Ellington Financial Inc. Reports Third Quarter 2026 Results

OLD GREENWICH, Conn.--(BUSINESS WIRE)--Ellington Financial Inc. (NYSE: EFC) ("we") today reported financial results for the quarter ended September 30, 2026.

Highlights

• Net income attributable to common stockholders of $40.4 million, or $0.31 per common share, including unallocated Corporate/Other income and expense items.
  • $61.1 million, or $0.47 per common share, from the investment portfolio segment.
  • $12.5 million, or $0.10 per common share, from the Longbridge segment.
• Adjusted Distributable Earnings¹ of $58.0 million, or $0.45 per common share, including incentive fee expense of $0.9 million, or $0.01 per common share, and other unallocated Corporate/Other income and expense items.
  • $77.6 million, or $0.60 per common share, from the investment portfolio segment.
  • $8.6 million, or $0.07 per common share, from the Longbridge segment.
• Book value per common share of $13.53 as of September 30, 2026, including the effects of dividends of $0.39 per common share for the quarter.
• Recourse debt-to-equity ratio² of 2.2:1 as of September 30, 2026. Including all recourse and non-recourse borrowings, which primarily consist of securitization-related liabilities, debt-to-equity ratio of 9.4:1².
  • 25% of total recourse borrowings² are long-term and non-mark-to-market.
  • 17% of total recourse borrowings² are unsecured.
  • Weighted average remaining term of repo borrowings² is 8.9 months.
• Total unencumbered assets³ of $1.92 billion, consisting of cash and cash equivalents of $269.5 million and other unencumbered assets of $1.66 billion as of September 30, 2026.
• Issued 2,496,140 common shares under the ATM program at an average price of $13.61 per share, during the quarter. Subsequent to quarter end, repurchased 329,045 shares at an average price of $11.44 per share.⁴
• Issued $150 million of 7.375% senior unsecured notes due 2030 in an add-on offering, bringing the series to $550 million outstanding.

Third Quarter 2026 Results

“Ellington Financial delivered strong results in a challenging market. Despite rising interest rates, and widening yield spreads late in the quarter, we generated GAAP net income of $0.31 per share and an annualized economic return of 9.4%, preserved book value per share, and produced adjusted distributable earnings in excess of our dividends,” said Laurence Penn, Chief Executive Officer and President.

“We benefited from meaningful contributions from retained tranches from non-QM and Agency-eligible securitizations, commercial mortgage bridge loans, and corporate credit. Our loan originator investments, particularly LendSure, delivered standout results. Longbridge also contributed positively, as higher origination volumes and hedging gains outweighed narrower origination margins and lower proprietary securitization gains. Credit performance remained strong across the portfolio, and our interest rate hedges and credit hedges successfully cushioned the impact of late-quarter volatility.

“In September, we issued $150 million of senior unsecured notes at a yield spread over Treasuries that was approximately 70 basis points tighter than last year’s issuance, supported by strong institutional demand. The offering proved well timed, providing additional dry powder ahead of the late-quarter market selloff and advancing our long-term strategy to reduce reliance on secured, mark-to-market financing. Prior to the offering, Moody’s changed our rating outlook to Positive, citing our stronger funding profile, solid earnings, and improving asset quality.

“Our ample liquidity, together with proceeds from the notes offering and capital released through securitizations, supported meaningful growth in our loan portfolios. Our residential loan portal continues to attract a broader seller base, connecting us with 57 sellers and generating $1.6 billion in loan purchases during the quarter, which complemented loan flow from Longbridge and other channels. We also completed our acquisition of a controlling interest in Statebridge, a diversified loan servicer, which should enable us to apply our data and workout expertise more directly to delinquent loans and REO, with the goal of further improving loss mitigation and enhancing recoveries throughout the credit cycle.

“In July and August, we raised common equity at book value under our ATM program. Then, we repurchased common stock accretively over several days following quarter end, after our common stock price had dropped to approximately 85% of our most recently reported book value per share. The opportunity was brief, limiting our repurchases to just under $4 million. Under normal market conditions, should similarly accretive repurchase opportunities arise again, we would expect to take advantage of them.

