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,
2024.
Third Quarter 2024 Results
- Net income of $17.3 million, or $0.24 per common
share, which consists of:
- Net interest income of $0.3 million, or less than $0.01
per common share
- Total expenses of $4.3 million, or $0.06 per common
share
- Net realized and unrealized gains of $21.2 million, or
$0.29 per common share, on RMBS and derivative instruments,
including net interest income on interest rate swaps
- Third quarter dividends declared and paid of
$0.36 per common share
- Book value per common share of $8.40 at September 30,
2024
- Total return of 2.10%, comprised of $0.36 dividend per
common share and $0.18 decrease in book value per common
share, divided by beginning book value per common share
Other Financial Highlights
- Orchid maintained a strong liquidity position
of $326.7 million in cash and cash equivalents and
unpledged securities, or approximately 50% of
stockholders' equity as of September 30, 2024
- Borrowing capacity in excess of September 30,
2024 outstanding repurchase agreement balances of $5,230.9
million, spread across 25 active lenders
- Company to discuss results on Friday, October 25, 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 third quarter results, Robert E. Cauley,
Chairman and Chief Executive Officer, said, “The long-awaited
impacts of tight monetary policy orchestrated by the Federal
Reserve appear to have finally had the desired impacts on inflation
and the imbalances in the labor market. Inflation is closing in on
the Fed’s 2% target and hiring and wage growth are slowing while
the unemployment rate has steadily risen. In contrast, growth in
the economy and consumer spending have remained robust throughout.
In late September the Fed reduced the overnight funding rate by 50
basis points, and the market anticipated it was the first of many
such cuts. Unfortunately, the non-farm payroll report for
September 2024, released in early October, as well as the latest
readings on inflation and spending, imply the magnitude and urgency
of additional rate cuts by the Fed may differ with those market
expectations.
“For the third quarter of 2024 Orchid Island generated an
economic return of 2.1%, not annualized. We have maintained
the dividend rate at $0.12 per month which, based on yesterday’s
closing price of $7.80, represents a dividend yield of
approximately 18.5%. Our portfolio positioning continues to be
predominantly focused on a barbell strategy with 30-year, fixed
rate Agency RMBS, while our hedges are more focused and have a
longer duration bias to protect the portfolio against an
unanticipated rise in longer term rates. This positioning was
not optimal during the current quarter, as interest rates decreased
significantly, leading to a modest decline in our book value, but
we made modest changes to our positioning since quarter end to
better balance the anticipated outcomes for different rate
movements. However, we continue to view a bear-steepening of the
yield curve as the greatest risk to the portfolio.
“We were able to raise additional capital at attractive levels
via our ATM program and increase the size of the portfolio while
maintaining leverage levels. Looking forward, we anticipate
investment opportunities to remain attractive with potential
total returns that could improve if the Fed were to continue easing
monetary policy. Absent such a development, total returns
available today are still quite attractive and hedged net-interest
spreads are ample in relation to the current dividend
level.”
Details of Third Quarter 2024 Results of
Operations
The Company reported net income of $17.3 million for
the three month period ended September 30, 2024, compared with
a net loss of $80.1 million for the three month period ended
September 30, 2023. Interest income on the portfolio in
the third quarter was up approximately $14.6 million from
the second quarter of 2024. The yield on our average Agency
RMBS increased from 5.05% in the second quarter of 2024 to
5.43% for the third quarter of 2024, and our repurchase
agreement borrowing costs increased from 5.34% for the second
quarter of 2024 to 5.62% for the third quarter of 2024.
Book value decreased by $0.18 per share in the third quarter
of 2024. The decrease in book value reflects our net income of
$0.24 per share and the dividend distribution of
$0.36 per share. The Company recorded net realized and
unrealized gains of $21.2 million on Agency RMBS assets and
derivative instruments, including net interest income on interest
rate swaps.
