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Item 8. Financial Statements and Supplementary Data

2025-06-23 compared with 2025-03-31 · 407 added, 134 removed, 1074 unchanged (33% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2024 AND DECEMBER 31, 2023

CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2025 AND DECEMBER 31, 2024 AND 2023 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2025 AND 2024 AND YEARS ENDED DECEMBER 31, 2024 AND DECEMBER 31, 2023

Report of Independent Registered Public Accounting Firm (PCAOB ID NO.

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ellington Credit Company and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, of shareholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Ellington Credit Company and its subsidiaries (the "Company") as of March 31, 2025, December 31, 2024 and 2023, and the related consolidated statements of operations, of shareholders' equity and of cash flows for the three-month period ended March 31, 2025, and for the two years in the period ended December 31, 2024 , including the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025, December 31, 2024 and 2023, and the results of its operations, shareholders’ equity and its cash flows for the three-month period ended March 31, 2025, and for the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Valuation of Certain Level 3 Investments in Securities

As described in Notes 2 and 4 to the consolidated financial statements, the Company held $104.1 million of total level 3 investments in securities, at fair value as of December 31, 2024.

As described in Notes 2 and 4 to the consolidated financial statements, the Company held $133.9 million of total level 3 investments in securities, at fair value as of March 31, 2025.

The Company has chosen to elect the fair value option for its investments in securities.

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The principal considerations for our determination that performing procedures relating to the valuation of certain level 3 investments in securities is a critical audit matter are (i) the significant judgment by management in determining the fair value of these investments, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the valuation of these level 3 investments and the assumptions related to yield.

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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(ii) comparing management’s estimate of fair value to independent sources, where available.

and (iii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of estimates of fair value by applying assumptions related to yield.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 31, 2025

June 23, 2025

We have served as the Company's auditor since 2012.

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CONSOLIDATED BALANCE SHEETS

December 31, 2024 December 31, 2023

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

(In thousands except for share amounts)

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CONSOLIDATED STATEMENTS OF OPERATIONS

December 31, 2024 December 31, 2023

Three-Month Period Ended Year Ended

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

(In thousands except for per share amounts)

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BALANCE, December 31, 2024 29,651,553 $ 297 1,000 $ 1 $ 348,587 $ ( 155,159 ) $ 193,726

Common shares issued (1)

8,075,118 81 52,055 52,136

Preferred shares redeemed ( 1,000 ) ( 1 ) ( 1 )

Share based compensation 203 203

Repurchase of common shares ( 167,476 ) ( 2 ) ( 976 ) ( 978 )

Dividends declared (2)

( 8,715 ) ( 8,715 )

Net income (loss) ( 7,870 ) ( 7,870 )

BALANCE, March 31, 2025 37,559,195 $ 376 — $ — $ 399,869 $ ( 171,744 ) $ 228,501

BALANCE, December 31, 2023 18,601,464 $ 186 — $ — $ 274,698 $ ( 138,646 ) $ 136,238

Common shares issued (1)(3)

1,218,146 12 7,391 7,403

Issuance of restricted shares (3)

Share based compensation (3)

Dividends declared (2)(3)

( 4,757 ) ( 4,757 )

Net income (loss) (3)

BALANCE, March 31, 2024 (3)

19,819,610 $ 198 — $ — $ 282,161 $ ( 139,442 ) $ 142,917

(1) Net of discounts and commissions and offering costs.

(2) For each of the three-month periods ended March 31, 2025 and 2024, dividends totaling $ 0.24 per common share outstanding, were declared.

For each of the years ended December 31, 2024 and 2023, dividends totaling $ 0.96 per common share outstanding, were declared.

(3) Unaudited.

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

December 31, 2024 December 31, 2023

(In thousands)

Three-Month Period Ended Year Ended

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

(In thousands) (Unaudited)

Cash flows provided by (used in) operating activities:

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CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

December 31, 2024 December 31, 2023

Three-Month Period Ended Year Ended

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

Cash flows provided by (used in) financing activities:

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Proceeds from the issuance of preferred shares — — 1 —

Repurchase of preferred shares ( 1 ) — — —

Offering costs paid ( 10 ) ( 122 ) ( 221 ) ( 231 )

Repurchase of common shares ( 978 ) — — —

Dividends paid ( 8,082 ) ( 4,659 ) ( 22,215 ) ( 14,122 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

March 31, 2025

Organization and Investment Objective

Ellington Credit Company, or "EARN," (formerly Ellington Residential Mortgage REIT) was initially formed as a Maryland real estate investment trust, or "REIT," on August 2, 2012, and commenced operations on September 25, 2012, with a focus on acquiring, investing in, and managing residential mortgage- and real estate-related assets through its wholly owned subsidiaries.

EARN conducts its business through its wholly owned subsidiaries, EARN OP GP LLC, or the "General Partner," and Ellington Residential Mortgage LP, or the "Operating Partnership," which were formed as a Delaware limited liability company and a Delaware limited partnership, respectively, on July 31, 2012 and commenced operations on September 25, 2012.

Ellington Credit Company ("EARN") (formerly Ellington Residential Mortgage REIT) was initially formed as a Maryland real estate investment trust ("REIT") on August 2, 2012, and commenced operations on September 25, 2012, with a focus on acquiring, investing in, and managing residential mortgage- and real estate-related assets through its wholly owned subsidiaries.

EARN conducts its business through its wholly owned subsidiaries, EARN OP GP LLC (the "General Partner"), and Ellington Residential Mortgage LP (the "Operating Partnership"), which were formed as a Delaware limited liability company and a Delaware limited partnership, respectively, on July 31, 2012 and commenced operations on September 25, 2012.

The Operating Partnership conducts its business of acquiring, investing in, and managing targeted assets through its wholly owned subsidiaries.

EARN, the General Partner, the Operating Partnership, and their consolidated subsidiaries are hereafter defined as the "Company."

On March 29, 2024, the Company's Board of Trustees approved a strategic transformation, the "CLO Strategic Transformation," of the Company's investment strategy to focus on corporate collateralized loan obligations, or "CLOs." In connection with the CLO Strategic Transformation, the Company revoked its status as a REIT under the Internal Revenue Code of 1986, as amended, or "the Code," and, effective January 1, 2024, conducts its operations as a taxable C-Corp and maintains its exclusion from registration under the Investment Company Act of 1940, as amended, or the "1940 Act." On April 19, 2024, the Company changed its name and amended its declaration of trust and bylaws accordingly.

After obtaining shareholder approval of certain matters related to the CLO Strategic Transformation at a special meeting of shareholders held on January 17, 2025, the "Special Meeting", the Company intends to convert to a Delaware closed-end fund registered under the 1940 Act that will elect to be treated as a regulated investment company, or "RIC," on April 1, 2025, or the "Conversion";

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

In connection with the CLO Strategic Transformation, the Company revoked its status as a REIT under the Internal Revenue Code of 1986, as amended ("the Code") and, effective January 1, 2024, conducts its operations as a taxable C-Corporation and maintains its exclusion from registration under the Investment Company Act of 1940, as amended (the "1940 Act").

On April 19, 2024, the Company changed its name and amended its declaration of trust and bylaws accordingly.

After obtaining shareholder approval of certain matters related to the CLO Strategic Transformation at a special meeting of shareholders held on January 17, 2025 (the "Special Meeting"), the Company intends to convert to a Delaware closed-end fund registered under the 1940 Act that will elect to be treated as a regulated investment company ("RIC"), on April 1, 2025 (the "Conversion");

see Note 13 for additional details.

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Additionally, the Company 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.

In order to maintain its exclusion from registration under the 1940 Act, the Company also maintains a core portfolio of Agency MBS.

In order to maintain its exclusion from registration under the 1940 Act, the Company also maintained a core portfolio of Agency RMBS prior to the Conversion.

