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
|
☒
|
ORCHID ISLAND CAPITAL, INC.
|
||||
TABLE OF CONTENTS
|
||||
Page
|
||||
PART I. FINANCIAL INFORMATION
|
||||
ITEM 1. Condensed Financial Statements
|
1
|
|||
Condensed Consolidated Balance Sheets (unaudited)
|
1
|
|||
Condensed Consolidated Statements of Operations (unaudited)
|
2
|
|||
Condensed Consolidated Statement of Stockholders' Equity (unaudited)
|
3
|
|||
Condensed Consolidated Statements of Cash Flows (unaudited)
|
4
|
|||
Notes to Condensed Consolidated Financial Statements
|
5
|
|||
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
24
|
|||
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
|
45
|
|||
ITEM 4. Controls and Procedures
|
48
|
|||
PART II. OTHER INFORMATION
|
||||
ITEM 1. Legal Proceedings
|
49
|
|||
ITEM 1A. Risk Factors
|
49
|
|||
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
49
|
|||
ITEM 3. Defaults upon Senior Securities
|
49
|
|||
ITEM 4. Mine Safety Disclosures
|
49
|
|||
ITEM 5. Other Information
|
49
|
|||
ITEM 6. Exhibits
|
50
|
|||
SIGNATURES
|
51
|
ORCHID ISLAND CAPITAL, INC.
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
($ in thousands, except per share data)
|
||||||||
(Unaudited)
|
||||||||
June 30, 2018
|
December 31, 2017
|
|||||||
ASSETS:
|
||||||||
Mortgage-backed securities, at fair value
|
||||||||
Pledged to counterparties
|
$
|
3,644,163
|
$
|
3,712,561
|
||||
Unpledged
|
45,433
|
32,250
|
||||||
Total mortgage-backed securities
|
3,689,596
|
3,744,811
|
||||||
Cash and cash equivalents
|
137,947
|
214,363
|
||||||
Restricted cash
|
31,065
|
32,349
|
||||||
Accrued interest receivable
|
14,771
|
14,444
|
||||||
Derivative assets, at fair value
|
34,207
|
17,160
|
||||||
Other assets
|
445
|
216
|
||||||
Total Assets
|
$
|
3,908,031
|
$
|
4,023,343
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
LIABILITIES:
|
||||||||
Repurchase agreements
|
$
|
3,449,854
|
$
|
3,533,786
|
||||
Dividends payable
|
4,683
|
7,429
|
||||||
Derivative liabilities, at fair value
|
2,240
|
2,038
|
||||||
Accrued interest payable
|
7,221
|
6,516
|
||||||
Due to affiliates
|
656
|
797
|
||||||
Other liabilities
|
34,178
|
10,566
|
||||||
Total Liabilities
|
3,498,832
|
3,561,132
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares issued
|
||||||||
and outstanding as of June 30, 2018 and December 31, 2017
|
-
|
-
|
||||||
Common Stock, $0.01 par value; 500,000,000 shares authorized, 52,034,596
|
||||||||
shares issued and outstanding as of June 30, 2018 and 53,061,904 shares issued
|
||||||||
and outstanding as of December 31, 2017
|
520
|
531
|
||||||
Additional paid-in capital
|
423,709
|
461,680
|
||||||
Accumulated (deficit) retained earnings
|
(15,030
|
)
|
-
|
|||||
Total Stockholders' Equity
|
409,199
|
462,211
|
||||||
Total Liabilities and Stockholders' Equity
|
$
|
3,908,031
|
$
|
4,023,343
|
||||
See Notes to Consolidated Financial Statements
|
ORCHID ISLAND CAPITAL, INC.
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
For the Six and Three Months Ended June 30, 2018 and 2017
|
||||||||||||||||
($ in thousands, except per share data)
|
||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Interest income
|
$
|
78,526
|
$
|
66,890
|
$
|
38,590
|
$
|
34,579
|
||||||||
Interest expense
|
(31,728
|
)
|
(15,478
|
)
|
(16,579
|
)
|
(8,763
|
)
|
||||||||
Net interest income
|
46,798
|
51,412
|
22,011
|
25,816
|
||||||||||||
Realized (losses) gains on mortgage-backed securities
|
(20,513
|
)
|
2,585
|
(12,175
|
)
|
3,935
|
||||||||||
Unrealized losses on mortgage-backed securities
|
(92,129
|
)
|
(32,048
|
)
|
(20,418
|
)
|
(17,090
|
)
|
||||||||
Gains (losses) on derivative instruments
|
56,853
|
(23,861
|
)
|
14,859
|
(19,442
|
)
|
||||||||||
Net portfolio (loss) income
|
(8,991
|
)
|
(1,912
|
)
|
4,277
|
(6,781
|
)
|
|||||||||
Expenses:
|
||||||||||||||||
Management fees
|
3,318
|
2,702
|
1,606
|
1,400
|
||||||||||||
Allocated overhead
|
742
|
756
|
361
|
388
|
||||||||||||
Accrued incentive compensation
|
12
|
230
|
1
|
218
|
||||||||||||
Directors' fees and liability insurance
|
500
|
508
|
248
|
232
|
||||||||||||
Audit, legal and other professional fees
|
463
|
389
|
167
|
219
|
||||||||||||
Direct REIT operating expenses
|
810
|
496
|
407
|
265
|
||||||||||||
Other administrative
|
194
|
200
|
141
|
140
|
||||||||||||
Total expenses
|
6,039
|
5,281
|
2,931
|
2,862
|
||||||||||||
Net (loss) income
|
$
|
(15,030
|
)
|
$
|
(7,193
|
)
|
$
|
1,346
|
$
|
(9,643
|
)
|
|||||
Basic and diluted net (loss) income per share
|
$
|
(0.29
|
)
|
$
|
(0.21
|
)
|
$
|
0.03
|
$
|
(0.26
|
)
|
|||||
Weighted Average Shares Outstanding
|
52,794,513
|
35,117,364
|
52,587,472
|
37,211,362
|
||||||||||||
Dividends declared per common share
|
$
|
0.58
|
$
|
0.84
|
$
|
0.27
|
$
|
0.42
|
||||||||
See Notes to Consolidated Financial Statements
|
ORCHID ISLAND CAPITAL, INC.
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
For the Six Months Ended June 30, 2018
|
||||||||||||||||
($ in thousands, except per share data)
|
||||||||||||||||
Additional
|
Retained
|
|||||||||||||||
Common
|
Paid-in
|
Earnings
|
||||||||||||||
Stock
|
Capital
|
(Deficit)
|
Total
|
|||||||||||||
Balances, January 1, 2018
|
$
|
531
|
$
|
461,680
|
$
|
-
|
$
|
462,211
|
||||||||
Net loss
|
-
|
-
|
(15,030
|
)
|
(15,030
|
)
|
||||||||||
Cash dividends declared, $0.58 per share
|
-
|
(30,624
|
)
|
-
|
(30,624
|
)
|
||||||||||
Issuance of common stock pursuant to stock based
|
||||||||||||||||
compensation plan
|
-
|
219
|
-
|
219
|
||||||||||||
Amortization of stock based compensation
|
-
|
104
|
-
|
104
|
||||||||||||
Shares repurchased and retired
|
(11
|
)
|
(7,670
|
)
|
-
|
(7,681
|
)
|
|||||||||
Balances, June 30, 2018
|
$
|
520
|
$
|
423,709
|
$
|
(15,030
|
)
|
$
|
409,199
|
|||||||
See Notes to Consolidated Financial Statements
|
ORCHID ISLAND CAPITAL, INC.
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
For the Six Months Ended June 30, 2018 and 2017
|
||||||||
($ in thousands)
|
||||||||
2018
|
2017
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(15,030
|
)
|
$
|
(7,193
|
)
|
||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Stock based compensation
|
323
|
359
|
||||||
Realized and unrealized losses on mortgage-backed securities
|
112,642
|
29,463
|
||||||
Realized and unrealized gains on interest rate swaptions
|
(4,434
|
)
|
-
|
|||||
Realized and unrealized (gains) losses on interest rate swaps
|
(12,805
|
)
|
3,689
|
|||||
Realized (gains) losses on forward settling to-be-announced securities
|
(9,971
|
)
|
2,384
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accrued interest receivable
|
(327
|
)
|
(2,491
|
)
|
||||
Other assets
|
(269
|
)
|
(212
|
)
|
||||
Accrued interest payable
|
705
|
342
|
||||||
Other liabilities
|
6,716
|
(2,563
|
)
|
|||||
Due (from) to affiliates
|
(141
|
)
|
124
|
|||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
77,409
|
23,902
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
From mortgage-backed securities investments:
|
||||||||
Purchases
|
(1,995,208
|
)
|
(3,692,066
|
)
|
||||
Sales
|
1,757,652
|
3,064,979
|
||||||
Principal repayments
|
180,169
|
155,303
|
||||||
Redemption of FHLB stock
|
-
|
3
|
||||||
Proceeds from (payments on) net settlement of to-be-announced securities
|
12,493
|
(5,591
|
)
|
|||||
Purchase of derivative financial instruments, net of margin cash received
|
14,768
|
-
|
||||||
NET CASH USED IN INVESTING ACTIVITIES
|
(30,126
|
)
|
(477,372
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from repurchase agreements
|
26,040,287
|
25,243,560
|
||||||
Principal payments on repurchase agreements
|
(26,124,219
|
)
|
(24,758,809
|
)
|
||||
Cash dividends
|
(33,370
|
)
|
(28,902
|
)
|
||||
Proceeds from issuance of common stock, net of issuance costs
|
-
|
122,857
|
||||||
Common stock repurchases
|
(7,681
|
)
|
-
|
|||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
(124,983
|
)
|
578,706
|
|||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
(77,700
|
)
|
125,236
|
|||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period
|
246,712
|
94,425
|
||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period
|
$
|
169,012
|
$
|
219,661
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
31,023
|
$
|
15,136
|
||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
|
||||||||
Securities acquired settled in later period
|
$
|
-
|
$
|
273,689
|
||||
See Notes to Consolidated Financial Statements
|
(in thousands)
|
||||||||
June 30, 2018
|
December 31, 2017
|
|||||||
Cash and cash equivalents
|
$
|
137,947
|
$
|
214,363
|
||||
Restricted cash
|
31,065
|
32,349
|
||||||
Total cash, cash equivalents and restricted cash
|
$
|
169,012
|
$
|
246,712
|
(in thousands)
|
||||||||
June 30, 2018
|
December 31, 2017
|
|||||||
Pass-Through RMBS Certificates:
|
||||||||
Hybrid Adjustable-rate Mortgages
|
$
|
24,684
|
$
|
27,398
|
||||
Adjustable-rate Mortgages
|
1,718
|
1,754
|
||||||
Fixed-rate Mortgages
|
2,978,653
|
3,594,533
|
||||||
Fixed-rate CMOs
|
542,656
|
-
|
||||||
Total Pass-Through Certificates
|
3,547,711
|
3,623,685
|
||||||
Structured RMBS Certificates:
|
||||||||
Interest-Only Securities
|
116,181
|
86,918
|
||||||
Inverse Interest-Only Securities
|
25,704
|
34,208
|
||||||
Total Structured RMBS Certificates
|
141,885
|
121,126
|
||||||
Total
|
$
|
3,689,596
|
$
|
3,744,811
|
(in thousands)
|
||||||||
June 30, 2018
|
December 31, 2017
|
|||||||
Greater than one year and less than five years
|
$
|
5
|
$
|
29
|
||||
Greater than five years and less than ten years
|
3,600
|
3,281
|
||||||
Greater than or equal to ten years
|
3,685,991
|
3,741,501
|
||||||
Total
|
$
|
3,689,596
|
$
|
3,744,811
|
($ in thousands)
|
||||||||||||||||||||
OVERNIGHT
|
BETWEEN 2
|
BETWEEN 31
|
GREATER
|
|||||||||||||||||
(1 DAY OR
|
AND
|
AND
|
THAN
|
|||||||||||||||||
LESS)
|
30 DAYS
|
90 DAYS
|
90 DAYS
|
TOTAL
|
||||||||||||||||
June 30, 2018
|
||||||||||||||||||||
Fair market value of securities pledged, including
|
||||||||||||||||||||
accrued interest receivable
|
$
|
-
|
$
|
1,916,675
|
$
|
1,741,654
|
$
|
-
|
$
|
3,658,329
|
||||||||||
Repurchase agreement liabilities associated with
|
||||||||||||||||||||
these securities
|
$
|
-
|
$
|
1,794,668
|
$
|
1,655,186
|
$
|
-
|
$
|
3,449,854
|
||||||||||
Net weighted average borrowing rate
|
-
|
2.13
|
%
|
2.00
|
%
|
-
|
2.07
|
%
|
||||||||||||
December 31, 2017
|
||||||||||||||||||||
Fair market value of securities pledged, including
|
||||||||||||||||||||
accrued interest receivable
|
$
|
-
|
$
|
1,983,958
|
$
|
1,266,590
|
$
|
475,975
|
$
|
3,726,523
|
||||||||||
Repurchase agreement liabilities associated with
|
||||||||||||||||||||
these securities
|
$
|
-
|
$
|
1,871,833
|
$
|
1,208,518
|
$
|
453,435
|
$
|
3,533,786
|
||||||||||
Net weighted average borrowing rate
|
-
|
1.53
|
%
|
1.53
|
%
|
1.57
|
%
|
1.54
|
%
|
(in thousands)
|
|||||||||
Derivative Instruments and Related Accounts
|
Balance Sheet Location
|
June 30, 2018
|
December 31, 2017
|
||||||
Assets
|
|||||||||
Interest rate swaps
|
Derivative assets, at fair value
|
$
|
26,334
|
$
|
13,745
|
||||
Payer swaptions
|
Derivative assets, at fair value
|
7,233
|
3,405
|
||||||
Receiver swaptions
|
Derivative assets, at fair value
|
640
|
-
|
||||||
TBA securities
|
Derivative assets, at fair value
|
-
|
10
|
||||||
Total derivative assets, at fair value
|
$
|
34,207
|
$
|
17,160
|
|||||
Liabilities
|
|||||||||
Interest rate swaps
|
Derivative liabilities, at fair value
|
$
|
-
|
$
|
215
|
||||
TBA securities
|
Derivative liabilities, at fair value
|
2,240
|
1,823
|
||||||
Total derivative liabilities, at fair value
|
$
|
2,240
|
$
|
2,038
|
|||||
Margin Balances Posted to (from) Counterparties
|
|||||||||
Futures contracts
|
Restricted cash
|
$
|
5,922
|
$
|
5,545
|
||||
TBA securities
|
Restricted cash
|
2,050
|
1,508
|
||||||
TBA securities
|
Other liabilities
|
-
|
(59
|
)
|
|||||
Interest rate swaption contracts
|
Other liabilities
|
(7,959
|
)
|
(3,505
|
)
|
||||
Total margin balances on derivative contracts
|
$
|
13
|
$
|
3,489
|
($ in thousands)
|
||||||||||||||||
June 30, 2018
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Contract
|
Average
|
Average
|
||||||||||||||
Notional
|
Entry
|
Effective
|
Open
|
|||||||||||||
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity(1)
|
||||||||||||
Eurodollar Futures Contracts (Short Positions)
|
||||||||||||||||
2018
|
$
|
1,375,000
|
1.97
|
%
|
2.56
|
%
|
$
|
4,035
|
||||||||
2019
|
1,500,000
|
2.16
|
%
|
2.88
|
%
|
10,779
|
||||||||||
2020
|
1,500,000
|
2.64
|
%
|
2.98
|
%
|
5,011
|
||||||||||
Total / Weighted Average
|
$
|
1,475,000
|
2.32
|
%
|
2.86
|
%
|
$
|
19,825
|
||||||||
Treasury Note Futures Contracts (Short Position)(2)
|
||||||||||||||||
September 2018 5-year T-Note futures
|
||||||||||||||||
(Sep 2018 - Sep 2023 Hedge Period)
|
$
|
165,000
|
2.90
|
%
|
3.04
|
%
|
$
|
(7
|
)
|
($ in thousands)
|
||||||||||||||||
December 31, 2017
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Contract
|
Average
|
Average
|
||||||||||||||
Notional
|
Entry
|
Effective
|
Open
|
|||||||||||||
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity(1)
|
||||||||||||
Eurodollar Futures Contracts (Short Positions)
|
||||||||||||||||
2018
|
$
|
1,212,500
|
1.86
|
%
|
1.98
|
%
|
$
|
1,418
|
||||||||
2019
|
1,350,000
|
2.11
|
%
|
2.27
|
%
|
2,152
|
||||||||||
2020
|
987,500
|
2.59
|
%
|
2.36
|
%
|
(2,360
|
)
|
|||||||||
Total / Weighted Average
|
$
|
1,183,333
|
2.16
|
%
|
2.20
|
%
|
$
|
1,210
|
||||||||
Treasury Note Futures Contracts (Short Position)(2)
|
||||||||||||||||
March 2018 10 year T-Note futures
|
||||||||||||||||
(Mar 2018 - Mar 2028 Hedge Period)
|
$
|
140,000
|
2.23
|
%
|
2.33
|
%
|
$
|
755
|
(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 $113.62 at June 30, 2018 and $124.05 at December 31, 2017. The notional contract values of the short positions were $187.5 million and $173.7 million at June 30, 2018 and December 31, 2017, respectively.
