UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10‑Q~~

10-Q

☑

QUARTERLY

REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~

March 31, 2021

◻

☐

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________

to ___________

Commission File Number~~: 001-32171~~

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

~~Maryland~~		~~72-1571637~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~		~~(I.R.S. Employer~~ ~~Identification No.)~~

3305 Flamingo Drive

Vero Beach

Florida

32963

(Address of principal executive offices) (Zip Code)

~~(772)~~ (

772

)

231-1400

(Registrant’s telephone number, including area code)

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

Indicate by check

mark whether the

registrant (1) has filed

all reports required

to be filed

by Section 13 or

15(d) of the

Securities Exchange Act

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

No ◻

☐

Indicate by check mark whether

the registrant has submitted electronically

every Interactive Data File required

to be submitted pursuant to

Rule 405

of Regulation S-T (§232.405 of this chapter) during the preceding 12 months ~~(or~~

(or for such shorter period that the registrant was required

to submit such

files).

Yes

No ◻

☐

Indicate by check mark whether the registrant is a

large accelerated filer, an accelerated filer,

a non-accelerated filer, a smaller reporting

company, or

an emerging growth company. See the definitions of "large accelerated filer," ~~"accelerated~~

"accelerated filer", "smaller reporting company", and "emerging growth

company" in Rule 12b-2 of the Exchange Act. Check one:


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

☐

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

~~Title of each Class~~	~~Latest Practicable Date~~	~~Shares Outstanding~~
Title of each Class Latest Practicable Date Shares Outstanding Class A Common Stock, $0.001 par value May 14, 2021 11,608,555 Class B Common Stock, $0.001 par value May 14, 2021 31,938 Class C Common Stock, $0.001 par value May 14, 2021 31,938	~~November 6, 2020~~	~~11,608,555~~
~~Class B Common Stock, $0.001 par value~~	~~November 6, 2020~~	~~31,938~~
~~Class C Common Stock, $0.001 par value~~	~~November 6, 2020~~	~~31,938~~

BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS

	Page

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. Financial Statements~~		1
~~Condensed Consolidated Balance Sheets (unaudited)~~		1
~~Condensed Consolidated Statements of Operations (unaudited)~~		2
~~Condensed Consolidated Statement of Stockholders’ Equity (unaudited)~~		3
~~Condensed Consolidated Statements of Cash Flows (unaudited)~~		4
~~Notes to Condensed Consolidated Financial Statements~~		5
~~ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		26
~~ITEM 3. Quantitative and Qualitative Disclosures About Market Risk~~		54
~~ITEM 4. Controls and Procedures~~		54

~~PART II. OTHER INFORMATION~~

~~ITEM 1. Legal Proceedings~~		55
~~ITEM 1A. Risk Factors~~		55
~~ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds~~		55
~~ITEM 3. Defaults Upon Senior Securities~~		55
~~ITEM 4. Mine Safety Disclosures~~		55
~~ITEM 5. Other Information~~		55
~~ITEM 6. Exhibits~~		56
~~SIGNATURES~~		57

PART I. FINANCIAL

INFORMATION

ITEM 1. Financial

Statements

Condensed

Consolidated

Balance Sheets

(unaudited)

Condensed

Consolidated

Statements

of Operations

(unaudited)

Condensed

Consolidated

Statement

of Stockholders’

Equity (unaudited)

Condensed

Consolidated

Statements

of Cash Flows

(unaudited)

Notes to Condensed

Consolidated

Financial Statements

ITEM 2. Management’s

Discussion

and Analysis

of Financial

Condition

and Results

of Operations

ITEM 3. Quantitative

and Qualitative

Disclosures

About Market

Risk

ITEM 4. Controls

and Procedures

PART II. OTHER INFORMATION

ITEM 1. Legal

Proceedings

ITEM 1A. Risk

Factors

ITEM 2. Unregistered

Sales of Equity

Securities

and Use of

Proceeds

ITEM 3. Defaults

Upon Senior

Securities

ITEM 4. Mine

Safety Disclosures

ITEM 5. Other

Information

ITEM 6. Exhibits

SIGNATURES

- 1 -

PART I. FINANCIAL

INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
September 30, 2020 December 31, 2019
ASSETS:
Mortgage-backed securities, at fair value

Pledged to counterparties

$
73,115,844

$
217,793,209

Unpledged

28,685

47,744

Total mortgage-backed securities

73,144,529

217,840,953

Cash and cash equivalents

5,837,067

8,070,067

Restricted cash

1,253,075

4,315,050

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

13,002,739

8,892,211

Accrued interest receivable

234,431

750,875

Property and equipment, net

2,110,752

2,162,975

Real property held for sale

450,000

450,000

Deferred tax assets

24,003,192

33,288,536

Other assets

2,127,592

3,718,281

Total Assets
$
122,163,377

$
279,488,948

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements

$
70,685,172

$
209,954,000

Long-term debt

27,618,048

27,481,121

Accrued interest payable

83,384

645,302

Other liabilities

1,346,817

1,431,534

Total Liabilities
99,733,421

239,511,957

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, 2020 and December 31, 2019

-

-

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

shares issued and outstanding as of September 30, 2020 and December 31, 2019

11,609

11,609

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

issued and outstanding as of September 30, 2020 and December 31, 2019

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, 2020 and December 31, 2019

32

32

Additional paid-in capital

332,642,758

332,642,758

Accumulated deficit

(310,224,475
)

(292,677,440
)
Stockholders’ Equity
22,429,956

39,976,991

Total Liabilities and Stockholders' Equity
$
122,163,377

$
279,488,948

See Notes to Condensed Consolidated Financial Statements

~~-1-~~

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine and Three Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Revenues:
Advisory services

$
4,969,143

$
5,052,251

$
1,629,463

$
1,791,135

Interest income

3,167,439

5,970,482

604,158

1,646,389

Dividend income from Orchid Island Capital, Inc. common stock

1,246,636

1,094,426

493,118

364,809

Total revenues

9,383,218

12,117,159

2,726,739

3,802,333

Interest expense

Repurchase agreements

(1,030,372
)

(3,654,675
)

(42,955
)

(1,001,781
)
Long-term debt

(893,299
)

(1,195,690
)

(261,341
)

(389,543
)
Net revenues

7,459,547

7,266,794

2,422,443

2,411,009

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

303,651

6,226,586

275,796

950,334

Realized (losses) gains on mortgage-backed securities

(5,804,656
)

23,078

-

23,078

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

38,935

(972,823
)

793,727

(927,222
)
(Losses) gains on derivative instruments

(5,292,346
)

(6,105,202
)

75

(483,446
)
Gains on retained interests in securitizations

58,735

314,984

58,735

39,869

Impairment of real property held for sale

-

(673,438
)

-

(673,438
)
Other (expense) income

(8,248
)

32,523

(8,890
)

32,029

Total other (expense) income
(10,703,929
)

(1,154,292
)

1,119,443

(1,038,796
)

Expenses:
Compensation and related benefits

3,157,074

3,074,650

1,010,407

987,024

Directors' fees and liability insurance

511,786

490,775

166,093

169,468

Audit, legal and other professional fees

467,015

381,024

120,374

96,996

Administrative and other expenses

870,919

878,924

318,874

352,896

Total expenses
5,006,794

4,825,373

1,615,748

1,606,384

Net (loss) income before income tax provision

(8,251,176
)

1,287,129

1,926,138

(234,171
)
Income tax provision

9,295,859

942,364

608,351

537,945

Net (loss) income $ (17,547,035 ) $ 344,765 $ 1,317,787 $ (772,116 )

Basic and Diluted Net (loss) income Per Share of:
CLASS A COMMON STOCK

Basic and Diluted

$
(1.51
)

$
0.03

$
0.11

$
(0.07
)
CLASS B COMMON STOCK

Basic and Diluted

$
(1.51
)

$
0.03

$
0.11

$
(0.07
)
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK

Basic and Diluted

11,608,555

12,370,114

11,608,555

11,704,207

CLASS B COMMON STOCK

Basic and Diluted

31,938

31,938

31,938

31,938

See Notes to Condensed Consolidated Financial Statements

~~-2-~~

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine and Three Months Ended September 30, 2020 and 2019

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

12,773,145

$
12,773

$
334,919,265

$
(305,977,417
)

$
28,954,621

Net income

-

-

-

1,618,603

1,618,603

Class A common shares repurchased and retired

(714
)

-

(1,542
)

-

(1,542
)
Balances, March 31, 2019

12,772,431

$
12,773

$
334,917,723

$
(304,358,814
)

$
30,571,682

Net loss

-

-

-

(501,722
)

(501,722
)
Balances, June 30, 2019

12,772,431

$
12,773

$
334,917,723

$
(304,860,536
)

$
30,069,960

Net loss

-

-

(772,116
)

(772,116
)
Class A common shares repurchased and retired

(1,100,000
)

(1,100
)

(2,274,965
)

-

(2,276,065
)
Balances, September 30, 2019

11,672,431

$
11,673

$
332,642,758

$
(305,632,652
)

$
27,021,779

Balances, January 1, 2020

11,672,431

$
11,673

$
332,642,758

$
(292,677,440
)

$
39,976,991

Net loss

-

-

-

(22,332,947
)

(22,332,947
)
Balances, March 31, 2020

11,672,431

$
11,673

$
332,642,758

$
(315,010,387
)

$
17,644,044

Net income

-

-

-

3,468,125

3,468,125

Balances, June 30, 2020

11,672,431

$
11,673

$
332,642,758

$
(311,542,262
)

$
21,112,169

Net income

-

-

-

1,317,787

1,317,787

Balances, September 30, 2020

11,672,431

$
11,673

$
332,642,758

$
(310,224,475
)

$
22,429,956

See Notes to Condensed Consolidated Financial Statements

~~-3-~~

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, 2020 and 2019

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

$
(17,547,035
)

$
344,765

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

Depreciation

52,223

54,886

Deferred income tax provision

9,285,344

1,136,975

Losses (gains) on mortgage-backed securities, net

5,501,005

(6,249,664
)
Gains on retained interests in securitizations

(58,735
)

(314,984
)
Impairment of real property held for sale

-

673,438

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

(38,935
)

972,823

Realized and unrealized losses on forward settling TBA securities

1,441,406

2,005,175

Changes in operating assets and liabilities:

Accrued interest receivable

516,444

194,552

Other assets

1,590,689

(158,981
)
Accrued interest payable

(561,918
)

(365,887
)
Other liabilities

(26,123
)

(315,920
)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

154,365

(2,022,822
)

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

Purchases

(43,129,835
)

(3,285,372
)
Sales

171,155,249

43,975,274

Principal repayments

11,170,005

14,756,931

Proceeds from termination of retained interests

58,735

314,984

Net settlement of forward settling TBA contracts

(1,500,000
)

(2,889,941
)
Purchases of Orchid Island Capital, Inc. common stock

(4,071,593
)

-

NET CASH PROVIDED BY INVESTING ACTIVITIES

133,682,561

52,871,876

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements

501,460,570

860,182,000

Principal repayments on repurchase agreements

(640,729,398
)

(906,103,000
)
Net proceeds on long-term debt

136,927

-

Class A common shares repurchased and retired

-

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

(139,131,901
)

(48,198,607
)

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

(5,294,975
)

2,650,447

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

12,385,117

6,240,488

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

$
7,090,142

$
8,890,935

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:

Interest expense

$
2,485,589

$
5,216,252

Income taxes

$
(1,568,363
)

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

~~-4-~~

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED BALANCE

SHEETS

(Unaudited)

March 31, 2021

December 31, 2020

ASSETS:

Mortgage-backed securities, at fair value

Pledged to counterparties

72,833,006

65,153,274

Unpledged

22,826

24,957

Total mortgage

-backed securities

72,855,832

65,178,231

Cash and cash equivalents

5,973,247

7,558,342

Restricted cash

4,037,655

3,353,015

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

15,598,096

13,547,764

Accrued interest receivable

212,051

202,192

Property and equipment, net

2,076,127

2,093,440

Deferred tax assets

34,204,364

34,668,467

Due from affiliates

711,657

632,471

Other assets

1,564,005

1,466,647

Total Assets

137,233,034

128,700,569

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Repurchase agreements

73,135,999

65,071,113

Long-term debt

27,607,361

27,612,781

Accrued interest payable

91,841

107,417

Other liabilities

619,554

1,421,409

Total Liabilities

101,454,755

94,212,720

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:

Preferred stock, $

0.001

par value;

10,000,000

shares authorized;

100,000

designated Series A Junior Preferred Stock,

9,900,000

shares undesignated;

no shares issued and outstanding as of March 31, 2021 and December

31, 2020

Class A Common stock, $

0.001

par value;

98,000,000

shares designated:

11,608,555

shares issued and outstanding as of March 31, 2021 and December 31, 2020

11,609

Class B Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

issued and outstanding as of March 31, 2021 and December 31, 2020

Class C Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

issued and outstanding as of March 31, 2021 and December 31, 2020

Additional paid-in capital

332,642,758

Accumulated deficit

(296,876,152)

(298,166,582)

Stockholders’ Equity

35,778,279

34,487,849

Total Liabilities

and Stockholders' Equity

137,233,034

128,700,569

See Notes to Condensed Consolidated Financial Statements

- 2 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

(Unaudited)

For the three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

2021

2020

Revenues:

Advisory services

2,025,409

1,724,597

Interest income

610,618

2,039,994

Dividend income from Orchid Island Capital, Inc. common stock

506,095

364,809

Total revenues

3,142,122

4,129,400

Interest expense

Repurchase agreements

(39,858)

(927,816)

Long-term debt

(249,548)

(349,501)

Net revenues

2,852,716

2,852,083

Other income (expense):

Unrealized losses on mortgage-backed securities

(1,392,261)

(574,281)

Realized losses on mortgage-backed securities

(5,804,656)

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

2,050,332

(4,408,105)

Gains (losses) on derivative instruments

243

(5,290,731)

Other income

324

Total other income (expense)

658,400

(16,077,449)

Expenses:

Compensation and related benefits

1,123,530

1,100,044

Directors' fees and liability insurance

188,020

164,581

Audit, legal and other professional fees

137,168

159,293

Administrative and other expenses

307,865

282,039

Total expenses

1,756,583

1,705,957

Net income (loss) before income tax provision

1,754,533

(14,931,323)

Income tax provision

464,103

7,401,624

Net income (loss)

1,290,430

(22,332,947)

Basic and Diluted Net income (loss) Per Share of:

CLASS A COMMON STOCK

Basic and Diluted

0.11

(1.92)

CLASS B COMMON STOCK

Basic and Diluted

0.11

(1.92)

Weighted Average Shares Outstanding:

CLASS A COMMON STOCK

Basic and Diluted

11,608,555

CLASS B COMMON STOCK

Basic and Diluted

31,938

See Notes to Condensed Consolidated Financial Statements

- 3 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

(Unaudited)

For the three Months Ended March 31, 2021 and 2020

Stockholders' Equity

Common Stock

Additional

Accumulated

Par Value

Paid-in Capital

Deficit

Total

Balances, January 1, 2020

11,672,431

11,673

332,642,758

(292,677,440)

39,976,991

Net loss

(22,332,947)

Balances, March 31, 2020

11,672,431

11,673

332,642,758

(315,010,387)

17,644,044

Balances, January 1, 2021

11,672,431

11,673

332,642,758

(298,166,582)

34,487,849

Net income

1,290,430

Balances, March 31, 2021

11,672,431

11,673

332,642,758

(296,876,152)

35,778,279

See Notes to Condensed Consolidated Financial Statements

��

- 4 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

For the Three Months Ended March 31, 2021 and 2020

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss)

1,290,430

(22,332,947)

Adjustments to reconcile net income (loss) to net cash provided by

(used in) operating activities:

Depreciation

17,313

17,598

Deferred income tax provision

464,103

7,400,852

Losses on mortgage-backed securities, net

1,392,261

6,378,937

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

(2,050,332)

4,408,105

Realized and unrealized losses on forward settling TBA securities

1,441,406

Changes in operating assets and liabilities:

Accrued interest receivable

(9,859)

527,542

Due from affiliates

(79,186)

101,800

Other assets

(97,358)

(126,771)

Accrued interest payable

(15,576)

(535,734)

Other liabilities

(801,855)

(849,083)

NET CASH PROVIDED BY (USED IN) OPERATING

ACTIVITIES

109,941

(3,568,295)

CASH FLOWS FROM INVESTING ACTIVITIES:

From mortgage-backed securities investments:

Purchases

(12,367,589)

(20,823,373)

Sales

171,155,249

Principal repayments

3,297,727

6,687,740

Net settlement of forward settling TBA contracts

(1,500,000)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

(9,069,862)

155,519,616

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from repurchase agreements

74,799,000

361,393,397

Principal repayments on repurchase agreements

(66,734,114)

(518,990,000)

Principal repayments on long-term debt

(5,420)

(5,077)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

8,059,466

(157,601,680)

NET DECREASE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

(900,455)

(5,650,359)

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, beginning of the period

10,911,357

12,385,117

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, end of the period

10,010,902

6,734,758

SUPPLEMENTAL DISCLOSURES OF CASH

FLOW INFORMATION:

Cash paid (received) during the period for:

Interest expense

304,982

1,813,051

Income taxes

13,465

See Notes to Condensed Consolidated Financial Statements

- 5 -

BIMINI CAPITAL

MANAGEMENT, INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL

STATEMENTS

(Unaudited)

~~September 30, 2020~~March 31,

2021

NOTE 1.

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business

Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” or the “Company”)

formed in September 2003, is a

holding company.

The Company operates in two business segments through its principal wholly-owned

operating subsidiary, Royal

Palm Capital LLC, which includes its wholly-owned subsidiary, Bimini Advisors Holdings, LLC.

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an

investment advisor registered with the

Securities and Exchange Commission), are collectively referred to as "Bimini Advisors."

Bimini Advisors manages a residential

mortgage-backed securities (“MBS”) portfolio for Orchid Island Capital,

Inc. ("Orchid") and receives fees for providing these services.

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

Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments,

for its own benefit. Royal

Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal

Palm."

COVID-19

Impact

Beginning

in mid-March

2020, the

global pandemic

associated

with the novel

coronavirus

(“COVID-19”)

and related

economic

conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought

about by COVID-19,

the MBS market

experienced

severe dislocations.

This resulted

in falling

prices of our

assets and

increased

margin

calls from

our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial

condition.

The MBS market

largely stabilized

after the

Federal Reserve

announced

on March 23,

2020 that

it would purchase

MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning.

As of March

31, 2020,

and at all

times since

then, we

have timely

satisfied all

margin calls.

The MBS

market continues

to react to

the pandemic

and the various

measures put

in place to

stabilize

the

market. To the extent

the financial

or mortgage

markets do

not respond

favorably to

any of these

actions, or

such actions

do not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely affected.

Although

the

Company cannot

estimate the

length or

gravity of

the impact

of the COVID-19

pandemic at

this time, if

the pandemic

continues,

it may

continue to

have materially

adverse effects

on the Company’s

results of

future operations,

financial position,

and liquidity

during 2021.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini

Capital, Bimini Advisors and Royal Palm.

All

inter-company accounts and transactions have been eliminated from the consolidated

financial statements.

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 for a description of the accounting used for this VIE.

- 6 -

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.

a result, the Company does not consolidate these VIEs and accounts for the interest

in these VIEs as mortgage-backed securities.

See Note 3 for additional information regarding the Company’s investments in mortgage-backed securities.

The maximum exposure to

loss for these VIEs is the carrying value of the mortgage-backed securities.

Basis of

Presentation

The accompanying unaudited condensed consolidated financial statements have

been prepared in accordance with accounting

principles generally accepted in the United States (“GAAP”) 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~~three-month period ended ~~September 30, 2020~~ March 31, 2021

are not necessarily

indicative of the results that may be expected

for the year ending December 31, ~~2020.~~2021.

~~-5-~~

The consolidated balance sheet at December 31, ~~2019~~2020 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, 2019.~~

~~COVID-19 Impact~~

Beginning in mid-March 2020, the global pandemic associated with the novel coronavirus COVID-19 (“COVID-19”) and related economic conditions began to impact our financial position and results of operations. As a result of the economic, health and market turmoil brought about by COVID-19, the Agency MBS market experienced severe dislocations. This resulted in falling prices of our assets and increased margin calls from our repurchase agreement lenders. Further, as interest rates declined, we faced additional margin calls related to our various hedge positions. In order to maintain our leverage ratio at prudent levels, maintain sufficient cash and liquidity, reduce risk and satisfy margin calls, we sold assets at levels significantly below their carrying values and closed several hedge positions. The Agency MBS market largely stabilized after the Federal Reserve announced on March 23, 2020 that it would purchase Agency MBS and U.S. Treasuries in the amounts needed to support smooth market functioning. As of September 30, 2020, we had timely satisfied all margin calls. The following summarizes the impact COVID-19 has had on our financial position and results of operations through September 30, 2020.

We sold approximately $171.2 million of MBS during the three months ended March 31, 2020, realizing losses of approximately $5.8 million. Substantially all of the realized losses were a direct result of the adverse MBS market conditions associated with COVID-19. We had no additional sales of MBS during the six months ended September 30, 2020.

Our MBS portfolio had a fair market value of approximately $73.1 million as of September 30, 2020, compared to $52.8 million as of June 30, 2020, $54.4 million at March 31, 2020, and $217.8 million as of December 31, 2019.

Our outstanding balances under our repurchase agreement borrowings as of September 30, 2020 were approximately $70.7 million, compared to $51.6 million as of June 30, 2020, $52.4 million as of March 31, 2020 and $210.0 million as of December 31, 2019.

We recorded an additional valuation allowance against our deferred tax assets of approximately $11.2 million during the three months ended March 31, 2020. We have not adjusted the valuation allowance since March 31, 2020.

~~Our stockholders’ equity was $22.4 million as of September 30, 2020, compared to $21.1 million as of June 30, 2020, $17.6 million as of March 31, 2020 and $40.0 million as of December 31, 2019.~~

In response to the Shelter in Place order issued in Florida in March 2020, management has invoked the Company’s Disaster Recovery Plan and its employees are working remotely. Prior planning resulted in the successful implementation of this plan and key operational team members maintain daily communication.

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

~~-6-~~

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

The Company has evaluated the other provisions of the CARES Act and does not believe it will have a material effect on the Company’s business, results of operations and financial condition. The Federal Housing Financing Agency (the “FHFA”) has instructed the GSEs on how they will handle servicer advances for loans that back Agency RMBS that enter into forbearance, which should limit prepayments during the forbearance period that could have resulted otherwise. During the forbearance period the Company will continue to receive scheduled principal and interest each month on its Agency RMBS securities. There can be no assurance as to how, in the long term, these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may continue to be materially adversely affected.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management

to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the consolidated

financial statements and the reported amounts of revenues and expenses during

the reporting period. Actual results could differ from

those estimates.

Significant estimates affecting the accompanying consolidated financial statements include

determining the fair

values of MBS, investment in Orchid common shares and derivatives, determining

the amounts of asset valuation allowances, ~~the impairment for the real property held for sale,~~ and the

computation of the income tax provision or benefit and the deferred tax asset allowances

recorded for each accounting period. Management believes the estimates and assumptions underlying the financial statements are reasonable based on the information available as of September 30, 2020, however uncertainty over the ultimate impact that COVID-19 will have on the global economy generally, and on our business in particular, makes any estimates and assumptions as of September 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Segment Reporting

The Company’s operations are classified into two principal reportable segments: the asset

management segment and the

investment portfolio segment. These segments are evaluated by management in deciding

how to allocate resources and in assessing

performance.

The accounting policies of the operating segments are the same as the

Company’s accounting policies with the

exception that inter-segment revenues and expenses are included in the presentation

of segment results.

For further information see

Note 14.

Cash and Cash Equivalents and Restricted Cash

Cash and cash

equivalents

include cash

on deposit

with financial

institutions

and highly

liquid investments

with original

maturities

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

March 31,

2021 and

December 31,

2020.

March 31, 2021

December 31, 2020

Cash and cash equivalents ~~include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase.~~

5,973,247

7,558,342

Restricted cash ~~includes cash pledged as collateral for repurchase agreements and derivative instruments. The following table presents the Company’s~~

4,037,655

3,353,015

Total cash, cash equivalents

and restricted cash ~~as of September 30, 2020 and December 31, 2019.~~

(in thousands)
September 30, 2020 December 31, 2019
Cash and cash equivalents

$
5,837,067

$
8,070,067

Restricted cash

1,253,075

4,315,050

Total cash, cash equivalents and restricted cash
$
7,090,142

$
12,385,117

10,010,902

10,911,357

~~-7-~~

- 7 -

The Company

maintains cash

balances at

several banks

and excess

margin with

an exchange

clearing member.

At times,

balances

may exceed

federally insured

limits. The

Company has

not experienced

any losses

related to

these balances.

The Federal

Deposit

Insurance

Corporation

insures eligible

accounts up

to $250,000

per depositor

at each financial

institution.

Restricted

cash balances

are

uninsured,

but are held

in separate

accounts that

are segregated

from the general

funds of the

counterparty.

The Company

limits

uninsured

balances to

only large,

well-known

banks

and exchange

clearing members

and believes

that it is

not exposed

to significant

credit risk

on cash and

cash equivalents

or restricted

cash balances.

