What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-08-05 · 544 added, 476 removed, 1390 unchanged (42% of the section changed)

12 unchanged sentences

differ materially from those anticipated in such forward-looking statements.

We are a specialty finance company that invests in residential mortgage-backed

securities (“RMBS”) which are issued and

On August 30, 2022, the Company effected a 1-for-5 reverse stock split of its common

stock and proportionately decreased the

number of authorized shares of common stock.

All share and per share information has been retroactively adjusted to reflect

reverse split.

We are a specialty finance company that invests in residential mortgage-backed securities

(“RMBS”) which are issued and

guaranteed by a federally chartered corporation or agency (“Agency RMBS”).

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the Securities and Exchange Commission (the “SEC”).

Our business objective is to provide attractive risk-adjusted total returns over

the long term through a combination of capital

Our business objective is to provide attractive risk-adjusted total returns over the

long term through a combination of capital

appreciation and the payment of regular monthly distributions.

We intend to achieve this

objective by investing in and strategically

We intend to achieve this objective

by investing in and strategically

allocating capital between the two categories of Agency RMBS described above.

to generate income from (i) the net interest

We seek to generate income from (i) the net interest

margin on our leveraged PT RMBS portfolio and the leveraged portion

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rate environments.

We operate so as to qualify to be taxed as a real estate investment trust (“REIT”) under the

Internal Revenue Code of 1986, as

We operate so as to qualify to be taxed as a real estate investment trust

(“REIT”) under the Internal Revenue Code of 1986, as

amended (the “Code”).

We generally will not be subject to U.S.

federal income tax to the extent that we currently

distribute all of our

federal income tax to the extent that we

currently distribute all of our

REIT taxable income (as defined in the Code) to our stockholders and maintain

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We issued a total

of 27,493,650 shares under the August 2020 Equity Distribution Agreement for

aggregate gross proceeds of approximately $150.0

million, and net proceeds of approximately $147.4 million, after commissions

of 5,538,730 shares under the August 2020 Equity Distribution Agreement for aggregate

gross proceeds of approximately $150.0

net proceeds of approximately $147.4 million, after commissions and

prior to its termination in June 2021.

On January 20, 2021, we entered into an underwriting agreement (the “January 2021 Underwriting

Agreement”) with J.P.

On January 20, 2021, we entered into an underwriting agreement (the “January 2021

Underwriting Agreement”) with J.P.

Securities LLC (“J.P.

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Morgan purchased the

shares of our common stock from

the Company pursuant to the January 2021 Underwriting Agreement

at $5.20 per share.

shares of our common stock from the Company pursuant to the January 2021

Underwriting Agreement at $26.00 per share.

we granted J.P.

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Morgan purchased the shares of our common stock from

the Company pursuant to the March 2021 Underwriting Agreement at $5.45 per share.

the Company pursuant to the March 2021 Underwriting Agreement at $27.25 per

In addition, we granted J.P.

Morgan a 30-day

option to purchase up to an additional 1,200,000 shares of our common stock

on the same terms and conditions, which J.P.

option to purchase up to an additional 240,000 shares of our common stock on the same

terms and conditions, which J.P.

exercised in full on March 3, 2021.

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of 9,881,467 shares under the June 2021 Equity Distribution Agreement for aggregate

gross proceeds of approximately $250.0

million, and net proceeds of approximately $246.2 million, after commissions

and fees, prior to its termination in October 2021.

gross proceeds of approximately $250.0 million,

and net proceeds of approximately $246.2 million, after commissions and fees, prior to

its termination in October 2021.

On October 29, 2021,

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transactions.

30, 2022, we issued a total of 15,835,700 shares under the October 2021 Equity

Distribution Agreement for aggregate gross proceeds

of approximately $78.3 million, and net proceeds of approximately $77.0 million,

after commissions and fees.

September 30, 2022, we issued a total of 3,167,140 shares under the October 2021

Equity Distribution Agreement for aggregate gross

proceeds of approximately $78.3 million, and net proceeds of approximately

$77.0 million, after commissions and fees.

Stock Repurchase Agreement

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shares of our common stock.

The timing, manner, price and amount of any repurchases is determined by the Company in its discretion and is subject

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

timing, manner, price and amount of any repurchases is determined by the Company in its discretion and is subject

to economic and

market conditions, stock price, applicable legal requirements and other factors.

