What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-23 · 136 added, 156 removed, 831 unchanged (26% of the section changed)

32 unchanged sentences

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Investments in Mortgage-Backed Securities

As described in Notes 1 and 13 to the financial statements, the Company accounts for its mortgage-backed securities at fair value, which totaled $3.9 billion at December 31, 2023.

As described in Note 13 to the financial statements, the Company accounts for its mortgage-backed securities at fair value, which totaled $5.3 billion at December 31, 2024.

The fair value of mortgage-backed securities is based on independent pricing sources and/or third-party broker quotes, when available.

Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values based on various techniques including observing the most recent transactions for like or identical assets (including security coupon rate, maturity, yield, prepayment speed), market credit spreads, and model driven approaches.

Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values based on various techniques including observing the most recent transactions for like or identical assets, market credit spreads, and model driven approaches.

We identified the valuation of mortgage-backed securities as a critical audit matter.

4 unchanged sentences

Assessing the range of values used for each investment position, and evaluating the price selected for potential bias by comparing the selected price to the high, low and average of the range of pricing sources.

Utilizing personnel with specialized knowledge and skill in valuation to develop an independent estimate of the fair value of each investment position by:

(i) assessing the stated security coupon rate, maturity, yield, and prepayment speed, and comparing to the fair value used by the Company;

(ii) comparing the Company’s fair value estimate of mortgage-backed securities to recent available market transactions, if available.

Utilizing personnel with specialized skill and knowledge in valuation to:

(i) develop an independent estimate of the fair value of each investment position utilizing third-party pricing services and transparent market data;

and (ii) comparing those fair value estimates to the fair value determined by the Company.

/s/ BDO USA, P.C.

Certified Public Accountants

We have served as the Company's auditor since 2011.

8 unchanged sentences

$ 5,253,310 $ 3,894,012

Treasury securities, at fair value (includes pledged assets of $ 36,382 at December 31, 2022)

Treasury securities, available-for-sale (includes pledged assets of $ 79,680 at December 31, 2023)

Treasury securities, available-for-sale (amortized cost of $ 100,412 and $ 148,803 ;

includes pledged assets of $ 100,551 and $ 79,680 , respectively)

100,551 148,820

Cash and cash equivalents

17 unchanged sentences

5,053,127 3,795,002

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:

16 unchanged sentences

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2023, 2022 and 2021

For the Years Ended December 31,

($ in thousands, except per share data)

3 unchanged sentences

( 236,281 ) ( 201,918 ) ( 61,708 )

Net interest (expense) income

Net interest income (expense)

5,296 ( 24,349 ) 82,925

6 unchanged sentences

133,554 45,237 452,476

Net portfolio loss

Net portfolio income (loss)

54,406 ( 20,695 ) ( 241,004 )

10 unchanged sentences

Direct REIT operating expenses

715 831 1,090

Other administrative

1 unchanged sentence

16,744 18,531 17,449

Net income (loss)

$ 37,662 $ ( 39,226 ) $ ( 258,453 )

Unrealized gains on U.S.

Treasury securities measured at fair value through other comprehensive net loss

Comprehensive net loss

Treasury securities measured at fair value through other comprehensive net income (loss)

$ 122 $ 17 $ -

Basic and diluted net loss per share

Comprehensive net income (loss)

$ 37,784 $ ( 39,209 ) $ ( 258,453 )

Basic and diluted net income (loss) per share

$ 0.57 $ ( 0.89 ) $ ( 6.90 )

Weighted Average Shares Outstanding

16 unchanged sentences

Shares repurchased and retired

( 2,549 ) ( 24 ) ( 24,586 ) - - ( 24,610 )

Balances, December 31, 2022

1 unchanged sentence

- - - ( 39,226 ) - ( 39,226 )

Unrealized gain on available-for-sale securities

- - - - 17 17

Cash dividends declared

24 unchanged sentences

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2023, 2022 and 2021

For the Years Ended December 31,

($ in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ 37,662 $ ( 39,226 ) $ ( 258,453 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock based compensation

553 1,198 685

Discount accretion on U.S.

Treasury Bills

Net discount accretion on U.S.

