Ellington Credit Company (NYSE:EARN) Q4 2024 Earnings Conference Call March 13, 2025 11:00 AM ET Company Participants Alaael-Deen Shilleh - Associate General Counsel and Secretary Laurence E. Penn - Chief Executive Officer and President Mark Tecotzky - Co-Chief Investment Officer Christopher Smernoff - Chief Financial Officer Gregory Borenstein - Head of Corporate Credit at Ellington Management Group Conference Call Participants Douglas Harter - UBS Matthew Erdner - JonesTrading Operator Good morning, ladie ...

Earnings Conference Call Q4 2024 March 13, 2025 Q4 2024 EARNINGS Important Notice Forward-Looking Statements Certain statements in this presentation constitute 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 from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking s ...

Financial Performance - Estimated book value per common share is in the range of $6.52 to $6.54 as of December 31, 2024, including dividends of $0.24 per common share declared during the quarter[6] - Estimated net income (loss) per common share for the quarter ended December 31, 2024, is in the range of $(0.08) to $(0.06)[6] - Estimated Adjusted Distributable Earnings per common share for the quarter ended December 31, 2024, is in the range of $0.26 to $0.28[6] - Total shareholders' equity is estimated to be $195 million as of December 31, 2024[6] Portfolio Composition - CLO portfolio increased to approximately $170 million and MBS portfolio increased to approximately $510 million as of December 31, 2024[6] - Capital allocation to CLOs was approximately 72% as of December 31, 2024, compared to 58% as of September 30, 2024[6] Strategic Initiatives - The company expects to complete the conversion to a closed-end fund on or before April 1, 2025[2] - The strategic transformation to focus on corporate CLOs was approved by shareholders on January 17, 2025[15] - The conversion will allow the company to operate as a regulated investment company under the Internal Revenue Code[2] Financial Reporting - The preliminary financial results are subject to completion and may differ materially from actual results[3]

Core Insights - The article discusses the importance of understanding past performance in relation to future investment results, emphasizing that historical data does not guarantee future outcomes [1][2] - It highlights the role of analysts in providing insights and opinions on various investment opportunities, while noting that these views may not represent the entire platform [1][3] Group 1 - The article mentions that analysts may hold beneficial positions in the stocks they discuss, indicating a potential alignment of interests [2] - It emphasizes the need for investors to conduct their own research and due diligence before making investment decisions [1][3] - The content reflects a focus on innovation, disruption, and growth within the financial sector, particularly in high-tech and early growth companies [3]

Financial Performance and Metrics - The company's book value per share was $6.85 as of September 30, 2024, compared to $6.91 and $7.32 as of June 30, 2024, and December 31, 2023, respectively[190] - Book value per share decreased to $6.85 as of September 30, 2024, from $6.91 as of June 30, 2024, with an economic return of 2.6% for the three-month period ended September 30, 2024[218] - Book value per share decreased from $7.32 in December 2023 to $6.85 in September 2024, despite the increase in total shareholders' equity[248] - Net income for the three-month period ended September 30, 2024, was $5.4 million, compared to a net loss of $11.4 million for the same period in 2023[250] - Net income for Q3 2024 was $5.4 million, a significant improvement from a net loss of $11.4 million in Q3 2023[250] - Net income (loss) for the nine-month period ended September 30, 2024 was $8.6 million, compared to $(7.9) million for the same period in 2023[267] - Net income for the nine-month period ended September 30, 2024 was $8.6 million, compared to a net loss of $7.9 million for the same period in 2023, driven by positive net interest income and total other income[267] - Net Income (Loss) for the three-month period ended September 30, 2024 was $5.445 million, compared to a loss of $11.420 million in the same period in 2023[287] - Net Income (Loss) for the nine-month period ended September 30, 2024 was $8.591 million, compared to a loss of $7.880 million in the same period in 2023[287] - Adjusted Distributable Earnings for the nine-month period ended September 30, 2024 were $19.827 million, up from $8.442 million in 2023[287] - Adjusted Distributable Earnings for the three-month period ended September 30, 2024 were $7.241 million, up from $3.239 million in the same period in 2023[287] - Adjusted Distributable Earnings for the nine-month period ended