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Dec 31, 2019
Orchid Island Q4 2019 Earnings Report
Orchid Island Capital reported net income for Q4 2019, driven by net interest income and net portfolio gains.
Key Takeaways
Orchid Island Capital reported a net income of $18.6 million for the fourth quarter of 2019, a significant improvement compared to the net loss of $26.4 million in the same period of 2018. The company benefited from net interest income of $17.5 million and net portfolio gains of $3.8 million. The allocation to the PT RMBS portfolio increased to approximately 80%.
Net income was $18.6 million, or $0.29 per common share.
Net interest income was $17.5 million, or $0.28 per common share.
Net realized and unrealized gains on RMBS and derivative instruments were $3.8 million, or $0.06 per share.
Book value per share was $6.27 at the end of the quarter.
Forward Guidance
The company expects that performance of Agency RMBS for the balance of the first quarter of 2020 and possibly thereafter will likely hinge on developments with the coronavirus in China and elsewhere and the extent it impacts growth prospects, and therefore interest rate levels. The company has continued to take steps to lower the exposure of our portfolio to higher prepayments, but with a slightly different focus given the exposure of our portfolio to a potential rate sell-off and duration extension should the coronavirus crisis abate.
Positive Outlook
- The company has adjusted the coupon selection to even lower coupon securities.
- The company has changed product selection to fewer 30-year securities and more 15-year securities.
- The company has reduced the concentration of high quality securities where the value would erode if interest rates were to increase and prepayment expectations drop.
- The company is repositioning the portfolio in light of the new rate environment and elevated levels of refinancing activity.
- The company lowered the weighted average net coupon and upgraded the call protection of the securities they owned.
Challenges Ahead
- The extent and duration of the potential coronavirus pandemic remain unknown, and therefore the effect on global growth remains unknown as well.
Historical Earnings Impact
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