Advisory Services

Orchid is externally

managed and

advised by

Bimini Advisors

pursuant to

the terms

of a management

agreement.

Under the terms

the management

agreement,

Orchid is

obligated to

pay Bimini

Advisors a

monthly management

fee and a

pro rata portion

of certain

overhead costs

and to reimburse

the Company

for any direct

expenses incurred

on its behalf.

Revenues from

management

fees are

recognized

over the period

of time in

which the

service is

performed.

Mortgage-Backed

Securities

The Company invests primarily in mortgage pass-through (“PT”) ~~mortgage backed~~ mortgage-backed

certificates issued by Freddie Mac, Fannie Mae

or Ginnie Mae (“MBS”), collateralized mortgage obligations (“CMOs”), interest-only

(“IO”) securities and inverse interest-only (“IIO”)

securities representing interest in or obligations backed by pools of mortgage-backed

loans. We refer to MBS and CMOs as PT MBS.

We refer to IO and IIO securities as structured MBS. The Company has elected to account for

its investment in MBS under the fair

value option.

Electing the fair value option requires the Company to record changes in

fair value in the consolidated statement of

operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period and

is consistent with the underlying economics and how the portfolio is managed.

The Company records MBS transactions on the trade date.

Security purchases that have not settled as of the balance sheet date

are included in the MBS balance with an offsetting liability recorded, whereas securities sold

that have not settled as of the balance

sheet date are removed from the MBS balance with an offsetting receivable recorded.

Fair value is defined as the price that would be received to sell the asset or paid to transfer

the liability in an orderly transaction

between market participants at the measurement date.

The fair value measurement assumes that the transaction to sell

the asset or

transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in

the

most advantageous market for the asset or liability. Estimated fair values for MBS are based on independent pricing sources and/or

third-party 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

investment

and serves

to reduce

the asset’s

carrying value.

At each reporting date, the effective yield is adjusted prospectively for future

reporting periods based on the new estimate of prepayments and the contractual

terms of the security.

For IIO securities, effective

yield and income recognition calculations also take into account the index

value applicable to the security.

Changes in fair value of

MBS during each reporting period are recorded in earnings and reported as unrealized

gains or losses on mortgage-backed securities

in the accompanying consolidated statements of operations.

The amount reported as unrealized gains or losses on ~~mortgage backed~~ mortgage-backed

securities thus captures the net effect of changes in the fair market value of securities caused by market

developments and any

premium or discount lost as a result of principal repayments during the period.

~~-8-~~

Orchid Island Capital, Inc. Common Stock

- 8 -

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 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.

Retained

Interests

in Securitizations

The Company ~~has elected~~

holds retained

interests in

the subordinated

tranches of

securities

created in

securitization

transactions.

These retained

interests currently

have a recorded

fair value ~~option for its investment in Orchid common shares. The change in~~

of zero, as

the ~~fair value~~ prospect

of ~~this investment and dividends~~future

cash flows

being received ~~on this investment are~~

is uncertain.

Any cash

received

from the retained

interests is

reflected

in the consolidated

statements

of operations. We estimate the fair value of our investment in Orchid on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock on a national stock exchange. Electing the fair value option requires the Company to record changes in fair value in the consolidated statements of operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with how the investment is managed.

~~Retained Interests in Securitizations~~

Derivative

Financial Instruments

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

~~Derivative Financial Instruments~~

~~The Company~~ uses derivative

instruments

to manage

interest rate

risk, facilitate

asset/liability

strategies

and manage

other

exposures,

and it may

continue to

do so in the

future. The

principal instruments

that the Company

has used to

date are Treasury

Note (“~~T-Note”~~T-

Note”) and

Eurodollar

futures contracts,

and “to-be-announced”

(“TBA”) securities

transactions,

but it may

enter into

other derivative

instruments

in the future.

The Company

accounts for

TBA securities

as derivative

instruments.

Gains and losses

associated

with TBA

securities

transactions

are reported

in gain (loss)

on derivative

instruments

in the accompanying

consolidated

statements

of operations.

Derivative

instruments

are carried

at fair value,

and changes

in fair value

are recorded

in the consolidated

operations

for each period.

The Company’s

derivative

financial

instruments

are not designated

as hedge accounting

relationships,

but rather

are used as

economic

hedges of

its portfolio

assets and

liabilities.

Holding derivatives

creates exposure

to credit

risk related

to the potential

for failure

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.

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

The fair value of financial instruments for which it is practicable to estimate that

value is disclosed, either in the body of the

consolidated financial statements or in the accompanying notes. MBS, Orchid

common stock and derivative assets and liabilities are

accounted for at fair value in the consolidated balance sheets. The methods

and assumptions used to estimate fair value for these

instruments are presented in Note 13 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, 2020~~March 31, 2021 and

December 31, ~~2019,~~2020, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company’s junior subordinated notes.

Currently, there is a limited market for these

types of instruments and the Company is unable to ascertain what interest rates would

be available to the Company for similar financial

instruments. Further information regarding these instruments is presented in Note

8 to the consolidated financial statements.

~~-9-~~

Property

and Equipment,

net

~~Property and Equipment, net~~

- 9 -

Property and equipment, net, consists of computer equipment with a depreciable

life of 3 years, office furniture and equipment with

depreciable lives of 8 to 20 years, land which has no depreciable life, and buildings and

improvements with depreciable lives of 30

years.

Property and equipment is recorded at acquisition cost and depreciated

using the straight-line method over the estimated useful

lives of the assets. Depreciation is included in administrative and other expenses

in the consolidated statement of operations.

Repurchase

Agreements

The Company

finances the

acquisition

of the majority

of its PT

MBS through

the use of

repurchase

agreements

under master

repurchase

agreements.

Repurchase

agreements

are accounted

for as collateralized

financing

transactions,

which are

carried at

their

contractual

amounts, including

accrued interest,

as specified

in the respective

agreements.

~~Share-Based Compensation~~

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.

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. 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

Income taxes are provided for using the asset and liability method. Deferred tax assets and

liabilities represent the differences

between the financial statement and income tax bases of assets and liabilities using enacted

tax rates. The measurement of net

deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it

is more likely than not that they will

not be realized.

~~-10-~~

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

open for examination.

Although management believes its calculations for tax returns are correct and the positions

taken thereon are reasonable, the final

outcome of tax audits could be materially different from the tax returns filed by the Company, and those differences could result in

significant costs or benefits to the Company. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm,

and

its includable subsidiaries, file as separate tax paying entities.

The Company assesses the likelihood, based on their technical merit, that uncertain

tax positions will be sustained upon

examination based on the facts, circumstances and information available at the

end of each period.

The measurement of uncertain tax

positions is adjusted when new information is available, or when an event occurs

that requires a change. The Company recognizes tax

positions in the consolidated financial statements only when it is more likely than

not that the position will be sustained upon

examination by the relevant taxing authority based on the technical merits of the position.

A position that meets this standard is

measured at the largest amount of benefit that will more likely than not be realized upon

settlement. The difference between the benefit

recognized and the tax benefit claimed on a tax return is referred to as an unrecognized

tax benefit and is recorded as a liability in the

consolidated balance sheets. The Company records income tax-related interest and penalties,

if applicable, within the income tax

provision.

- 10 -

Recent Accounting

Pronouncements

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial

Instruments – Credit Losses (Topic

326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit

losses on most financial assets to be

measured at amortized cost and certain other instruments to be measured using an expected

credit loss model (referred to as the

current expected credit loss model). The Company’s adoption of this ASU did not have a material impact

on its consolidated financial

statements as its financial assets were already measured at fair value through earnings.

In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate

Reform on Financial Reporting

.”

ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for

modifications

on debt instruments, leases, derivatives, and other contracts, related to the expected market

transition from the London Interbank

Offered Rate (“LIBOR,”),

and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU

2020-04 generally considers contract modifications related to reference rate reform to

be an event that does not require contract

remeasurement at the modification date nor a reassessment of a previous accounting

determination. The guidance in ASU 2020-04 is

optional and may be elected over time, through December 31, 2022, as reference

rate reform activities occur. The Company does not

believe the adoption of this ASU will have a material impact on its consolidated financial

statements.

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848). ASU 2021-01 expands the scope of ASC

848 to include all affected derivatives and give market participants the ability to apply certain

aspects of the contract modification and

hedge accounting expedients to derivative contracts affected by the discounting transition. In

addition, ASU 2021-01 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 immediately and available generally through December

31, 2022, as reference rate reform

activities occur. The Company does not believe the adoption of this ASU will have a material impact on its consolidated

financial

statements.

NOTE 2. ADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the

terms of a management agreement.

As Manager,

Bimini Advisors is responsible for administering Orchid's business activities and

day-to-day operations. Pursuant to the terms of the

management agreement, Bimini Advisors provides Orchid with its management

team, including its officers, along with appropriate

support personnel. Bimini Advisors is at all times subject to the supervision and

oversight of Orchid's board of directors and has only

such functions and authority as delegated to it. Bimini Advisors receives a monthly

management fee in the amount of:

●

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

●

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

than or equal to $500 million, and

●

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

~~-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, ~~2021~~2022 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.

- 11 -

The following table summarizes the advisory services revenue from Orchid

for the ~~nine and~~ three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Management fee

$
3,897

$
4,051

$
1,252

$
1,440

Allocated overhead

1,072

1,001

377

351

Total

$
4,969

$
5,052

$
1,629

$
1,791

(in thousands)

Three Months Ended March 31,

2021

2020

Management fee

1,621

1,377

Allocated overhead

404

348

Total

2,025

1,725

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the net amount due from Orchid was approximately ~~$0.6~~ $

0.7

million and ~~$0.6~~ $

0.6

million, respectively. ~~These amounts are included in “other assets” in the consolidated balance sheets.~~

NOTE 3.

MORTGAGE-BACKED SECURITIES

The following

table presents

the Company’s

MBS portfolio

as of ~~September 30, 2020~~March

31, 2021 and

December 31,

2020:

(in thousands)

March 31, 2021

December 31, ~~2019:~~2020

Fixed-rate MBS

(in thousands)
September 30, 2020 December 31, 2019
Fixed-rate MBS

$
72,782

$
216,231

Interest-Only MBS

334

1,024

Inverse Interest-Only MBS

29

586

Total

$
73,145

$
217,841

72,504

64,902

Interest-Only MBS

329

251

Inverse Interest-Only MBS

Total

72,856

65,178

NOTE 4.

REPURCHASE AGREEMENTS

The Company

pledges certain

of its MBS

as collateral

under repurchase

agreements

with financial

institutions.

Interest rates

are

generally fixed

based on prevailing

rates corresponding

to the 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, 2020,~~ March

31, 2021,

the Company

had met all

margin call

requirements.

~~-12-~~

As of ~~September~~ March

31, 2021 and

December 31,

2020,

the Company’s

repurchase

agreements

had remaining

maturities

as summarized

below:

($ in thousands)

OVERNIGHT

BETWEEN 2

BETWEEN 31

GREATER

(1 DAY OR

AND

THAN

LESS)

30 ~~2020 and~~ DAYS

90 DAYS

TOTAL

March 31, 2021

Fair value of securities pledged, including accrued

interest receivable

28,910

13,054

31,081

73,045

Repurchase agreement liabilities associated with

these securities

28,488

13,281

31,367

73,136

Net weighted average borrowing rate

0.21%

0.27%

0.20%

0.21%

December 31, ~~2019, the Company’s repurchase agreements had remaining maturities as summarized below:~~2020

Fair value of securities pledged, including accrued

($ in thousands)
OVERNIGHT BETWEEN 2 BETWEEN 31 GREATER
(1 DAY OR AND AND THAN
LESS) 30 DAYS 90 DAYS 90 DAYS TOTAL
September 30, 2020
Fair value of securities pledged, including accrued

interest receivable

$
-

$
34,229

$
5,182

$
33,938

$
73,349

Repurchase agreement liabilities associated with

these securities

$
-

$
32,960

$
4,913

$
32,812

$
70,685

Net weighted average borrowing rate

-

0.26
%

0.22
%

0.27
%

0.26
%
December 31, 2019
Fair value of securities pledged, including accrued

interest receivable

$
-

$
137,992

$
80,550

$
-

$
218,542

Repurchase agreement liabilities associated with

these securities

$
-

$
132,573

$
77,381

$
-

$
209,954

Net weighted average borrowing rate

-

2.02
%

1.92
%

-

1.98
%

interest receivable

49,096

8,853

7,405

65,354

Repurchase agreement liabilities associated with

these securities

49,120

8,649

7,302

65,071

Net weighted average borrowing rate

0.25%

0.23%

0.30%

0.25%

- 12 -

In addition,

cash pledged

to counterparties

for repurchase

agreements

was approximately ~~$1.3~~

4.0

million and ~~$3.8~~

3.4

million as

of ~~September 30, 2020~~March

31, 2021 and

December 31, ~~2019,~~

2020, 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, 2020~~March

31, 2021 and

December 31, ~~2019,~~

2020, 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 ~~$3.9~~

3.9

million and ~~$11.8~~

3.6

million,

respectively. ~~The~~

As of March

31, 2021

and December

31, 2020,

the Company

did not have

an amount

at risk with

any individual

counterparty

greater than

10% of the

Company’s ~~equity at December 31, 2019. As of September 30, 2020, the Company had amounts at risk greater than 10% of the Company’s equity as follows:.~~equity.

($ in thousands)
   % of Weighted
    Stockholders' Average
Amount Equity Maturity
Repurchase Agreement Counterparties at Risk at Risk (in Days)
September 30, 2020
Mirae Asset Securities (USA) Inc.
$2,562 11.4% 64

~~-13-~~

NOTE 5. DERIVATIVE

FINANCIAL INSTRUMENTS

~~Derivative Liabilities, at Fair Value~~

~~The table below summarizes fair value information about our derivative liabilities as of September 30, 2020 and December 31, 2019.~~

(in thousands)
Derivative Instruments and Related Accounts Balance Sheet Location September 30, 2020 December 31, 2019
Liabilities
TBA Securities
Other liabilities

$
-

$
59

Total derivative liabilities, at fair value

$
-

$
59

Margin Balances Posted To (From) Counterparties
Futures contracts
Restricted cash

$
1

$
537

Total margin balances on derivative contracts

$
1

$
537

Eurodollar

and T-Note futures

are cash settled

futures contracts

on an interest

rate, with

gains and losses

credited or

charged to the

Company’s cash

accounts on a

daily basis.

A minimum balance,

or “margin”,

is required

to be maintained

in the

account on a

daily basis.

The tables below

present information

related to the

Company’s Eurodollar

and T-note futures

positions at ~~September 30, 2020~~

March 31, 2021

and December

31, ~~2019.~~2020.

($ in thousands)
As of September 30, 2020
Junior Subordinated Debt Funding Hedges
Average Weighted Weighted
Contract Average Average
Notional Entry Effective Open
Expiration Year Amount Rate Rate
Equity⁽¹⁾

2021

$
1,000

1.02
%

0.20
%

$
(8
)
Total / Weighted Average

$
1,000

1.02
%

0.20
%

$
(8
)

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

2020

$
120,000

2.90
%

1.67
%

$
(1,480
)
2021

80,000

2.80
%

1.57
%

(984
)
Total / Weighted Average

$
100,000

2.86
%

1.63
%

$
(2,464
)
Treasury Note Futures Contracts

March 2020- 5-year T-Note futures⁽²⁾

(Mar 2020 - Mar 2025 Hedge Period)

$
20,000

1.96
%

2.06
%

$
88

~~-14-~~

($ in thousands)
As of December 31, 2019
Junior Subordinated Debt Funding Hedges
Average Weighted Weighted
Contract Average Average
Notional Entry Effective Open
Expiration Year Amount Rate Rate
Equity⁽¹⁾

2020

$
19,500

1.92
%

1.68
%

$
(46
)
Total / Weighted Average

$
19,500

1.92
%

1.68
%

$
(46
)

~~(1)~~

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

($ in thousands)

~~(2)~~

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

As of March 31, 2021

Junior Subordinated Debt Funding Hedges

~~The following table summarizes our contracts to purchase and sell TBA securities as~~Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.01%

0.21%

(6)

Total /

Weighted Average

1,000

1.01%

0.21%

(6)

($ in thousands)

As of December 31, ~~2019. There were no outstanding TBA securities at September 30, 2020.~~2020

($ in thousands)
Notional Net
Amount Cost Market Carrying

Long (Short)⁽¹⁾

Basis⁽²⁾

Value⁽³⁾

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

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

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

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

Junior Subordinated Debt Funding Hedges

~~(1)~~

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

Average

~~(2)~~

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

Weighted

~~(3)~~

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

Weighted

~~(4)~~

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

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.02%

0.18%

(8)

Total /

Weighted Average

1,000

1.02%

0.18%

(8)

(1)

Open equity represents the cumulative gains (losses) recorded on open

futures positions from inception.

(Losses) Gains on Derivative Instruments

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,~~March 31, 2021 and 2020 ~~and 2019.~~

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

$
(2,328
)

$
(2,995
)

$
-

$
(164
)
Junior subordinated debt funding hedges

(517
)

(409
)

-

-

T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,006
)

(696
)

-

(115
)
Net TBA securities

(1,441
)

(2,005
)

-

(204
)
(Losses) gains on derivative instruments

$
(5,292
)

$
(6,105
)

$
-

$
(483
)

~~-15-~~

(in thousands)

Three Months Ended March 31,

2021

2020

Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

(2,329)

- 13 -

Junior subordinated debt funding hedges

(515)

T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,006)

Net TBA securities

(1,441)

Losses on derivative instruments

(5,291)

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 recovering its assets pledged as collateral for its derivatives. The cash and cash

equivalents pledged as collateral for the Company’s derivative instruments are included in restricted cash on the

consolidated balance sheets. It is the Company's policy not to offset assets and liabilities associated with open derivative

contracts. However, the Chicago Mercantile Exchange (“CME”) rules characterize variation margin transfers as settlement

payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally

cleared derivatives for which the CME serves as the central clearing party are presented as if these derivatives had been

settled as of the reporting date.

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

March 31,

2021 and December

31, 2020.

($ in thousands)

March 31, 2021

December 31, 2020

Repurchase

Derivative

Repurchase

Derivative

Assets Pledged to Counterparties

Agreements

Total

Agreements

Total

PT MBS - at fair value

72,504

64,902

Structured MBS - at fair value

329

251

Accrued interest on pledged securities

212

201

Restricted cash

4,037

4,038

3,352

3,353

Total

77,082

77,083

68,706

68,707

Assets Pledged

from Counterparties

The table

below summarizes ~~Bimini’s assets~~

cash pledged ~~as collateral~~

to Bimini from

counterparties

under ~~its~~ repurchase

agreements

and derivative

agreements

of ~~September 30, 2020~~March 31,

2021 and December

31, ~~2019.~~2020.

Cash received

as margin is

recognized

in cash and

cash equivalents

with a corresponding

amount recognized

($ in thousands)
September 30, 2020 December 31, 2019
Repurchase Derivative Repurchase Derivative
Assets Pledged to Counterparties Agreements Agreements Total Agreements Agreements Total
PT MBS - at fair value

$
72,782

$
-

$
72,782

$
216,231

$
-

$
216,231

Structured MBS - at fair value

333

-

333

1,562

-

1,562

Accrued interest on pledged securities

234

-

234

749

-

749

Restricted cash

1,252

1

1,253

3,778

537

4,315

Total

$
74,601

$
1

$
74,602

$
222,320

$
537

$
222,857

as an increase

in repurchase

agreements

or other liabilities

in the consolidated

balance sheets.

($ in thousands)

Assets Pledged ~~from Counterparties~~

~~The table below summarizes cash pledged~~ to Bimini ~~from counterparties under repurchase agreements and derivative agreements as of September 30, 2020 and~~

March 31, 2021

December 31, ~~2019. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase~~2020

Repurchase agreements ~~or other liabilities in the consolidated balance sheets.~~

($ in thousands)
Assets Pledged to Bimini September 30, 2020 December 31, 2019
Repurchase agreements

$
80

$
-

Total

$
80

$
-

Total

~~-16-~~

- 14 -

NOTE 7. OFFSETTING ASSETS AND LIABILITIES

The Company’s

derivatives

and repurchase

agreements

are subject

to underlying

agreements

with master

netting or

similar

arrangements,

which provide

for the right

of offset in

the event

of default

or in the

event of bankruptcy

of either

party to the

transactions.

The Company

reports its

assets and

liabilities

subject to

these arrangements

on a gross

basis.

The following

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, 2020~~March 31,

2021 and December

31, ~~2019.~~2020.

(in thousands)
Offsetting of Liabilities
Gross Amount Not Offset in the
Net Amount Consolidated Balance Sheet
Gross Amount of Liabilities Financial
Gross Amount Offset in the Presented in the Instruments Cash
of Recognized Consolidated Consolidated Posted as Posted as Net
Liabilities Balance Sheet Balance Sheet Collateral Collateral Amount
September 30, 2020
Repurchase Agreements

$
70,685

$
-

$
70,685

$
(69,433
)

$
(1,252
)

$
-

$
70,685

$
-

$
70,685

$
(69,433
)

$
(1,252
)

$
-

December 31, 2019
Repurchase Agreements

$
209,954

$
-

$
209,954

$
(206,176
)

$
(3,778
)

$
-

TBA securities

59

-

59

-

-

59

$
210,013

$
-

$
210,013

$
(206,176
)

$
(3,778
)

$
59

(in thousands)

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

Posted as

Net

Liabilities

Balance Sheet

Collateral

Amount

March 31, 2021

Repurchase Agreements

73,136

(69,099)

(4,037)

73,136

(69,099)

(4,037)

December 31, 2020

Repurchase Agreements

65,071

(61,719)

(3,352)

65,071

(61,719)

(3,352)

The amounts

disclosed for

collateral

received by

or posted

to the same

counterparty

are limited

to the amount

sufficient to

reduce the

asset or liability

presented

in the consolidated

balance sheet

to zero.

The fair value

of the actual

collateral

received by

or posted

to the

same counterparty

typically

exceeds the

amounts presented.

See Note

6 for a discussion

of collateral

posted for, or

received against,

repurchase

obligations

and derivative

instruments.

NOTE 8.

LONG-TERM DEBT

Long-term

debt at ~~September 30,~~ March

31, 2021 and

December 31,

2020 ~~and~~ is summarized

as follows:

(in thousands)

March 31, 2021

December 31, ~~2019 is summarized as follows:~~2020

Junior subordinated debt

(in thousands)
September 30, 2020 December 31, 2019
Junior subordinated debt

$
26,804

$
26,804

Note payable

662

677

Paycheck Protection Plan ("PPP") loan

152

-

Total

$
27,618

$
27,481

26,804

Note payable

651

657

Paycheck Protection Plan ("PPP") loan

(1)

152

Total

27,607

27,613

(1)

The Small Business Administration has notified the Company that, effective

April 22, 2021, all principal and accrued interest under the PPP loan

has been forgiven.

Junior Subordinated Debt

During 2005,

Bimini Capital

sponsored the

formation

of a statutory

trust, known

as Bimini Capital

Trust II (“BCTII”)

of which 100%

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.

~~-17-~~

As of ~~September 30,~~March

31, 2021 and

December

31, 2020, ~~and December 31, 2019,~~

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

- 15 -

that floats

at a spread

of 3.50% over

the prevailing

three-month

LIBOR rate.

As of ~~September 30, 2020,~~ March

31, 2021,

the interest

rate was ~~3.75%~~3.68%.

The BCTII

trust preferred

securities

and Bimini

Capital's BCTII

Junior Subordinated

Notes require

quarterly interest

distributions

and are redeemable

at Bimini Capital's

option, in

whole or in

part and without

penalty. Bimini Capital's

BCTII Junior

Subordinated

Notes are

subordinate

and

junior in right

of payment

to all present

and future

senior indebtedness.

BCTII is a

VIE because

the holders

of the equity

investment

at risk do

not have substantive

decision-making

ability over

BCTII’s

activities.

Since Bimini

Capital's

investment

in BCTII’s

common equity

securities

was financed

directly by

BCTII as

a result of

its loan of

the

proceeds to

Bimini Capital,

that investment

is not considered

to be an equity

investment

at risk. Since

Bimini Capital's

common share

investment

in BCTII

is not a variable

interest,

Bimini Capital

is not the

primary beneficiary

of BCTII.

Therefore,

Bimini Capital

has not

consolidated

the financial

statements

of BCTII

into its consolidated

financial statements,

and this investment

is accounted

for on the

equity

method.

The accompanying

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.

Note Payable

On October

30, 2019,

the Company

borrowed ~~$680,000~~

$680,000 from

a bank. The

note is payable

in equal monthly

principal and

interest

installments

of approximately ~~$4,500~~

$4,500 through

October 30,

2039. Interest

accrues at

4.89% through

October 30,

2024. Thereafter,

interest

accrues based

on the weekly

average yield

to the United

States Treasury

securities

adjusted to

a constant

maturity of

5 years, plus

3.25%.

The note is

secured by

a mortgage

on the Company’s

office building.

