Orchid Island Capital Announces Second Quarter 2023 Results

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VERO BEACH, Fla., July 27, 2023--(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 June 30, 2023.

Second Quarter 2023 Results

  • Net income of $10.2 million, or $0.25 per common share, which consists of:

  • Net interest expense of $8.8 million, or $0.22 per common share

  • Total expenses of $4.8 million, or $0.12 per common share

  • Net realized and unrealized gains of $23.8 million, or $0.59 per common share, on RMBS and derivative instruments, including net interest income on interest rate swaps

  • Second quarter dividends declared and paid of $0.48 per common share

  • Book value per common share of $11.16 at June 30, 2023

  • Total return of 0.78%, comprised of $0.48 dividend per common share and $0.39 decrease in book value per common share, divided by beginning book value per common share

Other Financial Highlights

  • Orchid maintained a liquidity position of $204.1 million in cash and cash equivalents and unpledged RMBS, or 42% of stockholders' equity as of June 30, 2023

  • Borrowing capacity in excess of June 30, 2023 outstanding repurchase agreement balances of $4,201.7 million, spread across 20 active lenders

  • Company to discuss results on Friday, July 28, 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 second quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, "The regional banking crisis that emerged in March of 2023 elicited a severe market reaction, but the Federal Reserve ('Fed') and U.S. Treasury were very responsive to these developments and the damage was quickly contained by effective macro-prudential policy. By late April, market focus began to shift away from the prospects of contagion from a couple of high-profile bank failures to an impasse between congressional Republicans and the Biden administration over the debt ceiling. Fortunately, the impasse was resolved in late May. While the debt ceiling impasse was resolved before the government ran out of borrowing capacity and risk sentiment improved modestly, the economic data, particularly with respect to core inflation and the labor market, did not improve at all. The U.S. Treasury curve inversion peaked in early July, interest rates continued to rise as the 2-year U.S. Treasury approached 5% and the futures market priced in nearly two additional rate increases by the Fed with no rate decreases at all in 2023. In short, market expectations were now in sync with Fed rhetoric that funding rates would be higher and for far longer than previously expected. These developments were not good for the Agency RMBS market as the spread between the Agency RMBS current coupon and the 5-year U.S. Treasury reached approximately 187.5 bps on May 26, 2023.

"Orchid has maintained a lower coupon bias throughout the tightening cycle 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. We raised approximately $48 million of new capital in the second quarter and deployed the proceeds into higher coupon, low pay-up specified pools and hedged these positions predominantly with swaps. With the U.S. Treasury curve inverted as much as it is our hedge positions allow us to earn approximately 100 basis points of marginal net interest income on the new securities. We have also taken our economic leverage ratio (total liabilities adjusted for net TBA positions, divided by total stockholders' equity) up from approximately 6.5 to 1 on March 31, 2023, to approximately 8.1 to 1 on June 30, 2023. We are comfortable doing so because we still believe return prospects on Agency RMBS are skewed to the upside at current rate and spread levels. 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. In late May, when Agency RMBS spreads were at the widest spreads we have observed since the 2008 financial crisis, we moved most of our TBA hedges to rate hedges.

"As the third quarter unfolds, markets and the Fed are closely focused on incoming economic data as it pertains to inflation and the labor markets. Market performance – for all asset classes – will likely be dominated by these developments and their implications for monetary policy going forward. The Federal Deposit Insurance Corporation ('FDIC') liquidation sales of Agency RMBS seized from failed banks that began in April have gone well and are nearing an end, far sooner than originally anticipated. We anticipate current interest rate levels and curve shape – while challenging for levered Agency RMBS investors – are at or near the extremes we will experience for the cycle. As such, we do not anticipate changes to our strategy other than possibly adding current income securities hedged with interest rate swaps to increase our net interest income, assuming we can add additional capital at attractive levels. We would not consider these positions long-term holds."

