Core Viewpoint - Orchid Island (ORC) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates for the company [1][2]. Earnings Estimates - Analysts' optimism regarding Orchid Island's earnings prospects is leading to higher estimates, which is expected to positively impact the stock price [2]. - The Zacks Rank system indicates a strong correlation between earnings estimate revisions and stock price movements, supporting the investment thesis for Orchid Island [2]. Zacks Rank and Performance - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has a proven track record, with Zacks 1 Ranked stocks averaging a +25% annual return since 2008 [3]. - Orchid Island has received a Zacks Rank 1 (Strong Buy) due to strong agreement among analysts in revising earnings estimates upward, resulting in a significant improvement in consensus estimates for the upcoming quarter and full year [3][9]. Current Quarter and Year Estimates - For the current quarter, Orchid Island is expected to earn $0.15 per share, reflecting a +266.67% change from the previous year [6]. - The Zacks Consensus Estimate for the current quarter has increased by 275% over the last 30 days, with no negative revisions [6]. - For the full year, the expected earnings are $0.53 per share, representing a +394.44% change from the prior year, with a 61.54% increase in consensus estimates over the past month [7][8]. Stock Performance - Orchid Island shares have increased by 11.9% over the past four weeks, indicating investor confidence in the company's earnings growth prospects [10].

Financial Data and Key Metrics Changes - For Q1 2025, the company earned $0.18 per share compared to $0.07 in Q4 2024 [8] - Book value at March 31, 2025, was $7.94 per share, down from $8.09 at December 31, 2024 [8] - Total return for the quarter was 2.6% unannualized, compared to 0.6% for Q4 2024 [8] Business Line Data and Key Metrics Changes - The average portfolio size for Q1 was just under $6 billion, up from $5.3 billion in Q4 2024 [9] - The leverage ratio increased to 7.8% at March 31, 2025, from 7.3% at December 31, 2024 [9] - Prepayment speeds were 7.8% in Q1, down from 10.5% in Q4 2024 [9] Market Data and Key Metrics Changes - The market experienced significant volatility due to tariffs and their expected impact on the economy and inflation [11][72] - Swap spreads moved meaningfully negative late in the quarter and into April, affecting mortgage performance [18][22] - The performance of agency mortgages was strong, being the second-best sector in fixed income markets [22] Company Strategy and Development Direction - The company raised $206 million in capital during Q1 2025, selling 25 million shares of stock [42] - The strategy involved deploying proceeds into higher coupon, shorter duration assets while hedging predominantly with longer duration hedges [31] - The company is cautious about future capital raising, considering the current market volatility and the need for liquidity [108][122] Management's Comments on Operating Environment and Future Outlook - The management expressed uncertainty regarding future economic conditions, citing potential slower growth and upward pressure on inflation due to tariffs [71][75] - The company is positioned with a skew towards higher coupon, shorter duration assets, which should benefit from a steeper yield curve [76] - Management remains vigilant and ready to reposition as market conditions evolve [77] Other Important Information - The company declared and paid dividends of $0.36 per share for each quarter [8] - The liquidity position at March 31, 2025, was 52.2%, slightly down from 52.9% at December 31, 2024 [9] Q&A Session Summary Question: What is the duration gap at the end of the quarter and to-date? - The company does not provide duration in numerical terms but uses DV01, which was reported as $13, indicating a very narrow duration gap [84][85] Question: What is the current book value? - As of last Thursday, the estimated book value was $7.24, down 8.8%, but as of last night, it was estimated at $7.28, reflecting a decline of 8.3% quarter-to-date [94][95] Question: Where do you see gross ROE sitting today? - The gross ROE is very high, potentially in the range of 20%, with spreads on 7-year swaps versus current coupon above 200 basis points [103][104] Question: How are you looking at dividend issuance and buybacks? - The company is cautious about buybacks given the current stock price and may consider raising capital for liquidity purposes [108][122] Question: Will the 2025 dividend be 100% taxable income? - It is too early to confirm, but year-to-date, the taxable income has been in line with distributions [127][129]

