UNITED STATES

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, ~~2014~~2015

Commission File Number: 001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)


Maryland		72-1571637
(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: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

Class A Common Stock, $0.001 par value

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

State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, ~~2014:~~2015:

Title of each Class	Shares held by non-affiliates		Aggregate market value held by non-affiliates			Shares held by non-affiliates		Aggregate market value held by non-affiliates
Class A Common Stock, $0.001 par value		8,898,723	$	7,400,000	(a)		8,803,025	$	24,600,000	(a)
Class B Common Stock, $0.001 par value		20,760	$	1,000	(b)		20,760	$	1,000	(b)
Class C Common Stock, $0.001 par value		31,938	$	1,500	(b)		31,938	$	1,500	(b)

(a) The aggregate market value was calculated by using the last sale price of the Class A Common Stock as of June 30, ~~2014.~~2015.

(b) The market value of the Class B and Class C Common Stock is an estimate based on their initial purchase price.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:

Title of each Class	Latest Practicable Date	Shares Outstanding
Class A Common Stock, $0.001 par value	March ~~16, 2015~~22, 2016		~~12,332,506~~12,631,627
Class B Common Stock, $0.001 par value	March ~~16, 2015~~22, 2016		31,938
Class C Common Stock, $0.001 par value	March ~~16, 2015~~22, 2016		31,938

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for its ~~2015~~2016 Annual Meeting of Stockholders of the Registrant are incorporated by reference into Part III of this Annual Report on Form 10-K.

BIMINI CAPITAL MANAGEMENT, INC.

INDEX

PART I
ITEM 1. Business.			23
ITEM 1A. Risk Factors			1214
ITEM 1B. Unresolved Staff Comments.			3734
ITEM 2. Properties.			3734
ITEM 3. Legal Proceedings.			3734
ITEM 4. Mine Safety Disclosures.			3835
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.			3936
ITEM 6. Selected Financial Data.			4137
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.			4137
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.			68
ITEM 8. Financial Statements and Supplementary Data.			69
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.			103
ITEM 9A. Controls and Procedures.			103
ITEM 9B. Other Information.			~~106~~104
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance.			~~107~~105
ITEM 11. Executive Compensation.			~~107~~105
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.			~~107~~105
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.			~~107~~105
ITEM 14. Principal Accountant Fees and Services.			~~107~~105
PART IV
ITEM 15. Exhibits and Financial Statement Schedules.			~~108~~106

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 actual or proposed actions of the U.S. Federal Reserve with respect to monetary policy or interest rates;

·	the effect of rising interest rates on unemployment, inflation and mortgage supply and demand;

·	the effect of increased prepayment rates on the value of our assets;

·	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;

·	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;

·	our ability to make distributions to our stockholders in the future;

·	mortgage loan modification programs and future legislative action;

·	our understanding of our competition and our ability to compete effectively;

·	our ability to quantify risk based on historical experience;

·	the termination of our status as a Real Estate Investment Trust for federal income tax purposes effective January 1, 2015 and our ability to use net operating loss (“NOLs”)carryforwards to reduce our taxable income;

our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our NOLs to offset future taxable income, including whether our recently adopted shareholder rights plan will be effective in preventing an ownership change that would significantly limit our ability to utilize such losses;

·	our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act;

·	market trends;

·	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.

PART I

ITEM 1. BUSINESS

~~Overview~~Year 2015 Significant Events

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”), has historically been organized, operated and taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As of December 31, 2014, our corporate structure included two taxable REIT subsidiaries (“TRS”), and until its deconsolidation on December 31, 2014, a separately taxed REIT subsidiary, Orchid Island Capital, Inc. (“Orchid”).

Certain trends and events experienced during 2015 have caused Bimini Capital to no longer meet the Code’s rules and regulations to be taxed as a REIT, effective January 1, 2015. In particular, additional offerings of common stock by Orchid in 2015 increased revenue attributable to management fees received from Orchid. In addition, payments that have been and will be made by Bimini Capital pursuant to a litigation settlement agreement entered into in 2015 have reduced and may continue to reduce the value of Bimini Capital’s assets and the amount of revenues generated by our mortgage-backed securities portfolio. Consequently, the value of our two TRSs has increased in relation to the value of Bimini Capital’s assets to a level that exceeds the limits permitted for a REIT under the Code.

The failure to qualify as a REIT subjects Bimini Capital’s taxable income to federal and state corporate income taxes at regular corporate rates. However, Bimini Capital and its subsidiaries have NOL carryforwards that we believe will be available to offset taxable income, if any, in 2015 and in future periods. Management is implementing certain internal restructuring transactions that would maximize its ability to utilize the existing federal NOL carryforwards.

In addition, the termination of our REIT status eliminates the income, asset, distribution, and stock ownership requirements applicable to REITs, which will provide us with more flexibility in executing our business strategy. Specifically, because we are no longer required to derive a significant portion of our income from mortgage or other real estate related investments, we will have greater flexibility to invest in other types of assets as part of our principal investing activity, subject to maintaining compliance with our exclusion from regulation as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, because we will no longer be subject to the REIT distribution requirement, we will have greater flexibility to retain our earnings to fund future growth.

Overview

Bimini Capital is a specialty finance company that primarily invests in mortgage-backed securities (“MBS”). The principal and interest payments of these MBS are guaranteed by the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation, (“Freddie Mac”) or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as Agency MBS. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency MBS and (ii) structured Agency MBS, such as collateralized mortgage obligations (“CMOs”), interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only (“POs”), among other types of structured Agency MBS. Bimini Capital’s website is located at http://www.biminicapital.com. Information on our website is not part of this Annual Report on Form 10-K.

~~We are organized and operate as a real estate investment trust (“REIT”) for federal income tax purposes,~~Beginning in 2013, and as further described below, the Company, through its wholly-owned subsidiary, also began to serve as the external manager of ~~December 31, 2014, our corporate structure included two taxable REIT subsidiaries (“TRS”),~~Orchid, and ~~until~~from this arrangement the Company receives management fees and expense reimbursements. In addition, the Company receives dividends from its ~~deconsolidation on December 31, 2014, a separately taxed REIT subsidiary,~~investment in Orchid ~~Island Capital, Inc. (“Orchid”).~~common shares. The Company is self-managed and self-advised.

~~History – Inception Through 2007~~

We were originally formed in September 2003 as Bimini Mortgage Management, Inc. (“Bimini Mortgage”) for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“MBS”). Through November 2, 2005, we operated solely as a REIT.

On November 3, 2005, Bimini Mortgage acquired Opteum Financial Services, LLC (“OFS”). Upon closing of the transaction, OFS became a wholly-owned taxable REIT subsidiary. From November 3, 2005 to June 30, 2007, we operated a mortgage banking business through OFS. This entity ceased originating loans during the second quarter of 2007, and other parts of the business were sold. This entity was renamed Orchid Island TRS, LLC (“OITRS”) effective July 3, 2007 and then renamed MortCo TRS, LLC (“MortCo”) effective March 8, 2011. Hereinafter, any historical mention, discussion or references to Opteum Financial Services, LLC, Orchid Island TRS, LLC, OFS or to OITRS (such as in previously filed documents or Exhibits) now means MortCo.

·	~~On February 10, 2006, Bimini Mortgage changed its name to Opteum Inc. (“Opteum”). On September 28, 2007, Opteum changed its name to Bimini Capital Management, Inc.~~

~~History – 2008 to the Present~~

In August 2008, the Company began employing an alternative investment strategy utilizing structured MBS with comparable borrower and prepayment characteristics to the securities historically held in its pass-through (“PT”) MBS portfolio. Structured securities are not typically funded in the repurchase market but instead are purchased directly, thus reducing – but not eliminating - the Company’s reliance on access to repurchase agreement funding. The leverage inherent in the structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repurchase market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008.

~~-2-~~-3-

On February 20, 2013, Orchid successfully sold 2,360,000 shares of its common stock in an initial public offering (“IPO”) for aggregate proceeds of approximately $35.4 million. After the closing of the offering, and through December 31, 2013, Bimini owned approximately 29.38% of Orchid’s common stock. At the closing of the offering, Orchid entered into a management agreement with Bimini Advisors, LLC, a wholly-owned subsidiary of Bimini. Under the management agreement, Bimini Advisors will oversee the business affairs of Orchid and in return will receive a fee for these services.

·	~~During 2014, Orchid issued a total of 13,357,991 shares of stock, primarily through public offerings. At December 31, 2014 Bimini owned approximately 5.9% of Orchid’s common stock.~~

As used in this document, references to “Bimini Capital,” the parent company, and to or the general management of Bimini Capital’s portfolio of MBS refer to Bimini Capital Management, Inc. Orchid completed an initial public offering ("IPO") of its common stock effective February 20, 2013. After that date, and until December 31, 2014, Orchid continued to be consolidated as a variable interest entity (“VIE”) as described below. As used in this document, discussions related to REIT qualifying activities include the MBS portfolios of both Bimini Capital and Orchid through December 31, 2014. References to Bimini Capital’s taxable REIT subsidiaries or non-REIT eligible assets refer to Bimini Advisors, Inc., and its wholly-owned subsidiary, Bimini Advisors, LLC (together as “Bimini Advisors”) and to MortCo TRS, LLC and its consolidated subsidiaries (collectively, “MortCo”).

Consolidation

The consolidated financial statements include the accounts of Bimini Capital, ~~Orchid,~~ Bimini Advisors and ~~MortCo, as well as~~MortCo. The accounts of Orchid are included in the ~~wholly-owned subsidiaries~~consolidated statements of ~~MortCo.~~operations, equity and cash flows until December 31, 2014. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), requires the consolidation of a VIE by an enterprise if it is deemed the primary beneficiary of the VIE. Further, ASC 810 requires a qualitative assessment to determine the primary beneficiary of a VIE, ~~and~~an ongoing ~~assessments~~assessment of whether an enterprise is the primary beneficiary of a VIE, ~~as well as~~and additional disclosures for entities that have variable interests in VIEs.

From the effective date of Orchid’s IPO ~~effectiveness~~and until December 31, 2014, management concluded pursuant to ASC 810 that Orchid was a VIE because Orchid's equity holders lack the ability through voting rights to make decisions about its activities that have a significant effect on the success of Orchid. Management has also concluded that Bimini Capital was the primary beneficiary of Orchid because, under the management agreement between Bimini Advisors and Orchid, Bimini Capital had the power to direct the activities of Orchid that most significantly impact its economic performance.VIE. As a result, subsequent to Orchid’s IPO and until December 31, 2014, the Company ~~continued to consolidate~~consolidated Orchid in its ~~consolidated~~ financial statements. ~~While the~~The results of operations of Orchid are included in the Company’s 2014 consolidated ~~financial~~ statements of operations and cash flows, however, net income ~~or loss~~ attributable to Bimini Capital stockholders ~~does~~did not include the portion of net income attributable to noncontrolling interests. Additionally, noncontrolling interests in Orchid are recorded in our 2013 consolidated balance sheet and our consolidated statement of equity within the equity section but separate from the stockholders’ equity.

In December 2014, management re-evaluated the conditions resulting in the consolidation of Orchid and concluded that, due to Bimini’s decreased percentage ownership interest in Orchid, ~~the management contract~~there was no longer ~~represented~~ a variable ~~interest.~~interest requiring consolidation. As a result, in accordance with ASC 810, the Company has deconsolidated Orchid from the consolidated balance sheet as of December 31, 2014. However, as a VIE which was deconsolidated on December 31, 2014, Orchid’s results of operations ~~are~~were included in the consolidated statements of operations, equity and cash flows through December 31, 2014, and ~~will be~~are excluded in ~~future~~subsequent periods.

Assets recognized as a result of consolidating Orchid at December 31, 2013 did not represent additional assets that could be used to satisfy claims against Bimini Capital’s assets. Conversely, liabilities recognized as a result of consolidating Orchid did not represent additional claims on Bimini Capital’s assets; rather, they represented claims against the assets of Orchid. Creditors and stockholders of Orchid have no recourse to the assets of Bimini Capital.

~~Structure~~

Bimini Capital and Orchid have each elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Our qualification as a REIT depends upon our ability to meet, on an annual or in some cases quarterly basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares. MortCo has been treated as a TRS since its acquisition. Bimini Advisors, Inc. and its wholly owned subsidiary, Bimini Advisors, LLC (together “Bimini Advisors”) were incorporated. Each is a TRS. Bimini Capital, Orchid, MortCo, and Bimini Advisors are all treated as separate entities for tax purposes.

~~-3-~~

As used in this document, discussions related to “Bimini Capital,” the parent company, the registrant, and the REIT qualifying activities or the general management of our portfolio of MBS refer to Bimini Capital Management, Inc. Further, discussions related to our taxable REIT subsidiary or non-REIT eligible assets refer to MortCo and its consolidated subsidiaries and Bimini Advisors. Discussions relating to the “Company” refer to the consolidated entity (the combination of Bimini Capital, Orchid, MortCo and its subsidiaries and Bimini Advisors).

Our Investment and Capital Allocation Strategy

Investment Strategy

Our business objective is to provide attractive risk-adjusted total returns to our investors 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 pass-through Agency MBS and structured Agency MBS. We seek to generate income from (i) the net interest margin on our leveraged pass-through Agency MBS portfolio and the leveraged portion of our structured Agency MBS portfolio, and (ii) the interest income we generate from the unleveraged portion of our structured Agency MBS portfolio. We also seek to minimize the volatility of both the net asset value of, and income from, our portfolio through a process which emphasizes capital allocation, asset selection, liquidity and active interest rate risk management.

We fund our pass-through Agency MBS and certain of our structured Agency MBS, such as fixed and floating rate tranches of CMOs and POs, through repurchase agreements. However, we generally do not employ leverage on our structured Agency MBS that have no principal balance, such as IOs and IIOs. We may pledge a portion of these assets to increase our cash balance, but we do not intend to invest the cash derived from pledging the assets. Otherwise, we do not use leverage in these instances because the securities contain structural leverage.

-4-

Our target asset categories and principal assets in which we intend to invest are as follows:

Pass-through Agency MBS

We invest in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. In effect, these securities pass through the monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer or guarantor of the securities. Pass-through certificates can be divided into various categories based on the characteristics of the underlying mortgages, such as the term or whether the interest rate is fixed or variable.

The payment of principal and interest on mortgage pass-through securities issued by Ginnie Mae, but not the market value, is guaranteed by the full faith and credit of the federal government. Payment of principal and interest on mortgage pass-through certificates issued by Fannie Mae and Freddie Mac, but not the market value, is guaranteed by the respective agency issuing the security.

A key feature of most mortgage loans is the ability of the borrower to repay principal earlier than scheduled. This is called a prepayment. Prepayments arise primarily due to sale of the underlying property, refinancing or foreclosure. Prepayments result in a return of principal to pass-through certificate holders. This may result in a lower or higher rate of return upon reinvestment of principal. This is generally referred to as prepayment uncertainty. If a security purchased at a premium prepays at a higher-than-expected rate, then the value of the premium would be eroded at a faster-than-expected rate. Similarly, if a discount mortgage prepays at a lower-than-expected rate, the amortization towards par would be accumulated at a slower-than-expected rate. The possibility of these undesirable effects is sometimes referred to as “prepayment risk.”

~~-4-~~

In general, declining interest rates tend to increase prepayments, and rising interest rates tend to slow prepayments. Like other fixed-income securities, when interest rates rise, the value of Agency MBS generally declines. The rate of prepayments on underlying mortgages will affect the price and volatility of Agency MBS and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If interest rates rise, our holdings of Agency MBS may experience reduced spreads over our funding costs if the borrowers of the underlying mortgages pay off their mortgages later than anticipated. This is generally referred to as ~~extension~~“extension” risk.

The mortgage loans underlying pass-through certificates can generally be classified into the following three categories:

Fixed-Rate Mortgages. Fixed-rate mortgages are those where the borrower pays an interest rate that is constant throughout the term of the loan. Traditionally, most fixed-rate mortgages have an original term of 30 years. However, shorter terms (also referred to as ~~final~~“final maturity ~~dates)~~dates”) have become common in recent years. Because the interest rate on the loan never changes, even when market interest rates change, ~~over time~~ there can be a divergence between the interest rate on the loan and current market interest ~~rates.~~rates over time. This in turn can make fixed-rate mortgages ~~price sensitive~~price-sensitive to market fluctuations in interest rates. In general, the longer the remaining term on the mortgage loan, the greater the price sensitivity to movements in interest rates and, therefore, the likelihood for greater price variability.

ARMs. ARMs are mortgages for which the borrower pays an interest rate that varies over the term of the loan. The interest rate usually resets based on market interest rates, although the adjustment of such an interest rate may be subject to certain limitations. Traditionally, interest rate resets occur at regular intervals (for example, once per year). We refer to such ARMs as “traditional” ARMs. Because the interest rates on ARMs fluctuate based on market conditions, ARMs tend to have interest rates that do not deviate from current market rates by a large amount. This in turn can mean that ARMs have less price sensitivity to interest rates and, consequently, are less likely to experience significant price volatility.

-5-

Hybrid Adjustable-Rate Mortgages. Hybrid ARMs have a fixed-rate for the first few years of the loan, often three, five, seven or ten years, and thereafter reset periodically like a traditional ARM. Effectively, such mortgages are hybrids, combining the features of a pure fixed-rate mortgage and a traditional ARM. Hybrid ARMs have price sensitivity to interest rates similar to that of a fixed-rate mortgage during the period when the interest rate is fixed and similar to that of an ARM when the interest rate is in its periodic reset stage. However, because many hybrid ARMs are structured with a relatively short initial time span during which the interest rate is fixed, even during that segment of its existence, the price sensitivity may be high.

Structured Agency MBS

We also invest in structured Agency MBS, which include CMOs, IOs, IIOs and POs. The payment of principal and interest, as appropriate, on structured Agency MBS issued by Ginnie Mae, but not the market value, is guaranteed by the full faith and credit of the federal government. Payment of principal and interest, as appropriate, on structured Agency MBS issued by Fannie Mae and Freddie Mac, but not the market value, is guaranteed by the respective agency issuing the security. The types of structured Agency MBS in which we invest are described below.

CMOs. CMOs are a type of MBS the principal and interest of which are paid, in most cases, on a monthly basis. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities issued directly by or under the auspices of Ginnie Mae, Freddie Mac or Fannie Mae. CMOs are structured into multiple classes, with each class bearing a different stated maturity. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. Generally, fixed-rate mortgages are used to collateralize CMOs. However, the CMO tranches need not all have fixed-rate coupons. Some CMO tranches have floating rate coupons that adjust based on market interest rates, subject to some limitations. Such tranches, often called “CMO floaters,” can have relatively low price sensitivity to interest rates.

~~-5-~~

IOs. IOs represent the stream of interest payments on a pool of mortgages, either fixed-rate mortgages or hybrid ARMs. Holders of IOs have no claim to any principal payments. The value of IOs depends primarily on two factors, which are prepayments and interest rates. Prepayments on the underlying pool of mortgages reduce the stream of interest payments going forward, hence IOs are highly sensitive to prepayment rates. IOs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future interest payments on a pool of mortgages. On the other hand, an increase in interest rates has a tendency to reduce prepayments, which increases the expected absolute amount of future interest payments.

IIOs. IIOs represent the stream of interest payments on a pool of mortgages, either fixed-rate mortgages or hybrid ARMs. Holders of IIOs have no claim to any principal payments. The value of IIOs depends primarily on three factors, which are prepayments, ~~LIBOR rates~~London Interbank Offered Rate (“LIBOR”) and term interest rates. Prepayments on the underlying pool of mortgages reduce the stream of interest payments, making IIOs highly sensitive to prepayment rates. The coupon on IIOs is derived from both the coupon interest rate on the underlying pool of mortgages and 30-day LIBOR. IIOs are typically created in conjunction with a floating rate CMO that has a principal balance and which is entitled to receive all of the principal payments on the underlying pool of mortgages. The coupon on the floating rate CMO is also based on 30-day LIBOR. Typically, the coupon on the floating rate CMO and the IIO, when combined, equal the coupon on the pool of underlying mortgages. The coupon on the pool of underlying mortgages typically represents a cap or ceiling on the combined coupons of the floating rate CMO and the IIO. Accordingly, when the value of 30-day LIBOR increases, the coupon of the floating rate CMO will increase and the coupon on the IIO will decrease. When the value of 30-day LIBOR falls, the opposite is true. Accordingly, the value of IIOs are sensitive to the level of 30-day LIBOR and expectations by market participants of future movements in the level of 30-day LIBOR. IIOs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future interest payments on a pool of mortgages. On the other hand, an increase in interest rates has a tendency to reduce prepayments, which increases the expected absolute amount of future interest payments.

-6-

POs. POs represent the stream of principal payments on a pool of mortgages. Holders of POs have no claim to any interest payments, although the ultimate amount of principal to be received over time is known, ~~— it equals~~equaling the principal balance of the underlying pool of mortgages. ~~What is not known is the~~The timing of the receipt of the principal ~~payments.~~payments is not known. The value of POs depends primarily on two factors, which are prepayments and interest rates. Prepayments on the underlying pool of mortgages accelerate the stream of principal repayments, making POs highly sensitive to the rate at which the mortgages in the pool are prepaid. POs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future principal payments on a pool of mortgages. Further, an increase in interest rates has a tendency to reduce prepayments, which decelerates, or pushes further out in time, the ultimate receipt of the principal payments. The opposite is true when interest rates decline.

Our investment strategy consists of the following components:

·	investing in pass-through Agency MBS and certain structured Agency MBS, such as fixed and floating rate tranches of CMOs and POs, on a leveraged basis to increase returns on the capital allocated to this portfolio;

investing in certain structured Agency MBS, such as IOs and IIOs, generally on an unleveraged basis in order to (i) increase returns due to the structural leverage contained in such securities, (ii) enhance liquidity due to the fact that these securities will be unencumbered or, when encumbered, the cash from such borrowings may be retained and (iii) diversify portfolio interest rate risk due to the different interest rate sensitivity these securities have compared to pass-through Agency MBS;

·	investing in Agency MBS in order to minimize credit risk;

·	investing in assets that will cause us to maintain our exclusion from regulation as an investment company under the Investment Company ~~Act of 1940, as amended (the “Investment Company Act”); and~~Act.

·	~~investing in assets that will allow us to qualify and maintain our qualification as a REIT.~~

Our management makes investment decisions based on various factors, including, but not limited to, relative value, expected cash yield, supply and demand, costs of hedging, costs of financing, liquidity requirements, expected future interest rate volatility and the overall shape of the U.S. Treasury and interest rate swap yield curves. We do not attribute any particular quantitative significance to any of these factors, and the weight we give to these factors depends on market conditions and economic trends.

~~-6-~~

Over time, we will modify our investment strategy as market conditions change to seek to maximize the returns from our investment portfolio. We believe that this strategy will enable us to provide attractive long-term returns to our stockholders.

Capital Allocation Strategy

The percentage of capital invested in our two asset categories will vary and will be 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. Typically, pass-through Agency MBS and structured Agency MBS exhibit materially different sensitivities to movements in interest rates. Declines in the value of one portfolio may be offset by appreciation in the other, although we cannot assure you that this will be the case. Additionally, we will seek to maintain adequate liquidity as we allocate capital.

We allocate our capital to assist our interest rate risk management efforts. The unleveraged portfolio does not require unencumbered cash or cash equivalents to be maintained in anticipation of possible margin calls. To the extent more capital is deployed in the unleveraged portfolio, our liquidity needs will generally be less.

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During periods of rising interest rates, refinancing opportunities available to borrowers typically decrease because borrowers are not able to refinance their current mortgage loans with new mortgage loans at lower interest rates. In such instances, securities that are highly sensitive to refinancing activity, such as IOs and IIOs, typically increase in value. Our capital allocation strategy allows us to redeploy our capital into such securities when and if we believe interest rates will be higher in the future, thereby allowing us to hold securities the value of which we believe is likely to increase as interest rates rise. Also, by being able to re-allocate capital into structured Agency MBS, such as IOs, during periods of rising interest rates, we may be able to offset the likely decline in the value of our pass-through Agency MBS, which are negatively impacted by rising interest rates.

Financing Strategy

We borrow against our Agency MBS and certain of our structured Agency MBS using short-term repurchase agreements. Our borrowings currently consist of short-term repurchase agreements. We may use other sources of leverage, such as secured or unsecured debt or issuances of preferred stock. We do not have a policy limiting the amount of leverage we may incur. However, we generally expect that the ratio of our total liabilities compared to our equity, which we refer to as our leverage ratio, will be less than 12 to 1. Our amount of leverage may vary depending on market conditions and other factors that we deem relevant.

We allocate our capital between two sub-portfolios. The pass-through Agency MBS portfolio will be leveraged generally ~~via~~through repurchase agreement funding. The structured Agency MBS portfolio generally will not be leveraged. The leverage ratio is calculated by dividing our total liabilities by total stockholders’ equity at the end of each period. The amount of leverage will be a function of the capital allocated to the pass-through Agency MBS portfolio and the amount of haircuts required by our lenders on our borrowings. When the capital allocation to the pass-through Agency MBS portfolio is high, the leverage ratio will be high since more capital is being explicitly leveraged and less capital is un-leveraged. If the haircuts required by our lenders on our borrowings are higher, all else being equal, our leverage will be lower since our lenders will lend less against the value of the capital deployed to the pass-through Agency MBS portfolio. The allocation of capital between the two portfolios will be a function of several factors:

•·	The relative durations of the respective portfolios — We generally seek to have a combined duration at or near zero. If our pass-through securities have a longer duration, we will allocate more capital to the structured security portfolio to achieve a combined duration close to zero.

•·

The relative attractiveness of pass-through securities versus structured securities — To the extent we believe the expected returns of one type of security are higher than the other, we will allocate more capital to the more attractive securities, subject to the caveat that its combined duration remains at or near zero.

•·

Liquidity — We seek to maintain adequate cash and unencumbered securities relative to our repurchase agreement borrowings well in excess of anticipated price or prepayment related margin calls from our lenders. To the extent we feel price or prepayment related margin calls will be higher/lower, we will allocate less/more capital to the pass-through Agency MBS portfolio. Our pass-through Agency MBS portfolio likely will be our only source of price or prepayment related margin calls because we generally will not apply leverage to our structured Agency MBS portfolio. From time to time we may pledge a portion of our structured securities and retain the cash derived so it can be used to enhance our liquidity.

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Risk Management

We invest in Agency MBS to mitigate credit risk. Additionally, our Agency MBS are backed by a diversified base of mortgage loans to mitigate geographic, loan originator and other types of concentration risks.

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Interest Rate Risk Management

We believe that the risk of adverse interest rate movements represents the most significant risk to the value of our portfolio. This risk arises because (i) the interest rate indices used to calculate the interest rates on the mortgages underlying our assets may be different from the interest rate indices used to calculate the interest rates on the related borrowings, and (ii) interest rate movements affecting our borrowings may not be reasonably correlated with interest rate movements affecting our assets. We attempt to mitigate our interest rate risk by using the ~~following techniques:~~techniques described below:

Agency MBS Backed by ARMs. We seek to minimize the differences between interest rate indices and interest rate adjustment periods of our Agency MBS backed by ARMs and related borrowings. At the time of funding, we typically align (i) the underlying interest rate index used to calculate interest rates for our Agency MBS backed by ARMs and the related borrowings and (ii) the interest rate adjustment periods for our Agency MBS backed by ARMs and the interest rate adjustment periods for our related borrowings. As our borrowings mature or are renewed, we may adjust the index used to calculate interest expense, the duration of the reset periods and the maturities of our borrowings.

Agency MBS Backed by Fixed-Rate Mortgages. As interest rates rise, our borrowing costs increase; however, the income on our Agency MBS backed by fixed-rate mortgages remains unchanged. ~~Subject to qualifying and maintaining a qualification as a REIT, we~~We may seek to limit increases to our borrowing costs through the use of interest rate swap or cap agreements, options, put or call agreements, futures contracts, forward rate agreements or similar financial instruments to effectively convert our floating-rate borrowings into fixed-rate borrowings.

Agency MBS Backed by Hybrid ARMs. During the fixed-rate period of our Agency MBS backed by hybrid ARMs, the security is similar to Agency MBS backed by fixed-rate mortgages. During this period, ~~subject to qualifying and maintaining a qualification as a REIT,~~ we may employ the same hedging strategy that we employ for our Agency MBS backed by fixed-rate mortgages. Once our Agency MBS backed by hybrid ARMs convert to floating rate securities, we may employ the same hedging strategy as we employ for our Agency MBS backed by ARMs.

Derivative Instruments. We enter into derivative instruments to economically hedge against the possibility that rising rates may adversely impact the value of our repurchase agreement liabilities. The principal instruments that the Company has used to date are Eurodollar and ~~T-Note~~Treasury Note (“T-Note”) futures contracts and options to enter into interest rate swaps (“interest rate swaptions”), but may enter into other transactions in the future.

Interest rate swaptions provide us the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. We may enter into swaption agreements that provide us the option to enter into a pay fixed rate interest rate swap ("payer swaption"), or swaption agreements that provide us the option to enter into a receive fixed interest rate swap ("receiver swaptions").

Additionally, our structured Agency MBS generally exhibit sensitivities to movements in interest rates different than our pass-through Agency MBS. To the extent they do so, our structured Agency MBS may protect us against declines in the market value of our combined portfolio that result from adverse interest rate movements, although we cannot assure you that this will be the case.

We may purchase a portion of our Agency RMBS through forward settling transactions, including “to-be-announced” (“TBA”) securities transactions. We account for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if we cannot assert that it is probable at the inception of the TBA transaction, and throughout its term, that we 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. However, we have not entered into these TBA securities transactions as a hedge of our interest rate risk.

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Prepayment Risk Management

The risk of mortgage prepayments is another significant risk to our portfolio. When prevailing interest rates fall below the coupon rate of a mortgage, mortgage prepayments are likely to increase. Conversely, when prevailing interest rates increase above the coupon rate of a mortgage, mortgage prepayments are likely to decrease.

When prepayment rates increase, we may not be able to reinvest the money received from prepayments at yields comparable to those of the securities prepaid. Also, some ARMs and hybrid ARMs which back our Agency MBS may bear initial “teaser” interest rates that are lower than their fully-indexed interest rates. If these mortgages are prepaid during this “teaser” period, we may lose the opportunity to receive interest payments at the higher, fully-indexed rate over the expected life of the security. Additionally, some of our structured Agency MBS, such as IOs and IIOs, may be negatively affected by an increase in prepayment rates because their value is wholly contingent on the underlying mortgage loans having an outstanding principal balance.

A decrease in prepayment rates may also have an adverse effect on our portfolio. For example, if we invest in POs, the purchase price of such securities will be based, in part, on an assumed level of prepayments on the underlying mortgage loan. Because the returns on POs decrease the longer it takes the principal payments on the underlying loans to be paid, a decrease in prepayment rates could decrease our returns on these securities.

Prepayment risk also affects our hedging activities. When an Agency MBS backed by a fixed-rate mortgage or hybrid ARM is acquired with borrowings, we may cap or fix our borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related Agency MBS. If prepayment rates are different than our projections, the term of the related hedging instrument may not match the fixed-rate portion of the security, which could cause us to incur losses.

Because our business may be adversely affected if prepayment rates are different than our projections, we seek to invest in Agency MBS backed by mortgages with well-documented and predictable prepayment histories. To protect against increases in prepayment rates, we invest in Agency MBS backed by mortgages that we believe are less likely to be prepaid. For example, we invest in Agency MBS backed by mortgages (i) with loan balances low enough such that a borrower would likely have little incentive to refinance, (ii) extended to borrowers with credit histories weak enough to not be eligible to refinance their mortgage loans, (iii) that are newly originated fixed-rate or hybrid ARMs or (iv) that have interest rates low enough such that a borrower would likely have little incentive to refinance. To protect against decreases in prepayment rates, we may also invest in Agency MBS backed by mortgages with characteristics opposite to those described above, which would typically be more likely to be refinanced. We may also invest in certain types of structured Agency MBS as a means of mitigating our portfolio-wide prepayment risks. For example, certain tranches of CMOs are less sensitive to increases in prepayment rates, and we may invest in those tranches as a means of hedging against increases in prepayment rates.

Liquidity Management Strategy

Because of our use of leverage, we manage liquidity to meet our lenders’ margin calls ~~using the following measures:~~

·	~~Maintaining cash balances or unencumbered assets well in excess of anticipated margin calls; and~~

·	~~Making~~by maintaining cash balances or unencumbered assets well in excess of anticipated margin calls; and making margin calls on our lenders when we have an excess of collateral pledged against our borrowings.

We also attempt to minimize the number of margin calls we receive by:

·	Deploying capital from our leveraged Agency MBS portfolio to our unleveraged Agency MBS portfolio;

Investing in Agency MBS backed by mortgages that we believe are less likely to be prepaid to decrease the risk of excessive margin calls when monthly prepayments are announced. Prepayments are declared, and the market value of the related security declines, before the receipt of the related cash flows. Prepayment declarations give rise to a temporary collateral deficiency and generally result in margin calls by lenders;

·	Obtaining funding arrangements which defer or waive prepayment-related margin requirements in exchange for payments to the lender tied to the dollar amount of the collateral deficiency and a predetermined interest rate; and

·	Reducing our overall amount of leverage.

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To the extent we are unable to adequately manage our interest rate exposure and are subjected to substantial margin calls, we may be forced to sell assets at an inopportune time which in turn could impair our liquidity and reduce our borrowing capacity and book value.

Management of Orchid

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors and its ~~experienced RMBS~~MBS investment team pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid’s business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid’s board of directors, of which a majority of the members are independent, and is only permitted to perform such functions delegated by Orchid’s Board. Bimini ~~Advisors'~~Advisors’ authority to act on behalf of Orchid ~~Island Capital~~ is at all times limited by the oversight of the Orchid ~~Island Capital~~ board of ~~directors.~~directors and has only such functions and authority as delegated to it.

Bimini Advisors receives a monthly management fee in the amount of:

·	One-twelfth of 1.5% of the first $250 million of the Orchid’s equity, as defined in the management agreement,

·	One-twelfth of 1.25% of the Orchid’s equity that is greater than $250 million and less than or equal to $500 million, and

·	One-twelfth of 1.00% of the Orchid’s equity that is greater than $500 million.

Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf. In addition, Bimini Advisors began allocating to Orchid its pro rata portion of certain overhead costs set forth in the management agreement commencing with the calendar quarter beginning July 1, 2014. Should Orchid terminate the management agreement without cause, it shall pay to Bimini Advisors 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 initial term or automatic renewal term.

~~Taxation Structure~~Tax Status

As a REIT from inception through December 31, 2014, Bimini Capital was not subject to corporate income tax to the extent we currently distributed our taxable income to our shareholders, and complied with other Code requirements for REITs. However, Bimini Capital’s subsidiaries, which were TRSs through December 31, 2014, were subject to corporate income tax on their income. Bimini Capital and its subsidiaries have NOL carryforwards that, subject to various expiration dates, are available to offset any 2015 or future taxable income. See Note 13, Income Taxes.

Bimini Capital’s status as a REIT terminated effective as of January 1, 2015. The failure to qualify as a REIT subjects Bimini Capital’s taxable income to federal and state corporate income taxes at regular corporate rates. However, we believe the NOL carryforwards of Bimini Capital ~~has elected~~and its subsidiaries will be available to offset taxable income, if any, in 2015 and in future periods. Because the REIT-based ownership restrictions in Bimini Capital’s articles of incorporation no longer apply, Bimini Capital may be more likely to experience an “ownership change” under Code Sections 382 and 383, which could severely limit its ability to utilize the remaining NOL carry-forwards against future taxable income. Management is implementing certain internal restructuring transactions that would maximize its ability to utilize the existing federal NOL carryforwards. Also, Bimini Capital is prohibited from again electing to be taxed as a REIT under the federal income tax laws. Qualification as a REIT, and the maintenance of such qualification, will depend upon Bimini Capital’s ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of its gross income, the composition and values of its assets, distribution levels and the concentration of ownership of its capital stock. We believe that Bimini Capital is organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and we intend to continue to operate it in such a manner, but no assurance can be given that we will operate it in a manner so as to remain qualified as a REIT. Events that could cause Bimini Capital to no longer qualify as a REIT under the Code include, but are not limited to a material increase in the revenue attributable to our management of Orchid relative to revenues generated by our MBS portfolio and a significant increase in the value of our TRS in relation to the value of all of Bimini Capital’s assets.until 2020.

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~~As a~~In addition, the loss of Bimini Capital’s REIT status eliminates the income, asset, distribution, and stock ownership requirements applicable to REITs, which will provide the Company with more flexibility in executing its business strategy. Specifically, because Bimini Capital ~~generally~~is no longer required to derive a significant portion of its income from mortgage or other real estate related investments, the Company will ~~not~~have greater flexibility to invest in other types of assets as part of its investing strategy, subject to maintaining compliance with its exclusion from regulation as an investment company under the Investment Company Act. In addition, because Bimini Capital will no longer be subject to ~~U.S. federal income tax~~the REIT distribution requirement, the Company will have greater flexibility to retain earnings to fund future growth.

Investment Company Act Exemption

We operate our business so that we are exempt from registration under the Investment Company Act. We rely on the ~~REIT taxable income that is currently distributed~~exemption provided by Section 3(c)(5)(C) of the Investment Company Act, which applies to companies in the business of purchasing or otherwise acquiring mortgages and other liens on, and interests in, real estate. In order to rely on the exemption provided by Section 3(c)(5)(C), we must maintain at least 55% of our ~~stockholders. Taxable income generated by any new taxable REIT subsidiary (“TRS”)~~assets in qualifying real estate assets. For the purposes of this test, structured Agency MBS are non-qualifying real estate assets. We monitor our portfolio periodically and prior to each investment to confirm that we ~~may form or acquire will be subject~~continue to ~~federal, state and local income tax; Bimini Capital presently has two TRS’s, Bimini Advisors and MortCo. Under~~qualify for the ~~Code, REITs are subject to numerous organizational and operational requirements, including a requirement~~exemption. To qualify for the exemption, we make investments so that ~~they distribute annually~~ at least ~~90%~~55% of ~~their REIT taxable income, determined without regard~~the assets we own consist of qualifying mortgages and other liens on and interests in real estate, which we refer to as qualifying real estate assets, and so that at least 80% of the ~~deduction for dividends paid and excluding any net capital gains. If Bimini Capital fails~~assets we own consist of real estate-related assets, including our qualifying real estate assets.

We treat whole-pool pass-through Agency MBS as qualifying real estate assets based on no-action letters issued by the staff of the SEC. In August 2011, the SEC, through a concept release, requested comments on interpretations of Section 3(c)(5)(C). To the extent that the SEC or its staff publishes new or different guidance with respect to these matters, we may fail to qualify ~~as a REIT~~for this exemption. We manage our pass-through Agency MBS portfolio such that we have sufficient whole-pool pass-through Agency MBS to ensure we maintain our exemption from registration under the Investment Company Act. At present, we generally do not expect that our investments in ~~any calendar year and does not qualify~~structured Agency MBS will constitute qualifying real estate assets but will constitute real estate-related assets for ~~certain statutory relief provisions, its income would be subject to U.S. federal income tax, and it would likely be precluded from qualifying for treatment as a REIT until~~purposes of the fifth calendar year following the year in which it failed to qualify. Even if Bimini Capital qualifies as a REIT, it may still be subject to certain federal, state and local taxes on its income and assets and to U.S. federal income and excise taxes on its undistributed income.Investment Company Act.

Employees

As of December 31, ~~2014,~~2015, we had 67 full-time employees.

Competition

Our net income largely depends on our ability to acquire Agency MBS at favorable spreads over our borrowing costs. When we invest in Agency MBS and other investment assets, we compete with a variety of institutional investors, including ~~other~~mortgage REITs, insurance companies, mutual funds, pension funds, investment banking firms, banks and other financial institutions that invest in the same types of assets, the Federal Reserve Bank and other governmental entities or government sponsored entities. Many of these investors have greater financial resources and access to lower costs of capital than we do. The existence of these competitive entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of mortgage related securities, resulting in higher prices and lower yields on assets.

~~Distributions~~

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To maintain a qualification as a REIT, Bimini Capital must distribute substantially all of our REIT taxable income (as defined in the Code) to our stockholders for each year. We intend to distribute all such taxable income to satisfy such requirement.

Available Information

Our investor relations website is www.biminicapital.com. We make available on the website under "Financial Information/SEC filings," free of charge, our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any other reports (including any amendments to such reports) as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Information on our website, however, is not part of this Annual Report on Form 10-K. All reports filed with the SEC may also be read and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Further information regarding the operation of the public reference room may be obtained by calling 1-800-SEC-0330. In addition, all of our filed reports can be obtained at the SEC’s website at www.sec.gov.

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ITEM 1A. RISK FACTORS.

You should carefully consider the risks described below and all other information contained in this Annual Report on Form 10-K, including our annual consolidated financial statements and related notes thereto, before making an investment decision regarding our common stock. Our business, financial condition or results of operations could be harmed by any of these risks. Similarly, these risks could cause the market price of our common stock to decline and you might lose all or part of your investment. Our forward-looking statements in this annual report are subject to the following risks and uncertainties. Our actual results could differ materially from those anticipated by our forward-looking statements as a result of the risk factors below.

Risks Related to Our Business

Increases in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses and materially adversely affect our ability to pay distributions to our stockholders.

Under a normal yield curve, an investment in Agency MBS will decline in value if interest rates increase. In addition, net interest income could decrease if the yield curve becomes inverted or flat. While Fannie Mae, Freddie Mac or Ginnie Mae guarantees of the principal and interest payments related to the Agency MBS we own, these guarantees do not protect us from declines in market value caused by changes in interest rates. Declines in the market value of our investments may ultimately result in losses to us, which may reduce earnings and negatively affect our ability to pay distributions to our stockholders.

Significant increases in both long-term and short-term interest rates poses a substantial risk associated with our investment in Agency MBS. If long-term rates were to increase significantly, the market value of our Agency MBS would decline, and the duration and weighted average life of the investments would increase. We could realize a loss if the securities were sold. At the same time, an increase in short-term interest rates would increase the amount of interest owed on our repurchase agreements used to finance the purchase of Agency MBS, which would decrease cash available for distribution to our stockholders. Using this business model, we are particularly susceptible to the effects of an inverted yield curve, where short-term rates are higher than long-term rates. Although rare in a historical context, many countries in Europe have experienced inverted yield curves in recent months. Given the volatile nature of the U.S. economy since the end of the third round of quantitative easing (“QE3”), and the Federal Reserve’s recent increase in short-term interest rates, there can be no guarantee that the yield curve will not become and/or remain inverted. If this occurs, it could result in a decline in the value of our Agency MBS, our business, financial position and results of operations and our ability to pay distributions to our stockholders could be materially adversely affected.

An increase in interest rates may also cause a decrease in the volume of newly issued, or investor demand for, Agency MBS, which could materially adversely affect our ability to acquire assets that satisfy our investment objectives and our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Rising interest rates generally reduce the demand for consumer credit, including mortgage loans, due to the higher cost of borrowing. A reduction in the volume of mortgage loans may affect the volume of Agency MBS available to us, which could affect our ability to acquire assets that satisfy our investment objectives. Rising interest rates may also cause Agency MBS that were issued prior to an interest rate increase to provide yields that exceed prevailing market interest rates. If rising interest rates cause us to be unable to acquire a sufficient volume of Agency MBS or Agency MBS with a yield that exceeds our borrowing costs, our ability to satisfy our investment objectives and to generate income and pay dividends, our business, financial condition and results of operations and our ability to pay distributions to our stockholders may be materially adversely affected.

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Interest rate mismatches between our Agency MBS and our borrowings may reduce our net interest margin during periods of changing interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Our portfolio includes Agency MBS backed by ARMs, hybrid ARMs and fixed-rate mortgages, and the mix of these securities in the portfolio may be increased or decreased over time. Additionally, the interest rates on ARMs and hybrid ARMs may vary over time based on changes in a short-term interest rate index, of which there are many.

We finance our acquisitions of pass-through Agency MBS with short-term financing. During periods of rising short-term interest rates, the income we earn on these securities will not change (with respect to Agency MBS backed by fixed-rate mortgage loans) or will not increase at the same rate (with respect to Agency MBS backed by ARMs and hybrid ARMs) as our related financing costs, which may reduce our net interest margin or result in losses.

Adverse developments in the broader residential mortgage market may materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

The residential mortgage market in the United States has experienced a variety of difficulties and changed economic conditions, including defaults, credit losses and liquidity concerns over the past several years. In addition, certain commercial banks, investment banks and insurance companies have announced extensive losses from exposure to the residential mortgage market. These losses have reduced financial industry capital, leading to reduced liquidity for some institutions. These factors have impacted investor perception of the risk associated with real estate-related assets, including Agency MBS. As a result, values for MBS, including some Agency MBS and other AAA-rated MBS assets, have been negatively impacted at times. Further increased volatility and deterioration in the broader residential mortgage and MBS markets may adversely affect the performance and market value of the Agency MBS in which we invest.

We rely on our Agency MBS as collateral for our financings. Any decline in their value, or perceived market uncertainty about their value, would likely make it difficult for us to obtain financing on favorable terms or at all or maintain our compliance with terms of any financing arrangements already in place. Additionally, we have elected to account for our investment in MBS under the fair value option and, therefore, such investment will be reported on our consolidated financial statements at fair value with unrealized gains or losses included in earnings. If market conditions result in a decline in the value of our Agency MBS, our business, financial position and results of operations and our ability to pay distributions to our stockholders could be materially adversely affected.

~~An increase~~We invest in ~~interest rates~~structured Agency MBS, including CMOs, IOs, IIOs and POs. Although structured Agency MBS are generally subject to the same risks as our pass-through Agency MBS, certain types of risks may ~~cause a decrease~~be enhanced depending on the type of structured Agency MBS in ~~the volume of newly issued, or investor demand for, Agency RMBS,~~ which could materially adversely affect our ability to acquire assets that satisfy our investment objectives and our business, financial condition and results of operations and our ability to pay distributions to our stockholders.we invest.

