What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-30 compared with 2020-07-31 · 1164 added, 362 removed, 317 unchanged (83% of the section changed)

3 unchanged sentences

($ in thousands, except per share data)

June 30, 2020

September 30, 2020

December 31, 2019

1 unchanged sentence

Pledged to counterparties

Total mortgage-backed securities

Total mortgage

-backed securities

Cash and cash equivalents

2 unchanged sentences

Derivative assets, at fair value

Receivable for securities sold, pledged to counterparties

Reverse repurchase agreements

LIABILITIES AND STOCKHOLDERS' EQUITY

Repurchase agreements

Payable for unsettled securities purchased

Dividends payable

2 unchanged sentences

Due to affiliates

Obligation to return securities borrowed under reverse repurchase agreements, at fair value

Other liabilities

2 unchanged sentences

STOCKHOLDERS' EQUITY:

Preferred stock, $ 0.01 par value;

Preferred stock, $

shares authorized;

no shares issued

and outstanding as of June 30, 2020 and December 31, 2019

Common Stock, $ 0.01 par value;

and outstanding as of September 30, 2020 and December 31, 2019

Common Stock, $

shares authorized,

shares issued and outstanding as of June 30, 2020 and 63,061,781 shares issued

shares issued and outstanding as of September 30, 2020 and

shares issued

and outstanding as of December 31, 2019

2 unchanged sentences

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

Total Liabilities

and Stockholders' Equity

See Notes to Financial Statements

ORCHID ISLAND CAPITAL, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the Six and Three Months Ended June 30, 2020 and 2019

CONDENSED STATEMENTS

OF OPERATIONS

For the Nine and Three Months Ended September 30, 2020

($ in thousands, except per share data)

Six Months Ended June 30,

Three Months Ended June 30,

Nine Months Ended September 30,

Three Months Ended September 30,

Interest income

2 unchanged sentences

Realized (losses) gains on mortgage-backed securities

Unrealized gains on mortgage-backed securities

Losses on derivative and other hedging instruments

Unrealized gains (losses) on mortgage-backed securities

(Losses) gains on derivative and other hedging instruments

Net portfolio (loss) income

14 unchanged sentences

ORCHID ISLAND CAPITAL, INC.

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY

For the Six and Three Months Ended June 30, 2020 and 2019

CONDENSED STATEMENTS

OF STOCKHOLDERS' EQUITY

For the Nine and Three Months Ended September 30, 2020

(in thousands)

13 unchanged sentences

Balances, June 30, 2019

Cash dividends declared

Issuance of common stock pursuant to public offerings, net

Issuance of common stock pursuant to stock based

compensation plan

Amortization of stock based compensation

Balances, September 30, 2019

Balances, January 1, 2020

11 unchanged sentences

Balances, June 30, 2020

Cash dividends declared

Issuance of common stock pursuant to public offerings, net

Issuance of common stock pursuant to stock based

compensation plan

Amortization of stock based compensation

Balances, September 30, 2020

See Notes to Financial Statements

ORCHID ISLAND CAPITAL, INC.

CONDENSED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2020 and 2019

CONDENSED STATEMENTS

OF CASH FLOWS

For the Nine Months Ended September 30, 2020 and 2019

($ in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

CASH FLOWS FROM OPERATING

Net (loss) income

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

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

Stock based compensation

10 unchanged sentences

Due from affiliates

NET CASH PROVIDED BY OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Principal repayments

Proceeds from U.S.

Payments from U.S.

Treasury securities

Proceeds on U.S.

Treasury securities

Net payments on reverse repurchase agreements

11 unchanged sentences

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, beginning of the period

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, end of the period

SUPPLEMENTAL DISCLOSURE OF

CASH FLOW INFORMATION:

Cash paid during the period for:

SUPPLEMENTAL DISCLOSURE OF

NONCASH INVESTING ACTIVITIES:

Securities acquired settled in later period

Securities sold settled in later period

See Notes to Financial Statements

ORCHID ISLAND CAPITAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2020

ORCHID ISLAND

CAPITAL, INC.

NOTES TO CONDENSED

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 February 20, 2013, Orchid was a wholly owned subsidiary of Bimini Capital Management, Inc.

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 August 2, 2017, Orchid entered into an equity distribution agreement (the “August 2017 Equity Distribution Agreement”) with two sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $ 125,000,000 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 15,123,178 shares under the August 2017 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 125.0 million, and net proceeds of approximately $ 123.1 million, net of commissions and fees, prior to its termination in July 2019.

On July 30, 2019, Orchid entered into an underwriting agreement (the “Underwriting Agreement”) with Morgan Stanley & Co.

LLC, Citigroup Global Markets Inc.

Morgan Securities LLC, as representatives of the underwriters named therein, relating to the offer and sale of 7,000,000 shares of the Company’s common stock at a price to the public of $6.55 per share.

The underwriters purchased the shares pursuant to the Underwriting Agreement at a price of $ 6.3535 per share.

The closing of the offering of 7,000,000 shares of common stock occurred on August 2, 2019, with net proceeds to the Company of approximately $ 44.2 million after deduction of underwriting discounts and commissions and other estimated offering expenses.

On January 23, 2020, Orchid entered into an equity distribution agreement (the “January 2020 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 $ 200,000,000 of shares of the Company’s common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.

Through June 30, 2020, the Company issued a total of 3,170,727 shares under the January 2020 Equity Distribution Agreement for aggregate gross proceeds of approximately $ 19.8 million, and net proceeds of approximately $ 19.4 million, net of commissions and fees.

COVID-19 Impact

Beginning in mid-March 2020, the global pandemic associated with the novel coronavirus COVID-19 (“COVID-19”) and related economic conditions began to impact our financial position and results of operations.

As a result of the economic, health and market turmoil brought about by COVID-19, the Agency RMBS market experienced severe dislocations.

This resulted in falling prices of our assets and increased margin calls from our repurchase agreement lenders.

Further, as interest rates declined, we faced additional margin calls related to our various hedge positions.

Orchid Island

Capital, Inc.

the “Company”),

was incorporated

of residential

mortgage-backed

From incorporation

a wholly owned

of Bimini Capital

date of commencement

of operations).

