Orchid Island Capital, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Page Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; West Palm Beach, FL ; PCAOB ID# 243 ) 72 Balance Sheets 74 Statements of Comprehensive Income (Loss) 75 Statements of Stockholders’ Equity 76 Statements of Cash Flows 77 Notes to Financial Statements 78 71 Table of Contents Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Orchid Island Capital, Inc. Vero Beach, Florida Opinion on the Financial Statements We have audited the accompanying balance sheets of Orchid Island Capital, Inc. (the “Company”) as of December 31, 2024 and 2023, the related statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 21, 2025, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 72 Table of Contents Valuation of Investments in Mortgage-Backed Securities As described in Note 13 to the financial statements, the Company accounts for its mortgage-backed securities at fair value, which totaled $5.3 billion at December 31, 2024. The fair value of mortgage-backed securities is based on independent pricing sources and/or third-party broker quotes, when available. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values based on various techniques including observing the most recent transactions for like or identical assets, market credit spreads, and model driven approaches. We identified the valuation of mortgage-backed securities as a critical audit matter. The principal considerations for our determination are: (i) the potential for bias in how the Company subjectively selects the price from multiple pricing sources to determine the fair value of the mortgage-backed securities and (ii) the audit effort involved, including the involvement of valuation professionals with specialized skill and knowledge. The primary procedures we performed to address this critical audit matter included:   ● Testing the design, implementation, and operating effectiveness of controls relating to the valuation of mortgaged-backed securities in the Company’s process to select the price from multiple pricing sources to determine the fair value. ● Assessing the range of values used for each investment position, and evaluating the price selected for potential bias by comparing the selected price to the high, low and average of the range of pricing sources. ● Utilizing personnel with specialized skill and knowledge in valuation to: (i) develop an independent estimate of the fair value of each investment position utilizing third-party pricing services and transparent market data; and (ii) comparing those fair value estimates to the fair value determined by the Company. /s/ BDO USA, P.C. We have served as the Company's auditor since 2011. West Palm Beach, Florida February 21, 2025 73 Table of Contents ORCHID ISLAND CAPITAL, INC. BALANCE SHEETS ($ in thousands, except per share data) December 31, 2024 December 31, 2023 ASSETS: Mortgage-backed securities, at fair value (includes pledged assets of $ 5,209,068 and $ 3,885,554 , respectively) $ 5,253,310 $ 3,894,012 U.S. 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 309,330 171,893 Restricted cash 25,723 28,396 Accrued interest receivable 23,044 14,951 Derivative assets 9,277 6,420 Other assets 392 455 Total Assets $ 5,721,627 $ 4,264,947 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Repurchase agreements $ 5,025,543 $ 3,705,649 Payable for investment securities and TBA transactions - 60,454 Dividends payable 9,940 6,222 Derivative liabilities 332 12,694 Accrued interest payable 10,750 7,939 Due to affiliates 1,167 1,013 Other liabilities 5,395 1,031 Total Liabilities 5,053,127 3,795,002 COMMITMENTS AND CONTINGENCIES (Note 10) STOCKHOLDERS' EQUITY: Preferred stock, $ 0.01 par value; 20,000,000 shares authorized; no shares issued and outstanding as of December 31, 2024 and December 31, 2023 - - Common Stock, $ 0.01 par value; 100,000,000 shares authorized, 82,622,464 shares issued and outstanding as of December 31, 2024 and 51,636,074 shares issued and outstanding as of December 31, 2023 826 516 Additional paid-in capital 1,010,306 849,845 Accumulated deficit ( 342,771 ) ( 380,433 ) Accumulated other comprehensive income 139 17 Total Stockholders' Equity 668,500 469,945 Total Liabilities and Stockholders' Equity $ 5,721,627 $ 4,264,947 See Notes to Financial Statements 74 Table of Contents ORCHID ISLAND CAPITAL, INC. STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, ($ in thousands, except per share data) 2024 2023 2022 Interest income $ 241,577 $ 177,569 $ 144,633 Interest expense ( 236,281 ) ( 201,918 ) ( 61,708 ) Net interest income (expense) 5,296 ( 24,349 ) 82,925 Realized losses on mortgage-backed securities ( 4,602 ) ( 22,642 ) ( 133,695 ) Unrealized losses on mortgage-backed securities and U.S. Treasury securities ( 79,842 ) ( 18,941 ) ( 642,710 ) Gains on derivative instruments 133,554 45,237 452,476 Net portfolio income (loss) 54,406 ( 20,695 ) ( 241,004 ) Expenses: Management fees 9,354 10,491 10,447 Allocated overhead 2,644 2,389 2,042 Incentive compensation 723 1,419 957 Directors' fees and liability insurance 1,358 1,322 1,251 Audit, legal and other professional fees 1,341 1,495 1,143 Direct REIT operating expenses 787 715 831 Other administrative 537 700 778 Total expenses 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 income (loss) $ 122 $ 17 $ - 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 65,449,149 44,649,039 37,464,671 See Notes to Financial Statements 75 Table of Contents ORCHID ISLAND CAPITAL, INC. STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 2024, 2023 and 2022 (in thousands) Additional Retained Other Common Stock Paid-in Earnings Comprehensive Shares Par Value Capital (Deficit) Income Total Balances, January 1, 2022 35,399 $ 354 $ 850,497 $ ( 82,754 ) $ - $ 768,097 Net loss - - - ( 258,453 ) - ( 258,453 ) Cash dividends declared - - ( 87,906 ) - - ( 87,906 ) Issuance of common stock pursuant to public offerings, net 3,885 38 40,542 - - 40,580 Stock based awards and amortization 30 - 1,055 - - 1,055 Shares repurchased and retired ( 2,549 ) ( 24 ) ( 24,586 ) - - ( 24,610 ) Balances, December 31, 2022 36,765 368 779,602 ( 341,207 ) - 438,763 Net loss - - - ( 39,226 ) - ( 39,226 ) Unrealized gain on available-for-sale securities - - - - 17 17 Cash dividends declared - - ( 81,127 ) - - ( 81,127 ) Issuance of common stock pursuant to public offerings, net 15,880 157 159,281 - - 159,438 Stock based awards and