Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q2 2024 Earnings Presentation
35 slides from Orchid Island Capital's earnings presentation, Jul 26, 2024
Slide 1: Q2 2024 Earnings Supplemental Materials
8 Q2 2024 Earnings Supplemental Materials July 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 June 30, 2024
Financial Highlights for the Quarter Ended June 30, 2024 Net Income (Loss)1 Book Value 1 Q2 24 Q1 24 Q2 24 Q1 24 $(0.09) $0.38 $8.58 $9.12 Total Return 2 Dividend Declared 1 Q2 24 Q1 24 Q2 24 Q1 24 (1.97)% 4.18% $0.36 $0.36 1. Data is on a per share basis 2. Equal to (a) the sum of dividends declare
Slide 6: Portfolio Highlights for the Quarter Ended June 30, 2024
Portfolio Highlights for the Quarter Ended June 30, 2024 Average MBS Balances Economic Leverage Ratio 1 (in millions) Q2 24 Q1 24 Q2 24 Q1 24 $4,203 $3,888 7.1 7.0 Speeds Liquidity 2 (3mo. Portfolio CPR) Q2 24 Q1 24 Q2 24 Q1 24 7.6 6.0 47.7% 44.8% 1. The economic leverage ratio is calculated by divi
Slide 7: Financial Results for the Three Months Ended June 30, 2024
Orchid Island Capital Financial Results for the Three Months Ended June 30, 2024 Income Statement Balance Sheet ($ in thousands, except for per share data) ($ in thousands, except for per share data) Three Months Ended June 30, 30-Jun-24 31-Dec-23 2024 2023 ASSETS: Interest income $ 53,064 $ 39,911
Slide 8: Adjusted Economic Income in Dollars
Orchid Island Capital Financial Results for the Three Months Ended June 30, 2024 Adjusted Economic Income in Dollars ($ in thousands) Q2 2024 Q1 2024 Q4 2023 Q3 2023 Interest income $ 53,064 $ 48,871 $ 49,539 $ 50,107 Plus/(minus) discount accretion/premium amortization due to paydowns 4,402 3,037 8
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 5.5% 12/31/23 5.5% 12/31/23 3Mo 06/30/24 1Mo 06/30/24 07/19/24 3Mo 07/19/24 5.0% 5.0% 6Mo 6Mo Yield (%) Yield (%) 4.5% 4.5% 1Yr 4.0% 4.0% 2Yr 3Yr 5Yr 7Yr 10Yr 30Yr 1Yr 3.5% 3.5% 2Yr 3Yr 5Yr 7Yr 10Yr 3
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: 165b bps 150 12/13/22: 190 bps 100 07/19/24: 141 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-2
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 Jul-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 Oct-23 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Jan-24 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 8.0 6,000 7.5 7.0 200 Mortgage Rate (%) 5,000 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 Aggregate Refi Index - 532 Mortgage Rates (0-pt) - 7.14% Refi Index vs. P
Slide 14: U.S. Economy
U.S. Economy U.S. GDP vs Money Supply 30.0 25.0 20.0 Tillions ($) 15.0 10.0 5.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 U.S. Money Supply - M2 U.S. GDP - Nominal Dollars Source: Bloomberg Data 14
Slide 15: Portfolio Characteristics, Credit & Hedge Positions
Portfolio Characteristics, Credit & Hedge Positions 15
Slide 16: Investment Portfolio
Investment Portfolio The long-awaited pivot on the part of the Federal Reserve may finally be at hand. Since the Fed sees their current monetary policy as restrictive the Federal Reserve may begin to reverse some of the tightening that occurred in 2022 and 2023 and ease monetary policy. Current mark
Slide 17: Investment Portfolio Pass-Through Holdings
Investment Portfolio Pass-Through Holdings We are positioning Orchid’s MBS portfolio with a barbell strategy – favoring lower and higher 30-year fixed rate securities with a slightly longer duration bias to hedges. We have used the proceeds from our capital raising and paydowns to fund acquisition e
Slide 18: Investment Portfolio Funding Costs as of June 30, 2024
Investment Portfolio Funding Costs as of June 30, 2024 Orchid’s interest rate hedges, with a slightly longer duration bias and increased use of swaps versus swaptions and futures, continue to contain the elevated funding cost orchestrated by the Federal Reserve and preserve our net interest margin.
Slide 19: Hedging Positions
Hedging Positions Orchid has hedge positions equal to approximately 84% of our repo funding liability (excluding TBA shorts) with a greater emphasis on interest rate swaps and a slightly longer duration. The migration of the pass-through portfolio into higher coupons has also reduced the interest ra
Slide 20: Hedging Positions
Hedging Positions Interest Rate Futures Swap Agreements ($ 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 – Q2 Wrap-up and Outlook
Orchid Island Capital – Q2 Wrap-up and Outlook The long-awaited pivot on the part of the Federal Reserve may finally be at hand. Persistently strong growth of the U.S. economy and above trend inflation appear to have moderated sufficiently that the Fed now sees the risks to the economy as balanced.
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 07/03/24: 2,571.30 2,800 2,600 High: 2,718 08/01/22 2,400 2,200 07/03/24: 2,336.00 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
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 Q2 2024 Returns 6% 4.29% 4% 2.45% 2.58% 2% 0.97% 0.67% 0.78% 0.10% 0.30% 0.40% 0.06% 0.07% 0% -0.09% -0.01% -2% YTD 2024 Returns as of 06/30/24 15.29% 16% 12% 8% 5.95% 4% 2.58% 1.66% 1.53% 0.10% 0.70% 0% -0.07% -0.71% -0.49%
Slide 28: Orchid Island Capital Leverage Ratio History
Orchid Island Capital Leverage Ratio History 11.0 10.0 Leverage Ratio 7.8 9.0 8.0 7.0 7.1 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 Jun-24 Adjusted Leverage (1) Economic Leverage (
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 June 30, 2024 Weighted Total Average Counterparty Outstanding % of Total Longest Maturity Maturity in Balances Days ABN AMRO Bank N.V. 292,120 6.6% 40 8/29/2024 DV Securities, LLC Repo 276,688 6.4% 28 9/27/2024 Mitsubishi UFJ Securities (USA), Inc
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 second quarter of 2024. (1) As reported in
Slide 34: Securitized Products Returns June 2024
Securitized Products Returns June 2024 Last 12 months from June 2023 return summary – sorted by total returns Last 12 months from June 2023 returns summary – sorted by excess return Last 12 Mo. (As of 6/30/24) 2023 6/30/2024 Last 12 Mo. (As of 6/30/24) 2023 6/30/2024 Excess Return Excess Return (vs.
Slide 35: Securitized Products Returns June 2024
Securitized Products Returns June 2024 Securitized products total and excess returns versus swaps Source: BofA Global Research - Securitized Products Returns for June 2024/ Securitized Products Strategy / 01 July 2024 35
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