Ellington Credit (NYSE:EARN) reported a GAAP net loss of $0.86 per share for the first quarter ended March 31, 2026.
The loss was primarily attributed to volatility in the collateralized loan obligation (CLO) market, which pressured asset valuations.
>>> Horizon Kinetics Acquires 2.2 Million Shares of Hawaiian Electric
CEO Larry Penn noted that the CLO market experienced persistent turbulence during the quarter. This environment led to a decline in net asset value for the firm.
However, Penn highlighted that the company's active trading strategy and focus on higher positions in the capital stack helped it outperform peers.
Quarterly Financial Details
Adjusted Net Investment Income fell by $0.02 from the previous quarter to $0.19 per share. The decline reflected lower asset yields from CLO equity positions.
The weighted average cost yield for the CLO portfolio dropped to 12.5% from 13.7% in the prior quarter.
This decrease was mainly due to downward adjustments in projected cash flows.
>>> Guggenheim Lowers Gray Media Price Target to $7 After Q1 Results
CFO Chris Smernoff explained that the loss stemmed from mark-to-market reductions in CLO equity. CLO mezzanine debt showed greater resilience during the period.
Penn described the quarter as a technical dislocation that reset valuations rather than a fundamental credit deterioration.
He cited data from Nomura Research showing a median CLO equity return of negative 13% for the quarter.
Balance Sheet Strengthening and Recovery
To bolster its financial position, Ellington Credit raised $54 million through 8.5% senior unsecured notes.
The capital was intended to strengthen the balance sheet and enable strategic investments during the selloff.
>>> Japanese Bond Market Strain Threatens Global Yields and Financial Stability
By the end of April, most of the proceeds had been deployed, expanding the total CLO portfolio to approximately $328 million.
Market conditions improved notably as the second quarter began.
The estimated net asset value (NAV) rebounded to a midpoint of $4.29 per share from $4.09 at quarter-end.
This recovery resulted in an economic return of nearly 7% for April.
Management projected that Adjusted Net Investment Income would gradually recover to the low 20-cent range per share.
>>> All BTS Members Secure Solo Entries on Billboard Hot 100
This growth is expected as recent portfolio investments contribute more substantially to earnings.
