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

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

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

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

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

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

~~CMOs~~

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

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

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

Collateralized Mortgage Obligation MBS

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

Structured Agency MBS

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

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

~~-3-~~

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

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

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

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

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

Mortgage REIT Common Stock

We also maintain an investment in the common stock of Orchid. Because Orchid is a mortgage REIT that invests primarily in assets similar to those in which the Company invests, we consider this investment as a proxy for our overall investment strategy. We do not currently invest in other REIT common stock, but ~~may do~~subject to certain limitations we are not prohibited from doing so in the future.

~~Our investment strategy consists~~

Table of ~~the following components:~~

~~investing in pass-through Agency MBS and certain structured Agency MBS on a leveraged basis to increase returns on the capital allocated to this portfolio;~~Contents

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

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

~~investing in REIT common stock;~~

~~investing in assets that will cause us to maintain our exclusion from regulation as an investment company under the Investment Company Act.~~

~~-4-~~

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

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

Capital Allocation Strategy

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

The value of our investment in Orchid common stock typically fluctuates with Orchid’s book value, which is affected by the same factors that affect our MBS investments.

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

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

Financing Strategy

We borrow against our pass-through Agency MBS and certain of our structured Agency MBS using short-term repurchase agreements. A repurchase agreement (or "repo") ~~agreement~~ transaction acts as a financing arrangement under which we effectively pledge our investment securities as collateral to secure a loan. Our borrowings through ~~repurchase~~repo transactions are generally short-term and have maturities ranging from one day to one year but may have maturities up to five or more years. Our financing rates are typically impacted by the U.S. Federal Funds rate and other short-term benchmark rates and liquidity in the Agency MBS repo and other short-term funding markets. The terms of our master ~~repurchase~~repo agreements generally conform to the terms in the standard master repurchase agreement as published by the Securities Industry and Financial Markets Association ("SIFMA") as to repayment, margin requirements and the segregation of all securities sold under the repurchase transaction. In addition, each lender may require that we include supplemental terms and conditions to the standard master repurchase agreement to address such matters as additional margin maintenance requirements, cross default and other provisions. The specific provisions may differ for each lender and certain terms may not be determined until we engage in individual ~~repurchase~~repo transactions.

We may use other sources of leverage, such as secured or unsecured debt or issuances of preferred stock. We do not have a policy limiting the amount of leverage we may incur. However, we generally expect that the ratio of our total liabilities compared to our equity, which we refer to as our leverage ratio, will not exceed 12 to 1 and will generally be less than 1210 to 1. Our amount of leverage may vary depending on market conditions and other factors that we deem relevant.

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

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

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

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

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Risk Management

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

Interest Rate Risk Management

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

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

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

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

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

A futures contract is a legally binding agreement to buy or sell a financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. A futures contract differs from an option in that an option gives one of the counterparties a right, but not the obligation, to buy or sell, while a futures contract represents an obligation of both counterparties to buy or sell a financial instrument at a specified price.

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

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

We account 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 operations.

Prepayment Risk Management

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

When prepayment rates increase, we may not be able to reinvest the money received from prepayments at yields comparable to those of the securities prepaid. Additionally, some of our structured Agency MBS, such as IOs and IIOs, may be negatively affected by an increase in prepayment rates because their value is wholly contingent on the underlying mortgage loans having an outstanding principal balance.

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

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

~~-7-~~

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

Liquidity Management Strategy

Because of our use of leverage, we manage liquidity to meet our lenders’ margin calls by maintaining cash balances or unencumbered assets well in excess of anticipated margin calls; and making margin calls on our lenders when we have an excess of collateral pledged against our borrowings.

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

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

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

~~Investing in REIT common stock; and~~

~~Reducing our overall amount of leverage.~~

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deploying capital from our leveraged Agency MBS portfolio to our unleveraged Agency MBS portfolio;

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

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investing in Orchid common stock, and, potentially, other REIT common stock; and

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reducing our overall amount of leverage.

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

We did not experience significant margin call activity in 2023.

Investment Company Act Exemption

We operate our business so that we are exempt from registration under the Investment Company Act. We rely on the exemption provided by Section 3(c)(5)(C) of the Investment Company Act, which applies to companies in the business of purchasing or otherwise acquiring mortgages and other liens on, and interests in, real estate. In order to rely on the exemption provided by Section 3(c)(5)(C), we must maintain at least 55% of our assets in qualifying real estate assets. For the purposes of this test, structured Agency MBS are non-qualifying real estate assets. We monitor our portfolio periodically and prior to each investment to confirm that we continue to qualify for the exemption. To qualify for the exemption, we make investments so that at least 55% of the assets we own consist of qualifying mortgages and other liens on and interests in real estate, which we refer to as qualifying real estate assets, and so that at least 80% of the assets we own consist of real estate-related assets, including our qualifying real estate assets.

~~-8-~~

We treat whole-pool pass-through Agency MBS as qualifying real estate assets based on no-action letters issued by the staff of the SEC. In August 2011, the SEC, through a concept release, requested comments on interpretations of Section 3(c)(5)(C). To the extent that the SEC or its staff publishes new or different guidance with respect to these matters, we may fail to qualify for this exemption. We manage our pass-through Agency MBS portfolio such that we have sufficient whole-pool pass-through Agency MBS to ensure we maintain our exemption from registration under the Investment Company Act. At present, we generally do not expect that our investments in structured Agency MBS will constitute qualifying real estate assets, but will constitute real estate-related assets for purposes of the Investment Company Act.

Employees and Human Capital Resources

As of December 31, ~~2020,~~2023, we had 79 full-time ~~employees.~~

salaried employees, none of whom are subject to a collective bargaining agreement. We provide a variety of benefit programs including a 401(k) plan and health, dental and other insurance. We believe our relationship with our employees is excellent.

Competition

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

Available Information

Our investor relations website is https://~~ir.biminicapital.com.~~ir.biminicapital.com. We make available on the website under "Financials/SEC filings," free of charge, our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any other reports (including any amendments to such reports) as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Information on our website, however, is not part of this ~~Annual Report on Form 10-K.~~Report. In addition, all of our filed reports can be obtained at the SEC’s website at http://www.sec.gov.

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ITEM 1A. RISK FACTORS.

SummaryofRiskFactors

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading ~~“Risk Factors”~~“Risk Factors” and should be carefully considered, together with other information in this ~~Annual~~ Report ~~on Form 10-K~~ and our other filings with the SEC, before making an investment decision regarding our common stock.

●	Changes in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses.

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

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

●	Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings.
●	Although structured Agency MBS are generally subject to the same risks as our pass-through Agency MBS, certain types of risks may be enhanced depending on the type of structured Agency MBS in which we invest.

●	New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the federal government, on the other, which could adversely affect the price of, or our ability to invest in and finance Agency MBS.

●	Purchases and sales of Agency MBS by the Fed may adversely affect the price and return associated with Agency MBS

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

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

●

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

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

●	Our use of leverage could materially adversely affect our business, financial condition and results of operations.

●

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

●	Valuations of some of our assets may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed.

●

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

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

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

●	We depend primarily on a limited number of individuals to operate our business, and the sudden loss of certain key individuals could adversely impact our business.

●	We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments.

●	Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock.

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

~~Increases in interest rates may negatively affect the value~~

Table of ~~our investments and increase the cost of our borrowings, which could result in reduced earnings or losses.~~Contents

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

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

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

~~Differences in the stated maturity of our fixed rate assets, or in the timing of interest rate adjustments on our adjustable-rate assets, and our borrowings may adversely affect our profitability.~~

New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the federal government, on the other, which could adversely affect the price of, or our ability to invest in and finance Agency MBS.

~~Purchases and sales of Agency MBS by the Fed may adversely affect the prince and return associated with Agency MBS~~

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

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

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

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

~~Our use of leverage could materially adversely affect our business, financial condition and results of operations.~~

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

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

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

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

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

~~We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments.~~

~~Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock.~~

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

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

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

~~We cannot predict the effect that government policies, laws and plans adopted in response to the COVID-19 pandemic and the global recessionary economic conditions will have on us.~~

~~-10-~~

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

●	The termination of our management agreement with Orchid would significantly reduce our revenues in the near term.

●	We cannot predict the effect that government policies, laws and plans adopted in response to geopolitical events, a global pandemic, or global recessionary economic conditions will have on us.

●	Our investment in Orchid Island Capital, Inc. or other mortgage REIT common stock may fluctuate in value which may materially adversely affect our business, financial condition and results of operations.

Risk Factors

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

Risks Related to Our Business

~~Increases~~

Changes in interest rates may negatively affect the value of our investments and increase the cost of our borrowings, which could result in reduced earnings or losses.

Under normal market conditions, an investment in Agency MBS will decline in value if interest rates increase. In addition, net interest income could decrease if the yield curve ~~becomes~~is inverted or flat. While ~~Fannie Mae, Freddie Mac~~one or ~~Ginnie Mae~~more of the GSEs guarantee the principal and interest payments related to the Agency MBS we own, this guarantee does not protect us from declines in market value caused by changes in interest rates. Declines in the market value of our investments may ultimately result in losses to us, which may reduce earnings and cash available to fund our operations.

Significant increases in both long-term and short-term interest rates pose a substantial risk associated with our investment in Agency MBS. If long-term rates were to increase significantly, the market value of our Agency MBS would decline, and the duration and weighted average life of the investments would increase. We could realize a loss if the securities were sold. At the same time, an increase in short-term interest rates would increase the amount of interest owed on our repurchase agreements used to finance the purchase of Agency MBS, which would decrease cash. Using this business model, we are particularly susceptible to the effects of an inverted yield curve, where short-term rates are higher than long-term rates. Although rare in a historical context, the U.S. and many countries in Europe have experienced inverted yield curves. Given the volatile nature of the U.S. economy and potential future increases in short-term interest rates, there can be no guarantee that the yield curve will not become and/or remain inverted. If this occurs, it could result in a decline in the value of our Agency MBS, our business, financial position and results of operations.

~~-11-~~

Decreases in market interest rates may also adversely affect our results of operations and financial conditions. During periods of declining interest rates or prolonged low interest rates, the interest rates we earn on our new assets may be lower. In addition, prepayments on existing mortgages may increase causing yields on our MBS to be lower, to the extent they are carried at a premium.

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

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

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

Further downgrades of the U.S. credit rating, automatic spending cuts, mounting budget deficits or another government shutdown could negatively impact our liquidity, financial condition and earnings.

U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

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

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

Differences in the stated maturity of our fixed rate assets, or in the timing of interest rate adjustments on our adjustable-rate assets, and our borrowings may adversely affect our profitability.

We rely primarily on short-term and/or variable rate borrowings to acquire fixed-rate securities with long-term maturities. In addition, we may have adjustable rate assets with interest rates that vary over time based upon changes in an objective index, such as ~~LIBOR,~~SOFR, or the U.S. Treasury ~~rate or the Secured Overnight Financing Rate (“SOFR”).~~rate. These indices generally reflect short-term interest rates but these assets may not reset in a manner that matches our borrowings.

~~-12-~~

The relationship between short-term and longer-term interest rates is often referred to as the "yield curve." Ordinarily, short-term interest rates are lower than longer-term interest rates. If short-term interest rates rise disproportionately relative to longer-term interest rates (a "flattening" of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets. Because our investments generally bear interest at longer-term rates than we pay on our borrowings, a flattening of the yield curve would tend to decrease our net interest income and the market value of our investment portfolio. Additionally, to the extent cash flows from investments that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new investments and available borrowing rates may decline, which would likely decrease our net income. It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve "inversion"), in which event, our borrowing costs may exceed our interest income and result in operating losses.

~~New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the federal government, on the other, which could adversely affect the price~~

Table of ~~or our ability to invest in and finance Agency MBS.~~

The interest and principal payments we expect to receive on the Agency MBS in which we invest are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Principal and interest payments on Ginnie Mae certificates are directly guaranteed by the U.S. government. Principal and interest payments relating to the securities issued by Fannie Mae and Freddie Mac are only guaranteed by each respective GSE.

In September 2008, Fannie Mae and Freddie Mac were placed into the conservatorship of the FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the Housing and Economic Recovery Act of 2008. In addition to FHFA becoming the conservator of Fannie Mae and Freddie Mac, the U.S. Department of the Treasury (the “U.S. Treasury”) entered into Preferred Stock Purchase Agreements (“PSPAs”) with the FHFA and have taken various actions intended to provide Fannie Mae and Freddie Mac with additional liquidity in an effort to ensure their financial stability. In September 2019, the FHFA and the U.S. Treasury agreed to modifications to the PSPAs that will permit Fannie Mae and Freddie Mac to maintain capital reserves of $25 billion and $20 billion, respectively. As of September 30, 2020, Fannie Mae and Freddie Mac had retained equity capital of approximately $21 billion and $14 billion, respectively. In December 2020, a final rule was published in the federal register regarding GSE capital framework (the “December rule”), which requires Tier 1 capital in excess of 4% (approximately $265 billion) and a risk-weight floor of 20% for residential mortgages. 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.

Shortly after Fannie Mae and Freddie Mac were placed in federal conservatorship, the Secretary of the U.S. Treasury suggested that the guarantee payment structure of Fannie Mae and Freddie Mac in the U.S. housing finance market should be re-examined. The future roles of Fannie Mae and Freddie Mac could be significantly reduced and the nature of their guarantees could be eliminated or considerably limited relative to historical measurements. The U.S. Treasury could also stop providing credit support to Fannie Mae and Freddie Mac in the future. Any changes to the nature of the guarantees provided by Fannie Mae and Freddie Mac could redefine what constitutes an Agency MBS and could have broad adverse market implications. If Fannie Mae or Freddie Mac was eliminated, or their structures were to change in a material manner that is not compatible with our business model, we would not be able to acquire Agency MBS from these entities, which could adversely affect our business operations.

~~On December 9, 2020, the U.S. Supreme Court heard oral arguments in~~ ~~Collins v. Mnuchin~~, a case which has potentially significant implications for the structure and existence of the FHFA. At issue is the constitutionality of the FHFA and its director’s protection from being replaced at will by the President. A ruling in favor of the plaintiff could have broad policy and market implications by allowing the Biden administration to immediately replace the FHFA director, or invalidating actions taken by the FHFA.

~~-13-~~

Contents

~~The implementation of the Single Security Initiative may adversely affect our results and financial condition.~~

The Single Security Initiative is a joint initiative of Fannie Mae and Freddie Mac (the “Enterprises”), under the direction of the FHFA, the Enterprises’ regulator and conservator, to develop a common, single mortgage-backed security issued by the Enterprises.

On June 3, 2019, with the implementation of Release 2 of the common securitization platform, Freddie Mac and Fannie Mae commenced use of a common, single mortgage-backed security, known as the Uniform Mortgage-Backed Security (“UMBS”). Fannie Mae pools are now eligible for conversion into UMBS pools and Freddie Mac pools can be exchanged for UMBS pools. The conversion is not mandatory. UMBS is intended to enhance liquidity in the TBA market as the two GSEs’ floats are combined, eliminating or reducing the market pricing subsidy that Freddie Mac currently provides to lenders to pool their loans with Freddie Mac instead of Fannie Mae, and pave the way for future GSE reform by allowing new entrants to enter the MBS guarantee market.

The current float of Gold Participation Certificates (“Gold PCs”) issued by Freddie Mac is materially smaller than the float of Fannie Mae securities. To the extent Gold PCs are converted into UMBS, the float will contract further. A further decline could impact the liquidity of Gold PCs not converted into UMBS. Secondly, the TBA deliverable has appeared to deteriorate as the Fannie Mae and Freddie Mac pools with the worst prepayment characteristics are delivered into new TBA securities, concentrating the poorest pools into the TBA deliverable, which has negatively impacted their performance. To the extent investors recognize the relative performance of Fannie Mae or Freddie Mac pools over the other, they may stipulate that they only wish to be delivered TBA securities with pools from the better performing GSE. By bifurcating the TBA deliverable, liquidity in the TBA market could be negatively impacted.

Our liquidity is typically reduced each month when we receive margin calls related to factor changes, and typically increased each month when we receive payment of principal and interest on Fannie Mae and Freddie Mac securities. Legacy Freddie Mac securities pay principal and interest earlier in the month than Fannie Mae and UMBS, meaning that legacy Freddie Mac positions reduce the period of time between meeting factor-related margin calls and receiving principal and interest. The percentage of legacy Freddie Mac positions in the market and in our portfolio will likely decrease over time as those securities are converted to UMBS or paid off.

Purchases and sales of Agency MBS by the Fed may adversely affect the supply, price and ~~return~~returns associated with Agency MBS.

The Fed owned approximately ~~$2.0~~$2.4 trillion of Agency MBS as of December 31, ~~2020. Starting~~2023. After nearly doubling its Agency MBS holdings from $1.4 trillion in ~~October 2017,~~March 2020 to a peak of over $2.7 trillion in April of 2022 as a result of its COVID-19 policy response, the Fed ~~began to phase out its policy of reinvesting principal payments from its holdings~~halted purchases of Agency MBS ~~into new~~in September 2022 and began allowing up to $35 billion per month of Agency MBS ~~purchases, therefore causing a decline~~to run off its balance sheet. This, combined with the Fed’s aggressive hikes to the Fed Funds rate in an effort to curb inflation, has resulted in an increase in interest rates and an inversion of the yield curve that has negatively impacted the market value of Agency MBS. With prepayments slowing in response to rising mortgage rates, Agency MBS runoffs may not reduce the Fed’s balance sheet quickly enough to meet its stated policy goals, raising the possibility of the Fed ~~security holdings over time.~~selling Agency MBS outright. These actions by the Fed to date, along with interest rate increases, have adversely impacted the prices and returns of Agency MBS. While it is very difficult to predict the impact of ~~the~~a continuing Fed portfolio runoff or potential sales of Agency MBS on the supply, prices and liquidity of Agency MBS, returns on Agency MBS may be adversely affected.

Short-term interest rates are currently higher than long-term interest rates.This phenomenon, typically referred to as an inverted treasury or yield curve, occurred during 2022 and 2023, and may continue well into the future.Under such conditions the Company’s funding costs may equal or exceed yields available on the Company assets, adversely impacting our financial condition and results of operations and our ability to pay distributions to our stockholders.

As the Federal Reserve began to increase over-night funding rates during 2022 short-term interest rates began to rise faster than longer-term interest rates and eventually the treasury yield curve became inverted, whereby yields on short-terms rates exceeded yields on long-term interest rates. This condition continued through 2023 and continues into 2024, and may continue into the future. Consistent with this development, funding costs associated with the Company’s borrowings have increased relative to yields on the Company’s MBS securities. As a result, the Company’s net interest income has declined. The Company has employed various hedging strategies to off-set the phenomenon. However, such hedges may not be adequate to protect the Company’s net interest income in the future, adversely affecting our financial conditions, results of operations and the Company may have to reduce or even eliminate is monthly distributions of dividends.

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

In the case of residential mortgages, there are seldom any restrictions on borrowers’ ability to prepay their loans. Prepayment rates generally increase when interest rates fall and decrease when interest rates rise. Prepayment rates also may be affected by other factors, including, without limitation, conditions in the housing and financial markets, governmental action, general economic conditions and the relative interest rates on ARMs, hybrid ARMs and fixed-rate mortgage loans. ~~With respect to~~To the extent that our pass-through Agency MBS are carried at a premium to par, faster-than-expected prepayments could also materially adversely affect our business, financial condition and results of operations in various ways, including, if we are unable to quickly acquire new Agency MBS that generate comparable returns to replace the prepaid Agency MBS.

~~-14-~~

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

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

Table of Contents

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

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

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

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

~~-15-~~

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

Table of Contents

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

This risk is magnified given that the Company’s equity capital, particularly its tangible equity, is relatively small.

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

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

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

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

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

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

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

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

●

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

●

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

●

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

●

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

●

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

●

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

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

~~-16-~~

These risks are magnified given that the Company’s equity capital, particularly its tangible equity, is relatively small.

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

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

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

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

Our use of leverage could materially adversely affect our business, financial condition and results of operations.

We calculate our leverage ratio by dividing our total liabilities by total equity at the end of each period. Under normal market conditions, we generally expect our leverage ratio to be less than 1210 to 1, although at times our borrowings may be above or below this level. We incur this indebtedness by borrowing against a substantial portion of the market value of our pass-through Agency MBS and a portion of our structured Agency MBS. Our total indebtedness, however, is not expressly limited by our policies and will depend on our prospective lenders’ estimates of the stability of our portfolio’s cash flow. As a result, there is no limit on the amount of leverage that we may incur. We face the risk that we might not be able to meet our debt service obligations or a lender’s margin requirements from our income and, to the extent we cannot, we might be forced to liquidate some of our Agency MBS at unfavorable prices. Our use of leverage could materially adversely affect our business, financial condition and results of operations. For example, our borrowings are secured by our pass-through Agency MBS and a portion of our structured Agency MBS under repurchase agreements. A decline in the market value of the pass-through Agency MBS or structured Agency MBS used to secure these debt obligations could limit our ability to borrow or result in lenders requiring us to pledge additional collateral to secure our borrowings. In that situation, we could be required to sell Agency MBS under adverse market conditions in order to obtain the additional collateral required by the lender. If these sales are made at prices lower than the carrying value of the Agency MBS, we would experience losses. If we experience losses as a result of our use of leverage, such losses could materially adversely affect our business, results of operations and financial condition.

~~-17-~~

It may be uneconomical to "roll" our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts, which could negatively affect our financial condition and results of operations.

We may utilize TBA dollar roll transactions as a means of investing in and financing Agency MBS securities. TBA contracts enable us to purchase or sell, for future delivery, Agency MBS with certain principal and interest terms and certain types of collateral, but the particular Agency MBS to be delivered are not identified until shortly before the TBA settlement date. Prior to settlement of the TBA contract we may choose to move the settlement of the securities out to a later date by entering into an offsetting position (referred to as a "pair off"), net settling the paired off positions for cash, and simultaneously purchasing a similar TBA contract for a later settlement date, collectively referred to as a "dollar roll." The Agency MBS purchased for a forward settlement date under the TBA contract are typically priced at a discount to Agency MBS for settlement in the current month. This difference (or discount) is referred to as the "price drop." The price drop is the economic equivalent of net interest income earned from carrying the underlying Agency MBS over the roll period (interest income less implied financing cost). Consequently, TBA dollar roll transactions and such forward purchases of Agency MBS represent a form of off-balance sheet financing and increase our "at risk" leverage.

Under certain market conditions, TBA dollar roll transactions may result in negative carry income whereby the Agency MBS purchased for a forward settlement date under the TBA contract are priced at a premium to Agency MBS for settlement in the current month. Additionally, sales of some or all of the Fed's holdings of Agency MBS or declines in purchases of Agency MBS by the Fed could adversely impact the dollar roll market. Under such conditions, it may be uneconomical to roll our TBA positions prior to the settlement date and we could have to take physical delivery of the underlying securities and settle our obligations for cash. We may not have sufficient funds or alternative financing sources available to settle such obligations. In addition, pursuant to the margin provisions established by the Mortgage-Backed Securities Division ("MBSD") of the Fixed Income Clearing Corporation ("FICC"), we are subject to margin calls on our TBA contracts. Further, our clearing and custody agreements may require us to post additional margin above the levels established by the MBSD. Negative carry income on TBA dollar roll transactions or failure to procure adequate financing to settle our obligations or meet margin calls under our TBA contracts could result in defaults or force us to sell assets under adverse market conditions and adversely affect our financial condition and results of operations.

Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest.

Our results of operations are materially affected by conditions in the markets for mortgages and mortgage-related assets, including Agency MBS, as well as the broader financial markets and the economy generally.

Significant adverse changes in financial market conditions can result in a deleveraging of the global financial system and the forced sale of large quantities of mortgage-related and other financial assets. Concerns over rising interest rates, growing inflation, economic recession, geopolitical issues including events such as the COVID-19 pandemic or other global pandemics, the wars in Ukraine and Israel, policy priorities of a new U.S. presidential administration, trade wars, unemployment, the availability and cost of financing, the mortgage market and a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.

Increased volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets may adversely affect the performance and market value of our Agency MBS and our investment in Orchid common stock. If these conditions exist, institutions from which we seek financing for our investments may tighten their lending standards, increase margin calls or become insolvent, which could make it more difficult for us to obtain financing on favorable terms or at all. Our profitability and financial condition may be adversely affected if we are unable to obtain cost-effective financing for our investments.

Our forward settling transactions, including TBA transactions, subject us to certain risks, including price risks and counterparty risks.

We purchase some of our Agency MBS through forward settling transactions, including TBAs. In a forward settling transaction, we enter into a forward purchase agreement with a counterparty to purchase either (i) an identified Agency MBS, or (ii) a TBA, or to-be-issued, Agency MBS with certain terms. As with any forward purchase contract, the value of the underlying Agency MBS may decrease between the trade date and the settlement date. Furthermore, a transaction counterparty may fail to deliver the underlying Agency MBS at the settlement date. If any of these risks were to occur, our financial condition and results of operations may be materially adversely affected.

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

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

~~-18-~~

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

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

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

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

Because the price estimates provided by third-party dealers and pricing services may vary, we must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. Our business, financial condition and results of operations could be materially adversely affected if our fair value determinations of these assets were materially higher than the values that would exist if a ready market existed for these assets.

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

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

~~-19-~~

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

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

If a repurchase agreement counterparty defaults on their obligations to resell the Agency MBS back to us at the end otof the ~~repurchase~~repo transaction term, or if the value of the Agency MBS has declined by the end of the ~~repurchase~~repo transaction term or if we default on our obligations under the ~~repurchase~~repo transaction, we will lose money on these transactions, which, in turn, may materially adversely affect our business, financial condition and results of operations.

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

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

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

In October 2005, Bimini Capital completed a private offering of trust preferred securities of Bimini Capital Trust II, of which $26.8 million are still outstanding. The Company must pay interest on these junior subordinated notes on a quarterly basis at a rate equal to ~~current three month LIBOR rate~~CME 3-month Term SOFR plus ~~3.5%~~a tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. To the extent the Company’s does not generate sufficient earnings to cover the interest payments on the debt, our earnings and stockholders’ equity may be negatively impacted.

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

~~-20-~~

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

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

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

Our inability to access funding or the terms on which such funding is available could have a material adverse effect on our financial condition, particularly in times of significant market dislocations.

Our ability to fund our operations, meet financial obligations and finance asset acquisitions is dependent upon our ability to secure and maintain our repurchase agreements with our counterparties. Because repurchase agreements are short-term commitments of capital, lenders may respond to market conditions in ways that make it more difficult for us to renew or replace on a continuous basis our maturing short-term borrowings and have imposed and may continue to impose more onerous terms when rolling such financings. If we are not able to renew our existing repurchase agreements or arrange for new financing on terms acceptable to us, or if we are required to post more collateral or face larger haircuts, we may have to curtail our asset acquisition activities and/or dispose of assets.

Issues related to financing are exacerbated in times of significant dislocation in the financial markets, for example, such as those experienced related to the COVID-19 pandemic. It is possible our lenders will become unwilling or unable to provide us with financing, and we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also have revised and may continue to revise the terms of such financings, including haircuts and requiring additional collateral in the form of cash, based on, among other factors, the regulatory environment and their management of actual and perceived risk. Moreover, the amount of financing we receive under our repurchase agreements will be directly related to our lenders’ valuation of our assets that collateralize the outstanding borrowings. Typically, repurchase agreements grant the lender the absolute right to re-evaluate the fair market value of the assets that cover outstanding borrowings at any time. If a lender determines in its sole discretion that the value of the assets has decreased, the lender has the right to initiate a margin call. These valuations may be different than the values that we ascribe to these assets and may be influenced by recent asset sales at distressed levels by forced sellers. A margin call requires us to transfer additional assets to a lender without any advance of funds from the lender for such transfer or to repay a portion of the outstanding borrowings. Significant margin calls could have a material adverse effect on our results of operations, financial condition, business, liquidity and ability to make distributions to our stockholders, and could cause the value of our common stock to decline. Historically, we have experienced an increase in haircuts on financings we have rolled. As haircuts are increased, we are required to post additional collateral. We may also be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity. As a result of the COVID-19 pandemic, we experienced margin calls in 2020 well beyond historical norms. As of December 31, 2023, we had met all margin call requirements, but a sufficiently deep and/or rapid increase in margin calls or haircuts could have an adverse impact on our liquidity.

We may change our investment strategy, investment guidelines and asset allocation without notice or stockholder consent, which may result in riskier investments.

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

Report.

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

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

~~-21-~~

The occurrence of cyber-incidents, or a deficiency in our cybersecurity or in those of any of our ~~third- party~~third-party service providers could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.

A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources or the information resources of our third-party service providers. More specifically, a cyber-incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. The primary risks that could directly result from the occurrence of a cyber-incident include operational interruption and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our focus on mitigating the risk of a cyber-incident, do not guarantee that our business and results of operations will not be negatively impacted by such an incident.

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

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

Computer malware, ransomware, viruses, and computer hacking and phishing attacks have become more prevalent in the financial services industry and may occur on our or certain of our third party service providers' systems in the future. We rely heavily on our financial, accounting and other data processing systems. Although we have not detected a breach to date, financial services institutions have reported breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected. It is possible that we, or certain of our third-party service providers have experienced an undetected breach, and it is likely that other financial institutions have experienced more breaches than have been detected and reported. There is no assurance that we, or certain of the third parties that facilitate our business activities, have not or will not experience a breach. It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyber-attacks or security breaches of our networks or systems (or the networks or systems of certain third parties that facilitate our business activities) or any failure to maintain performance, reliability and security of certain of our third-party service providers' technical infrastructure, but such computer malware, ransomware, viruses, and computer hacking and phishing attacks may negatively affect our operations.

We depend primarily on ~~two~~a limited number of individuals to operate our business, and the sudden loss of ~~one or both~~certain key individuals could adversely impact our business.

