Form 8-K - Current report

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 30, 2025

 

Orchid Island Capital, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland	001-35236	27-3269228
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

3305 Flamingo Drive, Vero Beach, Florida 32963

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code [phone]

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:	Trading symbol:	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	ORC	NYSE

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02. Results of Operations and Financial Condition.

 

On January 30, 2025, Orchid Island Capital, Inc. (the “Company”) issued the press release attached hereto as Exhibit 99.1 announcing the Company’s results of operations for the period ended December 31, 2024. In addition, the Company posted the supplemental financial information on the investor relations section of its website (https://ir.orchidislandcapital.com). The press release, attached as Exhibit 99.1, is being filed under this “Item 2.02 Results of Operations and Financial Condition,” and shall be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. The information on the Company's website, including the supplemental financial information described in this Item 2.02, is not incorporated by reference into this Current Report on Form 8-K or in any disclosure document of the Company except as shall be expressly set forth therin.

 

Caution About Forward-Looking Statements.

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws, 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 U.S. government, including the Federal Reserve, market expectations, future opportunities and prospects of the Company, the stock repurchase program and general economic conditions. These forward-looking statements are based upon the Company’s present expectations, but the Company cannot assure investors that actual results will not vary from the expectations contained in the forward-looking statements. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which has been filed with the Securities and Exchange Commission ("SEC"), and other documents that the Company files with the SEC. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect the Company. Except as required by law, the Company is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.		Description
99.1		Press Release dated January 30, 2025
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: January 30, 2025		ORCHID ISLAND CAPITAL, INC.
	By:	/s/ Robert E. Cauley
		Robert E. Cauley
		Chairman and Chief Executive Officer

 

 

Exhibit 99.1

 

 

ORCHID ISLAND CAPITAL ANNOUNCES FOURTH QUARTER 2024 RESULTS

 

VERO BEACH, Fla. (January 30, 2025) – Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid” or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three and twelve month periods ended December 31, 2024.

 

Fourth Quarter 2024 Results

●

Net income of $5.6 million, or $0.07 per common share, which consists of:

●

Net interest income of $8.1 million, or $0.10 per common share

●

Total expenses of $4.4 million, or $0.05 per common share

●

Net realized and unrealized gains of $1.8 million, or $0.02 per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps

●

Fourth quarter total dividends declared and paid of $0.36 per common share

●

Total return of 0.60%, comprised of $0.36 dividends per common share and a $0.31 decrease in book value per common share, divided by beginning book value per common share

 

Full-year 2024 Results

●

Net income of $37.8 million, or $0.57 per common share, which consists of:

●

Net interest income of $5.3 million, or $0.08 per common share

●

Total expenses of $16.7 million, or $0.26 per common share

●

Net realized and unrealized gains of $49.1 million, or $0.75 per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps

●

Full year total dividends declared and paid of $1.44 per common share

●

Total return of 4.73%, comprised of $1.44 dividends per common share and a $1.01 decrease in book value per common share, divided by beginning book value per common share

 

Other Financial Highlights

	●	Book value per common share of $8.09 at December 31, 2024
	●	Orchid maintained a strong liquidity position of $353.6 million in cash and cash equivalents and unpledged securities (net of unsettled purchased securities), or 53% of stockholder’s equity as of December 31, 2024

●

Borrowing capacity in excess of December 31, 2024 outstanding repurchase agreement balances of $5,025.5 million, spread across 25 active lenders

●

Company to discuss results on Friday, January 31, 2025, 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 outlook for the fixed income market pivoted early in the fourth quarter of 2024.  As the third quarter came to an end, inflation was falling towards the Federal Reserve's (the "Fed") 2% target, the labor market was cooling, hiring levels had moderated and the unemployment rate was slowly creeping higher. As a result of these economic conditions, the Fed finally lowered the Fed funds rate by 50 basis points in September 2024.  At the time, the market expected the Fed to lower the rate by over 200 basis points over the next 18 months. Beginning early in the fourth quarter, the incoming data turned.  Readings on the labor market stabilized and hiring stopped slowing.  The unemployment rate appeared to plateau and most importantly, inflation data appeared “sticky”, as the decline previously in place seemed to lose momentum and remained above the Fed’s 2% target level. In early November, the Republican party swept the national elections, with the new president having a very pro-growth agenda for the country.  By the end of 2024, the Fed had lowered the Fed funds rate two more times – by 25 basis points in each case.  With the Fed funds rate lowered by 100 basis points over the course of the third and fourth quarters and the outlook reversing as described above, the Treasury curve shifted higher and is no longer inverted between the Fed funds level and the 10-year point, or between the 2-year and 10-year points. The Agency RMBS market generated negative total returns for the fourth quarter and was one of the worst performing sectors of the fixed income markets.  Returns for the Agency RMBS market versus comparable duration swaps, a proxy for returns for levered bond investors such as the Company, were also negative, albeit far less so than the absolute returns.

