Ellington Financial Inc. Reports Fourth Quarter 2025 Results

Ellington Financial Inc. (NYSE:EFC) ("we") today reported financial results for the quarter ended December 31, 2025.

Highlights

• Net income attributable to common stockholders of $14.7 million, or $0.14 per common share.¹
  • $42.2 million, or $0.39 per common share, from the investment portfolio.
    • $38.1 million, or $0.35 per common share, from the credit strategy.
    • $4.1 million, or $0.04 per common share, from the Agency strategy.
  • $16.4 million, or $0.15 per common share, from Longbridge.
• Adjusted Distributable Earnings of $51.4 million, or $0.47 per common share.²
  • $66.4 million, or $0.61 per common share, from the investment portfolio.
  • $14.6 million, or $0.13 per common share, from Longbridge.
• Book value per common share as of December 31, 2025 of $13.16, including the effects of dividends of $0.39 per common share for the quarter.
• Recourse debt-to-equity ratio³ of 1.9:1 as of December 31, 2025. Including all recourse and non-recourse borrowings, which primarily consist of securitization-related liabilities, debt-to-equity ratio of 9.0:1³.
  • Increased long-term, non-mark-to-market financing through completion of seven securitizations and closing of $400 million of Moody's- and Fitch-rated senior unsecured notes.
• Cash and cash equivalents of $201.9 million as of December 31, 2025, in addition to other unencumbered assets of $1.57 billion.

Fourth Quarter 2025 Results

"Ellington Financial reported another quarter of positive results, driven by our loan origination and securitization businesses, and supported by strengthening credit performance across our diversified loan portfolios," said Laurence Penn, Chief Executive Officer and President. "Once again, our adjusted distributable earnings substantially exceeded our dividends, with particularly strong contributions from our Longbridge segment.

"On October 6^th, we closed a $400 million unsecured notes offering—our largest such offering to date. During the quarter, we continued to fortify our balance sheet by utilizing a portion of the proceeds from that offering to replace short-term repo financing, while maintaining a robust and consistent pace of securitization activity. This activity was highlighted by the completion of our inaugural securitization of residential transition loans and, subsequent to year end, our first securitization of Agency-eligible loans. As a result of these actions, our balance sheet metrics strengthened meaningfully. The proportion of total recourse borrowings represented by long-term, non-mark-to-market borrowings almost doubled quarter over quarter, while unencumbered assets expanded by more than $500 million, collectively demonstrating the enhanced strength and flexibility of our balance sheet.

"We also took advantage of the notes offering to actively deploy capital into new investments, expanding our portfolio by 9% even after the impact of securitizations.⁴ Our portfolio continues to benefit from strong origination and acquisition activity across non-QM loans, Agency-eligible loans, closed-end second lien loans, proprietary reverse mortgage loans, and commercial mortgage bridge loans. By year end, we had largely deployed the proceeds from the notes offering.

"As we move into 2026, we remain focused on maintaining strong credit performance and disciplined portfolio growth, while increasing market share in loan originations and scaling our securitization platform. We also continue to optimize our capital structure and balance sheet. Following year-end, we raised common equity on an accretive basis with a highly targeted use of proceeds, namely retiring our highest-cost preferred equity. We will monitor the preferred equity market with an eye toward potentially refinancing that capital at a lower cost. Meanwhile, moving to the debt side of our balance sheet, we expect over time to continue to increase the share of unsecured, non-mark-to-market, and long-term financings. We believe that all these actions will drive an increasingly resilient earnings and dividend stream for shareholders."

Financial Results

Investment Portfolio Segment

The investment portfolio segment generated net income of $43.0 million in the fourth quarter, consisting of $38.9 million from the credit strategy and $4.1 million from the Agency strategy.

Credit

The total adjusted long credit portfolio⁵ increased by 15% to $4.11 billion as of December 31, 2025, compared to $3.56 billion as of September 30, 2025. The increase was driven by net purchases of non-QM loans, Agency-eligible loans, closed-end second lien loans, commercial mortgage bridge loans, ABS, and CLOs; and a larger portfolio of retained RMBS. These increases were partially offset by the impact of loans sold into securitizations.

