Ellington Financial Inc. (NYSE:EFC) Q4 2025 Earnings Call Transcript

Ellington Financial Inc. (NYSE:EFC) Q4 2025 Earnings Call Transcript February 26, 2026

Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0. Any member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning, ladies and gentlemen. Thank you for standing by. Today’s call is being recorded. Welcome to the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question during that time, simply press star then the number 1 on your telephone keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Alaael-Deen Shilleh. You may begin. Thank you.

Alaael-Deen Shilleh: Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and involve risks and uncertainties detailed in our annual and quarterly reports filed with the SEC. Actual results may differ materially from these statements, so they should not be considered to be predictions of future events. The company undertakes no obligation to update these forward-looking statements. Joining me today are Laurence Penn, Chief Executive Officer of Ellington Financial Inc.; Mark Tecotzky, Co-Chief Investment Officer; and JR Herlihy, Chief Financial Officer.

Today’s call will track the presentation. Our fourth quarter earnings conference call presentation is available on our website, ellingtonfinancial.com, and all statements and references to figures are qualified by the important notice and end notes in the back of the presentation. With that, I will hand the call over to Larry.

Laurence Penn: Thanks, Alaael-Deen. Good morning, everyone. Thank you for joining us today. I will begin on slide three of the presentation. Ellington Financial Inc. closed out 2025 on a high note, capping a year of consistently strong performance, portfolio growth, and liability optimization. In the fourth quarter, and building on the momentum established throughout the year, our adjusted distributable earnings continue to substantially exceed our dividends. We further expanded our investment portfolio from our unsecured notes offering and from our RTL securitization, which I will discuss later. While we were deploying the proceeds, I am all the more pleased with these results and ADE of $0.47 per share, which once again exceeded our $0.39 per share of dividends.

For the fourth quarter, we reported GAAP net income, given that we experienced some short-term drags and we continue to enhance our balance sheet. Our results were driven by exceptional performance in our loan origination and securitization platforms, with outsized contributions once again from our Longbridge segment. Our results were also reinforced by excellent credit performance across our residential and commercial loan portfolios. In early October, we successfully completed a $400,000,000 unsecured notes offering, our largest to date, marking a significant step forward in the evolution of our capital structure, and are encouraged by the significant premium at which the bonds continue to trade today. Consistent with our stated intentions, we used a portion of the offering proceeds to reduce short-term repo financing.

During the quarter, we also capitalized on the continued strength of the securitization market, completing seven additional securitizations over the course of the quarter. Most notably, in November, we completed our first securitization of residential transition loans. This securitization carries a revolving structure. So as our securitized RTL loans pay off, we can effectively reuse the securitization debt on a non-recourse, non mark-to-market basis to finance our flow of new RTL originations. Subsequent to year end, we completed our first securitization of agency-eligible mortgage loans. This expansion allows us to term out financing, replacing repo financing and further enhancing balance sheet resilience and capital efficiency. With that securitization, we have now expanded our EFMT-branded securitization shelf to encompass five different residential loan sectors across all of our major residential loan strategies.

Since launching our RTL strategy back in 2018, RTLs have generated consistently strong returns on equity for us. The aftermath of 2022 and 2023, however, as credit spreads widened and the yield curve inverted, securitization economics for RTL were typically unattractive relative to simple repo financing. That calculus has now shifted. The yield curve normalized, with securitization spreads relatively tight, and with the rating agencies taking a more constructive view of the product, securitization economics are now superior for RTL. The result is attractive long-term non mark-to-market financing, helping us manufacture high-yielding retained tranches and enhance EFC’s overall portfolio returns. As to our agency-eligible loan strategy, we initiated that strategy just last year, adding about $250,000,000 of loans in that sector over the course of 2025.

This move reflected a more general theme that we have highlighted on our prior earnings calls: moving into sectors where the GSEs are gradually reducing their footprint, which clears the way for private capital to step in and capture attractive risk-adjusted returns. We view the agency-eligible sector, particularly those subsectors where we think LLPAs are too high, as presenting a potentially significant long-term opportunity for EFC, especially given all the obvious synergies with our underwriting abilities, our sourcing channels, and the quality of our securitization platform. We also believe that the opportunities in the agency-eligible sector space only get better as policymakers appear increasingly receptive to an expanded role for private capital.

Shifting over to EFC’s balance sheet, we continue to focus on optimizing our capital structure and maximizing our resilience. In the fourth quarter, thanks to our unsecured notes offering, we almost doubled the proportion of our total recourse borrowings represented by long-term non mark-to-market borrowings, and we increased our unencumbered assets by about 45%. Alongside these balance sheet enhancements, we continued to lean into attractive investment opportunities in the fourth quarter. We deployed a portion of the proceeds from the notes offering into new investment opportunities, expanding our portfolio by 9% even after accounting for all our securitization activity. Our portfolio continues to benefit from strong origination and acquisition volumes across non-QM loans, agency-eligible loans, closed-end second-lien loans, proprietary reverse mortgages, and commercial mortgage bridge loans.

