EFC

Image source: The Motley Fool. Friday, Aug. 7, 2026 at 11:00 a.m. ET Associate General Counsel and Secretary - Alaael-Deen Shilleh Chief Executive Officer - Laurence Penn Co-Chief Investment Officer - Mark Tecotzky Chief Financial Officer - J.R. Herlihy Operator: Good morning, ladies and gentlemen. Welcome to the Ellington Financial Second Quarter 2026 Earnings Call. Today's call is being recorded. [Operator Instructions] I will now turn the call over to Mr. Alaael-Deen Shilleh, Associate General Counsel and Secretary. Please go ahead, Mr. Shilleh. Alaael-Deen Shilleh: 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 detailed in our annual and quarterly reports filed with the SEC. Actual results may differ materially from these statements, so they should not be considered to be predictions of future events. The company undertakes no obligation to update these forward-looking statements. Joining me today are Larry Penn, Chief Executive Officer of Ellington Financial; Mark Tecotzky, Co-Chief Investment Officer; and J.R. Herlihy, Chief Financial Officer. Our second quarter earnings conference call presentation is available on our website, ellingtonfinancial.com. Today's call will track that presentation and all statements and references to figures are qualified by the important notice and end notes in the presentation. With that, I'll hand it over to Larry. Laurence Penn: Thanks, Alaael-Deen. Good morning, everyone, and thank you for joining us today. I'll begin on Slide 3 of the presentation. Ellington Financial delivered yet another terrific quarter, continuing the momentum we have built over the past several years. Strong performance across our diversified platform once again drove strong GAAP earnings, adjusted distributable earnings well above our dividend, and also drove a further increase in book value per share. For the quarter, we generated GAAP net income of $0.43 per share, ADE of $0.60 per share, and an annualized economic return of 13.6%. These results reflected excellent securitization execution, continued outstanding results at Longbridge, solid contributions from our other loan origination partners and continued strong credit performance across our loan portfolios. Meanwhile, the financing spreads on our credit lines continue to narrow, which is providing an additional tailwind to our results. Importantly, all these drivers reinforce one another. Strong loan sourcing supports capital deployment and securitization volume. Through our securitization executions, we create attractive retained investments that help build our future earnings power. We release capital for redeployment, and we replace short-term financing with more stable non-mark-to-market funding. Moreover, our securitizations benefit greatly from increasing scale, as our larger and more frequent transactions continue to expand our investor base and have improved our execution levels over time. Meanwhile, strong loan credit performance supports the yields on our retained investments and also sustains and broadens the institutional investor demand for our securitizations. Finally, the profitability and market share growth of our originator affiliates contribute directly to our earnings, while also expanding the flow of loans available to our investment portfolio. We saw this dynamic play out repeatedly during the quarter. Ellington's proprietary residential loan portal, where we lock in loans for more than 40 unique sellers, is now generating more than $15 million of loan purchases per day for at a pace of around $4 billion annually. This portal supplied a significant portion of the approximately $2 billion of loans we securitized during the quarter. And of course, we have Longbridge, which supplies their expanding pipeline of proprietary reverse mortgage loans for our investment and securitization. Foundational to all of this is Ellington's well-known and long-standing focus on proprietary research, data, and modeling capabilities. A full 20% of Ellington's employees are dedicated to research and technology, and recent advances in AI are further enhancing the output of that team. Ellington's research and analytics helps shape the loans we originate, the underwriting standards and loan programs we support, the risks we choose to retain and those we choose to offload or hedge, and the way we manage our liquidity. Some of this is clearly visible in our credit statistics, as shown on Slide 14. As you can see on that slide, inception to date cumulative realized credit losses were a mere 17 basis points on approximately $20.4 billion of residential mortgage loan fundings and just 39 basis points on more than $2.5 billion of commercial mortgage bridge loan originations. Keep in mind, these are cumulative loss amounts, with the annualized ratios being far lower. This credit performance spans multiple market cycles, including COVID, the 2022 interest rate sell-off, and the more recent commercial real estate downturn, and reflect not only the quality of our underwriting at loan origination, but also the effectiveness of our asset management and loan workout capabilities. The same discipline is evident in our securitizations. Our EFMT non-QM shelf has continued to rank among the strongest in its cohort for both low delinquencies and controlled prepayment speeds. These drivers enhance the yields on the retained tranches we invest in, while also helping reinforce the liquidity and reputation of the EFMT franchise. They also demonstrate how Ellington's competitive advantage in research and underwriting can translate into stronger credit outcomes and better investment performance. Longbridge had another standout quarter. Originations were up 38% year-over-year. Margins remain healthy, securitization executions improved, and servicing continued to add meaningfully to the bottom line. Longbridge remains one component of EFC's much broader platform, but its performance demonstrates the value that can be created when sourcing, analytics, financing, securitization, and servicing all work together. With that, please turn to Slide 5, and I'll hand the call over to J.R. to walk through our financial results in more detail. JR? JR Herlihy: Thanks, Larry. Good morning, everyone. I'll begin on Slide 5 with our earnings summary, then review the principal drivers of the quarter, several disclosure enhancements we've made in our portfolio, and balance sheet activity. For the second quarter, EFC reported GAAP net income of $0.43 per common share on a fully marked-to-market basis and adjusted distributable earnings of $0.60 per share. On Slide 5, you can see the contribution to GAAP net income by segment, and on Slide 6, the corresponding contribution to ADE. Our quarterly results again demonstrated the strengths of our underlying businesses with continued excellent performance across the investment portfolio and another outstanding quarter from Longbridge. Looking ahead, we continue to see broad support for ADE reinforced by several factors, including attractive net interest margins, particularly on our portfolio of retained securitization tranches, robust credit performance, ample liquidity available for deployment, and of course, continued sizable earnings contributions from Longbridge. Turning to the investment portfolio. Net interest income increased significantly quarter-over-quarter, reflecting attractive asset yields and a higher average portfolio size. Earnings from unconsolidated entities also remain strong, driven by solid results in our equity stakes and loan originators and commercial mortgage bridge loans accounted for as equity method investments. Overall performance was excellent across the investment portfolio, led by our residential credit strategies, while gains on hedges more than offset net realized and unrealized losses. Credit performance across our loan businesses also remained excellent, with exceptionally low life-to-date realized credit losses across both our residential and commercial mortgage loan portfolios, consistent with the statistics that Larry highlighted. You'll notice several changes to our disclosures this quarter. These changes simplify certain parts of the presentation while adding detail where we believe it will be most useful to investors. First, we have incorporated Agency MBS into the broader investment portfolio disclosures throughout the presentation. In years past, Agency represented a substantially larger allocation of our capital, but we have since rotated much of that capital into credit strategies where we see stronger return opportunities and clearer competitive advantages. Given the smaller role today played by Agency MBS, we believe that the revised presentation better reflects how we evaluate and allocate capital across the portfolio. Second, we have expanded our Longbridge disclosures. Starting on Slide 9, we now separately present HECM and proprietary reverse mortgage origination volumes, including the channel composition of each, providing greater visibility into the scale and growth of both product lines. We have also added submission volumes to this slide. Because loan fundings are preceded by loan submissions, we believe that submissions provide a useful leading indicator of future origination volume. As you can see on Slide 9, second quarter submissions were up substantially, sequentially, supporting a healthy pipeline entering the second half of the year. That momentum is continuing with July 2026 marking Longbridge's highest ever month for prop reverse mortgage originations and submissions. Finally, turning to Slide 10, you can see that we are now presenting separate roll-forwards for HMBS MSRs and prop reverse mortgage MSRs together with earnings generated by those. The roll-forwards separately identify overall MSR values, new production, revenue, runoff, and changes in fair value, providing greater visibility into changes in MSR value and the components of net servicing profits. We believe that this additional detail should make the Longbridge business easier for investors and analysts to understand and model. Turning to Longbridge's results, please turn back to Slide 8. Longbridge delivered another outstanding quarter across both originations and servicing. It originated approximately $590 million of loans, a 38% year-over-year increase. Prop reverse represented approximately 54% of volume and reached record levels, while HECMs represented the remaining 46%. Originations at Longbridge benefited from strong volumes, healthy margins, and gains from the 2 proprietary reverse mortgage securitizations completed during the quarter. Those transactions represented Longbridge's strongest financing execution to date for this product, as measured by overall debt spreads. Servicing also made a substantial contribution at Longbridge, reflecting both steady base servicing income and continued strong execution on sales of HECM tail pools. Consistent with Ellington's broader risk management approach, we maintain enterprise-level interest rate hedges in the Longbridge segment that are designed to offset some of the pressure that higher interest rates can put on mortgage origination volumes and margins. Despite the increase in rates during the quarter, Longbridge's origination business remained highly profitable, while the enterprise hedges also generated gains. That combination was unusually favorable in the second quarter. All else equal, we should generally expect origination profitability and interest rates to move inversely, so these hedges should help stabilize the segment's earnings across different interest rate environments. Turning next to portfolio activity, please turn to Slide 7. Our adjusted long investment portfolio increased modestly during the quarter, as growth in residential transition loans, commercial mortgage bridge loans, and retained RMBS more than offset the impact of continued securitization activity. In other words, asset sourcing kept pace with our robust securitization activity. Our shorter-duration loan portfolios continue to generate significant principal repayments, including payoffs providing internally generated capital for redeployment into new opportunities. Turning to financing, our focus remains on improving the durability, diversification, and cost of our liability structure. As shown on Slide 11, at quarter end, the weighted average borrowing rate on our recourse borrowings was 5.5%, essentially unchanged from the prior quarter, contributing to a solid overall net interest margin of 336 basis points, which was also roughly unchanged quarter-over-quarter. Approximately 29% of our recourse borrowings were long-term and non-mark-to-market, while 17% consisted of unsecured debt. In addition, the weighted average remaining term of our repo borrowings increased to 9.3 months, approximately double the level in mid-2025, reducing near-term refinancing risk and providing greater funding certainty. During the quarter, we extended and/or improved terms on several warehouse facilities, while adding a new financing relationship covering multiple residential mortgage products. Our securitization program continued replacing shorter-term mark-to-market financing with longer-term non-recourse financing. Through the first half of 2026, we securitized approximately $4 billion unpaid principal balance compared to $4.4 billion UPB during all of 2025. We continue to be encouraged by the market's reception to our unsecured debt. Our outstanding notes have recently traded at a premium, despite higher interest rates, reflecting the progress we've made strengthening our balance sheet and funding profile. We believe this positions us well to continue increasing the use of unsecured financing as well as preferred equity over time as market conditions permit. At quarter end, our recourse debt-to-equity ratio remained 1.9x to 1x, while our overall debt-to-equity ratio increased modestly to 9.2x to 1x, primarily reflecting additional non-recourse borrowings associated with recent securitizations. Turning now to our hedging portfolio on Slide 17. We continue to manage interest rate, mortgage basis, and credit risks through a diversified set of instruments designed to protect book value while preserving our ability to capitalize on attractive opportunities. As you can see on Slide 18, during the quarter we increased our credit hedges as market conditions changed and as the size and characteristics of our portfolio evolved. Turning to corporate other. Aside from recurring items, we also recognize unrealized losses in our corporate other category. As has been our long-standing practice, we carry our outstanding unsecured notes at fair value on the liability side of our balance sheet. With spreads on our debt tightening during