Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q4 2023 Earnings Presentation
34 slides from Orchid Island Capital's earnings presentation, Feb 2, 2024
Slide 1: Q4 2023 Earnings Supplemental Materials
8 Q4 2023 Earnings Supplemental Materials February 2, 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 4-8 Market Developments 9 - 13 Portfolio Characteristics, Credit & Hedge Positions 14 - 23 Appendix 24 - 34 3
Slide 4: Financial Results
Financial Results 4 S-ORCHIDISLAND
Slide 5: Financial Highlights for the Quarter Ended December 31, 2023
Financial Highlights for the Quarter Ended December 31, 2023 Net Income (Loss)1 Book Value 1 Q4 23 Q3 23 Q4 23 Q3 23 $0.52 $(1.68) $9.10 $8.92 Total Return 2 Dividend Declared 1 Q4 23 Q3 23 Q4 23 Q3 23 6.05% (15.77)% $0.36 $0.48 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 December 31, 2023
Portfolio Highlights for the Quarter Ended December 31, 2023 Average MBS Balances Economic Leverage Ratio 1 (in millions) Q4 23 Q3 23 Q4 23 Q3 23 $4,207 $4,447 6.7 8.5 Speeds Liquidity 2 (3mo. Portfolio CPR) Q4 23 Q3 23 Q4 23 Q3 23 5.5 6.0 42.6% 35.1% 1. The economic leverage ratio is calculated by
Slide 7: Financial Results for the Three Months Ended December 31, 2023
Orchid Island Capital Financial Results for the Three Months Ended December 31, 2023 Income Statement Balance Sheet ($ in thousands, except for per share data) ($ in thousands, except for per share data) Three Months Ended December 31, 31-Dec-23 31-Dec-22 2023 2022 ASSETS: Interest income $ 49,539 $
Slide 8: Adjusted Economic Income Results
Orchid Island Capital Financial Results for the Three Months Ended December 31, 2023 Adjusted Economic Income in Dollars ($ in thousands) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Interest income $ 49,539 $ 50,107 $ 39,911 $ 38,012 Plus/(minus) discount accretion/premium amortization due to paydowns 8,067 7,2
Slide 9: Market Developments
Market Developments 9 SORCHIDISLAND
Slide 10: U.S. Treasury, U.S. Dollar Swap, Yield Spread Curve
U.S. Treasury, U.S. Dollar Swap, Yield Spread Curve 6.0% US Treasury Curve 6.0% SOFR Swap Curve 6Mo 6Mo 09/30/23 09/30/23 12/31/23 1Yr 12/31/23 1Yr 2Yr 01/19/24 2Yr 01/19/24 5.0% 5.0% 3Yr 10Yr 30Yr 3Yr 5Yr 7Yr Yield (%) 5Yr Yield (%) 7Yr 10Yr 30Yr 4.0% 4.0% 3Mo 3Mo 1Mo 1Mo 3.0% 3.0% 3.0% 3-Month Tre
Slide 11: 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 03/19/20: 165 bps 150 12/13/22: 190 bps 100 01/26/24: 140 bps 50 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 12: Swaption Implied Volatility
Swaption Implied Volatility 160 3m x 10Y Normal Vol 150 140 130 120 110 100 90 80 Jan-23 Apr-23 Jul-23 Oct-23 Jan-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 12
Slide 13: Refinancing Activity
Refinancing Activity Refi Index vs. Mortgage Rates Primary – Secondary Spreads 7,000 8.5 250.0 8.0 6,000 7.5 7.0 200.0 Mortgage Rate (%) 5,000 6.5 4,000 6.0 bps Refi Index 5.5 150.0 3,000 5.0 4.5 2,000 4.0 100.0 1,000 3.5 3.0 0 2.5 50.0 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22
Slide 14: Portfolio Characteristics, Credit & Hedge Positions
Portfolio Characteristics, Credit & Hedge Positions 14
Slide 15: Investment Portfolio
Investment Portfolio During the fourth quarter of 2023, the market reached cyclical highs in interest rates and mortgage spreads, so Orchid reduced both the size of the portfolio and leverage. Mid quarter as the market reversed and rallied hard into quarter end mortgage spreads tightened and Orchid’
Slide 16: Investment Portfolio Pass-Through Holdings
Investment Portfolio Pass-Through Holdings Over the course of 2023 we progressively migrated the portfolio holdings into higher coupons, increasing the weighted average coupon from 3.47% at December 31, 2022 to 4.33% at December 31, 2023 while retaining a bias towards discount securities with more f
Slide 17: Investment Portfolio Funding Costs as of December 31, 2023
