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The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio. 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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to ___________

 

Commission File Number: 001-32171

 

logosm.jpg

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)

 

Maryland

 

72-1571637

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3305 Flamingo Drive, Vero Beach, Florida 32963

(Address of principal executive offices) (Zip Code)

 

(772) 231-1400

(Registrant’s telephone number, including area code)

 

 

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

 

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

 

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

 

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

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐ 

Smaller reporting company

☒

  

Emerging growth company

☐

 

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

 

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

 

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

 

Title of each Class

Latest Practicable Date

Shares Outstanding

Class A Common Stock, $0.001 par value

August 1, 2024

10,005,457

Class B Common Stock, $0.001 par value

August 1, 2024

31,938

Class C Common Stock, $0.001 par value

August 1, 2024

31,938

 

 
Table of Contents

 

 

BIMINI CAPITAL MANAGEMENT, INC.

 

TABLE OF CONTENTS

 

 

 

Page
   

PART I. FINANCIAL INFORMATION
   

ITEM 1. Financial Statements

1

Condensed Consolidated Balance Sheets (unaudited)

1

Condensed Consolidated Statements of Operations (unaudited)

2

Condensed Consolidated Statement of Stockholders’ Equity (unaudited)

3

Condensed Consolidated Statements of Cash Flows (unaudited)

4

Notes to Condensed Consolidated Financial Statements (unaudited)

5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

38

ITEM 4. Controls and Procedures

39
   

PART II. OTHER INFORMATION
   

ITEM 1. Legal Proceedings

40

ITEM 1A. Risk Factors

40

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

40

ITEM 3. Defaults Upon Senior Securities

40

ITEM 4. Mine Safety Disclosures

40

ITEM 5. Other Information

40

ITEM 6. Exhibits

41

SIGNATURES

42

 

 
Table of Contents

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  (Unaudited) June 30, 2024  December 31, 2023 

ASSETS:

        

Mortgage-backed securities, at fair value:

        

Pledged to counterparties

 $86,153,715  $92,575,292 

Unpledged

  261,004   155,560 

Total mortgage-backed securities

  86,414,719   92,730,852 

Cash and cash equivalents

  4,941,339   3,716,386 

Restricted cash

  1,282,199   753,900 

Orchid Island Capital, Inc. common stock, at fair value

  4,746,052   4,797,269 

Accrued interest receivable

  427,607   488,660 

Property and equipment, net

  1,882,578   1,920,823 

Deferred tax assets, net

  18,542,508   19,047,680 

Due from affiliates

  1,085,587   1,013,406 

Other assets

  1,116,684   1,129,038 

Total Assets

 $120,439,273  $125,598,014 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        
         

LIABILITIES:

        

Repurchase agreements

 $82,875,999  $86,906,999 

Long-term debt

  27,382,035   27,394,417 

Accrued interest payable

  263,265   260,413 

Other liabilities

  1,850,970   2,908,444 

Total Liabilities

  112,372,269   117,470,273 
         

COMMITMENTS AND CONTINGENCIES (Note 9)

          
         

STOCKHOLDERS' EQUITY:

        

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 shares designated Series A Junior Preferred Stock, 9,900,000 shares undesignated; no shares issued and outstanding as of June 30, 2024 and December 31, 2023

  -   - 

Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 shares issued and outstanding as of June 30, 2024 and December 31, 2023

  10,005   10,005 

Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of June 30, 2024 and December 31, 2023

  32   32 

Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of June 30, 2024 and December 31, 2023

  32   32 

Additional paid-in capital

  329,815,150   329,815,150 

Accumulated deficit

  (321,758,215)  (321,697,478)

Total Stockholders’ Equity

  8,067,004   8,127,741 

Total Liabilities and Stockholders' Equity

 $120,439,273  $125,598,014 

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Six and Three Months Ended June 30, 2024 and 2023

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Revenues:

                

Advisory services

 $6,096,316  $6,898,860  $3,167,055  $3,516,450 

Interest income

  2,681,425   1,123,796   1,287,326   566,408 

Dividend income from Orchid Island Capital, Inc. common stock

  409,731   546,308   204,865   273,154 

Total revenues

  9,187,472   8,568,964   4,659,246   4,356,012 

Interest expense:

                

Repurchase agreements

  (2,365,309)  (1,072,033)  (1,157,306)  (563,963)

Long-term debt

  (1,212,485)  (1,111,457)  (604,810)  (565,322)

Net revenues

  5,609,678   6,385,474   2,897,130   3,226,727 
                 

Other income (expense):

                

Unrealized (losses) gains on mortgage-backed securities

  (123,963)  (262,634)  404,875   (920,753)

Realized losses on mortgage-backed securities

  (561,604)  -   (561,604)  - 

Unrealized losses on Orchid Island Capital Inc. common stock

  (51,217)  (85,363)  (335,751)  (216,247)

Gains on derivative instruments

  1,383,463   241,672   212,457   515,547 

Other income

  49   120   20   56 

Other income (expense), net

  646,728   (106,205)  (280,003)  (621,397)
                 

Expenses:

                

Compensation and related benefits

  3,647,526   2,641,742   1,784,092   1,278,046 

Direct advisory services costs

  852,378   821,298   503,235   368,252 

Directors' fees and liability insurance

  416,094   413,266   206,955   206,768 

Audit, legal and other professional fees

  372,538   307,979   131,618   178,749 

Administrative and other expenses

  523,435   367,584   156,676   191,197 

Total expenses

  5,811,971   4,551,869   2,782,576   2,223,012 
                 

Net income (loss) before income tax provision

  444,435   1,727,400   (165,449)  382,318 

Income tax provision

  505,172   436,420   108,396   96,811 
                 

Net (loss) income

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

Basic and Diluted Net (Loss) Income Per Share of:

                

CLASS A COMMON STOCK

                

Basic and Diluted

 $(0.01) $0.13  $(0.03) $0.03 

CLASS B COMMON STOCK

                

Basic and Diluted

 $(0.01) $0.13  $(0.03) $0.03 

Weighted Average Shares Outstanding:

                

CLASS A COMMON STOCK

                

Basic and Diluted

  10,005,457   10,019,888   10,005,457   10,019,888 

CLASS B COMMON STOCK

                

Basic and Diluted

  31,938   31,938   31,938   31,938 

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

For the Six and Three Months Ended June 30, 2024 and 2023

 

  

Stockholders' Equity

     
           Additional         
  

Common Stock, all classes

  

Paid-in

  

Accumulated

     
  

Shares

  

Par Value

  

Capital

  

Deficit

  

Total

 

Balances, January 1, 2024

  10,069,333  $10,069  $329,815,150  $(321,697,478) $8,127,741 

Net income

  -   -   -   213,108   213,108 

Balances, March 31, 2024

  10,069,333  $10,069  $329,815,150  $(321,484,370) $8,340,849 

Net loss

  -   -   -   (273,845)  (273,845)

Balances, June 30, 2024

  10,069,333  $10,069  $329,815,150  $(321,758,215) $8,067,004 
                     

Balances, January 1, 2023

  10,083,764  $10,084  $329,828,268  $(317,714,273) $12,124,079 

Net income

  -   -   -   1,005,473   1,005,473 

Balances, March 31, 2023

  10,083,764  $10,084  $329,828,268  $(316,708,800) $13,129,552 

Net income

  -   -   -   285,507   285,507 

Balances, June 30, 2023

  10,083,764  $10,084  $329,828,268  $(316,423,293) $13,415,059 

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Six Months Ended June 30, 2024 and 2023

 

  

2024

  

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net (loss) income

 $(60,737) $1,290,980 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

        

Depreciation

  38,245   38,245 

Deferred income tax provision

  505,172   436,420 

Unrealized losses on mortgage-backed securities

  123,963   262,634 

Realized losses on mortgage-backed securities

  561,604   - 

Unrealized losses on Orchid Island Capital, Inc. common stock

  51,217   85,363 

Changes in operating assets and liabilities:

        

Accrued interest receivable

  61,053   (81,495)

Due from affiliates

  45,126   (110,113)

Other assets

  (104,953)  (11,457)

Accrued interest payable

  2,852   7,437 

Other liabilities

  (1,057,474)  (1,849,508)

NET CASH PROVIDED BY OPERATING ACTIVITIES

  166,068   68,506 
         

CASH FLOWS FROM INVESTING ACTIVITIES:

        

From mortgage-backed securities investments:

        

Purchases

  (48,547,475)  (20,045,750)

Sales

  46,252,051   - 

Principal repayments

  7,925,990   1,906,078 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

  5,630,566   (18,139,672)
         

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Proceeds from repurchase agreements

  352,747,000   245,355,590 

Principal repayments on repurchase agreements

  (356,778,000)  (228,479,000)

Principal repayments on long-term debt

  (12,382)  (11,840)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

  (4,043,382)  16,864,750 
         

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

  1,753,252   (1,206,416)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period

  4,470,286   6,773,799 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period

 $6,223,538  $5,567,383 
         

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

        

Cash paid during the period for:

        

Interest expense

 $3,574,942  $2,176,053 

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2024

 

 

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

Business Description

 

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

 

Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments and shares of Orchid Island Capital, Inc. ("Orchid") common stock, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal Palm."

 

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with the Securities and Exchange Commission), are collectively referred to as "Bimini Advisors." Bimini Advisors manages a residential mortgage-backed securities (“MBS”) portfolio for Orchid and receives fees for providing these services. Bimini Advisors also provides certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. Bimini Advisors also manages the MBS portfolio of Royal Palm.

 

Segment Reporting

 

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

 

Consolidation

 

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

 

Basis of Presentation

 

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

 

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

 

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Use of Estimates

 

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

 

Variable Interest Entities (“VIEs”)

 

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

 

Cash and Cash Equivalents and Restricted Cash

 

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

 

  

June 30, 2024

  

December 31, 2023

 

Cash and cash equivalents

 $4,941,339  $3,716,386 

Restricted cash

  1,282,199   753,900 

Total cash, cash equivalents and restricted cash

 $6,223,538  $4,470,286 

 

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

 

Advisory Services

 

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

 

Mortgage-Backed Securities

 

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

 

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

 

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

 

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

 

Orchid Island Capital, Inc. Common Stock

 

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

 

Retained Interests in Securitizations

 

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

 

Derivative Financial Instruments

 

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

 

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

 

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

 

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

 

Financial Instruments

 

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

 

Property and Equipment, net

 

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

 

Repurchase Agreements

 

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

 

Earnings Per Share

 

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

 

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

 

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

 

Income Taxes

 

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

 

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

 

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

 

Recent Accounting Pronouncements

 

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

 

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

NOTE 2. ADVISORY SERVICES

 

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:

 

 

●

One-twelfth of 1.50% of the first $250 million of Orchid’s month-end equity, as defined in the management agreement,

 

●

One-twelfth of 1.25% of Orchid’s month-end equity that is greater than $250 million and less than or equal to $500 million, and

 

●

One-twelfth of 1.00% of Orchid’s month-end equity that is greater than $500 million.

 

The Company also provides certain repurchase agreement trading, clearing and administrative services to Orchid. In consideration for such services, Orchid pays the following fees to the Company:

 

 

●

a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and

 

●

a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

 

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

 

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

 

(in thousands)

                
  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Management fee

 $4,418  $5,346  $2,257  $2,704 

Allocated overhead

  1,330   1,215   732   639 

Repurchase, clearing and administrative Fee

  348   338   178   173 

Total

 $6,096  $6,899  $3,167  $3,516 

 

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

NOTE 3. MORTGAGE-BACKED SECURITIES

 

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

 

(in thousands)

                        
  

June 30, 2024

  

December 31, 2023

 
  

Par Value

  

Cost (1)

  

Fair Value

  

Par Value

  

Cost (1)

  

Fair Value

 

Fixed-rate MBS

 $84,732  $86,120  $83,961  $88,807  $91,701  $90,181 

Structured MBS (2)

  n/a   1,681   2,454   n/a   1,787   2,550 

Total

 $84,732  $87,801  $86,415  $88,807  $93,488  $92,731 

 

(1)

The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio.

(2)The notional balance for the structured MBS portfolio was $17.8 million and $18.9 million as of June 30, 2024 and December 31, 2023, respectively.

 

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

 

(in thousands)

        
  

2024

  

2023

 

Proceeds from sales of MBS

 $46,252  $- 

Carrying value of MBS sold

  (46,814)  - 

Net loss on sales of MBS

 $(562) $- 
         

Gross gain on sales of MBS

 $-  $- 

Gross loss on sales of MBS

  (562)  - 

Net loss on sales of MBS

 $(562) $- 

 

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NOTE 4. REPURCHASE AGREEMENTS

 

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

 

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

 

($ in thousands)

                    
  

OVERNIGHT

  

BETWEEN 2

  

BETWEEN 31

  

GREATER

     
  

(1 DAY OR

  

AND

  

AND

  

THAN

     
  

LESS)

  

30 DAYS

  

90 DAYS

  

90 DAYS

  

TOTAL

 

June 30, 2024

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $17,095  $69,483  $-  $86,578 

Repurchase agreement liabilities associated with these securities

 $-  $16,390  $66,486  $-  $82,876 

Net weighted average borrowing rate

  -   5.49%  5.46%  -   5.47%

December 31, 2023

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $68,477  $24,584  $-  $93,061 

Repurchase agreement liabilities associated with these securities

 $-  $63,637  $23,270  $-  $86,907 

Net weighted average borrowing rate

  -   5.56%  5.57%  -   5.56%

 

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

 

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

 

($ in thousands)

            
      

% of

  

Weighted

 
      

Stockholders'

  

Average

 
  

Amount

  

Equity

  

Maturity

 

Repurchase Agreement Counterparty

 

at Risk

  

at Risk

  

(in Days)

 

June 30, 2024

            

DV Securities, LLC Repo

 $1,176   14.6%  89 

Mirae Asset Securities (USA) Inc.

  978   12.1%  80 

South Street Securities, LLC

  827   10.3%  86 

December 31, 2023

            

Mirae Asset Securities (USA), Inc.

 $1,564   19.2%  18 

Citigroup Global Markets, Inc.

  1,302   16.0%  26 

Mitsubishi UFJ Securities, Inc.

  1,128   13.9%  23 

South Street Securities, LLC

  922   11.3%  52 

 

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NOTE 5. PLEDGED ASSETS

 

Assets Pledged to Counterparties

 

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

 

($ in thousands)

                                                
   

June 30, 2024

    

December 31, 2023

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 83,862     $ -     $ 83,862     $ 90,180     $ -     $ 90,180  

Structured MBS - at fair value

     2,292       -       2,292       2,395       -       2,395  

Accrued interest on pledged securities

     424       -       424       486       -       486  

Restricted cash

     427       855       1,282       -       754       754  

Total

   $ 87,005     $ 855     $ 87,860     $ 93,061     $ 754     $ 93,815  
 

NOTE 6. OFFSETTING ASSETS AND LIABILITIES

 

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

 

(in thousands)

                                                

Offsetting of Liabilities

  
                   

Net Amount

    

Gross Amount Not Offset

          
           

Gross

    

of Liabilities

    

in the

          
    Gross     Amount     Presented     Consolidated Balance Sheet          
    Amount     Offset in the     in the     Financial                
   

of

    

Consolidated

    

Consolidated

    

Instruments

    

Cash

          
   

Recognized

    

Balance

    

Balance

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Sheet

    

Sheet

    

Collateral

    

Collateral

    

Amount

  

June 30, 2024

                                                

Repurchase Agreements

   $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  
    $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  

December 31, 2023

                                                

Repurchase Agreements

   $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  
    $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  

 

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

 

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NOTE 7. LONG-TERM DEBT

 

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

 

(in thousands)

        
  

June 30, 2024

  

December 31, 2023

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  578   590 

Total

 $27,382  $27,394 

 

Junior Subordinated Debt

 

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

 

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

 

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

 

Secured Note Payable

 

On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable in equal monthly principal and interest installments of approximately $5,000 through October 30, 2039. Interest accrues at 4.89% through October 30, 2024. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.

