Orchid Island Capital(ORC) - 2025 Q2 - Quarterly Report

PART I Financial Statements This section presents Orchid Island Capital, Inc.'s unaudited condensed financial statements as of June 30, 2025, including balance sheets, income statements, equity statements, cash flows, and explanatory notes Condensed Balance Sheets Total assets grew to $7.61 billion by June 30, 2025, driven by mortgage-backed securities and funded by repurchase agreements and equity, with stockholders' equity reaching $912.0 million Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,610,631 | $5,721,627 | | Mortgage-backed securities, at fair value | $6,993,359 | $5,253,310 | | Cash and cash equivalents | $440,756 | $309,330 | | Total Liabilities | $6,698,671 | $5,053,127 | | Repurchase agreements | $6,655,879 | $5,025,543 | | Total Stockholders' Equity | $911,960 | $668,500 | Condensed Statements of Comprehensive Income (Loss) The company reported a $16.5 million net loss for the six months ended June 30, 2025, primarily due to derivative losses, contrasting with a $14.8 million net income in the prior year Statement of Comprehensive Income (Loss) Summary (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income (expense) | $42,867 | $(3,187) | $23,154 | $(697) | | (Losses) gains on derivative instruments | $(127,945) | $113,967 | $(53,286) | $26,068 | | Net (loss) income | $(16,456) | $14,797 | $(33,578) | $(4,979) | | Basic and diluted net (loss) income per share | $(0.16) | $0.27 | $(0.29) | $(0.09) | Condensed Statements of Stockholders' Equity Stockholders' equity increased to $912.0 million by June 30, 2025, driven by $344.8 million in common stock issuances, offsetting a $16.5 million net loss and $78.4 million in dividends - For the six months ended June 30, 2025, the company issued common stock generating net proceeds of $344.8 million ($205.4 million in Q1 and $139.4 million in Q2)[16] - Cash dividends declared for the first six months of 2025 totaled $78.4 million ($35.7 million in Q1 and $42.6 million in Q2)[16] - The company repurchased and retired 1,113,000 shares for a total cost of $7.26 million in the second quarter of 2025[16] Condensed Statements of Cash Flows Net cash increased by $121.3 million for the six months ended June 30, 2025, with $44.2 million from operations, $1.82 billion used in investing, and $1.89 billion provided by financing activities Cash Flow Summary (in thousands) | Cash Flow Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $44,222 | $64,300 | | Net Cash Used in Investing Activities | $(1,817,749) | $(719,723) | | Net Cash Provided by Financing Activities | $1,894,802 | $712,145 | | Net Increase in Cash | $121,275 | $56,722 | Notes to Condensed Financial Statements Notes detail accounting policies, RMBS investments, capital raising via 'at the market' offerings, portfolio composition, repurchase agreements, derivative hedging, and related party transactions - The company is engaged in managing a leveraged investment portfolio of residential mortgage-backed securities (RMBS)[20] - Through June 30, 2025, the company issued 34,355,086 shares under its February 2025 Equity Distribution Agreement for net proceeds of approximately $261.2 million[23] Mortgage-Backed Securities Portfolio (in thousands) | Security Type | Fair Value (June 30, 2025) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | Pass-Through RMBS | $6,978,561 | $5,237,812 | | Structured RMBS | $14,798 | $15,498 | | Total | $6,993,359 | $5,253,310 | Repurchase Agreements by Maturity (in thousands) | Maturity | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Between 2 and 30 days | $4,657,644 | $4,656,303 | | Between 31 and 90 days | $1,781,505 | $192,338 | | Greater than 90 days | $216,730 | $176,902 | | Total | $6,655,879 | $5,025,543 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, including a net loss driven by derivative losses, growth in the RMBS portfolio, and an outlook on market volatility and investment opportunities Results of Operations The company reported a $16.5 million net loss for the six months ended June 30, 2025, primarily due to derivative losses, despite improved net interest income of $42.9 million Net (Loss) Income Summary (in thousands) | Component | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net interest income (expense) | $42,867 | $(3,187) | $46,054 | | (Losses) gains on RMBS and derivative contracts | $(50,101) | $26,102 | $(76,203) | | Expenses | $(9,222) | $(8,118) | $(1,104) | | Net (loss) income | $(16,456) | $14,797 | $(31,253) | GAAP vs. Economic Net Interest Income (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | GAAP