Executive Summary

Q3 delivered a sharp rebound: net income $72.1M ($0.53/share), book value per share rose to $7.33, and total return was 6.7% vs -4.66% in Q2, driven by higher net interest income and $50.6M gains on RMBS/derivatives .
EPS and “Revenue” materially beat S&P Global consensus: EPS $0.53 vs $0.14*; revenue $77.5M vs $25.3M*; beats were powered by wider asset yields, disciplined hedging, and favorable specified pool prepayment behavior (see Estimates Context) . Values marked with * are from S&P Global.
Liquidity strengthened to ~$620M (~57% of equity) and adjusted leverage held at ~7.4x; management noted “room to raise leverage further should returns…become even more attractive” .
Macro catalysts called out: declining rate volatility, swap spreads at wides, and a potential end to QT that could ease repo costs; management sees the portfolio positioned to “deliver attractive return potential” in multiple rate paths .

What Went Well and What Went Wrong

What Went Well

Book value and returns rebounded: BVPS increased $0.12 QoQ to $7.33; total return was 6.7% on $0.36 dividends and BVPS accretion, reversing Q2’s drawdown .
Net interest income and asset gains: Net interest income rose to $26.9M from $23.2M in Q2 and $19.7M in Q1; RMBS/derivative gains were $50.6M vs Q2 losses of $51.7M .
Specified pool selection blunted prepay wave: Management cited strong call protection—e.g., in September, sixes paid 9.7 CPR vs 27.8 CPR generics; 6.5s at 13.9 CPR vs 42.8 CPR—supporting carry and income stability . “Newly acquired pools…had some form of prepayment protection” (70% low FICO/high mission, 22% FL/NY, 8% loan balance) .

What Went Wrong

Funding frictions and rising economic cost of funds: Economic cost of funds increased to 3.25% (from 2.95% in Q2), with repo spreads drifting from SOFR +16 bps to ~+18 bps in recent weeks amid reserve decline and heavy bill issuance .
Elevated prepayments in high coupons and TBA deliverables: While ORC’s pools outperformed, industry TBAs saw faster speeds as rates fell, which pressured dollar roll economics (management doesn’t expect specialness to return soon) .
Continued equity issuance dilutes per-share metrics: ORC issued 56.0M shares YTD under its February 2025 ATM through 9/30 for ~$420.2M gross, later upsized to $500M; subsequent to quarter-end issued another ~$25.0M, expanding the base but adding dilution risk if spreads compress .

Financial Results

GAAP P&L and Shareholder Metrics

Metric	Q1 2025	Q2 2025	Q3 2025
Net Interest Income ($M)	$19.7	$23.2	$26.9
Net Realized & Unrealized Gain (Loss) ($M)	$1.6	$(51.7)	$50.6
Total Expenses ($M)	$4.2	$5.0	$5.4
Net Income ($M)	$17.1	$(33.6)	$72.1
EPS (Basic & Diluted)	$0.18	$(0.29)	$0.53
Dividends/Share	$0.36	$0.36	$0.36
Book Value/Share	$7.94	$7.21	$7.33
Total Return (unannualized)	2.60%	(4.66)%	6.7%

Operating KPIs and Spreads

KPI	Q1 2025	Q2 2025	Q3 2025
Avg RMBS Yield %	5.41%	5.38%	5.65%
Avg Cost of Funds %	4.29%	4.23%	4.45%
Avg Economic Cost of Funds %	2.83%	2.95%	3.25%
Avg Interest Rate Spread %	1.12%	1.15%	1.20%
Avg Economic Interest Rate Spread %	2.58%	2.43%	2.40%
Adjusted Leverage (period-end)	7.5:1	7.3:1	7.4:1
Liquidity ($M)	$446.5	$492.5	$620.0
3-mo CPR (Total)	7.8%	10.1%	10.1%

Portfolio & Balance Sheet Snapshot

Metric	Q1 2025	Q2 2025	Q3 2025
Mortgage Assets at FV ($B)	$6.738	$6.993	$8.356
PT RMBS Allocation (Investable Capital)	97.9%	98.1%	98.5%
Effective Duration (Portfolio)	3.560	3.271	2.991
Repo Outstanding ($B)	$6.419	$6.656	$8.007

Results vs Consensus (S&P Global)

Metric	Q3 2025 Actual	Q3 2025 Consensus	Surprise
EPS (Primary)	$0.53	$0.14*	Beat
Revenue ($M)	$77.5	$25.3*	Beat
EPS – # of Estimates	—	1*	—
Revenue – # of Estimates	—	2*	—

Values marked with * are from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common Dividend (Monthly)	Oct–Nov 2025	$0.12/share	$0.12/share (Oct declared; next announcement Nov 12)	Maintained
Leverage Posture	Forward	Maintain mid-7s; opportunistic	~7.4x at 9/30; “room to raise leverage further” if returns improve (qualitative)	Constructively flexible
Liquidity	Forward	Strong	~$620M at 9/30; ability to pledge more structured RMBS to retain cash (qualitative)	Maintained/Enhanced

