Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q1 2017 Earnings Presentation
30 slides from Ellington Financial's earnings presentation, May 5, 2017
Slide 1: First Quarter 2017 Earnings Conference Call
First Quarter 2017 Earnings Conference Call May 5, 2017
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: First Quarter 2017
First Quarter 2017
Slide 4: Operating Results
Operating Results % of Quarter Ended % of Quarter Ended Per Average December 31, Per Average (In thousands, except per share amounts) March 31, 2017 Share Equity 2016 Share Equity Credit: Interest income and other income $ 13,133 $ 0.40 2.02% $ 11,902 $ 0.36 1.82% Net realized gain (loss) 2,259 0.07
Slide 5: Ellington Financial: First Quarter Highlights
Ellington Financial: First Quarter Highlights Net income of $15.3 million, or $0.47 per share Overall Results Increased holdings and leverage in both Credit strategy and Agency strategy Credit strategy gross income of $18.2 million(1), or $0.55 per share Credit Portfolio & Strong performance
Slide 6: Ellington Financial: Credit Strategy
Ellington Financial: Credit Strategy Low interest rate volatility and low overall market volatility during the first quarter Federal Reserve first signaled, and then announced, a federal funds rate increase, and also signaled a tapering of asset purchases starting later this year Market partic
Slide 7: Ellington Financial: Agency RMBS Strategy
Ellington Financial: Agency RMBS Strategy Yield curve flattened during the quarter 2-year U.S. Treasury yield rose 6 basis points to end the quarter at 1.25% 10-year U.S. Treasury yield fell 5 basis points to end the quarter at 2.39% Overall Market Conditions 30-year mortgage rate declined 1
Slide 8: Ellington Financial: Outlook
Ellington Financial: Outlook Expect to continue to hold a diversified Credit portfolio, primarily consisting of: Loans, including: Small Balance Commercial Mortgage Loans, especially NPLs and bridge loans Non-QM Mortgage Loans European MBS and NPLs (mortgage and consumer) Residential NPL
Slide 9: Credit Portfolio
Credit Portfolio
Slide 10: Long Credit Portfolio
EFC: Long Credit Portfolio Current Quarter Previous Quarter Long Credit Portfolio 3/31/17: $640MM(1)(2) Long Credit Portfolio 12/31/16: $552MM(1)(2) Corporate Debt and Corporate Debt and Jumbo/ Jumbo/ Seasoned Equity, 5% Equity, 9% Alt-A, 6% Euro CLO, 4% Alt-A, 10% Seasoned Manufactured Average Px 5
Slide 11: Long Credit Portfolio (Continued)
EFC: Long Credit Portfolio (Continued) Holdings Overview Holdings Overview Long Credit Portfolio 3/31/17: $640MM(1) Long Credit Portfolio 12/31/13: $700MM(1) Corporate Debt and Equity, 9% RMBS, 13% CLOs, 7% RMBS, 82% Residential Loans and REO, 18% CLOs 6% Consumer Loans and ABS, 18% European Non-Dol
Slide 12: Long Credit Portfolio as of March 31, 2017
EFC: Long Credit Portfolio as of March 31, 2017 Credit strategy is the main driver of earnings Long Credit securities and loan portfolio value: $587.4 million—excludes REO and equity investments in mortgage related entities Fair Value(1) Weighted Average Est. Yield at Market Price at Credit Sect
Slide 13: Credit Hedging Portfolio
EFC: Credit Hedging Portfolio(1)(2) Corporate CDS Indices / Instrument Tranches / Options / Single Single Name ABS CDS and Corporate Bonds/Corporate Category Names ABX Indices European Sovereign Debt Bond ETFs/Equities CMBX HY CDX OTR Bond Equivalent (4) Units Value(3)(4) Bond Equivalent Value (4) M
Slide 14: Agency Portfolio
Agency Portfolio
Slide 15: Agency Long Portfolio
EFC: Agency Long Portfolio Current Quarter Previous Quarter Agency Long Portfolio 3/31/17: $841MM(¹) Agency Long Portfolio 12/31/16: $827MM(¹) < 1% 4% FNMA Fixed - 30 Yr 5% FNMA Fixed - 30 Yr < 1% < 1% < 1% 7% FNMA Fixed - 15 Yr 7% FNMA Fixed - 15 Yr 4% 4% FHLM Fixed - 30 Yr FHLM Fixed - 30 Yr 2% 2%
Slide 16: Agency Interest Rate Hedging Portfolio
EFC: Agency Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 3/31/17: Agency Interest Rate Hedging Portfolio 12/31/16: Short $328MM 10-year equivalents Short $331MM 10-year equivalents >5 Yr Treasury >5 Yr Treasury 0-5 Yr Interest Rate Futures F
