orc10q20210331p1i0.gif
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM
10-Q

☑
☒
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

March 31, 2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________
to ___________

Commission File Number:  001-35236
:
001-35236
Orchid Island Capital, Inc.
(Exact name of registrant as specified in its charter)
Maryland27-3269228
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

Maryland
27-3269228
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3305 Flamingo Drive
,
Vero Beach
,
Florida
32963
(Address of principal executive offices) (Zip Code)

(772) (
772
)
231-1400
(Registrant'sRegistrant’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
Common Stock, $0.01 par value
ORC
New York Stock Exchange
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.
Yesý
☒
No
☐
Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required
to be submitted and posted pursuant to
Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
(or for such shorter period that the registrant was required
to submit and post such
files).
Yesý
☒
No
☐
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
"accelerated filer", "smaller reporting company", and "emerging growth
company" in Rule 12b-2 of the Exchange Act. Check one:
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company☐
Emerging growth company☒

☐
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
☐
Noý
☒
Number of shares outstanding at October 27, 2017: 46,108,208April 30, 2021:
94,410,960
ORCHID ISLAND
CAPITAL, INC.

TABLE OF CONTENTS
 
PART I. FINANCIAL
 
INFORMATION
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements1
Condensed Consolidated Balance Sheets (unaudited)1
Condensed Consolidated Statements of Operations (unaudited)2
Condensed Consolidated Statement of Stockholders' Equity (unaudited)3
Condensed Consolidated Statements of Cash Flows (unaudited)4
Notes to Condensed Consolidated Financial Statements5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations23
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk43
ITEM 4. Controls and Procedures46
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings47
ITEM 1A. Risk Factors47
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds47
ITEM 3. Defaults upon Senior Securities47
ITEM 4. Mine Safety Disclosures47
ITEM 5. Other Information47
ITEM 6. Exhibits48
SIGNATURES49
ITEM 1. Financial
Statements
1
Condensed
Balance Sheets
(unaudited)
1
Condensed
Statements
of Operations
(unaudited)
2
Condensed
Statements
of Stockholders’
Equity (unaudited)
3
Condensed
Statements
of Cash Flows
(unaudited)
4
Notes to Condensed
Financial Statements
5
ITEM 2. Management’s
Discussion
and Analysis
of Financial
Condition
and Results
of Operations
23
ITEM 3. Quantitative
and Qualitative
Disclosures
about Market
Risk
44
ITEM 4. Controls
and Procedures
47
PART II. OTHER INFORMATION
ITEM 1. Legal
Proceedings
48
ITEM 1A.
Risk Factors
48
ITEM 2. Unregistered
Sales of Equity
Securities
and Use of
Proceeds
48
ITEM 3. Defaults
upon Senior
Securities
48
ITEM 4. Mine
Safety Disclosures
48
ITEM 5. Other
Information
48
ITEM 6. Exhibits
49
SIGNATURES
50
 
 
 
 
 
 

1
PART I. FINANCIAL
INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS
 
 
ORCHID ISLAND CAPITAL, INC.
ORCHID ISLAND CAPITAL, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
($ in thousands, except per share data) 
  
  (Unaudited)    
   September 30, 2017  December 31, 2016 
ASSETS:      
Mortgage-backed securities, at fair value      
Pledged to counterparties $3,917,425  $2,972,290 
Unpledged  12,915   49,884 
Total mortgage-backed securities  3,930,340   3,022,174 
Cash and cash equivalents  161,659   73,475 
Restricted cash  19,629   20,950 
Accrued interest receivable  15,410   11,512 
Derivative assets, at fair value  16,871   10,365 
Other assets  475   218 
Total Assets $4,144,384  $3,138,694 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
LIABILITIES:        
Repurchase agreements $3,710,077  $2,793,705 
Dividends payable  6,343   4,616 
Derivative liabilities, at fair value  2,591   1,982 
Accrued interest payable  4,815   1,826 
Due to affiliates  762   566 
Other liabilities  5,395   3,220 
Total Liabilities  3,729,983   2,805,915 
         
COMMITMENTS AND CONTINGENCIES        
         
STOCKHOLDERS' EQUITY:        
Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares issued        
and outstanding as of September 30, 2017 and December 31, 2016  -   - 
Common Stock, $0.01 par value; 500,000,000 shares authorized, 45,308,169        
shares issued and outstanding as of September 30, 2017 and 32,962,919 shares issued        
and outstanding as of December 31, 2016  453   330 
Additional paid-in capital  413,948   332,449 
Retained earnings (accumulated deficit)  -   - 
Total Stockholders' Equity  414,401   332,779 
Total Liabilities and Stockholders' Equity $4,144,384  $3,138,694 
See Notes to Consolidated Financial Statements 
CONDENSED BALANCE SHEETS
($ in thousands, except per share data)
(Unaudited)
March 31, 2021
December 31, 2020
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties
$
4,120,500
$
3,719,906
Unpledged
218,036
6,989
Total mortgage
 
-backed securities
4,338,536
3,726,895
Cash and cash equivalents
211,436
220,143
Restricted cash
117,155
79,363
Accrued interest receivable
10,852
9,721
Derivative assets, at fair value
95,752
20,999
Receivable for securities sold, pledged to counterparties
154,977
414
Other assets
2,058
516
Total Assets
$
4,930,766
$
4,058,051
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Repurchase agreements
$
4,181,680
$
3,595,586
Payable for unsettled securities purchased
217,758
0
Dividends payable
6,156
4,970
Derivative liabilities, at fair value
35,057
33,227
Accrued interest payable
921
1,157
Due to affiliates
712
632
Other liabilities
22,306
7,188
Total Liabilities
4,464,590
3,642,760
 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $
0.01
1
par value;
100,000,000
shares authorized; no shares issued
and outstanding as of March 31, 2021 and December 31, 2020
0
0
Common Stock, $
0.01
par value;
500,000,000
shares authorized,
94,410,960
shares issued and outstanding as of March 31, 2021 and
76,073,317
shares issued
and outstanding as of December 31, 2020
944
761
Additional paid-in capital
512,595
432,524
Accumulated deficit
(47,363)
(17,994)
Total Stockholders' Equity
466,176
415,291
Total Liabilities
and Stockholders' Equity
$
4,930,766
$
4,058,051
See Notes to Financial Statements
ORCHID ISLAND CAPITAL, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited) 
For the Nine and Three Months Ended September 30, 2017 and 2016 
($ in thousands, except per share data) 
             
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  2017  2016 
Interest income $105,864  $62,059  $38,974  $22,358 
Interest expense  (28,116)  (10,629)  (12,638)  (3,979)
Net interest income  77,748   51,430   26,336   18,379 
Realized gains on mortgage-backed securities  3,354   4,482   769   229 
Unrealized (losses) gains on mortgage-backed securities  (35,601)  5,652   (3,553)  (2,398)
(Losses) gains on derivative instruments  (29,331)  (32,594)  (5,470)  6,587 
FHLB stock dividends  -   14   -   - 
Net portfolio income  16,170   28,984   18,082   22,797 
                 
Expenses:                
Management fees  4,230   2,968   1,528   1,052 
Allocated overhead  1,168   963   412   336 
Accrued incentive compensation  439   598   209   212 
Directors' fees and liability insurance  722   763   215   236 
Audit, legal and other professional fees  547   654   157   193 
Direct REIT operating expenses  816   426   320   187 
Other administrative  259   215   58   55 
Total expenses  8,181   6,587   2,899   2,271 
                 
Net income $7,989  $22,397  $15,183  $20,526 
                 
Basic and diluted net income per share $0.21  $0.99  $0.33  $0.85 
                 
Weighted Average Shares Outstanding  38,608,053   22,619,293   45,355,124   24,133,343 
                 
Dividends declared per common share $1.26  $1.26  $0.42  $0.42 
See Notes to Consolidated Financial Statements 
 
 
 
2
ORCHID ISLAND CAPITAL, INC. 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 
(Unaudited) 
For the Nine Months Ended September 30, 2017 
($ in thousands, except per share data) 
             
     Additional  Retained    
  Common  Paid-in  Earnings    
  Stock  Capital  (Deficit)  Total 
Balances, January 1, 2017 $330  $332,449  $-  $332,779 
Net income  -   -   7,989   7,989 
Cash dividends declared, $1.26 per share  -   (41,688)  (7,989)  (49,677)
Issuance of common stock pursuant to public offerings, net  123   122,734   -   122,857 
Issuance of common stock pursuant to stock based                
compensation plan  -   232   -   232 
Amortization of stock based compensation  -   221   -   221 
Balances, September 30, 2017 $453  $413,948  $-  $414,401 
See Notes to Consolidated Financial Statements 
 
 
 
3
 
ORCHID ISLAND CAPITAL, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited) 
For the Nine Months Ended September 30, 2017 and 2016 
($ in thousands) 
       
  2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $7,989  $22,397 
Adjustments to reconcile net income to net cash provided by operating activities:        
Stock based compensation  453   492 
Realized and unrealized losses (gains) on mortgage-backed securities  32,247   (10,134)
Realized and unrealized gains on interest rate swaptions  (827)  (36)
Realized and unrealized losses (gains) on interest rate swaps  1,398   (792)
Realized losses on forward settling to-be-announced securities  3,843   2,385 
Changes in operating assets and liabilities:        
Accrued interest receivable  (3,898)  (967)
Other assets  (170)  (93)
Accrued interest payable  2,989   1,010 
Other liabilities  (601)  (204)
Due to affiliates  196   15 
NET CASH PROVIDED BY OPERATING ACTIVITIES  43,619   14,073 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
From mortgage-backed securities investments:        
Purchases  (5,079,945)  (2,184,709)
Sales  3,890,959   1,717,612 
Principal repayments  248,483   178,460 
Redemption of FHLB stock  3   3,750 
Payments on net settlement of to-be-announced securities  (7,945)  (2,145)
Purchase of interest rate swaptions, net of margin cash received  410   705 
NET CASH USED IN INVESTING ACTIVITIES  (948,035)  (286,327)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from repurchase agreements  39,895,749   22,443,458 
Principal payments on repurchase agreements  (38,979,377)  (21,944,174)
Principal payments on FHLB advances  -   (187,500)
Cash dividends  (47,950)  (28,864)
Proceeds from issuance of common stock, net of issuance costs  122,857   47,116 
NET CASH PROVIDED BY FINANCING ACTIVITIES  991,279   330,036 
         
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH  86,863   57,782 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period  94,425   69,959 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period $181,288  $127,741 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest $25,127  $9,619 
         
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:        
Securities acquired settled in later period $-  $72,343 
Securities sold settled in later period  -   27,509 
See Notes to Consolidated Financial Statements 
4
2
ORCHID ISLAND CAPITAL, INC.
CONDENSED STATEMENTS
OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, 2021 and 2020
($ in thousands, except per share data)
Three Months Ended March 31,
2021
2020
Interest income
$
26,856
$
35,671
Interest expense
(1,941)
(16,523)
Net interest income
24,915
19,148
Realized losses on mortgage-backed securities
(7,397)
(28,380)
Unrealized (losses) gains on mortgage-backed securities
(88,866)
3,032
Gains (losses) on derivative and other hedging instruments
45,472
(82,858)
Net portfolio loss
(25,876)
(89,058)
Expenses:
Management fees
1,621
1,377
Allocated overhead
404
347
Accrued incentive compensation
364
(436)
Directors' fees and liability insurance
272
260
Audit, legal and other professional fees
318
255
Direct REIT operating expenses
421
206
Other administrative
93
132
Total expenses
3,493
2,141
Net loss
$
(29,369)
$
(91,199)
Basic net loss per share
$
(0.34)
$
(1.41)
Diluted net loss per share
$
(0.34)
$
(1.41)
Weighted Average Shares Outstanding
85,344,954
64,590,205
Dividends declared per common share
$
0.195
$
0.240
See Notes to Financial Statements
3
ORCHID ISLAND CAPITAL, INC.
CONDENSED STATEMENTS
OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 2021 and 2020
(in thousands)
Additional
Retained
Common Stock
Paid-in
Earnings
Shares
Par Value
Capital
(Deficit)
Total
Balances, January 1, 2020
63,062
$
631
$
414,998
$
(20,122)
$
395,507
Net loss
-
0
0
(91,199)
(91,199)
Cash dividends declared
-
0
(15,670)
0
(15,670)
Issuance of common stock pursuant to public offerings, net
3,171
31
19,416
0
19,447
Stock based awards and amortization
4
0
59
0
59
Balances, March 31, 2020
66,237
$
662
$
418,803
$
(111,321)
$
308,144
Balances, January 1, 2021
76,073
$
761
$
432,524
$
(17,994)
$
415,291
Net loss
-
0
0
(29,369)
(29,369)
Cash dividends declared
-
0
(17,226)
0
(17,226)
Issuance of common stock pursuant to public offerings, net
18,248
182
96,726
0
96,908
Stock based awards and amortization
90
1
571
0
572
Balances, March 31, 2021
94,411
$
944
$
512,595
$
(47,363)
$
466,176
See Notes to Financial Statements
4
ORCHID ISLAND CAPITAL, INC.
CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, 2021 and 2020
($ in thousands)
2021
2020
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss
$
(29,369)
$
(91,199)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Stock based compensation
259
59
Realized and unrealized losses on mortgage-backed securities
96,263
25,348
Realized and unrealized (gains) losses on interest rate swaptions
(13,903)
2,589
Realized and unrealized gains on interest rate floors
(1,384)
0
Realized and unrealized (gains) losses on interest rate swaps
(30,053)
54,934
Realized (gains) losses on forward settling to-be-announced securities
(574)
7,090
Changes in operating assets and liabilities:
Accrued interest receivable
(1,050)
2,350
Other assets
(588)
(655)
Accrued interest payable
(236)
(7,287)
Other liabilities
5,318
(223)
Due to (from) affiliates
80
(102)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
24,763
(7,096)
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases
(1,764,082)
(1,334,350)
Sales
988,523
1,808,867
Principal repayments
123,880
142,259
Payments on net settlement of to-be-announced securities
(3,289)
(7,602)
Purchase of derivative financial instruments, net of margin cash received
(7,385)
(45,458)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
(662,353)
563,716
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements
7,517,156
13,602,710
Principal payments on repurchase agreements
(6,931,062)
(14,240,566)
Cash dividends
(16,030)
(15,416)
Proceeds from issuance of common stock, net of issuance costs
96,908
19,447
Shares withheld from employee stock awards for payment of taxes
(297)
0
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
666,675
(633,825)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
29,085
(77,205)
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of the period
299,506
278,655
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of the period
$
328,591
$
201,450
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest
$
2,176
$
23,809
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING ACTIVITIES:
Securities acquired settled in later period
$
217,758
$
3,450
Securities sold settled in later period
154,977
0
See Notes to Financial Statements
5
ORCHID ISLAND
CAPITAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS
(Unaudited)
MARCH 31,
2021
SEPTEMBER 30, 2017

NOTE 1.
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization
and Business
Description

Orchid Island
Capital, Inc. ("Orchid" 
(“Orchid”
or the "Company"“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"
(“RMBS”).
From incorporation
to
February 20,
2013,
Orchid was
a wholly owned
subsidiary
of Bimini Capital
Management,
Inc. ("Bimini"(“Bimini”).
Orchid began
operations
on
November 24,
2010 (the
date of commencement
of operations).
From incorporation
through November
24, 2010, Orchid's
Orchid’s only
activity
was the issuance
of common stock
to Bimini.

On February 20, 2013, Orchid completed the initial public offering ("IPO") of its common stock in which it sold approximately 2.4 million shares of its common stock and raised gross proceeds of $35.4 million, which were invested in RMBS that were issued and the principal and interest of which were guaranteed by a federally chartered corporation or agency ("Agency RMBS") on a leveraged basis.  Orchid is an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act").

On July 29, 2016,January 23, 2020, Orchid entered into an equity distribution agreement (the "July 2016
“January 2020 Equity Distribution Agreement"Agreement”) with two
three sales agents pursuant to which the Company could offer and sell, from time to time, up
to an aggregate amount of $125,000,000 $
200,000,000
of shares of the Company'sCompany’s common stock in transactions that were deemed to be "at“at the market"market” offerings and
privately negotiated
transactions.
The Company issued a total of 10,174,992
3,170,727
shares under the July 2016January 2020 Equity Distribution Agreement for
aggregate
gross proceeds of $110.0
approximately $
19.8
million, and net proceeds of approximately $108.2 $
19.4
million, net of commissions and fees, prior to
its termination in February 2017.August 2020.

On February 23, 2017,August 4, 2020, Orchid entered into anotheran equity distribution agreement as amended and restated on May 10, 2017, (the "May 2017 “August 2020
Equity Distribution Agreement"Agreement”) with two
four sales agents pursuant to which the Company may offer and sell, from time to time, up to
an aggregate amount of $125,000,000 $
150,000,000
of
shares of the Company'sCompany’s common stock in transactions that are deemed to be "at“at the market" market”
offerings and privately negotiated
transactions.  The May 2017 Equity Distribution Agreement replaced
Through March 31, 2021, the July 2016 Equity Distribution Agreement. The Company issued a total of 12,299,032
10,156,561
shares under the May 2017August 2020 Equity Distribution
Agreement for aggregate gross proceeds of $125.0
approximately $
54.1
million, and net proceeds of approximately $122.9 $
53.2
million, net of
commissions and fees.
On January 20, 2021, Orchid entered into an underwriting agreement (the “January
2021 Underwriting Agreement”) with J.P.
Morgan Securities LLC (“J.P. Morgan”), relating to the offer and sale of
7,600,000
shares of the Company’s common stock. J.P.
Morgan purchased the shares of the Company’s common stock from the Company pursuant
to the January 2021 Underwriting
Agreement at $
5.20
per share. In addition, the Company granted J.P. Morgan a 30-day option to purchase up to an additional
1,140,000
shares of the Company’s common stock on the same terms and conditions, which
J.P.
Morgan exercised in full on January
21, 2021. The closing of the offering of
8,740,000
shares of the Company’s common stock occurred on January 25, 2021, with net
proceeds to the Company of approximately $
45.2
million, net of commissions and fees, prior to its termination in August 2017.offering expenses.

On AugustMarch 2, 2017,2021, Orchid entered into another equity distributionan underwriting agreement (the "August 2017 Equity Distribution Agreement"“March 2021
Underwriting Agreement”) with two sales agentsJ.P. Morgan,
relating to the offer and sale of
8,000,000
shares of the Company’s common stock. J.P. Morgan purchased the shares of the
Company’s common stock from the Company pursuant to which the March 2021 Underwriting
Agreement at $
5.45
per share. In addition, the
Company may offer and sell, from timegranted J.P. Morgan a 30-day option to time,purchase up to an aggregate amount of $125,000,000 of additional
1,200,000
shares of the Company'sCompany’s common stock on
the same terms and conditions, which J.P. Morgan exercised in transactions that are deemedfull on March 3, 2021. The closing of the offering of
9,200,000
shares
of the Company’s common stock occurred on March 5, 2021, with net proceeds to be "at the market" offerings and privately negotiated transactions.  The August 2017 Equity Distribution Agreement replaced the May 2017 Equity Distribution Agreement. Through September 30, 2017, the Company has not issued any shares under
of approximately $
50.1
million, net of
offering expenses.
COVID-19 Impact
Beginning
in mid-March
2020, the August 2017 Equity Distribution Agreement.
global pandemic
associated
with the novel
coronavirus
(“COVID-19”)
and related
economic

conditions
began to impact
our financial
position and
results of
operations.
As a result
of the economic,
health and
market turmoil
brought
5
6
about by COVID-19,
the Agency
RMBS market
experienced
severe dislocations.
This resulted
in falling
prices of our
assets and
increased
margin calls
from our repurchase
agreement
lenders, resulting
in material
adverse effects
on our results
of operations
and to our
financial
condition.
The Agency
RMBS market
largely stabilized
after the
Federal Reserve
announced
on March 23,
2020 that
it would purchase
Agency
RMBS and
U.S. Treasuries
in the amounts
needed to
support smooth
market functioning.
As of March
31, 2021,
we have timely
satisfied
all margin
calls. The
RMBS market
continues to
react to the
pandemic and
the various
measures put
in place to
stabilize the
market.
To
the extent
the financial
or mortgage
markets do
not respond
favorably to
any of these
actions, or
such actions
do not function
as intended,
our business,
results of
operations
and financial
condition may
continue to
be materially
adversely
affected. Although
the Company
cannot
estimate the
length or
gravity of
the impact
of the COVID-19
pandemic at
this time,
if the pandemic
continues,
it may continue
to have
materially
adverse effects
on the Company’s
results of
future operations,
financial position,
and liquidity
during 2021.

Basis of
Presentation
and Use of
Estimates

The accompanying
unaudited consolidated
financial
statements
have been
prepared in
accordance
with accounting
principles
generally
accepted
in the United
States ("GAAP"(“GAAP”)
for interim
financial information
and with the
instructions
to Form 10-Q
and Article
8 of Regulation
S-X.
Accordingly, they
do not include
all of the
information
and footnotes
required by
GAAP for
complete financial
statements.  The consolidated financial statements include the accounts of our wholly-owned subsidiary, Orchid Island Casualty, LLC.  Significant intercompany accounts and transactions have been eliminated.
In the opinion
of
management,
all adjustments (consisting
(consisting
of normal
recurring
accruals)
considered
necessary
for a fair
presentation
have been
included.
Operating
results for
the nine and three
month periods period
ended September 30, 2017March
31, 2021 are
not necessarily
indicative
of the results
that may be
expected for
the year ending
December 31,
2021.
The balance
sheet at December
31, 2020 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 ending December 31, 2017.

The balance sheet at December 31, 2016 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, 2016.2020.

The preparation
of financial
statements
in conformity
with GAAP
requires management
to make estimates
and assumptions
that affect
the reported
amounts of
assets and
liabilities
and disclosure
of contingent
assets and
liabilities
at the date
of the financial
statements
and
the reported
amounts of
revenues and
expenses during
the reporting
period. Actual
results could
differ from
those estimates.
The
significant
estimates
affecting the
accompanying
financial
statements
are the fair
values of RMBS
and derivatives.
Management
believes
the estimates
and assumptions
underlying
the financial
statements
are reasonable
based on the
information
available as
of March 31,
2021.

Statement of Comprehensive Income (Loss)
Variable Interest Entities (“VIEs”)

In accordance withWe obtain interests in VIEs through our investments in mortgage-backed securities.
Our interests in these VIEs are passive in
nature and are not expected to result in us obtaining a controlling financial interest in
these VIEs in the Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") Topic 220, Comprehensive Income,future.
As a statement of comprehensive income (loss) hasresult, we do not been included
consolidate these VIEs and we account for our interest in these VIEs as the Company has no items of other comprehensive income (loss).  Comprehensive income (loss)mortgage-backed
securities.
See Note 2 for additional
information regarding our investments in mortgage-backed securities.
Our maximum exposure to loss for these VIEs is the same as net income (loss) forcarrying
value of the periods presented.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.
7
(in thousands)
March 31, 2021
December 31, 2020
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.
$
211,436
$
220,143
Restricted cash includes cash pledged as collateral for repurchase agreements and other borrowings, and interest rate swaps and other derivative instruments.

117,155
The following table provides a reconciliation of79,363
Total cash, cash equivalents
and restricted cash reported within
$
328,591
$
299,506
The Company
maintains cash
balances at
three banks
and excess
margin on
account with
two exchange
clearing members.
At times,
balances may
exceed federally
insured limits.
The Company
has not experienced
any losses
related to
these balances.
The Federal
Deposit Insurance
Corporation
insures eligible
accounts up
to $250,000
per depositor
at each financial
institution.
Restricted
cash
balances are
uninsured,
but are held
in separate
customer accounts
that are segregated
from the statementgeneral
funds of financial position the
counterparty.
The
Company limits
uninsured
balances to
only large,
well-known
banks and exchange
clearing members
and believes
that sum it is
not exposed
to the total of the same such amounts shown in the statement of
any significant
credit risk
on cash flows.and
cash equivalents
or restricted
cash balances.

