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Item 7. 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, 2024, we had an ownership interest of approximately 99.2% in the Operating Partnership. The remaining ownership interest of approximately 0.8% 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 30-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, or "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, or "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 October 3, 2022, we completed the acquisition of a controlling interest in Longbridge Financial, LLC ("Longbridge"), a reverse mortgage loan originator and servicer (the "Longbridge Transaction"). As a result of the Longbridge Transaction, we consolidate Longbridge's financial results. 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, or "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, or "Agency RMBS"; commercial mortgage-backed securities, or "CMBS"; consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans; investments referencing mortgage servicing rights on traditional forward mortgage loans, or "Forward MSR-related investments"; collateralized loan obligations, or "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 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.

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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;

CMBS and Commercial Mortgage Loans . CMBS;

. CLOs backed by commercial mortgage loans, or "CRE CLOs"; and

. Commercial mortgage loans and other commercial real estate debt.

Consumer Loans and ABS . Consumer loans;

. ABS backed by consumer loans;

. 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.

. Other mortgage-related derivatives.

. 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, or "CDOs";

. RMBS backed by European residential mortgages, or "European RMBS";

. Retained tranches from securitizations in which we have participated; and

. Credit risk transfer securities, or "CRTs."

Residential Mortgage Loans . Non-QM loans;

. Residential non-performing mortgage loans, or "NPLs";

. 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, or "HELOCs."

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Asset Class Principal Assets

(continued)

Other . Mortgage servicing rights, or "MSRs" and MSR-related investments;

. Real estate, including commercial and residential real property;

. Strategic equity and/or debt investments in entities related to our business;

. Corporate debt and equity securities and corporate loans;

. Other non-mortgage-related derivatives; and

. Confirmation of originator fee certificates.

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, or "Fannie Mae," the Federal Home Loan Mortgage Corporation, or "Freddie Mac," or the Government National Mortgage Association, within the U.S. Department of Housing and Urban Development, or "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. 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, or "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.

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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 ten years. We typically originate and acquire first-lien loans but may also originate and acquire subordinated loans. As of December 31, 2024, 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, the Company, through certain of its subsidiaries, is party to various agreements that enable the Company 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.

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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, or "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 also 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 also 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.

Reverse Mortgage Loans and 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.

As a result of the Longbridge Transaction, 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, or "HECMs," which are insured by FHA and eligible for inclusion in GNMA-guaranteed HECM-backed MBS, or "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 or exceeding 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 in accordance with US GAAP 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.

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Strategic Equity Investments in Loan Originators

We have made, and in the future may make additional, equity investments in loan originators and other related entities; historically, our investments have generally represented non-controlling interests, although we are not restricted from holding controlling interests in such entities. 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, or "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, or "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, or "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 an ABX, PrimeX, or 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, strategic equity and/or debt investments in entities related to our business, corporate debt and equity securities, corporate loans, which can include litigation finance loans, and other 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 acquired residential and commercial 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

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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, or "SOFR." As each then-existing fixed-rate repurchase agreement, or "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, or "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, or "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

•In 2024, the U.S. Federal Reserve maintained its federal funds rate target range of 5.25%–5.50% across its first five meetings. At the September meeting, the Federal Reserve cut rates for the first time in four years, reducing the target range by 50 basis points to 4.75%–5.00%. The Federal Reserve cited a balance in risks to its employment and inflation goals.

•Subsequent meetings in November and December brought additional 25-basis-point cuts, bringing the range to 4.25%–4.50%. However, the December Summary of Economic Projections signaled a slower pace of rate cuts in 2025, with only two 25-basis-point reductions anticipated. Chair Powell noted further progress lowering inflation as a prerequisite for additional cuts.

•In June, the Federal Reserve reduced the pace of its balance sheet contraction by lowering the cap on portfolio runoff of U.S. Treasury securities from $60 billion to $25 billion, while maintaining the $35 billion cap on Agency RMBS.

Interest Rates

•Following sharp declines in the fourth quarter of 2023, interest rates rose in the first quarter of 2024 as expectations for Federal Reserve rate cuts shifted later in the year. The 2-year U.S. Treasury yield increased by 37 basis points to 4.62%, while the 10-year U.S. Treasury yield rose by 32 basis points to 4.20%. Interest rate volatility declined, with the MOVE Index reaching a two-year low by quarter-end.

In the second quarter, interest rates rose in April before declining in May and June, ending slightly higher overall. The 2-year U.S. Treasury yield increased by 13 basis points to 4.75%, and the 10-year U.S. Treasury yield rose by 20 basis points to 4.40%. Volatility spiked in mid-April but fell through the quarter's end.

The third quarter saw significant declines in interest rates, particularly short-term rates. The 10-year U.S. Treasury yield exceeded the 2-year yield for the first time since July 2022. The 2-year yield dropped by 111 basis points to

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3.64%, and the 10-year yield fell by 62 basis points to 3.78%. Volatility spiked in early August and September before subsiding.

In the fourth quarter, interest rates reversed course again, with the 2-year U.S. Treasury yield rising 60 basis points to 4.24% and the 10-year U.S. Treasury yield increasing 79 basis points to 4.57%. The MOVE Index peaked ahead of the U.S. presidential election but declined by year-end.

For 2024 as a whole, the 2-year U.S. Treasury yield decreased by 1 basis point, while the 10-year yield rose by 69 basis points.

•Mortgage rates closely tracked long-term interest rate movements. The Freddie Mac survey 30-year mortgage rate rose to 7.22% in May before declining to 6.08% by late September. Mortgage rates spiked again in the fourth quarter, ending the year at 6.85%.

•SOFR rates were stable in the first half of 2024 but fell sharply in the second half, reflecting the Federal Reserve rate cuts. For the full year, one-month SOFR decreased 102 basis points to 4.33%, while three-month SOFR fell 103 basis points to 4.31%. SOFR rates drive many of our financing costs.

Housing and Economic Indicators

•Housing price metrics showed modest gains. The S&P CoreLogic Case-Schiller US National Home Price Index increased by 3.9%, while the National Association of Realtors Housing Affordability Index rose 0.2%.

