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Item 7. Management’s Discussion and Analysis

2025-06-23 compared with 2025-03-31 · 403 added, 283 removed, 466 unchanged (60% of the section changed)

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Executive Summary

We were initially formed in August 2012 as a Maryland company and have historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, while electing to be taxed as a REIT under the Code.

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 company under the 1940 Act.

This includes holding a core portfolio of liquid Agency MBS pools in order to maintain our exemption from the 1940 Act.

During this time, we also plan to take advantage of our significant existing net operating loss carryforwards to offset the majority of our U.S.

We were initially formed in August 2012 as a Maryland company and had historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, while electing to be taxed as a REIT under the Code.

On March 29, 2024, our Board approved a strategic transformation (the "CLO Strategic Transformation") of our investment strategy to focus on corporate collateralized loan obligations ("CLOs").

In connection with the CLO Strategic Transformation, we revoked our election to be taxed as a REIT beginning with tax year 2024, rebranded as Ellington Credit Company, and operated as a taxable C-Corporation during the interim period from January 1, 2024 through March 31, 2025.

As a taxable C-Corporation, we continued to conduct our operations so that neither we nor any of our subsidiaries were required to register as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act").

This included holding a core portfolio of liquid Agency RMBS pools in order to maintain our exemption from the 1940 Act.

During this period, we also sought to take advantage of our significant existing net operating loss carryforwards to offset the majority of our U.S.

federal taxable income.

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").

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, the "Conversion").

We obtained shareholder approval of certain matters related to the Conversion at a special meeting of shareholders held on January 17, 2025 (the "Special Meeting").

In conjunction with the Conversion, we intend to liquidate the vast majority of our remaining mortgage- and real estate-related assets and, upon the effectiveness of the Conversion, we intend to operate so as to qualify to be taxed as a RIC under subchapter M of the Code.

After the Conversion, we would generally not be subject to corporate tax.

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 constructing and actively managing a portfolio of corporate CLOs, primarily mezzanine debt and equity tranches, which are typically collateralized by portfolios consisting primarily of below-investment-grade senior secured loans with a large number of discrete underlying borrowers across various industry sectors.

CLOs are a form of asset-backed security collateralized by syndicated corporate loans which receive interest and principal cash flows from these underlying loans.

Senior debt tranches are paid first, then mezzanine debt tranches, and finally, equity.

Additionally, we may also invest in CLO loan accumulation facilities, which are entities that acquire corporate loans and other similar corporate credit-related assets in anticipation of ultimately collateralizing a CLO transaction.

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 addition to carrying over the removal of certain provisions related to the maintenance of our REIT status (which had been made in the prior amendment), our Board of Trustees determined to more closely align the management fee arrangement between us and our Manager with the advisory fee structures of CLO-focused registered closed-end funds.

We currently use leverage in our strategies and to date have financed our assets exclusively through repurchase agreements, which we account for as collateralized borrowings.

As of December 31, 2024, we had outstanding borrowings under repurchase agreements in the amount of $563.0 million with 14 counterparties;

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 investments, and opportunistically mitigating its credit risk, foreign currency risk, and interest rate risk, by using a variety of hedging instruments.

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").

We currently use leverage and to date have financed our assets exclusively through repurchase agreements, which we account for as collateralized borrowings.

As of March 31, 2025, we had outstanding borrowings under repurchase agreements in the amount of $517.5 million with 13 counterparties;

87% of such borrowings were collateralized by Agency RMBS and 13% were collateralized by CLOs.

As part of the Conversion, we intend to sell our remaining liquid Agency MBS pools and operate in compliance with 1940 Act requirements.

As of December 31, 2024, our book value per share was $6.53 as compared to $7.32 as of December 31, 2023, respectively.

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 capital gain that we distribute to our stockholders as dividends if we meet certain source-of-income, distribution, and asset diversification requirements.

As of March 31, 2025, our book value per share was $6.08 as compared to $6.53 and $7.32 as of December 31, 2024 and 2023, respectively.

Trends and Recent Market Developments

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Federal Reserve Policy

• 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 cited a balance in risks to its employment and inflation goals.

• 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 progress lowering inflation as a prerequisite for additional cuts.

• In June, the Federal Reserve reduced the pace of its balance sheet contraction by lowering the cap on portfolio runoff of U.S.

Treasury securities from $60 billion to $25 billion, while maintaining the $35 billion cap on Agency RMBS.

• 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 “uncertainty around the economic outlook has increased.”

• The Federal Reserve announced that it would further reduce the pace of its balance sheet contraction, beginning in April, by lowering the cap on portfolio runoff of U.S.

Treasury securities from $25 billion to $5 billion, while maintaining the $35 billion cap on Agency RMBS runoff.

Tariff Policy

• During the first quarter of 2025, the administration announced a new round of tariffs, primarily on imports from China, Canada, and Mexico, along with additional tariffs on certain goods and sectors.

The administration also announced plans for broad “reciprocal” tariffs aimed at matching the tariff rates that other countries impose on U.S.

These announcements caused volatility to increase in financial markets, contributing to notable declines in major equity indices during the final weeks of the first quarter.

Interest Rates

• Following sharp declines in the fourth quarter of 2023, interest rates rose in the first quarter of 2024 as expectations for Federal Reserve rate cuts shifted later in the year.

The 2-year U.S.

Treasury yield increased by 37 basis points to 4.62%, while the 10-year U.S.

Treasury yield rose by 32 basis points to 4.20%.

Interest rate volatility declined, with the MOVE Index reaching a two-year low by quarter-end.

In the second quarter, interest rates rose in April before declining in May and June, ending slightly higher overall.

The 2-year U.S.

Treasury yield increased by 13 basis points to 4.75%, and the 10-year U.S.

Treasury yield rose by 20 basis points to 4.40%.

Volatility spiked in mid-April but fell through the quarter's end.

The third quarter saw significant declines in interest rates, particularly short-term rates.

The 10-year U.S.

Treasury yield exceeded the 2-year yield for the first time since July 2022.

The 2-year yield dropped by 111 basis points to 3.64%, and the 10-year yield fell by 62 basis points to 3.78%.

Volatility spiked in early August and September before subsiding.

In the fourth quarter, interest rates reversed course again, with the 2-year U.S.

Treasury yield rising 60 basis points to 4.24% and the 10-year U.S.

Treasury yield increasing 79 basis points to 4.57%.

The MOVE Index peaked ahead of the U.S.

presidential election but declined by year-end.

For 2024 as a whole, the 2-year U.S.

Treasury yield decreased by 1 basis point, while the 10-year yield rose by 69 basis points.

• Mortgage rates closely tracked long-term interest rate movements.

The Freddie Mac survey 30-year mortgage rate rose to 7.22% in May before declining to 6.08% by late September.

Mortgage rates spiked again in the fourth quarter, ending the year at 6.85%.

• SOFR rates were stable in the first half of 2024 but fell sharply in the second half, reflecting the Federal Reserve rate cuts.

For the full year, one-month SOFR decreased 102 basis points to 4.33%, while three-month SOFR fell 103 basis points to 4.31%.

• After rising sharply in the fourth quarter of 2024, interest rates declined significantly in the first quarter of 2025, with yields on the 2- and 10-year U.S.

Treasury securities falling by 36 basis points quarter over quarter, ending at 3.88% and 4.21%, respectively.

Meanwhile, interest rate volatility—as measured by the MOVE Index—declined in the early part of the quarter before reversing course and finishing slightly higher overall.

• Mortgage rates rose at the beginning of the first quarter of 2025, with the Freddie Mac survey 30-year mortgage rate increasing from 6.85% at the start of the year to 7.04% by mid-January.

However, mortgage rates subsequently declined, with the 30-year mortgage rate falling to 6.65% by the end of the quarter.

• Secured Overnight Financing Rates (“SOFR”) were largely unchanged over the first quarter of 2025.

The one-month SOFR rate declined by 1 basis point to 4.32%, while the three-month SOFR rate declined by 2 basis points to 4.29% at quarter end.

SOFR rates drive many of our financing costs.

Housing and Economic Indicators

• Housing price metrics showed modest gains for the full year.

The S&P CoreLogic Case-Schiller US National Home Price Index increased by 3.9%, while the National Association of Realtors Housing Affordability Index rose 0.2%.

• The Mortgage Bankers Association's Refinance Index, although still low on an historical basis, rose significantly in the first three quarters of 2024, tripling between the start of the year and September 27 th .

However, the index declined sharply in the fourth quarter, ending 2024 only slightly higher year-over-year.

• Similarly, mortgage prepayment speeds increased during the year but remained at relatively low levels.

Prepayment speeds for Fannie Mae 30-year RMBS started at 4.4 CPR in January 2024 and trended upward for most of the year, reaching a peak of 8.3 CPR in October.

Prepayment speeds then declined towards year-end, with Fannie Mae 30-year RMBS registering 6.0 CPR in December.

real GDP grew at annualized rates of 1.6% in the first quarter, 3.0% in the second quarter, and 3.1% in the third quarter, with an estimated growth rate of 2.3% in the fourth quarter.

Unemployment edged up from 3.8% to 4.1% by year-end.

• Inflation trended lower, with the 12-month percentage change in the Consumer Price Index for All Urban Consumers, not seasonally adjusted, falling from 3.1% in January to a low of 2.4% in September before ending the year at 2.9%.

• Following a 3.9% increase in 2024, the S&P CoreLogic Case-Shiller US National Home Price NSA Index rose by 1.3% over the first three months of 2025.

Meanwhile, the National Association of Realtors Housing Affordability Index increased by 2.3% during the first three months of 2025, reflecting a modest improvement in affordability with lower mortgage rates.