Our Company only has nine full-time employees, and therefore we depend on the efforts of ~~such persons could materially adversely affect~~all to operate our ~~business, financial condition and results~~business. Our current senior management consists of ~~operations.~~

~~We depend substantially on~~ two individuals, Robert E. Cauley, our Chairman and Chief Executive Officer, and G. Hunter Haas, our President, Chief Investment Officer and Chief Financial ~~Officer,~~Officer. They are supported by others to manage our ~~business.~~business, including the recent addition of another senior executive. We depend on the diligence, experience and skill of ~~Mr. Cauley and Mr. Haas~~all of our senior executives in managing all aspects of our business, including the selection, acquisition, structuring and monitoring of securities portfolios and associated borrowings. ~~Although we~~We have entered into contracts and compensation arrangements with Mr. Cauley and Mr. Haas that encourage their continued employment, ~~those~~although these contracts may not prevent either Mr. Cauley or Mr. Haas from leaving our company. ~~The~~While our Company has succession plans in place for the orderly departure of any key individual, the sudden loss of ~~either~~any of ~~them~~our senior executives could ~~materially adversely affect~~have a short-term adverse impact on our business, financial condition and results of operations.

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

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

~~-22-~~

~~The Basel III standards~~

New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the federal government, on the other, ~~supplementary regulatory standards may negatively impact our access to financing or~~which could adversely affect the ~~terms~~price of, ~~our future financing arrangements.~~

In response to various financial crises and the volatility of financial markets, the Basel Committee on Banking Supervision, an international body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States, adopted the Basel III standards several years ago. U.S. regulators have elected to implement substantially all of the Basel III standards. These new standards, including the Supplementary Leverage Ratio imposed by the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, require banks to hold more capital, predominantly in the form of common equity, than under the prior capital framework. These increased bank capital requirements may constrainor our ability to ~~obtain attractive future financings~~invest in and ~~increase~~finance, Agency MBS.

The interest and principal payments we expect to receive on the ~~cost of such financings if they~~Agency MBS in which we invest are ~~obtained.~~

guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Principal and interest payments on Ginnie Mae certificates are directly guaranteed by the U.S. ~~regulators adopted rules requiring enhanced supplementary leverage ratio standards that impose capital requirements more stringent than those~~government. Principal and interest payments relating to the securities issued by Fannie Mae and Freddie Mac are only guaranteed by each respective GSE.

In September 2008, Fannie Mae and Freddie Mac were placed into the conservatorship of the ~~Basel III standards for~~FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the ~~most systematically significant banking organizations in~~Housing and Economic Recovery Act of 2008 (the “Recovery Act”). In addition to the FHFA becoming the conservator of Fannie Mae and Freddie Mac, the U.S. ~~Adoption~~Treasury entered into Preferred Stock Purchase Agreements (“PSPAs”) with the FHFA and ~~implementation of~~have taken various actions intended to provide Fannie Mae and Freddie Mac with additional liquidity in an effort to ensure their financial stability. In September 2019, the ~~Basel III standards~~FHFA and the ~~supplemental regulatory standards adopted by~~ U.S. ~~regulators may negatively impact our access~~Treasury agreed to ~~financing or affect the terms of our future financing arrangements.~~

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may adversely affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.

LIBOR and other indices which are deemed “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted. In particular, regulators and law enforcement agencies in the U.K. and elsewhere are conducting criminal and civil investigations into whether the banks that contributed informationmodifications to the ~~British Bankers’ Association (“BBA”) in connection with the daily calculation~~PSPAs that will permit Fannie Mae and Freddie Mac to maintain capital reserves of ~~LIBOR may have been under-reporting or otherwise manipulating or attempting to manipulate LIBOR. A number of BBA member banks have entered into settlements with their regulators~~$25 billion and law enforcement agencies with respect to this alleged manipulation of LIBOR. Actions by the regulators or law enforcement agencies, as well as ICE Benchmark Administration (the current administrator of LIBOR), may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented in the U.K. or elsewhere. Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the market for or value of any securities on which the interest or dividend is determined by reference to LIBOR, loans, derivatives and other financial obligations or on our overall financial condition or results of operations.

~~-23-~~

The development of alternative reference rates is complex. In the United States, a committee was formed in 2014 to study the process and develop an alternative reference rate. The Alternative Reference Rate Committee (the “ARRC”) selected the SOFR, an overnight secured U.S. Treasury repo rate, as the new rate and adopted a Paced Transition Plan (“PTP”), which provides a framework for the transition from LIBOR to SOFR. SOFR is published daily at 8:00 a.m. Eastern Time by the NY Federal Reserve Bank for the previous business day’s trades. However, since SOFR is an overnight rate and many forms of loans or instruments used for hedging have much longer terms, there is a need for a term structure for the new reference rate. Various central banks, including the Fed, and the ARRC, are in the process of developing term rates to support cash markets that currently use LIBOR. Examples of the cash market would be floating rate notes, syndicated and bilateral corporate loans, securitizations, secured funding transactions and various mortgage and consumer loans – including many of the securities the Company owns from time to time such as IIOs. The Company also uses derivative securities tied to LIBOR to hedge its funding costs. Development of term rates for derivatives is being conducted by the International Swaps and Derivatives Association (“ISDA”). However, ARRC and ISDA may utilize different mechanisms to develop term rates which may cause potential mismatches between cash products or assets of the Company and hedge instruments. The process for determining term rates by both ARRC and ISDA is not finalized at this time.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist. Although regulators and IBA have clarified that the recent announcements should not be read to say that LIBOR has ceased or will cease, in the event LIBOR does cease to exist, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

$20 billion, respectively. As of ~~December 31,~~September 30, 2020, Fannie Mae and Freddie Mac ~~stopped issuing most LIBOR-indexed products~~had retained equity capital of approximately $21 billion and ~~stopped purchasing LIBOR-based loans.~~$14 billion, respectively. In December 2020, a final rule was published in the federal register regarding GSE capital framework (the “December rule”), which requires Tier 1 capital in excess of 4% (approximately $265 billion) and a risk-weight floor of 20% for residential mortgages. On ~~August 3, 2020,~~January 14, 2021, the U.S. Treasury and the FHFA executed letter agreements (the “January agreement”) 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 GSEs have common equity Tier 1 capital of at least 3% of their 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. On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the January agreement, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties. On September 15, 2021, the FHFA announced a notice of proposed rulemaking for the purpose of amending the December rule to, among other things, reduce the Tier 1 capital and risk-weight floor requirements.

Shortly after Fannie Mae ~~started accepting whole loan and MBS deliveries of ARMs indexed to SOFR,~~ and Freddie Mac ~~announced that it priced its first SOFR linked offering on October 16, 2020.~~

~~More generally, any~~were placed in federal conservatorship, the Secretary of the ~~above changes~~U.S. Treasury suggested that the guarantee payment structure of Fannie Mae and Freddie Mac in the U.S. housing finance market should be re-examined. The future roles of Fannie Mae and Freddie Mac could be significantly reduced and the nature of their guarantees could be eliminated or ~~any other consequential~~considerably limited relative to historical measurements. The U.S. Treasury could also stop providing credit support to Fannie Mae and Freddie Mac in the future. Any changes to ~~LIBOR~~the nature of the guarantees provided by Fannie Mae and Freddie Mac could redefine what constitutes an Agency MBS and could have broad adverse market implications. If Fannie Mae or ~~any other “benchmark”~~Freddie Mac was eliminated, or their structures were to change in a material manner that is not compatible with our business model, we would not be able to acquire Agency MBS from these entities, which could adversely affect our business operations. Such changes would likely have a similar impact on the business operations of Orchid, which could adversely affect the value and performance of our investment in Orchid common stock and the amount of management fees and expense reimbursements we receive from Orchid.

On June 23, 2021, the Supreme Court ruled in Collins v. Mnuchin, a case presenting a question of the constitutionality of the FHFA and its director’s protection from being replaced at will by the President. The Supreme Court held that the FHFA did not exceed its powers or functions as a ~~result~~conservator under the Recovery Act, and that the President may replace the director at will. On June 23, 2021, President Biden appointed Sandra Thompson as acting director of ~~international, national or other proposals for reform or other initiatives or investigations, or any further uncertainty in relation to~~ the ~~timing and manner of implementation of such changes, could have a material adverse effect on the value of and return on any securities based on or linked to a “benchmark.”~~

FHFA.

Our investment in Orchid Island Capital, Inc. or other mortgage REIT common stock may fluctuate in value which materially adversely affect our business, financial condition and results of operations.

Investments in the securities of companies that own Agency MBS will be subject to all of the risks associated with the direct ownership of Agency MBS discussed above that could adversely affect the market price of the investment and the ability of the REIT to pay dividends. In addition, the market value of the common stock could be affected by market conditions beyond the Company’s control, such as limited liquidity in trading market for the common stock. A decrease in the dividend payment rate or the market value of the common stock could have a material adverse effect on our business, financial condition and results of operations.

In addition, the Company’s ability to dispose of the common stock investment because selling investments in Orchid’s common equity securities may be hindered due to its relationship as Orchid’s manager and the possession of inside information. Also, if we or other significant investors sell or are perceived as intending to sell a substantial number of shares in a short period of time, the market price of our remaining shares could be adversely affected.

~~-24-~~

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

revenues in the near term.

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

In exchange for these services, Bimini Advisors receives a monthly management fee. In addition, Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and Bimini Advisors allocates to Orchid its pro rata portion of certain overhead costs. The significance of these management fees and overhead reimbursements has increased, and is expected to continue to increase, as Orchid’s capital base continues to grow. If Orchid were to terminate the management agreement without cause, it would be obligated to pay to Bimini Advisors a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the initial term or automatic renewal term. The loss of these revenues, if it were to occur, would have a severe and immediate impact on the Company.

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

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

We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic and acts of terrorism.

The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic, such as coronavirus, or other widespread health emergency (or concerns over the possibility of such an emergency) terrorist attacks could create economic and financial disruptions, and could lead to operational difficulties that could impair our ability to manage our businesses.

We are subject to risks related to corporate social responsibility.

Our business faces public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new legislative or regulatory initiatives related to ESG could adversely affect our business.

Risks Related to Our Organization and Structure

Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock.

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

~~-25-~~

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

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

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

The Dodd-Frank Act established a comprehensive regulatory framework for derivative contracts commonly referred to as “swaps.” As a result, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators (in some cases the fund’s directors) to be regulated as “commodity pool operators,” (“CPOs”). Under new rules adopted by the U.S. Commodity Futures Trading Commission, (the “CFTC”), those funds that become commodity pools solely because of their use of swaps must register with the National Futures Association (the “NFA”). Registration requires compliance with the CFTC’s regulations and the NFA’s rules with respect to capital raising, disclosure, reporting, recordkeeping and other business conduct.

We use hedging instruments in conjunction with our investment portfolio and related borrowings to reduce or mitigate risks associated with changes in interest rates, mortgage spreads, yield curve shapes and market volatility. These hedging instruments may include interest rate swaps, interest rate futures and options on interest rate futures. We do not currently engage in any speculative derivatives activities or other non-hedging transactions using swaps, futures or options on futures. We do not use these instruments for the purpose of trading in commodity interests, and we do not consider the Company or its operations to be a commodity pool as to which CPO registration or compliance is required. We have received a no-action letter from the CFTC for relief from registration as a commodity pool operator and commodity trading advisor.

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

~~-26-~~

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

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

Certain provisions of applicable law and our charter and bylaws may restrict business combination opportunities that would otherwise be favorable to our stockholders.

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

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

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

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

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

●

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

●

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

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

~~-27-~~

Certain provisions of Maryland law could inhibit changes in control.

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

●

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

●

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

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

U.S. Federal Income Tax Risks

An investment in our common stock has various income tax risks.

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

Our ability to use net operating loss ~~(“NOL”~~(“NOL”) carryovers and net capital loss ~~(“NCL”~~(“NCL”) carryovers to reduce our taxable income may be limited.

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

~~-28-~~

In addition, our NOL and NCL carryovers may be limited by Sections 382 and 383 of the Code if we undergo an “ownership change.” Generally, an “ownership change” occurs if certain persons or groups increase their aggregate ownership in our company by more than 50 percentage points looking back over the relevant testing period. If an ownership change occurs, our ability to use our NOLs and NCLs to reduce our taxable income in a future year would be limited to a Section 382 limitation equal to the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate in effect for the month of the ownership change. In the event of an ownership change, NOLs and NCLs that exceed the Section 382 limitation in any year will continue to be allowed as carryforwards for the remainder of the carryforward period and such losses can be used to offset taxable income for years within the carryforward period subject to the Section 382 limitation in each year. However, if the carryforward period for any NOL or NCL were to expire before that loss had been fully utilized, the unused portion of that loss would be lost. The carryforward period for NOLs incurred through 2017 is 20 years from the year in which the losses giving rise to the NOLs were incurred, and the carryforward period for NCL is five years from the year in which the losses giving rise to the NCL were incurred. Our use of new NOLs or NCLs arising after the date of an ownership change would not be affected by the Section 382 limitation (unless there were another ownership change after those new losses arose).

Based on our knowledge of our stock ownership, we do not believe that an ownership change has occurred since our losses were generated. Accordingly, we believe that at the current time there is no ~~annual~~ limitation imposed by the application of Section 382 on our use of NOLs or NCLs. However, for post-2017 losses, the Jobs and Tax Cuts Act of 2017 modified the general rule such that an NOL carryover can only offset 80 percent of taxable income in the year it is utilized, so our post-2017 NOLs are limited by this tax law change. The rules for pre-2017 NOLs remain unchanged, and ~~NCLs~~are 100% available to ~~reduce future~~offset taxable income. In addition, post-2017 NOLs can now be carried forward indefinitely instead of being limited to 20 years for pre-2017 NOLs. The determination of whether an ownership change has occurred or will occur is complicated and depends on changes in percentage stock ownership among stockholders. We adopted the Rights Plan described above in order to discourage or prevent an ownership change. However, there can be no assurance that the Rights Plan will prevent an ownership change. In addition, we have not obtained, and currently do not plan to obtain, a ruling from the Internal Revenue Service, or IRS, regarding our conclusion as to whether our losses are subject to any such limitations. Furthermore, we may decide in the future that it is necessary or in our interest to take certain actions that could result in an ownership change. Therefore, no assurance can be provided as to whether an ownership change has occurred or will occur in the future.

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

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

Changes in tax laws could adversely affect our future results.

We have recorded a net deferred tax asset in the consolidated balance sheet based on the differences between the financial statement and income tax bases of assets using enacted tax rates. When U.S. corporate income tax rates change, we are required to reevaluate our deferred tax assets using the new tax rate. Changes in enacted tax rates require an adjustment to the carrying value of our deferred tax assets with a corresponding charge or benefit to earnings in the period of the tax rate change. Based on the size of our deferred tax assets, any such adjustment could be significant.

Risks Related to Conflicts of Interest in Our Relationship with Orchid

~~Bimini Capital~~

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

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

~~-29-~~

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

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

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

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

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

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

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

~~-30-~~

Orchid may elect not to renew the management agreement without cause which may adversely affect our business, financial condition and results of operations.

Orchid may elect not to renew the management agreement, even without cause. The management agreement is automatically renewed in accordance with the terms of the agreement, each year, on February 20. However, with the consent of the majority of ~~their~~Orchid’s independent directors, and upon providing 180-days’ prior written notice, Orchid may elect not to renew the management agreement. If Orchid elects to not renew the agreement because of a decision by its Board of Directors that the management fee is unfair, Bimini Advisors will have the right to renegotiate a mutually agreeable management fee. If Orchid elects to not renew the management agreement without cause, it is required to pay Bimini Advisors a termination fee equal to three times the average annual management fee incurred during the prior 24-month period immediately preceding the most recently completed calendar quarter prior to the effective date of termination. Notwithstanding the termination fee, nonrenewal of the management agreement may adversely affect our business, financial condition and results of operations.

Risks Related to Our Common Stock

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

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

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

Our Class A Common Stock trades on the OTCQB under the symbol “BMNM”. We may apply to list our Class A Common Stock on a national securities market if, in the future, we qualify for such a listing. However, even if listed on a national securities market, the ability to buy and sell our Class A Common Stock may be limited due to our small public float, and significant sales may depress or result in a decline in the market price of our Class A Common Stock. Additionally, until such time that our Class A Common Stock is approved for listing on a national securities market, our ability to raise capital through the sale of additional securities may be limited. Accordingly, no assurance can be given as to:

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

~~the liquidity of any such market;~~

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

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

●

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

●

the liquidity of any such market;

●

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

●

the prices that may be obtained for our common stock.

We have not made distributions to our stockholders since 2011.

Our Board of Directors has not authorized the payment of any cash dividends to our stockholders since 2011. ~~All distributions~~Dividends will be declared and made at the discretion of our Board of Directors out of funds legally available therefor and will depend on our earnings, our financial condition and such other factors as our Board of Directors may deem relevant from time to time. As a result of the termination of our REIT status effective as of January 1, 2015, we are planning to retain any available funds and future earnings to fund the development and growth of our business. As a result, for the foreseeable future, weWe do not expect to make ~~distributions.~~

~~-31-~~

distributions for the foreseeable future.

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

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

Table of Contents

The market value of our common stock may be volatile.

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

~~actual or anticipated variations in our operating results;~~

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

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

~~changes in our book value;~~

~~changes in market valuations of similar companies;~~

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

~~departures of key management personnel;~~

~~actions by institutional stockholders;~~

~~speculation in the press or investment community; and~~

~~general market and economic conditions.~~

●

actual or anticipated variations in our operating results;

●

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

●

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

●

changes in our book value;

●

changes in market valuations of similar companies;

●

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

●

changes of key management personnel;

●

actions by institutional stockholders;

●

speculation in the press or investment community; and

●

general market and economic conditions.

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

Sales of our common stock may harm our share price.

There is very limited liquidity in the trading market for our common stock. Sales of substantial amounts of shares of our common stock, or the perception that these sales could occur, may harm prevailing market prices for our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 1C. CYBERSECURITY

The Board plays an active role in overseeing management of our risks, and cybersecurity represents an important component of the Company’s overall approach to risk management and oversight. Our cybersecurity processes and practices are integrated into the Company’s risk management and oversight program. In general, the Company seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that the Company collects and stores by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. The Company has adopted a cybersecurity incident response plan to enable rapid response, curtail further security breaches, mitigate and manage costs, and facilitate timely disclosure of material cyber incidents as required by the SEC.

Risk Management and Strategy

The Company and our Board place a high priority on maintaining security over our financial information that can be accessed via the Internet and mitigating information security risks. The Company engages a third-party security firm to provide threat detection and reports, conduct annual testing of our systems, train our employees and generally advise on cybersecurity processes. At least annually, our information technology team make a formal presentation to our Audit Committee and the Board to keep them apprised of the level of cybersecurity that exists to protect our financial information, training of the Company’s officers and employees, and the latest threats that have emerged, including a presentation from the third-party security firm.

The Company’s cybersecurity program is focused on the following key areas:

●

Governance: As discussed in more detail under “Item 1C. Cybersecurity—Governance,” the Audit Committee and the Board oversee cybersecurity risk management by regularly interacting with the Company’s management team, our information technology team and a third-party security firm.

~~-32-~~

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~~Risks Related~~

●

Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.

●

Technical Safeguards: The Company deploys technical safeguards that are designed to protect information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, redundant data storage and retention methods, anti-malware functionality and access controls, which are evaluated and improved through vulnerability and exposure assessments and cybersecurity threat intelligence. With the help of our third-party security firm, the Company has implemented several layers of physical security, digital security and data backup.

●

Incident Response and Recovery Planning: The Company has established a comprehensive incident response and recovery plan that addresses the response to a cybersecurity incident and plans to test and evaluate that plan on a regular basis.

●

Third-Party Risk Management: The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including counterparties, service providers or other external users of our systems, as well as the systems of third parties that could adversely impact the Company’s business in the event of a cybersecurity incident affecting those third-party systems.

●

Education and Awareness: A third-party security firm provides training to our employees, helping our information technology team to maintain a state-of-the-art cybersecurity system and staying up to date on the latest threats and counter measures available. The third-party security firm places a high priority on employee threat education through automated internal phishing tests. Our information technology team attends continuing education seminars and receives timely alerts to any new viruses or cyber threats as they occur as a means to equip personnel with effective tools to address cybersecurity threats, and to communicate evolving information security policies, standards, processes and practices.

Governance

The Company believes oversight of cybersecurity risk is the responsibility of the Audit Committee and the full Board. Accordingly, the Audit Committee and the Board oversee the Company’scybersecurity risk management process. The Board considers the Company’s cybersecurity posture and risk exposure with management taking into consideration the Company’s operations and the types of data retained on its systems as part of its and the Audit Committee’s periodic review of the Company’s risk management. The Company’s primary business involves investments in Agency MBS, which are securities backed primarily by single-family residential mortgage loans. The Company does not receive personal information on individual mortgage borrowers. The Board reviews the Company’s cybersecurity program and risk exposure with management on at least an annual basis and receives periodic reports from management, the information technology team, and the Company’s third-party security firm on these matters from time to ~~COVID-19~~

time. The ~~market~~Board may also conduct additional cybersecurity reviews or receive additional updates or reports as it deems necessary. Messrs. Cauley and ~~economic disruptions caused by COVID-19 have negatively impacted~~Haas work collaboratively to implement a program designed to protect our ~~business.~~

~~The COVID-19 pandemic has caused~~information systems from cybersecurity threats and ~~continues~~ to ~~cause significant disruptions~~promptly respond to any cybersecurity incidents in accordance with the Company’s incident response and recovery plan. These members of the Company’s management team monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents and report such threats and incidents to the ~~U.S.~~Board when appropriate. Messrs. Cauley and ~~global economies~~Haas each hold undergraduate and graduate degrees in their respective fields, and each have approximately 20 years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats. Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to affect the Company, including its business strategy, results of operations or financial condition. The Company is not aware of any material security breach to date. Accordingly, the Company has ~~contributed to volatility, illiquidity and dislocations~~not incurred any expenses over the last three years on information security breaches. However, the Company faces certain ongoing risks from cybersecurity that, if realized, could materially affect the Company. See “Item 1A. Risk Factors - The occurrence of cyber-incidents, or a deficiency in ~~the financial markets. The COVID-19 outbreak has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom~~our cybersecurity or in those of movement and business operations such as travel bans, border closings, closing non-essential businesses, quarantines and shelter-in-place orders. The market and economic disruptions caused by COVID-19 have negatively impacted andany of our third party service providers could ~~further~~ negatively impact our ~~business.~~

~~Beginning in mid-March 2020, Agency MBS markets experienced significant volatility and sharp declines in liquidity, which negatively impacted~~business by causing a disruption to our ~~portfolio. Our portfolio was pledged as collateral under daily mark-to-market repurchase agreements. Fluctuations in the value~~operations, a compromise or corruption of our ~~Agency MBS resulted in margin calls, requiring us~~confidential information or damage to ~~post additional collateral with~~ our ~~lenders under these repurchase agreements. These fluctuations~~business relationships or reputation, all of which could negatively impact our business and requirements to post additional collateral were material. For example, we sold approximately $171.2 million of Agency MBS during the three months ended March 31, 2020 in order to meet these margin calls and to maintain sufficient liquidity, which resulted in losses of approximately $5.8 million.

The Agency MBS market largely stabilized after 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. The Fed reaffirmed this commitment most recently on January 27, 2021, announcing that it would continue to increase its holdings of U.S. Treasuries and Agency MBS as needed to sustain smooth functioning of markets for these securities. However, if the COVID-19 outbreak continues or worsens, or if the current policy response changes or is ineffective, the Agency MBS market may experience significant volatility, illiquidity and dislocations in the future, which may adversely affect our results of ~~operations and financial condition.~~

Our inability to access funding or the terms on which such funding is available could have a material adverse effect on our financial condition, particularly in light of ongoing market dislocations resulting from the COVID-19 pandemic.

~~-33-~~

Issues related to financing are exacerbated in times of significant dislocation in the financial markets, such as those experienced related to the COVID-19 pandemic. It is possible our lenders will become unwilling or unable to provide us with financing, and we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also have revised and may continue to revise the terms of such financings, including haircuts and requiring additional collateral in the form of cash, based on, among other factors, the regulatory environment and their management of actual and perceived risk. Moreover, the amount of financing we receive under our repurchase agreements will be directly related to our lenders’ valuation of our assets that collateralize the outstanding borrowings. Typically, repurchase agreements grant the lender the absolute right to re-evaluate the fair market value of the assets that cover outstanding borrowings at any time. If a lender determines in its sole discretion that the value of the assets has decreased, the lender has the right to initiate a margin call. These valuations may be different than the values that we ascribe to these assets and may be influenced by recent asset sales at distressed levels by forced sellers. A margin call requires us to transfer additional assets to a lender without any advance of funds from the lender for such transfer or to repay a portion of the outstanding borrowings. Significant margin calls could have a material adverse effect on our results of operations, financial condition, business, and liquidity, and could cause the value of our common stock to decline. In addition, we experienced an increase in haircuts on financings we have rolled. As haircuts are increased, we are required to post additional collateral. We may also be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity. As a result of the ongoing COVID-19 pandemic, we experienced margins calls well beyond historical norms. A sufficiently deep and/or rapid increase in margin calls or haircuts will have an adverse impact on our liquidity.

~~We cannot predict the effect that government policies, laws and plans adopted in response to the COVID-19 pandemic and the global recessionary economic conditions will have on us.~~

Governments have adopted, and may continue to adopt, policies, laws and plans intended to address the COVID-19 pandemic and adverse developments in the economy and continued functioning of the financial markets. We cannot assure you that these programs will be effective, sufficient or will otherwise have a positive impact on our business.

Beginning in the first quarter of 2020, the Fed took significant action to purchase U.S. Treasuries and Agency MBS, support other asset classes and reduce short-term interest rates. On January 27, 2021, the FOMC announced its intention to continue using its full range of tools, including continuing to increase its holdings of U.S. Treasuries by at least $80 billion per month and its holdings of Agency MBS by at least $40 billion per month until “substantial further progress” has been made towards its maximum employment and price stability goals. Additionally, the FOMC decided to keep the target range for the federal funds rate between 0% and 0.25% and expects to maintain this target range until the labor market reaches maximum employment and will allow inflation to exceed 2% long enough to compensate for the extended period when inflation was below the 2% target.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided billions of dollars of relief to individuals, businesses, state and local governments, and the health care system suffering the impact of the pandemic, including mortgage loan forbearance and modification programs to qualifying borrowers who had difficulty making their loan payments. As certain time limits imposed in CARES Act programs began to expire, on December 27, 2020, President Trump signed into law an additional $900 billion coronavirus aid package as part of the Consolidated Appropriations Act, 2021, providing for extensions of many of the CARES Act policies and programs as well as additional relief.

~~-34-~~

The GSEs have also issued guidance on how they will handle servicer advances for loans that back Agency MBS that enter into forbearance, which should limit prepayments during the forbearance period that could have resulted otherwise. The results of these measures are likely to suppress refinancing activity during the forbearance period, but potentially increase refinancing activity once the forbearance period ends as delinquent loans are repurchased by the GSEs. A policy adopted by the GSEs in April 2020 approving the purchase of certain single-family mortgages in forbearance was not extended beyond December, meaning that mortgages originated after December 31, 2020 that enter delinquency or forbearance before delivery to the GSEs are ineligible for delivery. On February 9, 2021, the FHFA extended the foreclosure moratorium begun under the CARES Act for loans backed by Fannie Mae and Freddie Mac to March 31, 2021, and on February 16, 2021, the U.S. Housing and Urban Development Department extended the foreclosure moratorium for federally backed loans to June 30, 2021. Borrowers have the right to request and obtain a forbearance of 180 days, and an extension of an additional 180 days, upon a claim of pandemic-related financial hardship. Borrowers may also request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance.

operations.” There can be no assurance ~~as to how,~~that the Company's cybersecurity risk management program and processes, including its policies, controls or procedures, will be fully implemented, complied with or effective in ~~the long term, these~~protecting its systems and ~~other actions by the U.S. government will affect the efficiency, liquidity and stability~~information.

Table of the financial and mortgage markets or prepayments on Agency MBS. To the extent the financial or mortgage markets do not respond favorably to any of these actions, such actions do not function as intended, or prepayments increase materially as a result of these actions, our business, results of operations and financial condition may continue to be materially adversely affected.Contents

~~Measures intended to prevent the spread of COVID-19 have disrupted our ability to operate our business.~~

In response to the outbreak of COVID-19 and the federal and state mandates implemented to control its spread, all of our employees are working remotely. If our employees are unable to work effectively as a result of COVID-19, including because of illness, quarantines, office closures, ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted. Further, remote work arrangements may increase the risk of cybersecurity incidents, data breaches or cyber-attacks, which could have a material adverse effect on our business and results of operations, due to, among other things, the loss of proprietary data, interruptions or delays in the operation of our business and damage to our reputation.

~~ITEM 1B. UNRESOLVED STAFF COMMENTS.~~

~~None.~~

ITEM 2. PROPERTIES.

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

ITEM 3. LEGAL PROCEEDINGS.

In April ~~22,~~ 2020 and November 2021, the Company received ~~a demand~~demands for payment from Citigroup, Inc. in the total amount of ~~$33.1~~$33.3 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.~~demands vigorously if pursued by Citigroup. No provision or accrual has been recorded ~~as of December 31, 2020~~ related to the Citigroup ~~demand.~~

demands.

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

~~-35-~~

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

~~-36-~~

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PART II

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

Market Information

Our Class A Common Stock is traded over-the-counter under the symbol “BMNM”. As of March ~~15, 2021,~~7, 2024, we had ~~11,608,555~~10,005,457 shares of Class A Common Stock issued and outstanding, which were held by ~~177~~105 shareholders of record and ~~1,113~~799 beneficial owners whose shares were held in “street name” by brokers and depository institutions.

As of March ~~15, 2021,~~7, 2024, we had 31,938 shares of Class B Common Stock outstanding, which were held by 2 holders of record and 31,938 shares of Class C Common Stock outstanding, which were held by one holder of record. There is no established public trading market for our Class B Common Stock or Class C Common Stock.

Dividend Distribution Policy

We have not made a distribution to stockholders since 2011. We ~~are planning~~do not expect to ~~retain any available funds and future earnings to fund~~make distributions for the ~~development and growth of our business, so future distributions should not be expected.~~

foreseeable future.

Preferred Stock

Our charter authorizes us to issue preferred stock that could have a preference over our common stock with respect to distributions. If we were to issue any preferred stock, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock.

