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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 September 30, 2023

 

☐         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

November 3, 2023

10,005,457

Class B Common Stock, $0.001 par value

November 3, 2023

31,938

Class C Common Stock, $0.001 par value

November 3, 2023

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

40

ITEM 4. Controls and Procedures

41
   

PART II. OTHER INFORMATION
   

ITEM 1. Legal Proceedings

42

ITEM 1A. Risk Factors

42

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

42

ITEM 3. Defaults Upon Senior Securities

42

ITEM 4. Mine Safety Disclosures

42

ITEM 5. Other Information

42

ITEM 6. Exhibits

43

SIGNATURES

44

 

 
Table of Contents

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  

(Unaudited)

     
  September 30, 2023  December 31, 2022 

ASSETS:

        

Mortgage-backed securities, at fair value:

        

Pledged to counterparties

 $84,693,749  $45,716,793 

Unpledged

  167,412   176,643 

Total mortgage-backed securities

  84,861,161   45,893,436 

Cash and cash equivalents

  3,793,312   6,010,799 

Restricted cash

  1,412,250   763,000 

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

  4,842,794   5,975,248 

Accrued interest receivable

  420,919   204,018 

Property and equipment, net

  1,939,946   1,997,313 

Deferred tax assets, net

  23,498,839   23,178,243 

Due from affiliates

  1,251,520   1,130,713 

Other assets

  1,264,819   1,164,181 

Total Assets

 $123,285,560  $86,316,951 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        
         

LIABILITIES:

        

Repurchase agreements

 $81,416,999  $43,817,999 

Long-term debt

  27,400,415   27,416,239 

Accrued interest payable

  237,095   194,629 

Other liabilities

  1,247,833   2,764,005 

Total Liabilities

  110,302,342   74,192,872 
         

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 September 30, 2023 and December 31, 2022

  -   - 

Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 and 10,019,888 shares issued and outstanding as of September 30, 2023 and December 31, 2022

  10,005   10,020 

Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of September 30, 2023 and December 31, 2022

  32   32 

Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares issued and outstanding as of September 30, 2023 and December 31, 2022

  32   32 

Additional paid-in capital

  329,815,150   329,828,268 

Accumulated deficit

  (316,842,001)  (317,714,273)

Total Stockholders’ Equity

  12,983,218   12,124,079 

Total Liabilities and Stockholders' Equity

 $123,285,560  $86,316,951 

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Nine and Three Months Ended September 30, 2023 and 2022

 

   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Revenues:

                                

Advisory services

   $ 10,518,862     $ 9,719,703     $ 3,620,002     $ 3,311,962  

Interest income

     1,962,301       1,328,264       838,505       444,808  

Dividend income from Orchid Island Capital, Inc. common stock

     819,462       1,035,547       273,154       282,893  

Total revenues

     13,300,625       12,083,514       4,731,661       4,039,663  

Interest expense:

                                

Repurchase agreements

     (1,903,101 )     (313,843 )     (831,068 )     (209,928 )

Long-term debt

     (1,721,760 )     (938,557 )     (610,303 )     (378,752 )

Net revenues

     9,675,764       10,831,114       3,290,290       3,450,983  
                                 

Other income (expense):

                                

Unrealized losses on mortgage-backed securities

     (2,745,946 )     (6,605,850 )     (2,483,312 )     (2,572,296 )

Realized losses on mortgage-backed securities

     -       (858,001 )     -       -  

Unrealized losses on Orchid Island Capital Inc. common stock

     (1,132,454 )     (7,422,723 )     (1,047,091 )     (3,140,383 )

Gains on derivative instruments

     1,411,438       794,500       1,169,766       844,188  

Gains on retained interests in securitizations

     -       65,928       -       65,928  

Other income

     167       268       47       81  

Other expense, net

     (2,466,795 )     (14,025,878 )     (2,360,590 )     (4,802,482 )
                                 

Expenses:

                                

Compensation and related benefits

     3,900,039       3,835,763       1,258,297       1,230,113  

Direct advisory services costs

     1,137,935       915,134       316,637       358,928  

Directors' fees and liability insurance

     627,431       587,566       214,165       194,519  

Audit, legal and other professional fees

     427,210       370,323       119,231       103,090  

Administrative and other expenses

     564,678       506,872       197,094       190,657  

Total expenses

     6,657,293       6,215,658       2,105,424       2,077,307  
                                 

Net income (loss) before income tax benefit

     551,676       (9,410,422 )     (1,175,724 )     (3,428,806 )