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

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additional 904,564 shares of the Company’s common stock.

Coupled with the 783,757 shares

remaining from the original 2,000,000

Coupled with the 156,751

shares remaining from the original 400,000

share authorization, the increased authorization brought the total authorization

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Company’s 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 16,861,994 shares, bringing the

remaining authorization under the stock repurchase program to 17,699,305 shares, representing

approximately 10% of the Company’s

then outstanding shares of common stock.

This stock repurchase program has no

termination date.

From the inception of the stock repurchase program through June 30, 2022, the Company

repurchased a total of 6,561,810 shares

at an aggregate cost of approximately $42.6 million, including commissions and fees,

for a weighted average price of $6.49 per share.

During the six months ended June 30, 2022, the Company repurchased a total of 876,299

shares of its common stock at an aggregate

cost of approximately $2.2 million, including commissions and fees, for a weighted average

price of $2.53 per share.

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.

This stock repurchase program has no termination date.

From the inception of the stock repurchase program through September 30, 2022, the

Company repurchased a total of 1,487,362

shares at an aggregate cost of approximately $44.8 million, including commissions

and fees, for a weighted average price of $30.12

During the nine months ended September 30, 2022, the Company repurchased

a total of 350,260 shares of its common

stock at an aggregate cost of approximately $4.4 million, including commissions

and fees, for a weighted average price of $12.68 per

Subsequent to September 30, 2022, and through October 27, 2022, the Company

repurchased a total of 1,644,044 shares at an

aggregate cost of approximately $14.2 million, including commissions and fees, for a weighted

average price of $8.64 per share.

Factors that Affect our Results of Operations and Financial Condition

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the Company’s

six and three

Company’s results

of operations

ended September

the Company’s

Income Summary

$208.9 million,

$46.2 million,

for the three

$60.1 million,

The components

those components

are presented

ended September

in those components

(in thousands)

Six Months Ended June 30,

Three Months Ended, June 30,

Nine Months Ended September 30,

Three Months Ended, September 30,

Interest income

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Losses on RMBS and derivative contracts

Net portfolio loss

Net portfolio (loss) income

Net (loss) income

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and Unrealized

Losses”, “Economic

Gains and Losses”,

and Unrealized

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hedging purposes

for accounting

as hedges for

hedging purposes.

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of operations

for financial

cost of funds

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Our presentation

be comparable

not be comparable

to similarly-titled

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the Company’s

ended September

Net Earnings Excluding Realized and Unrealized Gains and Losses

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Three Months Ended

September 30, 2022

June 30, 2022

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March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Includes realized

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in the future.

forward contracts

to time invests

for the purchase

at a predetermined

predetermined

issuer, coupon

an agreed-upon

to be delivered

are not known

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RMBS purchased

are typically

typically priced

at a discount

to equivalent

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Consequently,

roll transactions

sheet financing.

are accounted

for as derivatives

market through

income statement.

Gains or losses

included with

of the discussions

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The unrealized

losses on derivative

in our statements

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of the economic

hedging strategy

our financial

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Economic Interest Expense and Economic Net Interest Income

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Reflects the effect of derivative instrument hedges for only the period

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Net Interest Income

ended September

$80.5 million

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income, consisting

of $112.7 million

offset by $32.2

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million increase

$634.5 million

combined with

point ("bps")

$98.8 million

85 bps increase

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cost of funds,

combined with

million increase

On an economic

$63.0 million

average outstanding

On an economic

$15.5 million,

respectively, resulting

$43.5 million

income, respectively.

ended September

$14.2 million

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133 bps increase

$244.2 million

average RMBS,

million decrease

million increase

66 bps increase

in the average

cost of funds,

$236.6 million

average outstanding

million decrease

On an economic

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expense, cost

the six months

economic basis.

($ in thousands)

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

($ in thousands)

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Portfolio yields and costs of borrowings presented in the tables above and the

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Interest Income and Average Asset Yield

the six months

$56.1 million,

respectively.

the six months

was $112.7 million

million, respectively.

RMBS holdings

respectively.

on our portfolio

2021, respectively.

