orc8k20150710.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 10, 2015

Orchid Island Capital, Inc.
(Exact Name of Registrant as Specified in Charter)

Maryland
001-35236
27-3269228
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)

3305 Flamingo Drive, Vero Beach, Florida 32963
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code (772) 231-1400

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:

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
 

 


 
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 10, 2015, Orchid Island Capital, Inc. (the “Company”) announced its preliminary book value of $12.38 per share as of June 30, 2015 and certain details of its MBS portfolio as of June 30, 2015. These figures and the estimated book value per share are preliminary, subject to change, and subject to review by the Company's independent registered public accounting firm. A copy of the Company’s press release announcing the dividend and the other information regarding the Company is attached hereto as Exhibit 99.1 and incorporated herein by this reference.


ITEM 8.01.  OTHER EVENTS.

On July 10, 2015, Orchid Island Capital, Inc. (the “Company”) announced that on July 9, 2015 the Board of Directors of the Company declared a dividend for the month of July 2015 of $0.14 per share to be paid on July 31, 2015 to holders of record on July 27, 2015 with an ex-dividend date of July 23, 2015.  A copy of the Company’s press release announcing the dividend and the other information regarding the Company is attached hereto as Exhibit 99.1 and incorporated herein by this reference.

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. These forward looking statements are based upon the Company’s present expectations, but the Company cannot assure you 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 Form 10-K for the year ended December 31, 2014.  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
 
Press Release dated July 10, 2015



 
 

 


 

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: July 10, 2015
        ORCHID ISLAND CAPITAL, INC.
 
     
     
 
By:
/s/ Robert E. Cauley
 
   
Robert E. Cauley
 
   
Chairman and Chief Executive Officer
 




 
 

 


 
INDEX TO EXHIBITS

Exhibit No.
 
Description
99.1
 
Press Release dated July 10, 2015


orc8k20150710x991.htm
ORCHID ISLAND CAPITAL ANNOUNCES
JULY 2015 MONTHLY DIVIDEND AND
JUNE 30, 2015 RMBS PORTFOLIO CHARACTERISTICS

·  
July 2015 Monthly Dividend of $0.14 Per Share
·  
Estimated Book Value Per Share at June 30, 2015 of $12.38
·  
Estimated 0.4% total return on equity for the quarter, or 1.6% annualized
·  
RMBS Portfolio Characteristics as of June 30, 2015

Vero Beach, Fla., July 10, 2015 - Orchid Island Capital, Inc. (the “Company”) (NYSE:ORC) announced today that the Board of Directors declared a monthly cash dividend for the month of July 2015. The dividend of $0.14 per share will be paid July 31, 2015, to holders of record on July 27, 2015, with an ex-dividend date of July 23, 2015.

Commenting on the dividend adjustment, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The Company today announced a reduction in its monthly dividend rate from $0.18 to $0.14 per share.  The reduction was the result of elevated prepayment speeds which persisted longer than we anticipated.  The Company’s portfolio is weighted towards premium coupon pass-through, interest only and inverse interest only RMBS, which are highly sensitive to prepayment rates. The $0.14 monthly dividend brings our pay-out rate more closely in line with the premium amortization that we are currently experiencing in the portfolio.”
 
The Company intends to make regular monthly cash distributions to its stockholders. In order to qualify as a real estate investment trust (“REIT”), the Company must distribute annually to its stockholders an amount at least equal to 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain. The Company will be subject to income tax on taxable income that is not distributed and to an excise tax to the extent that certain percentages of its taxable income is not distributed by specified dates. The Company has not established a minimum distribution payment level and is not assured of its ability to make distributions to stockholders in the future.

As of July 10, 2015, the Company had 22,959,817 shares outstanding. At March 31, 2015, the Company had 17,924,383 shares outstanding.

Estimated June 30, 2015 Book Value Per Share

The Company’s estimated book value per share as of June 30, 2015 was $12.38.  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, 2015, the Company's preliminary estimated total stockholders' equity was approximately $284.2 million with 22,959,817 common shares outstanding. These figures and the resulting estimated book value per share are preliminary, subject to change, and subject to review by the Company’s independent registered public accounting firm.

Estimated Return on Equity

The Company’s estimated total return on equity for the quarter ended June 30, 2015 was 0.4%, or 1.6% on an annualized basis. The Company calculates total return on equity as the sum of dividends declared and paid during the quarter plus changes in book value during the quarter, divided by the Company’s stockholders’ equity at the beginning of the quarter.  The total return was $0.05 per share, comprised of dividends per share of $0.54 and a decrease in book value per share of $0.49 from March 31, 2015.


