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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Orchid Island Capital Inc | NYSE:ORC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.0201 | -0.24% | 8.4299 | 8.45 | 8.37 | 8.41 | 919,654 | 01:00:00 |
Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid” or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three month period ended September 30, 2023.
Third Quarter 2023 Results
Other Financial Highlights
Management Commentary
Commenting on the third quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “As the third quarter unfolded interest rates were trading in a fairly well-defined range, volatility was trending lower and we were comfortable with our leverage and positioning. Orchid has maintained a lower coupon bias throughout the tightening cycle that began in 2022 as we believe these securities still offer superior total return potential over new origination, higher coupon securities. We continue to hold these securities for the same reasons although we used the proceeds from capital raising activity via our ATM program and paydowns to add higher coupon, low pay-up specified pools and hedged these positions predominantly with swaps. We added higher coupons to mitigate the lower carry of our legacy assets to allow us to continue to hold them and retain their higher return potential in the event of a normalization of rates and U.S. Treasury curve shape.
“The rates market shifted dramatically during the quarter. The credit rating of the U.S. was downgraded by Fitch, and Moody's has indicated it may do the same. Deficits in the U.S. were revised meaningfully higher in July as the Congressional Budget Office raised its estimate for the deficit this year to near $2 trillion. As the anticipated supply of U.S. Treasury debt has shifted up dramatically, the market appears to be demanding a term-premium to hold this debt. At the conclusion of the Federal Reserve's (the "Fed") September FOMC meeting, the Fed released its “dot” plot, a summary of FOMC members' anticipated level of the Federal Funds rate for the next several years. The dot plot released reflected a Federal Funds rate 50 basis points higher at the end of 2024 than the last dot plot issued at the conclusion of the FOMC meeting in June. The increase reflected expectations for a minimal reduction in the Federal Funds rate prior to the end of 2024. The Fed cited the persistently strong economy as the reason for keeping monetary policy restrictive for so long. Economic data released during the third quarter implies the U.S. economy is very resilient in the face of higher interest rates and growth for the quarter was 4.9%. All of these factors caused rates to increase dramatically, and they continue to do so into the fourth quarter. We have yet to see the rates market stabilize. All of these interest rate and economic forces coupled with the multiple sources of uncertainty created by the emerging war in the middle east, a House of Representatives without a speaker, and a presidential election on the horizon, among other factors, have created a perfect storm for financial markets and the mortgage market in particular. In the case of the latter, the elevated levels of volatility resulting from all of the above coupled with few buyers of the asset class have led to meaningful underperformance for the sector since early August and since mid-September in particular. The fact investors can earn more than 5% holding cash or U.S. Treasury bills has kept buyers of Agency RMBS on the sidelines and left the Agency RMBS sector, as well as many other risky asset classes, to perform very poorly.
“In response to the significant increase in interest rates and volatility, with the corresponding weakness in Agency RMBS assets continuing since the end of the third quarter, we have reduced our leverage and increased hedges. Since September 30, 2023, we have reduced our holding of 30-year fixed rate 3.0% coupons by approximately 40%, added to shorts in the same coupon and eliminated our 15-year TBA long position. Finally, we eliminated our short TBA positions in higher coupons. In the face of such challenging market conditions our goal is to weather the current storm by preserving our liquidity and maintaining suitable levels of leverage while attempting to maximize our potential upside when the market stabilizes. Going forward, there remains considerable uncertainty as to what lies beyond the current Fed tightening cycle. Will the Fed succeed in slowing demand and bring inflation back towards its 2.0% target, ultimately leading to reduced short-term rates and a steeper rates curve that is positively sloped? Or are we entering a new “new normal”, with rates appreciably higher than those that prevailed before the pandemic, with funding costs still at very elevated levels, rates generally much higher and maybe even inflation settling in above the Fed’s target? We anticipate the former outcome will materialize soon enough and are positioned accordingly. However, we are also prepared to make additional adjustments if the latter comes to pass.”
Details of Third Quarter 2023 Results of Operations
The Company reported net loss of $80.1 million for the three month period ended September 30, 2023, compared with a net loss of $84.5 million for the three month period ended September 30, 2022. The Company increased its Agency RMBS portfolio over the course of the third quarter of 2023, from $4.4 billion at June 30, 2023 to $4.5 billion at September 30, 2023. Interest income on the portfolio in the third quarter was up approximately $10.2 million from the second quarter of 2023. The yield on our average Agency RMBS increased from 3.81% in the second quarter of 2023 to 4.51% for the third quarter of 2023, repurchase agreement borrowing costs increased from 4.88% for the second quarter of 2023 to 5.44% for the third quarter of 2023, and our net interest spread improved from (1.07)% in the second quarter of 2023 to (0.93)% in the third quarter of 2023.