the quarter, the increases in the prices of our outstanding debt led to the recognition of an unrealized loss. Also in this category, higher interest rates led to unrealized losses on the fixed receiver interest rate swaps we used to hedge the fixed payments on our unsecured notes and preferred equity. At quarter end, book value per share increased by $0.05 to $13.61 after $0.39 per share in dividends, and our annualized compounded economic return for the quarter was 13.6%. With that, I'll turn the call over to Mark. Mark Tecotzky: Thank you, J.R. Despite rising interest rates, geopolitical uncertainty, and tremendous volatility in energy prices and equity markets, the mortgage and structured credit markets remained constructive. We had a favorable mortgage origination environment and relatively stable credit spreads, and we were able to execute our business plans consistently this quarter. Across our businesses, we continue to responsibly grow volumes, gain market share, expand our sourcing networks, and broaden our product offerings. Put simply, we bought a lot of loans, priced a lot of deals, and in so doing created a lot of attractive investments for EFC's portfolio. We also continue to support and collaborate closely with the growing portfolio of companies in which we've made equity investments. As a group, they have had phenomenal earnings this year, and their origination volumes have helped drive our securitization machine. On the commercial mortgage side, much of our loan sourcing comes through our affiliated originator, Sheridan Capital, which continues to grow its footprint and client base. We are helping institutionalize the business by expanding its capital markets capabilities and strengthening its operational infrastructure, applying many of the same principles that have served us so well with our affiliated residential mortgage originators. This is exactly the ecosystem we've been building. Our consistent demand for high-quality loans supports the growth and profitability of our origination partners. Those loans then become the raw material for our securitization platform, creating attractive retained investments for EFC's portfolio while providing institutional investors with high-quality securities. As Larry discussed earlier, those capabilities increasingly reinforce one another. Both net income and ADE again exceeded the dividends this quarter, while we continue to keep recourse borrowings low and organically created investments continue to perform well. We also continue investing in technology and automation while pushing for deeper integration across our businesses. On the residential mortgage side, with the help of the loan portal that Larry mentioned, we continue streamlining our channel connecting creditworthy borrowers seeking home financing with the vast reservoir of institutional capital looking for investment grade bonds. At Longbridge, our investments in technology, process improvements, and AI-enabled workflow look like they're paying off handsomely. For example, since January '23, the number of funded loans per operations employee has more than doubled, demonstrating how these investments are improving efficiency while supporting continued growth. This past quarter, we continued our disciplined portfolio growth while maintaining high securitization volumes. With bigger portfolios inevitably come some delinquencies. We put substantial resources into resolving residential mortgage delinquencies optimally for the company while seeking the best practical outcomes for borrowers experiencing financial difficulty. On the residential side, we are close to completing the acquisition of a loan servicer. We have redeployed substantial internal resources to help build what we believe can be a best-in-class residential special servicing platform with specialized processes for managing delinquent loans across multiple mortgage products. That acquisition should close in Q3. We believe that controlling our own special servicer will unlock significant value for us as we align incentives, share valuable data, and refine our workout expertise over time. We have a lot to build, but whether it's managing construction projects we take over from RTL borrowers or even just non-QM loans where borrowers can no longer pay their mortgage debt, we know that special servicing is going to be important to preserving value and delivering returns through market cycles. Stepping back, we are seeing an expansion of the addressable market for our business model. More and more mortgage loans are ultimately finding their way into the private label market rather than the GSEs. We expect approximately $250 billion of new issue non-agency mortgage securitizations this year. Larger new issue volumes have dramatically improved liquidity across the asset class, attracting many new investors over the past year. As liquidity continues to improve, more institutional investors enter the market, which in turn supports additional issuance and better execution. That virtuous cycle has been a meaningful tailwind for our securitization platform and for the broader private label market. We see these trends as ideally suited for integrated private sector capital platforms like Ellington Financial that can source, analyze, and securitize loans efficiently. Ellington has had a front row seat throughout this evolution, having been an early mover in securitizing non-QM, closed-end second liens, agency eligible loans, and of course proprietary reverse mortgages. As these markets continue to grow, we will continue investing in the people, technology, and infrastructure needed to support them, while continually working to improve efficiency across our platform. I'd like to finish with some thoughts on the forward MSR market, where we have one large investment that we've held since our acquisition of Arlington back in 2023. The market value of that MSR has increased significantly this year, even much more than you'd expect with the rise in interest rates we've seen. One factor at play is that for banks, the market is expecting that regulators will loosen the caps on how much Tier 1 bank capital can be in MSRs. If that happens, banks could flip from being net sellers of MSRs into being net buyers. The second factor at play is that mortgage companies with large servicing and origination arms are bidding up MSRs. Not only can those companies add mortgage servicing rights to their existing portfolio more efficiently than others, but they can also cross-sell a variety of products to what would become new servicing clients. When servicing low coupons in particular, home equity loans present obvious cross-selling opportunities. We all saw the feverish bidding war for Two Harbors that recently came to an end, and it was a large mortgage company as opposed to a pure investor that won that contest. Our forward MSR is also backed by low-coupon loans, and while we're pleased with the appreciation we've seen on that asset, we're better sellers than buyers at these levels from an investment standpoint. Now back to Larry. Laurence Penn: Thanks, Mark. On last quarter's earnings call, I concluded with the observation that Ellington Financial was firing on all cylinders. I am happy to report that we still are, with that momentum continuing into the third quarter. I firmly believe that EFC's sustained strong performance reflects the capabilities and investments we've been building over many years, rather than the success of any single recent initiative. Ellington's investment in research, analytics, technology, and disciplined risk management dates back to the firm's founding more than 30 years ago and has been central to EFC since its formation. Over the past decade, we've steadily expanded the ways we apply those capabilities by investing in strategic originator partnerships, building a best-in-class securitization platform, expanding our proprietary sourcing capabilities, and strengthening our funding profile. As those investments have reached greater scale, their benefits have increasingly reinforced one another across the business. We've now covered our dividend for 8 consecutive quarters and counting, reflecting the increase in contribution of those long-term investments to our earnings. Looking ahead, we'll continue focusing on the things we can control, disciplined underwriting, thoughtful capital allocation, continued investment in technology and our platform, and maintaining a strong, flexible balance sheet. We also intend to be opportunistic issuers of unsecured debt and preferred equity when market conditions are favorable, further diversifying our funding sources and enhancing our financial flexibility. We are aiming for a virtuous cycle of stronger balance sheets and improved credit ratings. As we've emphasized throughout today's call, the strength of our platform is not in any single business or investment strategy. Rather, it is the way our research, relationships, technology, and capital markets capabilities reinforce one another to create an increasingly diversified and resilient earning stream for our shareholders. And finally, a word about our adjusted distributable earnings and dividend. As strong as ADE was in the first quarter, it was even stronger in the second quarter at $0.60 per share compared to our $0.39 quarterly dividend. By out-earning the dividend, not only on an ADE basis, but on a GAAP basis as well, we've been able to build book value per share, and we think that's really important. For now, we think our $0.13 monthly dividend remains appropriate. With ADE running so strong, we could see upward pressure on our dividend based on the REIT distribution requirements. For now, however, we believe that continuing to build book value per share is the best use of our excess earnings and that our current dividend remains appropriate. And with that, let's open the floor to Q&A. Operator, please go ahead. Operator: [Operator Instructions] We'll go first this morning to Trevor Cranston with Citizens JMP. Trevor Cranston: On the -- Mark mentioned the pending acquisition of a residential servicer. Can you provide any additional sort of color around that, if that would come with some MSR assets attached or sub-servicing contracts or just any additional color on what that would look like? Laurence Penn: Mark? Mark Tecotzky: Why don't you take that one, Larry? Laurence Penn: Sure. Yes. So, well, first of all, it's a small servicer, single-digit billions of servicing rights. It does have some sub-servicing contracts, as you mentioned. But -- and it's diversified in the sense that it does service many different types of loans. And as we mentioned, we think it's going to close sometime in September. And it's the type of project, let's just call it, where we're going to try to build it as much in our image as we can. So, it's not going to bring any appreciable size of MSRs that are going to have a noticeable impact on our balance sheet, per se, or frankly even our earnings in the beginning. But as Mark said, we have big plans, especially to build out the special servicing aspects of the business. We think they already have some real good expertise in that area, in the special servicing area. And as Mark also mentioned in his script, that's going to be super important to us over time to get the best possible outcomes from our delinquent loans. Mark Tecotzky: Yes, I would just add one thing, Trevor, is that the motivation for this wasn't servicing acquisition. It's a recognition that over the past several years, we used to have a lot of servicing at Rushmore. Rushmore was bought by Mr. Cooper. Now Mr. Cooper is bought by Rocket. We used to have servicing some other platforms that have been absorbed. So it's just a recognition that as our footprint in the market grows and the available third-party special servicing capabilities have been diminished, we think there's a real need for high-touch servicing and we've seen the benefit of building things organically in collaboration with an experienced management team. So it's really -- that was really the motivation for it. Trevor Cranston: Got it. Okay. That makes sense. And then on Longbridge, J.R., in your commentary, you mentioned kind of the expected relationship and impact of higher rates on volumes and margins. Can you give us any sense sort of how Longbridge volume and margins are trending so far early in the third quarter with the new hiring mix? JR Herlihy: Yes. And they've been growing the volumes of prop reverse relative to HECM over the last several quarters. And this quarter we broke out them separately, and you see the prop was a larger percentage than HECM. The reason I start there is we've seen that prop has -- is relatively less sensitive to higher interest rates vis-a-vis HECM. We also have the enterprise hedge in place, which all else equal, higher rates, if it impacts origination volumes, should offset some of that impact. To your question about kind of forward-looking guidance, if you will, on volumes and margins, we did include submissions for the first time in our presentation on Slide 11, I believe -- excuse me, Slide 9. And you can see that submissions in Q2 for loans that are prospectively closing in Q3, $870 million in Q2 versus under $750 million in Q1. You can just see an upward trend we showed over the last 6 quarters. So, I think that should give a good idea of what Q3 may look like. Of course, not all submissions lean to originations, and there's going to be some fallout in those numbers, but I think it bodes well for volumes. In terms of margins, we're not giving Q3 guidance, if you will, on margins. I think a lot of the profits and props have also come through because of securitizations, and we did 2 securitizations of prop loans in Q2. There's always going to be some noise in the profits from the Longbridge segment around the securitization activity and execution. But long story short, I think the submission story is looking positive going into Q3 for Longbridge. Laurence Penn: And let me add 2 things to that. The first is that in terms of margins, right, in the HECM product, the real sort of point of sale, if you will, right is when you securitize into HMBS and those spreads are still quite healthy, quite tight on a historical basis. So that's good. We don't see those moving, frankly. On the prop side, it's really a function of securitization in terms of when we -- technically, those still on balance sheet, but certainly, when we feel like we've, I'll just say, generated a gain on those assets. And again, securitization spreads are still quite healthy. So gain on sale, looking good there. The other -- or just in prop, again, sort of equivalent of gain on sale. The other thing I wanted to