BIMINI CAPITAL MANAGEMENT, INC.
For the period ended Mar 31, 2025. Filed May 2, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 2, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001437749-24-032917
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001437749-25-014237
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 129 previous paragraphs and 126 current paragraphs.
84 unchanged; 24 reworded; 18 added; 19 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 38 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
The Company’s operations are classified into two reportable segments: the investment portfolio segment and the asset management segment.
Current report
The investment portfolio segment includes the investment activities conducted at Bimini Capital’s wholly owned subsidiary, Royal Palm Capital, LLC (collectively with its wholly owned subsidiaries, “Royal Palm”). The investment portfolio segment receives revenue in the form of interest and dividend income on its investments. References to the general management of the Company’s portfolio of MBS refer to the operations of Royal Palm.
Current report
Net Income Summary
Current report
Net Portfolio Interest Income
Current report
For the three months ended March 31, 2025, our total operating expenses were approximately $2.9 million, compared to $3.0 million for the three months ended March 31, 2024 as detailed in the table below.
Current report
The first two months of 2025 were essentially a continuation of the fourth quarter of 2024. Economic data continued to reflect robust economic activity and a healthy labor market, casting doubt on the need to ease monetary policy on the part of the Fed. This was consistent with the slow reversal in the outlook for Fed monetary policy that began after its initial 50 bp cut in September 2024 and with an economy that did not appear to be slowing or about to contract. Further, inflation data was stubbornly still above the Fed’s 2% target range and increasing slightly, which was consistent with behavior exhibited during the first quarter of recent years. Public comments by Fed officials indicated that the Fed was willing to be patient and to watch the evolution of incoming economic data before making any further adjustments to policy.
Current report
During the years following the COVID-19 pandemic in 2020, fiscal and monetary policies were very pro-cyclical and led to elevated levels of inflation and fiscal deficits. The combined effects of the pro-growth policies led the equity markets higher. However, another major development that occurred – in this case predominantly in 2024 – was the emergence of a new technology related to artificial intelligence (“AI”). The potential impact of this technology on the economy is immense and has led to even greater gains in market prices generally and, in particular, the stock prices of the companies involved, leading to record valuations. In early 2025 a competing technology emerged in China that appeared to deliver the same performance as domestic technologies but at a substantially lower cost. This led to considerable weakness in the U.S. domestic stock market and AI tech companies in particular – the leaders of the previous equity market record performance. In addition, incoming economic data began to soften later during the first quarter of 2025, and readings on consumer sentiment began to decline sharply.
Current report
In March 2025, the Trump administration introduced the first of several tariffs. The administration indicated there was more to come in the near future, and market expectations for growth and inflation began to erode quickly. Sentiment was further depressed when some incoming economic data was consistent with stagflation – the combination of slowing economic growth and inflation.
Current report
In early April, the Trump administration announced substantial additional new tariffs on what was termed “Liberation Day” – the magnitude and extent of which were far in excess of market expectations. The impact of the announcements was severe. Risk assets of all kinds were sold, and price declines were substantial. Even more troubling, safe haven assets such as U.S. Treasury securities declined in price just as severely. De-leveraging occurred as investors sold assets to raise cash, causing valuations to plunge further. Volatility in interest rates and equities surged and market functioning deteriorated. More significantly, fear grew that the new tariffs were so extreme that the trade wars they would likely trigger could materially alter the existing global trade regime and jeopardize the supremacy of the U.S. dollar and U.S. Treasury securities as the reserve currency and benchmark risk-free asset, respectively. Fortunately, before market functioning could deteriorate further, the Trump administration announced a 90-day pause before implementing the reciprocal tariffs – the most extreme tariffs announced – to allow time for trade partners to negotiate modifications to the tariffs. As the second quarter continues, there remains substantial uncertainty about how events will unfold surrounding the tariffs and global trade, and their impact on the markets and the Company.
Current report
The pivot in market outlook for Fed monetary policy that occurred during the fourth quarter of 2024 and led to interest rates rising steadily continued into the first quarter of 2025. The yield on the 10-year T-Note was close to 3.6% in September 2024 just after the Fed lowered the Fed Funds rate by 50 basis points at the September meeting of the FOMC. However, yields began to rise steadily not long thereafter, as economic data was not consistent with an economy on the verge of a recession and inflation was stubbornly above the Fed’s 2% target. By late 2024, the yield on the 10-year T-Note was over 4.6% and close to 4.8% in early January 2025. Over the course of the balance of the first quarter of 2025, interest rates gradually declined as sentiment indicators declined to levels not seen in several years, triggered by declines in U.S. equity markets – albeit off of record high levels – persistent inflation, and expectations that economic growth was about to slow. The economic data itself over this period was mixed – labor markets were weakening slowly, manufacturing activity was improving slightly but off of very low levels, and the service sector was slowing, but off of robust levels.
