Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q3 2024 Earnings Presentation
34 slides from Orchid Island Capital's earnings presentation, Oct 25, 2024
Slide 1: Q3 2024 Earnings Supplemental Materials
8 Q3 2024 Earnings Supplemental Materials October 25, 2024 1
Slide 2: Disclaimers
Disclaimers Forward-Looking Information This presentation contains forward-looking statements and information. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by,
Slide 3: Table of Contents
Table of Contents Topic Point Slide(s) Financial Results 4-7 Market Developments 8 - 13 Portfolio Characteristics, Credit & Hedge Positions 14 - 23 Appendix 24 - 34 3
Slide 4: Financial Results
Financial Results 4 SORCHIDISLAND
Slide 5: Financial Highlights for the Quarter Ended September 30, 2024
Financial Highlights for the Quarter Ended September 30, 2024 Net Income (Loss)1 Book Value 1 Q3 24 Q2 24 Q3 24 Q2 24 $0.24 $(0.09) $8.40 $8.58 Total Return 2 Dividend Declared 1 Q3 24 Q2 24 Q3 24 Q2 24 2.10% (1.97)% $0.36 $0.36 1. Data is on a per share basis 2. Equal to (a) the sum of dividends de
Slide 6: Portfolio Highlights for the Quarter Ended September 30, 2024
Portfolio Highlights for the Quarter Ended September 30, 2024 Average MBS Balances Economic Leverage Ratio 1 (in millions) Q3 24 Q2 24 Q3 24 Q2 24 $4,984 $4,203 7.6 7.1 Speeds Liquidity 2 (3mo. Portfolio CPR) Q3 24 Q2 24 Q3 24 Q2 24 8.8 7.6 49.8 % 47.7 % 1. The economic leverage ratio is calculated
Slide 7: Financial Results for the Three Months Ended September 30, 2024
Orchid Island Capital Financial Results for the Three Months Ended September 30, 2024 Income Statement Balance Sheet ($ in thousands, except for per share data) ($ in thousands, except for per share data) Three Months Ended September 30, 30-Sep-24 31-Dec-23 2024 2023 ASSETS: Interest income $ 67,646
Slide 8: Market Developments
Market Developments 8 S-ORCHIDISLAND
Slide 9: U.S. Treasury, U.S. Dollar Swap, Yield Spread Curve
U.S. Treasury, U.S. Dollar Swap, Yield Spread Curve 5.5% 1Mo 3Mo US Treasury Curve SOFR Swap Curve 06/30/24 5.5% 1Mo 6Mo 3Mo 06/30/24 09/30/24 09/30/24 1Yr 6Mo 10/18/24 10/18/24 5.0% 5.0% 1Yr 2Yr 2Yr 3Yr 5Yr 7Yr 30Yr 10Yr 4.5% 4.5% 3Yr 5Yr Yield (%) Yield (%) 7Yr 10Yr 30Yr 4.0% 4.0% 3.5% 3.5% 3.0% 3
Slide 10: 10-Year U.S. Treasury Note vs MBS Current Coupon
10-Year U.S. Treasury Note vs MBS Current Coupon 2010 – Current: 10Yr Treasury Note/Current Coupon Spread 200 05/26/23: 200 bps 12/13/22: 190 bps 03/19/20: 165 bps 150 100 50 10/18/24: 132 bps 0 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Jan-2017 Jan-2018 Jan-2019 Jan-2020 Jan-20
Slide 11: Swaption Implied Volatility
Swaption Implied Volatility 160 3m x 10Y Normal Vol 150 140 130 120 110 100 90 80 Oct-23 Jan-24 Apr-24 Jul-24 Oct-24 3M x 10Y USD Normal Annual Vol (BPS/ANNUM) 200 Swaption Implied Volatility (MOVE Index) 180 160 140 120 100 80 60 40 20 Source: Citi Velocity, Bloomberg Data 11
Slide 12: Refinancing Activity
Refinancing Activity Refi Index vs. Mortgage Rates Primary – Secondary Spreads 7,000 8.5 250 8.0 6,000 7.5 7.0 200 5,000 Mortgage Rate (%) 6.5 4,000 6.0 bps Refi Index 5.5 150 3,000 5.0 4.5 2,000 4.0 100 1,000 3.5 3.0 0 2.5 50 Jan-19 Oct-19 Jan-20 Oct-20 Jan-21 Oct-21 Jan-22 Oct-22 Jan-23 Oct-23 Jan
Slide 13: U.S. Economy
U.S. Economy U.S. GDP vs Money Supply 35.0 30.0 25.0 20.0 Trillions ($) 15.0 10.0 5.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 U.S. Money Supply - M2 U.S. GDP - Nominal Dollars Source: Bloomberg Data 13
Slide 14: Portfolio Characteristics, Credit & Hedge Positions
Portfolio Characteristics, Credit & Hedge Positions 14
Slide 15: Investment Portfolio
Investment Portfolio The long-awaited pivot on the part of the Federal Reserve finally occurred but may not lead to an extended easing cycle. The economy appears too resilient and very unlikely to contract anytime soon. We raised approximately $110 million via our ATM program during the third quarte
Slide 16: Investment Portfolio Pass-Through Holdings
Investment Portfolio Pass-Through Holdings We continued to position Orchid’s MBS portfolio with a barbell strategy – favoring lower and higher 30-year fixed rate securities with an up in coupon bias. We have used the proceeds from our capital raising and paydowns to fund acquisition exclusively in t
Slide 17: Investment Portfolio Funding Costs as of September 30, 2024
Investment Portfolio Funding Costs as of September 30, 2024 The interest rate cut by the Federal Reserve in September had an immediate impact on Orchid’s funding costs as our interest expense for September was approximately 30 basis points lower than in August. Funding spreads to Fed funds over quar
Slide 18: Hedging Positions
Hedging Positions Orchid has hedge positions equal to approximately 76% of our repo funding liability (excluding TBA shorts) with a greater emphasis on interest rate swaps and a slightly longer duration. The migration of the pass-through portfolio into higher coupons has also reduced the interest ra
