Orchid Island Capital, Inc 10-Q for FY2026 Q3
Orchid Island Capital, Inc. (ORC)
About this 10-Q
Orchid Island Capital, Inc filed this 10-Q on October 23, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
For the nine months ended September 30, 2026, Orchid Island Capital, Inc. reported a net loss of $109,683 and comprehensive net loss of $110,519 ($ in thousands), with net interest income of $176,169 versus $69,786 in 2025. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $178.92M
- compared with net income of $72.08M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number:
Orchid Island Capital, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol: | Name of Each Exchange on Which Registered |
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. Check one:
| | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of shares outstanding at October 22, 2026:
TABLE OF CONTENTS
ITEM 1. FINANCIAL STATEMENTS
ORCHID ISLAND CAPITAL, INC.
CONDENSED BALANCE SHEETS
($ in thousands, except per share data)
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS: | ||||||||
| Mortgage-backed securities, at fair value (includes pledged assets of $ and $, respectively) | $ | $ | ||||||
| U.S. Treasury securities, available-for-sale (amortized cost of $ and $; includes pledged assets of $ and $, respectively) | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accrued interest receivable | ||||||||
| Derivative assets | ||||||||
| Reverse repurchase agreements | ||||||||
| Receivable for investment securities and TBA transactions | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Repurchase agreements | $ | $ | ||||||
| Payable for investment securities and TBA transactions | ||||||||
| Dividends payable | ||||||||
| Derivative liabilities | ||||||||
| Accrued interest payable | ||||||||
| Due to affiliates | ||||||||
| Obligation to return securities borrowed under reverse repurchase agreements, at fair value | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding as of September 30, 2026 and December 31, 2025 | ||||||||
| Common Stock, $ par value; shares authorized, shares issued and outstanding as of September 30, 2026 and shares issued and outstanding as of December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Total Stockholders' Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See Notes to Financial Statements
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
For the Nine and Three Months Ended September 30, 2026 and 2025
($ in thousands, except per share data)
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest income | $ | $ | $ | $ | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net interest income | ||||||||||||||||
| Realized gains (losses) on mortgage-backed securities | ( | ) | ||||||||||||||
| Unrealized (losses) gains on mortgage-backed securities | ( | ) | ( | ) | ||||||||||||
| Gains (losses) on derivative and other hedging instruments | ( | ) | ( | ) | ||||||||||||
| Net portfolio (loss) income | ( | ) | ( | ) | ||||||||||||
| Expenses: | ||||||||||||||||
| Management fees | ||||||||||||||||
| Allocated overhead | ||||||||||||||||
| Incentive compensation | ||||||||||||||||
| Directors' fees and liability insurance | ||||||||||||||||
| Audit, legal and other professional fees | ||||||||||||||||
| Direct REIT operating expenses | ||||||||||||||||
| Other administrative | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Unrealized (losses) gains on U.S. Treasury securities measured at fair value through other comprehensive net (loss) income | ( | ) | ( | ) | ||||||||||||
| Comprehensive net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Basic and diluted net (loss) income per share | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted Average Shares Outstanding | ||||||||||||||||
See Notes to Financial Statements
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine Months Ended September 30, 2026 and 2025
(in thousands)
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Retained | Comprehensive | ||||||||||||||||||||||
| Common Stock | Paid-in | Earnings | Income | |||||||||||||||||||||
| Shares | Par Value | Capital | (Deficit) | (Loss) | Total | |||||||||||||||||||
| Balances, January 1, 2026 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Unrealized loss on available-for-sale securities | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Issuance of common stock pursuant to public offerings, net | ||||||||||||||||||||||||
| Balances, March 31, 2026 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Unrealized loss on available-for-sale securities | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Issuance of common stock pursuant to public offerings, net | ||||||||||||||||||||||||
| Shares repurchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balances, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Unrealized loss on available-for-sale securities | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Shares repurchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balances, September 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Retained | Comprehensive | ||||||||||||||||||||||
| Common Stock | Paid-in | Earnings | Income | |||||||||||||||||||||
| Shares | Par Value | Capital | (Deficit) | (Loss) | Total | |||||||||||||||||||
| Balances, January 1, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Unrealized gain on available-for-sale securities | - | |||||||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Issuance of common stock pursuant to public offerings, net | ||||||||||||||||||||||||
| Balances, March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Unrealized loss on available-for-sale securities | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Issuance of common stock pursuant to public offerings, net | ||||||||||||||||||||||||
| Shares repurchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balances, June 30, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Unrealized gain on available-for-sale securities | - | |||||||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock based awards and amortization | ||||||||||||||||||||||||
| Issuance of common stock pursuant to public offerings, net | ||||||||||||||||||||||||
| Balances, September 30, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
See Notes to Financial Statements
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2026 and 2025
($ in thousands)
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
| Stock based compensation | ||||||||
| Net discount accretion on U.S. Treasury securities | ( | ) | ( | ) | ||||
| Realized (gains) losses on mortgage-backed securities | ( | ) | ||||||
| Unrealized losses (gains) on mortgage-backed securities | ( | ) | ||||||
| Realized and unrealized (gains) losses on derivative instruments | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued interest receivable | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Accrued interest payable | ( | ) | ||||||
| Other liabilities | ||||||||
| Due to affiliates | ||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| From mortgage-backed securities investments: | ||||||||
| Purchases | ( | ) | ( | ) | ||||
| Sales and maturities | ||||||||
| Principal repayments | ||||||||
| Purchases of U.S. Treasury securities, available-for-sale | ( | ) | ( | ) | ||||
| Proceeds from maturity of U.S. Treasury securities, available-for-sale | ||||||||
| Net payments on reverse repurchase agreements | ( | ) | ||||||
| Net proceeds from (payments on) derivative instruments | ( | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from repurchase agreements | ||||||||
| Principal payments on repurchase agreements | ( | ) | ( | ) | ||||
| Cash dividends | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock, net of issuance costs | ||||||||
| Common stock repurchases, including shares withheld from employee stock awards for payment of taxes | ( | ) | ( | ) | ||||
| NET CASH 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: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
See Notes to Financial Statements
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2026
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Description
Orchid Island Capital, Inc. (“Orchid” or the “Company”) was incorporated in Maryland on August 17, 2010 for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“RMBS”). From incorporation to the completion of Orchid’s initial public offering of its common stock on February 20, 2013, Orchid was a wholly owned subsidiary of Bimini Capital Management, Inc. (“Bimini”). Orchid began operations on November 24, 2010 (the date of commencement of operations). From incorporation through November 24, 2010, Orchid’s only activity was the issuance of common stock to Bimini.
On June 11, 2024, Orchid entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $
On February 24, 2025, Orchid entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $
On October 27, 2025, Orchid entered into an equity distribution agreement (the “October 2025 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 $
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 10 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 statement of results for the interim period have been included. Operating results for the nine and three-month periods ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The balance sheet at December 31, 2025 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, 2025.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could significantly differ from those estimates. The significant estimates affecting the accompanying financial statements are the fair values of RMBS and derivatives. Management believes the estimates and assumptions underlying the financial statements are reasonable based on the information available as of September 30, 2026.
Variable Interest Entities (“VIEs”)
The Company obtains interests in VIEs through its investments in mortgage-backed securities. The Company’s interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for these interests in these VIEs as mortgage-backed securities. See Note 2 for additional information regarding the Company’s investments in mortgage-backed securities. The maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and other borrowings, and interest rate swaps and other derivative instruments.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
| (in thousands) | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
The Company maintains cash balances at three banks, an overnight cash sweep position backed by Federal Deposit Insurance Corporation ("FDIC") insured deposit balances at participating banks, a government securities backed overnight sweep fund, and excess margin on account with three exchange clearing members. At times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and exchange clearing members and believes that it is not exposed to any significant credit risk on cash and cash equivalents or restricted cash balances.
Mortgage-Backed Securities and U.S. Treasury Securities
The Company invests primarily in mortgage pass-through (“PT”) residential mortgage backed securities (“RMBS”) and collateralized mortgage obligations (“CMOs”) issued by Freddie Mac, Fannie Mae or Ginnie Mae, interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of RMBS. The Company refers to RMBS and CMOs as PT RMBS. The Company refers to IO and IIO securities as structured RMBS. The Company also invests in U.S. Treasury Notes ("T-Notes") and U.S. Treasury Bills (collectively, "U.S. Treasury securities"), primarily to satisfy collateral requirements of derivative counterparties. The Company has elected to account for its investment in RMBS under the fair value option. The Company recorded changes in fair value in net income. The Company has designated its U.S. Treasury securities as available-for-sale, and changes in fair value during the period for reasons other than expected credit losses are recognized in other comprehensive income (loss).
The Company records securities transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the portfolio balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the portfolio balance with an offsetting receivable recorded.
Fair value is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for RMBS are based on independent pricing sources and/or third party broker quotes, when available. Estimated fair values for U.S. Treasury securities are based on quoted prices for identical assets in active markets.
Income on PT RMBS is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the statements of comprehensive income (loss). For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Income on U.S. Treasury securities is based on the stated interest rate (if any) of the security. Premiums or discounts associated with the purchase are amortized or accreted income over the life of the investment and reported in the statements of comprehensive income (loss) as interest income.
Changes in fair value of investments for which the fair value option is elected are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities and U.S. Treasury securities in the accompanying statements of comprehensive income (loss). Realized gains and losses on sales of investments for which the fair value option has been elected, using the specific identification method, are reported as a separate component of net portfolio income on the statements of comprehensive income (loss). Changes in fair value of U.S. Treasury securities that are classified as available-for-sale are reported in accumulated other comprehensive income (loss) ("OCI"). Upon the sale of a security designated as available-for-sale, we determine the cost of the security and the amount of unrealized gain or loss to reclassify out of accumulated OCI into earnings based on the specific identification method.
The Company evaluated securities for allowance for credit losses and since all of the Company's available-for-sale securities designated investments consist of U.S. Treasury securities, which are backed by the full faith and credit of the U.S. government, the Company does not record an allowance for credit losses.
Derivative 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 T-Note, Secured Overnight Financing Rate ("SOFR"), federal funds (“Fed Funds”) and ERIS SOFR Swap futures contracts, short positions in U.S. Treasury securities, interest rate swaps, options to enter in interest rate swaps (“interest rate swaptions”), dual digital options, interest rate caps and floors, and “to-be-announced” (“TBA”) securities transactions, but the Company may enter into other derivative and other hedging instruments in the future.
The Company accounts for TBA securities as derivative instruments. Gains and losses associated with TBA securities transactions are reported in gain (loss) on derivative instruments in the accompanying statements of comprehensive income (loss).
The Company enters into short-sales of U.S. Treasury securities by borrowing the securities under reverse repurchase agreements and selling them into the market. The Company accounts for these as securities borrowing transactions and recognizes an obligation to return the borrowed securities at fair value on our accompanying balance sheets based on the value of the underlying U.S. Treasury security as of the reporting date. Gains and losses associated with U.S. Treasury security short positions are recognized in gain (loss) on derivative instruments, net in our statements of comprehensive income (loss).
Derivative and other hedging instruments are carried at fair value, and changes in fair value are recorded in income as gains or losses on derivative and other hedging instruments for each period. The Company’s derivative financial instruments are not designated as hedge accounting relationships, but rather are used as economic hedges of its portfolio assets and liabilities. Gains and losses on derivatives, except those that result in cash receipts or payments, are included in operating activities on the statements of cash flows. Cash payments and cash receipts from settlements of derivatives, including current period net cash settlements on interest rate swaps, are classified as an investing activity on the statements of cash flows.
Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties and exchanges to honor their commitments. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. The Company’s derivative agreements require it to post or receive collateral to mitigate such risk. In addition, the Company uses only registered central clearing exchanges and well-established commercial banks as counterparties, monitors positions with individual counterparties and adjusts posted collateral as required.
Financial Instruments
The fair value of financial instruments for which it is practicable to estimate that value is disclosed either in the body of the financial statements or in the accompanying notes. RMBS, Fed Funds, SOFR and T-Note futures contracts, interest rate swaps, interest rate swaptions, dual digital options, interest rate floors and caps, and TBA securities are accounted for at fair value in the balance sheets. The methods and assumptions used to estimate fair value for these instruments are presented in Note 13 of the financial statements.
Repurchase Agreements
The Company finances the acquisition of the majority of its RMBS through the use of repurchase agreements under master repurchase agreements. Repurchase agreements are accounted for as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.
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.
Manager Compensation
The Company is externally managed by Bimini Advisors, LLC (the “Manager” or “Bimini Advisors”), a Maryland limited liability company and wholly-owned subsidiary of Bimini. The Company’s management agreement with the Manager provides for payment to the Manager of a management fee and reimbursement of certain operating expenses, which are accrued and expensed during the period for which they are earned or incurred. Refer to Note 14 for the terms of the management agreement.
Earnings Per Share
Basic earnings per share (“EPS”) is calculated as net income or loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated using the treasury stock or two-class method, as applicable, for common stock equivalents, if any. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive.
Stock-Based Compensation
The Company may grant equity-based compensation to non-employee members of its Board of Directors and to the executive officers and employees of the Manager. Stock-based awards issued include performance units ("PUs"), deferred stock units ("DSUs") and immediately vested common stock awards. Compensation expense is measured and recognized for all stock-based payment awards made to employees and non-employee directors based on the fair value of the Company’s common stock on the date of grant. Compensation expense is recognized over each award’s respective service period using the graded vesting attribution method. The Company does not estimate forfeiture rates; but rather, adjusts for forfeitures in the periods in which they occur.
Income Taxes
Orchid has elected and is organized and operated 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”). REITs are generally not subject to U.S. federal income tax on their REIT taxable income provided that they distribute to their stockholders all of their REIT taxable income on an annual basis. A REIT must distribute at least 90% of its REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gain, and meet other requirements of the Code to retain its tax status.
Orchid assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. All of Orchid’s tax positions are categorized as highly certain. There is no accrual for any tax, interest or penalties related to Orchid’s tax position assessment. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change.
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Statements of Income, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026. We are currently evaluating the impact of adoption on our financial disclosures.
NOTE 2. MORTGAGE-BACKED SECURITIES, AT FAIR VALUE
The following table presents the Company’s RMBS portfolio that are remeasured at fair value through earnings as of September 30, 2026 and December 31, 2025:
| (in thousands) | ||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Par Value | Cost(1) | Fair Value | Par Value | Cost(1) | Fair Value | |||||||||||||||||||
| Fixed-rate RMBS | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Other(2)(3)(4) | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) | The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio. |
| (2) | Other securities are comprised of interest-only and inverse interest-only securities. |
| (3) | The notional balance for the interest-only securities portfolio was $ |
| (4) | The notional balance for the inverse interest-only securities portfolio was $ |
The following table is a summary of the Company’s net gain (loss) from the sale of RMBS for the nine months ended September 30, 2026 and 2025.
| (in thousands) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Proceeds from sales of RMBS | $ | $ | ||||||
| Carrying value of RMBS sold | ( | ) | ( | ) | ||||
| Net gain (loss) on sales of RMBS | $ | $ | ( | ) | ||||
| Gross gain on sales of RMBS | $ | $ | ||||||
| Gross loss on sales of RMBS | ( | ) | ||||||
| Net gain (loss) on sales of RMBS | $ | $ | ( | ) | ||||
During the nine months ended September 30, 2026, the Company resecuritized RMBS with a fair value of $
NOTE 3. U.S. TREASURY SECURITIES, AVAILABLE-FOR-SALE
The following table presents the amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale investments as of September 30, 2026 and December 31, 2025. U.S. Treasury securities are held primarily to satisfy collateral requirements of the Company's repurchase and derivative counterparties.
| (in thousands) | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| U.S. Treasury Note, 4.125%, 10/31/2026 Maturity | $ | $ | $ | ( | ) | $ | ||||||||||
| U.S. Treasury Note, 0.50%, 4/30/2027 Maturity | ( | ) | ||||||||||||||
| U.S. Treasury Note, 4.50%, 5/15/2027 Maturity | ( | ) | ||||||||||||||
| U.S. Treasury Note, 2.25%, 8/15/2027 Maturity | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
| December 31, 2025 | ||||||||||||||||
| U.S. Treasury Note, 0.75%, 5/31/2026 Maturity | $ | $ | $ | |||||||||||||
| U.S. Treasury Note, 4.625%, 6/30/2026 Maturity | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Because all of the Company's available-for-sale securities are backed by the full faith and credit of the U.S. government, the Company has recorded an allowance for credit losses.
