Q4 2025 Orchid Island Capital Inc Earnings Call

January 30, 2026

Speaker #1: After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone; you will then hear an automated message advising you're hand is raised.

Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Melissa Alfonso.

Speaker #1: Please go ahead.

Speaker #2: Thank you, DeeDee. Good morning and welcome to the fourth quarter 2025 earnings conference call for Orchid Island Capital. This call is being recorded today, January 30, 2026.

Melissa Alfonso: Thank you, Dee Dee. Good morning, and welcome to the Q4 2025 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, 30 January 2026. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith, belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.

Melissa Alphonso: Thank you, Dee Dee. Good morning, and welcome to the Q4 2025 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, 30 January 2026. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith, belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.

Speaker #2: At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: Listeners are cautioned that such forward-looking statements are based on information currently available, on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.

Q4 2025 Orchid Island Capital Inc Earnings Call

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Q4 2025 Orchid Island Capital Inc Earnings Call

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Friday, January 30th, 2026 at 3:00 PM

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Melissa Alfonso: Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Speaker #2: Important factors that could cause company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results.

Speaker #2: Changes in assumptions or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley.

Speaker #2: Please go ahead, sir.

Speaker #3: Thank you, Melissa, and good morning. I hope everybody's had a chance to download our deck off of our website. As usual, that's what we'll be using for a basis of the call today.

Robert Cauley: Thank you, Melissa, and good morning. I hope everybody's had a chance to download our deck off of our website. As usual, that's what we'll be using for basis of the call today. Again, as usual, I'll just walk you through the deck. I'm joined here today by Jerry Sintes, our controller, and Hunter Haas, our chief financial officer and chief investment officer. Starting on the third page, I'll just kind of give you an outline. Jerry will quickly go through results and discuss our liquidity position. I'll then go through the market developments, which basically shape the market that we operated in and the impact that that had on both our results for the fourth quarter and then also our outlook going forward into 2026.

Speaker #3: And again, as usual, I'll just walk you through the deck. I'm joined here today by Jerry Sintes, our controller, and Hunter Haas, our chief financial officer and chief investment officer.

Speaker #3: Starting on the third page, I'll just kind of give you an outline. Jerry, we'll quickly go through results and discuss our liquidity position. I'll then go through the market developments, which basically shape the market that we operated in and the impact that that had on both our results for the fourth quarter, and then also our outlook going forward into 2026.

Robert Cauley: Then Hunter will spend some time discussing the portfolio, hedge positions, and so forth, developments during the quarter, positioning in the portfolio as of today. Then we'll have a few concluding remarks. We have some information in the appendices that we want to share with you, and then we will take your questions. So with that, I'll turn it over to Jerry.

Speaker #3: Then Hunter will spend some time discussing the portfolio, hedge positions, and so forth, developments during the quarter, positioning in the portfolio as of today.

Then Hunter will spend some time discussing the portfolio, hedge positions, and so forth, developments during the quarter, positioning in the portfolio as of today. Then we'll have a few concluding remarks. We have some information in the appendices that we want to share with you, and then we will take your questions. So with that, I'll turn it over to Jerry.

Speaker #3: And then we'll have a few concluding remarks. We have some information in the appendices that we want to share with you. And then we will take your questions.

Speaker #3: So with that, I'll turn it over to

Speaker #3: Jerry. Thank you, Bob.

Jerry Sintes: Thank you, Bob. If we go kind of page five, I'll begin with the financial highlights for the fourth quarter. During the fourth quarter, we earned $103.4 million in net income, which equates to $0.62 per share, compared to $0.53 in Q3. Our book value at the end of the quarter was $7.54, compared to $7.33 at the end of Q3. Stockholders' equity at the end of Q4 was approximately $1.4 billion. We paid dividends during the quarter of $0.36, which has been the same rate for a couple of years now. Total return for the quarter, which takes into account the change in book value and the dividend, was 7.8% for Q4, compared to 6.7% for Q3.

Speaker #4: If we go to page five, I'll begin with the financial highlights for the fourth quarter. During the fourth quarter, we earned $103.4 million in net income, which equates to $0.62 per share.

Speaker #4: Compared to $0.53 in Q3. Both values at the end of the quarter were $754, compared to $733 at the end of Q3.

Speaker #4: Stockholder's equity at the end of Q4 was approximately $1.4 billion. We paid dividends during the quarter of 36 cents, which has been the same rate for a couple of years now.

Speaker #4: Total return for the quarter, which takes into account the change in book value and the dividend, was 7.8% for Q4 compared to 6.7% for Q3.

Jerry Sintes: Turning now to page 6, we'll look at some of the portfolio highlights. During Q4, we had average MBS of $9.5 billion, compared to $7.7 billion in Q3. At the end of the year, that the actual balance was $10.6 billion, so we grew a lot, approximately 27% during the quarter. Our leverage for Q4 was 7.4%, which is the same as Q3. Liquidity during quarter, at the end of the quarter was 57.7% and 57.1% at the end of Q3. That's a little higher than our historic normals, which are usually around 50%. The reason for that is primarily because of lower haircuts, which are around 4% at the end of the year.

Turning now to page 6, we'll look at some of the portfolio highlights. During Q4, we had average MBS of $9.5 billion, compared to $7.7 billion in Q3. At the end of the year, that the actual balance was $10.6 billion, so we grew a lot, approximately 27% during the quarter. Our leverage for Q4 was 7.4%, which is the same as Q3. Liquidity during quarter, at the end of the quarter was 57.7% and 57.1% at the end of Q3. That's a little higher than our historic normals, which are usually around 50%. The reason for that is primarily because of lower haircuts, which are around 4% at the end of the year.

Speaker #4: Turn now to page six. We'll look at some of the portfolio highlights. During Q4, we had average MBS of 9.5 billion compared to 7.7 billion in Q3.

Speaker #4: At the end of the year, that the actual balance was 10.6 billion. So we grew a lot approximately 27% during the quarter. Leverage for Q4 was 7.4%, which is the same as Q3.

Speaker #4: Liquidity during the quarter at the end of the quarter was 57.7% and 57.1% at the end of Q3. That's a little higher than our historic numbers, which are usually around 50%.

Speaker #4: Reason for that is primarily because of lower haircuts, which are around 4% at the end of the year. Prepayment speeds for the quarter were 15.7% compared to 10.1% in Q3.

Jerry Sintes: Prepayment speeds for the quarter were 15.7% compared to 10.1% in Q3. On page 7 and 8 are our financial statements, which you can read on in the deck or in our earnings release last night. Now I'll turn it back over to Bob.

Prepayment speeds for the quarter were 15.7% compared to 10.1% in Q3. On page 7 and 8 are our financial statements, which you can read on in the deck or in our earnings release last night. Now I'll turn it back over to Bob.

Speaker #4: On pages seven and eight are our financial statements, which you can read in the deck or in our earnings release last night. And now I'll turn it back over to

Speaker #4: Bob. Thanks, Jerry.

