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Orchid Island Capital, Inc.$7.51$.03.40%

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 Orchid Island Capital Announces Fourth Quarter 2015 Results
   Wednesday, February 24, 2016 4:55:19 PM ET

Orchid Island Capital, Inc. (ORC ) ("Orchid" or the "Company"), a real estate investment trust ("REIT"), today announced results of operations for the three month period ended December 31, 2015.

Fourth Quarter 2015 Highlights

-- Net income of $7.8 million, or $0.36 per common share

-- Fourth quarter total dividends declared and paid of $0.42 per common share

-- Book value per share of $11.64 at December 31, 2015

-- 3.2% economic gain on common equity for the quarter, or 12.7% annualized, comprised of $0.42 dividend per common share and $0.05 decrease in net book value per common share, divided by beginning book value per share

-- Company to discuss results on Thursday, February 25, 2016, at 10:00 AM ET

Details of Fourth Quarter 2015 Results of Operations

The Company reported net income of $7.8 million for the three month period ended December 31, 2015, compared with net income of $3.5 million for the three month period ended December 31, 2014. The fourth quarter net income of $7.8 million included net interest income of $16.7 million, net portfolio losses of $6.8 million (which includes realized and unrealized gains (losses) on securities sold and derivative instruments), accrued incentive compensation of $0.2 million, audit, legal and other professional fees of $0.2 million, management fees of $1.0 million, and other operating, general and administrative expenses of $0.8 million. During the fourth quarter of 2015, the Company sold residential mortgage-backed securities ("RMBS") with a market value at the time of sale of $379.9 million, resulting in realized losses of $0.3 million (based on security prices from September 30, 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 December 31, 2015, approximately 58% 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. The allocation percentage to the PT RMBS was unchanged from September 30, 2015.

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

(in thousands)
Portfolio Activity for the Fourth Quarter
                                                     Structured Security Portfolio
                                  Pass-Through       Interest Only   Inverse Interest
                                  Portfolio          Securities      Only Securities   Sub-total      Total
Market value - September 30, 2015 $    2,013,409     $    64,351     $     39,849      $   104,200    $  2,117,609
Securities purchased                   482,404            -                6,317           6,317         488,721
Securities sold                        (379,883  )        -                -               -             (379,883  )
Losses on sales                        (338      )        -                -               -             (338      )
Return of investment                   n/a                (5,498 )         (2,525 )        (8,023  )     (8,023    )
Pay-downs                              (40,831   )        n/a              n/a             n/a           (40,831   )
Premium lost due to pay-downs          (3,366    )        n/a              n/a             n/a           (3,366    )
Mark to market (losses) gains          (15,558   )        2,721            (3,042 )        (321    )     (15,879   )
Market value - December 31, 2015  $    2,055,837     $    61,574     $     40,599      $   102,173    $  2,158,010

The tables below present the allocation of capital between the respective portfolios at December 31, 2015 and September 30, 2015, and the return on invested capital for each sub-portfolio for the three month period ended December 31, 2015. The return on invested capital in the PT RMBS and structured RMBS portfolios was approximately 7.3% and (0.5)%, respectively, for the fourth quarter of 2015. The combined portfolio generated a return on invested capital of approximately 4.0%.

($ in thousands)
Capital Allocation
                                         Structured Security Portfolio
                     Pass-Through        Interest Only   Inverse Interest
                     Portfolio           Securities      Only Securities   Sub-total      Total
December 31, 2015
Market value         $    2,055,837      $    61,574     $     40,599      $   102,173    $  2,158,010
Cash                      69,709              -                -               -             69,709
Borrowings                (1,986,313 )        -                -               -             (1,986,313 )
          Total      $    139,233        $    61,574     $     40,599      $   102,173    $  241,406
          % of Total      57.7       %        25.5   %         16.8   %        42.3    %     100.0      %
September 30, 2015
Market value         $    2,013,409      $    64,351     $     39,849      $   104,200    $  2,117,609
Cash                      73,569              -                -               -             73,569
Borrowings                (1,943,299 )        -                -               -             (1,943,299 )
          Total      $    143,679        $    64,351     $     39,849      $   104,200    $  247,879
          % of Total      58.0       %        25.9   %         16.1   %        42.0    %     100.0      %