By year end, we had largely deployed the full proceeds of the notes offering to generate the precise amount of proceeds we needed to redeem our highest-cost tranche, and all this momentum has carried into 2026, positioning the portfolio for continued earnings strength into the new year. In January, with our common stock trading at a premium to book value per share, we raised common equity on an accretive basis, net of all deal costs. The issuance was not only accretive but highly targeted. We sized the offering to announce the redemption of our series A preferred stock, and we announced the redemption of that tranche immediately following the closing of the offering. The coupon on our series A preferred stock was over 9%. So starting tomorrow, when the required 30-day notice period ends and the redemption of that tranche is completed, our common shareholders will immediately see the benefit of a lower overall cost of capital.

We will continue to monitor the preferred equity market with an eye toward potentially refinancing that capital at a later date and at a lower cost. With that, please turn to slide five and I will turn the call over to JR to walk through our financial results in more detail. JR?

JR Herlihy: Larry. Good morning, everyone. For the fourth quarter, we reported GAAP net income of $0.14 per common share on a fully mark-to-market basis and ADE of $0.47 per share. On slide five, you can see the ADE breakdown by segment: $0.35 per share from credit, $0.04 from agency, and $0.13 from the Longbridge segment. Partially offsetting these results were net realized and unrealized losses on some of our other credit hedges as well as losses on residential REO. On slide six, you can see the portfolio income breakdown by strategy. In the credit portfolio, net interest income increased sequentially, and we also generated net realized and unrealized gains on non-QM retained tranches and forward MSR-related investments. We continue to benefit from excellent earnings from our affiliate loan originators along with 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, as shown on slide 15.

In the agency strategy, declining interest rate volatility and tightening agency yield spreads were broadly supportive of our portfolio in the fourth quarter. We generated strong results, led by net gains on both long agency RMBS and interest rate hedges. The Longbridge segment had another excellent quarter as well with positive contributions from both originations and servicing. Origination profits were driven by sequentially higher origination volumes, continued strong origination margins, and net gains related to two proprietary loan securitizations completed during the quarter. On the servicing side, steady base servicing net income, net gains on interest rate hedges, and a net gain on the HMBS MSR equivalent all contributed positively.

Turning now to portfolio changes during the quarter, slide seven shows a 15% increase in our adjusted long credit portfolio to $4,100,000,000 quarter over quarter. Non-QM loans, agency-eligible loans, closed-end second-lien loans, commercial mortgage bridge loans, ABS, and CLOs all expanded. Our portfolio of retained RMBS tranches also grew, reflecting the securitizations we executed during the quarter. These increases were partially offset by the impact of loans sold in securitizations. Our short-duration loan portfolios continue to return capital at a healthy pace. For our RTL, commercial mortgage, and consumer loan portfolios, we received total principal paydowns of $207,000,000 during the fourth quarter, which represented 12.7% of the client fair value of those portfolios.

On slide eight, you can see that our total long agency RMBS portfolio decreased slightly to $218,000,000 coming into the quarter. Slide nine illustrates that our Longbridge portfolio decreased by 18% to $617,000,000, as continued strong proprietary reverse mortgage loan origination volume was more than offset by the completion of two securitizations. Please turn next to slide 10 for a summary of our borrowings. At December 31, the total weighted average borrowing rate on recourse borrowings decreased by 32 basis points to 5.67% overall, as the impact of lower short-term rates and tighter repo spreads more than offset the impact of a higher proportion of unsecured notes. Meanwhile, we lengthened the term of some of our larger warehouse lines, and as a result, the overall weighted average remaining term on our repo extended by 38% quarter over quarter to nearly nine months, which is detailed on slide 24.

Quarter over quarter, net interest margin on our credit portfolio decreased by 28 basis points, with lower asset yields more than offsetting a lower cost of funds. Our average asset yield declined, but that was only because we had a higher proportion of our assets constituting loans held in warehouses pending securitization. This larger warehouse portfolio was the result of the deployment of the proceeds from the notes offering. The NIM on agency decreased by nine basis points driven by a decrease in asset yields. At December 31, our recourse debt to equity ratio was 1.9 to 1, up modestly from 1.8 to 1 as of September 30. As noted earlier, we issued $400,000,000 of unsecured notes during the quarter, a portion of which replaced repo borrowings.