Current report
Towards the end of the first quarter, the yield on the 10-year T-Note was trading between 4.15% and 4.30%. At this point in the quarter, stagflation fears were emerging. The yield on the 2-year T-Note followed a similar path over this period. When expectations for substantial additional Fed easing were high late in the third quarter of 2024 the 2-year T-Note yield was approximately 3.6% before rising steadily over the course of the fourth quarter of 2024 and through February 2025 to a yield of between 4.2% and 4.4%. This range was essentially level with the Fed Funds level – implying the market did not expect monetary policy changes over the next two years. As sentiment readings declined late in the first quarter, the 2-year T-Note yield declined towards 4.0% and, so far during the second quarter, the yield has ranged between 3.7% and 4.0%.
Current report
With the severe market turmoil triggered by the Trump administration's tariff announcements, the market now anticipates that the Fed will have to lower monetary policy by approximately 75 basis points by the end of 2025, as the market now expects the tariffs to trigger a growth slowdown if not outright recession in 2025. During the week of April 4, 2025, the yield on the 10-year T-Note rose by approximately 50 basis points – one of the largest one-week increases ever.
Current report
As a proxy for the performance of the Agency Residential MBS (“RMBS”) market during the first quarter of 2025, the spread of the 30-year, fixed rate current coupon to the 10-year T-Note traded in a narrow range throughout the first quarter of 2025 was between 120 and 130 basis points. When the Trump administration announced substantial additional tariffs on April 2, 2025, risk assets of all types came under tremendous selling pressure as deleveraging occurred, even with Agency RMBS. The spread of the current coupon then expanded to over 140 basis points, and to almost 180 basis points versus the 5-year T-Note. This spread to the 5-year T-Note was generally less than 150 basis points during the first quarter of 2025 but came within 12 basis points of the peak spread it reached in the fall of 2023 – its highest level since the COVID-19 onset in March 2020.
Current report
The Agency RMBS index generated a return for the first quarter of 3.0% and a return of 0.4% versus comparable duration swaps, as compared to 2.4% and -0.3%, respectively for these measures, for the investment grade corporate index, and 1.0% and -1.1%, respectively for these measures, for high yield debt. Total returns for U.S. Treasury securities and most sectors of the fixed income markets generated positive total returns for the quarter, although excess returns versus comparable duration swaps were mixed.
Current report
Within Agency RMBS for the first quarter of 2025, conventional 30-year mortgages generated a total return of 2.7%, 15-year mortgages generated a total return of 2.9% and Ginnie Mae 30-year mortgages generated a total return of 2.4%. Versus comparable duration swaps the returns were 0.4%, 0.6% and 0.3% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack of coupons were fairly even, but correlated with the duration of the respective securities, as lower coupon, longer duration bonds generated the highest total returns and the highest coupon – 7.0% - generated slightly lower total returns. The range for the lower portion of the coupon stack was 3.0% to 3.3% (for coupons up to 4.5%) and 2.6% to 2.9% for higher coupons. Excess returns versus comparable duration swaps were inversely related to coupons, as the higher coupons generated excess returns as high as 1.4% but excess returns for lower coupons were generally between 0.3% and 0.5%.
Current report
The outlook for the U.S. economy, interest rates and monetary policy – all critical factors impacting the markets the Company and Orchid Island invests their capital in – began to change late in the first quarter and so far in the second quarter of 2025. However, the performance of the Company for the first quarter of 2025 was impacted by market conditions prior to this change. Conversely, the outlook for the Company going forward will be impacted by events that occurred recently.
Current report
While economic data and events generally are never uniformly stable or consistent, the first quarter of 2025 was relatively uneventful. Interest rates were generally range bound, and volatility was low for most of the quarter. These are ideal conditions for a levered investment strategy in Agency RMBS. Accordingly, the Company and the Agency RMBS market generated attractive returns for the period. Orchid's stock also traded well during the quarter – at least until the last week of the quarter. Orchid was able to take advantage of the calm conditions and price performance of its common stock and raise additional capital, enhancing the Company’s advisory service revenues going forward.