NOTE 4. 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 September 30, 2026, the Company had met all margin call requirements.
As of September 30, 2026 and December 31, 2025, the Company’s repurchase agreements had remaining maturities as summarized below:
| ($ in thousands) | ||||||||||||||||||||
| OVERNIGHT | BETWEEN 2 | BETWEEN 31 | GREATER | |||||||||||||||||
| (1 DAY OR | AND | AND | THAN | |||||||||||||||||
| LESS) | 30 DAYS | 90 DAYS | 90 DAYS | TOTAL | ||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | % | % | |||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | % | ||||||||||||||||
In addition, cash pledged to counterparties for repurchase agreements was approximately $
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 September 30, 2026, 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 $
Reverse Repurchase Agreements
As of September 30, 2026 and December 31, 2025, the Company had $
NOTE 5. DERIVATIVE AND OTHER HEDGING INSTRUMENTS
The table below summarizes fair value information about the Company’s derivative and other hedging instruments assets and liabilities as of September 30, 2026 and December 31, 2025.
| (in thousands) | |||||||||
| Derivative and Other Hedging Instruments | Balance Sheet Location | September 30, 2026 | December 31, 2025 | ||||||
| Assets | |||||||||
| Interest rate swaps | Derivative assets, at fair value | $ | $ | ||||||
| TBA securities | Derivative assets, at fair value | ||||||||
| Total derivative assets, at fair value | $ | $ | |||||||
| Liabilities | |||||||||
| TBA securities | Derivative liabilities, at fair value | $ | $ | ||||||
| Total derivative liabilities, at fair value | $ | $ | |||||||
| Margin Balances Posted to (from) Counterparties | |||||||||
| Futures contracts | Restricted cash | $ | $ | ||||||
| TBA securities (including margin paid on unsettled trades) | Restricted cash | ||||||||
| TBA securities (including margin received on unsettled trades) | Other liabilities | ( | ) | ( | ) | ||||
| Total margin balances on derivative contracts | $ | $ | |||||||
T-Note and SOFR futures are cash and securities settled futures contracts on their respective underlying or delivery eligible underlying U.S. Treasury security, with gains and losses credited or charged to the Company’s cash accounts on a daily basis. A minimum balance, or “margin,” is required to be maintained in the account on a daily basis. The tables below present information related to the Company’s T-Note and SOFR futures positions at September 30, 2026 and December 31, 2025.
| ($ in thousands) | ||||||||||||||||
| September 30, 2026 | ||||||||||||||||
| Average | Weighted | Weighted | ||||||||||||||
| Contract | Average | Average | ||||||||||||||
| Notional | Entry | Effective | Open | |||||||||||||
| Expiration Year | Amount | Rate | Rate | Equity(1) | ||||||||||||
| U.S. Treasury Note Futures Contracts (Short Positions) | ||||||||||||||||
| December 2026 10-year T-Note futures (Dec 2026 - Dec 2036 Hedge Period)(2) | $ | % | % | $ | ||||||||||||
| December 2026 10-year Ultra futures (Dec 2026 - Dec 2036 Hedge Period)(3) | % | % | ||||||||||||||
| December 2026 30-year Ultra futures (Dec 2026 - Dec 2056 Hedge Period)(4) | % | % | ||||||||||||||
| SOFR Futures Contracts (Short Positions) | ||||||||||||||||
| December 2026 3-Month SOFR futures (Sep 2026 - Dec 2026 Hedge Period) | $ | % | % | $ | ||||||||||||
| March 2027 3-Month SOFR futures (Dec 2026 - Mar 2027 Hedge Period) | % | % | ||||||||||||||
| June 2027 3-Month SOFR futures (Mar 2027 - Jun 2027 Hedge Period) | % | % | ||||||||||||||
| ERIS SOFR Swap Futures Contracts (Short Positions)(6) | ||||||||||||||||
| December 2026 5-Year Term, 3.75% fixed rate, (Dec 2026 - Dec 2031 Hedge Period) | $ | % | % | $ | ||||||||||||
| ($ in thousands) | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||
| Average | Weighted | Weighted | ||||||||||||||
| Contract | Average | Average | ||||||||||||||
| Notional | Entry | Effective | Open | |||||||||||||
| Expiration Year | Amount | Rate | Rate | Equity(1) | ||||||||||||
| U.S. Treasury Note Futures Contracts (Short Positions)(2) | ||||||||||||||||
| March 2026 5-year T-Note futures (Mar 2026 - Mar 2031 Hedge Period)(5) | $ | % | % | $ | ||||||||||||
| March 2026 10-year T-Note futures (Mar 2026 - Mar 2036 Hedge Period)(2) | % | % | ||||||||||||||
| March 2026 10-year Ultra futures (Mar 2026 - Mar 2036 Hedge Period)(3) | % | % | ||||||||||||||
| SOFR Futures Contracts (Short Positions) | ||||||||||||||||
| March 2026 3-Month SOFR futures (Dec 2025 - Mar 2026 Hedge Period) | $ | % | % | $ | ( | ) | ||||||||||
| June 2026 3-Month SOFR futures (Mar 2026 - Jun 2026 Hedge Period) | % | % | ( | ) | ||||||||||||
| September 2026 3-Month SOFR futures (Jun 2026 - Sep 2026 Hedge Period) | % | % | ( | ) | ||||||||||||
| December 2026 3-Month SOFR futures (Sep 2026 - Dec 2026 Hedge Period) | % | % | ( | ) | ||||||||||||
| March 2027 3-Month SOFR futures (Dec 2026 - Mar 2027 Hedge Period) | % | % | ( | ) | ||||||||||||
| June 2027 3-Month SOFR futures (Mar 2027 - Jun 2027 Hedge Period) | % | % | ( | ) | ||||||||||||
| ERIS SOFR Swap Futures Contracts (Short Positions)(6) | ||||||||||||||||
| March 2026 5-Year Term, 3.75% fixed rate (Mar 2026 - Mar 2031 Hedge Period) | $ | % | % | $ | ( | ) | ||||||||||
| (1) | Open equity represents the cumulative gains (losses) recorded on open futures positions from inception. |
| (2) | 10-Year T-Note futures contracts were valued at a price of $ |
| (3) | 10-Year Ultra futures contracts were valued at a price of $ |
| (4) | 30-Year T-Note Ultra futures contracts were valued at a price of $ |
| (5) | 5-Year T-Note futures contracts were valued at a price of $ |
| (6) | ERIS swap futures are exchange traded futures that replicate the cash flows of an underlying swap position. |
Under its interest rate swap agreements, the Company typically pays a fixed rate and receives a floating rate ("payer swaps") based on an index, such as SOFR. The floating rate the Company receives under its swap agreements has the effect of offsetting the repricing characteristics of its repurchase agreements and cash flows on such liabilities. The Company is typically required to post margin on its interest rate swap agreements. The table below presents information related to the Company’s interest rate swap positions at September 30, 2026 and December 31, 2025.
| ($ in thousands) | ||||||||||||||||
| Average | ||||||||||||||||
| Fixed | Average | Average | ||||||||||||||
| Notional | Pay | Receive | Maturity | |||||||||||||
| Amount | Rate | Rate | (Years) | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| Expiration > 1 to ≤ 5 years | $ | % | % | |||||||||||||
| Expiration > 5 years | % | % | ||||||||||||||
| $ | % | % | ||||||||||||||
| December 31, 2025 | ||||||||||||||||
| Expiration > 1 to ≤ 5 years | $ | % | % | |||||||||||||
| Expiration > 5 years | % | % | ||||||||||||||
| $ | % | % | ||||||||||||||
Our interest rate swaps are centrally cleared through two registered commodities exchanges, the Chicago Mercantile Exchange ("CME") and the London Clearing House (“LCH”). The clearing exchanges require that we post an "initial margin" amount determined by the exchanges. Initial margin is intended to be set at a level sufficient to protect the exchange against potential losses that could arise during the period required to close out or hedge the interest rate swap positions following a participant default. The amount is determined using risk-based models that consider potential market movements over a multi-day liquidation period and is subject to adjustment based on changes in market volatility, portfolio composition, liquidity, concentration and other factors. We also exchange daily settlements of "variation margin" based upon changes in fair value, as measured by the exchanges. Pursuant to rules governing central clearing activities, we recognize variation margin settlements as a direct reduction of the carrying value of the interest rate swap asset or liability.
The following table summarizes the Company’s contracts to purchase and sell TBA securities as of September 30, 2026 and December 31, 2025.
| ($ in thousands) | ||||||||||||||||
| Notional | ||||||||||||||||
| Amount | Net | |||||||||||||||
| Long | Cost | Market | Carrying | |||||||||||||
| (Short)(1) | Basis(2) | Value(3) | Value(4) | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| 15-Year TBA securities: | ||||||||||||||||
| 5.5% | ( | ) | ||||||||||||||
| 30-Year TBA securities: | ||||||||||||||||
| 5.0% | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| 6.0% | ( | ) | ( | ) | ( | ) | ||||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| December 31, 2025 | ||||||||||||||||
| 15-Year TBA securities: | ||||||||||||||||
| 4.5% | $ | $ | $ | $ | ||||||||||||
| 30-Year TBA securities: | ||||||||||||||||
| 3.0% | ( | ) | ||||||||||||||
| 3.5% | ( | ) | ||||||||||||||
| 4.0% | ( | ) | ||||||||||||||
| 5.0% | ( | ) | ||||||||||||||
| 5.5% | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 6.5% | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) | Notional amount represents the par value (or principal balance) of the underlying Agency RMBS. |
| (2) | Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS. |
| (3) | Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end. |
| (4) | Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities) at fair value in the balance sheets. |
Gain (Loss) From Derivative and Other Hedging Instruments, Net
The table below presents the effect of the Company’s derivative and other hedging instruments on the statements of comprehensive income (loss) for the nine and three months ended September 30, 2026 and 2025.
| (in thousands) | ||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest rate futures contracts (short position) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Interest rate swaps | ( | ) | ( | ) | ||||||||||||
| Payer swaptions (short positions) | ( | ) | ( | ) | ||||||||||||
| Payer swaptions (long positions) | ||||||||||||||||
| TBA securities (short positions) | ( | ) | ( | ) | ||||||||||||
| TBA securities (long positions) | ( | ) | ( | ) | ||||||||||||
| U.S. Treasury securities (short positions) | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Credit Risk-Related Contingent Features
The use of derivatives and other hedging instruments creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company attempts to minimize this risk by limiting its counterparties for instruments which are not centrally cleared on a registered exchange to major financial institutions with acceptable credit ratings and monitoring positions with individual counterparties. In addition, the Company may be required to pledge assets as collateral for its derivatives, whose amounts vary over time based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by a counterparty, the Company may not receive payments provided for under the terms of its derivative agreements and may have difficulty obtaining its assets pledged as collateral for its derivatives. The cash and cash equivalents pledged as collateral for the Company's derivative instruments are included in restricted cash on its balance sheets.
It is the Company's policy not to offset assets and liabilities associated with open derivative contracts. However, CME and LCH rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME or LCH serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date.
See Note 6 for collateral pledged or received, Note 7 for offsetting information, and Note 13 for fair value measurement disclosures.
NOTE 6. PLEDGED ASSETS
Assets Pledged to Counterparties
The table below summarizes the Company’s assets pledged as collateral under repurchase agreements and derivative agreements by type, including securities pledged related to securities sold but not yet settled, as of September 30, 2026 and December 31, 2025.
| (in thousands) | ||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Repurchase | Derivative | Repurchase | Derivative | |||||||||||||||||||||
| Assets Pledged to Counterparties | Agreements | Agreements | Total | Agreements | Agreements | Total | ||||||||||||||||||
| PT RMBS - fair value | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Structured RMBS - fair value | ||||||||||||||||||||||||
| U.S. Treasury securities | ||||||||||||||||||||||||
| Accrued interest on pledged securities | ||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Assets Pledged from Counterparties
The table below summarizes assets pledged to the Company from counterparties under repurchase agreements and derivative agreements as of September 30, 2026 and December 31, 2025.
| (in thousands) | ||||||||||||||||
| Reverse | ||||||||||||||||
| Repurchase | Repurchase | Derivative | ||||||||||||||
| Agreements | Agreements | Agreements | Total | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities - fair value | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities - fair value | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
U.S. Treasury securities received as margin under the Company's repurchase agreements are not recorded in the balance sheets because the counterparty retains ownership of the security. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements or other liabilities in the balance sheets.
NOTE 7. OFFSETTING ASSETS AND LIABILITIES
The Company’s derivative agreements and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis in the case of repurchase agreements and for certain derivative agreements. CME and LCH rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME or LCH serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date.
The following table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of September 30, 2026 and December 31, 2025.
| (in thousands) | ||||||||||||||||||||||||
| Offsetting of Assets | ||||||||||||||||||||||||
| Net Amount | Gross Amount Not | |||||||||||||||||||||||
| Gross | Gross | of Assets | Offset in the Balance Sheet | |||||||||||||||||||||
| Amount | Amount | Presented | Financial | |||||||||||||||||||||
| of | Offset in the | in the | Instruments | Cash | ||||||||||||||||||||
| Recognized | Balance | Balance | Received as | Received as | Net | |||||||||||||||||||
| Assets | Sheet | Sheet | Collateral | Collateral | Amount | |||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| TBA securities | ( | ) | ||||||||||||||||||||||
| Reverse repurchase agreements | ( | ) | ||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| TBA securities | ( | ) | ||||||||||||||||||||||
| Reverse repurchase agreement | ( | ) | ||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Offsetting of Liabilities | ||||||||||||||||||||||||
| Net Amount | Gross Amount Not | |||||||||||||||||||||||
| Gross | Gross | of Liabilities | Offset in the Balance Sheet | |||||||||||||||||||||
| Amount | Amount | Presented | Financial | |||||||||||||||||||||
| of | Offset in the | in the | Instruments | |||||||||||||||||||||
| Recognized | Balance | Balance | Posted as | Cash Posted | Net | |||||||||||||||||||
| Liabilities | Sheet | Sheet | Collateral | as Collateral | Amount | |||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||
| Repurchase Agreements | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| TBA securities | ||||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| Repurchase Agreements | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| TBA securities | ( | ) | ||||||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The amounts disclosed for collateral received by or posted to the same counterparty up to and not exceeding the net amount of the asset or liability presented in the balance sheets. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 6 for a discussion of collateral posted or received against or for repurchase obligations and derivative and other hedging instruments.
NOTE 8. CAPITAL STOCK
Common Stock Issuances
During the nine months ended September 30, 2026 and the year ended December 31, 2025, the Company completed the following public offerings of shares of its common stock. The Company did not complete any public offerings of shares of its common stock during the three months ended September 30, 2026.
| ($ in thousands, except per share amounts) | |||||||||||||
| Weighted | |||||||||||||
| Average | |||||||||||||
| Price | |||||||||||||
| Received | Net | ||||||||||||
| Type of Offering | Period | Per Share(1) | Shares | Proceeds(2) | |||||||||
| 2026 | |||||||||||||
| At the Market Offering Program(3) | First Quarter | $ | $ | ||||||||||
| At the Market Offering Program(3) | Second Quarter | $ | |||||||||||
| Total | $ | ||||||||||||
| 2025 | |||||||||||||
| At the Market Offering Program(3) | First Quarter | $ | $ | ||||||||||
| At the Market Offering Program(3) | Second Quarter | ||||||||||||
| At the Market Offering Program(3) | Third Quarter | ||||||||||||
| At the Market Offering Program(3) | Fourth Quarter | ||||||||||||
| Total | $ | ||||||||||||
| (1) | Weighted average price received per share is after deducting the underwriters’ discount, if applicable, and other offering costs. |
| (2) | Net proceeds are net of the underwriters’ discount, if applicable, and other offering costs. |
| (3) | The Company has entered into 14 equity distribution agreements, 13 of which have either been terminated because all shares were sold 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
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
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
On June 22, 2026, 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
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. The stock repurchase program may be suspended or discontinued at the Company’s discretion without prior notice and has no termination date.
