BIMINI CAPITAL MANAGEMENT, INC.
For the period ended Mar 31, 2026. Filed May 8, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 8, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001437749-25-033846
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001437749-26-015844
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 128 current paragraphs.
77 unchanged; 33 reworded; 17 added; 13 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 38 previous and 31 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
Acquisition of TJIM
Current report
On April 1, 2026, the Company completed the acquisition of eighty percent of the membership interests of TJIM. At the time of the closing, 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. 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
Now that 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 required the deployment of a significant portion of the Company’s capital, including most of the capital currently deployed into the investment portfolio, with the exception of shares of Orchid. The results of TJIM going forward should represent a significant portion of the Company’s aggregate results. If 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, the Company’s operating segments will 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
In anticipation of the closing of the TJIM Acquisition, we sold a significant portion of the MBS portfolio in the first quarter of 2026. Our outstanding balances under repurchase agreement borrowings declined proportionately as well. As a result, many figures discussed below appear distorted when simple average balances are calculated, such as average MBS held and average outstanding balances under repurchase agreement borrowings. Further, since the sales occurred late in the quarter, interest income and interest expense amounts reflect balances of both assets and borrowing in place for the majority of the quarter. The combination of these two factors led to certain metrics such as our yield on average MBS and cost of funds measures to appear higher than they would have been had these large sales not occurred, or occurred earlier in the quarter. These factors should be kept in mind when reading the discussion of our investment portfolio segment results for the quarter.
Current report
As of March 31, 2026, the Company's portfolio had an effective duration of 3.483, indicating that an interest rate increase of 1.0% would be expected to cause a 3.483% decrease in the value of the MBS in our investment portfolio. As of December 31, 2025, the Company's portfolio had an effective duration of 2.229, indicating that an interest rate increase of 1.0% would be expected to cause a 2.229% 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
Economic developments during the first quarter of 2026 were, to a large extent, a continuation of 2025, with inflation stubbornly above the Fed’s target of 2%, the labor market stable, and growth and spending holding up. There was also considerable uncertainty surrounding the two primary focus points of the Fed – inflation and the labor market. The impact of tariffs implemented in 2025 had not materially impacted goods prices, and it was unclear whether they would, and to what extent. The Trump administration’s crack down on immigration has meaningfully slowed labor market growth, and economists suspect the current base line growth rate of the labor market is at or close to zero. Both of these factors make it difficult for economists and Fed officials to interpret economic data and ascertain the appropriate path, or level, of monetary policy. Consequently, the Fed has held monetary policy stable and guided that they will continue assessing incoming data over time to determine what changes, if any, are needed.
Current report
Additional factors that could affect the economy emerged over the course of the quarter. The first was apparent strains in the private credit markets. These first emerged in 2025, but intensified materially during the first quarter of 2026 – predominantly as developments in artificial intelligence were viewed as a threat to software developers. Coincidentally, the market feared the tens of billions of dollars of spending on data centers throughout the country and world announced in recent months by the country’s largest technology companies could lead to overcapacity. The weakness in the private credit markets spilled over into the broader equity markets, and most major market indices were down for the year by mid-single percentage points through late February, with software related companies down multiples of that.
Current report
On February 28, 2026, the United States and Israel attacked Iran and began the current war that has materially disrupted the supply and production of oil in the Persian Gulf region, among other important commodities needed for the global economy. Financial markets immediately reflected higher interest rates, equity markets declined, and commodity prices rose, especially the price of oil, which jumped to over $100 per barrel. Markets initially expected the war to be brief and the disruptions to the supply of oil and market turmoil to end quickly. This has not proved to be the case. With respect to domestic markets in the United States, the immediate impact has been inflationary, and headline inflation readings are expected to be elevated while the war lasts. Market pricing of Fed monetary policy adjustment quickly shifted from possibly one or two more interest rate cuts in 2026 to a possible hike before year end. As the war has continued, the market now expects the effect of the war may become more growth oriented, and longer-term rates have declined back to levels seen at year-end 2025. The ultimate outcome of the war remains unclear at this point, but what is very clear is the uncertainty surrounding the Fed and its pursuit of its dual mandates has become even more challenging.