Rising interest rates generally reduce the demand for consumer credit, including mortgage loans, due to the higher cost of borrowing. A reduction in the volume of mortgage loans may affect the volume ofThe structured Agency MBS ~~available~~in which we invest are securitizations (i) issued by Fannie Mae, Freddie Mac or Ginnie Mae, (ii) collateralized by Agency MBS and (iii) divided into various tranches that have different characteristics (such as different maturities or different coupon payments). These securities may carry greater risk than an investment in pass-through Agency MBS. For example, certain types of structured Agency MBS, such as IOs, IIOs and POs, are more sensitive to ~~us, which could affect our ability~~prepayment risks than pass-through Agency MBS. If we were to ~~acquire assets~~invest in structured Agency MBS that ~~satisfy our investment objectives. If rising interest rates cause us~~were more sensitive to ~~be unable~~prepayment risks relative to ~~acquire a sufficient volume~~other types of structured Agency MBS or pass-through Agency MBS, ~~with a yield that exceeds~~we may increase our borrowing costs, our ability to satisfy our investment objectives and to generate income and pay dividends, our business, financial condition and results of operations and our ability to pay distributions to our stockholders may be materially adversely affected.portfolio-wide prepayment risk.

~~We may incur increased borrowing costs, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.~~

Our borrowing costs under repurchase agreements and junior subordinated debt are generally variable and correspond to short-term interest rates, such as the London Interbank Offered Rate, or LIBOR, or a short-term U.S. Treasury index, plus or minus a margin. The margins on these borrowings over or under short-term interest rates may vary depending upon a number of factors, including, without limitation:

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·	~~the movement of interest rates;~~

·	~~the availability of financing in the market; and~~

·	~~the value and liquidity of our Agency RMBS.~~

If the interest rates on these repurchase agreements increase, our business, financial condition and results of operations and our ability to pay distributions to our stockholders could be materially adversely affected.

We finance our acquisitions of PT Agency MBS with short-term financing. During periods of rising short-term interest rates, the income we earn on these securities will not change (with respect to Agency MBS backed by fixed-rate mortgage loans) or will not increase at the same rate (with respect to Agency MBS backed by ARMs and hybrid ARMs) as our related financing costs, which may reduce our net interest margin or result in losses.

Separate legislation has been introduced in both houses of the U.S. Congress, which would, among other things, revoke the charters of Fannie Mae and Freddie Mac, which could materially adversely affect us if these proposed laws were enacted. We cannot predict the impact, if any, on our earnings or cash available for distribution to our stockholders of the ~~FHFA’s~~Federal Housing Finance Agency’s (the “FHFA”) proposed revisions to Fannie Mae’s, Freddie Mac’s and Ginnie Mae’s existing infrastructures to align the standards and practices of the three entities.

On June 25, 2013, a bipartisan group of senators introduced the Housing Finance Reform and Taxpayer Protection Act of 2013, which may serve as a catalyst for congressional discussion on the reform of Fannie Mae and Freddie Mac, to the U.S. Senate. On July 11, 2013, members of the House Committee on Financial Services introduced the Protecting American Taxpayers and Homeowners Act to the U.S. House of Representatives.

While the two bills that have been introduced are distinguishable in many respects, they have some notable commonalities. Both bills call for the revocation of the charters of Fannie Mae and Freddie Mac and seek to increase the opportunities for private capital to participate in, and consequently bear the risk of loss in connection with, government-guaranteed mortgage back securities. Both bills also have considerable support in their respective houses of Congress, which suggests that efforts to reform and possibly eliminate Fannie Mae and Freddie Mac may be gaining momentum.

The passage of any new legislation affecting Fannie Mae and Freddie Mac may create market uncertainty and reduce the actual or perceived credit quality of securities issued or guaranteed by the U.S. government through a new or existing successor entity to Fannie Mae and Freddie Mac. If the charters of Fannie Mae and Freddie Mac were revoked, it is unclear what effect, if any, this would have on the value of the existing Fannie Mae and Freddie Mac Agency MBS. It is also possible that the above-referenced proposed legislation, if made law, could adversely impact the market for securities issued or guaranteed by the U.S. government and the spreads at which they trade. The foregoing could materially adversely affect the pricing, supply, liquidity and value of our target assets and otherwise materially adversely affect our business, operations and financial condition.

~~-13-~~

On May 13, 2014, the FHFA released its updated whitepaper titled 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac, which set forth three goals for the next phase of the Fannie Mae and Freddie Mac conservatorships. These three goals are to (i) maintain foreclosure prevention activities and credit availability for new and refinanced mortgages, (ii) reduce taxpayer risk through increasing the role of private capital in the mortgage market, and (iii) build a new single-family securitization infrastructure for use by Fannie Mae and Freddie Mac and adaptable for use by other participants in the secondary market in the future. The FHFA refers to such an infrastructure as a common securitization platform, or CSP.

In September 2015, the FHFA released an update on the CSP, detailing progress made in the development of a new infrastructure for the securitization of single-family mortgages by Fannie Mae and Freddie Mac. The ~~first goal is to refine and improve foreclosure prevention and servicing initiatives for distressed borrowers. The second goal is to expand~~update includes details on the ~~credit risk transfer transactions~~organizational structure of Common Securitization Solutions, LLC, a joint venture company that ~~increase the participation of private capital in assuming credit risk associated with the secondary mortgage market. The third goal is to replace the current, outdated infrastructures of~~was established by Fannie Mae and Freddie Mac ~~with a common, more efficient securitization infrastructure~~to lead the work on this project. In addition, the update looks ahead to the anticipated announcement in 2016 of an implementation date for the initial software release that ~~aligns the standards and practices~~will allow use of the ~~two entities, beginning with core functions performed~~CSP by Freddie Mac, followed by the second software release that will enable both ~~entities such as issuance, master servicing, bond administration, collateral management~~Freddie Mac and ~~data integration.~~Fannie Mae to use the CSP to issue single mortgage-backed securities.

Furthermore, in October 2014, FHFA director Watt announced a number of general policy initiatives by the FHFA, including restoring a program that allows Fannie Mae and Freddie Mac to guarantee loans with down payments as low as 3%. Director Watt also said that the FHFA was taking steps to bring certainty to the circumstances under which Fannie Mae and Freddie Mac will require originators to repurchase defaulted mortgages that were later discovered to have underlying defects. We cannot predict the likelihood for the enactment, timing or final content of housing reform legislation.

The FHFA recognizes that there are a number of impediments to their goals which may or may not be surmountable, such as the absence of any significant secondary mortgage market mechanisms beyond Fannie Mae, Freddie Mac and Ginnie Mae, and that their proposals are in the formative stages. As a result, it is unclear if the proposals will be enacted. If such proposals are enacted, it is unclear how closely what is enacted will resemble the proposals from the FHFA ~~White Paper~~ or what the effects of the enactment will be in terms of our net asset value, earnings or cash available for distribution to our stockholders.

We invest in structured Agency MBS, including CMOs, IOs, IIOs and POs. Although structured Agency MBS are generally subject to the same risks as our pass-through Agency MBS, certain types of risks may be enhanced depending on the type of structured Agency MBS in which we invest.

The structured Agency MBS in which we invest are securitizations (i) issued by Fannie Mae, Freddie Mac or Ginnie Mae, (ii) collateralized by Agency MBS and (iii) divided into various tranches that have different characteristics (such as different maturities or different coupon payments). These securities may carry greater risk than an investment in pass-through Agency MBS. For example, certain types of structured Agency MBS, such as IOs, IIOs and POs, are more sensitive to prepayment risks than pass-through Agency MBS. If we were to invest in structured Agency MBS that were more sensitive to prepayment risks relative to other types of structured Agency MBS or pass-through Agency MBS, we may increase our portfolio-wide prepayment risk.

~~-14-~~-16-

Increased levels of prepayments on the mortgages underlying our Agency MBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

In the case of residential mortgages, there are seldom any restrictions on borrowers’ ability to prepay their loans. Prepayment rates generally increase when interest rates fall and decrease when interest rates rise. Prepayment rates also may be affected by other factors, including, without limitation, conditions in the housing and financial markets, governmental action, general economic conditions and the relative interest rates on ARMs, hybrid ARMs and fixed-rate mortgage loans. With respect to PT Agency MBS, faster-than-expected prepayments could also materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders in various ways, including the following:

A portion of our PT Agency MBS backed by ARMs and hybrid ARMs may initially bear interest at rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin. If a PT MBS backed by ARMs or hybrid ARMs is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that Agency MBS while it was less profitable and lost the opportunity to receive interest at the fully-indexed rate over the remainder of its expected life.

·	If we are unable to acquire new Agency MBS to replace the prepaid Agency MBS, our returns on capital may be lower than if we were able to quickly acquire new Agency MBS.

When we acquire structured Agency MBS, we anticipate that the underlying mortgages will prepay at a projected rate, generating an expected yield. When the prepayment rates on the mortgages underlying our structured Agency MBS are higher than expected, our returns on those securities may be materially adversely affected. For example, the value of our IOs and IIOs are extremely sensitive to prepayments because holders of these securities do not have the right to receive any principal payments on the underlying mortgages. Therefore, if the mortgage loans underlying our IOs and IIOs are prepaid, such securities would cease to have any value, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

On January 8, 2015, the FHFA announced they would reduce the mortgage insurance premium (“MIP”) from 135 basis points to 85 basis points. The MIP fee represents an insurance premium paid by borrowers to defer a portion the cost to the FHA for the guarantee of the loans. The change was to take effect immediately and was designed to enhance affordability of mortgage loans for eligible borrowers. The effect on securities owned by the Company is to reduce the refinancing threshold to the borrower and to potentially increase prepayment speeds going forward.

While we seek to minimize prepayment risk, we must balance prepayment risk against other risks and the potential returns of each investment. No strategy can completely insulate us from prepayment or other such risks.

A decrease in prepayment rates on the mortgages underlying our Agency MBS might decrease net interest income or result in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Certain of our structured Agency MBS may be adversely affected by a decrease in prepayment rates. For example, because POs are similar to zero-coupon bonds, our expected returns on such securities will be contingent on our receiving the principal payments of the underlying mortgage loans at expected intervals that assume a certain prepayment rate. If prepayment rates are lower than expected, we will not receive principal payments as quickly as we anticipated and, therefore, our expected returns on these securities will be adversely affected, which, in turn, could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

~~-15-~~-17-

Interest rate caps on the ARMs and hybrid ARMs backing our Agency MBS may reduce our net interest margin during periods of rising interest rates, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

ARMs and hybrid ARMs are typically subject to periodic and lifetime interest rate caps. Periodic interest rate caps limit the amount an interest rate can increase during any given period. Lifetime interest rate caps limit the amount an interest rate can increase through the maturity of the loan. Our borrowings typically are not subject to similar restrictions. Accordingly, in a period of rapidly increasing interest rates, our financing costs could increase without limitation while caps could limit the interest we earn on the ARMs and hybrid ARMs backing our Agency MBS. This problem is magnified for ARMs and hybrid ARMs that are not fully indexed because such periodic interest rate caps prevent the coupon on the security from fully reaching the specified rate in one reset. Further, some ARMs and hybrid ARMs may be subject to periodic payment caps that result in a portion of the interest being deferred and added to the principal outstanding. As a result, we may receive less cash income on Agency MBS backed by ARMs and hybrid ARMs than necessary to pay interest on our related borrowings. Interest rate caps on Agency MBS backed by ARMs and hybrid ARMs could reduce our net interest margin if interest rates were to increase beyond the level of the caps, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Failure to procure adequate repurchase agreement financing, or to renew or replace existing repurchase agreement financing as it matures, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We intend to maintain master repurchase agreements with several counterparties. We cannot assure you that any, or sufficient, repurchase agreement financing will be available to us in the future on terms that are acceptable to us. Any decline in the value of Agency MBS, or perceived market uncertainty about their value, would make it more difficult for us to obtain financing on favorable terms or at all, or maintain our compliance with the terms of any financing arrangements already in place. We may be unable to diversify the credit risk associated with our lenders. In the event that we cannot obtain sufficient funding on acceptable terms, our business, financial condition and results of operations and our ability to pay distributions to our stockholders may be materially adversely effected.

Furthermore, because we intend to rely primarily on short-term borrowings to fund our MBS, our ability to achieve our investment objective will depend not only on our ability to borrow money in sufficient amounts and on favorable terms, but also on our ability to renew or replace on a continuous basis our maturing short-term borrowings. If we are not able to renew or replace maturing borrowings, we will have to sell some or all of our assets, possibly under adverse market conditions. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk.

-18-

Adverse market developments could cause our lenders to require us to pledge additional assets as collateral. If our assets were insufficient to meet these collateral requirements, we might be compelled to liquidate particular assets at inopportune times and at unfavorable prices, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Adverse market developments, including a sharp or prolonged rise in interest rates, a change in prepayment rates or increasing market concern about the value or liquidity of one or more types of Agency MBS, might reduce the market value of our portfolio, which might cause our lenders to initiate margin calls. A margin call means that the lender requires us to pledge additional collateral to re-establish the ratio of the value of the collateral to the amount of the borrowing. The specific collateral value to borrowing ratio that would trigger a margin call is not set in the master repurchase agreements and not determined until we engage in a repurchase transaction under these agreements. Our fixed-rate Agency MBS generally are more susceptible to margin calls as increases in interest rates tend to more negatively affect the market value of fixed-rate securities. If we are unable to satisfy margin calls, our lenders may foreclose on our collateral. The threat or occurrence of a margin call could force us to sell either directly or through a foreclosure our Agency MBS under adverse market conditions. Because of the significant leverage we expect to have, we may incur substantial losses upon the threat or occurrence of a margin call, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Hedging against interest rate exposure may not completely insulate us from interest rate risk and could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

We may enter into interest rate cap or swap agreements or pursue other hedging strategies, including the purchase of puts, calls or other options and futures contracts in order to hedge the interest rate risk of our portfolio. In general, our hedging strategy depends on our view of our entire portfolio consisting of assets, liabilities and derivative instruments, in light of prevailing market conditions. We could misjudge the condition of our investment portfolio or the market. Our hedging activity will vary in scope based on the level and volatility of interest rates and principal prepayments, the type of Agency MBS we hold and other changing market conditions. Hedging may fail to protect or could adversely affect us because, among other things:

·	hedging can be expensive, particularly during periods of rising and volatile interest rates;

·	available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;

·	the duration of the hedge may not match the duration of the related liability;

·	certain types of hedges may expose us to risk of loss beyond the fee paid to initiate the hedge;

·	the credit quality of the counterparty on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and

·	the counterparty in the hedging transaction may default on its obligation to pay.

There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Alternatively, we may fail to properly assess a risk to our investment portfolio or may fail to recognize a risk entirely, leaving us exposed to losses without the benefit of any offsetting hedging activities. The derivative financial instruments we select may not have the effect of reducing our interest rate risk. The nature and timing of hedging transactions may influence the effectiveness of these strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. In addition, hedging activities could result in losses if the event against which we hedge does not occur.

Because of the foregoing risks, our hedging activity could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

-19-

Our use of certain hedging techniques may expose us to counterparty risks.

To the extent that our hedging instruments are not traded on regulated exchanges, guaranteed by an exchange or its clearinghouse, or regulated by any U.S. or foreign governmental authorities, there may not be requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable statutory and commodity and other regulatory requirements and, depending on the domicile of the counterparty, applicable international requirements. Consequently, if any of these issues causes a counterparty to fail to perform under a derivative agreement we could incur a significant loss.

For example, if a counterparty under an interest rate swaption agreement that we enter into as part of our hedging strategy cannot perform under the terms of the interest rate swaption agreement, we may not receive payments due under that agreement, and, thus, we may lose any potential benefit associated with the interest rate swaption. Additionally, we may also risk the loss of any collateral we have pledged to secure our obligations under these swaption agreements if the counterparty becomes insolvent or files for bankruptcy. Similarly, if an interest rate swaption counterparty fails to perform under the terms of the interest rate swaption agreement, in addition to not being able to exercise or otherwise cash settle the agreement, we could also incur a loss for the premium paid for that swaption.

We rely on analytical models and other data to analyze potential asset acquisition and disposition opportunities and to manage our portfolio. Such models and other data may be incorrect, misleading or incomplete, which could cause us to purchase assets that do not meet our expectations or to make asset management decisions that are not in line with our strategy.

We rely on analytical models and other data supplied by third parties. These models and data may be used to value assets or potential asset acquisitions and dispositions and in connection with our asset management activities. If our models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon could expose us to potential risks.

Our reliance on models and data may induce us to purchase certain assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging activities that are based on faulty models and data may prove to be unsuccessful.

Some models, such as prepayment models, may be predictive in nature. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses. In addition, the predictive models used by us may differ substantially from those models used by other market participants, resulting in valuations based on these predictive models that may be substantially higher or lower for certain assets than actual market prices. Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in home prices, or deep economic recessions or depressions), such models must employ greater degrees of extrapolation and are therefore more speculative and less reliable.

All valuation models rely on correct market data input. If incorrect market data is entered into even a well-founded valuation model, the resulting valuations will be incorrect. However, even if market data is inputted correctly, “model prices” will often differ substantially from market prices, especially for securities with complex characteristics or whose values are particularly sensitive to various factors. If our market data inputs are incorrect or our model prices differ substantially from market prices, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected.

~~-16-~~-20-

Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed. As a result, the values of some of our assets are uncertain.

While in many cases our determination of the fair value of our assets is based on valuations provided by third-party dealers and pricing services, we can and do value assets based upon our judgment, and such valuations may differ from those provided by third-party dealers and pricing services. Valuations of certain assets are often difficult to obtain or are unreliable. In general, dealers and pricing services heavily disclaim their valuations. Additionally, dealers may claim to furnish valuations only as an accommodation and without special compensation, and so they may disclaim any and all liability for any direct, incidental or consequential damages arising out of any inaccuracy or incompleteness in valuations, including any act of negligence or breach of any warranty. Depending on the complexity and illiquidity of an asset, valuations of the same asset can vary substantially from one dealer or pricing service to another. The valuation process during times of market distress can be particularly difficult and unpredictable and during such time the disparity of valuations provided by third-party dealers can widen.

Our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected if our fair value determinations of these assets were materially higher than the values that would exist if a ready market existed for these assets.

Because the assets that we acquire might experience periods of illiquidity, we might be prevented from selling our Agency MBS at favorable times and prices, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Agency MBS generally experience periods of illiquidity. Such conditions are more likely to occur for structured Agency MBS because such securities are generally traded in markets much less liquid than the PT Agency MBS market. As a result, we may be unable to dispose of our Agency MBS at advantageous times and prices or in a timely manner. The lack of liquidity might result from the absence of a willing buyer or an established market for these assets as well as legal or contractual restrictions on resale. The illiquidity of Agency MBS could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Under normal market conditions, we generally expect our leverage ratio to be less than 12 to 1, although at times our borrowings may be above this level. We incur this indebtedness by borrowing against a substantial portion of the market value of our PT Agency MBS and a portion of our structured Agency MBS. Our total indebtedness, however, is not expressly limited by our policies and will depend on our prospective lenders’ estimates of the stability of our portfolio’s cash flow. As a result, there is no limit on the amount of leverage that we may incur. We face the risk that we might not be able to meet our debt service obligations or a lender’s margin requirements from our income and, to the extent we cannot, we might be forced to liquidate some of our Agency MBS at unfavorable prices. Our use of leverage could materially adversely affect our business, financial condition and results of operation and our ability to pay distributions to our stockholders. For ~~example:~~example, our repurchase agreement borrowings are secured by our PT Agency MBS and may be secured by a portion of our structured Agency MBS under repurchase agreements. A decline in the market value of the PT Agency MBS or structured Agency MBS used to secure these debt obligations could limit our ability to borrow or result in lenders requiring us to pledge additional collateral to secure our borrowings. In that situation, we could be required to sell Agency MBS under adverse market conditions in order to obtain the additional collateral required by the lender. If these sales are made at prices lower than the carrying value of the Agency MBS, we would experience losses.

our repurchase agreement borrowings are secured by our PT Agency MBS and may be secured by a portion of our structured Agency MBS under repurchase agreements. A decline in the market value of the PT Agency MBS or structured Agency MBS used to secure these debt obligations could limit our ability to borrow or result in lenders requiring us to pledge additional collateral to secure our borrowings. In that situation, we could be required to sell Agency MBS under adverse market conditions in order to obtain the additional collateral required by the lender. If these sales are made at prices lower than the carrying value of the Agency MBS, we would experience losses.

to the extent we are compelled to liquidate qualifying real estate assets to repay debts, our compliance with the REIT rules regarding our assets and our sources of gross income could be negatively affected, which could jeopardize our qualification as a REIT. Losing our REIT qualification would cause us to be subject to U.S. federal income tax (and any applicable state and local taxes) on all of our income and would decrease profitability and cash available for distributions to stockholders.

~~-17-~~

If we experience losses as a result of our use of leverage, such losses could materially adversely affect our business, results of operations and financial condition and our ability to make distributions to our stockholders.

~~-18-~~-21-

Our use of repurchase agreements may give our lenders greater rights in the event that either we or any of our lenders file for bankruptcy, which may make it difficult for us to recover our collateral in the event of a bankruptcy filing.

Our borrowings under repurchase agreements may qualify for special treatment under the bankruptcy code, giving our lenders the ability to avoid the automatic stay provisions of the bankruptcy code and to take possession of and liquidate our collateral under the repurchase agreements without delay if we file for bankruptcy. Furthermore, the special treatment of repurchase agreements under the bankruptcy code may make it difficult for us to recover our pledged assets in the event that any of our lenders files for bankruptcy. Thus, the use of repurchase agreements exposes our pledged assets to risk in the event of a bankruptcy filing by either our lenders or us. In addition, if the lender is a broker or dealer subject to the Securities Investor Protection Act of 1970, or an insured depository institution subject to the Federal Deposit Insurance Act, our ability to exercise our rights to recover our investment under a repurchase agreement or to be compensated for any damages resulting from the lender’s insolvency may be further limited by those statutes.

If we fail to maintain our relationship with AVM, L.P. or if we do not establish relationships with other repurchase agreement trading, clearing and administrative service providers, our business, financial condition and results of operations and our ability to pay distributions to our stockholders could be materially adversely affected.

We have engaged AVM, L.P. to provide us with certain repurchase agreement trading, clearing and administrative services. If we are unable to maintain our relationship with AVM, L.P. or we are unable to establish successful relationships with other repurchase agreement trading, clearing and administrative service providers, our business, financial condition and results of operations and our ability to pay distributions to our stockholders could be materially adversely affected.

If our lenders default on their obligations to resell the Agency MBS back to us at the end of the repurchase transaction term, or if the value of the Agency MBS has declined by the end of the repurchase transaction term or if we default on our obligations under the repurchase transaction, we will lose money on these transactions, which, in turn, may materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

When we engage in a repurchase transaction, we initially sell securities to the financial institution under one of our master repurchase agreements in exchange for cash, and our counterparty is obligated to resell the securities to us at the end of the term of the transaction, which is typically from 24 to 90 days but may be up to 364 days or more. The cash we receive when we initially sell the securities is less than the value of those securities, which is referred to as the haircut. Many financial institutions from which we may obtain repurchase agreement financing have increased their haircuts in the past and may do so again in the future. If these haircuts are increased, we will be required to post additional cash or securities as collateral for our Agency MBS. If our counterparty defaults on its obligation to resell the securities to us, we would incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the securities). We would also lose money on a repurchase transaction if the value of the underlying securities had declined as of the end of the transaction term, as we would have to repurchase the securities for their initial value but would receive securities worth less than that amount. Any losses we incur on our repurchase transactions could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

If we default on one of our obligations under a repurchase transaction, the counterparty can terminate the transaction and cease entering into any other repurchase transactions with us. In that case, we would likely need to establish a replacement repurchase facility with another financial institution in order to continue to leverage our portfolio and carry out our investment strategy. There is no assurance we would be able to establish a suitable replacement facility on acceptable terms or at all.

~~-19-~~-22-

We have issued long-term debt to fund our operations which can increase the volatility of our earnings and stockholders’ equity.

In October 2005, Bimini Capital completed a private offering of trust preferred securities of Bimini Capital Trust II, of which $26.8 million are still outstanding. The Company must pay interest on these junior subordinated notes on a quarterly basis at a rate equal to current three month LIBOR rate plus 3.5%. To the extent the Company’s does not generate sufficient earnings to cover the interest payments on the debt, our earnings and stockholders’ equity may be negatively impacted.

The Company considers the junior subordinated notes as part of its long-term capital base. Therefore, for purposes of all disclosure in this report concerning our capital or leverage, the Company considers both stockholders’ equity and the $26.8 million of junior subordinated notes to constitute capital.

The Company has also elected to account for its investments in MBS under the fair value option and, therefore, will report MBS on our financial statements at fair value with unrealized gains and losses included in earnings. Changes in the value of the MBS do not impact the outstanding balance of the junior subordinated notes but rather our stockholders’ equity. Therefore, changes in the value of our MBS will be absorbed solely by our stockholders’ equity. Because our stockholders equity is small in relation to our total capital, such changes may result in significant changes in our stockholders’ equity.

To the extent consistent with qualifying and maintaining our qualification as a REIT, we may enter into interest rate cap or swap agreements or pursue other hedging strategies, including the purchase of puts, calls or other options and futures contracts in order to hedge the interest rate risk of our portfolio. In general, our hedging strategy depends on our view of our entire portfolio consisting of assets, liabilities and derivative instruments, in light of prevailing market conditions. We could misjudge the condition of our investment portfolio or the market. Our hedging activity will vary in scope based on the level and volatility of interest rates and principal prepayments, the type of Agency MBS we hold and other changing market conditions. Hedging may fail to protect or could adversely affect us because, among other things:

·	~~hedging can be expensive, particularly during periods of rising and volatile interest rates;~~

·	~~available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;~~

·	~~the duration of the hedge may not match the duration of the related liability;~~

·	~~certain types of hedges may expose us to risk of loss beyond the fee paid to initiate the hedge;~~

·	the amount of gross income that a REIT may earn from certain hedging transactions, other than hedging transactions that satisfy certain requirements of the Internal Revenue Code, is limited by federal income tax provisions governing REITs;

·	~~the credit quality of the counterparty on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and~~

·	~~the counterparty in the hedging transaction may default on its obligation to pay.~~

~~-20-~~

~~Our use of certain hedging techniques may expose us to counterparty risks.~~

Clearing facilities or exchanges upon which some of our hedging instruments are traded may increase margin requirements on our hedging instruments in the event of adverse economic developments.

In response to events having or expected to have adverse economic consequences or which create market uncertainty, clearing facilities or exchanges upon which some of our hedging instruments, such as Eurodollar futures contracts, are traded may require us to post additional collateral against our hedging instruments. In the event that future adverse economic developments or market uncertainty result in increased margin requirements for our hedging instruments, it could materially adversely affect our liquidity position, business, financial condition and results of operations.

We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments. ~~In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders.~~

Our Board of Directors has the authority to change our investment strategy or asset allocation at any time without notice to or consent from our stockholders. To the extent that our investment strategy changes in the future, we may make investments that are different from, and possibly riskier than, the investments described in this annual report. A change in our investment strategy may increase our exposure to interest rate and real estate market fluctuations. Furthermore, a change in our asset allocation could result in our allocating assets in a different manner than as described in this annual report.

In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to qualify as a REIT. These changes could materially adversely affect our business, financial condition, results of operations, the market value of our common stock and our ability to make distributions to our stockholders.

~~-21-~~-23-

Competition might prevent us from acquiring Agency MBS at favorable yields, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

We operate in a highly competitive market for investment opportunities. Our net income largely depends on our ability to acquire Agency MBS at favorable spreads over our borrowing costs. In acquiring Agency MBS, we compete with a variety of institutional investors, including ~~other~~mortgage REITs, investment banking firms, savings and loan associations, banks, insurance companies, mutual funds, other lenders, other entities that purchase Agency MBS, the Federal Reserve, other governmental entities and government-sponsored entities, many of which have greater financial, technical, marketing and other resources than we do. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us, such as funding from the U.S. Government. Additionally, many of our competitors are ~~not subject to REIT tax compliance or~~ required to maintain an exemption from the Investment Company Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments. Furthermore, competition for investments in Agency MBS may lead the price of such investments to increase, which may further limit our ability to generate desired returns. As a result, we may not be able to acquire sufficient Agency MBS at favorable spreads over our borrowing costs, which would materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

We are highly dependent on communications and information systems operated by third parties, and systems failures could significantly disrupt our business, which may, in turn, adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

Our business is highly dependent on communications and information systems that allow us to monitor, value, buy, sell, finance and hedge our investments. These systems are operated by third parties and, as a result, we have limited ability to ensure their continued operation. In the event of a systems failure or interruption, we will have limited ability to affect the timing and success of systems restoration. Any failure or interruption of our systems could cause delays or other problems in our securities trading activities, including Agency MBS trading activities, which could have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

We depend primarily on two individuals to operate our business, and the loss of one or both of such persons could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

We depend substantially on two individuals, Robert E. Cauley, our Chairman and Chief Executive Officer, and G. Hunter Haas, our President, Chief Investment Officer and Chief Financial Officer, to manage our business. We depend on the diligence, experience and skill of Mr. Cauley and Mr. Haas in managing all aspects of our business, including the selection, acquisition, structuring and monitoring of securities portfolios and associated borrowings. Although we have entered into contracts and compensation arrangements with Mr. Cauley and Mr. Haas that encourage their continued employment, those contracts may not prevent either Mr. Cauley or Mr. Haas from leaving our company. The loss of either of them could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

If we issue debt securities, our operations may be restricted and we will be exposed to additional risk.

If we decide to issue debt securities in the future, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our Class A Common Stock. We, and indirectly our stockholders, will bear the cost of issuing and servicing such securities. Holders of debt securities may be granted specific rights, including but not limited to, the right to hold a perfected security interest in certain of our assets, the right to accelerate payments due under the indenture, rights to restrict dividend payments, and rights to approve the sale of assets. Such additional restrictive covenants and operating restrictions could have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

~~-22-~~-24-

Adoption of the Basel III standards and other proposed supplementary regulatory standards may negatively impact our access to financing or affect the terms of our future financing arrangements.

In response to various financial crises and the volatility of financial markets, the Basel Committee on Banking Supervision, an international body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States, adopted the Basel III standards several years ago. The final package of Basel III reforms was approved by the G20 leaders in November 2010. In January 2013, the Basel Committee agreed to delay implementation of the Basel III standards and expanded the scope of assets permitted to be included in a bank's liquidity measurement. In 2014, the Basel Committee announced that it would propose additional changes to capital requirements for banks over the next few years. U.S. regulators have elected to implement substantially all of the Basel III standards. These new standards, including the Supplementary Leverage Ratio imposed by the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, which will be fully phased in by 2019, will require banks to hold more capital, predominantly in the form of common equity, than under the current capital framework. These increased bank capital requirements may constrain our ability to obtain attractive future financings and increase the cost of such financings if they are obtained.

In April 2014, U.S. regulators adopted rules requiring enhanced supplementary leverage ratio standards beginning in January 2018, which would impose capital requirements more stringent than those of the Basel III standards for the most systematically significant banking organizations in the U.S. Adoption and implementation of the Basel III standards and the supplemental regulatory standards adopted by U.S. regulators may negatively impact our access to financing or affect the terms of our future financing arrangements.

MortCo may be obligated to repurchase certain mortgage loans it originated if applicable underwriting requirements were not satisfied. Such repurchases could adversely affect the financial condition of MortCo and further limit its ability to repay amounts owed to us.

Prior to ceasing its operations in April 2007, MortCo originated residential mortgage loans. Those loans were typically sold to Fannie Mae, and the related mortgage servicing rights were typically sold to third-party servicing companies. Fannie Mae, servicing companies and certain investors have made repurchase claims to MortCo regarding certain residential mortgage loans that were originated by MortCo. These claims generally result from a default by a borrower under a loan followed by a rescission of mortgage insurance coverage due to an alleged underwriting deficiency. If MortCo is required to repurchase loans or pay losses incurred by Fannie Mae, servicing companies, investors or other third parties on a significant number of loans, then the financial condition of MortCo and its already limited ability to repay debt that it owes to us will be adversely affected.

The termination of our management agreement with Orchid could significantly reduce our revenues.

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors. As Manager, Bimini Advisors is responsible for administering Orchid’s business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel.

In exchange for these services, Bimini Advisors receives a monthly management fee. In addition, Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and Bimini Advisors allocates to Orchid its pro rata portion of certain overhead costs. If Orchid were to terminate the management agreement without cause, it would be obligated to pay to Bimini Advisors 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 initial term or automatic renewal term. The loss of these revenues, if it were to occur, would have a severe and immediate impact on the Company.

~~-23-~~-25-

Risks Related to Our Organization and Structure

Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock and our ability to pay distributions to our stockholders.

We have operated and intend to continue to operate our business so as to be exempt from registration under the Investment Company Act, because we are “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” Specifically, we invest and intend to continue to invest so that at least 55% of the assets that we own on an unconsolidated basis consist of qualifying mortgages and other liens and interests in real estate, which are collectively referred to as “qualifying real estate assets,” and so that at least 80% of the assets we own on an unconsolidated basis consist of real estate-related assets (including our qualifying real estate assets). We treat Fannie Mae, Freddie Mac and Ginnie Mae whole-pool residential mortgage pass-through securities issued with respect to an underlying pool of mortgage loans in which we hold all of the certificates issued by the pool as qualifying real estate assets based on no-action letters issued by the SEC. To the extent that the SEC publishes new or different guidance with respect to these matters, we may fail to qualify for this exemption.

If we fail to qualify for this exemption, we could be required to restructure our activities in a manner that, or at a time when, we would not otherwise choose to do so, which could negatively affect the value of shares of our common stock and our ability to distribute dividends. For example, if the market value of our investments in CMOs or structured Agency MBS, neither of which are qualifying real estate assets for Investment Company Act purposes, were to increase by an amount that resulted in less than 55% of our assets being invested in pass-through Agency MBS, we might have to sell CMOs or structured Agency MBS in order to maintain our exemption from the Investment Company Act. The sale could occur during adverse market conditions, and we could be forced to accept a price below that which we believe is acceptable.

Alternatively, if we fail to qualify for this exemption, we may have to register under the Investment Company Act and we could become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and other matters.

We may be required at times to adopt less efficient methods of financing certain of our securities, and we may be precluded from acquiring certain types of higher yielding securities. The net effect of these factors would be to lower our net interest income. If we fail to qualify for an exemption from registration as an investment company or an exclusion from the definition of an investment company, our ability to use leverage would be substantially reduced, and we would not be able to conduct our business as described in this prospectus. Our business will be materially and adversely affected if we fail to qualify for and maintain an exemption from regulation pursuant to the Investment Company Act.

~~-24-~~

Failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements and may result in fines and other penalties which could materially adversely affect our business and financial condition.

The Dodd-Frank Act established a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” As a result, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators (in some cases the fund’s directors) to be regulated as “commodity pool operators,” (“CPOs”). Under new rules adopted by the U.S. Commodity Futures Trading Commission, (the “CFTC”), those funds that become commodity pools solely because of their use of swaps must register with the National Futures Association (the “NFA”). Registration requires compliance with the CFTC’s regulations and the NFA’s rules with respect to capital raising, disclosure, reporting, recordkeeping and other business conduct. However, the CFTC’s Division of Swap Dealer and Intermediary Oversight recently issued a no-action letter saying, although it believes that mortgage REITs are properly considered commodity pools, it would not recommend that the CFTC take enforcement action against the operator of a mortgage REIT who does not register as a CPO if, among other things, the mortgage REIT limits the initial margin and premiums required to establish its swaps, futures and other commodity interest positions to not more than five percent (5%) of its total assets, the mortgage REIT limits the net income derived annually from those commodity interest positions which are not qualifying hedging transactions to less than five percent (5%) of its gross income and interests in the mortgage REIT are not marketed to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity futures, commodity options or swaps markets.

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We use hedging instruments in conjunction with our investment portfolio and related borrowings to reduce or mitigate risks associated with changes in interest rates, mortgage spreads, yield curve shapes and market volatility. These hedging instruments may include interest rate swaps, interest rate futures and options on interest rate futures. We do not currently engage in any speculative derivatives activities or other non-hedging transactions using swaps, futures or options on futures. We do not use these instruments for the purpose of trading in commodity interests, and we do not consider ~~our company~~the Company or its operations to be a commodity pool as to which CPO registration or compliance is required. We have claimed the relief afforded by the above-described no-action letter. Consequently, we will be restricted to operating within the parameters discussed in the no-action letter and will not enter into hedging transactions covered by the no-action letter if they would cause us to exceed the limits set forth in the no-action letter. However, there can be no assurance that the CFTC will agree that we are entitled to the no-action letter relief claimed.

The CFTC has substantial enforcement power with respect to violations of the laws over which it has jurisdiction, including their anti-fraud and anti-manipulation provisions. For example, the CFTC may suspend or revoke the registration of or the no-action relief afforded to a person who fails to comply with commodities laws and regulations, prohibit such a person from trading or doing business with registered entities, impose civil money penalties, require restitution and seek fines or imprisonment for criminal violations. In the event that the CFTC asserts that we are not entitled to the no-action letter relief claimed, we may be obligated to furnish additional disclosures and reports, among other things. Further, a private right of action exists against those who violate the laws over which the CFTC has jurisdiction or who willfully aid, abet, counsel, induce or procure a violation of those laws. In the event that we fail to comply with statutory requirements relating to derivatives or with the CFTC’s rules thereunder, including the no-action letter described above, we may be subject to significant fines, penalties and other civil or governmental actions or proceedings, any of which could have a materially adverse effect on our business, financial condition and results of operations.

Our Rights Plan could inhibit a change in our control that would otherwise be favorable to our stockholders.

In December 2015, our Board of Directors adopted a Rights Agreement (the “Rights Plan”) in an effort to protect against a possible limitation on our ability to use our net operating losses “(NOLs”) and net capital losses (“NCLs”) by discouraging investors from aggregating ownership of our Class A Common Stock and triggering an “ownership change” for purposes of Sections 382 and 383 of the Code. Under the terms of the Rights Plan, in general, if a person or group acquires ownership of 4.9% or more of the outstanding shares of our Class A Common Stock without the consent of our Board of Directors (an “Acquiring Person”), all of our other stockholders will have the right to purchase securities from us at a discount to such securities’ fair market value, thus causing substantial dilution to the Acquiring Person. As a result, the Rights Plan may have the effect of inhibiting or impeding a change in control not approved by our Board of Directors and, notwithstanding its purpose, could adversely affect our shareholders’ ability to realize a premium over the then-prevailing market price for our common stock in connection with such a transaction. In addition, because our Board of Directors may consent to certain transactions, the Rights Plan gives our Board of Directors significant discretion over whether a potential acquirer’s efforts to acquire a large interest in us will be successful. There can be no assurance that the Rights Plan will prevent an “ownership change” within the meaning of Sections 382 and 383 of the Code, in which case we may lose all or most of the anticipated tax benefits associated with our prior losses.

~~-25-~~

~~Our ownership limitations and certain other~~Certain provisions of applicable law and our charter and bylaws may restrict business combination opportunities that would otherwise be favorable to our stockholders.

Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders, including business combination provisions, supermajority vote and cause requirements for removal of directors, provisions that vacancies on our Board of Directors may be filled only by the remaining directors, for the full term of the directorship in which the vacancy occurred, the power of our Board of Directors to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock, to cause us to issue additional shares of stock of any class or series and to fix the terms of one or more classes or series of stock without stockholder approval, the restrictions on ownership and transfer of our stock and advance notice requirements for director nominations and stockholder proposals.

To assist us in qualifying as a REIT, among other purposes, ownership of our stock by any person will generally be limited to 9.8% in value or number of shares, whichever is more restrictive, of any class or series of our stock, except that Bimini may own up to 35.0% of our common stock so long as Bimini continues to qualify as a REIT. Additionally, our charter will prohibit beneficial or constructive ownership of our stock that would otherwise result in our failure to qualify as a REIT. The ownership rules in our charter are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be owned by one individual or entity. As a result, these ownership rules could cause an individual or entity to unintentionally own shares beneficially or constructively in excess of our ownership limits. Any attempt to own or transfer shares of our common stock or preferred stock in excess of our ownership limits without the consent of our Board of Directors will result in such shares being transferred to a charitable trust. These provisions may inhibit market activity and the resulting opportunity for our stockholders to receive a premium for their stock that might otherwise exist if any person were to attempt to assemble a block of shares of our stock in excess of the number of shares permitted under our charter and that may be in the best interests of our security holders.

Our Board of Directors may, without stockholder approval, amend our charter to increase or decrease the aggregate number of our shares or the number of shares of any class or series that we have the authority to issue and to classify or reclassify any unissued shares of common stock or preferred stock, and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our Board of Directors may take actions with respect to our common stock or preferred stock that may have the effect of delaying or preventing a change in control, including transactions at a premium over the market price of our shares, even if stockholders believe that a change in control is in their interest. These provisions, along with the restrictions on ownership and transfer contained in our charter and certain provisions of Maryland law described below, could discourage unsolicited acquisition proposals or make it more difficult for a third party to gain control of us, which could adversely affect the market price of our securities.

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Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.

Our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

·	actual receipt of an improper benefit or profit in money, property or services; or

·	a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

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We have entered into indemnification agreements with our directors and executive officers that obligate us to indemnify them to the maximum extent permitted by Maryland law. In addition, our charter authorizes the Company to obligate itself to indemnify our present and former directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law. Our bylaws require us, to the maximum extent permitted by Maryland law, to indemnify each present and former director or officer in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us. In addition, we may be obligated to advance the defense costs incurred by our directors and officers. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the provisions in our charter, bylaws and indemnification agreements or that might exist with other companies.

Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law ( the “MGCL”), may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:

“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder became an interested stockholder, and thereafter require two supermajority stockholder votes to approve any such combination; and

“control share” provisions that provide that a holder of “control shares” of the Company (defined as voting shares of stock which, when aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), entitle the acquiror to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) generally has no voting rights with respect to the control shares except to the extent approved by our stockholders by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have elected to opt-out of these provisions of the MGCL, in the case of the business combination provisions, by resolution of our Board of Directors (provided that such business combination is first approved by our Board of Directors, including a majority of our directors who are not affiliates or associates of such person), and in the case of the control share provisions, pursuant to a provision in our bylaws. However, our Board of Directors may by resolution elect to repeal the foregoing opt-out from the business combination provisions of the MGCL, and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future.

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We may be subject to adverse legislative or regulatory changes that could reduce the market price of our common stock.

At any time, laws or regulations, or the administrative interpretations of those laws or regulations, that impact our business and Maryland corporations may be amended. In addition, the markets for MBS and derivatives, including interest rate swaps, have been the subject of intense scrutiny in recent months. We cannot predict when or if any new law, regulation or administrative interpretation, or any amendment to any existing law, regulation or administrative interpretation, will be adopted or promulgated or will become effective. Additionally, revisions to these laws, regulations or administrative interpretations could cause us to change our investments. We could be materially adversely affected by any such change to any existing, or any new, law, regulation or administrative interpretation, which could reduce the market price of our common stock.

~~-27-~~

U.S. Federal Income Tax Risks

~~Your~~

An investment in our common stock has various ~~U.S. federal~~ income tax risks.

This summary of certain tax risks is limited to the ~~federal~~ tax risks addressed below. Additional risks or issues may exist that are not addressed in this Form 10-K and that could affect the federal and state tax treatment of us or our stockholders. This is not intended to be used and cannot be used by any stockholder to avoid penalties that may be imposed on stockholders under the Code. Management strongly urges ~~you~~shareholders to seek advice based on ~~your~~their particular circumstances from an independent tax advisor concerning the effects of federal, state and local income tax law on an investment in our common ~~stock and on your individual tax situation.~~stock.

Our ability to use net operating loss carryovers and net capital loss carryovers to reduce our taxable income may be limited.

We must have taxable income or net capital gains to benefit from these net operating loss and net capital loss carryovers, as well as certain other tax attributes. Although we believe that a significant portion of our NOLs will be available to use to offset the future taxable income of Bimini Capital and MortCo, no assurance can be provided that we will have taxable income or gains in the future to apply against our remaining NOLs and NCLs.

In addition, our NOL and NCL carryovers may be limited by Sections 382 and 383 of the Code if we undergo an “ownership change.” Generally, an “ownership change” occurs if certain persons or groups increase their aggregate ownership in our company by more than 50 percentage points looking back over the relevant testing period. If an ownership change occurs, our ability to use our NOLs and NCLs to reduce our taxable income in a future year would be limited to a Section 382 limitation equal to the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate in effect for the month of the ownership change. In the event of an ownership change, NOLs and NCLs that exceed the Section 382 limitation in any year will continue to be allowed as carryforwards for the remainder of the carryforward period and such losses can be used to offset taxable income for years within the carryforward period subject to the Section 382 limitation in each year. However, if the carryforward period for any NOL or NCL were to expire before that loss had been fully utilized, the unused portion of that loss would be lost. The carryforward period for NOLs is 20 years from the year in which the losses giving rise to the NOLs were incurred, and the carryforward period for NCL is five years from the year in which the losses giving rise to the NCL were incurred. Our use of new NOLs or NCLs arising after the date of an ownership change would not be affected by the Section 382 limitation (unless there were another ownership change after those new losses arose).

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Based on our knowledge of our stock ownership, we do not believe that an ownership change has occurred since our losses were generated. Accordingly, we believe that at the current time there is no annual limitation imposed on our use of our NOLs and NCLs to reduce future taxable income. The determination of whether an ownership change has occurred or will occur is complicated and depends on changes in percentage stock ownership among stockholders. We adopted the Rights Plan described above in order to discourage or prevent an ownership change. However, there can be no assurance that the Rights Plan will prevent an ownership change. In addition, we have not obtained, and currently do not plan to obtain, a ruling from the Internal Revenue Service, or IRS, regarding our conclusion as to whether our losses are subject to any such limitations. Furthermore, we may decide in the future that it is necessary or in our interest to take certain actions that could result in an ownership change. Therefore, no assurance can be provided as to whether an ownership change has occurred or will occur in the future.

Preserving the ability to use our NOLs and NCLs may cause us to forgo otherwise attractive opportunities.

Limitations imposed by Sections 382 and 383 of the Internal Revenue Code may discourage us from, among other things, redeeming our stock or issuing additional stock to raise capital or to acquire businesses or assets. Accordingly, our desire to preserve our NOLs and NCLs may cause us to forgo otherwise attractive opportunities.

Failure to qualify ~~or maintain its~~as a REIT in prior years could subject us to federal income tax consequences.

