10q10k10q10k.net

What changed in Orchid Island Capital, Inc.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of Orchid Island Capital, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+308 added−330 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-21)

Top changes in Orchid Island Capital, Inc.'s 2025 10-K

308 paragraphs added · 330 removed · 236 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

97 edited+12 added−22 removed283 unchanged
Biggest changeCertain provisions of the Maryland General Corporation Law (the “MGCL”), may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including: ● “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder became an interested stockholder, and thereafter require two supermajority stockholder votes to approve any such combination; and ● “control share” provisions that provide that a holder of “control shares” of the Company (defined as voting shares of stock which, when aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), entitle the acquiror to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) generally has no voting rights with respect to the control shares except to the extent approved by our stockholders by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Biggest changeCertain provisions of the Maryland General Corporation Law (the “MGCL”), may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including: ● “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder became an interested stockholder, and thereafter require two supermajority stockholder votes to approve any such combination; and ● “control share” provisions that provide that a holder of “control shares” of the Company (defined as voting shares of stock which, when aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), entitle the acquiror to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) generally has no voting rights with respect to the control shares except to the extent approved by our stockholders by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. 28 Table of Contents We have elected to opt-out of these provisions of the MGCL, in the case of the business combination provisions, by resolution of our Board of Directors (provided that such business combination is first approved by our Board of Directors, including a majority of our directors who are not affiliates or associates of such person), and in the case of the control share provisions, pursuant to a provision in our bylaws.
Because of the significant leverage we expect to have, we may incur substantial losses upon the threat or occurrence of a margin call, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
Because of the significant leverage we have and expect to have, we may incur substantial losses upon the threat or occurrence of a margin call, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
These and other provisions in our management agreement make non-renewal of our management agreement difficult and costly. ● We have not established a minimum distribution payment level, and we cannot assure you of our ability to make distributions to our stockholders in the future. ● Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock and our ability to pay distributions to our stockholders. ● Failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements and may result in fines and other penalties which could materially adversely affect our business and financial condition. ● Our ownership limitations and certain other provisions of applicable law and our charter and bylaws may restrict business combination opportunities that would otherwise be favorable to our stockholders. ● Our failure to maintain our qualification as a REIT would subject us to U.S. federal income tax, which could adversely affect the value of the shares of our common stock and would substantially reduce the cash available for distribution to our stockholders. ● We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or global recessionary economic conditions will have on us. 12 Table of Contents Risk Factors You should carefully consider the risks described below and all other information contained in this Report, including our annual financial statements and related notes thereto, before making an investment decision regarding our common stock.
These and other provisions in our management agreement make non-renewal of our management agreement difficult and costly. ● We have not established a minimum distribution payment level, and we cannot assure you of our ability to make distributions to our stockholders in the future. ● Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock and our ability to pay distributions to our stockholders. ● Failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements and may result in fines and other penalties which could materially adversely affect our business and financial condition. ● Our ownership limitations and certain other provisions of applicable law and our charter and bylaws may restrict business combination opportunities that would otherwise be favorable to our stockholders. ● Our failure to maintain our qualification as a REIT would subject us to U.S. federal income tax, which could adversely affect the value of the shares of our common stock and would substantially reduce the cash available for distribution to our stockholders. ● We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or global recessionary economic conditions will have on us. 11 Table of Contents Risk Factors You should carefully consider the risks described below and all other information contained in this Report, including our annual financial statements and related notes thereto, before making an investment decision regarding our common stock.
In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities, and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our assets can be represented by debt of “publicly offered REITs” (i.e., REITs that are required to file annual and period reports with the SEC under the Exchange Act) that is not secured by real property or interests in real property.
In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities, and qualified real estate assets) can consist of the securities of any one issuer, no more than 25% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our assets can be represented by debt of “publicly offered REITs” (i.e., REITs that are required to file annual and period reports with the SEC under the Exchange Act) that is not secured by real property or interests in real property.
During periods of rising short-term interest rates, the income we earn on these securities will not change (with respect to Agency RMBS backed by fixed-rate mortgage loans) or will not increase at the same rate (with respect to Agency RMBS backed by ARMs and hybrid ARMs) as our related financing costs, which may reduce our net interest margin or result in losses. 13 Table of Contents Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings.
During periods of rising short-term interest rates, the income we earn on these securities will not change (with respect to Agency RMBS backed by fixed-rate mortgage loans) or will not increase at the same rate (with respect to Agency RMBS backed by ARMs and hybrid ARMs) as our related financing costs, which may reduce our net interest margin or result in losses. 12 Table of Contents Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings.
Hedging may fail to protect or could adversely affect us because, among other things: 16 Table of Contents ● hedging can be expensive, particularly during periods of rising and volatile interest rates; ● available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; ● the duration of the hedge may not match the duration of the related liability; ● certain types of hedges may expose us to risk of loss beyond the fee paid to initiate the hedge; ● the amount of gross income that a REIT may earn from hedging transactions, other than hedging transactions that satisfy certain requirements of the Code, is limited by the U.S. federal income tax provisions governing REITs; ● the credit quality of the counterparty on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and ● the counterparty in the hedging transaction may default on its obligation to pay.
Hedging may fail to protect or could adversely affect us because, among other things: ● hedging can be expensive, particularly during periods of rising and volatile interest rates; ● available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; ● the duration of the hedge may not match the duration of the related liability; ● certain types of hedges may expose us to risk of loss beyond the fee paid to initiate the hedge; ● the amount of gross income that a REIT may earn from hedging transactions, other than hedging transactions that satisfy certain requirements of the Code, is limited by the U.S. federal income tax provisions governing REITs; ● the credit quality of the counterparty on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and ● the counterparty in the hedging transaction may default on its obligation to pay.
Such models and other data may be incorrect, misleading or incomplete, which could cause us to purchase assets that do not meet our expectations or to make asset management decisions that are not in line with our strategy. 11 Table of Contents ● Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed.
Such models and other data may be incorrect, misleading or incomplete, which could cause us to purchase assets that do not meet our expectations or to make asset management decisions that are not in line with our strategy. 10 Table of Contents ● Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed.
Unless our failure to qualify as a REIT was subject to relief under U.S. federal tax laws, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify. 31 Table of Contents Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments.
Unless our failure to qualify as a REIT was subject to relief under U.S. federal tax laws, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify. 29 Table of Contents Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments.
As of December 31, 2024, we had met all margin call requirements, but a sufficiently deep and/or rapid increase in margin calls or haircuts could have an adverse impact on our liquidity. We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments.
As of December 31, 2025, we had met all margin call requirements, but a sufficiently deep and/or rapid increase in margin calls or haircuts could have an adverse impact on our liquidity. We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments.
If a pass-through Agency RMBS backed by ARMs or hybrid ARMs is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that Agency RMBS while it was less profitable and lost the opportunity to receive interest at the fully-indexed rate over the remainder of its expected life. ● If we are unable to acquire new Agency RMBS to replace the prepaid Agency RMBS, our returns on capital may be lower than if we were able to quickly acquire new Agency RMBS.
If a PT Agency RMBS backed by ARMs or hybrid ARMs is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that Agency RMBS while it was less profitable and lost the opportunity to receive interest at the fully-indexed rate over the remainder of its expected life. ● If we are unable to acquire new Agency RMBS to replace the prepaid Agency RMBS, our returns on capital may be lower than if we were able to quickly acquire new Agency RMBS.
A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.
A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.
Any of these taxes would decrease cash available for distributions to stockholders. 32 Table of Contents The failure of Agency RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to continue to qualify as a REIT.
Any of these taxes would decrease cash available for distributions to stockholders. 30 Table of Contents The failure of Agency RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to continue to qualify as a REIT.
For example, if the market value of our investments in CMOs or structured Agency RMBS, neither of which are qualifying real estate assets for Investment Company Act purposes, were to increase by an amount that resulted in less than 55% of our assets being invested in pass-through Agency RMBS, we might have to sell CMOs or structured Agency RMBS in order to maintain our exemption from the Investment Company Act.
For example, if the market value of our investments in CMOs or structured Agency RMBS, neither of which are qualifying real estate assets for Investment Company Act purposes, were to increase by an amount that resulted in less than 55% of our assets being invested in PT Agency RMBS, we might have to sell CMOs or structured Agency RMBS in order to maintain our exemption from the Investment Company Act.
In response to events having or expected to have adverse economic consequences or which create market uncertainty, clearing facilities or exchanges upon which some of our hedging instruments, such as T-Note, Fed Funds, SOFR and Eurodollar futures contracts and interest rate swaps, are traded may require us to post additional collateral against our hedging instruments.
In response to events having or expected to have adverse economic consequences or which create market uncertainty, clearing facilities or exchanges upon which some of our hedging instruments, such as T-Note, Fed Funds, SOFR and ERIS SOFR Swap futures contracts and interest rate swaps, are traded may require us to post additional collateral against our hedging instruments.
Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk. Adverse market developments could cause our lenders to require us to pledge additional assets as collateral.
Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk. 14 Table of Contents Adverse market developments could cause our lenders to require us to pledge additional assets as collateral.
The structured Agency RMBS in which we invest are securitizations (i) issued by the GSEs, (ii) collateralized by Agency RMBS and (iii) divided into various tranches that have different characteristics (such as different maturities or different coupon payments). These securities may carry greater risk than an investment in pass-through Agency RMBS.
The structured Agency RMBS in which we invest are securitizations (i) issued by the GSEs, (ii) collateralized by Agency RMBS and (iii) divided into various tranches that have different characteristics (such as different maturities or different coupon payments). These securities may carry greater risk than an investment in PT Agency RMBS.
Under normal market conditions, we generally expect our leverage ratio to be less than 12 to 1, although at times our borrowings may be above or below this level. We incur this indebtedness by borrowing against a substantial portion of the market value of our pass-through Agency RMBS and a portion of our structured Agency RMBS.
Under normal market conditions, we generally expect our leverage ratio to be less than 12 to 1, although at times our borrowings may be above or below this level. We incur this indebtedness by borrowing against a substantial portion of the market value of our PT Agency RMBS and a portion of our structured Agency RMBS.
Such conditions are more likely to occur for structured Agency RMBS because such securities are generally traded in markets much less liquid than the pass-through Agency RMBS market. As a result, we may be unable to dispose of our Agency RMBS at advantageous times and prices or in a timely manner.
Such conditions are more likely to occur for structured Agency RMBS because such securities are generally traded in markets much less liquid than the PT Agency RMBS market. As a result, we may be unable to dispose of our Agency RMBS at advantageous times and prices or in a timely manner.
Any losses we incur on our repo transactions could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 20 Table of Contents If we default on one of our obligations under a repo transaction, the counterparty can terminate the transaction and cease entering into any other repo transactions with us.
Any losses we incur on our repo transactions could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. If we default on one of our obligations under a repo transaction, the counterparty can terminate the transaction and cease entering into any other repo transactions with us.
In addition, as a result of the relationship with our Manager, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain our ongoing relationship with our Manager. 23 Table of Contents We have no employees and our Manager is responsible for making all of our investment decisions.
In addition, as a result of the relationship with our Manager, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain our ongoing relationship with our Manager. We have no employees and our Manager is responsible for making all of our investment decisions.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “ Risk Factors ” and should be carefully considered, together with other information in this Report and our other filings with the SEC, before making an investment decision regarding our common stock. ● Increases in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses and materially adversely affect our ability to pay distributions to our stockholders. ● An increase in interest rates may also cause a decrease in the volume of newly issued, or investor demand for, Agency RMBS, which could materially adversely affect our ability to acquire assets that satisfy our investment objectives and our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Interest rate mismatches between our Agency RMBS and our borrowings may reduce our net interest margin during periods of changing interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings. ● Although structured Agency RMBS are generally subject to the same risks as our pass-through Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest. ● Differences in the stated maturity of our fixed rate assets, or in the timing of interest rate adjustments on our adjustable-rate assets, and our borrowings may adversely affect our profitability. ● Changes in the levels of prepayments on the mortgages underlying our Agency RMBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest. ● Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. ● Adverse market developments could cause our lenders to require us to pledge additional assets as collateral.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “ Risk Factors ” and should be carefully considered, together with other information in this Report and our other filings with the SEC, before making an investment decision regarding our common stock. ● Increases in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses and materially adversely affect our ability to pay distributions to our stockholders. ● An increase in interest rates may also cause a decrease in the volume of newly issued, or investor demand for, Agency RMBS, which could materially adversely affect our ability to acquire assets that satisfy our investment objectives and our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Interest rate mismatches between our Agency RMBS and our borrowings may reduce our net interest margin during periods of changing interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings. ● Differences in the stated maturity of our fixed rate assets, or in the timing of interest rate adjustments on our adjustable-rate assets, and our borrowings may adversely affect our profitability. ● Changes in the levels of prepayments on the mortgages underlying our Agency RMBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest. ● Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. ● Adverse market developments could cause our lenders to require us to pledge additional assets as collateral.