September 30, 2024 were $19.827 million, up from $8.442 million in the same period in 2023[287] - Adjusted Distributable Earnings Per Share for the three-month period ended September 30, 2024 was $0.28, up from $0.21 in the same period in 2023[287] - Adjusted Distributable Earnings Per Share for the nine-month period ended September 30, 2024 was $0.91, up from $0.59 in the same period in 2023[287] - Weighted Average Shares Outstanding increased to 25,591,607 for the three-month period ended September 30, 2024, compared to 15,199,837 in 2023[287] - Weighted Average Shares Outstanding increased to 25,591,607 for the three-month period ended September 30, 2024, compared to 15,199,837 in the same period in 2023[287] Interest Rates and Yields - The U.S. Federal Reserve reduced the federal funds rate by 50 basis points to 4.75%–5.00% in September 2024[191] - The 2-year U.S. Treasury yield decreased by 111 basis points to 3.64%, and the 10-year U.S. Treasury yield declined by 62 basis points to 3.78% in Q3 2024[192] - The Freddie Mac survey 30-year mortgage rate decreased from 6.86% at the end of June to 6.08% on September 26, 2024[193] - Weighted average yield of the overall portfolio was 7.21% for the three-month period ended September 30, 2024, compared to 4.25% for the same period in 2023[252] - The weighted average yield of the company's overall portfolio increased from 4.25% in Q3 2023 to 7.21% in Q3 2024[252] - Weighted average yield of the overall portfolio for the nine-month periods ended September 30, 2024 and 2023 was 6.29% and 3.95%, respectively[269] - Weighted average yield of the overall portfolio for the nine-month periods ended September 30, 2024 and 2023 was 6.29% and 3.95%, respectively, excluding Catch-up Amortization Adjustments[269] - Average repo borrowing cost was 5.59% for the three-month period ended September 30, 2024, compared to 5.60% for the three-month period ended June 30, 2024[219] - Weighted average borrowing rate on repurchase agreements was 5.37% as of September 30, 2024, compared to 5.54% as of June 30, 2024[219] - Average cost of funds for CLO and Non-Agency RMBS in the three-month period ended September 30, 2024 was 6.29% and 6.80%, respectively[256] - Total adjusted cost of funds for the three-month period ended September 30, 2024 was 1.99%, compared to 2.87% for the same period in 2023[259] - Net interest margin for the three-month period ended September 30, 2024 was 5.22%, compared to 1.38% for the same period in 2023[260] - Net interest margin for the three-month period ended September 30, 2024 was 5.22%, compared to 1.38% for the same period in 2023, due to higher weighted average yield on Agency RMBS and credit portfolios[260] - Total adjusted cost of funds for the nine-month periods ended September 30, 2024 and 2023 was 2.17% and 2.76%, respectively, reflecting the impact of interest rate swaps and net short U.S. Treasury securities[275] - Net interest margin for the nine-month period ended September 30, 2024 was 4.12%, compared to 1.19% for the same period in 2023[276] - The CLO portfolio contributed to an increase in the average cost of funds, with CLO borrowing costs at 6.44% in 2024 compared to no CLO borrowing in 2023[272] - Adjusted cost of funds for the nine-month period ended September 30, 2024 was 2.17%, compared to 2.76% in 2023, driven by interest rate swaps and net short U.S. Treasury securities[275] Portfolio and Investments - The company's CLO portfolio increased by 70% to $144.5 million as of September 30, 2024, compared to $85.1 million as of June 30, 2024[195] - The company's CLO portfolio consisted of $74.8 million in CLO equity tranches and $69.7 million in CLO mezzanine debt tranches as of September 30, 2024[194] - The U.S. CLO market saw $41 billion of new CLO issuance in Q3 2024, compared to $53 billion in Q2 2024[193] - The company's Agency RMBS holdings decreased by 13% to $462.1 million as of September 30, 2024, compared to $531.1 million as of June 30, 2024[197] - Aggregate holdings of interest-only securities and non-Agency RMBS decreased by 44% quarter over quarter to $11.3 million[197] - The fair value of CLO Notes decreased from $63,090 thousand to $52,892 thousand, a decline of 16.2% from December 31, 2023 to September 30, 2024[234] - The fair value of Agency RMBS increased from $454,407 thousand to $462,146 thousand, a growth of 1.7% over the same period[234] - The company's total investment portfolio fair value stood at $618,797 thousand as of September 30, 2024, compared to $611,236 thousand at the end of 2023[234] - The weighted average price of 30-year fixed-rate mortgages in the Agency RMBS portfolio increased from 98.42 to 100.09, reflecting a 1.7% rise[234] - Reverse mortgages in the Agency RMBS portfolio showed a fair value decrease from $37 