UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction of
Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
,
,
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code
(
)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol:
Name of each exchange on which registered:
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
ITEM 2.02. Results of Operations and Financial Condition.
On April 28, 2022, Orchid Island Capital, Inc. (the “Company”) issued the press release attached hereto as Exhibit 99.1
announcing the Company’s results of operations for the period ended March 31, 2022. In addition, the Company posted
supplemental financial information on the investor relations section of its website (https://ir.orchidislandcapital.com). The
press release, attached as Exhibit 99.1, is being furnished under this “Item 2.02 Results of Operations and Financial
Condition,” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be
deemed incorporated by reference in any disclosure document of the Company, except as shall be expressly set forth by
specific reference in such document.
Caution About Forward-Looking Statements.
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and other federal securities laws, including, but not limited to, statements regarding interest rates, liquidity,
pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio positioning and repositioning,
hedging levels, dividends, growth, the supply and demand for Agency RMBS, the effect of actual or expected actions of foreign
governments or of the U.S. government, including the Federal Reserve, market expectations, future opportunities and prospects
of the Company, the stock repurchase program and general economic conditions . These forward-looking statements are based
upon the Company’s present expectations, but the Company cannot assure investors that actual results will not vary from the
expectations contained in the forward-looking statements. Investors should not place undue reliance upon forward-looking
statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which has been filed with the Securities
and Exchange Commission (the “SEC”), and other documents that the Company files with the SEC. All forward-looking
statements speak only as of the date on which they are made. New risks and uncertainties arise over time, and it is not possible
to predict those events or how they may affect the Company. Except as required by law, the Company is not obligated to, and
does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
Description
99.1
104
Cover Page Interactive Data File (embedded within the Inline XBRL
document)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: April 28, 2022
By:
/s/ Robert E. Cauley
Robert E. Cauley
Chairman and Chief Executive Officer
ORCHID ISLAND CAPITAL ANNOUNCES FIRST QUARTER 2022 RESULTS
VERO BEACH, Fla. (April 28, 2022) – Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid” or the "Company"), a real estate investment
trust ("REIT"), today announced results of operations for the three month period ended March 31, 2022.
First Quarter 2022 Highlights
●
Net loss of $148.7 million, or $0.84 per common share, which consists of:
●
Net interest income of $39.2 million, or $0.22 per common share
●
Total expenses of $4.7 million, or $0.03 per common share
●
Net realized and unrealized losses of $183.2 million, or $1.04 per common share, on RMBS and derivative instruments,
including net interest expense on interest rate swaps
●
First quarter total dividends declared and paid of $0.155 per common share
●
Book value per common share of $3.34 at March 31, 2022
●
Total return of (19.5)%, comprised of $0.155 dividend per common share and $1.00 decrease in book value per common
share, divided by beginning book value per common share
●
Company to discuss results on Friday, April 29, 2022, 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 first quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The first quarter of 2022
was a period of rapid transition on the part of Federal Reserve (the “Fed”) policy makers. As 2021 came to a close, the Fed was
preparing to slowly remove the emergency monetary policy in place since the onset of the COVID-19 pandemic in early 2020 but
concluded in the first quarter of 2022 that the accommodative policy needed to be removed very quickly. This process has continued
into the second quarter of 2022 as well. Fed speakers uniformly cite the need to get the policy rate (the “Fed Funds” rate) to neutral by
the end of 2022. The neutral rate is generally considered to be approximately 2.50% to 2.75%. This means the Fed has to increase
the Fed Funds rate by 225-250 basis points in the next 8 months. Interest rates across the yield curve have increased by over 150
basis points on the front of the curve, and by over 80 basis points in the case of the 10-year U.S. treasury note during the first quarter
of 2022. The shape of the curve has flattened materially, and we have already seen the spread between the 2-year and 10-year, as
well as the spread between the 5-year and 30-year, points go negative for brief periods. Inflation, which has been accelerating since
the second quarter of 2021, has accelerated even further. The war in Ukraine caught the world by surprise, and western countries
reacted by imposing numerous sanctions as well as boycotts of various Russian goods. Coupled with the disruption in activity in
Ukraine itself, which is one of the world’s leading suppliers of food and many other commodities, the war has proven to be a substantial
source of inflationary pressure. COVID-19 induced lock-downs across China have exacerbated supply chain issues that were
pervasive already. As inflation has accelerated to levels not seen since the early 1980s – both in the U.S. and across the globe –
growth has remained very strong, especially so in the U.S. The Fed is clearly signaling a rapid removal of accommodation, which may
even involve outright sales from its SOMA portfolio.