mention, when rates go up, the HECM product, the government product, has very, very defined rules in terms of what LTVs, principal limit factors they call things like that, that the government will wrap effectively those loans. The FHA wraps those loans. So the proprietary product, of course, there's -- that's -- you have more flexibility. And what we found is that -- we found that when rates are low, the principal limit factors that are dictated by FHA actually are generally -- are often more competitive than on the prop side. But when rates rise, often, and that's what we're seeing now, is the opposite is true. So we think that from a risk perspective, we think that the government is actually imposing requirements that are probably a little too strict relative to where we think the right economics are. And so we and others in the space are able to take advantage of that and with rates higher, offer products, offer loans that are more attractive, frankly, to customers. So we're actually in some cases seeing the product take some of that market share away from the government product. Operator: We'll go next now to Bose George with KBW. Francesco Labetti: This is Frank Labetti on for Bose. Just sticking on the Longbridge topic, can you maybe discuss an outlook, more normalized earnings run rate or contribution to ADE from Longbridge as you guys continue to gain share and scale that segment? JR Herlihy: Sure. For the last 2 quarters, their contribution to ADE was $0.23 and $0.21. And the average of 2025 was $0.12. The portfolio is growing, origination volumes are growing, the MSR portfolios are growing, and so that kind of recurring base servicing income is growing. There are a few -- I'm trying to unpack the questions. There are a few different components that are important here. If you look at the roll-forwards that were included in the presentation, you can see the net profits from those MSRs are $0.06, $0.065 per share, something like that, meaning that everything else is $0.16, $0.17 per share for the quarter, originations, securitizations, less G&A. I mentioned earlier that there's going to be noise in the segment's results because of securitizations, the number that we do and the execution that we did, 2 this quarter. So the securitization execution has been notably strong in the first 2 quarters of this year. I don't know that $0.17 -- $0.16, $0.17 aside from servicing is the run rate. It's probably a little bit high, but we don't need it to be that high to hit our mid-40s ADE run rate that we had mentioned last quarter. So if it's in the low-mid teens, that's plenty to kind of carry its contribution to the overall EFC earnings stream. Laurence Penn: Yes, I think overall, we're comfortable now. Sure, if we do 2 securitizations in a quarter, like we did just now, we'll see a higher ADE, right? That definitely helped drive the $0.60. But even if we just do one, which I think is a modest goal at this point, we're comfortable guiding into the, let's just call it, the high 40s on ADE. Francesco Labetti: Great. That's very helpful. And then switching to the investment portfolio, you continue to see strong returns there. Given where spreads are now, where do you see the best risk-adjusted return in credit today? And then conversely, where are you maybe least comfortable adding to? Mark Tecotzky: Yes. I guess what I would say is that we look at what's kind of happened not just this year but really the last year, so mid-'25 to now, is that you've seen credit spreads tighten across the board. That's on investment-grade corporates, it's on high-yield bonds, it's in CRT, it's in non-QM investment-grade bonds. And you've seen the same thing happen to residential loan purchases and commercial loan purchases. So what's been supportive of our ADE is the fact that when you securitize, what really drives the economics is that difference between the spreads where you're buying the loans and the spreads where you're buying the -- you're selling the primarily investment grade bonds, right? What's that difference? Because that difference is really what you leverage in the retained pieces the same way -- sort of same way like how a CLO equity works, right? And so that difference has been preserved. So loans are tighter than what they were a year ago, but the bonds we sell are tighter than what they were a year ago. So we're not seeing a big change in expected yield on what we're retaining. So that to us has been very favorable that we're able to grow our portfolio at the same kind of yields where we were growing it a year ago, despite the fact that spreads have tightened. Where we think about pockets of weakness, and this is something we focus on all the time as we sort of parse through the monthly data we get. I think it's the same story you've seen a while ago. Lower FICO scores, right? They all -- any model will have higher delinquencies on lower FICO scores versus higher FICO scores, but that difference has gotten a little bit more elevated in the past year. I think we also are watching closely cash-out refinancing. So borrowers that are choosing to cash out in this environment of relatively high interest rates, that can also be a signal. And so we have kept our consumer portfolio relatively small. That used to be a bigger part of our pie chart, if you go back probably, 10, 12 years, and so we've seen a little bit of weakness there from time to time over the years, and that's one of the reasons why we've reduced those holdings on a percentage basis. Laurence Penn: Yes. So just to add -- sorry. Mark Tecotzky: No, no. Come on in, Larry. Laurence Penn: Yes, I was just going to say the other sector there where you actually are seeing not just weakness, and we mentioned this earlier in the call, but also you're actually starting to see some supply is in the commercial mortgage space. And there's a lot of non-performing loans out there. And people in one sense, have been waiting for years for some of that to come out. Well, we are actually finally seeing some supply there. I can't say that it's been -- we've made a big move into that yet, but there's not going to be a lot of buyers, we think, especially in the places where we tend to play, which are a lot of the smaller loans, not the $50 million, $100 million plus loans, but in the sub-$50 million, sub-$25 million area. We're hopeful that we could see some supply there at attractive levels. Operator: We'll go next now to Doug Harter with BTIG. Douglas Harter: Can you just talk about how you're thinking -- just given what you just mentioned about kind of the still attractiveness of returns, how you would think about maintaining short duration versus potentially adding some duration to potentially lock in those returns for longer? Has there been any change in your philosophy or how you're thinking about that? Mark Tecotzky: Hey Doug, it's Mark. So one thing I would say is that when we do the securitizations, we're almost always keeping the ability to call the deals. We have the call rights, right? So that represents sort of a longer-term investment and it's sort of like a nice forward investment that can be very profitable if you have a combination of lower interest rates and relatively well-behaved credit spreads. So I think on the RTL, residential transition loans, they're short duration and that's because that's the nature of the risk we wanna take, right? So properties where the renovation is relatively straightforward, it's not really complicated, it shouldn't take a long period of time, and so those ones are short duration, and I think they'll likely to stay that way because that's the risk we like. But your point about seeing attractive spreads on retained securitizations, keeping those call options, it does really lengthen out the -- it doesn't really change the cash flow of the retained pieces, but it gives us one way of participating in tighter market spreads and lower yields in the future, by virtue of having these call options, which I think can have -- we've mentioned -- we didn't talk about it on this call, but I think we mentioned maybe on the previous call. We think those can be tremendously valuable in many different future paths. Laurence Penn: Yes. And if I could add 2 more things. So the first is that, look, in reverse mortgages, those are long-duration assets. So that's a unique situation where we have really good market share in a growing market with a small number of competitors and very attractive returns. So -- but there, we certainly are, we think, locking in spreads for long periods of time. As -- non-QM, as Mark mentioned, right, that's a 30-year mortgage. So again, we're taking a duration there. But it's really important to our business model that we have just high cash flowing assets, including principal as an important component of our portfolio. And as Mark mentioned, whether it's RTL or frankly in commercial as well, we're dealing with, well by definition, RTL, transitional properties and same thing in terms of what we focus on in commercial. And so in those situations, we really strongly prefer having a shorter duration so we have more visibility, not just in terms of what our LTV is when we acquire the asset, but also if we have to resolve the asset. So I think it's really important to our business model, the way we manage our liquidity. Frankly, I think you see it in terms of our debt trades and people want us as a counterparty. That's just really important because it really helps us in terms of managing our liquidity, and that's an essential part of risk management overall. So I think you'll continue to see us have a portfolio that is largely short duration assets, especially in those sectors that I mentioned, but with things like reverse mortgages and others that are longer duration. Douglas Harter: That makes sense. Appreciate it. And then in your prepared remarks, you talked about the benefits of the investments in the operator -- operating companies. As you look at the benefits to the returns, how much of that comes through kind of your stake of the ownership versus comes through in kind of the returns of the investment portfolio of the assets you retain? Laurence Penn: Well, Mark, I'll let you sort of address the asset side. In terms of the stakes, I mean, Longbridge is fully consolidated, and obviously that's broken out. So you can see there, we've talked about how that's been a really nice boost to earnings in ADE, especially based upon their increasing volumes and margins is what's going on in the prop space. In terms of the others, I mean, LendSure has had excellent earnings recently. I mean, it's -- ultimately, J.R., it looks like you've got it right there in terms of the actual numbers. JR Herlihy: Right. So I first want to emphasize that the total investment amount on our balance sheet is more than $5 billion. It's $100 million for all the stakes. Longbridge is consolidated, so it doesn't have goodwill. But all the other stakes, $97 million. LendSure is about a little over half of that. They contribute to GAAP earnings because we mark-to-market the positions, which are typically reflecting what earnings are happening on the underlying originator level. And then the -- we also capture an ADE earnings contributions from the larger originators that are regularly distributing cash. So LendSure, for example, has made distributions to its owners multiples above our original cost basis in the investment and so -- and continues to do so on somewhat of a quarterly basis, these distributions, not every, but the last several quarters it's happened. And quantifying it, the contribution to ADE, the $0.60, something like $0.05, a little bit less than $0.05 is from the originators, so a little bit less than 10%. And that's been, I'd say, pretty steady over the last few quarters. It's certainly adding an element to ADE and kind of further diversification. But the rest of -- so the investment portfolio, the $0.23 came from Longbridge, $0.37 came from everything else, including overhead. The majority of those earnings come from the loans that we buy through the affiliates that we then securitize and we hold residual tranches. Most of that is net interest income, right? And many, not all, but many of the loans that we have on balance sheet are sourced by the LendSures, American Heritages, the Sheridans, our affiliates. So, the vast majority of the earnings contribution comes from the loans that we buy through these agreements, but these guys are hitting above their weight. They're making a real impact on a very modest $100 million out of $5-plus billion. So, kind of 2% of the portfolio is certainly contributing more than 2% of our earnings. Operator: We'll go next now to Marissa Lobo with UBS. Ameeta Lobo Nelson: On non-QM, issuance has been very robust. Can you speak to where EFC is differentiating from peers on their origination focus and how securitization execution has been trending on spread? Mark Tecotzky: Sure. Marissa, it's Mark. I would say, you know, Larry kind of talked about it in his remarks about our relative performance in regards to prepayment speeds and in regards to credit performance. We have always been very focused on prepayment risk because when you are a sponsor on one of these deals and you're a risk retainer and you're keeping the bottom part of it, a lot of your investment, a significant part of your investment is really in IO, right? So we have always focused on loans where we think are going to have the best S-curves, so not prepaid super fast when rates drop. And some of that we get as a function of explicit prepayment penalties. Some of it you just get from aggregation of particular loan attributes. So that's one part of the space we've liked. We've liked purchase money loans, higher FICO, better quality borrowers that are buying a market because -- buying a home because we have seen a little bit of softness in home prices, and we do see where purchasers are willing to buy homes, they're typically getting some kind of concession versus the listing price, which we like. And in terms of performance of non-QM bonds in general, I think they've had where spreads are. We think about it from a modeling standpoint when we bid loans and we think about, what's the right correlation, what's the right spread between IG corporates and investment-grade non-QM bonds? What's the right spread between Agency MBS and non-QM bonds? And I would say, thinking in that framework, we think non-QM bonds are -- they're fairly priced, maybe a little bit on the cheap side. We -- one thing we mentioned in the prepared remarks is that as the whole mortgage 2.0 space has grown to be -- we estimate it will be $250 billion this year. So you're thinking about $5 billion in new issue