Financial Data and Key Metrics Changes - The company reported a net income of $0.52 per share for Q4 2023, with a book value increase of approximately 2% from $8.92 to $9.10 [68] - Total return for the quarter was 6.05%, and the dividend declared was $0.36, reduced from $0.48 previously [68][70] - Economic net interest margin (NIM) improved significantly due to a higher weighted average coupon of 4.33% and a realized yield of 4.71% [94] Business Line Data and Key Metrics Changes - The company reduced its portfolio by almost 16%, particularly shedding TBA-like 3% coupon securities, which had a negative NIM, while increasing income [91][94] - The economic interest income increased due to a combination of higher coupons and effective hedging strategies [9][70] Market Data and Key Metrics Changes - The mortgage market remains volatile, with primary-secondary spreads still elevated historically, indicating potential for enhanced refinance ability in the future [73] - The company noted a significant market pivot in November and December, which positively impacted their portfolio positioning [19][89] Company Strategy and Development Direction - The company aims to maintain a barbell approach in its portfolio, focusing on both lower and higher coupons to optimize returns [30][41] - The management expressed confidence in the mortgage sector's attractiveness, especially as banks begin to re-enter the market [12][98] Management's Comments on Operating Environment and Future Outlook - Management indicated that the severe book value pressure experienced over the last two years is likely over, and they are comfortable with their current positioning [23][77] - The outlook remains cautious due to potential economic shifts, but there is optimism regarding the Fed's easing cycle and its impact on the mortgage market [77][100] Other Important Information - The company has been actively managing its hedging positions, with a focus on maintaining a high level of hedge coverage to mitigate risks [95][96] - The management highlighted the importance of monitoring the performance of the mortgage market, especially in light of potential selling pressures from banks [47][49] Q&A Session All Questions and Answers Question: Regarding the dividend expansion given the current economic basis - Management acknowledged the potential for dividend expansion but emphasized the need to monitor market developments closely before making any decisions [37][59] Question: Update on economic leverage and appetite for leverage going forward - The company indicated a cautious approach to increasing leverage, waiting to see how economic conditions evolve before making adjustments [99][100] Question: Insights on the performance of mortgage backs during commercial real estate corrections - Management noted that the lack of credit exposure in the mortgage sector typically bodes well during such corrections, although there could be selling pressure from banks [46][47]

59% -80% 3.9% Non-QM A1 High Yield 7.1% 8.6% Source: BofA Global Research - Securitized Products Returns for December 2023/ Securitized Products Strategy / 02 January 2024 10 • Reduced allocation to 30yr 3.0% by 38% and added 7.0% coupon securities • Orchid retains ample access to financing sources in excess of needs via the repurchase agreement funding market Investment Portfolio Funding Costs as of December 31, 2023 17 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |------ ...