“The impact of these developments on the Agency RMBS market was profound and rapid. Levered RMBS investors such as Orchid
that invest solely in the Agency RMBS market have limited options to avoid these headwinds. However, we took advantage of every
option we had to minimize the impact and are well positioned to take advantage of the opportunities in the Agency RMBS market that
will exist when the market stabilizes. We repositioned our hedge positions, and we have reduced the size of the portfolio through
ORC Announces First Quarter 2022 Results
Page 2
April 28, 2022
outright asset sales and retaining cash received from our monthly paydowns. Our leverage ratio declined from 8.1 to one at the end of
2021 to 7.5 to one at the end of the first quarter of 2022, and is even lower today. We have increased the allocation to the structured
securities, interest only portfolio. We have maintained ample liquidity at all times and retained cash balances equal to approximately
50% of our shareholders equity throughout. We took the painful step of reducing our dividend in response to the compression of the
gap between our funding costs and asset yields. This step was unavoidable, but we look forward to the return of a more generous
funding gap in the future. In the interim, we will continue to seek to preserve our liquidity and minimize the impact of the volatile market
on our portfolio so that we are able to take advantage of more favorable market conditions when they arise. Periods such as this are
always difficult, but we know from navigating through many such episodes in the past that the key is to preserve Orchid’s liquidity
above all else to ensure the Company is able to take advantage of the favorable market conditions that will exist when it ends. Once
again, we intend to do just that.”
Details of First Quarter 2022 Results of Operations
The Company reported net loss of $148.7 million for the three month period ended March 31, 2022, compared with net loss of
$29.4 million for the three month period ended March 31, 2021. The Company decreased its Agency RMBS portfolio over the course of
the first quarter of 2022. Interest income on the portfolio in the first quarter was down approximately $2.6 million from the fourth quarter
of 2021. The yield on our average MBS increased from 2.93% in the fourth quarter of 2021 to 3.02% for the first quarter of 2022,
repurchase agreement borrowing costs increased from 0.14% for the fourth quarter of 2021 to 0.20% for the first quarter of 2022, and
our net interest spread increased from 2.79% in the fourth quarter of 2021 to 2.82% in the first quarter of 2022.
Book value decreased by $1.00 per share in the first quarter of 2022. The decrease in book value reflects our net loss of $0.84 per
share and the dividend distribution of $0.155 per share. The Company recorded net realized and unrealized losses of $1.04 per share
on Agency RMBS assets and derivative instruments, including net interest expense on interest rate swaps.
