Ellington Credit Co
For the period ended Mar 31, 2025. Filed Jun 23, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Jun 23, 2025
EARN$3.28+4.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001560672-25-000033
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-03-31; filed 2025-06-23.
0001560672-25-000074
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 192 previous paragraphs and 220 current paragraphs.
96 unchanged; 54 reworded; 47 added; 41 removed; 1 previous and 23 current paragraphs rearranged.
Tables are not compared: 14 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (47)
Current report
Our primary investment objectives are to generate attractive current yields and risk-adjusted total returns for our shareholders. We seek to achieve these objectives by acquiring and managing a portfolio of corporate CLOs, with an emphasis on CLO mezzanine debt and equity tranches, and related investments, and opportunistically mitigating its credit risk, foreign currency risk, and interest rate risk, by using a variety of hedging instruments.
Current report
Our acquisition and management decisions will depend on prevailing market conditions and our targeted asset classes may vary over time in response to market conditions. We are advised by an affiliate of Ellington, Ellington Credit Company Management LLC (the "Adviser").
Current report
Following the Conversion, we liquidated our remaining mortgage-related assets, and we intend to operate so as to qualify to be taxed as a RIC under subchapter M of the Code moving forward. As a RIC, we generally do not have to pay corporate-level federal income tax on any net ordinary income or capital gain that we distribute to our stockholders as dividends if we meet certain source-of-income, distribution, and asset diversification requirements.
Current report
•After lowering its target range for the federal funds rate by a full percentage point to 4.25%–4.50% in the second half of 2024, the U.S. Federal Reserve (the "Federal Reserve") maintained that range at its January and March 2025 meetings. In its March announcement, the Federal Reserve noted that “uncertainty around the economic outlook has increased.”
Current report
Tariff Policy
Current report
•During the first quarter of 2025, the administration announced a new round of tariffs, primarily on imports from China, Canada, and Mexico, along with additional tariffs on certain goods and sectors. The administration also announced plans for broad “reciprocal” tariffs aimed at matching the tariff rates that other countries impose on U.S. exports.
Current report
These announcements caused volatility to increase in financial markets, contributing to notable declines in major equity indices during the final weeks of the first quarter.
Current report
•After rising sharply in the fourth quarter of 2024, interest rates declined significantly in the first quarter of 2025, with yields on the 2- and 10-year U.S. Treasury securities falling by 36 basis points quarter over quarter, ending at 3.88% and 4.21%, respectively. Meanwhile, interest rate volatility—as measured by the MOVE Index—declined in the early part of the quarter before reversing course and finishing slightly higher overall.
Current report
•Mortgage rates rose at the beginning of the first quarter of 2025, with the Freddie Mac survey 30-year mortgage rate increasing from 6.85% at the start of the year to 7.04% by mid-January. However, mortgage rates subsequently declined, with the 30-year mortgage rate falling to 6.65% by the end of the quarter.
Current report
•Secured Overnight Financing Rates (“SOFR”) were largely unchanged over the first quarter of 2025. The one-month SOFR rate declined by 1 basis point to 4.32%, while the three-month SOFR rate declined by 2 basis points to 4.29% at quarter end. SOFR rates drive many of our financing costs.
Current report
•Following a 3.9% increase in 2024, the S&P CoreLogic Case-Shiller US National Home Price NSA Index rose by 1.3% over the first three months of 2025. Meanwhile, the National Association of Realtors Housing Affordability Index increased by 2.3% during the first three months of 2025, reflecting a modest improvement in affordability with lower mortgage rates.
Current report
•The Mortgage Bankers Association’s Refinance Index, while still low by historical standards, rose by 80% quarter over quarter, indicating a pickup in refinancing activity amid slightly lower mortgage rates.
Current report
•Mortgage prepayment speeds also increased but remained low overall, with Fannie Mae 30-year MBS registering CPRs of 5.2 in January, 5.1 in February, and 6.6 in March.
Current report
•U.S. real GDP contracted at an estimated annualized rate of 0.3% in the first quarter of 2025, after growing by 2.4% in the prior quarter. Meanwhile, the unemployment rate edged higher, rising from 4.0% in January to 4.1% in February and 4.2% in March.
Current report
•Inflation, as measured by the 12-month change in the Consumer Price Index for All Urban Consumers (“CPI-U"), not seasonally adjusted, registered 3.0% in January, 2.8% in February, and 2.4% in March 2025. This compares to 12-month changes of 2.6% in October, 2.7% in November, and 2.9% in December 2024.
Current report
•The Bloomberg U.S. Corporate Bond Index generated a positive return of 2.31% but a negative excess return of (0.85%), while the Bloomberg U.S. Corporate High Yield Bond Index generated a positive return of 1.00% but a negative excess return of (1.13%), for the first quarter of 2025. Corporate credit spreads widened during the quarter, with spreads on the Markit CDX North America Investment Grade and High Yield Indices rising by 65 and 12 basis points quarter-over-quarter, respectively.
Current report
•After reaching record highs in 2024, U.S. leveraged loan and CLO issuance remained strong in the first quarter of 2025. Including nearly $200 million in repricings, U.S leveraged loan issuance totaled $387 billion, according to PitchBook|LCD. Meanwhile, U.S. CLO issuance approached $133 billion, including $90 billion in refinancings and resets, according to BofA Global Research.
Current report
•Leveraged loan prices also moved lower, with the Morningstar LSTA US Leveraged Loan Index falling by $1.02 to $96.31 as of March 31st.
Current report
•After strong gains in 2024, U.S. equity markets declined in the first quarter of 2025, with some indices recording their worst quarterly performance since 2022, driven largely by growing uncertainty around trade policy. In the first quarter, the NASDAQ fell by 10.4%, the S&P 500 fell by 4.6%, and the Dow Jones Industrial Average fell by 1.3%. In contrast, London's FTSE 100 index rose by 5.0%, while the MSCI World global equity index fell by 2.1%.
Current report
•Equity volatility rose during the first quarter of 2025, with the VIX spiking in mid-March amid heightened investor concerns.
Current report
The size of our Agency RMBS holdings decreased slightly to $503.9 million as of March 31, 2025, compared to $512.3 million as of December 31, 2024. While we continued to hold a core portfolio of liquid Agency RMBS in order to maintain our exemption from the 1940 Act (prior to the Conversion), we substantially increased our net short TBA position, which by March 31 st almost entirely offset our Agency RMBS holdings. Shortly after the Conversion, we sold our remaining Agency RMBS and liquidated our remaining TBA positions.
Current report
In addition to using short positions in TBAs, we also hedged our interest rate risk during the period using interest rate swaps, U.S. Treasury securities, and futures. At March 31, 2025, all of our interest rate hedges were in short TBA positions. We also maintained small credit hedge and foreign currency hedge portfolios during the period and at March 31, 2025.
Current report
For the three-month period ended March 31, 2025, CLO markets started on a constructive note, supported by sustained demand for leveraged loans, improving fundamentals for corporate borrowers, and strong capital inflows into floating-rate leveraged loan funds as investors positioned for a “higher for longer” interest rate environment. However, volatility increased as the quarter progressed—particularly in March—driven by growing investor concerns over proposed tariffs and the associated risk of an economic slowdown. This heightened volatility, coupled with elevated CLO issuance throughout the quarter, negatively pressured CLO prices in both the U.S. and Europe.
Current report
U.S. leveraged loan prices declined in the first calendar quarter of 2025, largely due to a sharp drop in March driven by weakness in lower-quality loans, particularly those more sensitive to higher tariff rates. This decompression within the loan index weighed on CLO mezzanine tranches, particularly those with elevated exposure to riskier assets. Meanwhile, U.S. loan prepayment rates, though still high by historical standards, declined quarter over quarter, resulting in reduced deleveraging for seasoned CLOs which adversely impacted mezzanine tranches priced at discounts.