thousand to $34 thousand, a decline of 8.1%[234] - 58% of the company's invested capital is allocated to corporate CLOs, while 42% is allocated to mortgage-related securities as of September 30, 2024[234] - The company's credit portfolio average holdings increased from $121.7 million in Q3 2023 to $520.0 million in Q3 2024, with yields increasing from 11.24% to 15.98%[254] - Total net realized and unrealized gains on Agency securities were $15.5 million for the three-month period ended September 30, 2024[215] - Total net realized and unrealized losses on the interest rate hedging portfolio were $(18.4) million, or $(0.72) per share, driven by a decrease in interest rates quarter over quarter[216] - Net realized and unrealized gains on long TBAs held for investment were $7.2 million, or $0.28 per share[216] - Other income (loss) for the three-month period ended September 30, 2024 was $3.9 million, primarily due to net realized and unrealized gains of $14.7 million on securities, partially offset by losses on financial derivatives[263][264] - Other income (loss) for the nine-month period ended September 30, 2024 was $6.9 million, primarily from net realized and unrealized gains on financial derivatives[279] - The U.S. Agency MBS Index generated an excess return of 0.76% in the third quarter of 2024[208] - Average pay-ups on the specified pool portfolio decreased to 0.25% as of September 30, 2024, compared to 0.63% as of June 30, 2024[209] - Three-month constant prepayment rates for fixed-rate specified pools increased to 7.5% as of September 30, 2024, compared to 6.7% as of June 30, 2024[212] - The trailing-twelve-month default rate for the Morningstar LSTA U.S. Leveraged Loan Index declined to 78 basis points in August 2024[201] Debt and Leverage - The company had outstanding borrowings under repurchase agreements of $486.9 million as of September 30, 2024, with 90% collateralized by Agency RMBS[189] - The debt-to-equity ratio decreased to 2.5:1 as of September 30, 2024, compared to 3.7:1 as of June 30, 2024[198] - Debt-to-equity ratio was 2.5:1 as of September 30, 2024, compared to 4.0:1 as of June 30, 2024, driven by higher shareholders' equity and less leverage on CLO investments[221] - Total debt-to-equity ratio decreased to 2.5:1 as of September 30, 2024, from 5.4:1 as of December 31, 2023[246] - The company's total debt-to-equity ratio improved significantly from 5.4:1 in December 2023 to 2.5:1 in September 2024[246] - Total outstanding liabilities under repurchase agreements decreased to $486.92 million as of September 30, 2024, from $729.54 million as of December 31, 2023[246] - Total borrowings outstanding under repurchase agreements decreased from $729.5 million in December 2023 to $486.9 million in September 2024[246] - Outstanding repurchase agreements decreased to $486.9 million as of September 30, 2024, from $729.5 million as of December 31, 2023[290] - Weighted average contractual haircut on repo borrowings increased to 8.6% as of September 30, 2024, from 5.7% as of December 31, 2023[292] - Aggregate amount at risk under repurchase agreements decreased to $43.3 million as of September 30, 2024, from $50.1 million as of December 31, 2023[294] - Aggregate amount at risk under derivative contracts decreased to $23.6 million as of September 30, 2024, from $26.0 million as of December 31, 2023[296] - Aggregate amount at risk under forward settling TBA and Agency pass-through certificates increased to $2.7 million as of September 30, 2024, from $1.7 million as of December 31, 2023[298] - The weighted average lives of RMBS and CLOs are generally much longer than the short-term repos used to finance them, creating a maturity mismatch[236] - Changes in interest rates may cause financing costs for RMBS and CLOs to increase relative to the income on these assets over the investment term[236] - Fluctuations in the fair value of RMBS and CLO investments may trigger changes in margin requirements, potentially requiring additional collateral[236] - Changes in fair value of RMBS and CLO investments may trigger margin requirements, potentially requiring additional collateral for repurchase agreements[236] - The company faces interest rate risk due to the mismatch between short-term repo financing (average maturity <364 days) and longer-term RMBS/CLO investments[236] Liquidity and Capital Resources - Cash and cash equivalents were $25.7 million as of September 30, 2024, compared to $28.8 million as of June 30, 2024[200] - Cash and cash equivalents stood at $25.7 million as of September 30, 2024[299] - Shareholders' equity increased to $191.6 million as of September 30, 2024, from $136.2 million as of December 31, 2023[248] - Shareholders' equity increased from $136.2 million in December 2023 to $191.6 million in September 2024, driven