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 September 30, 2023.
Third Quarter 2023 Results
Other Financial Highlights
Management Commentary
Commenting on the third quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “As the third quarter unfolded interest rates were trading in a fairly well-defined range, volatility was trending lower and we were comfortable with our leverage and positioning. Orchid has maintained a lower coupon bias throughout the tightening cycle that began in 2022 as we believe these securities still offer superior total return potential over new origination, higher coupon securities. We continue to hold these securities for the same reasons although we used the proceeds from capital raising activity via our ATM program and paydowns to add higher coupon, low pay-up specified pools and hedged these positions predominantly with swaps. We added higher coupons to mitigate the lower carry of our legacy assets to allow us to continue to hold them and retain their higher return potential in the event of a normalization of rates and U.S. Treasury curve shape.
“The rates market shifted dramatically during the quarter. The credit rating of the U.S. was downgraded by Fitch, and Moody’s has indicated it may do the same. Deficits in the U.S. were revised meaningfully higher in July as the Congressional Budget Office raised its estimate for the deficit this year to near $2 trillion. As the anticipated supply of U.S. Treasury debt has shifted up dramatically, the market appears to be demanding a term-premium to hold this debt. At the conclusion of the Federal Reserve’s (the “Fed”) September FOMC meeting, the Fed released its “dot” plot, a summary of FOMC members’ anticipated level of the Federal Funds rate for the next several years. The dot plot released reflected a Federal Funds rate 50 basis points higher at the end of 2024 than the last dot plot issued at the conclusion of the FOMC meeting in June. The increase reflected expectations for a minimal reduction in the Federal Funds rate prior to the end of 2024. The Fed cited the persistently strong economy as the reason for keeping monetary policy restrictive for so long. Economic data released during the third quarter implies the U.S. economy is very resilient in the face of higher interest rates and growth for the quarter was 4.9%. All of these factors caused rates to increase dramatically, and they continue to do so into the fourth quarter. We have yet to see the rates market stabilize. All of these interest rate and economic forces coupled with the multiple sources of uncertainty created by the emerging war in the middle east, a House of Representatives without a speaker, and a presidential election on the horizon, among other factors, have created a perfect storm for financial markets and the mortgage market in particular. In the case of the latter, the elevated levels of volatility resulting from all of the above coupled with few buyers of the asset class have led to meaningful underperformance for the sector since early August and since mid-September in particular. The fact investors can earn more than 5% holding cash or U.S. Treasury bills has kept buyers of Agency RMBS on the sidelines and left the Agency RMBS sector, as well as many other risky asset classes, to perform very poorly.
“In response to the significant increase in interest rates and volatility, with the corresponding weakness in Agency RMBS assets continuing since the end of the third quarter, we have reduced our leverage and increased hedges. Since September 30, 2023, we have reduced our holding of 30-year fixed rate 3.0% coupons by approximately 40%, added to shorts in the same coupon and eliminated our 15-year TBA long position. Finally, we eliminated our short TBA positions in higher coupons. In the face of such challenging market conditions our goal is to weather the current storm by preserving our liquidity and maintaining suitable levels of leverage while attempting to maximize our potential upside when the market stabilizes. Going forward, there remains considerable uncertainty as to what lies beyond the current Fed tightening cycle. Will the Fed succeed in slowing demand and bring inflation back towards its 2.0% target, ultimately leading to reduced short-term rates and a steeper rates curve that is positively sloped? Or are we entering a new “new normal”, with rates appreciably higher than those that prevailed before the pandemic, with funding costs still at very elevated levels, rates generally much higher and maybe even inflation settling in above the Fed’s target? We anticipate the former outcome will materialize soon enough and are positioned accordingly. However, we are also prepared to make additional adjustments if the latter comes to pass.”
Details of Third Quarter 2023 Results of Operations
The Company reported net loss of $80.1 million for the three month period ended September 30, 2023, compared with a net loss of $84.5 million for the three month period ended September 30, 2022. The Company increased its Agency RMBS portfolio over the course of the third quarter of 2023, from $4.4 billion at June 30, 2023 to $4.5 billion at September 30, 2023. Interest income on the portfolio in the third quarter was up approximately $10.2 million from the second quarter of 2023. The yield on our average Agency RMBS increased from 3.81% in the second quarter of 2023 to 4.51% for the third quarter of 2023, repurchase agreement borrowing costs increased from 4.88% for the second quarter of 2023 to 5.44% for the third quarter of 2023, and our net interest spread improved from (1.07)% in the second quarter of 2023 to (0.93)% in the third quarter of 2023.