2022 as compared

million increase

a $22.5 million

offset by the

$98.8 million

combined with

average RMBS.

$34.2 million,

million, respectively.

respectively.

for the three

RMBS holdings

respectively.

on our portfolio

for the three

2022 as compared

million increase

$244.2 million

combined with

2021, respectively.

a $1.4 million

offset by the

million decrease

average RMBS.

below presents

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Interest Expense and the Cost of Funds

We had average

$4,118.4 million

total interest

$32.2 million

the six months

the nine months

ended September

respectively.

ended September

for the comparable

million increase

85 bps increase

in the average

cost of funds,

combined with

million increase

offset by the

$63.0 million

ended September

$15.5 million

respectively.

in the average

economic cost

cost of funds

We had average

of $4,111.5 million and

total interest

$21.4 million

respectively.

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respectively.

in the average

cost of funds

average outstanding

and a $1,417.9

million decrease

ended September

for the three

respectively.

a 1 bps decrease

in the average

economic cost

for the three

cost of funds

ended September

of our repurchase

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directly affect

110 bps below the

average six-month

for the quarter

cost of funds

ended September

economic cost

average one-month

average six-month

140 bps below

six-month LIBOR

for the quarter

ended September

term to maturity

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and six-month

for each quarter

date and 2021

economic basis.

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Average GAAP Cost of Funds

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Gains or Losses

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(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

Nine Months Ended September 30,

Three Months Ended September 30,

Realized (losses) gains on sales of RMBS

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Total losses on

Gains (losses) on interest rate futures

Gains (losses) on interest rate swaps

Gains on interest rate futures

Gains on interest rate swaps

(Losses) gains on payer swaptions (short positions)

Gains (losses) on payer swaptions (long positions)

Gains on interest rate caps

Gains on payer swaptions (long positions)

Gains (losses) on interest rate caps

Gains (losses) on interest rate floors

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Gains (losses) on TBA securities (long positions)

(losses) from derivative instruments

from derivative instruments

yield on those

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of our asset/liability

the six months

respectively, from

received proceeds

million, respectively,

sales of RMBS.

respectively, from

ended September

$918.0 million,

respectively, from

and unrealized

part by changes

in yields and

trade relative

to comparable

varying levels

of the securities

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on the underlying

premiums increase.

To the extent

To the extent RMBS

at a discount

to par, unrealized

discount accreted

of prepayments

on the underlying

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Mortgage Rate

September 30, 2022

June 30, 2022

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Administration Ltd.

Company’s total

the Company’s

total operating

were approximately

$14.9 million

million, respectively,

to approximately

$10.9 million

million, respectively,

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(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

Nine Months Ended September 30,

Three Months Ended September 30,

Management fees

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Total expenses

Direct REIT operating expenses were higher in both the nine and three

month periods ended September 30, 2022, as compared to

the same periods in 2021 primarily due to increased commissions and fees related

to the Company’s interest rate derivative positions.

We are externally managed and advised by Bimini Advisors, LLC (the “Manager”) pursuant

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agreement, before or on the last day of the term of the

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.

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.

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

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 will pay the following fees to the Manager:

In consideration for such services, the Company

will pay the following fees to the Manager:

A daily fee equal to the outstanding principal balance of repurchase agreement funding

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The following table summarizes the management fee and overhead allocation

expenses for the six months ended June 30, 2022

expenses for the nine months ended September 30,

2022 and 2021, and for each quarter in 2022 to date and 2021.

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Three Months Ended

September 30, 2022

June 30, 2022

4 unchanged sentences

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

Mortgage-Backed Securities

As of September

at fair value

average coupon

ended September

million compared

$259.4 million

9.4% and 12.9%,

ended September

respectively.

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Portfolio (%)

September 30, 2022

June 30, 2022

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Asset Category

June 30, 2022

September 30, 2022

Fixed Rate RMBS

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($ in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

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Total Portfolio

June 30, 2022

September 30, 2022

December 31, 2021

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of the RMBS in the Company’s investment portfolio

at June 30, 2022.

at September 30, 2022.