From incorporation

through November

Orchid’s only

was the issuance

of common stock

On August 2, 2017, Orchid entered into an equity distribution agreement (the “August 2017

Equity Distribution Agreement”) with

two sales agents pursuant to which the Company could offer and sell, from time to time, up

to an aggregate amount of $

shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately

transactions.

The Company issued a total of

shares under the August 2017 Equity Distribution Agreement for aggregate

gross proceeds of approximately $

million, and net proceeds of approximately $

million, net of commissions and fees, prior

to its termination in July 2019.

On July 30, 2019, Orchid entered into an underwriting agreement (the “Underwriting

Agreement”) with Morgan Stanley & Co.

Citigroup Global Markets Inc.

Morgan Securities LLC, as representatives of the underwriters named therein, relating to the

offer and sale of

shares of the Company’s common stock at a price to the public of $

The underwriters

purchased the shares pursuant to the Underwriting Agreement at a price of $

The closing of the offering of

shares of common stock occurred on August 2, 2019, with net proceeds to the Company of

approximately $

million after deduction

of underwriting discounts and commissions and other estimated offering expenses.

On January 23, 2020, Orchid entered into an equity distribution agreement (the

“January 2020 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 $

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

shares under the January 2020 Equity Distribution Agreement for

gross proceeds of

approximately $

million, and net proceeds of approximately $

million, net of commissions and fees, prior to

its termination in August 2020.

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 may offer and sell, from time to time, up to

an aggregate amount of $

shares of the Company’s common stock in transactions that are deemed to be “at the market”

offerings and privately negotiated

transactions.

Through September 30, 2020, the Company issued a total of

shares under the August 2020 Equity Distribution

Agreement for aggregate gross proceeds of

approximately $

million, and net proceeds of approximately $

million, net of

commissions and fees.

Beginning in mid-March 2020, the global pandemic associated with the novel

coronavirus COVID-19 (“COVID-19”) and related

economic conditions began to impact our financial position and results of operations.

As a result of the economic, health and market

turmoil brought about by COVID-19, the Agency RMBS market experienced

severe dislocations.

This resulted in falling prices of our

assets and increased margin calls from our repurchase agreement lenders.

Further, as interest rates declined, we faced additional

margin calls related to our various hedge positions.

In order to maintain sufficient cash and liquidity, reduce risk and satisfy margin

calls, we were forced to sell assets at levels significantly below their carrying values and closed several hedge positions.

The Agency RMBS market largely stabilized after the Federal Reserve announced on March 23, 2020 that it would purchase Agency RMBS and U.S.

calls, we were forced to sell assets at levels significantly below their carrying values and

closed several hedge positions.

RMBS market largely stabilized after the Federal Reserve announced on March 23,

2020 that it would purchase Agency RMBS and

Treasuries in the amounts needed to support smooth market functioning.

As of June 30, 2020, we had timely satisfied all margin calls.

The following summarizes the impact COVID-19 has had on our financial position and results of operations through June 30, 2020.

We sold approximately $ 2.0 billion of RMBS during the six months ended June 30, 2020, realizing losses of approximately $ 25.0 million.

Approximately $ 1.1 billion of these sales were executed on March 19th and March 20th and resulted in losses of approximately $ 31.4 million.

The losses sustained on these two days were a direct result of the adverse RMBS market conditions associated with COVID-19.

We terminated interest rate swap positions with an aggregate notional value of $ 1.2 billion and incurred approximately $ 54.5 million in mark to market losses on the positions through the date of the respective terminations.

Approximately $ 45.0 million of these losses occurred during the three months ended March 31, 2020.

Our RMBS portfolio had a fair market value of approximately $ 3.3 billion as of June 30, 2020, compared to $ 3.6 billion as of December 31, 2019.

The June 30, 2020 balance represents an increase from the $ 2.9 billion balance as of March 31, 2020.

Our outstanding balances under our repurchase agreement borrowings as of June 30, 2020 were approximately $ 3.2 billion, compared to $ 3.4 billion as of December 31, 2019 and $ 2.8 billion as of March 31, 2020.

Our stockholders’ equity was $ 346.0 million as of June 30, 2020, compared to $ 395.5 million as of December 31, 2019 and $ 308.1 million as of March 31, 2020.

In response to the Shelter in Place order issued in Florida, our Manager (as defined below) has invoked its Disaster Recovery Plan and its employees are working remotely.

Prior planning resulted in the successful implementation of this plan and key operational team members maintain daily communication.

Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may continue to have adverse effects on the Company’s results of future operations, financial position, and liquidity in fiscal year 2020 and beyond.

In addition, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which has provided billions of dollars of relief to individuals, businesses, state and local governments, and the health care system suffering the impact of the pandemic, including mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments.

The Company has evaluated the provisions of the CARES Act and has determined that it will not have a material effect on the Company’s business, results of operations and financial condition.

The Federal Housing Financing Agency (the “FHFA”) has instructed the GSEs on how they will handle servicer advances for loans that back Agency RMBS that enter into forbearance, which should limit prepayments during the forbearance period that could have resulted otherwise.

There can be no assurance as to how, in the long term, these and other actions by the U.S.

government will affect the efficiency, liquidity and stability of the financial and mortgage markets.

To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may continue to be materially adversely affected.

Basis of Presentation and Use of Estimates

The accompanying unaudited financial statements have been prepared in accordance with accounting

principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the six and three month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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 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 June 30, 2020;

however, uncertainty over the ultimate impact that COVID-19 will have on the global economy generally, and on Orchid’s business in particular, makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

As of September 30, 2020, we had

timely satisfied all

margin calls.

The following summarizes the impact COVID-19 has had on our

financial position and results of operations through

September 30, 2020.

We sold approximately $

billion of RMBS during the nine months ended September 30, 2020, realizing losses

of approximately

Approximately $

billion of these sales were executed on March 19th and March 20th and

resulted in losses of

approximately $

The losses sustained on these two days were a direct result of the adverse

RMBS market conditions

associated with COVID-19.

