Orchid Island Capital (ORC) risk factors, FY2024 10-K

Other

1. 01Changes in the levels of prepayments on the mortgages underlying our Agency RMBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
2. 02Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders
3. 03Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
4. 04Our forward settling transactions, including TBA transactions, subject us to certain risks, including price risks and counterparty risks
5. 05Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed. As a result, the values of some of our assets are uncertain
6. 06We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments
7. 07We are completely dependent upon our Manager and certain key personnel of Bimini who provide services to us through the management agreement, and we may not find suitable replacements for our Manager and these personnel if the management agreement is terminated or such key personnel are no longer available to us
8. 08Our ownership limitations and certain other provisions of applicable law and our charter and bylaws may restrict business combination opportunities that would otherwise be favorable to our stockholders

Risks Related to Our Business

1. 09Increases in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses and materially adversely affect our ability to pay distributions to our stockholders
2. 10Interest rate mismatches between our Agency RMBS and our borrowings may reduce our net interest margin during periods of changing interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
3. 11Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings
4. 12We invest in structured Agency RMBS, including IOs, IIOs and POs. Although structured Agency RMBS are generally subject to the same risks as our pass-through Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest
5. 13Differences in the stated maturity of our fixed rate assets, or in the timing of interest rate adjustments on our adjustable-rate assets, and our borrowings may adversely affect our profitability
6. 14Purchases and sales of Agency RMBS by the Fed may adversely affect the supply, price and returns associated with Agency RMBS
7. 15Increased levels of prepayments on the mortgages underlying our Agency RMBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
8. 16If we are unable to acquire new Agency RMBS to replace the prepaid Agency RMBS, our returns on capital may be lower than if we were able to quickly acquire new Agency RMBS
9. 17A decrease in prepayment rates on the mortgages underlying our Agency RMBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
10. 18Hedging against interest rate exposure may not completely insulate us from interest rate risk and could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
11. 19the counterparty in the hedging transaction may default on its obligation to pay
12. 20Our use of certain hedging techniques may expose us to counterparty risks
13. 21It may be uneconomical to "roll" our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts, which could negatively affect our financial condition and results of operations
14. 22Interest rate caps on the ARMs and hybrid ARMs backing our Agency RMBS may reduce our net interest margin during periods of rising interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
15. 23Our results of operations are materially affected by conditions in the markets for mortgages and mortgage-related assets, including Agency RMBS, as well as the broader financial markets and the economy generally
16. 24Our reliance on models and data may induce us to purchase certain assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging activities that are based on faulty models and data may prove to be unsuccessful
17. 25Because the assets that we acquire might experience periods of illiquidity, we might be prevented from selling our Agency RMBS at favorable times and prices, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
18. 26Our use of repurchase agreements may give our lenders greater rights in the event that either we or any of our lenders file for bankruptcy, which may make it difficult for us to recover our collateral in the event of a bankruptcy filing
19. 27Clearing facilities or exchanges upon which some of our hedging instruments are traded may increase margin requirements on our hedging instruments in the event of adverse economic developments
20. 28Our inability to access funding or the terms on which such funding is available could have a material adverse effect on our financial condition, particularly in times of significant market dislocations
21. 29We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments. In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders
22. 30A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations
23. 31Competition might prevent us from acquiring Agency RMBS at favorable yields, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders
24. 32We are highly dependent on communications and information systems operated by third parties, and systems failures could significantly disrupt our business, which may, in turn, adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders

Risks Related to Conflicts of Interest in Our Relationship with Our Manager and Bimini

1. 33We have no employees and our Manager is responsible for making all of our investment decisions. None of our or our Manager’s officers are required to devote any specific amount of time to our business, and each of them may provide their services to Bimini, which could result in conflicts of interest
2. 34We, Bimini and other accounts managed by our Manager may compete for opportunities to acquire assets, which are allocated in accordance with the Investment Allocation Agreement by and among Bimini, our Manager and us
3. 35There are conflicts of interest in our relationships with our Manager and Bimini, which could result in decisions that are not in the best interests of our stockholders
4. 36If we elect to not renew the management agreement without cause, we would be required to pay our Manager a substantial termination fee. These and other provisions in our management agreement make non-renewal of our management agreement difficult and costly
5. 37Our Manager’s management fee is payable regardless of our performance
6. 38Our Manager will not be liable to us for any acts or omissions performed in accordance with the management agreement, including with respect to the performance of our investments

Risks Related to Our Common Stock

1. 39Investing in our common stock may involve a high degree of risk
2. 40We have not established a minimum distribution payment level, and we cannot assure you of our ability to make distributions to our stockholders in the future
3. 41Shares of our common stock eligible for future sale may harm our share price
4. 42We may be subject to adverse legislative or regulatory changes that could reduce the market price of our common stock
5. 43The market value of our common stock may be volatile
6. 44There may not be an active market for our common stock, which may cause our common stock to trade at a discount and make it difficult to sell the common stock you purchase

Risks Related to Our Organization and Structure

1. 45Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock and our ability to pay distributions to our stockholders
2. 46Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests
3. 47a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated
4. 48Certain provisions of Maryland law could inhibit changes in control
5. 49Your investment has various U.S. federal income tax risks
6. 50Our failure to maintain our qualification as a REIT would subject us to U.S. federal income tax, which could adversely affect the value of the shares of our common stock and would substantially reduce the cash available for distribution to our stockholders
7. 51Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments
8. 52Failure to make required distributions would subject us to tax, which would reduce the cash available for distribution to our stockholders
9. 53We intend to distribute our REIT taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both U.S. federal corporate income tax and the 4% nondeductible excise tax
10. 54Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows
11. 55The failure of Agency RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to continue to qualify as a REIT
12. 56Our ability to invest in and dispose of forward settling contracts, including TBA securities, could be limited by the requirements necessary to continue to qualify as a REIT, and we could fail to qualify as a REIT as a result of these investments
13. 57Complying with REIT requirements may limit our ability to hedge effectively
14. 58Our ownership of and relationship with any TRSs that we form will be limited and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax
15. 59We may pay taxable dividends in cash and our common stock, in which case stockholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock
16. 60Our ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their stock
17. 61Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
18. 62Liquidation of our assets may jeopardize our REIT qualification
19. 63We face possible risks associated with the effects of climate change and severe weather
20. 64If we issue debt securities, our operations may be restricted and we will be exposed to additional risk
21. 65Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may harm the value of our common stock
22. 66We are subject to risks related to corporate social responsibility
23. 67We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or the global recessionary economic conditions will have on us