Treasury securities

( 4,884 ) ( 1,875 ) -

4 unchanged sentences

79,842 18,941 642,710

Realized and unrealized losses (gains) on derivative instruments

Realized and unrealized (gains) losses on derivative instruments

( 46,370 ) 10,616 ( 245,421 )

22 unchanged sentences

Treasury securities

450,000 37,500 -

Net proceeds from derivative instruments

15 unchanged sentences

1,483,261 396,131 ( 2,943,417 )

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

134,764 ( 36,930 ) ( 213,223 )

17 unchanged sentences

From incorporation through November 24, 2010, Orchid’s only activity was the issuance of common stock to Bimini.

On August 4, 2020, Orchid entered into an equity distribution agreement (the “August 2020 Equity Distribution Agreement”) with four sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $ 150,000,000 of shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.

The Company issued a total of 5,498,730 shares under the August 2020 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 150.0 million, and net proceeds of approximately $ 147.4 million, after commissions and fees, prior to its termination in June 2021.

On January 20, 2021, Orchid entered into an underwriting agreement (the “January 2021 Underwriting Agreement”) with J.P.

Morgan Securities LLC (“J.P.

Morgan”), relating to the offer and sale of 1,520,000 shares of the Company’s common stock.

Morgan purchased the shares of the Company’s common stock from the Company pursuant to the January 2021 Underwriting Agreement at $ 26.00 per share.

In addition, the Company granted J.P.

Morgan a 30 -day option to purchase up to an additional 228,000 shares of the Company’s common stock on the same terms and conditions, which J.P.

Morgan exercised in full on January 21, 2021.

The closing of the offering of 1,748,000 shares of the Company’s common stock occurred on January 25, 2021, with proceeds to the Company of approximately $ 45.2 million, after deduction of underwriting discounts and commissions and other estimated offering expenses.

On March 2, 2021, Orchid entered into an underwriting agreement (the “March 2021 Underwriting Agreement”) with J.P.

Morgan, relating to the offer and sale of 1,600,000 shares of the Company’s common stock.

Morgan purchased the shares of the Company’s common stock from the Company pursuant to the March 2021 Underwriting Agreement at $ 27.25 per share.

In addition, the Company granted J.P.

Morgan a 30 -day option to purchase up to an additional 240,000 shares of the Company’s common stock on the same terms and conditions, which J.P.

Morgan exercised in full on March 3, 2021.

The closing of the offering of 1,840,000 shares of the Company’s common stock occurred on March 5, 2021, with proceeds to the Company of approximately $ 50.0 million, after deduction of underwriting discounts and commissions and other estimated offering expenses.

On June 22, 2021, Orchid entered into an equity distribution agreement (the “June 2021 Equity Distribution Agreement”) with four sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $ 250,000,000 of shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.

The Company issued a total of 9,881,467 shares under the June 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 250.0 million, and net proceeds of approximately $ 246.0 million, after commissions and fees, prior to its termination in October 2021.

On October 29, 2021, Orchid entered into an equity distribution agreement (the “October 2021 Equity Distribution Agreement”) with four sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $ 250,000,000 of shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.

The Company issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 151.8 million, and net proceeds of approximately $ 149.3 million, after commissions and fees, prior to its termination in March 2023.

On March 7, 2023, Orchid entered into an equity distribution agreement (the “March 2023 Equity Distribution Agreement”) with three sales agents pursuant to which the Company may offer and sell, from time to time, up to an aggregate amount of $ 250,000,000 of shares of the Company’s common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.

Through December 31, 2023 , the Company issued a total of 13,190,039 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 129.9 million, and net proceeds of approximately $ 127.8 million, after commissions and fees.

On March 7, 2023, Orchid entered into an equity distribution agreement (the “March 2023 Equity Distribution Agreement”) with three sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $ 250,000,000 of shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.

The Company issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 228.8 million and net proceeds of approximately $ 225.0 million, after commissions and fees, prior to its termination in June 2024.

On June 11, 2024, Orchid entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which the Company may offer and sell, from time to time, up to an aggregate amount of $ 250,000,000 of shares of the Company’s common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.

Through December 31, 2024 , the Company issued a total of 19,842,089 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 164.9 million, and net proceeds of approximately $ 162.1 million, after commissions and fees.

Subsequent to December 31, 2024 , the Company issued a total of 10,671,164 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 85.1 million, and net proceeds of approximately $ 83.8 million, after commissions and fees.

