Form 10-Q - Quarterly report [Sections 13 or 15(d)]

0001275477 BIMINI CAPITAL MANAGEMENT, INC. false --12-31 Q2 2024 0.001 0.001 10,000,000 10,000,000 100,000 100,000 9,900,000 9,900,000 0 0 0 0 0.001 0.001 98,000,000 98,000,000 10,005,457 10,005,457 10,005,457 10,005,457 0.001 0.001 1,000,000 1,000,000 31,938 31,938 31,938 31,938 0.001 0.001 1,000,000 1,000,000 31,938 31,938 31,938 31,938 0.0833 0.0833 0.0833 1 3 26.8 0 0 0 0 0 0 0 0 569,071 false false false false Includes interest on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column. Includes fees paid by Royal Palm to Bimini Advisors for advisory services at an annualized rate of 1.5% of capital allocated to Royal Palm's MBS portfolio. Totals in the table above may not foot due to rounding differences. The notional balance for the structured MBS portfolio was $17.8 million and $18.9 million as of June 30, 2024 and December 31, 2023, respectively. The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio. 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number: 001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)

Maryland

72-1571637

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3305 Flamingo Drive, Vero Beach, Florida 32963

(Address of principal executive offices) (Zip Code)

(772) 231-1400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:

Title of each Class	Latest Practicable Date	Shares Outstanding
Class A Common Stock, $0.001 par value	August 1, 2024	10,005,457
Class B Common Stock, $0.001 par value	August 1, 2024	31,938
Class C Common Stock, $0.001 par value	August 1, 2024	31,938

Table of Contents

BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS

	Page

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements	1
Condensed Consolidated Balance Sheets (unaudited)	1
Condensed Consolidated Statements of Operations (unaudited)	2
Condensed Consolidated Statement of Stockholders’ Equity (unaudited)	3
Condensed Consolidated Statements of Cash Flows (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	38
ITEM 4. Controls and Procedures	39

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings	40
ITEM 1A. Risk Factors	40
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
ITEM 3. Defaults Upon Senior Securities	40
ITEM 4. Mine Safety Disclosures	40
ITEM 5. Other Information	40
ITEM 6. Exhibits	41
SIGNATURES	42

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	*(Unaudited) June 30, 2024*			*December 31, 2023*
ASSETS:
Mortgage-backed securities, at fair value:
Pledged to counterparties	$	86,153,715		$	92,575,292
Unpledged		261,004			155,560
Total mortgage-backed securities		86,414,719			92,730,852
Cash and cash equivalents		4,941,339			3,716,386
Restricted cash		1,282,199			753,900
Orchid Island Capital, Inc. common stock, at fair value		4,746,052			4,797,269
Accrued interest receivable		427,607			488,660
Property and equipment, net		1,882,578			1,920,823
Deferred tax assets, net		18,542,508			19,047,680
Due from affiliates		1,085,587			1,013,406
Other assets		1,116,684			1,129,038
Total Assets	$	120,439,273		$	125,598,014

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	82,875,999		$	86,906,999
Long-term debt		27,382,035			27,394,417
Accrued interest payable		263,265			260,413
Other liabilities		1,850,970			2,908,444
Total Liabilities		112,372,269			117,470,273

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 shares designated Series A Junior Preferred Stock, 9,900,000 shares undesignated; no shares issued and outstanding as of June 30, 2024 and December 31, 2023		-			-
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 shares issued and outstanding as of June 30, 2024 and December 31, 2023		10,005			10,005
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of June 30, 2024 and December 31, 2023		32			32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of June 30, 2024 and December 31, 2023		32			32
Additional paid-in capital		329,815,150			329,815,150
Accumulated deficit		(321,758,215	)		(321,697,478	)
Total Stockholders’ Equity		8,067,004			8,127,741
Total Liabilities and Stockholders' Equity	$	120,439,273		$	125,598,014

See Notes to Condensed Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six and Three Months Ended June 30, 2024 and 2023

	*Six Months Ended June 30,*						*Three Months Ended June 30,*
	*2024*			*2023*			*2024*			*2023*
Revenues:
Advisory services	$	6,096,316		$	6,898,860		$	3,167,055		$	3,516,450
Interest income		2,681,425			1,123,796			1,287,326			566,408
Dividend income from Orchid Island Capital, Inc. common stock		409,731			546,308			204,865			273,154
Total revenues		9,187,472			8,568,964			4,659,246			4,356,012
Interest expense:
Repurchase agreements		(2,365,309	)		(1,072,033	)		(1,157,306	)		(563,963	)
Long-term debt		(1,212,485	)		(1,111,457	)		(604,810	)		(565,322	)
Net revenues		5,609,678			6,385,474			2,897,130			3,226,727

