Ellington Credit Company Reports Fourth Quarter 2024 Results
Ellington Credit Company (NYSE: EARN) reported Q4 2024 results with a net loss of $(2.0) million, or $(0.07) per share, while achieving Adjusted Distributable Earnings of $7.8 million ($0.27 per share). The company's book value stood at $6.53 per share, including $0.24 quarterly dividends.
Key metrics include:
- CLO portfolio grew 18% to $171.1 million, with capital allocation to CLOs increasing to 72%
- Net interest margin of 8.54% on credit, 3.24% on Agency, and 5.07% overall
- Debt-to-equity ratio of 2.9:1
- Cash and unencumbered assets totaling $111 million
Shareholders approved the company's conversion to a Delaware registered closed-end fund, transitioning from an MBS-focused REIT to a CLO-focused strategy. The conversion is expected to complete on April 1, 2025, with over 93% shareholder approval.
Ellington Credit Company (NYSE: EARN) ha riportato i risultati del Q4 2024 con una perdita netta di $(2,0) milioni, ovvero $(0,07) per azione, mentre ha raggiunto un utile distribuitivo rettificato di $7,8 milioni ($0,27 per azione). Il valore contabile dell'azienda si è attestato a $6,53 per azione, inclusi $0,24 di dividendi trimestrali.
I principali indicatori includono:
- Il portafoglio CLO è cresciuto del 18% a $171,1 milioni, con l'allocazione di capitale ai CLO che aumenta al 72%
- Margine di interesse netto dell'8,54% sui crediti, 3,24% sulle Agenzie e 5,07% complessivamente
- Rapporto debito/capitale di 2,9:1
- Cassa e beni non gravati per un totale di $111 milioni
Gli azionisti hanno approvato la conversione dell'azienda in un fondo chiuso registrato nel Delaware, passando da un REIT focalizzato su MBS a una strategia focalizzata sui CLO. Si prevede che la conversione si completi il 1° aprile 2025, con oltre il 93% di approvazione degli azionisti.
Ellington Credit Company (NYSE: EARN) reportó resultados del Q4 2024 con una pérdida neta de $(2.0) millones, o $(0.07) por acción, mientras logró ganancias distribuidas ajustadas de $7.8 millones ($0.27 por acción). El valor contable de la compañía se situó en $6.53 por acción, incluyendo $0.24 en dividendos trimestrales.
Las métricas clave incluyen:
- El portafolio de CLO creció un 18% a $171.1 millones, con la asignación de capital a CLOs aumentando al 72%
- Margen de interés neto del 8.54% en créditos, 3.24% en Agencia y 5.07% en total
- Relación deuda-capital de 2.9:1
- Efectivo y activos libres de gravámenes por un total de $111 millones
Los accionistas aprobaron la conversión de la compañía a un fondo cerrado registrado en Delaware, transitando de un REIT enfocado en MBS a una estrategia enfocada en CLO. Se espera que la conversión se complete el 1 de abril de 2025, con más del 93% de aprobación de los accionistas.
엘링턴 크레딧 컴퍼니 (NYSE: EARN)는 2024년 4분기 결과를 보고하면서 순손실이 $(2.0) 백만, 즉 주당 $(0.07)로 나타났으며, 조정된 분배 수익은 $7.8 백만($0.27 주당)을 달성했습니다. 회사의 장부 가치는 주당 $6.53로, 여기에는 분기 배당금 $0.24가 포함되어 있습니다.
주요 지표는 다음과 같습니다:
- CLO 포트폴리오가 18% 증가하여 $171.1 백만에 달하며, CLO에 대한 자본 배분이 72%로 증가했습니다.
- 신용의 순이자 마진은 8.54%, 에이전시에서 3.24%, 전체적으로 5.07%입니다.
- 부채 대 자본 비율은 2.9:1입니다.
- 현금 및 담보가 없는 자산 총액은 $111 백만입니다.
주주들은 회사의 델라웨어 등록 폐쇄형 펀드로의 전환을 승인했으며, MBS 중심의 REIT에서 CLO 중심의 전략으로 전환하고 있습니다. 전환은 2025년 4월 1일에 완료될 것으로 예상되며, 93% 이상의 주주 승인을 받았습니다.
Ellington Credit Company (NYSE: EARN) a annoncé les résultats du Q4 2024 avec une perte nette de $(2,0) millions, soit $(0,07) par action, tout en atteignant des bénéfices distribuables ajustés de $7,8 millions ($0,27 par action). La valeur comptable de l'entreprise s'élevait à $6,53 par action, y compris des dividendes trimestriels de $0,24.