|
($ in thousands)
|
||||||||||||||||||||
Average
|
Net
|
|||||||||||||||||||
Fixed
|
Average
|
Estimated
|
Average
|
|||||||||||||||||
Notional
|
Pay
|
Receive
|
Fair
|
Maturity
|
||||||||||||||||
Amount
|
Rate
|
Rate
|
Value
|
(Years)
|
||||||||||||||||
June 30, 2018
|
||||||||||||||||||||
Expiration > 1 to ≤ 3 years
|
$
|
650,000
|
1.09
|
%
|
2.36
|
%
|
$
|
16,223
|
1.6
|
|||||||||||
Expiration > 3 to ≤ 5 years
|
360,000
|
2.05
|
%
|
2.33
|
%
|
10,111
|
3.8
|
|||||||||||||
$
|
1,010,000
|
1.43
|
%
|
2.35
|
%
|
$
|
26,334
|
2.4
|
||||||||||||
December 31, 2017
|
||||||||||||||||||||
Expiration > 1 to ≤ 3 years
|
$
|
650,000
|
1.09
|
%
|
1.41
|
%
|
$
|
11,828
|
2.1
|
|||||||||||
Expiration > 3 to ≤ 5 years
|
360,000
|
2.05
|
%
|
1.53
|
%
|
1,702
|
4.3
|
|||||||||||||
$
|
1,010,000
|
1.43
|
%
|
1.45
|
%
|
$
|
13,530
|
2.8
|
($ in thousands)
|
|||||||||||||||||||||||||
Option
|
Underlying Swap
|
||||||||||||||||||||||||
Weighted
|
Average
|
Weighted
|
|||||||||||||||||||||||
Average
|
Average
|
Adjustable
|
Average
|
||||||||||||||||||||||
Fair
|
Months to
|
Notional
|
Fixed
|
Rate
|
Term
|
||||||||||||||||||||
Expiration
|
Cost
|
Value
|
Expiration
|
Amount
|
Rate
|
(LIBOR)
|
(Years)
|
||||||||||||||||||
June 30, 2018
|
|||||||||||||||||||||||||
≤ 1 year
|
|||||||||||||||||||||||||
Payer Swaptions
|
$
|
9,770
|
$
|
7,232
|
6.4
|
$
|
950,000
|
3.20
|
%
|
3 Month
|
9.3
|
||||||||||||||
Receiver Swaptions
|
760
|
640
|
7.4
|
100,000
|
2.80
|
%
|
3 Month
|
5.0
|
|||||||||||||||||
December 31, 2017
|
|||||||||||||||||||||||||
≤ 1 year
|
|||||||||||||||||||||||||
Payer Swaptions
|
$
|
2,367
|
$
|
3,405
|
8.0
|
$
|
200,000
|
2.16
|
%
|
3 Month
|
6.0
|
($ in thousands)
|
|||||||||
Notional
|
Net
|
||||||||
Amount
|
Cost
|
Market
|
Carrying
|
||||||
Long (Short)(1)
|
Basis(2)
|
Value(3)
|
Value(4)
|
||||||
June 30, 2018
|
|||||||||
30-Year TBA securities:
|
|||||||||
3.0%
|
$
|
(200,000)
|
$
|
(192,404)
|
$
|
(193,624)
|
$
|
(1,220)
|
|
3.5%
|
(200,000)
|
(197,980)
|
(199,000)
|
(1,020)
|
|||||
Total
|
$
|
(400,000)
|
$
|
(390,384)
|
$
|
(392,624)
|
$
|
(2,240)
|
|
December 31, 2017
|
|||||||||
30-Year TBA securities:
|
|||||||||
3.0%
|
$
|
(300,000)
|
$
|
(299,371)
|
$
|
(300,153)
|
$
|
(782)
|
|
4.0%
|
(357,000)
|
(373,403)
|
(373,477)
|
(74)
|
|||||
4.5%
|
356,556
|
380,371
|
379,414
|
(957)
|
|||||
Total
|
$
|
(300,444)
|
$
|
(292,403)
|
$
|
(294,216)
|
$
|
(1,813)
|
(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)
|
||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Eurodollar futures contracts (short positions)
|
$
|
20,661
|
$
|
(7,562
|
)
|
$
|
6,121
|
$
|
(6,990
|
)
|
||||||
T-Note futures contracts (short position)
|
7,750
|
(9,740
|
)
|
928
|
(5,890
|
)
|
||||||||||
Interest rate swaps
|
14,037
|
(4,175
|
)
|
3,530
|
(4,178
|
)
|
||||||||||
Receiver swaptions
|
(779
|
)
|
-
|
(430
|
)
|
-
|
||||||||||
Payer swaptions
|
5,213
|
-
|
3,146
|
-
|
||||||||||||
Net TBA securities
|
9,971
|
(2,384
|
)
|
1,564
|
(2,384
|
)
|
||||||||||
Total
|
$
|
56,853
|
$
|
(23,861
|
)
|
$
|
14,859
|
$
|
(19,442
|
)
|
(in thousands)
|
||||||||||||||||||||||||
June 30, 2018
|
December 31, 2017
|
|||||||||||||||||||||||
Repurchase
|
Derivative
|
Repurchase
|
Derivative
|
|||||||||||||||||||||
Assets Pledged to Counterparties
|
Agreements
|
Agreements
|
Total
|
Agreements
|
Agreements
|
Total
|
||||||||||||||||||
PT RMBS - fair value
|
$
|
3,522,217
|
$
|
11,319
|
$
|
3,533,536
|
$
|
3,612,244
|
$
|
-
|
$
|
3,612,244
|
||||||||||||
Structured RMBS - fair value
|
110,627
|
-
|
110,627
|
100,317
|
-
|
100,317
|
||||||||||||||||||
Accrued interest on pledged securities
|
14,130
|
36
|
14,166
|
13,962
|
-
|
13,962
|
||||||||||||||||||
Restricted cash
|
23,093
|
7,972
|
31,065
|
25,296
|
7,053
|
32,349
|
||||||||||||||||||
Total
|
$
|
3,670,067
|
$
|
19,327
|
$
|
3,689,394
|
$
|
3,751,819
|
$
|
7,053
|
$
|
3,758,872
|
(in thousands)
|
||||||||||||||||||||||||
June 30, 2018
|
December 31, 2017
|
|||||||||||||||||||||||
Repurchase
|
Derivative
|
Repurchase
|
Derivative
|
|||||||||||||||||||||
Assets Pledged to Orchid
|
Agreements
|
Agreements
|
Total
|
Agreements
|
Agreements
|
Total
|
||||||||||||||||||
Cash
|
$
|
1,392
|
$
|
7,959
|
$
|
9,351
|
$
|
67
|
$
|
3,564
|
$
|
3,631
|
||||||||||||
PT RMBS - fair value
|
9
|
-
|
9
|
-
|
-
|
-
|
||||||||||||||||||
U.S. Treasury securities - fair value
|
3,906
|
-
|
3,906
|
-
|
-
|
-
|
||||||||||||||||||
Total
|
$
|
5,307
|
$
|
7,959
|
$
|
13,266
|
$
|
67
|
$
|
3,564
|
$
|
3,631
|
(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
|
|||||||||||||||||||
June 30, 2018
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
26,334
|
$
|
-
|
$
|
26,334
|
$
|
-
|
$
|
-
|
$
|
26,334
|
||||||||||||
Interest rate swaptions
|
7,873
|
-
|
7,873
|
-
|
(7,873
|
)
|
-
|
|||||||||||||||||
$
|
34,207
|
$
|
-
|
$
|
34,207
|
$
|
-
|
$
|
(7,873
|
)
|
$
|
26,334
|
||||||||||||
December 31, 2017
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
13,745
|
$
|
-
|
$
|
13,745
|
$
|
-
|
$
|
-
|
$
|
13,745
|
||||||||||||
Interest rate swaptions
|
3,405
|
-
|
3,405
|
-
|
(3,405
|
)
|
-
|
|||||||||||||||||
TBA securities
|
10
|
-
|
10
|
-
|
(10
|
)
|
-
|
|||||||||||||||||
$
|
17,160
|
$
|
-
|
$
|
17,160
|
$
|
-
|
$
|
(3,415
|
)
|
$
|
13,745
|
(in thousands)
|
||||||||||||||||||||||||
Offsetting of Liabilities
|
||||||||||||||||||||||||
Net Amount
|
Gross Amount Not Offset in the
|
|||||||||||||||||||||||
of Liabilities
|
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
|
|||||||||||||||||||
June 30, 2018
|
||||||||||||||||||||||||
Repurchase Agreements
|
$
|
3,449,854
|
$
|
-
|
$
|
3,449,854
|
$
|
(3,426,761
|
)
|
$
|
(23,093
|
)
|
$
|
-
|
||||||||||
TBA securities
|
2,240
|
-
|
2,240
|
-
|
(2,050
|
)
|
190
|
|||||||||||||||||
$
|
3,452,094
|
$
|
-
|
$
|
3,452,094
|
$
|
(3,426,761
|
)
|
$
|
(25,143
|
)
|
$
|
190
|
|||||||||||
December 31, 2017
|
||||||||||||||||||||||||
Repurchase Agreements
|
$
|
3,533,786
|
$
|
-
|
$
|
3,533,786
|
$
|
(3,508,490
|
)
|
$
|
(25,296
|
)
|
$
|
-
|
||||||||||
Interest rate swaps
|
215
|
-
|
215
|
-
|
-
|
215
|
||||||||||||||||||
TBA securities
|
1,823
|
-
|
1,823
|
-
|
(1,508
|
)
|
315
|
|||||||||||||||||
$
|
3,535,824
|
$
|
-
|
$
|
3,535,824
|
$
|
(3,508,490
|
)
|
$
|
(26,804
|
)
|
$
|
530
|
($ in thousands, except per share amounts)
|
|||||||||||||||||||||
Weighted
|
|||||||||||||||||||||
Average
|
|||||||||||||||||||||
Price
|
|||||||||||||||||||||
Book Value Per Share
|
Received
|
Net
|
|||||||||||||||||||
Type of Offering
|
Period
|
Beginning
|
Ending
|
Per Share(1)
|
Shares
|
Proceeds(2)
|
|||||||||||||||
2017
|
|||||||||||||||||||||
At the Market Offering Program(3)
|
First Quarter
|
$
|
10.10
|
$
|
9.75
|
$
|
10.13
|
1,286,196
|
$
|
12,792
|
|||||||||||
At the Market Offering Program(3)
|
Second Quarter
|
9.75
|
9.23
|
10.17
|
11,012,836
|
110,065
|
|||||||||||||||
At the Market Offering Program(3)
|
Fourth Quarter
|
9.15
|
8.71
|
9.81
|
7,746,052
|
74,750
|
|||||||||||||||
20,045,084
|
$
|
197,607
|
(1)
|
Weighted average price received per share is before deducting the underwriters' discount, if applicable, and other offering costs.
