Third Quarter 2026
Filed Oct 22, 2026Net loss of $178.9 million, or $0.90 per common share, as losses on RMBS and derivative contracts outweighed $59.1 million of net interest income.
Third-quarter GAAP net loss was $178.9 million versus net income of $72.1 million in the prior-year quarter, driven by $231.7 million of losses on RMBS and derivative contracts. Book value per share declined $1.20 to $6.02 and total return was (12.47)%, despite wider reported interest spreads and substantial liquidity.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Interest income, three months ended September 30, 2026GAAP | $164.1M | down approximately $0.1 million | – |
| Interest expense, three months ended September 30, 2026GAAP | −$105.0M | – | – |
| Net interest income, three months ended September 30, 2026GAAP | $59.13M | – | – |
| Losses (gains) on RMBS and derivative contracts, three months ended September 30, 2026GAAP | −$231.7M | – | – |
| Net portfolio (loss) income, three months ended September 30, 2026GAAP | −$172.6M | – | – |
| Expenses, three months ended September 30, 2026GAAP | $6.33M | – | – |
| Net (loss) income, three months ended September 30, 2026GAAP | −$178.9M | – | – |
| Comprehensive net, three months ended September 30, 2026GAAP | −$179.2M | – | – |
| Basic and diluted net (loss) income per share, three months ended September 30, 2026GAAP | $(0.90) | – | – |
| Dividends declared per common share, three months ended September 30, 2026GAAP | $0.30 | – | – |
| Average yield on RMBS, three months ended September 30, 2026other | 5.91 % | – | – |
| Average cost of funds, three months ended September 30, 2026other | 3.92 % | – | – |
| Average economic cost of funds, three months ended September 30, 2026other | 3.43 % | – | – |
| Average interest rate spread, three months ended September 30, 2026other | 1.99 % | – | – |
| Average economic interest rate spread, three months ended September 30, 2026other | 2.48 % | – | – |
| Average RMBS, three months ended September 30, 2026other | $11.10B | – | – |
| Average repurchase agreements, three months ended September 30, 2026other | $10.72B | – | – |
| Average stockholders' equity, three months ended September 30, 2026other | $1.31B | – | – |
| Adjusted leverage ratio, three months ended September 30, 2026other | 8.8:1 | – | – |
| Economic leverage ratio, three months ended September 30, 2026other | 8.6:1 | – | – |
| Interest income, nine months ended September 30, 2026GAAP | $486.1M | – | – |
| Interest expense, nine months ended September 30, 2026GAAP | −$310.0M | – | – |
| Net interest income, nine months ended September 30, 2026GAAP | $176.2M | – | – |
| Losses (gains) on RMBS and derivative contracts, nine months ended September 30, 2026GAAP | −$265.4M | – | – |
| Net (loss) income, nine months ended September 30, 2026GAAP | −$109.7M | – | – |
| Basic and diluted net (loss) income per share, nine months ended September 30, 2026GAAP | $(0.56) | – | – |
| Dividends declared per common share, nine months ended September 30, 2026GAAP | $0.96 | – | – |
| Book value per share, September 30, 2026other | $6.02 | decreased by $1.20 per share in the third quarter of 2026 | – |
| Total return, third quarter 2026other | (12.47)% | – | – |
| Three-month constant prepayment rate, quarter ended September 30, 2026other | approximately 8.4% | – | – |
| Total mortgage assets, September 30, 2026other | $10.67B | – | – |
| Total stockholders' equity, September 30, 2026GAAP | 1,171,836 | – | – |
| Total assets, September 30, 2026GAAP | $12.02B | – | – |
| Total liabilities, September 30, 2026GAAP | 10,852,171 | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- Third quarter dividends declared and paid of $0.30 per common share.
- During the three months ended September 30, 2026, the Company repurchased a total of 4,946,123 shares at an aggregate cost of approximately $31.2 million including commissions and fees, for a weighted average price of $6.30 per share.
- Subsequent to September 30, 2026, the Company repurchased a total of 1,669,704 shares at an aggregate cost of approximately $ 8.4 million including commissions and fees, for a weighted average price of $ 5.05 per share.
- The remaining authorization under the stock repurchase program as of October 22, 2026 was 19,996,753 shares.
- On October 14, 2026, the Company declared a dividend of $0.10 per share to be paid on November 27, 2026.
- For the nine months ended September 30, 2026, the Company issued a total of 18,558,681 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 137.7 million, and net proceeds of approximately $ 135.5 million, after commissions and fees.
What drove it
- Net interest income was $59.1 million, or $0.30 per common share, in the third quarter.
- The yield on average Agency RMBS was 5.91% for the third quarter of 2026, compared with 5.74% in the second quarter of 2026.
- The average interest rate spread was 1.99 % and the average economic interest rate spread was 2.48 % for the third quarter.
- Management stated that it increased hedge coverage and extended hedge duration as market conditions deteriorated and leverage increased.
- The portfolio consisted of $ 10,655,685 of fixed rate RMBS, representing 99.9 % of the portfolio, at September 30, 2026.
- The Company had $ 7,864,200 of interest rate swap notional amount at September 30, 2026, with an average fixed pay rate of 3.63 % and an average maturity of 4.7 years.