Basis of Presentation and Use of Estimates

4 unchanged sentences

Management believes the estimates and assumptions underlying the financial statements are reasonable based on the information available as of December 31, 2024 .

Reclassification of Comparative Period Information

The Company previously reported $ 3.3 million and $ 0.4 million of commissions, fees and other expenses associated with its derivative holdings for the years ended December 31, 2022 and 2021, respectively, in "Direct REIT operating expenses" in the statements of comprehensive income (loss).

These expenses have been reclassified as part of "Gains (losses) on derivative and other hedging instruments" to conform with the presentation in the current period.

Common Stock Reverse Split

On August 30, 2022, the Company effected a 1 -for- 5 reverse stock split of its common stock and proportionately decreased the number of authorized shares of common stock.

All share, per share, deferred stock unit ("DSU") and performance unit ("PU") information has been retroactively adjusted to reflect the reverse split.

The shares of common stock retain a par value of $ 0.01 per share.

Variable Interest Entities (VIEs)

20 unchanged sentences

The Company has not experienced any losses related to these balances.

The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution.

Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty.

5 unchanged sentences

The Company also invests in U.S.

Treasury Notes and U.S.

Treasury Bills, primarily to satisfy collateral requirements of derivative counterparties.

The Company has elected to account for its investment in RMBS and U.S.

Treasury Notes under the fair value option.

Electing the fair value option requires the Company to record changes in fair value in the statements of comprehensive income (loss), which, in management’s view, more appropriately reflects the results of the Company's operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed.

Treasury Notes (T-Notes) and U.S.

Treasury Bills (collectively, "U.S.

Treasury securities"), primarily to satisfy collateral requirements of derivative counterparties.

The Company has elected to account for its investment in RMBS and its U.S.

Treasury securities acquired before September 2023 under the fair value option.

The Company recorded changes in fair value in net income.

The Company has designated its U.S.

Treasury Bills as available-for-sale.

Treasury securities acquired after August 2023 as available-for-sale, and changes in fair value during the period for reasons other than expected credit losses are recognized in other comprehensive income (loss).

The Company records securities transactions on the trade date.

6 unchanged sentences

Income on PT RMBS, and U.S.

Treasury Notes is based on the stated interest rate of the security.

Treasury securities acquired before September, 2023, is based on the stated interest rate of the security.

Premiums or discounts present at the date of purchase are not amortized.

4 unchanged sentences

For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security.

Income on U.S.

Treasury securities acquired after August, 2023, is based on the stated interest rate (if any) of the security.

Premiums or discounts associated with the purchase are amortized or accreted income over the life of the investment and reported in the statements of comprehensive income (loss) as interest income.

Changes in fair value of investments for which the fair value option is elected are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities and U.S.

1 unchanged sentence

Realized gains and losses on sales of investments for which the fair value option has been elected, using the specific identification method, are reported as a separate component of net portfolio income on the statements of comprehensive income (loss).

Treasury Bills are zero -coupon bonds that are purchased at a discount to the par amount.

This discount is accreted into income over the life of the investment and reported in the statements of comprehensive income (loss) as interest income.

Changes in fair value of U.S.

Treasury Bills that are classified as available-for-sale are reported in accumulated other comprehensive income ("OCI").

Treasury securities that are classified as available-for-sale are reported in accumulated other comprehensive income ("OCI").

Upon the sale of a security designated as available-for-sale, we determine the cost of the security and the amount of unrealized gain or loss to reclassify out of accumulated OCI into earnings based on the specific identification method.

4 unchanged sentences

The Company uses derivative and other hedging instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future.

The principal instruments that the Company has used to date are Treasury Note (“T-Note”), SOFR, federal funds ("Fed Funds") and Eurodollar futures contracts, short positions in U.S.

Treasury securities, interest rate swaps, options to enter in interest rate swaps (“interest rate swaptions”) , interest rate caps and TBA securities transactions, but the Company may enter into other derivative and other hedging instruments in the future.

The principal instruments that the Company has used to date are T-Note, Secured Overnight Financing Rate ("SOFR"), and federal funds ("Fed Funds") futures contracts, short positions in U.S.

Treasury securities, interest rate swaps, options to enter in interest rate swaps (“interest rate swaptions”), dual digital options, interest rate caps and floors, and "to-be-announced" ("TBA") securities transactions, but the Company may enter into other derivative and other hedging instruments in the future.