Book value decreased by $2.24 per share in the third quarter of 2023. The decrease in book value reflects our net loss of $1.68 per share and the dividend distribution of $0.48 per share. The Company recorded net realized and unrealized losses of $1.40 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.
Prepayments
For the quarter ended September 30, 2023, Orchid received $99.5 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 6.0%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):
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Structured |
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PT RMBS |
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RMBS |
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Total |
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Three Months Ended |
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Portfolio (%) |
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Portfolio (%) |
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Portfolio (%) |
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September 30, 2023 |
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6.1 |
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5.7 |
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6.0 |
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June 30, 2023 |
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5.6 |
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7.0 |
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5.6 |
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March 31, 2023 |
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3.9 |
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5.7 |
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4.0 |
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December 31, 2022 |
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4.9 |
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6.0 |
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5.0 |
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September 30, 2022 |
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|
6.1 |
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10.4 |
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6.5 |
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June 30, 2022 |
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8.3 |
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13.7 |
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9.4 |
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March 31, 2022 |
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8.1 |
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19.5 |
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10.7 |
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Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of September 30, 2023 and December 31, 2022:
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($ in thousands) |
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Weighted |
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Percentage |
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Average |
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of |
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Weighted |
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Maturity |
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Fair |
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Entire |
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Average |
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in |
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Longest |
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Asset Category |
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Value |
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Portfolio |
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Coupon |
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Months |
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Maturity |
||||
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September 30, 2023 |
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Fixed Rate RMBS |
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$ |
4,502,115 |
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|
|
99.6 |
% |
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|
4.03 |
% |
|
|
335 |
|
1-Sep-53 |
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Interest-Only Securities |
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17,833 |
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0.4 |
% |
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4.01 |
% |
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|
225 |
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25-Jul-48 |
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Inverse Interest-Only Securities |
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|
277 |
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0.0 |
% |
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0.00 |
% |
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|
277 |
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15-Jun-42 |
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Total Mortgage Assets |
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$ |
4,520,225 |
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100.0 |
% |
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|
4.01 |
% |
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|
333 |
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1-Sep-53 |
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December 31, 2022 |
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Fixed Rate RMBS |
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$ |
3,519,906 |
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|
|
99.4 |
% |
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|
3.47 |
% |
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|
339 |
|
1-Nov-52 |
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Interest-Only Securities |
|
|
19,669 |
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|
|
0.6 |
% |
|
|
4.01 |
% |
|
|
234 |
|
25-Jul-48 |
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Inverse Interest-Only Securities |
|
|
427 |
|
|
|
0.0 |
% |
|
|
0.00 |
% |
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|
286 |
|
15-Jun-42 |
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Total Mortgage Assets |
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$ |
3,540,002 |
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100.0 |
% |
|
|
3.46 |
% |
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|
336 |
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1-Nov-52 |
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($ in thousands) |
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September 30, 2023 |
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December 31, 2022 |
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Percentage of |
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Percentage of |
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Agency |
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Fair Value |
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Entire |
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Fair Value |
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Entire |
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||||
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Fannie Mae |
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$ |
2,989,840 |
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66.1 |
% |
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$ |
2,320,960 |
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65.6 |
% |
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Freddie Mac |
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1,530,385 |
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33.9 |
% |
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|
1,219,042 |
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34.4 |
% |
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Total Portfolio |
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$ |
4,520,225 |
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|
100.0 |
% |
|
$ |
3,540,002 |
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100.0 |
% |
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September 30, 2023 |
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December 31, 2022 |
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Weighted Average Pass-through Purchase Price |
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$ |
104.87 |
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$ |
106.41 |
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Weighted Average Structured Purchase Price |
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$ |
18.74 |
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$ |
18.74 |
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Weighted Average Pass-through Current Price |
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$ |
89.08 |
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$ |
91.46 |
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Weighted Average Structured Current Price |
|
$ |
13.92 |
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$ |
14.05 |
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Effective Duration (1) |
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|
5.460 |
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|
5.580 |
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(1) |
Effective duration is the approximate percentage change in price for a 100 bps change in rates. An effective duration of 5.460 indicates that an interest rate increase of 1.0% would be expected to cause a 5.460% decrease in the value of the RMBS in the Company’s investment portfolio at September 30, 2023. An effective duration of 5.580 indicates that an interest rate increase of 1.0% would be expected to cause a 5.580% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2022. These figures include the structured securities in the portfolio, but do not include the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc. |
Financing, Leverage and Liquidity
As of September 30, 2023, the Company had outstanding repurchase obligations of approximately $4,427.0 million with a net weighted average borrowing rate of 5.49%. These agreements were collateralized by RMBS and U.S. Treasury securities with a fair value, including accrued interest, of approximately $4,537.1 million and cash pledged to counterparties of approximately $113.4 million. The Company’s adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders’ equity, at September 30, 2023 was 9.5 to 1. At September 30, 2023, the Company’s liquidity was approximately $163.7 million consisting of cash and cash equivalents and unpledged RMBS (not including unsettled securities purchases). To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at September 30, 2023.
