Ellington Financial Inc. Reports First Quarter 2026 Results
EFC
Published on 05/05/2026 at 04:32 pm EDT
Ellington Financial Inc. (NYSE: EFC) ("we") today reported financial results for the quarter ended March 31, 2026.
Highlights
First Quarter 2026 Results
"Ellington Financial delivered an exceptionally strong first quarter, generating excellent results even as market volatility rose," said Laurence Penn, Chief Executive Officer and President. "Broad-based contributions across our diversified portfolio drove robust GAAP net income, an annualized economic return of 26%, and book value per share appreciation of 3% net of dividends. Adjusted distributable earnings continued to outpace dividends, supported by high yields and steady credit performance from our loan portfolios, as well as securitization gains at Longbridge. Our Longbridge segment had a tremendous quarter, contributing $0.47 per share to net income and $0.21 per share to ADE for the quarter.
"Our securitization platform continued to operate at an energetic pace during the quarter, as we participated in seven transactions totaling more than $2.8 billion, well above the volume in the comparable period of 2025. Our shift to larger deal sizes, without compromising speed to market, reflects the ongoing scaling of our origination platform. This has translated directly into improved execution economics, as fixed transaction costs are spread across larger pool balances, and as bigger transactions attract a broader and deeper institutional investor base. Greater market presence also enables us to lock in attractive, long-term, non-mark-to-market financing at even more attractive terms.
“At the end of January, we raised common equity on an accretive basis with a highly targeted use of proceeds, namely retiring our highest-cost preferred equity. We will monitor the preferred equity market with an eye toward potentially issuing additional preferred equity at a lower cost. Meanwhile, following the successful completion of our inaugural Moody’s- and Fitch-rated long-term debt deal in the fourth quarter of last year, we have meaningfully enhanced our ability to access the long-term institutional debt markets. Collectively, these actions have further strengthened our balance sheet and enhanced our financial flexibility, positioning us to act decisively, including capitalizing on the compelling investment opportunities emerging from the current environment.”
1
2
3
4
Financial Results
Investment Portfolio Segment
The investment portfolio segment generated net income of $77.6 million in the first quarter, consisting of $75.8 million from the credit strategy and $1.7 million from the Agency strategy.
Credit
The total adjusted long credit portfolio5 increased by 4% sequentially to $4.27 billion as of March 31, 2026. The increase was driven by purchases of non-QM loans, Agency-eligible loans, and residential transition loans; and a larger portfolio of retained RMBS. These increases were partially offset by the impact of loans sold into securitizations.
Key Highlights6:
During the quarter, the net interest margin7 on our credit portfolio increased modestly to 3.46% from 3.38%8, as slightly higher asset yields were partially offset by a slightly higher 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.
Agency
The long Agency RMBS portfolio decreased by 3% sequentially to $197.3 million as of March 31, 2026.
Key Highlights6:
The net interest margin7 on our Agency portfolio (excluding the Catch-up Amortization Adjustment) decreased to 1.47% as of March 31, 2026, from 1.90%8 as of December 31, 2025, driven by a higher 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, but that benefit declined during the quarter, contributing to the higher cost of funds.
Longbridge Segment
The Longbridge segment reported net income of $57.5 million for the first quarter. The Longbridge portfolio (excluding non-retained tranches of consolidated securitization trusts) increased by 13% sequentially to $695.1 million as of March 31, 2026, driven by continued strong proprietary reverse mortgage loan origination volumes, partially offset by the impact of a securitization of proprietary reverse mortgage loans completed during the quarter. Longbridge originated $515.4 million of new loans during the quarter, which was a 52% increase from the same period in 2025.
Key Highlights6:
5
6
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8
Corporate/Other Summary
Results for the quarter also reflect a significant unrealized gain on our unsecured debt, driven by credit spread widening during the quarter, partially offset by an incentive fee accrued during the first quarter.
