Maryland
|
27-3269228
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
|
Accelerated filer
|
|
Non-accelerated filer
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
|
|
|
Emerging growth company
|
|
ITEM 1. Condensed Financial Statements
|
1
|
|
Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016
|
1
|
|
Statements of Operations (unaudited) for the three months ended March 31, 2017 and 2016
|
2
|
|
Statement of Stockholders' Equity (unaudited) for the three months ended March 31, 2017
|
3
|
|
Statements of Cash Flows (unaudited) for the three months ended March 31, 2017 and 2016
|
4
|
|
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
24
|
|
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
|
40
|
|
ITEM 4. Controls and Procedures
|
44
|
ITEM 1. Legal Proceedings
|
45
|
ITEM 1A. Risk Factors
|
45
|
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
45
|
ITEM 3. Defaults upon Senior Securities
|
45
|
ITEM 4. Mine Safety Disclosures
|
45
|
ITEM 5. Other Information
|
45
|
ITEM 6. Exhibits
|
46
|
SIGNATURES
|
47
|
(in thousands)
|
||||||||
March 31, 2017
|
December 31, 2016
|
|||||||
Cash and cash equivalents
|
$
|
95,063
|
$
|
73,475
|
||||
Restricted cash
|
17,660
|
20,950
|
||||||
Total cash, cash equivalents and restricted cash
|
$
|
112,723
|
$
|
94,425
|
(in thousands)
|
||||||||
March 31, 2017
|
December 31, 2016
|
|||||||
Pass-Through RMBS Certificates:
|
||||||||
Hybrid Adjustable-rate Mortgages
|
$
|
43,756
|
$
|
45,459
|
||||
Adjustable-rate Mortgages
|
1,947
|
2,062
|
||||||
Fixed-rate Mortgages
|
3,061,957
|
2,826,694
|
||||||
Total Pass-Through Certificates
|
3,107,660
|
2,874,215
|
||||||
Structured RMBS Certificates:
|
||||||||
Interest-Only Securities
|
107,214
|
69,726
|
||||||
Inverse Interest-Only Securities
|
47,143
|
78,233
|
||||||
Total Structured RMBS Certificates
|
154,357
|
147,959
|
||||||
Total
|
$
|
3,262,017
|
$
|
3,022,174
|
(in thousands)
|
||||||||
March 31, 2017
|
December 31, 2016
|
|||||||
Greater than one year and less than five years
|
$
|
113
|
$
|
157
|
||||
Greater than five years and less than ten years
|
234
|
277
|
||||||
Greater than or equal to ten years
|
3,261,670
|
3,021,740
|
||||||
Total
|
$
|
3,262,017
|
$
|
3,022,174
|
($ in thousands)
|
||||||||||||||||
OVERNIGHT
|
BETWEEN 2
|
BETWEEN 31
|
||||||||||||||
(1 DAY OR
|
AND
|
AND
|
||||||||||||||
LESS)
|
30 DAYS
|
90 DAYS
|
TOTAL
|
|||||||||||||
March 31, 2017
|
||||||||||||||||
Fair market value of securities pledged, including
|
||||||||||||||||
accrued interest receivable
|
$
|
-
|
$
|
2,499,265
|
$
|
745,018
|
$
|
3,244,283
|
||||||||
Repurchase agreement liabilities associated with
|
||||||||||||||||
these securities
|
$
|
-
|
$
|
2,346,488
|
$
|
704,120
|
$
|
3,050,608
|
||||||||
Net weighted average borrowing rate
|
-
|
1.00
|
%
|
1.04
|
%
|
1.01
|
%
|
|||||||||
December 31, 2016
|
||||||||||||||||
Fair market value of securities pledged, including
|
||||||||||||||||
accrued interest receivable
|
$
|
-
|
$
|
2,284,815
|
$
|
686,065
|
$
|
2,970,880
|
||||||||
Repurchase agreement liabilities associated with
|
||||||||||||||||
these securities
|
$
|
-
|
$
|
2,154,766
|
$
|
638,939
|
$
|
2,793,705
|
||||||||
Net weighted average borrowing rate
|
-
|
1.01
|
%
|
0.96
|
%
|
1.00
|
%
|
(in thousands)
|
|||||||||
Derivative Instruments and Related Accounts
|
Balance Sheet Location
|
March 31, 2017
|
December 31, 2016
|
||||||
Assets
|
|||||||||
Interest rate swaps
|
Derivative assets, at fair value
|
$
|
12,430
|
$
|
10,302
|
||||
TBA securities
|
Derivative assets, at fair value
|
-
|
63
|
||||||
Total derivative assets, at fair value
|
$
|
12,430
|
$
|
10,365
|
|||||
Liabilities
|
|||||||||
Interest rate swaps
|
Derivative liabilities, at fair value
|
$
|
1,397
|
$
|
802
|
||||
TBA securities
|
Derivative liabilities, at fair value
|
2,236
|
1,180
|
||||||
Total derivative liabilities, at fair value
|
$
|
3,633
|
$
|
1,982
|
|||||
Margin Balances Posted to Counterparties
|
|||||||||
Futures contracts
|
Restricted cash
|
$
|
12,001
|
$
|
9,419
|
||||
TBA securities
|
Restricted cash
|
1,219
|
446
|
||||||
Total margin balances on derivative contracts
|
$
|
13,220
|
$
|
9,865
|
($ in thousands)
|
||||||||||||||||
March 31, 2017
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Contract
|
Average
|
Average
|
||||||||||||||
Notional
|
Entry
|
Effective
|
Open
|
|||||||||||||
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity
(1)
|
||||||||||||
Eurodollar Futures Contracts (Short Positions)
|
||||||||||||||||
2017
|
$
|
866,667
|
1.53
|
%
|
1.44
|
%
|
$
|
(556
|
)
|
|||||||
2018
|
1,000,000
|
1.84
|
%
|
1.83
|
%
|
(91
|
)
|
|||||||||
2019
|
1,000,000
|
2.09
|
%
|
2.20
|
%
|
1,050
|
||||||||||
2020
|
925,000
|
2.62
|
%
|
2.43
|
%
|
(1,767
|
)
|
|||||||||
Total / Weighted Average
|
$
|
953,333
|
2.06
|
%
|
2.02
|
%
|
$
|
(1,364
|
)
|
|||||||
Treasury Note Futures Contracts (Short Position)
(2)
|
||||||||||||||||
June 2017 10 year T-Note futures
|
||||||||||||||||
(Jun 2017 - Jun 2027 Hedge Period)
|
$
|
465,000
|
2.22
|
%
|
2.20
|
%
|
$
|
(2,347
|
)
|
($ in thousands)
|
||||||||||||||||
December 31, 2016
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Contract
|
Average
|
Average
|
||||||||||||||
Notional
|
Entry
|
Effective
|
Open
|
|||||||||||||
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity
(1)
|
||||||||||||
Eurodollar Futures Contracts (Short Positions)
|
||||||||||||||||
2017
|
$
|
600,000
|
1.48
|
%
|
1.28
|
%
|
$
|
(1,206
|
)
|
|||||||
2018
|
600,000
|
1.81
|
%
|
1.82
|
%
|
76
|
||||||||||
2019
|
675,000
|
2.00
|
%
|
2.21
|
%
|
1,429
|
||||||||||
2020
|
700,000
|
2.65
|
%
|
2.45
|
%
|
(1,394
|
)
|
|||||||||
Total / Weighted Average
|
$
|
643,750
|
2.01
|
%
|
1.97
|
%
|
$
|
(1,095
|
)
|
|||||||
Treasury Note Futures Contracts (Short Position)
(2)
|
||||||||||||||||
March 2017 10 year T-Note futures
|
||||||||||||||||
(Mar 2017 - Mar 2027 Hedge Period)
|
$
|
465,000
|
2.27
|
%
|
2.24
|
%
|
$
|
(3,134
|
)
|
(1)
|
Open equity represents the cumulative gains (losses) recorded on open futures positions from inception.
