Orchid Island Capital (ORC) Misses Q4 EPS by 3c

Orchid Island Capital (NYSE: ORC) reported Q4 EPS of $0.23, $0.03 worse than the analyst estimate of $0.26.

Commenting on the fourth quarter and full year results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “Orchid Island Capital generated another quarter of strong returns for stockholders. For the fourth quarter, Orchid generated a 4.0% return based on a $0.02 per share increase in book value and $0.195 per share of dividends. This marks the third consecutive quarter of positive returns since the market turbulence of the first quarter – a product of the COVID-19 pandemic and its impact on the economy and financial markets. Orchid’s strategy of focusing exclusively on Agency RMBS assets since inception with no credit exposure of any kind in any of our assets enabled Orchid to avoid the pitfalls so many around us suffered, in many cases leading to severe financial distress that many have yet to fully recover from. Managing our portfolio was never more challenging than what we experienced last March. Our asset selection acumen and disciplined investment style were put to the test, as was our liquidity management skills. During such periods, relationships with our credit counterparties and their confidence in us were critical. These relationships have been developed over nearly two decades and continue to pay dividends, especially in times of severe market stress like 2020. Since our difficulties last March were very temporary, we were able to quickly recover and capitalize on the many opportunities available in the market place over the balance of the year. In fact, in spite of the market disruptions of the first quarter, Orchid generated a positive 2.7% return for stockholders for the year based on a $0.63 per share decline in Orchid’s share price since December 31, 2019, offset entirely by $0.79 per share of dividends.

“During the fourth quarter of 2020 we focused on maximizing returns on the portfolio by reducing the income draining effects of prepayments on our premium RMBS. We shifted the portfolio into lower coupon securities and in some cases shorter maturity securities as well. Our prepayment rate in the fourth quarter was 16.7 CPR, a 2.4 CPR increase over the third quarter of 2020. During the fourth quarter, the spread between mortgage rates available to borrowers and rates on an interpolated par priced mortgage backed security, or the primary/secondary spread, continued to compress and rates available to borrowers were the lowest ever experienced. As a result, we were quite happy with the prepayment performance of the portfolio. We were also able to enhance our returns for the fourth quarter by taking advantage of the TBA dollar roll market. With the Federal Reserve continuing their asset purchases at a rate of $40 billion of Agency RMBS per month, concentrated in production coupons, we continued to modestly expand our use of the very attractive financing offered by the TBA dollar roll market. Coupled with continued low financing in the traditional repo markets and our low prepayment rates, we were able to continue to generate attractive net interest margins for our stockholders in support of the dividend. During the fourth quarter, we were also able to raise approximately $36.1 million of additional capital from our at-the-market program at attractive prices relative to our book value while also accretive to earnings.”

For earnings history and earnings-related data on Orchid Island Capital (ORC) click here.

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