Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q4 2024 Earnings Presentation
35 slides from Orchid Island Capital's earnings presentation, Jan 31, 2025
Slide 1: Q4 2024 Earnings Supplemental Materials
8 Q4 2024 Earnings Supplemental Materials January 31, 2025 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 & 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 December 31, 2024
Financial Highlights for the Quarter Ended December 31, 2024 Net Income (Loss)1 Book Value 1 Q4 24 Q3 24 Q4 24 Q3 24 $0.07 $0.24 $8.09 $8.40 Total Return 2 Dividend Declared 1 Q4 24 Q3 24 Q4 24 Q3 24 0.60% 2.10% $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 December 31, 2024
Portfolio Highlights for the Quarter Ended December 31, 2024 Average MBS Balances Economic Leverage Ratio 1 (in millions) Q4 24 Q3 24 Q4 24 Q3 24 $5,348 $4,984 7.3 7.6 Speeds Liquidity 2 (3mo. Portfolio CPR) Q4 24 Q3 24 Q4 24 Q3 24 10.5 8.8 52.9 % 49.8 % 1. The economic leverage ratio is calculated
Slide 7: Financial Highlights for the Year Ended December 31, 2024
Financial Highlights for the Year Ended December 31, 2024 Net Income (Loss)1 Book Value 1 24 23 24 23 $0.57 $(0.89) $8.09 $9.10 Total Return 2 Dividend Declared 1 24 23 24 23 4.73% (8.63)% $1.44 $1.80 1. Data is on a per share basis 2. Equal to (a) the sum of dividends declared and paid during the q
Slide 8: Financial Results for the Year Ended December 31, 2024
Orchid Island Capital Financial Results for the Year Ended December 31, 2024 Income Statement Balance Sheet ($ in thousands, except for per share data) ($ in thousands, except for per share data) Years Ended December 31, 31-Dec-24 31-Dec-23 2024 2023 ASSETS: Interest income $ 241,577 $ 177,569 Mortg
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 5.0% US Treasury Curve 5.0% SOFR Swap Curve 1Mo 1Mo 3Mo 3Mo 4.5% 6Mo 4.5% 6Mo 30Yr 1Yr 1Yr Yield (%) Yield (%) 4.0% 10Yr 4.0% 2Yr 5Yr 7Yr 09/30/24 09/30/24 3Yr 12/31/24 12/31/24 3.5% 01/24/25 01/24/25 3.5% 2Yr 3Yr 5Yr 7Yr 10Yr 30Yr 3.0% 3.0% 3.0% 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 200 150 03/19/20: 165 bps 12/13/22: 190 bps 100 05/26/23: 200 bps 50 01/24/25: 125 bps 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 3m x 10Y Normal Vol 120 110 100 90 80 Jan-24 Apr-24 Jul-24 Oct-24 Jan-25 3M x 10Y USD Normal Annual Vol (BPS/ANNUM) Swaption Implied Volatility (MOVE Index) 200 180 160 140 120 100 80 60 40 20 Source: Citi Velocity, Bloomberg Data 12
Slide 13: Refinancing Activity and Mortgage Rates
Refi Index 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Jan-19 Apr-19 Jul-19 Oct-19 Source: Wells Fargo Securities Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Aggregate Refi Index - 395 Refi Index Jul-21 Oct-21 0 1,000 2,000 3,000 4,000 5,000 6,000 Apr-20 Jan-22 Apr-22 Jul-20 Jul-22 Oct-22 Oct-20 Jan-2
Slide 14: U.S. Economy
U.S. Economy U.S. GDP vs Money Supply 35.0 30.0 25.0 20.0 Tillions ($) 15.0 10.0 5.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 U.S. Money Supply - M2 U.S. GDP - Nominal Dollars Source: Bloomberg Data 14
Slide 15: Portfolio Characteristics & Hedge Positions
Portfolio Characteristics & Hedge Positions 15
Slide 16: Investment Portfolio
Investment Portfolio The combination of 100 basis points of easing by the Federal Reserve and longer maturity U.S. Treasury security rates increasing 80 or more basis points caused the U.S. Treasury security yield curve to finally dis-invert, ending the longest period of inversion to ever occur. Thi
Slide 17: Investment Portfolio Pass-Through Holdings
Investment Portfolio Pass-Through Holdings We continued to position Orchid’s MBS portfolio with a barbell strategy but increased the up-in-coupon bias. We have used the proceeds from our capital raising, paydowns and sales of lower coupon securities to fund acquisitions exclusively in the higher cou
