Bimini Capital Management, Inc.

Equities

BMNM

US0903194019

Investment Management & Fund Operators

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May. 03	Transcript : Bimini Capital Management, Inc., Q1 2024 Earnings Call, May 03, 2024
May. 02	Bimini Capital Management, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2024	CI

BIMINI CAPITAL MANAGEMENT, INC. MANAGEMENT'S (form 10-Q)

August 12, 2022 at 12:13 pm EDT

DISCUSSION

AND ANALYSIS OF FINANCIAL

CONDITION

AND RESULTS OF

OPERATIONS.

The following discussion of our financial condition and results of operations should

be read in conjunction with the consolidated financial statements and notes to those statements included in Item 1 of this Form 10-Q.

The discussion may contain certain forward- looking statements that involve risks and uncertainties. Forward-looking statements



are those that are not historical in nature. As a
result of many factors, such as those set forth under "Risk Factors" in our

most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements. Overview Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding



company that was formed in September 2003.
The Company's principal wholly-owned operating subsidiary is Royal Palm Capital,

LLC. We operate in two business segments: the asset management segment, which includes (a) the investment advisory services provided

by Royal Palm's wholly-owned subsidiary, Bimini Advisors Holdings, LLC, to Orchid, and (b) the investment portfolio segment, which



includes the investment activities conducted
by Royal Palm.

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



with the
Securities and Exchange Commission), are collectively referred to as

"Bimini Advisors."

Bimini Advisors serves as the external manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"). From this arrangement,



the Company receives management fees and
expense reimbursements.

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



day-to-day
operations.

Pursuant to the terms of the management agreement, Bimini Advisors

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

subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to

it.

Effective April 1, 2022, Bimini Advisors started providing certain repurchase agreement

trading, clearing and administrative services to Orchid that were previously provided by a third party. The Company received additional fees for providing such services. Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries

referred to as "Royal Palm") maintains an investment portfolio, consisting primarily of residential mortgage-backed securities ("MBS")

issued and guaranteed by a federally chartered corporation or agency ("Agency MBS"). We also invest in the common stock of Orchid. Our investment

strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency



MBS, such as mortgage pass-through
certificates issued by Fannie Mae, Freddie Mac or Ginnie Mae (the "GSEs")

and collateralized mortgage obligations ("CMOs") issued by the GSEs ("PT MBS") and (ii) structured Agency MBS, such as interest only

securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of



structured Agency MBS. In addition, Royal Palm receives dividends
from its investment in Orchid common shares.
Stock Repurchase

Plan
On September

16, 2021,

the Board

authorized

a share repurchase

plan pursuant

to Rule 10b5-1

of the Securities

Exchange

Act of
1934 (the

"2021 Repurchase

Plan"). Pursuant

to the 2021

Repurchase

Plan, we

may purchase

shares of

our Class

A Common

Stock from
time to time

for an aggregate

purchase price

not to exceed

$2.5 million.

Share repurchases

may be executed

through various

means,
including,

without limitation,

open market

transactions.

The 2021

Repurchase

Plan does

not obligate

the Company

to purchase

any
shares, and

it expires

on September

16, 2023.

The authorization

for the 2021

Repurchase

Plan may be

terminated,

increased

or
decreased

by the Company's

Board of

Directors

in its discretion

at any time.

From the

commencement

of the 2021

Repurchase

Plan,
through June

30, 2022,

we repurchased

a total of

321,702 shares

at an aggregate

cost of approximately

$0.6 million,

including
commissions

and fees,

for a weighted

average price

of $2.00

per share.

During the

six months

ended June

30, 2022,

the Company
repurchased

a total of

229,415 shares

at an aggregate

cost of approximately

$0.5 million,

including

commissions

and fees,

for a weighted
average price

of $1.96

per share.

- 23 -
Subsequent

to June 30,

2022, the

Company repurchased

a total of

219,022 shares

at an aggregate

cost of approximately

$0.4
million, including

commissions

and fees,

for a weighted

average price

of $1.61

per share. Factors that Affect our Results of Operations and Financial Condition A variety of industry and economic factors (in addition to those related to the COVID-19



pandemic) may impact our results of
operations and financial condition. These factors include:
?
interest rate trends;
?
the difference between Agency MBS yields and our funding and hedging costs;
?
competition for, and supply of, investments in Agency MBS;
?
actions taken by the U.S. government, including the presidential administration,

the U.S. Federal Reserve (the "Fed"), the
Federal Open Market Committee (the "FOMC"), the Federal Housing Finance

Agency (the "FHFA") and the U.S. Treasury;
?
prepayment rates on mortgages underlying our Agency MBS, and credit trends

insofar as they affect prepayment

rates;

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



?
geo-political events that affect the U.S. and international economies, such as
the ongoing crisis in Ukraine; and
?
other market developments.
In addition, a variety of factors relating to our business may also impact our
results

of operations and financial condition. These
factors include:
?
our degree of leverage;
?
our access to funding and borrowing capacity;
?
our borrowing costs;
?
our hedging activities;
?
the market value of our investments;
?
the requirements to qualify for a registration exemption under the Investment
Company Act;
?
our ability to use net operating loss carryforwards and net capital loss
carryforwards

to reduce our taxable income;
?
the impact of possible future changes in tax laws or tax rates;
?
increases in our cost of funds resulting from increases in the Fed Funds rate
that

are controlled by the Fed which have
occurred, and are likely to continue to occur, in 2022; and
?
our ability to manage the portfolio of Orchid and maintain our role as manager.


Results

of Operations
Described

below are

the Company's

results of

operations

for the

six and three

months ended

June 30,

2022,

as compared

to the six
and three

months ended

June 30, 2021.
Net (Loss)

Income Summary
Consolidated

net loss for

the six months

ended June

30, 2022

was $4.7

million, or

$0.44 basic

and diluted

loss per share

of Class

A
Common Stock,

as compared

to a consolidated

net income

of $0.4

million,

or $0.03

basic and

diluted income

per share

of Class

A
Common Stock,

for the six

months ended

June 30,

2021.

Consolidated

net loss for

the three

months ended

June 30,

2022 was

$1.2 million,

or $0.11 basic

and diluted

loss per share

of Class A
Common Stock,

as compared

to consolidated

net loss of

$0.9 million,

or $0.08

basic and

diluted loss

per share

of Class

A Common

Stock,
for the three

months ended

June 30,

2021.
































































- 24 -
The components

of net (loss)

income for

the six months

ended June

30, 2022

and 2021,

along with

the changes

in those components
are presented

in the table

below.
(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2022
2021
Change
2022
2021
Change
Advisory services revenues
$
6,408
$
4,211
$
2,197
$
$
3,332
$
2,186
$
1,146
Interest and dividend income
1,636
2,201
(565)
742
1,084
(342)
Interest expense
(664)
(570)
(94)
(376)
(281)
(95)
Net revenues
7,380
5,842
1,538
3,698
2,989
709
Other expense
(9,223)
(1,822)
(7,401)
(2,865)
(2,480)
(385)
Expenses
(4,138)
(3,481)
(657)
(2,113)
(1,724)
(389)
Net (loss) income before income tax (benefit) provision
(5,981)
539
(6,520)
(1,280)
(1,215)
(65)
Income tax (benefit) provision
(1,315)
168
(1,483)
(93)
(295)
202
Net (loss) income
$
(4,666)
$
371
$
(5,037)
$
$
(1,187)
$
(920)
$
(267)
GAAP and

Non-GAAP

Reconciliation

Economic Interest Expense and Economic Net Interest Income We use derivative instruments, specifically Eurodollar and Treasury Note ("T-Note") futures contracts and TBA short positions to hedge a portion of the interest rate risk on repurchase agreements in a rising

rate environment.

We have not designated our derivative financial instruments as hedge accounting relationships,

but rather hold them for economic hedging purposes. Changes in fair value of these instruments are presented

in a separate line item in our consolidated statements of operations and not included in interest expense. As such, for financial reporting

purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.

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



to cost of funds measures, GAAP interest
expense, as reflected in our consolidated statements of operations, is

adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses that pertain to each period presented.



We believe that adjusting our GAAP interest
expense for the periods presented by the gains or losses on these derivative

instruments may not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments

may cover periods that extend into the future, not just the current period.

Any realized or unrealized gains or losses on the derivative instruments reflect



the change in market value of
the instrument caused by changes in underlying interest rates applicable to

the term covered by the instrument, which changes are reflective of the future periods covered by the derivative instrument, not just

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

in place for the respective period with the actual interest expense incurred on borrowings to reflect total economic

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

expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to

as economic net interest income. This presentation includes gains or losses on all contracts in effect during the reporting period,



covering the current period as well as
periods in the future.

- 25 - We believe that economic interest expense and economic net interest income provide



meaningful information to consider, in
addition to the respective amounts prepared in accordance with GAAP. The
non-GAAP measures help management to evaluate its
financial position and performance without the effects of certain transactions
and GAAP

adjustments that are not necessarily indicative of our current investment portfolio or operations. The unrealized gains or losses



on derivative instruments presented in our
consolidated statements of operations are not necessarily representative

of the total interest expense that we will ultimately realize. This is because as interest rates move up or down in the future, the gains

or losses we ultimately realize, and which will affect our total interest expense in future periods, may differ from the unrealized gains or losses recognized

as of the reporting date.

