[10-Q] BIMINI CAPITAL MANAGEMENT, INC. Quarterly Earnings Report
Bimini Capital Management (BMNM) reported stronger Q3 2025 results. For the quarter ended September 30, total revenues were $6.2 million, driven by advisory services of $4.46 million and interest/dividend income of $1.74 million. Net income for the quarter was $1.82 million, compared with $0.26 million a year ago. For the nine‑month period, revenues totaled $17.3 million and net income was $2.42 million, up from $0.20 million in 2024.
On the balance sheet as of September 30, 2025, assets were $139.7 million, including mortgage‑backed securities at fair value of $104.4 million and cash and cash equivalents of $9.56 million. Liabilities were $130.5 million, primarily repurchase agreements of $100.0 million and long‑term debt of $27.35 million. Stockholders’ equity rose to $9.24 million from $6.82 million at December 31, 2024. The company owned 569,071 shares of Orchid Island Capital and recorded $0.61 million of dividends for the nine months. Class A shares outstanding were 10,005,457 as of November 6, 2025. Advisory revenues from managing Orchid accounted for about 68% of year‑to‑date consolidated revenues.
- None.
- None.
Insights
Q3 profitability improved; revenues concentrated in advisory fees.
BMNM posted Q3 net income of
Balance sheet leverage centers on repurchase agreements of
Equity improved to
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number:
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| Bimini Capital Management, Inc. |
| (Exact name of registrant as specified in its charter) |
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(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.
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).
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 | ☐ |
| | ☐ | 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
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 | November 6, 2025 | |
| Class B Common Stock, $0.001 par value | November 6, 2025 | |
| Class C Common Stock, $0.001 par value | November 6, 2025 | |
BIMINI CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
| Page |
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| 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 |
19 |
| ITEM 3. Quantitative and Qualitative Disclosures About Market Risk |
37 |
| ITEM 4. Controls and Procedures |
37 |
| PART II. OTHER INFORMATION |
|
| ITEM 1. Legal Proceedings |
38 |
| ITEM 1A. Risk Factors |
38 |
| ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds |
38 |
| ITEM 3. Defaults Upon Senior Securities |
38 |
| ITEM 4. Mine Safety Disclosures |
38 |
| ITEM 5. Other Information |
38 |
| ITEM 6. Exhibits |
39 |
| SIGNATURES |
40 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this Report that are subject to risks and uncertainties. In some cases, these statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “should,” “may,” “plans,” “projects,” “will,” or similar expressions, or the negative of these words. These forward-looking statements involve risks and uncertainties because they relate to events, developments, and circumstances relating to our business, industry financial condition, liquidity, results of operations, plans and objectives and/or general economic or other conditions that may or may not occur in the future or may occur on longer or shorter timelines or to a greater or lesser degree than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Report as a result of the following factors, among others:
| ● |
adverse movements in interest rates; |
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| ● | our business and investment strategy; |
| ● |
our ability to acquire investments on attractive terms; |
| ● |
the effect of prepayment rates on the value of our assets; |
|
| ● | our ability to access the capital markets; | |
| ● | our ability to obtain future financing arrangements; | |
| ● | our ability to successfully hedge the interest rate risk and prepayment risk associated with our portfolio; | |
| ● | our understanding of our competition and our ability to compete effectively; | |
| ● | our ability to quantify risk based on historical experience; | |
| ● | our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our net operating loss carryforwards (“NOLs”) to offset future taxable income, including whether our stockholder rights plan will be effective in preventing an ownership change that would significantly limit our ability to utilize such NOLs; | |
| ● | the impact of technology on our operations and business; | |
| ● | our ability to maintain our exemption from the obligation to register under the Investment Company Act of 1940, as amended; | |
| ● | market trends; | |
| ● | the effect of actual, anticipated or proposed actions of the U.S. government, including the U.S. Federal Reserve, the Federal Housing Finance Agency, the Federal Housing Administration, the Federal Open Market Committee and the U.S. Treasury, on interest rates, monetary policy, fiscal policy and the housing and credit markets; | |
| ● | the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie-Mae and Freddie Mac and the U.S. government; | |
| ● | the impact of inflation on general economic conditions and monetary policy; | |
| ● | the impact of future changes in tax laws or tax rates; | |
| ● | geopolitical events, government responses to such events and the related impact on the economy both nationally and internationally; and | |
| ● | other risks described from time to time in our filings with the Securities and Exchange Commission (the “SEC”). |
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption “Risk Factors” in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2024 and any subsequent reports filed with or furnished to the SEC. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| BIMINI CAPITAL MANAGEMENT, INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Unaudited) September 30, 2025 | December 31, 2024 | |||||||
| ASSETS: | ||||||||
| Mortgage-backed securities, at fair value: | ||||||||
| Pledged to counterparties | $ | $ | ||||||
| Unpledged | ||||||||
| Total mortgage-backed securities | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Orchid Island Capital, Inc. common stock, at fair value | ||||||||
| Accrued interest receivable | ||||||||
| Property and equipment, net | ||||||||
| Deferred tax assets, net | ||||||||
| Due from affiliates | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Repurchase agreements | $ | $ | ||||||
| Long-term debt | ||||||||
| Accrued interest payable | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 9) | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; shares designated Series A Junior Preferred Stock, shares undesignated; shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Class A Common stock, $ par value; shares designated: shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Class B Common stock, $ par value; shares designated, shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Class C Common stock, $ par value; shares designated, shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
| BIMINI CAPITAL MANAGEMENT, INC. |
|||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||
| (Unaudited) |
|||||||||
| For the Nine and Three Months Ended September 30, 2025 and 2024 |
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2025 |
2024 |
2025 |
2024 |
|||||||||||||
| Revenues: |
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| Advisory services |
$ | $ | $ | $ | ||||||||||||
| Interest income |
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| Dividend income from Orchid Island Capital, Inc. common stock |
||||||||||||||||
| Total revenues |
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| Interest expense: |
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| Repurchase agreements |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Long-term debt |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net revenues |
||||||||||||||||
| Other income (expense): |
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| Unrealized gains on mortgage-backed securities |
||||||||||||||||
| Realized losses on mortgage-backed securities |
( |
) | ( |
) | ||||||||||||
| Unrealized losses on Orchid Island Capital Inc. common stock |
( |
) | ( |
) | ( |
) | ||||||||||
| Losses on derivative instruments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income |
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| Other (expense) income, net |
( |
) | ||||||||||||||
| Expenses: |
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| Compensation and related benefits |
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| Direct advisory services costs |
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| Directors' fees and liability insurance |
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| Audit, legal and other professional fees |
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| Administrative and other expenses |
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| Total expenses |
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| Net income before income tax provision |
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| Income tax provision |
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| Net income |
$ | $ | $ | $ | ||||||||||||
| Basic and Diluted Net Income Per Share of: |
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| CLASS A COMMON STOCK |
||||||||||||||||
| Basic and Diluted |
$ | $ | $ | $ | ||||||||||||
| CLASS B COMMON STOCK |
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| Basic and Diluted |
$ | $ | $ | $ | ||||||||||||
| Weighted Average Shares Outstanding: |
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| CLASS A COMMON STOCK |
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| Basic and Diluted |
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| CLASS B COMMON STOCK |
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| Basic and Diluted |
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See Notes to Condensed Consolidated Financial Statements
| BIMINI CAPITAL MANAGEMENT, INC. |
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| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
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| (Unaudited) |
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| For the Nine and Three Months Ended September 30, 2025 and 2024 |
| Stockholders' Equity |
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| Additional | ||||||||||||||||||||
| Common Stock, all classes |
Paid-in |
Accumulated |
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| Shares |
Par Value |
Capital |
Deficit |
Total |
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| Balances, January 1, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income |
- | |||||||||||||||||||
| Balances, March 31, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income |
- | |||||||||||||||||||
| Balances, June 30, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income |
- | |||||||||||||||||||
| Balances, September 30, 2025 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Balances, January 1, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income |
- | |||||||||||||||||||
| Balances, March 31, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||
| Balances, June 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net income |
- | |||||||||||||||||||
| Balances, September 30, 2024 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| BIMINI CAPITAL MANAGEMENT, INC. |
|||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||
| (Unaudited) |
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| For the Nine Months Ended September 30, 2025 and 2024 |
| 2025 |
2024 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Depreciation |
||||||||
| Deferred income tax provision |
||||||||
| Unrealized gains on mortgage-backed securities |
( |
) | ( |
) | ||||
| Realized losses on mortgage-backed securities |
||||||||
| Unrealized losses on Orchid Island Capital, Inc. common stock |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Accrued interest receivable |
( |
) | ||||||
| Due from affiliates |
( |
) | ( |
) | ||||
| Other assets |
( |
) | ( |
) | ||||
| Accrued interest payable |
( |
) | ||||||
| Other liabilities |
( |
) | ( |
) | ||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
( |
) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| From mortgage-backed securities investments: |
||||||||
| Purchases |
( |
) | ||||||
| Sales |
||||||||
| Principal repayments |
||||||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from repurchase agreements |
||||||||
| Principal repayments on repurchase agreements |
( |
) | ( |
) | ||||
| Principal repayments on long-term debt |
( |
) | ( |
) | ||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
( |
) | ||||||
| NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period |
||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest expense |
$ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
BIMINI CAPITAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2025
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 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 residential mortgage-backed securities (“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 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. Bimini Advisors also manages the MBS portfolio of Royal Palm.
Segment Reporting
The Company’s operations are classified into 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 statement of results for the interim periods are included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
The consolidated balance sheet at December 31, 2024 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 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
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, 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 MBS. 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 MBS. See Note 3. The maximum exposure to loss for these VIEs is the carrying value of the MBS.