Paycheck Protection

Plan Loan

On April 13,

2020, the

Company received

approximately ~~$152,000~~

152,000

through the

Paycheck Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan. ~~As discussed in Note 1,~~

PPP loans

carry a fixed

rate of

1.00

% and a term

of two years,

if not forgiven,

in whole or

in part.

Payments are

deferred for

the first ten

months after

the completion

of the loan

forgiveness

covered period.

PPP loans

may be forgiven,

whole or in

part, if the

proceeds are

used for payroll

and other

permitted

purposes in

accordance

with the requirements

of the PPP

and if

certain other

requirements

are met. ~~These loans carry a fixed rate~~

The Small

Business Administration

has notified

the Company

that, effective

as of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first ten months after the completion of the loan forgiveness covered period. The Company believes that April

22, 2021,

all ~~of the proceeds were used for eligible purposes and the outstanding~~

principal and

accrued interest ~~will ultimately be~~

under the

PPP loan

has been forgiven.

The table

below presents

the future

scheduled principal

payments on

the Company’s

long-term

debt. The

table gives

effect to

forgiveness

(in thousands)
Last three months of 2020

$
5

2021

22

2022

175

2023

24

2024

25

After 2024

27,367

Total

$
27,618

of all principal

and interest

under the

PPP loan.

~~-18-~~

(in thousands)

Last nine months of 2021

2022

2023

2024

2025

After 2025

27,341

Total

27,455

NOTE 9.

COMMON STOCK

There were

no issuances

of Bimini Capital's

Class A Common

Stock, Class

B Common Stock

or Class C

Common Stock

during the ~~nine~~

three months

ended ~~September 30, 2020~~March

31, 2021 and ~~2019.~~

2020.

- 16 -

Stock Repurchase

Plan

On March 26,

2018, the

Board of Directors

of Bimini Capital

Management,

Inc. (the ~~“Company”~~

“Company”)

approved a

Stock Repurchase

Plan (“

(“Repurchase

Plan”).

Pursuant to

Repurchase

Plan, the

Company may

purchase up

500,000

shares of

its Class A

Common Stock

from

time to time,

subject to

certain limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

of 1934.

Share repurchases

may be

executed through

various means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the

Company to

purchase any

shares.

The Repurchase

Plan was originally

set to expire

on November

15, 2018, but

it has been

extended by the

Board of Directors

and it is currently

set to expire

November 15, 2021

From the inception

of the Repurchase

Plan through ~~September 30, 2020,~~

March 31,

2021, the

Company repurchased

a total of

70,404

shares at

aggregate

cost of approximately ~~$166,945,~~

166,945

, including

commissions

and fees,

for a weighted

average price

of ~~$2.37~~ $

2.37

per share.

There were

no shares

repurchased

during the ~~nine~~

three months

ended ~~September 30, 2020.~~March

31, 2021.

~~Tender Offer~~

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

NOTE 10.

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.~~

business.

April 22, 2020

, the Company received a demand for payment from Citigroup, Inc. in the amount

of ~~$33.1~~ $

33.1

million related to the

indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets

Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,

LLC) prior to the date Royal Palm’s mortgage origination

operations ceased in 2007.

The demand is based on Royal Palm’s alleged breaches of certain representations and warranties

in the

related MLPA’s.

The Company believes the demands are without merit and intends to defend

against the demand vigorously.

provision or accrual has been recorded as of ~~September 30, 2020~~March 31, 2021 related to the Citigroup

demand.

Management is not aware of any other significant reported or unreported contingencies

at ~~September 30, 2020.~~March 31, 2021.

NOTE 11.

INCOME TAXES

The total income tax provision recorded for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2021

and 2020 was ~~$9.3~~ $

0.5

million and ~~$0.6~~ $

7.4

million, respectively, on consolidated pre-tax book (loss) income of $(8.3) million and $1.9 million in the nine and three months ended September 30, 2020, respectively. The total income tax provision (benefit) recorded for the nine and three months ended September 30, 2019 was $0.9 million and $0.5 million,

respectively, on consolidated pre-tax book income (loss) of ~~$1.3~~ $

1.8

million and ~~$(0.2)~~$(

14.9

) million in the ~~nine and~~ three months ended ~~September 30, 2019,~~March 31, 2021

and 2020, respectively.

~~-19-~~

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied

to actual income to date

and includes the expected realization of a portion of the tax benefits of federal and

state net operating losses carryforwards (“NOLs”).

In assessing the realizability of deferred tax assets, management considers whether

it is more likely than not that some portion or all of

the deferred tax assets will not be realized. The ultimate realization of capital loss

and NOL carryforwards is dependent upon the

generation of future capital gains and taxable income in periods prior to their expiration.

The Company currently provides a valuation

allowance against a portion of the NOLs since the Company believes that it is more likely

than not that some of the benefits will not be

realized in the future. The Company will continue to assess the need for a valuation

allowance at each reporting date.

As a result of adverse economic impacts of COVID-19 on its business, the Company performed

an assessment of the need for

additional valuation allowances against existing deferred tax assets as of March 31,

2020. Following the more-likely-than-not standard

that benefits will not be realized in the future, the Company determined an additional

valuation allowance of approximately ~~$11.2~~ $

11.2

million

was necessary for the net operating loss carryforwards and capital loss carryforwards

during the three months ended March 31, 2020. With the rapidly evolving and changing landscape caused by the pandemic, the Company will continue to closely monitor the impacts of COVID-19 on the Company’s ability to realize its deferred tax assets, and it may increase valuation allowances in the future as new information becomes available.

NOTE 12.

EARNINGS PER SHARE

- 17 -

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

Directors.

The Class

B common stock

is included

in the computation

of basic EPS

using the two-class

method, and

consequently

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 March

31, 2021 and

2020.

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 March

31, 2021 and ~~convertible into~~

2020.

The table

below reconciles

the numerator

and denominator

of EPS for

the three months

ended March

31, 2021 and

2020.

(in thousands, except per-share information)

2021

2020

Basic and diluted EPS per Class A common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, and when, authorized and declared by the Board of Directors. The Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversionshare:

Income (loss) attributable to Class A common ~~stock were not met at September 30, 2020~~shares:

Basic and ~~2019.~~diluted

~~Shares of Class C~~1,286

(22,272)

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 met~~shares outstanding at ~~September 30, 2020~~the balance sheet date

11,609

Weighted average shares-basic and ~~2019.~~diluted

11,609

~~The table below reconciles~~11,609

Income (loss) per Class A common share:

Basic and diluted

0.11

(1.92)

(in thousands, except per-share information)

2021

2020

Basic and diluted EPS per Class B common share:

Income (loss) attributable to Class B common shares:

Basic and diluted

(61)

Weighted average common shares:

Class B common shares outstanding at the ~~numerator~~balance sheet date

Effect of weighting

Weighted average shares-basic and ~~denominator of EPS for the nine~~diluted

Income (loss) per Class B common share:

Basic and ~~three months ended September 30, 2020 and 2019.~~diluted

(in thousands, except per-share information)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Basic and diluted EPS per Class A common share:
(Loss) income attributable to Class A common shares:

Basic and diluted

$
(17,499
)

$
344

$
1,314

$
(770
)
Weighted average common shares:

Class A common shares outstanding at the balance sheet date

11,609

11,609

11,609

11,609

Effect of weighting

-

761

-

95

Weighted average shares-basic and diluted

11,609

12,370

11,609

11,704

(Loss) income per Class A common share:

Basic and diluted

$
(1.51
)

$
0.03

$
0.11

$
(0.07
)

0.11

(1.92)

~~-20-~~

(in thousands, except per-share information)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Basic and diluted EPS per Class B common share:
(Loss) income attributable to Class B common shares:

Basic and diluted

$
(48
)

$
1

$
4

$
(2
)
Weighted average common shares:

Class B common shares outstanding at the balance sheet date

32

32

32

32

Weighted average shares-basic and diluted

32

32

32

32

(Loss) income per Class B common share:

Basic and diluted

$
(1.51
)

$
0.03

$
0.11

$
(0.07
)

NOTE 13.

FAIR VALUE

Fair value

is the price

that would

be received

to sell an

asset or

paid to transfer

a liability ~~(an~~

(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~~

(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

~~Level 2 valuations, where~~

- 18 -

techniques

typically

include option

pricing models,

discounted

cash flow

models and

similar techniques,

but may also

include the ~~valuation is based on quoted~~

use of market

prices ~~for similar instruments traded in active markets, quoted prices for identical~~ of assets

or ~~similar instruments in markets~~ liabilities

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, 2020~~

March 31,

2021 and ~~2019.~~

2020. 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

active markets,

the Company

looks to market

observable

data for

similar assets.

Fair value

measurements

for the retained

interests are

generated

by a model

that requires

management

to make a

significant

number of

assumptions,

and this model

resulted in

a value of

zero

at both ~~September 30, 2020~~March

31, 2021 and

December 31, ~~2019.~~

2020.

~~-21-~~

The Company's

MBS and TBA

securities

are valued

using Level

2 valuations,

and such valuations

currently are

determined

by the

Company based

on independent

pricing sources

and/or third

party broker

quotes, when

available.

Because the

price estimates

may vary,

the Company

must make certain

judgments and

assumptions

about the

appropriate

price to use

to calculate

the fair values.

The Company

and the independent

pricing sources

use various

valuation techniques

to determine

the price

of the Company’s

securities.

These

techniques

include observing

the most

recent market

for like or

identical assets

(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~~

(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 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, 2020~~

March 31,

2021 and

December 31,

2020:

(in thousands)

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair Value

Assets

Inputs

Measurements

(Level 1)

(Level 2)

(Level 3)

March 31, 2021

Mortgage-backed securities

72,856

Orchid Island Capital, Inc. common stock

15,598

December 31, ~~2019:~~2020

(in thousands)
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Fair Value Assets Inputs Inputs
Measurements (Level 1) (Level 2) (Level 3)
September 30, 2020
Mortgage-backed securities

$
73,145

$
-

$
73,145

$
-

Orchid Island Capital, Inc. common stock

13,003

13,003

-

-

December 31, 2019
Mortgage-backed securities

$
217,841

$
-

$
217,841

$
-

Orchid Island Capital, Inc. common stock

8,892

8,892

-

-

TBA securities

(59
)

-

(59
)

-

Mortgage-backed securities

The following table illustrates a roll forward for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2020 and 2019:$

65,178

(in thousands)
Retained Interests in Securitizations
Nine Months Ended September 30,
2020 2019
Balances, January 1

$
-

$
-

Gain included in earnings

59

315

Collections

(59
)

(315
)
Balances, September 30

$
-

$
-

65,178

Orchid Island Capital, Inc. common stock

13,548

During the ~~nine~~

three months

ended ~~September 30,~~ March

31, 2021 and

2020, ~~and 2019,~~ there

were no transfers

of financial

assets or liabilities

between levels

1, 2

- 19 -

or 3.

~~-22-~~

NOTE 14.

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~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ were approximately ~~$5.0~~ $

2.0

million and ~~$5.1~~ $

1.7

million, respectively,

accounting for approximately ~~53%~~

% and ~~42%~~

% 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, 2020 and 2019 is as follows:~~

(in thousands)
Asset Investment
Management Portfolio Corporate Eliminations Total
2020
Advisory services, external customers
$ 4,969 $ - $ - $ - $ 4,969
Advisory services, other operating segments⁽¹⁾
116 - - (116) -
Interest and dividend income
- 4,414 - - 4,414
Interest expense
- (1,030)
(893)⁽²⁾
- (1,923)
Net revenues
5,085 3,384 (893) (116) 7,460
Other
- (10,238)
(466)⁽³⁾
- (10,704)
Operating expenses⁽⁴⁾
(2,632) (2,375) - - (5,007)
Intercompany expenses⁽¹⁾
- (116) - 116 -
Income (loss) before income taxes
$ 2,453 $ (9,345) $ (1,359) $ - $ (8,251)

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

~~-23-~~

Segment information for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as

follows:

(in thousands)
Asset Investment
Management Portfolio Corporate Eliminations Total
2020
Advisory services, external customers
$ 1,629 $ - $ - $ - $ 1,629
Advisory services, other operating segments⁽¹⁾
32 - - (32) -
Interest and dividend income
- 1,097 - - 1,097
Interest expense
- (43)
(261)⁽²⁾
- (304)
Net revenues
1,661 1,054 (261) (32) 2,422
Other
- 1,070
49 ⁽³⁾
- 1,119
Operating expenses⁽⁴⁾
(956) (659) - - (1,615)
Intercompany expenses⁽¹⁾
- (32) - 32 -
Income (loss) before income taxes
$ 705 $ 1,433 $ (212) $ - $ 1,926

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

~~(1)~~

~~Includes fees paid by Royal Palm to Bimini Advisors for advisory services.~~

~~(2)~~

~~Includes interest on long-term debt.~~

~~(3)~~

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

(in thousands)

~~(4)~~

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

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,025

Advisory services, other operating segments

(1)

(36)

Interest and dividend income

1,117

Interest expense

(40)

(250)

(2)

(290)

Net revenues

2,061

1,077

(250)

(36)

2,852

Other income

658

(3)

659

Operating expenses

(4)

(1,103)

(653)

(1,756)

Intercompany expenses

(1)

(36)

Income (loss) before income taxes

958

1,046

(249)

1,755

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,725

Advisory services, other operating segments

(1)

(59)

Interest and dividend income

2,405

Interest expense

(928)

(350)

(2)

(1,278)

Net revenues

1,784

1,477

(350)

(59)

2,852

Other expenses

(15,563)

(514)

(3)

(16,077)

Operating expenses

(4)

(709)

(997)

(1,706)

Intercompany expenses

(1)

(59)

Income (loss) before income taxes

1,075

(15,142)

(864)

(14,931)

(1)

Includes fees paid by Royal Palm to Bimini Advisors for advisory services

(2)

Includes interest on long-term debt.

(3)

Includes gains (losses) on Eurodollar futures contracts entered into as

a hedge on junior subordinated notes and fair value adjustments

retained interests in securitizations.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as

follows:

(in thousands)
Asset Investment
Management Portfolio Corporate Total
September 30, 2020

$
1,474

$
107,414

13,275

$
122,163

December 31, 2019

1,457

263,223

14,809

279,489

- 20 -

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

March 31, 2021

1,700

122,894

12,639

137,233

December 31, 2020

1,469

113,764

13,468

128,701

NOTE 15. RELATED PARTY TRANSACTIONS

Relationships with Orchid

At ~~September 30, 2020~~both March 31, 2021 and December 31, ~~2019,~~2020, the Company owned

2,595,357 ~~and 1,520,036~~

shares of Orchid common stock, ~~respectively,~~ representing

approximately ~~3.8%~~

2.8

% and ~~2.4%~~

3.4

% of Orchid’s outstanding common stock on such dates.

The Company received dividends on this

common stock investment of approximately ~~$1.2~~ $

0.5

million and ~~$0.5~~ $

0.4

million during the ~~nine and~~ three months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively, and $1.1 million and $0.4 million during the nine and three months ended September 30, 2019,~~

respectively.

~~-24-~~

Robert Cauley, the Chief Executive Officer and Chairman of the Board of Directors of the Company, also serves as Chief

Executive Officer and Chairman of the Board of Directors of Orchid, receives compensation

from Orchid, and owns shares of common

stock of Orchid.

In addition, Hunter Haas, the Chief Financial Officer, Chief Investment Officer and Treasurer of the Company, also

serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of Orchid’s Board of Directors,

receives compensation from Orchid, and owns shares of common stock of Orchid.

Robert J. Dwyer and Frank E. Jaumot, our

independent directors, each own shares of common stock of Orchid.

~~NOTE 16. SUBSEQUENT EVENT~~

~~Real Property Held For Sale~~

On October 15, 2020, the Company completed the sale of real property that was not used in the Company’s business. The Company received proceeds of approximately $462,000. The transaction resulted in a gain of approximately $12,000, which will be included in the consolidated statement of operations during the fourth quarter of 2020.

~~-25-~~

- 21 -

ITEM 2. 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-looking~~forward-

looking statements that involve risks and uncertainties. Forward-looking statements

are those that are not historical in nature. As a

result of many factors, such as those set forth under “Risk Factors” in our most recent

Annual Report on Form 10-K, ~~and any subsequent Quarterly Reports on Form 10-Q,~~ our actual results

may differ materially from those anticipated in such forward-looking statements.

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company

that was formed in September 2003.

The Company’s principal wholly-owned operating subsidiary is Royal Palm Capital, LLC.

We operate in two business segments: the

asset management segment, which includes (a) the investment advisory services provided

by Royal Palm’s wholly-owned subsidiary,

Bimini Advisors Holdings, LLC, to Orchid, and (b) the investment portfolio segment, which includes

the investment activities conducted

by Royal Palm.

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with

the

Securities and Exchange Commission), are collectively referred to as “Bimini

Advisors.”

Bimini Advisors serves as the external

manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"). From this arrangement,

the Company receives management fees and

expense reimbursements.

As manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day

operations.

Pursuant to the terms of the management agreement, Bimini Advisors

provides Orchid with its management team,

including its officers, along with appropriate support personnel. Bimini Advisors is at all times

subject to the supervision and oversight of

Orchid's board of directors and has only such functions and authority as delegated to

it.

Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries referred

to as “Royal Palm”) maintains an investment

portfolio, consisting primarily of residential mortgage-backed securities ("MBS") issued

and guaranteed by a federally chartered

corporation or agency ("Agency MBS"). Our investment strategy focuses on, and our

portfolio consists of, two categories of Agency

MBS: (i) traditional pass-through Agency MBS, such as mortgage pass-through

certificates issued by Fannie Mae, Freddie Mac or

Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued

by the GSEs (“PT MBS”) and (ii) structured Agency

MBS, such as interest only securities ("IOs"), inverse interest only securities

("IIOs") and principal only securities ("POs"), among other

types of structured Agency MBS. In addition, Royal Palm receives dividends from its

investment in Orchid common shares.

COVID-19

Impact

Beginning

in mid-March

2020, the

global pandemic

associated

with the novel

coronavirus

(“COVID-19”)

and related

economic

conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought

about by COVID-19,

the MBS market

experienced

severe dislocations.

This resulted

in falling

prices of our

assets and

increased

margin

calls from

our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial

condition.

The MBS market

largely stabilized

after the

Federal Reserve

announced

on March 23,

2020 that

it would purchase

MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning.

As of March

31, 2020,

and at all

times since

then, we

have timely

satisfied all

margin calls.

The MBS

market continues

to react to

the pandemic

and the various

measures put

in place to

stabilize the

market. To the extent

the financial

or mortgage

markets do

not respond

favorably to

any of these

actions, or

such actions

do not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely affected.

Although the

Company cannot

estimate the

length or

gravity of

the impact

of the COVID-19 ~~Pandemic~~

pandemic at

this time, if

the pandemic

continues,

it may

continue to

have materially

~~Beginning in mid-March 2020,~~

adverse effects

on the ~~global pandemic associated with the novel coronavirus COVID-19 (“COVID-19”) and related economic conditions began to impact our~~ Company’s

results of

future operations,

financial position, and results of operations. As a result of the economic, health and market turmoil brought about by COVID-19, the Agency MBS market experienced severe dislocations. This resulted in falling prices of our assets and increased margin calls from our repurchase agreement lenders. Further, as interest rates declined, we faced additional margin calls related to our various hedge positions. In order to maintain our leverage ratio at prudent levels, maintain sufficient cash

and liquidity reduce risk and satisfy margin calls, we sold assets at levels significantly below their carrying values and closed several of our hedge positions. The Agency MBS market largely stabilized after the Federal Reserve (the “Fed”) announced on March 23, 2020 that it would purchase Agency MBS and U.S. Treasuries in the amounts needed to support smooth market functioning. As of September 30, 2020, we had timely satisfied all margin calls. The following summarizes the impact COVID-19 has had on our financial position and results of operations through September 30, 2020.

during 2021.

~~-26-~~

Our MBS portfolio had a fair market value of approximately $73.1 million as of September 30, 2020, compared to $52.8 million as of June 30, 2020, $54.4 million as of March 31, 2020, and $217.8 million as of December 31, 2019.

- 22 -

We recorded an additional valuation allowance against our deferred tax assets of approximately $11.2 million during the three months ended March 31, 2020. We did not record any additional valuation allowance during the six months ended September 30, 2020.

~~Our stockholders’ equity was $22.4 million as of September 30, 2020, $21.1 million as of June 30, 2020, $17.6 million as of March 31, 2020, and $40.0 million as of December 31, 2019.~~

~~Largely as a result of actions taken by the Federal Reserve (the “Fed”) in late March, Agency MBS valuations have increased and the market for these assets has stabilized.~~

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

Stock Repurchase

Plan

On March 26,

2018, the

Board of Directors

of the Company

approved a

Stock Repurchase

Plan (“Repurchase

Plan”).

Pursuant to

the

Repurchase

Plan, we

may purchase

up to 500,000

shares of

the Company’s

Class A Common

Stock from

time to time,

subject to

certain

limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

of 1934.

Share repurchases

may be executed

through various

means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the Company

to purchase

any shares.

The

Repurchase

Plan, ~~was originally set to expire~~

as currently

extended, expires

on November

15, ~~2018, but it has been extended~~2021.

The authorization

for the Share

Repurchase

Plan may be

terminated,

increased or

decreased by

the Company’s

Board of Directors ~~and it is currently set to expire on November 15, 2021.~~

in its discretion

at any time.

~~Through September 30, 2020,~~From commencement

of the Repurchase

Plan, through

March 31,

2021, the

Company repurchased

a total of ~~70,404~~

70,704 shares

at an

aggregate

cost of approximately ~~$166,945,~~

$166,945,

including commissions

and fees, for

a weighted

average price

of $2.37 per

share.

~~-27-~~

Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors (in addition to those related to the COVID-19 pandemic)

may impact our results of

operations and financial condition. These factors include:

●

interest rate trends;

●

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

●

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

●

actions taken by the U.S. government, including the

presidential administration, the ~~Fed,~~Federal Reserve (the “Fed”), the Federal

Open Market Committee (the “FOMC”), the Federal Housing Finance Agency ~~(the~~

(the “FHFA”) and the U.S. Treasury;

●

prepayment rates on mortgages underlying our Agency MBS, and credit trends

insofar as they affect prepayment rates; ~~and~~

●

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

●

other market developments.

In addition, a variety of factors relating to our business may also impact our results

of operations and financial condition. These

factors include:

●

our degree of leverage;

●

our access to funding and borrowing capacity;

●

our borrowing costs;

●

our hedging activities;

●

the market value of our investments;

●

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

●

our ability to use net operating loss carryforwards and net capital loss carryforwards

to reduce our taxable income;

●

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

●

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

Results of

Operations

Described

below are

the Company’s

results of

operations

for the ~~nine and~~ three

months ended ~~September 30, 2020,~~

March 31,

2021,

as compared

to the ~~nine and~~ three

months ended ~~September 30, 2019.~~

March 31,

2020.

Net Income

(Loss) ~~Income~~ Summary

Consolidated

net ~~loss~~ income

for the ~~nine~~ three

months ended ~~September 30, 2020~~

March 31,

2021 was ~~$17.5~~ $1.3

million, or ~~$1.51~~

$0.11 basic and diluted

income per

share of

Class A Common

Stock, as

compared to

a consolidated

net loss of

$22.3 million,

or $1.92 basic

and diluted

loss per share

of Class

- 23 -

Common Stock, ~~as compared to consolidated net income of $0.3 million, or $0.03 basic and diluted income per share of Class A Common Stock, for the nine months ended September 30, 2019.~~

~~Consolidated net income~~ for the three

months ended September 30, 2020 was $1.3 million, or $0.11 basic and diluted income per share of Class A Common Stock, as compared to consolidated net loss of $0.8 million, or $0.07 basic and diluted loss per share of Class A Common Stock, for the three months ended September 30, 2019.

March 31,

2020. The

components

~~-28-~~

~~The components~~ of net income

(loss) ~~income~~ for

the ~~nine and~~ three

months ended ~~September 30,~~

March 31,

2021 and 2020, ~~and 2019,~~

along with

the changes

in those components

are presented

in the table ~~below:~~

below.

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 Change 2020 2019 Change
Advisory services revenues

$
4,969

$
5,052

$
(83
)

$
1,629

$
1,791

$
(162
)
Interest and dividend income

4,414

7,065

(2,651
)

1,097

2,011

(914
)
Interest expense

(1,924
)

(4,850
)

2,926

(304
)

(1,391
)

1,087

Net revenues

7,459

7,267

192

2,422

2,411

11

Other (expense) income

(10,703
)

(1,155
)

(9,548
)

1,119

(1,039
)

2,158

Expenses

(5,007
)

(4,825
)

(182
)

(1,615
)

(1,606
)

(9
)
Net (loss) income before income tax provision

(8,251
)

1,287

(9,538
)

1,926

(234
)

2,160

Income tax provision

9,296

942

8,354

608

538

70

Net (loss) income

$
(17,547
)

$
345

$
(17,892
)

$
1,318

$
(772
)

$
2,090

(in thousands)

Three Months Ended March 31,

2021

2020

Change

Advisory services revenues

2,025

1,725

300

Interest and dividend income

1,117

2,405

(1,288)

Interest expense

(289)

(1,277)

988

Net revenues

2,853

Other income (expense)

658

(16,077)

16,735

Expenses

(1,757)

(1,706)

(51)

Net income (loss) before income tax provision

1,754

(14,930)

16,684

Income tax provision

(464)

(7,403)

6,939

Net income (loss)

1,290

(22,333)

23,623

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

We use derivative instruments, specifically Eurodollar and Treasury 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 designated our derivative financial instruments as hedge accounting relationships,

but rather hold them for economic

hedging purposes. Changes

in fair value of these instruments are presented in a separate line item in our consolidated

statements of

operations and not included in interest expense. As such, for financial reporting

purposes, interest expense and cost of funds are not

impacted by the fluctuation in value of the derivative instruments.

