Orchid Island Capital (ORC) Tops Q1 EPS by 3c

Orchid Island Capital (NYSE: ORC) reported Q1 EPS of $0.29, $0.03 better than the analyst estimate of $0.26.

First Quarter 2021 Highlights

• Net loss of $29.4 million, or $0.34 per common share, which consists of:
  • Net interest income of $24.9 million, or $0.29 per common share
  • Total expenses of $3.5 million, or $0.04 per common share
  • Net realized and unrealized losses of $50.8 million, or $0.60 per common share, on RMBS and derivative instruments, including net interest expense on interest rate swaps
• First quarter total dividends declared and paid of $0.195 per common share
• Book value per common share of $4.94 at March 31, 2021
• Total return of (6.0)%, comprised of $0.195 dividend per common share and $0.52 decrease in book value per common share, divided by beginning book value per common share
• Company to discuss results on Friday, April 30, 2021, at 10:00 AM ET
• Supplemental materials to be discussed on the call can be downloaded from the investor relations section of the Company’s website at https://ir.orchidislandcapital.com

Management Commentary

Commenting on the first quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “During the first quarter of 2021 the recovery from the pandemic accelerated rapidly. New cases of COVID-19 dropped, the distribution of the various vaccines ramped up rapidly and the U.S. government passed a $1.9 trillion stimulus package. The incoming economic data was also very strong, and markets reacted in kind. Equity markets reached new highs almost daily and interest rates increased dramatically. The Federal Reserve expressed their comfort with higher rates and a steep curve, stating the move was consistent with market expectations for a strong recovery, a recovery which in their eyes was a long way from complete.

“When we issued our earnings release for the fourth quarter of 2020 in February 2021, we were in the midst of repositioning our portfolio to minimize the impact of high prepayment speeds and their downward pressure on our net interest margin. During the remainder of the first quarter of 2021, we have continued to do so, and our portfolio in the first quarter had a three-month CPR of 12.0 versus 20.1 in the fourth quarter of 2020, a 40% decrease in realized speeds. The portfolio’s low-coupon bias has increased, and the concentration in higher quality specified pools has decreased as well. The combination of higher rates/lower dollar prices and the reduction in higher quality specified pools lowered the weighted average price of the portfolio by 2.8 basis points. We expect these developments to lead to lower premium amortization rates going forward. We believe that our current portfolio construction should perform well in the current, higher rate environment.

“The substantial move in the market and the increase in rates during the first quarter of 2021 negatively impacted our book value. As a result of the market move, we repositioned our hedge positions and eliminated our lower coupon dollar roll positions pending a stabilization in rates. Our hedge positions at March 31, 2021 consisted of option-based instruments such as swaptions or combinations of swaptions, interest rate swaps and TBA shorts and, since quarter end, futures, albeit to a lesser extent. Our leverage ratio remains at the low end of our target range as well. Absent another episode of extreme market volatility, we anticipate the portfolio should continue to generate attractive yields as it has in the past.”

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

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