Prepayments
For the quarter ended September 30, 2024, Orchid received
$137.7 million in scheduled and unscheduled principal
repayments and prepayments, which equated to a 3-month constant
prepayment rate (“CPR”) of approximately 8.8%. Prepayment rates on
the two RMBS sub-portfolios were as follows (in CPR):
|
|
|
|
|
Structured |
|
|
| |
|
PT RMBS |
|
RMBS |
|
Total |
|
Three Months Ended |
|
Portfolio (%) |
|
Portfolio (%) |
|
Portfolio (%) |
| September 30, 2024 |
|
8.8 |
|
6.4 |
|
8.8 |
| June 30, 2024 |
|
7.6 |
|
7.1 |
|
7.6 |
| March 31, 2024 |
|
6.0 |
|
5.9 |
|
6.0 |
| December 31, 2023 |
|
5.4 |
|
7.9 |
|
5.5 |
| September 30, 2023 |
|
6.1 |
|
5.7 |
|
6.0 |
| June 30, 2023 |
|
5.6 |
|
7.0 |
|
5.6 |
| March
31, 2023 |
|
3.9 |
|
5.7 |
|
4.0 |
| |
|
|
|
|
|
|
Portfolio
The following tables summarize certain characteristics of
Orchid’s PT RMBS (as defined below) and structured RMBS as
of September 30, 2024 and December 31, 2023:
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
| |
|
|
|
|
Percentage |
|
|
|
|
|
Average |
|
|
| |
|
|
|
|
of |
|
|
Weighted |
|
|
Maturity |
|
|
| |
|
Fair |
|
Entire |
|
|
Average |
|
|
in |
|
Longest |
|
Asset Category |
|
Value |
|
Portfolio |
|
|
Coupon |
|
|
Months |
|
Maturity |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fixed Rate RMBS |
|
$ |
5,427,069 |
|
99.7 |
% |
|
4.94 |
% |
|
327 |
|
1-Oct-54 |
| Interest-Only Securities |
|
|
15,382 |
|
0.3 |
% |
|
4.01 |
% |
|
214 |
|
25-Jul-48 |
| Inverse
Interest-Only Securities |
|
|
353 |
|
0.0 |
% |
|
0.00 |
% |
|
264 |
|
15-Jun-42 |
| Total
Mortgage Assets |
|
$ |
5,442,804 |
|
100.0 |
% |
|
4.90 |
% |
|
325 |
|
1-Oct-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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
| |
|
|
|
|
Percentage of |
|
|
|
|
|
Percentage of |
|
|
Agency |
|
Fair Value |
|
Entire Portfolio |
|
|
Fair Value |
|
Entire Portfolio |
|
| Fannie Mae |
|
$ |
3,692,047 |
|
67.8 |
% |
|
$ |
2,714,192 |
|
69.7 |
% |
| Freddie
Mac |
|
|
1,750,757 |
|
32.2 |
% |
|
|
1,179,820 |
|
30.3 |
% |
| Total
Portfolio |
|
$ |
5,442,804 |
|
100.0 |
% |
|
$ |
3,894,012 |
|
100.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
Weighted Average Pass-through Purchase Price |
|
$ |
102.72 |
|
$ |
104.10 |
| Weighted Average Structured
Purchase Price |
|
$ |
18.74 |
|
$ |
18.74 |
| Weighted Average Pass-through
Current Price |
|
$ |
98.89 |
|
$ |
95.70 |
| Weighted Average Structured
Current Price |
|
$ |
14.02 |
|
$ |
13.51 |
|
Effective Duration (1) |
|
|
3.490 |
|
|
4.400 |
|
(1 |
) |
Effective duration is the
approximate percentage change in price for a 100 basis
point change in rates. An effective duration
of 3.490 indicates that an interest rate increase of 1.0%
would be expected to cause a 3.490% decrease in the value of the
RMBS in the Company’s investment portfolio at September 30,
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. |
|
|
|
|
Financing, Leverage and Liquidity
As of September 30, 2024, the Company had outstanding
repurchase obligations of approximately $5,230.9
million with a net weighted average borrowing rate of 5.24%.
