Orchid Island Capital(US:ORC)2024-07-26 16:28Financial Performance - Net income for the six months ended June 30, 2024, was $14.8 million, or $0.27 per share, compared to $13.8 million, or $0.35 per share for the same period in 2023[372] - Net loss for the three months ended June 30, 2024, was $5.0 million, or $0.09 per share, compared to net income of $10.2 million, or $0.25 per share for the same period in 2023[372] - Average outstanding borrowings for the six months ended June 30, 2024, were $3.9 billion, with total interest expense of $105.1 million, compared to $3.8 billion and $90.9 million for the same period in 2023[393] - Total operating expenses for the six months ended June 30, 2024, were approximately $8.1 million, down from $9.8 million for the same period in 2023[401] Interest Expense and Cost of Funds - Average outstanding borrowings were $4.0 billion for both the three months ended June 30, 2024, and 2023, with total interest expense increasing to $53.8 million from $48.7 million[379] - The average cost of funds increased to 5.34% for the three months ended June 30, 2024, compared to 4.88% for the same period in 2023[379] - The average cost of funds increased to 5.43% for the six months ended June 30, 2024, from 4.81% in the same period of 2023, resulting in a $14.2 million increase in interest expense[393] - Economic interest expense was $24.3 million for the three months ended June 30, 2024, down from $25.2 million in 2023, with a decrease in the average economic cost of funds to 2.41%[380] - Economic interest expense for the six months ended June 30, 2024, was $48.1 million, slightly down from $48.2 million in the same period of 2023[395] RMBS Portfolio and Performance - The average portfolio size for RMBS held was $4.2 billion for the three months ended June 30, 2024, generating interest income of $53.1 million with a yield of 5.05%[391] - The RMBS portfolio as of June 30, 2024, consisted of $4,525.8 million in Agency RMBS at fair value, with a weighted average coupon of 4.68%[404] - Principal repayments received during the six months ended June 30, 2024, totaled $172.6 million, up from $138.4 million in the same period of 2023[404] - The average three-month prepayment speed increased to 7.6% for the quarter ended June 30, 2024, compared to 5.6% for the same quarter in 2023[404] Management and Strategy - The company aims to enhance liquidity and earnings stability by actively managing the allocation of capital between different Agency RMBS asset categories[368] - The management agreement with Bimini Advisors, LLC has been renewed through February 20, 2025, with automatic one-year extension options thereafter[387] - The company’s strategy involves funding PT RMBS and structured Agency RMBS through short-term borrowings structured as repurchase agreements[368] Financial Instruments and Risk Management - The company utilizes various financial instruments such as futures contracts, interest rate swaps, and swaptions to hedge against interest rate changes affecting operations[177] - The profitability and investment portfolio value may be adversely impacted by changing interest rates, including shifts in the forward yield curve[178] - The effective duration of mortgage-related securities is influenced by prepayment activity, which can significantly alter cash flow timing[180] - As of June 30, 2024, sensitivity analysis indicates potential fair value impacts on interest rate-sensitive investments with rate changes of ±200 bps, reflecting a negatively convex asset profile[181] REIT Compliance - The company must distribute at least 90% of its REIT taxable income to maintain REIT status, avoiding federal income tax on taxable income[188]