Orchid Island Capital Announces Fourth Quarter 2023 Results
- Net income of $27.1 million for the fourth quarter of 2023
- Book value per common share of $9.10 at the end of 2023
- Total return of 6.05%
- Strong liquidity position of $200.4 million
- Borrowing capacity in excess of $3,705.7 million
- Net loss of $39.2 million for the full year 2023
Insights
The financial results reported by Orchid Island Capital, Inc. for the fourth quarter and full year of 2023 show a net income of $27.1 million for the fourth quarter, a significant improvement from the net loss of $39.2 million for the entire year. This turnaround is primarily attributed to net realized and unrealized gains on RMBS and derivative instruments. The company's strategy to reduce leverage and decrease the size of the portfolio during periods of poor mortgage performance and increased interest rates has likely contributed to the stabilization of their book value, which increased from $8.92 to $9.10 per share.
Investors should note the company's effective duration, which indicates sensitivity to interest rate changes. The decrease from 5.580 to 4.400 suggests a reduced interest rate risk profile, likely due to the company's hedging activities. The total return of 6.05%, inclusive of dividends and book value increase, is a key metric for evaluating the performance of a REIT like Orchid. The company's liquidity position and borrowing capacity provide a buffer against market volatility, which is reassuring for investors concerned about short-term cash flow needs.
However, the net interest spread being negative in both the third and fourth quarters indicates that the cost of borrowing was higher than the income generated from the RMBS portfolio, a factor that could impact future profitability if not addressed. The constant prepayment rate (CPR) of 5.5% is also worth noting, as it influences the yield on the RMBS portfolio and the company's interest income.
Orchid Island Capital's positioning within the broader market is reflective of the fixed income market's performance in the latter part of 2023. The company's Agency MBS portfolio outperformed several sectors, benefiting from the overall positive returns in fixed income markets. This performance is particularly notable given the negative year-to-date returns observed in the fixed income markets as of November 1, 2023.
The decline in interest rates towards the end of the quarter, as indicated by the drops in the yield on 2-year and 10-year U.S. Treasuries, has likely contributed to the positive performance of Orchid's portfolio and book value. This decline also aligns with the broader equity market returns, with the S&P 500 showing strong performance. The company's strategic adjustments in response to market conditions, such as reducing exposure to lower coupon securities and increasing the weighted average coupon, demonstrate a proactive approach to asset management that could be favorable for long-term growth.
Investors should consider the implications of the Federal Reserve's potential rate cuts on Orchid's funding costs and earnings. If the Fed reduces rates, Orchid's funding costs may decrease, potentially leading to increased earnings and a more favorable economic interest spread, which widened from 1.33% to 2.35% by year-end.
Orchid Island Capital's results must be contextualized within the economic environment, particularly the monetary policy landscape. The Fed's signaling of a potential halt in rate hikes and possible rate cuts if inflation continues to moderate has significant implications for Orchid's business model. As a REIT, Orchid's performance is sensitive to interest rate movements and the Fed's future decisions could either alleviate or exacerbate cost pressures associated with their repurchase agreement funding.
The company's adjusted leverage ratio of 7.9 to 1 is an important indicator of financial risk. While leverage can amplify returns, it can also increase vulnerability to market fluctuations. The company's liquidity position and diversified borrowing across 21 active lenders mitigate some of this risk, but the leverage ratio remains a critical factor for assessing the company's financial health.
Moreover, the economic interest spread improvement suggests that Orchid has been able to manage its funding costs effectively despite the Fed's rate hikes. This spread is a vital indicator of the company's ability to generate profit from its spread business and its expansion is a positive sign. However, the sustainability of this spread amid changing economic conditions remains uncertain and requires ongoing scrutiny.