•The Mortgage Bankers Association's Refinance Index, although still low on an historical basis, rose significantly in the first three quarters of 2024, tripling between the start of the year and September 27th. However, the index declined sharply in the fourth quarter, ending 2024 only slightly higher year-over-year.

•Similarly, mortgage prepayment speeds increased during the year but remained at relatively low levels. Prepayment speeds for Fannie Mae 30-year RMBS started at 4.4 CPR in January 2024 and trended upward for most of the year, reaching a peak of 8.3 CPR in October. Prepayment speeds then declined towards year-end, with Fannie Mae 30-year RMBS registering 6.0 CPR in December.

•U.S. real GDP grew at annualized rates of 1.6% in the first quarter, 3.0% in the second quarter, and 3.1% in the third quarter, with an estimated growth rate of 2.3% in the fourth quarter. Unemployment edged up from 3.8% to 4.1% by year-end.

•Inflation trended lower, with the 12-month percentage change in the Consumer Price Index for All Urban Consumers, not seasonally adjusted, falling from 3.1% in January to a low of 2.4% in September before ending the year at 2.9%.

Fixed Income Performance

•MBS returns were mixed, with the Bloomberg U.S. MBS Index posting a full-year positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S. Treasury Index. The performance of both indices was volatile, particularly in the fourth quarter, when returns were sharply negative overall.

•Corporate bonds fared better. The Bloomberg U.S. Corporate Bond Index returned 2.13% with an excess return of 2.46%, while the Bloomberg High Yield Bond Index posted an 8.19% return and 5.02% excess return. Corporate credit spreads tightened, with the Markit CDX North America Investment Grade and High Yield Indices narrowing by 7 and 45 basis points, respectively.

Leveraged Loans and CLOs

•Including $800 billion in repricings, U.S. leveraged loan issuance reached a record $1.5 trillion in 2024, per PitchBook|LCD. CLO new issue volume also hit a record, exceeding $200 billion, according to BofA Global Research.

•Default rates on U.S. leveraged loans declined in 2024. According to PitchBook|LCD the twelve-month trailing default rate on the Morningstar LSTA Leveraged Loan Index fell to 0.80% as of September 30th, compared to 1.53% at the start of the year. Default rates rose slightly to 0.91% by December 31st, but remained well below the 10-year historical average of 1.62%.

•Additionally, prices on leveraged loans increased, with the Morningstar LSTA US Leveraged Loan Index rising by $1.10 over the year, reaching $97.33 as of December 31st.

•European leveraged loans followed a similar trend, with default rates declining significantly year over year, to 0.42% from 1.62%. Prices increased as well, with the Morningstar LSTA EU Leveraged Loan Index rising by €1.96 to €98.01.

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Equity Markets

•U.S. equities posted another strong year in 2024: the Dow Jones rose 12.9%, the S&P 500 gained 23.3%, and the NASDAQ climbed 28.6%. The FTSE 100 and MSCI World Indexes also posted gains of 5.7% and 17.0%, respectively.

•Equity volatility spiked at several points during 2024, with the VIX reaching, in early August, its highest level since October 2020.

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, 2024 and 2023.

($ in thousands) Fair Value % of Total Fair Value % of Total

Dollar Denominated:

Consumer loans and ABS backed by consumer loans(5) 87,249 1.9 % 83,130 2.0 %

Corporate debt and equity and corporate loans 27,598 0.6 % 29,720 0.7 %

HELOC and CES loans and retained RMBS(5)(7) 432,861 9.2 % — — %

Non-Dollar Denominated:

Corporate debt and equity 181 — % 189 — %

Other residential mortgage loans 39,168 0.8 % — — %

Adjustments:

Plus: Financing underlying Forward MSR-related investments(11) 93,500 13,500

(1)This information does not include U.S. Treasury securities, securities sold short, or financial derivatives.

(2)Conformed to current period presentation.

(3)Also 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)Also includes equity investments in unconsolidated entities holding commercial mortgage loans and REO.

(5)Also includes equity investments in securitization-related vehicles.

(6)Also includes corporate loans to certain loan origination entities in which we hold an equity investment.

(7)Retained RMBS represents RMBS issued by non-consolidated Ellington-sponsored loan securitization trusts, and interests in entities holding such RMBS.

(8)Also includes equity investment in Ellington affiliate.

(9)Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization.

(10)Includes an investment in an unconsolidated entity holding European RMBS.

(11)We participate in the economic returns of a portfolio of forward MSRs under various agreements with a licensed mortgage servicer holding such MSRs. Under such agreements, we can direct the servicer to finance the MSRs and distribute the proceeds of such financings to us. Forward MSR-related investments, at fair value are presented on our Consolidated Balance Sheet net of any such financing; as of December 31, 2024 and 2023, such borrowings were $93.5 million and $13.5 million, respectively.

Our total adjusted long credit portfolio increased by 24% to $3.42 billion as of December 31, 2024, from $2.75 billion as of December 31, 2023. The increase was primarily driven by net purchases of closed-end second lien loans, HELOCs, and commercial mortgage loans. A portion of the increase was offset by a smaller non-QM loan portfolio, driven by paydowns and the impact of three non-QM loan securitizations during the year, and net sales of non-Agency RMBS.

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Strong net interest income and net gains from our non-QM loans and retained tranches, non-Agency RMBS, residential NPLs and RPLs, and ABS drove the positive performance of our credit portfolio during the year. We also benefited from mark-to-market gains on our equity investments in the loan originators, driven by strong origination volumes and gain-on-sale margins.

Offsetting a portion of these gains were net losses on our commercial mortgage loans, consumer loans and a related equity investment in a consumer loan originator, forward MSR-related investments, negative operating income on certain non-performing commercial mortgage loans and REO, and net losses on residential REO liquidations. Finally, we had a net loss on the Great Ajax common shares we purchased in connection with the prior year's terminated merger. Note that sector-level performance is inclusive of associated financing costs and hedging gains and losses.

The percentage of delinquent loans in our residential mortgage loan portfolio increased year over year. The percentage of delinquent loans in our commercial mortgage loan portfolio (including loans accounted for as equity method investments) increased in the first three quarters of 2024, but declined during the fourth quarter, leading to a year-over-year decline as well. Both our residential and commercial mortgage loan portfolios continue to experience low levels of realized credit losses and strong overall credit performance, though we continue to work out several non-performing commercial assets.

