VERO BEACH, Fla.–(BUSINESS WIRE)–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 March 31, 2021.
First Quarter 2021 Highlights
Management Commentary
Commenting on the first quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “During the first quarter of 2021 the recovery from the pandemic accelerated rapidly. New cases of COVID-19 dropped, the distribution of the various vaccines ramped up rapidly and the U.S. government passed a $1.9 trillion stimulus package. The incoming economic data was also very strong, and markets reacted in kind. Equity markets reached new highs almost daily and interest rates increased dramatically. The Federal Reserve expressed their comfort with higher rates and a steep curve, stating the move was consistent with market expectations for a strong recovery, a recovery which in their eyes was a long way from complete.
“When we issued our earnings release for the fourth quarter of 2020 in February 2021, we were in the midst of repositioning our portfolio to minimize the impact of high prepayment speeds and their downward pressure on our net interest margin. During the remainder of the first quarter of 2021, we have continued to do so, and our portfolio in the first quarter had a three-month CPR of 12.0 versus 20.1 in the fourth quarter of 2020, a 40% decrease in realized speeds. The portfolio’s low-coupon bias has increased, and the concentration in higher quality specified pools has decreased as well. The combination of higher rates/lower dollar prices and the reduction in higher quality specified pools lowered the weighted average price of the portfolio by 2.8 basis points. We expect these developments to lead to lower premium amortization rates going forward. We believe that our current portfolio construction should perform well in the current, higher rate environment.
“The substantial move in the market and the increase in rates during the first quarter of 2021 negatively impacted our book value. As a result of the market move, we repositioned our hedge positions and eliminated our lower coupon dollar roll positions pending a stabilization in rates. Our hedge positions at March 31, 2021 consisted of option-based instruments such as swaptions or combinations of swaptions, interest rate swaps and TBA shorts and, since quarter end, futures, albeit to a lesser extent. Our leverage ratio remains at the low end of our target range as well. Absent another episode of extreme market volatility, we anticipate the portfolio should continue to generate attractive yields as it has in the past.”
Details of First Quarter 2021 Results of Operations
The Company reported net loss of $29.4 million for the three month period ended March 31, 2021, compared with net loss of $91.2 million for the three month period ended March 31, 2020. The Company increased its Agency RMBS portfolio over the course of the first quarter through capital raised through two follow-on offerings. Interest income on the portfolio was up approximately $1.0 million from the fourth quarter of 2020. The yield on our average MBS declined from 2.85% in the fourth quarter of 2020 to 2.66% for the first quarter of 2021, repurchase agreement borrowing costs declined from 0.23% for the fourth quarter of 2020 to 0.20% for the first quarter of 2021, and our net interest spread declined from 2.62% to 2.46% in the first quarter.
Book value decreased by $0.52 per share in the first quarter of 2021, reflecting our net loss of $0.34 per share, combined with the dividend distribution of $0.195 per share. The Company recorded net realized and unrealized losses of $0.60 per share on Agency RMBS assets and derivative instruments, including net interest expense on interest rate swaps. As interest rates increased over the course of the first quarter, mark to market gains on our hedging instruments were offset by mark to market losses on our Agency RMBS assets.
