Orchid Island Capital Announces Fourth Quarter 2022 Results
Orchid Island Capital (NYSE:ORC) reported a net income of $34.9 million ($0.95 per share) for Q4 2022, recovering from a net loss of $44.6 million in Q4 2021. Total expenses were $5.9 million. The company declared dividends of $0.48 per share for Q4, with a full-year dividend of $2.475 per share. Orchid's book value increased to $11.93 per share. The total return for Q4 was 8.67%, driven by a $0.51 increase in book value. However, for the full year, Orchid reported a net loss of $258.5 million. The portfolio's Agency RMBS decreased to $3.5 billion from $6.5 billion in 2021. Liquidity remained strong at $233 million, representing 53% of stockholder's equity.
- Q4 2022 net income of $34.9 million compared to a net loss of $44.6 million in Q4 2021.
- Dividends declared were $0.48 per share for Q4 and $2.475 per share for the full year.
- Book value per share increased to $11.93.
- Total return for Q4 was 8.67%.
- Full year net loss of $258.5 million, worsening from a loss of $64.8 million in 2021.
- Decrease in Agency RMBS portfolio from $6.5 billion to $3.5 billion.
Fourth Quarter 2022 Results
-
Net income of
, or$34.9 million per common share, which consists of:$0.95 -
Net interest income of
, or$2.4 million per common share$0.06 -
Total expenses of
, or$5.9 million per common share$0.16 -
Net realized and unrealized gains of
, or$38.4 million per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps$1.04 -
Fourth quarter and full year total dividends declared and paid of
and$0.48 per common share, respectively$2.47 5 -
Book value per common share of
at$11.93 December 31, 2022 -
Total return of
8.67% , comprised of dividend per common share and$0.48 increase in book value per common share, divided by beginning book value per common share$0.51
Other Financial Highlights
-
Orchid maintained a strong liquidity position of
in cash and cash equivalents and unpledged RMBS, or$233.0 million 53% of stockholder’s equity as ofDecember 31, 2022 -
Borrowing capacity in excess of
December 31, 2022 outstanding repurchase agreement balances of , spread across 20 active lenders$3,378.5 million -
Company to discuss results on
Friday, February 24, 2023 , at10:00 AM ET - Supplemental materials to be discussed on the call can be downloaded from the investor relations section of the Company’s website at https://ir.orchidislandcapital.com
Management Commentary
Commenting on the fourth quarter results,
“As incoming data over the course of the fourth quarter of 2022 and early first quarter of 2023 appeared to be consistent with the markets' thesis that inflation had peaked and the economy was slowing, confidence grew that the Fed would need to pivot and start to reduce monetary policy later in 2023. This led to a material change in risk sentiment during the fourth quarter and risk assets performed very well. The Agency RMBS market returns for 2022 were negative – down
“For Orchid, our performance during the fourth quarter benefited from our exposure to lower coupon, longer duration securities that we owned throughout 2022. While such securities generate less interest income, they have contributed significantly to our book value performance over the last two months of 2022 and into 2023. In conjunction with the Company’s short positions in lower coupon TBAs we have been able to manage our risk to higher rates while also capturing book value appreciation as the market has rallied since late October, all the while maintaining an economic leverage ratio on the low end of our typical range. We anticipate maintaining these lower coupon holdings as a core position for the time being and have added higher coupons with new capital and pay-downs, while still maintaining a lower coupon bias. As always, if market conditions change, we expect to adapt our positions accordingly. With the incoming data and market reaction observed so far in February this may indeed be occurring.”