Prepayments
For the quarter ended March 31, 2022, Orchid received $157.1 million in scheduled and unscheduled principal repayments and
prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 10.7%. Prepayment rates on the two
RMBS sub-portfolios were as follows (in CPR):
Structured
PT RMBS
RMBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
March 31, 2022
8.1
19.5
10.7
December 31, 2021
9.0
24.6
11.4
September 30, 2021
9.8
25.1
12.4
June 30, 2021
10.9
29.9
12.9
March 31, 2021
9.9
40.3
12.0
ORC Announces First Quarter 2022 Results
Page 3
April 28, 2022
Portfolio
The following tables summarize certain characteristics of Orchid’s PT RMBS (as defined below) and structured RMBS as of March
31, 2022 and December 31, 2021:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
March 31, 2022
Fixed Rate RMBS
$
4,372,517
95.5%
3.01%
336
1-Dec-51
Interest-Only Securities
206,617
4.5%
3.42%
257
25-Jan-52
Inverse Interest-Only Securities
1,460
0.0%
3.75%
297
15-Jun-42
Total Mortgage Assets
$
4,580,594
100.0%
3.11%
318
25-Jan-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)
March 31, 2022
December 31, 2021
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
3,016,954
65.9%
$
4,719,349
72.5%
Freddie Mac
1,563,640
34.1%
1,791,746
27.5%
Total Portfolio
$
4,580,594
100.0%
$
6,511,095
100.0%
March 31, 2022
December 31, 2021
Weighted Average Pass-through Purchase Price
$
107.82
$
107.19
Weighted Average Structured Purchase Price
$
15.25
$
15.21
Weighted Average Pass-through Current Price
$
98.85
$
105.31
Weighted Average Structured Current Price
$
15.61
$
14.08
Effective Duration
(1)
4.890
3.390
(1)
Effective duration of 4.890 indicates that an interest rate increase of 1.0% would be expected to cause a 4.890% decrease in the value of the
RMBS in the Company’s investment portfolio at March 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.
ORC Announces First Quarter 2022 Results
Page 4
April 28, 2022
Financing, Leverage and Liquidity
As of March 31, 2022, the Company had outstanding repurchase obligations of approximately $4,464.1 million with a net weighted
average borrowing rate of 0.37%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of
approximately $4,591.7 million and cash pledged to counterparties of approximately $113.6 million. The Company’s leverage ratio at
March 31, 2022 was 7.8 to 1. At March 31, 2022, the Company’s liquidity was approximately $301.0 million, consisting of
cash and cash
equivalents and unpledged RMBS (not including unsettled securities purchases). To enhance our liquidity even further, we may pledge
more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this
way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed
market in order to raise cash. Below is a list of our outstanding borrowings under repurchase obligations at March 31, 2022.
($ 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
$
390,917
8.6%
0.35%
$
21,978
12
Merrill Lynch, Pierce, Fenner & Smith Inc.
376,951
8.4%
0.29%
17,755
15
ABN AMRO Bank N.V.
357,326
8.0%
0.33%
10,722
12
Mitsubishi UFJ Securities (USA), Inc.
326,430
7.3%
0.50%
28,594
35
Cantor Fitzgerald & Co.
315,791
7.1%
0.38%
17,003
27
ED&F Man Capital Markets Inc.
282,992
6.3%
0.27%
15,059
17
Mirae Asset Securities (USA) Inc.
263,899
5.9%
0.32%
11,986
58
RBC Capital Markets, LLC
247,015
5.5%
0.37%
7,996
17
Goldman Sachs & Co. LLC
238,179
5.3%
0.44%
20,101
24
ING Financial Markets LLC
221,203
5.0%
0.40%
9,495
35
ASL Capital Markets Inc.
199,024
4.5%
0.38%
10,575
18
Santander Bank, N.A.
189,837
4.3%
0.38%
10,178
21
Citigroup Global Markets, Inc.
182,158
4.1%
0.39%
9,828
20
Nomura Securities International, Inc.
176,167
3.9%
0.38%
6,845
17
Daiwa Capital Markets America, Inc.
173,083
3.9%
0.39%
7,437
18
Wells Fargo Bank, N.A.
132,026
3.0%
0.35%
7,124
14
BMO Capital Markets Corp.
124,021
2.8%
0.42%
8,196
18
Austin Atlantic Asset Management Co.
87,245
2.0%
0.39%
4,605
6
Lucid Cash Fund USG LLC
82,630
1.9%
0.42%
7,969
14
South Street Securities, LLC
65,571
1.5%
0.37%
3,652
18
StoneX Financial Inc.
27,648
0.6%
0.19%
1,674
19
Mizuho Securities USA, Inc.
