Steven Bavaria's questions to Eagle Point Credit Company Inc (ECC) leadership • Q1 2025
Question
Steven Bavaria asked how Eagle Point accounts for future loan losses, questioning if the inability to create reserves like a traditional bank leads to a back-ending of losses that could make distributions function like a return of capital annuity.
Answer
CEO Thomas Majewski detailed the differences between GAAP, tax, and cash accounting. He explained that for GAAP purposes, a provision for future losses is embedded in the effective yield calculation, creating a reserve. For tax purposes, losses are realized on a cash basis, which can result in distributions being classified as a return of capital. He stressed that cash flow is the primary driver and remains robust, ensuring the ability to pay distributions regardless of accounting treatment.