Slide 1: Second Quarter 2015 Earnings Conference Call
Ellington Financial LLC (NYSE: EFC) Second Quarter 2015 Earnings Conference Call August 7, 2015
Slide 2: Important Notice
Important Notice Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may diff
Slide 3: Second Quarter 2015
Second Quarter 2015
Slide 4: Operating Results
Operating Results Six Month Quarter % of Quarter % of Period % of Ended Per Average Ended Per Average Ended Per Average (In thousands, except per share amounts) 6/30/2015 Share Equity 3/31/2015 Share Equity 6/30/2015 Share Equity Non-Agency MBS, mortgage loans, ABS, and other: Interest income and ot
Slide 5: Second Quarter Highlights
Ellington Financial: Second Quarter Highlights Overall Results Net income of $13.2 million, or $0.39 per share Non-Agency strategy gross income of $16.5 million(1), or $0.49 per share Interest income and other investment income, net realized and unrealized gains and net contributions from inte
Slide 6: Second Quarter Highlights (continued)
Ellington Financial: Second Quarter Highlights (continued) Total non-Agency Long Portfolio: $753.3(1) million as of June 30, 2015 as compared to $790.1(1) million as of March 31, 2015 Portfolios Agency Long Portfolio: $1,124.5 million at the end of the second quarter, as compared to $1,140.9 mil
Slide 7: Non-Agency Strategy
Ellington Financial: Non-Agency Strategy During the second quarter: Amidst heightened volatility and a global fixed-income sell-off, prices of non-Agency RMBS generally held firm—lack of new issue market coupled with strong fundamentals, including mortgage delinquency and foreclosure rates, have
Slide 8: Agency Strategy
Ellington Financial: Agency Strategy During the second quarter: The yield curve steepened 2-year U.S. Treasury yield increased 9 bps to 0.64% 10-year U.S. Treasury yield increased 43 bps to 2.35% Overall Market Agency RMBS production increased in the first part of the quarter, led by refin
Slide 9: Market Outlook
Ellington Financial: Market Outlook We expect to continue to reduce our non-Agency RMBS legacy portfolio in favor of our other non-Agency strategies: European MBS, CLOs, and NPLs (mortgage and consumer) U.S. CLOs, especially legacy debt and equity CMBS, especially ―B-pieces‖ where the new is
Slide 10: Non-Agency Portfolio
Non-Agency Portfolio
Slide 11: Non-Agency Long Portfolio
EFC: Non-Agency Long Portfolio Current Quarter Previous Quarter Non-Agency Long Portfolio 6/30/15: $753MM(1)(2) Non-Agency Long Portfolio 3/31/15: $790MM(1)(2)(3)(4) Distressed Corporate Distressed Loans, 7% Corporate Loans, 7% Average Px 68.9 Average Px 91.2 Euro CLO, 7% Euro CLO, 2% Average Px 96.
Slide 12: Non-Agency Long Portfolio (continued)
EFC: Non-Agency Long Portfolio (continued) Holdings Overview Holdings Overview Non-Agency Long Portfolio 6/30/15: $753MM(1) Non-Agency Long Portfolio 12/31/13: $700MM(1)(2) RMBS, 46% RMBS, 82% Distressed Residential Loans Corporate and REO, 4% CLOs 6% Loans, 7% European Non- Dollar CMBS and Denomina
Slide 13: Non-Agency Long Portfolio as of June 30, 2015
EFC: Non-Agency Long Portfolio as of June 30, 2015 Non-Agency strategy is the main driver of earnings Non-Agency long securities and loan portfolio value: $736.1 million — excludes REO and equity investments in mortgage related entities Est. Yield at Market Price at Fair Value Weighted Average H
Slide 14: Credit Hedging Portfolio as of June 30, 2015
EFC: Credit Hedging Portfolio as of June 30, 2015(1)(2) Corporate CDS Indices / Instrument Tranches / Options / Single Single Name ABS CDS and Corporate Bond Index Category Names ABX Indices European Sovereign Debt ETFs/Equity CMBX HY CDX OTR Bond Equivalent Units Value (3)(4) Bond Equivalent Value
Slide 15: Agency Portfolio
Agency Portfolio
Slide 16: Agency Long Portfolio
EFC: Agency Long Portfolio Current Quarter Previous Quarter Agency Long Portfolio 6/30/15: $1,124MM(¹) Agency Long Portfolio 3/31/15: $1,141MM(¹) FNMA Fixed - 30 Yr FNMA Fixed - 30 Yr 3% 5% 1% <1% 6% 1% 1% FNMA Fixed - 15 Yr 2% FNMA Fixed - 15 Yr 2% 1% 3% FHLM Fixed - 30 Yr 3% FHLM Fixed - 30 Yr FHL
Slide 17: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 6/30/15: Agency Interest Rate Hedging Portfolio 3/31/15: Short $547 MM 10-year equivalents Short $418 MM 10-year equivalents 0-5 Yr Interest 0-5 Yr Interest Rate Swaps Rate Swaps 2.8%