For the full year, the net interest margin on our credit portfolio, including the effect of actual and accrued periodic payments on interest rate swaps used to hedge the assets, was 2.83%, up from 2.70% for the prior year. The year-over-year increase was driven by higher asset yields, partially offset 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.

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, 2024:

Gross Unrealized Weighted Average

(1)Excludes commercial mortgage loans in non-accrual status, with a fair value of $37.6 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, 2024 all of our commercial mortgage loans were first-lien mortgages, the vast majority of which have floating rates, most of which benefit from interest rate floors.

The table(1)(2) below summarizes our interests in commercial mortgage loans by payment status of the loan as of December 31, 2024:

(In thousands) Unpaid Principal Balance Fair Value

(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.

Delinquencies in our commercial loan portfolio (including loans accounted for as equity method investments) declined during the fourth quarter, which reversed the increased level of delinquencies during the first three quarters of 2024, and led to a year-over-year decline. As of December 31, 2024, we held two commercial REO properties with a fair value of $17.5 million.

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Additionally, as of December 31, 2024, an unconsolidated variable interest entity in which we co-invest with other Ellington affiliates held a commercial multi-family REO property; the fair value of our allocable portion of such REO was approximately $33.6 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, 2024:

Multifamily 63.3 %

Hotel 7.6 %

Industrial 7.0 %

Retail 6.0 %

Commercial Mixed Use 6.0 %

Office 4.2 %

Healthcare 3.2 %

Mobile Home Community 1.7 %

Self Storage 1.0 %

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, 2024:

Property Location by U.S. State(1) December 31, 2024

Illinois 8.6 %

Texas 7.0 %

New Jersey 6.6 %

Connecticut 6.0 %

Michigan 5.0 %

All other states <5% 30.9 %

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, 2024:

Loan Type Unpaid Principal Balance Fair Value

(In thousands)

North America—United States:

Europe—United Kingdom:

Total residential mortgage loans and residential REO(1) $ 3,564,043

(1)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.

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The table below details (in thousands) the underlying reference amounts and components of our Forward MSR-related investments as of December 31, 2024:

The table below provides additional details on the MSRs underlying our Forward MSR-related investments as of December 31, 2024:

Weighted Average

(In thousands)

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 $59.2 million as of December 31, 2024. 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, 2024:

Weighted Average

(1)Fair value excludes accrued deferred performance-based fees to loan originator of $33 thousand.

(2)Excludes charged-off consumer loans with an aggregate unpaid principal balance and fair value of $81.8 million and $1.0 million, respectively, for which the Company has 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, 2024:

Investment in Unconsolidated Entity Description Fair Value

Loan Originators: Entity Type (In thousands)

LendSure Mortgage Corp. Residential Mortgage Loan Originator $ 33,617

Other Unconsolidated Entities: Underlying Product Type

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Investment Portfolio—Agency RMBS

Long Agency RMBS:

Floating Rate — — % 5,130 0.6 %

Our total long Agency RMBS portfolio decreased by approximately 65% year over year to $296.7 million, driven primarily by net sales, as we rotated investment capital into credit investments and away from Agency RMBS.

In the first quarter, Agency MBS underperformed as expectations for a Federal Reserve rate cut were delayed, pushing interest rates higher and yield spreads wider, especially in February. Spreads recovered in March due to lower volatility and capital inflows, but Agency MBS generated a modestly negative excess return to Treasuries overall for the quarter.

In the second quarter, renewed inflation concerns and a hawkish Fed caused Agency yield spreads to widen in April. However, declining interest rates and volatility in May and June reversed most of the widening, leading to slight underperformance against hedging instruments for the quarter.

The third quarter saw falling interest rates, a steepening yield curve, and tightening Agency yield spreads as markets anticipated Fed rate cuts. In September, the Fed reduced the target range for the federal funds rate by 50 basis points and signaled further cuts, leading Agency RMBS to outperform hedging instruments in the quarter.

In the fourth quarter, rising interest rates and intra-quarter volatility caused Agency RMBS to underperform relative to hedging instruments.

For the year, the Bloomberg Barclays U.S. MBS Index posted a positive return of 1.20% and a positive excess return (on a duration-adjusted basis) of 0.37% relative to the Bloomberg U.S. Treasury Index. Our Agency portfolio generated positive results for the year as well, with net gains on interest rate hedges exceeding net losses on Agency RMBS and negative net interest income.

For the full year, 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 year with a net short TBA position on a notional basis but a net long TBA position on a duration-weighted basis.

For the full year, the net interest margin on our Agency RMBS, excluding the Catch-up Amortization Adjustment, was 1.84%, up from 1.03% for the prior year. The increase was driven by higher asset yields and a lower cost of funds. As with our credit portfolio, 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, 2024 and 2023, the weighted average net pass-through rate on our fixed-rate specified pools was 4.1% and 3.9%, 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.

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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, 2024, September 30, 2024, June 30, 2024, March 31, 2024, and December 31, 2023.

Three-Month Period Ended

Three-Month Constant Prepayment Rates(1) 7.2 7.5 8.5 5.2 5.7

(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, 2024 and 2023:

(In thousands) (In thousands)

Fixed-rate Agency RMBS:

15-year fixed-rate mortgages:

20-year fixed-rate mortgages:

30-year fixed-rate mortgages:

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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 refer to the HMBS MSR Equivalent and Reverse MSRs collectively as our "Reverse MSR-related Net Assets." 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, 2024 and 2023:

Less: Non-retained tranches of consolidated securitization trusts 576,474 —

(1)This information does not include financial derivatives or loan commitments.

(2)Includes HECM loans, REO, and claims or other receivables.

(3)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. As of December 31, 2023, includes $6.9 million of assignable HECM Buyout Loans, $10.2 million of non-assignable HECM Buyout Loans, and $4.9 million of other inactive HECM loans.

(4)As of December 31, 2024, includes $606.8 million of securitized proprietary reverse mortgage loans and $15.0 million of cash held in securitization reserve funds.

