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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, 2023.
First Quarter 2023 Results
Other Financial Highlights
Management Commentary
Commenting on the first quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The economy and the outlook for monetary policy were very volatile during the quarter. While it is likely we are nearing the end of the Federal Reserve’s (“Fed”) accelerated policy removal period that began last March, the outlook for monetary policy over the balance of 2023 and beyond changed multiple times during the quarter, generating significant interest rate volatility, particularly in March of 2023.
“As the first quarter began, the market, as reflected in Fed funds futures pricing, anticipated the Fed would hike the Fed funds rate one or possibly two more times in early 2023 and then pivot to easing later in the year as inflation moderated towards the Fed’s long-term goal of 2%. However, the Fed is focused on services inflation, particularly services excluding housing or shelter related costs (what is currently referred to as “super core” inflation). Readings on “super core” inflation accelerated during the quarter and market pricing for Fed funds continued to increase as the projected terminal rate eventually exceeded 5.5%. The outlook changed abruptly when two banks failed and were taken over by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC, U.S. Treasury and Fed responded quickly, and as we enter the second quarter it seems the macroprudential steps taken appeared to have contained the crisis. However, in the immediate aftermath of these developments the market reaction was rapid and significant. The two-year U.S. treasury yield decreased by approximately 130 basis points in a little over two weeks. The December 2023 Fed funds future contract price moved nearly 175 basis points in the week after the failure of Silicon Valley Bank. In sum, volatility across the entire rates market was extremely elevated, surpassing all previous periods since the 2008 financial crisis.
“For Orchid, our performance coming into the first quarter benefited from our exposure to lower coupon, longer duration securities that we owned throughout 2022. While such securities generate less interest income, they offer very attractive total return opportunities, especially versus higher coupon, newer origination securities. Our book value performance for the first quarter of 2023 was primarily the result of price related returns on these securities, which enabled us to generate a total positive return for the quarter of 0.84%. In conjunction with the Company’s short positions in lower coupon TBAs we have been able to manage our risk to higher rates, all the while maintaining an economic leverage ratio on the low end of our typical range. We prefer to continue to hold these lower coupon holdings as a core position, supplemented by modest additions of higher coupons with new capital and pay-downs, while continuing to maintain a lower coupon bias.
“The failure of Silicon Valley Bank and Signature Bank in March led to their takeover by the FDIC. The FDIC took possession of approximately $114 billion of securities held by the two banks that the FDIC needs to liquidate. The magnitude of these sales in proportion to typical supply levels in the current rate environment represents a formidable test for the sector over the near term. Since the FDIC announced its intention to liquidate these securities, Agency RMBS have widened versus comparable duration U.S. treasuries, with lower coupons performing worse than the sector as a whole. The liquidation sales commenced on April 18, 2023, and are expected to continue for 30 to 40 more weeks. As the Company’s portfolio contains a significant allocation to some of the securities to be sold, the liquidation sales could impact our preference to maintain a lower coupon bias for the balance of 2023.
“The liquidations of two large bank portfolios and extreme volatility of the rates market have caused Agency RMBS spreads to comparable duration U.S. treasuries to widen to levels last seen in October of 2022. The liquidation sales by the FDIC have just begun and will last several months, so the ultimate impact on the market remains to be seen. However, since the liquidations began last week, the sector appears to have stabilized somewhat, so it may be the market has priced in the sales already. Time will tell. In the interim we intend to maintain our lower coupon bias as we believe they offer the best total return potential as we approach the end of the Fed’s tightening cycle and eventual pivot towards easing. To the extent we are able to raise new capital, and we desire to do so, we believe the return opportunities will be very attractive, even if performance of the sector may be choppy in the near term.”
Details of First Quarter 2023 Results of Operations
The Company reported net income of $3.5 million for the three month period ended March 31, 2023, compared with a net loss of $148.7 million for the three month period ended March 31, 2022. The Company increased its Agency RMBS portfolio over the course of the first quarter of 2023, from $3.5 billion at December 31, 2022 to $4.0 billion at March 31, 2023. Interest income on the portfolio in the first quarter was up approximately $6.1 million from the fourth quarter of 2022. The yield on our average Agency RMBS increased from 3.79% in the fourth quarter of 2022 to 4.03% for the first quarter of 2023, repurchase agreement borrowing costs increased from 3.63% for the fourth quarter of 2022 to 4.72% for the first quarter of 2023, and our net interest spread decreased from 0.16% in the fourth quarter of 2022 to (0.69)% in the first quarter of 2023.