However, the remaining proceeds were deployed alongside incremental borrowings into new investments and securitizations, and higher total equity, resulting in a modest net increase in the overall leverage ratio. For the same reason, our overall debt to equity ratio increased to 9.0 to 1 from 8.6 to 1. As Larry mentioned, our balance sheet metrics strengthened meaningfully during the quarter. Quarter over quarter, out of our total recourse borrowings, the share of long-term non mark-to-market financings increased to 30% from 17%, and the share of unsecured borrowings increased to 18% from 8%. Unencumbered assets also grew meaningfully, increasing 45% to $1,770,000,000, which was about 90–95% of total equity. Over time, we expect to continue this shift toward a greater proportion of unsecured, non mark-to-market, and longer-term financings through additional unsecured note issuance and securitizations, and the replacement of our highest-cost repo borrowings.

We view this transition as a fundamental evolution of our balance sheet that is enhancing risk management and earnings stability, and which we hope will also support stronger credit ratings for EFC and lower borrowing cost over time. As I mentioned last quarter, we selected the fair value option on our notes, as we have for our other unsecured debt. We mark them to market through the income statement. As a result, we expensed all associated deal costs in October rather than amortizing them over the life of the notes. And with credit spreads tightening during the quarter, we also recorded an unrealized loss in the notes for the quarter. These nonrecurring items, together with some short-term negative carry pending full deployment of the new note proceeds, represented a significant drag on our GAAP earnings for the quarter.

At year end, book value per share was $13.16, and the economic return for the fourth quarter was 4.6% annualized. With that, I will pass it over to Mark. Thanks, JR.

Mark Tecotzky: This was a highly productive quarter for EFC. We continued to execute our loan-origination-to-securitization playbook, completing seven securitizations in Q4 across a variety of loan types, and that momentum has carried into 2026. Over the course of 2025, we expanded our footprint well beyond non-QM where we started. Our securitization platform now encompasses second liens, reverse mortgages, residential transition loans, and agency-eligible loans. Over time, EFC has gotten a lot more efficient at maximizing profitability and managing risk across the full life cycle of a loan. From purchase commitment through securitization exit, we target a gain-on-sale profit to the securitization trust while hedging execution risk along the way.

Then at securitization time, we work to create high-yielding retained investments while adding to our growing portfolio of call options. When executed well in a cooperative market, this process is a virtuous cycle that is accretive to earnings at each step and is a key driver of the results we have delivered over time. Another benefit of our large securitization platform is that it allows us to provide consistent, competitive pricing to our origination partners and our affiliated originators. First, we earn a levered return while ramping for a deal; then at securitization, we sell in securitizations which typically comprise more than 90% of a given deal, and we retain things at attractive yields. What is more, the growing value of our stakes in those affiliated originators continued to generate strong results for EFC both during the quarter and throughout 2025.

But we were not just productive on the asset side of the balance sheet. As Larry and JR mentioned, we are excited about the long-term benefits to EFC of being a Moody’s- and Fitch-rated bond issuer. The combination of the substantial non mark-to-market financing we have built from being an active securitizer and now our latest bond issuance with very broad institutional participation has been important to protect earnings as asset spreads have tightened, and in the fourth quarter, we were able to both extend term and lower our repo financing spreads even further. I do not mean to imply that there is anything wrong with using repo as a financing tool. There is not. Repo markets functioned extremely well throughout 2025. We have also achieved tighter spreads in the investment-grade bonds, steadily reducing our dependence on short-term mark-to-market repo financing.

There were several important government policy announcements this past quarter and throughout 2025 that are relevant to EFC. The announcement of $200,000,000,000 of GSE MBS purchases was probably the most prominent. I will not go into details because there are not many, but I will point out that this is not quantitative easing. Unlike QE, it is unlikely to meaningfully reduce duration or negative convexity in the market, and, critically, it does not create bank reserves. What it has done is put a floor under agency MBS spreads and, by extension, other AAA-rated mortgage bonds like non-QM, second lien, and agency-eligible AAA tranches. But perhaps the more important point is that we are operating in a time of heightened policy uncertainty: potential restrictions on institutional purchases of single-family rentals, G-fee reductions, LLPA changes, mortgage insurance premium cuts are all on the table, each carrying implications for prepayment speeds, for the relative attractiveness of private-label versus GSE execution, and maybe even for home prices.

We have been focused on thinking carefully about these uncertainties and positioning the portfolio accordingly. As shown on slide four, our strong net portfolio growth was strong in the fourth quarter even after taking into account our strong securitization volume. This reflects years of methodically building out our capabilities to make it easy for partners to sell us loans while continuing to build symbiotic relationships with originators. Our goal is not to compete on price alone, but to differentiate through service quality and creative loan programs that respond to evolving markets. Not everything went according to plan this quarter. There have been some well-publicized challenges with bank loans, and our CLO portfolio, while small, was a modest drag.

