Orchid Island Capital, Inc. · NYSE:ORC

Orchid Island Capital — Q2 2022 Earnings Presentation

33 slides from Orchid Island Capital's earnings presentation, Aug 5, 2022

  1. Slide 1: Q2 2022 Earnings Supplemental Materials

    8 Q2 2022 Earnings Supplemental Materials August 5, 2022 1

  2. 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,

  3. Slide 3: Table of Contents

    Table of Contents Topic Point Slide(s)  Financial Highlights for the Quarter Ended June 30, 2022 4  Market Developments 5 - 15  Financial Results 16 - 22  Portfolio Characteristics, Credit Counterparties & Hedge Positions 23 - 28  Appendix 29 - 33 3

  4. Slide 4: Financial Highlights for the Quarter Ended June 30, 2022

    Financial Highlights for the Quarter Ended June 30, 2022 • Net loss per share of $0.34 • Net earnings per share of $0.12, excluding realized and unrealized gains/(losses) on RMBS and derivative instruments, including net interest expense on interest rate swaps (See page 29 for reconciliation of this

  5. Slide 5: Market Developments

    Market Developments 5 SORCHIDISLAND

  6. Slide 6: U.S. Treasury Curve & U.S. Dollar Swap Curve

    U.S. Treasury Curve & U.S. Dollar Swap Curve 3.5% US Treasury Curve 3.5% SOFR Swap Curve 5Yr 10Yr 30Yr 2Yr 3Yr 7Yr 2Yr 3Yr 5Yr 7Yr 10Yr 30Yr 3.0% 3.0% 2.5% 2.5% 2.0% 1Yr 2.0% 1Yr Yield (%) Yield (%) 6Mo 6Mo 1.5% 1.5% 3Mo 3Mo 1.0% 1.0% 07/29/22 07/29/22 1Mo 06/30/22 1Mo 06/30/22 0.5% 0.5% 03/31/22 03

  7. 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: Q2 2022 10-Year U.S. Treasury Note: 2-Year 3.60% 3.60% 3.40% 3.20% 2.80% 3.20% 2.40% 3.00% + 208 bps 2.00% 2.80% 1.60% 2.60% 1.20% + 31 bps 2.40% 0.80% 2.20% 0.40% 2.00% 0.00% 03/31/22 04/30/22 05/31/22 06/30/22 07/31/

  8. Slide 8: 10-Year U.S. Treasury Note vs MBS Current Coupon

    10-Year U.S. Treasury Note vs MBS Current Coupon 10-Year U.S. Treasury Note 10Yr Treasury Note/Current Coupon Spread 4.00% 1.80% 3.50% 1.60% 1.40% 3.00% 1.20% 2.50% 1.00% 2.00% 0.80% 1.50% 0.60% 1.00% 0.40% 0.50% 0.20% 0.00% 0.00% Source: Bloomberg Data 8

  9. Slide 9: 5-Year U.S. Treasury Note vs 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% ‐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 May‐14 May‐14 High: 2.538% 11/20/13 Aug‐14 Aug‐14 Nov‐14 High: 3.969% 12/31/13 Nov‐14 Feb‐15 Feb

  10. 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 Nov‐21 Nov‐21 Nov‐21 Nov‐21 Nov‐21 Dec‐21 Dec‐21 Dec‐21 Dec‐21 Jun‐21 Jun‐21 Jun‐21 Jun‐21 Jun‐21 Jul‐21 Jul‐21 Jul‐21 Jul‐21 Aug‐21 Aug‐21 Aug‐21 Aug‐21 Aug‐21

  11. 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 100.0 350 98.0 300 250 Payup (ticks) 96.0 200 94.0 150 92.0 100 90.0 50 88.0 0 FNCL 3.5 FNCL 4.0 FNCL 4.5 FN 85k 3.5 FN 85k 4.0 FN 85k 4.5 1 Year FNCL Roll 225k 3.5 vs FNCL 3.5 Roll 20 100 14 90