Prior to our 2015 tax year, we operated in a manner that was intended to cause us to qualify as a REIT for federal income tax purposes. However, the tax laws governing REITs are extremely complex, and interpretations of the tax laws governing qualification as a REIT would subject Bimini Capital to U.S. federal income tax, which could adversely affect the value of the shares of its common stock and would substantially reduce the cash available for distribution to its stockholders.

~~Management believes that Bimini Capital has been organized and has operated in conformity with the requirements for qualification~~are limited. Qualifying as a REIT ~~under the Code, and it intends to operate in a manner that will enable it to continue~~required us to meet numerous income and other tests. Given the requirements for qualification and taxation as a REIT. However, management cannot assure you that Bimini Capital will remain qualified as a REIT. Moreover, Bimini Capital’s qualification and taxation as a REIT will depend upon its ability to meet on a continuing basis, through actual annual operating results, certain qualification tests set forth in the U.S. federal tax laws. Accordingly, given thehighly complex nature of the rules governing REITs, the ongoing importance of factual determinations, ~~including the potential tax treatment of investments we make,~~ and the possibility of ~~future~~ changes in our circumstances, no assurance can be given that ~~Bimini Capital’s actual results of operations~~we qualified for any particular taxable year will satisfy such requirements. Events that could cause Bimini Capital to no longer qualify as a REIT under the Code include, but are not limited to a material increase in the revenue attributable to our management of Orchid relative to revenues generated by our MBS portfolio and a significant increase in the value our TRS in relation to the value of all of Bimini Capital’s assets.year.

If ~~Bimini Capital fails~~we failed to qualify as a REIT in any calendar year, it would be required to pay U.S. federal income tax (and any applicable state and local tax), including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and dividends paid to its stockholders would not be deductible by Bimini Capital in computing our taxable income. Further, if Bimini Capital fails to qualify as a REIT, it might need to borrow money or sell assets in order to pay any resulting tax. The payment of income tax would decrease the amount of Bimini Capital’s income available for distribution to its stockholders. Furthermore, if Bimini Capital fails to maintain its qualification as a REIT, it would no longer be required under U.S. federal tax laws to distribute substantially all of its REIT taxable incomeprior to our ~~stockholders. Unless Bimini Capital’s failure to qualify as a REIT was subject to relief under U.S. federal~~2015 tax ~~laws, it could~~year and we do not ~~re-elect to qualify as a REIT until the fifth calendar year following the year in which it failed to qualify.~~

~~Complying with REIT requirements may cause Bimini Capital to forego or liquidate otherwise attractive investments.~~

To qualify as a REIT, Bimini Capital must continually satisfy various tests regarding the sources of its income, the nature and diversification of its assets, the amounts it distributes to its stockholders and the ownership of its stock. In order to meet these tests, Bimini Capital may be required to forego investments it might otherwise make. Thus, compliance with the REIT requirements may hinder its investment performance.

~~-28-~~

In particular, Bimini Capital must ensure that at the end of each calendar quarter, at least 75% of the value of our total assets consists of cash, cash items, government securities and qualified REIT real estate assets, including Agency MBS. The remainder of Bimini Capital’s investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of Bimini Capital’s total assets (other than government securities, TRS securities, and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of its total assets can be represented by securities of one or more TRSs. Generally, if Bimini Capital fails to comply with these requirements at the end of any calendar quarter, it must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions, we would have to ~~avoid losing its REIT qualification and becoming subject to U.S.~~pay federal income tax ~~(and~~on our taxable income, if any, ~~applicable state~~for the year of the failure and ~~local taxes) on all~~for the following four years.

If we make distributions in excess of ~~its income. As~~our current and accumulated earnings and profits, those distributions will be treated as a ~~result, Bimini Capital~~return of capital, which will reduce the adjusted basis of your stock, and to the extent such distributions exceed your adjusted basis, you may ~~be required to liquidate from its portfolio otherwise attractive investments or contribute such investments to~~recognize a ~~TRS. These actions could have the effect of reducing Bimini Capital’s income and amounts available for distribution to its stockholders.~~capital gain.

~~Failure~~Unless you are a tax-exempt entity, distributions that we make to ~~make required distributions would subject Bimini Capital to tax, which would reduce the cash available for distribution to our stockholders.~~

To qualify as a REIT, Bimini Capital must distribute to its stockholders each calendar year at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. To the extent that Bimini Capital satisfies the 90% distribution requirement, but distribute less than 100% of its taxable income, ityou generally will be subject to ~~federal corporate~~tax as ordinary income ~~tax on its undistributed income. In addition, Bimini Capital will incur a 4% nondeductible excise tax on~~to the ~~amount, if any, by which its distributions in any calendar year are less than the sum of:~~

·~~85%~~extent of our ~~REIT ordinary income for that year;~~

·~~95% of our REIT capital gain net income for that year;~~current and

·~~any undistributed taxable income from prior years~~

~~Bimini Capital intends to distribute its REIT taxable income to its stockholders in a manner intended to satisfy the 90% distribution requirement~~ accumulated earnings and ~~to avoid both corporate income tax and the 4% nondeductible excise tax. However, there is no requirement that TRSs distribute their after-tax net income to their parent REIT or their stockholders.~~

~~Bimini Capital’s taxable income may be substantially different than its net income~~profits as determined ~~based on generally accepted accounting principles in the United States (“GAAP”), because,~~ for example, realized capital losses will be deducted in determining its GAAP net income, but may not be deductible in computing its taxable income. In addition, unrealized portfolio gains and losses are included in GAAP net income, but are not included in REIT taxable income. Also, Bimini Capital may invest in assets that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets. As a result of the foregoing, Bimini Capital may generate less cash flow than taxable income in a particular year. To the extent that Bimini Capital generates such non-cash taxable income in a taxable year, it may incur corporate income tax and the 4% nondeductible excise tax on that income if it does not distribute such income to stockholders in that year. In that event, Bimini Capital may be required to use cash reserves, incur debt, sell assets, make taxable distributions of its stock or debt securities or liquidate non-cash assets at rates or at times that it regards as unfavorable to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in that year.

~~Even if Bimini Capital qualifies as a REIT, we may face other tax liabilities that reduce our cash flows.~~

Even if Bimini Capital qualifies for taxation as a REIT, it may be subject to certain federal, state and local taxes on its income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, any TRSs we form will be subject to regular corporate federal, state and local taxes. Any of these taxes would decrease cash available for distributions to stockholders.

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~~The failure of Agency MBS subject to a repurchase agreement to qualify as real estate assets would adversely affect Bimini Capital’s ability to qualify as a REIT.~~

Bimini Capital has entered and intends to continue to enter into repurchase agreements under which it will nominally sell certain of our Agency MBS to a counterparty and simultaneously enter into an agreement to repurchase the sold assets. Management believes that for U.S. federal income tax ~~purposes these transactions~~purposes. If the amount we distribute to you exceeds your allocable share of our current and accumulated earnings and profits, the excess will be treated as ~~secured debt~~a return of capital to the extent of your adjusted basis in your stock. This will reduce your basis in your stock but will not be subject to tax. If the amount we distribute to you exceeds both your allocable share of our current and ~~Bimini Capital~~accumulated earnings and profits and your adjusted basis, this amount will be treated as the owner of the Agency MBS that are the subject of any such agreement notwithstanding that such agreement may transfer record ownership of such assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that Bimini Capital does not own the Agency MBS during the term of the repurchase agreement, in which case it could fail to qualify as a ~~REIT.~~

Bimini Capital’s ability to invest in and dispose of contracts for delayed delivery transactions, or delayed delivery contracts, including “to be announced” securities, could be limited by the requirements necessary to qualify as a REIT, and Bimini Capital could fail to qualify as a REIT as a result of these investments.

Bimini Capital may purchase Agency MBS through delayed delivery contracts, including “to-be-announced” forward contracts, or TBAs. Bimini Capital may recognize income or gains on the disposition of delayed delivery contracts. For example, rather than take delivery of the Agency MBS subject to a TBA, Bimini Capital may dispose of the TBA through a “roll” transaction in which it agrees to purchase similar securities in the future at a predetermined price or otherwise, which may result in the recognition of income or gains. The law is unclear regarding whether delayed delivery contracts will be qualifying assets for the 75% asset test and whether income and gains from dispositions of delayed delivery contracts will be qualifying income for the 75% gross income test.

~~Until a favorable private letter ruling is received~~gain from the ~~IRS~~sale or counsel advises that delayed delivery contracts should be treated as qualifying assets for purposes of the 75% asset test, Bimini Capital will limit its investment in delayed delivery contracts and any non-qualifying assets to no more than 25% of its total gross assets at the end of any calendar quarter and will limit the delayed delivery contracts issued by any one issuer to no more than 5% of its total gross assets at the end of any calendar quarter. Further, until we receive a favorable private letter ruling from the IRS or we are advised by counsel that income and gains from the disposition of delayed delivery contracts should be treated as qualifying income for purposes of the 75% gross income test, Bimini Capital will limit its income and gains from dispositions of delayed delivery contracts and any non-qualifying income to no more than 25% of its gross income for each calendar year. Accordingly, Bimini Capital’s ability to purchase Agency MBS through delayed delivery contracts and to dispose of delayed delivery contracts through roll transactions or otherwise, could be limited.

Moreover, even if Bimini Capital is advised by counsel that delayed delivery contracts should be treated as qualifying assets or that income and gains from dispositions of delayed delivery contracts should be treated as qualifying income, it is possible that the IRS could successfully take the position that such assets are not qualifying assets and such income is not qualifying income. In that event, Bimini Capital could be subject to a penalty tax or it could fail to qualify as a REIT if (i) the value of its delayed delivery contracts together with its non-qualifying assets for the 75% asset test, exceeded 25% of its total gross assets at the end of any calendar quarter, (ii) the value of its delayed delivery contracts, including TBAs, issued by any one issuer exceeds 5% of its total assets at the end of any calendar quarter, or (iii) its income and gains from the disposition of delayed delivery contracts together with its non-qualifying income for the 75% gross income test, exceeded 25% of its gross income for any taxable year.

~~Complying with REIT requirements may limit Bimini Capital’s ability to hedge effectively.~~

The REIT provisions of the Code substantially limit Bimini Capital’s ability to hedge. Bimini Capital’s aggregate gross income from non-qualifying hedges, fees, and certain other non-qualifying sources cannot exceed 5% of its annual gross income. As a result, Bimini Capital might have to limit its use of advantageous hedging techniques or implement those hedges through a TRS. Any hedging income earned by a TRS would be subject to federal, state and local income tax at regular corporate rates. This could increase the cost of Bimini Capital’s hedging activities or expose it to greater risks associated with changes in interest rates than it would otherwise want to bear.

~~-30-~~

Bimini Capital’s ownership of and relationship with any TRSs that we form will be limited and a failure to comply with the limits would jeopardize its REIT qualification and may result in the applicationexchange of a ~~100% excise tax.~~

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. A domestic TRS will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. Any domestic TRS that we may form will pay federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to Bimini Capital but is not required to be distributed to it unless necessary to maintain its REIT qualification.

Bimini Capital may pay taxable dividends in cash and our common stock, in which case stockholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.

Bimini Capital may make taxable dividends that are payable partly in cash and partly in its common stock. The IRS has issued private letter rulings to other REITs treating certain distributions that are paid partly in cash and partly in stock as dividends that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. federal income tax purposes. Those rulings may be relied upon only by the taxpayers to whom they were issued, but we could request a similar ruling from the IRS. In addition, the IRS previously issued a revenue procedure authorizing publicly traded REITs to make elective cash/stock dividends, but that revenue procedure has expired. Accordingly, it is unclear whether and to what extent Bimini Capital will be able to make taxable dividends payable in cash and common stock. Although Bimini Capital has no current intention of paying dividends in its own stock, if in the future it chooses to pay dividends in its common stock, its stockholders may be required to pay tax in excess of the cash that they receive. If a U.S. stockholder sells the shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, Bimini Capital may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock. If Bimini Capital pay dividends in its common stock and a significant number of its stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of its common stock.

~~Bimini Capital’s ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their stock.~~

In order for Bimini Capital to qualify as a REIT, no more than 50% in value of its outstanding stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. In order to assist Bimini Capital in qualifying as a REIT, among other purposes, ownership of its stock by any person is generally limited to 9.8% in value or number of shares, whichever is more restrictive, of any class or series of our stock.

These ownership limitations could have the effect of discouraging a takeover or other transaction in which holders of Bimini Capital’s common stock might receive a premium for their common stock over the then-prevailing market price or which holders might believe to be otherwise in their best interests.

~~-31-~~

~~Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.~~

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates is lower than ordinary income tax rates. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

~~We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock.~~

At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.capital asset.

Bimini Capital may recognize excess inclusion income that would increase the tax liability of its stockholders.

If Bimini Capital recognize excess inclusion income and that is allocated to its stockholders, this income cannot be offset by net operating losses of its stockholders. If the stockholder is a tax-exempt entity, then this income would be fully taxable as unrelated business taxable income under Section 512 of the Code. If the stockholder is a foreign person, such income would be subject to federal income tax withholding without reduction or exemption pursuant to any otherwise applicable income tax treaty. In addition, to the extent Bimini Capital’s stock is owned by tax-exempt "disqualified organizations," such as government-related entities that are not subject to tax on unrelated business taxable income, although Treasury regulations have not yet been drafted to clarify the law, it may incur a corporate level tax at the highest applicable corporate tax rate on the portion of our excess inclusion income that is allocable to such disqualified organizations.

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Excess inclusion income could result if Bimini Capital holds a residual interest in a real estate mortgage investment conduit, or REMIC. Excess inclusion income also could be generated if Bimini Capital were to issue debt obligations with two or more maturities and the terms of the payments on these obligations bore a relationship to the payments received on its mortgage-related securities securing those debt obligations (i.e., if Bimini Capital were to own an interest in a taxable mortgage pool). ~~However, Treasury regulations have not been issued regarding the allocation of excess inclusion income to stockholders of a REIT that owns an interest in a taxable mortgage pool.~~ Bimini Capital does not expect to acquire significant amounts of residual interests in REMICs, other than interests already owned by its ~~taxable REIT~~ subsidiary, which is treated as a separate taxable entity for these purposes. Bimini Capital intends to structure borrowing arrangements in a manner designed to avoid generating significant amounts of excess inclusion income. Bimini Capital does, however, expect to enter into various repurchase agreements that have differing maturity dates and afford the lender the right to sell any pledged mortgaged securities if Bimini Capital should default on its obligations.

~~Bimini Capital’s recognition of “phantom” income may reduce a stockholder’s after-tax return on an investment in our common stock.~~

Bimini Capital may recognize taxable income in excess of its economic income, known as phantom income, in the first years that it hold certain investments, and experience an offsetting excess of economic income over its taxable income in later years. As a result, stockholders at times may be required to pay U.S. federal income tax on distributions that economically represent a return of capital rather than a dividend. These distributions would be offset in later years by distributions representing economic income that would be treated as returns of capital for U.S. federal income tax purposes. Taking into account the time value of money, this acceleration of U.S. federal income tax liabilities may reduce a stockholder’s after-tax return on his or her investment to an amount less than the after-tax return on an investment with an identical before-tax rate of return that did not generate phantom income.

~~-32-~~

~~Liquidation of Bimini Capital’s assets may jeopardize its REIT qualification.~~

To qualify and maintain its qualification as a REIT, Bimini Capital must comply with requirements regarding its assets and its sources of income. If Bimini Capital were compelled to liquidate its assets to repay obligations to its lenders, it may be unable to comply with these requirements, thereby jeopardizing its qualification as a REIT, or it may be subject to a 100% tax on any resultant gain if it sell assets that are treated as inventory or property held primarily for sale to customers in the ordinary course of business.

Qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that Bimini Capital acquires, and the inaccuracy of any such opinions, advice or statements may adversely affect Bimini Capital’s REIT qualification and result in significant corporate-level tax.

When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity securities for U.S. federal income tax purposes, the value of such securities, and also to what extent those securities constitute qualified real estate assets for purposes of the REIT asset tests and produce income which qualifies under the 75% gross income test. The inaccuracy of any such opinions, advice or statements may adversely affect Bimini Capital’s REIT qualification and result in significant corporate-level tax.

~~The tax on prohibited transactions will limit Bimini Capital’s ability to engage in transactions which would be treated as prohibited transactions for federal income tax purposes.~~

Net income that Bimini Capital derives from a prohibited transaction is subject to a 100% tax. The term "prohibited transaction" generally includes a sale or other disposition of property (including agency securities, but other than foreclosure property, as discussed below) that is held primarily for sale to customers in the ordinary course of a trade or business by Bimini Capital.

We intend to conduct our operations at the REIT level so that no asset that Bimini Capital owns will be treated as, or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. As a result, we may choose not to engage in certain transactions at the REIT level, even though the sales. In addition, whether property is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances. No assurance can be given that any property that Bimini Capital sells will not be treated as property held for sale to customers, or that Bimini Capital can comply with certain safe-harbor provisions of the Internal Revenue Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid prohibited transaction characterization.

Risks Related to Conflicts of Interest in Our Relationship with Orchid

Bimini Capital and Orchid may compete for opportunities to acquire assets, which are allocated in accordance with the Investment Allocation Agreement by and among Orchid and Bimini Advisors.

From time to time we may seek to purchase for Bimini Capital the same or similar assets that we seek to purchase for Orchid. In such an instance, we may allocate such opportunities in a manner that preferentially favors Orchid. We will make available to either Bimini Capital or Orchid opportunities to acquire assets that we determine, in our reasonable and good faith judgment, based on the objectives, policies and strategies, and other relevant factors, are appropriate for either entity in accordance with the Investment Allocation Agreement among Bimini Capital, Orchid and Bimini Advisors.

~~-33-~~

Because many of Bimini Capital’s targeted assets are typically available only in specified quantities and because many of our targeted assets are also targeted assets for Orchid, we may not be able to buy as much of any given asset as required to satisfy the needs of both Bimini Capital and Orchid. In these cases, the Investment Allocation Agreement will require the allocation of such assets to both accounts in proportion to their needs and available capital. The Investment Allocation Agreement will permit departure from such proportional allocation when (i) allocating purchases of whole-pool Agency MBS, because those securities cannot be divided into multiple parts to be allocated among various accounts, and (ii) such allocation would result in an inefficiently small amount of the security being purchased for an account. In that case, the Investment Allocation Agreement allows for a protocol of allocating assets so that, on an overall basis, each account is treated equitably.

There are conflicts of interest in our relationships with Orchid, which could result in decisions that are not in the best interests of Bimini Capital’s stockholders.

We are subject to conflicts of interest arising out of Bimini Advisors relationship as Manager of Orchid. All of our executive officers may have conflicts between their duties to Bimini Capital and their duties to Orchid as its Manager.

Bimini Capital may acquire or sell assets in which Orchid may have an interest. Similarly, Orchid may acquire or sell assets in which Bimini Capital has or may have an interest. Although such acquisitions or dispositions may present conflicts of interest, we nonetheless may pursue and consummate such transactions. Additionally, Bimini Capital may engage in transactions directly with Orchid, including the purchase and sale of all or a portion of a portfolio asset.

Our officers devote as much time to Bimini Capital and to Orchid as they deem appropriate. However, these officers may have conflicts in allocating their time and services among Bimini Capital and Orchid. During turbulent conditions in the mortgage industry, distress in the credit markets or other times when we will need focused support and assistance from employees, Orchid and other entities for which we may act as manager in the future will likewise require greater focus and attention, placing personnel resources in high demand. In such situations, Bimini Capital may not receive the necessary support and assistance it requires or would otherwise receive if it were not acting as manager of one or more other entities.

-31-

We, directly or through Orchid, may obtain confidential information about the companies or securities in which we have invested or may invest. If we possess confidential information about such companies or securities, there may be restrictions on our ability to dispose of, increase the amount of, or otherwise take action with respect to the securities of such companies. Our management of other accounts could create a conflict of interest to the extent our officers are aware of material non-public information concerning potential investment decisions. We have implemented compliance procedures and practices designed to ensure that investment decisions are not made while in possession of material non-public information. We cannot assure you, however, that these procedures and practices will be effective. In addition, this conflict and these procedures and practices may limit the freedom of our officers to make potentially profitable investments, which could have an adverse effect on Bimini Capital’s operations. These limitations imposed by access to confidential information could therefore materially adversely affect Bimini Capital’s business, financial condition and results of operations and its ability to make distributions to Bimini Capital’s stockholders.

Mr. 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 Orchid and owns shares of common stock of Orchid at the time of this filing and may continue to hold shares in the future. Mr. Haas, our Chief Financial Officer, Chief Investment Officer and President, is a member of the Board of Directors of Orchid, serves as the Chief Financial Officer, Chief Investment Officer and Treasurer of Orchid and owns shares of common stock of Orchid at the time of this filing and may continue to hold shares in the future. Mr. Dwyer and Mr. Jaumot, the two independent members of our Board of Directors, own shares of common stock of Orchid at the time of this filing and may continue to own shares in the future. Accordingly, Messrs. Cauley, Haas, Dwyer and Jaumot may have a conflict of interest with respect to actions by Bimini Capital’s Board of Directors that relate to Orchid as its Manager.

~~-34-~~

Bimini continues to hold an investment in the common stock of Orchid. In evaluating opportunities for ourselves and Orchid, this may lead us to emphasize certain asset acquisition, disposition or management objectives over others, such as balancing risk or capital preservation objectives against return objectives. This could increase the risks or decrease the returns of your investment in our common stock.

Bimini Capital incurred considerable cost in sponsoring the initial public offering of Orchid. It did so in return for the ability to earn management fees and share a portion of our overhead costs in the future. If the independent board of Orchid elected to not renew or to cancel the management agreement with Bimini Advisors, Bimini Capital may not be able to recoup the costs incurred in bringing Orchid to market. Even if Orchid elected not to renew the management agreement without cause, and would be required to pay Bimini Advisors a substantial termination fee, this fee, in conjunction with any management fees collected or overhead costs shared prior to the early termination of the agreement, may not be sufficient to recoup the costs Bimini Capital incurred in bringing Orchid to market.

Orchid may elect not to renew the management agreement, even without cause. ~~With~~The initial term of our management agreement was automatically renewed in accordance with the terms of the agreement on February 20, 2016. Upon the expiration of any automatic renewal term, with the consent of the majority of their independent directors, and upon providing 180-days’ prior written notice, Orchid may elect not to renew the management ~~agreement after the initial term of the management agreement, which expires on February 20, 2016, or upon the expiration of any automatic renewal term, both upon 180-days’ prior written notice.~~agreement. If Orchid elects to not renew the agreement because of a decision by its Board of Directors that the management fee is unfair, Bimini Advisors will have the right to renegotiate a mutually agreeable management fee. If Orchid elects to not renew the management agreement without cause, it is required to pay Bimini Advisors a termination fee equal to three times the average annual management fee incurred during the prior 24-month period immediately preceding the most recently completed calendar quarter prior to the effective date of termination. While these provisions may increase the effective cost of electing to not renew the management agreement, the fee may be insufficient to recoup the costs Bimini Capital incurred in bringing Orchid to market and completing its initial public offering.

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Risks Related to Our Common Stock

Investing in our common stock may involve a high degree of risk.

The investments we make in accordance with our investment objectives may result in a high amount of risk when compared to alternative investment options and volatility or loss of principal. Our investments may be highly speculative and aggressive, and therefore an investment in our common stock may not be suitable for someone with lower risk tolerance.

There is a limited market for our Class A Common Stock.

Since November 5, 2007, our Class A Common Stock has traded on the OTC bulletin board under the symbol ~~“BMNM.OB”~~“BMNM”. We may apply to list our Class A Common Stock on a national securities market in the future; however, even if listed on a national securities market, the ability to buy and sell our Class A Common Stock may be limited due to our small public float, and significant sales may depress or result in a decline in the market price of our Class A Common Stock. Additionally, until such time that our Class A Common Stock is approved for listing on another national securities market, our ability to raise capital through the sale of additional securities may be limited. Accordingly, no assurance can be given as to:

· the likelihood that an actual market for our common stock will develop, or be continued once developed;

· the liquidity of any such market;

· the ability of any holder to sell shares of our common stock; or

· the prices that may be obtained for our common stock.

~~-35-~~

We have not made distributions to our stockholders since ~~2011 and we cannot assure you of our ability to make distributions to our stockholders in the future.~~2011.

~~We intend to make distributions to our stockholders in amounts such that we distribute all or substantially all~~Our Board of ~~our REIT taxable income in each year, subject to~~Directors have no authorized the ~~application~~payment of ~~our tax net operating loss carryforwards and certain other adjustments. We have not made distributions~~any cash dividends to our stockholders since ~~2011, and our ability to make distributions in the future might be harmed by the risk factors described in this Annual Report on Form 10-K.~~2011. All distributions will be made at the discretion of our Board of Directors out of funds legally available therefor and will depend on our earnings, our financial condition ~~qualifying and maintaining our qualification as a REIT~~ and such other factors as our Board of Directors may deem relevant from time to time. As a result of the termination of our REIT status effective as of January 1, 2015, we may retain any available funds and future earnings to fund the development and growth of our business. We cannot assure you that we will have the ability to make distributions to our stockholders in the ~~future. To~~future, or if the ~~extent~~ability to make distributions exists, that ~~we decide to pay distributions from the proceeds of~~ any ~~securities offerings, such distributions would generally~~will be considered a return of capital for U.S. federal income tax purposes. A return of capital reduces the basis of a stockholder’s investment in our common stock to the extent of such basis and is treated as capital gain thereafter.made.

Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may harm the value of our common stock.

In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock or common stock, as well as warrants to purchase shares of common stock or convertible preferred stock. Upon the liquidation of the Company, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings by us may dilute the holdings of our existing stockholders or reduce the market value of our common stock, or both. Our preferred stock, if issued, would have a preference on distributions that could limit our ability to make distributions to the holders of our common stock. Furthermore, our Board of Directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares or the number of shares of any class or series that we have the authority to issue, and to classify or reclassify any unissued shares of common stock or preferred stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Our stockholders are therefore subject to the risk of our future securities offerings reducing the market price of our common stock and diluting their common stock.

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The market value of our common stock may be volatile.

The market value of shares of our common stock may be highly volatile and subject to wide price fluctuations. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. Some of the factors that could negatively affect the share price or trading volume of our common stock include:

·	actual or anticipated variations in our operating results or distributions;

·	changes in our earnings estimates or publication of research reports about us or the real estate or specialty finance industry;

·	increases in market interest rates that affect the value of our MBS portfolios;

·	changes in market valuations of similar companies;

·	adverse market reaction to any increased indebtedness we incur in the future;

·	departures of key management personnel;

·	actions by institutional stockholders;

·	speculation in the press or investment community; and

·	general market and economic conditions.

We cannot make any assurances that the market price of our common stock will not fluctuate or decline significantly in the future.

~~-36-~~

Shares of our common stock eligible for future sale may harm our share price.

We cannot predict the effect, if any, of future sales of shares of our common stock, or the availability of shares for future sales, on the market price of our common stock. Sales of substantial amounts of shares of our common stock, or the perception that these sales could occur, may harm prevailing market prices for our common stock. The 2011 Long Term Incentive Compensation Plan provides for grants 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 award, subject to a maximum aggregate number of shares of common stock that may be issued under the 2011 Long Term Incentive Compensation Plan of 4,000,000 shares of common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Our executive offices and principal administrative offices are located at 3305 Flamingo Drive, Vero Beach, Florida, 32963, in an office building which we own. This facility is shared with our subsidiaries and Orchid. This property is suitable and adequate for our business as currently conducted.

ITEM 3. LEGAL PROCEEDINGS.

The Company ismay from time to time be involved in various lawsuits and claims, both ~~actual~~pending and ~~potential,~~threatened, including some that it has asserted against others, in which monetary and other damages are sought. These lawsuits and claims relate primarily to contractual disputes arising out of the ordinary course of the Company’s business. The outcome of such lawsuits and claims, as well as the costs to defend them, is inherently ~~unpredictable. However,~~unpredictable, and management ~~believes that, in the aggregate, the outcome of all lawsuits and claims involving the Company will not have~~may choose to settle certain matters based on a material effect on the Company’s consolidated financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.cost-benefit analysis.

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A complaint by a note-holder in Preferred Term Securities XX (“PreTSL XX”) was filed on July 16, 2010 in the Supreme Court of the State of New York, New York County, against Bimini Capital, ~~Management, Inc. (“Bimini”),~~ the Bank of New York Mellon (“~~BNYM”~~BNY Mellon”)~~, PreTSL XX, Ltd.~~ and Hexagon Securities LLC (“Hexagon”). and nominal defendants BNY Mellon and Preferred Term Securities XX, Ltd. (“PreTSL XX”), captioned Hildene Capital Management, LLC, et al. v. The Bank of New York Mellon, et. al. The complaint, filed by Hildene Capital Management, LLC and Hildene Opportunities Fund, Ltd. (“Hildene”), ~~alleges~~alleged that Hildene suffered losses as a result of ~~Bimini’s~~Bimini Capital’s repurchase of all outstanding fixed/floating rate capital securities of Bimini Capital Trust II for less than par value from PreTSL XX in October 2009. Hildene alleged claims against ~~BNYM~~BNY Mellon for breach of the Indenture, breach of fiduciary duties and breach of the covenant of good faith and fair dealing, and claims against Bimini Capital for tortious interference with contract, aiding and abetting breach of fiduciary duty, unjust enrichment and “rescission/illegality.” Hildene also alleged derivative claims brought in the name of Nominal Defendant ~~BNYM.~~BNY Mellon. (Subsequently, Hexagon and Nominal Defendant PreTSL XX were voluntarily dismissed without prejudice by Hildene.) PreTSL XX, Ltd. moved to intervene as an additional plaintiff in the action, and Bimini and ~~BNYM~~BNY Mellon opposed that motion. The court granted PreTSL XX, Ltd.’s motion to intervene and the Appellate Division, First Department affirmed that decision. In May 2013, Hildene voluntarily dismissed its purported derivative claims brought in the name of ~~BNYM,~~BNY Mellon, including its claim for “rescission/illegality.” On April 14, 2014 and May 18, 2014, Stipulations of Partial Discontinuance were filed with the court that dismissed all claims between and among Hildene and ~~BNYM,~~BNY Mellon, and PreTSL XX and ~~BNYM. The parties have completed discovery~~BNY Mellon.

On May 15, 2015, Hildene and ~~summary judgment motions were filed on June 13, 2014. On January 6, 2015,~~Bimini Capital agreed to settle the Court issued its Decision and Orders on the parties’ motions for summary judgment. The Court granted Bimini’s motion for summary judgment on Hildene’s claims for aiding and abetting breach of fiduciary duty and unjust enrichment, but denied Bimini’s motion with respect to Hildene’s claim for tortious interference with contract. The Court denied Hildene’s motion for summary judgment with respect to all three of Hildene’s claims, but granted its motion with respect to Bimini’s counterclaims for contribution and set-off. On February 9, 2015, Bimini filed a notice of appeal with respect to that portion of the Decision and Orders denying Bimini’s motion for summary judgment on Hildene’s claims for tortious interference with contract,case, and on ~~February 18,~~July 10, 2015, ~~Hildene’s~~a Stipulation of Discontinuance was filed ~~a notice of cross appeal with respect to that portion of the Decision~~dismissing all claims and ~~Orders that denied their motion for summary judgment on their claim for unjust enrichment. Trial is currently scheduled to begin June 1, 2015.~~counterclaims between and among Hildene and Bimini ~~denies that the repurchase was improper and intends to continue to defend the suit vigorously.~~

~~-37-~~

On March 2, 2011, Orchid Island TRS, LLC, formerly known as Opteum Financial Services, LLC and presently known as MortCo, LLC (“Opteum Financial”) and Opteum Mortgage Acceptance Corporation (“Opteum Acceptance”) (collectively referred to herein as “MortCo”) received a cover letter dated March 1, 2011 from Massachusetts Mutual Life Insurance Company (“Mass Mutual”) enclosing a draft complaint against MortCo.Capital. In summary, Mass Mutual alleges that it purchased residential mortgage-backed securities offered by MortCo in August 2005 and the first quarter of 2006 and that MortCo made false representations and warranties in connection with the ~~sale~~settlement and in accordance with GAAP, a loss of $3.5 million was accrued at March 31, 2015 and has been charged to operations for the year ended December 31, 2015. At December 31, 2015, $1.25 million of the ~~securities~~settlement remains unpaid in violation of Mass Gen. Laws Ch. 110A § 410(a)(2) (the “Massachusetts Blue Sky Law”). In its cover letter, Mass Mutual claims it is entitled to damages in excess of $25 million. However, no monetary demand is contained within the draft complaint and the actual damages Mass Mutual claims to have incurred is uncertain.

Mass Mutual has not filed the complaint or initiated litigation. Pursuant to its request, on March 14, 2011 Mass Mutual and MortCo entered into a Tolling Agreement through June 1, 2011 so that Mass Mutual could address its allegations against MortCo without incurring litigation costs. Mass Mutual never contacted MortCo to schedule such discussions. On August 22, 2011, the parties extended the Tolling Agreement through June 1, 2013, and on May 31, 2013, the parties extended the Tolling Agreement through December 2, 2013. To date, MortCo is aware of no action taken by Mass Mutual, and the Tolling Agreement appears to have expired by its own terms. MortCo denies Opteum Financial or Opteum Acceptance, individually or collectively, made false representations and warranties in connectionaccordance with the ~~sale~~terms of ~~securities to Mass Mutual. Mass Mutual has taken no action to prosecute its claim against MortCo, and~~ the ~~range of loss or potential loss, if any, cannot reasonably be estimated. Should Mass Mutual initiate litigation, MortCo will defend such litigation vigorously.~~agreement.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

~~-38-~~-35-

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Class A Common Stock is traded over-the-counter under the symbol “BMNM.OB”. As of February 18, ~~2015,~~2016, we had ~~12,332,506~~12,631,627 shares of Class A Common Stock issued and outstanding, which were held by ~~approximately 2,212 holders~~400 shareholders of ~~record.~~record and 1,672 beneficial owners whose shares were held in “street name” by brokers and depository institutions.

The following table is a summary of historical prices of our Class A Common Stock.

	High		Low		Close		Dividends Declared		High		Low		Close		Dividends Declared
2015
First quarter									$	1.90	$	1.48	$	1.75	$	-
Second quarter										2.98		1.51		2.80		-
Third quarter										2.94		1.21		1.33		-
Fourth quarter										1.45		0.66		0.80		-
2014																.
First quarter	$	0.75	$	0.25	$	0.56	$	-	$	0.75	$	0.25	$	0.56	$	-
Second quarter		0.92		0.45		0.83		-		0.92		0.45		0.83		-
Third quarter		1.86		0.79		1.45		-		1.86		0.79		1.45		-
Fourth quarter		1.90		1.32		1.90		-		1.90		1.32		1.90		-
2013								.
First quarter	$	0.48	$	0.13	$	0.35	$	-
Second quarter		0.43		0.19		0.29		-
Third quarter		0.29		0.18		0.22		-
Fourth quarter		0.35		0.10		0.27		-

As of December 31, ~~2014,~~2015, we had 31,938 shares of Class B Common Stock outstanding, which were held by 2 holders of record and 31,938 shares of Class C Common Stock outstanding, which were held by one holder of record. There is no established public trading market for our Class B Common Stock or Class C Common Stock.

Dividend Distribution Policy

~~To qualify as a REIT, we must distribute annually~~Our ability to make distributions to our stockholders ~~an amount at least equal to 90%~~will depend upon the performance of our ~~REIT taxable income, determined without regard to the deduction for dividends paid~~investment portfolio and ~~excluding any net capital gain, and subject to~~ the application of ~~any~~ available ~~tax~~ net operating loss carryforwards. We ~~will be subject~~have not made a distribution to ~~income tax on our taxable income that is not distributed~~stockholders since 2011, and ~~to an excise tax to the extent that certain percentages~~we cannot assure you of our ~~taxable income are not distributed by specified dates. Income as computed for purposes of the foregoing tax rules will not necessarily correspond~~ability to make distributions to our ~~income as determined for financial reporting purposes pursuant to GAAP.~~

stockholders in the future. Any ~~additional~~ distributions we make will be authorized by and at the discretion of our Board of Directors based upon a variety of factors deemed relevant by our directors, which may include:

·	actual results of operations;

·	our financial condition;

·	our level of retained cash flows;

·	our capital requirements;

·	any debt service requirements;

·	our taxable income;

·	the availability of tax net operating loss ~~carryforwards~~

·	~~the annual distribution requirements under the REIT provisions of the Code;~~carryforwards;

·	applicable provisions of Maryland law; and

·	other factors that our Board of Directors may deem relevant.

~~-39-~~-36-

~~We have not made a distribution to stockholders since 2011, and we cannot assure you of our ability to make distributions to our stockholders in the future.~~

Our charter authorizes us to issue preferred stock that could have a preference over our common stock with respect to distributions. We currently have no intention to issue any preferred stock, but if we do, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock.

Our ability to make distributions to our stockholders will depend upon the performance of our investment portfolio and the application of available net operating loss carryforwards. To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may consider various funding sources to cover any shortfall, including selling certain of our assets, borrowing funds or using a portion of the net proceeds we receive in this offering or future offerings (and thus all or a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes). We also may elect to pay all or a portion of any distribution in the form of a taxable distribution of our stock or debt securities. In addition, our Board of Directors may change our distribution policy in the future.

Securities Authorized For Issuance Under Equity Compensation Plans

On August 12, 2011, Bimini Capital’s shareholders approved the 2011 Long Term Compensation Plan (the “Plan”). The Plan is intended to permit the grant of stock options, stock appreciation rights (“SARs”), stock awards, performance units and other equity-based and incentive awards up to an aggregate of 4,000,000 shares, subject to adjustments and limitations as provided in the Plan. The following table provides information as of December 31, ~~2014~~2015 concerning shares of our common stock authorized for issuance under the Plan.

Number of securities

remaining available for

Total number of securities

Weighted-average

future issuance under

Total number of securities

Weighted-average

future issuance under

to be issued upon exercise

exercise price of

equity compensation plans

to be issued upon exercise

exercise price of

equity compensation plans

of outstanding options,

(excluding securities

of outstanding options,

(excluding securities

warrants and rights

reflected in column (a))

warrants and rights

reflected in column (a))

Plan Category

(a)

(b)

(a)

(b)

Equity compensation plans approved by

by security holders

31,500

2,918,500

(2)

77,500

2,872,500

(2)

Equity compensation plans not approved

by security holders(1)

Total

31,500

2,918,500

77,500

2,872,500

(1)	We do not have any equity compensation plans that have not been approved by our stockholders.

(2)	Represents the maximum number of shares remaining available for future issuance under the terms of the Incentive Plan.

Unregistered Sales of Equity Securities

During the year ended December 31, ~~2014,~~2015, the Company issued ~~35,271~~33,928 and ~~21,469~~14,975 shares of Class A Common Stock to Robert J. Dwyer and Frank E. Jaumot, respectively, in consideration for their service on the Company’s Board of Directors and on certain committees of the Board of Directors. The shares were issued pursuant to the exemption from registration under the Securities Act of 1933, as amended, contained in Section ~~4(2) thereof.~~

~~-40-~~

On February 19, 2014, the Compensation Committee of the Board of Directors of Bimini Capital approved certain performance bonuses for members of management. These bonuses were awarded primarily in recognition of management’s capital raising efforts in 2013. The bonuses consisted of cash and fully vested shares of the Company’s common stock issued under the 2011 Plan. In particular, executive officers received bonuses totaling approximately $422,000, consisting of 500,000 shares of the Company’s common stock with an approximate value of $190,000, and cash of approximately $232,000 which, at the officer’s election, could be used to purchase newly issued shares directly from the Company. Under this election, the officers purchased a total of 257,895 shares of the Company’s common stock. For purposes of these bonuses, the shares were valued at $0.38 per share, which was the closing market price of the Class A Common Stock on the day the Company’s Compensation Committee set the bonuses. Issuance of the shares was exempt from registration under the Securities Act of 1933 pursuant to Section 4(a)(2) thereof.

Issuer Purchases of Equity Securities

The Company did not repurchase any shares of its stock during the three months ended December 31, ~~2014.~~2015.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7. 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 financial statements and notes to those statements included in Item 8 of this Form 10-K. 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 this Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.

-37-

Year 2015 Significant Events

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”), has historically been organized, operated and taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and as of December 31, 2014, our corporate structure included two taxable REIT subsidiaries (“TRS”), and until its deconsolidation on December 31, 2014, a separately taxed REIT subsidiary, Orchid Island Capital, Inc. (“Orchid”).

Overview

Bimini Capital was formed in September 2003 to invest primarily in residential mortgage-backed securities (“MBS”) issued and guaranteed by a federally chartered corporation or agency (“Agency MBS”). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency MBS (“PT MBS”) and (ii) structured Agency MBS, 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 MBS. Beginning in 2013, and as further described below, the Company, through its wholly-owned subsidiary, also began to be an external manager of the portfolio of Orchid, and from this arrangement the Company receives management fees and expense reimbursements. In addition, the Company receives dividends from its investment in Orchid common shares. The Company treats its junior subordinated notes as an equity capital equivalent. The Company is self-managed and self-advised.

-38-

As used in this document, references to “Bimini Capital,” the parent company, and to or the general management of Bimini Capital’s portfolio of MBS refer to Bimini Capital Management, Inc. ~~Through February 19, 2013, Bimini Capital's consolidated financial statements include Orchid Island Capital, Inc. ("Orchid") as a wholly-owned qualified REIT subsidiary.~~ Orchid completed an initial public offering ("IPO") of its common stock effective February 20, 2013. After that date, and until December 31, 2014, Orchid continued to be consolidated as a variable interest entity (“VIE”) as described below. As used in this document, discussions related to REIT qualifying activities include the MBS portfolios of both Bimini Capital and ~~Orchid.~~Orchid through December 31, 2014. References to Bimini Capital’s taxable REIT subsidiaries or non-REIT eligible assets refer to Bimini Advisors, Inc., and its wholly-owned subsidiary, Bimini Advisors, LLC (together as “Bimini Advisors”) and to MortCo TRS, LLC and its consolidated subsidiaries (collectively, “MortCo”). MortCo, which was previously named Opteum Financial Services, LLC, (referred to as “OFS”) was renamed Orchid Island TRS, LLC (referred to as “OITRS”) effective July 3, 2007 and then renamed MortCo TRS, LLC effective March 8, 2011. Hereinafter, any historical mention, discussion or references to Opteum Financial Services, LLC, Orchid Island TRS, LLC, OFS or to OITRS (such as in previously filed documents or Exhibits) now mean MortCo. References to the “Company” refer to the consolidated entity which is the consolidation of Bimini Capital, Orchid, Bimini Advisors and MortCo, as of December 31, 2013 and for the years ended December 31, 2014 and 2013; and the consolidation of Bimini Capital, Bimini Advisors and MortCo as of December 31, 2014.

~~-41-~~

Bimini Capital was formed in September 2003 to invest primarily in residential mortgage related securities issued by the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Government National Mortgage Association (“Ginnie Mae”). The Company deploys its capital into two core strategies. The two strategies are a levered MBS portfolio and an unlevered structured MBS portfolio. The leverage applied to the MBS portfolio will typically be less than twelve to one. The Company manages its portfolio of agency MBS and structured MBS to generate income derived from the net interest margin of its MBS portfolio, levered predominantly under repurchase agreement funding, net of associated hedging costs, and the interest income derived from its unlevered portfolio of structured MBS. The Company treats its remaining junior subordinated notes as an equity capital equivalent. The Company is self-managed and self-advised and has elected to be taxed as a REIT for U.S. federal income tax purposes.

Management of Orchid

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors ~~and its experienced RMBS investment team~~ pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid’s business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid’s board of directors and has only such functions and authority as delegated to it.

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 MBS yields and our funding and hedging costs;

·	competition for investments in Agency MBS;

·	~~recent~~ actions taken by the Federal Reserve and the U.S. Treasury;

·	prepayment rates on mortgages underlying our Agency MBS, 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.

·	the termination of our status as a REIT for federal income tax purposes effective as of January 1, 2015 and our ability to use net operating loss carryforwards and net capital loss carryforwards to reduce our taxable income.

Consolidation of Orchid Island Capital, Inc.

Subsequent to Orchid’s IPO and until December 31, 2014, management concluded that Orchid was a VIE, as defined in generally accepted accounting principles, because Orchid’s equity holders lacked the ability through voting rights to make decisions about the activities that have a significant effect on the success of Orchid. Management also concluded that Bimini Capital was the primary beneficiary of Orchid because, under the management agreement between Bimini Advisors and Orchid, Bimini Capital had the power to direct the activities of Orchid that most significantly impact its economic performance. As a result, subsequent to Orchid’s IPO and until December 31, 2014, the Company continued to consolidate Orchid in its consolidated financial statements.

~~-42-~~-39-

In December 2014, wemanagement of Bimini Capital re-evaluated the conditions resulting in the consolidation of Orchid and concluded that, due to ~~Bimini’s~~Bimini Capital’s decreased percentage ownership interest in Orchid, ~~the management contract~~there was no longer ~~represented~~ a variable ~~interest.~~interest requiring consolidation. As a result, in accordance with ASC 810, the Company ~~has~~ deconsolidated Orchid from the consolidated balance sheet as of December 31, 2014. However, as a VIE which was deconsolidated on December 31, 2014, Orchid’s results of operations ~~are~~were included in the consolidated statements of operations, equity and cash flows through December 31, 2014, and ~~will be~~are excluded in ~~future~~subsequent periods.

~~The noncontrolling interests reported~~ During the period of time in ~~the Company’s 2013 consolidated balance sheet represented the portion of equity ownership in~~which Orchid ~~held by stockholders other than Bimini Capital. Noncontrolling interests is presented in~~was a VIE, the ~~equity section of the 2013 consolidated balance sheet, separate from equity attributed to Bimini Capital. The~~ net income of Orchid ~~through December 31, 2014~~ has been allocated ~~between~~to the noncontrolling interests and to Bimini Capital in proportion to their relative ownership interests in Orchid.

The consolidation of Orchid’s assets and liabilities with those of Bimini Capital and its wholly-owned subsidiaries asduring the period of ~~December 31, 2013 gives~~time in which Orchid was a VIE gave the appearance of a much larger organization. However, the assets recognized as a result of consolidating Orchid did not represent additional assets that could be used to satisfy claims against Bimini Capital’s assets, nor did they represent amounts that are available to be distributed to Bimini Capital’s stockholders. Conversely, liabilities recognized as a result of consolidating Orchid did not represent additional claims on Bimini Capital’s assets; rather, they represented claims against the assets of Orchid.