Securities Authorized For Issuance Under Equity Compensation Plans

On August 12, 2011, Bimini Capital’s shareholders approved the 2011 Long Term Compensation Plan (the “Plan”). The Plan is intended to permit the grant of stock options, stock appreciation rights (“SARs”), stock awards, performance units and other equity-based and incentive awards up to an aggregate of 4,000,000 shares (but no more than 10% of the number of shares of Class A Common Stock outstanding on any particular grant date), subject to adjustments and limitations as provided in the Plan. The following table provides information as of December 31, 2020 concerning shares of our common stock authorized for issuance under the Plan.

~~Number of securities~~

~~remaining available for~~

~~Total number of securities~~

~~Weighted-average~~

~~future issuance under~~

~~to be issued upon exercise~~

~~exercise price of~~

~~equity compensation plans~~

~~of outstanding options,~~

~~(excluding securities~~

~~warrants and rights~~

~~reflected in column (a))~~

~~Plan Category~~

~~(a)~~

~~(b)~~

~~Equity compensation plans approved by~~

~~by security holders~~

~~2,621,667~~

⁽²⁾

~~Equity compensation plans not approved~~

~~by security holders~~⁽¹⁾

~~Total~~

~~2,621,667~~

~~(1)~~

~~We do not have any equity compensation plans that have not been approved by our stockholders.~~

~~(2)~~

Represents the maximum number of shares remaining available for future issuance under the terms of the Incentive Plan irrespective of the 10% limitation described above. Taking into account the 10% limitation and the number of shares of Class A Common Stock outstanding as of December 31, 2020, no shares are available for future issuance under the terms of the Incentive Plan as of December 31, 2020.

~~-37-~~

None.

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

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 December 31, 2020.

None.

ITEM 6. ~~SELECTED FINANCIAL DATA.~~

~~Not Applicable.~~

[RESERVED]

~~-38-~~

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ITEM 7. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 8 of this Form 10-K. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in this Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company that was formed in September 2003. The Company’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 Island Capital, Inc. ("Orchid") and to Royal Palm, 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"). From this arrangement, the Company receives management fees and expense reimbursements. As manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it.

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"). We also invest in the common stock of Orchid. 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, Royal Palm receives dividends from its investment in Orchid common shares.

~~Impact~~

~~Beginning in mid-March 2020,~~portfolio of Orchid. From this arrangement, the ~~global pandemic associated with~~Company receives management fees and expense reimbursements. As manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations and, commencing April 1. 2022, provides certain repurchase agreement trading, clearing and administrative services. Pursuant to the ~~novel coronavirus COVID-19 (“COVID-19”) and related economic conditions began to impact our financial position and results of operations. As a result~~terms 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 repurchasemanagement agreement, ~~lenders. Further, as interest rates declined, we faced additional margin calls related to our various hedge positions. In order to maintain our leverage ratio~~Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at prudent levels, maintain sufficient cash and liquidity, reduce risk and satisfy margin calls, we sold assets at levels significantly below their carrying values and closed several of our hedge positions. During this period, we sold approximately $171.2 million of MBS during the three months ended March 31, 2020, realizing losses of approximately $5.8 million.

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. Agency MBS valuations have increased substantially since the end of March 2020. As of December 31, 2020, we had timely satisfied all ~~margin calls.~~

~~-39-~~

~~In response~~times subject to the ~~Shelter in Place order issued in Florida in March 2020, management~~supervision and oversight of Orchid's board of directors and has ~~invoked~~only such functions and authority as delegated to it.

Stock Repurchase Plans

On September 16, 2021, the ~~Company’s Disaster Recovery Plan and its employees are working remotely. Prior planning resulted in the successful implementation of this~~Board authorized a share repurchase plan ~~and key operational team members maintain daily communication.~~

~~In addition, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will provide billions of dollars of relief~~pursuant to ~~individuals, businesses, state and local governments, and the health care system suffering the impact~~Rule 10b5-1 of the pandemic, including mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments. On April 13, 2020, the Company received $152,000 through the Paycheck Protection ProgramSecurities Exchange Act of the CARES Act in the form of a low interest loan. The Company has evaluated the other provisions of the CARES Act and does not believe it will have material effect on our consolidated financial statements. The Federal Housing Financing Agency1934 (the “FHFA”) has instructed the GSEs on how they will handle servicer advances for loans that back Agency MBS that enter into forbearance, which should limit prepayments during the forbearance period that could have resulted otherwise. During the forbearance period the Company will continue to receive scheduled principal and interest each month on its Agency MBS securities. There can be no assurance as to how, in the long term, these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. 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.

~~Stock Repurchase Plan~~

~~On March 26, 2018, the Board of Directors of the Company approved a Stock Repurchase Plan (“~~“2021 Repurchase Plan”). Pursuant to the 2021 Repurchase Plan, we ~~may~~could purchase ~~up to 500,000~~ shares of ~~the Company’s~~our Class A Common Stock from time to time ~~subject~~for an aggregate purchase price not to ~~certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934.~~exceed $2.5 million. Share repurchases ~~may~~could be executed through various means, including, without limitation, open market transactions. The 2021 Repurchase Plan did not obligate the Company to purchase any shares, and it expired on September 16, 2023. From the commencement of the 2021 Repurchase Plan, through its expiration, we repurchased a total of 789,024 shares at an aggregate cost of approximately $1.2 million, including commissions and fees, for a weighted average price of $1.60 per share. During the year ended December 31, 2023, we repurchased a total of 14,431 shares at an aggregate cost of approximately $13,133, including commissions and fees, for a weighted average price of $0.91 per share.

On March 7, 2024, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2024 Repurchase Plan”). Pursuant to the 2024 Repurchase Plan, we can purchase shares of our Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases can be executed through various means, including, without limitation, open market transactions. The 2024 Repurchase Plan does not obligate the Company to purchase any ~~shares. The Repurchase Plan, as currently extended,~~shares and expires on ~~November 15, 2021.~~ March 7, 2026.

The ~~authorization~~Inflation Reduction Act of 2022 signed into law during in August 2022 includes a provision 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~~an excise tax equal to 1% of the ~~Repurchase Plan, through December 31, 2020,~~fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in 2023. While we ~~repurchased~~may complete transactions subject to the new excise tax, we do not expect a ~~total~~material impact to our financial condition or result of ~~70,404 shares at an aggregate cost~~operations.

Table of ~~approximately $166,945, including commissions and fees, for a weighted average price of $2.37 per share.~~Contents

~~Tender Offer~~

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

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 U.S. government, including the presidential administration, the Federal Reserve (the “Fed”), the Federal Open Market Committee (the “FOMC”), The Federal Housing Finance Agency (the “FHFA”) and the U.S. Treasury;

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

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

~~other market developments.~~

~~-40-~~

●

interest rate trends;

●

increases in our cost of funds resulting from increases in the Federal Funds rate that are controlled by the Federal Reserve (the "Fed") that occurred in 2022 and 2023;

●

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 U.S. government, including the presidential administration, the U.S. Federal Reserve (the "Fed"), the Federal Open Market Committee (the "FOMC"), the Federal Housing Finance Agency (the "FHFA") and the U.S. Treasury;

●

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

●

geo-political events that affect the U.S. and international economies; 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 or tax rates; and~~

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

●

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 other tax attributes to reduce our taxable income;

●

the impact of possible future changes in tax laws or tax rates;

	●	our ability to manage the portfolio of Orchid and maintain our role as manager; and
	●	the financial performance of Orchid and resulting changes in Orchid's shareholders equity, the carrying value of our investment, dividend income and our advisory services revenue.

Results of Operations

Described below are the Company’s results of operations for the year ended December 31, ~~2020,~~2023, as compared to the year ended December 31, ~~2019.~~

2022.

Net ~~(Loss) Income~~Loss Summary

Consolidated net loss for the year ended December 31, ~~2020~~2023 was ~~$5.5~~$4.0 million, or ~~$0.47~~$0.40 basic and diluted loss per share of Class A Common Stock, as compared to consolidated net ~~income~~loss of ~~$13.3~~$19.8 million, or ~~$1.09~~$1.90 basic and diluted ~~income~~loss per share of Class A Common Stock, for the year ended December 31, ~~2019.~~

2022.

The components of net ~~(loss) income~~loss for the ~~years~~years ended December 31, ~~2020~~2023 and ~~2019,~~2022, along with the changes in those components are presented in the table below:

(in thousands)
	2023			2022			Change
Advisory services revenue	$	13,595		$	12,996		$	599
Interest and dividend income		4,336			3,155			1,181
Interest expense		(5,419	)		(2,131	)		(3,288	)
Net revenues		12,512			14,020			(1,508	)
Other expense		(1,867	)		(12,146	)		10,279
Expenses		(10,498	)		(9,839	)		(659	)
Net income (loss) before income tax provision		147			(7,965	)		8,112
Income tax provision		4,131			11,858			(7,727	)
Net loss	$	(3,984	)	$	(19,823	)	$	15,839

Table of Contents

(in thousands)
2020 2019 Change
Advisory services revenue

$
6,795

$
6,908

$
(113
)
Interest and dividend income

5,517

9,328

(3,811
)
Interest expense

(2,225
)

(6,175
)

3,950

Net revenues

10,087

10,061

26

Other expense

(10,279
)

(603
)

(9,676
)
Expenses

(6,666
)

(6,440
)

(226
)
Net (loss) income before income tax benefit

(6,858
)

3,018

(9,876
)
Income tax benefit

(1,369
)

(10,282
)

9,463

Net (loss) income

$
(5,489
)

$
13,300

$
(18.789
)

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

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

~~-41-~~

We have not designated our derivative financial instruments as hedge accounting 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~~as reflected in our consolidated statements of operations, is adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses that pertain to each period presented. We believe that adjusting our GAAP interest expense for the periods presented by the gains or losses on these derivative instruments ~~would~~may 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 derivative 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, which changes are reflected of the future periods covered by the derivative 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 our borrowings to reflect total economic interest expense for the applicable period. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income.

We believe that economic interest expense and economic net interest income provide meaningful information to consider, in addition to the ~~respective amounts~~financial information prepared in accordance with GAAP. The non-GAAP measures help management to evaluate our 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 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 discussed above 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 the years ended December 31, ~~2020~~2023 and ~~2019~~2022 and for each quarter during ~~2020~~2023 and ~~2019. As a result~~2022.

Table of the market turmoil during the first quarter of 2020 several hedge positions where closed. 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 could materially impact the economic interest amounts reported below.

~~-42-~~

Contents

Gains (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) Income (Loss) Contracts
December 31, 2020

$
-

$
-

$
-

September 30, 2020

-

-

-

June 30, 2020

(2
)

-

(2
)
March 31, 2020

(5,291
)

(1,441
)

(3,850
)
December 31, 2019

287

(192
)

479

September 30, 2019

(483
)

(204
)

(279
)
June 30, 2019

(3,364
)

(734
)

(2,630
)
March 31, 2019

(2,258
)

(1,067
)

(1,191
)
Years Ended
December 31, 2020

$
(5,293
)

$
(1,441
)

$
(3,852
)
December 31, 2019

(5,818
)

(2,197
)

(3,621
)

Gains (Losses) on Futures Contracts
(in thousands)
Attributed to Current Period (Non-GAAP) Attributed to Future Periods (Non-GAAP)
Junior Junior Statement
Repurchase Subordinated Repurchase Subordinated of
Three Months Ended Agreements Debt Total Agreements Debt Total Operations
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
)
December 31, 2019

510

56

566

(50
)

(37
)

(87
)

479

September 30, 2019

(124
)

61

(63
)

(155
)

(61
)

(216
)

(279
)
June 30, 2019

(226
)

43

(183
)

(2,215
)

(232
)

(2,447
)

(2,630
)
March 31, 2019

5

65

70

(976
)

(285
)

(1,261
)

(1,191
)
Years Ended
December 31, 2020

$
(2,592
)

$
(160
)

$
(2,752
)

$
(743
)

$
(357
)

$
(1,100
)

$
(3,852
)
December 31, 2019

165

225

390

(3,396
)

(615
)

(4,011
)

(3,621
)

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⁾

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

December 31, 2019

1,899

948

510

438

951

1,461

September 30, 2019

1,646

1,002

(124
)

1,126

644

520

June 30, 2019

2,134

1,340

(226
)

1,566

794

568

March 31, 2019

2,190

1,313

5

1,308

877

882

Years Ended
December 31, 2020

$
3,764

$
1,074

$
(2,592
)

$
3,666

$
2,690

$
98

December 31, 2019

7,869

4,603

165

4,438

3,266

3,431

Gains (Losses) on Derivative Instruments

(in thousands)
				Attributed to Current Period (Non-GAAP)									Attributed to Future Periods (Non-GAAP)
	Statement of			Repurchase			Long-Term						Repurchase			Long-Term
Three Months Ended	Operations			Agreements			Debt			Total			Agreements			Debt		Total
December 31, 2023	$	(1,881	)	$	(21	)	$	-		$	(21	)	$	(1,860	)	$	-	$	(1,860	)
September 30, 2023		1,169			(11	)		-			(11	)		1,180			-		1,180
June 30, 2023		516			(18	)		-			(18	)		534			-		534
March 31, 2023		(274	)		(33	)		-			(33	)		(241	)		-		(241	)
December 31, 2022		7			(185	)		(48	)		(233	)		192			48		240
September 30, 2022		844			(184	)		(48	)		(232	)		1,028			48		1,076
June 30, 2022		(50	)		(186	)		(48	)		(234	)		136			48		184
March 31, 2022		-			(185	)		(48	)		(233	)		185			48		233
Years Ended
December 31, 2023	$	(470	)	$	(83	)	$	-		$	(83	)	$	(387	)	$	-	$	(387	)
December 31, 2022		801			(740	)		(192	)		(932	)		1,541			192		1,733

Economic Net Portfolio Interest Income

(in thousands)
			Interest Expense on Repurchase Agreements						Net Portfolio Interest Income
Three Months Ended	Interest Income		GAAP Basis		Effect of Non-GAAP Hedges⁽¹⁾		Economic Basis⁽²⁾		GAAP Basis		Economic Basis⁽³⁾
December 31, 2023	$	1,350	$	1,178	$	21	$	1,199	$	172	$	151
September 30, 2023		838		831		11		842		7		(4	)
June 30, 2023		567		564		18		582		3		(15	)
March 31, 2023		557		508		33		541		49		16
December 31, 2022		534		401		185		586		133		(52	)
September 30, 2022		445		210		184		394		235		51
June 30, 2022		392		73		186		259		319		133
March 31, 2022		491		31		185		216		460		275
Years Ended
December 31, 2023	$	3,312	$	3,081	$	83	$	3,164	$	231	$	148
December 31, 2022		1,862		715		740		1,455		1,147		407

(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.

~~-43-~~

Economic Net Interest Income
(in thousands)
Net Portfolio Interest Expense on Long-Term Debt
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⁾

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

December 31, 2019

951

1,461

376

56

320

575

1,141

September 30, 2019

644

520

390

61

329

254

191

June 30, 2019

794

568

400

43

357

394

211

March 31, 2019

877

882

406

65

341

471

541

Years Ended
December 31, 2020

$
2,690

$
98

$
1,150

$
(160
)

$
1,310

$
1,540

$
(1,212
)
December 31, 2019

3,266

3,431

1,572

225

1,347

1,694

2,084

Table of Contents

Economic Net Interest Income

(in thousands
	Net Portfolio					Interest Expense on Long-Term Debt
	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⁾
December 31, 2023	$	172	$	151		$	616	$	-	$	616	$	(444	)	$	(465	)
September 30, 2023		7		(4	)		611		-		611		(604	)		(615	)
June 30, 2023		3		(15	)		565		-		565		(562	)		(580	)
March 31, 2023		49		16			546		-		546		(497	)		(530	)
December 31, 2022		133		(52	)		477		48		525		(344	)		(577	)
September 30, 2022		235		51			379		48		427		(144	)		(376	)
June 30, 2022		319		133			304		48		352		15			(219	)
March 31, 2022		460		275			256		48		304		204			(29	)
Years Ended
December 31, 2023	$	231	$	148		$	2,338	$	-	$	2,338	$	(2,107	)	$	(2,190	)
December 31, 2022		1,147		407			1,416		192		1,608		(269	)		(1,201	)

(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

We have two operating segments. The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. The investment portfolio segment includes the investment activities conducted by Royal Palm. Segment information for the years ended December 31, ~~2020~~2023 and ~~2019~~2022 is as follows:

(in thousands)
Asset Investment
Management Portfolio Corporate Eliminations Total
2020
Advisory services, external customers

$
6,795

$
-

$
-

$
-

$
6,795

Advisory services, other operating segments⁽¹⁾

152

-

-

(152
)

-

Interest and dividend income

-

5,517

-

-

5,517

Interest expense

-

(1,074
)

(1,151
)⁽²⁾

-

(2,225
)
Net revenues

6,947

4,443

(1,151
)

(152
)

10,087

Other expense

-

(9,825
)

(454
)⁽³⁾

-

(10,279
)
Operating expenses⁽⁴⁾

(3,653
)

(3,014
)

-

-

(6,667
)
Intercompany expenses⁽¹⁾

-

(152
)

-

152

-

Income (loss) before income taxes

$
3,294

$
(8,548
)

$
(1,605
)

$
-

$
(6,859
)
Assets

$
1,469

$
113,764

$
13,468

$
-

$
128,701

(in thousands)
	Asset Management			Investment Portfolio			Corporate				Eliminations			Total
2023
Advisory services, external customers	$	13,595		$	-		$	-			$	-		$	13,595
Advisory services, other operating segments⁽¹⁾		124			-			-				(124	)		-
Interest and dividend income		-			4,334			2				-			4,336
Interest expense		-			(3,081	)		(2,338	)	⁽²⁾		-			(5,419	)
Net revenues		13,719			1,253			(2,336	)			(124	)		12,512
Other expense		-			(1,867	)		-		⁽³⁾		-			(1,867	)
Operating expenses⁽⁴⁾		(7,848	)		(2,649	)		(1	)			-			(10,498	)
Intercompany expenses⁽¹⁾		-			(124	)		-				124			-
Income (loss) before income taxes	$	5,871		$	(3,387	)	$	(2,337	)		$	-		$	147
Year end assets	$	1,853		$	117,012		$	6,733			$	-		$	125,598

~~-44-~~

Table of Contents

Asset Investment
Management Portfolio Corporate Eliminations Total
2019
Advisory services, external customers

$
6,908

$
-

$
-

$
-

$
6,908

Advisory services, other operating segments⁽¹⁾

271

-

-

(271
)

-

Interest and dividend income

-

9,327

1

9,328

Interest expense

-

(4,603
)

(1,572
)⁽²⁾

(6,175
)
Net revenues

7,179

4,724

(1,571
)

(271
)

10,061

Other income (expense)

-

112

(715
)⁽³⁾

(603
)
Operating expenses⁽⁴⁾

(2,750
)

(3,690
)

-

(6,440
)
Intercompany expenses⁽¹⁾

-

(271
)

-

271

-

Income (loss) before income taxes

$
4,429

$
875

$
(2,286
)

$
-

$
3,018

Assets

$
1,457

$
263,223

$
14,809

$
-

$
279,489

	Asset Management			Investment Portfolio			Corporate				Eliminations			Total
2022
Advisory services, external customers	$	12,996		$	-		$	-			$	-		$	12,996
Advisory services, other operating segments⁽¹⁾		115			-			-				(115	)		-
Interest and dividend income		-			3,155			-				-			3,155
Interest expense		-			(715	)		(1,416	)	⁽²⁾		-			(2,131	)
Net revenues		13,111			2,440			(1,416	)			(115	)		14,020
Other (expense) income		-			(12,212	)		66		⁽³⁾		-			(12,146	)
Operating expenses⁽⁴⁾		(7,805	)		(2,034	)		-				-			(9,839	)
Intercompany expenses⁽¹⁾		-			(115	)		-				115			-
Income (loss) before income taxes	$	5,306		$	(11,921	)	$	(1,350	)		$	-		$	(7,965	)
Year end assets	$	1,970		$	77,483		$	6,864			$	-		$	86,317

(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 and fair value adjustments on retained interests in securitizations.~~ notes.

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

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%~~

●

One-twelfth of 1.50% 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.

On April 1, 2022, pursuant to the third amendment to the management agreement

~~One-twelfth of 1.25% of Orchid’s month-end equity~~ entered into on November 16, 2021, the Company began providing certain repurchase agreement trading, clearing and administrative services to Orchid that ~~is greater than $250 million and less than or equal~~had been previously provided by AVM, L.P. under an agreement terminated on March 31, 2022. In consideration for such services, Orchid pays the following fees to ~~$500 million, and~~

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

the Company:

●

a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and

●

a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

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~~2025 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~~applicable renewal term.

~~-45-~~

Table of Contents

The following table summarizes the advisory services revenue received from Orchid for the years ended December 31, ~~2020~~2023 and ~~2019~~2022 and each quarter during ~~2020~~2023 and ~~2019.~~

($ in thousands)
Average Average Advisory Services
Orchid Orchid Management Overhead
Three Months Ended MBS Equity Fee Allocation Total
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

December 31, 2019

3,705,920

414,018

1,477

379

1,856

September 30, 2019

3,674,087

394,788

1,440

351

1,791

June 30, 2019

3,307,885

363,961

1,326

327

1,653

March 31, 2019

3,051,509

363,204

1,285

323

1,608

Years Ended
December 31, 2020

$
3,363,208

$
373,464

$
5,281

$
1,514

$
6,795

December 31, 2019

3,434,850

383,993

5,528

1,380

6,908

2022.

($ in thousands)
					Advisory Services
	Average		Average						Repurchase,
	Orchid		Orchid		Management		Overhead		Clearing and
Three Months Ended	MBS		Equity		Fee		Allocation		Administrative		Total
December 31, 2023	$	4,207,118	$	851,532	$	2,275	$	617	$	184	$	3,076
September 30, 2023		4,447,098		964,230		2,871		557		193		3,621
June 30, 2023		4,186,939		899,109		2,704		639		173		3,516
March 31, 2023		3,769,954		865,722		2,641		576		165		3,382
December 31, 2022		3,370,608		823,516		2,566		560		150		3,276
September 30, 2022		3,571,037		839,935		2,616		522		174		3,312
June 30, 2022		4,260,727		866,539		2,631		519		183		3,333
March 31, 2022		5,545,844		853,576		2,634		441		-		3,075
Years Ended
December 31, 2023	$	4,152,777	$	895,148	$	10,491	$	2,389	$	715	$	13,595
December 31, 2022		4,187,054		845,892		10,447		2,042		507		12,996

Investment Portfolio Segment

Net Portfolio Interest Income

(Expense)

We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the year ended December 31, ~~2020,~~2023, we generated ~~$2.7~~$0.2 million of net portfolio interest income, consisting of ~~$3.8~~$3.3 million of interest income from MBS assets offset by ~~$1.1~~$3.1 million of interest expense on repurchase liabilities. For the year ended December 31, ~~2019,~~2022, we generated ~~$3.3~~$1.1 million of net portfolio interest income, consisting of ~~$7.9~~$1.9 million of interest income from MBS assets offset by ~~$4.6~~$0.7 million of interest expense on repurchase liabilities. The ~~$4.1~~$1.4 million ~~decrease~~increase in interest income for the year ended December 31, ~~2020~~2023 was due to a 75$18.2 millionincrease in average MBS balances, combined with a 113 basis point ("bp") increase in yields earned on the ~~portfolio, combined with a $119.8~~portfolio. The $2.4 million ~~decrease in average MBS balances. The $3.5 million decrease~~increase in interest expense for the year ended December 31, ~~2020~~2023 was due to a ~~104~~339 bp ~~decrease~~increase in cost of funds, combined with a ~~$111.8~~$16.0 million ~~decrease~~increase in average repurchase liabilities.

Our economic interest expense on repurchase liabilities for the years ended December 31, ~~2020~~2023 and ~~2019~~2022 was ~~$3.7~~$3.2 million and ~~$4.4~~$1.5 million, respectively, resulting in ~~$0.1~~$0.1 million and ~~$3.4~~$0.4 million of economic net portfolio interest income (expense), respectively.

The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for each quarter in ~~2020~~2023 and ~~2019~~2022 and for the years ended December 31, ~~2020~~2023 and ~~2019~~2022 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⁾
December 31, 2023	$	88,796	$	1,350		6.08	%	$	84,162	$	1,178	$	1,199		5.60	%		5.70	%
September 30, 2023		74,316		838		4.51	%		71,056		831		842		4.68	%		4.74	%
June 30, 2023		54,705		567		4.14	%		51,893		564		582		4.35	%		4.49	%
March 31, 2023		45,767		557		4.87	%		43,455		508		541		4.68	%		4.98	%
December 31, 2022		45,081		534		4.74	%		43,656		401		586		3.68	%		5.37	%
September 30, 2022		41,402		445		4.30	%		40,210		210		394		2.09	%		3.92	%
June 30, 2022		46,607		392		3.36	%		45,870		73		259		0.63	%		2.25	%
March 31, 2022		57,741		491		3.40	%		56,846		31		216		0.22	%		1.52	%
Years Ended
December 31, 2023	$	65,896	$	3,312		5.03	%	$	62,642	$	3,081	$	3,164		4.92	%		5.05	%
December 31, 2022		47,708		1,862		3.90	%		46,646		715		1,455		1.53	%		3.12	%

~~-46-~~

Table of Contents

($ 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⁾

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
%

7.24
%
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
%
December 31, 2019

190,534

1,899

3.99
%

182,215

948

438

2.08
%

0.96
%
September 30, 2019

187,199

1,646

3.52
%

177,566

1,002

1,126

2.26
%

2.54
%
June 30, 2019

211,406

2,134

4.04
%

199,901

1,340

1,566

2.68
%

3.13
%
March 31, 2019

212,033

2,190

4.13
%

199,771

1,313

1,308

2.63
%

2.62
%
Years Ended
December 31, 2020

$
80,479

$
3,764

4.68
%

$
78,043

$
1,074

$
3,666

1.38
%

4.70
%
December 31, 2019

200,293

7,869

3.93
%

189,863

4,603

4,438

2.42
%

2.34
%

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

December 31, 2020

$
554

$
(61
)

3.20
%

(0.43
)%
September 30, 2020

561

(504
)

3.56
%

(3.41
)%
June 30, 2020

463

7

3.44
%

(0.07
)%
March 31, 2020

1,112

656

3.16
%

1.77
%
December 31, 2019

951

1,461

1.91
%

3.03
%
September 30, 2019

644

520

1.26
%

0.98
%
June 30, 2019

794

568

1.36
%

0.91
%
March 31, 2019

877

882

1.50
%

1.51
%
Years Ended
December 31, 2020

$
2,690

$
98

3.30
%

(0.02
)%
December 31, 2019

3,266

3,431

1.51
%

1.59
%

($ in thousands)
	Net Portfolio					Net Portfolio
	Interest Income (Expense)					Interest Spread
	GAAP		Economic			GAAP			Economic
Three Months Ended	Basis		Basis(²⁾			Basis			Basis⁽⁴⁾
December 31, 2023	$	172	$	151			0.48	%		0.38	%
September 30, 2023		7		(4	)		(0.17	)%		(0.23	)%
June 30, 2023		3		(15	)		(0.21	)%		(0.35	)%
March 31, 2023		49		16			0.19	%		(0.11	)%
December 31, 2022		133		(52	)		1.06	%		(0.63	)%
September 30, 2022		235		51			2.21	%		0.38	%
June 30, 2022		319		133			2.73	%		1.11	%
March 31, 2022		460		275			3.18	%		1.88	%
Years Ended
December 31, 2023	$	231	$	148			0.11	%		(0.02	)%
December 31, 2022		1,147		407			2.37	%		0.78	%

(1)	Portfolio yields and costs of borrowings presented in the tables above and the tables on ~~pages 48 and 49~~page 41 are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the periods presented.

(2)	Economic interest expense and economic net interest income presented in the tables above and the tables on page 4941 include the effect of derivative instrument hedges for only the period presented.

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

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

~~Interest Income and~~

Average ~~Earning~~ Asset Yield

Our interest income was $3.8 million for the year ended December 31, 2020 and $7.9 million for year ended December 31, 2019. Average MBS holdings were $80.5 million and $200.3 million for the years ended December 31, 2020 and 2019, respectively. The $4.1 million decrease in interest income was due to a $119.8 million decrease in average MBS holdings, offset by a 75 bp increase in yields.

~~-47-~~

The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of structured MBS and pass-through MBS (“PT MBS”) for the years ended December 31, ~~2020~~2023 and ~~2019~~2022 and each quarter during ~~2020~~2023 and ~~2019.~~

($ 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
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
%
December 31, 2019

188,884

1,650

190,534

1,870

29

1,899

3.96
%

6.90
%

3.99
%
September 30, 2019

185,309

1,890

187,199

1,652

(6
)

1,646

3.57
%

(1.15
)%

3.52
%
June 30, 2019

209,171

2,235

211,406

2,111

23

2,134

4.04
%

4.01
%

4.04
%
March 31, 2019

209,469

2,564

212,033

2,143

47

2,190

4.09
%

7.42
%

4.13
%
Years Ended
December 31, 2020

$
79,888

$
591

$
80,479

$
3,717

$
47

$
3,764

4.65
%

7.98
%

4.68
%
December 31, 2019

198,208

2,085

200,293

7,776

93

7,869

3.92
%

4.46
%

3.93
%

~~Interest Expense on Repurchase Agreements and the~~ 2022.

($ 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
December 31, 2023	$	86,242	$	2,554	$	88,796	$	1,294	$	56	$	1,350		6.00	%		8.67	%		6.08	%
September 30, 2023		71,731		2,585		74,316		781		57		838		4.35	%		8.91	%		4.51	%
June 30, 2023		52,004		2,701		54,705		508		59		567		3.91	%		8.59	%		4.14	%
March 31, 2023		42,912		2,855		45,767		500		57		557		4.66	%		8.09	%		4.87	%
December 31, 2022		42,125		2,956		45,081		473		61		534		4.49	%		8.31	%		4.74	%
September 30, 2022		38,384		3,018		41,402		383		62		445		3.99	%		8.17	%		4.30	%
June 30, 2022		43,568		3,039		46,607		333		59		392		3.06	%		7.75	%		3.36	%
March 31, 2022		54,836		2,905		57,741		472		19		491		3.45	%		2.61	%		3.40	%
Years Ended
December 31, 2023	$	63,222	$	2,674	$	65,896	$	3,083	$	229	$	3,312		4.88	%		8.55	%		5.03	%
December 31, 2022		44,728		2,980		47,708		1,661		201		1,862		3.71	%		6.74	%		3.90	%

Cost of Funds

Our average outstanding repurchase agreements were $78.0 million and $189.9 million, generating interest expense of $1.1 million and $4.6 million for the years ended December 31, 2020 and 2019, respectively. Our average cost of funds was 1.38% and 2.42% for the years ended December 31, 2020 and 2019, respectively. There was a 104 bp decrease in the average cost of funds and a $111.8 million decrease in average outstanding repurchase agreements during the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Our economic interest expense was $3.7 million and $4.4 million for the years ended December 31, 2020 and 2019, respectively. There was a 236 bp increase in the average economic cost of funds to 4.70% for the year ended December 31, 2020 from 2.34% for the previous year. The $0.7 million decrease in economic interest expense was due to a combination of the 104 bp decrease in the average cost of funds noted above and the $111.8 million decrease in average outstanding repurchase agreements during the year ended December 31, 2020.

Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 1017 bps ~~above~~below the one-month average ~~one-month LIBOR~~SOFR and 27 bps ~~below~~above the six-month average ~~six-month LIBOR~~SOFR for the ~~quarter~~year ended December 31, ~~2020.~~2023. Our average economic cost of funds was ~~373~~4 bps ~~above~~below the one-month average ~~one-month LIBOR~~SOFR and ~~361~~20 bps above the six-month average ~~six-month LIBOR~~SOFR for the ~~quarter~~year ended December 31, ~~2020.~~2023. The average term to maturity of the outstanding repurchase agreements increased ~~from 24~~ to 29 days at December 31, ~~2019 to 33~~2023 from 15 days at December 31, ~~2020.~~

2022.

~~-48-~~

Table of Contents

The tables below present the average outstanding balance under all repurchase agreements, interest expense and average economic cost of funds, and one-month average ~~one-month~~ and six-month ~~LIBOR~~average SOFR rates for each quarter in ~~2020~~2023 and ~~2019~~2022 and for the years ~~ended~~ December 31, ~~2020~~2023 and ~~2019~~2022 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
December 31, 2020

$
67,878

$
43

$
658

0.25
%

3.88
%
September 30, 2020

61,151

43

1,108

0.28
%

7.24
%
June 30, 2020

51,987

60

516

0.46
%

3.97
%
March 31, 2020

131,156

928

1,384

2.83
%

4.22
%
December 31, 2019

182,215

948

438

2.08
%

0.96
%
September 30, 2019

177,566

1,002

1,126

2.26
%

2.54
%
June 30, 2019

199,901

1,340

1,566

2.68
%

3.13
%
March 31, 2019

199,771

1,313

1,308

2.63
%

2.62
%

($ in thousands)
Average
Balance of Interest Expense Average Cost of Funds
Repurchase GAAP Economic GAAP Economic
Years Ended Agreements Basis Basis Basis Basis
December 31, 2020

$
78,043

$
1,074

3,666

1.38
%

4.70
%
December 31, 2019

189,863

4,603

4,438

2.42
%

2.34
%

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
December 31, 2020

0.15
%

0.27
%

0.10
%

(0.02
)%

3.73
%

3.61
%
September 30, 2020

0.17
%

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
%
December 31, 2019

1.90
%

1.98
%

0.18
%

0.10
%

(0.94
)%

(1.02
)%
September 30, 2019

2.22
%

2.18
%

0.04
%

0.08
%

0.32
%

0.36
%
June 30, 2019

2.45
%

2.49
%

0.23
%

0.19
%

0.68
%

0.64
%
March 31, 2019

2.50
%

2.77
%

0.13
%

(0.14
)%

0.12
%

(0.15
)%

Average GAAP Cost of Funds Average Economic Cost of Funds
Relative to Average Relative to Average
Average LIBOR One-Month Six-Month One-Month Six-Month
Years Ended One-Month Six-Month LIBOR LIBOR LIBOR LIBOR
December 31, 2020

0.55
%

0.69
%

0.83
%

0.69
%

4.15
%

4.01
%
December 31, 2019

2.27
%

2.35
%

0.15
%

0.07
%

0.07
%

(0.01
)%

($ in thousands)
	Average
	Balance of		Interest Expense				Average Cost of Funds
	Repurchase		GAAP		Economic		GAAP			Economic
Three Months Ended	Agreements		Basis		Basis		Basis			Basis
December 31, 2023	$	84,162	$	1,178	$	1,199		5.60	%		5.70	%
September 30, 2023		71,056		831		842		4.68	%		4.74	%
June 30, 2023		51,893		564		582		4.35	%		4.49	%
March 31, 2023		43,455		508		541		4.68	%		4.98	%
December 31, 2022		43,656		401		586		3.68	%		5.37	%
September 30, 2022		40,210		210		394		2.09	%		3.92	%
June 30, 2022		45,870		73		259		0.63	%		2.25	%
March 31, 2022		56,846		31		216		0.22	%		1.52	%
Years Ended
December 31, 2023	$	62,642	$	3,081	$	3,164		4.92	%		5.05	%
December 31, 2022		46,646		715		1,455		1.53	%		3.12	%

							Average GAAP Cost of Funds						Average Economic Cost of Funds
							Relative to Average						Relative to Average
	Average SOFR						One-Month			Six-Month			One-Month			Six-Month
Three Months Ended	One-Month			Six-Month			SOFR			SOFR			SOFR			SOFR
December 31, 2023		5.34	%		5.35	%		0.26	%		0.25	%		0.36	%		0.35	%
September 30, 2023		5.32	%		5.17	%		(0.64	)%		(0.49	)%		(0.58	)%		(0.43	)%
June 30, 2023		5.07	%		4.78	%		(0.72	)%		(0.43	)%		(0.58	)%		(0.29	)%
March 31, 2023		4.63	%		4.09	%		0.05	%		0.59	%		0.35	%		0.89	%
December 31, 2022		4.06	%		2.89	%		(0.38	)%		0.79	%		1.31	%		2.48	%
September 30, 2022		2.47	%		1.43	%		(0.38	)%		0.66	%		1.45	%		2.49	%
June 30, 2022		1.09	%		0.39	%		(0.46	)%		0.24	%		1.16	%		1.86	%
March 31, 2022		0.16	%		0.07	%		0.06	%		0.15	%		1.36	%		1.45	%
Years Ended
December 31, 2023		5.09	%		4.85	%		(0.17	)%		0.07	%		(0.04	)%		0.20	%
December 31, 2022		1.95	%		1.20	%		(0.42	)%		0.33	%		1.17	%		1.92	%

Dividend Income

from Orchid

Effective August 30, 2022, Orchid effected a 1-for-5 reverse stock split, converting every five shares of issued and outstanding Orchid common stock into one share of common stock. All share and per share amounts reported in this annual report with respect to Orchid’s common stock have been adjusted to reflect this reverse stock split.

We owned ~~1,520,036~~569,071 shares of Orchid common stock as of both December 31, ~~2019. We acquired 1,075,321 additional shares during the year ended December 31, 2020, bringing our total ownership to 2,595,357 shares.~~2023 and 2022. Orchid paid total dividends of ~~$0.79~~$1.80 per share during ~~2020~~2023 and ~~$0.96~~$2.475 per share during ~~2019.~~2022. During the years ended December 31, ~~2020~~2023 and ~~2019,~~2022, we received dividends on this ~~common~~common stock investment of approximately ~~$1.8~~$1.0 million and ~~$1.5~~$1.3 million, respectively.

~~-49-~~

Table of Contents

Long-Term Debt

Junior Subordinated Debt

~~Interest expense on our~~

Prior to June 30, 2023, the junior subordinated debt securities ~~was approximately $1.1 million and $1.6 million for the years ended December 31, 2020 and 2019, respectively. The average rate of interest~~ paid ~~for the year ended December 31, 2020 was 4.22% compared to 5.94% for the year ended December 31, 2019. 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. Starting June 30, 2023, the underlying index converted from three-month LIBOR to CME Term SOFR plus a tenor spread adjustment of 0.26161%. The interest rate for subsequent accrual periods will be CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. The CME Term SOFR index is in effect for all interest rate resets after July 3, 2023. The LIBOR and CME Term SOFR rate increases since January 2022 have negatively impacted our interest expense. Interest expense on our junior subordinated debt securities was approximately $2.3 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively. The average rate of interest paid for the year ended December 31, 2023 was 8.76% compared to 5.25% for the year ended December 31, 2022. As of December 31, ~~2020,~~2023, the interest rate was ~~3.72%~~9.15%.

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 may be forgiven, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP and if certain other requirements are met. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first ten months after the completion of the loan forgiveness covered period.

Gains or Losses and Other Income

The table below presents our gains or losses and other income for the years ended December 31, ~~2020~~2023 and ~~2019.~~

(in thousands)
2020 2019 Change
Realized (losses) gains on sales of MBS

$
(5,745
)

$
23

$
(5,768
)
Unrealized gains on MBS

112

6,338

(6,226
)
Total (losses) gains on MBS

(5,633
)

6,361

(11,994
)
Losses on derivative instruments

(5,293
)

(5,818
)

525

Gains on retained interests in securitizations

59

315

(256
)
Unrealized gains (losses) on Orchid Island Capital, Inc. common stock

584

(821
)

1,405

2022.

(in thousands)
	2023			2022			Change
Realized losses on sales of MBS	$	(20	)	$	(858	)	$	838
Unrealized losses on MBS		(199	)		(5,916	)		5,717
Total losses on MBS		(219	)		(6,774	)		6,555
(Losses) gains on derivative instruments		(470	)		801			(1,271	)
Unrealized losses on Orchid Island Capital, Inc. common stock		(1,178	)		(6,239	)		5,061

We invest in MBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from trading in these securities. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the year ended December 31, ~~2020,~~2023, we received proceeds of ~~$176.2~~$18.2 million from the sales of MBS compared to ~~$44.0~~$23.1 million for the year ended December 31, ~~2019.~~

~~-50-~~

2022.

The fair value of our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are ~~sensitive to~~driven in part by changes in yields and interest ~~rates.~~rates, the spreads that MBS trade relative to comparable duration U.S. Treasuries or swaps, as well as varying levels of demand for MBS, which affect the pricing of the securities in our portfolio. The unrealized gains and losses on MBS may also include the premium lost as a result of prepayments on the underlying mortgages, decreasing unrealized gains or increasing unrealized losses as prepayment speeds or premiums increase. To the extent MBS are carried at a discount to par, unrealized gains or losses on MBS would also include discount accreted as a result of prepayments on the underlying mortgages, increasing unrealized gains or decreasing unrealized losses as speeds on discounts increase. Gains and losses on interest rate futures contracts are affected by changes in implied forward rates during the reporting period. The table below presents historical interest rate data ~~as of~~for each quarter end during ~~2020~~2023 and ~~2019.~~2022.

Table of Contents

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⁾

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
%
December 31, 2019

1.69
%

1.92
%

3.18
%

3.72
%

1.91
%
September 30, 2019

1.55
%

1.68
%

3.12
%

3.61
%

2.13
%
June 30, 2019

1.76
%

2.00
%

3.24
%

3.80
%

2.40
%
March 31, 2019

2.24
%

2.41
%

3.72
%

4.27
%

2.61
%

			15 Year	30 Year	90 Day
	5 Year	10 Year	Fixed-Rate	Fixed-Rate	Average
	Treasury Rate⁽¹⁾	Treasury Rate⁽¹⁾	Mortgage Rate⁽²⁾	Mortgage Rate⁽²⁾	SOFR⁽³⁾
December 31, 2023	3.84%	3.87%	5.93%	6.66%	5.36%
September 30, 2023	4.61%	4.57%	6.72%	7.31%	5.27%
June 30, 2023	4.13%	3.82%	6.06%	6.71%	5.00%
March 31, 2023	3.61%	3.49%	5.56%	6.32%	4.51%
December 31, 2022	4.00%	3.88%	5.68%	6.42%	3.62%
September 30, 2022	4.04%	3.80%	5.96%	6.70%	2.13%
June 30, 2022	3.00%	2.97%	4.83%	5.70%	0.70%
March 31, 2022	2.42%	2.33%	3.83%	4.67%	0.09%

(1)	Historical 5 Year and 10 Year 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~~SOFR is obtained from the ~~Intercontinental Exchange Benchmark Administration Ltd.~~Federal Reserve Bank of New York.

Operating Expenses

For the year ended December 31, ~~2020,~~2023, our total operating expenses were approximately ~~$6.7~~$10.5 million compared to approximately ~~$6.4~~$9.8 million for the year ended December 31, ~~2019.~~2022. The table below presents a breakdown of operating expenses for the years ended December 31, ~~2020~~2023 and ~~2019.~~

(in thousands)
2020 2019 Change
Compensation and benefits

$
4,235

$
4,116

$
119

Legal fees

145

148

(3
)
Accounting, auditing and other professional fees

431

342

89

Directors’ fees and liability insurance

691

654

37

Administrative and other expenses

1,165

1,180

(15
)

$
6,667

$
6,440

$
227

2022.

(in thousands)
	2023		2022		Change
Compensation and benefits	$	6,855	$	6,530	$	325
Direct advisory services costs		1,511		1,333		178
Legal fees		67		101		(34	)
Accounting, auditing and other professional fees		476		404		72
Directors’ fees and liability insurance		837		804		33
Administrative and other expenses		752		667		85
	$	10,498	$	9,839	$	659

Income Taxes

In 2023, we recorded an income tax provision of $4.1 million, including a $2.7 million increase in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2023, of the Company’s ability to utilize tax net operating losses (“NOLs”) to offset future taxable income. In 2022, we recorded an income tax provision of $11.9 million, including a $12.2 million increase in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2022, of the Company’s ability to utilize NOLs to offset future taxable income. The Company is unable to reliably estimate an annual effective tax rate; therefore, it uses the discrete-period computation method for determining its income tax (benefit) provision. Our income tax (benefit) provision could be affected by numerous factors, including the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense. In that regard, the income tax provision for the year ended December 31, 2023 included a increase of $2.7 million in the deferred tax asset valuation allowance, while the income tax provision for the year ended December 31, 2022 included an increase of $12.2 million in the deferred tax asset valuation allowance.

Financial Condition:

Mortgage-Backed Securities

As of December 31, ~~2020,~~2023, our MBS portfolio consisted of ~~$65.2~~$92.7 million of agency or government MBS at fair value and had a weighted average coupon of ~~3.89%~~5.44%. During the year ended December 31, ~~2020,~~2023, we received principal repayments of ~~$13.9~~$5.4 million compared to ~~$22.7~~$8.2 million for the year ended December 31, ~~2019.~~2022. The average prepayment speeds for the quarters ended December 31, ~~2020~~2023 and ~~2019~~2022 were ~~14.4%~~8.0% and ~~15.6%~~8.3%, respectively.

Table of Contents

The following table presents the ~~3-month~~three-month constant prepayment rate (“CPR”) experienced on our structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category. Assets that were not owned for the entire quarter have been excluded from the calculation. The exclusion of certain assets during periods of high trading activity can create a very high, and often volatile, reliance on a small sample of underlying loans.

~~-51-~~

Structured
PT MBS MBS Total
Three Months Ended Portfolio (%) Portfolio (%) Portfolio (%)
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

December 31, 2019

15.6

15.6

15.6

September 30, 2019

9.5

16.2

10.5

June 30, 2019

9.9

14.6

10.5

March 31, 2019

5.7

13.4

6.8

		Structured
	PT MBS	MBS	Total
Three Months Ended	Portfolio (%)	Portfolio (%)	Portfolio (%)
December 31, 2023	8.9	4.6	8.0
September 30, 2023	4.3	6.6	4.8
June 30, 2023	8.0	13.0	9.6
March 31, 2023	2.4	10.3	5.0
December 31, 2022	8.2	8.4	8.3
September 30, 2022	13.1	7.5	10.8
June 30, 2022	17.2	22.9	20.0
March 31, 2022	18.5	25.6	20.9

The following tables summarize certain characteristics of our PT MBS and structured MBS as of December 31, ~~2020~~2023 and ~~2019:~~

($ in thousands)
Weighted
Percentage Average
of Weighted Maturity
Fair Entire Average in Longest
Asset Category Value Portfolio Coupon Months Maturity
December 31, 2020
Fixed Rate PT MBS
$
64,902 99.6% 3.89% 333 1-Aug-50
Interest-Only Securities
251 0.4% 3.56% 299 15-Jul-48
Inverse Interest-Only Securities
25 0.0% 5.84% 221 15-May-39
Total Mortgage Assets
$
65,178 100.0% 3.89% 333 1-Aug-50
December 31, 2019
Fixed Rate PT MBS
$
216,231 99.3% 4.25% 316 1-Nov-49
Interest-Only Securities
1,024 0.4% 3.65% 281 15-Jul-48
Inverse Interest-Only Securities
586 0.3% 4.77% 254 25-Apr-41
Total Mortgage Assets
$
217,841 100.0% 4.25% 316 1-Nov-49

($ in thousands)
December 31, 2020 December 31, 2019
Percentage of Percentage of
Agency Fair Value Entire Portfolio Fair Value Entire Portfolio
Fannie Mae

$
38,946

59.8
%

$
203,321

93.3
%
Freddie Mac

26,232

40.2
%

14,499

6.7
%
Ginnie Mae

-

0.0
%

21

0.0
%
Total Portfolio

$
65,178

100.0
%

$
217,841

100.0
%

December 31, 2020 December 31, 2019
Weighted Average Pass-through Purchase Price

$
109.51

$
107.12

Weighted Average Structured Purchase Price

$
4.28

$
6.39

Weighted Average Pass-through Current Price

$
112.67

$
108.77

Weighted Average Structured Current Price

$
3.20

$
6.91

Effective Duration ⁽¹⁾

3.309

3.196

2022:

($ in thousands)
									Weighted
			Percentage						Average
			of			Weighted			Maturity
	Fair		Entire			Average			in		Longest
Asset Category	Value		Portfolio			Coupon			Months		Maturity
December 31, 2023
Fixed Rate MBS	$	90,181		97.3	%		6.00	%		343	1-Nov-53
Structured MBS		2,550		2.7	%		2.84	%		290	15-May-51
Total MBS Portfolio	$	92,731		100.0	%		5.44	%		341	1-Nov-53
December 31, 2022
Fixed Rate MBS	$	42,974		93.6	%		4.07	%		329	1-Aug-52
Structured MBS		2,919		6.4	%		2.84	%		300	15-May-51
Total MBS Portfolio	$	45,893		100.0	%		3.67	%		327	1-Aug-52

($ in thousands)
	December 31, 2023					December 31, 2022
			Percentage of					Percentage of
Agency	Fair Value		Entire Portfolio			Fair Value		Entire Portfolio
Fannie Mae	$	38,204		41.2	%	$	33,883		73.8	%
Freddie Mac		54,527		58.8	%		12,010		26.2	%
Total Portfolio	$	92,731		100.0	%	$	45,893		100.0	%

	December 31, 2023		December 31, 2022
Weighted Average Pass-through Purchase Price	$	104.43	$	105.30
Weighted Average Structured Purchase Price	$	4.48	$	4.48
Weighted Average Pass-through Current Price	$	101.55	$	95.58
Weighted Average Structured Current Price	$	13.46	$	13.37
Effective Duration ⁽¹⁾		2.508		4.323

(1)

Effective duration is the approximate percentage change in price for a 100 bp change in rates. An effective duration of ~~3.309~~2.508 indicates that an interest rate increase of 1.0% would be expected to cause a ~~3.309%~~2.508% decrease in the value of the MBS in our investment portfolio at December 31, ~~2020.~~2023. An effective duration of ~~3.196~~4.323 indicates that an interest rate increase of 1.0% would be expected to cause a ~~3.196%~~4.323% decrease in the value of the MBS in our investment portfolio at December 31, ~~2019.~~2022. These figures include the structured securities in the portfolio but do include the effect of our funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

~~-52-~~

Table of Contents

The following table presents a summary of our portfolio assets acquired during the years ended December 31, ~~2020~~2023 and ~~2019.~~

($ in thousands)
2020 2019
Total Cost Average Price Weighted Average Yield Total Cost Average Price Weighted Average Yield
PT MBS

$
43,130

$
111.44

1.99
%

$
65,781

$
108.77

2.73
%

2022.

($ in thousands)
	2023							2022
	Total Cost		Average Price		Weighted Average Yield			Total Cost		Average Price		Weighted Average Yield
PT MBS	$	70,657	$	101.92		6.03	%	$	23,192	$	99.13		4.22	%

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 our investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages, loan payoffs in connection with home sales, and borrowers paying more than their scheduled loan payments, which accelerates the amortization of the loans.

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

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

We face the risk that the market value of our PT MBS assets will increase or decrease at different rates than that of our structured MBS or liabilities, including our hedging instruments. Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. We generally calculate duration and effective duration using various third-party models or obtain these quotes from third-parties. However, empirical results and various third-party models may produce different duration numbers for the same securities.

The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, ~~2020,~~2023, assuming rates instantaneously fall 100 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.

~~-53-~~

($ in thousands)
Fair $ Change in Fair Value % Change in Fair Value
MBS Portfolio Value -100BPS +100BPS +200BPS -100BPS +100BPS +200BPS
Fixed Rate MBS

$
64,902

$
2,017

$
(2,568
)

$
(5,782
)

3.11
%

(3.96
)%

(8.91
)%
Interest-Only MBS

251

(45
)

96

170

(18.07
)%

38.15
%

67.49
%
Inverse Interest-Only MBS

25

1

(3
)

(7
)

3.36
%

(13.94
)%

(29.36
)%
Total MBS Portfolio

$
65,178

$
1,973

$
(2,475
)

$
(5,619
)

3.03
%

(3.80
)%

(8.62
)%

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

Amount⁽¹⁾
-100BPS +100BPS +200BPS -100BPS +100BPS +200BPS
Eurodollar Futures Contracts

$
1,000

$
(10
)

$
10

$
20

(1.00
)%

1.00
%

2.00
%

Gross Totals

$
1,963

$
(2,465
)

$
(5,599
)

~~(1)~~

~~Represents the average contract/notional amount of Eurodollar futures contracts.~~

($ in thousands)
			$ Change in Fair Value									% Change in Fair Value
MBS Portfolio	Fair Value		-200BPS			-100BPS			+100BPS			-200BPS			-100BPS			+100BPS
Fixed Rate MBS	$	90,181	$	3,779		$	2,140		$	(2,692	)		4.19	%		2.37	%		(2.99	)%
Interest-Only MBS		2,546		(204	)		(64	)		30			(8.01	)%		(2.51	)%		1.18	%
Inverse Interest-Only MBS		4		3			2			(2	)		75.00	%		50.00	%		(50.00	)%
Total MBS Portfolio	$	92,731	$	3,578		$	2,078		$	(2,664	)		3.86	%		2.24	%		(2.87	)%
	Notional		$ Change in Fair Value									% Change in Fair Value
Repurchase Agreement Hedges	Amount (1)		-200BPS			-100BPS			+100BPS			-200BPS			-100BPS			+100BPS
Futures Contracts	$	79,400		(4,794	)		(2,337	)		2,227			(6.04	)%		(2.94	)%		2.80	%
Totals			$	(1,216	)	$	(259	)	$	(437	)

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

Table of Contents

Repurchase Agreements

As of December 31, ~~2020,~~2023, 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. These borrowings are secured by our MBS and cash.

As of December 31, ~~2020,~~2023, we had obligations outstanding under the repurchase agreements of approximately ~~$65.1~~$86.9 million with a net weighted average borrowing cost of ~~0.25%~~5.56%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 64 to ~~133~~60 days, with a weighted average maturity of 3329 days. Securing the repurchase agreement obligation as of December 31, ~~2020~~2023 are MBS with an estimated fair value, including accrued interest, of ~~$65.4 million and a weighted average maturity of 334 months, and cash posted as collateral of $3.4~~ $93.1 million. Through March ~~15, 2021,~~8, 2024, we have been able to maintain our repurchase facilities with comparable terms to those that existed at December 31, ~~2020~~2023 with maturities through ~~August 5, 2021.~~

~~-54-~~

April 29, 2024.

The table below presents information about our period-end and average repurchase agreement obligations for each quarter in ~~2020~~2023 and ~~2019.~~

($ in thousands)
Ending Maximum Average Difference Between Ending
Balance Balance Balance Repurchase Agreements and
of Repurchase of Repurchase of Repurchase Average Repurchase Agreements
Three Months Ended Agreements Agreements Agreements Amount Percent
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⁾
December 31, 2019

209,954

239,243

182,215

27,739

15.22
%⁽³⁾
September 30, 2019

154,475

200,552

177,566

(23,091
)

(13.00
)%⁽⁴⁾
June 30, 2019

200,656

200,776

199,901

755

0.38
%
March 31, 2019

199,146

200,113

199,771

(625
)

(0.31
)%

~~(1)~~

The higher ending balance relative to the average balance during the quarter ended September 30, 2020 reflects the increase in the portfolio. During the quarter ended September 30, 2020, 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 the quarter ended March 31, 2020, the Company's investment in PT MBS decreased $162.4 million.

~~(3)~~

The higher ending balance relative to the average balance during the quarter ended December 31, 2019 reflects the reinvestment of the portfolio. During the quarter ended December 31, 2019, the Company's investment in PT MBS increased $54.7 million.

~~(4)~~

The lower ending balance relative to the average balance during the quarter ended September 31, 2019 reflects the decrease in the portfolio to fund the July 2019 Tender Offer. During the quarter ended September 31, 2019, the Company's investment in PT MBS decreased $47.5 million.

2022.

($ in thousands)
							Difference Between Ending
	Ending		Maximum		Average		Repurchase Agreements and
	Balance of		Balance of		Balance of		Average
	Repurchase		Repurchase		Repurchase		Repurchase Agreements
Three Months Ended	Agreements		Agreements		Agreements		Amount			Percent
December 31, 2023	$	86,907	$	86,919	$	84,162	$	2,745			3.26	%
September 30, 2023		81,417		81,567		71,056		10,361			14.58	%
June 30, 2023		60,695		60,695		51,893		8,802			16.96	%
March 31, 2023		43,092		43,936		43,455		(363	)		(0.84	)%
December 31, 2022		43,818		44,780		43,656		162			0.37	%
September 30, 2022		43,494		46,977		40,210		3,284			8.17	%
June 30, 2022		36,926		53,289		45,870		(8,944	)		(19.50	)%
March 31, 2022		54,815		58,772		56,846		(2,031	)		(3.57	)%

Liquidity and Capital Resources

Liquidity is our ability to turn non-cash assets into cash to fund our operations and to meet our obligations in both the short-term (one year or less) and long-term (greater than one year). Our material cash requirements include the purchase of additional investments, repay principal and interest on ~~borrowings,~~repurchase agreements and long-term debt (see Note 9 to the consolidated financial statements for more information related to the timing of principal payments and maturities of our long-term debt.), fund overhead and fulfill margin calls. ~~Our primary immediate~~We have both internal and external sources of liquidity. However, our material unused sources of liquidity include cash balances, unencumbered assets ~~the availability~~and our ability to ~~borrow under repurchase agreements, and fees and dividends received from Orchid.~~sell encumbered assets to raise cash. Our ~~borrowing capacity will vary over time as the market value of our interest earning assets varies. Our investments~~balance sheet also ~~generate~~generates liquidity on an on-going basis through payments of principal and interest we receive on our MBS ~~portfolio. In addition, during the year ended December 31, 2020,~~portfolio and dividends we ~~received U.S. Federal income tax refunds of approximately $1.4 million related to the 2018 tax year and approximately $0.2 million related to the 2019 tax year.~~

The COVID-19 pandemic has adversely affected our liquidity, assets under management and operating results. As disclosed in detail elsewhere in this report, during March 2020, we significantly reduced our MBS assets to meet margin calls and repay debt. This reduction inreceive on our investment ~~portfolio will impact~~in Orchid common stock.

Internal Sources of Liquidity

Our internal sources of liquidity include our cash balances, unencumbered assets and our ability to ~~generate income in the future. However, management believes that~~liquidate our encumbered security holdings. Our balance sheet also generates liquidity on an ongoing basis through payments of principal and interest we ~~currently have sufficient liquidity and capital resources available for at least one year from the date of issuance of this Form 10-K for (a) the management of~~receive on our ~~existing~~ MBS portfolio ~~(b) to service~~and dividends we receive on our ~~management agreement to~~investment in Orchid ~~(c) to make all scheduled payments on borrowings, (d) for the payment of overhead and operating expenses, and (e) the payment of other accrued obligations.~~

~~Our~~common stock.

We employ a hedging strategy that typically involves taking short positions in ~~Eurodollar futures,~~ T-Note and SOFR futures, TBAs or other instruments. ~~Since inception we have primarily used short positions in Eurodollar futures.~~ When the market causes these short positions to decline in value we are required to meet margin calls with cash. This can reduce our liquidity position to the extent other securities in our portfolio move in price in such a way that we do not receive enough cash through margin calls to offset the ~~Eurodollar~~futures or TBA short position 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.

~~-55-~~

Table of Contents

External Sources of Liquidity

Our primary external sources of liquidity are our ability to (i) borrow under master repurchase agreements and (ii) use the TBA security market. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our master repurchase agreements have no stated expiration, but can be terminated at any time at our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur, but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.

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

~~As discussed above, we~~

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 structured securities replaces the leverage obtained by acquiring PT securities and funding them in the ~~repurchase~~repo market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.

In future periods we expect to continue to finance our activities through repurchase ~~agreements.~~agreements and through revenues from our advisory services business. As of December 31, ~~2020,~~2023, we had cash and cash equivalents of ~~$7.6~~$3.7 million. We generated cash flows of ~~$18.2~~$8.5 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of ~~$78.0~~$62.6 million during the year ended December 31, ~~2020.~~2023. In addition, during the year ended December 31, ~~2020,~~2023, we received approximately ~~$6.8~~$13.6 million in management fees and expense reimbursements as manager of Orchid and approximately ~~$1.8~~$1.0 million in dividends from our investment in Orchid common stock.

In order to generate additional cash to be invested in our MBS portfolio, on October 30, 2019, we obtained a $680,000 loan secured by a mortgage on the Company’s office property. The loan is payable in equal monthly principal and interest installments of approximately $4,500 through October 30, 2039. Interest accrued 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 net proceeds from this sale were approximately $462,000.

