Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q3 2022 Earnings Presentation
33 slides from Orchid Island Capital's earnings presentation, Oct 27, 2022
Slide 1: Q3 2022 Earnings Supplemental Materials
8 Q3 2022 Earnings Supplemental Materials October 27, 2022 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 Highlights for the Quarter Ended September 30, 2022 4 Market Developments 5 - 16 Financial Results 17 - 22 Portfolio Characteristics, Credit Counterparties & Hedge Positions 23 - 28 Appendix 29 - 33 3
Slide 4: Financial Highlights for the Quarter Ended September 30, 2022
Financial Highlights for the Quarter Ended September 30, 2022 • Net loss per share of $2.40 • Net earnings per share of $0.26, excluding realized and unrealized gains/(losses) on RMBS and derivative instruments, including net interest income on interest rate swaps (See page 29 for reconciliation of
Slide 5: Market Developments
Market Developments 5 SORCHIDISLAND
Slide 6: U.S. Treasury Curve & U.S. Dollar Swap Curve
U.S. Treasury Curve & U.S. Dollar Swap Curve 5.0% US Treasury Curve 5.0% SOFR Swap Curve 4.0% 4.0% 3Yr 5Yr 7Yr 10Yr 30Yr 3Yr 5Yr 7Yr 10Yr 3.0% 3.0% 30Yr Yield (%) 2Yr Yield (%) 1Yr 2Yr 1Yr 2.0% 2.0% 6Mo 06/30/22 6Mo 06/30/22 09/30/22 09/30/22 3Mo 3Mo 1.0% 10/19/22 1.0% 10/19/22 1Mo 1Mo 0.0% 0.0% YTM
Slide 7: 10-Year U.S. Treasury Note & 10-Year U.S. Dollar Swap
10-Year U.S. Treasury Note & 10-Year U.S. Dollar Swap 10-Year U.S. Treasury Note: Q3 2022 10-Year U.S. Treasury Note: 2-Year 4.20% 4.40% 4.00% 4.00% 3.80% 3.60% +112bps 3.60% 3.20% 2.80% 3.40% 2.40% 3.20% +337bps 2.00% 3.00% 1.60% 2.80% 1.20% 2.60% 0.80% 2.40% 0.40% 2.20% 0.00% 06/30/22 07/31/22 08/
Slide 8: 10-Year U.S. Treasury Note vs MBS Current Coupon
10-Year U.S. Treasury Note vs MBS Current Coupon 1 Year: 10Yr Treasury Note/Current Coupon Spread 200 180 160 140 120 Spread (bps) 100 80 60 40 20 0 Oct‐21 Nov‐21 Dec‐21 Jan‐22 Feb‐22 Mar‐22 Apr‐22 May‐22 Jun‐22 Jul‐22 Aug‐22 Sep‐22 Oct‐22 2010 – Current: 10Yr Treasury Note/Current Coupon Spread 200
Slide 9: 5-Year Treasury Note and 30-Year Treasury Bond Yield
Yield (%) Yield (%) 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% ‐0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Feb‐13 Feb‐13 Source: Bloomberg Data May‐13 May‐13 Aug‐13 Aug‐13 Nov‐13 Nov‐13 Feb‐14 Feb‐14 High: 2.538% 11/20/13 May‐14 May‐14 Aug‐14 Aug‐14 Nov‐14 Nov‐14 Feb‐15 Feb‐15 May‐15 May‐15
Slide 10: Commercial Bank & Federal Reserve MBS Holdings
Commercial Bank & Federal Reserve MBS Holdings Commercial Banks & Federal Reserve Holdings of MBS 3,200 3,000 2,800 2,600 2,400 2,200 2,000 Jun‐21 Sep‐21 Dec‐21 Mar‐22 Jun‐22 Sep‐22 Bank Holdings Fed Holdings Note: Data include the following types of institutions in the fifty states and the District
Slide 11: Mortgage Market Update: TBA & Roll Vs Specified Pool
Mortgage Market Update: TBA & Roll Vs Specified Pool FNCL Change '85k Max' Specified Pool Payup over TBA 104.0 300 102.0 250 100.0 Payup (ticks) 200 98.0 96.0 150 94.0 100 92.0 50 90.0 88.0 0 FNCL 3.0 FNCL 4.0 FNCL 5.0 FNCL 6.0 FN 85k 3.0 FN 85k 4.0 FN 85k 5.0 FN 85k 6.0 1 Year FNCL Roll 225k 3.5 vs
Slide 12: Swaption Implied Volatility