size a week, right? There's transparency, there's liquidity. There's a lot of data points for investors. There's a chance to put a significant amount of capital to work. Those features are sort of a virtuous cycle and attracting more buyers, right? So if I look at the deals we did, we started doing them 2017, I kind of look at like who was in the order book 2017 versus 2019 versus 2021, 2024, 2026, it keeps growing, right? You keep seeing new entrants in the space, new pools of capital that are finding these bonds attractive relative to corporates, relative to other ABS, relative to Agency MBS and I do think that will continue. They still offer a lot of spread and some of the structural features in the deals that got put in place post-COVID give some extension protections to the bonds. So yes, I think that where they are, they're still relatively attractive priced. And what kind of confirms that to us is seeing continued sophisticated investors enter the space as they're able to now put substantial money to work and they're finding it attractive relative to corporates and other ABS. Laurence Penn: And if I could just add one thing, our portal that we talked about, right? So we're buying, as I mentioned, over $15 million a day. So as you can imagine, in the portal, we have -- think of them like loan level price adjustments, right? Based upon the parameters of the loans that people are submitting into the portal, we're going to penalize or benefit the prices that we're willing to pay for those loans, and that's all funneled through Ellington Research. I mean, it could involve geography. Maybe we are penalizing super jumbo loans more than others. So you're going to see a difference. Obviously, we're buying a lot of loans, but ultimately you will see a difference in the -- what we end up buying in that portal just based upon us having those price adjustments for different attributes. And we're -- we think it's working because you can see it in the prepayment and credit performance of the loans. Ameeta Lobo Nelson: And just on hedging, you mentioned you increased credit hedges as market conditions changed. Can you speak to how you're thinking about hedge construction more broadly under Chair Warsh's framework? And on the credit side, how you're thinking about TBA shorts and CDX sizing from here? Mark Tecotzky: Those are great questions. So we use the hedges on the credit side in 2 fundamental ways. One is, as we are getting close to bringing a deal to market, sometimes we will try to lock in our investment grade execution by buying protection on some of the investment-grade credit indices, because we've done a lot of work on sort of the historical relationship between IG indices and non-QM spreads, and we see a tight correlation there. So it's a way for us to lock in execution and try to protect us from any kind of spread widening that could occur during the 3 or 4 days you're typically marketing a deal. So that's kind of one sort of tactical way we use hedges to preserve, to protect deal execution. Now, the other way is more trying to protect the portfolio if you had an economic shock. So if you had substantially weaker employment or the economy started to go into recession. So then we have a variety of hedges there, some on the commercial side. They could be in high-yield indices, sometimes it could be in an ETF that are designed to cushion us from book value volatility that were to come about from a substantially weakening in the economy. Now on the interest rate side you talked about, you have Kevin Warsh as opposed to Jay Powell and their styles in terms of how they view the benefits of communication, probably the other polar opposites, right? That is less of a factor for us in our hedging framework because we always try to really accurately and closely ring-fence the interest rate risk of our investments. And so you should think about the dividend and the ADE we're generating as really kind of like spreads to SOFR. And we try as best as we can with the hedging instruments available to us to insulate the portfolio from changes in interest rate risk. Now, I will say that said, this style from Warsh, we do expect it can lead to more interest rate volatility as sort of the market might react a little bit more aggressively to numbers because they don't really -- aren't anchored by a Fed guiding them where they plan on their plan for hikes or for cuts. But so far, I guess 2 meetings into Warsh, it's been very manageable for us. Laurence Penn: And if you look at Slide 16 of the presentation, right, that's where we show what we think our interest rate sensitivity is. And you can see on that slide that the way we manage the portfolio, and we always have, is not to try to lean one way or another in terms of what the Fed might do or what interest rates might do. But to be -- look, we're always going to be a little negatively convex, especially because if you look at Slide 16, the row that contains non-Agency RMBS, right, especially non-QM, things like that are going to be somewhat negatively convex. But overall you can see that we do a really good job being quite immunized from whether rates were up or down, lose a little money in sort of an instantaneous shock, but really not very much. I mean a minor, a very small change there you can see at the bottom of the page. Operator: We'll go next now to Crispin Love of Piper Sandler. Benjamin Graham: This is Ben Graham in for Crispin Love. In the release and presentation, you didn't break out the agency contribution to earnings and instead included it within the broader investment portfolio segment. I'm just wondering if this is just driven by the size of agency? I might have missed this, but would you expect agency to decrease further in the coming quarters and if that decision was a function of that outlook? JR Herlihy: Yes, thanks for the question. This is J.R. Yes, you nailed the main reason, its size. The agency portfolio, you see it's now on an invested basis sub-$200 million. On a capital basis, it's -- we haven't broken it out separately, but 1%. Going back several years, those numbers were $2 billion plus and 22% when agency was a much more meaningful part of the portfolio. And the evolution of Ellington Financial with more originator stakes and securitizations and owning loans on balance sheet and kind of the virtuous cycle that the vertical integration we've been developing, that's all in credit. That's where we see better return opportunities and we see a clearer competitive advantage for EFC. So over time we've rotated out of agency and we've also built up from a REIT test perspective, we used to need a big portfolios of agency because we had non-REIT assets in bigger size. We mentioned the consumer is a lot smaller than it used to be. Our corporate investment portfolios are much smaller. So, the evolution has been more toward credit and we haven't needed agency to pass REIT tests either or 40 Act tests. And so now it's part of the investment -- I mean, it's always been part of the investment portfolio, but given its size and modest contribution to the overall earnings, we think it's more appropriately considered as one of several of the diversified strategies within the investment portfolio. So that's how we've kind of -- we're bulking up Longbridge presentation, but at the same time pulling back on the agency because I think all the detail is not as relevant to investors at this point. Operator: We'll go next now to Timothy D'Agostino at B. Riley Securities. Timothy D'Agostino: I appreciate the commentary on the pending acquisition. I guess thinking past that and maybe into 2027, is additional M&A and potential investments into loan originators, is that part of the playbook? And if so, is there any areas you would look to address? Or any color about how you think about additional M&A or investments in originators? Laurence Penn: Sure, yes, absolutely part of the playbook. It's been a great part of our playbook, frankly, for the last, gosh, 12 years, I would say. So, yes, we mentioned the servicer. We also are looking at another, I would say, non-QM focus, but also doing other products as well on the resi side opportunity. We are being shown opportunities on the commercial mortgage side. We mentioned, I think, on our prepared remarks that we have a stake in Sheridan, and they've been a great source of -- not only have they been profitable, but I would say, even more importantly, they've been a great source of loan product for us there. And as I mentioned, we think in the commercial mortgage space we're going to see a lot more stressed and distressed assets coming out. So in all those areas, absolutely. And I would say, J.R. mentioned that right now, the REIT tests are something that are -- we can pass quite easily on the, let's say, the income and assets side. So given that, we could also increase our focus more. Mark mentioned the consumer side. You've also got things on the asset-based finance side as well that we're not really doing much of at all in Ellington Financial, and we're seeing opportunities there. So I mean, I would say the whole gamut, and it's absolutely an important part of our playbook. I will say that it's been our MO to invest in smaller originators and help them grow. And that includes supporting them, not just through operating capital, but also through guaranteeing warehouse lines and things like that. So we have a lot to offer, especially some of these smaller origination companies. And I absolutely would love to see us continue to broaden our array of investments there. Timothy D'Agostino: And then just as a quick follow-up, how do you think about funding those potential M&A or further investments? Laurence Penn: We just fund those with cash on hand. We don't explicitly borrow against them. Of course, that's another great use of our unsecured notes and preferred equity, right, where, as J.R. mentioned, these guys are punching way above their weight in terms of return on equity. So if they're earning 20% plus return on equity and we're funding them at high single digits or in the case of preferred equity or -- well, we mentioned that our unsecured notes are trading in the low 7s. That's obviously a great use of that capital. Operator: Thank you. And gentlemen, that was our final question for today. So we'd like to thank you all for participating in the Ellington Financial Second Quarter 2026 Earnings Conference Call. You may disconnect your line at this time and have a wonderful day. Goodbye, everyone. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Ellington Financial (EFC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Ellington Financial Inc. recently reported second-quarter 2026 results, posting net income of US$58.61 million (US$0.43 per basic and diluted share) and declaring a US$0.13 monthly dividend payable on September 30, 2026 to stockholders of record as of August 31, 2026. Beyond the headline numbers, management lifted its adjusted distributable earnings baseline and highlighted rapid growth in reverse mortgage originations and loan servicing capabilities, including the planned acquisition of a residential loan servicer. Next, we’ll examine how the higher adjusted distributable earnings baseline influences Ellington Financial’s investment narrative and income-focused appeal for investors. AI is about to change healthcare. These 43 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10b in market cap - there's still time to get in early. To own Ellington Financial, you really have to buy into its income-first model and the idea that a complex, mortgage-focused balance sheet can keep funding that payout. The latest quarter, with US$58.61 million in net income and another US$0.13 monthly dividend affirmed, reinforces the near-term income story rather than changing it. What does feel more meaningful is management’s higher adjusted distributable earnings baseline and the momentum in reverse mortgage and servicing platforms, especially with a servicer acquisition on deck. Those moves speak directly to the main short term catalysts: how reliably Ellington can cover its double‑digit yield, smooth out the impact of one-off items, and make better use of its capital after redeeming higher-cost preferreds. The flip side is that leverage, cash flow coverage, and complex mortgage credit risk still sit at the center of the bear case. However, one of Ellington Financial’s biggest structural risks is less obvious at first glance. Ellington Financial's shares have been on the rise but are still potentially undervalued. Find out how large the opportunity might be. Three Simply Wall St Community members put Ellington Financial’s fair value anywhere from US$14.58 to almost US$28.93, underlining just how far apart individual expectations can be. When you set those views against the recent reset in adjusted distributable earnings and the ongoing questions around dividend coverage and leverage, it becomes clear that different investors are anchoring on very different parts of the story, so it is worth weighing several of these perspectives before deciding where you stand. Explore 3 other fair value estimates on Ellington Financial - why the stock might be worth over 2x more than the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your Ellington Financial research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision. Our free Ellington Financial research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Ellington Financial's overall financial health at a glance. Our daily scans reveal stocks with breakout potential. Don't miss this chance: Find 49 companies with promising cash flow potential yet trading below their fair value. Rare earth metals are the new gold rush. Find out which 28 stocks are leading the charge. Capitalize on the AI infrastructure supercycle with our selection of the 57 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include EFC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Ellington Financial Inc. EFC reported second-quarter 2026 adjusted earnings of 60 cents per share, up 27.7% from 47 cents a year ago. The figure surpassed the Zacks Consensus Estimate of 46 cents by 30.4%. Revenues of $72.3 million jumped 66.8% year over year and topped the consensus estimate of $66.8 million by 8.2%. However, the stock has seen limited movement since the earnings release on Aug. 7. Results benefited from stronger net interest income, solid credit performance and contributions from Longbridge. Longbridge loan originations rose 38% year over year to $589.7 million, while its HMBS market share reached a record 29% during the quarter. Interest income was $170.8 million in the second quarter, up from $115.5 million in the year-ago period. Interest