An effective duration of 3.390 indicates that an interest rate increase

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assets acquired

ended September

settled after

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Structured RMBS

As of September

we had established

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of commercial

other financial

and had borrowings

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market rates.

our established

provide borrowing

As of September

we had obligations

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our outstanding

with a weighted

average remaining

the repurchase

as of September

with an estimated

accrued interest,

of approximately

and cash pledged

to counterparties

of 345 months,

counterparties

of approximately

$49.4 million.

Through August

able to maintain

our repurchase

with comparable

through November

with maturities

through January

The table below presents information about our period end,

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Three Months Ended

September 30, 2022

June 30, 2022

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market causes

liquidity position

to the extent

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asset pledged

over collateralized

be over collateralized

margin returned

2 unchanged sentences

and make margin

calls as needed,

Typically, but not

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on an individual

the six months

average haircut

the nine months

ended September

as of September

approximately

our collateral.

of our collateral.

TBAs represent

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such obligations.

earlier, we invest

of our capital

in structured

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PT securities

in the repurchase

This structured

RMBS strategy

a core element

of the Company’s

overall investment

since inception.

of our structured

RMBS in order

but generally

our activities

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current operations

As of September

and cash equivalents

$496.2 million

from principal

and had average

million during

the six months

ended September

below, we may

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Morgan a 30-day

option to purchase up to an additional 1,140,000 shares of our common stock

on the same terms and conditions, which J.P.

option to purchase up to an additional 228,000 shares of our common stock on the same

terms and conditions, which J.P.

exercised in full on January 21, 2021.

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Morgan a 30-day option to purchase up to an

additional 1,200,000 shares of our common stock on the same terms and

conditions, which J.P.

additional 240,000 shares of our common stock on the same terms and conditions,

Morgan exercised in full on March 3,

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that are deemed to be “at the market” offerings and privately negotiated transactions.

June 30, 2022, we issued a total of

15,835,700 shares under the October 2021 Equity Distribution Agreement for aggregate

gross proceeds of approximately $78.3 million,

and net proceeds of approximately $77.0 million, after commissions and fees.

September 30, 2022, we issued a total

of 3,167,140 shares under the October 2021 Equity Distribution Agreement for aggregate

gross proceeds of approximately $78.3

million, and net proceeds of approximately $77.0 million, after commissions and fees.

Economic Summary

another transitional

for the economy,

policy changed

developments.

began to accelerate

second quarter

months market

participants,

and especially

were the cause

these constraints

as the effects

itself declined

The sub-components

by the effects

on the supply

of labor, or lack

in the fourth

dropped their

that inflation

was “transitory.”

The Fed quickly

policy accommodation

to constraining

their balance

in the Ukraine,

which started

in late February

the inflationary

the beginning

of the second

market participants

year-over-year

effects would

kick in, since

in the second

and the monthly

core consumer

(“CPI”) readings

a 0.6% increase

was accelerating

second quarter,

not moderating,

broader based.

Further, survey-based

recent measures

are the highest

in four decades.

While several

The evolution

Trends in place

for the domestic

States, particularly

to inflation,

the Fed changed

As the second

market expected

policies implemented

that occurred

third quarter

clear evidence

and the various

of this, their

comments consistently

as the futures

As the quarter

and the inflation

data continued

the Fed would

target further

into restrictive

The inflation

in early October

rate to approach

the Fed Funds

fourth quarter

of 2022 alone.

economic data

well, implying

have an impact

on the economy

the most rate

to the change

were developments

abroad, particularly

and the United

While inflation

world outside

which is grappling

with persistent

the government

to intermittently

various population

has contributed

significantly

price pressures

globally, more

is essentially

– are raising

central banks’

are very likely.

energy inflation

poses additional

on governments

elevated prices

for essentials

and energy, but

are constrained

because their

efforts themselves

might increase

and run counter

economic activity

strong, particularly

the unemployment

measures have

In particular,

interest rate

the economy, such

as the housing

consumer goods

such as sales

light trucks,

have declined

stock markets

declined materially

equity indices

major currencies,

Euro, Yen, Yuan and most

market currencies.

With inflation

to the highest

the Fed intent

other currencies.

central banks

protect their

own currencies,

domestic economic

circumstances

might warrant.