From the inception of the stock repurchase program through September 30, 2026, the Company repurchased a total of
Cash Dividends
The table below presents the cash dividends declared on the Company’s common stock.
| (in thousands, except per share amounts) | ||||||||
| Year | Per Share Amount | Total | ||||||
| 2013 | $ | $ | ||||||
| 2014 | ||||||||
| 2015 | ||||||||
| 2016 | ||||||||
| 2017 | ||||||||
| 2018 | ||||||||
| 2019 | ||||||||
| 2020 | ||||||||
| 2021 | ||||||||
| 2022 | ||||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 - YTD(1) | ||||||||
| Totals | $ | $ | ||||||
| (1) | On October 14, 2026, the Company declared a dividend of $ |
NOTE 9. STOCK INCENTIVE PLAN
In 2021, the Company’s Board of Directors adopted, and the stockholders approved, the Orchid Island Capital, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”) to replace the Orchid Island Capital, Inc. 2012 Equity Incentive Plan (the “2012 Incentive Plan” and together with the 2021 Incentive Plan, the “Incentive Plans”). The 2021 Incentive Plan provides for the award of stock options, stock appreciation rights, stock awards, PUs, other equity-based awards (and dividend equivalents with respect to awards of PUs and other equity-based awards) and incentive awards. The 2021 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors except that the Company’s full Board of Directors will administer awards made to directors who are not employees of the Company or its affiliates. The 2021 Incentive Plan provides for awards of up to an aggregate of
Performance Units
The Company has issued, and may in the future issue additional, PUs under the Incentive Plans to certain executive officers and employees of its Manager. PUs vest after the end of a defined performance period, based on satisfaction of the performance conditions set forth in the PU agreement. When earned, each PU will be settled by the issuance of one share of the Company’s common stock, at which time the PU will be cancelled. The PUs contain dividend equivalent rights, which entitle the Participants to receive distributions declared by the Company on common stock, but do not include the right to vote the underlying shares of common stock. PUs are subject to forfeiture should the participant no longer serve as an executive officer or employee of the Company or the Manager. Compensation expense for the PUs, included in incentive compensation on the statements of comprehensive income (loss), is recognized over the remaining vesting period once it becomes probable that the performance conditions will be achieved. The dividend payable on the PUs as of September 30, 2026 and December 31, 2025 was $
The following table presents information related to PUs outstanding during the nine months ended September 30, 2026 and 2025.
| ($ in thousands, except per share data) | ||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Grant Date | Grant Date | |||||||||||||||
| Shares | Fair Value | Shares | Fair Value | |||||||||||||
| Unvested, beginning of period | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited(1) | ( | ) | ||||||||||||||
| Vested and issued | ( | ) | ( | ) | ||||||||||||
| Unvested, end of period | $ | $ | ||||||||||||||
| Compensation expense during period | $ | $ | ||||||||||||||
| Unrecognized compensation expense, end of period | $ | $ | ||||||||||||||
| Intrinsic value, end of period | $ | $ | ||||||||||||||
| Weighted-average remaining vesting term (in years) | ||||||||||||||||
| (1) | During 2025, a participant's service as an employee of the Manager ended, resulting in the forfeiture of |
Stock Awards
The Company has issued, and may in the future issue additional, immediately vested common stock under the Incentive Plans to certain executive officers and employees of its Manager. The following table presents information related to fully vested common stock issued during the nine months ended September 30, 2026 and 2025. All of the fully vested shares of common stock issued during the nine months ended September 30, 2026 and 2025, and the related compensation expense, were granted with respect to service performed during the fiscal years ended December 31, 2025 and 2024, respectively.
| ($ in thousands, except per share data) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Fully vested shares granted | ||||||||
| Weighted average grant date price per share | $ | $ | ||||||
| Compensation expense related to fully vested shares of common stock awards (1) | $ | $ | ||||||
| (1) | The awards issued during the three months ended March 31, 2026 and 2025 were granted with respect to service performed in 2025 and 2024, respectively. |
Deferred Stock Units
Non-employee directors receive a portion of their compensation in the form of DSU awards pursuant to the Incentive Plans. Each DSU represents a right to receive one share of the Company’s common stock. Each non-employee director may elect to receive all of his or her compensation in the form of DSUs. The DSUs are immediately vested and are settled at a future date based on the election of the individual participant. Compensation expense for the DSUs is included in directors’ fees and liability insurance in the statements of comprehensive income (loss). The DSUs contain dividend equivalent rights, which entitle the participant to receive distributions declared by the Company on common stock. These 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 dividend payable on the DSUs as of September 30, 2026 and December 31, 2025 was $
The following table presents information related to the DSUs outstanding during the nine months ended September 30, 2026 and 2025.
| ($ in thousands, except per share data) | ||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Grant Date | Grant Date | |||||||||||||||
| Shares | Fair Value | Shares | Fair Value | |||||||||||||
| Outstanding, beginning of period | $ | $ | ||||||||||||||
| Granted and vested | ||||||||||||||||
| Outstanding, end of period | $ | $ | ||||||||||||||
| Compensation expense during period | $ | $ | ||||||||||||||
| Intrinsic value, end of period | $ | $ | ||||||||||||||
NOTE 10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any reported or unreported contingencies as of September 30, 2026.
NOTE 11. INCOME TAXES
The Company will generally not be subject to U.S. federal income tax on its REIT taxable income to the extent that it distributes its REIT taxable income to its stockholders and satisfies the ongoing REIT requirements, including meeting certain asset, income and stock ownership tests. A REIT must generally distribute at least 90% of its REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gain, annually to its stockholders, to maintain REIT status. To avoid a 4% excise tax, a REIT generally must distribute during the taxable year an amount equal to at least 85% of its ordinary income, 95% of its capital gain net income, and certain undistributed income from prior taxable years. 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.
NOTE 12. EARNINGS PER SHARE (EPS)
The Company had dividend eligible PUs and DSUs that were outstanding during the nine and three months ended September 30, 2026 and 2025. The basic and diluted per share computations include these unvested PUs and DSUs if there is income available to common stock, as they have dividend participation rights. The unvested PUs and DSUs have no contractual obligation to share in losses. Because there is no such obligation, the unvested PUs and DSUs are not included in the basic and diluted EPS computations when no income is available to common stock even though they are considered participating securities.
The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, 2026 and 2025.
| (in thousands, except per share information) | ||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic and diluted EPS per common share: | ||||||||||||||||
| Numerator for basic and diluted EPS per share of common stock: | ||||||||||||||||
| Net (loss) income - Basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares of common stock: | ||||||||||||||||
| Shares of common stock outstanding at the balance sheet date | ||||||||||||||||
| Unvested dividend eligible share based compensation outstanding at the balance sheet date | ||||||||||||||||
| Effect of weighting | ( | ) | ( | ) | ||||||||||||
| Weighted average shares-basic and diluted | ||||||||||||||||
| Net (loss) income per common share: | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Anti-dilutive incentive shares not included in calculation | ||||||||||||||||
NOTE 13. FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies recurring fair value measurements within the fair value hierarchy based on the lowest level input that is significant to the measurement in its entirety. These inputs are:
| ● | Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume), |
| ● | Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and |
| ● | Level 3 valuations, where the valuation is generated from model-based techniques that use significant unobservable assumptions. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability, developed using the best information available in the circumstances. 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 and TBA securities are classified within Level 2 of the fair value hierarchy, and such valuations currently are determined by the Company based on independent pricing sources and/or third party broker quotes. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. The Company and the independent pricing sources use various valuation techniques to determine the price of the Company’s securities. These techniques include observing the most recent market for like or identical assets (including security coupon, maturity, yield, and prepayment speeds), spread pricing techniques to determine market credit spreads (option adjusted spread, zero volatility spread, spread to the U.S. Treasury curve or spread to a benchmark such as a TBA), and model driven approaches (the discounted cash flow method, Black Scholes and SABR models which rely upon observable market rates such as the term structure of interest rates and volatility). The appropriate spread pricing method used is based on market convention. The pricing source determines the spread of recently observed trade activity or observable markets for assets similar to those being priced. The spread is then adjusted based on variances in certain characteristics between the market observation and the asset being priced. Those characteristics include: type of asset, the expected life of the asset, the stability and predictability of the expected future cash flows of the asset, whether the coupon of the asset is fixed or adjustable, the guarantor of the security if applicable, the coupon, the maturity, the issuer, size of the underlying loans, year in which the underlying loans were originated, loan to value ratio, state in which the underlying loans reside, credit score of the underlying borrowers and other variables if appropriate. The fair value of the security is determined by using the adjusted spread.
The Company’s U.S. Treasury securities that are based on quoted prices for identical instruments in active markets are classified within Level 1 of the fair value hierarchy. U.S. Treasury securities are classified within Level 2 of the fair value hierarchy investments when they were issued before the current on-the-run security and were still outstanding at measurement date.
The Company’s futures contracts are classified within Level 1 of the fair value hierarchy, as they are exchange-traded instruments and quoted market prices are readily available. Futures contracts are settled daily. The Company’s interest rate swaps, interest rate swaptions and dual digital options are classified within Level 2 of the fair value hierarchy. The fair value of interest rate swaps is determined using a discounted cash flow approach using forward market interest rates and discount rates, which are observable inputs. The fair value of interest rate swaptions and dual digital options are determined using an option pricing model.
RMBS, U.S. Treasury securities, derivatives and TBA securities were recorded at fair value on a recurring basis during the nine and three months ended September 30, 2026 and 2025. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.
The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying values due to the short-term nature of these financial instruments as of September 30, 2026 and December 31, 2025. The Company estimates the fair value of the cash and cash equivalents and restricted cash using Level 1 inputs, and the accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities using Level 2 inputs.
The following table presents financial assets (liabilities) measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025. Derivative contracts are reported as a net position by contract type, and not based on master netting arrangements.
| (in thousands) | ||||||||||||
| Quoted Prices | ||||||||||||
| in Active | Significant | |||||||||||
| Markets for | Other | Significant | ||||||||||
| Identical | Observable | Unobservable | ||||||||||
| Assets | Inputs | Inputs | ||||||||||
| (Level 1) | (Level 2) | (Level 3) | ||||||||||
| September 30, 2026 | ||||||||||||
| Mortgage-backed securities | $ | $ | $ | |||||||||
| U.S. Treasury securities | ||||||||||||
| Interest rate swaps | ||||||||||||
| TBA securities | ||||||||||||
| Obligation to return securities borrowed under reverse repurchase agreements | ( | ) | ||||||||||
| December 31, 2025 | ||||||||||||
| Mortgage-backed securities | $ | $ | $ | |||||||||
| U.S. Treasury securities | ||||||||||||
| Interest rate swaps | ||||||||||||
| TBA securities | ( | ) | ||||||||||
| Obligation to return securities borrowed under reverse repurchase agreements | ( | ) | ||||||||||
During the nine and three months ended September 30, 2026 and 2025, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.
NOTE 14. RELATED PARTY TRANSACTIONS
Management Agreement
The Company is externally managed and advised by Bimini Advisors, LLC (the “Manager”) pursuant to the terms of a management agreement. The management agreement has been renewed through February 20, 2027 and provides for automatic -year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company. The Manager receives a monthly management fee in the amount of:
| ● | One-twelfth of 1.5% of the first $250 million of the Company’s month-end equity, as defined in the management agreement, |
| ● | One-twelfth of 1.25% of the Company’s month-end equity that is greater than $250 million and less than or equal to $500 million, and |
| ● | One-twelfth of 1.00% of the Company’s month-end equity that is greater than $500 million. |
The Manager also provides certain repurchase agreement trading, clearing and administrative services to the Company. In consideration for such services, the Company pays the following fees to the Manager:
| ● | A daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and |
| ● | A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month. |
The Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the Manager the Company’s pro rata portion of certain overhead costs set forth in the management agreement. Should the Company terminate the management agreement without cause, it will pay the Manager a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the term of the agreement.
Total expenses recorded for the management fee, allocated overhead and repurchase agreement trading, clearing and administrative services were approximately $
Other Relationships with Bimini
Robert Cauley, the Company’s Chief Executive Officer and Chairman of the Board of Directors, also serves as Chief Executive Officer and Chairman of the Board of Directors of Bimini and owns shares of common stock of Bimini. George H. Haas, IV, the Company’s Chief Financial Officer, Chief Investment Officer, Secretary and a member of the Board of Directors, also serves as the Chief Financial Officer, Chief Investment Officer and Treasurer of Bimini and owns shares of common stock of Bimini. In addition, as of September 30, 2026, Bimini owned
NOTE 15. SEGMENT INFORMATION
The Company follows ASC 280, Segment Reporting, which establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial statements issued to shareholders. The Company’s Chief Operating Decision Maker ("CODM"), its CEO, assesses performance and allocates resources based on company-wide financial information. The Company derives nearly all of its income from interest on its RMBS portfolio. Consequently, the Company has determined that it operates in a single reportable segment and the strategic purpose of all operating activities is to support that segment. The CODM evaluates company-wide performance based on multiple performance measures, including net income, which is the Company's primary measure of segment performance. The CODM does not generally evaluate the Company's performance using asset or historical cash flow information. Because the Company has one reportable segment, the required segment financial information is included in the financial statements. Significant expenses within net income that are used to evaluate performance are each separately presented in the statements of comprehensive income (loss). The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company's segment assets are presented in the Company's Balance Sheets under total assets.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes to those statements included in Item 1 of this Form 10-Q. Certain written statements in this Quarterly Report on Form 10-Q that are not historical facts constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Statements in this report addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend policy are forward-looking statements. Forward-looking statements are based upon management’s beliefs, assumptions, and expectations as of the date of this report regarding future events and operating performance, considering all information currently available to us, and are applicable only as of the date of this report. Forward-looking statements generally can be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions. We caution readers not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about interest rates, inflation, liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio composition, positioning and repositioning, hedging levels, leverage ratio, dividends, book value, investment and return opportunities, the supply and demand for Agency RMBS and the performance of the Agency RMBS sector generally, the effect of actual or expected actions of the U.S. government, including the Fed, market expectations, capital raising, future opportunities and prospects of the Company, the stock repurchase program, geopolitical uncertainty and general economic conditions (including the effects of artificial intelligence, wars, tariffs, trade wars, inflation, the U.S. deficit, and the strength of the U.S. dollar). As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Overview
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”). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through ("PT") Agency RMBS, such as mortgage PT certificates issued by the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac" and together with Fannie Mae, the "Enterprises") or the Government National Mortgage Association ("Ginnie Mae" and, together with the Enterprises the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”) and (ii) structured Agency RMBS, such as interest-only securities (“IOs”), inverse interest-only securities (“IIOs”) and principal only securities (“POs”), among other types of structured Agency RMBS. We were formed by Bimini Capital Management, Inc. ("Bimini") in August 2010, commenced operations on November 24, 2010 and completed our initial public offering (“IPO”) on February 20, 2013. We are externally managed by Bimini Advisors, LLC ("Bimini Advisors," or our "Manager"), an investment adviser registered with 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 appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in the two categories of Agency RMBS described above. We seek to generate income from the net interest margin on our leveraged PT RMBS and structured Agency RMBS portfolio. We intend to fund our PT RMBS and structured Agency RMBS through short-term borrowings structured as repurchase agreements.
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 REIT taxable income (as defined in the Code) to our stockholders and maintain our REIT qualification.
The Company’s common stock trades on the New York Stock Exchange under the symbol “ORC”.
Capital Raising Activities
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions. We issued a total of 30,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $250.0 million and net proceeds of approximately $245.8 million, after commissions and fees, prior to its termination in February 2025.
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $350,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions. On July 28, 2025, the February 2025 Equity Distribution Agreement was amended to increase the aggregate amount of gross proceeds from the sales of shares that may be offered by $150,000,000 to a total of $500,000,000. We issued a total of 59,492,504 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $445.1 million and net proceeds of approximately $438.0 million, after commissions and fees, prior to its termination in October 2025.
On October 27, 2025, we entered into an equity distribution agreement (the “October 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $500,000,000 of gross proceeds from the sales of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. From inception through September 30, 2026, we issued a total of 48,824,644 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $360.9 million, and net proceeds of approximately $355.2 million, after commissions and fees. For the nine months ended September 30, 2026, we issued a total of 18,558,681 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $137.7 million, and net proceeds of approximately $135.5 million, after commissions and fees.
