Orchid Island Capital, Inc. · NYSE:ORC
Orchid Island Capital — Q1 2023 Earnings Presentation
33 slides from Orchid Island Capital's earnings presentation, Apr 28, 2023
Slide 1: Q1 2023 Earnings Supplemental Materials
8 Q1 2023 Earnings Supplemental Materials April 28, 2023 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 March 31, 2023 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 March 31, 2023
Financial Highlights for the Quarter Ended March 31, 2023 • Net income per share of $0.09 • Net earnings per share of ($0.24), excluding realized and unrealized gains/(losses) on RMBS and derivative instruments, including net interest income on interest rate swaps (See page 30 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 US Treasury Curve SOFR Swap Curve 1Yr 1Yr 5.0% 5.0% 2Yr 2Yr 3Yr 3Yr 5Yr 7Yr 10Yr 30Yr 5Yr 4.0% 4.0% Yield (%) Yield (%) 7Yr 10Yr 30Yr 6Mo 6Mo 3.0% 3.0% 3Mo 12/31/22 12/31/22 03/31/23 3Mo 03/31/23 04/21/23 04/21/23 1Mo 1Mo 2.0% 2.0% YTM Change Change (12/3
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: Q1 2023 10-Year U.S. Treasury Note: 2-Year 4.50% 4.50% 4.00% 3.50% 4.00% 3.00% +183 bps -30 bps 2.50% 2.00% 3.50% 1.50% 1.00% 0.50% 3.00% 0.00% 12/31/22 01/31/23 02/28/23 03/31/23 3/31/21 6/30/21 9/30/21 12/31/21 3/31/
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 200 150 4/21/23: 168 bps 100 3/31/22 4/30/22 5/31/22 6/30/22 7/31/22 8/31/22 9/30/22 10/31/22 11/30/22 12/31/22 1/31/23 2/28/23 3/31/23 2010 – Current: 10Yr Treasury Note/Current Coupon Spread 200 10/13
Slide 9: 5-Year Treasury Note vs 30-Year Treasury Bond Spread
5-Year Treasury Note vs 30-Year Treasury Bond Spread 5.0% 5-Year Treasury Note and 30-Year Treasury Bond Yield 4.5% High 4.446% 10/20/22 4.0% High 4.381% 10/24/22 3.5% Yield (%) 3.0% 2.5% 2.0% 1.5% 1.0% Low: 0.997% 3/9/20 0.5% 0.0% Low: 0.191% 8/4/20 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19
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 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 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Bank Holdings Fed Holdings Note: Data
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 106.0 300 104.0 250 Payup (ticks) 200 102.0 150 100.0 100 98.0 50 96.0 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 5 vs FNCL 5 Roll 25
Slide 12: Swaption Implied Volatility
Swaption Implied Volatility 3m x 10Y Normal Vol 160 150 140 130 120 110 100 90 80 70 60 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 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 80 80 60 60 LOAS 40 40 Pay-up 20 20 0 0 -20 -20 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 UMBS/FNMA OAS to Libor 30Y 3
Slide 14: 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 2023 Returns 8% 7.48% 6% 4% 3.50% 3.34% 3.57% 3.01% 2.88% 2.96% 2.78% 2.53% 2.54% 1.86% 1.81% 2% 1.42% 0% 2022 Returns as of 12/31/22 0% -4% -4.30% -8% -8.53% -12% -10.91% -11.81% -11.09% -11.19% -12.46% -11.85% -12.36% -
Slide 15: Cross Asset Spreads Change, 2023
Cross Asset Spreads Change, 2023 Source: BofA Global Research, Bloomberg S&P LCD, 04/21/2023 15
Slide 16: Refinancing Activity
Refinancing Activity Refi Index vs. Mortgage Rates Primary – Secondary Spreads 5,000 7.6 250.0 7.3 7.0 4,000 6.7 6.4 200.0 Mortgage Rate (%) 6.1 5.8 3,000 bps Refi Index 5.5 5.2 150.0 4.9 2,000 4.6 4.3 4.0 3.7 100.0 1,000 3.4 3.1 2.8 0 2.5 50.0 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22
Slide 17: Financial Results
