bmnm10q20220930p1i0
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM

10-Q
FORM 10‑Q☑

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

For the quarterly period ended
September 30, 20172022

☐
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number:  001-32171

:
001-32171
Bimini Capital Management, Inc.
(Exact name of registrant as specified in its charter)
Maryland
72-1571637
Bimini Capital Management, Inc.
(Exact name of registrant as specified in its charter)
Maryland72-1571637
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

3305 Flamingo Drive
,
Vero Beach
,
Florida
32963
(Address of principal executive offices) (Zip Code)

(
(772) 772
)
231-1400
(Registrant'sRegistrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by
check mark
whether the
registrant (1) has
filed all
reports required
to be
filed by
Section 13 or
15(d) of
the Securities
Exchange Act
of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such
reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
ý
No
☐
Indicate by check
mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required
to be submitted and posted pursuant
to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was
required to submit and post such
files).
Yes
ý
No
☐
Indicate by check mark whether the registrant is
a large accelerated filer,
an accelerated filer, a non-accelerated filer,
a smaller reporting company,
or
an emerging growth company. See the definitions of "large accelerated filer," "accelerated
"accelerated filer", "smaller reporting company", and "emerging growth
company" in Rule 12b-2 of the Exchange Act. Check one:
Large accelerated filer
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
(Do not check if a smaller reporting company)
Smaller reporting company
☒
Emerging growth company
☐
Accelerated filer☐
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company☒
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐  No ý
No

ý
Indicate the number of shares outstanding of each of the Registrant'sRegistrant’s classes of common stock, as of the latest practicable date:
Title of each ClassLatest Practicable DateShares Outstanding
Class A Common Stock, $0.001 par valueNovember 3, 201712,631,627
Class B Common Stock, $0.001 par valueNovember 3, 201731,938
Class C Common Stock, $0.001 par valueNovember 3, 201731,938
Title of each Class
Latest Practicable Date
Shares Outstanding
Class A Common Stock, $0.001 par value
November 14, 2022
10,246,809
Class B Common Stock, $0.001 par value
November 14, 2022
31,938
Class C Common Stock, $0.001 par value
November 14, 2022
31,938
BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS


Page
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements1
Condensed Consolidated Balance Sheets (unaudited)1
Condensed Consolidated Statements of Operations (unaudited)2
Condensed Consolidated Statement of Stockholders' Equity (unaudited)3
Condensed Consolidated Statements of Cash Flows (unaudited)4
Notes to Condensed Consolidated Financial Statements5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations24
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk43
ITEM 4. Controls and Procedures44
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings45
ITEM 1A. Risk Factors45
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds45
ITEM 3. Defaults Upon Senior Securities45
ITEM 4. Mine Safety Disclosures45
ITEM 5. Other Information45
ITEM 6. Exhibits46
SIGNATURES47
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BIMINI CAPITAL MANAGEMENT, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
       
  (Unaudited)    
   September 30, 2017  December 31, 2016 
ASSETS:      
Mortgage-backed securities, at fair value      
Pledged to counterparties $197,515,121  $129,582,386 
Unpledged  475,282   719,603 
Total mortgage-backed securities  197,990,403   130,301,989 
Cash and cash equivalents  5,211,532   4,429,459 
Restricted cash  936,420   1,221,978 
Orchid Island Capital, Inc. common stock, at fair value  15,489,167   15,108,240 
Retained interests in securitizations  557,659   1,113,736 
Accrued interest receivable  711,030   512,760 
Property and equipment, net  3,378,516   3,407,040 
Deferred tax assets, net  62,632,660   63,833,063 
Other assets  2,921,694   2,942,139 
Total Assets $289,829,081  $222,870,404 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
LIABILITIES:        
Repurchase agreements $187,373,780  $121,827,586 
Junior subordinated notes due to Bimini Capital Trust II  26,804,440   26,804,440 
Accrued interest payable  247,596   114,199 
Other liabilities  1,298,472   1,977,281 
Total Liabilities  215,724,288   150,723,506 
         
COMMITMENTS AND CONTINGENCIES        
         
STOCKHOLDERS' EQUITY:        
Preferred stock, $0.001 par value; 10,000,000 shares authorized;  100,000 shares        
designated Series A Junior Preferred Stock, 9,900,000 shares undesignated;        
no shares issued and outstanding as of September 30, 2017 and December 31, 2016  -   - 
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 12,631,627        
shares issued and outstanding as of September 30, 2017 and December 31, 2016  12,632   12,632 
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares        
issued and outstanding as of September 30, 2017 and December 31, 2016  32   32 
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares        
issued and outstanding as of September 30, 2017 and December 31, 2016  32   32 
Additional paid-in capital  334,872,353   334,850,838 
Accumulated deficit  (260,780,256)  (262,716,636)
Stockholders' Equity  74,104,793   72,146,898 
Total Liabilities and Stockholders' Equity $289,829,081  $222,870,404 
See Notes to Condensed Consolidated Financial Statements 
BIMINI CAPITAL MANAGEMENT, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited) 
For the Nine and Three Months Ended September 30, 2017 and 2016 
             
   Nine Months Ended September 30,  Three Months Ended September 30, 
  2017  2016  2017  2016 
Interest income $4,075,160  $2,950,323  $1,513,511  $1,107,783 
Interest expense  (1,110,387)  (496,512)  (503,632)  (194,539)
Net interest income, before interest on junior subordinated notes  2,964,773   2,453,811   1,009,879   913,244 
Interest expense on junior subordinated notes  (914,055)  (818,169)  (316,176)  (278,196)
Net interest income  2,050,718   1,635,642   693,703   635,048 
Unrealized (losses) gains on mortgage-backed securities  (296,002)  (312,987)  168,034   (273,830)
Realized (losses) gains on mortgage-backed securities  (689)  179,667   -   (71,306)
(Losses) gains on derivative instruments, net  (828,825)  (1,549,638)  (18,813)  507,838 
Net portfolio income (loss)  925,202   (47,316)  842,924   797,750 
                 
Other income:                
Advisory services  5,398,019   3,930,533   1,939,974   1,387,997 
Gains on retained interests in securitizations  389,568   2,100,367   85,451   1,020,500 
Unrealized (losses) gains on Orchid Island Capital, Inc. common stock  (823,308)  683,568   501,612   181,355 
Orchid Island Capital, Inc. dividends  1,880,245   1,757,745   638,415   585,915 
Other income  1,223   892   366   432 
Total other income  6,845,747   8,473,105   3,165,818   3,176,199 
                 
Expenses:                
Compensation and related benefits  2,683,872   2,273,714   868,924   722,697 
Directors' fees and liability insurance  498,140   466,573   165,040   155,498 
Audit, legal and other professional fees  346,999   452,695   120,419   157,545 
Administrative and other expenses  1,022,377   887,982   364,058   321,428 
Total expenses  4,551,388   4,080,964   1,518,441   1,357,168 
                 
Net income before income tax provision  3,219,561   4,344,825   2,490,301   2,616,781 
Income tax provision  1,283,181   2,117,899   989,081   1,437,544 
                 
Net income $1,936,380  $2,226,926  $1,501,220  $1,179,237 
                 
                 
Basic and Diluted Net Income Per Share of:                
CLASS A COMMON STOCK                
Basic and Diluted $0.15  $0.17  $0.12  $0.09 
CLASS B COMMON STOCK                
Basic and Diluted $0.15  $0.17  $0.12  $0.09 
Weighted Average Shares Outstanding:                
CLASS A COMMON STOCK                
Basic and Diluted  12,701,627   12,694,762   12,701,627   12,708,464 
CLASS B COMMON STOCK                
Basic and Diluted  31,938   31,938   31,938   31,938 
See Notes to Condensed Consolidated Financial Statements 
BIMINI CAPITAL MANAGEMENT, INC. 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 
(Unaudited) 
For the Nine Months Ended September 30, 2017 
             
 Stockholders' Equity   
  Common Additional Accumulated   
  Stock Paid-in Capital Deficit Total 
Balances, January 1, 2017 $12,696  $334,850,838  $(262,716,636) $72,146,898 
Net income  -   -   1,936,380   1,936,380 
Amortization of stock based compensation  -   21,515   -   21,515 
                 
Balances, September 30, 2017 $12,696  $334,872,353  $(260,780,256) $74,104,793 
See Notes to Condensed Consolidated Financial Statements 
BIMINI CAPITAL MANAGEMENT, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited) 
For the Nine Months Ended September 30, 2017 and 2016 
       
  2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $1,936,380  $2,226,926 
Adjustments to reconcile net income to net cash provided by operating activities:        
Stock based compensation  21,515   217,206 
Depreciation  57,903   64,780 
Deferred income tax provision  1,200,403   1,891,268 
Losses on mortgage-backed securities, net  296,691   133,320 
Gains on retained interests in securitizations  (389,568)  (2,100,367)
Unrealized losses (gains) on Orchid Island Capital, Inc. common stock  823,308   (683,568)
Changes in operating assets and liabilities:        
Accrued interest receivable  (198,270)  (136,360)
Other assets  20,445   (226,813)
Accrued interest payable  133,397   12,000 
Other liabilities  (678,809)  (879,328)
NET CASH PROVIDED BY OPERATING ACTIVITIES  3,223,395   519,064 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
From mortgage-backed securities investments:        
Purchases  (77,294,851)  (133,099,987)
Sales  1,654,834   73,061,443 
Principal repayments  7,654,912   10,291,945 
Payments received on retained interests in securitizations  945,645   1,758,303 
Purchases of property and equipment  (29,379)  - 
Purchases of Orchid Island Capital, Inc. common stock  (1,204,235)  (1,859,277)
NET CASH USED IN INVESTING ACTIVITIES  (68,273,074)  (49,847,573)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from repurchase agreements  762,398,624   712,324,734 
Principal repayments on repurchase agreements  (696,852,430)  (663,567,951)
NET CASH PROVIDED BY FINANCING ACTIVITIES  65,546,194   48,756,783 
         
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH  496,515   (571,726)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period  5,651,437   6,712,483 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period $6,147,952  $6,140,757 
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest $1,891,045  $1,302,681 
Income taxes $261,492  $515,689 
         
See Notes to Condensed Consolidated Financial Statements 
BIMINI CAPITAL MANAGEMENT, INC.
NOTES TO
TABLE OF CONTENTS
Page
PART I. FINANCIAL
INFORMATION
ITEM 1. Financial
Statements
1
Condensed
Consolidated
Balance Sheets
(unaudited)
1
Condensed
Consolidated
Statements
of Operations
(unaudited)
2
Condensed
Consolidated
Statement
of Stockholders’
Equity (unaudited)
3
Condensed
Consolidated
Statements
of Cash Flows
(unaudited)
4
Notes to
Condensed
Consolidated
Financial
Statements
(unaudited)
5
ITEM 2. Management’s
Discussion
and Analysis
of Financial
Condition
and Results
of Operations
22
ITEM 3. Quantitative
and Qualitative
Disclosures
About Market
Risk
47
ITEM 4. Controls
and Procedures
48
PART II. OTHER INFORMATION
ITEM 1. Legal
Proceedings
49
ITEM 1A.
Risk Factors
49
ITEM 2. Unregistered
Sales of Equity
Securities
and Use of
Proceeds
49
ITEM 3. Defaults
Upon Senior
Securities
49
ITEM 4. Mine
Safety Disclosures
49
ITEM 5. Other
Information
49
ITEM 6. Exhibits
50
SIGNATURES
51
- 1 -
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS
(Unaudited)
September 30, 20172022
December 31, 2021
ASSETS:
Mortgage-backed securities, at fair value:
Pledged to counterparties
$
44,078,712
$
60,788,129
Unpledged
190,815
15,015
Total mortgage
-backed securities
44,269,527
60,803,144
Cash and cash equivalents
5,861,597
8,421,410
Restricted cash
1,537,500
1,391,000
Orchid Island Capital, Inc. common stock, at fair value
4,256,384
11,679,107
Accrued interest receivable
200,104
229,942
Property and equipment, net
2,016,436
2,024,190
Deferred tax assets
36,607,388
35,036,312
Due from affiliates
1,075,189
1,062,155
Other assets
1,045,417
1,437,381
Total Assets
$
96,869,542
$
122,084,641
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Repurchase agreements
$
43,493,999
$
58,877,999
Long-term debt
27,422,050
27,438,976
Accrued interest payable
134,738
55,610
Other liabilities
1,470,900
2,712,206
Total Liabilities
72,521,687
89,084,791

COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock, $
0.001
par value;
10,000,000
shares authorized;
100,000
shares
designated Series A Junior Preferred Stock,
9,900,000
shares undesignated;
no shares issued and outstanding as of September 30, 2022 and December
31, 2021
-
-
Class A Common stock, $
0.001
par value;
98,000,000
shares designated:
10,246,809
and
10,702,194
shares issued and outstanding as of September 30, 2022
and December 31, 2021, respectively.
10,247
10,702
Class B Common stock, $
0.001
par value;
1,000,000
shares designated,
31,938
shares
issued and outstanding as of September 30, 2022 and December 31, 2021
32
32
Class C Common stock, $
0.001
par value;
1,000,000
shares designated,
31,938
shares
issued and outstanding as of September 30, 2022 and December 31, 2021
32
32
Additional paid-in capital
330,068,058
330,880,252
Accumulated deficit
(305,730,514)
(297,891,168)
Stockholders’ Equity
24,347,855
32,999,850
Total Liabilities
and Stockholders' Equity
$
96,869,542
$
122,084,641
See Notes to Condensed Consolidated Financial Statements
- 2 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED
STATEMENTS
OF OPERATIONS
(Unaudited)
For the Nine and Three Months Ended September 30, 2022 and 2021
Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
2022
2021
Revenues:
Advisory services
$
9,719,703
$
6,757,799
$
3,311,962
$
2,546,578
Interest income
1,328,264
1,726,268
444,808
537,200
Dividend income from Orchid Island Capital, Inc. common stock
1,035,547
1,518,284
282,893
506,095
Total revenues
12,083,514
10,002,351
4,039,663
3,589,873
Interest expense
Repurchase agreements
(313,843)
(94,926)
(209,928)
(23,729)
Long-term debt
(938,557)
(747,577)
(378,752)
(248,465)
Net revenues
10,831,114
9,159,848
3,450,983
3,317,679
Other income (expense):
Unrealized losses on mortgage-backed securities
(6,605,850)
(2,221,521)
(2,572,296)
(323,659)
Realized (losses) gains on mortgage-backed securities
(858,001)
69,498
-
69,498
Unrealized losses on Orchid Island Capital, Inc. common stock
(7,422,723)
(856,468)
(3,140,383)
(778,607)
Gains (losses) on derivative instruments
794,500
(280)
844,188
(147)
Gains on retained interests in securitizations
65,928
-
65,928
-
Other income
268
154,122
81
149
Total other expense
(14,025,878)
(2,854,649)
(4,802,482)
(1,032,766)
Expenses:
Compensation and related benefits
3,835,763
3,219,685
1,230,113
1,029,465
Directors' fees and liability insurance
587,566
568,087
194,519
190,453
Audit, legal and other professional fees
370,323
405,828
103,090
133,925
Administrative and other expenses
1,422,006
939,966
549,585
298,719
Total expenses
6,215,658
5,133,566
2,077,307
1,652,562
Net (loss) income before income tax (benefit) provision
(9,410,422)
1,171,633
(3,428,806)
632,351
Income tax (benefit) provision
(1,571,076)
336,389
(255,618)
167,751
Net (loss) income
$
(7,839,346)
$
835,244
$
(3,173,188)
$
464,600
Basic and Diluted Net (loss) income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted
$
(0.75)
$
0.07
$
(0.31)
$
0.04
CLASS B COMMON STOCK
Basic and Diluted
$
(0.75)
$
0.07
$
(0.31)
$
0.04
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted
10,467,091
11,358,346
10,288,785
10,866,087
CLASS B COMMON STOCK
Basic and Diluted
31,938
31,938
31,938
31,938
See Notes to Condensed Consolidated Financial Statements
- 3 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED
STATEMENTS
OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine and Three Months Ended September 30, 2022 and 2021
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
-
-
-
(3,479,584)
(3,479,584)
Class A common shares repurchased and retired
(188,280)
(188)
(377,110)
-
(377,298)
Balances, March 31, 2022
10,577,790
$
10,578
$
330,503,142
$
(301,370,752)
$
29,142,968
Net loss
-
-
-
(1,186,574)
(1,186,574)
Class A common shares repurchased and retired
(41,135)
(41)
(72,958)
-
(72,999)
Balances, June 30, 2022
10,536,655
$
10,537
$
330,430,184
$
(302,557,326)
$
27,883,395
Net loss
-
-
-
(3,173,188)
(3,173,188)
Class A common shares repurchased and retired
(225,970)
(226)
(362,126)
-
(362,352)
Balances, September 30, 2022
10,310,685
$
10,311
$
330,068,058
$
(305,730,514)
$
24,347,855
Balances, January 1, 2021
11,672,431
$
11,673
$
332,642,758
$
(298,166,582)
$
34,487,849
Net income
-
-
-
1,290,430
1,290,430
Balances, March 31, 2021
11,672,431
$
11,673
$
332,642,758
$
(296,876,152)
$
35,778,279
Net loss
-
-
-
(919,786)
(919,786)
Balances, June 30, 2021
11,672,431
$
11,673
$
332,642,758
$
(297,795,938)
$
34,858,493
Net income
-
-
-
464,600
464,600
Class A common shares repurchases and retired
(814,074)
(815)
(1,569,694)
-
(1,570,509)
Balances, September 30, 2021
10,858,357
$
10,858
$
331,073,064
$
(297,331,338)
$
33,752,584
See Notes to Condensed Consolidated Financial Statements
- 4 -
BIMINI CAPITAL MANAGEMENT,
INC.
CONDENSED CONSOLIDATED
STATEMENTS
OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2022 and 2021
2022
2021
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income
$
(7,839,346)
$
835,244
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation
53,930
51,937
Deferred income tax (benefit) provision
(1,571,076)
336,389
Unrealized losses on mortgage-backed securities
6,605,850
2,221,521
Realized losses on mortgage-backed securities
858,001
(69,498)
Gains on retained interests in securitizations
(65,928)
-
PPP loan forgiveness
-
(153,724)
Unrealized losses on Orchid Island Capital, Inc. common stock
7,422,723
856,468
Changes in operating assets and liabilities:
Accrued interest receivable
29,838
(45,524)
Due from affiliates
(13,034)
(302,326)
Other assets
391,964
(84,426)
Accrued interest payable
79,128
(51,990)
Other liabilities
(1,241,306)
(98,625)
NET CASH PROVIDED BY OPERATING
ACTIVITIES
4,710,744
3,495,446
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases
(21,009,391)
(26,189,505)
Sales
23,096,853
13,063,248
Principal repayments
6,982,304
11,762,188
Payments received on retained interests in securitizations
65,928
-
Purchases of property and equipment
(46,176)
-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
9,089,518
(1,364,069)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements
268,710,690
195,962,000
Principal repayments on repurchase agreements
(284,094,690)
(197,873,114)
Principal repayments on long-term debt
(16,926)
(16,108)
Class A common shares repurchased and retired
(812,649)
(1,570,509)
NET CASH USED IN FINANCING ACTIVITIES
(16,213,575)
(3,497,731)
NET DECREASE IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
(2,413,313)
(1,366,354)
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, beginning of the period
9,812,410
10,911,357
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, end of the period
$
7,399,097
$
9,545,003
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest expense
$
1,173,272
$
896,052
See Notes to Condensed Consolidated Financial Statements
- 5 -
BIMINI CAPITAL
MANAGEMENT, INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
September
30, 2022
NOTE 1.
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business
Organization and Business Description

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

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital,LLC, which includes its wholly-owned subsidiaries,subsidiary, Bimini Advisors Holdings, LLC (formerly known as Bimini Advisors, Inc.) and Royal Palm Capital, LLC (formerly known as MortCo TRS, LLC).   LLC.
Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered
with the
Securities and Exchange Commission), are collectively referred to as "Bimini
"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 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."
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 with the
exception that inter-segment revenues and expenses are included in the presentation
of segment results.
For further information see
Note 13.
Consolidation
The accompanying consolidated financial statements include the accounts of Bimini
Capital, Bimini Advisors and Royal Palm.
All
inter-company accounts and transactions have been eliminated from the consolidated
financial statements.

