Executive Summary

Q1 2025 GAAP diluted EPS was $0.18, net portfolio income was $21.35M, total return was 2.60%, and book value per share fell $0.15 to $7.94; EPS rose versus Q4 2024 ($0.07) and was below Q3 2024 ($0.24) .
Versus S&P Global consensus, EPS was a slight miss (Primary EPS actual 0.163 vs 0.17 estimate), while “Revenue” (mapped to net portfolio income) was a clear beat ($21.35M vs $11.96M estimate); note definitional differences between GAAP diluted EPS ($0.18) and S&P Primary EPS (0.163) for ORC’s reporting framework *.
Spread metrics improved: average interest rate spread rose to 1.12% (from 0.40% in Q4 2024 and -0.51% in Q1 2024), and average economic interest rate spread increased to 2.58% (from 2.57% in Q4 2024 and 2.47% in Q1 2024) .
Management flagged tariff-driven volatility and very negative swap spreads after quarter-end, reduced the portfolio ~8% and estimated book value down ~8.8% by April 17, 2025; they intend to maintain prudent leverage and ample liquidity as turbulence persists .

What Went Well and What Went Wrong

What Went Well

Net interest income strengthened to $19.7M in Q1 as average RMBS yield rose to 5.41% and repo costs fell to 4.29%, supporting positive carry and improved spread dynamics .
Liquidity increased to ~$446.5M (cash and unpledged RMBS), ~52% of equity, with borrowing capacity across 24 active lenders, providing flexibility through volatility .
Accretive capital actions: management raised equity via ATM at a slight premium to book and later opportunistically repurchased 1.11M shares in April at ~$6.52, citing attractiveness and accretion to shareholders’ equity .
Quote: “We were able to take advantage of the calm conditions… to raise additional capital generally at a slight premium to book value and deploy the proceeds in an attractive investment environment.” — Robert E. Cauley .

What Went Wrong

Macro shocks (new tariffs) drove forced deleveraging, very negative swap spreads, and basis widening; management reduced the portfolio ~8% and estimated book value down ~8.8% by Apr 17 .
Book value fell $0.15 in Q1 (EPS $0.18 offset by dividends $0.36), and post-quarter volatility depressed returns quarter-to-date despite carry gains .
Analysts pressed on dividend coverage versus marginal ROE and capital raising/buybacks; management clarified GAAP vs tax dynamics (closed hedge gains amortized for tax but absent from book), complicating near-term comparability of earnings and distributions .

Financial Results

Core P&L and Capital Metrics

Metric	Q3 2024	Q4 2024	Q1 2025
Net Portfolio Income ($USD)	$21.589M	$9.902M	$21.348M
GAAP Diluted EPS ($)	$0.24	$0.07	$0.18
Dividends per Share ($)	$0.36	$0.36	$0.36
Book Value per Share ($)	$8.40	$8.09	$7.94

Spread and Margin Metrics

Metric	Q3 2024	Q4 2024	Q1 2025
Average Yield on RMBS (%)	5.43%	5.38%	5.41%
Average Cost of Funds (%)	5.62%	4.98%	4.29%
Average Interest Rate Spread (%)	-0.19%	0.40%	1.12%
Average Economic Cost of Funds (%)	2.96%	2.81%	2.83%
Average Economic Interest Rate Spread (%)	2.47%	2.57%	2.58%

Consensus vs Actual (S&P Global)

Metric	Q4 2024	Q1 2025
Primary EPS Consensus Mean ($)	-0.003*	0.17*
Primary EPS Actual ($)	0.0476*	0.1627*
Revenue Consensus Mean ($)	$4.236M*	$11.955M*
Revenue Actual ($)	$9.902M*	$21.348M*

Notes: Values retrieved from S&P Global.
Interpretation: Q1 2025 EPS was a slight miss vs consensus, while “Revenue” (net portfolio income) was a significant beat*.

Segment and Portfolio Allocation

Metric	Q3 2024	Q4 2024	Q1 2025
Capital Allocation: PT RMBS (%)	97.1%	97.2%	97.9%
Capital Allocation: Structured RMBS (%)	2.9%	2.8%	2.1%
ROIC: PT RMBS (%)	5.1%	1.7%	3.8%
ROIC: Structured RMBS (%)	-0.2%	4.0%	2.8%

KPIs

KPI	Q3 2024	Q4 2024	Q1 2025
Adjusted Leverage (period end)	8.0x	7.5x	7.5x
Economic Leverage (period end)	7.6x	7.3x	7.8x
Liquidity ($MM)	$326.7	$353.6	$446.5
CPR (%)	8.8%	10.5%	7.8%
Shares Outstanding	78,082,645	82,622,464	107,786,614

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share (Monthly)	Q2 2025 onward	$0.12 (maintained Q3–Q1)	$0.12 declared Apr 9 for May 29	Maintained
Leverage Posture	Near-term	“Leverage near lower end of typical range” (Q4 view)	Maintain prudent leverage amid turbulence	Maintained (qualitative)
Liquidity Approach	Near-term	N/A	Option to pledge structured RMBS into repo to retain cash on hand	New tactic disclosure