Our Longbridge segment generated positive results for the year, driven by positive results in originations, net mark-to-market gains on HMBS MSR Equivalent, and net gains on interest rate hedges. In originations, net gains related to proprietary reverse mortgage securitizations, along with improved origination margins and higher volumes in both HECM and proprietary reverse origination, drove results. Tighter HMBS yield spreads drove the net mark-to-market gains on HMBS MSR Equivalent.

Our Longbridge portfolio, excluding non-retained tranches of a consolidated securitization trusts, decreased by 24% year over year to $420.2 million as of December 31, 2024, driven primarily by the completion of three securitizations of proprietary reverse mortgage loans, partially offset by new proprietary reverse mortgage loan originations during the year.

Supplemental Longbridge Information:

The following table summarizes origination volumes by channel for the years ended December 31, 2024 and 2023:

Year Ended

(1)Represents initial borrowed amounts on reverse mortgage loans.

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Corporate/Other

Our results for the year also reflect a net unrealized loss on our unsecured borrowings, at fair value, driven by tighter credit spreads and shortening duration, as well as net losses on the fixed receiver interest rate swaps that we use to hedge the fixed payments on long-term debt and preferred equity, due to rising interest rates.

Financing—Overall

We have various financing arrangements in place as of December 31, 2024, 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 non-QM loans, proprietary reverse mortgage loans, closed-end second lien 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, 2024, we had $297.7 million of outstanding Unsecured borrowings including: (i) senior notes of $210.0 million, maturing in April 2027 and bearing an interest rate of 5.875%; (ii) senior notes of $34.9 million, maturing in March 2025 and bearing an interest rate of 6.75%; 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, 2024, 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 $4.8 billion, of which approximately 5.0%, or $238.1 million, related to our Agency RMBS holdings. The remaining outstanding borrowings related to our credit portfolio and Longbridge. Additionally, we had $9.2 billion of HMBS-related obligations.

The following table details our borrowings outstanding and debt-to-equity ratios as of December 31, 2024 and 2023:

As of

Recourse(1) borrowings:

Debt-to-equity ratio based on total recourse borrowings(1) 2.0:1 2.3:1

Non-Recourse(3) Borrowings:

(1)As of December 31, 2024 and 2023, excludes borrowings at certain unconsolidated entities that are recourse to us. Including such borrowings, our debt-to-equity ratio based on total recourse borrowings was 2.1:1 and 2.4:1 as of December 31, 2024 and 2023, respectively.

(2)For unsettled purchases and sales, assumes associated borrowings are subject to haircuts of 5.9% and 5.1% as of December 31, 2024 and 2023, respectively.

(3)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).

(4)Relates to our non-QM, European residential mortgage, and reverse mortgage loan securitizations, where we have elected the fair value option on the related debt.

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Our recourse debt-to-equity ratio, excluding U.S. Treasury securities and adjusted for unsettled purchases and sales, decreased to 1.8:1 as of December 31, 2024 as compared to 2.0:1 as of December 31, 2023. The decrease was primarily driven by a decrease in borrowings on our smaller Agency portfolio, higher shareholders' equity, and the impact of several securitizations completed during the year, which converted certain recourse borrowings to non-recourse borrowings. A portion of the decline was offset by an increase in borrowings on our larger credit portfolio. Our overall debt-to-equity ratio, based on total recourse and non-recourse borrowings excluding U.S. Treasury securities, adjusted for unsettled purchases and sales, also increased during the year, to 8.8:1 as of December 31, 2024, as compared to 8.4:1 as of December 31, 2023.

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, 2024, the average cost of funds on our secured financings increased to 5.65%, as compared to 5.45% for the year ended December 31, 2023 due to increases in interest rates. Our unsecured financing costs consist of interest expense related to our Unsecured borrowings. For the years ended December 31, 2024 and 2023, the average borrowing rate on our unsecured financings was 6.12% and 5.98%, respectively. Our average cost of funds, including both secured and unsecured financings, increased to 5.68% from 5.48% 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, or "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.

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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, or "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, 2024, 2023, and 2022, we recognized a Catch-Up Amortization Adjustment of $(0.6) million, $(0.1) million, and $4.1 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 judgement 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.

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Financial Condition

The following table summarizes the fair value of our consolidated portfolio of investments(1) as of December 31, 2024 and 2023.

Long:

Investment Portfolio:

Credit:

Dollar Denominated:

Consumer Loans and ABS backed by Consumer Loans(4) 87,249 83,130

Corporate Debt and Equity and Corporate Loans 27,598 29,720

Debt and Equity Investments in Loan Origination Entities(7) 61,619 38,528

Non-Dollar Denominated:

Corporate Debt and Equity 181 189

Other Residential Mortgage Loans 39,168 —

Agency:

Floating-Rate Specified Pools — 5,130

Longbridge:

Short:

Investment Portfolio:

Government Debt:

(1)For more detailed information about the investments in our portfolio, please see the notes to the consolidated financial statements.

(2)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.

(3)Includes investments in unconsolidated entities holding commercial mortgage loans and REO.

(4)Includes equity investments in securitization-related vehicles.

(5)Includes equity investment in Ellington affiliate.

(6)Includes equity investment in an unconsolidated entity which purchases certain other loans for eventual securitization.

(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 interest in entities holding such RMBS.

(9)Includes an equity investment in an unconsolidated entity holding European RMBS.

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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:

Total Net Mortgage-Related Derivatives 1,822

Corporate-Related Derivatives:

Total Net Corporate-Related Derivatives (29,913)

Interest Rate-Related Derivatives:

Total Interest Rate-Related Derivatives 141,145

Other Derivatives:

Total Net Other Derivatives 317

(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.

The following table summarizes our financial derivatives portfolio(1)(2) as of December 31, 2023.

Notional Net Fair Value

(In thousands) Long Short Net

Mortgage-Related Derivatives:

Total Net Mortgage-Related Derivatives 3,294

Corporate-Related Derivatives:

Total Net Corporate-Related Derivatives (7,127)

Interest Rate-Related Derivatives:

Total Interest Rate-Related Derivatives 86,111

Other Derivatives:

Total Net Other Derivatives (58)

(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, 2023, derivative assets and derivative liabilities were $144.0 million and $(61.8) million, respectively, for a net fair value of $82.2 million, as reflected in "Net Total" above.