On April 13, 2020, we received approximately $152,000 through the Paycheck Protection Program (“PPP”) of the CARES Act in the form of a low interest loan. PPP loans may be forgiven, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP and if certain other requirements are met. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first six months of the loan. The Company believes that all of the proceeds were used for eligible purposes and the outstanding principal and accrued interest will ultimately be forgiven.

~~-56-~~

~~The table below summarizes the effect that certain future contractual obligations existing as of December 31, 2020 will have on our liquidity and cash flows.~~

(in thousands)
Obligations Maturing
Within One to Three Three to Five More than Five Total
Year Years Years Years Total
Repurchase agreements

$
65,071

$
-

$
-

$
-

$
65,071

Interest expense on repurchase agreements⁽¹⁾

77

-

-

-

77

Junior subordinated notes⁽²⁾

-

-

-

26,000

26,000

Interest expense on junior subordinated notes⁽¹⁾

1,025

1,959

1,962

9,760

14,706

Principal and interest on mortgage loan⁽¹⁾

54

107

107

750

1,018

Totals

$
66,227

$
2,066

$
2,069

$
36,510

$
106,872

~~(1)~~

Interest expense on repurchase agreements, junior subordinated notes and mortgage loan are based on current interest rates as of December 31, 2020 and the remaining term of liabilities existing at that date.

~~(2)~~

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

Outlook

Orchid Island Capital Inc.

Orchid Island Capital reported net income for the ~~extent~~fourth quarter 2023 of $27.1 million and its shareholders equity increased from $466.8 million to $469.9 million. The market conditions described below led to these results as Orchid ~~is able to increase~~reported realized and unrealized gains on its ~~capital base over time, we will benefit via increased management fees. In addition,~~MBS portfolio of $183.0 million, exceeding realized and unrealized losses on hedge instruments of $149.0 million. Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay to us Orchid’s pro rata share of overhead as defined in the management agreement. As a stockholder of Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes do not impact our cash flows from Orchid.

The independent Board of Directors of Orchid has the ability to terminate the management agreement and thus end our ability to collect management fees and share overhead costs. Should Orchid terminate the management agreement without cause, it will be obligated to pay us a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the current automatic renewal term.

Economic Summary

~~COVID-19 related events dominated markets during the~~

The fourth quarter of ~~2020. The feared winter surge materialized, and new cases of COVID-19, hospitalizations and deaths exceeded~~2023 may prove to be the ~~levels seen during the spring or summer surge~~pivotal quarter in the Southern U.S., and by a considerable margin. This was the case both in the U.S. and across the globe. Perversely, as the effects of the pandemic spread, and it became clear the Federal government would need to pass another stimulus package to offset the effect of the pandemic on the economy,current interest ~~rates began to rise. While the yield on the benchmark ten-year U.S. Treasury Note was under 0.70% as~~rate cycle. As the third quarter came to a close and we moved into October, the ~~yield~~trajectory of economic growth, interest rates and expectations for monetary policy were all heading higher. In addition to the usual stimulants for higher interest rates – persistent levels of elevated inflation and economic growth – and surging budget deficits – drove rate expectations even higher. Indeed, over the course of October, incoming economic data related to the labor market and inflation exceeded ~~0.90%~~market expectations. Gross domestic product for the third quarter of 2023 was 4.9%, well above levels deemed consistent with price stability and the demand/supply balance sought by the Fed. The quarterly refunding announcement for the U.S. Treasury’s planned borrowing needs in the fourth quarter ~~end,~~significantly exceeded expectations. Risk assets were impacted as sentiment eroded and ~~nearly hit 1.00%~~the markets contemplated the impact of still higher levels of interest rates and the potential duration that rates might remain elevated.

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The market pivoted sharply in ~~November.~~the fourth quarter of 2023, followed shortly thereafter by the Fed. The ~~spike~~primary impetus for the change in ~~yield~~the market’s outlook was the trend in ~~November followed~~inflation data. While incoming data often exceeded expectations on a relative basis – the ~~news~~trend in inflation was nonetheless downward. While service inflation remained elevated, goods inflation was trending negative, and the net effect was persistently lower levels of both headline and core inflation. The annualized 3- and 6-month trends were below 3% and appeared headed towards the Fed’s 2% target. FOMC member Christopher Waller stated that ~~a vaccine with 90% effectiveness had been found~~if the trend in inflation data continued, the FOMC would likely ease monetary policy soon. Coincidentally the incoming economic data began to come in below expectations and ~~would become available by year end.~~the U.S. Treasury revised their upcoming borrowing needs downward. The ~~equity markets looked past~~reversal in the ~~near-term negative impacts~~market's outlook was cemented when, at the conclusion of the ~~pandemic on economic activity~~FOMC’s December meeting, Chairman Powell strongly hinted that the Fed was finished with their tightening cycle and the focus of discussions had turned to a removal of restrictive monetary policy in 2024. The interest rate market and all risk assets responded strongly to the reversal and rallied ~~as investors focused on a potential return to normalcy in 2021 and beyond. However,~~strongly into year-end.

Interest Rates

Starting at the ~~effects~~end of the ~~pandemic on economic activity did indeed take hold as~~second quarter of 2023 interest rates began to move steadily higher, driven by the ~~quarter unfolded. The labor market recovery reversed somewhat, and initial unemployment claims started to increase again. Retail sales, having rebounded so strongly over~~factors discussed above. In late October, rates across the ~~summer and fall, declined. These events overshadowed the national elections in early November.~~

~~-57-~~

As the election approached, polls indicated a potential “Blue Wave” where Democrats would sweep the elections, winning the presidential election and gaining control of both houses of Congress. Markets expected a substantially larger stimulus package if this outcome was realized than would be likely under Republican control. This potential outcome also buoyed equity markets and risk sentiment. Once the outcome of the election was known, it became clear the “Blue Wave” failed to materialize, although there was to be a run-off election for two Senate seats in Georgia on January 5, 2021. While this left open the possibility Democrats could control the presidency and both houses of Congress, it was not considered the likely outcome. Further, the Democratic majority in the House of Representatives shrankcurve appeared headed sustainably above 5% and the ~~presidential election outcome was much closer than polls indicated. The “Blue Wave” did not come to pass. This outcome tempered~~ market ~~enthusiasm for an outsized stimulus package in 2021 and market attention refocused on~~anticipated the ~~prospects for a stimulus package before year end. This ultimately came to pass with strong bipartisan support in~~Fed would keep the ~~form~~Fed funds rate above 5% through the end of ~~a $900 billion stimulus bill signed by President Trump in late December.~~

On January 5, 2021, the Democrats won both Senate seats in the run-off election and the “Blue Wave,” while more of a wavelet, was realized after all. The Senate was split 50/50 between Republicans and Democrats with the Vice-President able to break any ties in the favor of Democrats. Interest rates spiked as the prospects for additional stimulus were resurrected.2024. The yield on the ~~10-year~~2-year U.S. Treasury ~~Note broke above 1.00%~~came within 9 basis points of the level of Fed funds on October 18, 2023, implying the market was pricing Fed funds to remain essentially unchanged for the next two years. Frequent comments by Fed officials supported this thinking, as they continually pushed back against market pricing of rate cuts in early 2024. The message was consistent – rates will need to be higher for longer until the Fed was assured inflation was headed sustainably lower towards their 2% target.

The market’s apparent anxiousness for the Fed to ease monetary policy became particularly acute when the data turned in the fourth quarter of 2023, and ~~nearly reached 1.20% before retreating, settling~~inflation appeared headed towards the Fed’s target. When Governor Waller made his comments about the possibility of easing in the near future, which were reinforced by Chairman Powell’s comments at the Fed meeting in December, interest rates moved decisively lower. By year end, market pricing reflected six 25 basis point rate cuts by the end of 2024. However, as we move into ~~a range between approximately 1.02%~~2024 the inflation data has not maintained the trend in place described above. Further, the labor market data remains strong, and ~~1.15%. This range did~~most measures of economic growth have not ~~hold~~softened. In fact, gross domestic product for ~~long~~the fourth quarter of 2023 was 3.3% on an annualized basis. Comments by Fed officials have consistently pushed back on market pricing of the timing and extent of interest rate cuts for 2024. Financial conditions have also eased since early fourth quarter and the federal government is still running stimulative deficits with little to no evidence that policy will change in the near term. The risk that inflation could re-accelerate has been mentioned by many Fed officials. To date in 2024 the market has reversed yet again, and rates have ~~since moved higher still, surpassing 1.50%~~retraced some of the decline seen in ~~March. After early troubles~~November and December.

The Agency MBS Market

As with interest rates across the curve, Agency MBS spreads to comparable duration U.S. Treasuries or swaps continued widening into October as the outlook continued to deteriorate. By late October the spread of the current coupon 30-year Agency MBS to a comparable duration U.S. Treasury security reached its widest point for the current cycle. As the market reversed and risk appetite rapidly recovered the spread contracted quickly – declining by over 50 basis points by year-end. Since year end, the sector, as reflected by the spread of the current coupon Agency MBS, has reversed yet again, albeit modestly. The recovery in risk sentiment, coupled with the ~~roll-out~~decline in interest rates, appears to have stimulated bank demand for the Agency MBS sector. The regional banking crisis of March of 2023, a result of the ~~vaccine, inoculations accelerated~~severe decline in valuations of Agency MBS acquired by banks prior to the Fed rate hiking cycle and ~~risk sentiment improved as~~subsequent increase in rates across the ~~new year unfolded. Equity markets reached new all-time high levels,~~curve, may not be fully over. A funding program put in place in March of 2023 that allows such institutions to cheaply fund MBS positions at par and avoid having to sell them and realize significant losses, expires in March of 2024. However, the partial recovery in Agency MBS prices that occurred in November and December has erased some of their unrealized losses. The attractiveness of the asset class, coupled with softening loan demand, appears to have enticed banks to resume purchases.

Based on ICE Bank of America data for the fixed income indices, for the fourth quarter of 2023 Agency MBS generated a return of 7.4% and 1.7% versus comparable duration swaps, respectively. The 30-year fixed rate sector generated returns of 7.8% and 1.8% versus comparable duration swaps, respectively. With respect to individual sectors of the Agency MBS index, longer duration sectors and coupons outperformed owing to the significant rally of interest rates. Across the 30-year fixed rate coupon stack returns varied from 8.5% for 2.0% coupons to 3.0% for 7.0% coupons. Excess returns for the same coupons were 2.1% and 0.4%, respectively, and the ~~slope~~distribution of returns followed the durations of the ~~U.S. Treasury curve steepened as~~various coupons in a consistent fashion.

Table of Contents

The Agency MBS sector outperformed investment grade corporates on an absolute basis but trailed sub-investment grade corporates, again on an absolute basis. Relative to comparable duration swaps for the market anticipated the out-sized fiscal stimulus would stimulate inflation. The repeated statements from Fed officials that they would be very patient in removing accommodation reinforced market sentiment and risk tolerance increased.

~~Legislative Response and the Federal Reserve~~

~~Congress passed the CARES Act (described below) quickly in response~~fourth quarter, Agency MBS trailed investment grade corporates by 120 basis points but outperformed sub-investment grades corporates by 20 basis points. Note prior to the ~~pandemic’s emergence~~sharp reversal in the ~~spring of 2020 and followed with additional legislation over the ensuing months. However, as certain provisions of the CARES Act have expired, such as supplemental unemployment insurance~~markets at the end of ~~July, there appeared~~October total returns for all three sectors were negative year to ~~be a need for additional stimulus~~date, and all three sectors – Agency MBS, investment grade and sub-investment grade corporates – generated positive absolute and excess returns 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. 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. As mentioned above, this appears to be occurring early in 2021 now that effective vaccines have been found and inoculations are distributed to the most vulnerable amongst the population.

~~-58-~~

~~Interest Rates~~

Interest rates steadily increased throughout the fourth quarter as described above although levels of implied volatility remain very low by historical norms. Mortgage rates continued to slowly decline into year-end as originators added capacity and could handle ever increasing levels of production volume. As a result, the spread between rates available to borrowers and the implied yield on a current coupon mortgage, known as the Primary/Secondary spread, has continued to compress. The spread is still slightly above long-term average levels so further compression is possible, meaning rates available to borrowers can remain at current levels even if U.S. Treasury rates increased. To date, interest rates have continued to increase during the first quarter of 2021, with the yield on the 10-year U.S. Treasury rate surpassing 1.60% in early March. Rates available to borrowers have increased during the quarter, although less so than treasury rates, implying the primary/secondary spread is continuing to compress. Prepayment speeds released during the first quarter of 2021 for January and February have not shown any significant slowing since they reflect rates available to borrowers before the recent run-up in interest rates. The effect of the recent increase in rates will be felt in the months to come.

~~The Agency MBS Market~~

The Agency MBS market continues to be essentially bifurcated with two separate and distinct sub-markets. Lower coupon fixed rate mortgages, coupons of 1.5% through 2.5%, are purchased by the Fed. Fed purchase activity maintains substantial price pressure under these coupons, and they benefit from attractive TBA dollar roll drops. Higher coupons in the TBA market do not have the benefit of Fed purchases and trade poorly. Importantly, the Fed tends to take the worst performing collateral out of the market. The absence of Fed purchases of higher coupons means the market is left to absorb very high prepayment speeds on these securities. For these coupons, specified pools are in very high demand and continue to trade at very high premiums. These premiums have ceased rising as interest rates have begun to increase, although they remain at very high levels by historical standards. The market expects prepayments on higher coupons will eventually decline as “burn out” sets in – a phenomenon whereby refinancing activity declines as borrowers are exposed to refinancing incentives for an extended period of time. Through the February prepayment report released in early March of 2021, this has yet to meaningfully occur.

year.

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. On March 15, 2020, the Fed announced a $700 billion asset purchase program to provide liquidity to the U.S. Treasury and Agency MBS markets. Specifically, the Fed announced that it would purchase at least $500 billion of U.S. Treasuries and at least $200 billion of Agency MBS. 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 on March 3, 2020. On June 30, 2020, Fed Chairman Powell announced expectations to maintain interest rates at this level until the Fed is confident that the economy has weathered recent events and is on track to achieve maximum employment and price stability goals. The Federal Open Market Committee (“FOMC”) has continued to reaffirm this commitment at all subsequent meetings through January of 2021, as well as an intention to allow inflation to climb modestly above their 2% target and maintain that level for a period sufficient for inflation to average 2% long term.

~~-59-~~

In response to the deterioration in the markets for U.S. Treasuries, Agency MBS and other mortgage and fixed income markets ~~as investors liquidated investments in response to the economic crisis~~ resulting from ~~the actions to contain and minimize~~ the impacts of the COVID-19 pandemic, ~~on March 23, 2020,~~ the Fed ~~announced~~implemented a program ~~to acquire U.S. Treasuries and Agency MBS in the amounts needed to support smooth market functioning. With these purchases, market conditions improved substantially, and in early April,~~of quantitative easing. Through November of 2021, the Fed ~~began to gradually reduce the pace of these purchases. Currently, the Fed is~~was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency MBS each month. ~~Chairman Powell~~In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency MBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing the balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency MBS per month. As interest rates have ~~reiterated their commitment to this level~~increased and prepayment speeds have slowed, the actual balance sheet reduction of ~~asset purchases at every meeting since their meeting on June 30, 2020, including their most recent meeting in January of 2021. Since March 2020,~~Agency MBS has trended well below the cap during 2023. Recently the Fed has ~~taken various other steps~~indicated they may taper their quantitative tightening by slowing the rate of run-off of their portfolio, although it is likely they will allow their holdings of Agency MBS to ~~support certain other fixed income markets, to support mortgage servicers~~continue at the current pace and ~~to implement various portions~~slow the run-off of ~~the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.~~

~~The CARES Act was passed by Congress and signed into law by President Trump on March 27, 2020. The CARES Act provided many forms~~U.S. Treasuries in a way that achieves their desired rate of direct support to individuals and small businesses in order to stem the steep decline in economic activity. 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, President Trump signed an additional funding bill into law that provides 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 (July 25, 2020), expanded unemployment benefits (July 31, 2020), and a moratorium on foreclosures (August 31, 2020). On August 8, 2020, President Trump issued Executive Order 13945, 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 temporary financial assistance.

On December 27, 2020, President Trump signed into law an additional $900 billion coronavirus aid package as part of the Consolidated Appropriations Act, 2021, providing for extensions of many of the CARES Act policies and programs as well as 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 health providers, loans to qualified businesses, funding for rental assistance and funding for schools. On January 19, 2021, the CDC issued guidance extending eviction moratoriums for covered persons through March 31, 2021. In addition, on February 9, 2021, the FHFA announced that the foreclosure moratorium begun under the CARES Act for loans backed by Fannie Mae and Freddie Mac and the eviction moratorium for real estate owned by Fannie Mae and Freddie Mac were extended until March 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.

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. portfolio run-off.

On September 30, 2019, the FHFA announced that Fannie Mae and Freddie Macwere 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~~ the Enterprisesbeing privatized and represents the first concrete step on the road to ~~GSE~~Enterprise reform. ~~On June 30,~~In December 2020, the FHFA released a ~~proposed~~final rule on a new regulatory framework for the ~~GSEs~~ Enterpriseswhich 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~~ Enterprisesto 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~~Enterprise has common equity Tier 1 capital of at least 3% of its assets, (ii) the ~~GSEs~~ Enterpriseswill comply with the FHFA’s regulatory capital framework, (iii) higher-risk single-family mortgage acquisitions will be restricted to then current levels, and (iv) the U.S. Treasury and the FHFA will establish a timeline and process for future ~~GSE~~Enterprise reform. However, no definitive proposals or legislation have been released or enacted with respect to ending the conservatorship, unwinding the ~~GSEs,~~Enterprises, or materially reducing the roles of the ~~GSEs~~Enterprises in the U.S. mortgage market.

~~-60-~~

~~In 2017, policymakers~~ On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the January agreement, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties. On February 25, 2022, the FHFA published a final rule, effective as of April 26, 2022, amending the Enterprise capital framework established in December 2020 by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that ~~LIBOR will be replaced by December 31, 2021. The directive~~they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was ~~spurred by~~subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the ~~fact that banks are uncomfortable contributing~~fee posed a risk to the ~~LIBOR panel given~~fungibility of the shortage of underlying transactions on which to base levels and the liability associated with submitting an unfounded level. However, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023. Notwithstanding this possible extension, 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 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)~~Security (“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 poolsnegatively impacted liquidity and ~~newly issued single-family pools and was first reflected when January 2021 factors were released on the fourth business day in February 2021.~~

For Agency MBS investors, when a delinquent loan is bought out of a pool of mortgage loans, the 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 repurchased in most cases before the 24-month deadline under one of the following exceptions:

~~• 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 servicing requirements;~~

~~a loan entering a permanent modification, which generally requires it to be removed from the MBS. During any modification trial period, the loan will remain~~pricing in the ~~MBS until~~market for TBA securities. On November 30, 2023, the ~~trial period ends;~~

•FHFA published a ~~loan subject~~final rule, to become effective April 1, 2024, which will, among other things, reduce the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replace the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; update the credit score assumption to 680 for single-family mortgage exposures originated without a ~~short sale or deed-in-lieu~~representative credit score; and introduce a risk weight 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 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 degree to which speeds are affected depends on delinquency levels, borrower response, and referral to foreclosure timelines.

20% for guarantee assets.

The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to ~~evolve, especially in light~~evolve.

Table of ~~the COVID-19 pandemic, President Biden’s new administration and the new Congress in the United States.~~Contents

Effect on Us

Regulatory developments, movements in interest rates and prepayment rates affect us in many ways, including the following:

~~-61-~~

Effects on our Assets

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

~~Lower long-term interest rates can affect the value of our Agency MBS in a number of ways.~~

If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of ~~higher-coupon~~our Agency MBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market ~~yields.~~coupon/yield for longer, enhancing the return from the security. 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~~similarly yielding assets.

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

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

~~As described above, the~~

The Agency MBS 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. On March 23, 2020, the Fed announced that it would purchase Agency MBS and U.S. Treasuries in the amounts needed to support smooth market functioning, which largely stabilized the Agency MBS market, ~~a commitment it reaffirmed on June 30, 2020, September 16, 2020, December 16, 2020~~but ended these purchases in March 2022 and ~~January 27, 2021. If the Fed modifies, reduces or suspends~~announced plans to reduce its ~~purchases~~balance sheet. The Fed’s continued reduction of ~~Agency MBS,~~its balance sheet could negatively impact 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 MBS assets were acquired at a premium to par, this will tend to increase the realized yield on the asset in question.

~~-62-~~

portfolio.

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

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 ~~Federal Funds Rate and LIBOR. An increase~~short term interest rate markets. Increases in the ~~Federal~~Fed Funds ~~Rate~~rate or ~~LIBOR would~~SOFR typically 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~~The impact of these increases would be most prevalent with respect to our Agency MBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.

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

Summary

~~COVID-19 continues~~

As the fourth quarter of 2023 began, the financial markets, especially the fixed income markets in the U.S. were under duress. The U.S. economy proved incredibly resilient in the face of continued rate increases by the Fed since March of 2022 of 500 basis points. Growth for the third quarter was a surprising 4.9%, as measured by GDP. The preliminary growth rate for the fourth quarter was 3.2%, still above what is deemed to ~~dominate~~be a sustainable rate. Fiscal deficits in the U.S. continue to grow and are expected to remain at elevated levels for the next few years. The combination of these factors, among others, drove U.S. Treasury rates higher as the market expected the Fed, while at or near the end of their tightening cycle, was not going to lower rates until well into 2024.

A series of events in November and December triggered a violent reversal in the market outlook, the level of interest rates, the performance of risk assets and the outlook for monetary policy. The primary development was incoming inflation data. While the inflation data was at times above consensus expectations by economists, it was nonetheless steadily declining. Most measures of inflation exhibited a clear downward trend towards the Fed’s 2% target. While there were some instances of labor market and/or growth data that was soft released during the fourth quarter, generally the data remains firm, and the labor market has yet to materially weaken. Yet, it appeared the Fed was willing to contemplate reducing rates if the inflation trend continued. Comments by various Fed officials, including Chairman Powell, hinted at a pending shift in the outlook for monetary policy. The market quickly responded to this development. Interest rates declined by over 100 basis points in the case of the 10-year U.S. Treasury note, from late October to late December. Fed funds futures pricing implied the market expected the Fed to lower rates by over 150 basis points in 2024. Risk assets of every type performed strongly over the last two months of the year, in many cases reversing year-to-date negative returns as of November 1, 2023, into strong positive returns for the year.

However, as we move into 2024 the inflation data has not maintained the trend in place described above. Further, the labor market data remains strong, and most measures of economic growth have not softened. In fact, gross domestic product for the fourth quarter of 2023 was 3.2% on an annualized basis. Comments by Fed officials have consistently pushed back on market pricing of the timing and extent of interest rate cuts for 2024. Financial conditions have also eased since early fourth quarter and the federal government is still running stimulative deficits with little to no evidence that policy will change in the near term. The risk that inflation could re-accelerate has been mentioned by many Fed officials. To date in 2024 the interest rate market has reversed yet again, and rates have retraced some of the decline seen in November and December. Accordingly, the outlook for the balance of 2024 is quite uncertain. The evolution of economic data over the balance of the year will guide monetary policy decisions by the Fed and in turn significantly influence the performance of the markets and economy. While both have recovered from the depths of March 2020, especially the financial markets, the economy continues to languish. The recovery has proven to be very uneven, with some sectors back to or near pre-pandemic levels of activity while others remain far below with little prospect for getting back to those levels soon. The unemployment rate remains elevated - with the most recent read at 6.2% - as over nine million Americans remain out of work.

The Fed has taken, and continues to take, steps to support markets and the economy. Stimulus from Washington and the federal government, in spite of political hurdles and a change in presidential administrations, has also provided meaningful support. The new Biden administration has proposed another $1.9 trillion stimulus package that is currently making its way through Congress. The market expects the Fed Funds rate to remain at the effective lower bound near zero for an extended period of time. Henceforth, the Fed appears to be willing to let inflation run above the 2% target level, even when unemployment is very low, before removing accommodation.

~~The~~ Agency MBS ~~market continues~~market. It is also likely to ~~be bifurcated between~~impact the ~~production coupons - the target~~performance of ~~Fed asset purchases -~~Orchid Island Capital and ~~higher coupons in specified pool form. The TBA market for higher coupons remains weak as~~its ability to raise additional capital to deploy into the sector, ~~lacks support from the Fed~~ and prepayment speeds are extremely high, resulting in poor expected returns for investors. This leads investors to look to the specified pool market - with lower expected prepayment speeds - for attractive returns. With rates moving higher since the end of 2020 investors anticipate prepayment activity will diminish as borrowers have been exposed to refinancing incentives for such an extended period, but this has yet to materialize. Working against the burnout effect is compression of the primary/secondary spread, keeping mortgage rates low even as U.S. Treasury rates have increased. As interest rates have continued to increase during the first quarter of 2021, rates available to borrowers have risen as wellthus advisory service revenues and ~~now exceed 3%, although the increase in mortgage rates has been less than the increase in treasury rates, implying the primary/secondary spread has continued to compress.~~

~~-63-~~

Now that we are closer to containment of the COVID-19 pandemic with the emergence of several very effective vaccines, market participants expect the economy will fully recover over the next year or two. Interest rates have begun to drift higher and are likely to continue to do so absent an unexpected turn in efforts to contain the pandemic. Nonetheless, the Fed has stated that it will stay committed to providing maximum support to the economy and Washington continues to provide fiscal stimulus, albeit subject to considerable political haggling that slows progress. Prepayment speeds for Agency MBS will likely remain elevated until interest rates move well above current levels, and we expect that the most attractive returns available will be either in the TBA dollar roll market with lower coupons or with specified pools in higher coupons.

Bimini Advisors.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with ~~GAAP.~~ GAAP, which requires our management to make some complex and subjective decisions, estimates and assessments. Our most critical accounting policies involve decisions, estimates and assessments which ~~could significantly affect~~can have a material impact on reported assets, liabilities, revenues and ~~expenses.~~expenses and these estimates can change each reporting period. Management has identified the following as its most critical accounting estimates:

Mortgage-Backed Securities

Our investments in MBS are accounted for at fair value. We acquire our MBS for the purpose of generating long-term returns, and not for the short-term investment of idle capital. ~~Changes~~

As discussed in Note 14 to the ~~fair value of securities are reflected as part of our net income or loss in our consolidated statement of operations. We elected to account for all of~~financial statements, our MBS at fair value to reflect changes in the fair value of our MBS in our consolidated statement of operations, which we believe more appropriately reflects the results of our operations for a particular reporting period.

~~Our MBS~~ are valued using Level 2 valuations, and such valuations currently are determined based on independent pricing sources and/or third party broker quotes, when available. Because the price estimates may vary, management must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. Alternatively, the Company could opt to have the value of all of our positions in MBS determined by either an independent third-party or do so internally. In managing our portfolio, the Company employs the following four-step process at each valuation date to determine the fair value of our MBS.

~~First, the Company obtains fair values from subscription-based independent pricing services.~~

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

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

●

First, the Company obtains fair values from subscription-based independent pricing services.

●

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

●

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

Management believes its pricing methodology to be consistent with ~~observed prices from similar assets and selects that price. To~~ the ~~extent management believes that none~~definition of the prices are consistent with observed prices for similar assets, which is typically the case for only an immaterial portion of our portfolio each quarter, the Company may use a third price that is consistent with observed prices for identical or similar assets. In the case of assets that have quoted prices such as Agency MBS backed by fixed-rate mortgages, the Company generally uses the quoted or observed market price. For assets such as Agency MBS backed by ARMs or structured Agency MBS, the Company may determine the price based on the yield or spread that is identical to an observed transaction or a similar asset for which a dealer mark or subscription-based price has been obtained.

~~-64-~~

fair value described in Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements.

Income Recognition

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

Income Taxes

Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities represent the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates. The measurement of net deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it is more likely than not that they will not be realized. A majority of the Company’s net deferred tax assets, which consist primarily of NOLs, are expected to be realized over an extended number of years. Management’s conclusion is supported by taxable income projections which include forecasts of management fees, Orchid dividends and net interest income, and the subsequent reinvestment of those amounts into the MBS portfolio. However, management reassesses its valuation allowance conclusions whenever there is a material change in taxable income projections.

Capital Expenditures

At December 31, ~~2020,~~2023, we had no material commitments for capital expenditures.

~~Off-Balance Sheet Arrangements~~

~~At December 31, 2020, 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide disclosure pursuant to this Item. However, we have elected to include much of the information in Item 7 above, beginning on page 46.

Table of Contents

~~Not Applicable.~~

~~-65-~~

ITEM 8. Financial Statements and Supplementary Data.

Index to Financial Statements

		Page

Report of Independent Registered Public Accounting Firm (BDO USA, P.C.: West Palm Beach, FL; PCAOB ID#243)			67	53
Consolidated Balance Sheets			70	55
Consolidated Statements of Operations			71	56
Consolidated Statements of Equity			72	57
Consolidated Statements of Cash Flows			73	58
Notes to Consolidated Financial Statements	59		74

~~-66-~~

Table of Contents

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Bimini Capital Management, Inc.

Vero Beach, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bimini Capital Management, Inc. (the “Company”) as of December 31, ~~2020~~2023 and ~~2019,~~2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, ~~2020,~~2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2020~~2023 and ~~2019,~~2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2020,~~2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) ~~relate~~relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of ~~the~~ critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating ~~these~~the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

~~-67-~~

Realizability of ~~Deferred Tax Assets~~

deferred tax assets

As described in Note 1312 to the consolidated financial statements, the Company has recorded ~~$66.6~~$63.7 million in gross deferred tax assets as of December 31, ~~2020~~2023, and recorded a related valuation allowance of ~~$32.0~~$44.6 million. ~~Management~~The Company applies significant judgment in assessing the projections of future taxable income in the determination of the amount of deferred tax assets that are more-likely-than-not to be realized in the future. In assessing the realizability of deferred tax assets, management considers whether it is ~~more likely than not~~more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Table of Contents

We identified assessing the realizability of deferred tax assets as a critical audit matter. ~~The principal consideration for our determination~~Specifically, we identified that there is ~~the~~ significant judgment required by ~~management~~the Company in ~~formulating~~compiling the forecast of taxable income over the net operating loss expiration periods to determine the amount of deferred tax assets that were more-likely-than-not to be realized in the future. Auditing ~~these~~the forecasts of taxable income involved especially challenging auditor judgment, including the need for the involvement of individuals with specialized knowledge and skill in assessing these elements.