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($ in thousands) |
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Weighted |
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Weighted |
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Total |
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Average |
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Average |
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|||
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Outstanding |
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% of |
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Borrowing |
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Amount |
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Maturity |
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Counterparty |
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Balances |
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Total |
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Rate |
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at Risk(1) |
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in Days |
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|||||
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Cantor Fitzgerald & Co. |
|
$ |
354,817 |
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|
|
8.1 |
% |
|
|
5.48 |
% |
|
$ |
18,500 |
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|
|
28 |
|
|
Wells Fargo Bank, N.A. |
|
|
353,817 |
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|
|
8.0 |
% |
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|
5.47 |
% |
|
|
18,931 |
|
|
|
26 |
|
|
Mirae Asset Securities (USA) Inc. |
|
|
337,442 |
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|
7.6 |
% |
|
|
5.51 |
% |
|
|
14,082 |
|
|
|
42 |
|
|
ASL Capital Markets Inc. |
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|
321,162 |
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|
7.3 |
% |
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|
5.49 |
% |
|
|
17,557 |
|
|
|
39 |
|
|
J.P. Morgan Securities LLC |
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|
320,537 |
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|
|
7.2 |
% |
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|
5.47 |
% |
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|
17,940 |
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|
|
16 |
|
|
Mitsubishi UFJ Securities (USA), Inc. |
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|
312,097 |
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|
7.0 |
% |
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|
5.51 |
% |
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|
17,114 |
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|
|
50 |
|
|
Citigroup Global Markets, Inc. |
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|
294,638 |
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|
6.7 |
% |
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|
5.45 |
% |
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|
15,239 |
|
|
|
10 |
|
|
RBC Capital Markets, LLC |
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|
293,169 |
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|
|
6.6 |
% |
|
|
5.52 |
% |
|
|
9,273 |
|
|
|
46 |
|
|
Daiwa Capital Markets America, Inc. |
|
|
232,596 |
|
|
|
5.3 |
% |
|
|
5.49 |
% |
|
|
9,377 |
|
|
|
17 |
|
|
ED&F Man Capital Markets Inc. |
|
|
222,216 |
|
|
|
5.0 |
% |
|
|
5.44 |
% |
|
|
9,639 |
|
|
|
9 |
|
|
ING Financial Markets LLC |
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|
212,132 |
|
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|
4.8 |
% |
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|
5.48 |
% |
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|
8,861 |
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|
33 |
|
|
ABN AMRO Bank N.V. |
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|
211,135 |
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|
4.8 |
% |
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|
5.52 |
% |
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|
5,925 |
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|
45 |
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Merrill Lynch, Pierce, Fenner & Smith Inc. |
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|
196,295 |
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4.4 |
% |
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|
5.54 |
% |
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|
6,821 |
|
|
|
46 |
|
|
Banco Santander, N.A. |
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|
182,495 |
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4.1 |
% |
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|
5.49 |
% |
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|
7,833 |
|
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|
35 |
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Goldman Sachs & Co. LLC |
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|
173,371 |
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3.9 |
% |
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|
5.47 |
% |
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|
9,118 |
|
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|
18 |
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StoneX Financial Inc. |
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|
167,366 |
|
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3.8 |
% |
|
|
5.54 |
% |
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|
8,783 |
|
|
|
63 |
|
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South Street Securities, LLC |
|
|
111,871 |
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|
2.5 |
% |
|
|
5.51 |
% |
|
|
5,807 |
|
|
|
57 |
|
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BMO Capital Markets Corp. |
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|
110,904 |
|
|
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2.5 |
% |
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|
5.47 |
% |
|
|
5,803 |
|
|
|
12 |
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Lucid Prime Fund, LLC |
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|
10,575 |
|
|
|
0.2 |
% |
|
|
5.50 |
% |
|
|
568 |
|
|
|
19 |
|
|
Lucid Cash Fund USG, LLC |
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|
8,312 |
|
|
|
0.2 |
% |
|
|
5.50 |
% |
|
|
462 |
|
|
|
19 |
|
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Total / Weighted Average |
|
$ |
4,426,947 |
|
|
|
100.0 |
% |
|
|
5.49 |
% |
|
$ |
207,633 |
|
|
|
32 |
|
|
(1) |
Equal to the sum of the fair value of securities sold, accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities, accrued interest payable and the fair value of securities posted by the counterparties (if any). |
Hedging
In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding against a rise in interest rates by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted accounting principles (“GAAP”) in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these instruments are reflected in earnings for all periods presented. At September 30, 2023, such instruments were comprised of U.S. Treasury note (“T-Note”) futures contracts, interest rate swap agreements, interest rate swaption agreements, interest rate caps, interest rate floors and contracts to sell to-be-announced (“TBA”) securities.