|
(2)
|
T-Note futures contracts were valued at a price of $124.56 at March 31, 2017 and $124.28 at December 31, 2016. The notional contract values of the short positions was $579.2 million and $577.9 million at March 31, 2017 and December 31, 2016, respectively.
|
($ in thousands)
|
||||||||||||||||||||
Average
|
Net
|
|||||||||||||||||||
Fixed
|
Average
|
Estimated
|
Average
|
|||||||||||||||||
Notional
|
Pay
|
Receive
|
Fair
|
Maturity
|
||||||||||||||||
Amount
|
Rate
|
Rate
|
Value
|
(Years)
|
||||||||||||||||
March 31, 2017
|
||||||||||||||||||||
Expiration > 1 to ≤ 3 years
|
$
|
600,000
|
1.05
|
%
|
1.04
|
%
|
$
|
12,430
|
2.9
|
|||||||||||
Expiration > 3 to ≤ 5 years
|
200,000
|
2.14
|
%
|
1.15
|
%
|
(1,397
|
)
|
4.9
|
||||||||||||
$
|
800,000
|
1.32
|
%
|
1.07
|
%
|
$
|
11,033
|
3.4
|
||||||||||||
December 31, 2016
|
||||||||||||||||||||
Expiration > 3 to ≤ 5 years
|
$
|
700,000
|
1.20
|
%
|
0.91
|
%
|
$
|
9,500
|
3.4
|
($ in thousands)
|
|||||||||||||||||||
Notional
|
Net
|
||||||||||||||||||
Amount
|
Cost
|
Market
|
Carrying
|
||||||||||||||||
Long (Short)
(1)
|
Basis
(2)
|
Value
(3)
|
Value
(4)
|
||||||||||||||||
March 31, 2017
|
|||||||||||||||||||
30-Year TBA securities:
|
|||||||||||||||||||
3.0 |
%
|
|
$
|
(150,000
|
)
|
$
|
(147,406
|
)
|
$
|
(148,781
|
)
|
$
|
(1,375
|
)
|
|||||
4.5 |
%
|
|
(297,000
|
)
|
(317,199
|
)
|
(318,060
|
)
|
(861
|
)
|
|||||||||
$
|
(447,000
|
)
|
$
|
(464,605
|
)
|
$
|
(466,841
|
)
|
$
|
(2,236
|
)
|
||||||||
December 31, 2016
|
|||||||||||||||||||
30-Year TBA securities:
|
|||||||||||||||||||
3.0 |
%
|
|
$
|
(100,000
|
)
|
$
|
(99,406
|
)
|
$
|
(99,344
|
)
|
$
|
62
|
||||||
4.0 |
%
|
|
(100,000
|
)
|
(103,898
|
)
|
(105,078
|
)
|
(1,180
|
)
|
|||||||||
$
|
(200,000
|
)
|
$
|
(203,304
|
)
|
$
|
(204,422
|
)
|
$
|
(1,118
|
)
|
(1)
|
Notional amount represents the par value (or principal balance) of the underlying Agency RMBS.
|
(2)
|
Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
|
(3)
|
Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end.
|
(4)
|
Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities), at fair value in our consolidated balance sheets.
|
(in thousands)
|
||||||||
2017
|
2016
|
|||||||
Eurodollar futures contracts (short positions)
|
$
|
(571
|
)
|
$
|
(17,505
|
)
|
||
T-Note futures contracts (short position)
|
(3,851
|
)
|
(8,975
|
)
|
||||
Interest rate swaps
|
3
|
(21
|
)
|
|||||
Receiver swaptions
|
-
|
36
|
||||||
Net TBA securities
|
-
|
(1,125
|
)
|
|||||
$
|
(4,419
|
)
|
$
|
(27,590
|
)
|
(in thousands)
|
||||||||||||
March 31, 2017
|
||||||||||||
Repurchase
|
Derivative
|
|||||||||||
Assets Pledged to Counterparties
|
Agreements
|
Agreements
|
Total
|
|||||||||
PT RMBS - fair value
|
$
|
3,103,265
|
$
|
-
|
$
|
3,103,265
|
||||||
Structured RMBS - fair value
|
128,540
|
-
|
128,540
|
|||||||||
Accrued interest on pledged securities
|
12,478
|
-
|
12,478
|
|||||||||
Restricted cash
|
4,440
|
13,220
|
17,660
|
|||||||||
Total
|
$
|
3,248,723
|
$
|
13,220
|
$
|
3,261,943
|
(in thousands)
|
||||||||||||||||||||
December 31, 2016
|
||||||||||||||||||||
Repurchase
|
Clearing
|
Derivative
|
Insurance
|
|||||||||||||||||
Assets Pledged to Counterparties
|
Agreements
|
Margin
|
Agreements
|
Capital
(1)
|
Total
|
|||||||||||||||
PT RMBS - fair value
|
$
|
2,854,062
|
$
|
-
|
$
|
-
|
$
|
1,065
|
$
|
2,855,127
|
||||||||||
Structured RMBS - fair value
|
106,195
|
10,968
|
-
|
-
|
117,163
|
|||||||||||||||
Accrued interest on pledged securities
|
10,623
|
266
|
-
|
4
|
10,893
|
|||||||||||||||
Restricted cash
|
10,835
|
-
|
9,865
|
250
|
20,950
|
|||||||||||||||
Total
|
$
|
2,981,715
|
$
|
11,234
|
$
|
9,865
|
$
|
1,319
|
$
|
3,004,133
|
(1)
|
Orchid Island Casualty, Inc. was required to maintain sufficient capital in the form of cash and securities to protect it against losses.