by $62.5 million from share issuance and $8.6 million net gain[248] - The company's liquidity and capital resources are expected to be sufficient to meet short-term and long-term needs, including repayment of borrowings, funding assets, and paying dividends[288] - Capital resources include cash on hand, cash flow from investments, borrowings under repurchase agreements, and proceeds from equity offerings[288] - Short-term liquidity requirements include acquisition costs, management fees, margin requirements, and repayment of repurchase agreements[288] - The company believes its capital resources, including free cash on hand and current and anticipated availability of credit, will be sufficient to meet short-term and long-term liquidity requirements[310] - For the nine-month period ended September 30, 2024, the company's operating activities provided net cash of $4.7 million, while investing activities provided net cash of $190.4 million[306] - The company's repo activity used net cash of $255.3 million for the nine-month period ended September 30, 2024, resulting in a net cash usage of $60.2 million when combined with operating and investing activities[306] - The company issued 9,308,793 common shares during the nine-month period ended September 30, 2024, providing net proceeds of $62.5 million after commissions and offering costs[308] - As of September 30, 2024, the company had $22.4 million of common shares available to be issued under the 2023 ATM program[308] - The company repurchased 474,192 common shares through November 8, 2024 at an average price of $9.21 per share, with an aggregate cost of $4.4 million[309] - As of September 30, 2024, the company had $486.9 million of outstanding borrowings with 18 counterparties[315] Expenses and Costs - Total interest expense for the three-month periods ended September 30, 2024 and 2023 was $7.8 million and $12.3 million, respectively, primarily due to repo borrowings[255] - Interest expense decreased from $12.3 million in Q3 2023 to $7.8 million in Q3 2024[249] - Total interest expense for the nine-month periods ended September 30, 2024 and 2023 was $28.1 million and $33.7 million, respectively, primarily due to repo borrowings[271] - Management fee expense for the three-month periods ended September 30, 2024 and 2023 was $0.7 million and $0.4 million, respectively[261] - Management fee expense for the three-month periods ended September 30, 2024 and 2023 was $0.7 million and $0.4 million, respectively, driven by higher shareholders' equity[261] - Other operating expenses for the three-month periods ended September 30, 2024 and 2023 were $2.0 million and $0.9 million, respectively[262] - Other operating expenses for the three-month periods ended September 30, 2024 and 2023 were $2.0 million and $0.9 million, respectively, primarily due to increases in professional fees and compensation expense[262] - Management fee expense for the nine-month periods ended September 30, 2024 and 2023 was $1.8 million and $1.3 million, respectively, driven by higher shareholders' equity[277] - Other operating expenses for the nine-month periods ended September 30, 2024 and 2023 were $4.7 million and $2.9 million, respectively, due to increases in professional fees and compensation[278] - Other operating expenses for the nine-month periods ended September 30, 2024 and 2023 were approximately $4.7 million and $2.9 million, respectively, primarily due to increases in professional fees and compensation expense[278] - Income tax expense for the nine-month period ended September 30, 2024 was $0.7 million, with no such expense recorded in 2023 due

Financial Data and Key Metrics Changes - The company reported net income of $0.21 per share and adjusted distributable earnings (ADE) of $0.28 per share for Q3 2024, with ADE exceeding the first quarter level of $0.27 per share [21][22] - The debt-to-equity ratio decreased to 2.5:1 at quarter end from 3.7:1 at June 30, driven by higher shareholders' equity and reduced leverage on the growing CLO investment portfolio [19][22] - The overall net interest margin increased to 5.22% from 4.24% in the prior quarter, reflecting a higher allocation of capital to the credit strategy [22][23] Business Line Data and Key Metrics Changes - The CLO strategy generated $0.12 per share of portfolio income, supported by strong net interest income and net gains from opportunistic sales [27] - The Agency strategy performed well, generating $0.18 per share of portfolio income, driven by falling interest rates and tightening agency MBS spreads [29][30] - The CLO portfolio increased to $144.5 million at September 30 from $85 million at June 30, with CLO equity comprising 52% of total CLO holdings [36] Market Data and Key Metrics Changes - The CLO market benefited from strengthening