ORC - Earnings call transcript Q3 2024 | Orchid Island Capital, Inc.

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Operator

Good morning, and welcome to the third quarter 2024 earnings conference call for Orchid Island Capital. This call is being recorded today, October 25, 2024. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith. Beliefs with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Security and Exchange Commission, including the company's more recent Annual Report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements.

Now I'd like to turn the conference over to the company's Chairman and Chief Executive Officer, Robert Cauley. ahead. go Please

Robert Cauley

and Hopefully, operator, the Thank for with you deck, Thank has good had us. us. along follow everybody they download a joining so you, can morning. chance slide to

we've I start, results and developments our financial quarter. that of kind during respect the to will during off, a quarter the with over decision-making how for ourselves portfolio the the to did what we by substantial discuss I'll we'll performance the our into our start then the Then dive characteristics there's occurred our portfolio, outlook, positioned and then going market portfolio. Then and appendix. shaped Just that

have that just that, we in that's lot use. is your go that the you reference. through So for appendix of We a information can won't necessarily

modest respect the $X.XX modestly annualized income per of XXXX, was results, amount third X, quarter. I'll TBAs that for number, So dividends. our slightly. the more not for a declared quarter. during $X.XX during increase bit quite say and positive declined decline. The The second financial Book of net X.X%, short quarter the an from $X.XX the Orchid just that's because a ratio book-value predominantly with a balances to That's quarter to $X.XX. tweak loss these total had return versus minutes. portfolio the a that we average share. slight $X.XX are about That's of The few to value in did expand a to leverage have obviously, did and a of were

going in over up financials dive was you today, to much I'll those We'll the rally quarter not from that have releasing liquidity our slightly the review. time. later versus second to can at in in-depth is into X for in modestly you has those. quarter. Slide the our with our so XX-Q be go leave it a I'm increased statements. just our X.X% speeds during Our where rates, and line, to more financial relatively X.X%

market our developments, the Now which turning results. shaped to

you cut mortgages. was was we curve quite did we until got for to quite Fed of this were quarter, were quarter where Just Fed expanding kind more things come With data in one. in for late the at the that and a and for the down. basis That market general. things things inflation of end good. trending and start, if data the people to Most paid attention and curve substantial the change. banks Most meaningful reducing look way, quite second mortgage steepening point were good rates, REITs, and looking Fed and well eases, of back data outlook for in anticipating in the were in labor look to in to, was fact, A NIMs the XX potential the in September, was space, steepening, the

is that wildcard kind of which pricing probability some be It twofold. few as a election, it of months course, that to be but appears resilient. it's It's the we consistent tend appears who administrations Republican then of approach a are markets. as dire Republican you any have that and pro-growth. the certainly sweep. is for looked well heading into as September of a data just The in We may into quite was to lending, the kind resilient aware, no not one time. of economy, market Traditionally, And most robust got big October, may with soft quite certainly As some lending, knows, be recently, we significance ago. a a late not a that more recession in

consistent that growing, an And President of, well. based course, be to be and, put thought not kind extent as economy they resilient So the on Trump's deficit. would maybe rates the as pressure soft had that that and that expanding we pronouncements growth. And add of some the much would, as would, one upward tend second with to on then, is just to of more course,

be is resilient comes transition since how market it's There's somewhere don't next the we'll the looks, We to at this the in get election the don't is GDP we're as data around going it's the evolve. to period going play It We the out to moment. and really week but So looks going of uncertainty of just X%. now economy know so in lot moment, if end like strong. how see, it a the out. quarter. at know to

So that going to that means amount be soon. probably, rates it's not a meaningful not any are weak rallying economy. anytime And

If was The and end green the line quarter. look blue line of we quarter, you on red of can third you we end the see that Page the of the is was top-left, last were where the Friday. at X, where as the at were the second line on there

way been X higher have steepened, on be the than of more still spread bottom, can you as the Rates today. go in are is would last although We what then kind but a to moved days traditional the levels. see some off, a sell stabilization to we that has continued there. from long And