amortization 64 1 1,503 - - 1,504 Shares repurchased and retired (1,073 ) ( 10 ) ( 9,414 ) - - ( 9,424 ) Balances, December 31, 2023 51,636 516 849,845 ( 380,433 ) 17 469,945 Net income - - - 37,662 - 37,662 Unrealized gain on available-for-sale securities - - - - 122 122 Cash dividends declared - - ( 96,309 ) - - ( 96,309 ) Issuance of common stock pursuant to public offerings, net 31,328 313 259,015 - - 259,328 Stock based awards and amortization 54 1 1,041 - - 1,042 Shares repurchased and retired ( 396 ) ( 4 ) ( 3,286 ) - - ( 3,290 ) Balances, December 31, 2024 82,622 $ 826 $ 1,010,306 $ ( 342,771 ) $ 139 $ 668,500 See Notes to Financial Statements 76 Table of Contents ORCHID ISLAND CAPITAL, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, ($ in thousands) 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 37,662 $ ( 39,226 ) $ ( 258,453 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Stock based compensation 553 1,198 685 Net discount accretion on U.S. Treasury securities ( 4,884 ) ( 1,875 ) - Realized losses on mortgage-backed securities 4,602 22,642 133,695 Unrealized losses on mortgage-backed securities and U.S. Treasury securities 79,842 18,941 642,710 Realized and unrealized (gains) losses on derivative instruments ( 46,370 ) 10,616 ( 245,421 ) Changes in operating assets and liabilities: Accrued interest receivable ( 8,093 ) ( 3,432 ) 7,340 Other assets 63 ( 7 ) ( 128 ) Accrued interest payable 2,811 ( 1,270 ) 8,421 Other liabilities 650 534 454 Due to affiliates 154 ( 118 ) 69 NET CASH PROVIDED BY OPERATING ACTIVITIES 66,990 8,003 289,372 CASH FLOWS FROM INVESTING ACTIVITIES: From mortgage-backed securities investments: Purchases ( 2,393,320 ) ( 1,521,070 ) ( 1,004,526 ) Sales and maturities 454,272 797,633 2,759,919 Principal repayments 495,306 326,720 440,094 Purchases of U.S. Treasury securities ( 445,866 ) ( 97,787 ) - Maturity of U.S. Treasury securities 450,000 37,500 - Net proceeds from derivative instruments 24,121 15,940 245,335 NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ( 1,415,487 ) ( 441,064 ) 2,440,822 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from repurchase agreements 45,596,555 37,761,388 40,040,024 Principal payments on repurchase agreements ( 44,276,661 ) ( 37,434,184 ) ( 42,905,685 ) Cash dividends paid ( 92,503 ) ( 80,754 ) ( 93,494 ) Proceeds from issuance of common stock, net of issuance costs 259,328 159,438 40,580 Common stock repurchases, including shares withheld from employee stock awards for payment of taxes ( 3,458 ) ( 9,757 ) ( 24,842 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,483,261 396,131 ( 2,943,417 ) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 134,764 ( 36,930 ) ( 213,223 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period 200,289 237,219 450,442 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period $ 335,053 $ 200,289 $ 237,219 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 233,471 $ 203,188 $ 53,288 See Notes to Financial Statements 77 Table of Contents ORCHID ISLAND CAPITAL, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2024 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Business Description Orchid Island Capital, Inc. (“Orchid” or the “Company”), was incorporated in Maryland on August 17, 2010 for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“RMBS”). From incorporation to the completion of Orchid's initial public offering of its common stock on February 20, 2013 Orchid was a wholly owned subsidiary of Bimini Capital Management, Inc. (“Bimini”). Orchid began operations on November 24, 2010 ( the date of commencement of operations). From incorporation through November 24, 2010, Orchid’s only activity was the issuance of common stock to Bimini. 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 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 The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could significantly differ from those estimates. The significant estimates affecting the accompanying financial statements are the fair values of RMBS and derivatives. Management believes the estimates and assumptions underlying the financial statements are reasonable based on the information available as of December 31, 2024 . Variable Interest Entities (VIEs) The Company obtains interests in VIEs through its investments in mortgage-backed securities. The Company's interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for these interests in these VIEs as mortgage-backed securities. See Note 2 for additional information regarding the Company's investments in mortgage-backed securities. The maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities. 78 Table of Contents Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and other borrowings, and interest rate swaps and other derivative instruments. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows. (in thousands) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 309,330 $ 171,893 Restricted cash 25,723 28,396 Total cash, cash equivalents and restricted cash $ 335,053 $ 200,289 The Company maintains cash balances at three banks, a government securities backed overnight sweep fund, and excess margin on account with three exchange clearing members. At times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and exchange clearing members and believes that it is not exposed to any significant credit risk on cash and cash equivalents or restricted cash balances. Mortgage-Backed Securities and U.S. Treasury Securities The Company invests primarily in mortgage pass-through (“PT”) residential mortgage backed securities (“RMBS”) and collateralized mortgage obligations (“CMOs”) issued by Freddie Mac, Fannie Mae or Ginnie Mae, interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of RMBS. The Company refers to RMBS and CMOs as PT RMBS and IO and IIO securities as structured RMBS. The Company also invests in U.S. 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 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. Security purchases that have not settled as of the balance sheet date are included in the portfolio balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the portfolio balance with an offsetting receivable recorded. Fair value is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for RMBS are based on independent pricing sources and/or third party broker quotes, when available. Estimated fair values for U.S. Treasury securities are based on quoted prices for identical assets in active markets. Income on PT RMBS, and U.S. 