BIMINI CAPITAL MANAGEMENT, INC.
For the period ended Jun 30, 2025. Filed Aug 1, 2025.
View on SEC.govAbout this filing
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.
Jun 30, 2025 · Filed Aug 1, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-01.
0001437749-25-024322
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 126 previous paragraphs and 127 current paragraphs.
87 unchanged; 27 reworded; 11 added; 12 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 36 previous and 38 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 (11)
Current report
The start of the second quarter of 2025 was extremely turbulent and re-set the trajectory for all domestic markets. The trigger event was the announcement of the list of what were termed “reciprocal” tariffs introduced by President Trump on April 2, 2025. While the implementation of the reciprocal tariffs – the most significant in percentage terms - was paused for 90 days a week later on April 9, 2025, tariff-related developments remained the dominant driver of markets and the economic outlook. The pause in implementation of the reciprocal tariffs was intended to allow time for the administration to negotiate and execute trade agreements with the various trading partners of the United States. The deadline for finalizing such deals is not far off, and to date not many deals have been reached. There remains considerable uncertainty in the market regarding what will happen when the pause period ends and there are countries that have yet to reach a deal with the U.S. In the interim, statements regarding the negotiations and potential additional tariffs made by the President and members of his cabinet have been frequent and generally impacted markets when they occurred. However, a sense of “headline fatigue” has settled over the markets and successive statements seem to have a diminishing impact.
Current report
Over the course of the quarter, the focus of the administration shifted from purely tariff-related matters to passage of the President’s highest legislative priority. What became known as the One Big Beautiful Bill Act (the “Act”) was signed into law by the President on July 4 th. The Act made permanent most of the tax legislation originally enacted in 2017 as part of the Tax Cuts and Jobs Act of 2017, with minor revisions. Importantly, the Act is likely to be stimulative for the economy and not likely to reduce pressure on the fiscal deficit in the near term. The fiscal deficit has been a growing concern for markets as funding needs continue to escalate, putting upward pressure on treasury yields. Growing fiscal deficits are also a global issue, as most advanced economies in the world are similarly situated.
Current report
Economic developments during the second quarter continued to confound market participants, as the anticipated slowdown triggered by the tremendous uncertainty introduced by the administration’s tariffs has yet to appear. To date, any meaningful impact on goods inflation resulting from the tariffs has yet to materialize as well, although the data for June, released in July, did show modest upward pressure on goods prices. It is likely that the continued deficits run by the federal government, as they have since the COVID-19 outbreak, continue to buttress the economy and prevent a likely economic slowdown from occurring. The key metrics the Fed focuses on – namely, the jobs market and inflation data – continue to suggest there is no urgent need for them to ease monetary policy. Job growth, while not robust, remains above the level considered adequate to hold the unemployment rate steady, which has occurred, and inflation data remains above the Fed’s target level with the ultimate impact of the tariffs likely yet to come. Public comments by the Fed chair and most – but not all – members of the FOMC reflect the notion it would be prudent for the Fed to continue to watch the incoming economic data before determining when and by how much to adjust policy.
Current report
Interest rate developments followed a similar pattern to the economic developments described above. The initial reaction to the tariff announcement in early April was for the Treasury curve to steepen, as the front end of the curve moved lower in yield, consistent with anticipated interest rate cuts by the Fed as the economy slowed in response to the coming trade war. Yields on longer maturity Treasuries initially moved lower as well but then quickly reversed and moved higher in anticipation of significantly higher inflation driven by the impact of the tariffs on goods prices. There was also the fear that reserve status of the dollar and Treasuries might be imperiled, and the risk premium associated with owning Treasuries, particularly long-maturity securities, would increase.
Current report
Over the course of April, the yield of the 2-year Treasury declined from 3.885% on March 31, 2025, to 3.605% on April 30, 2025, the lowest yield for the year. The yield of the 10-year Treasury moved from 4.207% on March 31, 2025, to 3.997% on April 4 th, but then moved considerably higher, eventually to 4.601% in late May. The spread between the 2-year and 10-year Treasuries increased from approximately 30 bps at the end of the first quarter of 2025 to approximately 50 bps by the end of April. It generally remained around 50 bps for the balance of the quarter. At the end of April, market pricing for the Fed funds rate reflected over 4 cuts of 25 bps by the end of 2025.
