Ellington Financial Reports Third Quarter 2026 Earnings Growth, Strong Portfolio Performance and $58 Million in Adjusted Distributable Earnings
Ellington Financial Inc. (NYSE: EFC) has reported its financial results for the third quarter ended September 30, 2026, highlighting solid earnings, continued portfolio expansion, strong credit performance, and progress in strengthening its funding structure. The company generated net income attributable to common stockholders of $40.4 million, equivalent to $0.31 per common share, during the quarter.
The results reflected contributions from the company’s diversified investment portfolio and Longbridge business, supported by income from residential mortgage-related assets, commercial mortgage bridge loans, corporate credit investments, and loan originator partnerships. Ellington Financial also reported adjusted distributable earnings of $58.0 million, or $0.45 per common share, demonstrating its ability to generate earnings above its quarterly dividend obligations.
The investment portfolio segment contributed $61.1 million, equivalent to $0.47 per common share, while the Longbridge segment generated $12.5 million, or $0.10 per common share, in net income attributable to common stockholders. These segment results were partially affected by unallocated Corporate/Other income and expense items.
Adjusted Distributable Earnings included $77.6 million, or $0.60 per common share, from the investment portfolio segment and $8.6 million, or $0.07 per common share, from Longbridge. The calculation also included $0.9 million in incentive fee expense, equivalent to $0.01 per common share, along with other unallocated Corporate/Other items.
Ellington Financial reported book value of $13.53 per common share as of September 30, 2026, after accounting for quarterly dividends of $0.39 per common share. The company also maintained a recourse debt-to-equity ratio of 2.2:1. When all recourse and non-recourse borrowings, primarily consisting of securitization-related liabilities, were included, the overall debt-to-equity ratio stood at 9.4:1.
The company continued to emphasize liquidity management and funding diversification. Approximately 25% of total recourse borrowings were long-term and non-mark-to-market, while 17% were unsecured. The weighted average remaining term of repo borrowings was 8.9 months.
As of September 30, 2026, Ellington Financial held approximately $1.92 billion in total unencumbered assets. This included $269.5 million in cash and cash equivalents and approximately $1.66 billion in other unencumbered assets, providing additional financial flexibility to support investment activities and manage market volatility.
CEO Highlights Strong Performance Amid Market Volatility
Ellington Financial Chief Executive Officer and President Laurence Penn said the company delivered strong results despite challenging financial market conditions during the third quarter. Rising interest rates and widening yield spreads toward the end of the reporting period created pressure across several investment markets. Nevertheless, the company generated positive GAAP earnings, maintained its book value per common share, and achieved adjusted distributable earnings above its dividend payments.
Penn also highlighted an annualized economic return of 9.4% during the quarter, reflecting the company’s ability to manage its investment portfolio and navigate changing market conditions.
The company’s performance benefited from several investment strategies, particularly retained tranches from non-qualified mortgage (non-QM) and Agency-eligible securitizations, commercial mortgage bridge loans, and corporate credit investments. Investments in loan originators also delivered positive results, with LendSure identified as a particularly strong contributor.
Longbridge, the company’s reverse mortgage business, also generated positive results. Higher loan origination volumes and gains from interest-rate hedging activities helped offset narrower origination margins and lower gains from proprietary securitizations.
Credit performance remained strong across the company’s investment portfolio. Delinquency trends improved, while interest-rate and credit hedges helped reduce the impact of increased market volatility toward the end of the quarter.
Penn emphasized that risk management and portfolio diversification remained central to the company’s financial strategy. By maintaining exposure across different mortgage-related assets, credit investments, and lending businesses, Ellington Financial aims to reduce dependence on individual market segments and identify opportunities during periods of changing interest rates.
Senior Unsecured Notes Offering Strengthens Funding Structure
A major development during the third quarter was Ellington Financial’s issuance of $150 million in additional 7.375% senior unsecured notes due 2030. The transaction was completed through an add-on offering, increasing the total outstanding amount of the note series to $550 million.
The company said the offering attracted strong institutional demand and was completed at a yield spread over U.S. Treasury securities approximately 70 basis points tighter than its previous issuance in the prior year.
The transaction was an important component of Ellington Financial’s strategy to diversify its funding sources and reduce reliance on secured financing arrangements that are subject to mark-to-market requirements.
Secured financing can provide investment companies with access to capital, but market volatility may increase funding pressure when asset values decline or lenders adjust collateral requirements. Expanding unsecured funding can help companies improve financial flexibility and reduce some of these pressures.