Les indicateurs clés comprennent:
- Le portefeuille CLO a augmenté de 18% pour atteindre $171,1 millions, avec une allocation de capital aux CLO augmentant à 72%
- Une marge d'intérêt nette de 8,54% sur les crédits, 3,24% sur les agences et 5,07% au total
- Un ratio d'endettement de 2,9:1
- Des liquidités et des actifs non grevés totalisant $111 millions
Les actionnaires ont approuvé la conversion de l'entreprise en un fonds fermé enregistré dans le Delaware, passant d'un REIT axé sur les MBS à une stratégie axée sur les CLO. La conversion devrait être finalisée le 1er avril 2025, avec plus de 93% d'approbation des actionnaires.
Ellington Credit Company (NYSE: EARN) berichtete über die Ergebnisse des Q4 2024 mit einem Nettoverlust von $(2,0) Millionen, oder $(0,07) pro Aktie, während das bereinigte ausschüttbare Ergebnis $7,8 Millionen ($0,27 pro Aktie) betrug. Der Buchwert des Unternehmens lag bei $6,53 pro Aktie, einschließlich $0,24 vierteljährlicher Dividenden.
Wichtige Kennzahlen sind:
- Das CLO-Portfolio wuchs um 18% auf $171,1 Millionen, wobei die Kapitalallokation zu CLOs auf 72% anstieg.
- Nettozinsspanne von 8,54% auf Kredite, 3,24% auf Agenturen und insgesamt 5,07%
- Verschuldungsgrad von 2,9:1
- Bargeld und unbelastete Vermögenswerte in Höhe von insgesamt $111 Millionen
Die Aktionäre genehmigten die Umwandlung des Unternehmens in einen geschlossenen Fonds, der im Bundesstaat Delaware registriert ist, und wechselten von einem auf MBS fokussierten REIT zu einer auf CLOs fokussierten Strategie. Die Umwandlung wird voraussichtlich am 1. April 2025 abgeschlossen sein, mit über 93% Zustimmung der Aktionäre.
- CLO portfolio grew 18% to $171.1 million
- Strong dividend yield of 15.7%
- Adjusted Distributable Earnings of $0.27 per share exceeded dividend payments
- 93% shareholder approval for strategic transformation
- High net interest margin of 8.54% on credit portfolio
- Net loss of $2.0 million ($0.07 per share) in Q4
- Decline in net interest margin from previous quarter
- Underperformance in Agency MBS portfolio
- Increased debt-to-equity ratio to 2.9:1 from 2.5:1
Insights
Ellington Credit Company's Q4 2024 results present a mixed financial picture during a pivotal transformation period. While reporting a net loss of $2.0 million ($0.07/share), the company delivered Adjusted Distributable Earnings of $7.8 million ($0.27/share) that successfully covered its dividend obligations. This earnings dichotomy reflects the company's transitional state as it executes its strategic pivot from mortgage-backed securities to collateralized loan obligations.
The most significant development is the company's accelerating transformation into a CLO-focused investment vehicle. With shareholders overwhelmingly approving the conversion to a Delaware registered closed-end fund (over
The CLO portfolio demonstrated positive performance, particularly in mezzanine debt tranches, benefiting from tightening credit spreads, opportunistic sales, and redemptions of discount seasoned tranches. Meanwhile, the Agency MBS portfolio underperformed due to interest rate volatility, which explains the overall net loss position. The company maintains a substantial
Ellington's financial position shows evolving leverage metrics, with debt-to-equity increasing to 2.9:1 while net mortgage assets-to-equity declined to 2.6:1. This reflects the ongoing portfolio transition, with Agency MBS expected to be liquidated following the RIC conversion. The company's strategic focus on CLO equity tranches, where management sees the most attractive opportunities amid tightening CLO debt spreads, positions it to potentially benefit from improving economics in both new and existing CLO investments.
Fourth Quarter Highlights
-
Net income (loss) of
, or$(2.0) million per share.$(0.07) -
Adjusted Distributable Earnings1 of
, or$7.8 million per share.$0.27 -
Book value of
per share as of December 31, 2024, which includes the effects of dividends of$6.53 per share for the quarter.$0.24 -
Net interest margin2 of
8.54% on credit,3.24% on Agency, and5.07% overall. -
CLO portfolio increased to
at year end, compared to$171.1 million as of September 30, 2024.$144.5 million -
Capital allocation3 to CLOs increased to
72% at year end, compared to58% as of September 30, 2024. - Debt-to-equity ratio of 2.9:1 and net mortgage assets-to-equity ratio of 2.6:14 as of December 31, 2024.
- Weighted average constant prepayment rate ("CPR") for the fixed-rate Agency specified pool portfolio of 9.55.
