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Orchid Island Capital Announces Fourth Quarter 2022 Results

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 and twelve month periods ended December 31, 2022.

Fourth Quarter 2022 Results

  • Net income of $34.9 million, or $0.95 per common share, which consists of:
  • Net interest income of $2.4 million, or $0.06 per common share
  • Total expenses of $5.9 million, or $0.16 per common share
  • Net realized and unrealized gains of $38.4 million, or $1.04 per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps
  • Fourth quarter and full year total dividends declared and paid of $0.48 and $2.475 per common share, respectively
  • Book value per common share of $11.93 at December 31, 2022
  • Total return of 8.67%, comprised of $0.48 dividend per common share and $0.51 increase in book value per common share, divided by beginning book value per common share

Other Financial Highlights

  • Orchid maintained a strong liquidity position of $233.0 million in cash and cash equivalents and unpledged RMBS, or 53% of stockholder’s equity as of December 31, 2022
  • Borrowing capacity in excess of December 31, 2022 outstanding repurchase agreement balances of $3,378.5 million, spread across 20 active lenders
  • Company to discuss results on Friday, February 24, 2023, at 10:00 AM ET
  • Supplemental materials to be discussed on the call can be downloaded from the investor relations section of the Company’s website at https://ir.orchidislandcapital.com

Management Commentary

Commenting on the fourth quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “As 2022 came to an end the markets and the Federal Reserve’s (“Fed”) outlook for the economy, inflation and the path of monetary policy began to diverge. The seeds for the divergence were planted as the third quarter came to an end and the Fed had finally succeeded in convincing the market that they had much work to do in slowing the economy and inflation and that the process would take longer than the market had expected. In fact, the Fed was so successful at convincing the market it would aggressively remove accommodation and slow inflation that the market began to look beyond this step in the process and instead focus on the ramifications of such policy removal – namely a slowing of the economy. The change of focus – or “pivot” – on the part of the market occurred in late October/early November due to inflation data. The consumer price index data for October and November were much lower than previous months – although this data was revised higher in early February of 2023. The market interpreted this development as evidence that inflation had peaked and was coming down quite quickly.

“As incoming data over the course of the fourth quarter of 2022 and early first quarter of 2023 appeared to be consistent with the markets’ thesis that inflation had peaked and the economy was slowing, confidence grew that the Fed would need to pivot and start to reduce monetary policy later in 2023. This led to a material change in risk sentiment during the fourth quarter and risk assets performed very well. The Agency RMBS market returns for 2022 were negative – down 11.9%. However, the sector posted positive returns for the fourth quarter of 2.1%, which was 110 basis points higher than comparable duration swaps. The performance of the Agency RMBS sector was not uniformly positive for the fourth quarter. Early in the quarter U.S. Treasury yields reached their highest levels in many years in late October of 2022. Agency RMBS spreads to comparable duration U.S. Treasuries also reached their widest levels since the great financial crisis, easily surpassing the levels observed in March of 2020. As market sentiment turned mid-quarter and risk appetite improved, Agency RMBS, like most other asset classes, were viewed as very attractive. The sector’s rebound was likely triggered by the extreme spread levels reached in late October, and the rebound has continued into early 2023. However, the absence of the largest of the traditional buyers of the asset class – banks, and since March of 2020, the Fed, may result in the sector recovering more slowly towards pre-pandemic levels, if it can do so at all.

“For Orchid, our performance during the fourth quarter benefited from our exposure to lower coupon, longer duration securities that we owned throughout 2022. While such securities generate less interest income, they have contributed significantly to our book value performance over the last two months of 2022 and into 2023. In conjunction with the Company’s short positions in lower coupon TBAs we have been able to manage our risk to higher rates while also capturing book value appreciation as the market has rallied since late October, all the while maintaining an economic leverage ratio on the low end of our typical range. We anticipate maintaining these lower coupon holdings as a core position for the time being and have added higher coupons with new capital and pay-downs, while still maintaining a lower coupon bias. As always, if market conditions change, we expect to adapt our positions accordingly. With the incoming data and market reaction observed so far in February this may indeed be occurring.”