Income tax benefit

     (320,596 )     (1,571,076 )     (757,016 )     (255,618 )
                                 

Net income (loss)

   $ 872,272     $ (7,839,346 )   $ (418,708 )   $ (3,173,188 )
                                 

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

                                

CLASS A COMMON STOCK

                                

Basic and Diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )

CLASS B COMMON STOCK

                                

Basic and Diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )

Weighted Average Shares Outstanding:

                                

CLASS A COMMON STOCK

                                

Basic and Diluted

     10,019,307       10,467,091       10,018,163       10,288,785  

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 Nine and Three Months Ended September 30, 2023 and 2022

 

   

Stockholders' Equity

          
   

Common Stock

    

Additional

    

Accumulated

          
   

Shares

    

Par Value

    

Paid-in Capital

    

Deficit

    

Total

  

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  

Net loss

     -       -       -       (418,708 )     (418,708 )

Class A common shares repurchased and retired

     (14,431 )     (15 )     (13,118 )     -       (13,133 )

Balances, September 30, 2023

     10,069,333     $ 10,069     $ 329,815,150     $ (316,842,001 )   $ 12,983,218  
                                         

Balances, January 1, 2022

     10,766,070     $ 10,766     $ 330,880,252     $ (297,891,168 )   $ 32,999,850  

Net loss

     -       -       -       (3,479,584 )     (3,479,584 )

Class A common shares repurchased and retired

     (188,280 )     (188 )     (377,110 )     -       (377,298 )

Balances, March 31, 2022

     10,577,790     $ 10,578     $ 330,503,142     $ (301,370,752 )   $ 29,142,968  

Net loss

     -       -       -       (1,186,574 )     (1,186,574 )

Class A common shares repurchased and retired

     (41,135 )     (41 )     (72,958 )     -       (72,999 )

Balances, June 30, 2022

     10,536,655     $ 10,537     $ 330,430,184     $ (302,557,326 )   $ 27,883,395  

Net loss

     -       -       -       (3,173,188 )     (3,173,188 )

Class A common shares repurchased and retired

     (225,970 )     (226 )     (362,126 )     -       (362,352 )

Balances, September 30, 2022

     10,310,685     $ 10,311     $ 330,068,058     $ (305,730,514 )   $ 24,347,855  

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended September 30, 2023 and 2022

 

   

2023

    

2022

  

CASH FLOWS FROM OPERATING ACTIVITIES:

                

Net income (loss)

   $ 872,272     $ (7,839,346 )

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

                

Depreciation

     57,367       53,930  

Deferred income tax benefit

     (320,596 )     (1,571,076 )

Unrealized losses on mortgage-backed securities

     2,745,946       6,605,850  

Realized losses on mortgage-backed securities

     -       858,001  

Gains on retained interests in securitizations

     -       (65,928 )

Unrealized losses on Orchid Island Capital, Inc. common stock

     1,132,454       7,422,723  

Changes in operating assets and liabilities:

                

Accrued interest receivable

     (216,901 )     29,838  

Due from affiliates

     (120,807 )     (13,034 )

Other assets

     (100,638 )     391,964  

Accrued interest payable

     42,466       79,128  

Other liabilities

     (1,516,172 )     (1,241,306 )

NET CASH PROVIDED BY OPERATING ACTIVITIES

     2,575,391       4,710,744  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

                

From mortgage-backed securities investments:

                

Purchases

     (45,006,724 )     (21,009,391 )

Sales

     -       23,096,853  

Principal repayments

     3,293,053       6,982,304  

Payments received on retained interests in securitizations

     -       65,928  

Purchases of property and equipment

     -       (46,176 )

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

     (41,713,671 )     9,089,518  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

                

Proceeds from repurchase agreements

     380,920,000       268,710,690  

Principal repayments on repurchase agreements

     (343,321,000 )     (284,094,690 )

Principal repayments on long-term debt

     (15,824 )     (16,926 )

Class A common shares repurchased and retired

     (13,133 )     (812,649 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

     37,570,043       (16,213,575 )
                 

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

     (1,568,237 )     (2,413,313 )

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

     6,773,799       9,812,410  

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

   $ 5,205,562     $ 7,399,097  
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                

Cash paid during the period for:

                

Interest expense

   $ 3,582,395     $ 1,173,272  

 

See Notes to Condensed Consolidated Financial Statements

 

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BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2023

 

 

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”) formed in September 2003, 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 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 Island Capital, Inc. ("Orchid") and receives fees for providing these services. Effective April 1, 2022, Bimini Advisors started providing certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. Bimini Advisors also manages the MBS portfolio of Royal Palm Capital, LLC.