|
(in thousands)
|
||||||||
Assets Pledged to Orchid
|
March 31, 2017
|
December 31, 2016
|
||||||
PT RMBS - fair value
|
$
|
300
|
$
|
-
|
||||
U.S. Treasury securities - fair value
|
2,699
|
3,438
|
||||||
Cash
|
1,739
|
1,029
|
||||||
Total
|
$
|
4,738
|
$
|
4,467
|
(in thousands)
|
||||||||||||||||||||||||
Offsetting of Assets
|
||||||||||||||||||||||||
Net Amount
|
Gross Amount Not Offset in the
|
|||||||||||||||||||||||
of Assets
|
Consolidated Balance Sheet
|
|||||||||||||||||||||||
Gross Amount
|
Presented
|
Financial
|
||||||||||||||||||||||
Gross Amount
|
Offset in the
|
in the
|
Instruments
|
Cash
|
||||||||||||||||||||
of Recognized
|
Consolidated
|
Consolidated
|
Received as
|
Received as
|
Net
|
|||||||||||||||||||
Assets
|
Balance Sheet
|
Balance Sheet
|
Collateral
|
Collateral
|
Amount
|
|||||||||||||||||||
March 31, 2017
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
12,430
|
$
|
-
|
$
|
12,430
|
$
|
-
|
$
|
-
|
$
|
12,430
|
||||||||||||
$
|
12,430
|
$
|
-
|
$
|
12,430
|
$
|
-
|
$
|
-
|
$
|
12,430
|
|||||||||||||
December 31, 2016
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
10,302
|
$
|
-
|
$
|
10,302
|
$
|
-
|
$
|
-
|
$
|
10,302
|
||||||||||||
TBA securities
|
63
|
-
|
63
|
-
|
(63
|
)
|
-
|
|||||||||||||||||
$
|
10,365
|
$
|
-
|
$
|
10,365
|
$
|
-
|
$
|
(63
|
)
|
$
|
10,302
|
(in thousands)
|
||||||||||||||||||||||||
Offsetting of Liabilities
|
||||||||||||||||||||||||
Net Amount
|
Gross Amount Not Offset in the
|
|||||||||||||||||||||||
of Assets
|
Consolidated Balance Sheet
|
|||||||||||||||||||||||
Gross Amount
|
Presented
|
Financial
|
||||||||||||||||||||||
Gross Amount
|
Offset in the
|
in the
|
Instruments
|
|||||||||||||||||||||
of Recognized
|
Consolidated
|
Consolidated
|
Posted as
|
Cash Posted
|
Net
|
|||||||||||||||||||
Liabilities
|
Balance Sheet
|
Balance Sheet
|
Collateral
|
Collateral
|
Amount
|
|||||||||||||||||||
March 31, 2017
|
||||||||||||||||||||||||
Repurchase Agreements
|
$
|
3,050,608
|
$
|
-
|
$
|
3,050,608
|
$
|
(3,046,168
|
)
|
$
|
(4,440
|
)
|
$
|
-
|
||||||||||
Interest rate swaps
|
1,397
|
-
|
1,397
|
-
|
-
|
1,397
|
||||||||||||||||||
TBA securities
|
2,236
|
-
|
2,236
|
-
|
(1,219
|
)
|
1,017
|
|||||||||||||||||
$
|
3,054,241
|
$
|
-
|
$
|
3,054,241
|
$
|
(3,046,168
|
)
|
$
|
(5,659
|
)
|
$
|
2,414
|
|||||||||||
December 31, 2016
|
||||||||||||||||||||||||
Repurchase Agreements
|
$
|
2,793,705
|
$
|
-
|
$
|
2,793,705
|
$
|
(2,782,870
|
)
|
$
|
(10,835
|
)
|
$
|
-
|
||||||||||
Interest rate swaps
|
802
|
-
|
802
|
-
|
(802
|
)
|
-
|
|||||||||||||||||
TBA securities
|
1,180
|
-
|
1,180
|
-
|
(848
|
)
|
332
|
($ in thousands, except per share amounts)
|
|||||||||||||
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Price
|
|||||||||||||
Received
|
Net
|
||||||||||||
Type of Offering
|
Period
|
Per Share
(1)
|
Shares
|
Proceeds
(2)
|
|||||||||
2017
|
|||||||||||||
At the Market Offering Program
(3)
|
First Quarter
|
$
|
10.13
|
1,286,196
|
$
|
12,792
|
|||||||
At the Market Offering Program
(3)(4)
|
Second Quarter
|
10.06
|
594,784
|
5,892
|
|||||||||
1,880,980
|
$
|
18,684
|
|||||||||||
2016
|
|||||||||||||
At the Market Offering Program
(3)
|
Second Quarter
|
$
|
10.48
|
646,753
|
$
|
6,591
|
|||||||
At the Market Offering Program
(3)
|
Third Quarter
|
10.80
|
3,818,802
|
40,525
|
|||||||||
At the Market Offering Program
(3)
|
Fourth Quarter
|
10.79
|
6,707,101
|
71,212
|
|||||||||
11,172,656
|
$
|
118,328
|
(1)
|
Weighted average price received per share is gross of underwriters' discount, if applicable, and other offering costs.
|
(2)
|
Net proceeds are net of the underwriters' discount, if applicable, and other offering costs.
|
(3)
|
The Company has entered into five equity distribution agreements, four of which have been cancelled and replaced with the current agreement, to publicly offer and sell shares of the Company's common stock in at the market and privately negotiated transactions from time to time. As of March 31, 2017, shares with a value of $112.0 million remain available for issuance under the February 2017 Equity Distribution Agreement.
|
(4)
|
Shares issued in the second quarter of 2017 are not reflected in the Company's financial statements as of March 31, 2017.
|
(in thousands, except per share amounts)
|
||||||||
Year
|
Per Share Amount
|
Total
|
||||||
2013
|
$
|
1.395
|
$
|
4,662
|
||||
2014
|
2.160
|
22,643
|
||||||
2015
|
1.920
|
38,748
|
||||||
2016
|
1.680
|
41,388
|
||||||
2017 - YTD
(1)
|
0.560
|
18,942
|
||||||
Totals
|
$
|
7.715
|
$
|
126,383
|
(1)
|
On April 12, 2017, the Company declared a dividend of $0.14 per share to be paid on May 10, 2017. The effect of this dividend is included in the table above but is not reflected in the Company's financial statements as of March 31, 2017.
|
($ in thousands, except per share data)
|
||||||||||||||||
Three Months Ended March 31,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Grant Date
|
Grant Date
|
|||||||||||||||
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|||||||||||||
Unvested, beginning of period
|
8,000
|
$
|
12.23
|
16,000
|
$
|
12.23
|
||||||||||
Granted
|
-
|
-
|
-
|
-
|
||||||||||||
Vested and issued
|
-
|
-
|
-
|
-
|
||||||||||||
Unvested, end of period
|
8,000
|
$
|
12.23
|
16,000
|
$
|
12.23
|
||||||||||
Compensation expense during period
|
$
|
24
|
$
|
24
|
||||||||||||
Unrecognized compensation expense, end of period
|
$
|
8
|
$
|
106
|
||||||||||||
Intrinsic value, end of period
|
$
|
80
|
$
|
166
|
||||||||||||
Weighted-average remaining vesting term (in years)
|
0.1
|
1.1
|
($ in thousands, except per share data)
|
||||||||
Three Months Ended March 31,
|
||||||||
2017
|
2016
|
|||||||
Fully vested shares granted
(1)
|
17,335
|
33,019
|
||||||
Weighted average grant date price per share
|
$
|
9.67
|
$
|
9.99
|
||||
Compensation expense related to fully vested common share awards
(2)
|
$
|
168
|
$
|
330
|
(1)
|
The table above includes 17,335 fully vested shares of common stock which were granted in January and March 2017 with respect to service performed during 2016 and 33,019 fully vested shares common stock which were granted in January and March 2016 with respect to service performed during 2015.