Financial Accounting Standards Board (the "FASB"
Basis of
Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”) Accounting Standards Codification ("ASC") Topic 810, Consolidation,for interim financial
information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X.
Accordingly, they may not include all of the information and footnotes required by GAAP for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for
a fair presentation have been included.
Operating results for the nine and three-month periods ended September 30,
2022 are not
necessarily indicative of the results that may be expected for the year ending December
31, 2022.
The consolidated balance sheet at December 31, 2021 has been derived from the
audited financial statements at that date but
does not include all of the information and footnotes required by GAAP for
complete consolidated financial statements.
For further
information, refer to the financial statements and footnotes thereto included in the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2021.
- 6 -
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that
affect the consolidationreported amounts of aassets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from
those estimates.
Significant estimates affecting the accompanying consolidated financial statements include
determining the fair
values of MBS and derivatives, the value of Orchid Common Stock, determining
the amounts of asset valuation allowances, and the
computation of the income tax provision or benefit and the deferred tax asset allowances
recorded for each accounting period.
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 8
7 for a description of the accounting used for this VIE.
The Company obtains interests in VIEs through its investments in mortgage-backed
securities.
The interests in these VIEs are

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

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

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


Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Significant estimates affecting the accompanying consolidated financial statements include the fair values of MBS, investment in Orchid common shares, derivatives, retained interests, asset valuation allowances and deferred tax asset allowances recorded for each accounting period.

Statement of Comprehensive Income

In accordance with ASC Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income (loss).  Comprehensive income is the same as net income for all periods presented.

Cash and Cash Equivalents and Restricted Cash

Cash and
cash equivalents
include
cash on deposit
with financial
institutions
and highly
liquid investments
with original
maturities
of
three months
or less at
the time
of purchase.
Restricted
cash includes
cash pledged
as collateral
for repurchase
agreements
and
derivative
instruments.
The following
table presents
the Company’s
cash, cash
equivalents
and restricted
cash as of
September
30, 2022
and December
31, 2021.
September 30, 2022
December 31, 2021
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.
$
5,861,597
$
8,421,410
Restricted cash includes
1,537,500
1,391,000
Total cash, pledged as collateral for repurchase agreements cash equivalents
and derivative instruments.restricted cash

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

7,399,097
$
9,812,410
The Company
maintains
cash balances
at several
banks and at
excess margin
with an exchange
clearing member.
At times, these
balances
may exceed
federally
insured
limits. The
Company has
not experienced
any losses
related to
these balances.
The Federal
Deposit
Insurance Corporation
insures eligible
accounts up
to $250,000
per depositor
at each financial
institution. At September 30, 2017, the Company's cash deposits exceeded federally insured limits by approximately $3.3 million.
Restricted
cash balances
are
uninsured,
but are held
in separate customer
accounts that
are segregated
from the
general funds
of the counterparty.
The Company
limits
uninsured
balances to
only large,
well-known
banks
and derivative counterparties exchange
clearing members
and believes
that it is
not exposed
to significant
credit risk
on cash and
cash equivalents
or restricted
cash balances.

Mortgage-Backed Securities
Advisory Services

Orchid is
externally
managed and
advised by
Bimini Advisors
pursuant
to the terms
of a management
agreement.
Under the
terms of
the management
agreement,
Orchid is
obligated
to pay Bimini
Advisors a
monthly management
fee and a
pro rata
portion of
certain
overhead
costs and
to reimburse
the Company
for any direct
expenses incurred
on its behalf.
Revenues
from management
fees are
recognized
over the
period of
time in which
the service
is performed.
- 7 -
Mortgage-Backed
Securities
The Company invests primarily in mortgage pass-through ("PT"(“PT”) certificates,mortgage-backed
securities issued by Freddie Mac, Fannie Mae
or Ginnie Mae (“MBS”), collateralized mortgage obligations and(“CMOs”), interest-only ("IO"
(“IO”) securities and inverse interest-only ("IIO"(“IIO”)
securities representing interest in or obligations backed by pools of mortgage-backed
loans. The Company refers to MBS and CMOs
as PT MBS. The Company refers
to IO and IIO securities as structured MBS. The Company has elected to
account for its investment in
MBS under the fair value option.
Electing the fair value option requires the Company to record changes
in fair value in the consolidated
statement of operations, which, in management'smanagement’s view, more appropriately reflects the results of ourthe Company’s operations for a
particular reporting period and is consistent with the underlying economics and
how the portfolio is managed.

The Company records MBS transactions on the trade date.
Security purchases that have not settled as of the balance sheet date
are included in the MBS balance with an offsetting liability recorded, whereas securities sold
that have not settled as of the balance
sheet date are removed from the MBS balance with an offsetting receivable recorded.

The fairFair value of the Company's investment in MBS is governed by ASC Topic 820, Fair Value Measurement.  The definition of fair value in ASC Topic 820 focuses ondefined as the price that would be received to sell the asset or paid to
transfer the liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement assumes that the transaction to sell
the asset or
transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs
in the
most advantageous market for the asset or liability. Estimated fair values for MBS are based on independent pricing sources and/or
third-party broker quotes, when available.

Income on PT MBS is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase
are
not amortized.
Premium lost and discount accretion resulting from monthly principal repayments
are reflected in unrealized gains and
losses on MBS in the consolidated statements of operations.
For IO securities,
the income
is accrued
based on
the carrying
value and
the effective
yield. The
difference
between income
accrued and
the interest
received on
the security
is characterized
as a return
of
investment
and serves
to reduce
the asset's asset’s
carrying value.
At each reporting date, the effective yield is adjusted prospectively from the for future
reporting periodperiods based on the new estimate of prepayments and the contractual
terms of the security.
For IIO securities, effective
yield and income recognition calculations also take into account the index
value applicable to the security.
Changes in fair value of
MBS during each reporting period are recorded in earnings and reported as
unrealized gains or losses on mortgage-backed securities
in the accompanying consolidated statements of operations.
The amount reported as unrealized gains or losses on mortgage backed mortgage-backed
securities thus captures the net effect of changes in the fair market value of securities caused by market
developments and any
premium or discount lost as a result of principal repayments during the period.

Orchid Island Capital, Inc. Common Stock
The Company
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.
We estimate
the fair
value of 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 has elected the fair value option for its investment in Orchid common shares.  The change
holds retained
interests
in the subordinated
tranches
of securities
created in
securitization
transactions.
These retained
interests
currently
have a recorded
fair value
of this investment and dividendszero,
as the prospect
of future
cash flows
being received on this investment are
is uncertain.
Any cash
received
from the
retained
interests
is reflected in other income
as a gain
in the consolidated
statements
of operations.  We estimate
- 8 -
Derivative
Financial
Instruments
The Company
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 are
Treasury Note
(“T-
Note”) and
Eurodollar
futures contracts,
and “to-be-announced”
(“TBA”) securities
transactions.
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 derivative
transactions
are reported
in gain (loss)
on derivative
instruments
in the accompanying
consolidated
statements
of operations.
During the
nine and
three months
ended September
30, 2022,
the Company
only held
T-Note futures
contracts.
The Company
recorded
income of
approximately
$
0.8
million on
these instruments
during both
the nine
and three
months ended
September
30, 2022.
Losses recorded
during the
nine and
three months
ended September
30, 2021
were negligible.
Derivative
instruments
are carried
at fair value, of our investment in Orchid on a market approach using "Level 1" inputs based on the quoted market price of Orchid's common stock on a national stock exchange. Electing the fair value option requires the Company to record
and changes
in fair
value are
recorded
in the consolidated statements
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 operations, which,
its portfolio
assets and
liabilities.
Gains and
losses on
derivatives,
except those
that result
in management's view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with how the investment is managed.cash receipts
or payments,
are

included in
operating
activities
Advisory Services

Orchid is externally managed and advised by Bimini Advisors pursuant to the terms of a management agreement.  Under the terms of the management agreement, Orchid is obligated to pay Bimini Advisors a monthly management fee and a pro rata portion of certain overhead costs and to reimburse the Company for any direct expenses incurred on its behalf.

Retained Interests in Securitizations

Retained interests in the subordinated tranches of securities created in securitization transactions were initially recorded at their fair value when issued by Royal Palm. Subsequent adjustments to fair value are reflected in earnings. Quoted market prices for these assets are generally not available, so the Company estimates fair value based on the present value statements
of expected future cash flows using management's best estimates flows.
Cash payments
and cash receipts
from settlement
of key assumptions, which include expected credit losses, prepayment speeds, weighted-average life, and discount rates commensurate withderivatives,
including
current period
net cash settlements
on interest
rate swaps,
are classified
as an investing
activity
on the inherent risks statements
of the asset.

Derivative Financial Instruments

The Company uses derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future. The principal instruments that the Company has used to date are Treasury Note ("T-Note") and Eurodollar futures contracts, but the Company may enter into other transactions in the future.

The Company has elected not to treat any of its derivative financial instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option.  FASB ASC Topic 815, Derivatives and Hedging, requires that all derivative instruments be carried at fair value.  Changes in fair value are recorded in earnings for each period.

cash flows.
Holding derivatives
creates exposure
to credit
risk related
to the potential
for failure on the part of
by counterparties
to honor
their commitments.
In addition, the Company may be required to post collateral based on any declines in the market value of the derivatives.  In
the event
of default
by a counterparty,
the Company
may have difficulty
recovering
its collateral
and may not
receive payments
provided
for under
the terms
of the agreement.  To
The Company’s
derivative
agreements
require it
to post or
receive collateral
to mitigate this risk,
such risk.
In
addition,
the Company
uses only
registered
central clearing
exchanges
and well-established
commercial
banks as counterparties.
counterparties,

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

ASC Topic 825, Financial Instruments, requires disclosure of theThe fair value of financial instruments for which it is practicable to estimate that
value is disclosed, either in the body of the
consolidated financial statements or in the accompanying notes. MBS,
Orchid common stock Eurodollar futures contracts, interest rate swaptions and retained interests in securitization transactionsderivative assets and liabilities are
accounted for at fair value in the consolidated balance sheets. The methods
and assumptions used to estimate fair value for these
instruments are presented in Note 1412 of the consolidated financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, accrued
interest receivable, other assets, repurchase
agreements, accrued interest payable and other liabilities generally approximates
their carrying value as of September 30, 20172022 and
December 31, 2016,2021, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company'sCompany’s junior subordinated notes.
Currently, there is a limited market for these
types of instruments and the Company is unable to ascertain what interest rates would
be available to the Company for similar financial
instruments. InformationFurther information regarding carrying amount and effective interest rate for these instruments is presented in
Note 87 to the consolidated financial statements.

Property
and Equipment,
net

Property and equipment, net, consists of computer equipment with a depreciable
life of 3 years, office furniture and equipment with
depreciable lives of 8 to 20 years, land which has no depreciable life, and buildingsour building and
its 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-linestraight-
line method over the estimated useful lives of the assets. Depreciation is included

Repurchase Agreements

The Company finances the acquisition of the majority of its PT MBS through the use of repurchase agreements under master repurchase agreements. Pursuant to ASC Topic 860, Transfersin administrative and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specifiedother expenses in the respective agreements.


Share-Based Compensation

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

Earnings Per Share

The Company follows the provisions of ASC Topic 260, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents or two (or more) classes of securities that participate in dividend distributions to present both basic and diluted earnings per share ("EPS") on the face of the consolidated statement of operations.
- 9 -
Repurchase
Agreements
The Company
finances the
acquisition
of the majority
of its PT
MBS through
the use of
repurchase
agreements
under master
repurchase
agreements.
Repurchase
agreements
are accounted
for as collateralized
financing
transactions,
which are
carried at
their
contractual
amounts,
including
accrued interest,
as specified
in the respective
agreements.
Earnings
Per Share
Basic EPS is calculated as income available to common stockholders divided
by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated using the treasury stock or two-class
method, as applicable for common stock
equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result
is anti-dilutive.

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

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

Income Taxes

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

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

The Company'sCompany’s U.S. federal income tax returns for years ended on or after December 31, 2014
2018 remain open for examination.
Although management believes its calculations for tax returns are correct and the positions
taken thereon are reasonable, the final
outcome of tax audits could be materially different from the tax returns filed by the Company, and those differences could result in
significant costs or benefits to the Company. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm
and

its includable subsidiaries, file as separate tax paying entities.

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

- 10 -
Recent Accounting
Pronouncements

In November 2016,March 2020, the FASB issued Accounting Standards Update ("ASU"(“ASU”) 2016-18, Statement 2020-04 “Reference Rate Reform (Topic 848):
Facilitation
of Cash Flows – (Topic 230): Restricted Cash. the Effects of Reference Rate Reform on Financial Reporting
.”
ASU 2016-18 requires2020-04 provides optional expedients and exceptions to GAAP
requirements for modifications on debt instruments, leases, derivatives, and other
contracts, related to the expected market transition
from the London Interbank Offered Rate (“LIBOR,”),
and certain other floating rate benchmark indices, or collectively, IBORs, to
alternative reference rates. ASU 2020-04 generally considers contract modifications
related to reference rate reform to be an event that restricted cash
does not require contract remeasurement at the modification date nor a reassessment
of a previous accounting determination. The
guidance in ASU 2020-04 is optional and restricted cash equivalentsmay be includedelected over time, through December
31, 2022, as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017.  Early application is permitted.  The Company adopted the ASU beginning with the first quarter of 2017. The prior period consolidated statement of cash flows has been retrospectively adjusted to conform to this presentation.reference rate reform activities

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

In June 2016,January 2021, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses2021-01 “Reference Rate Reform (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model)848)”. ASU 2016-132021-01 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 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 ASU 2021-01 is effective for fiscal years,immediately and for interim periods within those years, beginning afteravailable generally through December 15, 2019.  Early application is permitted for fiscal periods beginning after December 15, 2018.  The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.
31, 2022, as reference rate reform

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


NOTE 2. MORTGAGE-BACKED SECURITIESADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the
terms of a management agreement.
As Manager,
TheBimini 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 1.50% 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
entered into on November 16, 2021, the
Company began providing certain repurchase agreement trading, clearing and
administrative services to Orchid that had been
previously provided by AVM, L.P.
under an agreement terminated on March 31, 2022.
In consideration for such services, Orchid will
pay the following table presentsfees to the Company's MBS portfolioCompany:
●
A daily fee equal to the outstanding principal balance of repurchase agreement funding
in place as of September 30, 2017the 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 December 31, 2016:

multiplied by 1.0 basis point for any amount of aggregate outstanding principal
(in thousands)      
   September 30, 2017  December 31, 2016 
Pass-Through MBS:      
Fixed-rate Mortgages $195,151  $124,299 
Total Pass-Through MBS  195,151   124,299 
Structured MBS:        
Interest-Only Securities  1,643   2,654 
Inverse Interest-Only Securities  1,196   3,349 
Total Structured MBS  2,839   6,003 
Total $197,990  $130,302 
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.
- 11 -
Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred
on its behalf and to pay to Bimini Advisors an
amount equal to Orchid's pro rata portion of certain overhead costs set forth in the
management agreement. The management
agreement has been renewed through February 20, 2023
and provides for automatic 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
renewal term.
The following table summarizes the Company's MBS portfolio as ofadvisory services revenue from
Orchid for the nine and three months ended September 30, 2017
2022 and 2021.
(in thousands)
Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
2022
2021
Management fee
$
7,881
$
5,569
$
2,616
$
2,157
Allocated overhead
1,482
1,189
522
390
Repurchase, Clearing and Administrative Fee
357
-
174
-
Total
$
9,720
$
6,758
$
3,312
$
2,547
At September 30, 2022 and December 31, 2016, according to2021, the contractual maturities of the securities in the portfolio. Actual maturities of MBS investments are generally shorter than stated contractual maturitiesnet amount due from
Orchid was approximately $
1.1
million and are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.$

1.1
(in thousands)      
 September 30, 2017 December 31, 2016 
Greater than or equal to ten years $197,990  $130,302 
Total $197,990  $130,302 

million,
respectively.
NOTE 3.  RETAINED INTERESTS IN SECURITIZATIONS
MORTGAGE-BACKED SECURITIES

The following
table presents
the Company’s
MBS portfolio
as of September
30, 2022
and December
31, 2021:
(in thousands)
September 30, 2022
December 31, 2021
Fixed-rate MBS
$
41,276
$
58,029
Structured MBS
2,994
2,774
Total
$
44,270
$
60,803
The following table summarizesis a summary of the estimated fairCompany’s net gain (loss) from the sale of MBS during the nine months ended
September 30, 2022 and 2021.
(in thousands)
2022
2021
Proceeds from sales of MBS
$
23,097
$
13,063
Carrying value of the Company's retained interests in asset backed securities asMBS sold
(23,955)
(12,994)
Net (loss) gain on sales of September 30, 2017 and December 31, 2016:MBS

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

(858)
$
69
Gross gain on sales of MBS
$
-
$
69
Gross loss on sales of MBS
(858)
-
Net (loss) gain on sales of MBS
$
(858)
$
69
- 12 -
NOTE 4.
REPURCHASE AGREEMENTS

The Company
pledges certain
of its MBS
as collateral
under repurchase
agreements
with financial
institutions.
Interest
rates are
generally
fixed based
on prevailing
rates corresponding
to the terms
of the borrowings,
and interest
is generally
paid at the
termination
of a
borrowing.
If the fair
value of the
pledged securities
declines,
lenders
will typically
require the
Company to
post additional
collateral
or pay
down borrowings
to re-establish
agreed upon
collateral
requirements,
referred
to as "margin
calls." Similarly,
if the fair
value of
the pledged
securities
increases,
lenders
may release
collateral
back to the
Company. As of
September
30, 2022,
the Company
had met all
margin call
requirements.
As of September
30, 2017, 2022
and December
31, 2021,
the Company Company’s
repurchase
agreements
had outstanding repurchaseremaining
maturities
as summarized
below:
($ in thousands)
OVERNIGHT
BETWEEN 2
BETWEEN 31
GREATER
(1 DAY OR
AND
AND
THAN
LESS)
30 DAYS
90 DAYS
90 DAYS
TOTAL
September 30, 2022
Fair value of securities pledged, including accrued
interest receivable
$
-
$
40,788
$
3,487
$
-
$
44,275
Repurchase agreement obligations of approximately $187.4 millionliabilities associated with a net
these securities
$
-
$
40,223
$
3,271
$
-
$
43,494
Net weighted average borrowing rate of 1.35%.  These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $198.2 million.  As of
-
2.97%
3.14%
-
2.98%
December 31, 2016, the Company had outstanding repurchase2021
Fair value of securities pledged, including accrued
interest receivable
$
-
$
60,859
$
159
$
-
$
61,018
Repurchase agreement obligations of approximately $121.8 millionliabilities associated with a net
these securities
$
-
$
58,793
$
85
$
-
$
58,878
Net weighted average borrowing rate of 0.99%.  These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $130.1 million.

-
0.14%
0.70%
-
0.14%
In addition,
cash pledged
to counterparties
for repurchase
agreements
was approximately
$

1.2
As
million and
$
1.4
million as
of
September
30, 2017 2022
and December
31, 2016, the Company's repurchase agreements had remaining maturities as summarized below:2021,

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

respectively.
If, during
the term
of a repurchase
agreement,
a lender
files
for bankruptcy,
the Company
might experience
difficulty recovering
its
pledged assets,,
which could
result in
an unsecured
claim against
the lender
for the difference
between the
amount loaned
to the Company
plus interest
due to the
counterparty
and the fair
value of the
collateral
pledged to
such lender,,
including the accrued interest receivable,
and cash posted by the Company as collateral, if any.
At September
30, 2017 2022
and December
31, 2016, 2021,
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
(if any),
including
accrued interest
on such securities)
with all
counterparties
of approximately $11.0
$
2.0
million and $8.4
$
3.5
million,
respectively.  The
As of September
30, 2022
and December
31, 2021,
the Company
did not have
an amount
at risk with
any individual
counterparty
greater than
10% of the Company's equity at September 30, 2017 or December 31, 2016.
Company’s equity.

- 13 -
NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS

In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding and junior subordinated notes by entering into derivatives and other hedging contracts.  To date the Company has entered into Eurodollar  and T-Note futures contracts, but may enter into other contracts in the future.  The Company has not elected hedging treatment under GAAP, and as such all gains or losses (realized and unrealized) on these instruments are reflected in earnings for all periods presented.

As of September 30, 2017 and December 31, 2016, such instruments were comprised entirely of Eurodollar futures contracts.  Eurodollar futures are cash settled futures contracts on an interest rate, with gains or losses credited or charged to the Company's account on a daily basis and reflected in earnings as they occur. A minimum balance, or "margin", is required to be maintained in the account on a daily basis. The Company is exposed to the changes in value of the futures by the amount of margin held by the broker.  This margin represents the collateral the Company has posted for its open positions and is recorded on the consolidated balance sheets as part of restricted cash.