These provisions may increase the effective cost to us of electing to not renew the management agreement, thereby adversely affecting our inclination to end our relationship with our Manager even if we believe our Manager’s performance is unsatisfactory. 25 Table of Contents Our Manager ’ s management fee is payable regardless of our performance.
These provisions may increase the effective cost to us of electing to not renew the management agreement, thereby adversely affecting our inclination to end our relationship with our Manager even if we believe our Manager’s performance is unsatisfactory. Our Manager ’ s management fee is payable regardless of our performance.
To the extent that our pass-through Agency RMBS are carried at a premium to par, faster-than-expected prepayments could also materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders in various ways, including the following: ● We could realize the loss of the premium paid on the Agency RMBS. ● We may have to reinvest the capital from the prepayments at lower prevailing interest rates. ● Pass-through Agency RMBS backed by ARMs and hybrid ARMs may initially bear interest at rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin.
To the extent that our PT Agency RMBS are carried at a premium to par, faster-than-expected prepayments could also materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders in various ways, including the following: 13 Table of Contents ● We could realize the loss of the premium paid on the Agency RMBS. ● We may have to reinvest the capital from the prepayments at lower prevailing interest rates. ● PT Agency RMBS backed by ARMs and hybrid ARMs may initially bear interest at rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin.
Additionally, we may engage in transactions directly with Bimini or its affiliates, including the purchase and sale of all or a portion of a portfolio asset. The officers of Bimini and our Manager devote as much time to us as our Manager deems appropriate.
Additionally, we may engage in transactions directly with Bimini or its affiliates, including the purchase and sale of all or a portion of a portfolio asset. 23 Table of Contents The officers of Bimini and our Manager devote as much time to us as our Manager deems appropriate.
We treat GSE whole-pool residential mortgage pass-through securities issued with respect to an underlying pool of mortgage loans in which we hold all of the certificates issued by the pool as qualifying real estate assets based on no-action letters issued by the SEC.
We treat GSE whole-pool residential mortgage PT securities issued with respect to an underlying pool of mortgage loans in which we hold all of the certificates issued by the pool as qualifying real estate assets based on no-action letters issued by the SEC.
When we engage in a repo transaction, we initially sell securities to the financial institution under one of our master repurchase agreements in exchange for cash, and our counterparty is obligated to resell the securities to us at the end of the term of the transaction, which is typically from 24 to 90 days but may be up to 364 days or more.
When we engage in a repo transaction, we initially sell securities to the financial institution under one of our master repurchase agreements in exchange for cash, and our counterparty is obligated to resell the securities to us at the end of the term of the transaction, which is typically less than 90 days but may be up to 364 days or more.
Therefore, our stockholders have no recourse against our Manager with respect to the performance of investments made in accordance with the management agreement. Risks Related to Our Common Stock Investing in our common stock may involve a high degree of risk.
Therefore, our stockholders have no recourse against our Manager with respect to the performance of investments made in accordance with the management agreement. 24 Table of Contents Risks Related to Our Common Stock Investing in our common stock may involve a high degree of risk.
A decline in the market value of the pass-through Agency RMBS or structured Agency RMBS used to secure these debt obligations could limit our ability to borrow or result in lenders requiring us to pledge additional collateral to secure our borrowings.
A decline in the market value of the PT Agency RMBS or structured Agency RMBS used to secure these debt obligations could limit our ability to borrow or result in lenders requiring us to pledge additional collateral to secure our borrowings.
Some of the factors that could negatively affect the share price or trading volume of our common stock include: ● actual or anticipated variations in our operating results or distributions; ● changes in our earnings estimates or publication of research reports about us or the real estate or specialty finance industry; ● the market valuations of Agency RMBS; ● increases in market interest rates that lead purchasers of our common stock to expect a higher dividend yield; ● government action or regulation; ● changes in our book value; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we incur in the future; ● a change in our Manager or additions or departures of key management personnel; ● actions by institutional stockholders; ● speculation in the press or investment community; and ● general market and economic conditions.
Some of the factors that could negatively affect the share price or trading volume of our common stock include: ● actual or anticipated variations in our operating results or distributions; ● changes in our earnings estimates or publication of research reports about us or the real estate or specialty finance industry; ● the market valuations of Agency RMBS; ● increases in market interest rates that lead purchasers of our common stock to expect a higher dividend yield; ● government action or regulation; ● changes in our book value; 25 Table of Contents ● changes in market valuations of similar companies; ● sales of shares of our common stock, the availability of shares of our common stock, or the perception that these sales could occur; ● adverse market reaction to any increased indebtedness we incur in the future; ● a change in our Manager or additions or departures of key management personnel; ● actions by institutional stockholders; ● speculation in the press or investment community; and ● general market and economic conditions.
Although structured Agency RMBS are generally subject to the same risks as our pass-through Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest.
Although structured Agency RMBS are generally subject to the same risks as our PT Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Even if we qualify for taxation as a REIT, we may face other tax liabilities that reduce our cash flows.
Declining real estate values will likely reduce the level of new mortgage and other real estate-related loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties.
Declining real estate values have in the past reduced, and in the future will likely reduce, the level of new mortgage and other real estate-related loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties.
Additionally, dealers may claim to furnish valuations only as an accommodation and without special compensation, and so they may disclaim any and all liability for any direct, incidental or consequential damages arising out of any inaccuracy or incompleteness in valuations, including any act of negligence or breach of any warranty.
In general, dealers and pricing services heavily disclaim their valuations. Additionally, dealers may claim to furnish valuations only as an accommodation and without special compensation, and so they may disclaim any and all liability for any direct, incidental or consequential damages arising out of any inaccuracy or incompleteness in valuations, including any act of negligence or breach of any warranty.
There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Alternatively, we may fail to properly assess a risk to our investment portfolio or may fail to recognize a risk entirely, leaving us exposed to losses without the benefit of any offsetting hedging activities.
There are no perfect hedging strategies, and interest rate hedging has failed in some situations, and may fail in the future, to protect us from loss. Alternatively, we may fail to properly assess a risk to our investment portfolio or may fail to recognize a risk entirely, leaving us exposed to losses without the benefit of any offsetting hedging activities.
As conservator, the FHFA has assumed all the powers of the shareholders, directors and officers of the Enterprises with the goal of preserving and conserving their assets. At various times since implementation of the conservatorship, Congress has considered structural changes to the Enterprises.
As conservator, the FHFA has assumed all the powers of the shareholders, directors and officers of the Enterprises with the goal of preserving and conserving their assets. At various times since implementation of the conservatorship, Congress and U.S. presidential administrations have considered structural changes to the Enterprises.
Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. For example: 17 Table of Contents ● our borrowings are secured by our pass-through Agency RMBS and a portion of our structured Agency RMBS under repurchase agreements.
Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. For example: ● our borrowings are secured by our PT Agency RMBS and a portion of our structured Agency RMBS under repurchase agreements.
Consequently, we will be restricted to operating within the parameters discussed in the no-action letter and will not enter into hedging transactions covered by the no-action letter if they would cause us to exceed the limits set forth in the no-action letter.
We have claimed the relief afforded by the above-described no-action letter. Consequently, we will be restricted to operating within the parameters discussed in the no-action letter and will not enter into hedging transactions covered by the no-action letter if they would cause us to exceed the limits set forth in the no-action letter.
If our assets were insufficient to meet these collateral requirements, we might be compelled to liquidate particular assets at inopportune times and at unfavorable prices, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Hedging against interest rate exposure may not completely insulate us from interest rate risk and could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● It may be uneconomical to "roll" our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts, which could negatively affect our financial condition and results of operations. ● Our forward settling transactions, including TBA transactions, subject us to certain risks, including price risks and counterparty risks. ● We rely on analytical models and other data to analyze potential asset acquisition and disposition opportunities and to manage our portfolio.
If our assets were insufficient to meet these collateral requirements, we might be compelled to liquidate particular assets at inopportune times and at unfavorable prices, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Hedging against interest rate exposure may not completely insulate us from interest rate risk and could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. ● Although structured Agency RMBS are generally subject to the same risks as our PT Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest. ● It may be uneconomical to "roll" our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts, which could negatively affect our financial condition and results of operations. ● Our forward settling transactions, including TBA transactions, subject us to certain risks, including price risks and counterparty risks. ● We rely on analytical models and other data to analyze potential asset acquisition and disposition opportunities and to manage our portfolio.
The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock. 34 Table of Contents Liquidation of our assets may jeopardize our REIT qualification.
The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.
Cauley and Haas may have a conflict of interest with respect to actions by our Board of Directors that relate to Bimini or our Manager. As of February 21, 2025, Bimini owned approximately 0.7% of our outstanding shares of common stock.
Cauley and Haas may have a conflict of interest with respect to actions by our Board of Directors that relate to Bimini or our Manager. As of February 19, 2026, Bimini owned approximately 0.3% of our outstanding shares of common stock.
Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders, including business combination provisions, supermajority vote and cause requirements for removal of directors, provisions that vacancies on our Board of Directors may be filled only by the remaining directors for the full term of the directorship in which the vacancy occurred, the power of our Board of Directors to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock, to cause us to issue additional shares of stock of any class or series and to fix the terms of one or more classes or series of stock without stockholder approval, the restrictions on ownership and transfer of our stock and advance notice requirements for director nominations and stockholder proposals.
Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders, including business combination provisions, supermajority vote and cause requirements for removal of directors, provisions that vacancies on our Board of Directors may be filled only by the remaining directors for the full term of the directorship in which the vacancy occurred, the power of our Board of Directors to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock, to cause us to issue additional shares of stock of any class or series and to fix the terms of one or more classes or series of stock without stockholder approval, the restrictions on ownership and transfer of our stock and advance notice requirements for director nominations and stockholder proposals. 27 Table of Contents To assist us in qualifying as a REIT, among other purposes, ownership of our stock by any person is generally limited to 9.8% in value or number of shares, whichever is more restrictive, of any class or series of our stock.
Additionally, the liquidation of collateral may jeopardize our ability to maintain our qualification as a REIT, as we must comply with requirements regarding our assets and our sources of gross income.
Liquidation of our assets may jeopardize our REIT qualification. To maintain our qualification as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income.
To the extent the financial or mortgage markets do not respond favorably to any of these actions, such actions do not function as intended, or prepayments increase materially as a result of these actions, our business, results of operations and financial condition may be materially adversely affected. 36 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
To the extent the financial or mortgage markets do not respond favorably to any of these actions, such actions do not function as intended, or prepayments increase materially as a result of these actions, our business, results of operations and financial condition may be materially adversely affected.
We finance our acquisitions of pass-through Agency RMBS with short-term financing.
We finance our acquisitions of PT Agency RMBS with short-term financing.
However, the CFTC’s Division of Swap Dealer and Intermediary Oversight issued a no-action letter saying, although it believes that mortgage REITs are properly considered commodity pools, it would not recommend that the CFTC take enforcement action against the operator of a mortgage REIT who does not register as a CPO if, among other things, the mortgage REIT limits the initial margin and premiums required to establish its swaps, futures and other commodity interest positions to not more than five percent (5%) of its total assets, the mortgage REIT limits the net income derived annually from those commodity interest positions which are not qualifying hedging transactions to less than five percent (5%) of its gross income and interests in the mortgage REIT are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options or swaps markets. 28 Table of Contents We use hedging instruments in conjunction with our investment portfolio and related borrowings to reduce or mitigate risks associated with changes in interest rates, mortgage spreads, yield curve shapes and market volatility.