|
(2)
|
Net proceeds are net of the underwriters' discount, if applicable, and other offering costs.
|
(3)
|
The Company has entered into six equity distribution agreements, five of which have either been terminated because all shares were sold or were replaced with a subsequent agreement.
|
(in thousands, except per share amounts)
|
||||||||
Year
|
Per Share Amount
|
Total
|
||||||
2013
|
$
|
1.395
|
$
|
4,662
|
||||
2014
|
2.160
|
22,643
|
||||||
2015
|
1.920
|
38,748
|
||||||
2016
|
1.680
|
41,388
|
||||||
2017
|
1.680
|
70,717
|
||||||
2018 - YTD(1)
|
0.670
|
35,313
|
||||||
Totals
|
$
|
9.505
|
$
|
213,471
|
(1)
|
On July 18, 2018, the Company declared a dividend of $0.09 per share to be paid on August 10, 2018. The effect of this dividend is included in the table above, but is not reflected in the Company's financial statements as of June 30, 2018.
|
($ in thousands, except per share data)
|
||||||||||||||||
Six Months Ended June 30,
|
||||||||||||||||
2018
|
2017
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Grant Date
|
Grant Date
|
|||||||||||||||
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|||||||||||||
Unvested, beginning of period
|
-
|
$
|
-
|
8,000
|
$
|
12.23
|
||||||||||
Granted
|
-
|
-
|
-
|
-
|
||||||||||||
Vested and issued
|
-
|
-
|
(8,000
|
)
|
12.23
|
|||||||||||
Unvested, end of period
|
-
|
$
|
-
|
-
|
$
|
-
|
||||||||||
Compensation expense during period
|
$
|
-
|
$
|
33
|
($ in thousands, except per share data)
|
||||||||
Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
Fully vested shares granted(1)
|
37,920
|
21,839
|
||||||
Weighted average grant date price per share
|
$
|
7.62
|
$
|
9.74
|
||||
Compensation expense related to fully vested shares of common stock awards(2)
|
$
|
289
|
$
|
213
|
(1)
|
The table above includes 31,816 fully vested shares of common stock which were granted in January and April 2018 with respect to service performed during 2017 and 17,335 fully vested shares common stock which were granted in January and March 2017 with respect to service performed during 2016.
|
(2)
|
Approximately $244,000 of compensation expense related to the 2018 share awards was accrued and recognized in 2017. Approximately $168,000 of compensation expense related to the 2017 share awards was accrued and recognized in 2016.
|
($ in thousands, except per share data)
|
||||||||||||||||
Six Months Ended June 30,
|
||||||||||||||||
2018
|
2017
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Grant Date
|
Grant Date
|
|||||||||||||||
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|||||||||||||
Unvested, beginning of period
|
41,693
|
$
|
9.95
|
45,305
|
$
|
10.33
|
||||||||||
Granted
|
27,935
|
7.45
|
15,707
|
9.55
|
||||||||||||
Vested and issued
|
(12,806
|
)
|
10.28
|
(9,660
|
)
|
10.52
|
||||||||||
Unvested, end of period
|
56,822
|
$
|
8.65
|
51,352
|
$
|
10.06
|
||||||||||
Compensation expense during period
|
$
|
104
|
$
|
130
|
||||||||||||
Unrecognized compensation expense, end of period
|
$
|
270
|
$
|
276
|
||||||||||||
Intrinsic value, end of period
|
$
|
427
|
$
|
506
|
||||||||||||
Weighted-average remaining vesting term (in years)
|
1.4
|
1.3
|
(in thousands, except per-share information)
|
||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Basic and diluted EPS per common share:
|
||||||||||||||||
Numerator for basic and diluted EPS per share of common stock:
|
||||||||||||||||
Net (loss) income - Basic and diluted
|
$
|
(15,030
|
)
|
$
|
(7,193
|
)
|
$
|
1,346
|
$
|
(9,643
|
)
|
|||||
Weighted average shares of common stock:
|
||||||||||||||||
Shares of common stock outstanding at the balance sheet date
|
52,035
|
45,300
|
52,035
|
45,300
|
||||||||||||
Unvested dividend eligible share based compensation
|
||||||||||||||||
outstanding at the balance sheet date
|
-
|
-
|
57
|
-
|
||||||||||||
Effect of weighting
|
760
|
(10,183
|
)
|
495
|
(8,089
|
)
|
||||||||||
Weighted average shares-basic and diluted
|
52,795
|
35,117
|
52,587
|
37,211
|
||||||||||||
Net (loss) income per common share:
|
||||||||||||||||
Basic and diluted
|
$
|
(0.29
|
)
|
$
|
(0.21
|
)
|
$
|
0.03
|
$
|
(0.26
|
)
|
|||||
Anti-dilutive incentive shares not included in calculation.
|
51
|
61
|
-
|
54
|
·
|
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)
|
|||||||||||||
June 30, 2018
|
||||||||||||||||
Mortgage-backed securities
|
$
|
3,689,596
|
$
|
-
|
$
|
3,689,596
|
$
|
-
|
||||||||
Interest rate swaps
|
26,334
|
-
|
26,334
|
-
|
||||||||||||
Interest rate swaptions
|
7,873
|
-
|
7,873
|
-
|
||||||||||||
TBA securities
|
(2,240
|
)
|
-
|
(2,240
|
)
|
-
|
||||||||||
December 31, 2017
|
||||||||||||||||
Mortgage-backed securities
|
$
|
3,744,811
|
$
|
-
|
$
|
3,744,811
|
$
|
-
|
||||||||
Interest rate swaps
|
13,530
|
-
|
13,530
|
-
|
||||||||||||
Interest rate swaptions
|
3,405
|
-
|
3,405
|
-
|
||||||||||||
TBA securities
|
(1,813
|
)
|
-
|
(1,813
|
)
|
-
|
·
|
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, and supply of, investments in Agency RMBS;
|
·
|
actions taken by the U.S. government, including the presidential administration, the Federal Reserve (the "Fed"), the Federal Open Market Committee (the "FOMC") and the U.S. Treasury;
|
·
|
prepayment rates on mortgages underlying our Agency RMBS, and credit trends insofar as they affect prepayment rates; and
|
·
|
other market developments.
|
·
|
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)
|
||||||||||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended, June 30,
|
|||||||||||||||||||||||
2018
|
2017
|
Change
|
2018
|
2017
|
Change
|
|||||||||||||||||||
Interest income
|
$
|
78,526
|
$
|
66,890
|
$
|
11,636
|
$
|
38,590
|
$
|
34,579
|
$
|
4,011
|
||||||||||||
Interest expense
|
(31,728
|
)
|
(15,478
|
)
|
(16,250
|
)
|
(16,579
|
)
|
(8,763
|
)
|
(7,816
|
)
|
||||||||||||
Net interest income
|
46,798
|
51,412
|
(4,614
|
)
|
22,011
|
25,816
|
(3,805
|
)
|
||||||||||||||||
Losses on RMBS and derivative contracts
|
(55,789
|
)
|
(53,324
|
)
|
(2,465
|
)
|
(17,734
|
)
|
(32,597
|
)
|
14,863
|
|||||||||||||
Net portfolio (deficiency) income
|
(8,991
|
)
|
(1,912
|
)
|
(7,079
|
)
|
4,277
|
(6,781
|
)
|
11,058
|
||||||||||||||
Expenses
|
(6,039
|
)
|
(5,281
|
)
|
(758
|
)
|
(2,931
|
)
|
(2,862
|
)
|
(69
|
)
|
||||||||||||
Net (loss) income
|
$
|
(15,030
|
)
|
$
|
(7,193
|
)
|
$
|
(7,837
|
)
|
$
|
1,346
|
$
|
(9,643
|
)
|
$
|
10,989
|
Net Earnings Excluding Realized and Unrealized Gains and Losses
|
||||||||||||||||||||||||
(in thousands, except per share data)
|
||||||||||||||||||||||||
Per Share
|
||||||||||||||||||||||||
Net Earnings
|
Net Earnings
|
|||||||||||||||||||||||
Excluding
|
Excluding
|
|||||||||||||||||||||||
Realized and
|
Realized and
|
Realized and
|
Realized and
|
|||||||||||||||||||||
Net
|
Unrealized
|
Unrealized
|
Net
|
Unrealized
|
Unrealized
|
|||||||||||||||||||
Income
|
Gains and
|
Gains and
|
Income
|
Gains and
|
Gains and
|
|||||||||||||||||||
(GAAP)
|
Losses(1)
|
Losses
|
(GAAP)
|
Losses
|
Losses
|
|||||||||||||||||||
Three Months Ended
|
||||||||||||||||||||||||
June 30, 2018
|
$
|
1,346
|
$
|
(17,734
|
)
|
$
|
19,080
|
$
|
0.03
|
$
|
(0.34
|
)
|
$
|
0.37
|
||||||||||
March 31, 2018
|
(16,377
|
)
|
(38,055
|
)
|
21,678
|
(0.31
|
)
|
(0.72
|
)
|
0.41
|
||||||||||||||
December 31, 2017
|
(5,982
|
)
|
(29,540
|
)
|
23,558
|
(0.12
|
)
|
(0.61
|
)
|
0.49
|
||||||||||||||
September 30, 2017
|
15,183
|
(8,254
|
)
|
23,437
|
0.33
|
(0.18
|
)
|
0.52
|
||||||||||||||||
June 30, 2017
|
(9,643
|
)
|
(32,597
|
)
|
22,954
|
(0.26
|
)
|
(0.88
|
)
|
0.62
|
||||||||||||||
March 31, 2017
|
2,449
|
(20,727
|
)
|
23,176
|
0.07
|
(0.63
|
)
|
0.70
|
||||||||||||||||
Six Months Ended
|
||||||||||||||||||||||||
June 30, 2018
|
$
|
(15,030
|
)
|
$
|
(55,789
|
)
|
$
|
40,759
|
$
|
(0.29
|
)
|
$
|
(1.06
|
)
|
$
|
0.77
|
||||||||
June 30, 2017
|
(7,193
|
)
|
(53,324
|
)
|
46,131
|
(0.21
|
)
|
(1.51
|
)
|
1.31
|
(1)
|
Includes realized and unrealized gains (losses) on RMBS and derivative financial instruments, including net interest expense on interest rate swaps.
|
Gains (Losses) on Derivative Instruments
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
Funding Hedges
|
||||||||||||||||
Recognized in
|
Attributed to
|
Attributed to
|
||||||||||||||
Income
|
TBA
|
Current
|
Future
|
|||||||||||||
Statement
|
Securities
|
Period
|
Periods
|
|||||||||||||
(GAAP)
|
Income
|
(Non-GAAP)
|
(Non-GAAP)
|
|||||||||||||
Three Months Ended
|
||||||||||||||||
June 30, 2018
|
$
|
14,859
|
$
|
1,564
|
$
|
(852
|
)
|
$
|
14,147
|
|||||||
March 31, 2018
|
41,994
|
8,407
|
(3,011
|
)
|
36,598
|
|||||||||||
December 31, 2017
|
13,982
|
(2,094
|
)
|
(3,763
|
)
|
19,839
|
||||||||||
September 30, 2017
|
(5,470
|
)
|
(1,459
|
)
|
(3,761
|
)
|
(250
|
)
|
||||||||
June 30, 2017
|
(19,442
|
)
|
(2,384
|
)
|
(3,654
|
)
|
(13,404
|
)
|
||||||||
March 31, 2017
|
(4,419
|
)
|
-
|
(3,193
|
)
|
(1,226
|
)
|
|||||||||
Six Months Ended
|
||||||||||||||||
June 30, 2018
|
$
|
56,853
|
$
|
9,971
|
$
|
(3,863
|
)
|
$
|
50,745
|
|||||||
June 30, 2017
|
(23,861
|
)
|
(2,384
|
)
|
(6,847
|
)
|
(14,630
|
)
|
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
|
||||||||||||||||||||||||
June 30, 2018
|
$
|
38,590
|
$
|
16,579
|
$
|
(852
|
)
|
$
|
17,431
|
$
|
22,011
|
$
|
21,159
|
|||||||||||
March 31, 2018
|
39,935
|
15,149
|
(3,011
|
)
|
18,160
|
24,786
|
21,775
|
|||||||||||||||||
December 31, 2017
|
40,098
|
13,554
|
(3,763
|
)
|
17,317
|
26,544
|
22,781
|
|||||||||||||||||
September 30, 2017
|
38,974
|
12,638
|
(3,761
|
)
|
16,399
|
26,336
|
22,575
|
|||||||||||||||||
June 30, 2017
|
34,579
|
8,763
|
(3,654
|
)
|
12,417
|
25,816
|
22,162
|
|||||||||||||||||
March 31, 2017
|
32,311
|
6,715
|
(3,193
|
)
|
9,908
|
25,596
|
22,403
|
|||||||||||||||||
Six Months Ended
|
||||||||||||||||||||||||
June 30, 2018
|
$
|
78,526
|
$
|
31,728
|
$
|
(3,863
|
)
|
$
|
35,591
|
$
|
46,798
|
$
|
42,935
|
|||||||||||
June 30, 2017
|
66,890
|
15,478
|
(6,847
|
)
|
22,325
|
51,412
|
44,565
|
(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
|
||||||||||||||||||||||||||||||||
June 30, 2018
|
$
|
3,717,690
|
$
|
38,590
|
4.15
|
%
|
$
|
3,534,567
|
$
|
16,579
|
$
|
17,431
|
1.88
|
%
|
1.97
|
%
|
||||||||||||||||
March 31, 2018
|
3,745,298
|
39,935
|
4.27
|
%
|
3,576,533
|
15,149
|
18,160
|
1.69
|
%
|
2.03
|
%
|
|||||||||||||||||||||
December 31, 2017
|
3,837,575
|
40,098
|
4.18
|
%
|
3,621,931
|
13,554
|
17,317
|
1.50
|
%
|
1.91
|
%
|
|||||||||||||||||||||
September 30, 2017
|
3,834,083
|
38,974
|
4.07
|
%
|
3,494,266
|
12,638
|
16,399
|
1.45
|
%
|
1.88
|
%
|
|||||||||||||||||||||
June 30, 2017
|
3,499,922
|
34,579
|
3.95
|
%
|
3,164,532
|
8,763
|
12,417
|
1.11
|
%
|
1.57
|
%
|
|||||||||||||||||||||
March 31, 2017
|
3,142,095
|
32,311
|
4.11
|
%
|
2,922,157
|
6,715
|
9,908
|
0.92
|
%
|
1.36
|
%
|
|||||||||||||||||||||
Six Months Ended
|
||||||||||||||||||||||||||||||||
June 30, 2018
|
$
|
3,731,494
|
$
|
78,526
|
4.21
|
%
|
$
|
3,555,550
|
$
|
31,728
|
$
|
35,591
|
1.78
|
%
|
2.00
|
%
|
||||||||||||||||
June 30, 2017
|
3,321,009
|
66,890
|
4.03
|
%
|
3,043,344
|
15,478
|
22,325
|
1.02
|
%
|
1.47
|
%
|
($ in thousands)
|
||||||||||||||||
Net Interest Income
|
Net Interest Spread
|
|||||||||||||||
GAAP
|
Economic
|
GAAP
|
Economic
|
|||||||||||||
Basis
|
Basis(2)
|
Basis
|
Basis(4)
|
|||||||||||||
Three Months Ended
|
||||||||||||||||
June 30, 2018
|
$
|
22,011
|
$
|
21,159
|
2.27
|
%
|
2.18
|
%
|
||||||||
March 31, 2018
|
24,786
|
21,775
|
2.58
|
%
|
2.24
|
%
|
||||||||||
December 31, 2017
|
26,544
|
22,781
|
2.68
|
%
|
2.27
|
%
|
||||||||||
September 30, 2017
|
26,336
|
22,575
|
2.62
|
%
|
2.19
|
%
|
||||||||||
June 30, 2017
|
25,816
|
22,162
|
2.84
|
%
|
2.38
|
%
|
||||||||||
March 31, 2017
|
25,596
|
22,403
|
3.19
|
%
|
2.75
|
%
|
||||||||||
Six Months Ended
|
||||||||||||||||
June 30, 2018
|
$
|
46,798
|
$
|
42,934
|
2.43
|
%
|
2.21
|
%
|
||||||||
June 30, 2017
|
51,412
|
44,565
|
3.01
|
%
|
2.56
|
%
|
(1)
|
Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 31 and 32 are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances.