• The Mortgage Bankers Association’s Refinance Index, while still low by historical standards, rose by 80% quarter over quarter, indicating a pickup in refinancing activity amid slightly lower mortgage rates.

• Mortgage prepayment speeds also increased but remained low overall, with Fannie Mae 30-year MBS registering CPRs of 5.2 in January, 5.1 in February, and 6.6 in March.

real GDP contracted at an estimated annualized rate of 0.3% in the first quarter of 2025, after growing by 2.4% in the prior quarter.

Meanwhile, the unemployment rate edged higher, rising from 4.0% in January to 4.1% in February and 4.2% in March.

• Inflation, as measured by the 12-month change in the Consumer Price Index for All Urban Consumers (“CPI-U"), not seasonally adjusted, registered 3.0% in January, 2.8% in February, and 2.4% in March 2025.

This compares to 12-month changes of 2.6% in October, 2.7% in November, and 2.9% in December 2024.

Fixed Income Performance

• MBS returns were mixed, with the Bloomberg U.S.

MBS Index posting a full-year positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S.

• For the first quarter of 2025, the Bloomberg U.S.

MBS Index posted a positive return of 3.06% but a negative excess return (on a duration-adjusted basis) of (0.07%) relative to the Bloomberg U.S.

Treasury Index.

The performance of both indices was volatile, particularly in the fourth quarter, when returns were sharply negative overall.

• Corporate bonds fared better.

• The Bloomberg U.S.

Corporate Bond Index returned 2.13% with an excess return of 2.46%, while the Bloomberg High Yield Bond Index posted an 8.19% return and 5.02% excess return.

Corporate credit spreads tightened, with the Markit CDX North America Investment Grade and High Yield Indices narrowing by 7 and 45 basis points, respectively.

Corporate Bond Index generated a positive return of 2.31% but a negative excess return of (0.85%), while the Bloomberg U.S.

Corporate High Yield Bond Index generated a positive return of 1.00% but a negative excess return of (1.13%), for the first quarter of 2025.

Corporate credit spreads widened during the quarter, with spreads on the Markit CDX North America Investment Grade and High Yield Indices rising by 65 and 12 basis points quarter-over-quarter, respectively.

Leveraged Loans and CLOs

• Including $800 billion in repricings, U.S.

leveraged loan issuance reached a record $1.5 trillion in 2024, per PitchBook|LCD.

CLO new issue volume also hit a record, exceeding $200 billion, according to BofA Global Research.

• Default rates on U.S.

leveraged loans declined in 2024.

According to PitchBook|LCD the twelve-month trailing default rate on the Morningstar LSTA Leveraged Loan Index fell to 0.80% as of September 30 th , compared to 1.53% at the start of the year.

Default rates rose slightly to 0.91% by December 31 st , but remained well below the 10-year historical average of 1.62%.

• Additionally, prices on leveraged loans increased, with the Morningstar LSTA US Leveraged Loan Index rising by $1.10 over the year, reaching $97.33 as of December 31 st .

• European leveraged loans followed a similar trend, with default rates declining significantly year over year, to 0.42% from 1.62%.

Prices increased as well, with the Morningstar LSTA EU Leveraged Loan Index rising by €1.96 to €98.01.

• After reaching record highs in 2024, U.S.

leveraged loan and CLO issuance remained strong in the first quarter of 2025.

Including nearly $200 million in repricings, U.S leveraged loan issuance totaled $387 billion, according to PitchBook|LCD.

Meanwhile, U.S.

CLO issuance approached $133 billion, including $90 billion in refinancings and resets, according to BofA Global Research.

• After declining in 2024, default rates on U.S.

leveraged loans declined further in the first quarter of 2025.

According to Pitchbook|LCD, the twelve-month trailing default rate on the Morningstar LSTA Leveraged Loan Index decreased to 0.82% at quarter end, down from 0.91% at December 31st.

• Leveraged loan prices also moved lower, with the Morningstar LSTA US Leveraged Loan Index falling by $1.02 to $96.31 as of March 31st.

• European leveraged loans mirrored these trends, as default rates declined to 0.29% from 0.42% quarter over quarter.

Prices also fell, with the Morningstar LSTA EU Leveraged Loan Index dropping by €0.38 to €97.63.

Equity Markets

equities posted another strong year in 2024:

the Dow Jones rose 12.9%, the S&P 500 gained 23.3%, and the NASDAQ climbed 28.6%.

The FTSE 100 and MSCI World Indexes also posted gains of 5.7% and 17.0%, respectively.

• Equity volatility spiked at several points during 2024, with the VIX reaching, in early August, its highest level since October 2020.

• After strong gains in 2024, U.S.

equity markets declined in the first quarter of 2025, with some indices recording their worst quarterly performance since 2022, driven largely by growing uncertainty around trade policy.

In the first quarter, the NASDAQ fell by 10.4%, the S&P 500 fell by 4.6%, and the Dow Jones Industrial Average fell by 1.3%.

In contrast, London's FTSE 100 index rose by 5.0%, while the MSCI World global equity index fell by 2.1%.

• Equity volatility rose during the first quarter of 2025, with the VIX spiking in mid-March amid heightened investor concerns.

Portfolio Overview and Outlook

Our CLO portfolio expanded nearly tenfold year over year to $171.1 million as of December 31, 2024, from $17.4 million, as we rotated investment capital into CLOs in conjunction with the CLO Strategic Transformation.

As of December 31, 2024, our CLO portfolio consisted of $99.1 million of CLO equity tranches, ($91.8 million dollar-denominated, $7.3 million non-dollar denominated) and $72.0 million of CLO notes, specifically mezzanine debt tranches ($55.2 million dollar-denominated, $16.8 million non-dollar denominated).

In conjunction with the Conversion, we intend to liquidate the vast majority of our remaining mortgage- and real estate-related assets and rotate all investment capital into CLOs.

Moving forward, we expect our CLO holdings to continue to be a blend of CLO equity and CLO debt investments, with the capital allocations fluctuating over time based on market opportunities.

Our CLO portfolio grew by 46% to $249.9 million as of March 31, 2025, from $171.1 million as of December 31, 2024, as we purchased additional CLOs in conjunction with the CLO Strategic Transformation.

As of March 31, 2025, our CLO portfolio consisted of $164.4 million of CLO equity tranches, ($151.3 million dollar-denominated, $13.1 million non-dollar denominated) and $85.5 million of CLO notes, specifically mezzanine debt tranches ($64.0 million dollar-denominated, $21.5 million non-dollar denominated).

We expect our CLO holdings to continue to be a blend of CLO equity and CLO debt investments, with the capital allocations fluctuating over time based on market opportunities.

In addition, we intend to continue to invest in both dollar-denominated and non-dollar denominated CLO investments, based on relative value opportunities, but expect the majority of our CLO investments will continue to be dollar-denominated.

The size of our Agency RMBS holdings decreased by 30% to $512.3 million as of December 31, 2024, compared to $728.0 million as of December 31, 2023, primarily driven by net sales in conjunction with the CLO Strategic Transformation, as well as paydowns.

Meanwhile, we sold our remaining non-Agency RMBS and interest only securities throughout the year and held only a de minimis amount at year end.

As of December 31, 2024, our mortgage-backed securities portfolio consisted almost entirely of $512.3 million of fixed-rate Agency "specified pools," and a de minimis amount of Agency interest-only securities, or "Agency IOs." Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through government-sponsored refinancing programs, and mortgages with various other characteristics.

Our debt-to-equity ratio, adjusted for unsettled trades, decreased to 2.9:1 as of December 31, 2024, as compared to 5.3:1 as of December 31, 2023.

The decline was driven by significantly higher shareholder's equity and less leverage on our CLO investments relative to Agency investments.

The size of our Agency RMBS holdings decreased slightly to $503.9 million as of March 31, 2025, compared to $512.3 million as of December 31, 2024.

While we continued to hold a core portfolio of liquid Agency RMBS in order to maintain our exemption from the 1940 Act (prior to the Conversion), we substantially increased our net short TBA position, which by March 31 st almost entirely offset our Agency RMBS holdings.

Shortly after the Conversion, we sold our remaining Agency RMBS and liquidated our remaining TBA positions.

As of March 31, 2025, our mortgage-backed securities portfolio consisted of $503.9 million of fixed-rate Agency "specified pools," and a de minimis amount of Agency interest-only securities, or "Agency IOs." Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through government-sponsored refinancing programs, and mortgages with various other characteristics.

Our debt-to-equity ratio, adjusted for unsettled trades, decreased to 2.2:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024, driven by higher shareholders’ equity and the use of significantly less leverage in our Agency RMBS portfolio.

Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions.

As of December 31, 2024, 89% of our borrowings were secured by Agency RMBS and 11% were secured by CLOs.

During the year, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in U.S.

As of March 31, 2025, 87% of our borrowings were secured by Agency RMBS and 13% were secured by CLOs.

In addition to using short positions in TBAs, we also hedged our interest rate risk during the period using interest rate swaps, U.S.

Treasury securities, and futures.

We ended the year with a net short TBA position on a notional basis, but a net long TBA position as measured by 10-year equivalents.

10-year equivalents for a group of positions represent the amount of 10-year U.S.

Treasury securities that would be expected to experience a similar change in market value under a standard parallel move in interest rates.

We also maintained modest credit hedge and currency hedge portfolios at year end.

As of December 31, 2024, we had cash and cash equivalents of $31.8 million, in addition to other unencumbered assets of $79.2 million.

At March 31, 2025, all of our interest rate hedges were in short TBA positions.

We also maintained small credit hedge and foreign currency hedge portfolios during the period and at March 31, 2025.

As of March 31, 2025, we had cash and cash equivalents of $17.4 million, in addition to other unencumbered assets of $151.5 million.