The primary procedures we performed to address this critical audit matter included:

Evaluating the positive and negative evidence in assessing whether the deferred tax assets are more-likely-than-not to be utilized, including evaluating the trends of historical financial results, projected sources of taxable income in future periods, and market information, such as interest yield curves.

~~Assessing the reasonableness of management’s historical ability to make forecasts of future taxable income, by performing a retrospective review of the prior year’s estimates.~~

~~Utilizing personnel with specialized knowledge and skill in tax to evaluate the forecasts of future income and tax implications.~~

•	Evaluating the positive evidence and negative evidence in assessing whether the deferred tax assets are more-likely-than-not to be utilized, including evaluating the trends of historical financial results with respect to the reasonableness of projected sources of taxable income in future periods, and market information.
•	Assessing the reasonableness of the Company’s historical ability to meet the forecasts of future taxable income period over period by evaluating the completeness and accuracy of the source information used to derive the forecasts and by performing a retrospective review of the prior year’s estimate.
•	Utilizing personnel with specialized knowledge and skill in income taxes to assist in the evaluation of the reasonableness of the Company’s analysis of the realizability of the deferred tax assets including the forecasts of the future taxable income and the underlying assumptions within those forecasts.

Valuation of Investments in Mortgage-Backed Securities

As described in Notes 1 and 1514 to the consolidated financial statements, the Company accounts for its mortgage-backed securities at fair value, which totaled ~~$65.2~~$92.7 million atas of December 31, ~~2020.~~2023.  The fair value of mortgage-backed securities is based on independent pricing sources and/or third-party broker quotes, when available. Because the price estimates may vary, ~~management~~the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values based on various techniques including observing the most recent ~~market~~transactions for like or identical assets (including security coupon rate, maturity, yield, prepayment speed), market credit spreads, and model driven approaches.

We identified the valuation of mortgage-backed securities as a critical audit matter.  The principal considerations for our determination are: (i) the potential for bias in how ~~management~~the Company subjectively selects the price from multiple pricing sources to determine the fair value of the mortgage-backed securities and (ii) the audit effort involved, including the ~~use~~involvement of valuation professionals with specialized skill and knowledge. 

The primary procedures we performed to address this critical audit matter included:  

Evaluating the design and implementation of controls relating to the valuation of mortgaged-backed securities, including controls over management’s process to select the price from multiple pricing sources.

Reviewing the range of values used for each investment position, and assessing the price selected for potential management bias by comparing the price to the high, low and average of the range of pricing sources.

~~Testing the reasonableness of fair values determined by management by comparing the fair value of certain securities to recent transactions, if applicable.~~

~~-68-~~

Utilizing personnel with specialized knowledge and skill in valuation to develop an independent estimate of the fair value of each investment position by considering the stated security coupon rate, yield, maturity, and prepayment speeds, and comparing to the fair value used by management.

●

Testing the design and implementation of controls relating to the valuation of mortgaged-backed securities, including controls over the Company’s process to select the price from multiple pricing sources to determine the fair value.

●

Assessing the range of values used for each investment position, and evaluating the price selected for potential bias by comparing the selected price to the high, low and average of the range of pricing sources.

●

Utilizing personnel with specialized knowledge and skill in valuation to develop an independent estimate of the fair value of each investment position by: (i) assessing the stated security coupon rate, maturity, yield, and prepayment speed, and comparing to the fair value used by the Company; (ii) comparing the Company’s fair value estimate of mortgage-backed securities to recent available market transactions, if available.

/s/ BDO USA, ~~LLP~~

P.C.

Certified Public Accountants

We have served as the Company's auditor since 2008.

West Palm Beach, Florida

March 8, 2024

Table of Contents

~~March 15, 2021~~

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022

	*2023*			*2022*
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties	$	92,575,292		$	45,716,793
Unpledged		155,560			176,643
Total mortgage-backed securities		92,730,852			45,893,436
Cash and cash equivalents		3,716,386			6,010,799
Restricted cash		753,900			763,000
Investment in Orchid Island Capital, Inc. common stock, at fair value		4,797,269			5,975,248
Accrued interest receivable		488,660			204,018
Property and equipment, net		1,920,823			1,997,313
Deferred tax assets, net of allowances		19,047,680			23,178,243
Due from affiliates		1,013,406			1,130,713
Other assets		1,129,038			1,164,181
Total Assets	$	125,598,014		$	86,316,951

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	86,906,999		$	43,817,999
Long-term debt		27,394,417			27,416,239
Accrued interest payable		260,413			194,629
Other liabilities		2,908,444			2,764,005
Total Liabilities		117,470,273			74,192,872

Commitments and Contingencies (Note 11)

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		-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 shares and 10,019,888 shares issued and outstanding, respectively		10,005			10,020
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding		32			32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding		32			32
Additional paid-in capital		329,815,150			329,828,268
Accumulated deficit		(321,697,478	)		(317,714,273	)
Stockholders' Equity		8,127,741			12,124,079
Total Liabilities and Equity	$	125,598,014		$	86,316,951

See Notes to Consolidated Financial Statements

~~-69-~~

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2020 and 2019

2020 2019
ASSETS:
Mortgage-backed securities, at fair value

Pledged to counterparties

$
65,153,274

$
217,793,209

Unpledged

24,957

47,744

Total mortgage-backed securities

65,178,231

217,840,953

Cash and cash equivalents

7,558,342

8,070,067

Restricted cash

3,353,015

4,315,050

Investment in Orchid Island Capital, Inc. common stock, at fair value

13,547,764

8,892,211

Accrued interest receivable

202,192

750,875

Property and equipment, net

2,093,440

2,162,975

Real property held for sale

-

450,000

Deferred tax assets

34,668,467

33,288,536

Due from affiliates

632,471

622,120

Other assets

1,466,647

3,096,161

Total Assets
$
128,700,569

$
279,488,948

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements

$
65,071,113

$
209,954,000

Long-term debt

27,612,781

27,481,121

Accrued interest payable

107,417

645,302

Other liabilities

1,421,409

1,431,534

Total Liabilities
94,212,720

239,511,957

Commitments and contingencies (Note 12)

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 December 31, 2020 and 2019

-

-

Class A Common stock, $0.001 par value; 98,000,000 shares designated: 11,608,555

shares issued and outstanding as of December 31, 2020 and 2019

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 December 31, 2020 and 2019

32

32

Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares

issued and outstanding as of December 31, 2020 and 2019

32

32

Additional paid-in capital

332,642,758

332,642,758

Accumulated deficit

(298,166,582
)

(292,677,440
)
Stockholders' Equity
34,487,849

39,976,991

Total Liabilities and Equity
$
128,700,569

$
279,488,948

See Notes to Consolidated Financial Statements

~~-70-~~

Table of Contents

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2020 and 2019

2020 2019
Revenues:
Advisory services

$
6,795,072

$
6,907,910

Interest income

3,764,003

7,868,940

Dividend income from Orchid Island Capital, Inc. common stock

1,752,730

1,459,235

Total revenues

12,311,805

16,236,085

Interest expense:

Repurchase agreements

(1,073,528
)

(4,602,837
)
Long-term debt

(1,150,613
)

(1,572,038
)
Net revenues

10,087,664

10,061,210

Other income (expense)
Unrealized gains on mortgage-backed securities

111,615

6,338,000

Realized (losses) gains on mortgage-backed securities

(5,744,589
)

23,078

Unrealized gains (losses) on Orchid Island Capital, Inc. common stock

583,961

(820,819
)
Losses on derivative instruments

(5,292,521
)

(5,817,825
)
Gains on retained interests in securitizations

58,735

314,984

Impairment of real property held for sale

-

(673,438
)
Other income

3,478

32,884

Other expense, net

(10,279,321
)

(603,136
)

Expenses:
Compensation and related benefits

4,235,487

4,115,743

Directors' fees and liability insurance

690,713

653,825

Audit, legal and other professional fees

576,662

489,243

Administrative and other expenses

1,164,039

1,180,898

Total expenses

6,666,901

6,439,709

Net (loss) income before income tax benefit

(6,858,558
)

3,018,365

Income tax benefit

(1,369,416
)

(10,281,612
)

Net (loss) income
$
(5,489,142
)

$
13,299,977

Basic and Diluted Net (Loss) Income Per Share of:
CLASS A COMMON STOCK

Basic and Diluted

$
(0.47
)

$
1.09

CLASS B COMMON STOCK

Basic and Diluted

$
(0.47
)

$
1.09

Weighted Average Shares Outstanding:
CLASS A COMMON STOCK

Basic and Diluted

11,608,555

12,178,160

CLASS B COMMON STOCK

Basic and Diluted

31,938

31,938

See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2023 and 2022

	*2023*			*2022*
Revenues:
Advisory services	$	13,594,907		$	12,995,504
Interest income		3,311,515			1,862,480
Dividend income from Orchid Island Capital, Inc. common stock		1,024,328			1,292,701
Total revenues		17,930,750			16,150,685
Interest expense:
Repurchase agreements		(3,080,817	)		(715,386	)
Long-term debt		(2,338,138	)		(1,415,624	)
Net revenues		12,511,795			14,019,675

Other income (expense):
Unrealized losses on mortgage-backed securities		(198,723	)		(5,915,904	)
Realized losses on mortgage-backed securities		(19,958	)		(858,001	)
Unrealized losses on Orchid Island Capital, Inc. common stock		(1,177,979	)		(6,239,189	)
(Losses) gains on derivative instruments		(470,379	)		800,820
Other income		205			66,269
Other expense, net		(1,866,834	)		(12,146,005	)

Expenses:
Compensation and related benefits		6,855,288			6,530,349
Direct advisory service costs		1,511,363			1,333,410
Directors' fees and liability insurance		837,333			804,186
Audit, legal and other professional fees		543,002			504,602
Administrative and other expenses		750,617			666,159
Total expenses		10,497,603			9,838,706

Net income (loss) before income tax provision		147,358			(7,965,036	)
Income tax provision		4,130,563			11,858,069

Net loss	$	(3,983,205	)	$	(19,823,105	)

Basic and Diluted Net Loss Per Share of:
CLASS A COMMON STOCK
Basic and Diluted	$	(0.40	)	$	(1.90	)
CLASS B COMMON STOCK
Basic and Diluted	$	(0.40	)	$	(1.90	)
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted		10,015,816			10,393,855
CLASS B COMMON STOCK
Basic and Diluted		31,938			31,938

See Notes to Consolidated Financial Statements

~~-71-~~

BIMINI CAPITAL MANAGEMENT, INC
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2020 and 2019

Stockholders' Equity
Common Stock Additional Accumulated
Shares Par Value Paid-in Capital Deficit Total
Balances, January 1, 2019

12,773,145

$
12,773

$
334,919,265

$
(305,977,417
)

$
28,954,621

Net income

-

-

-

13,299,977

13,299,977

Class A common shares repurchased and retired

(1,100,714
)

(1,100
)

(2,276,507
)

-

(2,277,607
)

Balances, December 31, 2019

11,672,431

11,673

332,642,758

(292,677,440
)

39,976,991

Net loss

-

-

-

(5,489,142
)

(5,489,142
)

Balances, December 31, 2020

11,672,431

$
11,673

$
332,642,758

$
(298,166,582
)

$
34,487,849

See Notes to Consolidated Financial Statements

~~-72-~~

Table of Contents

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2020 and 2019

2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income

$
(5,489,142
)

$
13,299,977

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation

69,536

73,057

Deferred income tax

(1,379,931
)

(10,085,715
)
Losses (gains) on mortgage-backed securities

5,632,974

(6,361,078
)
Gains on retained interests in securitizations

(58,735
)

(314,984
)
Gain from disposition of real property held for sale

(11,591
)

-

Impairment of real property held for sale

-

673,438

Realized losses on forward settling to-be-announced securities

1,441,406

2,196,582

Unrealized (gains) losses on Orchid Island Capital, Inc. common stock

(583,961
)

820,819

Changes in operating assets and liabilities:

Accrued interest receivable

548,683

29,660

Due from affiliates

(10,351
)

31,964

Other assets

1,629,514

(71,105
)
Accrued interest payable

(537,885
)

(32,960
)
Other liabilities

48,469

(255,913
)
NET CASH PROVIDED BY OPERATING ACTIVITIES

1,298,986

3,742

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:

Purchases

(43,129,835
)

(65,780,690
)
Sales

176,249,711

43,975,274

Principal repayments

13,909,872

22,749,733

Payments received on retained interests in securitizations

58,735

314,984

Net settlement of forward settling TBA contracts

(1,500,000
)

(3,075,488
)
Purchases of Orchid Island Capital, Inc. common stock

(4,071,592
)

-

Proceeds from disposition of real property held for sale

461,590

-

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

141,978,481

(1,816,187
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements

538,558,549

1,200,646,000

Principal repayments on repurchase agreements

(683,441,436
)

(1,191,088,000
)
Proceeds from issuance of long-term debt

152,165

680,000

Principal repayments on long-term debt

(20,505
)

(3,319
)
Class A common shares repurchased and retired

-

(2,277,607
)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(144,751,227
)

7,957,074

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(1,473,760
)

6,144,629

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the year

12,385,117

6,240,488

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the year

$
10,911,357

$
12,385,117

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:

Interest

$
2,762,026

$
6,207,835

Income taxes

$
(1,581,828
)

$
(46,700
)
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2023 and 2022

	*Stockholders' Equity*
	*Common Stock*						*Additional*			*Accumulated*
	*Shares*			*Par Value*			*Paid-in Capital*			*Deficit*			*Total*
Balances, January 1, 2022		10,766,070		$	10,766		$	330,880,252		$	(297,891,168	)	$	32,999,850
Net loss		-			-			-			(19,823,105	)		(19,823,105	)
Class A common shares repurchased and retired		(682,306	)		(682	)		(1,051,984	)		-			(1,052,666	)
Balances, December 31, 2022		10,083,764			10,084			329,828,268			(317,714,273	)		12,124,079
Net loss		-			-			-			(3,983,205	)		(3,983,205	)
Class A common shares repurchased and retired		(14,431	)		(15	)		(13,118	)		-			(13,133	)
Balances, December 31, 2023		10,069,333		$	10,069		$	329,815,150		$	(321,697,478	)	$	8,127,741

See Notes to Consolidated Financial Statements

~~-73-~~

Table of Contents

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2023 and 2022

	*2023*			*2022*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,983,205	)	$	(19,823,105	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		76,490			73,053
Deferred income tax provision		4,130,563			11,858,069
Unrealized losses on mortgage-backed securities		198,723			5,915,904
Realized losses on mortgage-backed securities		19,958			858,001
Gains on retained interests in securitizations		-			(65,928	)
Unrealized losses on Orchid Island Capital, Inc. common stock		1,177,979			6,239,189
Changes in operating assets and liabilities:
Accrued interest receivable		(284,642	)		25,924
Due from affiliates		117,307			(68,558	)
Other assets		35,143			273,200
Accrued interest payable		65,784			139,019
Other liabilities		144,439			51,799
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,698,539			5,476,567
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(70,656,530	)		(23,191,724	)
Sales		18,175,322			23,096,853
Principal repayments		5,425,111			8,230,674
Payments received on retained interests in securitizations		-			65,928
Purchases of Orchid Island Capital, Inc. common stock		-			(535,330	)
Acquisition of property and equipment		-			(46,176	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(47,056,097	)		7,620,225
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements		622,341,000			391,823,690
Principal repayments on repurchase agreements		(579,252,000	)		(406,883,690	)
Principal repayments on long-term debt		(21,822	)		(22,737	)
Class A common shares repurchased and retired		(13,133	)		(1,052,666	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		43,054,045			(16,135,403	)

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(2,303,513	)		(3,038,611	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the year		6,773,799			9,812,410
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the year	$	4,470,286		$	6,773,799

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	5,353,171		$	1,991,991

See Notes to Consolidated Financial Statements

Table of Contents

BIMINI CAPITAL MANAGEMENT,INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” orand collectively with its subsidiaries, the “Company”) formed in September 2003, is a holding company. The Company operates in two business segments through its principal wholly-owned operating subsidiary, Royal Palm Capital, LLC, which includes its wholly-owned subsidiary, Bimini Advisors Holdings, 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."

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an (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. Effective April 1, 2022, Bimini Advisors started providing certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. 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, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal Palm."

Consolidation

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

~~Variable Interest Entities (VIEs)~~

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 10 for a description of the accounting used for this VIE.

We obtain interests in VIEs through our investments in mortgage-backed securities. Our interests in these VIEs are passive in nature and are not expected to result in us obtaining a controlling financial interest in these VIEs in the future. As a result, we do not consolidate these VIEs and we account for our interests in these VIEs as mortgage-backed securities. See Note 3 for additional information regarding our investments in mortgage-backed securities. Our maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities.

Basis of Presentation

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

~~-74-~~

~~COVID-19 Impact~~

Beginning in mid-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. Further, as interest rates declined, we faced additional margin calls related to our various hedge positions. In order to maintain our leverage ratio at prudent levels, maintain sufficient cash and liquidity, reduce risk and satisfy margin calls, we sold assets at levels significantly below their carrying values and closed several hedge positions. During this period, we sold approximately $171.2 million of MBS during the three months ended March 31, 2020, realizing losses of approximately $5.8 million.

The Agency MBS market largely stabilized after the Federal Reserve 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 December 31, 2020, we had timely satisfied all margin calls.

Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may continue to have adverse effects on the Company’s results of future operations, financial position, and liquidity in fiscal year 2021.

In addition, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which has provided billions of dollars of relief to individuals, businesses, state and local governments, and the health care system suffering the impact of the pandemic, including mortgage loan forbearance and modification programs to qualifying borrowers who may have difficulty making their loan payments. On April 13, 2020, the Company received $152,000 through the Paycheck Protection Program of the CARES Act in the form of a low interest rate loan. The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

The CARES Act also makes technical corrections to, or modifies on a temporary basis, certain provisions of the U.S. Income Tax Code. Significant income tax impacts of the CARES Act include the ability to carry back a net operating loss for 5 years and an increase in the interest expense disallowance limitations from 30% to 50% of adjusted taxable income. Those changes did not significantly impact the consolidated financial statements or the Company’s 2019 income tax return.

~~The Company has evaluated the other provisions of the CARES Act and does not believe it will have a material effect on the Company’s business, results of operations and financial condition.~~

~~-75-~~

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 significantly 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, determining the amounts of asset valuation allowances, ~~the impairment for the real property held for sale,~~ and the computation of the income tax provision or benefit and the deferred tax asset allowances recorded for each accounting period. Management believes the estimates and assumptions underlying the consolidated financial statements are reasonable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact that COVID-19 will have on the global economy generally, and on our business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

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 the operating segments are the same as the Company’s accounting policies described in this note with the exception that inter-segment revenues and expenses are included in the presentation of segment results. For further information see Note ~~16.~~15.

Table of Contents

Variable Interest Entities (VIEs)

A variable interest entity ("VIE") is consolidated by an enterprise if it is deemed the primary beneficiary of the VIE. The Company obtains interests in VIEs through its investments in mortgage-backed securities. The interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for the interest in these VIEs as mortgage-backed securities. See Note 3. The maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities. Bimini Capital has a common share investment in a trust, Bimini Capital Trust II, ("BCTII"), used in connection with the issuance of Bimini Capital's junior subordinated notes. BCTII is a VIE, as the holders of the equity investment at risk do not have adequate decision making ability over BCTII’s activities. Bimini Capital's investment was financed directly by BCTII as a result of its loan of the proceeds to Bimini Capital, therefore that investment is not an equity investment at risk and is not a variable interest. Since Bimini Capital is not the primary beneficiary of BCTII, the Company has not consolidated the financial statements of BCTII into its consolidated financial statements, and this investment is accounted for on the equity method. See Note 9.

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 margin for derivative instruments. The following table presents the Company’s cash, cash equivalents and restricted cash as of December 31, ~~2020~~ 2023 and ~~2019.~~

2020 2019
Cash and cash equivalents

$
7,558,342

$
8,070,067

Restricted cash

3,353,015

4,315,050

Total cash, cash equivalents and restricted cash
$
10,911,357

$
12,385,117

2022.

	*2023*		*2022*
Cash and cash equivalents	$	3,716,386	$	6,010,799
Restricted cash		753,900		763,000
Total cash, cash equivalents and restricted cash	$	4,470,286	$	6,773,799

The Company maintains cash balances at several banks and excess margin with antwo exchange clearing ~~member.~~members. At times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to ~~$250,000~~$250,000 per depositor at each financial institution. Restricted cash balances are uninsured, but are held in separate accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and 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~~

Bimini Advisors manages and ~~advised by Bimini Advisors~~advises Orchid pursuant to the terms of a management agreement. See Note 2. 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.

~~-76-~~

Mortgage-Backed Securities

The Company invests primarily in pass-through ~~mortgage backed certificates~~(“PT”) mortgage-backed securities issued by Freddie Mac, Fannie Mae or Ginnie Mae (“MBS”), collateralized mortgage obligations (“CMOs”), interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of mortgage-backed loans. ~~We refer~~The Company refers to MBS and CMOs as PT ~~MBS. We refer to~~MBS and 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’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.

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Fair value is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for MBS are based on independent pricing sources and/or ~~third-party~~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 carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of MBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. The amount reported as unrealized gains or losses on ~~mortgage backed~~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.

Realized gains and losses on sales of MBS, using the specific identification method, are reported as a separate component of net portfolio income on the statement of operations.

Orchid Island Capital, Inc. Common Stock

The Company accounts for its investment in Orchid common shares at fair value. The change in the fair value and dividends received on this investment are reflected in the consolidated statements of ~~operations.~~operations for each reporting period. We estimate the fair value of ~~our investment in Orchid~~Orchid's common shares on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock on a national stock exchange.

Retained Interests in Securitizations

The Company holds retained interests in the subordinated tranches of securities created in securitization transactions. ~~These~~The carrying value of these retained interests ~~currently have a recorded fair value of~~is zero, as the prospect of future cash flows being received is uncertain. Any cash received from the retained interests is reflected as a gain in the consolidated statements of operations.

~~-77-~~

Derivative Financial Instruments

The Company ~~uses~~has historically used 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”) and Eurodollar~~interest rate futures contracts, and “to-be-announced” (“TBA”) ~~securities, but it may enter into other derivatives in the future.~~

securities.

The Company accounts for TBA securities as derivative instruments. Other types of derivative instruments may be used in the future. Gains and losses associated with ~~TBA securities~~derivative transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations.

During the year ended December 31, 2023, the Company only held T-Note and SOFR futures contracts. The Company recorded (loss) income of approximately $(0.5) million and $0.8 million on these instruments during the years ended December 31, 2023 and 2022, respectively.

Derivative instruments are carried at fair value, and changes in fair value are recorded in the consolidated statements of 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. Gains and losses on derivatives, except those that result in cash receipts or payments, are included in operating activities on the statements of cash flows. Cash payments and cash receipts from settlements of derivatives, including current period net cash settlements on interest rate swaps, is classified as an investing activity on the statements of cash flows. The Company's derivative agreements generally contain provisions that allow for netting or setting off derivative assets and liabilities with the counterparty; however, related assets and liabilities are reported on a gross basis in the Company's consolidated balance sheets. Derivative instruments in a gain position are reported as derivative assets at fair value and derivative instruments in a loss position are reported as derivative liabilities at fair value in the consolidated balance sheets.

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Holding derivatives creates exposure to credit risk related to the potential for failure by counterparties to honor their commitments. 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. The Company’s derivative agreements require it to post or receive collateral to mitigate such risk. In addition, the Company uses only registered central clearing exchanges and well-established commercial banks as counterparties, monitors positions with individual counterparties and adjusts posted collateral as required.

The Company’s futures contracts are exchange traded contracts that are valued based on exchange pricing with daily margin requirements. The margin requirement varies based on the market value of the open position and the equity retained in the account. Margin posted is treated as settlement of the outstanding value of the futures contract. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s balance sheets. The Company realizes gains and losses on these contracts upon expiration equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.

Financial Instruments

The 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 and derivative assets and liabilities are accounted for at fair value in the consolidated balance sheets. The methods and assumptions used to estimate fair value for these instruments are presented in Note ~~15 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 due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company’s junior subordinated notes. Currently, there is a limited market for these types of instruments and the Company is unable to ascertain what interest rates would be available to the Company for similar financial instruments. Further information regarding these instruments is presented in Note 10 to the consolidated financial statements.

14.

Property and Equipment, net

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

~~-78-~~

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~~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. Accordingly, shares of the Class B Common Stock are included in the computation of basic EPS using the ~~two-class~~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

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The Company’s U.S. federal income tax returns for years ended on or after December 31, ~~2017~~ 2020 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 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

~~On January 1,~~

In March 2020, ~~we adopted~~the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets to be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model). The Company’s adoption of this ASU did not have a material impact on its consolidated financial statements as its financial assets were already measured at fair value through earnings.

~~-79-~~

~~In March~~ 2020 ~~the FASB issued ASU 2020-04~~-04 “Reference Rate Reform (Topic ~~848)~~848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting.~~Reporting.” ASU ~~2020-04~~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~~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~~Company adopted this ASU ~~2020-04 is optional and may be elected over time, through December 31, 2022,~~during the second quarter of 2023 as ~~reference rate reform activities occur.~~the Secured Overnight Financing Rate ("SOFR") replaced LIBOR for the Company's junior subordinated debt positions. The ~~Company does not believe the~~ adoption of this ASU ~~will~~did not have a material impact on ~~its consolidated~~the Company's financial statements.

In January 2021, the FASB issued ASU ~~2021-01~~2021-01 “Reference Rate Reform (Topic ~~848)~~848).” ASU ~~2021-01~~2021-01 expands the scope of ASC 848 to include all affected derivatives and 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 ~~2021-01~~2021-01 adds implementation guidance to permit a company to apply certain optional expedients to modifications of 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 contract 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~~Company adopted this ASU ~~2021-01 is effective immediately and available generally through December 31, 2022,~~during the second quarter of 2023 as ~~reference rate reform activities occur.~~SOFR replaced LIBOR for the Company's junior subordinated debt positions. The ~~Company does not believe the~~ adoption of this ASU ~~will~~did not have a material impact on ~~its consolidated~~the Company's financial statements.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segments.” The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis. Amendments in ASU 2023-07 include: a requirement that a public entity provide all annual disclosures about a reportable segment’s profit or loss in its interim period disclosures, disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), disclosure of amounts for other segment items by reportable segment and a description of its composition, clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit or loss, requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss, and requires that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 as well as all existing disclosures required in Topic 280. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of ASU 2023-07 on its future financial statements.

In December 2023, the FASB ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its future financial statements.

NOTE 2. ADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:

~~One-twelfth of 1.5% of the first $250~~

●

One-twelfth of 1.50% of the first$250 million of the Orchid’s month-end equity, as defined in the management agreement,

●

One-twelfth of 1.25% of the 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 the Orchid’s month-end equity that is greater than $500 million.

On April 1, 2022, pursuant to the third amendment to the management agreement

~~One-twelfth of 1.25% of~~ entered into on November 16, 2021, the ~~Orchid’s month-end equity~~Company began providing certain repurchase agreement trading, clearing and administrative services to Orchid that ~~is greater than $250 million and less than or equal~~had been previously provided by a third party. In consideration for such services, Orchid will pay the following fees to ~~$500 million, and~~

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

Company:

	●	a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and
	●	a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

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. Orchid is required to pay Bimini Advisors by the 15th day of the month following the month the services are performed. The management agreement has been renewed through February 20, ~~2022~~ 2025 and provides for automatic ~~one-year~~one-year extension options thereafter. Should Orchid terminate the management 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 the ~~automatic~~applicable renewal term.

The following table summarizes the advisory services revenue from Orchid for the years ended December 31, ~~2020~~ 2023 and ~~2019.~~

(in thousands)
2020 2019
Management fee

$
5,281

$
5,528

Allocated overhead

1,514

1,380

Total

$
6,795

$
6,908

~~-80-~~

2022.

(in thousands)
	*2023*		*2022*
Management fee	$	10,491	$	10,447
Allocated overhead		2,389		2,042
Repurchase, clearing and administrative fee		715		507
Total	$	13,595	$	12,996

At December 31, ~~2020~~ 2023 and ~~2019,~~2022, the net amount due from Orchid was approximately ~~$0.6~~$1.0 million and ~~$0.6~~$1.1 million, respectively. ~~These amounts are included in “other assets” in the consolidated balance sheets.~~

NOTE 3. MORTGAGE-BACKED SECURITIES

The following table presents the Company’s MBS portfolio as of December 31, ~~2020~~ 2023 and ~~2019:~~2022:

(in thousands)
	*2023*						*2022*
	*Par Value*		Cost⁽¹⁾		*Fair Value*		*Par Value*		Cost⁽¹⁾		*Fair Value*
Fixed-rate MBS	$	88,807	$	91,701	$	90,181	$	44,963	$	46,603	$	42,974
Structured MBS⁽²⁾		n/a		1,787		2,550		n/a		2,053		2,919
Total	$	88,807	$	93,488	$	92,731	$	44,963	$	48,656	$	45,893

(1)	The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio.
(2)	The notional balance for the structured MBS portfolio was $18.9 million and $21.8 million as of December 31, 2023 and 2022, respectively.

The following table is a summary of the Company's net loss from the sale of MBS for the years ended December 31, 2023 and 2022:

(in thousands)
	*2023*			*2022*
Proceeds from sales of MBS	$	18,175		$	23,097
Carrying value of MBS sold		18,195			23,955
Net loss on sales of MBS	$	(20	)	$	(858	)

Gross gain sales of MBS	$	-		$	-
Gross loss on sales of MBS		(20	)		(858	)
Net loss on sales of MBS	$	(20	)	$	(858	)

(in thousands)
2020 2019
Fixed-rate Mortgages

$
64,902

$
216,231

Interest-Only Securities

251

1,024

Inverse Interest-Only Securities

25

586

Total

$
65,178

$
217,841

NOTE 4. PROPERTY AND EQUIPMENT, NET

The composition of property and equipment at December 31, ~~2020~~ 2023 and ~~2019~~2022 follows:

(in thousands)
	*2023*			*2022*
Land	$	1,185		$	1,185
Buildings and improvements		1,827			1,827
Computer equipment and software		45			45
Office furniture and equipment		220			220
Total cost		3,277			3,277
Less accumulated depreciation and amortization		(1,356	)		(1,280	)
Property and equipment, net	$	1,921		$	1,997

(in thousands)
2020 2019
Land

$
1,185

$
1,185

Buildings and improvements

1,827

1,827

Computer equipment and software

181

181

Office furniture and equipment

198

198

Total cost

3,391

3,391

Less accumulated depreciation and amortization

1,298

1,228

Property and equipment, net

$
2,093

$
2,163

~~Depreciation of property and equipment totaled approximately $70,000 and $73,000 for the years ended December 31, 2020 and 2019, respectively.~~

In August 2019, the Company transferred one its real estate properties to held for sale to generate additional cash to be invested in the MBS portfolio. The Company transferred the property at fair value, which resulted in an impairment charge of approximately $0.7 million during the year ended December 31, 2019. In October 2020, the Company completed the sale of this property, receiving proceeds of approximately $0.5 million. The transaction resulted in a gain of approximately $12,000.