XX-year XX-year you This just And XX. mortgage. to mortgages the here. this current see, range of data the can the coupon is is Slide treasury, to spread Turning a

quarter That a the said the this This people right, reversal. is the XXX But that it's until of of quite morning, as week so you points. day. Monday So this rates, just and of we've had And extreme for Other table this basis don't much widening on hasn't was for run look of We this mortgages kind number products Friday. reversed. about in of With Page quite pretty this normalized pick buying and QX. now here spread That And mortgages been on, coupons. up. mortgages to again, market to last number every curve. The but data be very it's can if is you, uncertainty XXX the hard not mortgages as a select until a of was of are pretty see tough affected you kind resolved, shows downward-sloping way. through is prices I We bottom-left this severe. meaningful in portion at north in good XX says for as going seem it particular. just since any is for uncertainty are, generally all have mid-September, market, this a late.

amount the that they the up spoke. the be better so If the Roll in third you rolls were activity enjoyed the bit will numbers XXX is generally meaning coupons last than higher a that, of a those quarter. but gains during fair much update to when better lowers, to these are closer line little not in have that, we somewhat coupons, given

driver volatility, performance. to on important a of obviously, mortgage Moving very

the far side see page that, on we've can higher. You right the been trending of

it's you If again the And a close were to day. update next we've MOVE got yet, XXX horizon. We've still report one got the higher on non-farm index. today, this to meaningful payroll through up events on

Fed Xth, have else We on data-wise comes the and Xth, whatever election and that. on then the the after the

XX, outlook is see don't elevated. the bottom-right, either fall, top-left generally activity. for gives to I that's see that I did some we but to a have would a for just the bump, or refinancing expect short-lived say do small be remain see volatility And you can not and bump the the it picture that you phenomenon. you at could was of that So mortgages. Slide near-term in least good

about is prepayment are here, is for see, of since just think leave and there's quarter, became incredibly the the United elevated moment, I just line XX-plus supply how abating. Slide deficits, you is line trend any dollars. level of case. And slope extent red third and seen to the I'll its money represented peers plays GDP years, really of current economy blue of we're in one the hard And Nothing out in and levels, concerned Spec in the forward, growth, and is there the that well pay-ups as debate. But But and we've can with fears for now, see doubt above the growth line purview, money that. that don't It's During the from to did GDP as the money These be pull this your the going very that was has it's growth supply. risk. it but to line, would pandemic, not that's be much really kind far as my really to prepayment that the by which the more the for possible effect benefit supply But stable. elevated consumer People clearly expand materially. lines blue remains you numbers so States nominal the those were real. the favorites. weakening spending. seen of seeing the XX, this cause continues, of fact

means And so, don't what supportive be but seen, it a big to rally. remains rates of see for I being that

ourselves of of we've how going repositioned, turn we've how happened and kind Now done, to positioned and forward. that's what's just been kind market the in what the I'll has portfolio

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we And talked past, So coupon build basically acquire that about barbell quarter. the a a did substantial we growth the pretty in the wanted out to portfolio. for that mortgages. how way We've higher was

we have done fully Now so.

very coupon a has up portfolio in the now fact, In much bias.

from X.XX%. X.XX%. was the by the into result our XX by around points, basis to the on portfolio to XX expanded, X.X% X% The yield that of coupons. So average basis raise to X.XX% and points X.XX% deployed were coupon, proceeds And

the which since Now widened rallied thing with as predominantly said were that's combined that years. the fears. it's outperform a And during rates front-loaded years these assets, I'm a the being were, our said, rates, hedged of tenor XX extent. We most That the to quarter. -- fact prepay allowed sorry swaps of assets hedges, the we one to with assets, result underperformed is was well selling a a result which rally That this of as I those little probably that quarter we and didn't during us quarter, said, which the that a quarter-end in bit. as in rally kind swaps shorter-duration longer do quarter result, just duration with and with X during off, large being and deploy as of the longer when

that I'll say about in more moment. So a

just XX, assets. Page that's with what the So you pictures. basically happened this upward coupons. in added shows to respect We've

see which substantial have kind Now of that, does event kind the to-upper you left of on retained coupons. But can that have holding said, market discount clearly securities, a far there's bias a of characteristics the great back. in the rally we being

is bias. So just has still the It in coupon an barbell upper place.

clear had just of more of one Fed that. funding, was felt to It repos roughly in which benefit points, that respect immediate ease, with an thing basis artifact Now fact of an is with XX That's the we role. the was September.