Book value decreased by $2.24 per share in the third quarter of 2023. The decrease in book value reflects our net loss of $1.68 per share and the dividend distribution of $0.48 per share. The Company recorded net realized and unrealized losses of $1.40 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.
Prepayments
For the quarter ended September 30, 2023, Orchid received $99.5 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 6.0%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):
Structured
PT RMBS
RMBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
September 30, 2023
6.1
5.7
6.0
June 30, 2023
5.6
7.0
5.6
March 31, 2023
3.9
5.7
4.0
December 31, 2022
4.9
6.0
5.0
September 30, 2022
6.1
10.4
6.5
June 30, 2022
8.3
13.7
9.4
March 31, 2022
8.1
19.5
10.7
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of September 30, 2023 and December 31, 2022:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
September 30, 2023
Fixed Rate RMBS
$
4,502,115
99.6
%
4.03
%
335
1-Sep-53
Interest-Only Securities
17,833
0.4
%
4.01
%
225
25-Jul-48
Inverse Interest-Only Securities
277
0.0
%
0.00
%
277
15-Jun-42
Total Mortgage Assets
$
4,520,225
100.0
%
4.01
%
333
1-Sep-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)
September 30, 2023
December 31, 2022
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
2,989,840
66.1
%
$
2,320,960
65.6
%
Freddie Mac
1,530,385
33.9
%
1,219,042
34.4
%
Total Portfolio
$
4,520,225
100.0
%
$
3,540,002
100.0
%
September 30, 2023
December 31, 2022
Weighted Average Pass-through Purchase Price
$
104.87
$
106.41
Weighted Average Structured Purchase Price
$
18.74
$
18.74
Weighted Average Pass-through Current Price
$
89.08
$
91.46
Weighted Average Structured Current Price
$
13.92
$
14.05
Effective Duration (1)
5.460
5.580
(1)
Effective duration is the approximate percentage change in price for a 100 bps change in rates. An effective duration of 5.460 indicates that an interest rate increase of 1.0% would be expected to cause a 5.460% decrease in the value of the RMBS in the Company’s investment portfolio at September 30, 2023. An effective duration of 5.580 indicates that an interest rate increase of 1.0% would be expected to cause a 5.580% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2022. 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.
Financing, Leverage and Liquidity
As of September 30, 2023, the Company had outstanding repurchase obligations of approximately $4,427.0 million with a net weighted average borrowing rate of 5.49%. These agreements were collateralized by RMBS and U.S. Treasury securities with a fair value, including accrued interest, of approximately $4,537.1 million and cash pledged to counterparties of approximately $113.4 million. The Company’s adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders' equity, at September 30, 2023 was 9.5 to 1. At September 30, 2023, the Company’s liquidity was approximately $163.7 million consisting of cash and cash equivalents and unpledged RMBS (not including unsettled securities purchases). To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at September 30, 2023.
($ in thousands)
Weighted
Weighted
Total
Average
Average
Outstanding
% of
Borrowing
Amount
Maturity
Counterparty
Balances
Total
Rate
at Risk(1)
in Days
Cantor Fitzgerald & Co.
$
354,817
8.1
%
5.48
%
$
18,500
28
Wells Fargo Bank, N.A.
353,817
8.0
%
5.47
%
18,931
26
Mirae Asset Securities (USA) Inc.
337,442
7.6
%
5.51
%
14,082
42
ASL Capital Markets Inc.
321,162
7.3
%
5.49
%
17,557
39
J.P. Morgan Securities LLC
320,537
7.2
%
5.47
%
17,940
16
Mitsubishi UFJ Securities (USA), Inc.
312,097
7.0
%
5.51
%
17,114
50
Citigroup Global Markets, Inc.
294,638
6.7
%
5.45
%
15,239
10
RBC Capital Markets, LLC
293,169
6.6
%
5.52
%
9,273
46
Daiwa Capital Markets America, Inc.
232,596
5.3
%
5.49
%
9,377
17
ED&F Man Capital Markets Inc.
