- **Strong Q3 Recovery**: $0.53 EPS vs. Q2 loss, 6.7% total return, and 7.4% leverage ratio.
- **High-Coupon Portfolio Strategy**: 70% of new investments in 5.5-6.5% pools with call protection, driving 2.59% net interest spread.
- **Hedging Effectiveness**: $5.6 billion hedge portfolio limits rate sensitivity, with 3.31% swap rate and -0.7 duration gap.
- **Fed Policy Outlook**: Anticipated rate cuts and end of QT to support funding costs, with cautious leverage approach.
- **Prepayment Resilience**: 6.3% CPR in 5.5% pools vs. 9.0% generic, showcasing call protection benefits.

**【CEO Summary Section】**
- Q3 net income of $0.53 per share, up from a 29% loss in Q2. Book value increased to $7.33 from $7.21, with a 6.7% total return.
- Portfolio balance grew to $7.7 billion from $6.9 billion, maintaining a 7.4% leverage ratio.
- Management emphasized disciplined investment in high-coupon, call-protected pools to mitigate prepayment risk.

**【CFO Financial Commentary】**
- GAAP net income of $0.53 per share, Non-GAAP EPS of $1.08, exceeding expectations.
- Prepayment speeds stable at 10.1%, liquidity at 57.1%.
- Cost control measures reduced operating expenses, supporting margin expansion.

**【Portfolio Strategy & Hedge Position】**
- $152 million equity raised and deployed into high-coupon (5.5-6.5%) specified pools with call protection.
- Weighted average coupon rose to 5.53%, net interest spread expanded to 2.59%.
- Hedge portfolio of $5.6 billion (70% of liabilities) included 3.9 billion in swaps at 3.31% and short TBA positions.
- Duration gap of -0.7 years, limiting interest rate sensitivity.

**【Q&A Highlights】**
- **Leverage & Risk Positioning**: Management cautious on leverage, considering Fed rate cuts and market dynamics. 30% of repo borrowings unhedged, benefiting from lower rates.
- **Pay-Up Dynamics**: Portfolio pay-up of 101.7, with 70% of new investments in high-coupon pools. Avoided excessive pay-ups, focusing on credit-impaired and geographically constrained assets.
- **Dollar Roll Market**: Specialness limited due to Fed policy and lack of bank participation. Focus on futures and swaps for hedging.
- **Book Value**: Modest increase month-to-date, reflecting stable asset performance.


Orchid Island Capital (ORC)-24 Oct 25-2025 Q3 Earnings call transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

ORC

ORC fundamentals

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