However, the CFTC’s Division of Swap Dealer and Intermediary Oversight issued a no-action letter saying, although it believes that mortgage REITs are properly considered commodity pools, it would not recommend that the CFTC take enforcement action against the operator of a mortgage REIT who does not register as a CPO if, among other things, the mortgage REIT limits the initial margin and premiums required to establish its swaps, futures and other commodity interest positions to not more than five percent (5%) of its total assets, the mortgage REIT limits the net income derived annually from those commodity interest positions which are not qualifying hedging transactions to less than five percent (5%) of its gross income and interests in the mortgage REIT are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options or swaps markets.
It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyber-attacks or security breaches of our networks or systems (or the networks or systems of certain third parties that facilitate our business activities) or any failure to maintain performance, reliability and security of our or certain of our third-party service providers' technical infrastructure, but such computer malware, ransomware, viruses, and computer hacking and phishing attacks may negatively affect our operations.
It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyber-attacks or security breaches of our networks or systems (or the networks or systems of certain third parties that facilitate our business activities) or any failure to maintain performance, reliability and security of our or certain of our third-party service providers' technical infrastructure, but such computer malware, ransomware, viruses, and computer hacking and phishing attacks may negatively affect our operations. 21 Table of Contents We invest in securities guaranteed by the Enterprises which are currently under conservatorship by the FHFA.
We are completely dependent upon our Manager and certain key personnel of Bimini who provide services to us through the management agreement, and we may not find suitable replacements for our Manager and these personnel if the management agreement is terminated or such key personnel are no longer available to us.
Accordingly, we may compete for access to the benefits that we expect our relationship with our Manager and Bimini to provide. 22 Table of Contents We are completely dependent upon our Manager and certain key personnel of Bimini who provide services to us through the management agreement, and we may not find suitable replacements for our Manager and these personnel if the management agreement is terminated or such key personnel are no longer available to us.
We intend to maintain master repurchase agreements with several counterparties. We cannot assure you that any, or sufficient, repurchase agreement financing will be available to us in the future on terms that are acceptable to us.
We cannot assure you that any, or sufficient, repurchase agreement financing will be available to us in the future on terms that are acceptable to us.
We rely heavily on our Manager’s financial, accounting and other data processing systems. Although we have not detected a breach to date, financial services institutions have reported breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected.
Although we have not detected a breach to date, financial services institutions have reported breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected.
We invest in securities guaranteed by the Enterprises which are currently under conservatorship by the FHFA. The ultimate impact on the operations of the Enterprises from the conservatorships and the support they receive from the U.S. government is not determinable and could affect the Enterprises in such a way that our business, operations and financial condition may be adversely affected.
The ultimate impact on the operations of the Enterprises from the conservatorships and the support they receive from the U.S. government is not determinable and could affect the Enterprises in such a way that our business, operations and financial condition may be adversely affected.
If we experience losses as a result of our use of leverage, such losses could materially adversely affect our business, results of operations and financial condition and our ability to make distributions to our stockholders.
If we experience losses as a result of our use of leverage, such losses could materially adversely affect our business, results of operations and financial condition and our ability to make distributions to our stockholders. We invest in structured Agency RMBS, including IOs, IIOs and POs.
TBA contracts enable us to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of collateral, but the particular Agency RMBS to be delivered are not identified until shortly before the TBA settlement date.
We may utilize TBA dollar roll transactions as a means of investing in and financing Agency RMBS. TBA contracts enable us to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of collateral, but the particular Agency RMBS to be delivered are not identified until shortly before the TBA settlement date.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
The relationship between short-term and longer-term interest rates is often referred to as the "yield curve." Ordinarily, short-term interest rates are lower than longer-term interest rates. If short-term interest rates rise disproportionately relative to longer-term interest rates (a "flattening" of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets.
If short-term interest rates rise disproportionately relative to longer-term interest rates (a "flattening" of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets.
If prepayment rates are lower than expected, we will not receive principal payments as quickly as we anticipated and, therefore, our expected returns on these securities will be adversely affected, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 15 Table of Contents While we seek to minimize prepayment risk, we must balance prepayment risk against other risks and the potential returns of each investment.
If prepayment rates are lower than expected, we will not receive principal payments as quickly as we anticipated and, therefore, our expected returns on these securities will be adversely affected, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: ● 85% of our REIT ordinary income for that year; ● 95% of our REIT capital gain net income for that year; and ● any undistributed taxable income from prior years We intend to distribute our REIT taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both U.S. federal corporate income tax and the 4% nondeductible excise tax.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: ● 85% of our REIT ordinary income for that year; ● 95% of our REIT capital gain net income for that year; and ● any undistributed taxable income from prior years.
As a result, the values of some of our assets are uncertain. While in many cases our determination of the fair value of our assets is based on valuations provided by third-party dealers and pricing services, we can and do value assets based upon our judgment, and such valuations may differ from those provided by third-party dealers and pricing services.
While in many cases our determination of the fair value of our assets is based on valuations provided by third-party dealers and pricing services, we can and do value assets based upon our judgment, and such valuations may differ from those provided by third-party dealers and pricing services. Valuations of certain assets are often difficult to obtain or are unreliable.
Concerns over rising or high interest rates, inflation, economic recession, geopolitical issues including events such as global pandemics, the wars in Ukraine and Israel, policy priorities of a new U.S. presidential administration, tariffs or trade wars, unemployment, the availability and cost of financing, the mortgage market and a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.
Concerns over rising or high interest rates, inflation, economic recession, geopolitical issues including events such as global pandemics, the wars in Ukraine and Israel, policy priorities of the U.S. presidential administration, tariffs or trade wars, unemployment, the availability and cost of financing, the mortgage market and a declining real estate market or prolonged government shutdown have in the past contributed, and may contribute in the future, to increased volatility and diminished expectations for the economy and markets. 17 Table of Contents Increased volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets have in the past adversely affected, and may adversely affect in the future, the performance and market value of our Agency RMBS.
These provisions, along with the restrictions on ownership and transfer contained in our charter and certain provisions of Maryland law described below, could discourage unsolicited acquisition proposals or make it more difficult for a third party to gain control of us, which could adversely affect the market price of our securities. 29 Table of Contents Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.
These provisions, along with the restrictions on ownership and transfer contained in our charter and certain provisions of Maryland law described below, could discourage unsolicited acquisition proposals or make it more difficult for a third party to gain control of us, which could adversely affect the market price of our securities.
For example, concerns about the fiscal stability and growth prospects of certain European countries in the last economic downturn had a negative impact on most economies of the Eurozone and global markets.
A continuation of this trend could result in problems in one country adversely affecting regional and even global economic conditions and markets. For example, concerns about the fiscal stability and growth prospects of certain European countries in the last economic downturn had a negative impact on most economies of the Eurozone and global markets.
Failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements and may result in fines and other penalties which could materially adversely affect our business and financial condition.
Our business will be materially and adversely affected if we fail to qualify for and maintain an exemption from regulation pursuant to the Investment Company Act. 26 Table of Contents Failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements and may result in fines and other penalties which could materially adversely affect our business and financial condition.
The 20% deduction results in a 29.6% maximum U.S. federal income tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders. Without further legislative action, the 20% deduction applicable to ordinary REIT dividends will expire on January 1, 2026.
The 20% deduction results in a 29.6% maximum U.S. federal income tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders.
However, our Board of Directors may by resolution elect to repeal the foregoing opt-out from the business combination provisions of the MGCL, and we may, by amendment to our bylaws, opt-in to the control share provisions of the MGCL in the future. 30 Table of Contents Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors or officers and could discourage lawsuits against us and our directors and officers.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors or officers and could discourage lawsuits against us and our directors and officers.
Furthermore, a change in our asset allocation could result in our allocating assets in a different manner than as described in this Report. 21 Table of Contents In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to qualify as a REIT.
In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to qualify as a REIT.
When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity securities for U.S. federal income tax purposes, the value of such securities, and the extent to which those securities constitute qualified real estate assets for purposes of the REIT asset tests and produce income that qualifies under the 75% gross income test.
Our qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax. 32 Table of Contents When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity securities for U.S. federal income tax purposes, the value of such securities, and the extent to which those securities constitute qualified real estate assets for purposes of the REIT asset tests and produce income that qualifies under the 75% gross income test.
In addition, hedging activities could result in losses if the event against which we hedge does not occur. Because of the foregoing risks, our hedging activity could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. Our use of certain hedging techniques may expose us to counterparty risks.
Because of the foregoing risks, our hedging activity could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 15 Table of Contents Our use of certain hedging techniques may expose us to counterparty risks.
Our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected if our fair value determinations of these assets were materially higher than the values that would exist if a ready market existed for these assets.
The valuation process during times of market distress can be particularly difficult and unpredictable and during such time the disparity of valuations provided by third-party dealers can widen. 18 Table of Contents Our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected if our fair value determinations of these assets were materially higher than the values that would exist if a ready market existed for these assets.
The IRS has issued Revenue Procedure 2017-45 authorizing elective cash/stock dividends to be made by publicly offered REITs.
We may make taxable dividends that are payable partly in cash and partly in our common stock. The IRS has issued Revenue Procedure 2017-45 authorizing elective cash/stock dividends to be made by publicly offered REITs.
As a result, our net interest income has declined. We have employed various hedging strategies to off-set the phenomenon. However, such hedges may not be adequate to protect our interest income if the yield curve inverts again in the future, adversely affecting our financial condition, results of operations and our ability to pay dividends to our stockholders.
However, such hedges may not be adequate to protect our interest income if the yield curve inverts again in the future. If the yield curve inverts again in the future, our financial condition, results of operations and our ability to pay dividends to our stockholders could be materially adversely affected.
Any failure or interruption of these systems could cause delays or other problems in our securities trading activities, including Agency RMBS trading activities, which could have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 22 Table of Contents Computer malware, ransomware, viruses, and computer hacking and phishing attacks have become more prevalent in the financial services industry and may occur on our or certain of our third party service providers' systems in the future.
Any failure or interruption of these systems could cause delays or other problems in our securities trading activities, including Agency RMBS trading activities, which could have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
No strategy can completely insulate us from prepayment or other such risks. Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. We intend to maintain master repurchase agreements with several counterparties.
In the event that future adverse economic developments or market uncertainty result in increased margin requirements for our hedging instruments, it could materially adversely affect our liquidity position, business, financial condition and results of operations.
In the event that future adverse economic developments or market uncertainty result in increased margin requirements for our hedging instruments, it could materially adversely affect our liquidity position, business, financial condition and results of operations. 19 Table of Contents Our inability to access funding or the terms on which such funding is available could have a material adverse effect on our financial condition, particularly in times of significant market dislocations.
To the extent securities in our portfolio of Agency RMBS are carried at prices below par, this would reduce the yield we realize on our portfolio, and adversely affect our results of operations, financial condition, liquidity and business and our ability to pay dividends to stockholders.
To the extent securities in our portfolio of Agency RMBS are carried at prices below par, this would reduce the yield we realize on our portfolio, and adversely affect our results of operations, financial condition, liquidity and business and our ability to pay dividends to stockholders. 20 Table of Contents Market disruptions in a single country could cause a worsening of conditions on a regional and even global level, and economic problems in a single country are increasingly affecting other markets and economies.
Bimini and our Manager make available to us opportunities to acquire assets that they determine, in their reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with the Investment Allocation Agreement. 24 Table of Contents Because many of our targeted assets are typically available only in specified quantities and because many of our targeted assets are also targeted assets for Bimini and may be targeted assets for other accounts our Manager may manage in the future, neither Bimini nor our Manager may be able to buy as much of any given asset as required to satisfy the needs of Bimini, us and any other account our Manager may manage in the future.