The timing of the September offering also provided additional liquidity ahead of the late-quarter market selloff. The proceeds strengthened the company’s ability to pursue investment opportunities while maintaining flexibility in its balance sheet.
Before the offering, Moody’s changed Ellington Financial’s rating outlook to Positive. The rating agency cited the company’s stronger funding profile, solid earnings performance, and improving asset quality.
According to management, the positive outlook reflected progress in the company’s efforts to strengthen its financial position and improve the quality and diversity of its funding arrangements.
Penn said the proceeds from the notes offering, together with available liquidity and capital released through securitization activities, supported meaningful growth in the company’s loan portfolios.
Residential Loan Portfolio Expands Through New Seller Relationships
Ellington Financial continued expanding its residential lending operations during the third quarter through its residential loan portal, which connects the company with a growing network of loan sellers.
The platform attracted 57 sellers during the quarter and generated approximately $1.6 billion in loan purchases. This activity complemented loan flows from Longbridge and other sourcing channels, allowing the company to increase its exposure to residential mortgage-related investments.
The residential loan portal is an important component of Ellington Financial’s proprietary sourcing strategy. By developing direct relationships with a broader group of sellers, the company can access additional loan opportunities and diversify the sources of assets entering its investment portfolio.
The expansion also supports the company’s objective of building a flexible investment platform capable of responding to changing conditions in residential mortgage markets.
Management indicated that liquidity from the unsecured notes offering and capital released through securitizations helped support the growth of its lending businesses.
Another important development was the completion of Ellington Financial’s acquisition of a controlling interest in Statebridge Company, LLC, a diversified loan servicing business.
The acquisition is expected to strengthen the company’s ability to manage delinquent loans and real estate owned (REO) assets by applying its data capabilities and workout expertise more directly to servicing operations.
Loan servicing is an important part of mortgage-related investment activities because it involves payment collection, borrower communication, account administration, and the management of loans experiencing financial difficulties.
By gaining greater control over servicing capabilities, Ellington Financial expects to improve loss mitigation strategies and enhance recoveries throughout different stages of the credit cycle.
The acquisition therefore represents an expansion of the company’s operating capabilities beyond traditional investment and lending activities.
Common Stock Issuance and Share Repurchases Support Capital Management
Ellington Financial also continued managing its common equity position during the third quarter through its at-the-market (ATM) equity offering program.
During July and August, the company issued 2,496,140 common shares at an average price of $13.61 per share. Management indicated that the shares were issued at approximately book value, supporting the company’s ability to raise additional capital without materially diluting existing shareholders relative to reported book value.
Following the end of the quarter, Ellington Financial repurchased 329,045 common shares at an average price of $11.44 per share.
The repurchases took place after the company’s share price declined to approximately 85% of its most recently reported book value per common share. Management viewed the opportunity as attractive because purchasing shares below book value can increase book value per remaining common share, assuming the transaction is completed at an appropriate discount.
However, the opportunity was relatively short-lived, limiting the total amount of shares repurchased to slightly less than $4 million.
Penn explained that the company would consider taking advantage of similar opportunities in the future if market conditions created an attractive valuation relative to book value.
The company’s approach reflects its broader capital allocation strategy, which seeks to balance equity issuance, investment growth, liquidity requirements, and shareholder returns.
Investment Portfolio Segment Delivers $61.1 Million in Net Income
Ellington Financial’s investment portfolio segment generated net income attributable to common stockholders of $61.1 million during the third quarter of 2026.
The segment remained a major contributor to overall company performance, supported by income from mortgage-related investments, commercial lending activities, corporate credit, and equity investments in loan originators.
The total adjusted long portfolio increased by 4.5% sequentially to approximately $4.70 billion as of September 30, 2026.
Portfolio growth was primarily driven by net purchases of residential transition loans, closed-end second lien loans, Agency-eligible residential mortgage loans, prime jumbo residential mortgage loans, and commercial mortgage bridge loans.
The company also increased its retained residential mortgage-backed securities (RMBS) portfolio.
These additions were partially offset by continued securitization activity and a reduction in the company’s Agency RMBS holdings.
The portfolio expansion demonstrates Ellington Financial’s continued focus on identifying opportunities across multiple segments of the mortgage and credit markets.
During the quarter, net interest income remained robust, while gains on hedging activities more than offset net realized and unrealized investment losses. Earnings from unconsolidated entities also contributed positively to the segment’s results.