 

 

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“In spite of the elevated level of interest rates and poor performance of the Agency RMBS asset class for the quarter, Orchid generated a positive return of 0.6% for the fourth quarter (unannualized) as our book value decline of $0.31 was offset by dividends declared and paid of $0.36 during the quarter. These figures compare to a 2.1% return (unannualized) for the third quarter of 2024 as the market rallied given the onset of the Fed easing cycle described above. For the year ended December 31, 2024, Orchid generated a total return of 4.73% versus (8.63)% for 2023. 

 

“With the economy remaining quite strong, inflation sticky and fiscal deficits likely to remain elevated, we believe upward pressure on longer-term rates may persist and additional interest rate cuts by the Fed will be modest.  We have retained a bar-bell strategy in our Agency RMBS portfolio with an up-in-coupon bias and leverage near the lower end of our typical range.  We used a combination of new capital raised via our ATM program, paydowns and sales of some lower coupon securities to add to our higher coupon holdings, in all cases with favorable prepayment characteristics acquired at modest pay-ups to TBA securities.  With dollar-roll levels elevated, we moved our TBA hedge positions to short Treasury future positions.  While we have shifted our portfolio over the course of 2024 towards an up-in-coupon bias, we still maintain significant lower coupon holdings and in securities with significant seasoning, resulting in attractive returns due to prepayments well above typical turnover levels and performance when and if the market rallies.”

 

Details of Fourth Quarter 2024 Results of Operations

 

The Company reported net income of $5.6 million for the three month period ended December 31, 2024, compared with net income of $27.1 million for the three month period ended December 31, 2023. The Company increased its average Agency RMBS portfolio during the fourth quarter of 2024, from $5.0 billion for the quarter ended September 30, 2024 to $5.3 billion for the quarter ended December 31, 2024. Interest income on the portfolio in the fourth quarter was up approximately $4.4 million from the third quarter of 2024. The yield on our average Agency RMBS decreased from 5.43% in the third quarter of 2024 to 5.38% for the fourth quarter of 2024, repurchase agreement borrowing costs decreased from 5.62% for the third quarter of 2024 to 4.98% for the fourth quarter of 2024, and our net interest spread increased from (0.19)% in the third quarter of 2024 to 0.40% in the fourth quarter of 2024.

 

Book value decreased by $0.31 per share in the fourth quarter of 2024. The decrease in book value reflects our net income of $0.07 per share and the dividend distribution of $0.36 per share. The Company recorded net realized and unrealized gains of $0.02 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.

 

Details of Full Year 2024 Results of Operations

 

The Company reported net income of $37.7 million for the year ended December 31, 2024, compared with a net loss of $39.2 million for the year ended December 31, 2023. Interest income on the portfolio in the year ended December 31, 2024 was approximately $241.6 million and the yield on our average Agency RMBS was 5.25%. Repurchase agreement interest expense was $236.3 million during 2024 with an average cost of 5.35%.

 

Book value decreased by $1.01 per share in the year ended December 31, 2024. The decrease in book value reflects our net income of $0.57 per share and the dividend distribution of $1.44 per share. The Company recorded net realized and unrealized gains of $0.75 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.

 

Prepayments

 

For the quarter ended December 31, 2024, Orchid received $185.0 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 10.5%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):

 

						Structured
		PT RMBS				RMBS				Total
Three Months Ended		Portfolio (%)				Portfolio (%)				Portfolio (%)
December 31, 2024			10.6				7.0				10.5
September 30, 2024			8.8				6.4				8.8
June 30, 2024			7.6				7.1				7.6
March 31, 2024			6.0				5.9				6.0
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

 

 

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Portfolio

 

The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of December 31, 2024 and December 31, 2023:

 