loan fundamentals and robust demand for leveraged loans, with declining default rates in both the U.S. and Europe [13][14] - Agency MBS spreads tightened, and the U.S. Agency MBS Index generated an excess return of 76 basis points for the quarter [15] - The Federal Reserve reduced the target range for the federal funds rate by 50 basis points in September, with expectations for further cuts later in 2024 [30] Company Strategy and Development Direction - The company is in the process of converting to a Delaware closed-end fund, with shareholder support for the conversion being overwhelmingly positive [9][11] - The strategic transformation aims to enhance risk-adjusted returns and provide better access to capital markets while reducing corporate income tax exposure [11][34] - The company plans to continue shifting its portfolio from Agency MBS to CLOs, with nearly 60% of capital allocated to CLOs by quarter end [36][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the continued ramp-up and strong performance of the CLO strategy, highlighting the active approach taken to enhance returns [55] - The company anticipates that the strategic transformation will generate superior risk-adjusted returns for shareholders [57] - Management noted that the current market conditions, including rising long-term interest rates, may impact origination volumes but could also create favorable supply-demand dynamics for Agency MBS [53] Other Important Information - The company accrued an income tax expense of $463,000 for the third quarter, resulting in an effective tax rate of about 7.8% due to the utilization of net operating losses [33][34] - The company is currently operating as a taxable C-Corp after revoking its REIT election effective January 1 of the year [32] Q&A Session Summary Question: Can you speak on the credit quality and the CLL book and how you expect that to trend over time? - Management indicated that the current trailing 12-month default rate is below 1%, with potential elevation in a high-rate environment, but overall credit quality remains stable [59][60] Question: How do you think about the dividend as you rotate more capital into CLOs? - Management stated that despite lower leverage, the increasing net interest margin supports the dividend, which remains well covered by adjusted distributable earnings [62] Question: Can you talk about your continued appetite to raise capital through the ATM? - Management confirmed that slight dilution occurred during the quarter, but raising capital at favorable prices is seen as accretive to earnings [64][65] Question: Would you expect the strong issuance trend to remain in place if pricing remains supportive? - Management expects continued strong issuance in the CLO market, driven by demand for floating-rate products and a busy pipeline ahead [67][68] Question: What does the timeline look like to move capital into new CLO equity? - Management indicated that they are prepared to act quickly to reinvest capital into new CLO equity once the shareholder vote is supportive, with a realistic target of 90 days for full rotation [70][75]

Ellington Credit (EARN) came out with quarterly earnings of $0.28 per share, beating the Zacks Consensus Estimate of $0.27 per share. This compares to earnings of $0.21 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.70%. A quarter ago, it was expected that this residential mortgage real estate investment trust would post earnings of $0.24 per share when it actually produced earnings of $0.36, delivering a surprise of 50%.Ov ...

Exhibit 99.1 Ellington Credit Company Reports Third Quarter 2024 Results OLD GREENWICH, Connecticut—November 12, 2024 Ellington Credit Company (NYSE: EARN) ("we", "us," or "our") today reported financial results for the quarter ended September 30, 2024. Highlights • Net income (loss) of $5.4 million, or $0.21 per share. • Adjusted Distributable Earnings of $7.2 million, or $0.28 per share. 1 2 3 4 5 • Book value of $6.85 per share as of September 30, 2024, which includes the effects of dividends of $0.24 pe ...

The recent Federal Reserve cut of interest rates could be a very good thing for REITs. Rates have been necessarily high for quite a while, and almost every REIT is confirming in their official risk disclosures that they've struggled in I'm Jason Ditz and I have 20 years of experience in foreign policy research. My work has appeared in Forbes, Toronto Star, Minneapolis Star-Tribune, Providence Journal, Washington Times and the Detroit Free Press, as well as American Conservative Magazine and the Quincy Insti ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Shares of Beneficial Interest, $0.01 par value per share EARN The New York Stock Exchange FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition perio ...