This compares to cash and cash equivalents of $31.8 million, and other unencumbered assets of $79.2 million, as of December 31, 2024.

CLO Performance

In 2024, the U.S.

CLO market benefited from strengthening loan fundamentals and robust demand for leveraged loans, as well as from spread tightening across credit risk assets broadly.

The trailing-twelve-month payment default rate for the Morningstar LSTA U.S.

Leveraged Loan Index (the "U.S.

LL Index") declined to 91 basis points at the end of 2024, which was 62 basis points lower year over year, while the balance of loans in the U.S.

LL Index rated CCC+ or below declined to 5.3%, the lowest level since October 2022.

LL Index price rose $1.10 to $97.33 at year-end, which combined with interest payments drove a total return for the year of nearly 9%.

Leveraged loan prepayment and repricing rates surged in 2024, with prepayment rates on the U.S.

LL Index increasing to 28% from 18% on a trailing-twelve-month basis, as borrowers took advantage of highly accessible capital markets to refinance debt at lower spreads, extend maturities, and increase liquidity.

As a result, the broadly syndicated loan market saw gross issuance of nearly $1.5 trillion for the year, the largest annual issuance amount on record, split between $650 billion of new loan issuance and refinancings, and more than $800 billion in repricings.

The wave of issuance was met by significant demand for the asset class, driven by a record year of CLO new issuance as well (over $200 billion in 2024), in addition to nearly $9 billion of net capital inflows into leveraged loan retail funds.

On balance, the U.S.

LL Index experienced net issuance of only $21 billion year-over-year.

Net issuance in the U.S.

CLO market was similarly limited in 2024.

The European CLO market also enjoyed strengthening loan fundamentals in 2024, benefiting from a full year default rate of just 42 basis points—120 basis points lower than 2023's default rate.

However, loan prepayment rates rose less than in the U.S., increasing to 13.1 CPR (+2.6 CPR year over year).

As a result of lower loan prepayment rates, the amount outstanding underlying the European leveraged loan index grew by 11%, compared to 2% in the U.S.

In both the U.S.

and Europe, declining default rates contributed to strong demand for CLO debt and equity tranches, and along with limited net CLO issuance, drove CLO mezzanine and equity credit spreads tighter over the course of 2024.

Additionally, high prepayment rates in the U.S.

drove substantial deleveraging in many seasoned CLOs, contributing to incremental credit spread tightening in many mezzanine tranches.

However, investors remained wary of credit dispersion and lower-quality loan portfolios in the U.S., driving debt spreads modestly wider for certain CLOs with elevated exposure to such assets.

In Europe, while CLO mezzanine tranches did not benefit as much from elevated prepayment rates and rapid deal deleveraging, they were aided by reduced credit dispersion in their underlying loan portfolios relative to U.S.

CLO equity performance, while positive in 2024, was mixed relative to CLO mezzanine performance.

While declining default rates contributed to demand for CLO equity tranches and alleviated credit losses, rapid prepayment rates in the loan market led to both price declines for loans trading above par and compression in loan floating rate spreads.

This occurred as a result of large volumes of loans trading at premiums to par being refinanced at par and replaced with lower-spread loans, triggering mark-to-market losses in some CLO equity profiles as both their interest payments (due to lower excess interest in the CLO) and underlying asset values declined in tandem.

Loan repayment rate effects were somewhat mitigated by tightening CLO debt spreads, which allowed some deals to refinance their debt or reset their debt (which also included reinvestment period extension in addition to debt cost reduction).

Deals that were able to exercise refinancing or reset options, typically those with higher existing costs of debt and better-performing portfolios, delivered stronger equity returns in 2024.

In Europe, CLO equity performance was generally stronger as a result of slower prepayment speeds, rendering the negative impact of the repayment of premium loans less pronounced, as well as low default rates.

Our CLO strategy had strong results for the year, led by robust net interest income and net gains in our U.S.

and European CLO debt portfolios, supported by opportunistic sales, tighter credit spreads on held positions, and redemptions of several of our discount seasoned CLO mezzanine tranches.

Performance from CLO equity was modestly positive, with net interest income exceeding net unrealized losses.

Non-Agency Performance

Our non-Agency RMBS portfolio and interest-only securities generated positive results for the year, driven by net interest income and net gains associated with several profitable sales.

For the three-month period ended March 31, 2025, CLO markets started on a constructive note, supported by sustained demand for leveraged loans, improving fundamentals for corporate borrowers, and strong capital inflows into floating-rate leveraged loan funds as investors positioned for a “higher for longer” interest rate environment.

However, volatility increased as the quarter progressed—particularly in March—driven by growing investor concerns over proposed tariffs and the associated risk of an economic slowdown.

This heightened volatility, coupled with elevated CLO issuance throughout the quarter, negatively pressured CLO prices in both the U.S.

leveraged loan prices declined in the first calendar quarter of 2025, largely due to a sharp drop in March driven by weakness in lower-quality loans, particularly those more sensitive to higher tariff rates.

This decompression within the loan index weighed on CLO mezzanine tranches, particularly those with elevated exposure to riskier assets.

Meanwhile, U.S.

loan prepayment rates, though still high by historical standards, declined quarter over quarter, resulting in reduced deleveraging for seasoned CLOs which adversely impacted mezzanine tranches priced at discounts.

While lower quarter over quarter, prepayment activity remained brisk in January and February, which pressured U.S.

CLO equity tranches as net interest margin compression continued.

This occurred as many floating-rate loans, typically those with higher coupon spreads, were refinanced and replaced with lower-coupon spreads.

While this refinancing activity also led to a quarter-over-quarter decline in CLO equity NAVs, which presented a headwind to CLO equity tranche valuations, it also should limit future refinancing opportunities — a potential tailwind for CLO equity.

Furthermore, CLO equity tranches with exposure to lower-quality loans, particularly those with exposure to higher tariffs, also underperformed.

In Europe, declining leveraged loan prices also pressured credit spreads, though European CLOs outperformed their U.S.

counterparts, supported by rising prepayment rates which boosted deal deleveraging, and relatively low default rates.

Against this backdrop, our CLO strategy generated negative results for the three-month period ended March 31, 2025, with mark-to-market losses exceeding net interest income and modest gains on our credit hedges.

Agency Performance

In the first quarter of 2024 Agency MBS underperformed as expectations for a Federal Reserve rate cut were delayed, pushing interest rates higher and yield spreads wider, especially in February.

Spreads recovered in March due to lower volatility

and capital inflows, but Agency MBS generated a modestly negative excess return to U.S.

Treasury securities overall for the quarter.

In April, renewed inflation concerns and a hawkish Federal Reserve caused Agency MBS yield spreads to widen.

However, declining interest rates and volatility in May and June reversed most of the widening, leading to slight underperformance against benchmark indices for the quarter.

The third quarter saw falling interest rates, a steepening yield curve, and tightening Agency MBS yield spreads as markets anticipated Federal Reserve rate cuts.

In September, the Federal Reserve reduced the target range for the federal funds rate by 50 basis points and signaled further cuts, leading Agency MBS to outperform benchmark indices in the quarter.

In the fourth quarter, rising interest rates and intra-quarter volatility caused Agency MBS to underperform relative to benchmark indices.

For 2024, the Bloomberg Barclays U.S.

MBS Index posted a positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S.

Treasury Index.

Our Agency portfolio generated positive results for the year as well, with net gains on interest rate hedges exceeding net losses on Agency MBS.

Average pay-ups on our specified pool portfolio decreased to 0.20% as of December 31, 2024, as compared to 1.01% as of December 31, 2023, as we rotated into highly liquid pools with low pay-ups in preparation for the Conversion.

Our net mortgage assets-to-equity ratio—which we define as the net aggregate market value of our mortgage-backed securities (including the underlying market values of our long and short TBA positions) divided by total shareholders' equity —declined year over year.

The decrease was driven by significantly higher shareholders' equity and a smaller Agency RMBS portfolio.

From time to time, in response to market opportunities and other factors, we increase or decrease our net mortgage assets-to-equity ratio by varying the sizes of our net short TBA position and/or our long RMBS portfolio in relation to the portion of our overall shareholders' equity employed in our mortgage-related strategies.

Agency RMBS yield spreads tightened in January and February, before reversing course and widening in March, driven in part by rising volatility related to uncertain tariff policies.

For the three-month period ended March 31, 2025, the U.S.

Agency MBS Index generated a negative excess return of (0.07%).

Our Agency portfolio generated positive results during each month of the period, with net gains on Agency RMBS exceeding net losses on interest rate hedges for January and February, and net gains on short TBA positions exceeding net losses on Agency RMBS in March.

Average pay-ups on our specified pool portfolio increased to 0.23% as of March 31, 2025, as compared to 0.20% as of December 31, 2024.

The following table summarizes our net mortgage assets-to-equity ratio and provides additional details, for the last five quarters, to illustrate this fluctuation.

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($ In thousands)

March 31, 2025 $ — $ (519,616) $ 503,894 $ (502,941) 0.0:1

December 31, 2024 61,190 (69,156) 512,309 (15,175) 2.6:1

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March 31, 2024 66,220 (66,830) 766,954 (3) 5.4:1

December 31, 2023 (2)

107,422 (78,285) 756,131 36,679 5.8:1

(1) Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.

(2) Conformed to current period presentation.

The following table summarizes prepayment rates for our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) for the three-month periods ended December 31, 2024, September 30, 2024, June 30, 2024, March 31, 2024, and December 31, 2023.

The following table summarizes prepayment rates for our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) for the three-month periods ended March 31, 2025, December 31, 2024, September 30, 2024, June 30, 2024, and March 31, 2024.

