Ellington Financial Inc.

03/02/2026 | Press release | Distributed by Public on 03/02/2026 15:39

Annual Report for Fiscal Year Ending 12/31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Our primary objective is to generate attractive risk-adjusted total returns for our stockholders. We seek to attain this objective by utilizing an opportunistic strategy to make investments, without restriction as to ratings, structure, or position in the capital structure, that we believe compensate us appropriately for the risks associated with them rather than targeting a specific yield. At any particular point in time, depending on how we perceive the market's pricing of risk both generally and across sectors, we may favor higher-risk assets or we may favor lower-risk assets, or a combination of the two, in the interests of portfolio diversification or other considerations.
We conduct all of our operations and business activities through the Operating Partnership. As of December 31, 2025, we had an ownership interest of approximately 99.1% in the Operating Partnership. The remaining ownership interest of approximately 0.9% in the Operating Partnership represents the interests in the Operating Partnership that are owned by an affiliate of our Manager, our current and certain former directors, and certain current and former Ellington employees and their related parties, and is reflected in our financial statements as a non-controlling interest. We are externally managed and advised by our Manager, an affiliate of Ellington. Ellington is a registered investment adviser with a 31-year history of investing in the Agency and credit markets.
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Provided that we maintain our qualification as a REIT, we generally will not be subject to U.S. federal, state, and local income tax on our REIT taxable income that is currently distributed to our stockholders. Any taxes paid by a domestic taxable REIT subsidiary ("TRS") will reduce the cash available for distribution to our stockholders. REITs are subject to a number of organizational and operational requirements, including a requirement that they currently distribute at least 90% of their annual REIT taxable income excluding net capital gains.
On December 14, 2023, we completed a merger between Arlington Asset Investment Corp., a Virginia corporation ("Arlington"), and our subsidiary EF Merger Sub Inc., a Virginia corporation (such transaction, the "Arlington Merger").
We have two reportable segments, the Investment Portfolio Segment and the Longbridge Segment. In our Investment Portfolio Segment, we invest in a diverse array of financial assets, including residential and commercial mortgage loans; residential mortgage-backed securities ("RMBS"), including RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity ("Agency RMBS"); commercial mortgage-backed securities ("CMBS"); consumer loans and asset-backed securities ("ABS") including ABS backed by consumer loans; investments referencing mortgage servicing rights on traditional forward mortgage loans ("Forward MSR-related investments"); collateralized loan obligations ("CLOs"); non-mortgage- and mortgage-related derivatives; debt and equity investments in loan origination companies; and other strategic investments. We refer to the portion of our investment portfolio excluding Agency RMBS as our credit portfolio.
Our Longbridge Segment is focused on the origination and servicing of, and investment in, reverse mortgage loans, including associated financial assets, financing, hedging, and allocated expenses. Longbridge Financial, LLC ("Longbridge") originates home equity conversion mortgage loans ("HECM loans"), which are insured by the Federal Housing Administration ("FHA"), and non-FHA-insured reverse mortgage loans, which we refer to as "proprietary reverse mortgage loans." HECM loans are generally eligible for securitization into HECM-backed MBS ("HMBS"), which are guaranteed by the Government National Mortgage Association ("GNMA").
The strategies that we employ are intended to capitalize on opportunities in the current market environment. Subject to maintaining our qualification as a REIT and our exclusion from registration as an investment company under the Investment Company Act, we intend to adjust our strategies to changing market conditions by shifting our asset allocations across various asset classes as credit and liquidity trends evolve over time. We believe that this flexibility, combined with Ellington's experience, will help us generate more consistent returns on our capital throughout changing market cycles. Additionally, subject to maintaining our qualification as a REIT, we opportunistically hedge our credit risk, interest rate risk, yield spread risk, and foreign currency risk; however, at any point in time we may choose not to hedge all or a portion of these risks, and we will generally not hedge those risks that we believe are appropriate for us to take at such time, or that we believe would be impractical or prohibitively expensive to hedge. For more information on our targeted assets, see "-Our Targeted Asset Classes" below.
Our Targeted Asset Classes
Our targeted asset classes currently include investments in the U.S. and Europe (as applicable) in the categories listed below. Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes. Also, we expect to continue to hold certain of our targeted assets through one or more TRSs. As a result, a portion of the income from such assets will be subject to U.S. federal and certain state corporate income taxes, as applicable.
Asset Class Principal Assets
Agency RMBS . Whole pool pass-through certificates;
. Partial pool pass-through certificates;
. Agency collateralized mortgage obligations ("CMOs"), including interest only securities ("IOs"), principal only securities ("POs"), and inverse interest only securities ("IIOs").
CMBS and Commercial Mortgage Loans . CMBS;
. CLOs backed by commercial mortgage loans ("CRE CLOs"); and
. Commercial mortgage loans and other commercial real estate debt.
Consumer Loans and ABS . Consumer loans;
. ABS backed by consumer loans;
. ABS backed by Small Business Administration ("SBA") loans, including IOs backed by SBA loans; and
. Retained tranches from securitizations to which we have contributed assets.
Corporate CLOs . Corporate CLO debt and equity tranches; and
. Investments in CLO loan accumulation facilities.
Mortgage-Related Derivatives . To-Be-Announced mortgage pass-through certificates ("TBAs");
. Credit default swaps ("CDS") on individual RMBS, on the CMBX and on other mortgage-related indices; and
. Other mortgage-related derivatives.
Non-Agency RMBS . RMBS backed by prime jumbo, Alt-A, non-QM, manufactured housing, and subprime mortgages;
. RMBS backed by fixed rate mortgages, Adjustable rate mortgages ("ARMs"), Option-ARMs, and Hybrid ARMs;
. RMBS backed by mortgages on single-family-rental properties;
. RMBS backed by first-lien and second-lien mortgages;
. RMBS backed by performing and non-performing mortgages;
. Investment grade and non-investment grade securities;
. Senior and subordinated securities;
. IOs, POs, IIOs, and inverse floaters;
. Collateralized debt obligations ("CDOs");
. RMBS backed by European residential mortgages ("European RMBS");
. Retained tranches from securitizations in which we have participated; and
. Credit risk transfer securities ("CRTs").
Asset Class Principal Assets
(continued)
Residential Mortgage Loans . Residential mortgage loans that are not deemed "qualified mortgage" loans under the rules of the Consumer Financial Protection Bureau ("non-QM loans");
. Residential "transition loans," such as residential bridge loans and residential "fix-and-flip" loans;
. Residential non-performing mortgage loans ("NPLs");
. Re-performing loans ("RPLs"), which generally are loans that were modified and/or formerly NPLs where the borrower has resumed making payments in some form or amount;
. Residential mortgage loans that meet the criteria for inclusion in an Agency securitization ("Agency-eligible residential mortgage loans")
. Retained tranches from securitizations to which we have contributed assets;
. Reverse mortgage loans
. Closed-end second lien mortgage loans; and
. Home equity line of credit loans ("HELOCs").
Strategic Investments . Strategic equity and/or debt investments in loan originators, loan servicers, and mortgage-related entities;
Other .
Mortgage servicing rights ("MSRs") and MSR-related investments;
. Real estate, including commercial and residential real property;
. Corporate debt and equity securities and corporate loans;
. Non-mortgage-related derivatives; and
. IO strips backed by small business administration loans.
Agency RMBS
Our Agency RMBS assets consist primarily of whole pool (and to a lesser extent, partial pool) pass-through certificates, the principal and interest of which are guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or the Government National Mortgage Association, within the U.S. Department of Housing and Urban Development ("Ginnie Mae") and which are backed by ARMs, Hybrid ARMs, or fixed-rate mortgages. In addition to investing in pass-through certificates which are backed by traditional mortgages, we have also invested in Agency RMBS backed by reverse mortgages. Reverse mortgages are mortgage loans for which neither principal nor interest is due until the borrower dies, the home is sold, or other trigger events occur. Mortgage pass-through certificates are securities representing undivided interests in pools of mortgage loans secured by real property where payments of both interest and principal, plus prepaid principal, on the securities are made monthly to holders of the security, in effect "passing through" monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer/guarantor and servicers of the securities. Whole pool pass-through certificates are mortgage pass-through certificates that represent the entire ownership of (as opposed to merely a partial undivided interest in) a pool of mortgage loans.
Our Agency RMBS assets are typically concentrated in specified pools. Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through the government-sponsored "Making Homes Affordable" refinancing programs, and mortgages with various other characteristics. We maintain our portfolio of Agency RMBS in part to help maintain our qualification as a REIT and to help maintain our exclusion from registration as an investment company under the Investment Company Act.
Our Agency strategy also includes RMBS that are backed by ARMs or Hybrid ARMs and reverse mortgages, and CMOs, including IOs, POs, and IIOs.
CLOs
CLOs are a form of asset-backed security typically collateralized by syndicated corporate loans or commercial mortgage loans. Our CLO holdings may include both debt and equity interests. Some of our CLOs include retained tranches from CLO securitizations for which we participated in the accumulation of the underlying assets.
CMBS
We acquire CMBS, which are securities collateralized by mortgage loans on commercial properties. The majority of CMBS issued are fixed rate securities backed by fixed rate loans made to multiple borrowers on a variety of property types, though single-borrower CMBS and floating rate CMBS have also been issued.
The majority of CMBS utilize senior/subordinate structures, similar to those found in non-Agency RMBS. Subordination levels vary so as to provide for one or more AAA credit ratings on the most senior classes, with less senior securities rated investment grade and non-investment grade, including a first loss component which is typically unrated. This first loss component is commonly referred to as the "B-piece," which is the most subordinated (and therefore highest yielding and riskiest) tranche of a CMBS securitization. We acquire investment grade, non-investment grade, and non-rated CMBS. Our target assets also include single-asset single-borrower CMBS ("SASB CMBS"). SASB CMBS can be collateralized by single properties or by a portfolio of properties.
Commercial Mortgage Loans and Other Commercial Real Estate Debt
We directly originate and participate in the origination of commercial mortgage "bridge" loans, which are loans secured by liens on commercial properties, and which have shorter terms and higher interest rates than more traditional commercial mortgage loans. Bridge loans are often secured by properties in transition, where the borrower is in the process of either re-developing or stabilizing operations at the property.
We also acquire seasoned commercial mortgage bridge loans, as well as longer-term commercial mortgage loans. Some of the seasoned commercial mortgage loans that we acquire may be non-performing, underperforming, or otherwise distressed; these loans are typically acquired at a discount both to their unpaid principal balances and to the value of the underlying real estate.
Our commercial mortgage loans may be fixed or floating rate and will generally have maturities ranging from one to two years. We typically originate and acquire first-lien loans but may also originate and acquire subordinated loans. As of December 31, 2025, all of our commercial mortgage loans were first-lien loans. Commercial real estate debt typically limits the borrower's right to freely prepay for a period of time through provisions such as prepayment fees, lockout, yield maintenance, or defeasance provisions.
Within both our loan origination and acquisition strategies, we often focus on smaller balance loans and/or loan packages that are less-competitively-bid. These loans typically have balances that are less than $30 million, and are secured by real estate and, in some cases, a personal guarantee from the borrower.
Consumer Loans and ABS
We acquire U.S. consumer whole loans and ABS, including ABS backed by U.S. consumer loans. Our U.S. consumer loan portfolio consists of unsecured loans and secured auto loans. We purchase newly originated consumer loans under flow agreements with certain originators and may also purchase seasoned consumer loans in the secondary market, and we continue to evaluate new opportunities.
MSRs and MSR-Related Investments
An MSR represents the right to service one or more mortgage loans in exchange for a specified revenue stream, typically a portion of the interest payments due on such mortgage loans together with certain other ancillary revenue. While the owner of an MSR is ultimately responsible for servicing the underlying loans in accordance with applicable regulations, the actual loan servicing functions are often subcontracted out to third-party licensed subservicers. The mortgages underlying MSRs can either be traditional "forward" mortgage loans ("Forward MSRs") or reverse mortgage loans ("Reverse MSRs").
The revenue stream associated with an MSR is often bifurcated into two components: a "base servicing fee," representing the actual or approximate cost of performing the loan servicing functions; and the remaining revenue, or "excess servicing spread." We have in the past acquired, and, may in the future acquire, excess servicing spread from mortgage loan servicers.
As a result of the Arlington Merger, we, through certain of our subsidiaries, are party to various agreements that enable us to participate in the economic returns of a portfolio of forward MSRs. The mortgage loans underlying such Forward MSR-related investments consist solely of residential mortgage loans guaranteed by Fannie Mae or Freddie Mac.
Non-Agency RMBS
We acquire non-Agency RMBS backed by prime jumbo, Alt-A, non-QM, manufactured housing, subprime residential, and single-family-rental mortgage loans. The loans backing our non-Agency RMBS can be performing or non-performing. Our non-Agency RMBS holdings can include investment-grade and non-investment grade classes, including non-rated classes.
Non-Agency RMBS are generally debt obligations issued by private originators of, or investors in, residential mortgage loans. Non-Agency RMBS generally are issued as CMOs and are backed by pools of whole mortgage loans or by mortgage pass-through certificates. Non-Agency RMBS generally are securitized in senior/subordinated structures, or in excess spread/over-collateralization structures. In senior/subordinated structures, the subordinated tranches generally absorb all losses on the underlying mortgage loans before any losses are borne by the senior tranches. In excess spread/over-collateralization structures, losses are first absorbed by any existing over-collateralization, then borne by subordinated tranches and excess spread, which represents the difference between the interest payments received on the mortgage loans backing the RMBS and the interest due on the RMBS debt tranches, and finally by senior tranches and any remaining excess spread. We also have acquired, and may acquire in the future, both Agency-issued and non-Agency-issued CRTs, which have credit risks similar to those of subordinated RMBS tranches, as well as RMBS backed by non-QM and CES loans, including retained tranches from loan securitizations in which we have participated.
We also have acquired, and may acquire in the future, European RMBS, including retained tranches from European RMBS securitizations in which we have participated.
Residential Mortgage Loans
Our residential mortgage loans include newly originated non-QM loans, residential transition loans, as well as legacy residential NPLs and RPLs. A non-QM loan is not necessarily high-risk, or subprime, but is instead a loan that does not conform to the complex Qualified Mortgage ("QM") rules of the Consumer Financial Protection Bureau. For example, many non-QM loans are made to creditworthy borrowers who cannot provide traditional documentation for income, such as borrowers who are self-employed. There is also demand from certain creditworthy borrowers for loans above the QM 43% debt-to-income ratio limit that still meet all ability-to-repay standards. We hold equity investments in various non-QM originators, and to date we have purchased the majority of our non-QM loans from these originators, although we could potentially purchase a greater share of non-QM loans from other sources in the future.
The residential transition loans that we purchase are typically newly originated loans and include: (i) "fix and flip" loans, which are made to real estate investors for the purpose of acquiring residential homes, making value-add improvements to such homes, and reselling the newly rehabilitated homes for a potential profit, and (ii) loans made to real estate investors for a "business purpose," such as purchasing a rental investment property, financing or refinancing a fully rehabilitated home awaiting sale, or securing short-term financing pending qualification for longer-term lower-rate financing. Our residential transition loans are secured by non-owner occupied properties, and are typically structured as fixed-rate, interest-only loans with terms to maturity between 6 and 24 months. Our underwriting guidelines focus on both the "as is" and "as repaired" property values, borrower experience as a real estate investor, and asset verification.
We are active in the market for residential NPLs and RPLs. The market for large residential NPL and RPL pools has remained highly concentrated, with the great majority having traded to only a handful of large players who typically securitize the residential NPLs and RPLs that they purchase. As a result, we have continued to focus our acquisitions on less-competitively-bid, and more attractively-priced mixed legacy pools sourced from motivated sellers.
We acquire HELOCs and closed-end second lien loans, which are loans made to homeowners collateralized by the existing equity in their homes. Closed-end second lien loans allow the borrower to take a one-time lump sum and are subordinate to the rights of the first lien mortgage holder as well as other potential senior liens. A HELOC is a line of credit that allows the borrower to draw down on their available line of credit as needed, and is subordinate to the rights of the first lien mortgage holder and to the rights of any other lien-holder on the home.
In addition to originating reverse mortgage loans, Longbridge also originates HELOCs designed for homeowners aged 62 or older. These loans are typically interest only, first or second lien loans that do not require principal payments as long as the borrower remains in compliance with specific terms of the loan such as related to owner-occupancy, payment of property taxes, and keeping insurance coverage and interest payments current. They differ from traditional HELOCs in that the principal is deferred until the borrower dies, sells the home, or becomes delinquent on property taxes or homeowners insurance.