Fourth Quarter 2023 Results
-
Net income of
$27.1 million $0.52 -
Net interest expense of
$(2.8) million $(0.05) -
Total expenses of
$4.1 million $0.08 -
Net realized and unrealized gains of
$34.0 million $0.65
-
Net interest expense of
-
Fourth quarter and full year total dividends declared and paid of
$0.36 $1.80 -
Book value per common share of
$9.10 -
Total return of
6.05% , comprised of$0.36 $0.18
Other Financial Highlights
-
Orchid maintained a strong liquidity position of
$200.4 million 43% of stockholder’s equity as of December 31, 2023 -
Borrowing capacity in excess of December 31, 2023 outstanding repurchase agreement balances of
$3,705.7 million - Company to discuss results on Friday, February 2, 2024, at 10:00 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, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The last quarter of 2023 may prove to be a very pivotal period. At the conclusion of the third quarter of 2023 several factors were driving interest rates rapidly higher and the market fully expected rates to remain higher for an extended period. Rapidly expanding federal deficits were a key driver and the Federal Reserve’s (the "Fed") own outlook, expressed via their quarterly “dot plots,” reflected rates remaining high through 2024. The outlook began to change in early November. The impetus was twofold. Economic data, particularly inflation data, appeared to moderate. The Fed reacted to this development in their public comments. Even the Chairman at the press conference at the conclusion of their December meeting strongly hinted that if inflation continued to moderate, they were done raising rates and they would likely cut rates – perhaps relatively soon.
“The markets reacted strongly to these developments. Risk assets of all types performed very well over the balance of the fourth quarter. Several sectors of the fixed income markets with negative year to date returns as of November 1, 2023 ended the quarter and year with positive returns. Interest rates ended the quarter significantly lower than the levels at September 30, 2023, even after rising significantly during October. The yield on the 2-year
“Orchid’s book value increased over the quarter, from
“As we enter 2024 the steps taken in 2023 should serve us well. We have reduced our exposure to lower coupon securities and increased the weighted average coupon of the portfolio from
Details of Fourth Quarter 2023 Results of Operations
The Company reported net income of
Book value increased by
Details of Full Year 2023 Results of Operations
The Company reported a net loss of
Prepayments
For the quarter ended December 31, 2023, Orchid received
|
|
|
|
|
|
Structured |
|
|
|
|
|
|
|
|
PT RMBS |
|
|
RMBS |
|
|
Total |
|
|||
Three Months Ended |
|
Portfolio (%) |
|
|
Portfolio (%) |
|
|
Portfolio (%) |
|
|||
December 31, 2023 |
|
|
5.4 |
|
|
|
7.9 |
|
|
|
5.5 |
|
September 30, 2023 |
|
|
6.1 |
|
|
|
5.7 |
|
|
|
6.0 |
|
June 30, 2023 |
|
|
5.6 |
|
|
|
7.0 |
|
|
|
5.6 |
|
March 31, 2023 |
|
|
3.9 |
|
|
|
5.7 |
|
|
|
4.0 |
|
December 31, 2022 |
|
|
4.9 |
|
|
|
6.0 |
|
|
|
5.0 |
|
September 30, 2022 |
|
|
6.1 |
|
|
|
10.4 |
|
|
|
6.5 |
|
June 30, 2022 |
|
|
8.3 |
|
|
|
13.7 |
|
|
|
9.4 |
|
March 31, 2022 |
|
|
8.1 |
|
|
|
19.5 |
|
|
|
10.7 |
|
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of December 31, 2023 and December 31, 2022:
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Average |