Our presentation of the economic value of our hedging strategy has important



limitations. First, other market participants may
calculate economic interest expense and economic net interest income

differently than the way we calculate them. Second, while we believe that the calculation of the economic value of our hedging strategy described

above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, the

economic value of our investment strategy should not be viewed in isolation and is not a substitute for interest expense and net



interest income computed in accordance with GAAP.
The tables below present a reconciliation of the adjustments discussed

above to interest expense shown for each period relative to our derivative instruments, and the consolidated statements of operations



line item, gains (losses) on derivative instruments,
calculated in accordance with GAAP for each quarter in 2022 and 2021.
Gains (Losses) on Derivative Instruments - Attributed to Current Period
(Non-GAAP)
(in thousands)
Attributed to Current Period (Non-GAAP)
Attributed to Future Periods (Non-GAAP)
Repurchase
Long-Term
Repurchase
Long-Term
Statement of
Three Months Ended
Agreements
Debt
Total
Agreements
Debt
Total
Operations
June 30, 2022
$
(186)
$
(48)
$
(234)
$
136
$
48
$
184
$
(50)
March 31, 2022
(185)
(48)
(233)
185
48
233
-
December 31, 2021
(707)
(60)
(767)
707
60
767
-
September 30, 2021
(709)
(57)
(766)
709
57
766
-
June 30, 2021
(708)
(58)
(766)
708
58
766
-
March 31, 2021
(708)
(58)
(766)
708
58
766
-
Six Months Ended
June 30, 2022
$
(371)
$
(96)
$
(467)
$
321
$
96
$
417
$
(50)
June 30, 2021
(1,416)
(116)
(1,532)
1,416
116
1,532
$
-
Economic Net Portfolio Interest Income
(in thousands)
Interest Expense on Repurchase Agreements
Net Portfolio
Effect of
Interest Income
Interest
GAAP
Non-GAAP
Economic
GAAP
Economic
Three Months Ended
Income
Basis
Hedges
(1)
Basis
(2)
Basis
Basis
(3)
June 30, 2022
$
392
$
73
$
(186)
$
259
$
319
$
133
March 31, 2022
491
31
(185)
216
460
275
December 31, 2021
511
21
(707)
728
490
(217)
September 30, 2021
537
24
(709)
733
513
(196)
June 30, 2021
578
31
(708)
739
547
(161)
March 31, 2021
611
40
(708)
748
571
(137)
Six Months Ended
June 30, 2022
$
883
$
104
$
(371)
$
475
$
779
$
408
June 30, 2021
1,189
71
(1,416)
1,487
1,118
(298)
(1)
Reflects the effect of derivative instrument hedges for only the period

presented.

(2)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense. (3) Calculated by adding the effect of derivative instrument hedges attributed

to the period presented to GAAP net portfolio interest income.




















































































































































- 26 -
Economic Net Interest Income
(in thousands)
Net Portfolio
Interest Expense on Long-Term Debt
Interest Income
Effect of
Net Interest Income (Loss)
GAAP
Economic
GAAP
Non-GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(1)
Basis
Hedges
(2)
Basis
(3)
Basis
Basis
(4)
June 30, 2022
$
319
$
133
$
304
$
(48)
$
352
$
15
$
(219)
March 31, 2022
460
275
256
(48)
304
204
(29)
December 31, 2021
490
(217)
249
(60)
309
241
(526)
September 30, 2021
513
(196)
248
(57)
305
265
(501)
June 30, 2021
547
(161)
250
(58)
308
297
(469)
March 31, 2021
571
(137)
250
(58)
308
321
(445)
Six Months Ended
June 30, 2022
$
779
$
408
$
560
$
(96)
$
656
$
219
$
(248)
June 30, 2021
1,118
(298)
500
(116)
616
618
(914)
(1)
Calculated by adding the effect of derivative instrument hedges attributed

to the period presented to GAAP net portfolio interest income. (2) Reflects the effect of derivative instrument hedges for only the period

presented.

(3)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense. (4) Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net interest income. Segment Information We have two operating segments. The asset management segment includes the investment



advisory services provided by Bimini
Advisors to Orchid and Royal Palm. The investment portfolio segment includes the

investment activities conducted by Royal Palm.



Segment information for the six months ended June 30, 2022 and 2021 is as
follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2022
Advisory services, external customers
$
6,408
$
-
$
-
$
-
$
6,408
Advisory services, other operating segments
(1)
56
-
-
(56)
-
Interest and dividend income
-
1,636
-
-
1,636
Interest expense
-
(104)

(560)
(2)
-
(664)
Net revenues
6,464
1,532
(560)
(56)
7,380
Other expenses
-
(9,224)
-
-
(9,224)
Operating expenses
(4)
(3,237)
(901)
-
-
(4,138)
Intercompany expenses
(1)
-
(56)
-
56
-
Income (loss) before income taxes
$
3,227
$
(8,649)
$
(560)
$
-
$
(5,982)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
4,211
$
-
$
-
$
-
$
4,211
Advisory services, other operating segments
(1)
72
-
-
(72)
-
Interest and dividend income
-
2,201
-
-
2,201
Interest expense
-
(71)

(499)
(2)
-
(570)
Net revenues
4,283
2,130
(499)
(72)
5,842
Other (expenses) income
-
(1,976)

154
(3)
-
(1,822)
Operating expenses
(4)
(2,230)
(1,251)
-
-
(3,481)
Intercompany expenses
(1)
-
(72)
-
72
-
Income (loss) before income taxes
$
2,053
$
(1,169)
$
(345)
$
-
$
539















































































































- 27 -
Segment information for the three months ended June 30, 2022 and 2021 is

as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2022
Advisory services, external customers
$
3,332
$
-
$
-
$
-
$
3,332
Advisory services, other operating segments
(1)
27
-
-
(27)
-
Interest and dividend income
-
742
-
-
742
Interest expense
-
(73)

(304)
(2)
-
(377)
Net revenues
3,359
669
(304)
(27)
3,697
Other expenses
-
(2,865)
-
-
(2,865)
Operating expenses
(4)
(1,695)
(417)
-
-
(2,112)
Intercompany expenses
(1)
-
(27)
-
27
-
Income (loss) before income taxes
$
1,664
$
(2,640)
$
(304)
$
-
$
(1,280)
Asset
Investment
Management
Portfolio
Corporate
Eliminations
Total
2021
Advisory services, external customers
$
2,186
$
-
$
-
$
-
$
2,186
Advisory services, other operating segments
(1)
37
-
-
(37)
-
Interest and dividend income
-
1,084
-
-
1,084
Interest expense
-
(31)

(250)
(2)
-
(281)
Net revenues
2,223
1,053
(250)
(37)
2,989
Other (expenses) income
-
(2,634)

154
(3)
-
(2,480)
Operating expenses
(4)
(1,125)
(599)
-
-
(1,724)
Intercompany expenses
(1)
-
(37)
-
37
-
Income (loss) before income taxes
$
1,098
$
(2,217)
$
(96)
$
-
$
(1,215)


Includes advisory services revenue received by Bimini Advisors from Royal Palm.
(2)
Includes interest on long-term debt.
(3)
Includes gains on Eurodollar futures contracts entered into as a hedge on junior

subordinated notes.
(4)
Corporate expenses are allocated based on each segment's proportional

share of total revenues.
Assets in each reportable segment were as follows:
(in thousands)
Asset
Investment
Management
Portfolio
Corporate
Total
June 30, 2022
$
2,082
$
82,326
$
8,935
$
93,343
December 31, 2021
1,901
111,022
9,162
122,085
Asset Management

Segment
Advisory Services

Revenue
Advisory services

revenue

consists

of management

fees and

overhead

reimbursements

charged

to Orchid

for the management

of its
portfolio

pursuant

to the terms

of a management

agreement.

We receive a monthly management fee in the amount of:
?
One-twelfth of 1.50% of the first $250 million of Orchid's month-end equity, as
defined in the management agreement,
?
One-twelfth of 1.25% of Orchid's month-end equity that is greater than $250
million

and less than or equal to $500 million, and
?
One-twelfth of 1.00% of Orchid's month-end equity that is greater than $500
million.



















































- 28 -
On April 1, 2022, pursuant to the third amendment to the management agreement

entered into on November 16, 2021, the
Company began providing certain repurchase agreement trading, clearing and

administrative services to Orchid that had been
previously provided by AVM, L.P.

under an agreement terminated on March 31, 2022.



In consideration for such services, Orchid pays
the following fees to the Company:
?
A daily fee equal to the outstanding principal balance of repurchase agreement
funding

in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance



less than or equal to $5 billion, and
multiplied by 1.0 basis point for any amount of aggregate outstanding principal

balance in excess of $5 billion, and
?
A fee for the clearing and operational services provided by personnel

of the Manager equal to $10,000 per month.
In addition, Orchid is obligated to reimburse us for any direct expenses

incurred on its behalf and to pay to us an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management



agreement. The management agreement has been
renewed through February 2023 and provides for automatic one-year extension

options. Should Orchid terminate the management
agreement without cause, it will be obligated to pay to us a termination fee

equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the automatic renewal

term.

The following table summarizes the advisory services revenue received from



Orchid in each quarter during 2022 and 2021.
(in thousands)
Advisory Services
Repurchase,
Average
Average
Clearing and
Orchid
Orchid
Management
Overhead
Administrative
Three Months Ended
MBS
Equity
Fee
Allocation
Fees
Total
June 30, 2022
$
4,260,727
$
866,539
$
2,631
$
519
$
183
$
3,333
March 31, 2022
5,545,844
853,576
2,634
441
-
3,075
December 31, 2021
6,056,259
806,382
2,587
443
-
3,030
September 30, 2021
5,136,331
672,384
2,157
390
-
2,547
June 30, 2021
4,504,887
542,679
1,791
395
-
2,186
March 31, 2021
4,032,716
456,687
1,621
404
-
2,025
Six Months Ended
June 30, 2022
$
4,903,286
$
860,058
$
5,265
$
960
$
183
$
6,408
June 30, 2021
4,268,801
499,683
3,412
799
-
4,211
Investment Portfolio Segment
Net Portfolio Interest Income
We define

net portfolio

interest

income as

interest

income on

MBS less

interest

expense on

repurchase

agreement

funding.

During the
six months

ended June

30, 2022,

we generated

$0.8 million

of net

portfolio

interest

income,

consisting

of $0.9

million

of interest

income from
MBS assets

offset by

$0.1 million

of interest

expense on

repurchase liabilities.

For the

comparable period ended

June 30,

2021, we
generated

$1.1 million

of net portfolio

interest

income, consisting

of $1.2 million

of interest

income from

MBS assets

offset by

$0.1 million

of
interest expense

on repurchase

liabilities.
The $0.3 million

decrease

in interest

income for

the six months

ended June

30, 2022

was due to
a $17.8 million

decrease in

average MBS

balances,

combined with

a 1 basis point

("bp") decrease

in yields earned

on the portfolio.