Other income (expense):
Unrealized (losses) gains on mortgage-backed securities		(123,963	)		(262,634	)		404,875			(920,753	)
Realized losses on mortgage-backed securities		(561,604	)		-			(561,604	)		-
Unrealized losses on Orchid Island Capital Inc. common stock		(51,217	)		(85,363	)		(335,751	)		(216,247	)
Gains on derivative instruments		1,383,463			241,672			212,457			515,547
Other income		49			120			20			56
Other income (expense), net		646,728			(106,205	)		(280,003	)		(621,397	)

Expenses:
Compensation and related benefits		3,647,526			2,641,742			1,784,092			1,278,046
Direct advisory services costs		852,378			821,298			503,235			368,252
Directors' fees and liability insurance		416,094			413,266			206,955			206,768
Audit, legal and other professional fees		372,538			307,979			131,618			178,749
Administrative and other expenses		523,435			367,584			156,676			191,197
Total expenses		5,811,971			4,551,869			2,782,576			2,223,012

Net income (loss) before income tax provision		444,435			1,727,400			(165,449	)		382,318
Income tax provision		505,172			436,420			108,396			96,811

Net (loss) income	$	(60,737	)	$	1,290,980		$	(273,845	)	$	285,507

Basic and Diluted Net (Loss) Income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted	$	(0.01	)	$	0.13		$	(0.03	)	$	0.03
CLASS B COMMON STOCK
Basic and Diluted	$	(0.01	)	$	0.13		$	(0.03	)	$	0.03
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted		10,005,457			10,019,888			10,005,457			10,019,888
CLASS B COMMON STOCK
Basic and Diluted		31,938			31,938			31,938			31,938

See Notes to Condensed Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six and Three Months Ended June 30, 2024 and 2023

	*Stockholders' Equity*
						*Additional*
	*Common Stock, all classes*				*Paid-in*		*Accumulated*
	*Shares*		*Par Value*		*Capital*		*Deficit*			*Total*
Balances, January 1, 2024		10,069,333	$	10,069	$	329,815,150	$	(321,697,478	)	$	8,127,741
Net income		-		-		-		213,108			213,108
Balances, March 31, 2024		10,069,333	$	10,069	$	329,815,150	$	(321,484,370	)	$	8,340,849
Net loss		-		-		-		(273,845	)		(273,845	)
Balances, June 30, 2024		10,069,333	$	10,069	$	329,815,150	$	(321,758,215	)	$	8,067,004

Balances, January 1, 2023		10,083,764	$	10,084	$	329,828,268	$	(317,714,273	)	$	12,124,079
Net income		-		-		-		1,005,473			1,005,473
Balances, March 31, 2023		10,083,764	$	10,084	$	329,828,268	$	(316,708,800	)	$	13,129,552
Net income		-		-		-		285,507			285,507
Balances, June 30, 2023		10,083,764	$	10,084	$	329,828,268	$	(316,423,293	)	$	13,415,059

See Notes to Condensed Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 2024 and 2023

	*2024*			*2023*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(60,737	)	$	1,290,980
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		38,245			38,245
Deferred income tax provision		505,172			436,420
Unrealized losses on mortgage-backed securities		123,963			262,634
Realized losses on mortgage-backed securities		561,604			-
Unrealized losses on Orchid Island Capital, Inc. common stock		51,217			85,363
Changes in operating assets and liabilities:
Accrued interest receivable		61,053			(81,495	)
Due from affiliates		45,126			(110,113	)
Other assets		(104,953	)		(11,457	)
Accrued interest payable		2,852			7,437
Other liabilities		(1,057,474	)		(1,849,508	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		166,068			68,506

CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(48,547,475	)		(20,045,750	)
Sales		46,252,051			-
Principal repayments		7,925,990			1,906,078
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		5,630,566			(18,139,672	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements		352,747,000			245,355,590
Principal repayments on repurchase agreements		(356,778,000	)		(228,479,000	)
Principal repayments on long-term debt		(12,382	)		(11,840	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(4,043,382	)		16,864,750

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		1,753,252			(1,206,416	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period		4,470,286			6,773,799
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period	$	6,223,538		$	5,567,383

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense	$	3,574,942		$	2,176,053

See Notes to Condensed Consolidated Financial Statements

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BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2024

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and collectively with its subsidiaries, the “Company”) was formed in September 2003, and is a holding company. The Company operates in two business segments through its principal wholly-owned operating subsidiary, Royal Palm Capital LLC, which includes its wholly-owned subsidiary, Bimini Advisors Holdings, LLC.

Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments and shares of Orchid Island Capital, Inc. ("Orchid") common stock, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "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 manages a residential mortgage-backed securities (“MBS”) portfolio for Orchid and receives fees for providing these services. Bimini Advisors also provides certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. Bimini Advisors also manages the MBS portfolio of Royal Palm.