222,216
5.0
%
5.44
%
9,639
9
ING Financial Markets LLC
212,132
4.8
%
5.48
%
8,861
33
ABN AMRO Bank N.V.
211,135
4.8
%
5.52
%
5,925
45
Merrill Lynch, Pierce, Fenner & Smith Inc.
196,295
4.4
%
5.54
%
6,821
46
Banco Santander, N.A.
182,495
4.1
%
5.49
%
7,833
35
Goldman Sachs & Co. LLC
173,371
3.9
%
5.47
%
9,118
18
StoneX Financial Inc.
167,366
3.8
%
5.54
%
8,783
63
South Street Securities, LLC
111,871
2.5
%
5.51
%
5,807
57
BMO Capital Markets Corp.
110,904
2.5
%
5.47
%
5,803
12
Lucid Prime Fund, LLC
10,575
0.2
%
5.50
%
568
19
Lucid Cash Fund USG, LLC
8,312
0.2
%
5.50
%
462
19
Total / Weighted Average
$
4,426,947
100.0
%
5.49
%
$
207,633
32
(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 September 30, 2023, such instruments were comprised of U.S. Treasury note (“T-Note”) futures contracts, interest rate swap agreements, interest rate swaption agreements, interest rate caps, interest rate floors and contracts to sell to-be-announced ("TBA") securities.
The table below presents information related to the Company’s T-Note futures contracts at September 30, 2023.
($ in thousands)
September 30, 2023
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity(1)
Treasury Note Futures Contracts (Short Positions)(2)
December 2023 5-year T-Note futures (Dec 2023 - Feb 2028 Hedge Period)
$
471,500
4.33
%
4.78
%
$
5,414
December 2023 10-year T-Note futures (Dec 2023 - Aug 2030 Hedge Period)
$
395,000
4.24
%
4.97
%
$
9,069
(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 $105.4. The contract values of the short positions were $496.8 million. 10-Year T-Note futures contracts were valued at a price of $108.1. The contract values of the short positions were $426.8 million.
The table below presents information related to the Company’s interest rate swap positions at September 30, 2023.
($ in thousands)
Average
Fixed
Average
Average
Notional
Pay
Receive
Maturity
Amount
Rate
Rate
(Years)
Expiration > 1 to ≤ 5 years
$
500,000
0.84
%
5.31
%
3.0
Expiration > 5 years
$
2,126,500
2.84
%
5.31
%
7.4
$
2,626,500
2.46
%
5.31
%
6.6
The following table presents information related to our interest rate swaption positions as of September 30, 2023.
($ in thousands)
Option
Underlying Swap
Weighted
Weighted
Average
Average
Average
Average
Fair
Months to
Notional
Fixed
Adjustable
Term
Expiration
Cost
Value
Expiration
Amount
Rate
Rate
(Years)
Payer Swaptions (long positions)
≤ 1 year
$
1,619
$
1,418
8.0
$
800,000
5.40
%
SOFR
1.0
$
1,619
$
1,418
8.0
$
800,000
5.40
%
1.0
The following table presents information related to our interest cap positions as of September 30, 2023.
($ in thousands)
Strike
Estimated
Notional
Swap
Curve
Fair
Expiration
Amount
Cost
Rate
Spread
Value
February 8, 2024
$
200,000
$
1,450
0.09
%
2Y10Y
$
704
The table below presents information related to the Company’s interest rate floor positions at September 30, 2023.
($ in thousands)
Strike
Notional
Swap
Fair
Amount
Cost
Rate
Terms
Value
September 30, 2023
Long Position
$
1,000,000
$
2,500
0.13
%
2Y_2s30s
$
3,981
Short Position
$
(1,000,000
)
$
(1,358
)
(0.37
)%
2Y_2s30s
$
(2,500
)
The following table summarizes our contracts to sell TBA securities as of September 30, 2023.
($ in thousands)
Notional
Net
Amount
Cost
Market
Carrying
Long (Short)(1)
Basis(2)
Value(3)
Value(4)
September 30, 2023
15-Year TBA securities:
5.00%
$
100,000
$
97,617
$
97,386
$
(231
)
30-Year TBA securities:
3.00%
(350,000
)
(297,154
)
(290,116
)
7,038
6.00%
(100,000
)
(99,872
)
(98,766
)
1,106
6.50%
(152,500
)
(154,382
)
(153,310
)
1,072
$
(502,500
)
$
(453,791
)
$
(444,806
)
$
8,985
(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 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 data)
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 - YTD(1)
1.560
68,604
Totals
$
66.210
$
596,074
(1)
On October 11, 2023, the Company declared a dividend of $0.12 per share to be paid on November 28, 2023. The effect of this dividend is included in the table above but is not reflected in the Company’s financial statements as of September 30, 2023.
