EARN — what changed in the latest 10-K

Text added vs the prior filing · source: 10-K · 2025-06-23

• Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subj…

• This Transition Report on Form 10-K and the information contained herein do not constitute an offer of any securities or solicitation of an offer to purchase securities.

• We are filing this Transition Report on Form 10-K for the period from January 1, 2025 to March 31, 2025 (the “Transition Period”) in conjunction with a change in our fiscal year end. Effective April 1, 2025, we transitioned from a fiscal year ending December 31 to a fiscal year ending March 31, alig…

• This Transition Report on Form 10-K is our final periodic report filing under the Exchange Act. Beginning with our fiscal year starting April 1, 2025, we will no longer file reports under the Exchange Act. Instead, we will file periodic and other reports with the SEC as required of registered invest…

• The Fund’s registration statement on Form N-2 contains important information relating to the Fund’s investment objectives and principal strategies, as well as a description of the Fund’s investment process and the primary risks associated with an investment in the Fund’s securities, which an investo…

Text removed vs the prior filing · source: 10-K · 2025-03-31

• Forward-looking statements are based on our beliefs, assumptions, and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are sub…

• Ellington Credit Company (formerly Ellington Residential Mortgage REIT) is a Maryland company that was formed in August 2012 through a strategic venture among affiliates of Ellington, an investment management firm and registered investment adviser with a 30-year investment history, and the Blackston…

• 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 com…

• 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 t…

Text added vs the prior filing · source: 10-K · 2025-06-23

• •Risks Related to CLO Investments. The Fund primarily invests in corporate CLOs, which are structured credit securities backed by pools of corporate loans. CLOs involve multiple layers of risk, including exposure to the creditworthiness of the underlying corporate borrowers, potential defaults, and …

• •Credit and Default Risk. The underlying corporate loans in the Fund’s CLO investments may be issued by highly leveraged borrowers with a heightened risk of default, particularly in times of economic downturns, rising interest rates, or sector-specific distress. If the credit performance of these bo…

• •Subordination Risk. The Fund’s investments in CLO equity and mezzanine debt securities are structurally subordinated to more senior CLO debt tranches, meaning that cash flows and recoveries are distributed to senior tranches before reaching subordinated investors. As a result, CLO equity and mezzan…

• •Liquidity and Market Volatility. CLO securities are often illiquid and trade in limited markets with relatively low transparency. Market volatility, particularly in stressed economic environments, could result in significant price fluctuations and valuation challenges. If the Fund needs to liquidat…

• •Structural and Managerial Risks of CLOs. The performance of CLO securities depends not only on the credit performance of the underlying loans but also on the decisions of the CLO Collateral Managers. These CLO Collateral Managers have significant discretion in selecting, trading, and managing under…

Text removed vs the prior filing · source: 10-K · 2025-03-31

• Risks Related to our CLO Investments and CLO Investment Activities

• •Our investments in CLO securities, particularly in mezzanine debt and equity tranches, are highly subordinated and exposed to first loss in the capital structure. These tranches are subject to the risk of total or partial write-downs in the event that underlying collateral defaults increase or deal…

• •CLOs are backed by pools of corporate loans, which are typically below investment grade and may be unsecured or second-lien in nature. Borrowers of these loans are often highly leveraged and more sensitive to rising interest rates, inflation, or recessionary conditions. Defaults, covenant breaches,…

• •The CLOs in which we invest may include exposure to middle-market loans, which are generally issued by smaller, less capitalized companies with limited financial flexibility and access to capital markets. These borrowers may be particularly vulnerable to economic downturns or industry-specific stre…

• •Many of the loans held in CLO portfolios are covenant-lite, meaning they lack traditional maintenance covenants. This limits the ability of CLO managers and lenders to intervene early when a borrower’s credit quality deteriorates, increasing the risk of sudden or severe losses.

Text added vs the prior filing · source: 10-K · 2025-06-23

• We and Ellington cannot provide any assurance that, whether the result of regulatory inquiries or otherwise, neither we nor Ellington nor its affiliates will become subject to investigations, enforcement actions, fines, penalties or the assertion of private litigation claims or that, if any such eve…

Text removed vs the prior filing · source: 10-K · 2025-03-31

• We and Ellington cannot provide any assurance that, whether the result of regulatory inquiries or otherwise, neither we nor Ellington nor its affiliates will become subject to investigations, enforcement actions, fines, penalties or the assertion of

• private litigation claims or that, if any such events were to occur, they would not materially adversely affect us. For a discussion of these and other related risks, see "Risk Factors—General Risk Factors—We, Ellington, or its affiliates may be subject to regulatory inquiries and proceedings, or ot…

Text added vs the prior filing · source: 10-K · 2025-06-23

• 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, t…

• 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 inves…

• 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").

• 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 capi…

• •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 “…

Text removed vs the prior filing · source: 10-K · 2025-03-31

• 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 t…

• 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 construc…

• 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 ad…

• •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 …

• •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 …

Text added vs the prior filing · source: 10-K · 2025-06-23

• We are subject to credit risk in connection with certain of our assets, especially our corporate CLOs. Credit losses can occur on our CLO investments. The corporate loans and other corporate credit assets underlying our CLO investments will typically be rated below investment grade and, as a result,…

• While most of the assets underlying our CLO investments are expected to be senior secured and first lien in nature, CLOs also invest, in some cases, in subordinated obligations that do not have first priority claims in the event of a default by their related obligors. Our CLO investments will typica…

• For our CLO credit risk, the two primary components of such credit risk are default risk and severity risk.

• Default risk for a CLO is the risk that the corporate borrowers of the underlying debt obligations fail to make principal and interest payments. We may selectively attempt to mitigate our default risk by, among other things, opportunistically entering into credit hedging transactions, utilizing inst…

• Severity risk for a CLO is the risk of loss upon a default on an underlying debt obligation. Severity risk includes the risk of loss of value of the asset, if any, securing the debt obligation, as well as the risk of loss associated with taking over the asset, if any. With corporate debt, if a compa…

Text removed vs the prior filing · source: 10-K · 2025-03-31

• We are subject to credit risk in connection with certain of our assets, especially our non-Agency RMBS and our corporate CLOs. Credit losses on real estate loans underlying our non-Agency RMBS can occur for many reasons, including, but not limited to, poor origination practices, fraud, faulty apprai…

• Credit losses can occur on our CLO investments. The corporate loans and other corporate credit assets underlying our CLO investments will typically be rated below investment grade and, as a result, involve greater credit and liquidity risk than investment grade corporate credit obligations and hence…

• While most of the assets underlying our CLO investments are expected to be senior secured and first lien in nature, CLOs

• also invest, in some cases, in subordinated obligations that do not have first priority claims in the event of a default by their related obligors. Our CLO investments will typically be in subordinated positions within the CLO capital structure with respect to realized losses, and the leveraged natu…

• For our non-Agency RMBS and other mortgage-related instruments with credit risk, the two primary components of such credit risk are default risk and severity risk.