Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q1 2024 Earnings Presentation
35 slides from Orchid Island Capital's earnings presentation, Apr 26, 2024
Slide 1: Q1 2024 Earnings Supplemental Materials
8 Q1 2024 Earnings Supplemental Materials April 26, 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 - 14 Portfolio Characteristics, Credit & Hedge Positions 15 - 24 Appendix 25 - 35 3
Slide 4: Financial Results
Financial Results 4 S-ORCHIDISLAND
Slide 5: Financial Highlights for the Quarter Ended March 31, 2024
Financial Highlights for the Quarter Ended March 31, 2024 Net Income (Loss)1 Book Value 1 Q1 24 Q4 23 Q1 24 Q4 23 $0.38 $0.52 $9.12 $9.10 Total Return 2 Dividend Declared 1 Q1 24 Q4 23 Q1 24 Q4 23 4.18% 6.05% $0.36 $0.36 1. Data is on a per share basis 2. Equal to (a) the sum of dividends declared a
Slide 6: Portfolio Highlights for the Quarter Ended March 31, 2024
Portfolio Highlights for the Quarter Ended March 31, 2024 Average MBS Balances Economic Leverage Ratio 1 (in millions) Q1 24 Q4 23 Q1 24 Q4 23 $3,888 $4,207 7.0 6.7 Speeds Liquidity 2 (3mo. Portfolio CPR) Q1 24 Q4 23 Q1 24 Q4 23 6.0 5.5 44.8% 42.6% 1. The economic leverage ratio is calculated by div
Slide 7: Financial Results for the Three Months Ended March 31, 2024
Orchid Island Capital Financial Results for the Three Months Ended March 31, 2024 Income Statement Balance Sheet ($ in thousands, except for per share data) ($ in thousands, except for per share data) Three Months Ended March 31, 31-Mar-24 31-Dec-23 2024 2023 ASSETS: Interest income $ 48,871 $ 38,01
Slide 8: Adjusted Economic Income
Orchid Island Capital Financial Results for the Three Months Ended March 31, 2024 Adjusted Economic Income in Dollars ($ in thousands) Q1 2024 Q4 2023 Q3 2023 Q2 2023 Interest income $ 48,871 $ 49,539 $ 50,107 $ 39,911 Plus/(minus) discount accretion/premium amortization due to paydowns 3,037 8,067
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 1Mo 10/19/23 1Mo 10/19/23 3Mo 12/31/23 3Mo 12/31/23 5.5% 5.5% 03/31/24 03/31/24 6Mo 04/19/24 6Mo 04/19/24 5.0% 5.0% Yield (%) Yield (%) 4.5% 4.5% 1Yr 4.0% 4.0% 2Yr 1Yr 3Yr 5Yr 7Yr 10Yr 30Yr 3.5% 3.5% 2Yr
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 12/13/22: 190 bps 150 100 04/19/24: 153 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
100 120 140 160 180 200 100 110 120 130 140 150 160 20 40 60 80 80 90 Jan-14 Apr-23 Apr-14 Jul-14 Oct-14 Source: Citi Velocity, Bloomberg Data Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Jul-23 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Oct-23 12 Apr-19 Jul-19 Oct-19
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 Aggregate Refi Index - 498 Mortgage Rates (0-pt) - 7.07% Refi I
Slide 14: U.S. Economy
U.S. Economy U.S. GDP vs Money Supply 30.0 25.0 20.0 Tillions ($) 15.0 10.0 5.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 U.S. Money Supply - M2 U.S. GDP - Nominal Dollars Source: Bloomberg Data 14
Slide 15: Portfolio Characteristics, Credit & Hedge Positions
Portfolio Characteristics, Credit & Hedge Positions 15
Slide 16: Investment Portfolio
Investment Portfolio The end of the current interest rate cycle seemed about to end late in 2023 and the market anticipated a pivot by the Fed to interest rate cuts commencing in 2024. The economy and inflation have remained stubbornly strong and the pivot, if it occurs, is unlikely to be imminent.
Slide 17: Investment Portfolio Pass-Through Holdings
Investment Portfolio Pass-Through Holdings We continue to add exposure to higher coupon, production coupons towards a bar-bell like exposure to the 30-year fixed rate coupon stack. We have used the proceeds from our (modest to date) capital raising and paydowns to fund the acquisitions. We have incr
Slide 18: Investment Portfolio Funding Costs as of March 31, 2024
Investment Portfolio Funding Costs as of March 31, 2024 Orchid’s interest rate hedges have contained the rapid expansion of our funding cost as the Federal Reserve has increased rates and protected our net interest margin from substantially declining. • Average repo rate for the quarter ended March
Slide 19: Hedging Positions
Hedging Positions Orchid has hedge positions equal to approximately 91% of our repo funding liability (excluding TBA shorts, interest rate caps/floors) with an emphasis towards interest rate swaps. The migration of the pass-through portfolio into higher coupons has also reduced the interest rate sen
Slide 20: Hedging Positions
Hedging Positions Interest Rate Futures Swap Agreements ($ 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 21: 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 22: 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 23: 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 24: Orchid Island Capital – Q1 Wrap-up and Outlook
Orchid Island Capital – Q1 Wrap-up and Outlook We may have been premature in our assessment that the conditions underlying the current interest rate cycle appeared to have subsided late in 2023, and the highly anticipated pivot by the Fed to interest rate cuts commencing in 2024 may have to wait. Th
Slide 25: Appendix
Appendix 25 S-ORCHIDISLAND
Slide 26: 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 2,800 04/03/24: 2,536 2,600 High: 2,718 08/01/22 2,400 04/03/24: 2,388 2,200 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-22
Slide 27: Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component
Cross Asset Fixed Income Performance by U.S. Aggregate Bond Index Component Q1 2024 Returns 10.55% 11% 9% 7% 5% 3.29% 3% 0.68% 0.85% 1% 0.13% -1% -0.08% -0.37% -0.78% -0.40% -0.39% -0.30% -1.04% -0.96% -3% 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 28: Orchid Island Capital Leverage Ratio History
Orchid Island Capital Leverage Ratio History 11 10 7.7 Leverage Ratio 9 8 7 6 7.0 5 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. The adjusted le
Slide 29: MBS Portfolio Characteristics as of March 31, 2024
Orchid Island Capital MBS Portfolio Characteristics as of March 31, 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 1,370,655,724 1,197,252,656 30.85% 87.35 3.00% 3.46% 3
Slide 30: Orchid Credit Counterparties
Orchid Credit Counterparties ($ in thousands) As of March 31, 2024 Total Weighted Counterparty Outstanding % of Total Average Longest Maturity Balances Maturity in Days RBC Capital Markets, LLC 290,314 7.80% 11 4/11/2024 ASL Capital Markets Inc. 265,535 7.13% 33 7/15/2024 Mitsubishi UFJ Securities (
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: 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 each quarter of 2023 through the first quarter of 2024. ($ in thousands) Inc
Slide 34: Securitized Products Returns March 2024
Securitized Products Returns March 2024 Last 12 months from February 2023 return summary – sorted by total returns Last 12 months from February 2023 returns summary – sorted by excess return Last 12 Mo. (As of 3/31/24) 2023 3/31/2024 Last 12 Mo. (As of 3/31/24) 2023 3/31/2024 Excess Return Excess Re
Slide 35: Securitized Products Returns March 2024
Securitized Products Returns March 2024 Securitized products total and excess returns versus swaps Source: BofA Global Research - Securitized Products Returns for March 2024/ Securitized Products Strategy / 01 April 2024 35
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