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Orchid Island Capital Announces Second Quarter 2015 Results

VERO BEACH, Fla., July 29, 2015 (GLOBE NEWSWIRE) -- Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid" or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three month period ended June 30, 2015.

Second Quarter 2015 Highlights

  • Net loss of $2.8 million, or $0.14 per common share
  • Second quarter total dividends declared and paid of $0.54 per common share
  • Book Value Per Share of $12.38 at June 30, 2015
  • 0.4% economic gain on common equity for the quarter, or 1.6% annualized, comprised of $0.54 dividend per common share and $0.49 decrease in net book value per common share, divided by beginning book value per share
  • Company to discuss results on Thursday, July 30, 2015, at 10:00 AM ET

Details of Second Quarter 2015 Results of Operations

The Company reported net loss of $2.8 million for the three month period ended June 30, 2015, compared with net income of $10.6 million for the three month period ended June 30, 2014. The second quarter net loss of $2.8 million included net interest income of $15.2 million, net portfolio losses of $16.0 million (which includes mark-to-market losses, realized losses on securities sold and losses on derivative instruments), management fees of $1.0 million, audit, legal and other professional fees of $0.2 million, and other operating, general and administrative expenses of $0.8 million. During the second quarter of 2015, the Company sold residential mortgage-backed securities ("RMBS") with a market value at the time of sale of $362.3 million, resulting in realized losses of $1.9 million (based on security prices from March 31, 2015). The remaining net loss on RMBS was due to fair value adjustments for the period.

Capital Allocation and Return on Invested Capital

The Company allocates capital to two RMBS sub-portfolios, the pass-through RMBS portfolio ("PT RMBS"), and the structured RMBS portfolio, consisting of interest only ("IO") and inverse interest-only ("IIO") securities. As of March 31, 2015, approximately 64% of the Company's investable capital (which consists of equity in pledged PT RMBS, available cash and unencumbered assets) was deployed in the PT RMBS portfolio. At June 30, 2015, the allocation to the PT RMBS had decreased by 8% to approximately 56%.

The table below details the changes to the respective sub-portfolios during the quarter, as well as the returns generated by each.

(in thousands)
Portfolio Activity for the Quarter
Structured Security Portfolio
Pass-Through Interest-Only Inverse Interest
Portfolio Securities Only Securities Sub-total Total
Market Value - March 31, 2015 $ 1,596,207 $ 65,232 $ 15,182 $ 80,414 $ 1,676,621
Securities Purchased 907,354 8,972 26,536 35,508 942,862
Securities Sold (362,319) -- -- -- (362,319)
Losses on Sales (1,891) -- -- -- (1,891)
Return on Investment n/a (5,306) (1,634) (6,940) (6,940)
Pay-downs (60,138) n/a n/a n/a (60,138)
Premium Lost Due to Pay-downs (5,656) n/a n/a n/a (5,656)
Mark to Market (Losses) Gains (19,978) 9,449 2,861 12,310 (7,668)
Market Value - June 30, 2015 $ 2,053,579 $ 78,347 $ 42,945 $ 121,292 $ 2,174,871

The tables below present the allocation of capital between the respective portfolios at June 30, 2015 and March 31, 2015, and the return on invested capital for each sub-portfolio for the three month period ended June 30, 2015. The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately (9.3)% and 15.6%, respectively, for the second quarter of 2015. The combined portfolio generated a return on invested capital of approximately (0.4)%. Due to the deployment of the proceeds of our capital raising activities during the three months ended June 30, 2015, the balances of the respective portfolios increased significantly. Accordingly, returns generated based on the beginning of period capital are larger than returns on a stabilized portfolio. We have added the return on average capital deployed to address this issue.

