Edgar Filing: Orchid Island Capital, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

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)

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  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  No 

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 12b2 of the Exchange Act.

Large accelerated filer  Accelerated filer Non-accelerated filer  Smaller Reporting Company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

Number of shares outstanding at July 28, 2016: 22,783,553

ORCHID ISLAND CAPITAL, INC.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements		1
	Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015	1
	Statements of Operations (unaudited) for the six and three months ended June 30, 2016 and 2015	2
	Statement of Stockholders' Equity (unaudited) for the six months ended June 30, 2016	3
	Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and 2015	4
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		25
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		44
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

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

ORCHID ISLAND CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)

	(Unaudited)
	June 30, 2016		December 31, 2015
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties	$	2,179,602	$	2,095,574
Unpledged		43,655		62,436
Total mortgage-backed securities		2,223,257		2,158,010
Cash and cash equivalents		65,352		57,229
Restricted cash		18,984		12,730
Accrued interest receivable		8,792		8,490
Derivative assets, at fair value		-		669
Other assets		750		4,709
Total Assets	$	2,317,135	$	2,241,837

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	2,060,827	$	1,798,813
FHLB advances		-		187,500
Payable for unsettled securities purchased		4,276		-
Derivative liabilities, at fair value		5,873		-
Accrued interest payable		1,412		863
Due to affiliates		444		465
Other liabilities		620		941
Total Liabilities		2,073,452		1,988,582

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, 2016 and December 31, 2015		-		-
Common Stock, $0.01 par value; 500,000,000 shares authorized, 22,430,858
shares issued and outstanding as of June 30, 2016 and 21,749,490 shares issued
and outstanding as of December 31, 2015		224		217
Additional paid-in capital		243,459		253,038
Total Stockholders' Equity		243,683		253,255
Total Liabilities and Stockholders' Equity	$	2,317,135	$	2,241,837
See Notes to Consolidated Financial Statements

ORCHID ISLAND CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six and Three Months Ended June 30, 2016 and 2015
($ in thousands, except per share data)

	Six Months Ended June 30,						Three Months Ended June 30,
	2016			2015			2016			2015
Interest income	$	39,701		$	31,367		$	19,235		$	16,753
Interest expense		(6,649	)		(2,863	)		(3,330	)		(1,567	)
Net interest income		33,052			28,504			15,905			15,186
Realized gains (losses) on mortgage-backed securities		4,253			(1,923	)		10			(1,891	)
Unrealized gains (losses) on mortgage-backed securities		8,049			(7,003	)		4,262			(13,324	)
Losses on derivative instruments		(39,181	)		(13,154	)		(11,591	)		(802	)
FHLB stock dividends		14			-			11			-
Net portfolio income (loss)		6,187			6,424			8,597			(831	)

Expenses:
Management fees		1,916			1,869			945			1,014
Allocated overhead		626			514			329			274
Accrued incentive compensation		385			322			214			157
Directors' fees and liability insurance		527			482			245			234
Audit, legal and other professional fees		461			333			215			173
Direct REIT operating expenses		239			88			99			46
Other administrative		161			139			87			103
Total expenses		4,315			3,747			2,134			2,001

Net income (loss)	$	1,872		$	2,677		$	6,463		$	(2,832	)

Basic and diluted net income (loss) per share	$	0.08		$	0.14		$	0.29		$	(0.14	)

Weighted Average Shares Outstanding		21,853,949			18,320,359			21,920,573			19,751,871

Dividends declared per common share	$	0.84		$	1.08		$	0.42		$	0.54
See Notes to Consolidated Financial Statements

ORCHID ISLAND CAPITAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 2016
($ in thousands, except per share data)

			Additional			Retained
	Common		Paid-in			Earnings
	Stock		Capital			(Deficit)			Total
Balances, January 1, 2016	$	217	$	253,038		$	-		$	253,255
Net income		-		-			1,872			1,872
Cash dividends declared, $0.84 per share		-		(16,549	)		(1,872	)		(18,421	)
Issuance of common stock pursuant to public offerings, net		7		6,584			-			6,591
Issuance of common stock pursuant to stock based
compensation plan		-		252			-			252
Amortization of stock based compensation		-		134			-			134
Balances, June 30, 2016	$	224	$	243,459		$	-		$	243,683
See Notes to Consolidated Financial Statements

ORCHID ISLAND CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 2016 and 2015
($ in thousands)

	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,872		$	2,677
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Stock based compensation		386			298
Realized and unrealized (gains) losses on mortgage-backed securities		(12,302	)		8,926
Realized (gains) losses on interest rate swaptions		(36	)		1,152
Unrealized losses on interest rate swaps		5,561			-
Realized losses on forward settling to-be-announced securities		1,911			31
Changes in operating assets and liabilities:
Accrued interest receivable		(203	)		(2,414	)
Other assets		(213	)		(234	)
Accrued interest payable		549			(29	)
Other liabilities		(321	)		(209	)
Due (from) to affiliates		(21	)		126
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(2,817	)		10,324

