Orchid Island Capital(US:ORC)2023-04-28 17:23Financial 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]