ORC - Orchid Island Capital turns in Q2 earnings beat amid 'lower coupon bias'

2023-07-27 16:40:43 ET

Orchid Island Capital ( NYSE: ORC ) stock drove up 2.3% in Thursday after-hours trading after the mortgage REIT delivered Q2 earnings that exceeded the average analyst estimate, aided by its exposure to lower coupon, longer duration securities.

Q2 GAAP EPS of $0.25 , vs. $0.09 expected, compared with -$0.24 in the prior quarter and -$1.70 in the year-earlier period.

“Orchid has maintained a lower coupon bias throughout the tightening cycle as we believe these securities still offer superior total return potential over new origination, higher coupon securities," said Chairman and CEO Robert E. Cauley.

During Q2, he added, Orchid ( ORC ) raised $48M of new capital and "deployed the proceeds into higher coupon, low pay-up specified pools and hedged these positions predominantly with swaps. With the U.S. Treasury curve inverted as much as it is our hedge positions allow us to earn approximately 100 basis points of marginal net interest income on the new securities."

Going forward, Cauley said the company does not expect to change its strategy "other than possibly adding current income securities hedged with interest rate swaps to increase our net interest income, assuming we can add additional capital at attractive levels."

Q2 book value of per share was $11.16 at June 30, 2023, down from $11.55 at March 31, 2023.

Net interest expense of $8.8M compared with $4.2M in the prior quarter.

Conference call on July 28 at 10:00 a.m. ET.

More on Orchid Island Capital:

• Orchid Island Capital GAAP EPS of $0.25 beats by $0.16
• Orchid Island Capital: Looks Like A Yield Trap

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