Book value decreased by $0.38 per share in the first quarter of 2023. The decrease in book value reflects our net income of $0.09 per share and the dividend distribution of $0.48 per share. The Company recorded net realized and unrealized gains of $0.33 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.
Prepayments
For the quarter ended March 31, 2023, Orchid received 61.0 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 4.0%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):
|
|
|
|
Structured |
|
|
|
|
PT RMBS |
|
RMBS |
|
Total |
Three Months Ended |
|
Portfolio (%) |
|
Portfolio (%) |
|
Portfolio (%) |
March 31, 2023 |
|
3.9 |
|
5.7 |
|
4.0 |
December 31, 2022 |
|
4.9 |
|
6.0 |
|
5.0 |
September 30, 2022 |
|
6.1 |
|
10.4 |
|
6.5 |
June 30, 2022 |
|
8.3 |
|
13.7 |
|
9.4 |
March 31, 2022 |
|
8.1 |
|
19.5 |
|
10.7 |
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of March 31, 2023 and December 31, 2022:
($ in thousands) |
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Weighted |
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Percentage |
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Average |
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|
|
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of |
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Weighted |
|
|
Maturity |
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|
|
|
Fair |
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Entire |
|
|
Average |
|
|
in |
|
Longest |
|
Asset Category |
|
Value |
|
Portfolio |
|
|
Coupon |
|
|
Months |
|
Maturity |
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate RMBS |
|
$ |
3,980,462 |
|
99.5 |
% |
|
3.56 |
% |
|
338 |
|
1-Feb-53 |
Interest-Only Securities |
|
|
18,962 |
|
0.5 |
% |
|
4.01 |
% |
|
231 |
|
25-Jul-48 |
Inverse Interest-Only Securities |
|
|
482 |
|
0.0 |
% |
|
0.00 |
% |
|
283 |
|
15-Jun-42 |
Total Mortgage Assets |
|
$ |
3,999,906 |
|
100.0 |
% |
|
3.55 |
% |
|
335 |
|
1-Feb-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) |
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|
|
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|
|
March 31, 2023 |
|
December 31, 2022 |
||||||||
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|
Percentage of |
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|
|
|
|
Percentage of |
|
Agency |
|
Fair Value |
|
Entire Portfolio |
|
|
Fair Value |
|
Entire Portfolio |
|
||
Fannie Mae |
|
$ |
2,630,153 |
|
65.8 |
% |
|
$ |
2,320,960 |
|
65.6 |
% |
Freddie Mac |
|
|
1,369,753 |
|
34.2 |
% |
|
|
1,219,042 |
|
34.4 |
% |
Total Portfolio |
|
$ |
3,999,906 |
|
100.0 |
% |
|
$ |
3,540,002 |
|
100.0 |
% |
|
|
March 31, 2023 |
|
December 31, 2022 |
||
Weighted Average Pass-through Purchase Price |
|
$ |
105.59 |
|
$ |
106.41 |
Weighted Average Structured Purchase Price |
|
$ |
18.74 |
|
$ |
18.74 |
Weighted Average Pass-through Current Price |
|
$ |
93.32 |
|
$ |
91.46 |
Weighted Average Structured Current Price |
|
$ |
14.02 |
|
$ |
14.05 |
Effective Duration (1) |
|
|
5.500 |
|
5.580 |
(1) |
Effective duration of 5.500 indicates that an interest rate increase of 1.0% would be expected to cause a 5.500% decrease in the value of the RMBS in the Company’s investment portfolio at March 31, 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 March 31, 2023, the Company had outstanding repurchase obligations of approximately $3,769.4 million with a net weighted average borrowing rate of 4.90%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $3,959.0 million and cash pledged to counterparties of approximately $18.1 million. The Company’s adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders’ equity, at March 31, 2023 was 8.4 to 1. At March 31, 2023, the Company’s liquidity was approximately $197.0 million consisting of cash and cash equivalents and unpledged RMBS (not including unsettled securities purchases). To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at March 31, 2023.