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(1,485,258	)		(1,139,704	)
Sales		1,327,500			402,575
Principal repayments		109,412			110,081
Redemption of FHLB stock		3,750			-
Increase in restricted cash		(6,254	)		(15,270	)
Payments on net settlement of to-be-announced securities		(1,598	)		(31	)
Purchase of interest rate swaptions, net of margin cash received		704			(1,157	)
NET CASH USED IN INVESTING ACTIVITIES		(51,744	)		(643,506	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements		14,290,130			7,458,153
Principal payments on repurchase agreements		(14,028,116	)		(6,880,733	)
Principal payments on FHLB advances		(187,500	)		-
Cash dividends		(18,421	)		(20,179	)
Proceeds from issuance of common stock, net of issuance costs		6,591			83,275
NET CASH PROVIDED BY FINANCING ACTIVITIES		62,684			640,516

NET INCREASE IN CASH AND CASH EQUIVALENTS		8,123			7,334
CASH AND CASH EQUIVALENTS, beginning of the period		57,229			93,137
CASH AND CASH EQUIVALENTS, end of the period	$	65,352		$	100,471

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	6,100		$	2,892

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Securities acquired settled in later period	$	4,276		$	7,623
See Notes to Consolidated Financial Statements

ORCHID ISLAND CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

JUNE 30, 2016

NOTE 1. 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").

Orchid completed a secondary offering of 1,800,000 shares of common stock on January 23, 2014. The underwriters exercised their overallotment option in full for an additional 270,000 shares on January 29, 2014. The aggregate net proceeds to Orchid were approximately $24.2 million which were invested in Agency RMBS on a leveraged basis.

Orchid completed a secondary offering of 3,200,000 shares of common stock shares on March 24, 2014. The underwriters exercised their overallotment option in full for an additional 480,000 shares on April 11, 2014. The aggregate net proceeds to Orchid were approximately $44.0 million which were invested in Agency RMBS on a leveraged basis.

On June 17, 2014, Orchid entered into an equity distribution agreement (the "June 2014 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 $35,000,000 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 2,528,416 shares under the June 2014 Equity Distribution Agreement for aggregate proceeds of approximately $34.2 million, net of commissions and fees, prior to its termination in September 2014.

On September 3, 2014, Orchid entered into a second equity distribution agreement (the "September 2014 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 $75,000,000 of shares of the Company's common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions. The September 2014 Equity Distribution Agreement replaced the June 2014 Equity Distribution Agreement. The Company issued a total of 5,087,646 shares under the September 2014 Equity Distribution Agreement for aggregate proceeds of approximately $69.1 million, net of commissions and fees, prior to its termination in March 2015.

On March 2, 2015, Orchid entered into a third equity distribution agreement (the "March 2015 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 $100,000,000 of shares of the Company's common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions. The March 2015 Equity Distribution Agreement replaced the September 2014 Equity Distribution Agreement. Through June 30, 2016, the Company issued a total of 6,867,855 shares under the March 2015 Equity Distribution Agreement for aggregate proceeds of approximately $89.7 million, net of commissions and fees. After June 30, 2016, the Company issued an additional 350,911 shares under the March 2015 Equity Distribution Agreement for aggregate proceeds of approximately $3.5 million, net of commissions and fees.

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. 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 share repurchase program through June 30, 2016, the Company repurchased a total of 1,216,243 shares at an aggregate cost of approximately $10.8 million, including 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 periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

The balance sheet at December 31, 2015 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, 2015.

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 Company maintains cash balances at four banks, 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, 2016, the Company's cash deposits exceeded federally insured limits by approximately $57.9 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 counterparties 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, and 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 from the reporting period 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.

FHLB Stock

The Company's wholly-owned subsidiary, Orchid Island Casualty, LLC, is a member of, and owns capital stock in, the Federal Home Loan Bank of Cincinnati ("FHLBC"). As a condition of its membership in the FHLBC, the subsidiary is required to maintain a FHLBC stock investment, both for membership and for the level of advances from the FHLBC to the subsidiary. The Company accounts for its investment in FHLBC stock as a cost method investment in "Other assets". The Company periodically evaluates FHLBC stock for impairment in accordance with ASC 320. See Note 3 for more information about the subsidiary's membership in the FHLBC.

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 T-Note and Eurodollar futures contracts, interest rate swaps, and options to enter in interest rate swaps ("interest rate swaptions"), but may enter into other derivatives in the future.

The Company purchases a portion of its Agency RMBS through forward settling transactions, including "to-be-announced" ("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." Specified pools of mortgage loans can also be the subject of a dollar roll transaction, when market conditions allow.