The Company accounts for TBA securities as derivative instruments.

Gains and losses associated with TBA securities transactions are reported in gain (loss) on derivative instruments in the accompanying statements of comprehensive income (loss).

Derivative and other hedging instruments are carried at fair value, and changes in fair value are recorded in statements of comprehensive income (loss) as gains or losses on derivative and other hedging instruments for each period.

Derivative and other hedging instruments are carried at fair value, and changes in fair value are recorded in income as gains or losses on derivative and other hedging instruments for each period.

The Company’s derivative financial instruments are not designated as hedge accounting relationships, but rather are used as economic hedges of its portfolio assets and liabilities.

Gains and losses on derivatives, except those that result in cash receipts or payments, are included in operating activities on the statements of cash flows.

Cash payments and cash receipts from settlements of derivatives, including current period net cash settlements on interest rates swaps, are classified as an investing activity on the statements of cash flows.

Cash payments and cash receipts from settlements of derivatives, including current period net cash settlements on interest rate swaps, are classified as an investing activity on the statements of cash flows.

Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties and exchanges to honor their commitments.

4 unchanged sentences

The fair value of financial instruments for which it is practicable to estimate that value is disclosed, either in the body of the financial statements or in the accompanying notes.

RMBS, Fed Funds, SOFR and T-Note futures contracts, interest rate swaps, interest rate swaptions, interest rate caps and TBA securities are accounted for at fair value in the balance sheets.

RMBS, Fed Funds, SOFR and T-Note futures contracts, interest rate swaps, interest rate swaptions, dual digital options, interest rate floors and caps, and TBA securities are accounted for at fair value in the balance sheets.

The methods and assumptions used to estimate fair value for these instruments are presented in Note 13 of the financial statements.

26 unchanged sentences

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020 - 04 “ Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

” ASU 2020 - 04 provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates.

ASU 2020 - 04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination.

The guidance in ASU 2020 - 04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur.

In December 2022, the FASB issued ASU 2022 - 06 "Reference Rate Reform (Topic 848 )," deferring the sunset date provided in ASU 2020 - 04 from December 31, 2022 to December 31, 2024.

The Company adopted this ASU during the second quarter of 2023 as the Secured Overnight Financing Rate ("SOFR") replaced LIBOR for certain derivative positions.

The adoption of this ASU did not have a material impact on its financial statements.

In January 2021, the FASB issued ASU 2021 - 01 “ Reference Rate Reform (Topic 848 ).” ASU 2021 - 01 expands the scope of ASC 848 to include all affected derivatives and give market participants the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition.

In addition, ASU 2021 - 01 adds implementation guidance to permit a company to apply certain optional expedients to modifications of interest rate indexes used for margining, discounting or contract price alignment of certain derivatives as a result of reference rate reform initiatives and extends optional expedients to account for a derivative contract modified as a continuation of the existing contract and to continue hedge accounting when certain critical terms of a hedging relationship change to modifications made as part of the discounting transition.

The guidance in ASU 2021 - 01 is effective immediately and available generally through December 31, 2024, as reference rate reform activities occur.

The Company adopted this ASU during the second quarter of 2023 as SOFR replaced LIBOR for certain derivative positions.

The adoption of this ASU did not have a material impact on its financial statements.

In November 2023, the FASB issued ASU No.

2023 - 07, “ Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures ”.

The amendments in the ASU require disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, with early adoption allowed.

We adopted this guidance as of January 1, 2024, and the adoption did not have a material impact on our financial statements.

Refer to Note 15, "Segment Information," for new disclosures resulting from the adoption of ASU 2023 - 07.

In November 2024, the FASB issued ASU No.

2024 - 03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses ".

The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Consolidated Statements of Income, as well as disclosures about selling expenses.

ASU 2024 - 03 is effective for fiscal years beginning after December 15, 2026, with early adoption allowed.

We are currently evaluating the impact of adoption on our financial disclosures.

MORTGAGE-BACKED SECURITIES AND U.S.

20 unchanged sentences

( 3 ) The notional balance for the inverse interest-only securities portfolio was $ 22.0 million and $ 26.8 million as of December 31, 2024 and 2023 , respectively.

As of December 31, 2022, the Company held U.S.

Treasury securities with a fair value of approximately $ 36.4 million, that were accounted for under the fair value option.