Three-Month Period Ended

December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023

March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024

Three-Month Constant Prepayment Rates (1)

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(1) Excludes recent purchases of fixed rate Agency specified pools with no prepayment history.

The following table provides details about the composition of our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) as of December 31, 2024 and 2023.

December 31, 2024 December 31, 2023

The following table provides details about the composition of our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) as of March 31, 2025 and December 31, 2024.

March 31, 2025 December 31, 2024

Coupon (%) Current Principal Fair Value Weighted Average Loan Age (Months) Weighted Average Coupon Current Principal Fair Value Weighted Average Loan Age (Months) Weighted Average Coupon

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5.00–5.49 106,267 104,274 19 5.00 % 96,309 93,163 24 5.00 %

Total 15-year fixed-rate mortgages — — — — % 28,647 27,847 78 3.46 %

20-year fixed-rate mortgages:

5.50–5.99 136,559 136,756 16 5.50 % 94,550 93,457 12 5.50 %

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6.50–6.99 47,636 49,269 14 6.50 % 69,146 70,911 12 6.50 %

4.50–4.99 — — — — % 491 489 63 4.50 %

5.00–5.49 — — — — % 577 583 64 5.00 %

6.50–6.99 — — — — % 991 1,019 6 6.50 %

Total 30-year fixed-rate mortgages 519,109 503,892 20 4.90 % 536,948 512,307 18 4.86 %

30-year fixed-rate mortgages:

2.00–2.49 — — — — % 4,614 3,687 38 2.00 %

2.50–2.99 25,728 20,980 37 2.50 % 37,503 32,160 36 2.50 %

3.00–3.49 — — — — % 76,869 68,695 59 3.00 %

3.50–3.99 55,966 49,505 32 3.50 % 111,327 104,283 73 3.50 %

4.00–4.49 93,905 85,833 15 4.00 % 134,317 129,181 72 4.00 %

4.50–4.99 55,755 52,504 14 4.50 % 124,152 122,062 51 4.50 %

5.00–5.49 96,309 93,163 24 5.00 % 106,323 105,851 28 5.00 %

5.50–5.99 94,550 93,457 12 5.50 % 39,423 39,801 19 5.50 %

6.00–6.49 45,589 45,954 9 6.00 % 18,084 18,478 14 6.00 %

6.50–6.99 69,146 70,911 12 6.50 % 44,898 46,096 7 6.50 %

Total 30-year fixed-rate mortgages 536,948 512,307 18 4.86 % 697,510 670,294 49 4.26 %

Total fixed-rate Agency RMBS $ 519,109 $ 503,892 20 4.90 % $ 536,948 $ 512,307 18 4.86 %

For the year ended December 31, 2024, we had total net realized and unrealized losses on our Agency securities of $(16.1) million, or $(0.68) per share, and net realized losses of $(24.8) million, or $(1.05) per share.

For the year ended December 31, 2024, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs, U.S.

For the three-month period ended March 31, 2025, we had total net unrealized gains on our Agency securities of $8.7 million, or $0.25 per share, and net realized losses of $(1.1) million, or $(0.03) per share.

For the three-month period ended March 31, 2025, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs, U.S.

Treasury securities, and futures.

We had total net realized and unrealized gains of $24.1 million, or $1.02 per share, on our interest rate hedging portfolio, driven by the increase in interest rates during the year.

At March 31, 2025, all of our interest rate hedges were in short TBA positions, and we had no long TBA positions.

We had total net realized and unrealized losses of $(5.5) million, or $(0.16) per share, on our interest rate hedging portfolio, driven by the decrease in interest rates during the period.

These gains exclude net realized and unrealized losses of $(0.4) million, or $(0.01) per share, on our long TBAs held for investment.

We ended the quarter with a net short TBA position on a notional basis, but a net long position as measured by 10-year equivalents.

Ten-year equivalents for a group of positions represent the amount of 10-year U.S.

Treasury securities that would be expected to experience a similar change in market value under a standard parallel move in interest rates.

The relative makeup of our interest rate hedging portfolio can change materially from period to period.

As of December 31, 2024, we also maintained a modest credit and foreign currency hedge portfolio.

After giving effect to dividends declared during the year ended December 31, 2024 of $0.96 per share, our book value per share decreased to $6.53 as of December 31, 2024, from $7.32 as of December 31, 2023, and we had an economic return of 2.3% for the year ended December 31, 2024.

As of March 31, 2025, we also maintained modest credit and foreign currency hedge portfolios.

After giving effect to dividends declared during the three-month period ended March 31, 2025 of $0.24 per share, our book value per share decreased to $6.08 as of March 31, 2025, from $6.53 as of December 31, 2024, and we had an economic return of (3.2%) for the three-month period ended March 31, 2025.

Economic return for a period is computed by adding back dividends declared during the period to ending book value per share, and comparing that amount to book value per share as of the beginning of the period.

For the years ended December 31, 2024 and 2023, our average repo borrowing cost was 5.48% and 5.18%, respectively, driven by increases in short-term interest rates year over year and the growth of our CLO portfolio, as our CLO portfolio has higher borrowing costs compared to our Agency RMBS portfolio.

As of December 31, 2024 and 2023, the weighted average borrowing rate on our repurchase agreements was 4.81% and 5.58%, respectively.

For the three-month periods ended March 31, 2025 and December 31, 2024, our average repo borrowing cost was 4.66% and 5.04%, respectively, driven by the decline in short-term interest rates period over period, partially offset by the growth of our CLO portfolio, which has higher borrowing costs compared to Agency RMBS.

As of March 31, 2025 and December 31, 2024, the weighted average borrowing rate on our repurchase agreements was 4.56% and 4.81%, respectively.

While large banks still dominate the repo market, non-bank firms, not subject to the same regulations as banks, are active in providing repo financing.

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however, we have also entered into repo agreements with non-bank dealers.

Our debt-to-equity ratio was 2.9:1 as of December 31, 2024, as compared to 5.4:1 as of December 31, 2023.

Adjusted for unsettled trades, our debt-to equity ratio was also 2.9:1 as of December 31, 2024, as compared to 5.3:1 as of December 31, 2023.

The year over year decline was driven by significantly higher shareholders' equity and less leverage on our CLO investments (relative to Agency investments), which constituted a significantly larger proportion of our overall portfolio as of December 31, 2024, compared to December 31, 2023.

Our debt-to-equity ratio was 2.3:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024.

Adjusted for unsettled trades, our debt-to equity ratio was 2.2:1 as of March 31, 2025, as compared to 2.9:1 as of December 31, 2024.

The decline was driven by higher shareholders' equity and use of significantly less l

everage in our Agency RMBS portfolio.

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We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made based upon information available to us at that time.

We rely on the experience of our Manager and Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates.

We rely on the experience of our Adviser and Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates.

See Note 2 of the notes to our consolidated financial statements for a complete discussion of our significant accounting policies.

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However, many of our financial instruments are not traded in an active market.

Therefore, management generally uses third-

party valuations when available.

Therefore, management generally uses third-party valuations when available.

If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology.

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see the interest rate sensitivity analysis included in Item 3.

Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further information.

Quantitative and Qualitative Disclosures about Market Risk in this Transition Report on Form 10-K for further information.

Interest Income :

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These assumptions require the use of a significant amount of judgment.

Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment as adjusted for credit impairment, if any.

Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment as adjusted for

credit impairment, if any.

The effective yield on our debt securities that are deemed to be of high credit quality (including Agency RMBS, exclusive of interest only securities) can be significantly impacted by our estimate of future prepayments.

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When differences arise between our previously calculated effective yields and our current calculated effective yields, a catch-up adjustment, or "Catch-up Amortization Adjustment," is made to interest income to reflect the cumulative impact of the changes in effective yields.

For the years ended December 31, 2024 and 2023, we recognized a Catch-up Amortization Adjustment of $(0.5) million and $(0.1) million, respectively.

For the three-month periods ended March 31, 2025 and 2024, we recognized a Catch-up Amortization Adjustment of $(0.2) million and $(0.9) million, respectively.

The Catch-up Amortization Adjustment is reflected as an increase (decrease) to interest income on the Consolidated Statement of Operations.

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Income Taxes :

We revoked our REIT election for tax year 2024 and currently operate as a taxable C-Corp.

We are subject to U.S.

We revoked our REIT election beginning with tax year 2024 and operated as a taxable C-Corporation through March 31, 2025.

During this period, we were subject to U.S.

federal, state, and local income tax.

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Investment portfolio

The following tables summarize our securities portfolio as of December 31, 2024 and 2023:

The following tables summarize our securities portfolio as of March 31, 2025 and December 31, 2024 and 2023:

March 31, 2025

($ In thousands) Current Principal Fair Value Average Price (1)

Cost Average Cost (1)

Credit Portfolio:

Dollar Denominated:

CLO Notes $ 74,818 $ 63,998 $ 85.54 $ 68,402 $ 91.42

CLO Equity n/a 151,323 n/a 167,649 n/a

Total Dollar Denominated CLOs 215,321 236,051

Corporate Debt 1,814 434 23.93 397 21.89

Corporate Equity n/a 56 n/a 76 n/a

Total Dollar Denominated Credit 215,811 236,524

Non-Dollar Denominated:

CLO Notes 22,479 21,450 95.42 21,405 95.22

CLO Equity n/a 13,086 n/a 13,962 n/a

Total non-Dollar Denominated CLOs 34,536 35,367

Total Credit 250,347 271,891

Agency Portfolio:

Dollar Denominated:

Agency RMBS (2)

30-year fixed-rate mortgages 519,109 503,892 97.07 502,508 96.80

Total Agency RMBS 519,109 503,892 97.07 502,508 96.80

Agency IOs n/a 2 n/a 2 n/a

Total Agency 503,894 502,510

Total $ 754,241 $ 774,401

(1) Expressed as a percentage of the current principal balance.

