Ellington Credit Company · NYSE:EARN
Ellington Credit — Ellington Residential Mortgage REIT — Q3 2016 Earnings Presentation
27 slides from Ellington Credit's earnings presentation, Nov 2, 2016
Slide 1: Third Quarter 2016 Earnings Conference Call
Third Quarter 2016 Earnings Conference Call November 2, 2016
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: Third Quarter 2016
Third Quarter 2016
Slide 4: Third Quarter Highlights
Ellington Residential: Third Quarter Highlights Net income of $6.6 million, or $0.73 per share Overall Core earnings augmented by net realized and unrealized gains on Agency and non-Agency Results RMBS Core Earnings of $2.9 million, or $0.32 per share Core Earnings excluding “catch-up” premi
Slide 5: Agency RMBS
Ellington Residential: Agency RMBS Bolstered by high demand from both domestic and overseas investors, prices of 30-year fixed rate Agency RMBS increased over the course of the third quarter, even while interest rates rose slightly and overall prepayment rates increased Despite the rise in inter
Slide 6: Non-Agency RMBS
Ellington Residential: Non-Agency RMBS Bias toward accommodative monetary policy by global central banks, in response to continued sluggish growth, contributed to the lower volatility and increased investor appetite for risk-taking Negative yields persisted throughout the quarter for many high q
Slide 7: Historically Low Volatility
Historically Low Volatility 10yr Swap Rate in February vs August 1.85 1.8 1.75 1.7 Rate 1.65 1.6 1.55 1.5 1.45 1.4 1.35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Day Of Month August 2016 February 2016 Realized volatility is currently much lower than earlier in 2016 Over the entire
Slide 8: Agency MBS are Attractive to Investors Worldwide
Agency MBS are Attractive to Investors Worldwide Japan’s monthly purchase of Agency securities hit the highest level in March 2016 relative to the last few years and remained elevated at $9.6 billion in July 2016 20,000 15,000 10,000 5,000 0 -5,000 -10,000 -15,000 -20,000 Monthly purchase from Japan
Slide 9: October Prepay Reports Highlight the Value of Prepayment Protection
October Prepay Reports Highlight the Value of Prepayment Protection FNCL 3.5% Prepayment Speeds Balance Year Collateral LTV FICO Sep Aug Jul Jun (Billions) Non- 2014 49.8 78 760 33.1 34.3 21.9 22.9 Specified Low Loan 2014 0.6 68 756 9.8 10.8 7.8 9.8 Balance FNCL 4.0% Prepayment Speeds Balance Year C
Slide 10: Elevated Prepayment Rates May Be Here to Stay
Elevated Prepayment Rates May Be Here to Stay Monthly Origination Overview for Closed Loans Percentage of loan applications in previous 90-day cycle that have closed 2016 2015 Sept Aug July June May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May ALL LOANS CLOSING RATE % 71.8% 72.3 71.6 69.6 70.6 68
Slide 11: Employment in the Mortgage Industry
Employment in the Mortgage Industry 310 Employees, (in thousands) 295 280 265 250 2009 2010 2011 2012 2013 2014 2015 2016 Mortgage Employment Concerning point for mortgage investors is capacity—mortgage industry employment is now at a post- crisis high This newfound capacity has contributed to t
Slide 12: Portfolio
Portfolio
Slide 13: Portfolio Summary
Ellington Residential: Portfolio Summary September 30, 2016 June 30, 2016 Current Average Average Current Average Average Fair Value Cost Fair Value Cost Principal Price(1) Cost(1) Principal Price(1) Cost(1) (In thousands) Agency RMBS(2) 15-year fixed rate $ 134,770 $ 143,300 $ 106.33 $ 141,566 $ 10
Slide 14: Agency Long Portfolio
Ellington Residential: Agency Long Portfolio Current Quarter Agency Long Portfolio Previous Quarter Agency Long Portfolio As of 9/30/16: $1.22BN(1) As of 6/30/16: $1.21BN(1) FNMA/FHLM FNMA/FHLM GNMA Fixed - 15 GNMA RM ARMS ARMS GNMA RM Yr Fixed 2.6% 3.6% GNMA/FNMA/ Fixed 0.1% 6.3% FHLM Fixed IOs 5.2