Details of Fourth Quarter 2022 Results of Operations

The Company reported net income of $34.9 million for the three month period ended December 31, 2022, compared with a net loss of $44.6 million for the three month period ended December 31, 2021. The Company decreased its Agency RMBS portfolio over the course of 2022, from $6.5 billion at December 31, 2021 to $3.5 billion at December 31, 2022. Interest income on the portfolio in the fourth quarter was down approximately $3.7 million from the third quarter of 2022. The yield on our average Agency RMBS decreased from 3.99% in the third quarter of 2022 to 3.79% for the fourth quarter of 2022, repurchase agreement borrowing costs increased from 2.48% for the third quarter of 2022 to 3.63% for the fourth quarter of 2022, and our net interest spread decreased from 1.51% in the third quarter of 2022 to 0.16% in the fourth quarter of 2022.

Book value increased by $0.51 per share in the fourth quarter of 2022. The increase in book value reflects our net income of $0.95 per share and the dividend distribution of $0.48 per share. The Company recorded net realized and unrealized gains of $1.04 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.

Details of Full Year 2022 Results of Operations

The Company reported a net loss of $258.5 million for the year ended December 31, 2022, compared with a net loss of $64.8 million for the year ended December 31, 2021. Interest income on the portfolio in the year ended December 31, 2022 was approximately $144.6 million and the yield on our average Agency RMBS was 3.45%. Repurchase agreement interest expense was $61.7 million during 2022 with an average cost of 1.53%.

Prepayments

For the quarter ended December 31, 2022, Orchid received $63.9 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 5.0%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):

 

 

 

 

Structured

 

 

 

PT RMBS

RMBS

Total

Three Months Ended

 

Portfolio (%)

Portfolio (%)

Portfolio (%)

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

December 31, 2021

 

9.0

 

24.6

 

11.4

September 30, 2021

 

9.8

 

25.1

 

12.4

June 30, 2021

 

10.9

 

29.9

 

12.9

March 31, 2021

 

9.9

 

40.3

 

12.0

Portfolio

The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of December 31, 2022 and December 31, 2021:

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Percentage

 

 

 

 

Average

 

 

 

 

 

 

of

 

Weighted

 

Maturity

 

 

 

Fair

Entire

 

Average

 

in

Longest

Asset Category

 

Value

Portfolio

 

Coupon

 

Months

Maturity

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

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Rate RMBS

 

$

6,298,189

96.7

%

 

2.93

%

 

342

1-Dec-51

Interest-Only Securities

 

210,382

3.2

%

 

3.40

%

 

263

25-Jan-52

Inverse Interest-Only Securities

 

2,524

0.1

%

 

3.75

%

 

300

15-Jun-42

Total Mortgage Assets

 

$

6,511,095

100.0

%

 

3.03

%

 

325

25-Jan-52

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

December 31, 2021

 

 

 

 

 

Percentage of

 

 

 

 

Percentage of

Agency

 

Fair Value

Entire Portfolio

 

Fair Value

Entire Portfolio

Fannie Mae

 

$

2,320,960

65.6

%

 

$

4,719,349

72.5

%

Freddie Mac

 

1,219,042

34.4

%

 

1,791,746

27.5

%

Total Portfolio

 

$

3,540,002

100.0

%

 

$

6,511,095

100.0

%

 

 

December 31,

2022

 

December 31,

2021

Weighted Average Pass-through Purchase Price

 

$

106.41

 

$

107.19

Weighted Average Structured Purchase Price

 

$

18.74

 

$

15.21

Weighted Average Pass-through Current Price

 

$

91.46

 

$

105.31

Weighted Average Structured Current Price

 

$

14.05

 

$

14.08

Effective Duration (1)

 

 

5.580

 

 

3.390

(1)

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. An effective duration of 3.390 indicates that an interest rate increase of 1.0% would be expected to cause a 3.390% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2021. 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 December 31, 2022, the Company had outstanding repurchase obligations of approximately $3,378.4 million with a net weighted average borrowing rate of 4.44%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $3,524.1 million and cash pledged to counterparties of approximately $13.3 million. The Company’s adjusted leverage ratio, defined as repurchase agreements divided by stockholders’ equity, at December 31, 2022 was 7.7 to 1. At December 31, 2022, the Company’s liquidity was approximately $233.0 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 December 31, 2022.