Details of Fourth Quarter 2022 Results of Operations
The Company reported net income of
Book value increased by
Details of Full Year 2022 Results of Operations
The Company reported a net loss of
Prepayments
For the quarter ended
|
|
|
|
Structured |
|
|
|
|
PT RMBS |
RMBS |
Total |
||
Three Months Ended |
|
Portfolio (%) |
Portfolio (%) |
Portfolio (%) |
||
|
|
4.9 |
|
6.0 |
|
5.0 |
|
|
6.1 |
|
10.4 |
|
6.5 |
|
|
8.3 |
|
13.7 |
|
9.4 |
|
|
8.1 |
|
19.5 |
|
10.7 |
|
|
9.0 |
|
24.6 |
|
11.4 |
|
|
9.8 |
|
25.1 |
|
12.4 |
|
|
10.9 |
|
29.9 |
|
12.9 |
|
|
9.9 |
|
40.3 |
|
12.0 |
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of
($ in thousands) |
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Weighted |
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Percentage |
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Average |
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of |
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Weighted |
|
Maturity |
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|||
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Fair |
Entire |
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Average |
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in |
Longest |
|||||
Asset Category |
|
Value |
Portfolio |
|
Coupon |
|
Months |
Maturity |
|||||
|
|
|
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|
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
|
$ |
3,519,906 |
99.4 |
% |
|
3.47 |
% |
|
339 |
|
||
|
|
19,669 |
0.6 |
% |
|
4.01 |
% |
|
234 |
|
|||
|
|
427 |
0.0 |
% |
|
0.00 |
% |
|
286 |
|
|||
Total Mortgage Assets |
|
$ |
3,540,002 |
100.0 |
% |
|
3.46 |
% |
|
336 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
|
$ |
6,298,189 |
96.7 |
% |
|
2.93 |
% |
|
342 |
|
||
|
|
210,382 |
3.2 |
% |
|
3.40 |
% |
|
263 |
|
|||
|
|
2,524 |
0.1 |
% |
|
3.75 |
% |
|
300 |
|
|||
Total Mortgage Assets |
|
$ |
6,511,095 |
100.0 |
% |
|
3.03 |
% |
|
325 |
|
($ in thousands) |
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Percentage of |
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|
Percentage of |
||
Agency |
|
Fair Value |
Entire Portfolio |
|
Fair Value |
Entire Portfolio |
||||||
Fannie Mae |
|
$ |
2,320,960 |
65.6 |
% |
|
$ |
4,719,349 |
72.5 |
% |
||
Freddie Mac |
|
1,219,042 |
34.4 |
% |
|
1,791,746 |
27.5 |
% |
||||
Total Portfolio |
|
$ |
3,540,002 |
100.0 |
% |
|
$ |
6,511,095 |
100.0 |
% |
|
|
|
|
|
||
|
|
$ |
106.41 |
|
$ |
107.19 |
Weighted Average Structured Purchase Price |
|
$ |
18.74 |
|
$ |
15.21 |
|
|
$ |
91.46 |
|
$ |
105.31 |
Weighted Average Structured Current Price |
|
$ |
14.05 |
|
$ |
14.08 |
Effective Duration (1) |
|
|
5.580 |
|
|
3.390 |
(1) |
Effective duration of 5.580 indicates that an interest rate increase of |
Financing, Leverage and Liquidity
As of
($ in thousands) |
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Weighted |
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|
Weighted |
|
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|
Total |
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|
|
Average |
|
|
|
|
Average |
|||
|
|
Outstanding |
% of |
|
Borrowing |
|
Amount |
Maturity |
||||||
Counterparty |
|
Balances |
Total |
|
Rate |
|
at Risk(1) |
in Days |
||||||
|
|
312,989 |
9.1 |
% |
|
4.23 |
% |
|
$ |
14,741 |
76 |
|||
|
|
274,790 |
8.1 |
% |
|
4.50 |
% |
|
8,379 |
29 |
||||
|
|
251,854 |
7.5 |
% |
|
4.48 |
% |
|
10,024 |
17 |
||||
|
|
240,587 |
7.1 |
% |
|
4.49 |
% |
|
9,729 |
28 |
||||
|
|
238,212 |
7.1 |
% |
|
4.47 |
% |
|
9,677 |
33 |
||||
|
|
229,444 |
6.8 |
% |
|
4.46 |
% |
|
11,805 |
29 |
||||
ABN AMRO Bank N.V. |
|
227,888 |
6.7 |