($ in thousands) |
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Weighted |
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|
Weighted |
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Total |
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|
|
Average |
|
|
|
|
|
Average |
|
|
|
Outstanding |
|
% of |
|
|
Borrowing |
|
|
Amount |
|
Maturity |
||
Counterparty |
|
Balances |
|
Total |
|
|
Rate |
|
|
at Risk(1) |
|
in Days |
||
J.P. Morgan Securities LLC |
|
$ |
350,932 |
|
9.2 |
% |
|
4.87 |
% |
|
$ |
21,181 |
|
13 |
Merrill Lynch, Pierce, Fenner & Smith Inc. |
|
|
337,222 |
|
8.9 |
% |
|
4.96 |
% |
|
|
12,736 |
|
19 |
RBC Capital Markets, LLC |
|
|
315,289 |
|
8.4 |
% |
|
4.94 |
% |
|
|
11,481 |
|
25 |
Mirae Asset Securities (USA) Inc. |
|
|
303,698 |
|
8.1 |
% |
|
4.72 |
% |
|
|
16,738 |
|
86 |
Daiwa Capital Markets America, Inc. |
|
|
255,292 |
|
6.8 |
% |
|
4.76 |
% |
|
|
11,006 |
|
17 |
Marex Capital Markets Inc. |
|
|
234,160 |
|
6.2 |
% |
|
4.88 |
% |
|
|
10,874 |
|
18 |
ING Financial Markets LLC |
|
|
232,368 |
|
6.2 |
% |
|
4.97 |
% |
|
|
11,341 |
|
34 |
ABN AMRO Bank N.V. |
|
|
220,568 |
|
5.9 |
% |
|
5.12 |
% |
|
|
12,506 |
|
74 |
Cantor Fitzgerald & Co. |
|
|
219,290 |
|
5.8 |
% |
|
4.85 |
% |
|
|
12,339 |
|
9 |
ASL Capital Markets Inc. |
|
|
213,221 |
|
5.7 |
% |
|
4.88 |
% |
|
|
12,153 |
|
18 |
Citigroup Global Markets, Inc. |
|
|
190,315 |
|
5.0 |
% |
|
4.99 |
% |
|
|
10,234 |
|
27 |
StoneX Financial Inc. |
|
|
182,084 |
|
4.8 |
% |
|
4.81 |
% |
|
|
9,240 |
|
25 |
Mitsubishi UFJ Securities (USA), Inc. |
|
|
173,462 |
|
4.6 |
% |
|
4.87 |
% |
|
|
11,115 |
|
22 |
Wells Fargo Bank, N.A. |
|
|
162,880 |
|
4.3 |
% |
|
5.06 |
% |
|
|
9,187 |
|
45 |
Goldman Sachs & Co. LLC |
|
|
124,384 |
|
3.3 |
% |
|
4.89 |
% |
|
|
8,120 |
|
17 |
Santander Bank, N.A. |
|
|
118,614 |
|
3.1 |
% |
|
4.84 |
% |
|
|
5,752 |
|
23 |
BMO Capital Markets Corp. |
|
|
77,400 |
|
2.1 |
% |
|
4.91 |
% |
|
|
4,446 |
|
20 |
South Street Securities, LLC |
|
|
37,144 |
|
1.0 |
% |
|
4.83 |
% |
|
|
1,670 |
|
17 |
Lucid Cash Fund USG, LLC |
|
|
18,430 |
|
0.5 |
% |
|
4.79 |
% |
|
|
876 |
|
13 |
Lucid Prime Fund, LLC |
|
|
2,684 |
|
0.1 |
% |
|
4.95 |
% |
|
|
220 |
|
13 |
Total / Weighted Average |
|
$ |
3,769,437 |
|
100.0 |
% |
|
4.90 |
% |
|
$ |
193,215 |
|
30 |
(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, 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 and contracts to sell to-be-announced (“TBA”) securities.
The table below presents information related to the Company’s T-Note futures contracts at March 31, 2023.
($ in thousands) |
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March 31, 2023 |
|
||||||||||
|
|
Average |
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Weighted |
|
|
Weighted |
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|
|
|
|
|
|
|
Contract |
|
Average |
|
|
Average |
|
|
|
|
|
|
|
|
Notional |
|
Entry |
|
|
Effective |
|
|
Open |
|
||
Expiration Year |
|
Amount |
|
Rate |
|
|
Rate |
|
|
Equity(1) |
|
||
Treasury Note Futures Contracts (Short Positions)(2) |
|
|
|
|
|
|
|
|
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|
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|
|
June 2023 5-year T-Note futures (Jun 2023 – Jun 2028 Hedge Period) |
|
$ |
926,500 |
|
4.17 |
% |
|
3.89 |
% |
|
$ |
(20,719 |
) |
June 2023 10-year Ultra futures (Jun 2023 – Jun 2033 Hedge Period) |
|
$ |
54,200 |
|
3.91 |
% |
|
3.48 |
% |
|
$ |
(2,181 |
) |
(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 $109.5 at March 31, 2023. The contract values of the short positions were $1,014.6 million at March 31, 2023. 10-Year Ultra futures contracts were valued at a price of $121.1 at March 31, 2023. The contract value of the short position was $65.7 million at March 31, 2023. |
The table below presents information related to the Company’s interest rate swap positions at March 31, 2023.