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 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 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, 2016 and December 31, 2015 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 June 2016, the FASB issued Accounting Standards Update ("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 (CECL) 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. Early application is permitted for certain provisions. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that performance targets that affect vesting and that could be achieved after the requisite service period be treated as performance conditions. The effective date of ASU 2014-12 is for interim and annual reporting periods beginning after December 15, 2015. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

NOTE 2. MORTGAGE-BACKED SECURITIES

The following table presents the Company's RMBS portfolio as of June 30, 2016 and December 31, 2015:

(in thousands)
	June 30, 2016		December 31, 2015
Pass-Through RMBS Certificates:
Hybrid Adjustable-rate Mortgages	$	50,461	$	52,238
Adjustable-rate Mortgages		2,095		2,976
Fixed-rate Mortgages		2,078,685		2,000,623
Total Pass-Through Certificates		2,131,241		2,055,837
Structured RMBS Certificates:
Interest-Only Securities		55,918		61,574
Inverse Interest-Only Securities		36,098		40,599
Total Structured RMBS Certificates		92,016		102,173
Total	$	2,223,257	$	2,158,010

The following table summarizes the Company's RMBS portfolio as of June 30, 2016 and December 31, 2015, 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.

(in thousands)
	June 30, 2016		December 31, 2015
Greater than one year and less than five years	$	270	$	-
Greater than five years and less than ten years		314		835
Greater than or equal to ten years		2,222,673		2,157,175
Total	$	2,223,257	$	2,158,010

The Company generally pledges its RMBS assets as collateral under repurchase agreements. At June 30, 2016 and December 31, 2015, the Company had unpledged securities totaling $43.7 million and $62.4 million, respectively. The unpledged balance at June 30, 2016 includes unsettled security purchases with a fair value of approximately $4.3 million that will be pledged as collateral under repurchase agreements on their respective settlement dates in July 2016.

NOTE 3. REPURCHASE AGREEMENTS AND OTHER BORROWINGS

The Company pledges certain of its RMBS as collateral under repurchase agreements with financial institutions and a secured borrowing facility with the FHLBC. Interest rates on the borrowings are generally based on the London Interbank Offered Rate ("LIBOR ") plus or minus a margin and amounts available to be borrowed are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. 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, 2016, the Company had met all margin call requirements.

Repurchase Agreements

As of June 30, 2016, the Company had outstanding repurchase obligations of approximately $2,060.8 million with a net weighted average borrowing rate of 0.69%. 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 $2,185.8 million, and cash pledged to the counterparties of approximately $3.6 million. As of December 31, 2015, the Company had outstanding repurchase obligations of approximately $1,798.8 million with a net weighted average borrowing rate of 0.64%. These agreements were collateralized by RMBS with a fair value, including accrued interest, of approximately $1,909.3 million, and cash pledged to the counterparties of approximately $4.0 million.

As of June 30, 2016 and 2015, the Company's repurchase agreements had remaining maturities as summarized below:

($ in thousands)
	OVERNIGHT			BETWEEN 2			BETWEEN 31
	(1 DAY OR			AND			AND
	LESS)			30 DAYS			90 DAYS			TOTAL
June 30, 2016
Fair market value of securities pledged, including
accrued interest receivable	$	276,136		$	1,506,619		$	403,006		$	2,185,761
Repurchase agreement liabilities associated with
these securities	$	261,357		$	1,419,188		$	380,282		$	2,060,827
Net weighted average borrowing rate		0.67	%		0.70	%		0.69	%		0.69	%
December 31, 2015
Fair market value of securities pledged, including
accrued interest receivable	$	-		$	1,894,491		$	14,801		$	1,909,292
Repurchase agreement liabilities associated with
these securities	$	-		$	1,789,338		$	9,475		$	1,798,813
Net weighted average borrowing rate		-			0.64	%		1.19	%		0.64	%

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, 2016, 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 $127.1 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, 2016 and December 31, 2015.

FHLB Advances

In December 2015, our wholly-owned subsidiary, Orchid Island Casualty, LLC, was accepted for membership in the FHLBC. As of December 31, 2015, our subsidiary had approximately $187.5 million of outstanding secured FHLB advances, with a weighted average borrowing rate of 0.42%. These advances were secured by RMBS with a fair value, including accrued interest, of approximately $192.2 million as of June 30, 2016. This agreement also required our subsidiary to purchase and hold stock in the FHLBC in an amount equal to a specified percentage of outstanding advances. As of December 31, 2015, our subsidiary held FHLBC stock with a cost basis of approximately $3.8 million which is included in other assets in our consolidated balance sheets.

On January 12, 2016, the regulator of the FHLB system, the Federal Housing Finance Agency ("FHFA"), released a final rule that amended regulations governing FHLB membership, including an amendment which prevents captive insurance companies from being eligible for FHLB membership. Under the terms of the final rule, our subsidiary is required to terminate its membership, redeem existing FHLBC stock, and repay its existing advances within one year following the effective date of the final rule. In addition, our subsidiary is prohibited from obtaining new advances or renewing existing advances upon their maturity during the one year transition period. The final rule became effective on February 19, 2016. During the six months ended June 30, 2016, all of our subsidiary's outstanding advances, including accrued interest, were refinanced through repurchase agreements. During the six months ended June 30, 2016, the Company redeemed all of its activity-based FHLBC stock but still holds stock with a carrying value of $2,500, the minimum amount required to retain membership.

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, and not as a hedge. 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 (Liability), at Fair Value

The table below summarizes fair value information about our derivative assets and liabilities as of June 30, 2016 and December 31, 2015.