Prepayments
For the quarter ended March 31, 2021, Orchid received $123.9 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 12.0%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):
|
|
|
Structured |
|
|
|
|
PT RMBS |
RMBS |
Total |
|
|
Three Months Ended |
Portfolio (%) |
Portfolio (%) |
Portfolio (%) |
|
|
March 31, 2021 |
9.9 |
40.3 |
12.0 |
|
|
December 31, 2020 |
16.7 |
44.3 |
20.1 |
|
|
September 30, 2020 |
14.3 |
40.4 |
17.0 |
|
|
June 30, 2020 |
13.9 |
35.3 |
16.3 |
|
|
March 31, 2020 |
9.8 |
22.9 |
11.9 |
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS and structured RMBS as of March 31, 2021 and December 31, 2020:
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Percentage |
|
Average |
|
|
|
|
|
|
of |
Weighted |
Maturity |
|
|
|
|
|
Fair |
Entire |
Average |
in |
Longest |
|
|
Asset Category |
|
Value |
Portfolio |
Coupon |
Months |
Maturity |
|
|
March 31, 2021 |
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
$ |
4,297,731 |
99.1% |
2.95% |
335 |
1-Mar-51 |
|
|
Total Mortgage-backed Pass-through |
|
4,297,731 |
99.1% |
2.95% |
335 |
1-Mar-51 |
|
|
Interest-Only Securities |
|
35,521 |
0.8% |
3.98% |
264 |
25-May-50 |
|
|
Inverse Interest-Only Securities |
|
5,284 |
0.1% |
3.77% |
311 |
15-Jun-42 |
|
|
Total Structured RMBS |
|
40,805 |
0.9% |
3.93% |
275 |
25-May-50 |
|
|
Total Mortgage Assets |
$ |
4,338,536 |
100.0% |
3.02% |
331 |
1-Mar-51 |
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
$ |
3,560,746 |
95.5% |
3.09% |
339 |
1-Jan-51 |
|
|
Fixed Rate CMOs |
|
137,453 |
3.7% |
4.00% |
312 |
15-Dec-42 |
|
|
Total Mortgage-backed Pass-through |
|
3,698,199 |
99.2% |
3.13% |
338 |
1-Jan-51 |
|
|
Interest-Only Securities |
|
28,696 |
0.8% |
3.98% |
268 |
25-May-50 |
|
|
Total Structured RMBS |
|
28,696 |
0.8% |
3.98% |
268 |
25-May-50 |
|
|
Total Mortgage Assets |
$ |
3,726,895 |
100.0% |
3.19% |
333 |
1-Jan-51 |
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021 |
|
December 31, 2020 |
|||||
|
|
|
|
|
Percentage of |
|
|
|
Percentage of |
|
|
Agency |
|
Fair Value |
|
Entire Portfolio |
|
Fair Value |
|
Entire Portfolio |
|
|
Fannie Mae |
$ |
3,439,588 |
|
79.3% |
$ |
2,733,960 |
|
73.4% |
|
|
Freddie Mac |
|
898,948 |
|
20.7% |
|
992,935 |
|
26.6% |
|
|
Total Portfolio |
$ |
4,338,536 |
|
100.0% |
$ |
3,726,895 |
|
100.0% |
|
|
|
|
March 31, 2021 |
|
December 31, 2020 |
||
|
Weighted Average Pass-through Purchase Price |
$ |
107.56 |
$ |
107.43 |
||
|
Weighted Average Structured Purchase Price |
$ |
18.69 |
$ |
20.06 |
||
|
Weighted Average Pass-through Current Price |
$ |
106.14 |
$ |
108.94 |
||
|
Weighted Average Structured Current Price |
$ |
13.83 |
$ |
10.87 |
||
|
Effective Duration (1) |
|
4.090 |
|
2.360 |
|
(1) |
Effective duration of 4.090 indicates that an interest rate increase of 1.0% would be expected to cause a 4.090% decrease in the value of the RMBS in the Company’s investment portfolio at March 31, 2021. An effective duration of 2.360 indicates that an interest rate increase of 1.0% would be expected to cause a 2.360% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2020. 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 March 31, 2021, the Company had outstanding repurchase obligations of approximately $4,181.7 million with a net weighted average borrowing rate of 0.18%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $4,285.9 million and cash pledged to counterparties of approximately $102.6 million. The Company’s leverage ratio at March 31, 2021 was 9.1 to 1. At March 31, 2021, the Company’s liquidity was approximately $218.1 million, consisting of unpledged RMBS (excluding the value of the unsettled purchases) and cash and cash equivalents. To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at March 31, 2021.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