The RCL strategy also underperformed, weighed by securitization costs and REO workouts. Delinquencies there remain quite manageable, and in fact, we have seen strong resolution outcomes in January. We also had small losses in CMBS and ABS. Given that these kinds of air pockets were spread widely across credit-sensitive markets in Q4, the price drop is well beyond any change in fundamental value. If anything, these dislocations are creating opportunities. Looking ahead, we need to keep our eye on credit. The housing market is showing somewhat broader signs of weakness than a year ago, and more and more borrowers are having trouble staying current. We have kept significant credit hedges in place as shown on slide 20, which I view as idiosyncratic rather than systemic, and we will look to add securities where our analysis indicates attractive value.

We continue to invest in our technology and sourcing to grow our loan origination footprint, which has been a key driver of our returns. Now back to Larry.

Laurence Penn: 2025 was an important year for Ellington Financial Inc., and I would like to close by highlighting what we achieved and how those accomplishments position us for 2026. I will group 2025’s achievements into five categories. First, we covered our dividend—adjusted distributable earnings in each of the four quarters of 2025—marking six consecutive quarters of dividend coverage. That consistency is particularly meaningful given how volatile markets have been. It underscores both the resilience of our earnings engine and the benefits of our diversification. Second, we significantly strengthened our liability structure. Over the course of the year, we completed 25 securitizations compared to just seven in 2024. We added several attractive new facilities.

We improved terms on existing secured financing lines. Taken together, these efforts supported not only portfolio growth but also a meaningful and deliberate evolution of our funding profile—one that is more durable, more flexible, and better suited to support our long-term objectives—and set the stage for more notes offerings in the future. We issued $400,000,000 of unsecured notes. Third, our loan originator affiliates had exceptional performance. They grew origination volume, gained market share, and made excellent earnings contributions to Ellington Financial Inc.’s bottom line. Our vertical integration continues to provide us with a tangible competitive advantage, driving loan sourcing, supporting securitization scale, and strengthening our earnings power.

Fourth, we continue to keep realized credit losses exceptionally low, which is a testament to our underwriting discipline and the depth of our asset management capabilities. Our delinquent inventory remains modest in size and is resolving nicely. Remember, we mark to market through the income statement, so for any loans that we expect to resolve below par, we have already taken that hit. Fifth, and central to our growth story, we expanded our portfolio by almost 20% year over year to nearly $5,000,000,000 while remaining disciplined on credit and risk management. That growth reflects both the payoff from technology initiatives and the addition of new strategic equity stakes with forward flow agreements to our diverse roster of sellers. The flow we are seeing at Ellington from our residential loan origination portal, which we launched just twelve months ago, is currently around $400,000,000 per month and growing.

The success of our loan portal is a powerful demonstration of how Ellington’s proprietary technology can scale EFC’s sourcing footprint, improve underwriting efficiency, and deepen EFC’s vertically integrated model. Complementing our investments in technology, we added two new strategic loan originator equity stakes in 2025, each paired with forward flow agreements that provide high-quality recurring loan flow. As to strategic initiatives, I am pleased to report that we are now in contract to acquire a small residential mortgage servicer, and are awaiting regulatory approval. Once completed, this acquisition will further enhance our vertical integration by bringing more servicing capabilities in-house. While it will take some time to build out the platform and design the servicing protocols, I believe that this acquisition will ultimately provide us with better control over our servicing outcomes and strengthen our ability to manage our loan portfolios across market cycles, especially for delinquent assets.

Together, these technology and strategic initiatives were key drivers of our portfolio growth in 2025, and we expect them to continue to support momentum in 2026. Our priorities for 2026 are clear. We are focused on growing our loan origination market share while maintaining strong credit performance, which, together with our securitization platform, should drive disciplined portfolio growth. I am also pleased to report that 2026 is off to an excellent start. We are estimating that EFC generated an economic return of approximately 2% in January, with loan production and portfolio growth remaining strong, particularly in our non-QM, commercial mortgage bridge, and reverse mortgage loan businesses. Over EFC’s nearly twenty-year history, I believe that we have consistently demonstrated disciplined stewardship of shareholder capital and a willingness to act opportunistically when market conditions are favorable.

The common stock offering we executed efficiently with institutional orders alone and our decision to redeem our series A preferred stock reflect that approach. We evaluated a range of alternatives, including refinancing our series A preferred with new preferred equity, but given the persistent wide pricing we have seen in the preferred market, we felt the choice was clear. Using a targeted common stock offering, which was more than two and a half times oversubscribed, underscored strong market support for the transaction and its rationale. In summary, I believe that expanding our loan sourcing, securitizing frequently and efficiently, strengthening our liability structure, and optimizing our capital base, all combined with our disciplined risk and liquidity management, position Ellington Financial Inc.

to deliver resilient earnings and stable dividend coverage over time and across market environments. Our team deserves a lot of credit for all the hard work they have put in to help make this happen. With that, we will now open for questions. Operator, please go ahead.

