BIMINI CAPITAL MANAGEMENT, INC.
For the period ended Dec 31, 2025. Filed Mar 13, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 13, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001437749-25-006605
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-13.
0001437749-26-008139
ITEM 7. 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 123 previous paragraphs and 127 current paragraphs.
76 unchanged; 34 reworded; 17 added; 13 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 65 previous and 62 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 (17)
Current report
Net Income (Loss) Summary
Current report
Pending Acquisition of Tom Johnson Investment Management
Current report
On January 13, 2026, the Company announced that Holdings has entered into an agreement to purchase eighty percent (80%) of the fully diluted equity interests of TJIM, a privately held registered investment adviser. The transaction is expected to close at the beginning of the second quarter of 2026. As of the announcement date, TJIM had approximately $1.6 billion of assets under management across equity and fixed income markets. TJIM’s management agreements are diverse, covering individual accounts, sub-advisory agreements, and wrap programs. The existing owners of TJIM will retain an ownership interest in TJIM and Bimini intends to retain its current staff and investment management team following the closing of the transaction. The transaction agreements include mutual put and call rights that could result in the Company’s acquisition of the remaining 20% equity interest retained by the existing owners. The transaction is intended to transition Bimini into a pure asset management firm with a more diverse mix of assets under its respective management teams.
Current report
If the acquisition of TJIM is completed, the composition of the Company’s business will change both from the perspective of how its capital is deployed and how it reports its results for its operating segments. The acquisition of an 80% ownership interest in TJIM will require the deployment of a significant portion of the Company’s capital, including all capital currently deployed into the investment portfolio, with the exception of shares of Orchid. The results of TJIM going forward would represent a significant portion of the Company’s aggregate results. If the acquisition is completed and the Company is able to generate and retain earnings going forward, the Company expects that such funds will be deployed into an Agency MBS investment portfolio, in which case they are expected to be managed more conservatively in terms of the amount of leverage employed when compared to leverage employed by the Company historically. Given the Company’s intention to retain ownership of shares of Orchid if the transaction closes, the Company’s operating segments would consist of the management of Orchid, the controlling stake in the operations of TJIM, and to a lesser extent its investment portfolio, for a total of three reportable segments.
Current report
With respect to the Company’s results of operations for 2025 and 2024, the investment portfolio comprised one of the Company’s reportable segments and the Company deployed significant capital to those operations. Accordingly, such operations are described in detail below.
Current report
Net Portfolio Interest Income
Current report
As of December 31, 2025, the Company's portfolio had an effective duration of 2.23, indicating that an interest rate increase of 1.0% would be expected to cause a 2.23% decrease in the value of the MBS in our investment portfolio. As of December 31, 2024, the Company's portfolio had an effective duration of 3.62, indicating that an interest rate increase of 1.0% would be expected to cause a 3.62% decrease in the value of the MBS in our investment portfolio. These figures do not include the effect of our funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.
Current report
As the year 2025 came to a close, market conditions were relatively calm. The government shutdown that commenced October 1, 2025, and lasted for six weeks, indirectly contributed to the calm. As a result of the government shutdown, many entities that provide economic data to the markets were unable to do so and it took several weeks after the government reopened before they were able to resume. The lack of economic data deprived both the markets and Fed policy makers of the ability to gauge the performance of the economy and its many components, such as the labor market, consumer spending and price data. As a result, market participants and the Fed were left with limited data from private sources. The result of the data vacuum for the markets was a continuation of the status quo, as the market awaited further clarification on growth and inflation. Interest rates were stable and traded in a rather tight range. Interest rate implied volatility continued its long decline that started in early April 2025, after the Trump administration imposed broad tariffs. The FOMC opted to continue on their path of policy normalization by lowering the Fed Funds rate twice in the fourth quarter of 2025, in each case by 25 basis points. In doing so, the Fed believed they had reached the upper end of neutral – implying the neutral policy rate was in fact a range versus a specific rate level.
Current report
As with prior quarters, the economy continues to operate with elevated inflation relative to the Fed’s 2% target, and with evidence of a fragile labor market. There is ample data to support either thesis regarding the outlook for the economy, and market participants and FOMC members are split on how monetary policy should be managed to address the Fed’s dual mandates. The two rate cuts that occurred during the fourth quarter of 2025 were the result of split votes whereby some members dissented in both the direction of more cuts and fewer, or no cuts. As we near the end of the first quarter of 2026 the dilemma persists, although the FOMC opted to hold policy steady at their January 2026 meeting, claiming they had time to monitor the incoming data for now as monetary policy was deemed near neutral and there was no pressing need to increase accommodation.