($ in thousands)
Capital Allocation
Structured Security Portfolio
Pass-Through Interest-Only Inverse Interest
Portfolio Securities Only Securities Sub-total Total
June 30, 2015
Market Value $ 2,053,579 $ 78,347 $ 42,945 $ 121,292 $ 2,174,871
Cash(1) 115,907 -- -- -- 115,907
Repurchase Agreement Obligations(2) (2,014,071) -- -- -- (2,014,071)
Total $ 155,415 $ 78,347 $ 42,945 $ 121,292 $ 276,707
% of Total 56.2% 28.3% 15.5% 43.8% 100.0%
March 31, 2015
Market Value $ 1,596,207 $ 65,232 $ 15,182 $ 80,414 $ 1,676,621
Cash 7,182 -- -- -- 7,182
Repurchase Agreement Obligations(3) (1,459,490) -- -- -- (1,459,490)
Total $ 143,899 $ 65,232 $ 15,182 $ 80,414 $ 224,313
% of Total 64.2% 29.0% 6.8% 35.8% 100.0%
(1) At June 30, 2015, total cash has been reduced by unsettled security purchases of approximately $7.6 million.
(2) At June 30, 2015, there were outstanding repurchase agreement balances of $29.2 million and $17.0 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in pass-through RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.
(3) At March 31, 2015, there were outstanding repurchase agreement balances of $21.6 million and $4.0 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in pass-through RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.
($ in thousands)
Returns for the Quarter Ended June 30, 2015
Structured Security Portfolio
Pass-Through Interest-Only Inverse Interest
Portfolio Securities Only Securities Sub-total Total
Income / (loss) (net of repo cost) $ 14,982 $ (228) $ 432 $ 204 $ 15,186
Realized and unrealized (losses) / gains (27,525) 9,449 2,861 12,310 (15,215)
Derivative losses (802) n/a n/a n/a (802)
Total Return $ (13,345) $ 9,221 $ 3,293 $ 12,514 $ (831)
Beginning Capital Allocation $ 143,899 $ 65,232 $ 15,182 $ 80,414 $ 224,313
Return on Invested Capital for the Quarter(1) (9.3)% 14.1% 21.7% 15.6% (0.4)%
Average Capital Allocation(2) $ 149,657 $ 71,790 $ 29,064 $ 100,854 $ 250,511
Return on Average Invested Capital for the Quarter(3) (8.9)% 12.8% 11.3% 12.4% (0.3)%
(1) Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage.
(2) Calculated using two data points, the Beginning and Ending Capital Allocation balances.
(3) Calculated by dividing the Total Return by the Average Capital Allocation, expressed as a percentage.

Prepayments

For the quarter, Orchid received $67.1 million in scheduled and unscheduled principal repayments and prepayments, which equated to a constant prepayment rate ("CPR") of approximately 15.3% for the second quarter of 2015. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):

Structured
PT RMBS RMBS Total
Three Months Ended Portfolio (%) Portfolio (%) Portfolio (%)
June 30, 2015 13.8 17.9 15.3
March 31, 2015 8.1 14.6 9.7
December 31, 2014 4.0 14.9 7.8
September 30, 2014 8.1 18.8 12.5
June 30, 2014 4.1 15.9 8.1
March 31, 2014 4.2 14.9 9.1

Portfolio

As of June 30, 2015, Orchid's RMBS portfolio consisted of $2,174.9 million of PT RMBS and structured RMBS at fair value and had a weighted average coupon of 4.15%. The following tables summarize Orchid's PT RMBS and structured RMBS as of June 30, 2015 and December 31, 2014:

($ in thousands)
Weighted Weighted
Percentage Average Average Weighted Weighted
of Weighted Maturity Coupon Average Average
Fair Entire Average in Longest Reset in Lifetime Periodic
Asset Category Value Portfolio Coupon Months Maturity Months Cap Cap
June 30, 2015
Adjustable Rate RMBS $ 3,456 0.2% 3.64% 229 1-Sep-35 0.57 10.07% 2.00%
Fixed Rate RMBS 1,993,369 91.7% 4.17% 325 1-Jun-45 NA NA NA
Hybrid Adjustable Rate RMBS 56,754 2.6% 2.56% 331 1-Aug-43 90.84 7.56% 2.00%
Total Mortgage-backed Pass-through 2,053,579 94.5% 4.12% 325 1-Jun-45 NA NA NA
Interest-Only Securities 78,347 3.6% 3.62% 256 25-Apr-45 NA NA NA
Inverse Interest-Only Securities 42,945 1.9% 6.20% 324 15-Apr-45 NA 6.38% NA
Total Structured RMBS 121,292 5.5% 4.53% 280 25-Apr-45 NA NA NA
Total Mortgage Assets $ 2,174,871 100.0% 4.15% 322 1-Jun-45 NA NA NA
December 31, 2014
Adjustable Rate RMBS $ 3,794 0.2% 3.55% 236 1-Sep-35 4.02 10.05% 2.00%
Fixed Rate RMBS 1,412,593 91.2% 4.37% 318 1-Dec-44 NA NA NA
Hybrid Adjustable Rate RMBS 70,400 4.6% 2.54% 338 1-Aug-43 97.75 7.54% 2.00%
Total Mortgage-backed Pass-through 1,486,787 96.0% 4.28% 319 1-Dec-44 NA NA NA
Interest-Only Securities 46,611 3.0% 3.95% 248 25-Jan-43 NA NA NA
Inverse Interest-Only Securities 15,773 1.0% 6.23% 308 25-Apr-41 NA 6.39% NA
Total Structured RMBS 62,384 4.0% 4.52% 263 25-Jan-43 NA NA NA
Total Mortgage Assets $ 1,549,171 100.0% 4.29% 317 1-Dec-44 NA NA NA
($ in thousands)
June 30, 2015 December 31, 2014
Percentage of Percentage of
Agency Fair Value Entire Portfolio Fair Value Entire Portfolio
Fannie Mae $ 1,716,523 78.9% $ 1,243,923 80.3%
Freddie Mac 437,182 20.1% 296,203 19.1%
Ginnie Mae 21,166 1.0% 9,045 0.6%
Total Portfolio $ 2,174,871 100.0% $ 1,549,171 100.0%
June 30, 2015 December 31, 2014
Weighted Average Pass-through Purchase Price $ 107.56 $ 107.88
Weighted Average Structured Purchase Price $ 14.02 $ 13.67
Weighted Average Pass-through Current Price $ 107.28 $ 108.59
Weighted Average Structured Current Price $ 15.49 $ 13.65
Effective Duration (1) 3.214 2.291
(1) Effective duration of 3.214 indicates that an interest rate increase of 1.0% would be expected to cause a 3.214% decrease in the value of the RMBS in the Company's investment portfolio at June 30, 2015. An effective duration of 2.291 indicates that an interest rate increase of 1.0% would be expected to cause a 2.291% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2014. These figures include the structured securities in the portfolio, but do not include the effect of the Company's funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

Financing, Leverage and Liquidity

As of June 30, 2015, the Company had outstanding repurchase obligations of approximately $2,014.1 million with a net weighted average borrowing rate of 0.39%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $2,123.6 million, and cash pledged to counterparties of approximately $14.4 million. The Company's leverage ratio at June 30, 2015 was 7.1 to 1 (excluding the $7.6 million of payable for unsettled securities purchased at June 30, 2015). At June 30, 2015, the Company's liquidity was approximately $151.8 million, consisting of unpledged RMBS (excluding the value of the unsettled purchases) and cash and cash equivalents. To enhance our liquidity even further, we may pledge more of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a listing of outstanding borrowings under repurchase obligations at June 30, 2015.