Prior to the CLO Strategic Transformation, the Company focused on acquiring and managing RMBS, for which the principal and interest payments are guaranteed by a U.S.

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Agency RMBS include both Agency pools and Agency collateralized mortgage obligations, or "CMOs," and non-Agency RMBS primarily consist of non-Agency CMOs, both investment grade and non-investment grade.

As a result of the CLO Strategic Transformation, the Company intends to gradually liquidate its portfolio of mortgage-related assets and invest its capital in CLOs.

As a result of the CLO Strategic Transformation, the Company has gradually liquidated a significant portion of its portfolio of mortgage-related assets and has continued to purchase additional CLOs.

Ellington Credit Company Management LLC, formerly Ellington Residential Mortgage Management LLC, or the "Manager," serves as the Manager of the Company pursuant to the terms of a management agreement, as described in Note 9.

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All inter-company balances and transactions have been eliminated.

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of consolidated financial statements in conformity

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates and those differences could be material.

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Furthermore, based on its validation criteria, management may determine that the average of the third-party valuations received for a given instrument does not result in what management believes to be the fair value of such instrument, and in such circumstances management may override this average with its own good faith valuation.

The validation criteria may take into account output from management's own models, recent trading activity in the same or similar instruments, and valuations received from third parties.

The use of proprietary models requires the use of a significant

amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates and default rates.

The validation criteria may take into account output from management's own models, recent trading activity in the same or

similar instruments, and valuations received from third parties.

The use of proprietary models requires the use of a significant amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates and default rates.

Given their relatively high level of price transparency, Agency RMBS pass-throughs, and TBAs are typically designated as Level 2 assets.

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The Company generally classifies its securities as available-for-sale.

The Company has chosen to elect the the fair value option, or "FVO," pursuant to ASC 825, Financial Instruments ("ASC 825") for its investments in securities.

The Company has chosen to elect the fair value option, or "FVO," pursuant to ASC 825, Financial Instruments ("ASC 825") for its investments in securities.

Electing the FVO allows the Company to record changes in fair value in the Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner.

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In its assessment of whether a credit loss exists, the Company compares the present value of estimated future cash flows of the impaired security with the amortized cost basis of such security.

The estimated future cash flows reflect those that a "market participant" would use and typically include assumptions related to fluctuations in interest rates, prepayment speeds, default rates, collateral performance, and the timing and amount of projected credit losses, as well as incorporating observations of current market developments and events.

Cash flows are discounted at an interest rate equal to the

current yield used to accrete interest income.

incorporating observations of current market developments and events.

Cash flows are discounted at an interest rate equal to the current yield used to accrete interest income.

If the present value of estimated future cash flows is less than the amortized cost basis of the security, an expected credit loss exists and is included in Unrealized gains (losses) on securities and loans, net, on the Consolidated Statement of Operations.

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(S) Income Taxes:

The Company has revoked its previous election to be taxed as a REIT under Sections 856 through 860 of the Code and will operate as a C-Corp subject to U.S.

federal, state, and local corporate income taxes for the tax year beginning January 1, 2024.

The Company has revoked its previous election to be taxed as a REIT under Sections 856 through 860 of the Code and operates as a C-Corporation subject to U.S.

federal, state, and local corporate income taxes beginning with the tax year beginning January 1, 2024.

The Company's financial results reflect provisions for any current or deferred income taxes.

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The Company may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations.

Should the relevant tax regulators successfully challenge any of such positions, the Company might be found to have a tax liability that has not been recorded in the

accompanying consolidated financial statements.

Should the relevant tax regulators successfully challenge any of such positions, the Company might be found to have a tax liability that has not been recorded in

the accompanying consolidated financial statements.

Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof.

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ASU 2023-09 will be applied on a prospective basis with the option to apply ASU 2023-09 retrospectively.

The Company is still assessing the impact of ASU 2023-09 on the Company's consolidated financial statements.

The Company has applied ASU 2023-09 on a prospective basis, which did not have a material impact on the Company's consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures ("ASU 2023-07") which requires incremental disclosures related to an entity's reportable segments, including identifying significant segment expense categories and any multiple measures of segment profit or loss used by the CODM.

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Government and are therefore subject to greater credit risk.

The following tables present details of the Company's investments in securities as of December 31, 2024 and 2023.

December 31, 2024:

The following tables present details of the Company's investments in securities as of March 31, 2025 and December 31, 2024 and 2023.

March 31, 2025:

Unamortized Premium (Discount) Gross Unrealized Weighted Average

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n/a n/a 2 — — 2 1.21 % 11.51 % 2.82

Total $ 618,220 $ ( 25,508 ) $ 774,401 $ 6,338 $ ( 26,498 ) $ 754,241 5.86 % 8.55 % 7.14

(1) Weighted average coupon represents the weighted average coupons of the securities, rather than, in the case of collateralized securities, the weighted average coupon rates on the underlying collateral.

(2) Total weighted average coupon excludes CLO equity securities, corporate equity, and interest only RMBS.

(3) Expected average lives of RMBS are generally shorter than stated contractual maturities.

Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.

(4) Weighted average coupon is based on a notional principal amount of $ 28 thousand, for Agency interest only securities.

December 31, 2024:

Unamortized Premium (Discount) Gross Unrealized Weighted Average

($ in thousands) Current Principal Amortized Cost

Losses Fair Value Coupon (1)(2)

CLO Notes $ 83,322 $ ( 10,740 ) $ 72,582 $ 1,382 $ ( 1,972 ) $ 71,992 11.69 % 15.05 % 2.89

CLO Equity n/a n/a 105,262 795 ( 6,927 ) 99,130 n/a 12.12 % 9.86

Corporate debt 1,787 ( 1,389 ) 398 30 — 428 — % — % 1.32

Corporate equity n/a n/a 75 — ( 19 ) 56 n/a n/a n/a

30-year fixed-rate mortgages 536,948 ( 17,320 ) 519,628 1,696 ( 9,017 ) 512,307 4.86 % 5.26 % 7.26

Interest only securities (4)

n/a n/a 2 — — 2 1.20 % 11.27 % 2.76

Total Long 622,057 ( 29,449 ) 697,947 3,903 ( 17,935 ) 683,915 5.76 % 7.29 % 7.17

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By Estimated Weighted Average Life

As of March 31, 2025:

($ in thousands)

CLOs and Other Securities (1)

Agency RMBS Agency IOs

Estimated Weighted Average Life (2)

Fair Value Amortized Cost Weighted Average Coupon (3)

Value Amortized Cost Weighted Average Coupon (3)

Fair Value Amortized Cost Weighted Average Coupon (3)

Less than three years $ 45,414 $ 46,781 10.74 % $ 15,072 $ 14,480 6.50 % $ 2 $ 2 1.21 %

Greater than three years and less than seven years 37,127 40,052 11.58 % 228,838 226,774 5.68 % — — — %

Greater than seven years and less than eleven years 3,341 3,371 4.17 % 259,982 261,254 4.17 % — — — %

Total $ 85,882 $ 90,204 10.89 % $ 503,892 $ 502,508 4.90 % $ 2 $ 2 1.21 %

(1) CLOs excludes CLO Equity;

Other Securities includes corporate debt.

(2) Expected average lives of RMBS, Agency IOs, and CLOs are generally shorter than stated contractual maturities.

(3) Weighted average coupon represents the weighted average coupons of the securities rather than the coupon rates on the underlying collateral.

As of December 31, 2024:

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(3) CLOs excludes CLO Equity.