For the purpose of computing economic net interest income and ratios relating to cost

of funds measures, GAAP interest expense

has been adjusted to reflect the realized and unrealized gains or losses

on certain derivative instruments the Company uses that

pertain to each period presented. We believe that adjusting our interest expense for the periods

presented by the gains or losses on

these derivative instruments would not accurately reflect our economic interest

expense for these periods. The reason is that these

derivative instruments may cover periods that extend into the future, not just the current

period.

Any realized or unrealized gains or

losses on the instruments reflect the change in market value of the instrument caused

by changes in underlying interest rates

applicable to the term covered by the instrument, not just the current period.

For each period presented, we have combined the effects of the derivative financial instruments

in place for the respective period

with the actual interest expense incurred on borrowings to reflect total economic interest

expense for the applicable period. Interest

expense, including the effect of derivative instruments for the period, is referred to as economic interest

expense. Net interest income,

when calculated to include the effect of derivative instruments for the period, is referred to

as economic net interest income. This

presentation includes gains or losses on all contracts in effect during the reporting period, covering

the current period as well as

periods in the future.

~~-29-~~

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.

- 24 -

Our presentation of the economic

value of our hedging strategy has important limitations. First, other market participants

may

calculate economic interest expense and economic net interest income differently than the

way we calculate them. Second, while we

believe that the calculation of the economic value of our hedging strategy described

above helps to present our financial position and

performance, it may be of limited usefulness as an analytical tool. Therefore, the economic

value of our investment strategy should not

be viewed in isolation and is not a substitute for interest expense and net interest

income computed in accordance with GAAP.

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our

derivative instruments, and the consolidated statements of operations line item, gains (losses) on derivative instruments,

calculated in accordance with GAAP for each quarter in ~~2020~~2021 and ~~2019.~~ 2020.

As a result of the market turmoil during the first quarter of 2020 several hedge positions where closed.

However, the

hedges closed were hedges that covered periods well beyond the first quarter of 2020.

Accordingly, the open equity at the

time these hedges were closed will result in adjustments to economic interest expense through the balance of their

respective original hedge periods.

Since the Company’s portfolio was significantly reduced during the first quarter of 2020,

the effect of applying the open equity at the time of closure of these hedge instruments to the current, and much smaller,

repurchase agreement interest expense amounts could materially impact the economic interest amounts reported below.

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)

(in thousands)

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
Recognized in
Statement of TBA
Operations Securities Futures
Three Months Ended (GAAP) Loss Contracts
September 30, 2020

$
-

$
-

$
-

June 30, 2020

(2
)

-

(2
)
March 31, 2020

(5,291
)

(1,441
)

(3,850
)
December 31, 2019

287

(192
)

479

September 30, 2019

(483
)

(204
)

(279
)
June 30, 2019

(3,364
)

(734
)

(2,630
)
March 31, 2019

(2,258
)

(1,067
)

(1,191
)

(in thousands)
Recognized in
Statement of TBA
Operations Securities Futures
Nine Months Ended (GAAP) Loss Contracts
September 30, 2020

$
(5,292
)

$
(1,441
)

$
(3,851
)
September 30, 2019

(6,105
)

(2,005
)

(4,100
)

Recognized in

Statement of

TBA

Operations

Securities

Futures

(GAAP)

Income (Loss)

Contracts

Three Months Ended

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(2)

March 31, 2020

(5,291)

(1,441)

(3,850)

Gains (Losses) on Futures Contracts

(in thousands)

Attributed to Current Period (Non-GAAP)

Attributed to Future Periods (Non-GAAP)

Repurchase

Long-Term

Repurchase

Long-Term

Statement of

Agreements

Debt

Total

Agreements

Debt

Total

Operations

Three Months Ended

March 31, 2021

(708)

(58)

(766)

708

766

December 31, 2020

(615)

(40)

(655)

615

655

September 30, 2020

(1,065)

(40)

(1,105)

1,065

1,105

June 30, 2020

(456)

(40)

(496)

456

494

(2)

March 31, 2020

(456)

(40)

(496)

(2,879)

(475)

(3,354)

(3,850)

Economic Net Portfolio Interest Income

(in thousands)

Interest Expense on Repurchase Agreements

Net Portfolio

Effect of

Interest Income

Interest

GAAP

Non-GAAP

Economic

GAAP

Economic

Income

Basis

Hedges

(1)

Basis

(2)

Basis

(3)

Three Months Ended

March 31, 2021

611

(708)

748

571

(137)

December 31, 2020

597

(615)

658

554

(61)

September 30, 2020

604

(1,065)

1,108

561

(504)

~~-30-~~

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, 2020

$
(1,065
)

$
(40
)

$
(1,105
)

$
1,065

$
40

$
1,105

$
-

June 30, 2020

(456
)

(40
)

(496
)

456

38

494

(2
)
March 31, 2020

(456
)

(40
)

(496
)

(2,879
)

(475
)

(3,354
)

(3,850
)
December 31, 2019

510

56

566

(50
)

(37
)

(87
)

479

September 30, 2019

(124
)

61

(63
)

(155
)

(61
)

(216
)

(279
)
June 30, 2019

(226
)

43

(183
)

(2,215
)

(232
)

(2,447
)

(2,630
)
March 31, 2019

5

65

70

(976
)

(285
)

(1,261
)

(1,191
)
(in thousands)
Junior Junior
Repurchase Subordinated Repurchase Subordinated Statement of
Nine Months Ended Agreements Debt Total Agreements Debt Total Operations
September 30, 2020

$
(1,977
)

$
(120
)

$
(2,097
)

$
(1,358
)

$
(396
)

$
(1,754
)

$
(3,851
)
September 30, 2019

(345
)

169

(176
)

(3,346
)

(578
)

(3,924
)

$
(4,100
)

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, 2020

$
604

$
43

$
(1,065
)

$
1,108

$
561

$
(504
)
June 30, 2020

523

60

(456
)

516

463

7

March 31, 2020

2,040

928

(456
)

1,384

1,112

656

December 31, 2019

1,899

948

510

438

951

1,461

September 30, 2019

1,646

1,002

(124
)

1,126

644

520

June 30, 2019

2,134

1,340

(226
)

1,566

794

568

March 31, 2019

2,190

1,313

5

1,308

877

882

(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, 2020

$
3,167

$
1,030

$
(1,978
)

$
3,008

$
2,137

$
159

September 30, 2019

5,970

3,655

(345
)

4,000

2,315

1,970

~~(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.~~

~~-31-~~

Economic Net Interest Income
(in thousands)
Net Portfolio Interest Expense on Long-Term Debt
Interest Income Effect of Net Interest Income (Loss)
GAAP Economic GAAP Non-GAAP Economic GAAP Economic
Three Months Ended Basis
Basis⁽¹⁾
Basis
Hedges⁽²⁾

Basis⁽³⁾
Basis
Basis⁽⁴⁾

September 30, 2020

$
561

$
(504
)

$
261

$
(40
)

$
301

$
300

$
(805
)
June 30, 2020

463

7

282

(40
)

322

181

(315
)
March 31, 2020

1,112

656

350

(40
)

390

762

266

December 31, 2019

951

1,461

376

56

320

575

1,141

September 30, 2019

644

520

390

61

329

254

191

June 30, 2019

794

568

400

43

357

394

211

March 31, 2019

877

882

406

65

341

471

541

(in thousands)
Net Portfolio Interest Expense on Junior Subordinated Notes
Interest Income Effect of Net Interest Income (Loss)
GAAP Economic GAAP Non-GAAP Economic GAAP Economic
Nine Months Ended Basis
Basis⁽¹⁾
Basis
Hedges⁽²⁾

Basis⁽³⁾
Basis
Basis⁽⁴⁾

September 30, 2020

$
2,137

$
159

$
893

$
(120
)

$
1,013

$
1,244

$
(854
)
September 30, 2019

2,315

1,970

1,196

169

1,027

1,119

943

~~(1)~~

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

~~(2)~~

~~Reflects the effect of derivative instrument hedges for only the period presented.~~

~~(3)~~

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

~~(4)~~

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

- 25 -

June 30, 2020

523

(456)

516

463

March 31, 2020

2,040

928

(456)

1,384

1,112

656

(1)

Reflects the effect of derivative instrument hedges for only the

period presented.

(2)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense.

(3)

Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net portfolio interest

income.

Economic Net Interest Income

(in thousands)

Net Portfolio

Interest Expense on Long-Term Debt

Interest Income

Effect of

Net Interest Income

GAAP

Economic

GAAP

Non-GAAP

Economic

GAAP

Economic

Basis

(1)

Basis

Hedges

(2)

Basis

(3)

Basis

(4)

Three Months Ended

March 31, 2021

571

(137)

250

(58)

308

321

(445)

December 31, 2020

554

(61)

257

(40)

297

(358)

September 30, 2020

561

(504)

261

(40)

301

300

(805)

June 30, 2020

463

282

(40)

322

181

(315)

March 31, 2020

1,112

656

350

(40)

390

762

266

(1)

Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net portfolio interest

income.

(2)

Reflects the effect of derivative instrument hedges for only

the period presented.

(3)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense.

(4)

Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net interest income.

Segment Information

We have two operating segments. The asset management segment includes the investment

advisory services provided by Bimini

Advisors to Orchid and Royal Palm. The investment portfolio segment includes the

investment activities conducted by Royal Palm. ~~Segment information for the nine months ended September 30, 2020 and 2019 is as follows:~~

~~-32-~~

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

$
5,052

$
-

$
-

$
-

$
5,052

Advisory services, other operating segments⁽¹⁾

200

-

-

(200
)

-

Interest and dividend income

-

7,064

1

-

7,065

Interest expense

-

(3,655
)

(1,195
)⁽²⁾

-

(4,850
)
Net revenues

5,252

3,409

(1,194
)

(200
)

7,267

Other

-

(419
)

(736
)⁽³⁾

-

(1,155
)
Operating expenses⁽⁴⁾

(2,019
)

(2,806
)

-

-

(4,825
)
Intercompany expenses⁽¹⁾

-

(200
)

-

200

-

Income (loss) before income taxes

$
3,233

$
(16
)

$
(1,930
)

$
-

$
1,287

Segment information for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as

follows:

~~(1)~~

~~Includes advisory services revenue received by Bimini Advisors from Royal Palm.~~

(in thousands)

~~(2)~~

~~Includes interest on long-term debt.~~

Asset

~~(3)~~

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

Investment

~~(4)~~

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

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,025

Advisory services, other operating segments

(1)

(36)

Interest and dividend income

1,117

Interest expense

(40)

~~-33-~~

(250)

(2)

(290)

Net revenues

2,061

1,077

(250)

(36)

2,852

Other income

658

(3)

659

Operating expenses

(4)

(1,103)

(653)

(1,756)

Intercompany expenses

(1)

(36)

Income (loss) before income taxes

958

1,046

(249)

1,755

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,725

Advisory services, other operating segments

(1)

(59)

Interest and dividend income

2,405

Interest expense

(928)

(350)

(2)

(1,278)

Net revenues

1,784

1,477

(350)

(59)

2,852

- 26 -

Other expenses

(15,563)

(514)

(3)

(16,077)

Operating expenses

(4)

(709)

(997)

(1,706)

Intercompany expenses

(1)

(59)

Income (loss) before income taxes

1,075

(15,142)

(864)

(14,931)

(1)

Includes advisory services revenue received by Bimini Advisors from

Royal Palm.

(2)

Includes interest on long-term debt.

(3)

Includes gains (losses) on Eurodollar futures contracts entered into as

a hedge on junior subordinated notes and fair value adjustments

retained interests in securitizations.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment were as follows:

(in thousands)
Asset Investment
Management Portfolio Corporate Total
September 30, 2020

$
1,474

$
107,414

$
13,275

$
122,163

December 31, 2019

1,457

263,223

14,809

279,489

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

March 31, 2021

1,700

122,894

12,639

137,233

December 31, 2020

1,469

113,764

13,468

128,701

Asset Management

Segment

Advisory Services

Revenue

Advisory services

revenue consists

of management

fees and overhead

reimbursements

charged to

Orchid for

the management

of its

portfolio

pursuant to

the terms

of a management

agreement.

We receive a monthly management fee in the amount of:

●

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

●

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

than or equal to $500 million, and

●

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

In addition, Orchid is obligated to reimburse us for any direct expenses incurred

on its behalf and to pay to us an amount equal to

Orchid's pro rata portion of certain overhead costs set forth in the management

agreement. The management agreement has been

renewed through February ~~2021~~2022 and provides for automatic one-year extension

options. Should Orchid terminate the management

agreement without cause, it will be obligated to pay to us a termination fee equal

to three times the average annual management fee,

as defined in the management agreement, before or on the last day of the automatic

renewal term.

Orchid has reported its September 30, 2020 stockholders’ equity to be approximately $376.7 million, a decrease of approximately 5% from December 31, 2019. Because of this decrease, Bimini expects to receive a proportional decrease in its management fee revenue going forward until Orchid is able to grow its equity base.

The following table summarizes the advisory services revenue received from

Orchid in each quarter during ~~2020~~2021 and ~~2019 and~~ 2020.

(in ~~the nine months ended~~ thousands)

Average

Advisory Services

Orchid

Management

Overhead

Three Months Ended

MBS

Equity

Fee

Allocation

Total

March 31, 2021

4,032,716

453,353

1,621

404

2,025

December 31, 2020

3,633,631

387,503

1,384

442

1,826

September 30, 2020 ~~and 2019.~~

(in thousands)
Average Average Advisory Services
Orchid Orchid Management Overhead
Three Months Ended MBS Equity Fee Allocation Total
September 30, 2020

$
3,422,564

$
368,588

$
1,252

$
377

$
1,629

June 30, 2020

3,126,779

361,093

1,268

347

1,615

March 31, 2020

3,269,859

376,673

1,377

348

1,725

December 31, 2019

3,705,920

414,018

1,477

379

1,856

September 30, 2019

3,674,087

394,788

1,440

351

1,791

June 30, 2019

3,307,885

363,961

1,326

328

1,654

March 31, 2019

3,051,509

363,204

1,285

322

1,607

(in thousands)
Average Average Advisory Services
Orchid Orchid Management Overhead
Nine Months Ended MBS Equity Fee Allocation Total
September 30, 2020

$
3,273,068

$
368,785

$
3,897

$
1,072

$
4,969

September 30, 2019

3,344,494

373,984

4,051

1,001

5,052

3,422,564

~~-34-~~368,588

1,252

377

1,629

June 30, 2020

3,126,779

361,093

1,268

347

1,615

March 31, 2020

3,269,859

376,673

1,377

348

1,725

Investment Portfolio Segment

Net Portfolio Interest Income

- 27 -

In response

to the COVID-19

related market

developments

during the

first quarter

of 2020 discussed

above, the

Company sold

significant

portion of

the MBS portfolio.

Our outstanding

balances under

repurchase

agreement

borrowings

declined proportionately

well. As a

result, many

figures discussed

below appear

distorted

when simple

average balances

are calculated,

such as average

MBS

held and average

outstanding

balances under

repurchase

agreement

borrowings.

Further, since

the sales occurred

very late

in the

quarter, interest

income and

interest expense

amounts reflect

balances of

both assets

and borrowing

in place for

the majority

of the

quarter.

The combination

of these two

factors led

to certain

metrics such

as our yield

on average

MBS and cost

of funds measures

appear higher

than they

would have

been had these

large sales

not occurred,

or had they

occurred earlier

in the quarter.

These factors

should be kept

in mind when

reading the

discussion of

our investment

portfolio

segment results

for the quarters

that follow.

We define net

portfolio

interest income

as interest

income on MBS

less interest

expense on

repurchase

agreement

funding.

During

the ~~nine~~ three

months ended ~~September 30,~~

March 31,

2021, we generated

$0.6 million

of net portfolio

interest income,

consisting

of $0.6 million

of interest

income from

MBS assets

offset by $40,000

of interest

expense on

repurchase

liabilities.

For the comparable

period ended

March 31,

2020, we generated ~~$2.1~~

$1.1 million

of net portfolio

interest income,

consisting

of ~~$3.2~~$2.0 million

of interest

income from

MBS assets

offset by ~~$1.0~~

$0.9 million

of interest

expense on

repurchase

liabilities. For the comparable period ended September 30, 2019, we generated $2.3 million of net portfolio interest income, consisting of $6.0 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities.

The ~~$2.8~~ $1.4

million decrease

in interest

income for

the ~~nine~~ three

months ended ~~September 30, 2020~~

March

31, 2021 was

due to a ~~$119.2 million decrease in average MBS balances, partially offset by a 110~~ 245

basis point

("bp") ~~increase~~ decrease

in yields

earned on

the ~~portfolio.~~ portfolio,

combined with

a $67.1 million

decrease

in average

MBS balances.

The ~~$2.6~~$0.9 million

decrease in

interest expense

for the ~~nine~~ three

months ended

March 31,

2021 was due

to a $62.1

million

decrease in

average repurchase

liabilities,

combined with

a 260 bp decrease

in cost of

funds.

Our economic

interest expense

on repurchase

liabilities

for the three

months ended

March 31,

2021 and 2020

was $0.7 million

and

$1.4 million,

respectively, resulting

in ($0.1)

million and

$0.7 million

of economic

net portfolio

interest

income, 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 three

months ended

March

31, 2021 and

for each quarter

in 2020 on

both a GAAP

and economic

basis.

($ in thousands)

Average

Yield on

Average

Interest Expense

Average Cost of Funds

MBS

Interest

Average

Repurchase

GAAP

Economic

GAAP

Economic

Held

(1)

Income

(2)

MBS

Agreements

(1)

Basis

(2)

Basis

(3)

Three Months Ended

March 31, 2021

69,017

611

3.54%

69,104

748

0.23%

4.33%

December 31, 2020

69,161

597

3.45%

67,878

658

0.25%

3.88%

September 30, 2020 ~~was due to a combination~~

62,981

604

3.84%

61,151

1,108

0.28%

7.24%

June 30, 2020

53,630

523

3.90%

51,987

516

0.46%

3.97%

March 31, 2020

136,142

2,040

5.99%

131,156

928

1,384

2.83%

4.22%

($ in thousands)

Net Portfolio

Interest Income

Interest Spread

GAAP

Economic

GAAP

Economic

Basis

(2)

Basis

(4)

Three Months Ended

March 31, 2021

571

(137)

3.31%

(0.79)%

December 31, 2020

554

(61)

3.20%

(0.43)%

September 30, 2020

561

(504)

3.56%

(3.40)%

June 30, 2020

463

3.44%

(0.07)%

March 31, 2020

1,112

656

3.16%

1.77%

(1)

Portfolio yields and costs of ~~a $111.0 million decrease~~borrowings presented in the table above

and the tables on pages

31 and 32 are calculated based on the

average balances of the underlying investment portfolio/repurchase ~~liabilities~~

agreement balances and ~~an 84 bp decrease in cost of funds.~~

~~Our economic interest expense on repurchase liabilities~~are annualized for the ~~nine months ended September 30, 2020~~quarterly periods

presented. Average balances for quarterly periods are calculated

using two data points, the beginning and ~~2019 was $3.0 million and $4.0 million, respectively, resulting in $0.2 million and $2.0 million of economic net portfolio interest income, respectively.~~ending balances.

During the three months ended September 30, 2020, we generated $0.6 million of net portfolio interest income, consisting of $0.6 million of interest income from MBS assets offset by approximately $43,000 of interest expense on repurchase liabilities. For the three months ended September 30, 2019, we generated $0.6 million of net portfolio interest income, consisting of $1.6 million of interest income from MBS assets offset by $1.0 million of interest expense on repurchase liabilities. The $1.0 million decrease in interest income for the three months ended September 30, 2020 was due to a $124.2 million decrease in average MBS balances, partially offset by a 32 bp increase in yields earned on the portfolio. The $1 million decrease in interest expense for the nine months ended September 30, 2020 was due to a combination of a $116.4 million decrease in average repurchase liabilities and a 198 bp decrease in cost of funds.

Our economic interest expense on repurchase liabilities for the three months ended September 30, 2020 and 2019 was $1.1 million and $1.1 million, respectively, resulting in $0.5 million of economic net portfolio

- 28 -

(2)

Economic interest expense and ~~$0.5 million of~~ economic net ~~portfolio~~ interest income ~~respectively.~~

~~The~~presented in the table above and the tables ~~below provide information~~ on page 32 include

the effect

of derivative instrument hedges for only the period presented.

(3)

Represents interest cost of our ~~portfolio~~borrowings and the effect of derivative

instrument hedges attributed to the period related to hedging

activities divided by average ~~balances, interest income, yield on assets,~~MBS held.

(4)

Economic Net Interest Spread is calculated by subtracting average ~~repurchase agreement balances, interest expense,~~ economic

cost of funds ~~net interest income and net interest rate spread for the nine months ended September 30, 2020 and 2019 and each quarter in 2020 and 2019~~from yield on ~~both a GAAP and economic basis.~~average MBS.

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

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

September 30, 2020

$
62,981

$
604

3.84
%

$
61,151

$
43

$
1,108

0.28
%

7.24
%
June 30, 2020

53,630

523

3.90
%

51,987

60

516

0.46
%

3.97
%
March 31, 2020

136,142

2,040

5.99
%

131,156

928

1,384

2.83
%

4.22
%
December 31, 2019

190,534

1,898

3.99
%

182,215

948

438

2.08
%

0.96
%
September 30, 2019

187,199

1,646

3.52
%

177,566

1,002

1,126

2.26
%

2.54
%
June 30, 2019

211,406

2,134

4.04
%

199,901

1,340

1,566

2.68
%

3.13
%
March 31, 2019

212,033

2,190

4.13
%

199,771

1,313

1,308

2.63
%

2.62
%

($ 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, 2020

$
84,251

$
3,167

5.01
%

$
81,431

$
1,030

$
3,008

1.69
%

4.92
%
September 30, 2019

203,546

5,970

3.91
%

192,413

3,655

4,000

2.53
%

2.77
%

~~-35-~~

($ 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, 2020

$
561

$
(504
)

3.56
%

(3.40
)%
June 30, 2020

463

7

3.44
%

3.44
%
March 31, 2020

1,112

656

3.16
%

1.77
%
December 31, 2019

951

1,461

1.91
%

3.03
%
September 30, 2019

644

520

1.26
%

0.98
%
June 30, 2019

794

568

1.36
%

0.91
%
March 31, 2019

877

882

1.50
%

1.51
%

($ 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, 2020

$
2,137

$
159

3.32
%

0.09
%
September 30, 2019

2,315

1,970

1.38
%

1.14
%

~~(1)~~

Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 37 and 38 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 38 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 ~~$3.2~~

$0.6 million

for the ~~nine~~ three

months ended ~~September 30, 2020~~

March 31,

2021 and ~~$6.0~~ $2.0

million for

the ~~nine~~ three

months ended ~~September 30, 2019.~~

March

31, 2020.

Average MBS

holdings were ~~$84.3~~

$69.0 million

and ~~$203.5~~ $136.1

million for

the ~~nine~~three months

ended ~~September 30,~~ March

31, 2021 and

2020, ~~and 2019,~~

respectively. The ~~$2.8~~

$1.4 million

decrease

in interest

income was

due to a ~~$119.2~~ $67.1

million decrease

in average

MBS holdings, ~~partially offset by~~

combined with

a ~~110 bp increase~~

245 basis point

("bp") decrease

in yields.

Average balances

as presented

here, and

in the table

below, are based

on beginning

and ending

outstanding

balances and

are skewed

lower for

the quarter

ended March

31, 2020 because

nearly all

of the disposals

occurred

at the end

~~Our interest income was $0.6 million~~of March 2020.

If average

balances were

calculated

based on

daily balances,

average MBS

holdings for

the three months

ended March

31, 2020 would

have been

$209.7 million

and the yield

would have

been 3.89%.

The table

below presents

the average

portfolio

size, income

and yields

of our respective

sub-portfolios,

consisting

of structured

MBS

and pass-through

MBS (“PT

MBS”) for

the three months

ended March

31, 2021 and

for each quarter

in 2020.