(in thousands)
Derivative Instruments and Related Accounts	Balance Sheet Location	June 30, 2016		December 31, 2015
Assets
Receiver swaptions	Derivative assets, at fair value		-		669
Total derivative assets, at fair value		$	-	$	669

Liabilities
Interest rate swaps	Derivative liabilities, at fair value	$	5,560	$	-
TBA securities	Derivative liabilities, at fair value		313		-
Total derivative liabilities, at fair value		$	5,873	$	-

Margin Balances Posted to Counterparties
Futures contracts	Restricted cash	$	3,458	$	8,483
Interest rate swap contracts	Restricted cash		11,692		-
Total margin balances on derivative contracts		$	15,150	$	8,483

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, 2016 and December 31, 2015.

($ in thousands)
	June 30, 2016
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾
Eurodollar Futures Contracts (Short Positions)
2016	$	200,000		1.68	%		0.66	%	$	(1,019	)
2017		200,000		2.14	%		0.75	%		(2,776	)
2018		200,000		2.53	%		0.94	%		(3,181	)
2019		200,000		2.55	%		1.07	%		(743	)
Total / Weighted Average	$	200,000		2.24	%		0.83	%	$	(7,719	)

Treasury Note Futures Contracts (Short Position)⁽²⁾
September 2016 10 year T-Note futures
(Sep 2016 - Sep 2026 Hedge Period)	$	185,000		1.65	%		1.25	%	$	(6,099	)

($ in thousands)
	December 31, 2015
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾
Eurodollar Futures Contracts (Short Positions)
2016	$	900,000		1.51	%		0.98	%	$	(4,718	)
2017		900,000		2.31	%		1.59	%		(6,550	)
2018		900,000		2.77	%		1.99	%		(7,060	)
2019		900,000		2.56	%		2.17	%		(865	)
Total / Weighted Average	$	900,000		2.23	%		1.57	%	$	(19,193	)

Treasury Note Futures Contracts (Short Position)⁽²⁾
December 2015 10 year T-Note futures
(Dec 2015 - Dec 2025 Hedge Period)	$	185,000		1.99	%		1.95	%	$	1,091

(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 $132.98 at June 30, 2016 and $125.91 at December 31, 2015. The nominal values of the short positions was $246.0 million and $232.9 million at June 30, 2016 and December 31, 2015, respectively.

Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate based on 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, 2016.

($ in thousands)
		Average		Net
		Fixed	Average	Estimated	Average
	Notional	Pay	Receive	Fair	Maturity
Expiration	Amount	Rate	Rate	Value	(Years)
> 3 to ≤ 5 years	$600,000	1.05%	0.63%	$(5,560)	3.6

The table below presents information related to the Company's interest rate swaption positions at December 31, 2015.

($ in thousands)
	Option			Underlying Swap
			Weighted				Weighted
			Average		Fixed	Receive	Average
		Fair	Months to	Notional	Pay	Rate	Term
Expiration	Cost	Value	Expiration	Amount	Rate	(LIBOR)	(Years)
Receiver Swaptions
≤ 1 year	$1,100	$669	4.2	$100,000	1.77%	3 Month	5.0

The following table summarizes our contracts to purchase and sell TBA securities as of June 30, 2016.

($ in thousands)
			Notional												Net
			Amount				Cost				Market				Carrying
			Long (Short)⁽¹⁾				Basis⁽²⁾				Value⁽³⁾				Value⁽⁴⁾
30-Year TBA securities:
	4.0	%		$	(100,000	)		$	(106,922	)		$	(107,235	)		$	(313	)
				$	(100,000	)		$	(106,922	)		$	(107,235	)		$	(313	)

(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.

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, 2016 and 2015.

(in thousands)
	Six Months Ended June 30,						Three Months Ended June 30,
	2016			2015			2016			2015
Eurodollar futures contracts (short positions)	$	(18,701	)	$	(10,960	)	$	(1,196	)	$	358
T-Note futures contracts (short position)		(13,976	)		(1,011	)		(5,001	)		(1,011	)
Interest rate swaps		(4,629	)		-			(4,608	)		-
Receiver swaptions		36			-			-			-
Payer swaptions		-			(1,152	)		-			(61	)
Net TBA securities		(1,911	)		(31	)		(786	)		(88	)
	$	(39,181	)	$	(13,154	)	$	(11,591	)	$	(802	)

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.

NOTE 5. PLEDGED ASSETS

Assets Pledged to Counterparties

The table below summarizes our assets pledged as collateral under our repurchase agreements, FHLB advances, derivative agreements and insurance capital by type, including securities pledged related to securities sold but not yet settled, as of June 30, 2016 and December 31, 2015.