(1) At December 31, 2015, there were outstanding repurchase agreement balances of $22.0 million and $25.7 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

(2) At September 30, 2015, total cash had been reduced by unsettled securities purchases of approximately $92.3 million and increased by unsettled securities sales of approximately $87.6 million.

(3) At September 30, 2015, there were outstanding repurchase agreement balances of $24.2 million and $23.1 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

($ in thousands)
Returns for the Quarter Ended December 31, 2015
                                                                     Structured Security Portfolio
                                                    Pass-Through     Interest Only   Inverse Interest
                                                    Portfolio        Securities      Only Securities   Sub-total      Total
Income (loss) (net of repo cost)                    $    16,965      $    (971   )   $     726         $   (245    )  $   16,720
Realized and unrealized gains / (losses)                 (19,262 )        2,721            (3,042 )        (321    )      (19,583 )
Derivative losses                                        12,770           n/a              n/a             n/a            12,770
                          Total Return              $    10,473      $    1,750      $     (2,316 )    $   (566    )  $   9,907
Beginning Capital Allocation                        $    143,678     $    64,351     $     39,849      $   104,200    $   247,878
Return on Invested Capital for the Quarter               7.3     %        2.7    %         (5.8   )%       (0.5    )%     4.0     %
Average Capital Allocation                          $    141,456     $    62,962     $     40,224      $   103,186    $   244,642
Return on Average Invested Capital for the Quarter       7.4     %        2.8    %         (5.8   )%       (0.5    )%     4.0     %

(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 $48.9 million in scheduled and unscheduled principal repayments and prepayments, which equated to a constant prepayment rate ("CPR") of approximately 9.0% for the fourth 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 (%)
December 31, 2015   6.8           13.4          9.0
September 30, 2015  6.1           16.2          10.2
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

The following tables summarize Orchid’s PT RMBS and structured RMBS as of December 31, 2015 and 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
December 31, 2015
Adjustable Rate RMBS               $ 2,976         0.1   %      3.63 %  224      1-Sep-35  4.10        10.04 %     2.00 %
Fixed Rate RMBS                      2,000,623     92.7  %      4.22 %  315      1-Dec-45  NA       NA          NA
Hybrid Adjustable Rate RMBS          52,238        2.5   %      2.55 %  325      1-Aug-43  84.93       7.55  %     2.00 %
Total Mortgage-backed Pass-through   2,055,837     95.3  %      4.18 %  315      1-Dec-45  80.57       7.68  %     2.00 %
Interest-Only Securities             61,573        2.9   %      3.58 %  250      25-Apr-45 NA       NA          NA
Inverse Interest-Only Securities     40,600        1.8   %      5.97 %  320      15-Apr-45 NA          6.36  %  NA
Total Structured RMBS                102,173       4.7   %      4.53 %  278      25-Apr-45 NA          6.36  %  NA
Total Mortgage Assets              $ 2,158,010     100.0 %      4.19 %  313      1-Dec-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  92.96       7.67  %     2.00 %
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)
                   December 31, 2015              December 31, 2014
                               Percentage of                  Percentage of
Agency             Fair Value  Entire Portfolio   Fair Value  Entire Portfolio
Fannie Mae       $ 1,747,699         81.0  %    $ 1,243,923         80.3  %
Freddie Mac        394,256           18.3  %      296,203           19.1  %
Ginnie Mae         16,055            0.7   %      9,045             0.6   %
Total Portfolio  $ 2,158,010         100.0 %    $ 1,549,171         100.0 %
                                               December 31, 2015   December 31, 2014
Weighted Average Pass-through Purchase Price $ 108.05            $ 107.88
Weighted Average Structured Purchase Price   $ 14.18             $ 13.67
Weighted Average Pass-through Current Price  $ 107.56            $ 108.59
Weighted Average Structured Current Price    $ 14.17             $ 13.65
Effective Duration                             2.753               2.291