-
Cash and cash equivalents of
at year end, in addition to other unencumbered assets of$31.8 million .$79.2 million -
Dividend yield of
15.7% based on the March 11, 2025 closing stock price of , and monthly dividend of$6.12 per common share declared on March 7, 2025.$0.08 -
Subsequent to year end, shareholders approved conversion to a
Delaware registered closed-end fund to be treated as a regulated investment company ("RIC") under the Internal Revenue Code, focused on corporate CLO investments (the "Conversion"). - Expect to complete the Conversion on April 1, 2025.
Fourth Quarter 2024 Results
"We continue to expand our CLO portfolio in preparation for the upcoming Conversion, and in the fourth quarter, we grew that portfolio by another
"Our results for the quarter reflect positive performance in our CLO portfolio, particularly CLO mezzanine debt. Net interest income in that portfolio rose, and we also generated net gains resulting from several opportunistic sales, tighter credit spreads, and redemptions of several of our discount seasoned CLO mezzanine tranches. However, intra-quarter interest rate and yield spread volatility drove underperformance in Agency MBS, which led to a small overall net loss for EARN for the quarter. The combination of portfolio growth and wide net interest margins on our CLOs continued to support our adjusted distributable earnings, which again covered our dividends for the quarter.
"With shareholder approval now secured, we are working to finalize the Conversion and expect to operate as a RIC beginning April 1. This conversion marks a pivotal milestone for Ellington Credit, positioning us to drive strong earnings and unlock greater value for shareholders over the long term. We remain committed to executing our strategies with discipline and appreciate our shareholders’ steadfast support throughout this process."
Strategic Transformation Update
On March 29, 2024, our Board of Trustees approved a strategic transformation of our investment strategy to focus on corporate CLOs, with an emphasis on mezzanine debt and equity tranches. As part of this transformation, we revoked our REIT tax election effective January 1, 2024 and rebranded as Ellington Credit Company. We remain listed on the New York Stock Exchange under the ticker symbol EARN.
At a special meeting of shareholders on January 17, 2025, we received approval to complete the Conversion. Over
We expect the Conversion to take effect on April 1, 2025, marking our full transition from an MBS-focused REIT to a CLO-focused closed-end fund. As part of this shift, we intend to sell our remaining liquid Agency MBS pools and, following the effectiveness of the RIC Conversion, operate in compliance with 1940 Act requirements.
Financial Results
The following table summarizes our portfolio of long investments as of December 31, 2024 and September 30, 2024:
|
December 31, 2024 |
|
September 30, 2024 |
||||||||||||||||||||||
($ in thousands) |
Current Principal |
|
Fair Value |
|
Average Price(1) |
|
Cost |
|
Average Cost(1) |
|
Current Principal |
|
Fair Value |
|
Average Price(1) |
|
Cost |
|
Average Cost(1) |
||||||
Credit Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Dollar Denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CLOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CLO Notes |
$ |
65,954 |
|
$ |
55,157 |
|
83.63 |
|
$ |
55,363 |
|
83.94 |
|
$ |
63,090 |
|
$ |
52,892 |
|
83.84 |
|
$ |
52,800 |
|
83.69 |
CLO Equity |
|
n/a |
|
|
91,832 |
|
n/a |
|
|
97,267 |
|
n/a |
|
|
n/a |
|
|
66,518 |
|
n/a |
|
|
69,188 |
|
n/a |
Total Dollar Denominated CLOs |
|
|
|
146,989 |
|
|
|
|
152,630 |
|
|
|
|
|
|
119,410 |
|
|
|
|
121,988 |
|
|
||
Corporate Debt |
|
1,787 |
|
|
428 |
|
23.95 |
|
|
398 |
|
22.27 |
|
|
1,222 |
|
|
391 |
|
32.00 |
|
|
372 |
|
30.44 |
Corporate Equity |
|
n/a |
|
|
56 |