 

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

 

(in thousands)

    

Last six months of 2024

 $15 

For the years ended:

    

2025

  26 

2026

  28 

2027

  29 

2028

  30 

After 2028

  27,254 

Total

 $27,382 

 

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NOTE 8. COMMON STOCK

 

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

 

Stock Repurchase Plans

 

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

 

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

 

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

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

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

 

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

 

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

 

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NOTE 10. INCOME TAXES

 

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

NOTE 11. EARNINGS PER SHARE

 

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

 

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

 

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

 

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class A common share:

                                

(Loss) income attributable to Class A common shares:

                                

Basic and diluted

   $ (61 )   $ 1,287     $ (273 )   $ 285  

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,020       10,005       10,020  

Weighted average shares-basic and diluted

     10,005       10,020       10,005       10,020  

(Loss) income per Class A common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  

 

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class B common share:

                                

(Loss) income attributable to Class B common shares:

                                

Basic and diluted

   $ -     $ 4     $ (1 )   $ 1  

Weighted average common shares:

                                

Class B common shares outstanding at the balance sheet date

     32       32       32       32  

Weighted average shares-basic and diluted

     32       32       32       32  

(Loss) income per Class B common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  

 

 

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NOTE 12. FAIR VALUE

 

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

 

 

●

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

 

●

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

 

●

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

 

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

 

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

 

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

 

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

 

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

 

(in thousands)

                
      

Quoted Prices

         
      

in Active

  

Significant

     
      

Markets for

  

Other

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
  

Fair Value

  

Assets

  

Inputs

  

Inputs

 
  

Measurements

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

June 30, 2024

                

Mortgage-backed securities

 $86,415  $-  $86,415  $- 

Orchid Island Capital, Inc. common stock

  4,746   4,746   -   - 

December 31, 2023

                

Mortgage-backed securities

 $92,731  $-  $92,731  $- 

Orchid Island Capital, Inc. common stock

  4,797   4,797   -   - 

 

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

NOTE 13. SEGMENT INFORMATION

 

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

 

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

 

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

 

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

 

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $6,096  $-  $-  $-  $6,096 

Advisory services, other operating segments(1)

  62   -   -   (62)  - 

Interest and dividend income

  -   3,090   1   -   3,091 

Interest expense(2)

  -   (2,365)  (1,212)  -   (3,577)

Net revenues

  6,158   725   (1,211)  (62)  5,610 

Other revenue

  -   647   -   -   647 

Operating expenses(3)

  (3,695)  (2,116)  (2)  -   (5,813)

Intercompany expenses(1)

  -   (62)  -   62   - 

Income (loss) before income taxes(4)

 $2,463  $(806) $(1,213) $-  $444 

 

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Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $6,899  $-  $-  $-  $6,899 

Advisory services, other operating segments(1)

  56   -   -   (56)  - 

Interest and dividend income

  -   1,669   1   -   1,670 

Interest expense(2)

  -   (1,072)  (1,112)  -   (2,184)

Net revenues

  6,955   597   (1,111)  (56)  6,385 

Other revenue (expenses)

  -   (106)  -   -   (106)

Operating expenses(3)

  (3,602)  (950)  -   -   (4,552)

Intercompany expenses(1)

  -   (56)  -   56   - 

Income (loss) before income taxes(4)

 $3,353  $(515) $(1,111) $-  $1,727 

 

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

 

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $3,167  $-  $-  $-  $3,167 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   1,492   -   -   1,492 

Interest expense(2)

  -   (1,157)  (605)  -   (1,762)

Net revenues

  3,197   335   (605)  (30)  2,897 

Other revenue (expenses)

  -   (280)  -   -   (280)

Operating expenses(3)

  (1,895)  (887)  -   -   (2,782)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,302  $(862) $(605) $-  $(165)

 

  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $3,516  $-  $-  $-  $3,516 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   839   1   -   840 

Interest expense(2)

  -   (564)  (565)  -   (1,129)

Net revenues

  3,546   275   (564)  (30)  3,227 

Other revenue (expenses)

  -   (621)  -   -   (621)

Operating expenses(3)

  (1,765)  (458)  -   -   (2,223)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,781  $(835) $(564) $-  $382 

 

(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 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.

(4)Totals in the table above may not foot due to rounding differences.

 

Assets in each reportable segment as of June 30, 2024 and December 31, 2023 were as follows:

 

(in thousands)

                
  

Asset

  

Investment

         
  

Management

  

Portfolio

  

Corporate

  

Total

 

June 30, 2024

 $2,028  $111,519   6,892  $120,439 

December 31, 2023

  1,853   117,012   6,733   125,598 

 

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NOTE 14. RELATED PARTY TRANSACTIONS

 

At both June 30, 2024 and December 31, 2023, the Company owned 569,071 shares of Orchid common stock, representing approximately 0.9% and 1.1%, respectively, of Orchid’s outstanding common stock on such dates. The Company received dividends on this common stock investment of approximately $0.4 million and $0.5 million during the six months ended June 30, 2024 and 2023, respectively, and $0.2 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively.

 

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, is eligible to receive compensation from Orchid, 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, receives compensation from Orchid, 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.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.

 

Overview

 

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company that was formed in September 2003. The Company’s principal wholly-owned operating subsidiary is Royal Palm Capital, LLC. We operate in two business segments: the asset management segment, which includes (a) the investment advisory services provided by Royal Palm’s wholly-owned subsidiary, Bimini Advisors Holdings, LLC, to Orchid Island Capital, Inc. ("Orchid") and to Royal Palm, and (b) the investment portfolio segment, which includes the investment activities conducted by Royal Palm.

 

Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries referred to as “Royal Palm”) maintains an investment portfolio, consisting primarily of residential mortgage-backed securities ("MBS") issued and guaranteed by a federally chartered corporation or agency ("Agency MBS"). We also invest in the common stock of Orchid. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency MBS: (i) traditional pass-through Agency MBS, such as mortgage pass-through certificates issued by Fannie Mae, Freddie Mac or Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”) and (ii) structured Agency MBS, such as interest only securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of structured Agency MBS. In addition, Royal Palm receives dividends from its investment in Orchid common shares.

 

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with the Securities and Exchange Commission), are collectively referred to as “Bimini Advisors.” Bimini Advisors serves as the external manager of the portfolio of Orchid. From this arrangement, the Company receives management fees and expense reimbursements. As manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations and providing certain repurchase agreement trading, clearing and administrative services. 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.

 

Stock Repurchase Plan

 

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

 

On March 7, 2024, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the "2024 Repurchase Plan"). Pursuant to the 2024 Repurchase Plan, we can purchase shares of our Class A Common Stock from time to time for an aggregate purchase price not to exceed $2.5 million. Share repurchases 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 Inflation Reduction Act of 2022 (the "Act"), includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and other provisions. The excise tax is effective beginning in 2023. The Company was not subject to the tax in 2023, as its repurchases were less than the threshold specified in the Act. There have been no repurchases in 2024. While we may complete transactions subject to the new excise tax, we do not expect this tax to have a material impact to our financial condition or result of operations.

 

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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, Agency MBS for us to invest in;
 

●

actions taken by the U.S. government, including the President's 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;
 

●

geo-political events that affect the U.S. and international economies; and
 

●

other financial market developments.

 

In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:

 

 

●

our degree of leverage;
 

●

our access to funding and borrowing capacity;
 

●

our borrowing costs;
 

●

our hedging activities;
 

●

the market value of our investments;
 

●

the requirements to qualify for a registration exemption under the Investment Company Act;
 

●

our ability to use net operating loss carryforwards and 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; and
 

●

the financial performance of Orchid and resulting changes in Orchid’s shareholders equity, the carrying value of our investment, dividend income and our advisory services revenue.

 

Results of Operations

 

Described below are the Company’s results of operations for the six and three months ended June 30, 2024, as compared to the six and three months ended June 30, 2023.

 

Net Income (Loss) Summary

 

Consolidated net loss for the six months ended June 30, 2024 was $0.1 million, or $0.01 basic and diluted loss per share of Class A Common Stock, as compared to a consolidated net income of $1.3 million, or $0.13 basic and diluted income per share of Class A Common Stock, for the six months ended June 30, 2023. Consolidated net loss for the three months ended June 30, 2024 was $0.3 million, or $0.03 basic and diluted loss per share of Class A Common Stock, as compared to a 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 June 30, 2023.

 

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The components of net income for the six and three months ended June 30, 2024 and 2023, along with the changes in those components are presented in the table below.

 

(in thousands)

                                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

Change

    

2024

    

2023

    

Change

  

Advisory services revenues

   $ 6,096     $ 6,899     $ (803 )   $ 3,167     $ 3,516     $ (349 )

Interest and dividend income

     3,091       1,670       1,421       1,492       840       652  

Interest expense

     (3,578 )     (2,184 )     (1,394 )     (1,762 )     (1,129 )     (633 )

Net revenues

     5,609       6,385       (776 )     2,897       3,227       (330 )

Other revenue (expense)

     647       (106 )     753       (280 )     (621 )     341  

Expenses

     (5,812 )     (4,552 )     (1,260 )     (2,783 )     (2,223 )     (560 )

Net income (loss) before income tax provision

     444       1,727       (1,283 )     (166 )     383       (549 )

Income tax provision

     505       436       69       108       97       11  

Net (loss) income

   $ (61 )   $ 1,291     $ (1,352 )   $ (274 )   $ 286     $ (560 )

 

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 and TBA short positions to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.

 

We have not designated our derivative financial instruments as hedge accounting relationships, but rather hold them for economic hedging purposes. Changes in fair value of these instruments are presented in a separate line item in our consolidated statements of operations and not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.

 

For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense, as reflected in our consolidated statements of operations, is adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses that pertain to each period presented. We believe that adjusting our GAAP interest expense for the periods presented by the gains or losses on these derivative instruments may not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments may cover periods that extend into the future, not just the current period. Any realized or unrealized gains or losses on the derivative instruments reflect the change in market value of the instrument caused by changes in underlying interest rates applicable to the term covered by the instrument, which changes are reflective of the future periods covered by the derivative instrument, not just the current period.

 

For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on 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.

 

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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 2024 and 2023.

 

Gains (Losses) on Derivative Instruments

 

(in thousands)

                        
           

Funding Hedges

  
           

Attributed to

    

Attributed to

  
   

Statement of

    

Current

    

Future

  
   

Operations

    

Period

    

Periods

  

Three Months Ended

  

(GAAP)

    

(Non-GAAP)

    

(Non-GAAP)

  

June 30, 2024

   $ 212     $ 44     $ 168  

March 31, 2024

     1,171       21       1,150  

December 31, 2023

     (1,881 )     (21 )     (1,860 )

September 30, 2023

     1,169       (11 )     1,180  

June 30, 2023

     516       (18 )     534  

March 31, 2023

     (274 )     (33 )     (241 )

Six Months Ended

                        

June 30, 2024

   $ 1,383     $ 65     $ 1,318  

June 30, 2023

     242       (51 )     293  

 

Economic Net Portfolio Interest Income

 

(in thousands)

                                                
           

Interest Expense on Repurchase Agreements

    

Net Portfolio

  
   

GAAP

            

Effect of

            

Interest Income (Expense)

  
   

Interest

    

GAAP

    

Non-GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Income

    

Basis

    

Hedges(1)

    

Basis(2)

    

Basis

    

Basis(3)

  

June 30, 2024

   $ 1,287     $ 1,157     $ (44 )   $ 1,113     $ 130     $ 174  

March 31, 2024

     1,394       1,208       (21 )     1,187       186       207  

December 31, 2023

     1,350       1,178       21       1,199       172       151  

September 30, 2023

     838       831       11       842       7       (4 )

June 30, 2023

     567       564       18       582       3       (15 )

March 31, 2023

     557       508       33       541       49       16  

Six Months Ended

                                                

June 30, 2024

   $ 2,681     $ 2,365     $ (65 )   $ 2,300     $ 316     $ 381  

June 30, 2023

     1,124       1,072       51       1,123       52       1  

 

(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.

 

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Economic Net Interest Income

 

(in thousands)

                                        
                   

Interest

                  
   

Net Portfolio

    

Expense on

                  
   

Interest Income (Expense)

    

Long-Term

    

Net Interest Income (Expense)

  
   

GAAP

    

Economic

    

Debt

    

GAAP

    

Economic

  

Three Months Ended

  

Basis

    

Basis(1)

    

(GAAP)

    

Basis

    

Basis(2)

  

June 30, 2024

   $ 130     $ 174     $ 605     $ (475 )   $ (431 )

March 31, 2024

     186       207       608       (422 )     (401 )

December 31, 2023

     172       151       616       (444 )     (465 )

September 30, 2023

     7       (4 )     611       (604 )     (615 )

June 30, 2023

     3       (15 )     565       (562 )     (580 )

March 31, 2023

     49       16       546       (497 )     (530 )

Six Months Ended

                                        

June 30, 2024

   $ 316     $ 381     $ 1,213     $ (897 )   $ (832 )

June 30, 2023

     52       1       1,111       (1,059 )     (1,110 )

 

(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. The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. The investment portfolio segment includes the investment activities conducted by Royal Palm.

 

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

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2024

                                        

Advisory services, external customers

   $ 6,096     $ -     $ -     $ -     $ 6,096  

Advisory services, other operating segments(1)

     62       -       -       (62 )     -  

Interest and dividend income

     -       3,090       1       -       3,091  

Interest expense(2)

     -       (2,365 )     (1,212 )     -       (3,577 )

Net revenues

     6,158       725       (1,211 )     (62 )     5,610  

Other revenue

     -       647       -       -       647  

Operating expenses(3)

     (3,695 )     (2,116 )     (2 )     -       (5,813 )

Intercompany expenses(1)

     -       (62 )     -       62       -  

Income (loss) before income taxes(4)

   $ 2,463     $ (806 )   $ (1,213 )   $ -     $ 444  

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 6,899     $ -     $ -     $ -     $ 6,899  

Advisory services, other operating segments(1)

     56       -       -       (56 )     -  

Interest and dividend income

     -       1,669       1       -       1,670  

Interest expense(2)

     -       (1,072 )     (1,112 )     -       (2,184 )

Net revenues

     6,955       597       (1,111 )     (56 )     6,385  

Other revenue (expenses)

     -       (106 )     -       -       (106 )

Operating expenses(3)

     (3,602 )     (950 )     -       -       (4,552 )

Intercompany expenses(1)

     -       (56 )     -       56       -  

Income (loss) before income taxes(4)

   $ 3,353     $ (515 )   $ (1,111 )   $ -     $ 1,727  

 

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

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2024

                                        

Advisory services, external customers

   $ 3,167     $ -     $ -     $ -     $ 3,167  

Advisory services, other operating segments(1)

     30       -       -       (30 )     -  

Interest and dividend income

     -       1,492       -       -       1,492  

Interest expense(2)

     -       (1,157 )     (605 )     -       (1,762 )

Net revenues

     3,197       335       (605 )     (30 )     2,897  

Other revenue (expenses)

     -       (280 )     -       -       (280 )

Operating expenses(3)

     (1,895 )     (887 )     -       -       (2,782 )

Intercompany expenses(1)

     -       (30 )     -       30       -  

Income (loss) before income taxes(4)

   $ 1,302     $ (862 )   $ (605 )   $ -     $ (165 )

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 3,516     $ -     $ -     $ -     $ 3,516  

Advisory services, other operating segments(1)

     30       -       -       (30 )     -  

Interest and dividend income

     -       839       1       -       840  

Interest expense(2)

     -       (564 )     (565 )     -       (1,129 )

Net revenues

     3,546       275       (564 )     (30 )     3,227  

Other revenue (expenses)

     -       (621 )     -       -       (621 )

Operating expenses(3)

     (1,765 )     (458 )     -       -       (2,223 )

Intercompany expenses(1)

     -       (30 )     -       30       -  

Income (loss) before income taxes(4)

   $ 1,781     $ (835 )   $ (564 )   $ -     $ 382  

 

(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)

Operating expenses are allocated based on each segment’s proportional share of total revenues.
(4) Totals in the table above may not foot due to rounding differences.