Robert Cauley: Thanks, Jerry. I will start with the market developments on page 10, as I always do. The top left, this is the Treasury curve here. This curve is actually a very good place to start because it basically encapsulates what went on during the quarter. Recognizing that these three lines just represent snapshots, if you will, of the cash curve as of 30 September, 31 December, and 23 January, or one week ago. In fact, rates were more or less steady throughout the quarter, and rates traded in a very tight range. Realized interest rate volatility obviously was very low, and implied vol in the swaption market was declining throughout the quarter and really has declined for quite some time. What's behind this? Well, typically, economic data, for one, as it comes out, tends to drive interest rate movements.

Speaker #3: I will start with the market developments on page 10. I always do. The top left—this is the Treasury curve. This curve is actually a very good place to start because it basically encapsulates what went on during the quarter.

Speaker #3: Recognizing that these three lines just represent snapshots, if you will, of the cash curve as of 9/30, 12/31, and 1/23, or one week ago.

Speaker #3: In fact, rates were more or less steady throughout the quarter, and rates traded in a very tight range. Realized interest rate volatility, obviously, was in for low.

Speaker #3: And implied vol in the swap ship market was declining throughout the quarter, and really has declined for quite some time. What's behind this? Well, typically economic data, for one, as it comes out, tends to drive interest rate movements.

Robert Cauley: Prior to the quarter, the data was basically considered to be suspect because of well-discussed issues at the various entities that collect the data. And then we had the government shutdown on 1 October. So basically, you went from having suspect data to no data at all, and then when the government reopened, you had very much delayed data that was still considered suspect. So basically, there was not much to drive interest rates other than geopolitical events and or political events, which did, but not meaningfully so. If you look to the right, you can see the swap curve is fairly similar, but it did move more, and that's all swap spreads.

Prior to the quarter, the data was basically considered to be suspect because of well-discussed issues at the various entities that collect the data. And then we had the government shutdown on 1 October. So basically, you went from having suspect data to no data at all, and then when the government reopened, you had very much delayed data that was still considered suspect. So basically, there was not much to drive interest rates other than geopolitical events and or political events, which did, but not meaningfully so. If you look to the right, you can see the swap curve is fairly similar, but it did move more, and that's all swap spreads.

Speaker #3: Prior to the quarter, the data was suspect because of well-discussed issues at the various entities that collect the data. And then we had the government shutdown on 10/01.

Speaker #3: So basically, you went from having suspect data to no data at all. And then, when the government reopened, you had very much delayed data that was still considered suspect.

Speaker #3: So basically there was not much to drive interest rates other than geopolitical events and/or political events, which did, but not meaningfully so. If you look to the right, you can see the swap curve is fairly similar but it did move more.

Speaker #3: And that's all swap spreads. And I'll discuss in a few moments why that is. But we basically had swap spreads moving up, as in less negative, and that's why you see movement in the curve from the red line up to the blue and the green line.

Robert Cauley: And I'll discuss in a few moments why that is, but we basically had swap spreads moving up, as in less negative, and that's why you see movement in the curve from the red line up to the blue and the green line. If you look at the spread between the three-month Treasury and the ten-year bill, really hasn't changed much for over a year, but there's been movements elsewhere in the curve. Moving on to slide 11, this is very germane to what's going on. The spread of the current coupon mortgage to the ten-year Treasury. As you can see, this is a very long look-back period. This goes all the way back to 2010. And the thing that sticks out very obviously is how much we've tightened of late, and especially since year-end.

And I'll discuss in a few moments why that is, but we basically had swap spreads moving up, as in less negative, and that's why you see movement in the curve from the red line up to the blue and the green line. If you look at the spread between the three-month Treasury and the ten-year bill, really hasn't changed much for over a year, but there's been movements elsewhere in the curve. Moving on to slide 11, this is very germane to what's going on. The spread of the current coupon mortgage to the ten-year Treasury. As you can see, this is a very long look-back period. This goes all the way back to 2010. And the thing that sticks out very obviously is how much we've tightened of late, and especially since year-end.

Speaker #3: If you look at the spread between the three-month Treasury and the 10-year bill, it really hasn't changed much for over a year, but there have been movements elsewhere in the curve.

Speaker #3: Moving on to slide 11. This is very germane to what's going on—the spread of the current coupon mortgage to the 10-year Treasury. As you can see, this is a very long look-back period.

Speaker #3: This goes all the way back to 2010. And the thing that sticks out very obviously is how much we've tightened of late, and especially since year-end.

Speaker #3: The most recent data point there is last Friday. You can see it's at about 80 basis points. If you look back to the period, say, between the taper tantrum in '13 up until the outbreak of the COVID pandemic, mortgages traded in a very tight range centered at approximately 75 basis points, say.

Robert Cauley: The most recent data point there is last Friday. You can see it's at about 80 basis points. If you look back to the period, say, between the Taper Tantrum in 2013 up until the outbreak of the COVID pandemic, mortgages traded in a very tight range, centered at approximately 75 basis points, say, and we're basically there. And obviously, the most recent development, which has become evident on the bottom left, when you just look at these prices, this is again, the same chart we always use. These are a selection of 30-year fixed-rate mortgages, 3%, 4%, 5%, and 6%, and these are normalized prices. So this basically shows you the price movement relative to the starting point at the beginning of the quarter. And as you can see, especially with respect to lower coupons, they had a very good quarter.

The most recent data point there is last Friday. You can see it's at about 80 basis points. If you look back to the period, say, between the Taper Tantrum in 2013 up until the outbreak of the COVID pandemic, mortgages traded in a very tight range, centered at approximately 75 basis points, say, and we're basically there. And obviously, the most recent development, which has become evident on the bottom left, when you just look at these prices, this is again, the same chart we always use. These are a selection of 30-year fixed-rate mortgages, 3%, 4%, 5%, and 6%, and these are normalized prices. So this basically shows you the price movement relative to the starting point at the beginning of the quarter. And as you can see, especially with respect to lower coupons, they had a very good quarter.

Speaker #3: And we're basically there. And obviously, the most recent development, which has become evident on the bottom left when you just look at these prices—this is, again, the same chart we always use.

Speaker #3: These are a selection of 30-year fixed-rate mortgages: 3%, 4%, 5%, and 6%. And these are normalized prices. So this basically shows you the price movement relative to the starting point at the beginning of the quarter.

Speaker #3: And as you can see, especially with respect to lower coupons, they had a very good quarter. And then if you kind of try to focus in on what happened around January 8th when the administration announced that the GSEs would be buying up to 200 billion of mortgages, performance was affected.

Robert Cauley: Then if you kind of try to focus in on what happened around 8 January, when the administration announced that the GSEs would be buying up to $200 billion of mortgages, performance was affected. In the case of lower coupons, they went materially higher. In the case of higher coupon sixes, they gave up performance. And the reason, remember, these are TBAs, not pools. And the reason that the higher coupon suffered is simply because the anticipation is that the administration's goal is to lower mortgage rates, increase affordability of housing, which would drive prepayments faster. So current market pricing, as reflected in the TBA market for any of the higher coupons, 5, 5.5, and 6 and above, are for very, very fast speeds, and lower coupons did very, very well.