These agreements were collateralized by RMBS with a fair value,
including accrued interest, of approximately $5,461.0
million and cash pledged to counterparties of approximately
$9.2 million. The Company’s adjusted leverage ratio, defined as the
balance of repurchase agreement liabilities divided by
stockholders' equity, at September 30, 2024 was
8.0 to 1. At September 30, 2024, the Company’s liquidity
was approximately $326.7 million consisting of cash and cash
equivalents and unpledged RMBS. To enhance our liquidity even
further, we may pledge more of our structured RMBS as part of a
repurchase agreement funding, but retain the cash in lieu of
acquiring additional assets. In this way we can, at a modest
cost, retain higher levels of cash on hand and decrease the
likelihood we will have to sell assets in a distressed market in
order to raise cash. Below is a list of our outstanding borrowings
under repurchase obligations at September 30, 2024.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
| |
|
Total |
|
|
|
|
Average |
|
|
Average |
| |
|
Outstanding |
|
% of |
|
|
Borrowing |
|
|
Maturity |
|
Counterparty |
|
Balances |
|
Total |
|
|
Rate |
|
|
in Days |
| ABN AMRO Bank N.V. |
|
$ |
381,192 |
|
7.29 |
% |
|
5.37 |
% |
|
15 |
| Merrill Lynch, Pierce, Fenner
& Smith |
|
|
379,748 |
|
7.26 |
% |
|
5.20 |
% |
|
35 |
| ASL Capital Markets Inc. |
|
|
346,397 |
|
6.62 |
% |
|
5.35 |
% |
|
31 |
| Cantor Fitzgerald &
Co |
|
|
289,468 |
|
5.53 |
% |
|
5.30 |
% |
|
11 |
| DV Securities, LLC Repo |
|
|
274,284 |
|
5.24 |
% |
|
5.24 |
% |
|
19 |
| Mitsubishi UFJ Securities
(USA), Inc |
|
|
263,580 |
|
5.04 |
% |
|
5.35 |
% |
|
23 |
| J.P. Morgan Securities
LLC |
|
|
254,798 |
|
4.87 |
% |
|
5.33 |
% |
|
9 |
| Banco Santander SA |
|
|
248,472 |
|
4.75 |
% |
|
5.33 |
% |
|
49 |
| Daiwa Securities America
Inc. |
|
|
247,191 |
|
4.73 |
% |
|
5.04 |
% |
|
28 |
| Citigroup Global Markets
Inc |
|
|
244,746 |
|
4.68 |
% |
|
5.04 |
% |
|
25 |
| Wells Fargo Bank, N.A. |
|
|
241,641 |
|
4.62 |
% |
|
5.29 |
% |
|
16 |
| ING Financial Markets LLC |
|
|
225,593 |
|
4.31 |
% |
|
5.01 |
% |
|
39 |
| Marex Capital Markets
Inc. |
|
|
223,192 |
|
4.27 |
% |
|
5.00 |
% |
|
21 |
| Goldman, Sachs & Co |
|
|
208,485 |
|
3.99 |
% |
|
5.32 |
% |
|
16 |
| Bank of Montreal |
|
|
204,522 |
|
3.91 |
% |
|
5.31 |
% |
|
15 |
| South Street Securities,
LLC |
|
|
194,516 |
|
3.72 |
% |
|
5.20 |
% |
|
19 |
| Clear Street LLC |
|
|
193,535 |
|
3.70 |
% |
|
5.21 |
% |
|
48 |
| Mirae Asset Securities (USA)
Inc. |
|
|
193,120 |
|
3.69 |
% |
|
5.26 |
% |
|
26 |
| StoneX Financial Inc. |
|
|
159,098 |
|
3.04 |
% |
|
5.03 |
% |
|
21 |
| The Bank of Nova Scotia |
|
|
149,958 |
|
2.87 |
% |
|
5.29 |
% |
|
15 |
| RBC Capital Markets, LLC |
|
|
143,225 |
|
2.74 |
% |
|
5.31 |
% |
|
45 |
| Nomura Securities
International, Inc. |
|
|
75,278 |
|
1.44 |
% |
|
5.31 |
% |
|
15 |
| Lucid Prime Fund, LLC |
|
|
48,322 |
|
0.92 |
% |
|
5.29 |
% |
|
17 |
| Wells Fargo Securities,
LLC |
|
|
23,004 |
|
0.44 |
% |
|
5.06 |
% |
|
25 |
| Lucid
Cash Fund USG LLC |
|
|
17,506 |
|
0.33 |
% |
|
5.31 |
% |
|
17 |
| Total /
Weighted Average |
|
$ |
5,230,871 |
|
100.00 |
% |
|
5.24 |
% |
|
25 |
| |
|
|
|
|
|
|
|
|
|
|
|
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, 2024, such instruments were comprised of U.S. Treasury note
(“T-Note”) and Secured Overnight Financing Rate ("SOFR") futures
contracts, interest rate swap agreements and contracts to sell
to-be-announced ("TBA") securities.