 

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

 

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 nine and three-month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending  December 31, 2023.

 

The consolidated balance sheet at December 31, 2022 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, 2022.

 

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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 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 September 30, 2023 and December 31, 2022.

 

  

September 30, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $3,793,312  $6,010,799 

Restricted cash

  1,412,250   763,000 

Total cash, cash equivalents and restricted cash

 $5,205,562  $6,773,799 

 

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

 

Orchid is externally managed and advised by Bimini Advisors 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 in accordance with FASB Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. 

 

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 lost 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 nine and three months ended September 30, 2023 and 2022, the Company only held U.S. Treasury Note ("T-Note") futures contracts. The Company recorded gains of approximately $1.4 million and $1.2 million on these instruments during nine and three months ended September 30, 2023, respectively, and gains of $0.8 million during both the nine and three months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, the Company had open short positions of T-Note futures with notional balances of $36.4 million and $14.4 million, respectively.

 

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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.

 

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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.

 

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 tax audits 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. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm and its includable subsidiaries, file as separate tax paying entities.

 

The Company assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. 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 records income tax-related interest and penalties, if applicable, within the income tax provision.

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR,”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform (Topic 848)," deferring the sunset date provided in ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company adopted this ASU during the second quarter of 2023 as the Secured Overnight Financing Rate ("SOFR") replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.

 

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give market participants the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. In addition, ASU 2021-01 adds implementation guidance to permit a company to apply certain optional expedients to modifications of interest rate indexes used for margining, discounting or contract price alignment of certain derivatives as a result of reference rate reform initiatives and extends optional expedients to account for a derivative contract modified as a continuation of the existing contract and to continue hedge accounting when certain critical terms of a hedging relationship change to modifications made as part of the discounting transition. The guidance in ASU 2021-01 is effective immediately and available generally through December 31, 2024, as reference rate reform activities occur. The Company adopted this ASU during the second quarter of 2023 as SOFR replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.
 

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:

 

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●

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.

 

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 a third party. In consideration for such services, Orchid will pay 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, 2024 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 nine and three months ended September 30, 2023 and 2022.

 

(in thousands)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Management fee

   $ 8,216     $ 7,881     $ 2,870     $ 2,616  

Allocated overhead

     1,772       1,482       557       522  

Repurchase, Clearing and Administrative Fee

     531       357       193       174  

Total

   $ 10,519     $ 9,720     $ 3,620     $ 3,312  

 

At September 30, 2023 and December 31, 2022, the net amount due from Orchid was approximately $1.3 million and $1.1 million, respectively.
 

NOTE 3. MORTGAGE-BACKED SECURITIES

 

The following table presents the Company’s MBS portfolio as of September 30, 2023 and December 31, 2022:

 

(in thousands)

                                                
   

September 30, 2023

                          
   

Par Value

    

Cost (1)

    

Fair Value

    

Par Value

    

Cost (1)

    

Fair Value

  

Fixed-rate MBS

   $ 86,224     $ 88,417     $ 82,303     $ 44,963     $ 46,603     $ 42,974  

Structured MBS (2)

     n/a       1,823       2,558       n/a       2,053       2,919  

Total

   $ 86,224     $ 90,240     $ 84,861     $ 44,963     $ 48,656     $ 45,893  

 

(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 $19.4 million and $21.8 million as of September 30, 2023 and December 31, 2022, respectively.

 

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The following table is a summary of the Company’s net loss from the sale of RMBS for the nine months ended September 30, 2023 and 2022.