There

was a $33,000 increase in interest

expense for the six months

ended June 30, 2022 that was due to a $19.3 million



decrease in average
repurchase

liabilities

that was

partially

offset by a

20 bp increase

in cost of

funds.


























































































- 29 -
Our economic interest

expense on repurchase

liabilities for the

six months ended June 30,

2022 and 2021 was $0.5 million



and $1.5
million, respectively,

resulting

in $0.4

million and

($0.3) million

of economic

net portfolio

interest

income (expense),

respectively.

During the three months ended June 30, 2022, we

generated approximately

$319,000 of net portfolio interest income, consisting of
approximately

$392,000 of interest

income from MBS

assets offset

by approximately

$73,000 of interest

expense on repurchase

liabilities.

For

the

three

months

ended

June

30,

2021,

we

generated

approximately $547,000

of

net

portfolio

interest

income,

consisting

of
approximately

$578,000

of interest

income from

MBS assets

offset by

approximately

$31,000

of interest

expense on

repurchase

liabilities.

Our economic

interest

expense on

repurchase

liabilities

for the

three months

ended June

30, 2022

and 2021

was $0.3

million and

$0.7
million,

respectively,

resulting

in

approximately $0.1

million

and

($0.2)

million

of

economic

net

portfolio

interest

income

(expense),
respectively.

The

tables

below

provide

information

on our

portfolio

average

balances,

interest

income,

yield

on

assets,

average

repurchase

agreement
balances,

interest

expense,

cost of

funds,

net interest

income and

net interest

rate spread

for the

six months

ended June

30, 2022

and 2021
and each

quarter in

2022 and

2021 on both

a GAAP and

economic basis.
($ in thousands)
Average
Yield on
Average
Interest Expense
Average Cost of Funds
MBS
Interest
Average
Repurchase
GAAP
Economic
GAAP
Economic
Three Months Ended
Held
(1)
Income
(2)
MBS
Agreements
(1)
Basis
Basis
(2)
Basis
Basis
(3)
June 30, 2022
$
46,607
$
392
3.36%
$
45,870
$
73
$
259
0.63%
2.25%
March 31, 2022
57,741
491
3.40%
56,846
31
216
0.22%
1.52%
December 31, 2021
62,597
511
3.27%
61,019
21
728
0.14%
4.77%
September 30, 2021
66,692
537
3.22%
67,253
24
733
0.14%
4.36%
June 30, 2021
70,925
578
3.26%
72,241
31
739
0.17%
4.09%
March 31, 2021
69,017
611
3.54%
69,104
40
748
0.23%
4.33%
Six Months Ended
June 30, 2022
$
52,174
$
883
3.39%
$
51,358
$
104
$
475
0.40%
1.85%
June 30, 2021
69,971
1,189
3.40%
70,672
71
1,487
0.20%
4.21%
($ in thousands)
Net Portfolio
Net Portfolio
Interest Income
Interest Spread
GAAP
Economic
GAAP
Economic
Three Months Ended
Basis
Basis
(2)
Basis
Basis
(4)
June 30, 2022
$
319
$
133
2.73%
1.11%
March 31, 2022
460
275
3.18%
1.88%
December 31, 2021
490
(217)
3.13%
(1.50)%
September 30, 2021
513
(196)
3.08%
(1.13)%
June 30, 2021
547
(161)
3.09%
(0.83)%
March 31, 2021
571
(137)
3.31%
(0.79)%
Six Months Ended
June 30, 2022
$
779
$
408
2.99%
1.54%
June 30, 2021
1,118
(298)
3.20%
-0.81%
(1)
Portfolio yields

and costs

of borrowings

presented in

the tables

above and

the tables

on pages

30 and

31 are

calculated based

on the
average balances

of the underlying

investment portfolio/repurchase



agreement balances

and are annualized

for the periods

presented.

Average balances for quarterly periods are calculated using two data



points, the beginning and ending balances.
(2)
Economic interest expense and economic net interest income
presented in the tables above and the tables on page 31 include

the effect
of derivative instrument hedges for only the period presented.
(3)
Represents

interest

cost

of

our

borrowings

and

the

effect

of

derivative

instrument

hedges

attributed

to

the

period

related

to

hedging
activities divided by average MBS.
(4)
Economic net interest spread is calculated by subtracting average economic

cost of funds from yield on average MBS.































































- 30 -
Interest Income and Average Earning Asset Yield
Our interest

income was

$0.9 million

for the six

months ended

June 30,

2022 and

$1.2 million

for the six

months ended

June 30,

2021.

Average

MBS holdings

were $52.2

million

and $70.0

million

for the

six months

ended

June 30,

2022 and

2021, respectively.

The $0.3

million
decrease in interest

income was due to

a $17.8 million

decrease in average

MBS holdings,

combined with a 1 basis

point ("bp") decrease
in yields.
Our interest income

was $0.4 million

for the three months

ended June 30,

2022 and $0.6 million

for the three months

ended June 30,
2021.

Average MBS holdings

were $46.6 million

and $70.9 million

for the three months

ended June 30,

2022 and 2021,

respectively. The
$0.2 million

decrease in interest

income was due

to a $24.3 million

decrease in average

MBS holdings,

partially offset

by a 10 bp increase
in yields

in average

MBS holdings.
The tables below present the average

portfolio size, income

and yields of our respective



sub-portfolios,

consisting of structured

MBS
and PT MBS,

for the six

months ended

June 30,

2022 and

2021, and

for each

quarter during

2022 and

2021.
($ in thousands)
Average MBS Held
Interest Income
Realized Yield on Average MBS
PT
Structured
PT
Structured
PT
Structured
Three Months Ended
MBS
MBS
Total
MBS
MBS
Total
MBS
MBS
Total
June 30, 2022
$
43,568
$
3,039
$
46,607
$
333
$
59
$
392
3.06%
7.75%
3.36%
March 31, 2022
54,836
2,905
57,741
472
19
491
3.45%
2.61%
3.40%
December 31, 2021
59,701
2,896
62,597
500
11
511
3.35%
1.55%
3.27%
September 30, 2021
64,641
2,051
66,692
533
4
537
3.30%
0.91%
3.22%
June 30, 2021
70,207
718
70,925
579
(1)
578
3.30%
(0.11)%
3.26%
March 31, 2021
68,703
314
69,017
605
6
611
3.53%
6.54%
3.54%
Six Months Ended
June 30, 2022
$
49,202
$
2,972
$
52,174
$
805
$
78
$
883
3.27%
5.24%
3.39%
June 30, 2021
69,455
516
69,971
1,184
5
1,189
3.41%
1.92%
3.40%
Interest Expense on Repurchase Agreements and the Cost of Funds
Our average

outstanding

balances

under repurchase

agreements

were $51.4

million and

$70.7 million,

generating

interest expense

of
$104,000 and $71,000

for the six months ended

June 30, 2022 and

2021, respectively.

Our average

cost of funds was

0.40% and 0.20%
for six months ended

June 30, 2022 and

2021,

respectively.

There was a 20 bp increase

in the average cost

of funds and a $19.3 million
decrease in average

outstanding

repurchase

agreements

during the six months

ended June 30, 2022,

compared to the six months

ended
June 30,

2021.


Our economic

interest

expense

was $0.5

million

and $1.5

million

for the

six months

ended June

30, 2022

and 2021,

respectively.

There

was a 236 bp decrease in the average economic cost of funds to 1.85% for the six



months ended June 30, 2022 from 4.21% for the six
months ended June 30,

2021.

The $1.0 million decrease

in economic interest

expense was due to the

$19.3 million decrease

in average
outstanding repurchase

agreements,

combined with the 236 bp decrease economic cost of funds during the six months
ended June 30,
2022.
Our average

outstanding

balances

under repurchase

agreements

were $45.9

million and

$72.2 million,

generating

interest expense

of
approximately

$73,000

and 31,000

for the

three

months

ended June

30, 2022

and 2021,

respectively.

Our average

cost of

funds

was 0.63%
and 0.17%

for three

months

ended

June 30,

2022 and

2021, respectively.

There was

a 46

bp increase

in the

average

cost of

funds, partially
offset by

a $26.4

million

decrease

in average

outstanding

repurchase

agreements

during the

three months

ended June

30, 2022,

compared
to the three

months ended

June 30,

2021.






















































































- 31 -
Our economic interest expense

was $0.3 million and $0.7 million for the three months ended June 30, 2022 and
2021, respectively.
There was a 184 bp decrease

in the average economic

cost of funds to 2.25%

for the three months ended

June 30, 2022 from 4.09%

for
the three

months ended

June 30,

2021.
Because all of

our repurchase agreements are short-term, changes in market rates

have a

more immediate impact on our



interest
expense.

Our average

cost of funds

calculated

on a GAAP

basis was

30 bps below

the average

one-month

LIBOR and

127 bps below

the
average six-month

LIBOR for

the quarter

ended June

30, 2022.

Our average

economic cost

of funds was

132 bps above

the average

one-

month LIBOR and 35 bps above the average

six-month LIBOR

for the quarter ended June 30, 2022.



The average term to maturity

of the
outstanding

repurchase

agreements

increased

from 16 days

at December

31, 2021

to 26 days

at June 30,

2022.
The tables

below

present

the average

outstanding

balances

under

our repurchase

agreements,

interest

expense

and average

economic
cost of funds,

and average

one-month and

six-month LIBOR

rates for the

six months ended

June 30, 2022

and 2021, and

for each quarter
in 2022 and

2021, on

both a GAAP

and economic

basis.
($ in thousands)
Average
Balance of
Interest Expense
Average Cost of Funds
Repurchase
GAAP
Economic
GAAP
Economic
Three Months Ended
Agreements
Basis
Basis
Basis
Basis
June 30, 2022
$
45,870
$
73
$
259
0.63%
2.25%
March 31, 2022
56,846
31
216
0.22%
1.52%
December 31, 2021
61,019
21
728
0.14%
4.77%
September 30, 2021
67,253
24
733
0.14%
4.36%
June 30, 2021
72,241
31
739
0.17%
4.09%
March 31, 2021
69,104
40
748
0.23%
4.33%
Six Months Ended
June 30, 2022
$
51,358
$
104
$
475
0.40%
1.85%
June 30, 2021
70,672
71
1,487
0.20%
4.21%
Average GAAP Cost of Funds
Average Economic Cost of Funds
Relative to Average
Relative to Average
Average LIBOR
One-Month
Six-Month
One-Month
Six-Month
Three Months Ended
One-Month
Six-Month
LIBOR
LIBOR
LIBOR
LIBOR
June 30, 2022
0.93%
1.90%
(0.30)%
(1.27)%
1.32%
0.35%
March 31, 2022
0.25%
0.76%
(0.03)%
(0.54)%
1.27%
0.76%
December 31, 2021
0.09%
0.23%
0.05%
(0.09)%
4.68%
4.54%
September 30, 2021
0.09%
0.16%
0.05%
(0.02)%
4.27%
4.20%
June 30, 2021
0.10%
0.18%
0.07%
(0.01)%
3.99%
3.91%
March 31, 2021
0.13%
0.23%
0.10%
0.00%
4.20%
4.10%
Six Months Ended
June 30, 2022
0.59%
1.33%
(0.19)%
(0.93)%
1.26%
0.52%
June 30, 2021
0.11%
0.20%
0.09%
0.00%
4.10%
4.01%
Dividend Income
At both June 30, 2022 and December

31, 2021, we owned 2,595,357



shares of Orchid common

stock. Orchid paid total

dividends of
$0.29 and

$0.39 per

share during

the six

months ended

June 30,

2022 and

2021, respectively.