Financial Performance - For the nine months ended September 30, 2023, the net loss was $66.4 million, or $1.58 per share, compared to a net loss of $293.4 million, or $8.31 per share for the same period in 2022, indicating a significant improvement [141]. - For the three months ended September 30, 2023, the net earnings were $(80,132) thousand, resulting in a loss per share of $(1.68) compared to a net earnings of $10,249 thousand and a gain per share of $0.25 for the previous quarter [146]. - The nine months ended September 30, 2023, reported net earnings of $(66,353) thousand, with a loss per share of $(1.58), an improvement from $(293,379) thousand and a loss per share of $(8.31) for the same period in 2022 [146]. Interest Income and Expense - Interest income for the nine months ended September 30, 2023, was $128.0 million, an increase of 13.6% from $112.7 million in the same period of 2022 [141]. - Interest expense surged to $149.6 million for the nine months ended September 30, 2023, compared to $32.2 million in the same period of 2022, reflecting a substantial increase of 364.5% [141]. - The net interest income (expense) for the nine months ended September 30, 2023, was $(21.6) million, a decrease of 126.8% from $80.5 million in the same period of 2022 [141]. Derivative Instruments - Realized and unrealized gains and losses on derivative instruments for the three months ended September 30, 2023, included a gain of $142,042 thousand attributed to funding hedges [158]. - The company recognized a total of $194,253 thousand in gains on derivative instruments for the nine months ended September 30, 2023, with $67,133 thousand attributed to current periods [158]. - The company has reclassified certain expenses related to derivative instruments, impacting the presentation of net earnings and gains on derivative instruments [148]. Share Repurchase and Equity - The company repurchased a total of 373,041 shares at an aggregate cost of approximately $4.0 million during the nine months ended September 30, 2023, at a weighted average price of $10.62 per share [138]. - As of September 30, 2023, the company had issued a total of 13,190,039 shares under the March 2023 Equity Distribution Agreement for gross proceeds of approximately $129.8 million [134]. - The stock repurchase program has been authorized for up to 6,183,601 shares, representing approximately 18% of the company's outstanding shares as of October 2022 [137]. Economic Indicators - The advanced GDP reading for Q3 2023 was 4.9%, indicating strong economic resilience despite ongoing tightening by the Federal Reserve [220]. - Consumer spending remains robust, supported by a strong labor market and residual savings from pandemic-related stimulus [221]. - The Fed's dot plot indicated a funds rate 50 basis points higher at the end of 2024 compared to the previous estimate, reflecting a strong economy [223]. Agency RMBS Performance - Agency RMBS generated a return of -4.1% in Q3 2023, with the 30-year fixed rate sector returning -4.6% [226]. - The Agency RMBS sector underperformed both investment grade and sub-investment grade corporates in Q3 2023 [227]. - The actual balance sheet reduction of Agency RMBS trended below the cap during 2023 due to rising interest rates and slowed prepayment speeds [228]. Risk Management - The company utilizes derivative and hedging instruments to manage interest rate risk, which may affect future financial performance [151]. - The company may enter into interest rate swaps to protect its net interest margin against increases in short-term interest rates [241]. - The company faces liquidity risk due to financing long-term assets with shorter-term borrowings, which could lead to adverse changes in liquidity if the value of pledged Agency RMBS decreases [268]. Operating Expenses - Total operating expenses for the nine months ended September 30, 2023, were approximately $14.5 million, compared to $13.3 million for the same period in 2022, indicating an increase [187]. - The total expenses for the nine months ended September 30, 2023, were $14,467,000, compared to $13,261,000 in 2022, representing an increase of 9.1% [192]. Cash and Liquidity - Cash and cash equivalents stood at $158.6 million as of September 30, 2023, with cash flows generated from RMBS principal and interest payments totaling $353.4 million [216]. - As of September 30, 2023, the company had unrestricted cash and cash equivalents of $158.6 million and unpledged securities of approximately $5.1 million available for margin calls and corporate purposes [268]. Management and Governance - The management agreement with Bimini Advisors, LLC has been renewed through February 20, 2024, with automatic one-year extension options thereafter [188]. - The effectiveness of the company's disclosure controls and procedures was confirmed by the CEO and CFO as of the evaluation date [273].