Current report
One additional development that will likely impact monetary policy going forward was the decision by President Trump to nominate Kevin Warsh as the next chairman of the Fed in late January. The term of the current chairman, Jerome Powell, ends in May of 2026. While President Trump has been highly critical of Chairman Powell and openly stated his desire for lower interest rates, the market does not appear to anticipate incoming Chairman Warsh will aggressively lower the Fed Funds rate. In fact, incoming Chairman Warsh is expected to be more of a proponent of fighting inflation and shrinking the Fed’s balance sheet.
Current report
As alluded to above, interest rates were quite stable over the course of the fourth quarter of 2025 and into the first quarter of 2026. All indicators of economic activity, while often of suspect quality and not always available or timely, did not indicate much changed during the fourth quarter. Inflation data remained above the Fed’s target, although there did not appear to be material flow-through from the tariffs implemented during the year, and the labor market, while not robust, did not appear to be deteriorating. The Fed lowered the Fed Funds rate two times in the fourth quarter – a continuation of their plan to bring monetary policy towards neutral – and signaled they had done so. Additional cuts may come if needed but are not anticipated in the near term. Longer maturity U.S. Treasury rates remained in a tight range throughout the fourth quarter and remained so into the first quarter of 2026. As a result of the two 25 basis point rate cuts by the Fed in the fourth quarter, the spread between the Fed Funds rate and the two-year U.S. Treasury is less inverted than was the case at September 30, 2025, reflecting both the cuts and the market pricing in fewer cuts in the future. Accordingly, the U.S. Treasury curve is slightly steeper, as evidenced by the spread between the 2-year and 10-year U.S. Treasury notes increasing from approximately 54 basis points to approximately 70 basis points at year-end.
Current report
The Federal Reserve ended their quantitative tightening program, which reduced their balance sheet via the maturation of their holdings, and began reinvesting them into additional U.S. Treasury holdings on December 1, 2025. Run-off from the Agency residential mortgage-backed securities ("RMBS") holdings is now directed towards purchasing U.S. Treasury bills. The Fed also announced their intention, via Reserve Management Purchases (“RMPs”), to grow their balance sheet over time to maintain a stable relationship between the size of their balance sheet and the economy. These steps will result in increased purchases of U.S. Treasury securities by the Fed going forward, and interest rate swap spreads have widened – or become less negative – as a result. The widening of swap spreads, particularly longer-dated spreads, caused the swap curve to steepen more than the cash U.S. Treasury curve. Longer-dated swap spreads had become progressively more negative over the previous years, reflecting the market’s concern with increasing government issuance of U.S. Treasury securities. The increased purchases by the Fed offset some of the impact of the deficit-induced growth in issuance anticipated in the future.
Current report
As realized interest rate volatility was very low during the quarter, implied rate volatility in the swaptions market continued to decline and has reached multi-year lows in early 2026.
Current report
As a proxy for the performance of the Agency RMBS market during 2025, the spread of the 30-year, fixed rate current coupon to the 10-year U.S. Treasury Note peaked at approximately 142 basis points in April 2025, not long after the market turmoil surrounding the various tariff measures introduced by the Trump administration on April 2, 2025. Since then, the spread has steadily declined, closely mirroring the performance of implied interest rate volatility, an important driver of Agency RMBS performance. The current coupon spread to the 10-year U.S. Treasury was at approximately 105 basis points at the beginning of the fourth quarter of 2025, and approximately 88 basis points at the end of the fourth quarter. In January 2026, President Trump announced plans for the Enterprises to purchase up to $200 billion of Agency RMBS in 2026 in an effort to drive mortgage rates down and improve housing affordability. The market reacted strongly to the news, and the current coupon spread tightened to approximately 74 basis points, the tightest level since early 2022 when the Fed was still buying Agency RMBS under its quantitative easing program. Since the announcement, spreads have widened slightly but are still lower than the level at the end of 2025.