We also acquire residential mortgage loans that have been originated in compliance with U.S government Agency or government-sponsored enterprise ("GSE") guidelines that are eligible for sale to or securitization by the GSEs ("Agency-eligible residential mortgage loans"). Such loans may be collateralized by owner-occupied or non-owner occupied properties.
Reverse Mortgage Loans, Reverse MSRs
Reverse mortgage loans are residential mortgage loans for which neither principal nor interest is due until the borrower dies, the home is sold, or other trigger events occur. Reverse mortgage loans can have either fixed interest rates or adjustable interest rates. In the case of most fixed-rate reverse mortgage loans, the borrower must draw the loan proceeds up front in one lump sum, while many adjustable-rate mortgage loans provide the borrower with a line of credit that can be drawn over time.
We consolidate Longbridge, which acquires reverse mortgage loans both through its origination activities and through secondary market purchases. Historically, the majority of loans acquired by Longbridge have been home equity conversion mortgage loans ("HECMs"), which are insured by FHA and eligible for inclusion in GNMA-guaranteed HECM-backed MBS ("HMBS"). Longbridge is an approved issuer of HMBS, and it pools and securitizes the majority of its HECM loans into HMBS, which it then sells in the secondary market while retaining the servicing rights on the underlying HECM loans. In addition, Longbridge opportunistically acquires, in the secondary market, HECM loans that have been mandatorily repurchased from HMBS pools ("HECM Buyout Loans") by other HECM servicers upon the outstanding principal balance of such loans reaching 98% of their respective maximum claim amount. Depending on their status, HECM Buyout Loans are either eligible to be assigned to HUD in connection with an FHA insurance claim ("assignable buyout loans" or "ABOs"), or ineligible to be assigned to HUD ("non-assignable buyout loans" or "NABOs").
Longbridge also originates and purchases proprietary reverse mortgage loans, which typically carry loan balances or credit lines that exceed FHA limits or have other characteristics that make them ineligible for FHA insurance.
The majority of Longbridge's existing MSRs relate to HECM loans that Longbridge pooled and securitized into HMBS and then sold into the secondary market with servicing rights retained. In accordance with U.S. GAAP, so long as Longbridge retains such mortgage servicing rights and the obligations relating thereto, such HECM loans do not meet the requirement for sale accounting and remain on Longbridge's balance sheet. The sold HMBS securities are accounted for as secured borrowings. In addition, Longbridge opportunistically acquires, in the secondary market or otherwise, MSRs associated with either proprietary reverse mortgage loans, HECMs or HECM buyout loans.
Strategic Investments
We have made, and in the future may make additional, equity and/or debt investments in loan originators, loan servicers, and other related operating companies. Our investments may either be controlling interests (as is the case with Longbridge), or non-controlling interests (as is the case with our other investments in these types of operating companies). We have also acquired debt investments and/or warrants in certain of these loan originators. We have also entered into various other arrangements, such as entering into flow agreements or providing guarantees or financing lines, with certain of the loan originators in which we have invested.
TBAs and Other Mortgage-Related Derivatives
In addition to investing in specified pools of Agency RMBS, we utilize TBA transactions, whereby we agree to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are liquid, have quoted market prices, and represent the most actively traded class of mortgage-backed securities ("MBS"). TBA trading is based on the assumption that mortgage pools that are eligible to be delivered at TBA settlement are fungible and thus the specific mortgage pools to be delivered do not need to be explicitly identified at the time a trade is initiated.
We generally engage in TBA transactions for purposes of managing certain risks associated with our investment strategies. Other than with respect to TBA transactions entered into by our TRSs, most of our TBA transactions are treated for tax purposes as hedging transactions used to hedge indebtedness incurred to acquire or carry real estate assets ("qualifying liability hedges"). The principal risks that we use TBAs to mitigate are interest rate and yield spread risks. For example, we may hedge the interest rate and/or yield spread risk inherent in our long Agency RMBS by taking short positions in TBAs that are similar in character. Alternatively, we may opportunistically engage in TBA transactions because we find them attractive in their own right, from a relative value perspective or otherwise. For accounting purposes, in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") we classify TBA transactions as derivatives.
We also take long and short positions in various other mortgage-related derivative instruments, including mortgage-related credit default swaps. A credit default swap is a credit derivative contract in which one party (the protection buyer) pays an ongoing periodic premium (and often an upfront payment as well) to another party (the protection seller) in return for compensation for default (or similar credit event) by a reference entity. In this case, the reference entity can be an individual MBS or an index of several MBS, such as a CMBX index. Payments from the protection seller to the protection buyer typically occur if a credit event takes place. A credit event can be triggered by, among other things, the reference entity's failure to pay its principal obligations or a severe ratings downgrade of the reference entity.
Other Investment Assets
Our other investment assets include real estate, including residential and commercial real property, corporate debt and equity securities, corporate loans, loans collateralized by accounts receivable, litigation finance assets, and non-mortgage-related derivatives. We do not typically purchase real property directly; rather, our real estate ownership usually results from foreclosure activity with respect to our residential and commercial mortgage loans.
Hedging Instruments
Interest Rate Hedging
We opportunistically hedge our interest rate risk by using various hedging strategies, subject to maintaining our qualification as a REIT. The interest rate hedging instruments that we use and may use in the future include, without limitation:
•TBAs;
•interest rate swaps (including floating-to-fixed, fixed-to-floating, floating-to-floating, or more complex swaps such as floating-to-inverse floating, callable or non-callable);
•CMOs;
•U.S. Treasury securities;
•swaptions, caps, floors, and other derivatives on interest rates;
•futures and forward contracts; and
•options on any of the foregoing.
Because fluctuations in short-term interest rates may expose us to fluctuations in the spread between the interest we earn on certain of our investments and the interest we pay on certain of our borrowings, we may seek to manage such exposure by entering into short positions in interest rate swaps. An interest rate swap is an agreement to exchange interest rate cash flows, calculated on a notional principal amount, at specified payment dates during the life of the agreement. Typically, one party pays a fixed interest rate and receives a floating interest rate and the other party pays a floating interest rate and receives a fixed interest rate. Each party's payment obligation is computed using a different interest rate. In an interest rate swap, the notional principal is generally not exchanged. We generally enter into these transactions to offset the potential adverse effects of rising interest rates on short-term repurchase agreements. Our repurchase agreements generally have maturities of up to 364 days and carry interest rates that are determined by reference to a benchmark rate such as the Secured Overnight Financing Rate ("SOFR"). As each then-existing fixed-rate repurchase agreement ("repo") borrowing matures, it will generally be replaced with a new fixed-rate repo borrowing based on market interest rates established at that future date.
In the case of interest rate swaps, most of our agreements are structured such that we receive payments based on a variable interest rate and make payments based on a fixed interest rate. The variable interest rate on which payments are received is generally calculated based on various reset mechanisms for a benchmark rate such as SOFR. To the extent that the benchmark rates used to calculate the payments we receive on our interest rate swaps continue to be highly correlated with our repo borrowing costs, our interest rate swap contracts should help to reduce the variability of our overall repo borrowing costs, thus reducing risk to the extent we hold fixed-rate assets that are financed with repo borrowings.
Credit Risk Hedging
We enter into credit-hedging positions in order to protect against adverse credit events with respect to our credit investments, subject to maintaining our qualification as a REIT. Our credit hedging portfolio can vary significantly from period to period, and can encompass a wide variety of financial instruments, including corporate debt or equity-related instruments, RMBS- or CMBS-related instruments, or instruments involving other markets. Our hedging instruments can include both "single-name" instruments (i.e., instruments referencing one underlying entity or security) and hedging instruments referencing indices.
Our credit hedges consist of financial instruments tied to corporate credit, such as CDS on corporate bond indices, short positions in and CDS on corporate bonds, and positions involving exchange traded funds ("ETFs") of corporate bonds. They also include put contracts on certain equity indices, as well as CDS tied to individual MBS or an index of several MBS, such as CDS on CMBS indices ("CMBX").
Foreign Currency Hedging
To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT. In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk.
Trends and Recent Market Developments
Market Overview
Federal Reserve Policy
•After lowering its target range for the federal funds rate by a full percentage point to 4.25%-4.50% in the second half of 2024, the U.S. Federal Reserve (the "Federal Reserve") maintained that range through the first eight months of 2025, noting increased uncertainty around the economic outlook.
Beginning in September, the Federal Reserve initiated a gradual easing cycle, lowering the target range by 25 basis points at each of its September, October, and December meetings, bringing the target range to 3.50%-3.75% at year end. The December Summary of Economic Projections signaled a slower pace of rate cuts in 2026, with the median member's projection implying only one additional 25-basis-point reduction.
•Beginning in April, the Federal Reserve decelerated the pace of its balance sheet contraction by lowering the cap on portfolio runoff of U.S. Treasury securities from $25 billion to $5 billion, while maintaining the $35 billion cap on Agency RMBS runoff. In October, the Federal Reserve announced that balance sheet runoff would conclude on December 1, 2025, at which point principal payments from both U.S. Treasury and Agency securities would be reinvested into U.S. Treasury securities. At its December meeting, the Federal Reserve further announced it would initiate purchases of short-term Treasury securities to maintain an ample level of reserves.
Tariff Policy
•During the first quarter of 2025, the administration announced a new round of tariffs, primarily on imports from China, Canada, and Mexico, along with additional tariffs on certain goods and sectors. The administration also announced plans for broad "reciprocal" tariffs aimed at matching the tariff rates that other countries impose on U.S. exports. These announcements contributed to increased market volatility and notable declines in major equity indices late in the quarter.
•In early April, the U.S. administration announced its plans for broad-based tariffs. These announcements caused uncertainty in financial markets, contributing to heightened volatility and further declines in major equity indices and widening of credit spreads in early April. Financial markets recovered following the April 9th announcement of a 90-day pause on most tariffs, excluding those applied to Chinese imports. In mid-May, the U.S. and China mutually agreed to reduce minimum tariff rates on bilateral trade, contributing to improved market sentiment. By the end of the second quarter, multiple major equity indices had reached all-time highs.
•In the third quarter, the U.S. administration continued to adjust the broad-based tariffs announced in early April and introduced additional tariffs affecting various countries and industries. Several trading partners, including the United Kingdom, the European Union, Japan, South Korea, and others, reportedly reached agreements with the U.S. to reduce tariff levels, though implementation remained ongoing. The administration also extended the pause on higher tariffs for Chinese imports, leaving the reduced minimum tariff rate in place.
•In the fourth quarter, the U.S. administration delayed scheduled tariffs on certain countries and sectors while advancing negotiations with additional trading partners, announcing framework agreements with Vietnam, Argentina, and Switzerland, among others. At the same time, several tariff measures remained subject to ongoing judicial review, creating additional uncertainty regarding the scope, timing, and potential retroactive application of certain trade actions.
Government Shutdown
•A partial U.S. government shutdown began on October 1, 2025, following a lapse in federal appropriations due to disagreements over spending levels. Essential government functions continued to operate, but many agencies temporarily furloughed employees. The shutdown disrupted the release of key economic data and contributed to short-term market uncertainty.
•After setting a record for the longest shutdown in U.S. history, the shutdown ended on November 12th with a continuing resolution to keep most agencies running through January 30, 2026.
Interest Rates
•After rising sharply in the fourth quarter of 2024, interest rates declined significantly in the first quarter of 2025, with yields on 2- and 10-year U.S. Treasury securities falling by 36 basis points quarter over quarter, ending at 3.88% and 4.21%, respectively.
Interest rates were relatively volatile in the second quarter in response to economic uncertainty and evolving expectations for monetary policy. The yield on the 2-year U.S. Treasury security traded within a 45-basis point range before ending the quarter down 16 basis points to 3.72%. The yield on the 10-year U.S. Treasury security traded within a 60-basis point range before ending the quarter up just 2 basis points to 4.23%.
In the third quarter, interest rates continued to trend lower. The yield on the 2-year U.S. Treasury security ended the quarter down 11 basis points at 3.61%, while the yield on the 10-year U.S. Treasury ended the quarter down 8 basis points at 4.15%.
In the fourth quarter, the yield on the 2-year U.S. Treasury security continued to fall, ending the quarter down 14 basis points to 3.47%. The yield on the 10-year U.S. Treasury increased modestly by 2 basis points to 4.17%.
Interest rate volatility declined significantly over the course of the year, with the MOVE Index ending 2025 down approximately 35% year over year.
•Mortgage rates generally tracked the decline in long-term interest rates during the year. The Freddie Mac 30-year mortgage rate survey began the year at 6.85% and peaked at 7.04% in mid-January, before declining steadily and ending the year at 6.18%.
•Secured Overnight Financing Rates ("SOFR") were largely stable in the first half of 2025 but fell sharply in the second half, reflecting the Federal Reserve rate cuts. For the full year, one-month SOFR rate declined by 64 basis points to 3.69%, while three-month SOFR rate fell by 65 basis points to 3.65%. SOFR rates drive many of our financing costs.
Housing and Economic Indicators
•The S&P Cotality Case-Shiller US National Home Price Index rose 2.6% in the first half of 2025 before declining modestly in the second half, ending the year up 1.3% overall. Housing affordability followed a similar arc, deteriorating through mid-year before recovering as mortgage rates fell, with the National Association of Realtors Housing Affordability Index finishing 2025 up 10.5% from where it began.
•The Mortgage Bankers Association's Refinance Index rose significantly in the first three quarters of 2025, more than tripling between the start of the year and late September, before declining sharply in the fourth quarter. Despite the late-year pullback, refinancing activity ended 2025 significantly higher than at the start of the year.
•Mortgage prepayment speeds generally rose during the year, but remained low by historical standards. Prepayment speeds for Fannie Mae 30-year RMBS started the year at 5.2 CPR, reached a peak of 10.2 CPR in October, and then declined into year end, registering 8.7 CPR in December.
•U.S. real GDP contracted at an estimated annualized rate of 0.5% in the first quarter of 2025, before expanding by 3.8% in the second quarter and 4.4% in the third quarter. Fourth-quarter growth moderated but remained positive at 1.4%. Unemployment rose modestly during 2025, from 4.1% at the start of the year to 4.4% by year end.
•Inflation trended lower in early 2025, with the 12-month percentage change in the Consumer Price Index for All Urban Consumers, not seasonally adjusted, falling from 3.0% in January to 2.3% in April, before rising to 2.7% in December.
Fixed Income Performance
•MBS returns were generally positive throughout 2025, with the Bloomberg U.S. MBS Index posting a full-year return of 8.58% and an excess return (on a duration-adjusted basis) of 1.71% relative to the Bloomberg U.S. Treasury Index.
•Corporate bonds also posted strong returns. The Bloomberg U.S. Corporate Bond Index returned 7.77% with an excess return of 1.19%, while the Bloomberg High Yield Bond Index posted an 8.62% return and 2.60% excess return. High Yield corporate credit spreads widened modestly during the year with the Markit CDX North America High Yield Index increasing by 5 basis points. The Markit CDX North America Investment Grade Index was largely unchanged year over year.
Equity Markets
•Despite early-year declines due to trade policy uncertainty, U.S. equities posted strong gains in 2025, with the Dow Jones rising 13.0%, the S&P 500 rising 16.4%, and the NASDAQ rising 20.4%. International equities performed even better, with the FTSE 100 and MSCI World Indexes rising 21.5% and 19.5%, respectively.
•Equity volatility spiked early in the year before declining steadily, ending 2025 lower overall.
Portfolio Overview and Outlook-Investment Portfolio Segment
Investment Portfolio-Credit(1)
The following tables summarize the long investments in our credit portfolio as of December 31, 2025 and 2024.
December 31, 2025
December 31, 2024(2)
($ in thousands) Fair Value % of Total Fair Value % of Total
Dollar Denominated:
Agency-eligible residential mortgage loans $ 243,615 4.4 % $ - - %
CLOs 111,808 2.0 % 61,085 1.3 %
CMBS 26,550 0.5 % 39,206 0.8 %
Commercial mortgage loans(3)(5)
765,059 13.8 % 470,142 10.0 %
Consumer loans and ABS backed by consumer loans(6)
143,648 2.6 % 87,249 1.9 %
Corporate debt and equity and corporate loans 29,147 0.5 % 27,598 0.6 %
Debt and equity investments in loan origination entities(7)
95,688 1.7 % 61,619 1.3 %
Forward MSR-related investments 77,852 1.4 % 77,848 1.7 %
HELOC and CES loans and retained RMBS(6)(8)
364,838 6.6 % 432,861 10.3 %
Non-Agency RMBS 95,240 1.7 % 166,587 2.5 %
Non-QM loans and retained RMBS(3)(6)(8)
2,624,068 47.4 % 2,007,670 43.0 %
Other investments(9)(10)
70,466 1.3 % 61,508 1.3 %
Residential transition loans and other residential mortgage loans(3)(4)
839,456 15.1 % 1,127,770 24.1 %
Non-Dollar Denominated:
CLOs 13,232 0.2 % 6,333 0.1 %
Corporate debt and equity - - % 181 - %
RMBS(11)(12)
16,953 0.3 % 14,394 0.3 %
Other residential mortgage loans 27,536 0.5 % 39,168 0.8 %
Total Long Credit Portfolio $ 5,545,156 100.0 % $ 4,681,219 100.0 %
Adjustments:
Less: Non-retained tranches of consolidated securitization trusts 1,433,814 1,353,055
Total adjusted long credit portfolio $ 4,111,342 $ 3,328,164
(1)This information does not include U.S. Treasury securities, securities sold short, or financial derivatives.