Current report
While lower quarter over quarter, prepayment activity remained brisk in January and February, which pressured U.S. CLO equity tranches as net interest margin compression continued. This occurred as many floating-rate loans, typically those with higher coupon spreads, were refinanced and replaced with lower-coupon spreads. While this refinancing activity also led to a quarter-over-quarter decline in CLO equity NAVs, which presented a headwind to CLO equity tranche valuations, it also should limit future refinancing opportunities—a potential tailwind for CLO equity. Furthermore, CLO equity tranches with exposure to lower-quality loans, particularly those with exposure to higher tariffs, also underperformed.
Current report
In Europe, declining leveraged loan prices also pressured credit spreads, though European CLOs outperformed their U.S. counterparts, supported by rising prepayment rates which boosted deal deleveraging, and relatively low default rates.
Current report
Against this backdrop, our CLO strategy generated negative results for the three-month period ended March 31, 2025, with mark-to-market losses exceeding net interest income and modest gains on our credit hedges.
Current report
Agency RMBS yield spreads tightened in January and February, before reversing course and widening in March, driven in part by rising volatility related to uncertain tariff policies. For the three-month period ended March 31, 2025, the U.S. Agency MBS Index generated a negative excess return of (0.07%).
Current report
Our Agency portfolio generated positive results during each month of the period, with net gains on Agency RMBS exceeding net losses on interest rate hedges for January and February, and net gains on short TBA positions exceeding net losses on Agency RMBS in March.
Current report
(2)Excludes IOs.
Current report
Other income (loss) consists of net realized and net change in unrealized gains (losses) on securities and financial derivatives. For the three-month period ended March 31, 2025, Other income (loss) was $(14.5) million, consisting primarily of net realized and unrealized losses of $(7.9) million on our financial derivatives and $(7.6) million on our securities. Net realized and unrealized losses of $(7.9) million on our financial derivatives consisted of net realized and unrealized losses of $(8.9) million on our TBAs, $(0.5) million on our Euro FX futures, and $(0.4) million on our forwards, partially offset by net realized and unrealized gains of $1.3 million on our interest rate swaps, $0.5 million on our U.S. Treasury futures, and $0.1 million on our credit default swaps. The net loss on our financial derivatives was primarily the result of falling interest rates during the period. Net realized and unrealized losses of $(7.6) million on our securities consisted primarily of net realized and unrealized losses of $(16.4) million on our corporate CLOs, partially offset by net realized and unrealized gains $7.6 million on our Agency RMBS and $1.2 million on U.S. Treasury securities.
Current report
For the three-month period ended March 31, 2024, Other income (loss) was $5.6 million, consisting primarily of net realized and unrealized gains of $13.7 million on our financial derivatives, which were partially offset by net realized and unrealized losses of $(8.1) million on our securities. Net realized and unrealized gains of $13.7 million on our financial derivatives consisted of net realized and unrealized gains of $15.7 million on our interest rate swaps and $0.4 million on our TBAs, partially offset primarily by net realized and unrealized losses of $(2.2) million on our U.S. Treasury and Euro FX futures, and $(0.2) million on our credit default swaps. The net gain on our financial derivatives was primarily the result of rising interest rates during the quarter. Net realized and unrealized losses of $(8.1) million on our securities, also driven by rising interest rates, consisted primarily of net realized and unrealized losses of $(10.8) million on our Agency RMBS, partially offset by net realized and unrealized gains of $1.2 million on our corporate CLOs, $0.8 million on our non-Agency RMBS, and $0.7 million on our U.S. Treasury securities.
Current report
For the three-month periods ended March 31, 2025 and 2024, our income tax expense (benefit) was $(6) thousand and $0.3 million, respectively.
Current report
Net Income (Loss)
Current report
Interest Income
Current report
Interest Expense
Current report
Adjusted Cost of Funds
Current report
Other Operating Expenses
Current report
Other Income (Loss)
Current report
Income Tax Expense (Benefit)
Showing the first 40 of 47 passages. Open the source sections for the rest.
Removed paragraphs (41)
Previous report
Our primary objective is to generate attractive current yields and risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the associated risks. Following the CLO Strategic Transformation, we now seek to attain this objective by constructing and actively managing a portfolio of corporate CLOs, primarily mezzanine debt and equity tranches, which are typically collateralized by portfolios consisting primarily of below-investment-grade senior secured loans with a large number of discrete underlying borrowers across various industry sectors. CLOs are a form of asset-backed security collateralized by syndicated corporate loans which receive interest and principal cash flows from these underlying loans. Senior debt tranches are paid first, then mezzanine debt tranches, and finally, equity. Additionally, we may also invest in CLO loan accumulation facilities, which are entities that acquire corporate loans and other similar corporate credit-related assets in anticipation of ultimately collateralizing a CLO transaction.
Previous report
We are externally managed and advised by our Manager, an affiliate of Ellington. Ellington has a longstanding record of investing in the CLO sector. In connection with the CLO Strategic Transformation, on June 25, 2024, our Board of Trustees unanimously approved the Management Agreement where, in addition to carrying over the removal of certain provisions related to the maintenance of our REIT status (which had been made in the prior amendment), our Board of Trustees determined to more closely align the management fee arrangement between us and our Manager with the advisory fee structures of CLO-focused registered closed-end funds.
Previous report
•In 2024, the U.S. Federal Reserve maintained its federal funds rate target range of 5.25%–5.50% across its first five meetings. At the September meeting, the Federal Reserve cut rates for the first time in four years, reducing the target range by 50 basis points to 4.75%–5.00%. The Federal Reserve cited a balance in risks to its employment and inflation goals.
Previous report
•Subsequent meetings in November and December brought additional 25-basis-point cuts, bringing the range to 4.25%–4.50%. However, the December Summary of Economic Projections signaled a slower pace of rate cuts in 2025, with only two 25-basis-point reductions anticipated. Chair Powell noted further progress lowering inflation as a prerequisite for additional cuts.
Previous report
•Following sharp declines in the fourth quarter of 2023, interest rates rose in the first quarter of 2024 as expectations for Federal Reserve rate cuts shifted later in the year. The 2-year U.S. Treasury yield increased by 37 basis points to 4.62%, while the 10-year U.S. Treasury yield rose by 32 basis points to 4.20%. Interest rate volatility declined, with the MOVE Index reaching a two-year low by quarter-end.
Previous report
In the second quarter, interest rates rose in April before declining in May and June, ending slightly higher overall. The 2-year U.S. Treasury yield increased by 13 basis points to 4.75%, and the 10-year U.S. Treasury yield rose by 20 basis points to 4.40%. Volatility spiked in mid-April but fell through the quarter's end.
Previous report
The third quarter saw significant declines in interest rates, particularly short-term rates. The 10-year U.S. Treasury yield exceeded the 2-year yield for the first time since July 2022. The 2-year yield dropped by 111 basis points to 3.64%, and the 10-year yield fell by 62 basis points to 3.78%. Volatility spiked in early August and September before subsiding.
Previous report
In the fourth quarter, interest rates reversed course again, with the 2-year U.S. Treasury yield rising 60 basis points to 4.24% and the 10-year U.S. Treasury yield increasing 79 basis points to 4.57%. The MOVE Index peaked ahead of the U.S. presidential election but declined by year-end.
Previous report
For 2024 as a whole, the 2-year U.S. Treasury yield decreased by 1 basis point, while the 10-year yield rose by 69 basis points.