(2) Excludes IOs.

December 31, 2024 December 31, 2023

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(2) Excludes IOs.

As of December 31, 2024, 72% of our invested capital, calculated based on risk capital, was allocated to corporate CLOs and 28% was allocated to mortgage-related securities.

As of March 31, 2025, 81% of our invested capital, calculated based on risk capital, was allocated to corporate CLOs and 19% was allocated to mortgage-related securities.

Substantially all of our mortgage-related securities are Agency RMBS, which include investments in Agency pools.

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Consequently, the weighted average term of our repurchase agreement financings will almost always be substantially shorter than the expected average maturity of our RMBS and CLOs.

This mismatch in maturities, together with the uncertainty of prepayments on the

underlying mortgage or corporate loans, and other potential changes in the timing and/or amount of cash flows, creates the risk that changes in interest rates will cause our financing costs with respect to our RMBS and CLOs to increase relative to the income on these assets over the term of our investments.

In addition, changes in the fair value of our RMBS and CLO investments, whether as a result of changes in market conditions, prepayments, or other factors, may trigger changes in margin requirements, in which counterparties to our repurchase agreements may require us post additional collateral to re-establish the agreed-upon collateralization requirements.

This mismatch in maturities, together with the uncertainty of prepayments on the underlying mortgage or corporate loans, and other potential changes in the timing and/or amount of cash flows, creates the risk that changes in interest rates will cause our financing costs with respect to our RMBS and CLOs to increase relative to the income on these assets over the term of our investments.

In addition, changes in the fair value of our RMBS and CLO investments, whether as a result of changes in market conditions, prepayments, or other factors, may trigger changes in margin

requirements, in which counterparties to our repurchase agreements may require us to post additional collateral to re-establish the agreed-upon collateralization requirements.

Financial Derivatives

The following table summarizes our portfolio of financial derivative holdings as of December 31, 2024 and 2023:

(In thousands) December 31, 2024 December 31, 2023

The following table summarizes our portfolio of financial derivative holdings as of March 31, 2025 and December 31, 2024 and 2023:

(In thousands) March 31, 2025 December 31, 2024 December 31, 2023

Financial derivatives–assets, at fair value:

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Total $ (481) $ 36,186 $ 66,950

Pursuant to our hedging program, we engage in a variety of interest rate hedging activities that are designed to reduce the interest rate risk with respect to the liabilities incurred to acquire or hold RMBS.

Pursuant to our hedging program prior to Conversion, we engage in a variety of interest rate hedging activities that are designed to reduce the interest rate risk with respect to the liabilities incurred to acquire or hold RMBS.

These interest rate hedges generally seek to reduce the interest rate sensitivity of our liabilities or, in other words, reduce the volatility of our financing cost over time attributable to interest rate changes.

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In the case of TBAs, many of our positions are short TBA positions with negative duration, meaning that should interest rates rise, we would expect to profit from these positions.

These profits would then serve to offset corollary expected increases in our current and/or future borrowing costs under our repurchase agreements, and so in this manner our short TBA positions serve as a hedge against potential increases in interest rates.

While we use TBAs to hedge interest rate risk and certain other risks, we also hold net long positions in certain TBA securities as a means of acquiring exposure to Agency RMBS.

These profits would then serve to offset corollary expected increases

in our current and/or future borrowing costs under our repurchase agreements, and so in this manner our short TBA positions serve as a hedge against potential increases in interest rates.

CLOs, on the other hand, generally have less interest rate risk than fixed-rate RMBS, because they are primarily backed by floating-rate loans.

As a result, we had no interest rate hedges in place with respect to our CLO portfolio at year end.

As a result, we had no interest rate hedges in place with respect to our CLO portfolio as of March 31, 2025.

Credit Risk Hedging

We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or spread widening risk with respect to our CLOs, or other assets, subject to maintaining our exemption from the 1940 Act prior to the Conversion.

We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or credit spread widening risk with respect to our CLOs, or other assets.

The derivative instruments that we use for credit hedging purposes may include contracts referencing the secured or unsecured debt or equity of certain corporations, as well as contracts referencing indices comprised of corporate debt and equity.

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The composition and relative mix of our hedging instruments may vary from period to period given the amount of our liabilities outstanding or anticipated to be entered into, the overall market environment and our view as to which instruments best enable us to execute our hedging goals.

At year end, we held a modest credit hedge portfolio.

As of March 31, 2025, we held a modest credit hedge portfolio.

Foreign Currency Hedging

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In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk.

At year end, we maintained foreign currency hedges in connection with our European CLO holdings.

The following table summarizes our outstanding liabilities under repurchase agreements as of December 31, 2024 and 2023.

As of March 31, 2025, we maintained foreign currency hedges in connection with our European CLO holdings.

The following table summarizes our outstanding liabilities under repurchase agreements as of March 31, 2025 and December 31, 2024.

We had no other borrowings outstanding.

December 31, 2024 December 31, 2023

Weighted Average Weighted Average

Remaining Days to Maturity Borrowings Outstanding Interest Rate Remaining Days to Maturity Borrowings Outstanding Interest Rate Remaining Days to Maturity

March 31, 2025 December 31, 2024 December 31, 2023

Weighted Average Weighted Average Weighted Average

Remaining Days to Maturity Borrowings Outstanding Interest Rate Remaining Days to Maturity Borrowings Outstanding Interest Rate Remaining Days to Maturity Borrowings Outstanding Interest Rate Remaining Days to Maturity

(In thousands) (In thousands)

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We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions.

As of December 31, 2024 and 2023, our total debt-to-equity ratio was 2.9:1 and 5.4:1, respectively.

Collateral transferred with respect to our outstanding repo borrowings, including net cash collateral posted or (received), had an aggregate fair value of $0.6 billion and $0.8 billion, as of December 31, 2024 and 2023, respectively.

As of March 31, 2025 and December 31, 2024 and 2023, our total debt-to-equity ratio was 2.3:1, 2.9:1, and 5.4:1, respectively.

Collateral transferred with respect to our outstanding repo borrowings, including net cash collateral posted or (received), had an aggregate fair value of $0.6 billion as of both March 31, 2025 and December 31, 2024 and $0.8 billion as of December 31, 2023.

Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets conditions, and the timing of security purchase and sale transactions.

Shareholders' Equity

As of December 31, 2024, our shareholders' equity increased to $193.7 million from $136.2 million as of December 31, 2023.

This increase principally consisted of net proceeds from the issuance of shares of $73.6 million and a net income of $6.6 million, partially offset by dividends declared of $23.1 million.

As of December 31, 2024, our book value per share was $6.53, as compared to $7.32 as of December 31, 2023.

As of March 31, 2025, our shareholders' equity increased to $228.5 million from $193.7 million as of December 31, 2024.

This increase principally consisted of net proceeds from the issuance of shares of $52.1 million partially offset by dividends declared of $8.7 million, a net loss of $(7.9) million, and share repurchases of $1.0 million.

As of March 31, 2025, our book value per share was $6.08, as compared to $6.53 as of December 31, 2024.

Results of Operations

Results of Operations for the Three-Month Periods Ended March 31, 2025 and 2024

The following table summarizes our results of operations for the three-month periods ended March 31, 2025 and 2024:

Three-Month Period Ended

(In thousands except for per share amounts) March 31, 2025 March 31, 2024

Interest Income (Expense)

Interest income $ 15,462 $ 10,379

Interest expense (6,215) (10,100)

Net interest income (expense) 9,247 279

Management fees to affiliate 860 538

Other operating expenses 1,722 1,089

Total expenses 2,582 1,627

Other Income (Loss)

Net realized and change in net unrealized gains (losses) on securities

(7,649) (8,063)

Net realized and change in net unrealized gains (losses) on financial derivatives

(7,920) 13,675

Other, net 1,028 —

Total Other Income (Loss) (14,541) 5,612

Net Income (Loss) before income taxes (7,876) 4,264

Income tax expense (benefit) (6) 303

Net Income (Loss) $ (7,870) $ 3,961

Net Income (Loss) Per Common Share $ (0.23) $ 0.20

Net Income (Loss)

Net income (loss) for the three-month period ended March 31, 2025 was $(7.9) million, as compared to $4.0 million for the three-month period ended March 31, 2024.

The period-over-period change in our results of operations was primarily due to total other loss and in increase in total expenses in the current period, as compared to total other income in the prior period, partially offset by an increase in net interest income.

Interest Income

Our portfolio as of March 31, 2025 consisted of credit investments, primarily CLOs, and Agency RMBS.

As of March 31, 2024, our portfolio consisted primarily of Agency RMBS, with credit investments including CLOs and non-Agency RMBS.

Before interest expense, we earned approximately $14.7 million and $9.2 million in interest income on these securities for the three-month periods ended March 31, 2025 and 2024, respectively.

The period-over-period increase in interest income was driven by higher asset yields in both our Agency and credit portfolios, along with higher average holdings in our credit portfolio which have a significantly higher yield relative to our Agency portfolio.

The Catch-up Amortization Adjustment causes variability in our interest income and portfolio yields.

For the three-month periods ended March 31, 2025 and 2024, we had a negative Catch-up Amortization Adjustments of approximately $(0.2) million and $(0.9) million, respectively, which decreased interest income.

Excluding the Catch-up Amortization Adjustments, the weighted average yield of our overall portfolio was 8.58% and 5.20% for the three-month periods ended March 31, 2025 and 2024, respectively.