($ in thousands)

Average MBS Held

Interest Income

Realized Yield on Average MBS

Structured

MBS

Total

MBS

Total

MBS

Total

Three Months Ended

March 31, 2021

68,703

314

69,017

605

611

3.53%

6.54%

3.54%

December 31, 2020

68,842

319

69,161

598

(1)

597

3.47%

(1.20)%

3.45%

September 30, 2020 ~~and $1.6 million for the three months ended September~~

62,564

417

62,981

588

604

3.76%

15.35%

3.84%

June 30, ~~2019. Average MBS holdings were $63.0 million and $187.2 million for the three months ended September 30,~~ 2020 ~~and 2019, respectively. The $1.0 million decrease in interest income was due to a $124.2 million decrease in average MBS holdings, partially offset by a 32 bp increase in yields.~~

53,101

~~-36-~~529

53,630

502

~~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,~~21

523

3.78%

16.12%

3.90%

March 31, 2020 ~~and 2019, and for each quarter during 2020 and 2019.~~

135,044

($ 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, 2020

$
62,564

$
417

$
62,981

$
588

$
16

$
604

3.76
%

15.35
%

3.84
%
June 30, 2020

53,101

529

53,630

502

21

523

3.78
%

16.12
%

3.90
%
March 31, 2020

135,044

1,098

136,142

2,029

11

2,040

6.01
%

3.93
%

5.99
%
December 31, 2019

188,884

1,650

190,534

1,870

28

1,898

3.96
%

6.90
%

3.99
%
September 30, 2019

185,309

1,890

187,199

1,652

(6
)

1,646

3.57
%

(1.15
)%

3.52
%
June 30, 2019

209,171

2,235

211,406

2,111

23

2,134

4.04
%

4.01
%

4.04
%
March 31, 2019

209,469

2,564

212,033

2,143

47

2,190

4.09
%

7.42
%

4.13
%

($ 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, 2020

$
83,570

$
681

$
84,251

$
3,119

$
48

$
3,167

4.98
%

9.42
%

5.01
%
September 30, 2019

201,316

2,230

203,546

5,906

64

5,970

3.91
%

3.86
%

3.91
%

1,098

136,142

2,029

2,040

6.01%

3.93%

5.99%

Interest Expense on Repurchase Agreements and the Cost of Funds

Our average

outstanding

balances under

repurchase

agreements

were ~~$81.4~~ $69.1

million and ~~$192.4~~

$131.2 million,

generating

interest expense

of ~~$1.0~~$40,000

and $0.9 million ~~and $3.7 million~~

for the ~~nine~~ three

months ended

March 31,

2021 and 2020,

respectively.

Our average

cost of funds

was 0.23%

and

2.83% for

three months

ended March

31, 2021 and

2020,

respectively.

There was

a 260 bp decrease

in the average

cost of funds

and a

$62.1 million

decrease in

average outstanding

balances under

repurchase

agreements

during the

three months

ended March

31, 2021 as

compared to

the three

months ended

March 31,

2020. Average

balances as

presented

here, and

in the table

below, are based

beginning and

ending outstanding

balances and

are skewed

lower for

the quarter

ended March

31, 2020 because

nearly all

of the

deleveraging

occurred at

the end of

March 2020.

If average

balances were

calculated

based on

daily balances,

average outstanding

repurchase

agreements

for the three

months ended

March 31,

2020 would

have been

$198.4 million

and the cost

of funds would

have

been 1.87%.

Our economic

interest expense

was $0.7 million

and $1.4 million

for the three

months ended

March 31, 2021

and 2020, respectively.

There was

a 11 bp increase

in the average

economic cost

of funds

to 4.33%

for the three

months ended

March 31,

2021 from

4.22% for

the

three months

ended March

31, 2020.

The $0.7

million decrease

in economic

interest expense

was due

to a 260

bp decrease

in the average

cost of funds

combined with

the unfavorable

performance

of our derivative

holdings attributed

to the current

period.

Because all

of our repurchase

agreements

are short-term,

changes in

market rates

have a more

immediate impact

on our interest

expense.

The Company’s

average cost

of funds calculated

on a GAAP

basis was 10

bps above the

average one-month

LIBOR and

equal

to the average

six-month LIBOR

for the quarter

ended March

31, 2021.

The Company’s

average economic

cost of funds

was 420 bps

above the

average one-month

LIBOR and

410 bps above

the average

six-month LIBOR

for the quarter

ended March

31, 2021.

The

- 29 -

average term

to maturity

of the outstanding

repurchase

agreements

increased from

33 days at

December 31,

2020 to 64

days at March

31, 2021.

The tables

below present

the average

outstanding

balances under

all repurchase

agreements,

interest expense

and average

economic cost

of funds,

and average

one-month

and six-month

LIBOR rates

for the three

months ended

March 31,

2021 and for

each

quarter in

2020 on both

a GAAP and

economic basis.

($ in thousands)

Average

Balance of

Interest Expense

Average Cost of Funds

Repurchase

GAAP

Economic

GAAP

Economic

Agreements

Basis

Three Months Ended

March 31, 2021

69,104

748

0.23%

4.33%

December 31, 2020

67,878

658

0.25%

3.88%

September 30, 2020 ~~and 2019, respectively. Our average cost~~

61,151

1,108

0.28%

7.24%

June 30, 2020

51,987

516

0.46%

3.97%

March 31, 2020

131,156

928

1,384

2.83%

4.22%

Average GAAP Cost of ~~funds was 1.69% and 2.53% for nine months ended~~ Funds

Average Economic Cost of Funds

Relative to Average

Average LIBOR

One-Month

Six-Month

One-Month

Six-Month

One-Month

Six-Month

LIBOR

Three Months Ended

March 31, 2021

0.13%

0.23%

0.10%

0.00%

4.20%

4.10%

December 31, 2020

0.15%

0.27%

0.10%

(0.02)%

3.73%

3.61%

September 30, 2020 ~~and 2019, respectively. There was an 84 bp decrease in the average cost of funds and a $111.0 million decrease in average outstanding repurchase agreements during the nine months ended September~~

0.17%

0.35%

0.11%

(0.07)%

7.08%

6.89%

June 30, 2020 ~~compared to the nine months ended September 30, 2019.~~

0.55%

~~Our economic interest expense was $3.0 million and $4.0 million for the nine months ended September 30,~~0.70%

(0.09)%

(0.24)%

3.42%

3.27%

March 31, 2020 and 2019, respectively. There was a 215 bp increase in the average economic cost of funds to 4.92% for the nine months ended September 30, 2020 from 2.77% for the nine months ended September 30, 2019. The $1.0 million decrease in economic interest expense was due to the $111.0 million decrease in average outstanding repurchase agreements during the nine months ended September 30, 2020, combined with the negative performance of our derivative holdings attributed to the current period.

1.34%

Our average outstanding balances under repurchase agreements were $61.2 million and $177.6 million, generating interest expense of approximately $43,000 and $1.0 million for the three months ended September 30, 2020 and 2019, respectively. Our average cost of funds was 0.28% and 2.26% for three months ended September 30, 2020 and 2019, respectively. There was a 198 bp decrease in the average cost of funds and a $116.4 million decrease in average outstanding repurchase agreements during the three months ended September 30, 2020, compared to the three months ended September 30, 2019. 1.43%

1.49%

Our economic interest expense was $1.1 million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively. There was a 470 bp increase in the average economic cost of funds to 7.24% for the three months ended September 30, 2020 from 2.54% for the three months ended September 30, 2019.1.40%

2.88%

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 11 bps above the average one-month LIBOR and 7 bps below the average six-month LIBOR for the quarter ended September 30, 2020. Our average economic cost of funds was 707 bps above the average one-month LIBOR and 689 bps above the average six-month LIBOR for the quarter ended September 30, 2020. The average term to maturity of the outstanding repurchase agreements increased from 24 days at December 31, 2019 to 73 days at September 30, 2020.2.79%

~~-37-~~

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, 2020 and 2019, and for each quarter in 2020 and 2019, 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, 2020

$
61,151

$
43

$
1,108

0.28
%

7.24
%
June 30, 2020

51,987

60

516

0.46
%

3.97
%
March 31, 2020

131,156

928

1,384

2.83
%

4.22
%
December 31, 2019

182,215

948

438

2.08
%

0.96
%
September 30, 2019

177,566

1,002

1,126

2.26
%

2.54
%
June 30, 2019

199,901

1,340

1,566

2.68
%

3.13
%
March 31, 2019

199,771

1,313

1,308

2.63
%

2.62
%

($ in thousands)
Average
Balance of Interest Expense Average Cost of Funds
Repurchase GAAP Economic GAAP Economic
Nine Months Ended Agreements Basis Basis Basis Basis
September 30, 2020

$
81,431

$
1,030

$
3,008

1.69
%

4.92
%
September 30, 2019

192,413

3,655

4,000

2.53
%

2.77
%

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, 2020

0.17
%

0.35
%

0.11
%

(0.07
)%

7.07
%

6.89
%
June 30, 2020

0.55
%

0.70
%

(0.09
)%

(0.24
)%

3.42
)%

3.27
%
March 31, 2020

1.34
%

1.43
%

1.49
%

1.40
%

2.88
%

2.79
%
December 31, 2019

1.90
%

1.98
%

0.18
%

0.10
%

(0.94
)%

(1.02
)%
September 30, 2019

2.22
%

2.18
%

0.04
%

0.08
%

0.32
%

0.36
%
June 30, 2019

2.45
%

2.49
%

0.23
%

0.19
%

0.68
%

0.64
%
March 31, 2019

2.50
%

2.77
%

0.13
%

(0.14
)%

0.12
%

(0.15
)%

Average GAAP Cost of Funds Average Economic Cost of Funds
Relative to Average Relative to Average
Average LIBOR One-Month Six-Month One-Month Six-Month
Nine Months Ended One-Month Six-Month LIBOR LIBOR LIBOR LIBOR
September 30, 2020

0.68
%

0.83
%

1.01
%

0.86
%

4.24
%

4.09
%
September 30, 2019

2.39
%

2.48
%

0.14
%

0.05
%

0.38
%

0.29
%

~~-38-~~

Dividend Income

WeAt both March

31, 2021 and

December 31,

2020,

we owned ~~1,520,036~~

2,595,357 shares

of Orchid common ~~stock as~~

stock.

Orchid paid

total dividends

$0.195 and

$0.24 and

per share

during the

three months

ended March

31, 2021 and

2020,

respectively.

During the

three months

ended

March 31, ~~2020. We acquired 975,321 additional shares during the three months ended June 30,~~

2021 and 2020, and an additional 100,000 shares during the three months ended September 30, 2020, bringing our total ownership to 2,595,357 shares. Orchid paid total dividends of $0.595 per share and $0.19 per share during the nine and three months ended September 30, 2020, respectively, and $0.72 per share and $0.24 per share during the nine and three months ended September 30, 2019, respectively. During the nine and three months ended September 30, 2020,

we received

dividends

on this common

stock investment

of approximately ~~$1.2~~

$0.5

million and ~~$0.5~~

$0.4

million, ~~respectively, compared to $1.1 million and $0.4 million during the nine and three months ended September 30, 2019,~~

respectively.

Long-Term Debt

Junior Subordinated ~~Notes~~Debt

Interest expense

on our junior

subordinated

debt securities

was ~~$0.9~~approximately

$0.2 million ~~and $1.2 million~~

for the ~~nine months~~three-month

period ended ~~September 30, 2020 and 2019, respectively.~~

March

31, 2021,

compared to

approximately

$0.3 million

for the same

period in

2020.

The average

rate of interest

paid for the ~~nine~~

three months

ended ~~September 30, 2020~~March

31, 2021 was ~~4.38%~~

3.71% compared

to ~~6.06%~~5.19% for

the comparable

period in ~~2019.~~

2020. The junior

subordinated

~~Interest expense on our junior subordinated~~

debt securities was $0.3 million and $0.4 million for the three month periods ended September 30, 2020 and 2019, respectively. The average rate of interest paid for the three months ended September 30, 2020 was 3.80% compared to 5.86% for the comparable period in 2019.

pay

~~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, 2020,~~ March

31, 2021,

the interest

rate was ~~3.75%~~3.68%.

Note Payable

On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable

in equal monthly principal and interest

installments of approximately $4,500 through October 30, 2039. Interest accrues

at 4.89% through October 30, 2024. Thereafter,

- 30 -

interest accrues based on the weekly average yield to the United States Treasury securities adjusted to

a constant maturity of 5 years,

plus 3.25%. The note is secured by a mortgage on the Company’s office building.

Paycheck Protection Plan Loan

On April 13,

2020, the

Company received

approximately

$152,000

through the

Paycheck Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan.

PPP loans

may be forgiven,

in whole or

in part, if

the proceeds

are used for

payroll and

other

permitted

purposes in

accordance

with the requirements

of the PPP

and if certain

other requirements

are met.

These loans

carry a fixed

rate of 1.00%

and a term

of two years,

if not forgiven,

in whole or

in part.

Payments are

deferred for

the first

ten months

after the

completion

of the loan

forgiveness

period.

The Small

Business Administration

has notified

the Company

that, effective

as of April

22, 2021,

all principal

and accrued

interest

under the

PPP loan

has been forgiven.

Gains or Losses and Other Income

The table

below presents

our gains

or losses and

other income

for the three

months ended

March 31,

2021 and 2020.

(in thousands)

2021

2020

Change

Realized losses on sales of MBS

(5,805)

5,805

Unrealized losses on MBS

(1,392)

(574)

(818)

Total losses on

MBS

(1,392)

(6,379)

4,987

Losses on derivative instruments

(5,291)

5,291

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

2,050

(4,408)

6,458

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

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

three months

ended March

31, 2020 we

received proceeds

of approximately

$171.2

million from

the sales of

MBS. Most

of these sales

occurred during

the second

half of March

2020 as we

sold assets

in order

to maintain

our leverage

ratio at prudent

levels, maintain

sufficient

cash and liquidity

and reduce

risk associated

with the market

turmoil brought

about

by COVID-19.

We did not

sell any MBS

during the

three months

March 31,

2021.

The fair value

of our MBS

portfolio and

derivative

instruments,

and the gains

(losses) reported

on those financial

instruments,

are

sensitive to

changes in

interest rates.

The table

below presents

historical

interest rate

data as of

each quarter

end during

2021 and 2020.

5 Year

10 Year

15 Year

30 Year

Three

U.S. Treasury

Fixed-Rate

Month

Rate

(1)

Rate

(1)

Mortgage Rate

(2)

Mortgage Rate

(2)

Libor

(3)

March 31, 2021

0.94%

1.75%

2.39%

3.08%

0.19%

December 31, 2020

0.36%

0.92%

2.22%

2.68%

0.23%

September 30, 2020

0.27%

0.68%

2.39%

2.89%

0.24%

June 30, 2020

0.29%

0.65%

2.60%

3.16%

0.31%

March 31, 2020

0.38%

0.70%

2.89%

3.45%

1.10%

(1)

Historical 5 Year and

10 U.S. Year

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 is obtained from the Intercontinental Exchange Benchmark

Administration Ltd.

Operating Expenses

- 31 -

For the three

months ended

March 31,

2021, our

total operating

expenses were

approximately

$1.8 million

compared

approximately

$1.7 million

for the three

months ended

March 31,

2020. The

table below

presents a

breakdown

of operating

expenses for

the three

months ended

March 31,

2021 and 2020.

(in thousands)

2021

2020

Change

Compensation and benefits

1,124

1,100

Legal fees

Accounting, auditing and other professional fees

139

(46)

Directors’ fees and liability insurance

188

165

Other G&A expenses

308

282

1,757

1,706

Income Tax Provision

We recorded an income tax provision for the three months ended March 31, 2021 of approximately

$0.5 million on consolidated

pre-tax book income of $1.8 million. We recorded an income tax provision for the three months ended

March 31, 2020 of approximately

$7.4 million on a consolidated pre-tax book loss of $14.9 million.

As a result

of adverse

economic impacts

of COVID-19

on our business,

management

performed

an assessment

of the need

for

additional

valuation allowances

against existing

deferred tax

assets. Following

the more-likely-than-not

standard that

benefits will

not be

realized in

the future,

we determined

an additional

valuation allowance

of approximately

$11.2 million was

necessary during

the three

months ended

March 31,

2020 for

the net operating

loss carryforwards

and capital

loss carryforwards.

With the evolving

and changing

landscape caused

by the pandemic,

we will continue

to closely

monitor the

impacts of

COVID-19

on the Company’s

ability to

realize its

deferred tax

assets and

may increase

valuation allowances

in the future

as new information

becomes available.

Financial

Condition:

Mortgage-Backed Securities

As of March

31, 2021,

our MBS portfolio

consisted of

$72.9 million

of agency or

government

MBS at fair

value and had

a weighted

average coupon

of 3.66%.

During the

three months

ended March

31, 2021,

we received

principal repayments

of $3.3 million

compared to

$6.7 million

for the comparable

period ended

March 31,

2020.

The average

prepayment

speeds for

the quarters

ended March

31, 2021

and 2020 were

18.3% and

13.7%,

respectively.

The following

table presents

the 3-month

constant prepayment

rate (“CPR”)

experienced

on our structured

and PT MBS

sub-

portfolios,

on an annualized

basis, for

the quarterly

periods presented.

CPR is a

method of

expressing the

prepayment

rate for

a mortgage

pool that assumes

that a constant

fraction of

the remaining

principal is

prepaid each

month or

year. Specifically, the

CPR in the

chart

below represents

the three-month

prepayment

rate of the

securities

in the respective

asset category.

Assets that

were not

owned for

the

entire quarter

have been

excluded from

the calculation.

The exclusion

of certain

assets during

periods of

high trading

activity can

create a

very high,

and often

volatile, reliance

on a small

sample of

underlying

loans.

Structured

PT MBS

MBS

Total

Three Months Ended

Portfolio (%)

March 31, 2021

18.5

16.4

18.3

December 31, 2020

12.8

24.5

14.4

September 30, 2020

13.0

32.0

15.8

June 30, 2020

12.4

25.0

15.3

March 31, 2020

11.6

18.1

13.7

- 32 -

The following

tables summarize

certain characteristics

of our PT

MBS and structured

MBS as of March

31, 2021 and

December 31,

2020:

($ in thousands)

Weighted

Percentage

Average

Weighted

Maturity

Fair

Entire

Average

Longest

Asset Category

Value

Portfolio

Coupon

Months

Maturity

March 31, 2021

Fixed Rate MBS

72,504

99.5%

3.66%

335

1-Jan-51

Interest-Only MBS

329

0.5%

3.51%

298

15-Jul-48

Inverse Interest-Only MBS

0.0%

5.87%

218

15-May-39

Total MBS Portfolio

72,856

100.0%

3.66%

335

1-Jan-51

December 31, 2020

Fixed Rate MBS

64,902

99.6%

3.89%

333

1-Aug-50

Interest-Only MBS

251

0.4%

3.56%

299

15-Jul-48

Inverse Interest-Only MBS

0.0%

5.84%

221

15-May-39

Total MBS Portfolio

65,178

100.0%

3.89%

333

1-Aug-50

($ in thousands)

March 31, 2021

December 31, 2020

Percentage of

Agency

Fair Value

Entire Portfolio

Fair Value

Entire Portfolio

Fannie Mae

48,564

66.7%

38,946

59.8%

Freddie Mac

24,292

33.3%

26,232

40.2%

Total Portfolio

72,856

100.0%

65,178

100.0%

March 31, 2021

December 31, 2020

Weighted Average Pass-through Purchase Price

108.84

109.51

Weighted Average Structured Purchase Price

4.28

Weighted Average Pass-through Current Price

109.63

112.67

Weighted Average Structured Current Price

4.80

3.20

Effective Duration

(1)

3.976

3.309

(1)

Effective duration is the approximate percentage change

in price for a 100 basis point change in rates.

An effective duration of 3.976 indicates

that an interest rate increase of 1.0% would be expected to cause a 3.976% decrease

in the value of the MBS in our investment portfolio

March 31, 2021.

An effective duration of 3.309 indicates that an interest rate

increase of 1.0% would be expected to cause a 3.309% decrease

in the value of the MBS in our investment portfolio at December 31,

2020. 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

three months

ended March

31, 2021 and

2020.

($ in thousands)

Three Months Ended March 31,

2021

2020

Total Cost

Average

Price

Weighted

Average

Yield

Total Cost

Average

Price

Weighted

Average

Yield

PT MBS

12,368

104.84

1.19%

20,823

110.83

2.64%

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

- 33 -

priced by the

market.

The stated

contractual

final maturity

of the mortgage

loans underlying

our portfolio

of PT MBS

generally ranges

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

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

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

expected prepayments.

We face

the risk that

the market

value of our

PT MBS assets

will increase

or decrease

at different

rates than

that of our

structured

MBS or liabilities,

including our

hedging instruments.

Accordingly, we

assess our

interest rate

risk by estimating

the duration

of our assets

and the duration

of our liabilities.

We generally

calculate duration

and effective

duration using

various third-party

models or obtain

these

quotes from

third parties.

However, empirical

results and

various third-party

models may

produce different

duration numbers

for the same

securities.

The following

sensitivity

analysis

shows the

estimated impact

on the fair

value of our

interest rate-sensitive

investments

and hedge

positions as

of March 31,

2021, 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

72,504

2,487

(3,399)

(7,366)

3.43%

(4.69)%

(10.16)%

Interest-Only MBS

329

(100)

127

(30.33)%

22.55%

38.71%

Inverse Interest-Only MBS

(3)

(7)

3.56%

(14.46)%

(30.16)%

Total MBS Portfolio

72,856

2,388

(3,328)

(7,246)

3.28%

(4.57)%

(9.95)%

($ in thousands)

Notional

$ Change in Fair Value

% Change in Fair Value

Amount

(1)

-100BPS

+100BPS

+200BPS

-100BPS

+100BPS

+200BPS

Eurodollar Futures Contracts

Junior Subordinated Debt Hedges

1,000

(10)

(1.00)%

1.00%

2.00%

1,000

(10)

Gross Totals

2,378

(3,318)

(7,226)

(1)

Represents the

average contract/notional

amount of Eurodollar

futures contracts.

- 34 -

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 March

31, 2021,

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

six of these

counterparties.

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 March

31, 2021,

we had obligations

outstanding

under the

repurchase

agreements

of approximately

$73.1 million

with a net

weighted average

borrowing

cost of 0.21%.

The remaining

maturity of

our outstanding

repurchase

agreement

obligations

ranged from

6 to

127 days, with

a weighted

average maturity

of 64 days.

Securing the

repurchase

agreement

obligation

as of March

31, 2021 are

MBS

with an estimated

fair value,

including

accrued interest,

of $73.0 million

and a weighted

average maturity

of 336 months.

Through May

14,

2021, we have

been able

to maintain

our repurchase

facilities

with comparable

terms to those

that existed

at March 31,

2021 with

maturities

through August

5, 2021.

The table below presents information about our period-end, maximum and average

repurchase agreement obligations for each

quarter in 2021 and 2020.

($ in thousands)

Ending

Maximum

Average

Difference Between Ending

Balance

Repurchase Agreements and

of Repurchase

Average Repurchase Agreements

Three Months Ended

Agreements

Amount

Percent

March 31, 2021

73,136

76,004

69,104

4,032

5.83%

December 31, 2020

65,071

70,684

67,878

(2,807)

(4.14)%

September 30, 2020

70,685

70,794

61,151

9,534

15.59%

(1)

June 30, 2020

51,617

52,068

51,987

(370)

(0.71)%

March 31, 2020

52,357

214,921

131,156

(78,799)

(60.08)%

(2)

(1)

The higher ending balance relative to the average balance during the

quarter ended September 30, 2020 reflects the increase in the portfolio.

During that quarter, the Company's investment

in PT MBS increased $20.4 million.

(2)

The lower ending balance relative to the average balance during the quarter

ended March 31, 2020 reflects the Company’s response to

the

COVID-19 pandemic. During that quarter,

the Company's investment in PT MBS decreased $162.4 million.

Liquidity and Capital Resources

Liquidity is

our ability

to turn non-cash

assets into

cash, purchase

additional

investments,

repay principal

and interest

on borrowings,

fund overhead

and fulfill

margin calls.

Our primary

immediate

sources of

liquidity include

cash balances,

unencumbered

assets, the

availability

to borrow

under repurchase

agreements,

and fees and

dividends received

from Orchid.

Our borrowing

capacity will

vary over

time as the

market value

of our interest

earning assets

varies.

Our investments

also generate

liquidity on

an on-going

basis through

payments of

principal and

interest

we receive

on our MBS

portfolio.

The COVID-19

pandemic has

adversely affected

our liquidity,

assets under

management

and operating

results.

During March

2020,

we significantly

reduced our

MBS assets

to meet margin

calls and

repay debts.

As described

elsewhere

in this report,

since March

2020

Bimini’s operating

results have

stabilized,

liquidity

has improved

and our investments

in MBS and

Orchid shares

has increased.

Our hedging

strategy typically

involves taking

short positions

in Eurodollar

futures, T-Note

futures, TBAs

or other instruments.

- 35 -

Currently, our

hedge positions

are limited

to short positions

in Eurodollar

futures.

When the market

causes these

short positions

to decline

in value we

are required

to meet margin

calls with

cash.

This can reduce

our liquidity

position to

the extent

other securities

in our portfolio

move in price

in such a way

that we do

not receive

enough cash

through margin

calls to offset

the Eurodollar

related margin

calls. If this

were to occur

in sufficient

magnitude,

the loss of

liquidity might

force us to

reduce the

size of the

levered portfolio,

pledge additional

structured

securities

to raise funds

or risk operating

the portfolio

with less liquidity.