(in thousands)    
 September 30, 2017 December 31, 2016 
Cash and cash equivalents $161,659  $73,475 
Restricted cash  19,629   20,950 
Total cash, cash equivalents and restricted cash $181,288  $94,425 

Mortgage-Backed
Securities
The Company maintains cash balances at four banks, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. At September 30, 2017, the Company's cash deposits exceeded federally insured limits by approximately $158.1 million. 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 bank and derivative counterparties and believes that it is not exposed to any significant credit risk on cash and cash equivalents or restricted cash balances.

6
Mortgage-Backed Securities

The Company invests primarily
in mortgage
pass-through ("PT"
(“PT”) residential
mortgage backed
certificates
issued by Freddie
Mac,
Fannie Mae
or Ginnie Mae
(“RMBS”),
collateralized
mortgage obligations and
(“CMOs”),
interest-only ("IO"
(“IO”) securities
and inverse
interest-only ("IIO"
(“IIO”) securities
representing interest in or obligations backed by pools of RMBS.
We refer to RMBS and CMOs as PT RMBS. We refer
to IO and IIO securities as structured RMBS. The Company has elected to account for its
investment in RMBS under the fair value
option. Electing the fair value option requires
the Company to record changes in fair value in the consolidated statement of operations,
which, in management's
management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with the
underlying economics and how the portfolio is managed.

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

Fair value
is defined
as the price
that would
be received
to sell the
asset or paid
to transfer
the liability
in an orderly
transaction
between market
participants
at the measurement
date.
The fair value
measurement
assumes that
the transaction
to sell the
asset or
transfer the
liability either
occurs in
the principal
market for
the asset or
liability, or in
the absence
of a principal
market, occurs
in the most
advantageous
market for
the asset or
liability. Estimated
fair values
for RMBS
are based
on independent
pricing sources
and/or third
party
broker quotes,
when available.
Income on PT
RMBS securities
is based on
the stated
interest rate
of the security.
Premiums or
discounts present
at the date
of
purchase are
not amortized.
Premium lost
and discount
accretion
resulting from
monthly principal
repayments
are reflected
in unrealized
gains (losses)
on RMBS in
the statements
of operations.
For IO securities,
the income
is accrued
based on the
carrying value
and the
effective yield.
The difference
between income
accrued and
the interest
received on
the security
is characterized
as a return
of investment
and serves
to reduce
the asset’s
carrying value.
At each reporting
date, the
effective yield
is adjusted
prospectively
for future
reporting
periods
based on the
new estimate
of prepayments
and the contractual
terms of the
security. For IIO
securities,
effective yield
and income
recognition
calculations
also take
into account
the index value
applicable
to the security.
Changes in
fair value
of RMBS during
each
reporting
period are
recorded in
earnings and
reported as
unrealized
gains or losses
on mortgage-backed
securities
in the accompanying
statements
of operations.
Derivative and Other Hedging Instruments
The Company
uses derivative
and other
hedging instruments
to manage
interest rate
risk, facilitate
asset/liability
strategies
and
manage other
exposures,
and it may
continue to
do so in the
future. The
principal instruments
that the Company
has used to
date are
Treasury Note
(“T-Note”),
Fed Funds and
Eurodollar
futures contracts,
short positions
in U.S. Treasury
securities,
interest rate
swaps,
8
options to
enter in interest
rate swaps
(“interest
rate swaptions”)
and “to-be-announced”
(“TBA”) securities
transactions,
but the Company
may enter
into other
derivative
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 operations.
Derivative
and other
hedging instruments
are carried
at fair value,
and changes
in fair value
are recorded
in earnings
for each period.
The Company’s
derivative
financial
instruments
are not designated
as hedge accounting
relationships,
but rather
are used as
economic
hedges of
its portfolio
assets and
liabilities.
Holding derivatives
creates exposure
to credit
risk related
to the potential
for failure
on the part
of counterparties
and exchanges
to
honor their
commitments.
In 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 Company's investments in RMBS is governed by FASB ASC 820, Fair Value Measurement.  The definitionbody of fair value in FASB ASC 820 focuses on
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, financial
statements
or in the absence of a principal market, occurs
accompanying
notes. RMBS,
Eurodollar,
Fed Funds
and T-Note
futures contracts,
interest rate
swaps, interest
rate
swaptions
and TBA securities
are accounted
for at fair
value in the most advantageous market
balance sheets.
The methods
and assumptions
used to estimate
fair
value for the asset or liability. Estimated fair values for RMBS
these instruments
are based on independent pricing sources and/or third party broker quotes, when available.presented
in Note 12

Income on PT RMBS securities is based on the stated interest rate of the security. Premiums or discounts present at the date financial
statements.
The estimated
fair value
of purchase are not amortized. Premium lostcash and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the consolidated statements
cash equivalents,
restricted
cash, accrued
interest receivable,
receivable
for securities
sold,
other assets,
due to affiliates,
repurchase
agreements,
payable for
unsettled securities
purchased,
accrued interest
payable and
other
liabilities
generally approximates
their carrying
values as of operations. For IO securities, the income is accrued based on the carrying value
March 31,
2021 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 from the reporting period 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 December
31, 2020 due
to the security. Changes in fair valueshort-term
nature of RMBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations.
these

financial instruments.
Derivative Financial Instruments
Repurchase
Agreements
 
The Company uses derivative instruments to manage
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, rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so
as specified
in the future. The principal instruments that the Company has used respective
agreements.
Reverse Repurchase
Agreements
and Obligations
to date are Treasury Note ("T-Note") and Eurodollar futures contracts, interest rate swaps, and options to enter in interest rate swaps ("interest rate swaptions"), but may enter into other derivatives in the future.Return Securities
Borrowed under
Reverse Repurchase
Agreements

The Company purchases a portion
borrows
securities
to cover short
sales of its Agency RMBS U.S.
Treasury securities
through forward settling reverse
repurchase
transactions including "to-be-announced" ("TBA")
under our
master repurchase
agreements.
We account for
these as securities transactions.  At times when market conditions are conducive, the Company may choose
borrowing
transactions
and recognize
an obligation
to movereturn the settlement of these TBA securities transactions out to a later date by entering into an offsetting short position, which is then net settled for cash, and simultaneously entering into a substantially similar TBA securities trade for a later settlement date.  Such a set of transactions is referred to as a TBA "dollar roll" transaction.  The TBA securities purchased at the later settlement date are typically priced at a discount to securities for settlement in the current month.  This difference is referred to as the "price drop."  The price drop represents compensation to the Company for foregoing net interest margin and is referred to as TBA "dollar roll income."  Specified pools of mortgage loans can also be the subject of a TBA dollar roll transaction, when market conditions allow.

borrowed
securities
7

The Company accounts for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if the Company cannot assert that it is probable at inception of the TBA transaction, or throughout its term, that it will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a short position, upon settlement of the trade. The Company accounts for TBA dollar roll transactions as a series of derivative transactions. Gains, losses and dollar roll income associated with TBA securities transactions and dollar roll transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations.  The fair value of TBA securities is estimated based on similar methods used to value RMBS securities.

The Company has elected not to treat any of its derivative financial instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. FASB ASC Topic 815, Derivatives and Hedging, requires that all derivative instruments be carried at fair value.  Changes in fair value are recorded in earnings for each period.

Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties and exchanges to honor their commitments.  In addition, the Company may be required to post collateral based on any declines in the market value of the derivatives.  In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement.  To mitigate this risk, the Company uses only well-established commercial banks as counterparties.

Financial Instruments

FASB ASC 825, Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value, either in the body of the financial statements or in the accompanying notes. RMBS, Eurodollar and T-Note futures contracts, interest rate swaps, interest rate swaptions and TBA securities are accounted for at fair value in
on the consolidated balance sheets. The methods and assumptions used to estimate fair
sheet based
on the value for these instruments are presented in Note 12
of the consolidated financial statements.underlying
borrowed

securities
as of the
reporting
date.
The estimated fair value 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 cash and cash equivalents, restricted cash, accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying values as of September 30 2017 and December 31, 2016 due to the short-term nature of these financial instruments.days
or less.

Repurchase Agreements

The Company finances the acquisition of the majority of its RMBS through the use of repurchase agreements under master repurchase agreements. Pursuant to ASC Topic 860, Transfers and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.

Manager Compensation

The Company
is externally
managed by
Bimini Advisors,
LLC (the "Manager"
“Manager”
or "Bimini Advisors"“Bimini
Advisors”),
a Maryland
limited liability
company and
wholly-owned
subsidiary
of Bimini.
The Company's Company’s
management
agreement
with the
Manager provides
for payment
to the
Manager of
a management
fee and reimbursement
of certain
operating
expenses, which
are accrued
and expensed
during the
period for
which they
are earned
or incurred.
Refer to
Note 13 for
the terms of
the management
agreement.

8
9

Earnings
Per Share

The Company follows the provisions of FASB ASC 260, Earnings Per Share. Basic earnings
per share ("EPS"
(“EPS”) is
calculated
as net income
or loss attributable
to common stockholders
divided by
the weighted
average number
of shares
of common stock
outstanding
or subscribed
during the
period. Diluted
EPS is calculated
using the treasury
stock or two-class
method, as
applicable,
for common
stock equivalents,
if any. However, the
common stock
equivalents
are not included
in computing
diluted EPS
if the result
is anti-dilutive.

Income Taxes

Orchid has qualified and elected to be taxed as a real estate investment trust ("REIT"(“REIT”) under
the Internal Revenue Code of 1986,
as amended (the "Code"“Code”).
REITs are generally not subject to federal income tax on their REIT taxable income provided that they
distribute to their stockholders at least 90% of their REIT taxable income on an annual
basis. In addition, a REIT must meet other
provisions of the Code to retain its tax status.

Orchid measures, recognizes and presents its uncertain tax positions in accordance with FASB ASC 740, Income Taxes.  Under that guidance, 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'sOrchid’s tax positions are categorized as
highly certain.
There is no accrual for any tax, interest or penalties related to Orchid'sOrchid’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 2016, the FASB issuedOn January 1, 2020, we adopted Accounting Standards Update ("ASU"(“ASU”) 2016-18, Statement2016-13,
Financial Instruments – Credit Losses (Topic
326): Measurement of Cash Flows – (Topic 230): Restricted Cash. Credit Losses on Financial Instruments.
ASU 2016-182016-13 requires that restricted cashcredit losses on most financial assets measured
at amortized cost and restricted cash equivalentscertain other instruments to be includedmeasured using an expected credit
loss model (referred to as componentsthe current
expected credit loss model). The Company’s adoption of total cash and cash equivalentsthis ASU did not have a material effect on its financial
statements as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017.  Early application is permitted.  The Company adopted the ASU beginning with the first quarter of 2017. The prior period consolidated statement of cash flows has been retrospectively adjusted to conform to this presentation.its

financial assets were already measured at fair value through earnings.
In August 2016,March 2020, the FASB issued ASU 2016-15, Statement2020-04 “
Reference Rate Reform (Topic 848): Facilitation of Cash Flows –the Effects of Reference Rate
Reform on Financial Reporting.
”
ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for
modifications
on debt instruments, leases, derivatives, and other contracts, related to the expected market
transition from the London Interbank
Offered Rate (“LIBOR”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU
2020-04 generally considers contract modifications related to reference rate reform to
be an event that does not require contract
remeasurement at the modification date nor a reassessment of a previous accounting
determination. The guidance in ASU 2020-04 is
optional and may be elected over time, through December 31, 2022, as reference
rate reform activities occur. The Company does not
believe the adoption of this ASU will have a material impact on its consolidated financial
statements.
In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 230): Classification848). ASU 2021-01 expands the scope of Certain Cash ReceiptsASC
848 to include all affected derivatives and Cash Payments. give market participants the ability to apply certain
aspects of the contract modification and
hedge accounting expedients to derivative contracts affected by the discounting transition. In
addition, ASU 2016-15 addresses eight specific cash flow issues with the objective2021-01 adds
implementation guidance to permit a company to apply certain optional expedients
to modifications of reducing interest rate indexes used for
margining, discounting or contract price alignment of certain derivatives as a result
of reference rate reform initiatives and extends
optional expedients to account for a derivative contract modified as a continuation of
the existing diversitycontract and to continue hedge
accounting when certain critical terms of a hedging relationship change to modifications
made as part of the discounting transition. The
guidance in practice. ASU 2016-152021-01 is effective for fiscal years,immediately and for interim periods within those years, beginning afteravailable generally through December 15, 2017.  Early application is permitted.
31, 2022, as reference rate reform
activities occur. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model). ASU 2016-13 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019.  Early application is permitted for fiscal periods beginning after December 15, 2018.  The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 provides guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities.  ASU 2016-01 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017 and, for most provisions, is effective using the cumulative-effect transition approach.  Early application is permitted for certain provisions.  The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements.

9
NOTE 2.
MORTGAGE-BACKED SECURITIES

10
The following
table presents
the Company’s
RMBS portfolio
as of March
31, 2021 and
December 31,
2020:
(in thousands)
March 31, 2021
December 31, 2020
Pass-Through RMBS Certificates:
Fixed-rate Mortgages
$
4,297,731
$
3,560,746
Fixed-rate CMOs
0
137,453
Total Pass-Through
Certificates
4,297,731
3,698,199
Structured RMBS Certificates:
Interest-Only Securities
35,521
28,696
Inverse Interest-Only Securities
5,284
0
Total Structured
RMBS Certificates
40,805
28,696
Total
$
4,338,536
$
3,726,895
NOTE 3.
REPURCHASE AGREEMENTS
The following table presentsCompany
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 Company's RMBS portfolioterms
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 March
31, 2021,
the Company
had met all
margin call
requirements.
As of March
31, 2021 and
December 31,
2020, 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
March 31, 2021
Fair market value of securities pledged, including
accrued interest receivable
$
58,219
$
2,288,135
$
1,316,896
$
622,666
$
4,285,916
Repurchase agreement liabilities associated with
these securities
$
53,526
$
2,233,561
$
1,289,617
$
604,976
$
4,181,680
Net weighted average borrowing rate
0.24%
0.18%
0.18%
0.18%
0.18%
December 31, 2020
Fair market value of securities pledged, including
accrued interest receivable
$
0
$
2,112,969
$
1,560,798
$
55,776
$
3,729,543
Repurchase agreement liabilities associated with
these securities
$
0
$
2,047,897
$
1,494,500
$
53,189
$
3,595,586
Net weighted average borrowing rate
0
0.23%
0.22%
0.30%
0.23%
In addition, cash pledged to counterparties for repurchase agreements was approximately
$
102.6
million and $
58.8
million as of September 30, 2017
March 31, 2021 and December 31, 2016:2020, respectively.

(in thousands)      
   September 30, 2017  December 31, 2016 
Pass-Through RMBS Certificates:      
Hybrid Adjustable-rate Mortgages $42,201  $45,459 
Adjustable-rate Mortgages  1,783   2,062 
Fixed-rate Mortgages  3,740,658   2,826,694 
Total Pass-Through Certificates  3,784,642   2,874,215 
Structured RMBS Certificates:        
Interest-Only Securities  90,551   69,726 
Inverse Interest-Only Securities  55,147   78,233 
Total Structured RMBS Certificates  145,698   147,959 
Total $3,930,340  $3,022,174 
If, during
the term of
a repurchase
agreement,
a lender files
for bankruptcy,
the Company
might experience
difficulty recovering
its

pledged assets,
which could
The following table summarizes
result in
an unsecured
claim against
the Company's RMBS portfolio as of September 30, 2017 and December 31, 2016, according lender
for the difference
between the
amount loaned
to the contractual maturities of the securities in the portfolio. Actual maturities of RMBS investments are generally shorter than stated contractual maturities and are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.Company

plus interest
(in thousands)      
  September 30, 2017  December 31, 2016 
Greater than one year and less than five years $52  $157 
Greater than five years and less than ten years  2,771   277 
Greater than or equal to ten years  3,927,517   3,021,740 
Total $3,930,340  $3,022,174 

NOTE 3.   REPURCHASE AGREEMENTS AND OTHER BORROWINGS

The Company pledges certain of its RMBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates correspondingdue to the terms of
counterparty
and 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, 2017, the Company had met all margin call requirements.

As of September 30, 2017, the Company had outstanding repurchase obligations of approximately $3,710.1 million with a net weighted average borrowing rate of 1.37%.  These agreements were collateralized by RMBS with a fair value, including accrued interest and securities pledged related to securities sold but not yet settled, of approximately $3,932.6 million, and cash pledged to the counterparties of approximately $12.0 million.  As of December 31, 2016, the Company had outstanding repurchase obligations of approximately $2,793.7 million with a net weighted average borrowing rate of 1.00%.  These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $2,970.9 million, and cash pledged to the counterparties of approximately $10.8 million.

10

As of September 30, 2017 and 2016, 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, 2017 
Fair market value of securities pledged, including               
accrued interest receivable $-  $2,506,628  $941,339  $484,607  $3,932,574 
Repurchase agreement liabilities associated with                    
these securities $-  $2,358,459  $897,376  $454,242  $3,710,077 
Net weighted average borrowing rate  -   1.34%  1.34%  1.57%  1.37%
December 31, 2016 
Fair market value of securities pledged, including                    
accrued interest receivable $-  $2,284,815  $686,065  $-  $2,970,880 
Repurchase agreement liabilities associated with                    
these securities $-  $2,154,766  $638,939  $-  $2,793,705 
Net weighted average borrowing rate  -   1.01%  0.96%  -   1.00%

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, 2017, March
31, 2021,
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
(if any),
and the fair
value of securities
and cash pledged (if
(if any),
including accrued
interest on
such securities)
with all
counterparties
of approximately $227.9
$
205.9
11
million.
The Company
did not have
an amount
at risk with
any individual
counterparty
greater than
10% of the Company's
Company’s equity
at September 30, 2017March
31, 2021 and
December 31, 2016.
2020.

NOTE 4. DERIVATIVE FINANCIALAND OTHER HEDGING INSTRUMENTS

The table
below summarizes
fair value
information
about our
derivative
and other
hedging instruments
assets and
liabilities
as of
March 31,
2021 and December
31, 2020.
(in thousands)
Derivative and Other Hedging Instruments
Balance Sheet Location
March 31, 2021
December 31, 2020
Assets
Interest rate swaps
Derivative assets, at fair value
$
25,254
$
7
Payer swaptions (long positions)
Derivative assets, at fair value
58,643
17,433
Interest rate floors
Derivative assets, at fair value
2,399
0
TBA securities
Derivative assets, at fair value
9,456
3,559
Total derivative
assets, at fair value
$
95,752
$
20,999
Liabilities
Interest rate swaps
Derivative liabilities, at fair value
$
0
$
24,711
Payer swaptions (short positions)
Derivative liabilities, at fair value
35,057
7,730
TBA securities
Derivative liabilities, at fair value
0
786
Total derivative
liabilities, at fair value
$
35,057
$
33,227
Margin Balances Posted to (from) Counterparties
Futures contracts
Restricted cash
$
585
$
489
TBA securities
Restricted cash
1,781
284
TBA securities
Other liabilities
(7,407)
(2,520)
Interest rate swaption contracts
Other liabilities
(13,962)
(3,563)
Interest rate swap contracts
Restricted cash
12,214
19,761
Total margin
balances on derivative contracts
$
(6,789)
$
14,451
Eurodollar, Fed
Funds and
T-Note futures
are cash settled
futures contracts
on an interest
rate, with
gains and losses
credited
or
charged to
the Company’s
cash accounts
on a daily
basis. A
minimum balance,
or “margin”,
is required
to be maintained
in the account
on
a daily basis.
The tables
below present
information
related to
the Company’s
Eurodollar
and T-Note futures
positions at
March 31,
2021
and December
31, 2020.
In connection with its interest rate risk management strategy,
($ in thousands)
March 31, 2021
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity
(1)
Eurodollar Futures Contracts (Short Positions)
2021
$
50,000
1.01%
0.21%
$
(301)
Treasury Note Futures Contracts (Short
Position)
(2)
June 2021 5-year T-Note futures
(Jun 2021 - Jun 2026 Hedge Period)
$
69,000
0.88%
1.17%
$
1,036
($ in thousands)
December 31, 2020
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
12
Expiration Year
Amount
Rate
Rate
Equity
(1)
Eurodollar Futures Contracts (Short Positions)
2021
$
50,000
1.03%
0.18%
$
(424)
Treasury Note Futures Contracts (Short
Position)
(2)
March 2021 5 year T-Note futures
(Mar 2021 - Mar 2026 Hedge Period)
$
69,000
0.72%
0.67%
$
(186)
(1)
Open equity represents the Company economically hedges a portion of the cost of its repurchase agreement funding by entering into derivatives and other hedging contracts.  To date, the Company has entered into Eurodollar and cumulative gains (losses) recorded on open
futures positions from inception.
(2)
T-Note futures contracts interest rate swaps,were valued
at a price of $
123.40
at March 31, 2021 and interest rate swaptions, but may enter into other contracts in the future.  $
126.16
at December 31, 2020.
The Company has not elected hedging treatment under GAAP, and as such all gains or losses (realized and unrealized) on these instruments are reflected in earnings for all periods presented.

In addition, the Company utilizes TBA securities as a means of investing in and financing Agency RMBS or as a means of reducing its exposure to Agency RMBS, and also a hedge for tax purposes. The Company accounts for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if the Company cannot assert that it is probable at inception and throughout the termcontract values of the TBA securities that it will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a
short position, upon settlement of the trade.positions were $

85.1
11
million and $

87.1
Derivative Assets (Liabilities),
million at Fair Value

The table below summarizes fair value information about our derivative assets and liabilities as of September 30, 2017March 31, 2021 and December 31, 2016.2020, respectively.

(in thousands)       
Derivative Instruments and Related AccountsBalance Sheet Location September 30, 2017  December 31, 2016 
Assets       
Interest rate swapsDerivative assets, at fair value $10,693  $10,302 
Payer swaptionsDerivative assets, at fair value  3,194   - 
TBA securitiesDerivative assets, at fair value  2,984   63 
Total derivative assets, at fair value  $16,871  $10,365 
          
Liabilities         
Interest rate swapsDerivative liabilities, at fair value $2,591  $802 
TBA securitiesDerivative liabilities, at fair value  -   1,180 
Total derivative liabilities, at fair value  $2,591  $1,982 
          
Margin Balances Posted to (from) Counterparties         
Futures contractsRestricted cash $6,193  $9,419 
TBA securitiesRestricted cash  -   446 
TBA securitiesOther liabilities  (1,867)  - 
Interest rate swaption contractsOther liabilities  (2,776)  - 
Interest rate swap contractsRestricted cash  1,437   - 
Total margin balances on derivative contracts  $2,987  $9,865 

Eurodollar and T-Note futures are cash settled futures contracts on an interest rate, with gains and losses credited or charged to the Company's cash accounts on a daily basis. A minimum balance, or "margin", is required to be maintained in the account on a daily basis. The tables below present information related to the Company's Eurodollar and T-Note futures positions at September 30, 2017 and December 31, 2016.

($ in thousands)            
  September 30, 2017 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year Amount  Rate  Rate  
Equity(1)
 
Eurodollar Futures Contracts (Short Positions)            
2017 $1,000,000   1.62%  1.48% $(340)
2018  1,000,000   1.84%  1.73%  (1,091)
2019  1,000,000   2.09%  1.98%  (1,138)
2020  925,000   2.62%  2.13%  (4,505)
Total / Weighted Average $976,923   2.13%  1.91% $(7,074)
                 
Treasury Note Futures Contracts (Short Position)(2)
                
September 2017 10-year T-Note futures                
(Sep 2017 - Sep 2027 Hedge Period) $115,000   1.98%  2.16% $(81)

12

($ in thousands)            
  December 31, 2016 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year Amount  Rate  Rate  
Equity(1)
 
Eurodollar Futures Contracts (Short Positions)            
2017 $600,000   1.48%  1.28% $(1,206)
2018  600,000   1.81%  1.82%  76 
2019  675,000   2.00%  2.21%  1,429 
2020  700,000   2.65%  2.45%  (1,394)
Total / Weighted Average $643,750   2.01%  1.97% $(1,095)
                 
Treasury Note Futures Contracts (Short Position)(2)
                
March 2017 10 year T-Note futures                
(Mar 2017 - Mar 2027 Hedge Period) $465,000   2.27%  2.24% $(3,134)

(1)Open equity represents the cumulative gains (losses) recorded on open futures positions from inception.
(2)T-Note futures contracts were valued at a price of $125.31 at September 30, 2017 and $124.28 at December 31, 2016.  The notional contract values of the short positions were $144.1 million and $577.9 million at September 30, 2017 and December 31, 2016, respectively.

