Orchid Island Capital(ORC)2024-10-25 17:02Financial Performance - Net income for the nine months ended September 30, 2024, was $32.1 million, or $0.53 per share, compared to a net loss of $66.4 million, or $1.58 per share, for the same period in 2023[119] - The company reported a net loss of $66.353 million for the three months ended September 30, 2023, with a net loss per share of $1.58, while for the same period in 2024, the net income was $17.320 million, translating to a net income per share of $0.24[125] - The company reported net portfolio income of $44.5 million for the nine months ended September 30, 2024, compared to a net loss of $51.9 million for the same period in 2023, indicating a change of $96.4 million[119] - Economic net interest income for the nine months ended September 30, 2024, was $86.1 million, compared to $45.6 million for the same period in 2023, indicating a substantial improvement in economic performance[138] Interest Income and Expenses - Interest income increased by $41.6 million to $169.6 million for the nine months ended September 30, 2024, compared to $128.0 million for the same period in 2023[119] - Interest income from RMBS assets for the nine months ended September 30, 2024, was $169.6 million, an increase of $41.6 million from $128.0 million in the same period of 2023, driven by a 106 basis point increase in yield[136] - Total interest expense for the nine months ended September 30, 2024, was $172,428 thousand, up from $149,593 thousand in the same period of 2023, a rise of 15%[151] - The company incurred net interest expense of $2.8 million for the nine months ended September 30, 2024, compared to $21.6 million for the same period in 2023, reflecting a significant decrease in net interest expense[136] Shareholder Activities - 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 since the inception of the stock repurchase program[115] - The company issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $228.8 million[111] - The company issued a total of 15,309,022 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $128.6 million, with net proceeds of approximately $126.5 million[191] Risk Management - The company utilized various derivative instruments to hedge interest rate risks, which are not included in GAAP interest expense, allowing for a clearer view of economic interest expense[129] - 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 or derivative instruments decreases[233] - Counterparty credit risk exists related to potential losses if counterparties to repurchase agreements and derivative contracts fail to perform, despite efforts to mitigate this risk through collateral adjustments[236] Market Conditions - The Fed lowered the Fed Funds rate by 50 basis points in late September 2024, marking the first interest rate cut since March 2023, which is expected to impact the company's operations positively[194] - The anticipated increase in mortgage refinance applications following the Fed Funds rate cut in September 2024 may accelerate the balance sheet reduction process[201] - The Agency RMBS index generated a total return of 0.2% for Q2 2024, compared to 4.3% for the S&P 500, indicating modest performance in the risk asset category[199] Operational Efficiency - Total expenses for the nine months ended September 30, 2024, were $12.4 million, a decrease of $2.1 million from $14.5 million for the same period in 2023[119] - Management fees for the nine months ended September 30, 2024, were $6,867,000, a decrease of $1,349,000 (16.4%) compared to $8,216,000 for the same period in 2023[162] - The company has sufficient short-term and long-term liquidity and capital resources for acquisitions, repayments on borrowings, and dividend payments[180] Dividend Information - The company intends to pay regular monthly dividends, having declared a dividend of $0.12 per share to be paid on November 27, 2024[217] - The company reported a total dividend payout of $67.65 per share since its IPO, amounting to $685.335 million[217] Portfolio Performance - The RMBS portfolio as of September 30, 2024, consisted of $5,442.8 million in Agency RMBS at fair value, with a weighted average coupon of 4.90%[169] - Unrealized gains on RMBS for the nine months ended September 30, 2024, were $161.919 million, compared to a loss of $210.159 million in the same period of 2023[159] - The average RMBS held increased to $4,984,279 thousand for the three months ended September 30, 2024, compared to $4,447,098 thousand for the same period in 2023, reflecting a growth of 12%[141] Economic Indicators - The 30-year fixed-rate mortgage rate as of September 30, 2024, was 6.08%, down from 7.31% in the same period of 2023[157] - The average 10-year U.S. Treasury rate as of September 30, 2024, was 3.80%, down from 4.57% in the same period of 2023[157] - The average SOFR for the three months ended September 30, 2024, was 5.16%, compared to 5.32% for the same period in 2023, indicating a decrease of 0.16%[152] Internal Controls - There were no significant changes in the company's internal control over financial reporting during the most recent fiscal quarter that materially affected its effectiveness[239] - The company has effective disclosure controls and procedures in place, ensuring timely communication of information to management[238]