|
(2)
|
Approximately $168,000 of compensation expense related to the 2017 share awards was accrued and recognized in 2016. Approximately $330,000 of compensation expense related to the 2016 share awards was accrued and recognized in 2015.
|
($ in thousands, except per share data)
|
||||||||||||||||
Three Months Ended March, 31,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Grant Date
|
Grant Date
|
|||||||||||||||
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|||||||||||||
Unvested, beginning of period
|
45,305
|
$
|
10.33
|
7,508
|
$
|
13.32
|
||||||||||
Granted
|
15,707
|
9.55
|
41,500
|
10.00
|
||||||||||||
Vested and issued
|
(4,830
|
)
|
10.52
|
(751
|
)
|
13.32
|
||||||||||
Unvested, end of period
|
56,182
|
$
|
10.10
|
48,257
|
$
|
10.46
|
||||||||||
Compensation expense during period
|
$
|
62
|
$
|
21
|
||||||||||||
Unrecognized compensation expense, end of period
|
$
|
344
|
$
|
448
|
||||||||||||
Intrinsic value, end of period
|
$
|
561
|
$
|
500
|
||||||||||||
Weighted-average remaining vesting term (in years)
|
1.5
|
2.0
|
(in thousands, except per-share information)
|
||||||||
Three Months Ended March 31,
|
||||||||
2017
|
2016
|
|||||||
Basic and diluted EPS per common share:
|
||||||||
Numerator for basic and diluted EPS per common share:
|
||||||||
Net income (loss) - Basic and diluted
|
$
|
2,449
|
$
|
(4,591
|
)
|
|||
Weighted average common shares:
|
||||||||
Common shares outstanding at the balance sheet date
|
34,270
|
21,772
|
||||||
Unvested dividend eligible share based compensation
|
||||||||
outstanding at the balance sheet date
|
64
|
-
|
||||||
Effect of weighting
|
(1,265
|
)
|
(16
|
)
|
||||
Weighted average shares-basic and diluted
|
33,069
|
21,756
|
||||||
Net Income (loss) per common share:
|
||||||||
Basic and diluted
|
$
|
0.07
|
$
|
(0.21
|
)
|
|
Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),
|
|
Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
|
|
Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company's own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
|
(in thousands)
|
||||||||||||||||
Quoted Prices
|
||||||||||||||||
in Active
|
Significant
|
|||||||||||||||
Markets for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Fair Value
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
Measurements
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
March 31, 2017
|
||||||||||||||||
Mortgage-backed securities
|
$
|
3,262,017
|
$
|
-
|
$
|
3,262,017
|
$
|
-
|
||||||||
Margin posted on derivative agreements
|
13,220
|
13,220
|
-
|
-
|
||||||||||||
Interest rate swaps
|
11,034
|
-
|
11,034
|
-
|
||||||||||||
TBA securities
|
(2,236
|
)
|
-
|
(2,236
|
)
|
-
|
||||||||||
December 31, 2016
|
||||||||||||||||
Mortgage-backed securities
|
$
|
3,022,174
|
$
|
-
|
$
|
3,022,174
|
$
|
-
|
||||||||
Margin posted on derivative agreements
|
9,865
|
9,865
|
-
|
-
|
||||||||||||
Interest rate swaps
|
9,500
|
-
|
9,500
|
-
|
||||||||||||
TBA securities
|
(1,117
|
)
|
-
|
(1,117
|
)
|
-
|
|
One-twelfth of 1.5% of the first $250 million of the Company's equity, as defined in the management agreement,
|
|
One-twelfth of 1.25% of the Company's equity that is greater than $250 million and less than or equal to $500 million, and
|
|
One-twelfth of 1.00% of the Company's equity that is greater than $500 million.
|
|
interest rate trends;
|
|
the difference between Agency RMBS yields and our funding and hedging costs;
|
|
competition for investments in Agency RMBS;
|
|
actions taken by the new presidential administration, the Federal Reserve (the "Fed") and the U.S. Treasury;
|
|
prepayment rates on mortgages underlying our Agency RMBS, and credit trends insofar as they affect prepayment rates; and
|
|
other market developments.
|
|
our degree of leverage;
|
|
our access to funding and borrowing capacity;
|
|
our borrowing costs;
|
|
our hedging activities;
|
|
the market value of our investments; and
|
|
the requirements to qualify as a REIT and the requirements to qualify for a registration exemption under the Investment Company Act.
|
(in thousands)
|
||||||||||||
2017
|
2016
|
Change
|
||||||||||
Interest income
|
$
|
32,311
|
$
|
20,466
|
$
|
11,845
|
||||||
Interest expense
|
(6,715
|
)
|
(3,319
|
)
|
(3,396
|
)
|
||||||
Net interest income
|
25,596
|
17,147
|
8,449
|
|||||||||
Losses on RMBS and derivative contracts
|
(20,727
|
)
|
(19,558
|
)
|
(1,169
|
)
|
||||||
Net portfolio income (deficiency)
|
4,869
|
(2,411
|
)
|
7,280
|
||||||||
Expenses
|
(2,420
|
)
|
(2,180
|
)
|
(240
|
)
|
||||||
Net income (loss)
|
$
|
2,449
|
$
|
(4,591
|
)
|
$
|
7,040
|
Gains (Losses) on Derivative Instruments
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
Funding Hedges
|
||||||||||||||||
Recognized in
|
Attributed to
|
Attributed to
|
||||||||||||||
Income
|
TBA
|
Current
|
Future
|
|||||||||||||
Statement
|
Securities
|
Period
|
Periods
|
|||||||||||||
(GAAP)
|
Income (Loss)
|
(Non-GAAP)
|
(Non-GAAP)
|
|||||||||||||
Three Months Ended
|
||||||||||||||||
March 31, 2017
|
$
|
(4,419
|
)
|
$
|
-
|
$
|
(3,193
|
)
|
$
|
(1,226
|
)
|
|||||
December 31, 2016
|
23,207
|
(133
|
)
|
(2,967
|
)
|
$
|
26,307
|
|||||||||
September 30, 2016
|
6,587
|
(474
|
)
|
(2,660
|
)
|
$
|
9,721
|
|||||||||
June 30, 2016
|
(11,591
|
)
|
(786
|
)
|
(2,210
|
)
|
$
|
(8,595
|
)
|
|||||||
March 31, 2016
|
(27,590
|
)
|
(1,125
|
)
|
(1,933
|
)
|
$
|
(24,532
|
)
|
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
|
||||||||||||||||||||||||
March 31, 2017
|
$
|
32,311
|
$
|
6,715
|
$
|
(3,193
|
)
|
$
|
9,908
|
$
|
25,596
|
$
|
22,403
|
|||||||||||
December 31, 2016
|
25,068
|
4,976
|
(2,967
|
)
|
7,943
|
20,092
|
17,125
|
|||||||||||||||||
September 30, 2016
|
22,358
|
3,979
|
(2,660
|
)
|
6,639
|
18,379
|
15,719
|
|||||||||||||||||
June 30, 2016
|
19,235
|
3,330
|
(2,210
|
)
|
5,540
|
15,905
|
13,695
|
|||||||||||||||||
March 31, 2016
|
20,466
|
3,319
|
(1,933
|
)
|
5,252
|
17,147
|
15,214
|
(1)
|
Reflects the effect of derivative instrument hedges for only the period presented.