(in thousands)
	June 30, 2016
	Repurchase		FHLB		Derivative		Insurance
Assets Pledged to Counterparties	Agreements		Advances		Agreements		Capital⁽¹⁾		Total
PT RMBS - fair value	$	2,120,581	$	-	$	-	$	1,753	$	2,122,334
Structured RMBS - fair value		57,268		-		-		-		57,268
Accrued interest on pledged securities		7,912		-		-		6		7,918
Restricted cash		3,584		-		15,150		250		18,984
Total	$	2,189,345	$	-	$	15,150	$	2,009	$	2,206,504

(in thousands)
	December 31, 2015
	Repurchase		FHLB		Derivative		Insurance
Assets Pledged to Counterparties	Agreements		Advances		Agreements		Capital⁽¹⁾		Total
PT RMBS - fair value	$	1,833,020	$	191,550	$	-	$	1,752	$	2,026,322
Structured RMBS - fair value		69,252		-		-		-		69,252
Accrued interest on pledged securities		7,019		645		-		6		7,670
Restricted cash		3,997		-		8,483		250		12,730
Total	$	1,913,288	$	192,195	$	8,483	$	2,008	$	2,115,974

(1)	Orchid Island Casualty, Inc. is required to maintain sufficient capital in the form of cash and securities to protect it against losses.

Assets Pledged from Counterparties

The table below summarizes our assets pledged to us from counterparties under our repurchase agreements as of June 30, 2016 and December 31, 2015.

(in thousands)
Assets Pledged to Orchid	June 30, 2016		December 31, 2015
PT RMBS - fair value	$	-	$	167
U.S. Treasury securities - fair value		-		723
Cash		1,910		1,421
Total	$	1,910	$	2,311

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 in the consolidated balance sheets.

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, 2016 and December 31, 2015.

(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

Received as

Net

Assets

Balance Sheet

Collateral

Amount

December 31, 2015

Receiver swaptions

669

(669

)

(in thousands)
Offsetting of Liabilities
							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
	of Recognized			Consolidated			Consolidated			Posted as				Cash Posted				Net
	Liabilities			Balance Sheet			Balance Sheet			Collateral				Collateral				Amount
June 30, 2016
Repurchase Agreements		$	2,060,827		$	-		$	2,060,827		$	(2,057,243	)		$	(3,584	)		$	-
Interest rate swaps			5,560			-			5,560			-				(5,560	)			-
		$	2,066,387		$	-		$	2,066,387		$	(2,057,243	)		$	(9,144	)		$	-
December 31, 2015
Repurchase Agreements		$	1,798,813		$	-		$	1,798,813		$	(1,794,816	)		$	(3,997	)		$	-

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 Notes 3 and 4 for a discussion of collateral posted or received against or for repurchase obligations and derivative instruments.

NOTE 7. CAPITAL STOCK

Common Stock Issuances

During 2016 and 2015, 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 September 30, 2015, December 31, 2015 and June 30, 2016.

($ in thousands, except per share amounts)
		Weighted
		Average
		Price
		Received				Net
Type of Offering	Period	Per Share⁽¹⁾		Shares		Proceeds⁽²⁾
2016
At the Market Offering Program⁽³⁾	Second Quarter	$	10.48		646,753	$	6,591
					646,753	$	6,591
2015
At the Market Offering Program⁽³⁾	First Quarter	$	13.66		1,210,487	$	16,175
At the Market Offering Program⁽³⁾	Second Quarter		13.65		5,024,530		67,100
					6,235,017	$	83,275

(1)	Weighted average price received per share is gross of 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 three equity distribution agreements, two of which have been cancelled and replaced with the current agreement, to publicly offer and sell shares of the Company's common stock in at the market and privately negotiated transactions from time to time. As of June 30, 2016, shares with a value of $8.3 million remain available for issuance under the March 2015 Equity Distribution Agreement.

Share 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. As part of the share 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 share repurchase program through June 30, 2016, the Company repurchased a total of 1,216,243 shares at an aggregate cost of approximately $10.8 million, including commissions and fees, for a weighted average price of $8.92 per share. No shares have been repurchased during the six months ended June 30, 2016.

Cash Dividends

The table below presents the cash dividends declared on the Company's common stock since its February 2013 IPO.

(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 - YTD⁽¹⁾		0.980		21,618
Totals	$	6.455	$	87,671

(1)	On July 13, 2016, the Company declared a dividend of $0.14 per share to be paid on July 29, 2016. 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, 2016.

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

On April 25, 2014, the Compensation Committee granted each of our non-employee directors 6,000 shares of restricted common stock subject to a three year vesting schedule whereby 2,000 shares of the award vest on the first, second and third anniversaries of the award date. Directors will have all the rights of a stockholder with respect to the awards, including the right to receive dividends and vote the shares. The awards are subject to forfeiture should the director no longer be a member of the Board of Directors of the Company prior to the respective vesting dates. There were no vested and unissued restricted stock awards at June 30, 2016 and December 31, 2015.

The table below presents information related to the Company's restricted common stock at June 30, 2016 and 2015.

($ in thousands, except per share data)
	Six Months Ended June 30,
	2016					2015
				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value
Unvested, beginning of period		16,000		$	12.23		24,000		$	12.23
Granted		-			-		-			-
Vested and issued		(8,000	)		12.23		(8,000	)		12.23
Unvested, end of period		8,000		$	12.23		16,000		$	12.23

Compensation expense during period				$	49				$	49
Unrecognized compensation expense, end of period				$	82				$	179
Intrinsic value, end of period				$	82				$	179
Weighted-average remaining vesting term (in years)					0.8					1.8

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, 2016 and 2015.