Current report
The fixed income markets have experienced a period of calm as 2025 came to close and we enter 2026. Interest rates have remained in a very tight range, implied interest rate volatility has continued the steady decline that began in April of 2025, and Agency RMBS performed well during the fourth quarter of 2025. Other sectors of the fixed income markets performed well during the fourth quarter as well, and spreads on investment grade corporate bonds reached levels not seen since 1998. Risk sentiment generally was quite strong during the quarter, and the S&P 500 generated a return of 2.3%. The government shutdown that started on October 1, 2025, and lasted until mid-November created a near complete data vacuum for the markets during the quarter. Once the government reopened it was several weeks before data for the quarter was available. Exacerbating the data shortage was the perception the data was of poor-quality owing to frequent and substantial revisions after the initial release. The market had limited means to gauge the strength of the economy. The Fed did lower the Fed Funds rate twice in the fourth quarter – in both cases by 25 basis points – and stated they had reached the upper end of what they deemed the range of neutral. However, owing to the lack of the most critical data on the labor market and inflation - and the fact that the data that was available did not indicate much had changed with the economy since the shutdown began – the Fed seems likely to hold rates steady for now until incoming data dictates otherwise. This seems especially likely to be the case as President Trump announced Kevin Warsh will replace current Chairman Powell in May, and the Fed is not likely to take meaningful policy steps just before a chairmanship transition.
Current report
The Agency RMBS market generated a total return of 1.7% for the quarter, consistent with the solid returns for all sectors of the fixed income markets. The return for the Agency RMBS market versus comparable durations swaps, a proxy for returns for levered bond investors such as the Company, was 1.3%. During the fourth quarter, excess returns were generally even across the various 30-year coupons – with the 3.5% coupon being an outlier to the upside at 2.2%. The highest coupons, 6.0% and higher, lagged the returns of the rest of the coupon stack on an excess return basis, all between 0.5% and 0.9%.
Current report
Looking forward, economic activity remains resilient and could strengthen as the stimulative components of the One Big Beautiful Bill Act, passed in mid-2025, start to impact the economy – lower tax withholding, capital expenditure expensing, less regulation, among other measures. The labor market still seems weak, although it is not deteriorating. Inflation remains sticky, still above the Fed’s target level of 2%, but there do not appear to be meaningful follow-through impacts from the tariffs introduced in 2025. Monetary policy may remain steady for the time being as well. If these conditions persist, interest rates are likely to remain stable, implied interest rate volatility subdued and risk assets, including Agency RMBS, will likely perform well. This outlook will change if interest rates move substantially in either direction, especially if the movement is towards higher rates, and interest rate implied volatility increases materially.
Removed paragraphs (13)
Previous report
Net Loss Summary
Previous report
Net Portfolio Interest Income (Expense)
Previous report
Average Asset Yield
Previous report
The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of structured MBS and pass-through MBS (“PT MBS”) for the years ended December 31, 2024 and 2023 and each quarter during 2024 and 2023.
Previous report
The following table presents a summary of our portfolio assets acquired during the years ended December 31, 2024 and 2023.
Previous report
The economic trajectory in place as the third quarter of 2024 came to an end has not changed as we enter 2025. Economic growth is above the level considered sustainable – the level that can persist without causing the economy to overheat and inflation to rise. The labor market no longer appears to be cooling, hiring has stabilized, and the unemployment rate remains in the low 4% area, which is indicative of a tighter labor market, if not an overheating one. Importantly, inflation readings have stabilized at levels clearly above the Fed’s target level of 2%. The strength of the economy has been supported by stimulative fiscal policy on the part of the federal government as budget deficits have consistently approached $2 trillion, representing unsustainably high percentages of gross domestic product. The impact of the deficits is partially offset by an expanded balance sheet of the Fed which remains above target levels, allowing the market to avoid having to fund the deficits in their entirety.
Previous report
In November of 2024, the Republican party swept the U.S. national elections, and the pro-business agenda of the new president has enhanced market optimism for sustained growth at or above current levels. President Trump has stated that he intends to use tariffs to shift domestic consumption away from imports and towards domestic producers, at the potential cost of higher prices. The market anticipates that the combination of pro-growth policies on the part of the incoming administration, supported by Republican control of both houses of Congress, along with wide-spread tariffs on a host of imported goods, will both fuel growth and pressure inflation higher. To date in the first quarter of 2025, the near term impact of these developments appears to be pressuring economic growth, at least in the near term.
Previous report
In response to the developments described above, interest rate movements during the fourth quarter of 2024 were significant. As the third quarter of 2024 came to a close, interest rates were declining in anticipation of the first interest rate cut by the Fed since 2020. The Fed began raising the overnight rate in March of 2022 and did not stop until July of 2023, when the target range for the Fed Funds rate was 5.25% to 5.50%. At the time the Fed lowered the overnight rate by 50 basis points on September 18, 2024, the market expected at least eight more cuts over the next 18 months. Rates reversed course early in the fourth quarter, triggered by the non-farm payroll report for September released in early October. Consequently, the markets outlook for the economy, inflation and future interest rate cuts by the Fed changed dramatically over the course of the fourth quarter and into 2025.