Because many of our targeted assets are typically available only in specified quantities and because many of our targeted assets are also targeted assets for Bimini and may be targeted assets for other accounts our Manager may manage in the future, neither Bimini nor our Manager may be able to buy as much of any given asset as required to satisfy the needs of Bimini, us and any other account our Manager may manage in the future.
Interest rate caps on Agency RMBS backed by ARMs and hybrid ARMs could reduce our net interest margin if interest rates were to increase beyond the level of the caps, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 18 Table of Contents Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest.
Interest rate caps on Agency RMBS backed by ARMs and hybrid ARMs could reduce our net interest margin if interest rates were to increase beyond the level of the caps, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
In addition, we may have adjustable-rate assets with interest rates that vary over time based upon changes in an objective index, such as the U.S. Treasury rate or SOFR. These indices generally reflect short-term interest rates but these assets may not reset in a manner that matches our borrowings.
We rely primarily on short-term and/or variable rate borrowings to acquire fixed-rate securities with long-term maturities. In addition, we may have adjustable-rate assets with interest rates that vary over time based upon changes in an objective index, such as the U.S. Treasury rate or SOFR.
Further, we do not have any agreement or understanding with Bimini that would give us any priority over Bimini or any of its affiliates. Accordingly, we may compete for access to the benefits that we expect our relationship with our Manager and Bimini to provide.
Further, we do not have any agreement or understanding with Bimini that would give us any priority over Bimini or any of its affiliates.
We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or the global recessionary economic conditions will have on us.
Our stockholders are therefore subject to the risk of our future securities offerings reducing the market price of our common stock and diluting their common stock. 33 Table of Contents We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or the global recessionary economic conditions will have on us.
If our market data inputs are incorrect or our model prices differ substantially from market prices, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected. 19 Table of Contents Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed.
Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed. As a result, the values of some of our assets are uncertain.
A return of capital reduces the basis of a stockholder’s investment in our common stock to the extent of such basis and is treated as capital gain thereafter. Shares of our common stock eligible for future sale may harm our share price.
A return of capital reduces the basis of a stockholder’s investment in our common stock to the extent of such basis and is treated as capital gain thereafter. We may be subject to adverse legislative or regulatory changes that could reduce the market price of our common stock.

… 51 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

0 edited+2 added−24 removed0 unchanged
Removed
ITEM 1C. CYBERSECURITY The Company has no employees and is externally managed by our Manager, which is a wholly owned subsidiary of Bimini. Pursuant to the terms of the Management Agreement, our Manager manages, operates and administers our day-to-day operations, business and affairs, subject to the direction and supervision of the Board.
Added
ITEM 1C. Cybersecurity . 34 ITEM 2. Properties. 36 ITEM 3. Legal Proceedings. 36 ITEM 4. Mine Safety Disclosures. 36 PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 37 ITEM 6. Reserved . 39 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 40 ITEM 7A.
Removed
The Board plays an active role in overseeing management of our risks, and cybersecurity represents an important component of the Company’s overall approach to risk management and oversight. As an externally managed company, the Company relies on our Manager’s information systems in connection with the Company’s day-to-day operations.
Added
Quantitative and Qualitative Disclosures About Market Risk. 63 ITEM 8. Financial Statements and Supplementary Data. 67 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 92 ITEM 9A. Controls and Procedures. 92
Removed
Consequently, the Company also relies on our Manager’s processes for assessing, identifying, and managing material risks from cybersecurity threats undertaken by our Manager. All of the Company’s executive officers are executive officers, directors and employees of Bimini. Our Manager’s cybersecurity processes and practices are integrated into the Company’s risk management and oversight program.
Removed
In general, the Company seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that the Company collects and stores by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
Removed
The Company has adopted a cybersecurity incident response plan to enable rapid response, curtail further security breaches, mitigate and manage costs, and facilitate timely disclosure of material cyber incidents as required by the SEC.
Removed
Risk Management and Strategy The Company, our Manager and our Board place a high priority on maintaining security over our financial information that can be accessed via the Internet and mitigating information security risks.
Removed
The Company engages a third-party security firm to provide threat detection and reports, conduct annual testing of our Manager’s systems, train the Manager’s employees and generally advise on cybersecurity processes.
Removed
At least annually, our Manager has its information technology team and its third-party security firm make a formal presentation to our Audit Committee and the Board to keep them apprised of the level of cybersecurity that exists to protect our financial information, training of the Company’s officers and the Manager’s employees, and the latest threats that have emerged.
Removed
The Company’s cybersecurity program is focused on the following key areas: ● Governance : As discussed in more detail under “Item 1C.
Removed
Cybersecurity—Governance,” the Audit Committee and the Board oversee cybersecurity risk management by regularly interacting with the Company’s management team, our Manager’s information technology team and a third-party security firm. ● Collaborative Approach : The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. ● Technical Safeguards : The Company deploys technical safeguards that are designed to protect information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, redundant data storage and retention methods, anti-malware functionality and access controls, which are evaluated and improved through vulnerability and exposure assessments and cybersecurity threat intelligence.
Removed
With the help of the third-party security firm, the Company has implemented several layers of physical security, digital security and data backup. ● Incident Response and Recovery Planning : The Company has established a comprehensive incident response and recovery plan that addresses the response to a cybersecurity incident and plans to test and evaluate that plan on a regular basis. 37 Table of Contents ● Third-Party Risk Management: The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including counterparties, service providers or other external users of our Manager’s systems, as well as the systems of third parties that could adversely impact the Company’s business in the event of a cybersecurity incident affecting those third-party systems. ● Education and Awareness : A third-party security firm provides training to our Manager’s employees, helping our Manager’s information technology team to maintain a state-of-the-art cybersecurity system and stay up to date on the latest threats and counter measures available.
Removed
The third-party security firm places a high priority on employee threat education through automated internal phishing tests.
Removed
Our Manager’s information technology team attends continuing education seminars and receives timely alerts to any new viruses or cyber threats as they occur as a means to equip personnel with effective tools to address cybersecurity threats, and to communicate evolving information security policies, standards, processes and practices.
Removed
Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to affect the Company, including its business strategy, results of operations or financial condition. The Company is not aware of any material security breach to date.
Removed
Accordingly, the Company has not incurred any expenses over the last three years on information security breaches. However, the Company faces certain ongoing risks from cybersecurity that, if realized, could materially affect the Company. See “Item 1A.
Removed
Risk Factors - The occurrence of cyber-incidents, or a deficiency in our cybersecurity or in those of any of our third party service providers could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.” There can be no assurance that the Company's cybersecurity risk management program and processes, including its policies, controls or procedures, will be fully implemented, complied with or effective in protecting its systems and information.
Removed
Governance The Company believes oversight of cybersecurity risk is the responsibility of the Audit Committee and the full Board. Accordingly, the Audit Committee and the Board oversee the Company’s cybersecurity risk management process.
Removed
The Board considers the Company’s cybersecurity posture and risk exposure with management taking into consideration the Company’s operations and the types of data retained on its systems as part of its and the Audit Committee’s periodic review of the Company’s risk management.
Removed
The Company’s primary business involves investments in Agency RMBS, which are securities backed primarily by single-family residential mortgage loans. The Company does not receive personal information on individual mortgage borrowers.
Removed
The Board reviews the Company’s cybersecurity program and risk exposure with management on at least an annual basis and receives reports from management, the Manager’s information technology team, and the Company’s third-party security firm on these matters from time to time. The Board may also conduct additional cybersecurity reviews or receive additional updates or reports as it deems necessary.
Removed
As noted above, the Company relies on its Manager’s information systems in connection with the Company’s day-to-day operations. Consequently, the Company also relies on the processes for assessing, identifying, and managing material risks from cybersecurity threats undertaken by its Manager. Messrs.
Removed
Cauley and Haas work collaboratively to implement a program designed to protect our Manager’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with the Company’s incident response and recovery plan.
Removed
These members of the Company’s management team monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents and report such threats and incidents to the Board when appropriate. Messrs.
Removed
Cauley and Haas each hold undergraduate and graduate degrees in their respective fields, and each have approximately twenty years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 2. PROPERTIES We do not own any real property. Our offices are owned by Bimini, the parent of our Manager, and are located at 3305 Flamingo Drive, Vero Beach, Florida 32963. We consider this property to be adequate for our business as currently conducted. Our telephone number is (772) 231-1400. 38 Table of Contents
Biggest changeITEM 2. PROPERTIES We do not own any real property. Our offices are owned by Bimini, the parent of our Manager, and are located at 3305 Flamingo Drive, Vero Beach, Florida 32963. We consider this property to be adequate for our business as currently conducted. Our telephone number is (772) 231-1400.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed14 unchanged
Biggest changeMaximum Number of Shares Shares That Total Weighted- Purchased as May Yet Be Number Average Part of Publicly Repurchased of Shares Price Paid Announced Under the Repurchased (1) Per Share Programs Authorization October 1, 2024 - October 31, 2024 - $ - - 3,832,361 November 1, 2024 - November 30, 2024 - $ - - 3,832,361 December 1, 2024 - December 31, 2024 1,920 $ 7.87 - 3,832,361 Totals / Weighted Average 1,920 $ 7.87 - 3,832,361 (1) Includes 1,920 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.
Biggest changeMaximum Shares Number of Purchased as Shares That Total Weighted- Part of May Yet Be Number Average Publicly Repurchased of Shares Price Paid Announced Under the Repurchased (1) Per Share Programs Authorization October 1, 2025 - October 31, 2025 - $ - - 2,719,137 November 1, 2025 - November 30, 2025 - $ - - 2,719,137 December 1, 2025 - December 31, 2025 2,223 $ 7.28 - 2,719,137 Totals / Weighted Average 2,223 $ 7.28 - 2,719,137 (1) Includes 2,223 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.
The performance graph was prepared based on the following assumptions: (i) $100 was invested in the Company's common stock, the S&P 500 Total Return Index and the FTSE NAREIT Mortgage REIT Index on December 31, 2019, and (ii) dividends were reinvested on the relevant payment dates.
The performance graph was prepared based on the following assumptions: (i) $100 was invested in the Company's common stock, the S&P 500 Total Return Index and the FTSE NAREIT Mortgage REIT Index on December 31, 2020, and (ii) dividends were reinvested on the relevant payment dates.
Unregistered Sales of Equity Securities The Company did not issue or sell equity securities that were not registered under the Securities Act during the year ended December 31, 2024. 41 Table of Contents Issuer Purchases of Equity Securities On July 29, 2015, the Company's Board of Directors authorized the repurchase of up to 400,000 shares of the Company's common stock.
Unregistered Sales of Equity Securities The Company did not issue or sell equity securities that were not registered under the Securities Act during the year ended December 31, 2025. Issuer Purchases of Equity Securities On July 29, 2015, the Company's Board of Directors authorized the repurchase of up to 400,000 shares of the Company's common stock.
Unless modified or revoked by the Board, the authorization does not expire. The table below presents the Company's share repurchase activity for the three months ended December 31, 2024.
Unless modified or revoked by the Board, the authorization does not expire. 38 Table of Contents The table below presents the Company's share repurchase activity for the three months ended December 31, 2025.
In addition, our Board of Directors may change our distribution policy in the future. 40 Table of Contents Performance Graph Set forth below is a graph comparing the yearly percentage change in the cumulative total return on our common stock through December 31, 2024, with the cumulative total return of the S&P 500 Total Return Index and the FTSE NAREIT Mortgage REIT Index.
In addition, our Board of Directors may change our distribution policy in the future. 37 Table of Contents Performance Graph Set forth below is a graph comparing the yearly percentage change in the cumulative total return on our common stock, with the cumulative total return of the S&P 500 Total Return Index and the FTSE NAREIT Mortgage REIT Index for the period beginning December 31, 2020, and ending December 31, 2025.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock trades on the NYSE under the symbol “ORC.” As of February 21, 2025, we had 93,293,628 shares of common stock issued and outstanding which were held by 12 stockholders of record and approximately 69,600 beneficial owners whose shares were held in “street name” by brokers and depository institutions.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock trades on the NYSE under the symbol “ORC.” As of February 19, 2026, we had 190,693,392 shares of common stock issued and outstanding which were held by 12 stockholders of record and approximately 90,000 beneficial owners whose shares were held in “street name” by brokers and depository institutions.