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4)	Current Period (Q1 2025)	Trend
Tariffs/macro volatility	Fed cuts anticipated; bear-steepening risk noted (Q3); sticky inflation and limited further cuts (Q4)	Tariffs introduced; swap spreads very negative; basis widening and forced deleveraging; outlook highly uncertain	Deteriorated risk backdrop
Hedging/Duration	Longer-duration hedges to protect against long-end rise (Q3); TBA hedges shifted to Treasury futures (Q4)	More Treasury futures; front-end hedges via SOFR strips; unwound short-tenor swaps; maintained DV01 flatness	Mix evolving; duration matched with lower notionals
Capital actions	Raised ATM capital; increased portfolio while maintaining leverage (Q3); continued ATM issuance (Q4)	Raised $206M; later repurchased ~1.1M shares at ~$6.44–6.52 post selloff; capital actions accretive	Opportunistic issuance/buybacks
Bank participation	Banks less aggressive; money manager redemptions pressured MBS (Q4)	Some bank activity (Ginnie/structured) but not enough vs forced selling; mortgages became cheap	Mixed; not a strong bid
Servicer dynamics (Rocket/Mr. Cooper)	N/A	Potential faster speeds from servicing consolidation; specified pools pay-ups vs TBAs could shift; monitoring exposure	Emerging risk to convexity
Volatility hedging (options)	N/A	Swaptions expensive now; focus on delta hedging and leverage management; tail-risk trades difficult during stress	Hedging cost elevated

Management Commentary

“Interest rates were generally range bound, and volatility was low for most of the first quarter… These are ideal conditions for a levered investment strategy in Agency RMBS.” — Robert E. Cauley .
“Tariff announcements… brought the favorable market conditions… to an abrupt end… the Company sold assets as needed to maintain leverage… Since March 31, 2025, the portfolio was reduced by ~8% and book value declined by ~8.8% by April 17.” — Robert E. Cauley .
“We raised quite… a lot of capital in the first quarter, $206 million… and we reactivated our buyback program… 1.1 million shares at… $6.44… spotted our book value at roughly $7.36.” — George (Hunter) Haas .
“If you have new capital to deploy today… hedge with swaps… extremely attractive spreads… widest spreads we’ve seen in quite a time.” — Robert E. Cauley .

Q&A Highlights

Duration and hedging: DV01 very flat; unwound limited swaps and added TBA shorts as assets were sold; positioned for a steepening with longer-tenor hedges .
ROE and returns: Spreads vs swaps above ~200 bps at times; high-teens to low-20s ROE achievable at current leverage for new money, albeit volatile .
Dividend coverage vs tax: Distribution closely tied to taxable income; closed hedge gains amortized for tax but not reflected in book; management not committing to full-year taxability in April .
Servicer consolidation impact: Expect faster speeds under Rocket; specified pools and TBAs may both speed up; relative speed/payouts TBD; GSEs adjusting pool limits .
Volatility hedges: Swaptions currently pricey; team prefers delta hedging, leverage adjustments, and selective futures/swaps usage; tail-risk hedges considered when entry costs are compelling .

Estimates Context

Q1 2025 EPS: Primary EPS actual was 0.163 vs 0.17 consensus (miss); GAAP diluted EPS reported was $0.18, reflecting definitional differences. Revenue (net portfolio income) was $21.35M vs $11.96M consensus (beat)*.
Q4 2024 EPS: Primary EPS actual 0.048 vs -0.003 consensus (beat); Revenue actual $9.90M vs $4.24M consensus (beat)*.
Consensus recommendation and target price data not available for these periods*.

Notes: Values retrieved from S&P Global.

Key Takeaways for Investors

Carry dynamics improved materially in Q1 as RMBS yields rose and funding costs declined, expanding interest spreads; this supports earnings power if volatility normalizes .
Post-quarter tariff-driven basis widening and negative swap spreads materially hit book value; management responded by lowering leverage and boosting liquidity, which tempers near-term downside risk .
Capital flexibility remains high: ATM program (new $350M capacity) and active buybacks provide tools to manage through dislocations and opportunistically deploy into wide spreads .
Revenue (net portfolio income) meaningfully exceeded Street expectations in Q1, but EPS was slightly below S&P Primary EPS consensus; consensus models may need to reconcile GAAP vs “Primary” definitions for mREITs*.
Servicer consolidation (Rocket/Mr. Cooper) is a medium-term convexity risk; ORC’s specified-pool strategy and mix shift toward higher coupons can mitigate but warrants monitoring .
Hedge mix (more Treasury futures, selected longer-tenor swaps, front-end SOFR strips) and a flat DV01 profile are designed to reduce rate sensitivity; basis risk remains the key driver to watch .
Trading lens: Near-term catalysts include any easing in swap spreads/volatility and signs of stabilizing basis; strategic buys on dislocations are plausible given management’s liquidity and capital flexibility .

Appendix: Additional Data

Balance Sheet Summary (Q1 2025 vs Q4 2024)

Metric	Q4 2024	Q1 2025
Total Assets ($MM)	$5,721.6	$7,304.3
Repurchase Agreements ($MM)	$5,025.5	$6,418.6
Stockholders’ Equity ($MM)	$668.5	$855.9
RMBS at Fair Value ($MM)	$5,253.3	$6,738.1

Prepayment Speeds

Period	PT RMBS CPR (%)	Structured RMBS CPR (%)	Total CPR (%)
Q3 2024	8.8	6.4	8.8
Q4 2024	10.6	7.0	10.5
Q1 2025	7.8	4.5	7.8

Values retrieved from S&P Global where indicated with an asterisk.

Orchid Island Capital, Inc. (ORC)·Q1 2025 Earnings Summary