[Report Overview and Highlights](index=1&type=section&id=Report%20Overview%20and%20Highlights) [Conversion Update](index=1&type=section&id=Conversion%20Update) The company completed its conversion to a Delaware-domiciled closed-end fund focused on corporate CLOs on April 1, 2025, intending to operate as a RIC for tax purposes, and changed its fiscal year end to March 31 - Completed conversion to a closed-end fund focused on corporate CLOs on April 1, 2025, and will operate as a **Regulated Investment Company (RIC)**[3](index=3&type=chunk) - Post-conversion, the company liquidated its entire long Agency RMBS and short TBA positions[3](index=3&type=chunk)[6](index=6&type=chunk) - The fiscal year end has been changed to March 31, with the three-month period ended March 31, 2025, being a short fiscal year as a taxable C-Corporation[4](index=4&type=chunk) [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) For Q1 2025, the company reported a net loss of **$7.9 million** and Adjusted Distributable Earnings of **$9.0 million**, while significantly increasing its CLO portfolio and reducing leverage Q1 2025 Key Financial Metrics | Metric | Value | Per Share | | :--- | :--- | :--- | | Net Income (Loss) | $(7.9) million | $(0.23) | | Adjusted Distributable Earnings | $9.0 million | $0.26 | | Book Value (as of Mar 31, 2025) | - | $6.08 | | Dividends (for the period) | - | $0.24 | Portfolio and Capital Allocation Changes (as of Mar 31, 2025 vs. Dec 31, 2024) | Metric | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | CLO Portfolio | $249.9 million | $171.1 million | | Capital Allocation to CLOs | 81% | 72% | - The debt-to-equity ratio decreased to **2.2:1**, and the net mortgage assets-to-equity ratio was reduced to **0.0:1**[8](index=8&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed the net loss to macro-driven CLO price declines, expanded the CLO portfolio by **46%** in preparation for conversion, and plans to deploy capital into dislocated credit markets - CEO Laurence Penn attributed the quarterly net loss to macro challenges causing CLO price declines, rather than credit-specific concerns[5](index=5&type=chunk) - The CLO portfolio was expanded by **46%** during the quarter to **$250 million**, while the Agency RMBS portfolio was neutralized using net short TBA positions before being liquidated post-conversion[6](index=6&type=chunk) - The company's estimated net asset value per share as of April 30 was in the range of **$5.85 to $5.91**[6](index=6&type=chunk) - Management sees the timing of the conversion as advantageous, providing 'dry powder' to invest in a dislocated credit market with wider spreads and expanded opportunities[9](index=9&type=chunk) [Financial Results and Portfolio Composition](index=2&type=section&id=Financial%20Results%20and%20Portfolio%20Composition) [Portfolio of Long Investments](index=2&type=section&id=Portfolio%20of%20Long%20Investments) As of March 31, 2025, the total long investment portfolio increased to **$754.2 million**, driven by significant expansion in the Credit Portfolio, particularly CLOs, while the Agency Portfolio slightly decreased Portfolio Fair Value Comparison ($ in thousands) | Portfolio Segment | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Credit | $250,347 | $171,606 | | Total Agency | $503,894 | $512,309 | | **Total Investments** | **$754,241** | **$683,915** | [CLO Holdings](index=2&type=section&id=CLO%20Holdings) The CLO portfolio grew by **46%** to **$249.9 million** as of March 31, 2025, with capital allocation to CLOs increasing to **81%**, composed of both equity and mezzanine debt tranches CLO Portfolio Composition (March 31, 2025) | CLO Tranche | Fair Value ($M) | | :--- | :--- | | Equity Tranches | $164.4 | | Mezzanine Debt Tranches | $85.5 | | **Total** | **$249.9** | - The company aims to maintain a diversified portfolio of CLO equity and debt, with the majority expected to remain dollar-denominated[12](index=12&type=chunk) [Agency RMBS Holdings](index=2&type=section&id=Agency%20RMBS%20Holdings) Agency RMBS holdings slightly decreased to **$503.9 million**, with the company substantially increasing its net short TBA position to offset long holdings prior to conversion - Agency RMBS holdings decreased slightly from **$512.3 million** to **$503.9 million** quarter-over-quarter[13](index=13&type=chunk) - The company used a significantly increased net short TBA position to neutralize its Agency RMBS holdings prior to the conversion[13](index=13&type=chunk) [Leverage and Hedging](index=2&type=section&id=Leverage%20and%20Hedging) The company's leverage decreased, with the adjusted debt-to-equity ratio falling to **2.2:1**, and all interest rate hedges shifted to short TBA positions by quarter-end Leverage Ratio Comparison | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Debt-to-Equity Ratio | 2.2:1 | 2.9:1 | | Net Mortgage Assets-to-Equity Ratio | 0.0:1 | 2.6:1 | - As of March 31, 2025, all interest rate hedges consisted of short TBA positions; the company no longer held any interest rate swap hedges[14](index=14&type=chunk)[15](index=15&type=chunk) [Operating Results and Performance Analysis](index=3&type=section&id=Operating%20Results%20and%20Performance%20Analysis) [Net Interest Margin and Adjusted Distributable Earnings](index=3&type=section&id=Net%20Interest%20Margin%20and%20Adjusted%20Distributable%20Earnings) The credit portfolio's net interest margin significantly increased to **11.13%**, while the Agency portfolio's decreased, and Adjusted Distributable Earnings per share slightly declined but covered dividends Net Interest Margin Comparison (Q1 2025 vs Q4 2024) | Portfolio | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Credit | 11.13% | 8.54% | | Agency | 2.29% | 3.24% | - Adjusted distributable earnings per share was **$0.26**, a slight decrease from **$0.27** in the previous quarter, but still exceeded dividends paid[16](index=16&type=chunk) Operating Results by Strategy (Total Profit/Loss, $ in thousands) | Strategy | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Total CLO | $(8,477) | $2,821 | | Total Agency RMBS | $2,875 | $(3,335) | | **Net Income (Loss)** | **$(7,870)** | **$(2,005)** | [CLO Performance](index=4&type=section&id=CLO%20Performance) The CLO strategy generated negative results due to mark-to-market losses and increased market volatility in March, with U.S. mezzanine tranches impacted by lower-quality loans and slower prepayments - The CLO strategy had negative results as mark-to-market losses surpassed net interest income and gains on credit hedges[22](index=22&type=chunk) - Market volatility increased in March, driven by concerns over tariffs and economic slowdown, which negatively pressured CLO prices in both the U.S. and Europe[19](index=19&type=chunk) - U.S. CLO mezzanine tranches were impacted by weakness in lower-quality loans and reduced deleveraging from slower prepayments[20](index=20&type=chunk) [Agency Performance](index=4&type=section&id=Agency%20Performance) The company's Agency portfolio generated positive results throughout the quarter, successfully navigating widening Agency RMBS yield spreads in March due to rising volatility - EARN's Agency portfolio generated positive results during each month of the period[24](index=24&type=chunk) - Agency RMBS yield spreads widened in March due to rising volatility related to uncertain tariff policies, leading to a negative excess return of **(0.07%)** for the U.S. Agency MBS Index for the quarter[23](index=23&type=chunk) [General and Administrative Expenses](index=4&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses increased quarter-over-quarter due to higher professional fees, compensation related to the conversion, and increased management fees from a larger capital base - G&A expenses increased due to higher professional fees and compensation related to the conversion, and higher management fees from a larger capital base[25](index=25&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) [Consolidated Statement of Operations (Unaudited)](index=6&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20OPERATIONS%20(UNAUDITED)) For Q1 2025, the company reported a net loss of **$(7.9) million** due to significant unrealized losses on securities and derivatives, despite **$9.2 million** in net interest income Statement of Operations Highlights (Q1 2025 vs Q4 2024, $ in thousands) | Line Item | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Total Net Interest Income | $9,247 | $6,142 | | Total Expenses | $2,582 | $2,269 | | Total Other Income (Loss) | $(14,541) | $(6,059) | | **Net Income (Loss)** | **$(7,870)** | **$(2,005)** | | **Net Income (Loss) Per Share** | **$(0.23)** | **$(0.07)** | [Consolidated Balance Sheet (Unaudited)](index=7&type=section&id=CONSOLIDATED%20BALANCE%20SHEET%20(UNAUDITED)) As of March 31, 2025, total assets decreased to **$783.6 million**, total liabilities decreased to **$555.1 million**, while total shareholders' equity increased to **$228.5 million**, resulting in a book value per share of **$6.08** Balance Sheet Summary (As of Mar 31, 2025 vs. Dec 31, 2024, $ in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $783,557 | $824,092 | | Total Liabilities | $555,056 | $630,366 | | **Total Shareholders' Equity** | **$228,501** | **$193,726** | | **Book Value Per Share** | **$6.08** | **$6.53** | - The increase in shareholders' equity was supported by the issuance of **8,075,118** common shares under the at-the-market offering program during the quarter[35](index=35&type=chunk) [Reconciliation