Orchid Island Capital, Inc.
For the period ended Oct 22, 2026. Filed Oct 22, 2026.
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Oct 22, 2026 · Filed Oct 22, 2026
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Contents
EX-99.1 · Hedging
Hedging
In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding against a rise in interest rates by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted accounting principles (“GAAP”) in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these instruments are reflected in earnings for all periods presented. At September 30, 2026, such instruments were comprised of U.S. Treasury note (“T-Note”) and Secured Overnight Financing Rate ("SOFR") futures contracts, interest rate swap agreements and to-be-announced ("TBA") securities contracts.
The table below presents information related to the Company’s T-Note and SOFR futures contracts at September 30, 2026.
| ($ in thousands) | ||||
|---|---|---|---|---|
| Average · Weighted · Weighted | ||||
| Contract · Average · Average | ||||
| Notional | Entry | Effective | Open | |
| Expiration Year | Amount | Rate | Rate | Equity(1) |
| Treasury Note Futures Contracts (Short Positions) | ||||
| December 2026 10-year T-Note futures (Dec 2026 - Dec 2036 Hedge Period)(2) | $858,600 | 4.90% | 5.24% | $17,763 |
| December 2026 10-year Ultra futures (Dec 2026 - Dec 2036 Hedge Period)(3) | 560,000 | 4.95% | 5.33% | 16,963 |
| December 2026 30-year Ultra futures (Dec 2026 - Dec 2056 Hedge Period)(4) | 150,000 | 5.69% | 5.75% | 1,313 |
| SOFR Futures Contracts (Short Positions) | ||||
| December 2026 3-Month SOFR futures (Sep 2026 - Dec 2026 Hedge Period) | $97,500 | 3.27% | 3.97% | $681 |
| March 2027 3-Month SOFR futures (Dec 2026 - Mar 2027 Hedge Period) | 97,500 | 3.22% | 4.30% | 1,056 |
| June 2027 3-Month SOFR futures (Mar 2027 - Jun 2027 Hedge Period) | 97,500 | 3.21% | 4.61% | 1,368 |
| ERIS SOFR Swap Futures Contracts (Short Positions)(5) | ||||
| December 2026 5-Year Term, 3.75% fixed rate, (Dec 2026 - Dec 2031 Hedge Period) | $10,000 | 4.52% | 4.86% | $145 |
| (1) | Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. |
| (2) | 10-Year T-Note futures contracts were valued at a price of $104.20 at September 30, 2026. The aggregate contract values of the short positions were $894.7 million at September 30, 2026. |
| (3) | 10-Year Ultra futures contracts were valued at a price of $105.00 at September 30, 2026. The aggregate contract values of the short positions were $588.0 million at September 30, 2026. |
| (4) | 30-Year T-Note Ultra futures contracts were valued at a price $103.59 at September 30, 2026. The contract value of the short position was $155.4 million at September 30, 2026. |
| (5) | ERIS swap futures are exchange traded futures that replicate the cash flows of an underlying swap position. |
The table below presents information related to the Company’s interest rate swap positions at September 30, 2026.
| ($ in thousands) | ||||
|---|---|---|---|---|
| Average | ||||
| Fixed · Average · Average | ||||
| Notional | Pay | Receive | Maturity | |
| Amount | Rate | Rate | (Years) | |
| Expiration > 1 to ≤ 5 years | $5,292,800 | 3.47% | 3.90% | 2.9 |
| Expiration > 5 years | 2,571,400 | 3.97% | 3.90% | 8.3 |
| $7,864,200 | 3.63% | 3.90% | 4.7 | |
The following table summarizes our contracts to sell TBA securities as of September 30, 2026.
| ($ in thousands) | ||||
|---|---|---|---|---|
| Notional | ||||
| Amount · Net | ||||
| Long · Cost · Market · Carrying | ||||
| (Short)(1) · Basis(2) · Value(3) · Value(4) | ||||
| 15-Year TBA securities: | ||||
| 5.5% | 100,000 | 99,703 | 98,523 | (1,180) |
| 30-Year TBA securities: | ||||
| 5.0% | (345,000) | (331,555) | (319,152) | 12,403 |
| 6.0% | (70,000) | (69,716) | (68,453) | 1,263 |
| $ (315,000) | $ (301,568) | $ (289,082) | $ 12,486 | |
| (1) | Notional amount represents the par value (or principal balance) of the underlying Agency RMBS. |
| (2) | Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS. |
| (3) | Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end. |
| (4) | Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities) at fair value in our balance sheets. |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.