UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2019

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number: 001-32171


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~~Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. Check one:


Large accelerated filer	☐ ◻	Accelerated filer	☐ ◻
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	☒ ⌧
		Emerging growth company	☐ ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐◻

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

Indicate the number of shares outstanding of each of the ~~Registrant's~~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	November ~~3, 2017~~8, 2019	~~12,631,627~~11,608,555
Class B Common Stock, $0.001 par value	November ~~3, 2017~~8, 2019	31,938
Class C Common Stock, $0.001 par value	November ~~3, 2017~~8, 2019	31,938

BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

ITEM 1. ~~Condensed~~ Financial Statements		1
		1
Condensed Consolidated Balance Sheets (unaudited)	1
		1
Condensed Consolidated Statements of Operations (unaudited)	2
		2
Condensed Consolidated Statement of ~~Stockholders'~~Stockholders’ Equity (unaudited)	3
		3
Condensed Consolidated Statements of Cash Flows (unaudited)	4
		4
Notes to Condensed Consolidated Financial Statements			5
ITEM 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations				24	25
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk				43	49
ITEM 4. Controls and Procedures				44	50

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings				45	51
ITEM 1A. Risk Factors				45	51
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds				45	51
ITEM 3. Defaults Upon Senior Securities				45	51
ITEM 4. Mine Safety Disclosures				45	51
ITEM 5. Other Information				45	51
ITEM 6. Exhibits				46	52
SIGNATURES				47	53

PART I. FINANCIAL INFORMATION

ITEM 1. ~~CONDENSED~~ FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.	BIMINI CAPITAL MANAGEMENT, INC.							BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS							CONDENSED CONSOLIDATED BALANCE SHEETS

		(Unaudited)							(Unaudited)
		September 30, 2017			December 31, 2016				September 30, 2019			December 31, 2018
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties		$	197,515,121		$	129,582,386			$	163,178,685		$	212,349,874
Unpledged			475,282			719,603				48,338			74,318
Total mortgage-backed securities			197,990,403			130,301,989				163,227,023			212,424,192
Cash and cash equivalents			5,211,532			4,429,459				7,801,875			4,947,801
Restricted cash			936,420			1,221,978				1,089,060			1,292,687
Orchid Island Capital, Inc. common stock, at fair value			15,489,167			15,108,240				8,740,207			9,713,030
Retained interests in securitizations			557,659			1,113,736
Accrued interest receivable			711,030			512,760				585,983			780,535
Property and equipment, net			3,378,516			3,407,040				2,181,146			3,298,067
Deferred tax assets, net			62,632,660			63,833,063
Real property held for sale										450,000			-
Deferred tax assets										22,065,846			23,202,821
Other assets			2,921,694			2,942,139				3,838,121			3,740,543
Total Assets		$	289,829,081		$	222,870,404			$	209,979,261		$	259,399,676

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements		$	187,373,780		$	121,827,586			$	154,475,000		$	200,396,000
Junior subordinated notes due to Bimini Capital Trust II			26,804,440			26,804,440				26,804,440			26,804,440
Accrued interest payable			247,596			114,199				312,375			678,262
Other liabilities			1,298,472			1,977,281				1,365,667			2,566,353
Total Liabilities			215,724,288			150,723,506				182,957,482			230,445,055

COMMITMENTS AND CONTINGENCIES

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;
no shares issued and outstanding as of September 30, 2017 and December 31, 2016			-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 12,631,627
shares issued and outstanding as of September 30, 2017 and December 31, 2016			12,632			12,632
no shares issued and outstanding as of September 30, 2019 and December 31, 2018										-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 11,608,555
shares issued and outstanding as of September 30, 2019 and 12,709,269 shares issued
and outstanding as of December 31, 2018										11,609			12,709
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of September 30, 2017 and December 31, 2016			32			32
issued and outstanding as of September 30, 2019 and December 31, 2018										32			32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of September 30, 2017 and December 31, 2016			32			32
issued and outstanding as of September 30, 2019 and December 31, 2018										32			32
Additional paid-in capital			334,872,353			334,850,838				332,642,758			334,919,265
Accumulated deficit			(260,780,256	)		(262,716,636	)			(305,632,652	)		(305,977,417	)
Stockholders' Equity			74,104,793			72,146,898
Stockholders’ Equity										27,021,779			28,954,621
Total Liabilities and Stockholders' Equity		$	289,829,081		$	222,870,404			$	209,979,261		$	259,399,676
See Notes to Condensed Consolidated Financial Statements	See Notes to Condensed Consolidated Financial Statements							See Notes to Condensed Consolidated Financial Statements

-1-

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine and Three Months Ended September 30, 2019 and 2018

	Nine Months Ended September 30,						Three Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Advisory services	$	5,052,251		$	5,933,461		$	1,791,135		$	1,873,002
Interest income		5,970,482			6,135,025			1,646,389			2,054,249
Dividend income from Orchid Island Capital, Inc. common stock		1,094,426			1,261,630			364,809			380,009
Total revenues		12,117,159			13,330,116			3,802,333			4,307,260
Interest expense
Repurchase agreements		(3,654,675	)		(2,795,728	)		(1,001,781	)		(1,049,174	)
Junior subordinated notes		(1,195,690	)		(1,097,497	)		(389,543	)		(388,012	)
Net revenues		7,266,794			9,436,891			2,411,009			2,870,074

Other income (expense):
Unrealized gains (losses) on mortgage-backed securities		6,226,586			(8,407,020	)		950,334			(1,593,237	)
Realized gains (losses) on mortgage-backed securities		23,078			(576,521	)		23,078			(473,165	)
Unrealized losses on Orchid Island Capital, Inc. common stock		(972,823	)		(3,085,673	)		(927,222	)		(410,410	)
(Losses) gains on derivative instruments		(6,105,202	)		3,558,272			(483,446	)		947,850
Gains on retained interests in securitizations		314,984			1,105,056			39,869			1,356,887
Impairment of real property held for sale		(673,438	)		-			(673,438	)		-
Other income		32,523			1,047			32,029			133
Total other expense		(1,154,292	)		(7,404,839	)		(1,038,796	)		(171,942	)

Expenses:
Compensation and related benefits		3,074,650			3,071,203			987,024			968,672
Directors' fees and liability insurance		490,775			481,838			169,468			160,613
Audit, legal and other professional fees		381,024			347,385			96,996			48,879
Administrative and other expenses		878,924			985,196			352,896			317,742
Total expenses		4,825,373			4,885,622			1,606,384			1,495,906

Net income (loss) before income tax provision (benefit)		1,287,129			(2,853,570	)		(234,171	)		1,202,226
Income tax provision (benefit)		942,364			(675,575	)		537,945			328,735

Net income (loss)	$	344,765		$	(2,177,995	)	$	(772,116	)	$	873,491

Basic and Diluted Net income (loss) Per Share of:
CLASS A COMMON STOCK
Basic and Diluted	$	0.03		$	(0.17	)	$	(0.07	)	$	0.07
CLASS B COMMON STOCK
Basic and Diluted	$	0.03		$	(0.17	)	$	(0.07	)	$	0.07
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted		12,370,114			12,718,667			11,704,207			12,732,812
CLASS B COMMON STOCK
Basic and Diluted		31,938			31,938			31,938			31,938
See Notes to Condensed Consolidated Financial Statements

-2-

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine and Three Months Ended September 30, 2017 and 2016

Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 2017 2016
Interest income $ 4,075,160 $ 2,950,323 $ 1,513,511 $ 1,107,783
Interest expense (1,110,387 ) (496,512 ) (503,632 ) (194,539 )
Net interest income, before interest on junior subordinated notes 2,964,773 2,453,811 1,009,879 913,244
Interest expense on junior subordinated notes (914,055 ) (818,169 ) (316,176 ) (278,196 )
Net interest income 2,050,718 1,635,642 693,703 635,048
Unrealized (losses) gains on mortgage-backed securities (296,002 ) (312,987 ) 168,034 (273,830 )
Realized (losses) gains on mortgage-backed securities (689 ) 179,667 - (71,306 )
(Losses) gains on derivative instruments, net (828,825 ) (1,549,638 ) (18,813 ) 507,838
Net portfolio income (loss) 925,202 (47,316 ) 842,924 797,750

Other income:
Advisory services 5,398,019 3,930,533 1,939,974 1,387,997
Gains on retained interests in securitizations 389,568 2,100,367 85,451 1,020,500
Unrealized (losses) gains on Orchid Island Capital, Inc. common stock (823,308 ) 683,568 501,612 181,355
Orchid Island Capital, Inc. dividends 1,880,245 1,757,745 638,415 585,915
Other income 1,223 892 366 432
Total other income 6,845,747 8,473,105 3,165,818 3,176,199

Expenses:
Compensation and related benefits 2,683,872 2,273,714 868,924 722,697
Directors' fees and liability insurance 498,140 466,573 165,040 155,498
Audit, legal and other professional fees 346,999 452,695 120,419 157,545
Administrative and other expenses 1,022,377 887,982 364,058 321,428
Total expenses 4,551,388 4,080,964 1,518,441 1,357,168

Net income before income tax provision 3,219,561 4,344,825 2,490,301 2,616,781
Income tax provision 1,283,181 2,117,899 989,081 1,437,544

Net income $ 1,936,380 $ 2,226,926 $ 1,501,220 $ 1,179,237

Basic and Diluted Net Income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted $ 0.15 $ 0.17 $ 0.12 $ 0.09
CLASS B COMMON STOCK
Basic and Diluted $ 0.15 $ 0.17 $ 0.12 $ 0.09
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted 12,701,627 12,694,762 12,701,627 12,708,464
CLASS B COMMON STOCK
Basic and Diluted 31,938 31,938 31,938 31,938
See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine and Three Months Ended September 30, 2019 and 2018

	Stockholders' Equity
	Common			Additional			Accumulated
	Stock			Paid-in Capital			Deficit			Total
Balances, January 1, 2018	$	12,725		$	334,878,779		$	(279,199,256	)	$	55,692,248
Net loss		-			-			(3,273,766	)		(3,273,766	)
Class A common shares sold directly to employees		83			199,914			-			199,997
Amortization of stock based compensation		-			2,869			-			2,869
Balances, March 31, 2018	$	12,808		$	335,081,562		$	(282,473,022	)	$	52,621,348
Net income		-			-			222,280			222,280
Class A common shares repurchased and retired		(31	)		(73,316	)		-			(73,347	)
Amortization of stock based compensation		-			2,869			-			2,869
Balances, June 30, 2018	$	12,777		$	335,011,115		$	(282,250,742	)	$	52,773,150
Net income		-			-			873,491			873,491
Class A common shares repurchased and retired		(29	)		(70,444	)		-			(70,473	)
Amortization of stock based compensation		-			(1,820	)		-			(1,820	)
Balances, September 30, 2018	$	12,748		$	334,938,851		$	(281,377,251	)	$	53,574,348

Balances, January 1, 2019	$	12,773		$	334,919,265		$	(305,977,417	)	$	28,954,621
Net income		-			-			1,618,603			1,618,603
Class A common shares repurchased and retired		-			(1,542	)		-			(1,542	)
Balances, March 31, 2019	$	12,773		$	334,917,723		$	(304,358,814	)	$	30,571,682
Net loss		-			-			(501,722	)		(501,722	)
Balances, June 30, 2019	$	12,773		$	334,917,723		$	(304,860,536	)	$	30,069,960
Net loss		-			-			(772,116	)		(772,116	)
Class A common shares repurchased and retired		(1,100	)		(2,274,965	)		-			(2,276,065	)
Balances, September 30, 2019	$	11,673		$	332,642,758		$	(305,632,652	)	$	27,021,779
See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine Months Ended September 30, 2017

Stockholders' Equity
Common Additional Accumulated
Stock Paid-in Capital Deficit Total
Balances, January 1, 2017 $ 12,696 $ 334,850,838 $ (262,716,636 ) $ 72,146,898
Net income - - 1,936,380 1,936,380
Amortization of stock based compensation - 21,515 - 21,515

Balances, September 30, 2017 $ 12,696 $ 334,872,353 $ (260,780,256 ) $ 74,104,793
See Notes to Condensed Consolidated Financial Statements

-3-

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2019 and 2018

	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	344,765		$	(2,177,995	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Stock based compensation		-			3,918
Depreciation		54,886			57,853
Deferred income tax provision (benefit)		1,136,975			(480,767	)
(Gains) losses on mortgage-backed securities, net		(6,249,664	)		8,983,541
Gains on retained interests in securitizations		(314,984	)		(1,105,056	)
Impairment of real property held for sale		673,438			-
Unrealized losses on Orchid Island Capital, Inc. common stock		972,823			3,085,673
Realized and unrealized losses (gains) on forward settling TBA securities		2,005,175			(19,297	)
Changes in operating assets and liabilities:
Accrued interest receivable		194,552			(29,006	)
Other assets		(158,981	)		(1,315,505	)
Accrued interest payable		(365,887	)		128,514
Other liabilities		(315,920	)		383,980
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(2,022,822	)		7,515,853

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(3,285,372	)		(91,578,375	)
Sales		43,975,274			60,431,192
Principal repayments		14,756,931			19,646,969
Payments received on retained interests in securitizations		-			426,414
Proceeds from termination of retained interests		314,984			4,968,740
Costs associated with termination of retained interests		-			(3,636,718	)
Purchases of property and equipment		-			(15,393	)
Net settlement of forward settling TBA contracts		(2,889,941	)		(222,891	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		52,871,876			(9,980,062	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements		860,182,000			1,233,087,584
Principal repayments on repurchase agreements		(906,103,000	)		(1,229,528,096	)
Class A common shares repurchased and retired		(2,277,607	)		(143,820	)
Class A common shares sold directly to employees		-			199,997
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(48,198,607	)		3,615,665

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		2,650,447			1,151,456
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period		6,240,488			8,752,860
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period	$	8,890,935		$	9,904,316

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest expense	$	5,216,252		$	3,764,711
Income taxes	$	(46,700	)	$	1,418,880
See Notes to Condensed Consolidated Financial Statements

-4-

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2017 and 2016

2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,936,380 $ 2,226,926
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation 21,515 217,206
Depreciation 57,903 64,780
Deferred income tax provision 1,200,403 1,891,268
Losses on mortgage-backed securities, net 296,691 133,320
Gains on retained interests in securitizations (389,568 ) (2,100,367 )
Unrealized losses (gains) on Orchid Island Capital, Inc. common stock 823,308 (683,568 )
Changes in operating assets and liabilities:
Accrued interest receivable (198,270 ) (136,360 )
Other assets 20,445 (226,813 )
Accrued interest payable 133,397 12,000
Other liabilities (678,809 ) (879,328 )
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,223,395 519,064

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases (77,294,851 ) (133,099,987 )
Sales 1,654,834 73,061,443
Principal repayments 7,654,912 10,291,945
Payments received on retained interests in securitizations 945,645 1,758,303
Purchases of property and equipment (29,379 ) -
Purchases of Orchid Island Capital, Inc. common stock (1,204,235 ) (1,859,277 )
NET CASH USED IN INVESTING ACTIVITIES (68,273,074 ) (49,847,573 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements 762,398,624 712,324,734
Principal repayments on repurchase agreements (696,852,430 ) (663,567,951 )
NET CASH PROVIDED BY FINANCING ACTIVITIES 65,546,194 48,756,783

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 496,515 (571,726 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period 5,651,437 6,712,483
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period $ 6,147,952 $ 6,140,757

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,891,045 $ 1,302,681
Income taxes $ 261,492 $ 515,689

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, ~~2017~~

2019

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

~~Organization and~~ Business Description

Bimini Capital Management, Inc., a Maryland corporation ("(“Bimini ~~Capital"~~Capital” or the ~~"Company"~~“Company”)~~, was~~ formed in September 2003, ~~for~~is a holding company. The Company operates in two business segments through its principal wholly-owned operating subsidiaries, Bimini Advisors Holdings, LLC and Royal Palm Capital, LLC.

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with the ~~purpose of creating~~Securities and ~~managing~~Exchange Commission), are collectively referred to as "Bimini Advisors." Bimini Advisors manages a ~~leveraged investment portfolio consisting of~~ residential mortgage-backed securities ~~("MBS"~~(“MBS”)~~. In addition, the Company manages an MBS~~ portfolio for Orchid Island Capital, Inc. ("Orchid") and receives fees for providing these services.

~~Consolidation~~ Bimini Advisors also manages the MBS portfolio of Royal Palm Capital, LLC.

~~The accompanying consolidated financial statements include the accounts of Bimini Capital, its wholly-owned subsidiaries, Bimini Advisors Holdings, LLC (formerly known as Bimini Advisors, Inc.) and~~ Royal Palm Capital, LLC ~~(formerly known as MortCo TRS, LLC). Bimini Advisors Holdings, LLC and~~maintains an investment portfolio, consisting primarily of MBS investments, for its ~~wholly-owned subsidiary, Bimini Advisors, LLC are collectively referred to as "Bimini Advisors."~~own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal Palm."

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital, Bimini Advisors and Royal Palm. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

Variable Interest Entities (“VIEs”)

Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") Topic 810, Consolidation, requires the consolidation of a variable interest entity ("VIE") by an enterprise if it is deemed the primary beneficiary of the VIE. Bimini Capital has a common share investment in a trust used in connection with the issuance of Bimini Capital's junior subordinated notes. See Note 8 for a description of the accounting used for this VIE.

The Company obtains interests in VIEs through its investments in mortgage-backed securities. The interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for the interest in these VIEs as mortgage-backed securities. See Note 3 for additional information regarding the Company’s investments in mortgage-backed securities. The maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ~~("GAAP"~~(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they domay not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine and three month periods ended September 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2019.

-5-

The consolidated balance sheet at December 31, ~~2016~~2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements. For further information, refer to the financial statements and footnotes thereto included in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2018.

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 determining the fair values of MBS, investment in Orchid common shares, derivatives and retained interests, determining the amounts of asset valuation allowances, and the computation of the income tax provision or benefit and the deferred tax asset allowances recorded for each accounting period.

~~Statement of Comprehensive Income~~Segment Reporting

~~In accordance with ASC Topic 220,~~ ~~Comprehensive Income, a statement~~The Company’s operations are classified into two principal reportable segments: the asset management segment and the investment portfolio segment. These segments are evaluated by management in deciding how to allocate resources and in assessing performance. The accounting policies of ~~comprehensive income has not been included as~~ the ~~Company has no items of other comprehensive income (loss). Comprehensive income is~~operating segments are the same as ~~net income for all periods presented.~~the Company’s accounting policies with the exception that inter-segment revenues and expenses are included in the presentation of segment results. For further information see Note 15.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and derivative instruments. The following table presents the Company’s cash, cash equivalents and restricted cash as of September 30, 2019 and December 31, 2018.

(in thousands)
	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Cash and cash equivalents		$	5,211,532		$	4,429,459		$	7,801,875		$	4,947,801
Restricted cash			936,420			1,221,978			1,089,060			1,292,687
Total cash, cash equivalents and restricted cash		$	6,147,952		$	5,651,437		$	8,890,935		$	6,240,488

The Company maintains cash balances at several banks and atexcess margin with an exchange clearing member. At times, ~~these~~ 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 September 30, ~~2017,~~2019, the ~~Company's~~Company’s cash deposits exceeded federally insured limits by approximately ~~$3.3~~$6.6 million. The Company also maintains excess margin in accounts with derivative exchanges. Restricted cash balances are uninsured, but are held in separate ~~customer~~ accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and ~~derivative counterparties~~exchange clearing members and believes that it is not exposed to significant credit risk on cash and cash equivalents or restricted cash balances.

