Ellington Credit Company · NYSE:EARN
Ellington Credit — Ellington Residential Mortgage REIT — Q1 2021 Earnings Presentation
28 slides from Ellington Credit's earnings presentation, May 4, 2021
Slide 1: Earnings Conference Call Q1 2021
May 4, 2021 Earnings Conference Call Q1 2021 Q 1 2 0 2 1 E A R N IN G S
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. Actual results may differ f
Slide 3: First Quarter Market Update
First Quarter Market Update Quarter Ended 3/31/2021 12/31/2020 Q/Q 9/30/2020 Q/Q 6/30/2020 Q/Q 3/31/2020 Q/Q (1) UST (%) 3M UST 0.02 0.06 -0.04 0.09 -0.03 0.13 -0.04 0.06 +0.07 2Y UST 0.16 0.12 +0.04 0.13 -0.01 0.15 -0.02 0.25 -0.10 5Y UST 0.94 0.36 +0.58 0.28 +0.08 0.29 -0.01 0.38 -0.09 10Y UST 1.7
Slide 4: First Quarter Highlights
First Quarter Highlights • Net Income: $0.1 million or $0.01 per share • Core Earnings(1): $3.8 million, or $0.31 per share Results • Economic Return: 0.1% for the quarter • Net Interest Margin(2): 1.96% Shareholders’ Equity & • Shareholders’ Equity: $163.1 million BVPS(3) • Book Value Per Share: $1
Slide 5: Summary of Financial Results
Summary of Financial Results Quarter Ended 3/31/2021 Quarter Ended 12/31/2020 (in thousands except per share amounts) Interest Income $ 6,535 $ 6,174 Interest Expense (781) (716) Total Net Interest Income $ 5,754 $ 5,458 (1) Total Other Gain (Loss) (437) (381) Total Expenses (1,465) (1,400) (2) Add
Slide 6: Consolidated Balance Sheet (Unaudited)
Consolidated Balance Sheet (Unaudited) As of (in thousands except share amounts) March 31, 2021 December 31, 2020 (1) Assets Cash and cash equivalents $ 52,500 $ 58,166 Mortgage-backed securities, at fair value 1,204,629 1,081,380 Other investments, at fair value 289 292 Due from brokers 57,375 47,7
Slide 7: Portfolio Summary
Portfolio Summary March 31, 2021 December 31, 2020 Current Fair Average Average Current Fair Average Average (1) Cost (1) (1) Cost (in thousands) Principal Value Price Cost Principal Value Price Cost(1) Agency RMBS (2) 15-year fixed rate mortgages $113,924 $ 120,774 $ 106.01 $ 118,491 $ 104.01 $ 77,
Slide 8: Interest Rate Hedging Portfolio
Interest Rate Hedging Portfolio Short $373.3MM 10-yr equivalents(1) Short $196.1MM 10-yr equivalents(1) As of 3/31/2021 As of 12/31/2020 2-5 Yr Treasuries and Treasury Futures 2-5 Yr Interest Rate Swaps >5 Yr Interest Rate Swaps >5 Yr Treasuries and Treasury Futures We hedge along the entire yield S
Slide 9: Dynamic Hedging Strategy
Dynamic Hedging Strategy Net RMBS Exposure Based on Fair Value(1) As of 3/31/2021 As of 12/31/2020 $1,300 $1,300 Total RMBS $1,100 $1,205 $1,100 Total RMBS $1,081 $900 $900 $700 $700 ($ in millions) ($ in millions) Net Long Net Long $500 Exposure $500 Exposure to RMBS to RMBS $1,018 $925 $300 $300 $
Slide 10: Relative Yield Spreads
Relative Yield Spreads As of March 31, 2021(1) Securitized Products 24 Mo Tights 24 Mo Wides US Agency MBS TOAS -58 -4 88 US Agency MBS TZV -4 31 145 US Agency FN 3 OAS -36 7 99 US Agency G2 3 OAS -2 21 110 US Spec HLB 3 -17 -1 55 Non-QM AAA 50 90 300 Legacy Resi 105 165 550 CRT OTR M1 56 77 711 Sub
Slide 11: Spread Differential: 3-mo. LIBOR vs. Repo Funding Rate
Spread Differential: 3-mo. LIBOR vs. Repo Funding Rate(1) 3-month LIBOR Minus Earn Repo Funding Rate 0.80 30mo. LIBOR Minus EARN's Average Repo Rate (%) 0.60 0.40 0.20 0.00 -0.20 -0.40 -0.60 -0.80 -1.00 -1.20 • Because we receive 3-month LIBOR on our interest rate swaps, when 3-month LIBOR is lower
Slide 12: Commitment to ESG
Commitment to ESG Ellington is committed to corporate 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 shareholder performance, and make a positive im
Slide 13: 2021 Objectives
2021 Objectives Capitalize on investment opportunities driven by market volatility and uncertainty, as we did 1 following the severe dislocations of 2020 Rely on disciplined interest rate hedging and liquidity management to manage future volatility and 2 protect book value 3 Dial up and down our MBS
Slide 14: Supplemental Slides
Supplemental Slides Q 1 2 0 2 1 E A R N IN G S
Slide 15: Agency Portfolio Summary
Agency Portfolio Summary 30-Year Fixed 20-Year Fixed 15-Year Fixed RM Fixed ARMs Fixed IOs As of 3/31/2021 As of 12/31/2020 Wtd. Avg. Wtd. Avg. (1)(2) (3) (1)(2) Category Fair Value Coupon Category Fair Value Coupon(3) 30-Year Fixed $933.0 3.57 30-Year Fixed $834.9 3.87 20-Year Fixed 42.0 2.34 20-Ye
Slide 16: CPR Breakout of Agency Fixed Long Portfolio