(1) Effective duration of 2.753 indicates that an interest rate increase of 1.0% would be expected to cause a 2.753% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 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 December 31, 2015, the Company had outstanding repurchase obligations of approximately $1,798.8 million with a net weighted average borrowing rate of 0.64%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $1,909.3 million, and cash pledged to counterparties of approximately $4.0 million.

In December 2015, our wholly-owned subsidiary, Orchid Island Casualty, LLC, was accepted for membership in the Federal Home Loan Bank of Cincinnati ("FHLBC"). As of December 31, 2015, our subsidiary had approximately $187.5 million of outstanding secured FHLB advances, with a weighted average borrowing rate of 0.42% and a weighted average remaining term to maturity of 22 days. These advances were secured by RMBS with a fair value, including accrued interest, of approximately $192.2 million as of December 31, 2015. On January 12, 2016, the regulator of the FHLB system, the Federal Housing Finance Agency ("FHFA"), released a final rule that amends regulations governing FHLB membership, including an amendment which prevents captive insurance companies from being eligible for FHLB membership. Under the terms of the final rule, our subsidiary is required to terminate its membership, redeem existing FHLBC stock, and repay its existing advances within one year following the effective date of the final rule, which was February 19, 2016. In addition, our subsidiary is prohibited from obtaining new advances or renewing existing advances upon their maturity during the one year transition period. Subsequent to December 31, 2015, all outstanding advances, including accrued interest, have been refinanced through repurchase agreements.

The Company’s leverage ratio at December 31, 2015 was 7.9 to 1. At December 31, 2015, the Company’s liquidity was approximately $119.7 million, consisting of unpledged RMBS 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 December 31, 2015.

($ in thousands)
                                                                     Weighted               Weighted
                                             Total                   Average                Average
                                             Outstanding  % of       Borrowing      Amount  Maturity
Counterparty                                 Balances     Total      Rate           at Risk in Days
Citigroup Global Markets, Inc.             $ 185,107        10.3  %      0.62 %   $ 18,271  14
South Street Securities, LLC                 156,375        8.7   %      0.70 %     8,266   28
Wells Fargo Bank, N.A.                       130,331        7.2   %      0.64 %     6,785   11
Cantor Fitzgerald & Co.                      128,751        7.2   %      0.71 %     7,036   20
ED&F Man Capital Markets Inc.                127,285        7.1   %      0.60 %     6,918   19
ICBC Financial Services LLC                  125,437        7.0   %      0.55 %     6,237   12
Mizuho Securities USA, Inc.                  119,092        6.6   %      0.72 %     12,414  13
KGS - Alpha Capital Markets, L.P.            117,395        6.5   %      0.67 %     6,799   13
Mitsubishi UFJ Securities (USA), Inc.        113,021        6.3   %      0.54 %     5,973   18
J.P. Morgan Securities LLC                   108,145        6.0   %      0.61 %     8,841   14
Daiwa Capital Markets America, Inc.          99,292         5.5   %      0.69 %     5,240   9
RBC Capital Markets, LLC                     93,582         5.2   %      0.55 %     6,716   13
Natixis, New York Branch                     86,180         4.8   %      0.71 %     4,786   10
Guggenheim Securities, LLC                   83,913         4.7   %      0.55 %     4,560   17
Merrill Lynch, Pierce, Fenner & Smith Inc.   81,284         4.5   %      0.74 %     2,549   15
Nomura Securities International, Inc.        39,422         2.2   %      0.68 %     2,040   13
Suntrust Robinson Humphrey, Inc.             4,201          0.2   %      0.66 %     263     15
                                           $ 1,798,813      100.0 %      0.64 %   $ 113,694 15

(1) 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 against a rise in interest rates 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. As of December 31, 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 pay fixed interest rate swaps ("payer swaptions") or the option to enter into receive fixed interest rate swaps ("receiver swaptions").