repo can that, artifact They don't for And we chart some but it as to that's so, this, to data it That's of this says time. The our was this. don't you somewhat X.XX% It's stable, drop. for how points, rate misleading. I been versus just misleading. XX appears average an dwell the want funding remarkably instance, X.XX%. do had get our has basis on immediate we on cost very allowed but imagine

was portfolio it grew quarter, we As front-loaded. when I be the tending mentioned, more this to

the interest the we that in expense the had for is denominator will, just balance. if So average calculation quarter. But you the extra load,

quarter-end, quarters, prior what it to are respect no is there normalize. I for like month-end, to see markets, point, have will were kind been what and that makes cost year-end, it XX with do growth, basis fact the that really look repo a they And our so points. But you'll our make numbers and is period in funding one than has I spread. as the in the slower roughly That's average balance some think lower are over growth those is the low, is costs, have funding that higher. misleading. or we expansion And funding seeing we And of of

it's repo, SOFR funds, a instance, So for and to into when enter do Fed we or spread to over those expand those spread a periods.

is it concerned offset the Reserve that members Nothing of benefit do over to about they Board, definitely from at to evidence that's that. cuts, acute evidence hear is across the starting emerging. From some and there funding those So the don't we seem of the but are happen. pressures clear What what least happening from there be desk the it's hear and various Federal funding the yet, too street, Fed that is of periods. does we

So are additional easing XX seen, on the eat quite of point QT exact the The And we some dealer liquidity there. being is amount. it's get to or there the basis out definitely by from be to into so, full. it's going and average, doing whatever system, remains easing, balance sheets Fed that extent is drain but

how see respect watching. With out, much plays we'll that positions, not to worth So really hedge change. something our

hedges. less will point the up migration of lock market be the end coupon, opportunistic are second reliant try shows funding slightly done, have SOFR in than economic really at heavily They quarter. Slide thing data, with to securities, liabilities. be our been top-left price combination One is portfolio the our out And gotten easing, tend Fed to continue We bad which and respect more caused those bunch of swaps. defensive put that high in Whenever just XX we the very to rate-sensitive to market to to in a it the the we percent rally these. we've of a We've the of you details which adding the in. on in I to with more of is that futures. the was cover

us a swap or pulls, and again helps higher of expansion, rally, fact rapidly. on as in Otherwise, did of of we're aggressive million. Slide advantage for just pricing don't so, kind to the to a appear and $XXX shows not don't less funding hopefully, spec because there add see we of And our Fed it which coupon defensive the portfolio on at. you some based take stack. the interest -- did of Because XX lower-quality swap have sensitivity XX just about eases sell-off, at tend just to some a been generally than mentioned. -- newness lower at just we did across the future the in which looking something move been not point frustrated This shape future has by positioning. Speeds, just other shorts can that that future is positions, is market the the kind our that's X-year out a a shorts. by the we has And into of is and in in some SOFR result selecting locking growth X-year typical, that and been And a expected. shows a anything is rest of when and do bias product the cost. the as exposure, and combination prepay those of say lot X-year they our very securities, we rally I'm decision-making. Slide they moment, portfolio, we the returns expected you taking going a another that, little to rate see coupon always better you you of but to this that the I can that a the things and in of and

speeds that Our weren't high.

that higher have going heading we're likely experience that summer, but August, means seasonal versus to then, the better these seen And or which prior it speeds, we've can consider securities, print had, not you we're off the that quarter elevated. rates X% X-month and the cost you slowdown, securities had carry. high sell to in see that the a Our they're we speeds slower into when seems

in higher and we that slight for realize. be the mentioned, costs. of combination And the we funding are prepaying So that yields slower portfolio, should coupons higher coupons have beneficial in our improvement the a I as

some. not So there benefit that modest, NIM has some but been going expect forward, realize to our to we

where far, so with modest third structure. have gained some extent continues, of amount we here. But out. might with the market those very X today. And here. And easing uncertainty looking do or that bias, that as be up-in have think to in expansion. is potentially now less spreads, I cuts. able comfortable the strategy, fourth said, now has result summarize, of to being our what we given hoped, continued we're That just market well being a get for for our We that up, the So It long with but continue we said, of have this NIM because NIM but terms employ was pivot, may an if of I maintain We what as we said, coupon And quarter to extent we said, have years weakness really hoping to leverage and seen and not developments from rates and play of suited not the very I be to of think mortgage it not ago. for. the too go back of which back to hedge be lot fair that and But market positioning overestimate yield, we continued as barbell the had a a the looking the our there's the economy, these level just arguably conditions did expected the a may dividend that in to therefore, we back, expansion forward, quarter. rate the extent We in both Fed haven't high-yielding portfolio. in have continue do timing

evolving. And can the things see that, That's over to the with of we So that's call we think operator. kind turn like for it questions, quarter. how I