|
n/a |
|
|
75 |
|
n/a |
|
|
n/a |
|
|
30 |
|
n/a |
|
|
43 |
|
n/a |
Non-Agency RMBS(2) |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
9,343 |
|
|
9,448 |
|
101.12 |
|
|
7,844 |
|
83.96 |
Total Dollar Denominated Credit |
|
|
|
147,473 |
|
|
|
|
153,103 |
|
|
|
|
|
|
129,279 |
|
|
|
|
130,247 |
|
|
||
Non-Dollar Denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CLOs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CLO Notes |
|
17,368 |
|
|
16,835 |
|
96.93 |
|
|
17,219 |
|
99.14 |
|
|
17,555 |
|
|
16,818 |
|
95.80 |
|
|
16,173 |
|
92.13 |
CLO Equity |
|
n/a |
|
|
7,298 |
|
n/a |
|
|
7,995 |
|
n/a |
|
|
n/a |
|
|
8,258 |
|
n/a |
|
|
8,394 |
|
n/a |
Total non-Dollar Denominated CLOs |
|
|
|
24,133 |
|
|
|
|
25,214 |
|
|
|
|
|
|
25,076 |
|
|
|
|
24,567 |
|
|
||
Total Credit |
|
|
|
171,606 |
|
|
|
|
178,317 |
|
|
|
|
|
|
154,355 |
|
|
|
|
154,814 |
|
|
||
Agency Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Dollar Denominated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Agency RMBS(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
30-year fixed-rate mortgages |
|
536,948 |
|
|
512,307 |
|
95.41 |
|
|
519,628 |
|
96.77 |
|
|
461,682 |
|
|
462,112 |
|
100.09 |
|
|
454,370 |
|
98.42 |
Reverse mortgages |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
34 |
|
|
34 |
|
100.00 |
|
|
37 |
|
108.82 |
Total Agency RMBS |
|
536,948 |
|
|
512,307 |
|
95.41 |
|
|
519,628 |
|
96.77 |
|
|
461,716 |
|
|
462,146 |
|
100.09 |
|
|
454,407 |
|
98.42 |
Agency IOs |
|
n/a |
|
|
2 |
|
n/a |
|
|
2 |
|
n/a |
|
|
n/a |
|
|
1,870 |
|
n/a |
|
|
1,583 |
|
n/a |
Total Agency |
|
|
|
512,309 |
|
|
|
|
519,630 |
|
|
|
|
|
|
464,016 |
|
|
|
|
455,990 |
|
|
||
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
425 |
|
|
426 |
|
100.24 |
|
|
426 |
|
100.24 |
Total |
|
|
$ |
683,915 |
|
|
|
$ |
697,947 |
|
|
|
|
|
$ |
618,797 |
|
|
|
$ |
611,230 |
|
|
(1) |
Expressed as a percentage of current principal balance. |
(2) |
Excludes IOs. |
CLO Holdings
Our CLO holdings grew by
Agency RMBS and Non-Agency Holdings
Our Agency RMBS holdings increased by
Leverage and Hedging
Our debt-to-equity ratio (adjusted for unsettled trades) increased to 2.9:1 as of December 31, 2024, compared to 2.5:1 at the end of the third quarter, driven by an increase in borrowings on our larger CLO and Agency RMBS portfolios, partially offset by higher shareholders’ equity. Meanwhile, our net mortgage assets-to-equity ratio declined to 2.6:1 from 3.0:1, driven by the increase in shareholders’ equity and a net short TBA position at the end of the fourth quarter in contrast to a net long TBA position at the end of the third quarter.
We hedged our interest rate risk using interest rate swaps and short positions in TBAs,
Net Interest Margin and Adjusted Distributable Earnings
In the fourth quarter, the net interest margins on our credit and Agency portfolios decreased to
The decline in net interest margin also led to a small decrease in our adjusted distributable earnings per share to
The following table summarizes our operating results by strategy for the three-month periods ended December 31, 2024 and September 30, 2024:
|
|
Three-Month
|
|
Per Share |
|
Three-Month
|
|
Per Share |
||||||||
(In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
||||||||
Credit: |
|
|
|
|
|
|
|
|
||||||||
CLOs |
|
|
|
|
|
|
|
|
||||||||
Interest and other income(1) |
|
$ |
5,651 |
|
|
$ |
0.20 |
|
|
$ |
4,388 |
|
|
$ |
0.17 |
|
Interest expense |
|
|
(671 |
) |
|
|
(0.02 |
) |
|
|
(506 |
) |
|
|
(0.02 |
) |
Realized gain (loss), net |
|
|
867 |
|
|
|
0.03 |
|
|
|
399 |
|
|
|
0.02 |
|
Unrealized gain (loss), net |
|
|
(2,803 |
) |
|
|
(0.10 |
) |
|
|
(1,187 |
) |
|
|
(0.05 |
) |
Credit hedges and other activities, net(2) |
|
|
(223 |
) |
|
|
(0.01 |
) |
|
|
(19 |
) |
|
|
— |
|
Total CLO profit (loss) |
|
|
2,821 |
|
|
|