Credit Portfolio(1)
The following table summarizes our credit portfolio holdings as of March 31, 2026 and December 31, 2025:
March 31, 2026
December 31, 2025(2)
($ in thousands)
Fair Value
%
Fair Value
%
Dollar denominated:
Agency-eligible residential mortgage loans and retained RMBS(6)(8)
$
313,537
5.5
%
$
243,615
4.4
%
CLOs
97,108
1.7
%
111,808
2.0
%
CMBS
28,883
0.5
%
26,550
0.5
%
Commercial mortgage loans(3)(5)
776,588
13.5
%
765,059
13.7
%
Consumer loans and ABS backed by consumer loans(6)
149,151
2.6
%
143,648
2.6
%
Corporate debt and equity and corporate loans
33,378
0.6
%
29,147
0.5
%
Debt and equity investments in loan origination-related entities(7)
100,589
1.7
%
95,688
1.7
%
Forward MSR-related investments
72,824
1.3
%
77,852
1.4
%
Home equity line of credit and closed-end second lien loans and retained RMBS(6)(8)
357,385
6.2
%
364,838
6.6
%
Non-QM loans and retained RMBS(3)(6)(8)
2,667,157
46.4
%
2,624,068
47.2
%
Other RMBS
110,603
1.9
%
109,974
2.0
%
Residential transition loans and other residential mortgage loans(2)(3)(4)
905,583
15.7
%
839,456
15.1
%
Other investments(9)(10)
79,398
1.4
%
70,466
1.3
%
Non-Dollar denominated:
CLOs
11,983
0.2
%
13,232
0.2
%
RMBS(11)(12)
21,737
0.4
%
16,953
0.3
%
Other residential mortgage loans
25,707
0.4
%
27,536
0.5
%
Total long credit portfolio
$
5,751,611
100.0
%
$
5,559,890
100.0
%
Adjustments:
Less: Non-retained tranches of consolidated securitization trusts
1,480,798
1,433,814
Total adjusted long credit portfolio
$
4,270,813
$
4,126,076
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Agency RMBS Portfolio
The following table(1) summarizes our Agency RMBS portfolio holdings as of March 31, 2026 and December 31, 2025:
March 31, 2026
December 31, 2025(2)
($ in thousands)
Fair Value
%
Fair Value
%
Long Agency RMBS:
Fixed rate
$
196,756
99.7
%
$
203,077
99.7
%
Reverse mortgages
560
0.3
%
556
0.3
%
Total long Agency RMBS
$
197,316
100.0
%
$
203,633
100.0
%
(1)
(2)
Longbridge Portfolio
Longbridge originates reverse mortgage loans, including (i) home equity conversion mortgage loans, or "HECMs," which are insured by the FHA, and (ii) "proprietary reverse mortgage loans," which are not insured by the FHA. HECMs are eligible for inclusion in GNMA-guaranteed HECM-backed MBS, or "HMBS." Upon securitization, the HECMs remain on our balance sheet under GAAP. We have securitized some of the proprietary reverse mortgage loans originated by Longbridge, and we have retained certain of the securitization tranches in compliance with credit risk retention rules. Longbridge has typically retained the MSRs associated with the loans it has originated. Longbridge also originates home equity lines of credit, or "HELOCs," designed for homeowners aged 62 or older.
The following table summarizes loan-related assets(1) in the Longbridge segment as of March 31, 2026 and December 31, 2025:
March 31, 2026
December 31, 2025
(In thousands)
HMBS assets(2)
$
10,893,878
$
10,524,652
Less: HMBS liabilities
(10,765,668
)
(10,406,332
)
HMBS MSR(3)
128,210
118,320
Unsecuritized HECM loans(4)
172,860
174,046
Proprietary reverse mortgage loans(5)(6)
1,974,539
1,687,801
Reverse MSRs
30,192
28,913
Unsecuritized REO(6)
5,702
4,742
Total
2,311,503
2,013,822
Less: Non-retained tranches of consolidated securitization trusts
1,616,404
1,396,607
Total, excluding non-retained tranches of consolidated securitization trusts
$
695,099
$
617,215
(1)
(2)
(3)
(4)
(5)
(6)
The following table summarizes Longbridge's origination volumes by channel for the three-month periods ended March 31, 2026 and December 31, 2025:
($ In thousands)
March 31, 2026
December 31, 2025
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
1,577
$
361,697
70
%
1,668
$
382,613
72
%
Retail
743
153,677
30
%
824
147,119
28
%
Total
2,320
$
515,374
100
%
2,492
$
529,732
100
%
(1)
Financing
Key Highlights:
The following table summarizes our outstanding borrowings and debt-to-equity ratios as of March 31, 2026 and December 31, 2025:
March 31, 2026
December 31, 2025