|
(2)
|
Economic interest expense and economic net interest income presented in the table above and the tables on page 32 includes the effect of our derivative instrument hedges for only the periods presented.
|
(3) |
Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period divided by average RMBS.
|
(4) |
Economic net interest spread is calculated by subtracting average economic cost of funds from realized yield on average RMBS.
|
($ in thousands)
|
||||||||||||||||||||||||||||||||||||
Average RMBS Held
|
Interest Income
|
Realized Yield on Average RMBS
|
||||||||||||||||||||||||||||||||||
PT
|
Structured
|
PT
|
Structured
|
PT
|
Structured
|
|||||||||||||||||||||||||||||||
RMBS
|
RMBS
|
Total
|
RMBS
|
RMBS
|
Total
|
RMBS
|
RMBS
|
Total
|
||||||||||||||||||||||||||||
Three Months Ended
|
||||||||||||||||||||||||||||||||||||
June 30, 2018
|
$
|
3,572,540
|
$
|
145,150
|
$
|
3,717,690
|
$
|
36,273
|
$
|
2,317
|
$
|
38,590
|
4.06
|
%
|
6.38
|
%
|
4.15
|
%
|
||||||||||||||||||
March 31, 2018
|
3,610,527
|
134,771
|
3,745,298
|
38,725
|
1,210
|
39,935
|
4.29
|
%
|
3.59
|
%
|
4.27
|
%
|
||||||||||||||||||||||||
December 31, 2017
|
3,704,163
|
133,412
|
3,837,575
|
38,927
|
1,171
|
40,098
|
4.20
|
%
|
3.51
|
%
|
4.18
|
%
|
||||||||||||||||||||||||
September 30, 2017
|
3,687,533
|
146,550
|
3,834,083
|
38,476
|
498
|
38,974
|
4.17
|
%
|
1.36
|
%
|
4.07
|
%
|
||||||||||||||||||||||||
June 30, 2017
|
3,349,042
|
150,880
|
3,499,922
|
32,479
|
2,100
|
34,579
|
3.88
|
%
|
5.57
|
%
|
3.95
|
%
|
||||||||||||||||||||||||
March 31, 2017
|
2,990,937
|
151,158
|
3,142,095
|
29,772
|
2,539
|
32,311
|
3.98
|
%
|
6.72
|
%
|
4.11
|
%
|
||||||||||||||||||||||||
Six Months Ended
|
||||||||||||||||||||||||||||||||||||
June 30, 2018
|
$
|
3,591,534
|
$
|
139,960
|
$
|
3,731,494
|
$
|
74,998
|
$
|
3,527
|
$
|
78,526
|
4.18
|
%
|
5.04
|
%
|
4.21
|
%
|
||||||||||||||||||
June 30, 2017
|
3,169,990
|
151,019
|
3,321,009
|
62,251
|
4,639
|
66,890
|
3.93
|
%
|
6.14
|
%
|
4.03
|
%
|
($ in thousands)
|
||||||||||||||||||||
Average
|
Interest Expense
|
Average Cost of Funds
|
||||||||||||||||||
Balance of
|
GAAP
|
Economic
|
GAAP
|
Economic
|
||||||||||||||||
Borrowings
|
Basis
|
Basis
|
Basis
|
Basis
|
||||||||||||||||
Three Months Ended
|
||||||||||||||||||||
June 30, 2018
|
$
|
3,534,567
|
$
|
16,579
|
$
|
17,431
|
1.88
|
%
|
1.97
|
%
|
||||||||||
March 31, 2018
|
3,576,533
|
15,149
|
18,160
|
1.69
|
%
|
2.03
|
%
|
|||||||||||||
December 31, 2017
|
3,621,931
|
13,554
|
17,317
|
1.50
|
%
|
1.91
|
%
|
|||||||||||||
September 30, 2017
|
3,494,266
|
12,638
|
16,399
|
1.45
|
%
|
1.88
|
%
|
|||||||||||||
June 30, 2017
|
3,164,532
|
8,763
|
12,417
|
1.11
|
%
|
1.57
|
%
|
|||||||||||||
March 31, 2017
|
2,922,157
|
6,715
|
9,908
|
0.92
|
%
|
1.36
|
%
|
|||||||||||||
Six Months Ended
|
||||||||||||||||||||
June 30, 2018
|
$
|
3,555,550
|
$
|
31,728
|
$
|
35,591
|
1.78
|
%
|
2.00
|
%
|
||||||||||
June 30, 2017
|
3,043,344
|
15,478
|
22,325
|
1.02
|
%
|
1.47
|
%
|
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
|
||||||||||||||||||||||||
June 30, 2018
|
1.99
|
%
|
2.48
|
%
|
(0.11
|
)%
|
(0.60
|
)%
|
(0.02
|
)%
|
(0.51
|
)%
|
||||||||||||
March 31, 2018
|
1.69
|
%
|
2.11
|
%
|
0.00
|
%
|
(0.42
|
)%
|
0.34
|
%
|
(0.08
|
)%
|
||||||||||||
December 31, 2017
|
1.36
|
%
|
1.62
|
%
|
0.14
|
%
|
(0.12
|
)%
|
0.55
|
%
|
0.29
|
%
|
||||||||||||
September 30, 2017
|
1.20
|
%
|
1.45
|
%
|
0.25
|
%
|
(0.00
|
)%
|
0.68
|
%
|
0.43
|
%
|
||||||||||||
June 30, 2017
|
1.05
|
%
|
1.43
|
%
|
0.06
|
%
|
(0.32
|
)%
|
0.52
|
%
|
0.14
|
%
|
||||||||||||
March 31, 2017
|
0.82
|
%
|
1.37
|
%
|
0.10
|
%
|
(0.45
|
)%
|
0.54
|
%
|
(0.01
|
)%
|
||||||||||||
Six Months Ended
|
||||||||||||||||||||||||
June 30, 2018
|
1.84
|
%
|
2.30
|
%
|
(0.06
|
)%
|
(0.52
|
)%
|
0.16
|
%
|
(0.30
|
)%
|
||||||||||||
June 30, 2017
|
0.94
|
%
|
1.40
|
%
|
0.08
|
%
|
(0.38
|
)%
|
0.53
|
%
|
0.07
|
%
|
(in thousands)
|
||||||||||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||||||||||
2018
|
2017
|
Change
|
2018
|
2017
|
Change
|
|||||||||||||||||||
Realized (losses) gains on sales of RMBS
|
$
|
(20,513
|
)
|
$
|
2,585
|
$
|
(23,098
|
)
|
$
|
(12,175
|
)
|
$
|
3,935
|
$
|
(16,110
|
)
|
||||||||
Unrealized losses on RMBS
|
(92,129
|
)
|
(32,048
|
)
|
(60,081
|
)
|
(20,418
|
)
|
(17,090
|
)
|
(3,328
|
)
|
||||||||||||
Total losses on RMBS
|
(112,642
|
)
|
(29,463
|
)
|
(83,179
|
)
|
(32,593
|
)
|
(13,155
|
)
|
(19,438
|
)
|
||||||||||||
Gains (losses) on interest rate futures
|
28,411
|
(17,302
|
)
|
45,713
|
7,049
|
(12,880
|
)
|
19,929
|
||||||||||||||||
Gains (losses) on interest rate swaps
|
14,037
|
(4,175
|
)
|
18,212
|
3,530
|
(4,178
|
)
|
7,708
|
||||||||||||||||
(Losses) gains on receiver swaptions
|
(779
|
)
|
-
|
(779
|
)
|
(430
|
)
|
-
|
(430
|
)
|
||||||||||||||
Gains on payer swaptions
|
5,213
|
-
|
5,213
|
3,146
|
-
|
3,146
|
||||||||||||||||||
Gains (losses) on TBA securities
|
9,971
|
(2,384
|
)
|
12,355
|
1,564
|
(2,384
|
)
|
3,948
|
5 Year
|
10 Year
|
15 Year
|
30 Year
|
Three
|
||||||||||||||||
U.S. Treasury
|
U.S. Treasury
|
Fixed-Rate
|
Fixed-Rate
|
Month
|
||||||||||||||||
Rate(1)
|
Rate(1)
|
Mortgage Rate(2)
|
Mortgage Rate(2)
|
LIBOR(3)
|
||||||||||||||||
June 30, 2018
|
2.73
|
%
|
2.85
|
%
|
4.04
|
%
|
4.57
|
%
|
2.34
|
%
|
||||||||||
March 31, 2018
|
2.56
|
%
|
2.74
|
%
|
3.91
|
%
|
4.44
|
%
|
2.31
|
%
|
||||||||||
December 31, 2017
|
2.21
|
%
|
2.40
|
%
|
3.39
|
%
|
3.95
|
%
|
1.61
|
%
|
||||||||||
September 30, 2017
|
1.93
|
%
|
2.33
|
%
|
3.11
|
%
|
3.81
|
%
|
1.32
|
%
|
||||||||||
June 30, 2017
|
1.88
|
%
|
2.30
|
%
|
3.17
|
%
|
3.90
|
%
|
1.26
|
%
|
||||||||||
March 31, 2017
|
1.93
|
%
|
2.40
|
%
|
3.41
|
%
|
4.20
|
%
|
1.13
|
%
|
(1)
|
Historical 5 and 10 Year U.S. Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange.
|
(2)
|
Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac's Primary Mortgage Market Survey.
|
(3)
|
Historical LIBOR is obtained from the Intercontinental Exchange Benchmark Administration Ltd.
|
(in thousands)
|
||||||||||||||||||||||||
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||||||||||
2018
|
2017
|
Change
|
2018
|
2017
|
Change
|
|||||||||||||||||||
Management fees
|
$
|
3,318
|
$
|
2,702
|
$
|
616
|
$
|
1,606
|
$
|
1,400
|
$
|
206
|
||||||||||||
Overhead allocation
|
742
|
756
|
(14
|
)
|
361
|
388
|
(27
|
)
|
||||||||||||||||
Accrued incentive compensation
|
12
|
230
|
(218
|
)
|
1
|
218
|
(217
|
)
|
||||||||||||||||
Directors fees and liability insurance
|
500
|
508
|
(8
|
)
|
248
|
232
|
16
|
|||||||||||||||||
Audit, legal and other professional fees
|
463
|
389
|
74
|
167
|
219
|
(52
|
)
|
|||||||||||||||||
Direct REIT operating expenses
|
810
|
496
|
314
|
407
|
265
|
142
|
||||||||||||||||||
Other administrative
|
194
|
200
|
(6
|
)
|
141
|
140
|
1
|
|||||||||||||||||
Total expenses
|
$
|
6,039
|
$
|
5,281
|
$
|
758
|
$
|
2,931
|
$
|
2,862
|
$
|
69
|
·
|
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 $500 million.