Current report
While interest rates across the U.S. Treasury curve had been remarkably stable for most of 2025, especially the latter half of the year, interest rate volatility increased during the first quarter of 2026 although it has since subsided into the second quarter. While the range of the yield on the 10-year U.S. Treasury and other maturities outside of the 2-year U.S. Treasury have increased, yields have remained within the new range throughout the year. Implied interest rate volatility in the rate options market spiked at the onset of the Iranian war, but has since retraced most of the upward spike. Shorter maturity U.S. Treasuries, those most sensitive to monetary policy, have increased as the market no longer anticipates additional interest rate cuts by the Fed. Prior to the outbreak of the war, the market was anticipating at least two 25-basis point cuts in the Fed Funds rate by the end of 2026, with additional cuts priced in for 2027. By the end of the first quarter, market pricing was approximately one-quarter of one 25-basis point cut by the end of 2026.
Current report
The Fed ended its quantitative tightening program, which reduced its balance sheet via the maturation of its holdings, and began reinvesting them into additional U.S. Treasury holdings on December 1, 2025. Run-off from the Agency MBS holdings is now directed towards purchasing U.S. Treasuries. The Fed also announced its intention, via Reserve Management Purchases (“RMPs”), to grow its balance sheet over time to maintain a stable relationship between the size of its balance sheet and the economy. These steps will result in increased purchases of U.S. Treasuries by the Fed going forward, and interest rate swap spreads have widened – or become less negative – as a result. When the RMP program was first introduced, U.S. Treasury purchases were $40 billion per month, which had the added benefit of taking pressure off of the overnight funding markets, as market participants such as money-market funds had fewer options to deploy their liquidity and therefore increased the pool of available funds for the overnight repurchase agreement (“repo”) funding markets. As a result, funding levels available to the Company in the repo markets during the quarter – typically expressed as a spread over SOFR – were lower than had been the case for 2025. As is typically the case, the U.S. Treasury cash balances are elevated around the April 15 th filing deadline for individual income taxes. The Fed has reduced its RMP purchases for the balance of the filing period – typically approximately 2 months – to $25 billion per month. The market anticipates the level of purchases will go back to $40 billion per month thereafter. The reduction in monthly RMP purchases during this period is not expected to materially impact the Company’s funding levels.
Current report
The Agency MBS market had a strong start to the quarter as both absolute and relative performance versus comparable duration U.S. Treasuries and swaps. On January 8, 2026, President Trump announced plans for Fannie Mae and Freddie Mac (the "Enterprises") to purchase up to $200 billion of Agency MBS 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 MBS under its quantitative easing program. The anticipated increase in purchases by the Enterprises resulted in an immediate outperformance of the sector. Subsequently, the Iranian war commenced on February 28, 2026, and negatively impacted the performance of the Agency MBS sector, as well all risk markets generally, for the month of March 2026. The Agency MBS market had a -1.6% return for March and an excess return of -0.3% versus comparable duration swaps. For the first quarter of 2026, the Agency MBS sector still managed to generate a positive return of 0.6%, but versus comparable durations swaps, the return was only 0.02%. The returns compare to absolute returns of -0.6% and -0.4%, respectively, for the high yield and investment grade corporate bond sectors for the first quarter of 2026, and 0.1% and 1.4%, respectively, of excess returns versus comparable duration swaps for the quarter.
Current report
Within Agency MBS for the first quarter of 2026, conventional 30-year mortgages generated a total return of 0.6%, 15-year mortgages generated a total return of 0.3% and Ginnie Mae 30-year mortgages generated a total return of 0.9%. Versus comparable duration swaps, the returns were (0.11%), (0.08%) and 0.29% 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 varied greatly by coupon, with lower (3.0% and lower) and highest coupons (6.5% and higher) outperforming middle coupons. This was the case for both absolute and excess returns for the first quarter. As interest rates ended the quarter slightly higher than at the end of 2025 prepayment rates – and expectations for prepayment rates going forward – subsided. This led to outperformance for the highest coupons – even higher than the lowest coupon securities. The Company has the greatest concentration of its holdings in the 5.5% and 6.0% coupons, which generated absolute returns of 0.4% and 0.6%, respectively. Excess returns for these coupons were both -0.2%.