 

Assets in each reportable segment were as follows:

 

(in thousands)

                                
   

Asset

    

Investment

                  
   

Management

    

Portfolio

    

Corporate

    

Total

  

June 30, 2024

   $ 2,028     $ 111,519       6,892     $ 120,439  

December 31, 2023

     1,853       117,012       6,733       125,598  

 

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.

 

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On April 1, 2022, pursuant to the third amendment to the management agreement entered into on November 16, 2021, the Company began providing certain repurchase agreement trading, clearing and administrative services to Orchid that had been previously provided by AVM, L.P. under an agreement terminated on March 31, 2022. In consideration for such services, Orchid pays the following fees to the Company:

 

 

●

a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and
 

●

a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

 

In addition, Orchid is obligated to reimburse us for any direct expenses incurred on its behalf and to pay to us an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. The management agreement has been renewed through February 2025 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 2024 and 2023.

 

(in thousands)

                                                
                   

Advisory Services

  
                                   

Repurchase,

          
   

Average

    

Average

                    

Clearing and

          
   

Orchid

    

Orchid

    

Management

    

Overhead

    

Administrative

          

Three Months Ended

  

MBS

    

Equity

    

Fee

    

Allocation

    

Fees

    

Total

  

June 30, 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  

December 31, 2023

     4,207,118       851,532       2,275       617       184       3,076  

September 30, 2023

     4,447,098       964,230       2,871       557       193       3,621  

June 30, 2023

     4,186,939       899,109       2,704       639       173       3,516  

March 31, 2023

     3,769,954       865,722       2,641       576       165       3,382  

Six Months Ended

                                                

June 30, 2024

   $ 4,045,480     $ 685,912     $ 4,418     $ 1,330     $ 348     $ 6,096  

June 30, 2023

     3,978,447       882,415       5,345       1,215       338       6,898  

 

Investment Portfolio Segment

 

Net Portfolio Interest Income (Expense)

 

We define net portfolio interest income as interest income on MBS less interest expense on repurchase agreement funding. During the six months ended June 30, 2024, we generated $0.3 million of net portfolio interest income, consisting of $2.7 million of interest income from MBS assets offset by $2.4 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2023, we generated $52,000 of net portfolio interest income, consisting of $1.1 million of interest income from MBS assets offset by $1.1 million of interest expense on repurchase liabilities. The $1.5 million increase in interest income was due to a 155 basis point ("bp") increase in yields, combined with an $38.9 million increase in average MBS holdings. There was a $1.3 million increase in interest expense for the six months ended June 30, 2024 that was due to a 108 bp increase in cost of funds, combined with a $37.1 million increase in average repurchase liabilities.

 

Our economic interest expense on repurchase liabilities for the six months ended June 30, 2024 and 2023 was $2.3 million and $1.2 million, respectively, resulting in $381,000 and $1,000 of economic net portfolio interest income, respectively.

 

During the three months ended June 30, 2024, we generated $0.1 million of net portfolio interest income, consisting of $1.3 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2023, we generated $3,000 of net portfolio interest income, consisting of $567,000 of interest income from MBS assets offset by $564,000 of interest expense on repurchase liabilities. The $0.7 million increase in interest income was due to a 174 bp increase in yields, combined with an $32.8 million increase in average MBS holdings. There was a $0.6 million increase in interest expense for the three months ended June 30, 2024 that was due to a 118 bp increase in cost of funds, combined with a $31.8 million increase in average repurchase liabilities.

 

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Our economic interest expense on repurchase liabilities for the three months ended June 30, 2024 and 2023 was $1,113,000 and $582,000, respectively, resulting in $174,000 and $(15,000) of economic net portfolio interest income (expense), respectively.

 

The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the six months ended June 30, 2024 and 2023 and each quarter in 2024 and 2023 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)

  

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 %

December 31, 2023

     88,796       1,350       6.08 %     84,162       1,178       1,199       5.60 %     5.70 %

September 30, 2023

     74,316       838       4.51 %     71,056       831       842       4.68 %     4.74 %

June 30, 2023

     54,705       567       4.14 %     51,893       564       582       4.35 %     4.49 %

March 31, 2023

     45,767       557       4.87 %     43,455       508       541       4.68 %     4.98 %

Six Months Ended

                                                                

June 30, 2024

   $ 89,118     $ 2,681       6.02 %   $ 84,745     $ 2,365     $ 2,300       5.58 %     5.43 %

June 30, 2023

     50,236       1,124       4.47 %     47,674       1,072       1,123       4.50 %     4.71 %

 

($ in thousands)

                                
   

Net Portfolio

    

Net Portfolio

  
   

Interest Income (Expense)

    

Interest Spread

  
   

GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Basis

    

Basis(2)

    

Basis

    

Basis(4)

  

June 30, 2024

   $ 130     $ 174       0.35 %     0.56 %

March 31, 2024

     186       207       0.52 %     0.61 %

December 31, 2023

     172       151       0.48 %     0.38 %

September 30, 2023

     7       (4 )     (0.17 )%     (0.23 )%

June 30, 2023

     3       (15 )     (0.21 )%     (0.35 )%

March 31, 2023

     49       16       0.19 %     (0.11 )%

Six Months Ended

                                

June 30, 2024

   $ 316     $ 381       0.44 %     0.59 %

June 30, 2023

     52       1       (0.03 )%     (0.24 )%

 

(1)

Portfolio yields and costs of borrowings presented in the tables above and the tables on page 28 are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances.

(2)

Economic interest expense and economic net interest income presented in the tables above and the tables on page 28 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.

 

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Table of Contents

 

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 2024 and 2023.

 

($ in thousands)

                                                                        
   

Average MBS Held

    

Interest Income

    

Realized Yield on Average MBS

  
   

PT

    

Structured

            

PT

    

Structured

            

PT

    

Structured

          

Three Months Ended

  

MBS

    

MBS

    

Total

    

MBS

    

MBS

    

Total

    

MBS

    

MBS

    

Total

  

June 30, 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 %

December 31, 2023

     86,242       2,554       88,796       1,294       56       1,350       6.00 %     8.67 %     6.08 %

September 30, 2023

     71,731       2,585       74,316       781       57       838       4.35 %     8.91 %     4.51 %

June 30, 2023

     52,004       2,701       54,705       508       59       567       3.91 %     8.59 %     4.14 %

March 31, 2023

     42,912       2,855       45,767       500       57       557       4.66 %     8.09 %     4.87 %

Six Months Ended

                                                                        

June 30, 2024

   $ 86,652     $ 2,466     $ 89,118     $ 2,590     $ 91     $ 2,681       5.98 %     7.41 %     6.02 %

June 30, 2023

     47,458       2,778       50,236       1,008       116       1,124       4.25 %     8.33 %     4.47 %

 

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 19 bps above the average one-month SOFR and 14 bps above the average six-month SOFR for the quarter ended June 30, 2024. Our average economic cost of funds was 2 bps below the average one-month SOFR and 7 bps below the average six-month SOFR for the quarter ended June 30, 2024. The average term to maturity of the outstanding repurchase agreements was 69 days at June 30, 2024, compared to 29 days at December 31, 2023. 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 2024 and 2023, on both a GAAP and economic basis.

 

($ in thousands)

                                        
   

Average

                                  
   

Balance of

    

Interest Expense

    

Average Cost of Funds

  
   

Repurchase

    

GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Agreements

    

Basis

    

Basis

    

Basis

    

Basis

  

June 30, 2024

   $ 83,737     $ 1,157     $ 1,113       5.53 %     5.32 %

March 31, 2024

     85,753       1,208       1,187       5.63 %     5.54 %

December 31, 2023

     84,162       1,178       1,199       5.60 %     5.70 %

September 30, 2023

     71,056       831       842       4.68 %     4.74 %

June 30, 2023

     51,893       564       582       4.35 %     4.49 %

March 31, 2023

     43,455       508       541       4.68 %     4.98 %

Six Months Ended

                                        

June 30, 2024

   $ 84,745     $ 2,365     $ 2,300       5.58 %     5.43 %

June 30, 2023

     47,674       1,072       1,123       4.50 %     4.71 %

 

                   

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

  

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 %

December 31, 2023

     5.34 %     5.35 %     0.26 %     0.25 %     0.36 %     0.35 %

September 30, 2023

     5.32 %     5.17 %     (0.64 )%     (0.49 )%     (0.58 )%     (0.43 )%

June 30, 2023

     5.07 %     4.78 %     (0.72 )%     (0.43 )%     (0.58 )%     (0.29 )%

March 31, 2023

     4.63 %     4.09 %     0.05 %     0.59 %     0.35 %     0.89 %

Six Months Ended

                                                

June 30, 2024

     5.33 %     5.39 %     0.25 %     0.19 %     0.10 %     0.04 %

June 30, 2023

     4.85 %     4.44 %     (0.35 )%     0.06 %     (0.14 )%     0.27 %

 

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Table of Contents

 

Dividend Income from Orchid

 

During the six months ended June 30, 2024 and 2023, we owned 569,071 shares of Orchid common stock, respectively. Orchid paid total dividends of $0.72 and $0.96 per share during the six months ended June 30, 2024 and 2023, respectively, resulting in dividend income on this common stock investment of approximately $0.4 million and $0.6 million, respectively. Orchid paid total dividends of $0.36 and $0.48 per share during the three months ended June 30, 2024 and 2023, respectively, resulting in dividend income on this common stock investment of approximately $0.2 million and $0.3 million, respectively.

 

Long-Term Debt

 

Junior Subordinated Debt

 

Prior to June 30, 2023, the junior subordinated debt securities paid interest at a floating rate, adjusted quarterly and set at a spread of 3.50% over the prevailing three-month LIBOR rate on the determination date. Starting June 30, 2023, the underlying index converted from three-month LIBOR to CME Term SOFR plus a tenor spread adjustment of 0.26161%. The interest rate for subsequent accrual periods will be CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. The CME Term SOFR index is in effect for all interest rate resets after July 3, 2023. The LIBOR and CME Term SOFR rate increases since January 2022 have increased our interest expense. Interest expense on our junior subordinated debt securities was $1.2 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively.  The average rate of interest paid for the six months ended June 30, 2024 was 9.11% compared to 8.39% for the comparable period in 2023. Interest expense on our junior subordinated debt securities was $0.6 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively.  The average rate of interest paid for the three months ended June 30, 2024 was 9.09% compared to 8.49% for the comparable period in 2023.

 

Note Payable

 

On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable in equal monthly principal and interest installments of approximately $5,000 through October 30, 2039. Interest accrues at 4.89% through October 30, 2024. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.

 

Gains or Losses and Other Income

 

The table below presents our gains or losses and other income for the six and three months ended June 30, 2024 and 2023.

 

(in thousands)

                                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

Change

    

2024

    

2023

    

Change

  

Realized losses on sales of MBS

   $ (562 )   $ -     $ (562 )   $ (562 )   $ -     $ (562 )

Unrealized (losses) gains on MBS

     (124 )     (263 )     139       405       (921 )     1,326  

Total losses on MBS

     (686 )     (263 )     (423 )     (157 )     (921 )     764  

Gains on derivative instruments

     1,383       242       1,141       212       516       (304 )

Unrealized losses on Orchid Island Capital, Inc. common stock

     (51 )     (85 )     34       (336 )     (216 )     (120 )

 

We invest in MBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from trading in these securities. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the six months ended June 30, 2024, we received proceeds of $46.3 million from the sales of RMBS. We did not sell any MBS during the six months ended June 30, 2023. 

 

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Table of Contents

 

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 2024 and 2023.

 

   

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)

  

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%

  

December 31, 2023

  

3.84%

    

3.87%

    

5.93%

    

6.61%

    

5.36%

  

September 30, 2023

  

4.61%

    

4.57%

    

6.72%

    

7.31%

    

5.27%

  

June 30, 2023

  

4.13%

    

3.82%

    

6.06%

    

6.71%

    

5.00%

  

March 31, 2023

  

3.61%

    

3.49%

    

5.56%

    

6.32%

    

4.51%

  

 

(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 six and three months ended June 30, 2024, our total operating expenses were approximately $5.8 million and $2.8 million, respectively, compared to $4.6 million and $2.2 million, respectively, for the six and three months ended June 30, 2023. The table below presents a breakdown of operating expenses for the six and three months ended June 30, 2024 and 2023.

 

(in thousands)

                                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

Change

    

2024

    

2023

    

Change

  

Compensation and related benefits

   $ 3,648     $ 2,642     $ 1,006     $ 1,784     $ 1,278     $ 506  

Direct advisory services costs

     852       821       31       503       368       135  

Legal fees

     43       38       5       23       20       3  

Accounting, auditing and other professional fees

     330       270       60       109       159       (50 )

Directors’ fees and liability insurance

     416       413       3       207       207       -  

Administrative and other expenses

     523       368       155       157       191       (34 )
    $ 5,812     $ 4,552     $ 1,260     $ 2,783     $ 2,223     $ 560  

 

Income Tax Provision

 

We recorded an income tax provision for the six months ended June 30, 2024 and 2023 of approximately $0.5 million and $0.4 million, respectively, on consolidated pre-tax book income of $0.4 million and $1.7 million, respectively. The total income tax provision recorded for the three months ended June 30, 2024 and 2023 was $0.1 million and $0.1 million, respectively, on consolidated pre-tax book (loss) income of $(0.2) million and $0.4 million, respectively. The Company uses the discrete-period computation method for determining its income tax (benefit) 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. The increase in the income tax provision relative to the pre-tax book income (loss) for the six and three months ended June 30, 2024 compared to the same periods in 2023 was primarily due to an increase in executive compensation subject to Section 162(m) limitations.

 

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Financial Condition:

 

Mortgage-Backed Securities

 

As of June 30, 2024, our MBS portfolio consisted of $86.4 million of agency or government MBS at fair value and had a weighted average coupon of 5.00%. During the six months ended June 30, 2024, we received principal repayments of $7.9 million compared to $1.9 million for the comparable period ended June 30, 2023. The average prepayment speeds for the quarters ended June 30, 2024 and 2023 were 10.0% and 9.6%, respectively.

 

The following table presents the three-month constant prepayment rate (“CPR”) experienced on our structured and PT MBS sub-portfolios, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three-month prepayment rate of the securities in the respective asset category.

