Orchid Island Capital(ORC)2025-04-25 15:02Financial 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]