Ellington Credit Co Q1 FY2025 earnings call

• Successfully completed conversion to a registered closed-end fund on April 1st, sold remaining agency mortgage pools with minimal impact on net asset value. • Changed fiscal calendar to begin on April 1st. • Increased CLO portfolio by 46% to $250 million in preparation for conversion, ramped up TBA short mortgage hedges. • Market backdrop in Q1 had strong January-February then turbulence in March with volatility, spread widening in credit markets. • After conversion, increased liquidity and bought CLO investments during April market turmoil, with prices reversing in May. • Greg discussed CLO market performance, with headwinds for CLO equity, diversification benefits of Europe vs US and mezz vs equity, and continued focus on portfolio liquidity and agility.

During calendar Q1, the Agency mortgage strategy generated positive portfolio income for 2025 of about $2.55 million. The CLO portfolio had mark-to-market losses exceeding net interest income and modest gains on credit hedges. At March 31st, the CLO portfolio was $250 million, a 46% increase from prior, and Agency RMBS holdings decreased slightly to $504 million from $512 million at December 31st. The CLO portfolio contributed negative $0.24 per share to portfolio P&L, while the agency portfolio contributed positive $0.08 per share.

• Still on plan for dividend coverage, expecting to be short in current quarter but on track for third quarter. • Plan to issue unsecured debt later this year, which should be accretive to net investment income.

• Market volatility, including interest rate and spread volatility. • Impact of tariffs on credit concerns for companies, affecting CLO valuations. • Credit spread widening in March and April, leading to price declines in CLO mezzanine debt and equity. • Macroeconomic uncertainties affecting the credit backdrop and portfolio valuations.

Q: Really great timing with the divestment of the Agency portfolio. I think you said $50 million of CLOs have been acquired since the conversion. I mean how does the yield on those assets compare to the, call it, $250 million that was in the back book? And then right now -- forgive me if I didn't hear you guys. But right now, do you guys have dry powder to deploy or are you fully deployed right now?

A: Greg Borenstein said the weighted average yield of acquired CLOs varied, and Larry Penn said they still have good dry powder. Greg also discussed that the pace depends on portfolio mix and risk management.

Q: Following up on the dry powder question, where I believe you said you're at $284 million today in CLOs. First, what is fully deployed look like? And when would you expect to be fully deployed? And were you more aggressive putting capital to work in early to mid-April, given the price moves relative to your initial expectations for redeployment?

A: Greg Borenstein said they were opportunistic and initially expected a longer ramp-in, but things cheapened into end of March. Larry Penn added it depends on portfolio mix and risk management, and they could be over $300 million with current equity base, and plan to issue unsecured debt later.