Current report
The tariff announcements late in the first quarter and in early April 2025 brought these favorable market conditions to an abrupt end. In fact, conditions were reminiscent of March 2020 when the COVID-19 pandemic led to an abrupt de-leveraging that materially depressed prices of all asset classes. It is not clear if these conditions have subsided fully or if they will return. Accordingly, the Company intends to maintain prudent leverage and ample liquidity with respect to its investment portfolio while the threat of turbulent market conditions persists.
Removed paragraphs (19)
Previous report
Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company that was formed in September 2003. The Company’s principal wholly-owned operating subsidiary is Royal Palm Capital, LLC. We operate in two business segments: the asset management segment, which includes (a) the investment advisory services provided by Royal Palm’s wholly-owned subsidiary, Bimini Advisors Holdings, LLC, to Orchid Island Capital, Inc. ("Orchid") and to Royal Palm, and (b) the investment portfolio segment, which includes the investment activities conducted by Royal Palm.
Previous report
Stock Repurchase Plan
Previous report
On September 16, 2021, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2021 Repurchase Plan”). Pursuant to the 2021 Repurchase Plan, the Company could purchase shares of its Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases could be executed through various means, including, without limitation, open market transactions. From the commencement of the 2021 Repurchase Plan, through its expiration on September 16, 2023, the Company repurchased a total of 789,024 shares at an aggregate cost of approximately $1.3 million, including commissions and fees, for a weighted average price of $1.60 per share.
Previous report
On March 7, 2024, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the "2024 Repurchase Plan"). Pursuant to the 2024 Repurchase Plan, we can purchase shares of our Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases can be executed through various means, including, without limitation, open market transactions. The 2024 Repurchase Plan does not obligate the Company to purchase any shares and expires on March 7, 2026. There have been no repurchases in 2024.
Previous report
The Inflation Reduction Act of 2022 (the "Act"), includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and other provisions. The excise tax was effective beginning in 2023. The Company was not subject to the tax in 2023, as its repurchases were less than the threshold specified in the Act. While we may complete transactions subject to the new excise tax, we do not expect this tax to have a material impact to our financial condition or result of operations.
Previous report
Net Income (Loss) Summary
Previous report
Net Portfolio Interest Income (Expense)
Previous report
Our economic interest expense on repurchase liabilities for the three months ended September 30, 2024 and 2023 was $1,409,000 and $842,000, respectively, resulting in $76,000 and $(4,000) of economic net portfolio interest income (expense), respectively.
Previous report
For the nine and three months ended September 30, 2024, our total operating expenses were approximately $8.4 million and $2.6 million, respectively, compared to $6.7 million and $2.1 million, respectively, for the nine and three months ended September 30, 2023. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2024 and 2023.
Previous report
The trajectory of the economy that existed as the second quarter of 2024 ended continued into the third quarter. The trend was apparent in the incoming economic data, the level of interest rates and the outlook for monetary policy on the part of the Fed. With respect to the latter, the Fed finally lowered the Fed Funds rate in late September by 50 basis points, the first interest rate cut since the Fed stopped tightening monetary policy in March of 2023. The move was well telegraphed by various Fed officials during their public comments leading up to the event, as the Fed was careful not to surprise the market with the cut. Throughout the third quarter, incoming labor market and inflation data was consistent with the Fed’s view that inflation was approaching its 2% target and would soon get there. The Fed’s focus has shifted to the labor market and ensuring the supply/demand balance that had led to a low unemployment rate and outsized wage gains did not slow too much and jeopardize its efforts to fulfill its second mandate of full employment. Further, elevated interest rate levels had materially impacted the housing market and other interest rate sensitive sectors of the economy, so the Fed feared that if the labor market cooled too much then economic growth could as well. The manufacturing side of the economy was already weak, so all things considered the Fed’s movement of monetary policy back towards the neutral rate appears to be consistent with its mandates.
Previous report
Unlike the inflation and labor market data, consumer spending levels and economic growth generally – as measured by GDP – were still quite robust during the third quarter and, in the case of the latter, trending at or above sustainable trend growth rates. However, as long as inflation data continued to move towards its target level – and such data was already there when three- or six-month measures were annualized – the Fed appeared comfortable lowering the Fed Funds rate to ensure the labor market did not cool too much. As the fourth quarter of 2024 begins, the latest reading on the labor market appears to have reversed the slowing trend apparent over the last several months as the September reading was very strong, previous months data was revised higher and the unemployment rate declined. Also, in late September, the government revised previously released data on gross domestic income (“GDI”), another measure of economic growth. GDI data over the past several quarters had been quite low and inconsistent with GDP data and consumer spending levels. Most economists believed the GDI data painted the more accurate picture of the true level of economic growth in the economy. However, the GDI data was revised higher and was now consistent with the GDP data. Together with the latest labor market data, the economy now appears quite healthy and the market expects that the Fed will be more conservative in the timing and extent of further reductions in the Fed Funds rate.