($ in thousands)
														Weighted
						Percentage								Average
						of				Weighted				Maturity
		Fair				Entire				Average				in			Longest
Asset Category		Value				Portfolio				Coupon				Months			Maturity
December 31, 2024
Fixed Rate RMBS		$	5,237,812				99.7	%			5.03	%			330		1-Nov-54
Interest-Only Securities			15,308				0.3	%			4.01	%			212		25-Jul-48
Inverse Interest-Only Securities			190				0.0	%			0.00	%			261		15-Jun-42
Total Mortgage Assets		$	5,253,310				100.0	%			4.99	%			328		1-Nov-54
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

 

($ in thousands)
		December 31, 2024								December 31, 2023
						Percentage of								Percentage of
Agency		Fair Value				Entire Portfolio				Fair Value				Entire Portfolio
Fannie Mae		$	3,693,032				70.3	%		$	2,714,192				69.7	%
Freddie Mac			1,560,278				29.7	%			1,179,820				30.3	%
Total Portfolio		$	5,253,310				100.0	%		$	3,894,012				100.0	%

 

		December 31, 2024				December 31, 2023
Weighted Average Pass-through Purchase Price		$	102.45			$	104.10
Weighted Average Structured Purchase Price		$	18.74			$	18.74
Weighted Average Pass-through Current Price		$	96.44			$	95.70
Weighted Average Structured Current Price		$	14.38			$	13.51
Effective Duration (1)			4.200				4.400

 

(1)

Effective duration of 4.200 indicates that an interest rate increase of 1.0% would be expected to cause a 4.200% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2024. An effective duration of 4.400 indicates that an interest rate increase of 1.0% would be expected to cause a 4.400% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2023. These figures include the structured securities in the portfolio, but do not include the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

 

 

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Financing, Leverage and Liquidity

 

As of December 31, 2024, the Company had outstanding repurchase obligations of approximately $5,025.5 million with a net weighted average borrowing rate of 4.66%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $5,231.9 million. The Company’s adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders' equity, at December 31, 2024 was 7.5:1. At December 31, 2024, the Company’s liquidity was approximately $353.6 million consisting of cash and cash equivalents and unpledged securities (not including unsettled securities purchases). To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets.  In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at December 31, 2024.

 

($ in thousands)
										Weighted								Weighted
		Total								Average								Average
		Outstanding				% of				Borrowing				Amount				Maturity
Counterparty		Balances				Total				Rate				at Risk(1)				in Days
Merrill Lynch, Pierce, Fenner & Smith			360,113				7.2	%			4.67	%		$	10,390				21
ABN AMRO Bank N.V.			335,584				6.7	%			4.60	%			9,715				17
RBC Capital Markets, LLC			267,565				5.3	%			4.68	%			8,326				21
Cantor Fitzgerald & Co			254,445				5.1	%			4.74	%			12,734				8
DV Securities, LLC Repo			251,638				5.0	%			4.63	%			10,243				28
MUFG Securities Canada, Ltd.			248,084				4.9	%			4.62	%			6,672				13
Mitsubishi UFJ Securities (USA), Inc.			244,546				4.9	%			4.66	%			12,979				13
J.P. Morgan Securities LLC			241,633				4.8	%			4.77	%			12,359				8
Daiwa Securities America Inc.			232,972				4.6	%			4.62	%			9,185				23
Goldman, Sachs & Co			232,011				4.6	%			4.63	%			12,496				27
Wells Fargo Bank, N.A.			227,854				4.5	%			4.76	%			7,917				17
Citigroup Global Markets Inc			226,627				4.5	%			4.62	%			11,888				27
Marex Capital Markets Inc.			211,474				4.2	%			4.62	%			8,937				21
ASL Capital Markets Inc.			210,826				4.2	%			4.63	%			10,771				24
ING Financial Markets LLC			208,713				4.2	%			4.63	%			8,103				30
The Bank of Nova Scotia			192,117				3.8	%			4.66	%			6,175				21
Bank of Montreal			191,010				3.8	%			4.60	%			9,982				21
South Street Securities, LLC			184,014				3.7	%			4.71	%			9,115				22
Mirae Asset Securities (USA) Inc.			176,902				3.5	%			4.76	%			6,843				139
Clear Street LLC			163,116				3.3	%			4.54	%			6,458				79
StoneX Financial Inc.			151,169				3.0	%			4.63	%			7,683				17
Banco Santander SA			90,417				1.8	%			4.75	%			5,117				17
Nomura Securities International, Inc.			70,878				1.4	%			4.64	%			3,901				17
Lucid Prime Fund, LLC			29,149				0.6	%			4.70	%			1,436				16
Wells Fargo Securities, LLC			22,686				0.4	%			4.88	%			4,876				23
Total / Weighted Average		$	5,025,543				100.0	%			4.66	%		$	214,301				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 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 December 31, 2024, such instruments were comprised of U.S. Treasury note (“T-Note”) futures contracts, interest rate swap agreements, and contracts to sell to-be-announced ("TBA") securities.