During the

six months

ended June

30, 2022
and 2021,

we received

dividends

on this common

stock investment

of approximately

$0.8

million and

$1.0 million,

respectively. Orchid

paid

total dividends of $0.135 and $0.195 per share

during the three months ended June 30, 2022

and 2021, respectively.



During the three
months ended June 30, 2022 and 2021, we received dividends on this common stock
investment

of approximately $0.4

million and $0.5
million, respectively.































- 32 -
Long-Term Debt
Junior Subordinated Notes
Interest

expense on

our junior

subordinated

debt securities

was $0.54

million and

$0.50 million

for the

six months

ended June

30, 2022
and 2021, respectively.

The average rate

of interest paid for the

six months ended June 30,

2022 was 4.16% compared

to 3.69% for the
comparable

period in

2021.

Interest

expense on

our junior

subordinated

debt securities

was $0.30

million and

$0.25 million

for the

three month

periods ended

June

30, 2022 and 2021, respectively.

The average rate of interest paid for the

three months ended June 30, 2022 was



4.50% compared to
3.67% for

the comparable

period in

2021.

The junior

subordinated

debt securities

pay interest

at a floating

rate.

The rate is

adjusted quarterly

and set at

a spread of

3.50% over
the prevailing

three-month

LIBOR rate

on the determination

date.

As of June

30, 2022,

the interest

rate was

5.33%.
Note Payable
On October

30, 2019,

the Company borrowed

$680,000 from a

bank. The

note is

payable in equal

monthly principal and interest
installments of approximately

$4,500 through October

30, 2039. Interest accrues

at 4.89% through October

30, 2024. Thereafter, interest
accrues based

on the weekly

average yield

to the United

States Treasury

securities

adjusted to

a constant

maturity of

5 years, plus

3.25%.
The note

is secured

by a mortgage

on the Company's

office building.
Gains or Losses and Other Income
The table

below presents

our gains

or losses

and other

income for

the six and

three months

ended June

30, 2022

and 2021.
(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2022
2021
Change
2022
2021
Change
Realized losses on sales of MBS
$
(858)
$
-
$
(858)
$
(858)
$
-
$
(858)
Unrealized losses on MBS
(4,034)
(1,898)
(2,136)
(919)
(506)
(413)
Total losses on

MBS
(4,892)
(1,898)
(2,994)
(1,777)
(506)
(1,271)
Losses on derivative instruments
(50)
-
(50)
(50)
-
(50)
Unrealized losses on
Orchid Island Capital, Inc. common stock
(4,282)
(78)
(4,204)
(1,038)
(2,128)
1,090
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 six months

ended June 30, 2022, we received



proceeds of $23.1 million

from the sales of
MBS. We did

not sell any

MBS during

the six months

ended June

30, 2021.






























































- 33 -
The fair

value of

our MBS

portfolio and derivative instruments, and the

gains (losses) reported on



those financial instruments, are
sensitive

to changes

in interest

rates.

The table

below presents

historical

interest

rate data

as of the

end of quarter

during 2022

and 2021.
5 Year
10 Year
15 Year
30 Year
Three
U.S. Treasury
U.S. Treasury
Fixed-Rate
Fixed-Rate
Month
Rate
(1)
Rate
(1)
Mortgage Rate
(2)
Mortgage Rate
(2)
Libor
(3)
June 30, 2022
3.00%
2.97%
4.65%
5.52%
1.97%
March 31, 2022
2.42%
2.33%
3.39%
4.17%
0.84%
December 31, 2021
1.26%
1.51%
2.35%
3.10%
0.21%
September 30, 2021
1.00%
1.53%
2.18%
2.90%
0.12%
June 30, 2021
0.87%
1.44%
2.27%
2.98%
0.13%
March 31, 2021
0.94%
1.75%
2.39%
3.08%
0.19%
(1)
Historical 5 Year and 10

Year U.S. Treasury

Rates are obtained from quoted end of day prices on the Chicago Board Options



Exchange.
(2)
Historical 15 Year and

30 Year Fixed

Rate Mortgage Rates are obtained from Freddie Mac's Primary

Mortgage Market Survey.
(3)
Historical LIBOR are obtained from the Intercontinental Exchange Benchmark
Administration

Ltd.
Operating Expenses
For the six

and three months ended June

30, 2022, our total

operating expenses were approximately $4.1 million and $2.1 million,
respectively, compared

to approximately

$3.5 million

and $1.7

million for

the six and

three months

ended June

30, 2021,

respectively.

The
table below

presents

a breakdown

of operating

expenses for

the six and

three months

ended June

30, 2022

and 2021.
(in thousands)
Six Months Ended June 30,
Three Months Ended June 30,
2022
2021
Change
2022
2021
Change
Compensation and related benefits
$
2,606
$
2,190
$
416
$
1,262
$
1,067
$
195
Legal fees
64
77
(13)
29
32
(3)
Accounting, auditing and other professional fees
203
195
8
94
102
(8)
Directors' fees and liability insurance
393
378
15
197
190
7
Administrative and other expenses
872
641
231
531
333
198
$
4,138
$
3,481
$
657
$
2,113
$
1,724
$
389
Income Tax Provision
We recorded

an income

tax (benefit)

provision

for the six

months ended

June 30,

2022 and

2021 of approximately

$(1.3) million

and
$0.2 million,

respectively, on

a consolidated

pre-tax book

(loss)

income of

$(6.0) million

and $0.5

million, respectively.

We recorded

an income

tax benefit

for the three

months ended

June 30,

2022 and

2021 of approximately

$0.1 million

and $0.3
million, respectively,

on a consolidated

pre-tax book

loss of $1.3

million and

$1.2 million,

respectively.






























































- 34 -
Financial

Condition:
Mortgage-Backed Securities
As of June

30, 2022,

our MBS portfolio

consisted

of $38.5 million

of agency

or government

MBS at

fair value

and had a

weighted
average coupon

of 3.55%.

During the

six months

ended June

30, 2022,

we received

principal

repayments

of $5.1 million

compared

to
$7.4 million

for the comparable

period ended

June 30,

2021.

The average

prepayment

speeds for

the quarters

ended June

30, 2022

and
2021 were

20.0% and

21.9%,

respectively.
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.
Structured
PT MBS
MBS
Total
Three Months Ended
Portfolio (%)
Portfolio (%)
Portfolio (%)
June 30, 2022
17.2
22.9
20.0
March 31, 2022
18.5
25.6
20.9
December 31, 2021
13.7
35.2
21.1
September 30, 2021
15.5
26.9
18.3
June 30, 2021
21.0
31.3
21.9
March 31, 2021
18.5
16.4
18.3
The following

tables summarize

certain characteristics

of our PT

MBS and structured

MBS as of

June 30,

2022 and

December

31,
2021:

($ in thousands)
Weighted
Percentage
Average
of
Weighted
Maturity
Fair
Entire
Average
in
Longest
Asset Category
Value
Portfolio
Coupon
Months
Maturity
June 30, 2022
Fixed Rate MBS
$
35,492
92.1%
4.03%
324
1-May-52
Interest-Only MBS
3,034
7.9%
2.82%
302
15-May-51
Inverse Interest-Only MBS
9
0.0%
5.45%
203
15-May-39
Total MBS Portfolio
$
38,535
100.0%
3.55%
322
1-May-52
December 31, 2021
Fixed Rate MBS
$
58,029
95.4%
3.69%
330
1-Sep-51
Interest-Only MBS
2,759
4.6%
2.86%
306
15-May-51
Inverse Interest-Only MBS
15
0.0%
5.90%
209
15-May-39
Total MBS Portfolio
$
60,803
100.0%
3.41%
329
1-Sep-51



























































- 35 -
($ in thousands)
June 30, 2022
December 31, 2021
Percentage of
Percentage of
Agency
Fair Value
Entire Portfolio
Fair Value
Entire Portfolio
Fannie Mae
$
24,701
64.1%
$
39,703
65.3%
Freddie Mac
13,834
35.9%
21,100
34.7%
Total Portfolio
$
38,535
100.0%
$
60,803
100.0%
June 30, 2022
December 31, 2021
Weighted Average Pass-through Purchase Price
$
106.70
$
109.33
Weighted Average Structured Purchase Price
$
4.48
$
4.81
Weighted Average Pass-through Current Price
$
100.30
$
109.30
Weighted Average Structured Current Price
$
12.95
$
9.87
Effective Duration
(1)
3.909
2.103
(1)
Effective duration is the approximate percentage change in price

for a 100 basis point change in rates.

An effective duration of 3.909 indicates that an interest rate increase of 1.0% would be expected to cause a 3.909% decrease in the



value of the MBS in our investment portfolio at
June 30, 2022.

An effective duration of 2.103 indicates that an interest rate increase

of 1.0% would be expected to cause a 2.103% decrease in the value of the MBS in our investment portfolio at December 31, 2021.