Slide 19: Hedging Positions
Hedging Positions Interest Rate Futures Swap Agreements ($ in thousands) ($ in thousands) Contract Notional Weighted Average Weighted Average Notional Average Fixed Average Net Estimated Weighted Avg Open Equity(1) Amount Entry Rate Effective Rate Amount Pay Rate Receive Rate Fair Value Maturity (Ye
Slide 20: Current Agency Conventional 30-year Fixed Rate Risk Metrics
Current Agency Conventional 30-year Fixed Rate Risk Metrics Below are the return projections under various scenarios of conventional 30-year fixed rate Agency RMBS, option adjusted spreads, effective duration and convexity figures, as well as Orchid’s portfolio allocation to each. All figures are as
Slide 21: Investment Portfolio Interest Rate Sensitivity
Investment Portfolio Interest Rate Sensitivity Orchid’s Agency RMBS portfolio consists predominantly of 30-year, fixed rate pass through securities with a bias towards securities with favorable convexity characteristics and expected returns in various interest rate scenarios. Combined with our hedge
Slide 22: Investment Portfolio Prepayment Experience
Investment Portfolio Prepayment Experience Despite the rally in rates during the quarter and available Agency fixed rate mortgages approaching 6%, prepayment rates for Orchid’s Agency RMBS portfolio generally remained quite low, even for our higher coupon securities. Our discount holdings continued
Slide 23: Orchid Island Capital – Q3 Wrap-up and Outlook
Orchid Island Capital – Q3 Wrap-up and Outlook The long-awaited pivot on the part of the Federal Reserve finally happened when the Federal Reserve lowered the funds rate by 50 basis points at their September meeting. However, persistently strong growth of the U.S. economy and stubborn, above-trend i
Slide 24: Appendix
Appendix 24 S-ORCHIDISLAND
Slide 25: Commercial Bank & Federal Reserve MBS Holdings
Commercial Bank & Federal Reserve MBS Holdings Commercial Banks & Federal Reserve Holdings of MBS 3,000 2,800 High: 2/1/2022 2,987 10/2/2024: 2,659 2,600 High: 8/1/2022 2,718 2,400 2,200 10/2/2024: 2,282 2,000 1,800 1,600 1,400 1,200 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 3/31/20 6/30/20 9/30/
Slide 26: Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component
Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component Q3 2024 Returns 10% 8.06% 8% 6.61% 5.53% 5.84% 5.89% 6% 5.20% 5.28% 4.74% 4.65% 4.63% 4.12% 4% 3.35% 2.71% 2% 0% YTD 2024 Returns as of 09/30/24 24% 22.08% 20% 16% 12.95% 12% 8.17% 8.00% 8% 6.25% 5.32% 5.07% 4.50% 4.56% 4.45
Slide 27: Orchid Island Capital Leverage Ratio History
Orchid Island Capital Leverage Ratio History 11.0 10.0 8.0 Leverage Ratio 9.0 8.0 7.0 7.6 6.0 5.0 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Adjusted Leverage (1) Economic Leverage (
Slide 28: MBS Portfolio Characteristics as of September 30, 2024
Orchid Island Capital MBS Portfolio Characteristics as of September 30, 2024 Percent of Current Int Rate Sensitivity Int Rate Sensitivity Type Face FMV Portfolio Price CPN GWAC AGE WA Mat 1m CPR 3m CPR (-50 BPS) 1 (+50 BPS) 1 Fixed Rate MBS 30yr 3.0 1,313,569,064 1,192,648,971 21.91% 90.79 3.00% 3.4
Slide 29: MBS Portfolio Characteristics as of June 30, 2024
Orchid Island Capital MBS Portfolio Characteristics as of June 30, 2024 Percent of Current Int Rate Sensitivity Int Rate Sensitivity Type Face FMV Portfolio Price CPN GWAC AGE WA Mat 1m CPR 3m CPR (-50 BPS) 1 (+50 BPS) 1 Fixed Rate MBS 30yr 3.0 1,344,062,768 1,163,056,346 25.70% 86.53 3.00% 3.46% 39
Slide 30: Orchid Credit Counterparties
Orchid Credit Counterparties ($ in thousands) As of September 30, 2024 Weighted Total Average Counterparty Outstanding % of Total Longest Maturity Maturity in Balances Days ABN AMRO Bank N.V. 381,192 7.29% 15 10/15/2024 Merrill Lynch, Pierce, Fenner & Smith 379,748 7.26% 35 11/15/2024 ASL Capital Ma
Slide 31: Gains (Losses) on Derivative Instruments
Gains (Losses) on Derivative Instruments The tables to the left present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GA
Slide 32: Economic Net Interest Spread
Economic Net Interest Spread The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income and net interest spread for each quarter of 2024 to date and 2023 on both a GAAP and economi
Slide 33: Securitized Products Returns September 2024
Securitized Products Returns September 2024 Last 12 months from September 2023 return summary – sorted by total returns Last 12 months from September 2023 returns summary – sorted by excess return Last 12 Mo. (As of 9/30/24) 2023 9/30/2024 Last 12 Mo. (As of 9/30/24) 2023 9/30/2024 Excess Return Exc
Slide 34: Securitized Products Returns September 2024
Securitized Products Returns September 2024 Securitized products total and excess returns versus swaps Source: BofA Global Research - Securitized Products Returns for September 2024/ Securitized Products Strategy / 01 October 2024 34
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