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(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, 2023, a total of 19 long and 2,882 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, 2024, our Consolidated Balance Sheet reflected total assets of $16.3 billion and total liabilities of $14.7 billion. As of December 31, 2023, our Consolidated Balance Sheet reflected total assets of $15.3 billion and total liabilities of $13.8 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 $15.5 billion and $14.3 billion as of December 31, 2024 and December 31, 2023, respectively. Our investments in securities sold short and financial derivatives included in total liabilities were $364.6 million and $216.1 million as of December 31, 2024 and 2023, respectively. As of both December 31, 2024 and 2023, 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.

Typically, we 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, 2024 and 2023, we had a net short notional TBA position of $13.1 million and $57.9 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, 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 of reverse mortgage loans, and $227.3 million for U.S. Treasury securities. As of December 31, 2023 indebtedness outstanding on our repos was approximately $3.0 billion. As of December 31, 2023, our assets financed with repos consisted of Agency RMBS of $1.2 billion, credit portfolio assets of $2.1 billion, reverse mortgage loans of $203.7 million, and U.S. Treasury securities of $154.6 million. As of December 31, 2023, outstanding indebtedness under repos was $1.1 billion for Agency RMBS, $1.6 billion for credit portfolio assets, $150.2 million on reverse mortgage loans, and $155.0 million for U.S. Treasury securities.

In addition to our repos, as of December 31, 2024 we had Total other secured borrowings of $2.2 billion, collateralized by $2.4 billion of residential mortgage loans, European residential mortgage loans, ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs. This compares to Total other secured borrowings of $1.7 billion as of December 31, 2023, used to finance $1.9 billion of non-QM loans, ABS backed by consumer loans, reverse mortgage loans, and Reverse MSRs. Additionally, as of December 31, 2024, we had HMBS-related obligations of $9.2 billion collateralized by $9.2 billion of HMBS assets, and as of December 31, 2023, we had HMBS-related obligations of $8.4 billion collateralized by $8.5 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 both December 31, 2024 and 2023, we had Unsecured borrowings outstanding of $297.7 million.

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As of December 31, 2024 and 2023, our debt-to-equity ratio was 8.9:1 and 8.7:1, respectively. Our recourse debt-to-equity ratio was 2.0:1 as of December 31, 2024 as compared to 2.3:1 as of December 31, 2023. See the discussion in "—Liquidity and Capital Resources" below for further information on our borrowings.

Equity

As of December 31, 2024, our equity increased by $55.2 million to $1.591 billion from $1.536 billion as of December 31, 2023. The increase principally consisted of net income of $148.1 million; net proceeds from the issuance of common stock of $99.6 million, after commissions and offering costs; and contributions from our non-controlling interests of $13.0 million. These increases were partially offset by common and preferred dividends of $168.6 million, redemptions preferred stock of $23.9 million, distributions to non-controlling interests of $10.8 million, payments of $1.8 million related to the cancellation of employee stock options, purchases of non-controlling interests of $0.7 million, and repurchases of common stock of $0.7 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 $1.570 billion as of December 31, 2024. As of December 31, 2024, our book value per share of common stock, calculated using Total Stockholders' Equity less the aggregate liquidation preference of outstanding preferred stock, was $13.52.

Results of Operations

The following tables summarizes our results of operations by segment (as applicable) for the years ended December 31, 2024 and 2023:

Interest Income (Expense)

Other Income (Loss)

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)

Expenses

Base management fee to affiliate, net of fee rebates(1) — — 23,460 23,460

Income tax expense (benefit) — — 612 612

Earnings (losses) from investments in unconsolidated entities 32,445 — — 32,445

Net income (loss) attributable to non-controlling interests 1,010 77 1,156 2,243

(Gain) loss on redemption of preferred stock — — 335 335

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.

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Interest Income (Expense)

Other Income (Loss)

Unrealized gains (losses) on unsecured borrowings, at fair value — — 146 146

Net change from HECM reverse mortgage loans, at fair value — 503,831 — 503,831

Net change related to HMBS obligations, at fair value — (451,598) — (451,598)

Expenses

Base management fee to affiliate, net of fee rebates(1) — — 20,419 20,419

Income tax expense (benefit) — — 457 457

Earnings (losses) from investments in unconsolidated entities (855) — — (855)

Net income (loss) attributable to non-controlling interests 3,125 (41) 730 3,814

Net Income (Loss) Per Common Share $ 1.65 $ 0.14 $ (0.90) $ 0.89

(1)See Note 16 of the notes to the consolidated financial statements for further details on management fee rebates.

Results of Operations for the Years Ended December 31, 2024 and 2023

Net Income (Loss) Attributable to Common Stockholders

For the year ended December 31, 2024 we had net income (loss) attributable to common stockholders of $117.8 million, compared to $60.9 million for the year ended December 31, 2023. The increase in our results of operations was primarily due to an increase in net interest income along with significant earnings from investments in unconsolidated entities in the current period, as compared to losses from investments in unconsolidated entities in the prior period. These increases were partially offset by an increase in dividends on preferred stock and total expenses.

Interest Income

Interest income was $416.0 million for the year ended December 31, 2024, as compared to $370.2 million for the year ended December 31, 2023. 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, 2024 increased to $358.3 million, as compared to $344.6 million for the year ended December 31, 2023.

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The following table details our interest income, average holdings of yield-bearing assets, and weighted average yield based on amortized cost for the year ended December 31, 2024 and 2023:

Credit(1) Agency(1) Total(1)

(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, 2024, interest income from our credit portfolio was $320.6 million, as compared to $293.0 million for the year ended December 31, 2023. This period-over-period increase was primarily driven by higher average asset yields for the year ended December 31, 2024.

For the year ended December 31, 2024 and 2023, interest income from our Agency RMBS was $22.6 million and $37.0 million, respectively. This period-over-period decrease was due to a significantly smaller Agency portfolio in the current period, partially offset by higher average asset yields for the year ended December 31, 2024.