Under our
interest rate
swap agreements,
we typically
pay a fixed
rate and receive
a floating
rate based
on the London Interbank Offered RateLIBOR ("LIBOR") ("payer
swaps").
The floating
rate we receive
under our
swap agreements
has the effect
of offsetting
the repricing
characteristics
of our repurchase
agreements
and cash flows
on such liabilities.
We are typically
required to
post collateral
on our interest
rate swap
agreements.
The table
below presents
information
related to
the Company's Company’s
interest rate
swap positions
at September 30, 2017March 31,
2021 and December
31, 2020.
($ in thousands)
Average
Net
Fixed
Average
Estimated
Average
Notional
Pay
Receive
Fair
Maturity
Amount
Rate
Rate
Value
(Years)
March 31, 2021
Expiration > 3 to ≤ 5 years
$
955,000
0.64%
0.21%
$
15,286
4.8
Expiration > 5 years
400,000
1.16%
0.18%
9,968
8.1
$
1,355,000
0.79%
0.20%
$
25,254
5.7
December 31, 2016.2020

Expiration > 3 to ≤ 5 years
($ in thousands)               
     Average     Net    
     Fixed  Average  Estimated  Average 
  Notional  Pay  Receive  Fair  Maturity 
  Amount  Rate  Rate  Value  (Years) 
September 30, 2017               
Expiration > 1 to ≤ 3 years $650,000   1.09%  1.31% $10,318   2.3 
Expiration > 3 to ≤ 5 years  360,000   2.05%  1.32%  (2,216)  4.5 
  $1,010,000   1.43%  1.31% $8,102   3.1 
December 31, 2016                    
Expiration > 3 to ≤ 5 years $700,000   1.20%  0.91% $9,500   3.4 
$

620,000
1.29%
0.22%
$
(23,760)
3.6
Expiration > 5 years
200,000
0.67%
0.23%
(944)
6.4
$
820,000
1.14%
0.23%
$
(24,704)
4.3
The table
below presents
information
related to
the Company's Company’s
interest rate
floor positions
at March 31,
2021.
($ in thousands)
Net
Strike
Estimated
Notional
Swap
Curve
Fair
Expiration
Amount
Cost
Rate
Spread
Value
February 3, 2023
$
70,000
$
511
0.76%
30Y5Y
$
1,435
February 3, 2023
80,000
504
1.10%
10Y2Y
964
$
150,000
$
1,015
0.94%
2,399
The table
below presents
information
related to
the Company’s
interest rate
swaption positions
at September 30, 2017.March 31,

2021 and
($ in thousands)                
 OptionUnderlying Swap
       Weighted      Weighted
       Average  FixedReceiveAverage
      FairMonths toNotionalPayRateTerm
Expiration CostValueExpirationAmountRate(LIBOR)(Years)
Payer Swaptions                
≤ 1 year$2,367$3,19411.0$200,0002.16%3 Month6.0

13
December 31,
2020.

($ in thousands)
Option
Underlying Swap
Weighted
Average
Weighted
Average
Average
Adjustabl
e
Average
Fair
Months to
Notional
Fixed
Rate
Term
Expiration
Cost
Value
Expiration
Amount
Rate
(LIBOR)
(Years)
March 31, 2021
Payer Swaptions - long
>1 year ≤ 2 years
$
25,390
$
58,643
22.1
$
1,027,200
2.20%
3 Month
15.0
13
Payer Swaptions - short
≤ 1 year
$
(10,720)
$
(35,057)
10.1
$
(782,850)
2.20%
3 Month
15.0
December 31, 2020
Payer Swaptions - long
≤ 1 year
$
3,450
$
5
2.5
$
500,000
0.95%
3 Month
4.0
>1 year ≤ 2 years
13,410
17,428
17.4
675,000
1.49%
3 Month
12.8
$
16,860
$
17,433
11.0
$
1,175,000
1.26%
3 Month
9.0
Payer Swaptions - short
≤ 1 year
$
(4,660)
$
(7,730)
5.4
$
(507,700)
1.49%
3 Month
12.8
The following table summarizes our contracts to purchase and sell TBA
securities as of September 30, 2017March 31, 2021 and December 31, 2016.2020
.
 
($ in thousands)        
  Notional     Net
  Amount Cost Market Carrying
  
Long (Short)(1)
 
Basis(2)
 
Value(3)
 
Value(4)
September 30, 2017        
30-Year TBA securities:        
 3.0%$(300,000)$(303,773)$(300,789)$2,984
December 31, 2016        
30-Year TBA securities:        
 3.0%$(100,000)$(99,406)$(99,344)$62
 4.0% (100,000) (103,898) (105,078) (1,180)
Total$(200,000)$(203,304)$(204,422)$(1,118)
($ in thousands)
Notional
Net
Amount
Cost
Market
Carrying
Long (Short)
(1)
Basis
(2)
Value
(3)
Value
(4)
March 31, 2021
30-Year TBA securities:
2.5%
$
(250,000)
$
(257,188)
$
(256,270)
$
918
3.0%
(1,062,000)
(1,114,345)
(1,105,807)
8,538
Total
$
(1,312,000)
$
(1,371,533)
$
(1,362,077)
$
9,456
December 31, 2020
30-Year TBA securities:
2.0%
$
465,000
$
479,531
$
483,090
$
3,559
3.0%
(328,000)
(342,896)
(343,682)
(786)
Total
$
137,000
$
136,635
$
139,408
$
2,773
 
(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.
Notional amount represents the par value (or principal balance) of the
underlying Agency RMBS.
(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 our consolidated balance sheets.
(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 our balance sheets.
Gain (Loss) From Derivative and Other Hedging Instruments, Net

The table below presents the effect of the Company'sCompany’s derivative financialand other hedging instruments on the consolidated statements of
operations for the nine and three months ended September 30, 2017March 31, 2021 and 2016.2020.

(in thousands)            
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  2017  2016 
Eurodollar futures contracts (short positions) $(6,955) $(17,507) $607  $1,194 
T-Note futures contracts (short position)  (16,190)  (12,288)  (6,450)  1,688 
Interest rate swaps  (3,170)  (450)  1,005   4,179 
Receiver swaptions  -   36   -   - 
Payer swaptions  827   -   827   - 
Net TBA securities  (3,843)  (2,385)  (1,459)  (474)
Total $(29,331) $(32,594) $(5,470) $6,587 

(in thousands)
Three Months Ended March 31,
2021
2020
Eurodollar futures contracts (short positions)
$
12
$
(8,217)
T-Note futures contracts (short position)
2,476
(4,339)
Interest rate swaps
27,123
(60,623)
Payer swaptions (short positions)
(26,167)
0
Payer swaptions (long positions)
40,070
(2,589)
Interest rate floors
1,384
0
TBA securities (short positions)
9,133
(7,090)
TBA securities (long positions)
(8,559)
0
Total
$
45,472
$
(82,858)
Credit Risk-Related Contingent Features

14
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. We minimize this risk by limiting our counterparties for instruments which are not centrally cleared on a registered
exchange to major financial institutions with acceptable credit ratings and monitoring positions with individual counterparties.
In addition, we may be required to pledge assets as collateral for our derivatives, whose amounts vary over time based on
the market value, notional amount and remaining term of the derivative contract. In the event of a default by a counterparty,,
we may not receive payments provided for under the terms of our derivative agreements, and may have difficulty obtaining
our assets pledged as collateral for our derivatives. The cash and cash equivalents pledged as collateral for our derivative
instruments are included in restricted cash on our consolidated balance sheets.

14It is the Company's policy not to offset assets and
liabilities associated with open derivative contracts. However, the Chicago Mercantile Exchange (“CME”) rules characterize
variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets
and liabilities associated with centrally cleared derivatives for which the CME serves as the central clearing party are
presented as if these derivatives had been settled as of the reporting date.

NOTE 5. PLEDGED ASSETS

Assets Pledged
to Counterparties
The table
below summarizes
our assets
pledged as
collateral
under our
repurchase
agreements
and derivative
agreements
by type,
including securities
pledged related
to securities
sold but not
yet settled,
as of March
31, 2021 and
December 31,
2020.
(in thousands)
March 31, 2021
December 31, 2020
Repurchase
Derivative
Repurchase
Derivative
Assets Pledged to Counterparties

Agreements
Agreements
Total
Agreements
Agreements
Total
PT RMBS - fair value
$
4,081,596
$
0
$
4,081,596
$
3,692,811
$
0
$
3,692,811
Structured RMBS - fair value
38,904
0
38,904
27,095
0
27,095
Accrued interest on pledged securities
10,572
0
10,572
9,636
0
9,636
Receivable for securities sold
154,977
0
154,977
0
0
0
Restricted cash
102,575
14,580
117,155
58,829
20,534
79,363
Total
$
4,388,624
$
14,580
$
4,403,204
$
3,788,371
$
20,534
$
3,808,905
Assets Pledged
from Counterparties
The table
below summarizes
our assets
pledged as collateral to
us from counterparties
under our
repurchase
agreements, prime brokerage clearing accounts, derivative
reverse repurchase
agreements
and insurance capital by type, including securities pledged related to securities sold but not yet settled, derivative
agreements
as of September 30, 2017March
31, 2021 and
December 31,
2020.
(in thousands)
March 31, 2021
December 31, 2016.
2020

Repurchase
(in thousands)         
  September 30, 2017 
  Repurchase  Derivative    
Assets Pledged to Counterparties Agreements  Agreements  Total 
PT RMBS - fair value $3,779,375  $-  $3,779,375 
Structured RMBS - fair value  138,050   -   138,050 
Accrued interest on pledged securities  15,150   -   15,150 
Restricted cash  11,999   7,630   19,629 
Total $3,944,574  $7,630  $3,952,204 
Derivative

Repurchase
(in thousands)               
  December 31, 2016 
  Repurchase  Clearing  Derivative  Insurance    
Assets Pledged to Counterparties Agreements  Margin  Agreements  
Capital(1)
  Total 
PT RMBS - fair value $2,854,062  $-  $-  $1,065  $2,855,127 
Structured RMBS - fair value  106,195   10,968   -   -   117,163 
Accrued interest on pledged securities  10,623   266   -   4   10,893 
Restricted cash  10,835   -   9,865   250   20,950 
Total $2,981,715  $11,234  $9,865  $1,319  $3,004,133 

(1)Orchid Island Casualty, Inc. was required to maintain sufficient capital in the form of cash and securities to protect it against losses.

Derivative
Assets Pledged from Counterpartiesto Orchid

Agreements
The table below summarizes our assets pledged to us from counterparties under our repurchase agreements as of September 30, 2017 and December 31, 2016.Agreements

Total
(in thousands)                  
 September 30, 2017  December 31, 2016 
 Repurchase Derivative   Repurchase Derivative   
Assets Pledged to OrchidAgreements Agreements Total Agreements Agreements Total 
Cash $253  $4,643  $4,896  $1,029  $-  $1,029 
PT RMBS - fair value  1,768   -   1,768   -   -   - 
U.S. Treasury securities - fair value  -   -   -   3,438   -   3,438 
Total $2,021  $4,643  $6,664  $4,467  $-  $4,467 
Agreements

Agreements
PT RMBS and Total
Cash
$
99
$
21,369
$
21,468
$
120
$
6,083
$
6,203
U.S. Treasury securities - fair value
737
0
737
253
0
253
Total
$
836
$
21,369
$
22,205
$
$
373
$
6,083
$
6,456
RMBS and
U.S. Treasury
securities
received as
margin under
our repurchase
agreements
are not recorded
in the consolidated balance
sheets
because the
counterparty
retains ownership
of the security.
U.S. Treasury
securities
received from
counterparties
as collateral
under our
reverse repurchase
agreements
are recognized
as obligations
to return
securities
borrowed
under reverse
repurchase
agreements
in the
balance sheet.
Cash received
as margin is
recognized in
as cash and
cash equivalents
with a corresponding
amount recognized
as an
15
increase in
repurchase
agreements
or other liabilities
in the consolidated balance
sheets.

15

NOTE 6. OFFSETTING ASSETS AND LIABILITIES

The Company's derivatives Company’s
derivative
agreements
and repurchase
agreements
and reverse
repurchase
agreements
are subject
to underlying
agreements
with master
netting or
similar arrangements,
which provide
for the right
of offset in
the event
of default
or in the event
of
bankruptcy
of either
party to the
transactions.
The Company
reports its
assets and
liabilities
subject to
these arrangements
on a gross basis.

basis.
The following
table presents
information
regarding
those assets
and liabilities
subject to
such arrangements
as if the Company
had
presented
them on a
net basis as
of September 30, 2017March 31,
2021 and December
31, 2016.2020.

(in thousands)                  
Offsetting of Assets 
     Net Amount Gross Amount Not Offset in the   
     of Assets Consolidated Balance Sheet   
   Gross Amount Presented Financial     
 Gross Amount Offset in the in the Instruments Cash   
 of Recognized Consolidated Consolidated Received as Received as Net 
 Assets Balance Sheet Balance Sheet Collateral Collateral Amount 
September 30, 2017                  
Interest rate swaps $10,693  $-  $10,693  $-  $-  $10,693 
Interest rate swaptions  3,194   -   3,194   -   (2,776)  418 
TBA securities  2,984   -   2,984   -   (1,867)  1,117 
  $16,871  $-  $16,871  $-  $(4,643) $12,228 
December 31, 2016                        
Interest rate swaps $10,302  $-  $10,302  $-  $-  $10,302 
TBA securities  63   -   63   -   (63)  - 
  $10,365  $-  $10,365  $-  $(63) $10,302 

(in thousands)
(in thousands)                  
Offsetting of Liabilities 
     Net Amount Gross Amount Not Offset in the    
     of Assets Consolidated Balance Sheet    
   Gross Amount Presented Financial     
 Gross Amount Offset in the in the Instruments     
 of Recognized Consolidated Consolidated Posted as Cash Posted Net 
 Liabilities Balance Sheet Balance Sheet Collateral Collateral Amount 
September 30, 2017                  
Repurchase Agreements $3,710,077  $-  $3,710,077  $(3,698,078) $(11,999) $- 
Interest rate swaps  2,591   -   2,591   -   (1,437)  1,154 
  $3,712,668  $-  $3,712,668  $(3,698,078) $(13,436) $1,154 
December 31, 2016                        
Repurchase Agreements $2,793,705  $-  $2,793,705  $(2,782,870) $(10,835) $- 
Interest rate swaps  802   -   802   -   (802)  - 
TBA securities  1,180   -   1,180   -   (848)  332 
  $2,795,687  $-  $2,795,687  $(2,782,870) $(12,485) $332 
Offsetting of Assets

Gross Amount Not
Net Amount
Offset in the Balance Sheet
of Assets
Financial
Gross Amount
Gross Amount
Presented
Instruments
Cash
of Recognized
Offset in the
in the
Received as
Received as
Net
Assets
Balance Sheet
Balance Sheet
Collateral
Collateral
Amount
March 31, 2021
Interest rate swaps
$
25,254
$
0
$
25,254
$
0
$
0
$
25,254
Interest rate swaptions
58,643
0
58,643
0
(13,962)
44,681
Interest rate floors
2,399
0
2,399
0
0
2,399
TBA securities
9,456
0
9,456
0
(7,407)
2,049
$
95,752
$
0
$
95,752
$
0
$
(21,369)
$
74,383
December 31, 2020
Interest rate swaps
$
7
$
0
$
7
$
0
$
0
$
7
Interest rate swaptions
17,433
0
17,433
0
(3,563)
13,870
TBA securities
3,559
0
3,559
0
(2,520)
1,039
$
20,999
$
0
$
20,999
$
0
$
(6,083)
$
14,916
(in thousands)
Offsetting of Liabilities
Gross Amount Not
Net Amount
Offset in the Balance Sheet
of Liabilities
Financial
Gross Amount
Gross Amount
Presented
Instruments
of Recognized
Offset in the
in the
Posted as
Cash Posted
Net
Liabilities
Balance Sheet
Balance Sheet
Collateral
as Collateral
Amount
March 31, 2021
Repurchase Agreements
$
4,181,680
$
0
$
4,181,680
$
(4,079,105)
$
(102,575)
$
0
Interest rate swaptions
35,057
0
35,057
0
0
35,057
$
4,216,737
$
0
$
4,216,737
$
(4,079,105)
$
(102,575)
$
35,057
December 31, 2020
Repurchase Agreements
$
3,595,586
$
0
$
3,595,586
$
(3,536,757)
$
(58,829)
$
0
Interest rate swaps
24,711
0
24,711
0
(19,761)
4,950
Interest rate swaptions
7,730
0
7,730
0
0
7,730
TBA securities
786
0
786
0
(284)
502
$
3,628,813
$
0
$
3,628,813
$
(3,536,757)
$
(78,874)
$
13,182
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 consolidated balance
sheets.
The fair value
of the actual
collateral
received by
or posted
to the same
counterparty
16
typically exceeds
the amounts
presented.
See Note
5 for a discussion
of collateral
posted or
received against
or for repurchase
obligations
and derivative
and other
hedging instruments.

16

NOTE 7.
CAPITAL STOCK

Common Stock
Issuances

During 2017the
three months
ended March
31, 2021 and 2016,
the year ended
December 31,
2020, the
Company completed
the following
public
offerings of
shares of
its common
stock.  There
($ in thousands, except per share amounts)
Weighted
Average
Price
Received
Net
Type of Offering
Period
Per Share
(1)
Shares
Proceeds
(2)
2021
At the Market Offering Program
(3)
First Quarter
$
5.10
308,048
$
1,572
Follow-on Offerings
First Quarter
5.31
17,940,000
95,336
Total
18,248,048
$
96,908
2020
At the Market Offering Program
(3)
First Quarter
$
6.13
3,170,727
$
19,447
At the Market Offering Program
(3)
Second Quarter
0
0
0
At the Market Offering Program
(3)
Third Quarter
5.06
3,073,326
15,566
At the Market Offering Program
(3)
Fourth Quarter
5.32
6,775,187
36,037
13,019,240
$
71,050
(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 eight equity distribution agreements,
seven of which have either been terminated because all shares were no common stock issuances through public offerings during the three months ended March 31, 2016 and September 30, 2017.sold
or were replaced with a subsequent agreement.

($ in thousands, except per share amounts)         
   Weighted       
   Average       
   Price       
   Received     Net 
Type of OfferingPeriod 
Per Share(1)
  Shares  
Proceeds(2)
 
2017          
At the Market Offering Program(3)
First Quarter $10.13   1,286,196  $12,792 
At the Market Offering Program(3)
Second Quarter  10.17   11,012,836   110,065 
        12,299,032  $122,857 
2016             
At the Market Offering Program(3)
Second Quarter $10.48   646,753  $6,591 
At the Market Offering Program(3)
Third Quarter  10.80   3,818,802   40,525 
At the Market Offering Program(3)
Fourth Quarter  10.79   6,707,101   71,212 
        11,172,656  $118,328 

(1)Weighted average price received per share is gross of 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 five equity distribution agreements, all of which have either been terminated because all shares were sold or were replaced with a subsequent agreement.

Share
Stock Repurchase Program

On July 29, 2015, the Company'sCompany’s Board of Directors authorized the repurchase of up to
2,000,000
shares of the Company’s
common stock. On February 8, 2018, the Board of Directors approved an increase
in the stock repurchase program for up to an
additional
4,522,822
shares of the Company's common stock. Coupled with the
783,757
shares remaining from the original
2,000,000
share authorization, the increased authorization brought the total authorization to
5,306,579
shares, representing 10% of the
Company’s then outstanding share count. As part of the sharestock repurchase program, shares
may be purchased in open market
transactions, including through 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"
(the “Exchange Act”).
Open market repurchases
will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions
on the method, timing, price and volume of
open market stock repurchases. The timing, manner, price and amount of any repurchases will be determined by the
Company in its
discretion and will be subject to economic and market conditions, stock price, applicable
legal requirements and other factors.
The
authorization does not obligate the Company to acquire any particular amount of
common stock and the program may be suspended or
discontinued at the Company'sCompany’s discretion without prior notice.

From the inception of the sharestock repurchase program through September 30, 2017,March 31, 2021, the Company
repurchased a total of 1,216,243
5,685,511
shares at an aggregate cost of approximately $10.8 $
40.4
million, including commissions and fees, for a weighted average price
of $8.92 $
7.10
per
share. No shares were repurchased during the year ended December 31, 2016 or the ninethree months ended September 30, 2017.March 31, 2021
and 2020. The remaining authorization under the
repurchase program as of March 31, 2021 was
837,311
shares.

17

17
Cash Dividends

The table below presents the cash dividends declared on the Company'sCompany’s common stock.

(in thousands, except per share amounts) 
Year Per Share Amount  Total 
2013 $1.395  $4,662 
2014  2.160   22,643 
2015  1.920   38,748 
2016  1.680   41,388 
2017 - YTD(1)
  1.400   56,027 
Totals $8.555  $163,468 

(1)On October 11, 2017, the Company declared a dividend of $0.14 per share to be paid on November 10, 2017.  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, 2017.
(in thousands, except per share amounts)

Year
Per Share
Amount
Total
2013
$
1.395
$
4,662
2014
2.160
22,643
2015
1.920
38,748
2016
1.680
41,388
2017
1.680
70,717
2018
1.070
55,814
2019
0.960
54,421
2020
0.790
53,570
2021 - YTD
(1)
0.260
23,374
Totals
$
11.915
$
365,337
(1)
On
April 14, 2021
, the Company declared a dividend of $
0.065
per share to be paid on
May 26, 2021
.
The effect of this dividend is included in
the table above but is not reflected in the Company’s financial statements
as of March 31, 2021.
NOTE 8.
STOCK INCENTIVE PLAN

In October 2012, the Company'sCompany’s Board of Directors adopted and Bimini, then the Company'sCompany’s sole stockholder,
approved, the Orchid Island Capital, Inc. 2012 Equity Incentive Plan (the "Incentive Plan"“Incentive Plan”) to recruit and retain employees,
directors and other service providers, including employees of the Manager and other affiliates. The Incentive Plan provides
for the award of stock options, stock appreciation rights, stock award, performance units, other equity-based awards (and
dividend equivalents with respect to awards of performance units and other equity-based awards) and incentive awards.
The Incentive Plan is administered by the Compensation Committee of the Company'sCompany’s Board of Directors except that the Company's
Company’s full Board of Directors will administer awards made to directors who are not employees of the Company or its
affiliates.
The Incentive Plan provides for awards of up to an aggregate of 10% of the issued and outstanding shares of our
common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate
4,000,000
shares of the Company's
Company’s common stock that may be issued under the Incentive Plan.

Restricted Stock Awards

The table below presents information related to the Company's restricted common stock at September 30, 2017 and 2016.

($ in thousands, except per share data)            
  Nine Months Ended September 30, 
  2017  2016 
     Weighted     Weighted 
     Average     Average 
     Grant Date     Grant Date 
  Shares  Fair Value  Shares  Fair Value 
Unvested, beginning of period  8,000  $12.23   16,000  $12.23 
Granted  -   -   -   - 
Vested and issued  (8,000)  12.23   (8,000)  12.23 
Unvested, end of period  -  $-   8,000  $12.23 
                 
Compensation expense during period     $33      $73 
Unrecognized compensation expense, end of period     $-      $57 
Intrinsic value, end of period     $-      $83 
Weighted-average remaining vesting term (in years)      -       0.6 

18
Performance Units

Stock Awards

The Company issues immediately vested common stock underhas issued, and may in the Incentive Plan to certain executive officers, employees and directors. The following table presents information related to fully vested common stock issued during the nine months ended September 30, 2017 and 2016.