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Weighted

 

 

Total

 

 

 

Average

 

 

 

 

Average

 

 

Outstanding

% of

 

Borrowing

 

Amount

Maturity

Counterparty

 

Balances

Total

 

Rate

 

at Risk(1)

in Days

Mirae Asset Securities (USA) Inc.

 

312,989

9.1

%

 

4.23

%

 

$

14,741

76

RBC Capital Markets, LLC

 

274,790

8.1

%

 

4.50

%

 

8,379

29

Daiwa Capital Markets America, Inc.

 

251,854

7.5

%

 

4.48

%

 

10,024

17

ED&F Man Capital Markets Inc.

 

240,587

7.1

%

 

4.49

%

 

9,729

28

ING Financial Markets LLC

 

238,212

7.1

%

 

4.47

%

 

9,677

33

Cantor Fitzgerald & Co.

 

229,444

6.8

%

 

4.46

%

 

11,805

29

ABN AMRO Bank N.V.

 

227,888

6.7

%

 

4.48

%

 

5,672

13

J.P. Morgan Securities LLC

 

219,283

6.5

%

 

4.49

%

 

12,507

12

Merrill Lynch, Pierce, Fenner & Smith Inc.

 

192,467

5.7

%

 

4.47

%

 

6,910

9

Citigroup Global Markets, Inc.

 

190,956

5.7

%

 

4.32

%

 

10,354

9

StoneX Financial Inc.

 

184,375

5.5

%

 

4.45

%

 

9,299

26

Mitsubishi UFJ Securities (USA), Inc.

 

178,394

5.3

%

 

4.36

%

 

5,603

21

ASL Capital Markets Inc.

 

165,172

4.9

%

 

4.50

%

 

9,075

35

Goldman Sachs & Co. LLC

 

124,821

3.7

%

 

4.53

%

 

7,944

26

Santander Bank, N.A.

 

115,477

3.4

%

 

4.39

%

 

5,749

24

Wells Fargo Bank, N.A.

 

95,366

2.8

%

 

4.46

%

 

5,071

12

BMO Capital Markets Corp.

 

77,708

2.3

%

 

4.37

%

 

4,365

23

South Street Securities, LLC

 

37,198

1.1

%

 

4.48

%

 

1,834

17

Lucid Cash Fund USG, LLC

 

18,703

0.6

%

 

4.38

%

 

883

12

Lucid Prime Fund, LLC

 

2,761

0.1

%

 

4.38

%

 

123

12

Total / Weighted Average

 

$

3,378,445

100.0

%

 

4.44

%

 

$

149,744

27

(1)

Equal to the sum of the fair value of securities sold, accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities, accrued interest payable and the fair value of securities posted by the counterparties (if any).

Hedging

In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding against a rise in interest rates by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted accounting principles (“GAAP”) in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these instruments are reflected in earnings for all periods presented. At December 31, 2022, 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 December 31, 2022.

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

Average

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

Contract

 

Average

 

 

Average

 

 

 

 

 

 

 

Notional

 

Entry

 

 

Effective

 

 

Open

 

Expiration Year

 

Amount

 

Rate

 

 

Rate

 

 

Equity(1)

 

U.S. Treasury Note Futures Contracts (Short Positions)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

March 2023 5-year T-Note futures (Mar 2023 – Mar 2028 Hedge Period)

 

$

750,500

 

4.20

%

 

4.22

%

 

$

(100

)

March 2023 10-year Ultra futures (Mar 2023 – Mar 2033 Hedge Period)

 

$

174,500

 

3.66

%

 

3.79

%

 

$

965

 

(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 $107.93 at December 31, 2022. The contract values of the short positions were $810.0 million at December 31, 2022. 10-Year Ultra futures contracts were valued at a price of $118.28 at December 31, 2022. The contract value of the short position was $206.4 million at December 31, 2022.