Impact of Consolidation on Period-to-Period Comparisons

The discussion and tables set forth below present information as of certain dates and for certain periods of time in which Orchid was consolidated as a VIE. In ~~addition~~particular, unless stated otherwise balance sheet data as of March 31, 2014, June 30, 2014 and September 30, 2014 and statement of operations data for the year ended December 31, 2014 and each quarter of 2014 reflect the consolidation of Orchid as a VIE.

The discussion and tables set forth below also present information as of certain dates and for certain periods of time in which Orchid was not consolidated as a VIE. Unless stated otherwise, balance sheet data as of December 31, 2014, March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, statement of operations data for the year ended December 31, 2015, and the statement of cash flows for the year ended December 31, 2015 do not reflect the consolidation of Orchid as a VIE.

Certain discussion and tables below provide period-to-period comparisons in which Orchid was consolidated on the first date or period and deconsolidated on the second date or period. The changes reflected in those period-to-period comparisons are due in large part to the ~~presentation~~consolidation (or deconsolidation) of the Company’s consolidated portfolio activities in this section, we have also provided additional discussion related to the portfolio activities of Bimini Capital on its own. We believe that this “parent-only” information along with the consolidated presentation provides useful information about the activities that are relevant to shareholders of Bimini Capital.Orchid.

Dividends To Stockholders

InPrior to January 1, 2015, in order to maintain its qualification as a REIT, Bimini Capital iswas required (among other ~~provisions)~~provisions in the Code) to annually distribute dividends to its stockholders in an amount at least equal to, generally, 90% of Bimini Capital’s REIT taxable income. REIT taxable income is a term that describes Bimini Capital’s operating results calculated in accordance with rules and regulations promulgated pursuant to the ~~Internal Revenue~~ Code.

Effective January 1, 2015, with the termination of Bimini Capital’s REIT taxable income is computed differently from net income as computed in accordance with generally accepted accounting principles ("GAAP net income"), as reported in the Company’s accompanying consolidated financial statements. Depending on the number and size of the various items or transactions being accounted for differently, the differences between REIT taxable income and GAAP net income can be substantial and each item can affect several reporting periods. Certain of these items are timing or temporary differences between years; for example, an itemstatus, any dividends that may be ~~a deduction for GAAP net income in the current year may not be a deduction for REIT taxable income until a later year. Others~~paid to stockholders are permanent differences that only impact either GAAP or tax. The most significant differences are as follows: the results of the Company’s taxable REIT subsidiaries do not impact REIT taxable income, unrealized gains or losses on the MBS do not impact REIT taxable income, interest income on MBS securities is computed differently for REIT taxable income and GAAP, and for tax reporting purposes Orchid’s IPO expenses (which were paidno longer deductible by Bimini ~~Advisors) are considered capital costs.~~

~~A REIT may be subject to a federal excise tax if it distributes less than 85% of its REIT~~Capital in computing taxable income by the end of the calendar year. Accordingly, dividends are based on its REIT taxable income (after considering the possible impact of applying NOLs to the income as described below in “Net Operating Losses”), as determined for federal income tax purposes, as opposed to its net income computed in accordance with GAAP (as reported in the accompanying consolidated financial statements).income.

During the ~~year~~years ended December 31, 2015 and 2014, Bimini Capital made no dividend ~~distributions as a separately reporting tax REIT.~~declarations. All distributions are made at the discretion of the Company’s Board of Directors and will depend on the Company’s results of operations, financial conditions, ~~maintenance of REIT status,~~ availability of net operating losses and other factors that may be deemed relevant. Bimini Capital continues to evaluate its dividend payment policy. However, as more fully described below, due to net operating losses incurred in prior periods, Bimini Capital is unlikely to declare and pay dividends to stockholders until such net operating losses have been consumed.

~~-43-~~

Orchid paid its first dividend on March 27, 2013 to stockholders of record as of March 25, 2013 in an amount of $0.135 per share of its common stock. Orchid has also paid dividends each month since then for a total amount of $1.395 per share of its common stock during 2013 and $2.16 during 2014.

~~Net Operating Losses~~

As described above, a REIT may be subject to a federal excise tax if it distributes less than 85% of its REIT taxable income by the end of a calendar year. In calculating the amount of excise tax payable in a given year, if any, Bimini Capital reduces REIT taxable income by distributions made to stockholders in the form of dividends and/or NOL carryforwards from prior years, to the extent any are available. Since income subject to excise tax is REIT taxable income less qualifying dividends and the application of NOLs, if a REIT has sufficient NOLs it could apply such NOLs against its taxable income and avoid excise taxes without paying qualifying dividends to stockholders. Accordingly, if in future periods Bimini Capital has taxable income, it can avoid the obligation to pay excise taxes by applying the estimated $18.0 million of NOL’s available as of December 31, 2014 against such taxable income until the NOL’s are exhausted in lieu of making distributions to stockholders. Further, Bimini Capital, could avoid the obligation to pay excise taxes through a combination of qualifying dividends and the application of NOL’s. In any case, future distributions to stockholders are expected to be less than REIT taxable income until the existing NOL’s are consumed.

Results of Operations

Described below are the Company’s results of operations for the year ended December 31, ~~2014,~~2015, as compared to the year ended December 31, ~~2013.~~2014.

-40-

Net Income ~~(Loss)~~ Summary

Consolidated net income for the year ended December 31, ~~2014~~2015 was ~~$7.7~~$59.2 million, or ~~$0.63~~$4.77 basic and diluted income per share of Class A Common Stock, as compared to consolidated net ~~loss~~income of ~~$2.3~~$7.7 million, or ~~$0.21~~$0.63 basic and diluted ~~loss~~income per share of Class A Common Stock, for the year ended December 31, ~~2013.~~ 2014. The increase in net income was due primarily to the reversal of a valuation allowance on deferred tax assets in connection with the termination of Bimini Capital’s REIT status. The comparability of the results of operations for 2015 and 2014 are affected by the inclusion of the activities of Orchid for the year ended December 31, 2015 prior to the deconsolidation date.

The components of net income ~~(loss)~~ for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, along with the changes in those components are presented in the table below:

(in thousands)
2014 2013 Change
Net portfolio interest income $ 31,157 $ 8,515 $ 22,642
Interest expense on junior subordinated notes (985 ) (995 ) 10
Gains (losses) on MBS and derivative instruments 1,160 (9,325 ) 10,485
Net portfolio income (deficiency) 31,332 (1,805 ) 33,137
Other income 3,882 7,176 (3,294 )
Expenses, including income tax benefit (5,343 ) (7,916 ) 2,573
Net income (loss) 29,871 (2,545 ) 32,416
Less: Income (loss) attributable to noncontrolling interests 22,126 (215 ) 22,341
Net income (loss) attributable to Bimini Capital Management, Inc. $ 7,745 $ (2,330 ) $ 10,075

(in thousands)
	2015			2014			Change
Net portfolio interest income	$	3,887		$	31,157		$	(27,270	)
Interest expense on junior subordinated notes		(998	)		(985	)		(13	)
(Losses) gains on MBS and derivative instruments		(3,400	)		1,160			(4,560	)
Net portfolio (deficiency) income		(511	)		31,332			(31,843	)
Other income		6,947			3,882			3,065
Expenses		(9,655	)		(7,220	)		(2,435	)
(Loss) income before income tax benefit		(3,219	)		27,994			(31,213	)
Income tax benefit		(62,450	)		(1,877	)		(60,573	)
Net income		59,231			29,871			29,360
Less: Income attributable to noncontrolling interests		-			22,126			(22,126	)
Net income attributable to Bimini Capital Management, Inc.	$	59,231		$	7,745		$	51,486

As described below, “other income” includes gains on fair value adjustments on retained interests in securitizations. The 2013 “other income” also includes approximately $4.7 million for the reversal of reserves related to certain loans MortCo had originated in its prior business.

~~-44-~~

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

To date, the Company has used derivatives, specifically interest rate futures contracts, such as Eurodollar and ~~T-Note~~Treasury Note (“T-Note”) futures contracts, and interest rate swaptions, to hedge a portion of the interest rate risk on its repurchase agreements and junior subordinate notes in a rising rate environment. Each interest rate futures contract covers a specific three month period, but the Company typically has many contracts in place at any point in time — usually covering several years in the aggregate. We currently have ~~several~~Eurodollar futures contracts in place. We previously entered into interest rate ~~swaption~~swaptions agreements ~~in place, giving~~through Orchid that gave us the option to enter into ~~pay fixed~~ swaps covering future periods.

The Company has not elected to designate its 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 the Company’s 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. In the future, the Company may use other derivative instruments to hedge its interest expense and/or elect to designate its derivative holdings for hedge accounting treatment.

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. As of December 31, ~~2014,~~2015, the Company has Eurodollar futures contracts in place through 2018. Adjusting our interest expense for the periods presented by the gains or losses on all derivative instruments would not accurately reflect our economic interest expense for these periods.

-41-

For each period presented, the Company has combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on repurchase agreements and junior subordinated notes to reflect total expense for the applicable period. 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.

However, because the Company has not elected hedging treatment under ASC Topic 815, the gains or losses on all of the Company’s derivative instruments held during the period are reflected in our consolidated statements of operations. This presentation includes gains or losses on all contracts in effect during the reporting period, including those covering both the current period as well as future periods.

The Company believes 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 the Company 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 realized and unrealized gains or losses presented in the Company’s consolidated statements of operations are not necessarily representative of the total interest rate expense that the Company will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses the Company ultimately realizes, and which will affect the Company’s total interest rate expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.

The Company’s 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 Company calculates them. Second, while the Company believes 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 the Company’s 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.

~~-45-~~-42-

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the ~~statement~~consolidated statements of operations line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for the years ended December 31, ~~2014~~2015 and ~~2013~~2014 and for each quarter during ~~2014~~2015 and ~~2013.~~2014.

Gains (Losses) on Derivative Instruments - Recognized in Statement of Operations (GAAP)
Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)										Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
				Junior										Junior
	Repurchase			Subordinated							Repurchase			Subordinated
	Agreements			Debt			Total
Three Months Ended											Agreements			Debt			Total
Consolidated
December 31, 2015											$	426		$	197		$	623
September 30, 2015												(676	)		(315	)		(991	)
June 30, 2015												7			(1	)		6
March 31, 2015												(687	)		(328	)		(1,015	)
December 31, 2014	$	(9,719	)	$	(287	)	$	(10,006	)			(9,719	)		(287	)		(10,006	)
September 30, 2014		3,257			149			3,406				3,257			149			3,406
June 30, 2014		(5,757	)		(117	)		(5,874	)			(5,757	)		(117	)		(5,874	)
March 31, 2014		(1,693	)		(24	)		(1,717	)			(1,693	)		(24	)		(1,717	)
December 31, 2013		729			(38	)		691
September 30, 2013		(2,283	)		(167	)		(2,450	)
June 30, 2013		6,841			230			7,071
March 31, 2013		(481	)		6			(475	)
Bimini Capital Only
December 31, 2015											$	426		$	197		$	623
September 30, 2015												(676	)		(315	)		(991	)
June 30, 2015												7			(1	)		6
March 31, 2015												(687	)		(328	)		(1,015	)
December 31, 2014												(158	)		(287	)		(445	)
September 30, 2014												200			149			349
June 30, 2014												(29	)		(117	)		(146	)
March 31, 2014												-			(24	)		(24	)

(in thousands)
														Junior
											Repurchase			Subordinated
Years Ended											Agreements			Debt			Total
Consolidated
December 31, 2015											$	(930	)	$	(447	)	$	(1,377	)
December 31, 2014	$	(13,912	)	$	(279	)	$	(14,191	)			(13,912	)		(279	)		(14,191	)
December 31, 2013		4,806			31			4,837
Bimini Capital Only
December 31, 2015											$	(930	)	$	(447	)	$	(1,377	)
December 31, 2014												13			(279	)		(266	)

Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
Junior
Repurchase Subordinated
Agreements Debt Total
Three Months Ended
December 31, 2014 $ (145 ) $ (136 ) $ (281 )
September 30, 2014 (24 ) (141 ) (165 )
June 30, 2014 (3 ) (127 ) (130 )
March 31, 2014 (136 ) (109 ) (245 )
December 31, 2013 (153 ) (94 ) (247 )
September 30, 2013 (121 ) (79 ) (200 )
June 30, 2013 (79 ) (105 ) (184 )
March 31, 2013 (121 ) (101 ) (222 )
Years Ended
December 31, 2014 $ (308 ) $ (513 ) $ (821 )
December 31, 2013 (474 ) (379 ) (853 )

~~-46-~~-43-

Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP)
Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)										Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
				Junior										Junior
	Repurchase			Subordinated							Repurchase			Subordinated
	Agreements			Debt			Total
Three Months Ended											Agreements			Debt			Total
Consolidated
December 31, 2015											$	(31	)	$	(80	)	$	(111	)
September 30, 2015												(20	)		(74	)		(94	)
June 30, 2015												(9	)		(64	)		(73	)
March 31, 2015												(1	)		(54	)		(55	)
December 31, 2014	$	(9,574	)	$	(151	)	$	(9,725	)			(145	)		(136	)		(281	)
September 30, 2014		3,281			290			3,571				(24	)		(141	)		(165	)
June 30, 2014		(5,754	)		10			(5,744	)			(3	)		(127	)		(130	)
March 31, 2014		(1,557	)		85			(1,472	)			(136	)		(109	)		(245	)
December 31, 2013		882			56			938
September 30, 2013		(2,162	)		(88	)		(2,250	)
June 30, 2013		6,920			335			7,255
March 31, 2013		(360	)		107			(253	)
Bimini Capital Only
December 31, 2015											$	(31	)	$	(80	)	$	(111	)
September 30, 2015												(20	)		(74	)		(94	)
June 30, 2015												(9	)		(64	)		(73	)
March 31, 2015												(1	)		(54	)		(55	)
December 31, 2014												-			(136	)		(136	)
September 30, 2014												-			(141	)		(141	)
June 30, 2014												-			(127	)		(127	)
March 31, 2014												(106	)		(109	)		(215	)

(in thousands)
														Junior
											Repurchase			Subordinated
Years Ended											Agreements			Debt			Total
Consolidated
December 31, 2015											$	(61	)	$	(272	)	$	(333	)
December 31, 2014	$	(13,604	)	$	234		$	(13,370	)			(308	)		(513	)		(821	)
December 31, 2013		5,280			410			5,690
Bimini Capital Only
December 31, 2015											$	(61	)	$	(272	)	$	(333	)
December 31, 2014												(106	)		(513	)		(619	)

Economic Net Portfolio Interest Income
(in thousands)
Interest Expense on Repurchase Agreements Net Portfolio
Effect of Interest Income
Interest GAAP Non-GAAP Economic GAAP Economic
Income Basis
Hedges(1)

Basis(2)
Basis
Basis(3)

Three Months Ended
December 31, 2014 $ 13,168 $ 1,213 $ (145 ) $ 1,358 $ 11,955 $ 11,810
September 30, 2014 10,035 886 (24 ) 910 9,149 9,125
June 30, 2014 7,119 728 (3 ) 731 6,391 6,388
March 31, 2014 4,116 454 (136 ) 590 3,662 3,526
December 31, 2013 3,021 343 (153 ) 496 2,678 2,525
September 30, 2013 2,768 329 (121 ) 450 2,439 2,318
June 30, 2013 2,480 361 (79 ) 440 2,119 2,040
March 31, 2013 1,526 247 (121 ) 368 1,279 1,158
Years Ended
December 31, 2014 $ 34,438 $ 3,281 $ (308 ) $ 3,589 $ 31,157 $ 30,849
December 31, 2013 9,795 1,280 (474 ) 1,754 8,515 8,041

-44-

Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP)
(in thousands)
				Junior
	Repurchase			Subordinated
Three Months Ended	Agreements			Debt			Total
Consolidated
December 31, 2015	$	457		$	277		$	734
September 30, 2015		(656	)		(241	)		(897	)
June 30, 2015		16			63			79
March 31, 2015		(686	)		(274	)		(960	)
December 31, 2014		(9,574	)		(151	)		(9,725	)
September 30, 2014		3,281			290			3,571
June 30, 2014		(5,754	)		10			(5,744	)
March 31, 2014		(1,557	)		85			(1,472	)
Bimini Capital Only
December 31, 2015	$	457		$	277		$	734
September 30, 2015		(656	)		(241	)		(897	)
June 30, 2015		16			63			79
March 31, 2015		(686	)		(274	)		(960	)
December 31, 2014		(158	)		(151	)		(309	)
September 30, 2014		199			290			489
June 30, 2014		(29	)		10			(19	)
March 31, 2014		106			85			191

(in thousands)
				Junior
	Repurchase			Subordinated
Years Ended	Agreements			Debt			Total
Consolidated
December 31, 2015	$	(869	)	$	(175	)	$	(1,044	)
December 31, 2014		(13,604	)		234			(13,370	)
Bimini Capital Only
December 31, 2015	$	(869	)	$	(175	)	$	(1,044	)
December 31, 2014		118			234			352

-45-

Economic Net Portfolio Interest Income
(in thousands)
			Interest Expense on Repurchase Agreements
					Gains
					(Losses) on
					Derivative
					Instruments					Net Portfolio
					Attributed					Interest Income
	Interest		GAAP		to Current			Economic		GAAP		Economic
Three Months Ended	Income		Basis		Period(1)			Basis(2)		Basis		Basis
Consolidated
December 31, 2015	$	1,035	$	120	$	(31	)	$	151	$	915	$	884
September 30, 2015		996		107		(20	)		127		889		869
June 30, 2015		1,074		98		(9	)		107		976		967
March 31, 2015		1,207		100		(1	)		101		1,107		1,106
December 31, 2014		13,168		1,213		(145	)		1,358		11,955		11,810
September 30, 2014		10,035		886		(24	)		910		9,149		9,125
June 30, 2014		7,119		728		(3	)		731		6,391		6,388
March 31, 2014		4,116		454		(136	)		590		3,662		3,526
Bimini Capital Only
December 31, 2015	$	1,035	$	120	$	(31	)	$	151	$	915	$	884
September 30, 2015		996		107		(20	)		127		889		869
June 30, 2015		1,074		98		(9	)		107		976		967
March 31, 2015		1,207		100		(1	)		101		1,107		1,106
December 31, 2014		1,022		87		-			87		935		935
September 30, 2014		749		67		-			67		682		682
June 30, 2014		530		52		-			52		478		478
March 31, 2014		333		43		(106	)		149		290		184

(in thousands)
			Interest Expense on Repurchase Agreements
					Gains
					(Losses) on
					Derivative
					Instruments					Net Portfolio
					Attributed					Interest Income
	Interest		GAAP		to Current			Economic		GAAP		Economic
Years Ended	Income		Basis		Period(1)			Basis(2)		Basis		Basis
Consolidated
December 31, 2015	$	4,312	$	425	$	(61	)	$	486	$	3,887	$	3,826
December 31, 2014		34,438		3,281		(308	)		3,589		31,157		30,849
Bimini Capital Only
December 31, 2015	$	4,312	$	425	$	(61	)	$	486	$	3,887	$	3,826
December 31, 2014		2,634		249		(106	)		355		2,385		2,279

(1)	Reflects the effect of derivative instrument hedges for only the period presented.

(2)	Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.

(3)	Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net portfolio interest income.

~~-47-~~-46-

Economic Net Interest Income	Economic Net Interest Income																Economic Net Interest Income
(in thousands)	(in thousands)																(in thousands)
		Net Portfolio				Interest Expense on Junior Subordinated Notes												Net Portfolio				Interest Expense on Junior Subordinated Notes
		Interest Income						Effect of					Net Interest Income					Interest Income						Effect of					Net Interest Income
		GAAP		Economic		GAAP		Non-GAAP			Economic		GAAP		Economic			GAAP		Economic		GAAP		Non-GAAP			Economic		GAAP		Economic
		Basis		Basis(1)		Basis		Hedges(2)			Basis(3)		Basis		Basis(4)
Three Months Ended	Three Months Ended																	Basis		Basis(1)		Basis		Hedges(2)			Basis(3)		Basis		Basis
Consolidated																	Consolidated
December 31, 2015																		$	915	$	884	$	255	$	(80	)	$	335	$	660	$	549
September 30, 2015																			889		869		252		(74	)		326		637		543
June 30, 2015																			976		967		248		(64	)		312		728		655
March 31, 2015																			1,107		1,106		243		(54	)		297		864		809
December 31, 2014		$	11,955	$	11,810	$	248	$	(136	)	$	384	$	11,707	$	11,426			11,955		11,810		248		(136	)		384		11,707		11,426
September 30, 2014			9,149		9,125		248		(141	)		389		8,901		8,736			9,150		9,126		248		(141	)		389		8,902		8,737
June 30, 2014			6,391		6,388		245		(127	)		372		6,146		6,016			6,391		6,388		245		(127	)		372		6,146		6,016
March 31, 2014			3,662		3,526		243		(109	)		352		3,419		3,174			3,662		3,526		243		(109	)		352		3,419		3,174
December 31, 2013			2,678		2,525		249		(94	)		343		2,429		2,182
September 30, 2013			2,439		2,318		251		(80	)		331		2,188		1,987
June 30, 2013			2,119		2,040		248		(105	)		353		1,871		1,687
March 31, 2013			1,279		1,158		247		(101	)		348		1,032		810
Bimini Capital Only																	Bimini Capital Only
December 31, 2015																		$	915	$	884	$	255	$	(80	)	$	335	$	660	$	549
September 30, 2015																			889		869		252		(74	)		326		637		543
June 30, 2015																			976		967		248		(64	)		312		728		655
March 31, 2015																			1,107		1,106		243		(54	)		297		864		809
December 31, 2014																			935		935		248		(136	)		384		687		551
September 30, 2014																			682		682		248		(141	)		389		434		293
June 30, 2014																			478		478		245		(127	)		372		233		106
March 31, 2014																			290		184		243		(109	)		352		47		(168	)

(in thousands)																	(in thousands)
																		Net Portfolio				Interest Expense on Junior Subordinated Notes
																		Interest Income						Effect of					Net Interest Income
																		GAAP		Economic		GAAP		Non-GAAP			Economic		GAAP		Economic
Years Ended	Years Ended																	Basis		Basis(1)		Basis		Hedges(2)			Basis(3)		Basis		Basis
Consolidated																	Consolidated
December 31, 2015																		$	3,887	$	3,826	$	998	$	(272	)	$	1,270	$	2,889	$	2,556
December 31, 2014		$	31,157	$	30,849	$	984	$	(513	)	$	1,497	$	30,173	$	29,352			31,158		30,850		984		(513	)		1,497		30,174		29,353
December 31, 2013			8,515		8,041		995		(380	)		1,375		7,520		6,666
Bimini Capital Only																	Bimini Capital Only
December 31, 2015																		$	3,887	$	3,826	$	998	$	(272	)	$	1,270	$	2,889	$	2,556
December 31, 2014																			2,385		2,279		984		(513	)		1,497		1,401		782

(1)	Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net portfolio interest income.

(2)	Reflects the effect of derivative instrument hedges for only the period presented.

(3)	Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.

(4)	Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net interest income.

Net Portfolio Income

During the year ended December 31, 2015, the Company generated $3.9 million of net portfolio interest income, consisting of $4.3 million of interest income from MBS assets offset by $0.4 million of interest expense on repurchase liabilities. For the year ended December 31, 2014, the Company generated $31.2 million of net portfolio interest income, consisting of $34.4 million of interest income from MBS assets offset by $3.3 million of interest expense on repurchase liabilities. ~~For the comparable period ended December 31, 2013, the Company generated $8.5~~The $30.1 million ~~of net portfolio interest income, consisting of $9.8 million of interest income from MBS assets offset by $1.3 million of interest expense on repurchase liabilities. The increases~~decrease in interest income and $2.9 million decrease in interest expense for the year ended December 31, ~~2014~~2015 primarily ~~reflect~~reflects the ~~deployment of the proceeds~~deconsolidation of Orchid’s assets and liabilities from the balance sheet beginning December 31, 2014 ~~capital raising activities into~~and the ~~MBS portfolio~~effect this had on ~~a leveraged basis.~~the Company’s consolidated statement of operations.

-47-

The Company’s economic interest expense on repurchase liabilities for the years ended December 31, 2015 and 2014 ~~and 2013~~ was ~~$3.6~~$0.5 million and ~~$1.8~~$3.6 million, respectively, resulting in ~~$30.8~~$3.8 million and ~~$8.0~~$30.8 million of economic net portfolio interest income, respectively.

The discussion above and in the following sections related to the Company’s net portfolio income during the year ended December 31, 2014 includes the activities of Orchid as a VIE. Orchid’s activities are not included for the year December 31, 2015. During the year ended December 31, 2015, Bimini Capital generated $3.9 million of net portfolio interest income, consisting of $4.3 million of interest income from MBS assets offset by $0.4 million of interest expense on repurchase liabilities. For the comparable period ended December 31, 2014, Bimini Capital generated $2.4 million of net portfolio interest income, consisting of $2.6 million of interest income from MBS assets offset by $0.2 million of interest expense on repurchase liabilities. For the comparable period ended December 31, 2013, Bimini Capital generated $0.4 million of net portfolio interest income, consisting of $0.6 million of interest income from MBS assets offset by $0.2 million of interest expense on repurchase liabilities.

Bimini’s economic interest expense on repurchase liabilities for the years ended December 31, 2015 and 2014 ~~and 2013~~ was ~~$0.4~~$0.5 million and ~~$0.5~~$0.4 million, respectively, resulting in ~~$2.3~~$3.8 million and ~~$0.1~~$2.3 million of economic net portfolio interest income, respectively.

~~-48-~~

The tables below provide consolidated information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for each quarter in ~~2014~~2015 and ~~2013~~2014 and for the years ended December 31, ~~2014~~2015 and ~~2013~~2014 on both a GAAP and economic basis.

($ in thousands)
	Average				Yield on			Average		Interest Expense				Average Cost of Funds						Average				Yield on			Average		Interest Expense				Average Cost of Funds
	MBS		Interest		Average			Repurchase		GAAP		Economic		GAAP			Economic			MBS		Interest		Average			Repurchase		GAAP		Economic		GAAP			Economic
	Held(1)		Income(2)		MBS			Agreements(1)		Basis		Basis(2)		Basis			Basis(3)
Three Months Ended																				Held(1)		Income(2)		MBS			Agreements(1)		Basis		Basis(2)		Basis			Basis(3)
Consolidated
December 31, 2015																				$	103,551	$	1,035		4.00	%	$	95,456	$	119	$	151		0.50	%		0.63	%
September 30, 2015																					115,437		996		3.45	%		107,442		108		127		0.40	%		0.47	%
June 30, 2015																					111,674		1,074		3.85	%		103,750		98		107		0.38	%		0.41	%
March 31, 2015																					116,709		1,207		4.14	%		108,129		100		101		0.37	%		0.37	%
December 31, 2014	$	1,466,048	$	13,168		3.59	%	$	1,442,905	$	1,213	$	1,358		0.34	%		0.38	%		1,466,048		13,168		3.59	%		1,442,905		1,213		1,358		0.34	%		0.38	%
September 30, 2014		1,108,367		10,035		3.62	%		1,096,611		886		910		0.32	%		0.33	%		1,108,367		10,035		3.62	%		1,096,611		886		910		0.32	%		0.33	%
June 30, 2014		882,591		7,119		3.23	%		783,323		728		731		0.37	%		0.37	%		882,591		7,119		3.23	%		783,323		728		731		0.37	%		0.37	%
March 31, 2014		601,441		4,116		2.74	%		533,008		454		590		0.34	%		0.44	%		601,441		4,116		2.74	%		533,008		454		590		0.34	%		0.44	%
December 31, 2013		380,341		3,021		3.18	%		345,068		343		496		0.40	%		0.57	%
September 30, 2013		375,950		2,768		2.94	%		341,468		329		450		0.39	%		0.53	%
June 30, 2013		392,429		2,480		2.53	%		350,714		361		440		0.41	%		0.50	%
March 31, 2013		286,226		1,526		2.13	%		252,763		247		368		0.39	%		0.58	%
Bimini Capital Only
December 31, 2015																				$	103,551	$	1,035		4.00	%	$	95,456	$	119	$	151		0.50	%		0.63	%
September 30, 2015																					115,437		996		3.45	%		107,442		108		127		0.40	%		0.47	%
June 30, 2015																					111,674		1,074		3.85	%		103,750		98		107		0.38	%		0.41	%
March 31, 2015																					116,709		1,207		4.14	%		108,129		100		101		0.37	%		0.37	%
December 31, 2014																					103,696		1,022		3.94	%		96,591		87		86		0.36	%		0.36	%
September 30, 2014																					82,599		749		3.63	%		76,772		67		67		0.35	%		0.35	%
June 30, 2014																					70,710		530		3.00	%		65,849		53		53		0.32	%		0.32	%
March 31, 2014																					51,951		333		2.57	%		48,106		43		149		0.36	%		1.24	%

($ in thousands)
																				Average				Yield on			Average		Interest Expense				Average Cost of Funds
																				MBS		Interest		Average			Repurchase		GAAP		Economic		GAAP			Economic
Years Ended																				Held(1)		Income(2)		MBS			Agreements(1)		Basis		Basis(2)		Basis			Basis(3)
Consolidated
December 31, 2015																				$	111,843	$	4,312		3.86	%	$	103,694	$	425	$	486		0.41	%		0.47	%
December 31, 2014	$	1,014,612	$	34,438		3.39	%	$	963,962	$	3,281	$	3,589		0.34	%		0.37	%		1,014,612		34,438		3.39	%		963,962		3,281		3,589		0.34	%		0.37	%
December 31, 2013		358,737		9,795		2.73	%		322,503		1,280		1,754		0.40	%		0.54	%
Bimini Capital Only
December 31, 2015																				$	111,843	$	4,312		3.86	%	$	103,694	$	425	$	486		0.41	%		0.47	%
December 31, 2014																					77,239		2,634		3.41	%		71,830		250		355		0.35	%		0.49	%

($ in thousands)
Net Portfolio Net Portfolio
Interest Income Interest Spread
GAAP Economic GAAP Economic
Basis
Basis(2)
Basis
Basis(4)

Three Months Ended
December 31, 2014 $ 11,955 $ 11,810 3.25 % 3.21 %
September 30, 2014 9,149 9,125 3.30 % 3.29 %
June 30, 2014 6,391 6,388 2.86 % 2.86 %
March 31, 2014 3,662 3,526 2.40 % 2.30 %
December 31, 2013 2,678 2,525 2.78 % 2.61 %
September 30, 2013 2,439 2,318 2.55 % 2.41 %
June 30, 2013 2,119 2,040 2.12 % 2.03 %
March 31, 2013 1,279 1,158 1.74 % 1.55 %
Years Ended
December 31, 2014 $ 31,157 $ 30,849 3.05 % 3.02 %
December 31, 2013 8,515 8,041 2.33 % 2.19 %

-48-

($ in thousands)
	Net Portfolio				Net Portfolio
	Interest Income				Interest Spread
	GAAP		Economic		GAAP			Economic
Three Months Ended	Basis		Basis(2)		Basis			Basis(4)
Consolidated
December 31, 2015	$	915	$	884		3.50	%		3.37	%
September 30, 2015		889		869		3.05	%		2.98	%
June 30, 2015		976		967		3.47	%		3.44	%
March 31, 2015		1,107		1,106		3.77	%		3.77	%
December 31, 2014		11,955		11,810		3.25	%		3.21	%
September 30, 2014		9,150		9,126		3.30	%		3.29	%
June 30, 2014		6,391		6,388		2.86	%		2.86	%
March 31, 2014		3,662		3,526		2.40	%		2.30	%
Bimini Capital Only
December 31, 2015	$	915	$	884		3.50	%		3.37	%
September 30, 2015		889		869		3.05	%		2.98	%
June 30, 2015		976		967		3.47	%		3.44	%
March 31, 2015		1,107		1,106		3.77	%		3.77	%
December 31, 2014		935		935		3.58	%		3.58	%
September 30, 2014		682		682		3.28	%		3.28	%
June 30, 2014		478		478		2.68	%		2.68	%
March 31, 2014		290		184		2.21	%		1.33	%

($ in thousands)
	Net Portfolio				Net Portfolio
	Interest Income				Interest Spread
	GAAP		Economic		GAAP			Economic
Years Ended	Basis		Basis(2)		Basis			Basis(4)
Consolidated
December 31, 2015	$	3,887	$	3,826		3.45	%		3.39	%
December 31, 2014		31,158		30,850		3.05	%		3.02	%
Bimini Capital Only
December 31, 2015	$	3,887	$	3,826		3.45	%		3.39	%
December 31, 2014		2,385		2,279		3.06	%		2.92	%

(1)

Portfolio yields and costs of borrowings presented in the ~~table~~tables above and the tables on pages ~~50 and 51~~50-52 are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances. The ending balances at December 31, 2014 used for calculating averages include the portfolio/repurchase agreement balances of Orchid Island Capital, Inc.

(2)	Economic interest expense and economic net interest income presented in the tables above and the tables on ~~page 51~~pages 51-52 include the effect of derivative instrument hedges for only the period presented.

(3)	Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period related to hedging activities divided by Average MBS Held.

(4)	Economic Net Interest Spread is calculated by subtracting Average Economic Cost of Funds from Yield on Average MBS.

~~-49-~~

Interest Income and Average Earning Asset Yield

Interest income for the Company was ~~$34.4~~$4.3 million for the year ended December 31, ~~2014~~2015 and ~~$9.8~~$34.4 million for year ended December 31, ~~2013.~~2014. Average MBS holdings were ~~$1,014.6~~$111.8 million and ~~$358.7~~$1,014.6 million for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively. The ~~$24.6~~$30.1 million ~~increase~~decrease in interest income was due to a ~~$655.9~~$902.8 million ~~increase~~decrease in average MBS holdings, ~~combined with~~offset by a 6647 basis point increase in yields. The ~~increase~~decrease in average MBS during the year ended December 31, ~~2014~~2015 reflects the ~~deployment of the proceeds~~deconsolidation of Orchid’s ~~2014 capital raising activities, on a leveraged basis.~~assets as of December 31, 2014.

-49-

Interest income for Bimini Capital was $4.3 million for the year ended December 31, 2015 and $2.6 million for the year ended December 31, 2014. Average MBS holdings were $111.8 million and $77.2 million for the years ended December 31, ~~2014~~2015 and ~~$0.6 million for the years ended December 31, 2013. Average MBS holdings were $77.2 million and $42.6 million for the years ended December 31,~~ 2014, ~~and 2013,~~ respectively. The ~~$2.0~~$1.7 million increase in interest income was due to a combination of a ~~201~~45 basis point increase in yields and a $34.6 million increase in average MBS holdings.

The ~~table~~tables below ~~presents~~present the consolidated average portfolio size, income and yields of our respective sub-portfolios, consisting of structured MBS and pass-through MBS (“PT MBS”).

($ in thousands)
		Average MBS Held						Interest Income							Realized Yield on Average MBS										Average MBS Held						Interest Income							Realized Yield on Average MBS
		PT		Structured				PT		Structured					PT			Structured							PT		Structured				PT		Structured					PT			Structured
		MBS		MBS		Total		MBS		MBS			Total		MBS			MBS			Total
Three Months Ended	Three Months Ended																								MBS		MBS		Total		MBS		MBS			Total		MBS			MBS			Total
Consolidated																								Consolidated
December 31, 2015																									$	98,585	$	4,966	$	103,551	$	1,057	$	(22	)	$	1,035		4.29	%		(1.82	)%		4.00	%
September 30, 2015																										109,582		5,855		115,437		1,038		(42	)		996		3.79	%		(2.90	)%		3.45	%
June 30, 2015																										105,368		6,306		111,674		1,031		43			1,074		3.91	%		2.75	%		3.85	%
March 31, 2015																										111,035		5,674		116,709		1,090		117			1,207		3.93	%		8.25	%		4.14	%
December 31, 2014		$	1,397,518	$	68,530	$	1,466,048	$	13,719	$	(551	)	$	13,168		3.93	%		(3.21	)%		3.59	%			1,397,518		68,530		1,466,048		13,719		(551	)		13,168		3.93	%		(3.21	)%		3.59	%
September 30, 2014			1,048,424		59,943		1,108,367		10,266		(231	)		10,035		3.92	%		(1.55	)%		3.62	%			1,048,424		59,943		1,108,367		10,266		(231	)		10,035		3.92	%		(1.55	)%		3.62	%
June 30, 2014			833,497		49,094		882,591		8,303		(1,184	)		7,119		3.98	%		(9.64	)%		3.23	%			833,497		49,094		882,591		8,303		(1,184	)		7,119		3.98	%		(9.64	)%		3.23	%
March 31, 2014			564,540		36,901		601,441		4,852		(736	)		4,116		3.44	%		(7.97	)%		2.74	%			564,540		36,901		601,441		4,852		(736	)		4,116		3.44	%		(7.97	)%		2.74	%
December 31, 2013			355,868		24,473		380,341		3,011		10			3,021		3.38	%		0.16	%		3.18	%
September 30, 2013			352,252		23,698		375,950		2,704		64			2,768		3.07	%		1.07	%		2.94	%
June 30, 2013			366,862		25,567		392,429		2,805		(325	)		2,480		3.06	%		(5.09	)%		2.53	%
March 31, 2013			268,024		18,202		286,226		1,714		(188	)		1,526		2.56	%		(4.13	)%		2.13	%
Bimini Capital Only																								Bimini Capital Only
December 31, 2015																									$	98,585	$	4,966	$	103,551	$	1,057	$	(22	)	$	1,035		4.29	%		(1.82	)%		4.00	%
September 30, 2015																										109,582		5,855		115,437		1,038		(42	)		996		3.79	%		(2.90	)%		3.45	%
June 30, 2015																										105,368		6,306		111,674		1,031		43			1,074		3.91	%		2.75	%		3.85	%
March 31, 2015																										111,035		5,674		116,709		1,090	��	117			1,207		3.93	%		8.25	%		4.14	%
December 31, 2014																										98,552		5,144		103,696		957		65			1,022		3.89	%		5.01	%		3.94	%
September 30, 2014																										79,390		3,209		82,599		784		(35	)		749		3.95	%		(4.36	)%		3.63	%
June 30, 2014																										69,298		1,412		70,710		629		(99	)		530		3.63	%		(27.87	)%		3.00	%
March 31, 2014																										50,315		1,636		51,951		450		(117	)		333		3.58	%		(28.49	)%		2.57	%

($ in thousands)
																									Average MBS Held						Interest Income							Realized Yield on Average MBS
																									PT		Structured				PT		Structured					PT			Structured
Years Ended	Years Ended																								MBS		MBS		Total		MBS		MBS			Total		MBS			MBS			Total
Consolidated																								Consolidated
December 31, 2015																									$	106,143	$	5,700	$	111,843	$	4,216	$	96		$	4,312		3.97	%		1.67	%		3.86	%
December 31, 2014		$	960,995	$	53,617	$	1,014,612	$	37,140	$	(2,702	)	$	34,438		3.86	%		(5.04	)%		3.39	%			960,995		53,617		1,014,612		37,140		(2,702	)		34,438		3.86	%		(5.04	)%		3.39	%
December 31, 2013			335,751		22,986		358,737		10,234		(439	)		9,795		3.05	%		(1.91	)%		2.73	%
Bimini Capital Only																								Bimini Capital Only
December 31, 2015																									$	106,143	$	5,700	$	111,843	$	4,216	$	96		$	4,312		3.97	%		1.67	%		3.86	%
December 31, 2014																										74,389		2,850		77,239		2,820		(186	)		2,634		3.79	%		(6.51	)%		3.41	%

Interest Expense on Repurchase Agreements and the Cost of Funds

Average outstanding repurchase agreements for the Company were ~~$964.0~~$103.7 million and ~~$322.5~~$964.0 million, generating interest expense of ~~$3.3~~$0.4 million and ~~$1.3~~$3.3 million for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively. Our average cost of funds was ~~0.34%~~0.41% and ~~0.40%~~0.34% for years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively. There was a 67 basis point ~~decrease~~increase in the average cost of funds and a ~~$641.5~~$860.3 million ~~increase~~decrease in average outstanding repurchase agreements during the year ended December 31, ~~2014~~2015 as compared to the year ended December 31, ~~2013.~~2014. The ~~increase~~decrease in average outstanding repurchase agreements, and the corresponding ~~increase~~decrease in interest expense, reflects the ~~leveraging~~deconsolidation of ~~the proceeds~~Orchid as of ~~Orchid’s 2014 capital raising activities.~~December 31, 2014.

-50-

The Company’s economic interest expense was ~~$3.6~~$0.5 million and ~~$1.8~~$3.6 million for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively. There was a 1710 basis point ~~decrease~~increase in the average economic cost of funds to ~~0.37%~~0.47% for the year ended December 31, ~~2014~~2015 from ~~0.54%~~0.37% for the previous year.

Average outstanding repurchase agreements for Bimini Capital were $103.7 million and total interest expense was $0.4 million for the year ended December 31, 2015. During the year ended December 31, 2014, average outstanding repurchase agreements for Bimini Capital were $71.8 million and total interest expense was $0.2 million for the year ended December 31, 2014. During the year ended December 31, 2013, average outstanding repurchase agreements for Bimini Capital were $38.0 million and total interest expense was $0.2 million. Bimini Capital’s average cost of funds was ~~0.35%~~0.41% and ~~0.40%~~0.35% for years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively.

Bimini Capital’s economic interest expense was ~~$0.4~~$0.5 million and ~~$0.5~~$0.4 million for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively. There was ~~an 80~~a 2 basis point decrease in the average economic cost of funds to ~~0.49%~~0.47% for the year ended December 31, ~~2014~~2015 from ~~1.29%~~0.49% for the previous year.

~~-50-~~

Since all of ~~the~~ our repurchase agreements are short-term, changes in market rates directly affect our interest expense. The Company’s average cost of funds calculated on a GAAP basis was ~~18 basis points above average one-month LIBOR and equal to average six-month LIBOR for the quarter ended December 31, 2014. The Company’s average economic cost of funds was~~ 22 basis points above average one-month LIBOR and 422 basis points above average six-month LIBOR for the quarter ended December 31, ~~2014.~~2015. The Company’s average economic cost of funds was 35 basis points above average one-month LIBOR and 2 basis points below average six-month LIBOR for the quarter ended December 31, 2015. The average term to maturity of the outstanding repurchase agreements ~~decreased~~increased from ~~15 days at December 31, 2013 to~~ 14 days at December 31, ~~2014.~~2014 to 17 days at December 31, 2015.

The tables below present the consolidated average outstanding balance under all repurchase agreements, interest expense and average economic cost of funds, and average one-month and six-month LIBOR rates for each quarter in ~~2014~~2015 and ~~2013~~2014 and for the years ended December 31, ~~2014~~2015 and ~~2013~~2014 on both a GAAP and economic basis.

