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    EFC
    Earnings call· Jun 2026(Q2 FY26)

    Ellington Financial Q2 FY26 earnings call EFC

    Aug 7, 2026 Source

    Executive summary

    Ellington Financial Q2 FY26 — Strong Performance Across Diversified Platform

    Ellington Financial delivered a strong quarter, driven by excellent securitization execution, outstanding results from Longbridge, and robust credit performance across loan portfolios. The company continues to build book value per share through excess earnings, reinforcing its diversified and resilient earning stream. Management aims for a virtuous cycle of stronger balance sheets and improved credit ratings.

    Highlights

    5

    • Generated GAAP net income of 43 cents per share for Q2 FY26.

    • Achieved Adjusted Distributable Earnings (ADE) of 60 cents per share for Q2 FY26, well above the 39 cents quarterly dividend.

    • Increased book value per share by 5 cents to $13.61 after dividends for Q2 FY26.

    • Longbridge originations were up 38% year-over-year in Q2 FY26.

    • Securitized approximately $2 billion of loans during Q2 FY26, with H1 2026 securitizations reaching $4 billion UPB.

    Concerns

    3

    • Lower FICO scores and cash-out refinancing

    • Commercial real estate downturn / stressed assets

    • Interest rate volatility

    Guidance & targets

    1
    CategoryTargetConfidence
    Adjusted Distributable Earnings (ADE) run rate
    high 40s cents per share
    high materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Longbridge
    Longbridge delivered an outstanding quarter with significant year-over-year growth in originations, driven by proprietary reverse mortgages. Strong submission volumes indicate continued momentum. The segment's contribution to ADE has significantly increased, supported by MSR profits and securitization activity, with efficiency gains from technology investments.
    Origination Volume: ~$590 millionProprietary Reverse Mortgage Volume: ~54% of totalHECM Volume: ~46% of totalQ2 Submissions: $870 millionQ1 Submissions: $750 millionJuly 2026 Prop Reverse Originations/Submissions: Highest ever monthADE Contribution Q2 FY26: 23 cents per shareADE Contribution Q1 FY26: 21 cents per shareADE Contribution 2025 Average: 12 cents per shareMSR Net Profits: ~6-6.5 cents per shareOrigination/Securitization/G&A Contribution: ~16-17 cents per shareFunded Loans per Operations Employee: More than doubled since Jan 2023
    		—38%——

    Operational metrics

    23
    Loan purchases per day
    $15 million
    Q2 FY26

    Ellington's proprietary residential loan portal is generating more than $15 million of loan purchases per day.

    Annual pace of loan purchases
    $4 billion
    Annual

    The proprietary residential loan portal is purchasing loans at a pace of around $4 billion annually.

    Loans securitized
    $2 billion
    Q2 FY26

    Approximately $2 billion of loans were securitized during the quarter.

    Cumulative realized credit losses (residential mortgage)
    17 bps
    Inception to date

    Inception to date cumulative realized credit losses were 17 basis points on approximately $20.4 billion of residential mortgage loan fundings.

    Cumulative realized credit losses (commercial mortgage bridge loan)
    39 bps
    Inception to date

    Inception to date cumulative realized credit losses were 39 basis points on more than $2.5 billion of commercial mortgage bridge loan originations.

    Adjusted long investment portfolio
    increased modestly
    Q2 FY26

    The adjusted long investment portfolio increased modestly during the quarter, as growth in residential transition loans, commercial mortgage bridge loans, and retained RMVs more than offset securitization activity.

    Weighted average borrowing rate on recourse borrowings
    5.5%unchanged from prior quarter
    Q2 FY26 end

    At quarter end, the weighted average borrowing rate on recourse borrowings was 5.5%, essentially unchanged from the prior quarter.

    Net interest margin
    336 bpsroughly unchanged quarter over quarter
    Q2 FY26

    Contributing to a solid overall net interest margin of 336 basis points, which was also roughly unchanged quarter over quarter.

