Mortgage investment firm Ellington Financial (NYSE: EFC) fell short of the market’s revenue expectations in Q4 CY2025, with sales falling 8.6% year on year to $65.81 million. Its non-GAAP profit of $0.47 per share was 2.4% above analysts’ consensus estimates.

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“Ellington Financial reported another quarter of positive results, driven by our loan origination and securitization businesses, and supported by strengthening credit performance across our diversified loan portfolios,” said Laurence Penn, Chief Executive Officer and President.

Company Overview

Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial (NYSE: EFC) acquires and manages a diverse portfolio of mortgage-related, consumer-related, and other financial assets to generate returns for investors.

Sales Growth

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Ellington Financial grew its revenue at a mediocre 9.6% compounded annual growth rate. This wasn’t a great result compared to the rest of the banking sector, but there are still things to like about Ellington Financial.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Ellington Financial’s recent performance shows its demand has slowed as its annualized revenue growth of 8.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Ellington Financial missed Wall Street’s estimates and reported a rather uninspiring 8.6% year-on-year revenue decline, generating $65.81 million of revenue.

Since the company recorded losses on certain securities, it generated more net interest income than revenue (a 1.1x multiple of its revenue to be exact) during the last five years, meaning Ellington Financial lives and dies by its lending activities because non-interest income barely moves the needle.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

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Tangible Book Value Per Share (TBVPS)

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Ellington Financial’s TBVPS declined at a 5.6% annual clip over the last five years. On a two-year basis, TBVPS fell at a slower pace, dropping by 2.5% annually from $13.96 to $13.28 per share.

Key Takeaways from Ellington Financial’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its net interest income fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $12.50 immediately following the results.

Ellington Financial may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).