Ellington Credit CoEARN
Ellington Credit Co Fair Value Disclosure
Valuation
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 | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||
| CLOs | $ | — | $ | 116,434 | $ | 133,423 | $ | 249,857 | ||||||||||||||||||
| Corporate debt | — | — | 434 | 434 | ||||||||||||||||||||||
| Corporate equity | — | — | 56 | 56 | ||||||||||||||||||||||
| Agency RMBS: | ||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| 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:
| (In thousands) | ||||||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||
| CLOs | $ | — | $ | 67,498 | $ | 103,624 | $ | 171,122 | ||||||||||||||||||
| Corporate debt | — | — | 428 | 428 | ||||||||||||||||||||||
| Corporate equity | — | — | 56 | 56 | ||||||||||||||||||||||
| Agency RMBS: | ||||||||||||||||||||||||||
| 30-year fixed-rate mortgages | — | 512,307 | — | 512,307 | ||||||||||||||||||||||
| Interest only securities | — | — | 2 | 2 | ||||||||||||||||||||||
| Total securities, at fair value | — | 579,805 | 104,110 | 683,915 | ||||||||||||||||||||||
| Financial derivatives–assets, at fair value: | ||||||||||||||||||||||||||
| TBAs | — | 592 | — | 592 | ||||||||||||||||||||||
| Interest rate swaps | — | 40,317 | — | 40,317 | ||||||||||||||||||||||
| Futures | 170 | — | — | 170 | ||||||||||||||||||||||
| Credit default swaps | — | 705 | — | 705 | ||||||||||||||||||||||
| Forwards | — | 83 | — | 83 | ||||||||||||||||||||||
| Total financial derivatives–assets, at fair value | 170 | 41,697 | — | 41,867 | ||||||||||||||||||||||
| Total securities and financial derivatives–assets, at fair value | 170 | 621,502 | 104,110 | 725,782 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Securities sold short: | ||||||||||||||||||||||||||
| U.S. Treasury securities sold short, at fair value | — | (22,578) | — | (22,578) | ||||||||||||||||||||||
| Financial derivatives–liabilities, at fair value: | ||||||||||||||||||||||||||
| TBAs | — | (1,363) | — | (1,363) | ||||||||||||||||||||||
| Interest rate swaps | — | (1,595) | — | (1,595) | ||||||||||||||||||||||
| Futures | (811) | — | — | (811) | ||||||||||||||||||||||
| Credit default swaps | — | (1,912) | — | (1,912) | ||||||||||||||||||||||
| Total financial derivatives–liabilities, at fair value | (811) | (4,870) | — | (5,681) | ||||||||||||||||||||||
| Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value | $ | (811) | $ | (27,448) | $ | — | $ | (28,259) | ||||||||||||||||||
December 31, 2023:
| (In thousands) | ||||||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||
| Agency RMBS: | ||||||||||||||||||||||||||
| 15-year fixed-rate mortgages | $ | — | $ | 27,847 | $ | — | $ | 27,847 | ||||||||||||||||||
| 20-year fixed-rate mortgages | — | 7,863 | — | 7,863 | ||||||||||||||||||||||
| 30-year fixed-rate mortgages | — | 670,294 | — | 670,294 | ||||||||||||||||||||||
| Adjustable rate mortgages | — | 7,119 | — | 7,119 | ||||||||||||||||||||||
| Reverse mortgages | — | 14,874 | — | 14,874 | ||||||||||||||||||||||
| Interest only securities | — | 4,253 | 3,162 | 7,415 | ||||||||||||||||||||||
| Non-Agency RMBS | — | 10,443 | 10,276 | 20,719 | ||||||||||||||||||||||
| CLOs | — | 11,816 | 5,601 | 17,417 | ||||||||||||||||||||||
| Total securities, at fair value | — | 754,509 | 19,039 | 773,548 | ||||||||||||||||||||||
| Financial derivatives–assets, at fair value: | ||||||||||||||||||||||||||
| TBAs | — | 654 | — | 654 | ||||||||||||||||||||||
| Interest rate swaps | — | 71,341 | — | 71,341 | ||||||||||||||||||||||
| Futures | 2,284 | — | — | 2,284 | ||||||||||||||||||||||
| Total financial derivatives–assets, at fair value | 2,284 | 71,995 | — | 74,279 | ||||||||||||||||||||||
| Total securities and financial derivatives–assets, at fair value | 2,284 | 826,504 | 19,039 | 847,827 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Financial derivatives–liabilities, at fair value: | ||||||||||||||||||||||||||
| TBAs | — | (1,876) | — | (1,876) | ||||||||||||||||||||||
| Interest rate swaps | — | (4,758) | — | (4,758) | ||||||||||||||||||||||
| Futures | (63) | — | — | (63) | ||||||||||||||||||||||
| Credit default swaps | — | (632) | — | (632) | ||||||||||||||||||||||
| 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 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: | |||||||||||||||||||||||
| 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: | |||||||||||||||||
| 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:
| (In thousands) | CLOs | Corporate Debt | Corporate Equity | Agency RMBS | Non-Agency RMBS | ||||||||||||||||||||||||
| Beginning balance as of December 31, 2023 | $ | 5,601 | $ | — | $ | — | $ | 3,162 | $ | 10,276 | |||||||||||||||||||
| Purchases | 179,444 | 400 | 75 | — | — | ||||||||||||||||||||||||
| Proceeds from sales | (42,997) | (5) | — | (3,010) | (10,898) | ||||||||||||||||||||||||
| (Amortization)/accretion, net | (3,045) | — | — | (437) | (428) | ||||||||||||||||||||||||
| Net realized gains (losses) | 1,145 | 3 | — | 727 | 3,403 | ||||||||||||||||||||||||
| Change in net unrealized gains (losses) | (6,767) | 30 | (19) | (440) | (2,353) | ||||||||||||||||||||||||
| Transfers: | |||||||||||||||||||||||||||||
| Transfers into level 3 | 14,566 | — | — | — | — | ||||||||||||||||||||||||
| Transfers out of level 3 | (44,323) | — | — | — | — | ||||||||||||||||||||||||
| Ending balance as of December 31, 2024 | $ | 103,624 | $ | 428 | $ | 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 December 31, 2024, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2024. For Level 3 financial instruments held by the Company as of December 31, 2024, change in net unrealized gains (losses) of $(6.0) million, $30 thousand, and $(19) thousand for the year ended December 31, 2024 relate to CLOs, corporate debt, and corporate equity, respectively.