 

(in thousands)

                
   

2023

    

2022

  

Proceeds from sales of MBS

   $ -     $ 23,097  

Carrying value of MBS sold

     -       (23,955 )

Net loss on sales of MBS

   $ -     $ (858 )
                 

Gross gain on sales of MBS

   $ -     $ -  

Gross loss on sales of MBS

     -       (858 )

Net loss on sales of MBS

   $ -     $ (858 )
 

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. As of September 30, 2023, the Company had met all margin call requirements.

 

As of September 30, 2023 and December 31, 2022, the Company’s repurchase agreements had remaining maturities as summarized below:

 

($ in thousands)

                                        
   

OVERNIGHT

    

BETWEEN 2

    

BETWEEN 31

    

GREATER

          
   

(1 DAY OR

    

AND

    

AND

    

THAN

          
   

LESS)

    

30 DAYS

    

90 DAYS

    

90 DAYS

    

TOTAL

  

September 30, 2023

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 50,480     $ 34,631     $ -     $ 85,111  

Repurchase agreement liabilities associated with these securities

   $ -     $ 47,888     $ 33,529     $ -     $ 81,417  

Net weighted average borrowing rate

     -       5.47 %     5.53 %     -       5.50 %

December 31, 2022

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 42,553     $ 3,364     $ -     $ 45,917  

Repurchase agreement liabilities associated with these securities

   $ -     $ 40,492     $ 3,326     $ -     $ 43,818  

Net weighted average borrowing rate

     -       4.50 %     4.29 %     -       4.48 %

 

In addition, cash pledged to counterparties for repurchase agreements was approximately $0.7 million and $0.5 million as of  September 30, 2023 and  December 31, 2022, respectively.

 

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable, and cash posted by the Company as collateral, if any. At  September 30, 2023 and December 31, 2022, 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 cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately $4.3 million and $2.5 million, respectively. Summary information regarding amounts at risk with individual counterparties greater than 10% of equity at  September 30, 2023 and December 31, 2022 is presented in the table below. 

 

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$ in thousands)

                        
           

% of

    

Weighted

  
           

Stockholders'

    

Average

  
   

Amount

    

Equity

    

Maturity

  

Repurchase Agreement Counterparty

  

at Risk

    

at Risk

    

(in Days)

  

September 30, 2023

                        

Citigroup Global Markets, Inc.

   $ 1,792       13.8 %     29  

December 31, 2022

                        

Mirae Asset Securities (USA), Inc.

   $ 1,322       10.9 %     14  
 

NOTE 5. PLEDGED ASSETS

 

Assets Pledged to Counterparties

 

The table below summarizes Bimini’s assets pledged as collateral under its repurchase agreements and derivative agreements as of September 30, 2023 and December 31, 2022.

 

($ in thousands)

                                                
   

September 30, 2023

    

December 31, 2022

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 82,303     $ -     $ 82,303     $ 42,975     $ -     $ 42,975  

Structured MBS - at fair value

     2,391       -       2,391       2,742       -       2,742  

Accrued interest on pledged securities

     417       -       417       200       -       200  

Restricted cash

     693       719       1,412       454       309       763  

Total

   $ 85,804     $ 719     $ 86,523     $ 46,371     $ 309     $ 46,680  

 

Assets Pledged from Counterparties

 

The table below summarizes cash pledged to Bimini from counterparties under repurchase agreements as of September 30, 2023 and December 31, 2022. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements in the consolidated balance sheets.

 

($ in thousands)

                

Assets Pledged to Bimini

  

September 30, 2023

    

December 31, 2022

  

Cash

   $ -     $ 148  

Total

   $ -     $ 148  
 

NOTE 6. OFFSETTING ASSETS AND LIABILITIES

 

The Company’s derivatives and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following tables present information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of September 30, 2023 and December 31, 2022.

