David A. Johnson is founder and principal of Endurance Capital Management, a New Jersey Limited Liability Company. As an investor entrepreneur, David invests in stocks, bonds, options, ETFs, REITs, real estate, closed end funds and alternative investment funds such as hedge funds and private credit. With over 30 years' experience in investing, David holds a Master of Science (MS) Degree in Finance, with a concentration in Investment Analysis, from Boston University, a Certificate in Financial Planning, and ...

Financial Data and Key Metrics Changes - The company reported GAAP net income of $0.27 per share and adjusted net investment income of $0.18 per share for calendar Q2 [10] - The annualized economic return was nearly 20% net, and NAV per share grew [4] - The NAV at quarter end was $6.12 per share, with a NAV-based total return of 19.7% annualized [17] Business Line Data and Key Metrics Changes - The CLO portfolio grew by 27% quarter over quarter to $317 million, with new purchases of $91 million [14] - Contributions to net investment income came from U.S. CLO debt ($0.12), European CLO debt ($0.02), U.S. CLO equity ($0.02), and a penny loss on European CLO equity [10][11] - The company disposed of all remaining mortgage positions shortly after the REIT conversion, with minimal NAV impact [14] Market Data and Key Metrics Changes - Credit spreads on U.S. corporate high yield and investment grade bonds tightened overall during the quarter, with May and June's recovery offsetting April's weakness [5] - In Europe, leveraged loan prices posted modest gains but lagged behind the U.S. [12] - The CLO market saw high issuance levels historically, but lower than recent quarters due to intra-quarter volatility [6] Company Strategy and Development Direction - The company is focusing on CLO investments, benefiting from the closed-end fund structure, which enhances tax efficiency and allows for a concentrated investment strategy [9] - There is an emphasis on increasing exposure to CLO mezzanine positions and shifting focus to the secondary market for better relative value [21][22] - Plans to issue long-term unsecured debt later this year to increase leverage and enhance earnings growth [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the market environment remains uncertain due to tariff policies, which could create winners and losers among sectors [42] - The company expects net investment income to cover its distribution rate starting in September, indicating confidence in future performance [8][26] - The management believes that the portfolio is well-balanced with core positions for stability and others offering upside potential [23] Other Important Information - The company maintained a cash and cash equivalents total of $36.6 million at quarter end [17] - The CLO portfolio is heavily weighted towards first lien floating rate leveraged loans, with no single sector exceeding 11% [15] Q&A Session Summary Question: Why haven't AAA spreads fully retraced while underlying loan spreads have? - Management indicated that there is less demand for AAA CLOs compared to earlier in the year, which has affected pricing [31][32] Question: Would the allocation remain similar to June, leaning more towards debt than equity? - Management suggested that if the market conditions remain challenging, the allocation would likely continue to favor debt over equity [35] Question: Will CLO issuance trends reverse by year-end? - Management noted that new issuance depends on the attractiveness of loan versus debt spreads, and it is uncertain if the market will see a significant increase in new issuance [40] Question: Is there an increased risk perception for equity tranches? - Management acknowledged that equity tranches carry more risk due to their first-loss position, especially in light of tariff uncertainties [42] Question: What is the updated quarter-to-date NAV estimate? - The company reported a NAV estimate around $6.16 as of July 31 [46]

Financial Performance - GAAP Net Income was $102 million or $027 per share[11] - NAV-Based Total Return was 197% annualized[11] - Net Investment Income was $65 million or $017 per share[11] - Adjusted Net Investment Income was $66 million or $018 per share[11] - Net Asset Value was $2297 million or $612 per share as of June 30 2025[11] Investment Portfolio - The CLO portfolio grew by 27% to $3169 million as of June 30 2025 from $2499 million as of March 31 2025[11, 18] - CLO debt investments totaled $1489 million with 79% in the U S and 21% in Europe[11] - CLO equity investments totaled $1680 million with 92% in the U S and 8% in Europe[11] - The company purchased $906 million of CLO investments and sold $159 million[11] - The weighted average GAAP yield for the quarter based on amortized cost was 156% on the total CLO portfolio[11] Distributions - The company received $159 million in recurring cash distributions from the investment portfolio or $042 per share[11] - The distribution rate was 172% based on the August 18 2025 closing stock price of $559 and a monthly distribution of $008 per common share declared on August 7 2025[11]