Previous report
•Mortgage rates closely tracked long-term interest rate movements. The Freddie Mac survey 30-year mortgage rate rose to 7.22% in May before declining to 6.08% by late September. Mortgage rates spiked again in the fourth quarter, ending the year at 6.85%.
Previous report
•SOFR rates were stable in the first half of 2024 but fell sharply in the second half, reflecting the Federal Reserve rate cuts. For the full year, one-month SOFR decreased 102 basis points to 4.33%, while three-month SOFR fell 103 basis points to 4.31%. SOFR rates drive many of our financing costs.
Previous report
•Housing price metrics showed modest gains for the full year. The S&P CoreLogic Case-Schiller US National Home Price Index increased by 3.9%, while the National Association of Realtors Housing Affordability Index rose 0.2%.
Previous report
•The Mortgage Bankers Association's Refinance Index, although still low on an historical basis, rose significantly in the first three quarters of 2024, tripling between the start of the year and September 27 th. However, the index declined sharply in the fourth quarter, ending 2024 only slightly higher year-over-year.
Previous report
•Similarly, mortgage prepayment speeds increased during the year but remained at relatively low levels. Prepayment speeds for Fannie Mae 30-year RMBS started at 4.4 CPR in January 2024 and trended upward for most of the year, reaching a peak of 8.3 CPR in October. Prepayment speeds then declined towards year-end, with Fannie Mae 30-year RMBS registering 6.0 CPR in December.
Previous report
•U.S. real GDP grew at annualized rates of 1.6% in the first quarter, 3.0% in the second quarter, and 3.1% in the third quarter, with an estimated growth rate of 2.3% in the fourth quarter. Unemployment edged up from 3.8% to 4.1% by year-end.
Previous report
•Inflation trended lower, with the 12-month percentage change in the Consumer Price Index for All Urban Consumers, not seasonally adjusted, falling from 3.1% in January to a low of 2.4% in September before ending the year at 2.9%.
Previous report
•Corporate bonds fared better. The Bloomberg U.S. Corporate Bond Index returned 2.13% with an excess return of 2.46%, while the Bloomberg High Yield Bond Index posted an 8.19% return and 5.02% excess return. Corporate credit spreads tightened, with the Markit CDX North America Investment Grade and High Yield Indices narrowing by 7 and 45 basis points, respectively.
Previous report
•Including $800 billion in repricings, U.S. leveraged loan issuance reached a record $1.5 trillion in 2024, per PitchBook|LCD. CLO new issue volume also hit a record, exceeding $200 billion, according to BofA Global Research.
Previous report
•Additionally, prices on leveraged loans increased, with the Morningstar LSTA US Leveraged Loan Index rising by $1.10 over the year, reaching $97.33 as of December 31 st.
Previous report
•U.S. equities posted another strong year in 2024: the Dow Jones rose 12.9%, the S&P 500 gained 23.3%, and the NASDAQ climbed 28.6%. The FTSE 100 and MSCI World Indexes also posted gains of 5.7% and 17.0%, respectively.
Previous report
•Equity volatility spiked at several points during 2024, with the VIX reaching, in early August, its highest level since October 2020.
Previous report
The size of our Agency RMBS holdings decreased by 30% to $512.3 million as of December 31, 2024, compared to $728.0 million as of December 31, 2023, primarily driven by net sales in conjunction with the CLO Strategic Transformation, as well as paydowns. Meanwhile, we sold our remaining non-Agency RMBS and interest only securities throughout the year and held only a de minimis amount at year end.
Previous report
During the year, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in U.S. Treasury securities and futures. We ended the year with a net short TBA position on a notional basis, but a net long TBA position as measured by 10-year equivalents. 10-year equivalents for a group of positions represent the amount of 10-year U.S. Treasury securities that would be expected to experience a similar change in market value under a standard parallel move in interest rates. We also maintained modest credit hedge and currency hedge portfolios at year end.
Previous report
In 2024, the U.S. CLO market benefited from strengthening loan fundamentals and robust demand for leveraged loans, as well as from spread tightening across credit risk assets broadly. The trailing-twelve-month payment default rate for the Morningstar LSTA U.S. Leveraged Loan Index (the "U.S. LL Index") declined to 91 basis points at the end of 2024, which was 62 basis points lower year over year, while the balance of loans in the U.S. LL Index rated CCC+ or below declined to 5.3%, the lowest level since October 2022. The U.S. LL Index price rose $1.10 to $97.33 at year-end, which combined with interest payments drove a total return for the year of nearly 9%.
Previous report
Leveraged loan prepayment and repricing rates surged in 2024, with prepayment rates on the U.S. LL Index increasing to 28% from 18% on a trailing-twelve-month basis, as borrowers took advantage of highly accessible capital markets to refinance debt at lower spreads, extend maturities, and increase liquidity. As a result, the broadly syndicated loan market saw gross issuance of nearly $1.5 trillion for the year, the largest annual issuance amount on record, split between $650 billion of new loan issuance and refinancings, and more than $800 billion in repricings. The wave of issuance was met by significant demand for the asset class, driven by a record year of CLO new issuance as well (over $200 billion in 2024), in addition to nearly $9 billion of net capital inflows into leveraged loan retail funds. On balance, the U.S. LL Index experienced net issuance of only $21 billion year-over-year. Net issuance in the U.S. CLO market was similarly limited in 2024.
Previous report
The European CLO market also enjoyed strengthening loan fundamentals in 2024, benefiting from a full year default rate of just 42 basis points—120 basis points lower than 2023's default rate. However, loan prepayment rates rose less than in the U.S., increasing to 13.1 CPR (+2.6 CPR year over year). As a result of lower loan prepayment rates, the amount outstanding underlying the European leveraged loan index grew by 11%, compared to 2% in the U.S.
Previous report
In both the U.S. and Europe, declining default rates contributed to strong demand for CLO debt and equity tranches, and along with limited net CLO issuance, drove CLO mezzanine and equity credit spreads tighter over the course of 2024. Additionally, high prepayment rates in the U.S. drove substantial deleveraging in many seasoned CLOs, contributing to incremental credit spread tightening in many mezzanine tranches. However, investors remained wary of credit dispersion and lower-quality loan portfolios in the U.S., driving debt spreads modestly wider for certain CLOs with elevated exposure to such assets. In Europe, while CLO mezzanine tranches did not benefit as much from elevated prepayment rates and rapid deal deleveraging, they were aided by reduced credit dispersion in their underlying loan portfolios relative to U.S. CLOs.
Previous report
U.S. CLO equity performance, while positive in 2024, was mixed relative to CLO mezzanine performance. While declining default rates contributed to demand for CLO equity tranches and alleviated credit losses, rapid prepayment rates in the loan market led to both price declines for loans trading above par and compression in loan floating rate spreads. This occurred as a result of large volumes of loans trading at premiums to par being refinanced at par and replaced with lower-spread loans, triggering mark-to-market losses in some CLO equity profiles as both their interest payments (due to lower excess interest in the CLO) and underlying asset values declined in tandem. Loan repayment rate effects were somewhat mitigated by tightening CLO debt spreads, which allowed some deals to refinance their debt or reset their debt (which also included reinvestment period extension in addition to debt cost reduction). Deals that were able to exercise refinancing or reset options, typically those with higher existing costs of debt and better-performing portfolios, delivered stronger equity returns in 2024. In Europe, CLO equity performance was generally stronger as a result of slower prepayment speeds, rendering the negative impact of the repayment of premium loans less pronounced, as well as low default rates.