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 September 30, 2025 and December 31, 2024.
| September 30, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
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. 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”) MBS issued by Freddie Mac, Fannie Mae or Ginnie Mae, 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.
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 MBS in the accompanying consolidated statements of operations. The amount reported as unrealized gains or losses on MBS 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, 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.
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 nine and three months ended September 30, 2025 and 2024, the Company only held U.S. Treasury Note (“T-Note”) and Secured Overnight Financing Rate (“SOFR”) futures contracts. The Company recorded losses of approximately $(
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, if any, are reported as derivative assets at fair value and derivative instruments in a loss position, if any, are reported as derivative liabilities at fair value in the consolidated balance sheets.
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
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 fully realized in future accounting periods.
The Company’s U.S. federal income tax returns for years ended on or after December 31, 2022 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.
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
We adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments, beginning with our Annual Report on Form 10-K for the year ended December 31, 2024. The ASU is applicable to our interim periods beginning in 2025. The amendments in the ASU require disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The adoption did not have a material impact on our financial statements.
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, greater disaggregation of information in the income tax rate reconciliation and for paid income taxes to be disaggregated by jurisdiction. On January 1, 2025, the ASU became effective. This ASU affects financial statement disclosure only, which is not required until year-end 2025 and, as a result, does not affect our results of operations or financial condition.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Consolidated Statements of Income, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption allowed. We are currently evaluating the impact of adoption on our financial 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- of |
| ● | One- of |
| ● | One- of |
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 |
| ● | a fee for the clearing and operational services provided by personnel of the Manager equal to $ |
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, 2026 and provides for automatic -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 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 nine and three months ended September 30, 2025 and 2024.
| (in thousands) | ||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Management fee | $ | $ | $ | $ | ||||||||||||
| Allocated overhead | ||||||||||||||||
| Repurchase, clearing and administrative fee | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
At September 30, 2025 and December 31, 2024, the net amount due from Orchid was approximately $
NOTE 3. MORTGAGE-BACKED SECURITIES
The following table presents the Company’s MBS portfolio as of September 30, 2025 and December 31, 2024:
| (in thousands) | ||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Par Value | Cost (1) | Fair Value | Par Value | Cost (1) | Fair Value | |||||||||||||||||||
| Fixed-rate MBS | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Structured MBS (2) | n/a | n/a | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (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 $ |
The following table is a summary of the Company’s net gain (loss) from the sales of MBS for the nine months ended September 30, 2025 and 2024.
| (in thousands) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Proceeds from sales of MBS | $ | $ | ||||||
| Carrying value of MBS sold | ( | ) | ( | ) | ||||
| Net loss on sales of MBS | $ | ( | ) | $ | ( | ) | ||
| Gross gain on sales of MBS | $ | $ | ||||||
| Gross loss on sales of MBS | ( | ) | ( | ) | ||||
| Net loss on sales of MBS | $ | ( | ) | $ | ( | ) | ||
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 three months ended September 30, 2025 and 2024, the Company had met all margin call requirements.
As of September 30, 2025 and December 31, 2024, 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 | ||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | |||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | % | ||||||||||||||||
In addition, cash pledged to counterparties for repurchase agreements was approximately $
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 September 30, 2025 and December 31, 2024, 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 $
| ($ in thousands) | ||||||||||||
| % of | Weighted | |||||||||||
| Stockholders' | Average | |||||||||||
| Amount | Equity | Maturity | ||||||||||
| Repurchase Agreement Counterparty | at Risk | at Risk | (in Days) | |||||||||
| September 30, 2025 | ||||||||||||
| Marex Capital Markets Inc. | $ | % | ||||||||||
| Mirae Asset Securities (USA) Inc. | % | |||||||||||
| December 31, 2024 | ||||||||||||
| South Street Securities, LLC | $ | % | ||||||||||
| Marex Capital Markets Inc. | % | |||||||||||
| Mitsubishi UFJ Securities, Inc. | % | |||||||||||
| Mirae Asset Securities (USA) Inc. | % | |||||||||||
| DV Securities, LLC. | % | |||||||||||
| Clear Street LLC | % | |||||||||||
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 September 30, 2025 and December 31, 2024.
| ($ in thousands) | ||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Repurchase | Derivative | Repurchase | Derivative | |||||||||||||||||||||
| Agreements | Agreements | Total | Agreements | Agreements | Total | |||||||||||||||||||
| PT MBS - at fair value | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Structured MBS - at fair value | ||||||||||||||||||||||||
| Accrued interest on pledged securities | ||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Cash pledged to the Company from counterparties under repurchase agreements was $
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 September 30, 2025 and December 31, 2024.
| (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 |
|||||||||||||||||||
| September 30, 2025 |
||||||||||||||||||||||||
| Repurchase Agreements |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| December 31, 2024 |
||||||||||||||||||||||||
| Repurchase Agreements |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
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.
NOTE 7. LONG-TERM DEBT
Long-term debt at September 30, 2025 and December 31, 2024 is summarized as follows:
| (in thousands) | ||||||||
| September 30, 2025 | December 31, 2024 | |||||||
| Junior subordinated debt | $ | $ | ||||||
| Secured note payable | ||||||||
| Total | $ | $ | ||||||
Junior Subordinated Debt
During 2005, Bimini Capital sponsored the formation of a statutory trust, known as BCTII,
As of September 30, 2025 and December 31, 2024, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $
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 $
The table below presents the future scheduled principal payments on the Company’s long-term debt.
| (in thousands) | ||||
| Last three months of 2025 | $ | |||
| For the years: | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| After 2029 (cumulative) | ||||
| Total | $ |
NOTE 8. COMMON STOCK
There were
Stock Repurchase Plans
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 $
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 September 30, 2025, no further information has been received related to this matter. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the demands are without merit and the likelihood of a material adverse outcome is remote. Accordingly, provision or accrual has been recorded.
Management is not aware of any other significant reported or unreported contingencies at September 30, 2025.
NOTE 10. INCOME TAXES
The total income tax provision recorded for the nine months ended September 30, 2025 and 2024 was $
The Company’s tax provisions are computed using actual 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 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 net capital loss carryforwards and NOLs 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 September 30, 2025 and 2024.
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 September 30, 2025 and 2024.
The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, 2025 and 2024.
| (in thousands, except per-share information) | ||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic and diluted EPS per Class A common share: | ||||||||||||||||
| Income attributable to Class A common shares: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares: | ||||||||||||||||
| Class A common shares outstanding at the balance sheet date | ||||||||||||||||
| Weighted average shares-basic and diluted | ||||||||||||||||
| Income per Class A common share: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| (in thousands, except per-share information) | ||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic and diluted EPS per Class B common share: | ||||||||||||||||
| Income attributable to Class B common shares: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares: | ||||||||||||||||
| Class B common shares outstanding at the balance sheet date | ||||||||||||||||
| Weighted average shares-basic and diluted | ||||||||||||||||
| Income per Class B common share: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
NOTE 12. FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (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 and Orchid common stock are recorded at fair value on a recurring basis as of September 30, 2025 and December 31, 2024. 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.
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.
The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024:
| (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) | |||||||||||||
| September 30, 2025 | ||||||||||||||||
| Mortgage-backed securities | $ | $ | $ | $ | ||||||||||||
| Orchid Island Capital, Inc. common stock | ||||||||||||||||
| December 31, 2024 | ||||||||||||||||
| Mortgage-backed securities | $ | $ | $ | $ | ||||||||||||
| Orchid Island Capital, Inc. common stock | ||||||||||||||||
During the nine months ended September 30, 2025 and 2024, there were no transfers of financial assets or liabilities between Levels 1, 2 or 3.
NOTE 13. SEGMENT INFORMATION
The Company’s business is organized into the asset management and the investment portfolio segments, with each representing a reportable segment. Our CODM is our Chief Executive Officer. The results of each segment are regularly reviewed by the CODM to assess the performance of the segment and make decisions regarding the allocation of resources to the segments. The CODM uses both net revenues and income before federal income taxes, to assess the financial performance of the segments and for purposes of allocating resources. The accounting policies of our
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, overhead reimbursements and repurchase, clearing and administrative fees received pursuant to a management agreement with Orchid. Total revenues received under this management agreement for the nine and three months ended September 30, 2025 were approximately $
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.
The majority of our assets, revenues and expenses are directly associated with each respective business segment and are included in determining its asset balance and operating results. Those assets, revenues and expenses that are not directly attributable to a particular business segment are included in the Corporate function. Corporate operating expenses are allocated to the reportable segments based on their proportional share of total revenues. As a result, the sum of each income statement line item for the two reportable segments and the Corporate function is equal to that same income statement line item for the consolidated entity. In addition, the sum of the total assets for the two reportable segments and the Corporate function is equal to the total assets of the consolidated entity.
