News Column

Orchid Island Capital Announces Second Quarter 2014 Results

July 29, 2014

VERO BEACH, Fla., July 29, 2014 (GLOBE NEWSWIRE) -- Orchid Island Capital, Inc. (NYSE MKT:ORC) ("Orchid" or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three month period ended June 30, 2014.

Second Quarter 2014 Highlights

• Net income of $10.6 million, or $1.17 per common share• Second quarter total dividends declared and paid of $0.54 per common share• Book Value Per Share of $13.05 at June 30, 2014• 9.0% economic gain on common equity for the quarter, or 35.9% annualized, comprised of $0.54 dividend per common share and $0.58 increase in net book value per common share, divided by beginning book value per share• Company to discuss results on Wednesday, July 30, 2014, at 10:00 AM ET

Details of Second Quarter 2014 Results of Operations

The Company reported net income of $10.6 million for the three-month period ended June 30, 2014, compared with net loss of $1.5 million for the three month period ended June 30, 2013. The second quarter net income of $10.6 million included net interest income of $5.9 million, net gains of $5.8 million (which includes mark to market gains, realized gains on securities sold and losses on funding hedges), accrued incentive compensation of $0.2 million, audit, legal and other professional fees of $0.2 million, management fees of $0.4 million, and other operating, general and administrative expenses of $0.3 million. During the second quarter of 2014, the Company sold residential mortgage-backed securities ("RMBS") with a market value at the time of sale of $279.5 million, resulting in realized gains of $3.0 million (based on security prices from March 31, 2014). The remaining net gain 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, 2014, approximately 56% 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, 2014, the allocation to the PT RMBS had increased 4% to approximately 60%.

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

 
Portfolio Activity for the Quarter
  Structured Security Portfolio 
 Pass-ThroughInterest-OnlyInverse Interest   
 PortfolioSecuritiesOnly SecuritiesSub-totalTotal
Market Value - March 31, 2014 $ 701,476,202  $ 35,681,436  $ 10,599,862  $ 46,281,298  $ 747,757,500
Securities Purchased  404,680,187  7,869,803  --   7,869,803  412,549,990
Securities Sold  (279,489,911)  --   --   --   (279,489,911)
Gains on Sales  2,980,121  --   --   --   2,980,121
Return on Investment  n/a   (3,989,112)  (995,599)  (4,984,711)  (4,984,711)
Pay-downs  (11,392,716)  n/a   n/a   n/a   (11,392,716)
Premium Lost Due to Pay-downs  (670,987)  n/a   n/a   n/a   (670,987)
Mark to Market Gains (Losses)  9,338,792  (819,302)  735,475  (83,827)  9,254,965
Market Value - June 30, 2014 $ 826,921,688  $ 38,742,825  $ 10,339,738  $ 49,082,563  $ 876,004,251


The tables below present the allocation of capital between the respective portfolios at June 30, 2014 and March 31, 2014, and the return on invested capital for each sub-portfolio for the three month period ended June 30, 2014. The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 22.1% and (2.5)%, respectively, for the second quarter of 2014. The combined portfolio generated a return on invested capital of approximately 11.2%. Due to the deployment of the proceeds of our capital raising activities during the six months ended June 30, 2014, 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.

 
Capital Allocation
  Structured Security Portfolio 
 Pass-ThroughInterest-OnlyInverse Interest   
 PortfolioSecuritiesOnly SecuritiesSub-totalTotal
June 30, 2014         
Market Value  $ 826,921,688  $ 38,742,825  $ 10,339,738  $ 49,082,563  $ 876,004,251
Cash(1)  30,040,207  --   --   --   30,040,207
Repurchase Agreement Obligations(2)  (783,700,849)  --   --   --   (783,700,849)
Total  $ 73,261,046  $ 38,742,825  $ 10,339,738  $ 49,082,563  $ 122,343,609
% of Total 59.9% 31.7% 8.5% 40.1% 100.0%
March 31, 2014          
Market Value  $ 701,476,202  $ 35,681,436  $ 10,599,862  $ 46,281,298  $ 747,757,500
Cash  8,160,979  --   --   --   8,160,979
Repurchase Agreement Obligations  (651,246,345)  --   --   --   (651,246,345)
Total  $ 58,390,836  $ 35,681,436  $ 10,599,862  $ 46,281,298  $ 104,672,134
% of Total 55.8% 34.1% 10.1% 44.2% 100.0%
           