Previous report
Our CLO strategy had strong results for the year, led by robust net interest income and net gains in our U.S. and European CLO debt portfolios, supported by opportunistic sales, tighter credit spreads on held positions, and redemptions of several of our discount seasoned CLO mezzanine tranches. Performance from CLO equity was modestly positive, with net interest income exceeding net unrealized losses.
Previous report
Non-Agency Performance
Previous report
Our non-Agency RMBS portfolio and interest-only securities generated positive results for the year, driven by net interest income and net gains associated with several profitable sales.
Previous report
In the first quarter of 2024 Agency MBS underperformed as expectations for a Federal Reserve rate cut were delayed, pushing interest rates higher and yield spreads wider, especially in February. Spreads recovered in March due to lower volatility and capital inflows, but Agency MBS generated a modestly negative excess return to U.S. Treasury securities overall for the quarter.
Previous report
In April, renewed inflation concerns and a hawkish Federal Reserve caused Agency MBS yield spreads to widen. However, declining interest rates and volatility in May and June reversed most of the widening, leading to slight underperformance against benchmark indices for the quarter.
Previous report
The third quarter saw falling interest rates, a steepening yield curve, and tightening Agency MBS yield spreads as markets anticipated Federal Reserve rate cuts. In September, the Federal Reserve reduced the target range for the federal funds rate by 50 basis points and signaled further cuts, leading Agency MBS to outperform benchmark indices in the quarter.
Previous report
In the fourth quarter, rising interest rates and intra-quarter volatility caused Agency MBS to underperform relative to benchmark indices.
Previous report
For 2024, the Bloomberg Barclays U.S. MBS Index posted a positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S. Treasury Index. Our Agency portfolio generated positive results for the year as well, with net gains on interest rate hedges exceeding net losses on Agency MBS.
Previous report
Management Fees
Previous report
On January 8, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on February 25, 2025 to shareholders of record as of January 31, 2025.
Previous report
On February 10, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on March 25, 2025 to shareholders of record as of February 28, 2025.
Previous report
On March 7, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on April 25, 2025 to shareholders of record as of March 31, 2025.
Showing the first 40 of 41 passages. Open the source sections for the rest.
Reworded paragraphs (54)
Previous wording
We were initially formed in August 2012 as a Maryland company and have historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, while electing to be taxed as a REIT under the Code.
Current wording
We were initially formed in August 2012 as a Maryland company and had historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, while electing to be taxed as a REIT under the Code.
Previous wording
On March 29, 2024, our Board of Trustees approved a strategic transformation, the "CLO Strategic Transformation," of our investment strategy to focus on corporate collateralized loan obligations, or "CLOs." In connection with the CLO Strategic Transformation, we revoked our election to be taxed as a REIT for tax year 2024, rebranded as Ellington Credit Company, and began operating as a taxable C-Corp. As a taxable C-Corp, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act. This includes holding a core portfolio of liquid Agency MBS pools in order to maintain our exemption from the 1940 Act. During this time, we also plan to take advantage of our significant existing net operating loss carryforwards to offset the majority of our U.S. federal taxable income.
Current wording
On March 29, 2024, our Board approved a strategic transformation (the "CLO Strategic Transformation") of our investment strategy to focus on corporate collateralized loan obligations ("CLOs"). In connection with the CLO Strategic Transformation, we revoked our election to be taxed as a REIT beginning with tax year 2024, rebranded as Ellington Credit Company, and operated as a taxable C-Corporation during the interim period from January 1, 2024 through March 31, 2025. As a taxable C-Corporation, we continued to conduct our operations so that neither we nor any of our subsidiaries were required to register as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). This included holding a core portfolio of liquid Agency RMBS pools in order to maintain our exemption from the 1940 Act. During this period, we also sought to take advantage of our significant existing net operating loss carryforwards to offset the majority of our U.S. federal taxable income.
Previous wording
On April 1, 2025, we intend to convert to a Delaware closed-end fund registered under the 1940 Act that will elect to be treated as a regulated investment company (a "RIC") under the Code (such actions, collectively, the "Conversion"). We obtained shareholder approval of certain matters related to the Conversion at a special meeting of shareholders held on January 17, 2025 (the "Special Meeting"). In conjunction with the Conversion, we intend to liquidate the vast majority of our remaining mortgage- and real estate-related assets and, upon the effectiveness of the Conversion, we intend to operate so as to qualify to be taxed as a RIC under subchapter M of the Code. After the Conversion, we would generally not be subject to corporate tax.
Current wording
On April 1, 2025 (the "Conversion Date"), we converted to a Delaware closed-end fund registered under the 1940 Act that has applied and will elect to be treated as a regulated investment company (a "RIC") under the Internal Revenue Code of 1986, as amended (the "Code") (such actions, collectively, the "Conversion"). We obtained shareholder approval of certain matters related to the Conversion at a special meeting of shareholders held on January 17, 2025 (the "Special Meeting").
Previous wording
We currently use leverage in our strategies and to date have financed our assets exclusively through repurchase agreements, which we account for as collateralized borrowings. As of December 31, 2024, we had outstanding borrowings under repurchase agreements in the amount of $563.0 million with 14 counterparties; 89% of such borrowings were collateralized by Agency RMBS and 11% were collateralized by CLOs. As part of the Conversion, we intend to sell our remaining liquid Agency MBS pools and operate in compliance with 1940 Act requirements.
Current wording
We currently use leverage and to date have financed our assets exclusively through repurchase agreements, which we account for as collateralized borrowings. As of March 31, 2025, we had outstanding borrowings under repurchase agreements in the amount of $517.5 million with 13 counterparties; 87% of such borrowings were collateralized by Agency RMBS and 13% were collateralized by CLOs.
Previous wording
As of December 31, 2024, our book value per share was $6.53 as compared to $7.32 as of December 31, 2023, respectively.
Current wording
As of March 31, 2025, our book value per share was $6.08 as compared to $6.53 and $7.32 as of December 31, 2024 and 2023, respectively.
Previous wording
•In June, the Federal Reserve reduced the pace of its balance sheet contraction by lowering the cap on portfolio runoff of U.S. Treasury securities from $60 billion to $25 billion, while maintaining the $35 billion cap on Agency RMBS.
Current wording
•The Federal Reserve announced that it would further reduce the pace of its balance sheet contraction, beginning in April, by lowering the cap on portfolio runoff of U.S. Treasury securities from $25 billion to $5 billion, while maintaining the $35 billion cap on Agency RMBS runoff.
Previous wording
•MBS returns were mixed, with the Bloomberg U.S. MBS Index posting a full-year positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S. Treasury Index. The performance of both indices was volatile, particularly in the fourth quarter, when returns were sharply negative overall.
Current wording
•For the first quarter of 2025, the Bloomberg U.S. MBS Index posted a positive return of 3.06% but a negative excess return (on a duration-adjusted basis) of (0.07%) relative to the Bloomberg U.S. Treasury Index.
Previous wording
•Default rates on U.S. leveraged loans declined in 2024. According to PitchBook|LCD the twelve-month trailing default rate on the Morningstar LSTA Leveraged Loan Index fell to 0.80% as of September 30 th, compared to 1.53% at the start of the year. Default rates rose slightly to 0.91% by December 31 st, but remained well below the 10-year historical average of 1.62%.
Current wording
•After declining in 2024, default rates on U.S. leveraged loans declined further in the first quarter of 2025. According to Pitchbook|LCD, the twelve-month trailing default rate on the Morningstar LSTA Leveraged Loan Index decreased to 0.82% at quarter end, down from 0.91% at December 31st.