Slide 15: Agency Fixed Long Portfolio
Ellington Residential: Agency Fixed Long Portfolio Collateral Characteristics and Historical 3-month CPR Collateral Characteristics and Historical 3-month CPR For the Quarter Ended September 30, 2016(1) For the Quarter Ended June 30, 2016:(1) Geography 2% Other Geography Other 9% 2% 10% Non-Owner No
Slide 16: Non-Agency Long Portfolio
Ellington Residential: Non-Agency Long Portfolio Current Quarter Previous Quarter Non-Agency Long Portfolio 9/30/16: $17.9MM Non-Agency Long Portfolio 6/30/16: $22.8MM Sub Jumbo/ Alt-A Sub Jumbo/ 36.7% Alt-A Senior Jumbo/ Senior Jumbo/ 42.6% Alt-A/Alt-B Alt-A/Alt-B 43.5% 45.2% Seasoned Seasoned Subp
Slide 17: Borrowings and Hedges
Borrowings and Hedges
Slide 18: Repo Borrowings
Ellington Residential: Repo Borrowings September 30, 2016 June 30, 2016 Weighted Average Weighted Average Remaining Days Borrowings Remaining Days Borrowings Remaining Days to Maturity Outstanding Interest Rate to Maturity Outstanding Interest Rate to Maturity (In thousands) (In thousands) 30 days o
Slide 19: Interest Rate Hedging Portfolio
Ellington Residential: Interest Rate Hedging Portfolio Current Quarter Previous Quarter Agency Interest Rate Hedging Portfolio 9/30/16: Agency Interest Rate Hedging Portfolio 6/30/16: Short $308.1MM 10-year equivalents Short $301.7MM 10-year equivalents >5 Yr Treasuries >5 Yr Treasuries 5.4% 3.1% Eu
Slide 20: Interest Rate Hedging
Ellington Residential: Interest Rate Hedging Calculation of Exposure to Agency RMBS Based on Fair Value of TBA Portfolio: (In millions) 9/30/2016 6/30/2016 Agency-related Portfolio Long Agency RMBS $ 1,208 $ 1,199 (1) Net Short TBA Positions (490) (460) Net Long Exposure to Agency RMBS $ 718 $ 739
Slide 21: Interest Rate Hedging (Continued)
Ellington Residential: Interest Rate Hedging (Continued) September 30, 2016 Fixed Payer Interest Rate Swap Weighted Weighted Weighted Average Maturity Notional Amount Fair Value Average Pay Average Years Receive Rate Rate to Maturity (In thousands) 2016 $ 26,500 $ (43) 0.70 % 0.69 % 0.1 2017 74,750
Slide 22: Supplemental Information
Supplemental Information
Slide 23: Income Statement (Unaudited)
Ellington Residential: Income Statement (Unaudited) CONSOLIDATED STATEMENT OF OPERATIONS Nine Month Period Three Month Period Ended Ended September 30, 2016 June 30, 2016 September 30, 2016 (In thousands except share amounts) INTEREST INCOME (EXPENSE) Interest income $ 7,096 $ 7,538 $ 24,285 Interes
Slide 24: Balance Sheet (Unaudited)
Ellington Residential: Balance Sheet (Unaudited) CONSOLIDATED BALANCE SHEET As of Septem ber 30, 2016 June 30, 2016 Decem ber 31, 2015(1) (In thousands except share amounts) ASSETS Cash and cash equivalents $ 43,026 $ 36,200 $ 40,166 Mortgage-backed securities, at fair value 1,233,134 1,229,015 1,24
Slide 25: Reconciliation of Core Earnings to Net Income (Loss)
Reconciliation of Core Earnings to Net Income (Loss)(1) Three Month Period Ended Three Month Period Ended June (In thousands except share amounts) September 30, 2016 30, 2016 Net Income (Loss) $ 6,626 $ 3,507 Less: Net realized gains (losses) on securities 3,892 2,100 Net realized gains (losses) on
Slide 26: About Ellington
About Ellington EARN is managed by Ellington Residential Mortgage 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 170 employees, giving EARN access to time-tested infrastructure and industr
Slide 27: Investor Contact
Investor Contact: Maria Cozine, Vice President of Investor Relations or Lisa Mumford, Chief Financial Officer Ellington Residential Mortgage REIT (203) 409-3773 [email protected] Media Contact: Amanda Klein or Kevin Fitzgerald Gasthalter & Co. for Ellington Residential Mortgage REIT (212) 257-4170 E
Ellington Residential Mortgage REIT — Q3 2016 Earnings Presentation on 6ix