VERO BEACH, Fla. (July 26, 2018) – 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, 2018.

Second Quarter 2018 Highlights

·	Net interest income of $22.0 million, or $0.42 per common share

·	Total expenses of $2.9 million, or $0.05 per common share

·	Net realized and unrealized losses of $17.7 million, or $0.34 per share, on RMBS and derivative instruments, including net interest expense on interest rate swaps

·	Second quarter total dividends declared and paid of $0.27 per common share

·	Book value per share of $7.86 at June 30, 2018

·	0.5% economic gain on common equity for the quarter, or 2.0% annualized, comprised of $0.27 dividend per common share and $0.23 decrease in net book value per common share, divided by beginning book value per share

·	Company to discuss results on Friday, July 27, 2018, at 10:00 AM ET

·	Supplemental materials to be discussed on the call can be downloaded from the investor relations section of the Company's website at www.orchidislandcapital.com

Details of Second Quarter 2018 Results of Operations

Capital Allocation and Return on Invested Capital

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(1)

At June 30, 2018, there were outstanding repurchase agreement balances of $73.3 million secured by IO securities and $14.7 million secured IIO securities.  We entered into these arrangements to generate additional cash available to meet margin calls on PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.

(2)	At March 31, 2018 cash was reduced by unsettled security purchases of approximately $32.1 million and increased by unsettled sales of approximately $160.9 million, which have already been reflected in the market value of the portfolio.

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(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

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Portfolio

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Financing, Leverage and Liquidity

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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.  At June 30, 2018, such instruments were comprised of Eurodollar and Treasury note ("T-Note") futures contracts and interest rate swap and swaption agreements and to-be-announced ("TBA") securities.

The table below presents information related to the Company's Eurodollar and T-Note futures contracts at June 30, 2018.

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

(2)	T-Note futures contracts were valued at a price of $113.62 at June 30, 2018. The notional contract value of the short position was $187.5 million.

The table below presents information related to the Company's interest rate swap positions at June 30, 2018.

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(1)	Notional amount represents the par value (or principal balance) of the underlying Agency RMBS.

(2)	Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.

(3)	Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end.

(4)	Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities), at fair value in our consolidated balance sheets.

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Peer Performance

(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, AGNC and AI. HTS was included through Q1 2016. NLY acquired HTS in Q2 2016. HTS is excluded from any measurement periods after Q1 2016.

(3)	Represents the total rate of 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)	As of July 26, 2018, earnings data for the second quarter of 2018 was not available for all companies included in the peer average calculation.

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Book Value Per Share

Stock Offerings

On August 2, 2017, we entered into an equity distribution agreement (the "August 2017 Equity Distribution Agreement") with two sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $125,000,000 of shares of our common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions.  Through June 30, 2018, we issued a total of 7,746,052 shares under the August 2017 Equity Distribution Agreement for aggregate gross proceeds of $76.0 million, and net proceeds of approximately $74.7 million, net of commissions and fees.

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 is determined by the Company in its discretion and is subject to economic and market conditions, stock price, applicable legal requirements and other factors. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 4,522,822 shares of the Company's common stock. 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 June 30, 2018, the Company repurchased a total of 2,285,084 shares under the stock repurchase program at an aggregate cost of approximately $18.5 million, including commissions and fees, for a weighted average price of $8.11 per share. During the three months ended June 30, 2018, the Company repurchased a total of 1,068,841 shares under the stock repurchase program at an aggregate cost of approximately $7.7 million, including commissions and fees, for a weighted average price of $7.19 per share. As of June 30, 2018, the remaining authorization under the repurchase program is for up to 4,237,738 shares of the Company's common stock.

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Commenting on the second quarter, Robert E. Cauley, Chairman and Chief Executive Officer, said, "The US economy appears to be very strong.  Growth in the second quarter is expected to be 4% or higher on an annualized basis and, given the extent of fiscal stimulus introduced by the Tax Cuts and Jobs Act of 2017 and the Bipartisan Budget Act of 2018, is likely to remain strong for the foreseeable future.  While the annualized growth rate of the economy may not match what we are likely to see in the second quarter of 2018, growth is likely to remain above the sustainable growth rate of the economy for some time. As reflected in their "dot plot" release after the June FOMC meeting, the Federal Reserve (the "Fed") expects to continue to remove accommodation by raising the target range for the Federal Funds rate two more times in 2018 and three more times in 2019.  By any measure, economic activity is robust and the employment market in particular appears to be overheating.  Importantly, while inflation has returned to, or near, the Fed target level of 2%, it does not appear to be at risk of meaningfully exceeding this level in the near term.  This should keep the Fed from raising rates beyond their current gradual pace.

"One threat to the economy the market fears is a meaningful trade war.  The Trump administration appears determined to reverse what the President sees as years of unfair trade that has weakened the United States.  The administration has aggressively introduced tariffs in an apparent attempt to force our various trading counter-parties to agree to more even trade terms.  To date, this strategy does not appear to be working, and the market fears a protracted trade war could develop.  This threat seems to be trumping the effect of the economy on the rates markets and the various risky asset markets.  The perception that the strength of the economy will keep the Fed from raising the Federal Funds target range at its anticipated pace has kept upward pressure on other short-term rates.  Couple that with the lack of excess inflation and the possible detrimental effects of a trade war on growth in the future containing long-term rates from moving higher and you have a flat U.S. treasury curve.  The combination has caused the spread between short and long-term rates to compress to levels usually associated with the onset of a recession. This trend does not appear likely to reverse in the near-term.

"The Agency RMBS market has generated a modest positive return of 0.24% for the second quarter and (1.0%) for the first six months of 2018.  The reduction in asset purchases by the Fed has been offset by reduced supply of Agency RMBS, largely negating the negative effect of the former on the performance of the asset class.  A continued slowing of prepayment behavior has benefited higher coupon mortgages as well, enhancing the carry of mortgages.  Going forward, the continued compression of the yield curve should put downward pressure on both returns for Agency RMBS as well as demand for the asset class.

"Until recently Orchid's Agency RMBS portfolio was generally biased to higher coupon, fixed rate securities.  With prepayment behavior exhibiting far less sensitivity to interest rate incentives than was the norm prior to the financial crisis and the damage that was done to the housing finance capacity of the market, this strategy enabled Orchid to generate a superior income stream to our investors.  Over the last few quarters the sell-off in rates and material flattening of the curve has made this strategy less viable.  Accordingly, early this year we began repositioning the portfolio to adapt to the new market environment.  This repositioning is warranted as we believe the current market conditions – interest rates increasing while the yield curve flattens – are likely to persist for the balance of the Fed's tightening cycle. We have reduced our exposure to 30-year mortgages in favor of either 15-year securities or structured pass-through securities – predominantly in sequential form – with limited extension risk.  Our allocation to our traditional structured holdings, interest only and inverse interest only securities – remains steady at approximately 35% of capital.  With the prospect of continued increases to the Fed Funds target range and what we view as the asymmetric risk of longer-term rates – biased higher versus lower, we anticipate that we will maintain our hedge coverage at or close to 100%."

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Earnings Conference Call Details

Forward Looking Statements

CONTACT:

Orchid Island Capital, Inc.

Robert E. Cauley, 772-231-1400

Chairman and Chief Executive Officer

www.orchidislandcapital.com

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Summarized Financial Statements

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(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 the interest cost of our borrowings and the effect of derivative agreements 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.