Previous wording
•European leveraged loans followed a similar trend, with default rates declining significantly year over year, to 0.42% from 1.62%. Prices increased as well, with the Morningstar LSTA EU Leveraged Loan Index rising by €1.96 to €98.01.
Current wording
•European leveraged loans mirrored these trends, as default rates declined to 0.29% from 0.42% quarter over quarter. Prices also fell, with the Morningstar LSTA EU Leveraged Loan Index dropping by €0.38 to €97.63.
Previous wording
Our CLO portfolio expanded nearly tenfold year over year to $171.1 million as of December 31, 2024, from $17.4 million, as we rotated investment capital into CLOs in conjunction with the CLO Strategic Transformation. As of December 31, 2024, our CLO portfolio consisted of $99.1 million of CLO equity tranches, ($91.8 million dollar-denominated, $7.3 million non-dollar denominated) and $72.0 million of CLO notes, specifically mezzanine debt tranches ($55.2 million dollar-denominated, $16.8 million non-dollar denominated).
Current wording
Our CLO portfolio grew by 46% to $249.9 million as of March 31, 2025, from $171.1 million as of December 31, 2024, as we purchased additional CLOs in conjunction with the CLO Strategic Transformation. As of March 31, 2025, our CLO portfolio consisted of $164.4 million of CLO equity tranches, ($151.3 million dollar-denominated, $13.1 million non-dollar denominated) and $85.5 million of CLO notes, specifically mezzanine debt tranches ($64.0 million dollar-denominated, $21.5 million non-dollar denominated).
Previous wording
In conjunction with the Conversion, we intend to liquidate the vast majority of our remaining mortgage- and real estate-related assets and rotate all investment capital into CLOs. Moving forward, we expect our CLO holdings to continue to be a blend of CLO equity and CLO debt investments, with the capital allocations fluctuating over time based on market opportunities. In addition, we intend to continue to invest in both dollar-denominated and non-dollar denominated CLO investments, based on relative value opportunities, but expect the majority of our CLO investments will continue to be dollar-denominated.
Current wording
We expect our CLO holdings to continue to be a blend of CLO equity and CLO debt investments, with the capital allocations fluctuating over time based on market opportunities. In addition, we intend to continue to invest in both dollar-denominated and non-dollar denominated CLO investments, based on relative value opportunities, but expect the majority of our CLO investments will continue to be dollar-denominated.
Previous wording
As of December 31, 2024, our mortgage-backed securities portfolio consisted almost entirely of $512.3 million of fixed-rate Agency "specified pools," and a de minimis amount of Agency interest-only securities, or "Agency IOs." Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through government-sponsored refinancing programs, and mortgages with various other characteristics.
Current wording
As of March 31, 2025, our mortgage-backed securities portfolio consisted of $503.9 million of fixed-rate Agency "specified pools," and a de minimis amount of Agency interest-only securities, or "Agency IOs." Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through government-sponsored refinancing programs, and mortgages with various other characteristics.
Previous wording
Our debt-to-equity ratio, adjusted for unsettled trades, decreased to 2.9:1 as of December 31, 2024, as compared to 5.3:1 as of December 31, 2023. The decline was driven by significantly higher shareholder's equity and less leverage on our CLO investments relative to Agency investments. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions. As of December 31, 2024, 89% of our borrowings were secured by Agency RMBS and 11% were secured by CLOs.
Current wording
Our debt-to-equity ratio, adjusted for unsettled trades, decreased to 2.2:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024, driven by higher shareholders’ equity and the use of significantly less leverage in our Agency RMBS portfolio. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions. As of March 31, 2025, 87% of our borrowings were secured by Agency RMBS and 13% were secured by CLOs.
Previous wording
As of December 31, 2024, we had cash and cash equivalents of $31.8 million, in addition to other unencumbered assets of $79.2 million. This compares to cash and cash equivalents of $38.5 million, and other unencumbered assets of $22.9 million, as of December 31, 2023.
Current wording
As of March 31, 2025, we had cash and cash equivalents of $17.4 million, in addition to other unencumbered assets of $151.5 million. This compares to cash and cash equivalents of $31.8 million, and other unencumbered assets of $79.2 million, as of December 31, 2024.
Previous wording
Average pay-ups on our specified pool portfolio decreased to 0.20% as of December 31, 2024, as compared to 1.01% as of December 31, 2023, as we rotated into highly liquid pools with low pay-ups in preparation for the Conversion.
Current wording
Average pay-ups on our specified pool portfolio increased to 0.23% as of March 31, 2025, as compared to 0.20% as of December 31, 2024.
Previous wording
Our net mortgage assets-to-equity ratio—which we define 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 shareholders' equity —declined year over year. The decrease was driven by significantly higher shareholders' equity and a smaller Agency RMBS portfolio. From time to time, in response to market opportunities and other factors, we increase or decrease our net mortgage assets-to-equity ratio by varying the sizes of our net short TBA position and/or our long RMBS portfolio in relation to the portion of our overall shareholders' equity employed in our mortgage-related strategies. The following table summarizes our net mortgage assets-to-equity ratio and provides additional details, for the last five quarters, to illustrate this fluctuation.
Current wording
Our net mortgage assets-to-equity ratio—which we define 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 shareholders' equity —declined as we substantially increased our net short TBA position, which at period end almost entirely offset our Agency RMBS holdings. The following table summarizes our net mortgage assets-to-equity ratio and provides additional details, for the last five quarters, to illustrate this fluctuation.
Previous wording
For the year ended December 31, 2024, we had total net realized and unrealized losses on our Agency securities of $(16.1) million, or $(0.68) per share, and net realized losses of $(24.8) million, or $(1.05) per share.
Current wording
For the three-month period ended March 31, 2025, we had total net unrealized gains on our Agency securities of $8.7 million, or $0.25 per share, and net realized losses of $(1.1) million, or $(0.03) per share.
Previous wording
For the year ended December 31, 2024, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs, U.S. Treasury securities, and futures. We had total net realized and unrealized gains of $24.1 million, or $1.02 per share, on our interest rate hedging portfolio, driven by the increase in interest rates during the year. These gains exclude net realized and unrealized losses of $(4.2) million, or $(0.18) per share, on our long TBAs held for investment.
Current wording
For the three-month period ended March 31, 2025, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs, U.S. Treasury securities, and futures. At March 31, 2025, all of our interest rate hedges were in short TBA positions, and we had no long TBA positions. We had total net realized and unrealized losses of $(5.5) million, or $(0.16) per share, on our interest rate hedging portfolio, driven by the decrease in interest rates during the period. These gains exclude net realized and unrealized losses of $(0.4) million, or $(0.01) per share, on our long TBAs held for investment.
Previous wording
We ended the quarter with a net short TBA position on a notional basis, but a net long position as measured by 10-year equivalents. Ten-year equivalents for a group of positions represent the amount of 10-year U.S. Treasury securities that would be expected to experience a similar change in market value under a standard parallel move in interest rates. The relative makeup of our interest rate hedging portfolio can change materially from period to period. As of December 31, 2024, we also maintained a modest credit and foreign currency hedge portfolio.
Current wording
The relative makeup of our interest rate hedging portfolio can change materially from period to period. As of March 31, 2025, we also maintained modest credit and foreign currency hedge portfolios.
Previous wording
After giving effect to dividends declared during the year ended December 31, 2024 of $0.96 per share, our book value per share decreased to $6.53 as of December 31, 2024, from $7.32 as of December 31, 2023, and we had an economic return of 2.3% for the year ended December 31, 2024. Economic return for a period is computed by adding back dividends declared during the period to ending book value per share, and comparing that amount to book value per share as of the beginning of the period.