The table below presents information related to the Company’s
T-Note and SOFR futures contracts at September 30, 2024.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2024 |
|
| |
|
Average |
|
Weighted |
|
|
Weighted |
|
|
|
|
|
| |
|
Contract |
|
Average |
|
|
Average |
|
|
|
|
|
| |
|
Notional |
|
Entry |
|
|
Effective |
|
|
Open |
|
|
Expiration Year |
|
Amount |
|
Rate |
|
|
Rate |
|
|
Equity(1) |
|
| T-Note Futures
Contracts (Short Positions)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2024 10-year T-Note futures (Dec 2024 - Dec 2034 Hedge
Period) |
|
$ |
12,500 |
|
3.73 |
% |
|
3.62 |
% |
|
$ |
(88 |
) |
| SOFR Futures Contracts
(Short Positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2024 3-Month SOFR futures (Sep 2024 - Dec 2024 Hedge
Period) |
|
$ |
241,250 |
|
4.78 |
% |
|
4.73 |
% |
|
$ |
(110 |
) |
|
March 2025 3-Month SOFR futures (Dec 2024 - Mar 2025 Hedge
Period) |
|
|
129,250 |
|
4.23 |
% |
|
4.04 |
% |
|
|
(242 |
) |
|
June 2025 3-Month SOFR futures (Mar 2025 - Jun 2025 Hedge
Period) |
|
|
129,000 |
|
3.77 |
% |
|
3.52 |
% |
|
|
(333 |
) |
|
September 2025 3-Month SOFR futures (Jun 2025 - Sep 2025 Hedge
Period) |
|
|
129,000 |
|
3.49 |
% |
|
3.21 |
% |
|
|
(356 |
) |
|
December 2025 3-Month SOFR futures (Sep 2025 - Dec 2025 Hedge
Period) |
|
|
129,000 |
|
3.31 |
% |
|
3.07 |
% |
|
|
(320 |
) |
|
March 2026 3-Month SOFR futures (Dec 2025 - Mar 2026 Hedge
Period) |
|
|
129,000 |
|
3.21 |
% |
|
3.00 |
% |
|
|
(275 |
) |
|
June 2026 3-Month SOFR futures (Mar 2026 - Jun 2026 Hedge
Period) |
|
|
104,000 |
|
3.15 |
% |
|
2.97 |
% |
|
|
(178 |
) |
|
September 2026 3-Month SOFR futures (Jun 2026 - Sep 2026 Hedge
Period) |
|
|
104,000 |
|
3.11 |
% |
|
2.98 |
% |
|
|
(137 |
) |
|
December 2026 3-Month SOFR futures (Sep 2026 - Dec 2026 Hedge
Period) |
|
|
29,000 |
|
3.34 |
% |
|
3.01 |
% |
|
|
(96 |
) |
|
March 2027 3-Month SOFR futures (Dec 2026 - Mar 2027 Hedge
Period) |
|
|
16,250 |
|
3.10 |
% |
|
3.04 |
% |
|
|
(10 |
) |
| (1) |
Open equity
represents the cumulative gains (losses) recorded on open futures
positions from inception. |
| (2) |
10-Year T-Note futures contracts were valued at a price
of $114.28. The contract values of the short positions were
$14.3 million. |
| |
|
The table below presents information related to the Company’s
interest rate swap positions at September 30, 2024.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Average |
|
|
|
|
|
|
|
| |
|
|
|
|
Fixed |
|
|
Average |
|
|
Average |
|
| |
|
Notional |
|
Pay |
|
|
Receive |
|
|
Maturity |
|
|
|
|
Amount |
|
Rate |
|
|
Rate |
|
|
(Years) |
|
| Expiration > 1 to ≤ 5
years |
|
$ |
1,450,000 |
|
1.69 |
% |
|
5.41 |
% |
|
3.6 |
|
|
Expiration > 5 years |
|
|
2,036,800 |
|
3.55 |
% |
|
5.35 |
% |
|
7.2 |
|
|
|
|
$ |
3,486,800 |
|
2.78 |
% |
|
5.37 |
% |
|
5.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes our contracts to sell TBA