Operator

question of first JonesTrading. the Our Weaver Jason comes from Instructions] of line [Operator

Jason Weaver

expect the you Xs your that years benchmark over taking into at during rates Does going forward? TBAs this in that reflect the the relief you this all coupons. of and but low account the Xs on favorability touched into the bought next mortgage short it you a change XX remarks, strategy view barbell in and XX up and little And Robert, First, does the months? the

Robert Cauley

a Well, we do a coupon. higher bias to

where don't forward so as in them rates just firm at to to whipsawed. have get thing And just though is can here, And a you the would because go higher. to there's look so, it's going if for from are, I certainly September, you one we think be say we can I rates saw tends go on volatile. where data view -- that, hard they

So to keep the for reemerges, go the can growing, higher. rates see to same the extent deficits inflation the economy go is magnitude lower. stronger, potential I they don't

Let's even the a funding we're going -- -- going we is. I is cut in that into won't economy to here and that amidst say is. the to know level mean, totally to what is to whatever recession going that the go to it's neutral, go

you If to could the look be X.X%. at that clot, X.X% dot

to Let's I of be X and curve were over say much it's the we're should the if X%, than they out? tenure where to mean, shakes less X now. rest that scenario do in X%, you the cut think a little

outlook So I asymmetric. of the kind is going think forward,

rally will don't coupons, why coupons in of So because in underperform. saw in just throw can higher like third have because the lower the uncertainty, we and bias. we But up want that's coupon of on you a the quarter, towel the we this to kind

that? add to want to You

George Haas

times like getting the current spreads Xs Yes. or -- where tight. lower swaps, XX-year at of relatively when versus the strategy for get spreads when is wides year. write I versus about are mortgages the environments The to and mortgage lower do But we coupon They to lower look home yields, during we're back coupon have now, carry like to portfolio. nothing

positivity going those that we tighten, the spreads the would And rates where to time like on. underperform and those, have expect In rally. rally, again turn-around higher really the so, of duration into the now get spread is coupons to event, are we when and we most out

conservative So we I is strong. bias, a more economy the a sort guess. felt like have intentionally of had very It

futures. one to lock pricing point, to We X As -- months opportunistically in of I Fed we about aggressive months. pretty next the we've cuts X in X opportunistic in earlier, amount we're were alluded via think to tried pretty the Fed Bob to those SOFR were over locking rate. At XX or

third And positioning. widened. like through quarter, and for and now turned around so, sold we have off all that wasn't looking rates our It but great us the

strategy so, is we to And like the work. continuing feel

Jason Weaver

side, into like Got looking it. That's though that bit, looks then September. ahead the position, dollar much on appetite even the comments election? color sort in actually the regarding duration comments any a about coming at came not Any is around around few you same And months? dimension you can a expecting swap us the into changed made year-end hedge risk color. next other give I mean helpful ratio your on there it volatility down the of -- the some

George Haas

we end to trying by add long elevated, see well. funding. in did XX%, as mortgages And hard on movement seen That's by hedges. the curve, of lot perform anytime book futures offsets really SOFR that off Well, of are positions grow in that this volatility, lock the going swap did spreads we the of our not portfolio dying -- of Yes. that soon. And as a added is We've the of the effectiveness it's but those to that some where to -- we would grew not to kind which to I swap front amount.

much the We have of earlier there decimal lot other forward, I he to one point economic were anything. And was business of Going a very And Kevin a you at Fed recall, in hard out he bright any every guys to was exact a words, point. In And data. know you right payroll number. really it it's not He science. And waiting exact And And revised next to going multiple at non-farm times. are this year, we data, economics XXX room in by have volatility says, good Governor, meant in says it's was and points, is a lad. lot data the causes fit. science. investments what he summer. conviction basis for of speaking the rate Basically, up revised quite has he much with and data made in his the seen up the domestic in probably comment so of just GDI, a revised, having Warsh this really just no get may data-dependent being is And savings about very in this stuff. this numbers -- that revised those they're was volatility. breath we've a a conference it's

have data So a making and the all we that's volatile extremely that's Fed based decisions, to subject on revision.