|
Structured
|
||||||||||||
PT RMBS
|
RMBS
|
Total
|
||||||||||
Three Months Ended
|
Portfolio (%)
|
Portfolio (%)
|
Portfolio (%)
|
|||||||||
June 30, 2018
|
8.7
|
11.8
|
9.8
|
|||||||||
March 31, 2018
|
6.5
|
11.6
|
7.7
|
|||||||||
December 31, 2017
|
7.0
|
13.6
|
9.1
|
|||||||||
September 30, 2017
|
8.3
|
14.9
|
10.3
|
|||||||||
June 30, 2017
|
7.0
|
12.7
|
9.5
|
|||||||||
March 31, 2017
|
7.5
|
14.3
|
9.9
|
($ 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
|
|
June 30, 2018
|
|||||||||
Adjustable Rate RMBS
|
$
|
1,718
|
0.0%
|
3.95%
|
200
|
1-Sep-35
|
0.81
|
10.05%
|
2.00%
|
Fixed Rate RMBS
|
2,978,653
|
80.7%
|
4.30%
|
298
|
1-May-48
|
NA
|
NA
|
NA
|
|
Fixed Rate CMOs
|
542,656
|
14.7%
|
4.39%
|
310
|
15-Jul-47
|
NA
|
NA
|
NA
|
|
Hybrid Adjustable Rate RMBS
|
24,684
|
0.7%
|
2.57%
|
295
|
1-Aug-43
|
53.98
|
7.57%
|
2.00%
|
|
Total Mortgage-backed Pass-through
|
3,547,711
|
96.1%
|
4.30%
|
300
|
1-May-48
|
NA
|
NA
|
NA
|
|
Interest-Only Securities
|
116,181
|
3.1%
|
3.83%
|
279
|
25-Feb-48
|
NA
|
NA
|
NA
|
|
Inverse Interest-Only Securities
|
25,704
|
0.8%
|
3.57%
|
309
|
15-Jul-47
|
NA
|
5.30%
|
NA
|
|
Total Structured RMBS
|
141,885
|
3.9%
|
3.79%
|
285
|
25-Feb-48
|
NA
|
NA
|
NA
|
|
Total Mortgage Assets
|
$
|
3,689,596
|
100.0%
|
4.28%
|
299
|
1-May-48
|
NA
|
NA
|
NA
|
December 31, 2017
|
|||||||||
Adjustable Rate RMBS
|
$
|
1,754
|
0.0%
|
3.95%
|
206
|
1-Sep-35
|
5.50
|
10.05%
|
2.00%
|
Fixed Rate RMBS
|
3,594,533
|
96.0%
|
4.25%
|
338
|
1-Dec-47
|
NA
|
NA
|
NA
|
|
Hybrid Adjustable Rate RMBS
|
27,398
|
0.7%
|
2.59%
|
301
|
1-Aug-43
|
59.77
|
7.59%
|
2.00%
|
|
Total Mortgage-backed Pass-through
|
3,623,685
|
96.7%
|
4.24%
|
338
|
1-Dec-47
|
NA
|
NA
|
NA
|
|
Interest-Only Securities
|
86,918
|
2.3%
|
3.75%
|
262
|
15-Apr-47
|
NA
|
NA
|
NA
|
|
Inverse Interest-Only Securities
|
34,208
|
1.0%
|
4.02%
|
318
|
15-Jul-47
|
NA
|
5.11%
|
NA
|
|
Total Structured RMBS
|
121,126
|
3.3%
|
3.82%
|
278
|
15-Jul-47
|
NA
|
NA
|
NA
|
|
Total Mortgage Assets
|
$
|
3,744,811
|
100.0%
|
4.23%
|
336
|
1-Dec-47
|
NA
|
NA
|
NA
|
($ in thousands)
|
||||||||||||||||
June 30, 2018
|
December 31, 2017
|
|||||||||||||||
Percentage of
|
Percentage of
|
|||||||||||||||
Agency
|
Fair Value
|
Entire Portfolio
|
Fair Value
|
Entire Portfolio
|
||||||||||||
Fannie Mae
|
$
|
2,164,713
|
58.7
|
%
|
$
|
2,242,213
|
59.9
|
%
|
||||||||
Freddie Mac
|
1,519,420
|
41.2
|
%
|
1,496,615
|
40.0
|
%
|
||||||||||
Ginnie Mae
|
5,463
|
0.1
|
%
|
5,983
|
0.1
|
%
|
||||||||||
Total Portfolio
|
$
|
3,689,596
|
100.0
|
%
|
$
|
3,744,811
|
100.0
|
%
|
June 30, 2018
|
December 31, 2017
|
|||||||
Weighted Average Pass-through Purchase Price
|
$
|
106.25
|
$
|
107.52
|
||||
Weighted Average Structured Purchase Price
|
$
|
14.37
|
$
|
13.82
|
||||
Weighted Average Pass-through Current Price
|
$
|
104.08
|
$
|
106.79
|
||||
Weighted Average Structured Current Price
|
$
|
14.18
|
$
|
12.50
|
||||
Effective Duration (1)
|
3.421
|
2.989
|
(1)
|
Effective duration is the approximate percentage change in price for a 100 bps change in rates. An effective duration of 3.421 indicates that an interest rate increase of 1.0% would be expected to cause a 3.421% decrease in the value of the RMBS in the Company's investment portfolio at June 30, 2018. An effective duration of 2.989 indicates that an interest rate increase of 1.0% would be expected to cause a 2.989% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2017. 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)
|
||||||||||||||||||||||||
2018
|
2017
|
|||||||||||||||||||||||
Total Cost
|
Average Price
|
Weighted Average Yield
|
Total Cost
|
Average Price
|
Weighted Average Yield
|
|||||||||||||||||||
Pass-through RMBS
|
$
|
1,966,300
|
$
|
104.60
|
3.39
|
%
|
$
|
3,906,120
|
$
|
108.29
|
2.74
|
%
|
||||||||||||
Structured RMBS
|
28,908
|
21.56
|
5.39
|
%
|
59,272
|
16.34
|
5.03
|
%
|
($ in thousands)
|
||||||||||||||||
Difference Between Ending
|
||||||||||||||||
Ending
|
Average
|
Borrowings and
|
||||||||||||||
Balance of
|
Balance of
|
Average Borrowings
|
||||||||||||||
Three Months Ended
|
Borrowings
|
Borrowings
|
Amount
|
Percent
|
||||||||||||
June 30, 2018
|
$
|
3,449,854
|
$
|
3,534,567
|
$
|
(84,713
|
)
|
(2.40
|
)%
|
|||||||
March 31, 2018
|
3,619,280
|
3,576,533
|
42,747
|
1.20
|
%
|
|||||||||||
December 31, 2017
|
3,533,786
|
3,621,931
|
(88,145
|
)
|
(2.43
|
)%
|
||||||||||
September 30, 2017
|
3,710,077
|
3,494,266
|
215,811
|
6.18
|
%
|
|||||||||||
June 30, 2017
|
3,278,456
|
3,164,532
|
113,924
|
3.60
|
%
|
|||||||||||
March 31, 2017
|
3,050,608
|
2,922,157
|
128,451
|
4.40
|
%
|
(in thousands)
|
||||||||||||||||||||
Obligations Maturing
|
||||||||||||||||||||
Within One Year
|
One to Three Years
|
Three to Five Years
|
More than Five Years
|
Total
|
||||||||||||||||
Repurchase agreements
|
$
|
3,449,854
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,449,854
|
||||||||||
Interest expense on repurchase agreements(1)
|
14,289
|
-
|
-
|
-
|
14,289
|
|||||||||||||||
Totals
|
$
|
3,464,143
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,464,143
|
(1)
|
Interest expense on repurchase agreements is based on current interest rates as of June 30, 2018 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
|
1.680
|
70,717
|
||||||
2018 - YTD(1)
|
0.670
|
35,313
|
||||||
Totals
|
$
|
9.505
|
$
|
213,471
|
(1)
|
On July 18, 2018, the Company declared a dividend of $0.09 per share to be paid on August 10, 2018. The effect of this dividend is included in the table above but is not reflected in the Company's financial statements as of June 30, 2018.
|
Interest Rate Sensitivity(1)
|
||||||||
Portfolio
|
||||||||
Market
|
Book
|
|||||||
Change in Interest Rate
|
Value(2)(3)
|
Value(2)(4)
|
||||||
As of June 30, 2018
|
||||||||
-200 Basis Points
|
(1.37
|
)%
|
(12.31
|
)%
|
||||
-100 Basis Points
|
(0.20
|
)%
|
(1.80
|
)%
|
||||
-50 Basis Points
|
0.07
|
%
|
0.64
|
%
|
||||
+50 Basis Points
|
(0.23
|
)%
|
(2.08
|
)%
|
||||
+100 Basis Points
|
(0.50
|
)%
|
(4.52
|
)%
|
||||
+200 Basis Points
|
(1.64
|
)%
|
(14.80
|
)%
|
||||
As of December 31, 2017
|
||||||||
-200 Basis Points
|
(0.94
|
)%
|
(7.62
|
)%
|
||||
-100 Basis Points
|
(0.32
|
)%
|
(2.63
|
)%
|
||||
-50 Basis Points
|
(0.21
|
)%
|
(1.73
|
)%
|
||||
+50 Basis Points
|
(0.59
|
)%
|
(4.82
|
)%
|
||||
+100 Basis Points
|
(1.61
|
)%
|
(13.05
|
)%
|
||||
+200 Basis Points
|
(4.67
|
)%
|
(37.84
|
)%
|
(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)
|
|||||||||||||
April
|
8,088
|
$
|
7.45
|
-
|
5,306,579
|
|||||||||||
May
|
1,068,841
|
7.19
|
1,068,841
|
4,237,738
|
||||||||||||
June
|
1,077
|
7.50
|
-
|
4,237,738
|
||||||||||||
Totals / Weighted Average
|
1,078,006
|
$
|
7.19
|
1,068,841
|
4,237,738
|
(1)
|
Includes shares of the Company's common stock acquired by the Company in connection with the satisfaction of tax withholding obligations on vested employment-related awards under equity incentive plans.
|
(2)
|
On July 29, 2015, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 4,522,822 shares of the Company's common stock. Unless modified or revoked by the Board, the authorization does not expire.
|
* |
Filed herewith.
|
** |
Furnished herewith.
|
*** |
Submitted electronically herewith.
|
Orchid Island Capital, Inc.
|
||||
Registrant
|
||||
Date: July 27, 2018
|
By:
|
/s/ Robert E. Cauley
|
||
Robert E. Cauley
Chief Executive Officer, President and Chairman of the Board
|
||||
Date: July 27, 2018
|
By:
|
/s/ George H. Haas, IV
|
||
George H. Haas, IV
Secretary, Chief Financial Officer, Chief Investment Officer and Director (Principal Financial and Accounting Officer)
|
* |
Filed herewith.
|
** |
Furnished herewith.
|
*** |
Submitted electronically herewith.
|
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: July 27, 2018
|
|
/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: July 27, 2018
|
|
/s/ George H. Haas, IV
|
|
George H. 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.
|
July 27, 2018
|
/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.
|
July 27, 2018
|
/s/ George H Haas, IV
|
|
George H. Haas, IV
Chief Financial Officer
|
Open equity represents the cumulative gains (losses) recorded on open futures positions from inception
T -Note f utures c ontracts were valued at a price of $ 113.62 at June 30, 2018 and $12 4.05 at December 31, 2017 . The no tional contract values of the short positions were $ 187.5 million and $ 173.7 million at June 30, 2018 and December 31, 2017 , respectively
Notional amount represents the par value (or principal balance) of the underlying Agency RMBS
Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS ) as of period-end
Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS ) as of period-end
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 valu e in our consolidated balance sheets
Weighted average p rice received per share is before deducting the underwriters’ discount, if applicable, and other offering costs.
Net proceeds are net of the underwriters’ discount, if applicable, and other offering costs.
The Company has entered into six e quity d istribution a greements, five of which have either been terminated because all shares were sold or were replaced with a subsequent agreement .
On July 18 , 2018 , the Company declared a dividend of $0. 09 per share to be paid on August 1 0, 2018 . The effect of this dividend is included in the table above, but is not reflected in the Company’s financial statements as of June 30, 2018 .