Then if you kind of try to focus in on what happened around 8 January, when the administration announced that the GSEs would be buying up to $200 billion of mortgages, performance was affected. In the case of lower coupons, they went materially higher. In the case of higher coupon sixes, they gave up performance. And the reason, remember, these are TBAs, not pools. And the reason that the higher coupon suffered is simply because the anticipation is that the administration's goal is to lower mortgage rates, increase affordability of housing, which would drive prepayments faster. So current market pricing, as reflected in the TBA market for any of the higher coupons, 5, 5.5, and 6 and above, are for very, very fast speeds, and lower coupons did very, very well.

Speaker #3: In the case of lower coupons, they went materially higher. In the case of higher coupons—sixes—they gave up performance. And the reason is, remember, these are TBAs.

Speaker #3: Not polls. And the reason that the higher coupons suffered is simply because the anticipation is that the administration's goal is to lower mortgage rates to increase affordability of housing, which would drive prepayments faster.

Speaker #3: So current market pricing, as reflected in the rural market, for any of the higher coupons, 5%, 5.5%, and 6% and above, are for very, very fast speeds.

Speaker #3: lower coupons did very, very And well. Looking to the right, you can see in the rural market, especially the four-roll and the three-and-a-half have been really much on fire.

Robert Cauley: Looking to the right, you can see in the TBA market, especially the 4 roll and the 3.5 have been really much on fire, very strong. This reflects the relative value trading because these coupons are below par, not going to be subject to prepayments, and if the markets rally, these will be obviously the targets for purchases. So they've done extremely well. So the technicals, they're strong. That being said, going forward into 2026, to the extent that plays out and those coupons are produced because rates are lower, then the supply will overwhelm the demand, and that probably relative performance will go away, but that very much remains to be seen. Moving on to slide 12.

Looking to the right, you can see in the TBA market, especially the 4 roll and the 3.5 have been really much on fire, very strong. This reflects the relative value trading because these coupons are below par, not going to be subject to prepayments, and if the markets rally, these will be obviously the targets for purchases. So they've done extremely well. So the technicals, they're strong. That being said, going forward into 2026, to the extent that plays out and those coupons are produced because rates are lower, then the supply will overwhelm the demand, and that probably relative performance will go away, but that very much remains to be seen. Moving on to slide 12.

Speaker #3: Very strong. And this reflects relative value trading because these coupons are below par, not to be cited to prepayments. And if the market's rallied, these will be obviously the targets for purchases.

Speaker #3: So they've done extremely well. So the technical, they're strong. That being said, going forward into 2026, to the extent that plays out and those coupons are produced because rates are lower, then the supply will overwhelm the demand and that probably relative performance will go away.

Speaker #3: But that very much remains to be seen. Moving on to slide 12. I talked a moment ago about swaps and volatility, and you can see that this trend is very, very clear and strong.

Robert Cauley: I talked a moment ago about swap option volatility, and you can see that this trend is very, very clear and strong past year-end, even today, vol continues to decline. The peak that you see there on the top left, that's Liberation Day, early April of 2025. We all know what happened that day, but vol has done nothing but come off and continues to do so. If you kind of look at it in a historical context, going on the bottom of the page, we go back to, you know, 10 plus years now, we're pretty much back to the levels that we were at back during the days of the Fed rate suppression regime, when the Fed was using QE to keep rates artificially low.

I talked a moment ago about swap option volatility, and you can see that this trend is very, very clear and strong past year-end, even today, vol continues to decline. The peak that you see there on the top left, that's Liberation Day, early April of 2025. We all know what happened that day, but vol has done nothing but come off and continues to do so. If you kind of look at it in a historical context, going on the bottom of the page, we go back to, you know, 10 plus years now, we're pretty much back to the levels that we were at back during the days of the Fed rate suppression regime, when the Fed was using QE to keep rates artificially low.

Speaker #3: Past year-end, even today, vol continues to decline. The peak that you see there on the top left—that's Liberation Day, early April of 2025.

Speaker #3: We all know what happened that day. But vol had done nothing but come off and continues to do so. And if you kind of look at it in a historical context—going on the bottom of the page—we go back to 10-plus years now, we're pretty much back to the levels that we were at back during the days of the Fed rate suppression regime, when the Fed was using QE to keep rates artificially low, and in doing so, obviously, they suppressed volatility.

Robert Cauley: In doing so, obviously, they suppressed volatility, and it was indeed suppressed very low for many years, and we're basically back to those levels. What happens from this point on remains to be seen, but we are at a very low environment. We know that mortgage is very much susceptible to implied volatility, because it affects option values, especially in prepayment models and the like. With option values very low, then mortgages can do well, and in fact, they have. Turning to the next slide, on slide 13, we see a sample of swap spreads. The blue line is a two-year swap, and the purple line is a 10-year. As you can see, going back through the quarter, and really since the second half of the year, these have been moving higher or less negative. Why is that?

In doing so, obviously, they suppressed volatility, and it was indeed suppressed very low for many years, and we're basically back to those levels. What happens from this point on remains to be seen, but we are at a very low environment. We know that mortgage is very much susceptible to implied volatility, because it affects option values, especially in prepayment models and the like. With option values very low, then mortgages can do well, and in fact, they have. Turning to the next slide, on slide 13, we see a sample of swap spreads. The blue line is a two-year swap, and the purple line is a 10-year. As you can see, going back through the quarter, and really since the second half of the year, these have been moving higher or less negative. Why is that?

Speaker #3: And it was indeed suppressed very low for many years. And we're basically back to those levels. What happens at this point on remains to be seen, but we are at a very low environment.

Speaker #3: And we know that mortgages, very much because it affects option susceptible to implied volatility, values, especially in prepayment models and the like. And with option values very low, then mortgages can do well and, in fact, they have.

Speaker #3: Turning to the next slide on slide 13, we see a sample of swap spreads. The blue line is the two-year swap. And the purple line is a 10-year.

Speaker #3: As you can see, going back through the quarter, and really since the second half of the year, these have been moving higher or becoming less negative.

Speaker #3: Why is that? Well, the Fed announced at the October meeting that they were going to end QT. The market anticipated that. Swap spreads started to move.

Robert Cauley: Well, the Fed announced at the October meeting that they were going to end QT. The market anticipated that, swap spreads started to move, and then they announced in December at their meeting, reserve management program, in which they are going to be buying up to $40 billion of bills. So the logic behind that is a recognition on the part of the Fed, that as the economy grows, that their balance sheet should grow in proportionate fashion. As a result, they will be growing, so they're taking out bills, which also helps brings the Fed's Treasury holdings in line with the outstanding universe of Treasuries, because historically, they have not owned bills.

Well, the Fed announced at the October meeting that they were going to end QT. The market anticipated that, swap spreads started to move, and then they announced in December at their meeting, reserve management program, in which they are going to be buying up to $40 billion of bills. So the logic behind that is a recognition on the part of the Fed, that as the economy grows, that their balance sheet should grow in proportionate fashion. As a result, they will be growing, so they're taking out bills, which also helps brings the Fed's Treasury holdings in line with the outstanding universe of Treasuries, because historically, they have not owned bills.

Speaker #3: And then they announced in December at their meeting a reserve management program in which they are going to be buying up to $40 billion of bills.