Current report
On March 19, 2026, the OCC, FDIC and the Fed rescinded the 2023 Basel III Endgame proposal and concurrently issued three revised notices of proposed rulemaking. The three proposals include (i) a revised Basel III Endgame proposal that would apply an expanded risk-based approach to Category I and Category II banking organizations, thus narrowing the mandatory scope from the 2023 proposal, with all other banking organizations permitted to opt in; (ii) a revised standardized approach proposal that would reduce risk weights for traditional lending activities for banking organizations not subject to the expanded risk-based approach; and (iii) a revised GSIB capital surcharge proposal. The OCC, FDIC, and the Fed estimate that the revised proposals would decrease aggregate common equity tier 1 capital requirements by approximately 4.8% for Category I and Category II banking organizations, in contrast to the significant capital increases that would have resulted under the 2023 Basel III Endgame. Additionally, the revised proposal would eliminate the requirement to deduct mortgage servicing assets from common equity tier 1 capital, instead assigning a 250% risk weight, which is designed to promote mortgage origination and servicing by banking organizations. The Fed voted 6-to-1 to advance all three proposals and the FDIC board voted unanimously in favor of the revised Basel III Endgame and standardized approach proposals. The comment period for the revised proposals is scheduled to close on June 18, 2026.
Current report
Orchid invests and, through the end of the first quarter of 2026, the Company invested exclusively in Agency MBS securities and applies leverage utilizing repurchase agreement funding. The primary drivers of the performance of these assets – both absolute performance and performance relative to hedges – are interest rates, their impact on both asset prices and the level of prepayments, interest rate volatility, particularly the level of implied volatility in interest rate swaptions and various interest rate derivatives, and our funding levels. Accordingly, we have significant exposure to interest rates, and our performance is driven by our ability to select assets, manage our leverage, and the effectiveness of our hedging strategy.
Current report
Interest rates have been range bound for several months going back approximately 12 months, with the range briefly expanding slightly during the first quarter of 2026 as a result of the Iranian war. Interest rate volatility, both realized and implied in interest rate options, has remained subdued outside of a temporary spike at the onset of the war in Iran. It seems the economy and the markets generally are caught in a quandary where it is unclear if inflation, which has been running above the Fed’s 2% target level for several years, or growth prospects, now potentially negatively impacted by the war and increased commodity prices, will be the predominant driver of interest rates, monetary policy and the performance of risk assets of all types. The resulting uncertainty has resulted in relative stability in the level and volatility of interest rates, and this stability has generally been conducive for levered Agency MBS investors.
Current report
Looking forward, the war in Iran continues to be the dominant force driving the performance of all markets. At this point it is unclear what the ultimate outcome of the war will be or when it will end. As for the economy and monetary policy, the outlook is equally uncertain, as the war will likely impact both inflation and growth in the U.S. and global economies. Both Orchid and the Company have deployed modest levels of leverage for the past several quarters and are likely to continue to do so given the market uncertainty. Positioning of the portfolios, in terms of asset selection, is likely to remain defensive going forward as well.
Current report
On April 1, 2026, the Company completed the acquisition of Tom Johnson Investment Management, LLC, or “TJIM.” TJIM is an asset manager with approximately $1.6 billion in assets under management invested in both equities and domestic fixed income securities. Going forward, the results of the Company’s operations and our focus in our public disclosures will be impacted by factors other than just the fixed income markets and the Agency MBS market, although the MBS market will still be a significant factor. Beginning with the second quarter of 2026 our focus will expand to include factors impacting the domestic equity markets as well as fixed income markets other than the Agency MBS market.
Removed paragraphs (13)
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 PT MBS and structured, for each quarter during 2025 and 2024.
Previous report
Offsetting forces have driven economic activity and outlook since the new U.S. presidential administration took office in January. On the one hand the significant tariffs introduced have clouded the economic outlook and added upward pressure on prices – or at least such upward pressure is anticipated even if it hasn’t materialized to the extent expected to date. On the other hand, the administration has a decidedly pro-business agenda and has enacted the One Big Beautiful Bill Act (the “OBBB”), which 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. The OBBB is likely to be stimulative for the economy yet unlikely to reduce pressure on the fiscal deficit in the near term, itself a source of stimulus for the economy. The net effect of these two opposing forces appears, at least for now, to be leaning in the direction of economic weakness, especially for the labor market, which softened during the third quarter. The Chairman of the Fed has stated that the FOMC views the balance of risks as skewed towards economic and labor market weakness versus inflation, with the effects of tariffs causing only a one-time increase in prices versus a persistent source of inflation. In response to the deterioration in the labor market, the Fed lowered the Fed Funds rate by 25 basis points at their September meeting and again at the October meeting, although subsequent remarks by the Chairman imply they may not lower the funds rate again at upcoming meetings.