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. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the statements of comprehensive income (loss). For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. 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. 79 Table of Contents 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. Treasury securities in the accompanying statements of comprehensive income (loss). 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). Changes in fair value of U.S. 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. The Company evaluated securities for allowance for credit losses and since all of the Company's available-for-sale securities designated investments consist of U.S. Treasury securities, which are backed by the full faith and credit of the U.S. government, the Company does not record an allowance for credit losses. Derivative Financial Instruments 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 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 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 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. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. The Company’s derivative agreements require it to post or receive collateral to mitigate such risk. In addition, the Company uses only registered central clearing exchanges and well-established commercial banks as counterparties, monitors positions with individual counterparties and adjusts posted collateral as required. Financial Instruments 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, 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. Repurchase Agreements The Company finances the acquisition of the majority of its RMBS through the use of repurchase agreements under master repurchase agreements. Repurchase agreements are accounted for as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Manager Compensation The Company is externally managed by Bimini Advisors, LLC (the “Manager” or “Bimini Advisors”), a Maryland limited liability company and wholly-owned subsidiary of Bimini. The Company’s management agreement with the Manager provides for payment to the Manager of a management fee and reimbursement of certain operating expenses, which are accrued and expensed during the period for which they are earned or incurred. Refer to Note 14 for the terms of the management agreement. 80 Table of Contents Earnings Per Share Basic earnings per share (“EPS”) is calculated as net income or loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated using the treasury stock or two -class method, as applicable, for common stock equivalents, if any. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive. Stock-Based Compensation The Company may grant equity-based compensation to non-employee members of its board of directors and to the executive officers and employees of the Manager. Stock-based awards issued include Performance Units ("PUs"), Deferred Stock Units ("DSUs") and immediately vested common stock awards. Compensation expense is measured and recognized for all stock-based payment awards made to employees and non-employee directors based on the fair value of our common stock on the date of grant. Compensation expense is recognized over each award’s respective service period using the graded vesting attribution method. We do not estimate forfeiture rates; rather, we adjust for forfeitures in the periods in which they occur. Income Taxes Orchid elected and is organized and operated so as to qualify to be taxed as a REIT under the Code. REITs are generally not subject to U.S. federal income tax on their REIT taxable income provided that they distribute to their stockholders all of their REIT taxable income on an annual basis. A REIT must distribute at least 90% of its REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gain, and meet other requirements of the Code to retain its tax status. Orchid assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. All of Orchid’s tax positions are categorized as highly certain. There is no accrual for any tax, interest or penalties related to Orchid’s tax position assessment. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. Recent Accounting Pronouncements 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. 81 Table of Contents NOTE 2. MORTGAGE-BACKED SECURITIES AND U.S. TREASURY SECURITIES, AT FAIR VALUE The following table presents the Company’s RMBS portfolio that are remeasured at fair value through earnings as of December 31, 2024 and December 31, 2023 : (in thousands) December 31, 2024 December 31, 2023 Par Value Cost (1) Fair Value Par Value Cost (1) Fair Value Pass-Through RMBS Certificates: Fixed-rate Mortgages $ 5,431,274 $ 5,540,596 $ 5,237,812 $ 4,051,145 $ 4,198,424 $ 3,877,082 Total Pass-Through Certificates 5,431,274 5,540,596 5,237,812 4,051,145 4,198,424 3,877,082 Structured RMBS Certificates: Interest-Only Securities (2) n/a 17,334 15,308 n/a 19,839 16,572 Inverse Interest-Only Securities (3) n/a 1,498 190 n/a 1,825 358 Total Structured RMBS Certificates - 18,832 15,498 - 21,664 16,930 Total $ 5,431,274 $ 5,559,428 $ 5,253,310 $ 4,051,145 $ 4,220,088 $ 3,894,012 ( 1 ) The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio. ( 2 ) The notional balance for the interest-only securities portfolio was $ 85.8 million and $ 98.6 million as of December 31, 2024 and 2023 , respectively. ( 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. 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 . (in thousands) 2024 2023 2022 Proceeds from sales of RMBS $ 454,272 $ 797,633 $ 2,759,919 Carrying value of RMBS sold ( 458,874 ) ( 820,275 ) ( 2,893,614 ) Net loss on sales of RMBS $ ( 4,602 ) $ ( 22,642 ) $ ( 133,695 ) Gross gain on sales of RMBS $ 510 $ - $ 2,705 Gross loss on sales of RMBS ( 5,112 ) ( 22,642 ) ( 136,400 ) Net loss on sales of RMBS $ ( 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. 