Risk sentiment

is at extremely

classes across

the financial

Economic growth

globally, and likely

As the market

the Fed’s response

second quarter

shortly before

market expectations

the Fed Funds

rate to levels

rate of 2.50%

interest rates

further during

rate in early

4% in October

This increase

in short-term

Note maturities

year increased

for maturities

Treasury Note

on the 2-year

Yields on both

declined modestly

The Fed reacted

these developments

The Fed raised

the Fed Funds

rate by another

230 basis points

Fed to continue

each remaining

range of 3.5%

Fed’s long-term

to be between

As of September

market pricing

terminal rate

for the current

be approximately

first quarter

As of October

for a terminal

rate of approximately

sometime late

in the second

approximately

in early 2024.

their efforts

under control

the Fed Funds

inflation under

enter a recession.

from remaining

the Fed’s target

rate of inflation.

from accommodation

to the extreme

policy accommodation

a restrictive

policy stance

– has materially

The Fed’s policy

market participants

expect a global

market participants

has inverted.

of inflation.

However, as it

have to increase

the Fed Funds

futures market

market expects

first quarter

Accordingly, the

Treasury Note

on the 10-year

Incoming economic

curve inversion.

with inflation

stop tightening.

Such conditions,

high – reflecting

reflect market

for inflation

to ultimately

be contained,

and the largest

rate considerably

to deteriorate

and liquidity

in many financial

If such trends

evidence appears

smoothly, or financial

are prohibiting

activity from

smoothly, central

face a dilemma

or implementing

accommodations

before inflation

brought under

for the third

these returns

RMBS investors

the sector, Agency

have generally

or decreasing

their exposure

to the sector.

rates increased

those observed

third quarter

exceeded those

Fed via quantitative

easing (which

is now quantitative

their holdings

run-off), large

domestic banks

to quantitative

large domestic

due to quantitative

are experiencing

1 unchanged sentence

money managers

other sectors

income markets

as more attractive

or are experiencing

assets across

income investments),

are collectively

1 unchanged sentence

decline materially

other currencies

is the chance

central banks

in the currency

support their

local currency,

do so by selling

dollar-denominated

The only U.S.

dollar-denominated

Treasuries and

another source

on Agency RMBS.

relative performance

higher coupon,

30-year securities

in production

by originators.

large amounts

may eventually

have performed

third quarter.

These results

are consistent

relative duration

of the securities,

shorter durations,

or less sensitivity

credit sensitive

1 unchanged sentence

under pressure

likely to further

likely to weaken

the economies

while negative

income markets.

from performing

relative performance

This is consistent

sector’s history

of performance

in a counter-cyclical

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income markets

to the economic

crisis resulting

on the morning

of Monday, March

the Fed announced

support smooth

market functioning.

market conditions

substantially.

the Fed implemented

of quantitative

Through November

to purchasing

Treasuries and

and $40 billion

began tapering

its net asset

1 unchanged sentence

FOMC announced

Fed’s balance

the Fed’s balance

June of 2022,

in accordance

balance sheet

of $30 billion

1 unchanged sentence

$17.5 billion

numbers expected

of $60 billion

Treasuries and

former President

an additional

Appropriations

for extensions

the Fed’s decision

of U.S Treasuries

the CDC issued

guidance extending

eviction moratoriums

persons through

FHFA subsequently

through March

The FHFA subsequently

the foreclosure

Act for loans

and the eviction

Mae and Freddie

July 31, 2021

and September

respectively.

7 unchanged sentences

before January

most instances.

this limitation,

the comparable

respectively, and

historic average

for the comparable

in most instances.

the moratorium,

with foreclosure

still remaining

below pre-pandemic

Trump administration

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FHFA released

new regulatory

both a risk-based

13 unchanged sentences

However, no definitive

or legislation

the conservatorship,

23 unchanged sentences

capital required

a risk to the

the fungibility

of the Uniform

2 unchanged sentences

in the market

TBA securities.

will be replaced

21 unchanged sentences

of replacement

existing LIBOR-

linked consumer

4 unchanged sentences

indices based

consumer products

the one-month,

3 unchanged sentences

spread-adjusted

the Adjustable

Act (the “LIBOR

2 unchanged sentences

for a statutory

that use LIBOR

as a benchmark

6 unchanged sentences

as the recommended

not be construed

it should not

any benchmark

on a prospective

Fed published

rule to implement

other structured

the Fed proposed

plus the applicable

go into effect

30 days after

in the Federal

discontinuance

13 unchanged sentences

by application

continue until

as it appears

new benchmark

rate investments.