Previous report
Over the course of the third quarter of 2024, interest rates continued to decrease as they had through the last two months of the second quarter. After the yield on the 10-year T-Note peaked at 4.7% in late April 2024, the yield trended downward until hitting a year-to-date low near 3.6% on September 16, 2024. However, the GDI revisions in late September, coupled with the resurgence in the labor market data released in early October, drove 10-year U.S. Treasury rates back above 4% in early October. Otherwise, the U.S Treasury and swap curves steepened throughout the third quarter of 2024. The spread between the 2-year and 10-year T-Notes turned positive in early September 2024 for the first time since mid-2022, ending the longest period of inversion ever recorded.
Previous report
As noted above, the Fed reduced the overnight Fed Funds rate at its meeting in September by 50 basis points. Given developments discussed above that occurred prior to the Fed’s meeting in September – cooling inflation data, a slowing labor market and comments by Fed officials regarding their desire to start to remove overly restrictive monetary policy – the market anticipated two such 50 basis point cuts and at least one additional 25 basis point cut by year-end based on price levels in the futures and related markets. The developments late in the third quarter of 2024 and early in the fourth quarter of 2024 – the GDI revisions, September labor market report and even the September inflation report released in early October, which was slightly higher than expectations – have reduced market expectations of further Fed Funds rate cuts this year to less than two more 25 basis point cuts. Some economists believe the economy may have achieved a “soft” landing after the 500+ basis point hikes initiated by the Fed. A soft landing refers to the outcome where the economy does not suffer a contraction or even slowdown growth following a tightening cycle by the Fed. Such instances are very rare, and it remains to be seen if this will prove to be the case.
Previous report
Interest rate volatility embedded in interest rate derivatives, as measured by the MOVE index, was elevated throughout the third quarter of 2024 and even increased further still late in the quarter after the Fed Funds rate cut, likely in response to the developments discussed above, geopolitical events in the Middle East and uncertainty surrounding the U.S. presidential election in November. The value of the index approached a year-to-date high reading in early October. Given that uncertainty surrounding these same events remains, it is likely interest rate volatility will remain elevated through the fourth quarter of 2024.
Previous report
Declining interest rates across the maturity spectrum of the treasury curve led all fixed income sectors of the market to generate positive absolute returns for the third quarter of 2024 although excess returns versus comparable duration swaps were far less robust. Agency RMBS absolute returns for the quarter were 4.7% and 4.9% for conventional Agency RMBS – the non-GNMA component of the Agency RMBS index. These absolute returns compare to 5.7% for investment grade debt, 5.3% for high yield debt, 4.8% for US treasuries, 4.6% for Agency debt, and 4.5% for Agency CMBS. Excess returns versus comparable duration swaps for the quarter for Agency RBS were 0.7% and 0.9% for the non-GNMA component of the Agency RMBS index. Excess returns for the other major components of the domestic fixed income markets (excluding treasuries) for the third quarter of 2024 were 1.4% for investment grade debt, 0.3% for high yield debt, -0.1% for Agency debt, and 0.2% for Agency CMBS.
Previous report
Within the stack of 30-year, fixed rate Agency RMBS (the asset class in which the Company invests the vast majority of its capital), given the decrease in interest rates over the course of the third quarter of 2024 absolute returns tracked the duration of the securities - the higher the duration, the higher the return. The return for 2.0% coupon securities was 6.7% for the second quarter, the highest return, and 2.6% for 7.0% coupon securities, the lowest return and coupon. Within the stack of 30-year, fixed rate Agency RMBS, excess returns versus comparable duration swaps for the third quarter (a proxy for hedged returns) generally followed the same pattern, with lower coupon, longer duration coupons (3% and lower) with excess returns between 1.1% and 1.4%, the highest coupons (6.5% and 7.0%) at 0.2% and the intermediate coupons gradually declining as coupons declined.
