Orchid Island Capital Announces Second Quarter 2025 Results
VERO BEACH, Fla., July 24, 2025 (GLOBE NEWSWIRE) -- (July 24, 2025), Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid" or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three month period ended June 30, 2025.
Second Quarter 2025 Results
Net loss of $33.6 million, or $0.29 per common share, which consists of:
Net interest income of $23.2 million, or $0.20 per common share
Total expenses of $5.0 million, or $0.04 per common share
Net realized and unrealized losses of $51.7 million, or $0.45 per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps
Second quarter dividends declared and paid of $0.36 per common share
Book value per common share of $7.21 at June 30, 2025
Total return of (4.66)%, comprised of $0.36 dividend per common share and $0.73 decrease in book value per common share, divided by beginning book value per common share
Other Financial Highlights
Orchid maintained a strong liquidity position of $492.5 million in cash and cash equivalents and unpledged securities, or approximately 54% of stockholders' equity as of June 30, 2025
Borrowing capacity in excess of June 30, 2025 outstanding repurchase agreement balances of $6.7 billion, spread across 24 active lenders
Company to discuss results on Friday, July 25, 2025, at 10:00 AM ET
Supplemental materials to be discussed on the call can be downloaded from the investor relations section of the Company's website at https://ir.orchidislandcapital.com
Management Commentary
Commenting on the second quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, "The second quarter of 2025 was a very turbulent period for financial markets, with two large catalysts driving the volatility. The initial shock, and clearly the larger of the two, were reciprocal tariffs announced by the Trump administration in early April. After the announcement, market conditions resembled those following the outbreak of Covid-19, if only slightly less severe. A week later, the administration announced a pause in implementation of the tariffs for 90 days and markets slowly recovered some semblance of stability. While market conditions remained volatile for the balance of the quarter, the market slowly grew less affected by subsequent developments on the tariff front and most risk assets recovered fully. The second catalyst, the administration's successful passage of the One Big Beautiful Bill Act, refocused the market on domestic issues versus trade. In conjunction with this shift in market focus, the incoming economic data proved resilient and expectations for Fed rate cuts continued to subside and get pushed further into the future.
"Notably for the Company, while risk assets generally recovered from the severe turmoil early in the quarter, the Agency RMBS sector did not fully recover, as least versus comparable duration hedges, resulting in negative excess returns for the quarter. We were forced to respond to severe market conditions in early April and reduce the balance sheet in order to maintain prudent levels of leverage, incurring modest permanent losses in the process. The Agency RMBS market continued to languish into the third quarter; however, returns available in the market remain very attractive. The Company continued to increase its capital base during the second quarter while maintaining leverage levels on the lower end of our historical range. As a result, Orchid believes that it is well positioned to capture the attractive returns available in the market currently as well as benefit if and when the Agency RMBS market recovers from the widening during the second quarter."
Details of Second Quarter 2025 Results of Operations
The Company reported net loss of $33.6 million for the three month period ended June 30, 2025, compared with a net loss of $5.0 million for the three month period ended June 30, 2024. Interest income on the portfolio in the second quarter was up approximately $11.2 million from the first quarter of 2025. The yield on our average Agency RMBS decreased from 5.41% in the first quarter of 2025 to 5.38% for the second quarter of 2025, and our repurchase agreement borrowing costs decreased from 4.29% for the first quarter of 2025 to 4.23% for the second quarter of 2025. Book value decreased by $0.73 per share in the second quarter of 2025. The decrease in book value reflects our net loss of $0.29 per share and the dividend distribution of $0.36 per share. The Company recorded net realized and unrealized losses of $51.7 million on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.
Prepayments
For the quarter ended June 30, 2025, Orchid received $199.2 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate ("CPR") of approximately 10.1%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):
Structured
PT RMBS
RMBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
June 30, 2025
10.1
6.3
10.1
March 31, 2025
7.8
4.5
7.8
December 31, 2024
10.6
7.0
10.5
September 30, 2024
8.8
6.4
8.8
June 30, 2024
7.6
7.1
7.6
March 31, 2024
6.0
5.9
6.0
Portfolio
The following tables summarize certain characteristics of Orchid's PT RMBS (as defined below) and structured RMBS as of June 30, 2025 and December 31, 2024:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
June 30, 2025
Fixed Rate RMBS
$
6,978,561
99.8
%
5.45
%
333
1-Jul-55
Interest-Only Securities
14,550
0.2
%
4.01
%
206
25-Jul-48
Inverse Interest-Only Securities
248
0.0
%
0.00
%
255
15-Jun-42
Total Mortgage Assets
$
6,993,359
100.0
%
5.42
%
331
1-Jul-55
December 31, 2024
Fixed Rate RMBS
$
5,237,812
99.7
%
5.03
%
330
1-Nov-54
Interest-Only Securities
15,308
0.3
%
4.01
%
212
25-Jul-48
Inverse Interest-Only Securities
190
0.0
%
0.00
%
261
15-Jun-42
Total Mortgage Assets
$
5,253,310
100.0
%
4.99
%
328
1-Nov-54
($ in thousands)
June 30, 2025
December 31, 2024
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
4,421,358
63.2
%
$
3,693,032
70.3
%
Freddie Mac
2,572,001
36.8
%
1,560,278
29.7
%
Total Portfolio
$
6,993,359
100.0
%
$
5,253,310
100.0
%
June 30, 2025
December 31, 2024
Weighted Average Pass-through Purchase Price
$
102.38
$
102.45
Weighted Average Structured Purchase Price
$
18.74
$
18.74
Weighted Average Pass-through Current Price
$
99.98
$
96.44
Weighted Average Structured Current Price
$
14.65
$
14.38
Effective Duration (1)
3.271
4.200
(1
)
Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 3.271 indicates that an interest rate increase of 1.0% would be expected to cause a 3.271% decrease in the value of the RMBS in the Company's investment portfolio at June 30, 2025. An effective duration of 4.200 indicates that an interest rate increase of 1.0% would be expected to cause a 4.200% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2024. These figures include the structured securities in the portfolio, but do not include the effect of the Company's funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.