Segment Reporting

The Company’s operations are classified into two reportable segments: the asset management segment and the investment portfolio segment. These segments are evaluated by management in deciding how to allocate resources and in assessing performance. The accounting policies of the operating segments are the same as the Company’s accounting policies with the exception that inter-segment revenues and expenses are included in the presentation of segment results. For further information see Note 13.

Consolidation

The accompanying condensed consolidated financial statements include the accounts of Bimini Capital and its subsidiaries, as listed above. All inter-company accounts and transactions have been eliminated.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three-month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The consolidated balance sheet at December 31, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could significantly differ from those estimates. Significant estimates affecting the accompanying consolidated financial statements include determining the fair values of MBS and derivatives, the value of Orchid Common Stock, determining the amounts of asset valuation allowances, and the computation of the income tax provision or benefit and the deferred tax asset allowances recorded for each accounting period.

Variable Interest Entities (“VIEs”)

A variable interest entity ("VIE") is consolidated by an enterprise if it is deemed the primary beneficiary of the VIE. The Company obtains interests in VIEs through its investments in mortgage-backed securities. The interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for the interest in these VIEs as mortgage-backed securities. See Note 3. The maximum exposure to loss for these VIEs is the carrying value of the mortgage-backed securities. Bimini Capital has a common share investment in a trust, Bimini Capital Trust II, ("BCTII"), used in connection with the issuance of Bimini Capital's junior subordinated notes. BCTII is a VIE, as the holders of the equity investment at risk do not have adequate decision making ability over BCTII’s activities. Bimini Capital's investment was financed directly by BCTII as a result of its loan of the proceeds to Bimini Capital, therefore that investment is not an equity investment at risk and is not a variable interest. Since Bimini Capital is not the primary beneficiary of BCTII, the Company has not consolidated the financial statements of BCTII into its consolidated financial statements, and this investment is accounted for on the equity method. See Note 7.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and margin for derivative instruments. The following table presents the Company’s cash, cash equivalents and restricted cash as of June 30, 2024 and December 31, 2023.

	*June 30, 2024*		*December 31, 2023*
Cash and cash equivalents	$	4,941,339	$	3,716,386
Restricted cash		1,282,199		753,900
Total cash, cash equivalents and restricted cash	$	6,223,538	$	4,470,286

The Company maintains cash balances at several banks and excess margin with two exchange clearing members. At times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. Restricted cash balances are uninsured, but are held in separate accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and exchange clearing members and believes that it is not exposed to significant credit risk on cash and cash equivalents or restricted cash balances.

Advisory Services

Bimini Advisors manages and advises Orchid pursuant to the terms of a management agreement. See Note 2. Under the terms of the management agreement, Orchid is obligated to pay Bimini Advisors a monthly management fee and a pro rata portion of certain overhead costs and to reimburse the Company for any direct expenses incurred on its behalf. Revenues from management fees are recognized over the period of time in which the service is performed.

Mortgage-Backed Securities

The Company invests primarily in mortgage pass-through (“PT”) mortgage-backed securities issued by Freddie Mac, Fannie Mae or Ginnie Mae (“MBS”), collateralized mortgage obligations (“CMOs”), interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interest in or obligations backed by pools of mortgage-backed loans. The Company refers to MBS and CMOs as PT MBS and IO and IIO securities as structured MBS. The Company has elected to account for its investment in MBS under the fair value option. Electing the fair value option requires the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of the Company’s operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed.

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The Company records MBS transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the MBS balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the MBS balance with an offsetting receivable recorded.

Fair value is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in the most advantageous market for the asset or liability. Estimated fair values for MBS are based on independent pricing sources and/or third-party broker quotes, when available.

Income on PT MBS is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. Premium loss and discount accretion resulting from monthly principal repayments are reflected in unrealized gains and losses on MBS in the consolidated statements of operations. For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of MBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. The amount reported as unrealized gains or losses on mortgage-backed securities thus captures the net effect of changes in the fair market value of securities caused by market developments and any premium or discount lost as a result of principal repayments during the period. Realized gains and losses on sales of MBS and U.S. Treasury Notes, using the specific identification method, are reported as a separate component of net portfolio income on the statement of operations.

Orchid Island Capital, Inc. Common Stock

The Company accounts for its investment in Orchid common shares at fair value. The change in the fair value and dividends received on this investment are reflected in the consolidated statements of operations for each reporting period. We estimate the fair value of Orchid’s common shares on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock on a national stock exchange.