|
|
||
|
|
|
|
|
|
of |
|
|
Weighted |
|
|
Maturity |
|
|
|||
|
|
Fair |
|
|
Entire |
|
|
Average |
|
|
in |
|
Longest |
||||
Asset Category |
|
Value |
|
|
Portfolio |
|
|
Coupon |
|
|
Months |
|
Maturity |
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
|
$ |
3,877,082 |
|
|
|
99.6 |
% |
|
|
4.33 |
% |
|
|
334 |
|
1-Nov-53 |
Interest-Only Securities |
|
|
16,572 |
|
|
|
0.4 |
% |
|
|
4.01 |
% |
|
|
223 |
|
25-Jul-48 |
Inverse Interest-Only Securities |
|
|
358 |
|
|
|
0.0 |
% |
|
|
0.00 |
% |
|
|
274 |
|
15-Jun-42 |
Total Mortgage Assets |
|
$ |
3,894,012 |
|
|
|
100.0 |
% |
|
|
4.30 |
% |
|
|
331 |
|
1-Nov-53 |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
|
$ |
3,519,906 |
|
|
|
99.4 |
% |
|
|
3.47 |
% |
|
|
339 |
|
1-Nov-52 |
Interest-Only Securities |
|
|
19,669 |
|
|
|
0.6 |
% |
|
|
4.01 |
% |
|
|
234 |
|
25-Jul-48 |
Inverse Interest-Only Securities |
|
|
427 |
|
|
|
0.0 |
% |
|
|
0.00 |
% |
|
|
286 |
|
15-Jun-42 |
Total Mortgage Assets |
|
$ |
3,540,002 |
|
|
|
100.0 |
% |
|
|
3.46 |
% |
|
|
336 |
|
1-Nov-52 |
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
||
Agency |
|
Fair Value |
|
|
Entire Portfolio |
|
|
Fair Value |
|
|
Entire Portfolio |
|
||||
Fannie Mae |
|
$ |
2,714,192 |
|
|
|
69.7 |
% |
|
$ |
2,320,960 |
|
|
|
65.6 |
% |
Freddie Mac |
|
|
1,179,820 |
|
|
|
30.3 |
% |
|
|
1,219,042 |
|
|
|
34.4 |
% |
Total Portfolio |
|
$ |
3,894,012 |
|
|
|
100.0 |
% |
|
$ |
3,540,002 |
|
|
|
100.0 |
% |
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
||
Weighted Average Pass-through Purchase Price |
|
$ |
104.10 |
|
|
$ |
106.41 |
|
Weighted Average Structured Purchase Price |
|
$ |
18.74 |
|
|
$ |
18.74 |
|
Weighted Average Pass-through Current Price |
|
$ |
95.70 |
|
|
$ |
91.46 |
|
Weighted Average Structured Current Price |
|
$ |
13.51 |
|
|
$ |
14.05 |
|
Effective Duration (1) |
|
|
4.400 |
|
|
|
5.580 |
|
(1) |
Effective duration of 4.400 indicates that an interest rate increase of |
Financing, Leverage and Liquidity
As of December 31, 2023, the Company had outstanding repurchase obligations of approximately
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
||
|
|
Total |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|||
|
|
Outstanding |
|
|
% of |
|
|
Borrowing |
|
|
Amount |
|
|
Maturity |
|
|||||
Counterparty |
|
Balances |
|
|
Total |
|
|
Rate |
|
|
at Risk(1) |
|
|
in Days |
|
|||||
RBC Capital Markets, LLC |
|
|
300,275 |
|
|
|
8.1 |
% |
|
|
5.53 |
% |
|
$ |
9,705 |
|
|
|
16 |
|
Citigroup Global Markets Inc |
|
|
298,549 |
|
|
|
8.1 |
% |
|
|
5.55 |
% |
|
|
15,832 |
|
|
|
26 |
|
Mitsubishi UFJ Securities ( |
|
|
284,167 |
|
|
|
7.7 |
% |
|
|
5.57 |
% |
|
|
15,761 |
|
|
|
22 |
|
J.P. Morgan Securities LLC |
|
|
266,958 |
|
|
|
7.2 |
% |
|
|
5.54 |
% |
|
|
14,264 |
|
|
|
18 |
|
Cantor Fitzgerald & Co |
|
|
257,999 |
|
|
|
7.0 |
% |
|
|
5.54 |
% |
|
|
12,990 |
|
|
|
44 |
|
ASL Capital Markets Inc. |
|
|
244,611 |
|
|
|
6.6 |
% |
|
|
5.53 |
% |
|
|
13,391 |
|
|
|
17 |
|
Wells Fargo Bank, N.A. |
|
|
218,540 |
|
|
|
5.9 |
% |
|
|
5.56 |
% |
|
|
11,522 |
|
|
|
26 |
|
Mirae Asset Securities ( |
|
|
200,200 |
|
|
|
5.4 |
% |
|
|
5.53 |
% |
|
|
8,721 |
|
|
|
52 |
|
Merrill Lynch, Pierce, Fenner & Smith |
|
|
193,715 |
|
|
|
5.2 |
% |
|
|
5.56 |
% |
|
|
13,036 |
|
|
|
16 |
|
Daiwa Securities America Inc. |
|
|
179,787 |
|
|
|
4.9 |
% |
|
|
5.54 |
% |
|
|
6,862 |
|
|
|
24 |
|
ABN AMRO Bank N.V. |
|
|
177,114 |