Slide 18: Investment Portfolio Funding Costs as of December 31, 2024
Investment Portfolio Funding Costs as of December 31, 2024 Interest rate cuts by the Federal Reserve at their last three meetings in 2024 have lowered Orchid’s unhedged funding costs while hedged funding costs, or our economic cost of funds, remains in the prevailing range of the last two years. Fun
Slide 19: Hedging Positions
Hedging Positions Orchid has hedge positions equal to approximately 79% of our repo funding liability (excluding TBA shorts) with a greater emphasis on interest rate swaps and a slightly longer duration. The migration of the pass-through portfolio into higher coupons has also reduced the interest ra
Slide 20: Hedging Positions
Hedging Positions Interest Rate Futures Swap Agreements ($ 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 As longer maturity interest rates rose during the fourth quarter prepayment rates for Orchid’s Agency RMBS portfolio generally slowed, even for our higher coupon securities. Our discount holdings continued to benefit from the effects of seasoning. Prepaymen
Slide 24: Q4 Wrap-up and Outlook
Orchid Island Capital – Q4 Wrap-up and Outlook The wait for the Federal Reserve to start easing monetary policy is over. However, while the Fed lowered the target range for Fed funds by 100 basis points in just three meetings, further cuts may not be a certainty. The economy remains strong, the labo
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 01/15/25: 2643.4 2,800 2,600 High: 2,718 08/01/22 2,400 2,200 01/15/25: 2233.2 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 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 Q4 2024 Returns 3% 2.39% 1.73% 1% 0.18% -1% -0.05% -1.48% -1.22% -3% -2.74% -3.03% -2.87% -3.16% -3.14% -3.06% -3.39% -5% YTD 2024 Returns as of 12/31/24 28% 25.00% 24% 20% 14.90% 16% 12% 8.19% 8% 5.02% 4.68% 4% 1.20% 1.70%
Slide 28: Leverage Ratio
Orchid Island Capital Leverage Ratio History 11.0 10.0 Leverage Ratio 9.0 7.5 8.0 7.0 7.3 6.0 5.0 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 Dec-24 Adjusted Leverage (1) Economic Leverage (2) 1. The adju
Slide 29: MBS Portfolio Characteristics as of December 31, 2024
Orchid Island Capital MBS Portfolio Characteristics as of December 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) (+50 BPS) Fixed Rate MBS 15yr 5.0 TBA 50,000,000 49,742,190 0.94% 99.48 5.00% 5.85% 6 170
Slide 30: MBS Portfolio Characteristics as of September 30, 2024
Orchid Island Capital MBS Portfolio Characteristics as of September 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 1,313,569,064 1,192,648,971 21.91% 90.79 3.00% 3.4
Slide 31: Orchid Credit Counterparties
Orchid Credit Counterparties ($ in thousands) As of December 31, 2024 Weighted Total Average Counterparty Outstanding % of Total Longest Maturity Maturity in Balances Days Merrill Lynch, Pierce, Fenner & Smith 360,113 7.17% 21 1/21/2025 ABN AMRO Bank N.V. 335,584 6.68% 17 1/17/2025 RBC Capital Marke
Slide 32: 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 33: 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 34: Securitized Products Returns December 2024
Securitized Products Returns December 2024 Last 12 months from December 2023 return summary – sorted by total returns Last 12 months from December 2023 returns summary – sorted by excess return Last 12 Mo. (As of 12/31/24) 2023 12/31/2024 Last 12 Mo. (As of 12/31/24) 2023 12/31/2024 Excess Return Ex
Slide 35: Securitized Products Returns December 2024
Securitized Products Returns December 2024 Securitized products total and excess returns versus swaps Source: BofA Global Research - Securitized Products Returns for December 2024/ Securitized Products Strategy / 02 January 2025 35
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