Details of Second Quarter 2023 Results of Operations

The Company reported net income of $10.2 million for the three month period ended June 30, 2023, compared with a net loss of $60.1 million for the three month period ended June 30, 2022. The Company increased its Agency RMBS portfolio over the course of the second quarter of 2023, from $4.0 billion at March 31, 2023 to $4.4 billion at June 30, 2023. Interest income on the portfolio in the second quarter was up approximately $1.9 million from the first quarter of 2023. The yield on our average Agency RMBS decreased from 4.03% in the first quarter of 2023 to 3.81% for the second quarter of 2023, repurchase agreement borrowing costs increased from 4.72% for the first quarter of 2023 to 4.88% for the second quarter of 2023, and our net interest spread decreased from (0.69)% in the first quarter of 2023 to (1.07)% in the second quarter of 2023.

Book value decreased by $0.39 per share in the first quarter of 2023. The decrease in book value reflects our net income of $0.25 per share and the dividend distribution of $0.48 per share. The Company recorded net realized and unrealized gains of $0.59 per share on Agency RMBS assets and derivative instruments, including net interest income on interest rate swaps.

Prepayments

For the quarter ended June 30, 2023, Orchid received $138.4 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate ("CPR") of approximately 5.3%. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):

Structured

PT RMBS

RMBS

Total

Three Months Ended

Portfolio (%)

Portfolio (%)

Portfolio (%)

June 30, 2023

5.3

7.0

5.3

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 June 30, 2023 and December 31, 2022:

($ in thousands)

Weighted

Percentage

Average

of

Weighted

Maturity

Fair

Entire

Average

in

Longest

Asset Category

Value

Portfolio

Coupon

Months

Maturity

June 30, 2023

Fixed Rate RMBS

$

4,356,203

99.6

%

3.80

%

337

1-Jun-53

Interest-Only Securities

17,448

0.4

%

4.01

%

228

25-Jul-48

Inverse Interest-Only Securities

321

0.0

%

0.00

%

280

15-Jun-42

Total Mortgage Assets

$

4,373,972

100.0

%

3.78

%

334

1-Jun-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)

June 30, 2023

December 31, 2022

Fair Value

Percentage of Entire Portfolio

Fair Value

Percentage of Entire Portfolio

Agency

Fannie Mae

$

2,897,583

66.2

%

$

2,320,960

65.6

%

Freddie Mac

1,476,389

33.8

%

1,219,042

34.4

%

Total Portfolio

$

4,373,972

100.0

%

$

3,540,002

100.0

%

June 30, 2023

December 31, 2022

Weighted Average Pass-through Purchase Price

$

105.06

$

106.41

Weighted Average Structured Purchase Price

$

18.74

$

18.74

Weighted Average Pass-through Current Price

$

92.75

$

91.46

Weighted Average Structured Current Price

$

13.25

$

14.05

Effective Duration (1)

5.220

5.580

(1)

Effective duration of 5.220 indicates that an interest rate increase of 1.0% would be expected to cause a 5.220% decrease in the value of the RMBS in the Company’s investment portfolio at June 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 June 30, 2023, the Company had outstanding repurchase obligations of approximately $4,201.7 million with a net weighted average borrowing rate of 5.26%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $4,383.3 million and cash pledged to counterparties of approximately $30.6 million. The Company’s adjusted leverage ratio, defined as the balance of repurchase agreement liabilities divided by stockholders' equity, at June 30, 2023 was 8.6 to 1. At June 30, 2023, the Company’s liquidity was approximately $204.1 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 June 30, 2023.

($ in thousands)

Weighted

Weighted

Total

Average

Average

Outstanding

% of

Borrowing

Amount

Maturity

Counterparty

Balances

Total

Rate

at Risk(1)

in Days

J.P. Morgan Securities LLC

$

337,627

8.0

%

5.32

%

$

18,780

13

ASL Capital Markets Inc.

336,720

8.0

%

5.27

%

18,280

41

Mitsubishi UFJ Securities (USA), Inc.

331,790

7.9

%

5.25

%

16,536

19

Wells Fargo Bank, N.A.

328,470

7.8

%

5.28

%

17,626

15

RBC Capital Markets, LLC

315,578

7.5

%

5.19

%

10,406

15

Citigroup Global Markets, Inc.