|
|
|
4.8 |
% |
|
|
5.55 |
% |
|
|
10,102 |
|
|
|
20 |
|
Bank of Montreal |
|
|
169,041 |
|
|
|
4.6 |
% |
|
|
5.55 |
% |
|
|
9,112 |
|
|
|
16 |
|
StoneX Financial Inc. |
|
|
168,852 |
|
|
|
4.6 |
% |
|
|
5.55 |
% |
|
|
9,023 |
|
|
|
16 |
|
Goldman, Sachs & Co |
|
|
160,410 |
|
|
|
4.3 |
% |
|
|
5.56 |
% |
|
|
8,533 |
|
|
|
18 |
|
Banco Santander SA |
|
|
154,412 |
|
|
|
4.2 |
% |
|
|
5.53 |
% |
|
|
7,670 |
|
|
|
71 |
|
ING Financial Markets LLC |
|
|
128,758 |
|
|
|
3.5 |
% |
|
|
5.55 |
% |
|
|
5,498 |
|
|
|
16 |
|
Marex Capital Markets Inc. |
|
|
115,143 |
|
|
|
3.1 |
% |
|
|
5.52 |
% |
|
|
4,385 |
|
|
|
10 |
|
DV Securities, LLC Repo |
|
|
88,423 |
|
|
|
2.4 |
% |
|
|
5.55 |
% |
|
|
5,105 |
|
|
|
48 |
|
South Street Securities, LLC |
|
|
80,295 |
|
|
|
2.2 |
% |
|
|
5.57 |
% |
|
|
4,131 |
|
|
|
59 |
|
Lucid Cash Fund USG LLC |
|
|
9,840 |
|
|
|
0.3 |
% |
|
|
5.55 |
% |
|
|
768 |
|
|
|
18 |
|
Lucid Prime Fund, LLC |
|
|
8,560 |
|
|
|
0.2 |
% |
|
|
5.54 |
% |
|
|
474 |
|
|
|
18 |
|
Total / Weighted Average |
|
$ |
3,705,649 |
|
|
|
100.0 |
% |
|
|
5.55 |
% |
|
$ |
186,885 |
|
|
|
26 |
|
(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 and SOFR futures contracts at December 31, 2023.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Average |
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|||
|
|
Contract |
|
|
Average |
|
|
Average |
|
|
|
|
|
|||
|
|
Notional |
|
|
Entry |
|
|
Effective |
|
|
Open |
|
||||
Expiration Year |
|
Amount |
|
|
Rate |
|
|
Rate |
|
|
Equity(1) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2024 5-year T-Note futures (Mar 2024 - Mar 2029 Hedge Period) |
|
$ |
421,500 |
|
|
|
4.36 |
% |
|
|
4.04 |
% |
|
$ |
(9,936 |
) |
March 2024 10-year Ultra futures (Mar 2024 - Mar 2034 Hedge Period) |
|
|
320,000 |
|
|
|
4.38 |
% |
|
|
4.39 |
% |
|
$ |
(11,393 |
) |
SOFR Futures Contracts (Short Positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 2024 3-Month SOFR futures (Mar 2024 - Jun 2024 Hedge Period) |
|
$ |
25,000 |
|
|
|
5.08 |
% |
|
|
4.99 |
% |
|
$ |
(24 |
) |
September 2024 3-Month SOFR futures (Jun 2024 - Sep 2024 Hedge Period) |
|
|
25,000 |
|
|
|
4.67 |
% |
|
|
4.52 |
% |
|
$ |
(39 |
) |
December 2024 3-Month SOFR futures (Sep 2024 - Dec 2024 Hedge Period) |
|
|
25,000 |
|
|
|
4.27 |
% |
|
|
4.10 |
% |
|
$ |
(44 |
) |
March 2025 3-Month SOFR futures (Dec 2024 - Mar 2025 Hedge Period) |
|
|
25,000 |
|
|
|
3.90 |
% |
|
|
3.73 |
% |
|
$ |
(43 |
) |
June 2025 3-Month SOFR futures (Mar 2025 - Jun 2025 Hedge Period) |
|
|
25,000 |
|
|
|
3.58 |
% |
|
|
3.42 |
% |
|
$ |
(41 |
) |
September 2025 3-Month SOFR futures (Jun 2025 - Sep 2025 Hedge Period) |
|
|
25,000 |
|
|
|
3.37 |
% |
|
|
3.21 |
% |
|
$ |
(39 |
) |
December 2025 3-Month SOFR futures (Sep 2025 - Dec 2025 Hedge Period) |
|
|
25,000 |
|
|
|
3.25 |
% |
|
|
3.10 |
% |
|
$ |
(37 |
) |
March 2026 3-Month SOFR futures (Dec 2025 - Mar 2026 Hedge Period) |
|
|
25,000 |
|
|
|
3.21 |
% |
|
|
3.07 |
% |
|
$ |
(35 |
) |
(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 December 31, 2023.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
Average |
|
|
Average |
|
|||
|
|
Notional |
|
|
Pay |
|
|
Receive |
|
|
Maturity |
|
||||
|
|
Amount |
|
|
Rate |
|
|
Rate |
|
|
(Years) |
|
||||
Expiration > 1 to ≤ 5 years |
|
$ |
500,000 |
|
|
|
0.84 |
% |
|
|
5.64 |
% |
|
|
2.7 |
|
Expiration > 5 years |
|
|
1,826,500 |
|
|
|
2.62 |
% |
|
|
5.40 |
% |
|
|
6.8 |
|
|