(2)Conformed to current period presentation.
(3)Includes related REO. In accordance with U.S. GAAP, REO is not considered a financial instrument and, as a result, is included at the lower of cost or fair value, as discussed in Note 2 of the notes to consolidated financial statements.
(4)Other residential mortgage loans include secondary market purchases of non-performing and re-performing mortgage loans.
(5)Includes equity investments in unconsolidated entities holding commercial mortgage loans and REO and corporate loans secured by commercial mortgage loans.
(6)Includes equity investments in securitization-related vehicles.
(7)Includes corporate loans to certain loan origination entities in which we hold an equity investment.
(8)Retained RMBS represents RMBS issued by non-consolidated Ellington-sponsored loan securitization trusts, and interests in entities holding such RMBS.
(9)Includes equity investment in Ellington affiliate.
(10)Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization.
(11)Includes loan to an entity which purchases residential mortgage loans for eventual securitization.
(12)Includes investment in an unconsolidated entity holding European RMBS.
Our total adjusted long credit portfolio increased by 24% to $4.11 billion as of December 31, 2025, compared to $3.33 billion as of December 31, 2024. The increase was driven by net purchases of non-QM loans, commercial mortgage bridge loans, Agency-eligible loans, ABS, and CLOs; and a larger portfolio of retained RMBS. These increases were partially offset by the impact of loans sold into securitizations, net sales of non-Agency RMBS, and a smaller residential transition loan portfolio, with principal paydowns in that portfolio, together with the net effect of a securitization, exceeding new purchases. During the year, we also added two additional equity investments in loan originators, and signed an agreement to acquire a small residential mortgage servicer which, pending regulatory approval, would enable us to bring servicing capabilities in-house.
Positive performance was driven by higher net interest income along with net realized and unrealized gains on non-QM retained tranches, forward MSR-related investments, closed-end second lien retained tranches, home equity line of credit loans, NPL/RPL residential loans, and ABS. We also benefitted from strong results from our equity investments in loan originators
and strong credit performance across our loan businesses. Partially offsetting higher net interest income were net realized and unrealized losses on CLOs, CMBS, consumer loans, and residential REO.
The percentages of delinquent loans in our residential and commercial mortgage loan portfolios (including loans accounted for as equity method investments) increased year over year, although these percentages decreased during the fourth quarter. Both of these portfolios continue to experience low levels of realized credit losses and strong overall credit performance, though we continue to work out several non-performing assets.
During the year, the net interest margin on our credit portfolio increased to 3.25% from 2.83%, driven by an increase in asset yields and a lower cost of funds. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.
Supplemental Credit Portfolio Information:
The following tables provide supplemental information to, and should be read in conjunction with, the notes to our financial statements. See Note 5-Investments in Loans, Note 7-Forward MSR-related Investments, and Note 8-Investments in Unconsolidated Entities, of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The table below details certain information regarding our investments in commercial mortgage loans as of December 31, 2025:
Gross Unrealized Weighted Average
($ in thousands) Unpaid Principal Balance Premium (Discount) Amortized Cost Gains Losses Fair Value Coupon
Yield(1)
Life (Years)(2)
Commercial mortgage loans(3)(4)
$ 934,319 $ (7,858) $ 926,461 $ 146 $ (2,638) $ 923,969 9.39 % 9.26 % 1.12
(1)Excludes commercial mortgage loans in non-accrual status, with a fair value of $79.1 million.
(2)Expected average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
(3)Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities. Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet.
(4)As of December 31, 2025, all of our commercial mortgage loans were first-lien mortgages.
The table(1)(2)below summarizes our interests in commercial mortgage loans by payment status of the loan as of December 31, 2025:
December 31, 2025
(In thousands) Unpaid
Principal Balance 		Fair Value
Performing $ 854,486 $ 844,862
Non-performing 79,833 79,107
Total $ 934,319 $ 923,969
(1)Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities. Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet.
(2)As discussed in Note 2 and Note 5 of the Notes to Consolidated Financial Statements, commercial loans that are 90 days or more delinquent are considered non-performing.
As of December 31, 2025, we held three commercial REO properties with a fair value of $19.1 million. Additionally, as of December 31, 2025, an unconsolidated variable interest entity in which we co-invest with other Ellington affiliates held a commercial REO property; the fair value of our allocable portion of such REO was approximately $40.3 million.
The table below summarizes our interests in commercial mortgage loans by property type of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2025:
Property Type(1)
December 31, 2025
Multifamily 59.3 %
Hotel 11.8 %
Retail 8.9 %
Commercial Mixed Use 5.9 %
Industrial 5.8 %
Office 5.1 %
Healthcare 1.4 %
Mobile Home Community 1.2 %
Self Storage 0.6 %
100.0 %
(1)Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities. Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet.
The table below summarizes our interests in commercial mortgage loans by geographic location of the underlying real estate collateral, as a percentage of total outstanding unpaid principal balance, as of December 31, 2025:
Property Location by U.S. State(1)
December 31, 2025
New York 23.3 %
Florida 19.6 %
Texas 8.6 %
New Jersey 7.8 %
Illinois 5.9 %
All other states <5% 34.8 %
100.0 %
(1)Includes our allocable portion of commercial mortgage loans, based on our ownership percentage, held in variable interest entities. Our equity investments in such variable interest entities are included in Investments in unconsolidated entities, at fair value on the Consolidated Balance Sheet.
The table below summarizes our interests in residential mortgage loans by loan type, and REO resulting from the foreclosure of residential mortgage loans, as of December 31, 2025:
Loan Type Unpaid Principal Balance Fair Value
(In thousands)
North America-United States:
Non-QM loans $ 2,524,853 $ 2,425,913
Residential transition loans 759,095 754,749
HELOCs and closed-end second lien loans 140,552 148,781
Agency eligible mortgage loans 235,384 243,615
Other residential mortgage loans(1)
41,222 42,500
Europe-United Kingdom:
Other residential mortgage loans 38,707 27,536
Total residential mortgage loans $ 3,739,813 $ 3,643,094
Residential REO(2)
42,944
Total residential mortgage loans and residential REO(2)
$ 3,686,038
(1)Other residential mortgage loans include secondary market purchases of non-performing and re-performing mortgage loans.
(2)REO is not considered a financial instrument and, as a result, is included at the lower of cost or fair value, as discussed in Note 2 of the notes to consolidated financial statements.
The table(1)below provides additional details for residential mortgage loans that are 90 days or more past due as of December 31, 2025:
Loan Type Unpaid Principal Balance Fair Value
(In thousands)
Non-performing residential mortgage loans-non-performing at acquisition
$ 28,915 $ 30,029
Non-performing residential mortgage loans-performing at acquisition
217,209 202,072
Total non-performing residential mortgage loans $ 246,124 $ 232,101
Total residential mortgage loans $ 3,698,016 $ 3,612,467
Total residential mortgage loans, excluding non-performing residential mortgage loans-non-performing at acquisition
$ 3,669,101 $ 3,582,438
Total delinquency (%) 6.7 % 6.4 %
Delinquency excluding loans non-performing at acquisition (%) 5.9 % 5.6 %
(1)Excludes the assets of the European Mortgage Loan Securitization (see Note 13, Securitization Transactions-Residential Mortgage Loan Securitizations-European Residential Mortgage Loans), which is a consolidated VIE holding non-performing residential mortgage loans with an unpaid principal balance and fair value of 20.4 million and 14.5 million, respectively. The net fair value of the interest held by us in this VIE was $64 thousand.
The table below details (in thousands) the underlying reference amounts and components of our Forward MSR-related investments as of December 31, 2025:
Fair Value of Underlying MSR Financing Advances Receivable Cash and Other Net Receivables Fair Value of Forward MSR-related Investments
$ 156,015 $ (93,500) $ 5,670 $ 9,667 $ 77,852
The table below provides additional details on the MSRs underlying our Forward MSR-related investments as of December 31, 2025:
Weighted Average
Holder of Mortgage Loan Unpaid Principal Balance Fair Value Rate Servicing Fee Loan Age (Months) Projected CPR Market Yield Multiple
(In thousands)
Federal National Mortgage Association $ 9,871,452 $ 143,917 3.09 % 0.25 % 61 4.98 % 9.43 % 5.82
Federal Home Loan Mortgage Corporation 801,944 12,098 3.71 % 0.25 % 57 5.02 % 9.53 % 6.03
Total $ 10,673,396 156,015 3.14 % 0.25 % 61 4.98 % 9.44 % 5.84
As discussed in Note 16 of the notes to our consolidated financial statements, we, through a wholly-owned trust subsidiary, purchase automobile loans under agreements with a consumer loan originator. We have beneficial interests in the loan cash flows, which are net of servicing-related fees and expenses including a deferred performance-based fee to the consumer loan originator, in which we have a non-controlling equity interest. The total fair value of these investments, which are included in Securities, at fair value on the Consolidated Balance Sheet, was $53.1 million as of December 31, 2025. The table below provides additional information about the automobile loans underlying these participation certificates, which comprise our investments in ABS backed by consumer loans, as of December 31, 2025:
Weighted Average
($ in thousands) Unpaid Principal Balance Premium (Discount) Amortized Cost Fair Value Life (Years) Delinquency (Days)
Automobile loans underlying ABS backed by consumer loans(1)
$ 59,927 $ (105) $ 59,822 $ 52,705 1.65 11
(1)Excludes charged-off consumer loans with an aggregate unpaid principal balance and fair value of $97.2 million and $0.4 million, respectively, for which we have determined that it is probable the servicer will be able to collect principal and interest. See Note 5 of the Notes to Consolidated Financial Statements for additional details on charged-off consumer loans.
The following table provides additional details about our investments in unconsolidated entities as of December 31, 2025:
Investment in Unconsolidated Entity Description Fair Value
Loan Originators: Entity Type (In thousands)
LendSure Mortgage Corp. Residential Mortgage Loan Originator $ 52,645
Other Residential Mortgage Loan, Commercial Mortgage Loan, and Consumer Loan Originators 25,605
78,250
Other Unconsolidated Entities: Underlying Product Type
Co-investments with Ellington affiliate(s) Commercial Mortgage Loans and REO 101,112
Equity investments in securitization-related risk retention vehicles Consumer Loans and European RMBS 566
Equity investments in securitization-related risk retention vehicles Residential Mortgage Loan 69,136
Other Various 63,357
234,171
$ 312,421
Investment Portfolio-Agency RMBS
December 31, 2025 December 31, 2024
($ in thousands) Fair Value % of Long Agency Portfolio Fair Value % of Long Agency Portfolio
Long Agency RMBS:
Fixed Rate $ 203,077 93.0 % $ 250,376 84.4 %
Reverse Mortgages 556 0.3 % 33,124 11.2 %
IOs 14,734 6.7 % 13,217 4.4 %
Total Long Agency RMBS $ 218,367 100.0 % $ 296,717 100.0 %
Our total long Agency RMBS portfolio decreased by 26% year over year to $218.4 million as of December 31, 2025, compared to $296.7 million as of December 31, 2024, primarily driven by net sales.
Net gains on our Agency RMBS, along with net interest income, were the primary drivers of the strong results in our Agency strategy in 2025. Declining interest rate volatility and tightening Agency yield spreads for much of the year provided broad support to our portfolio. These net gains were partially offset by net losses on our interest rate hedges, driven by declining interest rates.
During the quarter, we continued to hedge interest rate risk through the use of interest rate swaps and short positions in TBAs, U.S. Treasury securities and futures. We ended the quarter with a net long TBA position, on both a duration-weighted and notional basis, associated with the Agency strategy.
The net interest margin on our Agency portfolio, excluding the Catch-up Amortization Adjustment, increased to 2.32% for the year ended December 31, 2025, from 1.84% for the year ended December 31, 2024, primarily driven by a lower cost of funds. We continued to benefit from positive carry on our interest rate swap hedges, where we overall receive a higher floating rate and pay a lower fixed rate.
As of December 31, 2025 and 2024, the weighted average net pass-through rate on our fixed-rate specified pools was 3.9% and 4.1%, respectively.
We expect to continue to target specified pools that, taking into account their particular composition and based on our prepayment projections, should: (1) generate attractive yields relative to other Agency RMBS and U.S. Treasury securities, (2) have less prepayment sensitivity to government policy shocks, and/or (3) create opportunities for trading gains once the market recognizes their value, which for newer pools may come only after several months, when actual prepayment experience can be observed. We believe that our research team, proprietary prepayment models, and extensive databases remain essential tools in our implementation of this strategy.
The following table summarizes the prepayment rates for our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) for the three-month periods ended December 31, 2025, September 30, 2025, June 30, 2025, March 31, 2025, and December 31, 2024.
Three-Month Period Ended
December 31, 2025 September 30,
2025 		June 30, 2025 March 31, 2025 December 31, 2024
Three-Month Constant Prepayment Rates(1)
6.9 8.4 8.0 7.7 7.2
(1)Excludes Agency fixed-rate RMBS without any prepayment history.
The following table provides details about the composition of our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) as of December 31, 2025 and 2024:
December 31, 2025 December 31, 2024
Coupon (%) Current Principal Fair Value Weighted
Average Loan
Age (Months) 		Weighted Average Coupon Current Principal Fair Value Weighted
Average Loan
Age (Months) 		Weighted Average Coupon
(In thousands) (In thousands)
Fixed-rate Agency RMBS:
15-year fixed-rate mortgages:
3.50-3.99 $ 5,271 $ 5,204 99 3.50 % 7,173 6,913 94 3.50 %
4.50-4.99 - - - - % 102 102 165 4.50 %
Total 15-year fixed-rate mortgages 5,271 5,204 99 3.50 % 7,275 7,015 95 3.51 %
30-year fixed-rate mortgages:
2.00-2.49 12,431 10,209 51 2.00 % 17,125 13,527 39 2.00 %
2.50-2.99 19,039 16,189 56 2.50 % 22,189 18,162 44 2.50 %
3.00-3.49 36,626 32,871 70 3.00 % 34,310 29,701 58 3.00 %
3.50-3.99 48,228 44,984 80 3.50 % 54,192 48,557 68 3.50 %
4.00-4.49 28,089 26,896 68 4.00 % 32,394 29,938 55 4.00 %
4.50-4.99 5,657 5,597 67 4.50 % 8,146 7,752 54 4.50 %
5.00-5.49 21,856 21,988 51 5.00 % 46,392 45,062 30 5.00 %
5.50-5.99 8,333 8,504 33 5.50 % 8,759 8,672 21 5.50 %
6.00-6.49 23,497 24,322 35 6.00 % 33,707 34,065 22 6.00 %
6.50-6.99 6,015 6,313 32 6.50 % 7,701 7,925 20 6.50 %
Total 30-year fixed-rate mortgages 209,771 197,873 61 3.93 % 264,915 243,361 45 4.08 %
Total fixed-rate Agency RMBS $ 215,042 $ 203,077 62 3.92 % $ 272,190 $ 250,376 47 4.07 %
Portfolio Overview and Outlook-Longbridge Segment
As discussed in Note 13 of the Notes to the Consolidated Financial Statements, when Longbridge pools HECM loans into HMBS, such transfers do not qualify as sales under U.S. GAAP, and as a result, such transactions are treated as secured borrowings on our Consolidated Balance Sheet. The pooled HECM loans are included in Loans, at fair value, and the related liabilities are reflected as HMBS-related obligations, at fair value. After pooling the HECM loans into HMBS, Longbridge retains the mortgage servicing rights associated with such HMBS, which we refer to as the "HMBS MSR Equivalent."
Additionally, Longbridge typically retains the MSRs associated with the proprietary reverse mortgage loans that it originates and has acquired MSRs on reverse mortgage loans in the secondary market (collectively, "Reverse MSRs"). We have also securitized some of the proprietary reverse mortgage loans originated by Longbridge, and we have retained certain securitization tranches in compliance with credit risk retention rules.