($ in thousands)
Weighted Weighted
Total Average Average
Outstanding % of Borrowing Amount Maturity
Counterparty Balances(1) Total Rate at Risk(2) in Days
J.P. Morgan Securities LLC $ 246,677 12.3% 0.38% $ 13,665 10
Citigroup Global Markets, Inc. 246,642 12.2% 0.43% 21,849 17
RBC Capital Markets, LLC 154,226 7.7% 0.39% 9,566 18
ICBC Financial Services, LLC 151,271 7.5% 0.38% 8,357 13
Cantor Fitzgerald & Co. 146,785 7.3% 0.37% 7,571 13
ED&F Man Capital Markets Inc. 142,205 7.1% 0.35% 7,648 38
Mitsubishi UFJ Securities (USA), Inc. 138,558 6.9% 0.36% 7,350 20
Mizuho Securities USA, Inc. 116,520 5.8% 0.45% 12,744 13
KGS-Alpha Capital Markets, L.P. 104,460 5.2% 0.37% 5,752 10
Daiwa Capital Markets America, Inc. 100,975 5.0% 0.38% 4,711 10
Merrill Lynch, Pierce, Fenner & Smith Inc 96,449 4.8% 0.41% 3,161 19
South Street Securities, LLC 66,963 3.3% 0.39% 3,431 12
Wells Fargo Bank, N.A. 66,396 3.3% 0.39% 3,617 15
Goldman Sachs & Co. 54,670 2.7% 0.45% 2,975 79
Morgan Stanley & Co. LLC 54,378 2.7% 0.40% 3,668 7
CRT Capital Group, LLC 44,844 2.2% 0.35% 2,336 16
Nomura Securities International, Inc. 34,720 1.7% 0.37% 1,847 9
Guggenheim Securities, LLC 32,742 1.6% 0.40% 1,830 29
Barclays Capital Inc 10,128 0.5% 0.50% 516 14
Suntrust Robinson Humphrey, Inc. 4,462 0.2% 0.34% 272 2
Total / Weighted Average $ 2,014,071 100.0% 0.39% $ 122,866 18
(1) In June 2015, the Company purchased assets with a fair value of approximately $7.6 million which settle in July 2015 that are expected to be funded by repurchase agreements.
(2) Equal to the sum of the fair value of securities sold, accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities, accrued interest payable and the fair value of securities posted by the counterparties (if any).

Hedging

In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted accounting principles ("GAAP") in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such, all gains or losses on these instruments are reflected in earnings for all periods presented. At June 30, 2015, such instruments were comprised of Eurodollar and Treasury note ("T-Note") futures contracts and interest rate swaption agreements, giving the Company the option to enter into a pay fixed interest rate swap ("payer swaption"). The tables below presents information related to the Company's Eurodollar and T-Note futures contracts at June 30, 2015.

($ in thousands)
Eurodollar Futures Contracts
Average Weighted Weighted
Contract Average Average
Notional Entry Effective Open
Expiration Year Amount Rate Rate Equity(1)
2015 $ 900,000 0.85% 0.45% $ (1,819)
2016 900,000 1.51% 1.04% (4,189)
2017 900,000 2.31% 1.81% (4,570)
2018 900,000 2.77% 2.34% (3,887)
2019 900,000 2.56% 2.61% 124
Total / Weighted Average $ 900,000 2.04% 1.62% $ (14,341)
Treasury Note Futures Contracts
Average Weighted Weighted
Contract Average Average
Notional Entry Effective Open
Expiration Year Amount(2) Rate Rate Equity(1)
September 2015 10 year T-Note futures
(Sep 2015 - Sep 2025 Hedge Period) $120,000 2.15% 2.07% $ (1,011)
(1) Open equity represents the cumulative gains (losses) recorded on open futures positions.
(2) Treasury Futures Contracts were valued at 126-05+ at June 30, 2015. The nominal value of the short position was $151.4 million.

The table below presents information related to the Company's interest rate swaption positions at June 30, 2015.

($ in thousands)
Option Underlying Swap
Weighted Weighted
Average Fixed Receive Average
Fair Months to Notional Pay Rate Term
Expiration Cost Value Expiration Amount Rate (LIBOR) (Years)
≤ 1 year $ 3,200 $ 65 2 $ 175,000 3.29% 3 Month 10

Dividends

In addition to other requirements, to qualify as a REIT we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to pay regular monthly dividends to our stockholders and have declared the following dividends during 2015 and 2014.