($ in thousands)
	Average												Average
	Balance of		Interest Expense				Average Cost of Funds						Balance of		Interest Expense				Average Cost of Funds
	Repurchase		GAAP		Economic		GAAP			Economic			Repurchase		GAAP		Economic		GAAP			Economic
	Agreements		Basis		Basis		Basis			Basis
Three Months Ended													Agreements		Basis		Basis		Basis			Basis
Consolidated
December 31, 2015													$	95,456	$	119	$	151		0.50	%		0.63	%
September 30, 2015														107,442		108		127		0.40	%		0.47	%
June 30, 2015														103,750		98		107		0.38	%		0.41	%
March 31, 2015														108,129		100		101		0.37	%		0.37	%
December 31, 2014	$	1,442,905	$	1,213	$	1,358		0.34	%		0.38	%		1,442,905		1,213		1,358		0.34	%		0.38	%
September 30, 2014		1,096,611		886		910		0.32	%		0.33	%		1,096,611		885		910		0.32	%		0.33	%
June 30, 2014		783,323		728		731		0.37	%		0.37	%		783,323		728		731		0.37	%		0.37	%
March 31, 2014		533,008		454		590		0.34	%		0.44	%		533,008		454		590		0.34	%		0.44	%
December 31, 2013		345,068		343		496		0.40	%		0.57	%
September 30, 2013		341,468		329		450		0.39	%		0.53	%
June 30, 2013		350,714		361		440		0.41	%		0.50	%
March 31, 2013		252,763		247		368		0.39	%		0.58	%
Years Ended
Bimini Capital Only
December 31, 2015													$	95,456	$	119	$	151		0.50	%		0.63	%
September 30, 2015														107,442		108		127		0.40	%		0.47	%
June 30, 2015														103,750		98		107		0.38	%		0.41	%
March 31, 2015														108,129		100		101		0.37	%		0.37	%
December 31, 2014	$	963,962	$	3,281		3,589		0.34	%		0.37	%		96,591		87		86		0.36	%		0.36	%
December 31, 2013		322,503		1,280		1,754		0.40	%		0.54	%
September 30, 2014														76,772		67		67		0.35	%		0.35	%
June 30, 2014														65,849		53		53		0.32	%		0.32	%
March 31, 2014														48,106		43		149		0.36	%		1.24	%

-51-

Average GAAP Cost of Funds Average Economic Cost of Funds
Relative to Average Relative to Average
Average LIBOR One-Month Six-Month One-Month Six-Month
One-Month Six-Month LIBOR LIBOR LIBOR LIBOR
Three Months Ended
December 31, 2014 0.16 % 0.34 % 0.18 % 0.00 % 0.22 % 0.04 %
September 30, 2014 0.15 % 0.33 % 0.17 % (0.01 )% 0.18 % 0.00 %
June 30, 2014 0.15 % 0.33 % 0.22 % 0.04 % 0.22 % 0.04 %
March 31, 2014 0.16 % 0.34 % 0.18 % 0.00 % 0.28 % 0.10 %
December 31, 2013 0.17 % 0.36 % 0.23 % 0.04 % 0.40 % 0.21 %
September 30, 2013 0.19 % 0.40 % 0.20 % (0.01 )% 0.34 % 0.13 %
June 30, 2013 0.20 % 0.43 % 0.21 % (0.02 )% 0.30 % 0.07 %
March 31, 2013 0.21 % 0.48 % 0.18 % (0.09 )% 0.37 % 0.10 %
Years Ended
December 31, 2014 0.16 % 0.33 % 0.18 % 0.01 % 0.21 % 0.04 %
December 31, 2013 0.19 % 0.42 % 0.21 % (0.02 )% 0.35 % 0.12 %

($ in thousands)
		Average
		Balance of		Interest Expense			Average Cost of Funds
		Repurchase		GAAP		Economic	GAAP	Economic
Years Ended		Agreements		Basis		Basis	Basis	Basis
Consolidated
December 31, 2015	$	103,694	$	425		486	0.41%	0.47%
December 31, 2014		963,962		3,280		3,589	0.34%	0.37%
Bimini Capital Only
December 31, 2015	$	103,694	$	425	-	486	0.41%	0.47%
December 31, 2014		71,830		250		355	0.35%	0.49%

							Average GAAP Cost of Funds						Average Economic Cost of Funds
							Relative to Average						Relative to Average
	Average LIBOR						One-Month			Six-Month			One-Month			Six-Month
Three Months Ended	One-Month			Six-Month			LIBOR			LIBOR			LIBOR			LIBOR
Consolidated
December 31, 2015		0.28	%		0.65	%		0.22	%		(0.15	)%		0.35	%		(0.02	)%
September 30, 2015		0.19	%		0.49	%		0.21	%		(0.09	)%		0.28	%		(0.02	)%
June 30, 2015		0.18	%		0.40	%		0.20	%		(0.02	)%		0.23	%		0.01	%
March 31, 2015		0.17	%		0.35	%		0.20	%		0.02	%		0.20	%		0.02	%
December 31, 2014		0.16	%		0.34	%		0.18	%		0.00	%		0.22	%		0.04	%
September 30, 2014		0.15	%		0.33	%		0.17	%		(0.01	)%		0.18	%		0.00	%
June 30, 2014		0.15	%		0.33	%		0.22	%		0.04	%		0.22	%		0.04	%
March 31, 2014		0.16	%		0.34	%		0.18	%		0.00	%		0.28	%		0.10	%
Bimini Capital Only
December 31, 2015		0.28	%		0.65	%		0.22	%		(0.15	)%		0.35	%		(0.02	)%
September 30, 2015		0.19	%		0.49	%		0.21	%		(0.09	)%		0.28	%		(0.02	)%
June 30, 2015		0.18	%		0.40	%		0.20	%		(0.02	)%		0.23	%		0.01	%
March 31, 2015		0.17	%		0.35	%		0.20	%		0.02	%		0.20	%		0.02	%
December 31, 2014		0.16	%		0.34	%		0.20	%		0.02	%		0.20	%		0.02	%
September 30, 2014		0.15	%		0.33	%		0.20	%		0.02	%		0.20	%		0.02	%
June 30, 2014		0.15	%		0.33	%		0.17	%		(0.01	)%		0.17	%		(0.01	)%
March 31, 2014		0.16	%		0.34	%		0.20	%		0.02	%		1.08	%		0.90	%

							Average GAAP Cost of Funds						Average Economic Cost of Funds
							Relative to Average						Relative to Average
	Average LIBOR						One-Month			Six-Month			One-Month			Six-Month
Years Ended	One-Month			Six-Month			LIBOR			LIBOR			LIBOR			LIBOR
Consolidated
December 31, 2015		0.21	%		0.47	%		0.20	%		(0.06	)%		0.26	%		(0.00	)%
December 31, 2014		0.16	%		0.33	%		0.18	%		0.01	%		0.21	%		0.04	%
Bimini Capital Only
December 31, 2015		0.21	%		0.47	%		0.20	%		(0.06	)%		0.26	%		(0.00	)%
December 31, 2014		0.16	%		0.33	%		0.19	%		0.02	%		0.20	%		0.16	%

~~-51-~~-52-

Junior Subordinated Notes

Interest expense on the Company’s junior subordinated debt securities was approximately $1.0 million for both of the years ended December 31, ~~2014~~2015 and ~~2013.~~2014. The average rate of interest paid for the year ended December 31, ~~2014~~2015 was ~~3.74%~~3.79% compared to ~~3.78%~~3.74% for the comparable period in ~~2013.~~2014. The junior subordinated debt securities pay interest at a floating rate. The rate is adjusted quarterly and set at a spread of 3.50% over the prevailing three-month LIBOR rate on the determination date. As of December 31, ~~2014,~~2015, the interest rate was ~~3.74%~~4.01%.

Gains or Losses and Other Income

The table below presents the Company’s gains or losses and other income for the years ended December 31, ~~2014~~2015 and ~~2013.~~2014.

(in thousands)
2014 2013 Change
Realized gains (losses) on sales of MBS $ 2,949 $ (1,249 ) $ 4,198
Unrealized gains (losses) on MBS 12,402 (12,914 ) 25,316
Total gains (losses) on MBS 15,351 (14,163 ) 29,514
(Losses) gains on interest rate futures (9,752 ) 4,837 (14,589 )
Gains on retained interests 3,815 2,470 1,345
Loss on payer swaptions (4,439 ) - (4,439 )
Gains on release of loan loss reserves - 4,737 (4,737 )

(in thousands)
	2015			2014			Change
Realized (losses) gains on sales of MBS	$	(79	)	$	2,949		$	(3,028	)
Unrealized (losses) gains on MBS		(1,944	)		12,402			(14,346	)
Total (losses) gains on MBS		(2,023	)		15,351			(17,374	)
Losses on interest rate futures		(1,377	)		(9,752	)		8,375
Gains on retained interests		2,962			3,815			(853	)
Loss on payer swaption		-			(4,439	)		4,439
Unrealized (losses) gains on Orchid Island Capital, Inc.		(2,961	)		10			(2,971	)
Orchid Island Capital, Inc. dividends		1,894			-			1,894
Advisory services		5,042			-			5,042

We invest in MBS with the intent to earn net income from the realized yield on those assets over the related funding and hedging costs, and not for purposes of making short term gains from ~~sales.~~trading in these securities. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the year ended December 31, ~~2014,~~2015, the Company received proceeds of ~~$966.9~~$37.5 million from the sales of MBS compared to ~~$430.7~~$966.9 million and for the year ended December 31, ~~2013.~~2014.

The increase in MBS trading activities reflects the repositioning of our portfolio following Orchid’s capital raising activities in 2014. The net realized gains (losses) on MBS for the years ended December 31, 2014 and 2013 were the result of sales executed to replace securities that no longer offered attractive risk adjusted returns with those that did. Gains (losses) on interest rate futures and swaption contracts are a result of higher / lower short term and intermediate term rates and the resulting impact on implied forward rates during the years ended December 31, 2014 and 2013. The table below presents historical interest rate data ~~for~~as of each quarter end during ~~2014~~2015 and ~~2013.~~2014.

				15 Year			30 Year			Three					15 Year	30 Year	Three
	10 Year			Fixed-Rate			Fixed-Rate			Month			5 Year	10 Year	Fixed-Rate		Month
	Treasury Rate(1)			Mortgage Rate(2)			Mortgage Rate(2)			Libor(3)			Treasury Rate(1)		Mortgage Rate(2)		Libor(3)
December 31, 2015													1.76%	2.27%	3.21%	3.96%	0.54%
September 30, 2015													1.38%	2.06%	3.10%	3.89%	0.33%
June 30, 2015													1.63%	2.34%	3.19%	3.98%	0.28%
March 31, 2015													1.38%	1.93%	3.04%	3.77%	0.27%
December 31, 2014		2.17	%		3.13	%		3.86	%		0.25	%	1.65%	2.17%	3.13%	3.86%	0.25%
September 30, 2014		2.51	%		3.31	%		4.16	%		0.23	%	1.78%	2.51%	3.31%	4.16%	0.23%
June 30, 2014		2.52	%		3.27	%		4.16	%		0.23	%	1.63%	2.52%	3.27%	4.16%	0.23%
March 31, 2014		2.72	%		3.36	%		4.34	%		0.23	%	1.73%	2.72%	3.36%	4.34%	0.23%
December 31, 2013		3.03	%		3.48	%		4.46	%		0.24	%
September 30, 2013		2.62	%		3.52	%		4.49	%		0.25	%
June 30, 2013		2.48	%		3.17	%		4.07	%		0.27	%
March 31, 2013		1.85	%		2.76	%		3.57	%		0.28	%

(1)	Historical 5 Year and 10 Year Treasury Rates are obtained from quoted end of day prices on the ~~CBOE.~~Chicago Board Options Exchange.

(2)	Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac’s Primary Mortgage Market Survey.

(3)	Historical LIBOR are obtained from the Intercontinental Exchange Benchmark Administration Ltd.

~~-52-~~-53-

The retained interests in securitizations represent the residual net interest spread remaining after payments on the notes issued through the securitization. Fluctuations in value of retained interests are primarily driven by projections of future interest rates (the forward LIBOR curve), the discount rate used to determine the present value of the residual cash flows and prepayment and loss estimates on the underlying mortgage loans. During the year ended December 31, ~~2014,~~2015, the Company recorded gains on retained interests of ~~$3.8~~$3.0 million compared to gains of ~~$2.5~~$3.8 million for the year ended December 31, ~~2013.~~2014.

During the year ended December 31, 2015, advisory services revenue was comprised of management fees of approximately $4.0 million and allocated overhead of approximately $1.1 million. During the year ended December 31, 2014, the activities of Orchid were consolidated with the activities of the Company as more fully discussed in Note 17 to the consolidated financial statements. Amounts received under the management agreement for the year ended December 31, 2014 were eliminated in the consolidation.

Operating Expenses

For the year ended December 31, ~~2014,~~2015, the Company’s total operating expenses were approximately ~~$7.2~~$9.7 million compared to approximately ~~$9.2~~$7.2 million for the year ended December 31, ~~2013.~~2014. The table below presents a breakdown of operating expenses for the nine and three months ended December 31, 2015 and 2014.

(in thousands)
2014 2013 Change
Compensation and benefits $ 2,880 $ 2,298 $ 582
Legal fees 958 850 108
Accounting, auditing and other professional fees 948 892 56
Directors’ fees and liability insurance 1,171 836 335
Direct REIT operating expenses 462 441 21
Other G&A expenses 802 804 (2 )
Orchid Island Capital, Inc. IPO expenses(1)
- 3,042 (3,042 )
$ 7,221 $ 9,163 $ (1,942 )

~~(1)~~

Consists of underwriting, legal and other costs associated with the Orchid IPO, which was completed on February 20, 2013. Bimini Capital and Bimini Advisors acted as the sponsor of the offering by paying all such expenses.

(in thousands)
	2015		2014		Change
Compensation and benefits	$	2,907	$	2,880	$	27
Legal fees		1,051		959		92
Accounting, auditing and other professional fees		574		948		(374	)
Directors’ fees and liability insurance		670		1,171		(501	)
Direct operating expenses		282		462		(180	)
Settlement of litigation		3,500		-		3,500
Other G&A expenses		671		801		(130	)
	$	9,655	$	7,221	$	2,434

In May 2015, Bimini Capital agreed to settle a legal action as more fully described in Note 12 to the consolidated financial statements. In connection with the settlement, a loss of $3.5 million has been charged to operations for the year ended December 31, 2015. Also, the year-over-year comparability of the data in the table above is affected by the inclusion of Orchid’s activities in the year ended December 31, 2014. Expenses attributed to Orchid were approximately $2.1 million for the year ended December 31, 2014.

Income Taxes

During the year ended December 31, 2015, the Company realized an income tax benefit of approximately $62.4 million primarily due to the reversal of a valuation allowance on deferred tax assets associated with net operating loss carryforwards of MortCo and the establishment of deferred tax assets in connection with the termination of Bimini Capital’s REIT status. At December 31, 2015, MortCo and Bimini Capital had net operating losses of approximately $261.3 million and $21.3 million, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of capital loss and NOL carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration and is based on management’s estimated projections.

-54-

Financial Condition:

Mortgage-Backed Securities

As of December 31, ~~2014,~~2015, the Company’s MBS portfolio consisted of ~~$117.8~~$84.0 million of agency or government MBS at fair value and had a weighted average coupon of ~~4.33%~~4.27%. During the year ended December 31, ~~2014,~~2015, the Company received principal repayments of $20.7 million compared to $87.1 million for the comparable period ended December 31, 2014 (which includes repayments received by Orchid during 2014) ~~compared to $39.9 million for the comparable period ended December 31, 2013.~~. The average prepayment speeds for the quarters ended December 31, 2015 and 2014 were 10.4% and ~~2013 were~~ 8.1% ~~and 11.0%~~, respectively.

~~-53-~~

The following table presents the constant prepayment rate (“CPR”) experienced on the Company’s structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented (including the impact of Orchid for all periods presented prior to Orchid’s deconsolidation on December 31, 2014). CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category. Assets that were not owned for the entire quarter have been excluded from the calculation. The exclusion of certain assets during periods of high trading activity can create a very high, and often volatile, reliance on a small sample of underlying loans.

			Structured						Structured
	PT MBS		MBS		Total		PT MBS		MBS		Total
Three Months Ended	Portfolio (%)		Portfolio (%)		Portfolio (%)		Portfolio (%)		Portfolio (%)		Portfolio (%)
December 31, 2015								7.9		13.7		10.4
September 30, 2015								13.4		12.4		13.0
June 30, 2015								16.2		15.3		15.9
March 31, 2015								9.6		12.3		10.5
December 31, 2014		4.3		15.0		8.1		4.3		15.0		8.1
September 30, 2014		7.9		18.5		12.3		7.9		18.5		12.3
June 30, 2014		4.1		17.0		8.6		4.1		17.0		8.6
March 31, 2014		3.9		16.0		9.8		3.9		16.0		9.8
December 31, 2013		5.1		19.2		11.0
September 30, 2013		7.1		30.1		15.1
June 30, 2013		7.2		33.0		19.5
March 31, 2013		12.7		32.6		23.9

-55-

The following tables summarize certain characteristics of the ~~Company’s~~Bimini Capital’s PT MBS and structured MBS as of December 31, ~~2014~~2015 and ~~2013:~~2014:

($ in thousands)
					Weighted		Weighted
			Percentage		Average		Average	Weighted	Weighted
			of	Weighted	Maturity		Coupon	Average	Average
		Fair	Entire	Average	in	Longest	Reset in	Lifetime	Periodic
Asset Category		Value	Portfolio	Coupon	Months	Maturity	Months	Cap	Cap
December 31, 2015
Fixed Rate MBS	$	79,170	94.3%	4.26%	313	1-Sep-45	NA	NA	NA
Hybrid Adjustable Rate MBS		118	0.1%	4.00%	313	20-Jan-42	15.03	9.00%	1.00%
Total PT MBS		79,288	94.4%	4.26%	313	1-Sep-45	15.03	9.00%	1.00%
Interest-Only Securities		2,554	3.0%	3.10%	242	25-Dec-39	NA	NA	NA
Inverse Interest-Only Securities		2,146	2.6%	6.12%	301	25-Apr-41	NA	6.53%	NA
Total Structured MBS		4,700	5.6%	4.48%	269	25-Apr-41	NA	NA	NA
Total Mortgage Assets	$	83,988	100.0%	4.27%	310	1-Sep-45	NA	NA	NA
December 31, 2014
Fixed Rate MBS	$	112,174	95.2%	4.30%	327	1-Dec-44	NA	NA	NA
Hybrid Adjustable Rate MBS		442	0.4%	4.00%	325	20-Jan-42	27.03	9.00%	1.00%
Total PT MBS		112,616	95.6%	4.30%	327	1-Dec-44	27.03	9.00%	1.00%
Interest-Only Securities		2,276	1.9%	3.11%	240	25-Dec-39	NA	NA	NA
Inverse Interest-Only Securities		2,939	2.5%	6.35%	313	25-Apr-41	NA	0.80%	NA
Total Structured MBS		5,215	4.4%	4.94%	281	25-Apr-41	NA	NA	NA
Total Mortgage Assets	$	117,831	100.0%	4.33%	325	1-Dec-44	NA	NA	NA

($ in thousands)
Weighted Weighted
Percentage Average Average Weighted Weighted
of Weighted Maturity Coupon Average Average
Fair Entire Average in Longest Reset in Lifetime Periodic
Asset Category Value Portfolio Coupon Months Maturity Months Cap Cap
December 31, 2014
Fixed Rate MBS $ 112,174 95.2% 4.30% 327 1-Dec-44 NA NA NA
Hybrid Adjustable Rate MBS 442 0.4% 4.00% 325 20-Jan-42 27.03 9.00% 1.00%
Total PT MBS 112,616 95.6% 4.30% 327 1-Dec-44 27.03 9.00% 1.00%
Interest-Only Securities 2,276 1.9% 3.11% 240 25-Dec-39 NA NA NA
Inverse Interest-Only Securities 2,939 2.5% 6.35% 313 25-Apr-41 NA 0.80% NA
Total Structured MBS 5,215 4.4% 4.94% 281 25-Apr-41 NA NA NA
Total Mortgage Assets $ 117,831 100.0% 4.33% 325 1-Dec-44 NA NA NA
December 31, 2013
Adjustable Rate MBS $ 5,334 1.4% 3.92% 247 1-Sep-35 3.77 10.13% 2.00%
Fixed Rate MBS 267,481 68.7% 3.99% 314 1-Dec-43 NA NA NA
Hybrid Adjustable Rate MBS 90,487 23.2% 2.61% 349 1-Aug-43 108.23 7.61% 1.99%
Total PT MBS 363,302 93.3% 3.65% 322 1-Dec-43 102.41 7.75% 1.99%
Interest-Only Securities 20,443 5.3% 4.36% 262 25-Nov-40 NA NA NA
Inverse Interest-Only Securities 5,596 1.4% 5.91% 316 15-Dec-40 NA 6.07% NA
Total Structured MBS 26,039 6.7% 4.69% 274 15-Dec-40 NA NA NA
Total Mortgage Assets $ 389,341 100.0% 3.72% 318 1-Dec-43 NA NA NA

($ in thousands)
	December 31, 2015					December 31, 2014
			Percentage of					Percentage of
Agency	Fair Value		Entire Portfolio			Fair Value		Entire Portfolio
Fannie Mae	$	42,065		50.1	%	$	66,974		56.8	%
Freddie Mac		40,928		48.7	%		50,414		42.8	%
Ginnie Mae		995		1.2	%		443		0.4	%
Total Portfolio	$	83,988		100.0	%	$	117,831		100.0	%

~~-54-~~

($ in thousands)
December 31, 2014 December 31, 2013
Percentage of Percentage of
Agency Fair Value Entire Portfolio Fair Value Entire Portfolio
Fannie Mae $ 66,974 56.84 % $ 236,660 60.78 %
Freddie Mac 50,415 42.79 % 133,689 34.34 %
Ginnie Mae 442 0.37 % 18,992 4.88 %
Total Portfolio $ 117,831 100.00 % $ 389,341 100.00 %

	December 31, 2014		December 31, 2013		December 31, 2015		December 31, 2014
Weighted Average Pass Through Purchase Price	$	107.95	$	105.64
Weighted Average Pass-through Purchase Price					$	107.96	$	107.95
Weighted Average Structured Purchase Price	$	5.98	$	7.52	$	6.11	$	5.98
Weighted Average Pass Through Current Price	$	108.53	$	102.71
Weighted Average Pass-through Current Price					$	107.86	$	108.53
Weighted Average Structured Current Price	$	9.08	$	12.15	$	8.45	$	9.08
Effective Duration (1)		2.663		4.116		2.326		2.663

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 2.326 indicates that an interest rate increase of 1.0% would be expected to cause a 2.326% decrease in the value of the MBS in the Company’s investment portfolio at December 31, 2015. An effective duration of 2.663 indicates that an interest rate increase of 1.0% would be expected to cause a 2.663% decrease in the value of the MBS in the Company’s investment portfolio at December 31, 2014. An effective duration of 4.116 indicates that an interest rate increase of 1.0% would be expected to cause a 4.116% decrease in the value of the MBS in the Company’s investment portfolio at December 31, 2013. These figures include the structured securities in the portfolio but do include the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

-56-

The following table presents a summary of the Company’s portfolio assets acquired during the years ended December 31, ~~2014~~2015 and ~~2013.~~2014.

($ in thousands)
	2014								2013								2015								2014
		Total Cost		Average Price		Weighted Average Yield				Total Cost		Average Price		Weighted Average Yield				Total Cost		Average Price		Weighted Average Yield				Total Cost		Average Price		Weighted Average Yield
PT MBS		$	2,254,472	$	108.10		2.81	%		$	661,363	$	104.98		2.39	%		$	25,410	$	109.45		2.49	%		$	2,254,472	$	108.10		2.81	%
Structured MBS			61,836		14.99		(0.65	)%			44,679		15.44		1.69	%			987		8.18		10.23	%			61,836		14.99		(0.65	)%

The Company’s portfolio of PT MBS is typically comprised of adjustable-rate MBS, fixed-rate MBS and hybrid adjustable-rate MBS. The Company generally seeks to acquire low duration assets that offer high levels of protection from mortgage prepayments provided they are reasonably priced by the market. Although the duration of an individual asset can change as a result of changes in interest rates, the Company strives to maintain a hedged PT MBS portfolio with an effective duration of less than 2.0. The stated contractual final maturity of the mortgage loans underlying the Company’s portfolio of PT MBS generally ranges up to 30 years. However, the effect of prepayments of the underlying mortgage loans tends to shorten the resulting cash flows from the Company’s investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages and loan payoffs in connection with home sales.

The duration of the Company’s IO and IIO portfolio will vary greatly depending on the structural features of the securities. While prepayment activity will always affect the cash flows associated with the securities, the interest only nature of IO’s may cause their durations to become extremely negative when prepayments are high, and less negative when prepayments are low. Prepayments affect the durations of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which is inversely related to the level of one month LIBOR) cause their price movements - and model duration - to be affected by changes in both prepayments and one month LIBOR - both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.

~~-55-~~

Prepayments on the loans underlying the Company’s MBS can alter the timing of the cash flows from the underlying loans to the Company. As a result, the Company gauges the interest rate sensitivity of its assets by measuring their effective duration. While modified duration measures the price sensitivity of a bond to movements in interest rates, effective duration captures both the movement in interest rates and the fact that cash flows to a mortgage related security are altered when interest rates move. Accordingly, when the contract interest rate on a mortgage loan is substantially above prevailing interest rates in the market, the effective duration of securities collateralized by such loans can be quite low because of expected prepayments.

The Company faces the risk that the market value of its PT MBS assets will increase or decrease at different rates than that of its structured MBS or liabilities, including its hedging instruments. Accordingly, the Company assesses its interest rate risk by estimating the duration of its assets and the duration of its liabilities. The Company generally calculates duration and effective duration using various third party models or obtains these quotes from third parties. However, empirical results and various ~~third party~~third-party models may produce different duration numbers for the same securities.

-57-

The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, ~~2014,~~2015, assuming rates instantaneously fall 100 basis points (“bps”), rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.

($ in thousands)
	Fair		$ Change in Fair Value									% Change in Fair Value									Fair		$ Change in Fair Value									% Change in Fair Value
MBS Portfolio	Value		-100BPS			+100BPS			+200BPS			-100BPS			+100BPS			+200BPS			Value		-100BPS			+100BPS			+200BPS			-100BPS			+100BPS			+200BPS
Hybrid Adjustable Rate MBS		442		3			(6	)		(15	)		0.72	%		(1.38	)%		(3.31	)%	$	118	$	2		$	(2	)	$	(4	)		1.43	%		(1.38	)%		(2.97	)%
Fixed Rate MBS		112,174		2,547			(5,074	)		(11,461	)		2.27	%		(4.52	)%		(10.22	)%		79,170		2,317			(3,707	)		(8,119	)		2.93	%		(4.68	)%		(10.26	)%
Interest-Only MBS		2,276		(1,018	)		573			817			(44.75	)%		25.16	%		35.89	%		2,554		(1,176	)		830			1,231			(46.04	)%		32.49	%		48.21	%
Inverse Interest-Only MBS		2,939		(364	)		(58	)		(516	)		(12.40	)%		(1.97	)%		(17.54	)%		2,146		(147	)		(124	)		(488	)		(6.85	)%		(5.79	)%		(22.71	)%
Total MBS Portfolio	$	117,831	$	1,168		$	(4,565	)	$	(11,175	)		0.99	%		(3.87	)%		(9.48	)%	$	83,988	$	996		$	(3,003	)	$	(7,380	)		1.19	%		(3.58	)%		(8.79	)%

($ in thousands)
	Notional		$ Change in Fair Value									% Change in Fair Value									Notional		$ Change in Fair Value									% Change in Fair Value
	Amount(1)		-100BPS			+100BPS			+200BPS			-100BPS			+100BPS			+200BPS			Amount(1)		-100BPS			+100BPS			+200BPS			-100BPS			+100BPS			+200BPS
Eurodollar Futures Contracts
Repurchase Agreement Hedges	$	706,000	$	(1,527	)	$	1,765		$	3,530			(0.88	)%		1.02	%		2.04	%	$	560,000	$	(1,003	)	$	1,400		$	2,800			(0.73	)%		1.01	%		2.03	%
Junior Subordinated Debt Hedges		364,000		(727	)		910			1,820			(0.81	)%		1.02	%		2.03	%		260,000		(466	)		650			1,300			(0.73	)%		1.01	%		2.03	%
	$	1,070,000	$	(2,254	)	$	2,675		$	5,350			(0.86	)%		1.02	%		2.03	%	$	820,000	$	(1,469	)	$	2,050		$	4,100			(0.73	)%		1.01	%		2.03	%

Gross Totals			$	(1,086	)	$	(1,890	)	$	(5,825	)												$	(473	)	$	(953	)	$	(3,280	)

(1)	Represents the total cumulative contract/notional amount of Eurodollar futures contracts.

In addition to changes in interest rates, other factors impact the fair value of the Company’s interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of the Company’s assets would likely differ from that shown above and such difference might be material and adverse to the Company’s stockholders.

~~-56-~~

Repurchase Agreements

As of December 31, ~~2014,~~2015, the Company had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with ~~seven~~three of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with the Company. These borrowings are secured by the Company’s MBS and bear interest rates that are based on a spread to LIBOR.

As of December 31, ~~2014,~~2015, the Company had obligations outstanding under the repurchase agreements of approximately ~~$110.0~~$77.2 million with a net weighted average borrowing cost of ~~0.36%~~0.61%. The remaining maturity of the Company’s outstanding repurchase agreement obligations ranged from 611 to 3325 days, with a weighted average maturity of 1417 days. Securing the repurchase agreement obligation as of December 31, ~~2014~~2015 are MBS with an estimated fair value, including accrued interest, of ~~$116.4~~$81.5 million and a weighted average maturity of ~~327 months and cash pledged to counterparties of approximately $0.3 million.~~314 months. Through March ~~16, 2015,~~22, 2016, the Company has been able to maintain its repurchase facilities with comparable terms to those that existed at December 31, ~~2014~~2015 with maturities through ~~April 24, 2015.~~May 13, 2016.

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The table below presents information about our period-end and average repurchase agreement obligations for each quarter in ~~2014~~2015 and ~~2013.~~2014.

($ in thousands)	($ in thousands)											($ in thousands)
						Difference Between Ending											Difference Between Ending
		Ending Balance		Average Balance		Repurchase Agreements and							Ending Balance		Average Balance		Repurchase Agreements and
		of Repurchase		of Repurchase		Average Repurchase Agreements							of Repurchase		of Repurchase		Average Repurchase Agreements
Three Months Ended		Agreements		Agreements		Amount			Percent				Agreements		Agreements		Amount			Percent
December 31, 2015													$	77,234	$	95,456	$	(18,222	)		(19.09	)%(1)
September 30, 2015														113,677		107,442		6,235			5.80	%
June 30, 2015														101,206		103,750		(2,544	)		(2.45	)%
March 31, 2015														106,294		108,129		(1,835	)		(1.70	)%
December 31, 2014		$	109,964	$	1,442,905	$	(1,332,941	)		(92.38	)%(1)			109,964		1,442,905		(1,332,941	)		(92.38	)%(2)
September 30, 2014			1,339,196		1,096,611		242,585			22.12	%(2)			1,339,196		1,096,611		242,585			22.12	%(3)
June 30, 2014			854,026		783,323		70,703			9.03	%			854,026		783,323		70,703			9.03	%
March 31, 2014			712,620		533,008		179,612			33.70	%(3)			712,620		533,008		179,612			33.70	%(4)
December 31, 2013			353,396		345,068		8,328			2.41	%
September 30, 2013			336,739		341,468		(4,729	)		(1.38	)%
June 30, 2013			346,197		350,714		(4,517	)		(1.29	)%
March 31, 2013			355,231		252,763		102,468			40.54	%(4)

(1)	The lower ending balance relative to the average balance during the quarter ended December 31, 2015 reflects the repositioning of the portfolio. During the quarter ended December 31, 2015, the Company’s investment in PT MBS decreased $38.6 million.

(2)	The lower ending balance relative to the average balance during the quarter ended December 31, 2014 reflects the deconsolidation of Orchid at December 31, 2014.

~~(2)~~(3)

The higher ending balance relative to the average balance during the quarter ended September 30, 2014 reflects the deployment of the proceeds, on a leveraged basis, of Orchid’s equity offerings. During the quarter ended September 30, 2014, the Company’s investment in PT RMBS increased $294.4 million.

~~(3)~~(4)

The higher ending balance relative to the average balance during the quarter ended March 31, 2014 reflects the deployment of the proceeds, on a leveraged basis, of Orchid’s January and March 2014 equity offerings. During the quarter ended March 31, 2014, the Company’s investment in PT RMBS increased $402.5 million.

~~(4)~~

The higher ending balance relative to the average balance during the quarter ended March 31, 2013 reflects the deployment of the proceeds, on a leveraged basis, of Orchid’s IPO. During the quarter ended March 31, 2013, the Company’s investment in PT RMBS increased $219.3 million.

~~-57-~~

Liquidity and Capital Resources

Liquidity is our ability to turn non-cash assets into cash, purchase additional investments, repay principal and interest on borrowings, fund overhead, fulfill margin calls and pay dividends. Our principal immediate sources of liquidity include cash balances, unencumbered assets, ~~and borrowings~~the availability to borrow under repurchase ~~agreements.~~agreements, and fees and dividends received from Orchid. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our balance sheet also generates liquidity on an on-going basis through payments of principal and interest we receive on our MBS portfolio, and from cash flows received from the retained interests and the collection of servicing advances. Management believes that we currently have sufficient liquidity and capital resources available for (a) the acquisition of additional investments consistent with the size and nature of our existing MBS portfolio, (b) the repayments on borrowings, ~~and~~ (c) the payment of overhead and operating ~~expenses.~~expenses, and the payment of other accrued obligations.

~~Because~~Our strategy for hedging our ~~PT MBS~~funding costs typically involves taking short positions in Eurodollar futures, T-Note futures, swaptions or other instruments. Since inception we have primarily used short positions in Eurodollar futures. When the market causes these short positions to decline in value we are required to meet margin calls with cash. This can reduce our liquidity position to the extent other securities in our portfolio ~~consists entirely of government and agency securities,~~move in price in such a way that we do not ~~anticipate having difficulty converting our assets~~receive enough cash through margin calls to ~~cash should our~~offset the Eurodollar related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity ~~needs ever exceed our immediately available sources~~might force us to reduce the size of ~~cash. Our~~the levered portfolio, pledge additional structured ~~MBS portfolio also consists entirely of governmental agency~~ securities although they typically do not trade with comparable bid / ask spreads as PT MBS. However, we anticipate that we would be able to liquidate such securities readily, even in distressed markets, although we would likely do so at prices below where such securities could be sold in a more stable market. To enhance our liquidity even further, we may pledge a portion of our structured MBS as part of a repurchase agreement funding but retain the cash in lieu of acquiring additional assets. In this way, we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise ~~cash.~~funds or risk operating the portfolio with less liquidity.

~~The Company’s~~Our master repurchase agreements have no stated expiration, but can be terminated at any time at ~~the Company’s~~our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur, but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.

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Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repurchase transaction basis.

As discussed above, the Company invests a portion of its capital in structured MBS. We do not ~~fund the purchase~~apply leverage to this portion of ~~these investments in the repurchase market but instead purchase them directly, thus reducing – but not eliminating - the Company’s reliance on access to repurchase agreement funding.~~our portfolio. The leverage inherent in ~~the~~ structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repurchase market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.

~~-58-~~

In an effort to increase assets under management and generate additional revenues needed to cover operating costs, Bimini Capital and Bimini Advisors acted as the sponsor of the initial public offering of common stock for Orchid, which closed on February 20, 2013. Bimini Advisors paid all of the underwriting, legal and other costs incurred in connection with the offering. Bimini Advisors did so in anticipation of receiving fees from Orchid for acting as its manager as well as the ability to share certain overhead expenses. To the extent Orchid is able to increase its capital base over time, Bimini Advisors will benefit via increased management fees. The independent members of the Orchid Board of Directors have the ability to terminate the management agreement and thus end the ability of Bimini Advisors to collect management fees and share overhead costs. Should Orchid terminate the management agreement without cause, it shall pay to Bimini Advisors 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 initial term or automatic renewal term.

~~In the coming~~future periods we expect to continue to finance our activities ~~in a manner that is consistent with our operations via~~through repurchase agreements. As of December 31, ~~2014,~~2015, the Company had cash and cash equivalents of ~~$4.7~~$6.3 million. We generated cash flows of ~~$116.6~~$25.1 million from principal and interest payments on our MBS portfolio and ~~$4.4~~$3.7 million from retained interests and had average repurchase agreements outstanding of $103.7 million during the year ended December 31, ~~2014.~~2015. In addition, during the year ended December 31, 2015, the Company received approximately $4.9 million in management fees and expense reimbursements as manager of Orchid and approximately $1.9 million in dividends from its investment in Orchid common shares.

In May 2015, Bimini Capital agreed to settle a legal action as more fully described in Note 12 to the consolidated financial statements. A loss of $3.5 million has been charged to operations for the year ended December 31, 2015, and $1.25 million of this amount remains unpaid at December 31, 2015. Although payments under the settlement agreement will reduce the Company’s liquidity, management believes that the Company will be able to generate sufficient cash from its operations to meet the remaining payment obligations as they come due.

The table below summarizes the effect on our liquidity and cash flows from certain future contractual obligations as of December 31, ~~2014.~~2015.

(in thousands)
	Obligations Maturing										Obligations Maturing
	Within		One to Three		Three to Five		More than Five		Total		Within		One to Three		Three to Five		More than Five		Total
	Year		Years		Years		Years		Total		Year		Years		Years		Years		Total
Repurchase agreements	$	109,964	$	-	$	-	$	-	$	109,964	$	77,234	$	-	$	-	$	-	$	77,234
Interest expense on repurchase agreements(1)		63		-		-		-		63		59		-		-		-		59
Junior subordinated notes(2)		-		-		-		26,000		26,000		-		-		-		26,000		26,000
Interest expense on junior subordinated notes(1)		1,032		1,975		1,972		15,745		20,724		1,107		2,115		2,118		15,826		21,166
Litigation settlement												500		500		250		-		1,250
Payable for unsettled securities purchased												1,859		-		-		-		1,859
Totals	$	111,059	$	1,975	$	1,972	$	41,745	$	156,751	$	80,759	$	2,615	$	2,368	$	41,826	$	127,568

(1)	Interest expense on repurchase agreements and junior subordinated notes are based on current interest rates as of December 31, ~~2014~~2015 and the remaining term of liabilities existing at that date.

(2)	The Company holds a common equity interest in Bimini Capital Trust II. The amount presented represents the net cash outlay of the Company.

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Outlook

Bimini Capital

Prior to 2008, MortCo incurred significant losses in the operation of a mortgage loan origination business. Bimini Capital materially downsized its investment portfolio to raise cash to fund the MortCo operations, leaving Bimini Capital with a significantly smaller capital base. This smaller capital base made it difficult to generate sufficient net interest income to cover expenses. Since MortCo terminated its operations in 2007, Bimini Capital has taken several significant steps designed to increase its probability of generating profits going forward, including a re-structuring of the portfolio, reducing expenses, retiring debt, and settling various litigation matters. In general, Bimini Capital still needed to increase its capital base, and/or create alternative sources of revenues, to ensure the generation of profits over the long-term. However, primarily because of litigation arising out of MortCo’s prior mortgage business, raising capital directly into Bimini Capital was not possible. Therefore, Orchid was formed as a new entity into which capital could be raised.

~~-59-~~

Orchid Island Capital Inc.

On October 22, 2012, Orchid filed a Form S-11 Registration Statement with the Securities and Exchange Commission related to a proposed IPO of its common equity. The Registration Statement was declared effective on February 14, 2013 and Orchid closed on its IPO of common stock on February 20, 2013. Bimini Capital and Bimini Advisors acted as the sponsor of the offering by paying for the underwriting, legal and other costs associated with the offering. During the year ended December 31, 2013, the Company incurred costs related to this offering of approximately $3.0 million. On an economic basis, Bimini Capital and Bimini Advisors incurred these costs in anticipation of receiving fees from Orchid for acting as its manager as well as the ability to share certain overhead expenses. The economic benefit of the management fees and the expense reduction will be recorded to the extent they are realized over time. Bimini Capital believes it will recover, over time, the expenses associated with the Orchid public offering.

To the extent Orchid is able to increase its capital base over time, Bimini Capital will benefit via increased management fees. Bimini Advisors will receive a monthly management fee in the amount of:

•

One-twelfth of 1.5% of the first $250 million of Orchid’s equity, as defined in the management agreement,

•

One-twelfth of 1.25% of Orchid’s equity that is greater than $250 million and less than or equal to $500 million, and

•

One-twelfth of 1.00% of Orchid’s equity that is greater than $500 million.

During the year ended December 31, 2014, Orchid completed ~~several~~ additional offerings of its common stock. As of March 31, 2014, Orchid reached $100 million of stockholders equity for the first time. As a result, pursuant to the management agreement between Bimini Advisors and Orchid, commencing on July 1, 2014 Bimini Advisors began to allocate certain overhead costs to Orchid on a pro rata ~~basis commencing on July 1, 2014.~~basis. As a stockholder of Orchid, Bimini will also continue to share in distributions, if any, paid by Orchid to its stockholders.

The independent Board of Directors of Orchid has the ability to terminate the management agreement and thus end the ability of the Bimini Advisors and Bimini Capital to collect management fees and share overhead costs. Should Orchid terminate the management agreement without cause, it shall pay to Bimini Advisors 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 initial term or automatic renewal term.

Tax Matters

~~For~~Bimini Capital historically has been taxed as a REIT under the Code. Certain trends and events experienced during 2015 have caused Bimini Capital to no longer meet the Code’s rules and regulations to be taxed as a REIT, effective January 1, 2015. In particular, additional offerings of common stock by Orchid in 2015 increased revenue attributable to management fees received from Orchid by Bimini Advisors. In addition, payments that have been and will be made by Bimini Capital pursuant to a litigation settlement agreement entered into in 2015 have reduced and may continue to reduce the value of Bimini Capital’s assets and revenues generated by our MBS portfolio. Consequently, the value of our two TRSs (MortCo and Bimini Advisors) has increased in relation to the value of Bimini Capital’s assets to a level that exceeds the limits permitted under the Code.

The failure to qualify as a REIT for the year ended December 31, ~~2014,~~2015 subjects Bimini Capital’s taxable income to federal and state corporate income taxes at regular corporate rates. However, Bimini Capital generated a REIT taxable loss. As more fully described in footnote 13 to the accompanying consolidated financial statements, REIT taxable income or loss generated by qualifying REIT activities is computed in accordance with the Internal Revenue Code, which is different from the Company’s financial statement income or loss as computed in accordance with GAAP. Bimini Capital had REIT taxand its subsidiaries have NOL carryforwards ~~of approximately $18.0 million as of December 31, 2014 which are immediately available~~that, subject to ~~offset future REIT taxable income.~~

The Company has used the term “REIT taxable income” throughout this document as being the amount available for distribution to its stockholders before any NOLs are applied, and before any distributions. In arriving at income that could be subjected to taxation at the REIT entity level for a given year, dividends paid in the current year and any NOLs carried-over from prior periods are deducted (in that order) from current period income first. NOLs expire 20 years from the year they are incurred. Since Bimini Capital currently has NOLs from prior periods, which begin to expire in 2028, andvarious expiration dates, are available to offset ~~income in~~any 2015 ~~and in~~or future ~~periods, Bimini Capital has the option, but not the obligation, to apply such NOLs against REIT~~ taxable income. ~~As a result,~~Management is implementing certain internal restructuring transactions that would maximize its ability to utilize the existing federal NOL carryforwards. Under Bimini ~~Capital could have income in 2015 and in future years, but not make distributions~~Capital’s current ownership structure, the NOL carryforwards of each entity may generally be applied only to ~~stockholders. This would occur if Bimini Capital had sufficient NOLs available to entirely~~ offset the ~~REIT~~taxable income ~~earned in a given year and chose to apply such NOLs. Bimini Capital could also apply available NOLs against a portion~~ of ~~future period earnings and reduce the distributions to stockholders. Bimini Capital is unlikely to declare and pay dividends to stockholders until existing NOLs have been consumed.~~that entity.

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~~Regulatory Developments with Respect to Fannie Mae and Freddie Mac and the Dodd-Frank Act~~

In response to the credit market disruption and the deteriorating financial conditions of Fannie Mae and Freddie Mac, Congress and the U.S. Treasury undertook a series of actions that culminated with putting Fannie Mae and Freddie Mac in conservatorship in September 2008. Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States. The Federal Housing Finance Agency (“FHFA”) now operates Fannie Mae and Freddie Mac as conservator, in an effort to stabilize the entities. The FHFA also noted that during the conservatorship period, it would work to enact new regulations for minimum capital standards, prudent safety and soundness standards and portfolio limits of Fannie Mae and Freddie Mac.

Although the U.S. Government has committed significant resources to Fannie Mae and Freddie Mac, Agency MBS guaranteed by either Fannie Mae or Freddie Mac are not backed by the full faith and credit of the United States. Moreover, the Secretary of the U.S. Treasury noted that the guarantee structure of Fannie Mae and Freddie Mac requires examination and that changes in the structures of the entities were necessary to reduce risk to the financial system. Such changes may involve an explicit U.S. Government backing of Fannie Mae and Freddie Mac Agency MBS or the express elimination of any implied U.S. Government guarantee and, therefore, creation of credit risk with respect to Fannie Mae and Freddie Mac Agency MBS. Additionally, on February 11, 2011, the U.S. Treasury issued a White Paper titled “Reforming America’s Housing Finance Market” that lays out, among other things, proposals to limit or potentially wind down the role that Fannie Mae and Freddie Mac play in the mortgage market.

~~On October 4, 2012, the FHFA released a white paper entitled~~ ~~Building a New Infrastructure for the Secondary Mortgage Market~~ ~~(the “FHFA White Paper”). This release follows up on the FHFA’s February 21, 2012~~ ~~Strategic Plan for Enterprise Conservatorships~~, which set forth three goals for the next phase of the Fannie Mae and Freddie Mac conservatorships. These three goals are to (i) build a new infrastructure for the secondary mortgage market, (ii) gradually contract Fannie Mae and Freddie Mac’s presence in the marketplace while simplifying and shrinking their operations, and (iii) maintain foreclosure prevention activities and credit availability for new and refinanced mortgages. The FHFA White Paper proposes a new infrastructure for Fannie Mae and Freddie Mac that has two basic goals.

The first such goal is to replace the current, outdated infrastructures of Fannie Mae and Freddie Mac with a common, more efficient infrastructure that aligns the standards and practices of the two entities, beginning with core functions performed by both entities such as issuance, master servicing, bond administration, collateral management and data integration. The second goal is to establish an operating framework for Fannie Mae and Freddie Mac that is consistent with the progress of housing finance reform and encourages and accommodates the increased participation of private capital in assuming credit risk associated with the secondary mortgage market. The FHFA recognizes that there are a number of impediments to their goals which may or may not be surmountable, such as the absence of any significant secondary mortgage market mechanisms beyond Fannie Mae, Freddie Mac and Ginnie Mae. The FHFA provided an update on their progress in this regard at an industry conference on October 20, 2014. The Director of the FHFA, Mel Watt, outlined the progress to date associated with representation and warranty practices associated with eligible loans for securitization by the GSEs, the Common Securitization Platform (“CSP’) and Common Securitization Solutions (“CSC”) – a joint venture to house and operate the CSP, which will be designed to allow Fannie Mae and Freddie Mac to securitize loans off of a single platform. As a result, it is still unclear if the proposals will be enacted. If such proposals are enacted, it is unclear how closely what is enacted will resemble the proposals from the FHFA White Paper or what the effects of the enactment will be on housing finance. As the economy has recovered, home prices have increased off the low levels seen in the aftermath of the financial crisis and a significant portion of the shadow inventory of homes that resulted from foreclosures have been worked off. The combination of recovering home prices, attractive financing levels and decreased liquidations of homes via foreclosures have resulted in an acceleration in lending activity.

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~~Fannie Mae~~In addition, the termination of our REIT status eliminates the income, asset, distribution, and ~~Freddie Mac reform regained momentum~~stock ownership requirements applicable to REITs, which will provide us with more flexibility in the first quarter of 2014 when Senators Tim Johnson (D-SD) and Mike Crapo (R-ID), the two most senior members of the Senate Banking Committee, released a proposed bill (the “Johnson-Crapo Bill”), which is generally based on the Corker-Warner Bill. However, this momentum was lost in the second quarter of 2014 when the Johnson-Crapo Bill was approved by the Senate Banking Committee, but failed to secure enough support to be considered by Congress. The final outcome of the Johnson-Crapo Bill remains uncertain, as reports indicate that the House Republican leadership continues to favor a very different approach. As the FHFA and both houses of Congress are each working on separate measures intended to dramatically restructure the U.S. housing finance system and the operations of Fannie Mae and Freddie Mac, we expect debate and discussion on the topic to continue throughout 2015. FHFA Chairman Mel Watt, during testimony before Congress in January of 2015, reiterated that the FHFA continues to work towards achieving these goals, although specific details about the eventual outcome were not provided. It is unclear which, if any, of these measures will be enacted, and, if any are enacted, what the effects would be.