Swaption Implied Volatility 3m x 10Y Normal Vol 150 140 130 120 110 100 90 80 70 60 50 Dec‐19 Mar‐20 Jun‐20 Sep‐20 Dec‐20 Mar‐21 Jun‐21 Sep‐21 Dec‐21 Mar‐22 Jun‐22 Sep‐22 3M x 10Y USD Normal Annual Vol (BPS/ANNUM) Source: Citi Velocity 12
Slide 13: TBA OAS & Specified Pool Pay-up Performance
TBA OAS & Specified Pool Pay-up Performance TBA Libor OAS FNCL 3.0 Specified Pool Pay‐up 100 140 120 80 100 60 80 LOAS Pay‐up 40 60 40 20 20 0 0 ‐20 ‐20 ‐40 ‐40 Specified Pool Payup, FN3.0 LLB Specified Pool Payup, FN3.0 MLB 30Y 2.0S UMBS/FNMA OAS to Libor 30Y 2.5s UMBS/FNMA OAS to Libor 30Y 3s UMBS
Slide 14: Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component 2022
Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component 2022 Q3 2022 Returns 0% ‐2% ‐1.34% ‐4% ‐3.18% ‐3.85% ‐3.90% ‐3.77% ‐4.35% ‐4.58% ‐6% ‐4.75% ‐5.06% ‐4.89% ‐5.35% ‐8% ‐6.97% ‐7.49% ‐10% YTD 2022 Returns as of 9/30/22 0% ‐5% ‐5.06% ‐10% ‐15% ‐11.81% ‐11.41% ‐13.66% ‐13.09% ‐
Slide 15: Cross Asset Spreads Change
Cross Asset Spreads Change Source: BofA Global Research, Bloomberg S&P LCD, 09/30/2022 15
Slide 16: Refinancing Activity
Refinancing Activity Refi Index vs. Mortgage Rates Primary – Secondary Spreads 7,000 8.0 200 7.5 6,000 175 Mortgage Rate (%) 7.0 5,000 6.5 Refi Index 150 6.0 bps 4,000 5.5 125 3,000 5.0 4.5 100 2,000 4.0 3.5 75 1,000 3.0 0 2.5 50 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-20 Apr-21
Slide 17: Financial Results
Financial Results vy S-ORCHIDISLAND
Slide 18: Financial Results for the Three Months Ended September 30, 2022
Orchid Island Capital Financial Results for the Three Months Ended September 30, 2022 Income Statement MBS Portfolio Returns by Sector Net Income Structured Security Portfolio Realized and Excluding Realized Unrealized Total(1) and Unrealized Interest‐ Inverse Gains/(Losses) Gains and Losses Pass‐Th
Slide 19: Orchid Economic Interest Rate Spread and Dividend History
Orchid Economic Interest Rate Spread and Dividend History Orchid Yield on MBS vs Economic Cost of Funds 5.00% 4.53% 4.27% 4.34% 4.41% 4.36% 4.50% 4.07% 4.18% 4.15% 4.25% 3.96% 4.11% 3.95% 3.91% 4.05% 3.99% 3.79% 4.00% 3.62% 3.62% 3.66% 3.63% 3.57% 3.48% 3.57% 3.49% 3.29% 3.25% 3.42% 3.31% 3.50% 3.18
Slide 20: Orchid EPS as Reported and with Gains/(Losses) Removed
Orchid Earnings Per Share (EPS) as Reported and with Gains/(Losses) Removed(1) $8.00 $6.00 $5.86 $4.25 $3.29 $3.36 $3.44 $3.50 $3.70 $4.00 $3.11 $3.53 $3.16 $3.34 $3.08 $2.48 $2.78 $3.34 $1.47 $2.45 $1.20 $2.10 $1.01 $1.00 $3.43 $2.05 $1.21 $3.16 $3.09 Per Share Amount $3.30 $3.14 $1.55 $1.50 $2.00
Slide 21: Orchid and Peer Group Leverage Ratio History
Orchid and Peer Group Leverage Ratio History Orchid Island Capital Leverage Ratio History Orchid Island vs Historic Peers 11.0 12 9.9 10 10.0 9.7 9.4 9.2 9.1 9.0 9.1 9.1 8.2 7.8 8 9.0 8.5 8.4 8.5 8.6 8.2 Leverage Ratio (1) 8.1 8.8 7.9 8.6 8.5 8.8 8.0 8.8 6 7.6 7.3 8.2 7.1 7.1 7.8 7.9 7.7 7.0 6.7 4 6
Slide 22: Capital Allocation & MBS Portfolio Activity for Three Months Ended September 30, 2022
Orchid Capital Allocation & MBS Portfolio Activity for the Three Months Ended September 30, 2022 Capital Allocation Portfolio Activity ($ in thousands) ($ in thousands) Inverse Pass-Through Interest-Only Structured Security Portfolio Interest Only Portfolio Securities Sub-total Total Securities Pass