“Looking ahead, our diversified business model and proprietary sourcing channels, together with our flexible balance sheet and disciplined risk management, should position us well to capitalize on the attractive investment opportunities that we see developing in the wake of the recent spikes in interest rates and volatility.”

Financial Results

Investment Portfolio Segment

The investment portfolio segment generated net income attributable to common stockholders of $61.1 million in the third quarter.

The total adjusted long portfolio⁵ increased by 4.5% sequentially, to $4.70 billion as of September 30, 2026. The increase was driven by net purchases of residential transition loans, closed-end second lien loans, Agency-eligible residential mortgage loans, prime jumbo residential mortgage loans, commercial mortgage bridge loans, and a larger portfolio of retained RMBS. These increases were partially offset by the impact of continued securitization activity and a smaller Agency RMBS portfolio.

Key Highlights⁶:

• Net interest income remained robust, while net gains on hedges more than offset net realized and unrealized losses. Earnings from unconsolidated entities also contributed to the positive results.
• Strong performance across several strategies, led by retained tranches from securitizations of non-QM and Agency-eligible loans, commercial mortgage bridge loans, and equity investments in loan originators, particularly LendSure. Additional positive contributions from retained tranches of closed-end second lien loan securitizations, non-Agency RMBS, CLOs, and corporate debt and equity.
• These contributions were partially offset by negative results in warehoused non-QM whole loans, residential transition loan retained tranches, CMBS, and residential and commercial REO.
• Strong credit performance across our loan businesses, with sequentially lower 90-day delinquency rates and continued low life-to-date realized loan losses.

During the quarter, the net interest margin⁷ on our investment portfolio increased to 3.55% from 3.36%, as higher asset yields were only partially offset by higher funding costs. We also benefited from modestly higher positive carry on our interest rate swaps, with our weighted average receive rate continuing to exceed our weighted average pay rate.

During the quarter, we acquired a controlling interest in Statebridge Company, LLC ("Statebridge"), a diversified loan servicer. As of September 30, 2026, Statebridge serviced approximately 14,700 loans with an aggregate unpaid principal balance ("UPB") of $1.9 billion, nearly all for third-party clients, comprising approximately 3,500 non-QM and RTL loans with $1.1 billion of UPB, approximately 4,900 qualifying-mortgage loans with $0.6 billion of UPB, and approximately 6,300 consumer installment and commercial mortgage loans with $0.2 billion of UPB.

Longbridge Segment

The Longbridge segment reported net income attributable to common stockholders of $12.5 million, compared with $30.2 million in the second quarter. Adjusted Distributable Earnings were $8.6 million, compared with $28.9 million in the second quarter. The sequential decline primarily reflected narrower origination margins and reduced proprietary reverse mortgage securitization gains.

Longbridge originated $676.3 million of loans during the quarter, up 36% year over year, contributing to a 59% sequential increase in the net Longbridge portfolio⁵ to $1.0 billion as of September 30, 2026. Much of this increase was reversed upon the October settlement of a proprietary reverse mortgage loan securitization that priced in September.

Key Highlights⁶:

• Positive contribution from originations, driven by sequentially higher origination volumes and net gains from a proprietary reverse mortgage loan securitization priced during the quarter, partially offset by origination margin compression amid higher interest rates.
• Positive contribution from servicing, reflecting strong tail securitization executions, steady base servicing net income, and gains on MSR-related hedges, partially offset by a mark-to-market loss on the HMBS MSR.
• Significant net gains on "enterprise" interest-rate hedges intended to mitigate the potential impact of higher interest rates on origination profits.
• Net unrealized loss on the retained tranches of consolidated proprietary reverse mortgage loan securitization trusts, driven by revised home price projections.
• Achieved a quarterly record HMBS market share of 31%, ranking as the second-largest issuer in the market, according to Bloomberg.

