Orchid Island Cap (NYSE:ORC) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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View the webcast at https://edge.media-server.com/mmc/p/pp74w7ci/
Summary
Orchid Island Cap reported a net loss of $0.11 per share for Q1 2026, a significant drop from the net income of $0.62 per share in Q4 2025.
The company’s average portfolio balance grew to approximately $11 billion compared to $9.5 billion in the previous quarter, with a leverage ratio increase to 7.9.
Management highlighted the impact of geopolitical events on market variables, noting stability in interest rates and a modest recovery in mortgage spreads.
The company maintained a focus on a highly liquid 100% agency portfolio, raising $108 million in Q1 and an additional $28 million in early April.
Orchid Island Cap’s outlook remains bullish due to stable market conditions and attractive returns, despite uncertainties related to geopolitical tensions.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Orchid Island Capital First Quarter 2026 Earnings Call. At this time, all participants are in listen only mode. After the speaker’s presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Melissa Alfonso, Office Manager. Please go ahead. Good morning and welcome to the first quarter 2026 earnings conference call for Orchid Island Capital. This call is being recorded today, April 24, 2026. At this time the Company would like to remind the listeners that statements made during today’s conference call relating to matters not historical facts are forward looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform act of 1995. Listeners are cautioned that such forward looking statements are based on information currently available on the management’s good faith belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward looking statements. Important factors that could cause such differences are described in the Company’s filings with the securities and Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K. The company assumes no obligation to update such forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward looking statements. Now I’d like to turn the conference over to the Company’s Chairman and Chief Executive Officer, Mr. Robert Cawley. Please go ahead sir.
Robert Cawley (Chairman and Chief Executive Officer)
Thank you Melissa. Good morning everyone. I hope everybody’s had a chance to download our deck as usual. That will be kind of the basis of our call today. First off, I’d just like to walk you through the agenda as usual. Jerry Cintez, our controller will walk you through the financial results. I’ll then go through the market developments. Basically discuss briefly the market variables that impact our decision making and our performance and have a few comments on those. Then we’ll talk about the portfolio and our hedging positions and then we will open the call up for questions. With that I’ll turn it over to Jerry. Thank you Bob. If we start on page 5, we’ll look at the financial highlights of the first quarter. For the first quarter we had a net loss of $0.11 per share compared to net income of $0.62 in Q4. Our book value at March 31 was 708 per share compared to 754 at December 31st. Total return for the quarter was a negative 1.3% compared to 7.8% in Q4, and we declared dividends of $0.36 during both quarters on page 6. Portfolio highlights Our portfolio continued to grow during Q1. We had an average balance of approximately 11 billion compared to 9.5 billion in Q4. Our leverage ratio increased to 7.9 compared to 7.4 at December 31. Three month CPR during the quarter was 14.7% compared to 15.7% and our liquidity at March 31 was 54.5% compared to 57.7%. On page 7 is our financial statements, which are also presented in our earnings release last night and will also be available in our 10-Q later. And with that I’ll turn it back over to Bob for a discussion of the market development. Thanks Jerry. Alrighty, I will start on slide number nine. As I mentioned, we’re just going to go through the market variables that impact our decision making and our performance. So on page or slide 9 we have the interest rate curves on the top of the page. On the top left is the nominal or cash market curve. On the right is a swap curve. On the bottom it’s just the spread between 3 month treasury bills and 10 year treasuries. Just a few general comments. Obviously in this environment, the war headlines with respect to the war are driving performance of not just interest rates but basically all risk assets. We kind of have competing forces at play. On the one hand you have forces that are inflationary in nature. Others are kind of impact growth or slow growth. The ultimate outcome that’s yet to be seen. We could end up with both. We could end up with stagflation. With respect to the economic data we’ve been seeing, it’s actually been fairly resilient, although I would characterize it as mixed. We’ve had some strong, some weak. But that being said, most of the data that we’ve seen so far is really for the pre war period, so we haven’t seen a lot to gauge the impact of the war. I’d also like to point out that while the war kind of represents a headwind to economic activity and maybe supportive of inflation, there are also tailwinds impacting the economy. The one big beautiful bill was passed last year. The government is running a very significant fiscal deficit. But both of those factors should be kind of supportive of the economy and I think they go a long way in explaining why the data has been so resilient and kind of finally, as we’re Fairly far into Q1 earnings, the earnings have been very strong. So at least so far the impact of the war seems to be modest. With respect to rates, as I mentioned, rates have been very stable. If you look on the left you can see that the curve has flattened. The market is pricing out most Fed cuts that were in the market three months ago or pre war. Now there’s virtually nothing priced in in terms of cuts for the balance of 26 a few basis points, but the curve has been very stable. The impact of inflation is driving Fed cuts out of the market and the impact on growth is keeping longer term rates stable. On the right hand side you can see the swap curve even more stable, same kind of flattening. I would say that the difference between these two is simply just swap spreads. And if you look at where swap spreads are for some comp context, most spreads across the curve are at or slightly above their 12 month averages. They have been moving in Q1. I’ll say a little bit about that in a moment. Moving on to the next kind of variable for us, obviously mortgage spreads and the performance of To Be Announced (TBAs). We do not own typically a lot of To Be Announced (TBAs), we do own spec polls, but they trade at a spread to To Be Announced (TBAs). So obviously the performance of this matters. If you look on the top, you can see the spread of a current coupon mortgage to the 10 year Treasury. This data goes back 16 years. So it gives you a lot of perspective. As you can see on the right hand side, for quite a while mortgages have been tightening. I think it’s noteworthy to note that’s pretty solid performance and also without the participation of one of the largest, typically one of the largest holders of mortgages, which are the large banks, they have not been active in the market and yet this market has performed well. If you look at the extreme right, you can see the tightening. As we all know, early in January President Trump put out a post on Truth Social media indicating that the GSC, Fannie and Freddie would be buying up to $200 billion in mortgages this year. Mortgages gapped tighter. That was in early January. As we moved into February, the performance of the sector was still very solid. At the end of the month, the war hit, we gapped wider, but as you can see, we’ve been tightening since. And so the way I look at that is that the tightening that we’ve seen in place for two years appears to be resuming in terms of the extent of the tightening, our book was down about 6.1%. We’ve gotten back a little under half this week. We’ve given back a little bit, but we’ve basically recouped about half. With respect to the prices of To Be Announced (TBAs) on the bottom left, as we always show, these prices are normalized. So for each coupon we start at 100. I just basically want to show the change over the quarter. Obviously, the announcement by President Trump early in the month caused most mortgages to do very, very well. The exception being the orange line there. Those are higher coupon mortgages, representative of higher coupons, and they would be impacted by speeds. The rationale for the buying of the GSEs is to try to drive spreads tighter, which would presumably impact refinancing, driving …
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