Current report
Over the balance of the second quarter of 2025, Treasury yields remained volatile on a daily basis, responding to frequent public comments regarding tariffs and trade negotiations by the administration, but the spread between the 2-year and 10-year Treasuries remained fairly stable at around 50 bps. The yields on the 2-year and 10-year Treasuries both traded in approximately 20 bps ranges individually but were highly correlated with one another over the same period. On the other hand, market pricing for the Fed Funds rate changed after April as the administration’s focus shifted towards the Act and the economic data failed to live up to market expectations. Jobs and economic growth data remained fairly stable, and the inflation data did not reflect significant pressure from the tariffs. By the end of the second quarter, the market was only expecting a little over 2.5 twenty-five bps reductions of the Fed Funds rate. The number of cuts continues to decline and current market pricing is for less than two cuts of 25 bps by year end.
Current report
The Agency MBS Market
Current report
The market turmoil associated with the introductions of the reciprocal tariffs was nearly as severe as the initial days of the COVID-19 outbreak. Prices for any assets with risk associated with them were sold and levered investors were forced to sell to meet margin calls. Agency MBS, given their typical high liquidity and minimal risk, were also sold as investors generally sold what they could in an effort to minimize realized losses. This period lasted until the pause in implementation of the reciprocal tariffs was announced on April 9 th but losses sustained across markets were substantial and the confidence in the status of the dollar and Treasuries was shaken. Spreads on Agency MBS to comparable duration Treasuries, and especially to comparable duration swaps, increased by over 30 bps in early April and came within approximately 10 bps of the extremes seen at the end of the Fed’s 525 bps tightening cycle in late 2023. Spreads to swaps have not recovered much of the widening since early April and are only approximately 15 bps lower currently. As the market anticipates continued elevated levels of Treasury issuance going forward, and the government runs fiscal deficits at or near $2 trillion per year, swap rates have continued to decline relative to nominal Treasury yields. As a result, swap spreads have become progressively more negative and spreads of Agency MBS to swaps have increased. Swaps are a primary instrument used by the Company to hedge and while this development has hurt the performance of our hedges and portfolio over the course of the second quarter, it has increased the potential returns associated with investing in new Agency MBS.
Current report
The second quarter of 2025 was a very turbulent period for financial markets, with two large catalysts driving the volatility. The initial shock, and clearly the larger of the two, was reciprocal tariffs announced by the Trump administration against essentially every trading partner of the United States. This announcement was expected but the magnitude of the tariffs greatly exceeded market expectations. After the announcement, market conditions resembled those following the outbreak of COVID-19, if only slightly less severe. A week later, the administration announced a pause in implementation of the tariffs for 90 days and markets slowly recovered some semblance of stability. The markets expected a slowdown in economic activity and accelerated inflation as trade wars unfolded. The Fed was expected to be forced to lower rates by 100 bps or more by year end and the Treasury curve steepened. While market conditions remained volatile for the balance of the quarter, the market slowly grew less affected by subsequent developments on the tariff front and most risk assets recovered fully, to a large extent driven by the catalyst discussed below.
Current report
As the administration’s focus shifted to their highest legislative objective, the Act, the beneficial impact of the Act on the economy drove expectations as the market became somewhat immunized to tariff developments, especially so as the feared surge in inflation failed to materialize, at least to date. In conjunction with this shift in market perception, the incoming economic data proved resilient and expectations for Fed rate cuts continued to subside and get pushed further into the future. Notably for the Company, while risk assets generally recovered from the severe turmoil early in the second quarter, the Agency MBS sector did not fully recover, as least versus comparable duration hedges, resulting in negative excess returns for the quarter.
Current report
As the third quarter unfolds, the trend of strong risk asset performance and resilient economic data continues. The inflation data has begun to show some impact from the tariffs, but the economy appears sufficiently resilient to absorb them, certainly benefiting from continued fiscal stimulus (large fiscal deficits), the unfolding benefits of artificial intelligence, progress on trade negotiations, and a very pro-business administration as evidenced by the Act. The Agency MBS market continues to languish, although returns available in the market remain elevated.
Removed paragraphs (12)
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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%.
Previous 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.
Previous report
The Agency RMBS Market
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Reworded paragraphs (27)
Previous 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.
Current wording
Described below are the Company’s results of operations for the six and three months ended June 30, 2025, as compared to the six and three months ended June 30, 2024.
Previous 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.
Current wording
Consolidated net income for the six months ended June 30, 2025 was $0.6 million, or $0.06 basic and diluted income per share of Class A Common Stock, as compared to consolidated net loss of $0.1 million, or $0.01 basic and diluted income per share of Class A Common Stock, for the six months ended June 30, 2024. Consolidated net income for the three months ended June 30, 2025 was $0.04 million, or $ 0.00 basic and diluted income per share of Class A Common Stock, as compared to consolidated net loss of $0.3 million, or $0.03 basic and diluted income per share of Class A Common Stock, for the three months ended June 30, 2024.
Previous 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.
Current wording
The components of net income for the six and three months ended June 30, 2025 and 2024, along with the changes in those components are presented in the table below.