Advisory Services

Orchid is 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 its behalf. Revenues from management fees are recognized over the period of time in which the service is performed.

-6-

Mortgage-Backed Securities

The Company invests primarily in mortgage pass-through ~~("PT"~~(“PT”) certificates, collateralized mortgage obligations (“CMOs”), and interest-only ~~("IO"~~(“IO”) securities and inverse interest-only ~~("IIO"~~(“IIO”) securities representing interest in or obligations backed by pools of mortgage-backed 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~~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~~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~~defined as 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 on MBS in the consolidated statements of operations. For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the ~~asset's~~asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively ~~from the~~for future reporting ~~period~~periods 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.

Orchid Island Capital, Inc. Common Stock

The Company has elected the fair value option for its investment in Orchid common shares. The change in the fair value of this investment and dividends received on this investment are reflected in ~~other income in~~ the consolidated statements of operations. We estimate the fair value of our investment in Orchid on a market approach using ~~"Level 1"~~“Level 1” inputs based on the quoted market price of ~~Orchid's~~Orchid’s common stock on a national stock exchange. Electing the fair value option requires the Company to record changes in fair value in the consolidated statements of operations, which, in ~~management's~~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.

~~Advisory Services~~

Retained Interests in Securitizations

Retained interests in the subordinated tranches of securities created in securitization transactions were initially recorded at their fair value when issued by Royal Palm. ~~Subsequent~~These retained interests currently have a recorded fair value of zero, but may generate cash flows in the future. Any cash received from the retained interests are reflected in the consolidated statement of cash flows. Realized gains and 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~~consolidated statements 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.operations.

-7-

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 Treasury Note ~~("T-Note"~~(“T-Note”) and Eurodollar futures contracts, and “to-be-announced” (“TBA”) securities transactions, but ~~the Company~~it may enter into other ~~transactions~~derivatives in the future.

The Company ~~has elected not to treat any of its~~accounts for TBA securities as derivative ~~financial instruments as hedges~~instruments. Gains and losses associated with TBA securities transactions are reported in ~~order to align the accounting treatment of its~~gain (loss) on derivative instruments ~~with~~in the ~~treatment~~accompanying consolidated statements of ~~its portfolio assets under the fair value option. FASB ASC Topic 815,~~ ~~Derivatives and Hedging, requires that all derivative~~operations.

Derivative instruments beare carried at fair ~~value. Changes~~value, and changes in fair value are recorded in ~~earnings~~the consolidated operations for each period. The Company’s derivative financial instruments are not designated as hedge accounting relationships, but rather are used as economic hedges of its portfolio assets and liabilities.

Holding derivatives creates exposure to credit risk related to the potential for failure ~~on the part of~~by 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~~The fair value of financial instruments for which it is practicable to estimate that value is disclosed, either in the body of the financial statements or in the accompanying notes. MBS, Orchid common stock ~~Eurodollar futures contracts, interest rate swaptions~~ and ~~retained interests in securitization transactions~~derivative assets and liabilities 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 14 of the consolidated financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, other assets, repurchase agreements, accrued interest payable and other liabilities generally approximates their carrying value as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the ~~Company's~~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~~Further information regarding ~~carrying amount and effective interest rate for~~ these instruments is presented in Note 8 to the consolidated financial statements.

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.

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~~Repurchase agreements are accounted for ~~repurchase transactions~~ as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.

-8-

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. 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~~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.~~the issuance of the common stock.

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, if any, on each share of Class A Common ~~Stock if, as and when authorized and declared by the Board of Directors.~~Stock. 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.

Income Taxes

For the calendar year ended December 31, 2015, Bimini Capital, Bimini Advisors, Inc. and Royal Palm were separate taxpaying entities for income tax purposes and filed separate Federal income tax returns. Bimini Advisors, Inc. remained a separate tax paying entity through January 31, 2016; on that date, Bimini Advisors, Inc. was reorganized (as Bimini Advisors Holdings, LLC) to be an LLC wholly-owned by Bimini Capital. Beginning with the tax period starting on February 1, 2016, Bimini Capital and Bimini Advisors are combined as a single tax paying entity. Royal Palm continues to be treated as a separate tax paying entity.

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~~Company’s evaluation, it is more likely than not that they will not be realized.

The ~~Company's~~Company’s U.S. federal income tax returns for years ended on or after December 31, ~~2014~~2016 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.

For tax filing purposes, Bimini Capital and Bimini Advisors are consolidated as a single tax paying entity. Royal Palm files as a separate tax paying entity.

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 uncertain 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.

-9-

Recent Accounting Pronouncements

In ~~November~~June 2016, the FASB issued Accounting Standards Update ~~("ASU"~~(“ASU”) ~~2016-18,~~2016-13, ~~Statement of Cash Flows – (Topic 230): Restricted Cash.~~ ASU 2016-18 requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company adopted the ASU beginning with the first quarter of 2017. The prior period consolidated statement of cash flows has been retrospectively adjusted to conform to this presentation.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). ASU 2016-13 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. ~~Early application is permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.~~

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 provides guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. ASU 2016-01 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017 and, for most provisions, is effective using the cumulative-effect transition approach. Early application is permitted for certain provisions. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial ~~statements.~~statements because our financial assets are measured at fair value through earnings.

NOTE 2. ADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid 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 Orchid’s month-end equity, as defined in the management agreement,

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

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

Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and to pay to Bimini Advisors an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. The term of the management agreement is automatically renewed on February 20 of each year for an additional one year term unless terminated by either party. The current term of the management agreement expires February 20, 2020. Orchid did not notify the Company of its intention to not renew the agreement within the prescribed 180 day notice period. Therefore, the agreement will remain in place through February 20, 2021. Should Orchid terminate the management agreement without cause, it will 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 current automatic renewal term.

The following table summarizes the advisory services revenue from Orchid for the nine and three months ended September 30, 2019 and 2018.

(in thousands)
	Nine Months Ended September 30,				Three Months Ended September 30,
	2019		2018		2019		2018
Management fee	$	4,051	$	4,800	$	1,440	$	1,482
Allocated overhead		1,001		1,133		351		391
Total	$	5,052	$	5,933	$	1,791	$	1,873

At September 30, 2019 and December 31, 2018, the net amount due from Orchid was approximately $0.6 million and $0.7 million, respectively. These amounts are included in “other assets” in the consolidated balance sheets.

-10-

NOTE 2.3. MORTGAGE-BACKED SECURITIES

The following table presents the ~~Company's~~Company’s MBS portfolio as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(in thousands)
September 30, 2017 December 31, 2016
Pass-Through MBS:
Fixed-rate Mortgages $ 195,151 $ 124,299
Total Pass-Through MBS 195,151 124,299
Structured MBS:
Interest-Only Securities 1,643 2,654
Inverse Interest-Only Securities 1,196 3,349
Total Structured MBS 2,839 6,003
Total $ 197,990 $ 130,302

(in thousands)
	September 30, 2019		December 31, 2018
Fixed-rate MBS	$	161,538	$	209,675
Interest-Only MBS		1,136		2,021
Inverse Interest-Only MBS		553		728
Total	$	163,227	$	212,424

The following table summarizes the Company's MBS portfolio as of September 30, 2017 and December 31, 2016, 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)
September 30, 2017 December 31, 2016
Greater than or equal to ten years $ 197,990 $ 130,302
Total $ 197,990 $ 130,302

~~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 September 30, 2017 and December 31, 2016:~~

(in thousands)
Series Issue Date September 30, 2017 December 31, 2016
HMAC 2004-2 May 10, 2004 $ 20 $ 143
HMAC 2004-3 June 30, 2004 148 364
HMAC 2004-4 August 16, 2004 290 463
HMAC 2004-5 September 28, 2004 100 144
Total $ 558 $ 1,114

NOTE 4. REPURCHASE AGREEMENTS

The Company pledges certain of its RMBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of September 30, ~~2017,~~2019, the Company had outstanding repurchase agreement obligations of approximately $187.4 million with a net weighted average borrowing rate of 1.35%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $198.2 million. As of December 31, 2016, the Company had outstanding repurchase agreement obligations of approximately $121.8 million with a net weighted average borrowing rate of 0.99%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $130.1 million.

met all margin call requirements.

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the ~~Company's~~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
September 30, 2017
September 30, 2019
Fair value of securities pledged, including accrued
interest receivable	$	-	$	75,619		$	122,589		$	-		$	198,208		$	-	$	162,592		$	1,171		$	-	$	163,763
Repurchase agreement liabilities associated with
these securities	$	-	$	71,261		$	116,113		$	-		$	187,374		$	-	$	153,429		$	1,046		$	-	$	154,475
Net weighted average borrowing rate		-		1.35	%		1.34	%		-			1.35	%		-		2.34	%		2.18	%		-		2.34	%
December 31, 2016
December 31, 2018
Fair value of securities pledged, including accrued
interest receivable	$	-	$	71,565		$	41,334		$	17,172		$	130,071		$	-	$	107,876		$	105,251		$	-	$	213,127
Repurchase agreement liabilities associated with
these securities	$	-	$	66,919		$	38,733		$	16,176		$	121,828		$	-	$	101,327		$	99,069		$	-	$	200,396
Net weighted average borrowing rate		-		1.01	%		0.96	%		0.98	%		0.99	%		-		2.56	%		2.56	%		-		2.56	%

In addition, cash pledged to counterparties for repurchase agreements was approximately $0.4 million and $0.2 million as of September 30, 2019 and December 31, 2018, respectively.

-11-

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 September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had 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 ~~$11.0~~$9.4 million and ~~$8.4~~$12.4 million, respectively. ~~The Company did not have an amount~~Summary information regarding amounts at risk with ~~any~~ individual ~~counterparty~~counterparties greater than 10% of ~~the Company's~~ equity at September 30, ~~2017 or~~2019 and December 31, ~~2016.~~2018 is presented in the table below.

($ in thousands)
			% of			Weighted
			Stockholders'			Average
	Amount		Equity			Maturity
Repurchase Agreement Counterparties	at Risk		at Risk			(in Days)
September 30, 2019
ED&F Man Capital Markets Inc.	$	3,433		12.7	%		16
Mirae Asset Securities (USA) Inc.		3,216		11.9	%		9
December 31, 2018
ED&F Man Capital Markets Inc.	$	4,037		13.9	%		17
Mirae Asset Securities (USA) Inc.		3,506		12.1	%		40

NOTE 5. 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 and other hedging contracts. To date the Company has entered into Eurodollar and T-Note futures contracts, 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.

AsIn addition, the Company utilizes TBA securities as a means of investing in and financing MBS or as a means of reducing its exposure to MBS. The Company accounts for TBA securities as derivative instruments.

Derivative Liabilities, at Fair Value

The table below summarizes fair value information about our derivative liabilities as of September 30, ~~2017~~2019 and December 31, ~~2016, such instruments were comprised entirely of~~ 2018.

(in thousands)
Derivative Instruments and Related Accounts	Balance Sheet Location	September 30, 2019			December 31, 2018
Liabilities
TBA Securities	Other liabilities	$	53		$	938
Total derivative liabilities, at fair value		$	53		$	938

Margin Balances Posted To (From) Counterparties
Futures contracts	Restricted cash	$	690		$	520
TBA securities	Restricted cash		-			543
TBA securities	Other liabilities		(91	)		-
Total margin balances on derivative contracts		$	781		$	1,063

-12-

Eurodollar ~~futures contracts. Eurodollar~~and T-Note futures are cash settled futures contracts on an interest rate, with gains orand losses credited or charged to the ~~Company's account~~Company’s cash accounts on a daily ~~basis and reflected in earnings as they occur.~~basis. A minimum balance, or ~~"margin"~~“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.

~~The~~ tables below present information related to the ~~Company's~~Company’s Eurodollar and T-note futures positions at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

($ in thousands)
As of September 30, 2017
As of September 30, 2019
	Repurchase Agreement Funding Hedges											Repurchase Agreement Funding Hedges
	Average		Weighted			Weighted						Average		Weighted			Weighted
	Contract		Average			Average						Contract		Average			Average
	Notional		Entry			Effective			Open			Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾			Amount		Rate			Rate			Equity⁽¹⁾
2017	$	60,000		1.58	%		1.48	%	$	(14	)
2018		60,000		1.90	%		1.73	%		(100	)
Eurodollar Futures Contracts (Short Positions)
2019		60,000		2.32	%		1.98	%		(207	)	$	120,000		2.83	%		1.96	%	$	(261	)
2020		60,000		2.60	%		2.14	%		(278	)		120,000		2.90	%		1.54	%		(1,632	)
2021		60,000		2.80	%		2.29	%		(306	)		80,000		2.80	%		1.38	%		(1,135	)
Total / Weighted Average	$	60,000		2.36	%		2.00	%	$	(905	)	$	102,222		2.86	%		1.54	%	$	(3,028	)

Treasury Note Futures Contracts (Short Position)⁽²⁾
December 2019 5-year T-Note futures
(Dec 2019 - Dec 2024 Hedge Period)												$	20,000		1.79	%		1.96	%	$	161

($ in thousands)
As of September 30, 2017
As of September 30, 2019
	Junior Subordinated Debt Funding Hedges											Junior Subordinated Debt Funding Hedges
	Average		Weighted			Weighted						Average		Weighted			Weighted
	Contract		Average			Average						Contract		Average			Average
	Notional		Entry			Effective			Open			Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾			Amount		Rate			Rate			Equity⁽¹⁾
2017	$	26,000		2.15	%		1.48	%	$	(43	)
2018		26,000		1.84	%		1.73	%	$	(28	)
2019		26,000		1.63	%		1.98	%	$	90		$	26,000		1.77	%		1.96	%	$	13
2020		26,000		1.95	%		2.14	%	$	50			19,500		1.92	%		1.57	%		(69	)
2021		26,000		2.22	%		2.29	%	$	18
Total / Weighted Average	$	26,000		1.92	%		2.00	%	$	87		$	20,800		1.88	%		1.67	%	$	(56	)

($ in thousands)
As of December 31, 2016
As of December 31, 2018
	Repurchase Agreement Funding Hedges											Repurchase Agreement Funding Hedges
	Average		Weighted			Weighted						Average		Weighted			Weighted
	Contract		Average			Average						Contract		Average			Average
	Notional		Entry			Effective			Open			Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾			Amount		Rate			Rate			Equity⁽¹⁾
2017	$	60,000		1.32	%		1.28	%	$	(26	)
2018		60,000		1.90	%		1.82	%	$	(49	)
2019		60,000		2.32	%		2.21	%	$	(69	)	$	125,000		2.56	%		2.67	%	$	139
2020		60,000		2.60	%		2.45	%	$	(88	)		150,000		2.84	%		2.49	%		(523	)
2021		60,000		2.80	%		2.64	%	$	(93	)		100,000		2.80	%		2.46	%		(346	)
Total / Weighted Average	$	60,000		2.19	%		2.08	%	$	(325	)	$	125,000		2.74	%		2.54	%	$	(730	)

-13-

($ in thousands)
As of December 31, 2016
As of December 31, 2018
	Junior Subordinated Debt Funding Hedges											Junior Subordinated Debt Funding Hedges
	Average		Weighted			Weighted						Average		Weighted			Weighted
	Contract		Average			Average						Contract		Average			Average
	Notional		Entry			Effective			Open			Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾			Amount		Rate			Rate			Equity⁽¹⁾
2017	$	26,000		1.93	%		1.28	%	$	(169	)
2018		26,000		1.84	%		1.82	%	$	(6	)
2019		26,000		1.63	%		2.21	%	$	150		$	26,000		1.63	%		2.68	%	$	271
2020		26,000		1.95	%		2.45	%	$	132			26,000		1.95	%		2.49	%		142
2021		26,000		2.22	%		2.64	%	$	110			26,000		2.22	%		2.46	%		61
Total / Weighted Average	$	26,000		1.91	%		2.08	%	$	217		$	26,000		1.93	%		2.54	%	$	474

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

(2)	T-Note futures contracts were valued at a price of $119.15 at September 30, 2019. The notional contract values of the short positions were $23.8 million.

The following table summarizes our contracts to purchase and sell TBA securities as of September 30, 2019 and December 31, 2018.

($ in thousands)
			Notional									Net
			Amount			Cost			Market			Carrying
			Long (Short)⁽¹⁾			Basis⁽²⁾			Value⁽³⁾			Value⁽⁴⁾
September 30, 2019
30-Year TBA Securities:
	3.5	%	$	(50,000	)	$	(51,268	)	$	(51,321	)	$	(53	)
December 31, 2018
30-Year TBA Securities:
	3.0	%	$	(50,000	)	$	(47,844	)	$	(48,782	)	$	(938	)

(1)	Notional amount represents the par value (or principal balance) of the underlying Agency MBS.

(2)	Cost basis represents the forward price to be paid (received) for the underlying Agency MBS.

(3)	Market value represents the current market value of the TBA securities (or of the underlying Agency MBS) as of period-end.

(4)	Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities), at fair value in our consolidated balance sheets.

(Losses) Gains On Derivative Instruments ~~Net~~

The table below presents the effect of the ~~Company's~~Company’s derivative financial instruments on the consolidated statements of operations for the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

(in thousands)
	Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended September 30,
		2017			2016				2017			2016		2019			2018		2019			2018
Eurodollar futures contracts (short positions)		$	(829	)	$	(1,550	)		$	(19	)	$	508
Repurchase agreement funding hedges														$	(2,995	)	$	2,101	$	(164	)	$	477
Junior subordinated debt funding hedges															(409	)		679		-			122
T-Note futures contracts (short positions)
Repurchase agreement funding hedges															(696	)		759		(115	)		-
Net TBA securities															(2,005	)		19		(204	)		349
(Losses) gains on derivative instruments		$	(829	)	$	(1,550	)		$	(19	)	$	508	$	(6,105	)	$	3,558	$	(483	)	$	948

-14-

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. The Company attempts to minimize this risk in several ways. For instruments which are not centrally cleared on a registered exchange, the Company limits its counterparties to major financial institutions with acceptable credit ratings,, and by monitoring positions with individual counterparties. In addition, the Company may be required to pledge assets as collateral for 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, the Company may not receive payments provided for under the terms of its derivative agreements, and may have difficulty ~~obtaining~~recovering its assets pledged as collateral for its derivatives. The cash and cash equivalents pledged as collateral for the ~~Company's~~Company’s derivative instruments are included in restricted cash on the consolidated balance sheets.

NOTE 6. PLEDGED ASSETS

Assets Pledged to Counterparties

The ~~tables~~table below ~~summarize our~~summarizes Bimini’s assets pledged as collateral under ~~our~~its repurchase agreements and derivative agreements ~~pledged related to securities sold but not yet settled,~~ as of September 30, ~~2017~~2019 and December 31, ~~2016.~~

2018.