Slide 18: Agency Interest Rate Hedging Portfolio (continued)
EFC: Agency Interest Rate Hedging Portfolio (continued) Calculation of Exposure to Agency RMBS Based on Fair Value of TBA Portfolio: (In millions) Agency-related Portfolio 6/30/2015 3/31/2015 Long Agency RMBS $1,124 $1,141 Net Short TBAs (654) (664) Net Long Exposure to Agency RMBS $470 $477 Short
Slide 19: Borrowings
Borrowings
Slide 20: Repo Borrowings as of June 30, 2015
EFC: Repo Borrowings as of June 30, 2015 ($ in thousands) Repo Borrowings Remaining Days to Maturity Non-Agency Agency Total % of Total Borrowings 30 Days or Less $37,213 $126,395 $163,608 12.0% 31-60 Days 31,096 109,392 140,488 10.3% 61-90 Days 31,448 229,314 260,762 19.2% 91-120 Days 6,305 199,808
Slide 21: Average Cost of Borrowings
EFC: Average Cost of Borrowings ($ In thousands) As of June 30, 2015 For the Quarter Ended June 30, 2015 Average Borrowings for Collateral for Borrowing Outstanding Borrowings1 (1) Ended1 the Quarter (1) Average Cost of(1)Funds1 Non-Agency RMBS, CMBS, and Other $269,445 $299,675 2.12% Agency RMBS 1,
Slide 22: Supplemental Information
Supplemental Information
Slide 23: Gross Profit and Loss
EFC: Gross Profit and Loss Six Months Ended June 30, 2015 Years Ended 2015 2014 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % $ % $ % Long: Non-Agency 37,014 4.72 77,636 11.38 109,536 18.53 129,830 30.02 1,505 0.39 70,840 21.87 101,748 36.33 (64,565) (26.20) Credit Hedge and
Slide 24: Capital and Leverage
EFC: Capital and Leverage(1) Capital Usage Across Entire Portfolio(2) Notes 6/30/2015 (1) Excludes U.S. Treasury securities (2) Capital usage based on pro forma calculation of leverage generally applicable to long positions in target asset classes. 3/31/2015 (3) Assets per strategy capital includes
Slide 25: Non-Agency and Agency Fair Values and Average Prices
EFC: Non-Agency and Agency Fair Values and Average Prices Non-Agency and Agency Portfolios by Fair Value $ In millions Non-Agency Agency $1,400.0 1,217.7 1,200.0 1,140.9 1,124.5 1,064.2 1,000.0 880.4 790.1 800.0 753.3 719.7 600.0 400.0 200.0 - 9/30/2014 12/31/2014 3/31/2015 6/30/2015 Average Price –
Slide 26: Yields and Net Interest Margin
EFC: Yields and Net Interest Margin Yields – Agency and Non-Agency Non-Agency Agency 12.00% Total 9.82% 10.00% 9.50% 9.35% 8.75% 8.00% 5.39% 5.63% 5.43% 5.44% 6.00% 4.00% 3.22% 3.22% 3.00% 2.83% 2.00% 0.00% Q3 2014 Q4 2014 Q1 2015 Q2 2015 Note: Yields are based on amortized cost, not fair value. Exc
Slide 27: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio Dividends Per Share $0.70 Dividend Yield as of August 5, 2015 14.2% (1) $0.65 $0.77 $0.60 $0.65 $0.65 $0.65 $0.55 $0.50 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Expense Ratio(2) 3.15% 3.03% 3.05% 2.95% 2.85% 2.75% 2.63% 2.65% 2.59% 2.54% 2.55% 2.45% 2.35% 2.25% (1) Based on N
Slide 28: Diluted Book Value
EFC: Diluted Book Value EFC has successfully preserved book value through market cycles, while producing strong results for investors Price of ABX 2006-2 AAA has been extremely volatile in comparison to $90 DBVPS Cumulative Dividends ABX 2006-2 AAA EFC’s stable book value $45.00 $80 $40.00 $70 $35
Slide 29: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Six Month Period Three Month Period Ended Ended (In thousands, except per share data) June 30, 2015 March 31, 2015 June 30, 2015 Investment income Interest income $ 25,739 $ 26,513 $ 52,252 Other investment inc
Slide 30: Balance Sheet
Balance Sheet (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY As of June 30, March 31, December 31, (In thousands, except share amounts) 2015 2015 2014 (1) ASSETS Cash and cash equivalents $ 123,856 $ 156,250 $ 114,140 Investments, financial derivatives a
Slide 31: About Ellington
About Ellington EFC is managed by Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C. (“EMG”) EMG was founded in 1994 by Michael Vranos and five partners; currently has over 150 employees, giving EFC access to time-tested infrastructure and proprietary resource
Slide 32: Investor and Media Contacts
Investor Contact: Media Contact: Lindsay Tragler, Investor Relations or Steve Bruce or Taylor Ingraham Lisa Mumford, Chief Financial Officer ASC Advisors, for Ellington Financial LLC Ellington Financial LLC (203) 409-3575 (203) 992-1230 Ellington Financial LLC 53 Forest Ave Old Greenwich, CT 06870 w