Our master

repurchase

agreements

have no stated

expiration,

but can be

terminated

at any time

at our option

or at the

option of the

counterparty. However,

once a definitive

repurchase

agreement

under a master

repurchase

agreement

has been entered

into, it generally

may not be

terminated

by either

party.

A negotiated

termination

can occur, but

may involve

a fee to

be paid by

the party

seeking to

terminate

the repurchase

agreement

transaction.

Under our

repurchase

agreement funding

arrangements,

we are required

to post margin

at the initiation

of the borrowing.

The margin

posted represents

the haircut,

which is a

percentage

of the market

value of the

collateral

pledged. To the extent

the market

value of the

asset collateralizing

the financing

transaction

declines, the

market value

of our posted

margin will

be insufficient

and we will

be required

post additional

collateral.

Conversely, if

the market

value of the

asset pledged

increases in

value, we

would be over

collateralized

and we

would be entitled

to have excess

margin returned

to us by the

counterparty.

Our lenders

typically

value our

pledged securities

daily to

ensure the

adequacy of

our margin

and make margin

calls as needed,

as do we.

Typically, but not always,

the parties

agree to a

minimum

threshold

amount for

margin calls

so as to avoid

the need for

nuisance margin

calls on a

daily basis.

As discussed

above, we

invest a portion

of our capital

in structured

MBS.

We generally

do not apply

leverage to

this portion

of our

portfolio.

The leverage

inherent in

the structured

securities

replaces the

leverage obtained

by acquiring

PT securities

and funding

them in

the repurchase

market.

This structured

MBS strategy

has been a

core element

of the Company’s

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 March

31, 2021,

we had cash

and cash equivalents

of $6.0 million.

We generated

cash flows

of $3.9 million

from principal

and interest

payments on

our MBS portfolio

and had average

repurchase

agreements

outstanding

of $69.1 million

during the

three months

ended March

31, 2021.

In addition,

during

the three

months ended

March 31,

2021, we received

approximately

$2.0 million

in management

fees and expense

reimbursements

manager of

Orchid and

approximately

$0.5 million

in dividends

from our investment

in Orchid common

stock.

In order to generate additional cash to be invested in our MBS portfolio, on October

30, 2019, we obtained a $680,000 loan

secured by a mortgage on the Company’s office property.

The loan is payable in equal monthly principal and interest installments of

approximately $4,500 through October 30, 2039. Interest accrues at 4.89%, through October

30, 2024. Thereafter, interest accrued

based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity ~~of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.~~

~~Paycheck Protection Plan Loan~~

On April 13, 2020, the Company received approximately $152,000 through the Paycheck Protection Program (“PPP”) of the CARES Act in the form of a low interest loan. PPP loans may be forgiven, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP and if certain other requirements are met. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first ten months after the completion of the loan forgiveness covered period.

~~-39-~~

~~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, 2020 and 2019.~~

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 Change 2020 2019 Change
Realized (losses) gains on sales of MBS

$
(5,805
)

$
23

$
(5,828
)

$
-

$
23

$
(23
)
Unrealized gains on MBS

304

6,227

(5,923
)

276

950

(674
)
Total (losses) gains on MBS

(5,501
)

6,250

(11,751
)

276

973

(697
)
(Losses) gains on derivative instruments

(5,292
)

(6,105
)

813

-

(483
)

483

Gains on retained interests in securitizations

59

315

(256
)

59

40

19

Unrealized gains (losses) on

Orchid Island Capital, Inc. common stock

39

(973
)

1,012

794

(927
)

1,721

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, 2020, we received proceeds of $171.2 million from the sales of MBS. Most of these sales occurred during the second half of March 2020 as we sold assets in order to maintain our leverage ratio at prudent levels, maintain sufficient cash and liquidity and reduce risk associated with the market turmoil brought about by COVID-19. During the nine months ended September 30, 2019, we received proceeds of $44.0 million from the sales of MBS.

The fair value of our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are sensitive to changes in interest rates. The table below presents historical interest rate data for each quarter end during 2020 and 2019.

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, 2020

0.27
%

0.68
%

2.39
%

2.89
%

0.24
%
June 30, 2020

0.29
%

0.65
%

2.60
%

3.16
%

0.31
%
March 31, 2020

0.38
%

0.70
%

2.89
%

3.45
%

1.10
%
December 31, 2019

1.69
%

1.92
%

3.18
%

3.72
%

1.91
%
September 30, 2019

1.55
%

1.68
%

3.12
%

3.61
%

2.13
%
June 30, 2019

1.76
%

2.00
%

3.24
%

3.80
%

2.40
%
March 31, 2019

2.24
%

2.41
%

3.72
%

4.27
%

2.61
%

~~(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.~~

~~-40-~~

~~Operating Expenses~~

For the nine and three months ended September 30, 2020, our total operating expenses were approximately $5.0 million and $1.6 million, respectively, compared to approximately $4.8 million and $1.6 million for the nine and three months ended September 30, 2019, respectively. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2020 and 2019.

(in thousands)
Nine Months Ended September 30, Three Months Ended September 30,
2020 2019 Change 2020 2019 Change
Compensation and related benefits

$
3,157

$
3,075

$
82

$
1,010

$
987

$
23

Legal fees

122

120

2

27

24

3

Accounting, auditing and other professional fees

345

261

84

94

73

21

Directors’ fees and liability insurance

512

491

21

166

169

(3
)
Administrative and other expenses

871

878

(7
)

319

353

(34
)

$
5,007

$
4,825

$
182

$
1,616

$
1,606

$
10

~~Income Tax Provision~~

We recorded an income tax provision for the nine and three months ended September 30, 2020 of approximately $9.3 million and $0.6 million, respectively, on consolidated pre-tax book (loss) income of $(8.3) million and $1.9 million in the nine and three months ended September 30, 2020, respectively. We recorded an income tax provision (benefit) for the nine and three months ended September 30, 2019 of approximately $0.9 million and $0.5 million, respectively, on consolidated pre-tax book income (loss) of $1.3 million and $(0.2) million in the nine and three months ended September 30, 2019, respectively.

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

~~Financial Condition:~~

~~Mortgage-Backed Securities~~

As of September 30, 2020, our MBS portfolio consisted of $73.1 million of agency or government MBS at fair value and had a weighted average coupon of 3.97%. During the nine months ended September 30, 2020, we received principal repayments of $11.2 million compared to $14.8 million for the comparable period ended September 30, 2019. The average prepayment speeds for the quarters ended September 30, 2020 and 2019 were 15.8% and 10.5%, respectively.

~~-41-~~

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

Structured
PT MBS MBS Total
Three Months Ended Portfolio (%) Portfolio (%) Portfolio (%)
September 30, 2020

13.0

32.0

15.8

June 30, 2020

12.4

25.0

15.3

March 31, 2020

11.6

18.1

13.7

December 31, 2019

15.6

15.6

15.6

September 30, 2019

9.5

16.2

10.5

June 30, 2019

9.9

14.6

10.5

March 31, 2019

5.7

13.4

6.8

~~The following tables summarize certain characteristics of our PT MBS and structured MBS as of September 30, 2020 and December 31, 2019:~~

($ in thousands)
Weighted
Percentage Average
of Weighted Maturity
Fair Entire Average in Longest
Asset Category Value Portfolio Coupon Months Maturity
September 30, 2020
Fixed Rate MBS
$
72,782 99.5% 3.97% 337 15-Aug-50
Interest-Only MBS
334 0.5% 3.54% 289 15-Jul-48
Inverse Interest-Only MBS
29 0.0% 5.85% 224 15-May-39
Total MBS Portfolio
$
73,145 100.0% 3.97% 337 15-Aug-50
December 31, 2019
Fixed Rate MBS
$
216,231 99.3% 4.25% 316 1-Nov-49
Interest-Only MBS
1,024 0.4% 3.65% 281 15-Jul-48
Inverse Interest-Only MBS
586 0.3% 4.77% 254 25-Apr-41
Total MBS Portfolio
$
217,841 100.0% 4.25% 316 1-Nov-49

($ in thousands)
September 30, 2020 December 31, 2019
Percentage of Percentage of
Agency Fair Value Entire Portfolio Fair Value Entire Portfolio
Fannie Mae

$
40,579

55.5
%

$
203,321

93.3
%
Freddie Mac

32,566

44.5
%

14,499

6.7
%
Ginnie Mae

-

0.0
%

21

0.0
%
Total Portfolio

$
73,145

100.0
%

$
217,841

100.0
%

~~-42-~~

September 30, 2020 December 31, 2019
Weighted Average Pass-through Purchase Price

$
109.74

$
107.12

Weighted Average Structured Purchase Price

$
4.96

$
6.39

Weighted Average Pass-through Current Price

$
112.59

$
108.77

Weighted Average Structured Current Price

$
3.50

$
6.91

Effective Duration ⁽¹⁾

3.184

3.196

~~(1)~~

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 3.184 indicates that an interest rate increase of 1.0% would be expected to cause a 3.184% decrease in the value of the MBS in our investment portfolio at September 30, 2020. An effective duration of 3.196 indicates that an interest rate increase of 1.0% would be expected to cause a 3.196% decrease in the value of the MBS in our investment portfolio at December 31, 2019. 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, 2020 and 2019.~~

($ in thousands)
Nine Months Ended September 30,
2020 2019
Total Cost Average Price Weighted Average Yield Total Cost Average Price Weighted Average Yield
PT MBS

$
43,130

$
111.44

1.99
%

$
3,285

$
104.12

3.35
%

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.

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.

~~-43-~~

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, 2020, 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

$
72,782

$
2,205

$
(2,767
)

$
(6,264
)

3.03
%

(3.80
)%

(8.61
)%
Interest-Only MBS

334

(60
)

142

257

(18.00
)%

42.58
%

76.95
%
Inverse Interest-Only MBS

29

1

(4
)

(8
)

3.20
%

(13.46
)%

(28.63
)%
Total MBS Portfolio

$
73,145

$
2,146

$
(2,629
)

$
(6,015
)

2.93
%

(3.59
)%

(8.22
)%

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

Amount⁽¹⁾
-100BPS +100BPS +200BPS -100BPS +100BPS +200BPS
Eurodollar Futures Contracts
Junior Subordinated Debt Hedges

$
1,000

$
(10
)

$
10

$
20

(1.00
)%

1.00
%

2.00
%

$
1,000

$
(10
)

$
10

$
20

Gross Totals

$
2,136

$
(2,619
)

$
(5,995
)

~~(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, 2020, 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, 2020, we had obligations outstanding under the repurchase agreements of approximately $70.7 million with a net weighted average borrowing cost of 0.26%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 5 to 225 days, with a weighted average maturity of 73 days. Securing the repurchase agreement obligation as of September 30, 2020 are MBS with an estimated fair value, including accrued interest, of $73.3 million and a weighted average maturity of 338 months. Through November 6, 2020, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2020 with maturities through May 13, 2021.

~~-44-~~

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

($ in thousands)
Ending Maximum Average Difference Between Ending
Balance Balance Balance Repurchase Agreements and
of Repurchase of Repurchase of Repurchase Average Repurchase Agreements
Three Months Ended Agreements Agreements Agreements Amount Percent
September 30, 2020

$
70,685

$
70,794

$
61,151

$
9,534

15.59
%⁽¹⁾
June 30, 2020

51,617

52,068

51,987

(370
)

(0.71
)%
March 31, 2020

52,357

214,921

131,156

(78,799
)

(60.08
)%⁽²⁾
December 31, 2019

209,954

239,243

182,215

27,739

15.22
%⁽³⁾
September 30, 2019

154,475

200,552

177,566

(23,091
)

(13.00
)%⁽⁴⁾
June 30, 2019

200,656

200,776

199,901

755

0.38
%
March 31, 2019

199,146

200,113

199,771

(625
)

(0.31
)%

~~(1)~~

The higher ending balance relative to the average balance during the quarter ended September 30, 2020 reflects the increase in the portfolio. During the quarter ended September 30, 2020, the Company's investment in PT MBS increased $20.4 million

~~(2)~~

The lower ending balance relative to the average balance during the quarter ended March 31, 2020 reflects the Company’s response to the COVID-19 pandemic. During the quarter ended March 31, 2020, the Company's investment in PT MBS decreased $162.4 million.

~~(3)~~

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

~~(4)~~

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

~~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 primary immediate sources of liquidity include cash balances, unencumbered assets, the availability to borrow under repurchase agreements, and fees and dividends received from Orchid. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our investments also generate liquidity on an on-going basis through payments of principal and interest we receive on our MBS portfolio. In addition, in the three months ended September 30, 2020, we received U.S. Federal income tax refunds of approximately $1.4 million related to the 2018 tax year and approximately $0.2 million related to the 2019 tax year.

The COVID-19 pandemic has adversely affected our liquidity, assets under management and operating results. As disclosed in detail elsewhere in this report, during March 2020, we significantly reduced our MBS assets to meet margin calls and repay debts. This reduction in our investment portfolio will impact our ability to generate income in the future. In addition, for the foreseeable future we may receive reduced income from our management of the Orchid portfolio. However, management believes that we currently have sufficient liquidity and capital resources available for at least one year from the date of issuance of this Form 10-Q for (a) the management of our existing MBS portfolio, (b) to service our management agreement to Orchid, (c) to make all scheduled payments on borrowings, (d) for the payment of overhead and operating expenses, and (e) the payment of other accrued obligations.

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

~~-45-~~

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

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

As discussed above, we invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in the structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repurchase market. This structured MBS strategy has been a core element of the Company’s 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, 2020, we had cash and cash equivalents of $5.8 million. We generated cash flows of $14.9 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $81.4 million during the nine months ended September 30, 2020. In addition, during the nine months ended September 30, 2020, we received approximately $5.0 million in management fees and expense reimbursements as manager of Orchid and approximately $1.2 million in dividends from our investment in Orchid common stock.

In order to generate additional cash to be invested in our MBS portfolio, on October 30, 2019, we obtained a $680,000 loan secured by a mortgage on the Company’s office property. The loan is payable in equal monthly principal and interest installments of approximately $4,500 through October 30, 2039. Interest accrues at 4.89%, through October 30, 2024. Thereafter, interest accrued based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of five years, plus 3.25%.

Net loan proceeds were approximately $651,000.

In addition, ~~subsequent to September 30,~~

during 2020, we completed the sale of real property that was

not used in

the Company’s business.

The proceeds from this sale were approximately $462,000 and ~~we intend to invest these proceeds~~were

invested in our MBS portfolio.

On April 13,

2020, we received

approximately ~~$152,000~~

$152,000 through

the Paycheck

Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan. These

loans carry

a fixed rate

of 1.00% and

a term of

two years,

if not forgiven,

in whole or

in part. Payments

are deferred

for the first

six months

of the loan.

PPP loans

may be forgiven,

in whole or

in part, if

the proceeds

are used for

payroll and

other permitted

purposes in

accordance

with the requirements

of the PPP

and if certain

other requirements

are met. ~~These loans carry a fixed rate~~The

Small Business

Administration

has notified

the Company

that, effective

as of ~~1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first six months of the loan. The Company believes that~~ April

22, 2021,

all ~~of the proceeds were used for eligible purposes and the outstanding~~ principal

and accrued

interest ~~will ultimately be~~ under

the PPP loan

has been

forgiven.

~~-46-~~

The table below summarizes the effect that certain future contractual obligations existing as of ~~September 30, 2020~~March

31, 2021 will have on our

liquidity and cash flows. The figures below ~~assume~~ reflect forgiveness of all principal and interest under

the PPP loan.

- 36 -

(in thousands)

Obligations Maturing

Within One

Year

One to Three

Years

Three to Five

Years

More than

Five Years

Total

Repurchase agreements

73,136

Interest expense on repurchase agreements

(1)

Junior subordinated notes

(2)

26,000

Interest expense on junior subordinated notes

(1)

1,016

1,945

1,942

9,434

14,337

Principal and interest on mortgage loan

(1)

107

730

998

Totals

74,277

2,052

2,049

36,164

114,542

(1)

Interest expense

on repurchase

agreements,

junior subordinated

notes and mortgage

loan are based

on current interest

rates as of March

31, 2021

and the remaining

term of liabilities

existing at

that ~~the entire PPP loan will be forgiven.~~date.

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

$
70,684

$
-

$
-

$
-

$
70,684

Interest expense on repurchase agreements⁽¹⁾

77

-

-

-

77

Junior subordinated notes⁽²⁾

-

-

-

26,000

26,000

Interest expense on junior subordinated notes⁽¹⁾

1,032

1,977

1,980

10,098

15,087

Principal and interest on mortgage loan⁽¹⁾

54

107

107

757

1,025

Totals

$
71,847

$
2,084

$
2,087

$
36,855

$
112,873

(2)

~~(1)~~

Interest expense on repurchase agreements, junior subordinated notes and mortgage loan are based on current interest rates as of September 30, 2020 and the remaining term of liabilities existing at that date.

~~(2)~~We hold a common

equity interest

in Bimini Capital

Trust II.

The amount presented

represents our

~~We hold a common equity interest in Bimini Capital Trust II. The amount presented represents our~~ net cash outlay.

Outlook

Orchid Island

Capital Inc.

Orchid Island Capital ~~Inc.~~continued to recover from the market impact during the first quarter

of 2020 caused by the COVID-19

pandemic.

~~The COVID-19 pandemic discussed above impacted~~ Orchid Island Capital as well. Recently Orchid reported a stockholders’ equity of approximately $376.7 million as of September 30, 2020, up from $346 million as of June 30, 2020 and $308 million as of March 31, 2020, but down from approximately $396 million at December 31, 2019. In the near term the management fees we receive from Orchid will be proportionately reduced. However, to the extent Orchid iswas able to ~~increase~~grow its capital base ~~over time, we will benefit via~~ with two secondary offerings of common

stock, realizing net proceeds of $96.9

million. However, as the economic recovery from the pandemic accelerated during the first quarter of 2021 interest rates

increased ~~management fees.~~as

the market anticipated strong growth for 2021 and a potential acceleration in inflation.

As described more fully below, these

developments had an adverse impact on the Agency MBS market and Orchid incurred

a net loss for the quarter of $29.4 million.

The

net effect of the capital raises and the net loss was a $50.9 million increase in the shareholders

equity of Orchid Island.

The increase

in the equity base of Orchid resulted in an 11% increase in advisory service revenue for the first quarter of 2021 versus the fourth

quarter of 2020 and a 17% increase versus the first quarter of 2020. In addition, Orchid

is obligated to reimburse us for direct expenses

paid on its behalf and to pay to us Orchid’s pro rata share of overhead as defined in the management

agreement.

As a stockholder of

Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders.

Our operating results are also impacted

by changes in the market value of our holdings of Orchid common shares, although these

market value changes do not impact our

cash flows from Orchid.

The Company ~~has acquired an additional 1,075,321 shares~~increased its holdings of Orchid ~~since March 31,~~during the second quarter

of 2020

as the shares of Orchid

were trading at a significant discount to Orchid’s reported book value as of March 31, 2020.

The Company currently owns

approximately 2.6 million shares of Orchid.

The independent Board of Directors of Orchid has the ability to terminate the

management agreement and thus end our ability to

collect management fees and share overhead costs.

Should Orchid terminate the management agreement without cause,

it will be

obligated to pay us a termination fee equal to three times the average annual management

fee, as defined in the management

agreement, before or on the last day of the current automatic renewal term.

Economic Summary

During the

first quarter

of 2021 the

economy made

tremendous

strides towards

recovery from

the COVID-19

pandemic. Evidence

the recovery

was pervasive.

New cases

of COVID-19,

which peaked

around the

turn of the

year, moderated

significantly, as

did

hospitalizations

and deaths.

As a result

of the U.S.

Senate run-off

elections in

early January, both

of which were

won by Democrats,

one

party was

now in control

of the White

House and

both houses

of Congress.

This led the

way to a new

stimulus package

being passed

that

was at the

high end of

market expectations

- $1.9 trillion.

The ~~COVID-19 coronavirus that emerged in China in late 2019 and spread~~ American

Rescue Plan

Act of 2021

was signed

into law on

March 11, 2021.

This marked

the third

legislative

act related

to the nation’s

recovery from

the COVID-19

pandemic, after

the $2.2 trillion

CARES Act

(described

below), which

passed on March

27, 2020 and

the $2.3 trillion

Consolidated

Appropriations

Act of 2021,

which contained

$900

billion of

COVID-19

relief and

was signed on

December 27,

2020.

Given the momentum

the administration

had after

passing the

- 37 -

American Rescue

Plan Act of

2021, President

Biden shortly

thereafter

announced plans

for a $2 trillion-plus

infrastructure

bill.

The vaccine

roll-out,

which initially

seemed haphazard,

improved to

the point

where the

U.S. became

a world leader.

The U.S.

was well on

its way to

herd immunity

as over 200

million inoculations

were administered

by April 21,

2021, well

ahead of even

the most optimistic

projections

the beginning

of the year.

Economic data

released over

the course

of the first

quarter has

been consistently

very strong.

Fueled by

two

rounds of

stimulus checks

during the

first quarter,

consumers have

been spending.

Retail sales,

home sales,

demand for

new cars

and

other durable

goods are

all benefitting

from the stimulus

and considerable

pent-up demand.

Job growth

appears to

be accelerating

quickly, and the

unemployment

rate has dropped

to 6.1%.

All of ~~2020 continues~~the

developments

described above

have stoked

inflation fears.

The most

obvious evidence

of potential

price pressures

relate to be

supply shortages

of a variety

of consumer

goods and

commodities

caused by

the ~~driving force behind economic activity both in the U.S.~~

combination

of still constrained

production

and ~~abroad. As reported in our second quarter earnings release, cases of COVID-19 were starting~~ surging

demand that

have begun

to surge in the U.S. starting in mid-June. This surge lasted into July and August, particularly in the southern and warmer states. By late summer the surge subsided and economic optimism rebounded as evidenced by most measures of economic activity. As the weather turns colder in the fall and people spend more time indoors, cases could start to increase again. This appears to be happening as we enter the fourth quarter, especially in northern states surface

across the U.S. and Europe. To date governments have not responded with such drastic measures such as shelter in place orders like we saw in the spring. In contrast with the spring and summer, hospitalizations and serious cases appear to be occurring less frequently, and the medical community appears more adept at dealing with the more severe cases.

economy.

~~-47-~~

The ~~economic~~factors

highlighted

above have

led to a surging

economy, which

grew at an

annualized

rate of 6.4%

during the

first quarter.

They

have also impacted

the financial

markets.

The various

broad equity

indices are

making new

all-time highs

on a frequent

basis, and

corporate

debt issuance

levels – both

investment

grade and

high yield

– are at or

near record

levels reflecting

the demand

for capital

and

investor appetite

for yield.

U.S. Treasury

rates, at

least longer-term

rates, have

risen significantly.

The ten-year

U.S. Treasury

note yield

increased from

0.916% to

1.742% over

the course

of the first

quarter, an increase

of 82.6 basis

points, and

the U.S.

Treasury curve

has

steepened substantially.

The market

has moved up

expectations

for a recovery

from the ~~severe contraction that occurred~~pandemic

and return

to normalcy

significantly.

The Federal

Reserve (the

“Fed”) gave

a green light

to higher

rates, referring

to them as

a sign of economic

strength.

However, when

the

market has

attempted

to price in

an acceleration

to the ~~spring continues. However, the “V” shaped days~~ timing

of the ~~recovery are over, at least on a broad basis. Growth is very uneven with certain sectors approaching levels~~rate

increases by

the Fed, the

Fed has pushed

back against

such

sentiment.

These efforts

have largely

been successful,

and current

market pricing

only reflects

one interest

rate hike by

the end of activity last seen before the onset of the pandemic, while others remain far short of such levels. A few sectors have surpassed pre-pandemic levels – importantly housing among them, as well as retail sales. However, the leisure and hospitality sectors remain far below pre-pandemic activity levels and are not expected to fully recover in the near term. The consequence of the unbalanced recovery is a labor market that still has a long way to go to get back to February 2020 levels, as the unemployment rate was reported at 7.9% in early October. While progress towards finding a vaccine continues, with many efforts showing considerable promise, widespread access to a viable vaccine appears to be months away. Progress has also been made on the treatment and testing side of the pandemic, especially with respect to the latter. The lower death and hospitalization rates may be a result of the former.

2022.

Legislative

Response and

the Federal

Reserve

Congress passed

the CARES

Act ~~(described below)~~ quickly

in response

to the pandemic’s

emergence ~~this~~

last spring

and followed

with additional

legislation

over the ensuing

months.

However, as certain

provisions

of the CARES

Act ~~have~~ expired,

such as supplemental

unemployment

insurance ~~at the end of~~

last

July, there ~~appears~~ appeared

to be a need

for additional

stimulus for

the economy

to deal with

the ~~uneven recovery~~surge

in the pandemic

that occurred

as cold

weather set

in, particularly

over the Christmas

holiday.

As mentioned

above, the

Federal government

eventually

passed an additional

stimulus package

in late December

2020 and ~~still high level~~again

in March of ~~unemployment. However,~~

2021. In addition,

the ~~government~~Fed has ~~been unable to reach an agreement on additional measures. The Fed on the other hand has~~

provided,

and continues

to provide,

much support

to the markets

and the economy

as it can within

the constraints

of its mandate.

