Ellington Financial Inc. · NYSE:EFC
Ellington Financial — Debt Investor Presentation (March 2023)
47 slides from Ellington Financial's debt investor presentation, March 2023
Slide 1: Presentation to Debt & Preferred Equity Investors
Presentation to Debt & Preferred Equity Investors March 2023
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: Ellington Financial Overview
Ellington Financial Overview Hybrid mortgage REIT with diversified investment portfolio and income stream: residential and commercial mortgage, consumer / corporate loans, as well as multiple proprietary loan origination businesses; ability to shift capital allocation across various asset classes Re
Slide 4: Table of Contents
Table of Contents The Ellington Platform 5 Ellington Financial Inc. (NYSE: EFC) 16 Supplemental Information 27 4
Slide 5: The Ellington Platform
Ellington Financial The Ellington Platform a
Slide 6: 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 12/31/2022 Ellington family of SEC-registered investment advisors(4) Founded: 1994 Employees: >170 • Ellington Managemen
Slide 7: Ellington Management Group Headcount and Strategy Breakdown
Ellington Management Group Headcount by Department Strategy Breakdown ($bn) Legal/Compliance Other Custom Risk Management /Internal Audit Accounts 1% 4% <$0.1 Bank Advisory $0.4 Traditional Treasury & Mandate Middle Office $3.1 8% Portfolio Management / Administration Trading Ellington 9% 31% Sponso
Slide 8: Access to Experienced Management
Access to Experienced Management Years of Years at Experience(3) Ellington(3) • Founder and CEO of Ellington Michael Vranos Co-Chief Investment 38 28 • Former head of RMBS trading and origination at Kidder Peabody Officer (1) • B.A. in Mathematics from Harvard University (magna cum laude, Phi Beta K
Slide 9: Our Infrastructure Is A Competitive Advantage
Our Infrastructure Is A Competitive Advantage Ellington has over 170 employees supporting approximately $9.2 billion(1) in assets under management Ellington Principals ` Services Agreement Ellington Management Group, L.L.C. Ellington Financial Management LLC Management ` Agreement ` ` Portfolio Mana
Slide 10: Integrated Investment Process, with an Emphasis on Risk Management
Integrated Investment Process, with an Emphasis on Risk Management Portfolio Risk Measurement, Risk Management Construction Hedging and Trade Execution and Compliance • CEO, Portfolio Management (PM) • Exposures assessed relative to • Trade suitability and allocation based Committee and Risk Oversig
Slide 11: Ellington's Approach to Risk Management
Ellington’s Approach to Risk Management Principles Process Protection Trading / Monitor / Portfolio Mitigate: Monitoring Threshold Notification Workflow Spread risk / technical market risk Preserve Capital and Stress Safeguards Testing Risk Fundamental / cashflow / default risk Oversight Daily Group
Slide 12: Access to Robust Compliance and Internal Audit Program
Access to Robust Compliance and Internal Audit Program Compliance Program Extensive Surveillance Infrastructure • Chief Compliance Officer and dedicated team • Oversight integrated with proprietary portfolio management system (automated diagnostics and • Compliance Committee full data transparency)
Slide 13: Ellington's Technology
Ellington’s Technology ◼ Modeling, research and infrastructure have Trading and Research been at the heart of Ellington’s business Borrower behavior models, collateral surveillance, model since it was founded relative valuation monitoring within and among sectors − 25% of Ellington’s employees are i
Slide 14: An Integrated Platform
An Integrated Platform Robust infrastructure provides a constant, dynamic feedback loop between Research, Trading, Portfolio Management, and Oversight disciplines • Automated trade allocation • Source, clean, link, aggregate and • Threshold monitoring analyze data to build predictive models: • Trade
Slide 15: 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 16: Ellington Financial Inc. (NYSE: EFC)
Ellington Financial Inc. (NYSE: EFC) 16