82 Table of Contents NOTE 3. U.S. TREASURY SECURITIES, 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 . U.S. Treasury securities are held primarily to satisfy collateral requirements of its repurchase and derivative counterparties. (in thousands) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2024 U.S. Treasury Note, 4.625%, 6/30/2026 Maturity $ 100,412 $ 139 $ - $ 100,551 $ 100,412 $ 139 $ - $ 100,551 December 31, 2023 U.S. Treasury Bill, 1/2/2024 Maturity $ 49,671 $ 9 $ - $ 49,680 U.S. Treasury Bill, 2/15/2024 Maturity 49,992 8 - 50,000 U.S. Treasury Bill, 4/30/2024 Maturity 49,140 - - 49,140 $ 148,803 $ 17 $ - $ 148,820 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. NOTE 4. REPURCHASE AGREEMENTS The Company pledges certain of its RMBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of December 31, 2024 , the Company had met all margin call requirements. As of December 31, 2024 and 2023 , the Company’s repurchase agreements had remaining maturities as summarized below: ($ in thousands) OVERNIGHT BETWEEN 2 BETWEEN 31 GREATER (1 DAY OR AND AND THAN LESS) 30 DAYS 90 DAYS 90 DAYS TOTAL December 31, 2024 Fair market value of securities pledged, including accrued interest receivable $ - $ 4,850,491 $ 199,993 $ 181,437 $ 5,231,921 Repurchase agreement liabilities associated with these securities $ - $ 4,656,303 $ 192,338 $ 176,902 $ 5,025,543 Net weighted average borrowing rate - 4.66 % 4.56 % 4.76 % 4.66 % December 31, 2023 Fair market value of securities pledged, including accrued interest receivable $ - $ 3,125,315 $ 710,055 $ 65,106 $ 3,900,476 Repurchase agreement liabilities associated with these securities $ - $ 2,966,650 $ 674,696 $ 64,303 $ 3,705,649 Net weighted average borrowing rate - 5.55 % 5.54 % 5.46 % 5.55 % 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. 83 Table of Contents 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. At December 31, 2024 , the Company had an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable and securities posted by the counterparty (if any), and the fair value of securities and cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately $ 214.3 million. The Company did not have an amount at risk with any individual counterparty that was greater than 10% of the Company’s equity at December 31, 2024 and 2023 . NOTE 5. DERIVATIVE AND OTHER HEDGING INSTRUMENTS The table below summarizes fair value information about the Company's derivative and other hedging instruments assets and liabilities as of December 31, 2024 and 2023 . (in thousands) Derivative and Other Hedging Instruments Balance Sheet Location December 31, 2024 December 31, 2023 Assets Interest rate swaps Derivative assets, at fair value $ 4,574 $ 6,348 Payer swaptions (long positions) Derivative assets, at fair value - 72 TBA securities Derivative assets, at fair value 4,703 - Total derivative assets, at fair value $ 9,277 $ 6,420 Liabilities TBA securities Derivative liabilities, at fair value $ 332 $ 12,694 Total derivative liabilities, at fair value $ 332 $ 12,694 Margin Balances Posted to (from) Counterparties Futures contracts Restricted cash $ 2,625 $ 4,096 TBA securities Restricted cash 280 23,720 Interest rate swaption contracts Restricted cash - 580 TBA securities Other liabilities ( 4,282 ) - Total margin balances on derivative contracts $ ( 1,377 ) $ 28,396 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. The tables below present information related to the Company’s T-Note and SOFR futures positions at December 31, 2024 and 2023 . ($ in thousands) December 31, 2024 Average Weighted Weighted Contract Average Average Notional Entry Effective Open Expiration Year Amount Rate Rate Equity(1) U.S. Treasury Note Futures Contracts (Short Positions) (2) March 2025 5-year T-Note futures (Mar 2025 - Mar 2030 Hedge Period) $ 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 84 Table of Contents ($ in thousands) December 31, 2023 Average Weighted Weighted Contract Average Average Notional Entry Effective Open Expiration Year Amount Rate Rate Equity(1) U.S. 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) June 2024 3-Month SOFR futures (Mar 2024 - Jun 2024 Hedge Period) $ 25,000 5.08 % 4.99 % $ ( 24 ) September 2024 3-Month SOFR futures (Jun 2024 - Sep 2024 Hedge Period) 25,000 4.67 % 4.52 % ( 39 ) December 2024 3-Month SOFR futures (Sep 2024 - Dec 2024 Hedge Period) 25,000 4.27 % 4.10 % ( 44 ) March 2025 3-Month SOFR futures (Dec 2024 - Mar 2025 Hedge Period) 25,000 3.90 % 3.73 % ( 43 ) June 2025 3-Month SOFR futures (Mar 2025 - Jun 2025 Hedge Period) 25,000 3.58 % 3.42 % ( 41 ) September 2025 3-Month SOFR futures (Jun 2025 - Sep 2025 Hedge Period) 25,000 3.37 % 3.21 % ( 39 ) December 2025 3-Month SOFR futures (Sep 2025 - Dec 2025 Hedge Period) 25,000 3.25 % 3.10 % ( 37 ) March 2026 3-Month SOFR futures (Dec 2025 - Mar 2026 Hedge Period) 25,000 3.21 % 3.07 % ( 35 ) ( 1 ) Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. ( 2 ) 5 -Year T-Note futures contracts were valued at a price of $ 106.30 at December 31, 2024 and $ 108.77 at December 31, 2023 . 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 . The contract value of the short positions was $ 36.2 million and $ 361.3 million at December 31, 2024 and 2023 , respectively. Under its interest rate swap agreements, the Company typically pays a fixed rate and receives a floating rate ("payer swaps") based on an index, such as SOFR. The floating rate the Company receives under its swap agreements has the effect of offsetting the repricing characteristics of its repurchase agreements and cash flows on such liabilities. The Company is typically required to post margin on its interest rate swap agreements. The table below presents information related to the Company’s interest rate swap positions at December 31, 2024 and 2023 . ($ in thousands) Average Fixed Average Average Notional Pay Receive Maturity Amount Rate Rate (Years) December 31, 2024 Expiration > 1 to ≤ 5 years $ 1,450,000 1.69 % 4.58 % 3.4 Expiration > 5 years 2,066,800 3.55 % 4.52 % 7.0 $ 3,516,800 2.78 % 4.54 % 5.5 December 31, 2023 Expiration > 1 to ≤ 5 years $ 500,000 0.84 % 5.64 % 2.7 Expiration > 5 years 1,826,500 2.62 % 5.40 % 6.8 $ 2,326,500 2.24 % 5.45 % 5.9 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. The initial margin amount is intended to be set at a level sufficient to protect the exchange from the interest rate swap's maximum estimated single-day price movement and is subject to adjustment based on changes in market volatility and other factors. We also exchange daily settlements of "variation margin" based upon changes in fair value, as measured by the exchanges. 