Previous report
With respect to interest rates, the most significant development may have been the dramatic change in the shape of the U.S. Treasury Note yield curve. By the end of 2024, the Fed had lowered the target range for Fed Funds by 100 basis points. The 10-year U.S. Treasury Note yield curve increased by approximately 80 basis points over the quarter, causing the first dis-inversion of the yield curve between the Fed Funds rate and the 10-year U.S. Treasury Note since June 2022, and between the 2-year and 10-year U.S. Treasury Notes since November 2022. As federal deficits have remained historically high since the pandemic and the market does not anticipate the incoming administration is likely to be fiscally conservative, the market anticipates federal deficits to remain elevated and issuance of U.S. Treasury securities to continue to grow. This led swap spreads to become increasingly negative (as the market demands a higher yield for a greater supply of U.S. Treasury securities) such that the swap curve remains inverted – although the 18-month to 15-year point are upward sloping.
Previous report
As a proxy for the performance of the Agency MBS market during the fourth quarter of 2024, the spread of the 30-year, fixed rate current coupon to the 10-year U.S. Treasury Note hit a multi-year low of approximately 109 basis points the day after the Fed lowered the Fed Funds rate on September 18, 2024. This is in contrast to the spread in May of 2023 of over 200 basis points. The developments described above led to higher interest rates and elevated levels of interest rate volatility. By the end of October of 2024, the spread had increased to approximately 147 basis points and ended the year at approximately 128 basis points. The Agency MBS index generated a negative return for the fourth quarter of -3.2% and a return of -0.6% versus comparable duration swaps, as compared to -2.8% and 0.9%, respectively, for the investment grade corporate index, and 0.2% and 1.4%, respectively for high yield debt. While total returns for U.S. Treasury securities were also negative, most sectors of the fixed income markets generated positive total returns for the quarter, as well as positive excess returns versus comparable duration swaps.
Previous report
The outlook for the fixed income market pivoted early in the fourth quarter of 2024. As the third quarter came to an end, inflation was falling towards the Fed’s 2% target, the labor market was cooling as hiring levels moderated and the unemployment rate was slowly creeping higher, and the Fed had finally lowered the Fed Funds rate by 50 basis points. At the time, the market expected the Fed to lower the rate by over 200 basis points over the next 18 months. Beginning early in the fourth quarter, the incoming data turned. Readings on the labor market stabilized and hiring stopped slowing. The unemployment rate appeared to plateau, and most importantly, the decline in inflation rates previously in place seemed to lose momentum and inflation remained above the Fed’s 2% target level. In early November, the Republican party swept the U.S. national elections, and the new president has a very pro-growth agenda for the country. President Trump has stated that he favors using tariffs to shift domestic consumption away from imports and towards domestically produced goods. If successful, such a policy could ultimately support strong growth in domestic goods production and employment; however, it is likely to be a source of inflationary pressure in the short term, at a time when inflation is already too high.
Previous report
As the economic outlook shifted, the Fed did lower the Fed Funds rate two more times during 2024 – by 25 basis points in each case. With the Fed Funds rate lowered by 100 basis points over the course of the quarter, the persistently strong economic outlook led to a dis-inversion of the yield curve between the Fed Funds rate and the 10-year U.S. Treasury Note, and between the 2-year U.S. Treasury Note and 10-year U.S. Treasury Note. The Agency MBS market generated negative total returns for the quarter and was one of the worst performing sectors of the fixed income markets. Returns for the Agency MBS market versus comparable durations swaps, a proxy for returns for levered bond investors such as the Company, were also negative, albeit far less so than the absolute returns. During the fourth quarter, the lowest coupon and longest duration securities generated the worst returns, and performance generally tracked these metrics as the highest coupon securities generated the best returns.
Previous report
Looking forward, economic activity remains resilient if not strong, the labor market is quite healthy and inflation, while well off the peak seen in 2022, remains above the Fed’s 2% target. The Trump administration has rapidly implemented various policy objectives, and the process could pressure economic growth downward initially and inflation higher, as there remains considerable uncertainty regarding the ultimate impact of these actions on the economy.