(1) At June 30, 2014, total cash has been reduced by unsettled security purchases of approximately $6.8 million.
(2) At June 30, 2014, there were outstanding repurchase agreement balances of $12.5 million and $5.0 million secured by interest-only and inverse interest-only 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.
 
Returns for the Quarter
  Structured Security Portfolio 
 Pass-ThroughInterest-OnlyInverse Interest   
 PortfolioSecuritiesOnly SecuritiesSub-totalTotal
Income / (loss) (net of repo cost)  $ 6,998,465  $ (1,219,347)  $ 134,519  $ (1,084,828)  $ 5,913,637
Realized and unrealized gains / (losses)  11,647,926  (819,302)  735,475  (83,827)  11,564,099
Hedge losses  (5,728,196)  n/a   n/a   n/a   (5,728,196)
Total Return  $ 12,918,195  $ (2,038,649)  $ 869,994  $ (1,168,655)  $ 11,749,540
Beginning Capital Allocation  $ 58,390,836  $ 35,681,436  $ 10,599,862  $ 46,281,298  $ 104,672,134
Return on Invested Capital for the Quarter(1) 22.1% (5.7)% 8.2% (2.5)% 11.2%
Average Capital Allocation(2)  $ 65,825,941  $ 37,212,131  $ 10,469,800  $ 47,681,931  $ 113,507,872
Return on Average Invested Capital for the Quarter(3) 19.6% (5.5)% 8.3% (2.5)% 10.4%
           
(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 $16.4 million in scheduled and unscheduled principal repayments and prepayments, which equated to a constant prepayment rate ("CPR") of approximately 8.1% for the second quarter of 2014. Prepayment rates on the two RMBS sub-portfolios were as follows (in CPR):

       
  Structured  
 PT RMBSRMBSTotal
Three Months EndedPortfolio (%)Portfolio (%)Portfolio (%)
June 30, 2014 4.1 15.9 8.1
March 31, 2014 4.2 14.9 9.1
December 31, 2013 5.3 17.9 9.9
September 30, 2013 6.5 28.2 12.6
June 30, 2013 6.5 29.8 16.3
March 31, 2013 9.2 33.0 20.0


Portfolio

As of June 30, 2014, Orchid's RMBS portfolio consisted of $876.0 million of PT RMBS and structured RMBS at fair value and had a weighted average coupon of 4.17%. The following tables summarize Orchid's PT RMBS and structured RMBS as of June 30, 2014 and December 31, 2013:

 
($ in thousands)
       Weighted  Weighted    
   Percentage  Average  AverageWeightedWeighted
   ofWeightedMaturity  CouponAverageAverage
 FairEntireAverageinLongestReset inLifetimePeriodic
Asset CategoryValuePortfolioCouponMonthsMaturityMonthsCapCap
June 30, 2014                
Adjustable Rate RMBS$ 4,650 0.5% 4.11% 2391-Sep-35 0.51 10.16% 2.00%
Fixed Rate RMBS 747,210 85.3% 4.30% 3131-Jun-44 NA NA NA
Hybrid Adjustable Rate RMBS 75,061 8.6% 2.55% 3441-Aug-43 103.66 7.55% 2.00%
Total Mortgage-backed Pass-through 826,921 94.4% 4.14% 3161-Jun-44 97.64 7.70% 2.00%
Interest-Only Securities 38,743 4.4% 4.40% 27525-Jan-43 NA NA NA
Inverse Interest-Only Securities 10,340 1.2% 6.03% 30715-Dec-40 NA 6.19% NA
Total Structured RMBS 49,083 5.6% 4.74% 28225-Jan-43 NA NA NA
Total Mortgage Assets$ 876,004 100.0% 4.17% 3141-Jun-44 NA NA NA
December 31, 2013                
Adjustable Rate RMBS$ 5,334 1.5% 3.92% 2471-Sep-35  3.77 10.13% 2.00%
Fixed Rate RMBS 245,523 69.9% 4.05% 3231-Dec-43  NA  NA NA
Hybrid Adjustable Rate RMBS 76,118 21.7% 2.56% 3501-Aug-43  109.60 7.56% 2.00%
Total Mortgage-backed Pass-through 326,975 93.1% 3.70% 3281-Dec-43  102.67 7.72% 2.00%
Interest-Only Securities 19,206 5.5% 4.39% 26125-Nov-40 NA NA NA
Inverse Interest-Only Securities 5,042 1.4% 5.92% 31715-Dec-40 NA 6.08% NA
Total Structured RMBS 24,248 6.9% 4.71% 27215-Dec-40 NA NA NA
Total Mortgage Assets$ 351,223 100.0% 3.77% 3241-Dec-43 NA NA NA
 