The table below presents information related to the Company’s interest rate swap positions at December 31, 2022.

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

Net

 

 

 

 

 

 

Fixed

 

Average

 

Estimated

Average

 

 

Notional

Pay

 

Receive

 

Fair

Maturity

 

 

Amount

Rate

 

Rate

 

Value

(Years)

Expiration > 3 to ≤ 5 years

 

$

500,000

0.84

%

 

4.75

%

 

$

56,764

3.7

Expiration > 5 years

 

900,000

1.70

%

 

4.23

%

 

105,638

6.6

 

 

$

1,400,000

1.39

%

 

4.41

%

 

$

162,402

5.6

The following table presents information related to our interest rate swaption positions as of December 31, 2022.

($ 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 positions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

≤ 1 year

 

$

36,685

 

$

21,253

 

9.6

$

1,250,000

 

4.09

%

3 Month

 

10.0

> 10 years

 

11,021

 

12,145

 

239.5

120,000

 

2.05

%

3 Month

 

10.0

 

 

$

47,706

 

$

33,398

 

29.8

$

1,370,000

 

3.91

%

3 Month

 

10.0

Payer Swaptions (short positions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

≤ 1 year

 

$

(17,800

)

 

$

(5,982

)

 

3.6

$

(917,000

)

 

4.09

%

3 Month

 

10.0

The following table presents information related to our interest cap positions as of December 31, 2022.

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

Strike

 

 

Estimated

 

 

Notional

 

 

 

Swap

Curve

 

Fair

Expiration

 

Amount

Cost

Rate

Spread

 

Value

February 8, 2024

 

$

200,000

$

1,450

0.09

%

2Y10Y

 

$

1,119

The following table summarizes our contracts to sell TBA securities as of December 31, 2022.

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

 

 

 

 

 

 

 

 

Net

 

 

Amount

 

Cost

 

Market

 

Carrying

 

 

Long (Short)(1)

 

Basis(2)

 

Value(3)

 

Value(4)

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-Year TBA securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.00%

 

$

(175,000

)

 

$

(142,268

)

 

$

(143,145

)

 

$

(877

)

3.00%

 

(500,000

)

 

(440,644

)

 

(440,274

)

 

370

 

 

$

(675,000

)

 

$

(582,912

)

 

$

(583,419

)

 

$

(507

)

(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 amounts)

 

 

 

 

 

 

Year

 

Per Share

Amount

Total

2013

 

$

6.975

$

4,662

2014

 

10.800

22,643

2015

 

9.600

38,748

2016

 

8.400

41,388

2017

 

8.400

70,717

2018

 

5.350

55,814

2019

 

4.800

54,421

2020

 

3.950

53,570

2021

 

3.900

97,601

2022

 

2.475

87,906

2023 YTD(1)

 

0.320

12,540

Totals

 

$

64.970

$

540,010

(1)

On January 11, 2023, the Company declared a dividend of $0.16 per share to be paid on February 24, 2023. On February 15, 2023, the Company declared a dividend of $0.16 per share to be paid on March 29, 2023. The effect of these dividends are included in the table above but are not reflected in the Company’s financial statements as of December 31, 2022.