The table below presents information related to the Company’s T-Note futures contracts at September 30, 2023.
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($ in thousands) |
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September 30, 2023 |
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Average |
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Weighted |
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Weighted |
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|||
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Contract |
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Average |
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Average |
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|||
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Notional |
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Entry |
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Effective |
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Open |
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Expiration Year |
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Amount |
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Rate |
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Rate |
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Equity(1) |
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Treasury Note Futures Contracts (Short Positions)(2) |
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December 2023 5-year T-Note futures (Dec 2023 – Feb 2028 Hedge Period) |
|
$ |
471,500 |
|
|
|
4.33 |
% |
|
|
4.78 |
% |
|
$ |
5,414 |
|
|
December 2023 10-year T-Note futures (Dec 2023 – Aug 2030 Hedge Period) |
|
$ |
395,000 |
|
|
|
4.24 |
% |
|
|
4.97 |
% |
|
$ |
9,069 |
|
|
(1) |
Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. |
|
|
(2) |
5-Year T-Note futures contracts were valued at a price of $105.4. The contract values of the short positions were $496.8 million. 10-Year T-Note futures contracts were valued at a price of $108.1. The contract values of the short positions were $426.8 million. |
The table below presents information related to the Company’s interest rate swap positions at September 30, 2023.
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($ in thousands) |
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Average |
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Fixed |
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Average |
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|
Average |
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|||
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Notional |
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Pay |
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Receive |
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Maturity |
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||||
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|
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Amount |
|
|
Rate |
|
|
Rate |
|
|
(Years) |
|
||||
|
Expiration > 1 to ≤ 5 years |
|
$ |
500,000 |
|
|
|
0.84 |
% |
|
|
5.31 |
% |
|
|
3.0 |
|
|
Expiration > 5 years |
|
$ |
2,126,500 |
|
|
|
2.84 |
% |
|
|
5.31 |
% |
|
|
7.4 |
|
|
|
|
$ |
2,626,500 |
|
|
|
2.46 |
% |
|
|
5.31 |
% |
|
|
6.6 |
|
The following table presents information related to our interest rate swaption positions as of September 30, 2023.
