Ellington Credit Company (EARN) Q4 2025 earnings summary

Executive summary

• Reported a GAAP net loss of $21.1 million, or $0.56 per share, for Q4 2025, with a NAV-based total return of -9.1% (non-annualized), driven by CLO equity market declines and spread compression, but active trading and a shift to mezzanine debt limited losses and outperformed peers.

• Net investment income was $7.8 million, or $0.21 per share, with adjusted net investment income matching this figure.

• Net asset value per share was $5.19 as of December 31, 2025, with cash and equivalents totaling $24.3 million.

• CLO portfolio fair value stood at $369.5 million, with 77% of CLO debt and 97% of CLO equity investments in the U.S.; portfolio diversification remains high, with no sector exceeding 11% exposure.

• Active trading, opportunistic redemptions, and increased credit hedges to 90% of NAV provided downside protection and realized gains.

Financial highlights

• GAAP net loss of $21.1 million, or $0.56 per share, driven by unrealized losses in CLO equity and drag from credit hedges.

• Net investment income of $7.8 million, or $0.21 per share; received $19.1 million in recurring cash distributions.

• Net asset value at December 31, 2025, was $195.0 million, or $5.19 per share.

• Weighted average GAAP yield for the quarter was 13.7% on the total CLO portfolio.

• Purchased $65.8 million and sold $17.4 million of CLO investments across 47 trades during the quarter.

Outlook and guidance

• Management expects to selectively increase CLO equity positions as market opportunities arise in 2026 and remains focused on active trading, risk management, and capitalizing on market dislocations, especially in mezzanine debt.

• Plans to rebuild net investment income and NAV by deploying capital into distressed opportunities and is exploring issuance of long-term unsecured debt for additional capital.

• Monthly distributions of $0.08 per share declared through March 2026; future distributions may be modified at the board's discretion.

• Management expects a portion of recent mark-to-market losses to reverse if market conditions normalize.