bmnm10q20210630p1i0.jpg
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10‑Q

10-Q
☑
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September
June 30, 20172021

☐
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

:
001-32171
Bimini Capital Management, Inc.
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.)
 
Maryland72-1571637
(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) (
772
)
231-1400
(Registrant'sRegistrant’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
(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
"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☐

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
No
ý

Indicate the number of shares outstanding of each of the Registrant'sRegistrant’s classes of common stock, as of the latest practicable date:
Title of each ClassLatest Practicable DateShares Outstanding
Class A Common Stock, $0.001 par valueNovember 3, 201712,631,627
Class B Common Stock, $0.001 par valueNovember 3, 201731,938
Class C Common Stock, $0.001 par valueNovember 3, 201731,938
BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS


Page
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements1
Condensed Consolidated Balance Sheets (unaudited)1
Condensed Consolidated Statements of Operations (unaudited)2
Condensed Consolidated Statement of Stockholders' Equity (unaudited)3
Condensed Consolidated Statements of Cash Flows (unaudited)4
Notes to Condensed Consolidated Financial Statements5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations24
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk43
ITEM 4. Controls and Procedures44
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings45
ITEM 1A. Risk Factors45
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds45
ITEM 3. Defaults Upon Senior Securities45
ITEM 4. Mine Safety Disclosures45
ITEM 5. Other Information45
ITEM 6. Exhibits46
SIGNATURES47
PART I. FINANCIAL INFORMATION
 
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BIMINI CAPITAL MANAGEMENT, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
       
  (Unaudited)    
   September 30, 2017  December 31, 2016 
ASSETS:      
Mortgage-backed securities, at fair value      
Pledged to counterparties $197,515,121  $129,582,386 
Unpledged  475,282   719,603 
Total mortgage-backed securities  197,990,403   130,301,989 
Cash and cash equivalents  5,211,532   4,429,459 
Restricted cash  936,420   1,221,978 
Orchid Island Capital, Inc. common stock, at fair value  15,489,167   15,108,240 
Retained interests in securitizations  557,659   1,113,736 
Accrued interest receivable  711,030   512,760 
Property and equipment, net  3,378,516   3,407,040 
Deferred tax assets, net  62,632,660   63,833,063 
Other assets  2,921,694   2,942,139 
Total Assets $289,829,081  $222,870,404 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
LIABILITIES:        
Repurchase agreements $187,373,780  $121,827,586 
Junior subordinated notes due to Bimini Capital Trust II  26,804,440   26,804,440 
Accrued interest payable  247,596   114,199 
Other liabilities  1,298,472   1,977,281 
Total Liabilities  215,724,288   150,723,506 
         
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 
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 
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 
Additional paid-in capital  334,872,353   334,850,838 
Accumulated deficit  (260,780,256)  (262,716,636)
Stockholders' Equity  74,104,793   72,146,898 
Total Liabilities and Stockholders' Equity $289,829,081  $222,870,404 
See Notes to Condensed Consolidated Financial Statements 
Title of each Class
Latest Practicable Date
Shares Outstanding
Class A Common Stock, $0.001 par value
August 13, 2021
10,795,676
Class B Common Stock, $0.001 par value
August 13, 2021
31,938
Class C Common Stock, $0.001 par value
August 13, 2021
31,938
 
 
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 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 
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.
TABLE OF CONTENTS
Page
PART I. FINANCIAL
INFORMATION
ITEM 1. Financial
Statements
1
Condensed
Consolidated
Balance Sheets
(unaudited)
1
Condensed
Consolidated
Statements
of Operations
(unaudited)
2
Condensed
Consolidated
Statement
of Stockholders’
Equity (unaudited)
3
Condensed
Consolidated
Statements
of Cash Flows
(unaudited)
4
Notes to Condensed
Consolidated
Financial Statements
(unaudited)
5
ITEM 2. Management’s
Discussion
and Analysis
of Financial
Condition
and Results
of Operations
21
ITEM 3. Quantitative
and Qualitative
Disclosures
About Market
Risk
44
ITEM 4. Controls
and Procedures
55
PART II. OTHER INFORMATION
ITEM 1. Legal
Proceedings
46
ITEM 1A.
Risk Factors
46
ITEM 2. Unregistered
Sales of Equity
Securities
and Use of
Proceeds
46
ITEM 3. Defaults
Upon Senior
Securities
46
ITEM 4. Mine
Safety Disclosures
46
ITEM 5. Other
Information
46
ITEM 6. Exhibits
46
SIGNATURES
48
- 1 -
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
June 30, 2021
December 31, 2020
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties
$
68,973,238
$
65,153,274
Unpledged
20,392
24,957
Total mortgage
-backed securities
68,993,630
65,178,231
Cash and cash equivalents
7,275,488
7,558,342
Restricted cash
5,892,425
3,353,015
Orchid Island Capital, Inc. common stock, at fair value
13,469,903
13,547,764
Accrued interest receivable
216,050
202,192
Property and equipment, net
2,058,815
2,093,440
Deferred tax assets
34,499,829
34,668,467
Due from affiliates
794,251
632,471
Other assets
1,471,857
1,466,647
Total Assets
$
134,672,248
$
128,700,569
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Repurchase agreements
$
71,345,999
$
65,071,113
Long-term debt
27,449,886
27,612,781
Accrued interest payable
77,569
107,417
Other liabilities
940,301
1,421,409
Total Liabilities
99,813,755
94,212,720
COMMITMENTS AND CONTINGENCIES (Note 10)
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 June 30, 2021 and December
31, 2020
0
0
Class A Common stock, $
0.001
par value;
98,000,000
shares designated:
11,608,555
shares issued and outstanding as of June 30, 2021 and December 31,
2020
11,609
11,609
Class B Common stock, $
0.001
par value;
1,000,000
shares designated,
31,938
shares
issued and outstanding as of June 30, 2021 and December 31, 2020
32
32
Class C Common stock, $
0.001
par value;
1,000,000
shares designated,
31,938
shares
issued and outstanding as of June 30, 2021 and December 31, 2020
32
32
Additional paid-in capital
332,642,758
332,642,758
Accumulated deficit
(297,795,938)
(298,166,582)
Stockholders’ Equity
34,858,493
34,487,849
Total Liabilities
and Stockholders' Equity
$
134,672,248
$
128,700,569
See Notes to Condensed Consolidated Financial Statements
- 2 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
For the Six and Three Months Ended June 30, 2021 and
2020
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
2021
2020
Revenues:
Advisory services
$
4,211,221
$
3,339,680
$
2,185,812
$
1,615,083
Interest income
1,189,068
2,563,281
578,450
523,287
Dividend income from Orchid Island Capital, Inc. common stock
1,012,189
753,518
506,094
388,709
Total revenues
6,412,478
6,656,479
3,270,356
2,527,079
Interest expense
Repurchase agreements
(71,197)
(987,417)
(31,339)
(59,601)
Long-term debt
(499,112)
(631,958)
(249,564)
(282,457)
Net revenues
5,842,169
5,037,104
2,989,453
2,185,021
Other income (expense):
Unrealized (losses) gains on mortgage-backed securities
(1,897,862)
27,855
(505,601)
602,136
Realized losses on mortgage-backed securities
0
(5,804,656)
0
0
Unrealized (losses) gains on Orchid Island Capital, Inc. common stock
(77,861)
(754,792)
(2,128,193)
3,653,312
Losses on derivative instruments
(133)
(5,292,421)
(376)
(1,690)
Other income
153,973
642
153,887
318
Total other (expense)
income
(1,821,883)
(11,823,372)
(2,480,283)
4,254,076
Expenses:
Compensation and related benefits
2,190,220
2,146,667
1,066,690
1,046,623
Directors' fees and liability insurance
377,634
345,693
189,614
181,112
Audit, legal and other professional fees
271,903
346,641
134,735
187,348
Administrative and other expenses
641,247
552,045
333,382
270,005
Total expenses
3,481,004
3,391,046
1,724,421
1,685,088
Net income (loss) before income tax provision (benefit)
539,282
(10,177,314)
(1,215,251)
4,754,009
Income tax provision (benefit)
168,638
8,687,508
(295,465)
1,285,884
Net income (loss)
$
370,644
$
(18,864,822)
$
(919,786)
$
3,468,125
Basic and Diluted Net income (loss) Per Share of:
CLASS A COMMON STOCK
Basic and Diluted
$
0.03
$
(1.62)
$
(0.08)
$
0.30
CLASS B COMMON STOCK
Basic and Diluted
$
0.03
$
(1.62)
$
(0.08)
$
0.30
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted
11,608,555
11,608,555
11,608,555
11,608,555
CLASS B COMMON STOCK
Basic and Diluted
31,938
31,938
31,938
31,938
See Notes to Condensed Consolidated Financial Statements
- 3 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six and Three Months Ended June 30, 2021 and
2020
Stockholders' Equity
Common Stock
Additional
Accumulated
Shares
Par Value
Paid-in Capital
Deficit
Total
Balances, January 1, 2020
11,672,431
$
11,673
$
332,642,758
$
(292,677,440)
$
39,976,991
Net loss
-
0
0
(22,332,947)
(22,332,947)
Balances, March 31, 2020
11,672,431
$
11,673
$
332,642,758
$
(315,010,387)
$
17,644,044
Net income
-
0
0
3,468,125
3,468,125
Balances, June 30, 2020
11,672,431
$
11,673
$
332,642,758
$
(311,542,262)
$
21,112,169
Balances, January 1, 2021
11,672,431
$
11,673
$
332,642,758
$
(298,166,582)
$
34,487,849
Net income
-
0
0
1,290,430
1,290,430
Balances, March 31, 2021
11,672,431
$
11,673
$
332,642,758
$
(296,876,152)
$
35,778,279
Net loss
-
0
0
(919,786)
(919,786)
Balances, June 30, 2021
11,672,431
$
11,673
$
332,642,758
$
(297,795,938)
$
34,858,493
See Notes to Condensed Consolidated Financial Statements
- 4 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 2021 and 2020
2021
2020
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)
$
370,644
$
(18,864,822)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation
34,625
34,911
Deferred income tax provision
168,638
8,686,736
Losses on mortgage-backed securities, net
1,897,862
5,776,801
PPP loan forgiveness
(153,724)
0
Unrealized losses on Orchid Island Capital, Inc. common stock
77,861
754,792
Realized and unrealized losses on forward settling TBA securities
0
1,441,406
Changes in operating assets and liabilities:
Accrued interest receivable
(13,858)
556,646
Due from affiliates
(161,780)
52,970
Other assets
(5,210)
(20,960)
Accrued interest payable
(28,289)
(575,438)
Other liabilities
(481,108)
(489,128)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
1,705,661
(2,646,086)
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases
(13,139,464)
(20,823,373)
Sales
0
171,155,249
Principal repayments
7,426,203
8,914,759
Net settlement of forward settling TBA contracts
0
(1,500,000)
Purchases of Orchid Island Capital, Inc. common stock
0
(3,615,712)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
(5,713,261)
154,130,923
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements
117,034,000
430,566,397
Principal repayments on repurchase agreements
(110,759,114)
(588,903,397)
Proceeds from long-term debt
0
152,165
Principal repayments on long-term debt
(10,730)
(10,125)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
6,264,156
(158,194,960)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
2,256,556
(6,710,123)
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of the period
10,911,357
12,385,117
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of the period
$
13,167,913
$
5,674,994
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid (received) during the period for:
Interest expense
$
600,157
$
2,194,813
Income taxes
$
0
$
13,465
See Notes to Condensed Consolidated Financial Statements
- 5 -
BIMINI CAPITAL
MANAGEMENT, INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
SeptemberJune 30, 2017
2021

NOTE 1.
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business
Organization and Business
Description

Bimini Capital Management, Inc., a Maryland corporation ("(“Bimini Capital"Capital” or the "Company"“Company”), was
formed in September 2003, for the purpose of creating and managingis a leveraged investment portfolio consisting of residential mortgage-backed securities ("MBS").  In addition, the
holding company.
The Company manages an MBS portfolio for Orchid Islandoperates in two business segments through its principal wholly-owned
operating subsidiary, Royal
Palm Capital Inc. ("Orchid") and receives fees for providing these services.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital,LLC, which includes its wholly-owned subsidiaries,subsidiary, Bimini Advisors Holdings, LLC (formerly known as Bimini Advisors, Inc.) and Royal Palm Capital, LLC (formerly known as MortCo TRS, LLC).   LLC.
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 manages a residential
mortgage-backed securities (“MBS”) portfolio for Orchid Island Capital, Inc.
("Orchid") and receives fees for providing these services.
Bimini Advisors also manages the MBS portfolio of Royal Palm Capital, LLC.
Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments
and shares of Orchid common
stock, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries
are collectively referred to as "Royal Palm."
COVID-19
Impact
Beginning
in March 2020,
the global
pandemic associated
with the novel
coronavirus
(“COVID-19”)
and related
economic conditions
began to impact
our financial
position and
results of
operations.
As a result
of the economic,
health and
market turmoil
brought about
by
COVID-19,
the MBS market
experienced
severe dislocations.
This resulted
in falling
prices of
our assets
and increased
margin calls
from
our repurchase
agreement
lenders, resulting
in material
adverse effects
on our results
of operations
and to our
financial condition.
The MBS market
largely stabilized
after the
Federal Reserve
announced
on March 23,
2020 that
it would purchase
MBS and U.S.
Treasuries in
the amounts
needed to
support smooth
market functioning.
As of March
31, 2020,
and at all
times since
then, we
have timely
satisfied all
margin calls.
The MBS
market continues
to react to
the pandemic
and the various
measures put
in place to
stabilize the
market. To the extent
the financial
or mortgage
markets do
not respond
favorably to
any of these
actions, or
such actions
do not function
as intended,
our business,
results of
operations
and financial
condition
may continue
to be materially
adversely affected.
Although the
Company cannot
estimate the
length or
gravity of
the impact
of the COVID-19
pandemic at
this time, it
may have a
material adverse
effect
on the Company’s
results of
future operations,
financial position,
and liquidity
during 2021.
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.

Financial Accounting Standards Board (the "FASB"
Variable Interest Entities (“VIEs”) Accounting Standards Codification ("ASC") Topic 810, Consolidation, requires the consolidation of a
A variable interest entity ("VIE") is consolidated 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
- 6 -
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 ninesix and three month periodsthree-month period ended SeptemberJune 30, 2017 2021
are not necessarily
indicative of the results that may be expected for the year ending December 31, 2017.2021.

The consolidated balance sheet at December 31, 20162020 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, 2016.2020.


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 consolidated
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 and derivatives, 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
Segment Reporting
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

In accordance with ASC Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income (loss).  Comprehensive income isoperating 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 14.
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
June 30,
2021 and
December 31,
2020.
June 30, 2021
December 31, 2020
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.
$
7,275,488
$
7,558,342
Restricted cash includes
5,892,425
3,353,015
Total cash, pledged as collateral for repurchase agreements cash equivalents
and derivative instruments.restricted cash

$
(in thousands)      
 September 30, 2017 December 31, 2016 
Cash and cash equivalents $5,211,532  $4,429,459 
Restricted cash  936,420   1,221,978 
Total cash, cash equivalents and restricted cash $6,147,952  $5,651,437 

13,167,913
$
10,911,357
The Company
maintains cash
balances at
several banks
and atexcess
margin with
an exchange
clearing member.
At times, these
balances
- 7 -
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, the Company's cash deposits exceeded federally insured limits by approximately $3.3 million.
Restricted
cash balances
are
uninsured,
but are held
in separate customer
accounts that
are segregated
from the general
funds of the
counterparty.
The Company
limits
uninsured
balances to
only large,
well-known
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.
Mortgage-Backed
Securities

The Company invests primarily in mortgage pass-through ("PT"(“PT”) mortgage-backed
certificates issued by Freddie Mac, Fannie Mae
or Ginnie Mae (“MBS”), collateralized mortgage obligations and(“CMOs”), interest-only ("IO"
(“IO”) securities and inverse interest-only ("IIO"(“IIO”)
securities representing interest in or obligations backed by pools of mortgage-backed
loans. We refer to MBS and CMOs as PT MBS.
We refer to IO and IIO securities as structured MBS. 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'smanagement’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 fairFair 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 ondefined 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 and
losses 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 periodperiods 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 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
accounts for
its investment
in Orchid common
shares at
fair value.
The change
in the fair
value and dividends
received
- 8 -
on this investment
are reflected
in the consolidated
statements
of operations.
We estimate
the fair value option for its
of our investment
in Orchid
on a
market approach
using “Level
1” inputs based
on the quoted
market price
of Orchid’s common shares. 
stock on a
national stock
exchange.
Retained
Interests
in Securitizations
The changeCompany
holds retained
interests in
the subordinated
tranches of
securities
created in
securitization
transactions.
These retained
interests currently
have a recorded
fair value
of this investment and dividendszero, as
the prospect
of future
cash flows
being received on this investment are
is uncertain.
Any cash
received
from the retained
interests is
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" inputs based on the quoted market price of 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 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

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.