The effect of the actions taken and to be taken by the U.S. Treasury, Congress or FHFA remains uncertain. New and recently enacted laws, regulations and programs related to Fannie Mae and Freddie Mac may adversely affect the pricing, supply, liquidity and value of Agency RMBS and otherwise materially harmexecuting our business ~~and operations.~~

The Dodd-Frank Act provides for new regulations on financial institutions and creates new supervisory and advisory bodies, including the new Consumer Financial Protection Bureau. The Dodd-Frank Act tasks many agencies with issuing a variety of new regulations, including rules relatedstrategy. Specifically, because we are no longer required to ~~mortgage origination and servicing, securitization and derivatives. Because~~derive a significant ~~number~~portion of ~~regulations~~our income from mortgage or other real estate related investments, we will have greater flexibility to invest in other types of assets as part of our principal investing activity, subject to maintaining compliance with our exclusion from regulation as an investment company under the ~~Dodd-Frank Act~~Investment Company Act. In addition, because we will no longer be subject to the REIT distribution requirement, we will have ~~either not yet been proposed or not yet been adopted in final form, it is not possible for us~~greater flexibility to ~~predict how the Dodd-Frank Act will impact~~retain our ~~business.~~earnings to fund future growth.

Interest Rates

Global interest rate and capital markets volatility continued throughout the fourth quarter of 2015. The ~~Federal Reserve has taken a number of steps~~uncertainty over ~~the last few years to lower both short and long-term interest rates. In August 2011,~~when the Federal Reserve would begin to raise the target Federal Funds rate finally was resolved on December 16, 2015, when the Federal Reserve Open Market Committee (“FOMC”) announced that it ~~expected to maintain~~was increasing the target Federal Funds Rate at a low level at least through mid-2013, and on January 25, 2012 it extended that outlook through late 2014. Additionally, on September 21, 2011, the Federal Reserve announced the extension of the maturities of its U.S. Treasury securities portfoliorate by selling approximately $400 billion in short-term U.S. Treasury securities and purchasing an equivalent amount of longer-term U.S. Treasury securities. This program, known as “Operation Twist,” lasted through December 2012. The goal of Operation Twist was to lower the yields on longer-term U.S. Treasury securities, which the Federal Reserve believed would lower interest rates tied to such yields, such as mortgage rates and0.25%. Although interest rates on ~~commercial loans.~~longer-dated bonds initially increased in the aftermath of the FOMC’s announcement, mortgage spreads tightened during the fourth quarter, continuing to put downward pressure on net interest margin for many firms that primarily invest in mortgage-backed securities (“MBS”). We continue to see a relatively tight yield curve, making the investing environment difficult.

~~In September 2012,~~While the ~~Federal Reserve announced an open-ended program~~U.S. economy generally appears to ~~expand its holdings~~be on a trajectory of ~~long-term securities by purchasing an additional $40 billion of Agency MBS per month until key~~slow, sustainable growth, many economic indicators ~~such as~~were less positive in the ~~unemployment rate, showed signs~~fourth quarter and full year 2015 relative to 2014. The consensus forecast of ~~improvement. This program, known as “QE3”, when combined with other programs to extend~~economic growth in the average maturity of the Federal Reserve’s holdings of securities and reinvest principal payments from the Federal Reserve’s holdings of agency debt and Agency MBS into Agency MBS, was expected to increase the Federal Reserve’s holdings of long-term securities by $85 billion each month. The Federal Reserve also announced that it would keep the target rangeU.S. for the ~~Federal Funds Rate between zero~~first quarter of 2016 remains at approximately 2.5%, accompanied by marginal growth in payrolls and ~~0.25% through at least mid-2015, which was six months longer~~inflation. Some analysts have far lower expectations for 2016 annual growth, citing difficult economic conditions in countries as varied and diverse as China, Canada and Brazil. Some data suggest that American consumers are making fewer purchases and taking on less additional debt than ~~previously expected.~~in previous quarters, hindering GDP growth. In addition, wage growth and commodity prices remain weak, suggesting continued sluggish economic growth globally.

The Federal Reserve, ~~provided further guidance~~in its December 16, 2015 announcement, cautioned capital markets to anticipate the ~~market~~possibility of one or more additional increases in ~~December 2012 by stating that it intended to keep~~ the Federal Funds Rate ~~close~~in 2016, depending on future growth in inflation and other economic indicators. Federal Reserve Chair Janet Yellen, in her remarks following the December FOMC policy meeting, stated that monetary policy remains “accommodative” following the initial rise in the Federal Funds Rate. Together with increasingly negative economic data reported to ~~zero while~~date in 2016, many market participants are increasingly skeptical of additional increases in the ~~unemployment rate is above 6.5%~~Federal Funds Rate in the foreseeable future. We do not share this view and ~~as long as inflation does not rise above 2.5%. In December 2012,~~anticipate the Federal Reserve ~~also announced~~will indeed raise rates again this year and next, albeit at a more gradual pace than it envisioned last December. We believe that ~~it would initially begin buying $45 billion~~data dependency and analysis of ~~long-term Treasury bonds each month~~the Federal Reserve will continue to drive the direction and ~~noted that such amount may increase~~volatility of interest rates in the ~~future. This bond purchase program replaced Operation Twist.~~U.S., with the uncertainty that this dynamic creates further enhancing volatility in the interest rate and fixed income markets.

With the flattening of the yield curve, a higher cost of capital for the Company is evident, which could, in the longer-term, lead to narrowing net interest margins and lower yields on existing Agency MBS. Home sales and new single-family home construction remain relatively slow due, in part, to mortgage lending rules implemented under the Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and bank conservatism in efforts to, among other things, prevent future MBS repurchase requests. These factors have created a shortage of mortgage origination, resulting in low Agency MBS issuance. The Federal Reserve’s purchases of Agency MBS through reinvesting principal and interest payments it receives on its existing Agency MBS portfolio have continued to dominate the Agency MBS markets, where many participants perceive a lack of liquidity. The Federal Reserve purchases contributed to strong Agency MBS demand and limited new investment opportunities in the fourth quarter of 2015. While the Federal Reserve has not indicated when it will cease or reduce its Agency MBS purchases by reinvesting principal and interest payments, private banks have less incentive to purchase Freddie Mac and Fannie Mae MBS, as the Basel III liquidity coverage ratio rules provide lower quality liquid asset credit for such securities on their balance sheet than for cash, U.S. Treasuries and MBS issued by the Ginnie Mae.

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~~The Federal Reserve Open Market Committee (the “FOMC”) meeting minutes released~~While there are signs that slow and steady economic growth will continue to persist in the United States, uncertainty continues to dominate the market. We believe the general business environment will continue to be challenging for the rest of 2016. Our growth outlook is dependent, in part, on ~~April 10, 2013 revealed that~~ the ~~FOMC had begun considering when~~strength of the ~~Federal Reserve should begin tapering~~financial markets, the ~~pace~~impact of ~~Agency MBS purchases set~~fiscal and monetary policy actions by the United States and other countries, and liquidity in ~~September 2012. The FOMC meeting minutes released on May 22, 2013 announced~~the financial system. We do not anticipate the U.S. moving into a negative interest rate environment, and believe that the Federal Reserve ~~was considering beginning~~will continue to ~~taper such purchase~~remove accommodation at a very slow rate. Our portfolio positioning is therefore unlikely to change materially over the course of the year. We will continue to closely monitor the developments in the market and may seek to re-align our strategy as ~~early as June 2013. In minutes released on June 25, 2013,~~we evaluate the ~~FOMC stated that~~opportunities across the ~~Federal Reserve would begin~~spectrum in the mortgage industry and other types of assets in a continuing effort to ~~scale back Agency MBS purchases later in 2013 and that such purchases would cease entirely when~~seek the unemployment rate reached 7%. On October 30, 2013, the FOMC announced that it would continue reinvesting principal payments from its holdings of agency debt and Agency MBS into Agency MBS and U.S. Treasury securities at the current pace indefinitely. The October 30, 2013 announcement provided no additional guidance as to when tapering might begin.highest risk-adjusted returns for our capital.

~~At its December 18, 2013 meeting,~~Recent Regulatory Developments

In March 2015, housing and mortgage financial reform legislation, H.R. 1491, was proposed by congressmen John Delaney (D-MD), John Camey (D-DE) and James A. Himes (D CT), each of whom is a member of the ~~FOMC indicated that~~House Financial Services Committee. The bill is called The Partnership to Strengthen Homeownership Act, and is similar to one introduced by the same congressmen in the last Congress (H.R. 5055), which never made it ~~saw improvement~~out of committee. Under this proposed legislation, all government guaranteed single-family and multi-family mortgage backed securities will be supported by a minimum of 5% private sector capital, which will stand in ~~economic activity~~a first loss position. The remaining 95% of the risk will be shared between Ginnie Mae and ~~labor market conditions. As~~ a ~~result, the FOMC announced that, beginning in January 2014, it would reduce its monthly purchases of Agency RMBS from $40 billion~~private reinsurer on a pari passu basis. Fees paid to ~~$35 billion and U.S. Treasury securities from $45 billion to $40 billion. The FOMC further stated that it would continue reinvesting principal payments from its holdings of~~Ginnie Mae for providing these securities ~~in Agency RMBS~~will be allocated to affordable housing programs. Under the bill, Freddie Mac and ~~rolling~~Fannie Mae would be wound down over ~~maturing Treasury bonds at auction. Subsequently,~~a five-year period, and their multifamily businesses will be spun out as separate entities. Ginnie Mae would be required to create and implement a workable multifamily guarantee that utilizes private sector pricing consistent with the ~~FOMC announced additional $5 billion reductions to its monthly purchases of both Agency RMBS and Treasury bonds.~~single family model. The ~~FOMC ended its bond buying program in October 2014. The FOMC announced they~~GSEs' current multifamily businesses would continue to ~~reinvest principal~~function within the new multifamily housing market as purely private organizations with an explicit government guarantee provided by Ginnie Mae and ~~interest payments received from their RMBS portfolio in additional RMBS.~~a private sector reinsurer.

~~On January 28,~~In May 2015, Senate Banking Committee Chairman Richard Shelby (R-AL) released a draft bill entitled The Regulatory Relief Bill of 2015 (the "Regulatory Relief Bill"). If enacted, this bill would increase the ~~FOMC issued~~threshold for a ~~release noting that inflation has declined “substantially”~~financial institution to be deemed a Systemically Important Financial Institution ("SIFI") from $50 billion to $500 billion while giving the Financial Stability Oversight Council discretion to designate banks with greater than $50 billion in ~~recent months~~assets as SIFIs, give non-banks an opportunity to file a remedial plan addressing regulators' concerns before being designated as SIFIs, require an affirmative vote every five-years to renew the SIFI designation of non-banks, provide regulatory relief for community banks and ~~that~~broaden the ~~FOMC anticipates inflation~~Consumer Financial Protection Bureau Qualified Mortgage rule. The draft bill was unable to ~~decline further~~win the support to bring it to a floor vote in the ~~near term. However, on~~Senate. In July 2015, Senator Shelby attached this bill to a ~~more hawkish note,~~Senate Appropriations Subcommittee mark-up of the ~~FOMC stated that recent declines in energy prices have boosted household purchasing power~~Financial Services and ~~that economic activity has been expanding at~~General Government Appropriations Act for Fiscal Year 2016, which passed a ~~solid pace.~~subcommittee vote.

~~Although historically correlated with movements~~We expect debate and discussion on residential housing and mortgage reform to continue in 2016. However, we cannot be certain if H.R. 1491, the Federal Funds Rate, European inter-bank lending rates, specifically LIBOR, are independently affected by the fiscal and budgetary problems of the member countries of the European Union. In recent years, the European Central Bank, International Monetary Fund and member countries have provided emergency funding mechanisms to support members facing the inability to raise new debt at acceptable levels (such as Greece, Ireland, Portugal and Spain). To the extent this crisis reemerges, LIBOR may increase substantially.

Although long-term interest rates are currently at historically low levels, they are still high relative to short-term interest rates. We believe that the relationship between long and short-term interest rates will remain relatively unchanged so long as neither the U.S. economic recoveryRegulatory Relief Bill or inflation rates accelerate to levels unacceptable to the FOMC. The FOMC also recently reiterated its continued long-term goals of reaching maximum employment and inflation at 2% before adjusting the target Federal Funds Rate. If the economic recovery were to strengthen or inflation rates increase, the Federal Reserve may decide to abandon its current low-interest rate policiesany other housing- and/or ~~increase interest rates. Although an increase in~~mortgage-related bill will be approved by Congress, and if so, what the Federal Funds Rate would most likely result in an increase in LIBOR, other European-specific factors, such as a credit disruption in the European inter-bank credit market, could cause an increase in LIBOR independent of movements in the Federal Funds Rate.effect will be.

Effect on Us

Regulatory developments, movements in interest rates and prepayment rates as well as loan modification programs affect us in many ways, including the following:

Effects on our Assets

A change in or elimination of the guarantee structure of Agency MBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency MBS may cause us to change our investment strategy to focus on non-Agency MBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.

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Lower long-term interest rates can affect the value of our Agency MBS in a number of ways. If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of higher-coupon Agency MBS. This is because investors typically place a premium on assets with yields that are higher than market yields. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly-yielding assets.

If prepayment levels increase, the value of our Agency MBS affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency MBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency MBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. IOs and IIOs, however, may be the types of Agency MBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.

Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency MBS with shorter durations, such as short-term fixed and floating rate CMOs. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than pass-through Agency MBS, particularly pass-through Agency MBS backed by fixed-rate mortgages.

We do not believe our investment portfolio will be materially affected by loan modification programs because Agency MBS backed by loans that would qualify for such programs (e.g., seriously delinquent loans) will be purchased by Fannie Mae and Freddie Mac at their par value prior to the implementation of such programs. However, if Fannie Mae and Freddie Mac were to modify or end their repurchase programs or if the U.S. Government modified its loan modification programs to modify non-delinquent mortgage loans, our investment portfolio could be negatively impacted.

Effects on our borrowing costs

We leverage our pass-through Agency MBS portfolio and a portion of our structured Agency MBS with principal balances through the use of short-term repurchase agreement transactions. ~~In addition, we have $26.8 million outstanding junior subordinated debt that we consider to be part of our capital base.~~ The interest rates on our debt are determined by market levels of both the Federal Funds Rate and LIBOR. An increase in the U.S. Federal Funds Rate or LIBOR would increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. This would be most prevalent with respect to our Agency MBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.

In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which effectively convert our floating-rate repurchase agreement debt to fixed-rate debt, or utilize other hedging instruments such as Eurodollar and T-Note futures contracts or interest rate swaptions.

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Summary

~~The relatively large~~Over the past quarter the spread between short and long-term interest rates has increased, but that increase has not positively affected our net interest ~~margin.~~margin as spreads between Agency MBS and benchmark interest rates have widened. However, ~~changes in~~ prepayment rates ~~could negatively affect~~have declined to the benefit of our net interest ~~margin and~~margin. The market remains highly uncertain regarding when or by how much the ~~value of~~Federal Reserve will increase interest rates or what the growth prospects are for the global economy. Economic data, as it is released, continues to have a significant impact in shaping market expectations. These developments are very important to our ~~assets. Furthermore,~~results as increases in the Federal Funds Rate and LIBOR could significantly increase our financing costs, which could lower our net interest margin.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations is based on the amounts reported in our consolidated financial statements. These financial statements are prepared in accordance with GAAP. The Company’s significant accounting policies are described in Note 1 to the Company’s accompanying consolidated financial statements.

GAAP requires the Company’s management to make complex and subjective decisions and assessments. The Company’s most critical accounting policies involve decisions and assessments which could significantly affect reported assets and liabilities, as well as reported revenues and expenses. The Company believes that all of the decisions and assessments upon which its financial statements are based were reasonable at the time made based upon information available to it at that time.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital, Bimini Advisors and MortCo, as well as the wholly-owned subsidiaries of MortCo. The accounts of Orchid are included in the consolidated balance sheet as of December 31, 2013 and the consolidated statements of operations, equity and cash flows until the deconsolidation of Orchid on December 31, 2014. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

Mortgage-Backed Securities

Our investments in MBS are accounted for under the fair value option. We acquire our MBS for the purpose of generating long-term returns, and not for the short-term investment of idle capital. Changes in the fair value of securities accounted for under the fair value option are reflected as part of our net income or loss in our consolidated statement of operations, as opposed to a component of other comprehensive income in our consolidated statement of stockholder’s equity if they were instead reclassified as available-for-sale securities. We elected to account for all of our MBS under the fair value option in order to reflect changes in the fair value of our MBS in our consolidated statement of operations, which we believe more appropriately reflects the results of our operations for a particular reporting period. GAAP requires the use of a three-level valuation hierarchy to disclose the classification of fair value measurements used for determining the fair value of our MBS. These levels include:

·	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

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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.

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Our MBS are valued using Level 2 valuations, and such valuations currently are determined based on independent pricing sources and/or third party broker quotes when available. Because the price estimates may vary, management 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 MBS determined by either an independent third-party or do so internally. In managing our portfolio, the Company employs the following four-step process at each valuation date to determine the fair value of our MBS.

·	First, the Company obtains fair values from subscription-based independent pricing services. These prices are used by both the Company as well as our repurchase agreement counterparty on a daily basis to establish margin requirements for our borrowings.

Second, the Company requests non-binding quotes from one to four broker-dealers for certain MBS in order to validate the values obtained by the pricing service. The Company requests these quotes from broker-dealers that actively trade and make markets in the respective asset class for which the quote is requested.

·	Third, the Company reviews the values obtained by the pricing source and the broker-dealers for consistency across similar assets.

Finally, if the data from the pricing services and broker-dealers is not homogenous or if the data obtained is inconsistent with management’s market observations, the Company makes a judgment to determine which price appears the most consistent with observed prices from similar assets and selects that price. To the extent management believes that none of the prices are consistent with observed prices for similar assets, which is typically the case for only an immaterial portion of our portfolio each quarter, the Company may use a third price that is consistent with observed prices for identical or similar assets. In the case of assets that have quoted prices such as Agency MBS backed by fixed-rate mortgages, the Company generally uses the quoted or observed market price. For assets such as Agency MBS backed by ARMs or structured Agency MBS, the Company may determine the price based on the yield or spread that is identical to an observed transaction or a similar asset for which a dealer mark or subscription-based price has been obtained.

Management believes its pricing methodology to be consistent with the definition of fair value described in FASB ASC 820, Fair Value Measurements.

Investment in Orchid Island Capital, Inc.

At the date of Orchid’s deconsolidation, the Company elected the fair value option for its continuing investment in ~~Orchid.~~Orchid common shares. The change in the fair value of this investment isand dividends received on this investment are reflected in other income in the consolidated statements of operations for the year ended December 31, 2015. We estimate the fair value of our ~~2014~~investment in Orchid on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock on the NYSE. Electing the fair value option requires the Company to record changes in fair value in the consolidated ~~statement~~statements of ~~operations. Going forward, dividends received~~operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with how the investment is managed.

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Advisory Services

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors pursuant to the terms of a management agreement. Under the terms of the management agreement Orchid is obligated to pay Bimini Advisors a monthly management fee and a pro rata portion of certain overhead costs and to reimburse the Company for any direct expenses incurred on ~~this investment will be reflected in our consolidated statement of operations.~~its behalf.

Retained Interests in Securitizations

~~From 2005 to 2007, MortCo participated in securitization transactions as part of its mortgage origination business.~~ Retained interests in the subordinated tranches of securities created in securitization transactions were initially recorded at their fair value when issued by MortCo. Subsequent adjustments to fair value are reflected in earnings. Quoted market prices for these assets are generally not available, so the Company estimates fair value based on the present value of expected future cash flows using management’s best estimates of key assumptions, which include expected credit losses, prepayment speeds, weighted-average life, and discount rates commensurate with the inherent risks of the asset.

Derivative Financial Instruments

~~The Company has entered into Eurodollar and T-Note futures contracts and interest rate swaptions~~We use derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and itwe may continue to do so in the future. The ~~Company has~~principal instruments that we have used to date are T-Note and Eurodollar futures contracts and interest rate swaptions, but we may enter into other derivatives in the future.

We have elected not to ~~not~~ treat any of ~~its~~our derivative financial instruments as ~~hedges.~~hedges in order to align the accounting treatment of our derivative instruments with the treatment of our 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.

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Repurchase Agreements

We finance the acquisition of a significant portion of our MBS through repurchase transactions under master repurchase agreements. Repurchase transactions are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, which due to their short term nature approximate fair value.

In instances where we acquire Agency MBS through repurchase agreements with the same counterparty from whom the Agency MBS were purchased, we account for the purchase commitment and repurchase agreement on a net basis and record a forward commitment to purchase Agency MBS as a derivative instrument if the transaction does not comply with the criteria in FASB ASC 860, ~~Transfers and Servicing~~, for gross presentation. If the transaction complies with the criteria for gross presentation, we present the assets and the related financing on a gross basis in our statements of financial condition, and the corresponding interest income and interest expense in our statement of operations. Such forward commitments are recorded at fair value with subsequent changes in fair value recognized in income. Additionally, we record the cash portion of our investment in Agency MBS as a mortgage related receivable from the counterparty on our consolidated balance sheet.

Income Recognition

All of our MBS are either PT MBS or structured MBS, including CMOs, IOs, IIOs or POs. Income on PT MBS, POs and CMOs that contain principal balances is based on the stated interest rate of the security. As a result of accounting for our MBS under the fair value option, premium or discount present at the date of purchase is not amortized. For IOs, IIOs and CMOs that do not contain principal balances, income is accrued based on the carrying value and the effective yield. As cash is received it is first applied to accrued interest and then to reduce the carrying value of the security. At each reporting date, the effective yield is adjusted prospectively from the reporting period based on the new estimate of prepayments, current interest rates and current asset prices. The new effective yield is calculated based on the carrying value at the end of the previous reporting period, the new prepayment estimates and the contractual terms of the security. Changes in fair value of all of our MBS during the period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security.

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Income Taxes

Through December 31, 2014, Bimini Capital ~~and its qualified REIT subsidiary have elected to be~~was taxed as a ~~REIT~~real estate investment trust (“REIT”) under the ~~Code. As further described below, MortCo and~~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. See Note 13 for an additional discussion of the termination of Bimini Capital’s REIT status effective January 1, 2015. Bimini Advisors and MortCo are taxpaying entities for income tax purposes and are taxed separately from Bimini Capital. ~~Bimini Capital~~

Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities represent the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates. The measurement of net deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it is more likely than not that they will ~~generally~~ not be ~~subject to~~realized.

The Company’s U.S. federal income tax returns for years ended on or after December 31, 2012 remain open for examination. Although management believes its ~~REIT taxable income (net~~calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of tax audits could be materially different from the ~~application of net operating loss carryovers)~~tax returns filed by the Company, and those differences could result in significant costs or benefits to the extent that Bimini Capital 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.Company.

~~MortCo, Bimini Advisors~~The Company measures, recognizes and ~~their activities are subject to corporate income taxes and the applicable provisions of FASB~~presents its uncertain tax positions in accordance with ASC Topic 740, Income Taxes. ~~Deferred~~Under that guidance, the Company assesses the likelihood, based on their technical merit, that tax ~~assets~~positions will be sustained upon examination based on the facts, circumstances and ~~liabilities are recognized for~~information available at the ~~future~~end of each period. The measurement of uncertain tax ~~consequences attributable to differences between~~positions is adjusted when new information is available, or when an event occurs that requires a change. The Company recognizes tax positions in the financial ~~statement carrying amounts of existing assets and liabilities and their respective tax basis. In assessing the realizability of deferred tax assets, management considers whether~~statements only when it is more likely than not that ~~some portion or all~~the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the ~~deferred tax assets~~position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be ~~realized. To~~realized upon settlement. The difference between the ~~extent management believes deferred~~benefit recognized and the tax ~~assets will not be fully realized in future periods,~~benefit claimed on a ~~provision~~tax return is referred to as an unrecognized tax benefit and is recorded so as ~~to reflect~~a liability in the ~~net portion,~~consolidated balance sheets. The Company records income tax-related interest and penalties, if ~~any, of~~applicable, within the ~~deferred~~income tax ~~asset management expects to realize.~~provision.

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Capital Expenditures

At December 31, ~~2014,~~2015, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At December 31, ~~2014,~~2015, we did not have any off-balance sheet arrangements.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and our distributions will be determined by our Board of Directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements

	Page

Report of Independent Registered Public Accounting Firm		70
Consolidated Balance Sheets		71
Consolidated Statements of Operations		72
Consolidated Statements of Equity		73
Consolidated Statements of Cash Flows		74
Notes to Consolidated Financial Statements		75

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Bimini Capital Management, Inc.

Vero Beach, Florida

We have audited the accompanying consolidated balance sheets of Bimini Capital Management, Inc. and subsidiaries (the “Company”) as of December 31, ~~2014~~2015 and ~~2013~~2014 and the related consolidated statements of operations, equity, and cash flows for each of the two years in the period ended December 31, ~~2014.~~2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, ~~2014~~2015 and ~~2013,~~2014, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2014~~2015, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2014, based on criteria established in ~~Internal Control – Integrated Framework (2013)~~ ~~issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 16, 2015 expressed an unqualified opinion thereon.~~

As described in Note 1, management determined that on December 31, 2014 Orchid Island Capital, Inc. (“Orchid”) should no longer be consolidated as a variable interest entity in the Company’s consolidated financial statements. As a result, the assets and liabilities of Orchid have been deconsolidated from the Company’s consolidated balance sheet at December 31, 2014, and the Company is accounting for its investment in Orchid as an investment under the fair value option at December 31, 2014. Also as a result of the deconsolidation on December 31, 2014, Orchid’s results of operations and cash flows ~~will cease~~ceased to be included in the Company’s consolidated statements of operations and cash flows after December 31, 2014. Our opinion is not modified with respect to this matter.

West Palm Beach, Florida

March ~~16, 2015~~22, 2016

/s/ BDO USA, LLP

Certified Public Accountants

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BIMINI CAPITAL MANAGEMENT, INC.	BIMINI CAPITAL MANAGEMENT, INC.								BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS								CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2014 and 2013
DECEMBER 31, 2015 and 2014									DECEMBER 31, 2015 and 2014

		2014				2013				2015			2014
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties		$	116,026,180			$	372,102,248			$	81,192,199		$	116,026,180
Unpledged			1,804,852				17,238,710				2,796,200			1,804,852
Total mortgage-backed securities			117,831,032				389,340,958				83,988,399			117,831,032
Cash and cash equivalents			4,699,059				11,959,292				6,310,683			4,699,059
Restricted cash			733,660		��		2,557,165				401,800			733,660
Investment in Orchid Island Capital, Inc., at fair value			12,810,728				-
Investment in Orchid Island Capital, Inc. common stock, at fair value											13,852,707			12,810,728
Retained interests in securitizations			1,899,684				2,530,834				1,124,278			1,899,684
Accrued interest receivable			460,326				1,720,726				351,049			460,326
Property and equipment, net			3,584,603				3,663,437				3,492,612			3,584,603
Deferred tax assets, net			1,900,064				-				64,832,242			1,900,064
Other assets			2,960,042				2,755,234				2,701,655			2,960,042
Total Assets		$	146,879,198			$	414,527,646			$	177,055,425		$	146,879,198

LIABILITIES AND EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements		$	109,963,995			$	353,396,075			$	77,234,249		$	109,963,995
Junior subordinated notes due to Bimini Capital Trust II			26,804,440				26,804,440				26,804,440			26,804,440
Payable for unsettled securities purchased											1,859,277			-
Accrued interest payable			94,397				142,055				83,957			94,397
Other liabilities			814,597				826,660				2,533,442			814,597
Total Liabilities			137,677,429				381,169,230				108,515,365			137,677,429

EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; designated, 1,800,000
shares as Class A Redeemable and 2,000,000 shares as Class B Redeemable; no
shares issued and outstanding as of December 31, 2014 and 2013			-				-
Class A Common Stock, $0.001 par value; 98,000,000 shares designated: 12,324,391
shares issued and outstanding as of December 31, 2014 and 11,509,756 shares
issued and outstanding as of December 31, 2013			12,324				11,510
Class B Common Stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2014 and 2013			32				32
Class C Common Stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2014 and 2013			32				32
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 shares
designated Series A Junior Preferred Stock, 9,900,000 shares undesignated as of
December 31, 2015; 1,800,000 shares designated Class A Redeemable and
2,000,000 shares designated Class B Redeemable as of December 31, 2014;
no shares issued and outstanding as of December 31, 2015 and 2014											-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 12,373,294
shares issued and outstanding as of December 31, 2015 and 12,324,391 shares
issued and outstanding as of December 31, 2014											12,373			12,324
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2015 and 2014											32			32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2015 and 2014											32			32
Additional paid-in capital			334,522,850				334,810,312				334,630,263			334,522,850
Accumulated deficit			(325,333,469	)			(333,078,313	)			(266,102,640	)		(325,333,469	)
Stockholders’ equity			9,201,769				1,743,573
Noncontrolling interests			-				31,614,843
Total Equity			9,201,769				33,358,416
Total Stockholders' Equity											68,540,060			9,201,769
Total Liabilities and Equity		$	146,879,198			$	414,527,646			$	177,055,425		$	146,879,198

The following table includes assets to be used to settle liabilities of the variable interest entity ("VIE"). These assets and liabilities are included in the 2013 consolidated balance sheet above. See Note 17 for additional information on our VIE, which was consolidated as of December 31, 2013 and was deconsolidated on December 31, 2014.
ASSETS:
Mortgage-backed securities		$	-			$	351,222,512
Cash and cash equivalents and restricted cash			-				10,615,027
Accrued interest receivable and other assets			-				1,738,508
LIABILITIES:
Repurchase agreements			-				318,557,054
Accrued interest payable and other liabilities			-				171,721
See Notes to Consolidated Financial Statements

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See Notes to Consolidated Financial Statements								See Notes to Consolidated Financial Statements
BIMINI CAPITAL MANAGEMENT, INC.	BIMINI CAPITAL MANAGEMENT, INC.							BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS	CONSOLIDATED STATEMENTS OF OPERATIONS							CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2014 and 2013
For the Years Ended December 31, 2015 and 2014								For the Years Ended December 31, 2015 and 2014

		2014			2013				2015			2014(1)
Interest income		$	34,438,486		$	9,794,654			$	4,312,063		$	34,438,486
Interest expense			(3,281,130	)		(1,279,737	)			(425,107	)		(3,281,130	)
Net interest income, before interest on junior subordinated notes			31,157,356			8,514,917				3,886,956			31,157,356
Interest expense on junior subordinated notes			(984,617	)		(995,397	)			(997,812	)		(984,617	)
Net interest income			30,172,739			7,519,520				2,889,144			30,172,739
Unrealized gains (losses) on mortgage-backed securities			12,402,090			(12,913,561	)
Realized gains (losses) on mortgage-backed securities			2,948,683			(1,248,618	)
(Losses) gains on derivative instruments			(14,191,436	)		4,837,469
Net portfolio income (loss)			31,332,076			(1,805,190	)
Unrealized (losses) gains on mortgage-backed securities										(1,944,186	)		12,402,090
Realized (losses) gains on mortgage-backed securities										(78,850	)		2,948,683
Losses on derivative instruments										(1,376,963	)		(14,191,436	)
Net portfolio (loss) income										(510,855	)		31,332,076

Other income:
Gains on retained interests in securitizations			3,815,160			2,469,701				2,962,158			3,815,160
Gains on release of loan loss reserves			-			4,737,260
Other income (expense)			66,991			(31,268	)
Unrealized (losses) gains on Orchid Island Capital, Inc. common stock										(2,960,771	)		9,752
Orchid Island Capital, Inc. dividends										1,894,480			-
Advisory services										5,041,692			-
Other income										9,730			57,239
Total other income			3,882,151			7,175,693				6,947,289			3,882,151

Expenses:
Compensation and related benefits			2,880,304			2,297,984				2,907,186			2,880,304
Directors' fees and liability insurance			1,171,422			836,473				669,944			1,171,422
Orchid Island Capital, Inc. IPO expenses			-			3,042,322
Audit, legal and other professional fees			1,906,333			1,741,587				1,624,822			1,906,333
Direct REIT operating expenses			462,246			440,733
Direct operating expenses										281,636			462,246
Settlement of litigation										3,500,000			-
Administrative and other expenses			800,342			803,861				671,808			800,342
Total expenses			7,220,647			9,162,960				9,655,396			7,220,647

Net income (loss) before income tax benefit			27,993,580			(3,792,457	)
Net (loss) income before income tax benefit										(3,218,962	)		27,993,580
Income tax benefit			(1,877,797	)		(1,247,768	)			(62,449,791	)		(1,877,797	)

Net income (loss)			29,871,377			(2,544,689	)
Less: Income (loss) attributable to noncontrolling interests			22,126,533			(214,717	)
Net income										59,230,829			29,871,377
Less: Income attributable to noncontrolling interests										-			22,126,533

Net Income (Loss) attributable to Bimini Capital stockholders		$	7,744,844		$	(2,329,972	)
Net Income attributable to Bimini Capital stockholders									$	59,230,829		$	7,744,844

Basic and Diluted Net Income (Loss) Per Share of:
Basic and Diluted Net Income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted		$	0.63		$	(0.21	)		$	4.77		$	0.63
CLASS B COMMON STOCK
Basic and Diluted		$	0.63		$	(0.21	)		$	4.77		$	0.63
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted			12,198,187			10,966,076				12,385,938			12,198,187
CLASS B COMMON STOCK
Basic and Diluted			31,938			31,938				31,938			31,938
(1) The results of operations of Orchid Island Capital, Inc. were included for the year ended December 31, 2014 as a consolidated variable interest								(1) The results of operations of Orchid Island Capital, Inc. were included for the year ended December 31, 2014 as a consolidated variable interest
entity. See Note 1 for additional information.
See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements							See Notes to Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC

CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2014 and 2013

Stockholders' Equity
Common Additional Accumulated Noncontrolling
Stock Paid-in Capital Deficit Interests Total
Balances, January 1, 2013 $ 10,681 $ 334,254,432 $ (330,748,341 ) $ - $ 3,516,772
Net loss - - (2,329,972 ) (214,717 ) (2,544,689 )
Issuance of common shares of
Orchid Island Capital, Inc. - 278,238 - 35,121,762 35,400,000
Cash dividends paid to
noncontrolling interests - - - (3,292,202 ) (3,292,202 )
Issuance of Class A common shares
for equity plan exercises 893 (893 ) - - -
Amortization of equity plan compensation - 278,535 - - 278,535

Balances, December 31, 2013 11,574 334,810,312 (333,078,313 ) 31,614,843 33,358,416
Net income - - 7,744,844 22,126,533 29,871,377
Issuance of common shares of
Orchid Island Capital, Inc. - (621,681 ) - 171,992,831 171,371,150
Cash dividends paid to
noncontrolling interests - - - (20,522,827 ) (20,522,827 )
Issuance of Class A common shares
for board compensation and
for equity plan exercises 556 235,698 - - 236,254
Class A common shares sold
directly to employees 258 97,742 - - 98,000
Amortization of equity plan compensation - 779 - 65,227 66,006
Deconsolidation of Orchid Island
Capital, Inc. as of December 31, 2014 - - - (205,276,607 ) (205,276,607 )

Balances, December 31, 2014 $ 12,388 $ 334,522,850 $ (325,333,469 ) $ - $ 9,201,769
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2015 and 2014

	Stockholders' Equity
	Common		Additional			Accumulated			Noncontrolling
	Stock		Paid-in Capital			Deficit			Interests			Total
Balances, January 1, 2014	$	11,574	$	334,810,312		$	(333,078,313	)	$	31,614,843		$	33,358,416
Net income		-		-			7,744,844			22,126,533			29,871,377
Issuance of common shares of
Orchid Island Capital, Inc.		-		(621,681	)		-			171,992,831			171,371,150
Cash dividends paid to
noncontrolling interests		-		-			-			(20,522,827	)		(20,522,827	)
Issuance of Class A common shares
for board compensation and
for equity plan exercises		556		235,698			-			-			236,254
Class A common shares sold
directly to employees		258		97,742			-			-			98,000
Amortization of equity plan compensation		-		779			-			65,227			66,006
Deconsolidation of Orchid Island
Capital, Inc. as of December 31, 2014		-		-			-			(205,276,607	)		(205,276,607	)

Balances, December 31, 2014		12,388		334,522,850			(325,333,469	)		-			9,201,769
Net income		-		-			59,230,829			-			59,230,829
Issuance of Class A common shares
for board compensation and
for equity plan exercises		49		88,186			-			-			88,235
Amortization of equity plan compensation		-		19,227			-			-			19,227

Balances, December 31, 2015	$	12,437	$	334,630,263		$	(266,102,640	)	$	-		$	68,540,060
See Notes to Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC.	BIMINI CAPITAL MANAGEMENT, INC.							BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS							CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2014 and 2013
Years Ended December 31, 2015 and 2014								Years Ended December 31, 2015 and 2014

		2014			2013				2015			2014(1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	29,871,377		$	(2,544,689	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income									$	59,230,829		$	29,871,377
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation and equity plan amortization			302,260			278,535				107,462			302,260
Depreciation			102,800			121,822				91,991			102,800
Deferred income tax benefit			(1,900,064	)		(1,287,154	)			(62,932,178	)		(1,900,064	)
(Gains) losses on mortgage-backed securities			(15,350,773	)		14,162,179
Losses (gains) on mortgage-backed securities										2,023,036			(15,350,773	)
Gains on retained interests in securitizations			(3,815,160	)		(2,469,701	)			(2,962,158	)		(3,815,160	)
Loss on disposal of property and equipment			12,886			-				-			12,886
Gains on release of loan loss reserves			-			(4,737,260	)
Realized and unrealized losses on interest rate swaptions			4,438,787			-				-			4,438,787
Fair value adjustment on Investment in Orchid Island Capital, Inc.			(9,752	)		-				2,960,771			(9,752	)
Changes in operating assets and liabilities:
Accrued interest receivable			(4,950,854	)		(1,001,831	)			109,277			(4,950,854	)
Other assets			(159,037	)		1,230,608				258,387			(159,037	)
Accrued interest payable			580,093			18,609				(10,440	)		580,093
Other liabilities			745,801			236,955				1,718,845			745,801
NET CASH PROVIDED BY OPERATING ACTIVITIES			9,868,364			4,008,073				595,822			9,868,364

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases			(2,316,307,507	)		(706,042,461	)			(26,396,648	)		(2,316,307,507	)
Sales			966,896,310			430,697,721				37,545,348			966,896,310
Principal repayments			87,102,953			39,946,437				20,670,897			87,102,953
Payments received on retained interests in securitizations			4,446,310			3,274,876				3,737,564			4,446,310
Increase in restricted cash			(5,966,495	)		(1,716,665	)
Decrease (increase) in restricted cash										331,860			(5,966,495	)
Purchases of Orchid Island Capital, Inc. common stock										(2,143,473	)		-
Purchases of property and equipment			(36,852	)		(10,949	)			-			(36,852	)
Purchase of interest rate swaptions, net of margin cash received			(4,291,625	)		-				-			(4,291,625	)
Deconsolidation of Orchid Island Capital, Inc.			(93,136,610	)		-				-			(93,136,610	)
NET CASH USED IN INVESTING ACTIVITIES			(1,361,293,516	)		(233,851,041	)

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES										33,745,548			(1,361,293,516	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements			8,382,637,845			3,867,715,039				1,010,947,179			8,382,637,845
Principal repayments on repurchase agreements			(7,189,419,249	)		(3,664,613,138	)			(1,043,676,925	)		(7,189,419,249	)
Issuance of common shares of Orchid Island Capital, Inc.			171,371,150			35,400,000				-			171,371,150
Cash dividends paid to noncontrolling interests			(20,522,827	)		(3,292,202	)			-			(20,522,827	)
Class A common shares sold directly to employees			98,000			-				-			98,000
NET CASH PROVIDED BY FINANCING ACTIVITIES			1,344,164,919			235,209,699
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES										(32,729,746	)		1,344,164,919

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(7,260,233	)		5,366,731
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS										1,611,624			(7,260,233	)
CASH AND CASH EQUIVALENTS, beginning of the year			11,959,292			6,592,561				4,699,059			11,959,292
CASH AND CASH EQUIVALENTS, end of the year		$	4,699,059		$	11,959,292			$	6,310,683		$	4,699,059

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest		$	3,685,654		$	2,256,525			$	1,433,359		$	3,685,654
Income taxes		$	22,267		$	39,386			$	137,001		$	22,267
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Securities acquisitions settled in later period									$	1,859,277		$	-
(1) The cash flows or Orchid Island Capital, Inc. are included for the year ended December 31, 2014 as a consolidated variable								(1) The cash flows or Orchid Island Capital, Inc. are included for the year ended December 31, 2014 as a consolidated variable
interest entity. See Note 1 for additional information.
See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements							See Notes to Consolidated Financial Statements

-74-

BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital”), was formed in September 2003 for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“MBS”). From inception through December 31, 2014, Bimini Capital ~~has~~ elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). ~~As a~~Effective January 1, 2015, Bimini Capital’s REIT ~~Bimini Capital is generally not subject to federal income tax on its REIT taxable income provided that it distributes to its stockholders at least 90% of its REIT taxable income on~~status was terminated. See Note 13 for an ~~annual basis. In addition, a REIT must meet other provisions~~additional discussion of the ~~Code to retain its special tax status.~~changes in Bimini Capital’s ~~website is located at http://www.biminicapital.com.~~REIT status effective January 1, 2015.

On February 20, 2013, Orchid Island Capital, Inc. (“Orchid”) completed the initial public offering (“IPO”) of its common stock. Prior to the completion of its IPO, Orchid was a wholly-owned qualified REIT subsidiary of Bimini Capital. ~~During 2014, Orchid has completed additional offerings of its common stock,~~Since Orchid’s IPO and until December 31, 2014, Orchid ~~continued to be~~was consolidated as a ~~VIE. As used in this document, discussions related to REIT qualifying activities include the MBS portfolios of Bimini Capital and Orchid.~~variable interest entity (“VIE”). Effective December 31. 2014. Orchid was deconsolidated.

As used in this document, discussions related to the “Company”, refer to the consolidated entity, including Bimini Capital, our wholly-owned subsidiaries, and, through December 31, 2014, our ~~variable interest entity (“VIE”). As of December 31, 2014, balance sheet references to the “Company” do not include the VIE’s assets or liabilities.~~VIE. References to “Bimini Capital” and the “parent” refer to Bimini Capital Management, Inc. as a separate entity.

~~Discussions~~ Through December 31, 2014, discussions related to Bimini Capital’s taxable REIT subsidiaries (“TRS”) or non-REIT eligible assets refer to Bimini Advisors, Inc. and its wholly-owned subsidiary, Bimini Advisors, LLC (together “Bimini Advisors”) and MortCo TRS, LLC ~~(“MortCo”)~~ and its consolidated ~~subsidiaries.~~subsidiaries (“MortCo”).

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital, Bimini Advisors and ~~MortCo, as well as the wholly-owned subsidiaries of~~ MortCo. The accounts of Orchid are included in ~~the consolidated balance sheet as of December 31, 2013 and~~ the consolidated statements of operations, equity and cash flows until December 31, 2014. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

~~-75-~~

From the effective date of Orchid’s IPO and until December 31, 2014, management concluded pursuant to ASC 810 that Orchid was a VIE because Orchid's equity holders lack the ability through voting rights to make decisions about its activities that have a significant effect on the success of Orchid. Management had also concluded that Bimini Capital was the primary beneficiary of Orchid because, under the management agreement between Bimini Advisors and Orchid, Bimini Capital had the power to direct the activities of Orchid that most significantly impact its economic performance.VIE. As a result, subsequent to Orchid’s IPO and until December 31, 2014, the Company consolidated Orchid in its financial statements. ~~While the~~The results of operations of Orchid are included in the Company’s 2014 consolidated ~~financial~~ statements of operations and cash flows, however, net income ~~or loss~~ attributable to Bimini Capital stockholders ~~does~~did not include the portion of net income ~~or loss~~ attributable to noncontrolling interests. Additionally, noncontrolling interests in Orchid are recorded in our 2013 consolidated balance sheet and our consolidated statement of equity within the equity section but separate from the stockholders’ equity.

-75-

As further described in Note 9, Bimini Capital has a common share investment in a trust used in connection with the issuance of Bimini Capital’s junior subordinated notes. Pursuant to ASC 810, Bimini Capital’s common share investment in the trust has not been consolidated in the financial statements of Bimini Capital, and accordingly, this investment has been accounted for on the equity method.

~~Liquidity~~

Material losses incurred by the Company in 2006 and 2007 attributable to the former mortgage origination operations of MortCo significantly reduced Bimini Capital’s equity capital base and the size of its MBS portfolio when compared to pre-2006 levels. Litigation costs stemming from both the former operations of MortCo and Bimini Capital itself caused the Company’s overhead to be high in relation to its portfolio size. The smaller capital base made it difficult to generate sufficient net interest income to cover expenses.

Beginning in 2007, the Company began a series of actions to respond to the losses and their impact on our capital base. One of these actions was to evaluate and pursue capital raising opportunities for Orchid. Orchid completed its initial public offering of common stock on February 20, 2013. Bimini Capital and Bimini Advisors acted as sponsor to Orchid by agreeing to fund all underwriting, legal and other costs of the offering, which totaled approximately $3.0 million during the year ended December 31, 2013. Orchid has no obligation or intent to reimburse Bimini Capital and Bimini Advisors, either directly or indirectly, for the offering costs; therefore, they were expensed in the Company’s 2013 consolidated statement of operations. As of March 31, 2014, Orchid reached $100 million of stockholders’ equity for the first time. As a result, in accordance with the management agreement between Bimini Advisors and Orchid, Bimini Advisors began to allocate certain overhead costs to Orchid on a pro rata basis commencing on July 1, 2014. As a stockholder of Orchid, Bimini Capital will continue to share in distributions, if any, paid by Orchid to its stockholders.

~~-76-~~

At December 31, 2014, the Company had cash and cash equivalents of approximately $4.7 million, an MBS portfolio of approximately $117.8 million and an equity capital base of approximately $9.2 million. The Company generated cash flows of approximately $116.6 million from principal and interest payments on its MBS portfolio ($9.0 million excluding those of Orchid) and approximately $4.4 million from retained interests in securitizations during the year ended December 31, 2014. In addition, during the year ended December 31, 2014 Bimini Advisors received approximately $2.4 million in management fees and expense reimbursements as manager of Orchid. These amounts were eliminated from the 2014 consolidated statement of operations as the results of Orchid were included the consolidated presentation for the year ended December 31, 2014. If cash resources are, at any time, insufficient to satisfy the Company’s liquidity requirements, such as when cash flows from operations are materially negative, the Company may be required to pledge additional assets to meet margin calls, liquidate assets, sell additional debt or equity securities or pursue other financing alternatives.