Previous 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.
Current wording
During the three months ended June 30, 2025, we generated $0.4 million of net portfolio interest income, consisting of $1.6 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2024, we generated $0.1 million of net portfolio interest income, consisting of $1.3 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. The $0.3 million increase in interest income was due to a $26.8 million increase in average MBS holdings, offset by a 34 bp decrease in yields. There was a $0.03 million increase in interest expense for the three months ended June 30, 2025 that was due to a $24.9 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 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.
Current wording
Our economic interest expense on repurchase liabilities for the six months ended June 30, 2025 and 2024 was $2.3 million and $2.3 million, respectively, resulting in $1.0 million and $0.4 million of economic net portfolio interest income, respectively. Our economic interest expense on repurchase liabilities for the three months ended June 30, 2025 and 2024 was $1.1 million and $1.1 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 three months ended March 31, 2025 and 2024 and each quarter in 2025 and 2024 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 six months ended June 30, 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 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.
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 7 bps above the average one-month SOFR and 2 bps above the average six-month SOFR for the quarter ended June 30, 2025. Our average economic cost of funds was 35 bps below the average one-month SOFR and 40 bps below the average six-month SOFR for the quarter ended June 30, 2025. The average term to maturity of the outstanding repurchase agreements was 69 days at June 30, 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 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.
Current wording
During both of the six months ended June 30, 2025 and 2024, we owned 569,071 shares of Orchid common stock. Orchid paid total dividends of $0.72 per share during both the six months ended June 30, 2025 and 2024, resulting in dividend income of approximately $0.4 million in each period.
Previous 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.
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 $1.1 million and $1.2. million for the six months ended June 30, 2025 and 2024, respectively. The average rate of interest paid for the six months ended June 30, 2025 was 8.09% compared to 9.11% for the comparable period in 2024. Interest expense on our junior subordinated debt securities was $0.5 million and $0.6 million for the three months ended June 30, 2025 and 2024, respectively. The average rate of interest paid for the three months ended June 30, 2025 and 2024 was 8.06% and 9.09%, respectively.
Previous wording
The table below presents our gains or losses and other income for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents our gains or losses and other income for the six and three months ended June 30, 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 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.
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. During the six months ended June 30, 2025 and 2024, we received proceeds totaling $9.8 million and $46.3 million, respectively, from the sales of MBS.
Previous wording
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 wording
For the six and three months ended June 30, 2025, our total operating expenses were approximately $5.7 million and $2.8 million, respectively, compared to $5.8 million and $2.8 million for the six and three months ended June 30, 2024, respectively, as detailed in the table below.
Previous 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.
Current wording
We recorded income tax provisions for the six months ended June 30, 2025 and 2024 of approximately $0.2 million and $0.5 million, respectively, on consolidated pre-tax book income of $0.8 million and $0.4 million, respectively. We recorded income tax provisions for the three months ended June 30, 2025 and 2024 of approximately $0.01 million and $0.1 million, respectively, on consolidated pre-tax book income (loss) of $0.05 million and $(0.2) 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 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.
Current wording
As of June 30, 2025, our MBS portfolio consisted of $107.6 million of agency or government MBS at fair value and had a weighted average coupon of 5.25%. During the six months ended June 30, 2025, we received principal repayments of $6.2 million compared to $7.9 million for the comparable period ended June 30, 2024. The average prepayment speeds for the quarters ended June 30, 2025 and 2024 were 9.9% and 10.0%, respectively.
Previous 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.
Current wording
As of June 30, 2025, we had obligations outstanding under the repurchase agreements of approximately $101.7 million with a net weighted average borrowing cost of 4.49%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 14 to 136 days, with a weighted average maturity of 69 days. Securing the repurchase agreement obligation as of June 30, 2025 are MBS with an estimated fair value, including accrued interest, of $107.8 million. Through July 31, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at June 30, 2025 with maturities through November 13, 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 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.
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 June 30, 2025, we had cash and cash equivalents of $5.3 million. We generated cash flows of $9.5 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $112.5 million during the six months ended June 30, 2025. In addition, during the six months ended June 30, 2025, we received approximately $7.4 million in management fees and expense reimbursements as manager of Orchid and approximately $0.4 million in dividends from our investment in Orchid common stock.
Previous 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.
Current wording
Orchid reported a net loss for the second quarter 2025 of $33.6 million, and its stockholders’ equity increased from $855.9 million at the end of the first quarter of 2025 to $912.0 million at June 30, 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
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 wording
The Agency RMBS index generated a return for the second quarter of 1.1% and a return of -0.3% versus comparable duration swaps, as compared to 1.8% and 0.5%, respectively for these measures, for the investment grade corporate index, and 3.6% and 2.0%, 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, aside from Treasuries, versus comparable duration swaps were mixed.