($ in thousands)
As of September 30, 2017
							September 30, 2019						December 31, 2018
	Repurchase		Derivative				Repurchase		Derivative				Repurchase		Derivative
Assets Pledged to Counterparties	Agreements		Agreements		Total		Agreements		Agreements		Total		Agreements		Agreements		Total
PT MBS - at fair value	$	195,151	$	-	$	195,151	$	161,538	$	-	$	161,538	$	209,675	$	-	$	209,675
Structured MBS - at fair value		2,364		-		2,364		1,641		-		1,641		2,675		-		2,675
Accrued interest on pledged securities		693		-		693		584		-		584		777		-		777
Cash		391		545		936
Restricted cash								399		690		1,089		230		1,063		1,293
Total	$	198,599	$	545	$	199,144	$	164,162	$	690	$	164,852	$	213,357	$	1,063	$	214,420

($ in thousands)
As of December 31, 2016
Repurchase Derivative
Assets Pledged to Counterparties Agreements Agreements Total
PT MBS - at fair value $ 124,298 $ - $ 124,298
Structured MBS - at fair value 5,284 - 5,284
Accrued interest on pledged securities 489 - 489
Cash 456 766 1,222
Total $ 130,527 $ 766 $ 131,293

Assets Pledged from Counterparties

The table below summarizes ~~assets~~cash pledged to usBimini from counterparties under ~~our~~ repurchase agreements and derivative agreements as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements or other liabilities in the consolidated balance sheets.

($ in thousands)
Assets Pledged to Bimini	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
Cash	$	8	$	-
Repurchase agreements					$	172	$	371
Derivative agreements						91		-
Total	$	8	$	-	$	263	$	371

-15-

NOTE 7. OFFSETTING ASSETS AND LIABILITIES

The ~~Company's~~Company’s derivatives and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following ~~table presents~~tables present information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

(in thousands)
Offsetting of Liabilities	Offsetting of Liabilities																				Offsetting of Liabilities
										Gross Amount Not Offset in the																				Gross Amount Not Offset in the
							Net Amount			Consolidated Balance Sheet																	Net Amount			Consolidated Balance Sheet
				Gross Amount			of Liabilities			Financial														Gross Amount			of Liabilities			Financial
	Gross Amount			Offset in the			Presented in the			Instruments				Cash							Gross Amount			Offset in the			Presented in the			Instruments				Cash
	of Recognized			Consolidated			Consolidated			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
September 30, 2017
September 30, 2019
Repurchase Agreements		$	187,374		$	-		$	187,374		$	(186,983	)		$	(391	)		$	-		$	154,475		$	-		$	154,475		$	(154,076	)		$	(399	)		$	-
December 31, 2016
TBA securities																							53			-			53			-				-				53
																						$	154,528		$	-		$	154,528		$	(154,076	)		$	(399	)		$	53
December 31, 2018
Repurchase Agreements		$	121,828		$	-		$	121,828		$	(121,372	)		$	(456	)		$	-		$	200,396		$	-		$	200,396		$	(200,166	)		$	(230	)		$	-
TBA securities																							938			-			938			-				(543	)			395
																						$	201,334		$	-		$	201,334		$	(200,166	)		$	(773	)		$	395

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.~~ASC 210-20-50. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 6 for a discussion of collateral posted for, or received against, repurchase obligations and derivative instruments.

NOTE 8. TRUST PREFERRED SECURITIES

During 2005, Bimini Capital sponsored the formation of a statutory trust, known as Bimini Capital Trust II ~~("BCTII"~~(“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 September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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 September 30, ~~2017,~~2019, the interest rate was ~~4.82%~~5.62%. 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. Bimini Capital's BCTII Junior Subordinated Notes are subordinate and junior in right of payment to all present and future senior indebtedness.

BCTII is a VIE because the holders of the equity investment at risk do not have ~~adequate~~substantive decision making ability over ~~BCTII's~~BCTII’s activities. Since Bimini Capital's investment in ~~BCTII's~~BCTII’s common equity securities was financed directly by 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, and this investment is accounted for on the equity method.

-16-

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

NOTE 9. COMMON STOCK

~~The table below presents information related to~~In January 2018, Bimini ~~Capital's~~sold 83,332 shares of its Class A Common Stock ~~issued~~directly to two employees. There were no other issuances of the Company’s Class A Common stock during the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

Nine Months Ended September 30, Three Months Ended September 30,
Shares Issued Related To: 2017 2016 2017 2016
Vested incentive plan shares - 258,333 - -
Total shares of Class A Common Stock issued - 258,333 - -

There were no issuances of Bimini Capital's Class B Common Stock and Class C Common Stock during the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

Stock Repurchase Plan

On March 26, 2018, the Board of Directors of Bimini Capital Management, Inc. (the “Company”) approved a Stock Repurchase Plan (“Repurchase Plan”). Pursuant to Repurchase Plan, the Company may purchase up to 500,000 shares of its Class A Common Stock from time to time, subject to certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934. Share repurchases may be executed through various means, including, without limitation, open market transactions. The Repurchase Plan does not obligate the Company to purchase any shares. The Repurchase Plan was originally set to expire on November 15, 2018, but it has been extended by the Board of Directors until November 15, 2020. The authorization for the Share Repurchase Plan may be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time.

From the inception of the Repurchase Plan through September 30, 2019, the Company repurchased a total of 70,404 shares at an aggregate cost of approximately $166,945, including commissions and fees, for a weighted average price of $2.37 per share.

Tender Offer

In July 2019, the Company completed a “modified Dutch auction” tender offer and paid an aggregate of $2.2 million, excluding fees and related expenses, to repurchase 1.1 million shares of Bimini Capital’s Class A common stock at a price of $2.00 per share.

NOTE 10. STOCK INCENTIVE PLANS

On August 12, 2011, Bimini ~~Capital's~~Capital’s shareholders approved the 2011 Long Term Compensation Plan (the ~~"2011 Plan"~~“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 interests with those of the Company and its stockholders. The 2011 Plan is intended to permit the grant of stock options, stock appreciation rights ~~("SARs"~~(“SARs”), stock awards, performance units and other equity-based and incentive awards. The maximum aggregate number of shares of 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.

-17-

~~Share Awards~~

~~During the three months ended March 31, 2016, the~~Performance Units

The Compensation Committee of the Board of Directors of Bimini Capital (the "Committee") ~~approved certain performance bonuses for members of management. These bonuses were awarded primarily~~has issued, and may in ~~recognition of service in 2015. The bonuses consisted of cash of approximately $0.5 million and 258,333 fully vested shares of~~ the Company's Class A Common Stock with an approximate value of $0.2 million, or $0.75 per share. The shares were issued under the 2011 Plan. For purposes of these bonuses, shares of the Company's common stock were valued based on the closing price of the Company's Class A Common Stock on January 15, 2016, the bonus date. The expense related to this bonus was accrued at December 31, 2015 and does not affect the results of operations for the nine and three months ended September 30, 2016.

~~Performance Units~~

~~The Committee may~~future issue additional, Performance Units under the 2011 Plan to certain officers and employees. ~~"Performance Units"~~“Performance Units” represent the ~~participant's~~participant’s right to receive an amount, based on the value of a specified number of shares of 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 are earned, including but not limited to any applicable performance period and performance goals. Performance goals may relate to the ~~Company's~~Company’s financial performance or the ~~participant's~~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 are earned, they will be settled in cash, shares of common stock or a combination thereof.

The following table presents the activity related to Performance Units during the nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

($ in thousands, except per share data)
	Nine Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2019					2018
			Weighted						Weighted				Weighted						Weighted
			Average						Average				Average						Average
			Grant Date						Grant Date				Grant Date						Grant Date
			Fair Value						Fair Value				Fair Value						Fair Value
	Shares		Per Share		Shares				Per Share		Shares		Per Share		Shares				Per Share
Unvested, beginning of period		70,000	$	1.23			77,500		$	1.22		-	$	-			41,000		$	0.84
Granted		-		-			-			-		-		-			-			-
Forfeited		-		-			(1,000	)		0.84		-		-			(6,000	)		0.84
Vested and issued		-		-			-			-		-		-			-			-
Unvested, end of period		70,000	$	1.23			76,500		$	1.23		-	$	-			35,000		$	0.84

Compensation expense during the period			$	22					$	23			$	-					$	4
Unrecognized compensation expense at period end			$	17					$	50			$	-					$	2
Weighted-average remaining vesting term (in years)				0.8						1.8				-						0.2
Intrinsic value of unvested shares at period end			$	195					$	191			$	-					$	79

NOTE 11. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any significant reported or unreported contingencies at September 30, ~~2017.~~2019.

NOTE 12. INCOME TAXES

The total income tax provision (benefit) recorded for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$1.3~~$0.9 million and ~~$2.1~~$(0.7) million, respectively, on consolidated pre-tax book income (loss) of ~~$3.2~~$1.3 million and ~~$4.3~~$(2.9) million in the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The total income tax provision recorded for the three months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$1.0~~$0.5 million and ~~$1.4~~$0.3 million, respectively, on consolidated pre-tax book income (loss) of ~~$2.5~~$(0.2) million and ~~$2.6~~$1.2 million in the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

In September 2019, the Florida Department of Revenue announced a reduction in the corporate income tax rate from 5.5% to 4.458% retroactive to January 1, 2019. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted, so accordingly, the Company’s tax provision for the nine and three months ended September 30, 2019 included a charge of $0.6 million due to a remeasurement of deferred tax assets and liabilities resulting from the tax rate reduction. The ~~Company's~~rate reduction is for taxable years beginning on or after January 1, 2019, but before January 1, 2022. Further reduction in the tax rate is possible for taxable years beginning on or after January 1, 2020, and January 1, 2021.

-18-

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to actual income to date and includes the expected realization of a portion of the tax benefits of federal and state net operating losses carryforwards ~~("NOLs"~~(“NOLs”). 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. The Company currently provides a valuation allowance against a portion of the NOLs since the Company believes that it is more likely than not that some of the benefits will not be realized in the future. The Company will continue to assess the need for a valuation allowance at each reporting date.

NOTE 13. EARNINGS PER SHARE

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, and when, authorized and declared by the Board of Directors. Following the provisions of FASB ASC 260, the Class B 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. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, ~~2017~~2019 and ~~2016.~~2018.

Shares of Class C common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, ~~2017~~2019 and ~~2016.~~2018.

The Company has dividend eligible stock incentive plan shares that were outstanding during the nine and three months ended September 30, ~~2017.~~2018. The basic and diluted per share computations include these unvested incentive plan shares if there is income available to Class A common stock, as they have dividend participation rights. The stock incentive plan shares have no contractual obligation to share in losses. Because there is no such obligation, the incentive plan shares are not included in the basic and diluted EPS computations when no income is available to Class A common stock even though they are considered participating securities.

The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

(in thousands, except per-share information)
	Nine Months Ended September 30,					Three Months Ended September 30,
	2019		2018			2019			2018
Basic and diluted EPS per Class A common share:
Income (loss) attributable to Class A common shares:
Basic and diluted	$	344	$	(2,173	)	$	(770	)	$	871
Weighted average common shares:
Class A common shares outstanding at the balance sheet date		11,609		12,684			11,609			12,684
Unvested dividend-eligible stock incentive plan shares
outstanding at the balance sheet date		-		-			-			35
Effect of weighting		761		35			95			14
Weighted average shares-basic and diluted		12,370		12,719			11,704			12,733
Income (loss) per Class A common share:
Basic and diluted	$	0.03	$	(0.17	)	$	(0.07	)	$	0.07

-19-

(in thousands, except per-share information)
Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 2017 2016
Basic and diluted EPS per Class A common share:
Income attributable to Class A common shares:
Basic and diluted $ 1,931 $ 2,221 $ 1,497 $ 1,176
Weighted average common shares:
Class A common shares outstanding at the balance sheet date 12,632 12,632 12,632 12,632
Unvested dividend-eligible stock incentive plan shares
outstanding at the balance sheet date 70 77 70 77
Effect of weighting - (14 ) - (1 )
Weighted average shares-basic and diluted 12,702 12,695 12,702 12,708
Income per Class A common share:
Basic and diluted $ 0.15 $ 0.17 $ 0.12 $ 0.09

(in thousands, except per-share information)
Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 2017 2016
Basic and diluted EPS per Class B common share:
Income attributable to Class B common shares:
Basic and diluted $ 5 $ 6 $ 4 $ 3
Weighted average common shares:
Class B common shares outstanding at the balance sheet date 32 32 32 32
Weighted average shares-basic and diluted 32 32 32 32
Income per Class B common share:
Basic and diluted $ 0.15 $ 0.17 $ 0.12 $ 0.09

(in thousands, except per-share information)
	Nine Months Ended September 30,					Three Months Ended September 30,
	2019		2018			2019			2018
Basic and diluted EPS per Class B common share:
Income (loss) attributable to Class B common shares:
Basic and diluted	$	1	$	(5	)	$	(2	)	$	2
Weighted average common shares:
Class B common shares outstanding at the balance sheet date		32		32			32			32
Weighted average shares-basic and diluted		32		32			32			32
Income (loss) per Class B common share:
Basic and diluted	$	0.03	$	(0.17	)	$	(0.07	)	$	0.07

NOTE 14. FAIR VALUE

~~Authoritative accounting literature establishes a~~The 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 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

~~The Company's MBS are valued using~~ Level 2 valuations, ~~and such valuations currently are determined by~~where the ~~Company~~valuation is based on ~~independent~~quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and

Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing ~~sources and/~~the asset or ~~third-party broker quotes, when available. Because~~liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the ~~price estimates may vary,~~use of market prices of assets or liabilities that are not directly comparable to 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 its MBS positions determined by either an independent third-partysubject asset or ~~could do so internally.~~liability.

MBS, Orchid common stock, retained interests and ~~futures contracts~~TBA securities were all recorded at fair value on a recurring basis during the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~2018. 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.~~assumptions, and this model resulted in a value of zero at both September 30, 2019 and December 31, 2018.

-20-

The Company's MBS and TBA securities are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third party broker quotes, when available. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. The Company and the independent pricing sources use various valuation techniques to determine the price of the Company’s securities. These techniques include observing the most recent market for like or identical assets, spread pricing techniques (option adjusted spread, zero volatility spread, spread to the U.S. Treasury curve or spread to a benchmark such as a TBA security), and model driven approaches (the discounted cash flow method, Black Scholes and SABR models which rely upon observable market rates such as the term structure of interest rates and volatility). The appropriate spread pricing method used is based on market convention. The pricing source determines the spread of recently observed trade activity or observable markets for assets similar to those being priced. The spread is then adjusted based on variances in certain characteristics between the market observation and the asset being priced. Those characteristics include: type of asset, the expected life of the asset, the stability and predictability of the expected future cash flows of the asset, whether the coupon of the asset is fixed or adjustable, the guarantor of the security if applicable, the coupon, the maturity, the issuer, size of the underlying loans, year in which the underlying loans were originated, loan to value ratio, state in which the underlying loans reside, credit score of the underlying borrowers and other variables if appropriate. The fair value of the security is determined by using the adjusted spread.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

(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)
September 30, 2017
September 30, 2019
Mortgage-backed securities	$	197,990	$	-	$	197,990	$	-	$	163,227		$	-	$	163,227		$	-
Orchid Island Capital, Inc. common stock		15,489		15,489		-		-		8,740			8,740		-			-
Retained interests in securitizations		558		-		-		558
December 31, 2016
TBA securities										(53	)		-		(53	)		-
December 31, 2018
Mortgage-backed securities	$	130,302	$	-	$	130,302	$	-	$	212,424		$	-	$	212,424		$	-
Orchid Island Capital, Inc. common stock		15,108		15,108		-		-		9,713			9,713		-			-
Retained interests in securitizations		1,114		-		-		1,114
TBA securities										(938	)		-		(938	)		-

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 nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

(in thousands)
	Retained Interests in Secuitizations						Retained Interests in Securitizations
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
Balances, January 1	$	1,114		$	1,124		$	-		$	653
Gain included in earnings		390			2,100			315			1,105
Collections		(946	)		(1,758	)		(315	)		(1,758	)
Balances, September 30	$	558		$	1,466		$	-		$	-

During the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

-21-

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.

NOTE 15. SEGMENT INFORMATION

The ~~following table summarizes~~Company’s operations are classified into two principal reportable segments: the ~~significant quantitative~~asset management segment and the investment portfolio segment.

The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. As discussed in Note 2, the revenues of the asset management segment consist of management fees and overhead reimbursements received pursuant to a management agreement with Orchid. Total revenues received under this management agreement for the nine months ended September 30, 2019 and 2018, were approximately $5.1 million and $5.9 million, respectively, accounting for approximately 42% and 45% of consolidated revenues, respectively.

The investment portfolio segment includes the investment activities conducted by Royal Palm. The investment portfolio segment receives revenue in the form of interest and dividend income on its investments.

Segment information ~~about our level 3 fair value measurements~~for the nine months ended September 30, 2019 and 2018 is as follows:

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2019
Advisory services, external customers	$	5,052		$	-		$	-		$	-		$	5,052
Advisory services, other operating segments⁽¹⁾		200			-			-			(200	)		-
Interest and dividend income		-			7,064			1			-			7,065
Interest expense		-			(3,655	)		(1,195	)⁽²⁾		-			(4,850	)
Net revenues		5,252			3,409			(1,194	)		(200	)		7,267
Other		-			(419	)		(736	)⁽³⁾		-			(1,155	)
Operating expenses⁽⁴⁾		(2,019	)		(2,806	)		-			-			(4,825	)
Intercompany expenses⁽¹⁾		-			(200	)		-			200			-
Income (loss) before income taxes	$	3,233		$	(16	)	$	(1,930	)	$	-		$	1,287


	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2018
Advisory services, external customers	$	5,933		$	-		$	-		$	-		$	5,933
Advisory services, other operating segments⁽¹⁾		185			-			-			(185	)		-
Interest and dividend income		-			7,396			1			-			7,397
Interest expense		-			(2,796	)		(1,097	)⁽²⁾		-			(3,893	)
Net revenues		6,118			4,600			(1,096	)		(185	)		9,437
Other		-			(9,190	)		1,785	⁽³⁾		-			(7,405	)
Operating expenses⁽⁴⁾		(2,174	)		(2,712	)		-			-			(4,886	)
Intercompany expenses⁽¹⁾		-			(185	)		-			185			-
Income (loss) before income taxes	$	3,944		$	(7,487	)	$	689		$	-		$	(2,854	)

-22-

Segment information for the three months ended September 30, 2019 and 2018 is as follows:

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2019
Advisory services, external customers	$	1,791		$	-		$	-		$	-		$	1,791
Advisory services, other operating segments⁽¹⁾		63			-			-			(63	)		-
Interest and dividend income		-			2,011			-			-			2,011
Interest expense		-			(1,002	)		(389	)⁽²⁾		-			(1,391	)
Net revenues		1,854			1,009			(389	)		(63	)		2,411
Other		-			(438	)		(601	)⁽³⁾		-			(1,039	)
Operating expenses⁽⁴⁾		(754	)		(852	)		-			-			(1,606	)
Intercompany expenses⁽¹⁾		-			(63	)		-			63			-
Income (loss) before income taxes	$	1,100		$	(344	)	$	(990	)	$	-		$	(234	)


	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2018
Advisory services, external customers	$	1,873		$	-		$	-		$	-		$	1,873
Advisory services, other operating segments⁽¹⁾		65			-			-			(65	)		-
Interest and dividend income		-			2,434			-			-			2,434
Interest expense		-			(1,049	)		(388	)⁽²⁾		-			(1,437	)
Net revenues		1,938			1,385			(388	)		(65	)		2,870
Other		-			(1,651	)		1,478	⁽³⁾		-			(173	)
Operating expenses⁽⁴⁾		(653	)		(842	)		-			-			(1,495	)
Intercompany expenses⁽¹⁾		-			(65	)		-			65			-
Income (loss) before income taxes	$	1,285		$	(1,173	)	$	1,090		$	-		$	1,202

(1)	Includes fees paid by Royal Palm to Bimini Advisors for advisory services.