Financial Data and Key Metrics Changes - The total return for Q3 2023 was a negative 15.77%, with dividends paid at $0.48, unchanged from the previous quarter [4] - Net income for the quarter was a loss of $1.68 per share compared to income of $0.25 per share last year, and book value decreased over 20% from $11.16 to $8.92 [22] - Economic leverage ratio increased from 8.1 million to 8.5 million but was later reduced to about 7.4% [23][61] Business Line Data and Key Metrics Changes - The average coupon of the portfolio increased from 3.83% to 4.05%, and the realized yield rose from 3.81% to 4.51% [11] - The portfolio size was approximately $3.65 billion, down 18% from the average of Q3 [4] Market Data and Key Metrics Changes - The mortgage market has faced significant challenges, with spreads widening and volatility remaining high [27][28] - The primary-secondary spread is trending downward as mortgage originators attempt to maintain their ability to generate mortgages [10] Company Strategy and Development Direction - The company aims to diversify its portfolio across different coupon rates to avoid excessive concentration [18][30] - The focus is on maintaining high hedge levels due to rising funding costs and the current market environment [18][56] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current mortgage market environment is challenging and expected to remain so [22][28] - There is a belief that a softening of the economy may occur, which could lead to better performance of certain securities [31][59] Other Important Information - The company raised about $80 million through its ATM program to enhance its portfolio [4][11] - Liquidity is currently at the low end of the range, around 30% to 40%, and efforts are being made to improve it [24][61] Q&A Session Summary Question: What is the strategy for diversification within the coupon stack? - The company plans to maintain a slight bias towards lower coupons due to their favorable characteristics, while also considering higher coupons for better carry [39][40] Question: Have there been any margin calls on repo funding this quarter? - The company experiences daily margin call activity, which is managed internally now [48] Question: What flexibility exists regarding the dividend? - The dividend was adjusted to align with earnings, and the current rate of $0.12 seems reasonable given the market conditions [50][68] Question: What is the current status of book value and economic leverage? - Book value has decreased significantly, and economic leverage is down to 7.4% from 8.5% [69]

Financial Highlights - The company's net income per share was $0.25[9] - Excluding realized and unrealized gains/(losses) on RMBS and derivative instruments, the net earnings per share was ($0.34)[9] - The company had a gain of $0.59 per share from net realized and unrealized gains on RMBS and derivative instruments[9] - The book value per share was $11.16 at June 30, 2023, compared to $11.55 at March 31, 2023[9] - The company declared and paid $0.48 per share in dividends in Q2 2023, and has declared a total of $65.77 per share in dividends since its IPO[9] - The total economic gain for the quarter was $0.09 per share, or 0.78%[9] Portfolio Characteristics - As of June 30, 2023, total mortgage assets were valued at $4,473,323,493[57], with a weighted average coupon (CPN) of 3.81%[57] and weighted average maturity (WA Mat) of 331 months[57] - Pass-through MBS comprised 99.60% of the portfolio, with a market value of $4,455,554,930[57] - Structured MBS represented 0.397% of the portfolio, with a market value of $17,768,563[57] - The interest rate sensitivity of the portfolio was $113,489,015 for a -50 BPS shock and ($119,797,621) for a +50 BPS shock[57] Hedge Positions - The company held hedge positions with an average notional balance of ($4,035,200,000)[57] - These hedges included 5-Year Treasury Futures, 10-Year Treasury Futures, 10-Year Ultra Treasury Futures, Swaps, TBA, and Swaptions[57] - The total interest rate sensitivity of the hedge positions was ($99,119,651) for a -50 BPS shock and $100,362,186 for a +50 BPS shock[57]

Orchid Island Capital, Inc. (NYSE:ORC) Q2 2023 Earnings Conference Call July 28, 2023 10:00 AM ET Company Participants Robert Cauley - Chairman and CEO Hunter Haas - CFO Conference Call Participants Matthew Erdner - JonesTrading Mikhail Goberman - JMP Securities Christopher Nolan - Ladenburg Thalmann Operator Good morning and welcome to the Second Quarter 2023 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, July 28, 2023. At this time, the Company would like to remind ...