The table below presents information related to the Company’s Eurodollar and T-Note futures contracts at December 31, 2015.

($ in thousands)
                                                              December 31, 2015
                                                              Average   Weighted    Weighted
                                                              Contract  Average     Average
                                                              Notional  Entry       Effective       Open
Expiration Year                                               Amount    Rate        Rate            Equity
Eurodollar Futures Contracts (Short Positions)
2016                                                          900,000      1.51 %       0.98 %         (4,718  )
2017                                                          900,000      2.31 %       1.59 %         (6,550  )
2018                                                          900,000      2.77 %       1.99 %         (7,060  )
2019                                                          900,000      2.56 %       2.17 %         (865    )
Total / Weighted Average                                    $ 900,000      2.23 %       1.57 %    $    (19,193 )
Treasury Note Futures Contracts (Short Position)
March 2016 10 year T-Note futures
                         (Mar 2016 - Mar 2026 Hedge Period) $ 185,000      1.99 %       1.95 %    $    1,091

(1) Open equity represents the cumulative gains (losses) recorded on open futures positions.

(2) T-Note futures contracts were valued at a price of $125.91 at December 31, 2015. The nominal value of the short position was $232.9 million.

The table below presents information related to the Company’s interest rate receiver swaption position at December 31, 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)
December 31, 2015
less-than or equal to 1 year $ 1,100 $ 669    4.2         $ 100,000     1.77 %  3 Month  5.0

Dividends

In addition to other requirements that must be satisfied 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 2016, 2015 and 2014.

(in thousands, except per share data)
Declaration Date   Record Date        Payment Date         Per Share Amount   Total
2016
February 10, 2016  February 24, 2016  February 29, 2016  $ 0.14             $ 3,049
January 11, 2016   January 26, 2016   January 29, 2016     0.14               3,049
Totals                                                   $ 0.28             $ 6,098
2015
December 10, 2015  December 24, 2015  December 30, 2015  $ 0.14             $ 3,048
November 10, 2015  November 24, 2015  November 30, 2015    0.14               3,051
October 8, 2015    October 26, 2015   October 30, 2015     0.14               3,051
September 11, 2015 September 25, 2015 September 30, 2015   0.14               3,069
August 11, 2015    August 26, 2015    August 31, 2015      0.14               3,132
July 9, 2015       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                                                   $ 1.92             $ 38,748
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 dividends declared in January and February 2016 are not reflected in the Company’s financial statements as of December 31, 2015.

Peer Performance

Portfolio Total Rate of Return Versus Peer Group Average
                                                                           ORC Spread
                                          Orchid                           Over / (Under)
                                          Total Rate      Peer             Peer
                                          of Return       Average          Average
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  )%         4.3   %
Stub 2013 (Annualized)                         (2.8 )%         (17.5 )%         14.6  %
First Quarter 2014                             (2.9 )%         4.3   %          (7.3  )%
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 Return                              13.6 %          15.6  %          (2.0  )%
First Quarter 2015                             2.7  %          1.4   %          1.3   %
Second Quarter 2015                            0.4  %          (1.8  )%         2.2   %
Third Quarter 2015                             (2.2 )%         (1.5  )%         (0.6  )%
Fourth Quarter 2015                            3.2  %          0.3   %          2.9   %
2015 Total Return                              3.8  %          (1.6  )%         5.4   %
Two Year Return                                17.3 %          14.2  %          3.1   %
ORC IPO to 2015 End - 3/31/13 - 12/31/15       13.4 %          (1.7  )%         15.40 %

Source: Company SEC filings and press releases

(1) Total rate of return for each period is change in book value per share over the period plus dividends per share declared divided by the book value per share 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 per share in March 2013. The book value per share at March 31, 2013 was $14.98.