At December 31, 2024, the Company transferred $44.3 million of assets from Level 3 to Level 2 and $14.6 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.
Year Ended December 31, 2023:
| (In thousands) | Non-Agency RMBS | Agency RMBS | CLOs | ||||||||||||||
| Beginning balance as of December 31, 2022 | $ | 11,834 | $ | 4,085 | $ | — | |||||||||||
| Purchases | 4,141 | — | 5,465 | ||||||||||||||
| Proceeds from sales | (5,058) | (1,484) | — | ||||||||||||||
| Principal repayments | (226) | (382) | — | ||||||||||||||
| (Amortization)/accretion, net | (379) | (653) | 102 | ||||||||||||||
| Net realized gains (losses) | (228) | (217) | — | ||||||||||||||
| Change in net unrealized gains (losses) | 799 | 276 | 34 | ||||||||||||||
| Transfers: | |||||||||||||||||
| Transfers into level 3 | — | 1,848 | — | ||||||||||||||
| Transfers out of level 3 | (607) | (311) | — | ||||||||||||||
| Ending balance as of December 31, 2023 | $ | 10,276 | $ | 3,162 | $ | 5,601 | |||||||||||
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 December 31, 2023, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2023. For Level 3 financial instruments held by the Company as of December 31, 2023, change in net unrealized gains (losses) of $0.4 million, $0.6 million, and $34 thousand for the year ended December 31, 2023 relate to non-Agency RMBS, Agency RMBS, and CLOs, respectively.
At December 31, 2023, the Company transferred $0.9 million of assets from Level 3 to Level 2 and $1.8 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.
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:
Range | ||||||||||||||||||||||||||||||||||||||
Description | Fair Value | Valuation Technique | Significant Unobservable Input | Min | Max | Weighted Average(1) | ||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||
| CLOs | $ | 73,807 | Market quotes | Non-Binding Third-Party Valuation | $5.00 | $100.75 | $61.98 | |||||||||||||||||||||||||||||||
| 59,616 | Discounted Cash Flows | |||||||||||||||||||||||||||||||||||||
| 133,423 | Yield(2) | 3.5% | 76.2% | 16.3% | ||||||||||||||||||||||||||||||||||
| Agency RMBS–Interest Only Securities | 2 | Option Adjusted Spread ("OAS") | LIBOR OAS(3) | 1,007 | 1,007 | 1,007 | ||||||||||||||||||||||||||||||||
| Corporate equity | 56 | Discounted Cash Flows | Yield | 18.5% | 22.6% | 20.2% | ||||||||||||||||||||||||||||||||
| Corporate debt | 434 | Discounted Cash Flows | Yield | 8.7% | 43.4% | 16.6% | ||||||||||||||||||||||||||||||||
(1)Averages are weighted based on the fair value of the related instrument.
(2)Excludes $1.3 million of CLOs which have estimated yields greater than 100%. Including such positions our weighted average yield would be 18.1%.
(3)Shown in basis points.
Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments. For those instruments valued using discounted cash flows, such estimates of future cash flows may incorporate projections of interest and principal payments, fee rebates, credit losses, and redemptions. For those assets valued using the LIBOR Option Adjusted Spread, or "OAS," valuation methodology, cash flows are projected using management's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates (which are calculated by using an assumed spread over projected Secured Overnight Financing Rates, or "SOFR" rates) implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset.
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 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 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 17,375 | $ | 17,375 | $ | 31,840 | $ | 31,840 | $ | 38,533 | $ | 38,533 | |||||||||||||||||||||||
| Due from brokers | 4,308 | 4,308 | 21,517 | 21,517 | 3,245 | 3,245 | |||||||||||||||||||||||||||||
| Reverse repurchase agreements | — | — | 23,000 | 23,000 | — | — | |||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Repurchase agreements | 517,538 | 517,538 | 562,974 | 562,974 | 729,543 | 729,543 | |||||||||||||||||||||||||||||
| Due to brokers | 914 | 914 | 30,671 | 30,671 | 54,476 | 54,476 | |||||||||||||||||||||||||||||
Cash and cash equivalents includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and cash held in money market accounts, which are liquid in nature and for which fair value equals the carrying value; such assets are considered Level 1 assets. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items approximates carrying value and such items are considered Level 1 assets and liabilities. The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value due to their short term nature. Repurchase agreements and reverse repurchase agreements are classified as Level 2 assets and liabilities based on the adequacy of the collateral and their short term nature.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jun 23, 2025 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 12, 2024 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.