Note 8 - Stock Incentive Plan

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

NOTE 8. STOCK INCENTIVE PLAN

In 2021, the Company’s Board of Directors adopted, and the stockholders approved, the Orchid Island Capital, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”) to replace the Orchid Island Capital, Inc. 2012 Equity Incentive Plan (the “2012 Incentive Plan” and together with the 2021 Incentive Plan, the “Incentive Plans”). The 2021 Incentive Plan provides for the award of stock options, stock appreciation rights, stock 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 2021 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors except that the Company’s full Board of Directors will administer awards made to directors who are not employees of the Company or its affiliates. The 2021 Incentive Plan provides for awards of up to an aggregate of 10% of the issued and outstanding shares of the Company's common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate 1,473,324 shares of the Company’s common stock that may be issued under the 2021 Incentive Plan. The 2021 Incentive Plan replaces the 2012 Incentive Plan, and no further grants will be made under the 2012 Incentive Plan. However, any outstanding awards under the 2012 Incentive Plan will continue in accordance with the terms of the 2012 Incentive Plan and any award agreement executed in connection with such outstanding awards.

Performance Units

The Company has issued, and may in the future issue additional performance units under the Incentive Plan to certain executive officers and employees of its Manager. “Performance Units” vest after the end of a defined performance period, based on satisfaction of the performance conditions set forth in the performance unit agreement. When earned, each Performance Unit will be settled by the issuance of one share of the Company’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 underlying shares of common stock. Performance Units are subject to forfeiture should the participant no longer serve as an executive officer or employee of the Company. Compensation expense for the Performance Units, included in incentive compensation on the statements of operations, is 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 years ended December 31, 2022 and 2021.

($ in thousands, except per share data)
	2022					2021
				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value
Unvested, beginning of period		26,645		$	29.40		911		$	37.25
Granted		35,114			16.55		27,579			29.40
Forfeited		(14,980	)		21.04		(934	)		29.40
Vested and issued		(9,859	)		29.40		(911	)		37.25
Unvested, end of period		36,920		$	20.57		26,645		$	29.40
Compensation expense during period				$	376				$	321
Unrecognized compensation expense, end of period				$	357				$	467
Intrinsic value, end of period				$	388				$	599
Weighted-average remaining vesting term (in years)					1.2					1.4

The number of shares of common stock issuable upon the vesting of the remaining outstanding Performance Units was reduced as a result of two book value impairment events that occurred pursuant to the terms of the long term equity incentive compensation plans (the “Plans”) established under the Company’s 2012 Equity Incentive Plan and 2021 Equity Incentive Plan. The first book value impairment event occurred when the Company's book value per share declined by more than 15% during the quarter ended March 31, 2022 and the Company’s book value per share decline from January 1, 2022 to June 30, 2022 was more than 10%. The second book value impairment event occurred when the Company's book value per share declined by more than 15% during the quarter ended September 30, 2022 and the Company’s book value per share decline from July 1, 2022 to December 31, 2022 was more than 10%. The Plans provide that if such a book value impairment event occurs, then the number of outstanding Performance Units that are outstanding as of the last day of such two quarter period shall be reduced by 15%.

Stock Awards

The Company has issued, and may in the future issue additional, immediately vested common stock under the Incentive Plans to certain executive officers and employees of its Manager. Compensation expense for the stock awards is based on the fair value of the Company’s common stock on the grant date and is included in incentive compensation in the statements of operations. The following table presents information related to fully vested common stock issued during the years ended December 31, 2022 and 2021. All of the fully vested shares of common stock issued during the years ended  December 31, 2022 and 2021, and the related compensation expense, were granted with respect to service performed during the previous fiscal years.

($ in thousands, except per share data)
	2022		2021
Fully vested shares granted		35,114		27,579
Weighted average grant date price per share	$	16.55	$	29.40
Compensation expense related to fully vested shares of common stock awards(1)	$	581	$	811

(1) The awards issued during the year ended December 31, 2022 were granted with respect to service performed in 2021. Approximately $600,000 of compensation expense related to the 2022 awards was accrued and recognized in 2021.

Deferred Stock Units

Non-employee directors receive a portion of their compensation in the form of DSU awards pursuant to the Incentive Plans. Each DSU represents a right to receive one share of the Company’s common stock. Beginning in 2022, each non-employee director can elect to receive all of his or her compensation in the form of DSUs. The DSUs are immediately vested and are settled at a future date based on the election of the individual participant. Compensation expense for the DSUs is included in directors’ fees and liability insurance in the statements of operations. The DSUs contain dividend equivalent rights, which entitle the participant to receive distributions declared by the Company on common stock. These distributions will be made in the form of cash or additional DSUs at the participant’s election. The DSUs do not include the right to vote the underlying shares of common stock.

The following table presents information related to the DSUs outstanding during the years ended December 31, 2022 and 2021.

($ in thousands, except per share data)
	2022				2021
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
	Shares		Fair Value		Shares		Fair Value
Outstanding, beginning of period		28,595	$	26.92		18,189	$	27.20
Granted and vested		25,602		12.89		10,406		26.43
Outstanding, end of period		54,197	$	20.29		28,595	$	26.92
Compensation expense during period			$	328			$	240
Intrinsic value, end of period			$	569			$	643