Ellington Credit Company

What they do

The company holds all assets and conducts operations through Ellington Residential Mortgage LP, its operating partnership, and is externally managed by Ellington Credit Company Management LLC, an affiliate of Ellington Management Group. It builds a portfolio of corporate CLO debt and CLO equity tranches, including U.S. and European issues, financed largely with repurchase agreements and other borrowings. The company converted from a mortgage REIT to a closed-end fund/RIC and changed its fiscal year end from December 31 to March 31 effective April 1, 2025.

Revenue drivers

• CLO equity investments — Largest portfolio segment; $177.1 million U.S. CLO equity and $2.8 million European CLO equity at fair value at June 30, 2026, representing 53.0% and 0.8% of total investments, respectively. These subordinated tranches receive residual cash flows after senior CLO debt is paid.
• CLO debt investments — $120.7 million U.S. CLO debt and $33.4 million European CLO debt at fair value at June 30, 2026, together 46.1% of total investments. Income comes from interest on these mezzanine and other CLO debt tranches.
• Net interest income — The company earns the spread between interest income on its CLO portfolio and interest expense on repurchase agreements and other borrowings. For the quarter ended June 30, 2026, net investment income was $6.1 million, or $0.16 per share.
• Trading and realized gains — The company actively buys and sells CLO positions; in the June 2026 quarter it purchased $64.8 million and sold $35.1 million across 64 trades. GAAP net income also reflects realized and unrealized gains and losses on securities and derivatives.

Recent performance

For the quarter ended June 30, 2026, Ellington Credit reported GAAP net income of $12.3 million, or $0.33 per share, and net investment income of $6.1 million, or $0.16 per share. NAV per share was $4.18 as of June 30, 2026, including $0.24 per share of distributions for the quarter. The CLO portfolio totaled $334.1 million, split between $154.1 million of CLO debt and $180.0 million of CLO equity. The weighted average GAAP yield on the total CLO portfolio was 11.9% for the quarter based on amortized cost, and the company received $17.6 million, or $0.47 per share, in recurring cash distributions from the portfolio. The company raised $2.6 million by issuing 579,416 common shares at a 5% weighted average premium to NAV.

Strategy

Management said it used the first-quarter 2026 market dislocation to deploy proceeds from a March unsecured note offering and reposition the portfolio. In mezzanine debt, the company rotated out of lower-coupon, shorter-spread-duration positions trading near or above par into higher-coupon, wider-spread investments with stronger underlying credit fundamentals. In CLO equity, it added longer-tenor, higher-cash-flow structures while reducing exposure to shorter-tenor positions more sensitive to loan price volatility. Management also cited benefits from refinancings and resets of existing CLO equity positions. It expects net investment income to grow as it deploys excess liquidity, selectively increases leverage, and rotates toward higher-yielding investments.

Risks

• CLO credit and default risk — The underlying corporate loans in the company's CLO investments may be issued by highly leveraged borrowers with heightened default risk, which could reduce the value of its CLO holdings and its ability to distribute dividends.
• Subordination risk — The company focuses on CLO mezzanine debt and equity tranches that are structurally subordinated to senior CLO debt, and CLO equity is typically under-collateralized at issuance, increasing the risk of principal impairment.
• Liquidity and valuation risk — CLO securities are often illiquid and trade in limited markets with low transparency, so market volatility could force sales at depressed prices and create valuation challenges.
• Structural and managerial risk — CLO performance depends on the credit performance of underlying loans and on the actions of CLO managers, and the company's investments involve complex documentation and accounting that increase the likelihood of accounting errors or restatement.

Outlook

Management stated that market dynamics in the second quarter of 2026, including higher reinvestment yields, improving credit fundamentals, and a more constructive technical backdrop, continue to favor active portfolio management. The company expects net investment income to grow as it deploys excess liquidity held at quarter end, selectively increases leverage, and rotates the portfolio toward higher-yielding investments. Management pointed to its active trading capabilities, flexible balance sheet, and disciplined hedging strategy as positioning the company to generate attractive risk-adjusted returns.