Previous report
The impact of tariffs on inflation, particularly goods inflation, has yet to meet market expectations, although there is evidence of such price pressures emerging. Further, it remains possible, to the extent tariff-induced price increases have been absorbed by other parties along the supply chain, that such pressure could increase in the future to the extent the price increases are not fully absorbed. There is also the possibility that the stimulative effects of the OBBB and numerous other efforts on the part of the administration to reduce regulations, stimulate growth and onshore of production back into the U.S. could prevail and cause economic growth to rebound, perhaps significantly. These considerations are behind the subset of Fed officials and market participants that feel economic and labor market weakness, and the need for the Fed to ease monetary policy, is misplaced or will only prove to be temporary.
Previous report
On October 1, 2025, the U.S. federal government shut down as Congress was unable to agree on a funding bill to keep the government running. The shutdown of the government prevented most economic data from being released, adding uncertainty to the economic outlook. To the extent the shutdown continues for an extended period of time, the shutdown itself will become a source of economic weakness as most federal employees go unpaid and the government – the largest consumer in the economy – has limited capacity to spend.
Previous report
Interest rate movements during the third quarter were very minor – less than 10 basis points – for all points along the cash U.S. Treasury curve and the SOFR swap curve for maturities longer than 2 years. For shorter maturities rate movements were larger – and as much as 35 to 40 basis points lower – for maturities inside 2 years. The largest declines were around the 6-month maturity, reflecting market expectations of interest rate cuts by the Fed over the next two quarters. One-year maturities, in both cash U.S. Treasuries and SOFR swaps, declined by 30 and 22 basis points, respectively, again reflecting market expectations of Fed Funds rate cuts in the near term. Since the end of the third quarter, interest rates have declined slightly more – approximately 10 basis points in the case of longer maturities – as a result of uncertainty surrounding the government shutdown.
Previous report
As rates were relatively stable for longer maturity U.S. Treasuries and SOFR swaps and lower for shorter duration instruments, both the cash U.S. Treasury curve and SOFR swap curve remained upward sloping and the steepness of both curves increased modestly. The spread between the 2-year and 10-year U.S. Treasury securities has increased by approximately 5 basis points to approximately 55 basis points at quarter end, and remained in that area since.
Previous report
While interest rates were relatively unchanged during the quarter, implied volatility in interest rate swaptions declined materially during the quarter. The MOVE index, comprised of a basket of four interest rate swaptions and a widely referenced proxy for interest rate volatility, has been declining since May 2025, when the administration announced reciprocal tariffs. The index peaked in April at nearly 140 and has declined since, reaching a recent low of just under 67 on October 27, 2025. For reference, the index was at approximately 90 on June 30, 2025. Declining interest rate volatility is beneficial for Agency RMBS given the prepayment option held by the borrowers of the loans underlying the securities.
Previous report
The market conditions described above – low interest rate volatility and the prospects for reduced funding levels via Fed Funds rate cuts – were generally conducive to Agency RMBS performance. Spreads to comparable duration U.S. Treasuries and SOFR swaps declined, and most securities generated positive absolute and relative returns. However, as prevailing mortgage rates available to borrowers declined over the third quarter and into the fourth quarter prepayments have increased for securities with premium prices and expectations for continued high prepayment rates remain. The Mortgage Bankers Association index of 30-year contract rates declined from 6.79% for the week ended June 27, 2025, to 6.46% for the week ended September 26, 2025. The index has declined slightly more since the end of the third quarter. Secondly, the Trump administration has spoken of privatizing Fannie Mae and Freddie Mac (the "Enterprises"), although it does not appear as if this development is imminent. If it were to occur, an important consideration would be if the implicit government guarantee of the securities issued by the Enterprises would be retained. Comments made by the administration to date indicate that they would likely be maintained, but there can be no assurance that would be the case.
Previous report
The Agency RMBS index generated a return for the third quarter of 2.4% and a return of 1.2% versus comparable duration swaps, as compared to 2.7% and 1.5%, respectively for these measures, for the investment grade corporate index, and 2.4% and 1.3%, 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 and excess returns versus comparable duration swaps for the third quarter.
