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Orchid Island Capital Announces January 2018 Monthly Dividend and December 31, 2017 RMBS Portfolio Characteristics

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  • January 2018 Monthly Dividend of $0.11 Per Share
  • Estimated Book Value Per Share at December 31, 2017 of $8.71
  • Estimated GAAP net loss of $0.12 per share for the quarter ended December 31, 2017, including an estimated $0.58 per share of realized and unrealized losses on RMBS and derivative instruments
  • Estimated GAAP net income of $0.04 per share for the year ended December 31, 2017, including an estimated $1.98 per share of realized and unrealized losses on RMBS and derivative instruments
  • Estimated (0.2)% total return on equity for the quarter, or (0.9)% annualized.  Estimated total return for the year was 2.9%
  • RMBS Portfolio Characteristics as of December 31, 2017

VERO BEACH, Fla., Jan. 10, 2018 (GLOBE NEWSWIRE) -- Orchid Island Capital, Inc. (the "Company") (NYSE:ORC) announced today that the Board of Directors declared a monthly cash dividend for the month of January 2018. The dividend of $0.11 per share will be paid February 9, 2018 to holders of record on January 31, 2018, with an ex-dividend date of January 30, 2018.

Commenting on the change to the Company's monthly distribution rate, Robert E. Cauley, Chairman and Chief Executive Officer, said, "The decision to reduce our monthly dividend from $0.14 to $0.11 was a difficult one but a necessary one. The current interest rate and investment environment has put downward pressure on the earnings power of the portfolio. In particular, continued upward movements in our borrowing costs driven by rate increases by the Federal Reserve, without a corresponding increase in yields available on the Agency RMBS assets we acquire, has depressed our net interest margin and necessitated the reduction in our monthly dividend."

The Company intends to make regular monthly cash distributions to its stockholders. In order to qualify as a real estate investment trust ("REIT"), the Company must distribute annually to its stockholders an amount at least equal to 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain. The Company will be subject to income tax on taxable income that is not distributed and to an excise tax to the extent that a certain percentage of its taxable income is not distributed by specified dates. The Company has not established a minimum distribution payment level and is not assured of its ability to make distributions to stockholders in the future.

As of January 10, 2018, the Company had 53,061,904 shares outstanding. At September 30, 2017, the Company had 45,308,169 shares outstanding.

Estimated December 31, 2017 Book Value Per Share

The Company's estimated book value per share as of December 31, 2017 was $8.71.  The Company computes book value per share by dividing total stockholders' equity by the total number of outstanding shares of common stock. At December 31, 2017, the Company's preliminary estimated total stockholders' equity was approximately $462.2 million with 53,061,904 shares of common stock outstanding. These figures and the resulting estimated book value per share are preliminary, subject to change, and subject to review by the Company's independent registered public accounting firm. 

Estimated Net Income Per Share and Realized and Unrealized Gains and Losses on RMBS and Derivative Instruments

The Company estimates it generated a net loss per share of $0.12, which includes $0.58 per share of realized and unrealized losses on RMBS and derivative instruments for the quarter ended December 31, 2017.  These figures compare to three monthly dividends declared during the quarter of $0.14, for a total of $0.42 declared during the quarter.  Net income per common share calculated under generally accepted accounting principles can, and does, differ from our REIT taxable income.  The Company views REIT taxable income as a better indication of income to be paid in the form of a dividend rather than net income. Many components of REIT taxable income can only be estimated at this time and our monthly dividends declared are based on both estimates of REIT taxable income to be earned over the course of the current quarter and calendar year and a longer-term estimate of the REIT taxable income of the Company. These figures are preliminary, subject to change, and subject to review by the Company's independent registered public accounting firm. 

Estimated Return on Equity

The Company's estimated total return on equity for the quarter ended December 31, 2017 was (0.2)%, or (0.9)% on an annualized basis. The Company calculates total return on equity as the sum of dividends declared and paid during the quarter plus changes in book value during the quarter, divided by the Company's stockholders' equity at the beginning of the quarter.  The total return was $(0.02) per share, comprised of dividends per share of $0.42 and a decrease in book value per share of $0.44 from September 30, 2017.

RMBS Portfolio Characteristics

Details of the RMBS portfolio as of December 31, 2017 are presented below. These figures are preliminary and subject to change and, with respect to figures that will appear in the Company's financial statements and associated footnotes as of and for the quarter ended December 31, 2017, are subject to review by the Company's independent registered public accounting firm.