Basis of Presentation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's consolidated financial position, results of operations and cash flows have been included and are of a normal and recurring nature.

Use of Estimates

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. Significant estimates affecting the accompanying consolidated financial statements include the fair values of MBS, ~~Investment~~investment in Orchid ~~Eurodollar futures contracts, interest rate swaptions,~~common shares, derivatives, retained interests and asset valuation ~~allowances.~~allowances and the level of deferred tax asset allowances recorded for each accounting period.

Statement of Comprehensive Income ~~(Loss)~~

In accordance with ASC Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income. Comprehensive income ~~(loss)~~ is the same as net income ~~(loss)~~ for all 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.~~less at the time of purchase. At December 31, 2015, restricted cash consisted of approximately $0.4 million of cash held by a broker as margin on Eurodollar futures contracts. At December 31, 2014, restricted cash consisted of approximately $0.5 million of cash held by a broker as margin on Eurodollar futures contracts and $0.3 million of cash held on deposit as collateral with repurchase agreement counterparties. ~~At December 31, 2013 restricted cash consisted of approximately $2.6 million of cash held by a broker as margin on Eurodollar futures contracts.~~

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 December 31, ~~2014,~~2015, the Company’s cash deposits exceeded federally insured limits by approximately $3.8 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 ~~uses~~limits uninsured balances to only large, well-known ~~bank~~banks and derivative counterparties and believes that it is not exposed to significant credit risk on cash and cash equivalents or restricted cash balances.

~~-77-~~-76-

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 mortgage-backed ~~loans (collectively, “MBS”). These investments meet the requirements to be classified as available for sale under ASC 320-10-25,~~ ~~Debt and Equity Securities~~ ~~(which requires the securities to be carried at fair value on the balance sheet with changes in fair value charged to other comprehensive income, a component of stockholders’ equity). However, the~~loans. The Company has elected to account for its investment in MBS 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 MBS transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the MBS balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the MBS balance with an offsetting receivable recorded.

The fair value of the Company’s investment in MBS is governed by ASC Topic 820, Fair Value Measurement. The definition of fair value in ASC Topic 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 MBS are based on independent pricing sources and/or third party broker quotes, when available.

Income on PT MBS 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 ~~or losses~~(losses) on MBS in the consolidated ~~statement~~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 MBS 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. The amount reported as unrealized gains or losses on mortgage backed securities thus captures the net effect of changes in the fair market value of securities caused by market developments and any premium or discount lost as a result of principal repayments during the period.

~~Investment in~~ Orchid Island Capital, Inc. Common Stock

At the date of Orchid’s deconsolidation, the Company elected the fair value option for its continuing investment in ~~Orchid.~~Orchid common shares. The change in the fair value of this investment isand dividends received on this investment are reflected in other income in ~~our 2014~~the consolidated ~~statement~~statements of ~~operations. Going forward, dividends received on this investment will be reflected in our consolidated statement of operations.~~operations for the year ended December 31, 2015. We estimate the fair value of our investment in Orchid on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock. Electing the fair value option requires the Company to record changes in fair value in the consolidated ~~statement~~statements 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~~ how the investment is managed.

Advisory Services

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Retained Interests in Securitizations

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 ~~Eurodollar~~T-Note and ~~T-Note~~Eurodollar futures contracts and options to enter in interest rate swaps (“interest rate swaptions”), but it may enter into other ~~types of transactions~~derivatives in the future.

The Company has elected not to ~~not~~ treat any of its derivative financial instruments as ~~hedges.~~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

ASC Topic 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. MBS, the Company’s investment in Orchid, Eurodollar futures contracts, interest rate swaptions and retained interests in securitization transactions 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 15 of the consolidated financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, other assets, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying value as of December 31, ~~2014~~2015 and December 31, ~~2013,~~2014, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company’s junior subordinated notes. Currently, there is a limited market for these types of instruments and the Company is unable to ascertain what interest rates would be available to the Company for similar financial instruments. Information regarding carrying amount, effective interest rate and maturity date for these instruments is presented in Note 9 to the consolidated financial statements.

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Property and Equipment, net

Property and equipment, net, consists of computer equipment with a depreciable life of 3 years, office furniture and equipment with depreciable lives of 8 to 20 years, land which has no depreciable life, and buildings and improvements with depreciable lives of 30 years. Property and equipment is recorded at acquisition cost and depreciated using the straight-line method over the estimated useful lives of the assets.

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Repurchase Agreements

The Company finances the acquisition of the majority of its PT MBS 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.

Share-Based Compensation

The Company follows the provisions of ASC Topic 718, Compensation – Stock Compensation, to account for stock and stock-based awards. For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings over the vesting period based on the fair value of the award. Payments pursuant to dividend equivalent rights, which are granted along with certain equity based awards, are charged to stockholders’ equity when dividends are declared. The Company applies a zero forfeiture rate for its equity based awards, as such awards have been granted to a limited number of employees and historical forfeitures have been minimal. A significant forfeiture, or an indication that significant forfeitures may occur, would result in a revised forfeiture rate which would be accounted for prospectively as a change in an estimate. For transactions with non-employees in which services are performed in exchange for the Company’s common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance.

Earnings Per Share

The Company follows the provisions of ASC Topic 260, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents or two (or more) classes of securities that participate in dividend distributions to present both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the treasury stock or two-class method, as applicable for common stock equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive.

Outstanding shares of Class B Common Stock, participating and convertible into Class A Common Stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A Common Stock if, as and when authorized and declared by the Board of Directors. Accordingly, shares of the Class B Common Stock are included in the computation of basic EPS using the two-class method and, consequently, are presented separately from Class A Common Stock.

The shares of Class C Common Stock are not included in the basic EPS computation as these shares do not have participation rights. The outstanding shares of Class B and Class C Common Stock are not included in the computation of diluted EPS for the Class A Common Stock as the conditions for conversion into shares of Class A Common Stock were not met.

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Income Taxes

Through December 31, 2014, Bimini Capital ~~has elected to be~~was taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and Orchid, until the closing of its IPO on February 20, 2013, was a “qualified REIT subsidiary” of Bimini Capital under the Code. Beginning with its short tax period commencing on February 20, 2013 and ended December 31, 2013, Orchid has qualified and elected to be taxed as a REIT, and filed a REIT tax return separate from Bimini Capital.. 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. ~~At December 31, 2014, management believes that the Company has complied with the Code requirements and Bimini Capital continues to qualify as a REIT. As further described in~~See Note 13 ~~Income Taxes,~~for an additional discussion of the termination of Bimini Capital’s REIT status effective January 1, 2015. Bimini Advisors and MortCo are taxpaying entities for income tax purposes and are taxed separately from Bimini ~~Capital~~Capital.

Income taxes are provided for using the asset and ~~Orchid.~~liability method. Deferred tax assets and liabilities represent the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates. The measurement of net deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it is more likely than not that they will not be realized.

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The Company’s U.S. federal income tax returns for years ended on or after December 31, ~~2011~~2012 remain open for examination. Although management believes its calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of tax audits could be materially different from the tax returns filed by the Company, and those differences could result in significant costs or benefits to the Company.

The Company measures, recognizes and presents its uncertain tax positions in accordance with ASC Topic 740, Income Taxes. Under that guidance, the Company 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. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. The Company recognizes tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The difference between the benefit recognized and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit and is recorded as a liability in the consolidated balance sheets. The Company records income tax-related interest and penalties, if applicable, within the income tax provision.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentations.

Recent Accounting Pronouncements

In January 2016, the FASB issued Accounting Standards Update (“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 November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that all deferred tax liabilities and tax assets be classified as non-current in a classified balance sheet, rather than separating such deferred taxes into current and non-current amounts, as is required under current guidance. ASU 2015-17 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2016 and may be applied either prospectively or retrospectively. The ASU is not expected to materially impact the Company’s consolidated financial statements.

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In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 provides guidance for determining whether a cloud computing arrangement includes a software license and requires that all software licenses within the scope of Subtopic 350-40 be accounted for in a manner consistent with other licenses of intangible assets. ASU 2015-05, for which early application is permitted, is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with retrospective application permitted for all relevant prior periods The ASU is not expected to materially impact the Company’s consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 changes the evaluation that a reporting entity must perform to determine whether it should consolidate certain types of legal entities, reduces the number of consolidation models and places emphasis on risk of loss when determining a controlling financial interest. Under ASU 2015-02, all entities are within the scope of Accounting Standards Codification (“ASC”) Subtopic 810, Consolidation, including limited partnerships and similar legal entities, unless a scope exception applies. The presumption that a general partner controls a limited partnership has been eliminated. In addition, fees paid to decision makers that meet certain conditions no longer cause consolidation of VIEs in certain instances. The amendments place more emphasis on variable interests other than fee arrangements and reduce the extent to which related party arrangements cause an entity to be considered a primary beneficiary. ASU 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early application is permitted. The ASU is not expected to materially impact the Company’s consolidated financial

In June 2014, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standard Update (“ASU”)~~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 ASU is not expected to materially impact the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. ASU 2014-11 amends the accounting guidance for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings, and requires additional disclosure about certain transactions by the transferor. ASU 2014-11 is effective for certain transactions that qualify for sales treatment for the first interim or annual period beginning after December 15, 2014. The new disclosure requirements for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that qualify for secured borrowing treatment is effective for annual periods beginning after December 15, 2014 and for interim periods beginning after March 15, 2015. The ~~Company currently records its repurchase arrangements as secured borrowings and do~~adoption of this ASU did not ~~anticipate that ASU 2014-11 will~~ have ~~any~~a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This new standard requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, unrecognized tax benefits will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The ASU became effective beginning January 1, 2014 on either a prospective or retrospective basis. The guidance represents a change in financial statement presentation only and the adoption of this ASU did not have any impact on the Company’s consolidated financial results.

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NOTE 2. MORTGAGE-BACKED SECURITIES

The following table presents the Company’s MBS portfolio as of December 31, ~~2014~~2015 and ~~2013:~~2014:

(in thousands)
	2014		2013		2015		2014
Pass-Through MBS:
Hybrid Adjustable-rate Mortgages	$	442	$	90,487	$	118	$	442
Adjustable-rate Mortgages		-		5,334
Fixed-rate Mortgages		112,174		267,481		79,170		112,174
Total Pass-Through MBS		112,616		363,302		79,288		112,616
Structured MBS:
Interest-Only Securities		2,276		20,443		2,554		2,276
Inverse Interest-Only Securities		2,939		5,596		2,146		2,939
Total Structured MBS		5,215		26,039		4,700		5,215
Total	$	117,831	$	389,341	$	83,988	$	117,831

~~Included in the table above at December 31, 2013 are $351.2 million of MBS assets that may only be used to settle liabilities of the consolidated VIE.~~

The following table summarizes the Company’s MBS portfolio as of December 31, ~~2014~~2015 and ~~2013,~~2014, according to the contractual maturities of the securities in the portfolio. Actual maturities of MBS 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)
	December 31, 2014		December 31, 2013		December 31, 2015			December 31, 2014
Less than one year	$	-	$	46
Greater than five years and less than ten years		16		1,520		$	3		$	16
Greater than or equal to ten years		117,815		387,775			83,985			117,815
Total	$	117,831	$	389,341		$	83,988		$	117,831

NOTE 3. RETAINED INTERESTS IN SECURITIZATIONS

The following table summarizes the estimated fair value of the Company’s retained interests in asset backed securities as of December 31, ~~2014~~2015 and ~~2013:~~2014:

(in thousands)
Series	Issue Date	2014		2013		Issue Date	2015		2014
HMAC 2004-2	May 10, 2004	$	320	$	-	May 10, 2004	$	110	$	320
HMAC 2004-3	June 30, 2004		753		1,518	June 30, 2004		453		753
HMAC 2004-4	August 16, 2004		496		654	August 16, 2004		75		496
HMAC 2004-5	September 28, 2004		331		359	September 28, 2004		182		331
HMAC 2004-6						November 17, 2004		304		-
Total		$	1,900	$	2,531		$	1,124	$	1,900

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NOTE 4. PROPERTY AND EQUIPMENT

The composition of property and equipment at December 31, ~~2014~~2015 and ~~2013~~2014 follows:

(in thousands)
	2014		2013		2015		2014
Land	$	2,247	$	2,247	$	2,247	$	2,247
Buildings and improvements		1,827		1,827		1,827		1,827
Computer equipment and software		187		394		187		187
Office furniture and equipment		227		248		227		227
Total cost		4,488		4,716		4,488		4,488
Less accumulated depreciation and amortization		903		1,053		995		903
Property and equipment, net	$	3,585	$	3,663	$	3,493	$	3,585

Depreciation of property and equipment totaled ~~$103,000~~$92,000 and ~~$122,000~~$103,000 for the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, respectively.

NOTE 5. OTHER ASSETS

The composition of other assets at December 31, ~~2014~~2015 and ~~2013~~2014 follows:

(in thousands)	(in thousands)					(in thousands)
		2014		2013			2015		2014
Prepaid expenses		$	265	$	298		$	499	$	265
Servicing advances			699		831			546		699
Servicing sale receivable, including accrued interest			465		464			308		465
Investment in Bimini Capital Trust II			804		804			804		804
Due from affiliates			330		-			465		330
Other			397		358			80		397
Total other assets		$	2,960	$	2,755		$	2,702	$	2,960

Receivables are carried at their estimated collectible amounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the counterparty to make required payments, if any. Management considers the following factors when determining the collectability of specific accounts: past transaction activity, current economic conditions and changes in payment terms. Amounts that the Company determines are no longer collectible are written off. As of December 31, ~~2014~~2015 and ~~2013,~~2014, management determined that no allowance for doubtful accounts was necessary. Collections on amounts previously written off are included in income as received.

NOTE 6. REPURCHASE AGREEMENTS

As of December 31, 2015, the Company had outstanding repurchase agreement obligations of approximately $77.2 million with a net weighted average borrowing rate of 0.61%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $81.5 million. As of December 31, 2014, the Company had outstanding repurchase agreement obligations of approximately $110.0 million with a net weighted average borrowing rate of 0.36%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $116.4 million, and cash pledged to counterparty of approximately $0.3 million. As of December 31, 2013, the Company had outstanding repurchase agreement obligations of approximately $353.4 million with a net weighted average borrowing rate of 0.39%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $373.4 million.

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As of December 31, ~~2014~~2015 and December 31, ~~2013,~~2014, the Company’s repurchase agreements had remaining maturities as summarized below:

($ in thousands)
	OVERNIGHT		BETWEEN 2			BETWEEN 31			GREATER					OVERNIGHT		BETWEEN 2			BETWEEN 31			GREATER
	(1 DAY OR		AND			AND			THAN					(1 DAY OR		AND			AND			THAN
	LESS)		30 DAYS			90 DAYS			90 DAYS		TOTAL			LESS)		30 DAYS			90 DAYS			90 DAYS		TOTAL
December 31, 2015
Fair value of securities pledged, including accrued
interest receivable														$	-	$	81,464		$	-		$	-	$	81,464
Repurchase agreement liabilities associated with
these securities														$	-	$	77,234		$	-		$	-	$	77,234
Net weighted average borrowing rate															-		0.61	%		-			-		0.61	%
December 31, 2014
Fair value of securities pledged, including accrued
interest receivable	$	-	$	114,433		$	1,998		$	-	$	116,431		$	-	$	114,433		$	1,998		$	-	$	116,431
Repurchase agreement liabilities associated with
these securities	$	-	$	108,074		$	1,890		$	-	$	109,964		$	-	$	108,074		$	1,890		$	-	$	109,964
Net weighted average borrowing rate		-		0.36	%		0.33	%		-		0.36	%		-		0.36	%		0.33	%		-		0.36	%
December 31, 2013
Fair value of securities pledged, including accrued
interest receivable	$	-	$	357,338		$	16,081		$	-	$	373,419
Repurchase agreement liabilities associated with
these securities	$	-	$	337,977		$	15,419		$	-	$	353,396
Net weighted average borrowing rate		-		0.39	%		0.37	%		-		0.39	%

As of December 31, 2013, the outstanding repurchase obligations of the consolidated VIE included in the table above was $318.6 million collateralized by MBS with a fair value, including accrued interest, of approximately $337.0 million.

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, if any. At December 31, ~~2014~~2015 and December 31, ~~2013,~~2014, the Company had ~~a maximum~~an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable, and the fair value of securities and cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately $3.5 million and $6.7 million, ~~and $19.9 million,~~ respectively. The Company did not have an amount at risk with any individual counterparty greater than 10% of the Company’s equity at December 31, 2015. Summary information regarding amounts at risk with individual counterparties greater than 10% of equity at December 31, 2014 ~~and December 31, 2013~~ is as follows:

($ in thousands)
% of Weighted
Stockholders' Average
Amount Equity Maturity
Repurchase Agreement Counterparties at Risk at Risk (in Days)
December 31, 2014
JVB Financial Group, LLC $ 1,807 19.6 % 8
ED&F Man Capital Markets Inc. 1,490 16.2 % 22
December 31, 2013
Citigroup Global Markets, Inc. $ 5,487 16.4 % 11

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The December 31, 2013 information presented in the table above includes the balances and exposures of the consolidated VIE. At December 31, 2013, Bimini Capital had a maximum amount at risk of approximately $1.6 million. Summary information regarding amounts at risk with individual counterparties greater than 10% of stockholders’ equity attributable to Bimini Capital equity at December 31, 2013 is as follows:

($ in thousands)
			% of			Weighted				% of			Weighted
			Stockholders'			Average				Stockholders'			Average
	Amount		Equity			Maturity		Amount		Equity			Maturity
Repurchase Agreement Counterparties	at Risk		at Risk			(in Days)		at Risk		at Risk			(in Days)
Suntrust Robinson Humphrey, Inc.	$	715		41.0	%		3
December 31, 2014
JVB Financial Group, LLC		559		32.1	%		21	$	1,807		19.6	%		8
ED&F Man Capital Markets Inc.									1,490		16.2	%		22

NOTE 7. 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 and junior subordinated notes by entering into derivatives ~~such as~~and other hedging contracts. To date, the Company has entered into Eurodollar and T-Note futures contracts and interest rate ~~swaptions.~~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.

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As of December 31, ~~2014~~2015 and ~~2013,~~2014, such instruments were comprised entirely of Eurodollar futures contracts. During the year ended December 31, ~~2014,~~2015, the Company entered into, and settled before the end of the year, a T-Note futures contract. Eurodollar and T-Note futures are cash settled futures contracts on an interest rate, with gains or losses credited or charged to the Company’s account on a daily basis and reflected in earnings as they occur. A minimum balance, or “margin”, is required to be maintained in the account on a daily basis. The Company is exposed to the changes in value of the futures by the amount of margin held by the broker. This margin represents the collateral the Company has posted for its open positions and is recorded on the consolidated balance sheets as part of restricted cash.

During the year ended December 31, 2014, the Company, through its consolidated VIE, was a party to interest rate swaption agreements which granted the Company the right but not the obligation to enter into underlying pay fixed interest rate swap (“payer swaption”). The Company may also enter into swaption agreements that provide the Company the option to enter into a receive fixed interest rate swap (“receiver swaption”).

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 futures positions at December 31, ~~2014~~2015 and December 31, ~~2013.~~2014.

($ in thousands)
Eurodollar Futures Positions	Eurodollar Futures Positions																	Eurodollar Futures Positions
As of December 31, 2014
As of December 31, 2015
		Repurchase Agreement Funding Hedges								Junior Subordinated Debt Funding Hedges									Repurchase Agreement Funding Hedges
		Weighted			Average					Weighted			Average						Average		Weighted			Weighted
		Average			Contract					Average			Contract						Contract		Average			Average
		LIBOR			Notional		Open			LIBOR			Notional		Open				Notional		Entry			LIBOR			Open
Expiration Year		Rate			Amount		Equity(1)			Rate			Amount		Equity(1)				Amount		Rate			Rate			Equity(1)
2015			0.63	%	$	36,500	$	(5	)		0.57	%	$	26,000	$	(237	)
2016			1.54	%		56,000		46			1.54	%		26,000		(61	)		$	56,000		1.45	%		0.98	%	$	(264	)
2017			2.23	%		56,000		(3	)		2.23	%		26,000		(67	)			56,000		2.23	%		1.59	%		(362	)
2018			2.51	%		56,000		(38	)		2.51	%		26,000		(56	)			56,000		2.65	%		1.91	%		(207	)
Total / Weighted Average			1.72	%	$	50,429	$	-			1.60	%	$	26,000	$	(421	)		$	56,000		2.00	%		1.41	%	$	(833	)
Cash posted as collateral, included in restricted cash															$	476

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2015
	Junior Subordinated Debt Funding Hedges
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			LIBOR			Open
Expiration Year	Amount		Rate			Rate			Equity(1)
2016	$	26,000		1.77	%		0.98	%	$	(205	)
2017		26,000		2.49	%		1.59	%		(234	)
2018		26,000		2.94	%		1.91	%		(134	)
Total / Weighted Average	$	26,000		2.29	%		1.41	%	$	(573	)

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2014
	Repurchase Agreement Funding Hedges
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			LIBOR			Open
Expiration Year	Amount		Rate			Rate			Equity(1)
2015	$	36,500		0.65	%		0.63	%	$	(5	)
2016		56,000		1.45	%		1.54	%		46
2017		56,000		2.23	%		2.23	%		(3	)
2018		56,000		2.65	%		2.51	%		(38	)
Total / Weighted Average	$	50,429		1.72	%		1.72	%	$	-

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($ in thousands)
Eurodollar Futures Positions	Eurodollar Futures Positions																	Eurodollar Futures Positions
As of December 31, 2013
As of December 31, 2014
		Repurchase Agreement Funding Hedges								Junior Subordinated Debt Funding Hedges									Junior Subordinated Debt Funding Hedges
		Weighted			Average					Weighted			Average						Average		Weighted			Weighted
		Average			Contract					Average			Contract						Contract		Average			Average
		LIBOR			Notional		Open			LIBOR			Notional		Open				Notional		Entry			LIBOR			Open
Expiration Year		Rate			Amount		Equity(1)			Rate			Amount		Equity(1)				Amount		Rate			Rate			Equity(1)
2014			0.40	%	$	262,500	$	(189	)		0.35	%	$	26,000	$	(428	)
2015			0.80	%		275,000		(146	)		0.80	%		26,000		(176	)		$	26,000		1.48	%		0.57	%	$	(237	)
2016			1.90	%		250,000		1,367			1.74	%		26,000		9				26,000		1.77	%		1.54	%		(61	)
2017			3.03	%		250,000		2,291			-			-		-				26,000		2.49	%		2.23	%		(67	)
2018			3.77	%		250,000		1,575			-			-		-				26,000		2.94	%		2.51	%		(56	)
Total / Weighted Average			2.02	%	$	257,353	$	4,898			0.89	%	$	26,000	$	(595	)		$	26,000		2.06	%		1.60	%	$	(421	)
Cash posted as collateral, included in restricted cash															$	2,557

(1)	Open equity represents the cumulative gains (losses) recorded on open futures positions from inception.

Gain (Loss) From Derivative Instruments, Net

The ~~tables~~table below ~~present~~presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the years ended December 31, ~~2014~~2015 and ~~2013.~~2014.

(in thousands)
	Consolidated					Parent-Only					Consolidated						Parent-Only
	2014			2013		2014			2013		2015			2014			2015			2014
Eurodollar futures contracts (short positions)	$	(9,838	)	$	4,837	$	(280	)	$	9	$	(1,377	)	$	(9,838	)	$	(1,377	)	$	(280	)
T-Note futures contracts (short positions)		86			-		14			-		-			86			-			14
Payer swaptions		(4,439	)		-		-			-		-			(4,439	)		-			-
Net (losses) gains on derivative instruments	$	(14,191	)	$	4,837	$	(266	)	$	9
Net losses on derivative instruments											$	(1,377	)	$	(14,191	)	$	(1,377	)	$	(266	)

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. WeThe Company attempts to minimize this risk by limiting ~~our~~its 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, wethe Company may be required to pledge assets as collateral for ~~our~~its 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, wethe Company may not receive payments provided for under the terms of ~~our~~its derivative agreements, and may have difficulty obtaining ~~our~~its assets pledged as collateral for ~~our~~its derivatives. The cash and cash equivalents pledged as collateral for ~~our~~the Company’s derivative instruments are included in restricted cash on ~~our~~the consolidated balance sheets.

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NOTE 8. OFFSETTING ASSETS AND LIABILITIES

The Company’s 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 December 31, ~~2014~~2015 and December 31, ~~2013.~~2014.

(in thousands)
Offsetting of Liabilities	Offsetting of Liabilities																				Offsetting of Liabilities
										Gross Amount Not Offset																	Net Amount			Gross Amount Not Offset in the
										in the Balance Sheet																	of Liabilities			Consolidated Balance Sheet
							Net Amount			Financial														Gross Amount			Presented			Financial
	Gross Amount			Gross Amount			of Liabilities			Instruments				Cash							Gross Amount			Offset in the			in the			Instruments				Cash
	of Recognized			Offset in the			Presented in the			Posted as				Posted as				Net			of Recognized			Consolidated			Consolidated			Posted as				Posted as				Net
	Liabilities			Balance Sheet			Balance Sheet			Collateral				Collateral				Amount			Liabilities			Balance Sheet			Balance Sheet			Collateral				Collateral				Amount
December 31, 2015
Repurchase Agreements																						$	77,234		$	-		$	77,234		$	(77,234	)		$	-			$	-
December 31, 2014
Repurchase Agreements		$	109,964		$	-		$	109,964		$	(109,706	)		$	(258	)		$	-		$	109,964		$	-		$	109,964		$	(109,706	)		$	(258	)		$	-
December 31, 2013
Repurchase Agreements		$	353,396		$	-		$	353,396		$	(353,396	)		$	-			$	-

The amounts disclosed for collateral received by or posted to the same counterparty are limited to the amount sufficient to reduce the asset or liability presented in the consolidated balance sheet to zero in accordance with ASU No. 2011-11, as amended by ASU No. 2013-01. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See ~~Note~~Notes 6 and 7 for a discussion of collateral posted for, or received against, repurchase ~~obligations.~~obligations and derivative instruments.

NOTE 9. TRUST PREFERRED SECURITIES

During 2005, Bimini Capital sponsored the formation of a statutory trust, known as Bimini Capital Trust II (“BCTII”) of which 100% of the common equity is owned by Bimini Capital. It was formed for the purpose of issuing trust preferred capital securities to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt securities of Bimini Capital. The debt securities held by BCTII are the sole assets of BCTII.

As of December 31, ~~2014~~2015 and ~~2013,~~2014, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes have a rate of interest that floats at a spread of 3.50% over the prevailing three-month LIBOR rate. As of December 31, ~~2014,~~2015, the interest rate was ~~3.74%~~4.01%. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes require quarterly interest distributions and are redeemable at Bimini Capital's option, in whole or in part and without ~~penalty, beginning December 15, 2010.~~penalty. Bimini Capital's BCTII Junior Subordinated Notes are subordinate and junior in right of payment of all present and future senior indebtedness.

~~The trust~~BCTII is a VIE because the holders of the equity investment at risk do not have adequate decision making ability over ~~the trust's~~BCTII’s activities. Since Bimini Capital's investment in ~~the trust's~~BCTII's common equity securities was financed directly by ~~the trust~~BCTII as a result of its loan of the proceeds to Bimini Capital, that investment is not considered to be an equity investment at risk. Since Bimini Capital's common share investment in BCTII is not a variable interest, Bimini Capital is not the primary beneficiary of BCTII. Therefore, Bimini Capital has not consolidated the financial statements of BCTII into its consolidated financial statements.

The accompanying consolidated financial statements present Bimini Capital's BCTII Junior Subordinated Notes issued to ~~the trust~~BCTII as a liability and Bimini Capital's investment in the common equity securities of BCTII as an asset (included in prepaid expenses and other assets, net). For financial statement purposes, Bimini Capital records payments of interest on the Junior Subordinated Notes issued to BCTII as interest expense.

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NOTE 10. CAPITAL STOCK

Authorized Shares

The total number of shares of capital stock which the Company has the authority to issue is 110,000,000 shares, classified as 100,000,000 shares of ~~Common Stock,~~common stock, and 10,000,000 shares of preferred stock. The Board of Directors has the authority to classify any unissued shares by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares.

Common Stock

Of the 100,000,000 authorized shares of common stock, 98,000,000 shares were designated as Class A ~~Common Stock,~~common stock, 1,000,000 shares were designated as Class B ~~Common Stock~~common stock and 1,000,000 shares were designated as Class C ~~Common Stock.~~common stock. Holders of shares of common stock have no sinking fund or redemption rights and have no pre-emptive rights to subscribe for any of the Company’s securities. All common shares have a $0.001 par value.

Class A Common Stock

Each outstanding share of Class A ~~Common Stock~~common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors. Holders of shares of Class A ~~Common Stock~~common stock are not entitled to cumulate their votes in the election of directors.

Subject to the preferential rights of any other class or series of stock and to the provisions of the Company's charter, as amended, regarding the restrictions on transfer of stock, holders of shares of Class A ~~Common Stock~~common stock are entitled to receive dividends on such stock if, as and when authorized and declared by the Board of Directors.

Class B Common Stock

Each outstanding share of Class B ~~Common Stock~~common stock entitles the holder to one vote on all matters submitted to a vote of common stockholders, including the election of directors. Holders of shares of Class B ~~Common Stock~~common stock are not entitled to cumulate their votes in the election of directors. Holders of shares of Class A ~~Common Stock~~common stock and Class B ~~Common Stock~~common stock shall vote together as one class in all matters except that any matters which would adversely affect the rights and preferences of Class B ~~Common Stock~~common stock as a separate class shall require a separate approval by holders of a majority of the outstanding shares of Class B ~~Common Stock.~~common stock. Holders of shares of Class B ~~Common Stock~~common stock are entitled to receive dividends on each share of Class B ~~Common Stock~~common stock in an amount equal to the dividends declared on each share of Class A ~~Common Stock~~common stock if, as and when authorized and declared by the Board of Directors.

Each share of Class B ~~Common Stock~~common stock shall automatically be converted into one share of Class A ~~Common Stock~~common stock on the first day of the fiscal quarter following the fiscal quarter during which the Company's Board of Directors were notified that, as of the end of such fiscal quarter, the stockholders' equity attributable to the Class A ~~Common Stock,~~common stock, calculated on a pro forma basis as if conversion of the Class B ~~Common Stock~~common stock (or portion thereof to be converted) had occurred, and otherwise determined in accordance with GAAP, equals no less than $150.00 per share (adjusted equitably for any stock splits, stock combinations, stock dividends or the like); provided, that the number of shares of Class B ~~Common Stock~~common stock to be converted into Class A ~~Common Stock~~common stock in any quarter shall not exceed an amount that will cause the stockholders' equity attributable to the Class A ~~Common Stock~~common stock calculated as set forth above to be less than $150.00 per share; provided further, that such conversions shall continue to occur until all shares of Class B ~~Common Stock~~common stock have been converted into shares of Class A ~~Common Stock;~~common stock; and provided further, that the total number of shares of Class A ~~Common Stock~~common stock issuable upon conversion of the Class B ~~Common Stock~~common stock shall not exceed 3% of the total shares of common stock outstanding prior to completion of an initial public offering of Bimini Capital's Class A ~~Common Stock.~~common stock.

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Class C Common Stock

No dividends will be paid on the Class C ~~Common Stock.~~common stock. Holders of shares of Class C ~~Common Stock~~common stock are not entitled to vote on any matter submitted to a vote of stockholders, including the election of directors, except that any matters that would adversely affect the rights and privileges of the Class C ~~Common Stock~~common stock as a separate class shall require the approval of a majority of the Class C ~~Common Stock.~~common stock.

Each share of Class C ~~Common Stock~~common stock shall automatically be converted into one share of Class A ~~Common Stock~~common stock on the first day of the fiscal quarter following the fiscal quarter during which the Company's Board of Directors were notified that, as of the end of such fiscal quarter, the stockholders' equity attributable to the Class A ~~Common Stock,~~common stock, calculated on a pro forma basis as if conversion of the Class C ~~Common Stock~~common stock had occurred and giving effect to the conversion of all of the shares of Class B ~~Common Stock~~common stock as of such date, and otherwise determined in accordance with GAAP, equals no less than $150.00 per share (adjusted equitably for any stock splits, stock combinations, stock dividends or the like); provided, that the number of shares of Class C ~~Common Stock~~common stock to be converted into Class A ~~Common Stock~~common stock shall not exceed an amount that will cause the stockholders' equity attributable to the Class A ~~Common Stock~~common stock calculated as set forth above to be less than $150.00 per share; and provided further, that such conversions shall continue to occur until all shares of Class C ~~Common Stock~~common stock have been converted into shares of Class A ~~Common Stock~~common stock and provided further, that the total number of shares of Class A ~~Common Stock~~common stock issuable upon conversion of the Class C ~~Common Stock~~common stock shall not exceed 3% of the total shares of common stock outstanding prior to completion of an initial public offering of Bimini Capital's Class A ~~Common Stock.~~common stock.

Preferred Stock

General

There are 10,000,000 authorized shares of preferred stock, with a $0.001 par value per share. The Company's Board of Directors has the authority to classify any unissued shares of preferred stock and to reclassify any previously classified but unissued shares of any series of preferred stock previously authorized by the Board of Directors. Prior to issuance of shares of each class or series of preferred stock, the Board of Directors is required by the Company’s charter to fix the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such class or series.

Classified and Designated Shares

Pursuant to the Company’s supplementary amendment of its charter, effective November 3, 2005, and by resolutions adopted on September 29, 2005, the Company’s Board of Directors classified and designated 1,800,000 shares of the authorized but unissued preferred stock, $0.001 par value, as Class A Redeemable Preferred Stock and 2,000,000 shares of the authorized but unissued preferred stock as Class B Redeemable Preferred Stock.

~~Class A Redeemable Preferred Stock and Class B Redeemable~~ Preferred Stock

The Class A Redeemable Preferred Stock and Class B Redeemable Preferred Stock rank equal to each other and shall have the same preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms; provided, however that the redemption provisions of the Class A Redeemable Preferred Stock and the Class B Redeemable Preferred Stock differ. Each outstanding share of Class A Redeemable Preferred Stock and Class B Redeemable Preferred Stock shall have one-fifth of a vote on all matters submitted to a vote of stockholders (or such lesser fraction of a vote as would be required to comply with the rules and regulations of the NYSE relating to the Company’s right to issue securities without obtaining a stockholder vote). Holders of shares of preferred stock shall vote together with holders of shares of common stock as one class in all matters that would be subject to a vote of stockholders.

-89-

The previously outstanding shares of Class A Redeemable Preferred Stock were converted into Class A ~~Common Stock~~common stock on April 28, 2006. No shares of the Class B Redeemable Preferred Stock have ever been issued.

~~Ownership Limitations~~

~~Bimini Capital’s amended~~In 2015 the Board approved Articles Supplementary to the Company’s charter ~~subject to certain exceptions, contains certain restrictions on the number of~~reclassifying and designating 1,800,000 shares of stock that a person may own. Bimini Capital’s amended charter contains a stock ownership limit that prohibits any person from acquiring or holding, directly or indirectly, applying attribution rules under the Code,authorized but unissued Class A Redeemable Preferred Stock and 2,000,000 shares of authorized but unissued Class B Redeemable Preferred Stock into undesignated preferred stock, ~~in excess of 4.98%~~par value $0.001 per share, of the total number or value of the outstanding shares of Bimini Capital’s common stock, whichever is more restrictive, or Bimini Capital’s stock in the aggregate. Bimini Capital’s amended charter further prohibits (i) any person from beneficially or constructively owning shares of Bimini Capital’s stock that would result in Bimini Capital being "closely held" under Section 856(h) of the Code or otherwise cause Bimini Capital to fail to qualify as a REIT, and (ii) any person from transferring shares of Bimini Capital’s stock if such transfer would result in shares of Bimini Capital’s stock being owned by fewer than 100 persons. Bimini Capital’s Board of Directors, in its sole discretion, may exempt a person from the stock ownership limit. However, Bimini Capital’s Board of Directors may not grant such an exemption to any person whose ownership, direct or indirect, of in excess of 9.8% of the number or value of the outstanding shares of Bimini Capital’s stock (whichever is more restrictive) would result in Bimini Capital being "closely held" within the meaning of Section 856(h) of the Code or otherwise would result in failing to qualify as a REIT. The person seeking an exemption must representCompany (“Preferred Stock”). After giving effect to the satisfaction of Bimini Capital’s Board of Directors that it will not violate the aforementioned restriction. The person also must agree that any violation or attempted violation of any of the foregoing restrictions will result in the automatic transferreclassification and designation of the shares of ~~stock causing such violation~~Class A Preferred Stock and Class B Preferred Stock, the Company has authority to issue 10,000,000 shares of undesignated Preferred Stock and no shares of Class A Preferred Stock or Class B Preferred Stock. The Articles Supplementary were filed with the State Department of Assessments and Taxation of Maryland (the “SDAT”) and became effective upon filing on December 21, 2015.

In 2015 the Board approved Articles Supplementary to the ~~trust (as defined below)~~Company’s charter creating a new series of Preferred Stock designated as Series A Junior Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”). ~~Bimini Capital’s Board of Directors may require a ruling from~~The Articles Supplementary were filed with the ~~IRS or an opinion of counsel, in either case in form~~SDAT and ~~substance satisfactory to Bimini Capital’s Board of Directors in its sole discretion, to determine or ensure Bimini Capital’s qualification as a REIT.~~became effective upon filing on December 21, 2015.

Rights Plan

~~Any person who acquires or attempts or intends to acquire beneficial or constructive ownership~~On December 21, 2015 the Board adopted a rights agreement and declared a distribution of ~~shares of Bimini Capital’s~~one preferred stock ~~that will or may violate any~~purchase right (“Right”) for each outstanding share of the ~~foregoing restrictions on transferability~~Company’s Class A common stock, Class B common stock, and ~~ownership, or any person who would have owned shares~~Class C common stock. The distribution was payable to stockholders of Bimini Capital’s stock that resulted in a transfer of shares to the trust in the manner described below, will be required to give notice immediately to Bimini Capital and provide Bimini Capital with such other information as Bimini Capital may request in order to determine the effect of such transfer on the Company.

If any transfer of shares of Bimini Capital’s stock occurs which, if effective, would result in any person beneficially or constructively owning shares of Bimini Capital’s stock in excess or in violation of the above transfer or ownership limitations, then that number of shares of Bimini Capital’s stock the beneficial or constructive ownership of which otherwise would cause such person to violate such limitations (rounded to the nearest whole share) shall be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, and the prohibited owner shall not acquire any rights in such shares. Such automatic transfer shall be deemed to be effectiverecord as of the close of business on ~~the business day prior~~December 21, 2015.

The Rights. Subject to the ~~date of such violative transfer. Shares of stock held in the trust shall be issued~~terms, provisions and outstanding shares of Bimini Capital’s stock. The prohibited owner shall not benefit economically from ownership of any shares of stock held in the trust, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares of stock held in the trust. The trusteeconditions of the ~~trust shall have all voting rights and rights~~Rights Plan, if the Rights become exercisable, each Right would initially represent the right to ~~dividends or other distributions with respect to shares~~purchase from the Company one ten-thousandth of ~~stock held in the trust, which rights shall be exercised~~a share of Series A Preferred Stock for ~~the exclusive benefit~~a purchase price of the charitable beneficiary. Any dividend or other distribution paid prior to the discovery by Bimini Capital that shares of stock have been transferred to the trustee shall be paid by the recipient of such dividend or distribution to the trustee upon demand, and any dividend or other distribution authorized but unpaid shall be paid when due to the trustee. Any dividend or distribution so paid to the trustee shall be held in trust for the charitable beneficiary. The prohibited owner shall have no voting rights with respect to shares of stock held in the trust and,$4.76, subject to Maryland law, effective as of the date that such shares of stock have been transferred to the trust, the trustee shall have the authority (at the trustee's sole discretion) (i) to rescind as void any vote cast by a prohibited owner prior to the discovery by Bimini Capital that such shares have been transferred to the trust, and (ii) to recast such voteadjustment in accordance with the ~~desires~~terms of the ~~trustee acting for~~Rights Plan (the “Purchase Price”). If issued, each fractional share of Series A Preferred Stock would give the ~~benefit~~stockholder approximately the same distribution, voting and liquidation rights as does one share of the ~~charitable beneficiary.~~Company’s Class A common stock. However, ~~if Bimini Capital~~prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including without limitation any distribution, voting or liquidation rights.

Exercisability. The Rights will generally not be exercisable until the earlier of (i) 10 business days after a public announcement by the Company that a person or group has ~~already taken irreversible corporate action, then~~acquired 4.9% or more of the ~~trustee shall not~~outstanding Class A common stock without the approval of the Board of Directors (an “Acquiring Person”) and (ii) 10 business days after the commencement of a tender or exchange offer by a person or group for 4.9% or more of the Class A common stock.

The date that the Rights may first become exercisable is referred to as the “Distribution Date.” Until the Distribution Date, the Class A common stock, Class B common stock and Class C common stock certificates will represent the Rights and will contain a notation to that effect. Any transfer of shares of Class A common stock, Class B common stock and/or Class C common stock prior to the Distribution Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer of the underlying shares of Class A common stock, Class B common stock or Class C common stock.

After the Distribution Date and following a determination by the Board that a person is an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the ~~authority~~right to ~~rescind~~receive upon exercise of a Right and ~~recast such vote.~~payment of the Purchase Price, that number of shares of Class A common stock, Class B common stock or Class C common stock, as the case may be, having a market value of two times the Purchase Price (or, at our option, shares of Series A Preferred Stock or other consideration as provided in the Rights Plan).

-90-

~~Within 20 days after receiving notice from Bimini Capital~~

Exchange. After the Distribution Date and following a determination by the Board that ~~shares~~a person or group is an Acquiring Person, the Board may exchange the Rights (other than Rights owned by such an Acquiring Person which will have become void), in whole or in part, at an exchange ratio of ~~Bimini Capital’s~~one share of Class A common stock, ~~have been transferred~~Class B common stock or Class C common stock, as the case may be, or a fractional share of Series A Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar Rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).

Expiration. The Rights and the Rights Plan will expire on the earliest of (i) December 21, 2025, (ii) the time at which the Rights are redeemed pursuant to the ~~trust,~~Rights Plan, (iii) the ~~trustee shall sell~~time at which the ~~shares~~Rights are exchanged pursuant to the Rights Plan, (iv) the repeal of ~~stock held in the trust to a person, whose ownership~~Section 382 of the ~~shares will not violate~~Code or any successor statute if the Board determines that the Rights Plan is no longer necessary for the preservation of the ~~ownership limitations set forth in Bimini Capital’s amended charter. Upon such sale,~~applicable tax benefits, (v) the ~~interest~~beginning of a taxable year of the ~~charitable beneficiary~~Company to which the Board determines that no applicable tax benefits may be carried forward and (vi) the close of business on June 30, 2016 if approval of the Rights Plan by the Company’s stockholders has not been obtained.

Redemption. At any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”). The redemption of the ~~shares sold shall~~Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the ~~trustee shall distribute the net proceeds~~only right of the ~~sale~~holders of Rights will be to receive the Redemption Price.

Anti-Dilution Provisions. The Board may adjust the Purchase Price, the number of shares of Series A Preferred Stock or other securities issuable and the number of outstanding Rights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a forward or reverse stock split or a reclassification of the preferred shares or Class A common stock, Class B common stock or Class C common stock. No adjustments to the ~~prohibited owner and~~Purchase Price of less than 1% will be made.

Anti-Takeover Effects. While this was not the purpose of the Board when adopting the Rights Plan, the Rights will have certain anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire the Company without the approval of the Board. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire the Company even if such acquisition may be favorable to the ~~charitable beneficiary as follows. The prohibited owner shall receive~~interests of the ~~lesser of (i)~~Company’s stockholders. Because the ~~price paid~~Board can redeem the Rights, the Rights should not interfere with a merger or other business combination approved by the ~~prohibited owner for~~Board.

Amendments. Before the ~~shares~~Distribution Date, the Board may amend or ifsupplement the ~~prohibited owner did not give value for~~Rights Plan without the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other such transaction), the market price, as defined in Bimini Capital’s amended charter, of such shares on the dayconsent of the ~~event causing the shares to be held in the trust and (ii) the price per share received by the trustee from the sale or other disposition~~holders of the ~~shares held in~~Rights. After the ~~trust, in each case reduced by~~Distribution Date, the ~~costs incurred~~Board may amend or supplement the Rights Plan only to ~~enforce the ownership limits as~~cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the shares in question. Any net sale proceeds in excess of the amount payable to the prohibited owner shall be paid immediately to the charitable beneficiary. If, prior to the discovery by Bimini Capital that shares of Bimini Capital’s stock have been transferred to the trust, such shares are sold by a prohibited owner, then (i) such shares shall be deemed to have been sold on behalf of the trust and (ii)Rights Plan, but only to the extent that the prohibited owner received an amount for such shares that exceeds the amount that such prohibited owner was entitled to receive pursuant to the aforementioned requirement, such excess shall be paid to the trustee upon demand.

~~In addition, shares of Bimini Capital’s stock held~~those changes do not impair or adversely affect, in any material respect, any Rights holder and do not result in the ~~trust shall be deemed~~Rights again becoming redeemable, and no such amendment may cause the Rights again to ~~have been offered for sale~~become redeemable or cause this Rights Plan again to ~~Bimini Capital, or Bimini Capital’s designee, at a price per share equal to~~become amendable other than in accordance with the lesser of (i) the price per share in the transaction that resulted in such transfer to the trust (or, in the case of a devise or gift, the market price at the time of such devise or gift) and (ii) the market price on the date Bimini Capital, or Bimini Capital’s designee, accept such offer. Bimini Capital shall have the right to accept such offer until the trustee has sold the shares of stock held in the trust. Upon such a sale to Bimini Capital, the interestapplicable timing of the ~~charitable beneficiary in the shares sold shall terminate and the trustee shall distribute the net proceeds of the sale to the prohibited owner.~~Rights Plan.