Previous report
Within Agency RMBS for the third quarter of 2025, conventional 30-year mortgages generated a total return of 2.6%, 15-year mortgages generated a total return of 1.5% and Ginnie Mae 30-year mortgages generated a total return of 2.2%. Versus comparable duration swaps, the returns were 1.4%, 0.4% and 1.0% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Because of the prospect of higher prepayment speeds and their negative effects on realized yields, higher coupon and premium dollar price Agency RMBS generated returns that lagged all lower coupons. Absolute returns within the 30-year stack of coupons ranged between 3.1% and 2.5% for par and lower dollar price Agency RMBS, and generally followed the durations of the Agency RMBS, with high duration/lower coupon Agency RMBS generating the highest returns. Agency RMBS with premium prices ranged from 2.3% to 0.7%, again with the longest duration/lowest coupons generating the highest returns. Versus comparable duration swaps, excess returns followed a similar pattern with the exception of the 4.0 and 4.5% coupons generating excess returns higher than surrounding coupon Agency RMBS – the result of market technical developments (a shortage of available bonds versus demand) that emerged during the third quarter. The range of excess returns across the coupon stack ranged from 1.9% for 2.0% coupons to 0.4% for 6.5% securities, and 7.0% securities had a negative excess return of -0.5%.
Previous report
The path of economic performance, the level of interest rates and the performance of Agency RMBS appear to be at a crossroads. During the third quarter, the path seemed to steer towards slower growth, lower rates and generally solid performance for Agency RMBS. The labor market in particular appears to have weakened significantly over the past two quarters, and the Fed intervened and lowered the Fed Funds rate by 25 basis points at their September and October meetings, although they may not continue to do so at subsequent meetings unless conditions warrant. The U.S. federal government shut down on October 1, 2025 has only added to the fear the economy will remain weak. However, other measures of economic performance, when available, indicate the economy may not be so weak. Growth, as measured by GDP, remains well above 0%, retail sales and corporate earnings remain strong, developments with artificial intelligence have the potential to materially lift productivity and output, and the administration has a profoundly pro-growth agenda – all of which suggest the current softness may be temporary. The outcome will likely emerge over the next quarter or two.
Previous report
While it remains to be seen just which path the economy takes going forward, the third quarter was conducive to solid performance for the Agency RMBS market and the Company. The sector generated positive absolute and excess returns, and the Company (and Orchid) generated positive total returns for the quarter as well. Also, Orchid continued to grow its capital through the issuance of shares of common stock through its at the market program, increasing the base on which the Company's advisory services revenue is generated. While Agency RMBS generated positive returns for the third quarter of 2025, returns available in the sector remain above historical averages. To the extent such favorable market conditions persist, we expect that Orchid will be able to deploy new capital with the prospects for above average returns.
Reworded paragraphs (33)
Previous wording
Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) is a specialty finance company that operates in two business segments: (i) investing in mortgage-backed securities (“MBS”) and Orchid Island Capital, Inc. (“Orchid”) common stock in our own portfolio, (ii) and serving as the external manager of Orchid which also invests in MBS. In both cases, the principal and interest payments of these MBS are guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as “Agency MBS.” Our investment strategy focuses on, and our portfolios primarily consist of traditional pass-through (“PT”) Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”); and structured Agency MBS, such as interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only securities (“POs”).
Current wording
Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) is a specialty finance company that operates in two business segments: (i) investing in mortgage-backed securities (“MBS”) and Orchid Island Capital, Inc. (“Orchid”) common stock in our own portfolio, (ii) and serving as the external manager of Orchid which also invests in MBS. In both cases, the principal and interest payments of these MBS are guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as “Agency MBS.” Our portfolio primarily consists of traditional pass through ("PT") Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”); and structured Agency MBS, such as interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only securities (“POs”).
Previous wording
The asset management segment includes the arrangement by which the Company, through Bimini Advisors, LLC, an investment advisor registered with the SEC, serves as the external manager of Orchid. From this arrangement the Company receives management fees and expense reimbursements. Bimini Advisors, LLC is a wholly owned subsidiary of Bimini Advisors Holdings, LLC, which is a wholly owned subsidiary of Royal Palm. Bimini Advisors Holdings, LLC and Bimini Advisors, LLC are collectively referred to as “Bimini Advisors.”