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 adjustments to fair value are reflected in earnings. Quoted market prices for these assets are generally not available, so the Company estimates fair value based on the present value of expected future cash flows using management's best estimates of key assumptions, which include expected credit losses, prepayment speeds, weighted-average life, and discount rates commensurate with the inherent risks of the asset.

Derivative
Financial Instruments

The Company
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 Companyit may
enter into
other transactions derivative
instruments
in the future.

The Company has elected not to treat any
accounts for
TBA securities
as derivative
instruments.
Gains and losses
associated
with TBA
securities
transactions
are reported
in gain (loss)
on derivative
instruments
in the accompanying
consolidated
statements
of its derivative financial operations.
Derivative
instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the
are carried
at fair value, option.  FASB ASC Topic 815, Derivatives
and Hedging, requires that all derivative instruments be carried at fair value.  Changes 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
The Company’s
derivative
agreements
require it
to post or
receive collateral
to mitigate this risk,
such risk.
In
addition, the
Company uses
only registered
central clearing
exchanges
and well-established
commercial
banks as counterparties.counterparties,

monitors positions
with individual
counterparties
and adjusts
posted collateral
as required.
Financial
Instruments

ASC Topic 825, Financial Instruments, requires disclosure of theThe fair value of financial instruments for which it is practicable to estimate that
value is disclosed, either in the body of the
consolidated financial statements or in the accompanying notes. MBS, Orchid
common stock Eurodollar futures contracts, interest rate swaptions and retained interests in securitization transactionsderivative 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 1413 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 SeptemberJune 30, 20172021 and
December 31, 2016,2020, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company'sCompany’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. InformationFurther 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
- 9 -
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 Depreciation is included in administrative and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.


Share-Based Compensation

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

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.
Repurchase
Agreements
The Company
finances the
acquisition
of the majority
of its PT
MBS through
the use of
repurchase
agreements
under master
repurchase
agreements.
Repurchase
agreements
are accounted
for as collateralized
financing
transactions,
which are
carried at
their
contractual
amounts, including
accrued interest,
as specified
in the respective
agreements.
Earnings
Per Share
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'sCompany’s evaluation, it
is more likely than not that they will
not be realized.

The Company'sCompany’s U.S. federal income tax returns for years ended on or after December 31, 20142017 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 its includable subsidiaries, and Royal Palm
and

its includable subsidiaries, file as separate tax paying entities.

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 consolidated 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.

Recent Accounting
Pronouncements

In November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18, 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.

- 10 -
In August 2016,March 2020, the FASB issued ASU 2016-15, Statement2020-04 “Reference Rate Reform (Topic 848):
Facilitation of Cash Flows –the Effects of Reference Rate
Reform on Financial Reporting
.”
ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for
modifications
on debt instruments, leases, derivatives, and other contracts, related to the expected market
transition from the London Interbank
Offered Rate (“LIBOR,”),
and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU
2020-04 generally considers contract modifications related to reference rate reform to
be an
event that does not require contract
remeasurement at the modification date nor a reassessment of a previous accounting
determination. The guidance in ASU 2020-04 is
optional and may be elected over time, through December 31, 2022, as reference
rate reform activities occur. The Company does not
believe the adoption of this ASU will have a material impact on its consolidated financial
statements.
In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 230): Classification848). ASU 2021-01 expands the scope of Certain Cash ReceiptsASC
848 to include all affected derivatives and Cash Payments.give market participants the ability to apply certain
aspects of the contract modification and
hedge accounting expedients to derivative contracts affected by the discounting transition. In
addition, ASU 2016-15 addresses eight specific cash flow issues with the objective2021-01 adds
implementation guidance to permit a company to apply certain optional expedients
to modifications of reducing interest rate indexes used for
margining, discounting or contract price alignment of certain derivatives as a result
of reference rate reform initiatives and extends
optional expedients to account for a derivative contract modified as a continuation of
the existing diversitycontract and to continue hedge
accounting when certain critical terms of a hedging relationship change to modifications
made as part of the discounting transition. The
guidance in practice. ASU 2016-152021-01 is effective for fiscal years,immediately and for interim periods within those years, beginning afteravailable generally through December 15, 2017.  Early application is permitted.
31, 2022, as reference rate reform
activities occur. 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
NOTE 2. ADVISORY SERVICES
Bimini Advisors serves as the current expected credit loss (CECL) model). ASU 2016-13manager and advisor for Orchid pursuant to the
terms of a management agreement.
As Manager,
Bimini Advisors is effectiveresponsible for fiscal years,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 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 ASUany direct expenses incurred on its consolidated financial statements.
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 management
In January 2016,agreement has been renewed through February 20, 2022
and provides for automatic one-year extension options thereafter. Should
Orchid terminate the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurementmanagement agreement without cause, it will be obligated
to pay 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 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.
automatic

renewal term.

NOTE 2.   MORTGAGE-BACKED SECURITIES

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

(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 

The following table summarizes the Company's MBS portfolio as of Septemberadvisory services revenue from Orchid
for the six and three months ended June 30, 20172021 and
2020.
(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
2021
2020
Management fee
$
3,412
$
2,645
$
1,791
$
1,268
Allocated overhead
799
695
395
347
Total
$
4,211
$
3,340
$
2,186
$
1,615
- 11 -
At June 30, 2021 and December 31, 2016, according 2020, the net amount due from Orchid was approximately $
0.8
million and $
0.6
million, respectively.
NOTE 3.
MORTGAGE-BACKED SECURITIES
The following
table presents
the Company’s
MBS portfolio
as of June
30, 2021 and
December 31,
2020:
(in thousands)
June 30, 2021
December 31, 2020
Fixed-rate MBS
$
67,910
$
64,902
Interest-Only MBS
1,064
251
Inverse Interest-Only MBS
20
25
Total
$
68,994
$
65,178
NOTE 4.
REPURCHASE AGREEMENTS
The Company
pledges certain
of its MBS
as collateral
under repurchase
agreements
with financial
institutions.
Interest rates
are
generally fixed
based on prevailing
rates corresponding
to the contractual maturities terms
of the securities inborrowings,
and interest
is generally
paid at the portfolio. Actual maturities
termination
of MBS investments are generally shorter than stated contractual maturities and are affected bya
borrowing.
If the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.fair

(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
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 September the
pledged
securities
increases,
lenders may
release collateral
back to the
Company. As of June
30, 2017 and December 31, 2016:2021,
the Company
had met all
margin call

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

requirements.
NOTE 4.   REPURCHASE AGREEMENTS

As of September June
30, 2017, 2021 and
December 31,
2020,
the Company Company’s
repurchase
agreements
had outstanding repurchaseremaining
maturities
as summarized
below:
($ in thousands)
OVERNIGHT
BETWEEN 2
BETWEEN 31
GREATER
(1 DAY OR
AND
AND
THAN
LESS)
30 DAYS
90 DAYS
90 DAYS
TOTAL
June 30, 2021
Fair value of securities pledged, including accrued
interest receivable
$
0
$
49,981
$
19,208
$
0
$
69,189
Repurchase agreement obligations of approximately $187.4 millionliabilities associated with a net
these securities
$
0
$
51,764
$
19,582
$
0
$
71,346
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
-
0.16%
0.14%
-
0.16%
December 31, 2016, the Company had outstanding repurchase2020
Fair value of securities pledged, including accrued
interest receivable
$
0
$
49,096
$
8,853
$
7,405
$
65,354
Repurchase agreement obligations of approximately $121.8 millionliabilities associated with a net
these securities
$
0
$
49,120
$
8,649
$
7,302
$
65,071
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.

-
0.25%
0.23%
0.30%
0.25%

As
In addition,
cash pledged
to counterparties
for repurchase
agreements
was approximately
$
5.9
million and
$
3.4
million as
of SeptemberJune 30, 2017
2021 and December
31, 2016, the Company's repurchase agreements had remaining maturities as summarized below:2020,
respectively.

($ in thousands)               
   OVERNIGHT  BETWEEN 2  BETWEEN 31  GREATER    
   (1 DAY OR  AND  AND  THAN    
  LESS)  30 DAYS  90 DAYS  90 DAYS  TOTAL 
September 30, 2017               
Fair value of securities pledged, including accrued               
interest receivable $-  $75,619  $122,589  $-  $198,208 
Repurchase agreement liabilities associated with                    
these securities $-  $71,261  $116,113  $-  $187,374 
Net weighted average borrowing rate  -   1.35%  1.34%  -   1.35%
December 31, 2016                    
Fair value of securities pledged, including accrued                    
interest receivable $-  $71,565  $41,334  $17,172  $130,071 
Repurchase agreement liabilities associated with                    
these securities $-  $66,919  $38,733  $16,176  $121,828 
Net weighted average borrowing rate  -   1.01%  0.96%  0.98%  0.99%

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 SeptemberJune 30, 2017
2021 and December
31, 2016, 2020,
the Company
had an aggregate
- 12 -
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
(if any),
including
accrued interest
on such securities)
with all counterparties
of approximately $11.0
$
3.7
million and $8.4
$
3.6
million,
respectively.  The
As of June
30, 2021
and December
31, 2020,
the Company
did not have
an amount
at risk with
any individual
counterparty
greater than
10% of the Company's equity at September 30, 2017 or December 31, 2016.
Company’s equity.

NOTE 5. DERIVATIVE
FINANCIAL INSTRUMENTS

Eurodollar
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
are cash settled
futures contracts but may enter into other contracts
on an interest
rate, with
gains and losses
credited or
charged to the
Company’s cash
accounts on a
daily basis.
A minimum balance,
or “margin”,
is required
to be maintained
in the future. 
account on a
daily basis.
The Company has not elected hedging treatment under GAAP, tables below
present information
related to the
Company’s Eurodollar
and as such all gains or losses (realized T-note futures
positions at
June 30, 2021
and unrealized) on these instruments are reflectedDecember
31, 2020.
($ in earnings for all periods presented.

thousands)
As of SeptemberJune 30, 2017 and2021
Junior Subordinated Debt Funding Hedges
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity
(1)
2021
$
1,000
1.00%
0.17%
$
(4)
($ in thousands)
As of December 31, 2016, such instruments were comprised entirely of Eurodollar futures contracts.  Eurodollar futures are cash settled futures contracts on an interest rate, with gains or losses credited or charged to the Company's account on a daily basis and reflected in earnings as they occur. A minimum balance, or "margin", is required to be maintained in the account on a daily basis. The Company is exposed to the changes in value of the futures by the amount of margin held by the broker.  This margin2020
Junior Subordinated Debt Funding Hedges
Average
Weighted
Weighted
Contract
Average
Average
Notional
Entry
Effective
Open
Expiration Year
Amount
Rate
Rate
Equity
(1)
2021
$
1,000
1.02%
0.18%
$
(8)
(1)
Open equity represents the collateral the Company has posted for its open positions and iscumulative gains (losses) recorded on the consolidated balance sheets as part of restricted cash.open


The tables below present information related to the Company's Eurodollar futures positions at September 30, 2017 and December 31, 2016.from inception.

($ in thousands)            
As of September 30, 2017            
  Repurchase Agreement Funding Hedges 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year Amount  Rate  Rate  
Equity(1)
 
2017 $60,000   1.58%  1.48% $(14)
2018  60,000   1.90%  1.73%  (100)
2019  60,000   2.32%  1.98%  (207)
2020  60,000   2.60%  2.14%  (278)
2021  60,000   2.80%  2.29%  (306)
Total / Weighted Average $60,000   2.36%  2.00% $(905)

($ in thousands)            
As of September 30, 2017            
  Junior Subordinated Debt Funding Hedges 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year 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 
2020  26,000   1.95%  2.14% $50 
2021  26,000   2.22%  2.29% $18 
Total / Weighted Average $26,000   1.92%  2.00% $87 

($ in thousands)            
As of December 31, 2016            
  Repurchase Agreement Funding Hedges 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year 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)
2020  60,000   2.60%  2.45% $(88)
2021  60,000   2.80%  2.64% $(93)
Total / Weighted Average $60,000   2.19%  2.08% $(325)


($ in thousands)            
As of December 31, 2016            
  Junior Subordinated Debt Funding Hedges 
  Average  Weighted  Weighted    
  Contract  Average  Average    
  Notional  Entry  Effective  Open 
Expiration Year 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 
2020  26,000   1.95%  2.45% $132 
2021  26,000   2.22%  2.64% $110 
Total / Weighted Average $26,000   1.91%  2.08% $217 

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

(Losses) Gains Onon Derivative Instruments Net

The table below presents the effect of the Company'sCompany’s derivative financial instruments on the consolidated statements of
operations for the ninesix and three months ended SeptemberJune 30, 20172021 and 2016.2020

.
(in thousands)            
 Nine Months Ended September 30, Three Months Ended September 30, 
  2017  2016  2017  2016 
Eurodollar futures contracts (short positions) $(829) $(1,550) $(19) $508 
(Losses) gains on derivative instruments $(829) $(1,550) $(19) $508 

(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
2021
2020
Eurodollar futures contracts (short positions)
Repurchase agreement funding hedges
$
0
$
(2,328)
$
0
$
0
Junior subordinated debt funding hedges
0
(517)
0
(2)
T-Note futures contracts (short positions)
Repurchase agreement funding hedges
0
(1,006)
0
0
Net TBA securities
0
(1,441)
0
0
Losses on derivative instruments
$
0
$
(5,292)
$
0
$
(2)
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
- 13 -
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 obtainingrecovering its assets pledged as collateral for its derivatives. The cash and cash
equivalents pledged as collateral for the Company'sCompany’s derivative instruments are included in restricted cash on the
consolidated balance sheets. It is the Company's policy not to offset assets and liabilities associated with open derivative

contracts. However, the Chicago Mercantile Exchange (“CME”) rules characterize variation margin transfers as settlement
payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally
cleared derivatives for which the CME serves as the central clearing party are presented as if these derivatives had been
settled as of the reporting date.

NOTE 6. PLEDGED ASSETS

Assets Pledged
to Counterparties
The table
below summarizes
Bimini’s assets
pledged as
collateral
under its repurchase
agreements
and derivative
agreements
as of
June 30, 2021
and December
31, 2020.
($ in thousands)
June 30, 2021
December 31, 2020
Repurchase
Derivative
Repurchase
Derivative
Assets Pledged to Counterparties

Agreements
The tables below summarize our assetsAgreements
Total
Agreements
Agreements
Total
PT MBS - at fair value
$
67,910
$
0
$
67,910
$
64,902
$
0
$
64,902
Structured MBS - at fair value
1,064
0
1,064
251
0
251
Accrued interest on pledged as collateral under our repurchase agreements and derivative agreements pledged related to securities sold but not yet settled, as of September 30, 2017 and December 31, 2016.
215
0
215
201
0
201
Restricted cash
5,892
0
5,892
3,352
1
3,353
Total
$
75,081
$
0
$
75,081
$
68,706
$
1
$
68,707

($ in thousands)         
As of September 30, 2017         
  Repurchase  Derivative    
Assets Pledged to Counterparties Agreements  Agreements  Total 
PT MBS - at fair value $195,151  $-  $195,151 
Structured MBS - at fair value  2,364   -   2,364 
Accrued interest on pledged securities  693   -   693 
Cash  391   545   936 
Total $198,599  $545  $199,144 

($ 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 SeptemberJune 30, 2017
2021 and December
31, 2016. 2020.
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 
Cash $8  $- 
Total $8  $- 

($ in thousands)
Assets Pledged to Bimini
June 30, 2021
December 31, 2020
Repurchase agreements
$
187
$
80
Total
$
187
$
80

NOTE 7. OFFSETTING ASSETS AND LIABILITIES

The Company’s
derivatives
and repurchase
agreements
are subject
to underlying
agreements
with master
netting or
similar
arrangements,
which provide
for the right
of offset in
the event
of default
or in the
event of bankruptcy
of either
party to the
transactions.
The Company's derivativesCompany
reports its
assets and repurchase agreements are
liabilities
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 SeptemberJune 30, 2017
2021 and December
31, 2016.2020.