($ in thousands, except per share data)
	Six Months Ended June 30,
	2016		2015
Fully vested shares granted⁽¹⁾		35,911		24,619
Weighted average grant date price	$	10.02	$	13.28
Compensation expense related to fully vested common share awards⁽²⁾	$	360	$	327

(1)	The table above includes 33,019 shares of fully vested shares which were granted in January and March 2016 with respect to service performed during 2015 and 21,715 shares of fully vested shares which were granted in January 2015 with respect to service performed during 2014.

(2)	Approximately $330,000 of compensation expense related to the 2016 share awards were accrued and recognized in 2015. Approximately $288,000 of compensation expense related to the 2015 share awards were accrued and recognized in 2014.

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 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, 2016.

($ in thousands, except per share data)
	Six Months Ended June, 30,
	2016					2015
				Weighted				Weighted
				Average				Average
				Grant Date				Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested, beginning of period		7,508		$	13.32		-	$	-
Granted		41,500			10.00		7,508		13.32
Vested and issued		(1,502	)		13.32		-		-
Unvested, end of period		47,506		$	10.42		7,508	$	13.32

Compensation expense during period				$	85			$	22
Unrecognized compensation expense, end of period				$	384			$	78
Intrinsic value, end of period				$	489			$	84
Weighted-average remaining vesting term (in years)					1.8				1.8

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, 2016.

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.

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, 2016. 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, 2016 and 2015.

(in thousands, except per-share information)
	Six Months Ended June 30,						Three Months Ended June 30,
	2016			2015			2016			2015
Basic and diluted EPS per common share:
Numerator for basic and diluted EPS per common share:
Net income (loss) - Basic and diluted	$	1,872		$	2,677		$	6,463		$	(2,832	)
Weighted average common shares:
Common shares outstanding at the balance sheet date		22,431			22,960			22,431			22,960
Unvested dividend eligible share based compensation
outstanding at the balance sheet date		56			24			56			-
Effect of weighting		(633	)		(4,664	)		(566	)		(3,208	)
Weighted average shares-basic and diluted		21,854			18,320			21,921			19,752
Income per common share:
Basic and diluted	$	0.08		$	0.14		$	0.29		$	0.14

There was an average of 25,705 shares of restricted common stock and Performance Units that were anti-dilutive and not included in diluted earnings per share for the three months ended June 30, 2015.

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:

	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.

The Company's RMBS, 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 our positions in RMBS, interest rate swaptions and TBA securities determined by either an independent third-party or 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, 2016 and 2015. 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, 2016 and December 31, 2015:

(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, 2016
Mortgage-backed securities	$	2,223,257		$	-	$	2,223,257		$	-
Margin posted on derivative agreements		15,150			15,150		-			-
Interest rate swaps		(5,560	)		-		(5,560	)		-
TBA securities		(313	)		-		(313	)		-
December 31, 2015
Mortgage-backed securities	$	2,158,010		$	-	$	2,158,010		$	-
Margin posted on derivative agreements		8,483			8,483		-			-
Receiver swaptions		669			-		669			-

During the six and three months ended June 30, 2016 and 2015, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

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, 2017 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:

	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.

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 $2.5 million and $1.3 million for the six and three months ended June 30, 2016, respectively, and $2.4 million and $1.3 million for the six and three months ended June 30, 2015, respectively. At June 30, 2016 and December 31, 2015, the net amount due to affiliates was approximately $0.4 million and $0.5 million, respectively.

Other Relationships with Bimini

John B. Van Heuvelen, one of our independent director nominees, owns shares of common stock of 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. Hunter 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, 2016, Bimini owned 1,395,036 shares, or 6.2%, of the Company's common stock.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under "Risk Factors" in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.

Overview

We are a specialty finance company that invests in residential mortgage-backed securities ("RMBS") which are issued and guaranteed by a federally chartered corporation or agency ("Agency RMBS"). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS ("PT RMBS") and (ii) structured Agency RMBS, such as collateralized mortgage obligations ("CMOs"), interest only securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of structured Agency RMBS. We were formed by Bimini in August 2010, commenced operations on November 24, 2010 and completed our initial public offering ("IPO") on February 20, 2013. We are externally managed by Bimini Advisors, a registered investment adviser with the Securities and Exchange Commission (the "SEC").

Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in and strategically allocating capital between the two categories of Agency RMBS described above. We seek to generate income from (i) the net interest margin on our leveraged pass-through Agency RMBS portfolio and the leveraged portion of our structured Agency RMBS portfolio, and (ii) the interest income we generate from the unleveraged portion of our structured Agency RMBS portfolio. We intend to fund our pass-through Agency RMBS and certain of our structured Agency RMBS through short-term borrowings structured as repurchase agreements. Pass-through Agency RMBS and structured Agency RMBS typically exhibit materially different sensitivities to movements in interest rates. Declines in the value of one portfolio may be offset by appreciation in the other. The percentage of capital that we allocate to our two Agency RMBS asset categories will vary and will be actively managed in an effort to maintain the level of income generated by the combined portfolios, the stability of that income stream and the stability of the value of the combined portfolios. We believe that this strategy will enhance our liquidity, earnings, book value stability and asset selection opportunities in various interest rate environments.