Current wording
The asset management segment includes the arrangement by which the Company, through Bimini Advisors, LLC, an investment advisor registered with the SEC, serves as the external manager of Orchid. From this arrangement the Company receives management fees and expense reimbursements. Bimini Advisors, LLC is a wholly owned subsidiary of Bimini Advisors Holdings, LLC ("Holdings"), which is a wholly owned subsidiary of Royal Palm. Holdings and Bimini Advisors, LLC are collectively referred to as “Bimini Advisors.”
Previous wording
Described below are the Company’s results of operations for the nine and three months ended September 30, 2025, as compared to the nine and three months ended September 30, 2024.
Current wording
Described below are the Company’s results of operations for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
Previous wording
Consolidated net income for the nine months ended September 30, 2025 was $2.4 million, or $0.24 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 nine months ended September 30, 2024. Consolidated net income for the three months ended September 30, 2025 was $1.8 million, or $ 0.18 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.3 million, or $0.03 basic and diluted income per share of Class A Common Stock, for the three months ended September 30, 2024.
Current wording
Consolidated net income for the three months ended March 31, 2026 was $0.8 million, or $0.08 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.6 million, or $0.06 basic and diluted income per share of Class A Common Stock, for the three months ended March 31, 2025. The components of net income for the three months ended March 31, 2026 and 2025, along with the changes in those components are presented in the table below.
Previous wording
During the three months ended September 30, 2025, we generated $0.4 million of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2024, we generated $0.1 million of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $1.4 million of interest expense on repurchase liabilities. The $0.05 million increase in interest income was due to a $3.6 million increase in average MBS holdings, offset by a 1 bp decrease in yields. There was a $0.2 million decrease in interest expense for the three months ended September 30, 2025 that was due to a 102 bp decrease in cost of funds, offset by a $2.9 million increase in average repurchase liabilities.
Current wording
During the three months ended March 31, 2026, we generated $0.5 million of net portfolio interest income, consisting of $1.2 million of interest income from MBS assets offset by $0.7 million of interest expense on repurchase liabilities. For the comparable period ended March 31, 2025, we generated $0.4 million 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. The $0.58 million decrease in interest income was due to a $69.2 million decrease in average MBS holdings, offset by a 314 bp increase in yields. There was a $0.6 million decrease in interest expense for the three months ended March 31, 2026 that was due to a $66.1 million decrease in average repurchase liabilities, offset by a 106 bp increase in cost of funds.
Previous wording
Our economic interest expense on repurchase liabilities for the nine months ended September 30, 2025 and 2024 was $3.3 million and $3.7 million, respectively, resulting in $1.5 million and $0.5 million of economic net portfolio interest income, respectively. Our economic interest expense on repurchase liabilities for the three months ended September 30, 2025 and 2024 was $1.0 million and $1.4 million, respectively, resulting in $0.5 million and $0.1 million of economic net portfolio interest income, respectively.
Current wording
Our economic interest expense on repurchase liabilities for the three months ended March 31, 2026 and 2025 was $0.6 million and $1.2 million, respectively, resulting in $0.5 million and $0.5 million of economic net portfolio interest income, respectively.
Previous wording
The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the nine months ended September 30, 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 three months ended March 31, 2026 and 2025 and each quarter in 2026 and 2025 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 28 bps above the average one-month SOFR and 22 bps above the average six-month SOFR for the quarter ended September 30, 2025. Our average economic cost of funds was 15 bps below the average one-month SOFR and 21 bps below the average six-month SOFR for the quarter ended September 30, 2025. The average term to maturity of the outstanding repurchase agreements was 26 days at September 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.
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 190 bps above the average one-month SOFR and 169 bps above the average six-month SOFR for the quarter ended March 31, 2026. Our average economic cost of funds was 129 bps above the average one-month SOFR and 108 bps above the average six-month SOFR for the quarter ended March 31, 2026. The average term to maturity of the outstanding repurchase agreements was 17 days at March 31, 2026, compared to 31 days at December 31, 2025. 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 2026 and 2025, on both a GAAP and economic basis.
Previous wording
During both of the nine months ended September 30, 2025 and 2024, we owned 569,071 shares of Orchid common stock. Orchid paid total dividends of $1.08 per share during both the nine months ended September 30, 2025 and 2024, resulting in dividend income of approximately $0.6 million in each period.