Stock Repurchase Agreement
On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 400,000 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 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. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 904,564 shares of the Company’s common stock. Coupled with the 156,751 shares remaining from the original 400,000 share authorization, the increased authorization brought the total authorization to 1,061,315 shares, representing 10% of the 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 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.
On June 22, 2026, 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 25,000,000 shares, bringing the remaining authorization under the stock repurchase program to 26,612,580 shares, representing approximately 13.3% of the Company’s then outstanding shares of common stock.
From the inception of the stock repurchase program through September 30, 2026, the Company repurchased a total of 12,310,506 shares at an aggregate cost of approximately $123.3 million, including commissions and fees, for a weighted average price of $10.02 per share. During the three months ended September 30, 2026, the Company repurchased a total of 4,946,123 shares at an aggregate cost of approximately $31.2 million, including commissions and fees, for a weighted average price of $6.30 per share. During the nine months ended September 30, 2026, the Company repurchased a total of 6,052,680 shares at an aggregate cost of approximately $38.5 million, including commissions and fees, for a weighted average price of $6.36 per share. During the year ended December 31, 2025, the Company repurchased a total of 1,113,224 shares at an aggregate cost of approximately $7.3 million, including commissions and fees, for a weighted average price of $6.52 per share. Subsequent to September 30, 2026, the Company repurchased a total of 1,669,704 shares at an aggregate cost of approximately $8.4 million, including commissions and fees, for a weighted average price of $5.05 per share. The remaining authorization under the stock repurchase program as of October 22, 2026 was 19,996,753 shares.
Factors that Affect our Results of Operations and Financial Condition
A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:
| ● |
interest rate trends; |
| ● | changes in our cost of funds, including changes in the Fed Funds rate; | |
| ● |
the difference between Agency RMBS yields and our funding and hedging costs; |
| ● |
competition for, and supply of, investments in Agency RMBS; |
| ● |
actions taken by the U.S. government, including the presidential administration, the Fed, the Federal Housing Financing Agency (the “FHFA”), the FDIC, Federal Housing Administration (the “FHA”), the Federal Open Market Committee (the “FOMC”) and the U.S. Treasury; |
| ● |
prepayment rates on mortgages underlying our Agency RMBS and credit trends insofar as they affect prepayment rates; and |
| ● |
other market developments, including bank failures. |
In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:
| ● |
our degree of leverage; |
| ● |
our access to funding and borrowing capacity; |
| ● |
our borrowing costs; |
| ● |
our hedging activities; |
| ● |
the market value of our investments; and |
| ● |
the requirements to maintain our qualification as a REIT and the requirements to qualify for a registration exemption under the Investment Company Act. |
Results of Operations
Described below are the Company’s results of operations for the nine and three months ended September 30, 2026, as compared to the Company’s results of operations for the nine and three months ended September 30, 2025.
Net (Loss) Income Summary
Net loss for the nine months ended September 30, 2026 was $109.7 million, or $0.56 per share. Net income for the nine months ended September 30, 2025 was $55.6 million, or $0.48 per share. Net loss for the three months ended September 30, 2026 was $178.9 million, or $0.90 per share. Net income for the three months ended September 30, 2025 was $72.1 million, or $0.53 per share. The components of net (loss) income for the nine and three months ended September 30, 2026 and 2025, along with the changes in those components are presented in the table below:
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Interest income |
$ | 486,145 | $ | 281,813 | $ | 204,332 | $ | 164,120 | $ | 108,434 | $ | 55,686 | ||||||||||||
| Interest expense |
(309,976 | ) | (212,027 | ) | (97,949 | ) | (104,986 | ) | (81,515 | ) | (23,471 | ) | ||||||||||||
| Net interest income |
176,169 | 69,786 | 106,383 | 59,134 | 26,919 | 32,215 | ||||||||||||||||||
| (Losses) gains on RMBS and derivative contracts |
(265,357 | ) | 499 | (265,856 | ) | (231,719 | ) | 50,600 | (282,319 | ) | ||||||||||||||
| Net portfolio (loss) income |
(89,188 | ) | 70,285 | (159,473 | ) | (172,585 | ) | 77,519 | (250,104 | ) | ||||||||||||||
| Expenses |
(20,495 | ) | (14,663 | ) | (5,832 | ) | (6,335 | ) | (5,441 | ) | (894 | ) | ||||||||||||
| Net (loss) income |
$ | (109,683 | ) | $ | 55,622 | $ | (165,305 | ) | $ | (178,920 | ) | $ | 72,078 | $ | (250,998 | ) | ||||||||
GAAP and Non-GAAP Reconciliations
In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including “Net Earnings Excluding Realized and Unrealized Gains and Losses”, “Economic Interest Expense,” “Economic Net Interest Income,” “Interest Income – Inclusive of Premium Amortization/Discount Accretion” and “Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion.”
Net Earnings Excluding Realized and Unrealized Gains and Losses
We have elected to account for our Agency RMBS under the fair value option. Securities held under the fair value option are recorded at estimated fair value, with changes in the fair value recorded as unrealized gains or losses through the statements of comprehensive income (loss).
In addition, we have not designated our derivative financial instruments used for hedging purposes as hedges for accounting purposes, but rather hold them for economic hedging purposes. Changes in fair value of these instruments are presented in a separate line item in the Company’s statements of comprehensive income (loss) and are not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.
Presenting net earnings excluding realized and unrealized gains and losses allows management to: (i) isolate the net interest income and other expenses of the Company over time, free of all fair value adjustments and (ii) assess the effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance. Our funding and hedging strategies, capital allocation and asset selection are integral to our risk management strategy, and therefore critical to the management of our portfolio. We believe that the presentation of our net earnings excluding realized and unrealized gains is useful to investors because it provides a means of comparing our results of operations to those of our peers who have not elected the same accounting treatment. Our presentation of net earnings excluding realized and unrealized gains and losses may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, net earnings excluding realized and unrealized gains and losses should not be considered as a substitute for our GAAP net income (loss) as a measure of our financial performance or any measure of our liquidity under GAAP. The table below presents a reconciliation of our net income (loss) determined in accordance with GAAP and net earnings excluding realized and unrealized gains and losses.
Described below are the Company’s results of operations for the nine months ended September 30, 2026 and 2025, and for each quarter in 2026 to date and 2025.
| Net Earnings Excluding Realized and Unrealized Gains and Losses |
||||||||||||||||||||||||
| (in thousands, except per share data) |
||||||||||||||||||||||||
| Per Share | ||||||||||||||||||||||||
| Net | Net | |||||||||||||||||||||||
| Income (Loss) |
Income (Loss) |
|||||||||||||||||||||||
| Excluding |
Excluding |
|||||||||||||||||||||||
| Net |
Realized and |
Realized and |
Net |
Realized and |
Realized and |
|||||||||||||||||||
| Income |
Unrealized |
Unrealized |
Income |
Unrealized |
Unrealized |
|||||||||||||||||||
| (Loss) | Gains and | Gains and | (Loss) | Gains and | Gains and | |||||||||||||||||||
| (GAAP) |
Losses(1) |
Losses |
(GAAP) |
Losses |
Losses |
|||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
$ | (178,920 | ) | $ | (231,719 | ) | $ | 52,799 | $ | (0.90 | ) | $ | (1.17 | ) | $ | 0.27 | ||||||||
| June 30, 2026 |
89,192 | 35,983 | 53,209 | 0.44 | 0.18 | 0.26 | ||||||||||||||||||
| March 31, 2026 |
(19,955 | ) | (69,621 | ) | 49,666 | (0.11 | ) | (0.37 | ) | 0.26 | ||||||||||||||
| December 31, 2025 |
103,408 | 70,742 | 32,666 | 0.62 | 0.43 | 0.19 | ||||||||||||||||||
| September 30, 2025 |
72,078 | 50,600 | 21,478 | 0.53 | 0.37 | 0.16 | ||||||||||||||||||
| June 30, 2025 |
(33,578 | ) | (51,736 | ) | 18,158 | (0.29 | ) | (0.45 | ) | 0.16 | ||||||||||||||
| March 31, 2025 |
17,122 | 1,635 | 15,487 | 0.18 | 0.02 | 0.16 | ||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
$ | (109,683 | ) | $ | (265,357 | ) | $ | 155,674 | $ | (0.56 | ) | $ | (1.35 | ) | $ | 0.79 | ||||||||
| September 30, 2025 |
55,622 | 499 | 55,123 | 0.48 | - | 0.48 | ||||||||||||||||||
| (1) |
Includes realized and unrealized gains (losses) on RMBS and derivative financial instruments, including net interest income or expense on interest rate swaps. |
Economic Interest Expense and Economic Net Interest Income
We use derivative and other hedging instruments, specifically Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, short positions in U.S. Treasury securities, dual digital options, interest rate floors and caps, and interest rate swaps and swaptions, to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.
We have not elected to designate our derivative holdings for hedge accounting treatment. Changes in fair value of these instruments are presented in a separate line item in our statements of comprehensive income (loss) and not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.
For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses, specifically Fed Funds, SOFR, ERIS SOFR Swap, and U.S. Treasury futures, dual digital options, interest rate floors and caps, and interest rate swaps and swaptions, that pertain to each period presented. We believe that adjusting our interest expense for the periods presented by the gains or losses on these derivative instruments would not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments may cover periods that extend into the future, not just the current period. Any realized or unrealized gains or losses on the instruments reflect the change in market value of the instrument caused by changes in underlying interest rates applicable to the term covered by the instrument, not just the current period. For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on borrowings to reflect total economic interest expense for the applicable period. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income. This presentation includes gains or losses on all contracts in effect during the reporting period, covering the current period as well as periods in the future.
From time to time, we invest in TBAs, which are forward contracts for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS to be delivered into the contract are not known until shortly before the settlement date. We may choose, prior to settlement, to move the settlement of these securities out to a later date by entering into a dollar roll transaction. The Agency RMBS purchased or sold for a forward settlement date are typically priced at a discount to equivalent securities settling in the current month. Consequently, forward purchases of Agency RMBS and dollar roll transactions represent a form of off-balance sheet financing. These TBAs are accounted for as derivatives and marked to market through the income statement. Gains or losses on TBAs are included with gains or losses on other derivative contracts and are not included in interest income for purposes of the discussions below.
We believe that economic interest expense and economic net interest income provide meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio or operations. The unrealized gains or losses on derivative instruments presented in our statements of comprehensive income (loss) are not necessarily representative of the total interest rate expense that we will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses we ultimately realize, and which will affect our total interest rate expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.
Our presentation of the economic value of our hedging strategy has important limitations. First, other market participants may calculate economic interest expense and economic net interest income differently than the way we calculate them. Second, while we believe that the calculation of the economic value of our hedging strategy described above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, the economic value of our investment strategy should not be viewed in isolation and is not a substitute for interest expense and net interest income computed in accordance with GAAP.
The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for each quarter in 2026 to date and 2025.
| Gains (Losses) on Derivative Instruments |
||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||
| U.S. Treasury Short and | Funding Hedges | |||||||||||||||||||
| Recognized |
TBA Securities |
Attributed to |
Attributed to |
|||||||||||||||||
| in Income |
Gain (Loss) |
Current |
Future |
|||||||||||||||||
| Statement | Short | Long | Period | Periods | ||||||||||||||||
| (GAAP) |
Positions |
Positions |
(Non-GAAP) |
(Non-GAAP) |
||||||||||||||||
| Three Months Ended |
||||||||||||||||||||
| September 30, 2026 |
$ | 335,368 | $ | 19,805 | $ | (1,180 | ) | $ | 13,010 | $ | 303,733 | |||||||||
| June 30, 2026 |
62,400 | (4,270 | ) | (347 | ) | 12,953 | 54,064 | |||||||||||||
| March 31, 2026 |
46,307 | (408 | ) | 1,277 | 14,643 | 30,795 | ||||||||||||||
| December 31, 2025 |
14,048 | (3,478 | ) | 158 | 19,578 | (2,210 | ) | |||||||||||||
| September 30, 2025 |
(8,772 | ) | (4,272 | ) | 957 | 21,872 | (27,329 | ) | ||||||||||||
| June 30, 2025 |
(53,286 | ) | (7,662 | ) | 472 | 20,937 | (67,033 | ) | ||||||||||||
| March 31, 2025 |
(74,659 | ) | 3,026 | 100 | 20,912 | (98,697 | ) | |||||||||||||
| Nine Months Ended |
||||||||||||||||||||
| September 30, 2026 |
$ | 444,075 | $ | 15,127 | $ | (250 | ) | $ | 40,606 | $ | 388,592 | |||||||||
| September 30, 2025 |
(136,717 | ) | (8,908 | ) | 1,529 | 63,721 | (193,059 | ) | ||||||||||||
| Economic Interest Expense and Economic Net Interest Income |
||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||
| Interest Expense on Borrowings |
||||||||||||||||||||||||
| Gains |
||||||||||||||||||||||||
| (Losses) on |
||||||||||||||||||||||||
| Derivative |
Net Interest Income |
|||||||||||||||||||||||
| Instruments |
GAAP |
|||||||||||||||||||||||
| GAAP |
GAAP |
Attributed |
Economic |
Net Interest |
Economic |
|||||||||||||||||||
| Interest |
Interest |
to Current |
Interest |
Income |
Net Interest |
|||||||||||||||||||
| Income |
Expense |
Period(1) |
Expense(2) |
(Expense) |
Income(3) |
|||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
$ | 164,120 | $ | 104,986 | $ | 13,010 | $ | 91,976 | $ | 59,134 | $ | 72,144 | ||||||||||||
| June 30, 2026 |
164,187 | 104,215 | 12,953 | 91,262 | 59,972 | 72,925 | ||||||||||||||||||
| March 31, 2026 |
157,838 | 100,775 | 14,643 | 86,132 | 57,063 | 71,706 | ||||||||||||||||||
| December 31, 2025 |
132,188 | 93,705 | 19,578 | 74,127 | 38,483 | 58,061 | ||||||||||||||||||
| September 30, 2025 |
108,434 | 81,515 | 21,872 | 59,643 | 26,919 | 48,791 | ||||||||||||||||||
| June 30, 2025 |
92,289 | 69,135 | 20,937 | 48,198 | 23,154 | 44,091 | ||||||||||||||||||
| March 31, 2025 |
81,090 | 61,377 | 20,912 | 40,465 | 19,713 | 40,625 | ||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
$ | 486,145 | $ | 309,976 | $ | 40,606 | $ | 269,370 | $ | 176,169 | $ | 216,775 | ||||||||||||
| September 30, 2025 |
281,813 | 212,027 | 63,721 | 148,306 | 69,786 | 133,507 | ||||||||||||||||||
| (1) |
Reflects the effect of derivative instrument hedges for only the period presented. |
| (2) |
Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP interest expense. |
| (3) |
Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net interest income. |
Net Interest Income (Expense)
During the nine months ended September 30, 2026, we earned net interest income of $176.2 million consisting of $486.1 million of interest income from RMBS assets offset by $310.0 million of interest expense on borrowings. For the comparable period ended September 30, 2025, we earned $69.8 million of net interest income, consisting of $281.8 million of interest income from RMBS assets offset by $212.0 million of interest expense on borrowings. The $204.3 million increase in interest income was due to a 31 basis point ("bps") increase in the yield on average RMBS, combined with a $4,330.1 million increase in average RMBS. The $98.0 million increase in interest expense was due to a $4,199.8 million increase in average outstanding borrowings, offset by a 48 bps decrease in the average cost of funds.
During the three months ended September 30, 2026, we earned net interest income of $59.1 million consisting of $164.1 million of interest income from RMBS assets offset by $105.0 million of interest expense on borrowings. For the comparable period ended September 30, 2025, we earned $26.9 million of net interest income, consisting of $108.4 million of interest income from RMBS assets offset by $81.5 million of interest expense on borrowings. The $55.7 million increase in interest income was due to a 26 bps increase in the yield on average RMBS, combined with a $3,428.9 million increase in average RMBS. The $23.5 million increase in interest expense was due to a $3,392.9 million increase in average outstanding borrowings, offset by a 53 bps decrease in the average cost of funds.
On an economic basis, our interest expense on borrowings for the nine months ended September 30, 2026 and 2025 was $269.4 million and $148.3 million, respectively, resulting in $216.8 million and $133.5 million of economic net interest income, respectively.