Speaker #3: And so the logic behind that is a recognition on the part of the Fed that, as the economy grows, their balance sheet should grow in proportionate fashion.

Speaker #3: As a result, they will be growing. So they're taking out bills, which also helps bridge the Fed's Treasury holdings in line with the outstanding universe of Treasuries, because historically, they have not owned bills.

Speaker #3: And they also have implications for the funding market, because bills are an investment option for money market lenders. And to the extent that the Fed is buying them, that allows more funding available for repo, such as ourselves, repo borrowers.

Robert Cauley: It also has implications for the funding market because bills are an investment option for money market lenders, and to the extent that the Fed is buying them, that allows more funding available for repo, such as ourselves, repo borrowers. Our hedge position, and Hunter will discuss this in greater detail later, but as you can see, we look at our hedge positions from the perspective of DV01. That's just our sensitivity of our hedge instruments to movements in rates. And you can see it's very heavily concentrated in swaps, and this is the reason why, what we just discussed, we expect that this may continue for some time. Moving on to slide 14. These are the same charts we've had for a while. As you can see, something has changed, but not much.

It also has implications for the funding market because bills are an investment option for money market lenders, and to the extent that the Fed is buying them, that allows more funding available for repo, such as ourselves, repo borrowers. Our hedge position, and Hunter will discuss this in greater detail later, but as you can see, we look at our hedge positions from the perspective of DV01. That's just our sensitivity of our hedge instruments to movements in rates. And you can see it's very heavily concentrated in swaps, and this is the reason why, what we just discussed, we expect that this may continue for some time. Moving on to slide 14. These are the same charts we've had for a while. As you can see, something has changed, but not much.

Speaker #3: Our hedge position—and Hunter will discuss this in greater detail later. But as you can see, we look at our hedge positions from the perspective of DV01.

Speaker #3: That's just our sensitivity of our hedge instruments to movements in rates. And you can see it's very heavily concentrated in swaps. And this is the reason why what we just discussed.

Speaker #3: We expect that this may continue for some time. Moving on to slide 14. These are the same charts we've had for a while. As you can see, something has changed, but not much.

Robert Cauley: On the top left, the red line is the mortgage rate, but it's still at 6.38%, and the refi index, while it's higher, it's not high. It's still quite low. I think if you look on the right-hand chart, you get an idea why. While mortgages have tightened substantially, and we mentioned that the current coupon mortgage spread to the ten-year Treasury was 80 or 90 basis points, the ten-year is about 4.25%. And these spreads and available mortgage rates to borrowers are still north of 6. So the spread for the borrower, not for mortgage-backed security, but for the borrower, is still relatively wide. It has not tightened as much as mortgage-backed securities have.

Speaker #3: On the top left, the red line is in the mortgage rate, but it's still at 6.38%. And the refi index, while it's higher, it's not high.

On the top left, the red line is the mortgage rate, but it's still at 6.38%, and the refi index, while it's higher, it's not high. It's still quite low. I think if you look on the right-hand chart, you get an idea why. While mortgages have tightened substantially, and we mentioned that the current coupon mortgage spread to the ten-year Treasury was 80 or 90 basis points, the ten-year is about 4.25%. And these spreads and available mortgage rates to borrowers are still north of 6. So the spread for the borrower, not for mortgage-backed security, but for the borrower, is still relatively wide. It has not tightened as much as mortgage-backed securities have.

Speaker #3: It's still quite low, and I think if you look at the right-hand chart, you get an idea why. While mortgages have tightened substantially—and we mentioned that the current coupon mortgage spread to the 10-year Treasury was 80 or 90 basis points—the 10-year is about 4.25%.

Speaker #3: And these spreads and available mortgage rates to borrowers are still north of 6. So the spread for the borrower—not for mortgage-backed securities, but for the borrower—is still relatively wide.

Speaker #3: It has not tightened as much as mortgage-backed securities have as a result. Mortgage rates available to borrowers are still close to 200 off the 10-year.

Robert Cauley: As a result, mortgage rates available to borrower are still close to 200 off the 10-year, and therefore, refinancing activity, while it's picked up some, is still not particularly high. Chart 15, just basically the same picture I like to show. The red line just shows you the supply of money, M2, and the blue line is just the economy, GDP, in nominal terms. And as the chart implies, the economy is still awash in liquidity. The takeaway from this, I believe, is that it's hard to say that financial conditions are overly tight. And if you look at the economy, the GDP data, retail sales, you know, they've not really weakened precipitously, and this might help explain why that might be. With that, that's the end of my discussion of the macro backdrop.

As a result, mortgage rates available to borrower are still close to 200 off the 10-year, and therefore, refinancing activity, while it's picked up some, is still not particularly high. Chart 15, just basically the same picture I like to show. The red line just shows you the supply of money, M2, and the blue line is just the economy, GDP, in nominal terms. And as the chart implies, the economy is still awash in liquidity. The takeaway from this, I believe, is that it's hard to say that financial conditions are overly tight. And if you look at the economy, the GDP data, retail sales, you know, they've not really weakened precipitously, and this might help explain why that might be. With that, that's the end of my discussion of the macro backdrop.

Speaker #3: And therefore, refinancing activity, while it's picked up some, is still not particularly high. Chart 15 is just basically the same picture I like to show.

Speaker #3: The red line just shows you the supply of money, M2, and the blue line is just the economy—GDP—in nominal terms. And as the chart implies, the economy is still awash in liquidity.

Speaker #3: The takeaway from this, I believe, is that it's hard to say that financial conditions are overly tight. And if you look at the economy—the GDP data, retail sales—there's not really weakened precipitously.

Speaker #3: And this might help explain why that might be. With that, that's the end of my discussion of the macro backdrop. I will turn it over to Hunter to discuss the portfolio.

Robert Cauley: I will turn it over to Hunter to discuss the portfolio.

I will turn it over to Hunter to discuss the portfolio.

Speaker #2: Thanks, Bob. Turning to slide 17. Just a few highlights for the quarter. During the quarter, we purchased $3.2 billion of agency-specified pools. The breakdown of the purchases is $892 million in Fannie 5s, $1.5 billion in Fannie 5.5s, $600 million in Fannie 6s, and $283 million in Fannie 6.5s.

Hunter Haas: Thanks, Bob. Turning to slide 17, just a few highlights for the quarter. During the quarter, we purchased $3.2 billion of agency-specified pools. The breakdown of the purchases is $892 million in Fannie fives, $1.5 billion Fannie five and a halves, $600 million Fannie sixes, and $283 million Fannie six and a halves. All these pools had some form of call protection, primarily lower loan balances, loans that were originated in refi challenged states like New York or Florida, and loans backed by borrowers with low credit scores, high LTVs, or high DTIs or the like, some sort of credit impairment that would keep them from being able to refinance as readily as borrowers that didn't have those constraints.

Speaker #2: All these pools had some form of call protection, primarily lower loan balances and loans that were originated and refinanced in states like New York or Florida.

Speaker #2: And loans backed by borrowers with low credit scores, or high LTVs, or high DTIs, and the like—some sort of credit impairment that would keep them from being able to refinance as readily as borrowers that didn't have those constraints.