 

         

Structured

        
   

PT MBS

    

MBS

    

Total

  

Three Months Ended

  

Portfolio (%)

    

Portfolio (%)

    

Portfolio (%)

  

June 30, 2024

   10.9     5.5     10.0  

March 31, 2024

   18.0     9.2     16.5  

December 31, 2023

   8.9     4.6     8.0  

September 30, 2023

   4.3     6.6     4.8  

June 30, 2023

   8.0     13.0     9.6  

March 31, 2023

   2.4     10.3     5.0  

 

The following tables summarize certain characteristics of our PT MBS and structured MBS as of June 30, 2024 and December 31, 2023:

 

($ in thousands)

                                  
                           

Weighted

    
           

Percentage

            

Average

    
           

of

    

Weighted

    

Maturity

    
   

Fair

    

Entire

    

Average

    

in

  

Longest

Asset Category

  

Value

    

Portfolio

    

Coupon

    

Months

  

Maturity

June 30, 2024

                                  

Fixed Rate MBS

   $ 83,961       97.2 %     5.46 %     340  

1-Apr-54

Structured MBS

     2,454       2.8 %     2.84 %     286  

15-May-51

Total MBS Portfolio

   $ 86,415       100.0 %     5.00 %     339  

1-Apr-54

December 31, 2023

                                  

Fixed Rate MBS

   $ 90,181       97.3 %     6.00 %     343  

1-Nov-53

Structured MBS

     2,550       2.7 %     2.84 %     290  

15-May-51

Total MBS Portfolio

   $ 92,731       100.0 %     5.44 %     341  

1-Nov-53

 

($ in thousands)

                                
   

June 30, 2024

    

December 31, 2023

  
           

Percentage of

            

Percentage of

  

Agency

  

Fair Value

    

Entire Portfolio

    

Fair Value

    

Entire Portfolio

  

Fannie Mae

   $ 11,405       13.2 %   $ 38,204       41.2 %

Freddie Mac

     75,010       86.8 %     54,527       58.8 %

Total Portfolio

   $ 86,415       100.0 %   $ 92,731       100.0 %

 

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June 30, 2024

    

December 31, 2023

  

Weighted Average Pass-through Purchase Price

   $ 103.23     $ 104.43  

Weighted Average Structured Purchase Price

   $ 4.48     $ 4.48  

Weighted Average Pass-through Current Price

   $ 99.09     $ 101.55  

Weighted Average Structured Current Price

   $ 13.78     $ 13.46  

Effective Duration (1)

     3.486       2.508  

 

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 3.486 indicates that an interest rate increase of 1.0% would be expected to cause a 3.486% decrease in the value of the MBS in our investment portfolio at June 30, 2024. An effective duration of 2.508 indicates that an interest rate increase of 1.0% would be expected to cause a 2.508% decrease in the value of the MBS in our investment portfolio at December 31, 2023. 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 June 30, 2024, assuming rates instantaneously fall 100 bps, rise 100 bps and rise 200 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.

 

($ in thousands)

                                                        
   

Fair

    

$ Change in Fair Value

    

% Change in Fair Value

  

MBS Portfolio

  

Value

    

-100BPS

    

+100BPS

    

+200BPS

    

-100BPS

    

+100BPS

    

+200BPS

  

Fixed Rate MBS

   $ 83,961     $ 2,715     $ (3,335 )   $ (7,256 )     3.23 %     (3.97 )%     (8.64 )%

Structured MBS

     2,454       (34 )     18       26       (1.39 )%     0.73 %     1.06 %

Total MBS Portfolio

   $ 86,415     $ 2,681     $ (3,317 )   $ (7,230 )     3.10 %     (3.84 )%     (8.37 )%
   

Notional

    

$ Change in Fair Value

    

% Change in Fair Value

  

Repurchase Agreement Hedges

  

Amount(1)

    

-100BPS

    

+100BPS

    

+200BPS

    

-100BPS

    

+100BPS

    

+200BPS

  

Interest Rate Futures Contracts

   $ 78,400     $ (2,806 )   $ 2,657     $ 5,284       (3.58 )%     3.39 %     6.74 %

Gross Totals

           $ (125 )   $ (660 )   $ (1,946 )                        

 

(1)

Represents the average contract/notional amount of U.S. Treasury and SOFR futures contracts.

 

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In addition to changes in interest rates, other factors impact the fair value of our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of our assets would likely differ from that shown above and such difference might be material and adverse to our stockholders.

 

Repurchase Agreements

 

As of June 30, 2024, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with five 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 June 30, 2024, we had obligations outstanding under the repurchase agreements of approximately $82.9 million with a net weighted average borrowing cost of 5.47%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 12 to 89 days, with a weighted average maturity of 69 days. Securing the repurchase agreement obligation as of June 30, 2024 are MBS with an estimated fair value, including accrued interest, of $86.6 million. Through August 1, 2024, we have been able to maintain our repurchase facilities with comparable terms to those that existed at June 30, 2024 with maturities through September 27, 2024.

 

The table below presents information about our period-end, maximum and average repurchase agreement obligations for each quarter in 2024 and 2023.

 

   

Ending

    

Maximum

    

Average

    

Difference Between Ending

  
   

Balance

    

Balance

    

Balance

    

Repurchase Agreements and

  
   

of Repurchase

    

of Repurchase

    

of Repurchase

    

Average Repurchase Agreements

  

Three Months Ended

  

Agreements

    

Agreements

    

Agreements

    

Amount

    

Percent

  

June 30, 2024

   $ 82,876     $ 84,553     $ 83,737     $ (861 )     (1.03 )%

March 31, 2024

     84,599       87,523       85,753       (1,154 )     (1.35 )%

December 31, 2023

     86,907       86,919       84,162       2,745       3.26 %

September 30, 2023

     81,417       81,567       71,056       10,361       14.58 %

June 30, 2023

     60,695       60,695       51,893       8,802       16.96 %

March 31, 2023

     43,092       43,936       43,455       (363 )     (0.84 )%

 

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.

 

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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 June 30, 2024, we had cash and cash equivalents of $4.9 million. We generated cash flows of $10.6 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $84.8 million during the six months ended June 30, 2024. In addition, during the six months ended June 30, 2024, we received approximately $6.1 million in management fees and expense reimbursements as manager of Orchid and approximately $0.4 million in dividends from our investment in Orchid common stock.

 

Outlook

 

Orchid Island Capital Inc.

 

Orchid Island Capital reported a net loss for the second quarter 2024 of $5.0 million and its shareholders’ equity increased from $481.6 million to $555.9 million. Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay to us Orchid’s pro rata share of overhead as defined in the management agreement. As a stockholder of Orchid, we will also continue to share in distributions, if any, paid by Orchid to its stockholders. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes do not impact our cash flows from Orchid.

 

Economic Summary

 

The extended recovery from the devastating effects on the U.S. economy of the pandemic in 2020 continued in late 2023 and early 2024. While economic growth was strong, the labor market remained out of balance with corresponding wage pressures and inflation, particularly services inflation, remained well above the Federal Reserve’s (the “Fed") target level. These conditions persisted despite over 500 basis points of monetary policy tightening on the part of the Fed over the period from March of 2022 through July of 2023. Inflation was clearly moderating over the course of the second half of 2023, but growth remained quite strong, well above the economy’s long-run potential.  Despite the strong growth, the Fed appeared to be on the brink of relaxing monetary policy beginning in 2024 based on the persistent trend lower in reported inflation figures in late 2023.  The market was further encouraged by comments from various Fed governors, including the chairman, that there would be eases in 2024.  This changed rapidly as 2024 unfolded and inflation readings reversed course and appeared to accelerate.  The tone of comments by all Fed officials pivoted away from potential near-term easing to the need to maintain higher rates.  The continued strength of the economy enabled the Fed to keep policy restrictive until inflation resumed moderating towards its 2% target range.  The Fed also made it clear to markets that it was prepared to raise rates further if inflation did indeed accelerate further, although it did not anticipate this would be likely.

 

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These trends continued into April as data for March was released and interest rates continued to increase from the low levels observed in December of 2023. However, as economic data for April, May and June was released, the data appeared to moderate.  Inflation readings have resumed the trend observed in late 2023 and appear to be headed towards the Fed’s 2% target again.  Job gains – as reflected in the monthly non-farm payroll reports released by the labor department – have moderated as well. Measures of consumer spending and business activity have slowed as well.  While these readings are not consistent with a recession, they are consistent with growth rates at or near the economy's potential, which appears to indicate the supply/demand imbalances that existed for the last two years have receded.  It appears the brief re-acceleration of inflation during the first quarter of 2024 will not be sustained and represents a one-off incident. Given this development, the Fed is anticipated to start loosening monetary policy during the second half of 2024.  Current market pricing is for between two and three 25 basis point cuts by the end of the year, as the Fed is perceived to be equally concerned with slowing economic growth as they are with a re-acceleration of inflation.

 

Interest Rates

 

Movements in interest rate levels across the curve as well as the shape of the curve followed the same pattern as the economic developments described above.  As economic data remained strong in late 2023 and into early 2024 and inflation appeared to reaccelerate, long maturity rates steadily increased. Starting in late 2023, the yield on the 10-year U.S. Treasury note increased from 3.8% to just over 4.7% in late April.  Likewise, the shape of the U.S. Treasury curve, as measured by the difference between the yields on the 2-year U.S. Treasury note and the 10-year U.S. Treasury note, flattened during the first quarter of 2024, becoming more inverted as the prospects for interest rate cuts by the Fed were priced out of the market.

 

As the economic data softened and inflation appeared to slow and resume a steady decline towards the Fed’s 2% target, starting with the April data released in May, the 10-year U.S. Treasury note yield declined from just over 4.7% in late April to approximately 4.4% at June 30, 2024 and just under 4.0% currently.  However, the slope of the U.S. Treasury curve – again, as measured by the difference in yield between the 2-year and 10-year U.S. Treasury notes – continued to flatten until late June.  In the last week of the second quarter, the yield curve began to steepen by over 20 basis points. However, the catalyst for the steepening in the curve that occurred in late June does not appear to have been driven by economic data, but perhaps by political developments in the United States and European Union, including both the evolving landscape of the U.S. presidential election in November and the recent elections in France and the United Kingdom, which resulted in a shift in control to more left-leaning parties with the potential for higher fiscal spending and government deficits.

 

Interest rate volatility embedded in interest rate derivatives, as measured by the MOVE index, reversed the pattern observed during the first quarter of 2024 – gradually declining – and spiked higher in early April, only to moderate again over the balance of the second quarter.  The level of the index ended only slightly higher than the level at the beginning of the second quarter – the index value was 98.6 on June 30, 2024, versus 86.4 on March 28, 2024.  The spike in early April was likely driven by strong jobs and inflation data for March released in early April of 2024.

 

The Agency RMBS Market 

 

As the economic data, particularly inflation, moderated over the course of the second quarter of 2024, market participants expected that should the trend continue, the Fed would soon begin loosening monetary policy and the curve slope would normalize and become positively sloped again.  Risk assets of all kinds performed very well for the second quarter as investors became comfortable short-term rates had peaked and would soon be heading lower, reducing funding costs and enhancing levered returns on risk assets.  Lower risk assets also generated positive returns, such as Agency RMBS, but the returns were modest.  The Agency RMBS index generated a total return for the quarter of 0.2%, and 0.3% for Fannie Mae Agency RMBS.  Versus comparable duration U.S. Treasuries (a proxy for hedge adjusted returns), the returns were (0.20%) and (0.25%), respectively. These returns for the second quarter of 2024 compare to 4.3% for the S&P 500, 1.1% for the high yield index and absolute returns of between 1.0% and 1.7% for the various sub-sectors of the non-Agency RMBS indices.

 

Within the stack of 30-year, fixed rate Agency RMBS (the asset class in which the Company invests the vast majority of its capital), absolute returns tracked the coupons of the securities - the higher the coupon, the higher the return. The return for 2.0% coupon securities was 0.1% for the second quarter, the lowest return, and 1.3% for 7.0% coupon securities, the highest return and coupon. Within the stack of 30-year, fixed rate Agency RMBS, excess returns versus comparable duration swaps for the second quarter (a proxy for hedged returns) were better for coupons on the lower and higher end of the coupon range, with returns for the middle coupons lagging. The lowest coupon securities, 2.0%, 2.5%, 3.0% and 3.5%, had excess returns of (0.1%).  The highest coupons securities, 6.5% and 7.0%, had excess returns of (0.2%) and 0.0%, respectively. The middle coupon security returns, 4.0% coupons through 6.0% coupons, had excess returns between (0.3%) and (0.6%).

 

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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 the 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 the balance sheet by a maximum of $25 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. As interest rates have remained high and prepayment speeds have slowed, the actual balance sheet reduction of Agency RMBS has trended well below the cap. On September 30, 2019, the FHFA announced that Fannie Mae and Feddie Mac were allowed to increase their capital buffers to $25 billion and $20 billion, respectively, from the prior limit of $3 billion each. This step could ultimately lead to the Enterprises being privatized and represents the first concrete step on the road to Enterprise reform.  In December 2020, the FHFA released a final rule on a new regulatory framework for the Enterprises which seeks to implement both a risk-based capital framework and minimum leverage capital requirements. On January 14, 2021, the U.S. Treasury and the FHFA executed letter agreements allowing the Enterprises to continue to retain capital up to their regulatory minimums, including buffers, as prescribed in the December rule.  These letter agreements provide, in part, (i) there will be no exit from conservatorship until all material litigation is settled and the Enterprise has common equity Tier 1 capital of at least 3% of its assets, (ii) the Enterprises will comply with the FHFA’s regulatory capital framework, (iii) higher-risk single-family mortgage acquisitions will be restricted to then current levels, and (iv) the U.S. Treasury and the FHFA will establish a timeline and process for future Enterprise reform. However, no definitive proposals or legislation have been released or enacted with respect to ending the conservatorship, unwinding the Enterprises, or materially reducing the roles of the Enterprises in the U.S. mortgage market.

 

On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the letter agreements, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties.  On February 25, 2022, the FHFA published a final rule, effective as of April 26, 2022, amending the Enterprise capital framework established in December 2020 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 (“UMBS”) 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 will, among other things, reduce the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replace 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; update the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduce a risk weight of 20% for guarantee assets.

 

On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame").  The Basel III Endgame, if implemented as proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency 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.  In testimony before the United States Senate Committee on Banking, Housing and Urban Affairs in July 2024, Fed chairman Jerome Powell stated that the OCC, the FDIC and the Fed were in discussions to materially revise the proposed rule, and that there was consensus at the Fed to undergo another comment period. This would likely delay the process into 2025 and a new presidential administration.

 

The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to evolve.

 

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Table of Contents

 

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.

 

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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 long-awaited pivot on the part of the Federal Reserve may finally be at hand.  Persistently strong growth of the U.S. economy and above trend inflation appear to have moderated sufficiently that the Fed now sees the risks to the economy as balanced – implying there is equal risk of more growth or a slow-down.  Because the Fed sees its current monetary policy as restrictive, the Fed may begin to reverse some of the tightening that occurred in 2022 and 2023 and ease monetary policy.  Current market pricing is for between two and three 25 basis point cuts by year end with several more in 2025.  Economic data released for April, May and June show moderating inflation that appears headed towards the Fed’s 2% target as well as a labor market more in balance with supply and demand roughly equal.  Should such conditions persist, the Fed should begin lowering the Fed funds rate this year, perhaps starting in September.