  12. Slide 12: Swaption Implied Volatility

    Swaption Implied Volatility 3m x 10Y Normal Vol 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 3M x 10Y USD Normal Annual Vol (BPS/ANNUM) Source: Citi Velocity 12

  13. 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 120 140 100 120 100 80 80 LOAS 60 Pay‐up 60 40 40 20 20 0 0 ‐20 ‐20 ‐40 ‐40 30Y 2.0S UMBS/FNMA OAS to Libor 30Y 2.5s UMBS/FNMA OAS to Libor Specified Pool Payup, FN3.0 LLB Specified Pool Payup, FN3.0 MLB 30Y 3s

  14. 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 Q2 2022 Returns 0% ‐2% ‐0.92% ‐0.99% ‐4% ‐2.85% ‐6% ‐4.01% ‐3.77% ‐3.99% ‐4.08% ‐4.70% ‐5.46% ‐6.12% ‐8% ‐7.26% ‐10% ‐12% ‐14% ‐13.49% ‐16% ‐18% ‐16.11% YTD 2022 Returns as of 6/30/22 0% ‐5% ‐3.77% ‐10% ‐7.16% ‐6.98% ‐8

  15. Slide 15: Refinancing Activity

    Refinancing Activity Refi Index vs. Mortgage Rates Primary – Secondary Spreads 5,500 6.0 250.0 5.5 4,500 200.0 Mortgage Rate (%) 5.0 3,500 bps Refi Index 4.5 150.0 4.0 2,500 3.5 100.0 1,500 3.0 500 2.5 50.0 Dec‐20 Mar‐21 Jun‐21 Sep‐21 Dec‐21 Mar‐22 Jun‐22 Dec‐20 Apr‐21 Aug‐21 Dec‐21 Apr‐22 Aggregate

  16. Slide 16: Financial Results

    Financial Results 16 S-ORCHIDISLAND

  17. Slide 17: Orchid Island Capital Financial Results for the Three Months Ended June 30, 2022

    Orchid Island Capital Financial Results for the Three Months Ended June 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‐Through

  18. Slide 18: 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% 4.07% 4.18% 4.15% 4.25% 4.50% 4.11% 3.91% 4.05% 3.96% 3.79% 3.95% 4.00% 3.62% 3.62% 3.57% 3.66% 3.63% 3.57% 3.48% 3.49% 3.29% 3.25% 3.42% 3.31% 3.50% 3.18% 3.04

  19. Slide 19: Orchid Earnings Per Share as Reported and with Gains/(Losses) Removed

    Orchid Earnings Per Share (EPS) as Reported and with Gains/(Losses) Removed(1) $1.50 $1.17 $1.00 $0.85 $0.66 $0.67 $0.69 $0.70 $0.74 $0.62 $0.71 $0.63 $0.67 $0.62 $0.50 $0.56 $0.67 $0.29 $0.20 $0.49 $0.24 $0.42 $0.20 $0.41 $0.24 $0.69 $0.62 $0.50 $0.66 $0.63 $0.63 $0.22 $0.31 $0.30 $0.56 $0.53 $0.33

  20. Slide 20: 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 12.0 9.9 10.0 9.7 10.0 9.4 9.2 9.1 9.1 9.1 Leverage Ratio (1) 9.0 9.0 8.0 8.5 8.4 8.5 8.6 8.2 7.7 8.1 8.8 7.9 8.6 8.5 8.8 8.0 7.6 8.8 6.0 7.3 8.2 7.1 7.1 7.8 7.9 7.7 7.0 6.7

  21. Slide 21: Peer Dividend Performance

    Peer Dividend Performance(1) Annualized Dividend / Beg BV 20% 15% 10% 5% 0% ORC Peer Average Annualized Dividend / Beg Stock Price 25% 20% 15% 10% 5% 0% ORC Peer Average 1. The peer average is the unweighted, simple, average of the total rate of return for each of the following companies based on th