The following table summarizes loan-related assets(1)in the Longbridge segment as of December 31, 2025 and 2024:
(In thousands) December 31, 2025 December 31, 2024
HMBS assets(2)(3)
$ 10,524,652 $ 9,245,834
Less: HMBS liabilities (10,406,332) (9,150,883)
HMBS MSR Equivalent 118,320 94,951
Unsecuritized HECM loans(4)
174,046 140,709
Proprietary reverse mortgage loans(3)(5)
1,687,801 728,959
Reverse MSRs 28,913 29,766
Unsecuritized REO(3)
4,742 2,323
Total 2,013,822 996,708
Less: Non-retained tranches of consolidated securitization trusts 1,396,607 576,474
Total, excluding non-retained tranches of consolidated securitization trusts $ 617,215 $ 420,234
(1)This information does not include financial derivatives or loan commitments.
(2)Includes HECM loans, REO, and claims or other receivables.
(3)REO is not considered a financial instrument and, as a result, is included at the lower of cost or fair value, as discussed in Note 2 of the notes to consolidated financial statements.
(4)As of December 31, 2025, includes $28.5 million of active HECM Buyout Loans, $19.0 million of inactive HECM Buyout Loans, and $6.1 million of other inactive HECM loans. As of December 31, 2024, includes $7.8 million of active HECM Buyout Loans, $11.1 million of inactive HECM Buyout Loans, and $5.0 million of other inactive HECM loans.
(5)As of December 31, 2025, includes $1.4 billion of securitized proprietary reverse mortgage loans and related REO, $26.0 million of cash held in a securitization reserve fund, and $19.9 million of investment related receivables. As of December 31, 2024, includes $606.8 million of securitized proprietary reverse mortgage loans and $15.0 million of cash held in a securitization reserve fund.
Our Longbridge segment reported excellent results for the year, with positive contributions from both originations and servicing. Strong performance from originations was driven by significantly higher origination volumes of proprietary reverse mortgage loans year over year, higher origination margins for HECM loans, and net gains related to proprietary reverse mortgage loan securitizations completed during the year. Strong results from servicing reflected steady base servicing net income, strong tail securitization executions, and a net gain on the HMBS MSR Equivalent, driven primarily by tighter HMBS yield spreads. These gains were partially offset by net unrealized losses on the retained tranches of consolidated proprietary reverse mortgage loan securitization trusts, due to faster prepayment speed assumptions, lower HPA projections, and higher applied discount rates; as well as net losses on interest rate hedges.
Our Longbridge portfolio, excluding non-retained tranches of consolidated securitization trusts, increased by 47% year over year to $617.2 million as of December 31, 2025, primarily driven by proprietary reverse mortgage loan originations, partially offset by the impact of securitizations of that product completed during the year.
Supplemental Longbridge Information:
The following table summarizes origination volumes by channel for the years ended December 31, 2025 and 2024:
Year Ended December 31,
($ In thousands) 2025 2024
Channel Units
New Loan Origination Volume(1)
% of New Loan Origination Volume Units
New Loan Origination Volume(1)
% of New Loan Origination Volume
Wholesale and correspondent 5,794 $ 1,286,763 72 % 5,298 $ 983,831 77 %
Retail 2,804 507,058 28 % 1,861 300,237 23 %
Total 8,598 $ 1,793,821 100 % 7,159 $ 1,284,068 100 %
(1)Represents initial borrowed amounts on reverse mortgage loans.
Corporate/Other
Results for the year also reflect: (i) an increase in the unrealized loss on our unsecured debt driven by credit spread tightening, (ii) debt issuance costs related to our October unsecured notes offering, which were fully expensed at issuance, (iii) higher corporate-level interest expense due to a larger amount of unsecured notes outstanding, (iv) an increase in incentive fee incurred, (v) an increase in income tax expense, (vi) a realized loss related to the par redemption of our 6.75% unsecured notes that we had carried at a slight discount to par. These higher expenses were partially offset by net gains on the fixed receiver interest rate swaps used to hedge the fixed payments on our unsecured notes and preferred equity, with interest rates lower during the year.
Financing-Overall
We have various financing arrangements in place as of December 31, 2025, including both secured and unsecured borrowings. We use repos, secured lines of credit, and various other secured borrowings to finance our portfolios, each of which we account for as collateralized borrowings. We have also obtained, through the securitization markets, term financing for residential mortgage loans, proprietary reverse mortgage loans, and consumer loans. Additionally, as an issuer of HMBS, we account for HMBS-related obligations as secured borrowings. Finally, as of December 31, 2025, we had $662.8 million of outstanding Unsecured borrowings including: (i) senior notes of $400.0 million, maturing in September 2030 and bearing an interest rate of 7.375%, (ii) senior notes of $210.0 million, maturing in April 2027 and bearing an interest rate of 5.875%, and (iii) senior notes of $37.8 million, maturing in August 2026 and bearing an interest rate of 6.00% (collectively, the "Senior Notes"); as well as $15.0 million of unregistered junior subordinated unsecured debt securities (the "Trust Preferred Debt"). The indentures governing the outstanding Senior Notes contain a number of covenants, including several financial covenants. See Note 14 of the Notes to the Consolidated Financial Statements for additional details on our Unsecured borrowings.
As of December 31, 2025, outstanding borrowings under repos and Total other secured borrowings (which include Other secured borrowings and Other secured borrowings, at fair value, as presented on our Consolidated Balance Sheet) were $5.9 billion, of which approximately 3%, or $201.7 million, related to our Agency RMBS holdings. The remaining outstanding borrowings related to our credit portfolio and Longbridge. Additionally, we had $10.4 billion of HMBS-related obligations.
The following table details our borrowings outstanding and debt-to-equity ratios as of December 31, 2025 and 2024:
As of
($ in thousands) December 31, 2025 December 31, 2024
Recourse borrowings:
Repurchase agreements $ 2,655,444 $ 2,584,040
Other secured borrowings 296,398 253,300
Unsecured borrowings, at par 662,750 297,681
Total recourse borrowings $ 3,614,592 $ 3,135,021
Debt-to-equity ratio based on total recourse borrowings 1.9:1 2.0:1
Debt-to-equity ratio based on total recourse borrowings excluding borrowings collateralized by U.S. Treasury securities
1.9:1 1.8:1
Debt-to-equity ratio based on total recourse borrowings excluding borrowings collateralized by U.S. Treasury securities, adjusted for unsettled purchases and sales(1)
1.9:1 1.8:1
Non-Recourse(2)Borrowings:
Other Secured Borrowings, at fair value(3)
2,945,578 1,934,309
HMBS-related obligations, at fair value 10,406,332 9,150,883
Total non-recourse borrowings 13,351,910 11,085,192
Total Recourse and Non-Recourse Borrowings $ 16,966,502 $ 14,220,213
Debt-to-equity ratio based on total recourse and non-recourse borrowings 9.1:1 8.9:1
Debt-to-equity ratio based on total recourse and non-recourse borrowings excluding borrowings collateralized by U.S. Treasury securities
9.0:1 8.8:1
Debt-to-equity ratio based on total recourse and non-recourse borrowings excluding borrowings collateralized by U.S. Treasury securities, adjusted for unsettled purchases and sales(1)
9.0:1 8.8:1
(1)For unsettled purchases and sales, assumes associated borrowings are subject to haircuts of 5.8% and 5.9% as of December 31, 2025 and 2024, respectively.
(2)All of our non-recourse borrowings are secured by collateral. In the event of default under a non-recourse borrowing, the lender has a claim against the collateral but not any of the Operating Partnership's other assets. In the event of default under a recourse borrowing, the lender's claim is not limited to the collateral (if any).
(3)Relates to our residential mortgage and reverse mortgage loan securitizations, where we have elected the fair value option on the related debt. See Note 2 and Note 13 of our consolidated financials statements.
Our recourse debt-to-equity ratio, excluding borrowings collateralized by U.S. Treasury securities and adjusted for unsettled purchases and sales, increased to 1.9:1 as of December 31, 2025, compared to 1.8:1 as of December 31, 2024. The increase reflected an unsecured notes offering completed in October and an increase in repo borrowings on our larger credit and Longbridge portfolios, even as a portion of the proceeds from that unsecured notes offering were used to replace repo borrowings. The increase was also partially offset by higher shareholders' equity and the impact of securitizations.
Our overall debt-to-equity ratio, based on total recourse and non-recourse borrowings excluding borrowings collateralized by U.S. Treasury securities, adjusted for unsettled purchases and sales, was 9.0:1 and 8.8:1 as of December 31, 2025 and 2024, respectively.
Our debt-to-equity ratio does not account for liabilities other than debt financings and does not include debt associated with securitization transactions accounted for as sales.
Our secured financing costs include interest expense related to our repo borrowings and Total other secured borrowings (which include Other secured borrowings and Other secured borrowings, at fair value, as presented on our Consolidated Balance Sheet but exclude HMBS-related obligations). For the year ended December 31, 2025, the average cost of funds on our secured financings decreased to 5.18%, as compared to 5.65% for the year ended December 31, 2024. Our unsecured financing costs consist of interest expense related to our Unsecured borrowings; for the years ended December 31, 2025 and 2024, the average borrowing rate on our unsecured financings was 6.42% and 6.12%, respectively. Our average cost of funds, including both secured and unsecured financings, decreased to 5.26% from 5.68% over the same period.
Critical Accounting Estimates
Our consolidated financial statements include the accounts of Ellington Financial Inc., its Operating Partnership, its subsidiaries, and variable interest entities ("VIEs"), for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated.
The preparation of our consolidated financial statements in accordance with U.S. GAAP require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain. Actual results could differ from those estimates and such differences could have a material impact on our financial condition and/or results of operations. We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made based upon information available to us at that time. We rely on the experience of our Manager and Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates. See Note 2 of the notes to our consolidated financial statements for a complete discussion of our significant accounting policies. We have identified our most critical accounting estimates to be the following:
Valuation:We have elected the fair value option for the vast majority of our assets and liabilities for which such election is permitted, as provided for under ASC 825, Financial Instruments("ASC 825"). For financial instruments that are traded in an "active market," the best measure of fair value is the quoted market price. However, many of our financial instruments are not traded in an active market. Therefore, management generally uses third-party valuations when available. If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology.
Summary descriptions, for various categories of financial instruments, of the valuation methodologies management uses in determining fair value of our financial instruments are detailed in Note 2 of the notes to our consolidated financial statements. Management utilizes such methodologies to assign a good faith fair value (the estimated price that, in an orderly transaction at the valuation date, would be received to sell an asset, or paid to transfer a liability, as the case may be) to each such financial instrument. See the notes to our consolidated financial statements for more information on valuation techniques used by management in the valuation of our assets and liabilities.
Because of the inherent uncertainty of valuation, the estimated fair value of our financial instruments may differ significantly from the values that would have been used had a ready market for the financial instruments existed, and the differences could be material to our consolidated financial statements.
The determination of estimated fair value of those of our financial instruments that are not traded in an active market requires the use of both macroeconomic and microeconomic assumptions and/or inputs, which are generally based on current market and economic conditions. Changes in market and/or economic conditions could have a significant adverse effect on the estimated fair value of our financial instruments. Changes to assumptions, including assumed market yields, may significantly impact the estimated fair value of our investments. Our valuations are sensitive to changes in interest rate; see the interest rate sensitivity analysis included in Item 7A. Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further information.
VIEs: We evaluate each of our investments and other contractual arrangements to determine whether our interest constitutes a variable interest in a VIE, and if so whether we are the primary beneficiary of such VIE. In making these determinations we use both qualitative and quantitative analyses involving a significant amount of judgment, taking into consideration factors such as which interests in the VIE create or absorb variability, the contractual terms related to such
interests, other transactions or agreements with the entity, key decision makers and their impact on the VIE's economic performance, and related party relationships.
Purchases and Sales of Investments and Investment Income: Purchase and sales transactions are generally recorded on trade date. Realized and unrealized gains and losses are calculated based on identified cost.
For securities, residential and commercial mortgage loans, consumer loans, and corporate loans, we generally amortize premiums and accrete discounts using the effective interest method. For certain of our securities, for purposes of estimating future expected cash flows, management uses assumptions including, but not limited to, assumptions for future prepayment rates, default rates, and loss severities (each of which may in turn incorporate various macroeconomic assumptions, such as future housing prices, GDP growth rates, and unemployment rates). In estimating future cash flows on certain of our loans, there are a number of assumptions that are subject to significant uncertainties and contingencies, including assumptions relating to prepayment rates, default rates, loan loss severities, and loan repurchases. These estimates require the use of a significant amount of judgment. Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment as adjusted for credit impairment, if any.
The effective yield on our debt securities that are deemed to be of high credit quality (including Agency RMBS, exclusive of interest only securities) can be significantly impacted by our estimate of future prepayments. Future prepayment rates are difficult to predict. We estimate prepayment rates over the remaining life of our securities using models that generally incorporate the forward yield curve, current mortgage rates, mortgage rates on the outstanding loans, age and size of the outstanding loans, and other factors. We compare estimated prepayments to actual prepayments on a quarterly basis, and effective yields are recalculated retroactive to the time of purchase. When differences arise between our previously calculated effective yields and our current calculated effective yields, a catch-up adjustment ("Catch-up Amortization Adjustment") is made to interest income to reflect the cumulative impact of the changes in effective yields. For the years ended December 31, 2025, 2024, and 2023, we recognized a Catch-Up Amortization Adjustment of $0.9 million, $(0.6) million, and $(0.1) million, respectively. The Catch-up Amortization Adjustment is reflected as an increase (decrease) to Interest income on the Consolidated Statement of Operations.
See the notes to our consolidated financial statements for more information on the assumptions and methods that we use to amortize purchase premiums and accrete purchase discounts.
Income Taxes: We have elected to be taxed as a REIT for U.S. federal income tax purposes, and are generally are not subject to corporate-level federal and state income tax on net income we distribute to our stockholders within the prescribed timeframes. We have elected to treat certain domestic and foreign subsidiaries as TRSs. Our financial results are generally not expected to reflect provisions for current or deferred income taxes, except for any activities conducted through one or more TRSs that are subject to corporate income taxation. Establishing a provision for income tax expense requires judgment and interpretation of the application of various federal, state, local, and foreign jurisdiction's tax laws. We may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any such positions, we might be found to have a tax liability that has not been recorded in the accompanying consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof. See Note 2 and Note 15 to our consolidated financial statements for additional details on income taxes.
Recent Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements for a description of relevant recent accounting pronouncements, if any.
Financial Condition
The following table summarizes the fair value of our consolidated portfolio of investments(1)as of December 31, 2025 and 2024.
(In thousands) December 31, 2025
December 31, 2024(2)
Long:
Investment Portfolio:
Credit:
Dollar denominated:
Agency-eligible residential mortgage loans $ 243,615 $ -
CLOs 111,808 61,085
CMBS 26,550 39,206
Commercial mortgage loans(3)(5)
765,059 470,142
Consumer loans and ABS backed by consumer loans(6)
143,648 87,249
Other investments(9)
70,466 61,508
Corporate debt and equity and corporate loans 29,147 27,598
Debt and equity investments in loan origination entities(7)
95,688 61,619
Non-Agency RMBS 95,240 118,410
Non-QM loans and retained non-QM RMBS(3)(6)(8)
2,624,068 2,007,670
Residential transition loans and other residential mortgage loans(3)(4)
839,456 1,127,770
HELOC and CES Loans and retained RMBS(6)(8)
364,838 481,038
Forward MSR-related investments 77,852 77,848
Non-Dollar denominated:
CLO 13,232 6,333
Corporate debt and equity - 181
RMBS(10)(11)
16,953 14,394
Other residential mortgage loans 27,536 39,168
Agency:
Fixed-rate specified pools 203,077 250,376
IOs 14,734 13,217
Reverse mortgage pools 556 33,124
Government debt 32,992 226,523
Longbridge:
Reverse mortgage loans(3)
12,344,835 10,097,279
Reverse MSRs 28,913 29,766
Total long $ 18,170,263 $ 15,331,504
Short:
Investment Portfolio:
Government debt:
Dollar denominated (269,978) (268,123)
Non-Dollar denominated (2,724) (25,451)
Total short $ (272,702) $ (293,574)
(1)For more detailed information about the investments in our portfolio, please see the notes to the consolidated financial statements.
(2)Conformed to current period presentation.
(3)Includes related REO. REO is not eligible to elect the fair value option as described in Note 2 of the notes to the consolidated financial statements and, as a result, is included at the lower of cost or fair value.
(4)Other residential mortgage loans include secondary market purchases of non-performing and re-performing mortgage loans.