The historical information set forth below is not necessarily indicative of future performance. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Orchid Island Capital, Inc. 100.00 105.25 105.40 58.89 57.09 62.76 NAREIT Mortgage REIT TRR Index 100.00 81.23 93.93 68.94 79.52 79.80 S&P 500 Total Return Index 100.00 118.40 152.39 124.79 157.59 197.02 Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plans required for this Item 5 is incorporated by reference to our definitive Proxy Statement to be filed in connection with our 2025 annual meeting of stockholders.
The historical information set forth below is not necessarily indicative of future performance. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Orchid Island Capital, Inc. 100.00 100.14 55.95 54.24 59.63 67.09 NAREIT Mortgage REIT TRR Index 100.00 115.64 84.86 97.89 98.24 113.98 S&P 500 Total Return Index 100.00 128.71 105.40 133.10 166.40 196.16 Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plans required for this Item 5 is incorporated by reference to our definitive Proxy Statement to be filed in connection with our 2026 annual meeting of stockholders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

121 edited+58 added−48 removed94 unchanged
Biggest changeGains (Losses) on Derivative Instruments - Reclassification of Derivative Transaction Expenses (in thousands) Recognized in Income Statement Attributed to Current Period Prior Reclassified Current Prior Reclassified Current Presentation Expenses Presentation Presentation Expenses Presentation Three Months Ended December 31, 2022 $ (10,657 ) $ 1,662 $ (12,319 ) $ 11,076 $ 1,662 $ 9,414 September 30, 2022 184,819 889 183,930 5,043 889 4,154 June 30, 2022 103,758 391 103,367 1,996 391 1,605 March 31, 2022 177,816 318 177,498 (1,287 ) 318 (1,605 ) 48 Table of Contents 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 December 31, 2024 $ 71,996 $ 63,853 $ 27,782 $ 36,071 $ 8,143 $ 35,925 September 30, 2024 67,646 67,306 31,924 35,382 340 32,264 June 30, 2024 53,064 53,761 29,459 24,302 (697 ) 28,762 March 31, 2024 48,871 51,361 27,587 23,774 (2,490 ) 25,097 December 31, 2023 49,539 52,325 25,161 27,164 (2,786 ) 22,375 September 30, 2023 50,107 58,705 24,440 34,265 (8,598 ) 15,842 June 30, 2023 39,911 48,671 23,482 25,189 (8,760 ) 14,722 March 31, 2023 38,012 42,217 19,211 23,006 (4,205 ) 15,006 December 31, 2022 31,897 29,512 9,414 20,098 2,385 11,799 September 30, 2022 35,611 21,361 4,154 17,207 14,250 18,404 June 30, 2022 35,268 8,180 1,605 6,575 27,088 28,693 March 31, 2022 41,857 2,655 (1,605 ) 4,260 39,202 37,597 Years Ended December 31, 2024 $ 241,577 $ 236,281 $ 116,752 $ 119,529 $ 5,296 $ 122,048 December 31, 2023 177,569 201,918 92,294 109,624 (24,349 ) 67,945 December 31, 2022 144,633 61,708 13,568 48,140 82,925 96,493 (1) Reflects the effect of derivative instrument hedges for only the period presented.
Biggest changeThe 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 the years ended December 31, 2025, 2024 and 2023 and each quarter during 2025, 2024 and 2023. 44 Table of Contents Gains (Losses) on Derivative Instruments (in thousands) Economic Hedges Recognized in Attributed to Attributed to Income TBA Securities Gain (Loss) Current Future Statement Short Long Period Periods (GAAP) Positions Positions (Non-GAAP) (Non-GAAP) Three Months Ended December 31, 2025 $ 14,048 $ (3,478 ) $ 158 $ 19,578 $ (2,210 ) September 30, 2025 (8,772 ) (4,272 ) 957 21,872 (27,329 ) June 30, 2025 (53,286 ) (7,662 ) 472 20,937 (67,033 ) March 31, 2025 (74,659 ) 3,026 100 20,912 (98,697 ) December 31, 2024 160,412 9,937 (683 ) 27,782 123,376 September 30, 2024 (140,825 ) (16,315 ) 348 31,924 (156,782 ) June 30, 2024 26,068 3,042 - 29,459 (6,433 ) March 31, 2024 87,899 9,903 105 27,587 50,304 December 31, 2023 (149,016 ) (29,750 ) (2,262 ) 25,161 (142,165 ) September 30, 2023 142,042 21,511 (2,024 ) 24,440 98,115 June 30, 2023 93,367 15,599 (574 ) 23,482 54,860 March 31, 2023 (41,156 ) (5,990 ) - 19,211 (54,377 ) Years Ended December 31, 2025 $ (122,669 ) $ (12,386 ) $ 1,687 $ 83,299 $ (195,269 ) December 31, 2024 133,554 6,567 (230 ) 116,752 10,465 December 31, 2023 45,237 1,370 (4,860 ) 92,294 (43,567 ) 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 December 31, 2025 $ 132,188 $ 93,705 $ 19,578 $ 74,127 $ 38,483 $ 58,061 September 30, 2025 108,434 81,515 21,872 59,643 26,919 48,791 June 30, 2025 92,289 69,135 20,937 48,198 23,154 44,091 March 31, 2025 81,090 61,377 20,912 40,465 19,713 40,625 December 31, 2024 71,996 63,853 27,782 36,071 8,143 35,925 September 30, 2024 67,646 67,306 31,924 35,382 340 32,264 June 30, 2024 53,064 53,761 29,459 24,302 (697 ) 28,762 March 31, 2024 48,871 51,361 27,587 23,774 (2,490 ) 25,097 December 31, 2023 49,539 52,325 25,161 27,164 (2,786 ) 22,375 September 30, 2023 50,107 58,705 24,440 34,265 (8,598 ) 15,842 June 30, 2023 39,911 48,671 23,482 25,189 (8,760 ) 14,722 March 31, 2023 38,012 42,217 19,211 23,006 (4,205 ) 15,006 Years Ended December 31, 2025 $ 414,001 $ 305,732 $ 83,299 $ 222,433 $ 108,269 $ 191,568 December 31, 2024 241,577 236,281 116,752 119,529 5,296 122,048 December 31, 2023 177,569 201,918 92,294 109,624 (24,349 ) 67,945 (1) Reflects the effect of derivative instrument hedges for only the period presented.
We issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $228.8 million and net proceeds of approximately $225.0 million, after commissions and fees, prior to its termination in June 2024.
We issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $228.8 million and net proceeds of approximately $225.0 million, after commissions and fees, prior to its termination in June 2024.
Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasuries and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities.
Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities.
We issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $151.8 million, and net proceeds of approximately $149.3 million, after commissions and fees, prior to its termination in March 2023. 43 Table of Contents On March 7, 2023, we entered into an equity distribution agreement (the “March 2023 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
We issued a total of 9,742,188 shares under the October 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately $151.8 million, and net proceeds of approximately $149.3 million, after commissions and fees, prior to its termination in March 2023. 55 Table of Contents On March 7, 2023, we entered into an equity distribution agreement (the “March 2023 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
The Basel III Endgame, if implemented as proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets.
The Basel III Endgame, if implemented as originally proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets.
For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses, specifically Fed Funds, SOFR and T-Note futures, dual digital options, interest rate floors and caps, and interest rate swaps and swaptions, that pertain to each period presented.
For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses, specifically Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures, dual digital options, interest rate floors and caps, and interest rate swaps and swaptions, that pertain to each period presented.
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 the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac" and together with Fannie Mae, the "Enterprises") or the Government National Mortgage Association ("Ginnie Mae" and, together with the Enterprises the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”) and (ii) structured Agency RMBS, such as interest-only securities (“IOs”), inverse interest-only securities (“IIOs”) and principal only securities (“POs”), among other types of structured Agency RMBS.
Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional PT Agency RMBS, such as mortgage PT certificates issued by the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac" and together with Fannie Mae, the "Enterprises") or the Government National Mortgage Association ("Ginnie Mae" and, together with the Enterprises the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”) and (ii) structured Agency RMBS, such as interest-only securities (“IOs”), inverse interest-only securities (“IIOs”) and principal only securities (“POs”), among other types of structured Agency RMBS.
The table below presents a reconciliation of our net income (loss) determined in accordance with GAAP and net earnings excluding realized and unrealized gains and losses. Described below are the Company's results of operations for the years ended December 31, 2024, 2023 and 2022, and for each quarter during 2024, 2023 and 2022.
The table below presents a reconciliation of our net income (loss) determined in accordance with GAAP and net earnings excluding realized and unrealized gains and losses. Described below are the Company's results of operations for the years ended December 31, 2025, 2024 and 2023, and for each quarter during 2025, 2024 and 2023.
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 2024, 2023 and 2022. 5 Year 10 Year 15 Year 30 Year U.S.
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 2025, 2024 and 2023. 5 Year 10 Year 15 Year 30 Year U.S.
The management agreement has been renewed through February 20, 2026 and provides for automatic one-year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company.
The management agreement has been renewed through February 20, 2027 and provides for automatic one-year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company.
These factors include: ● interest rate trends; ● changes in our cost of funds, including increases in the Fed Funds rate that are controlled by the Federal Reserve (the "Fed") that occurred in 2022 and 2023, the decreases in the Fed Funds rate in 2024, or potential additional decreases in the Fed Funds rate: ● the difference between Agency RMBS yields and our funding and hedging costs; ● competition for, and supply of, investments in Agency RMBS; ● actions taken by the U.S. government, including the presidential administration, the Fed, the Federal Housing Financing Agency (the “FHFA”), the Federal Deposit Insurance Corporation (the "FDIC"), the Federal Housing Administration (the “FHA”), the Federal Open Market Committee (the “FOMC”) and the U.S.
These factors include: ● interest rate trends; ● changes in our cost of funds, including decreases in the Fed Funds rate that are controlled by the Federal Reserve (the "Fed") that occurred in 2024 and 2025, or potential additional changes in the Fed Funds rate: ● the difference between Agency RMBS yields and our funding and hedging costs; ● competition for, and supply of, investments in Agency RMBS; ● actions taken by the U.S. government, including the presidential administration, the Fed, the Federal Housing Financing Agency (the “FHFA”), the Federal Deposit Insurance Corporation (the "FDIC"), the Federal Housing Administration (the “FHA”), the Federal Open Market Committee (the “FOMC”) and the U.S.
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 years ended December 31, 2024 and 2023.
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 years ended December 31, 2025 and 2024.
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.
Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in the two categories of Agency RMBS described above.
Treasury; ● prepayment rates on mortgages underlying our Agency RMBS and credit trends insofar as they affect prepayment rates; and ● other market developments, including bank failures. 44 Table of Contents In addition, a variety of factors relating to our business may also impact our results of operations and financial condition.
Treasury; ● prepayment rates on mortgages underlying our Agency RMBS and credit trends insofar as they affect prepayment rates; and ● other market developments, including bank failures. In addition, a variety of factors relating to our business may also impact our results of operations and financial condition.
The principal instruments that we have used to date are Fed Funds, SOFR, T-Note and Eurodollar futures contracts, interest rate swaps, interest rate swaptions, interest rate caps and TBA securities, but we may enter into other derivatives in the future. We account for TBA securities as derivative instruments.
The principal instruments that we have used to date are Fed Funds, SOFR, T-Note and ERIS SOFR Swap futures contracts, interest rate swaps, interest rate swaptions, interest rate caps and TBA securities, but we may enter into other derivatives in the future. We account for TBA securities as derivative instruments.
Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions").
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions").
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 table on page 52 includes the effect of our derivative instrument hedges for only 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 includes the effect of our derivative instrument hedges for only the periods presented.
The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 calendar day periods. 53 Table of Contents Unrealized Gains and Losses on PT RMBS For the purpose of recording income on the Company’s investments in PT RMBS, interest income is based on the stated interest rate of the security.