[Financial Highlights and Management Commentary](index=1&type=section&id=Financial%20Highlights%20and%20Management%20Commentary) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Ellington Credit Company reported a **NAV of $6.12 per share** and **GAAP net income of $10.2 million** for Q1 FY2026, with its CLO portfolio growing **27% to $316.9 million** Key Financial Metrics | Metric | Q1 FY2026 (ended June 30, 2025) | Q4 FY2025 (ended March 31, 2025) | | :--- | :--- | :--- | | **NAV per Share** | $6.12 | $6.08 | | **GAAP Net Income** | $10.2 million ($0.27/share) | N/A | | **Net Investment Income (NII)** | $6.5 million ($0.17/share) | N/A | | **Adjusted NII** | $6.6 million ($0.18/share) | N/A | | **Total CLO Portfolio** | $316.9 million | $249.9 million | | **CLO Debt Investments** | $148.9 million | $85.5 million | | **CLO Equity Investments** | $168.0 million | $164.4 million | - The company achieved a weighted average GAAP yield of **15.6%** on its total CLO portfolio for the quarter[8](index=8&type=chunk) - Received **$15.9 million** in recurring cash distributions from the investment portfolio, equivalent to **$0.42 per share**[8](index=8&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted a **19.7% annualized return** for the quarter, driven by strong CLO performance and successful disposition of legacy mortgage investments, projecting NII to cover distributions by September - Generated a strong annualized return of **19.7%** in the first quarter of the new fiscal year[3](index=3&type=chunk) - Successfully completed the disposition of legacy mortgage-related investments with minimal impact on NAV[3](index=3&type=chunk) - Capitalized on market volatility early in the quarter to make compelling investments and later added credit hedges at attractive entry points as spreads tightened[4](index=4&type=chunk)[5](index=5&type=chunk) - Management projects that Net Investment Income (NII) will cover the monthly distribution beginning in September, following a period of capital rotation[6](index=6&type=chunk) [Distributions](index=1&type=section&id=Distributions) The Board of Trustees declared consistent monthly distributions of **$0.08 per common share** for April through August 2025 Monthly Distributions | Declaration Date | Record Date | Payment Date | Distribution Per Share | | :--- | :--- | :--- | :--- | | April 3, 2025 | April 30, 2025 | May 27, 2025 | $0.08 | | May 7, 2025 | May 30, 2025 | June 30, 2025 | $0.08 | | June 9, 2025 | June 30, 2025 | July 31, 2025 | $0.08 | | July 8, 2025 | July 31, 2025 | August 29, 2025 | $0.08 | | August 7, 2025 | August 29, 2025 | September 30, 2025 | $0.08 | [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) [Investment Portfolio Composition](index=2&type=section&id=Investment%20Portfolio%20Composition) As of June 30, 2025, the total investment portfolio had a fair value of **$317.3 million**, predominantly in CLO investments with **52.9% in CLO equity** Investment Portfolio by Type (as of June 30, 2025) | Investment Type | Amortized Cost (In thousands) | Fair Value (In thousands) | % of Total Investments | | :--- | :--- | :--- | :--- | | **Total CLO debt** | $144,917 | $148,868 | 47.0% | | U.S. CLO debt | $116,246 | $117,930 | 37.2% | | European CLO debt | $28,671 | $30,938 | 9.8% | | **Total CLO equity** | $164,955 | $167,990 | 52.9% | | U.S. CLO equity | $152,729 | $155,235 | 48.9% | | European CLO equity | $12,226 | $12,755 | 4.0% | | **Total investments** | **$310,308** | **$317,279** | **100.0%** | [Results of Operations](index=2&type=section&id=Results%20of%20Operations) The company reported **total investment income of $11.7 million** and **net income of $10.2 million** for the quarter, with U.S. CLO equity as the largest contributor Condensed Statement of Operations (Quarter Ended June 30, 2025) | (In thousands, except per share amounts) | Quarter Ended June 30, 2025 | Per Share | | :--- | :--- | :--- | | Total investment income | $11,670 | $0.31 | | Total expenses | ($5,149) | ($0.14) | | **Net investment income** | **$6,521** | **$0.17** | | Net realized gain on investments | $229 | $0.01 | | Change in net unrealized gain on investments | $3,777 | $0.10 | | **Net income** | **$10,205** | **$0.27** | - The largest contributors to net income were **U.S. CLO Equity ($8.6 million)** and **U.S. CLO Debt ($4.5 million)**[11](index=11&type=chunk) [Net Asset Value (NAV) Summary](index=3&type=section&id=Net%20Asset%20Value%20(NAV)%20Summary) As of June 30, 2025, the company's **total assets were $363.9 million**, resulting in a **net asset value of $229.7 million** or **$6.12 per common share** Net Asset Value (as of June 30, 2025) | (In thousands, except per share amounts) | June 30, 2025 | | :--- | :--- | | Total assets | $363,946 | | Total liabilities | $134,213 | | **Net asset value** | **$229,733** | | Common shares outstanding | 37,559,195 | | **Net asset value per common share** | **$6.12** | [CLO Market and Strategy Performance](index=2&type=section&id=CLO%20Market%20and%20Strategy%20Performance) [Market and Strategy Overview](index=2&type=section&id=Market%20and%20Strategy%20Overview) The quarter saw initial market volatility followed by a rebound, with U.S. CLOs outperforming, and the company's strategy delivering excellent results, ending with a **$316.9 million CLO portfolio** - The quarter started with high volatility and widening credit spreads in April, followed by a market rebound in May and June as tariff concerns eased[13](index=13&type=chunk) - U.S. CLOs outperformed European CLOs, with U.S. leveraged loan prices rebounding more strongly and U.S. CLO equity benefiting from strong investor demand and lower volatility[14](index=14&type=chunk)[16](index=16&type=chunk) - The company's performance was enhanced by active trading, deal calls of two mezzanine positions, and a beneficial reset of a CLO equity position[17](index=17&type=chunk) - The CLO portfolio ended the quarter at **$316.9 million** with a weighted average expected yield of **15.0%** based on fair market value[17](index=17&type=chunk) [Supplemental Information](index=3&type=section&id=Supplemental%20Information) [Reconciliation of Non-GAAP Measures](index=4&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) GAAP Net Investment Income of **$6.521 million** was adjusted for non-recurring costs, resulting in an **Adjusted NII of $6.596 million** or **$0.18 per share** Reconciliation of Net Investment Income to Adjusted Net Investment Income (Quarter Ended June 30, 2025) | (In thousands except per share amounts) | Quarter Ended June 30, 2025 | | :--- | :--- | | Net Investment Income (GAAP) | $6,521 | | Adjustment: Non-recurring expenses | $75 | | **Adjusted Net Investment Income (Non-GAAP)** | **$6,596** | | **Adjusted Net Investment Income Per Share** | **$0.18** | - Adjusted Net Investment Income is presented because management believes it is a useful indicator of long-term financial performance and distribution-paying ability by excluding certain non-recurring expenses[23](index=23&type=chunk) [Company Overview, Conference Call, and Forward-Looking Statements](index=3&type=section&id=Company%20Overview%2C%20Conference%20Call%2C%20and%20Forward-Looking%20Statements) This section provides corporate information, details for the Q1 2026 earnings call, and a cautionary statement regarding forward-looking statements and associated risks - The company is a non-diversified closed-end fund primarily investing in CLO mezzanine debt and equity tranches[19](index=19&type=chunk) - A conference call to discuss the financial results was scheduled for 11:00 a.m. Eastern Time on Wednesday, August 20, 2025[20](index=20&type=chunk) - The report contains forward-looking statements that are subject to numerous risks and uncertainties, including changes in interest rates, market volatility, and default rates[21](index=21&type=chunk)

Core Viewpoint - Ellington Credit (EARN) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended June 2025, which could significantly influence its near-term stock price depending on how actual results compare to consensus estimates [1][2]. Earnings Expectations - The consensus estimate for Ellington Credit's quarterly earnings is $0.21 per share, reflecting a year-over-year decrease of 41.7%. Revenues are projected to be $9.68 million, representing a substantial increase of 148.2% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial projections during this period [4]. Earnings Surprise Prediction - The Most Accurate Estimate for Ellington Credit aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%. The stock currently holds a Zacks Rank of 2, complicating predictions of an earnings beat [12]. Historical Performance - In the last reported quarter, Ellington Credit was expected to post earnings of $0.27 per share but delivered $0.26, resulting in a surprise of -3.70%. Over the past four quarters, the company has exceeded consensus EPS estimates three times [13][14]. Industry Comparison - Another player in the REIT and Equity Trust industry, Ready Capital (RC), is expected to report a loss of $0.01 per share for the same quarter, indicating a year-over-year change of -114.3%. Its revenues are expected to decline by 24.8% to $38.32 million, with a recent 5.9% downward revision in the consensus EPS estimate [18][19].