On an economic basis, our interest expense on borrowings for the three months ended September 30, 2026 and 2025 was $92.0 million and $59.6 million, respectively, resulting in $72.1 million and $48.8 million of economic net interest income, respectively.
The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income and net interest spread for the nine months ended September 30, 2026 and 2025, and for each quarter in 2026 to date and 2025 on both a GAAP and economic basis.
| ($ in thousands) |
||||||||||||||||||||||||||||||||
| Average |
Yield on |
Interest Expense |
Average Cost of Funds |
|||||||||||||||||||||||||||||
| RMBS |
Interest |
Average |
Average |
GAAP |
Economic |
GAAP |
Economic |
|||||||||||||||||||||||||
| Held(1) |
Income |
RMBS |
Borrowings(1) |
Basis |
Basis(2) |
Basis |
Basis(3) |
|||||||||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||||||||||
| September 30, 2026 |
$ | 11,103,616 | $ | 164,120 | 5.91 | % | $ | 10,724,316 | $ | 104,986 | $ | 91,976 | 3.92 | % | 3.43 | % | ||||||||||||||||
| June 30, 2026 |
11,439,353 | 164,187 | 5.74 | % | 10,975,819 | 104,215 | 91,262 | 3.80 | % | 3.33 | % | |||||||||||||||||||||
| March 31, 2026 |
10,983,600 | 157,838 | 5.75 | % | 10,490,095 | 100,775 | 86,132 | 3.84 | % | 3.28 | % | |||||||||||||||||||||
| December 31, 2025 |
9,492,369 | 132,188 | 5.57 | % | 9,061,222 | 93,705 | 74,127 | 4.14 | % | 3.27 | % | |||||||||||||||||||||
| September 30, 2025 |
7,674,720 | 108,434 | 5.65 | % | 7,331,428 | 81,515 | 59,643 | 4.45 | % | 3.25 | % | |||||||||||||||||||||
| June 30, 2025 |
6,865,727 | 92,289 | 5.38 | % | 6,537,260 | 69,135 | 48,198 | 4.23 | % | 2.95 | % | |||||||||||||||||||||
| March 31, 2025 |
5,995,702 | 81,090 | 5.41 | % | 5,722,092 | 61,377 | 40,465 | 4.29 | % | 2.83 | % | |||||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||
| September 30, 2026 |
$ | 11,175,523 | $ | 486,145 | 5.80 | % | $ | 10,730,076 | $ | 309,976 | $ | 269,370 | 3.85 | % | 3.35 | % | ||||||||||||||||
| September 30, 2025 |
6,845,383 | 281,813 | 5.49 | % | 6,530,260 | 212,027 | 148,306 | 4.33 | % | 3.03 | % | |||||||||||||||||||||
| ($ in thousands) |
||||||||||||||||
| Net Interest Income |
Net Interest Spread |
|||||||||||||||
| GAAP |
Economic |
GAAP |
Economic |
|||||||||||||
| Basis |
Basis(2) |
Basis |
Basis(4) |
|||||||||||||
| Three Months Ended |
||||||||||||||||
| September 30, 2026 |
$ | 59,134 | $ | 72,144 | 1.99 | % | 2.48 | % | ||||||||
| June 30, 2026 |
59,972 | 72,925 | 1.94 | % | 2.41 | % | ||||||||||
| March 31, 2026 |
57,063 | 71,706 | 1.91 | % | 2.47 | % | ||||||||||
| December 31, 2025 |
38,483 | 58,061 | 1.43 | % | 2.30 | % | ||||||||||
| September 30, 2025 |
26,919 | 48,791 | 1.20 | % | 2.40 | % | ||||||||||
| June 30, 2025 |
23,154 | 44,091 | 1.15 | % | 2.43 | % | ||||||||||
| March 31, 2025 |
19,713 | 40,625 | 1.12 | % | 2.58 | % | ||||||||||
| Nine Months Ended |
||||||||||||||||
| September 30, 2026 |
$ | 176,169 | $ | 216,775 | 1.95 | % | 2.45 | % | ||||||||
| September 30, 2025 |
69,786 | 133,507 | 1.16 | % | 2.46 | % | ||||||||||
| (1) |
Portfolio yields and costs of borrowings presented in the tables above are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances. |
| (2) |
Economic interest expense and economic net interest expense presented in the table above includes the effect of our derivative instrument hedges for only the periods presented. |
| (3) |
Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period divided by average RMBS. |
| (4) |
Economic net interest spread is calculated by subtracting average economic cost of funds from realized yield on average RMBS. |
Interest Expense and the Cost of Funds
We had average outstanding borrowings of $10,730.1 million and $6,530.3 million and total interest expense of $310.0 million and $212.0 million for the nine months ended September 30, 2026 and 2025, respectively. Our average cost of funds was 3.85% for the nine months ended September 30, 2026, compared to 4.33% for the comparable period in 2025.
We had average outstanding borrowings of $10,724.3 million and $7,331.4 million and total interest expense of $105.0 million and $81.5 million for the three months ended September 30, 2026 and 2025, respectively. Our average cost of funds was 3.92% for the three months ended September 30, 2026, compared to 4.45% for the comparable period in 2025.
Our economic interest expense was $269.4 million and $148.3 million for the nine months ended September 30, 2026 and 2025, respectively. There was a 32 bps increase in the average economic cost of funds to 3.35% for the nine months ended September 30, 2026, from 3.03% for the nine months ended September 30, 2025.
Our economic interest expense was $92.0 million and $59.6 million for the three months ended September 30, 2026 and 2025, respectively. There was a 18 bps increase in the average economic cost of funds to 3.43% for the three months ended September 30, 2026, from 3.25% for the three months ended September 30, 2025.
Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 17 bps above the one-month average SOFR and 24 bps above the six-month average SOFR for the quarter ended September 30, 2026. Our average economic cost of funds was 32 bps below the average one-month SOFR and 25 bps below the average six-month SOFR for the quarter ended September 30, 2026. The average term to maturity of the outstanding repurchase agreements was 26 days at September 30, 2026 and 39 days at December 31, 2025.
The table below presents the one-month average and six-month average SOFR rates for the nine months ended September 30, 2026 and 2025, and for each quarter in 2026 to date and 2025.
| Average GAAP Cost of Funds |
Average Economic Cost of Funds |
|||||||||||||||||||||||
| Relative to Average |
Relative to Average |
|||||||||||||||||||||||
| Average SOFR |
One-Month |
Six-Month |
One-Month |
Six-Month |
||||||||||||||||||||
| One-Month |
Six-Month |
SOFR |
SOFR |
SOFR |
SOFR |
|||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
3.75 | % | 3.68 | % | 0.17 | % | 0.24 | % | (0.32 | )% | (0.25 | )% | ||||||||||||
| June 30, 2026 |
3.63 | % | 3.67 | % | 0.17 | % | 0.13 | % | (0.30 | )% | (0.34 | )% | ||||||||||||
| March 31, 2026 |
3.65 | % | 3.86 | % | 0.19 | % | (0.02 | )% | (0.37 | )% | (0.58 | )% | ||||||||||||
| December 31, 2025 |
3.79 | % | 4.20 | % | 0.35 | % | (0.06 | )% | (0.52 | )% | (0.93 | )% | ||||||||||||
| September 30, 2025 |
4.31 | % | 4.37 | % | 0.14 | % | 0.08 | % | (1.06 | )% | (1.12 | )% | ||||||||||||
| June 30, 2025 |
4.32 | % | 4.37 | % | (0.09 | )% | (0.14 | )% | (1.37 | )% | (1.42 | )% | ||||||||||||
| March 31, 2025 |
4.33 | % | 4.55 | % | (0.04 | )% | (0.26 | )% | (1.50 | )% | (1.72 | )% | ||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2026 |
3.68 | % | 3.74 | % | 0.17 | % | 0.11 | % | (0.33 | )% | (0.39 | )% | ||||||||||||
| September 30, 2025 |
4.32 | % | 4.43 | % | 0.01 | % | (0.10 | )% | (1.29 | )% | (1.40 | )% | ||||||||||||
Gains or Losses
The table below presents our gains or losses for the nine and three months ended September 30, 2026 and 2025.
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Realized gains (losses) on sales of RMBS |
$ | 924 | $ | (9,288 | ) | $ | 10,212 | $ | - | $ | - | $ | - | |||||||||||
| Unrealized (losses) gains on RMBS |
(710,357 | ) | 146,504 | (856,861 | ) | (567,087 | ) | 59,372 | (626,459 | ) | ||||||||||||||
| Total (losses) gains on RMBS |
(709,433 | ) | 137,216 | (846,649 | ) | (567,087 | ) | 59,372 | (626,459 | ) | ||||||||||||||
| Gains (losses) on interest rate futures |
49,495 | (26,789 | ) | 76,284 | 40,836 | (3,159 | ) | 43,995 | ||||||||||||||||
| Gains (losses) on interest rate swaps |
371,003 | (102,549 | ) | 473,552 | 266,648 | (2,298 | ) | 268,946 | ||||||||||||||||
| Losses on payer swaptions (short positions) |
(4,676 | ) | - | (4,676 | ) | (5,608 | ) | - | (5,608 | ) | ||||||||||||||
| Gains (losses) on payer swaptions (long positions) |
13,376 | - | 13,376 | 14,866 | - | 14,866 | ||||||||||||||||||
| Gains (losses) on TBA securities (short positions) |
17,877 | (8,908 | ) | 26,785 | 20,911 | (4,272 | ) | 25,183 | ||||||||||||||||
| (Losses) gains on TBA securities (long positions) |
(249 | ) | 1,529 | (1,778 | ) | (1,180 | ) | 957 | (2,137 | ) | ||||||||||||||
| Losses on U.S. Treasury securities (short positions) |
(2,750 | ) | - | (2,750 | ) | (1,105 | ) | - | (1,105 | ) | ||||||||||||||
| Total gains (losses) from derivative instruments |
$ | 444,076 | $ | (136,717 | ) | $ | 580,793 | $ | 335,368 | $ | (8,772 | ) | $ | 344,140 | ||||||||||
We invest in RMBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from sales. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the nine months ended September 30, 2026, we received proceeds of $769.8 million from sales of RMBS, resulting in gains of approximately $0.9 million. These proceeds included $413.3 million of RMBS, measured at fair value, that the Company transferred into a larger RMBS transaction collateralized by the transferred securities. This resecuritization did not result in the recognition of any gain or loss. During the nine months ended September 30, 2025, we received proceeds of $733.9 million from sales of RMBS, resulting in losses of approximately $9.3 million.
Realized and unrealized gains and losses on RMBS are driven in part by changes in yields and interest rates, the spreads that Agency RMBS trade relative to comparable duration U.S. Treasuries or swaps, as well as varying levels of demand for RMBS, which affect the pricing of the securities in our portfolio. The unrealized gains and losses on RMBS may also include the premium lost as a result of prepayments on the underlying mortgages, decreasing unrealized gains or increasing unrealized losses as prepayment speeds or premiums increase. To the extent RMBS are carried at a discount to par, unrealized gains or losses on RMBS would also include discount accreted as a result of prepayments on the underlying mortgages, increasing unrealized gains or decreasing unrealized losses as speeds on discounts increase. Gains and losses on interest rate futures contracts are affected by changes in implied forward rates during the reporting period. The table below presents historical interest rate data for each quarter in 2026 to date and 2025.
| 5 Year |
10 Year |
15 Year |
30 Year |
|||||||||||||||||
| U.S. | U.S. | Fixed-Rate | Fixed-Rate | 90 Day | ||||||||||||||||
| Treasury |
Treasury |
Mortgage |
Mortgage |
Average |
||||||||||||||||
| Rate(1) |
Rate(1) |
Rate(2) |
Rate(2) |
SOFR(3) |
||||||||||||||||
| September 30, 2026 |
5.09 | % | 5.29 | % | 6.60 | % | 7.28 | % | 3.68 | % | ||||||||||
| June 30, 2026 |
4.19 | % | 4.42 | % | 5.82 | % | 6.43 | % | 3.63 | % | ||||||||||
| March 31, 2026 |
3.95 | % | 4.31 | % | 5.75 | % | 6.38 | % | 3.68 | % | ||||||||||
| December 31, 2025 |
3.72 | % | 4.16 | % | 5.44 | % | 6.15 | % | 4.01 | % | ||||||||||
| September 30, 2025 |
3.73 | % | 4.15 | % | 5.49 | % | 6.30 | % | 4.35 | % | ||||||||||
| June 30, 2025 |
3.80 | % | 4.23 | % | 5.89 | % | 6.77 | % | 4.34 | % | ||||||||||
| March 31, 2025 |
3.98 | % | 4.25 | % | 5.89 | % | 6.65 | % | 4.35 | % | ||||||||||
| (1) |
Historical 5 and 10 Year U.S. Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange. |
| (2) |
Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac’s Primary Mortgage Market Survey. |
| (3) |
Historical SOFR is obtained from the Federal Reserve Bank of New York. The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 calendar day periods. |
Unrealized Gains and Losses on PT RMBS
For the purpose of recording income on the Company’s investments in PT RMBS, interest income is based on the stated interest rate of the security. Using the fair value accounting method, premiums or discounts to the face value of the PT RMBS present at the date of purchase are not amortized. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the statements of comprehensive income (loss). The following table adjusts the Company’s interest income as reported on the Company’s statements of comprehensive income for the periods indicated to show interest income adjusted for premium amortization and discount accretion on its mortgage-backed security investments. The purpose of presenting this non-GAAP measure of interest income is to provide management and investors with an alternative way of evaluating yield on RMBS that may be more comparable to some of the Company's peers who amortize premiums and discounts on their PT RMBS investments.
| ($ in thousands) |
||||||||||||||||||||||||||||||||
| Unrealized Gains (Losses) on PT RMBS |
Inclusive of |
|||||||||||||||||||||||||||||||
| Price |
Premium Amortization/ |
|||||||||||||||||||||||||||||||
| (Premium |
Only |
Discount Accretion |
||||||||||||||||||||||||||||||
| Average |
Yield on |
Amortization)/ |
Unrealized |
Yield on |
||||||||||||||||||||||||||||
| RMBS |
Interest |
Average |
As |
Discount |
Gains |
Interest |
Average |
|||||||||||||||||||||||||
| Held |
Income |
RMBS |
Reported(1) |
Accretion(2) |
(Losses) |
Income(3) |
RMBS(3) |
|||||||||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||||||||||
| September 30, 2026 |
$ | 11,103,616 | $ | 164,120 | 5.91 | % | $ | (566,995 | ) | $ | (5,929 | ) | $ | (561,066 | ) | $ | 158,191 | 5.70 | % | |||||||||||||
| June 30, 2026 |
11,439,353 | 164,187 | 5.74 | % | (27,326 | ) | (11,679 | ) | (15,647 | ) | 152,508 | 5.33 | % | |||||||||||||||||||
| March 31, 2026 |
10,983,600 | 157,838 | 5.75 | % | (115,868 | ) | (13,551 | ) | (102,317 | ) | 144,287 | 5.25 | % | |||||||||||||||||||
| December 31, 2025 |
9,492,369 | 132,188 | 5.57 | % | 53,960 | (7,412 | ) | 61,372 | 124,776 | 5.26 | % | |||||||||||||||||||||
| September 30, 2025 |
7,674,720 | 108,434 | 5.65 | % | 59,418 | (1,412 | ) | 60,830 | 107,022 | 5.58 | % | |||||||||||||||||||||
| June 30, 2025 |
6,865,727 | 92,289 | 5.38 | % | 9,264 | (1,471 | ) | 10,735 | 90,818 | 5.29 | % | |||||||||||||||||||||
| March 31, 2025 |
5,995,702 | 81,090 | 5.41 | % | 77,445 | 2,608 | 74,837 | 83,698 | 5.58 | % | ||||||||||||||||||||||
| (1) |
As reported in the Company’s statements of comprehensive income (loss) using the fair value accounting method. |
| (2) |
Premium amortization/discount accretion for each period is calculated using the beginning of period market value of all securities. Amounts presented are intended to approximate amortization/accretion using the yield method over the life of the security based on premium/discount present at purchase date. |
| (3) |
Interest Income – Inclusive of Premium Amortization/Discount Accretion and Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion are non-GAAP measures. See “—GAAP and Non-GAAP Reconciliations,” for a description of our non-GAAP measures. |
Expenses
For the nine and three months ended September 30, 2026, the Company’s total operating expenses were approximately $20.5 million and $6.3 million, respectively, compared to approximately $14.7 million and $5.4 million for the nine and three months ended September 30, 2025, respectively. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2026 and 2025.