We terminated interest rate swap positions with an aggregate notional value of $

billion and incurred approximately $

million in mark to market losses on the positions through the date of the respective

terminations.

Approximately $

these losses occurred during the three months ended March 31, 2020.

Our RMBS portfolio had a fair market value of approximately $

billion as of September 30, 2020, compared to $

billion as of

December 31, 2019.

The September 30, 2020 balance represents an increase

billion balance as of June 30, 2020

billion balance as of March 31, 2020.

Our outstanding balances under our repurchase agreement borrowings as of September

30, 2020 were approximately $

compared to $

billion as of December 31, 2019, $

billion as of March 31, 2020 and $

billion as of June 30, 2020.

Our stockholders’ equity was $

million as of September 30, 2020, compared to $

million as of December 31, 2019,

million as of March 31, 2020 and $

million as of June 30, 2020.

In response to the Shelter in Place order issued in Florida in March 2020, our

Manager (as defined below) invoked its Disaster

Recovery Plan and its employees are working remotely.

Prior planning resulted in the successful implementation of this plan

operational team members maintain daily communication.

Although the Company cannot estimate the length or gravity of the impact

of the COVID-19 outbreak at this time, if the pandemic

continues, it may continue to have adverse effects on the Company’s results of future operations,

financial position, and liquidity in

fiscal year 2020 and beyond.

In addition, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES)

Act, which has provided

billions of dollars of relief to individuals, businesses, state and local governments,

and the health care system suffering the impact of

the pandemic, including mortgage loan forbearance and modification programs

to qualifying borrowers who may have difficulty making

their loan payments.

The Company has evaluated the provisions of the CARES

Act and has determined that it will not have a material

effect on the Company’s business, results of operations and financial condition.

The Federal Housing

Financing Agency (the “FHFA”)

has instructed the GSEs on how they will handle servicer advances for loans that

back Agency RMBS that enter into forbearance,

which should limit prepayments during the forbearance period that could have resulted

There can be no assurance as to

how, in the long term, these and other actions by the U.S.

government will affect the efficiency, liquidity and stability of the financial and

mortgage markets.

To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do

not function as intended, our business, results of operations and financial condition may

continue to be materially adversely affected.

The accompanying

with accounting

in the United

States (“GAAP”)

financial information

8 of Regulation

Accordingly, they

do not include

and footnotes

complete financial

In the opinion

all adjustments

not necessarily

of the results

the year ending

sheet at December

from the audited

financial statements

of the information

and footnotes

complete financial

and footnotes

thereto included

in the Company’s

Annual Report

ended December

The preparation

in conformity

requires management

to make estimates

and assumptions

and disclosure

of contingent

of the financial

expenses during

the reporting

results could

those estimates.

affecting the

values of RMBS

and derivatives.

the estimates

and assumptions

the financial

are reasonable

over the ultimate

economy generally,

and on Orchid’s

particular, makes

any estimates

and assumptions

as of September

30, 2020 inherently

would be absent

and potential

Variable Interest Entities (“VIEs”)

We obtain interests in VIEs through our investments in mortgage-backed securities.

Our interests in these VIEs are passive in nature and are not expected to result in us obtaining a controlling financial interest in these VIEs in the future.

As a result, we do not consolidate these VIEs and we account for our interest in these VIEs as mortgage-backed securities.

See Note 2 for additional information regarding our investments in mortgage-backed securities.

Our maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities.

Our interests in these VIEs are passive in

nature and are not expected to result in us obtaining a controlling financial interest in

these VIEs in the future.

As a result, we do not

consolidate these VIEs and we account for our interest in these VIEs as mortgage-backed

See Note 2 for additional

information regarding our investments in mortgage-backed securities.

Our maximum exposure to loss for these VIEs is the carrying

value of the mortgage-backed securities.

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.

Cash and cash

with financial

liquid investments

with original

cash includes

as collateral

for repurchase

other derivative

The following

table provides

a reconciliation

of cash, cash

and restricted

cash reported

position that

same such amounts

the statement

of cash flows.

(in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

1 unchanged sentence

Restricted cash

Total cash, cash equivalents and restricted cash

The Company maintains cash balances at three banks and excess margin on account with two exchange

Total cash, cash equivalents

and restricted cash

maintains cash

clearing members.

At times, balances may exceed federally insured limits.

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.

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

The Company invests primarily in mortgage pass-through (“PT”) residential mortgage backed certificates issued by Freddie Mac, Fannie Mae or Ginnie Mae (“RMBS”), collateralized mortgage obligations (“CMOs”), interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of RMBS.

exceed federally

insured limits.

has not experienced

these balances.

Deposit Insurance

insures eligible

per depositor

at each financial

customer accounts

that are segregated

from the general

counterparty.

Company limits

banks and exchange

clearing members

any significant

cash equivalents

or restricted

cash balances.

Mortgage-Backed

invests primarily

(“PT”) residential

mortgage backed

issued by Freddie

or Ginnie Mae

collateralized

mortgage obligations

interest-only

(“IO”) securities

interest-only

(“IIO”) securities

representing interest in or obligations backed by pools of RMBS.

We refer to RMBS and CMOs as PT RMBS.

We refer to IO and IIO securities as structured RMBS.

The Company has elected to account for its investment in RMBS under the fair value option.

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

The Company records RMBS transactions on the trade date.

Security purchases that have not settled as of the balance sheet date are included in the RMBS balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the RMBS 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.

Income on PT RMBS securities 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 operations.

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.

Changes in fair value of RMBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying statements of operations.

to IO and IIO securities as structured RMBS.

The Company has elected to account for its

investment in RMBS under the fair value

Electing the fair value option requires the Company to record changes in

fair value in the statement of operations, which, in

management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with the

underlying economics and how the portfolio is managed.

purchases that

of the balance

an offsetting

liability recorded,

whereas securities

have not settled

balance sheet

date are removed

from the RMBS

an offsetting

receivable recorded.

asset or paid

the liability

in an orderly

between market

at the measurement

The fair value

the transaction

liability either

the principal

liability, or in

of a principal

market, occurs

on independent

pricing sources

broker quotes,

when available.

