Ellington Credit Company (EARN) Q3 2024 earnings summary

Executive summary

• Completed strategic transformation to focus on CLO investments, revoking REIT status and rebranding as Ellington Credit Company, with plans to convert to a closed-end fund/RIC pending shareholder approval.

• CLO portfolio grew 70% to $144.5 million, with capital allocation to CLOs rising to 58% from 45% sequentially.

• Net income for Q3 2024 was $5.4 million ($0.21 per share); adjusted distributable earnings were $7.2 million ($0.28 per share).

• Book value per share was $6.85 at September 30, 2024, down from $6.91 in Q2.

• Shareholder approval is pending for conversion to a closed-end fund/RIC, expected to enhance tax efficiency and growth potential.

Financial highlights

• Net income of $5.4 million ($0.21 per share) for Q3 2024, compared to a net loss in the prior year.

• Adjusted distributable earnings were $7.2 million ($0.28 per share), covering dividends.

• Book value per share was $6.85 at quarter end.

• Debt-to-equity ratio declined to 2.5:1 from 3.7:1 sequentially.

• Cash and cash equivalents stood at $25.7 million, with $95.8 million in other unencumbered assets.

Outlook and guidance

• Anticipates maintaining the $0.08 per share monthly dividend, with a yield of 14.5%.

• Expects RIC conversion to eliminate corporate income tax and lower cost of capital.

• Plans to complete transition to a closed-end fund/RIC, fully rotate out of Agency MBS, and focus on CLO opportunities.

• Sees ample opportunities in CLO equity and expects to capitalize on market inefficiencies.

• Plans to maintain a blend of CLO equity and debt investments, with majority in dollar-denominated CLOs.