Ellington Credit Company

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Ellington Credit Company First Quarter 2025 Financial Results Conference Call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press the star and 1 on your telephone keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require any operator assistance, please press star and 0. It is now my pleasure to turn the floor over to Aladin Chalet, Associate General Counsel. Sir, you may begin.

Thank you. Before we begin, I'd like to remind everyone that this conference call may include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and involve risks and uncertainties that details in our most recently filed annual report on Form 10-K and our filed but not yet effective registration statement on Form N-2. Actual results may differ materially from these statements, so they should not be considered to be predictions of future events. The company undertakes no obligations to update these forward-looking statements. Joining me today are Larry Penn, Chief Executive Officer of Ellington Credit Company, Greg Bornstein, Portfolio Manager, Mark Takotsky, Executive Vice President, and Chris Murnoff, Chief Financial Officer. Our earnings call presentation is available on our website, ellingtoncredit.com. Today's call will track that presentation, and all statements and references to figures are qualified by the important notice and end notes at the back of the presentation. With that, I'll turn the call over to Larry.

Thanks, Aladina. Good morning, everyone. We appreciate your time and interest in Ellington Credit Company. I am very pleased to report that on April 1st, we successfully completed our conversion to a registered closed-end fund. As planned, within days of the conversion, we quickly and efficiently sold our remaining agency mortgage pools and covered our TBA short positions, all with minimal impact on our net asset value. In fact, even with all the market gyrations in early April, we estimate that these pool liquidations had only about a one penny per share effect on-earns to that net asset value. This one-penny effect was exactly what we had estimated on our last earnings call, and it was the precise and well-timed hedging by Mark Takotsky and his team that made this excellent result possible. As a byproduct of our conversion to a closed-end fund, we also changed our fiscal calendar to begin on April 1st. Therefore, on today's earnings call, When we're referring to the quarter ended March 31st, 2025, to avoid confusion, we'll refer to that quarter as calendar Q1. Okay, so now to our calendar Q1 results. During calendar Q1, in preparation for the conversion, we increased our CLO portfolio by 46% to $250 million, while we kept the size of our long agency mortgage portfolio stable. in order to maintain our exemption from the 1940 Act right up to the point of conversion. Also, starting in January, we aggressively ramped up our TBA short mortgage hedges, and so when volatility began to spike in March, we had already completely neutralized our exposure to the mortgage basis, thus saving us from the losses that we would have incurred when spreads widened later in the quarter. This positioning also enabled our agency mortgage portfolio to significantly outperform during those volatile periods leading up to and through our final sales in early April. Turning to slide four, let's take a look at the market backdrop for the quarter. A strong January and February gave way to turbulence in March as investor sentiment soured on fears of tariffs, slowing growth, and inflation persistence. interest rate and spread volatility surged in March, equity indices declined, and credit spreads widened, including in the CLO market, where both mezzanine debt and equity tranches saw meaningful price declines. You can see in the middle of slide four that spreads on high yield, investment grade, and CLO debt tranches widened, and therefore prices declined across the board during the quarter, with most of that occurring in March. Importantly, the price declines we saw were a function of potential future credit concerns, especially for companies that would be impacted by skyrocketing tariffs and not the result of any current or near-term credit concerns. Let's now move past quarter end and into early April. After selling all our mortgage pools following the conversion, our liquidity and buying power increased significantly, and we got to work ramping up our CLO portfolio. Our timing was fortunate, as we were able to add very attractive assets during all the April market turmoil. More recently, significant tariff de-escalations have led to credit spreads and prices reversing course in May, retracing a significant portion of the March and April move. It was great to be able to put fresh cash to work in CLOs while prices were lower. To sum up calendar Q1, while our agency mortgage strategy delivered positive results for the quarter, Declining prices on CLO mezzanine debt and equity drove an overall net loss. Nevertheless, our adjusted distributable earnings continue to cover our dividends for the quarter, and we've seen prices come back strong so far in calendar Q2. I'll turn it over to Chris now to walk through some more of the financial details.