Retained Interests in Securitizations

The Company holds retained interests in the subordinated tranches of securities created in securitization transactions. The carrying value of these retained interests is zero, as the prospect of future cash flows being received is uncertain. Any cash received from the retained interests is reflected as a gain in the consolidated statements of operations.

Derivative Financial Instruments

The Company has historically used derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future. The principal instruments that the Company has used are interest rate futures contracts, and “to-be-announced” (“TBA”) securities transactions. The Company accounts for TBA securities as derivative instruments. Other types of derivative instruments may be used in the future. Gains and losses associated with derivative transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations.

During the six and three months ended June 30, 2024 and 2023, the Company only held U.S. Treasury Note ("T-Note") and Secured Overnight Financing Rate ("SOFR") futures contracts. The Company recorded gains of approximately $1.4 million and $0.2 million on these instruments during the six and three months ended June 30, 2024 , respectively, $0.2 and $0.5 million during the six and three months ended June 30, 2023, respectively.

Derivative instruments are carried at fair value, and changes in fair value are recorded in the consolidated operations for each period. The Company’s derivative financial instruments are not designated as hedge accounting relationships, but rather are used as economic hedges of its portfolio assets and liabilities. Gains and losses on derivatives, except those that result in cash receipts or payments, are included in operating activities on the statements of cash flows. Cash payments and cash receipts from settlement of derivatives, including current period net cash settlements on interest rate swaps, are classified as an investing activity on the statements of cash flows. The Company's derivative agreements generally contain provisions that allow for netting or setting off derivative assets and liabilities with the counterparty; however, related assets and liabilities are reported on a gross basis in the Company's consolidated balance sheets. Derivative instruments in a gain position are reported as derivative assets at fair value and derivative instruments in a loss position are reported as derivative liabilities at fair value in the consolidated balance sheets.

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Holding derivatives creates exposure to credit risk related to the potential for failure by counterparties to honor their commitments. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. The Company’s derivative agreements require it to post or receive collateral to mitigate such risk. In addition, the Company uses only registered central clearing exchanges and well-established commercial banks as counterparties, monitors positions with individual counterparties and adjusts posted collateral as required. The Company’s futures contracts are exchange traded contracts that are valued based on exchange pricing with daily margin requirements. The margin requirement varies based on the market value of the open position and the equity retained in the account. Margin posted is treated as settlement of the outstanding value of the futures contract. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s balance sheets. The Company realizes gains and losses on these contracts upon expiration equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.

Financial Instruments

The fair value of financial instruments is disclosed either in the body of the consolidated financial statements or in the accompanying notes. MBS, Orchid common stock and derivative assets and liabilities are accounted for at fair value in the consolidated balance sheets. The methods and assumptions used to estimate fair value for these instruments are presented in Note 12.

Property and Equipment, net

Property and equipment, net, consists of computer equipment with a depreciable life of 3 years, office furniture and equipment with depreciable lives of 8 to 20 years, land which has no depreciable life, and our building and its improvements with depreciable lives of 30 years. Property and equipment is recorded at acquisition cost and depreciated to their respective salvage values using the straight-line method over the estimated useful lives of the assets. Depreciation is included in administrative and other expenses in the consolidated statement of operations.

Repurchase Agreements

The Company finances the acquisition of the majority of its PT MBS through the use of repurchase agreements under master repurchase agreements. Repurchase agreements are accounted for as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.

Earnings Per Share

Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the treasury stock or two-class method, as applicable for common stock equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive.

Outstanding shares of Class B Common Stock, participating and convertible into Class A Common Stock, are entitled to receive dividends in an amount equal to the dividends declared, if any, on each share of Class A Common Stock. Accordingly, shares of the Class B Common Stock are included in the computation of basic EPS using the two-class method and, consequently, are presented separately from Class A Common Stock.

The shares of Class C Common Stock are not included in the basic EPS computation as these shares do not have participation rights. The outstanding shares of Class B and Class C Common Stock are not included in the computation of diluted EPS for the Class A Common Stock as the conditions for conversion into shares of Class A Common Stock were not met.

Income Taxes

Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities represent the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates. The measurement of net deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it is more likely than not that they will not be realized in future accounting periods.

The Company’s U.S. federal income tax returns for years ended on or after December 31, 2020 remain open for examination. Although management believes its calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of a tax examination, should it occur, could be materially different from the tax returns filed by the Company, and those differences could result in significant costs or benefits to the Company. Bimini Capital and its includable subsidiaries, and Royal Palm and its includable subsidiaries, file their tax returns as separate tax paying entities.