securities as of September 30, 2024.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Notional |
|
|
|
|
|
|
|
|
|
|
|
| |
Amount |
|
|
|
|
|
|
|
|
|
|
Net |
| |
Long |
|
|
Cost |
|
|
Market |
|
|
Carrying |
|
|
(Short)(1) |
|
|
Basis(2) |
|
|
Value(3) |
|
|
Value(4) |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30-Year TBA
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0% |
$ |
(300,000 |
) |
|
$ |
(271,195 |
) |
|
$ |
(269,027 |
) |
|
$ |
2,168 |
|
|
$ |
(300,000 |
) |
|
$ |
(271,195 |
) |
|
$ |
(269,027 |
) |
|
$ |
2,168 |
|
(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 |
|
|
1.800 |
|
|
81,127 |
| 2024 -
YTD(1) |
|
|
1.200 |
|
|
76,738 |
|
Totals |
|
$ |
67.650 |
|
$ |
685,335 |
|
(1) |
On
October 16, 2024, the Company declared a dividend of $0.12 per
share to be paid on November 27, 2024. 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,
2024. |
|
|
|
Book Value Per Share
The Company's book value per share at September 30, 2024 was
$8.40. 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, 2024, the Company's
stockholders' equity was $656.0 million with
78,082,645 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 June 30, 2024, the allocation
to the PT RMBS portfolio was approximately 96.2%.
The table below details the changes to the respective
sub-portfolios during the quarter.
| (in
thousands) |
|
|
Portfolio Activity for the Quarter |
|
| |
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
| |
|
|
|
|
|
|
|
Inverse |
|
|
|
|
|
|
|
|
| |
|
Pass- |
|
|
Interest |
|
|
Interest |
|
|
|
|
|
|
|
|
| |
|
Through |
|
|
Only |
|
|
Only |
|
|
|
|
|
|
|
|
|
|
|
Portfolio |
|
|
Securities |
|
|
Securities |
|
Sub-total |
|
|
Total |
|
|
Market value - June 30, 2024 |
|
$ |
4,509,084 |
|
|
$ |
16,447 |
|
|
$ |
224 |
|
$ |
16,671 |
|
|
$ |
4,525,755 |
|
| Securities purchased |
|
|
959,202 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
959,202 |
|
| Securities sold |
|
|
(66,509 |
) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
(66,509 |
) |
| Gains on sales |
|
|
510 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
510 |
|
| Return of investment |
|
|
n/a |
|
|
|
(581 |
) |
|
|
- |
|
|
(581 |
) |
|
|
(581 |
) |
| Pay-downs |
|
|
(137,137 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
n/a |
|
|
|
(137,137 |
) |
| Discount accretion due to
pay-downs |
|
|
5,048 |
|
|
|
n/a |
|
|
|
n/a |
|
|
n/a |
|
|
|
5,048 |
|
| Mark to
market gains (losses) |
|
|
156,871 |
|
|
|
(484 |
) |
|
|
129 |
|
|
(355 |
) |
|
|
156,516 |
|
|
Market value - September 30, 2024 |
|
$ |
5,427,069 |
|
|
$ |
15,382 |
|
|
$ |
353 |
|
$ |
15,735 |
|
|
$ |
5,442,804 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tables below present the allocation of capital between the
respective portfolios at September 30, 2024 and June 30,
2024, and the return on invested capital for each sub-portfolio for
the three month period ended September 30, 2024.