(5) At January 1, 2014, Orchid had 3,341,665 shares outstanding and a book value per share 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 per share net of fees and offering costs. The book value per share as of March 31, 2014 was $12.47.

Book Value Per Share

The Company’s book value per share at December 31, 2015 was $11.64. 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 December 31, 2015, the Company’s stockholders’ equity was $253.3 million with 21,749,490 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. There were no shares issued under the Equity Distribution Agreement during the fourth quarter of 2015. Through December 31, 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.

Stock 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, 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. Through December 31, 2015, we repurchased a total of 1,216,243 shares under the stock repurchase program at an aggregate cost of approximately $10.8 million, including commissions and fees, for a weighted average price of $8.92 per share.

Management Commentary

Commenting on the fourth quarter, Robert E. Cauley, Chairman and Chief Executive Officer, said, "Our view of the world has changed markedly since the end of the third quarter of 2015--twice! The fourth quarter of 2015 brought the first rate hike by the U.S. Federal Reserve (the "Fed") since 2006. The path leading up to this initial hike was very volatile--beginning in 2013 with the "taper tantrum" when the Fed first signaled an end to quantitative easing--the third episode of QE at that--and continuing to the summer of last year when the market was poised for the first hike only to back away as developments in China and elsewhere roiled the financial markets. Since making the first hike and hinting at 3 or more hikes this year via their "dot plot", the market fell into turmoil and appears to be pricing into the bond markets at best one more hike this year, if any. Once again developments abroad are mainly to blame, although this time domestic economic data contributed as well after fourth quarter growth in GDP was initially reported at only 0.6%. Since late January 2016, the data has once again reversed and conditions abroad, as well as in the energy markets, have stabilized, for now.

"With the rebound in financial markets following the turbulence in the third quarter, short-term rates backed up in the fourth quarter as the market priced in rate hikes by the Fed. Mark to market losses on the portfolio during the fourth quarter exceeded mark to market gains on the hedge positions by approximately $9.1 million. The mark to market losses on the portfolio were concentrated in our call protected, high coupon fixed rate securities as mortgages widened and pay-up premiums were under pressure, and in our inverse IO positions ("IIO") as the forward curve priced in additional Fed rate increases, which negatively impacted IIO’s as is usually the case. Going into year-end in anticipation of the seasonal slowdown in prepayment speeds, we continued to position the portfolio with our exposure to faster prepayment speeds. This positioning has performed well for January and February, although with the decrease in primary mortgage rates to 3.75% and below we are likely to see an increase in prepayment speeds--likely in the March prepayment speed report released in early April. We have increased the quality of the call protection in the RMBS in our portfolio as well as slightly reduced the average age of the fixed rate portfolio to hopefully off-set the increase in prepayment speeds, should it occur.

"We have also altered the composition of our funding hedges so far in the first quarter of 2016. We have closed out $700 million of the $900 million of Eurodollar shorts in place at year end and replaced them with $600 million of 4 year, pay fixed swaps with a weighted average rate of 1.025%. Given the rally in the rates market that enabled us to lock in such low rates for a 4 year tenor swap, our view is counter to the markets, which seems to anticipate negative rates in the U.S. before another rate hike by the Fed. We do not share this view and anticipate the Fed will indeed raise rates again this year and next, albeit at a more gradual pace than envisioned by the Fed last December. The switch to swaps from Eurodollar shorts for such a substantial portion of our hedge book should also help market participants gauge our net interest expense going forward. We continue to maintain a $185 million short in 10 year U.S. Treasury futures, so our hedge position, in conjunction with our IO and IIO securities, did not change quite as much as the Eurodollar shorts to swap trade would suggest.