Reworded paragraphs (34)
Previous wording
Consolidated netloss for the year ended December 31, 2024 was$1.3 million, or$0.13 basic and diluted loss per share of Class A Common Stock, as compared to consolidated netloss of$4.0 million, or$0.40 basic and diluted loss per share of Class A Common Stock, for the year ended December 31, 2023.
Current wording
Consolidated netincome for the year ended December 31, 2025 was$5.8 million, or$0.58 basic and diluted income per share of Class A Common Stock, as compared to consolidated netloss of$1.3 million, or$0.13 basic and diluted loss per share of Class A Common Stock, for the year ended December 31, 2024.
Previous wording
The components of netloss for the years ended December 31, 2024 and 2023, along with the changes in those components are presented in the table below:
Current wording
The components of netincome (loss) for the years ended December 31, 2025 and 2024, along with the changes in those components are presented in the table below:
Previous wording
We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the year ended December 31, 2024, we generated$0.7 million of net portfolio interest income, consisting of$5.8 million of interest income from MBS assets offset by$5.1 million of interest expense on repurchase liabilities. For the year ended December 31, 2023, we generated$0.2 million of net portfolio interest income, consisting of$3.3 million of interest income from MBS assets offset by$3.1 million of interest expense on repurchase liabilities. The$2.5 million increase in interest income for the year ended December 31, 2024 was primarily due to a$34.4 million increase in average MBS balances, combined with a 79 basis point ("bp")increase in yields earned on the portfolio. The$2.1 million increase in interest expense for the year ended December 31, 2024 was primarily due to a 45 bpincrease in cost of funds, combined with a$33.0 million increase in average repurchase liabilities.
Current wording
We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the year ended December 31, 2025, we generated$1.6 million of net portfolio interest income, consisting of$6.3 million of interest income from MBS assets offset by$4.7 million of interest expense on repurchase liabilities. For the year ended December 31, 2024, we generated$0.7 million of net portfolio interest income, consisting of$5.8 million of interest income from MBS assets offset by$5.1 million of interest expense on repurchase liabilities. The$0.5 million increase in interest income for the year ended December 31, 2025 was primarily due to a$9.4 million increase in average MBS balances, offset by a 7 basis point ("bp")decrease in yields earned on the portfolio. The$0.5 million decrease in interest expense for the year ended December 31, 2025 was primarily due to a 90 bpdecrease in cost of funds, offset by a$9.0 million increase in average repurchase liabilities.
Previous wording
Our economic interest expense on repurchase liabilities for the years ended December 31, 2024 and 2023 was$5.1 million and$3.2 million, respectively, resulting in$0.7 million and$0.1 million of economic net portfolio interest income (expense), respectively.
Current wording
Our economic interest expense on repurchase liabilities for the years ended December 31, 2025 and 2024 was$4.2 million and$5.1 million, respectively, resulting in$2.1 million and$0.7 million of economic net portfolio interest income, respectively.
Previous wording
Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 28 bpsabove the one-month average SOFR and 7 bpsabove the six-month average SOFR for the year ended December 31, 2024. Our average economic cost of funds was 25 bpsabove the one-month average SOFR and 4 bpsabove the six-month average SOFR for the year ended December 31, 2024. The average term to maturity of the outstanding repurchase agreements increased to 49 days at December 31, 2024 from 29 days at December 31, 2023.
Current wording
Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 28 bpsabove the one-month average SOFR and 10 bpsabove the six-month average SOFR for the year ended December 31, 2025. Our average economic cost of funds was 13 bpsbelow the one-month average SOFR and 31 bpsbelow the six-month average SOFR for the year ended December 31, 2025. The average term to maturity of the outstanding repurchase agreements decreased to 31 days as of December 31, 2025 from 49 days as of December 31, 2024.
Previous wording
The tables below present the average outstanding balance under all repurchase agreements, interest expense and average economic cost of funds, and one-month average and six-month average SOFR rates for each quarter in 2024 and 2023 and for the years December 31, 2024 and 2023 on both a GAAP and economic basis.
Current wording
The table below presents one-month average and six-month average SOFR rates for each quarter in 2025 and 2024 and for the years ended December 31, 2025 and 2024 on both a GAAP and economic basis.
Previous wording
We owned 569,071 shares of Orchid common stock as of both December 31, 2024 and 2023. Orchid paid total dividends of $1.44 per share during 2024 and $1.80 per share during 2023. During the years ended December 31, 2024 and 2023, we received dividends on our Orchid common stock of approximately $0.8 million and $1.0 million, respectively.