Part I [Business](index=4&type=section&id=Item%201.%20Business) Ellington Credit Company converted to a CLO-focused closed-end fund, managed by Ellington Credit Company Management LLC, targeting high yields from corporate CLOs - The company completed its **CLO Strategic Transformation** by converting from a REIT to a registered closed-end investment company effective April 1, 2025, focusing on mezzanine debt and equity tranches of corporate CLOs[22](index=22&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - The company is externally managed by Ellington Credit Company Management LLC, an affiliate of Ellington Management Group, L.L.C., with approximately **$14.9 billion in assets under management** as of March 31, 2025[28](index=28&type=chunk)[31](index=31&type=chunk) - The company uses leverage, primarily through repurchase agreements, with a **debt-to-equity ratio of 2.3 to 1** as of March 31, 2025[62](index=62&type=chunk) - Post-conversion, a new Advisory Agreement includes a **1.50% annual base management fee** on Net Asset Value and a **17.5% performance fee** on pre-performance fee net investment income above an **8.00% annualized hurdle rate**[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its CLO-focused strategy, including credit, leverage, market, and operational risks, alongside uncertainties from its recent fund conversion - The primary risk is exposure to the creditworthiness of underlying corporate borrowers in CLOs, with focus on subordinated mezzanine and equity tranches increasing loss exposure[143](index=143&type=chunk)[146](index=146&type=chunk)[198](index=198&type=chunk) - The Fund employs significant direct leverage and is exposed to substantial indirect leverage through CLO equity investments, with typical debt-to-equity ratios of **8 to 16 times**, magnifying loss risk[143](index=143&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - The Adviser's performance fee, based on pre-performance fee net investment income without considering capital losses, may incentivize higher-risk investments or increased leverage[144](index=144&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Failure to qualify and maintain Regulated Investment Company (RIC) status would subject the Fund to corporate-level U.S. federal income tax, significantly reducing net returns and distributions[144](index=144&type=chunk)[313](index=313&type=chunk) - The recent conversion to a closed-end fund introduces material risks related to new operational processes, 1940 Act compliance, accounting changes, and tax year uncertainty, potentially delaying RIC qualification[143](index=143&type=chunk)[189](index=189&type=chunk) [Unresolved Staff Comments](index=57&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[348](index=348&type=chunk) [Cybersecurity](index=57&type=section&id=Item%201C.%20Cybersecurity) The company relies on its affiliate Ellington's cybersecurity processes, overseen by the Audit Committee, focusing on governance, technical safeguards, incident response, and employee education - The company is externally managed and relies on the information systems and cybersecurity processes of its affiliate, Ellington[349](index=349&type=chunk) - Ellington's cybersecurity strategy is a cross-functional approach focusing on governance, technical safeguards, incident response planning, third-party risk management, and employee training[350](index=350&type=chunk)[351](index=351&type=chunk)[358](index=358&type=chunk) - The Board, through its Audit Committee, oversees cybersecurity risk management, receiving regular presentations on the threat environment, vulnerability assessments, and technological trends[356](index=356&type=chunk) - To date, no cybersecurity threats have materially affected the company, despite two minor business email compromise incidents in recent years without material impact[355](index=355&type=chunk) [Properties](index=59&type=section&id=Item%202.%20Properties) The company does not own properties, operating from leased office space in Old Greenwich, CT, provided by its Adviser - The company does not own any properties and operates from a leased office space in Old Greenwich, CT, provided by its Adviser[360](index=360&type=chunk) [Legal Proceedings](index=59&type=section&id=Item%203.%20Legal%20Proceedings) Neither the company nor its Adviser are currently subject to any material legal proceedings, though regulatory inquiries are expected - Neither the company nor its Adviser are currently subject to any material legal proceedings[361](index=361&type=chunk) - The company and its affiliates operate in a highly regulated market and expect to receive regulatory inquiries from time to time[361](index=361&type=chunk)[362](index=362&type=chunk) [Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[363](index=363&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on the NYSE under "EARN," with 107 holders of record as of June 6, 2025, and 167,476 shares repurchased in Q1 2025 before the program's termination - The company's common shares trade on the NYSE under the ticker "EARN"[365](index=365&type=chunk) Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | — | — | 725,808 | | Feb 1 - Feb 28, 2025 | — | — | 725,808 | | Mar 1 - Mar 31, 2025 | 167,476 | $5.84 | 558,332 | | **Total** | **167,476** | **$5.84** | **558,332** | - The 2018 Share Repurchase Program is no longer usable following the company's conversion