Key Highlights⁶:

• Overall positive performance driven by higher net interest income in the credit portfolio, and net realized and unrealized gains on non-QM retained tranches and forward-MSR related investments.
• Partially offsetting higher net interest income were net realized and unrealized losses on non-QM loans, commercial mortgage bridge loans, closed-end second lien loans and related retained tranches, CLOs, CMBS, ABS, and residential REO.
• Strong credit performance across our loan businesses, including sequentially lower 90-day delinquency rates and continued low life-to-date realized credit losses in both our residential and commercial loan portfolios.
• Strong results from equity investments in loan originators.

During the quarter, the net interest margin⁷ on our credit portfolio decreased to 3.37% from 3.65%, with lower asset yields more than offsetting a slightly lower cost of funds. Asset yields declined primarily due to a higher proportion of loans held in warehouses pending securitization; this larger warehouse portfolio was the result of the deployment of the proceeds from the notes offering. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.

Agency

The long Agency RMBS portfolio decreased slightly quarter over quarter to $218.4 million as of December 31, 2025, compared to $220.7 million as of September 30, 2025.

Key Highlights⁶:

• Strong results driven by net interest income, net gains on Agency RMBS and net gains on interest rate hedges. Declining interest rate volatility and tightening Agency yield spreads were supportive of our portfolio.
• Pay-ups on our specified pools decreased to 0.79% as of December 31, 2025, from 0.81% as of September 30, 2025.

The net interest margin⁷ on our Agency portfolio (excluding the Catch-up Amortization Adjustment) decreased to 2.18% as of December 31, 2025, from 2.27% as of September 30, 2025, driven by a decrease in asset yields. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.

Longbridge Segment

The Longbridge segment reported net income of $16.4 million for the fourth quarter. The Longbridge portfolio (excluding non-retained tranches of consolidated securitization trusts) decreased by 18% sequentially to $617.2 million as of December 31, 2025, as continued strong proprietary reverse mortgage loan origination volume was more than offset by the completion of two securitizations.

Key Highlights⁶:

• Positive contribution from originations, supported by sequentially higher overall origination volumes, continued strong origination margins, and net gains related to the proprietary reverse mortgage loan securitizations completed during the quarter.
• Strong positive contribution from servicing, reflecting strong tail securitization executions, a net gain on the HMBS MSR Equivalent, driven primarily by improved profits from tail securitizations, along with steady base servicing net income.
• Net gains on interest rate hedges.

Corporate/Other Summary

Results also reflect: (i) an increase in the unrealized loss on our unsecured debt, driven by credit spread tightening during the quarter, (ii) debt issuance costs related to our October unsecured notes offering, which were fully expensed at issuance, and (iii) higher corporate-level interest expense due to a larger amount of unsecured notes outstanding.

Credit Portfolio⁽¹⁾

The following table summarizes our credit portfolio holdings as of December 31, 2025 and September 30, 2025:

Agency RMBS Portfolio

The following table⁽¹⁾ summarizes our Agency RMBS portfolio holdings as of December 31, 2025 and September 30, 2025:

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 insured by the FHA. 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 some of the proprietary reverse mortgage loans originated by Longbridge, and we have retained certain of the 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 December 31, 2025 and September 30, 2025:

The following table summarizes Longbridge's origination volumes by channel for the three-month periods ended December 31, 2025 and September 30, 2025:

Financing

Key Highlights:

• Recourse Debt-to-Equity Ratio: 1.9:1 as of December 31, 2025, compared to 1:8.1 as of September 30, 2025. We issued $400 million of unsecured notes during the quarter, a portion of which replaced repo borrowings; however, the overall ratio increased slightly as the remaining proceeds from that offering, along with incremental borrowings, funded new investments, outweighing the combined impact of repo paydowns, securitizations, and higher total equity.
• Overall Debt-to-Equity Ratio: 9.0:1 and 8.6:1 as of December 31, 2025 and September 30, 2025, respectively.

The following table summarizes our outstanding borrowings and debt-to-equity ratios as of December 31, 2025 and September 30, 2025:

Operating Results

The following table summarizes our operating results by strategy for the three-month period ended December 31, 2025:

The following table summarizes our operating results by strategy for the three-month period ended September 30, 2025:

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 Thursday, February 26, 2026, to discuss our financial results for the quarter ended December 31, 2025. 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 EFCQ425. 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 Thursday, February 26, 2026, at approximately 2:00 p.m. Eastern Time through Thursday, March 5, 2026 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 753-0348. International callers should dial (402) 220-2672. 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 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.

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 December 31, 2025 and September 30, 2025, 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:

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Investors:

Ellington Financial

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