Current wording
We owned 569,071 shares of Orchid common stock throughout each of the years ended December 31, 2025 and 2024. Orchid paid total dividends of $1.44 per share during 2025 and $1.44 per share during 2024. During the years ended December 31, 2025 and 2024, we received dividends on our Orchid common stock of approximately $0.8 million and $0.8 million, respectively.
Previous wording
Prior to June 30, 2023, our 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 LIBOR and CME Term SOFR rate increases since January 2022 have increased our interest expense. Interest expense on our junior subordinated debt securities was approximately$2.4 million and$2.3 million for the years ended December 31, 2024 and 2023, respectively. The average rate of interest paid for the year ended December 31, 2024 was 8.97% compared to 8.76% for the year ended December 31, 2023. As of December 31, 2024, the interest rate was 8.12%.
Current wording
The junior subordinated debt securities pay 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 approximately$2.1 million and$2.4 million for the years ended December 31, 2025 and 2024, respectively. The average rate of interest paid for the year ended December 31, 2025 was 7.94% compared to 8.97% for the year ended December 31, 2024. As of December 31, 2025, the interest rate was 7.48%.
Previous wording
On October 30, 2019, the Company borrowed $680,000 from a bank. 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%. As of December 31, 2024, the interest rate was 7.37%. 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. The related note is secured by a mortgage on the Company’s office building and has a final maturity of October 30, 2039. Through October 30, 2024, interest accrued on the note 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
We invest in MBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from trading in these securities. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the year ended December 31, 2024, we received proceeds of $46.3 million from the sales of MBS compared to $18.2 million for the year ended December 31, 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. During the year ended December 31, 2025, we received proceeds of $19.5 million from the sales of MBS compared to $46.3 million for the year ended December 31, 2024.
Previous wording
For the year ended December 31, 2024, our total operating expenses were approximately $11.3 million compared to approximately $10.5 million for the year ended December 31, 2023. The table below presents a breakdown of operating expenses for the years ended December 31, 2024 and 2023.
Current wording
For the year ended December 31, 2025, our total operating expenses were approximately $12.6 million compared to approximately $11.3 million for the year ended December 31, 2024 as detailed in the table below.
Previous wording
In 2024, we recorded an income tax provision of $3.1 million, including a $1.3 million increase in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2024, of the Company’s ability to utilize tax NOLs to offset future taxable income. In 2023, we recorded an income tax provision of $4.1 million, including a $2.7 million increase in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2023, of the Company’s ability to utilize NOLs to offset future taxable income. The Company uses the discrete-period computation method for determining its income tax (benefit) provision. Our income tax provision is 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. Non-deductible expenses, including executive compensation in excess of Section 162(m) limitations increased the income tax provision by $0.9 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively.
Current wording
In 2025, we recorded an income tax benefit of $1.3 million, including a $3.7 million decrease in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2025, of the Company’s ability to utilize tax NOLs to offset future taxable income. During 2025, Orchid raised approximately $741.4 million in new capital. This increase in Orchid's equity should increase Bimini's future management fee revenues, allowing the Company to utilize more of its tax NOLs. In 2024, we recorded an income tax provision of $3.1 million, including a $1.3 million increase in the deferred tax asset valuation allowance as a result of management’s reassessment, as of December 31, 2024, of the Company’s ability to utilize NOLs to offset future taxable income. The Company uses the discrete-period computation method for determining its income tax (benefit) provision. Our income tax provision is 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. Non-deductible expenses, including executive compensation in excess of Section 162(m) limitations increased the income tax provision by $0.8 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively.
Previous wording
As of December 31, 2024, our MBS portfolio consisted of $122.3 million of agency or government MBS at fair value and had a weighted average coupon of 5.26%. During the year ended December 31, 2024, we received principal repayments of $13.4 million compared to $5.4 million for the year ended December 31, 2023. The average prepayment speeds for the quarters ended December 31, 2024 and 2023 were 11.1% and 8.0%, respectively.
Current wording
As of December 31, 2025, our MBS portfolio consisted of $88.9 million of agency or government MBS at fair value and had a weighted average coupon of 5.73%. During the year ended December 31, 2025, we received principal repayments of $16.4 million compared to $13.4 million for the year ended December 31, 2024. The average prepayment speeds for the quarters ended December 31, 2025 and 2024 were 16.6% and 11.1%, respectively.