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The Company assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained during a tax examination based on the facts, circumstances and information available. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The difference between the benefit recognized and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit and is recorded as a liability in the consolidated balance sheets. The Company has recorded no such liabilities. The Company records income tax-related interest and penalties, if applicable, within the income tax provision.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segments.” The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis. Amendments in ASU 2023-07 include: a requirement that a public entity provide all annual disclosures about a reportable segment’s profit or loss in its interim period disclosures, disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), disclosure of amounts for other segment items by reportable segment and a description of its composition, clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit or loss, requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss, and requires that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 as well as all existing disclosures required in Topic 280. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of ASU 2023-07 on its future financial statements.

In December 2023, the FASB ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its future income tax related disclosures.

NOTE 2. ADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the terms of a management agreement. 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. Bimini Advisors receives 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.

The Company also provides certain repurchase agreement trading, clearing and administrative services to Orchid. 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.

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Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and to pay to Bimini Advisors an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. Orchid is required to pay Bimini Advisors by the 15th day of the month following the month the services are performed. The management agreement has been renewed through February 20, 2025 and provides for automatic one-year extension options thereafter. Should Orchid terminate the management agreement without cause, it will be obligated to pay Bimini Advisors 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 applicable renewal term.

The following table summarizes the advisory services revenue from Orchid for the six and three months ended June 30, 2024 and 2023.

(in thousands)
	*Six Months Ended June 30,*				*Three Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Management fee	$	4,418	$	5,346	$	2,257	$	2,704
Allocated overhead		1,330		1,215		732		639
Repurchase, clearing and administrative Fee		348		338		178		173
Total	$	6,096	$	6,899	$	3,167	$	3,516

At June 30, 2024 and December 31, 2023, the net amount due from Orchid was approximately $1.1 million and $1.0 million, respectively.

NOTE 3. MORTGAGE-BACKED SECURITIES

The following table presents the Company’s MBS portfolio as of June 30, 2024 and December 31, 2023:

(in thousands)
	June 30, 2024						December 31, 2023
	Par Value		Cost (1)		Fair Value		Par Value		Cost (1)		Fair Value
Fixed-rate MBS	$	84,732	$	86,120	$	83,961	$	88,807	$	91,701	$	90,181
Structured MBS ⁽²⁾		n/a		1,681		2,454		n/a		1,787		2,550
Total	$	84,732	$	87,801	$	86,415	$	88,807	$	93,488	$	92,731

(1)	The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio.
(2)	The notional balance for the structured MBS portfolio was $17.8 million and $18.9 million as of June 30, 2024 and December 31, 2023, respectively.

The following table is a summary of the Company's net gain (loss) from the sale of mortgage-backed securities for the six months ended June 30, 2024 and 2023.

(in thousands)
	*2024*			*2023*
Proceeds from sales of MBS	$	46,252		$	-
Carrying value of MBS sold		(46,814	)		-
Net loss on sales of MBS	$	(562	)	$	-

Gross gain on sales of MBS	$	-		$	-
Gross loss on sales of MBS		(562	)		-
Net loss on sales of MBS	$	(562	)	$	-

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NOTE 4. REPURCHASE AGREEMENTS

The Company pledges certain of its MBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. During the six months ended June 30, 2024 and 2023, the Company had met all margin call requirements.

As of June 30, 2024 and December 31, 2023, the Company’s repurchase agreements had remaining maturities as summarized below:

($ in thousands)
	*OVERNIGHT*		*BETWEEN 2*			*BETWEEN 31*			*GREATER*
	*(1 DAY OR*		*AND*			*AND*			*THAN*
	*LESS)*		*30 DAYS*			*90 DAYS*			*90 DAYS*		*TOTAL*
June 30, 2024
Fair value of securities pledged, including accrued interest receivable	$	-	$	17,095		$	69,483		$	-	$	86,578
Repurchase agreement liabilities associated with these securities	$	-	$	16,390		$	66,486		$	-	$	82,876
Net weighted average borrowing rate		-		5.49	%		5.46	%		-		5.47	%
December 31, 2023
Fair value of securities pledged, including accrued interest receivable	$	-	$	68,477		$	24,584		$	-	$	93,061
Repurchase agreement liabilities associated with these securities	$	-	$	63,637		$	23,270		$	-	$	86,907
Net weighted average borrowing rate		-		5.56	%		5.57	%		-		5.56	%

In addition, cash pledged to counterparties for repurchase agreements was approximately $0.4 million as of June 30, 2024. There was no cash pledged to counterparties for repurchase agreements as of December 31, 2023.

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable, and cash posted by the Company as collateral, if any. At June 30, 2024 and December 31, 2023, the Company had an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable, and the fair value of securities and any cash pledged, including accrued interest on such securities) with all counterparties of approximately $4.0 million and $6.0 million, respectively. Summary information regarding amounts at risk with individual counterparties greater than 10% of the Company's stockholders' equity at June 30, 2024 and December 31, 2023 is presented in the table below.