Treasury securities are held primarily to satisfy collateral requirements of its repurchase and derivative counterparties.

The following table is a summary of the Company's net gain (loss) from the sale of mortgage-backed securities for the years ended December 31, 2024, 2023 and 2022 .

12 unchanged sentences

$ ( 4,602 ) $ ( 22,642 ) $ ( 133,695 )

During the year ended December 31, 2024, the Company resecuritized RMBS with a fair value of $ 221.7 million by transferring the RMBS into a larger RMBS backed by the transferred RMBS.

The Company retained the larger RMBS.

No gain or loss was recorded on this resecuritization.

TREASURY SECURITIES, AVAILABLE-FOR-SALE

As of December 31, 2023 , the Company held U.S.

Treasury securities with a fair value of approximately $ 148.8 million that were classified as available-for-sale.

The following table presents the amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale investments as of December 31, 2024 and 2023 .

Treasury securities are held primarily to satisfy collateral requirements of its repurchase and derivative counterparties.

The amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale investments as of December 31, 2023 are as follows:

(in thousands)

December 31, 2024

Treasury Note, 4.625%, 6/30/2026 Maturity

$ 100,412 $ 139 $ - $ 100,551

December 31, 2023

Treasury Bill, 1/2/2024 Maturity

5 unchanged sentences

$ 148,803 $ 17 $ - $ 148,820

The Company had no securities classified as available-for-sale that were in an unrealized loss position as of December 31, 2023, 2022 and 2021 .

Because all of the Company's available-for-sale securities are backed by the full faith and credit of the U.S.

government, the Company has not recorded an allowance for credit losses.

REPURCHASE AGREEMENTS

20 unchanged sentences

In addition, cash pledged to counterparties as collateral for repurchase agreements was approximately $ 22.8 million as of December 31, 2024 .

There was no cash pledged to counterparties for repurchase agreements as of December 31, 2023.

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable and cash posted by the Company as collateral.

13 unchanged sentences

Derivative assets, at fair value

Interest rate caps

Derivative assets, at fair value

TBA securities

2 unchanged sentences

$ 9,277 $ 6,420

Interest rate swaps

Derivative liabilities, at fair value

Payer swaptions (short positions)

Derivative liabilities, at fair value

TBA securities

Derivative liabilities, at fair value

$ 332 $ 12,694

Total derivative liabilities, at fair value

10 unchanged sentences

Other liabilities

Interest rate swaption contracts

Other liabilities

Total margin balances on derivative contracts

$ ( 1,377 ) $ 28,396

T-Note and SOFR futures are cash settled futures contracts on an interest rate, with gains and losses credited or charged to the Company’s cash accounts on a daily basis.

T-Note and SOFR futures are cash and securities settled futures contracts on their respective underlying or delivery eligible underlying U.S.

Treasury security, with gains and losses credited or charged to the Company’s cash accounts on a daily basis.

A minimum balance, or “margin”, is required to be maintained in the account on a daily basis.

6 unchanged sentences

$ 312,500 4.22 % 4.37 % $ 1,890

March 2025 10-year T-Note futures (Mar 2025 - Mar 2035 Hedge Period)

93,500 4.30 % 4.49 % 1,119

March 2024 10-year Ultra futures (Mar 2025 - Mar 2035 Hedge Period)

32,500 4.25 % 4.58 % 914

($ in thousands)

December 31, 2023

Expiration Year

Treasury Note Futures Contracts (Short Positions)(2)

March 2024 5-year T-Note futures (Mar 2024 - Mar 2029 Hedge Period)

$ 421,500 4.36 % 4.04 % $ ( 9,936 )

March 2024 10-year Ultra futures (Mar 2024 - Mar 2034 Hedge Period)

320,000 4.38 % 4.39 % ( 11,393 )

SOFR Futures Contracts (Short Positions)

15 unchanged sentences

25,000 3.21 % 3.07 % ( 35 )

($ in thousands)

December 31, 2022

Expiration Year

Treasury Note Futures Contracts (Short Position) (2)

March 2023 5-year T-Note futures (Mar 2023 - Mar 2028 Hedge Period)

$ 750,500 4.20 % 4.22 % $ ( 100 )

March 2023 10-year Ultra futures (Mar 2023 - Mar 2033 Hedge Period)

174,500 3.66 % 3.79 % $ 965

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

1 unchanged sentence

The contract values of the short positions were $ 332.2 million and $ 458.5 million at December 31, 2024 and 2023 , respectively.