Slide 23: Portfolio Characteristics, Credit Counterparties & Hedge Positions
Portfolio Characteristics, Credit Counterparties & Hedge Positions 23
Slide 24: MBS Portfolio Characteristics as of September 30, 2022
Orchid Island Capital MBS Portfolio Characteristics as of September 30, 2022 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) (+50 BPS) Fixed Rate MBS 15yr 4.0 $ 408,052 $ 397,235 0.01% $ 97.35 4.00% 4.54% 53 126
Slide 25: CPR Performance versus FNMA Fixed Rate Coupon
CPR Performance versus FNMA Fixed Rate Coupon Jul CPR Cohort Aug CPR 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 30yr 3.0 30yr 3.5 30yr 4.0 30yr 3.0 30yr 3.5 30yr 4.0 ORC Cohort ORC Cohort Sep CPR Quarterly CPR Percentage Vs. Cohort 10 120% 9 Percentage of cohort 8 100% 7 80% 6 5 60% 4 40% 3 2 20% 1
Slide 26: Prepayment Sensitivity in PT Portfolio
Prepayment Sensitivity in PT Portfolio Prepayments as Percentage of Portfolio Principal Balance 4.00% 3.60% 3.83% 3.20% 2.80% 2.40% 2.00% 1.60% 1.29% 1.20% 0.97% 0.80% 0.64% 0.40% 0.69% 0.00% Mar‐13 Jun‐13 Sep‐13 Mar‐14 Jun‐14 Sep‐14 Mar‐15 Jun‐15 Sep‐15 Mar‐16 Jun‐16 Sep‐16 Mar‐17 Jun‐17 Sep‐17 Mar
Slide 27: Orchid Credit Counterparties and Cost of Funds
Orchid Credit Counterparties and Cost of Funds Orchid Island Capital Credit Counterparties Avg SOFR vs Cost of Funds ($ in thousands) As of September 30, 2022 Weighted Total Average Counterparty Outstanding % of Total Longest Maturity 3.00% Maturity in Balances Days Daiwa Securities America Inc. 305
Slide 28: Orchid Island Capital Hedge Positions
Orchid Island Capital Hedge Positions Treasury Futures Swap Agreements ($ in thousands) ($ in thousands) Average Net Average As of 09/30/2022 Notional Average Fixed Pay Weighted Weighted Receive Estimated Maturity Contract Notional Amount Rate Average Entry Average Open Equity(1) Rate Fair Value (Ye
Slide 29: Appendix
Appendix 29 S-ORCHIDISLAND
Slide 30: Earnings Per Share Support Data
Orchid Island Capital Earnings Per Share Support Data Net Earnings Less Realized Realized and Net Earnings Less Realized Realized and Unrealized Gains Weighted Average Shares Quarter Net Income (GAAP) and Unrealized Gains and Net Income Per Share Unrealized Gains and and Unrealized Gains and and Los
Slide 31: ORC Historical Portfolio Breakdown
Appendix ORC Historical Portfolio Breakdown 7,000 6,000 5,000 Market Value (in Millions of Dollars) 4,000 3,000 2,000 1,000 0 15‐Year Fixed Rate RMBS 20‐Year Fixed Rate RMBS 30‐Year Fixed Rate RMBS CMO TBA Deriv Source: Company Press Releases 31
Slide 32: Securitized Products Returns September 2022
Securitized Products Returns September 2022 2022 and 2021 returns summary – sorted by 2022 total return 2022 and 2021 returns summary – sorted by 2022 excess return 2022 (As of 9/30/22) 2021 9/30/2022 2022 (As of 9/30/2022) 2021 9/30/2022 Excess Return Excess Return Excess Return Total Excess Return
Slide 33: Securitized Products Returns September 2022
Securitized Products Returns September 2022 Securitized products total and excess returns versus swaps/Libor Source: BofA Global Research - Securitized Products Returns for September 2022/ Securitized Products Strategy / 03 October 2022 33
Orchid Island Capital — Q3 2022 Earnings Presentation on 6ix