Ellington Financial Inc. Q4 FY2025 earnings call

• Ellington closed 2025 strong with consistent performance, portfolio growth, and liability optimization. • In Q4, adjusted distributable earnings exceeded dividends. Expanded investment portfolio from unsecured notes offering and RTL securitization. • Successfully completed $400,000,000 unsecured notes offering, using proceeds to reduce short-term repo financing. • Completed seven securitizations in Q4, including first securitization of residential transition loans and agency-eligible mortgage loans. • Focused on optimizing balance sheet, increasing long-term non mark-to-market borrowings and unencumbered assets. • Loan origination and securitization playbook executed, with Longbridge segment contributing excellently. • Loan originator affiliates had exceptional performance, growing volume and market share. • Realized credit losses remained low, delinquent inventory resolving nicely. • Expanded portfolio by almost 20% year over year, with loan portal flow at $400,000,000 per month and growing. • In contract to acquire a small residential mortgage servicer, awaiting regulatory approval.

For the fourth quarter, adjusted distributable earnings were $0.47 per share, exceeding dividends of $0.39 per share. ADE breakdown by segment: $0.35 per share from credit, $0.04 from agency, and $0.13 from the Longbridge segment. The adjusted long credit portfolio increased 15% quarter over quarter to $4,100,000,000. The total long agency RMBS portfolio decreased slightly to $218,000,000, and the Longbridge portfolio decreased by 18% to $617,000,000.

• 2026 priorities include growing loan origination market share, maintaining strong credit performance, and disciplined portfolio growth. • Estimated economic return of approximately 2% in January, with loan production and portfolio growth strong in non-QM, commercial mortgage bridge, and reverse mortgage loan businesses. • Will continue to monitor preferred equity market for potential refinancing at lower cost. • Expect to continue shift toward greater proportion of unsecured, non mark-to-market, and longer-term financings through additional unsecured note issuance and securitizations.

• Well-publicized challenges with bank loans, CLO portfolio was a modest drag, RCL strategy underperformed with securitization costs and REO workouts. • Heightened policy uncertainty, including potential restrictions on institutional purchases of single-family rentals, G-fee reductions, LLPA changes, mortgage insurance premium cuts, with implications for prepayment speeds, relative attractiveness of private-label versus GSE execution, and home prices. • Credit risk with housing market showing broader weakness and more borrowers having trouble staying current.

Q: Talk about decision to buy servicer, use for Ellington portfolio, ownership.

A: Tremendous consolidation in servicing industry, need best-in-class for handling delinquent borrowers, owned within EFC, building best-in-class with focus on metrics.

Q: Conditions for applying repo to retained tranches, terms, leverage returns.

A: Repo market functioned well, financing spreads low, retained tranches inherently levered, internal haircuts higher than lender advance rates, not looking to add more leverage.

Q: Approach to agency-eligible market, policy changes impact.

A: Policy changes possible, execution in private-label better now, need to monitor LLPAs and G-fees, ramp up prepayment speeds in agency-eligible sectors to account for risk.

Q: Current margins, competition in origination activity.

A: Competitive landscape not cutthroat, margins good in forward and reverse spaces, volumes steady.

Q: Potential changes to bank capital standards, bank activity.

A: Banks expected to buy more but didn't, possible changes in capital regs, banks may retain more loans and get involved in servicing.

Q: Priorities in 2026, book value update.

A: Priorities include covering dividend, strengthening liability structure, supporting originators, managing delinquencies, growing. Book value up one-ish percent in January net of dividend, with economic return of approx 2% in January.

Q: Leverage range, RTL securitization structure.

A: Intra-quarter leverage fluctuates, securitization pace accelerating. RTL securitization is revolver with 2-year reinvestment period.