Current wording
We owned 569,071 shares of Orchid common stock throughout each of the three months ended March 31, 2026 and 2025. Orchid paid total dividends of $0.36 per share during both the three months ended March 31, 2026 and 2025, resulting in dividend income of approximately $0.2 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 $1.6 million and $1.8 million for the nine months ended September 30, 2025 and 2024, respectively. The average rate of interest paid for the nine months ended September 30, 2025 was 8.07% compared to 9.09% 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 September 30, 2025 and 2024, respectively. The average rate of interest paid for the three months ended September 30, 2025 and 2024 was 8.03% and 9.04%, respectively.
Current wording
The junior subordinated debt securities paid interest at a floating rate. The interest rate is the CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. Interest expense on our junior subordinated debt securities was $0.5 million and $0.5 million for the three months ended March 31, 2026 and 2025, respectively. The average rate of interest paid for the three months ended March 31, 2026 was 7.48% compared to 8.11% for the comparable period in 2025.
Previous wording
On October 30, 2019, the Company borrowed $680,000 from a bank which is secured by a mortgage on the Company’s office building. Through October 30, 2024, interest accrued at 4.89%. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The interest rate reset to 7.37% on October 30, 2024 and will reset again on October 30, 2029.
Current wording
On October 30, 2019, the Company borrowed $680,000 from a bank which is secured by a mortgage on the Company’s office building 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
The table below presents our gains or losses and other income for the nine and three months ended September 30, 2025 and 2024.
Current wording
The table below presents our gains or losses and other income for the three months ended March 31, 2026 and 2025.
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. During the nine months ended September 30, 2025 and 2024, we received proceeds totaling $9.8 million and $46.3 million, respectively, from the sales of MBS.
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 three months ended March 31, 2026, we received proceeds totaling $68.6 million from the sales of MBS. We did not sell any MBS during the three months ended March 31, 2025.
Previous wording
For the nine and three months ended September 30, 2025, our total operating expenses were approximately $8.7 million and $3.0 million, respectively, compared to $8.4 million and $2.6 million for the nine and three months ended September 30, 2024, respectively, as detailed in the table below.
Current wording
For the three months ended March 31, 2026, our total operating expenses were approximately $3.7 million compared to $2.9 million for the three months ended March 31, 2025, respectively, as detailed in the table below.
Previous wording
We recorded income tax provisions for the nine months ended September 30, 2025 and 2024 of approximately $0.6 million and $1.1 million, respectively, on consolidated pre-tax book income of $3.0 million and $1.2 million, respectively. We recorded income tax provisions for the three months ended September 30, 2025 and 2024 of approximately $0.4 million and $0.5 million, respectively, on consolidated pre-tax book income of $2.2 million and $0.8 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 three months ended March 31, 2026 and 2025 of approximately $0.2 million and $0.2 million, respectively, on consolidated pre-tax book income of $1.0 million and $0.7 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. Our income tax provision could be affected by numerous factors, including non-deductible expenses, the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense.
Previous wording
As of September 30, 2025, our MBS portfolio consisted of $104.4 million of agency or government MBS at fair value and had a weighted average coupon of 5.26%. During the nine months ended September 30, 2025, we received principal repayments of $10.2 million compared to $10.1 million for the comparable period ended September 30, 2024. The average prepayment speeds for the quarters ended September 30, 2025 and 2024 were 16.8% and 6.3%, respectively.
Current wording
As of March 31, 2026, our MBS portfolio consisted of $16.1 million of agency or government MBS at fair value and had a weighted average coupon of 5.35%. During the three months ended March 31, 2026, we received principal repayments of $3.6 million compared to $2.9 million for the comparable period ended March 31, 2025. The average prepayment speeds for the quarters ended March 31, 2026 and 2025 were 2.9% and 7.3%, 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 in the respective asset category.
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 duration of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which has inverse relationship to their reference index) causes 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 duration of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which has inverse relationship to their reference index) causes 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
As of September 30, 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 six of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with us. These borrowings are secured by our MBS.
Current wording
As of March 31, 2026, 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 three of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with us. These borrowings are secured by our MBS.
Previous wording
As of September 30, 2025, we had obligations outstanding under the repurchase agreements of approximately $100.0 million with a net weighted average borrowing cost of 4.36%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 14 to 44 days, with a weighted average maturity of 26 days. Securing the repurchase agreement obligation as of September 30, 2025 are MBS with an estimated fair value, including accrued interest, of $104.8 million. Through November 6, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2025 with maturities through November 13, 2025.