Total |
|
|
|
Average |
|
|
Average |
|
|
|
Outstanding |
|
% of |
|
Borrowing |
|
Amount |
Maturity |
|
Counterparty |
|
Balances |
|
Total |
|
Rate |
|
at Risk(1) |
in Days |
|
Wells Fargo Bank, N.A. |
$ |
404,493 |
|
9.7% |
|
0.17% |
$ |
19,971 |
14 |
|
Mirae Asset Securities (USA) Inc. |
|
382,677 |
|
9.2% |
|
0.19% |
|
19,637 |
62 |
|
J.P. Morgan Securities LLC |
|
368,853 |
|
8.8% |
|
0.18% |
|
20,891 |
152 |
|
ASL Capital Markets Inc. |
|
353,065 |
|
8.4% |
|
0.15% |
|
18,697 |
25 |
|
Mitsubishi UFJ Securities (USA), Inc. |
|
338,980 |
|
8.1% |
|
0.22% |
|
22,561 |
18 |
|
RBC Capital Markets, LLC |
|
279,377 |
|
6.7% |
|
0.17% |
|
12,107 |
37 |
|
ABN AMRO Bank N.V. |
|
226,566 |
|
5.4% |
|
0.15% |
|
7,640 |
35 |
|
Cantor Fitzgerald & Co. |
|
223,019 |
|
5.3% |
|
0.18% |
|
11,141 |
28 |
|
Citigroup Global Markets, Inc. |
|
213,195 |
|
5.1% |
|
0.18% |
|
10,344 |
42 |
|
Nomura Securities International, Inc. |
|
209,661 |
|
5.0% |
|
0.18% |
|
6,278 |
27 |
|
ED&F Man Capital Markets Inc. |
|
209,572 |
|
5.0% |
|
0.20% |
|
11,285 |
59 |
|
Barclays Capital Inc |
|
152,630 |
|
3.6% |
|
0.17% |
|
3,658 |
42 |
|
ING Financial Markets LLC |
|
148,152 |
|
3.5% |
|
0.20% |
|
8,029 |
13 |
|
Merrill Lynch, Pierce, Fenner & Smith Inc |
|
144,398 |
|
3.5% |
|
0.17% |
|
6,979 |
14 |
|
South Street Securities, LLC |
|
104,768 |
|
2.5% |
|
0.24% |
|
5,404 |
64 |
|
Goldman Sachs & Co. |
|
100,860 |
|
2.4% |
|
0.17% |
|
5,045 |
38 |
|
Daiwa Capital Markets America, Inc. |
|
98,315 |
|
2.4% |
|
0.16% |
|
4,542 |
37 |
|
BMO Capital Markets Corp. |
|
90,021 |
|
2.2% |
|
0.15% |
|
3,605 |
14 |
|
Austin Atlantic Asset Management Co. |
|
49,470 |
|
1.2% |
|
0.19% |
|
2,030 |
1 |
|
Lucid Cash Fund USG LLC |
|
49,289 |
|
1.2% |
|
0.22% |
|
4,308 |
15 |
|
J.V.B. Financial Group, LLC |
|
34,319 |
|
0.8% |
|
0.20% |
|
1,783 |
24 |
|
Total / Weighted Average |
$ |
4,181,680 |
|
100.0% |
|
0.18% |
$ |
205,935 |
43 |
|
(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 March 31, 2021, such instruments were comprised of Eurodollar and Treasury note (“T-Note”) futures contracts, interest rate swap agreements, interest rate swaption agreements, and to-be-announced (“TBA”) securities transactions.
The table below presents information related to the Company’s Eurodollar and T-Note futures contracts at March 31, 2021.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Weighted |
|
Weighted |
|
|
|
|
|
|
|
Contract |
|
Average |
|
Average |
|
|
|
|
|
|
|
Notional |
|
Entry |
|
Effective |
|
|
Open |
|
Expiration Year |
|
Amount |
|
Rate |
|
Rate |
|
|
Equity(1) |
|
|
Eurodollar Futures Contracts (Short Positions) |
|
|
|
|
|
|
|
|
|
|
|
2021 |
$ |
50,000 |
|
1.01% |
|
0.21% |
|
$ |
(301) |
|
|
Treasury Note Futures Contracts (Short Positions)(2) |
|
|
|
|
|
|
|
|
|
|
|
June 2021 5-year T-Note futures |
|
|
|
|
|
|
|
|
|
|
|
|
(Jun 2021 – Jun 2026 Hedge Period) |
$ |
69,000 |
|
0.88% |
|
1.17% |
|
$ |
1,036 |
|
(1) |
Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. |
|
|
(2) |
T-Note futures contracts were valued at a price of $123.40 at March 31, 2021. The contract value of the short position was $85.1 million. |
The table below presents information related to the Company’s interest rate swap positions at March 31, 2021.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
Net |
|
|
|
|
|
|
|
Fixed |
|
Average |
|
|
Estimated |
|
Average |
|
|
|
Notional |
|
Pay |
|
Receive |
|
|
Fair |
|
Maturity |
|
Expiration |
|
Amount |
|
Rate |
|
Rate |
|
|
Value |
|
(Years) |
|
> 3 to ≤ 5 years |
$ |
955,000 |
|
0.64% |
|
0.21% |
|
|
15,286 |
|
4.8 |
|
> 5 years |
|
400,000 |
|
1.16% |
|
0.18% |
|
|
9,968 |
|
8.1 |
|
|
$ |
1,355,000 |
|
0.79% |
|
0.20% |
|
$ |
25,254 |
|
5.7 |
