Ellington Credit Company (EARN) investor relations material

Executive summary

• Q1 2026 saw significant volatility and technical dislocations in the CLO market, resulting in a GAAP net loss of $32.3 million ($0.86 per share) and a NAV-based total return of -17.1%, but active trading, up-in-credit bias, and enhanced capital structure drove outperformance versus peers.

• Asset valuation declines were driven by technical factors, not fundamental credit deterioration, with CLO equity particularly impacted by spread widening, liquidity issues, and sector-specific weakness.

• The fund issued $54 million in 8.5% five-year senior unsecured notes at quarter-end, strengthening the balance sheet, refinancing short-term debt, and enabling rapid deployment into new CLO investments.

• By April, market conditions improved, liquidity returned, and the fund achieved a strong monthly economic return of nearly 7%.

• Management emphasized active trading, hedging, and portfolio repositioning as key drivers of resilience and future earnings growth.

Financial highlights

• Reported a GAAP net loss of $32.3 million ($0.86 per share) for Q1 2026, primarily due to unrealized losses in CLO equity.

• Adjusted net investment income was $7.3 million ($0.19 per share), reflecting core earnings strength despite market volatility.

• Weighted average GAAP yield on the CLO portfolio was 12.5% for the quarter.

• NAV at March 31, 2026 was $4.09 per share; estimated NAV at April 30, 2026 was $4.26–$4.32.

• CLO portfolio fair value declined to $307.9 million, but grew by over 6% in April to $328 million.

Outlook and guidance

• Management expects adjusted net investment income to rebound in the next quarter, targeting the low-20 cent range per share.

• Improved market conditions and higher investment yields post-quarter support a positive outlook for total returns and earnings growth.

• Board considers earnings, liquidity, and financial condition in setting distributions, which are not guaranteed.