The following tables reflect the components of net interest income (expense) by security type for the years ended December 31, 2024 and 2023:

The following tables reflect the components of net interest income (expense) by security type for the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023:

Three-Month Period Ended

March 31, 2025 Three-Month Period Ended

March 31, 2024

Interest Net Amortization Net Interest

Income (Expense) Net Coupon

Interest Net Amortization Net Interest

Income (Expense)

($ in thousands)

CLOs $ 9,456 $ ( 974 ) $ 8,482 $ 1,288 $ ( 44 ) $ 1,244

Agency RMBS 6,172 157 6,329 8,457 ( 1,054 ) 7,403

Non-Agency RMBS — — — 897 ( 333 ) 564

Other securities (1)

286 ( 42 ) 244 ( 68 ) 30 ( 38 )

Total $ 15,914 $ ( 859 ) $ 15,055 $ 10,574 $ ( 1,401 ) $ 9,173

(1) Other securities includes corporate debt and U.S.

Treasury securities.

December 31, 2024 Year Ended

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Treasury securities.

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

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

At March 31, 2025, the Company had gross unrealized losses on securities of $( 26.5 ) million, of which $( 13.0 ) million relates primarily to adverse changes in estimated future cash flows on CLOs.

At December 31, 2024, the Company had gross unrealized losses on securities of $( 17.9 ) million, of which $( 2.0 ) million relates primarily to adverse changes in estimated future cash flows on CLOs.

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The Company determined for certain securities that a portion of such securities' cost basis is not collectible;

for the years ended December 31, 2024 and 2023, the Company recognized realized losses on such securities of $( 13 ) thousand and $( 0.5 ) million, respectively.

for the three-month period ended March 31, 2024 and the years ended December 31, 2024 and 2023, the Company recognized realized losses on such securities of $( 13 ) thousand, $( 13 ) thousand, and $( 0.5 ) million, respectively.

No such losses were recognized for the three-month period ended March 31, 2025.

Such realized losses are reflected in Net realized gains (losses) on securities, on the Consolidated Statement of Operations.

The following tables present the Company's financial instruments measured at fair value on:

March 31, 2025:

(In thousands)

Description Level 1 Level 2 Level 3 Total

CLOs $ — $ 116,434 $ 133,423 $ 249,857

Corporate debt — — 434 434

Corporate equity — — 56 56

30-year fixed-rate mortgages — 503,892 — 503,892

Interest only securities — — 2 2

Total securities, at fair value — 620,326 133,915 754,241

Financial derivatives–assets, at fair value:

TBAs — 138 — 138

Interest rate swaps — 181 — 181

Futures 157 — — 157

Credit default swaps — — — —

Forwards — — — —

Total financial derivatives–assets, at fair value 157 319 — 476

Total securities and financial derivatives–assets, at fair value 157 620,645 133,915 754,717

Financial derivatives–liabilities, at fair value:

TBAs — ( 282 ) — ( 282 )

Interest rate swaps — ( 187 ) — ( 187 )

Futures — — — —

Credit default swaps — ( 488 ) — ( 488 )

Total financial derivatives–liabilities, at fair value $ — $ ( 957 ) $ — $ ( 957 )

December 31, 2024:

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Total financial derivatives–liabilities, at fair value $ ( 63 ) $ ( 7,266 ) $ — $ ( 7,329 )

The tables below include roll-forwards of the Company's financial instruments for the years ended December 31, 2024 and 2023 (including change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

The tables below include roll-forwards of the Company's financial instruments for the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023 (including change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

Three-Month Period Ended March 31, 2025:

(In thousands) CLOs Corporate Debt Corporate Equity Agency RMBS

Beginning balance — December 31, 2024

$ 103,624 $ 428 $ 56 $ 2

Purchases 51,769 12 — —

Proceeds from sales ( 17,517 ) ( 13 ) — —

(Amortization)/accretion, net ( 1,464 ) — — —

Net realized gains (losses) ( 201 ) — — —

Change in net unrealized gains (losses) ( 8,988 ) 7 — —

Transfers into level 3 16,155 — — —

Transfers out of level 3 ( 9,955 ) — — —

Ending balance — March 31, 2025

$ 133,423 $ 434 $ 56 $ 2

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations.

The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company at March 31, 2025, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2025.

For Level 3 financial instruments held by the Company as of March 31, 2025, change in net unrealized gains (losses) of $( 9.5 ) million, $ 7 thousand, and $( 1 ) thousand for the three-month period ended March 31, 2025 relate to CLOs, corporate debt, and corporate equity, respectively.

At March 31, 2025, the Company transferred $ 10.0 million of assets from Level 3 to Level 2 and $ 16.2 million of assets from Level 2 to Level 3.

Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria.

The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Three-Month Period Ended March 31, 2024 (unaudited) :

(In thousands) CLOs Non-Agency RMBS Agency RMBS

Beginning balance — December 31, 2023

$ 5,601 $ 10,276 $ 3,162

Purchases 16,952 — —

Proceeds from sales — — ( 263 )

Principal repayments ( 1,620 ) ( 13 ) —

(Amortization)/accretion, net ( 34 ) ( 258 ) ( 180 )

Net realized gains (losses) 34 42 20

Change in net unrealized gains (losses) ( 379 ) 491 179

Transfers into level 3 6,456 1,811 1,002

Transfers out of level 3 ( 1,414 ) ( 6,521 ) —

Ending balance — March 31, 2024

$ 25,596 $ 5,828 $ 3,920

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations.

The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company as of March 31, 2024, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2024.

For Level 3 financial instruments held by the Company as of March 31, 2024, change in net unrealized gains (losses) of $ 0.4 million, $ 0.1 million, and $ 0.2 million for the three-month period ended March 31, 2024 relate to CLOs, non-Agency RMBS, and Agency RMBS, respectively.

At March 31, 2024, the Company transferred $ 7.9 million of assets from Level 3 to Level 2 and $ 9.3 million of assets from Level 2 to Level 3.

Transfers between these hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria.

The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Year Ended December 31, 2024:

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The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 financial instruments as of December 31, 2024:

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 financial instruments as of March 31, 2025:

Valuation Technique

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Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements.

The following table summarizes the estimated fair value of all other financial instruments not included in the disclosures above as of December 31, 2024 and 2023:

December 31, 2024 December 31, 2023

(In thousands) Fair Value Carrying Value Fair Value Carrying Value

The following table summarizes the estimated fair value of all other financial instruments not included in the disclosures above as of March 31, 2025 and December 31, 2024 and 2023:

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

(In thousands) Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value

Cash and cash equivalents $ 17,375 $ 17,375 $ 31,840 $ 31,840 $ 38,533 $ 38,533

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The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of its known or expected cash receipts and its known or expected cash payments principally related to its investments and borrowings, as well as to mitigate changes in the fair value of its investments that are caused by changes in overall market conditions.

The following table details the fair value of the Company's holdings of financial derivatives as of December 31, 2024 and 2023:

December 31, 2024 December 31, 2023

The following table details the fair value of the Company's holdings of financial derivatives as of March 31, 2025 and December 31, 2024 and 2023:

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

(In thousands)

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Interest Rate Swaps

The following tables provide information about the Company's fixed payer interest rate swaps as of December 31, 2024 and 2023.

The following tables provide information about the Company's fixed payer interest rate swaps as of March 31, 2025 and December 31, 2024 and 2023.

March 31, 2025:

Weighted Average

Maturity Notional Amount Fair Value Pay Rate Receive Rate Remaining Years to Maturity

(In thousands)

2040 $ 500 $ 181 0.90 % 4.33 % 15.57

Total $ 500 $ 181 0.90 % 4.33 % 15.57

December 31, 2024:

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Total $ 887,437 $ 63,537 2.54 % 5.38 % 6.68

The following tables provide information about the Company's fixed receiver interest rate swaps as of December 31, 2024 and 2023.

The following tables provide information about the Company's fixed receiver interest rate swaps as of March 31, 2025 and December 31, 2024 and 2023.