Segment information for the nine months ended September 30, 2025 and 2024 is as follows:
| (in thousands) | ||||||||||||||||||||
| Asset | Investment | |||||||||||||||||||
| Management | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||
| 2025 | ||||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||||||
| Operating expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Asset | Investment | |||||||||||||||||||
| Management | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||
| 2024 | ||||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||
| Other income, net | ||||||||||||||||||||
| Operating expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
Segment information for the three months ended September 30, 2025 and 2024 is as follows:
| (in thousands) | ||||||||||||||||||||
| Asset | Investment | |||||||||||||||||||
| Management | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||
| 2025 | ||||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||
| Other income, net | ||||||||||||||||||||
| Operating expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Asset | Investment | |||||||||||||||||||
| Management | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||
| 2024 | ||||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense), net | ( | ) | ||||||||||||||||||
| Operating expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| (1) | Includes fees paid by Royal Palm to Bimini Advisors for advisory services at an annualized rate of |
| (2) | Includes interest on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column. |
| (3) | Operating expenses are allocated based on each segment’s proportional share of total revenues. |
Assets in each reportable segment as of September 30, 2025 and December 31, 2024 were as follows:
| (in thousands) | ||||||||||||||||
| Asset | Investment | |||||||||||||||
| Management | Portfolio | Corporate | Total | |||||||||||||
| September 30, 2025 | $ | $ | $ | |||||||||||||
| December 31, 2024 | ||||||||||||||||
NOTE 14. RELATED PARTY TRANSACTIONS
At both September 30, 2025 and December 31, 2024, the Company owned
Robert Cauley, the Chief Executive Officer and Chairman of the Board of Directors of the Company, also serves as Chief Executive Officer and Chairman of the Board of Directors of Orchid, participates in Orchid's long term incentive compensation plan, and owns shares of common stock of Orchid. In addition, Hunter Haas, the Chief Financial Officer, Chief Investment Officer, Treasurer and member of the Board of Directors of the Company, also serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of Orchid’s Board of Directors, participates in Orchid's long term incentive compensation plan, and owns shares of common stock of Orchid. Robert J. Dwyer and Frank E. Jaumot, who are the Company's independent directors, each own shares of common stock of Orchid.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our consolidated financial condition, cash flows, 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. 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., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) is a specialty finance company that operates in two business segments: (i) investing in mortgage-backed securities (“MBS”) and Orchid Island Capital, Inc. (“Orchid”) common stock in our own portfolio, (ii) and serving as the external manager of Orchid which also invests in MBS. In both cases, the principal and interest payments of these MBS are guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as “Agency MBS.” Our investment strategy focuses on, and our portfolios primarily consist of traditional pass-through (“PT”) Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”); and structured Agency MBS, such as interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only securities (“POs”).
The Company’s operations are classified into two reportable segments: the investment portfolio segment and the asset management segment.
The investment portfolio segment includes the investment activities conducted at Bimini Capital’s wholly owned subsidiary, Royal Palm Capital, LLC (collectively with its wholly owned subsidiaries, “Royal Palm”). The investment portfolio segment receives revenue in the form of interest and dividend income on its investments. References to the general management of the Company’s portfolio of MBS refer to the operations of Royal Palm.
The asset management segment includes the arrangement by which the Company, through Bimini Advisors, LLC, an investment advisor registered with the SEC, serves as the external manager of Orchid. From this arrangement the Company receives management fees and expense reimbursements. Bimini Advisors, LLC is a wholly owned subsidiary of Bimini Advisors Holdings, LLC, which is a wholly owned subsidiary of Royal Palm. Bimini Advisors Holdings, LLC and Bimini Advisors, LLC are collectively referred to as “Bimini Advisors.”
Factors that Affect our Results of Operations and Financial Condition
A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:
| ● |
interest rate trends; |
|
| ● | changes in our cost of borrowed funds, including changes in the Federal Funds rate that is controlled by the Federal Reserve (the “Fed”); | |
| ● |
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 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; |
|
| ● |
geopolitical events that affect the U.S. and international economies; and |
|
| ● |
other financial market developments. |
In addition, a variety of factors directly relating to our business may also impact our results of operations and financial condition. These factors include:
| ● |
our use of leverage to finance our assets; |
|
| ● |
our access to funding and borrowing capacity; |
|
| ● |
our borrowing costs; |
|
| ● |
our hedging activities; |
|
| ● |
the market value of our investments; |
|
| ● |
the requirements for us to maintain a registration exemption under the Investment Company Act; |
|
| ● |
our ability to use tax net operating loss carryforwards and other tax attributes to reduce our taxable income; |
|
| ● |
the impact of possible future changes in tax laws or tax rates; |
|
| ● |
our ability to manage the portfolio of Orchid and maintain our role as manager; |
|
| ● |
the financial performance of Orchid and resulting changes in Orchid’s stockholders' equity and our advisory services revenue; and |
|
| ● | the carrying value of our investment in Orchid's common stock and dividend income received on that investment. |
Results of Operations
Described below are the Company’s results of operations for the nine and three months ended September 30, 2025, as compared to the nine and three months ended September 30, 2024.
Net Income Summary
Consolidated net income for the nine months ended September 30, 2025 was $2.4 million, or $0.24 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.2 million, or $0.02 basic and diluted income per share of Class A Common Stock, for the nine months ended September 30, 2024. Consolidated net income for the three months ended September 30, 2025 was $1.8 million, or $ 0.18 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.3 million, or $0.03 basic and diluted income per share of Class A Common Stock, for the three months ended September 30, 2024.
The components of net income for the nine and three months ended September 30, 2025 and 2024, along with the changes in those components are presented in the table below.
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024 |
Change |
2025 |
2024 |
Change |
|||||||||||||||||||
| Advisory services revenues |
$ | 11,851 | $ | 9,397 | $ | 2,454 | $ | 4,458 | $ | 3,301 | $ | 1,157 | ||||||||||||
| Interest and dividend income |
5,473 | 4,781 | 692 | 1,739 | 1,690 | 49 | ||||||||||||||||||
| Interest expense |
(5,277 | ) | (5,559 | ) | 282 | (1,701 | ) | (1,981 | ) | 280 | ||||||||||||||
| Net revenues |
12,047 | 8,619 | 3,428 | 4,496 | 3,010 | 1,486 | ||||||||||||||||||
| Other (expense) revenue |
(356 | ) | 1,067 | (1,423 | ) | 669 | 420 | 249 | ||||||||||||||||
| Expenses |
(8,715 | ) | (8,438 | ) | (277 | ) | (2,972 | ) | (2,627 | ) | (345 | ) | ||||||||||||
| Net income before income tax provision |
2,976 | 1,248 | 1,728 | 2,193 | 803 | 1,390 | ||||||||||||||||||
| Income tax provision |
558 | 1,053 | (495 | ) | 370 | 547 | (177 | ) | ||||||||||||||||
| Net income |
$ | 2,418 | $ | 195 | $ | 2,223 | $ | 1,823 | $ | 256 | $ | 1,567 | ||||||||||||
GAAP and Non-GAAP Reconciliation
Economic Interest Expense and Economic Net Interest Income
We use derivative instruments, primarily U.S. Treasury Note (“T-Note”) and SOFR futures contracts 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 repurchase agreements 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.
We believe that economic interest expense and economic net interest income provide meaningful information to consider, in addition to the financial information 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 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 2025 and 2024.
Gains (Losses) on Derivative Instruments
| (in thousands) |
||||||||||||
| Funding Hedges |
||||||||||||
| Consolidated | Attributed to | Attributed to | ||||||||||
| Statement of |
Current |
Future |
||||||||||
| Operations |
Period |
Periods |
||||||||||
| Three Months Ended |
(GAAP) |
(Non-GAAP) |
(Non-GAAP) |
|||||||||
| September 30, 2025 |
$ | (170 | ) | $ | 108 | $ | (278 | ) | ||||
| June 30, 2025 |
(431 | ) | 112 | (543 | ) | |||||||
| March 31, 2025 |
(1,369 | ) | 106 | (1,475 | ) | |||||||
| December 31, 2024 |
3,015 | 1 | 3,014 | |||||||||
| September 30, 2024 |
(1,991 | ) | (36 | ) | (1,955 | ) | ||||||
| June 30, 2024 |
212 | 44 | 168 | |||||||||
| March 31, 2024 |
1,171 | 21 | 1,150 | |||||||||
| Nine Months Ended |
||||||||||||
| September 30, 2025 |
$ | (1,970 | ) | $ | 326 | $ | (2,296 | ) | ||||
| September 30, 2024 |
(608 | ) | 29 | (637 | ) | |||||||
Economic Net Portfolio Interest Income
| (in thousands) |
||||||||||||||||||||||||
| Interest Expense on Repurchase Agreements |
Net Portfolio |
|||||||||||||||||||||||
| GAAP |
Effect of |
Interest Income |
||||||||||||||||||||||
| Interest |
GAAP |
Non-GAAP |
Economic |
GAAP |
Economic |
|||||||||||||||||||
| Three Months Ended |
Income |
Basis |
Hedges(1) |
Basis(2) |
Basis |
Basis(3) |
||||||||||||||||||
| September 30, 2025 |
$ | 1,534 | $ | 1,157 | $ | (108 | ) | $ | 1,049 | $ | 377 | $ | 485 | |||||||||||
| June 30, 2025 |
1,582 | 1,191 | (112 | ) | 1,079 | 391 | 503 | |||||||||||||||||
| March 31, 2025 |
1,742 | 1,307 | (106 | ) | 1,201 | 435 | 541 | |||||||||||||||||
| December 31, 2024 |
1,673 | 1,402 | (1 | ) | 1,401 | 271 | 272 | |||||||||||||||||
| September 30, 2024 |
1,485 | 1,373 | 36 | 1,409 | 112 | 76 | ||||||||||||||||||
| June 30, 2024 |
1,287 | 1,157 | (44 | ) | 1,113 | 130 | 174 | |||||||||||||||||
| March 31, 2024 |
1,394 | 1,208 | (21 | ) | 1,187 | 186 | 207 | |||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2025 |
$ | 4,858 | $ | 3,655 | $ | (326 | ) | $ | 3,329 | $ | 1,203 | $ | 1,529 | |||||||||||
| September 30, 2024 |
4,166 | 3,738 | (29 | ) | 3,709 | 428 | 457 | |||||||||||||||||
| (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. |
Economic Net Interest Income
| (in thousands) |
||||||||||||||||||||
| Interest |
||||||||||||||||||||
| Net Portfolio |
Expense on |
|||||||||||||||||||
| Interest Income |
Long-Term |
Net Interest Income (Expense) |
||||||||||||||||||
| GAAP |
Economic |
Debt |
GAAP |
Economic |
||||||||||||||||
| Three Months Ended |
Basis |
Basis(1) |
(GAAP) |
Basis |
Basis(2) |
|||||||||||||||
| September 30, 2025 |
$ | 377 | $ | 485 | $ | 544 | $ | (167 | ) | $ | (59 | ) | ||||||||
| June 30, 2025 |
391 | 503 | 540 | (149 | ) | (37 | ) | |||||||||||||
| March 31, 2025 |
435 | 541 | 538 | (103 | ) | 3 | ||||||||||||||
| December 31, 2024 |
271 | 272 | 581 | (310 | ) | (309 | ) | |||||||||||||
| September 30, 2024 |
112 | 76 | 607 | (495 | ) | (531 | ) | |||||||||||||
| June 30, 2024 |
130 | 174 | 605 | (475 | ) | (431 | ) | |||||||||||||
| March 31, 2024 |
186 | 207 | 608 | (422 | ) | (401 | ) | |||||||||||||
| Nine Months Ended |
||||||||||||||||||||
| September 30, 2025 |
$ | 1,203 | $ | 1,529 | $ | 1,622 | $ | (419 | ) | $ | (93 | ) | ||||||||
| September 30, 2024 |
428 | 457 | 1,820 | (1,392 | ) | (1,363 | ) | |||||||||||||
| (1) |
Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net portfolio interest income. |
| (2) |
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; (a) the asset management segment, which includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm, and (b) the investment portfolio segment, which includes the investment activities conducted by Royal Palm.