of Adjusted Distributable Earnings to Net Income (Loss)](index=8&type=section&id=Reconciliation%20of%20Adjusted%20Distributable%20Earnings%20to%20Net%20Income%20(Loss)) Adjusted Distributable Earnings (ADE), a non-GAAP measure, reconciles the **$(7.9) million** net loss to **$9.0 million** ADE for Q1 2025 by excluding unrealized gains/losses and non-recurring items - Adjusted Distributable Earnings is calculated by adjusting GAAP net income for items like net realized and unrealized gains/losses on securities and derivatives[36](index=36&type=chunk)[37](index=37&type=chunk) ADE Reconciliation (Q1 2025, $ in thousands) | Line Item | Amount | | :--- | :--- | | Net Income (Loss) | $(7,870) | | Adjustments (subtotal) | $16,829 | | **Adjusted Distributable Earnings** | **$8,953** | | **Adjusted Distributable Earnings Per Share** | **$0.26** | [Other Information](index=4&type=section&id=Other%20Information) [About Ellington Credit Company](index=4&type=section&id=About%20Ellington%20Credit%20Company) Ellington Credit Company is a non-diversified, closed-end fund externally managed by Ellington Management Group, L.L.C., focused on investing primarily in CLO mezzanine debt and equity tranches - The Fund is a non-diversified closed-end fund investing primarily in CLO mezzanine debt and equity tranches[26](index=26&type=chunk) [Conference Call Information](index=5&type=section&id=Conference%20Call%20Information) A conference call to discuss Q1 2025 financial results is scheduled for 11:00 a.m. Eastern Time on May 21, 2025, with an investor presentation available online - A conference call to discuss financial results is scheduled for 11:00 a.m. Eastern Time on May 21, 2025[27](index=27&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=5&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements subject to numerous risks and uncertainties, including changes in interest rates, market volatility, and regulatory changes, where actual results may vary materially - The release contains forward-looking statements subject to risks such as interest rate changes, market volatility, and our ability to adapt to the new regulatory regime post-conversion[28](index=28&type=chunk)

Group 1 - Ellington Credit Company has changed its mandate from a REIT (Real Estate Investment Trust) to a RIC (Registered Investment Company) [1] - The new focus of Ellington Credit Company is on investment strategies that align with the RIC structure [1]

Part I [Business](index=4&type=section&id=Item%201.%20Business) Ellington Credit Company is undergoing a significant strategic transformation, shifting its focus from a residential mortgage REIT to a C-Corporation specializing in corporate Collateralized Loan Obligations (CLOs) - On March 29, 2024, the company initiated a **"CLO Strategic Transformation,"** shifting its investment strategy to focus on corporate CLOs, revoking its REIT election, and planning to convert to a RIC on April 1, 2025[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The primary investment objective is to generate attractive yields and returns by managing a portfolio of corporate CLOs, with an emphasis on **mezzanine debt and equity tranches**[19](index=19&type=chunk)[29](index=29&type=chunk) - The company is externally managed by an affiliate of Ellington Management Group, L.L.C., which had approximately **$13.7 billion in assets under management** as of December 31, 2024[20](index=20&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - A new management agreement includes a **1.50% annual Base Management Fee** on Net Asset Value and a **Performance Fee of 17.5%** above an 8% annual hurdle rate, with the Manager waiving all Performance Fees through March 31, 2025[51](index=51&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - As of December 31, 2024, the company had a **debt-to-equity ratio of 2.9 to 1**, with approximately **$563.0 million** outstanding under repurchase agreements[47](index=47&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its CLO investments, legacy Agency RMBS portfolio, financing and hedging activities, external manager relationship, and planned organizational changes - **CLO Investment Risks:** Investments in CLO mezzanine and equity tranches are **highly subordinated and exposed to first-loss risk**, with underlying corporate loans being typically below investment grade and sensitive to economic downturns[99](index=99&type=chunk)[106](index=106&type=chunk)[114](index=114&type=chunk) - **Agency RMBS Risks:** The value of Agency RMBS is subject to changes in the status of Fannie Mae and Freddie Mac, **prepayment rate volatility**, and interest rate fluctuations[141](index=141&type=chunk)[148](index=148&type=chunk)[155](index=155&type=chunk) - **Financing and Hedging