Outstanding Borrowings(1)
Debt-to- Equity Ratio(2)
Outstanding Borrowings(1)
Debt-to- Equity Ratio(2)
(In thousands)
(In thousands)
Recourse borrowings(3)
$
3,822,166
2.0:1
$
3,614,592
1.9:1
Non-recourse borrowings(3)
13,891,000
7.1:1
13,351,910
7.1:1
Total Borrowings
$
17,713,166
9.0:1
$
16,966,502
9.1:1
Total Equity
$
1,957,988
$
1,871,155
Recourse borrowings excluding borrowings collateralized by U.S. Treasury securities, adjusted for unsettled purchases and sales
1.9:1
1.9:1
Total borrowings excluding borrowings collateralized by U.S. Treasury securities, adjusted for unsettled purchases and sales
9.0:1
9.0:1
(1)
(2)
(3)
Operating Results
The following table summarizes our operating results by strategy for the three-month period ended March 31, 2026:
Investment Portfolio
Longbridge
Corporate/ Other
Total
Per Share
(In thousands except per share amounts)
Credit
Agency
Investment Portfolio Subtotal
Interest income and other income(1)
$
105,573
$
1,958
$
107,531
$
63,111
$
1,341
$
171,983
$
1.40
Interest expense
(44,799
)
(1,155
)
(45,954
)
(27,157
)
(11,391
)
(84,502
)
(0.69
)
Realized gain (loss), net
11,782
(1
)
11,781
276
—
12,057
0.10
Unrealized gain (loss), net
(31,593
)
(936
)
(32,529
)
14,908
21,188
3,567
0.03
Net change from reverse mortgage loans and HMBS obligations
—
—
—
40,928
—
40,928
0.33
Earnings in unconsolidated entities
17,564
—
17,564
—
—
17,564
0.14
Interest rate hedges and other activity, net(2)
23,892
1,846
25,738
6,762
(5,696
)
26,804
0.22
Credit hedges and other activities, net(3)
20
—
20
411
—
431
—
Income tax (expense) benefit
—
—
—
—
(966
)
(966
)
(0.01
)
Investment and transaction related expenses
(4,027
)
—
(4,027
)
(15,800
)
—
(19,827
)
(0.16
)
Other expenses
(2,574
)
—
(2,574
)
(25,964
)
(32,008
)
(60,546
)
(0.49
)
Net income (loss)
75,838
1,712
77,550
57,475
(27,532
)
107,493
0.87
Dividends on preferred stock
—
—
—
—
(5,883
)
(5,883
)
(0.05
)
Issuance costs of redeemed preferred stock
—
—
—
—
(3,966
)
(3,966
)
(0.03
)
Net (income) loss attributable to non-participating non-controlling interests
(1,175
)
—
(1,175
)
—
(4
)
(1,179
)
(0.01
)
Net income (loss) attributable to common stockholders and participating non-controlling interests
74,663
1,712
76,375
57,475
(37,385
)
96,465
0.78
Net (income) loss attributable to participating non-controlling interests
—
—
—
—
(998
)
(998
)
—
Net income (loss) attributable to common stockholders
$
74,663
$
1,712
$
76,375
$
57,475
$
(38,383
)
$
95,467
$
0.78
Net income (loss) attributable to common stockholders per share of common stock
$
0.61
$
0.02
$
0.63
$
0.47
$
(0.32
)
$
0.78
Weighted average shares of common stock and convertible units(4) outstanding
122,984
Weighted average shares of common stock outstanding
121,711
(1)
(2)
(3)
(4)
The following table summarizes our operating results by strategy for the three-month period ended December 31, 2025:
Investment Portfolio(1)
Longbridge
Corporate/ Other
Total
Per Share
(In thousands except per share amounts)
Credit
Agency
Investment Portfolio Subtotal
Interest income and other income(2)
$
100,279
$
2,069
$
102,348
$
42,510
$
1,795
$
146,653
$
1.34
Interest expense
(46,619
)
(1,331
)
(47,950
)
(24,371
)
(10,983
)
(83,304
)
(0.76
)
Realized gain (loss), net
2,272
(10
)
2,262
60
—
2,322
0.02
Unrealized gain (loss), net
(19,063
)
1,513
(17,550
)
8,927
(7,905
)
(16,528
)
(0.15
)
Net change from reverse mortgage loans and HMBS obligations
—
—
—
31,900
—
31,900
0.29
Earnings in unconsolidated entities
18,203
—
18,203
—
—
18,203
0.17
Interest rate hedges and other activity, net(3)
(402
)
1,339
937
1,767
(661
)
2,043
0.02
Credit hedges and other activities, net(4)
(4,413
)
—
(4,413
)
(435
)
—
(4,848
)
(0.05
)
Income tax (expense) benefit
—
—
—
—
(1,353
)
(1,353
)
(0.01
)
Investment and transaction related expenses
(8,213
)
—
(8,213
)
(16,506
)
(5,962
)
(30,681
)
(0.28
)
Other expenses
(2,663
)
—
(2,663
)
(27,491
)
(11,639
)
(41,793
)
(0.38
)
Net income (loss)
39,381
3,580
42,961
16,361
(36,708
)
22,614
0.21
Dividends on preferred stock