Segment information for the nine months ended September 30, 2025 and 2024 is as follows:
| (in thousands) |
||||||||||||||||||||
| Asset |
Investment |
|||||||||||||||||||
| Management |
Portfolio |
Corporate |
Eliminations |
Total |
||||||||||||||||
| 2025 |
||||||||||||||||||||
| Advisory services, external customers |
$ | 11,851 | $ | - | $ | - | $ | - | $ | 11,851 | ||||||||||
| Advisory services, other operating segments(1) |
131 | - | - | (131 | ) | - | ||||||||||||||
| Interest and dividend income |
- | 5,473 | - | - | 5,473 | |||||||||||||||
| Interest expense(2) |
- | (3,655 | ) | (1,622 | ) | - | (5,277 | ) | ||||||||||||
| Net revenues |
11,982 | 1,818 | (1,622 | ) | (131 | ) | 12,047 | |||||||||||||
| Other income (expense), net |
- | (356 | ) | - | - | (356 | ) | |||||||||||||
| Operating expenses(3) |
(5,923 | ) | (2,792 | ) | - | - | (8,715 | ) | ||||||||||||
| Intercompany expenses(1) |
- | (131 | ) | - | 131 | - | ||||||||||||||
| Income (loss) before income taxes |
$ | 6,059 | $ | (1,461 | ) | $ | (1,622 | ) | $ | - | $ | 2,976 | ||||||||
| Asset |
Investment |
|||||||||||||||||||
| Management |
Portfolio |
Corporate |
Eliminations |
Total |
||||||||||||||||
| 2024 |
||||||||||||||||||||
| Advisory services, external customers |
$ | 9,397 | $ | - | $ | - | $ | - | $ | 9,397 | ||||||||||
| Advisory services, other operating segments(1) |
101 | - | - | (101 | ) | - | ||||||||||||||
| Interest and dividend income |
- | 4,780 | 1 | - | 4,781 | |||||||||||||||
| Interest expense(2) |
- | (3,739 | ) | (1,820 | ) | - | (5,559 | ) | ||||||||||||
| Net revenues |
9,498 | 1,041 | (1,819 | ) | (101 | ) | 8,619 | |||||||||||||
| Other income, net |
- | 1,067 | - | - | 1,067 | |||||||||||||||
| Operating expenses(3) |
(5,430 | ) | (3,009 | ) | 1 | - | (8,438 | ) | ||||||||||||
| Intercompany expenses(1) |
- | (101 | ) | - | 101 | - | ||||||||||||||
| Income (loss) before income taxes |
$ | 4,068 | $ | (1,002 | ) | $ | (1,818 | ) | $ | - | $ | 1,248 | ||||||||
Segment information for the three months ended September 30, 2025 and 2024 is as follows:
| (in thousands) |
||||||||||||||||||||
| Asset |
Investment |
|||||||||||||||||||
| Management |
Portfolio |
Corporate |
Eliminations |
Total |
||||||||||||||||
| 2025 |
||||||||||||||||||||
| Advisory services, external customers |
$ | 4,458 | $ | - | $ | - | $ | - | $ | 4,458 | ||||||||||
| Advisory services, other operating segments(1) |
50 | - | - | (50 | ) | - | ||||||||||||||
| Interest and dividend income |
- | 1,739 | - | - | 1,739 | |||||||||||||||
| Interest expense(2) |
- | (1,157 | ) | (544 | ) | - | (1,701 | ) | ||||||||||||
| Net revenues |
4,508 | 582 | (544 | ) | (50 | ) | 4,496 | |||||||||||||
| Other income, net |
- | 669 | - | - | 669 | |||||||||||||||
| Operating expenses(3) |
(2,117 | ) | (855 | ) | - | - | (2,972 | ) | ||||||||||||
| Intercompany expenses(1) |
- | (50 | ) | - | 50 | - | ||||||||||||||
| Income (loss) before income taxes |
$ | 2,391 | $ | 346 | $ | (544 | ) | $ | - | $ | 2,193 | |||||||||
| Asset |
Investment |
|||||||||||||||||||
| Management |
Portfolio |
Corporate |
Eliminations |
Total |
||||||||||||||||
| 2024 |
||||||||||||||||||||
| Advisory services, external customers |
$ | 3,301 | $ | - | $ | - | $ | - | $ | 3,301 | ||||||||||
| Advisory services, other operating segments(1) |
40 | - | - | (40 | ) | - | ||||||||||||||
| Interest and dividend income |
- | 1,690 | - | - | 1,690 | |||||||||||||||
| Interest expense(2) |
- | (1,373 | ) | (608 | ) | - | (1,981 | ) | ||||||||||||
| Net revenues |
3,341 | 317 | (608 | ) | (40 | ) | 3,010 | |||||||||||||
| Other income (expense), net |
- | 421 | (1 | ) | - | 420 | ||||||||||||||
| Operating expenses(3) |
(1,735 | ) | (892 | ) | - | - | (2,627 | ) | ||||||||||||
| Intercompany expenses(1) |
- | (40 | ) | - | 40 | - | ||||||||||||||
| Income (loss) before income taxes |
$ | 1,606 | $ | (194 | ) | $ | (609 | ) | $ | - | $ | 803 | ||||||||
| (1) |
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. |
| (2) |
Includes interest expense on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column. |
| (3) |
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 |
|||||||||||||
| September 30, 2025 |
$ | 2,356 | $ | 130,599 | 6,794 | $ | 139,749 | |||||||||
| December 31, 2024 |
2,006 | 146,714 | 6,134 | 154,854 | ||||||||||||
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. |
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. |
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 2026 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 applicable renewal term.
The following table summarizes the advisory services revenue received from Orchid in each quarter and during 2025 and 2024.
| (in thousands) |
||||||||||||||||||||||||
| Advisory Services |
||||||||||||||||||||||||
| Repurchase, |
||||||||||||||||||||||||
| Average |
Average |
Clearing and |
||||||||||||||||||||||
| Orchid |
Orchid |
Management |
Overhead |
Administrative |
||||||||||||||||||||
| Three Months Ended |
MBS |
Equity |
Fee |
Allocation |
Fees |
Total |
||||||||||||||||||
| September 30, 2025 |
$ | 7,674,720 | $ | 1,108,307 | $ | 3,294 | $ | 887 | $ | 277 | $ | 4,458 | ||||||||||||
| June 30, 2025 |
6,865,727 | 1,012,986 | 2,982 | 582 | 247 | 3,811 | ||||||||||||||||||
| March 31, 2025 |
5,995,702 | 902,590 | 2,747 | 608 | 227 | 3,582 | ||||||||||||||||||
| December 31, 2024 |
5,348,057 | 817,241 | 2,488 | 677 | 222 | 3,387 | ||||||||||||||||||
| September 30, 2024 |
4,984,279 | 780,010 | 2,448 | 637 | 216 | 3,301 | ||||||||||||||||||
| June 30, 2024 |
4,203,416 | 699,766 | 2,257 | 732 | 178 | 3,167 | ||||||||||||||||||
| March 31, 2024 |
3,887,545 | 672,057 | 2,161 | 598 | 170 | 2,929 | ||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2025 |
$ | 6,845,383 | $ | 1,007,961 | $ | 9,023 | $ | 2,077 | $ | 751 | $ | 11,851 | ||||||||||||
| September 30, 2024 |
4,358,413 | 717,278 | 6,866 | 1,967 | 564 | 9,397 | ||||||||||||||||||
Investment Portfolio Segment
Net Portfolio Interest Income
During the nine months ended September 30, 2025, we generated $1.2 million of net portfolio interest income, consisting of $4.9 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2024, we generated $0.4 million of net portfolio interest income, consisting of $4.2 million of interest income from MBS assets offset by $3.7 million of interest expense on repurchase liabilities. The $0.7 million increase in interest income was due to a $20.4 million increase in average MBS holdings, offset by a 26 basis point (“bp”) decrease in yields. There was a $0.1 million decrease in interest expense for the nine months ended September 30, 2025 that was due to a 110 bp decrease in cost of funds, offset by a $19.5 million increase in average repurchase liabilities.