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

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

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

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


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

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

(Losses) Gains On Derivative Instruments, Net

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

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

Credit Risk-Related Contingent Features

The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company attempts to minimize this risk in several ways.  For instruments which are not centrally cleared on a registered exchange, the Company limits its counterparties to major financial institutions with acceptable credit ratings, and by monitoring positions with individual counterparties. In addition, the Company may be required to pledge assets as collateral for its derivatives, whose amounts vary over time based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by a counterparty, the Company may not receive payments provided for under the terms of its derivative agreements, and may have difficulty obtaining 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.


NOTE 6. PLEDGED ASSETS

Assets Pledged
to Counterparties
The table
below summarizes
Bimini’s assets
pledged
as collateral
under its
repurchase
agreements
and derivative
agreements
as of
September
30, 2022
and December
31, 2021.
($ in thousands)
September 30, 2022
December 31, 2021
Repurchase
Derivative
Repurchase
Derivative
Agreements
Agreements
Total
Agreements
Agreements
Total
PT MBS - at fair value
$
41,276
$
-
$
41,276
$
58,029
$
-
$
58,029
Structured MBS - at fair value
2,803
-
2,803
2,759
-
2,759
Accrued interest on pledged securities
196
-
196
230
-
230
Restricted cash
1,244
294
1,538
1,391
-
1,391
Total
$
45,519
$
294
$
45,813
$
62,409
$
-
$
62,409
Assets Pledged
from Counterparties
The table
below summarizes
cash pledged
to Bimini
from counterparties
under repurchase
agreements
as of September
30, 2022
and December
31, 2021.
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 CounterpartiesBimini

The tables below summarize our assets pledged as collateral under our repurchase agreements and derivative agreements pledged related to securities sold but not yet settled, as of September 30, 2017 and 2022
December 31, 2016.2021
Cash
$
148
$
106
Total
$
148
$
106

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

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

Assets Pledged from Counterparties

The table below summarizes assets pledged to us from counterparties under our repurchase agreements as of September 30, 2017 and December 31, 2016. 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 September 30, 2017  December 31, 2016 
Cash $8  $- 
Total $8  $- 


NOTE 7.6. OFFSETTING ASSETS AND LIABILITIES

The Company’s
derivatives
and repurchase
agreements
are subject
to underlying
agreements
with master
netting or
similar
arrangements,
which provide
for the right
of offset in
the event
of default
or in the
event of
bankruptcy
of either
party to the
transactions.
The Company's derivativesCompany
reports its
assets and repurchase agreements are
liabilities
subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions.  The Company reports its assets and liabilities subject to
these arrangements
on a gross
basis.
The following table presents
tables present
information
regarding
those assets
and liabilities
subject to
such arrangements
as if the
Company had
presented
them on a
net basis as
of September
30, 2022
and December
31, 2021.
(in thousands)
Offsetting of Liabilities
Gross Amount Not Offset in the
Net Amount
Consolidated Balance Sheet
Gross Amount
of Liabilities
Financial
Gross Amount
Offset in the
Presented in the
Instruments
Cash
of Recognized
Consolidated
Consolidated
Posted as
Posted as
Net
Liabilities
Balance Sheet
Balance Sheet
Collateral
Collateral
Amount
September 30, 2017 and 2022
Repurchase Agreements
$
43,494
$
-
$
43,494
$
(42,250)
$
(1,244)
$
-
$
43,494
$
-
$
43,494
$
(42,250)
$
(1,244)
$
-
December 31, 2016.2021

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

$
58,878
$
-
$
58,878
$
(57,487)
$
(1,391)
$
-
$
58,878
$
-
$
58,878
$
(57,487)
$
(1,391)
$
-
- 14 -
The amounts
disclosed
for collateral
received by
or posted
to the same
counterparty
are limited
to the amount
sufficient
to reduce
the
asset or
liability
presented
in the consolidated
balance sheet
to zero in accordance with ASU No. 2011-11, as amended by ASU No. 2013-01.  zero.
The fair
value of the
actual collateral
received by
or posted
to the
same counterparty
typically
exceeds the
amounts presented.
See Note 6
5 for a discussion
of collateral
posted for, or
received against,
repurchase
obligations
and derivative
instruments.

NOTE 8.  TRUST PREFERRED SECURITIES7.
LONG-TERM DEBT

Long-term
debt at September
30, 2022 and
December
31, 2021
is summarized
as follows:
(in thousands)
September 30, 2022
December 31, 2021
Junior subordinated debt
$
26,804
$
26,804
Secured note payable
618
635
Total
$
27,422
$
27,439
Junior Subordinated Debt
During 2005,
Bimini Capital
sponsored
the formation
of a statutory
trust, known
as Bimini
Capital Trust
II ("BCTII"(“BCTII”)
of which 100%
of
the common
equity is owned
by Bimini
Capital.
It was formed
for the purpose
of issuing
trust preferred
capital securities
to third-party
investors
and investing
the proceeds
from the
sale of such
capital securities
solely in
junior subordinated
debt securities
of Bimini
Capital.
The debt
securities
held by BCTII
are the sole
assets of
BCTII.

As of September
30, 2017 2022
and December
31, 2016, 2021,
the outstanding
principal
balance on
the junior
subordinated
debt securities
owed
to BCTII
was $26.8 $
26.8
million.
The BCTII
trust preferred
securities
and Bimini
Capital's
BCTII Junior
Subordinated
Notes have
a rate of
interest
that floats
at a spread
of 3.50%
3.50
% over the
prevailing
three-month
LIBOR rate.
As of September
30, 2017, 2022,
the interest
rate was 4.82%
6.79
%. The BCTII
trust preferred
securities
and Bimini
Capital's
��
BCTII Junior
Subordinated
Notes require
quarterly
interest
distributions
and are redeemable
at Bimini
Capital's
option, in
whole or
in part and
without penalty.
Bimini Capital's
BCTII Junior
Subordinated
Notes
are subordinate
and junior
in right
of payment
to all present
and future
senior indebtedness.

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

method.
The accompanying
consolidated
financial
statements
present
Bimini Capital's
BCTII Junior
Subordinated
Notes issued
to BCTII
as a
liability
and Bimini
Capital's
investment
in the common
equity securities
of BCTII
as an asset (included
(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
$
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.

- 15 -
The table
below presents
the future
scheduled
principal
payments
on the Company’s
long-term
debt.
(in thousands)
Last three months of 2022
$
5
For the years ended:
2023
24
2024
25
2025
26
2026
28
After 2026
27,314
Total
$
27,422
NOTE 9.  8.
COMMON STOCK

The table below presents information related to Bimini Capital's Class A Common Stock issued during the nine and three months ended September 30, 2017 and 2016.

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

There were
no issuances
of Bimini
Capital's Class
A Common
Stock, Class
B Common
Stock andor Class
C Common
Stock during
the
nine months
ended September
30, 2017 2022
and 2016.

2021.
NOTE 10.    STOCK INCENTIVE PLANS

Stock Repurchase
Plans
On August 12, 2011, Bimini Capital's shareholders approvedMarch 26,
2018, the 2011 Long Term Compensation Plan (the "2011 Plan") to assist the Company in recruiting and retaining employees, directors and other service providers by enabling them to participate in the success
Board of Bimini Capital and to associate their interests with those
Directors
of the Company and its stockholders.  The 2011
(the “Board”)
approved
a Stock Repurchase
Plan is intended (the
“2018 Repurchase
Plan”).
Pursuant
to permit the grant of stock options, stock appreciation rights ("SARs"), stock awards, performance units and other equity-based and incentive awards.  The maximum aggregate number of 2018
Repurchase
Plan, the
Company could
purchase
up to
500,000
shares of common stock that
its Class
A Common
Stock from
time to time,
subject to
certain limitations
imposed by
Rule 10b-18
of the Securities
Exchange Act
of 1934.
The 2018
Repurchase
Plan
was terminated
on September
16, 2021.
On September
16, 2021,
the Board
authorized
a share repurchase
plan pursuant
to Rule 10b5-1
of the Securities
Exchange
Act of
1934 (the
“2021 Repurchase
Plan”). Pursuant
to the 2021
Repurchase
Plan, the
Company may
purchase
shares of
its Class
A Common
Stock from
time to time
for an aggregate
purchase
price not
to exceed
$
2.5
million. Share
repurchases
may be issued under executed
through various
means, including,
without limitation,
open market
transactions.
The 2021 Repurchase
Plan does
not obligate
the 2011 Company
to purchase
any shares,
and it expires
on September
16, 2023.
The authorization
for the 2021
Repurchase
Plan pursuant tomay
be terminated,
increased
or
decreased
by the exerciseCompany’s
Board of options and SARs, the grant of stock awards or other equity-based awards and the settlement of incentive awards and performance units is equal to 4,000,000 shares.
Directors

in its discretion
Share Awards

at any time.
During the three
nine months
ended March 31, 2016, September
30, 2022,
the Compensation Committee Company
repurchased
a total of
455,385
shares under
the 2021
Repurchase
Plan at an
aggregate
cost of approximately
$
0.8
million, including
commissions
and fees,
for a weighted
average price
of $
1.78
per share.
From the
inception
of the Board2021
Repurchase
Plan through
September
30, 2022,
the Company
repurchased
a total of Directors of Bimini Capital (the "Committee") approved certain performance bonuses for members of management.  These bonuses were awarded primarily in recognition of service in 2015.  The bonuses consisted of cash
547,672
shares at
an
aggregate
cost of approximately $0.5
$
1.0
million, including
commissions
and 258,333 fully vested shares fees,
for a weighted
average price
of the Company's Class A Common Stock with an approximate value of $0.2 million, or $0.75 $
1.84
per share.  The shares were issued under the 2011 Plan. For purposes of these bonuses, shares of the Company's common stock were valued based on the closing price of the Company's Class A Common Stock on January 15, 2016, the bonus date. The expense related to this bonus was accrued at December 31, 2015 and does not affect the results of operations for the nine and three months ended September 30, 2016.

Performance Units

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


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

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

NOTE 11.  9.
COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various
claims and legal actions arising in the ordinary course of
business.
On
April 22, 2020
, the Company received a demand for payment from Citigroup, Inc. in the
amount of $
33.1
million related to the
indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets
Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,
LLC) prior to the date Royal Palm’s mortgage origination
operations ceased in 2007. In November 2021, Citigroup notified the Company
of additional indemnity claims totaling $
0.2
million. The
demands are 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 demands
vigorously.
No provision or accrual has been
recorded related to the Citigroup demands.
- 16 -
Management is not aware of any other significant reported or unreported contingencies
at September 30, 2017.2022.

NOTE 12.  10.
INCOME TAXES

The total income tax (benefit) provision recorded for the nine months ended September
30, 20172022 and 20162021 was $1.3 $
(1.6)
million and $2.1
$
0.3
million, respectively, on consolidated pre-tax book (loss) income of $3.2 $
(9.4)
million and $4.3 $
1.2
million in the nine months ended
September 30, 20172022 and 2016,2021, respectively.
The total income tax (benefit) provision recorded for the three
months ended September
30, 20172022 and 20162021 was $1.0$(
0.3
) million and $1.4 $
0.2
million, respectively, on consolidated pre-tax book (loss) income of $2.5$(
3.4
) million and $2.6
$
0.6
million in the three months ended September 30, 20172022 and 2016,2021, respectively.

The Company'sCompany’s tax provision is based on a projected effective rate based on annualized amounts
applied to actual income to date
and includes the expected realization of a portion of the tax benefits of federal
and state net operating losses carryforwards ("NOLs"(“NOLs”).
In assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of capital
loss and NOL carryforwards is dependent upon the
generation of future capital gains and taxable income in periods prior to their expiration.
The Company currently provides a valuation
allowance against a portion of the NOLs since the Company believes that it is more likely
than not that some of the benefits will not be
realized in the future. The Company will continue to assess the need for a valuation
allowance at each reporting date.

NOTE 13.   11.
EARNINGS PER SHARE
Shares of

Class B common
stock,
participating
and convertible
into Class
A common
stock, are
entitled to
receive dividends
in an
amount equal
to the dividends
declared
on each share
of Class A
common stock
if, and when,
authorized
and declared
by the Board
of
Directors.
The Class
B common stock
is included
in the computation
of basic EPS
using the
two-class
method, and
consequently
is
presented
separately
from Class
A common
stock.
Shares of
Class B common
stock are
not included
in the computation
of diluted
Class A
EPS as the
conditions
for conversion
to Class A
common stock
were not
met at September
30, 2022 and
2021.
Shares of
Class B 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 participating
were not
met at September
30, 2022
and convertible into2021.
The table
below reconciles
the numerator
and denominator
of EPS for
the nine
and three
months ended
September
30, 2022
and
2021.
(in thousands, except per-share information)
Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
2022
2021
Basic and diluted EPS per Class A common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, and when, authorized and declared by the Board of Directors. Following the provisions of FASB ASC 260, the Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversionshare:
(Loss) income attributable to Class A common stock were not met at September 30, 2017shares:
Basic and 2016.diluted

$
(7,815)
Shares of Class C$
833
$
(3,163)
$
464
Weighted average common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to shares:
Class A common stock were not metshares outstanding at the balance sheet date
10,247
10,794
10,247
10,794
Effect of weighting
220
564
42
72
Weighted average shares-basic and diluted
10,467
11,358
10,289
10,866
(Loss) income per Class A common share:
Basic and diluted
$
(0.75)
$
0.07
$
(0.31)
$
0.04
- 17 -
(in thousands, except per-share information)
Nine Months Ended September 30, 2017
Three Months Ended September 30,
2022
2021
2022
2021
Basic and 2016.diluted EPS per Class B common share:

(Loss) income attributable to Class B common shares:
Basic and diluted
$
(24)
$
2
$
(10)
$
1
Weighted average common shares:
Class B common shares outstanding at the balance sheet date
32
32
32
32
Weighted average shares-basic and diluted
32
32
32
32
(Loss) income per Class B common share:
Basic and diluted
$
(0.75)
$
0.07
$
(0.31)
$
0.04
NOTE 12.
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
●
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.
MBS, Orchid
common stock,
retained
interests
and TBA
securities
were all
recorded
at fair value
on a recurring
basis during
the nine
and three
months ended
September
30, 2022
and 2021.
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.
Retained
interests
have a recorded
fair value
of zero as
of September
30, 2022
and December
31, 2021,
as the prospect
of future
cash flows
is uncertain.
Any cash
received from
the retained
interests
is reflected
as a gain
in the consolidated
statements
of operations.
- 18 -
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. 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
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 fair
value of interest
rate swaps
is determined
using a discounted
cash flow
approach
using forward
market interest
rates
and discount
rates, which
are observable
inputs. The
fair value
of interest
rate swaptions
is determined
using an option
pricing model.
The following
table presents
financial
assets and
liabilities
measured
at fair value
on a recurring
basis as of
September
30, 2022 and
December
31, 2021:
(in thousands)
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Fair Value
Assets
Inputs
Inputs
Measurements
(Level 1)
(Level 2)
(Level 3)
September 30, 2022
Mortgage-backed securities
$
44,270
$
-
$
44,270
$
-
Orchid Island Capital, Inc. common stock
4,256
4,256
-
-
December 31, 2021
Mortgage-backed securities
$
60,803
$
-
$
60,803
$
-
Orchid Island Capital, Inc. common stock
11,679
11,679
-
-
During the
nine months
ended September
30, 2022
and 2021,
there were
no transfers
of financial
assets or
liabilities
between levels
1, 2 or 3.
- 19 -
NOTE 13.
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 revenues received under this management
agreement for the nine months ended September 30, 2022 and 2021, were approximately
$
9.7
million and $
6.8
million, respectively,
accounting for approximately
80
% and
68
% of consolidated revenues, respectively.
The investment portfolio segment includes the investment activities conducted
by Royal Palm.
The investment portfolio segment
receives revenue in the form of interest and dividend income on its investments.
Segment information for the nine months ended September 30, 2022 and 2021 is as
follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2022
Advisory services, external customers
$
9,720
$
-
$
-
$
-
$
9,720
Advisory services, other operating segments
(1)
85
-
-
(85)
-
Interest and dividend income
-
2,364
-
-
2,364
Interest expense
-
(314)
(938)
(2)
-
(1,252)
Net revenues
9,805
2,050
(938)
(85)
10,832
Other expenses
-
(14,092)
66
-
(14,026)
Operating expenses
(3)
(4,914)
(1,302)
-
-
(6,216)
Intercompany expenses
(1)
-
(85)
-
85
-
Income (loss) before income taxes
$
4,891
$
(13,429)
$
(872)
$
-
$
(9,410)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
6,758
$
-
$
-
$
-
$
6,758
Advisory services, other operating segments
(1)
108
-
-
(108)
-
Interest and dividend income
-
3,245
-
-
3,245
Interest expense
-
(95)
(748)
(2)
-
(843)
Net revenues
6,866
3,150
(748)
(108)
9,160
Other (expenses) income
-
(3,008)
154
-
(2,854)
Operating expenses
(3)
(3,396)
(1,738)
-
-
(5,134)
Intercompany expenses
(1)
-
(108)
-
108
-
Income (loss) before income taxes
$
3,470
$
(1,704)
$
(594)
$
-
$
1,172
- 20 -
Segment information for the three months ended September 30, 2022 and 2021 is
as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2022
Advisory services, external customers
$
3,312
$
-
$
-
$
-
$
3,312
Advisory services, other operating segments
(1)
29
-
-
(29)
-
Interest and dividend income
-
728
-
-
728
Interest expense
-
(210)
(379)
(2)
-
(589)
Net revenues
3,341
518
(379)
(29)
3,451
Other expenses
-
(4,868)
66
-
(4,802)
Operating expenses
(3)
(1,677)
(401)
-
-
(2,078)
Intercompany expenses
(1)
-
(29)
-
29
-
Income (loss) before income taxes
$
1,664
$
(4,780)
$
(313)
$
-
$
(3,429)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
2,547
$
-
$
-
$
-
$
2,547
Advisory services, other operating segments
(1)
35
-
-
(35)
-
Interest and dividend income
-
1,043
-
-
1,043
Interest expense
-
(24)
(248)
(2)
-
(272)
Net revenues
2,582
1,019
(248)
(35)
3,318
Other (expenses) income
-
(1,033)
-
-
(1,033)
Operating expenses
(3)
(1,157)
(496)
-
-
(1,653)
Intercompany expenses
(1)
-
(35)
-
35
-
Income (loss) before income taxes
$
1,425
$
(545)
$
(248)
$
-
$
632
Includes fees paid by Royal Palm to Bimini Advisors for advisory services
.
(2)
Includes interest on long-term debt.
(3)
Corporate expenses are allocated based on each segment’s proportional
share of total revenues.
Assets in each reportable segment as of September 30, 2022 and December
31, 2021 were as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Total
September 30, 2022
$
1,967
$
86,542
8,361
$
96,870
December 31, 2021
1,901
111,022
9,162
122,085
NOTE 14. RELATED PARTY TRANSACTIONS
Relationships with Orchid
At both September 30, 2022 and December 31, 2021, the Company has dividend eligibleowned
519,071
shares of Orchid common stock incentive plan shares that were(after giving
effect to Orchid’s 1-for-5 reverse stock split), representing approximately
1.5
% and
1.5
%, respectively, of Orchid’s outstanding common
stock on such dates. The Company received dividends on this common
stock investment of approximately $
1.0
million and $
0.3
million
during the nine and three months ended September 30, 2017. The basic2022, respectively, and diluted per share computations include these unvested incentive plan shares if there is income available to Class A common stock, as they have dividend participation rights. The stock incentive plan shares have no contractual obligation to share in losses. Because there is no such obligation,approximately $
1.5
million and $
0.5
million during the incentive plan shares are not included in the basic and diluted EPS computations when no income is available to Class A common stock even though they are considered participating securities.

The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, 2017 and 2016.2021,
respectively.

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

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


NOTE 14.   FAIR VALUE

Authoritative accounting literature establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications are:

·Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),
·Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
·Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company's own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

The Company's MBS are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third-party broker quotes, when available. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. Alternatively, the Company could opt to have the value of all of its MBS positions determined by either an independent third-party or could do so internally.

MBS, Orchid common stock, retained interests and futures contracts were all recorded at fair value on a recurring basis during the nine and three months ended September 30, 2017 and 2016. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets.  When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.  Fair value measurements for the retained interests are generated by a model that requires management to make a significant number of assumptions.


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

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

The following table illustrates a roll forward for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2017 and 2016:

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

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

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


The following table summarizes the significant quantitative information about our level 3 fair value measurements as of September 30, 2017.