(2)	Includes interest on junior subordinated note.

(3)	Includes gains (losses) on Eurodollar futures contracts entered into as a hedge on junior subordinated notes and fair value adjustments on retained interests in securitizations.

(4)	Corporate expenses are allocated based on each segment’s proportional share of total revenues.

Assets in each reportable segment as of September 30, ~~2017.~~2019 and December 31, 2018 were as follows:

Retained interests in securitzations, at fair value (in thousands)
$ 558
CPR Range
Prepayment Assumption (Weighted Average)
Constant Prepayment Rate 10% (10 %)
Severity
Default Assumptions Probability of Default (Weighted Average) Range Of Loss Timing
Real Estate Owned 100 % 25.5 % Next 10 Months
Loans in Foreclosure 100 % 25.5 % Month 4 - 13
Loans 90 Day Delinquent 100 % 45 % Month 11-28
Loans 60 Day Delinquent 85 % 45 % Month 11-28
Loans 30 Day Delinquent 75 % 45 % Month 11-28
Current Loans 3.1 % 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 12.2 - 15.3 (13.2) 27.50% (27.50 %)
Discounted Cash Flows Discounted Cash Flow 1.3 - 14.2 (3.8) 27.50% (27.50 %)

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Total
September 30, 2019		$	1,448		$	196,886		$	11,645		$	209,979
December 31, 2018			1,488			245,866			12,046			259,400

-23-

NOTE ~~15.~~16. RELATED PARTY TRANSACTIONS

~~Management Agreement~~

Orchid is 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.~~

~~The following table summarizes the advisory services revenue from Orchid for the nine and three months ended September 30, 2017 and 2016.~~

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 2017 2016
Management fee $ 4,230 $ 2,968 $ 1,528 $ 1,052
Allocated overhead 1,168 963 412 336
Total $ 5,398 $ 3,931 $ 1,940 $ 1,388

At September 30, 2017 and December 31, 2016, the net amount due from Orchid was approximately $0.8 million and $0.6 million, respectively, and such amounts are included in "other assets" in the consolidated balance sheets. Orchid accrued cash and equity compensation payable to officers and employees of Bimini of $0.4 million and $0.2 million during the nine and three months ended September 30, 2017, respectively and $0.6 million and $0.2 million during the nine and three months ended September 30, 2016, respectively. ~~This compensation is not included in the consolidated statements of operations~~.

~~Other~~ Relationships with Orchid

At both September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company owned 1,520,036 ~~and 1,395,036~~ shares of Orchid common stock, ~~respectively,~~ representing approximately ~~3.4%~~2.4% and ~~4.2%~~3.1% of ~~the~~Orchid’s outstanding ~~shares, respectively.~~common stock on such dates. The Company received dividends on this common stock investment of approximately ~~$1.9~~$1.1 million and ~~$0.6~~$0.4 million during the nine and three months ended September 30, ~~2017,~~2019, respectively, and approximately ~~$1.8~~$1.3 million and ~~$0.6~~$0.4 million during the nine and three months ended September 30, ~~2016,~~2018, respectively.

Robert Cauley, the Chief Executive Officer and Chairman of the Board of Directors of the Company, also serves as Chief Executive Officer and Chairman of the Board of Directors of Orchid, receives compensation from Orchid, and owns shares of common stock of Orchid. In addition, Hunter Haas, the Chief Financial Officer, Chief Investment Officer and Treasurer of the Company, also serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of ~~Orchid's~~Orchid’s Board of Directors, receives compensation from Orchid, and owns shares of common stock of Orchid. Robert J. Dwyer and Frank E. Jaumot, our independent directors, each own shares of common stock of Orchid.

NOTE 17. REAL PROPERTY HELD FOR SALE

In order to generate additional cash to be invested in the MBS portfolio, in August 2019, the Company moved to dispose of one its real estate properties. The Company expects to complete the sale of this property within one year. The Company has recorded an impairment charge of approximately $0.7 million in the nine and three months ended September 30, 2019. After the impairment charge, the asset has a carrying value of approximately $0.5 million and is presented separately in the consolidated balance sheets.

NOTE 18. SUBSEQUENT EVENTS

Long-Term Debt Incurred

On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable in equal monthly installments of approximately $4,500, including interest at 4.89%, through October 30, 2039. The note is secured by a mortgage on the Company’s office building.

-24-

ITEM 2. ~~MANAGEMENT'S~~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 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under ~~"Risk Factors"~~“Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, our actual results may differ materially from those anticipated in such forward-looking statements.

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company that was formed in September ~~2003~~2003. The Company’s principal wholly-owned operating subsidiaries are Bimini Advisors Holdings, LLC and Royal Palm Capital, LLC. We operate in two business segments: the asset management segment, which includes the investment advisory services provided by Bimini Advisors to ~~invest~~Orchid, and the investment portfolio segment, which includes the investment activities conducted by Bimini Capital and Royal Palm.

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with the Securities and Exchange Commission), are collectively referred to as “Bimini Advisors.” Bimini Advisors serves as the external manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"). From this arrangement, the Company receives management fees and expense reimbursements. 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. In addition, the Company receives dividends from its investment in Orchid common shares.

Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries referred to as “Royal Palm”) maintains an investment portfolio, consisting primarily inof 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.

~~The Company also serves as~~Stock Repurchase Plan

On March 26, 2018, the ~~external manager~~Board of Directors of the ~~portfolio~~“Company approved a Stock Repurchase Plan (“Repurchase Plan”). Pursuant to Repurchase Plan, we may purchase up to 500,000 shares of ~~Orchid Island Capital, Inc. ("Orchid"),~~the Company’s Class A Common Stock from time to time, subject to certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934. Share repurchases may be executed through ~~its wholly owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors"). From this arrangement,~~various means, including, without limitation, open market transactions. The Repurchase Plan does not obligate the Company ~~receives management~~to purchase any shares. The Repurchase Plan was originally set to expire on November 15, 2018, but it has been extended by the Board of Directors until November 15, 2020. The authorization for the Share Repurchase Plan may be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time.

Through September 30, 2019, we repurchased a total of 70,404 shares at an aggregate cost of approximately $166,945, including commissions and fees, for a weighted average price of $2.37 per share.

-25-

Tender Offer

In July 2019, we completed a “modified Dutch auction” tender offer and paid an aggregate of $2.2 million, excluding fees and ~~expense reimbursements. As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant~~related expenses, to ~~the terms~~repurchase 1.1 million shares of ~~the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is~~our Class A common stock at ~~all times subject to the supervision and oversight~~a price of ~~Orchid's board of directors and has only such functions and authority as delegated to it. In addition, the Company receives dividends from its investment in Orchid common shares.~~$2.00 per share.

Factors that Affect our Results of Operations and Financial Condition

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

•

interest rate trends;

•

the difference between Agency MBS yields and our funding and hedging costs;

•

competition for, and supply of, investments in Agency MBS;

•

actions taken by the ~~new~~U.S. government, including the presidential administration, the Federal Reserve (the ~~"Fed"~~“Fed”), the Federal Open Market Committee (the “FOMC”), the Federal Housing Financing Agency (the “FHFA”) and the U.S. Treasury;

prepayment rates on mortgages underlying our Agency MBS, and credit trends insofar as they affect prepayment rates; and

•

the equity markets and the ability of Orchid to raise additional capital; 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;

the requirements to qualify for a registration exemption under the Investment Company Act;

our ability to use net operating loss carryforwards and net capital loss carryforwards to reduce our taxable income;

the impact of possible future changes in tax laws; and

our ability to manage the portfolio of Orchid and maintain our role as manager.

Results of Operations

Described below are the ~~Company's~~Company’s results of operations for the nine and three months ended September 30, ~~2017,~~2019, as compared to the nine and three months ended September 30, ~~2016.~~2018.

Net Income (Loss) Summary

Consolidated net income for the nine months ended September 30, ~~2017~~2019 was ~~$1.9~~$0.3 million, or ~~$0.15~~$0.03 basic and diluted income per share of Class A Common Stock, as compared to consolidated net ~~income~~loss of $2.2 million, or $0.17 basic and diluted ~~income~~loss per share of Class A Common Stock, for the nine months ended September 30, ~~2016.~~2018.

Consolidated net ~~income~~loss for the three months ended September 30, ~~2017~~2019 was ~~$1.5~~$0.8 million, or ~~$0.12~~$0.07 basic and diluted ~~income~~loss per share of Class A Common Stock, as compared to consolidated net income of ~~$1.2~~$0.9 million, or ~~$0.09~~$0.07 basic and diluted income per share of Class A Common Stock, for the three months ended September 30, ~~2016.~~2018.

-26-

The components of net income (loss) for the nine and three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, along with the changes in those components are presented in the table below:

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 Change 2017 2016 Change
Net portfolio interest $ 2,965 $ 2,454 $ 511 $ 1,010 $ 913 $ 97
Interest expense on junior subordinated notes (914 ) (818 ) (96 ) (316 ) (278 ) (38 )
(Losses) gains on MBS and derivative instruments (1,126 ) (1,683 ) 557 149 163 (14 )
Net portfolio income (loss) 925 (47 ) 972 843 798 45
Other income 6,846 8,473 (1,627 ) 3,166 3,176 (10 )
Expenses, including income taxes (5,835 ) (6,199 ) 364 (2,508 ) (2,795 ) 287
Net income $ 1,936 $ 2,227 $ (291 ) $ 1,501 $ 1,179 $ 322

(in thousands)
	Nine Months Ended September 30,									Three Months Ended September 30,
	2019			2018			Change			2019			2018			Change
Advisory services revenues	$	5,052		$	5,933		$	(881	)	$	1,791		$	1,873		$	(82	)
Interest and dividend income		7,065			7,397			(332	)		2,011			2,434			(423	)
Interest expense		(4,850	)		(3,893	)		(957	)		(1,391	)		(1,437	)		46
Net revenues		7,267			9,437			(2,170	)		2,411			2,870			(459	)
Other expense		(1,155	)		(7,405	)		6,250			(1,039	)		(172	)		(867	)
Expenses		(4,825	)		(4,886	)		61			(1,606	)		(1,496	)		(110	)
Net income (loss) before income tax provision (benefit)		1,287			(2,854	)		4,141			(234	)		1,202			(1,436	)
Income tax provision (benefit)		942			(676	)		1,618			538			329			209
Net income (loss)	$	345		$	(2,178	)	$	2,523		$	(772	)	$	873		$	(1,645	)

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

We use derivative instruments, specifically Eurodollar and Treasury Note ~~("T-Note"~~(“T-Note”) futures contracts and TBA short positions to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.

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

For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized and unrealized gains or losses on ~~specific~~certain derivative instruments the Company uses that pertain to each period presented. We believe that adjusting our interest expense for the periods presented by the gains or losses on ~~all~~these derivative instruments would not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments may cover periods that extend into the future, not just the current period. Any realized or unrealized gains or losses on the instruments reflect the change in market value of the instrument caused by changes in underlying interest rates applicable to the term covered by the instrument, not just the current period.

For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on borrowings to reflect total economic interest 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. This presentation includes gains or losses on all contracts in effect during the reporting period, covering the current period as well as periods in the future.

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

-27-

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

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the consolidated statements of operations line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for each quarter in ~~2017~~2019 and ~~2016.~~

2018.

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
Junior
Repurchase Subordinated
Three Months Ended Agreements Debt Total
September 30, 2017 $ (13 ) $ (6 ) $ (19 )
June 30, 2017 (581 ) (251 ) (832 )
March 31, 2017 15 7 22
December 31, 2016 496 1,037 1,533
September 30, 2016 326 182 508
June 30, 2016 (353 ) (404 ) (757 )
March 31, 2016 (787 ) (513 ) (1,300 )

(in thousands)
Junior
Repurchase Subordinated
Nine Months Ended Agreements Debt Total
September 30, 2017 $ (579 ) $ (250 ) $ (829 )
September 30, 2016 (814 ) (735 ) (1,549 )

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
	Recognized in
	Statement of			TBA						Junior
	Operations			Securities			Repurchase			Subordinated
Three Months Ended	(GAAP)			Income (Loss)			Agreements			Debt
September 30, 2019	$	(483	)	$	(204	)	$	(279	)	$	-
June 30, 2019		(3,364	)		(734	)		(2,441	)		(189	)
March 31, 2019		(2,258	)		(1,067	)		(971	)		(220	)
December 31, 2018		(3,835	)		(1,214	)		(2,184	)		(437	)
September 30, 2018		948			349			478			121
June 30, 2018		870			194			534			142
March 31, 2018		1,740			(524	)		1,849			415

(in thousands)
	Recognized in
	Statement of			TBA						Junior
	Operations			Securities			Repurchase			Subordinated
Nine Months Ended	(GAAP)			Income (Loss)			Agreements			Debt
September 30, 2019	$	(6,105	)	$	(2,005	)	$	(3,691	)	$	(409	)
September 30, 2018		3,558			19			2,861			678

Losses on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
Junior
Repurchase Subordinated
Three Months Ended Agreements Debt Total
September 30, 2017 $ (162 ) $ (40 ) $ (202 )
June 30, 2017 (152 ) (37 ) (189 )
March 31, 2017 (116 ) (60 ) (176 )
December 31, 2016 (122 ) (57 ) (179 )
September 30, 2016 (92 ) (55 ) (147 )
June 30, 2016 (60 ) (77 ) (137 )
March 31, 2016 (45 ) (80 ) (125 )

Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
	Attributed to Current Period (Non-GAAP)									Attributed to Future Periods (Non-GAAP)
				Junior									Junior
	Repurchase			Subordinated						Repurchase			Subordinated
Three Months Ended	Agreements			Debt			Total			Agreements			Debt			Total
September 30, 2019	$	(124	)	$	61		$	(63	)	$	(155	)	$	(61	)	$	(216	)
June 30, 2019		(226	)		43			(183	)		(2,215	)		(232	)		(2,447	)
March 31, 2019		5			65			70			(976	)		(285	)		(1,261	)
December 31, 2018		134			68			202			(2,318	)		(505	)		(2,823	)
September 30, 2018		(35	)		11			(24	)		513			110			623
June 30, 2018		(108	)		(19	)		(127	)		642			161			803
March 31, 2018		(153	)		(33	)		(187	)		2,002			448			2,451

(in thousands)
				Junior									Junior
	Repurchase			Subordinated						Repurchase			Subordinated
Nine Months Ended	Agreements			Debt			Total			Agreements			Debt			Total
September 30, 2019	$	(345	)	$	169		$	(176	)	$	(3,348	)	$	(578	)	$	(3,926	)
September 30, 2018		(296	)		(41	)		(338	)		3,157			719			3,877

-28-

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
Three Months Ended	Income		Basis		Hedges⁽¹⁾			Basis⁽²⁾		Basis		Basis⁽³⁾
September 30, 2019	$	1,646	$	1,002	$	(124	)	$	1,126	$	644	$	520
June 30, 2019		2,134		1,340		(226	)		1,566		794		568
March 31, 2019		2,190		1,313		5			1,308		877		882
December 31, 2018		2,227		1,235		134			1,101		992		1,126
September 30, 2018		2,054		1,049		(35	)		1,084		1,005		970
June 30, 2018		2,001		938		(108	)		1,046		1,063		955
March 31, 2018		2,080		809		(153	)		962		1,271		1,118

(in thousands)
			Interest Expense on Repurchase Agreements							Net Portfolio
					Effect of					Interest Income
	Interest		GAAP		Non-GAAP			Economic		GAAP		Economic
Nine Months Ended	Income		Basis		Hedges⁽¹⁾			Basis⁽²⁾		Basis		Basis⁽³⁾
September 30, 2019	$	5,970	$	3,655	$	(345	)	$	4,000	$	2,315	$	1,970
September 30, 2018		6,135		2,796		(296	)		3,092		3,339		3,043

(in thousands)
Junior
Repurchase Subordinated
Nine Months Ended Agreements Debt Total
September 30, 2017 $ (430 ) $ (137 ) $ (567 )
September 30, 2016 (197 ) (212 ) (409 )

Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP)
(in thousands)
Junior
Repurchase Subordinated
Three Months Ended Agreements Debt Total
September 30, 2017 $ 149 $ 34 $ 183
June 30, 2017 (429 ) (214 ) (643 )
March 31, 2017 131 67 198
December 31, 2016 618 1,094 1,712
September 30, 2016 418 237 655
June 30, 2016 (293 ) (327 ) (620 )
March 31, 2016 (742 ) (433 ) (1,175 )

(in thousands)
Junior
Repurchase Subordinated
Nine Months Ended Agreements Debt Total
September 30, 2017 $ (149 ) $ (113 ) $ (262 )
September 30, 2016 (617 ) (523 ) (1,140 )

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
Three Months Ended Income Basis
Hedges⁽¹⁾

Basis⁽²⁾
Basis
Basis⁽³⁾

September 30, 2017 $ 1,514 $ 504 $ (162 ) $ 666 $ 1,010 $ 848
June 30, 2017 1,269 324 (152 ) 476 945 793
March 31, 2017 1,293 283 (116 ) 399 1,010 894
December 31, 2016 1,285 251 (122 ) 373 1,034 912
September 30, 2016 1,108 195 (92 ) 287 913 821
June 30, 2016 1,025 174 (60 ) 234 851 791
March 31, 2016 817 127 (45 ) 172 690 645

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

Basis⁽²⁾
Basis
Basis⁽³⁾

September 30, 2017 $ 4,076 $ 1,111 $ (430 ) $ 1,541 $ 2,965 $ 2,535
September 30, 2016 2,950 496 (197 ) 693 2,454 2,257

(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.

Economic Net Interest Income
(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
Three Months Ended Basis
Basis⁽¹⁾
Basis
Hedges⁽²⁾

Basis⁽³⁾
Basis
Basis⁽⁴⁾

September 30, 2017 $ 1,010 $ 847 $ 316 $ (40 ) $ 356 $ 694 $ 491
June 30, 2017 945 793 306 (37 ) 343 639 450
March 31, 2017 1,010 894 292 (60 ) 352 718 542
December 31, 2016 1,034 912 291 (57 ) 348 743 564
September 30, 2016 913 821 278 (55 ) 333 635 488
June 30, 2016 851 791 276 (77 ) 353 575 438
March 31, 2016 690 645 264 (80 ) 344 426 301

(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
Nine Months Ended Basis
Basis⁽¹⁾
Basis
Hedges⁽²⁾

Basis⁽³⁾
Basis
Basis⁽⁴⁾

September 30, 2017 $ 2,965 $ 2,534 $ 914 $ (137 ) $ 1,051 $ 2,051 $ 1,483
September 30, 2016 2,454 2,257 818 (212 ) 1,030 1,636 1,227

Economic Net Interest Income
(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
Three Months Ended	Basis		Basis⁽¹⁾		Basis		Hedges⁽²⁾			Basis⁽³⁾		Basis			Basis⁽⁴⁾
September 30, 2019	$	644	$	520	$	390	$	61		$	329	$	254		$	191
June 30, 2019		794		568		400		43			357		394			211
March 31, 2019		877		882		406		65			341		471			541
December 31, 2018		992		1,126		393		68			325		599			801
September 30, 2018		1,005		970		388		11			377		617			593
June 30, 2018		1,063		955		372		(19	)		391		691			564
March 31, 2018		1,271		1,118		337		(33	)		370		934			748

(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
Nine Months Ended	Basis		Basis⁽¹⁾		Basis		Hedges⁽²⁾			Basis⁽³⁾		Basis			Basis⁽⁴⁾
September 30, 2019	$	2,315	$	1,970	$	1,196	$	169		$	1,027	$	1,119		$	943
September 30, 2018		3,339		3,043		1,097		(41	)		1,138		2,242			1,905

(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 ~~subtracting~~adding the effect of derivative instrument hedges attributed to the period presented ~~from~~to GAAP net interest income.