 
 

 


 
RMBS Portfolio Characteristics

Details of the RMBS portfolio as of June 30, 2015 are presented below. These figures are preliminary and subject to change and, with respect to figures that will appear in the Company’s financial statements and associated footnotes as of and for the quarter and six months ended June 30, 2015, are subject to review by the Company’s independent registered public accounting firm.
 
 
·  
RMBS Assets by Agency
·  
Investment Company Act of 1940 Whole Pool Test Results
·  
Repurchase agreement exposure by counterparty
·  
RMBS Risk Measures

About Orchid Island Capital, Inc.

Orchid Island Capital, Inc. is a specialty finance company that invests in Agency RMBS that are either traditional pass-through Agency RMBS or structured Agency RMBS. Orchid Island Capital, Inc. has elected to be taxed as a REIT for federal income tax purposes.

Forward-Looking Statements

This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon Orchid Island Capital, Inc.’s present expectations, but these statements are not guaranteed to occur. 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 Form 10-K for the year ended December 31, 2014.
RMBS Valuation Characteristics
                                   
($ in thousands)
                                   
                     
Percentage
   
Weighted
   
Realized
 
   
Current
   
Fair
   
Current
   
of
   
Average
   
Jun 2015 CPR
 
Asset Category
 
Face
   
Value(1)
   
Price
   
Portfolio
   
Coupon
   
(Reported in Jul)
 
As of June 30, 2015
                                   
Adjustable Rate RMBS
  $ 3,226     $ 3,456       107.15       0.16 %     3.64 %     0.22 %
10-1 Hybrid Rate RMBS
    55,544       56,754       102.18       2.61 %     2.56 %     7.90 %
Hybrid Adjustable Rate RMBS
    55,544       56,754       102.18       2.61 %     2.56 %     7.90 %
15 Year Fixed Rate RMBS
    74,255       78,434       105.63       3.61 %     3.40 %     11.72 %
20 Year Fixed Rate RMBS
    323,601       346,133       106.96       15.92 %     4.00 %     5.50 %
30 Year Fixed Rate RMBS
    1,457,655       1,568,802       107.62       72.12 %     4.24 %     10.62 %
Total Fixed Rate RMBS
    1,855,511       1,993,369       107.43       91.65 %     4.17 %     9.77 %
Total Pass-through RMBS
    1,914,281       2,053,579       107.28       94.42 %     4.12 %     9.70 %
Interest-Only Securities
    577,619       78,347       13.56       3.60 %     3.62 %     17.22 %
Inverse Interest-Only Securities
    205,433       42,945       20.90       1.98 %     6.20 %     19.91 %
Structured RMBS
    783,052       121,292       15.49       5.58 %     4.53 %     17.83 %
Total Mortgage Assets
  $ 2,697,333     $ 2,174,871               100.00 %     4.15 %     11.98 %

 

 
 

 


 
RMBS Assets by Agency
           
Investment Company Act of 1940 (Whole Pool) Test
 
($ in thousands)
           
($ in thousands)
           
         
Percentage
           
Percentage
 
   
Fair
   
of
     
Fair
   
of
 
Asset Category
 
Value(1)
   
Portfolio
 
Asset Category
 
Value(1)
   
Portfolio
 
As of June 30, 2015
           
As of June 30, 2015
           
Fannie Mae
  $ 1,766,724       81.2 %
Whole Pool Assets
  $ 1,731,062       79.6 %
Freddie Mac
    386,981       17.8 %
Non Whole Pool Assets
    443,809       20.4 %
Ginnie Mae
    21,166       1.0 %
Total Mortgage Assets
  $ 2,174,871       100.0 %
Total Mortgage Assets
  $ 2,174,871       100.0 %                  

(1)  
Amounts in the tables above include assets with a fair value of approximately $7.6 million purchased in June 2015 which settle in July 2015.
 
Repurchase Agreement Exposure By Counterparty
                   
($ in thousands)
                   
               
Weighted
   
         
% of
   
Average
   
   
Total
   
Total
   
Maturity
 
Longest
As of June 30, 2015
 
Borrowings(1)
   