(in thousands)                  
Offsetting of Liabilities 
          Gross Amount Not Offset in the    
       Net Amount Consolidated Balance Sheet    
   Gross Amount of Liabilities Financial     
 Gross Amount Offset in the Presented in the Instruments Cash   
 of Recognized Consolidated Consolidated Posted as Posted as Net 
 Liabilities Balance Sheet Balance Sheet Collateral Collateral Amount 
September 30, 2017                  
Repurchase Agreements $187,374  $-  $187,374  $(186,983) $(391) $- 
December 31, 2016                        
Repurchase Agreements $121,828  $-  $121,828  $(121,372) $(456) $- 

(in thousands)
Offsetting of Liabilities
Gross Amount Not Offset in the
- 14 -
Net Amount
Consolidated Balance Sheet
Gross Amount
of Liabilities
Financial
Gross Amount
Offset in the
Presented in the
Instruments
Cash
of Recognized
Consolidated
Consolidated
Posted as
Posted as
Net
Liabilities
Balance Sheet
Balance Sheet
Collateral
Collateral
Amount
June 30, 2021
Repurchase Agreements
$
71,346
$
0
$
71,346
$
(65,454)
$
(5,892)
$
0
$
71,346
$
0
$
71,346
$
(65,454)
$
(5,892)
$
0
December 31, 2020
Repurchase Agreements
$
65,071
$
0
$
65,071
$
(61,719)
$
(3,352)
$
0
$
65,071
$
0
$
65,071
$
(61,719)
$
(3,352)
$
0
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.  zero.
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
LONG-TERM DEBT

Long-term
debt at June
30, 2021 and
December 31,
2020 is summarized
as follows:
(in thousands)
June 30, 2021
December 31, 2020
Junior subordinated debt
$
26,804
$
26,804
Note payable
646
657
Paycheck Protection Plan ("PPP") loan
(1)
0
152
Total
$
27,450
$
27,613
Junior Subordinated Debt
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 June
30, 20172021 and
December 31, 2016,
2020,
the outstanding
principal balance
on the junior
subordinated
debt securities
owed to
BCTII was $26.8
$
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%
3.50
% over the
prevailing
three-month
LIBOR rate.
As of September June
30, 2017,2021, the
interest rate
was 4.82%
3.62
%. 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 decision making 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.

The accompanying
consolidated
financial statements
present Bimini
Capital's BCTII
Junior Subordinated
Notes issued
to BCTII
as a
- 15 -
liability and
Bimini Capital's
investment
in the common
equity securities
of BCTII
as an asset (included
(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 Payable
On October
30, 2019,
the Company
borrowed
$
680,000
from a bank.
The note is
payable in
equal monthly
principal and
interest
installments
of approximately
$
4,500
through October
30, 2039.
Interest accrues
at 4.89% through
October 30,
2024. Thereafter,
interest
accrues based
on the weekly
average yield
to the United
States Treasury
securities
adjusted to
a constant
maturity of
5 years,
plus
3.25
%.
The note is
secured by
a mortgage
on the Company’s
office building.
Paycheck Protection
Plan Loan
On April 13,
2020, the
Company received
approximately
$
152,000
through the
Paycheck Protection
Program (“PPP”)
of the CARES
Act in the
form of a
low interest
loan.
PPP loans
carry a fixed
rate of
1.00
% and a term
of two years,
if not forgiven,
in whole or
in part. The
Small Business
Administration
notified the
Company that,
effective as
of April 22,
2021, all principal
and accrued
interest under
the PPP
loan has been
forgiven.

The table
below presents
the future
scheduled principal
payments on
the Company’s
long-term
debt.
(in thousands)
Last six months of 2021
$
11
2022
23
2023
24
2024
25
2025
26
After 2025
27,341
Total
$
27,450
NOTE 9.
COMMON STOCK

The table below presents information related to
There were
no issuances
of Bimini Capital's
Class A Common
Stock, issued during the nine and three months ended September 30, 2017 and 2016.Class

  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
or Class C
Common Stock
during the nine
six months
ended September June
30, 2017 2021
and 2016.2020.

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
and it is currently
set to expire
on
November 15, 2021
.
From the inception
of the Repurchase
Plan through
June 30, 2021,
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.
There were
no shares
repurchased
during the
six months
ended June
30, 2021.
Tender Offer
In July 2021,
the Company
completed
a “modified
Dutch auction”
tender offer
and paid an
aggregate
of $1.5 million,
excluding
fees
- 16 -
and related
expenses, to
repurchase
812,879 shares
of Bimini
Capital’s Class
A common stock
at a price
of $1.85 per
share.
The financial
statement
impact of the
completion
of this tender
offer will
be reported
in our September
30, 2021 Form
10-Q filing.
NOTE 10.    STOCK INCENTIVE PLANS

On August 12, 2011, Bimini Capital's shareholders approved the 2011 Long Term Compensation Plan (the "2011 Plan") to assist the Company in recruiting and retaining employees, directors and other service providers by enabling them to participate in the success of Bimini Capital and to associate their 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"), 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.

Share Awards

During the three months ended March 31, 2016, 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 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 issue Performance Units under the 2011 Plan to certain officers and employees.  "Performance Units" represent the participant's right to receive an amount, based on the value of a specified number of shares of common stock, 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 financial performance or the participant's performance or such other criteria determined by the Committee, including goals stated with reference to the performance measures discussed below.  If Performance Units 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 and 2016:

($ in thousands, except per share data)            
  Nine Months Ended September 30, 
  2017  2016 
     Weighted     Weighted 
     Average     Average 
     Grant Date     Grant Date 
     Fair Value     Fair Value 
  Shares  Per Share Shares  Per Share 
Unvested, beginning of period  70,000  $1.23   77,500  $1.22 
Granted  -   -   -   - 
Forfeited  -   -   (1,000)  0.84 
Vested and issued  -   -   -   - 
Unvested, end of period  70,000  $1.23   76,500  $1.23 
                 
Compensation expense during the period     $22      $23 
Unrecognized compensation expense at period end     $17      $50 
Weighted-average remaining vesting term (in years)      0.8       1.8 
Intrinsic value of unvested shares at period end     $195      $191 

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.
On
April 22, 2020
, the Company received a demand for payment from Citigroup, Inc. in the amount
of $
33.1
million related to the
indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets
Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,
LLC) prior to the date Royal Palm’s mortgage origination
operations ceased in 2007.
The demand is based on Royal Palm’s alleged breaches of certain representations and warranties
in the
related MLPA’s.
The Company believes the demands are without merit and intends to defend
against the demand vigorously.
No
provision or accrual has been recorded as of June 30, 2021 related to the Citigroup demand.
Management is not aware of any other significant reported or unreported contingencies
at SeptemberJune 30, 2017.2021.

NOTE 12.  11.
INCOME TAXES

The total income tax provision recorded for the ninesix months ended SeptemberJune 30, 20172021 and 2016 2020
was $1.3 $
0.2
million and $2.1 $
8.7
million,
respectively, on consolidated pre-tax book income (loss) of $3.2 $
0.5
million and $4.3$(
10.2
) million in the ninesix and three months ended SeptemberJune 30, 2017
2021 and 2016,2020, respectively.
The total income tax (benefit) provision recorded for the three months ended SeptemberJune 30, 2017
2021 and 2016 2020
was $1.0$(
0.3
) million and $1.4 $
1.3
million, respectively, on consolidated pre-tax book (loss) income of $2.5$(
1.2
) million and $2.6 $
4.8
million in the
three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.

The Company'sCompany’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.

As a result of adverse economic impacts of COVID-19 on its business, the Company performed
an assessment of the need for
additional valuation allowances against existing deferred tax assets as of March 31,
2020. Following the more-likely-than-not standard
that benefits will not be realized in the future, the Company determined an additional
valuation allowance of approximately $
11.2
million
was necessary for the net operating loss carryforwards and capital loss carryforwards
during the three months ended March 31, 2020.
With the rapidly evolving and changing landscape caused by the pandemic, including the
potential for new government restrictions on
the economy in reaction to the Delta Variant, the Company will continue to closely monitor the impacts of COVID-19 on the Company’s
ability to realize its deferred tax assets, and it may re-evaluate valuation allowances
in the future as new information becomes
available.
NOTE 13.   12.
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.
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
- 17 -
EPS as the
conditions
for conversion
to Class A
common stock
were not
met at June
30, 2021 and
2020.
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 June
30, 2021 and
2020.
The table
below reconciles
the numerator
and denominator
of EPS for
the six and
three months
ended June
30, 2021 and
2020.
(in thousands, except per-share information)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
2021
2020
Basic and diluted EPS per 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 conversionshare:
Income (loss) attributable to Class A common stock were not met at September 30, 2017shares:
Basic and 2016.diluted

$
370
Shares of Class C$
(18,813)
$
(917)
$
3,458
Weighted average 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 shares:
Class A common stock were not metshares outstanding at September 30, 2017the balance sheet date
11,609
11,609
11,609
11,609
Weighted average shares-basic and 2016.diluted

11,609
The Company has dividend eligible stock incentive plan shares that were outstanding during the nine and three months ended September 30, 2017. The basic and diluted11,609
11,609
11,609
Income (loss) 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 share:
Basic and diluted
$
0.03
$
(1.62)
$
(0.08)
$
0.30
(in losses. Because there is no such obligation, the incentive plan shares are not included in the basicthousands, except per-share information)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
2021
2020
Basic and diluted EPS computations when no income is availableper Class B common share:
Income (loss) attributable to Class AB common stock even though they are considered participating securities.shares:

Basic and diluted
The table below reconciles$
1
$
(52)
$
(3)
$
10
Weighted average common shares:
Class B common shares outstanding at the numeratorbalance sheet date
32
32
32
32
Weighted average shares-basic and denominator of EPS for the ninediluted
32
32
32
32
Income (loss) per Class B common share:
Basic and three months ended September 30, 2017 and 2016.diluted
$
0.03
$
(1.62)
$
(0.08)
$
0.30

(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 


NOTE 14.   13.
FAIR VALUE

Authoritative accounting literature establishes a framework for using fairFair value to measure assets and liabilities and defines fair value as
is the price
that would
be received
to sell an
asset or
paid to transfer
a liability (an
(an exit price) as opposed to.
A fair value
measure should
reflect the price
assumptions
that market
participants
would be paid to acquire use
in pricing
the asset or received
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 assume the liability (an entry price). A derive
fair value measure should
measurements.
These stratifications
are:
●
Level 1 valuations,
where the
valuation
is based on
quoted market
prices for
identical assets
or liabilities
traded in
active markets
(which include
exchanges and
over-the-counter
markets with
sufficient volume),
●
Level 2 valuations,
where the
valuation
is based on
quoted market
prices for
similar instruments
traded in
active markets,
quoted
prices for
identical or
similar instruments
in markets
that are not
active and
model-based
valuation
techniques
for which
all
significant
assumptions
are observable
in the market,
and
●
Level 3 valuations,
where the
valuation
is generated
from model-based
techniques
that use significant
assumptions
not
observable
in the market,
but observable
based on Company-specific
data. These
unobservable
assumptions
reflect the
Company’s own
estimates for
assumptions
that market
participants
would use
in pricing
the asset or liability, including
liability. Valuation
techniques
typically
include option
pricing models,
discounted
cash flow models
and similar
techniques,
but may also
include the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or
use of an market
prices of assets
or liabilities
that are not
directly comparable
to the subject
asset or
liability.
- 18 -
MBS, Orchid
common stock,
retained
interests and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured
TBA securities
were all recorded
at fair value based
on inputs a recurring
basis during
the six
and three
months ended
June 30, 2021
and 2020.
When determining
fair value
measurements,
the Company uses
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 derive fairactive 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. These stratifications are:
measurements
for the retained
interests are

generated
by a model
that requires
management
to make a
significant
number of
assumptions,
and this model
resulted in
a value of
zero
·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),
at both June
30, 2021 and
December 31,
2020.
·Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
·Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company's own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

The Company's
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-partythird
party broker
quotes, when
available.
Because the
price estimates
may vary,
the Company
must make certain
judgments and
assumptions
about the
appropriate
price to use
to calculate
the fair values. Alternatively,
The Company
and the Company could opt independent
pricing sources
use various
valuation techniques
to have determine
the value price
of all the Company’s
securities.
These
techniques
include observing
the most
recent market
for like or
identical assets
(including
security coupon,
maturity, yield,
and prepayment
speeds),
spread pricing
techniques
to determine
market credit
spreads (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 its MBS positionsinterest
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 either an independent third-party or could do so internally.using the
adjusted spread.

MBS, Orchid common stock, retained interests and The Company’s
futures contracts were all recorded
are Level
1 valuations,
as they
are exchange-traded
instruments
and quoted
market prices
are
readily available.
Futures contracts
are settled
daily. The Company’s
interest rate
swaps and
interest rate
swaptions
are Level 2
valuations.
The fair value
of interest
rate swaps
is determined
using a discounted
cash flow
approach
using forward
market interest
rates
and discount
rates, which
are observable
inputs. The
fair value
of interest
rate swaptions
is determined
using an option
pricing model.
The following
table presents
financial assets
and liabilities
measured
at fair value
on a recurring basis during the nine and three months ended September 30, 2017 and 2016. 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.


The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September
June 30, 2017 2021
and
December 31,
2020:
(in thousands)
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Fair Value
Assets
Inputs
Inputs
Measurements
(Level 1)
(Level 2)
(Level 3)
June 30, 2021
Mortgage-backed securities
$
68,994
$
0
$
68,994
$
0
Orchid Island Capital, Inc. common stock
13,470
13,470
0
0
December 31, 2016:2020

(in thousands)            
     Quoted Prices       
     in Active  Significant    
     Markets for  Other  Significant 
     Identical  Observable  Unobservable 
  Fair Value  Assets  Inputs  Inputs 
  Measurements  (Level 1)  (Level 2)  (Level 3) 
September 30, 2017            
Mortgage-backed securities $197,990  $-  $197,990  $- 
Orchid Island Capital, Inc. common stock  15,489   15,489   -   - 
Retained interests in securitizations  558   -   -   558 
December 31, 2016                
Mortgage-backed securities $130,302  $-  $130,302  $- 
Orchid Island Capital, Inc. common stock  15,108   15,108   -   - 
Retained interests in securitizations  1,114   -   -   1,114 

Mortgage-backed securities
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 and 2016:$

65,178
(in thousands)      
  Retained Interests in Secuitizations 
  Nine Months Ended September 30, 
  2017  2016 
Balances, January 1 $1,114  $1,124 
Gain included in earnings  390   2,100 
Collections  (946)  (1,758)
Balances, September 30 $558  $1,466 

$
0
$
65,178
$
0
Orchid Island Capital, Inc. common stock
13,548
13,548
0
0
During the nine
six months
ended September June
30, 20172021 and 2016,
2020, there
were no transfers
of financial
assets or liabilities
between levels
1, 2 or 3.

Our retained interests
NOTE 14.
SEGMENT INFORMATION
- 19 -
The Company’s operations are valuedclassified into two principal reportable segments: the 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 six months ended June 30, 2021 and 2020, were approximately
$
4.2
million and $
3.4
million, respectively,
accounting for approximately
66
% and
50
% 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 for the six months ended June 30, 2021 and 2020 is as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
4,211
$
0
$
0
$
0
$
4,211
Advisory services, other operating segments
(1)
72
0
0
(72)
0
Interest and dividend income
0
2,201
0
0
2,201
Interest expense
0
(71)
(499)
(2)
0
(570)
Net revenues
4,283
2,130
(499)
(72)
5,842
Other income
0
(1,976)
154
(3)
0
(1,822)
Operating expenses
(4)
(2,230)
(1,251)
0
0
(3,481)
Intercompany expenses
(1)
0
(72)
0
72
0
Income (loss) before income taxes
$
2,053
$
(1,169)
$
(345)
$
0
$
539
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2020
Advisory services, external customers
$
3,340
$
0
$
0
$
0
$
3,340
Advisory services, other operating segments
(1)
84
0
0
(84)
0
Interest and dividend income
0
3,317
0
0
3,317
Interest expense
0
(988)
(632)
(2)
0
(1,620)
Net revenues
3,424
2,329
(632)
(84)
5,037
Other expenses
0
(11,307)
(516)
(3)
0
(11,823)
Operating expenses
(4)
(1,690)
(1,701)
0
0
(3,391)
Intercompany expenses
(1)
0
(84)
0
84
0
Income (loss) before income taxes
$
1,734
$
(10,763)
$
(1,148)
$
0
$
(10,177)
Segment information for the three months ended June 30, 2021 and 2020 is as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
2,186
$
0
$
0
$
0
$
2,186
Advisory services, other operating segments
(1)
37
0
0
(37)
0
Interest and dividend income
0
1,084
0
0
1,084
Interest expense
0
(31)
(250)
(2)
0
(281)
Net revenues
2,223
1,053
(250)
(37)
2,989
- 20 -
Other
0
(2,634)
154
(3)
0
(2,480)
Operating expenses
(4)
(1,125)
(599)
0
0
(1,724)
Intercompany expenses
(1)
0
(37)
0
37
0
Income (loss) before income taxes
$
1,098
$
(2,217)
$
(96)
$
0
$
(1,215)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2020
Advisory services, external customers
$
1,615
$
0
$
0
$
0
$
1,615
Advisory services, other operating segments
(1)
26
0
0
(26)
0
Interest and dividend income
0
912
0
0
912
Interest expense
0
(60)
(282)
(2)
0
(342)
Net revenues
1,641
852
(282)
(26)
2,185
Other
0
4,256
(2)
(3)
0
4,254
Operating expenses
(4)
(1,067)
(618)
0
0
(1,685)
Intercompany expenses
(1)
0
(26)
0
26
0
Income (loss) before income taxes
$
574
$
4,464
$
(284)
$
0
$
4,754
(1)
Includes fees paid by Royal Palm to Bimini Advisors for advisory services
.
(2)
Includes interest on long-term debt.
(3)
Includes income recognized on the forgiveness of the PPP loan and
gains (losses) on Eurodollar futures contracts entered into as a hedge
on
junior subordinated notes.
(4)
Corporate expenses are allocated based on a discounted cash flow approach.  These values are sensitive to changeseach segment’s proportional
share of total revenues.
Assets 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.