-29-

Segment Information

We have two operating segments. The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. The investment portfolio segment includes the investment activities conducted by Royal Palm. Segment information for the nine months ended September 30, 2019 and 2018 is as follows:

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2019
Advisory services, external customers	$	5,052		$	-		$	-		$	-		$	5,052
Advisory services, other operating segments⁽¹⁾		200			-			-			(200	)		-
Interest and dividend income		-			7,064			1			-			7,065
Interest expense		-			(3,655	)		(1,195	)⁽²⁾		-			(4,850	)
Net revenues		5,252			3,409			(1,194	)		(200	)		7,267
Other		-			(419	)		(736	)⁽³⁾		-			(1,155	)
Operating expenses⁽⁴⁾		(2,019	)		(2,806	)		-			-			(4,825	)
Intercompany expenses⁽¹⁾		-			(200	)		-			200			-
Income (loss) before income taxes	$	3,233		$	(16	)	$	(1,930	)	$	-		$	1,287


	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2018
Advisory services, external customers	$	5,933		$	-		$	-		$	-		$	5,933
Advisory services, other operating segments⁽¹⁾		185			-			-			(185	)		-
Interest and dividend income		-			7,396			1			-			7,397
Interest expense		-			(2,796	)		(1,097	)⁽²⁾		-			(3,893	)
Net revenues		6,118			4,600			(1,096	)		(185	)		9,437
Other		-			(9,190	)		1,785	⁽³⁾		-			(7,405	)
Operating expenses⁽⁴⁾		(2,174	)		(2,712	)		-			-			(4,886	)
Intercompany expenses⁽¹⁾		-			(185	)		-			185			-
Income (loss) before income taxes	$	3,944		$	(7,487	)	$	689		$	-		$	(2,854	)

-30-

Segment information for the three months ended September 30, 2019 and 2018 is as follows:

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2019
Advisory services, external customers	$	1,791		$	-		$	-		$	-		$	1,791
Advisory services, other operating segments⁽¹⁾		63			-			-			(63	)		-
Interest and dividend income		-			2,011			-			-			2,011
Interest expense		-			(1,002	)		(389	)⁽²⁾		-			(1,391	)
Net revenues		1,854			1,009			(389	)		(63	)		2,411
Other		-			(438	)		(601	)⁽³⁾		-			(1,039	)
Operating expenses⁽⁴⁾		(754	)		(852	)		-			-			(1,606	)
Intercompany expenses⁽¹⁾		-			(63	)		-			63			-
Income (loss) before income taxes	$	1,100		$	(344	)	$	(990	)	$	-		$	(234	)


	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2018
Advisory services, external customers	$	1,873		$	-		$	-		$	-		$	1,873
Advisory services, other operating segments⁽¹⁾		65			-			-			(65	)		-
Interest and dividend income		-			2,434			-			-			2,434
Interest expense		-			(1,049	)		(388	)⁽²⁾		-			(1,437	)
Net revenues		1,938			1,385			(388	)		(65	)		2,870
Other		-			(1,651	)		1,478	⁽³⁾		-			(173	)
Operating expenses⁽⁴⁾		(653	)		(842	)		-			-			(1,495	)
Intercompany expenses⁽¹⁾		-			(65	)		-			65			-
Income (loss) before income taxes	$	1,285		$	(1,173	)	$	1,090		$	-		$	1,202

(1)	Includes advisory services revenue received by Bimini Advisors from Royal Palm.

(2)	Includes interest on junior subordinated note.

(3)	Includes gains (losses) on Eurodollar futures contracts entered into as a hedge on junior subordinated notes and fair value adjustments on retained interests in securitizations.

(4)	Corporate expenses are allocated based on each segment’s proportional share of total revenues.

Assets in each reportable segment were as follows:

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Total
September 30, 2019		$	1,448		$	196,886		$	11,645		$	209,979
December 31, 2018			1,488			245,866			12,046			259,400

-31-

Asset Management Segment

Advisory Services Revenue

Advisory services revenue consists of management fees and overhead reimbursements charged to Orchid for the management of its portfolio pursuant to the terms of a management agreement. We receive a monthly management fee in the amount of:

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

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

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

In addition, Orchid is obligated to reimburse us for any direct expenses incurred on its behalf and to pay to us an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. The management agreement has been renewed through February 2020 and provides for automatic one-year extension options. Should Orchid terminate the management agreement without cause, it will be obligated to pay to us 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 automatic renewal term.

The following table summarizes the advisory services revenue received from Orchid in each quarter during 2019 and 2018 and in the nine months ended September 30, 2019 and 2018.

(in thousands)
	Average		Average		Advisory Services
	Orchid		Orchid			Management		Overhead
Three Months Ended	MBS		Equity			Fee		Allocation		Total
September 30, 2019	$	3,674,087	$	394,788		$	1,440	$	351	$	1,791
June 30, 2019		3,307,885		363,961			1,326		327		1,654
March 31, 2019		3,051,509		363,204			1,285		323		1,607
December 31, 2018		3,264,230		395,911			1,404		434		1,838
September 30, 2018		3,601,776		431,962			1,482		391		1,873
June 30, 2018		3,717,690		469,974			1,606		361		1,967
March 31, 2018		3,745,298		488,906			1,712		381		2,093
(in thousands)
	Average		Average		Advisory Services
	Orchid		Orchid			Management		Overhead
Nine Months Ended	MBS		Equity			Fee		Allocation		Total
September 30, 2019		3,344,494		373,984			4,051		1,001		5,052
September 30, 2018		3,688,255		463,517			4,800		1,133		5,933

Investment Portfolio Segment

Net Portfolio Interest Income

We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the nine months ended September 30, ~~2017, the Company~~2019, we generated ~~$3.0~~$2.3 million of net portfolio interest income, consisting of ~~$4.1~~$6.0 million of interest income from MBS assets offset by ~~$1.1~~$3.7 million of interest expense on repurchase liabilities. For the comparable period ended September 30, ~~2016, the Company~~2018, we generated ~~$2.5~~$3.3 million of net portfolio interest income, consisting of ~~$3.0~~$6.1 million of interest income from MBS assets offset by ~~$0.5~~$2.8 million of interest expense on repurchase liabilities. The $0.1 million decrease in interest income for the nine months ended September 30, 2019 was due to a 18 basis point ("bp") decrease in yields earned on the portfolio, offset by a $3.4 million increase in average MBS balances. The $0.9 million increase in interest expense for the nine months ended September 30, 2019 was due to a combination of a $2.0 million increase in average repurchase liabilities and an 57 bp increase in cost of funds.

~~The Company's~~

-32-

Our economic interest expense on repurchase liabilities for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$1.5~~$4.0 million and ~~$0.7~~$3.1 million, respectively, resulting in ~~$2.5~~$2.0 million and ~~$2.3~~$3.0 million of economic net portfolio interest income, respectively.

During the three months ended September 30, ~~2017, the Company~~2019, we generated ~~$1.0~~$0.6 million of net portfolio interest income, consisting of ~~$1.5~~$1.6 million of interest income from MBS assets offset by ~~$0.5~~$1.0 million of interest expense on repurchase liabilities. For the three months ended September 30, ~~2016, the Company~~2018, we generated ~~$0.9~~$1.0 million of net portfolio interest income, consisting of ~~$1.1~~$2.1 million of interest income from MBS assets offset by ~~$0.2~~$1.0 million of interest expense on repurchase liabilities. The $0.5 million decrease in interest income for the three months ended September 30, 2019 was due to a $11.2 million decrease in average MBS balances, combined with a 62 bp decrease in yields earned on the portfolio.

~~The Company's~~Our economic interest expense on repurchase liabilities for the three months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$0.7~~$1.1 million and ~~$0.3~~$1.1 million, respectively, resulting in ~~$0.8~~$0.5 million and ~~$0.8~~$1.0 million of economic net portfolio interest income, respectively.

There was a decrease of $24.3 million in average MBS balances in the third quarter of 2019, compared to the second quarter of 2019. In order to fund the share-repurchase, we sold MBS assets with an approximate fair market at time of sale, including accrued interest, of $44.0 million.

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 the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 and each quarter in ~~2017~~2019 and ~~2016~~2018 on both a GAAP and economic basis.

($ in thousands)
Average Yield on Average Interest Expense Average Cost of Funds
MBS Interest Average Repurchase GAAP Economic GAAP Economic
Three Months Ended
Held⁽¹⁾

Income⁽²⁾
MBS
Agreements⁽¹⁾
Basis
Basis⁽²⁾
Basis
Basis⁽³⁾

September 30, 2017 $ 170,237 $ 1,514 3.56 % $ 161,003 $ 504 $ 666 1.25 % 1.66 %
June 30, 2017 134,188 1,269 3.78 % 126,341 324 476 1.02 % 1.51 %
March 31, 2017 128,098 1,293 4.04 % 119,938 283 399 0.94 % 1.33 %
December 31, 2016 131,952 1,285 3.89 % 123,909 251 373 0.81 % 1.20 %
September 30, 2016 122,220 1,108 3.63 % 114,858 195 287 0.68 % 1.00 %
June 30, 2016 110,017 1,025 3.73 % 103,259 174 234 0.67 % 0.91 %
March 31, 2016 96,592 817 3.39 % 90,014 127 172 0.57 % 0.77 %

($ in thousands)
Average Yield on Average Interest Expense Average Cost of Funds
MBS Interest Average Repurchase GAAP Economic GAAP Economic
Nine Months Ended
Held⁽¹⁾

Income⁽²⁾
MBS
Agreements⁽¹⁾
Basis
Basis⁽²⁾
Basis
Basis⁽³⁾

September 30, 2017 $ 144,174 $ 4,076 3.77 % $ 135,761 $ 1,111 $ 1,541 1.09 % 1.51 %
September 30, 2016 109,610 2,950 3.59 % 102,710 496 693 0.64 % 0.90 %

($ in thousands)
	Average				Yield on			Average		Interest Expense				Average Cost of Funds
	MBS		Interest		Average			Repurchase		GAAP		Economic		GAAP			Economic
Three Months Ended	Held⁽¹⁾		Income⁽²⁾		MBS			Agreements⁽¹⁾		Basis		Basis⁽²⁾		Basis			Basis⁽³⁾
September 30, 2019	$	187,199	$	1,646		3.52	%	$	177,566	$	1,002	$	1,126		2.26	%		2.54	%
June 30, 2019		211,406		2,134		4.04	%		199,901		1,340		1,566		2.68	%		3.13	%
March 31, 2019		212,033		2,190		4.13	%		199,771		1,313		1,308		2.63	%		2.62	%
December 31, 2018		212,317		2,227		4.20	%		202,069		1,235		1,101		2.44	%		2.18	%
September 30, 2018		198,367		2,054		4.14	%		189,582		1,049		1,084		2.21	%		2.29	%
June 30, 2018		194,677		2,001		4.11	%		184,621		938		1,046		2.03	%		2.27	%
March 31, 2018		207,261		2,080		4.01	%		197,001		809		962		1.64	%		1.96	%

($ in thousands)
	Average				Yield on			Average		Interest Expense				Average Cost of Funds
	MBS		Interest		Average			Repurchase		GAAP		Economic		GAAP			Economic
Nine Months Ended	Held⁽¹⁾		Income⁽²⁾		MBS			Agreements⁽¹⁾		Basis		Basis⁽²⁾		Basis			Basis⁽³⁾
September 30, 2019	$	203,546	$	5,970		3.91	%	$	192,413	$	3,655	$	4,000		2.53	%		2.77	%
September 30, 2018		200,102		6,135		4.09	%		190,402		2,796		3,092		1.96	%		2.17	%

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

September 30, 2017 $ 1,010 $ 847 2.31 % 1.90 %
June 30, 2017 945 793 2.76 % 2.27 %
March 31, 2017 1,010 894 3.10 % 2.71 %
December 31, 2016 1,034 912 3.08 % 2.69 %
September 30, 2016 913 821 2.95 % 2.63 %
June 30, 2016 851 791 3.06 % 2.82 %
March 31, 2016 690 645 2.82 % 2.62 %

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

September 30, 2017 $ 2,965 $ 2,534 2.68 % 2.26 %
September 30, 2016 2,454 2,257 2.95 % 2.69 %

-33-

($ in thousands)
	Net Portfolio				Net Portfolio
	Interest Income				Interest Spread
	GAAP		Economic		GAAP			Economic
Three Months Ended	Basis		Basis⁽²⁾		Basis			Basis⁽⁴⁾
September 30, 2019	$	644	$	520		1.26	%		0.98	%
June 30, 2019		794		568		1.36	%		0.91	%
March 31, 2019		877		882		1.50	%		1.51	%
December 31, 2018		992		1,126		1.76	%		2.02	%
September 30, 2018		1,005		970		1.93	%		1.85	%
June 30, 2018		1,063		955		2.08	%		1.84	%
March 31, 2018		1,271		1,118		2.37	%		2.05	%

($ in thousands)
	Net Portfolio				Net Portfolio
	Interest Income				Interest Spread
	GAAP		Economic		GAAP			Economic
Nine Months Ended	Basis		Basis⁽²⁾		Basis			Basis⁽⁴⁾
September 30, 2019	$	2,315	$	1,970		1.38	%		1.14	%
September 30, 2018		3,339		3,043		2.13	%		1.92	%

(1)

Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 3035 and 3136 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.

(2)	Economic interest expense and economic net interest income presented in the tables above and the tables on page 3136 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.

(4)	Economic net interest spread is calculated by subtracting average economic cost of funds from yield on average MBS.

Interest Income and Average Earning Asset Yield

~~Interest~~Our interest income ~~for the Company~~ was ~~$4.1~~$6.0 million for the nine months ended September 30, ~~2017~~2019 and ~~$3.0~~$6.1 million for the nine months ended September 30, ~~2016.~~2018. Average MBS holdings were ~~$144.2~~$203.5 million and ~~$109.6~~$200.1 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~$1.1~~$0.1 million ~~increase~~decrease in interest income was due to ~~combination of~~ a 18 ~~basis point increase~~bp decrease in yields, ~~and~~partially offset by a ~~$34.6~~$3.4 million increase in average MBS holdings.

~~Interest~~Our interest income ~~for the Company~~ was ~~$1.5~~$1.6 million for the three months ended September 30, ~~2017~~2019 and ~~$1.1~~$2.1 million for the three months ended September 30, ~~2016.~~2018. Average MBS holdings were ~~$170.2~~$187.2 million and ~~$122.2~~$198.4 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~$0.4~~$0.5 million ~~increase~~decrease in interest income was due to a ~~$48.0~~$11.2 million ~~increase~~decrease in average MBS holdings, ~~partially offset by~~combined with a ~~7 basis point~~62 bp decrease in yields.

-34-

The tables below present the ~~consolidated~~ average portfolio size, income and yields of our respective sub-portfolios, consisting of structured MBS and PT MBS, for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, and for each quarter during ~~2017~~2019 and ~~2016.~~2018.

($ in thousands)
Average MBS Held Interest Income Realized Yield on Average MBS
PT Structured PT Structured PT Structured
Three Months Ended MBS MBS Total MBS MBS Total MBS MBS Total
September 30, 2017 $ 167,081 $ 3,156 $ 170,237 $ 1,524 $ (10 ) $ 1,514 3.65 % (1.28 )% 3.56 %
June 30, 2017 130,519 3,669 134,188 1,220 49 1,269 3.74 % 5.33 % 3.78 %
March 31, 2017 123,163 4,935 128,098 1,210 83 1,293 3.93 % 6.67 % 4.04 %
December 31, 2016 127,627 4,325 131,952 1,238 47 1,285 3.88 % 4.32 % 3.89 %
September 30, 2016 119,411 2,809 122,220 1,092 16 1,108 3.66 % 2.19 % 3.63 %
June 30, 2016 106,653 3,364 110,017 1,008 17 1,025 3.78 % 2.05 % 3.73 %
March 31, 2016 92,365 4,227 96,592 783 34 817 3.39 % 3.25 % 3.39 %

($ in thousands)
Average MBS Held Interest Income Realized Yield on Average MBS
PT Structured PT Structured PT Structured
Nine Months Ended MBS MBS Total MBS MBS Total MBS MBS Total
September 30, 2017 $ 140,254 $ 3,920 $ 144,174 $ 3,954 $ 122 $ 4,076 3.76 % 4.12 % 3.77 %
September 30, 2016 106,143 3,467 109,610 2,883 67 2,950 3.62 % 2.58 % 3.59 %

($ in thousands)
	Average MBS Held						Interest Income							Realized Yield on Average MBS
	PT		Structured				PT		Structured					PT			Structured
Three Months Ended	MBS		MBS		Total		MBS		MBS			Total		MBS			MBS			Total
September 30, 2019	$	185,309	$	1,890	$	187,199	$	1,652	$	(6	)	$	1,646		3.57	%		(1.15	)%		3.52	%
June 30, 2019		209,171		2,235		211,406		2,111		23			2,134		4.04	%		4.01	%		4.04	%
March 31, 2019		209,469		2,564		212,033		2,143		47			2,190		4.09	%		7.42	%		4.13	%
December 31, 2018		209,971		2,346		212,317		2,181		46			2,227		4.15	%		7.85	%		4.20	%
September 30, 2018		196,305		2,062		198,367		2,008		46			2,054		4.09	%		8.94	%		4.14	%
June 30, 2018		192,368		2,309		194,677		1,959		42			2,001		4.07	%		7.16	%		4.11	%
March 31, 2018		204,786		2,475		207,261		2,054		26			2,080		4.01	%		4.29	%		4.01	%

($ in thousands)
	Average MBS Held						Interest Income							Realized Yield on Average MBS
	PT		Structured				PT		Structured					PT			Structured
Nine Months Ended	MBS		MBS		Total		MBS		MBS			Total		MBS			MBS			Total
September 30, 2019	$	201,316	$	2,230	$	203,546	$	5,906	$	64		$	5,970		3.91	%		3.86	%		3.91	%
September 30, 2018		197,820		2,282		200,102		6,021		114			6,135		4.06	%		6.66	%		4.09	%

Interest Expense on Repurchase Agreements and the Cost of Funds

~~Average~~Our average outstanding balances under repurchase agreements ~~for the Company~~ were ~~$135.8~~$192.4 million and ~~$102.7~~$190.4 million, generating interest expense of ~~$1.1~~$3.7 million and ~~$0.5~~$2.8 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Our average cost of funds was ~~1.09%~~2.53% and ~~0.64%~~1.96% for nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. There was a ~~45 basis point~~57 bp increase in the average cost of funds and a ~~$33.1~~$2.0 million increase in average outstanding repurchase agreements during the nine months ended September 30, ~~2017,~~2019, compared to the nine months ended September 30, ~~2016.~~2018.