Previous report
On September 30, 2019, the FHFA announced that Fannie Mae and Feddie 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 the Enterprises being privatized and represents the first concrete step on the road to Enterprise reform. In December 2020, the FHFA released a final rule on a new regulatory framework for the Enterprises which seeks to implement both a risk-based capital framework and minimum leverage capital requirements. On January 14, 2021, the U.S. Treasury and the FHFA executed letter agreements allowing the Enterprises 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 Enterprise has common equity Tier 1 capital of at least 3% of its assets, (ii) the Enterprises *will comply with the FHFA’s regulatory capital framework, (iii) higher-risk single-family mortgage acquisitions will be restricted to then current levels, and (iv) the U.S. Treasury and the FHFA will establish a timeline and process for future Enterprise reform. However, no definitive proposals or legislation have been released or enacted with respect to ending the conservatorship, unwinding the Enterprises, or materially reducing the roles of the Enterprises in the U.S. mortgage market.
Previous report
The long-awaited impacts of tight monetary policy orchestrated by the Fed appear to have finally slowed inflation sufficiently such that the Fed could re-focus on its second mandate – full employment in the economy. The labor market data over the course of the second and third quarters of 2024 reflected greater balance between the supply and demand for labor, such that hiring and wage growth were slowing and the unemployment rate was rising gradually. In late September 2024, the Fed reduced the Fed funds rate by 50 basis points, and the market anticipated it was the first of many such cuts. In contrast, growth in the economy, as measured by both GDP and GDI as well as consumer spending, has remained robust throughout. However, the non-farm payroll report for September 2024, released in early October, as well as the latest readings on inflation were robust and exceeded market expectations. Should such signs of economic strength continue, the Fed may be more conservative in the timing and extent of further reductions in the Fed Funds rate than the market had expected at the beginning of the third quarter.
Previous report
Interest rates decreased over the course of the third quarter of 2024, continuing the trend started in late April 2024. The U.S. Treasury curve also steepened as the market anticipated additional easing of monetary policy by the Fed and the spread between the 2-year and 10-year T-Notes finally turned positive in early September 2024 after being inverted since mid-2022, the longest inversion ever. Cheaper funding levels coupled with a still healthy economy were supportive of risk assets, and domestic fixed income securities all generated positive returns for the quarter. Agency RMBS also generated positive excess returns versus comparable duration swaps. Based on recent positive economic data, it is unclear how much further the Fed will go in relaxing monetary policy. Further, geo-political events around the world, especially in the Middle East, as well as the U.S. presidential election in November, are cause for uncertainty in the outlook for markets and the economy. The market in which the Company and Orchid Island invest the preponderance of their capital, the Agency RMBS market, has performed well so far in 2024, and potential returns available in the market remain attractive.
Reworded paragraphs (24)
Previous wording
The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Current wording
The following discussion of our consolidated financial condition, cash flows, 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 statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Previous wording
Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries referred to as “Royal Palm”) maintains an investment portfolio, consisting primarily of residential mortgage-backed securities ("MBS") issued and guaranteed by a federally chartered corporation or agency ("Agency MBS"). We also invest in the common stock of Orchid. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency MBS, such as mortgage pass-through certificates issued by Fannie Mae, Freddie Mac or Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”) and (ii) structured Agency MBS, such as interest only securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of structured Agency MBS. In addition, Royal Palm receives dividends from its investment in Orchid common shares.
Current wording
Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) is a specialty finance company that operates in two business segments: (i) investing in mortgage-backed securities (“MBS”) and Orchid Island Capital, Inc. (“Orchid”) common stock in our own portfolio, (ii) and serving as the external manager of Orchid which also invests in MBS. In both cases, the principal and interest payments of these MBS are guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as “Agency MBS.” Our investment strategy focuses on, and our portfolios primarily consist of traditional pass-through (“PT”) Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”); and structured Agency MBS, such as interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only securities (“POs”).
Previous wording
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. From this arrangement, the Company receives management fees and expense reimbursements. As manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations and providing certain repurchase agreement trading, clearing and administrative services. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it.
Current wording
The asset management segment includes the arrangement by which the Company, through Bimini Advisors, LLC, an investment advisor registered with the SEC, serves as the external manager of Orchid. From this arrangement the Company receives management fees and expense reimbursements. Bimini Advisors, LLC is a wholly owned subsidiary of Bimini Advisors Holdings, LLC, which is a wholly owned subsidiary of Royal Palm. Bimini Advisors Holdings, LLC and Bimini Advisors, LLC are collectively referred to as “Bimini Advisors.”