The following table summarizes the significant quantitative information about our level 3 fair value measurementseach reportable segment as of SeptemberJune 30, 2017.2021 and December 31, 2020 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
June 30, 2021
$
1,733
$
120,020
12,919
$
134,672
December 31, 2020
1,469
113,764
13,468
128,701
NOTE 15. 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 OrchidRelationships with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:

·One-twelfth of 1.5% of the first $250 million of the Orchid's equity, as defined in the management agreement,
·One-twelfth of 1.25% of the Orchid's equity that is greater than $250 million and less than or equal to $500 million, and
·One-twelfth of 1.00% of the Orchid's equity that is greater than $500 million.

Orchid is obligated to reimburse 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 management agreement has been renewed through February 20, 2018 and provides for automatic one-year extension options thereafter.  Should Orchid terminate the management agreement without cause, it will 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, 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 Septemberboth June 30, 20172021 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 September 30, 2017 and December 31, 2016,2020, the Company owned 1,520,036  and 1,395,036
2,595,357
shares of Orchid common stock, respectively, representing
approximately 3.4%
2.2
% and 4.2%
3.4
% of theOrchid’s outstanding shares, respectively.  common stock on such dates.
The Company received dividends on this
common stock investment of approximately $1.9 $
1.0
million and $0.6 $
0.5
million during the ninesix and three months ended SeptemberJune 30, 2017, respectively,2021, and
approximately $1.8 $
0.8
million and $0.6 $
0.4
million during the ninesix and three months ended SeptemberJune 30, 2016,2020, 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'sOrchid’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.
- 21 -
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 to invest primarily in residential mortgage-backed securities ("MBS") issued and guaranteed by a federally chartered corporation or agency ("Agency MBS"). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency MBS ("PT MBS") and (ii) structured Agency MBS, such as collateralized mortgage obligations ("CMOs"), interest only securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of structured Agency MBS.

2003.
The Company alsoCompany’s principal wholly-owned operating subsidiary is Royal Palm Capital, LLC.
We operate in two business segments: the
asset management segment, which includes (a) the investment advisory services provided
by Royal Palm’s wholly-owned subsidiary,
Bimini Advisors Holdings, LLC, to Orchid, and (b) the investment portfolio segment, which includes
the investment activities conducted
by 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"), through its wholly owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors"). From this arrangement,
the Company receives management fees and
expense reimbursements.
As Manager,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.
Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries referred
to as “Royal Palm”) maintains an investment
portfolio, consisting primarily of 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, such as mortgage pass-through
certificates issued by Fannie Mae, Freddie Mac or
Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued
by the GSEs (“PT MBS”) and (ii) structured Agency
MBS, such as interest only securities ("IOs"), inverse interest only securities
("IIOs") and principal only securities ("POs"), among other
types of structured Agency MBS. In addition, the CompanyRoyal Palm receives dividends from its
investment in Orchid common shares.

Impact of
the COVID-19
Pandemic
Beginning
in March 2020,
the global
pandemic associated
with the novel
coronavirus
COVID-19 (“COVID-19”)
and related
economic
conditions
began to impact
our financial
position and
results of
operations.
As a result
of the economic,
health and
market turmoil
brought
about by COVID-19,
the Agency
MBS market
experienced
severe dislocations.
This resulted
in falling
prices of our
assets and
increased
margin calls
from our repurchase
agreement
lenders, resulting
in material
adverse effects
on our results
of operations
and to our
financial
statements.
The Agency
MBS market
largely stabilized
after the
Federal Reserve
(the “Fed”)
announced
on March 23,
2020 that
it would purchase
Agency MBS
and U.S.
Treasuries in the
amounts needed
to support
smooth market
functioning.
As of March
31, 2020,
and at all
times
since then,
we have timely
satisfied
all margin
calls. The
MBS market
continues to
react to the
pandemic and
the various
measures put
in
place to stabilize
the market.
To the extent the
financial or
mortgage markets
do not respond
favorably to
any of these
actions, or
such
actions do
not function
as intended,
our business,
results of
operations
and financial
condition
may continue
to be materially
adversely
affected. Although
the Company
cannot estimate
the length
or gravity
of the impact
of the COVID-19
pandemic at
this time,
it may continue
to have materially
adverse effects
on the Company’s
results of
future operations,
financial position,
and liquidity
during 2021.
Stock Repurchase
Plan
- 22 -
On March 26,
2018, the
Board of Directors
of the Company
approved a
Stock Repurchase
Plan (“Repurchase
Plan”).
Pursuant to
Repurchase
Plan, we
may purchase
up to 500,000
shares of
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 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
and it is currently
set to expire
on November
15, 2021.
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 commencement
of the Repurchase
Plan, through
June 30, 2021,
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 2021,
we completed
a “modified
Dutch auction”
tender offer
and paid an
aggregate
of $1.5 million,
excluding fees
and related
expenses, to
repurchase
812,879 shares
of our Class
A common stock,
which were
retired, at
a price of
$1.85 per
share.
Factors that Affect our Results of Operations and Financial Condition

A variety
of industry and
economic factors (in
addition to those
related to the
COVID-19 pandemic) 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
U.S. Federal
Reserve (the
“Fed”), the
Federal Open Market Committee (the “FOMC”), the Federal ReserveHousing Finance
Agency (the "Fed"“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;laws or tax rates; 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 ninesix and three months
ended SeptemberJune 30, 2017, 2021,
as compared to the nine six
and three
months ended September
June 30, 2016.2020.

- 23 -
Net Income
(Loss) Summary

Consolidated
net income
for the nine
six months
ended September June
30, 2017 2021
was $1.9 $0.4
million, or $0.15
$0.03 basic
and diluted
income per
share of
Class
A Common Stock, as compared to consolidated net incomeloss of $2.2$18.9 million,
or $0.17$1.62 basic and diluted incomeloss per share of Class A Common
Stock,
for the nine six
months ended September
June 30, 2016.2020.

Consolidated
net incomeloss for
the three months
ended September June
30, 20172021 was $1.5
$0.9 million,
or $0.12$0.08 basic
and diluted
loss per share
of Class A
Common Stock,
as compared
to consolidated
net income of
$3.5 million,
or $0.30 basic
and diluted
income per share
of Class A Common
Stock, as compared to consolidated net income of $1.2 million, or $0.09 basic and diluted income per share of Class A Common Stock,
for the three
months ended September
June 30, 2016.2020.

The components of net income (loss)
for the ninesix and three months ended SeptemberJune 30, 20172021 and 2016,2020, along with the changes in those
components
are presented
in the table
below:

(in thousands)
(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 

Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
Change
2021
2020
Change
Advisory services revenues
$
4,211
$
3,340
$
871
$
2,186
$
1,615
$
571
Interest and dividend income
2,201
3,317
(1,116)
1,084
912
172
Interest expense
(570)
(1,620)
1,050
(281)
(342)
61
Net revenues
5,842
5,037
805
2,989
2,185
804
Other (expense) income
(1,822)
(11,823)
10,001
(2,480)
4,254
(6,734)
Expenses
(3,481)
(3,391)
(90)
(1,724)
(1,685)
(39)
Net income (loss) before income tax provision (benefit)
539
(10,177)
10,716
(1,215)
4,754
(5,969)
Income tax provision (benefit)
(168)
(8,688)
8,520
295
(1,286)
1,581
Net income (loss)
$
371
$
(18,865)
$
19,236
$
(920)
$
3,468
$
(4,388)
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 designatedesignated our derivative holdings forfinancial 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,
- 24 -
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.

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 20172021 and 2016.2020.

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)

As a result of the market turmoil during the first quarter of 2020 several hedge positions where closed.
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)
             
However, the
hedges closed were hedges that covered periods well beyond the first quarter of 2020.
Accordingly, the open equity at the
time these hedges were closed will result in adjustments to economic interest expense through the balance of their
respective original hedge periods.
Since the Company’s portfolio was significantly reduced during the first quarter of 2020,
the effect of applying the open equity at the time of closure of these hedge instruments to the current, and much smaller,
repurchase agreement interest expense amounts has materially impacted the economic interest amounts reported below.
Losses on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
Recognized in
Statement of
TBA
Operations
Securities
Futures
Three Months Ended
(GAAP)
Loss
Contracts
June 30, 2021
$
-
$
-
$
-
March 31, 2021
-
-
-
December 31, 2020
-
-
-
September 30, 2020
-
-
-
June 30, 2020
(2)
-
(2)
March 31, 2020
(5,291)
(1,441)
(3,850)
Six Months Ended
June 30, 2021
$
-
$
-
$
-
June 30, 2020
(5,292)
(1,441)
(3,851)
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)
Repurchase
Long-Term
Repurchase
Long-Term
Statement of
Three Months Ended
Agreements
Debt
Total
Agreements
Debt
Total
Operations
June 30, 2021
$
(708)
$
(58)
$
(766)
$
708
$
58
$
766
$
-
March 31, 2021
(708)
(58)
(766)
708
58
766
-

(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.

- 25 -
December 31, 2020
(615)
(40)
(655)
615
40
655
-
September 30, 2020
(1,065)
(40)
(1,105)
1,065
40
1,105
-
June 30, 2020
(456)
(40)
(496)
456
38
494
(2)
March 31, 2020
(456)
(40)
(496)
(2,879)
(475)
(3,354)
(3,850)
Six Months Ended
June 30, 2021
$
(1,416)
$
(116)
$
(1,532)
$
1,416
$
116
$
1,532
$
-
June 30, 2020
(912)
(80)
(992)
(2,423)
(437)
(2,860)
$
(3,852)
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)
June 30, 2021
$
578
$
31
$
(708)
$
739
$
547
$
(161)
March 31, 2021
611
40
(708)
748
571
(137)
December 31, 2020
597
43
(615)
658
554
(61)
September 30, 2020
604
43
(1,065)
1,108
561
(504)
June 30, 2020
523
60
(456)
516
463
7
March 31, 2020
2,040
928
(456)
1,384
1,112
656
Six Months Ended
June 30, 2021
$
1,189
$
71
$
(1,416)
$
1,487
$
1,118
$
(298)
June 30, 2020
2,563
988
(912)
1,900
1,575
663
(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 Long-Term Debt
Interest Income
Effect of
Net Interest Income (Loss)
GAAP
Economic
GAAP
Non-GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(1)
Basis
Hedges
(2)
Basis
(3)
Basis
Basis
(4)
June 30, 2021
$
547
$
(161)
$
250
$
(58)
$
308
$
297
(469)
March 31, 2021
571
(137)
250
(58)
308
321
(445)
December 31, 2020
554
(61)
257
(40)
297
297
(358)
September 30, 2020
561
(504)
261
(40)
301
300
(805)
June 30, 2020
463
7
282
(40)
322
181
(315)
March 31, 2020
1,112
656
350
(40)
390
762
266
Six Months Ended
June 30, 2021
$
1,118
$
(298)
$
500
$
(116)
$
616
$
618
$
(914)
June 30, 2020
1,575
663
632
(80)
712
943
(49)
(1)
Calculated by adding the effect of derivative instrument hedges
attributed to the period presented to GAAP net portfolio interest
income.
(2)
Reflects the effect of derivative instrument hedges for only
the period presented.
(3)
Calculated by subtracting the effect of derivative instrument hedges
attributed to the period presented from GAAP interest expense.
(4)
Calculated by adding the effect of derivative instrument hedges
attributed to the period presented to GAAP net interest income.
Segment Information
- 26 -
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.

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 

Segment information for the six months ended June 30, 2021 and 2020 is as follows:
(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.
(in thousands)
(3)Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.
Asset
(4)Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP net interest income.
Investment

Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
4,211
$
-
$
-
$
-
$
4,211
Advisory services, other operating segments
(1)
72
-
-
(72)
-
Interest and dividend income
-
2,201
-
-
2,201
Interest expense
-
(71)
(499)
(2)
-
(570)
Net revenues
4,283
2,130
(499)
(72)
5,842
Other income
-
(1,976)
154
(3)
-
(1,822)
Operating expenses
(4)
(2,230)
(1,251)
-
-
(3,481)
Intercompany expenses
(1)
-
(72)
-
72
-
Income (loss) before income taxes
$
2,053
$
(1,169)
$
(345)
$
-
$
539
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2020
Advisory services, external customers
$
3,340
$
-
$
-
$
-
$
3,340
Advisory services, other operating segments
(1)
84
-
-
(84)
-
Interest and dividend income
-
3,317
-
-
3,317
Interest expense
-
(988)
(632)
(2)
-
(1,620)
Net revenues
3,424
2,329
(632)
(84)
5,037
Other expenses
-
(11,307)
(516)
(3)
-
(11,823)
Operating expenses
(4)
(1,690)
(1,701)
-
-
(3,391)
Intercompany expenses
(1)
-
(84)
-
84
-
Income (loss) before income taxes
$
1,734
$
(10,763)
$
(1,148)
$
-
$
(10,177)
Segment information for the three months ended June 30, 2021 and 2020 is as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
2,186
$
-
$
-
$
-
$
2,186
Advisory services, other operating segments
(1)
37
-
-
(37)
-
Interest and dividend income
-
1,084
-
-
1,084
Interest expense
-
(31)
(250)
(2)
-
(281)
Net revenues
2,223
1,053
(250)
(37)
2,989
Other
-
(2,634)
154
(3)
-
(2,480)
Operating expenses
(4)
(1,125)
(599)
-
-
(1,724)
Intercompany expenses
(1)
-
(37)
-
37
-
Income (loss) before income taxes
$
1,098
$
(2,217)
$
(96)
$
-
$
(1,215)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2020
Advisory services, external customers
$
1,615
$
-
$
-
$
-
$
1,615
Advisory services, other operating segments
(1)
26
-
-
(26)
-
Interest and dividend income
-
912
-
-
912
Interest expense
-
(60)
(282)
(2)
-
(342)
- 27 -
Net revenues
1,641
852
(282)
(26)
2,185
Other
-
4,256
(2)
(3)
-
4,254
Operating expenses
(4)
(1,067)
(618)
-
-
(1,685)
Intercompany expenses
(1)
-
(26)
-
26
-
Income (loss) before income taxes
$
574
$
4,464
$
(284)
$
-
$
4,754
(1)
Includes advisory services revenue received by Bimini Advisors from
Royal Palm.
(2)
Includes interest on long-term debt.
(3)
Includes income recognized on the forgiveness of the PPP loan and
gains (losses) on Eurodollar futures contracts entered into as a hedge
on
junior subordinated notes.
(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
June 30, 2021
$
1,733
$
120,020
$
12,919
$
134,672
December 31, 2020
1,469
113,764
13,468
128,701
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 2022 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 2021 and 2020.
(in thousands)
Average
Average
Advisory Services
Orchid
Orchid
Management
Overhead
Three Months Ended
MBS
Equity
Fee
Allocation
Total
June 30, 2021
$
4,504,887
$
542,679
$
1,791
$
395
$
2,186
March 31, 2021
4,032,716
456,687
1,621
404
2,025
December 31, 2020
3,633,631
387,503
1,384
442
1,826
September 30, 2020
3,422,564
368,588
1,252
377
1,629
June 30, 2020
3,126,779
361,093
1,268
347
1,615
March 31, 2020
3,269,859
376,673
1,377
348
1,725
Six Months Ended
June 30, 2021
$
4,268,801
$
499,683
$
3,412
$
799
$
4,211
- 28 -
June 30, 2020
3,198,319
368,883
2,645
695
3,340
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
six months
ended June
30, 2021,
we generated
$1.1 million
of net portfolio
interest income,
consisting
of $1.2
million of
interest income
from
MBS assets offset by
$0.1 million of interest
expense on repurchase liabilities.
For the comparable period ended
June 30, 2020,
we
generated
$1.6 million
of net portfolio
interest income,
consisting
of $2.6 million
of interest
income from
MBS assets
offset by
$1.0 million
of
interest expense
on repurchase
liabilities.
The $1.4 million
decrease
in interest
income for
the six months
ended June
30, 2021
was due to
a $24.9 million
decrease
in average
MBS balances,
combined
with a 200 basis
point ("bp")
decrease
in yields earned
on the portfolio.
The
$0.9 million
decrease in
interest
expense for the
six months
ended June
30, 2021 was
due to a combination
of a $20.9 million
decrease in
average repurchase
liabilities
and a 196
bp decrease
in cost of
funds.
Our economic interest
expense on repurchase
liabilities
for the six months ended
June 30, 2021 and 2020
was $1.5 million
and $1.9
million, respectively,
resulting in
($0.3) million
and $0.7 million
of economic
net portfolio
interest
income, respectively.
During the ninethree months ended SeptemberJune 30, 2017, the Company2021, we generated $3.0 millionapproximately $547,000 of net portfolio interest income, consisting
of $4.1 million
approximately
$578,000 of
interest
income from MBS
assets offset
by $1.1 millionapproximately
$31,000 of
interest expense
on repurchase
liabilities.
For the comparable period
three months
ended September June
30, 2016, the Company2020,
we generated $2.5 million
approximately
$523,000 of
net portfolio
interest income, consisting
of $3.0 million
approximately
$463,000 of
interest
income from
MBS assets
offset by $0.5 millionapproximately
$60,000 of
interest expense
on repurchase
liabilities.