~~The Company's~~Our economic interest expense was ~~$1.5~~$4.0 million and ~~$0.7~~$3.1 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. There was a ~~61 basis point~~60 bp increase in the average economic cost of funds to ~~1.51%~~2.77% for the nine months ended September 30, ~~2017~~2019 from ~~0.90%~~2.17% for the nine months ended September 30, ~~2016.~~2018. The ~~$0.8~~$0.9 million increase in economic interest expense was due to the ~~$33.1~~$2.0 million increase in average outstanding repurchase agreements during the nine months ended September 30, ~~2017,~~2019, combined with the negative performance of our derivative holdings attributed to the current period.

~~Average~~Our average outstanding balances under repurchase agreements ~~for the Company~~ were ~~$161.0~~$177.6 million and ~~$114.9~~$189.6 million, generating interest expense of ~~$0.5~~$1.0 million and ~~$0.2~~$1.0 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Our average cost of funds was ~~1.25%~~2.26% and ~~0.68%~~2.21% for three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. There was a ~~57 basis point~~5 bp increase in the average cost of funds and a ~~$46.1~~$12.0 million ~~increase~~decrease in average outstanding repurchase agreements during the three months ended September 30, ~~2017,~~2019, compared to the three months ended September 30, ~~2016.~~2018.

~~The Company's~~Our economic interest expense was ~~$0.7~~$1.1 million and ~~$0.3~~$1.1 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. There was a ~~66 basis point~~25 bp increase in the average economic cost of funds to ~~1.66%~~2.54% for the three months ended September 30, ~~2017~~2019 from ~~1.00%~~2.29% for the three months ended September 30, 2016. The $0.4 million increase in economic interest expense was due to the $46.1 million increase in average outstanding repurchase agreements during the three months ended September 30, 2017, combined with the negative performance of our derivative agreements attributed to the current period.2018.

Because all of our repurchase agreements are short-term, changes in market rates ~~directly affect~~have a more immediate impact on our interest expense. ~~The Company's~~Our average cost of funds calculated on a GAAP basis was ~~5 basis points~~4 bps above the average one-month LIBOR and 20 basis points below the average six-month LIBOR for the quarter ended September 30, 2017. The Company's average economic cost of funds was 46 basis points above the average one-month LIBOR and 21 basis points8 bps above the average six-month LIBOR for the quarter ended September 30, ~~2017.~~2019. Our average economic cost of funds was 32 bps above the average one-month LIBOR and 36 bps above the average six-month LIBOR for the quarter ended September 30, 2019. The average term to maturity of the outstanding repurchase agreements ~~increased~~decreased from 4031 days at December 31, ~~2016~~2018 to 4814 days at September 30, ~~2017.~~2019.

-35-

The tables below present the ~~consolidated~~ average outstanding balances under our repurchase agreements, interest expense and average economic cost of funds, and average one-month and six-month LIBOR rates for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, and for each quarter in ~~2017~~2019 and ~~2016,~~2018, on both a GAAP and economic basis.

($ in thousands)
	Average
	Balance of		Interest Expense				Average Cost of Funds
	Repurchase		GAAP		Economic		GAAP			Economic
Three Months Ended	Agreements		Basis		Basis		Basis			Basis
September 30, 2019	$	177,566	$	1,002	$	1,126		2.26	%		2.54	%
June 30, 2019		199,901		1,340		1,566		2.68	%		3.13	%
March 31, 2019		199,771		1,313		1,308		2.63	%		2.62	%
December 31, 2018		202,069		1,235		1,101		2.44	%		2.18	%
September 30, 2018		189,582		1,049		1,084		2.21	%		2.29	%
June 30, 2018		184,621		938		1,046		2.03	%		2.27	%
March 31, 2018		197,001		809		962		1.64	%		1.96	%

($ in thousands)
	Average
	Balance of		Interest Expense				Average Cost of Funds
	Repurchase		GAAP		Economic		GAAP			Economic
Nine Months Ended	Agreements		Basis		Basis		Basis			Basis
September 30, 2019	$	192,413	$	3,655	$	4,000		2.53	%		2.77	%
September 30, 2018		190,402		2,796		3,092		1.96	%		2.17	%

							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
September 30, 2019		2.22	%		2.18	%		0.04	%		0.08	%		0.32	%		0.36	%
June 30, 2019		2.45	%		2.49	%		0.23	%		0.19	%		0.68	%		0.64	%
March 31, 2019		2.50	%		2.77	%		0.13	%		(0.14	)%		0.12	%		(0.15	)%
December 31, 2018		2.39	%		2.74	%		0.05	%		(0.30	)%		(0.21	)%		(0.56	)%
September 30, 2018		2.17	%		2.55	%		0.04	%		(0.34	)%		0.12	%		(0.26	)%
June 30, 2018		1.99	%		2.48	%		0.04	%		(0.45	)%		0.28	%		(0.21	)%
March 31, 2018		1.69	%		2.11	%		(0.05	)%		(0.47	)%		0.27	%		(0.15	)%


							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
Nine Months Ended	One-Month			Six-Month			LIBOR			LIBOR			LIBOR			LIBOR
September 30, 2019		2.39	%		2.48	%		0.14	%		0.05	%		0.38	%		0.29	%
September 30, 2018		1.95	%		2.38	%		0.01	%		(0.42	)%		0.22	%		(0.21	)%

Dividend Income

($ in thousands)
Average
Balance of Interest Expense Average Cost of Funds
Repurchase GAAP Economic GAAP Economic
Three Months Ended Agreements Basis Basis Basis Basis
September 30, 2017 $ 161,003 $ 504 $ 666 1.25 % 1.66 %
June 30, 2017 126,341 324 476 1.02 % 1.51 %
March 31, 2017 119,938 283 399 0.94 % 1.33 %
December 31, 2016 123,909 251 373 0.81 % 1.20 %
September 30, 2016 114,858 195 287 0.68 % 1.00 %
June 30, 2016 103,259 174 234 0.67 % 0.91 %
March 31, 2016 90,014 127 172 0.57 % 0.77 %

($ in thousands)
Average
Balance of Interest Expense Average Cost of Funds
Repurchase GAAP Economic GAAP Economic
Nine Months Ended Agreements Basis Basis Basis Basis
September 30, 2017 $ 135,761 $ 1,111 $ 1,541 1.09 % 1.51 %
September 30, 2016 102,710 496 693 0.64 % 0.90 %

We have owned 1,520,036 shares of Orchid common stock since March 2017. Orchid paid total dividends of $0.72 per share and $0.24 per share during the nine and three months ended September 30, 2019, respectively, and $0.83 per share and $0.25 per share during the nine and three months ended September 30, 2018, respectively. During the nine and three months ended September 30, 2019, we received dividends on this common stock investment of approximately $1.1 million and $0.4 million, respectively, compared to $1.3 million and $0.4 million during the nine and three months ended September 30, 2018, respectively.

-36-

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
September 30, 2017 1.20 % 1.45 % 0.05 % (0.20 )% 0.46 % 0.21 %
June 30, 2017 1.05 % 1.43 % (0.03 )% (0.41 )% 0.46 % 0.08 %
March 31, 2017 0.82 % 1.37 % 0.12 % (0.43 )% 0.51 % (0.04 )%
December 31, 2016 0.62 % 1.28 % 0.19 % (0.47 )% 0.58 % (0.08 )%
September 30, 2016 0.49 % 1.09 % 0.19 % (0.41 )% 0.51 % (0.09 )%
June 30, 2016 0.44 % 0.92 % 0.23 % (0.25 )% 0.47 % (0.01 )%
March 31, 2016 0.40 % 0.84 % 0.17 % (0.27 )% 0.37 % (0.07 )%

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
Nine Months Ended One-Month Six-Month LIBOR LIBOR LIBOR LIBOR
September 30, 2017 1.03 % 1.42 % 0.06 % (0.33 )% 0.48 % 0.09 %
September 30, 2016 0.44 % 0.95 % 0.20 % (0.31 )% 0.46 % (0.05 )%

Junior Subordinated Notes

Interest expense on ~~the Company's~~our junior subordinated debt securities was ~~$0.9~~$1.2 million and ~~$0.8~~$1.1 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The average rate of interest paid for the nine months ended September 30, ~~2017~~2019 was ~~4.64%~~6.06% compared to ~~4.13%~~5.57% for the comparable period in ~~2016.~~2018.

Interest expense on ~~the Company's~~our junior subordinated debt securities was ~~$0.3~~$0.4 million and ~~$0.3~~$0.4 million for the three month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The average rate of interest paid for the three months ended September 30, ~~2017~~2019 was ~~4.76%~~5.86% compared to ~~4.19%~~5.84% for the comparable period in ~~2016.~~2018.

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 September 30, ~~2017,~~2019, the interest rate was ~~4.82%~~5.62%.

Gains or Losses and Other Income

The table below presents ~~the Company's~~our gains or losses and other income for the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2017 2016 Change 2017 2016 Change
Realized (losses) gains on sales of MBS $ (1 ) $ 180 $ (181 ) $ - $ (71 ) $ 71
Unrealized (losses) gains on MBS (296 ) (313 ) 17 168 (274 ) 442
Total (losses) gains on MBS (297 ) (133 ) (164 ) 168 (345 ) 513
(Losses) gains on derivative instruments (829 ) (1,550 ) 721 (19 ) 508 (527 )
Advisory services 5,398 3,931 1,467 1,940 1,388 552
Gains on retained interests in securitizations 390 2,100 (1,710 ) 85 1,021 (936 )
Unrealized (losses) gains on
Orchid Island Capital, Inc. common stock (823 ) 684 (1,507 ) 502 181 321
Orchid Island Capital, Inc. dividends 1,880 1,758 122 638 586 52

2018.

(in thousands)
	Nine Months Ended September 30,									Three Months Ended September 30,
	2019			2018			Change			2019			2018			Change
Realized gains (losses) on sales of MBS	$	23		$	(577	)	$	600		$	23		$	(473	)	$	496
Unrealized gains (losses) on MBS		6,227			(8,407	)		14,634			950			(1,593	)		2,543
Total gains (losses) on MBS		6,250			(8,984	)		15,234			973			(2,066	)		3,039
(Losses) gains on derivative instruments		(6,105	)		3,558			(9,663	)		(483	)		948			(1,431	)
Gains on retained interests in securitizations		315			1,105			(790	)		40			1,357			(1,317	)
Unrealized losses on
Orchid Island Capital, Inc. common stock		(973	)		(3,086	)		2,113			(927	)		(410	)		(517	)

We invest in MBS with the intent to earn net income from the realized yield on those assets over ~~the~~their related funding and hedging costs, and not for ~~purposes~~the purpose of making short term gains from 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 nine months ended September 30, ~~2017,~~2019 and 2018, the Company received proceeds of ~~$1.7~~$44.0 million and $60.4 million from the sales of MBS. There were no sales of MBS during the three months ended September 30, 2017. During the nine and three months ended September 30, 2016, the Company received proceeds of $73.1 million and $31.3 million from the sales of MBS, respectively.

The fair value of ~~the Company's~~our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are sensitive to changes in interest rates. The table below presents historical interest rate data for each quarter end during ~~2017~~2019 and ~~2016.~~

2018.

15 Year 30 Year Three
5 Year 10 Year Fixed-Rate Fixed-Rate Month

Treasury Rate⁽¹⁾

Treasury Rate⁽¹⁾

Mortgage Rate⁽²⁾

Mortgage Rate⁽²⁾

Libor⁽³⁾

September 30, 2017 1.93 % 2.33 % 3.11 % 3.81 % 1.32 %
June 30, 2017 1.88 % 2.30 % 3.17 % 3.90 % 1.26 %
March 31, 2017 1.93 % 2.40 % 3.41 % 4.20 % 1.13 %
December 31, 2016 1.93 % 2.45 % 3.43 % 4.20 % 0.98 %
September 30, 2016 1.16 % 1.61 % 2.76 % 3.46 % 0.85 %
June 30, 2016 1.01 % 1.49 % 2.84 % 3.57 % 0.65 %
March 31, 2016 1.22 % 1.79 % 2.97 % 3.69 % 0.63 %

	5 Year			10 Year			15 Year			30 Year			Three
	U.S. Treasury			U.S. Treasury			Fixed-Rate			Fixed-Rate			Month
	Rate⁽¹⁾			Rate⁽¹⁾			Mortgage Rate⁽²⁾			Mortgage Rate⁽²⁾			Libor⁽³⁾
September 30, 2019		1.55	%		1.68	%		3.12	%		3.61	%		2.13	%
June 30, 2019		1.76	%		2.00	%		3.24	%		3.80	%		2.40	%
March 31, 2019		2.24	%		2.41	%		3.72	%		4.27	%		2.61	%
December 31, 2018		2.51	%		2.69	%		4.09	%		4.64	%		2.80	%
September 30, 2018		2.95	%		3.06	%		4.08	%		4.63	%		2.40	%
June 30, 2018		2.73	%		2.85	%		4.04	%		4.57	%		2.34	%
March 31, 2018		2.56	%		2.74	%		3.91	%		4.44	%		2.31	%

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

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

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

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 nine and three months ended September 30, 2017, the Company recorded gains on retained interests of $0.4 million and $0.1 million, respectively, compared to gains of $2.1 million and $1.0 million, respectively, for the nine and three months ended September 30, 2016.

-37-

~~Advisory Services~~

~~Advisory services revenue consists of management fees and overhead reimbursements charged to Orchid for the management of its portfolio pursuant to the terms of a management agreement.~~

Operating Expenses

For the nine and three months ended September 30, ~~2017, the Company's~~2019, our total operating expenses were approximately ~~$4.6~~$4.8 million and ~~$1.5~~$1.6 million, respectively, compared to approximately ~~$4.1~~$4.9 million and ~~$1.4~~$1.5 million for the nine and three months ended September 30, ~~2016,~~2018, respectively. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

(in thousands)
	Nine Months Ended September 30,							Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended September 30,
	2017		2016		Change			2017		2016		Change			2019		2018		Change			2019		2018			Change
Compensation and related benefits	$	2,684	$	2,274	$	410		$	869	$	723	$	146		$	3,075	$	3,071	$	4		$	987	$	969		$	18
Legal fees		81		144		(63	)		40		40		-			120		71		49			24		(35	)		59
Accounting, auditing and other professional fees		266		308		(42	)		80		118		(38	)		261		276		(15	)		73		84			(11	)
Directors' fees and liability insurance		498		467		31			165		155		10
Directors’ fees and liability insurance																491		482		9			169		161			8
Administrative and other expenses		1,022		888		134			364		321		43			878		986		(108	)		353		317			36
	$	4,551	$	4,081	$	470		$	1,518	$	1,357	$	161		$	4,825	$	4,886	$	(61	)	$	1,606	$	1,496		$	110

Financial Condition:

Mortgage-Backed Securities

As of September 30, ~~2017, the Company's~~2019, our MBS portfolio consisted of ~~$198.0~~$163.2 million of agency or government MBS at fair value and had a weighted average coupon of ~~4.23%~~4.28%. During the nine months ended September 30, ~~2017, the Company~~2019, we received principal repayments of ~~$7.7~~$14.8 million compared to ~~$10.3~~$19.6 million for the comparable period ended September 30, ~~2016.~~2018. The average prepayment speeds for the quarters ended September 30, ~~2017~~2019 and ~~2016~~2018 were ~~8.3%~~10.5% and ~~13.6%~~9.5%, respectively.

The following table presents the 3-month constant prepayment rate ~~("CPR"~~(“CPR”) experienced on ~~the Company's~~our structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented. 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
PT MBS MBS Total
Three Months Ended Portfolio (%) Portfolio (%) Portfolio (%)
September 30, 2017 5.2 18.8 8.3
June 30, 2017 5.9 20.4 9.9
March 31, 2017 4.8 18.8 8.8
December 31, 2016 5.5 27.3 11.1
September 30, 2016 9.4 19.7 13.6
June 30, 2016 7.8 20.4 12.6
March 31, 2016 11.8 16.6 14.3

			Structured
	PT MBS		MBS		Total
Three Months Ended	Portfolio (%)		Portfolio (%)		Portfolio (%)
September 30, 2019		9.5		16.2		10.5
June 30, 2019		9.9		14.6		10.5
March 31, 2019		5.7		13.4		6.8
December 31, 2018		5.5		11.7		6.6
September 30, 2018		8.6		13.5		9.5
June 30, 2018		13.4		11.6		13.1
March 31, 2018		7.2		16.8		8.6

-38-

The following tables summarize certain characteristics of ~~the Company's~~our PT MBS and structured MBS as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

($ in thousands)
Weighted
Percentage Average
of Weighted Maturity
Fair Entire Average in Longest
Asset Category Value Portfolio Coupon Months Maturity
September 30, 2017
Fixed Rate MBS $ 195,151 98.6% 4.23% 326 1-Sep-47
Total PT MBS 195,151 98.6% 4.23% 326 1-Sep-47
Interest-Only Securities 1,643 0.8% 3.44% 232 25-Dec-39
Inverse Interest-Only Securities 1,196 0.6% 5.32% 281 25-Apr-41
Total Structured MBS 2,839 1.4% 4.23% 253 25-Apr-41
Total MBS $ 197,990 100.0% 4.23% 325 1-Sep-47
December 31, 2016
Fixed Rate MBS $ 124,299 95.4% 4.24% 347 1-Oct-46
Total PT MBS 124,299 95.4% 4.24% 347 1-Oct-46
Interest-Only Securities 2,654 2.0% 3.48% 245 25-Dec-39
Inverse Interest-Only Securities 3,349 2.6% 5.52% 325 25-Dec-46
Total Structured MBS 6,003 4.6% 4.62% 290 25-Dec-46
Total MBS $ 130,302 100.0% 4.26% 344 25-Dec-46

($ in thousands)
					Weighted
			Percentage		Average
			of	Weighted	Maturity
		Fair	Entire	Average	in	Longest
Asset Category		Value	Portfolio	Coupon	Months	Maturity
September 30, 2019
Fixed Rate MBS	$	161,538	99.0%	4.28%	332	1-May-49
Interest-Only MBS		1,136	0.7%	3.69%	288	15-Jul-48
Inverse Interest-Only MBS		553	0.3%	4.54%	257	25-Apr-41
Total MBS Portfolio	$	163,227	100.0%	4.28%	332	1-May-49
December 31, 2018
Fixed Rate MBS	$	209,675	98.7%	4.26%	327	1-Aug-48
Interest-Only MBS		2,021	1.0%	3.69%	293	15-Jul-48
Inverse Interest-Only MBS		728	0.3%	4.06%	272	25-Apr-41
Total MBS Portfolio	$	212,424	100.0%	4.25%	327	1-Aug-48

($ in thousands)
	September 30, 2017					December 31, 2016					September 30, 2019					December 31, 2018
			Percentage of					Percentage of					Percentage of					Percentage of
Agency	Fair Value		Entire Portfolio			Fair Value		Entire Portfolio			Fair Value		Entire Portfolio			Fair Value		Entire Portfolio
Fannie Mae	$	171,565		86.7	%	$	120,961		92.8	%	$	148,279		90.8	%	$	193,437		91.1	%
Freddie Mac		26,201		13.2	%		8,870		6.8	%		14,917		9.1	%		18,881		8.9	%
Ginnie Mae		224		0.1	%		471		0.4	%		31		0.1	%		106		0.0	%
Total Portfolio	$	197,990		100.0	%	$	130,302		100.0	%	$	163,227		100.0	%	$	212,424		100.0	%

	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
Weighted Average Pass-through Purchase Price	$	109.33	$	110.31	$	106.50	$	106.81
Weighted Average Structured Purchase Price	$	6.02	$	6.74	$	6.39	$	6.39
Weighted Average Pass-through Current Price	$	108.00	$	107.54	$	108.19	$	103.87
Weighted Average Structured Current Price	$	7.38	$	10.40	$	6.58	$	8.67
Effective Duration ⁽¹⁾		3.867		4.769		2.607		3.935

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of ~~3.867~~2.607 indicates that an interest rate increase of 1.0% would be expected to cause a ~~3.867%~~2.607% decrease in the value of the MBS in ~~the Company's~~our investment portfolio at September 30, ~~2017.~~2019. An effective duration of ~~4.769~~3.935 indicates that an interest rate increase of 1.0% would be expected to cause a ~~4.769%~~3.935% decrease in the value of the MBS in ~~the Company's~~our investment portfolio at December 31, ~~2016.~~2018. These figures include the structured securities in the portfolio but do include the effect of ~~the Company's funding cost~~our hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

The following table presents a summary of ~~the Company's~~our portfolio assets acquired during the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

($ in thousands)
	Nine Months Ended September 30,																Nine Months Ended September 30,
	2017								2016								2019								2018
		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		$	77,295	$	107.68		2.70	%		$	133,100	$	110.31		2.42	%		$	3,285	$	104.12		3.35	%		$	91,578	$	104.72		3.67	%

~~The Company's~~-39-

Our portfolio of PT MBS is typically comprised of adjustable-rate MBS, fixed-rate MBS and hybrid adjustable-rate MBS. ~~The Company~~We generally ~~seeks~~seek to acquire low duration assets that offer high levels of protection from mortgage prepayments provided that 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~~our 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~~our investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages, ~~and~~ loan payoffs in connection with home ~~sales.~~sales, and borrowers paying more than their scheduled loan payments, which accelerates the amortization of the loans.