NOTE 5. OTHER ASSETS

AND OTHER LIABILITIES

The composition of other assets at December 31, ~~2020~~ 2023 and ~~2019~~2022 follows:

(in thousands)
	*2023*		*2022*
Investment in Bimini Capital Trust II	$	804	$	804
Prepaid expenses		252		261
Other		73		99
Total other assets	$	1,129	$	1,164

(in thousands)
2020 2019
Investment in Bimini Capital Trust II

$
804

$
804

Prepaid expenses

278

215

Servicing advances

205

205

Servicing sale receivable, including accrued interest

-

159

Refundable income taxes withheld

-

1,578

Other

180

135

Total other assets

$
1,467

$
3,096

~~-81-~~

~~Receivables are carried~~

The composition of other liabilities at their estimated collectible amounts. The Company maintains an allowance for credit losses for expected losses, if any. Management considers the following factors when determining the expected losses of specific accounts: past transaction activity, current economic conditions, changes in payment terms and reasonable and supportable forecasts. Adjustments to the allowance for credit losses are recorded with a corresponding adjustment included in the consolidated statement of operations. As of December 31, ~~2020~~ 2023 and ~~2019, management determined that no allowance for credit losses was necessary. Collections on amounts previously written off are included in income as received.~~2022 follows:

(in thousands)
	*2023*		*2022*
Accrued payroll	$	2,730	$	2,600
Accrued liabilities		136		104
Accounts payable		42		60
Total other liabilities	$	2,908	$	2,764

NOTE 6. REPURCHASE AGREEMENTS

The Company pledges certain of its ~~RMBS~~MBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of December 31, ~~2020,~~2023, the Company had met all margin call requirements.

As of December 31, ~~2020~~ 2023 and December 31, ~~2019,~~2022, the Company’s repurchase agreements had remaining 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
December 31, 2020
Fair value of securities pledged, including accrued

interest receivable

$
-

$
49,096

$
8,853

$
7,405

$
65,354

Repurchase agreement liabilities associated with

these securities

$
-

$
49,120

$
8,649

$
7,302

$
65,071

Net weighted average borrowing rate

-

0.25
%

0.23
%

0.30
%

0.25
%
December 31, 2019
Fair value of securities pledged, including accrued

interest receivable

$
-

$
137,992

$
80,550

$
-

$
218,542

Repurchase agreement liabilities associated with

these securities

$
-

$
132,573

$
77,381

$
-

$
209,954

Net weighted average borrowing rate

-

2.02
%

1.92
%

-

1.98
%

($ in thousands)
	*Overnight*		*Between*			*Between*			*Greater*
	*(1 Day*		*2 and*			*31 and*			*Than*
	*or Less)*		*30 DAYS*			*90 Days*			*90 Days*		*Total*
December 31, 2023
Fair value of securities pledged, including accrued interest receivable	$	-	$	68,477		$	24,584		$	-	$	93,061
Repurchase agreement liabilities associated with these securities	$	-	$	63,637		$	23,270		$	-	$	86,907
Net weighted average borrowing rate		-		5.56	%		5.57	%		-		5.56	%
December 31, 2022
Fair value of securities pledged, including accrued interest receivable	$	-	$	42,553		$	3,364		$	-	$	45,917
Repurchase agreement liabilities associated with these securities	$	-	$	40,492		$	3,326		$	-	$	43,818
Net weighted average borrowing rate		-		4.50	%		4.29	%		-		4.48	%

In addition, cash pledged to counterparties as collateral for repurchase agreements was approximately ~~$3.4 million and $3.8~~$0.5 million as of December 31, ~~2020 and 2019, respectively.~~

2022.

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable, and cash posted by the Company as collateral, if any. At December 31, ~~2020~~ 2023 and December 31, ~~2019,~~2022, the Company had an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable, and the fair value of securities and cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately ~~$3.6~~$6.0 million and ~~$11.8~~$2.5 million, respectively. ~~The Company did not have an amount~~Summary information regarding amounts at risk with ~~any~~ individual ~~counterparty~~counterparties greater than 10% of ~~the Company’s~~ equity at December 31, ~~2020~~2023 and ~~December 31, 2019.~~

~~-82-~~

~~NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS~~

~~The table below summarizes fair value information about our derivative assets and liabilities as of December 31, 2020 and 2019.~~

(in thousands)
Derivative Instruments and Related Accounts Balance Sheet Location December 31, 2020 December 31, 2019
Liabilities
TBA Securities
Other liabilities
$
-
$
59
Total derivative liabilities, at fair value

$
-
$
59

Margin Balances Posted to (from) Counterparties
Futures contracts
Restricted cash
$
1
$
537
Total margin balances on derivative contracts

$
1
$
537

Eurodollar and T-Note futures are cash settled futures contracts on an interest rate, with gains and losses credited or charged to the Company’s cash accounts on a daily basis. A minimum balance, or “margin”,2022 is ~~required to be maintained~~presented in the ~~account on a daily basis. The tables below present information related to the Company’s Eurodollar and T-note futures positions at December 31, 2020 and December 31, 2019.~~

($ in thousands)
As of December 31, 2020
Junior Subordinated Debt Funding Hedges
Average Weighted Weighted
Contract Average Average
Notional Entry LIBOR Open
Expiration Year Amount Rate Rate
Equity⁽¹⁾
2021
$1,000 1.02% 0.18% $(8)

($ in thousands)
As of December 31, 2019
Repurchase Agreement Funding Hedges
Average Weighted Weighted
Contract Average Average
Notional Entry LIBOR Open
Expiration Year Amount Rate Rate
Equity⁽¹⁾

Eurodollar Futures Contracts (Short Positions)
2020

$
120,000

2.90
%

1.67
%

$
(1,480
)
2021

80,000

2.80
%

1.57
%

(984
)
Total / Weighted Average

$
200,000

2.86
%

1.63
%

$
(2,464
)
Treasury Note Futures Contracts (Short Positions)⁽²⁾

March 2020 5-year T-Note futures

$
20,000

1.96
%

2.06
%

88

($ in thousands)
As of December 31, 2019
Junior Subordinated Debt Funding Hedges
Average Weighted Weighted
Contract Average Average
Notional Entry LIBOR Open
Expiration Year Amount Rate Rate
Equity⁽¹⁾
2020
$19,500 1.92% 1.68% $(46)

~~(1)~~

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

~~(2)~~

~~T-Note futures contracts were valued at a price of $118.61 at December 31, 2019. The contract value of the short positions was $23.7 million.~~

table below.

~~-83-~~

~~The following table summarizes our contracts to purchase and sell TBA securities as of December 31, 2019. There were no open TBA contracts as of December 31, 2020.~~

($ in thousands)
Notional Net
Amount Cost Market Carrying

Long (Short)⁽¹⁾

Basis⁽²⁾

Value⁽³⁾

Value⁽⁴⁾
December 31, 2019
30-Year TBA Securities:

3.5%
$
(50,000)
$
(51,414)
$
(51,438)
$
(24)

4.5%
(50,000) (52,621) (52,656) (35)

Totals
$
(100,000)
$
(104,035)
$
(104,094)
$
(59)

~~(1)~~

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

~~(2)~~

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

~~(3)~~

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

~~(4)~~

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

~~Losses on Derivative Instruments~~

~~The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the years ended December 31, 2020 and 2019.~~

(in thousands)
2020 2019
Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

$
(2,328
)

$
(2,709
)
Junior subordinated debt funding hedges

(517
)

(390
)
T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,007
)

(522
)
Net TBA securities

(1,441
)

(2,197
)
Losses on derivative instruments

$
(5,293
)

$
(5,818
)

~~Credit Risk-Related Contingent Features~~

The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company attempts to minimize this risk in several ways. For instruments which are not centrally cleared on a registered exchange, the Company limits it 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 recovering its assets pledged as collateral for its derivatives. The cash and cash equivalents pledged as collateral for the Company’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.

~~-84-~~

($ in thousands)
			*% of*			*Weighted*
			*Stockholders'*			*Average*
	*Amount*		*Equity*			*Maturity*
Repurchase Agreement Counterparty	*at Risk*		*at Risk*			*(in Days)*
December 31, 2023
Mirae Asset Securities (USA) Inc.	$	1,564		19.2	%		18
Citigroup Global Markets, Inc.		1,302		16.0	%		26
Mitsubishi UFJ Securities, Inc.		1,128		13.9	%		23
South Street Securities, LLC		922		11.3	%		52
December 31, 2022
Mirae Asset Securities (USA) Inc.	$	1,322		10.9	%		14

NOTE 8.7. 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 December 31, ~~2020~~ 2023 and ~~2019.~~

($ in thousands)
December 31, 2020 December 31, 2019
Repurchase Derivative Repurchase Derivative
Assets Pledged to Counterparties Agreements Agreements Total Agreements Agreements Total
PT MBS - at fair value

$
64,902

$
-

$
64,902

$
216,231

$
-

$
216,231

Structured MBS - at fair value

251

-

251

1,562

-

1,562

Accrued interest on pledged securities

201

-

201

749

-

749

Cash

3,352

1

3,353

3,778

537

4,315

Total

$
68,706

$
1

$
68,707

$
222,320

$
537

$
222,857

2022.

($ in thousands)
	*December 31, 2023*						*December 31, 2022*
	*Repurchase*		*Derivative*				*Repurchase*		*Derivative*
Assets Pledged to Counterparties	*Agreements*		*Agreements*		*Total*		*Agreements*		*Agreements*		*Total*
PT MBS - at fair value	$	90,180	$	-	$	90,180	$	42,975	$	-	$	42,975
Structured MBS - at fair value		2,395		-		2,395		2,742		-		2,742
Accrued interest on pledged securities		486		-		486		200		-		200
Cash		-		754		754		454		309		763
Total	$	93,061	$	754	$	93,815	$	46,371	$	309	$	46,680

Assets Pledged from Counterparties

The table below summarizes assets pledged to Bimini from counterparties under repurchase agreements as of December 31, ~~2020~~ 2023 and ~~2019.~~2022. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements in the consolidated balance sheets.

($ in thousands)
Assets Pledged to Bimini	*2023*		*2022*
Cash	$	-	$	148
Total	$	-	$	148

($ in thousands)
Assets Pledged to Bimini December 31, 2020 December 31, 2019
Repurchase agreements

$
80

$
-

Total

$
80

$
-

NOTE 9.8. OFFSETTING ASSETS AND LIABILITIES

The Company’s repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of December 31, ~~2020~~ 2023 and ~~2019.~~

(in thousands)
Offsetting of Liabilities
Net Amount Gross Amount Not Offset in the
of Liabilities Consolidated Balance Sheet
Gross Amount Presented Financial
Gross Amount Offset in the in the Instruments Cash
of Recognized Consolidated Consolidated Posted as Posted as Net
Liabilities Balance Sheet Balance Sheet Collateral Collateral Amount
December 31, 2020
Repurchase Agreements

$
65,071

$
-

$
65,071

$
(61,719
)

$
(3,352
)

$
-

$
65,071

$
-

$
65,071

$
(61,719
)

$
(3,352
)

$
-

December 31, 2019
Repurchase Agreements

$
209,954

$
-

$
209,954

$
(206,176
)

$
(3,778
)

$
-

TBA securities

59

-

59

-

-

59

$
210,013

$
-

$
210,013

$
(206,176
)

$
(3,778
)

$
59

2022.

~~-85-~~

(in thousands)
*Offsetting of Liabilities*
					*Net Amount*		*Gross Amount*
			*Gross*		*of Liabilities*		*Not Offset in the*
			*Amount*		*Presented*		*Consolidated Balance Sheet*
	*Gross*		*Offset in the*		*in the*		*Financial*
	*Amount of*		*Consolidated*		*Consolidated*		*Instruments*			*Cash*
	*Recognized*		*Balance*		*Balance*		*Posted as*			*Posted as*			*Net*
	*Liabilities*		*Sheet*		*Sheet*		*Collateral*			*Collateral*			*Amount*
December 31, 2023
Repurchase Agreements	$	86,907	$	-	$	86,907	$	(86,907	)	$	-		$	-
	$	86,907	$	-	$	86,907	$	(86,907	)	$	-		$	-
December 31, 2022
Repurchase Agreements	$	43,818	$	-	$	43,818	$	(43,364	)	$	(454	)	$	-
	$	43,818	$	-	$	43,818	$	(43,364	)	$	(454	)	$	-

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. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 87 for a discussion of collateral posted for, or received against, repurchase obligations and derivative instruments.

NOTE ~~10.~~9. LONG-TERM DEBT

Long-term debt at December 31, ~~2020~~ 2023 and ~~2019~~2022 is summarized as follows:

(in thousands)
2020 2019
Junior subordinated debt

$
26,804

$
26,804

Note payable

657

677

Paycheck Protection Plan ("PPP") loan

152

-

Total

$
27,613

$
27,481

(in thousands)
	*2023*		*2022*
Junior subordinated debt	$	26,804	$	26,804
Note payable		590		612
Total	$	27,394	$	27,416

Junior Subordinated Debt

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

As of December 31, ~~2020~~ 2023 and ~~2019,~~2022, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million. ~~The~~Through June 30, 2023, the BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes ~~have~~had a rate of interest that ~~floats~~floated at a spread of 3.50% over the prevailing ~~three-month~~three-month LIBOR rate. Starting June 30, 2023, the underlying index converted from three-month LIBOR to CME 3-month Term SOFR plus a tenor spread adjustment of 0.26161%. The interest rate for subsequent accrual periods will be CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. The CME Term SOFR index is in effect for all interest rate resets after July 3, 2023. As of December 31, ~~2020,~~2023, the interest rate was ~~3.72%~~9.15%. 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 substantive decision making ability over BCTII’s activities. Since Bimini Capital's investment in 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~~Company's included consolidated financial statements present Bimini Capital's BCTII Junior Subordinated Notes issued to BCTII as a liability and Bimini Capital's investment in the common equity securities of BCTII as an asset (included in other assets). For financial statement purposes, Bimini Capital records payments of interest on the Junior Subordinated Notes issued to BCTII as interest expense.

Secured 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~~$5,000 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.

~~-86-~~

~~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. As discussed in Note 1, PPP loans may be forgiven, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP and if certain other requirements are met. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first ten months after the completion of the loan forgiveness covered period.

The table below presents the future scheduled principal payments on the Company’s long-term debt.

(in thousands)
Year Ending December 31,	*Amounts*
2024	$	27
2025		26
2026		28
2027		29
2028		30
Thereafter		27,254
Total	$	27,394

(in thousands)
Year Ending December 31,
Amounts
2021

$
21

2022

174

2023

24

2024

25

2025

26

Thereafter

27,343

Total

$
27,613

NOTE ~~11.~~10. CAPITAL STOCK

Authorized Shares

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

Common Stock

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

ClassA Common Stock

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

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

~~-87-~~

ClassB Common Stock

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

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

ClassC Common Stock

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

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

~~-88-~~

Preferred Stock

General

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

Classified and Designated Shares

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

Preferred Stock

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

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

In 2015 the Board approved Articles Supplementary to the Company’s charter reclassifying and designating 1,800,000 shares of authorized but unissued Class A Redeemable Preferred Stock and 2,000,000 shares of authorized but unissued Class B Redeemable Preferred Stock into undesignated preferred stock, par value $0.001 per share, of the Company (“Preferred Stock”). After giving effect to the reclassification and designation of the shares of Class A Preferred Stock and Class B Preferred Stock, the Company has authority to issue 10,000,000 shares of undesignated Preferred Stock and no shares of Class A Preferred Stock or Class B Preferred Stock. The Articles Supplementary were filed with the State Department of Assessments and Taxation of Maryland (the “SDAT”) and became effective upon filing on December 21, 2015.

In 2015 the Board approved Articles Supplementary to the Company’s charter creating a new series of Preferred Stock designated as Series A Junior Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”). The Articles Supplementary were filed with the SDAT and became effective upon filing on December 21, 2015.

~~-89-~~

Rights Plan

On December 21, 2015 the Board adopted a rights agreement and declared a distribution of one preferred stock purchase right (“Right”) for each outstanding share of the Company’s Class A common stock, Class B common stock, and Class C common stock. The distribution was payable to stockholders of record as of the close of business on December 21, 2015.

The Rights. Subject to the terms, provisions and conditions of the Rights Plan, if the Rights become exercisable, each Right would initially represent the right to purchase from the Company one ~~ten-thousandth~~ten-thousandth of a share of Series A Preferred Stock for a purchase price of $4.76, subject to adjustment in accordance with the terms of the Rights Plan (the “Purchase Price”). If issued, each fractional share of Series A Preferred Stock would give the stockholder approximately the same distribution, voting and liquidation rights as does one share of the Company’s Class A common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company, including without limitation any distribution, voting or liquidation rights.

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

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

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

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

Expiration. The Rights and the Rights Plan will expire on the earliest of (i) December 21,2025, (ii) the time at which the Rights are redeemed pursuant to the Rights Plan, (iii) the time at which the Rights are exchanged pursuant to the Rights Plan, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that the Rights Plan is no longer necessary for the preservation of the applicable tax benefits, (v) the beginning of a taxable year of the Company to which the Board determines that no applicable tax benefits may be carried forward and (vi) the close of business on June 30,2016 if approval of the Rights Plan by the Company’s stockholders has not been obtained.

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

~~-90-~~

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

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

Amendments. Before the Distribution Date, the Board may amend or supplement the Rights Plan without the consent of the holders of the Rights. After the Distribution Date, the Board may amend or supplement the Rights Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Rights Plan, but only to the extent that those changes do not impair or adversely affect, in any material respect, any Rights holder and do not result in the Rights again becoming redeemable, and no such amendment may cause the Rights again to become redeemable or cause this Rights Plan again to become amendable other than in accordance with the applicable timing of the Rights Plan.

There were no issuances of the Company's Class A Common Stock, Class B Common Stock or Class C Common Stock during the years ended December 31, ~~2020~~ 2023 and ~~2019.~~

2022.

Stock Repurchase ~~Plan~~

Plans

On ~~March 26, 2018,~~ September 16, 2021, the Board authorized a share repurchase plan pursuant to Rule 10b5-1of ~~Directors~~the Securities Exchange Act of ~~Bimini Capital Management, Inc.~~1934 (the ~~“Company”) approved a Stock Repurchase Plan (“~~“2021Repurchase Plan”). Pursuant to the 2021Repurchase Plan, the Company ~~may~~could purchase ~~up to 500,000~~ shares of its Class A Common Stock from time to time ~~subject~~for an aggregate purchase price not to ~~certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934.~~exceed $2.5 million. Share repurchases ~~may~~could be executed through various means, including, without limitation, open market transactions. The 2021Repurchase Plan ~~does~~ did not obligate the ~~Company~~Company to purchase any ~~shares.~~ shares, and expired on September 16, 2023. The authorization for the 2021 Repurchase Plan ~~was originally set to expire on November 15, 2018, but it has been extended~~could be terminated, increased or decreased by the Company’s Board of Directors ~~and it is currently set to expire on November 15, 2021.~~

in its discretion at any time.From the ~~inception~~commencement of the2021 Repurchase Plan, through ~~December 31, 2020,~~ its expiration on September 16, 2023, the Company repurchased a total of ~~70,404~~789,024 shares at an aggregate cost of approximately ~~$166,945,~~$1.3 million, including commissions and fees, for a weighted average price of ~~$2.37~~$1.60 per share.

~~Tender Offer~~

~~In July 2019,~~During the year ended December 31, 2023, the Company ~~completed~~repurchased a ~~“modified Dutch auction” tender offer and paid~~total of 14,431 shares at an aggregate cost of ~~$2.2 million, excluding~~approximately $13,133, including commissions and fees, ~~and related expenses, to~~for a weighted average price of $0.91 per share under the 2021 repurchase Plan. During the year ended December 31, 2022, the Company repurchased a total of 682,306 shares at an aggregate cost of approximately $1.1 million, including commissions and fees, for a weighted average price of $1.54 per share under the 2021 repurchase Plan.

On March 7, 2024, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2024 Repurchase Plan”). Pursuant to the 2024 Repurchase Plan, the Company can purchase shares of ~~Bimini Capital’s~~its Class A ~~common~~Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases can be executed through various means, including, without limitation, open market transactions. The 2024 Repurchase Plan does not obligate the Company to purchase any shares, and expires on March 7, 2026. The authorization for the 2024 Repurchase Plan can be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time.

The Inflation Reduction Act of 2022 signed into law during in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock atrepurchased by covered corporations during a ~~price~~taxable year, subject to certain limits and provisions, including a $1 million threshold before the tax becomes applicable. The excise tax is effective beginning in 2023. Since the total amount of ~~$2.00 per share.~~stock repurchases during the year ended December 31, 2023 was under the $1 million threshold, no excise tax is due for the year ended December 31, 2023.

NOTE ~~12.~~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.

~~-91-~~

In April ~~22,~~ 2020 and November 2021, the Company received ~~a demand~~demands for payment from Citigroup, Inc. in the total amount of ~~$33.1~~$33.3 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.~~demands vigorously if pursued by Citigroup. No provision or accrual has been recorded ~~as of December 31, 2020~~ related to the Citigroup ~~demand.~~

demands.

Management is not aware of any other significant reported or unreported contingencies at December 31, ~~2020.~~2023.

NOTE ~~13.~~12. INCOME TAXES

In ~~2020,~~2023, the Company recorded an income tax ~~benefit~~provision of ~~$1.4~~$4.1 million, including ~~an $0.3~~a $2.7 million increase in the deferred tax asset valuation allowance, primarily as a result of management’s reassessment of the Company’s ability to utilize net operating losses (“NOLs”) and capital loss carryforwards to offset future taxable income. In ~~2019,~~2022, the Company recorded an income tax ~~benefit~~provision of ~~$10.3~~$11.9 million, including ~~an $11.1~~a $12.2 million ~~decrease~~increase in the deferred tax asset valuation allowance as a result of management’s reassessment of the Company’s ability to utilize NOLs and capital loss carryforwards to offset future taxable income.

The Company is unable to reliably estimate an annual effective tax rate; therefore, it uses the discrete-period computation method for determining its income tax (benefit) provision. The Company's income tax (benefit) provision is affected by numerous factors, including the projected utilization of net operating loss carryovers and changes in its deferred tax assets and liabilities and their valuations.

The income tax ~~benefit~~provision included in the consolidated statements of operations consists of the following for the years ended December 31, ~~2020~~ 2023 and ~~2019:~~

(in thousands)
2020 2019
Current

$
10

$
(196
)
Deferred

(1,379
)

(10,086
)
Income tax benefit, net

$
(1,369
)

$
(10,282
)

2022:

(in thousands)
	*2023*		*2022*
Current	$	-	$	-
Deferred		4,131		11,858
Income tax provision, net	$	4,131	$	11,858

The income tax provision differs from the amount computed by applying the federal income tax statutory rate of 21 percent on income or loss before income tax expense. A reconciliation for the years ended December 31, ~~2020~~ 2023 and ~~2019~~2022 is presented in the table below.

(in thousands)
2020 2019
Federal tax (benefit) provision based on statutory rate applicable for each year

$
(1,440
)

$
634

State income tax (benefit) provision

(302
)

164

Increase (decrease) of deferred tax asset valuation allowance

349

(11,109
)
Other

24

29

Income tax benefit

$
(1,369
)

$
(10,282
)

(in thousands)
	*2023*			*2022*
Federal tax provision (benefit) based on statutory rate applicable for each year	$	31		$	(1,673	)
State income tax benefit		(22	)		(344	)
Non-deductible expenses		1,443			1,249
Increase of deferred tax asset valuation allowance		2,653			12,188
Other		26			438
Income tax provision	$	4,131		$	11,858

~~-92-~~

Deferred tax assets consisted of the following as of December 31, ~~2020~~ 2023 and ~~2019:~~

(in thousands)
2020 2019
Deferred tax assets:

Net operating loss carryforwards

$
58,701

$
58,250

Orchid Island Capital, Inc. common stock

3,083

3,338

MBS unrealized losses and (gains)

241

(377
)
Capital loss carryforwards

2,573

1,743

Management agreement

813

813

Other

1,232

1,148

66,643

64,915

Valuation allowance

(31,975
)

(31,626
)
Net deferred tax assets

$
34,668

$
33,289

2022:

(in thousands)
	*2023*			*2022*
Deferred tax assets:
Net operating loss carryforwards	$	55,399		$	56,278
Orchid Island Capital, Inc. common stock		4,626			4,530
MBS unrealized losses and gains		586			1,118
Capital loss carryforwards		2,146			2,395
Management agreement		813			813
Other		103			16
		63,673			65,150
Valuation allowance		(44,625	)		(41,972	)
Net deferred tax assets	$	19,048		$	23,178

As of December 31, ~~2020~~ 2023 and ~~2019,~~2022, the Company had federal NOL carryforwards of ~~approximately $268.9~~approximately $257.2 million and ~~$267.1~~$260.7 million, respectively, and Florida NOL carryforwards of ~~$40.8~~$32.0 million and ~~$39.1~~$35.5 million, ~~respectively.~~respectively. The NOL carryforwards can be used to offset future taxable income and will begin to expire in ~~2026, and the capital loss carryforwards will begin to expire in 2022.~~

2026.

In connection with Orchid’s 2013 IPO, Bimini Advisors paid for, and expensed for GAAP purposes, certain offering costs totaling approximately $3.2 million. For tax purposes, these offering costs created an intangible asset related to the Orchid management agreement with a tax basis of $3.2 million. The deferred tax asset related to the intangible asset at December 31, ~~2020~~ 2023 and ~~2019~~2022 totaled $0.8 million and $0.8 million, respectively.

In assessing the realizability of deferred tax assets, management considers both positive and negative evidence 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~~As of December 31, 2023, the valuation allowance recognized against the deferred tax asset is based on management’s estimated projections of future taxable income, and the projected ability to utilize the NOL carryforwards to offset that projected taxable income before the NOLs expire. Utilization of the NOLs is based on these estimates and the assumptions that management will be able to reinvest retained earnings in order to grow the MBS portfolio going forward and that market value will not be eroded due to adverse market conditions or hedging inefficiencies. With respect to the taxable income projections, management estimates the dividends expected to be received on its Orchid share holdings as well as the management fees and overhead sharing payments it will receive from Orchid. With respect to the MBS portfolio, management makes estimates of various metrics such as the yields on the assets it plans to acquire, its future funding and interest costs, future prepayment speeds and net interest margin, among others. Estimates ~~are~~were also made for other assets and expenses. Changes in the taxable income projections have a direct impact on the amount of the valuation allowance, and the impact in any reporting period may be significant. Utilization of the NOLs is based on these estimates and the assumptions that management will be able to reinvest retained earnings in order to grow the MBS portfolio going forward and that market value will not be eroded due to adverse market conditions or hedging inefficiencies. These estimates and assumptions may change from year to year to the extent Orchid’s book value changes, thus changing projected management fees and overhead sharing payments, and/or market conditions, including changes in interest rates, such that estimates with respect to the portfolio metrics warrant revisions.

During 2020 and 2019, the Company continues to hold a minimal amount of residual interests in real estate mortgage investment conduits (“REMICs”), some of which generate excess inclusion income (“EII”). These residual interests have no recorded value on the balance sheet. In its 2009 tax return, the Company disclosed a tax filing position related to the EII taxable income and has since included a notice of inconsistent treatment in its tax returns to disclose the position. The tax filing position will continue to be disclosed with respect to the remaining securitizations as long as they are held.

The Company has not identified any unrecognized tax benefits that would result in liabilities its consolidated financial statements. The Company has not had any settlements in the current period with taxing authorities and is not currently under audit. Additionally, no tax benefits have been recognized in the consolidated financial statements as a result of a lapse of the applicable statute of limitations.

~~-93-~~

NOTE ~~14.~~13. EARNINGS PER SHARE

Shares of Class B common stock, participating and convertible into Class A common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, and when, authorized and declared by the Board of Directors. The Class B common stock is included in the computation of basic EPS using the ~~two-class~~two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at December 31, ~~2020~~ 2023 and ~~2019.~~

2022.

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 December 31, ~~2020~~ 2023 and ~~2019.~~2022.

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

(in thousands, except per-share information)
	*2023*			*2022*
Basic and diluted EPS per Class A common share:
Loss attributable to Class A common shares:
Basic and diluted	$	(3,971	)	$	(19,762	)
Weighted average common shares:
Class A common shares outstanding at the balance sheet date		10,005			10,020
Effect of weighting		11			374
Weighted average shares-basic and diluted		10,016			10,394
Loss per Class A common share:
Basic and diluted	$	(0.40	)	$	(1.90	)

in thousands, except per-share information)
	2023			2022
Basic and diluted EPS per Class B common share:
Loss attributable to Class B common shares:
Basic and diluted	$	(12	)	$	(61	)
Weighted average common shares:
Class B common shares outstanding at the balance sheet date		32			32
Effect of weighting		-			-
Weighted average shares-basic and diluted		32			32
Loss per Class B common share:
Basic and diluted	$	(0.40	)	$	(1.90	)

(in thousands, except per-share information)
2020 2019
Basic and diluted EPS per Class A common share:
(Loss) income attributable to Class A common shares:

Basic and diluted

$
(5,474
)

$
13,265

Weighted average common shares:

Class A common shares outstanding at the balance sheet date

11,609

11,609

Effect of weighting

-

569

Weighted average shares-basic and diluted

11,609

12,178

(Loss) income per Class A common share:

Basic and diluted

$
(0.47
)

$
1.09

(in thousands, except per-share information)
2020 2019
Basic and diluted EPS per Class B common share:
(Loss) income attributable to Class B common shares:

Basic and diluted

$
(15
)

$
35

Weighted average common shares:

Class B common shares outstanding at the balance sheet date

32

32

Effect of weighting

-

-

Weighted average shares-basic and diluted

32

32

(Loss) income per Class B common share:

Basic and diluted

$
(0.47
)

$
1.09

NOTE ~~15.~~14. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications are:

Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),

Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and

~~-94-~~

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.