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Management fees |
$ | 12,183 | $ | 9,023 | $ | 3,160 | $ | 4,072 | $ | 3,294 | $ | 778 | ||||||||||||
| Allocated overhead |
1,881 | 2,077 | (196 | ) | 510 | 887 | (377 | ) | ||||||||||||||||
| Incentive compensation |
2,232 | 242 | 1,990 | 402 | 221 | 181 | ||||||||||||||||||
| Directors fees and liability insurance |
999 | 1,006 | (7 | ) | 364 | 334 | 30 | |||||||||||||||||
| Audit, legal and other professional fees |
1,018 | 1,053 | (35 | ) | 306 | 300 | 6 | |||||||||||||||||
| Direct REIT operating expenses |
1,487 | 783 | 704 | 506 | 309 | 197 | ||||||||||||||||||
| Other administrative |
695 | 479 | 216 | 175 | 96 | 79 | ||||||||||||||||||
| Total expenses |
$ | 20,495 | $ | 14,663 | $ | 5,832 | $ | 6,335 | $ | 5,441 | $ | 894 | ||||||||||||
As of December 31, 2025 and 2024, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the nine months ended September 30, 2026 and 2025, the Company awarded shares of Company common stock with a fair value of $1.7 million and $0.3 million, respectively. Accrued incentive compensation for the nine months ended September 30, 2026 includes a reversal of a $1.1 million under accrual of the December 31, 2025 liability. Incentive compensation for the nine months ended September 30, 2025 includes a reversal of a $0.4 million over accrual of the December 31, 2024 liability.
We are 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, 2027 and provides for automatic one-year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company. The Manager receives a monthly management fee in the amount of:
| ● |
One-twelfth of 1.5% of the first $250 million of the Company’s month-end equity, as defined in the management agreement, |
| ● |
One-twelfth of 1.25% of the Company’s month-end equity that is greater than $250 million and less than or equal to $500 million, and |
| ● |
One-twelfth of 1.00% of the Company’s month-end equity that is greater than $500 million. |
The Manager also provides certain repurchase agreement trading, clearing and administrative services to the Company. In consideration for such services, the Company pays the following fees to the Manager:
| ● |
A daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and |
| ● |
A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month. |
The Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the Manager the Company’s pro rata portion of certain overhead costs set forth in the management agreement. Should the Company terminate the management agreement without cause, it will pay the Manager a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the term of the agreement.
The following table summarizes the management fee and overhead allocation expenses for the nine months ended September 30, 2026 and 2025, and for each quarter in 2026 to date and 2025.
| ($ in thousands) |
||||||||||||||||||||||||||||
| Advisory Services |
||||||||||||||||||||||||||||
| Average |
Average |
Average |
Repurchase |
|||||||||||||||||||||||||
| Orchid |
Orchid |
Repurchase |
Management |
Overhead |
Clearing and |
|||||||||||||||||||||||
| Three Months Ended |
MBS |
Equity |
Agreements |
Fee |
Allocation |
Administrative |
Total |
|||||||||||||||||||||
| September 30, 2026 |
$ | 11,103,616 | $ | 1,443,023 | $ | 10,724,316 | $ | 4,072 | $ | 510 | $ | 370 | $ | 4,952 | ||||||||||||||
| June 30, 2026 |
11,439,353 | 1,442,960 | 10,975,819 | 4,123 | 585 | 369 | 5,077 | |||||||||||||||||||||
| March 31, 2026 |
10,983,600 | 1,365,471 | 10,490,095 | 3,988 | 786 | 353 | 5,127 | |||||||||||||||||||||
| December 31, 2025 |
9,492,369 | 1,233,957 | 9,061,222 | 3,700 | 705 | 319 | 4,724 | |||||||||||||||||||||
| September 30, 2025 |
7,674,720 | 1,108,307 | 7,331,428 | 3,294 | 887 | 277 | 4,458 | |||||||||||||||||||||
| June 30, 2025 |
6,865,727 | 1,012,986 | 6,537,260 | 2,982 | 582 | 247 | 3,811 | |||||||||||||||||||||
| March 31, 2025 |
5,995,702 | 902,590 | 5,722,092 | 2,747 | 608 | 227 | 3,582 | |||||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||
| September 30, 2026 |
$ | 11,175,523 | $ | 1,417,151 | $ | 10,730,077 | $ | 12,183 | $ | 1,881 | $ | 1,092 | $ | 15,156 | ||||||||||||||
| September 30, 2025 |
6,845,383 | 1,007,961 | 6,530,260 | 9,023 | 2,077 | 751 | 11,851 | |||||||||||||||||||||
Financial Condition:
Mortgage-Backed Securities
As of September 30, 2026, our RMBS portfolio consisted of $10.7 billion of Agency RMBS at fair value and had a weighted average coupon on assets of 5.51%. During the nine months ended September 30, 2026, we received principal repayments of $1,169.5 million, compared to $544.9 million for the nine months ended September 30, 2025. The average three month prepayment speeds for the quarters ended September 30, 2026 and 2025 were 8.4% and 10.1%, respectively.
The following table presents the 3-month constant prepayment rate (“CPR”) experienced on our RMBS portfolio, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category.
| Total |
||||
| Three Months Ended |
Portfolio (%) |
|||
| September 30, 2026 |
8.4 | |||
| June 30, 2026 |
10.9 | |||
| March 31, 2026 |
14.7 | |||
| December 31, 2025 |
15.7 | |||
| September 30, 2025 |
10.1 | |||
| June 30, 2025 |
10.1 | |||
| March 31, 2025 |
7.8 | |||
The following tables summarize certain characteristics of the Company’s RMBS portfolio as of September 30, 2026 and December 31, 2025:
| ($ in thousands) |
|||||||||||||||||
| Weighted |
|||||||||||||||||
| Percentage |
Average |
||||||||||||||||
| of |
Weighted |
Maturity |
|||||||||||||||
| Fair |
Entire |
Average |
in |
Longest |
|||||||||||||
| Asset Category |
Value |
Portfolio |
Coupon |
Months |
Maturity |
||||||||||||
| September 30, 2026 |
|||||||||||||||||
| Fixed Rate RMBS |
$ | 10,655,685 | 99.9 | % | 5.53 | % | 334 | 1-Jun-56 |
|||||||||
| Other |
11,383 | 0.1 | % | 3.41 | % | 201 | 25-Jul-48 |
||||||||||
| Total Mortgage Assets |
$ | 10,667,068 | 100.0 | % | 5.51 | % | 333 | 1-Jun-56 |
|||||||||
| December 31, 2025 |
|||||||||||||||||
| Fixed Rate RMBS |
$ | 10,615,570 | 99.9 | % | 5.67 | % | 341 | 1-Jan-56 |
|||||||||
| Other |
13,088 | 0.1 | % | 3.25 | % | 210 | 25-Jul-48 |
||||||||||
| Total Mortgage Assets |
$ | 10,628,658 | 100.0 | % | 5.64 | % | 340 | 1-Jan-56 |
|||||||||
| ($ in thousands) |
||||||||||||||||
| September 30, 2026 |
December 31, 2025 |
|||||||||||||||
| Percentage of |
Percentage of |
|||||||||||||||
| Agency |
Fair Value |
Entire Portfolio |
Fair Value |
Entire Portfolio |
||||||||||||
| Fannie Mae |
$ | 5,557,220 | 52.1 | % | $ | 5,675,461 | 53.4 | % | ||||||||
| Freddie Mac |
5,109,848 | 47.9 | % | 4,953,197 | 46.6 | % | ||||||||||
| Total Portfolio |
$ | 10,667,068 | 100.0 | % | $ | 10,628,658 | 100.0 | % | ||||||||
As of September 30, 2026, the Company's portfolio had an effective duration of 4.327, indicating that an interest rate increase of 1.0% would be expected to cause a 4.327% decrease in the value of the RMBS in the Company’s investment portfolio. This compares to an effective duration of 2.513 as of December 31, 2025, which indicated that an interest rate increase of 1.0% would be expected to cause a 2.513% decrease in the value of the RMBS in the Company’s investment portfolio. These figures do not include the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.
The following table presents a summary of portfolio assets acquired during the nine months ended September 30, 2026 and 2025, including securities purchased during the period that settled after the end of the period, if any.
| ($ in thousands) |
||||||||||||||||||||||||
| 2026 |
2025 |
|||||||||||||||||||||||
| Total Cost |
Average Price |
Weighted Average Yield |
Total Cost |
Average Price |
Weighted Average Yield |
|||||||||||||||||||
| PT RMBS |
$ | 2,687,133 | $ | 100.85 | 5.04 | % | $ | 4,244,377 | $ | 101.91 | 5.45 | % | ||||||||||||
The 2026 acquisitions above included $413.3 million of RMBS received as a resecuritization of previously owned RMBS.
Borrowings
As of September 30, 2026, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with 33 of these counterparties. None of these lenders are affiliated with the Company. These borrowings are secured by the Company’s RMBS and cash, and bear interest at prevailing market rates. We believe our established repurchase agreement borrowing facilities provide borrowing capacity in excess of our needs.
As of September 30, 2026, we had obligations outstanding under the repurchase agreements of approximately $10.4 billion with a net weighted average borrowing cost of 3.99%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 1 to 338 days, with a weighted average remaining maturity of 26 days. The repurchase agreement obligations outstanding as of September 30, 2026 were secured by RMBS with an estimated fair value, including accrued interest, of approximately $10.7 billion, and cash pledged to counterparties of approximately $130.0 million. Through October 23, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2026, with maturities through September 3, 2027.
The table below presents information about our period end, maximum and average balances of borrowings for each quarter in 2026 to date and 2025.
| ($ in thousands) |
||||||||||||||||||||
| Difference Between Ending |
||||||||||||||||||||
| Ending |
Maximum |
Average |
Borrowings and |
|||||||||||||||||
| Balance of |
Balance of |
Balance of |
Average Borrowings |
|||||||||||||||||
| Three Months Ended |
Borrowings |
Borrowings |
Borrowings |
Amount |
Percent |
|||||||||||||||
| September 30, 2026 |
$ | 10,361,717 | $ | 11,077,552 | $ | 10,724,316 | $ | (362,599 | ) | (3.38 | )% | |||||||||
| June 30, 2026 |
11,086,915 | 11,139,168 | 10,975,819 | 111,096 | 1.01 | % | ||||||||||||||
| March 31, 2026 |
10,864,723 | 11,023,983 | 10,490,095 | 374,628 | 3.57 | % | ||||||||||||||
| December 31, 2025 |
10,115,466 | 10,119,839 | 9,061,222 | 1,054,244 | 11.63 | % | ||||||||||||||
| September 30, 2025 |
8,006,978 | 8,024,512 | 7,331,428 | 675,550 | 9.21 | % | ||||||||||||||
| June 30, 2025 |
6,655,879 | 6,655,879 | 6,537,260 | 118,619 | 1.81 | % | ||||||||||||||
| March 31, 2025 |
6,418,641 | 6,453,905 | 5,722,092 | 696,549 | 12.17 | % | ||||||||||||||
Leverage
We use two primary measures of leverage. Economic leverage is calculated by dividing total liabilities, adjusted for our net notional TBA position and securities borrowed, by stockholders' equity. We include our net TBA position in our calculation of economic leverage because a forward contract to purchase or sell an Agency RMBS in the TBA market carries similar risks to an Agency RMBS purchased or sold in the cash market and funded with repurchase agreement liabilities. Adjusted leverage is calculated by dividing our repurchase agreements by stockholders' equity. Our economic leverage was 8.6 to 1 as of September 30, 2026 compared to 7.3 to 1 as of December 31, 2025. Our adjusted leverage as of September 30, 2026 was 8.8 to 1, compared to 7.4 to 1 as of December 31, 2025. The following table presents information related to our historical leverage.
| ($ in thousands) |
||||||||||||||||||||||
| Ending |
Ending |
Ending |
Ending |
Ending |
||||||||||||||||||
| Repurchase |
Total |
Net TBA |
Securities |
Stockholders' |
Adjusted |
Economic |
||||||||||||||||
| Agreements |
Liabilities |
Positions |
Borrowed |
Equity |
Leverage |
Leverage |
||||||||||||||||
| September 30, 2026 |
$ | 10,361,717 | $ | 10,852,171 | $ | (315,000 | ) | $ | 435,692 | $ | 1,171,836 | 8.8:1 |
8.6:1 |
|||||||||
| June 30, 2026 |
11,086,915 | 11,662,854 | (594,900 | ) | 496,036 | 1,441,258 | 7.7:1 |
7.3:1 |
||||||||||||||
| March 31, 2026 |
10,864,723 | 11,279,585 | 95,000 | 359,202 | 1,391,808 | 7.8:1 |
7.9:1 |
|||||||||||||||
| December 31, 2025 |
10,115,466 | 10,304,045 | (180,000 | ) | 128,754 | 1,371,948 | 7.4:1 |
7.3:1 |
||||||||||||||
| September 30, 2025 |
8,006,978 | 8,052,945 | (32,000 | ) | - | 1,086,090 | 7.4:1 |
7.4:1 |
||||||||||||||
| June 30, 2025 |
6,655,879 | 6,698,673 | - | - | 911,959 | 7.3:1 |
7.3:1 |
|||||||||||||||
| March 31, 2025 |
6,418,641 | 6,448,407 | 200,000 | - | 855,879 | 7.5:1 |
7.8:1 |
|||||||||||||||
Liquidity and Capital Resources
Liquidity is our ability to turn non-cash assets into cash, purchase additional investments, repay principal and interest on borrowings, fund overhead, fulfill margin calls and pay dividends. We have both internal and external sources of liquidity. However, our material unused sources of liquidity include cash balances, unencumbered assets and our ability to sell encumbered assets to raise cash. Our balance sheet also generates liquidity on an ongoing basis through payments of principal and interest we receive on our RMBS portfolio. Management believes that we currently have sufficient short-term and long-term liquidity and capital resources available for (a) the acquisition of additional investments consistent with the size and nature of our existing RMBS portfolio, (b) the repayments on borrowings and (c) the payment of dividends to the extent required for our continued qualification as a REIT. We may also generate liquidity from time to time by selling our equity or debt securities in public offerings or private placements.
Internal Sources of Liquidity
Our internal sources of liquidity include our cash balances, unencumbered assets and our ability to liquidate our encumbered security holdings. Our balance sheet also generates liquidity on an ongoing basis through payments of principal and interest we receive on our RMBS portfolio. Because our PT RMBS portfolio consists entirely of government and agency securities, we do not anticipate having difficulty converting our assets to cash should our liquidity needs ever exceed our immediately available sources of cash. Our structured RMBS portfolio also consists entirely of governmental agency securities, although they typically do not trade with comparable bid / ask spreads as PT RMBS. However, we anticipate that we would be able to liquidate such securities readily, even in distressed markets, although we would likely do so at prices below where such securities could be sold in a more stable market.
Our strategy for hedging our funding costs typically involves taking short positions in interest rate futures, interest rate swaps, interest rate swaptions or other instruments. When the market causes these short positions to decline in value we are required to meet margin calls with cash. This can reduce our liquidity position to the extent other securities in our portfolio move in price in such a way that we do not receive enough cash via margin calls to offset the derivative related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.
External Sources of Liquidity
Our primary external sources of liquidity are our ability to (i) borrow under master repurchase agreements, (ii) use the TBA security market and (iii) sell our equity or debt securities in public offerings or private placements. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our master repurchase agreements have no stated expiration but can be terminated at any time at our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.
Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient, and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis. Throughout the nine months ended September 30, 2026, haircuts on our pledged collateral remained stable and as of September 30, 2026, our weighted average haircut was approximately 4.1% of the value of our collateral.
TBAs represent a form of off-balance sheet financing and are accounted for as derivative instruments. (See Note 5 to our Financial Statements in this Form 10-Q for additional details on our TBAs). Under certain market conditions, it may be uneconomical for us to roll our TBAs into future months and we may need to take or make physical delivery of the underlying securities. If we were required to take physical delivery to settle a long TBA, we would have to fund our total purchase commitment with cash or other financing sources and our liquidity position could be negatively impacted.