(5)Includes equity investments in unconsolidated entities holding commercial mortgage loans and REO and corporate loans secured by commercial mortgage loans.
(6)Includes equity investments in securitization-related vehicles.
(7)Includes corporate loans made to certain loan origination entities in which we hold an equity investment.
(8)Retained RMBS represents RMBS issued by non-consolidated Ellington-sponsored loan securitization trusts, and interest in entities holding such RMBS.
(9)Includes equity investment in Ellington affiliate.
(10)Includes loan to an entity which purchases residential mortgage loans for eventual securitization.
(11)Includes an equity investment in an unconsolidated entity holding European RMBS.
The following table summarizes our financial derivatives portfolio(1)(2)as of December 31, 2025.
Notional Net Fair Value
(In thousands) Long Short Net
Mortgage-Related Derivatives:
CDS on MBS and MBS Indices $ 190 $ (26,739) $ (26,549) $ 2,204
Total Net Mortgage-Related Derivatives 2,204
Corporate-Related Derivatives:
CDS on Corporate Bonds and Corporate Bond Indices 165,010 (1,047,704) (882,694) (20,941)
Total Return Swaps 1,772 - 1,772 24
Options 8,575 - 8,575 5,607
Warrants(3)
109 - 109 1
Total Net Corporate-Related Derivatives (15,309)
Interest Rate-Related Derivatives:
TBAs 89,488 (328,374) (238,886) (341)
Interest Rate Swaps 6,056,495 (8,223,774) (2,167,279) 102,101
U.S. Treasury Futures(4)
1,900 (257,200) (255,300) 1,050
Total Interest Rate-Related Derivatives 102,810
Other Derivatives:
Foreign Currency Forwards(5)
- (28,934) (28,934) (55)
Total Net Other Derivatives (55)
Net Total $ 89,650
(1)For more detailed information about the financial derivatives in our portfolio, please refer to Note 10 of the notes to the consolidated financial statements.
(2)In the table above, fair value of certain derivative transactions are shown on a net basis. The accompanying financial statements separate derivative transactions as either assets or liabilities. As of December 31, 2025, derivative assets and derivative liabilities were $142.7 million and $(53.1) million, respectively, for a net fair value of $89.7 million, as reflected in "Net Total" above.
(3)Notional represents the maximum number of shares available to be purchased upon exercise.
(4)Notional value represents the total face amount of U.S. Treasury securities underlying all contracts held. As of December 31, 2025, a total of 19 long and 2,323 short U.S. Treasury futures contracts were held.
(5)Short notional value represents U.S. Dollars to be received by us at the maturity of the forward contract.
The following table summarizes our financial derivatives portfolio(1)(2)as of December 31, 2024.
Notional Net
Fair Value
(In thousands) Long Short Net
Mortgage-Related Derivatives:
CDS on MBS and MBS Indices $ 209 $ (31,473) $ (31,264) $ 1,822
Total Net Mortgage-Related Derivatives 1,822
Corporate-Related Derivatives:
CDS on Corporate Bonds and Corporate Bond Indices 2,000 (913,305) (911,305) (33,349)
Options 1 - 1 3,427
Warrants(3)
102 - 102 9
Total Net Corporate-Related Derivatives (29,913)
Interest Rate-Related Derivatives:
TBAs 151,156 (164,256) (13,100) (36)
Interest Rate Swaps 3,084,335 (4,334,395) (1,250,060) 140,411
U.S. Treasury Futures(4)
1,900 (107,000) (105,100) 770
Total Interest Rate-Related Derivatives 141,145
Other Derivatives:
Foreign Currency Forwards(5)
- (25,988) (25,988) 317
Total Net Other Derivatives 317
Net Total $ 113,371
(1)For more detailed information about the financial derivatives in our portfolio, please refer to Note 10 of the notes to the consolidated financial statements.
(2)In the table above, fair value of certain derivative transactions are shown on a net basis. The accompanying financial statements separate derivative transactions as either assets or liabilities. As of December 31, 2024, derivative assets and derivative liabilities were $184.4 million and $(71.0) million, respectively, for a net fair value of $113.4 million, as reflected in "Net Total" above.
(3)Notional represents the maximum number of shares available to be purchased upon exercise.
(4)Notional value represents the total face amount of U.S. Treasury securities underlying all contracts held. As of December 31, 2024, a total of 19 long and 821 short U.S. Treasury futures contracts were held.
(5)Short notional value represents U.S. Dollars to be received by us at the maturity of the forward contract.
As of December 31, 2025, our Consolidated Balance Sheet reflected total assets of $19.4 billion and total liabilities of $17.5 billion. As of December 31, 2024, our Consolidated Balance Sheet reflected total assets of $16.3 billion and total liabilities of $14.7 billion. Our investments in securities, loans, MSRs, Forward MSR-related investments, unconsolidated entities, loan commitments, financial derivatives, and real estate owned included in total assets were $18.3 billion and $15.5 billion as of December 31, 2025 and 2024, respectively. Our investments in securities sold short and financial derivatives included in total liabilities were $325.8 million and $364.6 million as of December 31, 2025 and 2024, respectively. As of both December 31, 2025 and 2024, investments in securities sold short consisted principally of short positions in U.S. Treasury securities and sovereign bonds. We primarily use short positions in U.S. Treasury securities and sovereign bonds to hedge the risk of rising interest rates and foreign currency risk.
We frequently hold a net short position in TBAs. The amounts of net short TBAs, as well as of other hedging instruments, may fluctuate according to the size of our investment portfolio as well as according to how we view market dynamics as favoring the use of one hedging instrument or another. As of December 31, 2025 and 2024, we had a net short notional TBA position of $238.9 million and $13.1 million, respectively.
For a more detailed discussion of our investment portfolio, see "-Trends and Recent Market Developments-Portfolio Overview and Outlook" above.
We use mortgage-related credit derivatives primarily to hedge credit risk in certain credit strategies, although we have also taken net long positions in certain CDS on RMBS and CMBS indices. Our CDS on individual RMBS represent "single-name" positions whereby we have synthetically purchased credit protection on specific non-Agency RMBS bonds. As there is no longer an active market for CDS on individual RMBS or CDS on RMBS indices, our portfolios in these sectors continues to run off. We also use CDS on corporate bond indices, options thereon, and various other instruments as a means to hedge credit risk. As market conditions change, especially as the pricing of various credit hedging instruments changes in relation to our outlook on future credit performance, we continuously re-evaluate both the extent to which we hedge credit risk and the particular mix of instruments that we use to hedge credit risk.
We may hold long and/or short positions in corporate bonds or equities. Our long and short positions in corporate bonds or equities may serve as outright investments or portfolio hedges.
We use a variety of instruments to hedge interest rate risk in our portfolio, including non-derivative instruments such as U.S. Treasury securities and sovereign debt instruments, and derivative instruments such as interest rate swaps, TBAs, Eurodollar and U.S. Treasury futures, and options on the foregoing. The mix of instruments that we use to hedge interest rate risk may change materially from one period to the next. We have also entered into foreign currency forward and futures contracts in order to hedge risks associated with foreign currency fluctuations.
We have entered into repos to finance many of our assets. We account for our repos as collateralized borrowings. As of December 31, 2025 indebtedness outstanding on our repos was approximately $2.7 billion. As of December 31, 2025, our assets financed with repos consisted of Agency RMBS of $214.2 million, credit portfolio assets of $2.9 billion, reverse mortgage loans of $142.3 million, and U.S. Treasury securities of $33.0 million. As of December 31, 2025, outstanding indebtedness under repos was $201.7 million for Agency RMBS, $2.3 billion for credit portfolio assets, $121.0 million of reverse mortgage loans, and $33.3 million for U.S. Treasury securities. As of December 31, 2024 indebtedness outstanding on our repos was approximately $2.6 billion. As of December 31, 2024, our assets financed with repos consisted of Agency RMBS of $249.4 million, credit portfolio assets of $2.7 billion, reverse mortgage loans of $40.3 million, and U.S. Treasury securities of $226.5 million. As of December 31, 2024, outstanding indebtedness under repos was $238.1 million for Agency RMBS, $2.1 billion for credit portfolio assets, $30.4 million on reverse mortgage loans, and $227.3 million for U.S. Treasury securities.
In addition to our repos, as of December 31, 2025 we had Total other secured borrowings of $3.2 billion, collateralized primarily by $3.5 billion of residential mortgage loans, ABS backed by consumer loans, reverse mortgage loans, and reserve cash. This compares to Total other secured borrowings of $2.2 billion as of December 31, 2024, used to finance $2.4 billion of residential mortgage loans, ABS backed by consumer loans, reverse mortgage loans, Reverse MSRs, and reserve cash. Additionally, as of December 31, 2025, we had HMBS-related obligations of $10.4 billion collateralized by $10.5 billion of HMBS assets, and as of December 31, 2024, we had HMBS-related obligations of $9.2 billion collateralized by $9.2 billion of HMBS assets, which include HECM loans as well as REO and claims and other receivables. In addition to our secured
borrowings, as of December 31, 2025 and 2024, we had Unsecured borrowings outstanding of $662.8 million and $297.7 million, respectively.
As of December 31, 2025 and 2024, our debt-to-equity ratio was 9.1:1 and 8.9:1, respectively. Our recourse debt-to-equity ratio was 1.9:1 as of December 31, 2025 as compared to 2.0:1 as of December 31, 2024. See the discussion in "-Liquidity and Capital Resources" below for further information on our borrowings.
Equity
As of December 31, 2025, our equity increased by $280.3 million to $1.871 billion from $1.591 billion as of December 31, 2024. The increase principally consisted of net proceeds from the issuance of common stock of $301.8 million, after commissions and offering costs; net income of $150.8 million; and contributions from non-controlling interests of $35.7 million. These increases were partially offset by common and preferred dividends of $186.4 million and distributions to non-controlling interests of $25.5 million. Stockholders' equity, which excludes the non-controlling interests related to the minority interest in the Operating Partnership as well as the minority interests of our joint venture partners, was $1.834 billion as of December 31, 2025. As of December 31, 2025, our book value per share of common stock, calculated using Total Stockholders' Equity less the aggregate liquidation preference of outstanding preferred stock, was $13.16.
Results of Operations
The following tables summarize our results of operations by segment (as applicable) for the years ended December 31, 2025 and 2024:
Year Ended December 31, 2025
(In thousands except per share amounts) Investment Portfolio Longbridge Corporate/ Other Total
Interest Income (Expense)
Interest income $ 375,731 $ 111,994 $ 6,765 $ 494,490
Interest expense (196,480) (84,654) (23,399) (304,533)
Net interest income 179,251 27,340 (16,634) 189,957
Other Income (Loss)
Realized and unrealized gains (losses) on securities and loans, net 92,011 53,700 - 145,711
Realized and unrealized gains (losses) on financial derivatives, net (44,443) (11,815) 43 (56,215)
Realized and unrealized gains (losses) on real estate owned, net (13,370) 523 - (12,847)
Unrealized gains (losses) on other secured borrowings, at fair value, net (55,764) (36,959) - (92,723)
Realized and unrealized gains (losses) on unsecured borrowings, at fair value - - (12,851) (12,851)
Net change from HECM reverse mortgage loans, at fair value - 708,312 - 708,312
Net change related to HMBS obligations, at fair value - (585,333) - (585,333)
Other, net 22,120 30,313 - 52,433
Total other income (loss) 554 158,741 (12,808) 146,487
Expenses
Base management fee to affiliate, net of fee rebates(1)
- - 25,404 25,404
Incentive fee to affiliate - - 4,533 4,533
Investment and transaction related expenses 22,175 52,632 5,962 80,769
Other operating expenses 8,788 98,777 20,265 127,830
Total expenses 30,963 151,409 56,164 238,536
Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 148,842 34,672 (85,606) 97,908
Income tax expense (benefit) - - 3,792 3,792
Earnings (losses) from investments in unconsolidated entities 56,653 - - 56,653
Net Income (Loss) 205,495 34,672 (89,398) 150,769
Net income (loss) attributable to non-controlling interests 2,569 - 1,331 3,900
Dividends on preferred stock - - 28,126 28,126
Net Income (Loss) Attributable to Common Stockholders $ 202,926 $ 34,672 $ (118,855) $ 118,743
Net Income (Loss) Per Common Share $ 2.04 $ 0.35 $ (1.20) $ 1.19
(1)See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates.
Year Ended December 31, 2024
(In thousands except per share amounts) Investment Portfolio Longbridge Corporate/Other Total
Interest Income (Expense)
Interest income $ 358,308 $ 50,660 $ 7,047 $ 416,015
Interest expense (216,144) (45,187) (18,275) (279,606)
Net interest income 142,164 5,473 (11,228) 136,409
Other Income (Loss)
Realized and unrealized gains (losses) on securities and loans, net 33,665 24,794 - 58,459
Realized and unrealized gains (losses) on financial derivatives, net 31,554 15,977 (6,785) 40,746
Realized and unrealized gains (losses) on real estate owned, net (4,893) - - (4,893)
Unrealized gains (losses) on other secured borrowings, at fair value, net (39,959) 4,098 - (35,861)
Unrealized gains (losses) on unsecured borrowings, at fair value - - (9,147) (9,147)
Net change from HECM reverse mortgage loans, at fair value - 637,019 - 637,019
Net change related to HMBS obligations, at fair value - (545,673) - (545,673)
Other, net 8,254 20,334 - 28,588
Total other income (loss) 28,621 156,549 (15,932) 169,238
Expenses
Base management fee to affiliate, net of fee rebates(1)
- - 23,460 23,460
Investment and transaction related expenses 15,201 41,863 - 57,064
Other operating expenses 5,523 82,814 20,515 108,852
Total expenses 20,724 124,677 43,975 189,376
Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities 150,061 37,345 (71,135) 116,271
Income tax expense (benefit) - - 612 612
Earnings (losses) from investments in unconsolidated entities 32,445 - - 32,445
Net Income (Loss) 182,506 37,345 (71,747) 148,104
Net income (loss) attributable to non-controlling interests 1,010 77 1,156 2,243
Dividends on preferred stock - - 27,697 27,697
(Gain) loss on redemption of preferred stock - - 335 335
Net Income (Loss) Attributable to Common Stockholders $ 181,496 $ 37,268 $ (100,935) $ 117,829
Net Income (Loss) Per Common Share $ 2.09 $ 0.43 $ (1.16) $ 1.36
(1)See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates.
Net Income (Loss) Attributable to Common Stockholders
For the year ended December 31, 2025 we had net income (loss) attributable to common stockholders of $118.7 million, compared to $117.8 million for the year ended December 31, 2024.
Interest Income
Interest income was $494.5 million for the year ended December 31, 2025, as compared to $416.0 million for the year ended December 31, 2024. Interest income includes coupon payments received and accrued on our holdings, the net accretion and amortization of purchase discounts and premiums on various holdings, and interest on our cash balances, including those balances held by our counterparties as collateral.
Investment Portfolio
Interest income from our investment portfolio segment for the year ended December 31, 2025 increased to $375.7 million, as compared to $358.3 million for the year ended December 31, 2024.
The following table details our interest income, average holdings of yield-bearing assets, and weighted average yield based on amortized cost for the years ended December 31, 2025 and 2024:
Credit(1)
Agency(1)
Total(1)
(In thousands) Interest Income Average Holdings Yield Interest Income Average Holdings Yield Interest Income Average Holdings Yield
Year ended
December 31, 2025 		$ 352,754 $ 4,681,460 7.54 % $ 12,315 $ 271,098 4.54 % $ 365,069 $ 4,952,558 7.37 %
Year ended
December 31, 2024 		$ 320,584 $ 4,336,763 7.39 % $ 22,638 $ 550,939 4.11 % $ 343,222 $ 4,887,702 7.02 %
(1)Amounts exclude interest income on cash and cash equivalents (including when posted as margin) and long positions in U.S. Treasury securities.
For the year ended December 31, 2025, interest income from our credit portfolio was $352.8 million, as compared to $320.6 million for the year ended December 31, 2024. This year-over-year increase was primarily driven by a larger average credit portfolio and by higher average asset yields for the year ended December 31, 2025.
For the year ended December 31, 2025 and 2024, interest income from our Agency RMBS was $12.3 million and $22.6 million, respectively. This year-over-year decrease was due to a significantly smaller Agency portfolio in the current year, partially offset by higher average asset yields for the year ended December 31, 2025.
Some of the variability in our interest income and portfolio yields is due to the Catch-up Amortization Adjustment. For the year ended December 31, 2025 we had a positive Catch-up Amortization Adjustment of $0.9 million which increased our interest income. Comparatively, for the year ended December 31, 2024 we had a negative Catch-up Amortization Adjustment of $(0.6) million which decreased our interest income. Excluding the Catch-up Amortization Adjustment, the weighted average yield of our Agency portfolio and our total portfolio was 4.22% and 7.35%, respectively, for the year ended December 31, 2025. Excluding the Catch-up Amortization Adjustment, the weighted average yield of our Agency portfolio and our total portfolio was 4.21% and 7.03%, respectively, for the year ended December 31, 2024.
In addition, we had $6.8 million and $9.6 million of interest income related to long U.S. Treasury securities and reverse repo on short U.S. Treasury securities for the years ended December 31, 2025 and 2024, respectively, which we generally use to hedge our exposure to changes in interest rates.
Longbridge
For the years ended December 31, 2025 and 2024, interest income from the Longbridge segment was $112.0 million and $50.7 million, respectively. The increase was primarily related to a larger portfolio of proprietary reverse mortgage loans period over period, as well as an increase in interest income related to reverse repo on short positions in U.S. Treasury securities for the year ended December 31, 2025.
Corporate/Other
For the years ended December 31, 2025 and 2024, interest income not allocable to either the investment portfolio segment or the Longbridge segment was $6.8 million and $7.0 million, respectively, primarily related to interest income earned on cash balances and cash collateral held by counterparties.
Interest Expense
Interest expense primarily includes interest on funds borrowed under repos and Total other secured borrowings, interest on our unsecured borrowings, coupon interest on securities sold short, the related net accretion and amortization of purchase discounts and premiums on those short holdings, and interest on our counterparties' cash collateral held by us. For the years ended December 31, 2025 and 2024, we had total interest expense of $304.5 million and $279.6 million, respectively.
Investment Portfolio
Total interest expense in our investment portfolio segment decreased to $196.5 million for the year ended December 31, 2025, as compared to $216.1 million for the year ended December 31, 2024. The decline in interest expense was primarily the result of a decline in financing rates and a decline in average borrowings on our smaller Agency RMBS portfolio and U.S. Treasury securities. These declines were partially offset by an increase in borrowings on our larger credit portfolio.
The table below summarizes the components of interest expense in our Investment Portfolio for the years ended December 31, 2025 and 2024.
Year Ended
(In thousands) December 31, 2025 December 31, 2024
Repos and Total Other Secured Borrowings $ 194,612 $ 213,955
Securities Sold Short (1)
1,836 2,114
Other 32 75
Total $ 196,480 $ 216,144
(1)Amount includes the related net accretion and amortization of purchase discounts and premiums.
The following table summarizes our aggregate secured borrowings, including repos and Total other secured borrowings, for the years ended December 31, 2025 and 2024.
Year Ended
December 31, 2025 December 31, 2024
Collateral for Secured Borrowing Average
Borrowings 		Interest Expense Average
Cost of
Funds 		Average
Borrowings 		Interest Expense Average
Cost of
Funds
(In thousands)
Credit $ 3,553,366 $ 180,814 5.09 % $ 3,279,732 $ 177,037 5.40 %
Agency RMBS 181,476 8,140 4.49 % 447,668 24,574 5.49 %
Subtotal(1)
3,734,842 188,954 5.06 % 3,727,400 201,611 5.41 %
U.S. Treasury Securities 126,633 5,658 4.47 % 230,950 12,344 5.34 %
Total $ 3,861,475 $ 194,612 5.04 % $ 3,958,350 $ 213,955 5.41 %
(1)Excludes U.S. Treasury securities.
Among other instruments, we use interest rate swaps to hedge against the risk of rising interest rates. If we were to include as a component of our cost of funds the actual and accrued periodic payments on our interest rate swaps used to hedge our assets, our total average cost of funds would decrease to 4.17% and 4.30% for the years ended December 31, 2025 and 2024, respectively. Excluding the Catch-up Amortization Adjustment, our net interest margin, defined as the average yield on our portfolio of yield-bearing assets less the average cost of funds on our secured borrowings (including actual and accrued periodic payments on interest rate swaps as described above), was 3.18% and 2.73% for the years ended December 31, 2025 and 2024, respectively. These metrics do not include costs associated with any unsecured debt or costs associated with other instruments that we use to hedge interest rate risk, such as TBAs and futures.
Longbridge
Interest expense in the Longbridge segment primarily relates to Other secured borrowings and repurchase agreements. For the years ended December 31, 2025 and 2024, interest expense in the Longbridge segment was $84.7 million and $45.2 million, respectively. The increase in interest expense in the current period was primarily due to a significant increase in our average borrowings on proprietary reverse mortgage loans as well as an increase in interest expense on securities sold short, partially offset by a significant decrease in financing rates for the year ended December 31, 2025.
The table below summarizes the components of interest expense in the Longbridge segment for the years ended December 31, 2025 and 2024.
Year Ended
(In thousands) December 31, 2025 December 31, 2024
Repos and Total Other Secured Borrowings $ 75,206 $ 41,055
Securities Sold Short (1)
9,448 4,111
Other - 21
Total $ 84,654 $ 45,187
(1)Amount includes the related net accretion and amortization of purchase discounts and premiums.
For the year ended December 31, 2025, our average borrowings in the Longbridge segment were $1.3 billion and our average cost of funds was 5.60%. This compares to average borrowings of $555.7 million and an average cost of funds of 7.39% for the year ended December 31, 2024.
Corporate/Other
Certain items of interest expense are not allocable to either the investment portfolio segment or the Longbridge segment, such as interest expense on our Unsecured borrowings and certain cash collateral held by us. Total interest expense not allocable to either the investment portfolio segment or the Longbridge segment was $23.4 million and $18.3 million for the years ended December 31, 2025 and 2024, respectively. The rise in interest expense during the current period was primarily due to an increase in the amount of unsecured notes outstanding in the current year.
The table below summarizes the components of interest expense not included in either segment for the years ended December 31, 2025 and 2024.
Year Ended
(In thousands) December 31, 2025 December 31, 2024
Unsecured borrowings $ 23,381 $ 18,208
Other 18 67
Total $ 23,399 $ 18,275
Base Management Fees
Corporate/Other
For the year ended December 31, 2025, the net base management fee, which is based on total equity at the end of each quarter less any applicable rebates our Manager credited us, was $25.4 million as compared to $23.5 million for the year ended December 31, 2024. The increase in the net base management fee period over period was due to a larger capital base at the end of each fiscal quarter of 2025, as compared to 2024. See Note 16 of the notes to our consolidated financial statements for further detail on management fee rebates.
Incentive Fees
Corporate/Other
Each quarter, in addition to the base management fee, our Manager is also entitled to an incentive fee if our performance (as measured by adjusted net income, as defined in the management agreement) over the relevant rolling four quarter calculation period (including any opening loss carryforward) exceeds a defined return hurdle for the period. For the year ended December 31, 2025, we incurred an incentive fee of $4.5 million. No incentive fee was incurred for the year ended December 31, 2024, since for each quarter our income did not exceed the prescribed hurdle amount on a rolling four quarter basis. Because our operating results can vary materially from one period to another, incentive fee expense can be highly variable.
Investment and Transaction Related Expenses
Investment and transaction related expenses consist of servicing fees on our mortgage and consumer loans, origination expenses, as well as various other expenses and fees directly related to our financial assets and certain financial liabilities carried at fair value. For the years ended December 31, 2025 and 2024, investment and transaction related expenses were $80.8 million and $57.1 million, respectively.
Investment Portfolio
For the years ended December 31, 2025 and 2024, Investment and transaction related expenses in our investment portfolio segment were $22.2 million and $15.2 million, respectively. The increase in investment and transaction related expenses was primarily due to an increase in due diligence expenses on newly originated loans we purchased, as well as an increase in servicing expense on our larger average residential and commercial mortgage loan portfolios during the period.
Longbridge
Investment and transaction related expenses in the Longbridge segment primarily consist of servicing expense related to reverse mortgage loans and various loan origination expenses. For the years ended December 31, 2025 and 2024, Investment and transaction related expenses were $52.6 million and $41.9 million, respectively; such increase was primarily due to increases in various loan origination expenses, servicing expenses resulting from our larger originations and holdings of reverse mortgage loans, and debt issuance costs related to other secured borrowings, at fair value.
Corporate/Other
For the year ended December 31, 2025, investment and transaction related expenses not allocable to either the investment portfolio segment or the Longbridge segment were $6.0 million, representing debt issuance costs related to unsecured borrowings, at fair value.
Other Operating Expenses
Other operating expenses consist of professional fees, compensation and benefit expenses related to our dedicated or partially dedicated personnel, and various other operating expenses necessary to run our business. Other operating expenses exclude management and incentive fees, interest expense, and investment and transaction related expenses. Other operating expenses were $127.8 million for the year ended December 31, 2025 as compared to $108.9 million for the year ended December 31, 2024.
Investment Portfolio
Other operating expenses in our investment portfolio segment were $8.8 million and $5.5 million for the years ended December 31, 2025 and 2024, respectively. The increase in other operating expenses for the year ended December 31, 2025 was due to an increase in compensation and benefits expense.
Longbridge
For the years ended December 31, 2025 and 2024, other operating expenses in the Longbridge segment were $98.8 million and $82.8 million, respectively. These expenses primarily consist of compensation and benefits expense, and consist to a lesser extent of various overhead costs including rent expense, licensing fees, expenses related to office equipment, and amortization of intangible assets. The year-over-year increase was primarily due to an increase in compensation and benefits expenses and professional fees.
Corporate/Other
For the years ended December 31, 2025 and 2024, other operating expenses not allocable to either the investment portfolio segment or the Longbridge segment were $20.3 million and $20.5 million, respectively.
Other Income (Loss)
Other income (loss) consists of net realized and unrealized gains (losses) on securities and residential mortgage, commercial mortgage, consumer, and corporate loans, financial derivatives, and real estate owned, unrealized gains (losses) on other secured borrowings, at fair value and Unsecured borrowings, at fair value, net change from HECM reverse mortgage loans, at fair value, and net change related to HMBS obligations, at fair value. Other, net, another component of Other income (loss), includes rental income and income related to loan originations, as well as income on MSRs and Forward MSR-related investments, unrealized gains (losses) on loan commitments, realized gains (losses) on foreign currency transactions, and unrealized gains (losses) on foreign currency remeasurement.
Investment Portfolio
For the year ended December 31, 2025, other income (loss) was $0.6 million, consisting primarily of net realized and unrealized gains of $92.0 million on our securities and loans and $22.1 million of Other, net, partially offset by net unrealized losses of $(55.8) million on our Other secured borrowings, at fair value, net realized and unrealized losses of $(44.4) million on our financial derivatives, and $(13.4) million on real estate owned. Net realized and unrealized gains of $92.0 million on our securities and loans were primarily on non-QM loans and retained tranches, Agency RMBS, closed-end second lien loans and retained tranches, Agency-eligible loans, NPL/RPL residential loans, and other loans ABS. These gains were partially offset by net realized and unrealized losses on consumer loans, CMBS, and CLOs. Net realized and unrealized losses of $(44.4) million on our financial derivatives were primarily related to net realized and unrealized losses, driven by lower interest rates, on our interest rate swaps, and to a lesser extent, our TBAs. Other, net of $22.1 million consists primarily of net realized and unrealized gains on our forward MSR-related investments, realized gains on foreign currency transactions, unrealized gains on foreign currency remeasurement, various origination and loan income, and rental income. We recognized net unrealized losses of $(55.8) million on our Other secured borrowings, at fair value for the quarter ended December 31, 2025, related to borrowings on our securitized residential mortgage loans. Change in net unrealized gain (loss) on these securitized residential mortgage loans for the year ended December 31, 2025, was $51.9 million, which is included in Unrealized gains (losses) on securities and loans, net.
For the year ended December 31, 2024, other income (loss) was $28.6 million, consisting primarily of net realized and unrealized gains of $33.7 million on our securities and loans, $31.6 million on our financial derivatives, and $8.3 million of Other, net. These gains were partially offset by net unrealized losses of $(40.0) million on our Other secured borrowings, at fair value, and net realized and unrealized losses of $(4.9) million on real estate owned, net. Net realized and unrealized gains of $33.7 million on our securities and loans were primarily on non-Agency RMBS, non-QM loans and retained tranches, and ABS, due primarily to yield spread tightening. These gains were partially offset by net realized and unrealized losses on commercial mortgage loans, residential transition loans, consumer loan, and closed-end second lien mortgage loans, as well as Agency RMBS. Net realized and unrealized gains of $31.6 million on our financial derivatives were primarily related to net realized and unrealized gains on our interest rate swaps and net short TBA positions driven by higher interest rates during much
of the year (with the exception of the third quarter, where declining interest rates drove net losses for the period). Other, net of $8.3 million consists primarily of net income and realized and unrealized gains on our Forward MSR-related investments, various origination and loan income, and rental income. We recognized net unrealized losses of $(40.0) million on our Other secured borrowings, at fair value for the year ended December 31, 2024, related to borrowings on our securitized non-QM loans. These securitized non-QM loans had net unrealized gains of $43.1 million, which are included in Unrealized gains (losses) on securities and loans, net.
Longbridge
For the year ended December 31, 2025, other income (loss) from the Longbridge segment was $158.7 million, consisting primarily of gains from Net change from HECM reverse mortgage loans, at fair value of $708.3 million, net gains of $53.7 million on securities and loans, and $30.3 million of Other, net, which were partially offset by Net change related to HMBS obligations, at fair value of $(585.3) million, net losses of $(37.0) million on Other secured borrowings, at fair value, and net losses of $(11.8) million on financial derivatives. Net change from HECM reverse mortgage loans at fair value of $708.3 million primarily consisted of $596.1 million of coupon income on HECM loans, as well as net realized and unrealized gains of $118.5 million on HECM loans primarily driven by profitable new originations and tail fundings, as well as tighter yield spreads. Net change related to HMBS obligations, at fair value of $(585.3) million primarily consisted of $(555.4) million of interest expense on the HMBS obligations and net unrealized losses of $(30.0) million on the HMBS obligations, which partially offset the interest income and net realized and unrealized gains on HECM loans. Other, net of $30.3 million is primarily related to $20.3 million of origination fees and $8.0 million of servicing fees. Net gains of $53.7 million on securities and loans were primarily driven by unrealized gains on proprietary reverse mortgage loans, including gains related to securitizations of proprietary reverse mortgage loans, and gains on short positions in U.S. Treasury securities.
For the year ended December 31, 2024, other income (loss) from the Longbridge segment was $156.5 million, consisting primarily of gains from Net change from HECM reverse mortgage loans, at fair value of $637.0 million, net gains of $24.8 million on securities and loans, $20.3 million of Other, net, net gains of $16.0 million on financial derivatives, and net gains of $4.1 million on Other secured borrowings, at fair value. These gains were partially offset by Net change related to HMBS obligations, at fair value of $(545.7) million. Net change from HECM reverse mortgage loans at fair value of $637.0 million primarily consisted of $572.7 million of coupon income on HECM loans, as well as net realized and unrealized gains of $84.1 million on HECM loans primarily driven by profitable new originations and tail fundings, as well as tighter yield spreads. Net change related to HMBS obligations, at fair value of $(545.7) million primarily consisted of $(538.2) million of interest expense on the HMBS obligations and net unrealized losses of $(7.5) million on the HMBS obligations, which partially offset the interest income and net realized and unrealized gains on HECM loans. Other, net of $20.3 million is primarily related to $10.1 million of origination fees and $8.5 million of servicing fees. Net gains of $24.8 million on securities and loans were primarily driven by gains related to the securitizations of proprietary reverse mortgage loans, and net gains on interest rate hedges.
Corporate/Other
For the year ended December 31, 2025, other income (loss) was $(12.8) million, consisting primarily of an unrealized loss on our unsecured debt driven by credit spread tightening and a realized loss related to the par redemption of our 6.75% unsecured notes that we had carried at a slight discount to par. For the year ended December 31, 2024, other income (loss) was $(15.9) million, consisting primarily of net losses on our Unsecured borrowings, at fair value and on the fixed receiver interest rate swaps that we use to hedge the fixed payments on both our unsecured long-term debt and our preferred equity.
Income Tax Expense (Benefit)
Corporate/Other
Income tax expense (benefit) was $3.8 million for the year ended December 31, 2025, as compared to $0.6 million for the year ended December 31, 2024.
Earnings (Losses) from Investments in Unconsolidated Entities
Investment Portfolio
We have elected the fair value option for our equity investments in unconsolidated entities. Earnings (losses) from investments in unconsolidated entities was $56.7 million for the year ended December 31, 2025, as compared to $32.4 million for the year ended December 31, 2024. For the year ended December 31, 2025, Earnings (losses) from investments in unconsolidated entities of $56.7 million primarily consisted of net realized and unrealized gains on investments in loan originators, investments in unconsolidated entities related to residential mortgage loan securitizations, and investments in entities holding commercial mortgage loans and REO, in which we co-invest with other Ellington affiliates.
For the year ended December 31, 2024, Earnings (losses) from investments in unconsolidated entities of $32.4 million primarily consisted of net realized and unrealized gains on investments in loan originators and on investments in entities holding commercial mortgage loans and REO, in which we co-invest with other Ellington affiliates, partially offset by net unrealized losses on investments in unconsolidated entities related vehicles related to non-QM loan securitizations.
Adjusted Distributable Earnings
We calculate Adjusted Distributable Earnings as U.S. GAAP net income (loss) as adjusted for: (i) realized and unrealized gain (loss) on securities and loans, REO, mortgage servicing rights, financial derivatives (excluding periodic settlements on interest rate swaps), any borrowings carried at fair value, and foreign currency transactions; (ii) incentive fee to affiliate; (iii) Catch-up Amortization Adjustment (as defined below); (iv) non-cash equity compensation expense; (v) provision for income taxes; (vi) certain non-capitalized transaction costs; and (vii) other income or loss items that are of a non-recurring nature. For certain investments in unconsolidated entities, we include the relevant components of net operating income in Adjusted Distributable Earnings. The Catch-up Amortization Adjustment is a quarterly adjustment to premium amortization or discount accretion triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cash flows and prepayments, and can vary significantly from quarter to quarter. Non-capitalized transaction costs include expenses, generally professional fees, incurred in connection with the acquisition of an investment or issuance of long-term debt. We also include in Adjusted Distributable Earnings, for all loans that we originate through Longbridge, any realized and unrealized gains (losses) on such loans up to the point of loan sale or securitization, net of sale or securitization costs.
Adjusted Distributable Earnings is a supplemental non-GAAP financial measure. We believe that the presentation of Adjusted Distributable Earnings provides information useful to investors, because: (i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current-period earnings components that we believe are less useful in forecasting long-term performance and dividend-paying ability; (ii) we use it to evaluate the effective net yield provided by our investment portfolio, after the effects of financial leverage and by Longbridge, to reflect the earnings from its reverse mortgage origination and servicing operations; and (iii) we believe that presenting Adjusted Distributable Earnings assists investors in measuring and evaluating our operating performance, and comparing our operating performance to that of our residential mortgage REIT and mortgage originator peers. Please note, however, that: (I) our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable; and (II) Adjusted Distributable Earnings excludes certain items that may impact the amount of cash that is actually available for distribution.
In addition, because Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S. GAAP, it should be considered supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S. GAAP.
Furthermore, Adjusted Distributable Earnings is different from REIT taxable income. As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to our stockholders, in order to maintain our qualification as a REIT, is not based on whether we distributed 90% of our Adjusted Distributable Earnings.
In setting our dividends, our Board of Directors considers our earnings, liquidity, financial condition, REIT distribution requirements, and financial covenants, along with other factors that the Board of Directors may deem relevant from time to time.
The following tables reconcile, for the years ended December 31, 2025 and 2024 our Adjusted Distributable Earnings by segment to the line on our Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S. GAAP measure:
Year Ended December 31, 2025
Year Ended December 31, 2024(1)
(In thousands, except per share amounts) Investment Portfolio Longbridge Corporate/Other Total Investment Portfolio Longbridge Corporate/Other Total
Net Income (Loss) $ 205,495 $ 34,672 $ (89,398) $ 150,769 $ 182,506 $ 37,345 $ (71,747) $ 148,104
Income tax expense (benefit) - - 3,792 3,792 - - 612 612
Net income (loss) before income tax expense (benefit) 205,495 34,672 (85,606) 154,561 182,506 37,345 (71,135) 148,716
Adjustments:
Realized (gains) losses, net(2)
32,870 - 262 33,132 115,583 - 2,722 118,305
Unrealized (gains) losses, net(3)
5,738 43,509 9,524 58,771 (97,024) 6,485 7,324 (83,215)
Unrealized (gains) losses on MSRs, net of hedge (gains) losses(4)
- (5,486) - (5,486) - (17,515) - (17,515)
Incentive fee to affiliate - - 4,533 4,533 - - - -
Negative (positive) component of interest income represented by Catch-up Amortization Adjustment (863) - - (863) 552 - - 552
Adjustment related to consolidated proprietary reverse mortgage loan securitizations(5)
- (27,964) - (27,964) - (4,634) - (4,634)
Non-capitalized transaction costs and other expense adjustments(6)
9,219 4,772 7,350 21,341 6,544 5,108 1,300 12,952
(Earnings) losses from investments in unconsolidated entities (56,653) - - (56,653) (32,445) - - (32,445)
Adjusted distributable earnings from investments in unconsolidated entities(7)
37,468 - - 37,468 26,154 - - 26,154
Total Adjusted Distributable Earnings $ 233,274 $ 49,503 $ (63,937) $ 218,840 $ 201,870 $ 26,789 $ (59,789) $ 168,870
Dividends on preferred stock - - 28,126 28,126 - - 27,697 27,697
Adjusted Distributable Earnings attributable to non-controlling interests 2,644 - 2,048 4,692 1,412 51 1,335 2,798
Adjusted Distributable Earnings Attributable to Common Stockholders $ 230,630 $ 49,503 $ (94,111) $ 186,022 $ 200,458 $ 26,738 $ (88,821) $ 138,375
Adjusted Distributable Earnings Attributable to Common Stockholders, per share $ 2.32 $ 0.50 $ (0.95) $ 1.87 $ 2.31 $ 0.31 $ (1.03) $ 1.59
(1)Conformed to current period methodology.
(2)Includes realized (gains) losses on securities and loans, REO, financial derivatives (excluding periodic settlements on interest rate swaps and foreign currency transactions which are components of Other Income (Loss) on the Consolidated Statement of Operations.
(3)Includes unrealized (gains) losses on securities and loans, REO, financial derivatives (excluding periodic settlements on interest rate swaps), borrowings carried at fair value, and foreign currency transactions which are components of Other Income (Loss) on the Consolidated Statement of Operations.
(4)Represents net change in fair value of HMBS MSR Equivalent and mortgage servicing rights related to proprietary mortgage loans attributable to changes in market conditions and model assumptions. This adjustment also includes net (gains) losses on certain hedging instruments (including interest rate swaps, futures, and short U.S. Treasury securities), which are components of realized and/or unrealized gains (losses) on financial derivatives, net, realized and/or unrealized gains (losses) on securities and loans, net, interest income, and interest expense on the Consolidated Statement of Operations.
(5)Represents the effect of replacing mortgage loan interest income (net of securitization debt expense) with interest income of the retained tranches.
(6)For the year ended December 31, 2025, includes $7.6 million of non-capitalized transaction costs, $6.0 million of debt issuances costs related to unsecured borrowings, at fair value, $4.4 million of non-cash equity compensation and depreciation expense, $1.9 million of debt issuance costs related to Other secured borrowings, at fair value, and $1.4 million of various other expenses. For the year ended December 31, 2024, includes $7.2 million of non-capitalized transaction costs, $2.1 million of non-cash equity compensation and depreciation expense, $2.0 million of one-time compensation expense related to the cancellation of employee stock options, $0.5 million of merger and other business transition related-expenses, and $1.2 million of various other expenses.
(7)Includes our proportionate share of net interest income, net loan origination income (expense), and operating expenses for certain investments in unconsolidated entities including certain of our non-consolidated equity investments in loan originators that have been making (or are expected to make)
distributions to us. The additional adjusted distributable earnings related to our equity investments in certain loan originators was $14.4 million for the year ended December 31, 2024.
Liquidity and Capital Resources
Liquidity refers to our ability to generate and obtain adequate amounts of cash to meet our requirements, including repaying our borrowings, funding and maintaining positions in our assets, making distributions in the form of dividends, and other general business needs. Our short-term (the 12 months following period end) and long-term (beyond 12 months from period end) liquidity requirements include acquisition costs for assets we acquire, payment of our base management fee and incentive fee, compliance with margin requirements under our repos, reverse repos, and financial derivative contracts, repayment of repo borrowings and other secured borrowings to the extent we are unable or unwilling to extend such borrowings, payment of our general operating expenses, payment of interest payments on our unsecured borrowings, and payment of our dividends. Our capital resources primarily include cash on hand, cash flow from our investments (including principal and interest payments received on our investments and proceeds from the sale of investments), borrowings under repos and other secured borrowings, and proceeds from equity and debt offerings. We expect that these sources of funds will be sufficient to meet our short-term and long-term liquidity needs.
We held cash and cash equivalents of approximately $201.9 million and $192.4 million as of December 31, 2025 and 2024, respectively.
The following summarizes our borrowings under repos by remaining maturity:
(In thousands) December 31, 2025 December 31, 2024
Remaining Days to Maturity Outstanding Borrowings % of Total Outstanding Borrowings % of Total
30 Days or Less $ 267,237 10.1 % $ 852,062 33.0 %
31 - 60 Days 406,647 15.3 % 177,469 6.9 %
61 - 90 Days 210,885 7.9 % 130,048 5.0 %
91 - 120 Days 361,230 13.6 % 130,829 5.1 %
121 - 150 Days - - % 70,078 2.7 %
151 - 180 Days 13,143 0.5 % 35,723 1.4 %
181 - 364 Days 217,900 8.2 % 985,452 38.1 %
> 364 Days 1,178,402 44.4 % 202,379 7.8 %
$ 2,655,444 100.0 % $ 2,584,040 100.0 %
Repos involving underlying investments that were sold prior to period end for settlement following period end, are shown using their contractual maturity dates even though such repos may be expected to be terminated early upon settlement of the sale of the underlying investment.
The amounts borrowed under our repo agreements are generally subject to the application of "haircuts." A haircut is the percentage discount that a repo lender applies to the market value of an asset serving as collateral for a repo borrowing, for the purpose of determining whether such repo borrowing is adequately collateralized. As of December 31, 2025, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was 20.7% with respect to credit portfolio assets, 15.4% with respect to reverse mortgage loans, 5.8% with respect to Agency RMBS assets, and 19.3% overall. As of December 31, 2024, the weighted average contractual haircuts were 23.8% with respect to credit portfolio assets, 17.8% with respect to reverse mortgage loans, 5.9% with respect to Agency RMBS assets, and 20.8% overall.
We expect to continue to borrow funds in the form of repos as well as other similar types of financings. The terms of our repo borrowings are predominantly governed by master repurchase agreements, which generally conform to the terms in the standard master repurchase agreement as published by the Securities Industry and Financial Markets Association as to repayment and margin requirements. In addition, each lender may require that we include supplemental terms and conditions to the standard master repurchase agreement. Typical supplemental terms and conditions include the addition of or changes to provisions relating to margin calls, net asset value requirements, cross default provisions, certain key person events, changes in corporate structure, and requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction. These provisions may differ for each of our repo lenders.
As of December 31, 2025 and 2024, we had $2.7 billion and $2.6 billion, respectively, of borrowings outstanding under our repos. As of December 31, 2025, the remaining terms on our repos ranged from 2 days to 636 days, with a weighted average remaining term of 268 days. Our repo borrowings were with a total of 21 counterparties as of December 31, 2025. As of December 31, 2025, our repos had interest rates ranging from 2.79% to 7.05%, with a weighted average borrowing rate of
5.18%. As of December 31, 2024, the remaining terms on our repos ranged from 2 days to 563 days, with a weighted average remaining term of 169 days. Our repo borrowings were with a total of 24 counterparties as of December 31, 2024. As of December 31, 2024, our repos had interest rates ranging from 3.65% to 7.96%, with a weighted average borrowing rate of 6.12%. Investments transferred as collateral under repos had an aggregate fair value of $3.3 billion as of both December 31, 2025 and 2024. It is expected that amounts due upon maturity of our repos will be funded primarily through the roll/re-initiation of repos and, if we are unable or unwilling to roll/re-initiate our repos, through free cash and proceeds from the sale or securitization of assets being financed.
The following table details total outstanding borrowings, average outstanding borrowings, and the maximum outstanding borrowings at any month end for each quarter under repos for the past twelve quarters:
Quarter Ended Borrowings Outstanding at
Quarter End 		Average
Borrowings Outstanding 		Maximum Borrowings Outstanding at Any Month End
(In thousands)
December 31, 2025 $ 2,655,444 $ 2,646,700 $ 2,891,714
September 30, 2025 2,800,964 2,536,033 2,800,964
June 30, 2025 2,347,458 2,511,780 2,659,554
March 31, 2025 2,568,627 2,623,924 2,675,171
December 31, 2024 2,584,040 2,610,301 2,779,028
September 30, 2024 2,642,052 2,450,025 2,642,052
June 30, 2024 2,301,976 2,289,971 2,371,482
March 31, 2024 2,517,747 2,550,390 2,648,371
December 31, 2023 2,967,437 2,640,625 2,967,437
September 30, 2023 2,573,043 2,605,359 2,707,121
June 30, 2023 2,557,864 2,402,711 2,557,864
March 31, 2023(1)
2,285,898 2,464,050 2,641,488
(1)During this quarter, our borrowings decreased as the size of our investment portfolio decreased, driven primarily by our participation in a non-QM loan securitization in February 2023.
In addition to our borrowings under repos, we have entered into various other types of transactions to finance certain of our investments, including residential and commercial mortgage loans and REO, consumer loans and ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs; such transactions are accounted for as secured borrowings. As of December 31, 2025 and 2024, we had outstanding borrowings related to such transactions in the amount of $3.2 billion and $2.2 billion, respectively, which is reflected under the captions "Other secured borrowings" and "Other secured borrowings, at fair value" on the Consolidated Balance Sheet. As of December 31, 2025 and 2024, the fair value of assets collateralizing our Total other secured borrowings was $3.5 billion and $2.4 billion, respectively. Additionally, as of December 31, 2025, as an HMBS issuer, we had HMBS-related obligations of $10.4 billion collateralized by $10.5 billion of HMBS assets and as of December 31, 2024, we had HMBS-related obligations of $9.2 billion collateralized by $9.2 billion of HMBS assets; HMBS assets include HECM loans as well as REO and claims and other receivables. See Note 14 in the notes to our consolidated financial statements for further information on our other secured borrowings and HMBS-related obligations.
As of December 31, 2025 and 2024, we had $662.8 million and $297.7 million, respectively, of outstanding unsecured borrowings. As of December 31, 2025, our outstanding unsecured borrowings were comprised of $400.0 million of 7.375% Senior Notes due September 2030, $210.0 million of 5.875% Senior Notes due April 2027, $37.8 million of 6.00% Senior Notes due August 2026, and $15.0 million of unregistered junior subordinated unsecured debt securities, the "Trust Preferred Debt." The Trust Preferred Debt includes $10.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 3.26% and which matures on October 7, 2033, and $5.0 million which accrues and requires the payment of interest quarterly at three-month term SOFR plus 2.51% and which matures on July 7, 2035. As of December 31, 2024, our outstanding unsecured borrowings were comprised of $210.0 million of 5.875% Senior Notes due April 2027, $37.8 million of 6.00% Senior Notes due August 2026, and $15.0 million of Trust Preferred Debt. See Note 14 in the notes to our consolidated financial statements for further detail on our unsecured borrowings.
As of December 31, 2025, we had an aggregate amount at risk under our repos with 21 counterparties of approximately $616.5 million, and as of December 31, 2024, we had an aggregate amount at risk under our repos with 23 counterparties of approximately $687.6 million. Amounts at risk represent the excess, if any, for each counterparty of the fair value of collateral held by such counterparty over the amounts outstanding under repos. If the amounts outstanding under repos with a particular counterparty are greater than the collateral held by the counterparty, there is no amount at risk for the particular counterparty. Amount at risk as of December 31, 2025 and 2024, does not include approximately $0.4 million and $3.2 million, respectively, of net accrued interest receivable (payable), which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.
Our derivatives are predominantly subject to bilateral master trade agreements or clearing in accordance with the Dodd-Frank Act. We may be required to deliver or receive cash or securities as collateral upon entering into derivative transactions. Changes in the relative value of derivative transactions may require us or the counterparty to post or receive additional collateral. Entering into derivative contracts involves market risk in excess of amounts recorded on our balance sheet. In the case of cleared derivatives, the clearinghouse becomes our counterparty and the future commission merchant acts as an intermediary between us and the clearinghouse with respect to all facets of the related transaction, including the posting and receipt of required collateral.
As of December 31, 2025, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with seven counterparties of approximately $21.8 million. We also had $47.6 million of initial margin for cleared over-the-counter ("OTC") derivatives posted to central clearinghouses as of that date. As of December 31, 2024, we had an aggregate amount at risk under our derivatives contracts, excluding TBAs, with seven counterparties of approximately $9.4 million. We also had $57.6 million of initial margin for cleared OTC derivatives posted to central clearinghouses as of that date. Amounts at risk under our derivatives contracts represent the excess, if any, for each counterparty of the fair value of our derivative contracts plus our collateral held directly by the counterparty less the counterparty's collateral held by us. If a particular counterparty's collateral held by us is greater than the aggregate fair value of the financial derivatives plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.
We purchase and sell TBAs and Agency pass-through certificates on a when-issued or delayed delivery basis. The delayed delivery for these securities means that these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and therefore are more vulnerable, especially in the absence of margining arrangements with respect to these transactions, to increasing amounts at risk with the applicable counterparties. As of December 31, 2025, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with four counterparties of approximately $1.4 million. As of December 31, 2024, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with five counterparties of approximately $1.3 million. Amounts at risk in connection with our forward settling TBA and Agency pass-through certificates represent the excess, if any, for each counterparty of the net fair value of the forward settling transactions plus our collateral held directly by the counterparty less the counterparty's collateral held by us. If a particular counterparty's collateral held by us is greater than the aggregate fair value of the forward settling transactions plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.
We have an "at-the-market" offering program for shares of our common stock (the "Common ATM Program") in connection with which we have entered into equity distribution agreements with sales agents. Under the current Common ATM Program we are authorized to offer and sell up to $500.0 million of common stock from time to time. During the year ended December 31, 2025, we issued 22,400,438 shares of common stock under the Common ATM Program which provided $301.8 million of net proceeds after $2.1 million of agent commissions and $0.4 million of offering costs. During the year ended December 31, 2024, we issued 7,715,891 shares of common stock under the Common ATM Program which provided $99.6 million of net proceeds after $0.8 million of agent commissions and $0.6 million of offering costs. Under the current Common ATM Program we had a remaining authorization to issue $495.3 million of common shares as of December 31, 2025.
Subsequent to December 31, 2025, we issued 2,735,163 shares of common stock under the Common ATM Program which provided $37.4 million of net proceeds after $0.2 million of agent commissions and $36 thousand of offering costs. Additionally, on January 28, 2026, we completed a follow-on offering of 8,775,000 shares of our common stock. The issuance and sale of such shares of common stock generated net proceeds, after underwriters' discounts and commissions and offering costs, of $117.2 million.
On February 27, 2026, the Company redeemed all 4,600,000 outstanding shares of Series A Preferred Stock at of price of $115.8 million, based on the liquidation preference of $25.00 per share, plus accrued and unpaid dividends. See Note 27 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
We have commenced an "at-the-market" offering for our Series A Preferred Stock and Series B Preferred Stock (the
"Preferred ATM Program"), in connection with which we have entered into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $100.0 million of 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series A Preferred Stock") and/or 6.250% Series B Fixed-Rate Reset Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series B Preferred Stock") from time to time. As of December 31, 2025, we had remaining authorization under the Preferred ATM Program to issue $99.5 million of preferred stock. We did not issue any preferred stock under the Preferred ATM Program during the years ended December 31, 2025, 2024, and 2023.
In accordance with the terms of the Arlington Merger Agreement, each of the 957,133 outstanding shares of Arlington's 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 8.250% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series E Preferred Stock"). The Series E Preferred Stock became redeemable by us on March 30, 2024 and was fully redeemed on December 13, 2024.
Our Board of Directors approved the adoption of a share repurchase program under which we are authorized to repurchase up to $50 million of common stock (the "Common Share Repurchase Program"). The Common Share Repurchase Program is open-ended in duration and allows us to make repurchases from time to time on the open market or in negotiated transactions, including under 10b5-1 plans. Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations. In addition to making discretionary repurchases, we from time to time use 10b5-1 plans to increase the number of trading days available to implement these repurchases. During the year ended December 31, 2024, we repurchased 62,300 shares of common stock at an average price per share of $11.00 and a total cost of $0.7 million. During the year ended December 31, 2023, we repurchased 1,084,336 shares of common stock at an average price per share of $11.39 and a total cost of $12.4 million. We did not repurchase any common shares during the year ended December 31, 2025. As of December 31, 2025, we have authorization to repurchase an additional $45.1 million of common stock under the Common Share Repurchase Program.
On February 21, 2022, our Board of Directors approved the adoption of a share repurchase program under which we are authorized to repurchase up to $30.0 million of Series A Preferred Stock and Series B Preferred Stock (the "Preferred Share Repurchase Program"). The Preferred Share Repurchase Program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including under 10b5-1 plans. Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations. We have not yet repurchased any shares of preferred stock under the Preferred Share Repurchase Program.
We may declare dividends based on, among other things, our earnings, our financial condition, the REIT qualification requirements of the Internal Revenue Code of 1986, as amended, our working capital needs and new opportunities. The declaration of dividends to our stockholders and the amount of such dividends are at the discretion of our Board of Directors.
The following table sets forth the dividend distributions authorized by the Board of Directors payable to common stockholders and holders of Convertible Non-controlling Interest Units (as defined in Note 2 of the consolidated financial statements) for the years ended December 31, 2025 and 2024:
Declaration Date Dividend Per Share Dividend Amount Record Date Payment Date
(In thousands)
2025:
December 4, 2025 $ 0.13 $ 14,865 December 31, 2025 January 30, 2026
November 10, 2025 0.13 14,397 November 28, 2025 December 31, 2025
October 7, 2025 0.13 14,101 October 31, 2025 November 28, 2025
September 8, 2025 0.13 13,938 September 30, 2025 October 31, 2025
August 7, 2025 0.13 13,553 August 29, 2025 September 30, 2025
July 8, 2025 0.13 13,134 July 31, 2025 August 29, 2025
June 9, 2025 0.13 12,873 June 30, 2025 July 31, 2025
May 7, 2025 0.13 12,789 May 30, 2025 June 30, 2025
April 3, 2025 0.13 12,434 April 30, 2025 May 27, 2025
March 7, 2025 0.13 12,424 March 31, 2025 April 25, 2025
February 10, 2025 0.13 11,904 February 28, 2025 March 25, 2025
January 8, 2025 0.13 11,904 January 31, 2025 February 25, 2025
2024:
December 6, 2024 $ 0.13 $ 11,904 December 31, 2024 January 27, 2025
November 7, 2024 0.13 11,898 November 29, 2024 December 26, 2024
October 7, 2024 0.13 11,898 October 31, 2024 November 25, 2024
September 9, 2024 0.13 11,898 September 30, 2024 October 25, 2024
August 7, 2024 0.13 11,488 August 30, 2024 September 25, 2024
July 8, 2024 0.13 11,410 July 31, 2024 August 26, 2024
June 10, 2024 0.13 11,164 June 28, 2024 July 25, 2024
May 7, 2024 0.13 11,164 May 31, 2024 June 25, 2024
April 8, 2024 0.13 11,164 April 30, 2024 May 28, 2024
March 7, 2024 0.13 11,166 March 29, 2024 April 25, 2024
February 7, 2024 0.15 12,885 February 29, 2024 March 25, 2024
January 8, 2024 0.15 12,885 January 31, 2024 February 26, 2024
On January 8, 2026, the Board of Directors approved a dividend in the amount of $0.13 per share of common stock payable on February 27, 2026 to stockholders of record as of January 30, 2026.
On February 9, 2026, the Board of Directors approved a dividend in the amount of $0.13 per share of common stock payable on March 31, 2026 to stockholders of record as of February 27, 2026.
The following table sets forth the dividend distributions authorized by the Board of Directors during the years ended December 31, 2025 and 2024 to holders of our preferred stock:
Declaration Date Dividend Per Share Dividend Amount Record Date Payment Date
(In thousands)
Series A Preferred Stock:
December 4, 2025 $ 0.5939070 $ 2,732 December 31, 2025 January 30, 2026
September 8, 2025 0.6240390 2,869 September 30, 2025 October 30, 2025
June 9, 2025 0.6153410 2,831 June 30, 2025 July 30, 2025
March 7, 2025 0.6090310 2,830 March 31, 2025 April 30, 2025
December 6, 2024 0.6418780 2,668 December 31, 2024 January 30, 2025
September 9, 2024 0.4218750 1,941 September 30, 2024 October 30, 2024
June 10, 2024 0.4218750 1,941 June 28, 2024 July 30, 2024
March 7, 2024 0.4218750 1,941 March 29, 2024 April 30, 2024
Series B Preferred Stock:
December 4, 2025 0.3906250 1,883 December 31, 2025 January 30, 2026
September 8, 2025 0.3906250 1,883 September 30, 2025 October 30, 2025
June 9, 2025 0.3906250 1,883 June 30, 2025 July 30, 2025
March 7, 2025 0.3906250 1,883 March 31, 2025 April 30, 2025
December 6, 2024 0.3906250 1,883 December 31, 2024 January 30, 2025
September 9, 2024 0.3906250 1,883 September 30, 2024 October 30, 2024
June 10, 2024 0.3906250 1,883 June 28, 2024 July 30, 2024
March 7, 2024 0.3906250 1,883 March 29, 2024 April 30, 2024
Series C Preferred Stock:
December 4, 2025 0.5390625 2,156 December 31, 2025 January 30, 2026
September 8, 2025 0.5390625 2,156 September 30, 2025 October 30, 2025
June 9, 2025 0.5390625 2,156 June 30, 2025 July 30, 2025
March 7, 2025 0.5390625 2,156 March 31, 2025 April 30, 2025
December 6, 2024 0.5390625 2,156 December 31, 2024 January 30, 2025
September 9, 2024 0.5390625 2,156 September 30, 2024 October 30, 2024
June 10, 2024 0.5390625 2,156 June 28, 2024 July 30, 2024
March 7, 2024 0.5390625 2,156 March 29, 2024 April 30, 2024
Series D Preferred Stock:
December 4, 2025 0.4375000 166 December 20, 2025 December 30, 2025
September 8, 2025 0.4375000 166 September 20, 2025 September 30, 2025
June 9, 2025 0.4375000 166 June 20, 2025 June 30, 2025
March 7, 2025 0.4375000 166 March 20, 2025 March 30, 2025
December 6, 2024 0.4375000 166 December 20, 2024 December 30, 2024
September 9, 2024 0.4375000 166 September 20, 2024 September 30, 2024
June 10, 2024 0.4375000 166 June 20, 2024 July 1, 2024
March 7, 2024 0.4375000 166 March 20, 2024 April 1, 2024
Series E Preferred Stock:
December 31, 2024(1)
0.5405580 517 n/a December 13, 2024
September 9, 2024 0.7187630 688 September 20, 2024 September 30, 2024
June 10, 2024 0.7170790 686 June 20, 2024 July 1, 2024
March 7, 2024 0.5156250 494 March 20, 2024 April 1, 2024
(1)Declared and paid through redemption date of December 13, 2024.
At those times when cash flows from our operating activities are insufficient to fund our dividend payments, we fund such dividend payments through cash flows from our investing and/or financing activities, and in some cases from additional cash on hand. The following paragraphs summarize our cash flows for the years ended December 31, 2025 and 2024.
For the year ended December 31, 2025, our operating activities used net cash in the amount of $925.5 million and our
investing activities used net cash in the amount of $4.07 billion. Our repo activity used to finance many of our investments (including repayments of amounts borrowed under our repos) provided net cash of $3.47 billion. We received $2.76 billion in proceeds from the issuance of Total other secured borrowings, and we used $2.28 billion for principal payments on our Total other secured borrowings. Thus our operating and investing activities, when combined with our repo financings and Other secured borrowings (net of repayments), used net cash of $1.04 billion during the year ended December 31, 2025. We received proceeds from the issuance of HMBS-related obligations of $1.54 billion and used $858.5 million for principal payments on HMBS-related obligations. We used $34.9 million to repay the 6.75% senior notes. We received proceeds from the issuance of common stock, net of underwriters' discounts, commissions, and offering costs paid of $301.7 million, $394.0 million of proceeds from the issuance of the Company's 7.375% Senior Notes net of debt issuance costs, and contributions from non-controlling interests of $35.4 million. We used $183.6 million to pay dividends and $25.5 million for distributions to non-controlling interests (our joint venture partners). As a result there was an increase in our cash holdings of $129.2 million, from $208.9 million as of December 31, 2024 to $338.2 million as of December 31, 2025.
For the year ended December 31, 2024, our operating activities used net cash in the amount of $430.5 million and our investing activities used net cash in the amount of $728.3 million. Our repo activity used to finance many of our investments (including repayments of amounts borrowed under our repos) provided net cash of $669.8 million. We received $2.04 billion in proceeds from the issuance of Total other secured borrowings, and we used $1.92 billion for principal payments on our Total other secured borrowings. Thus our operating and investing activities, when combined with our repo financings and Other secured borrowings (net of repayments), used net cash of $374.5 million during the year ended December 31, 2024. We received proceeds from HMBS-related obligations of $1.45 billion and used $1.00 billion for principal payments on HMBS-related obligations. We received proceeds from the issuance of common stock, net of underwriters' discounts, commissions, and offering costs paid, of $99.3 million and contributions from non-controlling interests of $12.9 million. We used $163.5 million to pay dividends, $10.8 million for distributions to non-controlling interests (our joint venture partners), $23.9 million to redeem preferred stock, $3.6 million related to the cancellation of employee stock options, $0.7 million to repurchase common stock, and $0.7 million to purchase non-controlling interests. As a result there was an decrease in our cash holdings of $21.6 million, from $230.5 million as of December 31, 2023 to $208.9 million as of December 31, 2024.
Based on our current portfolio, amount of free cash on hand, debt-to-equity ratio, and current and anticipated availability of credit, we believe that our capital resources will be sufficient to enable us to meet anticipated short-term and long-term liquidity requirements. However, the unexpected inability to finance our Agency RMBS portfolio would create a serious short-term strain on our liquidity and would require us to liquidate much of that portfolio, which in turn would require us to restructure our portfolio to maintain our exclusion from registration as an investment company under the Investment Company Act and to maintain our qualification as a REIT. Steep declines in the values of our credit assets financed using repos, or in the values of our derivative contracts, would result in margin calls that would significantly reduce our free cash position. Furthermore, a substantial increase in prepayment rates on our assets financed by repos could cause a temporary liquidity shortfall, because we are generally required to post margin on such assets in proportion to the amount of the announced principal paydowns before the actual receipt of the cash from such principal paydowns. If our cash resources are at any time insufficient to satisfy our liquidity requirements, we may have to sell assets or issue additional debt or equity securities.
Although we may from time to time enter into financing arrangements that limit our leverage, our investment guidelines do not limit the amount of leverage that we may use, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets.
Contractual Obligations and Commitments
We are a party to a management agreement with our Manager. Pursuant to that agreement, our Manager is entitled to receive a base management fee, an incentive fee, reimbursement of certain expenses and, in certain circumstances, a termination fee. Such fees and expenses do not have fixed and determinable payments. For a description of the management agreement provisions, see Note 16 to our consolidated financial statements.
We have numerous contractual obligations and commitments related to our outstanding borrowings (see Note 14 of the notes to our consolidated financial statements) and related to our financial derivatives (see Note 10 of the notes to our consolidated financial statements).
See Note 24 of the notes to our consolidated financial statements for further detail on our other contractual obligations and commitments.
Off-Balance Sheet Arrangements
As of December 31, 2025, we did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities, nor do we have any commitment to provide funding to any such entities, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or resources that would be material to an investor in our securities. As such, we are not materially exposed to any market, credit, liquidity, or financing risk that could arise if we had engaged in such relationships.
Longbridge has a fiduciary responsibility related to escrow balances held in trust for borrowers' draws and other custodial funds due to servicing customers; as of December 31, 2025 the amount held in such accounts was $88.6 million. These funds, which do not represent assets or liabilities of ours, are maintained in segregated accounts at Longbridge, and accordingly, are not reflected on the Consolidated Balance Sheet.
At December 31, 2025, we have not entered into any repurchase agreements for which delivery of the borrowed funds is not scheduled until after period end.
Inflation
Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors generally influence our performance more than does inflation, although inflation rates often have a meaningful influence over the direction of interest rates, including influencing the Federal Reserve's monetary policy. In any event, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
In addition, elevated, long-term inflation could adversely impact the performance of our investment portfolio, or the prices of our investments, or both. For example, if higher inflation is not matched by an increase in wages, inflation could cause the real income of the borrowers on our residential and consumer loans to decline. In addition, in the case of borrowers on our commercial mortgage loans, net cash flow could decline if rents and/or expense reimbursements do not increase in kind with higher inflation.
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