The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 calendar day periods. Unrealized Gains and Losses on PT RMBS For the purpose of recording income on the Company’s investments in PT RMBS, interest income is based on the stated interest rate of the security.
(3) Interest Income – Inclusive of Premium Amortization/Discount Accretion and Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion are non-GAAP measures. See “—GAAP and Non-GAAP Reconciliations,” for a description of our non-GAAP measures. Expenses Total operating expenses were $16.7 million, $18.5 million and $17.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.
(3) Interest Income – Inclusive of Premium Amortization/Discount Accretion and Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion are non-GAAP measures. See “—GAAP and Non-GAAP Reconciliations,” for a description of our non-GAAP measures. Expenses Total operating expenses were $20.5 million, $16.7 million and $18.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The following table summarizes the management fee and overhead allocation expenses for each quarter in 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022.
The following table summarizes the management fee and overhead allocation expenses for each quarter in 2025, 2024 and 2023 and for the years ended December 31, 2025, 2024 and 2023.
The table below presents information about our period end, maximum and average balances of borrowings for each quarter in 2024 and 2023.
The table below presents information about our period end, maximum and average balances of borrowings for each quarter in 2025 and 2024.
For the comparable period ended December 31, 2023, we incurred $24.4 million of net interest expense, consisting of $177.6 million of interest income from RMBS assets offset by $201.9 million of interest expense on borrowings.
For the year ended December 31, 2023, we incurred $24.4 million of net interest expense, consisting of $177.6 million of interest income from RMBS assets offset by $201.9 million of interest expense on borrowings.
Throughout the year ended December 31, 2024, haircuts on our pledged collateral remained stable and as of December 31, 2024, our weighted average haircut was approximately 4.3% of the value of our collateral. TBAs represent a form of off-balance sheet financing and are accounted for as derivative instruments.
Throughout the year ended December 31, 2025, haircuts on our pledged collateral remained stable and as of December 31, 2025, our weighted average haircut was approximately 4.1% of the value of our collateral. TBAs represent a form of off-balance sheet financing and are accounted for as derivative instruments.
No gain or loss was recorded on this resecuritization. Realized and unrealized gains and losses on RMBS are driven in part by changes in yields and interest rates, the spreads that Agency RMBS trade relative to comparable duration U.S.
No gain or loss was recorded on this resecuritization. 48 Table of Contents Realized and unrealized gains and losses on RMBS are driven in part by changes in yields and interest rates, the spreads that Agency RMBS trade relative to comparable duration U.S.
The table below provides a breakdown of operating expenses for the years ended December 31, 2024, 2023 and 2022.
The table below provides a breakdown of operating expenses for the years ended December 31, 2025, 2024 and 2023.
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions.
On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
The $34.4 million increase in interest expense for the year ended December 31, 2024 was driven by a 28 bps increase in the average cost of funds, combined with a $428.4 million increase in average borrowings.
The $34.4 million increase in interest expense for the year ended December 31, 2024 was due to a 28 bps increase in the average cost of funds, combined with a $428.4 million increase in average borrowings.
(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.
(2) Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP interest expense.
During the years ended December 31, 2024, 2023 and 2022, the Company received proceeds of $904.3 million, $835.1 million, and $2,759.9 million, respectively, from the sales and maturities of RMBS and U.S. Treasury securities. Approximately $221.7 million of these proceeds received in 2024 consisted of pools that were consolidated into a larger pool and simultaneously acquired by us.
During the years ended December 31, 2025, 2024 and 2023, the Company received proceeds of $1,455.1 million, $904.3 million, and $835.1 million, respectively, from the sales and maturities of RMBS and U.S. Treasury securities. Approximately $221.7 million of the 2024 proceeds received consisted of pools that were consolidated into a larger pool and simultaneously acquired by us.
The following table presents the 3-month constant prepayment rate (“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.
The following table presents the 3-month constant prepayment rate (“CPR”) experienced on our portfolio, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year.
Net Interest Income During the year ended December 31, 2024, we generated $5.3 million of net interest income, consisting of $241.6 million of interest income from RMBS assets offset by $236.3 million of interest expense on borrowings.
For the comparable period ended December 31, 2024, we generated $5.3 million of net interest income, consisting of $241.6 million of interest income from RMBS assets offset by $236.3 million of interest expense on borrowings.
During the year ended December 31, 2024, we received principal repayments of $495.3 million, compared to $326.7 million for the year ended December 31, 2023. The average three month prepayment speeds for the quarters ended December 31, 2024 and 2023 were 10.5% and 5.5%, respectively.
During the year ended December 31, 2025, we received principal repayments of $903.4 million, compared to $495.3 million for the year ended December 31, 2024. The average three month prepayment speeds for the quarters ended December 31, 2025 and 2024 were 15.7% and 10.5%, respectively.
(in thousands, except per share amounts) Year Per Share Amount Total 2013 $ 6.975 $ 4,662 2014 10.800 22,643 2015 9.600 38,748 2016 8.400 41,388 2017 8.400 70,717 2018 5.350 55,814 2019 4.800 54,421 2020 3.950 53,570 2021 3.900 97,601 2022 2.475 87,906 2023 1.800 81,127 2024 1.440 96,309 2025 YTD (1) 0.240 22,097 Totals $ 68.130 $ 727,003 (1) On January 8, 2025, the Company declared a dividend of $0.12 per share to be paid on February 27, 2025.
(in thousands, except per share amounts) Year Per Share Amount Total 2013 $ 6.975 $ 4,662 2014 10.800 22,643 2015 9.600 38,748 2016 8.400 41,388 2017 8.400 70,717 2018 5.350 55,814 2019 4.800 54,421 2020 3.950 53,570 2021 3.900 97,601 2022 2.475 87,906 2023 1.800 81,127 2024 1.440 96,309 2025 1.440 190,930 2026 YTD(1) 0.240 44,957 Totals $ 69.570 $ 940,793 (1) On January 7, 2026, the Company declared a dividend of $0.12 per share to be paid on February 26, 2026.
On February 12, 2025, the Company declared a dividend of $0.12 per share to be paid on March 28, 2025. The effects of these dividends are included in the table above but are not reflected in the Company’s financial statements as of December 31, 2024. 66 Table of Contents
On February 11, 2026, the Company declared a dividend of $0.12 per share to be paid on March 30, 2026. The effects of these dividends are included in the table above but are not reflected in the Company’s financial statements as of December 31, 2025. 62 Table of Contents
On an economic basis, our interest expense on borrowings for the years ended December 31, 2024, 2023 and 2022 was $119.5 million, $109.6 million and $48.1 million, respectively, resulting in $122.1 million, $68.0 million and $96.5 million of economic net interest income, respectively.
On an economic basis, our interest expense on borrowings for the years ended December 31, 2025, 2024 and 2023 was $222.4 million, $119.5 million and $109.6 million, respectively, resulting in $191.6 million, $122.1 million and $68.0 million of economic net interest income, respectively.
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.
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. 59 Table of Contents Higher long-term rates can also affect the value of our Agency RMBS.
Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category.
Specifically, the CPR in the chart below represents the three month prepayment rate of the securities.
There was a 156 bps increase in the average economic cost of funds to 2.75% for the year ended December 31, 2023 from 1.19% for the year ended December 31, 2022. Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense.
There was a 4 bps decrease in the average economic cost of funds to 2.71% for the year ended December 31, 2024 from 2.75% for the year ended December 31, 2023. Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense.
Results of Operations Described below are the Company’s results of operations for the year ended December 31, 2024, as compared to the Company’s results of operations for the years ended December 31, 2023 and 2022. Net Income (Loss) Summary Net income for the year ended December 31, 2024 was $37.7 million, or $0.57 per share.
Results of Operations Described below are the Company’s results of operations for the year ended December 31, 2025, as compared to the Company’s results of operations for the years ended December 31, 2024 and 2023. Net Income (Loss) Summary Net income for the year ended December 31, 2025 was $159.0 million, or $1.24 per share.
Our average cost of funds was 5.35% for the year ended December 31, 2024, compared to 5.07% for the comparable period in 2023. There was a $428.4 million increase in average outstanding borrowings during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Our average cost of funds was 4.27% for the year ended December 31, 2025, compared to 5.35% for the comparable period in 2024. There was a $2,749.6 million increase in average outstanding borrowings during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
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 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.
Capital Expenditures At December 31, 2024, we had no material commitments for capital expenditures. 59 Table of Contents Stockholders ’ Equity On October 29, 2021, we entered into an equity distribution agreement (the “October 2021 Equity Distribution Agreement”) with four sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
Stockholders ’ Equity On October 29, 2021, we entered into an equity distribution agreement (the “October 2021 Equity Distribution Agreement”) with four sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares of our common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions.
The components of net income (loss) for the years ended December 31, 2024, 2023 and 2022 are presented in the table below: (in thousands) 2024 2023 2022 Interest income $ 241,577 $ 177,569 $ 144,633 Interest expense (236,281 ) (201,918 ) (61,708 ) Net interest income 5,296 (24,349 ) 82,925 Gains (losses) on RMBS and derivative contracts 49,110 3,654 (323,929 ) Net portfolio income (loss) 54,406 (20,695 ) (241,004 ) Expenses (16,744 ) (18,531 ) (17,449 ) Net income (loss) $ 37,662 $ (39,226 ) $ (258,453 ) GAAP and Non-GAAP Reconciliations In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including “Net Earnings Excluding Realized and Unrealized Gains and Losses”, “Economic Interest Expense”, “Economic Net Interest Income,” “Interest Income – Inclusive of Premium Amortization/Discount Accretion” and “Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion.” Net Earnings Excluding Realized and Unrealized Gains and Losses We have elected to account for our Agency RMBS under the fair value option.
The components of net income (income (loss)) for the years ended December 31, 2025, 2024 and 2023 are presented in the table below: (in thousands) 2025 2024 2023 Interest income $ 414,001 $ 241,577 $ 177,569 Interest expense (305,732 ) (236,281 ) (201,918 ) Net interest income 108,269 5,296 (24,349 ) Gains on RMBS and derivative contracts 71,241 49,110 3,654 Net portfolio income (loss) 179,510 54,406 (20,695 ) Expenses (20,480 ) (16,744 ) (18,531 ) Net income (loss) $ 159,030 $ 37,662 $ (39,226 ) GAAP and Non-GAAP Reconciliations In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including “Net Earnings Excluding Realized and Unrealized Gains and Losses”, “Economic Interest Expense”, “Economic Net Interest Income,” “Interest Income – Inclusive of Premium Amortization/Discount Accretion” and “Yield on Average RMBS – Inclusive of Premium Amortization/Discount Accretion.” 42 Table of Contents Net Earnings Excluding Realized and Unrealized Gains and Losses We have elected to account for our Agency RMBS under the fair value option.
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.
It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for PT Agency RMBS.
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.
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.
The average term to maturity of the outstanding repurchase agreements was 26 days at December 31, 2024 and 26 days at December 31, 2023.
The average term to maturity of the outstanding repurchase agreements was 39 days as of December 31, 2025 and 26 days as of December 31, 2024.
There was a 354 bps increase in the average cost of funds and an $57.0 million decrease in average outstanding borrowings during the year ended December 31, 2023 as compared to the year ended December 31, 2022. Our economic interest expense was $119.5 million, $109.6 million and $48.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
There was a 28 bps increase in the average cost of funds and an $428.4 million increase in average outstanding borrowings during the year ended December 31, 2024 as compared to the year ended December 31, 2023. Our economic interest expense was $222.4 million, $119.5 million and $109.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.
An effective duration of 4.400 indicates that an interest rate increase of 1.0% would be expected to cause a 4.400% decrease in the value of the RMBS in the Company’s investment portfolio at December 31, 2023. These figures include the structured securities in the portfolio, but do not include the effect of the Company’s funding cost hedges.
As of December 31, 2024, the Company's portfolio had an effective duration of 4.200, indicating that an interest rate increase of 1.0% would be expected to cause a 4.200% decrease in the value of the RMBS in the Company’s investment portfolio. These figures do not include the effect of the Company’s funding cost hedges.