|
($ in thousands) |
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Option |
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|
Underlying Swap |
|
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Weighted |
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|
Weighted |
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||
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|
|
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|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
Average |
|
Average |
|
|||
|
|
|
|
|
|
|
Fair |
|
|
Months to |
|
|
Notional |
|
|
Fixed |
|
Adjustable |
|
Term |
|
|||||
|
Expiration |
|
Cost |
|
|
Value |
|
|
Expiration |
|
|
Amount |
|
|
Rate |
|
Rate |
|
(Years) |
|
||||||
|
Payer Swaptions (long positions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
≤ 1 year |
|
$ |
1,619 |
|
|
$ |
1,418 |
|
|
|
8.0 |
|
|
$ |
800,000 |
|
|
|
5.40 |
% |
SOFR |
|
|
1.0 |
|
|
|
|
$ |
1,619 |
|
|
$ |
1,418 |
|
|
|
8.0 |
|
|
$ |
800,000 |
|
|
|
5.40 |
% |
|
|
|
1.0 |
|
The following table presents information related to our interest cap positions as of September 30, 2023.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
|
|
Estimated |
|
||
|
|
|
Notional |
|
|
|
|
|
|
Swap |
|
Curve |
|
Fair |
|
|||
|
Expiration |
|
Amount |
|
|
Cost |
|
|
Rate |
|
Spread |
|
Value |
|
||||
|
February 8, 2024 |
|
$ |
200,000 |
|
|
$ |
1,450 |
|
|
|
0.09 |
% |
2Y10Y |
|
$ |
704 |
|
The table below presents information related to the Company’s interest rate floor positions at September 30, 2023.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
|
|
|
|
||
|
|
|
Notional |
|
|
|
|
|
|
Swap |
|
|
|
Fair |
|
|||
|
|
|
Amount |
|
|
Cost |
|
|
Rate |
|
Terms |
|
Value |
|
||||
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Position |
|
$ |
1,000,000 |
|
|
$ |
2,500 |
|
|
|
0.13 |
% |
2Y_2s30s |
|
$ |
3,981 |
|
|
Short Position |
|
$ |
(1,000,000 |
) |
|
$ |
(1,358 |
) |
|
|
(0.37 |
)% |
2Y_2s30s |
|
$ |
(2,500 |
) |
The following table summarizes our contracts to sell TBA securities as of September 30, 2023.
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
|
|
|
|
|
|
|
|
Net |
|
||
|
|
|
Amount |
|
|
Cost |
|
|
Market |
|
|
Carrying |
|
||||
|
|
|
Long (Short)(1) |
|
|
Basis(2) |
|
|
Value(3) |
|
|
Value(4) |
|
||||
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15-Year TBA securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00% |
|
$ |
100,000 |
|
|
$ |
97,617 |
|
|
$ |
97,386 |
|
|
$ |
(231 |
) |
|
30-Year TBA securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.00% |
|
|
(350,000 |
) |
|
|
(297,154 |
) |
|
|
(290,116 |
) |
|
|
7,038 |
|
|
6.00% |
|
|
(100,000 |
) |
|
|
(99,872 |
) |
|
|
(98,766 |
) |
|
|
1,106 |
|
|
6.50% |
|
|
(152,500 |
) |
|
|
(154,382 |
) |
|
|
(153,310 |
) |
|
|
1,072 |
|
|
|
|
$ |
(502,500 |
) |
|
$ |
(453,791 |
) |
|
$ |
(444,806 |
) |
|
$ |
8,985 |
|
|
(1) |
Notional amount represents the par value (or principal balance) of the underlying Agency RMBS. |
|
|
(2) |
Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS. |
|
|
(3) |
Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end. |
|
|
(4) |
Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities) at fair value in our balance sheets. |
Dividends
In addition to other requirements that must be satisfied to qualify as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to pay regular monthly dividends to our stockholders and have declared the following dividends since our February 2013 IPO.
|
(in thousands, except per share data) |
|
|||||||
|
Year |
|
Per Share Amount |
|
|
Total |
|
||
|
2013 |
|
$ |
6.975 |
|
|
$ |
4,662 |
|
|
2014 |
|
|
10.800 |
|
|
|
22,643 |
|
|
2015 |
|
|
9.600 |
|
|
|
38,748 |
|
|
2016 |
|
|
8.400 |
|
|
|
41,388 |
|
|
2017 |
|
|
8.400 |
|
|
|
70,717 |
|
|
2018 |
|
|
5.350 |
|
|
|
55,814 |
|
|
2019 |
|
|
4.800 |
|
|
|
54,421 |
|
|
2020 |
|
|
3.950 |
|
|
|
53,570 |
|
|
2021 |
|
|
3.900 |
|
|
|
97,601 |
|
|
2022 |
|
|
2.475 |
|
|
|
87,906 |
|
|
2023 – YTD(1) |
|
|
1.560 |
|
|
|
68,604 |
|
|
Totals |
|
$ |
66.210 |
|
|
$ |
596,074 |
|
|
(1) |
On October 11, 2023, the Company declared a dividend of $0.12 per share to be paid on November 28, 2023. The effect of this dividend is included in the table above but is not reflected in the Company’s financial statements as of September 30, 2023. |
Book Value Per Share
The Company’s book value per share at September 30, 2023 was $8.92. The Company computes book value per share by dividing total stockholders’ equity by the total number of shares outstanding of the Company’s common stock. At September 30, 2023, the Company’s stockholders’ equity was $466.8 million with 52,332,306 shares of common stock outstanding.