During the

third quarter

of 2020, the

Fed

unveiled a

new monetary

policy framework

focused on

average inflation

rate targeting

that ~~will allow~~ allows

the Fed Funds

rate to remain

quite low,

even if inflation

is expected

to temporarily

surpass the

2% target

level. Further,

the Fed will

look past the

presence of

very tight

labor

markets, should

they ~~exist.~~ be present

at the time.

This marks

a significant

shift from

their prior

policy framework,

which was

focused on

the

unemployment

rate as a

key indicator

of impending

inflation.

Adherence

to this policy

could steepen

the U.S.

Treasury curve

as ~~short term~~ short-term

rates could

remain low

for a considerable

period but ~~longer term~~

longer-term

rates could

rise given

the Fed’s intention

to let inflation

potentially

run

above 2% in

the future

as the economy

more fully

recovers.

As mentioned

above, this

appears to

be occurring

early in 2021

now that

effective vaccines

have been

found and

inoculations

are distributed

at an accelerating

pace.

Interest Rates

Interest rates ~~remained in a tight range~~

steadily increased

throughout

the ~~third~~ first

quarter as

described above

and levels

of ~~2020 and seem likely to do so for~~ implied

volatility

rose as well.

Mortgage

rates slowly

declined at

the ~~short to medium term, especially given the change to the Fed’s monetary policy framework. With realized levels~~end of ~~volatility low, implied volatility is also very low by historical norms. Mortgage rates continue to slowly decline, however,~~

2020 as originators ~~slowly add~~

added capacity

and ~~can~~could handle

ever increasing

levels of production

volume.

This

trend in mortgage

rates quickly

reversed during

the first

quarter of

2021 as rates

began to increase,

especially in

late February

and March.

With the increase

in interest

rates, prepayment

activity slowed.

The percent

of the Agency

RMBS universe

with sufficient

rate incentive

economically

refinance

has declined

from approximately

80%

at the end

of 2020 to

approximately

46% at the

end of the

first quarter.

However, the spread

between rates

available to

borrowers

and the implied

yield on a

current coupon

mortgage,

known as the ~~Primary/Secondary~~

primary/secondary

spread, has

continued to

compress.

The spread

is still slightly

above long-term

average levels

so further

compression

is possible,

meaning ~~either~~ rates

available

to borrowers ~~can~~

could remain

at current

levels ~~should U.S. Treasury rates increase, or they could move lower~~ even

if U.S. Treasury

rates ~~remain stable. In either~~increased

further. Since

the

end of the

first quarter,

interest rates

have declined

by approximately

10 basis points

in the case

of the 10-year

U.S. Treasury

note.

Accordingly, prepayment

levels on ~~MBS~~

RMBS securities

are likely

to remain

high ~~for the foreseeable future.~~unless

U.S. Treasury

rates increase

above current

levels.

- 38 -

The Agency

MBS Market

The ~~Agency MBS~~

market conditions

that prevailed

throughout

the first

quarter were

not conducive

to mortgage

performance.

In fact, apart

from high

yield bonds,

all fixed income

sectors had

negative returns

for the quarter.

Interest rates

rose rapidly, and

volatility was

elevated.

Agency

RMBS had

negative absolute

and excess

returns for

the first

quarter of

-1.2% and

-0.3%, respectively

(both vs U.S

Treasuries and

LIBOR/swaps).

There is a

benefit to

higher interest

rates, and

as interest

rates rose

prepayment

levels declined.

The Mortgage

Bankers

Association

refinance

index declined

from approximately

4700 in early

January 2021

to approximately

2900 in early

April 2021,

before

rebounding

slightly since.

The Agency

RMBS market

continues to

be essentially

bifurcated

with two

separate and

distinct sub-markets.

Lower coupon

fixed rate ~~mortgages; with~~

mortgages,

coupons of

1.5% through

2.5%, are ~~or will be soon in the case of 1.5% coupons, the focus of daily purchases~~

purchased by

the Fed.

Fed purchase

activity maintains

substantial

price pressure

under these

coupons, and

they benefit

from attractive

TBA dollar

roll drops.

Higher coupons

in the TBA

market

do not have

the benefit

of Fed ~~purchases and trade poorly.~~ purchases.

Importantly, the

Fed tends

to take the

worst performing

collateral

out of the

market.

The

absence of

Fed purchases ~~in the~~

of higher ~~coupon sub-market~~

coupons means

the market

is left to

absorb still

very high

prepayment

speeds on these ~~securities. For these~~

securities

rates have

not risen

enough to

eliminate the

economic incentive

to refinance.

The market

expects prepayments

on higher

coupons ~~specified pools~~ will

eventually

decline as

“burn out”

sets in – a

phenomenon

whereby refinancing

activity declines

as borrowers

are exposed

to refinancing

incentives for

an extended

period.

Through the

April 2021

prepayment

report released

in ~~very high demand and trade at very high premiums. These premiums~~ early May, this

has yet to

occur.

While

market

participants

continue to ~~rise as~~

favor specified

pools that

have favorable

prepayment ~~activity remains very elevated and is likely to do so for some time. This dynamic~~

characteristics

that mute

the refinance

incentive,

the

premium over

generic TBA

securities

has ~~existed since March and is likely~~declined

significantly

with the reduced

refinance

incentive caused

by the increase

in rates

available to ~~continue.~~

borrowers.

~~-48-~~

Recent Legislative

and Regulatory

Developments

The Fed conducted

large scale

overnight repo

operations

from late

2019 until

July 2020 to

address disruptions

in the U.S.

Treasury,

Agency debt

and Agency

MBS financing

markets. These

operations

ceased in July

2020 after

the central

bank successfully

tamed volatile

funding costs

that had threatened

to cause disruption

across the

financial system.

The Fed has

taken a number

of other actions

to stabilize

markets as

a result of

the impacts

of the COVID-19 ~~pandemic, including the following:~~

pandemic. In

March of

~~On March 15,~~ 2020, the

Fed announced

a $700 billion

asset purchase

program to

provide liquidity

to the U.S.

Treasury and

Agency ~~MBS~~ RMBS

markets. ~~Specifically, the Fed announced that it would purchase at least $500 billion of U.S. Treasuries and at least $200 billion of Agency MBS.~~ The

Fed also lowered

the Fed Funds

rate to a

range of 0.0%

– 0.25%, after

having already

lowered the

Fed Funds

rate by 50

bps earlier

in the

month. Later

that same

month the

Fed announced

a program

to acquire

U.S. Treasuries

and Agency

RMBS in the

amounts needed

support smooth

market functioning.

With these

purchases,

market conditions

improved substantially.

Currently, the Fed

is committed

purchasing

$80 billion

of U.S. Treasuries

and $40 billion

of Agency

RMBS each

month. Chairman

Powell and

the Fed have

reiterated

their

commitment

to this level

of asset purchases

at every meeting

since their

meeting on

June 30,

2020. Chairman

Powell has

also maintained

that the Fed

expects to

maintain interest

rates at this

level until

the Fed is

confident that

the economy

has weathered

the pandemic

and its

impact on economic

activity and

is on track

to achieve

its maximum

employment

and price

stability goals.

The Fed has

taken various

other

steps to support

certain other

fixed income

markets, to

support mortgage

servicers and

to implement

various portions

of the Coronavirus

Aid, Relief,

and Economic

Security (“CARES”)

Act.

The CARES

Act was passed

by Congress

and signed

into law by

President

Trump on March 3,

27, 2020.

The CARES

Act provided

many forms

of direct

support to

individuals

and small

businesses

in order to

stem

the steep

decline in

economic activity.

This over

trillion COVID-19

relief bill,

~~Notwithstanding the Fed actions described above, markets~~

among other

things, provided

for ~~U.S. Treasuries, Agency MBS~~direct

payments to

each American

making up to

$75,000 a

year, increased

unemployment

benefits for

up to four

months (on

top of state

benefits),

funding to

hospitals and ~~other mortgage~~

health providers,

loans and ~~fixed income securities deteriorated as investors liquidated~~ investments ~~in response~~

businesses,

states and

municipalities

and grants

to the ~~economic crisis resulting from actions~~ airline

industry. On April

24, 2020,

President

Trump signed an

additional

funding

bill into law

that provides

an additional

$484 billion

of funding

to ~~contain~~ individuals,

small businesses,

hospitals,

health care

providers

and

additional

coronavirus

testing efforts.

Various provisions

of the CARES

Act began

to expire

in July 2020,

including a

moratorium

evictions (July

25, 2020),

expanded

unemployment

benefits (July

31, 2020),

and ~~minimize~~a moratorium

on foreclosures

(August 31,

2020). On

August 8,

2020, President

Trump issued Executive

Order 13945,

directing the ~~COVID-19 pandemic. In response, on March 23, 2020,~~

Department

of Health

and Human

Services, the ~~Fed announced a program~~

Centers for

Disease Control

and Prevention

(“CDC”),

the Department

of Housing

and Urban

Development,

and Department

of the Treasury

to acquire U.S. Treasuries and Agency MBS in the amounts needed to support smooth market functioning. With these purchases, market conditions improved substantially, and in early April, the Fed began to gradually reduce the pace of these purchases.take

- 39 -

measures to

temporarily

halt residential

evictions and

foreclosures,

including through

temporary

financial assistance.

On December

27, 2020,

President

Trump signed into

law an additional

$900 billion

coronavirus

aid package

as part of

the

Consolidated

Appropriations

Act of 2021,

providing for

extensions

of many of

the CARES

Act policies

and programs

as well as

additional

relief. The

package provided

for, among other

things, direct

payments to

most Americans

with a gross

income of less

than $75,000

a year,

extension of

unemployment

benefits through

March 14,

2021, funding

for procurement

of vaccines

and health

providers,

loans to qualified

businesses,

funding for

rental assistance

and funding

for schools.

On January

29, 2021,

the CDC

issued guidance

extending eviction

moratoriums

for covered

persons through

March 31,

2021, which

was further

extended to

June 30, 2021

on March 29,

2021. In addition,

on February

9, 2021, the

FHFA announced

that the foreclosure

moratorium

begun under

the CARES

Act for loans

backed by Fannie

Mae

and Freddie

Mac and the

eviction moratorium

for real estate

owned by Fannie

Mae and Freddie

Mac were extended

until March

31, 2021,

which was

further extended

to June 30,

2021 on February

25, 2021.

On February

16, 2021,

the U.S.

Housing and

Urban Development

Department

announced

the extension

of the FHA

eviction and

foreclosure

moratorium

to June 30,

2021.

On March 11, 2021,

the $1.9 trillion

American Rescue

Plan Act of

2021 was signed

into law.

This stimulus

program furthered

the

Federal government’s

efforts to stabilize

the economy

and provide

assistance

to sectors

of the population

still suffering

from the

various

physical and

economic effects

of the pandemic.

In January

2019, the

Trump administration

made statements

of its plans

to work with

Congress to

overhaul Fannie

Mae and Freddie

Mac and expectations

to announce

a framework

for the development

of a policy

for comprehensive

housing finance

reform soon.

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, Fed Chairman Powell announced expectations to maintain interest rates in a range of 0.0% - 0.25% until the Fed is confident that the economy has weathered recent events and is on track to achieve maximum employment and price stability goals. On September 16,

2020, the Federal Open Market Committee (“FOMC”) reaffirmed this commitment, as well as an intention to allow inflation to climb modestly above their 2% target and maintain that level for a period sufficient for inflation to average 2% long term.

On June 30, 2020, Chairman Powell also announced the Fed’s intention to increase its holdings of U.S. Treasury securities and Agency MBS over the coming months, at least at the then existing pace, to sustain smooth market functioning and thereby foster the effective transmission of monetary policy to broader financial conditions. On September 16, 2020, the FOMC reaffirmed this commitment. Since March, the Fed has taken various other steps to support certain other fixed income markets, to support mortgage servicers and to implement various portions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Since March, the Fed has taken various other steps to support certain other fixed income markets, to support mortgage servicers and to implement various portions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Congress and President Trump have adopted several pieces of legislation in response to the public health and economic impacts resulting from the COVID-19 pandemic. The first two pieces of legislation provided, among other things, emergency funding to develop a vaccine for COVID-19, medical supplies, grants for public health agencies, small business loans, assistance for health systems in other countries, expanded coronavirus testing, paid leave, enhanced unemployment insurance, expanded food security initiatives and increased federal Medicaid funding.

~~-49-~~

The CARES Act was passed by Congress and signed into law by President Trump on March 27, 2020. The CARES Act provides many forms of direct support to individuals and small businesses in order to stem the steep decline in economic activity. This over $2 trillion COVID-19 relief bill, among other things, provided for direct payments to each American making up to $75,000 a year, increased unemployment benefits for up to four months (on top of state benefits), funding to hospitals and health providers, loans and investments to businesses, states and municipalities and grants to the airline industry. On April 24, 2020, President Trump signed an additional funding bill into law that provides an additional $484 billion of funding to individuals, small businesses, hospitals, health care providers and additional coronavirus testing efforts. Various provisions of the CARES Act began to expire in July 2020, including a moratorium on evictions (July 25, 2020), expanded unemployment benefits (July 31, 2020), and a moratorium on foreclosures (August 31, 2020). On August 8, 2020, President Trump issued Executive Order 13945, directing the Department of Health and Human Services, the Centers for Disease Control and Prevention (“CDC”), the Department of Housing and Urban Development, and Department of the Treasury to take measures to temporarily halt residential evictions and foreclosures, including through temporary financial assistance. On September 4, 2020, the CDC issued guidance extending eviction moratoriums for covered persons through the end of 2020.

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. ~~On September 25, 2020,~~

The final

rule on the

new capital

framework

for the Financial Stability Oversight Council released a statement on the proposed rule cautioning that, in its opinion, the credit risk requirements were too low relative to other credit providers and would maintain a significant concentration of risk GSEs

was published

in the ~~GSEs. At this time, however, no decisions have been made on any additional steps to be taken as part of~~federal

December 2020.

January 14,

2021, the ~~GSE reform plan~~

U.S. Treasury

and the ~~economic impact~~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 ~~COVID-19 may delay GSE reform plans further. Although the Trump administration has made statements~~

at least 3%

of its ~~intentions~~ assets,

(ii)

the GSEs will

comply with

the FHFA’s regulatory

capital framework,

(iii) higher-risk

single-family

mortgage acquisitions

will be restricted

to ~~reform housing finance~~

current levels,

and ~~tax policy, many~~

(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 ~~these potential policy changes will require congressional action.~~the

GSEs in the

U.S. mortgage

market.

In 2017, policymakers

announced

that LIBOR

will be replaced

by December

31, 2021.

The directive

was spurred

by the fact

that

banks are uncomfortable

contributing

to the LIBOR

panel given

the shortage

of underlying

transactions

on which to

base levels

and the

liability associated

with submitting

an unfounded

level. The

ICE Benchmark

Administration,

in its capacity

as administrator

of USD LIBOR,

has confirmed

that it will

cease publication

of (i) the

one-week and

two-month

USD LIBOR

settings immediately

following

the LIBOR

publication

on December

31, 2021,

and (ii) the

overnight

and one, three,

six and 12-month

USD LIBOR

settings immediately

following

the

LIBOR ~~will be replaced~~ publication

on June 30,

2023. A joint

statement

by key regulatory

authorities

calls on banks

to cease entering

into new

contracts

that use USD

LIBOR as a

reference rate

by no later

than December

31, 2021.

The Alternative

Reference

Rates Committee,

a steering

committee comprised

of large U.S.

financial institutions,

has proposed

replacing USD-LIBOR

with a new

SOFR, a rate

based on U.S.

repo

trading. ~~The new benchmark rate will be based on overnight Treasury General Collateral repo rates. The rate-setting process will be managed~~ On

December 31,

2020, FNMA

and ~~published by the Fed~~FHLMC

ceased purchasing

LIBOR-based

adjustable-rate

mortgage (“ARM”)

loans and ~~the Treasury’s Office of Financial Research. Many~~began

accepting SOFR-based

ARMs and issuing

SOFR-based

MBS. However,

many banks

believe that

it may take

four to five

years to

complete the

transition

to SOFR,

for certain,

despite the

2021 deadline.

We will monitor

the emergence

of this new

rate carefully

as it will ~~likely~~

potentially

become the

new benchmark

for hedges

and a range

of interest

rate investments.

At this time,

however, no consensus

exists as

to what rate

or rates may

become accepted

alternatives

to LIBOR.

Effective January

1, 2021, Fannie

Mae, in alignment

with Freddie

Mac, will extend

the timeframe

for its delinquent

loan buyout

policy

for Single-Family

Uniform Mortgage-Backed

Securities

(UMBS) and

Mortgage-Backed

Securities

(MBS) from

four consecutively

missed

- 40 -

monthly payments

to twenty-four

consecutively

missed monthly ~~payments to twenty-four consecutively missed monthly~~

payments (i.e.,

24 months past

due). This

new timeframe

will apply

outstanding

single-family

pools and

newly issued

single-family

pools and ~~newly issued single-family pools and will~~ was

first be reflected

when January

2021 factors ~~are~~

were released

the fourth

business day

in February

2021.

For Agency ~~MBS~~

RMBS 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 ~~GSE’s~~

GSEs currently

anticipate,

however, that

delinquent

loans will

repurchased

in most cases

before the

24-month deadline

under one

of the following

exceptions

listed below. ~~Exceptions include:~~

• Aa loan that is paid

in full, or

where the

related lien

is released

and/or the

note debt

is satisfied

or forgiven;

• Aa loan repurchased by

a seller/servicer

under applicable

selling and

servicing requirements;

• Aa 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;

• Aa loan subject to a

short sale

or deed-in-lieu

of foreclosure; ~~and~~

• Aa loan referred to

foreclosure.

~~-50-~~

Because of

these exceptions,

the ~~GSE’s~~ GSEs

currently believe

based on

prevailing

assumptions

and market

conditions

this change

will

have only a

marginal impact

on prepayment

speeds, in

aggregate.

Cohort level

impacts may

vary. For example,

more than

half of loans

referred to

foreclosure

are historically

referred within

six months

of delinquency. The

degree to

which speeds

are affected

depends on

delinquency

levels, borrower

response, and

referral to

foreclosure

timelines.

The scope and

nature of

the actions

the U.S.

government

or the Fed

will ultimately

undertake

are unknown

and will continue

evolve, especially

in light of

the COVID-19

pandemic, President

Biden’s new

administration

and the ~~results of this week’s presidential and Congressional elections~~new

Congress in

the United

States.

On April 28,

2021 the FHFA

announced new

refinance

options for

low-income

families with

enterprise

backed mortgages

(FNMA and

FHLMC). Eligible

borrowers

will benefit

from a reduced

interest rate

and lower

monthly payment.

Eligibility

for the program

was further

clarified

the respective

GSEs on May

4, 2021. The

impact on

refinancing

on the Company

and the universe

of Agency

MBS is expected

to be limited

and concentrated

in loans with

lower loan

balances.

Effect on Us

Regulatory developments, movements in interest rates and prepayment rates affect us in many ways,

including the following:

Effects on our Assets

A change in

or elimination

of the guarantee

structure

of Agency ~~MBS~~

RMBS may increase

our costs (if,

for example,

guarantee

fees

increase) or

require us

to change

our investment

strategy altogether.

For example,

the elimination

of the guarantee

structure

of Agency

RMBS may cause

us to change

our investment ~~strategy altogether. For example, the elimination of the guarantee structure of Agency MBS may cause us to change our investment~~

strategy to

focus on non-Agency ~~MBS,~~

RMBS, which

in turn would

require us

to significantly

increase our

monitoring

of the credit

risks of our

investments

in addition

to interest

rate and prepayment

risks.

Lower long-term

interest rates

can affect the

value of our

Agency ~~MBS~~ RMBS

in a number

of ways. If

prepayment

rates are

relatively

low ~~(due,~~

(due, in part,

to the refinancing

problems described

above), lower

long-term

interest rates

can increase

the value of

higher-coupon

Agency ~~MBS.~~

RMBS. This

is because

investors

typically place

a premium

on assets

with yields

that are higher

than market

yields. Although

lower long-

term interest

rates may increase

asset values

in our portfolio,

we may not

be able to

invest new

funds in similarly-yielding

assets.

If prepayment

levels increase,

the value

of our Agency

RMBS affected

by such prepayments

may decline.

This is because ~~investors typically place~~

a ~~premium~~principal

prepayment

accelerates

the effective

term of an

Agency RMBS,

which would

shorten the

period during

which an investor

would receive

above-market

returns (assuming

the yield on ~~assets with yields that are~~

the prepaid

asset is higher

than market ~~yields. Although lower long-term interest rates~~

yields). Also,

prepayment

proceeds 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~~

RMBS backed

by mortgages

with high

interest rates

are more susceptible

- 41 -

prepayment

risk because

holders of

those mortgages

are most likely

to refinance

to a lower

rate. IOs

and IIOs, however,

may be the

types

of Agency ~~MBS~~

RMBS most

sensitive to

increased prepayment

rates. Because

the holder

of an IO or

IIO receives

no principal

payments,

the

values of IOs

and IIOs are

entirely dependent

on the existence

of a principal

balance on

the underlying

mortgages.

If the principal

balance

is eliminated

due to prepayment,

IOs and IIOs

essentially

become worthless.

Although increased

prepayment

rates can

negatively

affect

the value of

our IOs and

IIOs, they

have the opposite

effect on POs.

Because POs

act like zero-coupon

bonds, meaning

they are

purchased at

a discount

to their

par value and

have an effective

interest rate

based on the

discount and

the term of

the underlying

loan, an

increase in

prepayment

rates would

reduce the

effective term

of our POs

and

accelerate

the yields

earned on

those assets,

which would

increase our

net income.

~~-51-~~

Higher long-term

rates can

also affect

the value of

our Agency ~~MBS.~~

RMBS.

As long-term

rates rise,

rates available

to borrowers

also rise.

This tends

to cause prepayment

activity to

slow and extend

the expected

average life

of mortgage

cash flows.

As the expected

average

life of the

mortgage cash

flows increases,

coupled with

higher discount

rates, the

value of Agency ~~MBS~~

RMBS declines.

Some of the

instruments

the Company

uses to hedge

our Agency ~~MBS~~

RMBS assets,

such as interest

rate futures,

swaps and

swaptions,

are stable

average life

instruments.

This means

that to the

extent we

use such instruments

to hedge our

Agency ~~MBS~~ RMBS

assets, our

hedges may not

adequately

protect us

from price

declines, and

therefore

may negatively

impact our

book value.

It is for

this reason

we use interest

only

securities

in our portfolio.

As interest

rates rise,

the expected

average life

of these securities

increases,

causing generally

positive price

movements as

the number

and size of

the cash flows

increase the

longer the

underlying

mortgages

remain outstanding.

This makes

interest only

securities

desirable

hedge instruments

for pass-through

Agency ~~MBS.~~RMBS.

As described

above, the

Agency ~~MBS~~ RMBS

market began

to experience

severe dislocations

in mid-March

2020 as a result

of the

economic, health

and market

turmoil brought

about by COVID-19. On

In March ~~23,~~ of

2020, the

Fed announced

that it would

purchase Agency ~~MBS~~

RMBS and

U.S. Treasuries

in the amounts

needed to

support smooth

market functioning,

which largely

stabilized the

Agency ~~MBS~~ RMBS

market, a commitment

it reaffirmed ~~on June 30, 2020 and September 16, 2020.~~

at all subsequent

Fed meetings,

including its

most recent

meeting in

April of 2021.

If the Fed

modifies,

reduces or

suspends its

purchases

of Agency ~~MBS,~~ RMBS,

our investment

portfolio could

be negatively

impacted. Further,

the moratoriums

foreclosures

and evictions

described

above will

likely delay

potential

defaults on

loans that

would otherwise

be bought

out of Agency

MBS

pools as described

above.

Depending

on the ultimate

resolution

of the foreclosure

or evictions,

when and if

it occurs,

these loans

may be

removed from

the pool into

which they

were securitized.

If this were

to occur, it would

have the effect

of delaying

a prepayment

on the

Company’s securities

until such

time. As the

majority of

the Company’s

Agency RMBS

assets were

acquired at

a premium

to par, this will

tend to increase

the realized

yield on the

asset in question.

Because we

base our investment

decisions on

risk management

principles

rather than

anticipated

movements in

interest rates,

in a

volatile interest

rate environment

we may allocate

more capital

to structured

Agency ~~MBS~~ RMBS

with shorter

durations.

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 ~~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~~long-

term interest

rates than

PT ~~MBS,~~RMBS, particularly

PT ~~MBS~~RMBS backed

by fixed-rate

mortgages.

Effects on our borrowing costs

We leverage

our PT ~~MBS~~ RMBS

portfolio and

a portion

of our structured

Agency ~~MBS~~ RMBS

with principal

balances through

the use of ~~short-term~~

short-

term repurchase

agreement

transactions.

The interest

rates on

our debt are

determined

by the ~~short term~~ short-term

interest rate

markets. An

increase in

the Fed Funds

rate or LIBOR

would increase

our borrowing

costs, which

could affect

our interest

rate spread

if there is

corresponding

increase in

the interest

we earn on

our assets.