 

 

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The table below presents information related to the Company’s T-Note futures contracts at December 31, 2024.

 

($ in thousands)
		December 31, 2024
		Average				Weighted				Weighted
		Contract				Average				Average
		Notional				Entry				Effective				Open
Expiration Year		Amount				Rate				Rate				Equity(1)
U.S. Treasury Note Futures Contracts (Short Positions)(2)
March 2025 5-year T-Note futures (Mar 2025 - Mar 2030 Hedge Period)		$	312,500				4.22	%			4.37	%		$	1,890
March 2025 10-year T-Note futures (Mar 2025 - Mar 2035 Hedge Period)			93,500				4.30	%			4.49	%			1,119
March 2024 10-year Ultra futures (Mar 2025 - Mar 2035 Hedge Period)			32,500				4.25	%			4.58	%			914

 

(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 $106.30 at December 31, 2024. The contract value of the short position was $332.2 million at December 31, 2024. 10-Year T-Note futures contracts were valued at a price of $108.75, with a contract value of the short position of $101.7 million at December 31, 2024. 10-Year Ultra futures contracts were valued at price of $111.31 at December 31, 2024.  The contract value of the short position was $36.2 million at December 31, 2024 respectively.

 

The table below presents information related to the Company’s interest rate swap positions at December 31, 2024.

 

($ in thousands)
						Average
						Fixed				Average				Average
		Notional				Pay				Receive				Maturity
		Amount				Rate				Rate				(Years)
Expiration > 1 to ≤ 5 years		$	1,450,000				1.69	%			4.58	%			3.4
Expiration > 5 years			2,066,800				3.55	%			4.52	%			7.0
		$	3,516,800				2.78	%			4.54	%			5.5

 

The following table summarizes our contracts to sell TBA securities as of December 31, 2024.

 

($ in thousands)
			Notional												Net
			Amount				Cost				Market				Carrying
			Long (Short)(1)				Basis(2)				Value(3)				Value(4)
December 31, 2024
15-Year TBA securities:
5.00%			$	50,000			$	50,074			$	49,742			$	(332	)
30-Year TBA securities:
3.00%				(200,000	)			(174,406	)			(169,703	)			4,703
			$	(150,000	)		$	(124,332	)		$	(119,961	)		$	4,371

 

(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.

 

 

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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 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to pay regular monthly dividends to our stockholders and have declared the following dividends since our February 2013 IPO.

 

(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			1.440				96,309
2025 YTD(1)			0.120				10,869
Totals		$	68.010			$	715,775

 

(1)	On January 8, 2025, the Company declared a dividend of $0.12 per share to be paid on February 27, 2025. The effect of this dividend is included in the table above but is not reflected in the Company’s financial statements as of December 31, 2024.

 

Book Value Per Share

 

The Company's book value per share at December 31, 2024 was $8.09. The Company computes book value per share by dividing total stockholders' equity by the total number of shares outstanding of the Company's common stock. At December 31, 2024, the Company's stockholders' equity was $668.5 million with 82,622,464 shares of common stock outstanding.

 

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, 2024, approximately 97.1% of the Company’s investable capital (which consists of equity in pledged PT RMBS, available cash and unencumbered assets) was deployed in the PT RMBS portfolio. At December 31, 2024, the allocation to the PT RMBS portfolio increased to approximately 97.2%.

 

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, 2024		$	5,427,069			$	15,382			$	353			$	15,735			$	5,442,804
Securities purchased			320,170				-				-				-				320,170
Securities sold			(166,030	)			-				-				-				(166,030	)
Losses on sales			(5,112	)			-				-				-				(5,112	)
Return of investment			n/a				(576	)			-				(576	)			(576	)
Pay-downs			(184,405	)			n/a				-				n/a				(184,405	)
Premium lost due to pay-downs			(1,600	)			n/a				-				n/a				(1,600	)
Mark to market losses (gains)			(152,280	)			502				(163	)			339				(151,941	)
Market value - December 31, 2024		$	5,237,812			$	15,308			$	190			$	15,498			$	5,253,310

 

 

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The tables below present the allocation of capital between the respective portfolios at December 31, 2024 and September 30, 2024, and the return on invested capital for each sub-portfolio for the three month period ended December 31, 2024.