expenses increased to $98.6 million from $72.1 million, reflecting higher financing costs. Total expenses rose to $76.0 million from $57.1 million. The investment portfolio's net interest margin edged down to 3.36% from 3.37% in the prior quarter. Slightly higher asset yields were more than offset by a modest increase in funding costs. Positive carry from interest-rate swaps continued to support results, although the benefit moderated sequentially. The investment portfolio segment generated $119.9 million of interest and other income during the quarter. Net income attributable to common stockholders from the segment totaled $74.2 million, while Adjusted Distributable Earnings amounted to $75.7 million. The adjusted long investment portfolio increased roughly 1% sequentially to $4.50 billion. Growth was driven by residential transition loans, commercial mortgage bridge loans and retained RMBS. EFC securitized $1.87 billion of unpaid principal balance across non-QM, Agency-eligible and closed-end second-lien loans through seven transactions. Longbridge recorded $53.4 million of interest and other income and generated net income attributable to common stockholders of $30.2 million. Adjusted Distributable Earnings from the segment totaled $28.9 million. Originations included $316.2 million of proprietary reverse mortgage loans and $273.5 million of HECM loans. The company completed two proprietary reverse mortgage securitizations. These securitizations more than offset new portfolio growth, reducing the net Longbridge portfolio 7% sequentially to $649.3 million. Compensation and benefits increased to $28.4 million from $21.3 million a year earlier. Investment and transaction-related costs also remained meaningful, including servicing expenses of $7.9 million and other investment-related expenses of $14.5 million. Corporate/Other results were pressured by a substantial unrealized loss on unsecured debt, which more than offset a significantly lower incentive-fee accrual. Credit-spread tightening drove much of the debt valuation loss, while higher interest rates produced losses on fixed-receiver swaps used to hedge unsecured notes and preferred equity. The recourse debt-to-equity ratio remained 1.9:1, while the overall debt-to-equity ratio increased to 9.2:1 from 9.0:1 sequentially amid higher non-recourse securitization-related borrowings. Unencumbered assets totaled $1.86 billion, including $247.5 million of cash and cash equivalents. Of total recourse borrowings, 29% were long-term and non-mark-to-market, while 17% were unsecured. The weighted average remaining term of repo borrowings was 9.3 months, providing a relatively diversified funding structure for the portfolio. Management noted that the first-half 2026 performance produced a 20% annualized economic return. Adjusted Distributable Earnings totaled $1.15 per share during the first six months, compared with dividends of 78 cents per share, while book value per share increased 45 cents over the period. Ellinton Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Ellington Financial Inc. price-consensus-eps-surprise-chart | Ellington Financial Inc. Quote Digital Realty Trust DLR reported second-quarter 2026 core FFO per share, excluding net promote of $2.13, up 13.9% from the year-ago level. The figure surpassed the Zacks Consensus Estimate by 7.6%. Strong bookings, a record backlog and sharp renewal rent increases supported the quarter. Prologis PLD reported second-quarter 2026 core FFO per share of $1.63, outpacing the Zacks Consensus Estimate of $1.53. Results reflected strengthening demand, disciplined execution and expanding capabilities across logistics, data centers and energy. Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ellington Financial Inc. (EFC) : Free Stock Analysis Report Prologis, Inc. (PLD) : Free Stock Analysis Report Digital Realty Trust, Inc. (DLR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Ellington Financial Inc. EFC used its second-quarter earnings call to frame a higher earnings baseline, with management comfortable guiding adjusted distributable earnings into the high-40-cent range even with just one proprietary reverse mortgage securitization in a quarter. The call also centered on Longbridge growth, expanding securitization scale, tighter control of loan servicing and continued balance sheet discipline as management carries momentum into the third quarter. Second-quarter adjusted earnings were $0.60 per share, which surpassed the Zacks Consensus Estimate of $0.46. Revenues of $72.3 million also topped the Zacks Consensus Estimate of $66.8 million. Ellington Financial Inc. price-consensus-eps-surprise-chart | Ellington Financial Inc. Quote CFO and treasurer J.R. Herlihy said Longbridge contributed $0.23 per share of ADE versus $0.21 in the first quarter and a $0.12 quarterly average in 2025. In Q&A, a KBW analyst asked about a normalized Longbridge contribution. CEO and president Laurence Penn said EFC is comfortable guiding overall ADE into the high 40s, even with one proprietary reverse mortgage securitization in a quarter. Longbridge originated $589.7 million of loans, up 38% year over year, with proprietary reverse mortgages representing 54% of volume and HECMs accounting for 46%. CFO and treasurer Herlihy said second-quarter submissions rose to $870 million from under $750 million in the first quarter, while July set records for proprietary reverse mortgage originations and submissions. CEO Penn said higher rates can make proprietary products more competitive against government HECMs because Ellington has more flexibility on product economics. He also said securitization spreads remained healthy across both channels. Penn said the residential loan portal is purchasing more than $15 million of loans per day, an annual pace of roughly $4 billion. The portal supplied a meaningful portion of about $2 billion securitized in the quarter. Herlihy said EFC securitized about $4 billion of unpaid principal balance in the first half of 2026 compared with $4.4 billion during all of 2025. Co-chief investment officer Mark Tecotzky said tighter loan spreads have been offset by tighter spreads on the investment-grade bonds EFC sells, preserving expected yields on retained securitization investments. Tecotzky said Ellington expects to close the acquisition of a residential loan servicer in the third quarter, building a higher-touch special servicing platform for delinquent loans. A Citizens JMP analyst asked about the assets coming with the transaction. CEO Penn said the servicer has single-digit billions of servicing rights, but it should not materially affect the balance sheet or earnings initially. Penn and Tecotzky said greater control over workouts, incentives and data is central to the strategy. In a later exchange with B. Riley, Penn said investments in smaller originators remain part of EFC's playbook. Tecotzky said EFC is watching lower-FICO borrowers and cash-out refinancing more closely, while keeping its consumer exposure relatively small. Penn said commercial mortgage markets are beginning to offer more nonperforming loan supply, especially in the sub-$50 million and sub-$25 million segments where EFC often operates. In response to a BTIG analyst, Tecotzky said residential transition loans should remain short duration, while retained securitization call rights provide longer-term optionality. Penn said reverse mortgages and non-QM loans provide longer-duration exposure within that framework. Penn said the $0.13 monthly dividend remains appropriate despite $0.60 of quarterly ADE. Book value rose $0.05 to $13.61 after $0.39 per share of dividends, and Penn favored retaining excess earnings for further book value growth. Penn also emphasized disciplined underwriting, capital allocation, technology investment and a flexible balance sheet. Management plans to use unsecured debt and preferred equity opportunistically when market conditions are favorable. EFC carries a Zacks Rank #2 (Buy), a favorable near-term rank, but its Style Scores are weaker. It carries a Value Score of F, Growth Score of F, Momentum Score of D and VGM Score of F. The methodology favors A or B Style Scores alongside top Zacks Ranks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The current setup, therefore, combines a positive Rank with Style Scores that do not reinforce it. The Zacks Rank can change as analysts revise estimates following the just-reported results, so the signal should be viewed as dynamic rather than definitive. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ellington Financial Inc. (EFC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Ellington Financial Inc.? Here are five stocks we like better. Strong quarterly performance: Ellington Financial reported $0.60 in adjusted distributable earnings per share, exceeding its $0.39 dividend, while book value rose to $13.61 per share. Management plans to maintain the $0.13 monthly dividend and use excess earnings to support book-value growth. Loan and reverse-mortgage growth: The company securitized nearly $4 billion of residential and commercial loans in the first half of 2026, while Longbridge’s reverse-mortgage originations increased 38% year over year to approximately $590 million. Longbridge contributed $0.23 per share to quarterly ADE. Strategic expansion and risk monitoring: Ellington is shifting toward credit strategies, pursuing a residential loan-servicer acquisition and evaluating opportunities in distressed commercial mortgage loans. Management noted tighter credit spreads and weaker performance among lower-FICO and cash-out refinance borrowers as areas to watch. Ellington Financial (NYSE:EFC) reported second-quarter 2026 GAAP net income of $0.43 per common share and adjusted distributable earnings, or ADE, of $0.60 per share, exceeding its $0.39 quarterly dividend. Book value per share increased $0.05 during the quarter to $13.61 after dividends, while the company reported an annualized compounded economic return of 13.6%. Chief Executive Officer Larry Penn said results reflected contributions across the company’s investment portfolio, securitization platform, loan-originator affiliates and Longbridge Financial, its reverse mortgage business. Penn said the company has covered its dividend for eight consecutive quarters and intends to maintain its $0.13 monthly dividend for now, prioritizing book-value growth with excess earnings. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Penn said Ellington’s proprietary residential loan portal, which works with more than 40 sellers, is purchasing more than $15 million of loans per day, representing an annualized pace of roughly $4 billion. The company said its securitization activity releases capital for redeployment, creates retained investments and shifts funding from short-term financing to longer-term, non-mark-to-market structures. The company securitized about $4 billion of unpaid principal balance during the first half of 2026, approaching the $4.4 billion it securitized during all of 2025. Chief Financial Officer JR Herlihy said higher loan sourcing kept pace with securitization volume, with growth in residential transition loans, commercial mortgage bridge loans and retained residential mortgage-backed securities offsetting the effects of securitizations. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Management also highlighted credit results. Penn said inception-to-date realized credit losses totaled 17 basis points on approximately $20.4 billion of residential mortgage loan fundings and 39 basis points on more than $2.5 billion of commercial mortgage bridge loan originations. He said the figures span market events including the COVID period, the 2022 interest-rate selloff and the commercial real estate downturn. Co-Chief Investment Officer Mark Tecotzky said credit spreads have tightened across corporate bonds, structured credit and loan purchases over the past year. However, he said the spread differential between purchased loans and the investment-grade bonds Ellington sells through securitizations has been preserved, supporting returns on retained securitization tranches. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Tecotzky said the company is monitoring weaker performance among lower-FICO borrowers and cash-out refinance loans. He also said Ellington sees emerging supply of nonperforming commercial mortgage loans, particularly among smaller loans, though he said the company has not yet made a significant move into that market. Longbridge originated approximately $590 million of reverse mortgage loans during the quarter, a 38% increase from a year earlier. Proprietary reverse mortgages accounted for roughly 54% of originations, with Home Equity Conversion Mortgages, or HECMs, representing the remaining 46%. Herlihy said Longbridge benefited from strong volumes, healthy margins and gains from two proprietary reverse mortgage securitizations completed during the period. The transactions produced the business’s strongest financing execution to date for proprietary reverse mortgages, based on overall debt spreads, according to management. Longbridge also generated a substantial servicing contribution, including base servicing income and sales of HECM tail pools. The company said it uses enterprise-level interest-rate hedges intended to offset some pressure that higher rates can place on mortgage originations and margins. During the second quarter, Longbridge’s origination business remained profitable while the hedges generated gains. Herlihy said Longbridge contributed $0.23 per share to ADE in the second quarter, compared with $0.21 in the first quarter and an average of $0.12 per quarter in 2025. He said servicing-related profits were about $0.065 per share during the quarter, while the remaining contribution included originations, securitizations and expenses. Management cautioned that quarterly earnings can vary with the timing and execution of securitizations. The company added new disclosures for Longbridge, including separate HECM and proprietary reverse mortgage volume, channel composition, submission volumes and separate servicing-rights roll-forwards. Management said second-quarter loan submissions reached $870 million, compared with less than $750 million in the first quarter, and said July was Longbridge’s highest-ever month for proprietary reverse mortgage originations and submissions. Ellington reported a 5.5% weighted-average borrowing rate on recourse borrowings at quarter-end, essentially unchanged from the prior quarter. Its overall net interest margin was 336 basis points. About 29% of recourse borrowings were long-term and non-mark-to-market, while unsecured debt represented 17% of recourse