The following table details our interest income, average holdings of yield-bearing assets, and weighted average yield based on amortized cost for the three-month periods ended March 31, 2025 and 2024:

(In thousands) Interest Income Average Holdings Yield Interest Income Average Holdings Yield Interest Income Average Holdings Yield

Three-month period ended March 31, 2025 $ 8,353 $ 201,810 16.56 % $ 6,329 $ 491,511 5.15 % $ 14,682 $ 693,321 8.47 %

Three-month period ended March 31, 2024 $ 1,808 $ 44,071 16.41 % $ 7,403 $ 732,617 4.04 % $ 9,211 $ 776,688 4.74 %

(1) Amounts exclude interest income on cash and cash equivalents (including when posted as margin), long U.S.

Treasury securities, and reverse repurchase agreements.

Interest Expense

For the three-month periods ended March 31, 2025 and 2024, the majority of interest expense that we incurred was related to our repo borrowings, which we use to finance our assets.

We also incur interest expense in connection with our short positions in U.S.

Treasury securities as well as on our counterparties' cash collateral held by us.

Our total interest expense for the three-month periods ended March 31, 2025 and 2024 was $6.2 million and $10.1 million, respectively, which primarily consisted of interest expense on our repo borrowings.

The period-over-period decrease in total interest expense primarily resulted from lower overall borrowings driven by growth of the CLO portfolio, which carries significantly less leverage compared to Agency RMBS, and lower financing costs stemming from the decline in short-term interest rates.

The following table (1) provides details of our borrowings under repurchase agreements for the three-month periods ended March 31, 2025 and 2024:

Three-Month Period Ended March 31, 2025 Three-Month Period Ended March 31, 2024

Average Borrowed Funds Interest Expense Average

Funds Average Borrowed Funds Interest Expense Average

($ In thousands)

Repurchase Agreements:

CLO $ 61,651 $ 826 5.43 % $ 3,940 $ 67 6.84 %

Non-Agency RMBS — — — % 10,535 178 6.80 %

Total Credit 61,651 826 5.43 % 14,475 245 6.81 %

Agency RMBS 438,696 4,936 4.56 % 655,270 9,092 5.58 %

Subtotal 500,347 5,762 4.67 % 669,745 9,337 5.61 %

Treasury securities 30,475 338 4.50 % 5,481 72 5.30 %

Total $ 530,822 $ 6,100 4.66 % $ 675,226 $ 9,409 5.60 %

(1) Amounts exclude interest expense on cash and cash equivalents (including when received as margin) and short positions in U.S.

Treasury securities.

Adjusted Cost of Funds

Among other instruments, we use interest rate swaps and U.S.

Treasury securities to hedge against the risk to our borrowings of rising interest rates.

As an alternative cost of funds measure, we add to our repo borrowing cost the net periodic amounts paid or payable by us on our interest rate swaps and the net interest (income) expense we incur on our positions in U.S.

Treasury securities, and express the total as a percentage of our average outstanding repurchase agreement borrowings on yield-bearing assets (excluding U.S.

Treasury securities).

The following table details the components of our adjusted cost of funds (1) for the three-month periods ended March 31, 2025 and 2024:

Three-Month Period Ended

March 31, 2025 Three-Month Period Ended

March 31, 2024

($ In thousands) Average Borrowed Funds (2)

Interest Expense (Benefit) Average

Funds Average Borrowed Funds (2)

Interest Expense (Benefit) Average

Repurchase Agreements:

CLO $ 61,651 $ 826 5.43 % $ 3,940 $ 67 6.84 %

Non-Agency RMBS — — — % 10,535 178 6.80 %

Total Credit 61,651 826 5.43 % 14,475 245 6.81 %

Agency RMBS 438,696 4,936 4.56 % 655,270 9,092 5.58 %

500,347 5,762 4.67 % 669,745 9,337 5.61 %

Net interest (income) expense related to U.S.

Treasury securities (4)

38 0.03 % (21) (0.01) %

Net periodic expense (benefit) paid or payable on interest rate swaps (1,721) (1.39) % (5,701) (3.43) %

Total Adjusted Cost of Funds $ 500,347 $ 4,079 3.31 % $ 669,745 $ 3,615 2.17 %

(1) This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.

(2) Excludes average borrowed funds related to repurchase agreements collateralized by U.S.

Treasury securities.

(3) Excludes U.S.

Treasury securities.

(4) Includes interest expense from repurchase agreements collateralized by U.S.

Treasury securities and from positions in short U.S.

Treasury securities and interest income from reverse repurchase agreements collateralized by U.S.

Treasury securities and from positions in long U.S.

Treasury securities.

For the three-month period ended March 31, 2025, the weighted average yield on our Agency RMBS and credit portfolios excluding the impact of the Catch-up Amortization Adjustment was 8.58%, while our total adjusted average cost of funds, including interest rate swaps and net short U.S.

Treasury securities, was 3.31%, resulting in a net interest margin of 5.27%.

By comparison, for the three-month period ended March 31, 2024, the weighted average yield of our portfolio of Agency and credit portfolios excluding the impact of the Catch-up Amortization Adjustment was 5.20%, while our total adjusted average cost of funds, including interest rate swaps and net short U.S.

Treasury securities, was 2.17%, resulting in a net interest margin of 3.03%.

Management Fees

For the three-month periods ended March 31, 2025 and 2024, our management fee expense was approximately $0.9 million and $0.5 million, respectively.

Management fees are calculated based on our shareholders' equity at the end of each quarter.

The increase in the management fee period over period was driven by higher shareholders' equity as of March 31, 2025.

Other Operating Expenses

Other operating expenses, as presented above, includes professional fees, compensation expense, insurance expense, and various other operating expenses included on the Consolidated Statement of Operations incurred in connection with the operation of our business.

For the three-month periods ended March 31, 2025 and 2024, our other operating expenses were approximately $1.7 million and $1.1 million, respectively.

The increase in other operating expenses for the three-month period ended March 31, 2025 was primarily due to increases in professional fees, compensation expense, and other operating expenses related to the CLO Strategic Transformation.

Other Income (Loss)

Other income (loss) consists of net realized and net change in unrealized gains (losses) on securities and financial derivatives.

For the three-month period ended March 31, 2025, Other income (loss) was $(14.5) million, consisting primarily of net realized and unrealized losses of $(7.9) million on our financial derivatives and $(7.6) million on our securities.

Net realized and unrealized losses of $(7.9) million on our financial derivatives consisted of net realized and unrealized losses of $(8.9) million on our TBAs, $(0.5) million on our Euro FX futures, and $(0.4) million on our forwards, partially offset by net realized and unrealized gains of $1.3 million on our interest rate swaps, $0.5 million on our U.S.

Treasury futures, and $0.1 million on our credit default swaps.

The net loss on our financial derivatives was primarily the result of falling interest rates during the period.

Net realized and unrealized losses of $(7.6) million on our securities consisted primarily of net realized and unrealized

losses of $(16.4) million on our corporate CLOs, partially offset by net realized and unrealized gains $7.6 million on our Agency RMBS and $1.2 million on U.S.

Treasury securities.

For the three-month period ended March 31, 2024, Other income (loss) was $5.6 million, consisting primarily of net realized and unrealized gains of $13.7 million on our financial derivatives, which were partially offset by net realized and unrealized losses of $(8.1) million on our securities.

Net realized and unrealized gains of $13.7 million on our financial derivatives consisted of net realized and unrealized gains of $15.7 million on our interest rate swaps and $0.4 million on our TBAs, partially offset primarily by net realized and unrealized losses of $(2.2) million on our U.S.

Treasury and Euro FX futures, and $(0.2) million on our credit default swaps.

The net gain on our financial derivatives was primarily the result of rising interest rates during the quarter.

Net realized and unrealized losses of $(8.1) million on our securities, also driven by rising interest rates, consisted primarily of net realized and unrealized losses of $(10.8) million on our Agency RMBS, partially offset by net realized and unrealized gains of $1.2 million on our corporate CLOs, $0.8 million on our non-Agency RMBS, and $0.7 million on our U.S.

Treasury securities.

Income Tax Expense (Benefit)

We revoked our election to be taxed as a REIT, effective January 1, 2024, and operated as a taxable C-Corporation until the Conversion Date.

We plan to use our existing net operating loss carryforwards (“NOLs”) to offset a majority of our U.S.

federal taxable income recognized while we operated as a taxable C-Corporation;

to the extent that those NOLs are unable to offset any portion of our taxable income, such portion is subject to the typical corporate federal and state income tax rates.

For the three-month periods ended March 31, 2025 and 2024, our income tax expense (benefit) was $(6) thousand and $0.3 million, respectively.

Adjusted Distributable Earnings

We calculate Adjusted Distributable Earnings as net income (loss) adjusted for:

(i) net realized and change in net unrealized gains and (losses) on securities, financial derivatives, and foreign currency transactions;

(ii) net realized and change in net unrealized gains (losses) associated with periodic settlements on interest rate swaps;

(iii) other income or loss items that are of a non-recurring nature, if any;

(iv) Catch-up Amortization Adjustment (as defined below);

and (v) provision for income taxes.

The Catch-up Amortization Adjustment is a quarterly adjustment to premium amortization or discount accretion triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses).

The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from quarter to quarter.

Adjusted Distributable Earnings is a supplemental non-GAAP financial measure.

We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because:

(i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current period earnings components that we believe are less useful in forecasting long-term performance and dividend-paying ability;

(ii) we use it to evaluate the effective net yield provided by our portfolio, after the effects of financial leverage;

and (iii), we believe that presenting Adjusted Distributable Earnings assists investors in measuring and evaluating our operating performance, and comparing our operating performance to that of our peers.

Our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable;

Adjusted Distributable Earnings excludes certain items, such as most realized and unrealized gains and losses, that may impact the amount of cash that is actually available for distribution.