The Company'sOur economic
interest expense
on repurchase
liabilities for the nine months ended September 30, 2017 and 2016 was $1.5 million and $0.7 million, respectively, resulting in $2.5 million and $2.3 million of economic net portfolio interest income, respectively.

During the three months ended September 30, 2017, the Company generated $1.0 million of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $0.5 million of interest expense on repurchase liabilities.  For the three months ended September 30, 2016, the Company generated $0.9 million of net portfolio interest income, consisting of $1.1 million of interest income from MBS assets offset by $0.2 million of interest expense on repurchase liabilities.

The Company's economic interest expense on repurchase liabilities for the three
months ended September
June 30, 2017
2021 and 2016
2020 was $0.7
million and $0.3
$0.5
million, respectively,
resulting in $0.8
($0.2) million
and $0.8 millionapproximately
$7,000 of
economic net
portfolio
interest income,
respectively.


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 six
months ended
June 30,
2021 and
2020
and each quarter
in 2021 and
2020 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)
June 30, 2021
$
70,925
$
578
3.26%
$
72,241
$
31
$
739
0.17%
4.09%
March 31, 2021
69,017
611
3.54%
69,104
40
748
0.23%
4.33%
December 31, 2020
69,161
597
3.45%
67,878
43
658
0.25%
3.88%
September 30, 2020
62,981
604
3.84%
61,151
43
1,108
0.28%
7.25%
June 30, 2020
53,630
523
3.90%
51,987
60
516
0.46%
3.97%
March 31, 2020
136,142
2,040
5.99%
131,156
928
1,384
2.83%
4.22%
Six Months Ended
June 30, 2021
$
69,971
$
1,189
3.40%
$
70,672
$
71
$
1,487
0.20%
4.21%
June 30, 2020
94,886
2,563
5.40%
91,571
988
1,900
2.16%
4.15%
($ in thousands)
Net Portfolio
Net Portfolio
Interest Income
Interest Spread
GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(2)
Basis
Basis
(4)
June 30, 2021
$
547
$
(161)
3.09%
(0.83)%
March 31, 2021
571
(137)
3.31%
(0.79)%
- 29 -
December 31, 2020
554
(61)
3.20%
(0.42)%
September 30, 2020
561
(504)
3.56%
(3.40)%
June 30, 2020
463
7
3.44%
(0.07)%
March 31, 2020
1,112
656
3.16%
1.77%
Six Months Ended
June 30, 2021
$
1,118
$
(298)
3.20%
(0.81)%
June 30, 2020
1,575
663
3.24%
1.25%
(1)
Portfolio yields and
costs of borrowings
presented in the
tables
above and the
tables on pages
29 and 30
are calculated based
on the
average balances interest income, yield on assets, average 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
30 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 net interest income and net interest rate spread for the nine months ended September 30, 2017 and 2016 and each quarter in 2017 and 2016from yield on both a GAAP and economic basis.average MBS.

($ 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)            
  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%

(1)Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 30 and 31 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 31 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 was
$1.2 million
for the Company six
months ended
June 30, 2021
and $2.6 million
for the six
months ended
June 30,
2020.
Average MBS
holdings were
$70.0 million
and $94.9
million for
the six months
ended June
30, 2021
and 2020,
respectively. The
$1.4 million
decrease in
interest income
was $4.1 due to
a $24.9 million
decrease
in average
MBS holdings,
combined with
a 200 bp decrease
in yields.
Our interest
income was $0.6
million for the nine
three months
ended September June
30, 20172021 and $3.0 $0.5
million for
the ninethree months
ended September June
30, 2016. 
2020.
Average MBS holdings
were $144.2$70.9 million
and $109.6$53.6 million
for the nine three
months ended September
June 30, 2017 2021
and 2016,2020, respectively.
The $1.1
$0.1 million
increase in
interest income
was due to combination of
a 18 basis point $17.3 million
increase in yields and a $34.6 million increase in
average MBS holdings.
holdings,

Interest income for the Company was $1.5 million for the three months ended September 30, 2017 and $1.1 million for the three months ended September 30, 2016.  Average MBS holdings were $170.2 million and $122.2 million for the three months ended September 30, 2017 and 2016, respectively. The $0.4 million increase in interest income was due to a $48.0 million increase in average MBS holdings, partially offset
by a 7 basis point 64 bp
decrease in
yields.

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 six
months ended September
June 30, 2017 2021
and 2016, 2020,
and for each
quarter during 2017
2021 and 2016.2020.

($ 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
June 30, 2021
$
70,207
$
718
$
70,925
$
579
$
(1)
$
578
3.30%
(0.11)%
3.26%
March 31, 2021
68,703
314
69,017
605
6
611
3.53%
6.54%
3.54%
December 31, 2020
68,842
319
69,161
598
(1)
597
3.47%
(1.20)%
3.45%
September 30, 2020
62,564
417
62,981
588
16
604
3.76%
15.35%
3.84%
June 30, 2020
53,101
529
53,630
502
21
523
3.78%
16.12%
3.90%
March 31, 2020
135,044
1,098
136,142
2,029
11
2,040
6.01%
3.93%
5.99%
Six Months Ended
June 30, 2021
$
69,455
$
516
$
69,971
$
1,184
$
5
$
1,189
3.41%
1.92%
3.40%
June 30, 2020
94,073
813
94,886
2,531
32
2,563
5.38%
7.89%
5.40%
Interest Expense on Repurchase Agreements and the Cost of Funds

Our average
Average
outstanding
balances
under repurchase
agreements for the Company
were $135.8$70.7
million and
$91.6 million,
generating
interest expense
of
$0.1 million and $102.7 million, generating interest expense of $1.1 million and $0.5$1.0 million for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.
Our average cost of funds was 1.09%0.20% and 0.64%
2.16% for nine
six months
ended June
30, 2021 and
2020,
respectively.
There was
a 196 bp
decrease
in the average
cost of funds
and a $20.9
million decrease
in average outstanding
repurchase
agreements
during the six months
ended June 30,
2021, compared
to the six months
ended June
30, 2020.
- 30 -
Our economic
interest expense
was $1.5
million and
$1.9 million
for the
six months
ended June
30, 2021
and 2020,
respectively. There
was a 6
bp increase
in the average
economic cost
of funds
to 4.21%
for the six
months ended September
June 30, 2017
2021 from
4.15% for
the six months
ended June
30, 2020.
The $0.4
million decrease
in economic
interest
expense was
due to
the $20.9
million decrease
in average
outstanding
repurchase
agreements
during the
six months
ended June
30, 2021.
Our average
outstanding
balances
under repurchase
agreements
were $72.2
million and 2016,
$52.0 million,
generating
interest expense
of
approximately
$31,000 and
60,000 for
the three
months ended
June 30,
2021 and
2020, respectively.
Our average
cost of
funds was
0.17%
and 0.46% for
three months
ended June
30, 2021 and
2020, respectively.
There was a 45 basis point increase
29 bp decrease
in the average
cost of funds
and a $33.1
$20.3 million
increase in
average outstanding
repurchase
agreements
during the nine
three months
ended June
30, 2021,
compared to
the three
months ended September
June 30, 2017, compared to the nine months ended September 30, 2016.2020.
 

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


Average outstanding balances under repurchase agreements for the Company were $161.0 million and $114.9 million, generating interest expense of $0.5 million and $0.2 million for the three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.  Our average cost of funds was 1.25% and 0.68% for three months ended September 30, 2017 and 2016, respectively.  
There was a 57 basis point
12 bp increase
in the average
economic cost
of funds and a $46.1 million increase in average outstanding repurchase agreements during
to 4.09% for
the three months
ended September June
30, 2017, compared to2021 from
3.97% for the
three months
ended September June
30, 2016.  2020.

The Company's economic interest expense was $0.7 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively. There was a 66 basis point increase in the average economic cost of funds to 1.66% for the three months ended September 30, 2017 from 1.00% 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.

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 points7 bps above the average one-month LIBOR and 20 basis points1
bp below the
average six-month
LIBOR for
the quarter
ended June
30, 2021.
Our average
economic cost
of funds was
399 bps above
the average
one-
month LIBOR
and 391 bps above
the average
six-month LIBOR
for the quarter
ended SeptemberJune 30, 2017.
2021. The Company's average
term to maturity
of the
outstanding
repurchase
agreements
decreased from
33 days at
December 31,
2020 to 25
days at June
30, 2021.
The tables
below present
the average
outstanding
balances under
our repurchase
agreements,
interest expense
and average
economic
cost of funds, was 46 basis points above the
and average
one-month
and six-month
LIBOR and 21 basis points above the average six-month LIBOR rates
for the quarter six months
ended June
30, 2021 and
2020, and for
each quarter
in 2021 and
2020, 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
June 30, 2021
$
72,241
$
31
$
739
0.17%
4.09%
March 31, 2021
69,104
40
748
0.23%
4.33%
December 31, 2020
67,878
43
658
0.25%
3.88%
September 30, 2017. The average term2020
61,151
43
1,108
0.28%
7.25%
June 30, 2020
51,987
60
516
0.46%
3.97%
March 31, 2020
131,156
928
1,384
2.83%
4.22%
Six Months Ended
June 30, 2021
$
70,672
$
71
$
1,487
0.20%
4.21%
June 30, 2020
91,571
988
1,900
2.16%
4.15%
Average GAAP Cost of Funds
Average Economic Cost of Funds
Relative to maturity of the outstanding repurchase agreements increased from 40 days at 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
June 30, 2021
0.10%
0.18%
0.07%
(0.01)%
3.99%
3.91%
March 31, 2021
0.13%
0.23%
0.10%
0.00%
4.20%
4.10%
December 31, 2016 to 48 days at 2020
0.15%
0.27%
0.10%
(0.02)%
3.73%
3.61%
September 30, 2017.2020

0.17%
The tables below present 0.35%
0.11%
(0.07)%
7.08%
6.90%
June 30, 2020
0.55%
0.70%
(0.09)%
(0.24)%
3.42%
3.27%
March 31, 2020
1.34%
1.43%
1.49%
1.40%
2.88%
2.79%
Six Months Ended
- 31 -
June 30, 2021
0.11%
0.20%
0.09%
0.00%
4.10%
4.01%
June 30, 2020
0.94%
1.06%
1.22%
1.10%
3.21%
3.09%
Dividend Income
We owned 1,520,036
shares of Orchid
common stock
as of March 31, 2020.
We acquired 975,321
additional
shares during
the consolidated average outstanding balances under our repurchase agreements, interest expensethree
months ended June 30, 2020, and average economic cost of funds, and average one-month and six-month LIBOR rates foran additional 100,000 shares during the ninethree months ended September 30, 20172020, bringing our total
ownership
to 2,595,357
shares. Orchid
paid total
dividends of
$0.39 per
share and 2016,
$0.195 per
share during
the six and for each quarter in 2017
three months
ended
June 30,
2021, respectively,
and 2016, on both a GAAP $0.405
per share
and economic basis.$0.165
per share
during the
six and
three months
ended June
30, 2020,
respectively.

During the
($ 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%
six and

three months
ended June
30, 2021,
we received
dividends
on this
common stock
investment
of approximately
$1.0 million
and $0.5
million, respectively,
compared
to $0.8 million
and $0.4
million during
the six and
three months
ended June
30, 2020,
respectively.


        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)%

Long-Term Debt
Junior Subordinated Notes

Interest expense
on the Company'sour junior subordinated
debt securities
was $0.9$0.5 million
and $0.8$0.6 million
for the ninesix months ended September
June 30, 2017 2021
and 2016, 2020,
respectively.
The average
rate of interest
paid for the ninesix months
ended SeptemberJune 30, 2017 2021
was 4.64%3.69% compared
to 4.13%4.68% for the
comparable
period in 2016.
2020.

Interest expense
on the Company'sour junior subordinated
debt securities
was $0.3$0.2 million
and $0.3 million
for the three month
periods ended September June
30, 20172021 and 2016,2020, respectively.
The average rate of interest paid for the three months ended SeptemberJune 30, 2017
2021 was 4.76%3.67% compared to 4.19%
4.17% for
the comparable
period in 2016.
2020.

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 June
30, 2017, 2021,
the interest
rate was 4.82%3.62%.
Note Payable

On October 30, 2019,
the Company borrowed $680,000 from a
bank. The note is
payable in equal monthly principal and
interest
installments
of approximately
$4,500 through
October 30, 2039.
Interest accrues
at 4.89% through
October 30, 2024. Thereafter,
interest
accrues based
on the weekly
average yield
to the United
States Treasury
securities
adjusted to
a constant maturity
of 5 years, plus
3.25%.
The note is
secured by
a mortgage
on the Company’s
office building.
Paycheck Protection Plan Loan
On April 13, 2020, the Company received
approximately
$152,000
through the Paycheck
Protection
Program (“PPP”)
of the CARES
Act in
the form
of a low
interest loan.
The Small
Business Administration
notified the
Company that,
effective as
of April
22, 2021,all
principal
and accrued
interest under
the PPP loan
has been forgiven.
Gains or Losses and Other Income

The table
below presents the Company's
our gains
or losses and
other income
for the nine six
and three
months ended September
June 30, 2017 2021
and 2016.2020.
(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 
                         
 

(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
Change
2021
2020
Change
Realized losses on sales of MBS
$
-
$
(5,805)
$
5,805
$
-
$
-
$
-
Unrealized (losses) gains on MBS
(1,898)
28
(1,926)
(506)
602
(1,108)
- 32 -
Total (losses)
gains on MBS
(1,898)
(5,777)
3,879
(506)
602
(1,108)
Losses on derivative instruments
-
(5,292)
5,292
-
(2)
2
Unrealized (losses) gains on
Orchid Island Capital, Inc. common stock
(78)
(755)
677
(2,128)
3,653
(5,781)
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 purposesthe 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 higherhigh
er 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 ninesix months
ended SeptemberJune 30, 2017, the Company
2020, we received
proceeds of $1.7
$171.2 million
from the sales
of
MBS.
Most of
these sales
occurred
during the
second half
of MBS.  There were no sales ofMarch
2020 as
we sold
assets in
order to
maintain our
leverage ratio
at prudent
levels, maintain
sufficient cash
and liquidity
and reduce
risk associated
with the market
turmoil brought
about by COVID-19.
We did not
sell
any MBS during
the threesix months
ended September June
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.2021.

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 2021
and 2016.
2020.

        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%

(1)Historical 5 and 10 Year Treasury 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)
June 30, 2021
0.87%
1.44%
2.27%
2.98%
0.13%
March 31, 2021
0.94%
1.75%
2.39%
3.08%
0.19%
December 31, 2020
0.36%
0.92%
2.22%
2.68%
0.23%
September 30, 2020
0.27%
0.68%
2.39%
2.89%
0.24%
June 30, 2020
0.29%
0.65%
2.60%
3.16%
0.31%
March 31, 2020
0.38%
0.70%
2.89%
3.45%
1.10%
(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 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 throughChicago Board
Options Exchange.
(2)
Historical 15 Year and
30 Year Fixed
Rate Mortgage Rates are obtained from Freddie Mac’s
Primary Mortgage Market Survey.
(3)
Historical LIBOR are obtained from 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.Intercontinental Exchange Benchmark
Administration Ltd.