RMBS securities

interest rate

of the security.

discounts present

not amortized.

resulting from

monthly principal

are reflected

in unrealized

gains (losses)

the statements

of operations.

For IO securities,

carrying value

effective yield.

The difference

between income

is characterized

of investment

carrying value.

At each reporting

effective yield

prospectively

of prepayments

and the contractual

effective yield

the index value

to the security.

of RMBS during

gains or losses

on mortgage-backed

in the accompanying

of operations.

Derivative and Other Hedging 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 Treasury Note (“T-Note”), 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”) and “to-be-announced” (“TBA”) securities transactions, but the Company may enter

into other derivative 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 operations.

Derivative instruments are carried at fair value, and changes in fair value are recorded in earnings 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.

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 addition, the Company may be required to post collateral based on any declines in the market value of the derivatives.

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.

To mitigate this risk, the Company uses only well-established commercial banks and exchanges as counterparties.

uses derivative

hedging instruments

interest rate

risk, facilitate

asset/liability

principal instruments

that the Company

Treasury Note

Fed Funds and

futures contracts,

short positions

interest rate

enter in interest

rate swaptions”)

and “to-be-announced”

(“TBA”) securities

transactions,

but the Company

in the future.

TBA securities

as derivative

Gains and losses

in gain (loss)

on derivative

in the accompanying

of operations.

at fair value,

in fair value

for each period.

The Company’s

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, Eurodollar, Fed Funds and T-Note futures contracts, interest rate swaps, interest rate swaptions 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 12 of the financial statements.

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 as of June 30, 2020 and December 31, 2019 due to the short-term nature of these financial instruments.

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.

Reverse Repurchase Agreements and Obligations to Return Securities Borrowed under Reverse Repurchase Agreements

The Company borrows securities to cover short sales of U.S.

Treasury securities through reverse repurchase transactions under our master repurchase agreements.

We account for these as securities borrowing transactions and recognize an obligation to return the borrowed securities at fair value on the balance sheet based on the value of the underlying borrowed securities as of the reporting date.

The securities received as collateral in connection with our reverse repurchase agreements mitigate our credit risk exposure to counterparties.

Our reverse repurchase agreements typically have maturities of 30 days or less.

are not designated

as hedge accounting

relationships,

economic hedges

Holding derivatives

creates exposure

to the potential

of counterparties

and exchanges

may be required

to post collateral

in the market

by a counterparty,

may have difficulty

its collateral

payments provided

of the agreement.

To mitigate this risk,

uses only well-established

and exchanges

as counterparties.

The fair value

it is practicable

the financial

futures contracts,

interest rate

swaps, interest

and TBA securities

are accounted

balance sheets.

and assumptions

used to estimate

value for these

are presented

of the financial

The estimated

cash equivalents,

cash, accrued

interest receivable,

for securities

other assets,

due to affiliates,

unsettled securities

accrued interest

generally approximates

their carrying

the short-term

these financial

of the majority

use of repurchase

are accounted

for as collateralized

transactions,

amounts, including

accrued interest,

in the respective

Reverse Repurchase

and Obligations

to Return Securities

Borrowed under

Reverse Repurchase

to cover short

sales of U.S.

Treasury securities

through reverse

master repurchase

We account for

these as securities

and recognize

an obligation

to return the

at fair value

on the balance

of the underlying

The securities

in connection

with our reverse

counterparties.

have maturities

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 13 for the terms of the management agreement.

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 or subscribed 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.

Orchid has qualified and elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).

REITs are generally not subject to federal income tax on their REIT taxable income provided that they distribute to their stockholders at least 90% of their REIT taxable income on an annual basis.

In addition, a REIT must meet other provisions 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

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326):

is externally

Bimini Advisors,

limited liability

The Company’s

Manager provides

fee and reimbursement

expenses, which

the management

Basic earnings

as net income

or loss attributable

to common stockholders

average number

of common stock

or subscribed

EPS is calculated

using the treasury

stock or two-class

stock equivalents,

are not included

if the result

is anti-dilutive.

Orchid has qualified and elected to be taxed as a real estate investment trust (“REIT”) under

the Internal Revenue Code of 1986,

as amended (the “Code”).

REITs are generally not subject to federal income tax on their REIT taxable income provided that they

distribute to their stockholders at least 90% of their REIT taxable income on an annual

In addition, a REIT must meet other

provisions 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

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

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13,

Financial Instruments – Credit Losses (Topic

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model).

The Company’s adoption of this ASU did not have a material effect on its financial statements as its financial assets were already measured at fair value through earnings.

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.

The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements.

ASU 2016-13 requires credit losses on most financial assets measured

at amortized cost and certain other instruments to be measured using an expected credit

loss model (referred to as the current

expected credit loss model).

The Company’s adoption of this ASU did not have a material effect on its financial

statements as its

financial assets were already measured at fair value through earnings.

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.

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.

The Company does not

believe the adoption of this ASU will have a material impact on its consolidated financial

MORTGAGE-BACKED SECURITIES

The following table presents the Company’s RMBS portfolio as of June 30, 2020 and December 31, 2019:

The following

table presents

the Company’s

RMBS portfolio

as of September

(in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

3 unchanged sentences

Fixed-rate CMOs

Total Pass-Through Certificates

Total Pass-Through

Structured RMBS Certificates:

1 unchanged sentence

Inverse Interest-Only Securities

Total Structured RMBS Certificates

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

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 June 30, 2020, the Company had met all margin call requirements.

As of June 30, 2020 and December 31, 2019, the Company’s repurchase agreements had remaining maturities as summarized below:

Total Structured

RMBS Certificates

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE

pledges certain

as collateral

under repurchase

with financial

institutions.

Interest rates

generally fixed

based on prevailing

rates corresponding

of the borrowings,

pledged securities

typically require

to post additional

down borrowings

to re-establish

requirements,

calls." Similarly,

release collateral

As of September

requirements.

As of September

Company’s repurchase

had remaining

as summarized

($ in thousands)

June 30, 2020

September 30, 2020

Fair market value of securities pledged, including

9 unchanged sentences

Net weighted average borrowing rate

In addition, cash pledged to counterparties for repurchase agreements was approximately $35.6 million and $65.9 million as of June 30, 2020 and December 31, 2019, respectively.

