SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission File Number: 001-35236
Orchid Island Capital, Inc.
(Exact name of registrant as specified in its charter)
Maryland
27-3269228
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3305 Flamingo Drive, Vero Beach, Florida 32963
(Address of principal executive offices) (Zip Code)
(772) 231-1400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
NYSE MKT
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý
As of June 30, 2012, there was no established public trading market for the registrant’s securities and the registrant had no voting common shares held by non-affiliates.
Number of shares outstanding at March 22, 2013: 3,341,665
ORCHID ISLAND CAPITAL, INC.
INDEX
PART I
ITEM 1. Business.
1
ITEM 1A. Risk Factors
10
ITEM 1B. Unresolved Staff Comments.
43
ITEM 2. Properties.
ITEM 3. Legal Proceedings.
ITEM 4. Mine Safety Disclosures.
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
44
ITEM 6. Selected Financial Data.
45
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
64
ITEM 8. Financial Statements and Supplementary Data.
65
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
84
ITEM 9A. Controls and Procedures.
ITEM 9B. Other Information.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance.
85
ITEM 11. Executive Compensation.
87
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
88
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
89
ITEM 14. Principal Accountant Fees and Services.
90
PART IV
ITEM 15. Exhibits, Financial Statement Schedules.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this annual report that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “should,” “may,” “plans,” “projects,” “will,” or similar expressions, or the negative of these words, we intend to identify forward-looking statements. Statements regarding the following subjects are forward-looking by their nature:
·
our business and investment strategy;
our expected operating results;
our ability to acquire investments on attractive terms;
the effect of the U.S. Federal Reserve’s and the U.S. Treasury’s recent actions on the liquidity of the capital markets;
the federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government;
mortgage loan modification programs and future legislative action;
our ability to access the capital markets;
our ability to obtain future financing arrangements;
our ability to successfully hedge the interest rate risk and prepayment risk associated with our portfolio;
our ability to make distributions to our stockholders in the future;
our understanding of our competition and our ability to compete effectively;
our ability to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes;
our ability to maintain our exemption from registration under the Investment Company Act;
our ability to maintain the listing of our common stock on the NYSE MKT;
market trends;
changes in interest rates;
changes in the yield curve;
changes in prepayment rates;
changes in market value of our assets;
changes in business conditions and the general economy;
expected capital expenditures; and
the impact of technology on our operations and business.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption ‘‘Risk Factors’’ in this Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS
Our Company
Orchid Island Capital, Inc., a Maryland corporation (“Orchid,” the “Company,” “we” or “us”), is a specialty finance company that invests in Agency residential mortgage-backed securities (“RMBS”). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS and (ii) structured Agency RMBS, such as CMOs, IOs, IIOs and POs, among other types of structured Agency RMBS. Our website is located at http://www.orchidislandcapital.com.
We were formed by Bimini Capital Management, Inc. (sometimes referred to herein as “Bimini”) in August 2010 and commenced operations on November 24, 2010. At December 31, 2012, Bimini was our sole stockholder. On February 14, 2013, we listed our common stock on the NYSE MKT and trade under the symbol “ORC.”
Bimini managed our portfolio from our inception through the completion of our initial public offering on February 20, 2013. Upon completion of the offering, we became externally managed by Bimini Advisors, LLC (“Bimini Advisors,” or the “Manager”). Our Manager is an investment advisor registered with the Securities and Exchange Commission (“SEC”). Additionally, our Manager is a wholly-owned subsidiary of Bimini, which has a long track record of managing investments in U.S. government agency mortgage-backed securities.