Current wording
As of March 31, 2026, we had obligations outstanding under the repurchase agreements of approximately $15.2 million with a net weighted average borrowing cost of 3.79%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 13 to 23 days, with a weighted average maturity of 17 days. Securing the repurchase agreement obligation as of March 31, 2026 are MBS with an estimated fair value, including accrued interest, of $16.0 million. Through May 7, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed at March 31, 2026 with maturities through May 26, 2026.
Previous wording
In future periods we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of September 30, 2025, we had cash and cash equivalents of $9.6 million. We generated cash flows of $15.0 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $108.6 million during the nine months ended September 30, 2025. In addition, during the nine months ended September 30, 2025, we received approximately $11.9 million in management fees and expense reimbursements as manager of Orchid and approximately $0.6 million in dividends from our investment in Orchid common stock.
Current wording
In future periods, we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of March 31, 2026, we had cash and cash equivalents of $16.4 million. We generated cash flows of $5.0 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $50.3 million during the three months ended March 31, 2026. In addition, during the three months ended March 31, 2026, we received approximately $5.1 million in management fees and expense reimbursements as manager of Orchid and approximately $0.2 million in dividends from our investment in Orchid common stock.
Previous wording
Orchid reported net income for the third quarter 2025 of $55.6 million, and its stockholders’ equity increased from $912.0 million at the end of the second quarter of 2025 to $1,086.1 million at September 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.
Current wording
Orchid reported a net loss for the first quarter of 2026 of $20.2 million, or $0.11 per share and its shareholders equity increased from $1.372 billion to $1.392 billion. During the first quarter, market conditions were not as favorable for levered MBS investors as the fourth quarter of 2025 or most of 2025. Orchid reported gains on hedge instruments of $46.3 million and realized and unrealized losses on its MBS portfolio of $115.9 million, which together resulted in losses of $69.6 million. Orchid is obligated to reimburse Bimini for direct expenses paid on its behalf as well as Orchid’s pro-rata 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
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. 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 third quarter of 2025. As of September 30, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $654 billion from the peak to $2.1 trillion, shedding approximately 49% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since February 2021. In remarks on October 14, 2025, Fed Chairman Jerome Powell signaled that the Fed may end its balance sheet runoff in the coming months.
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 kept the balance sheet reduction for Agency MBS below $20 billion per month throughout 2024 and 2025. 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. As of March 31, 2026, the Fed had reduced its balance sheet for Agency MBS by approximately $745 billion from the peak of approximately $2.7 trillion to approximately $2.0 trillion, shedding approximately 54% of the Agency MBS added during pandemic quantitative easing and representing the lowest level since December 2020.
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. In March 2025, the Trump administration's nominee for FHFA director, Bill Pulte, was confirmed and replaced 14 board members at the Enterprises. Although this led to some speculation in the market regarding an end to conservatorship, the new FHFA director signaled a more cautious approach, stating that significant study on the impact to mortgage rates would need to be done prior to any privatization of the Enterprises. During the third quarter of 2025, the Trump administration signaled an intention to begin the privatization of the Enterprises through an initial public offering, but did not announce that they have taken any formal steps towards such an offering.
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 of immediately and significantly increasing mortgage application volumes. The longer-term implications of this directive remai…
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 originally 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. 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 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.
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 “2023 Basel III Endgame”). The 2023 Basel III Endgame, if implemented as originally proposed, would have significantly increased the credit weight risk for balance-sheet mortgages and for Agency MBS sold to the GSEs, which could have disincentivized banks from originating mortgages for sale to the GSEs and impacted pricing in the Agency MBS markets. The comment period for the 2023 Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry.
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 PT 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.
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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 became 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.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The components of net income for the nine and three months ended September 30, 2025 and 2024, along with the changes in those components are presented in the table below.
Previous report — wording carried elsewhere
Segment information for the nine months ended September 30, 2025 and 2024 is as follows:
Previous report — wording carried elsewhere
During the nine months ended September 30, 2025, we generated $1.2 million of net portfolio interest income, consisting of $4.9 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2024, we generated $0.4 million of net portfolio interest income, consisting of $4.2 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities. The $0.7 million increase in interest income was due to a $20.4 million increase in average MBS holdings, offset by a 26 basis point (“bp”) decrease in yields. There was a $0.1 million decrease in interest expense for the nine months ended September 30, 2025 that was due to a 110 bp decrease in cost of funds, offset by a $19.5 million increase in average repurchase liabilities.