—
—
—
—
(6,981
)
(6,981
)
(0.06
)
Net (income) loss attributable to non-participating non-controlling interests
(805
)
—
(805
)
—
(4
)
(809
)
(0.01
)
Net income (loss) attributable to common stockholders and participating non-controlling interests
38,576
3,580
42,156
16,361
(43,693
)
14,824
0.14
Net (income) loss attributable to participating non-controlling interests
—
—
—
—
(157
)
(157
)
—
Net income (loss) attributable to common stockholders
$
38,576
$
3,580
$
42,156
$
16,361
$
(43,850
)
$
14,667
$
0.14
Net income (loss) attributable to common stockholders per share of common stock
$
0.36
$
0.03
$
0.39
$
0.15
$
(0.40
)
$
0.14
Weighted average shares of common stock and convertible units(5) outstanding
109,652
Weighted average shares of common stock outstanding
108,491
(1)
(2)
(3)
(4)
(5)
About Ellington Financial
Ellington Financial invests in a diverse array of financial assets, including residential and commercial mortgage loans and mortgage-backed securities, reverse mortgage loans, mortgage servicing rights and related investments, consumer loans, asset-backed securities, collateralized loan obligations, non-mortgage and mortgage-related derivatives, debt and equity investments in loan origination companies, and other strategic investments. Ellington Financial is externally managed and advised by Ellington Financial Management LLC, an affiliate of Ellington Management Group, L.L.C.
Conference Call
We will host a conference call at 11:00 a.m. Eastern Time on Wednesday, May 6, 2026, to discuss our financial results for the quarter ended March 31, 2026. To participate in the event by telephone, please dial (800) 343-4136 at least 10 minutes prior to the start time and reference the conference ID EFCQ126. International callers should dial (203) 518-9843 and reference the same conference ID. The conference call will also be webcast live over the Internet and can be accessed via the "For Investors" section of our web site at www.ellingtonfinancial.com. To listen to the live webcast, please visit www.ellingtonfinancial.com at least 15 minutes prior to the start of the call to register, download, and install necessary audio software. In connection with the release of these financial results, we also posted an investor presentation, that will accompany the conference call, on our website at www.ellingtonfinancial.com under "For Investors—Presentations."
A dial-in replay of the conference call will be available on Wednesday, May 6, 2026, at approximately 2:00 p.m. Eastern Time through Wednesday, May 13, 2026 at approximately 11:59 p.m. Eastern Time. To access this replay, please dial (800) 677-6124. International callers should dial (402) 220-0664. A replay of the conference call will also be archived on our web site at www.ellingtonfinancial.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek" or similar expressions or their negative forms, or by references to strategy, plans, or intentions. Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our investments, market volatility, changes in mortgage default rates and prepayment rates, our ability to borrow to finance our assets, changes in government regulations affecting our business, our ability to maintain our exclusion from registration under the Investment Company Act of 1940, our ability to maintain our qualification as a real estate investment trust, or "REIT," and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations. Furthermore, forward-looking statements are subject to risks and uncertainties, including, among other things, those described under Item 1A of our Annual Report on Form 10-K, which can be accessed through our website at www.ellingtonfinancial.com or at the SEC's website (www.sec.gov). Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q, 10-K and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
This release and the information contained herein do not constitute an offer of any securities or solicitation of an offer to purchase securities.
ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three-Month Period Ended
March 31, 2026
December 31, 2025
(In thousands, except per share amounts)
NET INTEREST INCOME
Interest income
$
149,503
$
140,260
Interest expense
(88,249
)
(86,623
)
Total net interest income
61,254
53,637
Other Income (Loss)
Realized gains (losses) on securities and loans, net
14,715
4,263
Realized gains (losses) on financial derivatives, net
19,172
(8,467
)
Realized gains (losses) on real estate owned, net
(3,145
)
(1,968
)
Unrealized gains (losses) on securities and loans, net
(19,612
)
3,671
Unrealized gains (losses) on financial derivatives, net
7,042
5,385
Unrealized gains (losses) on real estate owned, net
1,255
(1,215
)
Unrealized gains (losses) on other secured borrowings, at fair value, net
6,993
(14,371
)
Unrealized gains (losses) on unsecured borrowings, at fair value
21,188
(7,905
)
Net change from HECM reverse mortgage loans, at fair value
235,035
156,532
Net change related to HMBS obligations, at fair value
(194,107
)
(124,632
)
Litigation settlement income
17,000
—
Other, net
4,478
13,308
Total other income (loss)
110,014
24,601
EXPENSES
Base management fee to affiliate, net of rebates
7,101
6,869
Incentive fee to affiliate
19,222
—
Investment and transaction related expenses:
Servicing expense
7,800
7,123
Debt issuance costs related to Other secured borrowings, at fair value
2,324
6,462
Debt issuance costs related to unsecured borrowings, at fair value
—
5,962
Other
9,703
11,134
Professional fees
3,634
3,333
Compensation and benefits
21,806
23,643
Other expenses
8,783
7,948
Total expenses
80,373
72,474
Net Income (Loss) before Income Tax Expense (Benefit) and Earnings from Investments in Unconsolidated Entities
90,895
5,764
Income tax expense (benefit)
966
1,353
Earnings (losses) from investments in unconsolidated entities
17,564
18,203
Net Income (Loss)
107,493
22,614
Net Income (Loss) attributable to non-controlling interests
2,177
966
Dividends on preferred stock
5,883
6,981
Issuance costs of redeemed preferred stock
3,966
—
Net Income (Loss) Attributable to Common Stockholders
$
95,467
$
14,667
Net Income (Loss) per Common Share:
Basic and Diluted
$
0.78
$
0.14
Weighted average shares of common stock outstanding
121,711
108,491
Weighted average shares of common stock and convertible units outstanding
122,984
109,652
ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of
(In thousands, except share and per share amounts)
March 31, 2026
December 31, 2025(1)
ASSETS
Cash and cash equivalents
$
163,224
$
201,893
Restricted cash
28,296
136,297
Securities, at fair value
1,136,825
1,034,882
Loans, at fair value
17,393,161
16,640,647
Loan commitments, at fair value
10,207
9,124
Forward MSR-related investments, at fair value
72,824
77,852
Mortgage servicing rights, at fair value
30,192
28,913
Investments in unconsolidated entities, at fair value
349,722
312,421
Real estate owned
101,167
75,548
Financial derivatives–assets, at fair value
152,834
142,723
Reverse repurchase agreements
487,333
453,037
Due from brokers
39,708
35,919
Investment related receivables
239,406
177,208
Other assets
28,197
26,446
Total Assets
$
20,233,096
$
19,352,910
LIABILITIES
Securities sold short, at fair value
$
297,231
$
272,702
Repurchase agreements
2,894,972
2,655,444
Financial derivatives–liabilities, at fair value
47,374
53,073
Due to brokers
65,024
48,104
Investment related payables
55,441
36,092
Other secured borrowings
264,444
296,398
Other secured borrowings, at fair value
3,125,332
2,945,578
HMBS-related obligations, at fair value
10,765,668
10,406,332
Unsecured borrowings, at fair value
638,644
659,832
Base management fee payable to affiliate
7,101
6,869
Incentive fee payable to affiliate
19,222
—
Dividends payable
19,108
19,428
Interest payable
17,666
26,798
Accrued expenses and other liabilities
57,881
55,105
Total Liabilities
18,275,108
17,481,755
EQUITY
Preferred stock, par value $0.001 per share, 100,000,000 shares authorized; 9,200,089 and 13,800,089 shares issued and outstanding, and $230,002 and $345,002 aggregate liquidation preference, respectively
220,924
331,958
Common stock, par value $0.001 per share, 300,000,000 shares authorized, respectively; 124,649,023 and 113,138,860 shares issued and outstanding, respectively(2)
125
113
Additional paid-in-capital
2,065,197
1,915,152
Retained earnings (accumulated deficit)
(366,110
)
(412,964
)
Total Stockholders' Equity
1,920,136
1,834,259
Non-controlling interests
37,852
36,896
Total Equity
1,957,988
1,871,155
TOTAL LIABILITIES AND EQUITY
$
20,233,096
$
19,352,910
SUPPLEMENTAL PER SHARE INFORMATION:
Book Value Per Common Share (3)
$
13.56
$
13.16
(1)
(2)
(3)
Reconciliation of Net Income (Loss) to 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 cashflows 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; and any realized and unrealized gains (losses) on HECM buyout loans and REO related to Longbridge's servicing activities.