3,996
0.1%
0.90%
1,352
12
Total / Weighted Average
$
4,464,109
100.0%
0.37%
$
240,124
22
(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).
ORC Announces First Quarter 2022 Results
Page 5
April 28, 2022
Hedging
In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its
repurchase agreement funding against a rise in interest rates by entering into derivative financial instrument contracts. The Company has
not elected hedging treatment under U.S. generally accepted accounting principles (“GAAP”) in order to align the accounting treatment of
its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these
instruments are reflected in earnings for all periods presented. At March 31, 2022, such instruments were comprised of Treasury note (“T-
Note”) futures contracts, interest rate swap agreements, and interest rate swaption agreements.
The table below presents information related to the Company’s T-Note futures contracts at March 31, 2022.
($ in thousands)
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity
(1)
Treasury Note Futures Contracts (Short Positions)
(2)
June 2022 5-year T-Note futures
(Jun 2022 - Jun 2027 Hedge Period)
$
1,194,000
2.25%
2.83%
32,928
June 2022 10-year Ultra futures
(Jun 2022 - Jun 2032 Hedge Period)
$
270,000
1.68%
2.06%
$
10,983
(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 $114.69 at March 31, 2022. The contract values of the short positions were $1,369.4
million at March 31, 2022. 10-Year Ultra futures contracts were valued at a price of $135.47 at March 31, 2022. The contract value of the short
position was $365.8 million at March 31, 2022.
The table below presents information related to the Company’s interest rate swap positions at March 31, 2022.
($ in thousands)
Average
Net
Fixed
Average
Estimated
Average
Notional
Pay
Receive
Fair
Maturity
Expiration
Amount
Rate
Rate
Value
(Years)
> 3 to ≤ 5 years
$
300,000
0.95%
0.93%
18,138
4.0
> 5 years
1,100,000
1.51%
0.37%
47,056
7.0
$
1,400,000
1.39%
0.49%
$
65,194
6.3
ORC Announces First Quarter 2022 Results
Page 6
April 28, 2022
The following table presents information related to our interest rate swaption positions as of March 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
≤ 1 year
$
31,905
$
33,040
11.3
$
1,282,400
2.44%
3 Month
11.3
>1 year ≤ 2 years
15,300
27,322
18.8
728,400
2.52%
3 Month
10.0
$
47,205
$
60,362
14.0
$
2,010,800
2.47%
3 Month
10.8
Payer Swaptions - short
≤ 1 year
$
(19,540)
$
(25,535)
5.8
$
(1,433,000)
2.47%
3 Month
10.8
The following table presents information related to our interest cap positions as of March 31, 2022.
($ in thousands)
Net
Strike
Estimated
Notional
Swap
Curve
Fair
Expiration
Amount
Cost
Rate
Spread
Value
February 8, 2024
$
200,000
$
2,350
0.09%
10Y2Y
$
1,354
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
$
1.395
$
4,662
2014
2.160
22,643
2015
1.920
38,748
2016
1.680
41,388
2017
1.680
70,717
2018
1.070
55,814
2019
0.960
54,421
2020
0.790
53,570
2021
0.780
97,601
2022 - YTD
(1)
0.200
35,484
Totals
$
12.635
$
475,048
(1)
On April 13, 2022, the Company declared a dividend of $0.045 per share to be paid on May 27, 2022. The effect of this dividend is included in
the table above but is not reflected in the Company’s financial statements as of March 31, 2022.
ORC Announces First Quarter 2022 Results
Page 7
April 28, 2022
Peer Performance
The tables below present total return data for Orchid compared to a selected group of peers based on stock price performance for
periods through March 31, 2022 and based on book value performance for periods through December 31, 2021.