|
(2)
|
Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP interest expense.
|
(3)
|
Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net interest income.
|
($ in thousands)
|
||||||||||||||||||||||||||||||||
Average
|
Yield on
|
Interest Expense
|
Average Cost of Funds
|
|||||||||||||||||||||||||||||
RMBS
|
Interest
|
Average
|
Average
|
GAAP
|
Economic
|
GAAP
|
Economic
|
|||||||||||||||||||||||||
Held
(1)
|
Income
|
RMBS
|
Borrowings
(1)
|
Basis
|
Basis
(2)
|
Basis
|
Basis
(3)
|
|||||||||||||||||||||||||
Three Months Ended
|
||||||||||||||||||||||||||||||||
March 31, 2017
|
$
|
3,142,095
|
$
|
32,311
|
4.11
|
%
|
$
|
2,922,157
|
$
|
6,715
|
$
|
9,908
|
0.92
|
%
|
1.36
|
%
|
||||||||||||||||
December 31, 2016
|
2,761,836
|
25,068
|
3.63
|
%
|
2,545,901
|
4,974
|
7,943
|
0.78
|
%
|
1.25
|
%
|
|||||||||||||||||||||
September 30, 2016
|
2,362,377
|
22,358
|
3.79
|
%
|
2,179,462
|
3,979
|
6,639
|
0.73
|
%
|
1.22
|
%
|
|||||||||||||||||||||
June 30, 2016
|
2,100,151
|
19,235
|
3.66
|
%
|
2,000,158
|
3,330
|
5,540
|
0.67
|
%
|
1.11
|
%
|
|||||||||||||||||||||
March 31, 2016
|
2,067,527
|
20,466
|
3.96
|
%
|
1,962,901
|
3,319
|
5,252
|
0.68
|
%
|
1.07
|
%
|
($ in thousands)
|
||||||||||||||||
Net Interest Income
|
Net Interest Spread
|
|||||||||||||||
GAAP
|
Economic
|
GAAP
|
Economic
|
|||||||||||||
Basis
|
Basis
(2)
|
Basis
|
Basis
(4)
|
|||||||||||||
Three Months Ended
|
||||||||||||||||
March 31, 2017
|
$
|
25,596
|
$
|
22,403
|
3.19
|
%
|
2.75
|
%
|
||||||||
December 31, 2016
|
20,092
|
17,125
|
2.85
|
%
|
2.38
|
%
|
||||||||||
September 30, 2016
|
18,379
|
15,719
|
3.06
|
%
|
2.57
|
%
|
||||||||||
June 30, 2016
|
15,905
|
13,695
|
2.99
|
%
|
2.55
|
%
|
||||||||||
March 31, 2016
|
17,147
|
15,214
|
3.28
|
%
|
2.89
|
%
|
(1)
|
Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 29 and 30 are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the quarterly periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances.
|
(2)
|
Economic interest expense and economic net interest income
presented in the table above and the tables on page 30 includes the effect of our derivative instrument hedges for only the periods presented.
|
(3) |
Represents interest cost of our borrowings and effect of derivative instruments hedges attributed to the period divided by average RMBS held.
|
(4) |
Economic net interest spread is calculated by subtracting average economic cost of funds from yield on average RMBS.
|
($ in thousands)
|
||||||||||||||||||||||||||||||||||||
Average RMBS Held
|
Interest Income
|
Realized Yield on Average RMBS
|
||||||||||||||||||||||||||||||||||
PT
|
Structured
|
PT
|
Structured
|
PT
|
Structured
|
|||||||||||||||||||||||||||||||
RMBS
|
RMBS
|
Total
|
RMBS
|
RMBS
|
Total
|
RMBS
|
RMBS
|
Total
|
||||||||||||||||||||||||||||
March 31, 2017
|
$
|
2,990,937
|
$
|
151,158
|
$
|
3,142,095
|
$
|
29,772
|
$
|
2,539
|
$
|
32,311
|
3.98
|
%
|
6.72
|
%
|
4.11
|
%
|
||||||||||||||||||
December 31, 2016
|
2,628,967
|
132,869
|
2,761,836
|
23,647
|
1,421
|
25,068
|
3.60
|
%
|
4.28
|
%
|
3.63
|
%
|
||||||||||||||||||||||||
September 30, 2016
|
2,257,480
|
104,897
|
2,362,377
|
21,898
|
460
|
22,358
|
3.88
|
%
|
1.75
|
%
|
3.79
|
%
|
||||||||||||||||||||||||
June 30, 2016
|
2,006,392
|
93,759
|
2,100,151
|
19,072
|
163
|
19,235
|
3.80
|
%
|
0.70
|
%
|
3.66
|
%
|
||||||||||||||||||||||||
March 31, 2016
|
1,968,690
|
98,837
|
2,067,527
|
19,682
|
784
|
20,466
|
4.00
|
%
|
3.17
|
%
|
3.96
|
%
|
($ in thousands)
|
||||||||||||||||||||
Average
|
Interest Expense
|
Average Cost of Funds
|
||||||||||||||||||
Balance of
|
GAAP
|
Economic
|
GAAP
|
Economic
|
||||||||||||||||
Borrowings
|
Basis
|
Basis