Our TBAs are also subject to margin requirements governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC and by our Master Securities Forward Transaction Agreements (“MSFTAs”), which may establish margin levels in excess of the MBSD. Such provisions require that we establish an initial margin based on the notional value of the TBA, which is subject to increase if the estimated fair value of our TBAs or the estimated fair value of our pledged collateral declines. The MBSD has the sole discretion to determine the value of our TBAs and of the pledged collateral securing such contracts. In the event of a margin call, we must generally provide additional collateral on the same business day.
Settlement of our TBA obligations by taking delivery of the underlying securities as well as satisfying margin requirements could negatively impact our liquidity position. However, since we do not use TBA dollar roll transactions as our primary source of financing, we believe that we will have adequate sources of liquidity to meet such obligations.
In future periods, we expect to continue to finance our activities in a manner that is consistent with our current operations through repurchase agreements. As of September 30, 2026, we had cash and cash equivalents of $462.4 million. We generated cash flows of $1,624.7 million from principal and interest payments on our RMBS and had average repurchase agreements outstanding of $10.7 billion during the nine months ended September 30, 2026.
As described more fully below, we may also access liquidity by selling our equity or debt securities in public offerings or private placements.
Capital Expenditures
At September 30, 2026, we had no material commitments for capital expenditures.
Stockholders’ Equity
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions. We issued a total of 30,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $250.0 million and net proceeds of approximately $245.8 million, after commissions and fees, prior to its termination in February 2025.
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $350,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions. On July 28, 2025, the February 2025 Equity Distribution Agreement was amended to increase the aggregate amount of gross proceeds from the sales of shares that may be offered by $150,000,000 to a total of $500,000,000. We issued a total of 59,492,504 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $445.1 million and net proceeds of approximately $438.0 million, after commissions and fees, prior to its termination in October 2025.
On October 27, 2025, we entered into an equity distribution agreement (the “October 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $500,000,000 of gross proceeds from the sales of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. From inception through September 30, 2026, we issued a total of 48,824,644 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $360.9 million, and net proceeds of approximately $355.2 million, after commissions and fees. For the nine months ended September 30, 2026, we issued a total of 18,558,681 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $137.7 million, and net proceeds of approximately $135.5 million, after commissions and fees.
Outlook
Economic Summary
During the third quarter and early fourth quarter of 2026, interest rates increased to levels not observed since the early 2000s. The move occurred in most western markets, including Japan and most of Europe, and there was a confluence of factors impacting interest rates across these markets. In the U.S. the drivers have been the following:
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Iran war-induced supply shocks, as the war continues with no end in sight and frequent escalations. |
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Persistently high inflation fueled by – |
| o |
War related high energy prices, especially diesel fuel which has pervasive supply-chain impacts |
| o |
The AI buildout and associated unprecedented capital expenditures |
| o |
Tariffs, |
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Resilient economic growth and expectations for more central bank rate increases |
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Fiscal sustainability concerns associated with ongoing fiscal budget deficits |
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Surging AI related debt issuance and increased competition for capital. |
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Bank of Japan (“BOJ”) policy normalization and reduced US treasury purchases as yields in Japan are no longer so far below U.S. Treasury rates and/or Yen support activities on the part of the BOJ |
With the recent dramatic increases in interest rates there has been widespread deleveraging and forced selling on the part of the various levered investors across fixed income markets. This in turn has put additional downward pressure on various fixed income assets – particularly Agency RMBS like the Company invests in – and interest rates themselves as additional hedging needs lead to shorting of various forms of interest rate products. Interest rates across the yield curve reached levels during the third quarter of 2026, last seen in the early 2000s. Implied interest rate volatility in the swaptions market has spiked higher during the third quarter of 2026 as well. One frequently referenced measure of implied interest rate volatility in the swaptions market – the ICE BofA MOVE index (the “MOVE index”), reached 115.02 just after the Iran war broke out in late February 2026.
Since quarter end the fiscal sustainability crisis associated with sovereign debt has deteriorated materially in France, resulting in yields on French government debt increasing precipitously, especially in relation to the level on German sovereign debt. This is commonly referred to as “fragmentation” in the EU sovereign debt markets, and akin to what occurred in the early 2010s during that debt crisis. The sovereign debt crisis in France has a significant political element and could affect the country’s leadership in the next French presidential elections in early 2027.
Interest Rates
The most significant development during the third quarter of 2026 was the significant increase in global interest rates, particularly in the U.S. The U.S. Treasury curve steepened as rates increased. The yield on the 2-year U.S. Treasury note increased from 4.18% at June 30, 2026, to 4.89% at September 30, 2026. The yield on the 10-year U.S. Treasury note increased from 4.47% at June 30, 2026, to 5.29% at September 30, 2026. As a result, the spread between the 2 and 10-year U.S. Treasury notes increased from 29 bps to 40 bps. Implied interest rate volatility in the swaptions market increased in tandem, reaching levels close to those observed just after the war in Iran started. The MOVE index increased from 71.96 at June 30, 2026, to 110.45 at September 30, 2026.
As interest rates in the U.S. Treasury market increased, mortgage rates available to residential home buyers also increased. The Mortgage Bankers Association U.S. fixed-rate 30-year contract rate weekly index increased from 6.57% on June 26, 2026, to 7.49% on October 2, 2026. With such an increase, housing affordability, already at multi-decade low levels, is even lower. Housing turnover and refinancing activity is likewise further subdued, and pre-payments on the Company’s portfolio have diminished as well.
With inflation persistently high and economic activity resilient, even in the face of higher interest rates, the Fed raised the overnight Fed Funds rate range in September by 25 bps to 3.75% to 4.00%. Current market pricing, as reflected in the Fed Funds futures market, among others, was for approximately 3.8 additional 25 bps hikes over the next year as of September 30, 2026. Inflation has been above the Fed’s 2% inflation target for over five years and the labor market, the second of the Fed’s dual mandate focus, remains stable. Fed Chairman Warsh’s public comments have repeatedly stressed his desire to get inflation back to the Fed’s target level, so these conditions are likely to keep additional rate hike pricing in the market over the near term at least.
While interest rates have increased markedly since the end of the second quarter and the Fed raised the Fed Funds target range 25 bps at their September meeting, the overnight funding markets have been otherwise stable. The Company’s funding of the levered RMBS portfolio is accomplished exclusively in the repurchase agreement – or “repo” – market. Repo funding is done at a spread to SOFR. Such spreads have been stable for the past several quarters. Earlier this year the Fed introduced their reserve management program (“RMP”), whereby they buy U.S. Treasury bills in the open market to support the funding markets. The levels of RMP purchases vary as the Fed perceives the stability in the funding markets. Also, money market assets are at very high levels by historical standards, with close to $8 trillion at the end of the third quarter of 2026. The allocation of money market assets to the repo market varies over time, but was approximately 30% at the end of the third quarter, thus providing a substantial source of liquidity to the market. As government deficits in the U.S. remain at historically high levels – approximately $2 trillion for the fiscal year ended September 30, 2026 – the government continues to issue increasing levels of U.S. Treasury bills into the market, absorbing funding that might otherwise be available for the repo market. To date this has not materially impacted funding levels, but may do so in the future.
The Agency RMBS Market
Interest rates rose substantially during the third quarter of 2026 to multi-decade high levels. As is typically the case, implied interest rate volatility in the swaptions market also rose precipitously during the quarter as well. Interest rates and implied volatility are the primary variables that impact the Agency RMBS market. The cash flows associated with Agency RMBS are driven in part by the extent of prepayment activity, which is inversely correlated with mortgage rates and the underlying U.S. Treasury rates. Implied volatility is a key variable in the pricing of the borrower’s prepayment option embedded in a residential mortgage loan. As interest rates rise, prepayment levels are anticipated to slow – materially in the case of this quarter – and the cash flows associated with Agency RMBS extend. At the end of the third quarter of 2026 nearly all Agency RMBS are trading at a discount to par. The price declines on these securities that occurred during the quarter triggered pervasive forced selling on the part of levered RMBS investors, exacerbating the downward price pressure. This resulted in poor absolute and relative returns for most Agency RMBS. For the third quarter of 2026, the Agency RMBS sector generated a total return of -4.1% and -0.8% versus comparable duration swaps. By comparison, the high-yield and investment-grade corporate bond sectors produced returns of -1.8% and -3.8%, respectively, and excess returns of -0.4% and 0.3%, respectively, versus comparable duration swaps over the same period.
Within Agency RMBS for the third quarter of 2026, conventional 30-year mortgages generated a total return of -4.4%, 15-year mortgages generated a total return of -2.2% and Ginnie Mae 30-year mortgages generated a total return of -4.1%. Versus comparable duration swaps, the returns were -0.8%, 0.4% and -1.0% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Absolute returns within the 30-year stack were lowest for lower coupons and increased for progressively higher coupons, with returns for coupons 5% and lower between -4.3% and -5.3%, and for coupons of 5.5% through 7.0% progressively improving from -3.5% to –1.7% . This is consistent with higher interest rates, lower prepayment expectations and the durations of the various coupons inversely related to coupon – the lower the coupon the higher the duration, and visa-versa. Conversely, excess returns were worst for middle coupons – between the 4.0% and 6.0% coupons, with lower and higher coupons slightly better. Excess returns for middle coupons were between -1.1% and -1.3%, while the lower coupons ranged between -0.2% and -0.6%. The poor performance of coupons in the middle of the stack resulted from their more extreme extension as they moved from at or just below par to discount prices – implying the underlying cash flows had the most extreme movement. Previously existing discount securities had already extended, and higher coupons were still slight premiums that had yet to fully extend.
Recent Legislative and Regulatory Developments
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and 2025. On December 1, 2025, the Fed ended quantitative tightening and began reinvesting all proceeds from maturing Agency RMBS up to a $35 billion per month cap in U.S. Treasuries and announced that it would begin buying an additional $40 billion per month of U.S. Treasuries via RMPs in order to maintain an ample level of reserves on an ongoing basis. RMPs were reduced to $25 billion per month in April 2026, and further reduced to $10 billion per month in May 2026. The Fed paused RMPs from mid-August 2026 through mid-October 2026, although the market anticipates that RMPs will resume and potentially increase in late 2026. As of September 30, 2026, the Fed had reduced its balance sheet for Agency RMBS by approximately $842 billion from the peak of approximately $2.7 trillion to approximately $1.9 trillion, shedding approximately 61% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since June 2020.
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions"). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. Throughout 2025 and early 2026, there was some speculation in the market regarding progress towards an end to the conservatorship, including through an initial public offering, but no definitive action has been taken and many analysts believe additional capital is needed before the Enterprises can safely exit conservatorship.
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the “OCC”) the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the “2023 Basel III Endgame”). The 2023 Basel III Endgame, if implemented as originally proposed, would have significantly increased the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could have disincentivized banks from originating mortgages for sale to the GSEs and impacted pricing in the Agency RMBS markets. The comment period for the 2023 Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry.
On November 25, 2025, the Fed, OCC and FDIC jointly adopted a final rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”). The rule, which became effective April 1, 2026 and may be adopted by banks subject to the rule as early as January 1, 2026, seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.
On March 19, 2026, the OCC, FDIC and the Fed rescinded the 2023 Basel III Endgame proposal and concurrently issued three revised notices of proposed rulemaking. The three proposals include (i) a revised Basel III Endgame proposal that would apply an expanded risk-based approach to Category I and Category II banking organizations, thus narrowing the mandatory scope from the 2023 proposal, with all other banking organizations permitted to opt in; (ii) a revised standardized approach proposal that would reduce risk weights for traditional lending activities for banking organizations not subject to the expanded risk-based approach; and (iii) a revised GSIB capital surcharge proposal. The OCC, FDIC, and the Fed estimate that the revised proposals would decrease aggregate common equity tier 1 capital requirements by approximately 4.8 percent for Category I and Category II banking organizations, in contrast to the significant capital increases that would have resulted under the 2023 Basel III Endgame. Additionally, the revised proposal would eliminate the requirement to deduct mortgage servicing assets from common equity tier 1 capital, instead assigning a 250% risk weight, which is designed to promote mortgage origination and servicing by banking organizations. The Fed voted 6-to-1 to advance all three proposals and the FDIC board voted unanimously in favor of the revised Basel III Endgame and standardized approach proposals. The comment period for the revised proposals closed on June 18, 2026, with the Fed indicating that they hope to release the final rule by the end of 2026.
The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to evolve.
Effect on Us
Regulatory developments, movements in interest rates and prepayment rates affect us in many ways, including the following:
Effects on our Assets
A change in or elimination of the guarantee structure of Agency RMBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency RMBS may cause us to change our investment strategy to focus on non-Agency RMBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.
If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency RMBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.
If prepayment levels increase, the value of any of our Agency RMBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency RMBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency RMBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency RMBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency RMBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.
Higher long-term rates can also affect the value of our Agency RMBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency RMBS declines. Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for PT Agency RMBS.
Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency RMBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT RMBS, particularly PT RMBS backed by fixed-rate mortgages.
Effects on our borrowing costs
We leverage our PT RMBS and structured Agency RMBS through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency RMBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, dual digital options or interest rate swaptions.
Summary
The Company invests exclusively in Agency RMBS and applies leverage utilizing repurchase agreement funding. The primary drivers of the performance of our assets, both absolute performance and performance relative to our hedges, are interest rates and their impact on both our asset prices and the level of prepayments, interest rate volatility – particularly the level of implied volatility in interest rate swaptions and various interest rate derivatives – and finally our funding levels. Accordingly, we have significant exposure to interest rates, and our performance is driven by our ability to select assets, manage our leverage, and our hedging strategy. During the third quarter of 2026, interest rates and implied interest rate volatility surged and interest rates across the U.S. Treasury yield curve increased to the highest levels since the early 2000s. There were numerous factors that contributed to the move in rates, and it is likely these factors will continue to support higher rates for the time being. War-induced supply shortages impacting the economy that was already experiencing sticky inflation comfortably above the Fed’s 2% target level, resilient growth in the economy, supported by the substantial capital expenditure buildout associated with AI hyperscalers and the need for data centers throughout the country, fiscal sustainability concerns associated with persistently high budget deficits and the resulting excess demand for capital between the U.S. government and the hyperscalers are powerful forces driving borrowing costs higher. While rates may ultimately stabilize and stop rising, it is not clear what the catalyst would be to drive rates meaningfully lower in the near term.
The factors above are likely to result in additional increases in the Fed Funds rate. Accordingly, the Company’s funding levels may move higher in the near term. However, to date the funding markets have been stable otherwise. Higher rates have slowed refinancing activity substantially, which is supportive of the revenue derived from the RMBS portfolio. The net effect of these factors on the net interest income derived from the RMBS portfolio cannot be determined at this time.
To the extent interest rates remain high and funding levels are increased by the Fed, their impact should put downward pressure on economic growth over time. To the extent this occurs, this process could reverse as the market and the Fed respond to slowing growth prospects. Such a development should simultaneously bring inflation back in line with the Fed’s 2% target. Further, the significant capital expenditure buildout associated with the hyperscalers adding data centers to support AI models should eventually slow as adequate capacity is available to support the initial surge in demand and subsequent work should be more maintenance related. This should quell the surge in the demand for capital to fund the initial buildout. What remains is the fiscal sustainability of the U.S. government and the deficits that have to be financed. To the extent this continues, there could be continued pressure on interest rates – particularly longer-term rates as the government continues to fund the deficits in the U.S. Treasury market. All else equal, this should lead to a steeper U.S. Treasury yield curve as longer maturity rates remain high in relation to overnight rates. While such conditions are generally favorable for the Company’s business model, there is no reason to assume such an outcome is more or less likely.
Critical Accounting Estimates
Our condensed financial statements are prepared in accordance with GAAP. GAAP requires our management to make some complex and subjective decisions and assessments. Our most critical accounting estimates involve decisions and assessments which could significantly affect reported assets, liabilities, revenues and expenses. There have been no changes to our critical accounting estimates as discussed in our annual report on Form 10-K for the year ended December 31, 2025.