($ in thousands)
 June 30, 2014December 31, 2013
   Percentage of  Percentage of
AgencyFair ValueEntire PortfolioFair ValueEntire Portfolio
Fannie Mae  $ 547,124 62.46%  $ 211,063 60.09%
Freddie Mac  318,454 36.35%  121,842 34.69%
Ginnie Mae  10,426 1.19%  18,318 5.22%
Total Portfolio  $ 876,004 100.00%  $ 351,223 100.00%
     
 June 30, 2014December 31, 2013
Weighted Average Pass Through Purchase Price  $ 106.80  $ 105.60
Weighted Average Structured Purchase Price  $ 13.19  $ 12.11
Weighted Average Pass Through Current Price  $ 107.68  $ 102.83
Weighted Average Structured Current Price  $ 13.89  $ 14.59
Effective Duration (1)  2.732  4.188
     
(1) Effective duration of 2.732 indicates that an interest rate increase of 1.0% would be expected to cause a 2.732% decrease in the value of the RMBS in the Company's investment portfolio at June 30, 2014. An effective duration of 4.188 indicates that an interest rate increase of 1.0% would be expected to cause a 4.188% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2013. 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, 2014, the Company had outstanding repurchase obligations of approximately $783.7 million with a net weighted average borrowing rate of 0.35%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $836.5 million. The Company's leverage ratio at June 30, 2014 was 6.3 to 1, excluding the $6.8 million of payable for unsettled securities purchased at June 30, 2014. At June 30, 2014, the Company's liquidity was approximately $69.1 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, 2014. 

 
($ in thousands)
     Weighted  Weighted
 Total  Average  Average
 Outstanding% ofBorrowingAmountMaturity
CounterpartyBalancesTotalRateat Risk(1)in Days
Citigroup Global Markets, Inc.  $ 156,153 19.8% 0.37%  $ 11,435  20
Cantor Fitzgerald & Co. 79,295 10.1% 0.34% 4,785 27
KGS - Alpha Capital Markets, L.P. 76,241 9.7% 0.33% 5,203 36
Morgan Stanley & Co. LLC 66,373 8.5% 0.33% 4,490 50
CRT Capital Group, LLC 64,760 8.3% 0.33% 3,804 55
Mitsubishi UFJ Securities (USA), Inc. 58,960 7.5% 0.31% 3,591 7
Goldman Sachs & Co. 56,637 7.2% 0.35% 3,050 25
ED&F Man Capital Markets Inc. 53,094 6.8% 0.32% 3,106 21
J.P. Morgan Securities LLC 48,343 6.2% 0.36% 2,888 10
Mizuho Securities USA, Inc. 45,138 5.8% 0.46% 5,636 13
South Street Securities, LLC 40,042 5.1% 0.32% 2,203 16
Suntrust Robinson Humphrey, Inc. 24,826 3.2% 0.31% 1,471 3
Other 13,839 1.8% 0.33% 859 74
   $ 783,701 100.0% 0.35%  $ 52,521  26
           
(1) Equal to the fair value of securities sold plus accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities and accrued interest payable.