●

	●	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, Orchid common stock, retained interests and TBA securities were all recorded at fair value on a recurring basis ~~during 2020~~ as of December 31, 2023 and ~~2019.~~2022. 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, and this model resulted in a value of zero at both December 31, 2020 and 2019.

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

The Company’s futures contracts 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~~Retained interests have a recorded fair value of zero as of December 31, 2023 and 2022, as the prospect of future cash flows is uncertain based on a Level 3 valuation analysis. Any cash received from the retained interests is reflected as a gain in the consolidated statements of operations.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest ~~rate swaps is determined~~receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities generally approximates their carrying values due to the short-term nature of these financial instruments as of December 31, 2023 and 2022. The Company estimates the fair value of the cash and cash equivalents and restricted cash using ~~a discounted cash flow approach~~Level 1 inputs, and the accrued interest receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities using ~~forward market interest rates and discount rates, which are observable~~Level 2 inputs. The fair value of ~~interest~~the Company’s junior subordinated debt approximates its carrying value. The carrying value is a reasonable estimate of fair value since the instrument carries a floating rate ~~swaptions~~that resets frequently. Further information regarding this instrument is ~~determined using an option pricing model.~~

~~-95-~~

presented in Note 9.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2020~~ 2023 and ~~2019:~~

(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)
December 31, 2020
Mortgage-backed securities

$
65,178

$
-

$
65,178

$
-

Orchid Island Capital, Inc. common stock

13,548

13,548

-

-

December 31, 2019
Mortgage-backed securities

$
217,841

$
-

$
217,841

$
-

Orchid Island Capital, Inc. common stock

8,892

8,892

-

-

TBA securities

(59
)

-

(59
)

-

The following table illustrates a roll forward for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019:

(in thousands)
Retained Interests
2020 2019
Gain included in earnings

59

315

Collections

(59
)

(315
)
Balances, December 31

$
-

$
-

2022:

(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)*
December 31, 2023
Mortgage-backed securities	$	92,731	$	-	$	92,731	$	-
Orchid Island Capital, Inc. common stock		4,797		4,797		-		-
December 31, 2022
Mortgage-backed securities	$	45,893	$	-	$	45,893	$	-
Orchid Island Capital, Inc. common stock		5,975		5,975		-		-

During the years ended December 31, ~~2020~~ 2023 and ~~2019,~~2022, there were no transfers of financial assets or liabilities between levels 1,2 or 3.

NOTE ~~16.~~15. SEGMENT INFORMATION

The Company’s operations are classified 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 revenue received under this management agreement for the years ended December 31, ~~2020~~ 2023 and ~~2019,~~2022, were approximately ~~$6.8~~$13.6 million and ~~$6.9~~$13.0 million, respectively, accounting for approximately ~~55%~~76% and ~~43%~~80% 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.

~~-96-~~

Segment information for the years ended December 31, ~~2020~~ 2023 and ~~2019~~2022 is as follows:

Asset Investment
Management Portfolio Corporate Eliminations Total
2019
Advisory services, external customers

$
6,908

$
-

$
-

$
-

$
6,908

Advisory services, other operating segments⁽¹⁾

271

-

-

(271
)

-

Interest and dividend income

-

9,327

1

-

9,328

Interest expense

-

(4,603
)

(1,572
)⁽²⁾

-

(6,175
)
Net revenues

7,179

4,724

(1,571
)

(271
)

10,061

Other income (expense)

-

112

(715
)⁽³⁾

-

(603
)
Operating expenses⁽⁴⁾

(2,750
)

(3,690
)

-

-

(6,440
)
Intercompany expenses⁽¹⁾

-

(271
)

-

271

-

Income (loss) before income taxes

$
4,429

$
875

$
(2,286
)

$
-

$
3,018

Assets

$
1,457

$
263,223

$
14,809

$
-

$
279,489

(in thousands)
	*Asset Management*			*Investment Portfolio*			*Corporate*				*Eliminations*			*Total*
2023
Advisory services, external customers	$	13,595		$	-		$	-			$	-		$	13,595
Advisory services, other operating segments⁽¹⁾		124			-			-				(124	)		-
Interest and dividend income		-			4,334			2				-			4,336
Interest expense		-			(3,081	)		(2,338	)	(2)		-			(5,419	)
Net revenues		13,719			1,253			(2,336	)			(124	)		12,512
Other expense		-			(1,867	)		-		(3)		-			(1,867	)
Operating expenses⁽⁴⁾		(7,848	)		(2,649	)		(1	)			-			(10,498	)
Intercompany expenses⁽¹⁾		-			(124	)		-				124			-
Income (loss) before income taxes	$	5,871		$	(3,387	)	$	(2,337	)		$	-		$	147
Year end assets	$	1,853		$	117,012		$	6,733			$	-		$	125,598

	*Asset Management*			*Investment Portfolio*			*Corporate*				*Eliminations*			*Total*
2022
Advisory services, external customers	$	12,996		$	-		$	-			$	-		$	12,996
Advisory services, other operating segments⁽¹⁾		115			-			-				(115	)		-
Interest and dividend income		-			3,155			-				-			3,155
Interest expense		-			(715	)		(1,416	)	(2)		-			(2,131	)
Net revenues		13,111			2,440			(1,416	)			(115	)		14,020
Other (expense) income		-			(12,212	)		66		(3)		-			(12,146	)
Operating expenses⁽⁴⁾		(7,805	)		(2,034	)		-				-			(9,839	)
Intercompany expenses⁽¹⁾		-			(115	)		-				115			-
Income (loss) before income taxes	$	5,306		$	(11,921	)	$	(1,350	)		$	-		$	(7,965	)
Year end assets	$	1,970		$	77,483		$	6,864			$	-		$	86,317

~~(1)~~

(1)

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

~~(2)~~

(2)

Includes interest on long-term debt.

~~(3)~~

(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 and fair value adjustments on retained interests in securitizations.~~

notes.

~~(4)~~

(4)

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

NOTE ~~17.~~16. RELATED PARTY TRANSACTIONS

Other Relationships with Orchid

At December 31, ~~2020~~ 2023 and ~~2019,~~2022, the Company owned ~~2,595,357 and 1,520,036~~ shares of Orchid common stock ~~respectively,~~ representing approximately ~~3.4%~~1.1% and ~~2.4%~~1.6%, respectively, of Orchid’s outstanding common stock, on such dates. During the years ended December 31, ~~2020~~ 2023 and ~~2019,~~2022, the Company received dividends on this common stock investment of approximately ~~$1.8~~$1.0 million and ~~$1.5~~$1.3 million, respectively.

~~-97-~~

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

~~NOTE 18. SUBSEQUENT EVENTS~~

~~COVID-19 and CARES Act Update~~

The Federal Housing Financing Agency (the “FHFA”) has instructed the GSEs on how they will handle servicer advances for loans that back Agency MBS that enter into forbearance, which should limit prepayments during the forbearance period that could have resulted otherwise. On January 29, 2021, the CDC issued guidance extending eviction moratoriums for covered persons through March 31, 2021. In addition, on February 9, 2021, the FHFA announced that the foreclosure moratorium begun under the CARES Act for loans backed by Fannie Mae and Freddie Mac and the eviction moratorium for real estate owned by Fannie Mae and Freddie Mac were extended until March 31, 2021. On February 16, 2021, the U.S. Housing and Urban Development Department announced the extensionTable of the FHA eviction and foreclosure moratorium to June 30, 2021. The moratoriums on foreclosures and evictions will likely delay potential defaults on loans that would otherwise be bought out of Agency MBS pools. 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 MBS assets were acquired at a premium to par, this will tend to increase the realized yield on the asset in question.Contents

~~-98-~~

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

We had no disagreements with our Independent Registered Public Accounting Firm on any matter of accounting principles or practices or financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the “evaluation date”), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (“the CEO”) and Chief Financial Officer (“the CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures, as designed and implemented, were effective as of the evaluation date (1) in ensuring that information regarding the Company and its subsidiaries is accumulated and communicated to our management, including our CEO and CFO, by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable assurance that information the Company must disclose in its periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms.

Changes in Internal ~~Controls~~Control over Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. In response to the COVID-19 pandemic, Company employees began working from home on March 23, ~~2020.~~2020 and generally returned to the office in June 2021. Management ~~has taken~~took measures to ensure that the Company’s internal control over financial reporting ~~are~~were unchanged during this period.

~~Management’s~~

Management’s Report of Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

~~pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;~~

provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

~~-99-~~

●

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

●

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. As a result, even systems determined to be effective can provide only reasonable assurance regarding the preparation and presentation of consolidated financial statements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2020.~~2023. In making this assessment, the Company’s management used criteria set forth in Internal ~~Control—~~Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on management’s assessment, the Company’s management believes that, as of December 31, ~~2020,~~2023, the Company’s internal control over financial reporting was effective based on those criteria.

Table of Contents

ITEM 9B. OTHER INFORMATION.

~~None.~~

During the quarter ended December 31, 2023, no director or officer of the Company adopted, modified or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, each as defined in Item 408 of Regulation S-K.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

~~-100-~~

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PART III

ITEM 10.Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 and not otherwise set forth below is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Company’s ~~2021~~2022 Annual Meeting of Stockholders, which the Company expects to file with the U.S. Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after December 31, ~~2020~~2023 (the "Proxy Statement").

ITEM 11.Executive Compensation.

The information required by this Item 11 is incorporated herein by reference to the Proxy Statement.

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 is incorporated herein by reference to the Proxy Statement and to Part II, Item 5 of this Form 10-K.

ITEM 13.Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 is incorporated herein by reference to the Proxy Statement.

ITEM 14.Principal Accountant Fees and Services.

The information required by this Item 14 is incorporated herein by reference to the Proxy Statement.

~~-101-~~

Table of Contents

PART IV

ITEM 15.Exhibits, Financial Statement Schedules.

a.	Financial Statements. The consolidated financial statements of the Company, together with the report of Independent Registered Public Accounting Firm thereon, are set forth in Part II-Item 8 of this Form 10-K and are incorporated herein by reference.

The following information is filed as part of this Form 10-K:

		Page

Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; West Palm Beach, FL; PCAOB ID#243)			67	53
Consolidated Balance Sheets			70	55
Consolidated Statements of Operations			71	56
Consolidated Statements of Equity			72	57
Consolidated Statements of Cash Flows			73	58
Notes to Consolidated Financial Statements	59		74

b.	~~Financial Statement Schedules.~~

b. Financial Statement Schedules.

Not applicable.

c.	~~Exhibits.~~

c. Exhibits.

Exhibit No

3.1	Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Form S-11/A, filed with the SEC on April 29, 2004
3.2	Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5	Certificate of Notice, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on February 1, 2008
3.6	Articles Supplementary, reclassifying shares of Class A Preferred Stock and Class B Preferred Stock into Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015
3.7	Articles Supplementary, creating the Series A Preferred Stock, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.
3.8	Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007

Table of Contents

4.1	Rights Plan, dated as of December 21, 2015, between the Company and Broadridge Corporate Issuer Solutions, Inc. incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.
4.2	Description of the Company’s Capital Stock, incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 27, 2020.
10.1	Bimini Capital Management, Inc. 2011 Long Term Incentive Compensation Plan, incorporated by reference to Exhibit 10.23 to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2011*
~~10.2~~	Management Agreement between Orchid Island Capital, Inc. and Bimini Advisors, LLC date February 20, 2013, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.
~~10.3~~ 10.2	First Amendment to Management Agreement dated as of April 1, 2014, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 3, 2014.
10.3	Second Amendment to Management Agreement dated as of June 30, 2014, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated July 3, 2014.
10.4	Third Amendment to Management Agreement dated as of November 16, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated November 17, 2021, filed with the SEC on November 18, 2021.
10.5	Investment Allocation Agreement among the Company, Orchid Island Capital, Inc. and Bimini Advisors, LLC dated February 20, 2013, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.*
~~21.1~~ 10.6	Agreement between the Company and Robert E. Cauley dated June 30, 2009, regarding compensation payable in connection with certain termination or change of control events, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 2, 2009.*
10.7	Agreement between the Company and G. Hunter Haas, IV dated June 30, 2009, regarding compensation payable in connection with certain termination or change of control events, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 2, 2009.*
21.1	Subsidiaries of the Registrant**
31.1	Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002**
31.2	Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002**
32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002***
32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002***

~~-102-~~

101.INS	Inline Instance Document****
101.SCH	Inline Taxonomy Extension Schema Document****
101.CAL	Inline Taxonomy Extension Calculation Linkbase Document****
101.DEF	Additional Inline Taxonomy Extension Definition Linkbase Document****
101.LAB	Inline Taxonomy Extension Label Linkbase Document****
101.PRE	Inline Taxonomy Extension Presentation Linkbase Document****
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

*	Management compensatory plan or arrangement required to be filed by Item 601 of Regulation S-K.

**	Filed herewith.

***	Furnished herewith

****	Submitted electronically herewith.

Table of ~~Regulation S-K.~~Contents

** Filed herewith.

*** Furnished herewith

**** Submitted electronically herewith.

ITEM 16.Form 10-K Summary.

~~None.~~

The Company has elected not to provide summary information.

~~-103-~~

Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIMINI CAPITAL MANAGEMENT, INC.

~~Date: March 15, 2021~~		~~By:~~	~~/s/ Robert E. Cauley~~
			~~Robert E. Cauley~~ ~~Chairman and Chief Executive Officer~~

~~Date: March 15, 2021~~	~~By:~~	~~/s/ G. Hunter Haas, IV~~



Date: March 8, 2024	By:	/s/ Robert E. Cauley
		Robert E. Cauley Chairman and Chief Executive Officer

Date: March 8, 2024

By:

/s/ G. Hunter Haas, IV

G. Hunter Haas, IV

President, Chief Financial Officer,

Chief Investment Officer and Treasurer ~~(Principal~~

(Principal Financial Officer and Principal

Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March ~~15, 2021.~~

8, 2024.

Signature		Capacity

/s/ Robert E. Cauley
Robert E. Cauley		Director, Chairman of the Board and Chief Executive Officer

/s/ G. Hunter Haas, IV
G. Hunter Haas, IV		Director, President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

/s/ Robert J. Dwyer
Robert J. Dwyer		Director

/s/ Frank E. Jaumot
Frank E. Jaumot		Director

~~-104-~~

Maryland		72-1571637
~~Maryland~~	~~72-1571637~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Title of each Class	Shares held by non-affiliates		Aggregate market value held by non-affiliates
Class A Common Stock, $0.001 par value		7,478,934	$	4,800,000	(a)
Class B Common Stock, $0.001 par value		20,760	$	1,000	(b)
Class C Common Stock, $0.001 par value		31,938	$	1,500	(b)

Title of each Class	Shares held by non-affiliates		Aggregate market value held by non-affiliates
Class A Common Stock, $0.001 par value		5,712,181	$5,712,181(a)
Class B Common Stock, $0.001 par value		20,760	$1,000 (b)
Class C Common Stock, $0.001 par value		31,938	$1,500 (b)

Title of each Class	Latest Practicable Date	Shares Outstanding
Class A Common Stock, $0.001 par value	March ~~15, 2021~~7, 2024		~~11,608,555~~ 10,005,457
Class B Common Stock, $0.001 par value	March ~~15, 2021~~7, 2024		31,938
Class C Common Stock, $0.001 par value	March ~~15, 2021~~7, 2024		31,938

PART I
ITEM 1. Business.		1
ITEM 1A. Risk Factors .		10	9
ITEM 1B. Unresolved Staff Comments.		35	28
ITEM 1C. Cybersecurity	28
ITEM 2. Properties.		35	30
ITEM 3. Legal Proceedings.		35	30
ITEM 4. Mine Safety Disclosures.		36	30
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.		37	31
ITEM 6. ~~Selected Financial Data.~~ Reserved.		38	31
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.		39	32
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.		65	51
ITEM 8. Financial Statements and Supplementary Data.		66	52
ITEM 9. Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure.		99	79
ITEM 9A. Controls and Procedures.		99	79
ITEM 9B. Other Information.		~~100~~	80
~~PART III~~ ITEM 9C. Disclosure Regarding Foreign Jurisdictions the Prevent Inspections.	80
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance.		~~101~~	81
ITEM 11. Executive Compensation.		~~101~~	81
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		~~101~~	81
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.		~~101~~	81
ITEM 14. Principal Accountant Fees and Services.		~~101~~	81
PART IV
ITEM 15. Exhibits and Financial Statement Schedules.		~~102~~	82
ITEM 16. Form 10-K Summary.	84	~~103~~

	●	our understanding of our competition and our ability to compete effectively;
	●	our ability to quantify risk based on historical experience;
	●	our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our NOLs to offset future taxable income, including whether our shareholder rights plan will be effective in preventing an ownership change that would significantly limit our ability to utilize such NOLs;
	●	expected capital expenditures;
	●	the impact of technology on our operations and business;
	●	our ability to maintain our exemption from the obligation to register under the Investment Company Act of 1940, as amended (the “Investment Company Act”);
	●	market trends;
	●	the effect of actual, anticipated or proposed actions of the U.S. government, including the U.S. Federal Reserve (the "Fed"), the Federal Housing Finance Agency (the "FHFA"), the Federal Housing Administration (the "FHA"), the Federal Open Market Committee (the "FOMC") and the U.S. Treasury, on interest rates, monetary policy, fiscal policy and the housing and credit markets;
	●	the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie-Mae and Freddie Mac and the U.S. government;

(in thousands)
	2020			2019			Change
Advisory services revenue	$	6,795		$	6,908		$	(113	)
Interest and dividend income		5,517			9,328			(3,811	)
Interest expense		(2,225	)		(6,175	)		3,950
Net revenues		10,087			10,061			26
Other expense		(10,279	)		(603	)		(9,676	)
Expenses		(6,666	)		(6,440	)		(226	)
Net (loss) income before income tax benefit		(6,858	)		3,018			(9,876	)
Income tax benefit		(1,369	)		(10,282	)		9,463
Net (loss) income	$	(5,489	)	$	13,300		$	(18.789	)

Gains (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)			Income (Loss)			Contracts
December 31, 2020	$	-		$	-		$	-
September 30, 2020		-			-			-
June 30, 2020		(2	)		-			(2	)
March 31, 2020		(5,291	)		(1,441	)		(3,850	)
December 31, 2019		287			(192	)		479
September 30, 2019		(483	)		(204	)		(279	)
June 30, 2019		(3,364	)		(734	)		(2,630	)
March 31, 2019		(2,258	)		(1,067	)		(1,191	)
Years Ended
December 31, 2020	$	(5,293	)	$	(1,441	)	$	(3,852	)
December 31, 2019		(5,818	)		(2,197	)		(3,621	)

Gains (Losses) on Futures Contracts
(in thousands)
	Attributed to Current Period (Non-GAAP)									Attributed to Future Periods (Non-GAAP)
				Junior									Junior						Statement
	Repurchase			Subordinated						Repurchase			Subordinated						of
Three Months Ended	Agreements			Debt			Total			Agreements			Debt			Total			Operations
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	)
December 31, 2019		510			56			566			(50	)		(37	)		(87	)		479
September 30, 2019		(124	)		61			(63	)		(155	)		(61	)		(216	)		(279	)
June 30, 2019		(226	)		43			(183	)		(2,215	)		(232	)		(2,447	)		(2,630	)
March 31, 2019		5			65			70			(976	)		(285	)		(1,261	)		(1,191	)
Years Ended
December 31, 2020	$	(2,592	)	$	(160	)	$	(2,752	)	$	(743	)	$	(357	)	$	(1,100	)	$	(3,852	)
December 31, 2019		165			225			390			(3,396	)		(615	)		(4,011	)		(3,621	)

(in thousands)
	Asset			Investment
	Management			Portfolio			Corporate			Eliminations			Total
2020
Advisory services, external customers	$	6,795		$	-		$	-		$	-		$	6,795
Advisory services, other operating segments⁽¹⁾		152			-			-			(152	)		-
Interest and dividend income		-			5,517			-			-			5,517
Interest expense		-			(1,074	)		(1,151	)⁽²⁾		-			(2,225	)
Net revenues		6,947			4,443			(1,151	)		(152	)		10,087
Other expense		-			(9,825	)		(454	)⁽³⁾		-			(10,279	)
Operating expenses⁽⁴⁾		(3,653	)		(3,014	)		-			-			(6,667	)
Intercompany expenses⁽¹⁾		-			(152	)		-			152			-
Income (loss) before income taxes	$	3,294		$	(8,548	)	$	(1,605	)	$	-		$	(6,859	)
Assets	$	1,469		$	113,764		$	13,468		$	-		$	128,701

($ in thousands)
	Average		Average		Advisory Services
	Orchid		Orchid		Management		Overhead
Three Months Ended	MBS		Equity		Fee		Allocation		Total
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
December 31, 2019		3,705,920		414,018		1,477		379		1,856
September 30, 2019		3,674,087		394,788		1,440		351		1,791
June 30, 2019		3,307,885		363,961		1,326		327		1,653
March 31, 2019		3,051,509		363,204		1,285		323		1,608
Years Ended
December 31, 2020	$	3,363,208	$	373,464	$	5,281	$	1,514	$	6,795
December 31, 2019		3,434,850		383,993		5,528		1,380		6,908

							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⁾
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	%
December 31, 2019		1.69	%		1.92	%		3.18	%		3.72	%		1.91	%
September 30, 2019		1.55	%		1.68	%		3.12	%		3.61	%		2.13	%
June 30, 2019		1.76	%		2.00	%		3.24	%		3.80	%		2.40	%
March 31, 2019		2.24	%		2.41	%		3.72	%		4.27	%		2.61	%

(in thousands)
	Obligations Maturing
	Within		One to Three		Three to Five		More than Five		Total
	Year		Years		Years		Years		Total
Repurchase agreements	$	65,071	$	-	$	-	$	-	$	65,071
Interest expense on repurchase agreements⁽¹⁾		77		-		-		-		77
Junior subordinated notes⁽²⁾		-		-		-		26,000		26,000
Interest expense on junior subordinated notes⁽¹⁾		1,025		1,959		1,962		9,760		14,706
Principal and interest on mortgage loan⁽¹⁾		54		107		107		750		1,018
Totals	$	66,227	$	2,066	$	2,069	$	36,510	$	106,872

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2020 and 2019

	2020			2019
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties	$	65,153,274		$	217,793,209
Unpledged		24,957			47,744
Total mortgage-backed securities		65,178,231			217,840,953
Cash and cash equivalents		7,558,342			8,070,067
Restricted cash		3,353,015			4,315,050
Investment in Orchid Island Capital, Inc. common stock, at fair value		13,547,764			8,892,211
Accrued interest receivable		202,192			750,875
Property and equipment, net		2,093,440			2,162,975
Real property held for sale		-			450,000
Deferred tax assets		34,668,467			33,288,536
Due from affiliates		632,471			622,120
Other assets		1,466,647			3,096,161
Total Assets	$	128,700,569		$	279,488,948

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	65,071,113		$	209,954,000
Long-term debt		27,612,781			27,481,121
Accrued interest payable		107,417			645,302
Other liabilities		1,421,409			1,431,534
Total Liabilities		94,212,720			239,511,957

Commitments and contingencies (Note 12)

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 December 31, 2020 and 2019		-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 11,608,555
shares issued and outstanding as of December 31, 2020 and 2019		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 December 31, 2020 and 2019		32			32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2020 and 2019		32			32
Additional paid-in capital		332,642,758			332,642,758
Accumulated deficit		(298,166,582	)		(292,677,440	)
Stockholders' Equity		34,487,849			39,976,991
Total Liabilities and Equity	$	128,700,569		$	279,488,948
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2020 and 2019

	2020			2019
Revenues:
Advisory services	$	6,795,072		$	6,907,910
Interest income		3,764,003			7,868,940
Dividend income from Orchid Island Capital, Inc. common stock		1,752,730			1,459,235
Total revenues		12,311,805			16,236,085
Interest expense:
Repurchase agreements		(1,073,528	)		(4,602,837	)
Long-term debt		(1,150,613	)		(1,572,038	)
Net revenues		10,087,664			10,061,210

Other income (expense)
Unrealized gains on mortgage-backed securities		111,615			6,338,000
Realized (losses) gains on mortgage-backed securities		(5,744,589	)		23,078
Unrealized gains (losses) on Orchid Island Capital, Inc. common stock		583,961			(820,819	)
Losses on derivative instruments		(5,292,521	)		(5,817,825	)
Gains on retained interests in securitizations		58,735			314,984
Impairment of real property held for sale		-			(673,438	)
Other income		3,478			32,884
Other expense, net		(10,279,321	)		(603,136	)

Expenses:
Compensation and related benefits		4,235,487			4,115,743
Directors' fees and liability insurance		690,713			653,825
Audit, legal and other professional fees		576,662			489,243
Administrative and other expenses		1,164,039			1,180,898
Total expenses		6,666,901			6,439,709

Net (loss) income before income tax benefit		(6,858,558	)		3,018,365
Income tax benefit		(1,369,416	)		(10,281,612	)

Net (loss) income	$	(5,489,142	)	$	13,299,977

Basic and Diluted Net (Loss) Income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted	$	(0.47	)	$	1.09
CLASS B COMMON STOCK
Basic and Diluted	$	(0.47	)	$	1.09
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted		11,608,555			12,178,160
CLASS B COMMON STOCK
Basic and Diluted		31,938			31,938
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2020 and 2019

				Stockholders' Equity
	Common Stock						Additional				Accumulated
	Shares			Par Value			Paid-in Capital				Deficit				Total
Balances, January 1, 2019		12,773,145		$	12,773			$	334,919,265			$	(305,977,417	)		$	28,954,621
Net income		-			-				-				13,299,977				13,299,977
Class A common shares repurchased and retired		(1,100,714	)		(1,100	)			(2,276,507	)			-				(2,277,607	)

Balances, December 31, 2019		11,672,431			11,673				332,642,758				(292,677,440	)			39,976,991
Net loss		-			-				-				(5,489,142	)			(5,489,142	)

Balances, December 31, 2020		11,672,431		$	11,673			$	332,642,758			$	(298,166,582	)		$	34,487,849
See Notes to Consolidated Financial Statements

($ in thousands)
	OVERNIGHT		BETWEEN 2			BETWEEN 31			GREATER
	(1 DAY OR		AND			AND			THAN
	LESS)		30 DAYS			90 DAYS			90 DAYS			TOTAL
December 31, 2020
Fair value of securities pledged, including accrued
interest receivable	$	-	$	49,096		$	8,853		$	7,405		$	65,354
Repurchase agreement liabilities associated with
these securities	$	-	$	49,120		$	8,649		$	7,302		$	65,071
Net weighted average borrowing rate		-		0.25	%		0.23	%		0.30	%		0.25	%
December 31, 2019
Fair value of securities pledged, including accrued
interest receivable	$	-	$	137,992		$	80,550		$	-		$	218,542
Repurchase agreement liabilities associated with
these securities	$	-	$	132,573		$	77,381		$	-		$	209,954
Net weighted average borrowing rate		-		2.02	%		1.92	%		-			1.98	%

(in thousands)
Derivative Instruments and Related Accounts	Balance Sheet Location	December 31, 2020		December 31, 2019
Liabilities
TBA Securities	Other liabilities	$	-	$	59
Total derivative liabilities, at fair value		$	-	$	59

Margin Balances Posted to (from) Counterparties
Futures contracts	Restricted cash	$	1	$	537
Total margin balances on derivative contracts		$	1	$	537

($ in thousands)
As of December 31, 2020
	Junior Subordinated Debt Funding Hedges
	Average	Weighted	Weighted
	Contract	Average	Average
	Notional	Entry	LIBOR	Open
Expiration Year	Amount	Rate	Rate	Equity⁽¹⁾
2021	$1,000	1.02%	0.18%	$(8)

($ in thousands)
As of December 31, 2019
	Repurchase Agreement Funding Hedges
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			LIBOR			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾
Eurodollar Futures Contracts (Short Positions)
2020	$	120,000		2.90	%		1.67	%	$	(1,480	)
2021		80,000		2.80	%		1.57	%		(984	)
Total / Weighted Average	$	200,000		2.86	%		1.63	%	$	(2,464	)
Treasury Note Futures Contracts (Short Positions)⁽²⁾
March 2020 5-year T-Note futures	$	20,000		1.96	%		2.06	%		88

(in thousands)
Offsetting of Liabilities
							Net Amount			Gross Amount Not Offset in the
							of Liabilities			Consolidated Balance Sheet
				Gross Amount			Presented			Financial
	Gross Amount			Offset in the			in the			Instruments				Cash
	of Recognized			Consolidated			Consolidated			Posted as				Posted as				Net
	Liabilities			Balance Sheet			Balance Sheet			Collateral				Collateral				Amount
December 31, 2020
Repurchase Agreements		$	65,071		$	-		$	65,071		$	(61,719	)		$	(3,352	)		$	-
		$	65,071		$	-		$	65,071		$	(61,719	)		$	(3,352	)		$	-
December 31, 2019
Repurchase Agreements		$	209,954		$	-		$	209,954		$	(206,176	)		$	(3,778	)		$	-
TBA securities			59			-			59			-				-				59
		$	210,013		$	-		$	210,013		$	(206,176	)		$	(3,778	)		$	59

(in thousands)
Year Ending December 31,	Amounts
2021	$	21
2022		174
2023		24
2024		25
2025		26
Thereafter		27,343
Total	$	27,613

(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)
December 31, 2020
Mortgage-backed securities	$	65,178		$	-	$	65,178		$	-
Orchid Island Capital, Inc. common stock		13,548			13,548		-			-
December 31, 2019
Mortgage-backed securities	$	217,841		$	-	$	217,841		$	-
Orchid Island Capital, Inc. common stock		8,892			8,892		-			-
TBA securities		(59	)		-		(59	)		-

(in thousands)
	Retained Interests
	2020			2019
Gain included in earnings		59			315
Collections		(59	)		(315	)
Balances, December 31	$	-		$	-