borrowings. The weighted-average remaining term of repo borrowings rose to 9.3 months, about twice the level of mid-2025. Recourse debt-to-equity remained 1.9-to-1, while total debt-to-equity increased modestly to 9.2-to-1, primarily due to additional non-recourse securitization financing. Herlihy said the company has reduced its allocation to agency mortgage-backed securities in favor of credit strategies, where it sees stronger return opportunities and competitive advantages. Agency MBS investments were below $200 million at quarter-end, according to management. Management said it plans to continue being opportunistic with unsecured debt and preferred-equity issuance when market conditions permit. Penn also said Ellington may continue investing in smaller originators, citing opportunities in residential mortgages, commercial mortgages, consumer lending and asset-based finance. Ellington said it expects to close the acquisition of a small residential loan servicer in the third quarter, potentially in September. Penn said the servicer has single-digit billions of dollars in servicing rights, some subservicing contracts and experience across several loan types. He said the acquisition is not expected to have a noticeable near-term effect on the balance sheet or earnings. Tecotzky said the primary rationale is to build high-touch residential special-servicing capabilities as the company’s footprint expands and third-party servicing options become more limited. Ellington expects the platform to help manage delinquent loans and preserve value through market cycles. Management also pointed to continued expansion in private-label mortgage securitization. Tecotzky said Ellington expects about $250 billion of new non-agency mortgage securitizations this year, with increased issuance improving liquidity and attracting additional institutional investors to the sector. Ellington Financial, Inc (NYSE: EFC) is a mortgage real estate investment trust (REIT) that focuses on generating attractive risk-adjusted returns through investments in residential and commercial mortgage-related assets. Established in 2013, the company is externally managed by Ellington Financial Management, L.P., a subsidiary of Ellington Management Group, an alternative asset management firm. EFC's core strategy centers on actively acquiring and managing agency and non-agency residential mortgage-backed securities (MBS), mortgage servicing rights, residential whole loans, and other structured finance instruments, including asset-backed securities and commercial mortgage-backed securities (CMBS). The company employs leverage and structured financing tools—such as repurchase agreements and secured credit facilities—to enhance portfolio yield while maintaining focus on risk mitigation. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Ellington Financial Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by a 'virtuous cycle' where proprietary loan sourcing, disciplined underwriting, and efficient securitization execution reinforce one another to build future earnings power. The proprietary residential loan portal now generates approximately $4 billion in annual loan purchases, supplying a significant portion of the $2 billion securitized during the quarter. Management attributes strong credit performance to a research-heavy approach, with 20% of employees dedicated to technology and AI-enhanced modeling to shape underwriting standards. Longbridge's record performance reflects the successful integration of sourcing, analytics, and servicing, with proprietary reverse mortgage originations reaching record levels. Strategic rotation of capital continues away from Agency MBS toward credit strategies where the firm sees stronger return opportunities and clearer competitive advantages. The firm is institutionalizing its commercial mortgage bridge business through affiliate Sheridan Capital, applying the same capital markets infrastructure used in its residential business. Management expects to close the acquisition of a residential loan servicer in Q3 2026 to build a best-in-class special servicing platform for managing delinquent loans. The firm anticipates approximately $250 billion in new issue non-agency mortgage securitizations for the full year, which is expected to further improve market liquidity and execution levels. Guidance for Adjusted Distributable Earnings (ADE) remains in the 'high 40s' range, even assuming a more modest pace of one securitization per quarter. Management intends to be an opportunistic issuer of unsecured debt and preferred equity to diversify funding and improve credit ratings as market conditions permit. The firm views its forward MSR portfolio as a potential sale candidate, noting that current market valuations are being driven to attractive levels by bank regulatory expectations and cross-selling demand. The firm recognized an unrealized loss in the 'corporate other' category due to the tightening of spreads on its own unsecured notes, which are carried at fair value. Recourse debt-to-equity remained stable at 1.9x, while overall debt-to-equity rose to 9.2x due to increased non-recourse borrowings from robust securitization activity. The weighted average remaining term of repo borrowings increased to 9.3 months, roughly double the level from mid-2025, significantly reducing near-term refinancing risk. Management noted that while ADE is running well above the $0.39 quarterly dividend, they prefer building book value over immediate dividend increases for now. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. The acquisition is not driven by MSR volume but by the need for high-touch special servicing capabilities as third-party options have diminished. Management plans to build the platform 'in their own image' to optimize outcomes for delinquent loans across multiple mortgage products. Proprietary reverse mortgage products are proving less sensitive to higher interest rates than government-backed HECM products. Q2 submissions reached $870 million, trending upward from $750 million in Q1, which management views as a positive leading indicator for Q3 volumes. Management is seeing pockets of weakness in lower FICO consumer loans and is closely monitoring cash-out refinancing behavior in a high-rate environment. The firm is seeing an emerging supply of stressed assets in the sub-$50 million commercial mortgage space, which they view as a potential growth area. Management confirmed that investing in smaller originators remains a core part of the playbook, with potential new opportunities in non-QM and commercial mortgage sectors. These investments are typically funded with cash on hand and punch 'above their weight,' contributing roughly 10% of ADE from only 2% of the total investment portfolio.

This article first appeared on GuruFocus. GAAP Net Income: $0.43 per share for the second quarter. Adjusted Distributable Earnings (ADE): $0.60 per share, exceeding the quarterly dividend. Annualized Economic Return: 13.6% for the quarter. Book Value per Share: Increased by $0.05 to $13.61 after paying $0.39 per share in dividends. Longbridge Originations: Approximately $590 million, a 38% year-over-year increase. Longbridge Product Mix: Proprietary reverse mortgages represented approximately 54% of volume, with HECMs representing the remaining 46%. Securitization Volume: Approximately $2 billion of loans securitized during the quarter; approximately $4 billion UPB securitized in the first half of 2026. Net Interest Margin: 336 basis points, roughly unchanged quarter over quarter. Recourse Debt-to-Equity Ratio: Remained at 1.9:1 at quarter end. Overall Debt-to-Equity Ratio: Increased modestly to 9.2:1, primarily due to additional non-recourse borrowings from securitizations. Weighted Average Borrowing Rate: 5.5% on recourse borrowings, essentially unchanged from the prior quarter. Credit Losses: Inception-to-date cumulative realized credit losses were 17 basis points on approximately $20.4 billion of residential mortgage loan fundings and 39 basis points on more than $2.5 billion of commercial mortgage bridge loan originations. Warning! GuruFocus has detected 8 Warning Signs with EFC. Is EFC fairly valued? Test your thesis with our free DCF calculator. Release Date: August 07, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Ellington Financial Inc (NYSE:EFC) delivered strong Q2 2026 results with GAAP net income of $0.43 per share and adjusted distributable earnings (ADE) of $0.60 per share, well above the $0.39 dividend, while book value per share increased to $13.61. The company achieved an annualized economic return of 13.6% for the quarter, driven by strong performance across its diversified platform, including excellent securitization execution and robust credit performance. Longbridge, a key subsidiary, had another standout quarter with originations up 38% year-over-year, record proprietary reverse mortgage volumes, and strong servicing contributions, supported by improved securitization executions. The company's securitization program continued to replace short-term mark-to-market financing with longer-term non-recourse funding, with approximately $4 billion UPB securitized in the first half of 2026, enhancing funding stability and reducing refinancing risk. Credit performance remained excellent, with inception-to-date cumulative realized credit losses of only 17 basis points on residential loans and 39 basis points on commercial loans, reflecting strong underwriting and asset management capabilities. The company is expanding its platform through strategic investments, including the pending acquisition of a residential servicer, which is expected to enhance special servicing capabilities and unlock value in managing delinquent loans. Higher interest rates during the quarter led to unrealized losses on fixed receiver interest rate swaps used to hedge fixed payments on unsecured notes and preferred equity, impacting corporate other results. The company recognized an unrealized loss in corporate other due to tightening spreads on its unsecured debt, which increased the fair value of the liabilities. Credit spreads have tightened across the board, making it more challenging to find attractive risk-adjusted returns, particularly in lower FICO score segments and cash-out refinancing, which the company is closely monitoring. The company's overall debt-to-equity ratio increased modestly to 9.2:1, primarily due to additional non-recourse borrowings associated with recent securitizations, which could increase leverage risk. The pending acquisition of a residential servicer is small and not expected to have an appreciable impact on balance sheet or earnings initially, indicating limited near-term financial benefit. The company expects some noise in Longbridge's earnings due to securitization activity, and the high ADE contribution from securitizations may not be sustainable as a run rate, with management guiding to a lower 'high 40s' ADE run rate. Q: Can you provide additional color on the pending acquisition of a residential servicer, including whether it comes with MSR assets or sub-servicing contracts?A: Mark Tecotzky (Co-Chief Investment Officer) and Laurence Penn (CEO) explained that it is a small servicer with single-digit billions in servicing rights and some sub-servicing contracts, expected to close in September. It will not bring appreciable MSR size to the balance sheet initially, but the strategic motivation is to build a best-in-class special servicing platform to manage delinquent loans across multiple products, filling a gap left by the consolidation of third-party servicers. Q: How are Longbridge volumes and margins trending early in the third quarter, and what is the expected relationship with higher interest rates?A: JR Herlihy (CFO) noted that proprietary reverse mortgages are less sensitive to higher rates than HECMs. Q2 submissions were $870 million, up from under $750 million in Q1, providing a positive leading indicator for Q3 volumes. Larry Penn (CEO) added that higher rates make the proprietary product more competitive versus the government HECM product, allowing Longbridge to gain market share. Q: What is a more normalized earnings run rate or contribution to ADE from Longbridge as the segment continues to scale?A: JR Herlihy (CFO) stated that Longbridge contributed $0.23 and $0.21 to ADE in the last two quarters, versus an average of $0.12 in 2025. While securitization execution was notably strong in the first half, the recurring base servicing income is growing. Larry Penn (CEO) guided that even with just one securitization per quarter, the company is comfortable with a high-40s ADE run rate. Q: Where do you see the best risk-adjusted returns in credit today, and conversely, where are you least comfortable adding?A: Mark Tecotzky (Co-CIO) explained that while credit spreads have tightened across the board, the spread between loan purchase prices and securitization bond sales has been preserved, keeping retained yields attractive. He noted weakness in lower FICO score loans and cash-out refinancings, which is why the consumer portfolio has been kept relatively small. Larry Penn (CEO) added that the commercial mortgage space is seeing increased supply of stressed assets, particularly in the sub-$50 million range, which could present opportunities. Q: Given the attractiveness of returns, how are you thinking about maintaining short duration versus adding duration to lock in returns for longer?A: Mark Tecotzky (Co-CIO) highlighted that the company retains call rights on securitizations, providing a long-term option value. He noted that short-duration assets like residential transition loans (RTLs) are intentional because they represent the risk profile the company prefers. Larry Penn (CEO) added that while reverse mortgages are long-duration, the overall portfolio is deliberately weighted toward shorter-duration, high-cash-flowing assets to manage liquidity and reduce refinancing risk. Q: How much of the benefits from investments in operating companies come through ownership stakes versus returns from the investment portfolio of retained assets?A: JR Herlihy (CFO) quantified that the total investment in originator stakes is about $100 million out of a $5 billion portfolio. The contribution to ADE from these originators is roughly a nickel per share, or less than 10% of the $0.60 ADE. While the majority of earnings come from loans sourced through affiliates and securitized into retained tranches, the originator stakes are "punching above their weight," contributing more than 2% of earnings on just 2% of the portfolio. Q: On non-QM, where is EFC differentiating from peers on origination focus, and how has securitization execution trended on