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 June 30, 2020, 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 $164.2 million.

The Company did not have an amount at risk with any individual counterparty greater than 10% of the Company’s equity at June 30, 2020 and December 31, 2019.

Reverse Repurchase Agreements

As of June 30, 2020, the Company had $ 139.7 million of reverse repurchase agreements outstanding used primarily to borrow securities to cover short sales of U.S.

Treasury securities, for which we had associated obligations to return borrowed securities at fair value of $ 139.8 million.

The Company had no reverse repurchase agreements outstanding as of December 31, 2019.

In addition, cash pledged to counterparties for repurchase agreements was approximately

million as of

September 30, 2020 and December 31, 2019, respectively.

a lender files

for bankruptcy,

might experience

difficulty recovering

pledged assets,

claim against

for the difference

amount loaned

to the Company

plus interest

including the accrued interest receivable

and cash posted by the Company as collateral.

had an aggregate

risk (the difference

amount loaned

to the Company,

including interest

the counterparty

value of securities

and cash pledged

including accrued

such securities)

counterparties

of approximately

any individual

Company’s equity

DERIVATIVE AND OTHER HEDGING INSTRUMENTS

Derivative and Other Hedging Instruments Assets (Liabilities), at Fair Value

The table below summarizes fair value information about our derivative and other hedging instruments assets and liabilities as of June 30, 2020 and December 31, 2019.

and Other Hedging

Assets (Liabilities),

at Fair Value

below summarizes

hedging instruments

(in thousands)

1 unchanged sentence

Balance Sheet Location

June 30, 2020

September 30, 2020

December 31, 2019

3 unchanged sentences

Derivative assets, at fair value

Total derivative assets, at fair value

Total derivative

assets, at fair value

Interest rate swaps

4 unchanged sentences

Derivative liabilities, at fair value

Treasury securities - short

Obligation to return securities borrowed

Total derivative liabilities, at fair value

Total derivative

liabilities, at fair value

Margin Balances Posted to (from) Counterparties

3 unchanged sentences

Restricted cash

TBA securities

Other liabilities

Interest rate swaption contracts

Restricted cash

Other liabilities

Interest rate swap contracts

Restricted cash

Total margin balances on derivative contracts

Eurodollar, Fed Funds and T-Note 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.

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 Eurodollar and T-Note futures positions at June 30, 2020 and December 31, 2019.

balances on derivative contracts

Eurodollar, Fed

T-Note futures

are cash settled

futures contracts

on an interest

gains and losses

the Company’s

cash accounts

minimum balance,

to be maintained

in the account

a daily basis.

below present

the Company’s

and T-Note futures

September 30,

2020 and December

($ in thousands)

June 30, 2020

September 30, 2020

Expiration Year

Eurodollar Futures Contracts (Short Positions)

Total / Weighted Average

Treasury Note Futures Contracts (Short Position) (2)

September 2020 5-year T-Note futures

(Sep 2020 - Sep 2025 Hedge Period)

Weighted Average

Treasury Note Futures Contracts (Short

December 2020 5-year T-Note futures

(Dec 2020 - Dec 2025 Hedge Period)

($ in thousands)

2 unchanged sentences

Eurodollar Futures Contracts (Short Positions)

Total / Weighted Average

Treasury Note Futures Contracts (Short Position) (2)

Weighted Average

Treasury Note Futures Contracts (Short

March 2020 5 year T-Note futures

(Mar 2020 - Mar 2025 Hedge Period)

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

T-Note futures contracts were valued at a price of $ 125.74 at June 30, 2020 and $ 118.61 at December 31, 2019.

The notional contract values of the short positions were $ 86.8 million and $ 81.8 million at June 30, 2020 and December 31, 2019, respectively.

Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate based on the LIBOR ("payer swaps").

The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics of our repurchase agreements and cash flows on such liabilities.

We are typically required to post collateral on our interest rate swap agreements.

The table below presents information related to the Company’s interest rate swap positions at June 30, 2020 and December 31, 2019.

Open equity represents the cumulative gains (losses) recorded on open

futures positions from inception.

T-Note futures contracts were valued

at a price of $

at September 30, 2020 and $

at December 31, 2019.

The contract values of

the short positions were $

million and $

million at September 30, 2020 and December 31, 2019, respectively.

interest rate

swap agreements,

rate and receive

floating rate

swap agreements

has the effect

of offsetting

the repricing

characteristics

of our repurchase

and cash flows

on such liabilities.

We are typically

post collateral

on our interest

below presents

the Company’s

interest rate

swap positions

($ in thousands)

June 30, 2020

September 30, 2020

Expiration > 3 to ≤ 5 years

3 unchanged sentences

Expiration > 3 to ≤ 5 years

The table below presents information related to the Company’s interest rate swaption positions at June 30,2020.

There were no open swaption positions at December 31, 2019.

below presents

the Company’s

interest rate

swaption positions

open swaption

($ in thousands)

Underlying Swap

June 30, 2020

September 30, 2020

Payer Swaptions - long

1 unchanged sentence

Payer Swaptions - short

The following table summarizes our contracts to purchase and sell TBA securities as of June 30, 2020 and December 31, 2019 .

The following table

summarizes our contracts

to purchase and

sell TBA securities

as of September

($ in thousands)

Long (Short) (1)

June 30, 2020

September 30, 2020

15-Year TBA securities:

30-Year TBA securities:

December 31, 2019

30-Year TBA securities:

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

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

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

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

The following table summarizes our U.S.

Treasury short positions as of June 30, 2020.

There were no U.S.

Treasury short positions as of December 31, 2019.

($ in thousands)

Notional amount represents the par value (or principal balance) of the

underlying Agency RMBS.

Cost basis represents the forward price to be paid (received) for the

underlying Agency RMBS.

Market value represents the current market value of the TBA securities

(or of the underlying Agency RMBS) as of period-end.

Net carrying value represents the difference between the market

value and the cost basis of the TBA securities as of period-end

and is reported

in derivative assets (liabilities) at fair value in our balance sheets.

