Orchid Island Capital(US:ORC)2021-04-30 20:37Financial Data and Key Metrics Changes - For Q1 2021, Orchid reported a net loss per share of $0.34, with net earnings per share of $0.26 when excluding realized and unrealized gains and losses [5] - Book value per share decreased to $4.94, down 9.52% from $5.46 at the end of 2020 [5] - Total economic loss for the quarter was $0.325 per share, representing a 6% loss, annualized at 23.81% [5] Business Line Data and Key Metrics Changes - The pass-through portfolio experienced a negative return of 9.4%, while IOs and inverse IOs had a strong positive return of nearly 30% [18] - The allocation to structured securities increased from 6.7% to 10.1%, with further increases noted since quarter-end [21] Market Data and Key Metrics Changes - A significant steepening of the yield curve occurred, with an almost 80 basis point move in rates during the quarter [7] - The mortgage market remains tight, supported by aggressive Fed purchases, with many securities trading at negative LIBOR OAS numbers [12] Company Strategy and Development Direction - The company is focusing on increasing its allocation towards IOs, which are expected to be less susceptible to market widening [38] - The strategy includes replacing some hedges with IOs to mitigate risks associated with potential rate increases [35] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about inflation and the potential for the Fed to taper quantitative easing, which could impact mortgage rates [66] - The company anticipates a gradual recovery in the economy and expects to see a flattening of the yield curve as rates rise [39] Other Important Information - The company declared and paid a dividend of $0.195 per share in Q1 2021, totaling $11.915 per share since its IPO [5] - The leverage ratio was approximately 9.1 at quarter-end, remaining near the low end of the historical range [29] Q&A Session Summary Question: Can you provide insight on net economic spread and how hedges affect it? - Management explained that the net economic spread was not materially different at quarter-end, with hedges like swaps and TBAs impacting the reported numbers [43][44] Question: How did capital raises in Q1 affect book value? - The first capital raise was slightly dilutive, while the second was at book value, contributing to a small decrease in book value during the quarter [48][50] Question: What metrics are used to set dividends? - The company looks at economic income, which includes adjustments for interest expenses and premium amortization, to determine dividends [52][53]