Risks:** The use of leverage through short-term repurchase agreements **magnifies potential losses** and exposes the company to liquidity risk from margin calls or the inability to renew financing[177](index=177&type=chunk)[183](index=183&type=chunk)[190](index=190&type=chunk) - **Manager Relationship Risks:** The company's dependence on its external manager creates **conflicts of interest** regarding fee structures and the allocation of investment opportunities[216](index=216&type=chunk)[218](index=218&type=chunk)[224](index=224&type=chunk) - **Organizational and Tax Risks:** The company must maintain its 1940 Act exclusion until its RIC conversion, and its ability to use **significant NOL carryforwards** could be limited by Section 382 ownership changes[247](index=247&type=chunk)[258](index=258&type=chunk)[266](index=266&type=chunk) [Unresolved Staff Comments](index=48&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[303](index=303&type=chunk) [Cybersecurity](index=48&type=section&id=Item%201C.%20Cybersecurity) The company relies on its external manager's cybersecurity framework, which is overseen by the Audit Committee and has not experienced any material threats to date - The company is externally managed and relies on the information systems and cybersecurity processes of its manager, Ellington[304](index=304&type=chunk) - Oversight is provided by the company's Board of Trustees through the Audit Committee, which receives regular reports on cybersecurity risks[311](index=311&type=chunk) - Ellington's cybersecurity program is led by its CTO and focuses on technical safeguards, incident response, third-party risk management, and employee training[309](index=309&type=chunk)[313](index=313&type=chunk) - To date, **no risks from cybersecurity threats have materially affected the company**, and recent minor incidents at the manager were not material[308](index=308&type=chunk)[310](index=310&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) The company does not own any real estate and uses office space provided by its external manager - The company does not own any properties and its principal offices are located in leased space provided by the Manager[314](index=314&type=chunk) [Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) Neither the company nor its manager are currently subject to any material legal proceedings - The company and its affiliates are not currently subject to any material legal proceedings[315](index=315&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[318](index=318&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%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 a share repurchase program in place but no shares repurchased in Q4 2024 - Common shares are listed on the NYSE under the symbol **"EARN"**[320](index=320&type=chunk) - A share repurchase program is in place, with authorization to repurchase up to **725,808 common shares** remaining as of December 31, 2024[323](index=323&type=chunk) - **No common shares were repurchased** under the program during the three-month period ended December 31, 2024[324](index=324&type=chunk) [[Reserved]](index=52&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company is executing a strategic transformation to focus on corporate CLOs, reporting net income of $6.6 million and an economic return of 2.3% for 2024 [Executive Summary and Market Developments](index=53&type=section&id=Executive%20Summary%20and%20Market%20Developments) The company is transforming to focus on CLOs amid a market environment of interest rate cuts and record leveraged loan issuance in 2024 - The company is undergoing a **"CLO Strategic Transformation,"** revoking its REIT status as of 2024 and planning to convert to a RIC on April 1, 2025[327](index=327&type=chunk)[328](index=328&type=chunk) - The Federal Reserve cut its target rate by a total of **100 basis points** in the latter half of 2024, ending the year at a range of 4.25%-4.50%[333](index=333&type=chunk) - The U.S. leveraged loan market saw record issuance of **$1.5 trillion** in 2024, with default rates declining to 0.91% by year-end[348](index=348&type=chunk) - Book value per share decreased from **$7.32** at year-end 2023 to **$6.53** as of December 31, 2024[332](index=332&type=chunk) [Portfolio Overview and Outlook](index=55&type=section&id=Portfolio%20Overview%20and%20Outlook) The company significantly expanded its CLO portfolio to $171.1 million while reducing Agency RMBS holdings and lowering its debt-to-equity ratio to 2.9:1 Portfolio Composition Change (Year-over-Year) | Asset Class | Dec 31, 2024 (in millions) | Dec 31, 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | CLO Portfolio | $171.1 | $17.4 | +883% | | Agency RMBS | $512.3 | $728.0 | -30% | - The debt-to-equity