(in thousands, except per share data)

Declaration Date
Record Date Payment Date Per Share
Amount

Total
2015
July 9, 2015(1) July 27, 2015 July 31, 2015 $ 0.14 $ 3,218
June 9, 2015 June 22, 2015 June 30, 2015 0.18 4,057
May 11, 2015 May 26, 2015 May 29, 2015 0.18 3,580
April 9, 2015 April 27, 2015 April 30, 2015 0.18 3,303
March 10, 2015 March 27, 2015 March 31, 2015 0.18 3,205
February 10, 2015 February 25, 2015 February 27, 2015 0.18 3,017
January 13, 2015 January 26, 2015 January 30, 2015 0.18 3,017
Totals $ 1.22 $ 23,397
2014
December 9, 2014 December 26, 2014 December 30, 2014 $ 0.18 $ 3,004
November 12, 2014 November 25, 2014 November 28, 2014 0.18 2,737
October 9, 2014 October 28, 2014 October 31, 2014 0.18 2,358
September 9, 2014 September 25, 2014 September 30, 2014 0.18 2,348
August 12, 2014 August 26, 2014 August 29, 2014 0.18 1,999
July 10, 2014 July 28, 2014 July 31, 2014 0.18 1,759
June 11, 2014 June 25, 2014 June 30, 2014 0.18 1,712
May 8, 2014 May 27, 2014 May 30, 2014 0.18 1,641
April 8, 2014 April 25, 2014 April 30, 2014 0.18 1,636
March 11, 2014 March 26, 2014 March 31, 2014 0.18 1,550
February 11, 2014 February 25, 2014 February 28, 2014 0.18 974
January 9, 2014 January 27, 2014 January 31, 2014 0.18 925
Totals $ 2.16 $ 22,643
(1) The effect of the dividend declared in July 2015 is not reflected in the Company's financial statements as of June 30, 2015.

Peer Performance
Portfolio Total Rate of Return Versus Peer Group Average
ORC Spread
Orchid Over / (Under)
Total Rate Peer Peer
of Return(1) Average(1)(2) Average(3)
Second Quarter 2013 (3.0)% (12.6)% 9.6%
Third Quarter 2013 (2.2)% 0.4% (2.6)%
Fourth Quarter 2013 3.3% (1.1)% 4.4%
Stub 2013 (Annualized)(4) (2.8)% (17.5)% 14.7%
First Quarter 2014(5) (2.9)% 4.3% (7.2)%
Second Quarter 2014 9.0% 7.2% 1.8%
Third Quarter 2014 5.8% 0.7% 5.1%
Fourth Quarter 2014 2.5% 3.0% (0.5)%
2014 Total 13.6% 15.6% (2.0)%
Return(5)
First Quarter 2015 2.7% 1.4% 1.3%
Second Quarter 2015(6) 0.4% (3.9)% 4.3%
One Year Return
03/31/14 - 03/31/15 20.5% 12.5% 8.0%
Two Year Return
03/31/13 - 03/31/15(5) 12.3% 0.6% 11.7%
(1) Total Rate of Return for each period is change in book value over the period plus dividends declared divided by the book value at the beginning of the period. None of the return calculations are annualized except the Stub 2013 calculation.
(2) The Peer average is the unweighted, simple, average of the Total Rate of Return for each of the following companies in each respective measurement period: NLY, ANH, CMO, CYS, ARR, HTS, and AGNC.
(3) Represents the Total Return for Orchid minus Peer Average in each respective measurement period.
(4) Orchid completed its Initial Public Offering, or IPO, in February 2013. We have elected to start our comparison beginning with Orchid's first full operating quarter, which was the second quarter of 2013. The Orchid IPO price was $15.00 per share on February 13, 2013 and Orchid paid its first dividend of $0.135 cents in March 2013. The Book Value at March 31, 2013 was $14.98.
(5) At January 1, 2014, Orchid had 3,341,665 shares outstanding and a book value of $13.40. During the first quarter of 2014 Orchid completed two secondary offerings in which it sold 5,750,000 shares at a price of $11.86 net of fees and offering costs and expenses. The book value as of March 31, 2014 was $12.47.
(6) As of July 29, 2015, only HTS, CYS and AGNC have reported second quarter 2015 results. NLY, ANH, CMO and ARR have been excluded from the average in this period.