(in thousands) 2024 2023 2022 Management fees $ 9,354 $ 10,491 $ 10,447 Overhead allocation 2,644 2,389 2,042 Incentive compensation 723 1,419 957 Directors fees and liability insurance 1,358 1,322 1,251 Audit, legal and other professional fees 1,341 1,495 1,143 Direct REIT operating expenses 787 715 831 Other administrative 537 700 778 Total expenses $ 16,744 $ 18,531 $ 17,449 54 Table of Contents As of December 31, 2023, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees.
(in thousands) 2025 2024 2023 Management fees $ 12,723 $ 9,354 $ 10,491 Overhead allocation 2,782 2,644 2,389 Incentive compensation 450 723 1,419 Directors fees and liability insurance 1,340 1,358 1,322 Audit, legal and other professional fees 1,338 1,341 1,495 Direct REIT operating expenses 1,208 787 715 Other administrative 639 537 700 Total expenses $ 20,480 $ 16,744 $ 18,531 As of December 31, 2023, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees.
($ in thousands) 2024 2023 Total Cost Average Price Weighted Average Yield Total Cost Average Price Weighted Average Yield Pass-through RMBS $ 2,393,320 $ 102.06 5.70 % $ 1,521,070 $ 100.27 5.40 % Borrowings As of December 31, 2024, 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 25 of these counterparties.
($ in thousands) 2025 2024 Total Cost Average Price Weighted Average Yield Total Cost Average Price Weighted Average Yield PT RMBS $ 7,464,907 $ 102.00 5.27 % $ 2,393,320 $ 102.06 5.70 % Borrowings As of December 31, 2025, 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 28 of these counterparties.
Securing the repurchase agreement obligations as of December 31, 2024 are RMBS with an estimated fair value, including accrued interest, of approximately $5,231.9 million. Through February 21, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at December 31, 2024 with maturities extending to various dates through May 19, 2025.
Securing the repurchase agreement obligations as of December 31, 2025 are RMBS with an estimated fair value, including accrued interest, of approximately $10,551.3 million. Through February 20, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed as of December 31, 2025 with maturities extending to various dates through November 13, 2026.
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR and T-Note futures contracts, dual digital options or interest rate swaptions. 63 Table of Contents Summary The outlook for the fixed income market pivoted early in the fourth quarter of 2024.
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, dual digital options or interest rate swaptions.
Our average cost of funds calculated on a GAAP basis was 26 bps above one-month average SOFR and 6 bps above six-month average SOFR for the year ended December 31, 2024. Our average economic cost of funds was 238 bps below one-month average SOFR and 258 bps below six-month average SOFR for the year ended December 31, 2024.
Our average cost of funds calculated on a GAAP basis was 8 bps above one-month average SOFR and 10 bps below six-month average SOFR for the year ended December 31, 2025. Our average economic cost of funds was 108 bps below one-month average SOFR and 126 bps below six-month average SOFR for the year ended December 31, 2025.
We acquire our Agency RMBS for the purpose of generating long-term returns, and not for the short-term investment of idle capital. As discussed in Note 13 to the financial statements, our Agency RMBS are valued using Level 2 valuations, and such valuations currently are determined by our manager based on independent pricing sources and/or third party broker quotes, when available.
As discussed in Note 13 to the financial statements, our Agency RMBS are valued using Level 2 valuations, and such valuations currently are determined by our manager based on independent pricing sources and/or third party broker quotes, when available.
U.S Fixed-Rate Fixed-Rate 90 Day Treasury Treasury Mortgage Mortgage Average Rate (1) Rate (1) Rate (2) Rate (2) SOFR (3) December 31, 2024 4.38 % 4.57 % 6.00 % 6.85 % 4.69 % September 30, 2024 3.58 % 3.80 % 5.16 % 6.08 % 5.31 % June 30, 2024 4.33 % 4.34 % 6.16 % 6.86 % 5.35 % March 31, 2024 4.22 % 4.21 % 6.11 % 6.79 % 5.35 % December 31, 2023 3.84 % 3.87 % 5.93 % 6.61 % 5.36 % September 30, 2023 4.61 % 4.57 % 6.72 % 7.31 % 5.27 % June 30, 2023 4.13 % 3.82 % 6.06 % 6.71 % 5.00 % March 31, 2023 3.61 % 3.49 % 5.56 % 6.32 % 4.51 % December 31, 2022 4.00 % 3.88 % 5.68 % 6.42 % 3.62 % September 30, 2022 4.04 % 3.80 % 5.96 % 6.70 % 2.13 % June 30, 2022 3.00 % 2.97 % 4.83 % 5.70 % 0.70 % March 31, 2022 2.42 % 2.33 % 3.83 % 4.67 % 0.09 % (1) Historical 5 and 10 Year U.S.
U.S Fixed-Rate Fixed-Rate 90 Day Treasury Treasury Mortgage Mortgage Average Rate (1) Rate (1) Rate (2) Rate (2) SOFR (3) December 31, 2025 3.72 % 4.16 % 5.44 % 6.15 % 4.01 % September 30, 2025 3.73 % 4.15 % 5.49 % 6.30 % 4.35 % June 30, 2025 3.80 % 4.23 % 5.89 % 6.77 % 4.34 % March 31, 2025 3.98 % 4.25 % 5.89 % 6.65 % 4.35 % December 31, 2024 4.38 % 4.57 % 6.00 % 6.85 % 4.69 % September 30, 2024 3.58 % 3.80 % 5.16 % 6.08 % 5.31 % June 30, 2024 4.33 % 4.34 % 6.16 % 6.86 % 5.35 % March 31, 2024 4.22 % 4.21 % 6.11 % 6.79 % 5.35 % December 31, 2023 3.84 % 3.87 % 5.93 % 6.61 % 5.36 % September 30, 2023 4.61 % 4.57 % 6.72 % 7.31 % 5.27 % June 30, 2023 4.13 % 3.82 % 6.06 % 6.71 % 5.00 % March 31, 2023 3.61 % 3.49 % 5.56 % 6.32 % 4.51 % (1) Historical 5 and 10 Year U.S.
(in thousands) 2024 2023 2022 Realized losses on sales of RMBS $ (4,602 ) $ (22,642 ) $ (133,695 ) Unrealized losses on RMBS and U.S. Treasury Notes (79,842 ) (18,941 ) (642,710 ) Total losses on RMBS and U.S.
(in thousands) 2025 2024 2023 Realized losses on sales of RMBS $ (6,321 ) $ (4,602 ) $ (22,642 ) Unrealized gains (losses) on RMBS and U.S. Treasury Notes 200,231 (79,842 ) (18,941 ) Total gains (losses) on RMBS and U.S.
This stock repurchase program has no termination date. From the inception of the stock repurchase program through December 31, 2024, the Company repurchased a total of 5,144,602 shares at an aggregate cost of approximately $77.5 million, including commissions and fees, for a weighted average price of $15.07 per share.
This stock repurchase program has no termination date. From the inception of the stock repurchase program through December 31, 2025, the Company repurchased a total of 6,257,826 shares at an aggregate cost of approximately $84.8 million, including commissions and fees, for a weighted average price of $13.55 per share.
There was a 4 bps decrease in the average economic cost of funds to 2.71% for the year ended December 31, 2024 from 2.75% for the year ended December 31, 2023.
There was a 40 bps increase in the average economic cost of funds to 3.11% for the year ended December 31, 2025 from 2.71% for the year ended December 31, 2024.
For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. 65 Table of Contents Dividends In addition to other requirements that must be satisfied to continue to qualify as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding any net capital gains.
Dividends In addition to other requirements that must be satisfied to continue to qualify as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding any net capital gains.
During the year ended December 31, 2024, the Company awarded shares of Company common stock with a fair value of $0.3 million. Accrued incentive compensation for the year ended December 31, 2024 includes a reversal of the over accrual of this liability. We are externally managed and advised by Bimini Advisors pursuant to the terms of a management agreement.
During the year ended December 31, 2024, the Company awarded shares of Company common stock with a fair value of $0.3 million. Accrued incentive compensation for the year ended December 31, 2024 includes a reversal of the over accrual of this liability.
As of December 31, 2024, we had obligations outstanding under the repurchase agreements of approximately $5,025.5 million with a net weighted average borrowing cost of 4.66%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 8 to 139 days, with a weighted average remaining maturity of 26 days.
As of December 31, 2025, we had obligations outstanding under the repurchase agreements of approximately $10,115.5 million with a net weighted average borrowing cost of 3.98%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 5 to 317 days, with a weighted average remaining maturity of 39 days.
Changes in fair value of all of our Agency RMBS during the period are recorded in earnings and reported as unrealized gains (losses) on mortgage-backed securities in the accompanying statements of comprehensive income (loss).
Changes in fair value of all of our Agency RMBS during the period are recorded in earnings and reported as unrealized gains (losses) on mortgage-backed securities in the accompanying statements of comprehensive income (loss). For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security.
Income on pass-through securities, POs and CMOs that contain principal balances is based on the stated interest rate of the security. As a result of accounting for our RMBS under the fair value option, premium or discount present at the date of purchase is not amortized.
As a result of accounting for our RMBS under the fair value option, premium or discount present at the date of purchase is not amortized. For IOs, IIOs and CMOs that do not contain principal balances, income is accrued based on the carrying value and the effective yield.
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.
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.
As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments. 45 Table of Contents Presenting net earnings excluding realized and unrealized gains and losses allows management to: (i) isolate the net interest income and other expenses of the Company over time, free of all fair value adjustments and (ii) assess the effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance.
Presenting net earnings excluding realized and unrealized gains and losses allows management to: (i) isolate the net interest income and other expenses of the Company over time, free of all fair value adjustments and (ii) assess the effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance.
Changes in fair value of these instruments are presented in a separate line item in the Company’s statements of comprehensive income (loss) and are not included in interest expense.
Changes in fair value of these instruments are presented in a separate line item in the Company’s statements of comprehensive income (loss) and are not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.
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 (expense) and net interest spread for each quarter in 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022 on both a GAAP and economic basis. 49 Table of Contents ($ 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 December 31, 2024 $ 5,348,057 $ 71,996 5.38 % $ 5,128,207 $ 63,853 $ 36,071 4.98 % 2.81 % September 30, 2024 4,984,279 67,646 5.43 % 4,788,287 67,306 35,382 5.62 % 2.96 % June 30, 2024 4,203,416 53,064 5.05 % 4,028,601 53,761 24,302 5.34 % 2.41 % March 31, 2024 3,887,545 48,871 5.03 % 3,708,573 51,361 23,774 5.54 % 2.56 % December 31, 2023 4,207,118 49,539 4.71 % 4,066,298 52,325 27,164 5.15 % 2.67 % September 30, 2023 4,447,098 50,107 4.51 % 4,314,332 58,705 34,265 5.44 % 3.18 % June 30, 2023 4,186,939 39,911 3.81 % 3,985,577 48,671 25,189 4.88 % 2.53 % March 31, 2023 3,769,954 38,012 4.03 % 3,573,941 42,217 23,006 4.72 % 2.57 % December 31, 2022 3,370,608 31,897 3.79 % 3,256,153 29,512 20,098 3.63 % 2.47 % September 30, 2022 3,571,037 35,611 3.99 % 3,446,420 21,361 17,207 2.48 % 2.00 % June 30, 2022 4,260,727 35,268 3.31 % 4,111,544 8,180 6,575 0.80 % 0.64 % March 31, 2022 5,545,844 41,857 3.02 % 5,354,107 2,655 4,260 0.20 % 0.32 % Years Ended December 31, 2024 $ 4,605,824 $ 241,577 5.25 % $ 4,413,417 $ 236,281 $ 119,529 5.35 % 2.71 % December 31, 2023 4,152,777 177,569 4.28 % 3,985,037 201,918 109,624 5.07 % 2.75 % December 31, 2022 4,187,054 144,633 3.45 % 4,042,056 61,708 48,140 1.53 % 1.19 % ($ in thousands) Net Interest Income Net Interest Spread GAAP Economic GAAP Economic Basis Basis (2) Basis Basis (4) Three Months Ended December 31, 2024 $ 8,143 $ 35,925 0.40 % 2.57 % September 30, 2024 340 32,264 (0.19 )% 2.47 % June 30, 2024 (697 ) 28,762 (0.29 )% 2.64 % March 31, 2024 (2,490 ) 25,097 (0.51 )% 2.47 % December 31, 2023 (2,786 ) 22,375 (0.44 )% 2.04 % September 30, 2023 (8,598 ) 15,842 (0.93 )% 1.33 % June 30, 2023 (8,760 ) 14,722 (1.07 )% 1.28 % March 31, 2023 (4,205 ) 15,006 (0.69 )% 1.46 % December 31, 2022 2,385 11,799 0.16 % 1.32 % September 30, 2022 14,250 18,404 1.51 % 1.99 % June 30, 2022 27,088 28,693 2.51 % 2.67 % March 31, 2022 39,202 37,597 2.82 % 2.70 % Years Ended December 31, 2024 $ 5,296 $ 122,048 (0.10 )% 2.54 % December 31, 2023 (24,349 ) 67,945 (0.79 )% 1.53 % December 31, 2022 82,925 96,493 1.92 % 2.26 % (1) Portfolio yields and costs of borrowings presented in the tables above and on pages 51 and 52 are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the periods presented.