Q&A Session

Operator: Thank you. If you would like to ask a question, press 1 now on your telephone keypad. Once again, that is 1 to ask a question. We will take our first question from Douglas Harter with UBS. Please go ahead. Your line is open.

Douglas Michael Harter: Thanks, and good morning. Hoping you could talk a little bit more about the decision to buy the servicer. Should we assume that we could get those outcomes without doing it in-house? Or is it more a way to kind of optimize the loan portfolio? And then just a clarification, is this something that would just be used for the Ellington portfolio, or could it be used for third-party clients? And, you know, is this entity owned within EFC, or is it going to be owned at broader Ellington?

Laurence Penn: Hey, Doug. So there were really a few considerations. There has been a tremendous consolidation in the servicing industry. You saw Mr. Cooper buy Rushmore, and now Mr. Cooper being bought by Rocket. So the big-box servicers are bigger, and there is less high-touch servicing capability out there to work with borrowers that hit any kind of challenge. If they hit a speed bump, have a loss of income, get behind in a payment, we believe that it is important for us to generate the best risk-adjusted returns, that we have best-in-class protocols and best-in-class technology for handling later-stage collection. So this is not about scaling something to be a low-cost Fannie servicer where you are just dealing with servicing for massive efficiencies.

This is just the recognition that as there has been consolidation in the servicing industry, there are not a lot of good alternatives to work with borrowers that hit any kind of challenge. So, you know, we just concluded that if we wanted to achieve that, it was something we had to build. We think that there is not enough of those capabilities out there in the marketplace that we could sort of assume that we could get those outcomes without doing it in-house. Owned within EFC. The way I think about it is our job right now is to build out the technology, to build out the protocols, to have this servicer be what we regard as best in class, and to demonstrate that to ourselves by seeing its servicing metrics—roll-to-delinquency rates and how you deal with borrowers that hit a speed bump—and how well it is operating efficiently.

So the first thing, we need to build it, get it to where we want it to be. There is a lot of sort of champion–challenger. Once we do that, I certainly think that there is going to be other investors in the mortgage space that are going to recognize there is not a lot of capability out there now for later-stage collections and might well have an interest in benefiting from what we are building.

Operator: Thank you, Doug. We will move now to Eric Hagen of BTIG. Please go ahead. Your line is open.

Eric J. Hagen: Can you discuss conditions right now for applying repo to the retained tranches held from securitization for non-QM and RTL? Have the terms improved, and are there scenarios where you could apply even more leverage to the retained tranches, and what would the returns look like?

Mark Tecotzky: Sure. I can take it. I mentioned in my prepared remarks, the repo market functioned really well this year. You had a gradually declining fed funds rate, and then the Fed injected some reserves into the system where they thought bank reserves were getting low. So repo functioned extremely well. Financing spreads on retained tranches are relatively low. I would say that those retained tranches are sort of inherently levered. You are dealing with small tranches at the bottom of the capital stack in securitization, where most of the cash flow is coming from excess spread. So those tranches, by nature of the investment and their leverage, already have a lot of price volatility. I do not see us wanting to add more leverage on those tranches.

We tend to operate the company very conservatively when it comes to repo. By that, I mean that we have internal haircuts that are significantly higher than the advance rates our repo lenders would give us. So we might have loan strategies where lenders would lend us 90–95 cents on the dollar versus the loan, and internally, we will think that we want to only borrow less than that to make sure we have cash on hand if you have spread volatility, things like that. We have plenty of ability to raise leverage if we want to. I do not feel as though, given the inherent price volatility, the retained tranches are probably a place where we would look to add it.

Laurence Penn: I was just going to add that, sure, we have some financing in that. But if you think about our long-term goals around our financing structure, liability structure, think about unsecured notes, which we did a debt deal at 7 3/8, now trading in the high sixes. Think about our preferred equity, eight-ish percent on preferred. It is our unsecured notes. Those are really more the instruments of financing that. Now, of course, those are not as low cost as repo, but remember, we are looking for this virtuous cycle, as Mark said. If we are well into the teens just on an unlevered yield and we are financing at 6–7%, it does not take much leverage, just from those instruments, to have 20% plus ROE. So we do not really need a lot of leverage. And you think about the kind of repo that we said we paid down when we did that notes offering in October in the fourth quarter—it was exactly the higher-cost repo that we would pay down first.