|
$ |
2,326,500 |
|
|
|
2.24 |
% |
|
|
5.45 |
% |
|
|
5.9 |
|
The following table presents information related to our interest rate swaption positions as of December 31, 2023.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
|
Underlying Swap |
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Average |
|
Weighted |
|
||
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
Adjustable |
|
Average |
|
|||
|
|
|
|
|
|
Fair |
|
|
Months to |
|
|
Notional |
|
|
Fixed |
|
Rate |
|
Term |
|
|||||
Expiration |
|
Cost |
|
|
Value |
|
|
Expiration |
|
|
Amount |
|
|
Rate |
|
(LIBOR) |
|
(Years) |
|
||||||
Payer Swaptions (long positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
≤ 1 year |
|
$ |
1,619 |
|
|
$ |
72 |
|
|
|
5.0 |
|
|
$ |
800,000 |
|
|
|
5.40 |
% |
SOFR |
|
|
1.0 |
|
The following table summarizes our contracts to sell TBA securities as of December 31, 2023.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
|
|
|
|
|
|
|
|
Net |
|
||
|
|
Amount |
|
|
Cost |
|
|
Market |
|
|
Carrying |
|
||||
|
|
Long (Short)(1) |
|
|
Basis(2) |
|
|
Value(3) |
|
|
Value(4) |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-Year TBA securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(70,700 |
) |
|
$ |
(59,278 |
) |
|
$ |
(62,647 |
) |
|
$ |
(3,369 |
) |
|
|
|
(250,000 |
) |
|
|
(242,725 |
) |
|
|
(247,657 |
) |
|
|
(4,932 |
) |
|
|
|
(325,000 |
) |
|
|
(322,410 |
) |
|
|
(326,803 |
) |
|
|
(4,393 |
) |
|
|
$ |
(645,700 |
) |
|
$ |
(624,413 |
) |
|
$ |
(637,107 |
) |
|
$ |
(12,694 |
) |
(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 Amount |
|
|
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 |
|
|
1.800 |
|
|
|
81,127 |
|
2024 YTD(1) |
|
|
0.120 |
|
|
|
6,181 |
|
Totals |
|
$ |
66.570 |
|
|
$ |
614,778 |
|
(1) |
On January 10, 2024, the Company declared a dividend of |
Book Value Per Share
The Company's book value per share at December 31, 2023 was
Capital Allocation and Return on Invested Capital
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 Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”), and the structured RMBS portfolio, consisting of interest-only (“IO”) and inverse interest-only (“IIO”) securities. As of September 30, 2023, approximately
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 - September 30, 2023 |
|
$ |
4,502,115 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
4,520,225 |
|
Securities purchased |
|
|
77,243 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
77,243 |
|
Securities sold |
|
|
(797,633 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(797,633 |
) |
Losses on sales |
|
|
(22,642 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22,642 |
) |
Return of investment |
|
|
n/a |
|
|
|
(593 |
) |
|
|
- |
|
|
|
(593 |
) |
|
|
(593 |
) |
Pay-downs |
|
|
(88,223 |
) |
|
|
n/a |
|
|
|
- |
|
|
|
n/a |
|
|
|
(88,223 |
) |
Discount accretion due to pay-downs |
|
|
8,067 |
|
|
|
n/a |
|
|
|
- |
|
|
|
n/a |
|
|
|
8,067 |
|
Mark to market gains (losses) |
|
|
198,155 |
|
|
|
(668 |
) |
|
|
81 |
|
|
|
(587 |
) |
|
|
197,568 |
|
Market value - December 31, 2023 |
|
$ |
3,877,082 |
|
|
$ |
16,572 |
|
|
$ |
358 |
|
|
$ |
16,930 |
|
|
$ |
3,894,012 |
|
The tables below present the allocation of capital between the respective portfolios at December 31, 2023 and September 30, 2023, and the return on invested capital for each sub-portfolio for the three month period ended December 31, 2023.