% |
|
4.48 |
% |
|
5,672 |
13 |
||||
|
|
219,283 |
6.5 |
% |
|
4.49 |
% |
|
12,507 |
12 |
||||
|
|
192,467 |
5.7 |
% |
|
4.47 |
% |
|
6,910 |
9 |
||||
|
|
190,956 |
5.7 |
% |
|
4.32 |
% |
|
10,354 |
9 |
||||
|
|
184,375 |
5.5 |
% |
|
4.45 |
% |
|
9,299 |
26 |
||||
|
|
178,394 |
5.3 |
% |
|
4.36 |
% |
|
5,603 |
21 |
||||
|
|
165,172 |
4.9 |
% |
|
4.50 |
% |
|
9,075 |
35 |
||||
|
|
124,821 |
3.7 |
% |
|
4.53 |
% |
|
7,944 |
26 |
||||
|
|
115,477 |
3.4 |
% |
|
4.39 |
% |
|
5,749 |
24 |
||||
|
|
95,366 |
2.8 |
% |
|
4.46 |
% |
|
5,071 |
12 |
||||
|
|
77,708 |
2.3 |
% |
|
4.37 |
% |
|
4,365 |
23 |
||||
|
|
37,198 |
1.1 |
% |
|
4.48 |
% |
|
1,834 |
17 |
||||
|
|
18,703 |
0.6 |
% |
|
4.38 |
% |
|
883 |
12 |
||||
|
|
2,761 |
0.1 |
% |
|
4.38 |
% |
|
123 |
12 |
||||
Total / Weighted Average |
|
$ |
3,378,445 |
100.0 |
% |
|
4.44 |
% |
|
$ |
149,744 |
27 |
(1) |
Equal to the sum of the fair value of securities sold, accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities, accrued interest payable and the fair value of securities posted by the counterparties (if any). |
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
The table below presents information related to the Company’s T-Note futures contracts at
($ in thousands) |
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Average |
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Weighted |
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Weighted |
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Contract |
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Average |
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Average |
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Notional |
|
Entry |
|
|
Effective |
|
|
Open |
|
||
Expiration Year |
|
Amount |
|
Rate |
|
|
Rate |
|
|
Equity(1) |
|
||
|
|
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|
|
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|
|
|
$ |
750,500 |
|
4.20 |
% |
|
4.22 |
% |
|
$ |
(100 |
) |
|
|
$ |
174,500 |
|
3.66 |
% |
|
3.79 |
% |
|
$ |
965 |
|
(1) |
Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. |
|
(2) |
5-Year T-Note futures contracts were valued at a price of |
The table below presents information related to the Company’s interest rate swap positions at
($ in thousands) |
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Average |
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|
Net |
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|||
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|
|
|
|
Fixed |
|
Average |
|
Estimated |
Average |
||||
|
|
Notional |
Pay |
|
Receive |
|
Fair |
Maturity |
||||||
|
|
Amount |
Rate |
|
Rate |
|
Value |
(Years) |
||||||
Expiration > 3 to ≤ 5 years |
|
$ |
500,000 |
0.84 |
% |
|
4.75 |
% |
|
$ |
56,764 |
3.7 |
||
Expiration > 5 years |
|
900,000 |
1.70 |
% |
|
4.23 |
% |
|
105,638 |
6.6 |
||||
|
|
$ |
1,400,000 |
1.39 |
% |
|
4.41 |
% |
|
$ |
162,402 |
5.6 |
The following table presents information related to our interest rate swaption positions as of
($ in thousands) |
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Option |
Underlying Swap |
|||||||||||||||||
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Weighted |
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Average |
|
Weighted |
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|
|
|
|
|
Average |
|
|
|
|
Average |
Adjustable |
|
Average |
||
|
|
|
|
|
|
Fair |
|
Months to |
Notional |
|
Fixed |
Rate |
|
Term |
||||||
Expiration |
|
Cost |
|
Value |
|
Expiration |
Amount |
|
Rate |
(LIBOR) |
|
(Years) |
||||||||
Payer Swaptions (long positions) |
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