Financial Performance - Net income for Q1 2025 was $17.1 million, or $0.18 per share, compared to $19.8 million, or $0.38 per share in Q1 2024, reflecting a decrease of 13.4% in net income [133]. - Interest income increased to $81.1 million in Q1 2025 from $48.9 million in Q1 2024, representing a growth of 65.5% [133]. - Net interest income improved to $19.7 million in Q1 2025 from a net interest expense of $2.5 million in Q1 2024, a positive change of $22.2 million [133]. - Gains on RMBS and derivative contracts decreased significantly to $1.6 million in Q1 2025 from $26.0 million in Q1 2024, a decline of 93.7% [133]. - Total gains on RMBS and U.S. Treasury securities amounted to $76.3 million for the three months ended March 31, 2025, compared to a loss of $61.9 million in the same period of 2024, marking a change of $138.2 million [169]. - The company's total operating expenses increased to approximately $4.2 million for the three months ended March 31, 2025, from approximately $3.7 million in the same period of 2024, reflecting a change of $488,000 [178]. Share Issuance and Repurchase - The company issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement, generating net proceeds of approximately $225.0 million [124]. - As of April 25, 2025, the remaining authorization under the stock repurchase program was 2,719,137 shares, representing approximately 10% of the outstanding shares [130]. - The company has entered into multiple equity distribution agreements, with the latest allowing for the sale of up to $350 million in shares [126]. - Total shares repurchased from inception of the stock repurchase program through March 31, 2025, amounted to 5,144,602 shares at an aggregate cost of approximately $77.5 million [130]. - Under the June 2024 Equity Distribution Agreement, the company issued 30,513,253 shares for net proceeds of approximately $245.8 million [212]. - As of March 31, 2025, the company had issued 14,470,882 shares under the February 2025 Equity Distribution Agreement for net proceeds of approximately $121.7 million [213]. Investment Strategy and Portfolio - The company operates to qualify as a REIT, generally avoiding U.S. federal income tax by distributing all REIT taxable income to stockholders [122]. - The company’s investment strategy focuses on Agency RMBS, with a portfolio that includes both traditional pass-through and structured Agency RMBS [120]. - The average RMBS held as of March 31, 2025, was $5,995.7 million, with an interest income of $81.1 million and a realized yield of 5.41% [162]. - As of March 31, 2025, the company's RMBS portfolio consisted of $6.7 billion of Agency RMBS at fair value, with a weighted average coupon of 5.30% [184]. - The company reported a total mortgage asset value of $6.738 billion as of March 31, 2025, with fixed-rate RMBS comprising 99.8% of the portfolio [189]. - The weighted average pass-through current price for the portfolio was $99.32 as of March 31, 2025, compared to $96.44 at December 31, 2024 [190]. Economic and Interest Rate Metrics - Economic interest expense for the three months ended March 31, 2025, was $40.5 million, compared to $23.8 million for the same period in 2024, resulting in economic net interest income of $40.6 million and $25.1 million, respectively [156]. - The economic net interest spread for the three months ended March 31, 2025, was 2.58%, compared to 2.47% for the same period in 2024 [159]. - The average cost of funds decreased to 4.29% for the three months ended March 31, 2025, down from 5.54% in the comparable period in 2024, reflecting a 125 basis points reduction [163]. - Economic interest expense rose to $40.5 million for the three months ended March 31, 2025, compared to $23.8 million in 2024, with an increase in the average economic cost of funds to 2.83% from 2.56% [164]. - Changes in interest rates can significantly impact the company's net interest income, affecting the spread between interest-earning assets and interest-bearing liabilities [245]. - As of March 31, 2025, a 200 basis point increase in interest rates could lead to a decline of 2.23% in portfolio value and 17.55% in market value [255]. Risk Management - The company employs various financial instruments, including interest rate swaps and options, to hedge against interest rate fluctuations, which are complex and may lead to volatile returns [246]. - The company maintains a hedged PT RMBS portfolio with an effective duration of less than 2.0, aiming to acquire low duration assets that provide protection from mortgage prepayments [248]. - Prepayment risk is significant, as faster-than-expected principal returns can affect net interest income and the average yield on assets [258]. - The company faces spread risk, where widening market spreads could lead to a decline in net book value if the value of Agency RMBS falls more than the gains from hedging instruments [260]. - Counterparty credit risk is present, as potential losses could arise if counterparties to repurchase agreements and derivative contracts fail to meet their obligations [264]. - The company uses hedging instruments to manage funding costs, but if prepayment rates decrease in a rising interest rate environment, it could negatively impact operations [263]. Liquidity and Capital Resources - Management believes that the company currently has sufficient short-term and long-term liquidity and capital resources for investment acquisitions and debt repayments [199]. - As of March 31, 2025, the company had cash and cash equivalents of $396.4 million and generated cash flows of $200.9 million from principal and interest payments on its RMBS portfolio [208]. - The average outstanding repurchase agreements during the three months ended March 31, 2025, amounted to $5.7 billion [208]. - The weighted average haircut on pledged collateral was approximately 4.3% as of March 31, 2025 [203]. - The company has established borrowing facilities in the repurchase agreement market with 24 counterparties, providing sufficient liquidity for its operations [193]. - As of March 31, 2025, the company had unrestricted cash and cash equivalents of $396.4 million and unpledged securities of approximately $50.1 million available for liquidity needs [261]. Market Conditions and Future Outlook - The Agency RMBS index generated a return of 3.0% for the first quarter of 2025, outperforming the investment grade corporate index and high yield debt [222]. - Conventional 30-year mortgages within Agency RMBS generated a total return of 2.7% for the first quarter of 2025 [223]. - The spread of the 30-year fixed rate current coupon to the 10-year T-Note traded between 120 and 130 basis points during the first quarter of 2025 [221]. - Following the Trump administration's tariff announcements, the spread of the current coupon expanded to over 140 basis points [221]. - The Fed reduced its balance sheet for Agency RMBS by approximately $551 billion from the peak to $2.2 trillion, representing a 40% reduction from the pandemic quantitative easing levels [224]. - The FHFA announced a final rule effective April 1, 2024, reducing the risk weight for guarantees on commingled securities to 5% and the credit conversion factor to 50% [225].