Eric J. Hagen: Thank you very much. Thank you.

Operator: We will move on to Trevor Cranston of Citizens JMP. Please go ahead. Your line is open.

Trevor John Cranston: Hey. Thanks. Mark mentioned the government policy announcements during the quarter and the potential impact they have on Ellington. Can you maybe expand a little bit on specifically how you guys are approaching the agency-eligible market, given the potential for changes to LLPAs or G-fees, which could come about, I suppose, over the course of the year, and sort of how that flows through to pricing, prepay, and convexity risk on those types of loans? Thanks.

Mark Tecotzky: Sure. Hey, Trevor. It is a great question. We do not have a crystal ball. We have a lot of resources to monitor potential policy changes, and I would say with this administration, lots of things are on the table. So the genesis of agency-eligible investor loans and second homes getting securitized in the private-label market—you have seen this off and on for the last five years. It certainly has accelerated some. The reason is that the loan-level price adjustments combined with the G-fee are so far in excess of expected losses in those markets that the private-label market has better pricing on the credit risk there, and it is overall better execution for loan originators. So it is flowing that way. Now, if there is a big change in LLPAs, it is possible the math could tilt back to Fannie/Freddie, and you could see a reduction in volume there.

I would say right now the execution is not close. So a small change in LLPAs I do not think is going to move the needle. You are still going to see the lion’s share of that volume in the higher LLPA category, not the super low LTV stuff, but still go in private label. We have to watch it. That is why I wanted to put that in the prepared remarks: pricing structures in the market are in place now, and if pricing structures in the market change, it can change the economics and the opportunity set and what we do. I would say right now it would take a fairly significant change in LLPAs and G-fees to swing the pendulum back over to GSE execution on those loans. But it can certainly happen, and that is something that we can monitor. We cannot hedge it, and we cannot control it.

Now, the other implication is on the prepayment side of things. If you have a big enough change in LLPA—sort of like when people talk about prepayment models, they talk about elbow shifts—and changes in LLPA represent an elbow shift. You basically make certain loans more refinanceable. So when we evaluate either premium investments in that space or the IOs you create, you know, an inverse IO, you have a prepayment model, and the prepayment model is calibrated to current market levels. The prepayment model does not know that an LLPA cut or a G-fee cut can happen in the future. So what we do to take into account that risk right now in those sectors is ramp up speeds higher than what you would get just to a calibrated model now. We think it is enough for risk.

That is something we want to manage to and take into account and properly probability-weight when we look at the distribution of recurrent returns. I would say that we are not the only ones in the market to view this as a heightened risk. So you can dial up your prepayment speeds on those sectors and still buy things at market levels with very attractive returns. It is not as though the other market participants are ignoring this risk or turning a blind eye to it in the pricing.

Trevor John Cranston: Yep. That makes sense. Okay. Thanks very much.

Mark Tecotzky: Thanks, Trevor.

Operator: Thank you. We will now move on to Bose George of KBW. Your line is now open.

Frank Gilabetti: Good morning, guys. Thanks for taking my question. You had another strong quarter in origination activity. Can you just discuss the current margins year to date, the current competition you are seeing?

Laurence Penn: Mark, why do you cover the forward space? I will cover the reverse space.

Mark Tecotzky: Sure. So in the forward space—non-QM, second liens, agency-eligible investor—I would say the competitive landscape in 2025 was competitive, but I would not characterize it as cutthroat competition. When we would think about our loan-level pricing that we put out every day, or where we are going to buy bulk packages from either affiliated originators or just originators we partner with, we could price things at levels such that I thought we had a gain on sale securitizing them and retain things at attractive yields. I think that it was competitive, but you could still price things with the margin. It was not the case in 2025 that the pricing pressure seemed cutthroat or that you were not compensated for taking the risk you are having to take on.

Laurence Penn: Thanks. And then let me cover the reverse space. Let us separate it into two parts: there is the HECM originations—the FHA-guaranteed product—then there is proprietary. Rates have not changed much recently and are still high relative to 2020–2021. So HECM volume, industry-wide, has not grown a lot recently. If rates do drop, it would have a lot of room to grow substantially. We are—Longbridge has been at times the highest, second highest, always in the top three originators in the HECM space. There is competition. The margins—gain-on-sale margins—are driven to a large extent by spreads in the marketplace as to where you can sell the Ginnie Mae, the HMBS. That was certainly a tailwind in the last half of last year.

It has been nice margins. But right now, margins are excellent, and volumes are quite steady. On the prop side, there is competition in the prop space, and again the gain-on-sale margin is going to be driven a lot by the securitization exit spreads. As long as securitization spreads remain tight—which, as I said, we just did record low spreads on our last deal on our AAAs—the gain-on-sale margins there I think will continue to be excellent. The volume there is growing as the products—the proprietary products—are expanding. We make tweaks to them all the time, and we feel really good about volumes there continuing to increase for Longbridge.