Book Value Per Share

The Company’s book value per share at December 31, 2022 was $11.93. The Company computes book value per share by dividing total stockholders’ equity by the total number of shares outstanding of the Company’s common stock. At December 31, 2022, the Company’s stockholders’ equity was $438.8 million with 36,764,983 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, 2022, approximately 85.4% 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 increased to 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 – September 30, 2022

 

$

3,150,403

 

$

50,274

 

$

537

 

$

50,811

 

$

3,201,214

Securities purchased

 

381,991

 

 

 

 

381,991

Securities sold

 

 

(28,422

)

 

 

(28,422

)

 

(28,422

)

Losses on sales

 

 

(1,023

)

 

 

(1,023

)

 

(1,023

)

Return of investment

 

n/a

 

(933

)

 

38

 

(895

)

 

(895

)

Pay-downs

 

(62,670

)

 

n/a

 

 

n/a

 

(62,670

)

Discount accretion due to pay-downs

 

6,748

 

n/a

 

 

n/a

 

6,748

Mark to market gains (losses)

 

43,434

 

(227

)

 

(148

)

 

(375

)

 

43,059

Market value – December 31, 2022

 

$

3,519,906

 

$

19,669

 

$

427

 

$

20,096

 

$

3,540,002

The tables below present the allocation of capital between the respective portfolios at December 31, 2022 and September 30, 2022, and the return on invested capital for each sub-portfolio for the three month period ended December 31, 2022.

($ in thousands)

 

Capital Allocation

 

 

 

 

 

 

 

Structured Security Portfolio

 

 

 

 

 

 

Pass-Through

 

Interest-Only

 

Inverse Interest

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Securities

 

Only Securities

 

Sub-total

 

Total

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market value

 

$

3,519,906

 

$

19,669

 

$

427

 

$

20,096

 

$

3,540,002

Cash

 

237,219

 

 

 

 

237,219

Borrowings(1)

 

(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

%

September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market value

 

$

3,150,403

 

$

50,274

 

$

537

 

$

50,811

 

$

3,201,214

Cash

 

280,952

 

 

 

 

280,952

Borrowings(2)

 

(3,133,861

)

 

 

 

 

(3,133,861

)

Total

 

$

297,494

 

$

50,274

 

$

537

 

$

50,811

 

$

348,305

% of Total

 

85.4

%

 

14.4

%

 

0.2

%

 

14.6

%

 

100.0

%

(1)

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.

(2)

At September 30, 2022, there were outstanding repurchase agreement balances of $41.0 million secured by IO securities and $0.5 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 12.3% and (2.0)%, respectively, for the fourth quarter of 2022. The combined portfolio generated a return on invested capital of approximately 10.9%.

($ in thousands)

 

Returns for the Quarter Ended December 31, 2022

 

 

 

 

 

 

 

Structured Security Portfolio

 

 

 

 

 

 

Pass-Through

 

Interest-Only

 

Inverse Interest

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Securities

 

Only Securities

 

Sub-total

 

Total

Income (net of borrowing cost)

 

$

1,692

 

$

594

 

$

100

 

$

694

 

$

2,386

Realized and unrealized gains (losses)

 

50,446

 

(1,250

)

 

(148

)

 

(1,398

)

 

49,048

Derivative losses (gains)

 

(10,658

)

 

n/a

 

n/a

 

n/a

 

(10,658

)

Total Return

 

$

41,480

 

$

(656

)

 

$

(48

)

 

$

(704

)

 

$

40,776

Beginning Capital Allocation

 

$

297,494

 

$

50,274

 

$

537

 

$

50,811

 

$

348,305

Return on Invested Capital for the Quarter(1)

 

13.9

%

 

(1.3

)%

 

(8.9

)%

 

(1.4

)%

 

11.7

%

Average Capital Allocation(2)

 

$

338,087

 

$

34,972

 

$

482

 

$

35,454

 

$

373,541

Return on Average Invested Capital for the Quarter(3)

 

12.3

%

 

(1.9

)%

 

(10.0

)%

 

(2.0

)%

 

10.9

%

(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 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.

Contacts

Orchid Island Capital, Inc.

Robert E. Cauley, 772-231-1400

Chairman and Chief Executive Officer

https://ir.orchidislandcapital.com

Read full story here

Staff

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