Some of the variability in our interest income and portfolio yields is due to the Catch-up Amortization Adjustment. For the years ended December 31, 2024 and 2023, we had a negative Catch-up Amortization Adjustment of $(0.6) million and $(0.1) million, respectively, which decreased our interest income. Excluding the Catch-up Amortization Adjustment, the weighted average yield of our Agency portfolio and our total portfolio was 4.21% and 7.03%, respectively, for the year ended December 31, 2024. Excluding the Catch-up Amortization Adjustment, the weighted average yield of our Agency portfolio and our total portfolio was 3.68% and 6.35%, respectively, for the year ended December 31, 2023.

In addition, we had $9.6 million and $12.4 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, 2024 and 2023, respectively, which we generally use to hedge our exposure to changes in interest rates.

Longbridge

For the years ended December 31, 2024 and 2023, interest income from the Longbridge segment was $50.7 million and $18.9 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, 2024.

Corporate/Other

For the years ended December 31, 2024 and 2023, interest income not allocable to either the investment portfolio segment or the Longbridge segment was $7.0 million and $6.7 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, 2024 and 2023, we had total interest expense of $279.6 million and $262.5 million, respectively.

Investment Portfolio

Total interest expense in our investment portfolio segment decreased to $216.1 million for the year ended December 31, 2024, as compared to $223.8 million for the year ended December 31, 2023. The decline in interest expense was primarily the result of a decline in average borrowings on our smaller Agency RMBS portfolio and a decline in interest expense related to our securities sold short. These declines were partially offset by an increase in financing rates and a modest increase in average secured borrowings on our credit assets.

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The table below summarizes the components of interest expense in our Investment Portfolio for the years ended December 31, 2024 and 2023.

Year Ended

(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, 2024 and 2023.

Year Ended

(In thousands)

(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 4.30% and 3.95% for the years ended December 31, 2024 and 2023, respectively. Excluding the Catch-up Amortization Adjustment, our net interest margin, defined as the average yield on our portfolio of yield-bearing targeted 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 2.73% and 2.40% for the years ended December 31, 2024 and 2023, 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, 2024 and 2023, interest expense in the Longbridge segment was $45.2 million and $25.8 million, respectively. The increase in interest expense in the current period was primarily due to a significant increase in the average size of borrowings, partially offset by a decrease in financing costs.

The table below summarizes the components of interest expense in the Longbridge segment for the years ended December 31, 2024 and 2023.

Year Ended

Repos and Total Other Secured Borrowings $ 41,055 $ 25,822

Securities Sold Short (1) 4,111 —

(1)Amount includes the related net accretion and amortization of purchase discounts and premiums.

For the year ended December 31, 2024, our average borrowings in the Longbridge segment were $555.7 million and our average cost of funds was 7.39%. This compares to average borrowings of $300.2 million and an average cost of funds of 8.59% for the year ended December 31, 2023.

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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 $18.3 million and $12.8 million for the years ended December 31, 2024 and 2023, respectively. This increase was primarily due to interest expense incurred on unsecured borrowings assumed by us as a result of the completion of the Arlington Merger in the fourth quarter of 2023.

The table below summarizes the components of interest expense not included in either segment for the years ended December 31, 2024 and 2023.

Year Ended

(1)Amount includes the related net accretion and amortization of purchase discounts and premiums.

Base Management Fees

Corporate/Other

For the year ended December 31, 2024, the gross base management fee, which is based on total equity at the end of each quarter, was $23.8 million, and our Manager credited us with rebates on our base management fee of $0.3 million, resulting in a net base management fee of $23.5 million. For the year ended December 31, 2023, the gross base management fee was $20.9 million, and our Manager credited us with rebates on our base management fee of $0.5 million, resulting in a net base management fee of $20.4 million. The increase in the net base management fee period over period was due to a larger capital base at the end of each quarter in 2024, as compared to 2023.

Other Investment Related Expenses

Other investment related expenses consist of servicing fees on our mortgage and consumer loans, 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, 2024 and 2023, other investment related expenses were $57.1 million and $37.2 million, respectively.

Investment Portfolio

For the years ended December 31, 2024 and 2023, Other investment related expenses in our investment portfolio segment were $15.2 million and $9.9 million, respectively. The increase in Other investment related expenses was primarily due to an increase in servicing expense on our larger residential mortgage loan portfolio as well as an increase in various legal and due diligence expenses on newly originated loans we purchase.

Longbridge

Other investment 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, 2024 and 2023, Other investment related expenses were $41.9 million and $27.3 million, respectively. The increase in Other investment related expenses in the Longbridge segment was primarily due to debt issuance costs incurred in connection with three securitizations of proprietary reverse mortgage loans in 2024, as well as an increase in servicing and various loan origination expenses resulting from our larger holdings and originations of reverse mortgage loans.

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 other investment related expenses. Other operating expenses were $108.9 million for the year ended December 31, 2024 as compared to $130.1 million for the year ended December 31, 2023.

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Investment Portfolio

Other operating expenses in our investment portfolio segment were $5.5 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively. The decrease in other operating expenses for the year ended December 31, 2024 was due to a decrease in compensation and benefits expense.

Longbridge

For the years ended December 31, 2024 and 2023, other operating expenses in the Longbridge segment were $82.8 million and $74.6 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 period-over-period increase was primarily due to an increase in compensation and benefits expenses and technology expenses, which were partially offset by a decline in professional fees.

Corporate/Other

For the years ended December 31, 2024 and 2023, other operating expenses not allocable to either the investment portfolio segment or the Longbridge segment were $20.5 million and $49.2 million, respectively. The period-over-period decrease in other operating expenses was primarily due to a decrease in professional fees and compensation and benefits expense. For the year ended December 31, 2023, professional fees and compensation and benefits expense included merger-related activities, including $17.1 million of compensation/severance costs and $7.5 million of other expenses, primarily professional fees related to the Arlington Merger, and $7.4 million of costs related to the termination of the Great Ajax merger.

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, 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.