0.10 |
|
|
|
3,075 |
|
|
|
0.12 |
|
Non-Agency RMBS(3) |
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
|
62 |
|
|
|
— |
|
|
|
473 |
|
|
|
0.02 |
|
Interest expense |
|
|
(26 |
) |
|
|
— |
|
|
|
(132 |
) |
|
|
(0.01 |
) |
Realized gain (loss), net |
|
|
1,696 |
|
|
|
0.06 |
|
|
|
2,531 |
|
|
|
0.10 |
|
Unrealized gain (loss), net |
|
|
(1,604 |
) |
|
|
(0.06 |
) |
|
|
(2,062 |
) |
|
|
(0.08 |
) |
Interest rate hedges, net |
|
|
29 |
|
|
|
— |
|
|
|
(33 |
) |
|
|
— |
|
Total non-Agency RMBS profit (loss) |
|
|
157 |
|
|
|
— |
|
|
|
777 |
|
|
|
0.03 |
|
Total Credit profit (loss) |
|
|
2,978 |
|
|
|
0.10 |
|
|
|
3,852 |
|
|
|
0.15 |
|
Agency RMBS(3): |
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
|
6,454 |
|
|
|
0.22 |
|
|
|
6,851 |
|
|
|
0.27 |
|
Interest expense |
|
|
(5,651 |
) |
|
|
(0.20 |
) |
|
|
(6,651 |
) |
|
|
(0.26 |
) |
Realized gain (loss), net |
|
|
(545 |
) |
|
|
(0.02 |
) |
|
|
(3,730 |
) |
|
|
(0.15 |
) |
Unrealized gain (loss), net |
|
|
(15,347 |
) |
|
|
(0.53 |
) |
|
|
19,199 |
|
|
|
0.75 |
|
Interest rate hedges and other activities, net(4) |
|
|
11,754 |
|
|
|
0.41 |
|
|
|
(11,216 |
) |
|
|
(0.44 |
) |
Total Agency RMBS profit (loss) |
|
|
(3,335 |
) |
|
|
(0.12 |
) |
|
|
4,453 |
|
|
|
0.17 |
|
Total Credit and Agency RMBS profit (loss) |
|
|
(357 |
) |
|
|
(0.02 |
) |
|
|
8,305 |
|
|
|
0.32 |
|
Other interest income (expense), net |
|
|
440 |
|
|
|
0.02 |
|
|
|
328 |
|
|
|
0.01 |
|
Income tax (expense) benefit |
|
|
181 |
|
|
|
0.01 |
|
|
|
(463 |
) |
|
|
(0.02 |
) |
General and administrative expenses |
|
|
(2,269 |
) |
|
|
(0.08 |
) |
|
|
(2,725 |
) |
|
|
(0.10 |
) |
Net income (loss) |
|
$ |
(2,005 |
) |
|
$ |
(0.07 |
) |
|
$ |
5,445 |
|
|
$ |
0.21 |
|
Weighted average shares outstanding |
|
|
28,733,893 |
|
|
|
|
|
25,591,607 |
|
|
|
(1) |
Includes distributions from fee rebate agreements which are included in Other, net on the Consolidated Statement of Operations. |
(2) |
Other activities includes currency hedges as well as net realized and unrealized gains (losses) on foreign currency. |
(3) |
Includes IOs. |
(4) |
Includes |
CLO Performance
In the fourth quarter, the
In the
In
As with the prior two quarters,
Our CLO strategy delivered positive results in the fourth quarter, driven by higher net interest income and net gains in
Agency and Non-Agency Performance
In the fourth quarter, rising interest rates and intra-quarter volatility contributed to the underperformance of Agency RMBS relative to hedging instruments. Overall for the fourth quarter, the
Average pay-ups on our specified pool portfolio decreased to
Meanwhile, our non-Agency RMBS portfolio generated positive results for the fourth quarter, driven by net interest income and profitable sales. We sold effectively all of our remaining non-Agency RMBS and interest-only securities during the quarter.
General and Administrative Expenses
Quarterly expenses declined quarter over quarter due to lower professional fees, compensation expense, and other operating expenses.
About Ellington Credit Company
Ellington Credit Company (the "Company"), formerly known as Ellington Residential Mortgage REIT, was initially formed as a real estate investment trust ("REIT") that invested primarily in residential mortgage-backed securities ("MBS"). On March 29, 2024, the Company's Board of Trustees approved a strategic transformation of the Company's investment strategy to focus on corporate CLOs, with an emphasis on mezzanine debt and equity tranches. In connection with this transformation, the Company revoked its election to be taxed as a REIT effective January 1, 2024, and rebranded as Ellington Credit Company. At a special meeting on January 17, 2025, the Company's shareholders approved proposals related to the RIC Conversion. The Company expects the conversion to take effect on April 1, 2025.