spread?A: Mark Tecotzky (Co-CIO) stated that EFC focuses on loans with the best prepayment S-curves, favoring purchase money loans with higher income and FICO scores. He believes non-QM bonds are fairly priced, possibly slightly cheap, and the market's growth to an estimated $250 billion in new issuance this year is attracting more institutional investors. Larry Penn (CEO) added that the proprietary loan portal uses loan-level price adjustments to penalize or benefit certain loan attributes, which has contributed to strong prepayment and credit performance. Q: How are you thinking about hedge construction under Chair Warsh's framework, and how are you sizing TBA shorts and CDX?A: Mark Tecotzky (Co-CIO) explained that credit hedges are used tactically to lock in execution during deal marketing and strategically to protect the portfolio from economic shocks. On the interest rate side, the company focuses on ring-fencing rate risk to generate ADE as spreads to SOFR. While Warsh's communication style may lead to more rate volatility, it has been manageable so far. Larry Penn (CEO) pointed to slide 16, showing the portfolio is well-immunized to instantaneous rate shocks. Q: Why did you stop breaking out the agency contribution to earnings, and should we expect agency to decrease further?A: JR Herlihy (CFO) confirmed the decision was driven by size, as the agency portfolio is now sub-$200 million on an invested basis, down from over $2 billion several years ago. The company has rotated capital into credit strategies where it sees better returns and clearer competitive advantages. The agency portfolio is no longer needed for REIT test purposes, so it is now appropriately considered one of several diversified strategies within the broader investment portfolio. Q: Is additional M&A and investment into loan originators part of the playbook into 2027, and how would you fund it?A: Larry Penn (CEO) confirmed it is absolutely part of the playbook, citing a 12-year history of investing in smaller originators. The company is looking at opportunities in non-QM, commercial mortgage, and asset-based finance. Funding would come from cash on hand, and given the high returns on equity (20%+) versus the low cost of unsecured debt (low 7s%), it represents a great use of capital. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

OLD GREENWICH, Conn., August 06, 2026--(BUSINESS WIRE)--Ellington Financial Inc. (NYSE: EFC) ("we") today reported financial results for the quarter ended June 30, 2026. Highlights Net income attributable to common stockholders of $54.4 million, or $0.43 per common share, including unallocated Corporate/Other income and expense items. Adjusted Distributable Earnings1 of $75.5 million, or $0.60 per common share, including unallocated Corporate/Other income and expense items. Book value per common share of $13.61 as of June 30, 2026, including the effects of dividends of $0.39 per common share for the quarter. Recourse debt-to-equity ratio2 of 1.9:1 as of June 30, 2026. Including all recourse and non-recourse borrowings, which primarily consist of securitization-related liabilities, debt-to-equity ratio of 9.2:12. Total unencumbered assets3 of $1.86 billion, consisting of cash and cash equivalents of $247.5 million and other unencumbered assets of $1.61 billion as of June 30, 2026. Second Quarter 2026 Results "Ellington Financial delivered another standout quarter, with continued book value growth and adjusted distributable earnings well in excess of our dividends, reflecting the strength and increasing momentum of our platform," said Laurence Penn, Chief Executive Officer and President. "Our second quarter results reflected positive trends that have steadily built over recent quarters. Credit performance remained strong across our loan portfolios, while our stable, flexible funding profile and expanding securitization platform further enhanced our balance sheet. Longbridge once again delivered exceptional performance, demonstrating the advantages of our vertically integrated reverse mortgage platform. Meanwhile, our other loan origination partners delivered solid results, and a growing pipeline of high-yielding, high-quality loans across our sourcing channels continued to provide attractive portfolio investments. "Together, these factors drove strong performance throughout the first half of 2026, during which we generated an annualized economic return of 20%, increased book value per share by $0.45, and generated ADE of $1.15, comfortably covering dividends of $0.78. "Looking ahead, we believe that our competitive advantages position us to sustain our momentum while generating attractive risk-adjusted returns for our shareholders, consistent with the prudent risk management that has long defined Ellington Financial." Financial Results Investment Portfolio Segment The investment portfolio segment generated net income attributable to common stockholders of $74.2 million in the second quarter. The total adjusted long portfolio4 increased by approximately 1% sequentially, to $4.50 billion as of June 30, 2026. Growth in our residential transition loan and commercial mortgage bridge loan portfolios, as well as retained RMBS, more than offset the impact of continued securitization activity. Key Highlights5: Net interest income increased significantly quarter over quarter. Earnings from unconsolidated entities remained strong, while gains on hedges more than offset net realized and unrealized losses. Excellent performance across most of the portfolio, led by our residential credit strategies — including non-QM loans, Agency-eligible loans, residential transition loan retained tranches, closed-end second lien retained tranches, non-Agency RMBS, and forward MSR-related investments — as well as CLOs, corporate debt and equity, and equity investments in loan originators. Weaker results in CMBS, residential REO, and other loans and ABS. Strong credit performance across our loan businesses, including continued low life-to-date realized credit losses in both our residential and commercial loan portfolios. During the quarter, the net interest margin6 on our investment portfolio declined slightly to 3.36% from 3.37%, as slightly higher asset yields were more than offset by slightly higher funding costs. We continued to benefit from positive carry on our interest rate swap hedges, driven by our interest rate swaps where our weighted average receive rate exceeded our weighted average pay rate, although this benefit moderated quarter over quarter. Longbridge Segment The Longbridge segment reported net income attributable to common stockholders of $30.2 million. Longbridge originated $589.7 million of loans during the quarter, up 38% from the same period in 2025. We also completed two proprietary reverse mortgage loan securitizations, and the loans securitized more than offset portfolio growth, resulting in a 7% sequential decline in the net Longbridge portfolio4 to $649.3 million as of June 30, 2026. Key Highlights5: Strong contribution from originations, supported by net gains related to two proprietary reverse mortgage loan securitizations completed during the quarter, and continued robust origination volumes and margins. Positive contribution from servicing, reflecting strong tail securitization executions and steady base servicing net income. Net gains on enterprise interest rate hedges intended to mitigate the potential impact of higher interest rates on origination profits. Longbridge's HMBS market share reached a new high of 29% for the quarter, ranking it as the #2 issuer in the market, according to Bloomberg. Corporate/Other Summary The net loss in Corporate/Other increased quarter over quarter, as a substantial unrealized loss on our unsecured debt more than offset a significantly lower incentive fee accrual. The primary driver of the unrealized loss on our unsecured debt was credit spread tightening, which reversed much of the credit spread widening experienced in the first quarter, and which was partially offset by the impact of higher interest rates. Higher interest rates also led to losses on the fixed receiver interest rate swaps used to hedge the fixed payments on our unsecured notes and preferred equity. Investment Portfolio(1) The following table summarizes our long investment portfolio holdings as of June 30, 2026 and March 31, 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 June 30, 2026 and March 31, 2026: The following table summarizes Longbridge's origination volumes by product and channel for the three-month periods ended June 30, 2026 and March 31, 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 June 30, 2026 and March 31, 2026: The following table presents the net profit (loss) related to the HMBS MSR, as discussed above, for the three-month periods ended June 30, 2026 and March 31, 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 June 30, 2026 and March 31, 2026: The following table presents the net profit (loss) on our MSRs, as discussed above, for the three-month periods ended June 30, 2026 and March 31, 2026: Financing Key Highlights: Recourse Debt-to-Equity Ratio, excluding borrowings collateralized by U.S. Treasury securities and adjusted for unsettled purchases and sales, was unchanged at 1.9:1 as of both June 30, 2026 and March 31, 2026, as higher repo borrowings were largely offset by growth in total equity. Overall Debt-to-Equity Ratio, excluding borrowings collateralized by U.S. Treasury securities and adjusted for unsettled purchases and sales, increased modestly to 9.2:1 as of June 30, 2026 from 9.0:1 as of March 31, 2026, primarily reflecting higher non-recourse borrowings associated with recent securitization activity. The following table summarizes our outstanding borrowings and debt-to-equity ratios as of June 30, 2026 and March 31, 2026: Operating Results The following table summarizes our operating results by segment for the three-month period ended June 30, 2026: The following table summarizes our operating results by segment for the three-month period ended March 31, 2026: About Ellington Financial Ellington Financial invests in a diverse array of financial assets, including residential and commercial mortgage loans and mortgage-backed securities, reverse mortgage loans, mortgage servicing rights and related investments, consumer loans, asset-backed securities, collateralized loan obligations, non-mortgage and mortgage-related derivatives, debt and equity investments in loan origination companies, and other strategic investments. Ellington Financial is externally managed and advised by Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C. Conference Call We will host a conference call at 11:00 a.m. Eastern Time on Friday, August 7, 2026, to discuss our financial results for the quarter ended June 30, 2026. To participate in the event by telephone, please dial (800) 343-4136 at least 10 minutes prior to the start time and reference the conference ID EFCQ226. International callers should dial (203) 518-9843 and reference the same conference ID. The conference call will also be webcast live over the Internet and can be accessed via the "For Investors" section of our web site at www.ellingtonfinancial.com. To listen to the live webcast, please visit www.ellingtonfinancial.com at least 15 minutes prior to the start of the call to register, download, and install necessary audio software. In connection with the release of these financial results, we also posted an investor presentation, that will accompany the conference call, on our website at www.ellingtonfinancial.com under "For Investors—Presentations." A dial-in replay of the conference call will be available on Friday, August 7, 2026, at approximately 2:00 p.m. Eastern Time through Friday, August 14, 2026 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 723-5759. International callers should dial (402) 220-2662. A replay of the conference call will also be archived on our web site at www.ellingtonfinancial.com. Cautionary Statement Regarding Forward-Looking Statements This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek" or similar expressions or their negative forms, or by references to strategy, plans, or intentions. Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our investments, market volatility, changes in mortgage default rates and prepayment rates, our ability to borrow to finance our assets, changes in government regulations affecting our business, our ability to maintain our exclusion from registration under the Investment Company Act of 1940, our ability to maintain our qualification as a real estate investment trust, or "REIT," and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations. Furthermore, forward-looking statements are subject to risks and uncertainties, including, among other things, those described under Item 1A of our Annual Report on Form 10-K, which can be accessed through our website at www.ellingtonfinancial.com or at the SEC's website (www.sec.gov). Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q, 10-K and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. This release and the information contained herein do not constitute an offer of any securities or solicitation of an offer to purchase securities. Reconciliation of Net Income (Loss) to Adjusted Distributable Earnings We calculate Adjusted Distributable Earnings as U.S. GAAP net income (loss) as adjusted for: (i) realized and unrealized gain (loss) on securities and loans, REO, mortgage servicing rights, financial derivatives (excluding periodic settlements on interest rate swaps), any borrowings carried at fair value, and foreign currency transactions; (ii) incentive fee to affiliate; (iii) Catch-up Amortization Adjustment (as defined below); (iv) non-cash equity compensation expense; (v) provision for income taxes; (vi) certain non-capitalized transaction costs; and (vii) other income or loss items that are of a non-recurring nature. For certain investments in unconsolidated entities, we include the relevant components of net operating income in Adjusted Distributable Earnings. The incentive fee is calculated based on Adjusted Net Income, a measure defined in our management agreement, rather than on Adjusted Distributable Earnings. Adjusted Net Income takes into account realized and unrealized gains and losses from our investment portfolio, any extraordinary items and certain other items, all of which are excluded from Adjusted Distributable Earnings. The Catch-up Amortization Adjustment is a quarterly adjustment to premium amortization or discount accretion triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from quarter to quarter. Non-capitalized transaction costs include expenses, generally professional fees, incurred in connection with the acquisition of an investment or issuance of long-term debt. We also include in Adjusted Distributable Earnings, for all loans that we originate through Longbridge, any realized and unrealized gains (losses) on such loans up to the point of loan sale or securitization, net of sale or securitization costs; and any realized and unrealized gains (losses) on HECM buyout loans and REO related to Longbridge's servicing activities. Adjusted Distributable Earnings is a supplemental non-GAAP financial measure. We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because: (i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current-period earnings components that we believe are less useful in forecasting long-term performance and dividend-paying ability; (ii) we use it to evaluate the effective net yield provided (a) by our investment portfolio, after the effects of financial leverage, and (b) by Longbridge, to reflect the earnings from its reverse mortgage origination and servicing operations; and (iii) we believe that presenting Adjusted Distributable Earnings assists investors in measuring and evaluating our operating performance, and comparing our operating performance to that of our residential mortgage REIT and mortgage originator peers. Please note, however, that: (I) our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable; and (II) Adjusted Distributable Earnings excludes certain items that may impact the amount of cash that is actually available for distribution. In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S. GAAP, it should be considered supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S. GAAP. Furthermore, Adjusted Distributable Earnings is different from REIT taxable income. As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to our stockholders, in order to maintain our qualification as a REIT, is not based on whether we distributed 90% of our Adjusted Distributable Earnings. In setting our dividends, our Board of Directors considers our earnings, liquidity, financial condition, REIT distribution requirements, and financial covenants, along with other factors that the Board of Directors may deem relevant from time to time. The following table reconciles, for the three-month periods ended June 30, 2026 and March 31, 2026, our Adjusted Distributable Earnings to the line on our Condensed Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S. GAAP measure: View source version on businesswire.com: https://www.businesswire.com/news/home/20260806774407/en/ Contacts Investors:Ellington FinancialInvestor Relations(203) [email protected] or Media:Amanda Shpiner/Grace CartwrightGasthalter & Co.for Ellington Financial(212) [email protected]

Ellington Financial EFC is slated to report second-quarter 2026 results on Aug. 6, after the market closes. The company’s quarterly results are likely to display a year-over-year increase in revenues but a dip in earnings per share (EPS). In the last reported quarter, this mortgage REIT reported an EPS of 55 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. EFC’s performance benefited from portfolio growth and strong Longbridge results but was partly offset by higher costs and market volatility. Over the preceding four quarters, EFC’s EPS outpaced the Zacks Consensus Estimate on all occasions, the average beat being 22.97%. This is depicted in the graph below: Ellington Financial Inc. price-eps-surprise | Ellington Financial Inc. Quote Ellington Financial’s second-quarter 2026 results are expected to reflect continued portfolio expansion and healthy earnings contributions from its credit investments. Growth in higher-yielding non-QM, agency-eligible residential, residential-transition and commercial mortgage loans is likely to have supported net interest income. The Longbridge Financial segment is likely to have remained a major earnings driver. Continued growth in proprietary and federally insured reverse-mortgage originations, servicing income and mortgage-servicing-right economics may have boosted the segment’s performance. Active securitization activity may have provided additional support through gain-on-sale income, improved funding efficiency and capital recycling. However, higher interest expenses and an expanding operating-cost base are expected to have limited profitability. Results may also be affected by fair-value changes in mortgage assets, hedges and unsecured borrowings amid fluctuations in interest rates and credit spreads. Management previously indicated that the reversal of March’s spread widening could reduce book value by approximately 13 cents per share in April, partly offsetting solid underlying portfolio performance. The Zacks Consensus Estimate for second-quarter revenues is pegged at $66.82 million, implying a 54.18% increase from the prior-year quarter’s reported number. EFC’s activities in the to-be-reported quarter were inadequate in garnering analysts’ confidence. The Zacks Consensus Estimate for second-quarter EPS has remained unchanged at 46 cents for more than three months. It suggests a 2.13% decline from the year-ago quarter’s tally. Our proven model does not conclusively predict a surprise in terms of EPS for EFC this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an EPS beat, which is not the case here. EFC has an Earnings ESP of 0.00% and currently carries a Zacks Rank of 3. You can uncover the best stocks before they’re reported with our Earnings ESP Filter. Here are two stocks from the broader finance sector — Klarna Group plc KLAR and Intuit INTU — you may want to consider, as our model shows that these have the right combination of elements to report an EPS beat this quarter. Klarna Group is slated to report quarterly numbers on Aug. 18. KLAR has an Earnings ESP of +43.34% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here. Intuitis slated to report quarterly numbers on Aug. 25. INTU has an Earnings ESP of +0.08% and a Zacks Rank of 3 at present. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ellington Financial Inc. (EFC) : Free Stock Analysis Report Intuit Inc. (INTU) : Free Stock Analysis Report Klarna Group plc (KLAR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Ellington Financial Inc. EFC has strengthened its income case as adjusted distributable earnings cover the dividend by a wider margin. Portfolio growth, steady credit performance and a larger contribution from Longbridge Financial are broadening the company’s earnings base. That progress comes with a higher cost structure and continued exposure to funding markets, credit spreads and securitization conditions. The balance of improving coverage and persistent volatility points to a measured investment stance. First-quarter adjusted distributable earnings reached 55 cents per share, well above the 39-cent quarterly dividend run rate. The result reflected high portfolio yields, steady credit performance and an outsized contribution from Longbridge. Management raised its quarterly adjusted distributable earnings guidance to around 45 cents per share. That level remains above the current dividend run rate and supports the near-term income outlook, though quarterly results can vary with market conditions. Longbridge generated $57.5 million of net income and $25.4 million of adjusted distributable earnings in the first quarter. Its portfolio increased 13% sequentially to $695.1 million. The segment adds reverse mortgage originations, securitization gains, servicing income and mortgage servicing rights to EFC’s traditional investment portfolio. This broader mix can reduce reliance on any single earnings source, although gain-on-sale margins remain sensitive to execution conditions. EFC ended the first quarter with $1.92 billion of unencumbered assets, including $163.2 million in cash and cash equivalents. Its recourse debt-to-equity ratio was 1.9X, while 30% of recourse borrowings were long-term and non-mark-to-market. That liquidity and funding mix provide room to expand higher-yielding loan strategies and absorb market volatility. The adjusted long credit portfolio rose 4% sequentially to $4.27 billion, led by continued deployment across residential and commercial credit assets. Total expenses climbed from $57.1 million in the second quarter of 2025 to about $80.4 million in the first quarter of 2026. The latest period included $19.2 million of incentive fees, along with higher compensation, servicing and transaction-related costs. Those expenses support a larger portfolio and the expanding Longbridge platform, but they also raise the bar for operating leverage. If asset yields, origination margins or securitization gains weaken, cost growth could absorb more of the benefit from higher income. EFC trades at 6.65X forward 12-month earnings, below the Zacks sub-industry multiple of 7.44X and its five-year median of 7.47X. Its 11.75% dividend yield adds to the income appeal, but the discount also reflects book-value and market sensitivity. Image Source: Zacks Investment Research Mortgage REIT peers offer different exposures. Annaly Capital Management, Inc. NLY combines Agency, residential credit and mortgage servicing rights strategies, while AGNC Investment Corp. AGNC is primarily focused on Agency mortgage-backed securities. EFC’s broader credit and reverse mortgage mix can support returns, but it also introduces more credit and execution risk. The bottom line is that EFC’s improving dividend coverage, portfolio growth and Longbridge diversification are constructive, while rising costs and sensitivity to rates, spreads and property values limit the case for a more aggressive view. The stock currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of F, a Value Score of F, a Growth Score of F and a Momentum Score of C. The Rank points to balanced near-term prospects, while the weak Style Scores suggest that the stock does not currently stand out across the core value, growth and combined style factors. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ellington Financial Inc. (EFC) : Free Stock Analysis Report AGNC Investment Corp. (AGNC) : Free Stock Analysis Report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Ellington Financial Inc. EFC received a major lift from Longbridge in the first quarter as reverse mortgage originations, servicing income and securitization gains expanded the segment’s contribution. The performance strengthened the case for a broader earnings mix beyond the company’s traditional investment portfolio. The central question is whether Longbridge can turn that quarterly momentum into a larger recurring profit stream. Higher volumes and wider capabilities are constructive, but funding needs, securitization conditions and a rising expense base remain important constraints. Longbridge generated $57.5 million of net income in the first quarter. That contribution helped EFC report earnings of 78 cents per share, up from 35 cents in the year-earlier period. Originations and servicing both contributed to the segment’s performance. Results also included net gains tied to a proprietary reverse mortgage loan securitization, interest-rate hedges and a $17 million litigation settlement, which means not every benefit should be viewed as recurring. Longbridge originated $515.4 million of new loans, up 52% from the same period in 2025 despite normal seasonal softness. Wholesale and correspondent channels accounted for 70% of volume, while retail generated the remaining 30%. The portfolio increased 13% sequentially to $695.1 million. Growth was driven by strong proprietary reverse mortgage originations and showed continued scale across proprietary products and Federal Housing Administration-insured home equity conversion mortgages. Management cited healthy origination margins and Longbridge’s lowest-ever funding cost on a proprietary reverse mortgage securitization. Successful transactions can recycle capital, reduce financing pressure and support earnings from origination gains and retained investments. That model still depends on receptive securitization markets. Wider spreads, weaker investor demand or slower execution could reduce gain-on-sale margins and leave more loans on the balance sheet for longer periods. Longbridge generates income from originations, servicing, securitization activity and mortgage servicing rights. The combination broadens EFC’s profit base and can reduce its dependence on net interest income from the investment portfolio. Finance of America Companies Inc. FOA is another publicly traded provider of home equity-based financing solutions for retirement, making its operating trends relevant to the reverse mortgage theme. Annaly Capital Management, Inc. NLY offers a different comparison through its Agency, residential credit and mortgage servicing rights strategies, illustrating how multiple mortgage-related income streams can support diversification. Over the past three months, EFC has underperformed FOA, while its performance is almost at par with NLY. Image Source: Zacks Investment Research Longbridge’s interest expense rose to $28.8 million from $16.6 million a year earlier as average borrowings increased to $2 billion from $1 billion. The average cost of funds declined to 5.38% from 5.58%, but the larger financing base still raised total interest expense. Investment and transaction-related expenses in the segment increased to $15.8 million from $10.8 million. Higher debt issuance, origination and servicing costs mean that additional volume must produce enough revenue to preserve operating leverage. The bottom line is that Longbridge is becoming a more important part of EFC’s earnings base. Originations, servicing and securitization capabilities create several profit channels, but the first-quarter result also benefited from items that may not repeat and require continued access to funding markets. EFC currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of F, a Value Score of F, a Growth Score of F and a Momentum Score of C. The Rank points to balanced near-term prospects, while the Style Scores indicate that the shares do not currently stand out across the main value, growth and combined investment factors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. EFC trades at 6.65X forward 12-month earnings, below the Zacks sub-industry multiple of 7.44X and its five-year median of 7.47X. Its 11.75% dividend yield adds to the income appeal, but the discount also reflects book value and market sensitivity. Image Source: Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ellington Financial Inc. (EFC) : Free Stock Analysis Report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report Finance of America Companies Inc. (FOA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research