10 -Year T-Note futures contracts were valued at a price of $ 108.75 , with a contract value of the short positions of $ 101.7 million at December 31, 2024 .

10 -Year Ultra futures contracts were valued at price of $ 111.31 at December 31, 2024 and $ 112.89 at December 31, 2023 .

17 unchanged sentences

$ 2,326,500 2.24 % 5.45 % 5.9

As of December 31, 2023, the table above includes swaps with aggregate notional amounts of $ 274.0 million that begin accruing interest February 24, 2024 with a weighted fixed pay rate of 3.43 % and a receive rate indexed to overnight SOFR.

In accordance with procedures prescribed by the Chicago Mercantile Exchange ("CME"), all of the Company’s remaining LIBOR interest rate swaps cleared through the CME were converted into SOFR interest rate swaps, effective September 10, 2023.

Our interest rate swaps are centrally cleared through two registered commodities exchanges, the CME and the London Clearing House (“LCH”).

Our interest rate swaps are centrally cleared through two registered commodities exchanges, the Chicago Mercantile Exchange ("CME") and the London Clearing House (“LCH”).

The clearing exchanges require that we post an "initial margin" amount determined by the exchanges.

1 unchanged sentence

We also exchange daily settlements of "variation margin" based upon changes in fair value, as measured by the exchanges.

The table below presents information related to the Company's interest rate cap positions at December 31, 2022.

The Company had no interest rate cap positions in place at December 31, 2023.

($ in thousands)

February 8, 2024

$ 200,000 $ 1,450 0.09 % 2Y10Y

The table below presents information related to the Company’s interest rate swaption positions at December 31, 2023 and 2022 .

The table below presents information related to the Company’s interest rate swaption position at December 31, 2023.

($ in thousands)

3 unchanged sentences

$ 1,619 $ 72 5.0 800,000 5.40 % SOFR

December 31, 2022

Payer Swaptions (long positions)

$ 36,685 $ 21,253 9.6 1,250,000 4.09 % SOFR

> 1 year ≤ 2 years

11,021 12,145 239.5 120,000 2.05 % SOFR

$ 47,706 $ 33,398 29.8 $ 1,370,000 3.91 % SOFR

Payer Swaptions (short positions)

$ ( 17,800 ) $ ( 5,982 ) 3.6 $ ( 917,000 ) 4.09 % SOFR

We purchase interest rate swaptions to help mitigate the potential impact of larger, more rapid changes in interest rates on the performance of our investment portfolio.

Interest rate swaptions provide us the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future.

Our interest rate swaption agreements are not subject to central clearing.

The difference between the premium paid and the fair value of the swaption is reported in gain (loss) on derivative and other hedging instruments in our statements of comprehensive income (loss).

If a swaption expires unexercised, the realized loss on the swaption would be equal to the premium paid.

If we sell or exercise a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash or the fair value of the underlying interest rate swap and the premium paid.

The following table summarizes the Company's contracts to purchase and sell TBA securities as of December 31, 2024 and 2023 .

4 unchanged sentences

$ 50,000 $ 50,074 $ 49,742 $ ( 332 )

( 250,000 ) ( 242,725 ) ( 247,657 ) ( 4,932 )

30-Year TBA securities:

( 200,000 ) ( 174,406 ) ( 169,703 ) 4,703

5 unchanged sentences

( 325,000 ) ( 322,410 ) ( 326,803 ) ( 4,393 )

$ ( 645,700 ) $ ( 624,413 ) $ ( 637,107 ) $ ( 12,694 )

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

15 unchanged sentences

- ( 219 ) 919

Dual digital option

Interest rate floors (long positions)

1,785 - 2,765

Interest rate floors (short positions)

58 unchanged sentences

$ 4,574 $ - $ 4,574 $ - $ - $ 4,574

Interest rate swaptions

TBA securities

4,703 - 4,703 - ( 4,282 ) 421

5 unchanged sentences

72 - 72 - - 72

Interest rate caps

$ 6,420 $ - $ 6,420 $ - $ - $ 6,420

TBA securities

672 - 672 - ( 532 ) 140

$ 40,172 $ - $ 40,172 $ - $ ( 13,021 ) $ 27,151

(in thousands)

12 unchanged sentences

$ 3,705,649 $ - $ 3,705,649 $ ( 3,705,649 ) $ - $ -

Interest rate swaptions

5,982 - 5,982 - - 5,982

TBA securities

5 unchanged sentences

CAPITAL STOCK

Reverse Stock Split

On August 30, 2022, the Company effected a 1 -for- 5 reverse stock split of its common stock and proportionately decreased the number of authorized shares of common stock.