Conference Call
We will host a conference call at 11:00 a.m. Eastern Time on Thursday, March 13, 2025 to discuss our financial results for the quarter ended December 31, 2024. To participate in the event by telephone, please dial (800) 225-9448 at least 10 minutes prior to the start time and reference the conference ID: EARNQ424. International callers should dial (203) 518-9708 and reference the same conference ID. The conference call will also be webcast live over the Internet and can be accessed via the "For Investors" section of our web site at www.ellingtoncredit.com. To listen to the live webcast, please visit www.ellingtoncredit.com at least 15 minutes prior to the start of the call to register, download, and install necessary audio software. In connection with the release of these financial results, we also posted an investor presentation, that will accompany the conference call, on our website at www.ellingtoncredit.com under "For Investors—Presentations."
A dial-in replay of the conference call will be available on Thursday, March 13, 2025, at approximately 2:00 p.m. Eastern Time through Thursday, March 20, 2025 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 839-8318. International callers should dial (402) 220-6071. A replay of the conference call will also be archived on our web site at www.ellingtoncredit.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release 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 statements as predictions of future events. Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements or from our beliefs, expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," or similar expressions or their negative forms, or by references to strategy, plans, or intentions. The following factors are examples of those that could cause actual results to vary from those stated or implied by our forward-looking statements: changes in interest rates and the market value of our investments, market volatility, changes in mortgage default rates and prepayment rates, our ability to borrow to finance our assets, our ability to pivot our investment strategy to focus on CLOs, a deterioration in the CLO market, our ability to utilize our NOLs, our ability to convert to a closed end fund/RIC, changes in government regulations affecting our business, our ability to maintain our exclusion from registration under the Investment Company Act of 1940, and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations. Furthermore, as stated above, forward-looking statements are subject to risks and uncertainties, including, among other things, those described under Item 1A of our Annual Report on Form 10-K, which can be accessed through the link to our SEC filings under "For Investors" on our website (at www.ellingtoncredit.com) or at the SEC's website (www.sec.gov). Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected or implied may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q, 10-K, and 8-K. New risks and uncertainties emerge from time to time, and it is not possible for us to predict or assess the impact of every factor that may cause our actual results to differ from those contained in any forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
ELLINGTON CREDIT COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) |
||||||||||||
|
|
Three-Month Period Ended |
|
Year Ended |
||||||||
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
||||||
(In thousands except share amounts and per share amounts) |
|
|
|
|
|
|
||||||
INTEREST INCOME (EXPENSE) |
|
|
|
|
|
|
||||||
Interest income |
|
$ |
12,849 |
|
|
$ |
12,504 |
|
|
$ |
49,863 |
|
Interest expense |
|
|
(6,707 |
) |
|
|
(7,752 |
) |
|
|
(34,794 |
) |
Total net interest income (expense) |
|
|
6,142 |
|
|
|
4,752 |
|
|
|
15,069 |
|
EXPENSES |
|
|
|
|
|
|
||||||
Management fees to affiliate |
|
|
729 |
|
|
|
721 |
|
|
|
2,539 |
|
Professional fees |
|
|
417 |
|
|
|
661 |
|
|
|
2,107 |
|
Compensation expense |
|
|
355 |
|
|
|
501 |
|
|
|
1,555 |
|
Insurance expense |
|
|
91 |
|
|
|
93 |
|
|
|
370 |
|
Other operating expenses |
|
|
677 |
|
|
|
749 |
|
|
|
2,213 |
|
Total expenses |
|
|
2,269 |
|
|
|
2,725 |
|
|
|
8,784 |
|
OTHER INCOME (LOSS) |
|
|
|
|
|
|
||||||
Net realized gains (losses) on securities |
|
|
1,118 |
|
|
|
(1,377 |
) |
|
|
(18,068 |
) |
Net realized gains (losses) on financial derivatives |
|
|
4,578 |
|
|
|
23,885 |
|
|
|
38,487 |
|
Change in net unrealized gains (losses) on securities |
|
|
(19,362 |
) |
|
|
16,057 |
|
|
|
(364 |
) |
Change in net unrealized gains (losses) on financial derivatives |