Investment Portfolio Funding Costs as of December 31, 2023 Orchid’s interest rate hedges with a notional balance (excluding short TBA positions, interest rate floors/caps) equal to approximately 85% of our repo liability balance has contained the rapid expansion of our funding cost as the Federal Re
Slide 18: Hedging Positions
Hedging Positions While the Federal Reserve has continued to increase funding rates, Orchid has hedge positions equal to approximately 85% of our repo funding liability (excluding TBA shorts, interest rate caps/floors) with an emphasis towards interest rate swaps. The migration of the pass-through p
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 In the current interest rate environment, prepayment rates for Agency RMBS remain very low. More seasoned securities tend to prepay slightly faster, increasing returns when such securities are priced at a discount. Prepayment Speeds (CPR) Securities (by cou
Slide 23: Orchid Island Capital – Q4 Wrap-up and Outlook
Orchid Island Capital – Q4 Wrap-up and Outlook The very challenging market environment we have experienced over the last two years appears to have subsided. While interest rates and the pressure on MBS spreads appear to have eased, the economy remains stable, and inflation elevated. The economic sta
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 3,200 High: 2,987 02/01/22 3,000 01/17/24: 2532.2 2,800 2,600 High: 2,718 08/01/22 2,400 2,200 01/17/24: 2431.7 2,000 1,800 1,600 1,400 1,200 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-
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 Q4 2023 Returns 13% 11.68% 11% 9.73% 9% 7.89% 7.48% 6.82% 7.17% 7.16% 6.39% 7% 5.66% 5.25% 5.46% 4.72% 5% 3.48% 3% 1% -1% -3% -5% Year Ended 12/31/2023 Returns 28% 26.26% 24% 20% 16% 13.44% 13.11% 12% 8.52% 5.83% 6.40% 6.82%
Slide 27: Leverage Ratio
Orchid Island Capital Leverage Ratio History 11.0 10.0 7.9 Leverage Ratio 9.0 8.0 7.0 6.8 6.0 5.0 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Adjusted Leverage (1) Economic Leverage (2) 1. T
Slide 28: MBS Portfolio Characteristics as of December 31, 2023
Orchid Island Capital MBS Portfolio Characteristics as of December 31, 2023 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 1,397,684,194 1,254,194,378 32.21% 89.73 3.00% 3.46
Slide 29: Orchid Credit Counterparties
Orchid Credit Counterparties ($ in thousands) As of December 31, 2023 Total Weighted Counterparty Outstanding % of Total Average Longest Maturity Balances Maturity in Days RBC Capital Markets, LLC 300,275 8.1% 16 1/17/2024 Citigroup Global Markets Inc 298,549 8.1% 26 1/26/2024 Mitsubishi UFJ Securit
Slide 30: 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 31: 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 the year ended December 31, 2023 and 2022, and each quarter of 2
Slide 32: Interest Income
Interest Income The table below depicts Orchid’s interest income and yield on average MBS if premium or discount associated with securities were amortized/accreted if Orchid used the available-for-sale accounting method for the years ended December 31, 2023, 2022 and 2021, and for each quarter of 20
Slide 33: Securitized Products Returns December 2023
Securitized Products Returns December 2023 Last 12 months from December 2022 – sorted by total returns Last 12 months from December 2022 – sorted by excess return Last 12 Mo. (As of 12/31/23) 2022 12/31/2023 Last 12 Mo. (As of 12/31/23) 2022 12/31/2023 Excess Return Excess Return (vs. Total Excess R
Slide 34: Securitized Products Returns December 2023
Securitized Products Returns December 2023 Securitized products total and excess returns versus swaps Source: BofA Global Research - Securitized Products Returns for December 2023/ Securitized Products Strategy / 02 January 2024 34
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