 

The developments described above led risk assets to perform very well during the second quarter of 2024, with the S&P 500 returning nearly 5%.  Less risky assets also generated positive returns for the quarter, although the returns were much more modest.  Agency RMBS returns for the quarter were 0.2% (absolute total return) but returns versus comparable duration swaps (a proxy for hedge returns) were slightly negative, owing largely to very poor relative performance over the last week of the second quarter.  Returns across the coupon stack of 30-year, fixed rate Agency RMBS, where the Company deploys most of its capital, were coupon dependent – ranging from 0.1% for the lowest coupons to 1.3% for the 7.0% coupon, the highest coupon.  Returns versus hedges were mixed, with the “wings,” or the lowest and highest coupons, better than the “belly” or middle coupons. 

 

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, 2023.

 

Capital Expenditures

 

At June 30, 2024, we had no material commitments for capital expenditures.

 

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.

 

- 38 -
Table of Contents

 

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.

 

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Table of Contents

 

 

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 June 30, 2024, no further information has been received related to this matter and the Company believes the demands are without merit. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the likelihood of a material adverse outcome is remote. Accordingly, no provision or accrual has been recorded.

 

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, 2023, filed with the SEC on March 10, 2024.

 

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 June 30, 2024.

 

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 June 30, 2024.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

During the quarter ended June 30, 2024, none 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).

 

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Table of Contents
 
 

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

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

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**

 

Exhibit 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.***

Exhibit 101.SCH

Inline XBRL Taxonomy Extension Schema Document***

Exhibit 101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document***

Exhibit 101.DEF 

Inline XBRL Additional Taxonomy Extension Definition Linkbase Document***

Exhibit 101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document***

Exhibit 101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document***
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*          Filed herewith.

**         Furnished herewith

***         Submitted electronically herewith.

 

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Table of Contents

 

 

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:          August 2, 2024

By:

/s/ Robert E. Cauley

  
   

Robert E. Cauley

Chairman and Chief Executive Officer

  

 

 

 

Date:          August 2, 2024

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)

  

 

- 42 -

Exhibit 31.1

CERTIFICATIONS

I, Robert E. Cauley, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Bimini Capital Management, Inc. (the "registrant");

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):

 

 

a)

all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: August 2, 2024  
   
/s/ Robert E. Cauley  

Robert E. Cauley

Chairman of the Board and Chief Executive Officer

  

 

 

 

Exhibit 31.2

CERTIFICATIONS

 

I, G. Hunter Haas, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Bimini Capital Management, Inc. (the "registrant");

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):

 

 

a)

all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: August 2, 2024  
   
/s/ G. Hunter Haas, IV  

G. Hunter Haas, IV

President and Chief Financial Officer

  

 

 

Exhibit 32.1

 

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

 

I, Robert E. Cauley, in compliance 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) filed with the Securities and Exchange Commission:

 

1.

fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934

 

 

 

August 2, 2024

/s/ Robert E.Cauley

 

 

Robert E. Cauley,

Chairman of the Board and

Chief Executive Officer

 

 

 

Exhibit 32.2

 

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

 

I, G. Hunter Haas, in compliance 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) filed with the Securities and Exchange Commission:

 

1.

fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934

 

 

 

August 2, 2024

/s/ G. Hunter Haas, IV

 

 

G. Hunter Haas, IV

President and Chief Financial Officer

 

 

 
v3.24.2.u1
Document And Entity Information - shares
 6 Months Ended
Jun. 30, 2024
Aug. 01, 2024
Document Information [Line Items]    
Entity Central Index Key 0001275477  
Entity Registrant Name BIMINI CAPITAL MANAGEMENT, INC.  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2024  
Document Transition Report false  
Entity File Number 001-32171  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 72-1571637  
Entity Address, Address Line One 3305 Flamingo Drive  
Entity Address, City or Town Vero Beach  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 32963  
City Area Code 772  
Local Phone Number 231-1400  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Common Class C [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   31,938
Common Class B [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   31,938
Common Class A [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   10,005,457
v3.24.2.u1
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
ASSETS:    
Total mortgage-backed securities $ 86,414,719 $ 92,730,852
Cash and cash equivalents 4,941,339 3,716,386
Restricted cash 1,282,199 753,900
Orchid Island Capital, Inc. common stock, at fair value 4,746,052 4,797,269
Accrued interest receivable 427,607 488,660
Property and equipment, net 1,882,578 1,920,823
Deferred tax assets, net 18,542,508 19,047,680
Other assets 1,116,684 1,129,038
Total Assets 120,439,273 125,598,014
LIABILITIES:    
Repurchase agreements 82,875,999 86,906,999
Long-term debt 27,382,035 27,394,417
Accrued interest payable 263,265 260,413
Other liabilities 1,850,970 2,908,444
Total Liabilities 112,372,269 117,470,273
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 shares designated Series A Junior Preferred Stock, 9,900,000 shares undesignated; no shares issued and outstanding as of June 30, 2024 and December 31, 2023 0 0
Additional paid-in capital 329,815,150 329,815,150
Accumulated deficit (321,758,215) (321,697,478)
Total Stockholders’ Equity 8,067,004 8,127,741
Total Liabilities and Stockholders' Equity 120,439,273 125,598,014
Common Class A [Member]    
STOCKHOLDERS' EQUITY:    
Common stock 10,005 10,005
Common Class B [Member]    
STOCKHOLDERS' EQUITY:    
Common stock 32 32
Common Class C [Member]    
STOCKHOLDERS' EQUITY:    
Common stock 32 32
Related Party [Member]    
ASSETS:    
Due from affiliates 1,085,587 1,013,406
Asset Pledged as Collateral [Member]    
ASSETS:    
Total mortgage-backed securities 86,153,715 92,575,292
Restricted cash 1,282,000 754,000
Accrued interest receivable 424,000 486,000
Total Assets 87,860,000 93,815,000
Asset Not Pledged as Collateral [Member]    
ASSETS:    
Total mortgage-backed securities $ 261,004 $ 155,560
v3.24.2.u1
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, authorized (in shares) 10,000,000 10,000,000
Preferred stock, issued (in shares) 0 0
Preferred stock, outstanding (in shares) 0 0
Series A Preferred Stock [Member]    
Preferred stock, authorized (in shares) 100,000 100,000
Preferred Undesignated [Member]    
Preferred stock, authorized (in shares) 9,900,000 9,900,000
Common Class A [Member]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, authorized (in shares) 98,000,000 98,000,000
Common stock, issued (in shares) 10,005,457 10,005,457
Common stock, outstanding (in shares) 10,005,457 10,005,457
Common Class B [Member]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, authorized (in shares) 1,000,000 1,000,000
Common stock, issued (in shares) 31,938 31,938
Common stock, outstanding (in shares) 31,938 31,938
Common Class C [Member]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, authorized (in shares) 1,000,000 1,000,000
Common stock, issued (in shares) 31,938 31,938
Common stock, outstanding (in shares) 31,938 31,938
v3.24.2.u1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenues:        
Advisory services $ 3,167,055 $ 3,516,450 $ 6,096,316 $ 6,898,860
Interest income 1,287,326 566,408 2,681,425 1,123,796
Dividend income from Orchid Island Capital, Inc. common stock 204,865 273,154 409,731 546,308
Total revenues 4,659,246 4,356,012 9,187,472 8,568,964
Interest expense:        
Repurchase agreements (1,157,306) (563,963) (2,365,309) (1,072,033)
Long-term debt (604,810) (565,322) (1,212,485) (1,111,457)
Net revenues 2,897,130 3,226,727 5,609,678 6,385,474
Other income (expense):        
Realized losses on mortgage-backed securities     (561,604) (0)
Gains on derivative instruments 212,457 515,547 1,383,463 241,672
Other income 20 56 49 120
Other income (expense), net (280,003) (621,397) 646,728 (106,205)
Expenses:        
Compensation and related benefits 1,784,092 1,278,046 3,647,526 2,641,742
Direct advisory services costs 503,235 368,252 852,378 821,298
Directors' fees and liability insurance 206,955 206,768 416,094 413,266
Audit, legal and other professional fees 131,618 178,749 372,538 307,979
Administrative and other expenses 156,676 191,197 523,435 367,584
Total expenses 2,782,576 2,223,012 5,811,971 4,551,869
Net income (loss) before income tax provision [1] (165,449) 382,318 444,435 1,727,400
Income tax provision 108,396 96,811 505,172 436,420
Net (loss) income $ (273,845) $ 285,507 $ (60,737) $ 1,290,980
Common Class A [Member]        
Basic and Diluted Net (Loss) Income Per Share of:        
Basic and Diluted (in dollars per share) $ (0.03) $ 0.03 $ (0.01) $ 0.13
Weighted Average Shares Outstanding:        
Basic and Diluted (in shares) 10,005,457 10,019,888 10,005,457 10,019,888
Common Class B [Member]        
Basic and Diluted Net (Loss) Income Per Share of:        
Basic and Diluted (in dollars per share) $ (0.03) $ 0.03 $ (0.01) $ 0.13
Weighted Average Shares Outstanding:        
Basic and Diluted (in shares) 31,938 31,938 31,938 31,938
Orchid Island Capital [Member]        
Revenues:        
Dividend income from Orchid Island Capital, Inc. common stock $ 200,000 $ 300,000 $ 400,000 $ 500,000
Other income (expense):        
Unrealized gains (losses) on investments (335,751) (216,247) (51,217) (85,363)
Collateralized Mortgage-Backed Securities [Member]        
Other income (expense):        
Unrealized gains (losses) on investments 404,875 (920,753) (123,963) (262,634)
Realized losses on mortgage-backed securities $ (561,604) $ 0 $ (561,604) $ 0
[1] Totals in the table above may not foot due to rounding differences.
v3.24.2.u1
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balances (in shares) at Dec. 31, 2022 10,083,764      
Balances at Dec. 31, 2022 $ 10,084 $ 329,828,268 $ (317,714,273) $ 12,124,079
Net (loss) income $ 0 0 1,005,473 1,005,473
Balances (in shares) at Mar. 31, 2023 10,083,764      
Balances at Mar. 31, 2023 $ 10,084 329,828,268 (316,708,800) 13,129,552
Balances (in shares) at Dec. 31, 2022 10,083,764      
Balances at Dec. 31, 2022 $ 10,084 329,828,268 (317,714,273) 12,124,079
Net (loss) income       1,290,980
Balances (in shares) at Jun. 30, 2023 10,083,764      
Balances at Jun. 30, 2023 $ 10,084 329,828,268 (316,423,293) 13,415,059
Balances (in shares) at Mar. 31, 2023 10,083,764      
Balances at Mar. 31, 2023 $ 10,084 329,828,268 (316,708,800) 13,129,552
Net (loss) income $ 0 0 285,507 285,507
Balances (in shares) at Jun. 30, 2023 10,083,764      
Balances at Jun. 30, 2023 $ 10,084 329,828,268 (316,423,293) 13,415,059
Balances (in shares) at Dec. 31, 2023 10,069,333      
Balances at Dec. 31, 2023 $ 10,069 329,815,150 (321,697,478) 8,127,741
Net (loss) income $ 0 0 213,108 213,108
Balances (in shares) at Mar. 31, 2024 10,069,333      
Balances at Mar. 31, 2024 $ 10,069 329,815,150 (321,484,370) 8,340,849
Balances (in shares) at Dec. 31, 2023 10,069,333      
Balances at Dec. 31, 2023 $ 10,069 329,815,150 (321,697,478) 8,127,741
Net (loss) income       (60,737)
Balances (in shares) at Jun. 30, 2024 10,069,333      
Balances at Jun. 30, 2024 $ 10,069 329,815,150 (321,758,215) 8,067,004
Balances (in shares) at Mar. 31, 2024 10,069,333      
Balances at Mar. 31, 2024 $ 10,069 329,815,150 (321,484,370) 8,340,849
Net (loss) income $ 0 0 (273,845) (273,845)
Balances (in shares) at Jun. 30, 2024 10,069,333      
Balances at Jun. 30, 2024 $ 10,069 $ 329,815,150 $ (321,758,215) $ 8,067,004
v3.24.2.u1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net (loss) income $ (60,737) $ 1,290,980
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation 38,245 38,245
Deferred income tax provision 505,172 436,420
Realized losses on mortgage-backed securities 561,604 0
Changes in operating assets and liabilities:    
Accrued interest receivable 61,053 (81,495)
Due from affiliates 45,126 (110,113)
Other assets (104,953) (11,457)
Accrued interest payable 2,852 7,437
Other liabilities (1,057,474) (1,849,508)
NET CASH PROVIDED BY OPERATING ACTIVITIES 166,068 68,506
CASH FLOWS FROM INVESTING ACTIVITIES:    
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 5,630,566 (18,139,672)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from repurchase agreements 352,747,000 245,355,590
Principal repayments on repurchase agreements (356,778,000) (228,479,000)
Principal repayments on long-term debt (12,382) (11,840)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,043,382) 16,864,750
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 1,753,252 (1,206,416)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period 4,470,286 6,773,799
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period 6,223,538 5,567,383
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Interest expense 3,574,942 2,176,053
Orchid Island Capital [Member]    
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Unrealized losses (gains) on investments 51,217 85,363
Collateralized Mortgage-Backed Securities [Member]    
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Unrealized losses (gains) on investments 123,963 262,634
Realized losses on mortgage-backed securities 561,604 0
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases (48,547,475) (20,045,750)
Sales 46,252,051 0
Principal repayments $ 7,925,990 $ 1,906,078
v3.24.2.u1
Note 1 - Organization and Significant Accounting Policies
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

Business Description

 

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

 

Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments and shares of Orchid Island Capital, Inc. ("Orchid") common stock, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal Palm."

 

Bimini Advisors Holdings, LLC and its wholly-owned subsidiary, Bimini Advisors, LLC (an investment advisor registered with the Securities and Exchange Commission), are collectively referred to as "Bimini Advisors." Bimini Advisors manages a residential mortgage-backed securities (“MBS”) portfolio for Orchid and receives fees for providing these services. Bimini Advisors also provides certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. Bimini Advisors also manages the MBS portfolio of Royal Palm.

 

Segment Reporting

 

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

 

Consolidation

 

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

 

Basis of Presentation

 

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

 

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

 

Use of Estimates

 

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

 

Variable Interest Entities (“VIEs”)

 

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

 

Cash and Cash Equivalents and Restricted Cash

 

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

 

  

June 30, 2024

  

December 31, 2023

 

Cash and cash equivalents

 $4,941,339  $3,716,386 

Restricted cash

  1,282,199   753,900 

Total cash, cash equivalents and restricted cash

 $6,223,538  $4,470,286 

 

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

 

Advisory Services

 

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

 

Mortgage-Backed Securities

 

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

 

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

 

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

 

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

 

Orchid Island Capital, Inc. Common Stock

 

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

 

Retained Interests in Securitizations

 

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

 

Derivative Financial Instruments

 

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

 

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

 

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

 

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

 

Financial Instruments

 

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

 

Property and Equipment, net

 

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

 

Repurchase Agreements

 

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

 

Earnings Per Share

 

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

 

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

 

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

 

Income Taxes

 

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

 

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

 

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

 

Recent Accounting Pronouncements

 

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

 

In December 2023, the FASB ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its future income tax related disclosures.
v3.24.2.u1
Note 2 - Advisory Services
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Advisory Services [Text Block]

NOTE 2. ADVISORY SERVICES

 

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:

 

 

●

One-twelfth of 1.50% of the first $250 million of Orchid’s month-end equity, as defined in the management agreement,

 

●

One-twelfth of 1.25% of Orchid’s month-end equity that is greater than $250 million and less than or equal to $500 million, and

 

●

One-twelfth of 1.00% of Orchid’s month-end equity that is greater than $500 million.