Retained interests in securitzations, at fair value (in thousands)
       $558 
     CPR Range     
Prepayment Assumption    (Weighted Average)     
Constant Prepayment Rate     10% (10%)    
     Severity     
Default Assumptions Probability of Default  (Weighted Average)  Range Of Loss Timing 
Real Estate Owned  100%  25.5% Next 10 Months 
Loans in Foreclosure  100%  25.5% Month 4 - 13 
Loans 90 Day Delinquent  100%  45% Month 11-28 
Loans 60 Day Delinquent  85%  45% Month 11-28 
Loans 30 Day Delinquent  75%  45% Month 11-28 
Current Loans  3.1%  45% Month 29 and Beyond 
      Remaining Life Range  Discount Rate Range 
Cash Flow Recognition Valuation Technique  (Weighted Average)  (Weighted Average) 
Nominal Cash Flows Discounted Cash Flow   12.2 - 15.3(13.2)  27.50% (27.50%)
Discounted Cash Flows Discounted Cash Flow   1.3 - 14.2(3.8)  27.50% (27.50%)

NOTE 15. RELATED PARTY TRANSACTIONS

Management Agreement

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

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

Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and to pay to Bimini Advisors an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. The management agreement has been renewed through February 20, 2018 and provides for automatic one-year extension options thereafter.  Should Orchid terminate the management agreement without cause, it will pay to Bimini Advisors a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the current automatic renewal term.

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

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

- 21 -
At September 30, 2017 and December 31, 2016, the net amount due from Orchid was approximately $0.8 million and $0.6 million, respectively, and such amounts are included in "other assets" in the consolidated balance sheets.  Orchid accrued cash and equity compensation payable to officers and employees of Bimini of $0.4 million and $0.2 million during the nine and three months ended September 30, 2017, respectively and $0.6 million and $0.2 million during the nine and three months ended September 30, 2016, respectively.  This compensation is not included in the consolidated statements of operations.

Other Relationships with Orchid

At September 30, 2017 and December 31, 2016, the Company owned 1,520,036  and 1,395,036 shares of Orchid common stock, respectively, representing approximately 3.4% and 4.2% of the outstanding shares, respectively.  The Company received dividends on this common stock investment of approximately $1.9 million and $0.6 million during the nine and three months ended September 30, 2017, respectively, and approximately $1.8 million and $0.6 million during the nine and three months ended September 30, 2016, respectively.

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

- 22 -
ITEM 2. MANAGEMENT'S MANAGEMENT’S
DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF
OPERATIONS.

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

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding
company that was formed in September 20032003.
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 investOrchid, 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 and, commencing April 1. 2022, provides certain repurchase agreement
trading, clearing and administrative services.
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 inof 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"MBS”) and (ii) structured Agency MBS, such as collateralized mortgage obligations ("CMOs"), interest
only securities ("IOs"), inverse interest only securities
("IIOs") and principal only securities ("POs"), among other types of
structured Agency MBS.

The Company also serves as the external manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"), through its wholly owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors").  From this arrangement, the Company receives management fees and expense reimbursements.  As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations.  Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. In addition, the CompanyRoyal Palm receives dividends
from its investment in Orchid common shares.

Stock Repurchase
Plan
On September
16, 2021,
the Board
authorized
a share repurchase
plan pursuant
to Rule 10b5-1
of the Securities
Exchange
Act of
1934 (the
“2021 Repurchase
Plan”). Pursuant
to the 2021
Repurchase
Plan, we
may 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
may be executed
through various
means,
including,
without limitation,
open market
transactions.
The 2021
Repurchase
Plan does
not obligate
the Company
to purchase
any
shares, and
it expires
on September
16, 2023.
The authorization
for the 2021
Repurchase
Plan may be
terminated,
increased
or
decreased
by the Company’s
Board of
Directors
in its discretion
at any time.
From the
commencement
of the 2021
Repurchase
Plan,
through September
30, 2022,
we repurchased
a total of
547,672 shares
at an aggregate
cost of approximately
$1.0 million,
including
commissions
and fees,
for a weighted
average price
of $1.84
per share.
During the
nine months
ended September
30, 2022,
the Company
repurchased
a total of
455,385 shares
at an aggregate
cost of approximately
$0.8 million,
including
commissions
and fees,
for a weighted
average price
of $1.78
per share.
- 23 -
Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors (including ongoing economic impacts from
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 newU.S. government, including the presidential administration,
the U.S. Federal Reserve (the "Fed"“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; and
●
•the equity markets and the ability of Orchid to raise additional capital;
●
geo-political events that affect the U.S. and international economies, such as the ongoing crisis in Ukraine; and
•●
other market developments.

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

●
our degree of leverage;
●
our access to funding and borrowing capacity;
●
our borrowing costs;
●
our hedging activities;
●
the market value of our investments;
●
the requirements to qualify for a registration exemption under the Investment Company Act;
●
our ability to use net operating loss carryforwards and net capital loss carryforwards
to reduce our taxable income;
●
the impact of possible future changes in tax laws;laws or tax rates;
●
increases in our cost of funds resulting from increases in the Fed Funds rate that
are controlled by the Fed which have
occurred, and
are likely to continue to occur, in 2022;
●
our ability to manage the portfolio of Orchid and maintain our role as manager.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
nine and
three months
ended September
30, 2022,
as compared
to
the nine
and three
months ended
September
30, 2021.
Net (Loss)
Income Summary
Consolidated
net loss for
the nine months
ended September
30, 2022
was $7.8
million, or
$0.75 basic
and diluted
loss per share
of
Class A Common
Stock, as
compared
to a consolidated
net income
of $0.8 million,
or $0.07
basic and
diluted income
per share
of Class
A
Common Stock,
for the nine
months ended
September
30, 2021.
Consolidated
net loss for
the three
months ended
September
30, 2022
was $3.2
million, or
$0.31 basic
and diluted
loss per
share of
Class A Common
Stock, as
compared
to consolidated
net income
of $0.5 million,
or $0.04
basic and diluted
income per
share of
Class A
Common Stock,
for the three
months ended
September
30, 2021.
 

 
Results of Operations

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

Net Income Summary

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

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

- 24 -
The components
of net (loss)
income for
the nine and three
months ended
September
30, 2017 2022
and 2016, 2021,
along with
the changes
in those
components
are presented
in the table below:
below.

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

Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
Change
2022
2021
Change
Advisory services revenues
$
9,720
$
6,758
$
2,962
$
$
3,312
$
2,547
$
765
Interest and dividend income
2,364
3,245
(881)
728
1,043
(315)
Interest expense
(1,252)
(843)
(409)
(589)
(272)
(317)
Net revenues
10,832
9,160
1,672
3,451
3,318
133
Other expense
(14,026)
(2,855)
(11,171)
(4,802)
(1,033)
(3,769)
Expenses
(6,216)
(5,134)
(1,082)
(2,077)
(1,653)
(424)
Net (loss) income before income tax (benefit) provision
(9,410)
1,171
(10,581)
(3,428)
632
(4,060)
Income tax (benefit) provision
(1,571)
336
(1,907)
(255)
167
(422)
Net (loss) income
$
(7,839)
$
835
$
(8,674)
$
$
(3,173)
$
465
$
(3,638)
GAAP and
Non-GAAP
Reconciliation

Economic Interest Expense and Economic Net Interest Income

We use derivative instruments, specifically Eurodollar and Treasury Note ("T-Note"(“T-Note”) futures contracts and TBA short positions to
hedge a portion of the interest rate risk on repurchase agreements in a rising
rate environment.
We have not elected to designatedesignated our derivative holdings forfinancial instruments as hedge accounting treatment under the Financial Accounting Standards Board, (the "FASB"), Accounting Standards Codification, ("ASC"), Topic 815, Derivatives and Hedging.relationships,
but rather hold them for
economic hedging purposes. Changes in fair value of these instruments are presented
in a separate line item in our consolidated
statements of operations and not included in interest expense. As such, for financial reporting
purposes, interest expense and cost of
funds are not impacted by the fluctuation in value of the derivative instruments.

For the purpose of computing economic net interest income and ratios relating
to cost of funds measures, GAAP interest
expense, has been as reflected in our consolidated statements of operations, is
adjusted to reflect the realized and unrealized gains or losses on specific
certain derivative instruments the Company uses that pertain to each period presented.
We believe that adjusting our GAAP interest
expense for the periods presented by the gains or losses on allthese derivative
instruments wouldmay 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
reflective 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 borrowings to reflect total economic
interest expense for the applicable period. Interest
expense, including the effect of derivative instruments for the period, is referred to as economic interest
expense. Net interest income,
when calculated to include the effect of derivative instruments for the period, is referred to
as economic net interest income. This
presentation includes gains or losses on all contracts in effect during the reporting period,
covering the current period as well as
periods in the future.

- 25 -
We believe that economic interest expense and economic net interest income provide
meaningful information to consider, in
addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its
financial position and performance without the effects of certain transactions and GAAP
adjustments that are not necessarily indicative
of our current investment portfolio or operations. The unrealized gains or losses
on derivative instruments presented in our
consolidated statements of operations are not necessarily representative
of the total interest rate expense that we will ultimately realize.
This is because as interest rates move up or down in the future, the gains
or losses we ultimately realize, and which will affect our total
interest rate expense in future periods, may differ from the unrealized gains or losses recognized
as of the reporting date.

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

The tables below present a reconciliation of the adjustments 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 each quarter in 20172022 and 2016.2021.
Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
Attributed to Current Period (Non-GAAP)
Attributed to Future Periods (Non-GAAP)
Repurchase
Long-Term
Repurchase
Long-Term
Statement of
Three Months Ended
Agreements
Debt
Total
Agreements
Debt
Total
Operations
September 30, 2022
$
(184)
$
(48)
$
(232)
$
1,028
$
48
$
1,076
$
844
June 30, 2022
(186)
(48)
(234)
136
48
184
(50)
March 31, 2022
(185)
(48)
(233)
185
48
233
-
December 31, 2021
(707)
(60)
(767)
707
60
767
-
September 30, 2021
(709)
(57)
(766)
709
57
766
-
June 30, 2021
(708)
(58)
(766)
708
58
766
-
March 31, 2021
(708)
(58)
(766)
708
58
766
-
Nine Months Ended
September 30, 2022
$
(555)
$
(144)
$
(699)
$
1,349
$
144
$
1,493
$
794
September 30, 2021
(2,125)
(173)
(2,298)
2,125
173
2,298
$
-

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP) 
(in thousands)         
     Junior    
  Repurchase  Subordinated    
Three Months Ended Agreements  Debt  Total 
September 30, 2017 $(13) $(6) $(19)
June 30, 2017  (581)  (251)  (832)
March 31, 2017  15   7   22 
December 31, 2016  496   1,037   1,533 
September 30, 2016  326   182   508 
June 30, 2016  (353)  (404)  (757)
March 31, 2016  (787)  (513)  (1,300)
             
(in thousands)            
      Junior     
  Repurchase  Subordinated     
Nine Months Ended Agreements  Debt  Total 
September 30, 2017 $(579) $(250) $(829)
September 30, 2016  (814)  (735)  (1,549)

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

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

Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP) 
(in thousands)         
     Junior    
  Repurchase  Subordinated    
Three Months Ended Agreements  Debt  Total 
September 30, 2017 $149  $34  $183 
June 30, 2017  (429)  (214)  (643)
March 31, 2017  131   67   198 
December 31, 2016  618   1,094   1,712 
September 30, 2016  418   237   655 
June 30, 2016  (293)  (327)  (620)
March 31, 2016  (742)  (433)  (1,175)
             
(in thousands)            
      Junior     
  Repurchase  Subordinated     
Nine Months Ended Agreements  Debt  Total 
September 30, 2017 $(149) $(113) $(262)
September 30, 2016  (617)  (523)  (1,140)

Economic Net Portfolio Interest Income 
(in thousands) 
     Interest Expense on Repurchase Agreements  Net Portfolio 
        Effect of     Interest Income 
  Interest  GAAP  Non-GAAP  Economic  GAAP  Economic 
Three Months Ended Income  Basis  
Hedges(1)
  
Basis(2)
  Basis  
Basis(3)
 
September 30, 2017 $1,514  $504  $(162) $666  $1,010  $848 
June 30, 2017  1,269   324   (152)  476   945   793 
March 31, 2017  1,293   283   (116)  399   1,010   894 
December 31, 2016  1,285   251   (122)  373   1,034   912 
September 30, 2016  1,108   195   (92)  287   913   821 
June 30, 2016  1,025   174   (60)  234   851   791 
March 31, 2016  817   127   (45)  172   690   645 
                         
(in thousands) 
      Interest Expense on Repurchase Agreements  Net Portfolio 
          Effect of      Interest Income 
  Interest  GAAP  Non-GAAP  Economic  GAAP  Economic 
Nine Months Ended Income  Basis  
Hedges(1)
  
Basis(2)
  Basis  
Basis(3)
 
September 30, 2017 $4,076  $1,111  $(430) $1,541  $2,965  $2,535 
September 30, 2016  2,950   496   (197)  693   2,454   2,257 

(1)Reflects the effect of derivative instrument hedges for only the period presented.
(2)Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.
(3)Calculated by adding
- 26 -
Economic Net Portfolio Interest Income
(in thousands)
Interest Expense on Repurchase Agreements
Net Portfolio
Effect of
Interest Income
Interest
GAAP
Non-GAAP
Economic
GAAP
Economic
Three Months Ended
Income
Basis
Hedges
(1)
Basis
(2)
Basis
Basis
(3)
September 30, 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
December 31, 2021
511
21
(707)
728
490
(217)
September 30, 2021
537
24
(709)
733
513
(196)
June 30, 2021
578
31
(708)
739
547
(161)
March 31, 2021
611
40
(708)
748
571
(137)
Nine Months Ended
September 30, 2022
$
1,328
$
314
$
(555)
$
869
$
1,014
$
459
September 30, 2021
1,726
95
(2,125)
2,220
1,631
(494)
(1)
Reflects the effect of derivative instrument hedges for only the period
presented.
(2)
Calculated by subtracting the effect of derivative instrument hedges
attributed to the period presented from GAAP interest expense.
(3)
Calculated by adding the effect of derivative instrument hedges attributed
to the period presented to GAAP net portfolio interest income.


Economic Net Interest Income 
(in thousands) 
  Net Portfolio  Interest Expense on Junior Subordinated Notes       
  Interest Income     Effect of     Net Interest Income 
  GAAP  Economic  GAAP  Non-GAAP  Economic  GAAP  Economic 
Three Months Ended Basis  
Basis(1)
  Basis  
Hedges(2)
  
Basis(3)
  Basis  
Basis(4)
 
September 30, 2017 $1,010  $847  $316  $(40) $356  $694  $491 
June 30, 2017  945   793   306   (37)  343   639   450 
March 31, 2017  1,010   894   292   (60)  352   718   542 
December 31, 2016  1,034   912   291   (57)  348   743   564 
September 30, 2016  913   821   278   (55)  333   635   488 
June 30, 2016  851   791   276   (77)  353   575   438 
March 31, 2016  690   645   264   (80)  344   426   301 
                             
(in thousands) 
  Net Portfolio  Interest Expense on Junior Subordinated Notes         
  Interest Income      Effect of      Net Interest Income 
  GAAP  Economic  GAAP  Non-GAAP  Economic  GAAP  Economic 
Nine Months Ended Basis  
Basis(1)
  Basis  
Hedges(2)
  
Basis(3)
  Basis  
Basis(4)
 
September 30, 2017 $2,965  $2,534  $914  $(137) $1,051  $2,051  $1,483 
September 30, 2016  2,454   2,257   818   (212)  1,030   1,636   1,227 

(1)Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net portfolio interest income.
(2)Reflects the effect of derivative instrument hedges for only the period presented.
(3)Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.
(4)Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP net interest income.

Net Portfolio Income

During the nine months ended September 30, 2017, the Company generated $3.0 million of net portfolio interest income, consistingincome.
Economic Net Interest Income
(in thousands)
Net Portfolio
Interest Expense on Long-Term Debt
Interest Income
Effect of $4.1 million of interest income from MBS assets offset by $1.1 million of interest expense on repurchase liabilities.  For the comparable period ended
Net Interest Income (Loss)
GAAP
Economic
GAAP
Non-GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(1)
Basis
Hedges
(2)
Basis
(3)
Basis
Basis
(4)
September 30, 2016,2022
$
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)
December 31, 2021
490
(217)
249
(60)
309
241
(526)
September 30, 2021
513
(196)
248
(57)
305
265
(501)
June 30, 2021
547
(161)
250
(58)
308
297
(469)
March 31, 2021
571
(137)
250
(58)
308
321
(445)
Nine Months Ended
September 30, 2022
$
1,014
$
459
$
939
$
(144)
$
1,083
$
75
$
(624)
September 30, 2021
1,631
(494)
748
(173)
921
883
(1,415)
(1)
Calculated by adding the Company generated $2.5 millioneffect of derivative instrument hedges attributed
to the period presented to GAAP net portfolio interest income, consistingincome.
(2)
Reflects the effect of $3.0 millionderivative 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 income from MBS assets offsetexpense.
(4)
Calculated by $0.5 millionadding the effect of derivative instrument hedges
attributed to the period presented to GAAP net interest expense on repurchase liabilities.income.

- 27 -
Segment Information
We have two operating segments. The Company's economic interest expense on repurchase liabilitiesasset management segment includes the investment
advisory services provided by Bimini
Advisors to Orchid and Royal Palm. The investment portfolio segment includes the
investment activities conducted by Royal Palm.
Segment information for the nine months ended September 30, 20172022 and 2016 was $1.5 million2021 is as
follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2022
Advisory services, external customers
$
9,720
$
-
$
-
$
-
$
9,720
Advisory services, other operating segments
(1)
85
-
-
(85)
-
Interest and $0.7 million, respectively, resulting in $2.5 milliondividend income
-
2,364
-
-
2,364
Interest expense
-
(314)
(938)
(2)
-
(1,252)
Net revenues
9,805
2,050
(938)
(85)
10,832
Other expenses
-
(14,092)
66
-
(14,026)
Operating expenses
(3)
(4,914)
(1,302)
-
-
(6,216)
Intercompany expenses
(1)
-
(85)
-
85
-
Income (loss) before income taxes
$
4,891
$
(13,429)
$
(872)
$
-
$
(9,410)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
6,758
$
-
$
-
$
-
$
6,758
Advisory services, other operating segments
(1)
108
-
-
(108)
-
Interest and $2.3 million of economic net portfolio interestdividend income respectively.

-
During the three months ended September 30, 2017, the Company generated $1.0 million of net portfolio interest3,245
-
-
3,245
Interest expense
-
(95)
(748)
(2)
-
(843)
Net revenues
6,866
3,150
(748)
(108)
9,160
Other (expenses) income consisting of $1.5 million of interest
-
(3,008)
154
-
(2,854)
Operating expenses
(3)
(3,396)
(1,738)
-
-
(5,134)
Intercompany expenses
(1)
-
(108)
-
108
-
Income (loss) before income from MBS assets offset by $0.5 million of interest expense on repurchase liabilities.  For the three months ended September 30, 2016, the Company generated $0.9 million of net portfolio interest income, consisting of $1.1 million of interest income from MBS assets offset by $0.2 million of interest expense on repurchase liabilities.taxes

$
The Company's economic interest expense on repurchase liabilities3,470
$
(1,704)
$
(594)
$
-
$
1,172
- 28 -
Segment information for the three months ended September 30, 20172022 and 2016 was $0.7 million and $0.3 million, respectively, resulting in $0.8 million and $0.8 million of economic net portfolio interest income, respectively.


The tables below provide consolidated information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the nine months ended September 30, 2017 and 2016 and each quarter in 2017 and 2016 on both a GAAP and economic basis.

