Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Q3 2024 Earnings Presentation
37 slides from Ellington Financial's earnings presentation, Nov 7, 2024
Slide 1: Earnings Conference Call Q3 2024
Earnings Conference Call Q3 November 7, 2024 2024 Q3 2024 EARNINGS
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: Third Quarter Highlights
Third Quarter Highlights(1) • Net income: $16.2 million or $0.19 per share(2) Overall Results • Economic return:(3) 0.9% for the quarter • Adjusted Distributable Earnings:(4) $34.5 million or $0.40 per share • Net income: $44.0 million or $0.51 per share • Credit strategy: • Net income: $39.2 millio
Slide 4: Portfolio Summary as of September 30, 2024
Portfolio Summary as of September 30, 2024(1) Allocated Fair Value Average Price WAVG Mkt (2) Equity and Asset (3)(7) (5)(7) Credit Equity ($ in $1,000s) (%) WAVG Life Yield(6)(7) Allocation by Strategy Residential Transition Loans and Other Residential Mortgage Loans (8) $ 1,248,001 99.6 0.9 10.0%
Slide 5: Operating Results by Strategy for the Quarter Ended September 30, 2024
Operating Results by Strategy for the Quarter Ended September 30, 2024 Investment Portfolio Investment Portfolio Corporate/ Total (In thousands, except per share amounts) Credit Agency Subtotal Longbridge Other Total Per Share (1) Interest income and other income $ 78,309 $ 5,418 $ 83,727 $ 16,470 $
Slide 6: Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings
Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings(1) Three-Month Period Ended September 30, 2024 Investment (in thousands, except per share amounts) Longbridge Corporate/Other Total Portfolio Net Income (Loss) $ 44,115 $ (2,451) $ (18,341) $ 23,323 Income tax expense (benefit) -
Slide 7: Long Credit Portfolio
Long Credit Portfolio* H I J H I J G G 3%1% 3% 2% 1% 3% 3% 3% F F 5% A: Residential Transition Loans and other Residential E Mortgage Loans(2) 5% 5% E A B: Non-QM Loans and Retained Non-QM RMBS(2)(4)(5) D 6% D 38% 2% A C: CMBS & Commercial Mortgage Loans (2)(6) 6% 46% $3.25 bn D: HELOCs and Closed-E
Slide 8: Long Agency Portfolio
Long Agency Portfolio Fixed Fixed IOs RM IOs RM 15- Fixed Fixed Year 4% Fixed 7% 2% 15- 9% Year 6% Fixed 5% $394.6 mm $457.7 mm 82% 85% 30-Year 30-Year Fixed Fixed As of 9/30/2024(1) As of 6/30/2024(1) Fair Value(1) Wtd. Avg. Fair Value(1) Wtd. Avg. (2) Category ($ in MMs) Coupon Category ($ in MMs)
Slide 9: Longbridge Portfolio
Longbridge Portfolio* E E <1% <1% D D 6% 6% C C A: Proprietary reverse mortgage loans 18% 20% B: Unsecuritized HECM loans(2) A C: HMBS MSR Equivalent (3) $494.2 mm 48% D: Reverse MSRs $520.8 mm A E: Other 56% B 20% B 26% As of 9/30/2024(1) As of 6/30/2024(1) • Longbridge originates reverse mortgage
Slide 10: Summary of Borrowings
Summary of Borrowings Recourse Borrowings ($ in thousands) As of 9/30/24 Three-Month Period Ended 9/30/24 Average Average Cost Outstanding Weighted Average Collateral Type Borrowings Borrowing Rate Borrowings of Funds Credit(1) $ 2,022,955 7.14% $ 1,759,915 7.50% Agency RMBS 346,193 5.35% 367,556 5.