308,384

7.3

%

5.24

%

16,692

28

Mirae Asset Securities (USA) Inc.

301,508

7.2

%

5.23

%

15,658

78

Daiwa Capital Markets America, Inc.

241,338

5.7

%

5.22

%

10,317

17

Marex Capital Markets Inc.

229,138

5.5

%

5.29

%

9,966

11

ING Financial Markets LLC

225,570

5.4

%

5.24

%

9,738

27

ABN AMRO Bank N.V.

218,376

5.2

%

5.30

%

6,968

13

Cantor Fitzgerald & Co.

217,196

5.2

%

5.25

%

11,486

17

Merrill Lynch, Pierce, Fenner & Smith Inc.

186,631

4.4

%

5.26

%

6,769

15

StoneX Financial Inc.

174,967

4.2

%

5.25

%

9,218

13

Goldman Sachs & Co. LLC

122,836

2.9

%

5.30

%

6,488

11

South Street Securities, LLC

117,859

2.8

%

5.36

%

5,976

88

Santander Bank, N.A.

113,119

2.7

%

5.20

%

5,037

24

BMO Capital Markets Corp.

74,325

1.8

%

5.25

%

3,901

17

Lucid Cash Fund USG, LLC

11,208

0.3

%

5.30

%

576

20

Lucid Prime Fund, LLC

9,077

0.2

%

5.30

%

480

20

Total / Weighted Average

$

4,201,717

100.0

%

5.26

%

$

200,898

25

(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 June 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 June 30, 2023.

($ in thousands)

June 30, 2023

Average

Weighted

Weighted

Contract

Average

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Rate

Equity(1)

Treasury Note Futures Contracts (Short Positions)(2)

September 2023 5-year T-Note futures (Sep 2023 - Sep 2028 Hedge Period)

$

471,500

3.69

%

4.40

%

$

9,795

September 2023 10-year T-Note futures (Sep 2023 - Sep 2033 Hedge Period)

$

285,000

3.76

%

4.47

%

$

3,793

September 2023 10-year Ultra futures (Sep 2023 - Sep 2033 Hedge Period)

$

244,200

3.71

%

3.77

%

$

2,182

(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 $107.1. The contract values of the short positions were $504.9 million. 10-Year T-Note futures contracts were valued at a price of $112.3. The contract values of the short positions were $320.0 million. 10-Year Ultra futures contracts were valued at a price of $118.4. The contract value of the short position was $289.2 million.

The table below presents information related to the Company’s interest rate swap positions at June 30, 2023.

($ in thousands)

Average

Fixed

Average

Average

Notional

Pay

Receive

Maturity

Amount

Rate

Rate

(Years)

Expiration > 1 to ≤ 5 years

$

500,000

0.84

%

5.53

%

3.2

Expiration > 5 years

$

1,651,500

2.53

%

5.14

%

6.9

$

2,151,500

2.13

%

5.23

%

6.1

The following table presents information related to our interest rate swaption positions as of June 30, 2023.

($ in thousands)

Option

Underlying Swap

Weighted Average Months to Expiration

Weighted

Average

Average

Average

Fair

Notional

Fixed

Adjustable

Term

Expiration

Cost

Value

Amount

Rate

Rate

(Years)

Payer Swaptions (long positions)

≤ 1 year

$

36,685

$

5,698

3.6

$

1,250,000

4.09

%

SOFR

10.0

>1 year

10,115

12,259

18.7

1,000,000

3.49

%

SOFR

2.0

$

46,800

$

17,957

10.3

$

2,250,000

3.82

%

6.4

Payer Swaptions (short positions)

≤ 1 year

$

(3,819

)

$

(68

)

0.6

$

(917,000

)

4.09

%

SOFR

10.0

>1 year

$

(8,433

)

$

(10,216

)

18.7

$

(1,000,000

)

3.74

%

SOFR

2.0

$

(12,252

)

$

(10,284

)

10.0

$

(1,917,000

)

3.91

%

5.8

The following table presents information related to our interest cap positions as of June 30, 2023.