 

The Company also provides certain repurchase agreement trading, clearing and administrative services to Orchid. In consideration for such services, Orchid pays the following fees to the Company:

 

 

●

a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and

 

●

a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

 

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

 

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

 

(in thousands)

                
  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Management fee

 $4,418  $5,346  $2,257  $2,704 

Allocated overhead

  1,330   1,215   732   639 

Repurchase, clearing and administrative Fee

  348   338   178   173 

Total

 $6,096  $6,899  $3,167  $3,516 

 

At June 30, 2024 and December 31, 2023, the net amount due from Orchid was approximately $1.1 million and $1.0 million, respectively.
v3.24.2.u1
Note 3 - Mortgage-backed Securities
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 3. MORTGAGE-BACKED SECURITIES

 

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

 

(in thousands)

                        
  

June 30, 2024

  

December 31, 2023

 
  

Par Value

  

Cost (1)

  

Fair Value

  

Par Value

  

Cost (1)

  

Fair Value

 

Fixed-rate MBS

 $84,732  $86,120  $83,961  $88,807  $91,701  $90,181 

Structured MBS (2)

  n/a   1,681   2,454   n/a   1,787   2,550 

Total

 $84,732  $87,801  $86,415  $88,807  $93,488  $92,731 

 

(1)

The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio.

(2)The notional balance for the structured MBS portfolio was $17.8 million and $18.9 million as of June 30, 2024 and December 31, 2023, respectively.

 

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

 

(in thousands)

        
  

2024

  

2023

 

Proceeds from sales of MBS

 $46,252  $- 

Carrying value of MBS sold

  (46,814)  - 

Net loss on sales of MBS

 $(562) $- 
         

Gross gain on sales of MBS

 $-  $- 

Gross loss on sales of MBS

  (562)  - 

Net loss on sales of MBS

 $(562) $- 

 
v3.24.2.u1
Note 4 - Repurchase Agreements
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block]

NOTE 4. REPURCHASE AGREEMENTS

 

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

 

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

 

($ in thousands)

                    
  

OVERNIGHT

  

BETWEEN 2

  

BETWEEN 31

  

GREATER

     
  

(1 DAY OR

  

AND

  

AND

  

THAN

     
  

LESS)

  

30 DAYS

  

90 DAYS

  

90 DAYS

  

TOTAL

 

June 30, 2024

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $17,095  $69,483  $-  $86,578 

Repurchase agreement liabilities associated with these securities

 $-  $16,390  $66,486  $-  $82,876 

Net weighted average borrowing rate

  -   5.49%  5.46%  -   5.47%

December 31, 2023

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $68,477  $24,584  $-  $93,061 

Repurchase agreement liabilities associated with these securities

 $-  $63,637  $23,270  $-  $86,907 

Net weighted average borrowing rate

  -   5.56%  5.57%  -   5.56%

 

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

 

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

 

($ in thousands)

            
      

% of

  

Weighted

 
      

Stockholders'

  

Average

 
  

Amount

  

Equity

  

Maturity

 

Repurchase Agreement Counterparty

 

at Risk

  

at Risk

  

(in Days)

 

June 30, 2024

            

DV Securities, LLC Repo

 $1,176   14.6%  89 

Mirae Asset Securities (USA) Inc.

  978   12.1%  80 

South Street Securities, LLC

  827   10.3%  86 

December 31, 2023

            

Mirae Asset Securities (USA), Inc.

 $1,564   19.2%  18 

Citigroup Global Markets, Inc.

  1,302   16.0%  26 

Mitsubishi UFJ Securities, Inc.

  1,128   13.9%  23 

South Street Securities, LLC

  922   11.3%  52 

 
v3.24.2.u1
Note 5 - Pledged Assets
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Pledged Assets [Text Block]

NOTE 5. PLEDGED ASSETS

 

Assets Pledged to Counterparties

 

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

 

($ in thousands)

                                                
   

June 30, 2024

    

December 31, 2023

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 83,862     $ -     $ 83,862     $ 90,180     $ -     $ 90,180  

Structured MBS - at fair value

     2,292       -       2,292       2,395       -       2,395  

Accrued interest on pledged securities

     424       -       424       486       -       486  

Restricted cash

     427       855       1,282       -       754       754  

Total

   $ 87,005     $ 855     $ 87,860     $ 93,061     $ 754     $ 93,815  
v3.24.2.u1
Note 6 - Offsetting Assets And Liabilities
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Offsetting Assets And Liabilities [Text Block]

NOTE 6. OFFSETTING ASSETS AND LIABILITIES

 

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

 

(in thousands)

                                                

Offsetting of Liabilities

  
                   

Net Amount

    

Gross Amount Not Offset

          
           

Gross

    

of Liabilities

    

in the

          
    Gross     Amount     Presented     Consolidated Balance Sheet          
    Amount     Offset in the     in the     Financial                
   

of

    

Consolidated

    

Consolidated

    

Instruments

    

Cash

          
   

Recognized

    

Balance

    

Balance

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Sheet

    

Sheet

    

Collateral

    

Collateral

    

Amount

  

June 30, 2024

                                                

Repurchase Agreements

   $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  
    $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  

December 31, 2023

                                                

Repurchase Agreements

   $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  
    $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  

 

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

 
v3.24.2.u1
Note 7 - Long-term Debt
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7. LONG-TERM DEBT

 

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

 

(in thousands)

        
  

June 30, 2024

  

December 31, 2023

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  578   590 

Total

 $27,382  $27,394 

 

Junior Subordinated Debt

 

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

 

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

 

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

 

Secured Note Payable

 

On October 30, 2019, the Company borrowed $680,000 from a bank. The note is payable in equal monthly principal and interest installments of approximately $5,000 through October 30, 2039. Interest accrues at 4.89% through October 30, 2024. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The note is secured by a mortgage on the Company’s office building.

 

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

 

(in thousands)

    

Last six months of 2024

 $15 

For the years ended:

    

2025

  26 

2026

  28 

2027

  29 

2028

  30 

After 2028

  27,254 

Total

 $27,382 

 
v3.24.2.u1
Note 8 - Common Stock
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Equity [Text Block]

NOTE 8. COMMON STOCK

 

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

 

Stock Repurchase Plans

 

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

 

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

 

The Inflation Reduction Act of 2022 included a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions, including a $1 million threshold before the tax becomes applicable. The excise tax is effective beginning in 2023. The amount of stock repurchases during the six months ended June 30, 2024 and 2023 were under the $1 million threshold, so no accrual for this excise tax has been recorded.
v3.24.2.u1
Note 9 - Commitments and Contingencies
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

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

 

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

 

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

 

 
v3.24.2.u1
Note 10 - Income Taxes
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10. INCOME TAXES

 

The total income tax provision recorded for the six months ended June 30, 2024 and 2023 was $0.5 million and $0.4 million, respectively, on consolidated pre-tax book income of $0.4 million and $1.7 million, respectively. The total income tax provision recorded for the three months ended June 30, 2024 and 2023 was $0.1 million and $0.1 million, respectively, on consolidated pre-tax book (loss) income of $(0.2) million and $0.4 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. The Company's income tax provision could be affected by numerous factors, including nondeductible expenses, the projected utilization of net operating loss carryovers and changes in its deferred tax assets and liabilities and their valuations. The Company’s tax provisions are based on estimated annual tax rates applied to actual income to date and include the expected realization of a portion of the tax benefits of federal and state net operating losses carryforwards (“NOLs”). In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized in future accounting periods. The ultimate realization of capital loss and NOL carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a valuation allowance against a portion of the deferred tax assets generated by the NOLs since the Company believes that it is more likely than not that some of the benefits will not be realized in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting date.
v3.24.2.u1
Note 11 - Earnings Per Share
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Earnings Per Share [Text Block]

NOTE 11. EARNINGS PER SHARE

 

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

 

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

 

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

 

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class A common share:

                                

(Loss) income attributable to Class A common shares:

                                

Basic and diluted

   $ (61 )   $ 1,287     $ (273 )   $ 285  

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,020       10,005       10,020  

Weighted average shares-basic and diluted

     10,005       10,020       10,005       10,020  

(Loss) income per Class A common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  

 

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class B common share:

                                

(Loss) income attributable to Class B common shares:

                                

Basic and diluted

   $ -     $ 4     $ (1 )   $ 1  

Weighted average common shares:

                                

Class B common shares outstanding at the balance sheet date

     32       32       32       32  

Weighted average shares-basic and diluted

     32       32       32       32  

(Loss) income per Class B common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  

 

 
v3.24.2.u1
Note 12 - Fair Value
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 12. FAIR VALUE

 

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

 

 

●

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

 

●

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

 

●

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

 

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

 

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

 

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

 

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

 

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

 

(in thousands)

                
      

Quoted Prices

         
      

in Active

  

Significant

     
      

Markets for

  

Other

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
  

Fair Value

  

Assets

  

Inputs

  

Inputs

 
  

Measurements

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

June 30, 2024

                

Mortgage-backed securities

 $86,415  $-  $86,415  $- 

Orchid Island Capital, Inc. common stock

  4,746   4,746   -   - 

December 31, 2023

                

Mortgage-backed securities

 $92,731  $-  $92,731  $- 

Orchid Island Capital, Inc. common stock

  4,797   4,797   -   - 

 

During the six months ended June 30, 2024 and 2023, there were no transfers of financial assets or liabilities between Levels 1, 2 or 3.
v3.24.2.u1
Note 13 - Segment Information
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

NOTE 13. SEGMENT INFORMATION

 

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

 

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

 

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

 

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

 

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $6,096  $-  $-  $-  $6,096 

Advisory services, other operating segments(1)

  62   -   -   (62)  - 

Interest and dividend income

  -   3,090   1   -   3,091 

Interest expense(2)

  -   (2,365)  (1,212)  -   (3,577)

Net revenues

  6,158   725   (1,211)  (62)  5,610 

Other revenue

  -   647   -   -   647 

Operating expenses(3)

  (3,695)  (2,116)  (2)  -   (5,813)

Intercompany expenses(1)

  -   (62)  -   62   - 

Income (loss) before income taxes(4)

 $2,463  $(806) $(1,213) $-  $444 

 

  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $6,899  $-  $-  $-  $6,899 

Advisory services, other operating segments(1)

  56   -   -   (56)  - 

Interest and dividend income

  -   1,669   1   -   1,670 

Interest expense(2)

  -   (1,072)  (1,112)  -   (2,184)

Net revenues

  6,955   597   (1,111)  (56)  6,385 

Other revenue (expenses)

  -   (106)  -   -   (106)

Operating expenses(3)

  (3,602)  (950)  -   -   (4,552)

Intercompany expenses(1)

  -   (56)  -   56   - 

Income (loss) before income taxes(4)

 $3,353  $(515) $(1,111) $-  $1,727 

 

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

 

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $3,167  $-  $-  $-  $3,167 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   1,492   -   -   1,492 

Interest expense(2)

  -   (1,157)  (605)  -   (1,762)

Net revenues

  3,197   335   (605)  (30)  2,897 

Other revenue (expenses)

  -   (280)  -   -   (280)

Operating expenses(3)

  (1,895)  (887)  -   -   (2,782)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,302  $(862) $(605) $-  $(165)

 

  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $3,516  $-  $-  $-  $3,516 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   839   1   -   840 

Interest expense(2)

  -   (564)  (565)  -   (1,129)

Net revenues

  3,546   275   (564)  (30)  3,227 

Other revenue (expenses)

  -   (621)  -   -   (621)

Operating expenses(3)

  (1,765)  (458)  -   -   (2,223)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,781  $(835) $(564) $-  $382 

 

(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 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.

(4)Totals in the table above may not foot due to rounding differences.

 

Assets in each reportable segment as of June 30, 2024 and December 31, 2023 were as follows:

 

(in thousands)

                
  

Asset

  

Investment

         
  

Management

  

Portfolio

  

Corporate

  

Total

 

June 30, 2024

 $2,028  $111,519   6,892  $120,439 

December 31, 2023

  1,853   117,012   6,733   125,598 

 
v3.24.2.u1
Note 14 - Related Party Transactions
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

NOTE 14. RELATED PARTY TRANSACTIONS

 

At both June 30, 2024 and December 31, 2023, the Company owned 569,071 shares of Orchid common stock, representing approximately 0.9% and 1.1%, respectively, of Orchid’s outstanding common stock on such dates. The Company received dividends on this common stock investment of approximately $0.4 million and $0.5 million during the six months ended June 30, 2024 and 2023, respectively, and $0.2 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively.

 

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, is eligible to receive compensation from Orchid, 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, receives compensation from Orchid, 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.

 
v3.24.2.u1
Insider Trading Arrangements
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2024
Insider Trading Arr Line Items    
Material Terms of Trading Arrangement [Text Block]  

ITEM 5. OTHER INFORMATION

 

During the quarter ended June 30, 2024, none 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).

 
Rule 10b5-1 Arrangement Terminated [Flag] false  
Non-Rule 10b5-1 Arrangement Terminated [Flag] false  
Rule 10b5-1 Arrangement Adopted [Flag] false  
Non-Rule 10b5-1 Arrangement Adopted [Flag] false  
v3.24.2.u1
Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Segment Reporting, Policy [Policy Text Block]

Segment Reporting

 

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

 
Consolidation, Policy [Policy Text Block]

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 Accounting, Policy [Policy Text Block]

Basis of Presentation

 

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

 

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

 
Use of Estimates, Policy [Policy Text Block]

Use of Estimates

 

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

 
Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities (“VIEs”)

 

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

 
Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents and Restricted Cash

 

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

 

  

June 30, 2024

  

December 31, 2023

 

Cash and cash equivalents

 $4,941,339  $3,716,386 

Restricted cash

  1,282,199   753,900 

Total cash, cash equivalents and restricted cash

 $6,223,538  $4,470,286 

 

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

 
Advisory Services [Policy Text Block]

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. 

 
Marketable Securities, Policy [Policy Text Block]

Mortgage-Backed Securities

 

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

 

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

 

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

 

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

 
Investment, Policy [Policy Text Block]

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.

 
Assets or Liabilities that Relate to Transferor's Continuing Involvement in Securitized or Asset-Backed Financing Assets, Policy [Policy Text Block]

Retained Interests in Securitizations

 

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

 
Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

 

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

 

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

 

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

 

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.

 
Fair Value of Financial Instruments, Policy [Policy Text Block]

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, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

 

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

 
Repurchase and Resale Agreements Policy [Policy Text Block]

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, Policy [Policy Text Block]

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 Tax, Policy [Policy Text Block]

Income Taxes

 

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

 

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

 

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.