|
|
8,847 |
|
|
|
(35,274 |
) |
|
|
(18,579 |
) |
Other, net |
|
|
(1,240 |
) |
|
|
590 |
|
|
|
(665 |
) |
Total other income (loss) |
|
|
(6,059 |
) |
|
|
3,881 |
|
|
|
811 |
|
Net income (loss) before income taxes |
|
|
(2,186 |
) |
|
|
5,908 |
|
|
|
7,096 |
|
Income tax expense (benefit) |
|
|
(181 |
) |
|
|
463 |
|
|
|
510 |
|
NET INCOME (LOSS) |
|
$ |
(2,005 |
) |
|
$ |
5,445 |
|
|
$ |
6,586 |
|
NET INCOME (LOSS) PER COMMON SHARE: |
|
|
|
|
|
|
||||||
Basic and Diluted |
|
$ |
(0.07 |
) |
|
$ |
0.21 |
|
|
$ |
0.28 |
|
WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
28,733,893 |
|
|
|
25,591,607 |
|
|
|
23,576,696 |
|
CASH DIVIDENDS PER SHARE: |
|
|
|
|
|
|
||||||
Dividends declared |
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.96 |
|
ELLINGTON CREDIT COMPANY CONSOLIDATED BALANCE SHEET (UNAUDITED) |
||||||||||||
|
|
As of |
||||||||||
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
||||||
(In thousands except share amounts and per share amounts) |
|
|
|
|
|
|
||||||
ASSETS |
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
$ |
31,840 |
|
|
$ |
25,747 |
|
|
$ |
38,533 |
|
Securities, at fair value |
|
|
683,915 |
|
|
|
618,797 |
|
|
|
773,548 |
|
Due from brokers |
|
|
21,517 |
|
|
|
9,341 |
|
|
|
3,245 |
|
Financial derivatives–assets, at fair value |
|
|
41,867 |
|
|
|
48,010 |
|
|
|
74,279 |
|
Reverse repurchase agreements |
|
|
23,000 |
|
|
|
109 |
|
|
|
— |
|
Receivable for securities sold |
|
|
11,077 |
|
|
|
45,915 |
|
|
|
51,132 |
|
Interest and principal receivable |
|
|
10,536 |
|
|
|
4,132 |
|
|
|
4,522 |
|
Other assets |
|
|
340 |
|
|
|
252 |
|
|
|
431 |
|
Total Assets |
|
$ |
824,092 |
|
|
$ |
752,303 |
|
|
$ |
945,690 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
||||||
LIABILITIES |
|
|
|
|
|
|
||||||
Repurchase agreements |
|
$ |
562,974 |
|
|
$ |
486,921 |
|
|
$ |
729,543 |
|
Payable for securities purchased |
|
|
1,997 |
|
|
|
34,469 |
|
|
|
12,139 |
|
Due to brokers |
|
|
30,671 |
|
|
|
21,832 |
|
|
|
54,476 |
|
Financial derivatives–liabilities, at fair value |
|
|
5,681 |
|
|
|
9,856 |
|
|
|
7,329 |
|
|
|
|
22,578 |
|
|
|
109 |
|
|
|
— |
|
Dividend payable |
|
|
2,372 |
|
|
|
2,237 |
|
|
|
1,488 |
|
Accrued expenses and other liabilities |
|
|
1,488 |
|
|
|
2,561 |
|
|
|
1,153 |
|
Management fee payable to affiliate |
|
|
729 |
|
|
|
721 |
|
|
|
513 |
|
Interest payable |
|
|
1,876 |
|
|
|
1,968 |
|
|
|
2,811 |
|
Total Liabilities |
|
|
630,366 |
|
|
|
560,674 |
|
|
|
809,452 |
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
||||||
Preferred shares, par value |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Common shares, par value |
|
|
297 |
|
|
|
280 |
|
|
|
186 |
|
Additional paid-in-capital |
|
|
348,587 |
|
|
|
337,523 |
|
|
|
274,698 |
|
Accumulated deficit |
|
|
(155,159 |
) |
|
|
(146,174 |
) |
|
|
(138,646 |
) |
Total Shareholders' Equity |
|
|
193,726 |
|
|
|
191,629 |
|
|
|
136,238 |
|
Total Liabilities and Shareholders' Equity |
|
$ |
824,092 |
|
|
$ |
752,303 |
|
|
$ |
945,690 |
|
SUPPLEMENTAL PER SHARE INFORMATION |
|
|
|
|
|
|
||||||
Book Value Per Share |
|
$ |
6.53 |
|
|
$ |
6.85 |
|
|
$ |
7.32 |
|
(1) |
Derived from audited financial statements as of December 31, 2023. |
(2) |
Following the special meeting of shareholders held on January 17, 2025, we fully redeemed the 1,000 Series A Preferred Shares in accordance with the terms of the previously announced Subscription and Investment Representation Agreement entered into on December 9, 2024. |
(3) |
Common shares issued and outstanding at December 31, 2024, includes 1,655,230 common shares issued under our at-the market common share offering program and 32,341 of restricted common shares issued under our 2023 Equity Incentive Plan during the fourth quarter. |
Reconciliation of Adjusted Distributable Earnings to Net Income (Loss)
We calculate Adjusted Distributable Earnings as net income (loss) adjusted for: (i) net realized and change in net unrealized gains and (losses) on securities, financial derivatives, and foreign currency transactions; (ii) net realized and change in net unrealized gains (losses) associated with periodic settlements on interest rate swaps; (iii) other income or loss items that are of a non-recurring nature, if any (iv) Catch-up Amortization Adjustment (as defined below); and (v) provision for income taxes. The Catch-up Amortization Adjustment is a quarterly adjustment to premium amortization or discount accretion triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from quarter to quarter.