Debt
   
in Days
 
Maturity
J.P. Morgan Securities LLC
  $ 246,677       12.3 %     10  
7/13/2015
Citigroup Global Markets Inc
    246,642       12.2 %     17  
9/14/2015
RBC Capital Markets, LLC
    154,226       7.7 %     18  
7/22/2015
ICBC Financial Services LLC
    151,271       7.5 %     13  
7/22/2015
Cantor Fitzgerald & Co
    146,785       7.3 %     13  
7/17/2015
ED&F Man Capital Markets Inc
    142,205       7.1 %     38  
8/24/2015
Mitsubishi UFJ Securities (USA), Inc
    138,558       6.9 %     20  
7/31/2015
Mizuho Securities USA, Inc
    116,520       5.8 %     13  
7/29/2015
KGS-Alpha Capital Markets, L.P
    104,460       5.2 %     10  
7/27/2015
Daiwa Securities America Inc.
    100,975       5.0 %     10  
7/15/2015
Merrill Lynch, Pierce, Fenner & Smith Inc
    96,449       4.8 %     19  
7/29/2015
South Street Securities, LLC
    66,963       3.3 %     12  
7/20/2015
Wells Fargo Bank, N.A.
    66,396       3.3 %     15  
7/15/2015
Goldman, Sachs & Co
    54,670       2.7 %     79  
9/17/2015
Morgan Stanley & Co
    54,378       2.7 %     7  
7/7/2015
CRT Capital Group, LLC
    44,844       2.2 %     16  
7/29/2015
Nomura Securities International, Inc.
    34,720       1.7 %     9  
7/13/2015
Guggenheim Securities, LLC
    32,742       1.6 %     29  
9/2/2015
Barclays Capital Inc
    10,128       0.5 %     14  
7/14/2015
Suntrust Robinson Humphrey, Inc
    4,462       0.2 %     2  
7/2/2015
Total Borrowings
  $ 2,014,071       100.0 %     18  
9/17/2015

(1)  
In June 2015, the Company purchased assets with a fair value of approximately $7.6 million which settle in July 2015 that are expected to be funded by repurchase agreements.  These anticipated borrowings are not included in the table above.

 
 

 


 
RMBS Risk Measures
                                   
($ in thousands)
                                   
Mortgage Assets
                                   
         
Weighted
                         
         
Average
   
Weighted
   
Weighted
   
Modeled
   
Modeled
 
         
Months
   
Average
   
Average
   
Interest
   
Interest
 
         
To Next
   
Lifetime
   
Periodic
   
Rate
   
Rate
 
   
Fair
   
Coupon Reset
   
Cap
   
Cap Per Year
   
Sensitivity
   
Sensitivity
 
Asset Category
 
Value
   
(if applicable)
   
(if applicable)
   
(if applicable)
   
(-50 BPS)(1)
   
(+50 BPS)(1)
 
As of June 30, 2015
                                   
Adjustable Rate RMBS
  $ 3,456       1       10.07 %     2.00 %   $ 19     $ (19 )
Hybrid Adjustable Rate RMBS
    56,754       91       7.56 %     2.00 %     1,003       (1,196 )
Total Fixed Rate RMBS
    1,993,369       n/a       n/a       n/a       37,182       (48,754 )
Total Pass-through RMBS
    2,053,579       n/a       n/a       n/a       38,204       (49,969 )
Interest-Only Securities
    78,347       n/a       n/a       n/a       (12,422 )     9,797  
Inverse Interest-Only Securities
    42,945       1       6.38 %     n/a       284       (1,817 )
Structured RMBS
    121,292       n/a       n/a       n/a       (12,138 )     7,980  
Total Mortgage Assets
  $ 2,174,871       n/a       n/a       n/a     $ 26,066     $ (41,989 )
                                                 
Funding Hedges
                                               
                                   
Modeled
   
Modeled
 
                                   
Interest
   
Interest
 
                   
Average
   
Hedge
   
Rate
   
Rate
 
                   
Notional
   
Period
   
Sensitivity
   
Sensitivity
 
                   
Balance(2)
   
End Date
   
(-50 BPS)(1)
   
(+50 BPS)(1)
 
Eurodollar Futures Contracts - Short Positions
    $ 780,000    
Mar-2019
    $ (15,233 )   $ 16,875  
Treasury Futures Contracts - Short Positions
      120,000    
Sep-2025
      (5,056 )     4,645  
Payer Swaption
                    175,000    
Sep-2025
      (54 )     377  
Grand Total
                                  $ 5,723     $ (20,092 )

(1)  
Modeled results from Citigroup Global Markets, Inc. Yield Book. Interest rate shocks assume instantaneous parallel shifts and horizon prices are calculated assuming constant LIBOR OAS. These results are for illustrative purposes only and actual results may differ materially.
(2)  
Treasury Futures Contracts were valued at 126-05+ at June 30, 2015.  The nominal value of the short position was $151.4 million.

Contact:

Orchid Island Capital, Inc.
Robert E. Cauley
3305 Flamingo Drive, Vero Beach, Florida 32963
Telephone: (772) 231-1400