($ in thousands) |
|
|||||||||||||||||||
Capital Allocation |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
3,877,082 |
|
|
$ |
16,572 |
|
|
$ |
358 |
|
|
$ |
16,930 |
|
|
$ |
3,894,012 |
|
Cash |
|
|
200,289 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
200,289 |
|
Borrowings(1) |
|
|
(3,705,649 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,705,649 |
) |
Total |
|
$ |
371,722 |
|
|
$ |
16,572 |
|
|
$ |
358 |
|
|
$ |
16,930 |
|
|
$ |
388,652 |
|
% of Total |
|
|
95.6 |
% |
|
|
4.3 |
% |
|
|
0.1 |
% |
|
|
4.4 |
% |
|
|
100.0 |
% |
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
4,502,115 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
4,520,225 |
|
Cash |
|
|
278,217 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
278,217 |
|
Borrowings(2) |
|
|
(4,426,947 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,426,947 |
) |
Total |
|
$ |
353,385 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
371,495 |
|
% of Total |
|
|
95.1 |
% |
|
|
4.8 |
% |
|
|
0.1 |
% |
|
|
4.9 |
% |
|
|
100.0 |
% |
(1) |
At December 31, 2023, there were outstanding repurchase agreement balances of |
(2) |
At September 30, 2023, there were outstanding repurchase agreement balances of |
The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately
($ in thousands) |
|
|||||||||||||||||||
Returns for the Quarter Ended December 31, 2023 |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
Income (net of borrowing cost) |
|
$ |
(3,191 |
) |
|
$ |
403 |
|
|
$ |
- |
|
|
$ |
403 |
|
|
$ |
(2,788 |
) |
Realized and unrealized gains (losses) |
|
|
183,580 |
|
|
|
(668 |
) |
|
|
81 |
|
|
|
(587 |
) |
|
|
182,993 |
|
Derivative losses |
|
|
(149,016 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
(149,016 |
) |
Total Return |
|
$ |
31,373 |
|
|
$ |
(265 |
) |
|
$ |
81 |
|
|
$ |
(184 |
) |
|
$ |
31,189 |
|
Beginning Capital Allocation |
|
$ |
353,385 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
371,495 |
|
Return on Invested Capital for the Quarter(1) |
|
|
8.9 |
% |
|
|
(1.5 |
)% |
|
|
29.2 |
% |
|
|
(1.0 |
)% |
|
|
8.4 |
% |
Average Capital Allocation(2) |
|
$ |
362,554 |
|
|
$ |
17,203 |
|
|
$ |
318 |
|
|
$ |
17,521 |
|
|
$ |
380,075 |
|
Return on Average Invested Capital for the Quarter(3) |
|
|
8.7 |
% |
|
|
(1.5 |
)% |
|
|
25.5 |
% |
|
|
(1.1 |
)% |
|
|
8.2 |
% |
(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 March 7, 2023, we entered into an equity distribution agreement (the “March 2023 Equity Distribution Agreement”) with three sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of
Stock Repurchase Program
On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of our common stock. The timing, manner, price and amount of any repurchases is determined by the Company in its discretion and is subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate the Company to acquire any particular amount of common stock and the program may be suspended or discontinued at the Company’s discretion without prior notice. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 904,564 shares of the Company’s common stock. Coupled with the 156,751 shares remaining from the original 400,000 share authorization, the increased authorization brought the total authorization to 1,061,315 shares, representing
From the inception of the stock repurchase program through December 31, 2023, the Company repurchased a total of 4,748,361 shares at an aggregate cost of approximately
Earnings Conference Call Details
An earnings conference call and live audio webcast will be hosted Friday, February 2, 2024, at 10:00 AM ET. The conference call may be accessed by dialing toll free (800) 715-9871. The conference passcode is 8307491. The supplemental materials may be downloaded from the investor relations section of the Company’s website at https://ir.orchidislandcapital.com. A live audio webcast of the conference call can be accessed via the investor relations section of the Company’s website at https://ir.orchidislandcapital.com, and an audio archive of the webcast will be available until March 1, 2024.