Speaker #2: On a model yield, our acquisitions were in basically the low 5% range. And we did sell some assets that were yielding mid-4s at the time we sold them.

Hunter Haas: On a model yield, our acquisitions were in basically the low 5% range, and we did sell some assets that were yielding mid-4s at the time we sold them. The model yield on... I'm sorry. The repositioning enhanced our carry profile while mitigating our exposure to higher rates and spread widening as the higher coupon mortgages have much less spread duration sensitivity than the lower coupons that we sold. Turning to slide eighteen. This is a new chart we just put in to kind of recapture what happened throughout the course of the year. Over the course of 2025, we experienced substantial growth, doubling both our equity base and MBS portfolio.

On a model yield, our acquisitions were in basically the low 5% range, and we did sell some assets that were yielding mid-4s at the time we sold them. The model yield on... I'm sorry. The repositioning enhanced our carry profile while mitigating our exposure to higher rates and spread widening as the higher coupon mortgages have much less spread duration sensitivity than the lower coupons that we sold. Turning to slide eighteen. This is a new chart we just put in to kind of recapture what happened throughout the course of the year. Over the course of 2025, we experienced substantial growth, doubling both our equity base and MBS portfolio.

Speaker #2: The model yield on—I'm sorry. The repositioning enhanced our carry profile while mitigating our exposure to higher rates and spread widening, as the higher coupon mortgages have much less spread duration sensitivity than the lower coupons that we sold.

Speaker #2: Slide 18, slide 18. This is a new chart we just put in to kind of recapture what happened throughout the course of the year.

Speaker #2: Over the course of 2025, we experienced substantial growth, doubling both our equity base and MBS portfolio. It's important to note that this growth occurred at a time when MBS spreads were at historic wides.

Hunter Haas: Important to note that this growth occurred at a time when MBS spreads were at historic wides, allowing us to build a portfolio with strong long-term return potential. The line on the slide shows a time series of Morgan Stanley index that tracks zero-volatility spread over the Treasury curve for a hypothetical 30-year MBS priced at par. The green shaded area highlights the timing of our asset purchases during 2025 and into early 2026. Over 75% of the $7.4 billion in acquisitions that we made during the last year and a month or so occurred at a time when the index, when this index was well over 100 basis points. On average, the spread level of all of our purchases was 108 basis points.

Important to note that this growth occurred at a time when MBS spreads were at historic wides, allowing us to build a portfolio with strong long-term return potential. The line on the slide shows a time series of Morgan Stanley index that tracks zero-volatility spread over the Treasury curve for a hypothetical 30-year MBS priced at par. The green shaded area highlights the timing of our asset purchases during 2025 and into early 2026. Over 75% of the $7.4 billion in acquisitions that we made during the last year and a month or so occurred at a time when the index, when this index was well over 100 basis points. On average, the spread level of all of our purchases was 108 basis points.

Speaker #2: Allowing us to build a portfolio with strong long-term return potential. The line on the slide shows a time series of Morgan Stanley index that tracks zero volatility spread over the Treasury curve for a hypothetical 30-year MBS priced at par.

Speaker #2: And the green shaded area highlights the timing of our asset purchases during 2025 and into early 2026. Over 75% of the $7.4 billion in acquisitions that we made during the last year and a month or so occurred at a time when the index—when this index was well over 100 basis points.

Speaker #2: On average, the spread level of all of our purchases was 108 basis points. And that's the weighted average of the Morgan Stanley index at the time we made the acquisitions, I should say.

Hunter Haas: That's the weighted average of the Morgan Stanley index at the time we made the acquisitions, I should say. So turning to slide 19, as you can see, we've talked about this in the past, our portfolio evolution. As mortgage spreads tightened throughout the year, we increased our allocation to production and pre-new coupons, primarily fives through six and a halfs. This strategic shift reflects the fact that lower coupon MBS, which carry greater spread sensitivity, i.e., duration, significantly outperformed higher coupon assets during the course of the last year. Initially, we executed this sort of strategic portfolio shift through acquisitions, deploying new capital into higher coupons.

That's the weighted average of the Morgan Stanley index at the time we made the acquisitions, I should say. So turning to slide 19, as you can see, we've talked about this in the past, our portfolio evolution. As mortgage spreads tightened throughout the year, we increased our allocation to production and pre-new coupons, primarily fives through six and a halfs. This strategic shift reflects the fact that lower coupon MBS, which carry greater spread sensitivity, i.e., duration, significantly outperformed higher coupon assets during the course of the last year. Initially, we executed this sort of strategic portfolio shift through acquisitions, deploying new capital into higher coupons.

Speaker #2: So, turning to slide 19, as you can see, we've talked about this in the past. Our portfolio evolution is mortgage spreads tightened throughout the year.

Speaker #2: We increased our allocation to production and premium coupons, primarily 5s through 6.5s. This strategic shift reflects the fact that lower coupon MBS, which carry greater spread sensitivity, i.e., duration, significantly outperformed higher coupon assets during the course of the last year.

Speaker #2: Initially, we executed this sort of strategic portfolio shift through acquisitions, deploying new capital into higher coupons. And then in mid-December, we took a more active portfolio management approach by actually selling lower-yielding 3s, 3.5s, and 4s, reallocating that into higher carry, lower duration, and spread duration pools in the 5% to 6.5% range, as I previously discussed.

Hunter Haas: Then in mid-December, we took a more active portfolio management approach by actually selling lower yielding 3s, 3.5s, and 4s, reallocating that into higher carry and lower duration and spread duration pools in the 5 to 6.5% range, as I previously discussed. Turning to slide 20, just to make a few quick notes about our funding costs. Our funding cost saw meaningful improvement over the quarter, driven primarily by Federal Reserve policy actions. We benefited from two rate cuts and the Fed's announcement that it would begin purchasing $40 billion in Treasuries per month, plus an additional roughly $15 billion tied to MBS pay downs through its reserve management purchase program.

Then in mid-December, we took a more active portfolio management approach by actually selling lower yielding 3s, 3.5s, and 4s, reallocating that into higher carry and lower duration and spread duration pools in the 5 to 6.5% range, as I previously discussed. Turning to slide 20, just to make a few quick notes about our funding costs. Our funding cost saw meaningful improvement over the quarter, driven primarily by Federal Reserve policy actions. We benefited from two rate cuts and the Fed's announcement that it would begin purchasing $40 billion in Treasuries per month, plus an additional roughly $15 billion tied to MBS pay downs through its reserve management purchase program.

Speaker #2: Turning to slide 20, just to make a few quick notes about our funding costs. Our funding costs saw meaningful improvement over the quarter, driven primarily by Federal Reserve policy actions.

Speaker #2: We benefited from two rate cuts, and the Fed's announcement that it would begin purchasing $40 billion in Treasuries per month, plus an additional roughly $15 billion tied to MBS paydowns, through its reserve management purchase program.

Speaker #2: Oregon's average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end. After the December 10th FOMC meeting, SOFR initially settled into the upper 360s.