Dividends
In addition to other requirements that must be satisfied to continue to qualify as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. REIT taxable income (loss) is computed in accordance with the Code and can be greater than or less than our financial statement net income (loss) computed in accordance with GAAP. These book to tax differences primarily relate to the recognition of interest income on RMBS, unrealized gains and losses on RMBS, and the amortization of losses on derivative instruments that are treated as funding hedges for tax purposes.
We intend to pay regular monthly dividends to our stockholders and have declared the following dividends since the completion of our IPO.
| (in thousands, except per share amounts) |
||||||||
| Year |
Per Share Amount |
Total |
||||||
| 2013 |
$ | 6.975 | $ | 4,662 | ||||
| 2014 |
10.800 | 22,643 | ||||||
| 2015 |
9.600 | 38,748 | ||||||
| 2016 |
8.400 | 41,388 | ||||||
| 2017 |
8.400 | 70,717 | ||||||
| 2018 |
5.350 | 55,814 | ||||||
| 2019 |
4.800 | 54,421 | ||||||
| 2020 |
3.950 | 53,570 | ||||||
| 2021 |
3.900 | 97,601 | ||||||
| 2022 |
2.475 | 87,906 | ||||||
| 2023 |
1.800 | 81,127 | ||||||
| 2024 |
1.440 | 96,309 | ||||||
| 2025 |
1.440 | 190,930 | ||||||
| 2026 - YTD(1) |
1.060 | 208,033 | ||||||
| Totals |
$ | 70.390 | $ | 1,103,869 | ||||
| (1) |
On October 14, 2026, the Company declared a dividend of $0.10 per share to be paid on November 27, 2026. 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, 2026. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risks that we are exposed to are interest rate risk, prepayment risk, spread risk, liquidity risk, extension risk and counterparty credit risk.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.
Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest-earning assets and the interest expense incurred in connection with our interest-bearing liabilities, by affecting the spread between our interest-earning assets and interest-bearing liabilities. Changes in the level of interest rates can also affect the rate of prepayments of our securities and the value of the RMBS that constitute our investment portfolio, which affects our net income, ability to realize gains from the sale of these assets and ability to borrow, and the amount that we can borrow against these securities.
We may utilize a variety of financial instruments in order to limit the effects of changes in interest rates on our operations. The principal instruments that we use are futures contracts, dual digital options, interest rate swaps and swaptions, and interest rate floors and caps. These instruments are intended to serve as an economic hedge against future interest rate increases on our repurchase agreement borrowings. Hedging techniques are partly based on assumed levels of prepayments of our Agency RMBS. If prepayments are slower or faster than assumed, the life of the Agency RMBS will be longer or shorter, which would reduce the effectiveness of any hedging strategies we may use and may cause losses on such transactions. Hedging strategies involving the use of derivative securities are highly complex and may produce volatile returns. Hedging techniques are also limited by the rules relating to REIT qualification. In order to preserve our REIT status, we may be forced to terminate a hedging transaction at a time when the transaction is most needed.
Our profitability and the value of our investment portfolio (including derivatives used for hedging purposes) may be adversely affected during any period as a result of changing interest rates, including changes in the forward yield curve.
Our portfolio of PT RMBS is typically comprised of fixed-rate RMBS, adjustable-rate RMBS (“ARMs”) and hybrid adjustable-rate RMBS. We generally seek to acquire low duration assets that offer high levels of protection from mortgage prepayments provided that they are reasonably priced by the market. Although the duration of an individual asset can change as a result of changes in interest rates, we strive to maintain a hedged PT RMBS portfolio with an effective duration of less than 2.0. The stated contractual final maturity of the mortgage loans underlying our portfolio of PT RMBS generally ranges up to 30 years. However, the effect of prepayments of the underlying mortgage loans tends to shorten the resulting cash flows from our investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages and loan payoffs in connection with home sales, and borrowers paying more than their scheduled loan payments, which accelerates the amortization of the loans.
The duration of our IO and IIO portfolios will vary greatly depending on the structural features of the securities. While prepayment activity will always affect the cash flows associated with the securities, the interest only nature of IOs may cause their durations to become extremely negative when prepayments are high, and less negative when prepayments are low. Prepayments affect the durations of IIOs similarly, but the floating rate nature of the coupon of IIOs (which is inversely related to the level of one month SOFR) causes their price movements, and model duration, to be affected by changes in both prepayments and one month SOFR, both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.
Prepayments on the loans underlying our RMBS can alter the timing of the cash flows from the underlying loans to us. As a result, we gauge the interest rate sensitivity of our assets by measuring their effective duration. While modified duration measures the price sensitivity of a bond to movements in interest rates, effective duration captures both the movement in interest rates and the fact that cash flows to a mortgage related security are altered when interest rates move. Accordingly, when the contract interest rate on a mortgage loan is substantially above prevailing interest rates in the market, the effective duration of securities collateralized by such loans can be quite low because of expected prepayments.
We face the risk that the market value of our RMBS assets will increase or decrease at different rates than that of our hedging instruments. Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our hedge instruments. We generally calculate duration using various third party models. However, empirical results and various third party models may produce different duration numbers for the same securities.
The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of September 30, 2026 and December 31, 2025, assuming rates instantaneously fall 200 bps, fall 100 bps, fall 50 bps, rise 50 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency RMBS’ effective duration to movements in interest rates. We have a negatively convex asset profile and a linear to slightly positively convex hedge portfolio (short positions). It is common for us to have losses in both directions.
All changes in value in the table below are measured as percentage changes from the investment portfolio value and net asset value at the base interest rate scenario. The base interest rate scenario assumes interest rates and prepayment projections as of September 30, 2026 and December 31, 2025.
Actual results could differ materially from estimates, especially in the current market environment. To the extent that these estimates or other assumptions do not hold true, which is likely in a period of high price volatility, actual results will likely differ materially from projections and could be larger or smaller than the estimates in the table below. Moreover, if different models were employed in the analysis, materially different projections could result. Lastly, while the table below reflects the estimated impact of interest rate increases and decreases on a static portfolio, we may from time to time sell any of our agency securities as a part of the overall management of our investment portfolio.
| Interest Rate Sensitivity(1) |
||||||||
| Portfolio |
||||||||
| Market |
Book |
|||||||
| Change in Interest Rate |
Value(2)(3) |
Value(2)(4) |
||||||
| As of September 30, 2026 |
||||||||
| -200 Basis Points |
(1.97 | )% | (17.95 | )% | ||||
| -100 Basis Points |
(0.37 | )% | (3.40 | )% | ||||
| -50 Basis Points |
(0.03 | )% | (0.30 | )% | ||||
| +50 Basis Points |
(0.20 | )% | (1.84 | )% | ||||
| +100 Basis Points |
(0.61 | )% | (5.58 | )% | ||||
| +200 Basis Points |
(2.02 | )% | (18.41 | )% | ||||
| As of December 31, 2025 |
||||||||
| -200 Basis Points |
(2.23 | )% | (17.30 | )% | ||||
| -100 Basis Points |
(0.65 | )% | (5.07 | )% | ||||
| -50 Basis Points |
(0.15 | )% | (1.14 | )% | ||||
| +50 Basis Points |
(0.29 | )% | (2.22 | )% | ||||
| +100 Basis Points |
(0.98 | )% | (7.62 | )% | ||||
| +200 Basis Points |
(3.27 | )% | (25.31 | )% | ||||
| (1) |
Interest rate sensitivity is derived from models that are dependent on inputs and assumptions provided by third parties as well as by our Manager and assumes there are no changes in mortgage spreads and assumes a static portfolio. Actual results could differ materially from these estimates. |
| (2) |
Includes the effect of derivatives and other securities used for hedging purposes. |
| (3) |
Estimated dollar change in investment portfolio value expressed as a percent of the total fair value of our investment portfolio as of such date. |
| (4) |
Estimated dollar change in portfolio value expressed as a percent of stockholders' equity as of such date. |
In addition to changes in interest rates, other factors impact the fair value of our interest rate-sensitive investments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of our assets would likely differ from that shown above and such difference might be material and adverse to our stockholders.
Prepayment Risk
Because residential borrowers have the option to prepay their mortgage loans at par at any time, we face the risk that we will experience a return of principal on our investments faster than anticipated. Various factors affect the rate at which mortgage prepayments occur, including changes in the level of and directional trends in housing prices, interest rates, general economic conditions, loan age and size, loan-to-value ratio, the location of the property and social and demographic conditions. Additionally, changes to government sponsored entity underwriting practices or other governmental programs could also significantly impact prepayment rates or expectations. Generally, prepayments on Agency RMBS increase during periods of falling mortgage interest rates and decrease during periods of rising mortgage interest rates. However, this may not always be the case. We may reinvest principal repayments at a yield that is lower or higher than the yield on the repaid investment, thus affecting our net interest income by altering the average yield on our assets.
Spread Risk
When the market spread widens between the yield on our Agency RMBS and benchmark interest rates, our net book value could decline if the value of our Agency RMBS falls by more than the offsetting fair value increases on our hedging instruments tied to the underlying benchmark interest rates. We refer to this as "spread risk" or "basis risk." The spread risk associated with our mortgage assets and the resulting fluctuations in fair value of these securities can occur independent of changes in benchmark interest rates and may relate to other factors impacting the mortgage and fixed income markets, such as actual or anticipated monetary policy actions by the Fed, market liquidity, or changes in required rates of return on different assets. Consequently, while we use futures contracts, dual digital options, interest rate swaps and swaptions, and interest rate caps and floors to attempt to protect against moves in interest rates, such instruments typically will not protect our net book value against spread risk.
Liquidity Risk
The primary liquidity risk for us arises from financing long-term assets with shorter-term borrowings through repurchase agreements. Our assets that are pledged to secure repurchase agreements are Agency RMBS and cash. As of September 30, 2026, we had unrestricted cash and cash equivalents of $462.4 million and unpledged securities of approximately $53.3 million (not including unsettled securities purchases or securities pledged to us) available to meet margin calls on our repurchase agreements and derivative contracts, and for other corporate purposes. However, should the value of our Agency RMBS pledged as collateral or the value of our derivative instruments suddenly decrease, margin calls relating to our repurchase and derivative agreements could increase, causing an adverse change in our liquidity position. Further, there is no assurance that we will always be able to renew (or roll) our repurchase agreements. In addition, our counterparties have the option to increase our haircuts (margin requirements) on the assets we pledge against repurchase agreements, thereby reducing the amount that can be borrowed against an asset even if they agree to renew or roll the repurchase agreement. Significantly higher haircuts can reduce our ability to leverage our portfolio or even force us to sell assets, especially if correlated with asset price declines or faster prepayment rates on our assets.
Extension Risk
The projected weighted average life and the duration (or interest rate sensitivity) of our investments is based on our Manager's assumptions regarding the rate at which the borrowers will prepay the underlying mortgage loans. In general, we use futures contracts, dual digital options and interest rate swaps and swaptions to help manage our funding cost on our investments in the event that interest rates rise. These hedging instruments allow us to reduce our funding exposure on the notional amount of the instrument for a specified period of time.
However, if prepayment rates decrease in a rising interest rate environment, the average life or duration of our fixed-rate assets or the fixed-rate portion of the ARMs or other assets generally extends. This could have a negative impact on our results from operations, as our hedging instrument expirations are fixed and will, therefore, cover a smaller percentage of our funding exposure on our mortgage assets to the extent that their average lives increase due to slower prepayments. This situation may also cause the market value of our Agency RMBS and CMOs collateralized by fixed rate mortgages or hybrid ARMs to decline by more than otherwise would be the case while most of our hedging instruments would not receive any incremental offsetting gains. In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur realized losses.
Counterparty Credit Risk
We are exposed to counterparty credit risk relating to potential losses that could be recognized in the event that the counterparties to our repurchase agreements and derivative contracts fail to perform their obligations under such agreements. The amount of assets we pledge as collateral in accordance with our agreements varies over time based on the market value and notional amount of such assets as well as the value of our derivative contracts. In the event of a default by a counterparty, we may not receive payments provided for under the terms of our agreements and may have difficulty obtaining our assets pledged as collateral under such agreements. Our credit risk related to certain derivative transactions is largely mitigated through daily adjustments to collateral pledged based on changes in market value and we limit our counterparties to registered central clearing exchanges and major financial institutions with acceptable credit ratings, monitoring positions with individual counterparties and adjusting collateral posted as required. However, there is no guarantee our efforts to manage counterparty credit risk will be successful and we could suffer significant losses if unsuccessful.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report (the “evaluation date”), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, the CEO and CFO concluded our disclosure controls and procedures, as designed and implemented, were effective as of the evaluation date (1) in ensuring that information regarding the Company is accumulated and communicated to our management, including our CEO and CFO, by our Manager's employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable assurance that information we must disclose in our periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We are not a party to any material pending legal proceedings as described in Item 103 of Regulation S-K.
A description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2025. As of September 30, 2026, there have been no material changes in our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not have any unregistered sales of its equity securities during the three months ended September 30, 2026.
The table below presents the Company’s share repurchase activity for the three months ended September 30, 2026.
| Shares Purchased | Maximum Number | |||||||||||||||
| Total Number | Weighted- | as Part of | of Shares That May | |||||||||||||
| of Shares of |
Average |
Publicly |
Yet Be |
|||||||||||||
| Common Stock |
Price Paid |
Announced |
Be Repurchased Under |
|||||||||||||
| Repurchased(1) |
Per Share |
Programs |
the Authorization |
|||||||||||||
| July 1, 2026 - July 31, 2026 |
- | $ | - | - | 26,612,580 | |||||||||||
| August 1, 2026 - August 31, 2026 |
1,196,123 | 6.57 | 1,196,123 | 25,416,457 | ||||||||||||
| September 1, 2026 - September 30, 2026 |
3,750,755 | 6.22 | 3,750,000 | 21,666,457 | ||||||||||||
| Totals / Weighted Average |
4,946,878 | $ | 6.30 | 4,946,123 | 21,666,457 | |||||||||||
| (1) |
Includes 755 shares of the Company’s common stock acquired by the Company in connection with the satisfaction of tax withholding obligations on vested employment related awards under equity incentive plans. These repurchases do not reduce the number of shares available under the stock repurchase program authorization. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
Trading Arrangements
During the quarter ended September 30, 2026, of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408 of Regulation S-K).
Exhibit No.
| Exhibit 101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*** |
| Exhibit 101.SCH |
Inline XBRL Taxonomy Extension Schema Document *** |
| Exhibit 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document*** |
| Exhibit 101.DEF |
Inline XBRL Additional Taxonomy Extension Definition Linkbase Document Created*** |
| Exhibit 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document *** |
| Exhibit 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document *** |
| Exhibit 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed herewith. |
| ** |
Furnished herewith. |
| *** |
Submitted electronically herewith. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Orchid Island Capital, Inc. |
||||
| Registrant |
||||
| Date: October 23, 2026 |
By: |
/s/ Robert E. Cauley |
||
| Robert E. Cauley Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) |
||||
| Date: October 23, 2026 |
By: |
/s/ George H. Haas, IV |
||
| George H. Haas, IV Secretary, Chief Financial Officer, Chief Investment Officer and Director (Principal Financial and Accounting Officer) |
||||
Exhibit 31.1
CERTIFICATIONS
I, Robert E. Cauley, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the "registrant"); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|
Date: October 23, 2026 |
/s/ Robert E. Cauley |
|
|
|
Robert E. Cauley |
|
|
|
Chairman of the Board, Chief Executive Officer and President |
|
Exhibit 31.2
CERTIFICATIONS
I, George H. Haas, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the "registrant"); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|
Date: October 23, 2026 |
/s/ George H. Haas, IV |
|
|
|
George H. Haas, IV |
|
|
|
Chief Financial Officer |
|
Exhibit 32.1
CERTIFICATION
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the “Company”) for the period ended September 30, 2026 to be filed with the Securities and Exchange Commission on or about the date hereof (the ”Report”), I, Robert E. Cauley, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report. |
It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.
|
/s/ Robert E. Cauley |
|
|
|
|
Robert E. Cauley, |
|
|
|
Chairman of the Board and Chief Executive Officer |
|
Exhibit 32.2
CERTIFICATION
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the “Company”) for the period ended September 30, 2026 to be filed with the Securities and Exchange Commission on or about the date hereof (the ”Report”), I, George H. Haas, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report. |
It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.
|
/s/ George H. Haas, IV |
|
|
|
|
George H. Haas, IV |
|
|
|
Chief Financial Officer |
|