|
Basis
|
Basis
|
||||||||||||||||
March 31, 2017
|
$
|
2,922,157
|
$
|
6,715
|
$
|
9,908
|
0.92
|
%
|
1.36
|
%
|
||||||||||
December 31, 2016
|
2,545,901
|
4,976
|
7,943
|
0.78
|
%
|
1.25
|
%
|
|||||||||||||
September 30, 2016
|
2,179,462
|
3,979
|
6,639
|
0.73
|
%
|
1.22
|
%
|
|||||||||||||
June 30, 2016
|
2,000,158
|
3,330
|
5,540
|
0.67
|
%
|
1.11
|
%
|
|||||||||||||
March 31, 2016
|
1,962,901
|
3,319
|
5,252
|
0.68
|
%
|
1.07
|
%
|
Average GAAP Cost of Funds
|
Average Economic Cost of Funds
|
|||||||||||||||||||||||
Relative to Average
|
Relative to Average
|
|||||||||||||||||||||||
Average LIBOR
|
One-Month
|
Six-Month
|
One-Month
|
Six-Month
|
||||||||||||||||||||
One-Month
|
Six-Month
|
LIBOR
|
LIBOR
|
LIBOR
|
LIBOR
|
|||||||||||||||||||
Three Months Ended
|
||||||||||||||||||||||||
March 31, 2017
|
0.82
|
%
|
1.37
|
%
|
0.10
|
%
|
(0.45
|
)%
|
0.54
|
%
|
(0.01
|
)%
|
||||||||||||
December 31, 2016
|
0.62
|
%
|
1.28
|
%
|
0.16
|
%
|
(0.50
|
)%
|
0.63
|
%
|
(0.03
|
)%
|
||||||||||||
September 30, 2016
|
0.49
|
%
|
1.09
|
%
|
0.24
|
%
|
(0.36
|
)%
|
0.73
|
%
|
0.13
|
%
|
||||||||||||
June 30, 2016
|
0.44
|
%
|
0.92
|
%
|
0.23
|
%
|
(0.25
|
)%
|
0.67
|
%
|
0.19
|
%
|
||||||||||||
March 31, 2016
|
0.40
|
%
|
0.84
|
%
|
0.28
|
%
|
(0.16
|
)%
|
0.67
|
%
|
0.23
|
%
|
(in thousands)
|
||||||||||||
2017
|
2016
|
Change
|
||||||||||
Realized (losses) gains on sales of RMBS
|
$
|
(1,350
|
)
|
$
|
4,242
|
$
|
(5,592
|
)
|
||||
Unrealized (losses) gains on RMBS
|
(14,958
|
)
|
3,787
|
(18,745
|
)
|
|||||||
Total (losses) gains on RMBS
|
(16,308
|
)
|
8,029
|
(24,337
|
)
|
|||||||
Losses on interest rate futures
|
(4,422
|
)
|
(26,480
|
)
|
22,058
|
|||||||
Gains (losses) on interest rate swaps
|
3
|
(21
|
)
|
24
|
||||||||
(Losses) gains on receiver swaptions
|
-
|
36
|
(36
|
)
|
||||||||
Losses on TBA securities
|
-
|
(1,125
|
)
|
1,125
|
15 Year
|
30 Year
|
Three
|
||||||||||||||||||
5 Year
|
10 Year
|
Fixed-Rate
|
Fixed-Rate
|
Month
|
||||||||||||||||
Treasury Rate
(1)
|
Treasury Rate
(1)
|
Mortgage Rate
(2)
|
Mortgage Rate
(2)
|
LIBOR
(3)
|
||||||||||||||||
March 31, 2017
|
1.93
|
%
|
2.40
|
%
|
3.41
|
%
|
4.20
|
%
|
1.13
|
%
|
||||||||||
December 31, 2016
|
1.93
|
%
|
2.45
|
%
|
3.43
|
%
|
4.20
|
%
|
0.98
|
%
|
||||||||||
September 30, 2016
|
1.16
|
%
|
1.61
|
%
|
2.76
|
%
|
3.46
|
%
|
0.85
|
%
|
||||||||||
June 30, 2016
|
1.01
|
%
|
1.49
|
%
|
2.84
|
%
|
3.57
|
%
|
0.65
|
%
|
||||||||||
March 31, 2016
|
1.22
|
%
|
1.79
|
%
|
2.97
|
%
|
3.69
|
%
|
0.63
|
%
|
(1)
|
Historical 5 and 10 Year Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange.
|
(2)
|
Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac's Primary Mortgage Market Survey.
|
(3)
|
Historical LIBOR are obtained from the Intercontinental Exchange Benchmark Administration Ltd.
|
(in thousands)
|
||||||||||||
2017
|
2016
|
Change
|
||||||||||
Management fees
|
$
|
1,302
|
$
|
971
|
$
|
331
|
||||||
Overhead allocation
|
368
|
298
|
70
|
|||||||||
Accrued incentive compensation
|
12
|
171
|
(159
|
)
|
||||||||
Directors fees and liability insurance
|
276
|
282
|
(6
|
)
|
||||||||
Audit, legal and other professional fees
|
170
|
247
|
(77
|
)
|
||||||||
Other direct REIT operating expenses
|
231
|
139
|
92
|
|||||||||
Other expenses
|
61
|
72
|
(11
|
)
|
||||||||
Total expenses
|
$
|
2,420
|
$
|
2,180
|
$
|
240
|
|
One-twelfth of 1.5% of the first $250 million of the Company's equity, as defined in the management agreement,
|
|
One-twelfth of 1.25% of the Company's equity that is greater than $250 million and less than or equal to $500 million, and
|
|
One-twelfth of 1.00% of the Company's equity that is greater than $500 million.