Book Value Per Share

The Company's Book Value Per Share at June 30, 2015 was $12.38. The Company computes Book Value Per Share by dividing total stockholders' equity by the total number of shares outstanding of the Company's common stock. At June 30, 2015, the Company's stockholders' equity was $284.1 million with 22,959,817 shares of common stock outstanding.

Secondary Offerings

On March 2, 2015, Orchid entered into an equity distribution agreement (the "Equity Distribution Agreement") with two sales agents pursuant to which the Company may offer and sell, from time to time, up to an aggregate amount of $100,000,000 of shares of the Company's common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions. Through June 30, 2015, the Company issued a total of 6,221,102 shares under the Equity Distribution Agreement for aggregate proceeds of approximately $83.1 million, net of commissions and fees. The average price received for shares issued during the three months ended June 30, 2015 was $13.65 per share.

Share Repurchase Program

On July 29, 2015, the Board of Directors passed a resolution authorizing the repurchase of up to 2,000,000 shares of the Company's common stock. As part of the stock repurchase program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate the Company to acquire any particular amount of common stock and the program may be suspended or discontinued at the Company's discretion without prior notice.

Management Commentary

Commenting on the second quarter, Robert E. Cauley, Chairman and Chief Executive Officer, said, "The second quarter of 2015 was a challenge to levered RMBS investors – and not many market participants saw it coming. The quarter started with a mini prepayment wave triggered by low rates early in the first quarter. Later in the quarter we had to deal with developments in Greece and China. The performance of the rates market in June, particularly the long end, was driven almost entirely by the latest rumors/headlines from abroad. Market participants never knew which direction the next 25 basis points in rates was headed – up or down. This kept fears of a return to lower rates in the minds of investors and the risk of a return to faster prepayment speeds.

"The impact of events overseas was not limited to the Treasury market. Agency pass-throughs widened in spread to comparable duration treasuries or swaps. The widening, between 5 and 12 basis points depending on the benchmark, exacerbated the performance of mortgages versus hedges.

"In addition to the developments above, the market continued to price in an even more dovish Federal Reserve for the balance of 2015. This started in the first quarter when economic data was quite soft and the Fed acknowledged an awareness of the impact that the strong dollar and events in Europe were having on domestic growth – namely weak manufacturing and exports due to the strong dollar and depressed mining and extraction in the fracking areas of the country caused by depressed oil prices. Fed funds futures for December moved from 39 basis points at March 31, 2015 to 29.5 basis points on June 30, 2015.

"In sum, it was not a good quarter to be a levered MBS investor. Prepayment speeds were elevated to start the quarter and remained stubbornly high into the third quarter. Late in the quarter mortgages widened, and continued to do so into early July, although the widening has since abated somewhat."

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Thursday, July 30, 2015, at 10:00 AM ET. The conference call may be accessed by dialing toll free (877) 341-5668. International callers dial (224) 357-2205. The conference passcode is 92927778. A live audio webcast of the conference call can be accessed via the investor relations section of the Company's website at www.orchidislandcapital.com, and an audio archive of the webcast will be available until August 20, 2015.

About Orchid Island Capital, Inc.

Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS and (ii) structured Agency RMBS, such as CMOs, IOs, IIOs and POs, among other types of structured Agency RMBS. Orchid is managed by Bimini Advisors, LLC, a registered investment adviser with the Securities and Exchange Commission.

Forward Looking Statements

Statements herein relating to matters that are not historical facts, including, but not limited to statements regarding the stock repurchase program, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned that such forward-looking statements are based on information available at the time and on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in Orchid Island Capital, Inc.'s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Orchid Island Capital, Inc. assumes no obligation to update forward-looking statements to reflect subsequent results, changes in assumptions or changes in other factors affecting forward-looking statements.