For the year ended December 31, 2023, other income (loss) was $12.5 million, consisting primarily of net realized and unrealized gains of $57.6 million on our securities and loans, net realized and unrealized gains of $3.8 million on our financial derivatives, and $5.6 million of Other, net. These gains were partially offset by net unrealized losses of $(51.6) million on our Other secured borrowings, at fair value. Net realized and unrealized gains of $57.6 million on our securities and loans were primarily on non-QM loans, Agency RMBS, and non-Agency RMBS. These gains were partially offset by net realized and unrealized losses on ABS backed by consumer loans, CMBS, U.S. Treasury securities and sovereign bonds, and equity securities. Net realized and unrealized gains of $3.8 million on our financial derivatives were primarily related to net realized and unrealized gains, driven by higher interest rates, on net short positions in TBAs and to a lesser extent interest rate swaps. Such gains were partially offset by net realized and unrealized losses on credit default swaps on corporate bond indices. We recognized net unrealized losses of $(51.6) million on our Other secured borrowings, at fair value for the year ended December 31, 2023, related to borrowings on our securitized non-QM loans. These securitized non-QM loans had net unrealized gains of $63.8 million, which are included in Unrealized gains (losses) on securities and loans, net. Other, net of $5.6 million, consisted

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primarily of various origination and loan income, rental income, and income and net realized and unrealized gains on Forward MSR-related investments.

Longbridge

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.

For the year ended December 31, 2023, other income (loss) from the Longbridge segment was $118.5 million, consisting primarily of gains from Net change from reverse mortgage loans, at fair value of $503.8 million, other income of $35.3 million, net unrealized gains of $23.3 million on securities and loans, and net realized and unrealized gains of $7.6 million on financial derivatives. These gains were partially offset by Net change related to HMBS obligations, at fair value of $(451.6) million. Gains from Net change from reverse mortgage loans at fair value of $503.8 million consisted of coupon income on HECM loans of $502.4 million and net realized and unrealized gains of $1.4 million on HECM loans. Other income of $35.3 million is primarily related to unrealized gains of $23.9 million on the Reverse MSRs acquired out of a bankruptcy proceeding in July 2023, $8.1 million of origination fees and $5.9 million of servicing fees. The unrealized gains of $23.3 million on securities and loans is primarily related to the mark-to-market gain on proprietary reverse loans driven by tighter yield spreads. Losses from Net change related to HMBS obligations, at fair value of $(451.6) million primarily relate to interest expenses of the HMBS obligation.

Corporate/Other

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. For the year ended December 31, 2023, other income (loss) was $38.2 million, consisting primarily of net realized and unrealized gains on the fixed payer interest rate swaps associated with the then-pending Great Ajax merger and unrealized gains on our Unsecured borrowings, at fair value, partially offset by net realized and unrealized losses on the fixed receiver interest rate swaps that we use to hedge the fixed payments on both our Unsecured borrowings and our preferred equity.

Income Tax Expense (Benefit)

Corporate/Other

Income tax expense (benefit) was $0.6 million for the year ended December 31, 2024, as compared to $0.5 million for the year ended December 31, 2023.

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 $32.4 million for the year ended December 31, 2024, as compared to $(0.9) million for the year ended December 31, 2023. 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 to risk retention related vehicles related to non-QM loan securitizations.

For the year ended December 31, 2023, Earnings (losses) from investments in unconsolidated entities of $(0.9) million, primarily consisted of unrealized losses on investments in loan originators, partially offset by unrealized gains on investments in entities holding commercial mortgage loans and REO, in which we co-invest with other Ellington affiliates, and investments in unconsolidated entities related to risk retention related vehicles related to non-QM loan securitizations.

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See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of

Operations for the Years Ended December 31, 2023 and 2022" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 29, 2024 for details on the Company's results of operations for the years ended December 31, 2023 and 2022.

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.

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.

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The following table reconciles, for the years ended December 31, 2024 and 2023 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:

Adjustments:

Bargain purchase (gain), net(6) — — — — — — (3,565) (3,565)

(1)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.

(2)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.

(3)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.

(4)Represents the effect of replacing mortgage loan interest income (net of securitization debt expense) with interest income of the retained tranches.

(5)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. For the year ended December 31, 2023, includes $7.4 million related to the Great Ajax merger, which was terminated in October 2023, $3.1 million of professional fees related to the acquisition and integration of Longbridge, $1.7 million of non-capitalized transaction costs, $1.4 million of non-cash equity compensation expense, and $1.1 million of various other expenses.

(6)For the year ended December 31, 2023, represents the reversal of the bargain purchase gain of $28.2 million net of the reversal of expenses related to the Arlington Merger of $24.6 million.

(7)Includes net interest income and operating expenses for certain investments in unconsolidated entities.

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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 targeted 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 $192.4 million and $228.9 million as of December 31, 2024 and 2023, respectively.

The following summarizes our borrowings under repos by remaining maturity:

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, 2024, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was 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. As of December 31, 2023, the weighted average contractual haircuts were 26.7% with respect to credit portfolio assets, 21.5% with respect to reverse mortgage loans, 5.1% with respect to Agency RMBS assets, and 18.3% 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.

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As of December 31, 2024 and 2023, we had $2.6 billion and $3.0 billion of borrowings outstanding under our repos, respectively. 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%. As of December 31, 2023, the remaining terms on our repos ranged from 2 days to 513 days, with a weighted average remaining term of 126 days. Our repo borrowings were with a total of 26 counterparties as of December 31, 2023. As of December 31, 2023, our repos had interest rates ranging from 4.81% to 8.68%, with a weighted average borrowing rate of 6.67%. Investments transferred as collateral under repos had an aggregate fair value of $3.3 billion and $3.7 billion, as of December 31, 2024 and 2023, respectively. 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 of securities.

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:

(In thousands)

(1)Average borrowings outstanding have been updated in the current period to correct for prior quarter.

(2)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 non-QM loans and REO, European residential mortgage loans, commercial mortgage loans, 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, 2024 and 2023, we had outstanding borrowings related to such transactions in the amount of $2.2 billion and $1.7 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, 2024 and 2023, the fair value of assets collateralizing our Total other secured borrowings was $2.4 billion and $1.9 billion, respectively. Additionally, as of December 31, 2024, as an HMBS issuer, we had HMBS-related obligations of $9.2 billion collateralized by $9.2 billion of HMBS assets and as of December 31, 2023, we had HMBS-related obligations of $8.4 billion collateralized by $8.5 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, 2024 and 2023, we had $297.7 million of outstanding unsecured borrowings. As of both December 31, 2024 and 2023, our outstanding unsecured borrowings were comprised of $210.0 million of 5.875% Senior Notes due April 2027, $34.9 million of 6.75% Senior Notes due March 2025, $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. See Note 14 in the notes to our consolidated financial statements for further detail on our unsecured borrowings.