Slide 11: Commercial Mortgage Loan Portfolio – Detail as of 9/30/24
Commercial Mortgage Loan Portfolio – Detail as of 9/30/24 (1)(2) Mobile Mixed Home 3% Self-Storage Use Healthcare 1% 4% 4% All Other States FL Office <5% 21% 5% Retail 37% 5% Property Industrial 6% Geography NY Type 11% 7% 65% Hotel IL MI Multifamily 11% 5% NJ TX 6% 9% Fixed First Lien 5% 100% Float
Slide 12: Proprietary Loan Origination Businesses
Proprietary Loan Origination Businesses Ellington Financial’s vertically integrated, proprietary loan origination businesses are designed to: • Lock in a steady flow of high-quality loan originations • Leverage Ellington’s core strengths of data analysis and modeling to help shape the underwriting c
Slide 13: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q2-2024(1)(2) Standard 16.0% Company Deviation EFC 3.7% 14.0% Hybrid REIT #02 6.1% 12.0% Hybrid REIT #03 6.4% Hybrid REIT #04 7.0% 10.0% Hybrid REIT #05 9.3% 8.0% Hybrid REIT #06 13.3% 6.0% Hybrid REIT
Slide 14: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value As of 9/30/2024 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates ($ in thousands) ∆ Fair Value % of Total Equity ∆ Fair Value % of Total Equity Agency RMBS – Fixed Pools and IOs excluding TBAs $ 7,
Slide 15: Supplemental Slides
Supplemental Slides Q3 2024 EARNINGS 15
Slide 16: Commitment to ESG
Commitment to ESG Ellington is committed to corporate social responsibility. We recognize the importance of environmental, social and governance (“ESG”) factors, and believe that the implementation of ESG policies will benefit our employees, support long-term stockholder performance, and make a posi
Slide 17: Third Quarter Market Update
Third Quarter Market Update Quarter Ended 9/30/2024 Q3/Q2 6/30/2024 Q2/Q1 3/31/2024 Q1/Q4 12/31/2023 (1) UST (%) 3M UST 4.62 -0.74 5.35 -0.01 5.36 +0.03 5.33 2Y UST 3.64 -1.11 4.75 +0.13 4.62 +0.37 4.25 5Y UST 3.56 -0.82 4.38 +0.16 4.21 +0.37 3.85 10Y UST 3.78 -0.62 4.40 +0.20 4.20 +0.32 3.88 30Y US
Slide 18: Derivatives Summary as of September 30, 2024
Derivatives Summary as of September 30, 2024(1) ($ in thousands) Long Notional Short Notional Net Notional Fair Value Mortgage-Related Derivatives: CDS on MBS and MBS Indices $ 214 $ (36,904) $ (36,690) $ 1,934 Total Net Mortgage-Related Derivatives $ 1,934 Corporate-Related Derivatives: CDS on Corp
Slide 19: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Instrument Corporate CDS Indices/ Tranches/ European Category Options/ Single Names Sovereign Debt CMBX Units HY CDX OTR Bond Equivalent Value(3)(4) Market Value Bond Equivalent Value(4) $0.00 -$20.00 -$40.00 -$60.00 -$80.00 -$100.00 -$120.00 -$140.00 -$160.00 6/30/202
Slide 20: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Commercial Mortgages • Bridge Loans 4% • CMBS, B-Pieces & Credit Bonds • NPLs • REO Residential Mortgages 20% • Non-QM Loans • Residential Transition Loans • MSR-Related Investments • HELOCs • Closed-End S
Slide 21: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio(1) We deploy a dynamic and adaptive hedging strategy to preserve book value C C 10.0% 16.2% A 30.0% A: >5 Yr Interest Rate Swaps A B: 2-5Yr Interest Rate Swaps 37.8% $248.1mm C: <2 Yr Interest Rate Swaps $282.1mm B B 60.0% 46.0% As of 9/30/2024 As of 6/30/2024
Slide 22: Agency Interest Rate Hedging Portfolio (continued)
Agency Interest Rate Hedging Portfolio (continued) Net Agency Pool Exposure Based on Fair Value(1) As of 9/30/2024 As of 6/30/2024 $500 $500 Long Agency Pools $448 $300 Long Agency $300 Pools $380.1 Net Long Exposure to Agency Pools ($ in millions) ($ in millions) $294 $100 Net Long $100 Exposure to
Slide 23: CPR Breakout of Agency Fixed Long Portfolio
CPR Breakout of Agency Fixed Long Portfolio Average for Quarter Ended 9/30/2024(1) Average for Quarter Ended 6/30/2024(1) Other Other Jumbo 21% MHA 21% 1% Loan Loan 1% 32% Balance Balance MHA Jumbo 34% 1% 1% Non- 6% Non- 5% Owner Owner 6% 5% High High LTV 18% LTV 15% 15% 18% Low Geography Low FICO F
Slide 24: Repo Borrowings
Repo Borrowings(1) Borrowings by Days to Maturity ($ in thousands) Repo Borrowings as of September 30, 2024 Remaining Days to Reverse % of Total Credit Agency U.S. Treasury Total Maturity Mortgage Loans Borrowings 30 Days or Less $ 681,209 $ 332,416 $ 256,302 $ 30,499 $ 1,300,426 49.2% >364 Days 28%
