Layla Zulfa
New York, NY – August 15, 2026 – Ellington Financial Inc. (NYSE: EFC) today announced a strong second quarter for 2026, reporting net income attributable to common stockholders of $54.4 million. This performance was significantly bolstered by the exceptional credit performance of its loan portfolio and a substantial surge in reverse mortgage origination volume at its wholly-owned subsidiary, Longbridge Financial. The Connecticut-based real estate investment trust (REIT) also reported adjusted distributable earnings (ADE) of $75.5 million, or $0.60 per share, comfortably exceeding its quarterly dividend payout of $0.39 per share. As of June 30, 2026, the company’s book value per common share stood at $13.61, reflecting the impact of dividends distributed during the quarter.
The robust financial results underscore a strategic period of growth and profitability for Ellington Financial. The company’s diversified business model, encompassing both a substantial investment portfolio and a burgeoning reverse mortgage segment, proved resilient and effective in the prevailing market conditions. The investment portfolio segment alone contributed $74.2 million in net income attributable to common stockholders, while the Longbridge reverse mortgage operations added a significant $30.2 million to this figure. On an adjusted distributable earnings basis, the investment portfolio generated $75.7 million, with Longbridge contributing $28.9 million.
Laurence Penn, Ellington Financial’s CEO and President, expressed considerable satisfaction with the company’s achievements during the quarter. "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," Penn stated in a press release. This optimistic outlook is supported by tangible financial metrics that demonstrate the company’s operational efficiency and strategic foresight.
Longbridge Financial Fuels Reverse Mortgage Expansion
The standout performance of Longbridge Financial, a key driver of Ellington’s growth, is particularly noteworthy. The subsidiary reported a net income of $30.2 million attributable to common stockholders in the second quarter. More impressively, Longbridge originated $589.7 million in reverse mortgages between April and June, marking a substantial 38% increase compared to the same period in 2025. This surge in origination volume signals a growing demand for reverse mortgage products and Longbridge’s increasing capacity to meet that demand.
During the quarter, Longbridge successfully completed two proprietary reverse mortgage securitizations. While these transactions, which involved removing securitized loans from the balance sheet, led to a sequential 7% decline in the Longbridge portfolio to $649.3 million as of June 30, 2026, this strategic move reflects a focus on optimizing capital and enhancing liquidity. The decline in portfolio size is a direct consequence of effective balance sheet management and the strategic deployment of securitization as a funding and risk-mitigation tool.
The strong contributions from originations were multifaceted. Longbridge benefited from net gains associated with its proprietary reverse securitizations and sustained robust profit margins. Furthermore, positive servicing income was generated through successful "tail securitization" executions and steady base servicing results. The company also prudently managed its exposure to interest rate volatility by recording net gains on enterprise interest rate hedges, specifically designed to safeguard origination profitability against the backdrop of potentially rising interest rates.
JR Herlihy, Ellington Financial’s Chief Financial Officer, elaborated on Longbridge’s performance during an earnings call with investors and analysts. "Originations at Longbridge benefited from strong volumes, healthy margins and gains from the two proprietary reverse mortgage securitizations completed during the quarter," Herlihy remarked. He further emphasized the significance of these transactions, stating, "Those transactions represented Longbridge’s strongest financing execution to date for this product, as measured by overall debt spreads." This indicates not only a strong operational performance but also favorable market reception for Longbridge’s securitized products.
Proprietary reverse mortgages constituted a significant portion of Longbridge’s total reverse mortgage volume, accounting for $316.2 million or 54% of its business in the second quarter. This aligns closely with broader industry trends, where proprietary products are gaining traction. Within its proprietary origination channels, wholesale and correspondent partners represented 72% of the business, while the retail channel accounted for the remaining 28%. A similar distribution was observed in its Home Equity Conversion Mortgage (HECM) production, with 73% of its HECM business flowing through wholesale and correspondent channels. This dual-channel strategy allows Longbridge to tap into diverse market segments and leverage the reach of its partners.
For the first time, Longbridge also began reporting loan submission volume, a key indicator of future origination potential. While not all submissions result in funded loans, the upward trend in this metric is a positive sign. The company reported a 17% increase in submissions from the first quarter and a substantial 34% rise year-over-year. This growing pipeline of potential business underscores the company’s efforts to expand its market presence. Herlihy confirmed this positive momentum, noting that "July 2026 marking Longbridge’s highest ever month for prop reverse mortgage originations and submissions."