During the three months ended September 30, 2025, we generated $0.4 million of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2024, we generated $0.1 million of net portfolio interest income, consisting of $1.5 million of interest income from MBS assets offset by $1.4 million of interest expense on repurchase liabilities. The $0.05 million increase in interest income was due to a $3.6 million increase in average MBS holdings, offset by a 1 bp decrease in yields. There was a $0.2 million decrease in interest expense for the three months ended September 30, 2025 that was due to a 102 bp decrease in cost of funds, offset by a $2.9 million increase in average repurchase liabilities.
Our economic interest expense on repurchase liabilities for the nine months ended September 30, 2025 and 2024 was $3.3 million and $3.7 million, respectively, resulting in $1.5 million and $0.5 million of economic net portfolio interest income, respectively. Our economic interest expense on repurchase liabilities for the three months ended September 30, 2025 and 2024 was $1.0 million and $1.4 million, respectively, resulting in $0.5 million and $0.1 million of economic net portfolio interest income, respectively.
The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the nine months ended September 30, 2025 and 2024 and each quarter in 2025 and 2024 on both a GAAP and economic basis.
| ($ 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 |
MBS |
Agreements(1) |
Basis |
Basis(2) |
Basis |
Basis(3) |
||||||||||||||||||||||||
| September 30, 2025 |
$ | 106,016 | $ | 1,534 | 5.79 | % | $ | 100,848 | $ | 1,157 | $ | 1,049 | 4.59 | % | 4.16 | % | ||||||||||||||||
| June 30, 2025 |
114,294 | 1,582 | 5.54 | % | 108,626 | 1,191 | 1,079 | 4.39 | % | 3.97 | % | |||||||||||||||||||||
| March 31, 2025 |
121,657 | 1,742 | 5.73 | % | 116,346 | 1,307 | 1,201 | 4.49 | % | 4.13 | % | |||||||||||||||||||||
| December 31, 2024 |
120,388 | 1,673 | 5.56 | % | 115,102 | 1,402 | 1,401 | 4.87 | % | 4.87 | % | |||||||||||||||||||||
| September 30, 2024 |
102,422 | 1,485 | 5.80 | % | 97,949 | 1,373 | 1,409 | 5.61 | % | 5.75 | % | |||||||||||||||||||||
| June 30, 2024 |
87,539 | 1,287 | 5.88 | % | 83,737 | 1,157 | 1,113 | 5.53 | % | 5.32 | % | |||||||||||||||||||||
| March 31, 2024 |
90,697 | 1,394 | 6.15 | % | 85,753 | 1,208 | 1,187 | 5.63 | % | 5.54 | % | |||||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||
| September 30, 2025 |
$ | 113,989 | $ | 4,858 | 5.68 | % | $ | 108,607 | $ | 3,655 | $ | 3,329 | 4.49 | % | 4.09 | % | ||||||||||||||||
| September 30, 2024 |
93,553 | 4,166 | 5.94 | % | 89,147 | 3,738 | 3,709 | 5.59 | % | 5.55 | % | |||||||||||||||||||||
| ($ in thousands) |
||||||||||||||||
| Net Portfolio |
Net Portfolio |
|||||||||||||||
| Interest Income |
Interest Spread |
|||||||||||||||
| GAAP |
Economic |
GAAP |
Economic |
|||||||||||||
| Three Months Ended |
Basis |
Basis(2) |
Basis |
Basis(4) |
||||||||||||
| September 30, 2025 |
$ | 377 | $ | 485 | 1.20 | % | 1.63 | % | ||||||||
| June 30, 2025 |
391 | 503 | 1.15 | % | 1.57 | % | ||||||||||
| March 31, 2025 |
435 | 541 | 1.24 | % | 1.60 | % | ||||||||||
| December 31, 2024 |
271 | 272 | 0.69 | % | 0.69 | % | ||||||||||
| September 30, 2024 |
112 | 76 | 0.19 | % | 0.05 | % | ||||||||||
| June 30, 2024 |
130 | 174 | 0.35 | % | 0.56 | % | ||||||||||
| March 31, 2024 |
186 | 207 | 0.52 | % | 0.61 | % | ||||||||||
| Nine Months Ended |
||||||||||||||||
| September 30, 2025 |
$ | 1,203 | $ | 1,529 | 1.19 | % | 1.59 | % | ||||||||
| September 30, 2024 |
428 | 457 | 0.35 | % | 0.39 | % | ||||||||||
| (1) |
Portfolio yields and costs of borrowings presented in the tables above, below and on page 27 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, below and on page 27 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. |
Average Asset Yield
The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of PT MBS and structured, for each quarter during 2025 and 2024.
| ($ 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 |
|||||||||||||||||||||||||||
| September 30, 2025 |
$ | 103,880 | $ | 2,136 | $ | 106,016 | $ | 1,504 | $ | 30 | $ | 1,534 | 5.79 | % | 5.80 | % | 5.79 | % | ||||||||||||||||||
| June 30, 2025 |
112,069 | 2,225 | 114,294 | 1,549 | 33 | 1,582 | 5.53 | % | 5.95 | % | 5.54 | % | ||||||||||||||||||||||||
| March 31, 2025 |
119,380 | 2,277 | 121,657 | 1,704 | 38 | 1,742 | 5.71 | % | 6.76 | % | 5.73 | % | ||||||||||||||||||||||||
| December 31, 2024 |
118,052 | 2,336 | 120,388 | 1,636 | 37 | 1,673 | 5.54 | % | 6.18 | % | 5.56 | % | ||||||||||||||||||||||||
| September 30, 2024 |
100,005 | 2,417 | 102,422 | 1,445 | 40 | 1,485 | 5.78 | % | 6.77 | % | 5.80 | % | ||||||||||||||||||||||||
| June 30, 2024 |
85,097 | 2,442 | 87,539 | 1,242 | 45 | 1,287 | 5.84 | % | 7.45 | % | 5.88 | % | ||||||||||||||||||||||||
| March 31, 2024 |
88,206 | 2,491 | 90,697 | 1,348 | 46 | 1,394 | 6.11 | % | 7.38 | % | 6.15 | % | ||||||||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||||||
| September 30, 2025 |
$ | 111,776 | $ | 2,213 | $ | 113,989 | $ | 4,757 | $ | 101 | $ | 4,858 | 5.67 | % | 6.18 | % | 5.68 | % | ||||||||||||||||||
| September 30, 2024 |
91,103 | 2,450 | 93,553 | 4,035 | 131 | 4,166 | 5.90 | % | 7.20 | % | 5.94 | % | ||||||||||||||||||||||||
Cost of Funds
Since all of our repurchase agreements are short-term, changes in market rates have a more immediate impact on our interest expense. Our average cost of funds calculated on a GAAP basis was 28 bps above the average one-month SOFR and 22 bps above the average six-month SOFR for the quarter ended September 30, 2025. Our average economic cost of funds was 15 bps below the average one-month SOFR and 21 bps below the average six-month SOFR for the quarter ended September 30, 2025. The average term to maturity of the outstanding repurchase agreements was 26 days at September 30, 2025, compared to 49 days at December 31, 2024. The tables below present the average outstanding balances under our repurchase agreements, interest expense and average economic cost of funds, and average one-month and six-month SOFR rates for each quarter in 2025 and 2024, on both a GAAP and economic basis.
| ($ in thousands) |
||||||||||||||||||||
| Average |
||||||||||||||||||||
| Balance of |
Interest Expense |
Average Cost of Funds |
||||||||||||||||||
| Repurchase |
GAAP |
Economic |
GAAP |
Economic |
||||||||||||||||
| Three Months Ended |
Agreements |
Basis |
Basis |
Basis |
Basis |
|||||||||||||||
| September 30, 2025 |
$ | 100,848 | $ | 1,157 | $ | 1,049 | 4.59 | % | 4.16 | % | ||||||||||
| June 30, 2025 |
108,626 | 1,191 | 1,079 | 4.39 | % | 3.97 | % | |||||||||||||
| March 31, 2025 |
116,346 | 1,307 | 1,201 | 4.49 | % | 4.13 | % | |||||||||||||
| December 31, 2024 |
115,102 | 1,402 | 1,401 | 4.87 | % | 4.87 | % | |||||||||||||
| September 30, 2024 |
97,949 | 1,373 | 1,409 | 5.61 | % | 5.75 | % | |||||||||||||
| June 30, 2024 |
83,737 | 1,157 | 1,113 | 5.53 | % | 5.32 | % | |||||||||||||
| March 31, 2024 |
85,753 | 1,208 | 1,187 | 5.63 | % | 5.54 | % | |||||||||||||
| Nine Months Ended |
||||||||||||||||||||
| September 30, 2025 |
$ | 108,607 | $ | 3,655 | $ | 3,329 | 4.49 | % | 4.09 | % | ||||||||||
| September 30, 2024 |
89,147 | 3,738 | 3,709 | 5.59 | % | 5.55 | % | |||||||||||||
| Average GAAP Cost of Funds |
Average Economic Cost of Funds |
|||||||||||||||||||||||
| Relative to Average |
Relative to Average |
|||||||||||||||||||||||
| Average SOFR |
One-Month |
Six-Month |
One-Month |
Six-Month |
||||||||||||||||||||
| Three Months Ended |
One-Month |
Six-Month |
SOFR |
SOFR |
SOFR |
SOFR |
||||||||||||||||||
| September 30, 2025 |
4.31 | % | 4.37 | % | 0.28 | % | 0.22 | % | (0.15 | )% | (0.21 | )% | ||||||||||||
| June 30, 2025 |
4.32 | % | 4.37 | % | 0.07 | % | 0.02 | % | (0.35 | )% | (0.40 | )% | ||||||||||||
| March 31, 2025 |
4.33 | % | 4.55 | % | 0.16 | % | (0.06 | )% | (0.20 | )% | (0.42 | )% | ||||||||||||
| December 31, 2024 |
4.53 | % | 5.03 | % | 0.34 | % | (0.16 | )% | 0.34 | % | (0.16 | )% | ||||||||||||
| September 30, 2024 |
5.16 | % | 5.37 | % | 0.45 | % | 0.24 | % | 0.59 | % | 0.38 | % | ||||||||||||
| June 30, 2024 |
5.34 | % | 5.39 | % | 0.19 | % | 0.14 | % | (0.02 | )% | (0.07 | )% | ||||||||||||
| March 31, 2024 |
5.32 | % | 5.39 | % | 0.31 | % | 0.24 | % | 0.22 | % | 0.15 | % | ||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||
| September 30, 2025 |
4.32 | % | 4.43 | % | 0.17 | % | 0.06 | % | (0.23 | )% | (0.34 | )% | ||||||||||||
| September 30, 2024 |
5.27 | % | 5.38 | % | 0.32 | % | 0.21 | % | 0.28 | % | 0.17 | % | ||||||||||||
Dividend Income from Orchid
During both of the nine months ended September 30, 2025 and 2024, we owned 569,071 shares of Orchid common stock. Orchid paid total dividends of $1.08 per share during both the nine months ended September 30, 2025 and 2024, resulting in dividend income of approximately $0.6 million in each period.