Hunter Haas: Orchid's average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end. After the 10 December FOMC meeting, SOFR initially settled into the upper 3.6s before spiking to 3.87 into year-end. During that time, repo spreads to SOFR also widened, kind of pushing from the mid-teens into the low- to mid-20 basis point range. So we had a little bit of funding pressure going into year-end. Since year-end, the funding environment has improved markedly. SOFR settled in the 3.63 to 3.65 range, and Orchid's repo spreads have trended to the 14 basis point area, call it.

Orchid's average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end. After the 10 December FOMC meeting, SOFR initially settled into the upper 3.6s before spiking to 3.87 into year-end. During that time, repo spreads to SOFR also widened, kind of pushing from the mid-teens into the low- to mid-20 basis point range. So we had a little bit of funding pressure going into year-end. Since year-end, the funding environment has improved markedly. SOFR settled in the 3.63 to 3.65 range, and Orchid's repo spreads have trended to the 14 basis point area, call it.

Speaker #2: Before spiking to 387 into year-end. During that time, repo spreads to SOFR also widened, kind of pushing from the mid-teens into the low to mid-20 basis point range.

Speaker #2: So we had a little bit of funding pressure going into year-end. Since year-end, the funding environment has proved markedly—SOFR settled in the 3.63 to 3.65 range.

Speaker #2: And Oregon's repo spreads have trended to the 14-basis-point area—call it—so we're kind of on track to turn over the repo book in sort of the 3.8% range.

Hunter Haas: So we're kind of on track to turn over the repo book in sort of the 3.8% range, going into the next few months, as we don't really expect any Fed cuts before the next governor is sworn in. Turning to slide 21, just want to do an overview of the hedges. Our hedge notional remained relatively stable over the quarter. At the end of the quarter, we were 69% of outstanding repo, just slightly lower than the 70% it was in at the end of the Q3. The unhedged notional portion of the portfolio stands to benefit from a material decline in short-term rates and tighter repo funding spreads as monetary policy continues to ease.

So we're kind of on track to turn over the repo book in sort of the 3.8% range, going into the next few months, as we don't really expect any Fed cuts before the next governor is sworn in. Turning to slide 21, just want to do an overview of the hedges. Our hedge notional remained relatively stable over the quarter. At the end of the quarter, we were 69% of outstanding repo, just slightly lower than the 70% it was in at the end of the Q3. The unhedged notional portion of the portfolio stands to benefit from a material decline in short-term rates and tighter repo funding spreads as monetary policy continues to ease.

Speaker #2: Going into the next few months, as we don't really expect any Fed cuts before the next governor's sworn in. Turning to slide 21, I just want to do an overview of the hedges.

Speaker #2: Our hedge notional remained relatively stable. At the end of the quarter, we were at 69% of outstanding repo, just slightly lower than the 70% it was at the end of the third quarter.

Speaker #2: The notional portion of the portfolio stands to the unhedged from a material decline in short-term rates, and tighter repo funding spreads as monetary policy continues to ease.

Speaker #2: As rolls weaken and mortgage spreads tighten, we also adjust our hedge positions by increasing our TBA shorts, primarily in 5s through 6.5s. As mortgages tighten, we put on a little bit of basis hedge that's not material, but just sort of legging in as we saw mortgages tighten for several months in a row.

Hunter Haas: As rolls weaken and mortgage spreads tighten, we also adjust our hedge positions by increasing our TBA shorts, primarily in 5s through 6.5s. As mortgages tighten, we put on a little bit of basis hedge. It's not material, but, you know, just sort of legging in as we saw mortgages had tightened for several months in a row. We added pay fix swaps on the very front end of the curve, further improving our downside rate protection. Slide 22, in a little more detail. This slide helps visualize the hedge adjustments I just discussed. At the end of Q3, we had virtually no outright TBA hedges. The short positions you see here reflected a 15 30s coupon swap we had in place, which we'd maintained for several months.

As rolls weaken and mortgage spreads tighten, we also adjust our hedge positions by increasing our TBA shorts, primarily in 5s through 6.5s. As mortgages tighten, we put on a little bit of basis hedge. It's not material, but, you know, just sort of legging in as we saw mortgages had tightened for several months in a row. We added pay fix swaps on the very front end of the curve, further improving our downside rate protection. Slide 22, in a little more detail. This slide helps visualize the hedge adjustments I just discussed. At the end of Q3, we had virtually no outright TBA hedges. The short positions you see here reflected a 15 30s coupon swap we had in place, which we'd maintained for several months.

Speaker #2: We added pay-fix swaps on the very front end of the curve for improving our downside rate protection. Slide 22, a little more detail.

Speaker #2: This slide helps visualize the hedge adjustments I just discussed. At the end of the third quarter, we had virtually no outright TBA hedges. The short positions you see here reflected a 15s/30s coupon swap we had in place.

Speaker #2: Which we maintained for several months. Now, as shown here, we're outright short 5.5s and 6.5s. And we put on a small short at 5s in early January.

Hunter Haas: Now shown here, we're outright short 5.5s and 6.5s, and we put on a small short in 5s, in early January. On the Treasury hedge side, we continue to reduce our exposure there, and it's reflected in the top left table. And then as we acquired new specified pools, we hedged them almost entirely with interest rate swaps, and we were focused more on the very front end of the curve. As rates come down, the duration of the portfolio shortened, and we put these hedges on, at a time when there were still several rate cuts, baked into 2026, which has unwound a little bit since.

Now shown here, we're outright short 5.5s and 6.5s, and we put on a small short in 5s, in early January. On the Treasury hedge side, we continue to reduce our exposure there, and it's reflected in the top left table. And then as we acquired new specified pools, we hedged them almost entirely with interest rate swaps, and we were focused more on the very front end of the curve. As rates come down, the duration of the portfolio shortened, and we put these hedges on, at a time when there were still several rate cuts, baked into 2026, which has unwound a little bit since.

Speaker #2: On the Treasury hedge side, we continue to reduce our exposure there, and it's reflected in the top left table. And then, as we acquired new specified pools, we hedged them almost entirely with interest rate swaps.

Speaker #2: And we were focused more on the very front end of the curve. As rates come down, the duration of the portfolio shortened. And we put these hedges on at a time when there were still several rate cuts baked into 2026.

Speaker #2: Which is unwound a little bit since. Net of the unwinds that we did during the quarter, we added 950 million to your pay fix swaps, 800 million three years, 90 million five years, and 75 million in seven years.

Hunter Haas: Net of the unwinds that we did during the quarter, we added $950 million two-year pay fix swaps, $800 million three years, $90 million five years, and $75 million in seven years. The strategy is aimed at locking in the, as I said, the, the market-predicted rate cuts, while fine-tuning the hedge book to account for, the shorter net duration of the, the portfolio. On slide 23, just going to kind of quickly go over some of the risk metrics in the portfolio. We like to follow these measures. You'll notice the portfolio duration remains low at 2.08. That's a direct result of our higher coupon SKU, which carries less duration exposure than the lower coupon alternatives....