Longbridge’s strategic focus on the HECM market has also yielded significant results. Its market share in the HECM Mortgage-Backed Securities (HMBS) market reached a new high of 29% for the quarter, positioning it as the second-largest issuer in the market, trailing only Finance of America. This achievement highlights a broader industry trend of consolidation in HMBS issuance among a few dominant platforms. It also underscores the increasing importance for reverse mortgage lenders and capital providers to have access to robust securitization markets and the financial backing of publicly traded parent companies like Ellington Financial.
The competitive dynamics in the reverse mortgage market were further illuminated by Penn’s commentary on interest rate impacts. "When rates are low, the principal limit factors that are dictated by [the Federal Housing Administration] actually are often more competitive than on the prop side, but when rates rise, the opposite is true," Penn explained. "We’re actually, in some cases, seeing the prop product take some of that market share away from the government product." This suggests that Longbridge’s proprietary products are well-positioned to capitalize on market shifts driven by interest rate environments, potentially capturing market share from government-backed HECM loans as rates fluctuate.
Ellington Portfolio Demonstrates Resilience and Strategic Development
Beyond its reverse mortgage operations, Ellington Financial’s investment portfolio continued to perform strongly, demonstrating resilience and strategic depth. As of June 30, 2026, the company’s total adjusted investment portfolio saw a modest increase of approximately 1% quarter-over-quarter, reaching $4.50 billion. The largest components of this portfolio remained Non-QM loans and retained residential mortgage-backed securities (RMBS), representing $2.69 billion, or 45.3% of the long portfolio. Residential transition loans (RTLs) and other residential mortgages accounted for $996.4 million (16.8%), followed by commercial mortgage loans at $836.7 million (14.1%).
Other significant holdings within the portfolio included $301.4 million in home equity lines of credit, closed-end second-lien loans, and retained RMBS; $189.7 million in agency pass-throughs; and $183.5 million in agency-eligible residential mortgages and retained RMBS. The company also maintained exposure to Collateralized Loan Obligations (CLOs) across dollar and non-dollar positions, totaling approximately $101.1 million, and corporate debt, equity, and corporate loans amounting to $42.2 million.
Ellington reported what it characterized as "excellent performance" across the majority of its investment portfolio. This strong performance was particularly evident in its residential credit strategies, encompassing non-QM loans, agency-eligible loans, retained tranches of residential transition and second-lien deals, non-agency RMBS, and forward MSR-related investments. This diversified approach to credit investment has proven effective in generating consistent returns and managing risk.
A significant strategic development on the horizon for Ellington Financial is its imminent acquisition of a special servicer. This move is aimed at enhancing the company’s ability to manage distressed borrowers and proactively address potential delinquencies and foreclosures, thereby improving its overall financial position. The acquisition signals a commitment to building a more integrated and comprehensive servicing platform.
Mark Tecotzky, Ellington Financial’s Co-Chief Investment Officer, highlighted the strategic rationale behind this acquisition. "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," Tecotzky explained. He further elaborated on the anticipated benefits, stating, "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." This initiative demonstrates a forward-looking strategy focused on operational control and value creation through enhanced asset management.
Penn echoed these sentiments, acknowledging that while the immediate impact on the balance sheet or earnings might not be substantial, the long-term vision is clear. "It’s not going to bring any appreciable size of MSRs that are going to have noticeable impact on our balance sheet, per se, or frankly even on our earnings in the beginning," Penn conceded. "But as Mark said, we have big plans, especially to build out the special servicing aspects of the business. We think they [the undisclosed servicer to be acquired] already have some real good expertise in that area." This indicates a strategic investment in building a core competency that is expected to yield significant returns as the platform matures and integrates with Ellington’s existing operations.
The second quarter of 2026 thus marks a period of significant achievement for Ellington Financial. The company’s dual-pronged strategy of expanding its reverse mortgage business through Longbridge Financial and maintaining a robust, well-performing investment portfolio has yielded impressive financial results. The proactive steps taken, such as strategic securitizations and the planned acquisition of a special servicer, position Ellington Financial for continued growth and resilience in the evolving financial landscape.
This article was written by Neil Pierson and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.