 

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(in thousands)

                                                

Offsetting of Liabilities

  
                           

Gross Amount Not Offset in the

          
                   

Net Amount

    

Consolidated Balance Sheet

          
           

Gross Amount

    

of Liabilities

    

Financial

                  
   

Gross Amount

    

Offset in the

    

Presented in the

    

Instruments

    

Cash

          
   

of Recognized

    

Consolidated

    

Consolidated

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Balance Sheet

    

Balance Sheet

    

Collateral

    

Collateral

    

Amount

  

September 30, 2023

                                                

Repurchase Agreements

   $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  
    $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  

December 31, 2022

                                                

Repurchase Agreements

   $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  
    $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  

 

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

NOTE 7. LONG-TERM DEBT

 

Long-term debt at September 30, 2023 and December 31, 2022 is summarized as follows:

 

(in thousands)

        
  

September 30, 2023

  

December 31, 2022

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  596   612 

Total

 $27,400  $27,416 

 

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 September 30, 2023 and December 31, 2022, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes have a rate of interest that floats at a spread of 3.50% over the prevailing three-month LIBOR rate. As of September 30, 2023, the interest rate was 9.17%. 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 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.

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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 three months of 2023

 $7 

For the years ended:

    

2024

  25 

2025

  26 

2026

  28 

2027

  29 

After 2027

  27,285 

Total

 $27,400 
 

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 nine months ended September 30, 2023 and 2022.

 

Stock Repurchase Plans

 

On March 26, 2018, the Board of Directors of the Company (the “Board”) approved a Stock Repurchase Plan (the “2018 Repurchase Plan”). Pursuant to the 2018 Repurchase Plan, the Company could purchase up to 500,000 shares of its Class A Common Stock from time to time, subject to certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934. The 2018 Repurchase Plan was terminated on September 16, 2021.

 

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. The 2021 Repurchase Plan expired on September 16, 2023 and did not obligate the Company to purchase any shares. 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. 

 

The Inflation Reduction Act of 2022 signed into law during in August 2022 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 provisions, including a $1 million threshold before the tax becomes applicable. The excise tax is effective beginning in 2023. Since the amount of stock repurchases during the nine months ended September 30, 2023 were under the $1 million threshold, no accrual for this excise tax has been recorded during 2023.
 

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.

 

In April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. in the total amount of $33.3 million related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to the date Royal Palm’s mortgage origination operations ceased in 2007. The Company believes the demands are without merit and intends to defend against the demands vigorously if pursued by Citigroup. No provision or accrual has been recorded related to the Citigroup demands.

 

Management is not aware of any other significant reported or unreported contingencies at September 30, 2023.

 

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NOTE 10. INCOME TAXES

 

The total income tax benefit recorded for the nine months ended September 30, 2023 and 2022 was $(0.3) million and $(1.6) million, respectively, on consolidated pre-tax book income (loss) of $0.6 million and $(9.4) million, respectively. The total income tax benefit recorded for the three months ended September 30, 2023 and 2022 was $(0.8) million and $(0.3) million, respectively, on consolidated pre-tax book loss of $(1.2) million and $(3.4) million, respectively. The Company is unable to reliably estimate an annual effective tax rate; therefore, it uses the discrete-period computation method for determining its income tax (benefit) provision. The Company's income tax (benefit) provision could be affected by numerous factors, including the projected utilization of net operating loss carryovers and changes in its deferred tax assets and liabilities and their valuations. In that regard, the Company's reported income tax benefit for both the nine and three months ended September 30, 2023 included an adjustment to the deferred tax asset valuation allowance of approximately $0.5 million.

 

The Company’s tax provisions are based on a projected effective rate based on annualized amounts applied to actual income to date and includes 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. 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 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. The Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, 2023 and 2022.

 

Shares of Class C common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, 2023 and 2022.

 

The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, 2023 and 2022.

 

(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class A common share:

                                

Loss attributable to Class A common shares:

                                

Basic and diluted

   $ 869     $ (7,815 )   $ (418 )   $ (3,163 )

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,247       10,005       10,247  

Effect of weighting

     14       220       13       42  

Weighted average shares-basic and diluted

     10,019       10,467       10,018       10,289  

Loss per Class A common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )

 

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(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class B common share:

                                

Loss attributable to Class B common shares:

                                

Basic and diluted

   $ 3     $ (24 )   $ (1 )   $ (10 )

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 per Class B common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )
 

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 stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications 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.

 

MBS, Orchid common stock, retained interests and TBA securities were all recorded at fair value on a recurring basis as of September 30, 2023 and December 31, 2022. 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 and TBA securities 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.