In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S.

GAAP, it should be considered supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S.

In setting our dividends, our Board considers our earnings, liquidity, financial condition, distribution requirements, and financial covenants, along with other factors that the Board may deem relevant from time to time.

The following table reconciles, for the three-month periods ended March 31, 2025 and 2024, Adjusted Distributable Earnings to the line on the Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S.

GAAP measure:

Three-Month Period Ended

(In thousands except for share amounts and per share amounts) March 31, 2025 March 31, 2024

Net Income (Loss) $ (7,870) $ 3,961

Income tax expense (benefit) (6) 303

Net Income (Loss) before income taxes $ (7,876) $ 4,264

Net realized (gains) losses on securities (377) 9,823

Change in net unrealized (gains) losses on securities 8,026 (1,760)

Net realized (gains) losses on financial derivatives (17,594) (3,459)

Change in net unrealized (gains) losses on financial derivatives 25,514 (10,216)

Net realized gains (losses) on periodic settlements of interest rate swaps 8,060 5,812

Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps (6,340) (111)

Strategic Transformation costs and other adjustments (1)

Negative (positive) component of interest income represented by Catch-up Amortization Adjustment 183 884

Subtotal 16,829 1,048

Adjusted Distributable Earnings $ 8,953 $ 5,312

Weighted Average Shares Outstanding 34,811,555 19,548,408

Adjusted Distributable Earnings Per Share $ 0.26 $ 0.27

(1) For the three-month period ended March 31, 2025, includes $(0.9) million of net realized and unrealized (gains) losses on foreign currency translation, which is included in Other, net on the Consolidated Statement of Operations and $0.3 million of expenses incurred primarily in connection with our strategic transformation.

For the three-month period ended March 31, 2024, includes $0.1 million, respectively, of expenses incurred primarily in connection with our strategic transformation.

Results of Operations for the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:

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Net Income (Loss) Per Common Share $ 0.28 $ 0.31

Results of Operations for the Years Ended December 31, 2024 and 2023

Net Income (Loss)

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Treasury futures, $(1.8) million on our TBAs, $(0.7) million on our credit default swaps, and $(0.1) million on Euro FX futures.

The net gain on our financial derivatives was primarily the result of rising interest rates during much of 2024, partially offset by net losses in the third quarter driven by

declining interest rates in that period.

The net gain on our financial derivatives was primarily the result of rising interest rates during much of 2024, partially offset by net losses in the third quarter driven by declining interest rates in that period.

Net realized and unrealized losses of $(18.4) million on our securities consisted primarily of net realized and unrealized losses of $(16.1) million on our on our Agency RMBS, $(3.7) million on our corporate CLOs, and $(0.4) million on our U.S.

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Adjusted Distributable Earnings

We calculate Adjusted Distributable Earnings as net income (loss) adjusted for:

(i) net realized and change in net unrealized gains and (losses) on securities, financial derivatives, and foreign currency transactions;

(ii) net realized and change in net unrealized gains (losses) associated with periodic settlements on interest rate swaps;

(iii) other income or loss items that are of a non-recurring nature, if any;

(iv) Catch-up Amortization Adjustment (as defined below);

and (v) provision for income taxes.

The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from quarter to quarter.

Adjusted Distributable Earnings is a supplemental non-GAAP financial measure.

We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because:

(ii) we use it to evaluate the effective net yield provided by our portfolio, after the effects of financial leverage;

Adjusted Distributable Earnings excludes certain items, such as most realized and unrealized gains and losses, that may impact the amount of cash that is actually available for distribution.

In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S.

GAAP, it should be considered supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S.

In setting our dividends, our Board of Trustees considers our earnings, liquidity, financial condition, distribution requirements, and financial covenants, along with other factors that the Board of Trustees may deem relevant from time to time.

The following table reconciles, for the years ended December 31, 2024 and 2023, Adjusted Distributable Earnings to the line on the Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S.

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These provisions may differ for each of our lenders.

As of December 31, 2024 and 2023, we had $563.0 million and $729.5 million outstanding under our repurchase agreements, respectively.

As of December 31, 2024, our outstanding repurchase agreements were with 14 counterparties.

As of March 31, 2025 and December 31, 2024 and 2023, we had $517.5 million, $563.0 million, and $729.5 million outstanding under our repurchase agreements, respectively.

As of March 31, 2025, our outstanding repurchase agreements were with 13 counterparties.

The amounts borrowed under our repurchase agreements are generally subject to the application of "haircuts." A haircut is the percentage discount that a repo lender applies to the market value of an asset serving as collateral for a repo borrowing, for the purpose of determining whether such repo borrowing is adequately collateralized.

As of December 31, 2024 and 2023, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was 9.5% and 5.7%, respectively.

As of March 31, 2025 and December 31,

2024 and 2023, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was 9.4%, 9.5% and 5.7%, respectively.

The following table details total outstanding borrowings, average outstanding borrowings, and the maximum outstanding borrowings at any month end for each quarter under repurchase agreements for the past twelve quarters.

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(In thousands)

March 31, 2025 $ 517,538 $ 530,822 $ 517,538

December 31, 2024 562,974 522,275 562,974

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June 30, 2022 950,339 1,070,229 1,087,826

March 31, 2022 1,211,163 1,133,738 1,211,163

(1) During this quarter, our borrowings decreased as we continue to transition our portfolio, in connection with our strategic transformation, out of highly leveraged positions such as Agency RMBS to a higher concentration of CLOs, which are typically leveraged at lower levels.

(1) During this quarter, our borrowings decreased as we continued to transition our portfolio, in connection with our strategic transformation, out of highly leveraged positions such as Agency RMBS to a higher concentration of CLOs, which are typically leveraged at lower levels.

As of March 31, 2025, we had an aggregate amount at risk under our repurchase agreements with 14 counterparties of $49.6 million.

As of December 31, 2024, we had an aggregate amount at risk under our repurchase agreements with 18 counterparties of $55.7 million.

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If the amounts outstanding under repurchase agreements with a particular counterparty are greater than the collateral held by the counterparty, there is no amount at risk for the particular counterparty.

Amounts at risk under our repurchase agreements as of December 31, 2024 and 2023 does not include $3.1 million and $0.5 million, respectively, of net accrued interest receivable, which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.

Amounts at risk under our repurchase agreements as of March 31, 2025 and December 31, 2024 and 2023, does not include $3.3 million, $3.1 million, and $0.5 million, respectively, of net accrued interest receivable, which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.

Our derivatives are predominantly subject to bilateral master trade agreements or clearing in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the "Dodd-Frank Act." We may be required to deliver or receive cash or securities as collateral upon entering into derivative transactions.

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In the case of cleared derivatives, the clearinghouse becomes our counterparty and the future commission merchant acts as an intermediary between us and the clearinghouse with respect to all facets of the related transaction, including the posting and receipt of required collateral.

As of December 31, 2024, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with three counterparties of approximately $31.3 million.

As of March 31, 2025, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with two counterparties of approximately $3.3 million.

As of December 31, 2024, we had an aggregate amount at risk under our derivatives contracts, excluding TBAs, with three counterparties of approximately $31.3 million.

Additionally, we had $17.1 million and $21.1 million of initial margin for cleared OTC derivatives received from central clearinghouses as of December 31, 2024 and 2023, respectively.

As of December 31, 2023, we had an aggregate amount at risk under our derivatives contracts, excluding TBAs, with three counterparties of approximately $47.1 million.

Additionally, we had $0.5 million, $17.1 million, and $21.1 million of initial margin for cleared OTC derivatives received from central clearinghouses as of March 31, 2025 and December 31, 2024 and 2023, respectively.

Amounts at risk under our derivatives contracts represent the excess, if any, for each counterparty of the fair value of our derivative contracts plus our collateral held directly by the counterparty less the counterparty's collateral held by us.

If a particular counterparty's collateral held by us is greater than the aggregate fair value of the financial derivatives plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.

We purchase and sell TBAs and Agency pass-through certificates on a when-issued or delayed delivery basis.

The delayed delivery for these securities means that these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and therefore are more vulnerable, especially in the absence of margining arrangements with respect to these transactions, to increasing amounts at risk with the applicable counterparties.

Prior to the Conversion we would purchase and sell TBAs and Agency pass-through certificates on a when-issued or delayed delivery basis.

The delayed delivery for these securities means that these transactions are more prone to market

fluctuations between the trade date and the ultimate settlement date, and therefore are more vulnerable, especially in the absence of margining arrangements with respect to these transactions, to increasing amounts at risk with the applicable counterparties.

As of March 31, 2025, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with one counterparty of approximately $2 thousand.

As of December 31, 2024, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with six counterparties of approximately $1.2 million.

As of December 31, 2023, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with seven counterparties of approximately $1.7 million.

Amounts at risk in connection with our forward settling TBA and Agency pass-through certificates represent the excess, if any,

for each counterparty of the net fair value of the forward settling contracts plus our collateral held directly by the counterparty less the counterparty's collateral held by us.

Amounts at risk in connection with our forward settling TBA and Agency pass-through certificates represent the excess, if any, for each counterparty of the net fair value of the forward settling contracts plus our collateral held directly by the counterparty less the counterparty's collateral held by us.

If a particular counterparty's collateral held by us is greater than the aggregate fair value of the forward settling contracts plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.

As of December 31, 2024, we had cash and cash equivalents of $31.8 million.

The timing and frequency of distributions will be determined by our Board of Trustees based upon a variety of factors deemed relevant by our trustees, including restrictions under applicable law and our capital requirements.

The declaration of dividends to our shareholders and the amount of such dividends are at the discretion of our Board of Trustees.

