Orchid Island Capital Boosts Returns with Expanding RMBS Portfolio and Solid Liquidity in Q3 2025

Q3 Highlights: Higher Net Income, Robust Book Value, and Steady Dividends

Orchid Island Capital (NYSE: ORC) posted a notable improvement in operating results for the third quarter of 2025, as the company benefited from stable interest rates and a carefully managed leverage strategy. Net income reached $72.1 million ($0.53 per share), up sharply from $17.3 million in the prior year quarter, underpinned by higher yields on its growing agency RMBS portfolio. Orchid also declared and paid a $0.36 dividend per share, supported by a strengthened book value per share of $7.33 as of September 30, 2025.

Expanded RMBS Holdings and Return Metrics Reflect Strategic Capital Allocation

Over the quarter, Orchid expanded its mortgage assets to $8.36 billion, up from $5.25 billion at the end of 2024, primarily via new acquisitions of fixed-rate agency RMBS. This strategic capital deployment, mostly into traditional pass-through RMBS, resulted in a strong 9.9% return on invested capital for that segment and an overall 9.8% portfolio return for the quarter. Nearly 98.5% of investable capital was concentrated in pass-through RMBS, illustrating a clear focus on core strengths.

Funding and Leverage: Ample Liquidity and Prudent Risk Management

Orchid maintained a robust liquidity buffer of $620 million in cash and unpledged securities—about 57% of total equity—at quarter’s end. The company’s repurchase agreements stood at $8.0 billion, collateralized mainly by RMBS assets, with a net weighted average borrowing rate of 4.33%. The adjusted leverage ratio was 7.4:1, consistent with the firm’s strategic intent to optimize risk-adjusted returns without significantly raising leverage. Borrowing relationships were diversified across 26 counterparties.

Prepayment Speeds Remain Manageable

The company reported a constant prepayment rate (CPR) of approximately 10.1% for the quarter, slightly up compared to several earlier quarters but within expected levels. Effective security selection and portfolio diversification helped manage risks tied to these prepayments even as market interest rates eased.

Effective Hedging Supports Risk Management in Volatile Markets

Orchid continued to hedge a portion of its interest rate risk using a combination of Treasury and SOFR futures, interest rate swaps, and TBA (to-be-announced) security positions. At quarter end, total notional value for swap positions was $3.94 billion, helping mitigate rate risk and supporting earnings stability despite changing market backdrops.

Shareholder Returns: Steady Dividends and Continued Buyback Authorization

Orchid maintained its regular monthly dividend policy, having paid out $1.20 per share so far in 2025. Since its 2013 IPO, cumulative dividends paid have reached $69.09 per share, with over $852 million returned to shareholders. The board also kept the stock repurchase program in place, though no shares were repurchased in Q3, and the remaining authorization as of late October was just over 2.7 million shares.

Looking Ahead: Positioned for Market Uncertainty with Strong Foundation

CEO Robert Cauley emphasized Orchid’s flexible capital position and resilience in an environment shaped by evolving interest rate policy, ongoing U.S. economic crosscurrents, and the company’s proactive risk management. With potential benefits from further economic growth initiatives, capital market activity, and continued investment in agency RMBS, Orchid aims to deliver attractive returns in a range of market scenarios.

Takeaway: Solid Q3 Underpins Confidence in Strategy

For investors tracking the mREIT space, Orchid’s Q3 results showcase the benefits of disciplined portfolio expansion, rigorous risk controls, and ongoing liquidity management. The focus on agency RMBS, steady capital returns, and preparedness for economic shifts may be worth watching as market volatility continues into 2026.

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