All share, per share, DSU and PU information has been retroactively adjusted to reflect the reverse split.

The shares of common stock retain a par value of $ 0.01 per share.

Common Stock Issuances

15 unchanged sentences

7.86 4,533,067 35,630

31,327,547 $ 259,328

At the Market Offering Program (3)

First Quarter

$ 11.77 2,690,000 $ 31,657

At the Market Offering Program (3)

Second Quarter

9.95 4,757,953 47,355

At the Market Offering Program (3)

Third Quarter

9.54 8,432,086 80,426

At the Market Offering Program (3)

1 unchanged sentence

15,880,039 $ 159,438

3,885,048 $ 40,580

Weighted average price received per share is after deducting the underwriters’ discount, if applicable, and other offering costs.

Net proceeds are net of the underwriters’ discount, if applicable, and other offering costs.

As of December 31, 2023 , the Company had entered into eleven equity distribution agreements, ten of which have either been terminated because all shares were sold or were replaced with a subsequent agreement.

As of December 31, 2024 , the Company had entered into twelve equity distribution agreements, eleven of which have either been terminated because all shares were sold or were replaced with a subsequent agreement.

Increase in Authorized Shares

On February 14, 2025, the Company amended its charter, increasing the number of shares authorized to 220,000,000 , consisting of 200,000,000 shares of Common Stock, $ 0.01 par value per share, and 20,000,000 shares of Preferred Stock, $ 0.01 value per share.

The aggregate par value of all authorized shares of stock having par value is $ 2,200,000 .

Stock Repurchase Program

12 unchanged sentences

During the year ended December 31, 2023 , the Company repurchased a total of 1,072,789 shares at an aggregate cost of approximately $ 9.4 million, including commissions and fees, for a weighted average price of $ 8.79 per share.

Subsequent to December 31, 2023 , and through February 23, 2024 , the Company repurchased a total of 332,773 shares at an aggregate cost of approximately $ 2.8 million, including commissions and fees, for a weighted average price of $ 8.35 per share.

The remaining authorization under the stock repurchase program as of February 21, 2025 was 3,832,361 shares.

30 unchanged sentences

36,773 8.62 76,696 10.82

Forfeited (1)

( 14,365 ) 12.48 - -

7 unchanged sentences

Weighted-average remaining vesting term (in years)

The number of shares of common stock issuable upon the vesting of the remaining outstanding PUs was reduced as a result of three book value impairment events that occurred pursuant to the terms of the long term equity incentive compensation plans (the “Plans”) established under the Company’s 2012 Equity Incentive Plan and 2021 Equity Incentive Plan.

The first book value impairment event occurred when the Company's book value per share declined by more than 15 % during the quarter ended March 31, 2022 and the Company’s book value per share decline from January 1, 2022 to June 30, 2022 was more than 10 %.

The second book value impairment event occurred when the Company's book value per share declined by more than 15 % during the quarter ended September 30, 2022 and the Company’s book value per share decline from July 1, 2022 to December 31, 2022 was more than 10 %.

The third book value impairment event occurred when the Company's book value per share declined by more than 15 % during the quarter ended September 30, 2023 and the Company’s book value per share decline from July 1, 2023 to December 31, 2023 was more than 10 %.

The number of shares of common stock issuable upon the vesting of the remaining outstanding PUs as of December 31, 2023 was reduced by 14,365 shares as a result of a book value impairment event that occurred pursuant to the terms of the long term equity incentive compensation plans (the “Plans”) established under the Company’s Incentive Plans.

The book value impairment event occurred when the Company's book value per share declined by more than 15 % during the quarter ended September 30, 2023 and the Company’s book value per share decline from July 1, 2023 to December 31, 2023 was more than 10 %.

The Plans provide that if such a book value impairment event occurs, then the number of outstanding PUs that are outstanding as of the last day of such two quarter period shall be reduced by 15%.