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 ninesix and three months
ended SeptemberJune 30, 2017, the Company's2021, our total operating expenses were approximately $4.6$3.5 million and $1.5$1.7 million,
respectively, compared
to approximately $4.1
$3.4 million
and $1.4 $1.7
million for
the six and
three months
ended June
30, 2020,
respectively.
The
table below
presents a
breakdown
of operating
expenses for
the six and
three months
ended June
30, 2021 and
2020.
(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2021
2020
Change
2021
2020
Change
Compensation and related benefits
$
2,190
$
2,147
$
43
$
1,067
$
1,047
$
20
Legal fees
77
95
(18)
32
75
(43)
Accounting, auditing and other professional fees
195
251
(56)
102
112
(10)
Directors’ fees and liability insurance
378
346
32
190
181
9
Administrative and other expenses
641
552
89
333
270
63
$
3,481
$
3,391
$
90
$
1,724
$
1,685
$
39
Income Tax Provision
We recorded an income tax provision (benefit) for the ninesix and three months ended SeptemberJune 30, 2016,
2021 of approximately $0.2 million and
$(0.3) million, respectively, on consolidated pre-tax book income (loss) of $0.5 million and $(1.2) million, respectively.   The table below presents a breakdown of operating expenses
We recorded an
- 33 -
income tax provision for the ninesix and three months ended SeptemberJune 30, 20172020 of approximately $8.7
million and 2016.$1.3 million, respectively, on

consolidated pre-tax book (loss) income of $(10.2) million and $4.8 million.
(in thousands)                  
  Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  Change  2017  2016  Change 
Compensation and related benefits $2,684  $2,274  $410  $869  $723  $146 
Legal fees  81   144   (63)  40   40   - 
Accounting, auditing and other professional fees  266   308   (42)  80   118   (38)
Directors' fees and liability insurance  498   467   31   165   155   10 
Administrative and other expenses  1,022   888   134   364   321   43 
  $4,551  $4,081  $470  $1,518  $1,357  $161 

As a result
of adverse
economic impacts
of COVID-19
on our business,
management
performed
an assessment
of the need
for
additional
valuation allowances
against existing
deferred tax
assets. Following
the more-likely-than-not
standard that
benefits will
not be
realized in
the future,
we determined
an additional
valuation allowance
of approximately
$11.2 million was
necessary during
the three
months ended
March 31,
2020 for
the net operating
loss carryforwards
and capital
loss carryforwards.
With the evolving
and changing
landscape caused
by the pandemic,
we will continue
to closely
monitor the
impacts of
COVID-19
on the Company’s
ability to
realize its
deferred tax
assets and
may increase
valuation allowances
in the future
as new information
becomes available.
Financial
Condition:

Mortgage-Backed Securities

As of September June
30, 2017, the Company's2021,
our MBS portfolio
consisted of $198.0
$69.0 million
of agency or
government
MBS at fair
value and had
a weighted
average coupon
of 4.23%3.33%.
During the nine
six months
ended September June
30, 2017, the Company2021,
we received
principal repayments
of $7.7$7.4 million
compared
to $10.3
$8.9 million
for the comparable
period ended September
June 30, 2016.  2020.
The average
prepayment
speeds for
the quarters
ended September June
30, 20172021 and 2016
2020 were 8.3%
21.9% and 13.6%
15.3%,
respectively.

The following
table presents
the 3-month
constant prepayment
rate ("CPR"(“CPR”)
experienced
on the Company'sour structured
and PT MBS sub-portfolios,
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.
Structured
PT MBS
MBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
June 30, 2021
21.0
31.3
21.9
March 31, 2021
18.5
16.4
18.3
December 31, 2020
12.8
24.5
14.4
September 30, 2020
13.0
32.0
15.8
June 30, 2020
12.4
25.0
15.3
March 31, 2020
11.6
18.1
13.7
The following
tables summarize
certain characteristics
of our PT
MBS and structured
MBS as of June
30, 2021 and
December 31,
2020:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
June 30, 2021
Fixed Rate MBS
$
67,910
98.4%
3.62%
333
1-Jan-51
Interest-Only MBS
1,064
1.6%
2.16%
346
1-May-51
Inverse Interest-Only MBS
20
0.0%
5.93%
215
15-May-39
Total MBS Portfolio
$
68,994
100.0%
3.33%
333
1-May-51
December 31, 2020
Fixed Rate MBS
$
64,902
99.6%
3.89%
333
1-Aug-50
Interest-Only MBS
251
0.4%
3.56%
299
15-Jul-48
- 34 -
Inverse Interest-Only MBS
25
0.0%
5.84%
221
15-May-39
Total MBS Portfolio
$
65,178
100.0%
3.89%
333
1-Aug-50
($ in thousands)
June 30, 2021
December 31, 2020
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
45,707
66.2%
$
38,946
59.8%
Freddie Mac
23,287
33.8%
26,232
40.2%
Total Portfolio
$
68,994
100.0%
$
65,178
100.0%
June 30, 2021
December 31, 2020
Weighted Average Pass-through Purchase Price
$
108.84
$
109.51
Weighted Average Structured Purchase Price
$
4.48
$
4.28
Weighted Average Pass-through Current Price
$
109.40
$
112.67
Weighted Average Structured Current Price
$
6.82
$
3.20
Effective Duration
(1)
3.562
3.309
(1)
Effective duration is the approximate percentage change
in price for a mortgage pool 100 basis point change in rates.
An effective duration of 3.562 indicates
that assumes thatan interest rate increase of 1.0% would be expected to cause a constant fraction3.562% decrease
in the value of the remaining principal is prepaid each month or year. Specifically, the CPR MBS in our investment portfolio
at
June 30, 2021.
An effective duration of 3.309 indicates that an interest rate
increase of 1.0% would be expected to cause a 3.309% decrease
in the chart below representsvalue of the three month prepayment rate ofMBS in our investment portfolio at December 31,
2020. These figures include the structured 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.portfolio
but do

     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 


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

($ in thousands)      
     Weighted 
   Percentage Average 
   ofWeightedMaturity 
  FairEntireAverageinLongest
Asset Category ValuePortfolioCouponMonthsMaturity
September 30, 2017      
Fixed Rate MBS$195,15198.6%4.23%3261-Sep-47
Total PT MBS 195,15198.6%4.23%3261-Sep-47
Interest-Only Securities 1,6430.8%3.44%23225-Dec-39
Inverse Interest-Only Securities 1,1960.6%5.32%28125-Apr-41
Total Structured MBS 2,8391.4%4.23%25325-Apr-41
Total MBS$197,990100.0%4.23%3251-Sep-47
December 31, 2016      
Fixed Rate MBS$124,29995.4%4.24%3471-Oct-46
Total PT MBS 124,29995.4%4.24%3471-Oct-46
Interest-Only Securities 2,6542.0%3.48%24525-Dec-39
Inverse Interest-Only Securities 3,3492.6%5.52%32525-Dec-46
Total Structured MBS 6,0034.6%4.62%29025-Dec-46
Total MBS$130,302100.0%4.26%34425-Dec-46

($ in thousands)            
  September 30, 2017  December 31, 2016 
     Percentage of     Percentage of 
Agency Fair Value  Entire Portfolio  Fair Value  Entire Portfolio 
Fannie Mae $171,565   86.7% $120,961   92.8%
Freddie Mac  26,201   13.2%  8,870   6.8%
Ginnie Mae  224   0.1%  471   0.4%
Total Portfolio $197,990   100.0% $130,302   100.0%

  September 30, 2017  December 31, 2016 
Weighted Average Pass-through Purchase Price $109.33  $110.31 
Weighted Average Structured Purchase Price $6.02  $6.74 
Weighted Average Pass-through Current Price $108.00  $107.54 
Weighted Average Structured Current Price $7.38  $10.40 
Effective Duration (1)
  3.867   4.769 

(1)
Effective duration is the approximate percentage change in price for a 100 basis point change in rates.  An effective duration of 3.867 indicates that an interest rate increase of 1.0% would be expected to cause a 3.867% decrease in the value of the MBS in the Company's investment portfolio at September 30, 2017.  An effective duration of 4.769 indicates that an interest rate increase of 1.0% would be expected to cause a 4.769% decrease in the value of the MBS in the Company's investment portfolio at December 31, 2016. These figures include the structured securities in the portfolio but do include the effect of the Company's funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.


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

($ in thousands)                  
 Nine Months Ended September 30, 
 2017 2016 
  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%

The Company's portfolio of PT MBS is typically comprised of adjustable-rate MBS, fixed-rate MBS and hybrid adjustable-rate MBS. The Company generally seeks to acquire low duration assets that offer high levels of protection from mortgage prepayments provided they are reasonably priced by the market.  Although the duration of an individual asset can change as a result of changes in interest rates, the Company strives to maintain a hedged PT MBS portfolio with an effective duration of less than 2.0. The stated contractual final maturity of the mortgage loans underlying the Company's portfolio of PT MBS generally ranges up to 30 years. However, the effect of our hedges.
Effective duration quotes for individual investments are obtained
from The Yield Book, Inc.
The following
table presents
a summary of
our portfolio
assets acquired
during the
six months
ended June
30, 2021 and
2020.
($ in thousands)
Six Months Ended June 30,
2021
2020
Total Cost
Average
Price
Weighted
Average
Yield
Total Cost
Average
Price
Weighted
Average
Yield
PT MBS
$
12,368
$
104.84
1.19%
$
20,823
$
110.83
2.64%
Structured MBS
772
7.72
3.33%
-
-
-
Our portfolio
of PT MBS
is typically
comprised of
adjustable-rate
MBS, fixed-rate
MBS and hybrid
adjustable-rate
MBS. We generally
seek to acquire
low duration
assets that
offer high levels
of protection
from mortgage
prepayments
provided that
they are reasonably
priced by the
market.
The stated
contractual
final maturity
of the mortgage
loans underlying
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'sour 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'sIO’s may cause
their durations
to become
extremely negative
when prepayments
are high,
and less negative
when prepayments
are low. Prepayments
affect the durations duration
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,
we gauge the Company gauges the
interest
rate sensitivity
of its assets
by measuring
their effective
duration.
While modified
duration measures
the price
sensitivity
of a bond
to
- 35 -
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.

We face
The Company faces
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 itsour assets
and the duration
of itsour 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.

securities.

The following
sensitivity
analysis
shows the
estimated impact
on the fair
value of our
interest rate-sensitive
investments
and hedge
positions as
of SeptemberJune 30, 2017,
2021, 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.

rates.
($ in thousands)                     
  Fair  $ Change in Fair Value  % Change in Fair Value 
MBS Portfolio Value  -100BPS  +100BPS  +200BPS  -100BPS  +100BPS  +200BPS 
Fixed Rate MBS $195,151  $6,177  $(10,066) $(22,189)  3.17%  (5.16)%  (11.37)%
Interest-Only MBS  1,643   (621)  465   735   (37.77)%  28.31%  44.75%
Inverse Interest-Only MBS  1,196   (134)  (51)  (256)  (11.17)%  (4.27)%  (21.37)%
Total MBS Portfolio $197,990  $5,422  $(9,652) $(21,710)  2.74%  (4.88)%  (10.96)%

($ 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)            

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

($ in thousands)
Fair
$ Change in Fair Value
% Change in Fair Value
MBS Portfolio
Value
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Fixed Rate MBS
$
67,910
$
2,287
$
(3,172)
$
(6,909)
3.37%
(4.67)%
(10.17)%
Interest-Only MBS
1,064
(274)
194
289
(25.79)%
18.29%
27.21%
Inverse Interest-Only MBS
20
1
(3)
(6)
5.01%
(14.81)%
(30.23)%
Total MBS Portfolio
$
68,994
$
2,014
$
(2,981)
$
(6,626)
2.92%
(4.32)%
(9.60)%
($ in thousands)
Notional
$ Change in Fair Value
% Change in Fair Value
Amount
(1)
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Eurodollar Futures Contracts
Junior Subordinated Debt Hedges
$
1,000
$
(5)
$
5
$
10
(1.00)%
1.00%
2.00%
$
1,000
$
(5)
$
5
$
10
Gross Totals
$
2,009
$
(2,976)
$
(6,616)
(1)
Represents the
average contract/notional
amount of Eurodollar
futures contracts.
In addition
to changes
in interest
rates, other
factors impact
the fair value
of the Company'sour 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'sour 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 June
30, 2017, the Company2021,
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 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'sour MBS.

As of September June
30, 2017, the Company2021,
we had obligations
outstanding
under the
repurchase
agreements
of approximately $187.4
$71.3 million
with a net
weighted average
borrowing
cost of 1.35%0.16%.
The remaining
maturity of the Company's
our outstanding
repurchase
agreement
obligations
ranged from 11
6 to 89
51 days, with
a weighted
average maturity
of 4825 days.
Securing the
repurchase
agreement
obligation
as of September June
30, 20172021 are
MBS with
an estimated
fair value,
including
accrued interest,
of $198.2$69.2 million
and a weighted
average maturity
of 326332 months.
Through November 3, 2017, the Company has August
13,
- 36 -
2021, we have
been able
to maintain its
our repurchase
facilities
with comparable
terms to those
that existed
at SeptemberJune 30, 2017
2021 with
maturities
through January 29, 2018.October
19, 2021.


The table below presents information about our period-end, maximum and average
repurchase agreement obligations for each
quarter in 20172021 and 2016.2020.

($ 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)

(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 $56.1 million.
($ in thousands)
(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.
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
June 30, 2021
$
71,346
$
72,372
$
72,241
$
(895)
(1.24)%
March 31, 2021
73,136
76,004
69,104
4,032
5.83%
December 31, 2020
65,071
70,684
67,878
(2,807)
(4.14)%
September 30, 2020
70,685
70,794
61,151
9,534
15.59%
(1)
June 30, 2020
51,617
52,068
51,987
(370)
(0.71)%
March 31, 2020
52,357
214,921
131,156
(78,799)
(60.08)%
(2)
(1)
The higher ending balance relative to the average balance during the
quarter ended September 30, 2020 reflects the increase in the portfolio.
During that quarter, the Company's investment
in PT MBS increased $20.4 million.
(2)
The lower ending balance relative to the average balance during the quarter
ended March 31, 2020 reflects the Company’s response to
the
COVID-19 pandemic. During that quarter,
the Company's investment in PT MBS decreased $162.4 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 primary
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 investments
also generates generate
liquidity on
an on-going
basis through
payments of
principal and
interest
we receive
on our MBS portfolio, and from cash flows received from the retained interests and the collection of servicing advances.  Management believes that we currently have sufficient
portfolio.
The COVID-19
pandemic has
adversely affected
our 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
assets under
management
and operating expenses,
results.
During March
2020,
we significantly
reduced our
MBS assets
to meet margin
calls and (d) the payment of other accrued obligations.
repay debts.
As described
elsewhere
in this report,
since March
2020

Bimini’s operating
results have
stabilized,
liquidity
has improved
and our investments
in MBS and
Orchid shares
have increased.
Our hedging
strategy for hedging our funding costs typically
involves taking
short positions
in Eurodollar
futures, T-Note
futures, swaptions TBAs
or other instruments. Since inception we have primarily used
Currently, our
hedge positions
are limited
to 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
- 37 -
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 June
30, 2021,
we had cash
and cash equivalents
of $7.3 million.
We generated
cash flows
of $8.6 million
from principal
and interest
payments on
our MBS portfolio
and had average
repurchase
agreements
outstanding
of $70.7 million
during the
six months
ended June
30, 2021.
In addition,
during the
six months
ended June
30, 2021,
we received
approximately
$4.1 million
in management
fees and
expense reimbursements
as manager
of Orchid and
approximately
$1.0 million
in dividends
from our investment
in Orchid common
stock.
In order to acquiregenerate additional assets.cash to be invested in our MBS portfolio, on October
30, 2019, we obtained a $680,000 loan

In future periods we expect to continue to finance our activities through repurchase agreements.  As of September 30, 2017,secured by a mortgage on the Company had cash and cash equivalents of $5.2 million.  We generated cash flows of $11.5 million fromCompany’s office property.
The loan is payable in equal monthly principal and interest paymentsinstallments of
approximately $4,500 through October 30, 2039. Interest accrues at 4.89%, through October
30, 2024. Thereafter, interest accrued
based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity
of five years, plus 3.25%.
Net loan proceeds were approximately $651,000.
In addition,
during 2020, we completed the sale of real property that was
not used in
the Company’s business.
The proceeds from this sale were approximately $462,000 and were
invested in our MBS portfolio and $0.9 million from retained interests and had average repurchase agreements outstanding of $135.8 million during the nine months ended September 30, 2017.  In addition, during the nine months ended September 30, 2017, the Company received approximately $5.3 million in management fees and expense reimbursements as manager of Orchid and approximately $1.9 million in dividends from its investment in Orchid common stock.portfolio.

The table below summarizes the effect that certain future contractual obligations existing as of September June
30, 20172021 will have on our
liquidity and cash flows. The figures below reflect forgiveness of all principal and interest under
the PPP loan.

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

(1)Interest expense on repurchase agreements and junior subordinated notes are based on current interest rates as of September 30, 2017 and the remaining term of liabilities existing at that date.
(in thousands)
(2)The Company holds a common equity interest in Bimini Capital Trust II.  The amount presented represents the net cash outlay of the Company.
Obligations Maturing

Within One
Year
One to Three
Years
Three to Five
Years
More than
Five Years
Total
Repurchase agreements
$
71,346
$
-
$
-
$
-
$
71,346
Interest expense on repurchase agreements
(1)
43
-
-
-
43
Junior subordinated notes
(2)
-
-
-
26,000
26,000
Interest expense on junior subordinated notes
(1)
996
1,911
1,908
9,030
13,845
Principal and interest on mortgage loan
(1)
54
107
108
717
986
Totals
$
72,439
$
2,018
$
2,016
$
35,747
$
112,220
(1)
Interest expense
on repurchase
agreements,
junior subordinated
notes and mortgage
loan are based
on current interest
rates as of June
30, 2021
and the remaining
term of liabilities
existing at
that date.
(2)
We hold a common
equity interest
in Bimini Capital
Trust II.
The amount presented
represents our net
cash outlay.
Outlook

Orchid Island
Capital Inc.
Orchid Island Capital Inc.