Slide 17: Portfolio Summary as of December 31, 2022
Portfolio Summary as of December 31, 2022(1) Allocated Fair Value Average Price WAVG Mkt Equity and Asset Credit Equity (2) ($ in $1,000s) (%) (3)(7) WAVG Life (5)(7) Yield (6)(7) Allocation by Strategy Residential transition loans and other residential mortgage loans and REO (8) $ 940,296 99.4 0.5
Slide 18: 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 19: 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 Q4 2022 is approximately 244% or 8.4% annualized(1) Diluted BVPS
Slide 20: Stable Economic Return
Stable Economic Return Standard Deviation of Quarterly Economic Returns of Hybrid REITs, Q1-2011 – Q3-2022(1)(2) Standard Company Deviation EFC 3.9% Hybrid REIT #02 5.8% Hybrid REIT #03 6.4% Hybrid REIT #04 6.4% Hybrid REIT #05 7.4% Hybrid REIT #06 9.8% Hybrid REIT #07 12.5% Hybrid REIT #08 13.9% Hy
Slide 21: Resilient Profit Generation Over Market Cycles
Resilient Profit Generation Over Market Cycles(1) COVID Pandemic ($ in thousands) Years Ended 2022 2021 2020 2019 2018 2017 2016 Long: Credit (74,934) -6.0% $188,562 18.1% $53,736 6.2% $73,919 11.1% $61,201 10.0% $61,136 9.6% $36,203 5.3% Credit Hedge and Other 3,227 0.3% (1,887) -0.2% 8,027 0.9% (1
Slide 22: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) Estimated Change in Fair Value 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates ($ in thousands) ∆ Fair Value % of Total Equity ∆ Fair Value % of Total Equity Agency RMBS – Fixed Pools and IOs excluding TBAs $ 24,022 2.01% $ (25
Slide 23: Agency Interest Rate Hedging Portfolio
Agency Interest Rate Hedging Portfolio We deploy a dynamic and adaptive hedging strategy to preserve book value Agency Interest Rate Hedging Portfolio 12/31/22: Net Agency Pool Exposure Based on Fair Value(2) Short $563.9mm 10-yr Equivalents(1) $1,200 $1,000 <2Yr Interest Long rate Swaps 2-5Yr Inter
Slide 24: Credit Hedging Portfolio
Credit Hedging Portfolio(1)(2) Instrument Corporate CDS Indices/ Single Name ABS CDS European Category Tranches/ Options/ Single Names and ABX Indices Sovereign Debt CMBX Units HY CDX OTR Bond Equivalent Value(3)(4) Bond Equivalent Value(4) Market Value Bond Equivalent Value(4) - (10.00) (20.00) (30
Slide 25: Diversified Sources of Financing
Diversified Sources of Financing ($ in thousands) As of 12/31/2022 Three-Month Period Ended 12/31/22 Average Average Cost Outstanding Weighted Average Collateral Type Borrowings Borrowing Rate Borrowings of Funds Credit (1) $3,178,378 4.82% $ 3,661,962 4.52% Agency RMBS 939,653 3.91% 1,027,447 3.28%
Slide 26: EFC Portfolio – Schedule of Unencumbered Assets
EFC Portfolio – Schedule of Unencumbered Assets as of December 31, 2022 Asset Type Fair Value ($000s) (1) Residential transition loans and other residential mortgage $ 64,589 loans and REO Non-QM loans and retained non-QM RMBS 63,819 Commercial Mortgage Loans and REO 43,220 Debt and Equity Investmen
Slide 27: Supplemental Information
Supplemental Information 27
Slide 28: EFC's Best-in-Class Performance Since Inception
EFC’s Best-in-Class Performance Since Inception Percentage of Book Value per Share Since Inception(1) Cumulative Total Economic Return Since Inception (1) EFC #4 EFC #4 #8 #3 #8 #5 #7 #7 #3 #6 #5 #9 #9 #6 #2 #2 Note: EFC peers are other hybrid mortgage REITs. Above charts have been normalized for st
Slide 29: EFC: Stable Returns During Financial Crises, including 2008
EFC: Stable Returns During Financial Crises, including 2008… Percentage of 9/30/07 Book Value per Share, 9/30/07-12/31/08 Cumulative Total Economic Return 9/30/07-12/31/08 125% 0% EFC 100% EFC #4 (25%) 75% #4 (50%) 50% #5 25% (75%) #5 #3 #3 #2 0% #2 2007 2007 Q4 2007 Q12008 2008 Q22008 2008 Q32008 2
Slide 30: …and 2020
…and 2020 Hybrid REITs’ 2020 Cumulative Total Economic Return 10% EFC (10%) #3 #5 #2 (30%) #4 #8 (50%) #9 (70%) #6 #7 (90%) (110%) 2019 Q12020 2020 Q22020 2020 Q32020 2020 Q42020 2020 EFC Peer #2 Peer #3 Peer #4 Peer #5 Peer #6 Peer #7 Peer #8 Peer #9 Note: EFC peers are other hybrid mortgage REITs.