($ in thousands, except per share data)      
  Nine Months Ended September 30, 
  2017  2016 
Fully vested shares granted(1)
  25,848   37,695 
Weighted average grant date price per share $9.76  $10.05 
Compensation expense related to fully vested common share awards(2)
 $252  $379 

(1)The table above includes 17,335 fully vested shares of common stock which were granted in January and March 2017 with respect to service performed during 2016 and 33,019 fully vested shares common stock which were granted in January and March 2016 with respect to service performed during 2015.
(2)Approximately $168,000 of compensation expense related to the 2017 share awards was accrued and recognized in 2016.  Approximately $330,000 of compensation expense related to the 2016 share awards was accrued and recognized in 2015.

Performance Units

The Company mayfuture issue additional, performance units under the Incentive Plan to certain
executive officers and employees.  "Performance Units"employees of its Manager.
“Performance Units” vest after the end of a defined performance period,
based on satisfaction of the performance conditions set forth in the performance unit agreement.
When earned, each
Performance Unit will be settled by the issuance of one share of the Company'sCompany’s common stock, at which time the
Performance Unit will be cancelled.
The Performance Units contain dividend equivalent rights, which entitle the Participants
to receive distributions declared by the Company on common stock, but do not include the right to vote the shares.  underlying
shares of common stock.
Performance Units are subject to forfeiture should the participant no longer serve as an executive
officer or employee forof the Company.  Company or the Manager.
Compensation expense for the Performance Units areis recognized over
the remaining vesting period once it becomes probable that the performance conditions will be achieved.

The following table presents information related to Performance Units outstanding during the ninethree months ended September
March 31, 2021 and 2020.
($ in thousands, except per share data)
Three Months Ended March 31,
18
2021
2020
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Shares
Fair Value
Shares
Fair Value
Unvested, beginning of period
4,554
$
7.45
19,021
$
7.78
Granted
137,897
5.88
0
0
Vested and issued
(2,277)
7.45
(4,153)
8.20
Unvested, end of period
140,174
$
5.91
14,868
$
7.66
Compensation expense during period
$
3
$
14
Unrecognized compensation expense, end of period
$
812
$
27
Intrinsic value, end of period
$
842
$
44
Weighted-average remaining vesting term (in years)
2.1
0.7
The number of shares of common stock issuable upon the vesting of the remaining outstanding Performance Units was
reduced in the third quarter of 2020 as a result of the book value impairment event that occurred pursuant to the Company's
Long Term
Incentive Compensation Plans (the "Plans"). The book value impairment event occurred when the Company's
book value per share declined by more than 15% during the quarter ended March 31, 2020 and the Company's book value
per share decline from January 1, 2020 to June 30, 2017.2020 was more than 10%. The Plans provide that if such a book value

impairment event occurs, then the number of outstanding Performance Units that are outstanding as of the last day of such
($ in thousands, except per share data)            
  Nine Months Ended September, 30, 
  2017  2016 
     Weighted     Weighted 
     Average     Average 
     Grant Date     Grant Date 
  Shares  Fair Value  Shares  Fair Value 
Unvested, beginning of period  45,305  $10.33   7,508  $13.32 
Granted  15,707   9.55   41,500   10.00 
Forfeited  -   -   (100)  10.00 
Vested and issued  (14,490)  10.52   (2,252)  13.32 
Unvested, end of period  46,522  $10.01   46,656  $10.37 
                 
Compensation expense during period     $188      $148 
Unrecognized compensation expense, end of period     $217      $320 
Intrinsic value, end of period     $474      $486 
Weighted-average remaining vesting term (in years)      1.2       1.6 
two-quarter period shall be reduced by 15%.

Stock Awards
The Company has issued, and may in the future issue additional, immediately vested common stock under the
Incentive Plan to certain executive officers and employees of its Manager. The following table presents information related
to fully vested common stock issued during the three months ended March 31, 2021 and 2020. All of the fully vested shares
of common stock issued during the three months ended March 31, 2021, and the related compensation expense, were
granted with respect to service performed during the previous fiscal year.
19
($ in thousands, except per share data)
Three Months Ended March 31,
2021
2020
Fully vested shares granted
137,897
0
Weighted average grant date price per share
$
5.88
0
Compensation expense related to fully vested shares of common stock awards
(1)
$
811
$
0

(1)
The awards issued during the three months ended March 31, 2021 were granted
with respect to service performed in 2020. Approximately
$600,000 of compensation expense related to the 2021 awards was
accrued and recognized in 2020.
Deferred Stock Units
Non-employee directors began to receive a portion of their compensation in the form of deferred stock unit awards
(“DSUs”) pursuant to the Incentive Plan beginning with the awards for the second quarter of 2018.
Each DSU represents a
right to receive one share of the Company’s common stock. The DSUs are immediately vested and are settled at a future
date based on the election of the individual participant.
The DSUs contain dividend equivalent rights, which entitle the
participant to receive distributions declared by the Company on common stock.
These dividend equivalent rights are settled
in cash or additional DSUs at the participant’s election. The DSUs do not include the right to vote the underlying shares of
common stock.
The following table presents information related to the DSUs outstanding during the three months ended March 31,
2021 and 2020.
19
($ in thousands, except per share data)
Three Months Ended March 31,
2021
2020
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Shares
Fair Value
Shares
Fair Value
Outstanding, beginning of period
90,946
$
5.44
43,570
$
6.56
Granted and vested
10,422
5.31
9,008
5.69
Issued
0
0
0
0
Outstanding, end of period
101,368
$
5.43
52,578
$
6.41
Compensation expense during period
$
45
$
45
Intrinsic value, end of period
$
609
$
155
NOTE 9.
COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various claims and
legal actions arising in the ordinary course of
business. Management is not aware of any reported or unreported contingencies
at September 30, 2017.March 31, 2021.

NOTE 10. INCOME TAXES

The Company will generally not be subject to federal income tax on its REIT taxable
income to the extent that it distributes its REIT
taxable income to its stockholders and satisfies the ongoing REIT requirements, including
meeting certain asset, income and stock
ownership tests. A REIT must generally distribute at least 90% of its REIT
taxable income to its stockholders, of which 85% generally
must be distributed within the taxable year, in order to avoid the imposition of an excise tax. The remaining balance
may be distributed
up to the end of the following taxable year, provided the REIT elects to treat such amount as a prior year distribution
and meets certain
other requirements.

NOTE 11.
EARNINGS PER SHARE (EPS)

The Company
had dividend
eligible shares of restricted common stockPerformance
Units and Performance
Deferred Stock
Units that
were outstanding
during the nine and
three months
ended September 30, 2017.March
31, 2021 and
2020. The
basic and diluted
per share
computations
include these
unvested Performance
Units and
Deferred
Stock Units
if there is
income available
to common stock,
as they have
dividend participation
rights. The
unvested Performance
Units and
Deferred
Stock Units
have no contractual
obligation
to share in
losses. Because
there is no
such obligation,
the unvested
Performance
Units and
Deferred
Stock Units
are not included
in the basic
and diluted
EPS computations
when no income
is available
to common
stock
even though
they are considered
participating
securities.
The table
below reconciles
the numerator
and denominator
of EPS for
the three months
ended March
31, 2021 and
2020.
(in thousands, except per share computations include these unvested shares of restrictedinformation)
Three Months Ended March 31,
2021
2020
Basic and diluted EPS per common stock and performance units if there is income available to common stock, as they have dividend participation rights. The shares of restricted common stock and Performance Units have no contractual obligation to share in losses. Because there is no such obligation, the shares of restricted common stock and Performance Units are not included in theshare:
Numerator for basic and diluted EPS computations when no income is available toper share of common stock:
Net loss - Basic and diluted
$
(29,369)
$
(91,199)
Weighted average shares of common stock:
Shares of common stock even though they are considered participating securities.

The table below reconcilesoutstanding at the numerator and denominator of EPS for the nine and three months ended September 30, 2017 and 2016.

(in thousands, except per-share information)            
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  2017  2016 
Basic and diluted EPS per common share:            
Numerator for basic and diluted EPS per common share:            
Net income - Basic and diluted $7,989  $22,397  $15,183  $20,526 
Weighted average common shares:                
Common shares outstanding at the balance sheet date  45,308   26,252   45,308   26,252 
Unvested dividend eligible share based compensation                
outstanding at the balance sheet date  47   55   47   55 
Effect of weighting  (6,747)  (3,688)  -   (2,174)
Weighted average shares-basic and diluted  38,608   22,619   45,355   24,133 
Net Income per common share:                
Basic and diluted $0.21  $0.99  $0.33  $0.85 

NOTE 12.   FAIR VALUE

Authoritative accounting literature establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications are:date
94,411
66,237
Effect of weighting
(9,066)
(1,647)
Weighted average shares-basic and diluted
85,345
64,590
Net loss per common share:
 
 
20
20
Basic and diluted
$
(0.34)
$
(1.41)
Anti-dilutive incentive shares not included in calculation.
242
67

·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),
NOTE 12.
FAIR VALUE
·Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
·Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company's own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
The framework
for using
fair value
to measure
assets and
liabilities
defines fair
value as the
price that
would be received
to sell an

asset or paid
to transfer
a liability
(an exit price).
A fair value
measure should
reflect the
assumptions
that market
participants
would use
in
pricing the
asset or liability,
including
the assumptions
about the
risk inherent
in a particular
valuation
technique,
the effect of
a restriction
on the sale
or use of
an asset and
the risk of
non-performance.
Required disclosures
include stratification
of balance
sheet amounts
measured at
fair value
based on
inputs the
Company uses
to derive
fair value
measurements.
These stratifications
are:
●
Level 1 valuations,
where the
valuation
is based on
quoted market
prices for
identical assets
or liabilities
traded in
active markets
(which include
exchanges and
over-the-counter
markets with
sufficient volume),
●
Level 2 valuations,
where the
valuation
is based on
quoted market
prices for
similar instruments
traded in
active markets,
quoted
prices for
identical or
similar instruments
in markets
that are not
active and
model-based
valuation
techniques
for which
all
significant
assumptions
are observable
in the market,
and
●
Level 3 valuations,
where the
valuation
is generated
from model-based
techniques
that use significant
assumptions
not
observable
in the market,
but observable
based on Company-specific
data. These
unobservable
assumptions
reflect the
Company’s own
estimates for
assumptions
that market
participants
would use
in pricing
the asset or
liability. Valuation
techniques
typically
include option
pricing models,
discounted
cash flow
models and
similar techniques,
but may also
include the
use of market
prices of assets
or liabilities
that are not
directly comparable
to the subject
asset or
liability.
The Company's
RMBS and
TBA securities
are Level
2 valuations,
and such valuations
currently are
determined
by the Company
based on independent
pricing sources
and/or third
party broker
quotes, when
available. Because
the price
estimates may
vary, the
Company must
make certain
judgments
and assumptions
about the
appropriate
price to use
to calculate
the fair values.
The Company
and
the independent
pricing sources
use various
valuation techniques
to determine
the price
of the Company’s
securities.
These techniques
include observing
the most recent
market for
like or identical
assets (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
futures contracts
are Level
1 valuations,
as they are
exchange-traded
instruments
and quoted
market prices
are
readily available.
Futures contracts
are settled
daily. The Company’s
interest rate
swaps and
interest rate
swaptions
are Level
2
valuations.
The fair value
of interest
rate swaps
is determined
using a discounted
cash flow
approach
using forward
market interest
rates
and discount
rates, which
are observable
inputs. The
fair value
of interest
rate swaptions
is determined
using an option
pricing model.
RMBS (based
on the fair
value option),
derivatives
and TBA securities are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third party broker quotes, when available. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. Alternatively, the Company could opt to have the value of all of its positions in RMBS, interest rate swaptions and TBA securities determined by either an independent third-party or could do so internally.

RMBS (based on the fair value option), interest rate swaps, interest rate swaptions, TBA securities and futures contracts were recorded
at fair value
on a recurring
basis during
the
three months
ended March
31, 2021 and
2020. When
determining
fair value
measurements,
the nine 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.
21
The following
table presents
financial assets
(liabilities)
measured
at fair value
on a recurring
basis as of
March 31,
2021 and
December 31,
2020.
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)
March 31, 2021
Mortgage-backed securities
$
0
$
4,338,536
$
0
Interest rate swaps
-
25,254
0
Interest rate swaptions
0
23,586
0
Interest rate floors
0
2,399
0
TBA securities
0
9,456
0
December 31, 2020
Mortgage-backed securities
$
0
$
3,726,895
$
0
Interest rate swaps
0
(24,704)
0
Interest rate swaptions
0
9,703
0
TBA securities
0
2,773
0
During the three months ended September 30, 2017March 31, 2021 and 2016. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets.  When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.

The following table presents financial assets (liabilities) measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:

(in thousands)            
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
  Fair Value  Assets  Inputs  Inputs 
  Measurements  (Level 1)  (Level 2)  (Level 3) 
September 30, 2017            
Mortgage-backed securities $3,930,340  $-  $3,930,340  $- 
Interest rate swaps  8,102   -   8,102   - 
Interest rate swaptions  3,194   -   3,194   - 
TBA securities  2,984   -   2,984   - 
December 31, 2016                
Mortgage-backed securities $3,022,174  $-  $3,022,174  $- 
Interest rate swaps  9,500   -   9,500   - 
TBA securities  (1,117)  -   (1,117)  - 

During the nine and three months ended September 30, 2017 and 2016,2020, there were no transfers
of financial assets or liabilities between levels 1,
2 or 3.

21

NOTE 13. RELATED PARTY
TRANSACTIONS

Management Agreement

The Company is externally managed and advised by Bimini Advisors, LLC (the "Manager"“Manager”) pursuant to the terms of a
management agreement. The management agreement has been renewed through February 20, 20182022 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 equity, as defined in the management agreement,
●
·One-twelfth of 1.25% of the Company's 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 equity that is greater than $500 million.
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 Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the
Manager the Company'sCompany’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 to 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.

22
Total
expenses recorded for the management fee and costs incurred were approximately $5.4 $
2.0
million and $1.9 $
1.7
million
for the nine and three months ended September 30, 2017, respectively,March 31, 2021 and approximately $3.9 million and $1.4 million for the nine and three months ended September 30, 2016,2020, respectively. At September 30, 2017
March 31, 2021 and December 31, 2016,2020, the net
amount due to affiliates was approximately $0.8 $
0.7
million and $0.6 $
0.6
million, respectively.

Other Relationships with Bimini

Robert Cauley, our Chief Executive Officer and Chairman of our Board of Directors, also serves as Chief Executive Officer and
Chairman of the Board of Directors of Bimini and owns shares of common stock of
Bimini. HunterGeorge H. Haas, IV, our Chief Financial
Officer, Chief Investment Officer, Secretary and a member of our Board of Directors, also serves as the Chief Financial Officer, Chief
Investment Officer and Treasurer of Bimini and owns shares of common stock of Bimini. In addition, as of September 30, 2017,March
31, 2021, Bimini
owned 1,520,036
2,595,357
shares, or 3.4%2.8%, of the Company'sCompany’s common stock.
22
23
ITEM 2. MANAGEMENT'S 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 consolidated financial
statements and notes to those statements included in Item 1 of this Form 10-Q. The
discussion may contain certain forward-looking
statements that involve risks and uncertainties. Forward-looking statements are
those that are not historical in nature. As a result of
many factors, such as those set forth under "Risk Factors"“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"
(“RMBS”) which are issued and
guaranteed by a federally chartered corporation or agency ("(“Agency RMBS"RMBS”). Our
investment strategy focuses on, and our portfolio
consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS, ("
such as mortgage pass-through certificates
issued by Fannie Mae, Freddie Mac or Ginnie Mae (the “GSEs”) and collateralized
mortgage obligations (“CMOs”) issued by the GSEs
(“PT RMBS"RMBS”) and (ii) structured Agency RMBS, such as collateralized mortgage obligations ("CMOs"), interest-only securities ("IOs"(“IOs”), inverse
interest-only securities ("IIOs"(“IIOs”) and
principal only securities ("POs"(“POs”), among other types of structured Agency RMBS.
We were formed by Bimini in August 2010,
commenced operations on November 24, 2010 and completed our initial public offering ("IPO"(“IPO”)
on February 20, 2013.
We are
externally managed by Bimini Advisors, a registeredan investment adviser registered with the Securities
and Exchange Commission (the "SEC"“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 and strategically
allocating capital between the two categories of Agency RMBS described above. We seek
to generate income from (i) the net interest
margin on our leveraged PT RMBS portfolio and the leveraged portion of our
structured Agency RMBS portfolio, and (ii) the interest
income we generate from the unleveraged portion of our structured Agency RMBS
portfolio. We intend to fund our PT RMBS and
certain of our structured Agency RMBS through short-term borrowings structured
as repurchase agreements. PT RMBS and structured
Agency RMBS typically exhibit materially different sensitivities to movements in interest
rates. Declines in the value of one portfolio
may be offset by appreciation in the other. The percentage of capital that we allocate to our two Agency RMBS asset categories will
vary and will be actively managed in an effort to maintain the level of income generated by the
combined portfolios, the stability of that
income stream and the stability of the value of the combined portfolios. We believe that this
strategy will enhance our liquidity,
earnings, book value stability and asset selection opportunities in various interest
rate environments.

We operate so as to qualify to be taxed as a real estate investment trust ("REIT"(“REIT”) under the Internal Revenue
Code of 1986, as
amended (the "Code"“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'sCompany’s common stock trades on the New York Stock Exchange ("NYSE") under the symbol "ORC"“ORC”.

Capital Raising Activities

On July 29, 2016,January 23, 2020, we entered into an equity distribution agreement (the "July 2016“January
2020 Equity Distribution Agreement"Agreement”) with two
three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount
of $125,000,000$200,000,000 of shares
of our common stock in transactions that were deemed to be "at“at the market"market” offerings and
privately negotiated transactions.
We issued
a total of 10,174,9923,170,727 shares under the July 2016January 2020 Equity Distribution Agreement for aggregate
gross proceeds of $110.0$19.8 million, and
net proceeds of approximately $108.2$19.4 million, net of commissions and fees, prior to
its termination.termination in August 2020.

23

On February 23, 2017,August 4, 2020, we entered into anotheran equity distribution agreement as amended and restated on May 10, 2017, (the "May 2017 “August 2020
Equity Distribution Agreement"Agreement”) with two four
sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount
of $125,000,000$150,000,000 of shares of our
common stock in transactions that are deemed to be "at“at the market"market” offerings and privately
negotiated transactions. The May 2017 Equity Distribution Agreement replaced the July 2016 Equity Distribution Agreement. WeThrough March 31,
24
2021, we issued a total of 12,299,03210,156,561 shares under the May 2017August 2020 Equity Distribution
Agreement for aggregate gross proceeds of $125.0
approximately $54.1 million, and net proceeds of approximately $122.9 $53.2
million, net of commissions and fees, prior to its termination.fees.

On August 2, 2017,January 20, 2021, we entered into another equity distributionan underwriting agreement (the "August 2017 Equity Distribution Agreement"“January 2021
Underwriting Agreement”) with two sales agents pursuantJ.P. Morgan
Securities LLC (“J.P. Morgan”), relating to which we maythe offer and sell, from time to time, up to an aggregate amountsale of $125,000,0007,600,000 shares of our common stock. J.P.
Morgan purchased the
shares of our common stock from the Company pursuant to the January 2021 Underwriting
Agreement at $5.20 per share. In addition,
we granted J.P.
Morgan a 30-day option to purchase up to an additional 1,140,000 shares
of our common stock on the same terms and
conditions, which J.P. Morgan exercised in transactions that are deemedfull on January 21, 2021. The closing of the offering of 8,740,000 shares of our common
stock occurred on January 25, 2021, with net proceeds to be "atus of approximately
$45.2 million,
net of offering expenses.
On March 2, 2021 we entered into an underwriting agreement (the “March 2021 Underwriting
Agreement”) with J.P. Morgan,
relating to the market" offeringsoffer and privately negotiated transactions.sale of 8,000,000 shares of our common stock. J.P. Morgan purchased the shares of our common stock from
the Company pursuant to the March 2021 Underwriting Agreement at $5.45 per share.
In addition, we granted J.P. Morgan a 30-day
option to purchase up to an additional 1,200,000 shares of our common stock on the
same terms and conditions, which J.P. Morgan
exercised in full on March 3, 2021. The August 2017 Equity Distributionclosing of the offering of 9,200,000 shares of our common stock
occurred on March 5, 2021,
with net proceeds to us of approximately $50.1 million, net of offering expenses.
Stock Repurchase Agreement replaced
On July 29, 2015, the May 2017 Equity Distribution Agreement. Through September 30, 2017, we haveCompany’s Board of Directors authorized the repurchase of up to 2,000,000
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 issuedobligate 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 4,522,822 shares of the Company’s common stock. Coupled with the 783,757 shares
remaining from the original 2,000,000
share authorization, the increased authorization brought the total authorization to 5,306,579
shares, representing 10% of the
Company’s then outstanding share count. This stock repurchase program has no termination
date.
From the inception of the stock repurchase program through March 31, 2021, the Company
repurchased a total of 5,685,511
shares at an aggregate cost of approximately $40.4
million, including commissions and fees, for a weighted average price
of $7.10
per
share. The Company did not repurchase any shares of its common stock during the three months
ended March 31, 2021. The
remaining authorization under the August 2017 Equity Distribution Agreement.repurchase program as of March 31, 2021 was 837,311 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;
●
·the difference between Agency RMBS yields and our funding and hedging costs;
·competition for investments in Agency RMBS;
interest rate trends;
·actions taken by the new presidential administration, the Federal Reserve (the "Fed") 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.
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 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.
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 qualify as a REIT and the requirements to qualify for a registration exemption under the Investment Company Act.

25
●
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 qualify 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 Company’s
results of
operations
for the nine and three
months ended September 30, 2017,
March 31,
2021, as compared
to the Company's
Company’s results
of operations
for the nine and three
months ended September 30, 2016.
March 31,
2020.

24

Net (Loss)
Income Summary

Net incomeloss for
the three
months ended
March 31,
2021 was $29.4
million, or
$0.34 per
share. Net
loss for the nine
three months
ended September 30, 2017
March 31, 2020
was $8.0 $91.2
million, or $0.21
$1.41 per
share. Net income for the nine months ended September 30, 2016 was $22.4 million, or $0.99 per share.  Net income The
components
of net loss
for the three
months ended September 30, 2017 was $15.2 million, or $0.33 per share. Net income for the three months ended September 30, 2016 was $20.5 million, or $0.85 per share.  The components of net income for the nine
March 31,
2021 and three months ended September 30, 2017 and 2016,
2020,
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, 
  2017  2016  Change  2017  2016  Change 
Interest income $105,864  $62,059  $43,805  $38,974  $22,358  $16,616 
Interest expense  (28,116)  (10,629)  (17,487)  (12,638)  (3,979)  (8,659)
Net interest income  77,748   51,430   26,318   26,336   18,379   7,957 
(Losses) gains on RMBS and derivative contracts  (61,578)  (22,446)  (39,132)  (8,254)  4,418   (12,672)
Net portfolio income  16,170   28,984   (12,814)  18,082   22,797   (4,715)
Expenses  (8,181)  (6,587)  (1,594)  (2,899)  (2,271)  (628)
Net income $7,989  $22,397  $(14,408) $15,183  $20,526  $(5,343)
(in thousands)

2021
2020
Change
Interest income
$
26,856
$
35,671
$
(8,815)
Interest expense
(1,941)
(16,523)
14,582
Net interest income
24,915
19,148
5,767
Losses on RMBS and derivative contracts
(50,791)
(108,206)
57,415
Net portfolio deficiency
(25,876)
(89,058)
63,182
Expenses
(3,493)
(2,141)
(1,352)
Net loss
$
(29,369)
$
(91,199)
$
61,830
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“Net Earnings Excluding Realized and Unrealized Gains and Losses"Losses”, "Economic “Economic
Interest Expense"Expense” and "Economic“Economic Net Interest Income."
”

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 consolidated statements of operations.

In addition, we have not elected to designatedesignated our derivative holdingsfinancial instruments used for hedge hedging purposes as hedges for
accounting treatment under the Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging.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 consolidatedCompany’s statements of operations 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 mark-to-marketfair value adjustments and (ii) assess the
effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance.
26
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.
gains and losses.

