Orchid Island Capital(US:ORC)2026-02-20 20:26Financial Performance - Net income for the year ended December 31, 2025, was $159.0 million, or $1.24 per share, compared to $37.7 million, or $0.57 per share in 2024, and a net loss of $39.2 million, or $0.89 per share in 2023 [276]. - For the three months ended December 31, 2025, net earnings were $103,408,000, a significant increase from $72,078,000 in the previous quarter, representing a 43.5% quarter-over-quarter growth [283]. - The total net income for the year ended December 31, 2025, was $159,030,000, compared to $37,662,000 in 2024, reflecting a substantial year-over-year increase of 322% [283]. - Economic net interest income for the year ended December 31, 2025, was reported at $87,789,000, compared to a loss of $11,448,000 in 2024, showcasing a significant turnaround [287]. - The company reported a total economic interest expense of $122,669,000 for the year ended December 31, 2025, which is a decrease from $133,554,000 in 2024 [294]. Interest Income and Expense - Interest income for 2025 was $414.0 million, up from $241.6 million in 2024 and $177.6 million in 2023, while interest expense increased to $305.7 million from $236.3 million in 2024 and $201.9 million in 2023 [276]. - The net interest income for 2025 was $108.3 million, a significant increase from $5.3 million in 2024 and a net loss of $24.3 million in 2023 [276]. - Total interest expense on borrowings for the year ended December 31, 2025, was $305.7 million, up from $236.3 million in 2024, marking a 29.3% increase [305]. - The average cost of funds decreased to 4.27% for the year ended December 31, 2025, from 5.35% in 2024, indicating improved funding efficiency [305]. - Economic interest expense for the year ended December 31, 2025, was $222.4 million, an increase from $119.5 million in 2024 and $109.6 million in 2023 [307]. Share Issuance and Repurchase - The company issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for gross proceeds of approximately $228.8 million and net proceeds of approximately $225.0 million [266]. - Total shares repurchased from inception of the stock repurchase program through December 31, 2025, amounted to 6,257,826 shares at an aggregate cost of approximately $84.8 million, with a weighted average price of $13.55 per share [273]. - The company plans to offer and sell up to an aggregate amount of $500.0 million of shares under the October 2025 Equity Distribution Agreement [269]. - The company issued a total of 30,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $250.0 million and net proceeds of approximately $245.8 million [357]. - The company issued a total of 59,492,504 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $445.1 million and net proceeds of approximately $438.0 million [358]. Portfolio and Asset Management - As of December 31, 2025, the company's RMBS portfolio consisted of $10,628.7 million of Agency RMBS at fair value, with a weighted average coupon on assets of 5.64% [329]. - The average three-month prepayment speeds for the quarters ended December 31, 2025, and 2024 were 15.7% and 10.5%, respectively [329]. - The company had outstanding obligations under repurchase agreements of approximately $10,115.5 million as of December 31, 2025, with a net weighted average borrowing cost of 3.98% [336]. - The company’s internal liquidity sources include cash balances and unencumbered assets, which are expected to be sufficient for ongoing operational needs [342]. - The total fair value of the RMBS portfolio as of December 31, 2025, included $5,675.5 million from Fannie Mae and $4,953.2 million from Freddie Mac [331]. Risk Management - The company utilized various hedging instruments to manage interest rate risk, including Fed Funds and interest rate swaps, to mitigate exposure in a rising rate environment [285]. - The company faces spread risk, where widening market spreads between the yield on Agency RMBS and benchmark interest rates could lead to a decline in net book value [415]. - The company is exposed to liquidity risk due to financing long-term assets with shorter-term borrowings through repurchase agreements, which could lead to adverse changes in liquidity if collateral values decrease [416]. - The company faces counterparty credit risk related to repurchase agreements and derivative contracts, which could lead to significant losses if counterparties fail to perform their obligations [419]. - A decrease in prepayment rates in a rising interest rate environment could extend the average life of fixed-rate assets, negatively impacting operational results and potentially forcing asset sales [418]. Dividends and Shareholder Returns - The company has declared total dividends of $69.570 per share amounting to $940,793,000 since its IPO [395]. - The company intends to pay regular monthly dividends to stockholders, with the most recent declared dividend of $0.12 per share to be paid on March 30, 2026 [396]. - The company experienced a three-month constant prepayment rate (CPR) of 15.7% for the quarter ended December 31, 2025 [330]. - The company has not designated its derivative holdings for hedge accounting treatment, which affects how changes in fair value are reported [286]. - The company employs a four-step process to determine the fair value of Agency RMBS, consistent with FASB ASC Topic 820 [386].