    Long-term and non-market market recourse borrowings
    29%
    Q2 FY26 end

    Approximately 29% of our recourse borrowings were long-term and non-market market.

    Unsecured debt as % of recourse borrowings
    17%
    Q2 FY26 end

    17% consisted of unsecured debt.

    Weighted average remaining term of repo borrowings
    9.3 monthsapproximately double mid-2025 level
    Q2 FY26 end

    The weighted average remaining term of our repo borrowings increased to 9.3 months, approximately double the level in mid-2025.

    Securitized UPB
    $4 billionvs $4.4 billion in all of 2025
    H1 2026

    Through the first half of 2026, we securitized approximately $4 billion unpaid principal balance compared to 4.4 billion UPV during all of 2025.

    Recourse debt-to-equity ratio
    1.9 to 1
    Q2 FY26 end

    At quarter end, our recourse debt-to-equity ratio remained 1.9 to 1.

    Overall debt-to-equity ratio
    9.2 to 1increased modestly
    Q2 FY26 end

    Our overall debt-to-equity ratio increased modestly to 9.2 to 1, primarily reflecting additional non-recourse borrowings associated with recent securitizations.

    Book value per share
    $13.61increased by 5 cents
    Q2 FY26 end

    At quarter end, book value per share increased by 5 cents to 1361 after 39 cents per share of dividends.

    Quarterly dividend
    39 cents
    Quarterly

    Our 13-cent monthly dividend remains appropriate, totaling 39 cents quarterly.

    Dividend coverage
    8 consecutive quarters
    Trailing

    We've now covered our dividend for eight consecutive quarters and counting.

    Total investment amount on balance sheet (stakes)
    $100 million
    Q2 FY26

    The total investment amount on our balance sheet for all stakes (excluding consolidated Longbridge) is $100 million.

    Agency portfolio size
    $200 million
    Q2 FY26

    The agency portfolio is now on an invested basis sub $200 million.

    Agency portfolio capital allocation
    1%vs 22% several years ago
    Q2 FY26

    On a capital basis, the agency portfolio is 1%, compared to 22% several years ago.

    New issue non-agency mortgage securitizations
    $250 billion
    FY26

    We expect approximately $250 billion of new issue non-agency mortgage securitizations this year.

    New issue size per week
    $5 billion
    Weekly

    Thinking about $5 billion in new issue size a week.

    Unsecured notes trading yield
    low sevens
    Q2 FY26

    Our unsecured notes are trading in the low sevens.

    Industry KPIs

    1
    MetricValueDetails
    Ffo core ffo normalized ffo per share60 centsUSD

    Orderbook & backlog

    1
    Longbridge Submissions$870 millionQ2 FY26

    Up from $750 million in Q1 FY26

    Submissions provide a useful leading indicator of future origination volume, though not all submissions lead to originations.

    Deals & partnerships

    1
    UndisclosedAcquisition of a small residential loan servicer to build out special servicing capabilities.

    The acquired servicer has single-digit billions of servicing rights and some sub-servicing contracts, servicing many different types of loans. The acquisition is motivated by the need for high-quality special servicing as third-party capabilities have diminished.

    Risks & headwinds

    3
    Lower FICO scores and cash-out refinancingPast year

    Higher delinquencies observed on lower FICO scores; cash-out refinancing in high-rate environment can be a signal of weakness.

    Mitigation: Kept consumer portfolio relatively small; focus on higher FICO, higher income borrowers for non-QM.

    Commercial real estate downturn / stressed assetsOngoing

    Increased supply of non-performing loans in the commercial mortgage space, particularly in sub-$50 million and sub-$25 million loan areas.

    Mitigation: Monitoring for attractive opportunities to acquire stressed assets; focus on smaller loans where there may be fewer buyers.

    Interest rate volatilityOngoing

    Potential for more interest rate volatility under the current Fed framework.

    Mitigation: Accurately and closely ring-fencing interest rate risk of investments; insulating the portfolio from changes in interest rate risk through hedging instruments; portfolio is largely immunized as shown by sensitivity analysis.