CPR Breakout of Agency Fixed Long Portfolio 1% 15% 15% Loan Balance 1% MHA 10% Low FICO 7% Non-Owner 1% 2% 53% Geography 56% Jumbo 16% 16% Other 4% 3% Average for Quarter Ended 3/31/2021(1) Average for Quarter Ended 12/31/2020(1) Collateral Characteristics and Historical 3-Mo CPR Collateral Characte
Slide 17: Non-Agency Portfolio as of 3/31/2021
Non-Agency Portfolio as of 3/31/2021 Senior Jumbo/ Alt-A Seasoned Subprime Sub Jumbo/ Alt-A Recent Subprime Total Non-Agency Avg Mkt Px: 80.8 • Decreased non-Agency RMBS holdings by 41% as we continued to monetize gains during the first quarter • We expect to continue to vary our allocation to non-A
Slide 18: Repo Borrowings
Repo Borrowings(1) March 31, 2021 December 31, 2020 Weighted Average Weighted Average Borrowings Interest Remaining Days Borrowings Interest Remaining Days Remaining Days to Maturity Outstanding Rate to Maturity Outstanding Rate to Maturity (in thousands) (in thousands) 30 days or less $ 283,521 0.2
Slide 19: Interest Rate Sensitivity Analysis
Interest Rate Sensitivity Analysis(1) ($ in thousands) Estimates Change in Fair Value 50 Basis Point Decline in Interest Rates 50 Basis Point Increase in Interest Rates Market Value % of Total Equity Market Value % of Total Equity Agency RMBS – ARM Pools $ 268 0.16% $ (205) -0.13% Agency RMBS – Fixe
Slide 20: Financial Derivatives as of March 31, 2021
Financial Derivatives as of March 31, 2021 (In thousands) Fixed Payer Interest Rate Notional Weighted Average Weighted Average Weighted Average Maturity Amount Fair Value Pay Rate Receive Rate Years to Maturity 2020-2022 $ 5,000 $ 5 0.05% 0.09% 1.56 2023-2025 215,290 (559) 0.56% 0.19% 2.69 2026-2028
Slide 21: Consolidated Statement of Operations (Unaudited)
Consolidated Statement of Operations (Unaudited) Three-Month Period Ended (in thousands except share amounts) March 31, 2021 December 31, 2020 Interest Income (Expense) Interest income $ 6,535 $ 6,174 Interest expense (781) (716) Total net interest income $ 5, 754 $ 5, 458 Expenses Management fees t
Slide 22: Consolidated Balance Sheet (Unaudited)
Consolidated Balance Sheet (Unaudited) As of (in thousands except share amounts) March 31, 2021 December 31, 2020 (1) Assets Cash and cash equivalents $ 52,500 $ 58,166 Mortgage-backed securities, at fair value 1,204,629 1,081,380 Other investments, at fair value 289 292 Due from brokers 57,375 47,7
Slide 23: Reconciliation of Core Earnings to Net Income (Loss)
Reconciliation of Core Earnings to Net Income (Loss)(1) Three-Month Period Ended (in thousands except share amounts) March 31, 2021 December 31, 2020 Net Income (Loss) $ 127 $ 7,394 Adjustments: Net realized (gains) losses on securities (3,081) (862) Change in net unrealized (gains) losses on securi
Slide 24: About Ellington Management Group
About Ellington Management Group Ellington Profile Ellington and its Affiliated Management Companies As of 3/31/2021 • Our external manager Ellington Residential Mortgage Management LLC is part of Founded: 1994 the Ellington family of SEC-registered investment advisors(3). Ellington Management Group
Slide 25: Endnotes
Endnotes Slide 3 – First Quarter Market Update (1) Source: Bloomberg (2) Source: Mortgage Bankers Association via Bloomberg (3) Source: J.P. Morgan Markets (4) LIBOR-based Option Adjusted Spread measures the additional yield spread over LIBOR that an asset provides at its current market price after
Slide 26: Endnotes
Endnotes Slide 9 – Dynamic Hedging Strategy (1) Net short TBA positions represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of March 31, 2021 and December 31, 2020. The net carrying value of the TBA positions as of March 31, 2021 and December 31, 2020 o
Slide 27: Endnotes
Endnotes Slide 20 – Financial Derivatives as of March 31, 2021 (1) Notional amount represents the principal balance of the underlying Agency RMBS. (2) Cost basis represents the forward price to be paid for the underlying Agency RMBS. (3) Market value represents the current market value of the underl
Slide 28: Investor and media contacts
Investors: Ellington Residential Mortgage REIT (203) 409-3773 info@earnreit.com Media: Amanda Klein or Kevin FitzGerald Gasthalter & Co. for Ellington Residential Mortgage REIT (212) 257-4170 Ellington@gasthalter.com Ellington Residential Mortgage REIT 53 Forest Ave Old Greenwich, CT 06870 www.earnr
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