"As we move forward in 2016 we anticipate a slight increase in prepayment speeds over the next couple of months, but less so than we experienced in 2015. As the declines in commodity prices and import prices become less negative on a year over year basis as we move through 2016, we expect headline inflation to slowly move towards 1.0% to 1.5%. We expect core inflation measures, even the Fed’s preferred measure, core personal consumption expenditures ("PCE"), will trend towards 2% as wage pressure continues to drive service sector costs. We do not anticipate the U.S. moving into a negative interest rate environment, and believe that the Fed will continue to remove accommodation at a very slow rate. Our portfolio positioning is therefore unlikely to change materially over the course of the year."

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Thursday, February 25, 2016, 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 52552386. 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 March 24, 2016.

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, interest rates, net interest income, net interest expense, liquidity, pledging of our structured RMBS, funding levels and spreads, inflation, prepayment speeds, portfolio positioning, market expectations and general economic conditions, 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 December 31, 2015 and 2014, and the unaudited quarterly results of operations for the calendar quarters and years ended December 31, 2015 and December 31, 2014. Amounts presented are subject to change.

ORCHID ISLAND CAPITAL, INC.
BALANCE SHEETS
($ in thousands, except per share data)
(Unaudited - Amounts Subject To Change)
                                           December 31, 2015   December 31, 2014
ASSETS:
Total mortgage-backed securities           $        2,158,010  $        1,549,171
Cash, cash equivalents and restricted cash          69,959              100,927
Accrued interest receivable                         8,490               6,211
Derivative assets, at fair value                    669                 1,217
Other assets                                        4,709               282
Total Assets                               $        2,241,837  $        1,657,808
LIABILITIES AND STOCKHOLDERS’ EQUITY
Repurchase agreements                      $        1,798,813  $        1,436,651
FHLB advances                                       187,500             -
Accrued interest payable                            863                 628
Due to affiliates                                   465                 330
Other liabilities                                   941                 2,121
Total Liabilities                                   1,988,582           1,439,730
Total Stockholders’ Equity                          253,255             218,078
Total Liabilities and Stockholders’ Equity $        2,241,837  $        1,657,808
Common shares outstanding                           21,749,490          16,699,656
Book value per share                       $        11.64      $        13.06
ORCHID ISLAND CAPITAL, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited - Amounts Subject to Change)
                                       Years Ended December 31,         Three Months Ended December 31,
                                       2015             2014            2015            2014
Interest income                        $    68,811      $    31,804     $    19,092     $    12,146
Interest expense                            (7,271  )        (3,031 )        (2,371 )        (1,126 )
Net interest income                         61,540           28,773          16,721          11,020
(Losses) gains                              (52,575 )        234             (6,813 )        (6,054 )
Net portfolio income                        8,965            29,007          9,908           4,966
Expenses                                    7,894            4,488           2,097           1,445
Net income                             $    1,071       $    24,519     $    7,811      $    3,521
Basic and diluted net income per share $    0.05        $    2.48       $    0.36       $    0.24
Dividends Declared Per Common Share:   $    1.92        $    2.16       $    0.42       $    0.54
                                       Three Months Ended
                                       December 31,
Key Balance Sheet Metrics              2015             2014
Average RMBS                           $   2,137,810    $   1,362,352
Average borrowings                         1,964,806        1,346,314
Average stockholders’ equity               254,562          195,432
Leverage ratio                             7.9:1            6.6:1
Key Performance Metrics
Average yield on RMBS                      3.57      %      3.57      %
Average cost of funds                      0.48      %      0.33      %
Average economic cost of funds             0.73      %      0.38      %
Average interest rate spread               3.09      %      3.24      %
Average economic interest rate spread      2.84      %      3.19      %

(1) Average RMBS, borrowings 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.

(3) Portfolio yields and costs of funds are calculated based on the average balances of the underlying investment portfolio/borrowings 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 options to enter into interest rate swaps ("interest rate swaptions") attributed to the period related to hedging activities, divided by average borrowings.

(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

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