March 31, 2025:

Weighted Average

Maturity Notional Amount Fair Value Pay Rate Receive Rate Remaining Years to Maturity

(In thousands)

2040 $ 500 $ ( 187 ) 4.41 % 0.84 % 15.57

Total $ 500 $ ( 187 ) 4.41 % 0.84 % 15.57

December 31, 2024:

18 unchanged sentences

Total $ 188,160 $ 3,046 5.38 % 3.71 % 8.36

The following tables provide information about the Company's futures as of December 31, 2024 and 2023.

The following tables provide information about the Company's futures as of March 31, 2025 and December 31, 2024 and 2023.

March 31, 2025:

Description Notional Amount Fair Value Remaining Months to Expiration

($ in thousands)

Short Contracts:

Euro FX Futures $ ( 19,125 ) $ 157 2.57

December 31, 2024:

23 unchanged sentences

Transactions with the same counterparty for the same TBA that result in a reduction of the position are treated as extinguished.

As of December 31, 2024 and 2023, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows:

December 31, 2024 December 31, 2023

As of March 31, 2025 and December 31, 2024 and 2023, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows:

March 31, 2025 December 31, 2024

TBA Securities Notional Amount (1)

6 unchanged sentences

Purchase contracts:

Assets $ — $ — $ — $ — $ 79,722 $ 78,709 $ 79,363 $ 654

Liabilities $ — $ — $ — $ — $ 61,190 $ 55,214 $ 53,851 $ ( 1,363 )

9 unchanged sentences

(4) Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis and is reported in Financial derivatives-assets at fair value and Financial derivatives-liabilities at fair value on the Consolidated Balance Sheet.

December 31, 2023

TBA Securities Notional Amount (1)

Market Value (3)

Net Carrying Value (4)

(In thousands)

Purchase contracts:

Assets $ 79,722 $ 78,709 $ 79,363 $ 654

Liabilities 27,700 28,398 28,385 ( 13 )

107,422 107,107 107,748 641

Sale contracts:

Liabilities ( 78,285 ) ( 69,206 ) ( 71,069 ) ( 1,863 )

( 78,285 ) ( 69,206 ) ( 71,069 ) ( 1,863 )

Total TBA securities, net $ 29,137 $ 37,901 $ 36,679 $ ( 1,222 )

(1) Notional amount represents the principal balance of the underlying Agency RMBS.

(2) Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.

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

Credit Default Swaps

The following table provides information about the Company's credit default swaps as of December 31, 2024 and 2023:

December 31, 2024 December 31, 2023

Notional Fair Value Weighted Average Remaining Term (Years) Notional Fair Value Weighted Average Remaining Term (Years)

The following table provides information about the Company's credit default swaps as of March 31, 2025 and December 31, 2024 and 2023:

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

Notional Fair Value Weighted Average Remaining Term (Years) Notional Fair Value Weighted Average Remaining Term (Years) Notional Fair Value Weighted Average Remaining Term (Years)

($ in thousands)

4 unchanged sentences

From time to time the Company enters into credit derivative contracts for which the Company sells credit protection ("written credit derivatives").

As of December 31, 2024, all of the Company's open written credit derivatives were credit default swaps on corporate bond indices, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets.

As of March 31, 2025 and December 31, 2024, all of the Company's open written credit derivatives were credit default swaps on corporate bond indices, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets.

No written credit derivatives were held as of March 31, 2025 or December 31, 2023.

As of December 31, 2024, the Company held written credit derivatives with a notional value of $ 23.8 million and a fair value of $ 0.7 million.

3 unchanged sentences

In situations where the credit quality of the underlying reference assets has deteriorated, the percentage of notional values that would be paid up front to enter into a new such contract ("points up front") is frequently used as an indication of credit risk.

Credit protection sellers entering the market in such situations would expect to be paid points up front corresponding to the approximate fair value of the contract.

As of December 31, 2024, the implied credit spread on the Company's outstanding written credit derivative ranged between 45 and 289 basis points.

Total net up-front payments (paid) or received relating to written credit derivatives outstanding as of December 31, 2024 was $ 0.7 million.

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the years ended December 31, 2024 and 2023:

Derivative Type Year Ended

Credit protection sellers entering the

market in such situations would expect to be paid points up front corresponding to the approximate fair value of the contract.

As of March 31, 2025, the implied credit spread on the Company's outstanding written credit derivative was 376 basis points, compared to a range of 45 to 289 basis points as of December 31, 2024.

Total net up-front payments (paid) or received relating to written credit derivatives outstanding as of March 31, 2025 and December 31, 2024 was $ 0.5 million and $ 0.7 million, respectively.

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the three-month periods ended March 31, 2025 and 2024 and years ended December 31, 2024 and 2023:

Derivative Type Three-Month

March 31, 2025 Three-Month

March 31, 2024 Year Ended

December 31, 2024 Year Ended

December 31, 2023

(In thousands) (Unaudited)

Interest rate swaps $ 812,723 $ 1,090,580 $ 972,807 $ 861,689

TBAs 418,109 194,352 286,658 289,786

Futures 82,369 61,675 96,410 67,592

Credit default swaps 59,809 25,466 39,320 14,989

Forwards 5,274 — 1,803 —

Warrants 4 — 1 —

Gains and losses on the Company's financial derivatives for the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023 are summarized in the tables below:

Three-Month Period Ended March 31, 2025

Derivative Type Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives

(In thousands)

4 unchanged sentences

Forwards ( 346 ) ( 346 ) $ ( 84 ) $ ( 84 )

Gains and losses on the Company's financial derivatives for the years ended December 31, 2024 and 2023 are summarized in the tables below:

Total $ 8,060 $ 9,534 $ 17,594 $ ( 6,340 ) $ ( 19,174 ) $ ( 25,514 )

Three-Month Period Ended March 31, 2024 (unaudited)

(In thousands)

Interest rate swaps $ 5,812 $ ( 1,167 ) $ 4,645 $ ( 111 ) $ 11,111 $ 11,000

TBAs ( 707 ) ( 707 ) 1,148 1,148

Futures ( 174 ) ( 174 ) ( 2,018 ) ( 2,018 )

Credit default swaps ( 305 ) ( 305 ) 86 86

Total $ 5,812 $ ( 2,353 ) $ 3,459 $ ( 111 ) $ 10,327 $ 10,216

Year Ended December 31, 2024

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At any given time, the Company seeks to have its outstanding borrowings under repurchase agreements with several different counterparties in order to reduce the exposure to any single counterparty.

As of December 31, 2024 and 2023, the Company had outstanding borrowings under repurchase agreements with 14 and 19 counterparties, respectively.

The following table details the Company's outstanding borrowings under repurchase agreements as of December 31, 2024 and 2023:

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

(In thousands) (In thousands)

As of March 31, 2025 and December 31, 2024 and 2023, the Company had outstanding borrowings under repurchase agreements with 13 , 14 , and 19 counterparties, respectively.

The following table details the Company's outstanding borrowings under repurchase agreements as of March 31, 2025 and December 31, 2024 and 2023:

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) (In thousands)

30 days or less $ 448,778 4.47 % 9 $ 499,701 4.71 % 15 $ 676,074 5.54 % 17

2 unchanged sentences

Total Agency RMBS 448,778 4.47 9 499,701 4.71 15 680,263 5.55 17

Non-Agency RMBS and CLOs:

CLOs and Non-Agency RMBS:

30 days or less 37,790 5.45 9 38,913 5.70 17 6,782 6.89 15

1 unchanged sentence

61-90 days — — — — — — 6,801 6.58 67

Total Non-Agency RMBS and CLOs 63,273 5.65 27 18,458 6.75 42

Total CLOs and non-Agency RMBS 68,760 5.17 25 63,273 5.65 27 18,458 6.75 42

Treasury Securities

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Repurchase agreements involving underlying investments that the Company sold prior to period end, for settlement following period end, are shown using their contractual maturity dates even though such repurchase agreements may be expected to be terminated early upon settlement of the sale of the underlying investment.