≤ 1 year |
|
$ |
36,685 |
|
$ |
21,253 |
|
9.6 |
$ |
1,250,000 |
|
4.09 |
% |
3 Month |
|
10.0 |
||||
> 10 years |
|
11,021 |
|
12,145 |
|
239.5 |
120,000 |
|
2.05 |
% |
3 Month |
|
10.0 |
|||||||
|
|
$ |
47,706 |
|
$ |
33,398 |
|
29.8 |
$ |
1,370,000 |
|
3.91 |
% |
3 Month |
|
10.0 |
||||
Payer Swaptions (short positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
≤ 1 year |
|
$ |
(17,800 |
) |
|
$ |
(5,982 |
) |
|
3.6 |
$ |
(917,000 |
) |
|
4.09 |
% |
3 Month |
|
10.0 |
The following table presents information related to our interest cap positions as of
($ in thousands) |
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|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
Strike |
|
|
Estimated |
||
|
|
Notional |
|
|
|
Swap |
Curve |
|
Fair |
||||
Expiration |
|
Amount |
Cost |
Rate |
Spread |
|
Value |
||||||
|
|
$ |
200,000 |
$ |
1,450 |
0.09 |
% |
2Y10Y |
|
$ |
1,119 |
The following table summarizes our contracts to sell TBA securities as of
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
|
|
|
|
|
|
|
Net |
||||
|
|
Amount |
|
Cost |
|
Market |
|
Carrying |
||||||||
|
|
Long (Short)(1) |
|
Basis(2) |
|
Value(3) |
|
Value(4) |
||||||||
|
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|
|
|
30-Year TBA securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(175,000 |
) |
|
$ |
(142,268 |
) |
|
$ |
(143,145 |
) |
|
$ |
(877 |
) |
|
|
(500,000 |
) |
|
(440,644 |
) |
|
(440,274 |
) |
|
370 |
|||||
|
|
$ |
(675,000 |
) |
|
$ |
(582,912 |
) |
|
$ |
(583,419 |
) |
|
$ |
(507 |
) |
(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. |
Dividends
In addition to other requirements that must be satisfied to qualify as a REIT, we must pay annual dividends to our stockholders of at least
(in thousands, except per share amounts) |
|
|
|
|
|
|
Year |
|
Per Share
|
Total |
|||
2013 |
|
$ |
6.975 |
$ |
4,662 |
|
2014 |
|
10.800 |
22,643 |
|||
2015 |
|
9.600 |
38,748 |
|||
2016 |
|
8.400 |
41,388 |
|||
2017 |
|
8.400 |
70,717 |
|||
2018 |
|
5.350 |
55,814 |
|||
2019 |
|
4.800 |
54,421 |
|||
2020 |
|
3.950 |
53,570 |
|||
2021 |
|
3.900 |
97,601 |
|||
2022 |
|
2.475 |
87,906 |
|||
2023 YTD(1) |
|
0.320 |
12,540 |
|||
Totals |
|
$ |
64.970 |
$ |
540,010 |
(1) |
On |
Book Value Per Share
The Company's book value per share at
Capital Allocation and Return on
The Company allocates capital to two RMBS sub-portfolios, the pass-through RMBS portfolio, consisting of mortgage pass-through certificates issued by Fannie Mae, Freddie Mac or
The table below details the changes to the respective sub-portfolios during the quarter.
(in thousands) |
|
|||||||||||||||||||
Portfolio Activity for the Quarter |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
||||||||||
|
|
Pass-Through |
|
Interest-Only |
|
Inverse Interest |
|
|
|
|
|
|
|
|
||||||
|
|
Portfolio |
|
Securities |
|
Only Securities |
|
Sub-total |
|
Total |
||||||||||
Market value - |
|
$ |
3,150,403 |
|
$ |
50,274 |
|
$ |
537 |
|
$ |
50,811 |
|
$ |
3,201,214 |
|||||
Securities purchased |
|
381,991 |
|
- |
|
- |
|
- |
|
381,991 |
||||||||||
Securities sold |
|
- |
|
(28,422 |
) |
|
- |
|
(28,422 |
) |
|
(28,422 |
) |
|||||||
Losses on sales |
|
- |
|
(1,023 |
) |
|
- |
|
(1,023 |
) |
|
(1,023 |
) |
|||||||
Return of investment |
|
n/a |
|
(933 |
) |
|
38 |
|
(895 |
) |
|
(895 |
) |
|||||||
Pay-downs |
|
(62,670 |
) |
|
n/a |
|
- |
|
n/a |
|
(62,670 |
) |
||||||||
Discount accretion due to pay-downs |
|
6,748 |
|
n/a |
|
- |
|
n/a |
|
6,748 |
||||||||||
Mark to market gains (losses) |
|
43,434 |
|
(227 |
) |
|
(148 |
) |
|
(375 |
) |
|
43,059 |
|||||||
Market value - |
|
$ |
3,519,906 |
|
$ |