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 GAAP, and as such, all gains or losses on these instruments are reflected in earnings for all periods presented. As of June 30, 2014, such instruments were comprised of Eurodollar futures contracts with an average contract notional amount of $480.0 million and a weighted average fixed LIBOR rate of 1.71%, and an interest rate swaption agreement, giving the Company the option to enter into a pay fixed interest rate swap ("payer swaption"). The table below presents information related to the Company's Eurodollar futures contracts at June 30, 2014.

 
($ in thousands)
  Average 
 WeightedContract  
 AverageNotionalOpen
Expiration YearLIBOR RateAmountEquity(1)
2015 0.65%  $ 550,000  $ (789) 
2016 1.54%  550,000  159 
2017 2.46%  400,000  202 
2018 2.98%  400,000  (452) 
Total / Weighted Average 1.71%  $ 480,000  $ (880) 
       
(1) Open equity represents the cumulative gains (losses) recorded on open futures positions.


The table below presents information related to the Company's interest rate swaption position at June 30, 2014.

 
($ in thousands)
 OptionUnderlying Swap
     FixedReceive 
   FairMonths toNotionalPayRateTerm
ExpirationCostValueExpirationAmountRate(LIBOR)(Years)
= 1 year  $ 1,520  $ 1,200 11.5  $ 100,000 2.38% 3 Month 5


Dividends

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 since our IPO.

         
Declaration DateRecord DatePayment DatePer Share

Amount
Total
2014
July 10, 2014(1)July 28, 2014July 31, 2014  $ 0.180  $ 1,758,965
June 11, 2014June 25, 2014June 30, 2014  0.180  1,711,531
May 8, 2014May 27, 2014May 30, 2014  0.180  1,640,820
April 8, 2014April 25, 2014April 30, 2014  0.180  1,636,500
March 11, 2014March 26, 2014March 31, 2014  0.180  1,550,100
February 11, 2014February 25, 2014February 28, 2014  0.180  974,100
January 9, 2014January 27, 2014January 31, 2014  0.180  925,500
2013
December 11, 2013December 26, 2013December 30, 2013  0.180  601,500
November 12, 2013November 25, 2013November 27, 2013  0.135  451,125
October 10, 2013October 25, 2013October 31, 2013  0.135  451,125
September 10, 2013September 25, 2013September 30, 2013  0.135  451,125
August 12, 2013August 26, 2013August 30, 2013  0.135  451,125
July 9, 2013July 25, 2013July 31, 2013  0.135  451,125
June 10, 2013June 25, 2013June 28, 2013  0.135  451,125
May 9, 2013May 28, 2013May 31, 2013  0.135  451,125
April 10, 2013April 25, 2013April 30, 2013  0.135  451,125
March 8, 2013March 25, 2013March 27, 2013  0.135  451,125
         
(1) The effect of the dividend declared in July 2014 is not reflected in the Company's financial statements as of June 30, 2014.

Book Value Per Share

The Company's Book Value Per Share at June 30, 2014 was $13.05. 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, 2014, the Company's stockholders' equity was $125.7 million with 9,632,108 shares of common stock outstanding.

Secondary Offerings

The Company completed a secondary offering of 1,800,000 common shares on January 23, 2014 at a price of $12.50 per share. The underwriters exercised their overallotment option in full for an additional 270,000 shares on January 29, 2014. The aggregate net proceeds to the Company were approximately $24.2 million which were invested in Agency RMBS securities on a leveraged basis.

The Company completed a secondary offering of 3,200,000 common shares on March 24, 2014 at a price of $12.55 per share. The underwriters exercised their overallotment option in full for an additional 480,000 shares on April 11, 2014. The aggregate net proceeds to the Company were approximately $44.0 million which were invested in Agency RMBS securities on a leveraged basis.