to a closed-end fund[367](index=367&type=chunk) [Reserved](index=60&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details the company's financial condition and results, reporting a **net loss of $(7.9) million** for Q1 2025 due to mark-to-market losses, as its CLO portfolio grew to **$249.9 million** amid its strategic transformation - The company is executing its **CLO Strategic Transformation**, shifting from an Agency RMBS-focused REIT to a CLO-focused closed-end fund, with its CLO portfolio growing to **$249.9 million** as of March 31, 2025[370](index=370&type=chunk)[384](index=384&type=chunk) Key Financial Metrics (as of March 31, 2025) | Metric | Value | | :--- | :--- | | Book Value per Share | $6.08 | | Debt-to-Equity Ratio (adjusted) | 2.2:1 | | CLO Portfolio (Fair Value) | $249.9 million | | Agency RMBS Portfolio (Fair Value) | $503.9 million | Results of Operations (Three Months Ended March 31) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Interest Income | $9,247 | $279 | | Total Other Income (Loss) | $(14,541) | $5,612 | | **Net Income (Loss)** | **$(7,870)** | **$3,961** | | **Net Income (Loss) Per Share** | **$(0.23)** | **$0.20** | - Adjusted Distributable Earnings for Q1 2025 were **$9.0 million**, or **$0.26 per share**, compared to **$5.3 million**, or **$0.27 per share**, for Q1 2024[461](index=461&type=chunk) - The company declared dividends of **$0.24 per share** for the three-month period ended March 31, 2025[493](index=493&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include credit risk from CLOs, interest rate risk managed by hedging, prepayment risk, and liquidity risk mitigated by diverse funding and unpledged assets - The company is subject to significant credit risk from its CLO investments, as the underlying corporate loans are typically below investment grade and carry greater default risk, especially in recessionary environments[514](index=514&type=chunk) - Interest rate risk is a key concern due to funding longer-term assets with shorter-term borrowings, managed using derivatives like interest rate swaps and TBAs[519](index=519&type=chunk)[520](index=520&type=chunk) Interest Rate Sensitivity Analysis (as of March 31, 2025) | ($ In thousands) | Decrease 50 bps | Decrease 100 bps | Increase 50 bps | Increase 100 bps | | :--- | :--- | :--- | :--- | :--- | | **Total Estimated Change in Portfolio Value** | **$ (26)** | **$ (57)** | **$ 20** | **$ 36** | | **% of Total Equity** | **(0.01)%** | **(0.02)%** | **0.01%** | **0.02%** | - Liquidity risk is managed by maintaining diverse funding sources, monitoring counterparty stability, and holding a cushion of cash and unpledged securities to meet potential margin calls[527](index=527&type=chunk)[528](index=528&type=chunk) [Financial Statements and Supplementary Data](index=88&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including balance sheets, statements of operations, and cash flows, along with detailed notes and the independent auditor's report [Report of Independent Registered Public Accounting Firm](index=89&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified audit opinion on the financial statements, identifying Level 3 securities valuation as a critical audit matter due to significant judgment - PricewaterhouseCoopers LLP provided an unqualified opinion, stating the financial statements are fairly presented in conformity with U.S. GAAP[531](index=531&type=chunk) - The valuation of Level 3 investments was identified as a Critical Audit Matter due to the significant management judgment and high degree of auditor subjectivity involved in determining their fair value[535](index=535&type=chunk)[537](index=537&type=chunk) [Consolidated Financial Statements](index=91&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show **total assets of $783.6 million** and **shareholders' equity of $228.5 million** as of March 31, 2025, with a **net loss of $(7.9) million** for the quarter Consolidated Balance Sheet Summary (in thousands) | | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $783,557 | $824,092 | | Total Liabilities | $555,056 | $630,366 | | **Total Shareholders' Equity** | **$228,501** | **$193,726** | Consolidated Statement of Operations Summary (in thousands) | | Three Months Ended Mar 31, 2025 | Year Ended Dec 31, 2024 | | :--- | :--- | :--- | | Total net interest income | $9,247 | $15,069 | | Total other income (loss) | $(14,541) | $811 | | **Net Income (Loss)** | **$(7,870)** | **$6,586** | [Notes to Consolidated Financial Statements](index=96&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the CLO Strategic Transformation, valuation methodologies for Level 2 and 3 assets, portfolio composition, repurchase agreement terms, related-party transactions, and subsequent events post-conversion - **Note 1:** Details the company's strategic transformation from a REIT to a CLO-focused closed-end fund, which was completed on April 1, 2025[557](index=557&type=chunk) - **Note 4:** As of March 31, 2025, the company held **$133.9 million of Level 3 securities** at fair value, primarily consisting of CLOs[641](index=641&type=chunk)[536](index=536&type=chunk) - **Note 6:** As of March 31, 2025, the company had **$517.5 million in outstanding borrowings** under repurchase agreements with 13 counterparties, collateralized by **$567.0 million of securities**[682](index=682&type=chunk)[683](index=683&type=chunk) - **Note 