This would

be most prevalent

with respect

to our Agency ~~MBS~~

RMBS backed

fixed rate

mortgage loans

because the

interest rate

on a fixed-rate

mortgage loan

does not change

even though

market rates

may change.

In order to

protect our

net interest

margin against

increases in

short-term

interest rates,

we may enter

into interest

rate swaps,

which

economically

convert our

floating-rate

repurchase

agreement

debt to fixed-rate

debt, or utilize

other hedging

instruments

such as

Eurodollar, Fed

Funds and

T-Note futures

contracts or

interest rate

swaptions.

- 42 -

Summary

COVID-19

continues to

dominate the

performance

of the markets

and economy. ~~While both have recovered~~

In the case

of the first

quarter of

2021 this meant

the

recovery from

the ~~depths~~pandemic,

in stark contrast

to the first

quarter of ~~March, especially~~

2020 when

the ~~financial markets,~~pandemic

first emerged

in the ~~economy continues to languish.~~ U.S.

The recovery

has

been driven

by many factors

– the emergence

and widespread

distribution

of a very effective

vaccine, substantial

government

stimulus

and accommodative

monetary

policy. The economy

is recovering

rapidly as

the emergence

of an effective

vaccine has

allowed pent-up

demand to

lead to a

surge in demand

for goods

and services,

fueled further

by multiple

rounds of

stimulus checks

and numerous

other

means of financial

support provided

by the government.

Financial

markets are

benefiting

from extremely

lose financial

conditions,

abundant liquidity,

high risk tolerance

and an insatiable

demand for

returns.

The surge

in economic

activity during

the first

quarter of

2021 and expectations

for activity

to return

to pre-pandemic

levels much

sooner than

anticipated

caused interest

rates to rise

rapidly as

well.

The yield on

the 10-year

U.S. Treasury

note increased

by over 82

basis points

and closed

the quarter

at approximately

1.75%, not

far below

the yield level

that prevailed

last January

before the

pandemic

emerged last

March.

In addition,

the U.S.

Treasury curve

has ~~proven~~ steepened

as the market

fears an

outbreak in

inflation caused

by the

combination

of abundant

liquidity

via government

stimulus,

loose financial

conditions

and very

strong demand

for all types

of goods and

services.

Constrained

supply of

needed raw

materials,

various inputs

to consumer

goods, such

as micro chips,

and even labor

have

exacerbated

the upward

pressure on

prices. It

remains to

be seen if

these price

pressures prove

to be ~~very uneven, with some sectors back~~temporary

lead to or near pre-pandemic levels of activity while others remain far below with little prospect for getting back to those levels soon. The unemployment rate remains elevated – with the most recent read at 7.9% - as millions of Americans remain out of work.more

sustained

inflation.

The Fed ~~has taken, and continues to take, steps to support markets and~~ believes

the ~~economy. However, much needed additional stimulus from Washington and~~ effects

are transitory.

Current market

pricing is

roughly in

line with

the ~~federal government has been absent since~~Fed’s view

as the Eurodollar

and

Fed Funds

futures markets

only reflect

at most one

interest rate

hike by the

end of the second quarter. The federal government appears hopelessly caught up in partisan politics and unable to agree on another round of stimulus. Interest rates continue to trade in a narrow range and at extremely low levels. The market expects the Fed Funds rate to remain at the effective lower bound near zero for an extended period of time, even more so after the Fed altered its monetary policy framework during the third quarter. Henceforth, the Fed appears to be willing to let inflation run above the 2% target level, even when unemployment is very low, before removing accommodation.2022.

~~-52-~~

The Agency ~~MBS~~

RMBS market

did not perform

well during

the first quarter

as market conditions

– rapidly

rising rates

and increased

volatility –

led to extension

fears in

mortgage cash

flows, driving

convexity related

selling and

spread widening.

Agency RMBS

had

negative absolute

and excess

returns for

the first

quarter of

2021 of -1.2%

and -0.3%,

respectively

(both vs U.S.

Treasuries and

LIBOR/swaps).

A positive

impact from

higher rates

and lowered

prepayment

expectations

is slower

premium amortization,

which

enhances net

income all

else equal.

The Mortgage

Bankers Association

refinance index

declined from

approximately

4700 in early

January 2021

to approximately

2900 in early

April, before

rebounding

slightly since.

As was the

case for much

of 2020, the

Agency RMBS

market continues

to be essentially

bifurcated ~~between the production~~

with two

separate and

distinct sub-markets.

Lower coupon

fixed rate

mortgages,

coupons ~~– the target~~ of ~~Fed asset purchases – and higher coupons in specified pool form. The TBA market for higher coupons remains weak as the sector lacks support form~~

1.5% through

2.5%, are

purchased by

the Fed and

benefit from

the substantial

price pressure

and attractive

TBA dollar

roll drops.

Higher

coupons in

the TBA market

do not have

the benefit

of Fed purchases,

so the market

is left to

absorb still

very high prepayment

speeds ~~are extremely high, resulting~~on

these securities

as rates have

not risen

enough to

eliminate the

economic incentive

to refinance.

The market

expects prepayments

higher coupons

will eventually

decline as

“burn out”

sets in, although

this has yet

to occur.

One final

element to

poor ~~expected returns~~ MBS

performance

for

the quarter

was the impact

of higher

rates on the

premiums paid

for ~~investors. This leads investors~~ specified

pools.

The premium

over generic

TBA securities

has

declined significantly

with the reduced

refinance incentive

caused by

the increase

in rates available

to ~~look to the specified pool market – with lower expected prepayment speeds – for attractive returns.~~borrowers.

~~Since the economy cannot fully recover absent~~ Now that

the containment

of the COVID-19

pandemic ~~which is not expected~~ appears

to ~~occur~~ be within

sight, at least

in the ~~near term, current~~U.S.,

the economy

and life as

we were

accustomed

to should return

to pre-pandemic

norms.

The key questions

the market ~~conditions are likely~~

must grapple

with going

forward relate

to ~~persist. As a~~whether

there have

been any permanent

changes that

will result, ~~we expect prepayment speeds will remain elevated,~~

including,

for example,

inflationary

pressures

resulting from

the unprecedented

government

stimulus and

monetary

quantitative

easing by the

Fed, ~~will be active~~the impact

of the many

technological

advancements

that were

born out

of the pandemic,

such as employees’

ability to

effectively

work remotely, the

desire to

live in congested

cities and

the ~~Agency MBS market with asset purchases, funding levels will remain low~~implications

for

commercial

real estate

values for

the cities

that many

may not want

to return

to, and the ~~most attractive returns available~~

willingness

to gather

in large numbers

or travel

air. These factors

will ~~be either in~~matter

to both the ~~TBA dollar roll market with lower coupons or with specified pools in higher coupons.~~

Company and

Orchid to the

extent they

impact the

levels of

interest rates

and the efficacy

refinancing

specifically, and

economic activity

and inflation

generally.

As of the date of this report, the only funding acquired by the Company under the CARES Act or other legislation adopted by Congress has been a $152,000 low interest loan made under the Paycheck Protection Program (“PPP”) of the CARES Act.

Critical Accounting Estimates

Our consolidated

financial

statements

are prepared

in accordance

with GAAP.

GAAP requires

our management

to make some

complex and

subjective

decisions

and assessments.

Our most critical

accounting

policies involve

decisions and

assessments

which could

significantly

affect reported

assets,

liabilities,

revenues and

expenses,

and these

decisions

and assessments

can change

significantly

- 43 -

each reporting

period.

There have

been no changes

to the processes

used to determine

our critical

accounting

estimates

as discussed

our annual

report on

Form 10-K for

the year ended

December 31, ~~2019.~~

2020.

Capital Expenditures

At ~~September 30, 2020,~~March 31, 2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At ~~September 30, 2020,~~March 31, 2021, we did not have any off-balance sheet arrangements.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result,

interest rates and other factors influence

our performance far more so than does inflation. Changes in interest rates do not

necessarily correlate with inflation rates or changes in

inflation rates. Our activities and balance sheet are measured with reference to historical

cost and/or fair market value without

considering inflation.

~~-53-~~

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET

RISK.

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”), we carried

out an evaluation, under the supervision and

with the participation of our management, including our Chief Executive Officer (the “CEO”)

and Chief Financial Officer (the “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 (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 our periodic reports under the Exchange Act is recorded, processed,

summarized and reported within the time periods

prescribed by the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no material changes in the Company’s internal control over financial reporting

that occurred during the Company’s

most recent fiscal quarter that have materially affected, or are reasonably likely to materially

affect, the Company’s internal control over

financial reporting.

~~-54-~~

- 44 -

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On April 22, 2020, the Company received a demand for payment from Citigroup, Inc. in

the amount of $33.1 million related to the

indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets

Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,

LLC) prior to the date Royal Palm’s mortgage origination

operations ceased in 2007.

The demand is based on Royal Palm’s alleged breaches of certain representations and warranties

in the

related MLPA’s.

The Company believes the demands are without merit and intends to defend

against the demand vigorously.

provision or accrual has been recorded as of ~~June 30, 2020~~March 31, 2021 related to the Citigroup

demand.

We are not party to any other material pending legal proceedings as described

in Item 103 of Regulation S-K.

ITEM 1A.

RISK FACTORS.

There have been

no material

changes to the

risk factors

disclosed in

our Annual Report

on Form 10-K

for the year

ended

December 31, ~~2019,~~

2020, filed

with the SEC

on March ~~27, 2020, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May~~ 15, ~~2020.~~

2021.

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

On March 26,

2018, the Company's

Board of Directors

authorized the

repurchase of

up to 500,000

shares of the

Company's Class

A common stock.

The maximum

remaining number

of shares that

may be repurchased

under this

authorization

is 429,596 shares.

The authorization,

as currently

extended, expires

on November

15, ~~2021..~~ 2021.

The Company

did

not repurchase

any of its common

stock during

the three months

ended March

31, 2021.

The Company

did not have

any unregistered

sales of its

equity securities

during the three

months ended ~~September 30, 2020.~~

March 31,

2021.

~~The Company did not have any unregistered sales of its equity securities during the three months ended September 30, 2020.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY

DISCLOSURES.

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

~~-55-~~

ITEM 6. EXHIBITS

Exhibit No

3.1 Articles ofAmendment andRestatement,incorporatedby referenceto Exhibit3.1 to the Company’s Form S-11/A, filedwith the SECon April 29,2004 3.2 Articles Supplementary,incorporatedby referenceto Exhibit3.1 to the Company’sCurrent Reporton Form 8-K, datedNovember 3,2005, filedwith the SECon November8, 2005 3.3 Articles ofAmendment, incorporatedby referenceto Exhibit3.1 to the Company’sCurrent Reporton Form 8-K, datedFebruary 10,2006, filed withthe SEC onFebruary 15,2006	~~Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Form S-11/A, filed with the SEC on April 29, 2004~~
~~3.2~~	~~Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005~~
~~3.3~~	~~Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006~~
~~3.4~~	~~Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007~~
~~3.5~~	~~Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007~~
~~31.1~~	Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*
~~31.2~~	Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*
~~32.1~~	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002**
~~32.2~~	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002**

~~101.INS~~		Instance Document***
~~101.SCH~~		Taxonomy Extension Schema Document***
~~101.CAL~~		Taxonomy Extension Calculation Linkbase Document***
~~101.DEF~~		Additional Taxonomy Extension Definition Linkbase Document***
~~101.LAB~~		Taxonomy Extension Label Linkbase Document***
~~101.PRE~~		Taxonomy Extension Presentation Linkbase Document***

~~Filed herewith.~~

~~Furnished herewith~~

~~***~~

~~Submitted electronically herewith.~~

~~-56-~~

- 45 -

3.4

Articles ofAmendment, incorporatedby referenceto Exhibit3.1 to the Company’sCurrent Reporton

Form 8-K,dated September24, 2007, filedwith the SECon September24, 2007

3.5

Amended andRestated Bylaws,incorporatedby referenceto Exhibit3.2 to the Company’sCurrent

Report on Form8-K, dated September24, 2007, filedwith the SECon September24, 2007

31.1

Certificationof the PrincipalExecutive Officer,pursuant toRule 13a-14(a)or 15d-14(a)of the Securities

Exchange Actof 1934, asadopted pursuantto Section 302of the SarbanesOxley Actof 2002*

31.2

Certificationof the PrincipalFinancial Officer,pursuant to Rule13a-14(a) or15d-14(a) ofthe Securities

Exchange Actof 1934, asadopted pursuantto Section 302of the SarbanesOxley Actof 2002*

32.1

Certificationof the ChiefExecutiveOfficer, pursuantto 18 U.S.C.Section 1350,as adopted pursuantto

Section 906 ofthe SarbanesOxley Act of2002**

32.2

Certificationof the ChiefFinancial Officer,pursuant to18 U.S.C. Section1350, as adoptedpursuant to

Section 906 ofthe SarbanesOxley Act of2002**

101.INS

Instance Document***

101.SCH

Taxonomy Extension Schema

Document***

101.CAL

Taxonomy Extension Calculation

Linkbase Document***

101.DEF

Additional Taxonomy Extension

Definition

Linkbase Document***

101.LAB

Taxonomy Extension Label

Linkbase Document***

101.PRE

Taxonomy Extension Presentation

Linkbase Document***

Filed herewith.

** Furnished herewith

*** Submitted electronically herewith.

- 46 -

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 6, 2020~~		~~By:~~	~~/s/ Robert E. Cauley~~
			~~Robert E. Cauley~~ ~~Chairman and Chief Executive Officer~~

Date:

May 14, 2021

~~Date: November 6, 2020~~		By:	~~/s/ G. Hunter Haas, IV~~
			~~G. Hunter Haas, IV~~ ~~President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)~~

~~-57-~~/s/ Robert E. Cauley

Robert E. Cauley

Chairman and Chief Executive Officer

Date:

May 14, 2021

By:

/s/ G. Hunter Haas, IV

G. Hunter Haas,

President, Chief Financial Officer, Chief

Investment Officer and Treasurer (Principal

Financial Officer and Principal Accounting Officer)

BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 30, 2020			December 31, 2019
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties	$	73,115,844		$	217,793,209
Unpledged		28,685			47,744
Total mortgage-backed securities		73,144,529			217,840,953
Cash and cash equivalents		5,837,067			8,070,067
Restricted cash		1,253,075			4,315,050
Orchid Island Capital, Inc. common stock, at fair value		13,002,739			8,892,211
Accrued interest receivable		234,431			750,875
Property and equipment, net		2,110,752			2,162,975
Real property held for sale		450,000			450,000
Deferred tax assets		24,003,192			33,288,536
Other assets		2,127,592			3,718,281
Total Assets	$	122,163,377		$	279,488,948

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	70,685,172		$	209,954,000
Long-term debt		27,618,048			27,481,121
Accrued interest payable		83,384			645,302
Other liabilities		1,346,817			1,431,534
Total Liabilities		99,733,421			239,511,957

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, 2020 and December 31, 2019		-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 11,608,555
shares issued and outstanding as of September 30, 2020 and December 31, 2019		11,609			11,609
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of September 30, 2020 and December 31, 2019		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, 2020 and December 31, 2019		32			32
Additional paid-in capital		332,642,758			332,642,758
Accumulated deficit		(310,224,475	)		(292,677,440	)
Stockholders’ Equity		22,429,956			39,976,991
Total Liabilities and Stockholders' Equity	$	122,163,377		$	279,488,948
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, 2020 and 2019

	Nine Months Ended September 30,						Three Months Ended September 30,
	2020			2019			2020			2019
Revenues:
Advisory services	$	4,969,143		$	5,052,251		$	1,629,463		$	1,791,135
Interest income		3,167,439			5,970,482			604,158			1,646,389
Dividend income from Orchid Island Capital, Inc. common stock		1,246,636			1,094,426			493,118			364,809
Total revenues		9,383,218			12,117,159			2,726,739			3,802,333
Interest expense
Repurchase agreements		(1,030,372	)		(3,654,675	)		(42,955	)		(1,001,781	)
Long-term debt		(893,299	)		(1,195,690	)		(261,341	)		(389,543	)
Net revenues		7,459,547			7,266,794			2,422,443			2,411,009

Other income (expense):
Unrealized gains on mortgage-backed securities		303,651			6,226,586			275,796			950,334
Realized (losses) gains on mortgage-backed securities		(5,804,656	)		23,078			-			23,078
Unrealized gains (losses) on Orchid Island Capital, Inc. common stock		38,935			(972,823	)		793,727			(927,222	)
(Losses) gains on derivative instruments		(5,292,346	)		(6,105,202	)		75			(483,446	)
Gains on retained interests in securitizations		58,735			314,984			58,735			39,869
Impairment of real property held for sale		-			(673,438	)		-			(673,438	)
Other (expense) income		(8,248	)		32,523			(8,890	)		32,029
Total other (expense) income		(10,703,929	)		(1,154,292	)		1,119,443			(1,038,796	)

Expenses:
Compensation and related benefits		3,157,074			3,074,650			1,010,407			987,024
Directors' fees and liability insurance		511,786			490,775			166,093			169,468
Audit, legal and other professional fees		467,015			381,024			120,374			96,996
Administrative and other expenses		870,919			878,924			318,874			352,896
Total expenses		5,006,794			4,825,373			1,615,748			1,606,384

Net (loss) income before income tax provision		(8,251,176	)		1,287,129			1,926,138			(234,171	)
Income tax provision		9,295,859			942,364			608,351			537,945

Net (loss) income	$	(17,547,035	)	$	344,765		$	1,317,787		$	(772,116	)

Basic and Diluted Net (loss) income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted	$	(1.51	)	$	0.03		$	0.11		$	(0.07	)
CLASS B COMMON STOCK
Basic and Diluted	$	(1.51	)	$	0.03		$	0.11		$	(0.07	)
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted		11,608,555			12,370,114			11,608,555			11,704,207
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 STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine and Three Months Ended September 30, 2020 and 2019

				Stockholders' Equity
	Common Stock						Additional			Accumulated
	Shares			Par Value			Paid-in Capital			Deficit			Total
Balances, January 1, 2019		12,773,145		$	12,773		$	334,919,265		$	(305,977,417	)	$	28,954,621
Net income		-			-			-			1,618,603			1,618,603
Class A common shares repurchased and retired		(714	)		-			(1,542	)		-			(1,542	)
Balances, March 31, 2019		12,772,431		$	12,773		$	334,917,723		$	(304,358,814	)	$	30,571,682
Net loss		-			-			-			(501,722	)		(501,722	)
Balances, June 30, 2019		12,772,431		$	12,773		$	334,917,723		$	(304,860,536	)	$	30,069,960
Net loss					-			-			(772,116	)		(772,116	)
Class A common shares repurchased and retired		(1,100,000	)		(1,100	)		(2,274,965	)		-			(2,276,065	)
Balances, September 30, 2019		11,672,431		$	11,673		$	332,642,758		$	(305,632,652	)	$	27,021,779

Balances, January 1, 2020		11,672,431		$	11,673		$	332,642,758		$	(292,677,440	)	$	39,976,991
Net loss		-			-			-			(22,332,947	)		(22,332,947	)
Balances, March 31, 2020		11,672,431		$	11,673		$	332,642,758		$	(315,010,387	)	$	17,644,044
Net income		-			-			-			3,468,125			3,468,125
Balances, June 30, 2020		11,672,431		$	11,673		$	332,642,758		$	(311,542,262	)	$	21,112,169
Net income		-			-			-			1,317,787			1,317,787
Balances, September 30, 2020		11,672,431		$	11,673		$	332,642,758		$	(310,224,475	)	$	22,429,956
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, 2020 and 2019

	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(17,547,035	)	$	344,765
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation		52,223			54,886
Deferred income tax provision		9,285,344			1,136,975
Losses (gains) on mortgage-backed securities, net		5,501,005			(6,249,664	)
Gains on retained interests in securitizations		(58,735	)		(314,984	)
Impairment of real property held for sale		-			673,438
Unrealized (gains) losses on Orchid Island Capital, Inc. common stock		(38,935	)		972,823
Realized and unrealized losses on forward settling TBA securities		1,441,406			2,005,175
Changes in operating assets and liabilities:
Accrued interest receivable		516,444			194,552
Other assets		1,590,689			(158,981	)
Accrued interest payable		(561,918	)		(365,887	)
Other liabilities		(26,123	)		(315,920	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		154,365			(2,022,822	)

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(43,129,835	)		(3,285,372	)
Sales		171,155,249			43,975,274
Principal repayments		11,170,005			14,756,931
Proceeds from termination of retained interests		58,735			314,984
Net settlement of forward settling TBA contracts		(1,500,000	)		(2,889,941	)
Purchases of Orchid Island Capital, Inc. common stock		(4,071,593	)		-
NET CASH PROVIDED BY INVESTING ACTIVITIES		133,682,561			52,871,876

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements		501,460,570			860,182,000
Principal repayments on repurchase agreements		(640,729,398	)		(906,103,000	)
Net proceeds on long-term debt		136,927			-
Class A common shares repurchased and retired		-			(2,277,607	)
NET CASH USED IN FINANCING ACTIVITIES		(139,131,901	)		(48,198,607	)

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(5,294,975	)		2,650,447
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period		12,385,117			6,240,488
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period	$	7,090,142		$	8,890,935

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest expense	$	2,485,589		$	5,216,252
Income taxes	$	(1,568,363	)	$	(46,700	)
See Notes to Condensed Consolidated Financial Statements

($ in thousands)
		% of	Weighted
		Stockholders'	Average
	Amount	Equity	Maturity
Repurchase Agreement Counterparties	at Risk	at Risk	(in Days)
September 30, 2020
Mirae Asset Securities (USA) Inc.	$2,562	11.4%	64

(in thousands)
Derivative Instruments and Related Accounts	Balance Sheet Location	September 30, 2020		December 31, 2019
Liabilities
TBA Securities	Other liabilities	$	-	$	59
Total derivative liabilities, at fair value		$	-	$	59

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

($ in thousands)
As of September 30, 2020
	Junior Subordinated Debt Funding Hedges
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾
2021	$	1,000		1.02	%		0.20	%	$	(8	)
Total / Weighted Average	$	1,000		1.02	%		0.20	%	$	(8	)

($ in thousands)
As of December 31, 2019
	Repurchase Agreement Funding Hedges
	Average		Weighted			Weighted
	Contract		Average			Average
	Notional		Entry			Effective			Open
Expiration Year	Amount		Rate			Rate			Equity⁽¹⁾
2020	$	120,000		2.90	%		1.67	%	$	(1,480	)
2021		80,000		2.80	%		1.57	%		(984	)
Total / Weighted Average	$	100,000		2.86	%		1.63	%	$	(2,464	)
Treasury Note Futures Contracts
March 2020- 5-year T-Note futures⁽²⁾
(Mar 2020 - Mar 2025 Hedge Period)	$	20,000		1.96	%		2.06	%	$	88

($ in thousands)
Assets Pledged to Bimini	September 30, 2020		December 31, 2019
Repurchase agreements	$	80	$	-
Total	$	80	$	-

(in thousands)
Last three months of 2020	$	5
2021		22
2022		175
2023		24
2024		25
After 2024		27,367
Total	$	27,618

(in thousands)
	Retained Interests in Securitizations
	Nine Months Ended September 30,
	2020			2019
Balances, January 1	$	-		$	-
Gain included in earnings		59			315
Collections		(59	)		(315	)
Balances, September 30	$	-		$	-

							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, 2020		0.17	%		0.35	%		0.11	%		(0.07	)%		7.07	%		6.89	%
June 30, 2020		0.55	%		0.70	%		(0.09	)%		(0.24	)%		3.42	)%		3.27	%
March 31, 2020		1.34	%		1.43	%		1.49	%		1.40	%		2.88	%		2.79	%
December 31, 2019		1.90	%		1.98	%		0.18	%		0.10	%		(0.94	)%		(1.02	)%
September 30, 2019		2.22	%		2.18	%		0.04	%		0.08	%		0.32	%		0.36	%
June 30, 2019		2.45	%		2.49	%		0.23	%		0.19	%		0.68	%		0.64	%
March 31, 2019		2.50	%		2.77	%		0.13	%		(0.14	)%		0.12	%		(0.15	)%


							Average GAAP Cost of Funds						Average Economic Cost of Funds
							Relative to Average						Relative to Average
	Average LIBOR						One-Month			Six-Month			One-Month			Six-Month
Nine Months Ended	One-Month			Six-Month			LIBOR			LIBOR			LIBOR			LIBOR
September 30, 2020		0.68	%		0.83	%		1.01	%		0.86	%		4.24	%		4.09	%
September 30, 2019		2.39	%		2.48	%		0.14	%		0.05	%		0.38	%		0.29	%

(in thousands)
	Obligations Maturing
	Within One Year		One to Three Years		Three to Five Years		More than Five Years		Total
Repurchase agreements	$	70,684	$	-	$	-	$	-	$	70,684
Interest expense on repurchase agreements⁽¹⁾		77		-		-		-		77
Junior subordinated notes⁽²⁾		-		-		-		26,000		26,000
Interest expense on junior subordinated notes⁽¹⁾		1,032		1,977		1,980		10,098		15,087
Principal and interest on mortgage loan⁽¹⁾		54		107		107		757		1,025
Totals	$	71,847	$	2,084	$	2,087	$	36,855	$	112,873