85 Table of Contents The table below presents information related to the Company’s interest rate swaption position at December 31, 2023. ($ in thousands) Option Underlying Swap Weighted Weighted Average Average Adjustable Average Fair Months to Notional Fixed Rate Term Expiration Cost Value Expiration Amount Rate Index (Years) December 31, 2023 Payer Swaptions (long positions) ≤ 1 year $ 1,619 $ 72 5.0 800,000 5.40 % SOFR 1.0 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 . ($ in thousands) Notional Net Amount Cost Market Carrying Long (Short)(1) Basis(2) Value(3) Value(4) December 31, 2024 15-Year TBA securities: 5.0% $ 50,000 $ 50,074 $ 49,742 $ ( 332 ) 30-Year TBA securities: 3.0% ( 200,000 ) ( 174,406 ) ( 169,703 ) 4,703 Total $ ( 150,000 ) $ ( 124,332 ) $ ( 119,961 ) $ 4,371 December 31, 2023 30-Year TBA securities: 2.0% $ ( 70,700 ) $ ( 59,278 ) $ ( 62,647 ) $ ( 3,369 ) 5.0% ( 250,000 ) ( 242,725 ) ( 247,657 ) ( 4,932 ) 5.5% ( 325,000 ) ( 322,410 ) ( 326,803 ) ( 4,393 ) Total $ ( 645,700 ) $ ( 624,413 ) $ ( 637,107 ) $ ( 12,694 ) ( 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 the balance sheets. 86 Table of Contents Gain (Loss) From Derivative and Other Hedging Instruments, Net The table below presents the effect of the Company’s derivative and other hedging instruments on the statements of comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 . (in thousands) 2024 2023 2022 Futures contracts (short positions) $ 26,638 32,650 206,907 Interest rate swaps 101,151 19,657 167,641 Payer swaptions (long positions) ( 72 ) ( 8,734 ) 152,365 Payer swaptions (short positions) - 4,113 ( 81,050 ) Interest rate caps - ( 219 ) 919 Dual digital option ( 500 ) - - Interest rate floors (long positions) - 1,785 - Interest rate floors (short positions) - ( 525 ) - TBA securities (short positions) 6,567 1,370 4,494 TBA securities (long positions) ( 230 ) ( 4,860 ) 1,200 Total $ 133,554 $ 45,237 $ 452,476 Credit Risk-Related Contingent Features The use of derivatives and other hedging instruments creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company attempts to minimize this risk by limiting its counterparties for instruments which are not centrally cleared on a registered exchange to major financial institutions with acceptable credit ratings and monitoring positions with individual counterparties. In addition, the Company may be required to pledge assets as collateral for its derivatives, whose amounts vary over time based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by a counterparty, the Company may not receive payments provided for under the terms of its derivative agreements, and may have difficulty obtaining its assets pledged as collateral for its derivatives. The cash and cash equivalents pledged as collateral for the Company's derivative instruments are included in restricted cash on its balance sheets. It is the Company's policy not to offset assets and liabilities associated with open derivative contracts. However, CME and LCH rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME or LCH serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date. NOTE 6. PLEDGED ASSETS Assets Pledged to Counterparties The table below summarizes the Company's assets pledged as collateral under our repurchase agreements and derivative agreements by type, including securities pledged related to securities sold but not yet settled, as of December 31, 2024 and 2023 . (in thousands) December 31, 2024 December 31, 2023 Repurchase Derivative Repurchase Derivative Assets Pledged to Counterparties Agreements Agreements Total Agreements Agreements Total PT RMBS - fair value $ 5,193,570 $ - $ 5,193,570 $ 3,868,624 $ - $ 3,868,624 Structured RMBS - fair value 15,498 - 15,498 16,930 - 16,930 U.S. Treasury securities - fair value - 100,551 100,551 - 79,680 79,680 Accrued interest on pledged securities 22,852 - 22,852 14,922 - 14,922 Restricted cash 22,818 2,905 25,723 - 28,396 28,396 Total $ 5,254,738 $ 103,456 $ 5,358,194 $ 3,900,476 $ 108,076 $ 4,008,552 87 Table of Contents Assets Pledged from Counterparties The table below summarizes assets pledged to the Company from counterparties under repurchase agreements and derivative agreements as of December 31, 2024 and 2023 . (in thousands) December 31, 2024 December 31, 2023 Repurchase Derivative Repurchase Derivative Assets Pledged to Orchid Agreements Agreements Total Agreements Agreements Total Cash $ 4,465 $ 4,282 $ 8,747 $ 42,179 $ - $ 42,179 U.S. Treasury securities - fair value 4,146 - 4,146 10,429 - 10,429 Total $ 8,611 $ 4,282 $ 12,893 $ 52,608 $ - $ 52,608 U.S. Treasury securities received as margin under the Company's repurchase agreements are not recorded in the balance sheets because the counterparty retains ownership of the security. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements or other liabilities in the balance sheets. NOTE 7. OFFSETTING ASSETS AND LIABILITIES The Company’s derivative agreements and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis in the case of repurchase agreements and for certain derivative agreements. CME and LCH rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME or LCH serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date. The following table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of December 31, 2024 and 2023 . (in thousands) Offsetting of Assets Net Amount Gross Amount Not Gross Gross of Assets Offset in the Balance Sheet Amount Amount Presented Financial of Offset in the in the Instruments Cash Recognized Balance Balance Received as Received as Net Assets Sheet Sheet Collateral Collateral Amount December 31, 2024 Interest rate swaps $ 4,574 $ - $ 4,574 $ - $ - $ 4,574 TBA securities 4,703 - 4,703 - ( 4,282 ) 421 $ 9,277 $ - $ 9,277 $ - $ ( 4,282 ) $ 4,995 December 31, 2023 Interest rate swaps $ 6,348 $ - $ 6,348 $ - $ - $ 6,348 Interest rate swaptions 72 - 72 - - 72 $ 6,420 $ - $ 6,420 $ - $ - $ 6,420 88 Table of Contents (in thousands) Offsetting of Liabilities Net Amount Gross Amount Not Gross Gross of Liabilities Offset in the Balance Sheet Amount Amount Presented Financial of Offset in the in the Instruments Recognized Balance Balance Posted as Cash Posted Net Liabilities Sheet Sheet Collateral Collateral Amount December 31, 2024 Repurchase Agreements $ 5,025,543 $ - $ 5,025,543 $ ( 5,002,725 ) $ ( 22,818 ) $ - TBA securities 332 - 332 - ( 280 ) 52 $ 5,025,875 $ - $ 5,025,875 $ ( 5,002,725 ) $ ( 23,098 ) $ 52 December 31, 2023 Repurchase Agreements $ 3,705,649 $ - $ 3,705,649 $ ( 3,705,649 ) $ - $ - TBA securities 12,694 - 12,694 - ( 12,694 ) - $ 3,718,343 $ - $ 3,718,343 $ ( 3,705,649 ) $ ( 12,694 ) $ - The amounts disclosed for collateral received by or posted to the same counterparty up to and not exceeding the net amount of the asset or liability presented in the balance sheets. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 6 for a discussion of collateral posted or received against or for repurchase obligations and derivative and other hedging instruments. NOTE 8. CAPITAL STOCK Common Stock Issuances During 2024 and 2023 , the Company completed the following public offerings of shares of its common stock. ($ in thousands, except per share amounts) Weighted Average Price Received Net Type of Offering Period Per Share (1) Shares Proceeds (2) 2024 At the Market Offering Program (3) First Quarter $ 8.80 1,490,075 $ 13,109 At the Market Offering Program (3) Second Quarter 8.40 11,990,383 100,698 At the Market Offering Program (3) Third Quarter 8.25 13,314,022 109,891 At the Market Offering Program (3) Fourth Quarter 7.86 4,533,067 35,630 31,327,547 $ 259,328 2023 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) Fourth Quarter - - - 15,880,039 $ 159,438 ( 1 ) Weighted average price received per share is after deducting the underwriters’ discount, if applicable, and other offering costs. ( 2 ) Net proceeds are net of the underwriters’ discount, if applicable, and other offering costs. ( 3 ) 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 . 89 Table of Contents Stock Repurchase Program On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s common stock. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 904,564 shares of the Company's common stock. Coupled with the 156,751 shares remaining from the original 400,000 share authorization, the increased authorization brought the total authorization to 1,061,315 shares, representing 10% of the then outstanding share count. On December 9, 2021, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 3,372,399 shares, bringing the remaining authorization under the stock repurchase program to 3,539,861 shares, representing approximately 10% of the Company’s then outstanding shares of common stock. On October 12, 2022, the Board of Directors approved an increase in the number of shares of the Company’s common stock available in the stock repurchase program for up to an additional 4,300,000 shares, bringing the remaining authorization under the stock repurchase program to 6,183,601 shares, representing approximately 18% of the Company’s then outstanding shares of common stock. As part of the stock repurchase program, shares may be purchased in open market transactions, block purchases, through 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. The stock repurchase program has no termination date. From the inception of the stock repurchase program through December 31, 2024 , the Company repurchased a total of 5,144,602 shares at an aggregate cost of approximately $ 77.5 million, including commissions and fees, for a weighted average price of $ 15.07 per share. During the year ended December 31, 2024 , the Company repurchased a total of 396,241 shares at an aggregate cost of approximately $ 3.3 million, including commissions and fees, for a weighted average price of $ 8.30 per share. 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. The remaining authorization under the stock repurchase program as of February 21, 2025 was 3,832,361 shares. Cash Dividends The table below presents the cash dividends declared on the Company’s common stock. (in thousands, except per share amounts) Year Per Share Amount Total 2013 $ 6.975 $ 4,662 2014 10.800 22,643 2015 9.600 38,748 2016 8.400 41,388 2017 8.400 70,717 2018 5.350 55,814 2019 4.800 54,421 2020 3.950 53,570 2021 3.900 97,601 2022 2.475 87,906 2023 1.800 81,127 2024 1.440 96,309 2025 YTD(1) 0.240 22,097 Totals $ 68.130 $ 727,003 ( 1 ) On January 8, 2025 , the Company declared a dividend of $ 0.12 per share to be paid on February 27, 2025 . On February 12, 2025 , the Company declared a dividend of $ 0.12 per share to be paid on March 28, 2025 . The effect of these dividends are included in the table above, but are not reflected in the Company’s financial statements as of December 31, 2024 . 90 Table of Contents NOTE 9. STOCK INCENTIVE PLAN In 2021, the Company’s Board of Directors adopted, and the stockholders approved, the Orchid Island Capital, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”) to replace the Orchid Island Capital, Inc. 2012 Equity Incentive Plan (the “2012 Incentive Plan” and together with the 2021 Incentive Plan, the “Incentive Plans”). The 2021 Incentive Plan provides for the award of stock options, stock appreciation rights, stock awards, PUs, other equity-based awards (and dividend equivalents with respect to awards of PUs and other equity-based awards) and incentive awards. The 2021 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors except that the Company’s full Board of Directors will administer awards made to directors who are not employees of the Company or its affiliates. The 2021 Incentive Plan provides for awards of up to an aggregate of 10 % of the issued and outstanding shares of the Company's common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate 1,473,324 shares of the Company’s common stock that may be issued under the 2021 Incentive Plan. The 2021 Incentive Plan replaces the 2012 Incentive Plan, and no further grants will be made under the 2012 Incentive Plan. However, any outstanding awards under the 2012 Incentive Plan will continue in accordance with the terms of the 2012 Incentive Plan and any award agreement executed in connection with such outstanding awards. Performance Units The Company has issued, and may in the future issue additional PUs under the Incentive Plan to certain executive officers and employees of its Manager. PUs vest after the end of a defined performance period, based on satisfaction of the performance conditions set forth in the PU agreement. When earned, each PU will be settled by the issuance of one share of the Company’s common stock, at which time the PU will be cancelled. The PUs contain dividend equivalent rights, which entitle the Participants to receive distributions declared by the Company on common stock, but do not include the right to vote the underlying shares of common stock. PUs are subject to forfeiture should the participant no longer serve as an executive officer or employee of the Company. Compensation expense for the PUs, included in incentive compensation on the statements of comprehensive income (loss), is recognized over the remaining vesting period once it becomes probable that the performance conditions will be achieved. The following table presents information related to PUs outstanding during the years ended December 31, 2024 and 2023 . ($ in thousands, except per share data) 2024 2023 Weighted Weighted Average Average Grant Date Grant Date Shares Fair Value Shares Fair Value Unvested, beginning of period 95,768 $ 12.48 36,920 $ 20.57 Granted 36,773 8.62 76,696 10.82 Forfeited (1) ( 14,365 ) 12.48 - - Vested and issued ( 37,975 ) 13.72 ( 17,848 ) 22.09 Unvested, end of period 80,201 $ 10.12 95,768 $ 12.48 Compensation expense during period $ 406 $ 590 Unrecognized compensation expense, end of period $ 329 $ 597 Intrinsic value, end of period $ 624 $ 807 Weighted-average remaining vesting term (in years) 1.1 1.2 ( 1 ) 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%. 