9:** Describes the new management agreement effective July 1, 2024, with a **1.50% annual base management fee** and a performance fee (waived through Q1 2025)[701](index=701&type=chunk)[703](index=703&type=chunk)[705](index=705&type=chunk) - **Note 13:** Details significant subsequent events including the April 1, 2025 conversion, sale of remaining Agency RMBS for **$500.9 million**, adoption of a new Advisory Agreement and a Dividend Reinvestment Plan (DRP)[741](index=741&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=132&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[762](index=762&type=chunk) [Controls and Procedures](index=132&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2025, with no material changes during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[763](index=763&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2025, based on the COSO framework[768](index=768&type=chunk) - No material changes were made to the internal control over financial reporting during the quarter ended March 31, 2025[764](index=764&type=chunk) [Other Information](index=134&type=section&id=Item%209B.%20Other%20Information) The company reports no other information under this item - None[769](index=769&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=134&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[770](index=770&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=134&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The Board of Trustees, with four independent members, oversees the company's business and risk management through its Audit and Nominating & Corporate Governance committees, while executive officers are provided by the Adviser - The Board is composed of six trustees, with **four being independent**, and Robert B. Allardice, III serving as the independent Chairman[772](index=772&type=chunk)[774](index=774&type=chunk)[796](index=796&type=chunk) - The Board has two standing committees, Audit and Nominating and Corporate Governance, both comprised solely of independent trustees[782](index=782&type=chunk)[788](index=788&type=chunk) - All executive officers are provided by the Adviser, an affiliate of Ellington, including Laurence E. Penn (CEO & President), Michael W. Vranos (Portfolio Manager & Trustee), and Christopher Smernoff (CFO)[777](index=777&type=chunk)[779](index=779&type=chunk) - The Board oversees risk management, with the Audit Committee specifically tasked with oversight of financial reporting, internal controls, and cybersecurity risks[797](index=797&type=chunk)[798](index=798&type=chunk)[799](index=799&type=chunk) [Executive Compensation](index=142&type=section&id=Item%2011.%20Executive%20Compensation) The company does not directly compensate its NEOs, who are employees of Ellington, but reimburses the Administrator for allocable compensation of certain staff, estimated at **$0.4 million** for Q1 2025 - The company does not directly compensate its NEOs, who are employees of Ellington and provided through the Adviser[808](index=808&type=chunk) - The company reimburses the Administrator for an allocable share of compensation for the CFO, COO, and support staff, with an estimated expense of approximately **$0.4 million** for Q1 2025[809](index=809&type=chunk) Trustee Compensation (Three Months Ended March 31, 2025) | Name | Fees Earned or Paid in Cash | Total Compensation | | :--- | :--- | :--- | | Robert B. Allardice, III | $27,500 | $27,963 | | David J. Miller | $19,375 | $19,838 | | Ronald I. Simon, Ph.D. | $19,375 | $19,838 | | Mary McBride | $17,500 | $17,963 | | Laurence E. Penn | — | — | | Michael W. Vranos | — | — | [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=143&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) As of June 6, 2025, executive officers and trustees as a group beneficially owned **1.4%** of outstanding common shares, with no individual holding **1%** or more, and the 2023 Equity Incentive Plan was terminated post-conversion - As of June 6, 2025, all executive officers and trustees as a group beneficially owned **510,442 common shares**, representing **1.4%** of the outstanding shares[815](index=815&type=chunk) - No individual trustee or executive officer beneficially owned **1% or more** of the company's common shares[815](index=815&type=chunk) - The company's 2023 Equity Incentive Plan was terminated upon conversion to a closed-end fund, but **39,577 previously granted restricted shares** remain outstanding and subject to vesting[824](index=824&type=chunk)[825](index=825&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=145&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Key related party transactions are governed by the Advisory and Administration Agreements with Ellington affiliates, stipulating management fees and expense reimbursements, with oversight by the Governance Committee and 1940 Act restrictions post-conversion - The primary related party relationships are with the Adviser and Administrator, both affiliates of Ellington, governed by the Advisory and Administration Agreements effective April 1, 2025[828](index=828&type=chunk)[838](index=838&type=chunk) - The Advisory Agreement stipulates a **1.50% annual base management fee** and a **17.5% performance fee** on income above an **8% hurdle**[829](index=829&type=chunk)[830](index=830&type=chunk) - The Administration Agreement outlines the reimbursement by the Fund for