Book Value Per Share
The Company's book value per share at September 30, 2023 was $8.92. 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 September 30, 2023, the Company's stockholders' equity was $466.8 million with 52,332,306 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, 2023, approximately 95.1% 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 June 30, 2023, the allocation to the PT RMBS portfolio was approximately 95.8%.
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 - June 30, 2023
$
4,356,203
$
17,448
$
321
$
17,769
$
4,373,972
Securities purchased
455,003
-
-
-
455,003
Securities sold
-
-
-
-
-
Losses on sales
-
-
-
-
-
Return of investment
n/a
(581
)
-
(581
)
(581
)
Pay-downs
(98,932
)
n/a
n/a
n/a
(98,932
)
Discount accretion due to pay-downs
7,252
n/a
n/a
n/a
7,252
Mark to market losses (gains)
(217,411
)
966
(44
)
922
(216,489
)
Market value - September 30, 2023
$
4,502,115
$
17,833
$
277
$
18,110
$
4,520,225
The tables below present the allocation of capital between the respective portfolios at September 30, 2023 and June 30, 2023, and the return on invested capital for each sub-portfolio for the three month period ended September 30, 2023.
($ in thousands)
Capital Allocation
Structured Security Portfolio
Pass-Through
Interest-Only
Inverse Interest
Portfolio
Securities
Only Securities
Sub-total
Total
September 30, 2023
Market value
$
4,502,115
$
17,833
$
277
$
18,110
$
4,520,225
Cash
278,217
-
-
-
278,217
Borrowings(1)
(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
%
June 30, 2023
Market value
$
4,356,203
$
17,448
$
321
$
17,769
$
4,373,972
Cash
249,337
-
-
-
249,337
Borrowings(2)
(4,201,717
)
-
-
-
(4,201,717
)
Total
$
403,823
$
17,448
$
321
$
17,769
$
421,592
% of Total
95.8
%
4.1
%
0.1
%
4.2
%
100.0
%
(1)
At September 30, 2023, there were outstanding repurchase agreement balances of $14.7 million secured by IO securities and $0.5 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 June 30, 2023, there were outstanding repurchase agreement balances of $14.8 million secured by IO securities and $0.3 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.
The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately (19.0)% and 7.7%, respectively, for the third quarter of 2023. The combined portfolio generated a return on invested capital of approximately (17.9)%.
($ in thousands)
Returns for the Quarter Ended September 30, 2023
Structured Security Portfolio
Pass-Through
Interest-Only
Inverse Interest
Portfolio
Securities
Only Securities
Sub-total
Total
Income (net of borrowing cost)
$
(9,045
)
$
447
$
-
$
447
$
(8,598
)
Realized and unrealized losses (gains)
(209,854
)
966
(44
)
922
(208,932
)
Derivative gains
142,042
n/a
n/a
n/a
142,042
Total Return
$
(76,857
)
$
1,413
$
(44
)
$
1,369
$
(75,488
)
Beginning Capital Allocation
$
403,823
$
17,448
$
321
$
17,769
$
421,592
Return on Invested Capital for the Quarter(1)
(19.0
)%
8.1
%
(13.7
)%
7.7
%
(17.9
)%
Average Capital Allocation(2)
$
378,604
$
17,641
$
299
$
17,940
$
396,544
Return on Average Invested Capital for the Quarter(3)
(20.3
)%
8.0
%
(14.7
)%
7.6
%
(19.0
)%
(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 October 29, 2021, we entered into an equity distribution agreement (the “October 2021 Equity Distribution Agreement”) with four sales agents pursuant to which we could 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 were deemed to be “at the market” offerings and privately negotiated transactions. We issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $151.8 million, and net proceeds of approximately $149.3 million, after commissions and fees, prior to its termination in March 2023.
