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.
Loan sourcing, securitization and credit performance
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.
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.
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 posts higher originations
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.
Funding and portfolio strategy
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.
Servicer acquisition and market outlook
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.
About Ellington Financial (NYSE:EFC)
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 contact@marketbeat.com.
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