ratio, adjusted for unsettled trades, decreased to **2.9:1** as of Dec 31, 2024, compared to 5.3:1 as of Dec 31, 2023[346](index=346&type=chunk) - As of year-end 2024, **89% of borrowings were secured by Agency RMBS** and 11% by CLOs[346](index=346&type=chunk) [Performance by Asset Class](index=56&type=section&id=Performance%20by%20Asset%20Class) The CLO strategy delivered strong results in 2024, while gains on interest rate hedges offset losses on the Agency RMBS portfolio - The CLO strategy had strong results, led by robust net interest income and net gains in the U.S. and European CLO debt portfolios[355](index=355&type=chunk) - The Agency portfolio generated positive results for the year, with **net gains on interest rate hedges of $24.1 million** exceeding net losses on Agency MBS of $(16.1) million[360](index=360&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - The non-Agency RMBS and interest-only securities portfolios generated positive results from net interest income and profitable sales before being substantially liquidated[356](index=356&type=chunk) [Financing and Book Value](index=59&type=section&id=Financing%20and%20Book%20Value) The company's average borrowing cost rose to 5.48% while its debt-to-equity ratio fell, resulting in a 2.3% economic return for 2024 Financing and Book Value Metrics | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Average Repo Borrowing Cost | 5.48% | 5.18% | | Debt-to-Equity Ratio (Year-End) | 2.9:1 | 5.4:1 | | Book Value Per Share (Year-End) | $6.53 | $7.32 | | Economic Return | 2.3% | N/A | [Critical Accounting Estimates](index=59&type=section&id=Critical%20Accounting%20Estimates) The company's most critical accounting estimates involve the subjective valuation of financial instruments and the recognition of interest income based on assumptions - **Valuation:** The company uses third-party valuations and internal discounted cash flow models for financial instruments not traded in active markets, a process requiring significant judgment for Level 3 assets[375](index=375&type=chunk)[376](index=376&type=chunk)[379](index=379&type=chunk) - **Interest Income:** Recognition is based on the effective interest method, which requires significant assumptions about future cash flows and can cause catch-up adjustments[381](index=381&type=chunk)[382](index=382&type=chunk) - **Income Taxes:** As a new C-Corp, the company must make judgments regarding tax positions and the recoverability of deferred tax assets[383](index=383&type=chunk) [Financial Condition](index=61&type=section&id=Financial%20Condition) As of Dec 31, 2024, total assets decreased to $824.1 million, while shareholders' equity increased to $193.7 million due to share issuances Investment Portfolio Summary (Fair Value, in thousands) | Portfolio | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Credit Portfolio | $171,606 | $38,136 | | Total Agency Portfolio | $512,309 | $735,412 | | **Total Securities, net** | **$684,337** | **$773,548** | Financial Derivatives (Net Fair Value, in thousands) | Derivative Type | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Financial Derivatives | $36,186 | $66,950 | Repurchase Agreement Borrowings (in thousands) | Date | Borrowings Outstanding | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Dec 31, 2024 | $562,974 | 4.81% | | Dec 31, 2023 | $729,543 | 5.58% | - Shareholders' equity increased to **$193.7 million** as of Dec 31, 2024, from $136.2 million a year prior, mainly due to **$73.6 million in net proceeds from share issuances**[399](index=399&type=chunk) [Results of Operations](index=64&type=section&id=Results%20of%20Operations) For 2024, net income rose to $6.6 million from $4.6 million in 2023, driven by a shift to positive net interest income of $15.1 million Results of Operations Summary (in thousands) | Line Item | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net Interest Income (Expense) | $15,069 | $(2,707) | | Total Expenses | $8,784 | $5,535 | | Total Other Income (Loss) | $811 | $12,801 | | **Net Income (Loss)** | **$6,586** | **$4,559** | | **Net Income (Loss) Per Share** | **$0.28** | **$0.31** | - The increase in net income was primarily due to **positive net interest income** in 2024, driven by a larger, higher-yielding credit portfolio[401](index=401&type=chunk)[402](index=402&type=chunk) - Total interest expense decreased to **$34.8 million** from $45.3 million in 2023, due to lower overall borrowings[405](index=405&type=chunk) - Other operating expenses increased to **$6.2 million** from $3.7 million, mainly due to costs associated with the CLO Strategic Transformation[412](index=412&type=chunk) [Adjusted Distributable Earnings](index=67&type=section&id=Adjusted%20Distributable%20Earnings) Adjusted Distributable Earnings, a