Orchid Island Capital (ORC) risk factors, FY2025 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 stockholders53% rewritten
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. 12Differences 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 profitability47% rewritten
5. 13Increased 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
6. 14If 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
7. 15A 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
8. 16Hedging 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
9. 17the counterparty in the hedging transaction may default on its obligation to pay
10. 18Our use of certain hedging techniques may expose us to counterparty risks
11. 19We invest in structured Agency RMBS, including IOs, IIOs and POs. Although structured Agency RMBS are generally subject to the same risks as our PT Agency RMBS, certain types of risks may be enhanced depending on the type of structured Agency RMBS in which we invest27% rewritten
12. 20It 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
13. 21Interest 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
14. 22Our 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
15. 23Our 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
16. 24Because 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
17. 25Our 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
18. 26Clearing 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
19. 27Our 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
20. 28We 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
21. 29A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations
22. 30Competition 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
23. 31We 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. 32We 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. 33We, 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. 34There 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. 35If 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. 36Our Manager’s management fee is payable regardless of our performance
6. 37Our 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. 38Investing in our common stock may involve a high degree of risk
2. 39We 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. 40We may be subject to adverse legislative or regulatory changes that could reduce the market price of our common stock
4. 41The market value of our common stock may be volatile

Risks Related to Our Organization and Structure

1. 42Loss 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. 43Our 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. 44a 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. 45Certain provisions of Maryland law could inhibit changes in control
5. 46Your investment has various U.S. federal income tax risks
6. 47Our 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. 48Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments
8. 49Failure to make required distributions would subject us to tax, which would reduce the cash available for distribution to our stockholders
9. 50We 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. 51Even if we qualify for taxation as a REIT, we may face other tax liabilities that reduce our cash flows
11. 52The 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. 53Our 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. 54Complying with REIT requirements may limit our ability to hedge effectively
14. 55Our 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. 56We 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. 57Our ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their stock
17. 58Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
18. 59Liquidation of our assets may jeopardize our REIT qualification
19. 60We face possible risks associated with the effects of climate change and severe weather
20. 61If we issue debt securities, our operations may be restricted and we will be exposed to additional risk
21. 62Future 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. 63We 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