Gain (Loss) From Derivative and Other Hedging Instruments, Net

The table below presents the effect of the Company’s derivative financial instruments on the statements of operations for the six and three months ended June 30, 2020 and 2019.

The table below presents the effect of the Company’s derivative financial instruments on the statements of operations

for the nine and three months ended September 30, 2020 and 2019.

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

Nine Months Ended September 30,

Three Months Ended September 30,

Eurodollar futures contracts (short positions)

T-Note futures contracts (short position)

Fed Funds futures contracts (short positions)

Interest rate swaps

4 unchanged sentences

Credit Risk-Related Contingent Features

The use of derivatives 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.

We minimize this risk by limiting our 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, we may be required to pledge assets as collateral for our 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, we may not receive payments provided for under the terms of our derivative agreements, and may have difficulty obtaining our assets pledged as collateral for our derivatives.

The cash and cash equivalents pledged as collateral for our derivative instruments are included in restricted cash on our balance sheets.

It is the Company's policy not to offset assets and liabilities associated with open derivative contracts.

However, the Chicago Mercantile Exchange (“CME”) 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 serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date.

The use of derivatives 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.

We minimize this risk by

limiting our 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, we may be

required to pledge assets as collateral for our 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,

receive payments provided for under the terms of our derivative agreements, and may have difficulty obtaining our assets

pledged as collateral for our derivatives.

The cash and cash equivalents pledged as collateral for our derivative instruments

are included in restricted cash on our balance sheets.

It is the Company's policy not to offset assets and liabilities

associated with open derivative contracts.

However, the Chicago Mercantile Exchange (“CME”) 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 serves as the central clearing party are presented

as if these derivatives had been settled as of the reporting date.

PLEDGED ASSETS

Assets Pledged to Counterparties

The table below summarizes our 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 June 30, 2020 and December 31, 2019.

Assets Pledged

to Counterparties

below summarizes

and derivative

including securities

pledged related

to securities

as of September

(in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

Restricted cash

Assets Pledged from Counterparties

The table below summarizes our assets pledged to us from counterparties under our repurchase agreements, reverse repurchase agreements and derivative agreements as of June 30, 2020 and December 31, 2019.

Assets Pledged

from Counterparties

below summarizes

us from counterparties

reverse repurchase

and derivative

as of September

(in thousands)

Assets Pledged to Orchid

June 30, 2020

September 30, 2020

Treasury securities - fair value

December 31, 2019

RMBS and U.S.

Treasury securities received as margin under our repurchase agreements are not recorded in the balance sheets because the counterparty retains ownership of the security.

Treasury securities received from counterparties as collateral under our reverse repurchase agreements are recognized as obligations to return securities borrowed under reverse repurchase agreements in the balance sheet.

Cash received as margin is recognized as cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements or other liabilities in the balance sheets.

our repurchase

are not recorded

in the balance

retains ownership

of the security.

received from

counterparties

as collateral

reverse repurchase

are recognized

as obligations

under reverse

balance sheet.

Cash received

cash equivalents

with a corresponding

amount recognized

or other liabilities

in the balance

OFFSETTING ASSETS AND LIABILITIES

The Company’s derivative agreements and repurchase agreements and reverse 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.

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 June 30, 2020 and December 31, 2019.

The Company’s

and repurchase

to underlying

similar arrangements,

which provide

for the right

or in the event

transactions.

these arrangements

The following

table presents

and liabilities

such arrangements

as if the Company

(in thousands)

6 unchanged sentences

Balance Sheet

June 30, 2020

September 30, 2020

Interest rate swaptions

TBA securities

Reverse repurchase agreements

(in thousands)

8 unchanged sentences

as Collateral

June 30, 2020

September 30, 2020

Repurchase Agreements

2 unchanged sentences

Interest rate swaptions

TBA securities

( 3,256,536 )

5 unchanged sentences

( 3,382,255 )

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 5 for a discussion of collateral posted or received against or for repurchase obligations and derivative instruments.

disclosed for

not exceeding

the net amount

asset or liability

in the balance

The fair value

of the actual

collateral received

typically exceeds

5 for a discussion

of collateral

received against

or for repurchase

and derivative

CAPITAL STOCK

Common Stock Issuances

During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company completed the following public offerings of shares of its common stock.

ended September

the year ended

Company completed

the following

public offerings

of its common

($ in thousands, except per share amounts)

Type of Offering

Per Share (1)

At the Market Offering Program

1 unchanged sentence

At the Market Offering Program

Third Quarter

At the Market Offering Program

First Quarter

5 unchanged sentences

Third Quarter

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

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

The Company has entered into seven equity distribution agreements, six of which have either been terminated because all shares were sold or were replaced with a subsequent agreement.

Weighted average price received per share is before deducting

the underwriters’ discount, if applicable, and other offering costs.

Net proceeds are net of the underwriters’ discount, if applicable, and

other offering costs.

The Company has entered into eight equity distribution agreements,

seven of which have either been terminated because all shares were

or were replaced with a subsequent agreement.

Stock Repurchase Program

On July 29, 2015 , the Company’s Board of Directors authorized the repurchase of up to 2,000,000 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 4,522,822 shares of the Company's common stock.

Coupled with the 783,757 shares remaining from the original 2,0000,000 share authorization, the increased authorization brought the total authorization to 5,306,579 shares, representing 10% of the Company’s then outstanding share count.

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.

From the inception of the stock repurchase program through June 30, 2020, the Company repurchased a total of 5,685,511 shares at an aggregate cost of approximately $ 40.4 million, including commissions and fees, for a weighted average price of $ 7.10 per share.

During the six months ended June 30, 2020, the Company repurchased a total of 19,891 shares at an aggregate cost of approximately $ 0.1 million, including commissions and fees, for a weighted average price of $ 3.42 per share.

During the six months ended June 30, 2019, the Company repurchased a total of 469,975 shares at an aggregate cost of approximately $ 3.0 million, including commissions and fees, for a weighted average price of $ 6.43 per share.

The remaining authorization under the repurchase program as of June 30, 2020 was 837,311 shares.