Slide 17: Agency Interest Rate Hedging Portfolio (Continued)
EFC: Agency Interest Rate Hedging Portfolio (Continued) Calculation of Exposure to Agency Pools Based on Fair Value: (In millions) Agency-related Portfolio 3/31/2017 12/31/2016 Long Agency RMBS $812 $798 Net Short TBAs (448) (390) Net Long Exposure to Agency RMBS $364 $408 Shorting “generic” pools
Slide 18: Borrowings
Ellington Financial Borrowings
Slide 19: Repo Borrowings as of March 31, 2017
EFC: Repo Borrowings as of March 31, 2017 ($ in thousands) Repo Borrowings % of Total Remaining Days to Maturity Credit Agency U.S. Treasury Total Borrowings 30 Days or Less $82,992 $384,009 $36,492 $503,493 46.3% 31-60 Days 18,374 169,346 — 187,720 17.3% 61-90 Days 61,625 134,491 — 196,116 18.0% 91
Slide 20: Average Cost of Borrowings
EFC: Average Cost of Borrowings As of March 31, 2017 For the Quarter Ended March 31, 2017 ($ In thousands) Average Borrowings for Collateral for Borrowing Outstanding Borrowings Average Cost of Funds (1) the Quarter Ended (1) (1) Credit $318,561 $292,369 3.05% Agency RMBS 793,020 792,810 0.95% Total
Slide 21: Supplemental Information
Ellington Financial Supplemental Information
Slide 22: Gross Profit and Loss
EFC: Gross Profit and Loss Three Months Years Ended Ended March 31, 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 ($ In thousands) $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % Long: Credit 21,974 3.38 36,203 5.29 46,892 6.09 77,636 11.38 109,536 18.53 129,830 30.02 1,505 0.39 70,840 21.87 101,748 36.
Slide 23: Capital and Leverage
EFC: Capital and Leverage(1) Capital Usage Across Entire Portfolio(2) Notes (1) Excludes U.S. Treasury securities. 3/31/2017 (2) Capital usage based on pro forma calculation of leverage generally applicable to long positions in target asset classes. (3) Assets per strategy capital used includes in t
Slide 24: Credit and Agency Fair Values and Average Prices
EFC: Credit and Agency Fair Values and Average Prices Credit and Agency Portfolios by Fair Value Average Price – Credit and Agency(1) $900.0 $120.00 108.70 108.79 106.06 105.84 $800.0 849.7 827.4 841.3 807.8 $100.00 $700.0 $600.0 640.3 $80.00 74.93 583.3 67.90 65.83 66.97 $ in Millions $500.0 552.0
Slide 25: Dividends and Expense Ratio
EFC: Dividends and Expense Ratio Dividends Per Share Expense Ratio(2) $0.55 3.10% Dividend Yield as of 3.07% May 3, 2017 $0.50 10.9% (1) 2.95% 2.96% $0.45 2.89% 2.80% 2.83% $0.40 $0.50 $0.45 $0.45 $0.45 2.65% $0.35 $0.30 2.50% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2016 Q3 2016 Q4 2016 Q1 2017 (1) Based
Slide 26: Diluted Book Value per Share
EFC: Diluted Book Value EFC has successfully preserved book value through market cycles, while producing strong results for investors EFC life-to-date diluted net-asset-value-based total return from inception in August 2007 through Q1 2017 is approximately 164%, or 10.6% annualized DBVPS Cumulat
Slide 27: Income Statement
Income Statement (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF OPERATIONS Three Month Period Ended (In thousands, except per share data) March 31, 2017 December 31, 2016 Investment income Interest income $ 22,886 $ 18,265 Other income 939 2,342 Total investment income 23,825 20,607 E
Slide 28: Balance Sheet
Balance Sheet (Unaudited) ELLINGTON FINANCIAL LLC CONSOLIDATED STATEMENT OF ASSETS, LIABILITIES AND EQUITY As of March 31, December 31, (In thousands, except share amounts) 2017 2016(1) ASSETS Cash and cash equivalents $ 104,219 $ 123,274 Restricted Cash 655 655 Investments, financial derivatives, a
Slide 29: 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 160 employees, giving EFC access to time-tested infrastructure and proprietary resource
Slide 30: Investor Contact
Investor Contact: Maria Cozine, Vice President of Investor Relations or Lisa Mumford, Chief Financial Officer Ellington Financial LLC (203) 409-3575 Info@ellingtonfinancial.com Media Contact: Amanda Klein or Kevin Fitzgerald Gasthalter & Co. for Ellington Financial LLC (212) 257-4170 Ellington@gasth