| ($ in
thousands) |
|
|
Capital Allocation |
|
| |
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
| |
|
|
|
|
|
|
|
Inverse |
|
|
|
|
|
|
|
|
|
| |
|
Pass- |
|
|
Interest |
|
|
Interest |
|
|
|
|
|
|
|
|
|
| |
|
Through |
|
|
Only |
|
|
Only |
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio |
|
|
Securities |
|
|
Securities |
|
|
Sub-total |
|
|
Total |
|
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Market value |
|
$ |
5,427,069 |
|
|
$ |
15,382 |
|
|
$ |
353 |
|
|
$ |
15,735 |
|
|
$ |
5,442,804 |
|
| Cash |
|
|
333,717 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
333,717 |
|
|
Borrowings(1) |
|
|
(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 |
% |
|
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Market value |
|
$ |
4,509,084 |
|
|
$ |
16,447 |
|
|
$ |
224 |
|
|
$ |
16,671 |
|
|
$ |
4,525,755 |
|
| Cash |
|
|
257,011 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
257,011 |
|
|
Borrowings(2) |
|
|
(4,345,704 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,345,704 |
) |
|
Total |
|
$ |
420,391 |
|
|
$ |
16,447 |
|
|
$ |
224 |
|
|
$ |
16,671 |
|
|
$ |
437,062 |
|
|
% of Total |
|
|
96.2 |
% |
|
|
3.8 |
% |
|
|
0.1 |
% |
|
|
3.8 |
% |
|
|
100.0 |
% |
|
(1) |
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. |
| (2) |
At June 30, 2024, there were
outstanding repurchase agreement balances of $13.5
million secured by IO securities and $0.2 million secured
by IIO securities. We entered into these arrangements to generate
additional cash available to meet margin calls on PT RMBS;
therefore, we have not considered these balances to be allocated to
the structured securities strategy. |
| |
|
The return on invested capital in the PT RMBS and structured
RMBS portfolios was approximately 5.1% and (0.2)%,
respectively, for the third quarter of 2024. The combined
portfolio generated a return on invested capital of approximately
4.9%.
| ($ in
thousands) |
|
|
Returns for the Quarter Ended September 30,
2024 |
|
| |
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
| |
|
|
|
|
|
|
|
Inverse |
|
|
|
|
|
|
|
|
|
| |
|
Pass- |
|
|
Interest |
|
|
Interest |
|
|
|
|
|
|
|
|
|
| |
|
Through |
|
|
Only |
|
|
Only |
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio |
|
|
Securities |
|
|
Securities |
|
|
Sub-total |
|
|
Total |
|
|
Income (net of borrowing cost) |
|
$ |
21 |
|
|
$ |
319 |
|
|
$ |
- |
|
|
$ |
319 |
|
|
$ |
340 |
|
| Realized and unrealized gains
(losses) |
|
|
162,429 |
|
|
|
(484 |
) |
|
|
129 |
|
|
|
(355 |
) |
|
|
162,074 |
|
|
Derivative losses |
|
|
(140,825 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
(140,825 |
) |
|
Total Return |
|
$ |
21,625 |
|
|
$ |
(165 |
) |
|
$ |
129 |
|
|
$ |
(36 |
) |
|
$ |
21,589 |
|
|
Beginning Capital Allocation |
|
$ |
420,391 |
|
|
$ |
16,447 |
|
|
$ |
224 |
|
|
$ |
16,671 |
|
|
$ |
437,062 |
|
| Return
on Invested Capital for the Quarter(1) |
|
|
5.1 |
% |
|
|
(1.0 |
)% |
|
|
57.6 |
% |
|
|
(0.2 |
)% |
|
|
4.9 |
% |
| Average
Capital Allocation(2) |
|
$ |
475,153 |
|
|
$ |
15,915 |
|
|
$ |
289 |
|
|
$ |
16,204 |
|
|
$ |
491,357 |
|
| Return
on Average Invested Capital for the Quarter(3) |
|
|
4.6 |
% |
|
|
(1.0 |
)% |
|
|
44.6 |
% |
|
|
(0.2 |
)% |
|
|
4.4 |
% |
| (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 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 24,675,497 shares under the March 2023
Equity Distribution Agreement for aggregate gross proceeds of
approximately $228.8 million and net proceeds of approximately
$225.0 million, after commissions and fees, prior to its
termination in June 2024.