The following table presents information related to our interest rate swaption positions as of March 31, 2021.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
Underlying Swap |
|||||||||||||
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
Weighted |
|
|
|
|
|
|
|
|
Average |
|
|
|
|
Average |
|
Adjustable |
|
Average |
|
|
|
|
|
|
Fair |
|
Months to |
|
|
Notional |
|
Fixed |
|
Rate |
|
Term |
|
|
Expiration |
|
Cost |
|
Value |
|
Expiration |
|
|
Amount |
|
Rate |
|
(LIBOR) |
|
(Years) |
|
|
Payer Swaptions – long |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
>1 year ≤ 2 years |
$ |
25,390 |
$ |
58,643 |
|
22.1 |
|
$ |
1,027,200 |
|
2.20% |
|
3 Month |
|
15.0 |
|
|
Payer Swaptions – short |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
≤ 1 year |
$ |
(10,720) |
$ |
(35,057) |
|
10.1 |
|
$ |
(782,850) |
|
2.20% |
|
3 Month |
|
15.0 |
|
The following table summarizes our contracts to purchase and sell TBA securities as of March 31, 2021.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|||
|
|
|
Notional |
|
|
|
|
|
Net |
|||
|
|
|
Amount |
|
Cost |
|
Market |
|
Carrying |
|||
|
|
|
Long (Short)(1) |
|
Basis(2) |
|
Value(3) |
|
Value(4) |
|||
|
March 31, 2021 |
|
|
|
|
|
|
|
|
|||
|
30-Year TBA securities: |
|
|
|
|
|
|
|
|
|||
|
2.5% |
$ |
(250,000) |
$ |
(257,188) |
$ |
(256,270) |
$ |
918 |
|||
|
3.0% |
|
(1,062,000) |
|
(1,114,345) |
|
(1,105,807) |
|
8,538 |
|||
|
|
$ |
(1,312,000) |
$ |
(1,371,533) |
$ |
(1,362,077) |
$ |
9,456 |
|
(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 |
|
Total |
|
|
2013 |
|
|
$ |
1.395 |
$ |
4,662 |
|
|
2014 |
|
|
|
2.160 |
|
22,643 |
|
|
2015 |
|
|
|
1.920 |
|
38,748 |
|
|
2016 |
|
|
|
1.680 |
|
41,388 |
|
|
2017 |
|
|
|
1.680 |
|
70,717 |
|
|
2018 |
|
|
|
1.070 |
|
55,814 |
|
|
2019 |
|
|
|
0.960 |
|
54,421 |
|
|
2020 |
|
|
|
0.790 |
|
53,570 |
|
|
2021 – YTD(1) |
|
|
|
0.260 |
|
23,374 |
|
|
Totals |
|
|
$ |
11.915 |
$ |
365,337 |
|
|
(1) |
On April 14, 2021, the Company declared a dividend of $0.065 per share to be paid on May 26, 2021. The effect of this dividend is included in the table above, but is not reflected in the Company’s financial statements as of March 31, 2021. |
Peer Performance
The tables below present total return data for Orchid compared to a selected group of peers based on stock price performance for periods through March 31, 2021 and based on book value performance for periods through December 31, 2020.
|
Portfolio Total Rate of Return Versus Peer Group Average – Stock Price Performance |
||||||
|
|
|
|
|
|
|
ORC Spread |
|
|
|
ORC |
|
|
|
Over / (Under) |
|
|
|
Total Rate |
|
Peer |
|
Peer |
|
|
|
of Return(1) |
|
Average(1)(2) |
|
Average(3) |
|
Year to Date (1/1/2021 – 3/31/2021) |
|
19.2% |
|
8.6% |
|
10.6% |
|
One Year Total Return |
|
135.8% |
|
76.5% |
|
59.3% |
|
Two Year Total Return |
|
25.6% |
|
(7.7)% |
|
33.3% |
|
Three Year Total Return |
|
29.0% |
|
(8.2)% |
|
37.2% |
|
Four Year Total Return |
|
12.3% |
|
11.4% |
|
0.9% |
|
Five Year Total Return |
|
27.3% |
|
23.9% |
|
3.4% |
|
Six Year Total Return |
|
18.3% |
|
26.9% |
|
(8.6)% |
|
Seven Year Total Return |
|
54.6% |
|
31.7% |
|
22.9% |
|
Inception to Date (2/13/2013 – 3/31/2021) |
|
43.1% |
|
12.6% |
|
30.5% |
Source: SEC filings and press releases of Orchid and Peer Group
|
(1) |
Source of total rate of return for each period is pulled from the Bloomberg COMP page and includes reinvested dividends for each period noted. |
|
|
(2) |
The peer average is the unweighted, simple, average of the total rate of return for each of the following companies in each respective measurement period: AGNC, NLY, ANH, AAIC, ARR, CMO, CHMI and DX. |
|
|
(3) |
Represents the total rate of return for Orchid minus peer average in each respective measurement period. |
|
