Orchid Island Capital(ORC) - 2024 Q4 - Annual Report

Financial Performance - Net income for the year ended December 31, 2024, was $37.7 million, or$ 0.57 per share, compared to a net loss of $39.2 million, or$ 0.89 per share, for 2023, and a net loss of $258.5 million, or$ 6.90 per share, for 2022[288]. - For the three months ended December 31, 2024, net earnings were $5,545,000, with a net loss excluding realized and unrealized gains and losses of$ 3,786,000, resulting in a per share loss of $0.05[295]. - The total net earnings for the year ended December 31, 2024, were$ 37,662,000, with a net loss of $11,448,000, translating to a per share loss of$ 0.18[295]. - The company reported a significant net loss of $80,132,000 for the three months ended September 30, 2023, with a per share loss of$ 1.68[295]. - The company reported total gains of $49,110 for the year ended December 31, 2024, a substantial improvement from$ 3,654 in 2023[328]. - The company declared cash dividends of $96.3 million in 2024, compared to$ 81.1 million in 2023, reflecting a 19% increase[450]. Interest Income and Expense - Interest income increased to $241.6 million in 2024 from$ 177.6 million in 2023 and $144.6 million in 2022, while interest expense rose to$ 236.3 million in 2024 from $201.9 million in 2023 and$ 61.7 million in 2022[288]. - The net interest income for 2024 was $5.3 million, a recovery from a net interest loss of$ 24.3 million in 2023, and a net interest income of $82.9 million in 2022[288]. - Economic interest expense for the years ended December 31, 2024, 2023, and 2022 was$ 119.5 million, $109.6 million, and$ 48.1 million, respectively[314]. - The company incurred $24.4 million of net interest expense for the year ended December 31, 2023, compared to$ 82.9 million of net interest income for the year ended December 31, 2022[313]. - The average cost of funds for the year ended December 31, 2024, was 5.35%, compared to 5.07% in 2023, indicating a significant increase in borrowing costs[321]. Asset Management and Portfolio - The company aims to provide attractive risk-adjusted total returns through capital appreciation and regular monthly distributions by investing in Agency RMBS[276]. - The RMBS portfolio as of December 31, 2024, consisted of $5,253.3 million of Agency RMBS at fair value, with a weighted average coupon of 4.99%[345]. - Total mortgage assets increased to$ 5,253.3 million as of December 31, 2024, up from $3,894.0 million as of December 31, 2023, representing a growth of approximately 35%[348]. - The company plans to continue selling existing assets to acquire new assets with potentially higher risk-adjusted returns, aligning with its asset/liability management strategy[328]. - The average yield on RMBS for the year ended December 31, 2024, was 5.25%, compared to 4.28% in 2023[335]. Shareholder Actions - The company issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for gross proceeds of approximately$ 228.8 million and net proceeds of approximately $225.0 million[280]. - The stock repurchase program has authorized the repurchase of up to 6,183,601 shares, representing approximately 18% of the then outstanding shares of common stock[284]. - From the inception of the stock repurchase program through December 31, 2024, the company repurchased a total of 5,144,602 shares at an aggregate cost of approximately$ 77.5 million, with a weighted average price of $15.07 per share[285]. Risk Management - The company utilizes various derivative and hedging instruments to manage interest rate risk, including Fed Funds, SOFR, and T-Note futures contracts[299]. - The company has not elected hedge accounting treatment for its derivative holdings, meaning changes in fair value are presented separately in financial statements[300]. - The company faces prepayment risk, which can lead to a faster return of principal on investments than anticipated, affecting net interest income[423]. - Liquidity risk arises from financing long-term assets with shorter-term borrowings, with potential margin calls increasing if the value of pledged assets decreases[425]. - Counterparty credit risk is present due to potential losses from counterparties failing to perform under repurchase agreements and derivative contracts[428]. Economic Environment - The 30-year fixed-rate mortgage rate as of December 31, 2024, was 6.85%, compared to 6.61% in 2023, showing an upward trend in mortgage rates[330]. - Economic activity remains resilient, with inflation above the Fed's 2% target, potentially impacting future rate decisions[394]. - The Fed lowered the Fed Funds rate by 100 basis points during the fourth quarter of 2024, with expectations for less than two additional 25 basis point reductions in the near future[392][393]. Financial Position - Total assets rose to$ 5.7 billion in 2024, compared to $4.3 billion in 2023, marking a 34% growth[444]. - Total liabilities increased to$ 5.1 billion in 2024, up from $3.8 billion in 2023, reflecting a 34% rise[444]. - Cash and cash equivalents grew to$ 309.3 million in 2024, up from $171.9 million in 2023, representing an 80% increase[444]. - The company had outstanding obligations under repurchase agreements of approximately$ 5,025.5 million with a net weighted average borrowing cost of 4.66% as of December 31, 2024[353].