Net of the unwinds that we did during the quarter, we added $950 million two-year pay fix swaps, $800 million three years, $90 million five years, and $75 million in seven years. The strategy is aimed at locking in the, as I said, the, the market-predicted rate cuts, while fine-tuning the hedge book to account for, the shorter net duration of the, the portfolio. On slide 23, just going to kind of quickly go over some of the risk metrics in the portfolio. We like to follow these measures. You'll notice the portfolio duration remains low at 2.08. That's a direct result of our higher coupon SKU, which carries less duration exposure than the lower coupon alternatives....

Speaker #2: The strategies aimed at locking in, as I said, market-predicted rate cuts, while fine-tuning the hedge book to account for the shorter net duration of the portfolio.

Speaker #2: Slide 23, just going to kind of quickly go over some of the risk metrics in the portfolio. We like to follow these measures. You'll notice the portfolio duration remains low at 2.08.

Speaker #2: That's a direct result of our higher coupon SKU, which carries less duration exposure than the lower coupon alternatives. The shorter duration profile is a key part of our risk management strategy.

Hunter Haas: The shorter duration profile is a key part of our risk management strategy. It performed better in a sell-off or a spread widening event, which we think could occur. It offers us more defensive positioning than the threes, three and a halves, and fours, which we sold in December. On the other hand, this profile will benefit less from further tightening, which we've actually have seen in January, which is consistent with our modestly lagging performance versus what some of the peer group has reported since Trump's announcement in January, how they wanted the GSEs to purchase $200 billion more MBS in their retained portfolios. Also, just want to note the OAS shown here.

The shorter duration profile is a key part of our risk management strategy. It performed better in a sell-off or a spread widening event, which we think could occur. It offers us more defensive positioning than the threes, three and a halves, and fours, which we sold in December. On the other hand, this profile will benefit less from further tightening, which we've actually have seen in January, which is consistent with our modestly lagging performance versus what some of the peer group has reported since Trump's announcement in January, how they wanted the GSEs to purchase $200 billion more MBS in their retained portfolios. Also, just want to note the OAS shown here.

Speaker #2: It performed better in a sell-off or a spread widening event, which we think could occur. It offers us more defensive positioning than the 3s, 3.5s, and 4s, which we sold in December.

Speaker #2: On the other hand, this profile will benefit less from further tightening, which we actually saw in January. This is consistent with our modestly lagging performance.

Speaker #2: Versus what some of the other peer group has reported since Trump's announcement in January of how they wanted the GSEs to purchase.

Speaker #2: A $200 billion more MBS in their retained portfolios. Also, just want to note that OAS shown here—SOFR OAS for 5s to 6.5s remains quite attractive in the 50 to 60 basis point range.

Hunter Haas: So for OAS, for fives to 6.5 remains quite attractive in the 50 to 60 basis point range, reflecting our strong call protection in our portfolio. For comparison, when we published the Q2 earnings call deck, the same OAS levels were at least 20 basis points wider. This tightening reflects improved technicals and more constructive tone in agency MBS markets, but also speaks to how well-timed our 2025 purchases were. Slide 24, I'll discuss the interest rate risk profile. You can see we continue to maintain a very flat interest rate profile. You'll notice the portfolio has some negative convexity. This is reflected in the fact that both the +50 and -50 interest rate shocks show small mark-to-market losses.

So for OAS, for fives to 6.5 remains quite attractive in the 50 to 60 basis point range, reflecting our strong call protection in our portfolio. For comparison, when we published the Q2 earnings call deck, the same OAS levels were at least 20 basis points wider. This tightening reflects improved technicals and more constructive tone in agency MBS markets, but also speaks to how well-timed our 2025 purchases were. Slide 24, I'll discuss the interest rate risk profile. You can see we continue to maintain a very flat interest rate profile. You'll notice the portfolio has some negative convexity. This is reflected in the fact that both the +50 and -50 interest rate shocks show small mark-to-market losses.

Speaker #2: Reflecting our strong call protection in our portfolio. For comparison, when we published the Q2 earnings call deck, the same OAS levels were at least 20 basis points wider.

Speaker #2: This tightening reflects improved technicals and a more constructive tone in agency and MBS markets, but also speaks to how well-timed our 2025 purchases were. Slide 24, I'll discuss the interest rate risk profile.

Speaker #2: You can see we continue to maintain a very flat interest rate profile. You'll notice the portfolio has some negative convexity. This is reflected in the fact that both the plus 50 and minus 50 interest rate shocks show small mark-to-market losses.

Hunter Haas: It's a natural result of hedging a, a convex agency MBS asset with more linear instruments like swaps and futures. December 31st, our DV01 stood at $122,000 long. As of now, more recently, it's increased slightly to $178,000. The duration gap also moved modestly throughout the Q4. It was negative 0.07 years at 30 September, positive 0.12 years at 31 December, and currently sits at approximately 0.17 years. Turning to slide 25. Prepayment speeds were a major focus during the Q4, especially given our relative underperformance of up-in-coupon TBAs. However, as we've emphasized in the past, Orchid is exclusively invested in specified pools with call protection. And this positioning insulated us from the more dramatic impacts seen in the TBA markets.

Speaker #2: It's a natural result of hedging a convex agency MBS asset with more linear instruments like swaps and futures. On December 31st, our DBO1 stood at 122,000 long.

It's a natural result of hedging a, a convex agency MBS asset with more linear instruments like swaps and futures. December 31st, our DV01 stood at $122,000 long. As of now, more recently, it's increased slightly to $178,000. The duration gap also moved modestly throughout the Q4. It was negative 0.07 years at 30 September, positive 0.12 years at 31 December, and currently sits at approximately 0.17 years. Turning to slide 25. Prepayment speeds were a major focus during the Q4, especially given our relative underperformance of up-in-coupon TBAs. However, as we've emphasized in the past, Orchid is exclusively invested in specified pools with call protection. And this positioning insulated us from the more dramatic impacts seen in the TBA markets.

Speaker #2: As of now, more recently, it's increased slightly to 178,000. The duration gap also moved modestly throughout the fourth quarter. It was negative 0.07 years at 9:30.

Speaker #2: 0.12, positive 0.12 years at 1,231, and currently sits at approximately 0.17 years. Turning to slide 25, prepayment speeds were a major focus during the fourth quarter.

Speaker #2: Especially given our relative underperformance of up-and-coupon TPAs. However, as we've emphasized in the past, ORCID's exclusively invested in specified pools with call protection. And this positioning insulated us from the more dramatic impacts seen in the TBA markets.

Hunter Haas: That said, that said, sheets did trend a little bit higher in the quarter, particularly for sixes, sixes and higher coupons, which reduced carry slightly and trimmed yields in those positions. Looking forward, we expect prepaid speeds to moderate modestly, which would improve carry. We continue to closely monitor, in light of the potential Fed actions and influence of GSE-related policy headlines that could put a little bit of upward pressure on speeds. But I think that most of that is probably baked in at this point. To wrap it up, 2025 was a, was a great year for us. We took advantage of a dislocated market, while staying very disciplined with respect to risk and liquidity.

Speaker #2: That said, she did trend a little bit higher in the quarter, particularly for 6s and higher coupons. Which reduced carry slightly and trimmed yields in those positions.