91 Table of Contents Stock Awards The Company has issued, and may in the future issue additional, immediately vested common stock under the Incentive Plans to certain executive officers and employees of its Manager. Compensation expense for the stock awards is based on the fair value of the Company’s common stock on the grant date and is included in incentive compensation in the statements of comprehensive income (loss). The following table presents information related to fully vested common stock issued during the years ended December 31, 2024 and 2023 . All of the fully vested shares of common stock issued during the years ended December 31, 2024 and 2023 , and the related compensation expense, were granted with respect to service performed during the previous fiscal years. ($ in thousands, except per share data) 2024 2023 Fully vested shares granted 36,773 76,696 Weighted average grant date price per share $ 8.62 $ 10.82 Compensation expense related to fully vested shares of common stock awards (1) $ 317 $ 830 ( 1 ) 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 Non-employee directors receive a portion of their compensation in the form of DSU awards pursuant to the Incentive Plans. Each DSU represents a right to receive one share of the Company’s common stock. Beginning in 2022, each non-employee director could elect to receive all of his or her compensation in the form of DSUs. The DSUs are immediately vested and are settled at a future date based on the election of the individual participant. Compensation expense for the DSUs is included in directors’ fees and liability insurance in the statements of comprehensive income (loss). The DSUs contain dividend equivalent rights, which entitle the participant to receive distributions declared by the Company on common stock. These distributions will be made in the form of cash or additional DSUs at the participant’s election. The DSUs do not include the right to vote the underlying shares of common stock. The following table presents information related to the DSUs outstanding during the years ended December 31, 2024 and 2023 . ($ in thousands, except per share data) 2024 2023 Weighted Weighted Average Average Grant Date Grant Date Shares Fair Value Shares Fair Value Outstanding, beginning of period 96,704 $ 15.69 54,197 $ 20.29 Granted and vested 57,681 8.43 42,507 9.81 Outstanding, end of period 154,385 $ 12.98 96,704 $ 15.69 Compensation expense during period $ 429 $ 378 Intrinsic value, end of period $ 1,201 $ 815 NOTE 10. COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any reported or unreported contingencies at December 31, 2024 . NOTE 11. INCOME TAXES The Company will generally not be subject to U.S. federal income tax on its REIT taxable income to the extent that it distributes its REIT taxable income to its stockholders and satisfies the ongoing REIT requirements, including meeting certain asset, income and stock ownership tests. A REIT must generally distribute at least 90% of its REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gain, to its stockholders, annually to maintain REIT status. An amount equal to the sum of 85% of its REIT ordinary income and 95% of its REIT capital gain net income, plus certain undistributed income from prior taxable years, must be distributed within the taxable year in order to avoid the imposition of an excise tax. The remaining balance may be distributed up to the end of the following taxable year, provided the REIT elects to treat such amount as a prior year distribution and meets certain other requirements. 92 Table of Contents REIT taxable income (loss) is computed in accordance with the Code, which is different than the Company’s financial statement net income (loss) computed in accordance with GAAP. Book to tax differences primarily relate to the recognition of interest income on RMBS, unrealized gains and losses on RMBS, and the amortization of losses on derivative instruments that are treated as hedges for tax purposes. As of December 31, 2024 , we had distributed all of our estimated REIT taxable income through fiscal year 2024 . Accordingly, no income tax provision was recorded for 2024 , 2023 and 2022 . NOTE 12. EARNINGS PER SHARE (EPS) The Company had dividend eligible PUs and DSUs that were outstanding during the years ended December 31, 2024, 2023 and 2022 . The basic and diluted per share computations include these unvested PUs and DSUs if there is income available to common stock, as they have dividend participation rights. The unvested PUs and DSUs have no contractual obligation to share in losses. Because there is no such obligation, the unvested PUs and DSUs are not included in the basic and diluted EPS computations when no income is available to common stock even though they are considered participating securities. The table below reconciles the numerator and denominator of EPS for the years ended December 31, 2024, 2023 and 2022 . (in thousands, except per-share information) 2024 2023 2022 Numerator for basic and diluted EPS per share of common stock: Net income (loss) - Basic and diluted $ 37,662 $ ( 39,226 ) $ ( 258,453 ) Weighted average shares of common stock: Shares of common stock outstanding at the balance sheet date 82,622 51,636 36,765 Unvested dividend eligible share based compensation outstanding at the balance sheet date 235 - - Effect of weighting ( 17,408 ) ( 6,987 ) 700 Weighted average shares-basic and diluted 65,449 44,649 37,465 Net income (loss) per common share: Basic and diluted $ 0.57 $ ( 0.89 ) $ ( 6.90 ) Anti-dilutive incentive shares not included in calculation. - 192 91 NOTE 13. FAIR VALUE The framework for using fair value to measure assets and liabilities defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price). 