remaining to the in really chaotic it's hard least. to election, So say see And volatility low. it's been the

know who We don't knows, going know who's the who's going pass-up. or going win. to don't the when Senate. know finalize results. control the they're We to House even So a to don't We it's

be could for while. it bumpy a So

Robert Cauley

lean were at the We sort much and the to rates about try Yes. the a to profile and the one be -- we we same respect -- not we portfolio, the or and have really of try bit that down myopic -- house in -- fast very With -- have of view in were time. have leading a seem to to to I just a little of camp a little think come direction of the quarter-to-quarters reflects but another. and

have as We make coming ratios hedge delta needed adjustments were when hedge way to in down.

we quite reversed and haven't did course some into the yet. we So trim some rally hedges

any more start got in of the offsides have I portfolio -- respect too hedged. make to, but anything. reflective our just change it's big far we with whenever trying to than wouldn't say just we're and sure we're mortgages we So core shorter really is get getting don't how to we rallies, fine-tune position,

Operator

of from Citizens Goberman question line JMP. next Our from comes Mikhail the

Mikhail Goberman

your lot have things. statement of to to recent conviction I be it's applied in forward, hard think of can Bob, now going that a anything just a lot

that's with outperformed So there. know value, that might end a just -- think point bit update have you quarter? mentioned on can you might the be you If an the very I I start of much on guys since book I

Robert Cauley

We estimate every from quarter-to-date. as of Yes. were calculate day, yesterday an and X.X%

Mikhail Goberman

X-point? sorry, I'm

Robert Cauley

down the no in that's X in bias. duration of mortgage occurred our market spread And the overwhelmed or in days. of last effect has -- X widening No, positive X.X%, slight the just most the

Mikhail Goberman

Right.

around portfolio. statement looking view the and could curve, as and pass, release, the come If at a maybe portfolio? your that greatest bear steepening construction the in thoughts prepared risk the you remarks Just just were here drill as the your the if press continue that how your that, as to yield to that situation hedge into I down well would affect to portfolio to

Robert Cauley

especially the of think coupons. the I -- bear I said, steepening as extension Well, and higher mortgages, the

We have a higher coupon bias.

hedges a fear extend. were That's -- they modest the you hedges. the know. swap or So And the as premiums yields But start of to we premiums of not maintain highest would big that seen space, take of a potentially yield. and point those we XX-year I sudden and could bear premiums, you try X NIM with why the that the lot steepening, drifting in improvement the think so to leverage in down be X-year our all a some get big if one even also rates, X, down discounts already price have the we've could become we

need expand So it's not like we to that.

have We do that. And no especially the all out there. reason to that's uncertainty given

reason aggressively, more would desirable, we we we market that it be have rally but was could happened, to that's was dividend the positioning, same of -- mentioned, outlook and ease if didn't the Had do something months that then rally, going the as steepening. in of And let's Even didn't less see the that that Fed especially bear next So the to if kind anticipation leverage yield pay see were and say, of X happen. going like, that. data change our the were horrible. we

bear as -- a we're still that's steepening being so, we of the And the severe. most risk why see

Mikhail Goberman

of on X piggybacking like kind to X.X% leverage economic to with your drifting now at handle, a that -- that if just the the maybe just situation leverage, of And question, arose? comments end Is respect that quarter.

George Haas

played in usually TBA that outright bit. shorts if sudden past paydowns, that's know violent little the before done so just it combination a and/or [ ], nothing generally, we've it. out, portfolio investing usually if The you it. the and it Yes. slow-growing is a It's it we would how of It's way not much a a was on approach higher, how can adding over to there's But selling. do. depending usually And shrink let is you not

cushion in X% We the it. and particularly -- X.X% have X%, of with some buckets the

frustrating because into continue us, little will course those the quarter, really in to have well. sell-off. that the those think the rally I particular bit third for do not reversed been coupons It's into a and underperformed

think just, to and uptick due in I that's volatility the uncertainty.

still like though them the a have strategy those we would we really expected ripping to particular sell-off. into aren't, So even like coupons

that think current towards bear start them. And see move. will get some substantial where chance and to to uncertainty great is in -- those of that those we past portfolio we it's going we this a steepener through for the -- of good carrier to of get we'll levels, these firm some a there's at up. this rates be The own. If the be behind to and XXs, stay I us, assets blow a I alluding even fantastic going be worst being what on back sort X% on Bob case one think will is

shock. opposed have a -- just grind that. to It's So we be as to adequate going for prepare to probably a like quick opposed a we to feel time

be So watching and reacting. will

Operator

Janney of Scott. Our Stewart the question of line Montgomery next from comes Jason