($ 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

$

211

The table below presents information related to the Company’s interest rate floor positions at June 30, 2023.

($ in thousands)

Net

Strike

Estimated

Notional

Swap

...

Fair

Amount

Cost

Rate

Terms

Value

June 30, 2023

Long Position

$

1,000,000

$

2,500

0.13

%

2Y_2s30s

$

3,844

Short Position

$

(1,000,000

)

$

(1,358

)

(0.37

)%

2Y_2s30s

$

(2,573

)

The following table summarizes our contracts to sell TBA securities as of June 30, 2023.

($ in thousands)

Notional Amount Long (Short)(1)

Net

Cost

Market

Carrying

Basis(2)

Value(3)

Value(4)

June 30, 2023

15-Year TBA securities:

5.00%

$

100,000

$

99,234

$

99,351

$

117

30-Year TBA securities:

3.00%

(350,000

)

(308,494

)

(308,410

)

84

$

(250,000

)

$

(209,260

)

$

(209,059

)

$

201

(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)

1.120

45,531

Totals

$

65.770

$

573,001

(1)

On July 12, 2023, the Company declared a dividend of $0.16 per share to be paid on August 29, 2023. The effect of this dividend is included in the table above but is not reflected in the Company’s financial statements as of June 30, 2023.

Book Value Per Share

The Company's book value per share at June 30, 2023 was $11.16. 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 June 30, 2023, the Company's stockholders' equity was $490.1 million with 43,896,709 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 June 30, 2023, approximately 95.8% of the Company’s investable capital (which consists of equity in pledged PT RMBS, available cash and unencumbered assets) was deployed in the PT RMBS portfolio. At March 31, 2023, the allocation to the PT RMBS portfolio was approximately 95.3%.

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 Portfolio

Interest-Only Securities

Inverse Interest Only Securities

Sub-total

Total

Market value - March 31, 2023

$

3,980,462

$

18,962

$

482

$

19,444

$

3,999,906

Securities purchased

521,364

-

-

-

521,364

Securities sold

-

-

-

-

-

Losses on sales

-

-

-

-

-

Return of investment

n/a

(647

)

-

(647

)

(647

)

Pay-downs

(76,725

)

n/a

n/a

n/a

(76,725

)

Discount accretion due to pay-downs

4,886

n/a

n/a

n/a

4,886

Mark to market losses

(73,784

)

(867

)

(161

)

(1,028

)

(74,812

)

Market value - June 30, 2023

$

4,356,203

$

17,448

$

321

$

17,769

$

4,373,972

The tables below present the allocation of capital between the respective portfolios at June 30, 2023 and March 31, 2023, and the return on invested capital for each sub-portfolio for the three month period ended June 30, 2023.

($ in thousands)

Capital Allocation

Structured Security Portfolio

Pass-Through Portfolio

Interest-Only Securities

Inverse Interest Only Securities

Sub-total

Total

June 30, 2023

Market value

$

4,356,203

$

17,448

$

321

$

17,769

$

4,373,972

Cash

249,337

-

-

-

249,337

Borrowings(1)

(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

%

March 31, 2023

Market value

$

3,980,462

$

18,962

$

482

$

19,444

$

3,999,906

Cash

185,958

-

-

-

185,958

Borrowings(2)

(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

%

(1)

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.

(2)

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.

The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 3.9% and (3.1)%, respectively, for the second quarter of 2023. The combined portfolio generated a return on invested capital of approximately 3.6%.

($ in thousands)

Returns for the Quarter Ended June 30, 2023

Structured Security Portfolio

Pass-Through Portfolio

Interest-Only Securities

Inverse Interest Only Securities

Sub-total

Total

Income (net of borrowing cost)

$

(9,176

)

$

416

$

-

$

416

$

(8,760

)

Realized and unrealized losses

(68,511

)

(867

)

(161

)

(1,028

)

(69,539

)

Derivative gains

93,367

n/a

n/a

n/a

93,367

Total Return

$

15,680

$

(451

)

$

(161

)

$

(612

)

$

15,068

Beginning Capital Allocation

$

396,983

$

18,962

$

482

$

19,444

$

416,427

Return on Invested Capital for the Quarter(1)

3.9

%

(2.4

)%

(33.4

)%

(3.1

)%

3.6

%

Average Capital Allocation(2)

$

400,403

$

18,205

$

402

$

18,607

$

419,010

Return on Average Invested Capital for the Quarter(3)

3.9

%

(2.5

)%

(40.0

)%

(3.3

)%

3.6

%

(1)

Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage.