($ in thousands)
			*% of*			*Weighted*
			*Stockholders'*			*Average*
	*Amount*		*Equity*			*Maturity*
Repurchase Agreement Counterparty	*at Risk*		*at Risk*			*(in Days)*
June 30, 2024
DV Securities, LLC Repo	$	1,176		14.6	%		89
Mirae Asset Securities (USA) Inc.		978		12.1	%		80
South Street Securities, LLC		827		10.3	%		86
December 31, 2023
Mirae Asset Securities (USA), Inc.	$	1,564		19.2	%		18
Citigroup Global Markets, Inc.		1,302		16.0	%		26
Mitsubishi UFJ Securities, Inc.		1,128		13.9	%		23
South Street Securities, LLC		922		11.3	%		52

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NOTE 5. PLEDGED ASSETS

Assets Pledged to Counterparties

The table below summarizes Bimini’s assets pledged as collateral under its repurchase agreements and derivative agreements as of June 30, 2024 and December 31, 2023.

($ in thousands)
	*June 30, 2024*						*December 31, 2023*
	*Repurchase*		*Derivative*				*Repurchase*		*Derivative*
	*Agreements*		*Agreements*		*Total*		*Agreements*		*Agreements*		*Total*
PT MBS - at fair value	$	83,862	$	-	$	83,862	$	90,180	$	-	$	90,180
Structured MBS - at fair value		2,292		-		2,292		2,395		-		2,395
Accrued interest on pledged securities		424		-		424		486		-		486
Restricted cash		427		855		1,282		-		754		754
Total	$	87,005	$	855	$	87,860	$	93,061	$	754	$	93,815

NOTE 6. OFFSETTING ASSETS AND LIABILITIES

The Company’s derivatives and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following tables present information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2024 and December 31, 2023.

(in thousands)
*Offsetting of Liabilities*
					*Net Amount*		*Gross Amount Not Offset*
			*Gross*		*of Liabilities*		*in the*
	*Gross*		*Amount*		*Presented*		*Consolidated Balance Sheet*
	*Amount*		*Offset in the*		*in the*		*Financial*
	of		*Consolidated*		*Consolidated*		*Instruments*			*Cash*
	*Recognized*		*Balance*		*Balance*		*Posted as*			*Posted as*			*Net*
	*Liabilities*		*Sheet*		*Sheet*		*Collateral*			*Collateral*			*Amount*
June 30, 2024
Repurchase Agreements	$	82,876	$	-	$	82,876	$	(82,449	)	$	(427	)	$	-
	$	82,876	$	-	$	82,876	$	(82,449	)	$	(427	)	$	-
December 31, 2023
Repurchase Agreements	$	86,907	$	-	$	86,907	$	(86,907	)	$	-		$	-
	$	86,907	$	-	$	86,907	$	(86,907	)	$	-		$	-

The amounts disclosed for collateral received by or posted to the same counterparty are limited to the amount sufficient to reduce the asset or liability presented in the consolidated balance sheet to zero. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 5 for a discussion of collateral posted for, or received against, repurchase obligations and derivative instruments.

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NOTE 7. LONG-TERM DEBT

Long-term debt at June 30, 2024 and December 31, 2023 is summarized as follows:

(in thousands)
	*June 30, 2024*		*December 31, 2023*
Junior subordinated debt	$	26,804	$	26,804
Secured note payable		578		590
Total	$	27,382	$	27,394

Junior Subordinated Debt

During 2005, Bimini Capital sponsored the formation of a statutory trust, known as Bimini Capital Trust II (“BCTII”) of which 100% of the common equity is owned by Bimini Capital. It was formed for the purpose of issuing trust preferred capital securities to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt securities of Bimini Capital. The debt securities held by BCTII are the sole assets of BCTII.

As of June 30, 2024 and December 31, 2023, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million. Through June 30, 2023, the BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes had a rate of interest that floated at a spread of 3.50% over the prevailing three-month LIBOR rate. Starting June 30, 2023, the underlying index converted from three-month LIBOR to CME 3-month Term SOFR plus a tenor spread adjustment of 0.26161%. The interest rate for subsequent accrual periods will be CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. The CME Term SOFR index is in effect for all interest rate resets after July 3, 2023. As of June 30, 2024, the interest rate was 9.10%. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes require quarterly interest distributions and are redeemable at Bimini Capital's option, in whole or in part and without penalty. Bimini Capital's BCTII Junior Subordinated Notes are subordinate and junior in right of payment to all present and future senior indebtedness.

The Company's included consolidated financial statements present Bimini Capital's BCTII Junior Subordinated Notes issued to BCTII as a liability and Bimini Capital's investment in the common equity securities of BCTII as an asset (included in other assets). For financial statement purposes, Bimini Capital records payments of interest on the Junior Subordinated Notes issued to BCTII as interest expense.

