Orchid Island Capital, Inc. Q1 FY2026 earnings call

• Financial highlights: Net loss per share, book value, total return, and dividends discussed. - Portfolio highlights: Portfolio growth, average balance, leverage ratio, CPR, and liquidity. - Market developments: Interest rate curves, mortgage spreads, implied volatility in interest rates, swap spreads, refinancing activity, and funding markets discussed. - Portfolio and hedging positions: Portfolio continued to grow, capital raised and deployed, portfolio coupon changes, prepayment risk, hedge positions, and return expectations. - Cost structure: Shareholders' equity grown 442% over 10 years, expense ratio moved to 1.7 which is low compared to peers.

For the first quarter, net loss was 11 cents per share vs net income of 62 cents in Q4. Book value at 331 was 708 per share vs 754 at Dec 31. Total return was negative 1.3% vs 7.8% in Q4. Dividends of 36 cents declared in both quarters. Portfolio had average balance of approx $11 billion in Q1 vs $9.5 billion in Q4. Leverage ratio increased to 7.9 vs 7.4 at 12-31. 3-month CPR was 14.7% vs 15.7%. Liquidity at 331 was 54.5% vs 57.7%.

• Expect prepayments to be benign but portfolio remains well-protected with modest premium dollar price. - Returns in the sector are approximately mid-teens, 15 to 17. - Market is appealing with attractive returns, variables like interest rates, swap spreads, implied vol, funding markets in good state. - Reevaluate dividend in first quarter of 2027 based on taxable earnings for 2027.

• War headlines as a significant risk factor impacting performance of interest rates and risk assets. - Swap spreads moving negatively or tightening which can offset hedge impacts and affect hedges. - Uncertainty regarding the outcome of the war and its potential impact on economic activity and market variables.

Q: Asked about effective duration of portfolio extending to about three as of 3-31, A: A little bit due to both GSE purchase announcement and adding belly coupons, rates drifting higher and strategic shift.

Q: Asked about core spread income coverage for dividend, A: Dividend yield in line with portfolio generation and market marginal return, reevaluate in first quarter 2027.

Q: Asked about current book value and impact of rates creeping up on premium portfolio, A: Book up about 2.5% as of yesterday but given back some this week, rates rising would improve carry, portfolio has call protection and skewed towards lower coupons as adding capital