The duration of ~~the Company's~~our 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~~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~~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~~causes 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.

Prepayments on the loans underlying ~~the Company's~~our MBS can alter the timing of the cash flows ~~from the underlying loans to the Company.~~received by us. As a result, ~~the Company gauges~~we gauge 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~~We face the risk that the market value of ~~its~~our PT MBS assets will increase or decrease at different rates than that of ~~its~~our structured MBS or liabilities, including ~~its~~our hedging instruments. Accordingly, ~~the Company assesses its~~we assess our interest rate risk by estimating the duration of ~~its~~our assets and the duration of ~~its~~our liabilities. ~~The Company~~We generally ~~calculates~~calculate duration and effective duration using various third-party models or ~~obtains~~obtain these quotes from third parties. However, empirical results and various third-party models may produce different duration numbers for the same securities.

The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of September 30, ~~2017,~~2019, assuming rates instantaneously fall 100 ~~basis points ("bps"),~~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'~~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
Fixed Rate MBS	$	195,151	$	6,177		$	(10,066	)	$	(22,189	)		3.17	%		(5.16	)%		(11.37	)%	$	161,538	$	3,671		$	(5,911	)	$	(13,883	)		2.27	%		(3.66	)%		(8.59	)%
Interest-Only MBS		1,643		(621	)		465			735			(37.77	)%		28.31	%		44.75	%		1,136		(291	)		362			637			(25.59	)%		31.86	%		56.01	%
Inverse Interest-Only MBS		1,196		(134	)		(51	)		(256	)		(11.17	)%		(4.27	)%		(21.37	)%		553		(25	)		(6	)		(73	)		(4.49	)%		(1.08	)%		(13.18	)%
Total MBS Portfolio	$	197,990	$	5,422		$	(9,652	)	$	(21,710	)		2.74	%		(4.88	)%		(10.96	)%	$	163,227	$	3,355		$	(5,555	)	$	(13,319	)		2.06	%		(3.40	)%		(8.16	)%

($ in thousands)
Notional $ Change in Fair Value % Change in Fair Value

Amount⁽¹⁾
-100BPS +100BPS +200BPS -100BPS +100BPS +200BPS
Eurodollar Futures Contracts
Repurchase Agreement Hedges $ 1,020,000 $ (1,701 ) $ 2,550 $ 5,100 (0.68 )% 1.02 % 2.04 %
Junior Subordinated Debt Hedges 442,000 (737 ) 1,105 2,210 (0.68 )% 1.02 % 2.04 %
$ 1,462,000 $ (2,438 ) $ 3,655 $ 7,310 (0.68 )% 1.02 % 2.04 %

Gross Totals $ 2,984 $ (5,997 ) $ (14,400 )

-40-

($ in thousands)
	Notional		$ Change in Fair Value									% Change in Fair Value
	Amount⁽¹⁾		-100BPS			+100BPS			+200BPS			-100BPS			+100BPS			+200BPS
Eurodollar Futures Contracts
Repurchase Agreement Hedges	$	102,222	$	(2,300	)	$	2,300		$	4,600			(1.02	)%		1.02	%		2.03	%
Junior Subordinated Debt Hedges		20,800		(260	)		260			520			(1.02	)%		1.02	%		2.04	%
Treasury Futures		20,000		(1,218	)		1,056			2,134			(5.11	)%		2.09	%		4.43	%
TBA Contracts		50,000		(496	)		1,576			4,357			(0.97	)%		3.07	%		8.49	%
	$	193,022	$	(4,274	)	$	5,192		$	11,611

Gross Totals			$	(919	)	$	(363	)	$	(1,708	)

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

In addition to changes in interest rates, other factors impact the fair value of ~~the Company's~~our 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~~our assets would likely differ from that shown above and such difference might be material and adverse to ~~the Company's~~our stockholders.

Repurchase Agreements

As of September 30, ~~2017, the Company~~2019, we 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 ~~five~~six of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with ~~the Company.~~us. These borrowings are secured by ~~the Company's~~our MBS.

As of September 30, ~~2017, the Company~~2019, we had obligations outstanding under the repurchase agreements of approximately ~~$187.4~~$154.5 million with a net weighted average borrowing cost of ~~1.35%~~2.34%. The remaining maturity of ~~the Company's~~our outstanding repurchase agreement obligations ranged from 113 to 8978 days, with a weighted average maturity of 4814 days. Securing the repurchase agreement obligation as of September 30, ~~2017~~2019 are MBS with an estimated fair value, including accrued interest, of ~~$198.2~~$163.8 million and a weighted average maturity of ~~326~~333 months. Through November ~~3, 2017, the Company has~~8, 2019, we have been able to maintain ~~its~~our repurchase facilities with comparable terms to those that existed at September 30, ~~2017~~2019 with maturities through ~~January 29, 2018.~~

December 17, 2019.

The table below presents information about our period-end, maximum and average repurchase agreement obligations for each quarter in ~~2017~~2019 and ~~2016.~~2018.

($ in thousands)
Difference Between Ending
Ending Balance Average Balance Repurchase Agreements and
of Repurchase of Repurchase Average Repurchase Agreements
Three Months Ended Agreements Agreements Amount Percent
September 30, 2017 $ 187,374 $ 161,003 $ 26,371 16.38
%⁽¹⁾
June 30, 2017 134,633 126,341 8,292 6.56 %
March 31, 2017 118,049 119,938 (1,889 ) (1.57 )%
December 31, 2016 121,828 123,909 (2,081 ) (1.68 )%
September 30, 2016 125,991 114,858 11,133 9.69 %
June 30, 2016 103,725 103,259 466 0.45 %
March 31, 2016 102,794 90,014 12,780 14.20
%⁽²⁾

($ in thousands)
	Ending		Maximum		Average		Difference Between Ending
	Balance		Balance		Balance		Repurchase Agreements and
	of Repurchase		of Repurchase		of Repurchase		Average Repurchase Agreements
Three Months Ended	Agreements		Agreements		Agreements		Amount			Percent
September 30, 2019	$	154,475	$	200,552	$	177,566	$	(23,091	)		(13.00	)%
June 30, 2019		200,656		200,776		199,901		755			0.38	%
March 31, 2019		199,146		200,113		199,771		(625	)		(0.31	)%
December 31, 2018		200,396		203,746		202,069		(1,673	)		(0.83	)%
September 30, 2018		203,742		204,988		189,582		14,160			7.47	%
June 30, 2018		175,422		193,753		184,621		(9,199	)		(4.98	)%
March 31, 2018		193,820		204,998		197,001		(3,181	)		(1.61	)%

~~(1)~~

The higher ending balance relative to the average balance during the quarter ended September 30, 2017 reflects the growth of the portfolio, on a leveraged basis. During the quarter ended September 30, 2017, the Company's investment in PT MBS increased $56.1 million.

-41-

~~(2)~~

The higher ending balance relative to the average balance during the quarter ended March 31, 2016 reflects the repositioning of the portfolio. During the quarter ended March 31, 2016, the Company's investment in PT MBS increased $26.2 million.

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 and fulfill margin calls. Our principal immediate sources of liquidity include cash balances, unencumbered assets, the availability to borrow under repurchase 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.~~portfolio. 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, (c) the payment of overhead and operating expenses, and (d) the payment of other accrued obligations.

Our ~~strategy for~~ hedging ~~our funding costs~~strategy typically involves taking short positions in Eurodollar futures, T-Note futures, ~~swaptions~~TBAs 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 move in price in such a way that we do not receive enough cash through margin calls to offset the Eurodollar related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.

Our master repurchase agreements have no stated expiration, but can be terminated at any time at 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.

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.

As discussed above, we invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of 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~~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.

In future periods we expect to continue to finance our activities through repurchase agreements. As of September 30, ~~2017, the Company~~2019, we had cash and cash equivalents of ~~$5.2~~$7.8 million. We generated cash flows of ~~$11.5~~$20.9 million from principal and interest payments on our MBS portfolio and ~~$0.9 million from retained interests and~~ had average repurchase agreements outstanding of ~~$135.8~~$192.4 million during the nine months ended September 30, ~~2017.~~2019. In addition, during the nine months ended September 30, ~~2017, the Company~~2019, we received approximately ~~$5.3~~$5.1 million in management fees and expense reimbursements as manager of Orchid and approximately ~~$1.9~~$1.1 million in dividends from ~~its~~our investment in Orchid common stock.

In July 2019, we completed a “modified Dutch auction” tender offer and paid an aggregate of $2.2 million, excluding fees and related expenses, to repurchase 1.1 million shares of our Class A common stock at a price of $2.00 per share. In order to fund the share-repurchase we sold MBS assets with an approximate fair market at time of sale, including accrued interest, of $44.0 million.

-42-

In order to generate additional cash to be invested in our MBS portfolio, on October 30, 2019, we obtained a $680,000 loan secured by a mortgage on the Company’s office property. The loan is payable in equal monthly installments of approximately $4,500, including interest at 4.89%, through October 30, 2039. Net loan proceeds were approximately $651,000. We are also seeking to sell a second real property that is not used in the Company’s business. As of September 30, 2019, that property had a carrying value of $450,000. When that property is sold, we intend to invest the net sale proceeds in our MBS portfolio.

The table below summarizes the effect that certain future contractual obligations existing as of September 30, ~~2017~~2019 will have on our liquidity and cash flows.

(in thousands)
	Obligations Maturing										Obligations Maturing
	Within One Year		One to Three Years		Three to Five Years		More than Five Years		Total		Within One Year		One to Three Years		Three to Five Years		More than Five Years		Total
Repurchase agreements	$	187,374	$	-	$	-	$	-	$	187,374	$	154,475	$	-	$	-	$	-	$	154,475
Interest expense on repurchase agreements⁽¹⁾		521		-		-		-		521		381		-		-		-		381
Junior subordinated notes⁽²⁾		-		-		-		26,000		26,000		-		-		-		26,000		26,000
Interest expense on junior subordinated notes⁽¹⁾		1,326		2,545		2,541		16,793		23,205		1,546		2,962		2,966		16,609		24,083
Litigation settlement		250		250		-		-		500
Totals	$	189,471	$	2,795	$	2,541	$	42,793	$	237,600	$	156,402	$	2,962	$	2,966	$	42,609	$	204,939

(1)	Interest expense on repurchase agreements and junior subordinated notes are based on current interest rates as of September 30, ~~2017~~2019 and the remaining term of liabilities existing at that date.

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

Outlook

Orchid Island Capital Inc.

To the extent Orchid is able to increase its capital base over time, we will benefit via increased management fees. In addition, Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay to us ~~Orchid's~~Orchid’s pro rata share of overhead as defined in the management agreement. As a stockholder of Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes do not impact our cash flows from Orchid.

The independent Board of Directors of Orchid has the ability to terminate the management agreement and thus end our ability to collect management fees and share overhead costs. Should Orchid terminate the management agreement without cause, it will be obligated to pay us 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 current automatic renewal term.

-43-

Interest Rates and the MBS Market

~~In many respects the~~The third quarter of 2019 was a ~~repeat of~~very volatile period. As 2018 came to a close, the first and second. Economic and market developments continued the trend in place since March. Inflation data continued to come in below market expectations. Optimism stemming from the surprise outcomedomestic economy of the U.S. ~~Presidential election last November~~was quite strong and the ~~markets' expectations for progress on health care, regulatory and tax reform, infrastructure spending, etc. were not realized. In contrast, events in Washington were chaotic at times as~~Fed was still removing accommodation from the Trump Administration struggled with a Republican party rife with internal struggles and political infighting inside the White House itself. Efforts to repeal and replace the Affordable Care Act seemed to come to an end and the continued in-fighting among Republicans called into question the ability of the Trump Administration to accomplish anything meaningful. The Federal Reserve (the "Fed") raised their target foreconomy, raising the Federal Funds (the “Fed Funds”) target range 25 bps at their December 2018 meeting. The trajectory of the economy and Fed monetary policy has changed dramatically since. The Fed has lowered the Fed Funds target range 25 bps at the July, September, and just last week, the October 2019 meetings. Global growth has continued to decelerate and domestic growth, at least the manufacturing side of the economy, has clearly slowed. Contributing to the global growth slow down has been the escalating trade war, particularly between the U.S. and China. The Trump administration has continued to increase both the dollar amount of goods imported from China that will be subject to tariffs and the magnitude of the tariffs that will be imposed. The most recent increase was announced on August 1st and was the largest in both the dollar amount of goods affected and the rate of the tariffs. The markets reacted violently, and risk-taking sentiment plummeted. Global stock markets declined and interest rates across the globe declined.

After a period of relative calm in ~~March~~July 2019, the escalation in the trade war triggered by the new tariff announcement in August brought about several meaningful developments for the global rates markets. In Germany, the 10-year Bund yield hit a new all-time low of -0.716% on August 28, 2019. The dollar amount of global debt trading at negative yields hit a new all-time high of $17.037 trillion on August 29, 2019. Domestically, the 10-year U.S. Treasury term premium reached -1.3273 on August 28, 2019, the 30-year government bond yield declined below 2% for the first time ever during August and ~~June,~~the spread between the 3-month U.S. Treasury bill and ~~announced a tapering of their asset purchases in September.~~the 10-year U.S. Treasury reached -0.5044 on August 27, 2019. In short, it was an unsettling month. However, the ~~market remained skeptical the Fed would be able to follow~~volatility continued through with as many additional hikes as the Fed was expecting as core inflation readings continued to show year over year declines, with many of the elements of the index exhibiting persistent weakness. Geopolitical events – particularly with respect to North Korea – keep the world and markets on edge. The yield on the 10-year US Treasury rate hit its year to date low on September 7, 2017, closing at 2.04%, and nearly broke below the psychologically important 2% level intra-day. Mother nature had a hand in shaping developments in the markets as well, as three major hurricanes made landfall – one each in Texas, Florida and Puerto Rico. In the case of Texas, Hurricane Harvey caused unprecedented flooding and disrupted the Nation's oil refining capacity for several days.

~~However, there was a perceptible change in market sentiment in early September, and the market reversed course into~~ the end of the ~~third quarter and early fourth~~ quarter. Geo-political events calmed down, removing the flight-to-quality induced demand for safe-haven assets, and economic news strengthened. Events in Washington turned mildly positive as the Trump Administration pivoted away from health care reform to tax reform, with what the market perceived to be slightly better prospects for success. Inflation data finally met expectations and showed signs of reversing its decline when the August data was released on September 14th. Finally, on September 20th, Fed Chairwomen Yellen sounded quite hawkish and reiterated her belief that recent inflation data represented temporary or transitory effects and would reverse soon enough back towards their 2% target. It was quite clear the Fed intended to raise the Federal Funds rate again in December. The market responded as Fed Funds futures pricing implied a 70-80% probability of a 25 basis point increase in the Federal Funds rate in December. The September

Domestic economic data released in early ~~October has also been very strong,~~September was not as bad as feared and the ~~anticipated short-term effects~~rates markets reversed violently again, with the yield on the 10-year U.S. Treasury rising from a low of 1.458% on September 3, 2019 – within 11 bps of the ~~hurricanes appear~~all-time lowest yield for the 10-year – to ~~have been less than feared. Further,~~just under 1.90% on September 13, 2019. This was a 44 bp move in just 8 trading days. On September 14th, there was a missile attack on substantial portions of Saudi Arabian oil productions facilities which turned the ~~repair work associated~~market around yet again. Developments during the period were not limited to the equity and rates markets. During September, the House of Representatives launched an impeachment inquiry into President Trump’s dealing with the ~~hurricanes should put even~~president of Ukraine. Finally, on September 16th, disruptions in the over-night funding markets caused the Fed Funds rate to trade outside of the 25 bps band established by the Fed, and over-night repo rates to spike towards 7%. The spike was caused more ~~upward pressure on economic activity.~~

Asby a lack of available funding versus an unwillingness to lend, which would be consistent with credit related fears present in the market. The Fed intervened rather quickly by initially providing overnight repo facilities and eventually term funding over quarter end to calm markets. The Fed took additional steps in October to address pressures in the over-night funding markets. These steps are described more fully below under “Recent Regulatory Developments”. In summary, the third quarter was very volatile and as we ~~move~~head into the fourth quarter, the markets are anxious for calm to return. So far in October, there have been positive developments. The U.S. and China reached a tentative agreement on October 11, 2019 that, among other things, prevented tariffs on $300 billion of goods from increasing on October 15, 2019 as originally scheduled. There are not many details of the tentative agreement available yet, but the market ~~pricing of additional policy accommodation removal is far less than~~senses the trade war, while not about to end, will not continue to escalate either, and appears to be thawing somewhat. A potential deal on Brexit has also been reached, which may prevent the United Kingdom from leaving the European Union without a deal. These recent developments led the Fed ~~anticipates. The latest reads on inflation returned~~ to ~~its aforementioned string~~announce at the conclusion of ~~below expectations readings. The perceived lack of meaningful inflation, coupled with a hawkish Fed, has caused~~their October 30, 2019 meeting that they expect the ~~U.S. Treasury curve to flatten,~~current policy rate will be appropriate as long as the ~~spread between 5-year Treasury Notes and 30-year Treasury Bonds~~economy continues to evolve in a manner that is ~~at multi-year lows. The market is also faced~~consistent with ~~uncertainty surrounding President Trump's appointment~~their outlook. This means monetary policy will be on hold barring an evolution of the ~~next Fed chair, with many of~~economy above or below the leading candidates perceived to be more hawkish by the markets than the current chairwoman, even though she remains a candidate herself. Regardless of the uncertainty in the bond market, the equity markets,Fed’s outlook for growth and risk markets generally, continue to hit all-time high closes almost daily, and the combination of robust economic data, low inflation and the prospects for tax reform make for an ideal environment for risk assets.inflation.