Financial Results vy S-ORCHIDISLAND
Slide 18: Financial Results for the Three Months Ended March 31, 2023
Orchid Island Capital Financial Results for the Three Months Ended March 31, 2023 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-Throug
Slide 19: 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% 3.99% 4.03% 3.96% 3.79% 3.95% 3.62% 3.62% 3.66% 3.79% 4.00% 3.57% 3.48% 3.57% 3.63% 3.49% 3.29% 3.25% 3.42% 3.31
Slide 20: Earnings Per Share 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 $0.95 $3.09 $3.30 $3.16 Per Share Amount $3.14 $1.55 $1.50
Slide 21: Orchid and Peer Group Leverage Ratio History
Orchid and Peer Group Leverage Ratio History Orchid Island Capital Leverage Ratio History Orchid Island vs Historic Peers Average 11.0 12 9.9 10.0 9.7 10 9.4 9.1 9.2 9.1 9.1 8.2 Leverage Ratio (1) 9.0 8.5 7.8 9.0 8 8.5 8.4 8.1 8.3 7.9 8.8 8.6 8.5 8.8 8.0 7.6 8.8 6 8.6 8.2 7.3 8.2 7.1 7.1 7.8 7.9 7.7
Slide 22: Capital Allocation & MBS Portfolio Activity for the Three Months Ended March 31, 2023
Orchid Capital Allocation & MBS Portfolio Activity for the Three Months Ended March 31, 2023 Capital Allocation Portfolio Activity ($ in thousands) ($ in thousands) Inverse Pass-Through Interest-Only Structured Security Portfolio Interest Only Portfolio Securities Sub-total Total Securities Pass-Thr
Slide 23: Portfolio Characteristics, Credit Counterparties & Hedge Positions
Portfolio Characteristics, Credit Counterparties & Hedge Positions 23
Slide 24: MBS Portfolio Characteristics as of March 31, 2023
Orchid Island Capital MBS Portfolio Characteristics as of March 31, 2023 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 $ 391,191 $ 387,352 0.01% $ 99.02 4.00% 4.54% 59 120 0.8%
Slide 25: Performance versus FNMA Fixed Rate Coupon Cohort
Performance versus FNMA Fixed Rate Coupon Cohort Jan CPR Feb 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 Mar CPR Quarterly CPR Percentage Vs. Cohort 16 125% 14 Percentage of cohort 100% 12 10 75% 8 6 50% 4 25% 2 0 0% 30y
Slide 26: Prepayment Sensitivity in PT Portfolio
Prepayment Sensitivity in PT Portfolio Prepayments as Percentage of Portfolio Principal Balance 4.40% 4.00% 3.60% 3.20% 3.47% 2.80% 2.40% 2.00% 1.60% 1.27% 1.20% 0.95% 0.80% 0.40% 0.62% 0.62% 0.00% Apr-13 Jul-13 Jan-14 Apr-14 Jul-14 Jan-15 Apr-15 Jul-15 Jan-16 Apr-16 Jul-16 Jan-17 Apr-17 Jul-17 Jan-
Slide 27: 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 March 31, 2023 Weighted Total Average Counterparty Outstanding % of Total Longest Maturity 5.00% Maturity in Balances Days 4.50% J.P. Morgan Securities LLC 350,
Slide 28: Hedge Positions
Orchid Island Capital Hedge Positions Treasury 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 Val
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
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 March 2023
Securitized Products Returns March 2023 Last 12 months from March 2022 – sorted by 2023 total return Last 12 months from March 2022 – sorted by 2023 excess return Last 12 Mo. (As of 3/31/23) 2022 3/31/2023 Last 12 Mo. (As of 3/31/23) 2022 3/31/2023 Excess Return Excess Return Excess Return Total (vs
Slide 33: Securitized Products Returns March 2023
Securitized Products Returns March 2023 Securitized products total and excess returns versus swaps/Libor Source: BofA Global Research - Securitized Products Returns for December 2022/ Securitized Products Strategy / 03 April 2023 33
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