To the extent Orchid is able to increasehad another strong quarter growing its capital base.
Orchid raised net proceeds of approximately $124.7
million through its “at the market” program. As for Orchid’s financial performance, while the
economy continued its strong recovery from
the COVID-19 pandemic, the interest rate market in the U.S. reversed course during the
second quarter as rates rallied throughout the
- 38 -
quarter and even more so into the third quarter.
Orchid had positioned its portfolio and hedges quite defensively as the second
quarter
unfolded, and Orchid’s MBS portfolio underperformed its hedge positions, resulting in a GAAP
loss of $0.17 per share or $16.9 million.
The net effect of the new shares issued, the net loss and dividends paid resulted in Orchid’s capital base increasing
$87.6 million, or
19% for during the second quarter.
Year to date Orchid has increased it capital base by approximately $138.5 million, or 33%.
As a
result, Bimini Advisor’s advisory services revenue increased 8% over time, wethe
first quarter and, as the increased capital base at Orchid was
not in place for the entire quarter, the run rate entering the third quarter is higher still.
Orchid’s financial performance and dividend
activity will benefit via increased management fees.  In addition, also continue to impact the size of the capital base going forward.
Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay
to us Orchid'sOrchid’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 Company increased its holdings of Orchid
during the second quarter of 2020, as the shares of Orchid were trading at a significant
discount to Orchid’s reported book value as of
March 31, 2020.
The Company currently owns approximately 2.6 million shares of 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.

Economic Summary
The economy
continued its
strong recovery
from the COVID-19
pandemic during
the second
quarter of
2021.
The surge
in COVID-19
cases that
occurred during
the first
quarter of
2021 abated
quickly as inoculations
of the new
vaccines were
widely distributed
throughout
the
population
– especially
to those
most susceptible
to the virus.
New COVID-19
cases, hospitalizations
and deaths
from the
virus
decreased dramatically,
allowing
the economy
to reopen
and substantial
pent-up demand
on the part
of consumers
to be unleashed.
Additional
fiscal policy
steps taken
by the Biden
administration,
as described
below, added to
the surge
in economic
activity.
The economic
data released
throughout
the second
quarter provided
evidence of
the recovery.
Retail sales,
especially
car sales,
air
travel and
hotel demand,
surged.
Home sales
grew at a
pace that
exceeded the
early 2000s.
Home price
increases exceeded
levels
seen in the
early 2000s
as well,
eventually
leading to
a slow down
in home sales
and price
appreciation
in the early
days of the
third
quarter as
elevated home
prices became
an impediment
to new sales.
As the demand
for many goods
and services
surged, the
lingering
effects of the
pandemic acted
to retard
supply, leading to
price increases.
For example,
the supply
of computer
chips in the
case of autos
and consumer
electronics
could not
keep up with
demand.
Shortages
of commodities
like lumber
in the case
of housing,
and labor
generally, constrained
the economy’s
ability to
meet demand.
Labor remained
constrained
as workers
either were
content to
collect
supplemental
unemployment
insurance
available initially
under COVID-19
related legislation,
were fearful
of excess exposure
to COVID-
19 (especially
in the case
of leisure
and hospitality
workers) or
affected by
the lack of
access to
childcare,
and thus unable
to return
to
work.
Gross domestic
product,
or GDP, expanded at
an 6.5% annualized
rate during
the second
quarter of
2021.
Importantly, the
supply/demand
imbalance
mentioned
above, coupled
with an expansion
in the monetary
base driven
by both fiscal
and monetary
policy
(the Fed’s monthly
asset purchases),
have driven
inflation higher.
The consumer
price index,
or CPI, has
accelerated
to over 5%
on a
year over year
basis for the
first time
since 2008.
The lone disappointment
over the period
has been job
growth, as
mentioned above.
As
we enter the
third quarter
of 2021 job
growth has
accelerated,
but the rapid
emergence
of the delta
variant of
COVID-19
during July
may
negatively
impact job
growth.
Legislative
Response and
the Federal
Reserve
Congress passed
the CARES
Act quickly
in response
to the pandemic’s
emergence
last spring
and followed
with additional
legislation
over the ensuing
months.
However, as certain
provisions
of the CARES
Act expired,
such as supplemental
unemployment
insurance
last
- 39 -
July, there appeared
to be a need
for additional
stimulus for
the economy
to deal with
the surge
in the pandemic
that occurred
as cold
weather set
in, particularly
over the Christmas
holiday.
As mentioned
above, the
Federal government
eventually
passed an additional
stimulus package
in late December
of 2020 and
again in March
of 2021. In
addition, the
Fed has provided,
and continues
to provide,
as
much support
to the markets
and the economy
as it can within
the
constraints
of its mandate.
During the
third quarter
of 2020, the
Fed
unveiled a
new monetary
policy framework
focused on
average inflation
rate targeting
that allows
the Fed Funds
rate to remain
quite low,
even if inflation
is expected
to temporarily
surpass the
2% target
level. Further,
the Fed will
look past the
presence of
very tight
labor
markets, should
they be present
at the time.
This marks
a significant
shift from
their prior
policy framework,
which was
focused on
the
unemployment
rate as a
key indicator
of impending
inflation.
Adherence
to this policy
could steepen
the U.S.
Treasury curve
as short-term
rates could
remain low
for a considerable
period but
longer-term
rates could
rise given
the Fed’s intention
to let inflation
potentially
run
above 2% in
the future
as the economy
more fully
recovers.
The response
of U.S. Treasury
rates appeared
to follow
this pattern
precisely
during the
first quarter
of 2021 but
it has since
reversed since
early in the
second quarter
2021.
Interest Rates
As economic
activity and
inflation
accelerated
during the
second quarter
of 2021, market
participants
anticipated
interest rates
would
continue to
rise as they
had done
during the
first quarter
of the year.
This was most
evident in
the open interest
in the various
U.S.
Treasury futures
– namely the
level of contracts
shorted.
However, interest
rates did
not continue
to rise in
the second
quarter of
2021. In
fact, over
the course
of the quarter,
longer term
interest rates
declined slowly
– by 27.2
bps in the
case of the
10-year U.S.
Treasury note
and 32.5 bps
in the case
of the 30-year
U.S. Treasury
bond.
Since quarter
end, rates
have accelerated
their decline,
especially
so as the
delta variant
of COVID-19
has appeared
to spread
at an accelerating
rate across
both the U.S.
and the MBSglobe.
The driver
of the counter-
intuitive movement
in rates was
likely the result
of technical
factors,
as market positioning
was so skewed
to the short
side and there
simply were
few if any
additional
sellers.
The disappointing
job growth
figures during
the second
quarter were
also cited
as evidence
the
market may
have been
overly optimistic
about the
magnitude of
the economic
recovery.
More recently,
the rapid
spread of
the delta
variant of
COVID-19
is causing
market participants
to lower their
near-term
growth estimates
– both for
the U.S.
and globally.
The Fed has
played a role
in the evolution
of interest
rates over
the course
of the quarter
as well. The
most significant
development
has been the
Fed’s insistence,
at least from
the FOMC leadership,
that the inflationary
pressures
evident in
the economy
will be transitory.
The Fed argues
that COVID-19
related supply
constraints
are driving
most price
pressures,
and that
activity related
to the opening
of the
economy – such
as travel,
dining out
and housing
– is causing
price pressures
related to
excessive demand,
which should
subside as
the
economy returns
to normal
levels of
activity.
Substantial
fiscal stimulus
also played
a role in
the Fed’s view
in that direct
payments to
consumers related
to the various
relief measures
passed by Congress
were one time
in nature
and their
effect will
fade.
Market pricing,
or
the level of
interest rates,
especially
long-term
rates, seems
to indicate
the market
agrees with
this point
of view.
However, at the
conclusion of
the FOMC meeting
in June, the
market was
surprised to
learn that
while the
leadership
of the Fed
maintained
this view, not
all members
of the FOMC
did.
Certain members
of the committee
believed that
inflation may
not be transitory,
and that as
a result the
Fed
would have
to raise interest
rates begin
to taper their
asset purchases
sooner than
previously
thought.
The market
interpreted
these
developments
as a hawkish
shift on
the part of
the Fed, although
the leadership
of the Fed
– especially
Chairman Powell
- has pushed
back against
this interpretation
and insists
the Fed’s stance
has not changed.
The Agency
RMBS Market

In many respectsPerformance
for the third Agency
RMBS market
for the second
quarter trailed
most other
asset classes,
especially
so in June.
The total
return for
the Agency
RMBS sub-index
was a repeat 0.33%
for the quarter.
As mentioned
above, at
the conclusion
of the firstJune
FOMC meeting
it
was evident
that not all
committee
members shared
the view of
the Fed leadership
that the removal
of accommodation
was still far
off – or
that the recovery
was far from
complete.
Certain members
thought the
Fed would
have to taper
their asset
purchases and second. Economic and
eventually
raise
short-term
interest rates
much sooner.
For the Agency
RMBS market, developments continued
this meant
Fed purchases
of $40 billion
per month
might be
ending
sooner than
most market
participants
expected.
The extremely
strong housing
market added
credence to
the trendnotion
that the Fed
did not
need to continue
to provide
support to
the market
any longer
as well.
Given the length
of time the
Fed has been
supporting
the Agency
RMBS market,
coupled with
banks that are
flush with
deposits that
need to be
invested, price
levels in place since March.  Inflation data continued
the Agency
RMBS market
were
quite rich
prior to come in below market expectations.  Optimism stemming from the surprise outcome this
development.
While all sectors
of the U.S. Presidential election last November andfinancial
markets appear
to be priced
at the markets' expectations for progresshigh
end of long-term
price ranges,
- 40 -
the removal
of such a large
buyer of
Agency RMBS
likely would
have a negative
effect on health care, regulatory and tax reform, infrastructure spending, etc. were not realized.  In contrast, events in Washington were chaotic at times astheir
valuations.
The market
has reacted
to the Trump Administration struggled with a Republican party rife with internal struggles and political infighting inside
potential of
lower Fed
purchases of
Agency RMBS,
leading to
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 relative
under-performance
of the Trump Administration to accomplish anything meaningful. Agency
RMBS market
during the
second quarter
of 2021.
The Federal Reserve (the "Fed") raised their targetsecond
driver of
Agency RMBS
performance,
both for the Federal
second quarter
of 2021 and
beyond, is,
as always,
the level of
prepayments.
As the market
has rallied
– especially
long-term
rates – rates
available to
borrowers
are now back
to levels seen
last
summer, and burn-out
in higher
coupon, more
seasoned mortgages
has
been modest.
This has been
supportive
of specified
pool
premiums, a
core holding
of the Company.
Going forward,
prepayment activity
could accelerate
as a result
of the FHFA’s recent decision
to remove the
Adverse Market
Refinance
Fee effective
August 1,
2021, earlier
than
had been anticipated.
The fee was
paid by originators
to the GSE’s
as a form
of compensation
to the GSE’s
to cover the
higher default
rates that
were anticipated.
Originators
generally
passed
the fee on
to borrowers,
so its removal
effectively lowers
available
mortgage rates
by the amount
of the fee,
or 50 basis
points.
Recent Legislative
and Regulatory
Developments
The Fed conducted
large scale
overnight repo
operations
from late
2019 until
July
2020 to address
disruptions
in the U.S.
Treasury,
Agency debt
and Agency
MBS financing
markets. These
operations
ceased in July
2020 after
the central
bank successfully
tamed volatile
funding costs
that had threatened
to cause disruption
across the
financial system.
The Fed has
taken a number
of other actions
to stabilize
markets as
a result of
the impacts
of the COVID-19
pandemic. In
March of
2020, the
Fed announced
a $700 billion
asset purchase
program to
provide liquidity
to the U.S.
Treasury and
Agency RMBS
markets. The
Fed also lowered
the Fed Funds
rate to a
range of 0.0%
– 0.25%, after
having already
lowered the
Fed Funds
rate by 50
bps earlier
in March the
month. Later
that same
month the
Fed announced
a program
to acquire
U.S. Treasuries
and June, Agency
RMBS in the
amounts needed
to
support smooth
market functioning.
With these
purchases,
market conditions
improved substantially.
Currently, the Fed
is committed
to
purchasing
$80 billion
of U.S. Treasuries
and announced a tapering $40 billion
of Agency
RMBS each
month. Chairman
Powell and
the Fed have
reiterated
their
commitment
to this level
of asset purchases
at every meeting
since their
meeting on
June 30,
2020. At the
July 2021 meeting,
the Fed
indicated they
had begun
their discussions
for adjusting
the path
and composition
of asset purchases,
but reiterated
the intention
to
provide notice
well in September. However, advance
of an announcement
to reduce
the market remained skeptical pace of
such purchases.
Chairman
Powell has
also maintained
that the
Fed expects
to maintain
interest
rates at this
level until
the Fed would be able is
confident that
the economy
has weathered
the pandemic
and its impact
on economic
activity and
is on track
to follow achieve
its maximum
employment
and price
stability
goals. The
Fed has taken
various other
steps
to support
certain other
fixed income
markets, to
support mortgage
servicers and
to implement
various portions
of the Coronavirus
Aid,
Relief, and
Economic Security
(“CARES”)
Act.
The CARES
Act was passed
by Congress
and signed
into law on
March 27, 2020.
This over $2
trillion COVID-19
relief bill,
among
other things,
provided for
direct payments
to each American
making up
to $75,000
a year, increased
unemployment
benefits for
up to four
months (on
top of state
benefits),
funding to
hospitals and
health providers,
loans and investments
to businesses,
states
and municipalities
and grants
to the airline
industry. On April
24, 2020,
an additional
funding bill
was signed
into law
that provided
an additional
$484 billion
of
funding to
individuals,
small businesses,
hospitals,
health care
providers and
additional
coronavirus
testing efforts.
Various provisions
of
the CARES
Act began
to expire in
July 2020,
including a
moratorium
on evictions,
expanded
unemployment
benefits, and
a moratorium
on
foreclosures.
On August
8, 2020,
Executive Order
13945 was
issued,
directing the
Department
of Health
and Human
Services, the
Centers for
Disease Control
and Prevention
(“CDC”),
the Department
of Housing
and Urban
Development,
and Department
of the
Treasury to take
measures to
temporarily
halt residential
evictions
and foreclosures,
including
through with temporary
financial assistance.
On December
27, 2020,
an additional
$900 billion
coronavirus
aid package
was signed
into law
as many additional hikes as part of
the Fed was expecting as core inflation readings continued to show year over year declines, withConsolidated
Appropriations
Act of 2021,
providing for
extensions
of many of
the elements of the index exhibiting persistent weakness.  Geopolitical events – particularly with respect to North Korea – keep the world CARES
Act policies
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 programs
as well as three major hurricanes made landfall – one each in Texas, Florida
additional
relief. The
package provided
for, among other
things, direct
payments to
most Americans
with a gross
income of
less than $75,000
a year, extension
of unemployment
benefits through
March 14, 2021,
funding for
procurement
of vaccines
and Puerto Rico.health
providers,
loans to qualified
businesses,
funding for
rental assistance
and funding
for schools.
On January
29, 2021,
the CDC
issued guidance
extending eviction
moratoriums
for covered
persons through
March 31,
2021, which
was subsequently
extended
to July 31,
2021. In addition,
on February
9,
- 41 -
2021, the
FHFA announced
that the case of Texas, Hurricane Harvey caused unprecedented floodingforeclosure
moratorium
begun under
the CARES
Act for loans
backed by Fannie
Mae and disrupted the Nation's oil refining capacity for several days.Freddie