($ 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 December 31, 2025 $ 9,492,369 $ 132,188 5.57 % $ 9,061,222 $ 93,705 $ 74,127 4.14 % 3.27 % September 30, 2025 7,674,720 108,434 5.65 % 7,331,428 81,515 59,643 4.45 % 3.25 % June 30, 2025 6,865,727 92,289 5.38 % 6,537,260 69,135 48,198 4.23 % 2.95 % March 31, 2025 5,995,702 81,090 5.41 % 5,722,092 61,377 40,465 4.29 % 2.83 % December 31, 2024 5,348,057 71,996 5.38 % 5,128,207 63,853 36,071 4.98 % 2.81 % September 30, 2024 4,984,279 67,646 5.43 % 4,788,287 67,306 35,382 5.62 % 2.96 % June 30, 2024 4,203,416 53,064 5.05 % 4,028,601 53,761 24,302 5.34 % 2.41 % March 31, 2024 3,887,545 48,871 5.03 % 3,708,573 51,361 23,774 5.54 % 2.56 % December 31, 2023 4,207,118 49,539 4.71 % 4,066,298 52,325 27,164 5.15 % 2.67 % September 30, 2023 4,447,098 50,107 4.51 % 4,314,332 58,705 34,265 5.44 % 3.18 % June 30, 2023 4,186,939 39,911 3.81 % 3,985,577 48,671 25,189 4.88 % 2.53 % March 31, 2023 3,769,954 38,012 4.03 % 3,573,941 42,217 23,006 4.72 % 2.57 % Years Ended December 31, 2025 $ 7,507,130 $ 414,001 5.51 % $ 7,163,001 $ 305,732 $ 222,433 4.27 % 3.11 % December 31, 2024 4,605,824 241,577 5.25 % 4,413,417 236,281 119,529 5.35 % 2.71 % December 31, 2023 4,152,777 177,569 4.28 % 3,985,037 201,918 109,624 5.07 % 2.75 % 46 Table of Contents ($ in thousands) Net Interest Income Net Interest Spread GAAP Economic GAAP Economic Basis Basis (2) Basis Basis (4) Three Months Ended December 31, 2025 $ 38,483 $ 58,061 1.43 % 2.30 % September 30, 2025 26,919 48,791 1.20 % 2.40 % June 30, 2025 23,154 44,091 1.15 % 2.43 % March 31, 2025 19,713 40,625 1.12 % 2.58 % December 31, 2024 8,143 35,925 0.40 % 2.57 % September 30, 2024 340 32,264 (0.19 )% 2.47 % June 30, 2024 (697 ) 28,762 (0.29 )% 2.64 % March 31, 2024 (2,490 ) 25,097 (0.51 )% 2.47 % December 31, 2023 (2,786 ) 22,375 (0.44 )% 2.04 % September 30, 2023 (8,598 ) 15,842 (0.93 )% 1.33 % June 30, 2023 (8,760 ) 14,722 (1.07 )% 1.28 % March 31, 2023 (4,205 ) 15,006 (0.69 )% 1.46 % Years Ended December 31, 2025 $ 108,269 $ 191,568 1.24 % 2.40 % December 31, 2024 5,296 122,048 (0.10 )% 2.54 % December 31, 2023 (24,349 ) 67,945 (0.79 )% 1.53 % (1) Portfolio yields and costs of borrowings presented in the tables above are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the periods presented.
The $64.0 million increase in interest income was driven by a 97 basis points ("bps") increase in yield on average RMBS, combined with a $453.0 million increase in average RMBS.
The $172.4 million increase in interest income was driven by a 26 basis points ("bps") increase in yield on average RMBS, combined with a $2,901.3 million increase in average RMBS.
As of December 31, 2024, the Fed had reduced its balance sheet for Agency RMBS by approximately $507 billion from the peak to $2.2 trillion, shedding approximately 37% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since May 2021. 61 Table of Contents On September 14, 2021, the U.S.
As of December 31, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $741 billion from the peak to $2.0 trillion, shedding approximately 54% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since December 2020.
The fair value of interest rate swaptions is determined using an option pricing model. The fair value of our TBA securities are determined by the Company based on independent pricing sources and/or third party broker quotes, similar to how the fair value of our Agency RMBS is derived, as discussed above.
The fair value of our TBA securities are determined by the Company based on independent pricing sources and/or third party broker quotes, similar to how the fair value of our Agency RMBS is derived, as discussed above. Income Recognition Since we commenced operations, we have elected to account for all of our Agency RMBS under the fair value option.
Subsequent to December 31, 2024, we issued a total of 10,671,164 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $85.1 million, and net proceeds of approximately $83.8 million, after commissions and fees.
Subsequent to December 31, 2025, we issued a total of 8,707,492 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $66.2 million, and net proceeds of approximately $65.2 million, after commissions and fees.
Net loss for the year ended December 31, 2023 was $39.2 million, or $0.89 per share. Net loss for the year ended December 31, 2022 was $258.5 million, or $6.90 per share.
Net income for the year ended December 31, 2024 was $37.7 million, or $0.57 per share. Net loss for the year ended December 31, 2023 was $39.2 million, or $0.89 per share.
Alternatively, our Manager could opt to have the value of all of our positions in Agency RMBS determined by either an independent third-party or do so internally. 64 Table of Contents In managing our portfolio, Bimini Advisors employs the following four-step process at each valuation date to determine the fair value of our Agency RMBS: • First, our Manager obtains fair values from subscription-based independent pricing sources.
In managing our portfolio, Bimini Advisors employs the following four-step process at each valuation date to determine the fair value of our Agency RMBS: • First, our Manager obtains fair values from subscription-based independent pricing sources.
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.
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.
(3) Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period divided by average RMBS.
(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.
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.
Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value.
Through December 31, 2024, we issued a total of 19,842,089 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $164.9 million, and net proceeds of approximately $162.1 million, after commissions and fees.
Through December 31, 2025, we issued a total of 30,265,963 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $223.1 million, and net proceeds of approximately $219.7 million, after commissions and fees.
Through December 31, 2024, we issued a total of 19,842,089 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $164.9 million, and net proceeds of approximately $162.1 million, after commissions and fees.
Through December 31, 2025, we issued a total of 30,265,963 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $223.1 million, and net proceeds of approximately $219.7 million, after commissions and fees.
The $140.2 million increase in interest expense for the year ended December 31, 2023 was due to a 354 bps increase in the average cost of funds, partially offset by a $57.0 million decrease in average borrowings.
The $69.5 million increase in interest expense for the year ended December 31, 2025 was driven by a $2,749.6 million increase in average borrowings, that was partially offset by 108 bps decrease in the average cost of funds.

… 147 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+0 added−0 removed38 unchanged
Biggest changeInterest Rate Sensitivity (1) Portfolio Market Book Change in Interest Rate Value (2)(3) Value (2)(4) As of December 31, 2024 -200 Basis Points (1.20 )% (9.41 )% -100 Basis Points (0.06 )% (0.43 )% -50 Basis Points 0.10 % 0.80 % +50 Basis Points (0.35 )% (2.75 )% +100 Basis Points (0.93 )% (7.31 )% +200 Basis Points (2.67 )% (20.99 )% As of December 31, 2023 -200 Basis Points (2.03 )% (16.78 )% -100 Basis Points (0.54 )% (4.48 )% -50 Basis Points (0.17 )% (1.40 )% +50 Basis Points 0.00 % 0.02 % +100 Basis Points (0.15 )% (1.23 )% +200 Basis Points (0.81 )% (6.70 )% (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.
Biggest changeInterest Rate Sensitivity (1) Portfolio Market Book Change in Interest Rate Value (2)(3) Value (2)(4) As of December 31, 2025 -200 Basis Points (2.23 )% (17.30 )% -100 Basis Points (0.65 )% (5.07 )% -50 Basis Points (0.15 )% (1.14 )% +50 Basis Points (0.29 )% (2.22 )% +100 Basis Points (0.98 )% (7.62 )% +200 Basis Points (3.27 )% (25.31 )% As of December 31, 2024 -200 Basis Points (1.20 )% (9.41 )% -100 Basis Points (0.06 )% (0.43 )% -50 Basis Points 0.10 % 0.80 % +50 Basis Points (0.35 )% (2.75 )% +100 Basis Points (0.93 )% (7.31 )% +200 Basis Points (2.67 )% (20.99 )% (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.
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. 68 Table of Contents 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.
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. 64 Table of Contents 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.
In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur realized losses. 69 Table of Contents 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.
In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur realized losses. 65 Table of Contents 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 following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, 2024 and December 31, 2023, assuming rates instantaneously fall 200 bps, fall 100 bps, fall 50 bps, rise 50 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency RMBS’ effective duration to movements in interest rates.
The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, 2025 and December 31, 2024, assuming rates instantaneously fall 200 bps, fall 100 bps, fall 50 bps, rise 50 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency RMBS’ effective duration to movements in interest rates.
We have a negatively convex asset profile and a linear to slightly positively convex hedge portfolio (short positions). It is not uncommon for us to have losses in both directions. All changes in value in the table below are measured as percentage changes from the investment portfolio value and net asset value at the base interest rate scenario.
We have a negatively convex asset profile and a linear to slightly positively convex hedge portfolio (short positions). It is common for us to have losses in both directions. All changes in value in the table below are measured as percentage changes from the investment portfolio value and net asset value at the base interest rate scenario.
The base interest rate scenario assumes interest rates and prepayment projections as of December 31, 2024 and 2023. Actual results could differ materially from estimates , especially in the current market environment.
The base interest rate scenario assumes interest rates and prepayment projections as of December 31, 2025 and 2024. Actual results could differ materially from estimates , especially in the current market environment.
However, there is no guarantee our efforts to manage counterparty credit risk will be successful, and we could suffer significant losses if unsuccessful. 70 Table of Contents
However, there is no guarantee our efforts to manage counterparty credit risk will be successful, and we could suffer significant losses if unsuccessful. 66 Table of Contents
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.
Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our hedge instruments. We generally calculate duration using various third party models. However, empirical results and various third party models may produce different duration numbers for the same securities.
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. 67 Table of Contents 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, 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. 63 Table of Contents We face the risk that the market value of our RMBS assets will increase or decrease at different rates than that of our hedging instruments.
As of December 31, 2024, we had unrestricted cash and cash equivalents of $309.3 million and unpledged securities of approximately $44.2 million (not including unsettled securities purchases or securities pledged to us) available to meet margin calls on our repurchase agreements and derivative contracts, and for other corporate purposes.
As of December 31, 2025, we had unrestricted cash and cash equivalents of $665.9 million and unpledged securities of approximately $125.9 million (not including unsettled securities purchases or securities pledged to us) available to meet margin calls on our repurchase agreements and derivative contracts, and for other corporate purposes.

Other ORC 10-K year-over-year comparisons