Previous wording
In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:
Current wording
In addition, a variety of factors directly relating to our business may also impact our results of operations and financial condition. These factors include:
Previous wording
Described below are the Company’s results of operations for the nine and three months ended September 30, 2024, as compared to the nine and three months ended September 30, 2023.
Current wording
Described below are the Company’s results of operations for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.
Previous wording
Consolidated net income for the nine months ended September 30, 2024 was $0.2 million, or $0.02 basic and diluted loss per share of Class A Common Stock, as compared to consolidated net income of $0.9 million, or $0.09 basic and diluted income per share of Class A Common Stock, for the nine months ended September 30, 2023. Consolidated net income for the three months ended September 30, 2024 was $0.3 million, or $0.03 basic and diluted loss per share of Class A Common Stock, as compared to a consolidated net loss of $0.4 million, or $0.04 basic and diluted income per share of Class A Common Stock, for the three months ended September 30, 2023.
Current wording
Consolidated net income for the three months ended March 31, 2025 was $0.6 million, or $0.06 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.2 million, or $0.02 basic and diluted income per share of Class A Common Stock, for the three months ended March 31, 2024.
Previous wording
The components of net income for the nine and three months ended September 30, 2024 and 2023, along with the changes in those components are presented in the table below.
Current wording
The components of net income for the three months ended March 31, 2025 and 2024, along with the changes in those components are presented in the table below.
Previous wording
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.
Current wording
We have two operating segments; (a) the asset management segment, which includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm, and (b) the investment portfolio segment, which includes the investment activities conducted by Royal Palm.
Previous wording
During the three months ended September 30, 2024, we generated $112,000 of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $1.4 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2023, we generated $7,000 of net portfolio interest income, consisting of $838,000 of interest income from MBS assets offset by $831,000 of interest expense on repurchase liabilities. The $647,000 increase in interest income was due to a 129 bp increase in yields, combined with an $28.1 million increase in average MBS holdings. There was a $542,000 increase in interest expense for the three months ended September 30, 2024 that was due to a 93 bp increase in cost of funds, combined with a $26.9 million increase in average repurchase liabilities.
Current wording
During the three months ended March 31, 2025, we generated $435,000 of net portfolio interest income, consisting of $1.7 million of interest income from MBS assets offset by $1.3 million of interest expense on repurchase liabilities. For the comparable period ended March 31, 2024, we generated $186,000 of net portfolio interest income, consisting of $1.4 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. The $0.4 million increase in interest income was due to a $31.0 million increase in average MBS holdings, offset by a 42 basis point (“bp”) decrease in yields. There was a $0.1 million increase in interest expense for the three months ended March 31, 2025 that was due to a $30.6 million increase in average repurchase liabilities, offset by a 114 bp decrease in cost of funds.
Previous wording
Our economic interest expense on repurchase liabilities for the nine months ended September 30, 2024 and 2023 was $3.7 million and $2.0 million, respectively, resulting in $457,000 and $(3,000) of economic net portfolio interest income (expense), respectively.
Current wording
Our economic interest expense on repurchase liabilities for the three months ended March 31, 2025 and 2024 was $1.2 million and $1.2 million, respectively, resulting in $0.5 million and $0.2 million of economic net portfolio interest income, respectively.
Previous wording
The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the nine months ended September 30, 2024 and 2023 and each quarter in 2024 and 2023 on both a GAAP and economic basis.
Current wording
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, 2025 and 2024 and each quarter in 2025 and 2024 on both a GAAP and economic basis.
Previous wording
Since 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 45 bps above the average one-month SOFR and 24 bps above the average six-month SOFR for the quarter ended September 30, 2024. Our average economic cost of funds was 59 bps below the average one-month SOFR and 38 bps below the average six-month SOFR for the quarter ended September 30, 2024. The average term to maturity of the outstanding repurchase agreements was 24 days at September 30, 2024, compared to 29 days at December 31, 2023. 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 SOFR rates for each quarter in 2024 and 2023, on both a GAAP and economic basis.
Current wording
Since 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 16 bps above the average one-month SOFR and 6 bps below the average six-month SOFR for the quarter ended March 31, 2025. Our average economic cost of funds was 20 bps below the average one-month SOFR and 42 bps below the average six-month SOFR for the quarter ended March 31, 2025. The average term to maturity of the outstanding repurchase agreements was 36 days at March 31, 2025, compared to 49 days at December 31, 2024. 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 SOFR rates for each quarter in 2025 and 2024, on both a GAAP and economic basis.