Portfolio Total Rate of Return Versus Peer Group Average - Stock Price Performance
ORC Spread
ORC
Over / (Under)
Total Rate
Peer
Peer
of Return
(1)
Average
(1)(2)
Average
(3)
Year to Date (1/1/2022 - 3/31/2022)
(24.6)%
(7.1)%
(17.5)%
One Year Total Return
(36.6)%
(15.9)%
(20.7)%
Two Year Total Return
49.5%
64.6%
(15.1)%
Three Year Total Return
(20.3)%
(19.6)%
(0.7)%
Five Year Total Return
(28.6)%
(11.2)%
(17.4)%
Inception to Date (2/28/2013 - 3/31/2022)
(4)
(6.1)%
1.7%
(7.8)%
Source: SEC filings and press releases of Orchid and Peer Group
(1)
Source of total rate of return for each period is the Bloomberg COMP page and includes reinvested dividends for each period noted.
(2)
The peer average is the unweighted, simple, average of the total rate of return for each of the following companies in each respective
measurement period: AGNC, NLY, ANH, AAIC, ARR, CMO, CHMI, DX and IVR.
(3)
Represents the total rate of return for Orchid minus peer average in each respective measurement period.
(4)
Orchid completed its Initial Public Offering on February 13, 2013. We have elected to start the comparison with Orchid’s first full month of
operations.
Portfolio Total Rate of Return Versus Peer Group Average - Book Value Performance
ORC Spread
ORC
Over / (Under)
Total Rate
Peer
Peer
of Return
(1)
Average
(1)(2)
Average
(3)
One Year Total Return
(6.4)%
(4.8)%
(1.6)%
Two Year Total Return
(5.2)%
(17.0)%
11.8%
Three Year Total Return
0.5%
(9.6)%
10.1%
Five Year Total Return
(6.6)%
(5.4)%
(1.2)%
Inception to Date (3/31/2013 - 12/31/2021)
(4)
10.5%
(4.0)%
14.5%
Source: SEC filings and press releases of Orchid and Peer Group
(1)
Total rate of return for each period is change in book value per share over the period plus dividends per share declared divided by the book
value per share at the beginning of the period.
(2)
The peer average is the unweighted, simple, average of the total rate of return for each of the following companies in each respective
measurement period: AGNC, NLY, ANH, AAIC, ARR, CMO, CHMI, DX and IVR.
(3)
Represents the total rate of return for Orchid minus peer average in each respective measurement period.
(4)
Peer book values are not available for Orchid’s true inception date (2/13/2013). Because all peer book values are not available as of Orchid’s
inception date (2/13/2013), the starting point for Orchid and all of the peer companies is 3/31/2013.
Book Value Per Share
The Company's book value per share at March 31, 2022 was $3.34. The Company computes book value per share by dividing
total stockholders' equity by the total number of shares outstanding of the Company's common stock. At March 31, 2022, the Company's
stockholders' equity was $592.4 million with 177,117,186 shares of common stock outstanding.
ORC Announces First Quarter 2022 Results
Page 8
April 28, 2022
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 December 31, 2021, approximately 70% 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, 2022, the allocation to the PT
RMBS portfolio decreased by 8% to approximately 62%.
The table below details the changes to the respective sub-portfolios during the quarter.
(in thousands)
Portfolio Activity for the Quarter
Structured Security Portfolio
Pass-Through
Interest-Only
Inverse Interest
Portfolio
Securities
Only Securities
Sub-total
Total
Market value - December 31, 2021
$
6,298,189
$
210,382
$
2,524
$
212,906
$
6,511,095
Securities sold
(1,401,012)
(12,029)
-
(12,029)
(1,413,041)
(Losses) Gains on sales
(51,795)
709
-
709
(51,086)
Return of investment
n/a
(10,205)
(251)
(10,456)
(10,456)
Pay-downs
(146,653)
n/a
-
n/a
(146,653)
Premium lost due to pay-downs
(8,431)
n/a
-
n/a
(8,431)
Mark to market (losses) gains
(317,781)
17,760
(813)
16,947
(300,834)
Market value - March 31, 2022
$
4,372,517
$
206,617
$
1,460
$
208,077
$
4,580,594
The tables below present the allocation of capital between the respective portfolios at March 31, 2022 and December 31, 2021,
and the return on invested capital for each sub-portfolio for the three month period ended March 31, 2022. The return on invested
capital in the PT RMBS and structured RMBS portfolios was approximately (32.4)% and 9.1%, respectively, for the first quarter of 2022.