The following table sets forth the dividend distributions authorized by the Board of Trustees for the periods indicated below:

Shortly after the Conversion, we sold our remaining Agency RMBS and liquidated our remaining TBA positions.

As of March 31, 2025 and December 31, 2024 and 2023, we had cash and cash equivalents of $17.4 million, $31.8 million, and $38.5 million, respectively.

The timing and frequency of distributions will be determined by our Board based upon a variety of factors deemed relevant by our trustees, including restrictions under applicable law and our capital requirements.

The declaration of dividends to our shareholders and the amount of such dividends are at the discretion of our Board.

The following table sets forth the dividend distributions authorized by our Board for the periods indicated below:

Three-Month Period Ended March 31, 2025:

Per Share Dividend

Amount Declaration Date Record Date Payment Date

(In thousands)

$ 0.08 $ 3,005 March 7, 2025 March 31, 2025 April 25, 2025

0.08 2,977 February 10, 2025 February 28, 2025 March 25, 2025

0.08 2,733 January 8, 2025 January 31, 2025 February 25, 2025

Year Ended December 31, 2024:

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0.08 1,096 January 9, 2023 January 31, 2023 February 27, 2023

On January 8, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on February 25, 2025 to shareholders of record as of January 31, 2025.

On February 10, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on March 25, 2025 to shareholders of record as of February 28, 2025.

On March 7, 2025, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on April 25, 2025 to shareholders of record as of March 31, 2025.

On April 3, 2025, the Board approved a monthly dividend in the amount of $0.08 per share payable on May 27, 2025 to shareholders of record as of April 30, 2025.

On May 7, 2025, the Board approved a monthly dividend in the amount of $0.08 per share payable on June 30, 2025 to shareholders of record as of May 30, 2025.

On June 9, 2025, the Board approved a monthly dividend in the amount of $0.08 per share payable on July 31, 2025 to shareholders of record as of June 30, 2025.

At those times when cash flows from our operating activities are insufficient to fund our dividend payments, we fund such dividend payments through cash flows from our investing and/or financing activities, and in some cases from additional cash on hand.

The following paragraphs summarize our cash flows for the years ended December 31, 2024 and 2023.

The following paragraphs summarize our cash flows for the three-month periods ended March 31, 2025 and 2024 and years ended December 31, 2024 and 2023.

For the three-month period ended March 31, 2025, our operating activities provided net cash of $9.2 million and our investing activities used net cash of $27.1 million.

Our repo activity used to finance our purchase of securities (including repayments, in conjunction with the sales of securities, of amounts borrowed under our repurchase agreements as well as collateral posted in connection with our repo activity) used net cash of $39.7 million.

Thus our operating and investing activities, when combined with such net financing activities, used net cash of $57.7 million.

We also received proceeds from the issuance of common shares, net of commissions and offering costs paid of $52.3 million and we used $1.0 million to repurchase our common shares and $8.1 million to pay dividends.

As a result of these activities, there was a decrease in our holdings of cash and cash equivalents of $14.5 million, from $31.8 million as of December 31, 2024 to $17.4 million as of March 31, 2025.

For the three-month period ended March 31, 2024, our operating activities used net cash of $1.2 million and our investing activities provided net cash of $40.6 million.

Thus our operating and investing activities, when combined with our net repo financing activities, used net cash of $18.7 million.

We also received proceeds from the issuance of common shares, net of commissions and offering costs paid of $7.3 million.

We also used $4.7 million to pay dividends.

As a result of these activities, there was a decrease in our cash holdings of $16.1 million, from $38.5 million as of December 31, 2023 to $22.4 million as of March 31, 2024.

For the year ended December 31, 2024, our operating activities provided net cash of $9.1 million and our investing activities provided net cash of $116.4 million.

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As a result of these activities, there was an increase in our cash holdings of $3.7 million, from $34.8 million as of December 31, 2022 to $38.5 million as of December 31, 2023.

We have implemented an "at-the-market" offering program, or "ATM program," by entering into equity distribution agreements with third party sales agents.

On November 14, 2023, we implemented an “at the market” offering program, or the "2023 ATM program," by entering into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $100.0 million of common shares from time to time.

On November 14, 2023, we implemented an “at the market” offering ("ATM") program (the "2023 ATM program), by entering into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $100.0 million of common shares from time to time.

On January 13, 2025 and February 11, 2025, the Company amended the equity distribution agreements (collectively the "EDA Amendments") with each of the sales agents.

The EDA Amendments authorize the Company to offer and sell up to $90.0 million of common stock from time to time (the "2025 Common ATM Program");

the 2023 ATM Program and 2025 ATM Program are collectively referred to as the "ATM Programs." During the three-month period ended March 31, 2025, we issued 8,075,118 common shares which provided $52.1 million of net proceeds after $0.4 million of commissions and $0.1 million of offering costs.

During the year ended December 31, 2024, we issued 10,964,023 common shares which provided $73.6 million of net proceeds after $0.6 million of commissions and $0.5 million of offering costs.

As of December 31, 2024, we had $11.2 million of common shares available to be issued under the 2023 ATM program.

Subsequent to December 31, 2024, we amended the 2023 ATM Program on January 13, 2025 and again on February 11, 2025 to authorize to offer and sell up to an additional $90.0 million of common shares from time to time.

Between January 1, 2025 and March 28, 2025, we have issued 8,075,118 common shares;

as of March 28, 2025, we had approximately $48.5 million of common shares authorized to be issued under the amended 2023 ATM program.

On June 13, 2018, our Board of Trustees approved the adoption of a share repurchase program under which we are authorized to repurchase up to 1.2 million common shares.

The program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including through Rule 10b5-1 plans.

During the year ended December 31, 2023, the Company issued 5,183,037 common shares, which provided $33.6 million of net proceeds after $0.7 million of commissions and offering costs.

As of March 31, 2025, we had $48.5 million of common shares available to be issued under the 2023 ATM program.

Subsequent to the Conversion, we are no longer able to utilize the 2023 ATM program.

On June 13, 2018, our Board approved the adoption of a share repurchase program under which we are authorized to repurchase up to 1.2 million common shares (the "2018 Share Repurchase Program").

The 2018 Share Repurchase Program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including through Rule 10b5-1 plans.

Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations.

We did not purchase any shares under this program during the years ended December 31, 2024 and 2023.

Under the current repurchase program adopted on June 13, 2018, we have repurchased 167,476 common shares through March 28, 2025 at an average price per share of $5.84 and an aggregate cost of $1.0 million, and have authorization to repurchase an additional 558,332 common shares.

During the three-month period ended March 31, 2025, we repurchased 167,476 common shares at an average price per share of $5.84 and a total cost of $1.0 million.

We did not repurchase any shares under this program during the three-month period ended March 31, 2024.

Subsequent to the Conversion, we are no longer able to utilize the 2018 Share Repurchase Program.

Based on our current portfolio, amount of free cash on hand, debt-to-equity ratio and current and anticipated availability of credit, we believe that our capital resources will be sufficient to enable us to meet anticipated short-term and long-term liquidity requirements.

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets.

Contractual Obligations and Commitments

We are a party to a management agreement with our Manager.

Pursuant to that agreement, our Manager is entitled to receive a management fee based on shareholders' equity, reimbursement of certain expenses and, in certain circumstances, a termination fee.

We are a party to an advisory agreement with the Adviser.

Pursuant to that agreement, the Adviser is entitled to receive a management fee, a performance fee, reimbursement of certain expenses and, in certain circumstances, a termination fee.

Such fees and expenses do not have fixed and determinable payments.

For a description of the management agreement provisions, see Note 9 to our consolidated financial statements.

We enter into repurchase agreements with third-party broker-dealers whereby we sell securities to such broker-dealers at

agreed-upon purchase prices at the initiation of the repurchase agreements and agree to repurchase such securities at predetermined repurchase prices and termination dates, thus providing the broker-dealers with an implied interest rate on the funds initially transferred to us by the broker-dealers.

For a description of the advisory agreement provisions, see Note 9 to our consolidated financial statements.

We enter into repurchase agreements with third-party broker-dealers whereby we sell securities to such broker-dealers at agreed-upon purchase prices at the initiation of the repurchase agreements and agree to repurchase such securities at predetermined repurchase prices and termination dates, thus providing the broker-dealers with an implied interest rate on the funds initially transferred to us by the broker-dealers.

We may enter into reverse repurchase agreements with third-party broker-dealers whereby we purchase securities under agreements to resell at an agreed-upon price and date.

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Repurchase agreements and reverse repurchase agreements that are conducted with the same counterparty may be reported on a net basis if they meet the requirements of ASC 210-20, Balance Sheet, Offsetting .

As of both December 31, 2024 and 2023, there were no repurchase agreements and reverse repurchase agreements reported on a net basis on the Consolidated Balance Sheet.

As of December 31, 2024, we had $563.0 million of outstanding borrowings with 14 counterparties.

As of both March 31, 2025 and December 31, 2024 and 2023, there were no repurchase agreements and reverse repurchase agreements reported on a net basis on the Consolidated Balance Sheet.

As of March 31, 2025, we had $517.5 million of outstanding borrowings with 13 counterparties.

Off-Balance Sheet Arrangements

As of December 31, 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of March 31, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as

entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.

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However, elevated long-term inflation could adversely impact the performance of our investment portfolio, or the prices of our investments, or both.

For example, if higher inflation is not matched by an increase in wages, inflation could cause the real income of the borrowers whose loans underlie our non-Agency RMBS to decline.

For example, if higher inflation is not matched by an increase in wages, inflation could cause the real income of consumers to decline.

A decline in the real income of consumers could also cause a decline in consumer spending, which could negatively impact the profitability of many of the corporate borrowers whose loans underlie our corporate CLOs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis