Longbridge originations jump 38%, propelling Ellington to $54.4M profit

Ellington Financial Inc. on Thursday reported second-quarter 2026 net income attributable to common stockholders of $54.4 million, driven by strong loan credit performance and growing reverse mortgage production at its Longbridge Financial subsidiary.

The Connecticut-based real estate investment trust generated adjusted distributable earnings (ADE) of $75.5 million, or 60 cents per share, which exceeded its quarterly dividend of 39 cents per share. Book value per common share rose to $13.61 as of June 30, including the impact of dividends paid during the quarter.

Ellington said its investment portfolio segment produced $74.2 million of net income attributable to common stockholders, while the Longbridge reverse mortgage segment contributed $30.2 million. ADE was $75.7 million from the investment portfolio segment and $28.9 million from Longbridge.

“Ellington Financial delivered another standout quarter, with continued book value growth and adjusted distributable earnings well in excess of our dividends, reflecting the strength and increasing momentum of our platform,” Laurence Penn, Ellington’s CEO and president, said in a statement.

Reverse mortgage growth at Longbridge

Longbridge reported $30.2 million of net income attributable to common stockholders in the second quarter. Longbridge originated $589.7 million of reverse mortgages from April through June, a 38% increase from the same period in 2025.

The company completed two proprietary reverse mortgage securitizations in the quarter. Because securitized loans were removed from the balance sheet, the Longbridge portfolio declined 7% sequentially to $649.3 million as of June 30, despite the higher origination volumes.

Ellington cited strong contributions from originations, supported by net gains tied to the proprietary reverse securitizations and continued robust margins, as well as positive servicing income driven by “strong tail securitization executions” and steady base servicing results. Longbridge also recorded net gains on enterprise interest rate hedges intended to protect origination profitability from rising interest rates.

“Originations at Longbridge benefited from strong volumes, healthy margins and gains from the two proprietary reverse mortgage securitizations completed during the quarter,” JR Herlihy, the company’s chief financial officer, told investors and analysts during an earnings call on Friday. “Those transactions represented Longbridge’s strongest financing execution to date for this product, as measured by overall debt spreads.”

Longbridge originated $316.2 million in proprietary reverse mortgages during the second quarter, which accounted for 54% of its total volume in the reverse market — roughly on par with the rest of the industry.

Broken down by channel, 72% of its proprietary production was tied to wholesale and correspondent partners, with the other 28% to retail. It had similar distribution across Home Equity Conversion Mortgage (HECM) production, with 73% of its business through the wholesale and correspondent channels.

Longbridge also began to report loan submission volume for the first time, noting that although “not all successfully convert to new loans, submissions can be a leading indicator of future funded loan volumes.” The company saw submissions rise 17% from the first quarter and 34% year over year.

“That momentum is continuing with July 2026 marking Longbridge’s highest ever month for prop reverse mortgage originations and submissions,” Herlihy said during Friday’s call.

Longbridge’s HECM Mortgage-Backed Securities (HMBS) market share hit a new high of 29% for the quarter, making it the No. 2 issuer in the market behind only Finance of America. For reverse mortgage lenders and capital providers, that gain underlines the consolidation of HMBS issuance among a few large platforms, along with the growing importance of securitization access and balance-sheet support from public parents.

“When rates are low, the principal limit factors that are dictated by [the Federal Housing Administration] actually are often more competitive than on the prop side, but when rates rise, the opposite is true,” Penn added. “We’re actually, in some cases, seeing the prop product take some of that market share away from the government product.”

Ellington portfolio, leverage and credit performance

Ellington’s total adjusted investment portfolio edged up about 1% quarter over quarter to $4.50 billion as of June 30. Non-QM loans and retained residential mortgage-backed securities (RMBS) remained the largest exposure at $2.69 billion, or 45.3% of the long portfolio. Residential transition loans (RTLs) and other residential mortgages totaled $996.4 million, or 16.8%, and commercial mortgage loans were $836.7 million, or 14.1%.

Other notable holdings included $301.4 million in home equity lines of credit, closed-end second-lien loans and retained RMBS; $189.7 million in agency pass-throughs; and $183.5 million in agency-eligible residential mortgages and retained RMBS. Collateralized loan obligations (CLOs) across dollar and non-dollar positions totaled about $101.1 million, while corporate debt, equity and corporate loans totaled $42.2 million.

Ellington reported what it described as “excellent performance” across most of its portfolio, led by residential credit strategies, including non-QM, agency-eligible loans, retained tranches of residential transition and second-lien deals, non-agency RMBS and forward MSR-related investments.

Company leaders also noted that Ellington is “close” to acquiring a special servicer that would work with distressed borrowers while seeking to improve the company’s financial position by reducing delinquencies and foreclosures.

“We have redeployed substantial internal resources to help build what we believe can be a best-in-class residential special servicing platform with specialized processes for managing delinquent loans across multiple mortgage products,” said Mark Tecotzky, Ellington’s co-chief investment officer. “We believe that controlling our own special servicer will unlock significant value for us as we align incentives, share valuable data and refine our workout expertise over time.”

“It’s not going to bring any appreciable size of MSRs that are going to have noticeable impact on our balance sheet, per se, or frankly even on our earnings in the beginning,” Penn added. “But as Mark said, we have big plans, especially to build out the special servicing aspects of the business. We think they [the undisclosed servicer to be acquired] already have some real good expertise in that area.”

This article was written by Neil Pierson and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.