Current wording
After giving effect to dividends declared during the three-month period ended March 31, 2025 of $0.24 per share, our book value per share decreased to $6.08 as of March 31, 2025, from $6.53 as of December 31, 2024, and we had an economic return of (3.2%) for the three-month period ended March 31, 2025. Economic return for a period is computed by adding back dividends declared during the period to ending book value per share, and comparing that amount to book value per share as of the beginning of the period.
Previous wording
For the years ended December 31, 2024 and 2023, our average repo borrowing cost was 5.48% and 5.18%, respectively, driven by increases in short-term interest rates year over year and the growth of our CLO portfolio, as our CLO portfolio has higher borrowing costs compared to our Agency RMBS portfolio. As of December 31, 2024 and 2023, the weighted average borrowing rate on our repurchase agreements was 4.81% and 5.58%, respectively.
Current wording
For the three-month periods ended March 31, 2025 and December 31, 2024, our average repo borrowing cost was 4.66% and 5.04%, respectively, driven by the decline in short-term interest rates period over period, partially offset by the growth of our CLO portfolio, which has higher borrowing costs compared to Agency RMBS. As of March 31, 2025 and December 31, 2024, the weighted average borrowing rate on our repurchase agreements was 4.56% and 4.81%, respectively.
Previous wording
Our debt-to-equity ratio was 2.9:1 as of December 31, 2024, as compared to 5.4:1 as of December 31, 2023. Adjusted for unsettled trades, our debt-to equity ratio was also 2.9:1 as of December 31, 2024, as compared to 5.3:1 as of December 31, 2023. The year over year decline was driven by significantly higher shareholders' equity and less leverage on our CLO investments (relative to Agency investments), which constituted a significantly larger proportion of our overall portfolio as of December 31, 2024, compared to December 31, 2023. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions.
Current wording
Our debt-to-equity ratio was 2.3:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024. Adjusted for unsettled trades, our debt-to equity ratio was 2.2:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024. The decline was driven by higher shareholders' equity and use of significantly less l everage in our Agency RMBS portfolio. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions.
Previous wording
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain. Actual results could differ from those estimates and such differences could have a material impact on our financial condition and/or results of operations. We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made based upon information available to us at that time. We rely on the experience of our Manager and Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates. See Note 2 of the notes to our consolidated financial statements for a complete discussion of our significant accounting policies. We have identified our most critical accounting estimates to be the following:
Current wording
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain. Actual results could differ from those estimates and such differences could have a material impact on our financial condition and/or results of operations. We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made based upon information available to us at that time. We rely on the experience of our Adviser and Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates. See Note 2 of the notes to our consolidated financial statements for a complete discussion of our significant accounting policies. We have identified our most critical accounting estimates to be the following:
Previous wording
The determination of estimated fair value of those of our financial instruments that are not traded in an active market requires the use of both macroeconomic and microeconomic assumptions and/or inputs, which are generally based on current market and economic conditions. Changes in market and/or economic conditions could have a significant adverse effect on the estimated fair value of our financial instruments. Changes to assumptions, including assumed market yields, may significantly impact the estimated fair value of our investments. Our valuations are sensitive to changes in interest rates; see the interest rate sensitivity analysis included in Item 3. Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further information.
Current wording
The determination of estimated fair value of those of our financial instruments that are not traded in an active market requires the use of both macroeconomic and microeconomic assumptions and/or inputs, which are generally based on current market and economic conditions. Changes in market and/or economic conditions could have a significant adverse effect on the estimated fair value of our financial instruments. Changes to assumptions, including assumed market yields, may significantly impact the estimated fair value of our investments. Our valuations are sensitive to changes in interest rates; see the interest rate sensitivity analysis included in Item 3. Quantitative and Qualitative Disclosures about Market Risk in this Transition Report on Form 10-K for further information.
Previous wording
The effective yield on our debt securities that are deemed to be of high credit quality (including Agency RMBS, exclusive of interest only securities) can be significantly impacted by our estimate of future prepayments. Future prepayment rates are difficult to predict. We estimate prepayment rates over the remaining life of our securities using models that generally incorporate the forward yield curve, current mortgage rates, mortgage rates on the outstanding loans, age and size of the outstanding loans, and other factors. We compare estimated prepayments to actual prepayments on a quarterly basis, and effective yields are recalculated retroactive to the time of purchase. When differences arise between our previously calculated effective yields and our current calculated effective yields, a catch-up adjustment, or "Catch-up Amortization Adjustment," is made to interest income to reflect the cumulative impact of the changes in effective yields. For the years ended December 31, 2024 and 2023, we recognized a Catch-up Amortization Adjustment of $(0.5) million and $(0.1) million, respectively. The Catch-up Amortization Adjustment is reflected as an increase (decrease) to interest income on the Consolidated Statement of Operations. Our accretion of discounts and amortization of premiums on securities for U.S. federal and other tax purposes is likely to differ from the accounting treatment under U.S. GAAP of these items as described above. See Note 2 of the notes to our consolidated financial statements for more information on the assumptions and methods that we use to amortize purchase premiums and accrete purchase discounts.
Current wording
The effective yield on our debt securities that are deemed to be of high credit quality (including Agency RMBS, exclusive of interest only securities) can be significantly impacted by our estimate of future prepayments. Future prepayment rates are difficult to predict. We estimate prepayment rates over the remaining life of our securities using models that generally incorporate the forward yield curve, current mortgage rates, mortgage rates on the outstanding loans, age and size of the outstanding loans, and other factors. We compare estimated prepayments to actual prepayments on a quarterly basis, and effective yields are recalculated retroactive to the time of purchase. When differences arise between our previously calculated effective yields and our current calculated effective yields, a catch-up adjustment, or "Catch-up Amortization Adjustment," is made to interest income to reflect the cumulative impact of the changes in effective yields. For the three-month periods ended March 31, 2025 and 2024, we recognized a Catch-up Amortization Adjustment of $(0.2) million and $(0.9) million, respectively. The Catch-up Amortization Adjustment is reflected as an increase (decrease) to interest income on the Consolidated Statement of Operations. Our accretion of discounts and amortization of premiums on securities for U.S. federal and other tax purposes is likely to differ from the accounting treatment under U.S. GAAP of these items as described above. See Note 2 of the notes to our consolidated financial statements for more information on the assumptions and methods that we use to amortize purchase premiums and accrete purchase discounts.
Previous wording
Income Taxes: We revoked our REIT election for tax year 2024 and currently operate as a taxable C-Corp. We are subject to U.S. federal, state, and local income tax. We may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any such positions, we might be found to have a tax liability that has not been recorded in the accompanying consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof. See Note 2 to our consolidated financial statements for additional details on income taxes.
Current wording
Income Taxes: We revoked our REIT election beginning with tax year 2024 and operated as a taxable C-Corporation through March 31, 2025. During this period, we were subject to U.S. federal, state, and local income tax. We may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any such positions, we might be found to have a tax liability that has not been recorded in the accompanying consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof. See Note 2 to our consolidated financial statements for additional details on income taxes.
Previous wording
The following tables summarize our securities portfolio as of December 31, 2024 and 2023:
Current wording
The following tables summarize our securities portfolio as of March 31, 2025 and December 31, 2024 and 2023:
Previous wording
As of December 31, 2024, 72% of our invested capital, calculated based on risk capital, was allocated to corporate CLOs and 28% was allocated to mortgage-related securities. Substantially all of our mortgage-related securities are Agency RMBS, which include investments in Agency pools.
Current wording
As of March 31, 2025, 81% of our invested capital, calculated based on risk capital, was allocated to corporate CLOs and 19% was allocated to mortgage-related securities. Substantially all of our mortgage-related securities are Agency RMBS, which include investments in Agency pools.