Capital Allocation and Return on Invested Capital
The Company allocates capital to two RMBS sub-portfolios, the pass-through RMBS portfolio, consisting of mortgage pass-through certificates issued by Fannie Mae, Freddie Mac or Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”), and the structured RMBS portfolio, consisting of interest-only (“IO”) and inverse interest-only (“IIO”) securities. As of September 30, 2023, approximately 95.1% of the Company’s investable capital (which consists of equity in pledged PT RMBS, available cash and unencumbered assets) was deployed in the PT RMBS portfolio. At June 30, 2023, the allocation to the PT RMBS portfolio was approximately 95.8%.
The table below details the changes to the respective sub-portfolios during the quarter.
|
(in thousands) |
|
|||||||||||||||||||
|
Portfolio Activity for the Quarter |
|
|||||||||||||||||||
|
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
|
Market value – June 30, 2023 |
|
$ |
4,356,203 |
|
|
$ |
17,448 |
|
|
$ |
321 |
|
|
$ |
17,769 |
|
|
$ |
4,373,972 |
|
|
Securities purchased |
|
|
455,003 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
455,003 |
|
|
Securities sold |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Losses on sales |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Return of investment |
|
|
n/a |
|
|
|
(581 |
) |
|
|
– |
|
|
|
(581 |
) |
|
|
(581 |
) |
|
Pay-downs |
|
|
(98,932 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
(98,932 |
) |
|
Discount accretion due to pay-downs |
|
|
7,252 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
7,252 |
|
|
Mark to market losses (gains) |
|
|
(217,411 |
) |
|
|
966 |
|
|
|
(44 |
) |
|
|
922 |
|
|
|
(216,489 |
) |
|
Market value – September 30, 2023 |
|
$ |
4,502,115 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
4,520,225 |
|
The tables below present the allocation of capital between the respective portfolios at September 30, 2023 and June 30, 2023, and the return on invested capital for each sub-portfolio for the three month period ended September 30, 2023.
|
($ in thousands) |
|
|||||||||||||||||||
|
Capital Allocation |
|
|||||||||||||||||||
|
|
|
|
|
|
|
Structured Security Portfolio |
|
|
|
|
|
|||||||||
|
|
|
Pass-Through |
|
|
Interest-Only |
|
|
Inverse Interest |
|
|
|
|
|
|
|
|
|
|||
|
|
|
Portfolio |
|
|
Securities |
|
|
Only Securities |
|
|
Sub-total |
|
|
Total |
|
|||||
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
4,502,115 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
4,520,225 |
|
|
Cash |
|
|
278,217 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
278,217 |
|
|
Borrowings(1) |
|
|
(4,426,947 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(4,426,947 |
) |
|
Total |
|
$ |
353,385 |
|
|
$ |
17,833 |
|
|
$ |
277 |
|
|
$ |
18,110 |
|
|
$ |
371,495 |
|
|
% of Total |
|
|
95.1 |
% |
|
|
4.8 |
% |
|
|
0.1 |
% |
|
|
4.9 |
% |
|
|
100.0 |
% |
|
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
$ |
4,356,203 |
|
|
$ |
17,448 |
|
|
$ |
321 |
|
|
$ |
17,769 |
|
|
$ |
4,373,972 |
|
|
Cash |
|
|
249,337 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
249,337 |
|
|
Borrowings(2) |
|
|
(4,201,717 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(4,201,717 |
) |
|
Total |
|
$ |
403,823 |
|
|
$ |
17,448 |
|
|
$ |
321 |
|
|
$ |
17,769 |
|
|
$ |
421,592 |
|
|
% of Total |
|
|
95.8 |
% |
|
|
4.1 |
% |
|
|
0.1 |
% |
|
|
4.2 |
% |
|
|
100.0 |
% |
|
(1) |
At September 30, 2023, there were outstanding repurchase agreement balances of $14.7 million secured by IO securities and $0.5 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy. |
|
|
(2) |
At June 30, 2023, there were outstanding repurchase agreement balances of $14.8 million secured by IO securities and $0.3 million secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy. |
The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately (19.0)% and 7.7%, respectively, for the third quarter of 2023. The combined portfolio generated a return on invested capital of approximately (17.
Contacts
Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
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