Financial Performance - Net income for the six months ended June 30, 2023, was $13.8 million, or $0.35 per share, compared to a net loss of $208.9 million, or $5.90 per share, for the same period in 2022[140] - For the three months ended June 30, 2023, net earnings were $10,250,000, compared to a loss of $84,513,000 in the same period last year, representing a significant improvement[145] - The net earnings excluding realized and unrealized gains and losses for the six months ended June 30, 2023, were $13,780,000, compared to a loss of $208,866,000 for the same period in 2022[145] - The earnings per share for the three months ended June 30, 2023, was $0.25, up from a loss of $2.40 per share in the same quarter of the previous year[145] - The company reported realized and unrealized gains of $23,828,000 for the three months ended June 30, 2023, compared to $12,739,000 for the previous quarter[145] Interest Income and Expense - Interest income for the six months ended June 30, 2023, was $77.9 million, an increase of $0.8 million from $77.1 million in the same period of 2022[140] - Interest expense for the six months ended June 30, 2023, was $90.9 million, an increase of $80.1 million from $10.8 million in the same period of 2022[140] - Economic net interest income for the six months ended June 30, 2023, was $52,211,000, compared to $280,865,000 for the same period in 2022[156] - For the six months ended June 30, 2023, the company generated net interest expense of $13.0 million, with interest income of $77.9 million and interest expense of $90.9 million[164] - The average cost of funds increased to 4.81% for the six months ended June 30, 2023, compared to 0.46% for the same period in 2022, resulting in an $80.1 million increase in interest expense[176] Portfolio Performance - Gains on RMBS and derivative contracts for the six months ended June 30, 2023, were $36.6 million, compared to losses of $266.2 million in the same period of 2022, representing a change of $302.8 million[140] - Net portfolio income for the six months ended June 30, 2023, was $23.6 million, compared to a loss of $199.9 million in the same period of 2022, reflecting a change of $223.5 million[140] - The yield on average RMBS for the six months ended June 30, 2023, was 3.92%, up from 3.15% in the same period of 2022, reflecting a 77 basis point increase[172] - The company reported a net interest income of $29.7 million on an economic basis for the six months ended June 30, 2023, compared to $66.3 million for the same period in 2022[165] - The economic net interest spread for the six months ended June 30, 2023, was 1.37%, compared to 2.69% for the same period in 2022[170] Shareholder Actions - Total shares repurchased from inception of the stock repurchase program through June 30, 2023, amounted to 4,048,613 shares at an aggregate cost of approximately $68.8 million[137] - The company issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for gross proceeds of approximately $151.8 million before its termination in March 2023[132] - As of June 30, 2023, the company had issued a total of 4,757,953 shares under the March 2023 Equity Distribution Agreement for gross proceeds of approximately $48.1 million[133] - The company’s stock repurchase program has no termination date and has been authorized for up to 6,183,601 shares, representing approximately 18% of the then outstanding shares[136] Economic Conditions and Market Outlook - The outlook indicates persistently high core inflation and strong labor market conditions, which may lead to further interest rate hikes by the Fed[223] - Risk sentiment improved after a settlement was reached regarding the debt ceiling, although economic data remained unchanged[225] - The yield spread between the 2-year U.S. Treasury and the 10-year U.S. Treasury reached a cycle peak of -1.084% in early July 2023[228] - The 30-year mortgage rate averaged 6.62% in Q2 2023, with a high of 6.91% and a low of 6.30%[230] - The Agency RMBS market generated a total return of -0.5% for Q2 2023, outperforming comparable duration SOFR swaps by 1.0%[231] Risk Factors - The company is exposed to spread risk, which could lead to a decline in net book value if the value of Agency RMBS falls more than the fair value increases on hedging instruments[280] - The company faces liquidity risk due to financing long-term assets with shorter-term borrowings, which could lead to increased margin calls if the value of pledged Agency RMBS decreases[281] - Counterparty credit risk exists, as potential losses could arise if counterparties to repurchase agreements and derivative contracts fail to perform their obligations[284] - Prepayment risk is significant, as residential