Slide 31: Demonstrated Outperformance Managing Agency RMBS Assets
Demonstrated Outperformance Managing Agency RMBS Assets The Ellington platform also has deep expertise in managing Agency assets, as demonstrated by the performance of Ellington Residential Mortgage REIT (NYSE: EARN) Percentage of 3/31/2013 Book Value per Share Cumulative Total Economic Return Since
Slide 32: Long Credit Portfolio
Long Credit Portfolio* G H I H I 2% 1% 1% G F E A F 1% 7% 1% A 1% 1% 7% 1% 8% 20% 20% 9% 20% A: CMBS & Commercial Loans & REO(3)(4) 9% B: Consumer Loans & ABS(2) E 3% B 3% 4% C: Residential Transition Loans and other 7% B $2.54 bn residential mortgage loans & REO(3) $2.06 bn 7% D 27% D: Non-QM loans
Slide 33: Diversified Credit Portfolio
Diversified Credit Portfolio Diversified sources of return to perform over market cycles Other Commercial Mortgages • Bridge Loans • CMBS, B-Pieces & Credit Bonds Residential Mortgages • NPLs • Non-QM Loans • REO • Residential Transition Loans • NPL / RPL • Non-Agency / Non-Conforming • REO • Single
Slide 34: Small Balance Commercial Mortgage Loan Portfolio – Detail
Small Balance Commercial Mortgage Loan Portfolio – Detail(1)(2) Self-Storage Mobile Office TX Home 8% 1% Retail 3% All Other 20% States 27% Mixed 4% 3% <5% Use Industrial 5% Hotel 6% Property Type Geography 18% 5% FL MI 71% 5% AZ 5% Multifamily 7% 13% NJ GA NY Floating First Lien with floor Interest
Slide 35: Long Agency Portfolio
Long Agency Portfolio ARMs ARMsFixed RM RM 1% IOs 1% Fixed IOs Fixed Fixed 15-Year 15-Year 3% 2% 3% 2% Fixed Fixed 13% 14% 20-Year 20-Year Fixed1% Fixed 3% $968.3 mm $1.70 bn 77% 80% 30-Year 30-Year Fixed Fixed As of 12/31/2022(1) As of 12/31/2021(1) Fair Value(1) Wtd. Avg. Fair Wtd. Avg. (2) Catego
Slide 36: Longbridge Portfolio
Longbridge Portfolio(1) D <1% A C 32% 32% A: Reverse MSRs (HMBS and proprietary)(2) B: Unsecuritized HECM loans C: Proprietary reverse mortgage loans $327.9 mm D: Other 37% B As of 12/31/2022(1) Longbridge originates reverse Upon securitization, the HECMs In addition, Longbridge originates In Q4, Lo
Slide 37: Repo Borrowings
Repo Borrowings(1) Borrowings by Days to Maturity ($ in thousands) Repo Borrowings as of December 31, 2022 % of Total >364 Remaining Days to Maturity Credit Agency U.S. Treasury Total 181-364 Days, Borrowings Days, 0% 30 Days 15% or Less, 30 Days or Less $ 462,284 $ 668,924 $ 69,347 $ 1,200,555 46.0
Slide 38: Condensed Consolidated Statement of Operations (Unaudited)
Condensed Consolidated Statement of Operations (Unaudited) Year Ended (In thousands, except per share amounts) December 31, 2022 December 31, 2021 Net Interest Income Interest income $ 282,218 $ 175,505 Interest expense (141,777) (44,030) Total net interest income $ 140,441 $ 131,475 Other Income (L
Slide 39: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet(1) (in thousands, except share and per share amounts) December 31, 2022 December 31, 2021 Assets Cash and cash equivalents 217,053 $ 92,661 Restricted cash 4,816 175 Securities, at fair value 1,459,465 2,087,360 Loans, at fair value 11,626,008 2,415,321 Loan comm
Slide 40: Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings
Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings(1) Year Ended December 31, 2022 Investment (in thousands, except per share amounts) Portfolio Longbridge(2) Corporate/Other Total Net Income (Loss) $ (59,110) $ 14,492 $ (26,251) $ (70,869) Income tax expense (benefit) (17,716) (
Slide 41: 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 42: Endnotes
Endnotes Slide 3 – Ellington Financial Overview (1) Total Equity includes net proceeds from the issuance of common stock under the Company’s ATM program through February 24, 2023 and net proceeds from the issuance of the Company’s Series C Preferred Equity completed on February 6, 2023. (2) Common E
Slide 43: Endnotes
Endnotes Slide 17 – Portfolio Summary as of December 31, 2022 (1) Includes REO at the lower of cost or fair value. Excludes hedges and other derivative positions. (2) Of deployed capital, 79% allocated to credit, 11% to agency, and 10% to Longbridge. (3) Average price excludes interest only, princip
Slide 44: Endnotes
Endnotes Slide 21 – Resilient Profit Generation Over Market Cycles (1) Gross profit excludes expenses other than interest expense and other investment related expenses. Figures in “%” columns are as a percentage of average total equity for the period which includes common and preferred equity as wel
Slide 45: Endnotes
Endnotes Slide 28– EFC’s Best-in-Class Performance Since Inception (1) For peer #2, percentage of book value per share and cumulative total economic return is based on an estimate as of 12/31/2022. Slide 32 – Long Credit Portfolio (1) Includes REO at the lower of cost or fair value. Excludes hedges
Slide 46: Endnotes
Endnotes Slide 40 – Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings (1) Beginning with the financial results for the quarter ended June 30, 2022, the supplemental non-GAAP financial measure that we previously referred to as "Core Earnings," we now refer to as "Adjusted Distrib
Slide 47: Investor Relations Contacts
JR Herlihy (203) 698-1200 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
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