9 unchanged sentences

Compensation expense related to fully vested shares of common stock awards (1)

The awards issued during the year ended December 31, 2023 were granted with respect to service performed in 2022 .

Approximately $ 600,000 of compensation expense related to the 2023 awards was accrued and recognized in 2022 .

The awards issued during the year ended December 31, 2022 were granted with respect to service performed in 2021.

Approximately $ 600,000 of compensation expense related to the 2022 awards was accrued and recognized in 2021.

The awards issued during the years ended December 31, 2024 and 2023 were granted with respect to service performed in 2023 and 2022, respectively.

Compensation expense accrued related to the share awards was $ 0.6 million for both the years ended December 31, 2024 and 2023.

Deferred Stock Units

17 unchanged sentences

Intrinsic value, end of period

$ 1,201 $ 815

COMMITMENTS AND CONTINGENCIES

18 unchanged sentences

Numerator for basic and diluted EPS per share of common stock:

Net loss - Basic and diluted

Net income (loss) - Basic and diluted

$ 37,662 $ ( 39,226 ) $ ( 258,453 )

2 unchanged sentences

82,622 51,636 36,765

Unvested dividend eligible share based compensation outstanding at the balance sheet date

Effect of weighting

2 unchanged sentences

65,449 44,649 37,465

Net loss per common share:

Net income (loss) per common share:

Basic and diluted

3 unchanged sentences

A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance.

Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements.

These stratifications are:

Required disclosures include presentation of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements.

These inputs are:

Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),

21 unchanged sentences

The fair value of interest rate swaptions is determined using an option pricing model.

RMBS (based on the fair value option), derivatives and TBA securities were recorded at fair value on a recurring basis during the years ended December 31, 2023, 2022 and 2021 .

Treasury securities, derivatives and TBA securities were recorded at fair value on a recurring basis during the years ended December 31, 2024, 2023 and 2022 .

When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset.

12 unchanged sentences

Interest rate swaps

Interest rate swaptions

TBA securities

- ( 12,694 ) -

December 31, 2023

4 unchanged sentences

Interest rate swaptions

Interest rate caps

TBA securities

- ( 12,694 ) -

During the years ended December 31, 2024 and 2023 , there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

10 unchanged sentences

under an agreement terminated on March 31, 2022.

In consideration for such services, the Company will pay the following fees to the Manager:

In consideration for such services, the Company pays the following fees to the Manager:

A daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and

4 unchanged sentences

Other Relationships with Bimini

Robert Cauley, the Company's Chief Executive Officer and Chairman of the Board of Directors, also serves as Chief Executive Officer and Chairman of the Board of Directors of Bimini and owns shares of common stock of Bimini.

Haas, the Company's Chief Financial Officer, Chief Investment Officer, Secretary and a member of the Board of Directors, also serves as the Chief Financial Officer, Chief Investment Officer and Treasurer of Bimini and owns shares of common stock of Bimini.

Robert Cauley, the Company's Chief Executive Officer ("CEO") and Chairman of the Board of Directors, also serves as CEO and Chairman of the Board of Directors of Bimini and owns shares of common stock of Bimini.

Haas, the Company's Chief Financial Officer ("CFO"), Chief Investment Officer ("CIO"), Secretary and a member of the Board of Directors, also serves as the CFO, CIO and Treasurer of Bimini and owns shares of common stock of Bimini.

In addition, as of December 31, 2024 , Bimini owned 569,071 shares, or 0.7 %, of the Company’s common stock.

SEGMENT INFORMATION

The Company follows ASC 280, Segment Reporting , which establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial statements issued to shareholders.

The Company’s Chief Operating Decision Maker ("CODM"), its CEO, assesses performance and allocates resources based on company-wide financial information.

The Company derives nearly all of its income from interest on its RMBS portfolio.

Consequently, the Company has determined that it operates in a single reportable segment and the strategic purpose of all operating activities is to support that one segment.

The CODM evaluates company-wide performance based on multiple performance measures, including, but not limited to net income and net interest income.

The CODM does not generally evaluate our performance using asset or historical cash flow information.

Since the Company operates in one operating segment, all required financial segment information can be found in the financial statements.

Significant expenses within net income that are used to evaluate performance are each separately presented in the statements of comprehensive income.

The Company does not distinguish between markets or segments for the purpose of internal reporting.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data