25Net Earnings Excluding Realized and Unrealized Gains and Losses
(in thousands, except per share data)

Per Share
Net Earnings Excluding Realized and Unrealized Gains and Losses 
(in thousands, except per share data)                  
           Per Share 
        Net Earnings        Net Earnings 
        Excluding        Excluding 
     Realized and  Realized and     Realized and  Realized and 
  Net  Unrealized  Unrealized  Net  Unrealized  Unrealized 
  Income  Gains and  Gains and  Income  Gains and  Gains and 
  (GAAP)  
Losses(1)
  Losses  (GAAP)  Losses  Losses 
Three Months Ended                  
September 30, 2017 $15,183  $(8,254) $23,437  $0.33  $(0.18) $0.52 
June 30, 2017  (9,643)  (32,597)  22,954   (0.26)  (0.88)  0.62 
March 31, 2017  2,449   (20,727)  23,176   0.07   (0.63)  0.70 
December 31, 2016  (20,419)  (38,003)  17,584   (0.72)  (1.33)  0.62 
September 30, 2016  20,526   4,418   16,108   0.85   0.18   0.67 
June 30, 2016  6,463   (7,319)  13,782   0.29   (0.33)  0.63 
March 31, 2016  (4,591)  (19,561)  14,970   (0.21)  (0.90)  0.69 
Nine Months Ended                        
September 30, 2017 $7,989  $(61,578) $69,567  $0.21  $(1.59) $1.80 
September 30, 2016  22,397��  (22,460)  44,857   0.99   (0.99)  1.98 
Net Earnings

Net Earnings
(1)Includes realized and unrealized gains (losses) on RMBS and derivative financial instruments.
Excluding

Excluding
Realized and
Realized and
Realized and
Realized and
Net
Unrealized
Unrealized
Net
Unrealized
Unrealized
Income
Gains and
Gains and
Income
Gains and
Gains and
(GAAP)
Losses
(1)
Losses
(GAAP)
Losses
Losses
Three Months Ended
March 31, 2021
$
(29,369)
$
(50,791)
$
21,422
$
(0.34)
$
(0.60)
$
0.26
December 31, 2020
16,479
(4,605)
21,084
0.23
(0.07)
0.30
September 30, 2020
28,076
5,745
22,331
0.42
0.09
0.33
June 30, 2020
48,772
28,749
20,023
0.74
0.43
0.31
March 31, 2020
(91,199)
(108,206)
17,007
(1.41)
(1.68)
0.27
(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 Eurodollar,
Fed Funds and Treasury Note ("T-Note"(“T-Note”)
futures contracts, short positions in U.S. Treasury securities, 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 under the Financial Accounting Standards Board, (the "FASB"), Accounting Standards Codification, ("ASC"), Topic 815, Derivatives and Hedging.treatment. Changes in fair value of these
instruments are presented in a separate line item in our consolidated statements of operations 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 specificcertain derivative instruments
the Company uses, specifically Eurodollar, Fed Funds and U.S. Treasury
futures, 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 allthese 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
27
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.

The Company may 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 consolidated statements of operations 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.
 
26
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 during 2017of 2021 to date and 2016.2020.

Gains (Losses) on Derivative Instruments 
(in thousands)            
        Funding Hedges 
  Recognized in     Attributed to  Attributed to 
  Income  TBA  Current  Future 
  Statement  Securities  Period  Periods 
  (GAAP)  Income  (Non-GAAP)  (Non-GAAP) 
Three Months Ended            
September 30, 2017 $(5,470) $(1,459) $(3,754) $(257)
June 30, 2017  (19,442)  (2,384)  (3,654)  (13,404)
March 31, 2017  (4,419)  -   (3,193)  (1,226)
December 31, 2016  23,207   (133)  (2,967)  26,307 
September 30, 2016  6,587   (474)  (2,660)  9,721 
June 30, 2016  (11,591)  (786)  (2,210)  (8,595)
March 31, 2016  (27,590)  (1,125)  (1,933)  (24,532)
Nine Months Ended                
September 30, 2017 $(29,331) $(3,843) $(10,601) $(14,887)
September 30, 2016  (32,594)  (2,385)  (6,803)  (23,406)
Gains (Losses) on Derivative Instruments

(in thousands)
Economic Interest Expense and Economic Net Interest Income 
(in thousands)                  
     Interest Expense on Borrowings       
        Gains       
        (Losses) on          
        Derivative          
        Instruments     Net Interest Income 
     GAAP  Attributed  Economic  GAAP  Economic 
  Interest  Interest  to Current  Interest  Net Interest  Net Interest 
  Income  Expense  
Period(1)
  
Expense(2)
  Income  
Income(3)
 
Three Months Ended                  
September 30, 2017 $38,974  $12,638  $(3,754) $16,392  $26,336  $22,582 
June 30, 2017  34,579   8,763   (3,654)  12,417   25,816   22,162 
March 31, 2017  32,311   6,715   (3,193)  9,908   25,596   22,403 
December 31, 2016  25,068   4,976   (2,967)  7,943   20,092   17,125 
September 30, 2016  22,358   3,979   (2,660)  6,639   18,379   15,719 
June 30, 2016  19,235   3,330   (2,210)  5,540   15,905   13,695 
March 31, 2016  20,466   3,319   (1,933)  5,252   17,147   15,214 
Nine Months Ended                        
September 30, 2017 $105,864  $28,116  $(10,601) $38,717  $77,748  $67,147 
September 30, 2016  62,059   10,629   (6,803)  17,431   51,430   44,628 
Funding Hedges
(1)Reflects the effect of derivative instrument hedges for only the period presented.
Recognized in
(2)Calculated by adding the effect of derivative instrument hedges attributedAttributed 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.
Attributed to
Income
U.S. Treasury and TBA
Current
Future
Statement
Securities Gain (Loss)
Period
Periods
(GAAP)
(Short Positions)
(Long Positions)
(Non-GAAP)
(Non-GAAP)
Three Months Ended
March 31, 2021
$
45,472
$
9,133
$
(8,559)
$
(4,044)
$
48,942
December 31, 2020
8,538
(436)
5,480
(5,790)
$
9,284
September 30, 2020
4,079
131
3,336
(6,900)
$
7,512
June 30, 2020
(8,851)
582
1,133
(5,751)
$
(4,815)
March 31, 2020
(82,858)
(7,090)
-
(4,900)
$
(70,868)
Economic Interest Expense and Economic Net Interest Income
(in thousands)
Interest Expense on Borrowings
Gains
(Losses) on
 
 
 
27
 
28
Derivative
Instruments
Net Interest Income

GAAP
Attributed
Economic
GAAP
Economic
Interest
Interest
to Current
Interest
Net Interest
Net Interest
Income
Expense
Period
(1)
Expense
(2)
Income
Income
(3)
Three Months Ended
March 31, 2021
$
26,856
$
1,941
$
(4,044)
$
5,985
$
24,915
$
20,871
December 31, 2020
25,893
2,011
(5,790)
7,801
23,882
18,092
September 30, 2020
27,223
2,043
(6,900)
8,943
25,180
18,280
June 30, 2020
27,258
4,479
(5,751)
10,230
22,779
17,028
March 31, 2020
35,671
16,523
(4,900)
21,423
19,148
14,248
(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
During the nine
three months
ended September 30, 2017, March
31, 2021,
we generated $77.7
$24.9 million
of net interest
income, consisting
of $105.9$26.9 million
of
interest income
from RMBS
assets offset
by $1.9 million
of interest income from RMBS assets offset by $28.1 million of interest
expense on
borrowings.
For the comparable
period ended September 30, 2016,
March 31,
2020, we generated $51.4
$19.1 million
of net interest
income, consisting
of $62.1$35.7 million
of interest
income from
RMBS assets
offset by $10.6 $16.5
million of
interest expense
on borrowings.
The $43.8 $8.8 million
decrease in
interest income
was due to
a 170 basis
point ("bps")
decrease in
the yield on
average RMBS,
partially offset
by the $762.9
million increase
in average
RMBS. The
$14.6 million
decrease in
interest income and $17.5
expense was
due to a 191
bps decrease
in the average
cost of funds,
partially offset
by a $759.5
million increase
in interest expense foraverage
outstanding
borrowings.
We had more
average assets
and borrowings
during the nine months ended September 30, 2017 primarily reflects
first quarter
of 2021 compared
to the growthfirst
quarter of
2020 as we
deployed the
proceeds of
our portfolio fueled by our net capital
raising activities, combined with increased yields earned on our portfolioactivity
during the
second half
of 2020 and increased costs and amounts
the first
quarter of our borrowings.
2021.

On an economic
basis, our
interest
expense on
borrowings
for the three
months ended
March 31,
2021 and 2020
was $6.0 million
and $21.4
million, respectively,
resulting in
$20.9 million
and $14.2
million of
economic net
interest
income, respectively.
The lower
economic interest
expense during
the three
months ended
March 31,
2021 was due
to the 191
bps decrease
in the average
cost of funds
noted above,
partially offset
by the $759.5
million increase
in average
outstanding
borrowings
and the negative
performance
of our
hedging activities
during the
period.
The tables
below provide
information
on our portfolio
average balances,
interest income,
yield on
assets, average
borrowings,
interest
expense, cost
of funds,
net interest
income and
net interest
spread for
each quarter
in 2021 to date
and 2020 on
both a GAAP
and
economic basis.
($ 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
March 31, 2021
$
4,032,716
$
26,856
2.66%
$
3,888,633
$
1,941
$
5,985
0.20%
0.62%
December 31, 2020
3,633,631
25,893
2.85%
3,438,444
2,011
7,801
0.23%
0.91%
September 30, 2020
3,422,564
27,223
3.18%
3,228,021
2,043
8,943
0.25%
1.11%
June 30, 2020
3,126,779
27,258
3.49%
2,992,494
4,479
10,230
0.60%
1.37%
March 31, 2020
3,269,859
35,671
4.36%
3,129,178
16,523
21,423
2.11%
2.74%
($ in thousands)
Net Interest Income
Net Interest Spread
GAAP
Economic
GAAP
Economic
Basis
Basis
(2)
Basis
Basis
(4)
Three Months Ended
29
March 31, 2021
$
24,915
$
20,871
2.46%
2.04%
December 31, 2020
23,882
18,093
2.62%
1.94%
September 30, 2020
25,180
18,280
2.93%
2.07%
June 30, 2020
22,779
17,028
2.89%
2.12%
March 31, 2020
19,148
14,248
2.25%
1.62%
(1)
Portfolio yields and costs of borrowings presented in the tables above
and the tables on pages
29 and 30 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 on borrowings for the nine months ended September 30, 2017 and 2016 was $38.7 million and $17.4 million, respectively, resulting in $67.1 million and $44.6 million of economic net interest income respectively.

Duringpresented in the three months ended Septembertable above and the tables on page 30 2017, we generated $26.3 million include
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 income, consisting of $39.0 million of interest income from RMBS assets offsetspread is calculated by $12.6 million of interest expense on borrowings.  For the three months ended September 30, 2016, we generated $18.4 million of net interest income, consisting of $22.4 million of interest income from RMBS assets offset by $4.0 million of interest expense on borrowings.  As in the nine months ended September 30, 2017, the increased interest income and interest expense for the three months ended September 30, 2017, as compared to the same period in 2016, reflects a combination of the growth of our portfolio and increased yields on the portfolio and costs of borrowings.

On an economic basis, our interest expense on repurchase liabilities for the three months ended September 30, 2017 and 2016 was $16.4 million and $6.6 million, respectively, resulting in $22.6 million and $15.7 million of economic net interest income, respectively.

The tables below provide information on our portfoliosubtracting average balances, interest income, yield on assets, average borrowings, interest expense, economic
cost of funds net interest income and net interest spread for the nine months ended September 30, 2017 and 2016 and each quarter during 2017 and 2016from realized yield on both a GAAP and economic basis.average RMBS.

($ 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, 2017 $3,834,083  $38,974   4.07% $3,494,266  $12,638  $16,392   1.45%  1.88%
June 30, 2017  3,499,922   34,579   3.95%  3,164,532   8,763   12,417   1.11%  1.57%
March 31, 2017  3,142,095   32,311   4.11%  2,922,157   6,715   9,908   0.92%  1.36%
December 31, 2016  2,761,836   25,068   3.63%  2,545,901   4,974   7,943   0.78%  1.25%
September 30, 2016  2,362,377   22,358   3.79%  2,179,462   3,979   6,639   0.73%  1.22%
June 30, 2016  2,100,151   19,235   3.66%  2,000,158   3,330   5,540   0.67%  1.11%
March 31, 2016  2,067,527   20,466   3.96%  1,962,901   3,319   5,252   0.68%  1.07%
Nine Months Ended 
September 30, 2017 $3,492,033  $105,864   4.04% $3,193,652  $28,116  $38,717   1.17%  1.62%
September 30, 2016  2,176,685   62,059   3.80%  2,047,507   10,629   17,431   0.69%  1.14%

28

($ in thousands)            
  Net Interest Income  Net Interest Spread 
  GAAP  Economic  GAAP  Economic 
  Basis  
Basis(2)
  Basis  
Basis(4)
 
Three Months Ended 
September 30, 2017 $26,336  $22,582   2.62%  2.19%
June 30, 2017  25,816   22,162   2.84%  2.38%
March 31, 2017  25,596   22,403   3.19%  2.75%
December 31, 2016  20,092   17,125   2.85%  2.38%
September 30, 2016  18,379   15,719   3.06%  2.57%
June 30, 2016  15,905   13,695   2.99%  2.55%
March 31, 2016  17,147   15,214   3.28%  2.89%
Nine Months Ended 
September 30, 2017 $77,748  $67,147   2.87%  2.42%
September 30, 2016  51,430   44,628   3.11%  2.66%

(1)Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 30 and 31 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 income presented in the table above and the tables on page 31 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 Income and Average Asset Yield

Our interest
income for
the nine three
months ended September 30, 2017
March 31,
2021 and 2016
2020 was $105.9 $26.9
million and $62.1
$35.7 million,
respectively.
We had
average RMBS
holdings of $3,492.0
$4,032.7 million
and $2,176.7 $3,269.9
million for
the nine three
months ended September 30, 2017
March 31,
2021 and 2016, 2020,
respectively.
The
yield on our
portfolio
was 4.04% 2.66%
and 3.80% for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, there was a $43.8 million increase in interest income due to a $1,315.3 million increase in average RMBS, combined with a 24 basis point ("bps") increase in the yield on average RMBS.  The increase in average RMBS during the nine months ended September 30, 2017 reflects the deployment of the proceeds of our net capital raising activities, on a leveraged basis.4.36%

Our interest income for the three
months ended September 30, 2017
March 31,
2021 and 2016 was $39.0 million and $22.4 million, 2020,
respectively. We had average RMBS holdings of $3,834.1 million and $2,362.4 million for For
the three
months
ended September 30, 2017 and 2016, respectively.  The yield on our portfolio was 4.07% and 3.79% for the three months ended September 30, 2017 and 2016, respectively. For the three months ended September 30, 2017March
31, 2021 as
compared
to the three
months ended September 30, 2016,
March 31,
2020, there
was a $16.6 $8.8
million increase decrease
in interest
income due
to a $1,471.7 170 bps
decrease in
the yield
on average
RMBS,
partially offset
by a $762.9
million increase
in average RMBS, combined with a 28 bps increase in the yield on average
RMBS.  The increase in average RMBS during the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, reflects the deployment of the proceeds of our net capital raising activities.

29

The table
below presents
the average
portfolio
size, income
and yields
of our respective
sub-portfolios,
consisting
of structured
RMBS
and PT RMBS for the nine months ended September 30, 2017 and 2016, and
for each quarter during 2017
in 2021 to
date and 2016.2020.

($ in thousands)                           
  Average RMBS Held  Interest Income  Realized Yield on Average RMBS 
  PT  Structured     PT  Structured     PT  Structured    
  RMBS  RMBS  Total  RMBS  RMBS  Total  RMBS  RMBS  Total 
Three Months Ended 
September 30, 2017 $3,687,533  $146,550  $3,834,083  $38,476  $498  $38,974   4.17%  1.36%  4.07%
June 30, 2017  3,349,042   150,880   3,499,922   32,479   2,100   34,579   3.88%  5.57%  3.95%
March 31, 2017  2,990,937   151,158   3,142,095   29,772   2,539   32,311   3.98%  6.72%  4.11%
December 31, 2016  2,628,967   132,869   2,761,836   23,647   1,421   25,068   3.60%  4.28%  3.63%
September 30, 2016  2,257,480   104,897   2,362,377   21,898   460   22,358   3.88%  1.75%  3.79%
June 30, 2016  2,006,392   93,759   2,100,151   19,072   163   19,235   3.80%  0.70%  3.66%
March 31, 2016  1,968,690   98,837   2,067,527   19,682   784   20,466   4.00%  3.17%  3.96%
Nine Months Ended 
September 30, 2017 $3,342,504  $149,529  $3,492,033  $100,727  $5,137  $105,864   4.02%  4.58%  4.04%
September 30, 2016  2,077,521   99,164   2,176,685   60,652   1,407   62,059   3.89%  1.89%  3.80%
($ in thousands)

Average RMBS Held
Interest Income
Realized Yield on Average RMBS
PT
Structured
PT
Structured
PT
Structured
Three Months Ended
RMBS
RMBS
Total
RMBS
RMBS
Total
RMBS
RMBS
Total
March 31, 2021
$
3,997,965
$
34,751
$
4,032,716
$
26,869
$
(13)
$
26,856
2.69%
(0.15)%
2.66%
December 31, 2020
3,603,885
29,746
3,633,631
25,933
(40)
25,893
2.88%
(0.53)%
2.85%
September 30, 2020
3,389,037
33,527
3,422,564
27,021
202
27,223
3.19%
2.41%
3.18%
June 30, 2020
3,088,603
38,176
3,126,779
27,004
254
27,258
3.50%
2.67%
3.49%
March 31, 2020
3,207,467
62,392
3,269,859
35,286
385
35,671
4.40%
2.47%
4.36%
Interest Expense and the Cost of Funds

We had average outstanding borrowings of $3,193.7 million and $2,047.5 million and total interest expense of $28.1 million and $10.6 million for the nine months ended September 30, 2017 and 2016, respectively. Our average cost of funds was 1.17% for the nine months ended September 30, 2017, compared to 0.69% for the comparable period in 2016.  There was a $1,146.1 million increase in average outstanding borrowings during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.  The higher cost of funds for the nine months ended September 30, 2017, compared to the same period in 2016, reflects the higher short-term rates as presented in the table below.  The increase in average outstanding borrowings reflects the investment, on a leveraged basis, of the proceeds of our net capital raising activities.

Our economic interest expense was $38.7 million and $17.4 million for the nine months ended September 30, 2017 and 2016, respectively. There was a 48 bps increase in the average economic cost of funds to 1.62% for the nine months ended September 30, 2017 from 1.14% for the nine months ended September 30, 2016.  The increase in economic interest expense was due to the increase in average outstanding borrowings during the nine months ended September 30, 2017, combined with the negative performance of our derivative agreements attributed to the current period.

We had average
outstanding
borrowings
of $3,494.3$3,888.6
million and
$3,129.2 million
and total
interest
expense of
$1.9 million
and $16.5
million for
the three
months ended
March 31,
2021 and 2020,
respectively. Our
average cost
of funds was
0.20% and
2.11% for the three
months ended
March 31,
2021 and
2020, respectively.
Contributing
to the decrease
in interest
expense was
a 191 bps
decrease
in the
average cost
of funds,
partially offset
by a $759.5
million increase
in average
outstanding
borrowings
during the
three months
ended
March 31,
2021 as compared
to the three
months ended
March 31,
2020.
Our economic
interest expense
was $6.0 million
and $21.4
million for
the three
months ended
March 31,
2021 and 2020,
respectively.
There was
a 212 bps
decrease in
the average
economic cost
of funds to
0.62% for
the three
months ended
March 31,
2021 from
2.74%
for the three
months ended
March 31,
2020.
Since all of
our repurchase
agreements
are short-term,
changes in
market rates
directly affect
our interest
expense. Our
average cost
of funds calculated
on a GAAP
basis was 7
bps above the
average one-month
LIBOR and
3 bps below
the average
six-month
LIBOR for
the quarter
ended March
31, 2021.
Our average
economic cost
of funds was
49 bps above
the average
one-month
LIBOR and
39 bps
above the average
six-month LIBOR
for the quarter
ended March
31, 2021.
The average
term to maturity
of the outstanding
repurchase
30
agreements
was 43 days
at March
31, 2021 and
31 days at
December 31,
2020.
The tables
below present
the average
balance of
borrowings
outstanding,
interest expense
and average
cost of funds,
and average
one-month
and six-month
LIBOR rates
for each quarter
in 2021 to date
and 2020 on
both a GAAP
and economic
basis.
($ in thousands)
Average
Interest Expense
Average Cost of Funds
Balance of
GAAP
Economic
GAAP
Economic
Three Months Ended
Borrowings
Basis
Basis
Basis
Basis
March 31, 2021
$
3,888,633
$
1,941
$
5,985
0.20%
0.62%
December 31, 2020
3,438,444
2,011
7,801
0.23%
0.91%
September 30, 2020
3,228,021
2,043
8,943
0.25%
1.11%
June 30, 2020
2,992,494
4,479
10,230
0.60%
1.37%
March 31, 2020
3,129,178
16,523
21,423
2.11%
2.74%
Average GAAP Cost of Funds
Average Economic Cost of Funds
Relative to Average
Relative to Average
Average LIBOR
One-Month
Six-Month
One-Month
Six-Month
One-Month
Six-Month
LIBOR
LIBOR
LIBOR
LIBOR
Three Months Ended
March 31, 2021
0.13%
0.23%
0.07%
(0.03)%
0.49%
0.39%
December 31, 2020
0.15%
0.27%
0.08%
(0.04)%
0.76%
0.64%
September 30, 2020
0.17%
0.35%
0.08%
(0.10)%
0.94%
0.76%
June 30, 2020
0.55%
0.70%
0.05%
(0.10)%
0.82%
0.67%
March 31, 2020
1.34%
1.43%
0.77%
0.68%
1.40%
1.31%
Gains or Losses
The table
below presents
our gains
or losses for
the three
months ended
March 31,
2021 and 2020.
(in thousands)
2021
2020
Change
Realized losses on sales of RMBS
$
(7,397)
$
(28,380)
$
20,983
Unrealized (losses) gains on RMBS
(88,866)
3,032
(91,898)
Total losses on
RMBS
(96,263)
(25,348)
(70,915)
Gains (losses) on interest rate futures
2,488
(12,556)
15,044
Gains (losses) on interest rate swaps
27,123
(60,623)
87,746
Losses on payer swaptions (short positions)
(26,167)
-
(26,167)
Gains (losses) on payer swaptions (long positions)
40,070
(2,589)
42,659
Gains on interest rate floors
1,384
-
1,384
Losses on TBA securities (long positions)
(8,559)
-
(8,559)
Gains (losses) on TBA securities (short positions)
9,133
(7,090)
16,223
Total
$
(50,791)
$
(108,206)
$
57,415
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 three
months ended
March 31,
2021 and 2020,
we received
proceeds of
$988.5 million
and $1,808.9
million,
respectively, from
the sales of
RMBS. Most
of these sales
in the first
quarter of
2020 occurred
during the
second half
of March 2020
as we
sold assets
in order to
maintain sufficient
cash and liquidity
and reduce
risk associated
with the
market turmoil
brought about
by COVID-
19.
31
Realized and
unrealized
gains and
losses on RMBS
are driven
in part by
changes in
yields and
interest rates,
which affect
the pricing
of the securities
in our portfolio.
As rates increased
during the
three months
ended March
31, 2021,
it had a negative
impact on
our RMBS
portfolio.
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 end
during 2021
to date and
2020.
5 Year
10 Year
15 Year
30 Year
Three
U.S. Treasury
U.S. Treasury
Fixed-Rate
Fixed-Rate
Month
Rate
(1)
Rate
(1)
Mortgage Rate
(2)
Mortgage Rate
(2)
LIBOR
(3)
March 31, 2021
0.94%
1.75%
2.39%
3.08%
0.19%
December 31, 2020
0.36%
0.92%
2.22%
2.68%
0.23%
September 30, 2020
0.27%
0.68%
2.39%
2.89%
0.24%
June 30, 2020
0.29%
0.65%
2.60%
3.16%
0.31%
March 31, 2020
0.38%
0.70%
2.89%
3.45%
1.10%
(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 LIBOR is obtained from the Intercontinental Exchange Benchmark
Administration Ltd.
Expenses
Total
operating expenses were approximately $3.5 million and $2,179.5 million and total interest expense of $12.6 million and $4.0$2.1 million for the three months ended September 30, 2017 March 31, 2021
and 2016,2020, respectively. Our average cost of funds was 1.45% and 0.73% for three months ended September 30, 2017 and 2016, respectively.  There was a 72 bps increase in the average cost of funds and a $1,314.8 million increase in average outstanding borrowings during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.  As in the nine months ended September 30, 2017, the higher cost of funds for the three months ended September 30, 2017, compared to the same period in 2016, reflects higher short-term rates, and the increase in average outstanding borrowings reflects the investment, on a leveraged basis, of the proceeds of our net capital raising activities.