non-GAAP measure, increased to $27.7 million, or $1.17 per share, for the year ended December 31, 2024 Adjusted Distributable Earnings (Non-GAAP) | Metric | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net Income (Loss) (GAAP) | $6,586 thousand | $4,559 thousand | | **Adjusted Distributable Earnings** | **$27,668 thousand** | **$13,000 thousand** | | **Adjusted Distributable Earnings Per Share** | **$1.17** | **$0.87** | - Adjusted Distributable Earnings is calculated by adjusting net income for items such as net realized and unrealized gains/losses on securities and derivatives[418](index=418&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through cash, investment cash flows, and repo borrowings, and raised $73.6 million from its ATM program in 2024 - As of December 31, 2024, the company had **$31.8 million in cash** and **$563.0 million outstanding** under repurchase agreements[423](index=423&type=chunk)[425](index=425&type=chunk) - During 2024, the company issued 10,964,023 common shares under its ATM program, raising **$73.6 million in net proceeds**[442](index=442&type=chunk) - The company declared and paid monthly dividends totaling **$0.96 per share** for the year ended December 31, 2024[434](index=434&type=chunk)[435](index=435&type=chunk) - Cash and cash equivalents decreased by **$6.7 million** during 2024, from $38.5 million to $31.8 million[440](index=440&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are credit, interest rate, prepayment, and liquidity risk, with active hedging strategies in place to manage interest rate exposure - The primary components of market risk are identified as interest rate risk, prepayment risk, and credit risk[453](index=453&type=chunk) - Credit risk is concentrated in **non-Agency RMBS and corporate CLOs**, which are backed by below-investment-grade loans[454](index=454&type=chunk)[455](index=455&type=chunk) - Interest rate risk is managed through hedging instruments, including **interest rate swaps and TBAs**, to mitigate the mismatch between assets and liabilities[461](index=461&type=chunk) Interest Rate Sensitivity Analysis (as of Dec 31, 2024) | Interest Rate Change | Estimated Market Value Change (in thousands) | % of Total Equity | | :--- | :--- | :--- | | +100 Basis Points | $(4,845) | (2.51)% | | +50 Basis Points | $(1,602) | (0.82)% | | -50 Basis Points | $(39) | (0.02)% | | -100 Basis Points | $(1,719) | (0.90)% | - Liquidity risk is managed by maintaining a prudent level of leverage, using hedges, and holding a cushion of cash and unpledged securities[468](index=468&type=chunk)[469](index=469&type=chunk) [Financial Statements and Supplementary Data](index=76&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, which received an unqualified opinion with a critical audit matter related to Level 3 investment valuation - The independent auditor, PricewaterhouseCoopers LLP, issued an **unqualified opinion** on the consolidated financial statements[473](index=473&type=chunk) - A critical audit matter was identified concerning the **valuation of certain Level 3 investments** in securities, due to the significant management judgment required[477](index=477&type=chunk)[478](index=478&type=chunk) Key Financial Data (in thousands) | Metric | As of/For Year Ended Dec 31, 2024 | As of/For Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | **Balance Sheet:** | | | | Total Assets | $824,092 | $945,690 | | Total Liabilities | $630,366 | $809,452 | | Total Shareholders' Equity | $193,726 | $136,238 | | **Statement of Operations:** | | | | Total Net Interest Income (Expense) | $15,069 | $(2,707) | | Net Income (Loss) | $6,586 | $4,559 | | Net Income (Loss) Per Share | $0.28 | $0.31 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=113&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 - None[663](index=663&type=chunk) [Controls and Procedures](index=113&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that **disclosure controls and procedures were effective** as of December 31, 2024[664](index=664&type=chunk) - There were **no material changes** in internal control over financial reporting during the fourth quarter of 2024[665](index=665&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of December 31, 2024, based on the 2013 COSO framework[668](index=668&type=chunk) [Other Information](index=114&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[669](index=669&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=114&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[670](index=670&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=115&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's 2025 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2025 annual shareholders' meeting[672](index=672&type=chunk) [Executive