Previous wording
Our most prevalent method of financing RMBS and CLOs is through short-term repos, which generally have maturities of 364 days or less. The weighted average lives of the RMBS and CLOs that we own are generally much longer. Consequently, the weighted average term of our repurchase agreement financings will almost always be substantially shorter than the expected average maturity of our RMBS and CLOs. This mismatch in maturities, together with the uncertainty of prepayments on the underlying mortgage or corporate loans, and other potential changes in the timing and/or amount of cash flows, creates the risk that changes in interest rates will cause our financing costs with respect to our RMBS and CLOs to increase relative to the income on these assets over the term of our investments. In addition, changes in the fair value of our RMBS and CLO investments, whether as a result of changes in market conditions, prepayments, or other factors, may trigger changes in margin requirements, in which counterparties to our repurchase agreements may require us post additional collateral to re-establish the agreed-upon collateralization requirements.
Current wording
Our most prevalent method of financing RMBS and CLOs is through short-term repos, which generally have maturities of 364 days or less. The weighted average lives of the RMBS and CLOs that we own are generally much longer. Consequently, the weighted average term of our repurchase agreement financings will almost always be substantially shorter than the expected average maturity of our RMBS and CLOs. This mismatch in maturities, together with the uncertainty of prepayments on the underlying mortgage or corporate loans, and other potential changes in the timing and/or amount of cash flows, creates the risk that changes in interest rates will cause our financing costs with respect to our RMBS and CLOs to increase relative to the income on these assets over the term of our investments. In addition, changes in the fair value of our RMBS and CLO investments, whether as a result of changes in market conditions, prepayments, or other factors, may trigger changes in margin requirements, in which counterparties to our repurchase agreements may require us to post additional collateral to re-establish the agreed-upon collateralization requirements.
Previous wording
The following table summarizes our portfolio of financial derivative holdings as of December 31, 2024 and 2023:
Current wording
The following table summarizes our portfolio of financial derivative holdings as of March 31, 2025 and December 31, 2024 and 2023:
Previous wording
Pursuant to our hedging program, we engage in a variety of interest rate hedging activities that are designed to reduce the interest rate risk with respect to the liabilities incurred to acquire or hold RMBS. These interest rate hedges generally seek to reduce the interest rate sensitivity of our liabilities or, in other words, reduce the volatility of our financing cost over time attributable to interest rate changes. Our interest rate hedging transactions may include:
Current wording
Pursuant to our hedging program prior to Conversion, we engage in a variety of interest rate hedging activities that are designed to reduce the interest rate risk with respect to the liabilities incurred to acquire or hold RMBS. These interest rate hedges generally seek to reduce the interest rate sensitivity of our liabilities or, in other words, reduce the volatility of our financing cost over time attributable to interest rate changes. Our interest rate hedging transactions may include:
Previous wording
In the case of TBAs, many of our positions are short TBA positions with negative duration, meaning that should interest rates rise, we would expect to profit from these positions. These profits would then serve to offset corollary expected increases in our current and/or future borrowing costs under our repurchase agreements, and so in this manner our short TBA positions serve as a hedge against potential increases in interest rates. While we use TBAs to hedge interest rate risk and certain other risks, we also hold net long positions in certain TBA securities as a means of acquiring exposure to Agency RMBS.
Current wording
In the case of TBAs, many of our positions are short TBA positions with negative duration, meaning that should interest rates rise, we would expect to profit from these positions. These profits would then serve to offset corollary expected increases in our current and/or future borrowing costs under our repurchase agreements, and so in this manner our short TBA positions serve as a hedge against potential increases in interest rates.
Previous wording
CLOs, on the other hand, generally have less interest rate risk than fixed-rate RMBS, because they are primarily backed by floating-rate loans. As a result, we had no interest rate hedges in place with respect to our CLO portfolio at year end.
Current wording
CLOs, on the other hand, generally have less interest rate risk than fixed-rate RMBS, because they are primarily backed by floating-rate loans. As a result, we had no interest rate hedges in place with respect to our CLO portfolio as of March 31, 2025.
Previous wording
We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or spread widening risk with respect to our CLOs, or other assets, subject to maintaining our exemption from the 1940 Act prior to the Conversion. The derivative instruments that we use for credit hedging purposes may include contracts referencing the secured or unsecured debt or equity of certain corporations, as well as contracts referencing indices comprised of corporate debt and equity. We may also utilize tranches or option contracts on corporate credit or equity indices, as well as contracts referencing various MBS indices and other derivative instruments. Currently, our credit hedges consist of CDS on corporate bond indices, although there are periods of time where we have no credit hedges in place.
Current wording
We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or credit spread widening risk with respect to our CLOs, or other assets. The derivative instruments that we use for credit hedging purposes may include contracts referencing the secured or unsecured debt or equity of certain corporations, as well as contracts referencing indices comprised of corporate debt and equity. We may also utilize tranches or option contracts on corporate credit or equity indices, as well as contracts referencing various MBS indices and other derivative instruments. Currently, our credit hedges consist of CDS on corporate bond indices, although there are periods of time where we have no credit hedges in place.
Previous wording
The composition and relative mix of our hedging instruments may vary from period to period given the amount of our liabilities outstanding or anticipated to be entered into, the overall market environment and our view as to which instruments best enable us to execute our hedging goals. At year end, we held a modest credit hedge portfolio.
Current wording
The composition and relative mix of our hedging instruments may vary from period to period given the amount of our liabilities outstanding or anticipated to be entered into, the overall market environment and our view as to which instruments best enable us to execute our hedging goals. As of March 31, 2025, we held a modest credit hedge portfolio.
Previous wording
To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates. In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk. At year end, we maintained foreign currency hedges in connection with our European CLO holdings.
Current wording
To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates. In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk. As of March 31, 2025, we maintained foreign currency hedges in connection with our European CLO holdings.
Previous wording
We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions. As of December 31, 2024 and 2023, our total debt-to-equity ratio was 2.9:1 and 5.4:1, respectively. Collateral transferred with respect to our outstanding repo borrowings, including net cash collateral posted or (received), had an aggregate fair value of $0.6 billion and $0.8 billion, as of December 31, 2024 and 2023, respectively. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets conditions, and the timing of security purchase and sale transactions.
Current wording
We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions. As of March 31, 2025 and December 31, 2024 and 2023, our total debt-to-equity ratio was 2.3:1, 2.9:1, and 5.4:1, respectively. Collateral transferred with respect to our outstanding repo borrowings, including net cash collateral posted or (received), had an aggregate fair value of $0.6 billion as of both March 31, 2025 and December 31, 2024 and $0.8 billion as of December 31, 2023. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets conditions, and the timing of security purchase and sale transactions.
Previous wording
As of December 31, 2024, our shareholders' equity increased to $193.7 million from $136.2 million as of December 31, 2023. This increase principally consisted of net proceeds from the issuance of shares of $73.6 million and a net income of $6.6 million, partially offset by dividends declared of $23.1 million. As of December 31, 2024, our book value per share was $6.53, as compared to $7.32 as of December 31, 2023.
Current wording
As of March 31, 2025, our shareholders' equity increased to $228.5 million from $193.7 million as of December 31, 2024. This increase principally consisted of net proceeds from the issuance of shares of $52.1 million partially offset by dividends declared of $8.7 million, a net loss of $(7.9) million, and share repurchases of $1.0 million. As of March 31, 2025, our book value per share was $6.08, as compared to $6.53 as of December 31, 2024.
Previous wording
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.