Issuances of Common Stock

The table below presents information related to the Company’s Class A Common Stock issued during the years ended December 31, ~~2014~~2015 and ~~2013.~~2014.

Shares Issued Related To:	2014		2013		2015		2014
Directors' compensation		56,740		-		48,903		56,740
Vesting incentive plan shares(1)		500,000		892,844		-		500,000
Shares sold directly to employees(1)		257,895		-		-		257,895
Total shares of Class A Common Stock issued		814,635		892,844		48,903		814,635

(1)	See Note 11, Stock Incentive Plans, for details of these issuances

-91-

There were no issuances of the Company's Class B Common Stock and Class C Common Stock during the years ended December 31, ~~2014~~2015 and ~~2013.~~2014.

NOTE 11. STOCK INCENTIVE PLANS

Bimini Capital

On August 12, 2011, Bimini Capital’s shareholders approved the 2011 Long Term Compensation Plan (the “2011 Plan”) to assist the Company in recruiting and retaining employees, directors and other service providers by enabling them to participate in the success of Bimini Capital and to associate their interest with those of the Company and its stockholders. The 2011 ~~plan~~Plan is intended to permit the grant of stock options, stock appreciation rights (“SARs”), stock awards, performance units and other equity-based and incentive awards. The maximum aggregate number of shares of ~~Common Stock~~common stock that may be issued under the 2011 Plan pursuant to the exercise of options and SARs, the grant of stock awards or other equity-based awards and the settlement of incentive awards and performance units is equal to 4,000,000 shares.

~~-91-~~

Phantom share awards represent a right to receive a share of Bimini Capital's Class A Common Stock. These awards do not have an exercise price and are valued at the fair value of Bimini Capital’s Class A Common Stock at the date of the grant. The grant date value is amortized to compensation expense on a straight-line basis over the vesting period of the respective award. The phantom shares vest, based on the employees’ continuing employment, following a schedule as provided in the individual grant agreements. Dividends paid on unsettled awards are charged to stockholders’ equity when declared.

~~A summary of phantom share activity during year ended December 31, 2013 is presented below:~~

2013
Weighted-
Average
Grant-Date
Shares Fair Value
Nonvested, at January 1 367,844 $ 1.11
Vested during the period (367,844 ) 1.11
Nonvested, at December 31 - $ -

($ in thousands)
2013
Compensation expense recognized during the year $ 157
Unrecognized compensation expense at year end $ -
Instrinsic value of unvested shares at year end $ -

Share Awards

In ~~July 2013,~~February 2014, the Compensation Committee of the Board of Directors of Bimini Capital (the “Committee”) approved the acceleration of the vesting of all outstanding, unvested equity awards held by management, as well as cash bonuses equal to 35% of the taxable income created by such vesting. The accelerated vesting date was the August 13, 2013. Expenses associated with each of the transactions described above were recorded in the year ended December 31, 2013.

In July 2013, the Committee also approved certain performance bonuses for members of management. These bonuses were awarded primarily in recognition of management’s efforts in completing the Orchid initial public offering. The bonuses, which were paid on August 13, 2013, consisted of cash and fully vested shares of the Company’s common stock issued under the 2011 Plan. In particular, executive officers and senior employees received bonuses totaling approximately $167,000, consisting of 525,000 shares of the Company’s common stock with an approximate value of $122,000, and cash of approximately $45,000. For purposes of these bonuses, shares of the Company’s common stock were valued based on the closing price of the Company’s common stock on August 13, 2013.

~~In February 2014, the Committee~~ approved certain performance bonuses for members of management. These bonuses were awarded primarily in recognition of management’s capital raising efforts in 2013. The bonuses, which were paid on February 19, 2014 (the “Bonus Date”), consisted of cash and fully vested shares of the Company’s common stock issued under the 2011 Plan. In particular, executive officers received bonuses totaling approximately $422,000, consisting of 500,000 shares of the Company’s common stock with an approximate value of $190,000, and cash of approximately $232,000 which, at the officer’s election, could be used to purchase newly issued shares directly from the Company. Under this election, the officers purchased 257,895 shares of the Company’s common stock. For purposes of these bonuses, shares of the Company’s common stock were valued based on the closing price of the Company’s common stock on ~~February 19, 2014.~~the Bonus Date. The expense related to this bonus was accrued at December 31, 2013 and ~~did~~does not affect the results of operations for the year ended December 31, 2014.

~~-92-~~

A summary of share award activity during the ~~years~~year ended December 31, 2014 ~~and 2013~~ is presented below:

($ in thousands, except per share data)
	2014			2013				Weighted-
		Weighted-			Weighted-			Average	Total
		Average	Total		Average	Total		Grant-Date	Compensation
		Grant-Date	Compensation		Grant-Date	Compensation	Shares	Fair Value	Expense
	Shares	Fair Value	Expense	Shares	Fair Value	Expense
Fully Vested Shares Granted	500,000	$0.38	$190	525,000	$0.23	$122	500,000	$0.38	$190

Performance ~~units~~Units

The Committee may issue Performance Units under the 2011 Plan to certain officers and employees. “Performance Units” represent the participant’s right to receive an amount, based on the value of a specified number of shares of ~~Common Stock,~~common stock, if the terms and conditions prescribed by the Committee are satisfied. The Committee will determine the requirements that must be satisfied before ~~performance units~~Performance Units are earned, including but not limited to any applicable performance period and performance goals. Performance goals may relate to the Company’s financial performance or the participant’s performance or such other criteria determined by the Committee, including goals stated with reference to the performance measures discussed below. If ~~performance units~~Performance Units are earned, they will be settled in cash, shares of ~~Common Stock~~common stock or a combination thereof.

~~A summary of performance unit activity during year ended~~

-92-

The following table presents information related to Performance Units outstanding at December 31, ~~2014 is presented below:~~2015 and December 31, 2014:

	2014				2015				2014
			Weighted-				Weighted-				Weighted-
			Average				Average				Average
			Grant-Date				Grant-Date				Grant-Date
	Shares		Fair Value		Shares		Fair Value		Shares		Fair Value
Nonvested, at January 1		-	$	-		31,500	$	1.78		-	$	-
Granted during the year		31,500		1.78		46,000		0.84		31,500		1.78
Nonvested, at December 31		31,500	$	1.78		77,500	$	1.22		31,500	$	1.78

($ in thousands)
	2014		2015		2014
Compensation expense recognized during the year	$	1	$	19	$	1
Unrecognized compensation expense at year end	$	55	$	75	$	55
Weighted-average remaining vesting term (in years)		3.0		2.5		3.0
Intrinsic value of unvested shares at year end	$	60	$	62	$	60

Orchid Island Capital

In October 2012, Orchid adopted the 2012 Equity Incentive Plan (the “2012 Plan”) to recruit and retain employees, directors and other service providers, including employees of Bimini Capital and other affiliates. The 2012 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 2012 Plan is administered by the Compensation Committee of Orchid’s Board of Directors except that Orchid’s full Board of Directors will administer awards made to directors who are not employees of Orchid or its affiliates. The 2012 Plan provides for awards of up to an aggregate of 10% of the issued and outstanding shares of Orchid’s common stock (on a fully diluted basis) at the time of the awards, subject to a maximum aggregate 4,000,000 shares of Orchid common stock that may be issued under the Incentive Plan.

~~-93-~~

~~A summary~~ The activity related to the 2012 Plan is included in the consolidated statements of ~~Orchid’s incentive share activity during~~operations, equity, and cash flows of the Company for the year ended December 31, ~~2014 is presented below:~~2014.

2014
Weighted-
Average
Grant-Date
Shares Fair Value
Restricted common stock, at January 1 - $ -
Restricted common stock granted during the period 29,844 12.41
Restricted common stock vested during the period (5,844 ) 13.16
Restricted common stock, at December 31 24,000 $ 12.23

($ in thousands)
2014
Compensation expense recognized during the year $ 142
Unrecognized compensation expense at year end $ 228
Weighted-average remaining vesting term (in years) 2.3
Instrinsic value of unvested shares at year end $ 313

Restricted Stock Awards

On April 25, 2014, Orchid’s Compensation Committee granted each of its 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 ~~any other Orchid~~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 Orchid ~~prior~~ to the respective vesting dates. The table below presents information related to the Orchid’s restricted common stock for the year ended December 31, 2014.

On January 21, 2015, Orchid’s Compensation Committee granted equity awards and agreed to pay cash bonuses of $250,000 to employees of Bimini Capital. The equity awards were made pursuant to the terms and conditions of

($ in thousands, except per share data)
			Weighted
			Average
			Grant Date
	Shares		Fair Value
Granted		24,000		12.23
Unvested, end of period		24,000	$	12.23
Compensation expense during period			$	65

-93-

Stock Awards

Orchid has issued immediately vested common stock under the 2012 Plan to certain executive officers and ~~consist of 11,292 shares of immediately~~directors. The following table presents information related to fully vested Orchid common stock ~~and 7,507 Orchid performance units. For purposes of~~issued during the equity grants, the Orchid common stock was valued at $13.32 per share, which was the closing market price on January 21, 2015. The performance units are earned at the rate of 10% per quarter commencing with the quarter ending Marchyear ended December 31, 2016 and concluding with the quarter ending June 30, 2018. The grantee must continue to serve as an executive officer of Orchid as of the end of each such quarter, and the performance objectives (as defined) must have been achieved, in order to receive the number of performance units that may be earned on each such date. When earned, each performance unit shall be settled by the issuance of one share of the Orchid’s common stock, at which time the performance unit shall be cancelled. The performance units contain dividend equivalent rights which entitle the participants to receive distributions declared by Orchid on its common stock.2014.

($ in thousands, except per share data)
Fully vested shares granted		5,844
Weighted average grant date price	$	13.16
Compensation expense related to fully vested common share awards	$	77

NOTE 12. COMMITMENTS AND CONTINGENCIES

~~Outstanding~~ Litigation

The Company may from time to time be involved in various lawsuits and claims, both pending and threatened, including some that it has asserted against others, in which monetary and other damages are sought. These lawsuits and claims relate primarily to contractual disputes arising out of the ordinary course of the Company’s business. The outcome of such lawsuits and claims, as well as the costs to defend them, is inherently unpredictable, and management may choose to settle certain matters based on a cost-benefit analysis. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving the Company will not have a material effect on the Company’s consolidated financial position or liquidity; however, any such outcome or settlement may be material to the results of operations of any particular period in which costs, if any, are recognized.

~~-94-~~

On May 15, 2015, Hildene and ~~summary judgment motions were filed on June 13, 2014. On January 6, 2015,~~Bimini Capital agreed to settle the Court issued its Decision and Orders on the parties’ motions for summary judgment. The Court granted Bimini’s motion for summary judgment on Hildene’s claims for aiding and abetting breach of fiduciary duty and unjust enrichment, but denied Bimini’s motion with respect to Hildene’s claim for tortious interference with contract. The Court denied Hildene’s motion for summary judgment with respect to all three of Hildene’s claims, but granted its motion with respect to Bimini’s counterclaims for contribution and set-off. On February 9, 2015, Bimini filed a notice of appeal with respect to that portion of the Decision and Orders denying Bimini’s motion for summary judgment on Hildene’s claims for tortious interference with contract,case, and on ~~February 18,~~July 10, 2015, ~~Plaintiffs~~a Stipulation of Discontinuance was filed ~~a notice of cross appeal with respect to that portion of the Decision~~dismissing all claims and ~~Orders that denied their motion for summary judgment on their claim for unjust enrichment. Trial is currently scheduled to begin June 1, 2015.~~counterclaims between and among Hildene and Bimini ~~denies that the repurchase was improper and intends to continue to defend the suit vigorously.~~

On March 2, 2011, Orchid Island TRS, LLC, formerly known as Opteum Financial Services, LLC and presently known as MortCo, LLC (“Opteum Financial”) and Opteum Mortgage Acceptance Corporation (“Opteum Acceptance”) (collectively referred to herein as “MortCo”) received a cover letter dated March 1, 2011 from Massachusetts Mutual Life Insurance Company (“Mass Mutual”) enclosing a draft complaint against MortCo.Capital. In summary, Mass Mutual alleges that it purchased residential mortgage-backed securities offered by MortCo in August 2005 and the first quarter of 2006 and that MortCo made false representations and warranties in connection with the ~~sale~~settlement and in accordance with GAAP, a loss of $3.5 million was accrued at March 31, 2015 and has been charged to operations for the ~~securities~~year ended December 31, 2015. During the year ended December 31, 2015, payments totaling $2.25 million were made, as required by the settlement agreement. The remaining $1.25 million is scheduled to be paid in ~~violation of Mass Gen. Laws Ch. 110A § 410(a)(2) (the “Massachusetts Blue Sky Law”). In its cover letter, Mass Mutual claims it~~installments through July 2019 and is ~~entitled to damages~~included in ~~excess of $25 million. However, no monetary demand is contained within~~other liabilities in the ~~draft complaint and the actual damages Mass Mutual claims to have incurred is uncertain.~~

Mass Mutual has not filed the complaint or initiated litigation. Pursuant to its request, on March 14, 2011 Mass Mutual and MortCo entered into a Tolling Agreement through June 1, 2011 so that Mass Mutual could address its allegations against MortCo without incurring litigation costs. Mass Mutual never contacted MortCo to schedule such discussions. On August 22, 2011, the parties extended the Tolling Agreement through June 1, 2013, and on MayDecember 31, 2013, the parties extended the Tolling Agreement through December 2, 2013. To date, MortCo is aware of no action taken by Mass Mutual, and the Tolling Agreement appears to have expired by its own terms. MortCo denies Opteum Financial or Opteum Acceptance, individually or collectively, made false representations and warranties in connection with the sale of securities to Mass Mutual. Mass Mutual has taken no action to prosecute its claim against MortCo, and the range of loss or potential loss, if any, cannot reasonably be estimated. Should Mass Mutual initiate litigation, MortCo will defend such litigation vigorously.2015 consolidated balance sheet.

~~-95-~~-94-

NOTE 13. INCOME TAXES

Taxation as a REIT ~~Activities~~through December 31, 2014

Generally, REITs are not subject to federal income tax on REIT taxable income distributed to its shareholders. REIT taxable income or loss, as generated by qualifying REIT activities, is computed in accordance with the Internal Revenue Code, which is different from the financial statement net income or loss as computed in accordance with GAAP. Depending on the number and size of the various items or transactions being accounted for differently, the differences between the Company’s REIT taxable income or loss and its GAAP financial statement net income or loss can be substantial and each item can affect several years.

~~As of December 31, 2014,~~ Bimini ~~Capital had~~Capital’s qualification as a REIT ~~tax net operating loss carryforward (“NOL carryforwards”~~depended upon its ability to meet, on an annual or ~~“NOLs”) of approximately $18.0 million that is immediately available~~in some cases quarterly basis, various complex requirements under the Code relating to, ~~offset future REIT taxable income. The REIT tax net operating loss carryforwards will expire in years 2028 through 2034.~~

~~As discussed in Note 1, Orchid was a qualified REIT subsidiary of Bimini Capital until~~among other things, the ~~closing~~sources of its ~~IPO~~gross income, the composition and ~~all~~values of its ~~activities were included with~~assets, its distribution levels and the ~~activities~~diversity of ~~Bimini Capital through that date. Subsequent to the closing~~ownership of its ~~IPO, Orchid became subject to the REIT filing requirements and qualifications independent of Bimini Capital.~~shares.

~~Taxable REIT Subsidiaries~~

As taxable REIT subsidiaries (“TRS”), Bimini Advisors and MortCo ~~are~~were tax paying entities for income tax purposes and are taxed separately from Bimini Capital, Orchid and from each other. Therefore, through December 31, 2014, Bimini Advisors and MortCo each separately ~~report~~computed and reported an income tax provision or benefit based on their own taxable activities. ~~For~~

Taxation Beginning January 1, 2015

Certain trends and events experienced during 2015 have caused Bimini Capital to no longer meet the ~~years ended December 31, 2014~~Code’s rules and ~~2013, neither TRS had~~regulations to be taxed as a REIT, effective January 1, 2015. In particular, additional offerings of common stock by Orchid in 2015 increased revenue attributable to management fees received from Orchid by Bimini Advisors. In addition, payments that have been and will be made by Bimini Capital pursuant to a litigation settlement agreement entered into in 2015 have reduced and may continue to reduce the value of Bimini Capital’s assets and the amount of revenues generated by our MBS portfolio. Consequently, the value of Bimini’s two subsidiaries (MortCo and Bimini Advisors) has increased in relation to the value of Bimini Capital’s assets to a level that that exceeds the limits for a REIT permitted under the Code.

The failure to qualify as a REIT subjects Bimini Capital’s taxable income ~~primarily due~~ to federal and state corporate income taxes at regular corporate rates. However, Bimini Capital and its subsidiaries have NOL carryforwards that will be available to offset taxable income, if any, in 2015 and future periods. Management is implementing certain internal restructuring transactions that would maximize its ability to utilize the ~~utilization of~~existing federal NOL carryforwards.

Income Tax Benefit Summary

The ~~TRS~~ income tax ~~(benefit) provision~~benefit included in the consolidated statements of operations consists of the following for the years ended December 31, ~~2014~~2015 and ~~2013~~2014:

(in thousands)
	2015			2014
Current	$	482		$	22
Deferred		(62,932	)		(1,900	)
Income tax benefit	$	(62,450	)	$	(1,878	)

-95-

The income tax benefit differs from the amount ~~determined~~computed by applying the federal income tax statutory ~~Federal~~ rate of ~~35%~~34 percent on income before income tax expense. A reconciliation of income tax at the statutory rate to income tax benefit for the ~~pre-tax income or loss due primarily to~~years ended December 31, 2015 and 2014 is presented in the ~~recording of, and adjustments to, the deferred~~table below.

(in thousands)
	2015			2014
Federal tax based on statutory rate	$	(1,094	)	$	9,798
State income tax		(194	)		1,120
Benefit of REIT exemption		-			(779	)
Income attributable to non-controlling interest		-			(8,629	)
Adjustment to record beginning deferred taxes due to change to taxable status		(9,187	)		-
Reduction of deferred tax asset valuation allowance		(52,135	)		(3,410	)
Other		160			22
Income tax benefit	$	(62,450	)	$	(1,878	)

Deferred tax ~~asset valuation allowances and the release~~assets consisted of the ~~deferred~~following as of December 31, 2015 and 2014:

(in thousands)
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	99,106		$	94,440
Tax hedges		591			-
Orchid Island Capital, Inc. common stock		3,787			-
Accrued expenses		528			1,077
Management agreement		1,267			1,251
Other		377			145
		105,656			96,913
Valuation allowance		(40,824	)		(95,013	)
Net deferred tax assets	$	64,832		$	1,900

As of December 31, 2015 and 2014, Bimini Capital had tax ~~valuation allowance related~~capital loss carryforwards of approximately $0.6 million and $0.5 million, respectively, which can be used to ~~an intangible asset~~offset future realized tax capital gains. The capital loss carryforwards will begin to expire in 2018. In addition, as of December 31, 2015 and 2014, Bimini Capital had estimated federal NOL ~~carryforwards.~~carryforwards of approximately $21.3 million and $17.3 million, respectively, and estimated Florida NOL carryforwards of $20.6 million and $16.5 million, respectively. The NOL carryforwards can be used to offset future taxable income and will begin to expire in 2028.

~~Bimini Advisors has~~As of December 31, 2015, MortCo had estimated federal NOL carryforwards of approximately $261.3 million and estimated available atFlorida NOLs of approximately $33.9 million. As of December 31, 2014, MortCo had estimated federal NOL carryforwards of approximately $263.9 million and estimated available Florida NOLs of approximately $36.4 million. These NOLs can be used to offset future taxable income and will begin to expire in 2025.

As of December 31, 2014, Bimini Advisors had estimated federal and Florida NOL carryforwards of approximately $1.6 ~~million which begin~~million. These NOLs were fully utilized during the 2015 tax year to ~~expire in 2031 and are fully available to~~ offset ~~future federal and Florida~~ taxable income. In connection with Orchid’s IPO, Bimini Advisors paid for, and expensed for GAAP purposes, certain offering costs totaling approximately $3.2 million. For tax purposes, these offering costs created an intangible asset related to the management agreement with a tax basis of $3.2 million. The deferred tax ~~assets~~asset related to ~~the NOL carryforwards and~~ the intangible asset at December 31, 2015 and 2014 total approximately ~~$1.9~~$1.3 million.

-96-

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of ~~deferred tax assets~~capital loss and NOL carryforwards is dependent upon the generation of future capital gains and taxable income ~~during the~~in periods ~~in which those temporary differences become deductible.~~

~~As of December 31, 2013, management did not believe that it had sufficient positive evidence~~prior to ~~conclude that the realization of its deferred tax assets was more likely than not; therefore, a~~their expiration. The valuation allowance ~~was provided for the entire balance of the deferred tax assets. During the year ended December 31, 2014, management re-evaluated this position and determined that, due~~relates primarily to ~~increased projected management fee revenue and~~ the ability to ~~allocate certain overhead expenses to Orchid, there is sufficient positive evidence to conclude that~~utilize the realization of Bimini Advisors’ deferred tax assets is more likely than not. As a result, Bimini Advisors recorded a deferred income tax benefit of approximately $1.9 million related to the release of the valuation allowance.

~~-96-~~

~~As of December 31, 2014, MortCo has estimated federal~~ NOL carryforwards of ~~approximately $263.9 million~~MortCo in future periods and is based on management’s estimated ~~available Florida NOLs~~projections of ~~approximately $36.4 million, both of which will begin to expire in 2025, and are fully available to offset~~ future ~~federal and Florida~~ taxable income, respectively. The net deferred tax assets for MortCo at December 31, 2014 are approximately $94.9 million. As of December 31, 2014 and 2013, management did not believe that it had sufficient positive evidence to conclude that the realization of MortCo’s deferred tax assets was more likely than not; therefore, a valuation allowance was provided for the entire balance of MortCo’s net deferred tax assets.income.

MortCo holds residual interests in various real estate mortgage investment conduits (“REMICs”), ~~which were issued in 2004, 2005 and 2006,~~ some of which generate excess inclusion income (“EII”), a type of taxable income pursuant to specific provisions of the Code. Through 2007, MortCo based its tax position regarding the taxability of EII on advice received from its tax consultants. During 2008, MortCo re-evaluated its EII tax position, and concluded that it was no longer more likely than not that the pre-2008 tax position would be fully sustained upon examination. Based on this conclusion, MortCo recorded a liability of approximately $2.1 million for taxes, interest and penalties related to this uncertain tax position during 2008.

During 2010 (as part of the filing of its 2009 tax returns), MortCo reached a tax filing position related to the EII taxable income that was different from what was reported ~~EII taxable income of approximately $2.1 million, paid $0.8 million of income tax, interest and penalties,~~in previous periods, and included a notice of inconsistent treatment in its tax returns. ~~Because~~MortCo continues to file its tax returns following its 2009 tax filing position, and it continues to include a notice of inconsistent treatment in each return.

The Company does not believe it has any unrecognized tax benefits included in its consolidated financial statements. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the uncertainty surrounding the taxation of EII, MortCo accounted for the pre-2008 tax position as being more likely than not that the tax position would not be fully sustained upon examination. On September 15, 2013, theapplicable statute of limitations for the IRS to challenge MortCo’s pre-2008 tax position expired. As such, the remaining balance of the liability recorded in 2008 was reversed during the year ended December 31, 2013, which resulted in a tax benefit of $1.3 million.limitations.

NOTE 14. EARNINGS PER SHARE

Shares of Class B ~~Common Stock,~~common stock, participating and convertible into Class A ~~Common Stock,~~common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A ~~Common Stock~~common stock if, and when, authorized and declared by the Board of Directors. Following the provisions of FASB ASC 260, the Class B ~~Common Stock~~common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A ~~Common Stock.~~common stock. Shares of Class B ~~Common Stock~~common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A ~~Common Stock~~common stock were not met at December 31, ~~2014~~2015 and ~~2013.~~2014.

Shares of Class C ~~Common Stock~~common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C ~~Common Stock~~common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A ~~Common Stock~~common stock were not met at December 31, ~~2014~~2015 and ~~2013.~~2014.

The Company has dividend eligible stock incentive plan shares that were outstanding during the years ended December 31, ~~2014~~2015 and ~~2013.~~2014. The basic and diluted per share computations include these unvested incentive plan shares if there is income available to Class A ~~Common Stock,~~common stock, as they have dividend participation rights. The stock incentive plan shares have no contractual obligation to share in losses. Since there is no such obligation, the incentive plan shares ~~are~~would not be included in the basic and diluted EPS computations when no income is available to Class A ~~Common Stock~~common stock even though they are considered participating securities.

~~-97-~~

The table below reconciles the numerators and denominators of the basic and diluted EPS.

(in thousands, except per-share information)
	2014			2013			2015			2014
Basic and diluted EPS per Class A common share:
Income (loss) attributable to Class A common shares:
Income attributable to Class A common shares:
Basic and diluted	$	7,725		$	(2,323	)	$	59,079		$	7,725
Weighted average common shares:
Class A common shares outstanding at the balance sheet date		12,324			11,510			12,373			12,324
Unvested dividend-eligible stock incentive plan shares
Unvested dividend-eligible share based compensation
outstanding at the balance sheet date		32			-			78			32
Effect of weighting		(158	)		(544	)		(65	)		(158	)
Weighted average shares-basic and diluted		12,198			10,966			12,386			12,198
Income (loss) per Class A common share:
Income per Class A common share:
Basic and diluted	$	0.63		$	(0.21	)	$	4.77		$	0.63

-97-

(in thousands, except per-share information)	(in thousands, except per-share information)
			2014		2013	2015		2014
Basic and diluted EPS per Class B common share:	Basic and diluted EPS per Class B common share:
Income (loss) attributable to Class B common shares:
	Basic and diluted	$	20	$	(7)
Income attributable to Class B common shares:
Basic and diluted						$	152	$	20
Weighted average common shares:	Weighted average common shares:
	Class B common shares outstanding at the balance sheet date		32		32
	Effect of weighting		-		-
Class B common shares outstanding at the balance sheet date							32		32
Effect of weighting							-		-
Weighted average shares-basic and diluted	Weighted average shares-basic and diluted		32		32		32		32
Income (loss) per Class B common share:
	Basic and diluted	$	0.63	$	(0.21)
Income per Class B common share:
Basic and diluted						$	4.77	$	0.63

NOTE 15. 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 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.

~~-98-~~

The Company’s MBS 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 MBS positions determined by either an independent third-party or do so internally.

~~Mortgage-backed securities,~~MBS and Orchid common stock (both based on the fair value option), retained interests, ~~and Eurodollar~~ futures contracts, and interest rate swaptions were recorded at fair value on a recurring basis during ~~2014~~2015 and ~~2013.~~2014. 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. Fair value measurements for the retained interests are generated by a model that requires management to make a significant number of assumptions.

-98-

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2014~~2015 and ~~2013:~~2014:

(in thousands)
			Quoted Prices								Quoted Prices
			in Active		Significant						in Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
			Identical		Observable		Unobservable				Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs		Fair Value		Assets		Inputs		Inputs
	Measurements		(Level 1)		(Level 2)		(Level 3)		Measurements		(Level 1)		(Level 2)		(Level 3)
December 31, 2015
Mortgage-backed securities									$	83,988	$	-	$	83,988	$	-
Eurodollar futures contracts										402		402		-		-
Orchid Island Capital, Inc. common stock										13,853		13,853		-		-
Retained interests										1,124		-		-		1,124
December 31, 2014
Mortgage-backed securities	$	117,831	$	-	$	117,831	$	-	$	117,831	$	-	$	117,831	$	-
Eurodollar futures contracts		476		476		-		-		476		476		-		-
Investment in Orchid		12,811		12,811		-		-
Orchid Island Capital, Inc. common stock										12,811		12,811		-		-
Retained interests		1,900		-		-		1,900		1,900		-		-		1,900
December 31, 2013
Mortgage-backed securities	$	389,341	$	-	$	389,341	$	-
Eurodollar futures contracts		2,557		2,557		-		-
Retained interests		2,531		-		-		2,531

The following table illustrates a roll forward for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, ~~2014~~2015 and ~~2013:~~2014:

(in thousands)
	Retained Interests						Retained Interests
	2014			2013			2015			2014
Balances, January 1	$	2,531		$	3,336		$	1,900		$	2,531
Gain included in earnings		3,815			2,470			2,962			3,815
Collections		(4,446	)		(3,275	)		(3,738	)		(4,446	)
Balances, December 31	$	1,900		$	2,531		$	1,124		$	1,900

During the years ended December 31, ~~2014~~2015 and ~~2013,~~2014, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

Our retained interests are valued based on a discounted cash flow approach. These values are sensitive to changes in unobservable inputs, including: estimated prepayment speeds, default rates and loss severity, weighted-average life, and discount rates. Significant increases or decreases in any of these inputs may result in significantly different fair value measurements.

~~-99-~~

The following table summarizes the significant quantitative information about our level 3 fair value measurements as of December 31, ~~2014.~~2015.

Retained interest fair value ($ in thousands)			$	1,900			$	1,124
		CPR Range				CPR Range
Prepayment Assumption		(Weighted Average)				(Weighted Average)
Constant Prepayment Rate		10% (10%)				10% (10%)
		Severity Range				Severity Range
Default Assumptions	Probability of Default	(Weighted Average)		Range Of Loss Timing	Probability of Default	(Weighted Average)		Range Of Loss Timing
Real Estate Owned	100%	40.13% - 40.13% (40.13%)		Next 10 Months	100%	41.6%		Next 10 Months
Loans in Foreclosure	100%	40.13% - 40.13% (40.13%)		Month 4 - 13	100%	41.6%		Month 4 - 13
Loans 90 Day Delinquent	100%	45%		Month 11-28	100%	45%		Month 11-28
Loans 60 Day Delinquent	85%	45%		Month 11-28	85%	45%		Month 11-28
Loans 30 Day Delinquent	75%	45%		Month 11-28	75%	45%		Month 11-28
Current Loans	2.50% - 4.28%	45%		Month 29 and Beyond	2.5%	45%		Month 29 and Beyond
		Remaining Life Range		Discount Rate Range
Cash Flow Recognition	Valuation Technique	(Weighted Average)		(Weighted Average)
Nominal Cash Flows	Discounted Cash Flow	0.2 - 13.4 (7.6)		27.50% (27.50%)
Discounted Cash Flows	Discounted Cash Flow	0.2 - 1.5 (0.7)		27.50% (27.50%)

-99-

		Remaining Life Range	Discount Rate Range
Cash Flow Recognition	Valuation Technique	(Weighted Average)	(Weighted Average)
Nominal Cash Flows	Discounted Cash Flow	0.2 - 15.4 (4.7)	27.50% (27.50%)
Discounted Cash Flows	Discounted Cash Flow	0.2 - 11.5 (1.2)	27.50% (27.50%)

NOTE 16. RELATED PARTY TRANSACTIONS

Management Agreement

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid’s business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid’s board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:

·	One-twelfth of 1.5% of the first $250 million of the Orchid’s equity, as defined in the management agreement,

·	One-twelfth of 1.25% of the Orchid’s equity that is greater than $250 million and less than or equal to $500 million, and

·	One-twelfth of 1.00% of the Orchid’s equity that is greater than $500 million.

Orchid is obligated to reimburse the Company for any direct expenses incurred on its behalf. In addition, the Company began allocating to Orchid its pro rata portion of certain overhead costs set forth in the management agreement commencing with the calendar quarter beginning July 1, 2014. Should the Orchid terminate the management agreement without cause, it shall pay to Bimini Advisors 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 initial term or automatic renewal term.

The following table summarizes the advisory services revenue from Orchid for the year ended December 31, 2015.

(in thousands)
Management fee	$	3,978
Allocated overhead		1,064
Total	$	5,042

~~Frank E. Jaumot is a shareholder in an accounting firm from which~~During the year ended December 31, 2014, the activities of Orchid were consolidated with the activities of the Company ~~receives accounting~~as more fully discussed in Note 17. Amounts received under the management agreement for the year ended December 31, 2014 were eliminated in the consolidation. At December 31, 2015 and ~~tax services. Mr. Jaumot~~December 31, 2014, the net amount due from Orchid was approximately $0.5 million and $0.3 million, respectively, and is ~~both a director and a shareholder of Bimini Capital and a shareholder of Orchid. Professional fees incurred with this firm were $83,000 and $99,000 for~~included in “other assets” in the consolidated balance sheets.

During the years ended December 31, 2015 and 2014, Orchid accrued cash and ~~2013,~~equity compensation payable to officers and employees of Bimini of $0.6 million and $0.5, respectively. The compensation for the year ended December 31, 2014 is included in “compensation and related benefits” in the consolidated statements of operations. The compensation for the year ended December 31, 2015 is not included in the consolidated statements of operations as Orchid is no longer part of the consolidation.

Other Relationships with Orchid

At December 31, 2015 and 2014, the Company owned 1,395,036 and 981,665 shares, respectively. of Orchid common stock representing approximately 6.4% and 5.9%, respectively, of the outstanding shares. During the year ended December 31, 2015, the Company received dividends on this common stock investment of approximately $1.9 million. Dividends received during the year ended December 31, 2014 were eliminated in the consolidation.

-100-

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 Orchid and owns shares of common stock of Orchid. Also, Hunter Haas, our Chief Financial Officer, Chief Investment Officer and Treasurer, also serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of Orchid’s Board of Directors and owns shares of common stock of Orchid.

NOTE 17. CONSOLIDATED VARIABLE INTEREST ENTITY AND NONCONTROLLING INTERESTS

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

As discussed in Note 1, Orchid completed its IPO on February 20, 2013. Bimini Capital owned 100% of the outstanding common stock of Orchid prior to the IPO, and approximately 29.38% after the IPO. Orchid operates as a mortgage REIT and was formed in order to increase Bimini Capital’s assets under management to generate additional revenues to cover operating costs. Orchid entered into a management agreement with Bimini Advisors under which Bimini Advisors will be responsible for administering the business activities and day-to-day operations of Orchid. Bimini Advisors receives a monthly management fee for these services. Bimini Capital and Bimini Advisors acted as sponsors of the Orchid IPO and paid approximately $3.0 million of IPO related expenses during the year ended December 31, 2013. The Company did not provide any further financial or other support to Orchid.

Management concluded that, after the close of its IPO, Orchid was a VIE because Orchid's equity holders lack the ability through voting rights to make decisions about its activities that have a significant effect on its success. Management also concluded that Bimini Capital was the primary beneficiary of Orchid because, under the terms of the management agreement, Bimini Capital had the power to direct the activities of Orchid that most significantly impact its economic performance including asset selection, asset and liability management and investment portfolio risk management. As a result, subsequent to Orchid’s IPO, and until December 31, 2014, the Company continued to consolidate Orchid in its consolidated financial statements.

~~-100-~~

Orchid completed additional offerings of its common stock during the year ended December 31, 2014. ~~As a result of these offerings, at December 31, 2014 Bimini owned approximately 5.9% of the outstanding common stock of Orchid. During 2014, management~~Management continued to re-evaluate the conditions resulting in the consolidation of Orchid and at December 31, 2014 concluded that, due to Bimini’s decreased percentage ownership interest in Orchid, ~~the management contract~~there was no longer ~~represented~~ a variable ~~interest.~~interest requiring consolidation. In accordance with ASC 810, the Company ~~has~~ deconsolidated Orchid from the consolidated balance sheet as of December 31, 2014. Orchid’s activities ~~are~~were included in the consolidated statements of operations, equity and cash flows through December 31, 2014 ~~but will be~~and are excluded in ~~future~~subsequent periods.

Bimini Capital’s continuing investment in Orchid is carried at fair value of $12.8 million on our December 31, 2014 consolidated balance sheet. At December 31, 2014, the net amount due from Orchid was approximately $0.3 million. Our exposure to loss related to our investment in Orchid and the management contract is limited to these amounts.

The table below presents the effects of the above on the changes in equity attributable to Bimini Capital stockholders during the ~~years~~year ended December 31, ~~2014 and 2013.~~2014.

(in thousands)
2014 2013
Net income attributable to Bimini Capital $ 7,745 $ (2,330 )
Transfers from the noncontrolling interests
Increase in Bimini Capital's paid-in capital for the sale of 2,360,000 common shares of Orchid - 278
Decrease in Bimini Capital's paid-in capital for the sale of 13,357,991 common shares of Orchid
and the effect of the 24,000 shares of unvested restricted shares of Orchid (622 ) -
Change from net loss attributable to Bimini Capital and transfers from noncontrolling interest $ 7,123 $ (2,052 )

The noncontrolling interests reported in the Company’s consolidated financial statements represent the portion of equity ownership in Orchid held by stockholders other than Bimini Capital. Noncontrolling interest is presented in the equity section of the December 31, 2013 consolidated balance sheet, separate from stockholders’ equity attributed to Bimini Capital. Net income of Orchid is allocated between the noncontrolling interests and to Bimini Capital in proportion to their relative ownership interests in Orchid.

~~The following is a roll forward of the noncontrolling interest during the years ended December 31, 2014 and 2013.~~

(in thousands)
2014 2013
Balance, January 1 $ 31,615 $ -
Issuance of common shares of Orchid Island Capital, Inc. 171,993 35,122
Net income (loss) attributed to noncontrolling interest 22,127 (215 )
Amortization of Orchid Island Capital, Inc. equity plan compensation 65 -
Cash dividends paid to noncontrolling interest (20,523 ) (3,292 )
Deconsolidation of Orchid Island Capital, Inc. (205,277 ) -
Balance, December 31 $ - $ 31,615

(in thousands)
Net income attributable to Bimini Capital	$	7,745
Transfers from the noncontrolling interests
Decrease in Bimini Capital's paid-in capital for the sale of 13,357,991 common shares of Orchid
and the effect of the 24,000 shares of unvested restricted shares of Orchid		(622	)
Change from net income attributable to Bimini Capital and transfers from noncontrolling interest	$	7,123

-101-

Net income of Orchid for the year ended December 31, 2014 is allocated between the noncontrolling interests and to Bimini Capital in proportion to their relative ownership interests in Orchid. The following ~~table presents~~is a roll forward of the ~~assets and liabilities of Orchid that are reflected in~~noncontrolling interest during the ~~consolidated balance sheet at~~year ended December 31, ~~2013 (excluding intercompany balances).~~2014.

(in thousands)
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties $ 335,775
Unpledged 15,448
Total mortgage-backed securities 351,223
Cash and cash equivalents 8,169
Restricted cash 2,446
Accrued interest receivable 1,559
Other assets 179
Total Assets $ 363,576

LIABILITIES:
Repurchase agreements $ 318,557
Accrued interest payable 91
Other liabilities 80
Total Liabilities $ 318,728

(in thousands)
	2014
Balance, January 1	$	31,615
Issuance of common shares of Orchid Island Capital, Inc.		171,993
Net income attributed to noncontrolling interest		22,127
Amortization of Orchid Island Capital, Inc. equity plan compensation		65
Cash dividends paid to noncontrolling interest		(20,523	)
Deconsolidation of Orchid Island Capital, Inc.		(205,277	)
Balance, December 31	$	-

The following table summarizes the operating results of Orchid (excluding intercompany transactions) for the ~~years~~year ended December 31, 2014 ~~and the period beginning February 20, 2013 (the date of its IPO) through December 31, 2013~~ which are reflected in our consolidated statements of operations for the ~~years~~year ended December 31, ~~2014 and 2013.~~2014.

(in thousands)
	2014			2013
Interest income	$	31,804		$	8,817		$	31,804
Interest expense		(3,031	)		(1,062	)		(3,031	)
Net interest income		28,773			7,755			28,773
Unrealized gains (losses) on mortgage-backed securities		11,368			(10,192	)
Realized gains (losses) on mortgage-backed securities		2,791			(1,198	)
(Losses) gains on derivative instruments		(13,925	)		4,828
Unrealized gains on mortgage-backed securities								11,368
Realized gains on mortgage-backed securities								2,791
Losses on derivative instruments								(13,925	)
Net portfolio income		29,007			1,193			29,007

Expenses:
Accrued incentive compensation		500			-			500
Directors' fees and liability insurance		569			290			569
Audit, legal and other professional fees		588			321			588
Direct REIT operating expenses		182			142			182
Other administrative		246			115			246
Total expenses		2,085			868			2,085

Net income	$	26,922		$	325		$	26,922

-102-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

We had no disagreements with our Independent Registered Public Accounting Firm on any matter of accounting principles or practices or financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the “evaluation date”), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (“the CEO”) and Chief Financial Officer (“the CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures, as designed and implemented, were effective as of the evaluation date (1) in ensuring that information regarding the Company and its subsidiaries is accumulated and communicated to our management, including our CEO and CFO, by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable assurance that information the Company must disclose in its periodic reports under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report of Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

·	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

·	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. As a result, even systems determined to be effective can provide only reasonable assurance regarding the preparation and presentation of consolidated financial statements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

-103-

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2014.~~2015. In making this assessment, the Company’s management used criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on management’s assessment, the Company’s management believes that, as of December 31, ~~2014,~~2015, the Company’s internal control over financial reporting was effective based on those criteria. The Company’s independent registered public accounting firm, BDO USA, LLP, has issued an attestation report on the Company’s internal control over financial reporting, which is included in this Annual Report.

~~-104-~~

~~Report of Independent Registered Public Accounting Firm~~

~~Board of Directors and Stockholders~~

~~Bimini Capital Management, Inc.~~

~~Vero Beach, Florida~~

~~We have audited Bimini Capital Management, Inc. and subsidiaries (the ”Company”) internal control over financial reporting as of December 31, 2014, based on criteria established in~~ ~~Internal Control – Integrated Framework (2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A - Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.~~

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2014 and 2013, and the related consolidated statements of operations, equity, and cash flows for each of the two years in the period ended December 31, 2014 and our report dated March 16, 2015 expressed an unqualified opinion thereon.

~~West Palm Beach, Florida~~

~~March 16, 2015~~

~~/s/ BDO USA, LLP~~

~~Certified Public Accountants~~

~~-105-~~

ITEM 9B. OTHER INFORMATION.

None.

~~-106-~~-104-

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 and not otherwise set forth below is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Company’s ~~2014~~2016 Annual Meeting of Stockholders, which the Company expects to file with the U.S. Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after December 31, ~~2014~~2015 (the "Proxy Statement").

ITEM 11. Executive Compensation.

The information required by this Item 11 is incorporated herein by reference to the Proxy Statement.

ITEM 12. Security Ownership Ofof Certain Beneficial Owners ~~And~~and Management ~~And~~and Related Stockholder Matters.

The information required by this Item 12 is incorporated herein by reference to the Proxy Statement and to Part II, Item 5 of this Form 10-K.

ITEM 13. Certain Relationships ~~And~~and Related Transactions, and Director Independence.

The information required by this Item 13 is incorporated herein by reference to the Proxy Statement.

ITEM 14. Principal Accountant Fees ~~And~~and Services.

The information required by this Item 14 is incorporated herein by reference to the Proxy Statement.

~~-107-~~-105-

PART IV

ITEM 15. Exhibits, Financial Statement Schedules.

a.	Financial Statements. The consolidated financial statements of the Company, together with the report of Independent Registered Public Accounting Firm thereon, are set forth in Part II-Item 8 of this Form 10-K and are incorporated herein by reference.

The following information is filed as part of this Form 10-K:

	Page

Report of Independent Registered Public Accounting Firm		70
Consolidated Balance Sheets		71
Consolidated Statements of Operations		72
Consolidated Statements of Equity		73
Consolidated Statements of Cash Flows		74
Notes to Consolidated Financial Statements		75

b. Financial Statement Schedules.

Not applicable.

~~-108-~~

c. Exhibits.

Exhibit No

3.1	Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Form S-11/A, filed with the SEC on April 29, 2004
3.2	Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5	Certificate of Notice, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on February 1, 2008
3.6	Articles Supplementary, reclassifying shares of Class A Preferred Stock and Class B Preferred Stock into Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015
3.7	Articles Supplementary, creating the Series A Preferred Stock, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.
3.8	Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
4.1	Rights Plan, dated as of December 21, 2015, between the Company and Broadridge Corporate Issuer Solutions, Inc. incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.

-106-

10.1	Bimini Capital Management, Inc. 2011 Long Term Incentive Compensation Plan, incorporated by reference to Exhibit 10.23 to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2011*
10.2	Settlement Agreement and Mutual Release by an among First Bank (as successor to Coast Bank of Florida) and MortCo TRS, LLC dated January 20, 2012, incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2012, filed with the SEC on May 7, 2012
10.3	Management Agreement between Orchid Island Capital, Inc. and Bimini Advisors, LLC date February 20, 2013, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.
10.4	Investment Allocation Agreement among the Company, Orchid Island Capital, Inc. and Bimini Advisors, LLC dated February 20, 2013, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.*
21.1	Subsidiaries of the Registrant**
23.1	Consent of BDO USA, LLP**
31.1	Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
31.2	Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***
32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***


101.INS		Instance Document****
101.SCH		Taxonomy Extension Schema Document****
101.CAL		Taxonomy Extension Calculation Linkbase Document****
101.DEF		Additional Taxonomy Extension Definition Linkbase Document****
101.LAB		Taxonomy Extension Label Linkbase Document****
101.PRE		Taxonomy Extension Presentation Linkbase Document****

Management compensatory plan or arrangement required to be filed by Item 601 of Regulation S-K.

Filed herewith.

***

Furnished herewith

****

Submitted electronically herewith. Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed as part of a registration statement or prospectus for purposes of sections 11 and 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934 and otherwise is not subject to liability under these sections

~~-109-~~-107-

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIMINI CAPITAL MANAGEMENT, INC.

Date: March ~~16, 2015~~22, 2016		By:	/s/ Robert E. Cauley
			Robert E. Cauley Chairman and Chief Executive Officer

Date: March ~~16, 2015~~22, 2016		By:	/s/ G. Hunter Haas, IV
			G. Hunter Haas IV President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March ~~16, 2015.~~22, 2016.

Signature		Capacity


/s/ Robert E. Cauley
Robert E. Cauley		Director, Chairman of the Board,
		Chief Executive Officer


~~/s/~~/s/ G. Hunter Haas, IV
G. Hunter Haas, IV		President, Chief Financial Officer,
		Chief Investment Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)


~~/s/~~/s/ Robert J. Dwyer
Robert J. Dwyer		Director




~~/s/~~/s/ Frank E. Jaumot
Frank E. Jaumot		Director