Long-Term Debt
Junior Subordinated Debt
The junior subordinated debt securities paid interest at a floating rate. The interest rate is the CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. Interest expense on our junior subordinated debt securities was $1.6 million and $1.8 million for the nine months ended September 30, 2025 and 2024, respectively. The average rate of interest paid for the nine months ended September 30, 2025 was 8.07% compared to 9.09% for the comparable period in 2024. Interest expense on our junior subordinated debt securities was $0.5 million and $0.6 million for the three months ended September 30, 2025 and 2024, respectively. The average rate of interest paid for the three months ended September 30, 2025 and 2024 was 8.03% and 9.04%, respectively.
Note Payable
On October 30, 2019, the Company borrowed $680,000 from a bank which is secured by a mortgage on the Company’s office building. Through October 30, 2024, interest accrued at 4.89%. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The interest rate reset to 7.37% on October 30, 2024 and will reset again on October 30, 2029.
Gains or Losses and Other Income
The table below presents our gains or losses and other income for the nine and three months ended September 30, 2025 and 2024.
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024 |
Change |
2025 |
2024 |
Change |
|||||||||||||||||||
| Realized losses on sales of MBS |
$ | (178 | ) | $ | (562 | ) | $ | 384 | $ | - | $ | - | $ | - | ||||||||||
| Unrealized gains on MBS |
2,230 | 2,356 | (126 | ) | $ | 839 | $ | 2,480 | $ | (1,641 | ) | |||||||||||||
| Total gains on MBS |
2,052 | 1,794 | 258 | 839 | 2,480 | (1,641 | ) | |||||||||||||||||
| Losses on derivative instruments |
(1,970 | ) | (608 | ) | (1,362 | ) | (170 | ) | (1,991 | ) | 1,821 | |||||||||||||
| Unrealized losses on Orchid Island Capital, Inc. common stock |
(438 | ) | (120 | ) | (318 | ) | - | (68 | ) | 68 | ||||||||||||||
We invest in MBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from trading in these securities. However, we have sold, and may sell in the future, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the nine months ended September 30, 2025 and 2024, we received proceeds totaling $9.8 million and $46.3 million, respectively, from the sales of MBS.
The fair value of our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are driven in part by changes in yields and interest rates, the spreads that MBS trade relative to comparable duration U.S. Treasuries or swaps, as well as varying levels of demand for MBS, which affect the pricing of the securities in our portfolio. The unrealized gains and losses on MBS may also include the premium lost as a result of prepayments on the underlying mortgages, decreasing unrealized gains or increasing unrealized losses as prepayment speeds or premiums increase. To the extent MBS are carried at a discount to par, unrealized gains or losses on MBS would also include discount accreted as a result of prepayments on the underlying mortgages, increasing unrealized gains or decreasing unrealized losses as speeds on discounts increase. Gains and losses on interest rate futures contracts are affected by changes in implied forward rates during the reporting period. The table below presents historical interest rate data as of the end of each quarter during 2025 and 2024.
| 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) |
SOFR(3) |
|||||||||||
| September 30, 2025 |
3.73% |
4.15% |
5.49% |
6.30% |
4.35% |
||||||||||
| June 30, 2025 |
3.80% |
4.23% |
5.89% |
6.77% |
4.34% |
||||||||||
| March 31, 2025 |
3.98% |
4.25% |
5.89% |
6.65% |
4.35% |
||||||||||
| December 31, 2024 |
4.38% |
4.57% |
6.00% |
6.85% |
4.69% |
||||||||||
| September 30, 2024 |
3.58% |
3.80% |
5.16% |
6.08% |
5.31% |
||||||||||
| June 30, 2024 |
4.33% |
4.34% |
6.16% |
6.86% |
5.35% |
||||||||||
| March 31, 2024 |
4.22% |
4.21% |
6.11% |
6.79% |
5.31% |
| (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 SOFR is obtained from the Federal Reserve Bank of New York. The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 day periods. |
Operating Expenses
For the nine and three months ended September 30, 2025, our total operating expenses were approximately $8.7 million and $3.0 million, respectively, compared to $8.4 million and $2.6 million for the nine and three months ended September 30, 2024, respectively, as detailed in the table below.
| (in thousands) |
||||||||||||||||||||||||
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024 |
Change |
2025 |
2024 |
Change |
|||||||||||||||||||
| Compensation and related benefits |
$ | 5,567 | $ | 5,402 | $ | 165 | $ | 1,795 | $ | 1,755 | $ | 40 | ||||||||||||
| Direct advisory services costs |
1,272 | 1,249 | 23 | 485 | 396 | 89 | ||||||||||||||||||
| Legal fees |
239 | 59 | 180 | 81 | 15 | 66 | ||||||||||||||||||
| Accounting, auditing and other professional fees |
613 | 440 | 173 | 280 | 111 | 169 | ||||||||||||||||||
| Directors’ fees and liability insurance |
579 | 630 | (51 | ) | 189 | 214 | (25 | ) | ||||||||||||||||
| Administrative and other expenses |
444 | 659 | (215 | ) | 140 | 136 | 4 | |||||||||||||||||
| $ | 8,714 | $ | 8,439 | $ | 275 | $ | 2,970 | $ | 2,627 | $ | 343 | |||||||||||||
Income Tax Provision
We recorded income tax provisions for the nine months ended September 30, 2025 and 2024 of approximately $0.6 million and $1.1 million, respectively, on consolidated pre-tax book income of $3.0 million and $1.2 million, respectively. We recorded income tax provisions for the three months ended September 30, 2025 and 2024 of approximately $0.4 million and $0.5 million, respectively, on consolidated pre-tax book income of $2.2 million and $0.8 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. Our income tax provision could be affected by numerous factors, including non-deductible expenses, the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense.
Financial Condition:
Mortgage-Backed Securities
As of September 30, 2025, our MBS portfolio consisted of $104.4 million of agency or government MBS at fair value and had a weighted average coupon of 5.26%. During the nine months ended September 30, 2025, we received principal repayments of $10.2 million compared to $10.1 million for the comparable period ended September 30, 2024. The average prepayment speeds for the quarters ended September 30, 2025 and 2024 were 16.8% and 6.3%, respectively.
The following table presents the three-month constant prepayment rate (“CPR”) experienced on our structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three-month prepayment rate of the securities in the respective asset category.