($ in thousands)                        
  Average     Yield on  Average  Interest Expense  Average Cost of Funds 
  MBS  Interest  Average  Repurchase  GAAP  Economic  GAAP  Economic 
Three Months Ended 
Held(1)
  
Income(2)
  MBS  
Agreements(1)
  Basis  
Basis(2)
  Basis  
Basis(3)
 
September 30, 2017 $170,237  $1,514   3.56% $161,003  $504  $666   1.25%  1.66%
June 30, 2017  134,188   1,269   3.78%  126,341   324   476   1.02%  1.51%
March 31, 2017  128,098   1,293   4.04%  119,938   283   399   0.94%  1.33%
December 31, 2016  131,952   1,285   3.89%  123,909   251   373   0.81%  1.20%
September 30, 2016  122,220   1,108   3.63%  114,858   195   287   0.68%  1.00%
June 30, 2016  110,017   1,025   3.73%  103,259   174   234   0.67%  0.91%
March 31, 2016  96,592   817   3.39%  90,014   127   172   0.57%  0.77%
                                 
($ in thousands)                                
  Average      Yield on  Average  Interest Expense  Average Cost of Funds 
  MBS  Interest  Average  Repurchase  GAAP  Economic  GAAP  Economic 
Nine Months Ended 
Held(1)
  
Income(2)
  MBS  
Agreements(1)
  Basis  
Basis(2)
  Basis  
Basis(3)
 
September 30, 2017 $144,174  $4,076   3.77% $135,761  $1,111  $1,541   1.09%  1.51%
September 30, 2016  109,610   2,950   3.59%  102,710   496   693   0.64%  0.90%

($ in thousands)            
  Net Portfolio  Net Portfolio 
  Interest Income  Interest Spread 
  GAAP  Economic  GAAP  Economic 
Three Months Ended Basis  
Basis(2)
  Basis  
Basis(4)
 
September 30, 2017 $1,010  $847   2.31%  1.90%
June 30, 2017  945   793   2.76%  2.27%
March 31, 2017  1,010   894   3.10%  2.71%
December 31, 2016  1,034   912   3.08%  2.69%
September 30, 2016  913   821   2.95%  2.63%
June 30, 2016  851   791   3.06%  2.82%
March 31, 2016  690   645   2.82%  2.62%
                 
($ in thousands)                
  Net Portfolio  Net Portfolio 
  Interest Income  Interest Spread 
  GAAP  Economic  GAAP  Economic 
Nine Months Ended Basis  
Basis(2)
  Basis  
Basis(4)
 
September 30, 2017 $2,965  $2,534   2.68%  2.26%
September 30, 2016  2,454   2,257   2.95%  2.69%

(1)Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 30 and 31 are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances.
(2)
Economic interest expense and economic net interest income presented in the tables above and the tables on page 31 include the effect of derivative instrument hedges for only the period presented.
(3)Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period related to hedging activities divided by average MBS.
(4)Economic net interest spread2021 is calculated by subtracting average economic cost of funds from yield on average MBS.


Interest Income and Average Earning Asset Yield

Interest income for the Company was $4.1 million for the nine months ended September 30, 2017 and $3.0 million for the nine months ended September 30, 2016.  Average MBS holdings were $144.2 million and $109.6 million for the nine months ended September 30, 2017 and 2016, respectively. The $1.1 million increase in interest income was due to combination of a 18 basis point increase in yields and a $34.6 million increase in average MBS holdings.

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

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

($ in thousands)                           
  Average MBS Held  Interest Income  Realized Yield on Average MBS 
  PT  Structured     PT  Structured     PT  Structured    
Three Months Ended MBS  MBS  Total  MBS  MBS  Total  MBS  MBS  Total 
September 30, 2017 $167,081  $3,156  $170,237  $1,524  $(10) $1,514   3.65%  (1.28)%  3.56%
June 30, 2017  130,519   3,669   134,188   1,220   49   1,269   3.74%  5.33%  3.78%
March 31, 2017  123,163   4,935   128,098   1,210   83   1,293   3.93%  6.67%  4.04%
December 31, 2016  127,627   4,325   131,952   1,238   47   1,285   3.88%  4.32%  3.89%
September 30, 2016  119,411   2,809   122,220   1,092   16   1,108   3.66%  2.19%  3.63%
June 30, 2016  106,653   3,364   110,017   1,008   17   1,025   3.78%  2.05%  3.73%
March 31, 2016  92,365   4,227   96,592   783   34   817   3.39%  3.25%  3.39%
                                     
($ in thousands)                                    
  Average MBS Held  Interest Income  Realized Yield on Average MBS 
  PT  Structured      PT  Structured      PT  Structured     
Nine Months Ended MBS  MBS  Total  MBS  MBS  Total  MBS  MBS  Total 
September 30, 2017 $140,254  $3,920  $144,174  $3,954  $122  $4,076   3.76%  4.12%  3.77%
September 30, 2016  106,143   3,467   109,610   2,883   67   2,950   3.62%  2.58%  3.59%

Interest Expense on Repurchase Agreements and the Cost of Funds

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

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


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

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

Because all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense.  The Company's average cost of funds calculated on a GAAP basis was 5 basis points above the average one-month LIBOR and 20 basis points below the average six-month LIBOR for the quarter ended September 30, 2017.  The Company's average economic cost of funds was 46 basis points above the average one-month LIBOR and 21 basis points above the average six-month LIBOR for the quarter ended September 30, 2017. The average term to maturity of the outstanding repurchase agreements increased from 40 days at December 31, 2016 to 48 days at September 30, 2017.

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

($ in thousands)               
  Average             
  Balance of  Interest Expense  Average Cost of Funds 
  Repurchase  GAAP  Economic  GAAP  Economic 
Three Months Ended Agreements  Basis  Basis  Basis  Basis 
September 30, 2017 $161,003  $504  $666   1.25%  1.66%
June 30, 2017  126,341   324   476   1.02%  1.51%
March 31, 2017  119,938   283   399   0.94%  1.33%
December 31, 2016  123,909   251   373   0.81%  1.20%
September 30, 2016  114,858   195   287   0.68%  1.00%
June 30, 2016  103,259   174   234   0.67%  0.91%
March 31, 2016  90,014   127   172   0.57%  0.77%
                     
($ in thousands)                    
  Average                 
  Balance of  Interest Expense  Average Cost of Funds 
  Repurchase  GAAP  Economic  GAAP  Economic 
Nine Months Ended Agreements  Basis  Basis  Basis  Basis 
September 30, 2017 $135,761  $1,111  $1,541   1.09%  1.51%
September 30, 2016  102,710   496   693   0.64%  0.90%



        Average GAAP Cost of Funds  Average Economic Cost of Funds 
        Relative to Average  Relative to Average 
  Average LIBOR  One-Month  Six-Month  One-Month  Six-Month 
Three Months Ended One-Month  Six-Month  LIBOR  LIBOR  LIBOR  LIBOR 
September 30, 2017  1.20%  1.45%  0.05%  (0.20)%  0.46%  0.21%
June 30, 2017  1.05%  1.43%  (0.03)%  (0.41)%  0.46%  0.08%
March 31, 2017  0.82%  1.37%  0.12%  (0.43)%  0.51%  (0.04)%
December 31, 2016  0.62%  1.28%  0.19%  (0.47)%  0.58%  (0.08)%
September 30, 2016  0.49%  1.09%  0.19%  (0.41)%  0.51%  (0.09)%
June 30, 2016  0.44%  0.92%  0.23%  (0.25)%  0.47%  (0.01)%
March 31, 2016  0.40%  0.84%  0.17%  (0.27)%  0.37%  (0.07)%
                         
                         
          Average GAAP Cost of Funds  Average Economic Cost of Funds 
          Relative to Average  Relative to Average 
  Average LIBOR  One-Month  Six-Month  One-Month  Six-Month 
Nine Months Ended One-Month  Six-Month  LIBOR  LIBOR  LIBOR  LIBOR 
September 30, 2017  1.03%  1.42%  0.06%  (0.33)%  0.48%  0.09%
September 30, 2016  0.44%  0.95%  0.20%  (0.31)%  0.46%  (0.05)%

Junior Subordinated Notes

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

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

The junior subordinated debt securities pay interest at a floating rate.  The rate is adjusted quarterly and set at a spread of 3.50% over the prevailing three-month LIBOR rate on the determination date.  As of September 30, 2017, the interest rate was 4.82%.

Gains or Losses and Other Income

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

as follows:
(in thousands)
We invest in MBS with the intent to earn net income from the realized yield on those assets over the related funding and hedging costs, and not for purposes of making short term gains from trading in these securities.   However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy.  During the nine months ended September 30, 2017, the Company received proceeds of $1.7 million from the sales of MBS.  There were no sales of MBS during the three months ended September 30, 2017. During the nine and three months ended September 30, 2016, the Company received proceeds of $73.1 million and $31.3 million from the sales of MBS, respectively.Asset

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

        15 Year  30 Year  Three 
  5 Year  10 Year  Fixed-Rate  Fixed-Rate  Month 
  
Treasury Rate(1)
  
Treasury Rate(1)
  
Mortgage Rate(2)
  
Mortgage Rate(2)
  
Libor(3)
 
September 30, 2017  1.93%  2.33%  3.11%  3.81%  1.32%
June 30, 2017  1.88%  2.30%  3.17%  3.90%  1.26%
March 31, 2017  1.93%  2.40%  3.41%  4.20%  1.13%
December 31, 2016  1.93%  2.45%  3.43%  4.20%  0.98%
September 30, 2016  1.16%  1.61%  2.76%  3.46%  0.85%
June 30, 2016  1.01%  1.49%  2.84%  3.57%  0.65%
March 31, 2016  1.22%  1.79%  2.97%  3.69%  0.63%

Portfolio
(1)Historical 5 and 10 Year Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange.
Corporate
(2)Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac's Primary Mortgage Market Survey.
Eliminations
(3)Historical LIBOR are obtained from the Intercontinental Exchange Benchmark Administration Ltd.
Total

The retained interests in securitizations represent the residual net interest spread remaining after payments on the notes issued through the securitization.  Fluctuations in value of retained interests are primarily driven by projections of future interest rates (the forward LIBOR curve), the discount rate used to determine the present value of the residual cash flows and prepayment and loss estimates on the underlying mortgage loans.  During the nine and three months ended September 30, 2017, the Company recorded gains on retained interests of $0.4 million and $0.1 million, respectively, compared to gains of $2.1 million and $1.0 million, respectively, for the nine and three months ended September 30, 2016.

Advisory Services

2022
Advisory services, external customers
$
3,312
$
-
$
-
$
-
$
3,312
Advisory services, other operating segments
(1)
29
-
-
(29)
-
Interest and dividend income
-
728
-
-
728
Interest expense
-
(210)
(379)
(2)
-
(589)
Net revenues
3,341
518
(379)
(29)
3,451
Other expenses
-
(4,868)
66
-
(4,802)
Operating expenses
(3)
(1,677)
(401)
-
-
(2,078)
Intercompany expenses
(1)
-
(29)
-
29
-
Income (loss) before income taxes
$
1,664
$
(4,780)
$
(313)
$
-
$
(3,429)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
2,547
$
-
$
-
$
-
$
2,547
Advisory services, other operating segments
(1)
35
-
-
(35)
-
Interest and dividend income
-
1,043
-
-
1,043
Interest expense
-
(24)
(248)
(2)
-
(272)
Net revenues
2,582
1,019
(248)
(35)
3,318
Other (expenses) income
-
(1,033)
-
-
(1,033)
Operating expenses
(3)
(1,157)
(496)
-
-
(1,653)
Intercompany expenses
(1)
-
(35)
-
35
-
Income (loss) before income taxes
$
1,425
$
(545)
$
(248)
$
-
$
632
Includes advisory services revenue received by Bimini Advisors from Royal Palm.
(2)
Includes interest on long-term debt.
(3)
Corporate expenses are allocated based on each segment’s proportional
share of total revenues.
Assets in each reportable segment were as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Total
September 30, 2022
$
1,967
86,542
$
8,361
$
96,870
December 31, 2021
1,901
111,022
9,162
122,085
- 29 -
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 1.50% 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 termsthird amendment to the management agreement
entered into on November 16, 2021, the
Company began providing certain repurchase agreement trading, clearing and
administrative services to Orchid that 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 the Company:
●
A daily fee equal to the outstanding principal balance of a management agreement.repurchase agreement funding
in place as of the end of such day


Operating Expenses

For the nine and three months ended September 30, 2017, the Company's total operating expenses were approximately $4.6 million and $1.5 million, respectively, compared to approximately $4.1 million and $1.4 millionmultiplied by 1.5 basis points for the nine and three months ended September 30, 2016, respectively.   The table below presents a breakdownamount of operating expenses for the nine and three months ended September 30, 2017 and 2016.

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

Financial Condition:

Mortgage-Backed Securities

As of September 30, 2017, the Company's MBS portfolio consisted of $198.0 million of agency or government MBS at fair value and had a weighted average coupon of 4.23%.  During the nine months ended September 30, 2017, the Company receivedaggregate outstanding principal repayments of $7.7 million compared to $10.3 million for the comparable period ended September 30, 2016.  The average prepayment speeds for the quarters ended September 30, 2017 and 2016 were 8.3% and 13.6%, respectively.balance

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

     Structured    
  PT MBS  MBS  Total 
Three Months Ended Portfolio (%)  Portfolio (%)  Portfolio (%) 
September 30, 2017  5.2   18.8   8.3 
June 30, 2017  5.9   20.4   9.9 
March 31, 2017  4.8   18.8   8.8 
December 31, 2016  5.5   27.3   11.1 
September 30, 2016  9.4   19.7   13.6 
June 30, 2016  7.8   20.4   12.6 
March 31, 2016  11.8   16.6   14.3 


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

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

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

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

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


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

($ in thousands)                  
 Nine Months Ended September 30, 
 2017 2016 
  Total Cost  Average Price  Weighted Average Yield  Total Cost  Average Price  Weighted Average Yield 
PT MBS $77,295  $107.68   2.70% $133,100  $110.31   2.42%

The Company's portfolio of PT MBS is typically comprised of adjustable-rate MBS, fixed-rate MBS and hybrid adjustable-rate MBS. The Company generally seeks to acquire low duration assets that offer high levels of protection from mortgage prepayments provided they are reasonably priced by the market.  Although the duration of an individual asset can change as a result of changes in interest rates, the Company strives to maintain a hedged PT MBS portfolio with an effective duration of less than 2.0. The stated contractual final maturityor equal to $5 billion, and
multiplied by 1.0 basis point for any amount of the mortgage loans underlying the Company's portfolio of PT MBS generally ranges up to 30 years. However, the effect of prepayments of the underlying mortgage loans tends to shorten the resulting cash flows from the Company's investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages and loan payoffs in connection with home sales.aggregate outstanding principal

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

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

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


The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of September 30, 2017, assuming rates instantaneously fall 100 basis points ("bps"), rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS' effective duration to movements in interest rates.

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

($ in thousands)                     
  Notional  $ Change in Fair Value  % Change in Fair Value 
  
Amount(1)
  -100BPS  +100BPS  +200BPS  -100BPS  +100BPS  +200BPS 
Eurodollar Futures Contracts                     
Repurchase Agreement Hedges $1,020,000  $(1,701) $2,550  $5,100   (0.68)%  1.02%  2.04%
Junior Subordinated Debt Hedges  442,000   (737)  1,105   2,210   (0.68)%  1.02%  2.04%
  $1,462,000  $(2,438) $3,655  $7,310   (0.68)%  1.02%  2.04%
                             
Gross Totals     $2,984  $(5,997) $(14,400)            

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

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

Repurchase Agreements

As of September 30, 2017, the Company had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with five of these counterparties.  We believe these facilities provide borrowing capacitybalance in excess of our needs.  None of these lenders are affiliated with$5 billion, and
●
A fee for the Company. These borrowings are securedclearing and operational services provided by the Company's MBS.personnel

As of September 30, 2017, the Company had obligations outstanding under the repurchase agreements of approximately $187.4 million with a net weighted average borrowing cost of 1.35%. The remaining maturity of the Company's outstanding repurchase agreement obligations ranged from 11Manager equal to 89 days, with a weighted average maturity of 48 days.  Securing the repurchase agreement obligation as of September 30, 2017 are MBS with an estimated fair value, including accrued interest, of $198.2 million and a weighted average maturity of 326 months.  Through November 3, 2017, the Company has been able to maintain its repurchase facilities with comparable terms to those that existed at September 30, 2017 with maturities through January 29, 2018.$10,000 per month.


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

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

(1)The higher ending balance relative to the average balance during the quarter ended September 30, 2017 reflects the growth of the portfolio, on a leveraged basis. During the quarter ended September 30, 2017, the Company's investment in PT MBS increased $56.1 million.
(2)The higher ending balance relative to the average balance during the quarter ended March 31, 2016 reflects the repositioning of the portfolio. During the quarter ended March 31, 2016, the Company's investment in PT MBS increased $26.2 million.


Liquidity and Capital Resources

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

Our strategy for hedging our funding costs typically involves taking short positions in Eurodollar futures, T-Note futures, swaptions or other instruments. Since inception we have primarily used short positions in Eurodollar futures.  When the market causes these short positions to decline in value we are required to meet margin calls with cash.  This can reduce our liquidity position to the extent other securities in our portfolio move in price in such a way that we do not receive enough cash through margin calls to offset the Eurodollar related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.

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


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

As discussed above, we invest a portion of our capital in structured MBS.  We do not apply leverage to this portion of our portfolio. The leverage inherent in the structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repurchase market.  This structured MBS strategy has been a core element of the Company's overall investment strategy since 2008.  However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.

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

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

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

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

To the extent Orchid is able to increase its capital base over time, we will benefit via increased management fees.  In addition, Orchid is obligated to reimburse us for any direct expenses paid
incurred on its behalf and to pay to us an amount equal to
Orchid's pro rata shareportion of certain overhead as definedcosts set forth 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.

The independent Board of Directors of Orchid has the ability to terminate the management agreement has been
renewed through February 2023 and thus end our ability to collect management fees and share overhead costs.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 current automatic
renewal term.

The following table summarizes the advisory services revenue received from
Orchid in each quarter during 2022 and 2021.
(in thousands)
Advisory Services
Repurchase,
Average
Average
Clearing and
Orchid
Orchid
Management
Overhead
Administrative
Three Months Ended
MBS
Equity
Fee
Allocation
Fees
Total
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
December 31, 2021
6,056,259
806,382
2,587
443
-
3,030
September 30, 2021
5,136,331
672,384
2,157
390
-
2,547
June 30, 2021
4,504,887
542,679
1,791
395
-
2,186
March 31, 2021
4,032,716
456,687
1,621
404
-
2,025
Nine Months Ended
September 30, 2022
$
4,459,203
$
853,350
$
7,881
$
1,482
$
357
$
9,720
September 30, 2021
4,557,978
557,250
5,569
1,189
-
6,758
- 30 -
Investment Portfolio Segment
Net Portfolio Interest Income
We define
net portfolio
interest
income as
interest
income on
MBS less
interest
expense on
repurchase
agreement
funding.
During the
nine months ended September 30, 2022, we generated $1.0 million of
net portfolio interest income, consisting of $1.3 million of interest
income from MBS
assets offset by $0.3
million of interest
expense on repurchase
liabilities.
For the comparable
period ended September
30, 2021, we
generated
$1.6 million
of net portfolio
interest income,
consisting
of $1.7 million
of interest
income from
MBS assets offset
by
$0.1 million
of interest
expense
on repurchase
liabilities.
The $0.4
million decrease
in interest
income for
the nine
months ended
September
30, 2022 was due to a $20.3 million decrease in average MBS balances,
which was partially offset by a 31 basis point ("bp") increase in
yields earned on the portfolio.
There was a $0.2 million increase
in interest expense
for the nine months ended
September 30, 2022
that
was due to
a 70 bp increase
in cost of
funds which
was partially
offset by a
$21.9 million
decrease
in average
repurchase
liabilities.
Our economic
interest
expense
on repurchase
liabilities
for the
nine months
ended September
30, 2022
and 2021
was $0.9
million and
$2.2 million,
respectively, resulting
in $0.5 million
and ($0.5)
million of
economic net
portfolio
interest
income (expense),
respectively.
During
the three
months
ended
September
30, 2022,
we generated
$0.2 million
of net
portfolio
interest
income,
consisting
of $0.4
million
of
interest income
from MBS
assets offset
by
$0.2 million
of
interest expense
on
repurchase liabilities.
For
the three
months ended
September 30, 2021, we generated $0.5 million of net portfolio interest income, consisting of approximately
$537,000 of interest income
from MBS
assets offset
by approximately
$24,000 of
interest
expense on
repurchase
liabilities.
Our economic interest expense
on repurchase liabilities
for the three months ended September 30, 2022 and 2021 was $0.4 million
and $0.7 million,
respectively, resulting
in approximately
$0.1 million
and ($0.2) million
of economic
net portfolio
interest income
(expense),
respectively.
The
tables
below
provide
information
on our
portfolio
average
balances,
interest
income,
yield
on
assets,
average
repurchase
agreement
balances, interest
expense, cost
of funds, net interest
income and net
interest rate
spread for the
nine months ended
September 30,
2022
and 2021
and each
quarter in
2022 and
2021 on both
a GAAP and
economic basis.
($ in thousands)
Average
Yield on
Average
Interest RatesExpense
Average Cost of Funds
MBS
Interest
Average
Repurchase
GAAP
Economic
GAAP
Economic
Three Months Ended
Held
(1)
Income
(2)
MBS
Agreements
(1)
Basis
Basis
(2)
Basis
Basis
(3)
September 30, 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%
December 31, 2021
62,597
511
3.27%
61,019
21
728
0.14%
4.77%
September 30, 2021
66,692
537
3.22%
67,253
24
733
0.14%
4.36%
June 30, 2021
70,925
578
3.26%
72,241
31
739
0.17%
4.09%
March 31, 2021
69,017
611
3.54%
69,104
40
748
0.23%
4.33%
Nine Months Ended
September 30, 2022
$
48,584
$
1,328
3.65%
$
47,642
$
314
$
869
0.88%
2.43%
September 30, 2021
68,878
1,726
3.34%
69,533
95
2,220
0.18%
4.26%
- 31 -
($ in thousands)
Net Portfolio
Net Portfolio
Interest Income
Interest Spread
GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(2)
Basis
Basis
(4)
September 30, 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%
December 31, 2021
490
(217)
3.13%
(1.50)%
September 30, 2021
513
(196)
3.08%
(1.13)%
June 30, 2021
547
(161)
3.09%
(0.83)%
March 31, 2021
571
(137)
3.31%
(0.79)%
Nine Months Ended
September 30, 2022
$
1,014
$
459
2.77%
1.22%
September 30, 2021
1,631
(494)
3.16%
(0.92)%
(1)
Portfolio yields
and costs
of borrowings
presented in
the tables
above and
the tables
on pages
32 and
33 are
calculated based
on the
average balances
of the underlying
investment portfolio/repurchase
agreement balances
and are annualized
for the periods
presented.
Average balances for quarterly periods are calculated using two data
points, the beginning and ending balances.
(2)
Economic interest expense and economic net interest income
presented in the tables above and the tables on page 33 include
the effect
of derivative instrument hedges for only the period presented.
(3)
Represents
interest
cost
of
our
borrowings
and
the
effect
of
derivative
instrument
hedges
attributed
to
the
period
related
to
hedging
activities divided by average MBS.
(4)
Economic net interest spread is calculated by subtracting average economic
cost of funds from yield on average MBS.
Interest Income and Average Earning Asset Yield
Our interest income
was $1.3
million for
the nine
months ended September 30,
2022 and
$1.7 million
for the
nine months ended
September
30, 2021.
Average
MBS Marketholdings
were
$48.6
million
and $68.9
million
for the
nine months
ended
September
30, 2022
and 2021,