The combined portfolio generated a return on invested capital of approximately (20.1)%.
($ in thousands)
Capital Allocation
Structured Security Portfolio
Pass-Through
Interest-Only
Inverse Interest
Portfolio
Securities
Only Securities
Sub-total
Total
March 31, 2022
Market value
$
4,372,517
$
206,617
$
1,460
$
208,077
$
4,580,594
Cash
427,445
-
-
-
427,445
Borrowings
(1)
(4,464,109)
-
-
-
(4,464,109)
Total
$
335,853
$
206,617
$
1,460
$
208,077
$
543,930
% of Total
61.7%
38.0%
0.3%
38.3%
100.0%
December 31, 2021
Market value
$
6,298,189
$
210,382
$
2,524
$
212,906
$
6,511,095
Cash
450,442
-
-
-
450,442
Borrowings
(2)
(6,244,106)
-
-
-
(6,244,106)
Total
$
504,525
$
210,382
$
2,524
$
212,906
$
717,431
% of Total
70.3%
29.3%
0.4%
29.7%
100.0%
ORC Announces First Quarter 2022 Results
Page 9
April 28, 2022
(1)
At March 31, 2022, there were outstanding repurchase agreement balances of $157.1 million secured by IO securities and $1.4 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 December 31, 2021, there were outstanding repurchase agreement balances of $159.0 million secured by IO securities
and $2.0 million
secured by IIO securities. We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS;
therefore, we have not considered these balances to be allocated to the structured securities strategy.
($ in thousands)
Returns for the Quarter Ended March 31, 2022
Structured Security Portfolio
Pass-Through
Interest-Only
Inverse Interest
Portfolio
Securities
Only Securities
Sub-total
Total
Income (net of borrowing cost)
$
37,411
$
1,654
$
137
$
1,791
$
39,202
Realized and unrealized (losses) / gains
(378,704)
18,469
(813)
17,656
(361,048)
Derivative gains
177,816
n/a
n/a
n/a
177,816
Total Return
$
(163,477)
$
20,123
$
(676)
$
19,447
$
(144,030)
Beginning Capital Allocation
$
504,525
$
210,382
$
2,524
$
212,906
$
717,431
Return on Invested Capital for the Quarter
(1)
(32.4)%
9.6%
(26.8)%
9.1%
(20.1)%
Average Capital Allocation
(2)
$
420,189
$
208,500
$
1,992
$
210,492
$
630,681
Return on Average Invested Capital for the Quarter
(3)
(38.9)%
9.7%
(33.9)%
9.2%
(22.8)%
(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. Through March
31, 2022, we issued a total of 15,835,700 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds
of approximately $78.3 million, and net proceeds of approximately $77.0 million, after commissions and fees. We did not issue any
shares under the October 2021 Equity Distribution Agreement during the three months ended March 31, 2022.
Stock Repurchase Program
On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 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 4,522,822 shares of the Company’s common stock. Coupled with the 783,757 shares remaining from the original 2,000,000
share authorization, the increased authorization brought the total authorization to 5,306,579 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 16,861,994 shares, bringing the
remaining authorization under the stock repurchase program to 17,699,305 shares, representing approximately 10% of the Company’s
then outstanding shares of common stock. This stock repurchase program has no termination date.
ORC Announces First Quarter 2022 Results
Page 10
April 28, 2022
From the inception of the stock repurchase program through March 31, 2022, the Company repurchased a total of 5,685,511
shares at an aggregate cost of approximately $40.4 million, including commissions and fees, for a weighted average price of $7.10 per
share. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2022 or the year
ended December 31, 2021.