Several investment strategies delivered particularly strong performance. Retained tranches from non-QM and Agency-eligible mortgage securitizations were important contributors, alongside commercial mortgage bridge loans and equity investments in loan originators, particularly LendSure.
The company also benefited from retained tranches of closed-end second lien loan securitizations, non-Agency RMBS, collateralized loan obligations (CLOs), and corporate debt and equity investments.
However, these positive contributions were partially offset by negative results from warehoused non-QM whole loans, retained tranches of residential transition loan securitizations, commercial mortgage-backed securities (CMBS), and residential and commercial REO assets.
Despite these differences across individual investment categories, overall credit performance remained strong.
Ellington Financial reported sequentially lower 90-day delinquency rates across its loan businesses, along with continued low realized loan losses over the life of its investments.
These credit indicators supported the company’s assessment that its underlying loan portfolio remained resilient despite changing market conditions.
Higher Asset Yields Improve Investment Portfolio Net Interest Margin
Another positive development was the improvement in the investment portfolio’s net interest margin.
During the third quarter, the net interest margin increased to 3.55%, compared with 3.36% in the second quarter.
The improvement reflected higher yields generated by the company’s assets, which more than offset the increase in funding costs.
Ellington Financial also benefited from modestly higher positive carry on its interest-rate swaps. Its weighted average receive rate continued to exceed its weighted average pay rate, supporting investment income.
Interest-rate swaps are important risk-management instruments for financial institutions and mortgage investors because they can help reduce the impact of changing interest rates on asset values, funding costs, and earnings.
By maintaining hedging positions alongside its underlying investments, Ellington Financial seeks to manage interest-rate exposure while preserving opportunities to generate income.
The improvement in net interest margin also demonstrates the importance of balancing asset yields with financing expenses in a business model that relies on mortgage-related investments and other income-producing assets.
Statebridge Acquisition Expands Loan Servicing Capabilities
Ellington Financial’s acquisition of a controlling interest in Statebridge Company, LLC, represents another important development in its investment portfolio strategy.
Statebridge provides diversified loan servicing services and is expected to support Ellington Financial’s efforts to improve the management of delinquent loans and REO properties.
As of September 30, 2026, Statebridge serviced approximately 14,700 loans with an aggregate unpaid principal balance (UPB) of $1.9 billion. Nearly all of these loans were serviced for third-party clients.
Its servicing portfolio included approximately 3,500 non-QM and residential transition loans with $1.1 billion in UPB.
The company also serviced approximately 4,900 qualifying-mortgage loans with $600 million in UPB, alongside approximately 6,300 consumer installment and commercial mortgage loans with $200 million in UPB.
This diversified servicing portfolio provides Statebridge with exposure to several lending categories and gives Ellington Financial access to additional operational capabilities.
Management expects the acquisition to create opportunities to apply its existing data resources and credit workout expertise more directly to servicing activities.
In particular, improved access to servicing information and operational processes could help the company identify potential credit problems earlier, develop appropriate borrower solutions, and improve recovery outcomes.
The acquisition also supports greater integration between Ellington Financial’s investment activities and the servicing operations associated with its loan portfolios.
Longbridge Segment Reports Higher Origination Volumes
Ellington Financial’s Longbridge segment generated net income attributable to common stockholders of $12.5 million during the third quarter, compared with $30.2 million in the second quarter.
Adjusted Distributable Earnings for the segment totaled $8.6 million, down from $28.9 million in the preceding quarter.
The sequential decline was primarily attributable to narrower loan origination margins and lower gains from proprietary reverse mortgage securitizations.
Despite the reduction in quarterly earnings, Longbridge recorded stronger loan origination activity.
The business originated approximately $676.3 million in loans during the third quarter, representing an increase of 36% compared with the same period in the previous year.
This higher production contributed to a 59% sequential increase in Longbridge’s net portfolio, which reached approximately $1.0 billion as of September 30, 2026.
However, much of this portfolio increase was subsequently reversed following the October settlement of a proprietary reverse mortgage loan securitization that had been priced in September.
Longbridge’s operating performance reflected different trends across its origination and servicing businesses.
Higher origination volumes supported revenue generation, but increased interest rates contributed to pressure on origination margins. At the same time, servicing activities benefited from strong securitization executions, steady base servicing income, and gains from mortgage servicing rights-related hedging activities.
These positive contributions were partially offset by a mark-to-market loss on the company’s home equity conversion mortgage-backed securities (HMBS) mortgage servicing rights.