 
New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

 

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

 

In December 2023, the FASB ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its future income tax related disclosures.
v3.24.2.u1
Note 1 - Organization and Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Cash and Cash Equivalents [Table Text Block]
  

June 30, 2024

  

December 31, 2023

 

Cash and cash equivalents

 $4,941,339  $3,716,386 

Restricted cash

  1,282,199   753,900 

Total cash, cash equivalents and restricted cash

 $6,223,538  $4,470,286 
v3.24.2.u1
Note 2 - Advisory Services (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Advisory Fee Income [Table Text Block]

(in thousands)

                
  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Management fee

 $4,418  $5,346  $2,257  $2,704 

Allocated overhead

  1,330   1,215   732   639 

Repurchase, clearing and administrative Fee

  348   338   178   173 

Total

 $6,096  $6,899  $3,167  $3,516 
v3.24.2.u1
Note 3 - Mortgage-backed Securities (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Marketable Securities [Table Text Block]

(in thousands)

                        
  

June 30, 2024

  

December 31, 2023

 
  

Par Value

  

Cost (1)

  

Fair Value

  

Par Value

  

Cost (1)

  

Fair Value

 

Fixed-rate MBS

 $84,732  $86,120  $83,961  $88,807  $91,701  $90,181 

Structured MBS (2)

  n/a   1,681   2,454   n/a   1,787   2,550 

Total

 $84,732  $87,801  $86,415  $88,807  $93,488  $92,731 
Gain (Loss) on Securities [Table Text Block]

(in thousands)

        
  

2024

  

2023

 

Proceeds from sales of MBS

 $46,252  $- 

Carrying value of MBS sold

  (46,814)  - 

Net loss on sales of MBS

 $(562) $- 
         

Gross gain on sales of MBS

 $-  $- 

Gross loss on sales of MBS

  (562)  - 

Net loss on sales of MBS

 $(562) $- 
v3.24.2.u1
Note 4 - Repurchase Agreements (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Repurchase Agreements [Table Text Block]

($ in thousands)

                    
  

OVERNIGHT

  

BETWEEN 2

  

BETWEEN 31

  

GREATER

     
  

(1 DAY OR

  

AND

  

AND

  

THAN

     
  

LESS)

  

30 DAYS

  

90 DAYS

  

90 DAYS

  

TOTAL

 

June 30, 2024

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $17,095  $69,483  $-  $86,578 

Repurchase agreement liabilities associated with these securities

 $-  $16,390  $66,486  $-  $82,876 

Net weighted average borrowing rate

  -   5.49%  5.46%  -   5.47%

December 31, 2023

                    

Fair value of securities pledged, including accrued interest receivable

 $-  $68,477  $24,584  $-  $93,061 

Repurchase agreement liabilities associated with these securities

 $-  $63,637  $23,270  $-  $86,907 

Net weighted average borrowing rate

  -   5.56%  5.57%  -   5.56%
Schedule of Repurchase Agreement Counterparties with Whom Repurchase Agreements Exceed 10 Percent of Stockholders' Equity [Table Text Block]

($ in thousands)

            
      

% of

  

Weighted

 
      

Stockholders'

  

Average

 
  

Amount

  

Equity

  

Maturity

 

Repurchase Agreement Counterparty

 

at Risk

  

at Risk

  

(in Days)

 

June 30, 2024

            

DV Securities, LLC Repo

 $1,176   14.6%  89 

Mirae Asset Securities (USA) Inc.

  978   12.1%  80 

South Street Securities, LLC

  827   10.3%  86 

December 31, 2023

            

Mirae Asset Securities (USA), Inc.

 $1,564   19.2%  18 

Citigroup Global Markets, Inc.

  1,302   16.0%  26 

Mitsubishi UFJ Securities, Inc.

  1,128   13.9%  23 

South Street Securities, LLC

  922   11.3%  52 
v3.24.2.u1
Note 5 - Pledged Assets (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Financial Instruments Owned and Pledged as Collateral [Table Text Block]

($ in thousands)

                                                
   

June 30, 2024

    

December 31, 2023

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 83,862     $ -     $ 83,862     $ 90,180     $ -     $ 90,180  

Structured MBS - at fair value

     2,292       -       2,292       2,395       -       2,395  

Accrued interest on pledged securities

     424       -       424       486       -       486  

Restricted cash

     427       855       1,282       -       754       754  

Total

   $ 87,005     $ 855     $ 87,860     $ 93,061     $ 754     $ 93,815  
v3.24.2.u1
Note 6 - Offsetting Assets And Liabilities (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Offsetting Liabilities [Table Text Block]

(in thousands)

                                                

Offsetting of Liabilities

  
                   

Net Amount

    

Gross Amount Not Offset

          
           

Gross

    

of Liabilities

    

in the

          
    Gross     Amount     Presented     Consolidated Balance Sheet          
    Amount     Offset in the     in the     Financial                
   

of

    

Consolidated

    

Consolidated

    

Instruments

    

Cash

          
   

Recognized

    

Balance

    

Balance

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Sheet

    

Sheet

    

Collateral

    

Collateral

    

Amount

  

June 30, 2024

                                                

Repurchase Agreements

   $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  
    $ 82,876     $ -     $ 82,876     $ (82,449 )   $ (427 )   $ -  

December 31, 2023

                                                

Repurchase Agreements

   $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  
    $ 86,907     $ -     $ 86,907     $ (86,907 )   $ -     $ -  
v3.24.2.u1
Note 7 - Long-term Debt (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Long-Term Debt Instruments [Table Text Block]

(in thousands)

        
  

June 30, 2024

  

December 31, 2023

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  578   590 

Total

 $27,382  $27,394 
Schedule of Maturities of Long-Term Debt [Table Text Block]

(in thousands)

    

Last six months of 2024

 $15 

For the years ended:

    

2025

  26 

2026

  28 

2027

  29 

2028

  30 

After 2028

  27,254 

Total

 $27,382 
v3.24.2.u1
Note 11 - Earnings Per Share (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class A common share:

                                

(Loss) income attributable to Class A common shares:

                                

Basic and diluted

   $ (61 )   $ 1,287     $ (273 )   $ 285  

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,020       10,005       10,020  

Weighted average shares-basic and diluted

     10,005       10,020       10,005       10,020  

(Loss) income per Class A common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  

(in thousands, except per-share information)

                                
   

Six Months Ended June 30,

    

Three Months Ended June 30,

  
   

2024

    

2023

    

2024

    

2023

  

Basic and diluted EPS per Class B common share:

                                

(Loss) income attributable to Class B common shares:

                                

Basic and diluted

   $ -     $ 4     $ (1 )   $ 1  

Weighted average common shares:

                                

Class B common shares outstanding at the balance sheet date

     32       32       32       32  

Weighted average shares-basic and diluted

     32       32       32       32  

(Loss) income per Class B common share:

                                

Basic and diluted

   $ (0.01 )   $ 0.13     $ (0.03 )   $ 0.03  
v3.24.2.u1
Note 12 - Fair Value (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

(in thousands)

                
      

Quoted Prices

         
      

in Active

  

Significant

     
      

Markets for

  

Other

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
  

Fair Value

  

Assets

  

Inputs

  

Inputs

 
  

Measurements

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

June 30, 2024

                

Mortgage-backed securities

 $86,415  $-  $86,415  $- 

Orchid Island Capital, Inc. common stock

  4,746   4,746   -   - 

December 31, 2023

                

Mortgage-backed securities

 $92,731  $-  $92,731  $- 

Orchid Island Capital, Inc. common stock

  4,797   4,797   -   - 
v3.24.2.u1
Note 13 - Segment Information (Tables)
 6 Months Ended
Jun. 30, 2024
Notes Tables  
Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $6,096  $-  $-  $-  $6,096 

Advisory services, other operating segments(1)

  62   -   -   (62)  - 

Interest and dividend income

  -   3,090   1   -   3,091 

Interest expense(2)

  -   (2,365)  (1,212)  -   (3,577)

Net revenues

  6,158   725   (1,211)  (62)  5,610 

Other revenue

  -   647   -   -   647 

Operating expenses(3)

  (3,695)  (2,116)  (2)  -   (5,813)

Intercompany expenses(1)

  -   (62)  -   62   - 

Income (loss) before income taxes(4)

 $2,463  $(806) $(1,213) $-  $444 
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $6,899  $-  $-  $-  $6,899 

Advisory services, other operating segments(1)

  56   -   -   (56)  - 

Interest and dividend income

  -   1,669   1   -   1,670 

Interest expense(2)

  -   (1,072)  (1,112)  -   (2,184)

Net revenues

  6,955   597   (1,111)  (56)  6,385 

Other revenue (expenses)

  -   (106)  -   -   (106)

Operating expenses(3)

  (3,602)  (950)  -   -   (4,552)

Intercompany expenses(1)

  -   (56)  -   56   - 

Income (loss) before income taxes(4)

 $3,353  $(515) $(1,111) $-  $1,727 

(in thousands)

                    
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2024

                    

Advisory services, external customers

 $3,167  $-  $-  $-  $3,167 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   1,492   -   -   1,492 

Interest expense(2)

  -   (1,157)  (605)  -   (1,762)

Net revenues

  3,197   335   (605)  (30)  2,897 

Other revenue (expenses)

  -   (280)  -   -   (280)

Operating expenses(3)

  (1,895)  (887)  -   -   (2,782)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,302  $(862) $(605) $-  $(165)
  

Asset

  

Investment

             
  

Management

  

Portfolio

  

Corporate

  

Eliminations

  

Total

 

2023

                    

Advisory services, external customers

 $3,516  $-  $-  $-  $3,516 

Advisory services, other operating segments(1)

  30   -   -   (30)  - 

Interest and dividend income

  -   839   1   -   840 

Interest expense(2)

  -   (564)  (565)  -   (1,129)

Net revenues

  3,546   275   (564)  (30)  3,227 

Other revenue (expenses)

  -   (621)  -   -   (621)

Operating expenses(3)

  (1,765)  (458)  -   -   (2,223)

Intercompany expenses(1)

  -   (30)  -   30   - 

Income (loss) before income taxes(4)

 $1,781  $(835) $(564) $-  $382 
Reconciliation of Assets from Segment to Consolidated [Table Text Block]

(in thousands)

                
  

Asset

  

Investment

         
  

Management

  

Portfolio

  

Corporate

  

Total

 