Previous wording
During the nine months ended September 30, 2024 and 2023, we owned 569,071 shares of Orchid common stock, respectively. Orchid paid total dividends of $1.08 and $1.44 per share during the nine months ended September 30, 2024 and 2023, respectively, resulting in dividend income on this common stock investment of approximately $0.6 million and $0.8 million, respectively. Orchid paid total dividends of $0.36 and $0.48 per share during the three months ended September 30, 2024 and 2023, respectively, resulting in dividend income on this common stock investment of approximately $0.2 million and $0.3 million, respectively.
Current wording
During both of the three months ended March 31, 2025 and 2024, we owned 569,071 shares of Orchid common stock. Orchid paid total dividends of $0.36 per share during both the three months ended March 31, 2025 and 2024, resulting in dividend income of approximately $0.2 million in each period.
Previous wording
Prior to June 30, 2023, the junior subordinated debt securities paid interest at a floating rate, adjusted quarterly and set at a spread of 3.50% over the prevailing three-month LIBOR rate on the determination date. Starting June 30, 2023, the underlying index converted from three-month LIBOR to CME Term SOFR plus a tenor spread adjustment of 0.26161%. The interest rate for subsequent accrual periods will be CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. The CME Term SOFR index is in effect for all interest rate resets after July 3, 2023. The LIBOR and CME Term SOFR rate increases since January 2022 have increased our interest expense. Interest expense on our junior subordinated debt securities was $1.8 million and $1.7 million for the nine months ended September 30, 2024 and 2023, respectively. The average rate of interest paid for the nine months ended September 30, 2024 was 9.09% compared to 8.62% for the comparable period in 2023. Interest expense on our junior subordinated debt securities was $0.6 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively. The average rate of interest paid for the three months ended September 30, 2024 was 9.04% compared to 9.07% for the comparable period in 2023.
Current wording
The junior subordinated debt securities paid interest at a floating rate. The interest rate is the CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. Interest expense on our junior subordinated debt securities was $0.5 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively. The average rate of interest paid for the three months ended March 31, 2025 was 8.11% compared to 9.14% for the comparable period in 2024.
Previous wording
On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable in equal monthly principal and interest installments of approximately $5,000 through October 30, 2039. Interest accrues at 4.89% through October 30, 2024. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.
Current wording
On October 30, 2019, the Company borrowed $680,000 from a bank which is secured by a mortgage on the Company’s office building. Through October 30, 2024, interest accrued at 4.89%. 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 interest rate reset to 7.37% on October 30, 2024 and will reset again on October 30, 2029.
Previous wording
The table below presents our gains or losses and other income for the nine and three months ended September 30, 2024 and 2023.
Current wording
The table below presents our gains or losses and other income for the three months ended March 31, 2025 and 2024.
Previous wording
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, 2024, we received proceeds of $46.3 million from the sales of RMBS. We did not sell any MBS during the nine months ended September 30, 2023.
Current wording
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 sell in the future, 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. We did not sell any MBS during the three months ended March 31, 2025 and 2024.
Previous wording
We recorded an income tax provision (benefit) for the nine months ended September 30, 2024 and 2023 of approximately $1.1 million and $(0.3) million, respectively, on consolidated pre-tax book income of $1.2 million and $0.6 million, respectively. The total income tax provision (benefit) recorded for the three months ended September 30, 2024 and 2023 was $0.5 million and $(0.8) million, respectively, on consolidated pre-tax book (loss) income of $0.8 million and $(1.2) million, respectively. The Company uses the discrete-period computation method for determining its income tax (benefit) provision. Our income tax provision could be affected by numerous factors, including non-deductible expenses, the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense. The increase in the income tax provision relative to the pre-tax book income (loss) for the nine and three months ended September 30, 2024 compared to the same periods in 2023 was primarily due to an increase in executive compensation subject to Section 162(m) limitations.
Current wording
We recorded an income tax provision for the three months ended March 31, 2025 and 2024 of approximately $0.2 million and $0.4 million, respectively, on consolidated pre-tax book income of $0.7 million and $0.6 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. Our income tax provision could be affected by numerous factors, including non-deductible expenses, the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense.
Previous wording
As of September 30, 2024, our MBS portfolio consisted of $118.4 million of agency or government MBS at fair value and had a weighted average coupon of 5.24%. During the nine months ended September 30, 2024, we received principal repayments of $10.1 million compared to $3.3 million for the comparable period ended September 30, 2023. The average prepayment speeds for the quarters ended September 30, 2024 and 2023 were 6.3% and 4.8%, respectively.