July 29, 2015

, the Company’s Board of Directors authorized the repurchase of up to

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

shares of the Company's common stock.

Coupled with the 783,757 shares remaining

from the original 2,000,000

share authorization, the increased authorization brought the total authorization to

5,306,579 shares, representing 10% of the

Company’s then outstanding share count.

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.

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.

From the inception of the stock repurchase program through September 30, 2020, the

Company repurchased a total of

shares at an aggregate cost of approximately $

million, including commissions and fees, for a weighted average price

During the nine months ended September 30, 2020, the Company repurchased

shares at an aggregate cost of

approximately $

million, including commissions and fees, for a weighted average price of

During the nine months

ended September 30, 2019, the Company repurchased a total of

shares at an aggregate cost of approximately $

including commissions and fees, for a weighted average price of $

The remaining authorization under the repurchase

program as of September 30, 2020 was

Cash Dividends

1 unchanged sentence

(in thousands, except per share amounts)

Per Share Amount

2020 - YTD (1)

On July 15, 2020 , the Company declared a dividend of $ 0.06 per share to be paid on August 27, 2020 .

The effect of this dividend is included in the table above, but is not reflected in the Company’s financial statements as of June 30, 2020.

On October 14, 2020, the Company declared a dividend of $

per share to be paid on November 25, 2020.

The effect of this dividend is

included in the table above, but is not reflected in the Company’s

financial statements as of September 30, 2020.

STOCK INCENTIVE PLAN

In October 2012, the Company’s Board of Directors adopted and Bimini, then the Company’s sole stockholder, approved, the Orchid Island Capital, Inc.

2012 Equity Incentive Plan (the “Incentive Plan”) to recruit and retain employees, directors and other service providers, including employees of the Manager and other affiliates.

The Incentive Plan provides for the award of stock options, stock

appreciation rights, stock award, performance units, other equity-based awards (and dividend equivalents with respect to awards of performance units and other equity-based awards) and incentive awards.

The 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 Incentive Plan provides for awards of up to an aggregate of 10 % of the issued and outstanding shares of our common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate 4,000,000 shares of the Company’s common stock that may be issued under the Incentive Plan.

In October 2012, the Company’s Board of Directors adopted and Bimini, then the Company’s sole stockholder,

approved, the Orchid Island Capital, Inc.

2012 Equity Incentive Plan (the “Incentive Plan”) to recruit and retain employees,

directors and other service providers, including employees of the Manager and other affiliates.

The Incentive Plan provides

for the award of stock options, stock appreciation rights, stock award, performance units, other equity-based awards (and

dividend equivalents with respect to awards of performance units and other equity-based awards) and incentive awards.

The 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

The Incentive Plan provides for awards of up to an aggregate of

% of the issued and outstanding shares of our

common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate

shares of the

Company’s common stock that may be issued under the Incentive Plan.

Performance Units

The Company has issued, and may in the future issue additional, performance units under the Incentive Plan to certain executive officers and employees of its Manager.

“Performance Units” vest after the end of a defined performance period, based on satisfaction of the performance conditions set forth in the performance unit agreement.

When earned, each Performance Unit will be settled by the issuance of one share of the Company’s common stock, at which time the Performance Unit will be cancelled.

The Performance Units 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.

Performance Units are subject to forfeiture should the participant no longer serve as an executive officer or employee of the Company.

Compensation expense for the Performance Units 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 Performance Units outstanding during the six months ended June 30, 2020 and 2019.

The Company has issued, and may in the future issue additional, performance units under the Incentive Plan to certain

executive officers and employees of its Manager.

“Performance Units” vest after the end of a defined performance period,

based on satisfaction of the performance conditions set forth in the performance unit agreement.

When earned, each

Performance Unit will be settled by the issuance of one share of the Company’s common stock, at which time the

Performance Unit will be cancelled.

The Performance Units 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.

Performance Units are subject to forfeiture should the participant no longer serve as an executive

officer or employee of the Company.

Compensation expense for the Performance Units 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 Performance Units outstanding during the nine months ended

September 30, 2020 and 2019.

($ in thousands, except per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Unvested, beginning of period

5 unchanged sentences

Weighted-average remaining vesting term (in years)

The number of shares of common stock issuable upon the vesting of the remaining outstanding Performance Units was

reduced as a result of the book value impairment event that occurred pursuant to the Company's Long Term

Compensation Plans (the "Plans").

The book value impairment event occurred when the Company's book value per share

declined by more than 15% during the quarter ended March 31, 2020 and the Company's book value per share decline from

January 1, 2020 to June 30, 2020 was more than 10%.

The Plans provide that if such a book value impairment event

occurs, then the number of outstanding Performance Units that are outstanding as of the last day of such two quarter period

shall be reduced by 15%.

Deferred Stock Units

Non-employee directors began to receive a portion of their compensation in the form of deferred stock unit awards (“DSUs”) pursuant to the Incentive Plan beginning with the awards for the second quarter of 2018.

Each DSU represents a right to receive one share of the Company’s common stock.

The DSUs are immediately vested and are settled at a future date based on the election of the individual participant.

The DSUs contain dividend equivalent rights, which entitle the participant to receive distributions declared by the Company on common stock.

These dividend equivalent rights are settled in 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 six months ended June 30, 2020 and 2019.

Non-employee directors began to receive a portion of their compensation in the form of deferred stock unit awards

(“DSUs”) pursuant to the Incentive Plan beginning with the awards for the second quarter of 2018.

Each DSU represents a

right to receive one share of the Company’s common stock.

The DSUs are immediately vested and are settled at a future

date based on the election of the individual participant.

The DSUs contain dividend equivalent rights, which entitle the

participant to receive distributions declared by the Company on common stock.

These dividend equivalent rights are settled

in 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 nine months ended September 30,

2020 and 2019.

($ in thousands, except per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Outstanding, beginning of period

4 unchanged sentences

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 June 30, 2020.

The Company will generally not be subject to 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 to its stockholders, of which 85% generally 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.

From time to time, the Company may become involved in various claims and

legal actions arising in the ordinary course of

Management is not aware of any reported or unreported contingencies

at September 30, 2020.