No formal revenue/expense guidance provided.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Funding/QT & Repo Markets	Q1: Stable repo; hedge mix shifting longer; watch swap spreads . Q2: Funding generally ample; period-end choppiness; spreads stable .	Expectation Fed ends QT “as early as next week,” easing repo costs; term repo spreads drifted to ~SOFR+18 bps; 30% repo unhedged to benefit from rate cuts .	Improving medium term; near-term friction
Swap Spreads & Hedging	Q1–Q2: Swap spreads deeply negative; swaps favored as hedges .	Swap spreads at 1–6m wides; 73% DV01 in swaps; beneficial to hedges if widening persists .	Supportive
Prepayments/Call Protection	Q1: Muted speeds; watching Rocket-Mr. Cooper servicing . Q2: Seasonal uptick; expect muted going forward .	Spec pools materially slower than generics in September (e.g., 6s 9.7 CPR vs 27.8 CPR); portfolio largely call-protected .	Positive relative to TBA
Dollar Roll/Specialness	Q1: Roll support varied; technicals matter . Q2: Belly coupons outperformed; rolls weaker on prepay fears .	Management does not expect meaningful specialness to return soon; not core to strategy .	Neutral/Headwind
Macro (Tariffs, Vol, Term Premium)	Q1: Tariffs triggered April volatility; term premium rising; banks absent . Q2: Curve steepening; volatility fell into Q3 .	Lower rate vol; supportive spreads; potential end of QT; macro path uncertain; sees attractive RMBS carry either way .	Supportive carry backdrop
Capital Actions	Q1–Q2: Raised equity (ATM); occasional buyback in stress .	Expanded ATM to $500M; $420.2M gross issued thru 9/30; $25.0M post-Q3; levered growth while managing dilution .	Growth with dilution risk

Management Commentary

“Orchid generated a total return for the quarter of 6.7%… invested… into Agency RMBS offering both net interest income and total return potential above historical norms… without meaningfully changing its leverage – approximately 7.4 to 1 inclusive of its TBA positions.” — Robert E. Cauley, CEO .
“Our portfolio remains 100% agency RMBS with a heavy tilt towards call-protected specified pools… Newly acquired pools… all had some form of prepayment protection… We improved the carry and prepayment stability… while maintaining a conservative leverage posture.” — Hunter Haas, CIO/CFO .
“Swap spreads… on a one, three, and six-month look-back [are] at their wides… this movement has been beneficial to us… 73.1% of our hedges are in swaps by DV01.” — Robert E. Cauley .
“We expect the Fed to end QT… and begin buying Treasury bills… a positive tailwind for our repo funding costs… paired with further rate cuts… would help with the continued expansion of our net interest margin.” — Hunter Haas .

Q&A Highlights

Leverage appetite: Could modestly increase leverage if rate cuts are locked in; otherwise protect against extension risk in a sell-off; liquidity positioned to adapt .
Dollar roll specialness: Unlikely to meaningfully return; not core to ORC’s strategy .
Funding: Term repo spreads drifted from ~+16 to ~+18 bps; end of QT expected to aid funding; ORC uses term to insulate from overnight volatility .
Call protection coverage: “Almost 100% of the portfolio has some form of call protection,” helping manage premium risk in rallies .
Swap spread sensitivity: Hedge DV01 around $2M; further widening would add book value, though incremental scope may be limited without QE .

Estimates Context

Q3 EPS versus S&P Global consensus: $0.53 actual vs $0.14 estimate* — a significant beat, reflecting stronger net interest income, favorable asset performance, and disciplined hedging . Values marked with * are from S&P Global.
Q3 “Revenue” versus S&P Global consensus: $77.5M actual (company statement line “Net portfolio income”) vs $25.3M estimate* — a substantial beat, consistent with higher realized/unrealized gains and carry . Values marked with * are from S&P Global.
Forward quarters (consensus): Q4 2025E EPS $0.18*, Q1 2026E $0.21*, Q2 2026E $0.24*; revenue estimates trend higher into 2026* (low estimate count; subject to change). Values marked with * are from S&P Global.

Key Takeaways for Investors

ORC produced a clean QoQ recovery with positive BV accretion, stronger NII, and sizeable asset/derivative gains; the portfolio is geared to harvest carry with robust call protection if refi waves reappear .
Funding relief is a near-term catalyst: a likely end to QT and ongoing rate cuts would lower repo costs and support NIM; management has 30% repo unhedged to benefit from cuts, with flexibility to term out as needed .
Swap spread dynamics currently favor hedging economics; ORC’s hedge book (73% swaps by DV01) is positioned to benefit from persistent wides, while overall duration gap remains minimal .
Equity issuance expands earning assets but brings dilution risk; execution discipline (buybacks in stress, accretive growth when feasible) will be key to sustaining BV per share gains across cycles .
Watch CPRs in high coupons and TBA deliverables; ORC’s specified pools have outpaced generics (slower speeds), underpinning carry—sustainability hinges on rate path and servicer behavior .
Macro narrative supports carry but remains two-tailed (slowing labor market vs fiscal impulse); ORC’s positioning is designed to perform in either scenario, with leverage optionality .
Dividend stability (monthly $0.12) continues, backed by taxable income dynamics; funding and spread trajectories will inform future dividend coverage and potential adjustments .

References: ORC Q3 2025 8‑K and press release ; Q3 2025 earnings press release –; Q3 2025 earnings call transcript –; Q2 2025 press release –; Q2 2025 call –; Q1 2025 press release –; Q1 2025 call –.

Orchid Island Capital, Inc. (ORC)·Q3 2025 Earnings Summary