Summarized Financial Statements

The following is a summarized presentation of the unaudited balance sheets as of June 30, 2015, and December 31, 2014, and the unaudited quarterly results of operations for the six and three months ended June 30, 2015 and 2014. Amounts presented are subject to change.

ORCHID ISLAND CAPITAL, INC.
BALANCE SHEETS
($ in thousands, except per share data)
(Unaudited - Amounts Subject To Change)
June 30, 2015 December 31, 2014
ASSETS:
Total mortgage-backed securities $ 2,174,871 $ 1,549,171
Cash, cash equivalents and restricted cash 123,531 100,927
Accrued interest receivable 8,663 6,211
Derivative assets, at fair value 65 1,217
Other assets 523 282
Total Assets $ 2,307,653 $ 1,657,808
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase agreements $ 2,014,071 $ 1,436,651
Payable for unsettled security purchased 7,623 --
Accrued interest payable 599 628
Due to affiliates 456 330
Other liabilities 755 2,121
Total Liabilities 2,023,504 1,439,730
Total Stockholders' Equity 284,149 218,078
Total Liabilities and Stockholders' Equity $ 2,307,653 $ 1,657,808
Common shares outstanding 22,959,817 16,699,656
Book value per share $ 12.38 $ 13.06
ORCHID ISLAND CAPITAL, INC.
STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(Unaudited - Amounts Subject to Change)
Six Months Ended June 30, Three Months Ended June 30,
2015 2014 2015 2014
Interest income $ 31,367 $ 10,372 $ 16,753 $ 6,589
Interest expense (2,863) (1,087) (1,567) (676)
Net interest income 28,504 9,285 15,186 5,913
(Losses) gains (22,080) 6,594 (16,017) 5,836
Net portfolio income (loss) 6,424 15,879 (831) 11,749
Expenses 3,747 1,649 2,001 1,114
Net income (loss) $ 2,677 $ 14,230 $ (2,832) $ 10,635
Basic and diluted net income (loss) per share $ 0.14 $ 2.01 $ (0.14) $ 1.17
Dividends Declared Per Common Share: $ 1.080 $ 1.080 $ 0.540 $ 0.540
Three Months Ended June 30,
Key Balance Sheet Metrics 2015 2014
Average RMBS(1) $ 1,925,747 $ 811,881
Average repurchase agreements(1) 1,736,781 717,474
Average stockholders' equity(1) 257,447 116,549
Leverage ratio(2) 7.1:1 6.3:1
Key Performance Metrics
Average yield on RMBS(3) 3.48% 3.25%
Average cost of funds(3) 0.36% 0.38%
Average economic cost of funds(4) 0.50% 0.38%
Average interest rate spread(5) 3.12% 2.87%
Average economic interest rate spread(6) 2.98% 2.87%
(1) Average RMBS, repurchase agreements and stockholders' equity balances are calculated using two data points, the beginning and ending balances.
(2) The leverage ratio is calculated by dividing total ending liabilities by ending stockholders' equity. At June 30, 2015 and 2014, the $7.6 million and $6.8 million, respectively of payable for unsettled securities purchased have been excluded from the total liabilities for this ratio.
(3) Portfolio yields and costs of funds are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the quarterly periods presented.
(4) Represents interest cost of our borrowings and the effect of Eurodollar and T-Note futures contracts and interest rate swaptions attributed to the period related to hedging activities, divided by average repurchase agreements.
(5) Average interest rate spread is calculated by subtracting average cost of funds from average yield on RMBS.
(6) Average economic interest rate spread is calculated by subtracting average economic cost of funds from average yield on RMBS.

CONTACT: Orchid Island Capital, Inc. Robert E. Cauley, 772-231-1400 Chairman and Chief Executive Officer www.orchidislandcapital.com

Source:Orchid Island Capital