Previous wording
The following table presents the three-month constant prepayment rate (“CPR”) experienced on our structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category.
Current wording
The following table presents the three-month constant prepayment rate (“CPR”) experienced on our portfolio, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities.
Previous wording
The duration of our IO and IIO portfolio will vary greatly depending on the structural features of the securities. While prepayment activity will always affect the cash flows associated with the securities, the interest only nature of IO’s may cause their durations to become extremely negative when prepayments are high, and less negative when prepayments are low. Prepayments affect the durations of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which has an inverse relationship to their reference index) cause their price movements - and model duration - to be affected by changes in both prepayments and their reference index - both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.
Current wording
The duration of our IO and IIO portfolios will vary greatly depending on the structural features of the securities. While prepayment activity will always affect the cash flows associated with the securities, the interest only nature of IO’s may cause their durations to become extremely negative when prepayments are high, and less negative when prepayments are low. Prepayments affect the durations of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which has an inverse relationship to their reference index) cause their price movements - and model duration - to be affected by changes in both prepayments and their reference index - both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.
Previous wording
We face the risk that the market value of our PT MBS assets will increase or decrease at different rates than that of our structured MBS or liabilities, including our hedging instruments. Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. We generally calculate duration and effective duration using various third-party models or obtain these quotes from third-parties. However, empirical results and various third-party models may produce different duration numbers for the same securities.
Current wording
We face the risk that the market value of our MBS assets will increase or decrease at different rates than those of our hedging instruments. Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our hedge instruments. We generally calculate duration and effective duration using various third-party models or obtain these quotes from third-parties. However, empirical results and various third-party models may produce different duration numbers for the same securities.
Previous wording
The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, 2024, assuming rates instantaneously fall 100 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.
Current wording
The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of December 31, 2025, assuming rates instantaneously fall 200 bps, fall 100 bps and rise 100 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.
Previous wording
As of December 31, 2024, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with six of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with the Company. These borrowings are secured by our MBS and cash.
Current wording
As of December 31, 2025, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with seven of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with the Company. These borrowings are secured by our MBS and cash.
Previous wording
As of December 31, 2024, we had obligations outstanding under the repurchase agreements of approximately$117.2 million with a net weighted average borrowing cost of 4.68%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 13 to 139 days, with a weighted average maturity of 49 days. Securing the repurchase agreement obligation as of December 31, 2024 are MBS with an estimated fair value, including accrued interest, of$122.7 million. Through March 7, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at December 31, 2024 with maturities through June 30, 2025.
Current wording
As of December 31, 2025, we had obligations outstanding under the repurchase agreements of approximately$85.3 million with a net weighted average borrowing cost of 3.98%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 21 to 58 days, with a weighted average maturity of 31 days. Securing the repurchase agreement obligation as of December 31, 2025 are MBS with an estimated fair value, including accrued interest, of$89.2 million. Through March 13, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed as of December 31, 2025 with maturities through March 24, 2026.
Previous wording
We invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repo market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.
Current wording
We invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repo market. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.
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 December 31, 2024, we had cash and cash equivalents of $5.7 million. We generated cash flows of $19.1 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $95.6 million during the year ended December 31, 2024. In addition, during the year ended December 31, 2024, we received approximately $12.8 million in management fees and expense reimbursements as manager of Orchid and approximately $0.8 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 December 31, 2025, we had cash and cash equivalents of $12.7 million. We generated cash flows of $22.6 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $104.6 million during the year ended December 31, 2025. In addition, during the year ended December 31, 2025, we received approximately $16.6 million in management fees and expense reimbursements as manager of Orchid and approximately $0.8 million in dividends from our investment in Orchid common stock.
Previous wording
At December 31, 2024, we had no material commitments for capital expenditures.
Current wording
As of December 31, 2025, we had no material commitments for capital expenditures.