its allocable portion of costs incurred by the Administrator, including compensation for the CFO and COO[838](index=838&type=chunk) - The Governance Committee reviews related party transactions, which are also subject to the prohibitions on principal and joint transactions under the 1940 Act since the conversion[826](index=826&type=chunk)[827](index=827&type=chunk) [Principal Accountant Fees and Services](index=147&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) PricewaterhouseCoopers LLP serves as the independent auditor, with all services pre-approved by the Audit Committee, and total fees for Q1 2025 were **$205,253**, primarily for audit services - PricewaterhouseCoopers LLP (PwC) is the company's independent registered public accounting firm[841](index=841&type=chunk) PwC Fees | Fee Type | Three-Month Period Ended Mar 31, 2025 | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Audit Fees | $205,000 | $514,250 | $476,840 | | Audit-related Fees | — | $44,700 | $76,500 | | Tax Fees | — | — | — | | All Other Fees | $253 | $1,010 | $1,641 | | **Total Fees** | **$205,253** | **$559,960** | **$554,981** | - All services provided by PwC were pre-approved by the Audit Committee in accordance with its established policies and procedures[846](index=846&type=chunk)[847](index=847&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=149&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists key exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications, with financial statement schedules omitted as information is in Item 8 - Key exhibits filed with the report include: - Corporate governance documents (Declaration of Trust, Bylaws) - Material contracts (Advisory Agreement, Administration Agreement) - CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley) - Insider Trading Policy and Recovery of Erroneously Awarded Compensation Policy[852](index=852&type=chunk)[853](index=853&type=chunk) - Financial statement schedules have been omitted as the necessary information is contained within the Financial Statements and Notes to Financial Statements in Item 8[852](index=852&type=chunk) [Form 10-K Summary](index=151&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary under this item - None[854](index=854&type=chunk)

Financial Data and Key Metrics Changes - For calendar Q1, the company reported a net loss of $0.23 per share and adjusted distributable earnings of $0.26 per share [10] - The overall net interest margin increased by 20 basis points to 5.27, supported by a growing capital allocation to CLOs [10][11] - The economic return for the quarter was negative 3.2%, with book value per share at $6.08 [11] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 46% to $250 million, while capital allocated to CLOs expanded to 81% from 72% [12] - The agency mortgage portfolio decreased slightly to $504 million from $512 million at the end of the previous quarter [12] - The portfolio P&L by strategy showed a negative $0.24 per share from CLOs and a positive $0.08 from agency [10] Market Data and Key Metrics Changes - The market experienced turbulence in March, with credit spreads widening and prices declining across high yield, investment grade, and CLO debt tranches [8] - Significant tariff de-escalations in May led to credit spreads and prices reversing course, retracing a significant portion of the March and April moves [9] Company Strategy and Development Direction - The company successfully completed its conversion to a registered closed-end fund and changed its fiscal calendar to begin on April 1 [5][6] - The strategy focuses on increasing the CLO portfolio while maintaining liquidity and flexibility in response to market conditions [23][30] - The company plans to add corporate debt to its liability structure later this year, which should be accretive to net investment income [30] Management's Comments on Operating Environment and Future Outlook - Management noted that while there were mark-to-market losses in calendar Q1, most price declines were driven by credit spread widening rather than realized credit losses [23] - The company is optimistic about deploying capital in a compelling market and believes it is well-positioned to drive strong earnings moving forward [30] Other Important Information - The company plans to issue monthly updates on portfolio metrics and net asset value on its website [27] - The company maintained high levels of liquidity, with approximately 18.8% of the total portfolio in cash and cash equivalents as of April 30 [28] Q&A Session Summary Question: How does the yield on newly acquired CLOs compare to the previous $250 million? - Management indicated that the weighted average yield varied from slightly wider to potentially hundreds of basis points back, depending on the type of assets purchased [34][35] Question: Do you have dry powder to deploy? - Management confirmed that they still have good dry powder available for deployment [37] Question: What are the latest thoughts on the ADE trajectory? - Management stated that they might be a little short this quarter but are on track for coverage in the third quarter [56]