We operate so as to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). We generally will not be subject to U.S. federal income tax to the extent that we currently distribute all of our REIT taxable income (as defined in the Code) to our stockholders and maintain our REIT qualification.

The Company's common stock trades on the New York Stock Exchange ("NYSE") under the symbol "ORC".

Capital Raising Activities

We completed secondary offerings in January and March 2014, raising aggregate net proceeds of approximately $68.2 million from the sale of 5,750,000 shares of our common stock inclusive of the $5.7 million of net proceeds received from the exercise of the underwriters' overallotment option granted in the March 2014 offering, which closed in April 2014.

On June 17, 2014, we entered into an equity distribution agreement (the "June 2014 Equity Distribution Agreement") with two sales agents pursuant to which the we could offer and sell, from time to time, up to an aggregate amount of $35,000,000 of shares of our common stock in transactions that were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 2,528,416 shares under the June 2014 Equity Distribution Agreement for aggregate proceeds of approximately $34.2 million, net of commissions and fees, prior to its termination.

On September 3, 2014, we entered into a second equity distribution agreement (the "September 2014 Equity Distribution Agreement") with two sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount of $75,000,000 of shares of our common stock in transactions that were deemed to be "at the market" offerings and privately negotiated transactions. The September 2014 Equity Distribution Agreement replaced the June 2014 Equity Distribution Agreement. We issued a total of 5,087,646 shares under the September 2014 Equity Distribution Agreement for aggregate proceeds of approximately $69.1 million, net of commissions and fees, prior to its termination.

On March 2, 2015, we entered into a third equity distribution agreement (the "March 2015 Equity Distribution Agreement") with two sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $100,000,000 of shares of our common stock in transactions that are deemed to be "at the market" offerings and privately negotiated transactions. The March 2015 Equity Distribution Agreement replaced the September 2014 Equity Distribution Agreement. Through June 30, 2016, we had issued a total of 6,687,855 shares under the March 2015 Equity Distribution Agreement for aggregate proceeds of approximately $89.7 million, net of commissions and fees.

On July 29, 2015, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of our common stock. 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 share repurchase program through June 30, 2016, we repurchased a total of 1,216,243 shares at an aggregate cost of approximately $10.8 million, including commissions and fees, for a weighted average price of $8.92 per share.

Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:

	interest rate trends;

	the difference between Agency RMBS yields and our funding and hedging costs;

	competition for investments in Agency RMBS;

	recent actions taken by the Federal Reserve 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.

In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:

	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.

Results of Operations

Described below are the Company's results of operations for the six and three months ended June 30, 2016, as compared to the Company's results of operations for the six and three months ended June 30, 2015.

Net Income (Loss) Summary

Net income for the six months ended June 30, 2016 was $1.9 million, or $0.08 per share. Net income for the six months ended June 30, 2015 was $2.7 million, or $0.14 per share. Net income for the three months ended June 30, 2016 was $6.5 million, or $0.29 per share. Net loss for the three months ended June 30, 2015 was $2.8 million, or $0.14 per share. The components of net income (loss) for the six and three months ended June 30, 2016 and 2015, along with the changes in those components are presented in the table below:

(in thousands)
	Six Months Ended June 30,									Three Months Ended, June 30,
	2016			2015			Change			2016			2015			Change
Interest income	$	39,701		$	31,367		$	8,334		$	19,235		$	16,753		$	2,482
Interest expense		(6,649	)		(2,863	)		(3,786	)		(3,330	)		(1,567	)		(1,763	)
Net interest income		33,052			28,504			4,548			15,905			15,186			719
Losses on RMBS and derivative contracts		(26,865	)		(22,080	)		(4,785	)		(7,308	)		(16,017	)		8,709
Net portfolio income (loss)		6,187			6,424			(237	)		8,597			(831	)		9,428
Expenses		(4,315	)		(3,747	)		(568	)		(2,134	)		(2,001	)		(133	)
Net income (loss)	$	1,872		$	2,677		$	(805	)	$	6,463		$	(2,832	)	$	9,295

GAAP and Non-GAAP Reconciliations

In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including "Economic Interest Expense" and "Economic Net Interest Income."

Economic Interest Expense and Economic Net Interest Income

We use derivative instruments, specifically Eurodollar and Treasury Note ("T-Note") futures contracts, interest rate swaps and swaptions, to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment. As discussed above, we have not elected to designate its derivative holdings for hedge accounting treatment. Therefore, changes in fair value of these instruments are presented in a separate line item in our consolidated statements of operations and not included in interest expense.

We have not elected to designate our derivative holdings for hedge accounting treatment under the Financial Accounting Standards Board, (the "FASB"), Accounting Standards Codification, ("ASC"), Topic 815, Derivatives and Hedging. Changes in fair value of these instruments are presented in a separate line item in our consolidated statements of operations and not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.

For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized gains or losses on specific derivative instruments that pertain to each period presented. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income.

We believe that economic interest expense and economic net interest income provides meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of its current investment portfolio or operations. The unrealized gains or losses on derivative instruments presented in our consolidated statements of operations are not necessarily representative of the total interest rate expense that we will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses we ultimately realize, and which will affect our total interest rate expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.