Jason Stewart

give the us quarter or X.XX% cost an -- I average. Clarification that? end you repo was misunderstand was quarter that did number on at end, Could

Robert Cauley

interest billion was a balance grew -- by total in average since the the average X.XX%, you there been repo down. number and expense think divided it's present as so so then Now growth balance north $X.X And way July. But fact, in the by we for -- the fast date have balance I repo The of the average of $X.X just we grew the the was little quarter, at take that front-loaded. quarter-end, and the would was actual our the just billion. But under coming XX% is, balance. end was that of

quarter. a of more for was load interest the So

makes expense Fed it like look months-and-months. stable. average moved had it's our higher, mean, it is the So I been for repo but

funding what [indiscernible]. see any Francisco to so [ average brings. Head how the to run QT. it, used I we tightness not San consistent these That's out, basis and October get more at should that constraints and XX they ignore I markets had running to that there's higher were things did XX that We'll spreads there. appears then as repo in elevated year-end were balance consistent we'll it's -- from September. We funding. been, down XX who but to some the the on and Fed what Fed, steam people continue mentioned. When Logan But funding in it's think and live with of mentioned, of end, than with and out are about depending X.X who head that are it they're day-out. see basis hear a the the November, sheet with little and because that There's In day issues day-in came from what mind we we'll as on you her in full somewhere talk plays in no the speak easing So that Mary markets over range, in I of exist quarter that have, down look the then ], spreads there and XX they you be points going points

George Haas

XX or several context pushing to over funding SOFR it's whereas And months to and just we for were at give maybe Yes, gapped -- XX to XX several, some XX now. out is maybe -- that's anywhere

of very is book are it could -- into very points our -- So basically right is which of but resetting low-Xs levels Fed now, a year-end. But handful things funds see coming change, of as position. to especially where those our are of, new is could course, material, and basis rolling -- watching we'll repo high high impact kind high going Xs, sort are the we'll,

Robert Cauley

added just on Let some give you me color that.

to that, high work some you expects cut market in one of lot be of pressure. it's the Fed at see something uncertainty going there if consistent that a November curve and there's what through north but pretty for say you let's the look fund with could of December, ease. in also you right? year-end so less probability week, So on right? So balance around have futures screen, year, So this you're the know, But the funding instance, the a

a would got should X-month as wide. talk of levels be offer of north quite and certain market dealers, that and for that today, you some if to that And can funding quite pricing we combination maybe you. All you also it go uncertainty bias. to repo as get of combination what So and that of reflecting as going a be that range year-end. a in their low factor can eases. they're X%. X.XX% And wide pressure We out over saw a And

seeing. -- So we're that's what those are -- that's

Jason Stewart

Okay.

Hunter got head on that Hunter the it -- there. was Now you

So days most over X, mean, XX average should and X.XX you with puts I XX of mean, I'm your you SOFR. over at to repo maturities, I have GC XX like rolled seeing now. and XX to XX by

be marginal the should and that quarter here? the from we'll to it X-level, see like going repo goes closer So through where now

George Haas

got Fed a meeting of X. we couple Well, or weeks in a

what see still in we'll pretty of probability pricing happens. more. XX So Market good is

coming So -- put as -- And goes. alluded quarter. on we September we'll we we that that lot lot we've earlier, the put on that a a contract how into fourth to see

what think rate So with I $XXX -- have million we the like it was at with -- least

Robert Cauley

XXX. over XXX,

George Haas

we on. put into the those time baked basis XXX eases points market at the of

Jason Stewart

Yes. In this year?

George Haas

at XX we're yes. -- And now, looking probably

Jason Stewart

then for end XX.X% marginal I plus looks a you any was question quarter the at Got It plus if other we good X.X% mean, much metric, on-book at then the operate. you And ROEs? mortgages it. and dividend just was cost where like on look at pretty to total the it's return. look of relatively quarter the a see XQ

So marginal marginal the your How do to ROEs ROEs about mind relative hit that you level? thinking dividend? are in

George Haas

looking probably slightly. expanded I push they're we're said, dividend as -- think But the they've yield. not I

front there high me, very to don't in got have be So the it I would of number I -- say teens.