Previous wording
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 wording
Within Agency MBS for the second quarter of 2025, conventional 30-year mortgages generated a total return of 1.0%, 15-year mortgages generated a total return of 1.8% and Ginnie Mae 30-year mortgages generated a total return of 1.1%. Versus comparable duration swaps the returns were -0.3%, 0.3% 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 correlated with the duration of the respective securities, as lower coupon, longer duration bonds generated the lowest total returns and the highest coupon – 7.0% - generated the highest total returns. The range for the lower portion of the coupon stack was 0.0% to 1.4% (for coupons up to 4.5%) and 1.4% to 1.9% for higher coupons. Excess returns versus comparable duration swaps were inversely related to coupons, as the higher coupons generated excess returns as high as 0.7% but excess returns for lower coupons were generally between -0.8% and -0.1%.
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 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.
Current wording
In response to the deterioration in the markets for U.S. Treasuries, Agency MBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency MBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency MBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency MBS 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 MBS 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 MBS below $20 billion per month throughout 2024 and the second quarter of 2025. As of June 30, 2025, the Fed had reduced its balance sheet for Agency MBS by approximately $602 billion from the peak to $2.2 trillion, shedding approximately 44% of the Agency MBS added during pandemic quantitative easing and representing the lowest level since March 2021.
Previous wording
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the “OCC”) the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the “Basel III Endgame”). The Basel III Endgame, if implemented as proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. In testimony before the United States Senate Committee on Banking, Housing and Urban Affairs in July 2024, Fed chairman Jerome Powell stated that the OCC, the FDIC and the Fed were in discussions to materially revise the proposed rule, and that there was consensus at the Fed to undergo another comment period. In remarks given on September 10, 2024, Michael Barr, the Fed's Vice Chair for Supervision, confirmed that the Basel III Endgame was being rewritten to, among other things, reduce the risk weights for residential real estate and retail exposures, extend the scope of the reduced risk weight for certain low-risk corporate debt, and eliminate the minimum haircut for securities financing transactions.
Current wording
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame"). The Basel III Endgame, if implemented as originally proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency MBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency MBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. While implementation of the Basel III Endgame has since stalled, Fed chairman Jerome Powell testified before the U.S. Senate Committee on Banking, Housing and Urban Affairs in June 2025 that the Fed was making a “fresh start” in reworking the Basel III Endgame. On June 27, 2025, the Fed, OCC and FDIC jointly issued a proposed rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”), with comments open to the public until August 26, 2025. The proposed rule seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.
Previous wording
A change in or elimination of the guarantee structure of Agency 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 to focus on non-Agency 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.
Current wording
A change in or elimination of the guarantee structure of Agency MBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency MBS may cause us to change our investment strategy to focus on non-Agency MBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.
Previous wording
If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency RMBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.
Current wording
If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency MBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.
Previous wording
If prepayment levels increase, the value of any of our Agency RMBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency RMBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency RMBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency RMBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency 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.
Current wording
If prepayment levels increase, the value of any of our Agency MBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency MBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency MBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency MBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency MBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency MBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency MBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.
Previous wording
Higher long-term rates can also affect the value of our Agency RMBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency RMBS declines. Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for pass-through Agency RMBS.
Current wording
Higher long-term rates can also affect the value of our Agency MBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency MBS declines. Some of the instruments we use to hedge our Agency MBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency MBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these 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.
Previous wording
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 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 by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT RMBS, particularly PT RMBS backed by fixed-rate mortgages.
Current wording
Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency MBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT MBS, particularly PT MBS backed by fixed-rate mortgages.
Previous wording
We leverage our PT RMBS portfolio and a portion of our structured Agency RMBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency RMBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.
Current wording
We leverage our PT MBS portfolio and a portion of our structured Agency MBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency MBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Segment information for the six months ended June 30, 2025 and 2024 is as follows:
Current report — wording carried from elsewhere
During the six months ended June 30, 2025, we generated $0.8 million of net portfolio interest income, consisting of $3.3 million of interest income from MBS assets offset by $2.5 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2024, we generated $0.3 million of net portfolio interest income, consisting of $2.7 million of interest income from MBS assets offset by $2.4 million of interest expense on repurchase liabilities. The $0.6 million increase in interest income was due to a $28.9 million increase in average MBS holdings, offset by a 39 basis point (“bp”) decrease in yields. There was a $0.1 million increase in interest expense for the six months ended June 30, 2025 that was due to a $27.7 million increase in average repurchase liabilities, offset by a 114 bp decrease in cost of funds.