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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 September 30, 2023 and December 31, 2022, 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, repurchase agreements, accrued interest payable and other liabilities approximate their carrying value as Level 1 assets under the fair value hierarchy as of September 30, 2023 and December 31, 2022, due to the short-term nature of these financial instruments. The fair value of the Company’s junior subordinated debt approximates its carrying value. The carrying value is a reasonable estimate of fair value since the instrument carries a floating rate that resets frequently. Further information regarding this instrument is presented in Note 7.

 

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

 

(in thousands)

                
      

Quoted Prices

         
      

in Active

  

Significant

     
      

Markets for

  

Other

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
  

Fair Value

  

Assets

  

Inputs

  

Inputs

 
  

Measurements

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

September 30, 2023

                

Mortgage-backed securities

 $84,861  $-  $84,861  $- 

Orchid Island Capital, Inc. common stock

  4,843   4,843   -   - 

December 31, 2022

                

Mortgage-backed securities

 $45,893  $-  $45,893  $- 

Orchid Island Capital, Inc. common stock

  5,975   5,975   -   - 

 

During the nine months ended September 30, 2023 and 2022, 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 nine and three months ended September 30, 2023, were approximately $10.5 million and $3.6 million, respectively, accounting for approximately 79% and 77% of consolidated revenues, respectively. Total revenues received under this management agreement for the nine and three months ended September 30, 2022, were approximately $9.7 million and $3.3 million, respectively, accounting for approximately 80% and 82% 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.

 

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Segment information for the nine months ended  September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 10,519     $ -     $ -     $ -     $ 10,519  

Advisory services, other operating segments(1)

     89       -       -       (89 )     -  

Interest and dividend income

     -       2,780       2       -       2,782  

Interest expense(2)

     -       (1,903 )     (1,722 )     -       (3,625 )

Net revenues

     10,608       877       (1,720 )     (89 )     9,676  

Other expenses

     -       (2,467 )     -       -       (2,467 )

Operating expenses(3)

     (5,174 )     (1,483 )     -       -       (6,657 )

Intercompany expenses(1)

     -       (89 )     -       89       -  

Income (loss) before income taxes(4)

   $ 5,434     $ (3,162 )   $ (1,720 )   $ -     $ 552  

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 9,720     $ -     $ -     $ -     $ 9,720  

Advisory services, other operating segments(1)

     85       -       -       (85 )     -  

Interest and dividend income

     -       2,364       -       -       2,364  

Interest expense(2)

     -       (314 )     (938 )     -       (1,252 )

Net revenues

     9,805       2,050       (938 )     (85 )     10,832  

Other (expenses) revenue

     -       (14,092 )     66       -       (14,026 )

Operating expenses(3)

     (4,914 )     (1,302 )     -       -       (6,216 )

Intercompany expenses(1)

     -       (85 )     -       85       -  

Income (loss) before income taxes(4)

   $ 4,891     $ (13,429 )   $ (872 )   $ -     $ (9,410 )

 

Segment information for the three months ended  September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 3,620     $ -     $ -     $ -     $ 3,620  

Advisory services, other operating segments(1)

     33       -       -       (33 )     -  

Interest and dividend income

     -       1,110       1       -       1,111  

Interest expense(2)

     -       (831 )     (610 )     -       (1,441 )

Net revenues

     3,653       279       (609 )     (33 )     3,290  

Other expenses

     -       (2,361 )     -       -       (2,361 )

Operating expenses(3)

     (1,582 )     (523 )     -       -       (2,105 )

Intercompany expenses(1)

     -       (33 )     -       33       -  

Income (loss) before income taxes(4)

   $ 2,071     $ (2,638 )   $ (609 )   $ -     $ (1,176 )

 

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Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 3,312     $ -     $ -     $ -     $ 3,312  

Advisory services, other operating segments(1)

     29       -       -       (29 )     -  

Interest and dividend income

     -       728       -       -       728  

Interest expense(2)

     -       (210 )     (379 )     -       (589 )

Net revenues

     3,341       518       (379 )     (29 )     3,451  

Other (expenses) revenue

     -       (4,868 )     66       -       (4,802 )

Operating expenses(3)

     (1,677 )     (401 )     -       -       (2,078 )

Intercompany expenses(1)

     -       (29 )     -       29       -  

Income (loss) before income taxes(4)

   $ 1,664     $ (4,780 )   $ (313 )   $ -     $ (3,429 )

 

(1)

Includes fees paid by Royal Palm to Bimini Advisors for advisory services.