borrowers can prepay their mortgage loans at par, affecting the timing of cash flows and net interest income[278] Operational Metrics - Total operating expenses for the six months ended June 30, 2023, were approximately $9.8 million, compared to $8.9 million for the same period in 2022[189] - The company maintained a total mortgage asset value of $4,373,972,000, with fixed-rate RMBS accounting for 99.6% of the portfolio[199] - The effective duration of the RMBS portfolio as of June 30, 2023, was 5.220, indicating a potential 5.220% decrease in value for a 1.0% interest rate increase[201] - The company had cash and cash equivalents of $198.2 million as of June 30, 2023, and generated cash flows of $209.0 million from principal and interest payments on its RMBS portfolio[219] - The average term to maturity of outstanding repurchase agreements was 25 days as of June 30, 2023, compared to 27 days at December 31, 2022[180]

Financial Data and Key Metrics Changes - The book value per share decreased to $11.55 at March 31, 2023, from $11.93 at the end of 2022, reflecting a decline of approximately 3.2% [54] - The company declared and paid a dividend of $0.48 per share during the quarter, with a total of $65.29 in dividends declared since the last IPO [54][68] - The net income per share was reported at $0.09, while the net earnings per share excluding realized and unrealized gains and losses was negative $0.24 [68] Business Line Data and Key Metrics Changes - The company maintained a low coupon bias, focusing on lower coupon mortgages which are expected to perform well in a slowing economy [1][4] - The weighted average coupon of the portfolio increased slightly to 3.56% at the end of Q1 from 3.47% at the end of the previous year, indicating a modest shift in strategy [35] Market Data and Key Metrics Changes - The mortgage market is experiencing significant volatility, with spreads widening and a notable impact from the liquidation of assets from failed banks [17][22] - The anticipated supply from FDIC liquidations is expected to pressure mortgage performance, particularly for lower coupon assets [17][21] Company Strategy and Development Direction - The company intends to maintain its current strategy, anticipating a pivot from the Fed and a subsequent economic downturn, which would favor their low coupon assets [4][24] - The focus remains on capital allocation towards lower coupon mortgages, avoiding higher coupon assets due to their exposure to market volatility [35][36] Management Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential for prolonged high inflation and the risks associated with further bank failures impacting the mortgage market [3][50] - The outlook suggests that mortgage rates are likely to remain high and sticky until there is clear evidence of a Fed pivot [28] Other Important Information - The company has a leverage ratio of approximately 6.5, which is lower than reported due to extensive use of TBA shorts [33] - The company raised capital early in the quarter, selling approximately 2.7 million shares to fund mortgage purchases [34] Q&A Session Summary Question: Update on book value and economic leverage - The book value was down about 2% as of last Friday, with a current leverage figure of approximately 6.5 [9] Question: View on natural turnover in housing - Natural turnover in housing is very low, with existing home sales expected to remain benign due to high prices and rates [25] Question: Opinion on the MSR market - The MSR market is viewed as having more downside than upside, with large banks moving away from it [26] Question: Dividend sustainability - The company aims to maintain the current dividend level but may reconsider if inflation remains high and the economy does not roll over [61]

Financial Performance - Net income for Q1 2023 was $3.5 million, or $0.09 per share, compared to a net loss of $148.7 million, or $4.20 per share, in Q1 2022[138] - Interest income decreased to $38.0 million in Q1 2023 from $41.9 million in Q1 2022, a decline of approximately 9.2%[138] - Interest expense increased significantly to $42.2 million in Q1 2023 from $2.7 million in Q1 2022, reflecting a rise of approximately 1495.7%[138] - Gains on RMBS and derivative contracts were $12.7 million in Q1 2023, a substantial recovery from losses of $183.6 million in Q1 2022, representing a change of $196.3 million[138] - For the three months ended March 31, 2023, the company reported a net interest loss of $4.2 million, compared to a net interest income of $39.2 million for the same period in 2022[161] - The company generated $15.0 million of economic net interest income for the three months ended March 31, 2023, down from $37.6 