These figures include the structured securities in the portfolio but do include the effect of our hedges. Effective duration quotes for

individual investments are obtained from The Yield

Book, Inc.
The following

table presents

a summary

of our portfolio

assets acquired

during the

six months

ended June

30, 2022

and 2021.
($ in thousands)
Six Months Ended June 30,
2022
2021
Total Cost
Average
Price
Weighted
Average
Yield
Total Cost
Average
Price
Weighted
Average
Yield
PT MBS
$
10,822
$
99.42
4.08%
$
12,368
$
104.84
1.19%
Structured MBS
-
-
-
772
7.72
3.33%
Our portfolio

of PT MBS

is typically

comprised

of adjustable-rate

MBS, fixed-rate

MBS and hybrid

adjustable-rate

MBS. We generally
seek to acquire

low duration

assets that

offer high

levels of

protection

from mortgage

prepayments

provided

that they

are reasonably
priced by

the market.

The stated

contractual

final maturity

of the mortgage

loans underlying

our portfolio

of PT MBS

generally ranges

up
to 30 years.

However, the

effect of prepayments

of the underlying

mortgage

loans tends

to shorten

the resulting

cash flows

from our
investments

substantially.

Prepayments

occur for

various reasons,

including

refinancing

of underlying

mortgages,

loan payoffs

in
connection

with home

sales, and

borrowers

paying more

than their

scheduled

loan payments,

which accelerates

the amortization

of the
loans.

The duration

of our IO

and IIO portfolio

will vary

greatly depending

on the structural

features

of the securities.

While prepayment
activity will

always affect

the cash

flows associated

with the

securities,

the interest

only nature

of IO's may

cause their

durations

to become
extremely

negative when

prepayments

are high,

and less negative

when prepayments

are low. Prepayments

affect the

duration

of IIO's
similarly, but the

floating rate

nature of

the coupon

of IIOs (which

is inversely

related to

the level

of one month

LIBOR) causes

their price
movements

- and model

duration

- to be affected

by changes

in both

prepayments

and one month

LIBOR - both

current and

anticipated
levels.

As a result,

the duration

of IIO securities

will also

vary greatly.




























































- 36 -
Prepayments

on the loans

underlying

our MBS

can alter

the timing

of the cash

flows received

by us. As

a result,

we gauge

the interest
rate sensitivity

of its assets

by measuring

their effective

duration.

While modified

duration measures

the price

sensitivity

of a bond

to
movements

in interest

rates, effective

duration

captures

both the

movement in

interest

rates and

the fact

that cash

flows to a

mortgage
related security

are altered

when interest

rates move.

Accordingly, when

the contract

interest

rate on a

mortgage

loan is substantially
above prevailing

interest

rates in

the market,

the effective

duration

of securities

collateralized

by such loans

can be quite

low because

of
expected prepayments.

We face the

risk that

the market

value of our

PT MBS assets

will increase

or decrease

at different

rates than

that of our

structured
MBS or liabilities,

including

our hedging

instruments.

Accordingly, we

assess our

interest

rate risk

by estimating

the duration

of our assets
and the duration

of our liabilities.

We generally

calculate

duration

and effective

duration

using various

third-party

models or

obtain these
quotes from

third parties.

However, empirical

results and

various third-party

models may

produce

different duration

numbers for

the same
securities.

The following

sensitivity

analysis

shows the

estimated

impact on

the fair

value of our

interest

rate-sensitive

investments

and hedge
positions

as of June

30, 2022,

assuming rates

instantaneously

fall 100 bps,

rise 100

bps and

rise 200

bps, adjusted

to reflect

the impact

of
convexity, which

is the measure

of the sensitivity

of our hedge

positions

and Agency

MBS' effective

duration

to movements

in interest
rates.

($ in thousands)
Fair
$ Change in Fair Value
% Change in Fair Value
MBS Portfolio
Value
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Fixed Rate MBS
$
35,492
$
1,584
$
(1,807)
$
(3,756)
4.46%
(5.09)%
(10.58)%
Interest-Only MBS
3,034
(255)
157
235
(8.40)%
5.18%
7.74%
Inverse Interest-Only MBS
9
2
(2)
(4)
22.04%
(24.62)%
(48.63)%
Total MBS

Portfolio
$
38,535
$
1,331
$
(1,652)
$
(3,525)
3.45%
(4.29)%
(9.15)%
($ in thousands)
Notional
$ Change in Fair Value
% Change in Fair Value
Amount
(1)
-100BPS
+100BPS
+200BPS
-100BPS
+100BPS
+200BPS
Treasury Futures Contracts
Repurchase Agreement Hedges
$
7,000
$
(540)
$
460
$
246
(7.71)%
6.57%
3.51%
$
7,000
$
(540)
$
460
$
246
Gross Totals
$
791
$
(1,192)
$
(3,279)
(1)
Represents the average contract/notional amount of Eurodollar futures

contracts.
In addition

to changes

in interest

rates, other

factors impact

the fair

value of our

interest

rate-sensitive

investments

and hedging
instruments,

such as the

shape of

the yield

curve, market

expectations

as to future

interest

rate changes

and other

market conditions.
Accordingly, in

the event

of changes

in actual

interest

rates, the

change in

the fair

value of our

assets would

likely differ

from that

shown
above and

such difference

might be

material and

adverse to

our stockholders.
Repurchase Agreements
As of June

30, 2022,

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

four 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.





































- 37 -
As of June

30, 2022,

we had obligations

outstanding

under the

repurchase

agreements

of approximately

$36.9 million

with a net
weighted

average borrowing

cost of 1.34%.

The remaining

maturity of

our outstanding

repurchase

agreement

obligations

ranged from

13
to 40 days,

with a weighted

average maturity

of 26 days.

Securing

the repurchase

agreement

obligation

as of June

30, 2022

are MBS with
an estimated

fair value,

including

accrued interest,

of $38.5

million and

a weighted

average maturity

of 323 months.

Through August

11,
2022, we

have been

able to maintain

our repurchase

facilities

with comparable

terms to

those that

existed at

June 30,

2022 with

maturities
through September

19, 2022.
The table below presents information about our period-end, maximum and average

repurchase agreement obligations for each
quarter in 2022 and 2021.
($ in thousands)
Ending
Maximum
Average
Difference Between Ending
Balance
Balance
Balance
Repurchase Agreements and
of Repurchase
of Repurchase
of Repurchase
Average Repurchase Agreements
Three Months Ended
Agreements
Agreements
Agreements
Amount
Percent
June 30, 2022
$
36,926
$
53,289
$
45,870
$
(8,944)
(19.50)%
March 31, 2022
54,815
58,772
56,846
(2,031)
(3.57)%
December 31, 2021
58,878
62,139
61,019
(2,141)
(3.51)%
September 30, 2021
63,160
72,047
67,253
(4,093)
(6.09)%
June 30, 2021
71,346
72,372
72,241
(895)
(1.24)%
March 31, 2021
73,136
76,004
69,104
4,032
5.83%
Liquidity and Capital Resources
Liquidity

is our ability

to turn non-cash

assets into

cash, purchase

additional

investments,

repay principal

and interest

on borrowings,
fund overhead

and fulfill

margin calls.

We have both

internal

and external

sources of

liquidity. However,

our material

unused sources

of
liquidity

include cash

balances,

unencumbered

assets and

our ability

to sell encumbered

assets to

raise cash.

Our balance

sheet also
generates

liquidity

on an on-going

basis through

payments of

principal

and interest

we receive

on our MBS

portfolio

and dividends

we
receive on

our investment

in Orchid

common stock.

Internal

Sources of

Liquidity
Our internal

sources of

liquidity

include our

cash balances,

unencumbered

assets and

our ability

to liquidate

our encumbered

security
holdings.

Our balance

sheet also

generated

liquidity

on an ongoing

basis through

payments

of principal

and interest

we receive

on our
MBS portfolio

and dividends

we receive

on our investment

in Orchid

common stock.

We have previously,

and may

again in the

future, employ

a hedging

strategy

that typically

involves

taking short

positions

in Eurodollar
futures,

T-Note futures,

TBAs or other

instruments.

When the

market causes

these short

positions

to decline

in value we

are required

to
meet margin

calls with

cash.

This can

reduce our

liquidity

position

to the extent

other securities

in our portfolio

move in price

in such a

way
that we do

not receive

enough cash

through margin

calls to offset

the Eurodollar

related margin

calls. If

this were

to occur in

sufficient
magnitude,

the loss of

liquidity

might force

us to reduce

the size

of the levered

portfolio,

pledge additional

structured

securities

to raise
funds or

risk operating

the portfolio

with less

liquidity.
- 38 -
External

Sources of

Liquidity
Our primary

external

sources of

liquidity

are our ability

to (i) borrow

under master

repurchase

agreements

and (ii)

use the TBA

security
market. Our

borrowing

capacity will

vary over

time as the

market value

of our interest

earning assets

varies. Our

master repurchase
agreements

have no stated

expiration,

but can be

terminated

at any time

at our option

or at the

option of

the counterparty.

However, once
a definitive

repurchase

agreement

under a master

repurchase

agreement

has been

entered into,

it generally

may not be

terminated

by
either party.

A negotiated

termination

can occur, but

may involve

a fee to

be paid by

the party

seeking to

terminate

the repurchase
agreement

transaction.

Under our

repurchase

agreement

funding arrangements,

we are required

to post margin

at the initiation

of the borrowing.

The margin
posted represents

the haircut,

which is a

percentage

of the market

value of the

collateral

pledged.

To the extent the

market value

of the
asset collateralizing

the financing

transaction

declines,

the market

value of our

posted margin

will be insufficient

and we will

be required

to
post additional

collateral.

Conversely, if

the market

value of the

asset pledged

increases

in value,

we would

be over collateralized

and we
would be

entitled to

have excess

margin returned

to us by the

counterparty.

Our lenders

typically

value our

pledged securities

daily to
ensure the

adequacy of

our margin

and make margin

calls as

needed, as

do we.

Typically, but not

always, the

parties agree

to a minimum
threshold

amount for

margin calls

so as to avoid

the need

for nuisance

margin calls

on a daily

basis. Our

master repurchase

agreements
do not specify

the haircut;

rather haircuts

are determined

on an individual

repurchase

transaction

basis.
As discussed

above, we

invest a

portion of

our capital

in structured

MBS.