The Company will generally not be subject to 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 to its stockholders, of which 85% generally

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.

EARNINGS PER SHARE (EPS)

The Company had dividend eligible Performance Units and Deferred Stock Units that were outstanding during the six and three months ended June 30, 2020 and 2019.

The basic and diluted per share computations include these unvested Performance Units and Deferred Stock Units if there is income available to common stock, as they have dividend participation rights.

The unvested Performance Units and Deferred Stock Units have no contractual obligation to share in losses.

Because there is no such obligation, the unvested Performance Units and Deferred Stock Units 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 six and three months ended June 30, 2020 and 2019.

eligible Performance

Deferred Stock

were outstanding

nine and three

basic and diluted

include these

unvested Performance

income available

stock, as they

have dividend

participation

Deferred Stock

no contractual

such obligation,

unvested Performance

are not included

EPS computations

when no income

they are considered

participating

below reconciles

the numerator

and denominator

ended September

(in thousands, except per share information)

Six Months Ended June 30,

Three Months Ended June 30,

Nine Months Ended September

Three Months Ended September

Basic and diluted EPS per common share:

8 unchanged sentences

Net (loss) income per common share:

Basic and diluted

Anti-dilutive incentive shares not included in calculation.

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

These stratifications 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.

The Company's RMBS, interest rate swaps, interest rate swaptions, U.S.

Treasury securities and TBA securities are valued using Level 2 valuations, and such valuations currently 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, spread pricing techniques (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.

RMBS (based on the fair value option), interest rate swaps, interest rate swaptions, U.S.

Treasury securities and TBA securities were recorded at fair value on a recurring basis during the six and three months ended June 30, 2020 and 2019.

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 following table presents financial assets (liabilities) measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.

Derivative contracts are reported as a net position by contract type, and not based on master netting arrangements.

The framework

would be received

asset or paid

(an exit price).

measure should

asset or liability,

the assumptions

risk inherent

in a particular

the effect of

a restriction

non-performance.

Required disclosures

include stratification

sheet amounts

measurements.

These stratifications

Level 1 valuations,

quoted market

identical assets

or liabilities

active markets

(which include

exchanges and

over-the-counter

sufficient volume),

Level 2 valuations,

quoted market

similar instruments

active markets,

similar instruments

are observable

in the market,

Level 3 valuations,

from model-based

that use significant

in the market,

but observable

based on Company-specific

Company’s own

estimates for

include option

pricing models,

similar techniques,

use of market

prices of assets

or liabilities

directly comparable

to the subject

asset or liability.

The Company's

RMBS, interest

interest rate

and TBA securities

Level 2 valuations,

and such valuations

currently are

by the Company

based on independent

pricing sources

broker quotes,

when available.

price estimates

may vary, the Company

certain judgments

and assumptions

the appropriate

the fair values.

and the independent

pricing sources

of the Company’s

These techniques

include observing

the most recent

identical assets,

spread pricing

(option adjusted

spread, spread

Treasury curve

benchmark such

and model driven

(the discounted

method, Black

upon observable

term structure

The appropriate

spread pricing

based on market

source determines

observed trade

assets similar

to those being

spread is then

adjusted based

characteristics

and the asset

being priced.

Those characteristics

of asset, the

expected life

of the asset,

the stability

predictability

of the expected

asset, whether

the guarantor

the maturity, the

issuer, size of

the underlying

loan to value

loans reside,

of the underlying

The fair value

of the security

is determined

adjusted spread.

value option),

interest rate

swaps, interest

rate swaptions,

and TBA securities

on a recurring

ended September

value measurements,

considers the

most advantageous

market in which

it would transact

and considers

When possible,

looks to active

and observable

price identical

When identical

in active markets,

looks to market

The following

table presents

financial assets

(liabilities)

at fair value

on a recurring

contracts are

a net position

netting arrangements.

(in thousands)

Quoted Prices

June 30, 2020

September 30, 2020

Mortgage-backed securities

2 unchanged sentences

TBA securities

Obligation to return securities borrowed under reverse repurchase agreements

December 31, 2019

2 unchanged sentences

TBA securities

During the six and three months ended June 30, 2020 and 2019, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

RELATED PARTY TRANSACTIONS

During the nine and three months ended September 30, 2020 and 2019, there were no transfers

of financial assets or liabilities

between levels 1, 2 or 3.

RELATED PARTY

Management Agreement

The Company is externally managed and advised by Bimini Advisors, LLC (the “Manager”) pursuant to the terms of a management agreement.

The management agreement has been renewed through February 20, 2021 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 Company is externally managed and advised by Bimini Advisors, LLC (the “Manager”) pursuant to the terms of a

management agreement.

The management agreement has been renewed through

February 20, 2021

and provides for

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 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 1.5% of the first $250 million of the Company’s month-end equity,

as defined in the management

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.

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 and costs incurred were approximately $3.3 million and $1.6 million for the six and three months ended June 30, 2020, respectively, and $3.3 million and $1.7 million for the six and three months ended June 30, 2019, respectively.

At June 30, 2020 and December 31, 2019, the net amount due to affiliates was approximately $0.6 million and $0.6 million, respectively.

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.

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.

expenses recorded for the management fee and costs incurred were approximately

for the nine and three months ended September 30, 2020, respectively, and

million for the nine and

three months ended September 30, 2019, respectively.

At September 30,

2020 and December 31, 2019, the net amount

due to affiliates was approximately

million, respectively.

Other Relationships with Bimini

Robert Cauley, our Chief Executive Officer and Chairman of our 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, IV, our Chief Financial Officer, Chief Investment Officer, Secretary and a member of our 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.

In addition, as of June 30, 2020, Bimini owned 2,495,357 shares, or 3.8% , of the Company’s common stock.

Robert Cauley, our Chief Executive Officer and Chairman of our 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

Haas, IV, our Chief Financial

Officer, Chief Investment Officer, Secretary and a member of our 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.

In addition, as of September

30, 2020, Bimini

, of the Company’s common stock.

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-Q

Item 1. Financial Statements