Net Interest Income (Expense) | $42,867 | $(3,187) | | Economic Net Interest Income | $84,716 | $53,859 | Financial Condition The RMBS portfolio grew to $7.0 billion by June 30, 2025, financed by $6.7 billion in repurchase agreements, maintaining a stable 7.3:1 economic leverage ratio Portfolio and Leverage Metrics | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Mortgage Assets (Fair Value) | $6,993,359 thousand | $5,253,310 thousand | | Repurchase Agreements | $6,655,879 thousand | $5,025,543 thousand | | Stockholders' Equity | $911,959 thousand | $668,500 thousand | | Economic Leverage | 7.3:1 | 7.3:1 | | Adjusted Leverage | 7.3:1 | 7.5:1 | Liquidity and Capital Resources The company maintains liquidity through internal cash and RMBS cash flows, supplemented by external repurchase agreements and equity offerings, which are deemed sufficient for obligations - As of June 30, 2025, the company had cash and cash equivalents of $440.8 million[211] - Primary external liquidity sources are master repurchase agreements, the TBA security market, and public or private equity/debt offerings[205] - The company has utilized a series of equity distribution agreements to raise capital, with the latest February 2025 agreement allowing for up to $350 million in share offerings[216] Outlook Q2 2025 was turbulent due to tariff announcements and new legislation, yet the economy remained resilient, creating attractive investment opportunities in the Agency RMBS market - Q2 2025 market volatility was driven by the announcement of 'reciprocal' tariffs and the signing of the 'One Big Beautiful Bill Act'[217][218] - Despite initial expectations of a slowdown, the economy has remained resilient, supported by fiscal deficits, and expectations for Fed rate cuts have been pushed further into the future[219][238] - The Agency RMBS market has lagged but offers elevated returns, and the company has increased its capital base to capitalize on these favorable investment opportunities[239] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks include interest rate, prepayment, spread, liquidity, extension, and counterparty credit risks, with hedging strategies and sensitivity analysis presented - The company's primary market risks include interest rate risk, prepayment risk, spread risk, liquidity risk, extension risk, and counterparty credit risk[244] Interest Rate Sensitivity Analysis (as of June 30, 2025) | Change in Interest Rate | Estimated Change in Portfolio Market Value | Estimated Change in Book Value | | :--- | :--- | :--- | | -100 Basis Points | (0.94)% | (7.22)% | | -50 Basis Points | (0.31)% | (2.38)% | | Base | 0.00% | 0.00% | | +50 Basis Points | (0.03)% | (0.23)% | | +100 Basis Points | (0.38)% | (2.92)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no significant changes to internal control over financial reporting - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[266] - No significant changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[267] PART II Legal Proceedings The company is not involved in any material pending legal proceedings - The company is not party to any material pending legal proceedings[269] Risk Factors No material changes to the company's risk factors have occurred since the December 31, 2024 Annual Report on Form 10-K - As of June 30, 2025, there have been no material changes in risk factors from those set forth in the Annual Report on Form 10-K for the year ended December 31, 2024[270] Unregistered Sales of Equity Securities and Use of Proceeds The company had no unregistered equity sales in Q2 2025 but repurchased 1,113,224 shares at a weighted average price of $6.52 under its stock repurchase program Share Repurchase Activity (Q2 2025) | Period | Total Shares Repurchased | Weighted Average Price Paid Per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | April 2025 | 1,113,224 | $6.52 | 1,113,224 | | May 2025 | - | - | - | | June 2025 | 2,786 | $7.01 | - | | Total | 1,116,010 | $6.52 | 1,113,224 | - As of the end of April 2025, 2,719,137 shares remained available for repurchase under the authorized program[273] Defaults upon Senior Securities The company reports no defaults on senior securities - None[274] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[275] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the second quarter of 2025[276] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, officer certifications, and XBRL data files - Exhibits filed include Articles of Amendment, Amended and Restated Bylaws, CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and Inline XBRL documents[278]