Compensation](index=115&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2025 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2025 annual shareholders' meeting[675](index=675&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=115&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2025 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2025 annual shareholders' meeting[676](index=676&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=115&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's 2025 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2025 annual shareholders' meeting[677](index=677&type=chunk) [Principal Accountant Fees and Services](index=115&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2025 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2025 annual shareholders' meeting[678](index=678&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=116&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including financial statements and key exhibits - Lists all documents filed with the report, including financial statements and exhibits[679](index=679&type=chunk) - Key exhibits include the Sixth Amended and Restated Management Agreement, the 2023 Equity Incentive Plan, and the Rights Agreement from April 2024[679](index=679&type=chunk)[680](index=680&type=chunk) [Form 10-K Summary](index=117&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is noted as 'None', indicating no summary is provided in this section of the report - None[681](index=681&type=chunk)

Company Overview - Ellington Credit Company (NYSE: EARN) has transitioned from operating as a mortgage REIT, primarily focusing on agency mortgage-backed securities, to a new strategic direction [1] Strategic Change - The company has undergone a strategic change, indicating a shift in its operational focus and investment strategy [1] Research Principles - Grassroots Trading emphasizes providing objective, unbiased, and balanced research, supported by solid data and devoid of emotional influences [1] - The focus is on small- to mid-cap companies, while also identifying potential opportunities in large- and mega-cap companies to offer comprehensive coverage of the equity markets [1]

Financial Data and Key Metrics Changes - The company reported a net loss of $0.07 per share for Q4 2024, with adjusted distributable earnings of $0.27 per share, covering dividends of $0.24 for the quarter [23][21] - The overall net interest margin remained strong at 5.07%, supported by a growing capital allocation to CLOs [23] - The debt-to-equity ratio adjusted for unsettled trades increased to 2.9 times from 2.5 times at September 30, while the net mortgage assets-to-equity ratio decreased to 2.6 times from 3 times [27] Business Line Data and Key Metrics Changes - The CLO portfolio grew by 18% to $171 million at year-end, with capital allocated to CLOs expanding to 72% from 58% at September 30 [28] - The CLO mezzanine debt portfolio continued to perform well, contributing to adjusted distributable earnings, while the Agency strategy generated a net loss due to rising interest rates and volatility [20][24] - The Agency RMBS holdings increased by 11% to $512 million at year-end [28] Market Data and Key Metrics Changes - Strong credit fundamentals and robust demand for leveraged loans supported the CLO markets, with credit spreads tightening [17] - The percentage of loans backing U.S. broadly syndicated CLOs trading at a premium declined from 63% at the end of January to 32% at the end of February [35] - European CLO equity outperformed U.S. CLO equity in Q4, benefiting from less capital markets activity and tighter credit spreads [36] Company Strategy and Development Direction - The company is on track to complete its conversion to a closed-end fund on April 1, which is expected to enhance risk-adjusted returns and access to capital markets [9][51] - The focus has shifted towards liquidity in the Agency pool position, with an emphasis on selling pools post-conversion [16][46] - The company plans to balance a swift ramp-up of CLO investments with careful asset selection, aiming for a fully ramped CLO portfolio around mid-year [50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the timing of the conversion, anticipating good entry points for deploying capital in the second quarter [57] - There are concerns about potential longer-term stresses on corporate borrowers, but management expects to find opportunities in equity as market conditions evolve [37][39] - Recent market volatility has created a dynamic trading environment, presenting opportunities for CLO investments [38] Other Important Information - The company has significantly derisked its Agency MBS portfolio by increasing short TBA hedging positions, which now