Adjusted Distributable Earnings is a supplemental non-GAAP financial measure. We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because: (i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current-period earnings components that we believe are less useful in forecasting long-term performance and dividend-paying ability; (ii) we use it to evaluate the effective net yield provided by our portfolio, after the effects of financial leverage; and (iii), we believe that presenting Adjusted Distributable Earnings assists investors in measuring and evaluating our operating performance, and comparing our operating performance to that of our peers. Our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable; adjusted Distributable Earnings excludes certain items, such as most realized and unrealized gains and losses, that may impact the amount of cash that is actually available for distribution.
In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with
In setting our dividends, our Board of Trustees considers our earnings, liquidity, financial condition, distribution requirements, and financial covenants, along with other factors that the Board of Trustees may deem relevant from time to time.
The following table reconciles, for the three-month periods ended December 31, 2024 and September 30, 2024, our Adjusted Distributable Earnings to the line on our Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable
|
|
Three-Month Period Ended |
||||||
(In thousands except share amounts and per share amounts) |
|
December 31, 2024 |
|
September 30, 2024 |
||||
Net Income (Loss) |
|
$ |
(2,005 |
) |
|
$ |
5,445 |
|
Income tax expense (benefit) |
|
|
(181 |
) |
|
|
463 |
|
Net Income (Loss) before income taxes |
|
|
(2,186 |
) |
|
|
5,908 |
|
Adjustments: |
|
|
|
|
||||
Net realized (gains) losses on securities |
|
|
(1,118 |
) |
|
|
1,377 |
|
Change in net unrealized (gains) losses on securities |
|
|
19,362 |
|
|
|
(16,057 |
) |
Net realized (gains) losses on financial derivatives |
|
|
(4,578 |
) |
|
|
(23,885 |
) |
Change in net unrealized (gains) losses on financial derivatives |
|
|
(8,847 |
) |
|
|
35,274 |
|
Net realized gains (losses) on periodic settlements of interest rate swaps |
|
|
4,814 |
|
|
|
6,969 |
|
Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps |
|
|
(1,412 |
) |
|
|
(2,278 |
) |
Strategic Transformation costs and other adjustments(1) |
|
|
1,807 |
|
|
|
106 |
|
Negative (positive) component of interest income represented by Catch-up Amortization Adjustment |
|
|
— |
|
|
|
(173 |
) |
Subtotal |
|
|
10,028 |
|
|
|
1,333 |
|
Adjusted Distributable Earnings |
|
$ |
7,842 |
|
|
$ |
7,241 |
|
Weighted Average Shares Outstanding |
|
|
28,733,893 |
|
|
|
25,591,607 |
|
Adjusted Distributable Earnings Per Share |
|
$ |
0.27 |
|
|
$ |
0.28 |
|
(1) |
For the three-month period ended December 31, 2024, includes |
__________________________________ | |
1 |
Adjusted Distributable Earnings is a non-GAAP financial measure. See "Reconciliation of Adjusted Distributable Earnings to Net Income (Loss)" below for an explanation regarding the calculation of Adjusted Distributable Earnings. |
2 |
Net interest margin of a group of assets represents the weighted average asset yield less the weighted average cost of borrowings secured by those assets (including the effect of net interest income (expense) related to |
3 |
Percentages shown are of net assets, as opposed to gross assets, deployed. |
4 |
We define our net mortgage assets-to-equity ratio as the net aggregate market value of our mortgage-backed securities (including the underlying market values of our long and short TBA positions) divided by total shareholder's equity. As of December 31, 2024 the market value of our mortgage-backed securities and our net short TBA position was |
5 |
Excludes recent purchases of fixed rate Agency specified pools with no prepayment history. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20250312407684/en/
Investors:
Ellington Credit Company
Investor Relations
(203) 409-3773
info@ellingtoncredit.com
or
Media:
Amanda Shpiner/Grace Cartwright
Gasthalter & Co.
for Ellington Credit Company
(212) 257-4170
Ellington@gasthalter.com
Source: Ellington Credit Company