On June 17, 2014, 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 $35,000,000 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, 2014, the Company has issued a total of 537,499 shares under the Equity Distribution Agreement for aggregate proceeds of approximately $6.9 million, net of commissions and fees. Through July 29, 2014, the Company has issued a total of 653,420 shares under the Equity Distribution Agreement for aggregate proceeds of approximately $8.4 million, net of commissions and fees.

Management Commentary

Commenting on the second quarter, Robert E. Cauley, Chairman and Chief Executive Officer, said, "This year has not followed the script most market participants had drawn up in their heads last December. The yield on the 10 year US Treasury note exceeded 3% at year end and the overwhelming majority of market participants expected rates to rise further. So we rallied – during the first quarter and again in the second. However, prepayment speeds remained subdued through the spring and have not rebounded materially during the summer months. The Mortgage Bankers refinance index has remained below 1500 most of the second quarter and was below 1400 for the week of July 18, 2014. The housing market has continued to recover but at a much slower pace than what we observed in 2013. The commercial banking sector has been retaining originated mortgage loans on their balance sheets in lieu of securitizing them at a much higher rate than 2013. The combination of all of these factors has resulted in gross and net supply of Agency MBS falling well below market expectations. In fact the net supply of Agency MBS was only $10 billion for the first six months of 2014. The Federal Reserve started to taper their asset purchases in January and has announced reductions of their monthly MBS and Treasury purchases by $5 billion each at every meeting since. They currently plan to stop their asset purchases in October of this year. The reduced demand on the part of the Federal Reserve was supposed to cause mortgages to widen, and many asset managers were underweight the sector as a result. However, the dramatic reduction in supply has led the sector to outperform and mortgage yield spreads over comparable duration Treasuries narrowed. In fact, the production 30 year Fannie Mae securities (3.0%, 3.5% and 4.0% coupon securities) outperformed their comparable duration Treasury benchmarks by over 2 points for the quarter. The 15 year production Fannie Mae coupons outperformed as well, although less so in absolute price terms.

"Orchid completed the deployment of the proceeds of our first quarter secondary offerings in April and initiated an At-The-Market program in late June. We were able to raise approximately $8.4 million through this program by July 7th and have invested the proceeds. As a result of the deployment of the new capital, the RMBS portfolio grew by approximately 17% during the quarter and has grown by almost 150% year to date. With the growth in the portfolio, we have shifted the exposure towards fixed rate RMBS and 30 year securities in particular. We have also been increasing the weighted average coupon of the pass-through portfolio from 3.70% at December 31, 2013 to 4.14% at June 30, 2014. The capital allocation was shifted from 55.8% pass-throughs and 44.2% structured securities at March 31, 2014 to 59.9% pass-throughs and 40.1% structured securities at June 30, 2014. To compensate for the added duration of the pass-throughs, especially 30 year securities, we have added to our funding hedge positions by increasing our Eurodollar shorts and adding a 1 year by 5 year payer swaption. We have also sold approximately $279 million of pass-through securities – predominantly low loan balance bonds and all 30 year securities - as they had appreciated in price as spec pool premiums increased from first quarter levels.

"As we move into the second half of the year, we have been confronted by geo-political events, strengthening economic data and higher inflation levels. The Treasury curve has bull-flattened as most of the flight to quality trading into US Treasuries has occurred in the long end of the curve – 10 year notes and 30 year bonds – as opposed to the front end of the curve as is more typically the case. This has been exacerbated by the considerable yield spread of longer dated US Treasury yields over comparable maturity German yields – resulting in relative value trading out of German Bunds and into US Treasuries. The market has also become very focused on communications from the Federal Reserve pertaining to their perception of the strength of the economy, its recovery and inflation levels. Once the Federal Reserve ends their asset purchases later this year, the market will anticipate the initial move away from the zero level in the Fed Funds target rate, as well as their exit strategy generally from the current interest rate regime. The Agency RMBS market will also be closely watched as the market still anticipates there may be some impact of the end of Fed purchases on mortgage spreads. Most multi-sector asset managers remain well underweight the MBS sector based on most positioning surveys. 