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 $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 September 30, 2023, we issued a total of 13,190,039 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $129.8 million, and net proceeds of approximately $127.8 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 1,061,316 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 September 30, 2023, the Company repurchased a total of 4,048,613 shares at an aggregate cost of approximately $68.8 million, including commissions and fees, for a weighted average price of $16.99 per share. During the nine months ended September 30, 2023, the Company repurchased a total of 373,041 shares at an aggregate cost of approximately $4.0 million, including commissions and fees, for a weighted average price of $10.62 per share.
Earnings Conference Call Details
An earnings conference call and live audio webcast will be hosted Friday, October 27, 2023, at 10:00 AM ET. The conference call may be accessed by dialing toll free (888) 510-2356. The conference passcode is 8493186. 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 November 27, 2023.
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 levels and spreads, prepayment speeds, portfolio positioning and repositioning, hedging levels, leverage ratio, dividends, growth, return opportunities, 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, capital raising, future opportunities and prospects of the Company, the stock repurchase program, geopolitical uncertainty 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.
Summarized Financial Statements
The following is a summarized presentation of the unaudited balance sheets as of September 30, 2023, and December 31, 2022, and the unaudited quarterly statements of operations for the nine and three months ended September 30, 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)
September 30, 2023
December 31, 2022
ASSETS:
Mortgage-backed securities, at fair value
$
4,520,225
$
3,540,002
U.S. Treasury securities, at fair value
-
36,382
U.S. Treasury securities, available-for-sale
98,326
-
Cash, cash equivalents and restricted cash
278,217
237,219
Accrued interest receivable
17,316
11,519
Derivative assets, at fair value
20,605
40,172
Other assets
2,204
442
Total Assets
$
4,936,893
$
3,865,736
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase agreements
$
4,426,947
$
3,378,445
Dividends payable
8,398
5,908
Derivative liabilities, at fair value
2,731
7,161
Accrued interest payable
15,836
9,209
Due to affiliates
1,252
1,131
Other liabilities
14,888
25,119
Total Liabilities
4,470,052
3,426,973
Total Stockholders' Equity
466,841
438,763
Total Liabilities and Stockholders' Equity
$
4,936,893
$
3,865,736
Common shares outstanding
52,332,306
36,764,983
Book value per share
$
8.92
$
11.93
ORCHID ISLAND CAPITAL, INC.
STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands, except per share data)
(Unaudited - Amounts Subject to Change)
Nine Months Ended September 30,
Three Months Ended September 30,
2023
2022
2023
2022
Interest income
$
128,030
$
112,735
$
50,107
$
35,610
Interest expense
(149,593
)
(32,196
)
(58,705
)
(21,361
)
Net interest (expense) income
(21,563
)
80,539
(8,598
)
14,249
Losses on RMBS and derivative contracts
(30,323
)
(360,657
)
(66,890
)
(94,433
)
Net portfolio loss
(51,886
)
(280,118
)
(75,488
)
(80,184
)
Expenses
14,467
13,261
4,644
4,329
Net loss
$
(66,353
)
$
(293,379
)
$
(80,132
)
$
(84,513
)
Other comprehensive income
16
-
16
-
Comprehensive net loss
$
(66,337
)
$
(293,379
)
$
(80,116
)
$
(84,513
)
Basic and diluted net loss per share
$
(1.58
)
$
(8.31
)
$
(1.68
)
$
(2.40
)
Weighted Average Shares Outstanding
42,103,532
35,336,702
47,773,409
35,205,888
Dividends Declared Per Common Share:
$
1.440
$
1.995
$
0.480
$
0.545
Three Months Ended September 30,
Key Balance Sheet Metrics
2023
2022
Average RMBS(1)
$
4,447,098
$
3,571,037
Average repurchase agreements(1)
4,314,332
3,446,420
Average stockholders' equity(1)
478,463
453,369
Adjusted leverage ratio - as of period end(2)
9.5:1
7.8:1
Economic leverage ratio - as of period end(3)
8.5:1
7.3:1
Key Performance Metrics
Average yield on RMBS(4)
4.51
%
3.99
%
Average cost of funds(4)
5.44
%
2.48
%
Average economic cost of funds(5)
3.18
%
2.00
%
Average interest rate spread(6)
(0.93
)%
1.51
%
Average economic interest rate spread(7)
1.33
%
1.99
%
(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/20231026165984/en/
Orchid Island Capital, Inc. Robert E. Cauley, 772-231-1400 Chairman and Chief Executive Officer https://ir.orchidislandcapital.com
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