Secured 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 $5,000 through October 30, 2039. Interest accrues at 4.89% through October 30, 2024. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.

The table below presents the future scheduled principal payments on the Company’s long-term debt.

(in thousands)
Last six months of 2024	$	15
For the years ended:
2025		26
2026		28
2027		29
2028		30
After 2028		27,254
Total	$	27,382

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NOTE 8. COMMON STOCK

There were no issuances of Bimini Capital's Class A Common Stock, Class B Common Stock or Class C Common Stock during the six months ended June 30, 2024 and 2023.

Stock Repurchase Plans

On September 16, 2021, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2021 Repurchase Plan”). Pursuant to the 2021 Repurchase Plan, the Company could purchase shares of its Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases could be executed through various means, including, without limitation, open market transactions. From the commencement of the 2021 Repurchase Plan, through its expiration on September 16, 2023, the Company repurchased a total of 789,024 shares at an aggregate cost of approximately $1.3 million, including commissions and fees, for a weighted average price of $1.60 per share.

On March 7, 2024, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2024 Repurchase Plan”). Pursuant to the 2024 Repurchase Plan, the Company can purchase shares of its Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases can be executed through various means, including, without limitation, open market transactions. The 2024 Repurchase Plan does not obligate the Company to purchase any shares, and expires on March 7, 2026. The authorization for the 2024 Repurchase Plan can be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time. The Company has not repurchased any shares under the 2024 Repurchase Plan.

The Inflation Reduction Act of 2022 included a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions, including a $1 million threshold before the tax becomes applicable. The excise tax is effective beginning in 2023. The amount of stock repurchases during the six months ended June 30, 2024 and 2023 were under the $1 million threshold, so no accrual for this excise tax has been recorded.

NOTE 9. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business.

As previously disclosed, in April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to 2007. As of June 30, 2024, no further information has been received related to this matter and the Company believes the demands are without merit. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the likelihood of a material adverse outcome is remote. Accordingly, no provision or accrual has been recorded.

Management is not aware of any other significant reported or unreported contingencies at June 30, 2024.

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NOTE 10. INCOME TAXES

The total income tax provision recorded for the six months ended June 30, 2024 and 2023 was $0.5 million and $0.4 million, respectively, on consolidated pre-tax book income of $0.4 million and $1.7 million, respectively. The total income tax provision recorded for the three months ended June 30, 2024 and 2023 was $0.1 million and $0.1 million, respectively, on consolidated pre-tax book (loss) income of $(0.2) million and $0.4 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. The Company's income tax provision could be affected by numerous factors, including nondeductible expenses, the projected utilization of net operating loss carryovers and changes in its deferred tax assets and liabilities and their valuations. The Company’s tax provisions are based on estimated annual tax rates applied to actual income to date and include the expected realization of a portion of the tax benefits of federal and state net operating losses carryforwards (“NOLs”). In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized in future accounting periods. The ultimate realization of capital loss and NOL carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a valuation allowance against a portion of the deferred tax assets generated by the NOLs since the Company believes that it is more likely than not that some of the benefits will not be realized in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting date.

NOTE 11. EARNINGS PER SHARE

Shares of Class B common stock, participating and convertible into Class A common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, and when, authorized and declared by the Board of Directors. Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at June 30, 2024 and 2023.

Shares of Class C common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at June 30, 2024 and 2023.

The table below reconciles the numerator and denominator of EPS for the six and three months ended June 30, 2024 and 2023.

(in thousands, except per-share information)
	*Six Months Ended June 30,*					*Three Months Ended June 30,*
	*2024*			*2023*		*2024*			*2023*
Basic and diluted EPS per Class A common share:
(Loss) income attributable to Class A common shares:
Basic and diluted	$	(61	)	$	1,287	$	(273	)	$	285
Weighted average common shares:
Class A common shares outstanding at the balance sheet date		10,005			10,020		10,005			10,020
Weighted average shares-basic and diluted		10,005			10,020		10,005			10,020
(Loss) income per Class A common share:
Basic and diluted	$	(0.01	)	$	0.13	$	(0.03	)	$	0.03

(in thousands, except per-share information)
	*Six Months Ended June 30,*					*Three Months Ended June 30,*
	*2024*			*2023*		*2024*			*2023*
Basic and diluted EPS per Class B common share:
(Loss) income attributable to Class B common shares:
Basic and diluted	$	-		$	4	$	(1	)	$	1
Weighted average common shares:
Class B common shares outstanding at the balance sheet date		32			32		32			32
Weighted average shares-basic and diluted		32			32		32			32
(Loss) income per Class B common share:
Basic and diluted	$	(0.01	)	$	0.13	$	(0.03	)	$	0.03

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NOTE 12. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include presentation of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These inputs are:

●

Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),

●

Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and

●

Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

The Company's MBS, Orchid common stock and retained interests were all recorded at fair value on a recurring basis as of June 30, 2024 and December 31, 2023. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.