Our economic interest expense was $16.4 million and $6.6 million for the three months ended September 30, 2017 and 2016, respectively. There was a 66 bps increase in the average economic cost of funds to 1.88% for the three months ended September 30, 2017 from 1.22% for the three months ended September 30, 2016. The increase in economic interest expense during the three months ended September 30, 2017 was due to a combination of the increase in average outstanding borrowings, higher average interest rates charged for those borrowings, and the negative performance of our derivative agreements attributed to the current period.

30

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 25 bps above the average one-month LIBOR and 0 bps below the average six-month LIBOR for the quarter ended September 30, 2017.  Our average economic cost of funds was 68 bps above the average one-month LIBOR and 43 bps above the average six-month LIBOR for the quarter ended September 30, 2017. The average term to maturity of the outstanding repurchase agreements increased to 59 days at September 30, 2017 from 15 days at December 31, 2016.

The tables below present the average balance of repurchase agreements outstanding, interest expense and average cost of funds, and average one-month and six-month LIBOR rates for the nine months ended September 30, 2017 and 2016, and for each quarter in 2017 and 2016 on both a GAAP and economic basis.

($ in thousands)               
  Average  Interest Expense  Average Cost of Funds 
  Balance of  GAAP  Economic  GAAP  Economic 
  Borrowings  Basis  Basis  Basis  Basis 
Three Months Ended               
September 30, 2017 $3,494,266  $12,638  $16,392   1.45%  1.88%
June 30, 2017  3,164,532   8,763   12,417   1.11%  1.57%
March 31, 2017  2,922,157   6,715   9,908   0.92%  1.36%
December 31, 2016  2,545,901   4,974   7,943   0.78%  1.25%
September 30, 2016  2,179,462   3,979   6,639   0.73%  1.22%
June 30, 2016  2,000,158   3,330   5,540   0.67%  1.11%
March 31, 2016  1,962,901   3,319   5,252   0.68%  1.07%
Nine Months Ended                    
September 30, 2017 $3,193,652  $28,116  $38,717   1.17%  1.62%
September 30, 2016  2,047,507   10,628   17,431   0.69%  1.14%

        Average GAAP Cost of Funds  Average Economic Cost of Funds 
        Relative to Average  Relative to Average 
  Average LIBOR  One-Month  Six-Month  One-Month  Six-Month 
  One-Month  Six-Month  LIBOR  LIBOR  LIBOR  LIBOR 
Three Months Ended                  
September 30, 2017  1.20%  1.45%  0.25%  (0.00)%  0.68%  0.43%
June 30, 2017  1.05%  1.43%  0.06%  (0.32)%  0.52%  0.14%
March 31, 2017  0.82%  1.37%  0.10%  (0.45)%  0.54%  (0.01)%
December 31, 2016  0.62%  1.28%  0.16%  (0.50)%  0.63%  (0.03)%
September 30, 2016  0.49%  1.09%  0.24%  (0.36)%  0.73%  0.13%
June 30, 2016  0.44%  0.92%  0.23%  (0.25)%  0.67%  0.19%
March 31, 2016  0.40%  0.84%  0.28%  (0.16)%  0.67%  0.23%
Nine Months Ended                        
September 30, 2017  1.03%  1.42%  0.14%  (0.25)%  0.59%  0.20%
September 30, 2016  0.44%  0.95%  0.25%  (0.26)%  0.70%  0.19%

31

Gains or Losses

The table below presents our gains or losses for the nine and three months ended September 30, 2017 and 2016.

(in thousands)                  
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  Change  2017  2016  Change 
Realized gains on sales of RMBS $3,354  $4,482  $(1,128) $769  $229  $540 
Unrealized (losses) gains on RMBS  (35,601)  5,652   (41,253)  (3,553)  (2,398)  (1,155)
Total (losses) gains on RMBS  (32,247)  10,134   (42,381)  (2,784)  (2,169)  (615)
Losses on interest rate futures  (23,145)  (29,795)  6,650   (5,843)  2,882   (8,725)
Losses on interest rate swaps  (3,170)  (450)  (2,720)  1,005   4,179   (3,174)
Gains on receiver swaptions  827   36   791   827   -   827 
Losses on TBA securities  (3,843)  (2,385)  (1,458)  (1,459)  (474)  (985)

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 purposes 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, 2017 and 2016, we received proceeds of $3,891.0 million and $1,717.6 million, respectively, from the sales of RMBS.  During the three months ended September 30, 2017 and 2016, we received proceeds of $826.0 million and $418.2 million, respectively, from the sales of RMBS, including sales settling in subsequent periods.

Realized and unrealized gains and losses on RMBS are driven in part by changes in yields and interest rates, which affect the pricing of the securities in our portfolio.  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 end during 2017 and 2016.

        15 Year  30 Year  Three 
  5 Year  10 Year  Fixed-Rate  Fixed-Rate  Month 
  
Treasury Rate(1)
  
Treasury Rate(1)
  
Mortgage Rate(2)
  
Mortgage Rate(2)
  
LIBOR(3)
 
September 30, 2017  1.93%  2.33%  3.11%  3.81%  1.32%
June 30, 2017  1.88%  2.30%  3.17%  3.90%  1.26%
March 31, 2017  1.93%  2.40%  3.41%  4.20%  1.13%
December 31, 2016  1.93%  2.45%  3.43%  4.20%  0.98%
September 30, 2016  1.16%  1.61%  2.76%  3.46%  0.85%
June 30, 2016  1.01%  1.49%  2.84%  3.57%  0.65%
March 31, 2016  1.22%  1.79%  2.97%  3.69%  0.63%

(1)Historical 5 and 10 Year 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 LIBOR are obtained from the Intercontinental Exchange Benchmark Administration Ltd.

32

Expenses

For the nine and three months ended September 30, 2017, the Company's total operating expenses were approximately $8.2 million and $2.9 million, respectively, compared to approximately $6.6 million and $2.3 million, respectively, for the nine and three months ended September 30, 2016.   The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2017March
31, 2021 and 2016.2020.

(in thousands)                  
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  Change  2017  2016  Change 
Management fees $4,230  $2,968  $1,262  $1,528  $1,052  $476 
Overhead allocation  1,168   963   205   412   336   76 
Accrued incentive compensation  439   598   (159)  209   212   (3)
Directors fees and liability insurance  722   763   (41)  215   236   (21)
Audit, legal and other professional fees  547   654   (107)  157   193   (36)
Direct REIT operating expenses  816   426   390   320   187   133 
Other administrative  259   215   44   58   55   3 
Total expenses $8,181  $6,587  $1,594  $2,899  $2,271  $628 
(in thousands)

2021
2020
Change
Management fees
$
1,621
$
1,377
$
244
Overhead allocation
404
347
57
Accrued incentive compensation
364
(436)
800
Directors fees and liability insurance
272
260
12
Audit, legal and other professional fees
318
255
63
Other direct REIT operating expenses
421
206
215
Other expenses
93
132
(39)
Total expenses
$
3,493
$
2,141
$
1,352
We are externally managed and advised by Bimini Advisors, LLC (the "Manager"“Manager”) pursuant
to the terms of a management
agreement. The management agreement has been renewed through February 20, 2018
2022 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 equity, as defined in the management agreement,
●
·One-twelfth of 1.25% of the Company's
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 Company is greater than $250 million and less than or equal to $500 million, and
·One-twelfth of 1.00% of the Company's equity that is greater than $500 million.

We are obligated to reimburse Bimini Advisorsthe Manager for any direct expenses
incurred on its behalf.  In addition, beginning July 1, 2014, Bimini Advisors began allocatingbehalf and to us itspay the Manager the
Company’s pro rata portion of certain overhead costs set forth in accordance with the management agreement.
Should wethe Company terminate the
management agreement without cause, weit will pay to 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.

Financial Condition:

Mortgage-Backed Securities

As of September 30, 2017, our RMBS portfolio consisted of $3,930.3 million of Agency RMBS at fair value and had a weighted average coupon on assets of 4.34%.  During the nine months ended September 30, 2017, we received principal repayments of $248.5 million compared to $178.5 million for the nine months ended September 30, 2016.  The average prepayment speeds for the quarters ended September 30, 2017 and 2016 were 10.3% and 11.7%, respectively.

33

32
The following table presentssummarizes the management fee and overhead allocation expenses
for each quarter in 2021 to date and
2020.
($ in thousands)
Average
Average
Advisory Services
Orchid
Orchid
Management
Overhead
Three Months Ended
MBS
Equity
Fee
Allocation
Total
March 31, 2021
$
4,032,716
$
453,353
$
1,621
$
404
$
2,025
December 31, 2020
3,633,631
387,503
1,384
442
1,826
September 30, 2020
3,422,564
368,588
1,252
377
1,629
June 30, 2020
3,126,779
361,093
1,268
348
1,616
March 31, 2020
3,269,859
376,673
1,377
347
1,724
Financial
Condition:
Mortgage-Backed Securities
As of March
31, 2021,
our RMBS portfolio
consisted of
$4,338.5 million
of Agency RMBS
at fair value
and had a
weighted average
coupon on
assets of 3.02%.
During the
three months
ended March
31, 2021,
we received
principal repayments
of $123.9
million
compared to
$142.3 million
for the three
months ended
March 31,
2020.
The average
three month
prepayment
speeds for
the quarters
ended March
31, 2021 and
2020 were
12.0% and
11.9%, respectively.
The following
table presents
the 3-month constant
prepayment
rate ("CPR"(“CPR”)
experienced on
our structured
and PT RMBS
sub-portfolios,
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.
Assets that
were not owned
for the entire
quarter have
been excluded
from the calculation.
The exclusion
of certain
assets during
periods of high
trading activity
can create a
very high,
and often volatile,
reliance on
a small sample
of underlying
loans.

     Structured    
  PT RMBS  RMBS  Total 
Three Months Ended Portfolio (%)  Portfolio (%)  Portfolio (%) 
September 30, 2017  8.3   14.9   10.3 
June 30, 2017  7.0   12.7   9.5 
March 31, 2017  7.5   14.3   9.9 
December 31, 2016  9.7   18.4   12.2 
September 30, 2016  8.9   17.9   11.7 
June 30, 2016  8.4   15.9   11.0 
March 31, 2016  5.5   12.4   8.2 

Structured
PT RMBS
RMBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
March 31, 2021
9.9
40.3
12.0
December 31, 2020
16.7
44.3
20.1
September 30, 2020
14.3
40.4
17.0
June 30, 2020
13.9
35.3
16.3
March 31, 2020
9.8
22.9
11.9
The following
tables summarize
certain characteristics
of the Company's Company’s
PT RMBS and
structured
RMBS as of September 30, 2017
March 31,
2021 and
December 31,
2020:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
March 31, 2021
Fixed Rate RMBS
$
4,297,731
99.1%
2.95%
335
1-Mar-51
Total Mortgage-backed Pass-through
4,297,731
99.1%
2.95%
335
1-Mar-51
33
Interest-Only Securities
35,521
0.8%
3.98%
264
25-May-50
Inverse Interest-Only Securities
5,284
0.1%
3.77%
311
15-Jun-42
Total Structured RMBS
40,805
0.9%
3.93%
275
25-May-50
Total Mortgage Assets
$
4,338,536
100.0%
3.02%
331
1-Mar-51
December 31, 2016:2020

Fixed Rate RMBS
($ in thousands)         
     Weighted Weighted  
   Percentage Average AverageWeightedWeighted
   ofWeightedMaturity CouponAverageAverage
  FairEntireAverageinLongestReset inLifetimePeriodic
Asset Category ValuePortfolioCouponMonthsMaturityMonthsCapCap
September 30, 2017         
Adjustable Rate RMBS$1,7830.0%3.90%2091-Sep-357.8510.05%2.00%
Fixed Rate RMBS 3,740,65895.2%4.37%3411-Sep-47NANANA
Hybrid Adjustable Rate RMBS 42,2011.1%2.55%3041-Aug-4364.077.55%2.00%
Total Mortgage-backed Pass-through 3,784,64296.3%4.35%3411-Sep-47NANANA
Interest-Only Securities 90,5512.3%3.75%26315-Apr-47NANANA
Inverse Interest-Only Securities 55,1471.4%4.43%33015-Jul-47NA5.37%NA
Total Structured RMBS 145,6983.7%4.00%28815-Jul-47NANANA
Total Mortgage Assets$3,930,340100.0%4.34%3391-Sep-47NANANA
December 31, 2016         
Adjustable Rate RMBS$2,0620.1%3.50%2191-Sep-355.6710.05%2.00%
Fixed Rate RMBS 2,826,69493.5%4.21%3251-Dec-46NANANA
Hybrid Adjustable Rate RMBS 45,4591.5%2.55%3131-Aug-4373.087.55%2.00%
Total Mortgage-backed Pass-through 2,874,21595.1%4.19%3241-Dec-46NANANA
Interest-Only Securities 69,7262.3%3.59%23525-Apr-45NANANA
Inverse Interest-Only Securities 78,2332.6%5.40%33825-Dec-46NA6.14%NA
Total Structured RMBS 147,9594.9%4.55%29025-Dec-46NANANA
Total Mortgage Assets$3,022,174100.0%4.20%32325-Dec-46NANANA
$

3,560,746
3495.5%
3.09%

339
($ in thousands)            
  September 30, 2017  December 31, 2016 
     Percentage of     Percentage of 
Agency Fair Value  Entire Portfolio  Fair Value  Entire Portfolio 
Fannie Mae $2,580,973   65.7% $2,226,893   73.7%
Freddie Mac  1,342,803   34.2%  785,496   26.0%
Ginnie Mae  6,564   0.1%  9,785   0.3%
Total Portfolio $3,930,340   100.0% $3,022,174   100.0%
1-Jan-51

Fixed Rate CMOs
  September 30, 2017  December 31, 2016 
Weighted Average Pass-through Purchase Price $108.23  $108.64 
Weighted Average Structured Purchase Price $14.19  $15.39 
Weighted Average Pass-through Current Price $108.03  $107.14 
Weighted Average Structured Current Price $13.18  $15.49 
Effective Duration (1)
  2.603   4.579 
137,453

3.7%
(1)Effective duration is the approximate percentage change in price for a 100 bps change in rates.  An effective duration of 2.603 indicates that an interest rate increase of 1.0% would be expected to cause a 2.603% decrease in the value of the RMBS in the Company's investment portfolio at September 30, 2017.  An effective duration of 4.579 indicates that an interest rate increase of 1.0% would be expected to cause a 4.579% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2016. These figures include the structured securities in the portfolio, but 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.
4.00%

312
15-Dec-42
Total Mortgage-backed Pass-through
3,698,199
99.2%
3.13%
338
1-Jan-51
Interest-Only Securities
28,696
0.8%
3.98%
268
25-May-50
Total Structured RMBS
28,696
0.8%
3.98%
268
25-May-50
Total Mortgage Assets
$
3,726,895
100.0%
3.19%
333
1-Jan-51
($ in thousands)
March 31, 2021
December 31, 2020
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
3,439,588
79.3%
$
2,733,960
73.4%
Freddie Mac
898,948
20.7%
992,935
26.6%
Total Portfolio
$
4,338,536
100.0%
$
3,726,895
100.0%
March 31, 2021
December 31, 2020
Weighted Average Pass-through Purchase Price
$
107.56
$
107.43
Weighted Average Structured Purchase Price
$
18.69
$
20.06
Weighted Average Pass-through Current Price
$
106.14
$
108.94
Weighted Average Structured Current Price
$
13.83
$
10.87
Effective Duration
(1)
4.090
2.360
(1)
Effective duration is the approximate percentage change
in price for a 100 bps change in rates.
An effective duration of 4.090 indicates that an
interest rate increase of 1.0% would be expected to cause a 4.090% decrease in
the value of the RMBS in the Company’s investment
portfolio
at March 31, 2021.
An effective duration of 2.360 indicates that an interest rate
increase of 1.0% would be expected to cause a 2.360%
decrease in the value of the RMBS in the Company’s investment
portfolio at December 31, 2020. These figures include the structured
securities
in the portfolio, but 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 three
months ended September 30, 2017
March 31, 2021
and 2016.

2020,
including securities
purchased
during the period
that settled
after the end
of the period,
if any.
($ in thousands)                  
 2017 2016 
  Total Cost  Average Price  Weighted Average Yield  Total Cost  Average Price  Weighted Average Yield 
Pass-through RMBS $5,007,614  $108.16   2.75% $2,204,085  $109.70   2.24%
Structured RMBS  72,331   14.46   6.21%  52,897   18.03   5.46%

($ in thousands)
2021
2020
Total Cost
Average
Price
Weighted
Average
Yield
Total Cost
Average
Price
Weighted
Average
Yield
Pass-through RMBS
$
1,971,296
$
107.09
1.38%
$
1,334,350
$
107.18
2.28%
Structured RMBS
4,807
6.93
0.14
-
-
0.00%
Borrowings

As of September 30, 2017, 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 20 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 the prevailing market rates.  We believe our established repurchase agreement borrowing facilities provide borrowing capacity in excess of our needs.

As of September 30, 2017, March
31, 2021,
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
21 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.
34
As of March
31, 2021,
we had obligations
outstanding
under the
repurchase
agreements
of approximately $3,710.1
$4,181.7 million
with a net
weighted average
borrowing
cost of 1.37%0.18%.
The remaining
maturity of
our outstanding
repurchase
agreement
obligations
ranged from 2
1 to 318
166 days, with
a weighted
average remaining
maturity of 59
43 days.
Securing the
repurchase
agreement
obligations
as of September 30, 2017 March
31, 2021
are RMBS
with an estimated
fair value,
including accrued
interest,
of approximately $3,932.6
$4,285.9 million
and a weighted
average maturity
of 340
339 months,
and cash pledged
to counterparties
of approximately $12.0
$102.6 million.
Through October 27, 2017, April
30, 2021,
we have been
able to maintain
our repurchase
facilities
with comparable
terms to those
that existed
at September 30, 2017March 31,
2021 with
maturities
through August 14, 2018.October
8, 2021.

35

The table below presents information about our period end, maximum and average repurchase agreement obligationsbalances
of borrowings for each quarter in 2017
2021 to date and 2016.2020.

($ in thousands) 
        Difference Between Ending 
  Ending  Average  Borrowings and 
  Balance of  Balance of  Average Borrowings 
Three Months Ended Borrowings  Borrowings  Amount  Percent 
September 30, 2017 $3,710,077  $3,494,266  $215,811   6.18%
June 30, 2017  3,278,456   3,164,532   113,924   3.60%
March 31, 2017  3,050,608   2,922,157   128,451   4.40%
December 31, 2016  2,793,705  ��2,545,901   247,804   9.73%
September 30, 2016  2,298,097   2,179,462   118,635   5.44%
June 30, 2016  2,060,827   2,000,158   60,669   3.03%
March 31, 2016  1,939,489   1,962,901   (23,412)  (1.19)%
($ 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
March 31, 2021
$
4,181,680
$
4,204,935
$
3,888,633
$
293,047
7.54%
December 31, 2020
3,595,586
3,597,313
3,438,444
157,142
4.57%
September 30, 2020
3,281,303
3,286,454
3,228,021
53,282
1.65%
June 30, 2020
3,174,739
3,235,370
2,992,494
182,245
6.09%
March 31, 2020
2,810,250
4,297,621
3,129,178
(318,928)
(10.19)%
(1)
(1)
The lower ending balance relative to the average balance during the quarter
ended March 31, 2020 reflects the disposal of RMBS pledged as
collateral in order to maintain cash and liquidity in response to the dislocations
in the financial and mortgage markets resulting from the
economic impacts of COVID-19.
During the quarter ended March 31, 2020, the Company’s investment
in RMBS decreased $642.1 million.
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.
Our principal
immediate sources
of liquidity
include cash
balances, unencumbered
assets and
borrowings
under repurchase
agreements.
Our borrowing
capacity will
vary over time
as the market
value of our
interest
earning assets
varies.
Our balance
sheet also
generates
liquidity
on an on-going
basis through
payments of
principal and
interest
we
receive on
our RMBS
portfolio.
Management
believes that
we currently
have sufficient
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.

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.
To enhance our liquidity
even further,
we
may pledge
a portion
of our structured
RMBS as part
of a repurchase
agreement
funding, but
retain the
cash in lieu
of acquiring
additional
assets.
In this way
we can, at
a modest cost,
retain higher
levels of
cash on hand
and decrease
the likelihood
we will have
to sell assets
in
a distressed
market in order
to raise cash.

Our strategy
for hedging
our funding
costs typically
involves taking
short positions
in interest
rate futures,
treasury futures,
interest rate
swaps, interest
rate swaptions
or other instruments. Since inception we have primarily used short positions in Eurodollar futures. 
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
35
funds or risk
operating
the portfolio
with less liquidity.

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.
transaction,
as it did during
the three
months ended
March 31,
2020.

36

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
repurchase
transaction
basis. Throughout
the nine three
months
ended September 30, 2017, March
31, 2021,
haircuts on
our pledged
collateral
remained
stable and
as of September 30, 2017, March
31, 2021,
our weighted
average haircut
was
approximately 5.5%
5.0% of the
value of our
collateral.

TBAs represent
a form of
off-balance sheet
financing and
are accounted
for as derivative
instruments.
(See Note
4 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,
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.
As discussed
earlier, we invest
a portion
of our capital
in structured
Agency RMBS.
We generally
do not apply
leverage to
this portion
of our portfolio.
The leverage
inherent in
structured
securities
replaces the
leverage obtained
by acquiring
PT securities
and funding
them
in the repurchase
market.
This structured
RMBS strategy
has been a
core element
of the Company's Company’s
overall investment
strategy since
inception.
However, we have
and may continue
to pledge
a portion
of our structured
RMBS in order
to raise our
cash levels,
but generally
will not pledge
these securities
in order to
acquire additional
assets.

The following
table summarizes
the effect on
our liquidity
and cash flows
from contractual
obligations
for repurchase
agreements
and
interest expense
on repurchase
agreements.
(in thousands)
Obligations Maturing
Within One
Year
One to Three
Years
Three to Five
Years
More than
Five Years
Total
Repurchase agreements
$
4,181,680
$
-
$
-
$
-
$
4,181,680
36
Interest expense on repurchase agreements.
agreements

(1)
(in thousands)               
  Obligations Maturing 
  Within One Year  One to Three Years  Three to Five Years  More than Five Years  Total 
Repurchase agreements $3,710,077  $-  $-  $-  $3,710,077 
Interest expense on repurchase agreements(1)
  13,672   -   -   -   13,672 
Totals $3,723,749  $-  $-  $-  $3,723,749 
1,800

-
(1)Interest expense on repurchase agreements is based on current interest rates as of September 30, 2017 and the remaining term of the liabilities existing at that date.
-

-
1,800
Totals
$
4,183,480
$
-
$
-
$
-
$
4,183,480
(1)
Interest expense
on repurchase
agreements is
based on current
interest rates
as of March 31,
2021 and the
remaining term
of the liabilities
existing
at that date.
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, 2017, March
31, 2021,
we had cash
and cash equivalents
of $161.7$211.4 million.
We generated
cash flows
of $350.4 $149.7
million from
principal and
interest
payments on
our RMBS
and had average
repurchase
agreements
outstanding
of $3,193.7 $3,888.6
million during
the nine three
months ended September 30, 2017.
March 31,
2021.