million in the same period in 2022[162] - Total operating expenses for the three months ended March 31, 2023, were approximately $5.0 million, an increase of $625,000 compared to $4.4 million for the same period in 2022[182] Shareholder Actions - Total shares repurchased from inception of the stock repurchase program through March 31, 2023, amounted to 4,048,613 shares at an aggregate cost of approximately $68.8 million[135] - The company issued 9,742,188 shares under the October 2021 Equity Distribution Agreement for gross proceeds of approximately $151.8 million before its termination in March 2023[130] - The stock repurchase program has been authorized for up to 6,183,601 shares, representing approximately 18% of the company's outstanding shares as of October 2022[134] - The company declared a dividend of $0.16 per share on April 12, 2023, to be paid on May 26, 2023, contributing to a total of $552.568 million in dividends since its IPO[244] Investment Strategy - The company aims to provide attractive risk-adjusted total returns through capital appreciation and regular monthly distributions from its Agency RMBS investments[127] - The company’s investment strategy involves leveraging both traditional pass-through Agency RMBS and structured Agency RMBS to manage interest rate sensitivity and income stability[127] - The company has not elected to designate its derivative holdings for hedge accounting treatment, meaning fluctuations in their value do not impact reported interest expense[147] - The company utilizes futures contracts, interest rate swaps, and swaptions to hedge against interest rate increases, but effectiveness may vary based on prepayment rates[249] Market Conditions - The Agency RMBS market generated a total return of 2.5% for the first quarter of 2023, underperforming comparable duration SOFR swaps by 0.2%[216] - The yield on the 2-year U.S. Treasury note increased from approximately 4.43% on December 31, 2022, to a high of 5.07% on March 8, 2023, before declining to around 3.77% on March 24, 2023[214] - The Mortgage Bankers Association 30-year survey rate averaged 6.45% for the first quarter of 2023, with a high of 6.79% and a low of 6.18%[215] - The Agency RMBS market experienced a return of -1.2% compared to comparable duration SOFR swaps in Q1 2023[238] Liquidity and Borrowings - The company had cash and cash equivalents of $143.2 million as of March 31, 2023, and generated cash flows of $95.6 million from principal and interest payments on its RMBS portfolio[206] - The company had obligations outstanding under repurchase agreements of approximately $3,769.4 million as of March 31, 2023, with a net weighted average borrowing cost of 4.90%[194] - The average outstanding borrowings decreased to $3,573.9 million in Q1 2023 from $5,354.1 million in Q1 2022, contributing to the increase in interest expense despite the lower borrowing volume[171] - As of March 31, 2023, the ending balance of borrowings was $3,769,437, an increase of 11.56% from $3,378,445 on December 31, 2022[196] Risk Factors - The company faces significant liquidity risk, with potential margin calls increasing if the value of pledged Agency RMBS or derivative instruments decreases[264] - Interest rate sensitivity analysis indicates that a 200 basis point increase in interest rates could lead to a decline of 2.41% in market value and 21.39% in book value as of March 31, 2023[259] - Counterparty credit risk is present due to potential losses from counterparties failing to meet obligations under repurchase agreements and derivative contracts[267] - The company faces potential negative impacts on operations if prepayment rates decrease in a rising interest rate environment, leading to extended average life or duration of fixed-rate assets[266] Regulatory Environment - The Fed committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month until tapering began in November 2021, ending net asset purchases by March 2022[218] - The LIBOR Act established SOFR as the new benchmark rate for contracts using LIBOR, providing a safe harbor from litigation for claims related to SOFR[223] - The FHFA allowed Enterprises to increase their capital buffers to $25 billion and $20 billion, respectively, from a prior limit of $3 billion each[220] - The final rule published by the FHFA on February 25, 2022, amended the Enterprise capital framework, including a dynamic leverage buffer and a reduction in the risk weight floor from 10% to 5%[220]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __ to __ Commission File Number: 001-35236 Orchid Island Capital, Inc. (Exact name of registrant as specified in its charter) Maryland 27-3269228 (I.R.S. Employer Identification ...