  22. Slide 22: Orchid Capital Allocation & MBS Portfolio Activity for the Three Months Ended June 30, 2022

    Orchid Capital Allocation & MBS Portfolio Activity for the Three Months Ended June 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-Thro

  23. Slide 23: Portfolio Characteristics, Credit Counterparties & Hedge Positions

    Portfolio Characteristics, Credit Counterparties & Hedge Positions 23

  24. Slide 24: Orchid Island Capital MBS Portfolio Characteristics as of June 30, 2022

    Orchid Island Capital MBS Portfolio Characteristics as of June 30, 2022 Int Rate Percent of Current 3m Sensitivity (‐50 Int Rate Sensitivity Type Face FMV Portfolio Price CPN GWAC AGE WA Mat 1m CPR CPR BPS) (+50 BPS) Fixed Rate MBS 15yr 4.0 416,340 $ 424,504 0.01% $ 101.96 4.00% 4.54% 50 130 0.8% 0.

  25. Slide 25: CPR Performance versus FNMA Fixed Rate Coupon

    CPR Performance versus FNMA Fixed Rate Coupon Apr CPR Cohort May CPR 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 30yr 3.0 30yr 3.5 30yr 4.0 30yr 3.0 30yr 3.5 30yr 4.0 ORC Cohort ORC Cohort Jun CPR Quarterly CPR Percentage Vs. Cohort 16 120% 14 Percentage of cohort 100% 12 80% 10 8 60% 6 40% 4

  26. Slide 26: Prepayment Sensitivity in PT Portfolio

    Prepayment Sensitivity in PT Portfolio Prepayments as Percentage of Portfolio Principal Balance 3.40% 3.20% 3.00% 2.88% 07/01/22 2.80% 2.60% 2.40% 2.20% 2.00% 1.80% 1.60% 1.40% 1.30% 1.20% 0.97% 1.00% 0.80% 0.65% 0.60% 0.90% 07/01/22 0.40% 0.20% 0.00% Mar‐13 Jun‐13 Sep‐13 Mar‐14 Jun‐14 Sep‐14 Mar‐15

  27. 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 June 30, 2022 Weighted Total Average Longest Counterparty Outstanding % of Total Maturity in Maturity Balances Days 3.00% J.P. Morgan Securities LLC 355,463 9.4

  28. 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 06/30/2022 Notional Average Fixed Pay Weighted Weighted Receive Estimated Maturity Contract Notional Amount Rate Average Entry Average Open Equity(1) Rate Fair Value (Ye

  29. Slide 29: Appendix

    Appendix 29 S-ORCHIDISLAND

  30. Slide 30: Orchid Island Capital 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

  31. Slide 31: ORC Historical Portfolio Breakdown

    Appendix ORC Historical Portfolio Breakdown 7,000 6,000 Market Value (in Millions of Dollars) 5,000 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

  32. Slide 32: Securitized Products Returns June 2022

    Securitized Products Returns June 2022 2022 and 2021 returns summary – sorted by 2022 total return 2022 and 2021 returns summary – sorted by 2022 excess return 2022 (As of 6/30/22) 2021 6/30/2022 2022 (As of 6/30/2022) 2021 6/30/2022 Excess Return Excess Return Excess Return Total Excess Return Tota

  33. Slide 33: Securitized Products Returns June 2022

    Securitized Products Returns June 2022 Securitized products total and excess returns versus swaps/Libor Dur 6/22 QTD YTD 2021 6/22 QTD YTD 2021 Dur 6/22 QTD YTD 2021 6/22 QTD YTD 2021 Agency MBS 5.4 -1.5% -3.9% -8.8% 4.1% -0.7% -1.2% -2.3% -0.6% SP return indicator -0.7% -2.5% -4.7% 1.6% -0.5% -1.9%

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