respectively.
The $0.4
million
decrease
in interest
income was
due to
a $20.3
million
decrease
in average
MBS holdings,
which was
partially
In many respects offset by a
31 basis point
("bp") increase
in yields.
Our interest income was $0.4 million for
the third three months ended September 30, 2022 and
$0.5 million for the
three months ended
September 30, 2021.
Average MBS holdings were $41.4 million and $66.7 million for the three months ended September
30, 2022 and
2021, respectively.
The $0.1 million
decrease in
interest income
was due to a $25.3
million decrease
in average
MBS holdings,
which was
partially offset
by a 108
bp increase
in yields in
average MBS
holdings.
The tables below present the average
portfolio size, income
and yields of our respective
sub-portfolios,
consisting of structured
MBS
and PT MBS,
for the nine
months ended
September
30, 2022
and 2021,
and for each
quarter during
2022 and
2021.
- 32 -
($ in thousands)
Average MBS Held
Interest Income
Realized Yield on Average MBS
PT
Structured
PT
Structured
PT
Structured
Three Months Ended
MBS
MBS
Total
MBS
MBS
Total
MBS
MBS
Total
September 30, 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%
December 31, 2021
59,701
2,896
62,597
500
11
511
3.35%
1.55%
3.27%
September 30, 2021
64,641
2,051
66,692
533
4
537
3.30%
0.91%
3.22%
June 30, 2021
70,207
718
70,925
579
(1)
578
3.30%
(0.11)%
3.26%
March 31, 2021
68,703
314
69,017
605
6
611
3.53%
6.54%
3.54%
Nine Months Ended
September 30, 2022
$
45,596
$
2,988
$
48,584
$
1,188
$
140
$
1,328
3.48%
6.22%
3.65%
September 30, 2021
67,851
1,027
68,878
1,717
9
1,726
3.37%
1.25%
3.34%
Interest Expense on Repurchase Agreements and the Cost of Funds
Our average
outstanding
balances
under repurchase
agreements
were $47.6
million and
$69.5 million,
generating
interest expense
of
$0.3 million
and $0.1
million for
the nine months
ended September
30, 2022
and 2021,
respectively.
Our average
cost of funds
was 0.88%
and 0.18% for nine months
ended September
30, 2022 and 2021, respectively.
There was a repeat of the first and second. Economic and market developments continued the trend in place since March.  Inflation data continued to come in below market expectations.  Optimism stemming from the surprise outcome of the U.S. Presidential election last November and the markets' expectations for progress on health care, regulatory and tax reform, infrastructure spending, etc. were not realized.  In contrast, events in Washington were chaotic at times as the Trump Administration struggled with a Republican party rife with internal struggles and political infighting inside the White House itself.  Efforts to repeal and replace the Affordable Care Act seemed to come to an end and the continued in-fighting among Republicans called into question the ability of the Trump Administration to accomplish anything meaningful. The Federal Reserve (the "Fed") raised their target for the Federal Funds rate in March and June, and announced a tapering of their asset purchases in September. However, the market remained skeptical the Fed would be able to follow through with as many additional hikes as the Fed was expecting as core inflation readings continued to show year over year declines, with many of the elements of the index exhibiting persistent weakness.  Geopolitical events – particularly with respect to North Korea – keep the world and markets on edge.  The yield on the 10-year US Treasury rate hit its year to date low on September 7, 2017, closing at 2.04%, and nearly broke below the psychologically important 2% level intra-day. Mother nature had a hand in shaping developments in the markets as well, as three major hurricanes made landfall – one each in Texas, Florida and Puerto Rico. In the case of Texas, Hurricane Harvey caused unprecedented flooding and disrupted the Nation's oil refining capacity for several days.

However, there was a perceptible change in market sentiment in early September, and the market reversed course into the end of the third quarter and early fourth quarter. Geo-political events calmed down, removing the flight-to-quality induced demand for safe-haven assets, and economic news strengthened.  Events in Washington turned mildly positive as the Trump Administration pivoted away from health care reform to tax reform, with what the market perceived to be slightly better prospects for success. Inflation data finally met expectations and showed signs of reversing its decline when the August data was released on September 14th.    Finally, on September 20th, Fed Chairwomen Yellen sounded quite hawkish and reiterated her belief that recent inflation data represented temporary or transitory effects and would reverse soon enough back towards their 2% target.  It was quite clear the Fed intended to raise the Federal Funds rate again in December. The market responded as Fed Funds futures pricing implied a 70-80% probability of a 25 basis point70 bp increase in the Federalaverage
cost of funds
and a
$21.9 million
decrease in
average outstanding repurchase agreements during
the
nine months
ended September 30,
2022, as
compared
to the nine
months ended
September
30, 2021.
Our economic
interest
expense
was $0.9
million
and $2.2
million
for the
nine
months
ended
September
30, 2022
and 2021,
respectively.
There was
a 183 bp decrease
in the average
economic cost
of funds
to 2.43%
for the nine
months ended
September
30, 2022 from
4.26%
for the nine
months ended September 30, 2021.
The $1.3 million decrease in
economic interest expense was due to the
$21.9 million
decrease in average
outstanding repurchase agreements,
combined with the
183 bp
decrease economic cost of
funds during the
nine
months ended
September
30, 2022.
Our average
outstanding
balances
under repurchase
agreements
were $40.2
million and
$67.3 million,
generating
interest expense
of
approximately
$0.2 million
and 24,000
for the three
months ended
September
30, 2022 and
2021, respectively.
Our average
cost of funds
was 2.09% and 0.14% for
three months ended
September 30,
2022 and 2021, respectively.
There was a 195 bp increase
in the average
cost of
funds,
which was
partially
offset by
a $27.0
million
decrease
in average
outstanding
repurchase
agreements
during
the three
months
ended September
30, 2022,
as compared
to the three
months ended
September
30, 2021.
Our
economic
interest
expense
was
$0.4
million
and
$0.7
million
for
the
three
months
ended
September 30,
2022
and
2021,
respectively. There
was a 44
bp decrease
in the average
economic
cost of funds
to 3.92%
for the
three months
ended September
30, 2022
from 4.36%
for the three
months ended
September
30, 2021.
Because all of
our repurchase agreements are short-term, changes in market rates
have a
more immediate impact on our
interest
expense.
Our average
cost of funds
calculated
on a GAAP
basis was
10 bps below
the average
one-month
LIBOR and
120 bps below
the
average
six-month
LIBOR for
the quarter
ended September
30, 2022.
Our average
economic
cost of
funds was
173 bps
above the
average
one-month
LIBOR
and 63
bps above
the average
six-month
LIBOR
for the
quarter
ended September
30, 2022.
The average
term to
maturity
of the outstanding
repurchase
agreements
decreased
from 16
days at December
31, 2021
to 16 days
at September
30, 2022.
The tables
below
present
the average
outstanding
balances
under
our repurchase
agreements,
interest
expense
and average
economic
cost of funds,
and average
one-month and
six-month LIBOR
rates for the
nine months
ended September
30, 2022 and
2021, and for
each
quarter in
2022 and
2021, on
both a GAAP
and economic
basis.
- 33 -
($ in thousands)
Average
Balance of
Interest Expense
Average Cost of Funds
Repurchase
GAAP
Economic
GAAP
Economic
Three Months Ended
Agreements
Basis
Basis
Basis
Basis
September 30, 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%
December 31, 2021
61,019
21
728
0.14%
4.77%
September 30, 2021
67,253
24
733
0.14%
4.36%
June 30, 2021
72,241
31
739
0.17%
4.09%
March 31, 2021
69,104
40
748
0.23%
4.33%
Nine Months Ended
September 30, 2022
$
47,642
$
314
$
869
0.88%
2.43%
September 30, 2021
69,533
95
2,220
0.18%
4.26%
Average GAAP Cost of Funds
Average Economic Cost of Funds
Relative to Average
Relative to Average
Average LIBOR
One-Month
Six-Month
One-Month
Six-Month
Three Months Ended
One-Month
Six-Month
LIBOR
LIBOR
LIBOR
LIBOR
September 30, 2022
2.19%
3.29%
(0.10)%
(1.20)%
1.73%
0.63%
June 30, 2022
0.93%
1.90%
(0.30)%
(1.27)%
1.32%
0.35%
March 31, 2022
0.25%
0.76%
(0.03)%
(0.54)%
1.27%
0.76%
December 31, 2021
0.09%
0.23%
0.05%
(0.09)%
4.68%
4.54%
September 30, 2021
0.09%
0.16%
0.05%
(0.02)%
4.27%
4.20%
June 30, 2021
0.10%
0.18%
0.07%
(0.01)%
3.99%
3.91%
March 31, 2021
0.13%
0.23%
0.10%
0.00%
4.20%
4.10%
Nine Months Ended
September 30, 2022
1.12%
1.98%
(0.24)%
(1.10)%
1.31%
0.45%
September 30, 2021
0.10%
0.19%
0.08%
(0.01)%
4.16%
4.07%
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 quarterly
report with respect
to Orchid’s
common stock
have been
adjusted
to reflect
this reverse
stock split.
At both September
30, 2022 and
December
31, 2021,
we owned 591,071
shares of
Orchid common
stock. Orchid
paid total
dividends
of $1.995
and $2.925
per share
during the
nine months
ended September
30, 2022
and 2021,
respectively.
During the
nine months
ended
September 30, 2022 and 2021, we
received dividends on this common stock investment of approximately $1.0 million and $1.5
million,
respectively. Orchid paid total dividends of $0.545 and $0.975 per share during the three months ended September 30, 2022 and 2021,
respectively.
During the three months ended
September 30, 2022 and 2021, we received
dividends on this common stock
investment of
approximately
$0.3
million and
$0.5 million,
respectively.
Long-Term Debt
Junior Subordinated Notes
Interest
expense on
our junior
subordinated
debt securities
was $0.9
million and
$0.7 million
for the nine
months ended
September
30,
2022 and 2021, respectively.
The average rate of interest paid for the nine months
ended September 30, 2022 was 4.64% compared
to
3.67% for
the comparable
period in
2021.
- 34 -
Interest expense
on
our
junior subordinated debt
securities was
$0.4 million
and
$0.2 million
for
the
three month
periods ended
September
30, 2022
and 2021,
respectively.
The average
rate of
interest
paid for
the three
months ended
September
30, 2022
was 5.58%
compared
to 3.62%
for the comparable
period in
2021.
The junior
subordinated
debt securities
pay interest
at a floating
rate.
The rate is
adjusted quarterly
and set at
a spread of
3.50% over
the prevailing
three-month
LIBOR rate
on the determination
date.
As of September
30, 2022,
the interest
rate was
6.79%.
Note Payable
On October
30, 2019,
the Company borrowed
$680,000 from a
bank. The
note is
payable in December.  equal
monthly principal and interest
installments of approximately
$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.
Gains or Losses and Other Income
The table
below presents
our gains
or losses
and other
income for
the nine and
three months
ended September
30, 2022
and 2021.
(in thousands)
Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
Change
2022
2021
Change
Realized (losses) gains on sales of MBS
$
(858)
$
69
$
(927)
$
-
$
69
$
(69)
Unrealized losses on MBS
(6,606)
(2,222)
(4,384)
(2,572)
(324)
(2,248)
Total losses on
MBS
(7,464)
(2,153)
(5,311)
(2,572)
(255)
(2,317)
Gains (losses) on derivative instruments
795
(280)
1,075
844
(147)
991
Gains on retained interests in securitizations
66
-
66
66
-
66
Unrealized losses on
Orchid Island Capital, Inc. common stock
(7,423)
(856)
(6,567)
(3,140)
(779)
(2,361)
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 nine
months ended
September
30, 2022
and September
30, 2021,
we received
proceeds
of
$23.1 million
and $13.1
million from
the sales
of MBS,
respectively.
The fair
value of
our MBS
portfolio
and derivative
instruments,
and the
gains (losses)
reported
on those
financial
instruments,
are driven
by changes in yields and interest rates,
the spreads that MBS trade relative
to comparable duration
U.S. Treasuries or swaps, as well as
varying levels
of demand
for MBS.
The table
below presents
historical
interest
rate data released
as of the
end of quarter
during 2022
and 2021.
- 35 -
5 Year
10 Year
15 Year
30 Year
Three
U.S. Treasury
U.S. Treasury
Fixed-Rate
Fixed-Rate
Month
Rate
(1)
Rate
(1)
Mortgage Rate
(2)
Mortgage Rate
(2)
Libor
(3)
September 30, 2022
4.04%
3.80%
5.35%
6.11%
3.45%
June 30, 2022
3.00%
2.97%
4.65%
5.52%
1.97%
March 31, 2022
2.42%
2.33%
3.39%
4.17%
0.84%
December 31, 2021
1.26%
1.51%
2.35%
3.10%
0.21%
September 30, 2021
1.00%
1.53%
2.18%
2.90%
0.12%
June 30, 2021
0.87%
1.44%
2.27%
2.98%
0.13%
March 31, 2021
0.94%
1.75%
2.39%
3.08%
0.19%
(1)
Historical 5 Year and 10
Year U.S. Treasury
Rates are obtained from quoted end of day prices on the Chicago Board Options
Exchange.
(2)
Historical 15 Year and
30 Year Fixed
Rate Mortgage Rates are obtained from Freddie Mac’s Primary
Mortgage Market Survey.
(3)
Historical LIBOR are obtained from the Intercontinental Exchange Benchmark
Administration Ltd.
Operating Expenses
For the nine
and three months ended September 30, 2022,
our total operating expenses were approximately $6.2 million and $2.1
million,
respectively, compared to approximately
$5.1 million and $1.7 million for the nine and three months ended September 30, 2021,
respectively.
The table
below presents
a breakdown
of operating
expenses for
the nine
and three
months ended
September
30, 2022 and
2021.
(in thousands)
Nine Months Ended September 30,
Three Months Ended September 30,
2022
2021
Change
2022
2021
Change
Compensation and related benefits
$
3,836
$
3,220
$
616
$
1,230
$
1,029
$
201
Legal fees
82
113
(31)
18
37
(19)
Accounting, auditing and other professional fees
288
293
(5)
85
97
(12)
Directors’ fees and liability insurance
588
568
20
195
190
5
Administrative and other expenses
1,422
940
482
549
300
249
$
6,216
$
5,134
$
1,082
$
2,077
$
1,653
$
424
Beginning
with the
second quarter
of 2022,
Bimini began
providing
certain repurchase
agreement
trading,
clearing and
administrative
services to
Orchid.
Providing
these services
required
Bimini to
increase staffing
and other
resources,
causing an
increase
in
compensation
related expenses
of approximately
$0.5 million
and $0.2
million for
the nine
and three
month periods
ended September
30,
2022, and
increases
in other
administrative
expenses
of approximately
$0.4 million
and $0.2
million for
the nine
and three
month periods
ended September
30, 2022,
as compared
to the nine
and three
months ended
September
30, 2021.
Income Tax Provision
We recorded
an income
tax (benefit)
provision
for the nine
months ended
September
30, 2022
and 2021
of approximately
$(1.6)
million and
$0.3 million,
respectively, on
consolidated
pre-tax book
(loss) income
of $(9.4)
million and
$1.2 million,
respectively. We
recorded
an income
tax (benefit)
provision
for the three
months ended
September
30, 2022
and 2021
of approximately
$(0.3) million
and
$0.2 million,
respectively, on
consolidated
pre-tax book
(loss) income
of $(3.4)
million and
$0.6 million.
- 36 -
Financial
Condition:
Mortgage-Backed Securities
As of September
30, 2022,
our MBS portfolio
consisted
of $44.3
million of
agency or
government
MBS at fair
value and
had a
weighted
average coupon
of 3.62%.
During the
nine months
ended September
30, 2022,
we received
principal
repayments
of $7.0 million
compared
to $11.8 million
for the
comparable
period ended
September
30,
2021.
The average
prepayment
speeds for
the quarters
ended
September
30, 2022
and 2021
were 10.8%
and 18.3%,
respectively.
The following
table presents
the three-month
constant prepayment
rate (“CPR”)
experienced
on our structured
and PT MBS
sub-
portfolios,
on an annualized
basis, for
the quarterly
periods presented.
CPR is a
method of
expressing
the prepayment
rate for
a mortgage
pool that
assumes that
a constant
fraction
of the remaining
principal
is prepaid
each month
or year. Specifically,
the CPR
in the chart
below represents
the three-month
prepayment
rate of the
securities
in the respective
asset category.
Structured
PT MBS
MBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
September 30, 2022
13.1
7.5
10.8
June 30, 2022
17.2
22.9
20.0
March 31, 2022
18.5
25.6
20.9
December 31, 2021
13.7
35.2
21.1
September 30, 2021
15.5
26.9
18.3
June 30, 2021
21.0
31.3
21.9
March 31, 2021
18.5
16.4
18.3
The following
tables summarize
certain characteristics
of our PT
MBS and structured
MBS as of
September
30, 2022
and December
31, 2021:
($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
September 30, 2022
Fixed Rate MBS
$
41,276
93.2%
4.02%
329
1-Jul-52
Structured MBS
2,994
6.8%
2.84%
301
15-May-51
Total MBS Portfolio
$
44,270
100.0%
3.62%
327
1-Jul-52
December 31, 2021
Fixed Rate MBS
$
58,029
95.4%
3.69%
330
1-Sep-51
Structured MBS
2,774
4.6%
2.88%
306
15-May-51
Total MBS Portfolio
$
60,803
100.0%
3.41%
329
1-Sep-51
($ in thousands)
September 30, 2022
December 31, 2021
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
31,774
71.8%
$
39,703
65.3%
Freddie Mac
12,496
28.2%
21,100
34.7%
Total Portfolio
$
44,270
100.0%
$
60,803
100.0%
- 37 -
September 30, 2022
December 31, 2021
Weighted Average Pass-through Purchase Price
$
105.51
$
109.33
Weighted Average Structured Purchase Price
$
4.48
$
4.81
Weighted Average Pass-through Current Price
$
94.00
$
109.30
Weighted Average Structured Current Price
$
13.36
$
9.87
Effective Duration
(1)
4.484
2.103
(1)
Effective duration is the approximate percentage change in price
for a 100 basis point change in rates.
An effective duration of 4.484 indicates
that an interest rate increase of 1.0% would be expected to cause a 4.484% decrease in the
value of the MBS in our investment portfolio at
September 30, 2022.
An effective duration of 2.103 indicates that an interest
rate increase of 1.0% would be expected to cause a 2.103%
decrease in the value of the MBS in our investment portfolio at December
31, 2021. These figures include the structured securities in the
portfolio but do include the effect of our hedges. Effective duration
quotes for individual investments are obtained from The Yield
Book, Inc.
The following
table presents
a summary
of our portfolio
assets acquired
during the
nine months
ended September
30, 2022
and 2021.
($ in thousands)
Nine Months Ended September 30,
2022
2021
Total Cost
Average
Price
Weighted
Average
Yield
Total Cost
Average
Price
Weighted
Average
Yield
PT MBS
$
21,009
$
99.14
4.12%
$
23,337
$
106.48
1.41%
Structured MBS
-
-
-
2,852
10.01
0.43%
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
duration
of IIO’s
similarly, but the
floating rate
nature of
the coupon
of IIOs (which
is inversely
related to
the level
of one month
LIBOR) causes
their price
movements
- and model
duration
- to be affected
by changes
in both
prepayments
and one month
LIBOR - both
current and
anticipated
levels.
As a result,
the duration
of IIO securities
will also
vary greatly.
Prepayments
on the loans
underlying
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.
- 38 -
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 September
30, 2022,
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.
($ in thousands)
Fair
$ Change in Fair Value
% Change in Fair Value
MBS Portfolio
Value
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Fixed Rate MBS
$
41,276
$
1,973
$
(2,149)
$
(4,393)
4.78%
(5.21)%
(10.64)%
Structured MBS
2,994
(124)
63
78
(4.14)%
2.10%
2.61%
Total MBS
Portfolio
$
44,270
$
1,849
$
(2,086)
$
(4,315)
4.18%
(4.71)%
(9.75)%
($ in thousands)
Notional
$ Change in Fair Value
% Change in Fair Value
Amount
(1)
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Treasury Futures Contracts
Repurchase Agreement Hedges
$
14,400
$
(1,115)
$
1,037
$
1,998
(7.75)%
7.20%
13.88%
$
14,400
$
(1,115)
$
1,037
$
1,998
Gross Totals
$
734
$
(1,049)
$
(2,317)
(1)
Represents the average contract/notional amount of Eurodollar futures
contracts.
In addition
to changes
in interest
rates, other
factors impact
the fair
value of 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.
Repurchase Agreements
As of September
30, 2022,
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 us.
These borrowings
are secured
by our MBS.
As of September
30, 2022,
we had obligations
outstanding
under the
repurchase
agreements
of approximately
$43.5 million
with a
net weighted
average borrowing
cost of 2.98%.
The remaining
maturity of
our outstanding
repurchase
agreement
obligations
ranged from
11 to 31 days,
with a weighted
average maturity
of 16 days.
Securing
the repurchase
agreement
obligation
as of September
30, 2022
are
MBS with
an estimated
fair value,
including
accrued interest,
of $44.3 million
and a weighted
average maturity
of 329 months.
Through
November
10, 2022,
we have been
able to maintain
our repurchase
facilities
with comparable
terms to those
that existed
at September
30,
2022 with
maturities
through December
19, 2022.
- 39 -
The table below presents information about our period-end, maximum and average
repurchase agreement obligations for each
quarter in 2022 and 2021.
($ in thousands)
Ending
Maximum
Average
Difference Between Ending
Balance
Balance
Balance
Repurchase Agreements and
of Repurchase
of Repurchase
of Repurchase
Average Repurchase Agreements
Three Months Ended
Agreements
Agreements
Agreements
Amount
Percent
September 30, 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)%
December 31, 2021
58,878
62,139
61,019
(2,141)
(3.51)%
September 30, 2021
63,160
72,047
67,253
(4,093)
(6.09)%
June 30, 2021
71,346
72,372
72,241
(895)
(1.24)%
March 31, 2021
73,136
76,004
69,104
4,032
5.83%
Liquidity and Capital Resources
Liquidity
is our ability
to turn non-cash
assets into
cash, purchase
additional
investments,
repay principal
and interest
on borrowings,
fund overhead
and fulfill
margin calls.
We have both
internal
and external
sources of
liquidity. However,
our material
unused sources
of
liquidity
include cash
balances,
unencumbered
assets and
our ability
to sell encumbered
assets to
raise cash.
Our balance
sheet also
generates
liquidity
on an on-going
basis through
payments of
principal
and interest
we receive
on our MBS
portfolio
and dividends
we
receive on
our investment
in Orchid
common stock.
Internal
Sources of
Liquidity
Our internal
sources of
liquidity
include our
cash balances,
unencumbered
assets and
our ability
to liquidate
our encumbered
security
holdings.
Our balance
sheet also
generated
liquidity
on an ongoing
basis through
payments
of principal
and interest
we receive
on our
MBS portfolio
and dividends
we receive
on our investment
in Orchid
common stock.
We have previously,
and may
again in the
future, employ
a hedging
strategy
that typically
involves
taking short
positions
in Eurodollar
futures,
T-Note futures,
TBAs or other
instruments.
When the
market causes
these short
positions
to decline
in value we
are required
to
meet margin
calls with
cash.
This can
reduce our
liquidity
position
to the extent
other securities
in our portfolio
move in price
in such a
way
that we do
not receive
enough cash
through margin
calls to offset
the Eurodollar
related margin
calls. If
this were
to occur
in sufficient
magnitude,
the loss of
liquidity
might force
us to reduce
the size
of the levered
portfolio,
pledge additional
structured
securities
to raise
funds or
risk operating
the portfolio
with less
liquidity.
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.
- 40 -
Under our
repurchase
agreement
funding arrangements,
we are required
to post margin
at the initiation
of the borrowing.
The margin
posted represents
the haircut,
which is a
percentage
of the market
value of the
collateral
pledged.
To the extent the
market value
of the
asset collateralizing
the financing
transaction
declines,
the market
value of our
posted margin
will be insufficient
and we will
be required
to
post additional
collateral.
Conversely, if
the market
value of the
asset pledged
increases
in value,
we would
be over collateralized
and we
would be
entitled to
have excess
margin returned
to us by the
counterparty.
Our lenders
typically
value our
pledged securities
daily to
ensure the
adequacy of
our margin
and make margin
calls as
needed, as
do we.
Typically, but not always,
the parties
agree to
a minimum
threshold
amount for
margin calls
so as to avoid
the need
for nuisance
margin calls
on a daily
basis. Our
master repurchase
agreements
do not specify
the haircut;
rather haircuts
are determined
on an individual
repurchase
transaction
basis.
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
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
and through
revenues
from our
advisory services
business.
As of September
30, 2022,
we had cash
and cash equivalents
of $5.9
million.
We generated
cash flows
of
$8.3 million
from principal
and interest
payments on
our MBS
portfolio
and had average
repurchase
agreements
outstanding
of $47.6
million during
the nine months
ended September
30, 2022.
In addition,
during the
nine months
ended September
30, 2022,
we received
approximately
$9.7 million
in management
fees and
expense reimbursements
as manager
of Orchid
and approximately
$1.0 million
in
dividends
from our
investment
in Orchid
common stock.
Outlook
Orchid Island
Capital Inc.
Orchid Island
Capital reported
a third quarter
2022 loss
of $84.5
million and
its shareholders
equity declined
from $506.4
million to
$400.4 million.
The market
conditions
described
below led
to the loss
as agency
MBS underperformed
comparable
duration
treasuries
and the Orchid’s
hedge positions.
The decline
in shareholders
equity is
likely to
lead to reduced
management
fees at Bimini
Advisors
going forward
if Orchid
is unable
to rebuild
its shareholders
equity since
the amount
of the management
fees paid
to the Company
are a
function of
Orchid’s equity.
Orchid also
reduced its
monthly dividend
once during
the quarter
from $0.225
per month
to $0.16 per
month.
The reduction
in the dividend
decreased
the monthly
dividend
revenues
to the Company.
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.
- 41 -
Economic
Summary
The evolution
of economic
and market
developments
pivoted in
the third
quarter of
2022.
Trends in place
since late
2021 have
changed in
the third
quarter.
The outlook
for the domestic
economy of
the United
States, particularly
with respect
to inflation,
the level
of
interest
rates and
expectations
for monetary
policy from
the Fed changed
during the
quarter.
As the second
quarter of
2022 ended,
the
market expected
that the
monetary
tightening
policies implemented
by the Fed
to control
inflation
would soon
succeed, and
that by
early in
2023 the
Fed would
likely start
to unwind
their rate
increases
in order
to avert
an economic
slowdown
resulting
from these
policies. The
catalyst for
the changes
that occurred
during the
third quarter
of 2022 was
clear evidence
that not
only was
inflation
persisting,
but that
it
was becoming
more broad
based and
entrenched.
As the Fed
and the various
members of
the FOMC
became aware
of this, their
public
comments consistently
sought to
dispel the
notion that
they would
be easing
monetary policy
in early October has also been very strong, 2023
as the futures
markets were
pricing.
As the quarter
unfolded
and the anticipated short-term effects of inflation
data continued
to reflect
this trend,
the hurricanes appearmarket
grew to have been less than feared. Further, the repair work associated with the hurricanes should put even more upward pressure on economic activity.
accept that