About Orchid Island Capital, Inc.
Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS, such as mortgage pass-through certificates, and CMOs issued by the GSEs, and (ii) structured Agency RMBS, such as IOs, IIOs and principal only securities, among other types of structured Agency RMBS. Orchid is managed by Bimini Advisors, LLC, a registered investment adviser with the Securities and Exchange Commission.
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 costs, prepayment speeds, portfolio positioning and repositioning, hedging levels, book value, leverage ratio, earnings, dividends 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
Summarized Financial Statements
The following is a summarized presentation of the unaudited balance sheets as of December 31, 2023 and 2022 ,and the unaudited quarterly statements of operations for the twelve and three months ended December 31, 2023 and 2022. Amounts presented are subject to change.
ORCHID ISLAND CAPITAL, INC. |
BALANCE SHEETS |
($ in thousands, except per share data) |
(Unaudited - Amounts Subject to Change) |
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
||
ASSETS: |
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
3,894,012 |
|
|
$ |
3,540,002 |
|
|
|
148,820 |
|
|
36,382 |
|
||
Cash, cash equivalents and restricted cash |
|
|
200,289 |
|
|
|
237,219 |
|
Accrued interest receivable |
|
|
14,951 |
|
|
|
11,519 |
|
Derivative assets, at fair value |
|
|
6,420 |
|
|
|
40,172 |
|
Other assets |
|
|
455 |
|
|
|
442 |
|
Total Assets |
|
$ |
4,264,947 |
|
|
$ |
3,865,736 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Repurchase agreements |
|
$ |
3,705,649 |
|
|
$ |
3,378,445 |
|
Payable of investment securities purchased |
|
|
60,454 |
|
|
|
- |
|
Dividends payable |
|
|
6,222 |
|
|
|
5,908 |
|
Derivative liabilities, at fair value |
|
|
12,694 |
|
|
|
7,161 |
|
Accrued interest payable |
|
|
7,939 |
|
|
|
9209 |
|
Due to affiliates |
|
|
1,013 |
|
|
|
1,131 |
|
Other liabilities |
|
|
1,031 |
|
|
|
25,119 |
|
Total Liabilities |
|
|
3,795,002 |
|
|
|
3,426,973 |
|
Total Stockholders' Equity |
|
|
469,945 |
|
|
|
438,763 |
|
Total Liabilities and Stockholders' Equity |
|
$ |
4,264,947 |
|
|
$ |
3,865,736 |
|
Common shares outstanding |
|
|
51,636,074 |
|
|
|
36,764,983 |
|
Book value per share |
|
$ |
9.10 |
|
|
$ |
11.93 |
|
ORCHID ISLAND CAPITAL, INC. |
STATEMENTS OF COMPREHENSIVE INCOME |
($ in thousands, except per share data) |
(Unaudited - Amounts Subject to Change) |
|
|
Years Ended December 31, |
|
|
Three Months Ended December 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Interest income |
|
$ |
177,569 |
|
|
$ |
144,633 |
|
|
$ |
49,539 |
|
|
$ |
31,898 |
|
Interest expense |
|
|
(201,918 |
) |
|
|
(61,708 |
) |
|
|
(52,325 |
) |
|
|
(29,512 |
) |
Net interest (expense) income |
|
|
(24,349 |
) |
|
|
82,925 |
|
|
|
(2,786 |
) |
|
|
2,386 |
|
Gains (losses) on RMBS and derivative contracts |
|
|
3,654 |
|
|
|
(323,929 |
) |
|
|
33,977 |
|
|
|
36,728 |
|
Net portfolio (loss) income |
|
|
(20,695 |
) |
|
|
(241,004 |
) |
|
|
31,191 |
|
|
|
39,114 |
|
Expenses |
