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Orchid Island Capital Inc (ORC) Reports Q3 2023 Loss of $80.1 Million

  • Orchid Island Capital Inc (NYSE:ORC) reported a net loss of $80.1 million for Q3 2023, a slight improvement from the net loss of $84.5 million in Q3 2022.

  • The company's Agency RMBS portfolio increased from $4.4 billion at the end of Q2 2023 to $4.5 billion at the end of Q3 2023.

  • Interest income on the portfolio in Q3 2023 was up approximately $10.2 million from Q2 2023.

  • Book value decreased by $2.24 per share in Q3 2023, reflecting the net loss of $1.68 per share and the dividend distribution of $0.48 per share.


Orchid Island Capital Inc (NYSE:ORC), a real estate investment trust (REIT), announced its Q3 2023 results on October 26, 2023. The company reported a net loss of $80.1 million for the quarter ending September 30, 2023, compared to a net loss of $84.5 million for the same period in 2022.

Financial Performance and Challenges


Despite the net loss, the company's Agency RMBS portfolio increased from $4.4 billion at the end of Q2 2023 to $4.5 billion at the end of Q3 2023. Interest income on the portfolio in Q3 2023 was up approximately $10.2 million from Q2 2023. However, the company's book value decreased by $2.24 per share in Q3 2023, reflecting the net loss of $1.68 per share and the dividend distribution of $0.48 per share.

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," said Robert E. Cauley, Chairman and Chief Executive Officer.

Market Volatility and Interest Rates


The company faced significant challenges due to rising interest rates and market volatility. The credit rating of the U.S. was downgraded by Fitch, and Moody's has indicated it may do the same. The rates market shifted dramatically during the quarter, causing rates to increase dramatically. This, 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.

Capital Allocation and Return on Invested Capital


As of September 30, 2023, approximately 95.1% of the Companys investable capital was deployed in the PT RMBS portfolio. At June 30, 2023, the allocation to the PT RMBS portfolio was approximately 95.8%. 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 (17.9)%.

Looking Ahead


Despite the challenges, the company remains optimistic about its future prospects. "Going forward, there remains considerable uncertainty as to what lies beyond the current Fed tightening cycle. 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," Cauley added.

Explore the complete 8-K earnings release (here) from Orchid Island Capital Inc for further details.

This article first appeared on GuruFocus.

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