As we move into the fourth quarter, market pricing of additional policy accommodation removal is far less than the Fed anticipates. The latest reads would
have to
raise the
Fed Funds
target further
into restrictive
territory.
At the conclusion
of their
meeting
on inflation returned November
2, 2022,
Fed chairman
Powell
expressed
the view
that since
the incoming
economic
data since
their September
meeting was
so strong,
the terminal
funds rate
would
likely have
to its aforementioned string of below expectations readings.  The perceived lack of meaningful inflation, coupled with a hawkish be higher
than the
Fed has caused the U.S. Treasury curve to flatten, as the spread between 5-year Treasury Notes and 30-year Treasury Bonds is at multi-year lows.  expected
in September.
The market
reacted quickly
to this guidance
and the terminal
rate priced
into
the Fed funds
futures market
was nearly
5.15% on
November
4, 2022.
The market
is also faced with uncertainty surrounding President Trump's appointment ofnow very
sensitive
to income
economic
data,
particularly
inflation
data.
Contributing
to the next Fed chair, with many ofchange
in economic
and interest
rate trends
were developments
abroad, particularly
in Europe
and the leading candidates perceived United
Kingdom.
While inflation
has proven
to be more hawkish by the markets than the current chairwoman, even though she remains a candidate herself.  Regardless of the uncertainty
robust and
challenging
to control
in the bond market,U.S.,
it has been
even more
so in Europe
and
most of the equity markets,
world outside
of China,
which is grappling
with persistent
COVID-19
cases that
have forced
the government
to intermittently
lock down
various population
centers.
The war
in Ukraine
has contributed
significantly
to food
and risk markets generally, continueenergy
price pressures
globally, more
so than in
the U.S.
The result
is essentially
all central
banks across
the globe
– outside
of China
and Japan
– are raising
rates.
Like the
Fed, the
central banks’
efforts have
yet to hit all-time high closes almost daily, slow
inflation
and more
rate hikes
are very
likely.
Food and
energy inflation
poses additional
pressure
on governments
who are
eager to
ease the combination
burden of robust
elevated prices
for essentials
like food
and energy, but
are constrained
because their
efforts themselves
might increase
inflationary
pressures
and run counter
to central
bank actions
that are
attempting
to
constrain
economic data, low inflation activity
and the prospects for tax reform make for an ideal environment for risk assets.
demand.


A further
complicating
The mortgage market closed the quarter with the current coupon, 30-year fixed rate Agency MBS trading at the tightest spread to comparable duration U.S. Treasuries since early 2014.  As
factor has
been the case
U.S. dollar.
As the Fed
is forced
to continue
to raise
rates in
the U.S.,
the dollar
has
appreciated
against all
other currencies.
This in turn
forces other
central banks
to raise
rates to
protect their
own currencies,
often above
and beyond
what their
domestic economic
circumstances
might warrant.
Risk sentiment
is at extremely
depressed
levels and
all asset
classes across
the financial
markets have
generated
negative
year-to-
date returns
for much 2022,
outside of
energy and
certain food
commodities.
Economic growth
is expected
to continue
to slow over
the balance
of the year, lower coupon MBS outperformed high coupon MBS versus their comparable duration
both in the
U.S. and
globally, and likely
contract in
2023.
Interest
Rates
As the market
incorporated
inflation
data and
the Fed’s response
through the
second quarter
of 2022,
interest
rates began
to rise
significantly.
On August
1, 2022,
the 10-year
U.S. Treasury benchmarks. 
Note closed
with a yield
of 2.5759%,
shortly before
the FOMC
began to
temper market
expectations
that the
Fed would
pivot away
from their
tightening
and begin
to lower
the Fed Funds
rate in early
2023.
The
yield on the
10-year U.S.
Treasury Note
closed just
above 3.83%
on September
30, 2022,
and just under
4.25% on
October 24,
2022.
This increase
was much
less than
the increase
in short-term
rates.
Interest
rates on
U.S. Treasury
Note maturities
inside one
year
increased
by well over
100 basis
points and
by more than
160 basis
points for
maturities
of three
months or
less – in
each case
by the end
of the third
quarter of
2022.
With the continued
increases
in market
expectations
of the Fed’s
terminal rate,
maturities
of three or
fewer
months have
increased
by more
than 250
basis points
from the
end of the
second quarter
through November
10, 2022.
As we approachof September
30, 2022,
market pricing
implied the winter
terminal rate
for the current
cycle would
be approximately
4.53%, which
would be
reached late
in the
first quarter
of 2023.
As of November
10, 2022,
pricing is
for a terminal
rate of approximately
4.85% sometime
late in June
of 2023
and
with the
Fed Funds
rate still
approximately
4.25% in
early 2024.
- 42 -
The Fed has
repeatedly
acknowledged
their efforts
to bring
inflation under
control and
taking the
Fed Funds
rate above
neutral may
cause the
economy to
enter a recession.
They deem
these steps
as necessary
to prevent
inflation
from remaining
higher than
the Fed’s
target rate
of inflation.
However, as it
appears the
Fed will
have to increase
the Fed Funds
rate considerably
higher than
was believed
to
be the case
even a few
months ago,
and central
banks across
the globe
are doing
likewise,
financial
conditions
have begun
to deteriorate
and liquidity
in many financial
markets has
declined.
If such trends
persist and
evidence appears
that certain
financial
markets are
not
operating
smoothly, or financial
conditions
are prohibiting
economic
activity from
operating
smoothly, central
banks may
face a dilemma
of
continuing
to increase
interest
rates or
implementing
accommodations
to permit
the smooth
operation
of financial
markets and
the
economy –
assuming
this were
to occur
before inflation
could be
brought under
control.
The outcome
in such a
scenario
cannot be
predicted
with any
confidence
at this time.
The Agency
MBS Market
Returns for
the Agency
MBS market
for the third
quarter of
2022 were
(5.4)% and
these returns
were 1.7%
lower than
comparable
duration
LIBOR swaps.
The largest
MBS investors
have generally
been selling
or decreasing
their exposure
to the sector.
Agency MBS
spreads relative
to benchmark
interest
rates increased
to levels
observed in
March of
2020 by
the end of
the third
quarter of
2022 and
have exceeded
those levels
in October
of 2022.
The largest
investors
of Agency
MBS, the
Fed via quantitative
easing (which
is now
quantitative
tightening
as the Fed
allows their
holdings of
Agency MBS
to run-off),
large domestic
banks (which
due to quantitative
tightening
by the Fed
are experiencing
declines in
reserves/deposits)
and large
money managers
(which have
experienced
significant
outflows
as investors
leave fixed
income investments),
are collectively
causing demand
for Agency
MBS to decline
materially
and driving
the spread
widening.
As the U.S.
dollar has
strengthened
against most
other currencies
across the
globe, there
is the chance
certain
central banks
– namely the
Bank of
Japan – may
be forced
to intervene
in the currency
markets to
support their
local currency,
in this case
the Yen.
They would
do so by selling
U.S. dollar-denominated
assets and
buying Yen.
The only
U.S. dollar-denominated
assets they
own
are U.S.
Treasuries and
Agency MBS,
and selling
these would
represent
another source
of downward
pressure
on Agency
MBS. The
relative performance
across the
Agency MBS
universe was
skewed in
favor of
higher coupon,
30-year securities
that are
currently
in
production
by originators.
Lower coupon
securities,
especially
those held
in large
amounts by
the Fed,
and which
may eventually
be sold
by the Fed,
have performed
the worst.
These results
are consistent
with the
relative duration
of the securities,
as higher
coupons have
shorter durations,
or less sensitivity
to movements
in interest
rates.
As both the
domestic and
the global
economies
appear to
be slowing,
the more
credit sensitive
sectors of
the fixed
income markets
have come
under pressure
and are
likely to
weaken further
if the economies
do indeed
contract.
Actions by
the Fed as
described
above
may prevent
the sector
from performing
well in the
near term
but, if the
economy does
contract
and enter
a recession,
the sector
could do
well on a
relative performance
basis owing
to the lack
of credit
exposure
of Agency
MBS.
This is consistent
with the
sector’s
history of
performance
in a counter-cyclical
manner –
doing well
when the
economy is
soft and
relatively
poorly when
the economy
is strong.
Recent Legislative
and Regulatory
Developments
In response
to the deterioration
in the markets
for U.S.
Treasuries, Agency
MBS and other
mortgage
and fixed
income markets
resulting
from the
impacts of
the COVID-19
pandemic,
the Fed implemented
a program
of quantitative
easing. Through
November
of 2021,
the Fed was
committed
to purchasing
$80 billion
of U.S.
Treasuries and
$40 billion
of Agency
MBS each
month. In
November
of 2021,
it
began tapering
its net asset
purchases
each month
and ended
net asset
purchases
entirely
by early March
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.
- 43 -
On January
29, 2021,
the CDC issued
guidance extending
eviction
moratoriums
for covered
persons put
in place by
the CARES
Act
through March
31, 2021.
The FHFA subsequently
extended
the foreclosure
moratorium
for loans
backed by
Fannie Mae
and Freddie
Mac
and the seasonal slowdown eviction
moratorium
for real
estate owned
by Fannie
Mae and Freddie
Mac until
July 31,
2021 and
September
30, 2021,
respectively. The
U.S. Housing
and Urban
Development
Department
subsequently
extended
the FHA
foreclosure
and eviction
moratoria
to
July 31, 2021,
and September
30, 2021,
respectively.
Despite
the expirations
of these
foreclosure
moratoria,
a final rule
adopted by
the
CFPB on
June 28,
2021, effectively
prohibited
servicers
from initiating
a foreclosure
before January
1, 2022,
in prepayment most instances.
Foreclosure
activity coupled has
risen since
the end of
the moratorium,
with foreclosure
starts in
the third
quarter of
2022 up 167%
from the
comparable
period in
2021, but
still remaining
slightly
below pre-pandemic
levels.
In January
2019, the
Trump administration
made statements
of its plans
to work with
Congress to
overhaul
Fannie Mae
and Freddie
Mac and expectations
to announce
a framework
for the development
of a policy
for comprehensive
housing finance
reform soon.
On
September
30, 2019,
the FHFA announced
that Fannie
Mae and Freddie
Mac were
allowed to
increase their
capital buffers
to $25 billion
and $20 billion,
respectively, from
the prior
limit of $3
billion each.
This step
could ultimately
lead to
Fannie Mae
and Freddie
Mac being
privatized
and represents
the first
concrete
step on the
road to GSE
reform.
On June 30,
2020, the
FHFA released
a proposed
rule on a
new regulatory
framework
for the GSEs
which seeks
to implement
both a risk-based
capital framework
and minimum
leverage
capital
requirements.
The final
rule on the
new capital
framework
for the GSEs
was published
in the federal
register
in December
2020.
On
January 14,
2021, the
U.S. Treasury
and the FHFA
executed letter
agreements
allowing
the GSEs
to continue
to retain
capital up
to their
regulatory
minimums,
including
buffers, as
prescribed
in the December
rule.
These letter
agreements
provide,
in part,
(i) there
will be no
exit from
conservatorship
until all
material litigation
is settled
and the GSE
has common
equity Tier
1 capital
of at least
3% of its
assets, (ii)
the GSEs
will comply
with the increase
FHFA’s regulatory capital
framework,
(iii) higher-risk
single-family
mortgage
acquisitions
will be
restricted
to
current levels,
and (iv)
the U.S.
Treasury and
the FHFA will
establish
a timeline
and process
for future
GSE reform.
However, no definitive
proposals
or legislation
have been
released
or enacted
with respect
to ending
the conservatorship,
unwinding
the GSEs,
or materially
reducing
the roles
of the GSEs
in rates the U.S.
mortgage
market. 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 GSE capital
framework
established
in December
2020 by, among
other things,
replacing
the fixed
leverage
buffer equal
to 1.5% of
a GSE’s adjusted
total assets
with a dynamic
leverage
buffer equal
to 50% of
a GSE’s stability
capital buffer,
reducing
the risk weight
floor from
10% to 5%,
and removing
the requirement
that began the
GSEs must
apply an overall
effectiveness
adjustment
to their
credit risk
transfer
exposures.
On June 14,
2022, the
GSEs announced
that they
will 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
GSE capital
framework.
Industry
groups have
expressed
concern that
this poses
a risk to
the fungibility
of the Uniform
Mortgage-Backed
Security
(“UMBS”),
which could
negatively
impact liquidity
and pricing
in early September, the market
for TBA
securities.
In 2017,
policymakers
announced
that LIBOR
will be replaced
by December
31, 2021.
The directive
was spurred
by the fact
that
banks are
uncomfortable
contributing
to the LIBOR
panel given
the shortage
of underlying
transactions
on which
to base levels
and the
liability
associated
with submitting
an unfounded
level. 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 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.
- 44 -
On December
7, 2021,
the CFPB
released
a final rule
that amends
Regulation
Z, which
implemented
the Truth in
Lending Act,
aimed
at addressing
cessation
of LIBOR
for both
closed-end
(e.g., home
mortgage)
and open-end
(e.g., home
equity line
of credit)
products.
The
rule, which
mostly became
effective
in April
of 2022,
establishes
requirements
for the selection
of replacement
indices for
existing LIBOR-
linked consumer
loans. Although
the rule
does not mandate
the use of
SOFR as the
alternative
rate, it
identifies
SOFR as a
comparable
rate for
closed-end
products
and states
that for
open-end products,
the CFPB
has determined
that ARRC’s
recommended
spread-adjusted
indices based
on SOFR
for consumer
products to
replace the
one-month,
three-month,
or six-month
USD LIBOR
index “have
historical
fluctuations
that are
substantially
similar to
those of
the LIBOR
indices that
they are
intended
to replace.”
The CFPB
reserved judgment,
however, on a
SOFR-based
spread-adjusted
replacement
index to
replace the
one-year USD
LIBOR until
it obtained
additional
information.
On March 15,
2022, the
Adjustable
Interest
Rate (LIBOR)
Act (the “LIBOR
Act”) was
signed into
law as part
of the Consolidated
Appropriations
Act, 2022
(H.R. 2471).
The LIBOR
Act provides
for a statutory
replacement
benchmark
rate for
contracts
that use
LIBOR
as a benchmark
and do not
contain any
fallback mechanism
independent
of LIBOR.
Pursuant to
the LIBOR
Act, SOFR
becomes the
new
benchmark
rate by operation
of law for
any such contract.
The LIBOR
Act establishes
a safe harbor
from litigation
for claims
arising out
of
or related
to the use
of SOFR
as the recommended
benchmark
replacement.
The LIBOR
Act makes
clear that
it should
not be construed
to disfavor
the use of
any benchmark
on a prospective
basis.
On July 28,
2022, the
Fed published
a proposed
rule to implement
the LIBOR
Act.
Since the
GSEs have
generally
been using
30-
day average
SOFR in their
newly issued
multifamily
loans and
other structured
products,
the Fed proposed
that the
benchmark
replacement
for Agency
MBS be the
30-day average
SOFR plus
the applicable
tenor spread
adjustment
specified
in the LIBOR
Act.
Comments
for the proposed
rule closed
August 29,
2022, and
any final
rule will
go into effect
30 days after
publication
in the Federal
Register.
The LIBOR
Act also
attempts
to forestall
challenges
that it is
impairing
contracts.
It provides
that the
discontinuance
of LIBOR
and
the automatic
statutory
transition
to a replacement
rate neither
impairs or
affects the
rights of
a party to
receive payment
under such
contracts,
nor allows
a party to
discharge
their performance
obligations
or to declare
a breach
of contract.
It amends
the Trust Indenture
Act of 1939
to state
that the
“the right
of any holder
of any indenture
security to
receive payment
of the principal
of and interest
on such
indenture
security shall
not be deemed
to be impaired
or affected”
by application
of the LIBOR
Act to any
indenture
security.
Effective January
1, 2021,
Fannie Mae,
in alignment
with Freddie
Mac, extended
the timeframe
for its delinquent
loan buyout
policy
for Single-Family
Uniform Mortgage-Backed
Securities
(UMBS) and
Mortgage-Backed
Securities
(MBS) from
four consecutively
missed
monthly payments
to twenty-four
consecutively
missed monthly
payments (i.e.,
24 months
past due).
This new
timeframe
applied to
outstanding
single-family
pools 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 anticipated,
however, that
delinquent
loans will
be repurchased
in
most cases
before the
24-month
deadline under
one of the
following
exceptions
listed below.
•
a loan that
is paid in
full, or
where the
related lien
is released
and/or the
note debt
is satisfied
or forgiven;
•
a loan repurchased
by a seller/servicer
under applicable
selling
and 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 in
the MBS until
the trial
period ends);
•
a loan subject
to a short
sale or
deed-in-lieu
of foreclosure;
or
•
a loan referred
to foreclosure.
- 45 -
Because of
these exceptions,
the GSEs
believe based
on prevailing
assumptions
and market
conditions
this change
will have
only a
marginal impact
on prepayment
speeds, should continuein
aggregate.
Cohort level
impacts may
vary. For example,
more than
half of loans
referred to moderate