(2)

Calculated using two data points, the Beginning and Ending Capital Allocation balances.

(3)

Calculated by dividing the Total Return by the Average Capital Allocation, expressed as a percentage.

Stock Offerings

On October 29, 2021, we entered into an equity distribution agreement (the "October 2021 Equity Distribution Agreement") with four sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $151.8 million, and net proceeds of approximately $149.3 million, after commissions and fees, prior to its termination in March 2023.

On March 7, 2023, we entered into an equity distribution agreement (the "March 2023 Equity Distribution Agreement") with three sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions. Through June 30, 2023, we issued a total of 4,757,953 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $48.1 million, and net proceeds of approximately $47.4 million, after commissions and fees.

Stock Repurchase Program

On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of our common stock. The timing, manner, price and amount of any repurchases is determined by the Company in its discretion and is subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate the Company to acquire any particular amount of common stock and the program may be suspended or discontinued at the Company’s discretion without prior notice. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 904,564 shares of the Company’s common stock. Coupled with the 156,751 shares remaining from the original 400,000 share authorization, the increased authorization brought the total authorization to 1,061,316 shares, representing 10% of the Company’s then outstanding share count. On December 9, 2021, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 3,372,399 shares, bringing the remaining authorization under the stock repurchase program to 3,539,861 shares, representing approximately 10% of the Company’s then outstanding shares of common stock. On October 12, 2022, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 4,300,000 shares, bringing the remaining authorization under the stock repurchase program to 6,183,601 shares, representing approximately 18% of the Company’s then outstanding shares of common stock. This stock repurchase program has no termination date.

From the inception of the stock repurchase program through June 30, 2023, the Company repurchased a total of 4,048,613 shares at an aggregate cost of approximately $68.8 million, including commissions and fees, for a weighted average price of $16.99 per share. During the six months ended June 30, 2023, the Company repurchased a total of 373,041 shares at an aggregate cost of approximately $4.0 million, including commissions and fees, for a weighted average price of $10.62 per share.

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Friday, July 28, 2023, at 10:00 AM ET. The conference call may be accessed by dialing toll free (888) 510-2356. The conference passcode is 8493186. The supplemental materials may be downloaded from the investor relations section of the Company’s website at https://ir.orchidislandcapital.com. A live audio webcast of the conference call can be accessed via the investor relations section of the Company’s website at https://ir.orchidislandcapital.com, and an audio archive of the webcast will be available until August 28, 2023.

About Orchid Island Capital, Inc.

Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS, such as mortgage pass-through certificates, and CMOs issued by the GSEs, and (ii) structured Agency RMBS, such as IOs, IIOs and principal only securities, among other types of structured Agency RMBS. Orchid is managed by Bimini Advisors, LLC, a registered investment adviser with the Securities and Exchange Commission.

Forward Looking Statements

Statements herein relating to matters that are not historical facts, including, but not limited to statements regarding interest rates, inflation, liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio positioning and repositioning, hedging levels, leverage ratio, dividends, growth, return opportunities, the supply and demand for Agency RMBS and the performance of the Agency RMBS sector generally, the effect of actual or expected actions of the U.S. government, including the Fed and the FDIC, market expectations, capital raising, future opportunities and prospects of the Company, the stock repurchase program and general economic conditions, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned that such forward-looking statements are based on information available at the time and on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in Orchid Island Capital, Inc.'s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Orchid Island Capital, Inc. assumes no obligation to update forward-looking statements to reflect subsequent results, changes in assumptions or changes in other factors affecting forward-looking statements.

