Investor Presentation December 2015 Disclaimers FORWARD-LOOKING - PowerPoint PPT Presentation

Investor Presentation December 2015

Disclaimers FORWARD-LOOKING INFORMATION This presentation contains forward-looking statements and information. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our expected performance and book value, anticipated returns and our investment, financing, and hedging strategies and means to implement the strategy. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. All forward-looking statements speak only as of the date of this presentation. Except as required by applicable law, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. Potential investors should not place undue reliance on our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in “Risk Factors” section and elsewhere in our Form 10-K for the year ended December 31, 2014 and other documents filed with the Securities and Exchange Commission could harm our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 2

Overview Topic Point Slide(s)  Management Experience 4  Independent Directors 5  Challenges of the Traditional Model 6  Orchid Business Model 7  Capital Allocation Process 8  Creating Desired Rate Profile 9  Security Selection and Considerations 10 – 14  Risk Mitigation 15  MBS Portfolio Characteristics 16  Credit Counterparties and Trade Activity 17  Growth and Dividend History 18  Sector Analysis 19  Eurodollar Introduction 20  Total Rate Of Return Scenarios 26 3

Management Experience Robert E. Cauley G. Hunter Haas, IV Jerry Sintes Chief Executive Officer, President and Chief Financial Officer, Secretary, Chief Vice President, Controller and Treasurer Chairman of the Board Investment Officer and Director 27 years of industry 14 years of industry experience 21 years of industry experience accounting and audit experience  Position at Orchid: Vice President  Position at Orchid: Chairman,  Position at Orchid: CFO, CIO and and Treasurer since August 2010 President and CEO since August Secretary since August 2010  2007 - Present: Vice President and 2010  2008 - Present: President, Chief Controller of Bimini  2008 - Present: CEO and Chairman Investment Officer and Chief Financial  2006 - 2007: Vice President and of the Board of Bimini Officer of Bimini Assistant Controller: Riverside National Bank  2003 - 2008: Bimini Co-Founder;  2004 - 2008: Senior Vice-President  2003 - 2005: Chief Financial Officer: Vice-Chairman, CFO and CIO of and head of Mortgage Research of Guaranty Savings Homestead Bimini Bimini Association and GS Financial Corp  1996 - 2003: Vice-President and  2002 - 2004: Vice President, Servicing  1992 - 2003: Audit manager; Bain, Freibaum, Sagona & Co., LLP Portfolio Manager; Federated Asset Risk Management; National City Investors  1988 – 1992: Audit Senior; Whitney  2001 - 2002: Assistant Vice National Bank  1994 - 1996: ABS/MBS structuring President, Capital Markets Finance  Certified Public Accountant, Member desk; Lehman Brothers Group; HomeSide Lending AICPA  1992 - 1994: Credit Analyst; Barclays Bank, PLC 4

Independent Directors John B. Van Heuvelen W Coleman Bitting Frank P. Filipps Ava L. Parker Position at Orchid: Lead Position at Orchid: Independent Position at Orchid: Independent Position at Orchid: Independent Independent Director; audit Director, compensation committee Director, member of audit, Director, nominating and committee chair and financial chair and member of nominating compensation, and nominating governance committee chair, and expert, member of compensation and governance committee. and governance committees. member of audit committee. committee. Board Memberships : Board Memberships : Experience : Board Memberships: 1995 – Present: Impac Mortgage Holdings, Inc. (Amex: IMH): chair of 2015 - Appointed as the first 23 Years Industry Experience audit committee. 2009 – Present: Hallador Energy female President of Palm Beach Company (Nasdaq: HNRG): audit 2002 – Present: Primus Guaranty, Ltd 2007 – Present: Maintains a State College. (NYSE: PRS): chair of compensation committee chair. private consulting practice focused committee from 2002-2006 and chair of the nominating and governance 2006 - Present: Jacksonville on REITs. 2002 – Present: MasTec, Inc committee from 2007 – 2011. Transportation Authority Board; (NYSE: MTZ): Currently the lead 2000 – 2007: Founding Partner 2010 – Present: Fortegra Financial outside director and member of Past chairman Corp. (NYSE: FRF); chairman of the and Head of Corporate Finance; nominating and governance audit committee; past chairman of Flagstone Securities. committee from 2010 – 2011, 2010 – 2012: Immediate Prior the audit committee and financial member of audit committee since Chairman of the State of Florida 2010 and chair of the compensation Prior to Flagstone: Senior equity expert from 2004-2009. committee since 2012. research position; Stifel, Nicolaus Board of Governors of the State 2005 – 2007: LifeVantage, Inc. Experience : & Co. Inc. and Kidder, Peabody & University System; Reappointed (OTC: LFVN) Co., Inc. 2005 – 2008 Chairman and CEO of by Governor Rick Scott in Jan. Clayton Holdings (Nasdaq: Clay) Experience : 2012. 1992 – 2005 Chairman and CEO President of Morgan Stanley Radian Group, Inc. Dean Witter Trust Company from Experience : 1975 – 1992 Various executive 1993 - 1999 Lawrence & Parker PA: Partner positions at AIG including founder, president and CEO of AIG Capital Linking Solutions, Inc.: President Corp. 5

Challenges of the Traditional Model The traditional REIT investment model: Repo-funded pass-through securities  Holders of premium priced Agency RMBS are Equity Issuances vs. Agency Prices (1) Dollars ($) $ in 000s vulnerable to losses if prepayments rise Price Risk 3,000 110 Agency Mortgage REIT Equity Issuances unexpectedly 2,700 2,400 106  Limited further price appreciation with premium Price of Fannie 4.5% 2,100 Agency RMBS, but risk of accelerated price declines 1,800 102 remain as rates rise 1,500 1,200 98 900 600 94  Agency RMBS prepay faster in low rate ` Reinvestment 300 environments Risk 0 90 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 - But capital has to be deployed in a less attractive investment environment due to higher RMBS Traditional Pass-Through Profile prices (return on allocated equity vs. interest rate shock) 50  Short term repo funding comes due before the 25 Maturity Risk assets pay off creating funding risk % Change in Book Value 0  Traditional REIT model assumes the ability to -200 -100 -50 0 +50 +100 +200 continuously roll-over maturing liabilities -25 Pass-through + Hedge  Deteriorating counterparty financial condition can Pass-through Profile -50 Counterparty result in funding instability Risk -75 - Risk that all funding counterparties pull back simultaneously -100 % Change in Interest Rate (BPs) (1) Source: Bloomberg 6

The Orchid Island Business Model Model Overview  Capital allocated to two sub-portfolios A levered pass-through portfolio utilizing funding hedges 1 A structured securities portfolio 2  The two sub-portfolios act as hedges for one another – enhancing book value stability Model Benefits  Same expected returns as traditional levered pass-through strategies employed by peers  Greater book value stability – leading to a higher Sharpe Ratio  Less reliance on funding since not all of our capital is levered Model Implementation  Capital allocation process  Security selection process  Funding hedge design and execution  Risk monitoring process 7

Capital Allocation Process Management seeks a certain rate profile based on market conditions and expectations Portfolio is constructed – Over time, market blending structured conditions or securities and hedged management’s pass-through sub- expectations may portfolios to achieve the change desired profile Adjustments are An assessment of the made if needed – but income generation the desired BV profile potential of the always takes priority portfolio is made Consideration of confidence in ability to hedge secondary risks – funding costs, volatility, curve shape changes 8