The segment also recorded significant net gains on enterprise interest-rate hedges designed to mitigate the potential impact of rising interest rates on origination profitability.
However, retained tranches of consolidated proprietary reverse mortgage securitization trusts recorded net unrealized losses, primarily reflecting revised home price projections.
Despite these challenges, Longbridge continued to strengthen its position in the reverse mortgage market.
During the quarter, the business achieved a record HMBS market share of 31%, ranking as the second-largest issuer in the market, according to Bloomberg.
This achievement highlights the segment’s growing origination capacity and its competitive position in the reverse mortgage industry.
Reverse Mortgage Business Strengthens Market Position
Longbridge’s performance during the third quarter highlighted the importance of its origination and servicing operations within Ellington Financial’s diversified business model.
Reverse mortgages allow eligible homeowners, generally older adults, to access the equity accumulated in their homes without making traditional monthly mortgage payments. These products create opportunities for lenders and investors, while also requiring specialized expertise in loan origination, servicing, securitization, and interest-rate risk management.
Longbridge’s ability to increase origination volumes by 36% year over year demonstrates continued demand and operating activity in this market.
The segment’s record 31% HMBS market share further reflects its growing presence in the industry. Ranking as the second-largest issuer represents a significant competitive achievement and provides a foundation for continued business development.
At the same time, the quarterly results demonstrate that reverse mortgage operations remain sensitive to interest rates, home price expectations, securitization conditions, and origination margins.
Ellington Financial’s hedging activities and servicing capabilities are therefore important elements of its strategy to manage these risks and maintain consistent operating performance.
Liquidity and Risk Management Remain Key Priorities
Ellington Financial’s third-quarter results also highlighted the importance of maintaining adequate liquidity and managing financing exposure during periods of market uncertainty.
The company ended September with $1.92 billion in unencumbered assets, including $269.5 million in cash and cash equivalents and $1.66 billion in other unencumbered assets.
Its recourse debt-to-equity ratio remained at 2.2:1, while the ratio including recourse and non-recourse borrowings stood at 9.4:1.
The company also maintained a diversified borrowing structure, with 25% of recourse borrowings classified as long-term and non-mark-to-market and 17% consisting of unsecured financing.
The weighted average remaining term of repo borrowings was 8.9 months.
These funding characteristics provide important context for evaluating the company’s ability to navigate changes in financing markets.
Market volatility can affect mortgage valuations, borrowing costs, collateral requirements, and securitization activity. Maintaining sufficient liquidity and a diversified funding base can help reduce the risk of forced asset sales and provide flexibility when attractive investment opportunities emerge.
Ellington Financial’s September unsecured notes offering further supported this objective by providing additional capital without increasing dependence on secured, mark-to-market financing to the same extent.
Looking ahead, Ellington Financial expects its diversified business model, proprietary asset-sourcing channels, flexible balance sheet, and disciplined risk management practices to support its ability to navigate changing market conditions.
Management sees potential investment opportunities emerging following recent increases in interest rates and market volatility.
The company’s residential loan sourcing platform, Longbridge operations, commercial mortgage lending activities, and corporate credit investments provide multiple channels through which it can identify and pursue investment opportunities.
The Statebridge acquisition also adds servicing capabilities that could help improve credit management and recovery outcomes across the company’s lending activities.
At the same time, Ellington Financial’s funding diversification strategy is expected to remain an important component of its long-term development. The company intends to continue balancing secured and unsecured financing, maintaining liquidity, and evaluating capital allocation opportunities.
Its recent share repurchases also demonstrate management’s willingness to use available capital when market valuations create opportunities to enhance shareholder value.
Overall, Ellington Financial’s third-quarter 2026 performance reflected contributions from its investment portfolio and Longbridge operations, continued expansion of its lending activities, and progress in strengthening its balance sheet.
Although lower reverse mortgage securitization gains and narrower origination margins affected Longbridge’s sequential earnings, strong investment portfolio performance, improved net interest margin, and effective hedging activities supported the company’s overall results.
With $58.0 million in adjusted distributable earnings, book value of $13.53 per common share, and substantial unencumbered assets, Ellington Financial entered the final quarter of 2026 with significant liquidity and a diversified investment platform.
The company’s ability to maintain credit quality, manage financing costs, expand proprietary sourcing channels, and identify attractive opportunities across mortgage and credit markets will remain important factors in its financial performance and long-term strategy.
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