Our presentation of the economic value of its hedging strategy has important limitations. First, other market participants may calculate economic interest expense and economic net interest income differently than the way we calculate them. Second, while we believe that the calculation of the economic value of our hedging strategy described above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, the economic value of our investment strategy should not be viewed in isolation and is not a substitute for interest expense and net interest income computed in accordance with GAAP.

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for the six months ended June 30, 2016 and 2015 and each quarter during 2016 and 2015.

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, 2016	$	(11,591	)	$	(786	)	$	(2,210	)	$	(8,595	)
March 31, 2016		(27,590	)		(1,125	)		(1,933	)		(24,532	)
December 31, 2015		12,770			362			(1,196	)		13,604
September 30, 2015		(22,506	)		55			(881	)		(21,680	)
June 30, 2015		(803	)		(88	)		(595	)		(120	)
March 31, 2015		(12,351	)		57			(306	)		(12,102	)
Six Months Ended
June 30, 2016	$	(39,181	)	$	(1,911	)	$	(4,143	)	$	(33,127	)
June 30, 2015		(13,154	)		(31	)		(901	)		(12,222	)

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, 2016	$	19,235	$	3,330	$	(2,210	)	$	5,540	$	15,905	$	13,695
March 31, 2016		20,466		3,319		(1,933	)		5,252		17,147		15,214
December 31, 2015		19,092		2,371		(1,196	)		3,567		16,721		15,525
September 30, 2015		18,352		2,037		(881	)		2,918		16,315		15,434
June 30, 2015		16,753		1,567		(595	)		2,162		15,186		14,591
March 31, 2015		14,614		1,296		(306	)		1,602		13,318		13,012
Six Months Ended
June 30, 2016	$	39,701	$	6,649	$	(4,143	)	$	10,792	$	33,052		28,909
June 30, 2015		31,367		2,863		(901	)		3,764		28,504		27,603

(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.

Net Interest Income

During the six months ended June 30, 2016, we generated $33.1 million of net interest income, consisting of $39.7 million of interest income from RMBS assets offset by $6.6 million of interest expense on borrowings. For the comparable period ended June 30, 2015, we generated $28.5 million of net interest income, consisting of $31.4 million of interest income from RMBS assets offset by $2.9 million of interest expense on borrowings. The $8.3 million increase in interest income and $3.8 million increase in interest expense for the six months ended June 30, 2016 reflects the growth of our portfolio fueled by our capital raising activities during the first six months of 2015 and the second quarter of 2016, as well as increased yields earned on our portfolio and increased costs of borrowings.

On an economic basis, our interest expense on borrowings for the six months ended June 30, 2016 and 2015 was $10.8 million and $3.8 million, respectively, resulting in $28.9 million and $27.6 million of economic net interest income, respectively.

During the three months ended June 30, 2016, we generated $15.9 million of net interest income, consisting of $19.2 million of interest income from RMBS assets offset by $3.3 million of interest expense on borrowings. For the three months ended June 30, 2015, we generated $15.2 million of net interest income, consisting of $16.8 million of interest income from RMBS assets offset by $1.6 million of interest expense on borrowings. As in the year to date period, the increased interest income and interest expense for the three months ended June 30, 2016 as compared to the same period in 2015, reflects a combination of the growth of our portfolio and increased yields on the portfolio and costs of borrowings.

On an economic basis, our interest expense on repurchase liabilities for the three months ended June 30, 2016 and 2015 was $5.5 million and $2.2 million, respectively, resulting in $13.7 million and $14.6 million of economic net interest income, respectively.

The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income and net interest spread for the six months ended June 30, 2016 and 2015 and each quarter during 2016 and 2015 on both a GAAP and economic basis.

($ 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, 2016	$	2,100,151	$	19,235		3.66	%	$	2,000,158	$	3,330	$	5,540		0.67	%		1.11	%
March 31, 2016		2,067,527		20,466		3.96	%		1,962,901		3,319		5,252		0.68	%		1.07	%
December 31, 2015		2,137,810		19,092		3.57	%		1,964,806		2,371		3,567		0.48	%		0.73	%
September 30, 2015		2,146,240		18,352		3.42	%		1,978,685		2,037		2,918		0.41	%		0.59	%
June 30, 2015		1,925,746		16,753		3.48	%		1,736,781		1,567		2,162		0.36	%		0.50	%
March 31, 2015		1,612,896		14,614		3.62	%		1,448,071		1,296		1,602		0.36	%		0.44	%
Six Months Ended
June 30, 2016	$	2,083,839	$	39,701		3.81	%	$	1,981,529	$	6,649	$	10,792		0.67	%		1.09	%
June 30, 2015		1,769,321		31,367		3.55	%		1,592,426		2,863		3,764		0.36	%		0.47	%

($ in thousands)

Net Interest Income

Net Interest Spread

GAAP

Economic

GAAP

Economic

Basis

Basis⁽²⁾

Basis

Basis⁽⁴⁾

Three Months Ended

June 30, 2016

15,905