That said, that said, sheets did trend a little bit higher in the quarter, particularly for sixes, sixes and higher coupons, which reduced carry slightly and trimmed yields in those positions. Looking forward, we expect prepaid speeds to moderate modestly, which would improve carry. We continue to closely monitor, in light of the potential Fed actions and influence of GSE-related policy headlines that could put a little bit of upward pressure on speeds. But I think that most of that is probably baked in at this point. To wrap it up, 2025 was a, was a great year for us. We took advantage of a dislocated market, while staying very disciplined with respect to risk and liquidity.

Speaker #2: Looking forward, we expect prepaid speeds to moderate modestly, which would improve carry. We continue to closely monitor this in light of potential Fed actions and the influence of GSE-related policy headlines that could put a little bit of upward pressure on speeds.

Speaker #2: But I think that most of that is probably baked in at this point. To wrap it up, 2025 was a great year for us.

Speaker #2: We took advantage of a dislocated market and stayed very disciplined with respect to risk and liquidity. We raised capital when spreads were wide.

Hunter Haas: We raised capital when spreads were wide, put it to work in production coupons, and call protected pools that should deliver great carry with lower interest rate sensitivity. We continue to manage our leverage tightly with a year, with the end of the year, with a very flat duration profile and our hedging where we see the most risk, which has continued to be sort of into a reignition of inflation type of bear steepening rate shock scenario. That's where we think that companies like ours get pinched the hardest. So with that, I'll turn it back over to Bob for his concluding remarks.

We raised capital when spreads were wide, put it to work in production coupons, and call protected pools that should deliver great carry with lower interest rate sensitivity. We continue to manage our leverage tightly with a year, with the end of the year, with a very flat duration profile and our hedging where we see the most risk, which has continued to be sort of into a reignition of inflation type of bear steepening rate shock scenario. That's where we think that companies like ours get pinched the hardest. So with that, I'll turn it back over to Bob for his concluding remarks.

Speaker #2: Put it to work in production coupons and call protected pools. That should deliver great carry with lower interest rate sensitivity. We continue to manage our leverage tightly with a year with the end of the year with a very flat duration profile.

Speaker #2: And our hedging, where we see the most risk, which has continued to be sort of into a reignition-of-inflation-type of bear steepening rate shock scenario.

Speaker #2: That's where we think that companies like ours get pinched the hardest. So with that, I'll turn it back over to Bob for his concluding remarks.

Speaker #2: All right, thanks, Hunter. Thank you very much. Just a couple of things I want to go over. Just kind of spend a few moments just talking about our outlook.

Robert Cauley: All right, thanks, Hunter. Thank you very much. Just a couple of things I want to go over. Just kind of spend a few moments just talking about our outlook. Hunter did a very good job of disclosing how, discussing how we're positioned and our hedge outlook and so forth. But it seems, even though mortgages have tightened quite a bit, based on what you see in the market and the sentiment in the market, it seems that it could continue, especially if you look at alternative assets available to multi-sector fixed income investors. Investment-Grade Corporate Spreads are at or near the tightest levels we've seen since the late nineties. High Yield Spreads are tight as well, and there's at least a prospect of the GSEs, you know, becoming more active.

Speaker #2: Hunter did a very good job of disclosing how—our discussing how we're positioned in our hedge outlook and so forth. But it seems even though mortgages have tightened quite a bit, based on what you see in the market and the sentiment in the market, it seems that it could continue.

Speaker #2: Especially if you look at alternative assets available to multi-sector fixed income investors. Investment-grade corporate spreads are at or near the tightest levels we've seen since the late '90s.

Speaker #2: High-yield spreads are tight as well. And there's at least a prospect of the GSEs becoming more active. I think it's debatable how much $200 billion per year represents in terms of an increase.

Robert Cauley: I think it's debatable how much $200 billion per year represents in terms of an increase, because from what we see, their current run rate is not far from that. But in any event, to the extent they become, stay there or become more active, you could see mortgages tighten further from here. And then with respect to just the rate outlook, generally speaking, and, you know, what, what would be on the horizon that would make you, make you think we're going to see a meaningful change? You know, there isn't anything really there now, although, as you know, those are famous last words. So to the extent we kind of stick around here and mortgages continue to grind tighter, the portfolio should do well.

I think it's debatable how much $200 billion per year represents in terms of an increase, because from what we see, their current run rate is not far from that. But in any event, to the extent they become, stay there or become more active, you could see mortgages tighten further from here. And then with respect to just the rate outlook, generally speaking, and, you know, what, what would be on the horizon that would make you, make you think we're going to see a meaningful change? You know, there isn't anything really there now, although, as you know, those are famous last words. So to the extent we kind of stick around here and mortgages continue to grind tighter, the portfolio should do well.

Speaker #2: Because from what we see, their current run rate's not far from that. But in any event, to the extent they stay there or become more active, you could see mortgages tighten further from here.

Speaker #2: And then, with respect to just the rate outlook generally speaking, and what would be on the horizon that would make you think we're going to see a meaningful change, there isn't anything really there now.

Speaker #2: Although, as you know, those are famous last words. So, to the extent we kind of stick around here, and mortgages continue to grind tighter, the portfolio should do well.

Robert Cauley: You know, everybody in our space has benefited from the benign rate environment in Q4 and really 2025 generally. We could see a continuation of that. Until we get the next black swan event or shock, it should remain a decent environment. Certainly, compared to a year ago, mortgages aren't as attractive. But that being said, I think it's unrealistic to think we could see some further tightening. One thing I do want to point out, though, which is, I think very important, I want to turn your attention to slide 7. We discussed this, Jerry went over this briefly, but what I want to point out, if you look on slide 7 in our balance sheet, you can see that the company basically doubled over the course of the year, size-wise.

You know, everybody in our space has benefited from the benign rate environment in Q4 and really 2025 generally. We could see a continuation of that. Until we get the next black swan event or shock, it should remain a decent environment. Certainly, compared to a year ago, mortgages aren't as attractive. But that being said, I think it's unrealistic to think we could see some further tightening. One thing I do want to point out, though, which is, I think very important, I want to turn your attention to slide 7. We discussed this, Jerry went over this briefly, but what I want to point out, if you look on slide 7 in our balance sheet, you can see that the company basically doubled over the course of the year, size-wise.

Speaker #2: Everybody in our space has benefited from the benign rate environment in the fourth quarter and really 2025 generally. We could see a continuation of that.

Speaker #2: And until we get the next black swan event or shock, it should remain a a year ago, mortgages aren't as attractive. But that being decent environment.

Speaker #2: I—and certainly compared to—don't think it's unrealistic to think we could see some further tightening. One thing I do want to point out, though, which I think is very important, I want to turn your attention to slide seven.

Speaker #2: And we discussed this; Jerry went over this briefly. But what I want to point out—if you look on slide seven in our balance sheet, you can see that the company basically doubled over the course of the year, size-wise.

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Q4 2025 Orchid Island Capital Inc Earnings Call

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Q4 2025 Orchid Island Capital Inc Earnings Call

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Orchid Island Capital

Q4 2025 Orchid Island Capital Inc Earnings Call

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