However, there was a perceptible change in market sentiment in early September,Mac and the market reversed course
eviction moratorium
for real estate
owned by Fannie
Mae and Freddie
Mac were extended
until March
31, 2021,
which was
extended to
July 31, 2021.
On February
16, 2021,
the U.S.
Housing and
Urban Development
Department
announced
the extension
of the
FHA eviction
and foreclosure
moratorium
to June 30,
2021, which
was extended
to July 31,
2021 and again
in July, although
the
moratorium
no longer
applies to
all geographic
areas.
On March 11, 2021,
the $1.9 trillion
American Rescue
Plan Act of
2021 was signed
into law.
This stimulus
program furthered
the
Federal government’s
efforts to stabilize
the end economy
and provide
assistance
to sectors
of the third quarterpopulation
still suffering
from the
various
physical and early
economic effects
of the pandemic.
In January
2019, the
Trump administration
made statements
of its plans
to work with
Congress to
overhaul Fannie
Mae and Freddie
Mac and expectations
to announce
a framework
for the development
of a policy
for comprehensive
housing finance
reform soon.
On
September
30, 2019,
the FHFA announced
that Fannie
Mae and Freddie
Mac were allowed
to increase
their capital
buffers to
$25 billion
and $20 billion,
respectively, from
the prior
limit of $3
billion each.
This step could
ultimately
lead to Fannie
Mae and Freddie
Mac being
privatized
and represents
the first
concrete step
on the road
to GSE reform.
On June 30,
2020, the
FHFA released
a proposed
rule on a
new regulatory
framework
for the GSEs
which seeks
to implement
both a risk-based
capital framework
and minimum
leverage
capital
requirements.
The final
rule on the
new capital
framework
for the GSEs
was published
in the federal
register in
December 2020.
On
January 14,
2021, the
U.S. Treasury
and the FHFA executed
letter agreements
allowing the
GSEs to continue
to retain
capital up
to their
regulatory
minimums, including
buffers, as
prescribed
in the December
rule.
These letter
agreements
provide, in
part, (i)
there will
be no
exit from conservatorship
until all
material litigation
is settled
and the GSE
has common
equity Tier
1 capital of
at least 3%
of its assets,
(ii)
the GSEs will
comply with
the FHFA’s regulatory
capital framework,
(iii) higher-risk
single-family
mortgage acquisitions
will be restricted
to
current levels,
and (iv) the
U.S. Treasury
and the FHFA
will establish
a timeline
and process
for future
GSE reform.
However, no definitive
proposals or
legislation
have been
released or
enacted with
respect to
ending the
conservatorship,
unwinding
the GSEs,
or materially
reducing the
roles of the
GSEs in the
U.S. mortgage
market. On
June 23, 2021,
President
Biden removed
the director
of the FHFA and
appointed an
acting director.
With the leadership
change at
FHFA, some observers
anticipate
that the Biden
administration
will be less
likely to focus
on ending
the GSEs’
conservatorship
and that the
January 14,
2021, letter
agreements
between the
U.S. Treasury
and the
FHFA may be renegotiated.
In 2017, policymakers
announced
that LIBOR
will be replaced
by December
31, 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. The
ICE Benchmark
Administration,
in its capacity
as administrator
of USD LIBOR,
has confirmed
that it will
cease publication
of (i) the
one-week and
two-month
USD LIBOR
settings immediately
following
the LIBOR
publication
on December
31, 2021,
and (ii) the
overnight
and one, three,
six and 12-month
USD LIBOR
settings immediately
following
the
LIBOR publication
on June 30,
2023.
A joint statement
by key regulatory
authorities
calls on banks
to cease entering
into new
contracts
that use USD
LIBOR as a
reference rate
by no later
than December
31, 2021.
The Alternative
Reference
Rates Committee,
a steering
committee comprised
of large U.S.
financial institutions,
has proposed
replacing USD-LIBOR
with a new
SOFR, a rate
based on U.S.
repo
trading. Many
banks believe
that it may
take four
to five years
to complete
the transition
to SOFR,
for certain,
despite the
2021 deadline.
We will monitor
the emergence
of this new
rate carefully
as it will
potentially
become the
new benchmark
for hedges
and a range
of
interest rate
investments.
At this time,
however, no consensus
exists as to
what rate
or rates may
become accepted
alternatives
to LIBOR.
Effective January
1, 2021, Fannie
Mae, in alignment
with Freddie
Mac, will extend
the timeframe
for its delinquent
loan buyout
policy
for Single-Family
Uniform Mortgage-Backed
Securities
(UMBS) and
Mortgage-Backed
Securities
(MBS) from
four consecutively
missed
monthly payments
to twenty-four
consecutively
missed monthly
payments (i.e.,
24 months past
due). This
new timeframe
will apply
to
outstanding
single-family
pools and
newly issued
single-family
pools and was
first reflected
when January
2021 factors
were released
on
the fourth quarter. Geo-political events calmed down, removing
business day
in February
2021.
For Agency
RMBS investors,
when a delinquent
loan is bought
out of a pool
of mortgage
loans, the flight-to-quality induced demand for safe-haven assets,
removal of
the loan from
the pool
is the same
as a total
prepayment
of the loan.
The respective
GSEs currently
anticipate,
however, that
delinquent
loans will
be
- 42 -
repurchased
in most cases
before the
24-month deadline
under one
of the following
exceptions
listed below.
• a loan that is paid
in full, or
where the
related lien
is released
and/or the
note debt
is satisfied
or forgiven;
• a loan repurchased by
a seller/servicer
under applicable
selling 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
servicing requirements;
• a loan entering a permanent
modification,
which generally
requires
it to be slightly better prospects for success. Inflation data finally met expectations and showed signs of reversing its decline whenremoved
from 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 clearMBS.
During any
modification
trial
period, 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
loan will
remain in the Federal Funds rate
MBS until
the trial
period ends;
• a loan subject to a
short sale
or deed-in-lieu
of foreclosure;
or
• a loan referred to
foreclosure.
Because of
these exceptions,
the GSEs
currently believe
based on prevailing
assumptions
and market
conditions
this change
will
have only a
marginal impact
on prepayment
speeds, in December.
aggregate.
Cohort level
impacts may
vary. For example,
more than
half of loans
referred to
foreclosure
are historically
referred within
six months
of delinquency. The September economic data released in early October has also been very strong,
degree to
which speeds
are affected
depends on
delinquency
levels, borrower
response, and the anticipated short-term effects of the hurricanes appear
referral to have been less than feared. Further, the repair work associated with the hurricanes should put even more upward pressure on economic activity.
foreclosure
timelines.

As we move into the fourth quarter, market pricing of additional policy accommodation removal is far less than the Fed anticipates. The latest reads on inflation returned to its aforementioned string of below expectations readings.  The perceived lack of meaningful inflation, coupled with a hawkish Fed, has caused the U.S. Treasury curve to flatten, as the spread between 5-year Treasury Notes and 30-year Treasury Bonds is at multi-year lows.  The market is also faced with uncertainty surrounding President Trump's appointment of the next Fed chair, with many of 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, 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.


The mortgage market closed the quarter with the current coupon, 30-year fixed rate Agency MBS trading at the tightest spread to comparable duration U.S. Treasuries since early 2014.  As has been the case for much of the year, lower coupon MBS outperformed high coupon MBS versus their comparable duration U.S. Treasury benchmarks.  As we approach the winter months and the seasonal slowdown in prepayment activity, coupled with the increase in rates that began in early September, speeds should continue to moderate

Recent Regulatory Developments

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
evolve, especially
in light of
the Trump COVID-19
pandemic, President
Biden’s new
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 new
Congress in
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.
United States.

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
RMBS may increase
our costs (if,
for example,
guarantee
fees
increase) or
require us
to change
our investment
strategy altogether.
For example,
the elimination
of the guarantee
structure
of Agency
RMBS may cause
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,
RMBS, 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.

Lower long-term
interest rates
can affect the
value of our
Agency RMBS
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
RMBS. 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
RMBS affected
by such prepayments
may decline.
This is because
a principal
prepayment
accelerates
the effective
term of an
Agency MBS, RMBS,
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, it
prepayment
proceeds may
not be possible able
to reinvest prepayment proceeds be reinvested
in similar-yielding
assets. Agency MBS
RMBS 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
RMBS 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 accretionyields
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
RMBS.
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
- 43 -
life of the
mortgage cash
flows increases,
coupled with
higher discount
rates, the
value of Agency
RMBS declines.
Some of the
instruments
the Company
uses to hedge
our Agency
RMBS assets,
such as interest
rate futures,
swaps and
swaptions,
are stable
average life
instruments.
This means
that to the
extent we
use such instruments
to hedge our
Agency RMBS
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.
This makes
interest only
securities
desirable
hedge instruments
for pass-through
Agency RMBS.
As described
above, the
Agency RMBS
market began
to experience
severe dislocations
in mid-March
2020 as a
result of
the
economic, health
and market
turmoil brought
about by COVID-19.
In March of
2020, the
Fed announced
that it would
purchase Agency
RMBS and
U.S. Treasuries
in the amounts
needed to
support smooth
market functioning,
which largely
stabilized the
Agency RMBS
market, a commitment
it reaffirmed
at all subsequent
Fed meetings.
At the July
2021 meeting,
the Fed began
to discuss
plans for
adjusting
the path and
composition
of asset purchases,
but reiterated
its intention
to provide
notice well
in advance
of an announcement
to reduce
the pace of
such purchases.
If the Fed
modifies, reduces
or suspends
its purchases
of Agency
RMBS, our
investment
portfolio
could be
negatively
impacted. Further,
the moratoriums
on foreclosures
and evictions
described
above will
likely delay
potential defaults
on loans
that would
otherwise
be bought out
of Agency MBS
pools as described
above.
Depending
on the ultimate
resolution
of the foreclosure
or
evictions,
when and if
it occurs,
these loans
may be removed
from the
pool into which
they were
securitized.
If this were
to occur, it would
have the effect
of delaying
a prepayment
on the Company’s
securities
until such
time. As the
majority of
the Company’s
Agency RMBS
assets were
acquired at
a premium
to par, this will
tend to increase
the realized
yield on the
asset in question.
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 RMBS
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 RMBS, particularly
PT RMBS backed
by fixed-rate
mortgages.
Effects on our
borrowing
costs
We leverage
our PT RMBS
portfolio and
a portion
of our structured
Agency RMBS
with principal
balances through
the use of
short-
term repurchase
agreement
transactions.
The interest
rates on
our debt are
determined
by the short
term interest
rate markets.
An
increase in
the Fed Funds
rate or LIBOR
would increase
our borrowing
costs, which
could affect
our interest
rate spread
if there is
no
corresponding
increase in
the interest
we earn on
our assets.
This would
be most prevalent
with respect
to our Agency
RMBS backed
by
fixed rate
mortgage loans
because the
interest rate
on a fixed-rate
mortgage loan
does not change
even though
market rates
may change.
In order to
protect our
net interest
margin against
increases in
short-term
interest rates,
we may enter
into interest
rate swaps,
which
economically
convert our
floating-rate
repurchase
agreement
debt to fixed-rate
debt, or utilize
other hedging
instruments
such as
Eurodollar, Fed
Funds and
T-Note futures
contracts or
interest rate
swaptions.
Summary
In contrast
to the twelve
months that
preceded the
second quarter
of 2021, COVID-19
did not suppress
the performance
of the
markets and
economy in
the second
quarter. The recovery
has been driven
by many factors
– the emergence
and widespread
distribution
of a very effective
vaccine, substantial
government
stimulus and
accommodative
monetary
policy. The economy
recovered
rapidly as
an
effective vaccine
allowed pent-up
demand to lead
to a surge
in demand for
goods and
services,
fueled further
by multiple
rounds of
stimulus checks
and numerous
other means
of financial
support provided
by the government.
Financial markets
are benefiting
from
extremely loose
financial
conditions,
abundant liquidity,
high risk
tolerance and
an insatiable
demand for
returns.
The constraint
that both
limits the
level of activity
and is a driver
of price pressures
is the lingering
effect of the
pandemic on
labor force
participation
– or lack
thereof.
A significant
part of the
price pressure
observed during
the second
quarter was
driven by
supply shortages,
which are
in turn
- 44 -
driven by under-staffed
producers
of various
goods and
services.
This constraint
should be slowly
removed over
the balance
of 2021
barring a
resurgence
of the pandemic.
The economic
data released
during the
second quarter
tells the story
quite well.
GDP expanded
at a 6.50%
annualized
rate.
The
housing market
is stronger
than in the
days before
the financial
crisis in the
late 2000s
– both in
terms of the
number of
homes sold
and
average prices
– which in
the
case of existing
home sales
are up over
23% year over
year in June
2021 versus
June 2020.
Price
pressures are
evident, due
to the combination
of constrained
supply channels
and robust
demand –
driven by a
strong combination
of
pent-up demand
and government
stimulus.
The CPI increased
by well over
5% year over
year in June
as well.
The Fed has
insisted
these price
pressures are
temporary, and
the market
appears to
agree based
on the level
of long-term
U.S. Treasury
rates.
However, not
all members
of the
FOMC or market
participants
agree.
Since the
disagreement
stems from
the length
of time the
price pressures
are
present in
the market,
it will be
resolved by
the mere passage
of time.
Returns for the Agency RMBS market trailed most other sectors of the financial markets,
including fixed income and equities or
high-yield.
The driver was the prospect the Fed would begin to taper their asset purchases
as the economy fully recovers.
This was
especially the case in June, after the Fed concluded their FOMC meeting and revealed
there was divergence in views of committee
members regarding the timing of this step.
While Fed leadership maintains this step is still well into the future, the robustness
of the
housing market coupled with the growing divergence of views within the Fed was enough
for the markets to begin to price in a
reduction in Fed asset purchases.
A second factor hurting the sector was the rally in long-term interest rates than other asset classes. We may attempt
that confounded many
market participants.
Rates available to mitigate our exposureborrowers are back to changes in long-term interest rates by investing in IOslevels prevalent during the summer of
2020 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.refinancing activity has
re-accelerated, delaying once more burn-out for higher coupon, more seasoned loans

and driving premiums for specified pools slightly
higher.
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. An increase in the Fed Funds Rate or LIBOR would increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. This would be most prevalent with respect to our Agency MBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change. 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 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 quarter of 2017, risk assets were performing very well as the Trump administration took office and appeared to be very pro-business.  The markets looked forward to a roll back of recently expanding regulations across many industries, a new and hopefully improved health care act, tax reform and possibly much needed infrastructure spending to refurbish the nation's aging roads, highways, bridges and airports.  While the Administration made bold promises, there has been very little delivered.  Market optimism was quickly replaced with pessimism.  Political infighting among the Administration and congressional republicans has generally been the cause, as has turmoil within 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 case of the core Consumer Price Index, ("CPI") measure, the year over year figure moved from 2.3% in January 2017 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.


Critical Accounting PoliciesEstimates

Our consolidated
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 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.
Our most critical
accounting
policies involve
decisions and assessments.  The Company's most critical accounting policies involve
assessments
which could
significantly
affect reported
assets,
liabilities,
revenues and
expenses,
and these
decisions
and assessments which could
can change
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.
each reporting
period.
There have
been no changes
to the processes
used to determine
our critical
accounting policies
estimates
as discussed
in
our annual
report on
Form 10-K for
the year ended
December 31, 2016.
2020.

Capital Expenditures

At SeptemberJune 30, 2017,2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At SeptemberJune 30, 2017,2021, 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.


- 45 -
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 itsour periodic reports under the Exchange Act is recorded, processed,
summarized and reported within the time periods
prescribed by the SEC'sSEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no significantmaterial changes in the Company'sCompany’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'sCompany’s internal control over
financial reporting.
- 46 -
PART II.
OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

On April 22, 2020, the Company received a demand for payment from Citigroup, Inc. in
the amount of $33.1 million related to the
indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets
Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,
LLC) prior to the date Royal Palm’s mortgage origination
operations ceased in 2007.
The demand is based on Royal Palm’s alleged breaches of certain representations and warranties
in the
related MLPA’s.
The Company believes the demands are without merit and intends to defend
against the demand vigorously.
No
provision or accrual has been recorded as of June 30, 2021 related to the Citigroup demand.
We are not party to any other material pending legal proceedings as described
in Item 103 of Regulation S-K.


ITEM 1A.
RISK FACTORS.

There have been
no material
changes fromto the
risk factors
disclosed in the "Risk Factors" section of
our Annual Report
on Form 10-K
for the year
ended
December 31,
2020, filed
with the SEC
on March 8, 2017.15,
2021.

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

None.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 maximum
remaining number
of shares that
may be repurchased
under this
authorization
is 429,596 shares.
The authorization,
as currently
extended, expires
on November
15, 2021.
The Company
did
not repurchase
any of its common
stock during
the three months
ended June 30,
2021.
The Company
did not have
any unregistered
sales of its
equity securities
during the three
months ended
June 30, 2021.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY
DISCLOSURES.

Not Applicable.

ITEM 5.
OTHER INFORMATION

None.


ITEM 6. EXHIBITS

Exhibit No

3.1Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company's Form S-11/A, filed with the SEC on April 29, 2004
3.2Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
31.1Certification 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*
31.2Certification 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*
32.1Certification 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**
32.2Certification 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.INSInstance Document***
101.SCHTaxonomy Extension Schema Document***
101.CALTaxonomy Extension Calculation Linkbase Document***
101.DEFAdditional Taxonomy Extension Definition Linkbase Document***
101.LABTaxonomy Extension Label Linkbase Document***
101.PRETaxonomy Extension Presentation Linkbase Document***

*Filed herewith.
3.1
***Submitted electronically herewith.
Form S-11/A, filedwith the SECon April 29,2004
3.2
3.3
- 48 -
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
By: /s/ Robert E. Cauley
Robert E. Cauley
Chairman and Chief Executive Officer


Date:
August 13, 2021

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

/s/ Robert E. Cauley
Robert E. Cauley
Chairman and Chief Executive Officer
Date:
August 13, 2021
By:
/s/ G. Hunter Haas, IV
G. Hunter Haas,
IV
President, Chief Financial Officer, Chief
Investment Officer and Treasurer (Principal
Financial Officer and Principal Accounting Officer)