|
Structured
|
||||||||||||
PT RMBS
|
RMBS
|
Total
|
||||||||||
Three Months Ended
|
Portfolio (%)
|
Portfolio (%)
|
Portfolio (%)
|
|||||||||
March 31, 2017
|
7.5
|
14.3
|
9.9
|
|||||||||
December 31, 2016
|
9.7
|
18.4
|
12.2
|
|||||||||
September 30, 2016
|
8.9
|
17.9
|
11.7
|
|||||||||
June 30, 2016
|
8.4
|
15.9
|
11.0
|
|||||||||
March 31, 2016
|
5.5
|
12.4
|
8.2
|
($ in thousands)
|
|||||||||||||||||||||||||||||
Weighted
|
Weighted
|
||||||||||||||||||||||||||||
Percentage
|
Average
|
Average
|
Weighted
|
Weighted
|
|||||||||||||||||||||||||
of
|
Weighted
|
Maturity
|
Coupon
|
Average
|
Average
|
||||||||||||||||||||||||
Fair
|
Entire
|
Average
|
in
|
Longest
|
Reset in
|
Lifetime
|
Periodic
|
||||||||||||||||||||||
Asset Category
|
Value
|
Portfolio
|
Coupon
|
Months
|
Maturity
|
Months
|
Cap
|
Cap
|
|||||||||||||||||||||
March 31, 2017
|
|||||||||||||||||||||||||||||
Adjustable Rate RMBS
|
$
|
1,947
|
0.1
|
%
|
3.52
|
%
|
215
|
1-Sep-35
|
3.22
|
10.04
|
%
|
2.00
|
%
|
||||||||||||||||
Fixed Rate RMBS
|
3,061,957
|
93.9
|
%
|
4.33
|
%
|
338
|
1-Mar-47
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Hybrid Adjustable Rate RMBS
|
43,756
|
1.3
|
%
|
2.55
|
%
|
310
|
1-Aug-43
|
70.01
|
7.55
|
%
|
2.00
|
%
|
|||||||||||||||||
Total Mortgage-backed Pass-through
|
3,107,660
|
95.3
|
%
|
4.31
|
%
|
337
|
1-Mar-47
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Interest-Only Securities
|
107,214
|
3.3
|
%
|
3.74
|
%
|
266
|
25-Dec-45
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Inverse Interest-Only Securities
|
47,143
|
1.4
|
%
|
5.26
|
%
|
326
|
25-Feb-47
|
NA
|
6.22
|
%
|
NA
|
||||||||||||||||||
Total Structured RMBS
|
154,357
|
4.7
|
%
|
4.20
|
%
|
284
|
25-Feb-47
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Total Mortgage Assets
|
$
|
3,262,017
|
100.0
|
%
|
4.30
|
%
|
335
|
1-Mar-47
|
NA
|
NA
|
NA
|
||||||||||||||||||
December 31, 2016
|
|||||||||||||||||||||||||||||
Adjustable Rate RMBS
|
$
|
2,062
|
0.1
|
%
|
3.50
|
%
|
219
|
1-Sep-35
|
5.67
|
10.05
|
%
|
2.00
|
%
|
||||||||||||||||
Fixed Rate RMBS
|
2,826,694
|
93.5
|
%
|
4.21
|
%
|
325
|
1-Dec-46
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Hybrid Adjustable Rate RMBS
|
45,459
|
1.5
|
%
|
2.55
|
%
|
313
|
1-Aug-43
|
73.08
|
7.55
|
%
|
2.00
|
%
|
|||||||||||||||||
Total Mortgage-backed Pass-through
|
2,874,215
|
95.1
|
%
|
4.19
|
%
|
324
|
1-Dec-46
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Interest-Only Securities
|
69,726
|
2.3
|
%
|
3.59
|
%
|
235
|
25-Apr-45
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Inverse Interest-Only Securities
|
78,233
|
2.6
|
%
|
5.40
|
%
|
338
|
25-Dec-46
|
NA
|
6.14
|
%
|
NA
|
||||||||||||||||||
Total Structured RMBS
|
147,959
|
4.9
|
%
|
4.55
|
%
|
290
|
25-Dec-46
|
NA
|
NA
|
NA
|
|||||||||||||||||||
Total Mortgage Assets
|
$
|
3,022,174
|
100.0
|
%
|
4.20
|
%
|
323
|
25-Dec-46
|
NA
|
NA
|
NA
|
($ in thousands)
|
||||||||||||||||
March 31, 2017
|
December 31, 2016
|
|||||||||||||||
Percentage of
|
Percentage of
|
|||||||||||||||
Agency
|
Fair Value
|
Entire Portfolio
|
Fair Value
|
Entire Portfolio
|
||||||||||||
Fannie Mae
|
$
|
2,491,752
|
76.4
|
%
|
$
|
2,226,893
|
73.7
|
%
|
||||||||
Freddie Mac
|
761,590
|
23.3
|
%
|
785,496
|
26.0
|
%
|
||||||||||
Ginnie Mae
|
8,675
|
0.3
|
%
|
9,785
|
0.3
|
%
|
||||||||||
Total Portfolio
|
$
|
3,262,017
|
100.0
|
%
|
$
|
3,022,174
|
100.0
|
%
|
March 31, 2017
|
December 31, 2016
|
|||||||
Weighted Average Pass-through Purchase Price
|
$
|
108.26
|
$
|
108.64
|
||||
Weighted Average Structured Purchase Price
|
$
|
14.52
|
$
|
15.39
|
||||
Weighted Average Pass-through Current Price
|
$
|
107.19
|
$
|
107.14
|
||||
Weighted Average Structured Current Price
|
$
|
14.58
|
$
|
15.49
|
||||
Effective Duration
(1)
|
3.495
|
4.579
|
(1)
|
Effective duration is the approximate percentage change in price for a 100 bps change in rates. An effective duration of 3.495 indicates that an interest rate increase of 1.0% would be expected to cause a 3.495% decrease in the value of the RMBS in the Company's investment portfolio at March 31, 2017. An effective duration of 4.579 indicates that an interest rate increase of 1.0% would be expected to cause a 4.579% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2016. These figures include the structured securities in the portfolio, but do not include the effect of the Company's funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.
|
($ in thousands)
|
||||||||||||||||||||||||
2017
|
2016
|
|||||||||||||||||||||||
Total Cost
|
Average Price
|
Weighted Average Yield
|
Total Cost
|
Average Price
|
Weighted Average Yield
|
|||||||||||||||||||
Pass-through RMBS
|
$
|
1,682,894
|
$
|
108.13
|
2.95
|
%
|
$
|
729,059
|
$
|
109.19
|
2.17
|
%
|
||||||||||||
Structured RMBS
|
54,346
|
16.35
|
5.32
|
%
|
7,681
|
17.14
|
3.74
|
%
|
($ in thousands)
|
||||||||||||||||
Difference Between Ending
|
||||||||||||||||
Ending
|
Average
|
Borrowings and
|
||||||||||||||
Balance of
|
Balance of
|
Average Borrowings
|
||||||||||||||
Three Months Ended
|
Borrowings
|
Borrowings
|
Amount
|
Percent
|
||||||||||||
March 31, 2017
|
$
|
3,050,608
|
$
|
2,922,157
|
$
|
128,451
|
4.40
|
%
|
||||||||
December 31, 2016
|
2,793,705
|
2,545,901
|
247,804
|
9.73
|
%
|
|||||||||||
September 30, 2016
|
2,298,097
|
2,179,462
|
118,635
|
5.44
|
%
|
|||||||||||
June 30, 2016
|
2,060,827
|
2,000,158
|
60,669
|
3.03
|
%
|
|||||||||||
March 31, 2016
|
1,939,489
|
1,962,901
|
(23,412
|
)
|
(1.19
|
)%
|
(in thousands)
|
||||||||||||||||||||
Obligations Maturing
|
||||||||||||||||||||
Within One Year
|
One to Three Years
|
Three to Five Years
|
More than Five Years
|
Total
|
||||||||||||||||
Repurchase agreements
|
$
|
3,050,608
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,050,608
|
||||||||||
Interest expense on repurchase agreements
(1)
|
4,075
|
-
|
-
|
-
|
4,075
|
|||||||||||||||
Totals
|
$
|
3,054,683
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,054,683
|
(1)
|
Interest expense on repurchase agreements is based on current interest rates as of March 31, 2017 and the remaining term of the liabilities existing at that date.
|
(in thousands, except per share amounts)
|
||||||||
Year
|
Per Share Amount
|
Total
|
||||||
2013
|
$
|
1.395
|
$
|
4,662
|
||||
2014
|
2.160
|
22,643
|
||||||
2015
|
1.920
|
38,748
|
||||||
2016
|
1.680
|
41,388
|
||||||
2017 - YTD
(1)
|
0.560
|
18,942
|
||||||
Totals
|
$
|
7.715
|
$
|
126,383
|
(1)
|
On April 12, 2017, the Company declared a dividend of $0.14 per share to be paid on May 10, 2017. The effect of this dividend is included in the table above but is not reflected in the Company's financial statements as of March 31, 2017.