| Structured |
|||||||||
| PT MBS |
MBS |
Total |
|||||||
| Three Months Ended |
Portfolio (%) |
Portfolio (%) |
Portfolio (%) |
||||||
| September 30, 2025 |
16.4 | 18.8 | 16.8 | ||||||
| June 30, 2025 |
10.3 | 7.3 | 9.9 | ||||||
| March 31, 2025 |
7.5 | 6.2 | 7.3 | ||||||
| December 31, 2024 |
10.9 | 12.5 | 11.1 | ||||||
| September 30, 2024 |
6.3 | 6.7 | 6.3 | ||||||
| June 30, 2024 |
10.9 | 5.5 | 10.0 | ||||||
| March 31, 2024 |
18.0 | 9.2 | 16.5 |
The following tables summarize certain characteristics of our PT MBS and structured MBS as of September 30, 2025 and December 31, 2024:
| ($ in thousands) |
|||||||||||||||||
| Weighted |
|||||||||||||||||
| Percentage |
Average |
||||||||||||||||
| of |
Weighted |
Maturity |
|||||||||||||||
| Fair |
Entire |
Average |
in |
Longest |
|||||||||||||
| Asset Category |
Value |
Portfolio |
Coupon |
Months |
Maturity |
||||||||||||
| September 30, 2025 |
|||||||||||||||||
| Fixed Rate MBS |
$ | 102,326 | 98.0 | % | 5.60 | % | 330 | 1-Aug-54 |
|||||||||
| Structured MBS |
2,082 | 2.0 | % | 2.90 | % | 275 | 15-May-51 |
||||||||||
| Total MBS Portfolio |
$ | 104,408 | 100.0 | % | 5.26 | % | 329 | 1-Aug-54 |
|||||||||
| December 31, 2024 |
|||||||||||||||||
| Fixed Rate MBS |
$ | 120,056 | 98.1 | % | 5.60 | % | 341 | 1-Jan-55 |
|||||||||
| Structured MBS |
2,292 | 1.9 | % | 2.85 | % | 281 | 15-May-51 |
||||||||||
| Total MBS Portfolio |
$ | 122,348 | 100.0 | % | 5.26 | % | 340 | 1-Jan-55 |
|||||||||
| ($ in thousands) |
||||||||||||||||
| September 30, 2025 |
December 31, 2024 |
|||||||||||||||
| Percentage of |
Percentage of |
|||||||||||||||
| Agency |
Fair Value |
Entire Portfolio |
Fair Value |
Entire Portfolio |
||||||||||||
| Fannie Mae |
$ | 29,528 | 28.3 | % | $ | 32,692 | 26.7 | % | ||||||||
| Freddie Mac |
74,880 | 71.7 | % | 89,656 | 73.3 | % | ||||||||||
| Total Portfolio |
$ | 104,408 | 100.0 | % | $ | 122,348 | 100.0 | % | ||||||||
| September 30, 2025 |
December 31, 2024 |
|||||||
| Weighted Average Pass-through Purchase Price |
$ | 102.99 | $ | 102.72 | ||||
| Weighted Average Structured Purchase Price |
$ | 4.48 | $ | 4.48 | ||||
| Weighted Average Pass-through Current Price |
$ | 101.74 | $ | 99.63 | ||||
| Weighted Average Structured Current Price |
$ | 14.02 | $ | 13.71 | ||||
| Effective Duration (1) |
2.699 | 3.622 | ||||||
| (1) |
Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 2.699 indicates that an interest rate increase of 1.0% would be expected to cause a 2.699% decrease in the value of the MBS in our investment portfolio at September 30, 2025. An effective duration of 3.622 indicates that an interest rate increase of 1.0% would be expected to cause a 3.622% decrease in the value of the MBS in our investment portfolio at December 31, 2024. 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. |
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 has inverse relationship to their reference index) causes their price movements - and model duration - to be affected by changes in both prepayments and their reference index - both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.
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 September 30, 2025, assuming rates instantaneously fall 200 bps, fall 100 bps and rise 100 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.
| ($ in thousands) |
||||||||||||||||||||||||||||
| Fair |
$ Change in Fair Value |
% Change in Fair Value |
||||||||||||||||||||||||||
| MBS Portfolio |
Value |
-200BPS |
-100BPS |
+100BPS |
-200BPS |
-100BPS |
+100BPS |
|||||||||||||||||||||
| Fixed Rate MBS |
$ | 102,326 | $ | 3,638 | $ | 2,245 | $ | (3,430 | ) | 3.56 | % | 2.19 | % | (3.35 | )% | |||||||||||||
| Structured MBS |
2,082 | (186 | ) | (53 | ) | 7 | (8.93 | )% | (2.55 | )% | 0.34 | % | ||||||||||||||||
| Total MBS Portfolio |
$ | 104,408 | $ | 3,452 | $ | 2,192 | $ | (3,423 | ) | 3.31 | % | 2.10 | % | (3.28 | )% | |||||||||||||
| Notional |
$ Change in Fair Value |
% Change in Fair Value |
||||||||||||||||||||||||||
| Repurchase Agreement Hedges |
Amount(1) |
-200BPS |
-100BPS |
+100BPS |
-200BPS |
-100BPS |
+100BPS |
|||||||||||||||||||||
| Interest Rate Futures Contracts |
62,400 | (7,960 | ) | (3,843 | ) | 3,595 | (12.76 | )% | (6.16 | )% | 5.76 | % | ||||||||||||||||
| Gross Totals |
$ | (4,508 | ) | $ | (1,651 | ) | $ | 172 | ||||||||||||||||||||
| (1) |
Represents the average contract/notional amount of U.S. Treasury and SOFR 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 September 30, 2025, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with six of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with us. These borrowings are secured by our MBS.
As of September 30, 2025, we had obligations outstanding under the repurchase agreements of approximately $100.0 million with a net weighted average borrowing cost of 4.36%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 14 to 44 days, with a weighted average maturity of 26 days. Securing the repurchase agreement obligation as of September 30, 2025 are MBS with an estimated fair value, including accrued interest, of $104.8 million. Through November 6, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2025 with maturities through November 13, 2025.
The table below presents information about our period-end, maximum and average repurchase agreement obligations for each quarter in 2025 and 2024.
| 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 |
|||||||||||||||
| September 30, 2025 |
$ | 99,953 | $ | 101,788 | $ | 100,848 | $ | (895 | ) | (0.89 | )% | |||||||||
| June 30, 2025 |
101,742 | 115,096 | 108,626 | (6,884 | ) | (6.34 | )% | |||||||||||||
| March 31, 2025 |
115,511 | 117,603 | 116,346 | (835 | ) | (0.72 | )% | |||||||||||||
| December 31, 2024 |
117,181 | 117,324 | 115,102 | 2,079 | 1.81 | % | ||||||||||||||
| September 30, 2024 |
113,023 | 113,026 | 97,949 | 15,074 | 15.39 | % | ||||||||||||||
| June 30, 2024 |
82,876 | 84,553 | 83,737 | (861 | ) | (1.03 | )% | |||||||||||||
| March 31, 2024 |
84,599 | 87,523 | 85,753 | (1,154 | ) | (1.35 | )% | |||||||||||||
Liquidity and Capital Resources
Liquidity is our ability to turn non-cash assets into cash to fund our operations and to meet our obligations in both the short-term (one year or less) and long-term (greater than one year). Our material cash requirements include the purchase of additional investments, repay principal and interest on repurchase agreements and long-term debt (see Note 7 to the consolidated financial statements for more information related to the timing of principal payments and maturities of our long-term debt.), 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 generates 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 employ a hedging strategy that typically involves taking short positions in T-Note and SOFR 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 futures or TBA short positions 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.
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 repo transaction basis.
We invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repo market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.
In future periods we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of September 30, 2025, we had cash and cash equivalents of $9.6 million. We generated cash flows of $15.0 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $108.6 million during the nine months ended September 30, 2025. In addition, during the nine months ended September 30, 2025, we received approximately $11.9 million in management fees and expense reimbursements as manager of Orchid and approximately $0.6 million in dividends from our investment in Orchid common stock.
Capital Expenditures
At September 30, 2025, we had no material commitments for capital expenditures.
Outlook
Orchid Island Capital Inc.
Orchid reported net income for the third quarter 2025 of $55.6 million, and its stockholders’ equity increased from $912.0 million at the end of the second quarter of 2025 to $1,086.1 million at September 30, 2025. Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay to us Orchid’s pro rata share of overhead as defined in the management agreement. As a stockholder of Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes do not impact our cash flows from Orchid.
Economic Summary
Offsetting forces have driven economic activity and outlook since the new U.S. presidential administration took office in January. On the one hand the significant tariffs introduced have clouded the economic outlook and added upward pressure on prices – or at least such upward pressure is anticipated even if it hasn’t materialized to the extent expected to date. On the other hand, the administration has a decidedly pro-business agenda and has enacted the One Big Beautiful Bill Act (the “OBBB”), which made permanent most of the tax legislation originally enacted in 2017 as part of the Tax Cuts and Jobs Act of 2017, with minor revisions. The OBBB is likely to be stimulative for the economy yet unlikely to reduce pressure on the fiscal deficit in the near term, itself a source of stimulus for the economy. The net effect of these two opposing forces appears, at least for now, to be leaning in the direction of economic weakness, especially for the labor market, which softened during the third quarter. The Chairman of the Fed has stated that the FOMC views the balance of risks as skewed towards economic and labor market weakness versus inflation, with the effects of tariffs causing only a one-time increase in prices versus a persistent source of inflation. In response to the deterioration in the labor market, the Fed lowered the Fed Funds rate by 25 basis points at their September meeting and again at the October meeting, although subsequent remarks by the Chairman imply they may not lower the funds rate again at upcoming meetings.
The impact of tariffs on inflation, particularly goods inflation, has yet to meet market expectations, although there is evidence of such price pressures emerging. Further, it remains possible, to the extent tariff-induced price increases have been absorbed by other parties along the supply chain, that such pressure could increase in the future to the extent the price increases are not fully absorbed. There is also the possibility that the stimulative effects of the OBBB and numerous other efforts on the part of the administration to reduce regulations, stimulate growth and onshore of production back into the U.S. could prevail and cause economic growth to rebound, perhaps significantly. These considerations are behind the subset of Fed officials and market participants that feel economic and labor market weakness, and the need for the Fed to ease monetary policy, is misplaced or will only prove to be temporary.
On October 1, 2025, the U.S. federal government shut down as Congress was unable to agree on a funding bill to keep the government running. The shutdown of the government prevented most economic data from being released, adding uncertainty to the economic outlook. To the extent the shutdown continues for an extended period of time, the shutdown itself will become a source of economic weakness as most federal employees go unpaid and the government – the largest consumer in the economy – has limited capacity to spend.
Interest Rates
Interest rate movements during the third quarter were very minor – less than 10 basis points – for all points along the cash U.S. Treasury curve and the SOFR swap curve for maturities longer than 2 years. For shorter maturities rate movements were larger – and as much as 35 to 40 basis points lower – for maturities inside 2 years. The largest declines were around the 6-month maturity, reflecting market expectations of interest rate cuts by the Fed over the next two quarters. One-year maturities, in both cash U.S. Treasuries and SOFR swaps, declined by 30 and 22 basis points, respectively, again reflecting market expectations of Fed Funds rate cuts in the near term. Since the end of the third quarter, interest rates have declined slightly more – approximately 10 basis points in the case of longer maturities – as a result of uncertainty surrounding the government shutdown.