Concerns
- The Company recorded net realized and unrealized losses of $231.7 million on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.
- Book value per common share decreased by $1.20 to $6.02 during the third quarter of 2026.
- Management described the third quarter as presenting very challenging market conditions, including a significant increase in interest rates, widespread deleveraging and forced selling in the Agency RMBS market, and higher implied interest-rate volatility.
- The adjusted leverage ratio was 8.8 to 1 and the economic leverage ratio was 8.6 to 1 at September 30, 2026.
- The portfolio effective duration was 4.327 at September 30, 2026, compared with 2.513 at December 31, 2025.
- The Company experienced a slight 6.7% reduction in portfolio size, according to management.
What to watch
- Whether Agency RMBS spreads recover and/or rates decrease, which management identified as relevant to book-value recovery potential.
- The effect of higher funding levels from Fed interest-rate hikes on funding costs and the portfolio's higher-coupon, low-premium specified pools.
- Prepayment speeds after the portfolio's three-month CPR declined to approximately 8.4% for the quarter ended September 30, 2026.
- The impact of nearly 100% hedge coverage and increased hedge duration on economic funding costs and interest-rate exposure.
- Further execution under the 19,996,753-share remaining repurchase authorization and the regular monthly dividend policy.
Balance sheet and cash flow
- Cash, cash equivalents and restricted cash were 613,968 at September 30, 2026, compared with 724,561 at December 31, 2025.
- Liquidity was approximately $515.7 million consisting of cash and cash equivalents and unpledged securities at September 30, 2026.
- Outstanding repurchase obligations were approximately $10.4 billion with a net weighted average borrowing rate of 3.99%.
- Repurchase agreements were $ 10,361,717 at September 30, 2026, compared with $ 10,115,466 at December 31, 2025.
- Repurchase agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $10.7 billion and cash pledged to counterparties of approximately $ 130.0 million.
- The Company's portfolio received $306.0 million in scheduled and unscheduled principal repayments and prepayments during the quarter ended September 30, 2026.
Analysis
Orchid Island reported a third-quarter GAAP net loss of $178.9 million, or $0.90 per common share, compared with GAAP net income of $72.1 million, or $0.53 per share, in the three months ended September 30, 2025. The principal driver was $231.7 million of losses on RMBS and derivative contracts. Net interest income nevertheless rose to $59.1 million from $26.9 million in the prior-year quarter, while expenses were $6.3 million versus $5.4 million.
The income profile improved on reported spread measures. Average Agency RMBS yield was 5.91 %, compared with 5.65 % a year earlier and 5.74% in the second quarter of 2026. Average cost of funds was 3.92 %, compared with 4.45 % a year earlier but up from 3.80% in the second quarter. The average interest rate spread was 1.99 % and the average economic interest rate spread was 2.48 %, compared with 1.20 % and 2.40 %, respectively, in the prior-year quarter. Prepayment activity moderated, with the three-month CPR at approximately 8.4%, versus 10.9 in the preceding quarter and 10.1 in the prior-year quarter.
Market dislocation had a substantial effect on shareholder value. Book value per share was $6.02 at September 30, 2026 after decreasing by $1.20 per share during the quarter, and total return was (12.47)%. Management attributed the conditions to higher rates, Agency RMBS deleveraging and forced selling, and higher implied volatility. It responded by increasing notional hedge balances to near 100% coverage and extending hedge duration, while using less than $400 million of modest asset sales and retaining monthly pay-downs to limit leverage expansion.
The balance sheet remained highly leveraged but liquid. Adjusted leverage was 8.8:1 and economic leverage was 8.6:1, while repurchase agreements totaled $ 10,361,717 at September 30, 2026. Liquidity was approximately $515.7 million, and the release cited borrowing capacity in excess of outstanding repurchase agreement balances across 33 active lenders. The portfolio's effective duration was 4.327, compared with 2.513 at December 31, 2025, increasing the stated sensitivity of RMBS portfolio value to an interest-rate increase.
Capital allocation favored repurchases during the sell-off. Orchid repurchased 4,946,123 shares for approximately $31.2 million in the third quarter and 1,669,704 shares for approximately $ 8.4 million after quarter-end through October 22. It also declared and paid $0.30 per common share for the third quarter and declared a $0.10 per-share dividend on October 14, 2026, payable November 27, 2026. The release provided no forward financial guidance.
Management, verbatim
Our objective was to maximize our book value recovery potential if spreads recovered and/or rates decreased and to sustain the dividend.
Robert E. Cauley, Chairman and Chief Executive Officer
To the extent the market has fully stabilized now, we are quite comfortable with our positioning.
Robert E. Cauley, Chairman and Chief Executive Officer
Not in the filing
stated, not guessed- Forward revenue, margin, operating-expense, tax-rate, earnings-per-share, book-value, leverage, dividend or capital-allocation guidance was not provided.
- Prior outlook was not provided, so no comparison of actual results with prior guidance is available.
- Revenue was not reported as a line item.
- Gross margin was not reported.
- Operating income was not reported.
- Cash flow from operations and free cash flow were not reported.
- Segment revenue and segment operating metrics were not reported.
- Non-GAAP financial measures were not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.