offset almost all long pool exposure [43] - The average pay-up on Agency pools decreased to 20 basis points from 101 basis points one year prior [16] Q&A Session Summary Question: How much capital will be freed up on April 1 when selling the Agency portfolio? - Management indicated that approximately 28% of the portfolio not in CLOs would be freed up, which is expected to be well-timed given current market volatility [54][56] Question: How have different parts of the CLO market reacted to recent volatility? - Management noted that AAA tranches have moved back about 0.50%, while equity generally saw declines, with performance varying by manager [60] Question: What is the expected leverage range once fully invested in CLOs? - Management suggested a reasonable estimate for leverage would be half the churn, indicating a potential for $150 million worth of CLOs for every $100 million of common equity [88]

Financial Data and Key Metrics Changes - The company reported a net loss of $0.07 per share for Q4 2024, with adjusted distributable earnings of $0.27 per share, maintaining a strong net interest margin of 5.07% [23][21][24] - The debt-to-equity ratio adjusted for unsettled trades increased to 2.9 times from 2.5 times at the end of Q3 2024, while the net mortgage assets-to-equity ratio decreased to 2.6 times from 3 times [27][21] - The book value per share was $6.53 at year-end, with combined cash and unencumbered assets totaling $111 million [26][21] Business Line Data and Key Metrics Changes - The CLO portfolio grew by 18% to $171 million at year-end, with capital allocated to CLOs increasing to 72% from 58% at the end of Q3 2024 [28][9] - The CLO mezzanine debt portfolio performed well, contributing positively to adjusted distributable earnings, while the Agency mortgage portfolio experienced a loss due to interest rate volatility [20][24] - The Agency RMBS holdings increased by 11% to $512 million at year-end, but the Agency strategy generated a net loss for the quarter [28][20] Market Data and Key Metrics Changes - Strong credit fundamentals and robust demand for leveraged loans supported the CLO markets, with credit spreads tightening and record high corporate loan issuance [17][18] - The CLO equity investments delivered modest returns, impacted by high pre-payment rates and coupon spread compression in the loan market [32][31] - The market experienced heightened volatility, with credit market conditions creating both challenges and opportunities for CLO investments [38][39] Company Strategy and Development Direction - The company is on track to complete its conversion to a closed-end fund on April 1, 2025, which is expected to enhance risk-adjusted returns and access to capital markets [9][51] - The focus has shifted towards liquidity in the Agency pool positions, with plans to sell these pools post-conversion to deploy capital into CLOs [16][49] - The company anticipates a fully ramped CLO portfolio by mid-year 2025, aiming to balance swift ramp-up with careful asset selection [50][49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the timing of the conversion, suggesting it may align well with emerging investment opportunities in the second quarter [57][51] - There are concerns about potential long-term stresses on corporate borrowers, but the company remains focused on maintaining liquidity and capitalizing on market inefficiencies [37][39] - The anticipated market volatility is seen as a chance to deploy capital effectively, with a focus on CLO equity investments [40][51] Other Important Information - The company has significantly derisked its Agency MBS portfolio by increasing short TBA hedging positions, effectively offsetting most of its Agency MBS exposure [43][42] - The transition from a mortgage REIT to a CLO-focused closed-end fund has been a complex process, supported by extensive planning and shareholder backing [46][48] Q&A Session Summary Question: How much capital will be freed up on April 1 when selling the Agency portfolio? - Management indicated that approximately 28% of the portfolio not in CLOs would be available for deployment, which is expected to be well-timed given current market volatility [54][56] Question: How have different parts of the CLO market reacted to recent volatility? - Responses highlighted that AAA tranches have seen slight declines, while equity investments have generally decreased several points, with market dynamics being manager-dependent [60][61] Question: What is the expected leverage range once fully invested in CLOs? - Management suggested a reasonable estimate of half the churn of leverage, indicating a potential for $150 million worth of CLOs for every $100 million of common equity [88][87]

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