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As of December 31, 2024, we had an aggregate amount at risk under our repos with 23 counterparties of approximately $687.6 million, and as of December 31, 2023, we had an aggregate amount at risk under our repos with 27 counterparties of approximately $705.4 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, 2024 and 2023, does not include approximately $3.2 million and $(0.6) 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, 2024, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with seven counterparties of approximately $9.4 million. We also had $57.6 million of initial margin for cleared over-the-counter, or "OTC," derivatives posted to central clearinghouses as of that date. As of December 31, 2023, we had an aggregate amount at risk under our derivatives contracts, excluding TBAs, with nine counterparties of approximately $8.7 million. We also had $56.9 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, 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. As of December 31, 2023, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with eight counterparties of approximately $12.9 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 previously commenced an "at-the-market" offering for shares of our common stock by entering into equity distribution agreements dated as of August 6, 2021 and amended on January 24, 2023 and November 13, 2023, with sales agents (the "2021 Common ATM Program"). For the year ended December 31, 2024, we issued 7,715,891 shares of common stock under the 2021 Common ATM Program, which provided $99.6 million of net proceeds after approximately $0.8 million of commissions and $0.6 million of offering costs. For the year ended December 31, 2023, we issued 9,140,986 shares of common stock under the 2021 Common ATM Program, which provided $122.1 million of net proceeds after approximately $1.1 million of commissions and $0.3 million of offering costs. On September 30, 2024, we commenced a new "at-the-market" offering (the "2024 Common ATM Program") by entering into new equity distribution agreements with sales agents under which we are authorized to offer and sell up to $300.0 million shares of common stock from time to time. As of December 31, 2024, we had remaining authorization under the 2024 Common ATM Program to issue $300.0 million of common stock.

We have commenced an "at-the-market" offering for our Series A Preferred Stock and Series B Preferred Stock, or the "Preferred ATM Program," by entering 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, 2024, 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, 2024 and 2023.

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On February 6, 2023, we issued 4,000,000 shares of Series C Fixed-Rate Reset Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series C Preferred Stock"), for proceeds of $96.5 million, net of underwriting discounts and commissions and offering costs of $3.5 million. Holders of the Series C Preferred Stock are entitled to receive cumulative cash dividends from and including the original issue date to, but excluding, April 30, 2028 (the "First Reset Date"), at a fixed rate equal to 8.625% per annum of the $25.00 per share liquidation preference. The applicable fixed rate resets on the First Reset Date and again on the fifth anniversary of the preceding reset date (each a "Reset Date"), at a rate equal to the five-year treasury rate as measured three business days prior to the Reset Date plus 5.13% per annum of the $25.00 per share liquidation preference. Dividends are payable quarterly in arrears on or about the 30th day of each January, April, July, and October.

In accordance with the terms of the Arlington Merger Agreement, on the closing date of the Arlington Merger, each outstanding share of Arlington's Class A common stock, par value $0.01 per share (other than shares held by us, EF Merger Sub Inc. or any of our wholly-owned subsidiaries, EF Merger Sub Inc. or Arlington) was automatically converted into the right to receive 0.3619 newly issued shares of common stock. In connection with the transactions completed pursuant to the Arlington Merger Agreement, 11,040,704 shares of our common stock were issued. In addition, in accordance with the terms of the Arlington Merger Agreement (i) each of the 379,668 outstanding shares of Arlington’s 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of our 7.000% Series D Preferred Stock, $0.001 par value per share ("Series D Preferred Stock"); and (ii) 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 the Company 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, or 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. As of December 31, 2024, 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, or 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.

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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, 2024 and 2023:

Declaration Date Dividend Per Share Dividend Amount Record Date Payment Date

(In thousands)

On January 8, 2025, the Board of Directors approved a dividend in the amount of $0.13 per share of common stock payable on February 25, 2025 to stockholders of record as of January 31, 2025. On February 10, 2025, the Board of Directors approved a dividend in the amount of $0.13 per share of common stock payable on March 25, 2025 to stockholders of record as of February 28, 2025.

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The following table sets forth the dividend distributions authorized by the Board of Directors during the years ended December 31, 2024 and 2023 and payable to holders of our preferred stock:

Declaration Date Dividend Per Share Dividend Amount Record Date Payment Date

(In thousands)

Series A Preferred Stock:

Series B Preferred Stock:

Series C Preferred Stock:

Series D Preferred Stock:

Series E Preferred Stock:

(1)Declared and paid through redemption date of December 13, 2024.

At those times when cash flows from the Company’s operating activities are insufficient to fund its dividend payments, the Company funds such dividend payments through cash flows from its investing and/or financing activities, and in some cases from additional cash on hand. The following paragraphs summarize the Company’s cash flows for the years ended December 31, 2024 and 2023.

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

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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.

For the year ended December 31, 2023, our operating activities used net cash in the amount of $241.9 million and our investing activities provided net cash in the amount of $174.9 million. Our repo activity used to finance many of our investments (including repayments of amounts borrowed under our repos) used net cash of $104.3 million. We received $1.73 billion in proceeds from the issuance of Total other secured borrowings, and we used $1.78 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 $225.6 million during the year ended December 31, 2023. We received proceeds from HMBS-related obligations of $1.46 billion and used $1.28 billion for principal payments on HMBS-related obligations. We received proceeds from the issuance of common and preferred stock, net of underwriters' discounts and commissions, agent commissions, and offering costs paid, of $218.3 million and contributions from non-controlling interests of $7.2 million. We used $149.3 million to pay dividends, $15.2 million for distributions to non-controlling interests (our joint venture partners), and $12.4 million to repurchase common stock. As a result there was an increase in our cash holdings of $8.7 million, from $221.9 million as of December 31, 2022 to $230.5 million as of December 31, 2023.

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

EFC US Equity

EFC · 10-K · period ended 2024-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

EFC US Equity☆

EFC · 10-K · period ended 2024-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

EFC US Equity