foreclosure
are historically
referred
within six
months of
delinquency. The
degree to
which speeds
are affected
depends on
delinquency
Recent Regulatory Developmentslevels, borrower
response,

and referral
to foreclosure
timelines.
The scope
and nature
of the actions
the U.S.
government
or the Fed
will ultimately
undertake
are unknown
and will
continue to evolve.  Although
evolve
Effect on
Us
Regulatory
developments,
movements
in interest
rates and
prepayment
rates affect
us in many
ways, including
the Trump administration has made statements following:
Effects on
our Assets
A change
in or elimination
of its intentionsthe guarantee
structure
of Agency
MBS may increase
our costs
(if, for
example, guarantee
fees
increase)
or require
us to reform housing financechange
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 tax policy, many
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
Agency
MBS.
This is because
investors
typically
place a premium
on assets
with yields
that are
higher than
market yields.
Although
lower long-
term interest
rates may
increase
asset values
in our portfolio,
we may not
be able to
invest new
funds in similarly-yielding
assets.
If prepayment
levels increase,
the value
of our Agency
MBS affected
by such prepayments
may decline.
This is because
a principal
prepayment
accelerates
the effective
term of an
Agency MBS,
which would
shorten the
period during
which an
investor would
receive
above-market
returns (assuming
the yield
on the prepaid
asset is
higher than
market yields).
Also, prepayment
proceeds
may not
be able
to be reinvested
in similar-yielding
assets. Agency
MBS backed
by mortgages
with high
interest
rates are
more susceptible
to prepayment
risk because
holders of
those mortgages
are most
likely to
refinance
to a lower
rate. IOs
and IIOs,
however, may
be the types
of Agency
MBS most
sensitive
to increased
prepayment
rates. Because
the holder
of an IO
or IIO receives
no principal
payments,
the values
of IOs
and IIOs are
entirely dependent
on the existence
of a principal
balance on
the underlying
mortgages.
If the principal
balance is
eliminated
due to prepayment,
IOs and IIOs
essentially
become worthless.
Although
increased
prepayment
rates can
negatively
affect the
value of
our IOs and
IIOs, they
have the
opposite effect
on POs. Because
POs act like
zero-coupon
bonds, meaning
they are
purchased
at a
discount to
their par
value and
have an effective
interest
rate based
on the discount
and the term
of the underlying
loan, an increase
in
prepayment
rates would
reduce the
effective term
of our POs
and accelerate
the yields
earned on
those assets,
which would
increase our
net income.
Higher long-term
rates can
also affect
the value
of our Agency
MBS.
As long-term
rates rise,
rates available
to borrowers
also rise.
This tends
to cause prepayment
activity to
slow and
extend the
expected average
life of mortgage
cash flows.
As the expected
average
life of the
mortgage
cash flows
increases,
coupled with
higher discount
rates, the
value of Agency
MBS declines.
Some of the
instruments
the Company
uses to hedge
our Agency
MBS assets,
such as 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 potential policy changes will require congressional action.  In addition,
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.
- 46 -
As described
above, 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 has made statements regarding additional increases to the Federal Funds Rate over the balance of 2017 and beyond.  The Fed also announced
that it will begin to reduce its holdings of would
purchase
Agency
MBS and U.S. treasuries.
Treasuries in
the amounts
needed to
support smooth
market functioning,
which largely
stabilized
the Agency
MBS market,

but ended
these purchases
in March
2022 and
announced
plans to
reduce its
balance sheet.
The Fed’s planned
reduction
of its balance
Effect sheet could
negatively
impact our
investment
portfolio.
Further, the
moratoriums
on Usforeclosures
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
Regulatory developments, 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. To the
extent 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.
To the extent they
were acquired
at a discount,
this will
tend to decrease
the realized
yield on the
asset in question.
Because we
base our
investment
decisions
on risk management
principles
rather than
anticipated
movements
in interest
rates, and prepayment in
a
volatile interest
rate environment
we may allocate
more capital
to structured
Agency MBS
with shorter
durations.
We believe
these
securities
have a lower
sensitivity
to changes
in long-term
interest
rates as well as loan modification programs affect us than
other asset
classes.
We may attempt
to mitigate
our
exposure
to changes
in many ways, including the following: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 Assets
borrowing

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

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

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

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

Effects on our borrowing costs

We leverage
our PT MBS
portfolio
and a portion
of our structured
Agency MBS
with principal
balances through
the use of
short-term
repurchase
agreement
transactions.
The interest
rates on
our debt
are determined
by market levels of both the short
term interest
rate markets.
Increases in
the
Fed Funds Rate and LIBOR. An
rate, SOFR
or LIBOR
typically
increase our
borrowing
costs, which
could affect
our interest
rate spread
if there
is no
corresponding
increase in the Fed Funds Rate or LIBOR would increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in
the interest
we earn
on our assets.
This would
be most prevalent
with respect
to our Agency
MBS backed
by
fixed
rate mortgage
loans because
the interest
rate on a
fixed-rate
mortgage
loan does
not change
even though
market rates
may change. We believe that we have sufficient borrowing capacity to support our MBS portfolio.

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

Summary

In a continuation
of the extremely
turbulent
and volatile
market conditions
that have
existed since
the onset
of the COVID-19
pandemic,
during the
third quarter
of 2022 the
state of
the markets
and the outlook
changed
materially.
The perception
of inflation
on the
part of the
Fed has shaped
the rates
markets, currency
markets and
the outlook
for the economy
since the
spring of
2021.
This is when
inflation
first began
to accelerate
in the U.S.
During the
third quarter,
the Fed’s outlook,
or more accurately,
the markets
perception
of how
the Fed saw
inflation,
changed significantly.
Through early
August of
2022 the
markets perceived
that, while
inflation
was not transitory,
the Fed would
be able to
dampen demand
by raising
rates and
cause inflation
to decrease
back towards
the Fed’s long-term
target of
2%.
Further, the
market anticipated
this would
happen by
early in 2023
and that
the Fed would
then start
to loosen
monetary
policy shortly
thereafter.
The Fed,
through repeated
public comments
by various
Fed
officials and
ultimately
by the Chairman
at the Fed’s
annual central
banker symposium
in Jackson
Hole, Wyoming
in late August,
stressed that
this was not
going to
be the case.
Incoming economic
data
over the
period was
persistently
strong, indicating
the rate
increases
to date had
yet to slow
demand.
More importantly,
incoming
inflation
data showed
no evidence
of slowing
at all and
was in fact
becoming more
widespread,
possibly
even well
entrenched.
This reinforced
the
notion the
Fed will
have to take
rates higher
and for longer.
- 47 -
The result
of these
developments
was significant
and widespread.
Germane to
Royal Palm
and levered
Agency MBS
investors
were
increases
in market
interest
rates and
a widening
in the spreads
that Agency
MBS securities
trade relative
to comparable
duration
U.S.
Treasuries or
swaps.
The yield
on the 10-year
closed just
above 3.83%
on September
30, 2022,
and nearly
4.25% on
October
24, 2022.
As we entered the first quarter of 2017, risk assets were performing very well as the Trump administration took office and appeared to be very pro-business.  The markets looked forward to a roll back of recently expanding regulations across many industries, a new and hopefully improved health care act, tax reform and possibly much needed infrastructure spending to refurbish the nation's aging roads, highways, bridges and airports.  While the Administration made bold promises, there has been very little delivered.  Market optimism was quickly replaced with pessimism.  Political infighting among the Administration and congressional republicans has generally been the cause, as has turmoil within the White House itself.   Geopolitical events surfaced in early April, specifically the Korean peninsula.  These events kept November
10, 2022,
the market on edge and induced sporadic flight to quality rallies as headlines hit
is pricing
in a terminal
rate of
4.85% in
June of 2023.
As the market from time
has continued
to time. Incoming inflation  data since March  was below expectations.  In the case increase
expectations
of the core Consumer Price Index, ("CPI") measure,Fed’s
terminal
rate, all
shorter maturity
U.S. Treasuries
have increased
in yield
as well.
Interest
rates on
maturities
inside one
year increased
by well over
100 basis
points and
by more than
160 basis
points for
maturities
of three
months or
less – in
each case
by the yearend
of the quarter.
Maturities
of three
months or
less have
increased
by over year figure moved from 2.3%
250 basis
points since
the end of
the second
quarter –
a very rare
event in January 2017 the
U.S. Treasury
market.
Agency MBS
spreads relative
to benchmark
interest
rates increased
to levels
observed
in March
of 2020 by
the end of
the third
quarter of
2022 and
have exceeded
those levels
in October
of 2022.
Returns for
the Agency
MBS market
for the third
quarter of
2022
were (5.4)%
and these
returns were
1.7% lower
than comparable
duration
LIBOR swaps.
The relative
performance
across the
Agency
MBS universe
is skewed
in favor
of higher
coupon, 30-year
securities
that are
currently
in production
by May and has stayed there through September.  Despite these readings, the Federal Reserve remains convinced these readings are being drivenoriginators.
Lower coupon
securities,
especially
those held
in large
amounts by temporary or transitory phenomenon and that inflation will reverse and head back towards their two percent target over the medium term.  To wit,
the Fed, appears
and which
may eventually
be sold by
the Fed,
have performed
the worst.
These results
are consistent
with the
relative duration
of the securities,
as higher
coupons have
shorter durations,
or less sensitivity
to
movements
in interest
rates. Actions
by the Fed
may prevent
the sector
from performing
well in the
near term
but, if they will hike their target rate again at the
economy does
contract
and enter
a recession,
the December meeting baring surprise outcomes sector
could do well
on a relative
performance
basis owing
to the downside.  The market accepts this outcome as highly likelylack
of credit
exposure
of Agency
MBS.
This is consistent
with the
sector’s
history of
performance
in a counter-cyclical
manner – as reflected in Fed Funds futures pricing.  However, using
doing well
when the same measure,
economy is
soft and
relatively
poorly when
the market does not expect the Fed to raise rates in 2018 and beyond to the extent the Fed expects to.  As a result, the combination of benign inflation readings currently coupled with hawkish Fed expectation has caused the yield curve to flatten significantly – to multi-year lows.  A second order effect of these developments has occurred in the equity and risk markets as they continue to perform exceedingly well.  The major equity indices in the US make record new highs almost daily.economy

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


is strong.
Critical Accounting PoliciesEstimates

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

GAAP requires the Company's
our management
to make some
complex and
subjective
decisions
and assessments.  The Company's
Our most
critical accounting
policies involve
decisions
and assessments
which could
significantly
affect reported
assets,
liabilities,
revenues
and liabilities, as well as reported revenues expenses,
and expenses. The Company believes that all of the these
decisions
and assessments upon which its financial statements are based were reasonable at the time made based upon information available to it at that time.
can change
significantly
each reporting
period.
There have
been no changes
to the processes
used to determine
our critical
accounting policies
estimates
as discussed
in
our annual
report on
Form 10-K
for the year
ended December
31, 2016.

2021.
Capital Expenditures

At September 30, 2017,2022, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At September 30, 2017, we did not have any off-balance sheet arrangements.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information
otherwise required under this item.

- 48 -
Not Applicable.


ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report (the "evaluation date"“evaluation date”), we
carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer (the "CEO"“CEO”)
and Chief Financial Officer (the "CFO"“CFO”), of
the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 as amended ("Exchange Act"(the “Exchange Act”). Based on this evaluation,
the CEO and CFO concluded our disclosure controls
and procedures, as designed and implemented, were effective as of the evaluation date (1)
in ensuring that information regarding the
Company and its subsidiaries is accumulated and communicated to our management,
including our CEO and CFO, by our employees,
as appropriate to allow timely decisions regarding required disclosure and (2)
in providing reasonable assurance that information we
must disclose in itsour periodic reports under the Exchange Act is recorded,
processed, summarized and reported within the time periods
prescribed by the SEC'sSEC’s rules and forms.

Changes in Internal ControlsControl over Financial Reporting

There were no significantmaterial changes in the Company'sCompany’s internal control over financial reporting
that occurred during the Company's Company’s
most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, the Company'sCompany’s internal control over
financial reporting.
- 49 -
PART II.
OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

On April 22, 2020, the Company received a demand for payment from Citigroup, Inc.
in the amount of $33.1 million related to the
indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets
Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,
LLC) prior to the date Royal Palm’s mortgage origination
operations ceased in 2007. In November 2021, Citigroup notified the Company
of additional indemnity claims totaling $0.2 million. The
demands are 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 demands
vigorously. No provision or accrual has been
recorded related to the Citigroup demands.
We are not party to any other material pending legal proceedings as described
in Item 103 of Regulation S-K.


ITEM 1A.
RISK FACTORS.

There have been no material changes fromto the risk factors disclosed in the "Risk Factors" section of our Annual
Report on Form 10-K for the year ended
December 31, 2021,
filed with the SEC on March 8, 2017.

11, 2022.
ITEM 2. UNREGISTERED
SALES OF
EQUITY SECURITIES
AND USE
OF PROCEEDS

On September 16, 2021, the Board authorized a share repurchase plan
pursuant to Rule 10b5-1 of the Securities Exchange Act of
1934 (the “2021 Repurchase Plan”). Pursuant to the 2021 Repurchase Plan, the Company
may purchase shares of its Class A
Common Stock from time to time for an aggregate purchase price not to exceed
$2.5 million.
The table below presents the Company’s share repurchase activity for the three months
ended September 30,
2022.
Approximate Dollar
Shares Purchased
Amount of Shares
Total Number
Weighted-Average
as Part of Publicly
That May Yet be
of Shares
Price Paid
Announced
Repurchased Under
Repurchased
Per Share
Programs
the Authorization
July 1, 2022 - July 30, 2022
218,311
$
1.61
218,311
$
1,505,329
August 1, 2022 - August 31, 2022
3,611
1.47
3,611
1,500,007
September 1, 2022 - September 30, 2022
4,048
1.37
4,048
1,494,444
Totals / Weighted Average
225,970
$
1.60
225,970
$
1,494,444
The Company did not have any unregistered sales of its equity securities during the
three months ended September 30, 2022.
ITEM 3.
DEFAULTS UPON SENIOR
SECURITIES
None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY
DISCLOSURES.

Not Applicable.

ITEM 5.
OTHER INFORMATION

None.


- 50 -
ITEM 6. EXHIBITS

Exhibit No

3.1
3.1Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company's Form S-11/A, filed with the SEC on April 29, 2004
3.2Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
31.1Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
3.2
3.3
3.4
3.5
31.1
31.2Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*
32.1Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the SarbanesOxley Act of 2002*
31.2
32.1
32.2
101.INS
Instance Document***
101.SCH
Taxonomy Extension Schema Document***
101.CAL
Taxonomy Extension Calculation Linkbase Document***
101.DEF
Additional Taxonomy Extension Definition Linkbase Document***
101.LAB
Taxonomy Extension Label Linkbase Document***
101.PRE
Taxonomy Extension Presentation Linkbase Document***
*
32.2Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002**
 
101.INSInstance Document***
101.SCHTaxonomy Extension Schema Document***
101.CALTaxonomy Extension Calculation Linkbase Document***
101.DEFAdditional Taxonomy Extension Definition Linkbase Document***
101.LABTaxonomy Extension Label Linkbase Document***
101.PRETaxonomy Extension Presentation Linkbase Document***

Filed herewith.
*Filed herewith.
**
Furnished herewith
**Furnished herewith
***
***Submitted electronically herewith.
Submitted electronically herewith.
- 51 -
Signatures
Pursuant to the requirements
of Section 13 or 15(d)
of the Securities Exchange
Act of 1934, as amended,
the registrant has duly
caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BIMINI CAPITAL MANAGEMENT,
INC.

Date:
November 14, 2022

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


/s/ Robert E. Cauley

Robert E. Cauley
Date:November 3, 2017
By: /s/ G. Hunter Hass, IV
Chairman and Chief Executive Officer
Date:
November 14, 2022
By:
/s/ G. Hunter Haas, IV
G. Hunter Haas,
IV
President, Chief Financial Officer, Chief
Investment Officer and Treasurer (Principal
President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)