Earnings Conference Call Details
An earnings conference call and live audio webcast will be hosted Friday, April 29, 2022, at 10:00 AM ET. The conference call
may be accessed by dialing toll free (888) 510-2536. 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 May 29, 2022.
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,
liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio positioning and repositioning,
hedging levels, dividends, growth, the supply and demand for Agency RMBS, the effect of actual or expected actions of foreign
governments or of the U.S. government, including the Federal Reserve, market expectations, 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.
CONTACT:
Orchid Island Capital, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
https://ir.orchidislandcapital.com
ORC Announces First Quarter 2022 Results
Page 11
April 28, 2022
Summarized Financial Statements
The following is a summarized presentation of the unaudited balance sheets as of March 31, 2022, and December 31, 2021, and the
unaudited quarterly statements of operations for the three months ended March 31, 2022 and 2021. Amounts presented are subject to
change.
ORCHID ISLAND CAPITAL, INC.
BALANCE SHEETS
($ in thousands, except per share data)
(Unaudited - Amounts Subject to Change)
March 31, 2022
December 31, 2021
ASSETS:
Mortgage-backed securities
$
4,580,594
$
6,511,095
U.S. Treasury Notes
36,477
37,175
Cash, cash equivalents and restricted cash
427,445
450,442
Accrued interest receivable
14,853
18,859
Derivative assets, at fair value
126,910
50,786
Other assets
1,153
320
Total Assets
$
5,187,432
$
7,068,677
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase agreements
$
4,464,109
$
6,244,106
Dividends payable
7,996
11,530
Derivative liabilities, at fair value
25,535
7,589
Accrued interest payable
1,018
788
Due to affiliates
1,066
1,062
Other liabilities
95,290
35,505
Total Liabilities
4,595,014
6,300,580
Total Stockholders' Equity
592,418
768,097
Total Liabilities and Stockholders' Equity
$
5,187,432
$
7,068,677
Common shares outstanding
177,117,186
176,993,049
Book value per share
$
3.34
$
4.34
ORC Announces First Quarter 2022 Results
Page 12
April 28, 2022
ORCHID ISLAND CAPITAL, INC.
STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(Unaudited - Amounts Subject to Change)
Three Months Ended March 31,
2022
2021
Interest income
$
41,857
$
26,856
Interest expense
(2,655)
(1,941)
Net interest income
39,202
24,915
Losses on RMBS and derivative contracts
(183,232)
(50,791)
Net portfolio loss
(144,030)
(25,876)
Expenses
4,697
3,493
Net loss
$
(148,727)
$
(29,369)
Basic net loss per share
$
(0.84)
$
(0.34)
Diluted net loss per share
$
(0.84)
$
(0.34)
Weighted Average Shares Outstanding
176,997,566
85,344,954
Dividends Declared Per Common Share:
$
0.155
$
0.195
Three Months Ended March 31,
Key Balance Sheet Metrics
2022
2021
Average RMBS
(1)
$
5,545,844
$
4,032,716
Average repurchase agreements
(1)
5,354,107
3,888,633
Average stockholders' equity
(1)
680,258
440,733
Leverage ratio
(2)
7.8:1
9.1:1
Key Performance Metrics
Average yield on RMBS
(3)
3.02%
2.66%
Average cost of funds
(3)
0.20%
0.20%
Average economic cost of funds
(4)
0.29%
0.62%
Average interest rate spread
(5)
2.82%
2.46%
Average economic interest rate spread
(6)
2.73%
2.04%
(1)
Average RMBS, borrowings and stockholders’ equity balances are calculated using two data points, the beginning and ending balances.
(2)
The leverage ratio is calculated by dividing total ending liabilities by ending stockholders’ equity.
(3)
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.
(4)
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.
(5)
Average interest rate spread is calculated by subtracting average cost of funds from average yield on RMBS.
(6)
Average economic interest rate spread is calculated by subtracting average economic cost of funds from average yield on RMBS.