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
September 30, 2024, we issued a total of
15,309,022 shares under the June 2024 Equity Distribution
Agreement for aggregate gross proceeds of approximately $128.6
million, and net proceeds of approximately $126.5 million, after
commissions and fees. Subsequent to September 30, 2024,
we issued a total of 332,000 shares under the June
2024 Equity Distribution Agreement for aggregate gross proceeds of
approximately $2.7 million, and net proceeds of approximately $2.7
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, 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 nine months ended
September 30, 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, October 25, 2024, at 10:00 AM ET. Participants can
register and receive dial-in information at
https://register.vevent.com/register/BI631347493dd04b38aa589f3e4b9f5a6d.
A live audio webcast of the conference call can be accessed at
https://edge.media-server.com/mmc/p/9wgzmhx7 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.
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
composition, positioning and repositioning, hedging levels,
leverage ratio, dividends, investment and 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 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,
772-231-1400Chairman and Chief Executive
Officerhttps://ir.orchidislandcapital.com
Summarized Financial Statements
The following is a summarized presentation of the unaudited
balance sheets as of September 30, 2024, and December 31,
2023, and the unaudited quarterly statements of operations for the
nine and three months ended September 30, 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) |
|
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
ASSETS: |
|
|
|
|
|
|
|
|
| Mortgage-backed securities, at
fair value |
|
$ |
5,442,804 |
|
|
$ |
3,894,012 |
|
| U.S. Treasury securities,
available-for-sale |
|
|
99,467 |
|
|
|
148,820 |
|
| Cash, cash equivalents and
restricted cash |
|
|
333,717 |
|
|
|
200,289 |
|
| Accrued interest
receivable |
|
|
22,868 |
|
|
|
14,951 |
|
| Derivative assets, at fair
value |
|
|
16,846 |
|
|
|
6,420 |
|
| Receivable for investment
securities and TBA transactions |
|
|
177 |
|
|
|
- |
|
| Other
assets |
|
|
614 |
|
|
|
455 |
|
|
Total Assets |
|
$ |
5,916,493 |
|
|
$ |
4,264,947 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
| Repurchase agreements |
|
$ |
5,230,871 |
|
|
$ |
3,705,649 |
|
| Payable for investment
securities and TBA transactions |
|
|
68 |
|
|
|
60,454 |
|
| Dividends payable |
|
|
9,396 |
|
|
|
6,222 |
|
| Derivative liabilities, at
fair value |
|
|
- |
|
|
|
12,694 |
|
| Accrued interest payable |
|
|
16,372 |
|
|
|
7,939 |
|
| Due to affiliates |
|
|
1,177 |
|
|
|
1,013 |
|
| Other
liabilities |
|
|
2,585 |
|
|
|
1,031 |
|
| Total Liabilities |