    What to watch in Q3 FY26

    5

    Residential Servicer Acquisition Closure

    Q3 FY26
    CurrentPending regulatory approval
    TargetClosed

    Why it matters

    The closure of this acquisition is critical for building out the company's special servicing platform, which is expected to unlock significant value and improve outcomes for delinquent loans.

    That acquisition should close in Q3.

    Q&A highlights

    5

    Can you provide more details on the pending acquisition of a residential servicer, specifically if it includes MSR assets or sub-servicing contracts?

    The acquisition is of a small servicer with single-digit billions of servicing rights and some sub-servicing contracts, diversified across loan types. It's not expected to significantly impact MSRs or earnings initially, but the focus is on building out special servicing capabilities to optimize outcomes for delinquent loans. The motivation is to address diminished third-party special servicing capabilities as Ellington's market footprint grows.

    “It's a recognition that over the past several years, you know, 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. 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 quality touch servicing and we've seen the benefit of building things organically in collaboration with an experienced management team so it's really really.”

    asked by Unknown Speaker · answered by Mark Tecotzky (Executives)

    2 min read6 chapters

    Detailed Narrative

    01

    Diversified Platform and Proprietary Sourcing

    Ellington Financial's strong performance is attributed to its diversified platform, including securitization execution, Longbridge's results, and contributions from other loan origination partners. The company's proprietary residential loan portal now generates over $15 million in daily loan purchases, totaling approximately $4 billion annually, supplying a significant portion of securitized loans. Longbridge also provides an expanding pipeline of proprietary reverse mortgage loans.

    02

    Credit Performance and Underwriting

    The company emphasizes its long-standing focus on proprietary research, data, and modeling, with 20% of employees dedicated to research and technology. This focus translates into strong credit outcomes, with inception-to-date cumulative realized credit losses of only 17 basis points on $20.4 billion of residential mortgage loan fundings and 39 basis points on over $2.5 billion of commercial mortgage bridge loan originations. The EFMT non-QM shelf consistently ranks high for low delinquencies and controlled prepayment speeds.

    03

    Longbridge Segment Performance

    Longbridge delivered another outstanding quarter, with originations up 38% year-over-year to approximately $590 million. Proprietary reverse mortgages accounted for 54% of this volume, reaching record levels, while HECMs made up the remaining 46%. The segment benefited from strong volumes, healthy margins, and improved securitization executions, with servicing also contributing significantly. Submissions for Q2 FY26 were $870 million, up from $750 million in Q1 FY26, indicating a healthy pipeline.

    04

    Financing and Balance Sheet Management

    Ellington Financial continues to focus on improving its liability structure. The weighted average borrowing rate on recourse borrowings remained stable at 5.5%, contributing to a net interest margin of 336 basis points. The company increased the weighted average remaining term of its repo borrowings to 9.3 months, reducing refinancing risk. Securitization activity replaced short-term mark-to-market financing with longer-term non-recourse financing, with $4 billion UPB securitized in H1 2026 compared to $4.4 billion in all of 2025.

    05

    Strategic Investments and M&A

    The company continues to invest in technology and automation, particularly at Longbridge, where funded loans per operations employee have more than doubled since January 2023. A small residential loan servicer acquisition is expected to close in Q3, aimed at building a best-in-class special servicing platform. Management views additional M&A and investments in loan originators as a key part of its playbook, leveraging its expertise and capital to support smaller originators and expand product offerings.

    06

    Market Outlook and Hedging

    Despite rising interest rates and market volatility🌐, mortgage and structured credit markets remain constructive. The non-agency mortgage securitization market is estimated to reach $250 billion in new issue volume this year, attracting new investors and improving liquidity. The company uses credit hedges tactically to lock in execution for deals and strategically to protect the portfolio from economic shocks. Interest rate hedges are designed to insulate the portfolio from rate changes, maintaining a largely immunized position.

    AI-generated summary of the company’s earnings call. Not investment advice.