Effective January

33 unchanged sentences

which generally

the MBS (during

any modification

the MBS until

period ends);

a loan subject

30 unchanged sentences

value of higher-coupon

place a premium

typically place

market yields.

26 unchanged sentences

become worthless.

rates can negatively

bonds, meaning

57 unchanged sentences

may be removed

pool into which

were securitized.

2 unchanged sentences

on the Company’s

of the Company’s

the Company’s

to par, this will

1 unchanged sentence

asset in question.

To the extent they

were acquired

at a discount,

tend to decrease

asset in question.

on risk management

3 unchanged sentences

to structured

We believe these

We may attempt

11 unchanged sentences

transactions.

are determined

term interest

1 unchanged sentence

SOFR or LIBOR

typically increase

our borrowing

corresponding

14 unchanged sentences

rate swaptions.

of the second

2022 inflation

Fed policy, interest

In a continuation

of the extremely

market conditions

existed since

of the COVID-19

third quarter

and the outlook

The perception

Fed has shaped

markets, currency

for the economy

Specifically, the

May, released in

market expectations.

Survey measures

expectations,

day, surged to

and was again

expectations.

elevated inflation

implying inflationary

clearly spread

those sectors

related supply

late 2021/early

the May, June and

July meetings.

Fed to continuing

rate by another

to affect economic

has acknowledged

their actions

most sensitive

– have already

other economic

the manufacturing

Initial claims

for unemployment

approximately

reading reported

contain inflation

This is reflected

for longer-term

shorter maturity

remain elevated,

Treasury Note

yielding approximately

3.07% on August

effect – more

to be ultimately

albeit potentially

at the expense

of a recession,

whereby shorter

maturity U.S.

Treasuries yield

than long-term

This condition

negative returns

for the second

quarter (-3.9%)

and year-to-date

and such returns

than comparable

duration U.S.

Treasuries by

2.3%, respectively.

duration U.S.

Treasuries were

extreme levels

COVID-19 pandemic

that triggered

unprecedented

in the market

actually delivered

better returns

income markets

second quarter

reason, returns

to the sector

largest participants

in the sector

money managers

from increasing

their investments

However, if the

could outperform

other sectors

the prospects

funding rates

and declining

to accelerate

third quarter

the Fed’s outlook,

or more accurately,

changed significantly.

Through early

markets perceived

was not transitory,

the Fed would

dampen demand

cause inflation

the Fed’s long-term

market anticipated

early in 2023

the Fed would

policy shortly

through repeated

public comments

Fed officials

and ultimately

by the Chairman

annual central

banker symposium

Hole, Wyoming

in late August,

stressed that

Incoming economic

strong, indicating

More importantly,

incoming inflation

becoming more

This reinforced

and for longer.

were significant

and widespread.

Orchid Island

were increases

in the spreads

RMBS securities

trade relative

to comparable

This increase

rates increased.

year increased

Yields of maturities

second quarter

through October

As of September

market pricing

terminal rate

for the current

be approximately

4.53% - achieved

first quarter

As of October

in a terminal

rate of approximately

sometime late

in the second

still approximately

spreads relative

rates increased

have exceeded

for the third

than comparable

duration LIBOR

RMBS universe

coupon, 30-year

in production

by originators.

may eventually

have performed

that occurred

These results

are consistent

relative duration

of the securities,

shorter durations,

or less sensitivity

from performing

could do well

on a relative

This is consistent

in a counter-cyclical

Our condensed

5 unchanged sentences

Our most critical

estimates involve

involve decisions

and assessments

9 unchanged sentences

expenditures.

Sheet Arrangements

any off-balance

sheet arrangements.

as a REIT, we must

7 unchanged sentences

can be greater

than our financial

(loss) computed

11 unchanged sentences

(in thousands, except per share amounts)

On July 13, 2022, the Company declared a dividend of $0.045 per share

to be paid on August 29, 2022.

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, 2022.

On October 12, 2022, the Company declared a dividend of $0.16 per

share to be paid on November 28, 2022.

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, 2022.

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 2. Management’s Discussion and Analysis