|
|
5,260,469 |
|
|
|
3,795,002 |
|
|
Total Stockholders' Equity |
|
|
656,024 |
|
|
|
469,945 |
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
5,916,493 |
|
|
$ |
4,264,947 |
|
| Common shares outstanding |
|
|
78,082,645 |
|
|
|
51,636,074 |
|
| Book
value per share |
|
$ |
8.40 |
|
|
$ |
9.10 |
|
| |
|
|
|
|
|
|
|
|
|
ORCHID ISLAND CAPITAL, INC. |
|
STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
|
($ in thousands, except per share data) |
|
(Unaudited - Amounts Subject to Change) |
|
|
|
Nine Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Interest income |
|
$ |
169,581 |
|
|
$ |
128,030 |
|
|
$ |
67,646 |
|
|
$ |
50,107 |
|
|
Interest expense |
|
|
(172,428 |
) |
|
|
(149,593 |
) |
|
|
(67,306 |
) |
|
|
(58,705 |
) |
| Net interest (expense)
income |
|
|
(2,847 |
) |
|
|
(21,563 |
) |
|
|
340 |
|
|
|
(8,598 |
) |
| Gains
(losses) on RMBS and derivative contracts |
|
|
47,351 |
|
|
|
(30,323 |
) |
|
|
21,249 |
|
|
|
(66,890 |
) |
| Net portfolio income
(loss) |
|
|
44,504 |
|
|
|
(51,886 |
) |
|
|
21,589 |
|
|
|
(75,488 |
) |
|
Expenses |
|
|
12,387 |
|
|
|
14,467 |
|
|
|
4,269 |
|
|
|
4,644 |
|
|
Net income (loss) |
|
$ |
32,117 |
|
|
$ |
(66,353 |
) |
|
$ |
17,320 |
|
|
$ |
(80,132 |
) |
| Other
comprehensive income |
|
|
38 |
|
|
|
16 |
|
|
|
48 |
|
|
|
16 |
|
|
Comprehensive net income (loss) |
|
$ |
32,155 |
|
|
$ |
(66,337 |
) |
|
$ |
17,368 |
|
|
$ |
(80,116 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share |
|
$ |
0.53 |
|
|
$ |
(1.58 |
) |
|
$ |
0.24 |
|
|
$ |
(1.68 |
) |
|
Weighted Average Shares Outstanding |
|
|
60,700,959 |
|
|
|
42,103,532 |
|
|
|
72,377,373 |
|
|
|
47,773,409 |
|
|
Dividends Declared Per Common Share: |
|
$ |
1.080 |
|
|
$ |
0.960 |
|
|
$ |
0.360 |
|
|
$ |
0.480 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Key Balance Sheet Metrics |
|
2024 |
|
|
2023 |
|
|
Average RMBS(1) |
|
$ |
4,984,279 |
|
|
$ |
4,447,098 |
|
| Average repurchase
agreements(1) |
|
|
4,788,287 |
|
|
|
4,314,332 |
|
| Average stockholders'
equity(1) |
|
|
605,978 |
|
|
|
478,463 |
|
| Adjusted leverage ratio - as
of period end(2) |
|
8.0:1 |
|
|
9.5:1 |
|
| Economic leverage ratio - as
of period end(3) |
|
7.6:1 |
|
|
8.5:1 |
|
| |
|
|
|
|
|
|
|
|
| Key Performance
Metrics |
|
|
|
|
|
|
|
|
| Average yield on RMBS(4) |
|
|
5.43 |
% |
|
|
4.51 |
% |
| Average cost of funds(4) |
|
|
5.62 |
% |
|
|
5.44 |
% |
| Average economic cost of
funds(5) |
|
|
2.96 |
% |
|
|
3.18 |
% |
| Average interest rate
spread(6) |
|
|
(0.19 |
)% |
|
|
(0.93 |
)% |
| Average
economic interest rate spread(7) |
|
|
2.47 |
% |
|
|
1.33 |
% |
| (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. |
| |
|
Orchid Island Capital (NYSE:ORC)
Historical Stock Chart
From Nov 2024 to Dec 2024
Orchid Island Capital (NYSE:ORC)
Historical Stock Chart
From Dec 2023 to Dec 2024