Financial Performance - Net income per share for Q1 2025 was $018, compared to $007 in Q4 2024[10] - Book value per share decreased slightly from $809 in Q4 2024 to $794 in Q1 2025[10] - Dividends declared per common share remained constant at $036[16] - Net portfolio income decreased from $23514 thousand in 2024 to $21348 thousand in 2025[16] Portfolio Characteristics - Average MBS balances increased from $5348 million in Q4 2024 to $5996 million in Q1 2025[14] - The weighted average coupon of the fixed rate MBS portfolio increased from 503% at December 31, 2024, to 532% at March 31, 2025[43, 47] - Economic leverage ratio increased from 73 in Q4 2024 to 78 in Q1 2025[14] - Liquidity decreased from 105% in Q4 2024 to 78% in Q1 2025[14] Hedging and Funding - The weighted average repo rate was 446% as of March 31, 2025[51] - Total notional balance of hedge positions was $(47328) million[56] - Interest rate swaps had a notional balance of $(39093) million with a weighted average pay fix rate of 329%[56]

Financial Data and Key Metrics Changes - For Q1, the company earned $0.18 per share compared to $0.07 in Q4 [5] - Book value at March 31 was $7.94 per share compared to $8.09 at December 31 [5] - Total return for the quarter was 2.6% unannualized compared to 0.6% for Q4 [5] - Liquidity at March 31 was 52.2% compared to 52.9% at December 31 [7] Business Line Data and Key Metrics Changes - The average portfolio was just under $6 billion compared to $5.3 billion in Q4 [6] - The leverage ratio at March 31 was 7.8 compared to 7.3 at December 31 [6] - Prepayment speeds were 7.8% in Q1 compared to 10.5% for Q4 [6] Market Data and Key Metrics Changes - The market moved to price in three or more Fed cuts by the end of the year [11] - Swap spreads moved meaningfully negative late in the quarter and into April [14] - The spread of the current coupon mortgage to the ten-year has widened significantly [16] Company Strategy and Development Direction - The company raised capital during the quarter and deployed it into higher coupon, shorter duration assets [24] - The strategy includes using longer duration hedges to mitigate exposure to declining swap spreads [24] - The company is focused on maintaining liquidity and is prepared to raise capital if necessary [76] Management's Comments on Operating Environment and Future Outlook - The management expressed uncertainty due to market volatility driven by tariffs and inflation [55] - The expectation is for slower growth and potential Fed eases, which could lead to a steeper yield curve [58] - The company is positioned with a skew towards higher coupon, shorter duration assets, which should work well in the current environment [59] Other Important Information - The company declared and paid dividends of $0.36 per share for each quarter [5] - The management acknowledged a mistake in the initial earnings release regarding the breakdown of earnings per share [9] Q&A Session Summary Question: What is the duration gap at the end of the quarter and to date? - The duration gap is very narrow, with a DV01 basis of $13, remaining about the same as of now [62][63] Question: Where do you see gross ROE sitting today? - The gross ROE is estimated to be around 20%, with high volatility in swaps [73] Question: How are you looking at dividend issuance and buybacks? - The company is cautious about buybacks due to stock trading close to book value and may consider raising capital for liquidity [76][78] Question: Will the 2025 dividend be 100% taxable income? - It is uncertain at this point, but the taxable income has been right on top of the distribution year to date [91][93] Question: Thoughts on the Rocket Mortgage and Nationstar deal? - The deal may increase prepayment speeds and impact the convexity of the mortgage universe negatively [99][100]

Financial Data and Key Metrics Changes - For Q1, the company earned $0.18 per share compared to $0.07 in Q4, with a book value of $7.94 per share down from $8.09 at the end of Q4 [5][6] - Total return for the quarter was 2.6% unannualized, an increase from 0.6% in Q4 [5] - The average portfolio size was just under $6 billion, up from $5.3 billion in Q4, with a leverage ratio of 7.8 compared to 7.3 at the end of Q4 [6] Business Line Data and Key Metrics Changes - The average portfolio size increased, indicating a more substantial investment in mortgage-backed securities [6] - Prepayment speeds decreased to 7.8% in Q1 from 10.5% in Q4, reflecting changes in market conditions [6][52] Market Data and Key Metrics Changes - The market experienced significant volatility due to tariffs and their expected impact on the economy and inflation, leading to pricing in multiple Fed cuts by year-end [11][60] - Swap spreads moved meaningfully negative late in the quarter, impacting mortgage performance [14][15] Company Strategy and Development Direction - The company raised capital during the quarter, deploying it into higher coupon, shorter duration assets, and hedging with longer duration instruments [24][32] - The strategy focuses on maintaining a balance between risk and return, particularly in a volatile market environment [61] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding future economic conditions, highlighting potential inflationary pressures and slower growth due to tariffs [56][60] - The company is positioned to benefit from a steeper yield curve, which is anticipated to occur as a result of the current economic landscape [61] Other Important Information - The company declared and paid dividends of $0.36 per share for the quarter, maintaining a consistent payout [5] - Liquidity at the end of Q1 was 52.2%, slightly down from 52.9% at the end of Q4 [7] Q&A Session Summary Question: What is the duration gap at the end of the quarter and to date? - Management indicated that the duration gap is narrow, with a DV01 basis of $13, remaining consistent [64][65] Question: What is the current book value? - The estimated book value was $7.28, reflecting an 8.3% decline quarter to date [70][71] Question: Where do you see gross ROE sitting today? - Management suggested that ROE is very high, potentially around 20%, due to volatile market conditions [79] Question: How are you looking at dividend issuance and buybacks? - Management noted that buybacks were reactivated due to stock price declines, and future capital raising may be considered for liquidity purposes [81][82] Question: How does the Rocket Mortgage and Nationstar merger affect prepay speeds? - Management indicated that the merger could lead to faster prepayment speeds, impacting the convexity of the mortgage universe [104]