  • RMBS Valuation Characteristics
  • RMBS Assets by Agency
  • Investment Company Act of 1940 Whole Pool Test Results
  • Repurchase Agreement Exposure by Counterparty
  • RMBS Risk Measures

About Orchid Island Capital, Inc.

Orchid Island Capital, Inc. is a specialty finance company that invests in Agency RMBS that are either traditional pass-through Agency RMBS or structured Agency RMBS. Orchid Island Capital, Inc. has elected to be taxed as a REIT for federal income tax purposes.  

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements include, but are not limited to, statements about the Company's distributions. These forward-looking statements are based upon Orchid Island Capital, Inc.'s present expectations, but these statements are not guaranteed to occur. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the "Risk Factors" section of the Company's Form 10-K for the year ended December 31, 2016.

                   
RMBS Valuation Characteristics                  
($ in thousands)                  
              Percentage Weighted Realized
    Current   Fair   Current of Average Dec 2017 CPR
Asset Category   Face   Value   Price Portfolio Coupon (Reported in Jan)
As of December 31, 2017                  
Adjustable Rate RMBS $ 1,660 $ 1,754 $ 105.67 0.05 % 3.95 % 0.02%
10-1 Hybrid Rate RMBS   27,173   27,398   100.83 0.73 % 2.59 % 12.94%
Hybrid Adjustable Rate RMBS   27,173   27,398   100.83 0.73 % 2.59 % 12.94%
15 Year Fixed Rate RMBS   39,193   40,729   103.92 1.09 % 3.50 % 12.10%
20 Year Fixed Rate RMBS   378,181   400,025   105.78 10.68 % 4.00 % 6.09%
30 Year Fixed Rate RMBS   2,947,170   3,153,779   107.01 84.22 % 4.29 % 5.71%
Total Fixed Rate RMBS   3,364,544   3,594,533   106.84 95.99 % 4.25 % 5.83%
Total Pass-through RMBS   3,393,377   3,623,685   106.79 96.77 % 4.24 % 5.88%
Interest-Only Securities   701,740   86,918   12.39 2.32 % 3.75 % 13.65%
Inverse Interest-Only Securities   266,958   34,208   12.81 0.91 % 4.02 % 11.65%
Structured RMBS   968,698   121,126   12.50 3.23 % 3.82 % 13.10%
Total Mortgage Assets $ 4,362,075 $ 3,744,811     100.00 % 4.23 % 7.48%
                       


RMBS Assets by Agency         Investment Company Act of 1940 Whole Pool Test
($ in thousands)         ($ in thousands)      
      Percentage         Percentage
    Fair of       Fair of
Asset Category   Value Portfolio   Asset Category   Value Portfolio
As of December 31, 2017         As of December 31, 2017      
Fannie Mae $ 2,242,214 59.9 %   Whole Pool Assets $ 3,054,748 81.6 %
Freddie Mac   1,496,615 39.9 %   Non-Whole Pool Assets   690,063 18.4 %
Ginnie Mae   5,982 0.2 %   Total Mortgage Assets $ 3,744,811 100.0 %
Total Mortgage Assets $ 3,744,811 100.0 %          
                   


Borrowings By Counterparty              
($ in thousands)              
            Weighted  
        % of   Average  
    Total   Total   Maturity Longest
As of December 31, 2017   Borrowings   Debt   in Days Maturity
J.P. Morgan Securities LLC $ 603,492   17.0 %   140 8/10/2018
Mirae Asset Securities (USA) Inc.   308,553   8.7 %   99 8/10/2018
Wells Fargo Bank, N.A.   240,456   6.8 %   13 1/12/2018
Citigroup Global Markets Inc   230,329   6.5 %   31 3/13/2018
RBC Capital Markets, LLC   221,684   6.3 %   14 1/12/2018
Guggenheim Securities, LLC   213,970   6.1 %   48 3/27/2018
Cantor Fitzgerald & Co   206,261   5.8 %   35 2/16/2018
Mizuho Securities USA, Inc   197,751   5.6 %   19 1/22/2018
Mitsubishi UFJ Securities (USA), Inc   187,974   5.3 %   19 1/22/2018
ED&F Man Capital Markets Inc   167,519   4.7 %   52 3/19/2018
Goldman, Sachs & Co   156,862   4.4 %   56 3/29/2018
ICBC Financial Services LLC   154,136   4.4 %   33 1/31/2018
Nomura Securities International, Inc.   140,555   4.0 %   18 1/29/2018
Merrill Lynch, Pierce, Fenner & Smith Incorporated   105,347   3.0 %   11 1/12/2018
Natixis, New York Branch   103,560   2.9 %   22 1/26/2018
FHLB-Cincinnati   94,794   2.7 %   4 1/2/2018
Daiwa Securities America Inc.   68,945   2.0 %   12 1/12/2018
KGS-Alpha Capital Markets, L.P   65,500   1.9 %   94 8/14/2018
Lucid Cash Fund USG LLC   25,062   0.7 %   19 1/17/2018
ING Financial Markets LLC   17,114   0.5 %   4 1/2/2018
J.V.B. Financial Group, LLC   12,915   0.4 %   74 3/13/2018
South Street Securities, LLC   11,007   0.3 %   31 1/29/2018
Total Borrowings $ 3,533,786   100.0 %   54 8/14/2018
                 