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MGM*9&3W48 S]:\LM+2[U34(K2UB>XN[A]J(.6=C_ )Y-$8M:L
DOCUMENT AND ENTITY INFORMATION - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 27, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Orchid Island Capital, Inc. | |
Entity Central Index Key | 0001518621 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Well Known Seasoned Issuer | No | |
Entity Common Stock Shares Outstanding | 52,034,596 | |
Trading Symbol | ORC |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred Shares Authorized | 100,000,000 | 100,000,000 |
Preferred Shares Issued | 0 | 0 |
Preferred Shares Outstanding | 0 | 0 |
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock Shares Authorized | 500,000,000 | 500,000,000 |
Common Shares Issued | 52,034,596 | 53,061,904 |
Common Shares Outstanding | 52,034,596 | 53,061,904 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Interest income | $ 38,590,000 | $ 34,579,000 | $ 78,526,000 | $ 66,890,000 |
Interest expense | 16,579,000 | 8,763,000 | 31,728,000 | 15,478,000 |
Net interest income | 22,011,000 | 25,816,000 | 46,798,000 | 51,412,000 |
Realized gains (losses) on mortgage-backed securities | (12,175,000) | 3,935,000 | (20,513,000) | 2,585,000 |
Unrealized gains (losses) on mortgage-backed securities | (20,418,000) | (17,090,000) | (92,129,000) | (32,048,000) |
(Losses) gains on derivative instruments | 14,859,000 | (19,442,000) | 56,853,000 | (23,861,000) |
Net portfolio income | 4,277,000 | (6,781,000) | (8,991,000) | (1,912,000) |
Expenses | ||||
Management Fee Expense | 1,606,000 | 1,400,000 | 3,318,000 | 2,702,000 |
Allocated Overhead | 361,000 | 388,000 | 742,000 | 756,000 |
Compensation and related benefits | 1,000 | 218,000 | 12,000 | 230,000 |
Directors fees and liability insurance | 248,000 | 232,000 | 500,000 | 508,000 |
Audit, legal and other professional fees | 167,000 | 219,000 | 463,000 | 389,000 |
Direct REIT operating expenses | 407,000 | 265,000 | 810,000 | 496,000 |
Other administrative | 141,000 | 140,000 | 194,000 | 200,000 |
Total expenses | 2,931,000 | 2,862,000 | 6,039,000 | 5,281,000 |
Net income (loss) | $ 1,346,000 | $ (9,643,000) | $ (15,030,000) | $ (7,193,000) |
Basic and diluted net income (loss) per share | ||||
Basic | $ 0.03 | $ (0.26) | $ (0.29) | $ (0.21) |
Diluted | $ 0.03 | $ (0.26) | $ (0.29) | $ (0.21) |
Weighted Average Shares Outstanding | ||||
Weighted Average Shares - Basic and Diluted | 52,587,472 | 37,211,362 | 52,794,513 | 35,117,364 |
Dividends Declared Per Common Share | $ 0.27 | $ 0.42 | $ 0.58 | $ 0.84 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY, (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($) |
Total |
Common Stock [Member] |
Additional Paid In Capital [Member] |
Retained Earnings [Member] |
---|---|---|---|---|
Balances at Dec. 31, 2017 | $ 462,211,000 | $ 531,000 | $ 461,680,000 | $ 0 |
Increase (Decrease) in Stockholders' Equity | ||||
Net income | (15,030,000) | 0 | 0 | (15,030,000) |
Cash dividend declared | 30,624,000 | 0 | 30,624,000 | 0 |
Issuance of common shares pursuant to stock based compensation plan | 219,000 | 0 | 219,000 | 0 |
Amortization of stock based compensation | 104,000 | 0 | 104,000 | 0 |
Stock Repurchased and Retired During Period, Value | (7,681,000) | (11,000) | (7,670,000) | 0 |
Balances at Jun. 30, 2018 | $ 409,199,000 | $ 520,000 | $ 423,709,000 | $ (15,030,000) |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY, (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Statement Of Stockholders Equity [Abstract] | ||||
Cash dividend declared, per share | $ 0.27 | $ 0.42 | $ 0.58 | $ 0.84 |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||
Organization and Significant Accounting Policies | Organization and Business Description Orchid Island Capital, Inc. (“Orchid” or the “Company”), was incorporated in Maryland on August 17, 2010 for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“RMBS”). From incorporation to February 20, 2013 Orchid was a wholly owned subsidiary of Bimini Capital Management, Inc. (“Bimini”). Orchid began operations on November 24, 2010 (the date of commencement of operations). From incorporation through November 24, 2010, Orchid’s only activity was the issuance of common stock to Bimini. On February 20, 2013, Orchid completed the initial public offering (“IPO”) of its common stock in which it sold approximately 2.4 million shares of its common stock and raised gross proceeds of $35.4 million, which were invested in RMBS that were issued and the principal and interest of which were guaranteed by a federally chartered corporation or agency (“Agency RMBS”) on a leveraged basis. Orchid is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). On July 29, 2016, Orchid entered into an equity distribution agreement (the “July 2016 Equity Distribution Agreement”) with two sales agents pursuant to which the Company could offer and sell, from time to time, up to an aggregate amount of $125,000,000 of shares of the Company’s common stock in transactions that were deemed to be “at the market” offerings and privately negotiated transactions. The Company issued a total of 10,174,992 shares under the July 2016 Equity Distribution Agreement for aggregate gross proceeds of $110.0 million, and net proceeds of approximately $108.2 million, net of commissions and fees, prior to its termination in February 2017. On February 23, 2017, Orchid entered into another equity distribution agreement, as amended and restated on May 10, 2017, (the “May 2017 Equity Distribution Agreement”) with two sales agents pursuant to which the Company may offer and sell, from time to time, up to an aggregate amount of $125,000,000 of shares of the Company’s common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. The Company issued a total of 12,299,032 shares under the May 2017 Equity Distribution Agreement for aggregate gross proceeds of $125.0 million, and net proceeds of approximately $122.9 million, net of commissions and fees, prior to its termination in August 2017. On August 2, 2017, Orchid entered into another equity distribution agreement (the “August 2017 Equity Distribution Agreement”) with two sales agents pursuant to which the Company may offer and sell, from time to time, up to an aggregate amount of $125,000,000 of shares of the Company’s common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through June 30, 2018, the Company issued a total of 7,746,052 shares under the August 2017 Equity Distribution Agreement for aggregate gross proceeds of approximately $76.0 million, and net proceeds of approximately $74.7 million, net of commissions and fees. Basis of Presentation and Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The consolidated financial statements include the accounts of our wholly-owned subsidiary, Orchid Island Casualty, LLC. Significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates affecting the accompanying financial statements are the fair values of RMBS and derivatives. Statement of Comprehensive Income (Loss) In accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 220, Comprehensive Income, a statement of comprehensive income (loss) has not been included as the Company has no items of other comprehensive income (loss). Comprehensive income (loss) is the same as net income (loss) for the periods presented. Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and other borrowings, and interest rate swaps and other derivative instruments.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
The Company maintains cash balances at four banks and excess margin on account at derivative exchanges, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. At June 30, 2018, the Company’s cash deposits exceeded federally insured limits by approximately $134.7 million. Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known bank and derivative exchanges and believes that it is not exposed to any significant credit risk on cash and cash equivalents or restricted cash balances. Mortgage-Backed Securities The Company invests primarily in mortgage pass-through (“PT”) certificates, collateralized mortgage obligations, interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of RMBS. The Company has elected to account for its investment in RMBS under the fair value option. Electing the fair value option requires the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed. The Company records RMBS transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the RMBS balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the RMBS balance with an offsetting receivable recorded. The fair value of the Company’s investments in RMBS is governed by FASB ASC 820, Fair Value Measurement. The definition of fair value in FASB ASC 820 focuses on the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for RMBS are based on independent pricing sources and/or third party broker quotes, when available. Income on PT RMBS securities is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the consolidated statements of operations. For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of RMBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. Derivative Financial Instruments
The Company uses derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future. The principal instruments that the Company has used to date are Treasury Note (“T-Note”) and Eurodollar futures contracts, interest rate swaps, options to enter in interest rate swaps (“interest rate swaptions”) and “to-be-announced” (“TBA”) securities transactions, but may enter into other derivatives in the future. The Company purchases a portion of its Agency RMBS through forward settling transactions, including TBA securities transactions. At times when market conditions are conducive, the Company may choose to move the settlement of these TBA securities transactions out to a later date by entering into an offsetting short position, which is then net settled for cash, and simultaneously entering into a substantially similar TBA securities trade for a later settlement date. Such a set of transactions is referred to as a TBA “dollar roll” transaction. The TBA securities purchased at the later settlement date are typically priced at a discount to securities for settlement in the current month. This difference is referred to as the “price drop.” The price drop represents compensation to the Company for foregoing net interest margin and is referred to as TBA “dollar roll income.”
The Company accounts for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if the Company cannot assert that it is probable at inception of the TBA transaction, or throughout its term, that it will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a short position, upon settlement of the trade. The Company accounts for TBA dollar roll transactions as a series of derivative transactions. Gains, losses and dollar roll income associated with TBA securities transactions and dollar roll transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations. The fair value of TBA securities is estimated based on similar methods used to value RMBS securities. The Company has elected not to treat any of its derivative financial instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. FASB ASC Topic 815, Derivatives and Hedging, requires that all derivative instruments be carried at fair value. Changes in fair value are recorded in earnings for each period. Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties and exchanges to honor their commitments. In addition, the Company may be required to post collateral based on any declines in the market value of the derivatives. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. To mitigate this risk, the Company uses only well-established commercial banks and exchanges as counterparties. Financial Instruments FASB ASC 825, Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value, either in the body of the financial statements or in the accompanying notes. RMBS, Eurodollar and T-Note futures contracts, interest rate swaps, interest rate swaptions and TBA securities are accounted for at fair value in the consolidated balance sheets. The methods and assumptions used to estimate fair value for these instruments are presented in Note 12 of the consolidated financial statements. The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying values as of June 30, 2018 and December 31, 2017 due to the short-term nature of these financial instruments. Repurchase Agreements The Company finances the acquisition of the majority of its RMBS through the use of repurchase agreements under master repurchase agreements. Pursuant to ASC Topic 860, Transfers and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Manager Compensation The Company is externally managed by Bimini Advisors, LLC (the “Manager” or “Bimini Advisors”), a Maryland limited liability company and wholly-owned subsidiary of Bimini. The Company’s management agreement with the Manager provides for payment to the Manager of a management fee and reimbursement of certain operating expenses, which are accrued and expensed during the period for which they are earned or incurred. Refer to Note 13 for the terms of the management agreement. Earnings Per Share The Company follows the provisions of FASB ASC 260, Earnings Per Share. Basic earnings per share (“EPS”) is calculated as net income or loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding or subscribed during the period. Diluted EPS is calculated using the treasury stock or two-class method, as applicable, for common stock equivalents, if any. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive. Income Taxes Orchid has qualified and elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). REITs are generally not subject to federal income tax on their REIT taxable income provided that they distribute to their stockholders at least 90% of their REIT taxable income on an annual basis. In addition, a REIT must meet other provisions of the Code to retain its tax status. Orchid measures, recognizes and presents its uncertain tax positions in accordance with FASB ASC 740, Income Taxes. Under that guidance, Orchid assesses the likelihood, based on their technical merit, that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. All of Orchid’s tax positions are categorized as highly certain. There is no accrual for any tax, interest or penalties related to Orchid’s tax position assessment. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. Recent Accounting Pronouncements In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows – (Topic 230): Restricted Cash. ASU 2016-18 requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company early adopted the ASU beginning with the first quarter of 2017. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. The Company’s adoption of this ASU did not have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model). ASU 2016-13 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. Early application is permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 provides guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. ASU 2016-01 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017 and, for most provisions, is effective using the cumulative-effect transition approach. |
MORTGAGE-BACKED SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities | NOTE 2. MORTGAGE-BACKED SECURITIES The following table presents the Company’s RMBS portfolio as of June 30, 2018 and December 31, 2017:
The following table summarizes the Company’s RMBS portfolio as of June 30, 2018 and December 31, 2017, according to the contractual maturities of the securities in the portfolio. Actual maturities of RMBS investments are generally shorter than stated contractual maturities and are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.
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REPURCHASE AGREEMENTS AND OTHER BORROWINGS |
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Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase Agreements and Other Borrowings | NOTE 3. REPURCHASE AGREEMENTS AND OTHER BORROWINGS The Company pledges certain of its RMBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of June 30, 2018, the Company had met all margin call requirements. As of June 30, 2018, the Company had outstanding repurchase obligations of approximately $3,449.9 million with a net weighted average borrowing rate of 2.07%. These agreements were collateralized by RMBS with a fair value, including accrued interest and securities pledged related to securities sold but not yet settled, of approximately $3,658.3 million, and cash pledged to the counterparties of approximately $23.1 million. As of December 31, 2017, the Company had outstanding repurchase obligations of approximately $3,533.8 million with a net weighted average borrowing rate of 1.54%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $3,726.5 million, and cash pledged to the counterparties of approximately $25.3 million. As of June 30, 2018 and 2017, the Company’s repurchase agreements had remaining maturities as summarized below:
If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable and cash posted by the Company as collateral. At June 30, 2018, the Company had an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable and securities posted by the counterparty (if any), and the fair value of securities and cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately $224.3 million. The Company did not have an amount at risk with any individual counterparty greater than 10% of the Company’s equity at June 30, 2018 and December 31, 2017 |
DERIVATIVE FINANCIAL INSTRUMENTS |
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Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding by entering into derivatives and other hedging contracts. To date, the Company has entered into Eurodollar and T-Note futures contracts, interest rate swaps, and interest rate swaptions, but may enter into other contracts in the future. The Company has not elected hedging treatment under GAAP, and as such all gains or losses (realized and unrealized) on these instruments are reflected in earnings for all periods presented. In addition, the Company utilizes TBA securities as a means of investing in and financing Agency RMBS or as a means of reducing its exposure to Agency RMBS. The Company accounts for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if the Company cannot assert that it is probable at inception and throughout the term of the TBA securities that it will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a short position, upon settlement of the trade. Derivative Assets (Liabilities), at Fair Value The table below summarizes fair value information about our derivative assets and liabilities as of June 30, 2018 and December 31, 2017.
Eurodollar and T-Note futures are cash settled futures contracts on an interest rate, with gains and losses credited or charged to the Company’s cash accounts on a daily basis. A minimum balance, or “margin”, is required to be maintained in the account on a daily basis. The tables below present information related to the Company’s Eurodollar and T-Note futures positions at June 30, 2018 and December 31, 2017.
The table below presents information related to the Company’s interest rate swaption positions at June 30, 2018 and December 31, 2017.
The following table summarizes our contracts to purchase and sell TBA securities as of June 30, 2018 and December 31, 2017.
Gain (Loss) From Derivative Instruments, Net The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the six and three months ended June 30, 2018 and 2017.
Credit Risk-Related Contingent Features The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. We minimize this risk by limiting our counterparties for instruments which are not centrally cleared on a registered exchange to major financial institutions with acceptable credit ratings and monitoring positions with individual counterparties. In addition, we may be required to pledge assets as collateral for our derivatives, whose amounts vary over time based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by a counterparty, we may not receive payments provided for under the terms of our derivative agreements, and may have difficulty obtaining our assets pledged as collateral for our derivatives. The cash and cash equivalents pledged as collateral for our derivative instruments are included in restricted cash on our consolidated balance sheets. |
[1],[2],[3],[4],[5],[6] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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PLEDGED ASSETS |
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Financial Instruments Pledged as Collateral [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pledged Assets [Text Block] | NOTE 5. PLEDGED ASSETS Assets Pledged to Counterparties The table below summarizes our assets pledged as collateral under our repurchase agreements and derivative agreements by type, including securities pledged related to securities sold but not yet settled, as of June 30, 2018 and December 31, 2017.
Assets Pledged from Counterparties The table below summarizes our assets pledged to us from counterparties under our repurchase agreements as of June 30, 2018 and December 31, 2017.
PT RMBS and U.S. Treasury securities received as margin under our repurchase agreements are not recorded in the consolidated balance sheets because the counterparty retains ownership of the security. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements or other liabilities in the consolidated balance sheets. |
OFFSETTING ASSETS AND LIABILITIES |
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Offsetting Assets And Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting Assets and Liabilities [Text Block] | NOTE 6. OFFSETTING ASSETS AND LIABILITIES The Company’s derivatives and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2018 and December 31, 2017.