19,669 |
|
$ |
427 |
|
$ |
20,096 |
|
$ |
3,540,002 |
The tables below present the allocation of capital between the respective portfolios at
($ in thousands) |
|
|||||||||||||||||||
Capital Allocation |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
||||||||||
|
|
Pass-Through |
|
Interest-Only |
|
Inverse Interest |
|
|
|
|
|
|
|
|
||||||
|
|
Portfolio |
|
Securities |
|
Only Securities |
|
Sub-total |
|
Total |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
3,519,906 |
|
$ |
19,669 |
|
$ |
427 |
|
$ |
20,096 |
|
$ |
3,540,002 |
|||||
Cash |
|
237,219 |
|
- |
|
- |
|
- |
|
237,219 |
||||||||||
Borrowings(1) |
|
(3,378,445 |
) |
|
- |
|
- |
|
- |
|
(3,378,445 |
) |
||||||||
Total |
|
$ |
378,680 |
|
$ |
19,669 |
|
$ |
427 |
|
$ |
20,096 |
|
$ |
398,776 |
|||||
% of Total |
|
95.0 |
% |
|
4.9 |
% |
|
0.1 |
% |
|
5.0 |
% |
|
100.0 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
3,150,403 |
|
$ |
50,274 |
|
$ |
537 |
|
$ |
50,811 |
|
$ |
3,201,214 |
|||||
Cash |
|
280,952 |
|
- |
|
- |
|
- |
|
280,952 |
||||||||||
Borrowings(2) |
|
(3,133,861 |
) |
|
- |
|
- |
|
- |
|
(3,133,861 |
) |
||||||||
Total |
|
$ |
297,494 |
|
$ |
50,274 |
|
$ |
537 |
|
$ |
50,811 |
|
$ |
348,305 |
|||||
% of Total |
|
85.4 |
% |
|
14.4 |
% |
|
0.2 |
% |
|
14.6 |
% |
|
100.0 |
% |
(1) |
At |
|
(2) |
At |
The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately
($ in thousands) |
|
|||||||||||||||||||
Returns for the Quarter Ended |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
||||||||||
|
|
Pass-Through |
|
Interest-Only |
|
Inverse Interest |
|
|
|
|
|
|
|
|
||||||
|
|
Portfolio |
|
Securities |
|
Only Securities |
|
Sub-total |
|
Total |
||||||||||
Income (net of borrowing cost) |
|
$ |
1,692 |
|
$ |
594 |
|
$ |
100 |
|
$ |
694 |
|
$ |
2,386 |
|||||
Realized and unrealized gains (losses) |
|
50,446 |
|
(1,250 |
) |
|
(148 |
) |
|
(1,398 |
) |
|
49,048 |
|||||||
Derivative losses (gains) |
|
(10,658 |
) |
|
n/a |
|
n/a |
|
n/a |
|
(10,658 |
) |
||||||||
Total Return |
|
$ |
41,480 |
|
$ |
(656 |
) |
|
$ |
(48 |
) |
|
$ |
(704 |
) |
|
$ |
40,776 |
||
Beginning Capital Allocation |
|
$ |
297,494 |
|
$ |
50,274 |
|
$ |
537 |
|
$ |
50,811 |
|
$ |
348,305 |
|||||
Return on |
|
13.9 |
% |
|
(1.3 |
)% |
|
(8.9 |
)% |
|
(1.4 |
)% |
|
11.7 |
% |
|||||
Average Capital Allocation(2) |
|
$ |
338,087 |
|
$ |
34,972 |
|
$ |
482 |
|
$ |
35,454 |
|
$ |
373,541 |
|||||
Return on |
|
12.3 |
% |
|
(1.9 |
)% |
|
(10.0 |
)% |
|
(2.0 |
)% |
|
10.9 |
% |
(1) |
Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage. |
|
(2) |
Calculated using two data points, the Beginning and Ending Capital Allocation balances. |
|
(3) |
Calculated by dividing the Total Return by the Average Capital Allocation, expressed as a percentage. |
Stock Offerings
On
Stock Repurchase Program
On
From the inception of the stock repurchase program through
Earnings Conference Call Details
An earnings conference call and live audio webcast will be hosted
About
Forward Looking Statements
Statements herein relating to matters that are not historical facts, including, but not limited to statements regarding interest rates, inflation, liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio positioning and repositioning, hedging levels, leverage ratio, dividends, growth, the supply and demand for Agency RMBS and the performance of the Agency RMBS sector generally, the effect of actual or expected actions of the
View source version on businesswire.com: https://www.businesswire.com/news/home/20230223005701/en/
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
Source:
FAQ
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