"We have positioned the portfolio for increased funding levels and a continuation of modest prepayment speeds. Mortgage borrowers have been exposed to very low levels of rates for an extended period and show a reduced sensitivity to refinancing opportunities. Mortgage lenders have reduced their capacity and new regulations imposed by the Dodd-Frank Act have impaired their ability to quickly ramp up their staff/capacity levels – further muting refinancing activity. We see the greatest risks to the market as two-fold. The first would be an outbreak of inflation – resulting in a more aggressive Fed and elevated volatility in the rates markets. The second would be the outcome least expected by market participants – a rally. To address the first risk we have added swaptions on the 5 year sector so if volatility moves meaningfully higher and the market expects more substantial Fed tightening, our hedge will benefit. We have guarded against the second by maintaining a material allocation to call protected securities. They continue to offer very good carry and protection from higher prepayments if the market rallies."

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Wednesday, July 30, 2014, 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 76376503. 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, 2014.

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 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, 2014, and December 31, 2013, and the unaudited quarterly results of operations for the six and three months ended June 30, 2014 and 2013. Amounts presented are subject to change.

 
ORCHID ISLAND CAPITAL, INC.
BALANCE SHEETS
(Unaudited - Amounts Subject To Change)
     
 June 30, 2014December 31, 2013
ASSETS:    
Total mortgage-backed securities  $ 876,004,251  $ 351,222,512
Cash, cash equivalents and restricted cash  36,868,745  10,615,027
Accrued interest receivable  3,798,455  1,559,437
Derivative asset, at fair value  1,199,700  --
Other assets  515,335  179,071
Total Assets  $ 918,386,486  $ 363,576,047
     
LIABILITIES AND STOCKHOLDERS' EQUITY  
Repurchase agreements  $ 783,700,849  $ 318,557,054
Payable for unsettled securities purchased  6,828,538  --
Accrued interest payable  308,339  91,461
Due to affiliates  152,166  81,925
Other liabilities  1,707,589  80,260
Total Liabilities  792,697,481  318,810,700
Total Stockholders' Equity  125,689,005  44,765,347
Total Liabilities and Stockholders' Equity  $ 918,386,486  $ 363,576,047
Common shares outstanding  9,632,108  3,341,665
Book value per share  $ 13.05  $ 13.40
 
ORCHID ISLAND CAPITAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited - Amounts Subject to Change)
         
 Six Months Ended June 30,Three Months Ended June 30,
 2014201320142013
Interest income  $ 10,371,927  $ 3,841,957  $ 6,589,305  $ 2,428,699
Interest expense  (1,086,511)  (523,306)  (675,668)  (321,886)
Net interest income  9,285,416  3,318,651  5,913,637  2,106,813
Gains (losses)  6,593,917  (3,614,649)  5,835,903  (3,201,488)
Net portfolio income (loss)  15,879,333  (295,998)  11,749,540  (1,094,675)
Expenses  1,649,129  849,796  1,114,599  451,477
Net income (loss)  $ 14,230,204  $ (1,145,794)  $ 10,634,941  $ (1,546,152)
Basic and diluted net income (loss) per share  $ 2.01  $ (0.43)  $ 1.17  $ (0.46)
Dividends Declared Per Common Share:  $ 1.08  $ 0.540  $ 0.540  $ 0.405
   
   
 Three Months Ended June 30,
Key Balance Sheet Metrics20142013
Average RMBS(1)  $ 811,880,875  $ 349,704,096
Average repurchase agreements(1) 717,473,597 312,590,604
Average stockholders' equity(1) 116,549,360 48,624,446
Leverage ratio(2) 6.3:1 6.5:1
     
Key Performance Metrics    
Average yield on RMBS(3) 3.25% 2.78%
Average cost of funds(3) 0.38% 0.41%
Average economic cost of funds(4) 0.38% 0.42%
Average interest rate spread(5) 2.87% 2.37%
Average economic interest rate spread(6) 2.87% 2.36%
     
(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, 2014, the $6.8 million of payable for unsettled securities purchased has 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 effect of Eurodollar futures contracts hedges 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



Orchid Island Capital, Inc.

Source: Orchid Island Capital


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