Portfolio Total Rate of Return Versus Peer Group Average – Book Value Performance |
||||||
|
|
|
|
|
|
|
ORC Spread |
|
|
|
ORC |
|
|
|
Over / (Under) |
|
|
|
Total Rate |
|
Peer |
|
Peer |
|
|
|
of Return(1) |
|
Average(1)(2) |
|
Average(3) |
|
One Year Total Return |
|
(0.3)% |
|
(13.2)% |
|
12.9% |
|
Two Year Total Return |
|
5.4% |
|
(4.0)% |
|
9.4% |
|
Three Year Total Return |
|
(4.9)% |
|
(7.5)% |
|
2.6% |
|
Four Year Total Return |
|
(1.4)% |
|
3.4% |
|
(4.8)% |
|
Five Year Total Return |
|
0.0% |
|
0.4% |
|
(0.4)% |
|
Six Year Total Return |
|
3.8% |
|
(1.0)% |
|
4.8% |
|
Seven Year Total Return |
|
17.3% |
|
13.9% |
|
3.4% |
|
Inception to Date (3/31/2013 – 12/31/2020)(4) |
|
13.4% |
|
0.9% |
|
12.5% |
Source: SEC filings and press releases of Orchid and Peer Group
|
(1) |
Total rate of return for each period is change in book value per share over the period plus dividends per share declared divided by the book value per share at the beginning of the period. |
|
|
(2) |
The peer average is the unweighted, simple, average of the total rate of return for each of the following companies in each respective measurement period: AGNC, NLY, ANH, AAIC, ARR, CMO, CHMI and DX. |
|
|
(3) |
Represents the total rate of return for Orchid minus peer average in each respective measurement period. |
|
|
(4) |
Peer book values are not available for Orchid’s true inception date (2/13/2013). Because all peer book values are not available as of Orchid’s true inception date (2/13/2013), the starting point for Orchid and all of the peer companies is 3/31/2013. |
Book Value Per Share
The Company’s book value per share at March 31, 2021 was $4.94. 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 March 31, 2021, the Company’s stockholders’ equity was $466.2 million with 94,410,960 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 December 31, 2020, approximately 93% 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 March 31, 2021, the allocation to the PT RMBS portfolio decreased by 3% to approximately 90%.
The table below details the changes to the respective sub-portfolios during the quarter, as well as the returns generated by each.
|
(in thousands) |
|||||||||||||||||||||
|
Portfolio Activity for the Quarter |
|||||||||||||||||||||
|
|
|
|
Structured Security Portfolio |
|
|||||||||||||||||
|
|
|
Pass-Through |
Interest-Onl |
Inverse Interes |
|
|
|||||||||||||||
|
|
|
Portfolio |
Securities |
Only Securitie |
Sub-total |
Total |
|||||||||||||||
|
Market value – December 31, 2020 |
$ |
3,698,199 |
$ |
28,696 |
$ |
– |
$ |
28,696 |
$ |
3,726,895 |
|||||||||||
|
Securities purchased |
|
1,971,296 |
|
– |
|
4,807 |
|
4,807 |
|
1,976,103 |
|||||||||||
|
Securities sold |
|
(1,143,364) |
|
– |
|
– |
|
– |
|
(1,143,364) |
|||||||||||
|
Losses on sales |
|
(7,397) |
|
– |
|
– |
|
– |
|
(7,397) |
|||||||||||
|
Return of investment |
|
n/a |
|
(2,439) |
|
(277) |
|
(2,716) |
|
(2,716) |
|||||||||||
|
Pay-downs |
|
(122,118) |
|
n/a |
|
– |
|
n/a |
|
(122,118) |
|||||||||||
|
Premium lost due to pay-downs |
|
(11,099) |
|
n/a |
|
– |
|
n/a |
|
(11,099) |
|||||||||||
|
Mark to market (losses) gains |
|
(87,786) |
|
9,264 |
|
754 |
|
10,018 |
|
(77,768) |
|||||||||||
|
Market value – March 31, 2021 |
$ |
4,297,731 |
$ |
35,521 |
$ |
5,284 |
$ |
40,805 |
$ |
4,338,536 |
|||||||||||
The tables below present the allocation of capital between the respective portfolios at March 31, 2021 and December 31, 2020, and the return on invested capital for each sub-portfolio for the three month period ended March 31, 2021. The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately (8.9)% and 34.9%, respectively, for the first quarter of 2021. The combined portfolio generated a return on invested capital of approximately (6.0)%.