($ in thousands) |
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|
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|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
Average |
|
|
Average |
|
|
Notional |
|
Pay |
|
|
Receive |
|
|
Maturity |
|
|
|
Amount |
|
Rate |
|
|
Rate |
|
|
(Years) |
|
Expiration > 3 to ≤ 5 years |
|
$ |
500,000 |
|
0.84 |
% |
|
5.02 |
% |
|
3.5 |
Expiration > 5 years |
|
|
1,174,000 |
|
2.10 |
% |
|
4.88 |
% |
|
7.2 |
|
|
$ |
1,674,000 |
|
1.72 |
% |
|
4.92 |
% |
|
6.1 |
The following table presents information related to our interest rate swaption positions as of March 31, 2023.
($ in thousands) |
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Option |
|
Underlying Swap |
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Weighted |
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Weighted |
||
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Average |
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|
Average |
|
Average |
|
Average |
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|
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|
|
Fair |
|
|
Months to |
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Notional |
|
|
Fixed |
|
Adjustable |
|
Term |
|||
Expiration |
|
Cost |
|
|
Value |
|
|
Expiration |
|
Amount |
|
|
Rate |
|
Rate |
|
(Years) |
||||
Payer Swaptions (long positions) |
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|
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|
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|
|
|
|
|
|
≤ 1 year |
|
$ |
36,685 |
|
|
$ |
6,548 |
|
|
6.6 |
|
$ |
1,250,000 |
|
|
4.09 |
% |
SOFR |
|
10.0 |
|
>1 year |
|
|
10,115 |
|
|
|
8,301 |
|
|
21.7 |
|
|
1,000,000 |
|
|
3.49 |
% |
SOFR |
|
2.0 |
|
|
|
$ |
46,800 |
|
|
$ |
14,849 |
|
|
13.3 |
|
$ |
2,250,000 |
|
|
3.82 |
% |
|
6.4 |
||
Payer Swaptions (short positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
>1 year |
|
$ |
(12,252 |
) |
|
$ |
(8,528 |
) |
|
13.0 |
|
$ |
(1,917,000 |
) |
|
3.91 |
% |
SOFR |
|
5.8 |
The following table presents information related to our interest cap positions as of March 31, 2023.
($ in thousands) |
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|||
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|
|
Net |
||
|
|
|
|
|
|
|
|
Strike |
|
|
|
Estimated |
||
|
|
Notional |
|
|
|
|
Swap |
|
Curve |
|
Fair |
|||
Expiration |
|
Amount |
|
Cost |
|
Rate |
|
Spread |
|
Value |
||||
February 8, 2024 |
|
$ |
200,000 |
|
$ |
1,450 |
|
0.09 |
% |
2Y10Y |
|
$ |
474 |
The following table summarizes our contracts to sell TBA securities as of March 31, 2023.
($ in thousands) |
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|
|
|
|
|
|
|
|
|
|
Notional |
|
|
|
|
|
|
|
|
|
|
Net |
|
||
|
|
Amount |
|
|
Cost |
|
|
Market |
|
|
Carrying |
|
||||
|
|
Long (Short)(1) |
|
|
Basis(2) |
|
|
Value(3) |
|
|
Value(4) |
|
||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-Year TBA securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.00% |
|
$ |
(175,000 |
) |
|
$ |
(144,511 |
) |
|
$ |
(144,526 |
) |
|
$ |
(15 |
) |
3.00% |
|
|
(700,000 |
) |
|
|
(616,438 |
) |
|
|
(627,457 |
) |
|
|
(11,019 |
) |
|
|
$ |
(875,000 |
) |
|
$ |
(760,949 |
) |
|
$ |
(771,983 |
) |
|
$ |
(11,034 |
) |
(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 |
|
$ |
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) |
|
|
0.640 |
|
|
25,098 |
Totals |
|
$ |
65.290 |
|
$ |
552,568 |
(1) |
On April 12, 2023, the Company declared a dividend of $0.16 per share to be paid on May 26, 2023. 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, 2023. |
Book Value Per Share
The Company’s book value per share at March 31, 2023 was $11.55. 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, 2023, the Company’s stockholders’ equity was $451.4 million with 39,085,756 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 March 31, 2023, approximately 95.3% of the Company’s investable capital (which consists of equity in pledged PT RMBS, available cash and unencumbered assets) was deployed in the PT RMBS portfolio. At December 31, 2022, the allocation to the PT RMBS portfolio was approximately 95.0%.