Stockholders' Stockholders’
Equity

On July 29, 2016,January 23, 2020, we entered into an equity distribution agreement (the "July 2016the January 2020 Equity Distribution Agreement") Agreement
with twothree sales agents pursuant to which
we could offer and sell, from time to time, up to an aggregate amount of $125,000,000$200,000,000 of shares
of our common stock in transactions
that were deemed to be "at“at the market"market” offerings and privately negotiated transactions.
We issued a total of 10,174,9923,170,727 shares under
the July 2016January 2020 Equity Distribution Agreement for aggregate gross proceeds of $110.0 $19.8
million, and net proceeds of approximately $108.2
$19.4 million, net of commissions and fees, prior to its termination.termination in August 2020.

On February 23, 2017,August 4, 2020, we entered into another equity distribution agreement, as amended and restated on May 10, 2017, (the "May 2017the August 2020 Equity Distribution Agreement")Agreement with two
four sales agents pursuant to which we
may offer and sell, from time to time, up to an aggregate amount of $125,000,000$150,000,000 of shares
of our common stock in transactions that
are deemed to be "at“at the market"market” offerings and privately negotiated transactions. The May 2017 Equity Distribution Agreement replaced the July 2016 Equity Distribution Agreement. WeThrough March 31,
2021, we issued a total of 12,299,032
10,156,561 shares under the May 2017August 2020 Equity Distribution Agreement for aggregate
gross proceeds of $125.0approximately $54.1 million,
and net proceeds of approximately $122.9$53.2 million, net of commissions and fees, prior to its termination.fees.

37
On August 2, 2017,January 20, 2021, we entered into another equity distribution agreement (the "August 2017 Equity Distribution Agreement") the January 2021 Underwriting Agreement
with two sales agents pursuantJ.P.
Morgan Securities LLC (“J.P. Morgan”),
relating to which we maythe offer and sell, from time to time, up to an aggregate amountsale of $125,000,0007,600,000 shares of our common stock. J.P. Morgan purchased the shares of our common stock from
the Company pursuant to the January 2021 Underwriting Agreement at $5.20 per share.
In addition, we granted J.P. Morgan a 30-day
option to purchase up to an additional 1,140,000 shares of our common stock on the
same terms and conditions, which J.P. Morgan
exercised in transactions that are deemedfull on January 21, 2021. The closing of the offering of 8,740,000 shares of our common
stock occurred on January 25,
2021, with net proceeds to be "atus of approximately $45.2 million, net of offering expenses.
On March 2, 2021 we entered into the market" offerings“March 2021 Underwriting Agreement with J.P. Morgan, relating to the offer and privately negotiated transactions.sale of
8,000,000 shares of our common stock. J.P. Morgan purchased the shares of our common stock from the Company pursuant to the
March 2021 Underwriting Agreement at $5.45 per share. In addition, we granted
J.P.
Morgan a 30-day option to purchase up to an
additional 1,200,000 shares of our common stock on the same terms and conditions,
which J.P. Morgan exercised in full on March 3,
2021. The August 2017 Equity Distribution Agreement replacedclosing of the May 2017 Equity Distribution Agreement. Through September 30, 2017, we have not issued anyoffering of 9,200,000 shares under the August 2017 Equity Distribution Agreement.of our common stock occurred on March
5, 2021, with net proceeds to us of

approximately $50.1 million, net of offering expenses payable.
Outlook

Interest Rates and the MBS Market

Economic Summary
In many respects the third quarter was a repeat ofDuring the first
quarter of 2021
the economy
made tremendous
strides towards
recovery from
the COVID-19
pandemic.
Evidence of
the recovery
was pervasive.
New cases of
COVID-19, which
peaked around
the turn of
the year, moderated
significantly, as
did hospitalizations
and second. Economic and market developments continued the trend in place since March.  Inflation data continued to come in below market expectations.  Optimism stemming from the surprise outcome deaths.
As a result
of the U.S. Presidential election last NovemberSenate
run-off elections
in early January,
both of which
were won by
Democrats,
one party was
now in control
of the White
House and both
houses of Congress.
This led the
way to a
new stimulus
package being
passed that was
at the high
end of market
expectations
- $1.9 trillion.
The American
Rescue Plan
Act of 2021 was
signed into
law on March
11, 2021.
This marked
the third legislative
act related
to the nation’s
recovery from
37
the COVID-19
pandemic, after
the $2.2 trillion
CARES Act (described
below), which
passed on March
27, 2020 and
the $2.3
trillion
Consolidated
Appropriations
Act of 2021,
which contained
$900 billion
of COVID-19
relief and was
signed on December
27, 2020.
Given the momentum
the administration
had after passing
the American
Rescue Plan
Act of 2021,
President
Biden
shortly thereafter
announced plans
for a $2 trillion-plus
infrastructure
bill.
The vaccine
roll-out,
which initially
seemed
haphazard, improved
to the point
where the U.S.
became a world
leader.
The U.S. was
well on its
way to herd
immunity as
over 200 million
inoculations
were administered
by April 21, 2021,
well ahead
of even the
most optimistic
projections at
the
beginning of
the year.
Economic data
released over
the course of
the first quarter
has been consistently
very strong.
Fueled
by two rounds
of stimulus
checks
during the first
quarter, consumers
have been spending.
Retail sales,
home sales, demand
for new cars
and other durable
goods are all
benefitting
from the stimulus
and considerable
pent-up demand.
Job growth
appears to be
accelerating
quickly, and the markets' expectationsunemployment
rate has dropped
to 6.0%.
All of the developments
described
above have stoked
inflation fears.
The most obvious
evidence of
potential price
pressures relate
to supply shortages
of a
variety of
consumer goods
and commodities
caused by the
combination
of still constrained
production and
surging demand
that have begun
to surface
across the
economy.
The factors
highlighted
above have led
to a surging
economy, which grew
at an annualized
rate of 6.4%
during the
first
quarter.
They have also
impacted the
financial markets.
The various
broad equity
indices are
making new all-time
highs on a
frequent basis,
and corporate
debt issuance
levels – both
investment
grade and high
yield – are
at or near record
levels
reflecting
the demand for progress on health care, regulatory
capital and tax reform, infrastructure spending, etc. were not realized.  In contrast, events in Washington were chaotic
investor appetite
for yield.
U.S. Treasury rates,
at times asleast longer-term
rates, have
risen
significantly. The
ten-year U.S.
Treasury note yield
increased from
0.916% to 1.742%
over the Trump Administration struggled with a Republican party rife with internal struggles and political infighting insidecourse
of the White House itself.  Efforts to repeal and replace the Affordable Care Act seemed to come tofirst
quarter, an end
increase of
82.6 basis points,
and the continued in-fighting among Republicans called into questionU.S.
Treasury curve
has steepened
substantially.
The market
has moved up
expectations
for a recovery
from the ability pandemic
and return to
normalcy significantly.
The Federal
Reserve (the
“Fed”) gave
a
green light
to higher rates,
referring to
them as a sign
of economic
strength.
However, when the
market has
attempted to
price
in an acceleration
to the timing
of the Trump Administration to accomplish anything meaningful. The Federal Reserve (the "Fed") raised their target forrate increases
by the Federal Funds rate in March and June, and announced a tapering of their asset purchases in September. However, the market remained skeptical Fed,
the Fed would be able to follow through with as many additional hikes as the Fed was expecting as core inflation readings continued to show year over year declines, with many of the elements of the index exhibiting persistent weakness.  Geopolitical events – particularly with respect to North Korea – keep the world has
pushed back
against such
sentiment.
These
efforts have largely
been successful,
and markets on edge.  The yield on the 10-year US Treasury current
market pricing
only reflects
one interest
rate hit its year to date low on September 7, 2017, closing at 2.04%, and nearly broke below the psychologically important 2% level intra-day. Mother nature had a hand in shaping developments in the markets as well, as three major hurricanes made landfall – one each in Texas, Florida and Puerto Rico. In the case of Texas, Hurricane Harvey caused unprecedented flooding and disrupted the Nation's oil refining capacity for several days.hike by

However, there was a perceptible change in market sentiment in early September, and the market reversed course into the end of 2022.
Legislative
Response and
the third quarterFederal
Reserve
Congress passed
the CARES Act
quickly in
response to
the pandemic’s
emergence last
spring and early fourth quarter. Geo-political events calmed down, removingfollowed
with
additional legislation
over the flight-to-quality induced demand for safe-haven assets, and economic news strengthened.  Events in Washington turned mildly positiveensuing
months.
However, as certain
provisions
of the Trump Administration pivoted away from health care reform to tax reform, with what the market perceived CARES
Act expired,
such as
supplemental
unemployment
insurance last
July, there appeared
to be slightly better prospects a need
for success. Inflation data finally met expectationsadditional
stimulus for
the economy
to deal
with the surge
in the pandemic
that occurred
as cold
weather set in,
particularly
over the Christmas
holiday.
As mentioned
above, the Federal
government eventually
passed an additional
stimulus package
in late December
of 2020 and showed signsagain
in
March of reversing its decline when the August data was released on September 14th.    Finally, on September 20th, Fed Chairwomen Yellen sounded quite hawkish and reiterated her belief that recent inflation data represented temporary or transitory effects and would reverse soon enough back towards their 2% target.  It was quite clear 2021.
In addition,
the Fed intended has provided,
and continues
to raiseprovide,
as much support
to the Federalmarkets
and the economy
as it can within
the constraints
of its mandate.
During the third
quarter of 2020,
the Fed unveiled
a new monetary
policy
framework
focused on average
inflation rate
targeting that
allows the
Fed Funds rate again in December. The market responded as Fed Funds futures pricing implied a 70-80% probability of a 25 basis point increase in
to remain quite
low, even if inflation
is
expected to temporarily
surpass the Federal Funds rate in December.  The September economic data released in early October has also been very strong, and the anticipated short-term effects of the hurricanes appears to have been less than feared.
2% target level.
Further, the repair work associated withFed
will look
past the hurricanes presence
of very tight
labor markets,
should put even more upward pressure they be
present at
the time.
This marks
a significant
shift from
their prior
policy framework,
which was focused
on economic activity.the

unemployment
As we move into the fourth quarter, market pricing of additional policy accommodation removal is far less than the Fed anticipates. The latest reads on inflation returned to its aforementioned string of below expectations readings.  The perceived lack of meaningful inflation, coupled withrate as a hawkish fed, has caused key
indicator of
impending inflation.
Adherence to
this policy
could steepen
the U.S. Treasury
curve
as short-term
rates could
remain low
for a considerable
period but longer-term
rates could rise
given the Fed’s
intention to flatten,
let
inflation potentially
run above 2%
in the future
as the spread between 5-year Treasury Notes economy
more fully
recovers.
As mentioned
above, this
appears to
be
occurring early
in 2021 now that
effective vaccines
have been found
and 30-year Treasury Bonds is inoculations
are distributed
at multi-year lows.  an accelerating
pace.
Interest Rates
Interest rates
steadily increased
throughout the
first quarter
as described
above and levels
of implied
volatility
rose as well.
Mortgage rates
slowly declined
at the end of
2020 as originators
added capacity
and could handle
ever increasing
levels of
production volume.
This trend in
mortgage rates
quickly reversed
during the first
quarter of 2021
as rates began
to increase,
especially
in late February
and March. With
the increase
in interest
rates, prepayment
activity slowed.
The market is also facedpercent
of the
Agency RMBS
universe with uncertainty surrounding President Trump's appointment
sufficient rate
incentive to
economically
refinance has
declined from
approximately
80% at the
end of 2020 to
approximately
46% at the end
of the next first
quarter. However, the
spread between
rates available
to borrowers
and the implied
yield on a current
coupon mortgage,
known as the
primary/secondary
spread, has
continued to
compress.
38
The spread is
still slightly
above long-term
average levels
so further
compression
is possible,
meaning rates
available to
borrowers could
remain at current
levels even
if U.S. Treasury
rates increased
further. Since the
end of the first
quarter,
interest rates
have declined
by approximately
20 basis points
in the case
of the 10-year
U.S. Treasury
note.
Accordingly,
prepayment levels
on RMBS securities
are likely
to remain high
unless U.S.
Treasury rates
increase above
current levels.
The Agency RMBS
Market
The market
conditions that
prevailed throughout
the first quarter
were not conducive
to mortgage
performance.
In fact,
apart from
high yield
bonds, all fixed
income sectors
had negative returns
for quarter.
Interest rates
rose rapidly, and volatility
was elevated.
Agency RMBS
had negative
absolute and
excess returns
for the first
quarter of -1.2%
and -0.3%, respectively
(both vs U.S
Treasuries
and LIBOR/swaps).
There is a
benefit to higher
interest rates,
and as interest
rates rose
prepayment
levels declined.
The Mortgage
Bankers Association
refinance index
declined from
approximately
4700 in early
January 2021
to approximately
2900 in early
April 2021,
before rebounding
slightly in
mid-April 2021.
The Agency RMBS
market continues
to be essentially
bifurcated with
two separate
and distinct
sub-markets.
Lower coupon fixed
rate mortgages,
coupons
of 1.5%
through 2.5%,
are purchased
by the Fed.
Fed chair, purchase
activity maintains
substantial
price pressure
under these coupons,
and they benefit
from attractive
TBA dollar
roll drops.
Higher coupons
in the TBA market
do not have
the benefit
of Fed
purchases.
Importantly, the Fed
tends to take
the worst
performing
collateral
out of the market.
The absence of
Fed
purchases of
higher coupons
means the market
is left to absorb
still very
high prepayment
speeds on these
securities
as rates
have not risen
enough to eliminate
the economic
incentive to
refinance.
The market
expects prepayments
on higher coupons
will eventually
decline as “burn
out” sets in
– a phenomenon
whereby refinancing
activity declines
as borrowers
are exposed to
refinancing
incentives
for an extended
period.
Through the
March 2021 prepayment
report released
in early April,
this has yet
to occur.
While market
participants
continue to favor
specified
pools that have
favorable
prepayment characteristics
that mute
the refinance
incentive,
the premium
over generic
TBA securities
has declined
significantly
with the reduced
refinance
incentive caused
by the increase
in rates available
to borrowers.
Recent Legislative
and Regulatory
Developments
The Fed conducted
large scale
overnight repo
operations
from late 2019
until July
2020 to address
disruptions
in the U.S.
Treasury, Agency debt and
Agency MBS financing
markets. These
operations ceased
in July 2020
after the central
bank
successfully
tamed volatile
funding costs
that had threatened
to cause disruption
across the
financial system.
The Fed has taken
a number
of other actions
to stabilize
markets as
a result of
the impacts
of the COVID-19
pandemic.
In
March of 2020,
the Fed announced
a $700 billion
asset purchase
program to
provide liquidity
to the U.S. Treasury
and Agency
RMBS markets.
The Fed also
lowered the
Fed Funds rate
to a range of
0.0% – 0.25%,
after having
already lowered
the Fed
Funds rate by
50 bps earlier
in the month.
Later that same
month the Fed
announced
a program to
acquire U.S.
Treasuries
and Agency RMBS
in the amounts
needed to support
smooth market
functioning.
With these
purchases, market
conditions
improved substantially.
Currently, the Fed is
committed to
purchasing $80
billion of
U.S. Treasuries
and $40 billion
of Agency
RMBS each month.
Chairman Powell
and the Fed have
reiterated
their commitment
to this level
of asset purchases
at every
meeting since
their meeting
on June 30,
2020. Chairman
Powell has
also maintained
that the Fed
expects to
maintain interest
rates at this
level until
the Fed is confident
that the economy
has weathered
the pandemic
and its impact
on economic
activity
and is on track
to achieve its
maximum employment
and price stability
goals. The Fed
has
taken various
other steps
to support
certain other
fixed income
markets, to
support mortgage
servicers and
to implement
various portions
of the Coronavirus
Aid,
Relief, and
Economic Security
(“CARES”)
Act.
The CARES Act
was passed by
Congress and
signed into
law by President
Trump on March
27, 2020.
The CARES
Act
provided many
forms of direct
support to individuals
and small businesses
in order to
stem the steep
decline in
economic
activity.
This over $2
trillion COVID-19
relief bill,
among other things,
provided for
direct payments
to each American
making
up to $75,000
a year, increased
unemployment
benefits for
up to four months
(on top of
state benefits),
funding to hospitals
and health providers,
loans and investments
to businesses,
states and municipalities
and grants to
the airline
industry. On April
24, 2020, President
Trump signed an
additional
funding bill
into law that
provides an
additional $484
billion of
funding to
individuals,
small businesses,
hospitals, health
care providers
and additional
coronavirus
testing efforts.
Various provisions
of
39
the CARES Act
began to expire
in July 2020,
including a
moratorium
on evictions
(July 25, 2020),
expanded unemployment
benefits (July
31, 2020), and
a moratorium
on foreclosures
(August 31, 2020).
On August 8,
2020, President
Trump issued
Executive Order
13945, directing
the Department
of Health and
Human Services,
the Centers
for Disease
Control and
Prevention (“CDC”),
the Department
of Housing and
Urban Development,
and Department
of the Treasury
to take measures
to
temporarily
halt residential
evictions and
foreclosures,
including through
temporary financial
assistance.
On December
27, 2020, President
Trump signed into
law an additional
$900 billion
coronavirus
aid package as
part of the
Consolidated
Appropriations
Act of 2021,
providing for
extensions of
many of the leading candidates perceived to be more hawkish by the markets than the current chairwoman, even though she remains a candidate herself.  Regardless of the uncertainty in the bond market, the equity markets,
CARES Act
policies and risk markets generally, continue to hit all-time high closes almost daily, and the combination of robust economic data, low inflation and the prospects for tax reform make for an ideal environment for risk assets.
programs as
well as

additional relief.
38
The mortgage market closed the quarter with the current coupon, 30-year fixed rate Agency RMBS trading at the tightest spread to comparable duration U.S. Treasuries since early 2014.  As has been the case package provided
for, much of the year, lower coupon RMBS outperformed high coupon RMBS versus their comparable duration U.S. Treasury benchmarks.  As we approach the winter months and the seasonal slowdown in prepayment activity, coupled with the increase in rates that began in early September, speeds should continue to moderate.

Recent Regulatory Developments

On January 12, 2016, the FHFA issued RIN 2590-AA39, Members of Federal Home Loan Banks (the "Final Rule"). The Final Rule, among other things, expressly excludes captive insurance companies, such as our wholly-owned captive insurance subsidiary, Orchid Island Casualty, LLC ("Orchid Island Casualty"),
direct payments
to most Americans
with a gross
income of
less than $75,000
a year, extension
of unemployment
benefits through
March 14, 2021,
funding for
procurement
of vaccines
and health providers,
loans to qualified
businesses,
funding for
rental assistance
and funding
for schools.
On January
29,
2021, the CDC
issued guidance
extending eviction
moratoriums
for covered persons
through March
31, 2021,
which was
further extended
to June 30,
2021 on March
29, 2021.
In addition,
on February
9, 2021, the
FHFA announced that
the
foreclosure
moratorium
begun under the
CARES Act for
loans backed
by Fannie Mae
and Freddie
Mac and the
eviction
moratorium
for real estate
owned by Fannie
Mae and Freddie
Mac were extended
until March
31, 2021, which
was further
extended to
June 30, 2021
on February
25,
2021. On February
16, 2021, the
U.S. Housing
and Urban Development
Department announced
the extension
of the FHA eviction
and foreclosure
moratorium
to June 30, 2021.
On March 11, 2021, the
$1.9 trillion
American Rescue
Plan Act of
2021 was signed
into law.
This stimulus
program
furthered the
Federal government’s
efforts to stabilize
the economy and
provide assistance
to sectors of
the population
still
suffering from
the various
physical and
economic effects
of the pandemic.
In January 2019,
the Trump administration
made statements
of its plans
to work with
Congress to
overhaul Fannie
Mae
and Freddie
Mac and expectations
to announce a
framework
for the development
of a policy
for comprehensive
housing
finance reform
soon. On September
30, 2019, the
FHFA announced that
Fannie Mae
and Freddie
Mac were allowed
to
increase their
capital buffers
to $25 billion
and $20 billion,
respectively, from
the prior limit
of $3 billion
each. This
step could
ultimately
lead to Fannie
Mae and Freddie
Mac being eligible privatized
and represents
the first
concrete step
on the road
to GSE
reform.
On June 30, 2020,
the FHFA released
a proposed rule
on a new regulatory
framework
for membership the GSEs
which seeks
to
implement both
a risk-based
capital framework
and minimum leverage
capital requirements.
The final rule
on the new capital
framework
for the GSEs
was published
in the Federal Home Loan Bank ("FHLB") system. Underfederal
register in
December 2020.
On January 14,
2021, the Final Rule, U.S.
Treasury and
the FHFA executed
letter agreements
allowing the
GSEs to continue
to retain capital
up to their
regulatory
minimums,
including
buffers, as prescribed
in the December
rule.
These letter
agreements provide,
in part, (i)
there will
be no exit from
conservatorship
until all material
litigation is
settled and the
GSE has common
equity Tier
1 capital of
at least 3%
of its assets,
(ii) the GSEs
will comply
with the FHFA’s regulatory
capital framework,
(iii) higher-risk
single-family
mortgage acquisitions
will
be restricted
to current
levels, and (iv)
the U.S. Treasury
and the FHFA will
establish a timeline
and process
for future GSE
reform. However,
no definitive
proposals or
legislation
have been released
or enacted
with respect
to ending the
conservatorship,
unwinding the
GSEs, or materially
reducing the
roles of the
GSEs in the
U.S. mortgage
market.
In 2017, policymakers
announced that
LIBOR will
be replaced by
December 31,
2021. The directive
was spurred
by the
fact that banks
are uncomfortable
contributing
to the LIBOR
panel given the
shortage of
underlying
transactions
on which to
base levels
and
the liability
associated with
submitting
an unfounded
level. The
ICE Benchmark
Administration,
in its capacity
as administrator
of USD LIBOR,
has confirmed
that it will
cease publication
of (i) the
one-week and
two-month USD
LIBOR
settings immediately
following the
LIBOR publication
on December
31, 2021, and
(ii) the overnight
and one, three,
six and 12-
month USD LIBOR
settings immediately
following the
LIBOR publication
on June 30, 2023.
A joint statement
by key regulatory
authorities
calls on banks
to cease entering
into new contracts
that use USD
LIBOR as a one-yearreference
rate by no later
than
December 31,
2021. The Alternative
Reference Rates
Committee,
a steering committee
comprised of
large U.S.
financial
institutions,
has proposed
replacing USD-LIBOR
with
a new SOFR,
a rate based
on U.S. repo
trading. Many
banks believe
that it may
take four to
five years
to complete
the transition period
to SOFR, for
certain, despite
the 2021 deadline.
We will monitor
the
emergence of
this new rate
carefully
as it will potentially
become the new
benchmark
for hedges and
a range of
interest rate
investments.
At this time,
however, no consensus
exists as to
what rate or
rates may become
accepted alternatives
to LIBOR.
40
Effective January
1, 2021, Fannie
Mae, in alignment
with Freddie
Mac, will
extend the timeframe
for its delinquent
loan
buyout policy
for Single-Family
Uniform Mortgage-Backed
Securities
(UMBS) and Mortgage-Backed
Securities
(MBS) from
four consecutively
missed monthly
payments to
twenty-four
consecutively
missed monthly
payments (i.e.,
24 months past
due). This
new timeframe
will apply
to outstanding
single-family
pools and newly
issued single-family
pools and was
first
reflected when
January 2021
factors were
released on
the fourth business
day in February
2021.
For Agency RMBS
investors, when
a delinquent
loan is bought
out of a pool
of mortgage
loans, the removal
of the loan
from the effective date pool
is the same
as a total prepayment
of February 19, 2016 within the loan.
The respective
GSEs currently
anticipate,
however, that
delinquent loans
will be repurchased
in most cases
before the 24-month
deadline under
one of the following
exceptions listed
below.
• a
loan that is
paid in full,
or where the
related lien
is released
and/or the
note debt is
satisfied or
forgiven;
• a
loan repurchased
by a seller/servicer
under applicable
selling and
servicing
requirements;
• a
loan entering
a permanent
modification,
which generally
requires it
to be removed
from the FHLBs were required to wind down their relationships withMBS.
During any captive insurance companies that had been admitted to membership on or after September 12, 2014, including Orchid Island Casualty ("Post-NPR Captives"). The Final Rule also precludes
modification
trial period,
the FHLBs from making any new advances or extending existing advances to Post-NPR Captives. In addition, upon the termination of membership, the FHLBs were required to liquidate all outstanding advances to Post-NPR Captives, settle all other business transactions, and repurchase or redeem all FHLB stock held by the terminated Post-NPR Captive in accordance with the Final Rule. Therefore, Orchid Island Casualty, along with all other Post-NPR Captives, was required to completely wind down all business relationships with the FHLBC, including the repayment of all outstanding advances, prior to or simultaneously with the termination of Orchid Island Casualty's membership with the FHLBC.loan will

The adopting release for the Final Rule expressly invited Congress to address the treatment of Post-NPR Captives with respect to membershipremain in the FHLB. In October 2015, Reps. Blaine Luetkemeyer (R-Mo.), Denny Heck (D-Wash.), Patrick McHenry (R-N.C.)
MBS until the
trial period
ends;
• a
loan subject
to a short sale
or deed-in-lieu
of foreclosure;
or
• a
loan referred
to foreclosure.
Because of these
exceptions,
the GSEs currently
believe based
on prevailing
assumptions
and John Carney (D-Del.) introduced H.R. 3808,market conditions
this
change will
have only a bill that would have preemptively prevented the FHFA from adopting the Final Rule
marginal impact
on prepayment
speeds, in such a way that would foreclose membership in the FHLB aggregate.
Cohort level
impacts may
vary. For example,
more than half
of loans referred
to captive insurance companies. There can be no wayforeclosure
are historically
referred within
six months of predicting if any subsequent legislation addressing the status of Post-NPR Captives with respect
delinquency. The degree
to the FHLB will be proposed in either house of Congress, the likelihood of passage of any such legislation,which
speeds are affected
depends on
delinquency
levels, borrower
response, and the ultimate effects, if any, on the availability of short-term, low-cost funding provided by the FHLBs
referral to Post-NPR Captives subsequent to the enactment of any such legislation.
foreclosure
timelines.