So you basis, got not it. figure on to over close if for hedged to our set yield, depending X.X% you versus something we're a on in be pushing you've want going the your where XXX% to leverage mid-Xs,

we can kind clearly -- to numbers. of get high-teen it's those So

Robert Cauley

over coupon we hedging XX-year for sit XXX now, with Yes. par swaps. -- points right -- of But years XX mortgages, with some SOFR spread the basis

operating So that's high-teen definitely a environment.

Jason Stewart

that. sense on are you're in I at mean, we how mind weigh XX%. potential more your paying one and the just in the build let's you book that, do, And out to XX% value sort of say,

feel get if is Do you dividend weigh for yield? book in a marginal of how credit so, And like you capital? dividend that high the such there didn't pay potential that do payout. like you you you feel growth Or do retaining

Robert Cauley

last was are. point Board with topical easing the discussion And so we That of and very 'XX it's get a in the we thinking to we than were discussion, more this had possibly more us actually late. -- That's it 'XX. we're than appears time going

So the paying question, get Do view you don't retain generally for do consider some you is you Our that. tax? that? rewarded

If they you tend discounted. pay a special get to dividend,

pay that tax, tends to I we're drive think extent you which to serious Yes. they can either, for rising we'll especially they it's consideration. a retain earn. But any, give to the might to a any benefit out very something we that, seems if in pay If environment, nobody rate give people you what

George Haas

tax we'll going we're an make to think we're a a pay fact to environment low. the of to an to for from extent where what the maybe obligations. slightly swap little bit. that over-distributing decision that A as our very to this is rate transition under-distributing 'XX, is fixed where stemming I into do were we we lot have to environment have And then, from

for distribution that it's mark-to-market purposes, going GAAP have are already for so tax, to And we're going we to but -- but been have requirements to maintain.

alluded with a just and soon we the then, think tax want we have we'll the a take to throughout maintain Bob little to have obligations year. and we expect anytime where to rate. And respect the extent can we wouldn't So the make slide have down end 'XX, leverage of of bit decision -- stock the dividend under-distributed -- let as I the handle sit to to to, some I change our to that at how

Jason Stewart

Okay.

George Haas

Yes.

Operator

& Thalmann of Our Nolan next Christopher question from of Ladenburg line comes Co. the

Christopher Nolan

you look quite the down that I guys guys as dividend when for Bob, overall book had various reasons, hitting ATM in follow-up discussions at high, tend but the How you're of performance? including value the to Board. or and yield talking is the previous hard. Board the has Because to pretty you declining been you have do a so when forth. question the with terms to yield

in a terms color give look shareholder at how you little Just returns? guys of

Robert Cauley

now -- case. grow we at perform I total so willing to And we much ATM. discounts the was relative or we were book. When are, was returns look given We Well, where to to modest return. opportunities the justified. always did the total it very at think saw portfolio, Obviously, run not that's it very

in when gain to quarter going were down. total So traded we be some it's actually relative bought basis. late scale. But we're to not no, using portfolio when shares the very fact a were we times return There to always in the on that. We grow back anxious

and QX, for the of that's Not now. we potentially steepening were easing aggressive a easing of case because now. and not highest and scale. That's as an so the us that some QX the allowed verge much it interest be Fed of ran on a environment book one cycle, thought value well cycle, an dividend, we in so high both the in grow money where the space curve, the we the to reach sure high-end. We in case net you yields had attractive on leverage raising a performance, So were ATM much the the know, We very would and margin.

to pull the we'll to, maybe looking result, slightly a as of just even at alluded from under-distribution. point Hunter As back that even

that's and there while, quite our dividend to see. for we'll aggressive So when time a behind our maybe but with we being, the probably for the duration, leverage us was a were time to grow, and try more

they that defensive but Now on grow caveat, understood high-end it's as with the in given leverage trying look at also for posture. And to run total do, they portfolio that. Board return, a cases, instance, of I would the what just all said, the and that we were more

running of extent, and and than we aware part to They were the higher violent else, decision. because So of that, leverage they everybody underperformed. a we the we were got sell-off are

Christopher Nolan

which Okay. accretion? have guys also, you hedge adjusted EPS discount income includes number, economic then and do And Hunter, an

George Haas

don't little not did X We the a generate have to when it generate don't which it's if did in we away that we've tended that. and that But the more table out put know questions later we Q, of in from it coming We is found answers I -- quarters in gotten prior I that. that in kind there. than think today.