June 30, 2024

 $2,028  $111,519   6,892  $120,439 

December 31, 2023

  1,853   117,012   6,733   125,598 
v3.24.2.u1
Note 1 - Organization and Significant Accounting Policies (Details Textual)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
USD ($)
Jun. 30, 2023
USD ($)
Jun. 30, 2024
USD ($)
Jun. 30, 2023
USD ($)
Number of Operating Segments     2  
Number of Reportable Segments     2  
Gain (Loss) on Derivative Instruments Held for Trading Purposes, Net $ 212,457 $ 515,547 $ 1,383,463 $ 241,672
Computer Equipment [Member]        
Property, Plant and Equipment, Useful Life (Year) 3 years   3 years  
Office Furniture and Equipment [Member] | Minimum [Member]        
Property, Plant and Equipment, Useful Life (Year) 8 years   8 years  
Office Furniture and Equipment [Member] | Maximum [Member]        
Property, Plant and Equipment, Useful Life (Year) 20 years   20 years  
Building and Building Improvements [Member]        
Property, Plant and Equipment, Useful Life (Year) 30 years   30 years  
Treasury Note Future [Member]        
Gain (Loss) on Derivative Instruments Held for Trading Purposes, Net $ 200,000 $ 200,000 $ 1,400,000 $ 500,000
v3.24.2.u1
Note 1 - Organization and Significant Accounting Policies - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Cash and cash equivalents $ 4,941,339 $ 3,716,386
Restricted cash 1,282,199 753,900
Total cash, cash equivalents and restricted cash $ 6,223,538 $ 4,470,286
v3.24.2.u1
Note 2 - Advisory Services (Details Textual) - Orchid Island Capital [Member]
 6 Months Ended
Jun. 30, 2024
USD ($)
Dec. 31, 2023
USD ($)
Monthly Management Fee, Calculation, Multiplier to Percentage of Equity 0.0833  
Monthly Management Fee, Percentage of Equity, First 250 Million 1.50%  
Monthly Management Fee, Percentage of Equity, Between 250 and 500 Million 1.25%  
Monthly Management Fee, Percentage of Equity, Over 500 Million 1.00%  
Daily Fee, Rate Multiplied By Repurchase Agreements Balance if Less than Five Billion 0.015%  
Daily Fee, Rate Multiplied By Repurchase Agreements Balance if More than Five Billion 0.01%  
Clearing and Operational Services Fee Per Month $ 10,000  
Management Agreement, Extension Period (Year) 1 year  
Management Agreement, Termination Fee, Multiplied by Average Management Fee 3  
Accounts Receivable, after Allowance for Credit Loss $ 1,100,000 $ 1,000,000
v3.24.2.u1
Note 2 - Advisory Services - Advisory Service Revenue (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Advisory services $ 3,167,055 $ 3,516,450 $ 6,096,316 $ 6,898,860
Orchid Island Capital [Member]        
Advisory services 3,167,000 3,516,000 6,096,000 6,899,000
Management Service [Member] | Orchid Island Capital [Member]        
Advisory services 2,257,000 2,704,000 4,418,000 5,346,000
Allocated Overhead [Member] | Orchid Island Capital [Member]        
Advisory services 732,000 639,000 1,330,000 1,215,000
Repurchase, Clearing and Administrative Fee [Member] | Orchid Island Capital [Member]        
Advisory services $ 178,000 $ 173,000 $ 348,000 $ 338,000
v3.24.2.u1
Note 3 - Mortgage-backed Securities (Details Textual) - USD ($)
$ in Millions
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Structured Mortgage-backed Securities [Member]    
Notional Amount of Nonderivative Instruments $ 17.8 $ 18.9
v3.24.2.u1
Note 3 - Mortgage-backed Securities - MBS Portfolio (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Fixed Rate Mortgages [Member]    
Par value $ 84,732 $ 88,807
Cost 86,120 [1] 91,701
Fair value 83,961 90,181
Structured Mortgage-backed Securities [Member]    
Cost [2] 1,681 [1] 1,787
Fair value [2] 2,454 2,550
Collateralized Mortgage-Backed Securities [Member]    
Par value 84,732 88,807
Cost 87,801 [1] 93,488
Fair value $ 86,415 $ 92,731
[1] The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio.
[2] The notional balance for the structured MBS portfolio was $17.8 million and $18.9 million as of June 30, 2024 and December 31, 2023, respectively.
v3.24.2.u1
Note 3 - Mortgage-backed Securities - Net Gain (Loss) From Sale of MBS (Details) - Collateralized Mortgage-Backed Securities [Member] - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Proceeds from sales of MBS $ 46,252,051 $ 0
Carrying value of MBS sold (46,814,000) 0
Net loss on sales of MBS (562,000) 0
Gross gain on sales of MBS 0 0
Gross loss on sales of MBS $ (562,000) $ 0
v3.24.2.u1
Note 4 - Repurchase Agreements (Details Textual) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Restricted Cash and Cash Equivalents, Current $ 1,282,199 $ 753,900
Repurchase Agreement Counterparty, Amount at Risk 4,000,000 6,000,000
Asset Pledged as Collateral [Member]    
Restricted Cash and Cash Equivalents, Current 1,282,000 754,000
Securities Sold under Agreements to Repurchase [Member] | Asset Pledged as Collateral [Member]    
Restricted Cash and Cash Equivalents, Current $ 427,000 $ 0
v3.24.2.u1
Note 4 - Repurchase Agreements - Schedule of Repurchase Agreements (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Fair value of securities pledged, including accrued interest receivable $ 86,578 $ 93,061
Repurchase agreement liabilities associated with these securities $ 82,876 $ 86,907
Net weighted average borrowing rate 5.47% 5.56%
Maturity Overnight [Member]    
Fair value of securities pledged, including accrued interest receivable $ 0 $ 0
Repurchase agreement liabilities associated with these securities $ 0 $ 0
Net weighted average borrowing rate 0.00% 0.00%
Maturity Less than 30 Days [Member]    
Fair value of securities pledged, including accrued interest receivable $ 17,095 $ 68,477
Repurchase agreement liabilities associated with these securities $ 16,390 $ 63,637
Net weighted average borrowing rate 5.49% 5.56%
Maturity 30 to 90 Days [Member]    
Fair value of securities pledged, including accrued interest receivable $ 69,483 $ 24,584
Repurchase agreement liabilities associated with these securities $ 66,486 $ 23,270
Net weighted average borrowing rate 5.46% 5.57%
Maturity Greater than 90 Days [Member]    
Fair value of securities pledged, including accrued interest receivable $ 0 $ 0
Repurchase agreement liabilities associated with these securities $ 0 $ 0
Net weighted average borrowing rate 0.00% 0.00%
v3.24.2.u1
Note 4 - Repurchase Agreements - Risks With Individual Counterparties (Details) - USD ($)
$ in Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Amount at risk $ 4,000 $ 6,000
DV Securities, LLC Repo [Member]    
Amount at risk $ 1,176  
Percent of Stockholders' Equity at Risk 14.60%  
Weighted Average Maturity (Year) 89 years  
Mirae Asset Securities (USA) Inc. [Member]    
Amount at risk $ 978 $ 1,564
Percent of Stockholders' Equity at Risk 12.10% 19.20%
Weighted Average Maturity (Year) 80 years 18 years
South Street Securities, LLC [Member]    
Amount at risk $ 827 $ 922
Percent of Stockholders' Equity at Risk 10.30% 11.30%
Weighted Average Maturity (Year) 86 years 52 years
Citigroup Global Markets Inc [Member]    
Amount at risk   $ 1,302
Percent of Stockholders' Equity at Risk   16.00%
Weighted Average Maturity (Year)   26 years
Mitsubishi UFJ Securities, Inc [Member]    
Amount at risk   $ 1,128
Percent of Stockholders' Equity at Risk   13.90%
Weighted Average Maturity (Year)   23 years
v3.24.2.u1
Note 5 - Pledged Assets - Schedule of Financial Instruments Owned and Pledged as Collateral (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Investments, fair value $ 4,746,052 $ 4,797,269
Accrued interest on pledged securities 427,607 488,660
Restricted cash 1,282,199 753,900
Assets 120,439,273 125,598,014
Asset Pledged as Collateral [Member]    
Accrued interest on pledged securities 424,000 486,000
Restricted cash 1,282,000 754,000
Assets 87,860,000 93,815,000
Asset Pledged as Collateral [Member] | Securities Sold under Agreements to Repurchase [Member]    
Accrued interest on pledged securities 424,000 486,000
Restricted cash 427,000 0
Assets 87,005,000 93,061,000
Asset Pledged as Collateral [Member] | Derivative [Member]    
Accrued interest on pledged securities 0 0
Restricted cash 855,000 754,000
Assets 855,000 754,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Pass Through Certificate [Member]    
Investments, fair value 83,862,000 90,180,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Pass Through Certificate [Member] | Securities Sold under Agreements to Repurchase [Member]    
Investments, fair value 83,862,000 90,180,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Pass Through Certificate [Member] | Derivative [Member]    
Investments, fair value 0 0
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Structured Finance [Member]    
Investments, fair value 2,292,000 2,395,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Structured Finance [Member] | Securities Sold under Agreements to Repurchase [Member]    
Investments, fair value 2,292,000 2,395,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Structured Finance [Member] | Derivative [Member]    
Investments, fair value $ 0 $ 0
v3.24.2.u1
Note 6 - Offsetting Assets And Liabilities - Offsetting of Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Repurchase Agreements [Member]    
Gross amount of liabilities   $ 86,907
Gross amount offset   0
Net amount of balance sheet liabilities   86,907
Securities posted as collateral   (86,907)
Cash posted as collateral   0
Net amount   0
Gross Amount Of Recognized Liabilties [Member]    
Gross amount of liabilities $ 82,876 86,907
Gross Amount Of Recognized Liabilties [Member] | Repurchase Agreements [Member]    
Gross amount of liabilities 82,876  
Gross Amount Of Liabilties Offset In The Balance Sheet [Member]    
Gross amount offset 0 0
Gross Amount Of Liabilties Offset In The Balance Sheet [Member] | Repurchase Agreements [Member]    
Gross amount offset 0  
Net Amount Of Liabilities Presented In The Balance Sheet [Member]    
Net amount of balance sheet liabilities 82,876 86,907
Net Amount Of Liabilities Presented In The Balance Sheet [Member] | Repurchase Agreements [Member]    
Net amount of balance sheet liabilities 82,876  
Gross Amount Of Financial Instruments Posted Not Offset in Balance Sheet [Member]    
Securities posted as collateral (82,449) (86,907)
Gross Amount Of Financial Instruments Posted Not Offset in Balance Sheet [Member] | Repurchase Agreements [Member]    
Securities posted as collateral (82,449)  
Gross Amounts Of Cash Posted Not Offset In Balance Sheet [Member]    
Cash posted as collateral (427) 0
Gross Amounts Of Cash Posted Not Offset In Balance Sheet [Member] | Repurchase Agreements [Member]    
Cash posted as collateral (427)  
Net Amount Of Liabilities [Member]    
Net amount 0 $ 0
Net Amount Of Liabilities [Member] | Repurchase Agreements [Member]    
Net amount $ 0  
v3.24.2.u1
Note 7 - Long-term Debt (Details Textual) - USD ($)
 6 Months Ended
Oct. 31, 2024
Jun. 30, 2023
Oct. 30, 2019
Jun. 30, 2023
Jun. 30, 2024
Dec. 31, 2023
Junior Subordinated Debt Securities [Member] | Bimini Capital Trust II (“BCTII”) [Member] | Bimini Capital Trust Junior Subordinated Note [Member]            
Long-Term Debt, Gross         $ 26,800,000 $ 26,800,000
Debt Instrument, Interest Rate, Effective Percentage         9.10%  
Junior Subordinated Debt Securities [Member] | Bimini Capital Trust II (“BCTII”) [Member] | Bimini Capital Trust Junior Subordinated Note [Member] | London Interbank Offered Rate (LIBOR) 1 [Member]            
Debt Instrument, Basis Spread on Variable Rate       3.50%    
Junior Subordinated Debt Securities [Member] | Bimini Capital Trust II (“BCTII”) [Member] | Bimini Capital Trust Junior Subordinated Note [Member] | CME Term SOFR [Member]            
Debt Instrument, Basis Spread on Variable Rate   0.26161%        
Debt Instrument, Coupon Spread on Variable Rate   3.50%        
Notes Payable to Banks [Member]            
Debt Instrument, Face Amount     $ 680,000      
Debt Instrument, Periodic Payment, Total     $ 5,000      
Debt Instrument, Interest Rate, Stated Percentage     4.89%      
Notes Payable to Banks [Member] | US Treasury Securities Interest Rate [Member] | Forecast [Member]            
Debt Instrument, Basis Spread on Variable Rate 3.25%          
Bimini Capital Trust II (“BCTII”) [Member]            
Noncontrolling Interest, Ownership Percentage by Parent         100.00%  
v3.24.2.u1
Note 7 - Long-term Debt - Schedule of Debt (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Long-term debt $ 27,382,035 $ 27,394,417
Junior Subordinated Debt [Member]    
Long-term debt 26,804,000 26,804,000
Notes Payable to Banks [Member]    
Long-term debt $ 578,000 $ 590,000
v3.24.2.u1
Note 7 - Long-term Debt - Future Scheduled Principal Payments on Long-term Debt (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Last six months of 2024 $ 15,000  
2025 26,000  
2026 28,000  
2027 29,000  
2028 30,000  
After 2028 27,254,000  
Total $ 27,382,035 $ 27,394,417
v3.24.2.u1
Note 8 - Common Stock (Details Textual) - USD ($)
$ / shares in Units, $ in Millions
 6 Months Ended 24 Months Ended
Mar. 07, 2024
Jun. 30, 2024
Jun. 30, 2023
Sep. 16, 2023
Sep. 16, 2021
The 2021 Repurchase Plan [Member]          
Share Repurchase Program, Authorized, Amount         $ 2.5
Treasury Stock, Shares, Acquired (in shares)       789,024  
Treasury Stock, Value, Acquired, Cost Method       $ 1.3  
Shares Acquired, Average Cost Per Share (in dollars per share)       $ 1.6  
The 2024 Share Repurchase Plan [Member]          
Share Repurchase Program, Authorized, Amount $ 2.5        
Treasury Stock, Shares, Acquired (in shares) 0        
Common Class A [Member]          
Stock Issued During Period, Shares, New Issues (in shares)   0 0    
Common Class B [Member]          
Stock Issued During Period, Shares, New Issues (in shares)   0 0    
Common Class C [Member]          
Stock Issued During Period, Shares, New Issues (in shares)   0 0    
v3.24.2.u1
Note 9 - Commitments and Contingencies (Details Textual)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
USD ($)
Threatened Litigation [Member] | Breach Of Representations And Warranties [Member]  
Loss Contingency Accrual, Provision $ 0
v3.24.2.u1
Note 10 - Income Taxes (Details Textual) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Tax Expense (Benefit) $ 108,396 $ 96,811 $ 505,172 $ 436,420
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest [1] $ (165,449) $ 382,318 $ 444,435 $ 1,727,400
[1] Totals in the table above may not foot due to rounding differences.
v3.24.2.u1
Note 11 - Earnings Per Share - Schedule of Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Common Class A [Member]        
Basic and diluted $ (273) $ 285 $ (61) $ 1,287
Common shares outstanding at the balance sheet date (in shares) 10,005,000 10,020,000 10,005,000 10,020,000
Weighted average shares-basic and diluted (in shares) 10,005,457 10,019,888 10,005,457 10,019,888
Basic and diluted (in dollars per share) $ (0.03) $ 0.03 $ (0.01) $ 0.13
Common Class B [Member]        
Basic and diluted $ (1) $ 1 $ 0 $ 4
Common shares outstanding at the balance sheet date (in shares) 32,000 32,000 32,000 32,000
Weighted average shares-basic and diluted (in shares) 31,938 31,938 31,938 31,938
Basic and diluted (in dollars per share) $ (0.03) $ 0.03 $ (0.01) $ 0.13
v3.24.2.u1
Note 12 - Fair Value (Details Textual) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Retained Interest, Fair Value Disclosure $ 0 $ 0
v3.24.2.u1
Note 12 - Fair Value - Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Mortgage-backed securities $ 86,414,719 $ 92,730,852
Fair Value, Recurring [Member]    
Mortgage-backed securities 86,415,000 92,731,000
Orchid Island Capital, Inc. common stock 4,746,000 4,797,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Mortgage-backed securities 0 0
Orchid Island Capital, Inc. common stock 4,746,000 4,797,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Mortgage-backed securities 86,415,000 92,731,000
Orchid Island Capital, Inc. common stock 0 0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Mortgage-backed securities 0 0
Orchid Island Capital, Inc. common stock $ 0 $ 0
v3.24.2.u1
Note 13 - Segment Information (Details Textual)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
USD ($)
Jun. 30, 2023
USD ($)
Jun. 30, 2024
USD ($)
Jun. 30, 2023
USD ($)
Number of Reportable Segments     2  
Revenues $ 4,659,246 $ 4,356,012 $ 9,187,472 $ 8,568,964
Subsidiary of Common Parent [Member] | Advisory Service [Member]        
Related Party Transaction, Rate     1.50%  
Orchid Island Capital [Member]        
Revenues $ 3,200,000 $ 3,500,000 $ 6,100,000 $ 6,900,000
Orchid Island Capital [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]        
Concentration Risk, Percentage 68.00% 81.00% 66.00% 81.00%
v3.24.2.u1
Note 13 - Segment Information - Schedule of Segment Information (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Advisory services, external customers $ 3,167,055 $ 3,516,450 $ 6,096,316 $ 6,898,860
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 1,492,000 840,000 3,091,000 1,670,000
Interest expense(2) [2] (1,762,000) (1,129,000) (3,577,000) (2,184,000)
Net revenues 2,897,000 3,227,000 5,610,000 6,385,000
Other revenue (280,003) (621,397) 646,728 (106,205)
Operating expenses(3) [3] (2,782,000) (2,223,000) (5,813,000) (4,552,000)
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [4] (165,449) 382,318 444,435 1,727,400
Operating Segments [Member] | Asset Management [Member]        
Advisory services, external customers 3,167,000 3,516,000 6,096,000 6,899,000
Advisory services, other operating segments(1) [1] 30,000 30,000 62,000 56,000
Interest and dividend income 0 0 0 0
Interest expense(2) [2] 0 0 0 0
Net revenues 3,197,000 3,546,000 6,158,000 6,955,000
Other revenue 0 0 0 0
Operating expenses(3) [3] (1,895,000) (1,765,000) (3,695,000) (3,602,000)
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [4] 1,302,000 1,781,000 2,463,000 3,353,000
Operating Segments [Member] | Investment Portfolio [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 1,492,000 839,000 3,090,000 1,669,000
Interest expense(2) [2] (1,157,000) (564,000) (2,365,000) (1,072,000)
Net revenues 335,000 275,000 725,000 597,000
Other revenue (280,000) (621,000) 647,000 (106,000)
Operating expenses(3) [3] (887,000) (458,000) (2,116,000) (950,000)
Intercompany expenses(1) [1] (30,000) (30,000) (62,000) (56,000)
Income (loss) before income taxes(4) [4] (862,000) (835,000) (806,000) (515,000)
Segment Reporting, Reconciling Item, Corporate Nonsegment [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 0 1,000 1,000 1,000
Interest expense(2) [2] (605,000) (565,000) (1,212,000) (1,112,000)
Net revenues (605,000) (564,000) (1,211,000) (1,111,000)
Other revenue 0 0 0 0
Operating expenses(3) [3] 0 0 (2,000) 0
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [4] (605,000) (564,000) (1,213,000) (1,111,000)
Intersegment Eliminations [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] (30,000) (30,000) (62,000) (56,000)
Interest and dividend income 0 0 0 0
Interest expense(2) [2] 0 0 0 0
Net revenues (30,000) (30,000) (62,000) (56,000)
Other revenue 0 0 0 0
Operating expenses(3) [3] 0 0 0 0
Intercompany expenses(1) [1] 30,000 30,000 62,000 56,000
Income (loss) before income taxes(4) [4] $ 0 $ 0 $ 0 $ 0
[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 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.
[4] Totals in the table above may not foot due to rounding differences.
v3.24.2.u1
Note 13 - Segment Information - Assets in Each Reportable Segment (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Assets $ 120,439,273 $ 125,598,014
Operating Segments [Member] | Asset Management [Member]    
Assets 2,028,000 1,853,000
Operating Segments [Member] | Investment Portfolio [Member]    
Assets 111,519,000 117,012,000
Segment Reporting, Reconciling Item, Corporate Nonsegment [Member]    
Assets $ 6,892,000 $ 6,733,000
v3.24.2.u1
Note 14 - Related Party Transactions (Details Textual) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Investment Income, Dividend $ 204,865 $ 273,154 $ 409,731 $ 546,308  
Orchid Island Capital [Member]          
Investment Owned, Balance, Shares (in shares) 569,071   569,071   569,071
Equity Method Investment, Ownership Percentage 0.90%   0.90%   1.10%
Investment Income, Dividend $ 200,000 $ 300,000 $ 400,000 $ 500,000  
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