The scope and
nature of the
actions the
U.S. government
or the Fed will
ultimately
undertake are
unknown and
will
continue to evolve.  Although evolve,
especially
in light of
the TrumpCOVID-19
pandemic, President
Biden’s new administration has made statements of its intentions to reform housing finance
and tax policy, many of these potential policy changes will require congressional action.  In addition, the Fed has made statements regarding additional increases tonew
Congress
in the Federal Funds Rate over the balance of 2017 and beyond.  The Fed also announced that it will begin to reduce its holdings of Agency MBS and U.S. treasuries.United
States.

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.

39

Lower long-term
interest rates
can affect the
value of our
Agency RMBS
in a number
of ways. 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 higher-coupon
Agency RMBS.
This is because
investors typically
place a premium
on assets with
yields that
are higher than
market yields.
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
our Agency
RMBS 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
41
a lower 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
the Company
uses 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 pass-through
Agency RMBS.
As described
above, the Agency
RMBS market
began to experience
severe dislocations
in mid-March
2020 as a result
of
the economic,
health and market
turmoil brought
about by COVID-19.
In March of
2020, the Fed
announced that
it would
purchase Agency
RMBS and U.S.
Treasuries in
the amounts needed
to support
smooth market
functioning,
which largely
stabilized
the Agency RMBS
market, a commitment
it reaffirmed
at all subsequent
Fed meetings,
including its
most recent
meeting in April
of 2021. If the
Fed modifies,
reduces or
suspends its
purchases of
Agency RMBS,
our investment
portfolio
could be negatively
impacted. Further,
the moratoriums
on foreclosures
and evictions
described above
will likely
delay
potential defaults
on loans that
would otherwise
be bought out
of Agency MBS
pools as described
above.
Depending on
the
ultimate resolution
of the foreclosure
or evictions,
when and if it
occurs, these
loans may be
removed from
the pool into
which
they were securitized.
If this were
to occur, it would
have the effect
of delaying
a prepayment
on the Company’s
securities
until
such time.
As the majority
of the Company’s
Agency RMBS
assets were
acquired at
a premium
to par, this will
tend to
increase the
realized yield
on the asset
in question.
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, such as short-term fixed and floating rate CMOs.
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.

If Fannie Mae and Freddie Mac were to modify or end their repurchase programs, our investment portfolio could be negatively impacted.

Effects on our
borrowing costs

We leverage our
PT RMBS portfolio
and a portion
of our structured
Agency RMBS
with principal
balances through
the use
of short-term
repurchase agreement
transactions.
The interest
rates on our
debt are determined
by market levels of both the short
term interest
rate
markets. An
increase in
the Fed Funds Rate and LIBOR. An increase in the Fed Funds Rate
rate or LIBOR
would 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. This
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 effectively
economically
convert our
floating-rate
repurchase agreement
debt to fixed-rate
debt, or utilize
other hedging
instruments
such as Eurodollar,
Fed Funds and
T-Note futures
contracts or
interest rate
swaptions.

40
42

Summary

As we entered COVID-19 continues
to dominate the
performance
of the markets
and economy.
In the case
of the first
quarter of 2021
this meant the
recovery from
the pandemic,
in stark contrast
to the first
quarter of 2020
when the pandemic
first emerged
in the
U.S. The recovery
has been driven
by many factors
– the emergence
and widespread
distribution
of a very effective
vaccine,
substantial
government stimulus
and accommodative
monetary policy. The
economy is recovering
rapidly as
the emergence
of
an effective vaccine
has allowed
pent-up demand
to lead to
a surge in demand
for goods and
services,
fueled further
by
multiple rounds
of stimulus
checks and numerous
other means
of financial
support provided
by the government.
Financial
markets are
benefiting from
extremely lose
financial conditions,
abundant liquidity,
high risk
tolerance and
an insatiable
demand for returns.
The surge in
economic activity
during the first
quarter of 2021
and expectations
for activity
to return to
pre-pandemic
levels
much sooner
than anticipated
caused interest
rates to rise
rapidly as
well.
The yield on
the 10-year
U.S. Treasury
note
increased by
over 82 basis
points and closed
the quarter
at approximately
1.75%, not far
below the yield
level that prevailed
last January
before the pandemic
emerged last
March.
In addition,
the U.S. Treasury
curve has steepened
as the market
fears an outbreak
in inflation
caused by the
combination
of abundant liquidity
via government
stimulus,
loose financial
conditions and
very strong
demand for all
types of goods
and services.
Constrained
supply
of needed raw
materials,
various
inputs to consumer
goods, such
as micro chips,
and even labor
have exacerbated
the upward
pressure on
prices. It
remains to
be seen if these
price pressures
prove to be temporary
or lead to more
sustained inflation.
The Fed believes
the effects are
transitory.
Current market
pricing is
roughly in line
with the Fed’s
view as the
Eurodollar
and Fed Funds
futures markets
only
reflect at
most one interest
rate hike by
the end of 2022.
The Agency RMBS
market did
not perform
well during
the first quarter
as market conditions
– rapidly rising
rates and
increased volatility
– led to extension
fears in mortgage
cash flows,
driving convexity
related selling
and spread widening.
Agency RMBS
had negative
absolute and
excess returns
for the first
quarter of 2017, risk assets were performing 2021
of -1.2% and
-0.3%, respectively
(both vs
U.S. Treasuries
and LIBOR/swaps).
A positive impact
from higher
rates and lowered
prepayment expectations
is slower
premium amortization,
which enhances
net income
all else equal.
The Mortgage
Bankers Association
refinance index
declined
from approximately
4700 in early
January 2021
to approximately
2900 in early
April, before
rebounding slightly
in mid-April.
As
was the case
for much of
2020, the Agency
RMBS market
continues to
be essentially
bifurcated with
two separate
and distinct
sub-markets.
Lower coupon
fixed rate mortgages,
coupons of 1.5%
through 2.5%,
are purchased
by the Fed and
benefit from
the substantial
price pressure
and attractive
TBA dollar
roll drops.
Higher coupons
in the TBA market
do not have
the benefit
of Fed purchases,
so the market
is left to
absorb still
very well high prepayment
speeds on
these securities
as rates have
not risen
enough to eliminate
the Trump administration took office and appeared economic
incentive to
refinance.
The market
expects prepayments
on higher coupons
will eventually
decline as “burn
out” sets in,
although this
has yet to occur.
One final element
to poor MBS
performance
for the quarter
was
the impact of
higher rates
on the premiums
paid for specified
pools.
The
premium over
generic TBA
securities
has declined
significantly
with the reduced
refinance incentive
caused by the
increase in
rates available
to borrowers.
Now that the
containment
of the COVID-19
pandemic appears
to be very pro-business.  within
sight, at least
in the U.S.,
the economy
and life
as we were
accustomed to
should return
to pre-pandemic
norms.
The markets looked forward to a roll back of recently expanding regulations across many industries, a new and hopefully improved health care act, tax reform and possibly much needed infrastructure spending to refurbish the nation's aging roads, highways, bridges and airports.  While the Administration made bold promises, there has been very little delivered.  Market optimism was quickly replaced with pessimism.  Political infighting among the Administration and congressional republicans has generally been the cause, as has turmoil within the White House itself.   Geopolitical events surfaced in early April, specifically the Korean peninsula.  These events kept key questions
the market on edge
must grapple
with going
forward relate
to whether there
have been any
permanent changes
that will result,
including, for
example, inflationary
pressures resulting
from the unprecedented
government stimulus
and induced sporadic flight to quality rallies as headlines hitmonetary
quantitative
easing by the market from time to time. Incoming inflation  data since March  was below expectations.  In
Fed, the caseimpact
of
the many technological
advancements
that were born
out of the core Consumer Price Index, ("CPI") measure,pandemic,
such as employees’
ability to effectively
work
remotely, the year over year figure moved from 2.3%
desire to live
in January 2017 congested cities
and the implications
for commercial
real estate values
for the cities
that many
may not want
to 1.7%return to,
and the willingness
to gather in
large numbers
or travel by May and has stayed there through September.  Despite these readings, the Federal Reserve remains convinced these readings are being driven by temporary or transitory phenomenon and that inflation
air. These factors
will reverse and head back towards their two percent target over the medium term.  To wit, the Fed appears as if they will hike their target rate again at the December meeting baring surprise outcomes matter
to the downside.  The market accepts this outcome as highly likely – as reflected in Fed Funds futures pricing.  However, using the same measure, the market does not expect the Fed to raise rates in 2018 and beyond
Company to the
extent they
impact the Fed expects to.  As a result,levels
of interest
rates and the combination
efficacy of benignrefinancing
specifically, and
economic activity
and inflation readings currently coupled with hawkish Fed expectation has caused the yield curve to flatten significantly – to multi-year lows.  A second order effect of these developments has occurred in the equity and risk markets as they continue to perform exceedingly well.  The major equity indices in the US make record new highs almost daily.
generally.

The RMBS market has performed well in this environment as the resulting low volatility, tight trading spreads across most comparable asset classes and with demand from asset managers and REIT's easily replacing the lost demand expected from the Fed's tapering of their asset purchases. Current coupon, 30-year fixed rate mortgage are trading at their tightest spread to comparable duration treasuries since early 2014.   If these conditions persist we do not believe that the market will be likely to suffer a material widening of spreads to comparable duration U.S. treasuries, even as the Fed has started to trim their asset purchases.  The risk to this outcome appears to be inflation exceeding market expectations which should allow the Fed to carry out their professed intentions to raise rates three times in 2018 and more so in the years after. This would also put upward pressure on volatility and longer-term rates, both negatively impacting MBS performance.

Critical Accounting PoliciesEstimates

43
Our condensed consolidated 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 policiesestimates involve decisions and
assessments which could significantly affect reported assets, liabilities, revenues and expenses.
There have been no
changes to our critical accounting policiesestimates as discussed in our annual report on Form 10-K for the year ended December
31, 2016.2020.

Capital Expenditures

At September 30, 2017,March 31, 2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At September 30, 2017,March 31, 2021, we did not have any off-balance sheet arrangements.

41

Dividends

In addition to other requirements that must be satisfied 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 $1.395  $4,662 
2014  2.160   22,643 
2015  1.920   38,748 
2016  1.680   41,388 
2017 - YTD(1)
  1.400   56,027 
Totals $8.555  $163,468 

(in thousands, except per share amounts)
(1)On October 11, 2017, the Company declared a dividend of $0.14 per share to be paid on November 10, 2017.  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, 2017.
Year

Per Share
Amount
Total
2013
$
1.395
$
4,662
2014
2.160
22,643
2015
1.920
38,748
2016
1.680
41,388
2017
1.680
70,717
2018
1.070
55,814
2019
0.960
54,421
2020
0.790
53,570
2021 - YTD
(1)
0.260
23,374
Totals
$
11.915
$
365,337
(1)
On April 14, 2021, the Company declared a dividend of $0.065 per
share to be paid on May 26, 2021.
The effect of this dividend is included in
the table above, but is not reflected in the Company’s financial statements
as of March 31, 2021.
Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors
influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with
inflation rates or changes in inflation rates. Our consolidated financial statements are prepared in accordance with GAAP and our
distributions will be determined by our Board of Directors consistent with our obligation to distribute to our stockholders at
least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our
activities and balance sheet are measured with reference to historical cost and/or fair market value without considering
inflation.

Jumpstart Our Business Startups Act of 2012

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act").  The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.  We have elected to "opt out" of this provision and, as a result, we will be required to comply with new or revised accounting standards as required when they are adopted.  The decision to opt out of the extended transition period under the JOBS Act is irrevocable.

42
44

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, and ability to realize gains from the sale of these assets and impacts our 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, and options to enter into interest rate swaps.swaps and swaptions. These
instruments are intended to serve as aan 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 adjustable-rate RMBS ("ARMs"(“ARMs”),
fixed-rate RMBS 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.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 LIBOR) cause causes
their price movements, and model duration, to be affected by changes in
both prepayments and one month LIBOR, both current and anticipated levels.
As a result, the duration of IIO securities will
also vary greatly.

43

Prepayments on the loans underlying our RMBS can alter the timing of the cash flows from the underlying loans to us.
45
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 PT RMBS assets will increase or decrease at different rates than that of
our structured RMBS or liabilities, including our hedging instruments. Accordingly,
we assess our interest rate risk by
estimating the duration of our assets and the duration of our liabilities. 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, 2017March 31, 2021 and December 31, 2016,2020, assuming rates instantaneously fall 200 bps, fall 100
bps, fall 50 bps, rise 50 bps, rise 100 bps and rise 100200 bps, adjusted to reflect the impact of convexity, which is the
measure
of the sensitivity of our hedge positions and Agency RMBS'RMBS’ effective duration to movements in interest rates.

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, 2017March 31, 2021 and December 31, 2016. We apply a floor of 0% for the down rate scenarios on our interest bearing liabilities and hedge positions, such that any hypothetical interest rate decrease would have a limited positive impact on our funding costs beyond a certain level.2020.

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 ourthe 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, 2017      
-100 Basis Points  (0.32)%  (3.06)%
-50 Basis Points  (0.11)%  (1.05)%
+50 Basis Points  (0.44)%  (4.20)%
+100 Basis Points  (1.53)%  (14.47)%
As of December 31, 2016        
-100 Basis Points  0.55%  4.96%
-50 Basis Points  0.55%  4.97%
+50 Basis Points  (0.95)%  (8.61)%
+100 Basis Points  (2.20)%  (19.98)%

(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.
 
Interest Rate Sensitivity

(1)
Portfolio
Market
Book
Change in Interest Rate
Value
(2)(3)
Value
(2)(4)
As of March 31, 2021
-200 Basis Points
(0.93)%
(8.66)%
-100 Basis Points
0.03%
0.29%
-50 Basis Points
0.20%
1.87%
+50 Basis Points
(0.60)%
(5.61)%
+100 Basis Points
(1.45)%
(13.50)%
+200 Basis Points
(3.57)%
(33.27)%
As of December 31, 2020
-200 Basis Points
2.43%
21.85%
-100 Basis Points
1.35%
12.08%
-50 Basis Points
0.69%
6.18%
+50 Basis Points
(0.90)%
(8.03)%
+100 Basis Points
(2.39)%
(21.42)%
+200 Basis Points
(6.60)%
(59.22)%
(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.
44
46
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 GSEgovernment 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 fallfalls 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 and
interest rate swaps and swaptions 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, 2017,March 31,
2021, we had unrestricted cash and cash equivalents of $161.7$211.4 million and unpledged securities of approximately $12.9 $218.0
million (not including 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
(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.

45

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 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.

47
However, if prepayment rates decrease in a rising interest rate environment, the average life or duration of our fixed-ratefixed-
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 securitiesAgency 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.
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.

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"“evaluation date”), we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer (the "CEO"“CEO”) and Chief
Financial Officer (the "CFO"“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act").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 and its subsidiary is accumulated and communicated to our management, including our CEO and CFO,
by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable
assurance that information we must disclose in itsour periodic reports under the Exchange Act is recorded, processed,
summarized and reported within the time periods prescribed by the SEC'sSEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no significant changes in the Company'sCompany’s internal control over financial reporting that occurred during the Company's
Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's
Company’s internal control over financial reporting.
46
48
PART II. OTHER
INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

We are not party to any material pending legal proceedings as described in Item 103 of Regulation
S-K.

ITEM 1A. RISK FACTORS

There
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, 2020. As of
March 31, 2021,
there have
been no material
changes from the in our
risk factors disclosed
from those
set forth in the "Risk Factors" section of
our Annual Report
on Form 10-K filed with
for the SEC on February 17, 2017.year
ended December
31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below
presents the
Company’s share
repurchase activity
for the three
months ended September 30, 2017.
March 31, 2021.

        Shares Purchased  Maximum Number 
  Total Number  Weighted-Average  as Part of Publicly  of Shares That May Yet 
  of Shares  Price Paid  Announced  Be Repurchased Under 
  
Repurchased(1)
  Per Share  
Programs(2)
  
the Authorization(2)
 
July  -  $-   -   783,757 
August  -   -   -   783,757 
September  482   10.19   -   783,757 
Totals / Weighted Average  482  $10.19   -   783,757 
Shares Purchased

Maximum Number
(1)The only shares of the Company's common stock acquired by the Company were in connection with the satisfaction of tax withholding obligations on vested employment-related awards under equity incentive plans.
Total Number
(2)On June 29, 2015, the Board of Directors authorized the purchase of up to 2,000,000 shares of common stock repurchase beginning July 1, 2016. Unless modified or revoked by the Board, the authorization does not expire.
Weighted-Average

as Part of Publicly
of Shares That May Yet
of Shares
Price Paid
Announced
Be Repurchased Under
Repurchased
(1)
Per Share
Programs
(2)
the Authorization
(2)
January 1, 2021 - January 31, 2021
-
$
-
-
837,311
February 1, 2021 - February 28, 2021
-
-
-
837,311
March 1, 2021 - March 31, 2021
50,577
5.88
-
837,311
Totals / Weighted Average
50,577
$
5.88
-
837,311
(1)
Includes 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.
(2)
On July 29,
2015, the Company's
Board of Directors
authorized the
repurchase of
up to 2,000,000
shares of the
Company's common
stock. On
February 8,
2018, the Board
of Directors
approved an increase
in the stock
repurchase program
for up to an
additional 4,522,822
shares of the
Company's common
stock. Unless
modified or
revoked by the
Board, the authorization
does not expire.
The Company
did not have
any unregistered
sales of its
equity securities
during the three
months ended September 30, 2017.
March 31,
2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.
None.

ITEM 4.
MINE SAFETY
DISCLOSURES

Not Applicable.

ITEM 5.
OTHER INFORMATION

None.
47
ITEM 6. EXHIBITS

Exhibit No.

3.1
Articles of Amendment and Restatement of Orchid Island Capital, Inc. (filed as Exhibit 3.1 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
3.2
Amended and Restated Bylaws of Orchid Island Capital, Inc. (filed as Exhibit 3.2 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
10.1
Amended and Restated Equity Distribution Agreement dated August 2, 2017, by and between the Company, Bimini Advisors, LLC, Ladenburg Thalman & Co. Inc and MUFG Securities Americas Inc. (filed as Exhibit 1.1 to the Company's Current Report on Form 8-K filed on August 2, 2017 and incorporated herein by reference).
31.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
 
Exhibit 101.INS XBRLInstance Document ***
Exhibit 101.SCH XBRLTaxonomy Extension Schema Document ***
Exhibit 101.CAL XBRLTaxonomy Extension Calculation Linkbase Document***
Exhibit 101.DEF XBRLAdditional Taxonomy Extension Definition Linkbase Document Created***
Exhibit 101.LAB XBRLTaxonomy Extension Label Linkbase Document ***
Exhibit 101.PRE XBRLTaxonomy Extension Presentation Linkbase Document ***
49

ITEM 6. EXHIBITS
*Filed herewith.
**Furnished herewith.
Exhibit No.
***Submitted electronically herewith.

3.1
3.2
3.3
4.1
10.1
31.1
31.2
32.1
32.2
Exhibit 101.INS XBRL
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 XBRL
Taxonomy Extension Schema Document ***
Exhibit 101.CAL XBRL
Taxonomy Extension Calculation Linkbase Document***
Exhibit 101.DEF XBRL
Additional Taxonomy Extension Definition Linkbase Document Created***
Exhibit 101.LAB XBRL
Taxonomy Extension Label Linkbase Document ***
Exhibit 101.PRE XBRL
Taxonomy Extension Presentation Linkbase Document ***
Exhibit 104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed
herewith.
** Furnished herewith.
*** Submitted
electronically herewith.
† Management contract or compensatory plan.
48
50
Signatures
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 27, 2017
By:/s/ Robert E. Cauley
Robert E. Cauley
Chief Executive Officer, President and Chairman of the Board
Date:October 27, 2017
By:/s/ G. Hunter Haas, IV
G. Hunter Haas, IV
Secretary, Chief Financial Officer, Chief Investment Officer and Director (Principal Financial and Accounting Officer)
49
INDEX TO EXHIBITS

Exhibit No.

3.1
Articles of Amendment and Restatement of Orchid Island Capital, Inc. (filed as Exhibit 3.1 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
3.2
Amended and Restated Bylaws of Orchid Island Capital, Inc. (filed as Exhibit 3.2 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
10.1
Amended and Restated Equity Distribution Agreement dated August 2, 2017, by and between the Company, Bimini Advisors, LLC, Ladenburg Thalman & Co. Inc and MUFG Securities Americas Inc. (filed as Exhibit 1.1 to the Company's Current Report on Form 8-K filed on August 2, 2017 and incorporated herein by reference).
31.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
 
Orchid Island Capital, Inc
Exhibit 101.INS XBRLInstance Document ***
Exhibit 101.SCH XBRLTaxonomy Extension Schema Document ***
Exhibit 101.CAL XBRLTaxonomy Extension Calculation Linkbase Document***
Exhibit 101.DEF XBRLAdditional Taxonomy Extension Definition Linkbase Document Created***
Exhibit 101.LAB XBRLTaxonomy Extension Label Linkbase Document ***
Exhibit 101.PRE XBRLTaxonomy Extension Presentation Linkbase Document ***
.

Registrant
*Filed herewith.
**Furnished herewith.
***Submitted electronically herewith.

Date:
 
April 30, 2021
By:
/s/ Robert E. Cauley
Robert E. Cauley
Chief Executive Officer, President and Chairman of the Board
(Principal Executive Officer)
Date:
 
April 30, 2021
By:
/s/ George H. Haas, IV
George H. Haas,
 
IV
Secretary, Chief Financial Officer, Chief Investment Officer and
Director (Principal Financial and Accounting Officer)

50