Current wording
In setting our dividends, our Board considers our earnings, liquidity, financial condition, distribution requirements, and financial covenants, along with other factors that the Board may deem relevant from time to time.
Previous wording
As of December 31, 2024 and 2023, we had $563.0 million and $729.5 million outstanding under our repurchase agreements, respectively. As of December 31, 2024, our outstanding repurchase agreements were with 14 counterparties.
Current wording
As of March 31, 2025 and December 31, 2024 and 2023, we had $517.5 million, $563.0 million, and $729.5 million outstanding under our repurchase agreements, respectively. As of March 31, 2025, our outstanding repurchase agreements were with 13 counterparties.
Showing the first 40 of 54 pairs. Open the source sections for the rest.
Rearranged current paragraphs (23)
Current report — wording carried from elsewhere
(1)Expressed as a percentage of the current principal balance.
Current report — wording carried from elsewhere
The following table summarizes our results of operations for the three-month periods ended March 31, 2025 and 2024:
Current report — wording carried from elsewhere
Net income (loss) for the three-month period ended March 31, 2025 was $(7.9) million, as compared to $4.0 million for the three-month period ended March 31, 2024. The period-over-period change in our results of operations was primarily due to total other loss and in increase in total expenses in the current period, as compared to total other income in the prior period, partially offset by an increase in net interest income.
Current report — wording carried from elsewhere
Our portfolio as of March 31, 2025 consisted of credit investments, primarily CLOs, and Agency RMBS. As of March 31, 2024, our portfolio consisted primarily of Agency RMBS, with credit investments including CLOs and non-Agency RMBS. Before interest expense, we earned approximately $14.7 million and $9.2 million in interest income on these securities for the three-month periods ended March 31, 2025 and 2024, respectively. The period-over-period increase in interest income was driven by higher asset yields in both our Agency and credit portfolios, along with higher average holdings in our credit portfolio which have a significantly higher yield relative to our Agency portfolio.
Current report — wording carried from elsewhere
The Catch-up Amortization Adjustment causes variability in our interest income and portfolio yields. For the three-month periods ended March 31, 2025 and 2024, we had a negative Catch-up Amortization Adjustments of approximately $(0.2) million and $(0.9) million, respectively, which decreased interest income. Excluding the Catch-up Amortization Adjustments, the weighted average yield of our overall portfolio was 8.58% and 5.20% for the three-month periods ended March 31, 2025 and 2024, respectively.
Current report — wording carried from elsewhere
The following table details our interest income, average holdings of yield-bearing assets, and weighted average yield based on amortized cost for the three-month periods ended March 31, 2025 and 2024:
Current report — wording carried from elsewhere
For the three-month periods ended March 31, 2025 and 2024, the majority of interest expense that we incurred was related to our repo borrowings, which we use to finance our assets. We also incur interest expense in connection with our short positions in U.S. Treasury securities as well as on our counterparties' cash collateral held by us. Our total interest expense for the three-month periods ended March 31, 2025 and 2024 was $6.2 million and $10.1 million, respectively, which primarily consisted of interest expense on our repo borrowings. The period-over-period decrease in total interest expense primarily resulted from lower overall borrowings driven by growth of the CLO portfolio, which carries significantly less leverage compared to Agency RMBS, and lower financing costs stemming from the decline in short-term interest rates.
Current report — wording carried from elsewhere
The following table(1) provides details of our borrowings under repurchase agreements for the three-month periods ended March 31, 2025 and 2024:
Current report — wording carried from elsewhere
The following table details the components of our adjusted cost of funds(1) for the three-month periods ended March 31, 2025 and 2024:
Current report — wording carried from elsewhere
(2)Excludes average borrowed funds related to repurchase agreements collateralized by U.S. Treasury securities.
Current report — wording carried from elsewhere
(3)Excludes U.S. Treasury securities.
Current report — wording carried from elsewhere
(4)Includes interest expense from repurchase agreements collateralized by U.S. Treasury securities and from positions in short U.S. Treasury securities and interest income from reverse repurchase agreements collateralized by U.S. Treasury securities and from positions in long U.S. Treasury securities.
Current report — wording carried from elsewhere
For the three-month period ended March 31, 2025, the weighted average yield on our Agency RMBS and credit portfolios excluding the impact of the Catch-up Amortization Adjustment was 8.58%, while our total adjusted average cost of funds, including interest rate swaps and net short U.S. Treasury securities, was 3.31%, resulting in a net interest margin of 5.27%. By comparison, for the three-month period ended March 31, 2024, the weighted average yield of our portfolio of Agency and credit portfolios excluding the impact of the Catch-up Amortization Adjustment was 5.20%, while our total adjusted average cost of funds, including interest rate swaps and net short U.S. Treasury securities, was 2.17%, resulting in a net interest margin of 3.03%.
Current report — wording carried from elsewhere
For the three-month periods ended March 31, 2025 and 2024, our management fee expense was approximately $0.9 million and $0.5 million, respectively. Management fees are calculated based on our shareholders' equity at the end of each quarter. The increase in the management fee period over period was driven by higher shareholders' equity as of March 31, 2025.
Current report — wording carried from elsewhere
Other operating expenses, as presented above, includes professional fees, compensation expense, insurance expense, and various other operating expenses included on the Consolidated Statement of Operations incurred in connection with the operation of our business. For the three-month periods ended March 31, 2025 and 2024, our other operating expenses were approximately $1.7 million and $1.1 million, respectively. The increase in other operating expenses for the three-month period ended March 31, 2025 was primarily due to increases in professional fees, compensation expense, and other operating expenses related to the CLO Strategic Transformation.
Current report — wording carried from elsewhere
We revoked our election to be taxed as a REIT, effective January 1, 2024, and operated as a taxable C-Corporation until the Conversion Date. We plan to use our existing net operating loss carryforwards (“NOLs”) to offset a majority of our U.S. federal taxable income recognized while we operated as a taxable C-Corporation; to the extent that those NOLs are unable to offset any portion of our taxable income, such portion is subject to the typical corporate federal and state income tax rates.
Current report — wording carried from elsewhere
The following table reconciles, for the three-month periods ended March 31, 2025 and 2024, Adjusted Distributable Earnings to the line on the Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S. GAAP measure:
Current report — wording carried from elsewhere
(1)For the three-month period ended March 31, 2025, includes $(0.9) million of net realized and unrealized (gains) losses on foreign currency translation, which is included in Other, net on the Consolidated Statement of Operations and $0.3 million of expenses incurred primarily in connection with our strategic transformation. For the three-month period ended March 31, 2024, includes $0.1 million, respectively, of expenses incurred primarily in connection with our strategic transformation.
Current report — wording carried from elsewhere
(1)Amounts exclude interest income on cash and cash equivalents (including when posted as margin), long U.S. Treasury securities, and reverse repurchase agreements.
Current report — wording carried from elsewhere
(1)Amounts exclude interest expense on cash and cash equivalents (including when received as margin) and short positions in U.S. Treasury securities.
Current report — wording carried from elsewhere
Among other instruments, we use interest rate swaps and U.S. Treasury securities to hedge against the risk to our borrowings of rising interest rates. As an alternative cost of funds measure, we add to our repo borrowing cost the net periodic amounts paid or payable by us on our interest rate swaps and the net interest (income) expense we incur on our positions in U.S. Treasury securities, and express the total as a percentage of our average outstanding repurchase agreement borrowings on yield-bearing assets (excluding U.S. Treasury securities).
Current report — wording carried from elsewhere
(1)This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.
Current report — wording carried from elsewhere
2024 and 2023, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was 9.4%, 9.5% and 5.7%, respectively.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
(2)Conformed to current period presentation.