The amounts disclosed for collateral received by or posted to the same counterparty up to and not exceeding the net amount of the asset or liability presented in the consolidated balance sheets. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 5 for a discussion of collateral posted or received against or for repurchase obligations and derivative instruments. |
CAPITAL STOCK |
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Capital Stock [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock | NOTE 7. CAPITAL STOCK Common Stock Issuances During 2017, the Company completed the following public offerings of shares of its common stock. There were no common stock issuances through public offerings during the three months ended June 30, 2018, March 31, 2018 and September 30, 2017.
Stock Repurchase Program On July 29, 2015, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s common stock. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 4,522,822 shares of the Company's common stock. As part of the stock repurchase program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate the Company to acquire any particular amount of common stock and the program may be suspended or discontinued at the Company’s discretion without prior notice. From the inception of the stock repurchase program through June 30, 2018, the Company repurchased a total of 2,285,084 shares at an aggregate cost of approximately $18.5 million, including commissions and fees, for a weighted average price of $8.11 per share. During the three months ended June 30, 2018, the Company repurchased a total of 1,068,841 shares at an aggregate cost of approximately $7.7 million, including commissions and fees, for a weighted average price of $7.19 per share. No shares were repurchased during the year ended December 31, 2017. As of June 30, 2018, the remaining authorization under the repurchase program is for up to 4,237,738 shares of the Company’s common stock. Cash Dividends The table below presents the cash dividends declared on the Company’s common stock.
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STOCK INCENTIVE PLAN |
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Employee Benefits And Share Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock incentive Plan | NOTE 8. STOCK INCENTIVE PLAN In October 2012, the Company’s Board of Directors adopted and Bimini, then the Company’s sole stockholder, approved, the Orchid Island Capital, Inc. 2012 Equity Incentive Plan (the “Incentive Plan”) to recruit and retain employees, directors and other service providers, including employees of the Manager and other affiliates. The Incentive Plan provides for the award of stock options, stock appreciation rights, stock award, performance units, other equity-based awards (and dividend equivalents with respect to awards of performance units and other equity-based awards) and incentive awards. The Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors except that the Company’s full Board of Directors will administer awards made to directors who are not employees of the Company or its affiliates. The Incentive Plan provides for awards of up to an aggregate of 10% of the issued and outstanding shares of our common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate 4,000,000 shares of the Company’s common stock that may be issued under the Incentive Plan. Restricted Stock Awards The table below presents information related to the Company’s restricted common stock at June 30, 2018 and 2017.
Stock Awards The Company issues immediately vested common stock under the Incentive Plan to certain executive officers, employees and directors. The following table presents information related to fully vested common stock issued during the six months ended June 30, 2018 and 2017.
Performance Units The Company may issue performance units under the Incentive Plan to certain executive officers and employees. “Performance Units” vest after the end of a defined performance period, based on satisfaction of the performance conditions set forth in the performance unit agreement. When earned, each Performance Unit will be settled by the issuance of one share of the Company’s common stock, at which time the Performance Unit will be cancelled. The Performance Units contain dividend equivalent rights which entitle the Participants to receive distributions declared by the Company on common stock, but do not include the right to vote the shares. Performance Units are subject to forfeiture should the participant no longer serve as an executive officer or employee for the Company. Compensation expense for the Performance Units are recognized over the remaining vesting period once it becomes probable that the performance conditions will be achieved. The following table presents information related to Performance Units outstanding during the six months ended June 30, 2018 and 2017.
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COMMITTMENTS AND CONTINGENCIES |
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Commitments And Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | NOTE 9. COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any reported or unreported contingencies at June 30, 2018. |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 10. INCOME TAXES The Company will generally not be subject to federal income tax on its REIT taxable income to the extent that it distributes its REIT taxable income to its stockholders and satisfies the ongoing REIT requirements, including meeting certain asset, income and stock ownership tests. A REIT must generally distribute at least 90% of its REIT taxable income to its stockholders, of which 85% generally must be distributed within the taxable year, in order to avoid the imposition of an excise tax. The remaining balance may be distributed up to the end of the following taxable year, provided the REIT elects to treat such amount as a prior year distribution and meets certain other requirements. |
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Earnings Per Share (EPS) | NOTE 11. EARNINGS PER SHARE (EPS) The Company had dividend eligible shares of restricted common stock and Performance Units that were outstanding during the six and three months ended June 30, 2018 and 2017. The basic and diluted per share computations include these unvested shares of restricted common stock and performance units if there is income available to common stock, as they have dividend participation rights. The shares of restricted common stock and Performance Units have no contractual obligation to share in losses. Because there is no such obligation, the shares of restricted common stock and Performance Units are not included in the basic and diluted EPS computations when no income is available to common stock even though they are considered participating securities. The table below reconciles the numerator and denominator of EPS for the six and three months ended June 30, 2018 and 2017.
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FAIR VALUE |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | NOTE 12. FAIR VALUE Authoritative accounting literature establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications are:
The Company’s RMBS, interest rate swaps, interest rate swaptions and TBA securities are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third party broker quotes, when available. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. Alternatively, the Company could opt to have the value of all of its positions in RMBS, interest rate swaps, interest rate swaptions and TBA securities determined by either an independent third-party or could do so internally. RMBS (based on the fair value option), interest rate swaps, interest rate swaptions, TBA securities and futures contracts were recorded at fair value on a recurring basis during the six and three months ended June 30, 2018 and 2017. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets. The following table presents financial assets (liabilities) measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017:
During the six and three months ended June 30, 2018 and 2017, there were no transfers of financial assets or liabilities between levels 1, 2 or 3. |
RELATED PARTY TRANSACTIONS |
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Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 13. RELATED PARTY TRANSACTIONS Management Agreement The Company is externally managed and advised by Bimini Advisors, LLC (the “Manager”) pursuant to the terms of a management agreement. The management agreement has been renewed through February 20, 2019 and provides for automatic one-year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company. The Manager receives a monthly management fee in the amount of:
The Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the Manager the Company’s pro rata portion of certain overhead costs set forth in the management agreement. Should the Company terminate the management agreement without cause, it will pay to the Manager a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the term of the agreement. Total expenses recorded for the management fee and costs incurred were approximately $4.1 million and $2.0 million for the six and three months ended June 30, 2018, respectively, and approximately $3.5 million and $1.8 for the six and three months ended June 30, 2017, respectively. At June 30, 2018 and December 31, 2017, the net amount due to affiliates was approximately $0.7 million and $0.8 million, respectively. Other Relationships with Bimini Robert Cauley, our Chief Executive Officer and Chairman of our Board of Directors, also serves as Chief Executive Officer and Chairman of the Board of Directors of Bimini and owns shares of common stock of Bimini. George H. Haas, our Chief Financial Officer, Chief Investment Officer, Secretary and a member of our Board of Directors, also serves as the Chief Financial Officer, Chief Investment Officer and Treasurer of Bimini and owns shares of common stock of Bimini. In addition, as of June 30, 2018, Bimini owned 1,520,036 shares, or 2.9%, of the Company’s common stock. |
BASIS OF PRESENTATION (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation and Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The consolidated financial statements include the accounts of our wholly-owned subsidiary, Orchid Island Casualty, LLC. Significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
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Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates affecting the accompanying financial statements are the fair values of RMBS and derivatives. |
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Statement of Comprehensive Income | Statement of Comprehensive Income (Loss) In accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 220, Comprehensive Income, a statement of comprehensive income (loss) has not been included as the Company has no items of other comprehensive income (loss). Comprehensive income (loss) is the same as net income (loss) for the periods presented. |
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Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and other borrowings, and interest rate swaps and other derivative instruments.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
The Company maintains cash balances at four banks and excess margin on account at derivative exchanges, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. At June 30, 2018, the Company’s cash deposits exceeded federally insured limits by approximately $134.7 million. Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known bank and derivative exchanges and believes that it is not exposed to any significant credit risk on cash and cash equivalents or restricted cash balances. |
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Mortgage-Backed Securities | Mortgage-Backed Securities The Company invests primarily in mortgage pass-through (“PT”) certificates, collateralized mortgage obligations, interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of RMBS. The Company has elected to account for its investment in RMBS under the fair value option. Electing the fair value option requires the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed. The Company records RMBS transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the RMBS balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the RMBS balance with an offsetting receivable recorded. The fair value of the Company’s investments in RMBS is governed by FASB ASC 820, Fair Value Measurement. The definition of fair value in FASB ASC 820 focuses on the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for RMBS are based on independent pricing sources and/or third party broker quotes, when available. Income on PT RMBS securities is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the consolidated statements of operations. For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of RMBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. |
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Derivative Financial Instruments | Derivative Financial Instruments
The Company uses derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future. The principal instruments that the Company has used to date are Treasury Note (“T-Note”) and Eurodollar futures contracts, interest rate swaps, options to enter in interest rate swaps (“interest rate swaptions”) and “to-be-announced” (“TBA”) securities transactions, but may enter into other derivatives in the future. The Company purchases a portion of its Agency RMBS through forward settling transactions, including TBA securities transactions. At times when market conditions are conducive, the Company may choose to move the settlement of these TBA securities transactions out to a later date by entering into an offsetting short position, which is then net settled for cash, and simultaneously entering into a substantially similar TBA securities trade for a later settlement date. Such a set of transactions is referred to as a TBA “dollar roll” transaction. The TBA securities purchased at the later settlement date are typically priced at a discount to securities for settlement in the current month. This difference is referred to as the “price drop.” The price drop represents compensation to the Company for foregoing net interest margin and is referred to as TBA “dollar roll income.”
The Company accounts for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if the Company cannot assert that it is probable at inception of the TBA transaction, or throughout its term, that it will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a short position, upon settlement of the trade. The Company accounts for TBA dollar roll transactions as a series of derivative transactions. Gains, losses and dollar roll income associated with TBA securities transactions and dollar roll transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations. The fair value of TBA securities is estimated based on similar methods used to value RMBS securities. The Company has elected not to treat any of its derivative financial instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. FASB ASC Topic 815, Derivatives and Hedging, requires that all derivative instruments be carried at fair value. Changes in fair value are recorded in earnings for each period. Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties and exchanges to honor their commitments. In addition, the Company may be required to post collateral based on any declines in the market value of the derivatives. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. To mitigate this risk, the Company uses only well-established commercial banks and exchanges as counterparties. |
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Financial Instruments | Financial Instruments FASB ASC 825, Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value, either in the body of the financial statements or in the accompanying notes. RMBS, Eurodollar and T-Note futures contracts, interest rate swaps, interest rate swaptions and TBA securities are accounted for at fair value in the consolidated balance sheets. The methods and assumptions used to estimate fair value for these instruments are presented in Note 12 of the consolidated financial statements. The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, receivable for securities sold, other assets, due to affiliates, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying values as of June 30, 2018 and December 31, 2017 due to the short-term nature of these financial instruments. |
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Repurchase Agreements | Repurchase Agreements The Company finances the acquisition of the majority of its RMBS through the use of repurchase agreements under master repurchase agreements. Pursuant to ASC Topic 860, Transfers and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. |
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Management Fees | Manager Compensation The Company is externally managed by Bimini Advisors, LLC (the “Manager” or “Bimini Advisors”), a Maryland limited liability company and wholly-owned subsidiary of Bimini. The Company’s management agreement with the Manager provides for payment to the Manager of a management fee and reimbursement of certain operating expenses, which are accrued and expensed during the period for which they are earned or incurred. Refer to Note 13 for the terms of the management agreement. |
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Earnings Per Share | Earnings Per Share The Company follows the provisions of FASB ASC 260, Earnings Per Share. Basic earnings per share (“EPS”) is calculated as net income or loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding or subscribed during the period. Diluted EPS is calculated using the treasury stock or two-class method, as applicable, for common stock equivalents, if any. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive. |
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Income Taxes | Income Taxes Orchid has qualified and elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). REITs are generally not subject to federal income tax on their REIT taxable income provided that they distribute to their stockholders at least 90% of their REIT taxable income on an annual basis. In addition, a REIT must meet other provisions of the Code to retain its tax status. Orchid measures, recognizes and presents its uncertain tax positions in accordance with FASB ASC 740, Income Taxes. Under that guidance, Orchid assesses the likelihood, based on their technical merit, that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. All of Orchid’s tax positions are categorized as highly certain. There is no accrual for any tax, interest or penalties related to Orchid’s tax position assessment. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows – (Topic 230): Restricted Cash. ASU 2016-18 requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company early adopted the ASU beginning with the first quarter of 2017. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. The Company’s adoption of this ASU did not have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model). ASU 2016-13 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. Early application is permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 provides guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. ASU 2016-01 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017 and, for most provisions, is effective using the cumulative-effect transition approach. |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||
Schedule of reconciliation of cash, cash equivalents and restricted cash | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
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MORTGAGE-BACKED SECURITIES (Tables) - Residential Mortgage Backed Securities [Member] |
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Schedule of RMBS portfolio | NOTE 2. MORTGAGE-BACKED SECURITIES The following table presents the Company’s RMBS portfolio as of June 30, 2018 and December 31, 2017:
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Schedule of RMBS portfolio according to the contractual maturities of the securities in the portfolio | The following table summarizes the Company’s RMBS portfolio as of June 30, 2018 and December 31, 2017, according to the contractual maturities of the securities in the portfolio. Actual maturities of RMBS investments are generally shorter than stated contractual maturities and are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.
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REPURCHASE AGREEMENTS AND OTHER BORROWINGS (Tables) |
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Disclosure of Repurchase Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of repurchase agreements and remaining maturities | As of June 30, 2018 and 2017, the Company’s repurchase agreements had remaining maturities as summarized below:
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DERIVATIVE FINANCIAL INSTRUMENTS (Tables) |
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | Derivative Assets (Liabilities), at Fair Value The table below summarizes fair value information about our derivative assets and liabilities as of June 30, 2018 and December 31, 2017.