Previous wording
Orchid reported net income for the fourth quarter 2024 of $5.6 million and its shareholders equity increased from $656.0 million to $668.5 million. The market conditions described below led to these results as Orchid reported realized and unrealized gains on hedge instruments of $160.4 million, exceeding realized and unrealized losses on its MBS portfolio of $158.7 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 fourth quarter 2025 of $103.4 million, or $0.62 per share and its stockholders' equity increased from $1.086 billion to $1.372 billion. Orchid’s stockholders’ equity at the end of 2024 was $668.5 million so the increase to $1.372 billion represents an increase of approximately 105%. During the fourth quarter market conditions were favorable for levered MBS investors as Orchid reported gains on hedge instruments of $14.0 million and realized and unrealized gains on its MBS portfolio of $56.7 million, which together equaled $70.7 million. Net income for the full year of 2025 was $159.0 million, or $1.24 per share. Orchid is obligated to reimburse Bimini for direct expenses paid on its behalf as well as Orchid’s pro-rate share of overhead expenses 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
Within Agency MBS for the fourth quarter of 2024, conventional 30-year mortgages generated a negative total return of -3.5%, 15-year mortgages generated a negative total return of -2.2% and Ginnie Mae 30-year mortgages generated a negative total return of -2.7%. Versus comparable duration swaps the returns were -0.8%, -0.5% 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 negatively correlated with the duration of the respective securities, as lower coupon, longer durations bonds generated the most negative total returns and the highest coupon – 7.0% - generated positive total returns. The range for the coupon stack was -4.8% for the 2.0% coupon to +0.9% for the 7.0% coupon during the fourth quarter of 2024. Excess returns versus comparable duration swaps were in the range of -0.6% to -0.9% for all coupons between 2.0% and 6.0% during the fourth quarter of 2024. Conversely, the excess return for the 6.5% coupon was -0.2% and +0.3% for the 7.0% coupon during the fourth quarter of 2024.
Current wording
Within Agency RMBS for the fourth quarter of 2025, conventional 30-year mortgages generated a total return of 1.7%, 15-year mortgages generated a total return of 1.5% and Ginnie Mae 30-year mortgages generated a total return of 1.5%. Versus comparable duration swaps, the returns were 1.4%, 0.8% and 1.1% 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 very consistent across the various coupons: the 2.0% coupon generated a return of 1.3%, the 3.5% coupon generated a return of 2.2% and all other coupons were between 1.6% and 1.8%. Excess returns versus comparable duration swaps were in the range of -0.5% to 2.1%, with the 3.5% coupon again being the outlier to the upside. The highest coupons – 6.0% and higher – all generated excess returns below 1.0%. Excess returns for the balance of the coupons were between 1.1% and 1.7%, similar to absolute returns.
Previous 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. Treasuries 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. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency MBS below $20 billion per month throughout 2024. As of December 31, 2024, the Fed had reduced its balance sheet for Agency MBS by approximately $507 billion from the peak to $2.2 trillion, shedding approximately 37% of the Agency MBS added during the quantitative easing related to the pandemic 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 2025. As of December 31, 2025, the Fed had reduced its balance sheet for Agency MBS by approximately $741 billion from the peak to $2.0 trillion, shedding approximately 54% of the Agency MBS added during pandemic quantitative easing and representing the lowest level since December 2020. On December 1, 2025, the Fed ended quantitative tightening and began reinvesting all proceeds from maturing Agency MBS up to a $35 billion per month cap in U.S. Treasuries and announced that it would begin buying an additional $40 billion per month of U.S. Treasuries via RMPs in order to maintain an ample level of reserves on an ongoing basis.
Previous 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.
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. Throughout 2025, there was some speculation in the market regarding progress towards an end to the conservatorship, including through an initial public offering, but a directive by the Trump administration in January 2026 that the Enterprises purchase up to $200 billion of Agency MBS from their accumulated cash reserves will increase the Enterprises’ balance sheets and exposure to mortgage risk and could make a near-term end to the conservatorship unlikely. The announcement of the directive, designed to increase liquidity and compress the spread between mortgage interest rates and the 10-year U.S. Treasury, had the intended effect immediately and significantly increased mortgage application volumes. The longer-term implications of this directive remain to…
Excerpt shortened here; the source contains the full paragraph.
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 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. 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 Federal Deposit Insurance Corporation (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 Vice Chair for Supervision Michelle Bowman commented in August 2025 that a revised Basel III Endgame is expected to be issued for public comment in early 2026, which the market expects to be more capital-neutral than the original proposal. On November 25, 2025, the Fed, OCC and FDIC jointly adopted a final rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”). The rule, which becomes effective April 1, 2026 and may be adopted by banks subject to the rule as early as January 1, 2026, 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 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.
Current 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.
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 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.
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 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.
Previous 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.
Current 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.
Previous 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.
Current 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 PT Agency RMBS.
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 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.
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 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.
Previous 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.
Current 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.
Previous wording
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR and T-Note futures contracts, dual digital options or interest rate swaptions.
Current wording
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, dual digital options or interest rate swaptions.