Key Highlights

  • Net loss was USD 178.9 million, or USD 0.90 per common share.
  • Net interest income was USD 59.1 million, or USD 0.30 per share.
  • Book value per share ended at USD 6.02, down USD 1.20 in the quarter.
  • Total return was negative 12.47% including a USD 0.30 dividend.

Quarter Results

Orchid Island Capital (NYSE:ORC) announced third-quarter 2026 results on Thursday. The net loss of USD 178.9 million, or USD 0.90 per common share, compares with Net Income of USD 72.1 million a year earlier. Net interest income was USD 59.1 million, or USD 0.30 per share, and total expenses were USD 6.3 million, or USD 0.03 per share. Net realized and unrealized losses on agency mortgage-backed securities and derivatives, including net interest income on Interest Rate swaps, were USD 231.7 million, or USD 1.17 per share.

The company declared and paid third-quarter dividends of USD 0.30 per common share. Book Value per share was USD 6.02 at Sept. 30, a decrease of USD 1.20, and the total return of negative 12.47% combines the Dividend and that decline against beginning book value.

Market Conditions

CEO Robert Cauley described very challenging conditions, with a significant increase in interest rates globally and benchmark U.S. Treasury yields at levels last seen in the early 2000s. He said the agency mortgage-backed securities market was hit particularly hard, with widespread deleveraging, forced selling and a jump in implied interest rate volatility.

Going into the sell-off, hedge coverage exceeded 90% of funding levels and the portfolio leaned toward higher coupons, which produced better, or less negative, absolute returns. As book value fell and Leverage rose, the company increased the notional balances of its hedges to near 100% coverage and extended their duration, rather than relying only on asset sales.

Liquidity and Capital

Cash and cash equivalents and unpledged securities totaled USD 515.7 million, about 44% of stockholders' equity. The company reported borrowing capacity above its USD 10.4 billion of outstanding repurchase agreements, spread across 33 active lenders.

Orchid made asset sales of under USD 400 million and retained monthly paydowns, which together with the other actions left the portfolio 6.7% smaller. It repurchased about 4.95 million shares in the third quarter and about 1.67 million shares so far in October. A conference call to discuss results was scheduled for Friday, Oct. 23.

Outlook Commentary

Cauley said the aim was to maximize the potential for book value recovery if spreads tighten or rates decline, and to sustain the dividend. He said that if funding costs rise with Federal Reserve rate hikes, the higher-coupon, low-premium specified pools offer higher income potential in a slow prepayment environment, particularly as most of the portfolio is priced below par, which allows discount accretion. He said the company is comfortable with its positioning if the market has fully stabilized. The cost of the funding hedges rose modestly with the larger notional balance and longer duration, while asset yields are higher across the portfolio, offset in part by the smaller portfolio.

Items to Follow

Net interest income less total expenses was USD 52.8 million before the USD 231.7 million of mark-to-market and swap-related losses. Net interest income of USD 0.30 per share equaled the dividend of USD 0.30, while mark-to-market losses of USD 1.17 per share drove the loss. Reference points include book value per share, hedge cost as notional and duration rise, leverage, repurchase activity, prepayment speeds, Treasury yields and agency Mortgage spreads.