The Company's MBS are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third-party broker quotes. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. The Company and the independent pricing sources use various valuation techniques to determine the price of the Company’s securities. These techniques include observing the most recent market for like or identical assets (including security coupon, maturity, yield, and prepayment speeds), spread pricing techniques to determine market credit spreads (option adjusted spread, zero volatility spread, spread to the U.S. Treasury curve or spread to a benchmark such as a TBA security), and model driven approaches (the discounted cash flow method, Black Scholes and SABR models which rely upon observable market rates such as the term structure of interest rates and volatility). The appropriate spread pricing method used is based on market convention. The pricing source determines the spread of recently observed trade activity or observable markets for assets similar to those being priced. The spread is then adjusted based on variances in certain characteristics between the market observation and the asset being priced. Those characteristics include: type of asset, the expected life of the asset, the stability and predictability of the expected future cash flows of the asset, whether the coupon of the asset is fixed or adjustable, the guarantor of the security if applicable, the coupon, the maturity, the issuer, size of the underlying loans, year in which the underlying loans were originated, loan to value ratio, state in which the underlying loans reside, credit score of the underlying borrowers and other variables if appropriate. The fair value of the security is determined by using the adjusted spread.

The Company’s futures contracts are Level 1 valuations, as they are exchange-traded instruments and quoted market prices are readily available. Futures contracts are settled daily. Retained interests have a recorded fair value of zero as of June 30, 2024 and December 31, 2023, as the prospect of future cash flows is uncertain based on a Level 3 valuation analysis. Any cash received from the retained interests is reflected as a gain in the consolidated statements of operations.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities generally approximates their carrying values due to the short-term nature of these financial instruments. The Company estimates the fair value of the cash and cash equivalents and restricted cash using Level 1 inputs, and the accrued interest receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities using Level 2 inputs. The fair value of the Company’s junior subordinated debt approximates its carrying value. The carrying value is a reasonable estimate of fair value since the instrument carries a floating rate that resets frequently. Further information regarding this instrument is presented in Note 7.

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The following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

(in thousands)
			*Quoted Prices*
			*in Active*		*Significant*
			*Markets for*		*Other*		*Significant*
			*Identical*		*Observable*		*Unobservable*
	*Fair Value*		*Assets*		*Inputs*		*Inputs*
	*Measurements*		*(Level 1)*		*(Level 2)*		*(Level 3)*
June 30, 2024
Mortgage-backed securities	$	86,415	$	-	$	86,415	$	-
Orchid Island Capital, Inc. common stock		4,746		4,746		-		-
December 31, 2023
Mortgage-backed securities	$	92,731	$	-	$	92,731	$	-
Orchid Island Capital, Inc. common stock		4,797		4,797		-		-

During the six months ended June 30, 2024 and 2023, there were no transfers of financial assets or liabilities between Levels 1, 2 or 3.

NOTE 13. SEGMENT INFORMATION

The Company’s operations are classified into two principal reportable segments: the asset management segment and the investment portfolio segment.

The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. As discussed in Note 2, the revenues of the asset management segment consist of management fees and overhead reimbursements received pursuant to a management agreement with Orchid. Total revenues received under this management agreement for the six and three months ended June 30, 2024 were approximately $6.1 million and $3.2 million, respectively, accounting for approximately 66% and 68% of consolidated revenues, respectively. Total revenues received under this management agreement for the six and three months ended June 30, 2023 were approximately $6.9 million and $3.5 million, respectively, accounting for approximately 81% and 81% of consolidated revenues, respectively.

The investment portfolio segment includes the investment activities conducted by Royal Palm. The investment portfolio segment receives revenue in the form of interest and dividend income on its investments.

Segment information for the six months ended June 30, 2024 and 2023 is as follows:

(in thousands)
	*Asset*			*Investment*
	*Management*			*Portfolio*			*Corporate*			*Eliminations*			*Total*
2024
Advisory services, external customers	$	6,096		$	-		$	-		$	-		$	6,096
Advisory services, other operating segments⁽¹⁾		62			-			-			(62	)		-
Interest and dividend income		-			3,090			1			-			3,091
Interest expense⁽²⁾		-			(2,365	)		(1,212	)		-			(3,577	)
Net revenues		6,158			725			(1,211	)		(62	)		5,610
Other revenue		-			647			-			-			647
Operating expenses⁽³⁾		(3,695	)		(2,116	)		(2	)		-			(5,813	)

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