RMBS Risk Measures                    
($ in thousands)                    
Mortgage Assets                    
      Weighted              
      Average   Weighted Weighted   Modeled   Modeled
      Months   Average Average   Interest   Interest
      To Next   Lifetime Periodic   Rate   Rate
    Fair Coupon Reset   Cap Cap Per Year   Sensitivity   Sensitivity
Asset Category   Value (if applicable)   (if applicable) (if applicable)   (-50 BPS)(1)   (+50 BPS)(1)
As of December 31, 2017                    
Adjustable Rate RMBS $ 1,754 5   10.05% 2.00% $ 13   $ (6 )
Hybrid Adjustable Rate RMBS   27,398 60   7.59% 2.00%   372     (397 )
Total Fixed Rate RMBS   3,594,533 n/a   n/a n/a   48,204     (78,228 )
Total Pass-through RMBS   3,623,685 n/a   n/a n/a   48,589     (78,631 )
Interest-Only Securities   86,918 n/a   n/a n/a   (15,869 )   9,561  
Inverse Interest-Only Securities   34,208 0   5.11% n/a   1,588     (3,866 )
Structured RMBS   121,126 n/a   n/a n/a   (14,281 )   5,695  
Total Mortgage Assets $ 3,744,811 n/a   n/a n/a $ 34,308   $ (72,936 )
                     
Funding Hedges                    
                Modeled   Modeled
                Interest   Interest
          Average Hedge   Rate   Rate
          Notional Period   Sensitivity   Sensitivity
          Balance(2) End Date   (-50 BPS)(1)   (+50 BPS)(1)
Eurodollar Futures Contracts - Short Positions $ 1,183,333 Dec-2020 $ (15,174 ) $ 17,750  
Treasury Futures Contracts - Short Positions   140,000 Mar-2018   (4,683 )   5,566  
Payer Swaps   1,010,000 Aug-2022   (13,296 )   13,296  
Payer Swaption   200,000 Aug-2025   (2,512 )   4,316  
TBA Short Positions   300,444 Jan-2018   (6,655 )   9,731  
Total Hedges         (42,320 )   50,659  
               
Grand Total       $ (8,012 ) $ (22,277 )
                   

(1) Modeled results from Citigroup Global Markets Inc. Yield Book. Interest rate shocks assume instantaneous parallel shifts and horizon prices are calculated assuming constant LIBOR option-adjusted spreads. These results are for illustrative purposes only and actual results may differ materially.
(2) Treasury futures contracts were valued at a price of $124.05 at December 31, 2017.  The notional contract value of the short position was $173.7 million.

                                     
Returns By Quarter                                    
($ Per Share)  
  Q1
    Q2
    Q3
    Q4
    YTD
  2017 
    2017 
    2017 
    2017 
    2017 
Beginning Book Value $ 10.10     $ 9.75    $ 9.23    $ 9.15    $ 10.10  
Dividends Paid 0.42       0.42      0.42      0.42      1.68  
Ending Book Value 9.75       9.23      9.15      8.71      8.71  
Total Return $ 0.07     $ (0.10)    $ 0.34    $ (0.02)    $ 0.29  
% Return (Not Annualized) 0.7%       (1.0)%       3.7%       (0.2)%       2.9%  
% Return (Annualized) 2.8%       (4.1)%       14.7%       (0.9)%       2.9%  
                                     

Contact:

Orchid Island Capital, Inc.
Robert E. Cauley
3305 Flamingo Drive, Vero Beach, Florida 32963
Telephone: (772) 231-1400

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