Current wording
As of March 31, 2025, our MBS portfolio consisted of $121.0 million of agency or government MBS at fair value and had a weighted average coupon of 5.27%. During the three months ended March 31, 2025, we received principal repayments of $2.9 million compared to $3.5 million for the comparable period ended March 31, 2024. The average prepayment speeds for the quarters ended March 31, 2025 and 2024 were 7.3% and 16.5%, respectively.
Previous wording
As of September 30, 2024, we had obligations outstanding under the repurchase agreements of approximately $113.0 million with a net weighted average borrowing cost of 5.20%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 15 to 46 days, with a weighted average maturity of 24 days. Securing the repurchase agreement obligation as of September 30, 2024 are MBS with an estimated fair value, including accrued interest, of $118.8 million. Through October 31, 2024, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2024 with maturities through January 24, 2025.
Current wording
As of March 31, 2025, we had obligations outstanding under the repurchase agreements of approximately $115.5 million with a net weighted average borrowing cost of 4.47%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 21 to 73 days, with a weighted average maturity of 36 days. Securing the repurchase agreement obligation as of March 31, 2025 are MBS with an estimated fair value, including accrued interest, of $121.4 million. Through May 1, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at March 31, 2025 with maturities through June 12, 2025.
Previous wording
In future periods we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of September 30, 2024, we had cash and cash equivalents of $4.6 million. We generated cash flows of $14.0 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $89.1 million during the nine months ended September 30, 2024. In addition, during the nine months ended September 30, 2024, we received approximately $9.4 million in management fees and expense reimbursements as manager of Orchid and approximately $0.6 million in dividends from our investment in Orchid common stock.
Current wording
In future periods we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of March 31, 2025, we had cash and cash equivalents of $4.4 million. We generated cash flows of $4.6 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $116.3 million during the three months ended March 31, 2025. In addition, during the three months ended March 31, 2025, we received approximately $3.6 million in management fees and expense reimbursements as manager of Orchid and approximately $0.2 million in dividends from our investment in Orchid common stock.
Previous wording
Orchid Island Capital reported net income for the third quarter 2024 of $17.4 million and its shareholders’ equity increased from $555.9 million to $656.0 million. Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay to us Orchid’s pro rata share of overhead as defined in the management agreement. As a stockholder of Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes do not impact our cash flows from Orchid.
Current wording
Orchid reported net income for the first quarter 2025 of $17.1 million, and its shareholders’ equity increased from $668.5 million at year-end 2024 to $855.9 million at March 31, 2025. 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.
Previous wording
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasuries and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024, although an increase in mortgage refinance applications following the announcement of the Fed Funds rate cut in September 2024 may accelerate the process. As of August 2024, the Fed had reduced its balance sheet for Agency RMBS by approximately $440 billion from the peak to $2.3 trillion, shedding approximately 32% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since June 2021.
Current wording
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March 2022, and ended asset purchases entirely in September 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed's decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and the first quarter of 2025. As of March 31, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $551 billion from the peak to $2.2 trillion, shedding approximately 40% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since May 2021.
Previous wording
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the January agreement, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties. On February 25, 2022, the FHFA published a final rule, effective as of April 26, 2022, amending the Enterprise capital framework established in December 2020 by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security (“UMBS”) and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which will, among other things, reduce the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replace the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; update the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduce a risk weight of 20% for guarantee assets.
Current wording
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the “September 2021 Provisions”). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. In March 2025, the Trump administration's nominee for FHFA director, Bill Pulte, was confirmed and replaced 14 board members at the Enterprises. Although this led to some speculation in the market regarding an end to conservatorship, the new FHFA director signaled a more cautious approach, stating that significant study on the impact to mortgage rates would need to be done prior to any privatization of the Enterprises.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Segment information for the nine months ended September 30, 2024 and 2023 is as follows:
Previous report — wording carried elsewhere
We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the nine months ended September 30, 2024, we generated $428,000 of net portfolio interest income, consisting of $4.2 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2023, we generated $59,000 of net portfolio interest income, consisting of $2.0 million of interest income from MBS assets offset by $1.9 million of interest expense on repurchase liabilities. The $2.2 million increase in interest income was due to a 145 basis point ("bp") increase in yields, combined with an $35.3 million increase in average MBS holdings. There was a $1.8 million increase in interest expense for the nine months ended September 30, 2024 that was due to a 102 bp increase in cost of funds, combined with a $33.7 million increase in average repurchase liabilities.