As of December 31, 2024 and 2023, the fair value of securities transferred as collateral under outstanding borrowings under repurchase agreements was $ 611.3 million and $ 791.5 million, respectively.

Collateral transferred under outstanding borrowings under repurchase agreements as of December 31, 2024 and 2023, includes investments in the amount of $ 10.5 million and $ 51.0 million, respectively, that were sold prior to period end but for which such sale had not yet settled.

In addition as of December 31, 2024 and 2023, the Company posted to/(received from) repurchase agreement counterparties net cash collateral of $ 4.2 million and $( 11.2 ) million, respectively, as a result of margin calls with various repurchase agreement counterparties.

As of March 31, 2025 and December 31, 2024 and 2023, the fair value of securities transferred as collateral under outstanding borrowings under repurchase agreements was $ 567.0 million, $ 611.3 million, and $ 791.5 million, respectively.

Collateral transferred under outstanding borrowings under repurchase agreements as of March 31, 2025 and December 31, 2024 and 2023, includes investments in the amount of $ 4.6 million, $ 10.5 million, and $ 51.0 million, respectively, that were sold prior to period end but for which such sale had not yet settled.

In addition as of March 31, 2025 and December 31, 2024 and 2023, the Company posted to/(received from) repurchase agreement counterparties net cash collateral of $ 0.1 million, $ 4.2 million, $( 11.2 ) million, respectively, as a result of margin calls with various repurchase agreement counterparties.

Additionally, as of December 31, 2024 and 2023, repurchase agreement counterparties posted/(received) RMBS of $( 3.1 ) million and $ 0.8 million, respectively, to/(from) the Company as a result of margin calls.

Amount at risk represents the excess, if any, for each counterparty of the fair value of collateral held by such counterparty over the amounts outstanding under repurchase agreements.

There was no counterparty for which the amount at risk was greater than 10 % of shareholders' equity as of either December 31, 2024 or 2023.

There was no counterparty for which the amount at risk was greater than 10 % of shareholders' equity as of either March 31, 2025 or December 31, 2024 and 2023.

Offsetting of Assets and Liabilities

2 unchanged sentences

Cash or other collateral is exchanged as required with each of the Company's counterparties in connection with open derivative positions and repurchase agreements.

The following tables present information about certain assets and liabilities representing financial instruments as of December 31, 2024 and 2023.

The following tables present information about certain assets and liabilities representing financial instruments as of March 31, 2025 and December 31, 2024 and 2023.

The Company has not previously entered into master netting agreements with any of its counterparties.

Certain of the Company's repurchase and reverse repurchase agreements and financial derivative transactions are governed by underlying agreements that generally provide a right of net settlement, as well as a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.

March 31, 2025:

Description Amount of Assets (Liabilities) Presented in the Consolidated Balance Sheet (1)

Financial Instruments Available for Offset

Financial Instruments Transferred or Pledged as Collateral (2)(3)

Cash Collateral (Received) Pledged (2)(3)

(In thousands)

Financial derivatives–assets $ 476 $ ( 319 ) $ — $ — $ 157

Reverse repurchase agreements — — — — —

Financial derivatives–liabilities ( 957 ) 319 — 638 —

Repurchase agreements ( 517,538 ) — 517,388 150 —

(1) In the Company's Consolidated Balance Sheet, all balances associated with repurchase and reverse repurchase agreements and financial derivatives are presented on a gross basis.

(2) For the purpose of this presentation, for each row the total amount of financial instruments transferred or pledged and cash collateral (received) or pledged may not exceed the applicable gross amount of assets or (liabilities) as presented here.

Therefore, the Company has reduced the amount of financial instruments transferred or pledged as collateral related to the Company's repurchase agreements and cash collateral pledged on the Company's financial derivative assets and liabilities.

As of March 31, 2025, the fair value of financial instruments transferred or pledged as collateral on the Company's repurchase agreements, net of the fair value of any financial instruments received by the Company as the result of margin calls, were $ 567.0 million.

As of March 31, 2025, total cash collateral (received) pledged on financial derivative assets and financial derivative liabilities excludes $ 2.0 million and $ 0.6 million, respectively, of net excess cash collateral.

(3) When collateral is pledged to or pledged by a counterparty, it is often pledged or posted with respect to all positions with such counterparty, and in such cases such collateral cannot be specifically identified as relating to a particular asset or liability.

As a result, in preparing the above table, the Company has made assumptions in allocating pledged or posted collateral among the various rows.

December 31, 2024:

11 unchanged sentences

As of December 31, 2024, the fair value of financial instruments transferred or pledged as collateral on the Company's repurchase agreements, net of the fair value of any financial instruments received by the Company as the result of margin calls, were $ 614.5 million.

As of December 31, 2024, total cash collateral (received) pledged on financial derivative assets and financial derivative liabilities excludes $ 31 thousand and $ 2.6 million, respectively, of net excess cash collateral.

20 unchanged sentences

Diluted EPS takes into account the effect of outstanding dilutive instruments, such as share options and warrants, if any, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding.

As of December 31, 2024 and 2023, the Company did not have any dilutive instruments outstanding.

The following table presents a reconciliation of the earnings/(losses) and shares used in calculating basic EPS for the years ended December 31, 2024 and 2023:

(In thousands except for share amounts) December 31, 2024 December 31, 2023

As of March 31, 2025 and December 31, 2024 and 2023, the Company did not have any dilutive instruments outstanding.

The following table presents a reconciliation of the earnings/(losses) and shares used in calculating basic EPS for the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023:

Three-Month Period Ended Year Ended

March 31, 2025 3/31/2024 December 31 2024 December 31 2023

(In thousands except for share amounts) (Unaudited)

Net income (loss) $ ( 7,870 ) $ 3,961 $ 6,586 $ 4,559

10 unchanged sentences

The Manager is responsible for the day-to-day operations of the Company.

For periods prior to July 1, 2024, under the terms of the Previous Management Agreement, the Manager received an annual management fee in an amount equal to 1.50 % per annum of shareholders' equity (as defined in the Previous Management Agreement) as of the end of each fiscal quarter (before deductions for any management fee with respect to such fiscal period).

Management Agreement) as of the end of each fiscal quarter (before deductions for any management fee with respect to such fiscal period).

The management fee was payable quarterly in arrears.

1 unchanged sentence

The Base Management Fee is payable quarterly in arrears.

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

For the years ended December 31, 2024 and 2023, the total management fee incurred was $ 2.5 million and $ 1.8 million, respectively.

13 unchanged sentences

With respect to the Performance Fee, there will be no accumulation of the Hurdle Amount from quarter to quarter, no claw back of amounts previously paid if the Pre-Performance Fee Net Investment Income in any subsequent quarter is below the Hurdle Amount for such subsequent quarter, and no delay or adjustment of payment if the Pre-Performance Fee Net Investment Income in any prior quarter was below the Hurdle Amount for such prior quarter.

The Manager has agreed to waive all of the Performance Fees payable under the New Management Agreement for all periods through December 31, 2024.

For the year ended December 31, 2024, the Company incurred a performance fee of $ 2.4 million which was fully waived by the Manager.

The Manager has agreed to waive all of the Performance Fees payable under the New Management Agreement for all periods through March 31, 2025.

For the three-month period ended March 31, 2025 and year ended December 31, 2024, the Company incurred a performance fee of $ 1.5 million and $ 2.4 million, respectively, which was fully waived by the Manager.

The New Management Agreement has an initial term expiring on June 25, 2025, unless terminated earlier in accordance with its terms.

8 unchanged sentences

In their capacities as officers or personnel of the Manager or its affiliates, such personnel will devote such portion of their time to the Company's affairs as is necessary to enable the Company to operate its business.