 

($ in thousands)
Capital Allocation
						Structured Security Portfolio
		Pass-Through				Interest-Only				Inverse Interest
		Portfolio				Securities				Only Securities				Sub-total				Total
December 31, 2024
Market value		$	5,237,812			$	15,308			$	190			$	15,498			$	5,253,310
Cash			335,053				-				-				-				335,053
Borrowings(1)			(5,025,543	)			-				-				-				(5,025,543	)
Total		$	547,322			$	15,308			$	190			$	15,498			$	562,820
% of Total			97.2	%			2.7	%			0.1	%			2.8	%			100.0	%
September 30, 2024
Market value		$	5,427,069			$	15,382			$	353			$	15,735			$	5,442,804
Cash			333,717				-				-				-				333,717
Borrowings(2)			(5,230,871	)			-				-				-				(5,230,871	)
Total		$	529,915			$	15,382			$	353			$	15,735			$	545,650
% of Total			97.1	%			2.8	%			0.1	%			2.9	%			100.0	%

 

(1)

At December 31, 2024, there were outstanding repurchase agreement balances of $12.5 million secured by IO securities and $0.1 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

(2)

At September 30, 2024, there were outstanding repurchase agreement balances of $12.7 million secured by IO securities and $0.3 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

 

The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 1.7% and 4.0%, respectively, for the fourth quarter of 2024. The combined portfolio generated a return on invested capital of approximately 1.8%.

 

($ in thousands)
Returns for the Quarter Ended December 31, 2024
						Structured Security Portfolio
		Pass-Through				Interest-Only				Inverse Interest
		Portfolio				Securities				Only Securities				Sub-total				Total
Income (net of borrowing cost)		$	7,850			$	293			$	-			$	293			$	8,143
Realized and unrealized (losses) gains			(158,992	)			502				(163	)			339				(158,653	)
Derivative gains			160,412				n/a				n/a				n/a				160,412
Total Return		$	9,270			$	795			$	(163	)		$	632			$	9,902
Beginning Capital Allocation		$	529,915			$	15,382			$	353			$	15,735			$	545,650
Return on Invested Capital for the Quarter(1)			1.7	%			5.2	%			(46.2	)%			4.0	%			1.8	%
Average Capital Allocation(2)		$	538,619			$	15,345			$	272			$	15,617			$	554,236
Return on Average Invested Capital for the Quarter(3)			1.7	%			5.2	%			(59.9	)%			4.0	%			1.8	%

 

(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.

 

 

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Stock Offerings

 

On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 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 $250,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through December 31, 2024, we issued a total of 19,842,089 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $164.9 million, and net proceeds of approximately $162.1 million, after commissions and fees. Subsequent to December 31, 2024, we issued a total of 7,721,664 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $60.7 million, and net proceeds of approximately $59.8 million, after commissions and fees.

 

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 10% of the Company’s then outstanding share count. On December 9, 2021, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 3,372,399 shares, bringing the remaining authorization under the stock repurchase program to 3,539,861 shares, representing approximately 10% of the Company’s then outstanding shares of common stock. On October 12, 2022, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 4,300,000 shares, bringing the remaining authorization under the stock repurchase program to 6,183,601 shares, representing approximately 18% of the Company’s then outstanding shares of common stock. This stock repurchase program has no termination date.

 

From the inception of the stock repurchase program through December 31, 2024, the Company repurchased a total of 5,144,602 shares at an aggregate cost of approximately $77.5 million, including commissions and fees, for a weighted average price of $15.07 per share. During the year ended December 31, 2024, the Company repurchased a total of 396,241 shares at an aggregate cost of approximately $3.3 million, including commissions and fees, for a weighted average price of $8.30 per share. 

 

Earnings Conference Call Details

 

An earnings conference call and live audio webcast will be hosted Friday, January 31, 2025, at 10:00 AM ET. Participants can register and receive dial-in information at https://register.vevent.com/register/BI26747ad72a1641c6a93279bd3ec65aa2. A live audio webcast of the conference call can be accessed at https://edge.media-server.com/mmc/p/4rmha7s8 or via the investor relations section of the Company's website at https://ir.orchidislandcapital.com. An audio archive of the webcast will be available for 30 days after the call.