Frank Gilabetti: Great. That is very helpful. Then I would love to get your thoughts on the potential changes to bank capital standards and whether you think banks could become more active?

Mark Tecotzky: You know, it is interesting. All the credible mortgage researchers that have years of experience and access to data expected much more significant bank buying in 2025 than they actually saw. What you have seen them doing instead is, with these big negative swap spreads, just buying treasuries and match funding them with swaps. We have not seen a lot of bank buying in pass-throughs or CMBS holdings as well as their pass-through holdings. In Q4, you saw, I think it was the first time in many years, that banks reduced their pass-through holdings. Spread levels now are tighter than what they were for most of 2025. So maybe these capital regs will change things. I just do not know. I think it is certainly possible you could see them retain more loans.

There has been some of that going on, especially the adjustable-rate loans like the 7/1 loans. I know some of these regs are intended to have banks get more involved in the servicing market. I think that is something you could see them do. But the big players in servicing—and the big transactions, the big sales, the big buyers—it has mostly been on the nonbank side for a while. We will have to see.

Operator: Thank you. We will now move on to Timothy D’Agostino of B. Riley Securities. Your line is open.

Timothy DeAgostino: Yeah. Hi. Thanks for the commentary today. I guess, at the start of ’26, it would be great if you could maybe lay out some of the biggest priorities or what is on the top of mind for management in accomplishing in 2026. Understanding that integrating the mortgage servicer, increasing long-term financing, maybe within the portfolio, whether it is the allocation or in the capital stack using more cash to buy back preferred or something like that. It would just be great to get maybe a couple points that you all are looking to accomplish in ’26 that are kind of at the top of mind. Thank you.

Laurence Penn: Mark, let me handle the capital structure side of it, and then you could talk about what we are looking at in terms of maybe from a portfolio allocation perspective. On the capital structure side, look, we just did redeem that preferred. We have another preferred that is going to become callable at that point, and it becomes callable at that point. Of course, there is a chance we could call that as well. It is something that we would absolutely consider at that time. We also will continue to monitor the preferred market. We saw some of our peers, in terms of where they issued preferred, and we did not like it, did not like the prints that we saw. We did not think that was appropriate for us to issue there. But should an opportunity arise, we could absolutely look to replace the preferred that we redeemed with probably similarly sized preferred.

I think that you look at our capital structure right now, and as I mentioned, we think that our marginal use of that capital is better than the coupon on the preferred. There is no reason we are in no sort of real hurry to call it. We have a lot of optionality when that happens. As long as that spread is a little tighter than the last one, we could be in the market with certainly another offering later in the year. We will see. You know, there is no real science around this, but I think most companies would probably look at just a slightly higher percentage of the equity base in preferred as something that was more typical in the space. So I think that is something that we will monitor throughout the year. And then, absolutely, I think if we need the capital—and I mentioned the fact that our unsecured notes, the Moody’s- and Fitch-rated notes that we issued early in the fourth quarter—they have tightened.

Of course, we would love them to continue to tighten.

JR Herlihy: Hey, Tim. Thanks for the question. I would say that those five categories Larry laid out—covering the dividend with ADE and continuing to have consistent and strong earnings; strengthening our liability structure; supporting our originator affiliates, more market share growth; managing through delinquencies—we talked about how delinquencies declined quarter over quarter; make a lot of progress cleaning up sub-performers, continue on that theme; and then continuing to grow—are really key to our performance and growth accomplishments in 2025 and are very relevant to your question for 2026. Just looking at the numbers, we were almost $5,000,000,000 of portfolio holdings at year end. That was $2.5 billion a little more than two years ago, and leverage has actually declined over that same period from 2.3 to 1.9. So we have been able to accomplish that growth without taking up leverage.

Looking forward in 2026, I do not want to just say more of the same, but kind of continuing to expand on each of those themes, supplementing them with additional strategic relationships with originators and continuing to add on the technology front, just improving the overall earnings quality, if you will, that we are delivering to shareholders. We want steady earnings, steady book value, dividend coverage, and keep that franchise going. And by the way, think about some of our peers—other mortgage REITs—that have hit some big stumbling blocks where they can borrow money, especially on an unsecured basis, has suffered immensely. We want to be the most attractive for debt investors to place their money in our space. My doubling comment is really about credit and Longbridge.

We have taken agency down, and that has taken leverage down, and I am really focusing on the credit and Longbridge portfolios when I give that statistic.