We generally

do not apply

leverage

to this portion

of our
portfolio.

The leverage

inherent

in structured

securities

replaces

the leverage

obtained

by acquiring

PT securities

and funding

them in the
repurchase

market.

This structured

MBS strategy

has been

a core element

of the Company's

overall investment

strategy

since 2008.

However, we

have and

may continue

to pledge

a portion

of our structured

MBS in order

to raise our

cash levels,

but generally

will not
pledge these

securities

in order

to acquire

additional

assets.
In future

periods we

expect to

continue to

finance our

activities

through repurchase

agreements.

As of June

30, 2022,

we had cash
and cash equivalents

of $5.6 million.

We generated

cash flows

of $6.0 million

from principal

and interest

payments on

our MBS

portfolio
and had average

repurchase

agreements

outstanding

of $51.4

million during

the six months

ended June

30, 2022.

In addition,

during the
six months

ended June

30, 2022,

we received

approximately

$6.3 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.
Outlook
Orchid Island

Capital Inc.
Orchid Island

Capital reported

a second quarter

2022 loss

of $60.1

million and

its shareholders

equity declined

from $592.4

million to
$506.4 million.

The market

conditions

described

below led

to the loss

as agency

MBS underperformed

comparable

duration

treasuries
and the Orchid's

hedge positions.

The decline

in shareholders

equity is

likely to

lead to reduced

management

fees at Bimini

Advisors
going forward

if Orchid

is unable

to rebuild

its shareholders

equity since

the amount

of the management

fees paid

to the Company

are a
function of

Orchid's equity.

Orchid also

reduced its

monthly dividend

twice during

the first

quarter from

$0.065 per

month to $0.045

per
month.

The reduction

in the dividend

decreased

the monthly

dividend revenues

to the Company.
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.
- 39 -
Economic Summary
The second

quarter of

2022 was

another transitional

period as

the outlook

for the economy,

inflation

and monetary

policy changed
materially.

Inflationary

data was

the driver

of these

developments.

Inflation

in the U.S.

began to accelerate

during the

second quarter

of
2021.

For several

months market

participants,

and especially

the Fed,

assumed that

inflation

would prove

transitory

as it was

assumed
temporary

supply chain

constraints

caused by

COVID-19

were the cause

and that

these constraints

would fade

as the effects

of COVID-19
itself declined

over time.

The sub-components

of inflation

exhibiting

the largest

increases

were items

likely to

be affected

by the effects

of
COVID-19

on the supply

of labor, or lack

thereof in

this case.

By early

in the fourth

quarter of

2021 the

Fed formally

dropped their
contention

that inflation

was "transitory."

The Fed quickly

pivoted from

providing

monetary

policy accommodation

to constraining

inflation
and reducing

their balance

sheet.

The war

in the Ukraine,

which started

in late February

of 2022,

exacerbated

the inflationary

forces.

At
the beginning

of the second

quarter

market participants

expected

year-over-year

inflation

readings

to moderate

as baseline

effects would
kick in, since

inflation

had surged

starting

in the second

quarter of

2021.

This did not

happen, and

the monthly

core consumer

price index
("CPI") readings

for May and

June of 2022

were quite

high - 0.6%

and 0.7%

respectively

- after

a 0.6% increase

for April

of 2022.

Inflation

was accelerating

during the

second quarter,

not moderating,

and becoming

broader based.

Further, survey-based

measures of
inflation

expectations

were rising

rapidly. The most

recent measures

of inflation

are the highest

in four decades.

While several

important

metrics of

economic activity

remain very

strong, particularly

hiring in

the labor

market and

the unemployment
rate, other

measures have

softened.

In particular,

interest

rate sensitive

sectors of

the economy, such

as the housing

market and

large
consumer goods

such as sales

of cars and

light trucks,

have declined

from peak

levels seen

earlier in

the year. The

stock markets

in the
U.S. and

abroad have

declined materially

so far in

2022 and

most broad

equity indices

are down

between 10%

and 30% year

to date in
U.S. dollar

terms.

With the

Fed in the

midst of an

accelerated

tightening

cycle the

dollar has

strengthened

against most

major currencies,
such as the

Euro, Yen, Yuan and

most emerging

market currencies.

Interest

Rates
With inflation

accelerating

to the highest

level since

the early

1980s and

the Fed intent

on taking

the Fed Funds

rate to levels

well
above their

presumptive

"neutral"

rate of 2.50%

to 2.75%,

interest rates

increased

further during

the second

quarter.

The yield on

the 10-
year U.S.

Treasury Note

came within

a few basis

points of

3.50% on

June 14,

2022, a few

days after

the May CPI

was released.

That
same day, the yield

on the 2-year

U.S. Treasury

Note reached

3.43%.

Yields on both

benchmark

treasuries

declined modestly

over the
balance of

the quarter

and into

the third

quarter of

2022.

The Fed reacted

quickly as

these developments

unfolded

and raised

the Fed Funds

rate by 50

basis points

on May 4,

2022, and

75
basis points

on June 15,

2022.

The Fed raised

the Fed Funds

rate by another

75 basis points

on July 27,

2022.

The market

expects the
Fed to continue

to raise

rates at

each remaining

meeting in

2022 and

for the Fed

Funds rate

to end the

year with

a target

range of 3.5%

-
3.75%.

This range

is clearly

above the

Fed's long-term

neutral rate

- deemed

to be between

2.50% and

2.75%.

The Fed has

also
acknowledged

their efforts

to bring

inflation

under control

and taking

the Fed Funds

rate above

neutral may

cause the

economy to

enter a
recession.

They deem

these steps

as necessary

to prevent

inflation

from remaining

higher than

the Fed's target

rate of inflation.
- 40 -
This rapid

transition

from accommodation

to the extreme

removal of

policy accommodation

- to the

point of

a restrictive

policy stance
- has materially

changed the

outlook for

the economy.

The Fed's policy

actions have

also been

matched by

most central

banks across
the globe,

and most

market participants

expect a global

recession

within a

year or so.

In the U.S.,

market participants

feel the Fed

will
succeed in

reducing

inflation,

albeit at

the cost of

a recession,

and as a

result the

U.S. Treasury

yield curve

has inverted.

Current

market
pricing in

the Fed Funds

futures market

indicate the

market expects

the Fed to

be cutting

rates as

early as the

first quarter

of 2023.
Accordingly, the

yield on the

2-year U.S.

Treasury Note

now exceeds

the yield

on the 10-year

U.S. Treasury

Note. Incoming

economic
data during

the second

quarter and

early third

quarter has

exacerbated

the yield

curve inversion.

It appears

the economy

is slowing

even
quicker than

feared, but

with inflation

so high it

does not

appear that

the Fed will

stop tightening.

Such conditions,

should they

persist, are
likely to

keep shorter

maturity

U.S. Treasuries

high - reflecting

increases

to the Fed

Funds rate

over the

near term

- relative

to longer
rates, which

reflect market

expectations

for inflation

to ultimately

be contained,

the economy

to slow and

the Fed to

eventually

lower the
Fed Funds

rate.
The Agency

MBS Market
The Agency

MBS market

generated

a negative

return of

3.9 % during

the second

quarter of

2022.

As interest

rates rose,

the
prospect

of the Fed

raising the

Fed Funds

rate well

above 3%

by year end

and the largest

MBS investors

selling or

decreasing

their
exposure

to the sector,

Agency MBS

spreads relative

to benchmark

interest

rates increased

to levels

just below

those observed

in March
of 2020.

The largest

investors

of Agency

MBS,

the Fed via

quantitative

easing (which

is now quantitative

tightening

as the Fed

allows their
holdings of

Agency MBS

to run-off),

large domestic

banks (which

due to quantitative

tightening

are experiencing

declines in
reserves/deposits)

and large

money managers

(which see

other sectors

of the fixed

income markets

as more attractive

or are experiencing
out-flows

in their

assets under

management

and selling

assets across

all of their

holdings),

are collectively

causing demand

for Agency
MBS to decline

materially

and driving

the spread

widening.

The relative

performance

across the

Agency MBS

universe is

skewed in

favor
of higher

coupon, 30-year

securities

that are

currently

in production

by originators.

Lower coupon

securities,

especially

those held

in large
amounts by

the Fed,

and which

may eventually

be sold by

the Fed,

have performed

the worst,

however, subsequent

to June 30,

2022,
performance

of these

securities

has improved.

As both the

domestic and

the global

economies

appear to

be slowing,

the more

credit sensitive

sectors of

the fixed

income markets
have come

under pressure

and are

likely to further

weaken if

the economies

do indeed

contract.

As a result,

the relative

performance

of
Agency MBS,

while negative

in absolute

terms, has

been better

than most

sectors of

the fixed

income markets.

Actions by

the Fed

as
described

above may

prevent the

sector from

performing

well in the

near term

but, if the

economy does

contract

and enter

a recession,

the
sector could

do well on

a relative

performance

basis owing

to the lack

of credit

exposure

of Agency

MBS.

This is consistent

with the
sector's

history of

performance

in a counter-cyclical

manner -

doing well

when the

economy is

soft and

relatively

poorly when

the economy
is strong.

Recent Legislative

and Regulatory

Developments
In response

to the deterioration

in the markets

for U.S.

Treasuries, Agency

MBS and other

mortgage

and fixed

income markets

as
investors

liquidated

investments

in response

to the economic

crisis resulting

from the

actions to

contain and

minimize the

impacts of

the
COVID-19

pandemic,

on the morning

of Monday, March

23, 2020,

the Fed announced

a program

to acquire

U.S. Treasuries

and Agency
MBS in the

amounts needed

to support

smooth market

functioning.

With these

purchases,

market conditions

improved substantially.
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

and ended

net asset

purchases

entirely

by early March
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, with

those numbers

expected to

double in

September

of 2022 to

a maximum

of $60 billion

of U.S.

Treasuries and

$35 billion

of
Agency MBS

each month.

