Orchid Island Capital(ORC)2024-02-23 18:10Financial Performance - Net loss for the year ended December 31, 2023 was 0.89 per share, compared to a net loss of 6.90 per share in 2022[286]. - The company’s net portfolio loss for 2023 was 241.0 million in 2022[286]. - For the year ended December 31, 2023, the company reported a net loss of 258,453,000 for the year ended December 31, 2022[292]. - The company reported realized losses on mortgage-backed securities of 133.7 million in 2022[443]. - The accumulated deficit increased to 341.2 million in 2022, reflecting a rise of approximately 11.5%[441]. Interest Income and Expense - Interest income for 2023 was 144.6 million in 2022, while interest expense rose significantly to 61.7 million[286]. - The net interest income for 2023 was a loss of 82.9 million in 2022[286]. - The total interest income for the year ended December 31, 2023, was 201.9 million, reflecting a significant increase in the cost of funds[310]. - The company reported a net interest income of 96.5 million in 2022 and 129.9 million[280]. - Total shares repurchased from inception of the stock repurchase program through December 31, 2023 amounted to 4,748,361 shares at an aggregate cost of approximately 8.79 per share, with a total of 1,072,789 shares repurchased at a cost of approximately 159,438,000[449]. Asset and Liability Management - Total assets increased to 3.87 billion in 2022, marking an increase of approximately 10%[441]. - Total liabilities rose to 3.43 billion in 2022, indicating an increase of about 10.5%[441]. - The fair value of mortgage-backed securities totaled 3.5 billion in 2022, reflecting an increase of approximately 10%[437]. - The average balance of borrowings for the three months ended December 31, 2023, was 52,325, resulting in an average cost of funds of 5.15%[324]. Economic Indicators and Market Conditions - The economic net interest income for the year ended December 31, 2023, was 323,929,000 in the previous year[292]. - The average economic cost of funds increased to 2.75% in 2023 from 1.19% in 2022, primarily due to higher borrowing costs[321]. - The 30-year fixed-rate mortgage rate as of December 31, 2023, was 6.61%, up from 6.70% in the previous quarter[329]. - Interest rates declined by over 100 basis points for the 10-year U.S. Treasury note from late October to late December 2023, with expectations of over 150 basis points in rate cuts in 2024[393]. Risk Management - The company utilizes various derivative instruments to hedge interest rate risk, including Fed Funds, SOFR, and T-Note futures contracts[295]. - The company has not elected to designate its derivative holdings for hedge accounting treatment, which affects the presentation of interest expense in financial reporting[296]. - The company engages in forward contracts for the purchase or sale of Agency RMBS, which are accounted for as derivatives and marked to market[298]. - The company utilizes futures contracts, interest rate swaps, and swaptions to hedge against interest rate changes, but these strategies may not fully protect against spread risk[410][423]. Dividend Policy - The company intends to pay regular monthly dividends, with a total of 1.800 per share for 2023, totaling 81,127,000, down from 90,984,000 in 2021[449]. Portfolio Composition - The company’s investment strategy focuses on Agency RMBS, including traditional pass-through and structured Agency RMBS[271]. - The RMBS portfolio as of December 31, 2023, consisted of $3,894.0 million of Agency RMBS at fair value, with a weighted average coupon of 4.30%[342]. - Fannie Mae securities accounted for 69.7% of the total portfolio fair value in 2023, up from 65.6% in 2022, indicating a shift in asset allocation[346]. - The effective duration of the company's PT RMBS portfolio is maintained at less than 2.0, aiming for low duration assets that offer high protection from mortgage prepayments[412].