Mark Tecotzky: I would just leave you with one thought. What we talk about in the earnings call, what you see in the earnings presentation, is what EFC is currently doing—how we drove returns in 2025 and the focus of this call, Q4 2025. But it is almost twenty-odd years since this company has been around—private and then going public—and over that time, we have generated returns in a lot of areas, and I think it speaks to the breadth of the capabilities of Ellington Management Group. You have seen CRT be a driver from time to time, legacy nonagencies, unsecured consumer, auto, aircraft; you have seen us involved in mobile home lending. We have tremendous capabilities in CLOs, tremendous capabilities in buying distressed commercial loans.

There are so many capabilities, skilled PMs, experienced researchers across almost all structured products within Ellington. I fully expect in all these areas that we are not always going to be doing what we are doing right now. The opportunity set for Ellington Financial Inc. will evolve over time. You could see an opportunity in auto; you could see an opportunity in unsecured consumer. Those have been small parts of the portfolio recently, but they can get interesting and exciting and priced really attractively over time. I put in that thing about the policy risk now because it is true. We are thinking about it. We are trying to position for it. We can predict what is likely, but we do not have a crystal ball to predict exactly what is going to happen.

The resources and capabilities that Ellington Financial Inc. is able to access by its shared services agreement with Ellington Management Group, I think, gives us a tremendous opportunity set.

Laurence Penn: I want to highlight one sector, Mark, which is the small-balance commercial sector. Look, everyone knows that there are sectors of the commercial mortgage market that have been under a lot of stress, and I think we have done a great job in terms of managing our portfolio with really minimal issues there. That has put us in a great position. We are seeing auctions from sellers, and it is such a highly fragmented market. It is a very sometimes geographically localized market. So we do not compete—certainly not with big banks—on those bridge loans. Sure, spreads have tightened overall, but our financing spreads have also tightened commensurately. That has been a growth area for us recently. I think it will continue to be. The technicals are, well, bad for sellers, good for buyers. So I think that is definitely an area where we are going to continue to see stress and opportunity.

Timothy DeAgostino: Awesome. Well, quick second question: regarding book value today, I might have missed it earlier, but could you give us an update, whether that be in a dollar figure or just directionally?

JR Herlihy: Good morning, guys. Thanks for taking the question. We mentioned an economic return of approximately 2% for the month of January. We have not put out January month-end yet. We should be putting those out again in the next few days—early next week. So that would imply that book value is up one-ish percent, net of the dividend. Those numbers are rough now, but that is the direction.

Operator: Thank you. We will now move on to Jason Weaver with JonesTrading. Your line is open.

Jason Weaver: Awesome. Thank you again for the time this morning. Congrats on the quarter. Just thinking about—in the prepared remarks, you spoke to the expanded opportunity set, partially due to the expansion of the seller network. Given the growth in size and flexibility of your financing capacity, would it be fair to expect a wider range on intra-quarter recourse leverage and a greater acceleration of securitization activity moving forward?

JR Herlihy: Could you repeat that? And a greater acceleration of securitization deals?

Jason Weaver: Yeah. So, you know, given how the flexibility and scope of your financing platform has increased markedly, would it be fair to expect a wider range on leverage moving quarter to quarter?

JR Herlihy: Yeah. So, certainly, intra-quarter, like if we showed month-end recourse debt-to-equity, it fluctuates. We had two deals that had not closed as of January and closed in early February. Pushing those forward from January would have taken leverage down, but they were still on balance and closed early in the month of February. So there is certainly noise within a quarter. We will see expansion to the extent we can do more. I think thematically, our securitization pace has been really high. We are off to a strong start. We are through six, seven weeks of 2026. We are ahead of the pace of 2025, which was almost above three times faster than 2024. So that acceleration continues, at least so far. I think if something happens where we feel like securitization spreads—let us say they widen out—we do not like them, then I think it is quite possible that we would have more loans in warehouse at quarter end and slightly higher leverage, but that would be somewhat temporary.

Jason Weaver: Got it. Thank you for that. And then the new RTL securitization that you priced, can you speak a little bit more to the structure there? Specifically, I was wondering what the reinvestment period window looks like.

Laurence Penn: Sure. As I mentioned, it is a revolver. I believe it is a two-year reinvestment period. So every month we can replace basically the loans that pay off with new loans. It is important because the average life is obviously a lot less than two years for those loans, so it makes the financing a lot more efficient.

Jason Weaver: Got it. That makes sense. I appreciate the color.

Laurence Penn: Alright. I think, operator, I think that is it. Look, I apologize for the delay. Thanks for sticking around for the call. We will make sure that we pay the phone bill on time next time. We appreciate your patience. It was a great quarter. We look forward to a great year. Thank you.

Operator: We thank you for participating in the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. Your line is now disconnected, and have a wonderful day.