As rates were relatively stable for longer maturity U.S. Treasuries and SOFR swaps and lower for shorter duration instruments, both the cash U.S. Treasury curve and SOFR swap curve remained upward sloping and the steepness of both curves increased modestly. The spread between the 2-year and 10-year U.S. Treasury securities has increased by approximately 5 basis points to approximately 55 basis points at quarter end, and remained in that area since.
While interest rates were relatively unchanged during the quarter, implied volatility in interest rate swaptions declined materially during the quarter. The MOVE index, comprised of a basket of four interest rate swaptions and a widely referenced proxy for interest rate volatility, has been declining since May 2025, when the administration announced reciprocal tariffs. The index peaked in April at nearly 140 and has declined since, reaching a recent low of just under 67 on October 27, 2025. For reference, the index was at approximately 90 on June 30, 2025. Declining interest rate volatility is beneficial for Agency RMBS given the prepayment option held by the borrowers of the loans underlying the securities.
The Agency MBS Market
The market conditions described above – low interest rate volatility and the prospects for reduced funding levels via Fed Funds rate cuts – were generally conducive to Agency RMBS performance. Spreads to comparable duration U.S. Treasuries and SOFR swaps declined, and most securities generated positive absolute and relative returns. However, as prevailing mortgage rates available to borrowers declined over the third quarter and into the fourth quarter prepayments have increased for securities with premium prices and expectations for continued high prepayment rates remain. The Mortgage Bankers Association index of 30-year contract rates declined from 6.79% for the week ended June 27, 2025, to 6.46% for the week ended September 26, 2025. The index has declined slightly more since the end of the third quarter. Secondly, the Trump administration has spoken of privatizing Fannie Mae and Freddie Mac (the "Enterprises"), although it does not appear as if this development is imminent. If it were to occur, an important consideration would be if the implicit government guarantee of the securities issued by the Enterprises would be retained. Comments made by the administration to date indicate that they would likely be maintained, but there can be no assurance that would be the case.
The Agency RMBS index generated a return for the third quarter of 2.4% and a return of 1.2% versus comparable duration swaps, as compared to 2.7% and 1.5%, respectively for these measures, for the investment grade corporate index, and 2.4% and 1.3%, respectively for these measures, for high yield debt. Total returns for U.S. Treasury securities and most sectors of the fixed income markets generated positive total returns and excess returns versus comparable duration swaps for the third quarter.
Within Agency RMBS for the third quarter of 2025, conventional 30-year mortgages generated a total return of 2.6%, 15-year mortgages generated a total return of 1.5% and Ginnie Mae 30-year mortgages generated a total return of 2.2%. Versus comparable duration swaps, the returns were 1.4%, 0.4% and 1.0% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Because of the prospect of higher prepayment speeds and their negative effects on realized yields, higher coupon and premium dollar price Agency RMBS generated returns that lagged all lower coupons. Absolute returns within the 30-year stack of coupons ranged between 3.1% and 2.5% for par and lower dollar price Agency RMBS, and generally followed the durations of the Agency RMBS, with high duration/lower coupon Agency RMBS generating the highest returns. Agency RMBS with premium prices ranged from 2.3% to 0.7%, again with the longest duration/lowest coupons generating the highest returns. Versus comparable duration swaps, excess returns followed a similar pattern with the exception of the 4.0 and 4.5% coupons generating excess returns higher than surrounding coupon Agency RMBS – the result of market technical developments (a shortage of available bonds versus demand) that emerged during the third quarter. The range of excess returns across the coupon stack ranged from 1.9% for 2.0% coupons to 0.4% for 6.5% securities, and 7.0% securities had a negative excess return of -0.5%.
Recent Legislative and Regulatory Developments
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed's decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and the third quarter of 2025. As of September 30, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $654 billion from the peak to $2.1 trillion, shedding approximately 49% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since February 2021. In remarks on October 14, 2025, Fed Chairman Jerome Powell signaled that the Fed may end its balance sheet runoff in the coming months.
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions"). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. In March 2025, the Trump administration's nominee for FHFA director, Bill Pulte, was confirmed and replaced 14 board members at the Enterprises. Although this led to some speculation in the market regarding an end to conservatorship, the new FHFA director signaled a more cautious approach, stating that significant study on the impact to mortgage rates would need to be done prior to any privatization of the Enterprises. During the third quarter of 2025, the Trump administration signaled an intention to begin the privatization of the Enterprises through an initial public offering, but did not announce that they have taken any formal steps towards such an offering.
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame"). The Basel III Endgame, if implemented as originally proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. While implementation of the Basel III Endgame has since stalled, Fed Vice Chair for Supervision Michelle Bowman commented in August 2025 that a revised Basel III Endgame is expected to be issued for public comment in early 2026, which the market expects to be more capital-neutral than the original proposal. On June 27, 2025, the Fed, OCC and FDIC jointly issued a proposed rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”), with comments open to the public until August 26, 2025. The proposed rule seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.
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 RMBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency RMBS may cause us to change our investment strategy to focus on non-Agency RMBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.
If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency RMBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.
If prepayment levels increase, the value of any of our Agency RMBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency RMBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency RMBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency RMBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency RMBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.
Higher long-term rates can also affect the value of our Agency RMBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency RMBS declines. Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for pass-through Agency RMBS.
Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency RMBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT RMBS, particularly PT RMBS backed by fixed-rate mortgages.
Effects on our borrowing costs
We leverage our PT RMBS portfolio and a portion of our structured Agency RMBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency RMBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR and T-Note futures contracts, dual digital options or interest rate swaptions.
Summary
The path of economic performance, the level of interest rates and the performance of Agency RMBS appear to be at a crossroads. During the third quarter, the path seemed to steer towards slower growth, lower rates and generally solid performance for Agency RMBS. The labor market in particular appears to have weakened significantly over the past two quarters, and the Fed intervened and lowered the Fed Funds rate by 25 basis points at their September and October meetings, although they may not continue to do so at subsequent meetings unless conditions warrant. The U.S. federal government shut down on October 1, 2025 has only added to the fear the economy will remain weak. However, other measures of economic performance, when available, indicate the economy may not be so weak. Growth, as measured by GDP, remains well above 0%, retail sales and corporate earnings remain strong, developments with artificial intelligence have the potential to materially lift productivity and output, and the administration has a profoundly pro-growth agenda – all of which suggest the current softness may be temporary. The outcome will likely emerge over the next quarter or two.
While it remains to be seen just which path the economy takes going forward, the third quarter was conducive to solid performance for the Agency RMBS market and the Company. The sector generated positive absolute and excess returns, and the Company (and Orchid) generated positive total returns for the quarter as well. Also, Orchid continued to grow its capital through the issuance of shares of common stock through its at the market program, increasing the base on which the Company's advisory services revenue is generated. While Agency RMBS generated positive returns for the third quarter of 2025, returns available in the sector remain above historical averages. To the extent such favorable market conditions persist, we expect that Orchid will be able to deploy new capital with the prospects for above average returns.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which requires our management to make some complex and subjective decisions, estimates and assessments. Our most critical accounting policies involve decisions, estimates and assessments which can have a material impact on reported assets, liabilities, revenues and expenses, and these estimates can change 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, 2024.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide disclosure pursuant to this Item. However, we have elected to include much of the information in Item 7 above.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report (the “evaluation date”), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the CEO and CFO concluded our disclosure controls and procedures, as designed and implemented, were effective as of the evaluation date (1) in ensuring that information regarding the Company and its subsidiaries is accumulated and communicated to our management, including our CEO and CFO, by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable assurance that information we must disclose in our periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no material changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 September 30, 2025, no further information has been received related to this matter. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the demands are without merit and the likelihood of a material adverse outcome is remote. Accordingly, no provision or accrual has been recorded.
We are not party to any other material pending legal proceedings as described in Item 103 of Regulation S-K.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 7, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not have any unregistered sales of its equity securities during the three months ended September 30, 2025.
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 did not repurchase shares of its common stock during the three months ended September 30, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended September 30, 2025, of the Company's directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement (as each term is defined in Item 408 of Regulation S-K).
ITEM 6. EXHIBITS
Exhibit No
| 3.1 |
Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Form S-11/A, filed with the SEC on April 29, 2004 |
| 3.2 |
Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005 |
| 3.3 |
Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006 |
| 3.4 |
Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007 |
| 3.5 | Certificate of Notice, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on February 1, 2008 |
| 3.6 | Articles Supplementary, reclassifying shares of Class A Preferred Stock and Class B Preferred Stock into Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015 |
| 3.7 | Articles Supplementary, creating the Series A Preferred Stock, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015. |
| 3.8 |
Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007 |
| 4.1 | Rights Plan, dated as of December 21, 2015, between the Company and Broadridge Corporate Issuer Solutions, Inc. incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015. |
| 4.2 | Description of the Company’s Capital Stock, incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 27, 2020. |
| 31.1 |
Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002* |
| 31.2 |
Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002* |
| 32.1 |
Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002** |
| 32.2 |
Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002** |
| 101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*** |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document*** |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document*** |
| 101.DEF |
Inline XBRL Additional Taxonomy Extension Definition Linkbase Document*** |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document*** |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document*** |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith
*** Submitted electronically herewith.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIMINI CAPITAL MANAGEMENT, INC. |
| Date: November 7, 2025 |
By: |
/s/ Robert E. Cauley |
||
| Robert E. Cauley Chairman and Chief Executive Officer |
||||
| Date: November 7, 2025 |
By: |
/s/ G. Hunter Haas, IV |
|
| G. Hunter Haas, IV President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