Financial Data and Key Metrics Changes - For calendar Q1, the company reported a net loss of $0.23 per share and adjusted distributable earnings of $0.26 per share [9] - The overall net interest margin increased by 20 basis points to 5.27, supported by a growing capital allocation to CLOs [9] - The economic return for the quarter was negative 3.2%, with book value per share at $6.08 [10][11] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 46% to $250 million, while capital allocated to CLOs expanded to 81% from 72% at the end of the previous quarter [11] - The agency RMBS holdings decreased slightly to $504 million from $512 million at the end of the previous quarter [11] - The portfolio P&L by strategy showed a negative $0.24 per share from CLOs and a positive $0.08 from agency [10] Market Data and Key Metrics Changes - The market experienced strong performance in January and February, followed by turbulence in March due to fears of tariffs, slowing growth, and persistent inflation [7] - Credit spreads widened significantly in March, impacting CLO mezzanine debt and equity tranches, leading to meaningful price declines [7][8] - Recent tariff de-escalations have led to credit spreads and prices reversing course in May, recovering a significant portion of the declines [8] Company Strategy and Development Direction - The company successfully completed its conversion to a registered closed-end fund and changed its fiscal calendar to begin on April 1 [4][5] - The strategy focuses on increasing the CLO portfolio while maintaining liquidity and flexibility in response to market conditions [22][29] - The company plans to add corporate debt to its liability structure later this year, which should be accretive to net investment income [29] Management's Comments on Operating Environment and Future Outlook - Management noted that while there were mark-to-market losses in calendar Q1, most price declines were driven by credit spread widening rather than realized credit losses [22] - The company is optimistic about deploying capital in a compelling market and believes it is well-positioned to drive strong earnings moving forward [29] - Management expects to be slightly short on dividend coverage in the second quarter but is on track for recovery in the third quarter [56] Other Important Information - The company disposed of all remaining mortgage positions shortly after April 1, which allowed for increased liquidity and buying power [8][25] - As of April 30, approximately 18.8% of the total portfolio, or about $59 million, was in cash and cash equivalents, providing ample dry powder for deployment [27] Q&A Session Summary Question: How does the yield on newly acquired CLOs compare to the previous $250 million? - Management indicated that the weighted average yield varied from slightly wider to potentially hundreds of basis points back, depending on the type of assets purchased [34] Question: Is there still dry powder available for deployment? - Management confirmed that there is still good dry powder available and that cash reserves are maintained to allow for increased portfolio size [37][39] Question: What are the latest thoughts on the ADE trajectory? - Management stated that they might be slightly short on covering the dividend in the second quarter but are on track for recovery in the third quarter [56]

Financial Performance - Net loss was $(7.9) million, or $(0.23) per share[11] - Adjusted Distributable Earnings were $9.0 million, or $0.26 per share[11] - Shareholders' equity was $228.5 million, with a book value per share of $6.08[11] Portfolio Allocation - Capital allocation to CLOs increased to 81% as of March 31, 2025, compared to 72% as of December 31, 2024[11] - The CLO portfolio grew to $249.9 million as of March 31, 2025, from $171.1 million as of December 31, 2024[11] - Agency RMBS portfolio was $503.9 million as of March 31, 2025[11] Market Conditions - The dividend rate was 17.1% based on the May 19, 2025, closing price of $5.62 and a monthly dividend of $0.08 per common share declared on May 7, 2025[11] - The weighted average constant prepayment speed on fixed-rate specified pools decreased quarter over quarter to 7.2 CPR from 9.5 CPR[11] Strategic Changes - The company completed its conversion to a CLO closed-end fund on April 1, 2025[11] - The entirety of Agency RMBS was sold and related TBA hedges were covered following the conversion in early April[11]

Core Viewpoint - Ellington Credit (EARN) reported quarterly earnings of $0.26 per share, missing the Zacks Consensus Estimate of $0.27 per share, and showing a decline from $0.27 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was -3.70%, contrasting with a previous quarter where the company exceeded expectations by 3.85% [2] - Revenues for the quarter were $9.25 million, missing the Zacks Consensus Estimate by 9.34%, compared to revenues of $0.28 million a year ago [3] - The company has not surpassed consensus revenue estimates in the last four quarters [3] Stock Performance - Ellington Credit shares have declined approximately 15.1% since the beginning of the year, while the S&P 500 has gained 1.4% [4] - The stock's immediate price movement will largely depend on management's commentary during the earnings call [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $8.1 million, and for the current fiscal year, it is $0.96 on revenues of $36.81 million [8] - The estimate revisions trend for Ellington Credit is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [7] Industry Context - The REIT and Equity Trust industry, to which Ellington Credit belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting potential challenges ahead [9]