For the years ended December 31, 2024 and 2023, the Company reimbursed the Manager $ 4.7 million and $ 2.7 million, respectively, for previously incurred operating and compensation expenses.

As of December 31, 2024 and 2023, the outstanding payable to the Manager for operating and compensation expenses was $ 0.3 million and $ 0.4 million, respectively, and is included in Accrued expenses on the Consolidated Balance Sheet.

During the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023, the Company reimbursed the Manager $ 0.5 million, $ 1.0 million, $ 4.7 million, and $ 2.7 million, respectively, for previously incurred operating and compensation expenses.

As of March 31, 2025 and December 31, 2024 and 2023, the outstanding payable to the Manager for operating and compensation expenses was $ 0.6 million, $ 0.3 million, and $ 0.4 million, respectively, and is included in Accrued expenses on the Consolidated Balance Sheet.

Termination Fee

The Management Agreement requires the Company to pay a termination fee to the Manager in the event of (1) the Company's termination or non-renewal of the Management Agreement without cause or (2) the Manager's termination of the Management Agreement upon a default by the Company in the performance of any material term of the Management Agreement.

Such termination fee will be equal to 5 % of Shareholders' Equity, as defined in the Management Agreement as of

the month-end preceding the date of the notice of termination or non-renewal of the Management Agreement.

Such termination fee will be equal to 5 % of Shareholders' Equity, as defined in the Management Agreement as of the month-end preceding the date of the notice of termination or non-renewal of the Management Agreement.

The Company will not be required to pay any termination fee as a result of the CLO Strategic Transformation or the Conversion.

10 unchanged sentences

Pursuant to our Manager's current policies and procedures, assets for which there are no readily observable market prices may be purchased or sold in cross transactions (i) at prices based upon third-party bids received through auction, (ii) at the average of the highest bid and lowest offer quoted by third-party dealers, or (iii) according to another pricing methodology approved by our Manager's Chief Compliance Officer.

During the year ended December 31, 2024, the Company entered into transactions with an affiliated entity whereby the Company purchased securities with a principal balance of $ 10.2 million at a cost of $ 5.3 million.

The price of each affiliated transaction was determined using the Manager's current policies and procedures utilizing an average of several bid prices received through auction.

As of December 31, 2024 the fair value of such securities purchased from affiliates of EMG had a principal balance and fair value of $ 9.8 million and $ 4.0 million, respectively.

During the year ended December 31, 2024, the Company recognized net income on such securities of $0.2 million.

During the three-month period ended March 31, 2025, the Company entered into transactions with an affiliated entity whereby the Company purchased securities with a principal balance of $ 0.3 million at a cost of $ 0.1 million.

During the three-month period ended March 31, 2024 and year ended December 31, 2024, the Company entered into transactions with an affiliated entity whereby the Company purchased securities with a principal balance of $ 10.2 million at a cost of $ 5.3 million.

The price of each affiliated transaction was determined using the Manager's current policies and procedures based on bid prices received through auction.

As of March 31, 2025 and December 31, 2024 the securities purchased from affiliates of EMG had

a principal balance of $ 10.4 million and $ 9.8 million, respectively, and fair value of $ 3.8 million and $ 4.0 million, respectively.

During the three-month periods ended March 31, 2025 and 2024 and year ended December 31, 2024, the Company recognized net income on such securities of $ 0.1 million, $( 0.3 ) million, and $ 0.2 million, respectively.

The Company did not purchase any securities from affiliated entities during the year ended December 31, 2023.

Preferred Shares

1 unchanged sentence

The Board of Trustees may authorize the issuance of additional shares.

On December 9, 2024, the Company issued 1,000 Series A Preferred Shares, par value $ 0.01 per share, or the "Preferred Shares," with each Preferred Share having 25 thousand votes.

On December 9, 2024, the Company issued 1,000 Series A Preferred Shares, par value $ 0.01 per share, or the "Preferred Shares," with each Preferred Share having 25,000 votes.

Any votes cast by the holder of the Preferred Shares are required to “mirror” the actual votes cast by the common shareholders.

6 unchanged sentences

As of December 31, 2024, there were 1,000 preferred shares outstanding.

The Company did not have any preferred shares outstanding as of December 31, 2023.

Subsequent to year end, the Company fully redeemed the Preferred Shares;

see Note 13 for additional details.

Subsequent to the Special Meeting the Company repurchased all preferred shares outstanding for an aggregate purchase price of $ 1 thousand, and as of March 31, 2025 there were no preferred shares outstanding.

Common Shares

1 unchanged sentence

The Board of Trustees may authorize the issuance of additional shares.

As of December 31, 2024 and 2023, there were 29,651,553 and 18,601,464 common shares outstanding, respectively.

Detailed below is a roll forward of the Company's common shares outstanding for the years ended December 31, 2024 and 2023:

As of March 31, 2025 and December 31, 2024 and 2023, there were 37,559,195 , 29,651,553 , and 18,601,464 , common shares outstanding, respectively.

Detailed below is a roll forward of the Company's common shares outstanding for the three-month periods ended March 31, 2025 and 2024 and the years ended December 31, 2024 and 2023:

Three-Month Period Ended Year Ended

March 31, 2025 March 31, 2024 (1)

December 31, 2024 December 31, 2023

4 unchanged sentences

Restricted common shares issued — — 90,229 47,393

Common shares repurchased ( 167,476 ) — — —

Forfeiture of common shares to satisfy tax withholding obligations — — ( 4,163 ) ( 6,806 )

Common Shares Outstanding (12/31/2024 and 12/31/2023, respectively)

Common Shares Outstanding (3/31/2025, 3/31/2024, 12/31/2024, 12/31/2023, respectively)

37,559,195 19,819,610 29,651,553 18,601,464

Unvested restricted shares outstanding (12/31/2024 and 12/31/2023, respectively)

Unvested restricted shares outstanding (3/31/2025, 3/31/2024, 12/31/2024, 12/31/2023, respectively)

39,577 53,448 62,729 53,448

The below table provides details on the Company's restricted shares granted pursuant to share award agreements which are unvested at December 31, 2024:

The below table provides details on the Company's restricted shares granted pursuant to share award agreements which are unvested at March 31, 2025:

Grant Recipient Number of Restricted Shares Granted Grant Date Vesting Date (1)

Independent trustees:

23,152 September 11, 2024 January 18, 2025

Partially dedicated employees:

5 unchanged sentences

Awards previously granted under the 2013 Equity Incentive Plan remain outstanding and valid in accordance with their terms, but no new awards will be granted under the 2013 Equity Incentive Plan.

As of December 31, 2024, there were 1,554,701 shares available for future issuance under the Company's 2023 Equity Incentive Plan.

On June 13, 2018, the Company's Board of Trustees approved the adoption of a share repurchase program under which the Company is authorized to repurchase up to 1.2 million common shares.

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

As of March 31, 2025, there were 1,950,083 shares available for future issuance under the Company's 2023 Equity Incentive Plan.

On June 13, 2018, the Company's Board of Trustees approved the adoption of a share repurchase program under which the Company is 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 the Company to make repurchases from time to time on the open market or in negotiated transactions, including through Rule 10b5-1 plans.

Repurchases are at the Company's discretion, subject to applicable law, share availability, price and its financial performance, among other considerations.

From inception of the current share repurchase program adopted on June 13, 2018 through December 31, 2024, the Company repurchased 474,192 of its common shares at an aggregate cost of $ 4.4 million, and an average price per share of $ 9.21 .

The Company did not repurchase any shares during either of the years ended December 31, 2024 and 2023.

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

the Company did not repurchase any shares during the three-month period ended March 31, 2024 or the years ended December 31, 2024 and 2023.

From inception of the 2018 Share Repurchase Program through March 31, 2025, the Company repurchased 641,668 of its common shares at an aggregate cost of $ 5.3 million, and an average price per share of $ 8.33 .