Summarized Financial Statements

The following is a summarized presentation of the unaudited balance sheets as of June 30, 2023, and December 31, 2022, and the unaudited quarterly statements of operations for the six and three months ended June 30, 2023 and 2022. Amounts presented are subject to change.

ORCHID ISLAND CAPITAL, INC.

BALANCE SHEETS

($ in thousands, except per share data)

(Unaudited - Amounts Subject to Change)

June 30, 2023

December 31, 2022

ASSETS:

Mortgage-backed securities

$

4,373,972

$

3,540,002

U.S. Treasury Notes

37,195

36,382

Cash, cash equivalents and restricted cash

249,337

237,219

Accrued interest receivable

15,266

11,519

Derivative assets, at fair value

52,324

40,172

Other assets

2,836

442

Total Assets

$

4,730,930

$

3,865,736

LIABILITIES AND STOCKHOLDERS' EQUITY

Repurchase agreements

$

4,201,717

$

3,378,445

Dividends payable

7,049

5,908

Derivative liabilities, at fair value

12,875

7,161

Accrued interest payable

11,280

9,209

Due to affiliates

1,241

1,131

Other liabilities

6,683

25,119

Total Liabilities

4,240,845

3,426,973

Total Stockholders' Equity

490,085

438,763

Total Liabilities and Stockholders' Equity

$

4,730,930

$

3,865,736

Common shares outstanding

43,896,709

36,764,983

Book value per share

$

11.16

$

11.93

ORCHID ISLAND CAPITAL, INC.

STATEMENTS OF OPERATIONS

($ in thousands, except per share data)

(Unaudited - Amounts Subject to Change)

Six Months Ended June 30,

Three Months Ended June 30,

2023

2022

2023

2022

Interest income

$

77,923

$

77,125

$

39,911

$

35,268

Interest expense

(90,888

)

(10,835

)

(48,671

)

(8,180

)

Net interest (expense) income

(12,965

)

66,290

(8,760

)

27,088

Gains (losses) on RMBS and derivative contracts

36,567

(266,224

)

23,828

(82,674

)

Net portfolio income (loss)

23,602

(199,934

)

15,068

(55,586

)

Expenses

9,823

8,932

4,819

4,553

Net income (loss)

$

13,779

$

(208,866

)

$

10,249

$

(60,139

)

Basic and diluted net income (loss) per share

$

0.35

$

(5.90

)

$

0.25

$

(1.70

)

Weighted Average Shares Outstanding

39,356,054

35,403,193

40,210,844

35,406,832

Dividends Declared Per Common Share:

$

0.960

$

1.450

$

0.480

$

0.675

Three Months Ended June 30,

Key Balance Sheet Metrics

2023

2022

Average RMBS(1)

$

4,186,939

$

4,260,727

Average repurchase agreements(1)

3,985,577

4,111,544

Average stockholders' equity(1)

470,723

549,390

Adjusted leverage ratio - as of period end(2)

8.6:1

7.4:1

Economic leverage ratio - as of period end(3)

8.1:1

7.8:1

Key Performance Metrics

Average yield on RMBS(4)

3.81

%

3.31

%

Average cost of funds(4)

4.88

%

0.80

%

Average economic cost of funds(5)

2.53

%

0.64

%

Average interest rate spread(6)

(1.07

)%

2.51

%

Average economic interest rate spread(7)

1.28

%

2.67

%

(1)

Average RMBS, borrowings and stockholders’ equity balances are calculated using two data points, the beginning and ending balances.

(2)

The adjusted leverage ratio is calculated by dividing ending repurchase agreement liabilities by ending stockholders’ equity.

(3)

The economic leverage ratio is calculated by dividing ending total liabilities adjusted for net notional TBA positions by ending stockholders' equity.

(4)

Portfolio yields and costs of funds are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the quarterly periods presented.

(5)

Represents the interest cost of our borrowings and the effect of derivative agreements attributed to the period related to hedging activities, divided by average borrowings.

(6)

Average interest rate spread is calculated by subtracting average cost of funds from average yield on RMBS.

(7)

Average economic interest rate spread is calculated by subtracting average economic cost of funds from average yield on RMBS.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727683209/en/

Contacts

Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com

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