Core Insights - Three stocks with strong income characteristics and buy rankings are highlighted for investors to consider on April 25th [1] Company Summaries - **Orchid Island Capital (ORC)**: A specialty finance company investing in residential mortgage-backed securities with government guarantees, has seen a 10.8% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days. The company has a dividend yield of 20.8%, significantly higher than the industry average of 12.8% [1][2] - **Vinci (VCISY)**: Engaged in the construction of buildings and civil structures, this company has experienced a nearly 5.7% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days. Vinci offers a dividend yield of 4%, compared to an industry average of 0.0% [2] - **Usinas Siderurgicas de Minas Gerais (USNZY)**: The largest flat steel complex in Latin America and among the top twenty steel producers globally, this company has seen a substantial increase of nearly 57.1% in the Zacks Consensus Estimate for current year earnings over the last 60 days. It has a dividend yield of 3.8%, exceeding the industry average of 1.7% [3]

Core Viewpoint - Orchid Island Capital, Inc. reported its first quarter 2025 results, highlighting a relatively stable economic environment until March, followed by market volatility due to tariff announcements and economic data suggesting stagflation. The company maintained prudent leverage and liquidity amid these conditions [4][5]. Financial Highlights - The company reported net income of $17.1 million for Q1 2025, down from $19.8 million in Q1 2024. Interest income increased by approximately $9.1 million from Q4 2024, with a yield on average Agency RMBS rising from 5.38% to 5.41% [6][7]. - Net interest income was $19.7 million, with total expenses of $4.2 million. The company declared dividends of $0.36 per common share, resulting in a total return of 2.60% for the quarter [7][8]. - As of March 31, 2025, the book value per common share was $7.94, with a decline of approximately 8.8% in book value since March 31, 2025 [7][26]. Portfolio and Prepayments - The company received $133.0 million in scheduled and unscheduled principal repayments, resulting in a 3-month constant prepayment rate (CPR) of approximately 7.8%, down from 10.6% in Q4 2024 [9]. - The portfolio consisted of $6.738 billion in total mortgage assets, with 99.8% in fixed-rate RMBS and 0.2% in interest-only securities as of March 31, 2025 [10][11]. Financing and Liquidity - As of March 31, 2025, the company had outstanding repurchase obligations of approximately $6.4 billion, with a net weighted average borrowing rate of 4.46%. The adjusted leverage ratio was 7.5 to 1, and liquidity stood at approximately $446.5 million [13][16]. - The company plans to enhance liquidity by potentially pledging more structured RMBS while retaining cash to avoid asset sales in distressed markets [13]. Capital Allocation and Returns - Approximately 97.9% of the company's investable capital was allocated to the pass-through RMBS portfolio as of March 31, 2025, with a return on invested capital of approximately 3.8% for the quarter [27][32]. - The structured RMBS portfolio generated a return on invested capital of 2.8%, contributing to a combined return of approximately 3.8% [32][33]. Stock Offerings and Repurchase Program - The company has engaged in multiple equity distribution agreements, raising significant capital through stock offerings, including approximately $123.7 million in gross proceeds from the February 2025 agreement [36][38]. - The stock repurchase program has authorized the repurchase of up to 6,183,601 shares, with a total of 5,144,602 shares repurchased at an aggregate cost of approximately $77.5 million since inception [39][40].

Group 1 - Orchid Island (ORC) has experienced a significant downtrend, with a stock decline of 24.7% over the past four weeks due to excessive selling pressure [1] - The stock is currently in oversold territory, indicated by an RSI reading of 26.89, suggesting that the heavy selling may be exhausting itself and a rebound could occur [5] - Wall Street analysts have raised earnings estimates for ORC by 11% over the last 30 days, indicating a potential for price appreciation in the near term [7] Group 2 - ORC holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a turnaround [8]

Group 1 - The individual investor tends toward value investing while also exploring new strategies [1] - The investor has experience teaching financial management, focusing on financial statement and project financial analysis [1] - The investor has been recognized as a contributor in various financial categories on Seeking Alpha [1] Group 2 - There is an open buy/write order to go long on ORC [3]