On November 14, 2023, the Company 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 it was 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, the Company issued 8,075,118 common shares, which provided $ 52.1 million of net proceeds after $ 0.6 million of commissions and offering costs.

During the year ended December 31, 2024, the Company issued 10,964,023 common shares, which provided $ 73.6 million of net proceeds after $ 1.1 million of commissions and offering costs.

As of December 31, 2024, the Company's remaining authorization under the 2023 ATM program was $ 11.2 million.

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, the Company's remaining authorization under the ATM programs was $ 48.5 million.

Distribution Policy

3 unchanged sentences

federal income tax treatment.

The Company revoked its prior REIT election, effective for the tax year beginning January 1, 2024, and operates as a taxable C-Corp, subject to applicable U.S.

The Company revoked its prior REIT election, effective for the tax year beginning January 1, 2024, and operates as a taxable C-Corporation, subject to applicable U.S.

federal, state, and local income tax.

1 unchanged sentence

Distributions in excess of the Company's current and accumulated earnings and profits are characterized as return of capital or are treated by shareholders as capital gains.

The following table details the tax characteristics of the Company's dividends declared on its common stock for the years ended December 31, 2024 and 2023.

Year Ended December 31,

The following table details the estimated tax characteristics of the Company's dividends declared on its common stock for the three-month period ended March 31, 2025 and the years ended December 31, 2024 and 2023.

Three-Month Period Ended March 31, 2025 Year Ended December 31,

Tax Characteristic 2024 2023

6 unchanged sentences

federal, state, or local income taxes, or foreign income taxes, such tax expense is recognized by the Company.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes , or "ASC 740." Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities under U.S.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes , or "ASC 740" and has applied ASU 2023-09 on a prospective basis as discussed in Note 2.

Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities under U.S.

GAAP and the carrying amounts used for income tax purposes.

For the year ended December 31, 2024, the Company recorded an income tax expense (benefit) of $ 0.5 million.

For the three-month periods ended March 31, 2025 and 2024 and year ended December 31, 2024, the Company recorded an income tax expense (benefit) of $( 6 ) thousand, $ 0.3 million, and $ 0.5 million, respectively.

No such expense was recorded for the year ended December 31, 2023, during which time the Company was operating as a REIT and generally not subject to income tax.

The Company evaluates its deferred tax assets for recoverability using an approach which considers the relative impact of negative and positive evidence, including historical profitability and projections of future taxable income.

As of December 31, 2024, the Company anticipates utilizing deferred tax assets of approximately $ 1.2 million, to offset a portion of its taxable income for its 2024 fiscal year;

the Company has recorded a valuation allowance of $ 11.1 million to fully reserve against the remaining deferred tax assets.

The following table summarizes the Company's (benefit) provision for income tax for the year ended December 31, 2024.

As of March 31, 2025, there was an approximate increase of $ 2.2 million in the Company's deferred tax assets and the Company has recorded a valuation allowance of $ 13.3 million to fully reserve against its deferred tax assets.

The following table summarizes the Company's (benefit) provision for income tax for the period January 1, 2025 to March 31, 2025 and the year ended December 31, 2024.

The Company did not record any provision for income tax for the year ended December 31, 2023.

(In thousands) December 31, 2024

(In thousands) Three-Month Period Ended March 31, 2025 Year Ended December 31, 2024

Current provision for income tax

Federal $ — $ 238

State ( 6 ) 272

Total current provision for income tax, net ( 6 ) 510

2 unchanged sentences

Total (benefit) provision for income tax $ ( 6 ) $ 510

The following table details the components of the Company's net deferred tax asset (liability) as of December 31, 2024

(In thousands) December 31, 2024

The following table details the components of the Company's net deferred tax asset (liability) as of March 31, 2025 and December 31, 2024.

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

Deferred tax asset

Net operating loss available for carry-back and carry-forward (1)

$ 13,333 $ 11,147

Net capital loss carry-forward — —

7 unchanged sentences

Net deferred tax asset (liability), net of valuation allowance $ — $ —

(1) Includes state net operating losses available for carry-back and carry-forward as of December 31, 2024 of $ 2.8 million.

(1) Includes state net operating losses available for carry-back and carry-forward as of March 31, 2025 and December 31, 2024 of $ 3.3 million and $ 2.8 million, respectively.

These deferred tax assets were fully offset by a valuation allowance.

The Company had a pre-tax U.S.

federal net operating loss carryforward ("NOL Carryforward") of approximately $ 39.8 million as of December 31, 2024;

federal net operating loss carryforward ("NOL Carryforward") of approximately $ 47.6 million and $ 39.8 million as of March 31, 2025 and December 31, 2024, respectively;

such NOL Carryforward has an unlimited carryforward period.

As a result of the change from a REIT to a taxable C-Corp, as of January 1, 2024, the Company established a deferred tax asset related to its NOL Carryforward, which it can utilize to offset a majority of its U.S.

federal taxable income and a portion of its state and local taxable income, as detailed below.

The following table details the reconciliation between the Company's U.S.

federal and state statutory income tax rate and the effective tax rate for the three-month period ended March 31, 2025.

Three-Month Period Ended

March 31, 2025

(In thousands)

Federal statutory amount and rate $ ( 1,654 ) 21.00 %

State statutory amount and rate, net of federal benefit

CT ( 467 ) 5.93 %

Other ( 32 ) 0.41 %

Change in valuation allowance 2,147 ( 27.26 ) %

Income tax expense (benefit) and Effective tax rate $ ( 6 ) 0.07 %

The following table details the reconciliation between the Company's U.S.

federal and state statutory income tax rate and the effective tax rate for the year ended December 31, 2024.

4 unchanged sentences

Effective tax rate 7.19 %

Based on its analysis of any potential uncertain income tax positions, the Company concluded that it did not have any uncertain tax positions that meet the recognition or measurement criteria of ASC 740 as of December 31, 2024 or 2023.

The Company did not pay any income tax or receive any income tax refunds for either federal or state jurisdictions during the three-month period ended March 31, 2025.

Tax authorities in the relevant jurisdictions may select the Company's tax returns for audit and propose adjustments before the expiration of the statute of limitations.

6 unchanged sentences

The Company has not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements.

The Company has no liabilities recorded for these agreements as of December 31, 2024 and 2023 and management is not aware of any significant contingencies at December 31, 2024.

The Company has no liabilities recorded for these agreements as of March 31, 2025 and December 31, 2024 and 2023 and management is not aware of any significant contingencies at March 31, 2025.

Subsequent Events

Special Meeting and Conversion

On January 17, 2025, the Company held the Special Meeting during which it obtained shareholder approval of certain matters related to the Conversion;

the Company intends to convert to a RIC on April 1, 2025.

In accordance with the terms of the Subscription and Investment Representation Agreement entered into by the Company and the Manager, the Series A Preferred Shares were fully redeemed at par immediately after the conclusion of the Special Meeting.

On January 8, 2025 , the Board of Trustees approved a monthly dividend in the amount of $ 0.08 per share paid 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 paid 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 .

Issuance of Common Shares

From January 1, 2025 through March 28, 2025, the Company has issued 8,075,118 common shares, which provided $ 52.2 million of net proceeds after $ 0.5 million of commissions and offering costs.

Repurchase of Common Shares

From January 1, 2025 through March 28, 2025, the Company has repurchased 167,476 common shares at an aggregate cost of $ 1.0 million and an average price per share of $ 5.84 .

After receiving shareholder approval of certain matters related to the Conversion at a special meeting of shareholders held on January 17, 2025, on April 1, 2025 (the "Conversion Date"), the Company filed a Notification of Registration pursuant to Section 8(a) of the 1940 Act, Form N-8A, and a Registration Statement on Form N-2 with the U.S.

Securities and Exchange Commission, thereby completing the Conversion.

The Company also changed its fiscal year to end on March 31 and it and the Manager entered into the Advisory Agreement (the "Advisory Agreement").

Shortly after the Conversion Date, the Company sold its remaining Agency RMBS, receiving sales proceeds of $500.9 million, and also liquidated its remaining TBA positions.

Following the Conversion, the Company has applied to be taxed as a RIC under subchapter M of the Code.

As a result of the Conversion, the 2023 Equity Incentive Plan, the ATM program, and the 2018 Share Repurchase Program, each as discussed in Note 10, are no longer operative.

The Management Agreement was terminated and the investment advisory functions set forth therein have been replaced by those set forth in the Advisory Agreement.

Pursuant to the Advisory Agreement, the Company will pay the Adviser a quarterly fee (the "Base Management Fee") equal to 1.50 % per annum of the Company's Net Asset Value (as defined below), prorated for partial quarterly periods based on the number of days in such partial period compared to a 90-day quarter, and calculated and payable quarterly in arrears.

In addition to the Base Management Fee, pursuant to the Advisory Agreement, the Company will pay the Adviser a performance fee (the "Performance Fee").

The Performance Fee is calculated and payable quarterly in arrears based upon the Company's Pre-Performance Fee Net Investment Income (as defined below) with respect to each fiscal quarter, and is subject to a hurdle rate, expressed as a rate of return on the Company's common equity, equal to 2.00 % per quarter (i.e.

8.00 % per annum), and is subject to a "catch-up" feature.

Specifically:

• If the Company’s Pre-Performance Fee Net Investment Income for a fiscal quarter does not exceed the Hurdle Amount (as defined below) for such quarter, then no Performance Fee is payable to the Manager with respect to such quarter;

• If the Company’s Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds the Hurdle Amount for such quarter but is less than or equal to 121.21 % of the Hurdle Amount, then 100 % of the portion of the Company’s Pre-Performance Fee Net Investment Income that exceeds the Hurdle Amount (the "Catch-Up") is payable to the Manager as the Performance Fee with respect to such quarter.

Therefore, once the Company’s Pre-Performance Fee Net Investment Income for such quarter exactly reaches 121.21 % of the Hurdle Amount, the Manager will have accrued a Performance Fee with respect to such quarter that is exactly equal to 17.5 % of the Pre-Performance Fee Net Investment Income (because 21.21 % of the Hurdle Amount (which is the Pre-Performance Fee Net Investment Income captured by the Manager during the Catch-Up phase) is equal to 17.5 % of 121.21 % of the Hurdle Amount (which is the entire Pre-Performance Fee Net Investment Income at the end of the Catch-Up phase));

• If the Company’s Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds 121.21 % of the Hurdle Amount for such quarter, then 17.5 % of the Company’s Pre-Performance Fee Net Investment Income is payable to the Manager as the Performance Fee with respect to such quarter.

The Advisory Agreement has the following definitions:

Hurdle Amount for any fiscal quarter means the result obtained by multiplying the Net Asset Value of Common Equity at the end of the immediately preceding fiscal quarter by the Hurdle Rate.

The Hurdle Amount will be appropriately adjusted for any common share issuances or repurchases during the fiscal quarter.

Hurdle Rate means 2.00 % per quarter, or 8.00 % per annum.

The Hurdle Rate will be appropriately prorated for partial quarterly periods based on the number of days in such partial period compared to a 90-day quarter.

Net Asset Value means the figure that is equal to the total assets of the Company minus its total liabilities.

Net Asset Value of Common Equity means the portion of Net Asset Value attributable to common equity.

Pre-Performance Fee Net Investment Income for any fiscal quarter means interest income (including accretions of discounts, amortization of premiums, and payment-in-kind income), dividend income, and any other income (including any fee income) earned or accrued by the Company during such fiscal quarter, minus the Company’s operating expenses for such quarter (which, for this purpose, will not include any litigation-related expenses, any extraordinary expenses, or Performance Fee).

Pre-Performance Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

For purposes of computing Pre-Performance Fee Net Investment Income, the calculation methodology will look through total return swaps as if the Company owned the referenced assets directly.

As a result, Pre-Performance Fee Net Investment Income includes net interest (whether positive or negative) associated with a total return swap, which is the difference between (a) the interest income and transaction fees related to the reference assets and (b) all interest and other expenses paid by the Company to the total return swap counterparty.

In the case of an interest rate swap, Pre-Performance Fee Net Investment Income includes the net payments and net accruals of periodic payments.

The Advisory Agreement has an initial term expiring on April 1, 2027, unless terminated earlier in accordance with its terms.

Thereafter, the Advisory Agreement will continue in effect from year to year, so long as such continuance shall be approved at least annually by (a) the vote of the Company’s Board, or by the vote of a majority of the outstanding voting securities of the Company and (b) the vote of a majority of the Company’s trustees who are not parties to the Advisory Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party, in accordance with the requirements of the 1940 Act.

Administration Agreement

In connection with the Conversion, on the Conversion Date, the Company and Ellington Credit Company Administration LLC (the "Administrator") entered into the Administration Agreement (the "Administration Agreement").

Pursuant to the Administration Agreement, the Administrator will furnish the Company with certain services, including office facilities, equipment and clerical, bookkeeping and record keeping services and the Administrator will also perform, or oversee the performance of, its required administrative services, which include, among other things, being responsible for the financial records which the Company is required to maintain and preparing reports for its shareholders.

In addition, the Administrator will assist the Company in determining and publishing its Net Asset Value, oversee the preparation and filing of the Company's tax returns and print and disseminate reports to the Company's shareholders, as well as oversee the payment of the Company's expenses and the performance of administrative and professional services rendered to the Company by other parties.

In exchange for the services rendered under the Administration Agreement, the Company will pay the Administrator an amount equal to the Company's allocable portion of the Administrator’s costs and expenses incurred in performing its obligations and providing personnel (including wages, salaries, bonuses and related payroll expenses) under the Administration Agreement, including rent, office supplies, the fees and expenses associated with performing compliance functions, as well as the Company’s allocable portion of the costs of compensation and related expenses of the Company’s Chief Financial Officer, Chief Operating Officer, and their respective support staff.

The Administration Agreement has an initial term expiring on April 1, 2027, unless terminated earlier in accordance with its terms.

Thereafter, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (a) the vote of the Board or the vote of a majority of the outstanding voting securities of the Company and (b) the vote of a majority of the Company’s trustees who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party.

Dividend Reinvestment Plan

In connection with the Conversion, on the Conversion Date the Company adopted the Dividend Reinvestment Plan (the "DRP"), to be administered by Equiniti Trust Company, LLC as plan agent (the "Plan Agent"), pursuant to an agreement adopted on the Conversion Date.

Under the DRP, the Company’s cash dividends and/or distributions (collectively, “Dividends”), after deducting any applicable U.S.

withholding taxes, will be automatically reinvested in additional shares of the same class to which the Dividends relate.

Shareholders will automatically participate in the DRP unless they opt out by notifying the Plan Agent via telephone, in writing, or through the Plan Agent’s online portal.

An opt-out election must be received by the Plan Agent before the record date of a given Dividend for such election to be effective for that Dividend.

Shareholders holding shares through a nominee (e.g., a broker) must contact their nominee to make such elections.

Shareholders who opt out will receive Dividends in cash.

Under the DRP, whenever the Company pays a Dividend, the Plan Agent will reinvest such Dividends for participating Shareholders in newly issued shares of the Company at a price per share equal to 95% of the market price per share at the close of regular trading on the New York Stock Exchange (the "NYSE") on the Dividend payment date (or, if no sale is reported that day, the average of the last bid and ask prices reported by the NYSE).

While the Company generally intends to issue new shares under the DRP, the Board reserves the right to authorize the purchase of shares in the open market in connection with the DRP.

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

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

On June 9, 2025 , the Board of Trustees 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 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data