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 – December 31, 2022 |
|
$ |
3,519,906 |
|
|
$ |
19,669 |
|
|
$ |
427 |
|
$ |
20,096 |
|
|
$ |
3,540,002 |
|
Securities purchased |
|
|
467,460 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
467,460 |
|
Securities sold |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
Losses on sales |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
– |
|
Return of investment |
|
|
n/a |
|
|
|
(679 |
) |
|
|
– |
|
|
(679 |
) |
|
|
(679 |
) |
Pay-downs |
|
|
(60,348 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
n/a |
|
|
|
(60,348 |
) |
Discount accretion due to pay-downs |
|
|
4,774 |
|
|
|
n/a |
|
|
|
n/a |
|
|
n/a |
|
|
|
4,774 |
|
Mark to market gains (losses) |
|
|
48,670 |
|
|
|
(28 |
) |
|
|
55 |
|
|
27 |
|
|
|
48,697 |
|
Market value – March 31, 2023 |
|
$ |
3,980,462 |
|
|
$ |
18,962 |
|
|
$ |
482 |
|
$ |
19,444 |
|
|
$ |
3,999,906 |
|
The tables below present the allocation of capital between the respective portfolios at December 31, 2022 and March 31, 2023, and the return on invested capital for each sub-portfolio for the three month period ended March 31, 2023.
($ in thousands) |
|
|||||||||||||||||||
Capital Allocation |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
3,980,462 |
|
|
$ |
18,962 |
|
|
$ |
482 |
|
|
$ |
19,444 |
|
|
$ |
3,999,906 |
|
Cash |
|
|
185,958 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
185,958 |
|
Borrowings(1) |
|
|
(3,769,437 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,769,437 |
) |
Total |
|
$ |
396,983 |
|
|
$ |
18,962 |
|
|
$ |
482 |
|
|
$ |
19,444 |
|
|
$ |
416,427 |
|
% of Total |
|
|
95.3 |
% |
|
|
4.6 |
% |
|
|
0.1 |
% |
|
|
4.7 |
% |
|
|
100.0 |
% |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
3,519,906 |
|
|
$ |
19,669 |
|
|
$ |
427 |
|
|
$ |
20,096 |
|
|
$ |
3,540,002 |
|
Cash |
|
|
237,219 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
237,219 |
|
Borrowings(2) |
|
|
(3,378,445 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,378,445 |
) |
Total |
|
$ |
378,680 |
|
|
$ |
19,669 |
|
|
$ |
427 |
|
|
$ |
20,096 |
|
|
$ |
398,776 |
|
% of Total |
|
|
95.0 |
% |
|
|
4.9 |
% |
|
|
0.1 |
% |
|
|
5.0 |
% |
|
|
100.0 |
% |
(1) |
At March 31, 2023, there were outstanding repurchase agreement balances of $15.4 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 December 31, 2022, there were outstanding repurchase agreement balances of $15.5 million secured by IO securities and $0.4 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy. |
The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 2.1% and 2.2%, respectively, for the first quarter of 2023. The combined portfolio generated a return on invested capital of approximately 2.1%.
($ in thousands) |
|
|||||||||||||||||||
Returns for the Quarter Ended March 31, 2023 |
|
|||||||||||||||||||
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
Income (net of borrowing cost) |
|
$ |
(4,622 |
) |
|
$ |
417 |
|
|
$ |
– |
|
|
$ |
417 |
|
|
$ |
(4,205 |
) |
Realized and unrealized gains (losses) |
|
|
53,868 |
|
|
|
(28 |
) |
|
|
55 |
|
|
|
27 |
|
|
|
53,895 |
|
Derivative losses |
|
|
(41,156 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
(41,156 |
) |
Total Return |
|
$ |
8,090 |
|
|
$ |
389 |
|
|
$ |
55 |
|
|
$ |
444 |
|
|
$ |
8,534 |
|
Beginning Capital Allocation |
|
$ |
378,680 |
|
|
$ |
19,669 |
|
|
$ |
427 |
|
|
$ |
20,096 |
|
|
$ |
398,776 |
|
Return on Invested Capital for the Quarter(1) |
|
|
2.1 |
% |
|
|
2.0 |
% |
|
|
12.9 |
% |
|
|
2.2 |
% |
|
|
2.1 |
% |
Average Capital Allocation(2) |
|
$ |
387,832 |
|
|
$ |
19,316 |
|
|
$ |
455 |
|
|
$ |
19,771 |
|
|
$ |
407,603 |
|
Return on Average Invested Capital for the Quarter(3) |
|
|
2.1 |
% |
|
|
2.0 |
% |
|
|
12.1 |
% |
|
|
2.2 |
% |
|
|
2.1 |
% |
(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. |
Contacts
Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
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