- 41 -
On December

27, 2020,

former President

Trump signed

into law

an additional

$900 billion

coronavirus

aid package

as part of

the
Consolidated

Appropriations

Act, 2021,

providing

for extensions

of many of

the CARES

Act policies

and programs

as well as

additional
relief. On

January 29,

2021, the

CDC issued

guidance extending

eviction moratoriums

for covered

persons through

March 31,

2021. The
FHFA subsequently

extended

the foreclosure

moratorium

begun under

the CARES

Act for loans

backed by

Fannie Mae

and Freddie

Mac
and the eviction

moratorium

for real

estate owned

by Fannie

Mae and Freddie

Mac until

July 31,

2021 and

September

30, 2021,
respectively. The

U.S. Housing

and Urban

Development

Department

subsequently

extended

the FHA

foreclosure

and eviction

moratoria

to
July 31, 2021,

and September

30, 2021,

respectively.

Despite

the expirations

of these

foreclosure

moratoria,

a final rule

adopted by

the
CFPB on

June 28,

2021, effectively

prohibited

servicers

from initiating

a foreclosure

before January

1, 2022 in

most instances.

Following
the end of

this limitation,

U.S. foreclosure

starts for

the first

half of 2022

were up

153% and

down 1% from

the comparable

periods in

2021
and 2020,

respectively, and

at 41% of

the 10-year

historic average

for the comparable

period.
In January

2019, the

Trump administration

made statements

of its plans

to work with

Congress to

overhaul

Fannie Mae

and Freddie
Mac and expectations

to announce

a framework

for the development

of a policy

for comprehensive

housing finance

reform soon.

On
September

30, 2019,

the FHFA announced

that Fannie

Mae and Freddie

Mac were

allowed to

increase their

capital buffers

to $25 billion
and

$20 billion,

respectively, from

the prior

limit of $3

billion each.

This step

could ultimately

lead to

Fannie Mae

and Freddie

Mac being
privatized

and represents

the first

concrete

step on the

road to GSE

reform.

On June 30,

2020, the

FHFA released

a proposed

rule on a
new regulatory

framework

for the GSEs

which seeks

to implement

both a risk-based

capital framework

and minimum

leverage

capital
requirements.

The final

rule on the

new capital

framework

for the GSEs

was published

in the federal

register

in December

2020.

On
January 14,

2021, the

U.S. Treasury

and the FHFA

executed letter

agreements

allowing

the GSEs

to continue

to retain

capital up

to their
regulatory

minimums,

including

buffers, as

prescribed

in the December

rule.

These letter

agreements

provide,

in part,

(i) there

will be no
exit from

conservatorship

until all

material litigation

is settled

and the GSE

has common

equity Tier

1 capital

of at least

3% of its

assets, (ii)
the GSEs

will comply

with the

FHFA's regulatory capital

framework,

(iii) higher-risk

single-family

mortgage

acquisitions

will be

restricted

to
current levels,

and (iv)

the U.S.

Treasury and

the FHFA will

establish

a timeline

and process

for future

GSE reform.

However, no definitive
proposals

or legislation

have been

released or

enacted with

respect to

ending the

conservatorship,

unwinding

the GSEs,

or materially
reducing

the roles

of the GSEs

in the U.S.

mortgage

market. On

September

14, 2021,

the U.S.

Treasury and

the FHFA suspended

certain
policy provisions

in the January

agreement,

including

limits on

loans acquired

for cash

consideration,

multifamily

loans, loans

with higher
risk characteristics

and second

homes and

investment

properties.

On February

25, 2022,

the FHFA published

a final rule,

effective as

of
April 26,

2022, amending

the GSE capital

framework

established

in December

2020 by, among

other things,

replacing

the fixed

leverage
buffer equal

to 1.5% of

a GSE's adjusted

total assets

with a dynamic

leverage

buffer equal

to 50% of

a GSE's stability

capital buffer,
reducing

the risk weight

floor from

10% to 5%,

and removing

the requirement

that the

GSEs must

apply an overall

effectiveness
adjustment

to their

credit risk

transfer

exposures.

On June 14,

2022, the

GSEs announced

that they

will 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

GSE capital
framework.

Industry

groups have

expressed

concern that

this poses

a risk to

the fungibility

of the Uniform

Mortgage-Backed

Security
("UMBS"),

which could

negatively

impact liquidity

and pricing

in the market

for TBA

securities.
In 2017,

policymakers

announced

that LIBOR

will be replaced

by December

31, 2021.

The directive

was spurred

by the fact

that
banks are

uncomfortable

contributing

to the LIBOR

panel given

the shortage

of underlying

transactions

on which

to base levels

and the
liability

associated

with submitting

an unfounded

level. However,

the ICE Benchmark

Administration,

in its capacity

as administrator

of
USD LIBOR,

has announced

that it intends

to extend

publication

of USD LIBOR

(other than

one-week and

two-month

tenors) by

18
months to

June 2023.

Notwithstanding

this extension,

a joint statement

by key regulatory

authorities

called on banks

to cease

entering
into new

contracts

that use

USD LIBOR

as a reference

rate by no

later than

December

31, 2021.

- 42 -
On December

7, 2021,

the CFPB

released

a final rule

that amends

Regulation

Z, which

implemented

the Truth in

Lending Act,

aimed
at addressing

cessation

of LIBOR

for both

closed-end

(e.g., home

mortgage)

and open-end

(e.g., home

equity line

of credit)

products.

The
rule, which

mostly became

effective

in April

of 2022,

establishes

requirements

for the selection

of replacement

indices for

existing LIBOR-
linked consumer

loans. Although

the rule

does not

mandate the

use of SOFR

as the alternative

rate, it

identifies

SOFR as a

comparable
rate for

closed-end

products

and states

that for

open-end products,

the CFPB

has determined

that ARRC's

recommended

spread-adjusted
indices based

on SOFR

for consumer

products

to replace

the one-month,

three-month,

or six-month

USD LIBOR

index "have

historical
fluctuations

that are

substantially

similar to

those of

the LIBOR

indices that

they are

intended

to replace."

The CFPB

reserved judgment,
however, on a

SOFR-based

spread-adjusted

replacement

index to

replace the

one-year USD

LIBOR until

it obtained

additional
information.

On March 15,

2022, the

Adjustable

Interest

Rate (LIBOR)

Act (the "LIBOR

Act") was

signed into

law as part

of the Consolidated
Appropriations

Act, 2022

(H.R. 2471).

The LIBOR

Act provides

for a statutory

replacement

benchmark

rate for

contracts

that use LIBOR
as a benchmark

and do not

contain any

fallback mechanism

independent

of LIBOR.

Pursuant to

the LIBOR

Act, SOFR

becomes the

new
benchmark

rate by operation

of law for

any such contract.

The LIBOR

Act establishes

a safe harbor

from litigation

for claims

arising out

of
or related

to the use

of SOFR

as the recommended

benchmark

replacement.

The LIBOR

Act makes

clear that

it should

not be construed
to disfavor

the use of

any benchmark

on a prospective

basis.
The LIBOR

Act also

attempts

to forestall

challenges

that it is

impairing

contracts.

It provides

that the

discontinuance

of LIBOR

and
the automatic

statutory

transition

to a replacement

rate neither

impairs or

affects the

rights of

a party to

receive payment

under such
contracts,

nor allows

a party to

discharge

their performance

obligations

or to declare

a breach

of contract.

It amends

the Trust Indenture
Act of 1939

to state

that the

"the right

of any holder

of any indenture

security to

receive payment

of the principal

of and interest

on such
indenture

security shall

not be deemed

to be impaired

or affected"

by application

of the LIBOR

Act to any

indenture

security.
One-week and

two-month

U.S. dollar

LIBOR rates

phased out

on December

31, 2021,

but other

U.S. dollar

tenors may

continue until
June 30,

2023. We will

monitor the

emergence

of SOFR

carefully

as it appears

likely to

become the

new benchmark

for hedges

and a
range of

interest

rate investments.

Effective January

1, 2021,

Fannie Mae,

in alignment

with Freddie

Mac, extended

the timeframe

for its delinquent

loan buyout

policy
for Single-Family

Uniform Mortgage-Backed

Securities

(UMBS) and

Mortgage-Backed

Securities

(MBS) from

four consecutively

missed
monthly payments

to twenty-four

consecutively

missed monthly

payments (i.e.,

24 months

past due).

This new

timeframe

applied to
outstanding

single-family

pools and

newly issued

single-family

pools and

was first

reflected

when January

2021 factors

were released

on
the fourth

business day

in February

2021.

For Agency

MBS investors,

when a delinquent

loan is bought

out of a

pool of mortgage

loans, the

removal of

the loan

from the

pool
is the same

as a total

prepayment

of the loan.

The respective

GSEs anticipated,

however, that

delinquent

loans will

be repurchased

in
most cases

before the

24-month

deadline under

one of the

following

exceptions

listed below.
•

a loan that

is paid in

full, or

where the

related lien

is released

and/or the

note debt

is satisfied

or forgiven;
•

a loan repurchased

by a seller/servicer

under applicable

selling

and servicing

requirements;
•

a loan entering

a permanent

modification,

which generally

requires

it to be

removed from

the MBS.

During any

modification

trial
period, the

loan will

remain in

the MBS until

the trial

period ends;
•

a loan subject

to a short

sale or

deed-in-lieu

of foreclosure;

or
•

a loan referred

to foreclosure.
Because of

these exceptions,

the GSEs

believe based

on prevailing

assumptions

and market

conditions

this change

will have

only a
marginal impact

on prepayment

speeds, in

aggregate.

Cohort level

impacts may

vary. For example,

more than

half of loans

referred

to
foreclosure

are historically

referred

within six

months of

delinquency. The

degree to

which speeds

are affected

depends on

delinquency
levels, borrower

response,

and referral

to foreclosure

timelines.
- 43 -
The scope

and nature

of the actions

the U.S.

government

or the Fed

will ultimately

undertake

are unknown

and will

continue to
evolve
Effect on Us
Regulatory

developments,

movements

in interest

rates and

prepayment

rates affect

us in many

ways, including

the following:
Effects on

our Assets
A change

in or elimination

of the guarantee

structure

of Agency

MBS 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.
Lower long-term

interest

rates can

affect the

value of our

Agency MBS

in a number

of ways.

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 higher-coupon

Agency
MBS.

This is because

investors

typically

place a premium

on assets

with yields

that are

higher than

market yields.