Financing, Leverage and Liquidity
As of June 30, 2025, the Company had outstanding repurchase obligations of approximately $6.7 billion with a net weighted average borrowing rate of 4.48%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $7.0 billion and cash pledged to counterparties of approximately $7.9 million. The Company's adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders' equity, at June 30, 2025 was 7.3 to 1. At June 30, 2025, the Company's liquidity was approximately $492.5 million consisting of cash and cash equivalents and unpledged securities. To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at June 30, 2025.
($ in thousands)
Weighted
Weighted
Total
Average
Average
Outstanding
% of
Borrowing
Maturity
Counterparty
Balances
Total
Rate
in Days
Wells Fargo Bank, N.A.
$
385,253
5.75
%
4.47
%
18
RBC Capital Markets, LLC
382,428
5.75
%
4.47
%
18
J.P. Morgan Securities LLC
348,072
5.23
%
4.48
%
16
Mirae Asset Securities (USA) Inc.
338,514
5.09
%
4.53
%
110
ASL Capital Markets Inc.
329,804
4.96
%
4.47
%
24
ABN AMRO Bank N.V.
324,113
4.87
%
4.47
%
67
Marex Capital Markets Inc.
310,890
4.67
%
4.47
%
59
Citigroup Global Markets Inc
307,521
4.62
%
4.49
%
29
Goldman, Sachs & Co
306,838
4.61
%
4.48
%
29
DV Securities, LLC Repo
298,080
4.48
%
4.48
%
41
ING Financial Markets LLC
295,129
4.43
%
4.48
%
31
Daiwa Securities America Inc.
294,156
4.42
%
4.48
%
21
StoneX Financial Inc.
284,546
4.28
%
4.47
%
17
South Street Securities, LLC
281,970
4.24
%
4.47
%
62
Clear Street LLC
281,435
4.23
%
4.48
%
68
Cantor Fitzgerald & Co
278,749
4.19
%
4.47
%
16
Merrill Lynch, Pierce, Fenner & Smith
260,220
3.91
%
4.50
%
21
MUFG Securities Canada, Ltd.
256,787
3.86
%
4.45
%
8
Mitsubishi UFJ Securities (USA), Inc.
250,750
3.77
%
4.49
%
16
The Bank of Nova Scotia
246,144
3.70
%
4.48
%
28
Bank of Montreal
228,211
3.43
%
4.48
%
21
Banco Santander SA
186,933
2.81
%
4.48
%
16
Nomura Securities International, Inc.
144,308
2.17
%
4.47
%
56
Lucid Prime Fund, LLC
35,028
0.53
%
4.48
%
17
Total / Weighted Average
$
6,655,879
100.00
%
4.48
%
35
Hedging
In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding against a rise in interest rates by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted accounting principles ("GAAP") in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these instruments are reflected in earnings for all periods presented. At June 30, 2025, such instruments were comprised of U.S. Treasury note ("T-Note") and Secured Overnight Financing Rate ("SOFR") futures contracts, interest rate swap agreements and contracts to sell to-be-announced ("TBA") securities.
The table below presents information related to the Company's T-Note and SOFR futures contracts at June 30, 2025.
($ in thousands)
June 30, 2025
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity(1)
U.S. Treasury Note Futures Contracts (Short Positions)(2)
September 2025 5-year T-Note futures (Sep 2025 - Sep 2030 Hedge Period)
$
487,500
4.03
%
3.72
%
$
(6,198
)
September 2025 10-year T-Note futures (Sep 2025 - Sep 2035 Hedge Period)
228,500
4.23
%
3.96
%
(3,842
)
September 2025 10-year Ultra futures (Sep 2025 - Sep 2035 Hedge Period)
197,500
4.48
%
4.20
%
(4,649
)
SOFR Futures Contracts (Short Positions)
September 2025 3-Month SOFR futures (Jun 2025 - Sep 2025 Hedge Period)
$
28,750
4.05
%
4.33
%
$
82
December 2025 3-Month SOFR futures (Sep 2025 - Dec 2025 Hedge Period)
28,750
3.83
%
4.01
%
53
March 2026 3-Month SOFR futures (Dec 2025 - Mar 2026 Hedge Period)