|
(1)
|
Interest rate sensitivity is derived from models that are dependent on inputs and assumptions provided by third parties as well as by our Manager, and assumes there are no changes in mortgage spreads and assumes a static portfolio. Actual results could differ materially from these estimates.
|
(2)
|
Includes the effect of derivatives and other securities used for hedging purposes.
|
(3)
|
Estimated dollar change in investment portfolio value expressed as a percent of the total fair value of our investment portfolio as of such date.
|
(4)
|
Estimated dollar change in portfolio value expressed as a percent of stockholders' equity as of such date.
|
Shares Purchased
|
Maximum Number
|
|||||||||||||||
Total Number
|
Weighted-Average
|
as Part of Publicly
|
of Shares That May Yet
|
|||||||||||||
of Shares
|
Price Paid
|
Announced
|
Be Repurchased Under
|
|||||||||||||
Repurchased
(1)
|
Per Share
|
Programs
(2)
|
the Authorization
(2)
|
|||||||||||||
January
|
-
|
$
|
-
|
-
|
783,757
|
|||||||||||
February
|
-
|
-
|
-
|
783,757
|
||||||||||||
March
|
1,154
|
9.55
|
-
|
783,757
|
||||||||||||
Totals / Weighted Average
|
1,154
|
$
|
9.55
|
-
|
(1)
|
The only shares of the Company's common stock acquired by the Company were in connection with the satisfaction of tax withholding obligations on vested employment-related awards under equity incentive plans.
|
(2)
|
On June 29, 2015, the Board of Directors authorized the purchase of up to 2,000,000 shares of common stock repurchase beginning July 1, 2016. Unless modified or revoked by the Board, the authorization does not expire.
|
3.1
|
Articles of Amendment and Restatement of Orchid Island Capital, Inc. (filed as Exhibit 3.1 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
|
||
3.2
|
Amended and Restated Bylaws of Orchid Island Capital, Inc. (filed as Exhibit 3.2 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
|
||
10.1
|
Equity Distribution Agreement dated February 23, 2017, by and between the Company, Bimini Advisors, LLC, Ladenberg Thalman & Co. Inc and MUFG Securities Americas Inc. (filed as Exhibit 1.1 to the Company's Current Report on Form 8-K filed on February 23, 2017 and incorporated herin by reference).
|
||
10.2
|
2017 Long-Term Equity Incentive Compensation Plan.*
|
||
31.1
|
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
31.2
|
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
32.1
|
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
32.2
|
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
Exhibit 101.INS XBRL
|
Instance Document ***
|
||
Exhibit 101.SCH XBRL
|
Taxonomy Extension Schema Document ***
|
||
Exhibit 101.CAL XBRL
|
Taxonomy Extension Calculation Linkbase Document***
|
||
Exhibit 101.DEF XBRL
|
Additional Taxonomy Extension Definition Linkbase Document Created***
|
||
Exhibit 101.LAB XBRL
|
Taxonomy Extension Label Linkbase Document ***
|
||
Exhibit 101.PRE XBRL
|
Taxonomy Extension Presentation Linkbase Document ***
|
* |
Filed herewith.
|
** |
Furnished herewith.
|
*** |
Submitted electronically herewith.
|
Orchid Island Capital, Inc
.
|
||||
Registrant
|
||||
Date:
April 28, 2017
|
By:
|
/s/ Robert E. Cauley
|
||
Robert E. Cauley
Chief Executive Officer, President and Chairman of the Board
|
||||
Date:
April 28, 2017
|
By:
|
/s/ G. Hunter Haas, IV
|
||
G. Hunter Haas, IV
Secretary, Chief Financial Officer, Chief Investment Officer and Director (Principal Financial and Accounting Officer)
|
3.1
|
Articles of Amendment and Restatement of Orchid Island Capital, Inc. (filed as Exhibit 3.1 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
|
||
3.2
|
Amended and Restated Bylaws of Orchid Island Capital, Inc. (filed as Exhibit 3.2 to the Company's Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated herein by reference).
|
||
10.1
|
Equity Distribution Agreement dated February 23, 2017, by and between the Company, Bimini Advisors, LLC, Ladenberg Thalman & Co. Inc and MUFG Securities Americas Inc. (filed as Exhibit 1.1 to the Company's Current Report on Form 8-K filed on February 23, 2017 and incorporated herin by reference).
|
||
10.2
|
2017 Long-Term Equity Incentive Compensation Plan.*
|
||
31.1
|
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
31.2
|
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
32.1
|
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
32.2
|
Certification of G. Hunter Haas, IV, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
Exhibit 101.INS XBRL
|
Instance Document ***
|
Exhibit 101.SCH XBRL
|
Taxonomy Extension Schema Document ***
|
Exhibit 101.CAL XBRL
|
Taxonomy Extension Calculation Linkbase Document***
|
Exhibit 101.DEF XBRL
|
Additional Taxonomy Extension Definition Linkbase Document Created***
|
Exhibit 101.LAB XBRL
|
Taxonomy Extension Label Linkbase Document ***
|
Exhibit 101.PRE XBRL
|
Taxonomy Extension Presentation Linkbase Document ***
|
* |
Filed herewith.
|
** |
Furnished herewith.
|
*** |
Submitted electronically herewith.
|
1-year
|
3-year
|
5-year
|
|
Peer-relative financial performance
|
9.00%
|
15.75%
|
20.25%
|
Agency RMBS rate relative performance
|
6.00%
|
10.50%
|
13.50%
|
Peer-relative book value performance
|
5.00%
|
8.75%
|
11.25%
|
Total for Measurement Period
|
20.00%
|
35.00%
|
45.00%
|
1-year
|
3-year
|
5-year
|
|
Peer-relative financial performance
|
Threshold + 5.0%
|
Threshold + 10.0%
|
Threshold + 15.0%
|
Agency RMBS rate relative performance
|
Threshold + 5.0%
|
Threshold + 10.0%
|
Threshold + 15.0%
|
Peer-relative book value performance
|
Threshold + 2.0%
|
Threshold + 4.0%
|
Threshold + 6.0%
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
|
a)
|
all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: April 28, 2017
|
|
/s/ Robert E. Cauley
|
|
Robert E. Cauley
|
|
Chairman of the Board, Chief Executive Officer and President
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Orchid Island Capital, Inc. (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
|
a)
|
all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: April 28, 2017
|
|
/s/ G. Hunter Haas, IV
|
|
G. Hunter Haas, IV
|
|
Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
April 28, 2017
|
/s/ Robert E. Cauley
|
|
Robert E. Cauley,
Chairman of the Board and
Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.
|
April 28, 2017
|
/s/ G. Hunter Haas, IV
|
|
G. Hunter Haas, IV
Chief Financial Officer
|