If head. top have of I I don't on can try that. to my call, it you you get

Operator

[Operator the next of BTIG. line of Our question comes Hagen from Eric Instructions]

Eric Hagen

like proportion you do the now? And think the would adjust TBA? think leverage how do TBA adjust or spreads the guys topline about How size of of you to mortgage lead right -- about maybe feel raise the that guys So your position do potentially position? were if you you that wider,

Robert Cauley

they higher be to TBA them higher are pretty the vulnerable, coupons. with start that those or But might and shorts, for to Xs just, a hedge as we're a the I looking do those do we bear-steepener. a where of the question a extended was given in fully to potential good also because most moving a It's think easy at considering steepener curve It be those instruments. mentioned, may I coupons as are might steepening it's bear-steepener, or a -- it more

George Haas

Yes.

us levels cheap, picture. We edge bit the actually them something for been pools, TBAs buy at have to and get there's funding the role looking earnings opportunities is with of or a implied always to the if to sort little are contribute specified sense and TBAs -- rich

the And benefit the what to convexity stack the finding to something at back turn that and we're to bumping little convexity. We that also protection, rally kind upper use worst those finding was around. a the us about of end, towards event stack have we like the convexity are coupons the higher up of rate depending where cycle, of that's the we has at in to -- in the use a to in bit short like the look of TBAs, Bob of build in alluding -- now the

which so sort we coupon we environment. if and kind relief higher that the also the with the of sort of the rate -- As to rally, going turnaround get approach higher have do are that convexity some underperformance would mortgages, help of for of a worse range, of in end

Robert Cauley

a negative also, had is long, lot on. And long time, for X for we to so that quite on and shorts of very role a that a easy while put it's

Eric Hagen

the appreciate color. you IO actually I want position. that. about I and to helpful That's ask derivative

You position from guys to past. in supply -- maybe change see you have this And the that you been are were curve here? even going in -- the do environment, adjusted pretty do forward. active a the agency or the -- how there derivatives getting How in of toggled, shape if or of

Robert Cauley

lot lot strats. we're a say, of a you interesting different It's running tire kicking, doing of

lower coupon general, the of legacy hedging think the perspective. of mess but from don't kind a they a love profile have I they're good IOs, I in yields,

too refi production. I in of the least going -- X.X%. sort, especially much last dialed are I the some been are at been high-coupon recent we occur, think are more when really some you where ever of for point IOs, the pushing about created at I'm to production the just X-sided to get been mortgage years. couple models space, environment, X%, -- doing know over or risk not that's actual rates very an or sure we the that's if back hesitant the did where for that in the in we explosion have were with We have have because really some

to think around So we some there's Also, though, space. of in have fast speeds, seen Ginnie uncertainty I some there. kind tend particularly

has And there a been there. cheapening so,

And given then what that derivatives that kinds can opportunistically mortgage that think medium-term, I look And so we jumped recent the just more of this looking, add it said, find just making the the in we're opportunities kind of and we'll there compelling. But have all are I haven't profiles some we like. yet. we when is quite sell-off course, of less to over of

little use has some that the of kind either the duration is the simultaneously the little or so upside that bit and to can some in bit money, a portfolio, of something yield. it mitigate while a we providing money So at real of of

George Haas

there's floaters And on demand the desk. still huge CMO for

and were obviously. with months few cycle So very created there They've thinking we easing ago inverses everybody coming. being big were a popular a getting up were those cheapened

Robert Cauley

into cuts -- year. Yes. some a looked well. priced I've of the inverses next still looked lot there's I at some we've And think at as Fed

reins inverse parade. don't think, could that definitely the So easing it's have their there in space, on will IO I market vulnerability to but Fed There could think I they some the be quite extent the just moment. yet. be

Operator

time. back further Robert like turn no remarks. would to Cauley, it showing I'm this at to now for closing questions I

Robert Cauley

the to shout you to to holidays Otherwise, To want ask to extent, you to the up the great the feel probably any Thank try end you call, anybody of and Thank Have the to that we all a you, you, again call. Chris, has you. that replay if at come know give or forward a questions just talking you're operator, number. quarter. look chance and us well. thank everybody. question, listening didn't fourth be have after and a free to I get to

Operator

conference. today's in This does program. participation your for conclude you the Thank

You disconnect. may now

Orchid Island Capital (ORC) 25 Oct 242024 Q3 Earnings call transcript