Corporate/Other Summary

The net loss in Corporate/Other narrowed quarter over quarter, primarily driven by a smaller combined net loss on our unsecured debt and interest rate hedges. Higher interest rates during the third quarter resulted in losses on the fixed receiver interest rate swaps used to hedge the fixed payments on our unsecured notes and preferred equity. These losses exceeded the net gains on our unsecured notes.

Our unsecured notes generated mark-to-market gains as a result of higher interest rates, although this was partially offset by credit spread tightening on our existing notes, reflecting the tighter pricing achieved on our September add-on offering. Related debt issuance costs were fully expensed at issuance. We also recorded a realized loss on the par redemption of our 6% senior notes, which were carried at a discount to par. Finally, results reflected a higher income tax expense.

Investment Portfolio⁽¹⁾

The following table summarizes our long investment portfolio holdings as of September 30, 2026 and June 30, 2026:

Longbridge Portfolio

Longbridge originates reverse mortgage loans, including (i) home equity conversion mortgage loans, or "HECMs," which are insured by the FHA, and (ii) "proprietary reverse mortgage loans," which are not FHA-insured. HECMs are eligible for inclusion in GNMA-guaranteed HECM-backed MBS, or "HMBS." Upon securitization, the HECMs remain on our balance sheet under GAAP. We have securitized certain proprietary reverse mortgage loans originated by Longbridge and have retained certain related securitization tranches in compliance with credit risk retention rules. Longbridge has typically retained the MSRs associated with the loans it has originated. Longbridge also originates home equity lines of credit, or "HELOCs," designed for homeowners aged 62 or older.

The following table summarizes loan-related assets⁽¹⁾ in the Longbridge segment as of September 30, 2026 and June 30, 2026:

The following table summarizes Longbridge's origination volumes by product and channel for the three-month periods ended September 30, 2026 and June 30, 2026:

In accordance with U.S. GAAP, HECM loans remain on our balance sheet after securitization. The carrying value of the HMBS assets net of the HMBS liabilities, approximates the value of the HMBS MSR. The following table presents a rollforward of the HMBS MSR for the three-month periods ended September 30, 2026 and June 30, 2026:

The following table presents the net profit (loss) related to the HMBS MSR, as discussed above, for the three-month periods ended September 30, 2026 and June 30, 2026:

The following table presents a rollforward of our purchased MSRs and MSRs retained on certain proprietary reverse mortgage loans, which are reported on our Condensed Consolidated Balance Sheet as Mortgage servicing rights, at fair value, for the three-month periods ended September 30, 2026 and June 30, 2026:

The following table presents the net profit (loss) on our MSRs, as discussed above, for the three-month periods ended September 30, 2026 and June 30, 2026:

Financing

Key Highlights:

• Issued $150 million of 7.375% senior unsecured notes due 2030 in an add-on offering, bringing the series to $550 million outstanding.
• Repaid $37.75 million of 6% unsecured notes, which matured on August 1, 2026.
• Recourse Debt-to-Equity Ratio, excluding borrowings collateralized by U.S. Treasury securities and adjusted for unsettled purchases and sales, increased to 2.2:1 as of September 30, 2026 from 1.9:1 as of June 30, 2026. This increase reflected the net increase in unsecured notes outstanding, as well as an increase in warehouse borrowings for loans awaiting securitization. The effect of higher recourse borrowings on the ratio was partially offset by securitization activity and higher total equity.
• Overall Debt-to-Equity Ratio, excluding borrowings collateralized by U.S. Treasury securities and adjusted for unsettled purchases and sales, increased to 9.4:1 as of September 30, 2026 from 9.2:1 as of June 30, 2026.

The following table summarizes our outstanding borrowings and debt-to-equity ratios as of September 30, 2026 and June 30, 2026:

Investors:
Ellington Financial
Investor Relations
(203) 409-3575
info@ellingtonfinancial.com

Or

Media:
Amanda Shpiner/Grace Cartwright
Gasthalter & Co.
for Ellington Financial
(212) 257-4170
ellington@gasthalter.com