|
($ in thousands) |
|||||||||||||||||||||
|
Capital Allocation |
|||||||||||||||||||||
|
|
|
|
Structured Security Portfolio |
|
|||||||||||||||||
|
|
|
Pass-Through |
Interest-Only |
Inverse Interest |
|
|
|||||||||||||||
|
|
|
Portfolio |
Securities |
Only Securities |
Sub-total |
Total |
|||||||||||||||
|
March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Market value |
$ |
4,297,731 |
$ |
35,521 |
$ |
5,284 |
$ |
40,805 |
$ |
4,338,536 |
|||||||||||
|
Cash(1) |
|
271,332 |
|
– |
|
– |
|
– |
|
271,332 |
|||||||||||
|
Borrowings(2) |
|
(4,181,680) |
|
– |
|
– |
|
– |
|
(4,181,680) |
|||||||||||
|
|
Total |
$ |
387,383 |
$ |
35,521 |
$ |
5,284 |
$ |
40,805 |
$ |
428,188 |
||||||||||
|
|
% of Total |
|
90.5% |
|
8.3% |
|
1.2% |
|
9.5% |
|
100.0% |
||||||||||
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Market value |
$ |
3,698,199 |
$ |
28,696 |
$ |
– |
$ |
28,696 |
$ |
3,726,895 |
|||||||||||
|
Cash |
|
299,506 |
|
– |
|
– |
|
– |
|
299,506 |
|||||||||||
|
Borrowings(3) |
|
(3,595,586) |
|
– |
|
– |
|
– |
|
(3,595,586) |
|||||||||||
|
|
Total |
$ |
402,119 |
$ |
28,696 |
$ |
– |
$ |
28,696 |
$ |
430,815 |
||||||||||
|
|
% of Total |
|
93.3% |
|
6.7% |
|
– |
|
6.7% |
|
100.0% |
||||||||||
|
(1) |
At March 31, 2021, cash was reduced by unsettled purchases of approximately $212.2 million and increased by unsettled sales of approximately $155.0 million, which have already been reflected in the market value of the portfolio. |
|
|
(2) |
At March 31, 2021, there were outstanding repurchase agreement balances of $22.5 million secured by IO securities and $4.0 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. |
|
|
(3) |
At December 31, 2020, there were outstanding repurchase agreement balances of $20.6 million secured by IO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy. |
| ($ in thousands) | |||||||||||||||||||
|
Returns for the Quarter Ended March 31, 2021 |
|||||||||||||||||||
|
|
|
|
Structured Security Portfolio |
|
|||||||||||||||
|
|
|
Pass-Through |
Interest-Only |
Inverse Interest |
|
|
|||||||||||||
|
|
|
Portfolio |
Securities |
Only Securities |
Sub-total |
Total |
|||||||||||||
|
Income / (loss) (net of borrowing cost) |
$ |
24,928 |
$ |
(64) |
$ |
51 |
$ |
(13) |
$ |
24,915 |
|||||||||
|
Realized and unrealized (losses) / gains |
|
(106,281) |
|
9,264 |
|
754 |
|
10,018 |
|
(96,263) |
|||||||||
|
Derivative gains |
|
45,472 |
|
n/a |
|
n/a |
|
n/a |
|
45,472 |
|||||||||
|
|
Total Return |
$ |
(35,881) |
$ |
9,200 |
$ |
805 |
$ |
10,005 |
$ |
(25,876) |
||||||||
|
Beginning Capital Allocation |
$ |
402,119 |
$ |
28,696 |
$ |
– |
$ |
28,696 |
$ |
430,815 |
|||||||||
|
Return on Invested Capital for the Quarter(1) |
|
(8.9)% |
|
32.1% |
|
n/a |
|
34.9% |
|
(6.0)% |
|||||||||
|
Average Capital Allocation(2) |
$ |
394,751 |
$ |
32,109 |
$ |
2,642 |
$ |
34,751 |
$ |
429,502 |
|||||||||
|
Return on Average Invested Capital for the Quarter(3) |
|
(9.1)% |
|
28.7% |
|
30.5% |
|
28.8% |
|
(6.0)% |
|||||||||
|
(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 August 4, 2020, we entered into an equity distribution agreement (the “August 2020 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $150,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.
Contacts
Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
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