 

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.

 

 

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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 U.S. government, including the Fed, market expectations, future opportunities and prospects of the Company, the stock repurchase program and general economic conditions, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned that such forward-looking statements are based on information available at the time and on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in Orchid Island Capital, Inc.'s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Orchid Island Capital, Inc. assumes no obligation to update forward-looking statements to reflect subsequent results, changes in assumptions or changes in other factors affecting forward-looking statements.

 

CONTACT:

Orchid Island Capital, Inc.

Robert E. Cauley, 772-231-1400

Chairman and Chief Executive Officer

https://ir.orchidislandcapital.com

 

Summarized Financial Statements

 

The following is a summarized presentation of the unaudited balance sheets as of December 31, 2024 and 2023, and the unaudited quarterly statements of operations for the twelve and three months ended December 31, 2024 and 2023. 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, 2024				December 31, 2023
ASSETS:
Mortgage-backed securities		$	5,253,310			$	3,894,012
U.S. Treasury securities		100,551				148,820
Cash, cash equivalents and restricted cash			335,053				200,289
Accrued interest receivable			23,044				14,951
Derivative assets, at fair value			9,277				6,420
Other assets			392				455
Total Assets		$	5,721,627			$	4,264,947
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase agreements		$	5,025,543			$	3,705,649
Payable of investment securities purchased			-				60,454
Dividends payable			9,940				6,222
Derivative liabilities, at fair value			332				12,694
Accrued interest payable			10,750				7,939
Due to affiliates			1,167				1,013
Other liabilities			5,395				1,031
Total Liabilities			5,053,127				3,795,002
Total Stockholders' Equity			668,500				469,945
Total Liabilities and Stockholders' Equity		$	5,721,627			$	4,264,947
Common shares outstanding			82,622,464				51,636,074
Book value per share		$	8.09			$	9.10

 

 

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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,
		2024				2023				2024				2023
Interest income		$	241,577			$	177,569			$	71,996			$	49,539
Interest expense			(236,281	)			(201,918	)			(63,853	)			(52,325	)
Net interest income (expense)			5,296				(24,349	)			8,143				(2,786	)
Gains on RMBS and derivative contracts			49,110				3,654				1,759				33,977
Net portfolio income (loss)			54,406				(20,695	)			9,902				31,191
Expenses			16,744				18,531				4,357				4,064
Net income (loss)		$	37,662			$	(39,226	)		$	5,545			$	27,127
Other comprehensive income			122				17				84				1
Comprehensive net		$	37,784			$	(39,209	)		$	5,629			$	27,128
Basic and diluted net income (loss) per share		$	0.57			$	(0.89	)		$	0.07			$	0.52
Weighted Average Shares Outstanding			65,449,149				44,649,039				79,590,498				52,396,001
Dividends Declared Per Common Share:		$	1.440			$	1.800			$	0.360			$	0.360

 

		Three Months Ended December 31,
Key Balance Sheet Metrics		2024				2023
Average RMBS(1)		$	5,348,057			$	4,207,118
Average repurchase agreements(1)			5,128,207				4,066,298
Average stockholders' equity(1)			662,262				468,393
Adjusted leverage ratio(2)		7.5:1				7.9:1
Economic leverage ratio(3)		7.3:1				6.7:1
Key Performance Metrics
Average yield on RMBS(4)			5.38	%			4.71	%
Average cost of funds(4)			4.98	%			5.15	%
Average economic cost of funds(5)			2.81	%			2.67	%
Average interest rate spread(6)			0.40	%			(0.44	)%
Average economic interest rate spread(7)			2.57	%			2.04	%

 

(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.

 

 

Document And Entity Information	Jan. 30, 2025
Document Information [Line Items]
Entity, Registrant Name	Orchid Island Capital, Inc.
Document, Type	8-K
Document, Period End Date	Jan. 30, 2025
Entity, Incorporation, State or Country Code	MD
Entity, File Number	001-35236
Entity, Tax Identification Number	27-3269228
Entity, Address, Address Line One	3305 Flamingo Drive
Entity, Address, City or Town	Vero Beach
Entity, Address, State or Province	FL
Entity, Address, Postal Zip Code	32963
City Area Code	772
Local Phone Number	231-1400
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	ORC
Security Exchange Name	NYSE
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0001518621

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