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 (a) by our investment portfolio, after the effects of financial leverage, and (b) 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 table reconciles, for the three-month periods ended March 31, 2026 and December 31, 2025, our Adjusted Distributable Earnings to the line on our Condensed Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable U.S. GAAP measure:
Three-Month Period Ended
March 31, 2026
December 31, 2025
(In thousands, except per share amounts)
Investment Portfolio
Longbridge
Corporate/ Other
Total
Investment Portfolio
Longbridge
Corporate/ Other
Total
Net Income (Loss)
$
77,550
$
57,475
$
(27,532
)
$
107,493
$
42,961
$
16,361
$
(36,708
)
$
22,614
Income tax expense (benefit)
—
—
966
966
—
—
1,353
1,353
Net income (loss) before income tax expense (benefit)
77,550
57,475
(26,566
)
108,459
42,961
16,361
(35,355
)
23,967
Adjustments:
Realized (gains) losses, net(1)
(19,398
)
—
263
(19,135
)
10,992
—
(1,122
)
9,870
Unrealized (gains) losses, net(2)
20,247
12,158
(16,400
)
16,005
16,277
11,919
8,351
36,547
Unrealized (gains) losses on reverse MSRs, net of hedging (gains) losses(3)
—
(15,822
)
—
(15,822
)
—
(3,004
)
—
(3,004
)
Incentive fee to affiliate
—
—
19,222
19,222
—
—
—
—
Negative (positive) component of interest income represented by Catch-up Amortization Adjustment
(21
)
—
—
(21
)
35
—
—
35
Adjustment related to consolidated proprietary reverse mortgage loan securitizations(4)
—
(12,690
)
—
(12,690
)
—
(11,647
)
—
(11,647
)
Non-capitalized transaction costs and other expense adjustments(5)
1,359
1,311
294
2,964
4,550
995
5,952
11,497
Litigation settlement income
—
(17,000
)
—
(17,000
)
—
—
—
—
(Earnings) losses from investments in unconsolidated entities
(17,564
)
—
—
(17,564
)
(18,203
)
—
—
(18,203
)
Adjusted distributable earnings from investments in unconsolidated entities(6)
9,584
—
—
9,584
10,655
—
—
10,655
Total Adjusted Distributable Earnings
$
71,757
$
25,432
$
(23,187
)
$
74,002
$
67,267
$
14,624
$
(22,174
)
$
59,717
Dividends on preferred stock
—
—
5,883
5,883
—
—
6,981
6,981
Adjusted Distributable Earnings attributable to non-controlling interests
928
—
695
1,623
824
—
550
1,374
Adjusted Distributable Earnings Attributable to Common Stockholders
$
70,829
$
25,432
$
(29,765
)
$
66,496
$
66,443
$
14,624
$
(29,705
)
$
51,362
Adjusted Distributable Earnings Attributable to Common Stockholders, per share
$
0.58
$
0.21
$
(0.24
)
$
0.55
$
0.61
$
0.13
$
(0.27
)
$
0.47
(1)
(2)
(3)
(4)
(5)
(6)
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