|
|
18,531 |
|
|
|
17,449 |
|
|
|
4,064 |
|
|
|
4,188 |
|
Net (loss) income |
|
$ |
(39,226 |
) |
|
$ |
(258,453 |
) |
|
$ |
27,127 |
|
|
$ |
34,926 |
|
Other comprehensive income |
|
|
17 |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
Comprehensive net |
|
$ |
(39,209 |
) |
|
$ |
(258,453 |
) |
|
$ |
27,128 |
|
|
$ |
34,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss) income per share |
|
$ |
(0.89 |
) |
|
$ |
(6.90 |
) |
|
$ |
0.52 |
|
|
$ |
0.95 |
|
Weighted Average Shares Outstanding |
|
|
44,649,039 |
|
|
|
37,464,671 |
|
|
|
52,396,001 |
|
|
|
36,786,056 |
|
Dividends Declared Per Common Share: |
|
$ |
1.800 |
|
|
$ |
2.475 |
|
|
$ |
0.360 |
|
|
$ |
0.480 |
|
|
|
Three Months Ended December 31, |
|
|||||
Key Balance Sheet Metrics |
|
2023 |
|
|
2022 |
|
||
Average RMBS(1) |
|
$ |
4,207,118 |
|
|
$ |
3,370,608 |
|
Average repurchase agreements(1) |
|
|
4,066,298 |
|
|
|
3,256,153 |
|
Average stockholders' equity(1) |
|
|
468,393 |
|
|
|
419,570 |
|
Adjusted leverage ratio(2) |
|
7.9:1 |
|
|
7.7:1 |
|
||
Economic leverage ratio(3) |
|
6.7:1 |
|
|
6.3:1 |
|
||
|
|
|
|
|
|
|
|
|
Key Performance Metrics |
|
|
|
|
|
|
|
|
Average yield on RMBS(4) |
|
|
4.71 |
% |
|
|
3.79 |
% |
Average cost of funds(4) |
|
|
5.15 |
% |
|
|
3.63 |
% |
Average economic cost of funds(5) |
|
|
2.36 |
% |
|
|
2.47 |
% |
Average interest rate spread(6) |
|
|
(0.44 |
)% |
|
|
0.16 |
% |
Average economic interest rate spread(7) |
|
|
2.35 |
% |
|
|
1.32 |
% |
(1) |
Average RMBS, borrowings and stockholders’ equity balances are calculated using two data points, the beginning and ending balances. |
(2) |
The adjusted leverage ratio is calculated by dividing ending repurchase agreement liabilities by ending stockholders’ equity. |
(3) |
The economic leverage ratio is calculated by dividing ending total liabilities adjusted for net notional TBA positions by ending stockholders' equity. |
(4) |
Portfolio yields and costs of funds are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the quarterly periods presented. |
(5) |
Represents the interest cost of our borrowings and the effect of derivative agreements attributed to the period related to hedging activities, divided by average borrowings. |
(6) |
Average interest rate spread is calculated by subtracting average cost of funds from average yield on RMBS. |
(7) |
Average economic interest rate spread is calculated by subtracting average economic cost of funds from average yield on RMBS. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240201758251/en/
Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
Source: Orchid Island Capital, Inc.
FAQ
What was Orchid Island Capital, Inc.'s net income for the fourth quarter of 2023?
What was Orchid Island Capital, Inc.'s book value per common share at the end of 2023?
What was Orchid Island Capital, Inc.'s total return for 2023?
What was Orchid Island Capital, Inc.'s liquidity position at the end of 2023?
What was Orchid Island Capital, Inc.'s borrowing capacity at the end of 2023?
What was Orchid Island Capital, Inc.'s net loss for the full year 2023?