Slide 25: Resilient Profit Generation Over Market Cycles
Resilient Profit Generation Over Market Cycles(1)(2) Nine-Month COVID Period Ended Pandemic ($ in thousands) September 30 Years Ended 2024 2023(3) 2022 2021 2020 2019 2018 2017 2016 Long: Credit $ 137,387 8.8% $ 103,239 7.7% $(74,934) -6.0% $188,562 18.1% $53,736 6.2% $73,919 11.1% $61,201 10.0% $61
Slide 26: Total Return Since Inception
Total Return Since Inception EFC has successfully preserved book value over 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 Q3 2024 is approximately 285.6%, or 8.2% annualized(1) Diluted B
Slide 27: Capital, Leverage & Portfolio Composition
Capital, Leverage & Portfolio Composition Capital Usage By Strategy(1) Leverage by Strategy (Debt-to-Equity)(1) 10.0 (2) 9/30/2024 8.6 8.5 8.5 8.4 8.6 8.0 8.4 8.3 8.3 8.3 (3) 6/30/2024 6.0 5.7 (4) 5.9 3/31/2024 4.0 4.3 (5) 12/31/2023 2.0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 12/31/2023 3/31/20
Slide 28: Condensed Consolidated Balance Sheet (Unaudited)
Condensed Consolidated Balance Sheet (Unaudited) (in thousands, except share and per share amounts) September 30, 2024 June 30, 2024 Assets Cash and cash equivalents $ 217,725 $ 198,513 Restricted cash 10,578 6,098 Securities, at fair value 1,063,774 1,127,684 Loans, at fair value 13,519,786 12,846,
Slide 29: Condensed Consolidated Statement of Operations (Unaudited)
Condensed Consolidated Statement of Operations (Unaudited) Three-Month Period Ended (In thousands, except per share amounts) September 30, 2024 June 30, 2024 Net Interest Income Interest income $ 107,281 $ 100,470 Interest expense (73,654) (66,874) Total net interest income $ 33,627 $ 33,596 Other I
Slide 30: About Ellington Management Group
About Ellington Management Group Ellington and its Affiliated Management Companies Ellington Profile • Our external manager Ellington Financial Management LLC is part of the As of 9/30/2024 Ellington family of SEC-registered investment advisors(4) Founded: 1994 Employees: >170 • Ellington Management
Slide 31: Investment Highlights of EFC
Investment Highlights of EFC Diversified investment Proprietary portfolio of high- Dynamic interest-rate and portfolio across residential yielding, short-duration loans credit hedging designed to mortgage, commercial reduce volatility of book value mortgage, consumer loan, and earnings and corporate
Slide 32: Endnotes
Endnotes Slide 3 – Third Quarter Highlights (1) Holdings, leverage, equity and book value amounts are as of September 30, 2024. (2) Includes $(25.3) million of preferred dividends accrued and certain corporate/other income and expense items not attributed to either the investment portfolio or Longbr
Slide 33: Endnotes
Endnotes Slide 5 – Operating Results by Strategy for the Quarter Ended September 30, 2024 (1) Other income primarily consists of rental income on real estate owned, loan origination fees, and servicing income. (2) Includes U.S. Treasury securities, if applicable. (3) Other activities include certain
Slide 34: Endnotes
Endnotes Slide 8 – Long Agency Portfolio (1) Agency long portfolio includes $380.1 million of long Agency securities and $14.6 million of interest only securities as of September 30, 2024 and $447.5 million of long Agency securities and $10.2 million of interest only securities as of June 30, 2024.
Slide 35: Endnotes
Endnotes Slide 17 – Third Quarter Market Update (1) Source: Bloomberg (2) Source: Mortgage Bankers Association via Bloomberg (3) Source: J.P. Morgan Markets (4) TSY-based OAS measures the additional yield spread over TSY that an asset provides at its current market price after taking into account an
Slide 36: Endnotes
Endnotes Slide 24 – Repo Borrowings (1) Included in the table, using the original maturity dates, are any repos involving underlying investments we sold prior to September 30, 2024 for settlement following September 30, 2024 even though we may expect to terminate such repos early. Not included are a
Slide 37: Investor Relations Contact
Investors: Investor Relations Ellington Financial Inc. (203) 409-3575 Info@ellingtonfinancial.com Media: Amanda Shpiner or Sara Widmann Gasthalter & Co. for Ellington Financial Inc. (212) 257-4170 Ellington@gasthalter.com Ellington Financial Inc. 53 Forest Ave Old Greenwich, CT 06870 www.ellingtonfi