Although

lower

long-
term interest

rates may

increase

asset values

in our portfolio,

we may not

be able to

invest new

funds in similarly-yielding

assets.
If prepayment

levels increase,

the value

of our Agency

MBS affected

by such prepayments

may decline.

This is because

a principal
prepayment

accelerates

the effective

term of an

Agency MBS,

which would

shorten the

period during

which an

investor would

receive
above-market

returns (assuming

the yield

on the prepaid

asset is

higher than

market yields).

Also, prepayment

proceeds

may not

be able
to be reinvested

in similar-yielding

assets. Agency

MBS 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. 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.
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
the Company

uses 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.

- 44 -
As described

above, the

Agency MBS

market began

to experience

severe dislocations

in mid-March

2020 as a

result of

the
economic,

health and

market turmoil

brought about

by COVID-19.

On March 23,

2020, the

Fed announced

that it would

purchase

Agency
MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning,

which largely

stabilized

the Agency

MBS market,
but ended

these purchases

in March

2022 and

announced

plans to

reduce its

balance sheet.

The Fed's planned

reduction

of its balance
sheet could

negatively

impact our

investment

portfolio.

Further, the

moratoriums

on foreclosures

and evictions

described

above will

likely
delay potential

defaults on

loans that

would otherwise

be bought

out of Agency

MBS pools

as described

above.

Depending

on the
ultimate resolution

of the foreclosure

or evictions,

when and

if it occurs,

these loans

may be removed

from the

pool into

which they

were
securitized.

If this were

to occur, it

would have

the effect

of delaying

a prepayment

on the Company's

securities

until such

time. As

the
majority of

the Company's

Agency MBS

assets were

acquired

at a premium

to par, this will

tend to increase

the realized

yield on

the asset
in question.
Because we

base our

investment

decisions

on risk management

principles

rather than

anticipated

movements

in interest

rates, in

a
volatile interest

rate environment

we may allocate

more capital

to structured

Agency MBS

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.
Effects on

our borrowing

costs
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, SOFR

or LIBOR

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.

This 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.
In order

to protect

our net interest

margin against

increases

in short-term

interest

rates, we

may enter

into interest

rate swaps,

which
economically

convert our

floating-rate

repurchase

agreement

debt to fixed-rate

debt, or

utilize other

hedging instruments

such as
Eurodollar, Fed

Funds and

T-Note futures

contracts

or interest

rate swaptions.
Summary
During the

latter part

of the second

quarter of

2022 inflation

data drove

a material

change in

Fed policy, interest

rates and

the outlook
for the economy.

Specifically, the

CPI for

May, released in

June, was

far above

market expectations.

Survey measures

of inflation
expectations,

released

on the same

day, surged to

multi-decade

highs. In

July, the June CPI

reading was

released

and was again

well
above market

expectations.

Equally

troubling,

elevated inflation

readings

were very

broad based,

implying inflationary

pressures

have
clearly spread

from just

those sectors

most exposed

to COVID-19

related supply

constraints.

This was

the catalyst

for the Fed

to pivot
even more

forcefully

than they

did during

late 2021/early

2022, and

the Fed raised

the Fed Funds

rate by 200

basis points

collectively

at
the May, June and

July meetings.

The market

expects the

Fed to continuing

raising the

Fed Funds

rate by another

100 basis

points by
year-end.

Increases

in the Fed

Funds rate

are likely

to affect economic

activity, and the

Fed has acknowledged

their actions

may lead to

a
recession.

Sectors of

the economy

most sensitive

to interest

rates - such

as housing

- have already

started to

slow and

other economic
indicators

have shown

evidence

of slowing,

such as new

orders and

production

levels for

the manufacturing

sector as

reported by

the
Institute

for Supply

Management.

Initial claims

for unemployment

in July of

2022 have

risen by

approximately

94,000 above

the low
reading reported

in March of

2022.

- 45 -
The market

appears to

anticipate

the Fed will

be able to

contain inflation

and that

the result

will be a

contraction

in economic

growth.

This is reflected

in yields

for longer-term

U.S. Treasuries.

With the

Fed expected

to increase

the Fed

Funds rate

by another

100 basis
points or

more, shorter

maturity U.S.

Treasuries remain

elevated,

with the

yield on the

2-year U.S.

Treasury Note

yielding approximately
3.07% on

August 3,

2022.

The

combined effect

- more increases

to the Fed

Funds rate,

inflation

to be ultimately

contained

by the Fed
albeit potentially

at the expense

of a recession,

has caused

the yield

curve to

invert whereby

shorter maturity

U.S. Treasuries

yield more
than long-term

U.S. Treasuries.

This condition

may persist

for the

balance of

2022 and

into 2023.
The Agency

MBS market

generated

negative returns

for the second

quarter (-3.9%)

and year-to-date

(-8.8%),

and such returns

were
lower than

comparable

duration

U.S. Treasuries

by 1.20%

and 2.3%,

respectively.

During June

of 2022,

spreads to

comparable

duration
U.S. Treasuries

were near

the extreme

levels observed

in March

of 2020 when

the markets

experienced

the extreme

turbulence

in the
early days

of the COVID-19

pandemic that

triggered

unprecedented

intervention

in the market

by the Fed.

In spite of

this poor
performance,

Agency MBS

actually delivered

better returns

than most

sectors of

the fixed

income markets

during the

second quarter

and
first six

months of

2022.

For this

reason, returns

to the sector

may remain

low as the

largest participants

in the sector

- the Fed

via
quantitative

easing, now

quantitative

tightening,

and large

banks and

money managers

- refrain

from increasing

their investments

in the
sector.

However, if the

economy does

enter into

a recession

the sector

could outperform

other sectors

owing to

its lack of

credit risk

and
the prospects

for lower

funding rates

and declining

longer-term

rates. Through

the early

days of the

third quarter

of 2022,

Agency MBS
have performed

well and

most of the

widening

in spreads

that occurred

in June of

2022 has

reversed.
Critical Accounting Estimates
Our consolidated

financial

statements

are prepared

in accordance

with GAAP.

GAAP requires

our management

to make some
complex and

subjective

decisions

and assessments.

Our most

critical accounting

policies involve

decisions

and assessments

which could
significantly

affect reported

assets,

liabilities,

revenues

and expenses,
and these

decisions

and assessments

can change

significantly
each reporting

period.

There have

been no changes

to the processes

used to determine

our critical

accounting

estimates

as discussed

in
our annual

report on

Form 10-K

for the year

ended December

31, 2021.
Capital Expenditures
At June 30, 2022, we had no material commitments for capital expenditures.
ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES



ABOUT MARKET

RISK.

Not Applicable.
- 46 -

Latest news about Bimini Capital Management, Inc.

Transcript : Bimini Capital Management, Inc., Q1 2024 Earnings Call, May 03, 2024	May. 03
Bimini Capital Management, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2024	May. 02	CI
Transcript : Bimini Capital Management, Inc., Q4 2023 Earnings Call, Mar 08, 2024	Mar. 08
Earnings Flash (BMNM) BIMINI CAPITAL MANAGEMENT Posts Q4 Revenue $2.8M	Mar. 07	MT
Bimini Capital Management, Inc. Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Mar. 06	CI
Bimini Capital Management, Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 06	CI
Bimini Capital Management, Inc. Appoints G. Hunter Haas, IV to the Board of Directors	Jan. 16	CI
Tranche Update on Bimini Capital Management, Inc.'s Equity Buyback Plan announced on September 16, 2021.	Nov. 03	CI
Transcript : Bimini Capital Management, Inc., Q3 2023 Earnings Call, Nov 03, 2023	Nov. 03
Bimini Capital Management, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 02	CI
Bimini Capital Management, Inc.'s Equity Buyback announced on September 16, 2021, has expired with 789,024 shares for $1.26 million.	23-09-15	CI
Tranche Update on Bimini Capital Management, Inc.'s Equity Buyback Plan announced on September 16, 2021.	23-08-11	CI
Transcript : Bimini Capital Management, Inc., Q2 2023 Earnings Call, Aug 11, 2023	23-08-11
Earnings Flash (BMNM) BIMINI CAPITAL MANAGEMENT Posts Q1 Revenue $3.2M	23-08-10	MT
Bimini Capital Management, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-10	CI
Tranche Update on Bimini Capital Management, Inc.'s Equity Buyback Plan announced on September 16, 2021.	23-05-12	CI
Transcript : Bimini Capital Management, Inc., Q1 2023 Earnings Call, May 12, 2023	23-05-12
Bimini Capital Management, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2023	23-05-11	CI
Tranche Update on Bimini Capital Management, Inc.'s Equity Buyback Plan announced on September 16, 2021.	23-03-10	CI
Transcript : Bimini Capital Management, Inc., Q4 2022 Earnings Call, Mar 10, 2023	23-03-10
Bimini Capital Management, Inc. Reports Earnings Results for the Fourth Quarter and Full Year Ended December 31, 2022	23-03-09	CI
Bimini Capital Management, Inc. Reports Earnings Results for the Fourth Quarter and Full Year Ended December 31, 2022	23-03-09	CI
Tranche Update on Bimini Capital Management, Inc.'s Equity Buyback Plan announced on September 16, 2021.	22-11-14	CI
Transcript : Bimini Capital Management, Inc., Q3 2022 Earnings Call, Nov 14, 2022	22-11-14
Bimini Capital Management, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2022	22-11-10	CI

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Company Profile

Bimini Capital Management, Inc. is a specialty finance company. The Company operates through two segments: the asset management segment and the investment portfolio segment. The investment portfolio segment includes the investment activities conducted at Bimini Capitalâs wholly owned subsidiary, Royal Palm Capital, LLC (Royal Palm). The asset management segment includes investment advisory services provided by Bimini Advisors Holdings, LLC (Bimini Advisors) to Orchid Island Capital, Inc (Orchid). Its portfolio consists of two categories of Agency mortgage-backed securities (MBS): traditional pass-through Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations, and structured Agency MBS, such as interest-only securities and principal-only securities. The Companyâs wholly owned subsidiaries include is Bimini Capital Management, Inc, Royal Palm, and Bimini Advisors. Royal Palm maintains an investment portfolio, consisting primarily of MBS.

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Investment Management & Fund Operators

Calendar

2024-06-11 - Annual General Meeting

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