-44-

In response to these developments, the markets expect continued accommodation on the part of the various central banks and this appears to be what the banks intend to deliver. The ~~mortgage market closed~~European Central Bank is under new leadership since November 1, 2019, and both the ~~quarter with~~outgoing president and his replacement have made clear their intentions to maintain adequate policy accommodation. This is the case as well in China and Japan. In the U.S., the picture is less clear. The Fed stated at the conclusion of their October 30, 2019 meeting that the current ~~coupon, 30-year fixed~~stance of monetary policy is appropriate as long as the economy continues to evolve in a manner consistent with their outlook. In other words, there will be no further adjustments to the Fed Funds rate ~~Agency MBS trading at~~absent a change in the ~~tightest spread~~performance of the economy or inflation. However, there appears to ~~comparable duration U.S. Treasuries since~~be a divide within the Fed over both the outlook for the economy and what the focus of the Fed should be. Domestic data – outside of manufacturing – has remained firm. Data released in early ~~2014. As has been~~October indicated this may not be the case for much longer. However, the data is far from weak. Outside of the ~~year, lower coupon~~U.S. the picture is far less cloudy. There is clear evidence of a global growth slow down. The question that the Fed is grappling with relates to which matters most to the Fed for setting monetary policy. Is it solely the state of the domestic economy or should the Fed respond to developments abroad, usually manifesting themselves in the rates and equities markets. The level of inflation and inflation expectations also matter. Currently, inflation is running below the Fed target of 2%, but has been moving closer to target of late. Inflation consistently below the Fed’s target would justify additional accommodation, but this may not be the case in the near future if inflation continues to move higher. Public comments by the Fed chairman and policy decision voting reveal the lack of consensus. The markets await resolution of the matter.

The Agency MBS ~~outperformed high coupon MBS~~market total return for the quarter was 1.4%, although the return was -0.2% versus ~~their comparable~~equivalent duration swaps and LIBOR per data by Bank of America Merrill Lynch/ICE Data Indices. With interest rates declining to near all-time low levels, prepayment activity accelerated and is expected to continue to remain high. The spread of the current-coupon 30-year mortgage to the 10-year U.S. Treasury ~~benchmarks.~~reached 98.07 bps on August 27, 2019, the highest spread since 2012. Total returns across the Agency MBS sector followed durations to some extent, as 30-year returns exceeded returns to 15-year MBS and Ginnie Mae securities, although within the coupon stack, this trend did not hold. As ~~we approach~~prepayment performance was worst among the ~~winter months~~3.5% and 4.0% coupons, these securities generally trailed higher with lower coupons on a total return basis. With prepayment activity elevated and the ~~seasonal slowdown~~continued poor quality of generic, TBA collateral, specified pools continue to outperform.

In June 2019, the Uniform MBS (“UMBS”) began trading. UMBS are passthrough securities representing an interest in a pool of residential mortgages that are issued and guaranteed by either Fannie Mae or Freddie Mac. The UMBS were designed to eliminate differences in underwriting, servicing and trading levels between Fannie Mae and Freddie Mac securities and to increase liquidity in the TBA market. TBA trades can now be settled through delivery of either Fannie Mae or Freddie Mac UMBS. Also, resecuritizations of Fannie Mae or Freddie Mac collateral can be commingled, and commingled passthrough securities can be used to settle UMBS TBA trades. It remains to be seen how effective the UMBS program will be at accomplishing these objectives. As mentioned, the deterioration in the TBA market continues to be a significant obstacle for Agency MBS performance, both on an outright return basis and compared to other sectors of the fixed income universe. Refinancing activity has increased and all agency loans outside of the specified pool market continue to exhibit very poor prepayment ~~activity, coupled~~behavior. The collateral generally has historically high gross weighted average coupons for any given coupon, higher loan balances and higher FICO scores – all consistent with ~~the~~higher prepayment expectations. This has led to a material increase in premiums charged for pools with more desirable prepayment characteristics. While these premiums have increased, and are very high for the current level of rates, ~~that began in early September, speeds should continue to moderate~~the all-in price for specified securities is historically low for the level of rates. This is because the dollar prices for the various TBA securities is very low for the level of rates – reflecting the very poor prepayment characteristics of the TBA collateral.

-45-

Recent Regulatory Developments

In September 2017, the FOMC announced that it would implement a balance sheet normalization policy by gradually decreasing the Fed’s reinvestment of U.S. Treasuries and Agency RMBS. More specifically, principal payments received by the Fed will be reinvested only to the extent they exceed gradually rising caps until the FOMC determines that the Fed is holding no more securities than necessary to implement monetary policy efficiently and effectively. In October 2017, the FOMC commenced this balance sheet normalization program. At the conclusion of the March 2019 FOMC meeting, the Fed said that the FOMC intends to slow the pace of the decline in its holdings of U.S. Treasuries and Agency RMBS over coming quarters provided that the economy and money market conditions evolve about as expected. The Fed specified that the FOMC intends to reduce the run-off of its holdings of U.S. Treasury securities by reducing the cap on monthly redemptions from the previous level of $30 billion to $15 billion beginning in May 2019, and continue to allow its holdings of Agency RMBS to decline, consistent with the aim of holding primarily U.S. Treasury securities in the long run. In October 2019, the Fed began reinvesting principal payments from Agency RMBS or agency debt in U.S. Treasury securities, subject to a maximum of $20 billion per month, with any principal payments in excess of that maximum reinvested in Agency RMBS.

On October 11, 2019, the Fed commenced purchases of up to $60 billion treasury bills per month through the second quarter of 2020. The Fed is also conducting overnight repo operations of $75 billion, initially, and 2-week term repo operations of at least $35 billion twice a week through January of 2020. Their goal is to maintain reserve balances over time at or above the levels that prevailed in early September 2019.

In 2017, policymakers announced that LIBOR will be replaced by 2021. The directive was spurred by the fact that banks are uncomfortable contributing to the LIBOR panel given the shortage of underlying transactions on which to base levels and the liability associated with submitting an unfounded level. LIBOR will be replaced with a new SOFR, a rate based on U.S. repo trading. The new benchmark rate will be based on overnight Treasury General Collateral repo rates. The rate-setting process will be managed and published by the Fed and the Treasury’s Office of Financial Research. Many banks believe that it may take four to five years to complete the transition to SOFR, despite the 2021 deadline. We will monitor the emergence of this new rate carefully as it will likely become the new benchmark for hedges and a range of interest rate investments.

The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to evolve. Although the Trump administration has made statements of its intentions to reform housing finance, ~~and tax policy,~~ many of these potential policy changes will require congressional action. In addition, the Fed has made statements regarding additional increases to the Federal Funds Rate over the balance of 2017 and beyond. The Fed also announced that it will begin to reduce its holdings of Agency MBS and U.S. treasuries.

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, ~~an increase in guarantee fees would increase our costs. In addition,~~ 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.

-46-

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, itprepayment proceeds may not be ~~possible~~able to ~~reinvest prepayment proceeds~~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 ~~discount accretion~~yields earned on those assets, ~~and increase the yields earned,~~ which would increase our net income.

Higher long-term rates can also affect the value of our Agency MBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency MBS declines. Some of the instruments the Company uses to hedge our Agency MBS assets, such as Euro Dollar futures, swaps, interest rate futures and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency MBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. We believe this makes interest only securities desirable hedge instruments for pass-through Agency MBS.

As the economy has rebounded from the financial crisis, the Fed has taken steps to remove the considerable accommodation that was employed to combat the crisis. At the conclusion of its meeting in September 2017, the Fed announced it would implement caps on the amount of Agency MBS assets it would allow to run off, or not be re-invested, starting in October 2017. Previously the Fed would re-invest all of the principal repayments it received each month on the Agency MBS assets it had acquired during its quantitative easing programs. By capping the amount they would allow to run off each month, the Fed was effectively limiting the amount it would re-invest. Per the Fed’s September 2017 announcement, the cap reached $20 billion per month in October 2018. At the time of the Fed’s announcement in September 2017, its monthly re-investments were approximately $20 billion per month as well, so this implied the Fed would stop, or nearly stop, re-investing its monthly pay-downs beyond October 2018. The purchases each month by the Fed have been a significant source of demand in the Agency MBS market and as it was reduced slowly over the course of 2018 and essentially eliminated beyond October 2018, the removal of this source of demand negatively impacted Agency MBS prices. The extent this negatively impacts the Agency MBS market was a function of the level of supply each month – as the supply/demand balance affects the price of any asset – and whether or not another source of demand was present to replace the Fed. At the conclusion of the March 2019 FOMC meeting, the Fed said that the FOMC intends to slow the pace of the decline in its holdings of U.S. Treasuries and Agency MBS over coming quarters provided that the economy and money market conditions evolve about as expected. The Fed specified that the FOMC intends to reduce the run-off of its holdings of U.S. Treasury securities by reducing the cap on monthly redemptions from the previous level of $30 billion to $15 billion beginning in May 2019, and continue to allow its holdings of Agency MBS to decline, consistent with the aim of holding primarily U.S. Treasury securities in the long run. Beginning in October 2019 principal payments from Agency MBS or agency debt were to be reinvested in U.S. Treasury securities subject to a maximum of $20 billion per month, with any principal payments in excess of that maximum reinvested in Agency MBS.

-47-

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.~~durations. 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 PT MBS, particularly PT MBS backed by fixed-rate mortgages.

If Fannie Mae and Freddie Mac were to modify or end their repurchase programs, our investment portfolio could be negatively impacted.

Effects on our borrowing costs

We leverage our PT MBS portfolio and a portion of our structured Agency MBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by ~~market levels of both~~ the ~~Fed Funds Rate and LIBOR.~~short term interest rate markets. An increase in the Fed Funds ~~Rate~~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. ~~We believe that we have sufficient borrowing capacity to support our MBS portfolio.~~

In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which ~~effectively~~economically 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.

Summary

~~As we entered the first~~The third quarter of ~~2017, risk assets were performing~~2019 proved to be a very ~~well as~~turbulent period for the markets. As the global economy continued its slowdown that started in 2018 and the domestic manufacturing segment continued to cool, the markets expected the Fed would need to ease monetary policy in 2019. Contributing to the slowdown, both globally and domestically, was the trade war between the U.S. and China. The trade war was meaningfully escalated when on August 1, 2019, the Trump administration ~~took office~~announced substantial increases to both the dollar amount of goods that would be subject to tariffs and ~~appeared to be very pro-business.~~the size of the tariffs themselves. The markets ~~looked forward~~reacted violently and several key market indicators reached new extreme levels – such as the yield on the German 10-year Bund, the 30-year U.S. Treasury yield and many others. These extreme levels were reached in late August and early September before the market once again pivoted and reversed course, as the yield on the 10-year U.S. Treasury note increased 44 bps in a mere 8 trading days. Not surprisingly, the markets would reverse a few more times as one development after another buffeted the market – including a major attack on Saudi oil fields, the possible impeachment of President Trump, a major disruption in the over-night funding markets and finally, in October, a potential end to the Brexit crisis and a ~~roll back~~tentative trade deal between the U.S. and China. In between all of ~~recently expanding regulations~~the events, volatility levels were elevated, risk markets gyrated wildly and Agency MBS assets performed poorly.

-48-

The Agency MBS market total return for the quarter was 1.4%, although the return was -0.2% versus equivalent duration swaps and LIBOR (per data by Bank of America Merrill Lynch/ICE Data Indices). With rates declining to near all-time low levels, prepayment activity accelerated and is expected to continue to remain high. The spread of the current-coupon 30-year mortgage to the 10-year U.S. Treasury reached 98.07 bps on August 27, 2019, the highest spread since 2012. Total returns across ~~many industries,~~the Agency MBS universe followed durations to some extent, as 30-year returns exceeded returns to 15-year MBS and Ginnie Mae securities, although within the coupon stack, this trend did not hold. As prepayment performance was worst among the 3.5% and 4.0% coupons, these securities generally trailed higher with lower coupons on a ~~new~~total return basis. With prepayment activity elevated and ~~hopefully improved health care act, tax reform~~the continued poor quality of generic, TBA collateral, specified pools continue to outperform. Agency MBS asset performance trailed that of other structured products outside of RMBS and ~~possibly much needed infrastructure spending~~investment grade corporates. High yield corporates generated returns similar to ~~refurbish~~Agency MBS of 1.2% and -0.1% versus comparable duration swaps and LIBOR. As we enter the ~~nation's aging roads, highways, bridges and airports. While the Administration made bold promises, there~~fourth quarter of 2019, Agency MBS performance has been very ~~little delivered. Market optimism was quickly replaced~~directional – with ~~pessimism. Political infighting among~~poor performance when the ~~Administration~~rates markets rally (yields lower) and ~~congressional republicans has generally been~~positive performance when rates increase. Even with the ~~cause, as has turmoil within~~increase in rates since the White House itself. Geopolitical events surfaced in early April, specifically the Korean peninsula. These events kept the market on edge and induced sporadic flight to quality rallies as headlines hit the market from time to time. Incoming inflation data since March was below expectations. In the caseend of the ~~core Consumer Price Index, ("CPI") measure, the year over year figure moved from 2.3% in January 2017~~third quarter, available mortgage rates are still very low by historical standards and prepayment activity is expected to 1.7% by May and has stayed there through September. Despite these readings, the Federal Reserve remains convinced these readings are being driven by temporary or transitory phenomenon and that inflation will reverse and head back towards their two percent target over the medium term. To wit, the Fed appears as if they will hike their target rate again at the December meeting baring surprise outcomes to the downside. The market accepts this outcome as highly likely – as reflected in Fed Funds futures pricing. However, using the same measure, the market does not expect the Fed to raise rates in 2018 and beyond to the extent the Fed expects to. As a result, the combination of benign inflation readings currently coupled with hawkish Fed expectation has caused the yield curve to flatten significantly – to multi-year lows. A second order effect of these developments has occurred in the equity and risk markets as they continue to perform exceedingly well. The major equity indices in the US make record new highs almost daily.

The MBS market has performed well in this environment as the resulting low volatility, tight trading spreads across most comparable asset classes and with demand from asset managers and REIT's easily replacing the lost demand expected from the Fed's tapering of their asset purchases. Current coupon, 30-year fixed rate mortgage are trading at their tightest spread to comparable duration treasuries since early 2014. If these conditions persist we do not believe that the market will be likely to suffer a material widening of spreads to comparable duration U.S. treasuries, even as the Fed has started to trim their asset purchases. The risk to this outcome appears to be inflation exceeding market expectations which should allow the Fed to carry out their professed intentions to raise rates three times in 2018 and more so in the years after. This would also put upward pressure on volatility and longer-term rates, both negatively impacting MBS performance.

remain elevated.

Critical Accounting ~~Policies~~Estimates

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

GAAP requires ~~the Company's~~our management to make some complex and subjective decisions and assessments. ~~The Company's~~Our 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.~~ There have been no changes to our critical accounting ~~policies~~estimates as discussed in our annual report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Capital Expenditures

At September 30, ~~2017,~~2019, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At September 30, ~~2017,~~2019, 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 activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

-49-

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the ~~"evaluation date"~~“evaluation date”), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the ~~"CEO"~~“CEO”) and Chief Financial Officer (the ~~"CFO"~~“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 ~~as amended ("Exchange Act"~~(the “Exchange Act”). Based on this evaluation, the CEO and CFO concluded our 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 we must disclose in ~~its~~our periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the ~~SEC's~~SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no significant changes in the ~~Company's~~Company’s internal control over financial reporting that occurred during the ~~Company's~~Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

-50-

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not party to any material pending legal proceedings as described in Item 103 of Regulation S-K.

ITEM 1A. RISK FACTORS.

There have been no material changes from the risk factors disclosed in the ~~"Risk Factors"~~“Risk Factors” section of our Annual Report on Form 10-K filed with the SEC on March ~~8, 2017.~~20, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~The table below presents the Company’s share repurchase activity for the three months ended September 30, 2019.

							Shares Purchased		Maximum Number
	Total Number			Weighted-Average			as Part of Publicly		of Shares That May Yet
	of Shares			Price Paid			Announced		Be Repurchased Under
	Repurchased			Per Share			Programs⁽²⁾		the Authorization⁽²⁾
July 1, 2019 - July 31, 2019		1,100,000	⁽¹⁾	$	2.00	⁽¹⁾		-		429,596
August 1, 2019 - August 31, 2019		-			-			-		429,596
September 1, 2019 - September 30, 2019		-			-			-		429,596
Totals / Weighted Average		1,100,000		$	2.00			-		429,596

(1)

(2)	On March 26, 2018, the Company's Board of Directors authorized the repurchase of up to 500,000 shares of the Company's Class A common stock. The authorization expires on November 15, 2020.

The Company did not have any unregistered sales of its equity securities during the three months ended September 30, 2019.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

-51-

ITEM 6. EXHIBITS

Exhibit No

3.1	Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the ~~Company's~~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~~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~~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~~Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5	Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the ~~Company's~~Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
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***

Filed herewith.

Furnished herewith

***

Submitted electronically herewith.

-52-

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:November ~~3, 2017~~8, 2019		By:	/s/ Robert E. Cauley
			Robert E. Cauley Chairman and Chief Executive Officer

Date:November ~~3, 2017~~8, 2019		By:	/s/ G. Hunter ~~Hass,~~Haas, IV
			G. Hunter Haas IV President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

-53-

(in thousands)
Series	Issue Date	September 30, 2017		December 31, 2016
HMAC 2004-2	May 10, 2004	$	20	$	143
HMAC 2004-3	June 30, 2004		148		364
HMAC 2004-4	August 16, 2004		290		463
HMAC 2004-5	September 28, 2004		100		144
Total		$	558	$	1,114

	Nine Months Ended September 30,				Three Months Ended September 30,
Shares Issued Related To:	2017		2016		2017		2016
Vested incentive plan shares		-		258,333		-		-
Total shares of Class A Common Stock issued		-		258,333		-		-

Retained interests in securitzations, at fair value (in thousands)							$	558
				CPR Range
Prepayment Assumption				(Weighted Average)
Constant Prepayment Rate					10% (10	%)
				Severity
Default Assumptions	Probability of Default			(Weighted Average)			Range Of Loss Timing
Real Estate Owned		100	%		25.5	%	Next 10 Months
Loans in Foreclosure		100	%		25.5	%	Month 4 - 13
Loans 90 Day Delinquent		100	%		45	%	Month 11-28
Loans 60 Day Delinquent		85	%		45	%	Month 11-28
Loans 30 Day Delinquent		75	%		45	%	Month 11-28
Current Loans		3.1	%		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				12.2 - 15.3	(13.2)		27.50% (27.50	%)
Discounted Cash Flows	Discounted Cash Flow				1.3 - 14.2	(3.8)		27.50% (27.50	%)

($ in thousands)
					Difference Between Ending
	Ending Balance		Average Balance		Repurchase Agreements and
	of Repurchase		of Repurchase		Average Repurchase Agreements
Three Months Ended	Agreements		Agreements		Amount			Percent
September 30, 2017	$	187,374	$	161,003	$	26,371			16.38	%⁽¹⁾
June 30, 2017		134,633		126,341		8,292			6.56	%
March 31, 2017		118,049		119,938		(1,889	)		(1.57	)%
December 31, 2016		121,828		123,909		(2,081	)		(1.68	)%
September 30, 2016		125,991		114,858		11,133			9.69	%
June 30, 2016		103,725		103,259		466			0.45	%
March 31, 2016		102,794		90,014		12,780			14.20	%⁽²⁾