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 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), ● Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and ● Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. 93 Table of Contents The Company's RMBS and TBA securities are Level 2 valuations, and such valuations are determined by the Company 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. The Company and the independent pricing sources use various valuation techniques to determine the price of the Company’s securities. These techniques include observing the most recent market for like or identical assets (including security coupon, maturity, yield, and prepayment speeds), spread pricing techniques to determine market credit spreads (option adjusted spread, zero volatility spread, spread to the U.S. Treasury curve or spread to a benchmark such as a TBA), and model driven approaches (the discounted cash flow method, Black Scholes and SABR models which rely upon observable market rates such as the term structure of interest rates and volatility). The appropriate spread pricing method used is based on market convention. The pricing source determines the spread of recently observed trade activity or observable markets for assets similar to those being priced. The spread is then adjusted based on variances in certain characteristics between the market observation and the asset being priced. Those characteristics include: type of asset, the expected life of the asset, the stability and predictability of the expected future cash flows of the asset, whether the coupon of the asset is fixed or adjustable, the guarantor of the security if applicable, the coupon, the maturity, the issuer, size of the underlying loans, year in which the underlying loans were originated, loan to value ratio, state in which the underlying loans reside, credit score of the underlying borrowers and other variables if appropriate. The fair value of the security is determined by using the adjusted spread. The Company’s U.S. Treasury securities are based on quoted prices for identical instruments in active markets and are classified as Level 1 assets. The Company’s futures contracts are Level 1 valuations, as they are exchange-traded instruments and quoted market prices are readily available. Futures contracts are settled daily. The Company’s interest rate swaps and interest rate swaptions are Level 2 valuations. The fair value of interest rate swaps is determined using a discounted cash flow approach using forward market interest rates and discount rates, which are observable inputs. The fair value of interest rate swaptions is determined using an option pricing model. RMBS, U.S. 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. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets. The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying values due to the short-term nature of these financial instruments as of December 31, 2024 and 2023 . The Company estimates the fair value of the cash and cash equivalents using Level 1 inputs, and the accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities using Level 2 inputs. The following table presents financial assets (liabilities) measured at fair value on a recurring basis as of December 31, 2024 and 2023 . Derivative contracts are reported as a net position by contract type, and not based on master netting arrangements. (in thousands) Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) December 31, 2024 Mortgage-backed securities $ - $ 5,253,310 $ - U.S. Treasury securities 100,551 - - Interest rate swaps - 4,574 - TBA securities - 4,371 - December 31, 2023 Mortgage-backed securities $ - $ 3,894,012 $ - U.S. Treasury securities 148,820 - - Interest rate swaps - 6,348 - Interest rate swaptions - 72 - TBA securities - ( 12,694 ) - 94 Table of Contents During the years ended December 31, 2024 and 2023 , there were no transfers of financial assets or liabilities between levels 1, 2 or 3. NOTE 14. RELATED PARTY TRANSACTIONS Management Agreement The Company is externally managed and advised by the Manager pursuant to the terms of a management agreement. The management agreement has been renewed through February 20, 2026 and provides for automatic one -year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company. The Manager receives a monthly management fee in the amount of: ● One- twelfth of 1.5% of the first $250 million of the Company’s month-end equity, as defined in the management agreement, ● One- twelfth of 1.25% of the Company’s month-end equity that is greater than $250 million and less than or equal to $500 million, and ● One- twelfth of 1.00% of the Company’s month-end equity that is greater than $500 million. On April 1, 2022, pursuant to the third amendment to the management agreement entered into on November 16, 2021, the Manager began providing certain repurchase agreement trading, clearing and administrative services to the Company that had been previously provided by AVM, L.P. under an agreement terminated on March 31, 2022. 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 ● A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month. The Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the Manager the Company’s pro rata portion of certain overhead costs set forth in the management agreement. Should the Company terminate the management agreement without cause, it will pay the Manager a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the term of the agreement. Total expenses recorded for the management fee, allocated overhead and repurchase agreement trading, clearing and administrative services were approximately $ 12.8 million, $ 13.6 million and $ 13.0 million, for the years ended December 31, 2024 , 2023 and 2022 , respectively. Other Relationships with 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. George H. 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. NOTE 15. 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. 95 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We had no disagreements with our Independent Registered Public Accounting Firm on any matter of accounting principles or practices or financial statement disclosure.