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Schedule of Eurodollar and T-Note futures positions | Eurodollar and T-Note futures are cash settled futures contracts on an interest rate, with gains and losses credited or charged to the Company’s cash accounts on a daily basis. A minimum balance, or “margin”, is required to be maintained in the account on a daily basis. The tables below present information related to the Company’s Eurodollar and T-Note futures positions at June 30, 2018 and December 31, 2017.
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Schedule of Interest Rate Swap Agreements [Table Text Block] | Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate based on the London Interbank Offered Rate (“LIBOR”) ("payer swaps"). The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics of our repurchase agreements and cash flows on such liabilities. We are typically required to post collateral on our interest rate swap agreements. The table below presents information related to the Company’s interest rate swap positions at June 30, 2018 and December 31, 2017.
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Schedule Of Interest Rate Swaption Agreements [Table Text Block] | The table below presents information related to the Company’s interest rate swaption positions at June 30, 2018 and December 31, 2017.
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Schedule of To Be Announced Securities [TableTextBlock] | The following table summarizes our contracts to purchase and sell TBA securities as of June 30, 2018 and December 31, 2017.
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Schedule of the effect of the Company's deriviative financial instruments on the consolidated statement of operations | Gain (Loss) From Derivative Instruments, Net The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the six and three months ended June 30, 2018 and 2017.
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PLEDGED ASSETS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Financial Instruments Pledged as Collateral [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets pledged as collateral under our repurchase agreements, prime brokerage clearing accounts, derivative agreements and insurance capital by type, including securities pledged related to securities sold but not yet settled | Assets Pledged to Counterparties The table below summarizes our assets pledged as collateral under our repurchase agreements and derivative agreements by type, including securities pledged related to securities sold but not yet settled, as of June 30, 2018 and December 31, 2017.
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Schedule of assets pledged to us from counterparties under our repurchase agreements. | Assets Pledged from Counterparties The table below summarizes our assets pledged to us from counterparties under our repurchase agreements as of June 30, 2018 and December 31, 2017.
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OFFSETTING ASSETS AND LIABILITIES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Offsetting Assets And Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting of Assets [Table Text Block] | The following table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2018 and December 31, 2017.
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Offsetting of Liabilties [Table Text Block] |
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CAPITAL STOCK (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Capital Stock [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of completed public offerings of shares of common stock | Common Stock Issuances During 2017, the Company completed the following public offerings of shares of its common stock. There were no common stock issuances through public offerings during the three months ended June 30, 2018, March 31, 2018 and September 30, 2017.
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Schedul of cash dividends declared on the Company's common stock | Cash Dividends The table below presents the cash dividends declared on the Company’s common stock.
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[4] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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STOCK INCENTIVE PLANS (Tables) |
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Employee Benefits And Share Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Restricted Stock Awards [Table Text Block] | Restricted Stock Awards The table below presents information related to the Company’s restricted common stock at June 30, 2018 and 2017.
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Schedule of fully vested common stock issued | Stock Awards The Company issues immediately vested common stock under the Incentive Plan to certain executive officers, employees and directors. The following table presents information related to fully vested common stock issued during the six months ended June 30, 2018 and 2017.
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Schedule of Performance Units outstanding | The following table presents information related to Performance Units outstanding during the six months ended June 30, 2018 and 2017.
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EARNINGS PER SHARE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciling the numerator and denominator of EPS | The table below reconciles the numerator and denominator of EPS for the six and three months ended June 30, 2018 and 2017.
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FAIR VALUE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of financial assets (liabilities) measured at fair value on a recurring basis | The following table presents financial assets (liabilities) measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017:
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ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - Organization and Business Description (Narrative) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Entity Incorporation, Date of Incorporation | Aug. 17, 2010 |
Entity Incorporation, State Country Name | MD |
The date of commencement of operations | Nov. 24, 2010 |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - Cash and Cash Equivalents and Restricted Cash (Narrative) (Details) |
Jun. 30, 2018
USD ($)
|
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Accounting Policies [Abstract] | |
Uninsured Cash Balances | $ 134,700,000 |
ORGANIZATION AND SIGINIFICANT ACCOUNTING POLICIES - Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 137,947,000 | $ 214,363,000 | ||
Restricted cash | 31,065,000 | 32,349,000 | ||
Total cash, cash equivalents and restricted cash | $ 169,012,000 | $ 246,712,000 | $ 219,661,000 | $ 94,425,000 |
MORTGAGE-BACKED SECURITIES - RMBS portfolio by contractual maturities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Greater than one year and less than five years | $ 5 | $ 29 |
Greater than five years and less than ten years | 3,600 | 3,281 |
Greater than or equal to ten years | 3,685,991 | 3,741,501 |
Total mortgage-backed securities | $ 3,689,596 | $ 3,744,811 |
REPURCHASE AGREEMENTS AND OTHER BORROWINGS (Narrative) (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Assets Sold under Agreements to Repurchase [Line Items] | ||
Outstanding repurchase obligations | $ 3,449,854,000 | $ 3,533,786,000 |
Fair Value of securities pledged, including accrued interest receivable | 3,658,329,000 | 3,726,523,000 |
Cash Held on Deposit with Repurchase Agreement Counterparties | $ 31,065,000 | $ 32,349,000 |
Net weighted average borrowing rate | 2.07% | 1.54% |
Repurchase Agreement [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Outstanding repurchase obligations | $ 3,449,854,000 | $ 3,533,786,000 |
Fair Value of securities pledged, including accrued interest receivable | 3,658,329,000 | 3,726,523,000 |
Cash Held on Deposit with Repurchase Agreement Counterparties | $ 23,093,000 | $ 25,296,000 |
Net weighted average borrowing rate | 2.07% | 1.54% |
Aggregate amount at risk will all counterparties | $ 224,300,000 |
DERIVATIVE FINANCIAL INSTRUMENTS - Interest rate swap positions (Details) - Swap [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Investment Securities Class [Domain] | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 1,010,000,000 | $ 1,010,000,000 |
Average Fixed Pay Rate | 1.43% | 1.43% |
Average Receive Rate | 2.35% | 1.45% |
Assets, at Fair Value | $ 26,334,000 | $ 13,530,000 |
Average Maturity | 2 years 4 months 2 days | 2 years 10 months 2 days |
1-3 Years | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 650,000,000 | $ 650,000,000 |
Average Fixed Pay Rate | 1.09% | 1.09% |
Average Receive Rate | 2.36% | 1.41% |
Assets, at Fair Value | $ 16,223,000 | $ 11,828,000 |
Average Maturity | 1 year 6 months 20 days | 2 years 20 days |
3-5 Years | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 360,000,000 | $ 360,000,000 |
Average Fixed Pay Rate | 2.05% | 2.05% |
Average Receive Rate | 2.33% | 1.53% |
Assets, at Fair Value | $ 10,111,000 | $ 1,702,000 |
Average Maturity | 3 years 9 months 3 days | 4 years 3 months 3 days |
DERIVATIVE FINANCIAL INTSTRUMENTS - Summary of Outstanding Swaptions (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Derivatives, Fair Value [Line Items] | ||
Assets, at Fair Value | $ 34,207,000 | $ 17,160,000 |
Payer Swaption [Member] | Less Than Or Equal To One Year [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Swaption Cost | 9,770,000 | 2,367,000 |
Assets, at Fair Value | $ 7,232,000 | $ 3,405,000 |
Derivative Instruments Average Months To Expiration | 6 months 11 days | 8 months |
Notional Amount | $ 950,000,000 | $ 200,000,000 |
Derivative Average Fixed Interest Rate | 3.20% | 2.16% |
Term (Years) | 9 years 3 months 7 days | 6 years |
Receiver Swaption [Member] | Less Than Or Equal To One Year [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Swaption Cost | $ 760,000 | |
Assets, at Fair Value | $ 640,000 | |
Derivative Instruments Average Months To Expiration | 7 months 12 days | |
Notional Amount | $ 100,000,000 | |
Derivative Average Fixed Interest Rate | 2.80% | |
Term (Years) | 5 years |
CAPITAL STOCK - Completed public offerings ofcommon stock (Details) - At the Market Offering Program [Member] - USD ($) |
3 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
|
Book Value Per Share | $ 8.71 | $ 9.23 | $ 9.75 | $ 8.71 | $ 9.15 | $ 10.1 | |
Weighted Average Price Received Per Share | $ 9.81 | $ 10.17 | $ 10.13 | $ 9.81 | $ 10.17 | ||
Stock Issued During Period Shares New Issues | 7,746,052 | 11,012,836 | 1,286,196 | 20,045,084 | |||
Stock Issued During Period, Value, New Issues | $ 74,750,000 | $ 110,065,000 | $ 12,792,000 | $ 197,607,000 |
CAPITAL STOCK - Cash dividends declared (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | 65 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Jun. 30, 2018 |
|
Dividends Payable [Line Items] | ||||||||||
Per Share Amount | $ 0.27 | $ 0.42 | $ 0.58 | $ 0.84 | ||||||
Dividend Declared [Member] | ||||||||||
Dividends Payable [Line Items] | ||||||||||
Per Share Amount | $ 0.67 | $ 1.68 | $ 1.68 | $ 1.92 | $ 2.16 | $ 1.395 | $ 9.505 | |||
Total | $ 35,313,000 | $ 70,717,000 | $ 41,388,000 | $ 38,748,000 | $ 22,643,000 | $ 4,662,000 | $ 213,471,000 | |||
Dividend Declared [Member] | Subsequent Event [Member] | ||||||||||
Dividends Payable [Line Items] | ||||||||||
Dividends Payable, Date Declared | Jul. 18, 2018 | |||||||||
Dividends Payable, Date to be Paid | Aug. 10, 2018 | |||||||||
Per Share Amount | $ 0.09 |
STOCK INCENTIVE PLAN - Descriptions of Plans (Details) |
3 Months Ended |
---|---|
Jun. 30, 2018
shares
| |
Employee Benefits And Share Based Compensation [Abstract] | |
Maximum Number of Shares to Be Issued the Plan | 4,000,000 |
Percentage of Outstanding Stock Limitation | 10.00% |
STOCK INCENTIVE PLAN - (Narrative) (Details) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restricted Stock | ||
Incentive Share Activity, Shares | ||
Nonvested - Beginning Balance | 0 | 8,000 |
Granted | 0 | 0 |
Vested | 0 | (8,000) |
Nonvested - Ending Balance | 0 | 0 |
Incentive Share Activity, Grant Date Fair Value | ||
Nonvested - Beginning Balance | $ 0 | $ 12.23 |
Granted | 0 | 0 |
Vested | 0 | 12.23 |
Nonvested - Ending Balance | $ 0 | $ 0 |
Stock Awards [Member] | ||
Incentive Share Activity, Shares | ||
Granted | 37,920 | 21,839 |
Incentive Share Activity, Grant Date Fair Value | ||
Granted | $ 7.62 | $ 9.74 |
Performance Shares [Member] | ||
Incentive Share Activity, Shares | ||
Nonvested - Beginning Balance | 41,693 | 45,305 |
Granted | 27,935 | 15,707 |
Vested | (12,806) | (9,660) |
Nonvested - Ending Balance | 56,822 | 51,352 |
Incentive Share Activity, Grant Date Fair Value | ||
Nonvested - Beginning Balance | $ 9.95 | $ 10.33 |
Granted | 7.45 | 9.55 |
Vested | 10.28 | 10.52 |
Nonvested - Ending Balance | $ 8.65 | $ 10.06 |
EARNINGS PER SHARE (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract] | ||||
Net Income (Loss) Available to Common Stockholders, Basic | $ 1,346,000 | $ (9,643,000) | $ (15,030,000) | $ (7,193,000) |
Net Income (Loss) Available to Common Stockholders, Diluted | $ 1,346,000 | $ (9,643,000) | $ (15,030,000) | $ (7,193,000) |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||||
Common Shares Outstanding | 52,035,000 | 45,300,000 | 52,035,000 | 45,300,000 |
Unvested Dividend Eligible Shares Outstanding at the Balance Sheet Date | 57,000 | 0 | 0 | 0 |
Effect of Weighting | 495,000 | (8,089,000) | 760,000 | (10,183,000) |
Weighted Average Shares - Basic and Diluted | 52,587,472 | 37,211,362 | 52,794,513 | 35,117,364 |
Income (Loss) Per Share - Basic | $ 0.03 | $ (0.26) | $ (0.29) | $ (0.21) |
Income (Loss) Pe Share - Diluted | $ 0.03 | $ (0.26) | $ (0.29) | $ (0.21) |
EARNINGS PER SHARE - (Narrative) (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Performance Shares [Member] | ||||
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0 | 54,000 | 51,000 | 61,000 |
RELATED PARTY TRANSACTIONS - Management Agreement (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Related Party Transaction [Line Items] | |||
Due to affiliates | $ 656,000 | $ 797,000 | |
Bimini Advisors, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Termination Date | 2/20/2019 | ||
Automatic Renewal Period Of Management Agreement | 1 year | ||
Management Fees And Allocated Expenses | $ 4,060,000 | $ 3,458,000 | |
Bimini Advisors, LLC [Member] | First $250 million of Equity [Member] | |||
Related Party Transaction [Line Items] | |||
Annual management fee as a percent of equity | 1.50% | ||
Bimini Advisors, LLC [Member] | Greater than $250 million but less than or equal to $500 million Equity [Member] | |||
Related Party Transaction [Line Items] | |||
Annual management fee as a percent of equity | 1.25% | ||
Bimini Advisors, LLC [Member] | Greater than $500 million of Equity [Member] | |||
Related Party Transaction [Line Items] | |||
Annual management fee as a percent of equity | 1.00% |
RELATED PARTY TRANSACTIONS - Other Relationships (Narrative) (Details) - Bimini Capital Management Inc [Member] |
Jun. 30, 2018
shares
|
---|---|
Related Party Transaction [Line Items] | |
Orchid Shares Owned | 1,520,036 |
Entity Ownership Percentage | 2.90% |
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