(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 September 30, 2023 and December 31, 2022 were as follows:

 

(in thousands)

                                
   

Asset

    

Investment

                  
   

Management

    

Portfolio

    

Corporate

    

Total

  

September 30, 2023

   $ 2,144     $ 113,934       7,208     $ 123,286  

December 31, 2022

     1,970       77,483       6,864       86,317  
 

NOTE 14. RELATED PARTY TRANSACTIONS

 

Relationships with Orchid

 

At both September 30, 2023 and December 31, 2022, the Company owned 569,071 shares of Orchid common stock, representing approximately 1.1% and 1.6%, respectively, of Orchid’s outstanding common stock on such dates. The Company received dividends on this common stock investment of approximately $0.8 million and $1.0 million during the nine months ended September 30, 2023 and 2022, respectively, and $0.3 million and $0.3 million during the three months ended September 30, 2023 and 2022, 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 and Treasurer 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 ("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, commencing April 1. 2022, provides 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. The 2021 Repurchase Plan expired on September 16, 2023 and did not obligate the Company to purchase any shares. 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. 

 

The Inflation Reduction Act of 2022, signed into law in August 2022, 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. 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;
  ● increases in our cost of funds resulting from increases in the Federal Funds rate, that is controlled by the Fed, that occurred in 2022 and the first three quarters of 2023, and may continue to occur;
 

●

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 presidential administration, the U.S. Federal Reserve (the “Fed”), the Federal Open Market Committee (the “FOMC”), the Federal Housing Finance Agency (the “FHFA”) and the U.S. Treasury;
 

●

prepayment rates on mortgages underlying our Agency MBS, and credit trends insofar as they affect prepayment rates;
 

●

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

●

other market developments.

 

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

 

 

●

our degree of leverage;
 

●

our access to funding and borrowing capacity;
 

●

our borrowing costs;
 

●

our hedging activities;
 

●

the market value of our investments;
 

●

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

●

our ability to use net operating loss carryforwards and 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 nine and three months ended September 30, 2023, as compared to the nine and three months ended September 30, 2022.

 

Net Income (Loss) Summary

 

Consolidated net income for the nine months ended September 30, 2023 was $0.9 million, or $0.09 basic and diluted income per share of Class A Common Stock, as compared to a consolidated net loss of $7.8 million, or $0.75 basic and diluted loss per share of Class A Common Stock, for the nine months ended September 30, 2022.

 

Consolidated net loss for the three months ended September 30, 2023 was $0.4 million, or $0.04 basic and diluted income per share of Class A Common Stock, as compared to a consolidated net loss of $3.2 million, or $0.31 basic and diluted loss per share of Class A Common Stock, for the three months ended September 30, 2022.

 

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The components of net income (loss) for the nine and three months ended September 30, 2023 and 2022, along with the changes in those components are presented in the table below.

 

(in thousands)

                                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

Change

    

2023

    

2022

    

Change

  

Advisory services revenues

   $ 10,519     $ 9,720     $ 799     $ 3,620     $ 3,312     $ 308  

Interest and dividend income

     2,782       2,364       418       1,111       728       383  

Interest expense

     (3,625 )     (1,252 )     (2,373 )     (1,441 )     (589 )     (852 )

Net revenues

     9,676       10,832       (1,156 )     3,290       3,451       (161 )

Other (expense) revenue

     (2,467 )     (14,026 )     11,559       (2,361 )     (4,802 )     2,441  

Expenses

     (6,657 )     (6,216 )     (441 )     (2,105 )     (2,077 )     (28 )

Net income (loss) before income tax benefit

     552       (9,410 )     9,962       (1,176 )     (3,428 )     2,252  

Income tax benefit

     (320 )     (1,571 )     1,251       (757 )     (255 )     (502 )

Net income (loss)

   $ 872     $ (7,839 )   $ 8,711     $ (419 )   $ (3,173 )   $ 2,754  

 

GAAP and Non-GAAP Reconciliation

 

Economic Interest Expense and Economic Net Interest Income

 

We use derivative instruments, primarily Treasury Note (“T-Note”) futures contracts and TBA short positions to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.

 

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

 

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

 

For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on borrowings to reflect total economic interest expense for the applicable period. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income. This presentation includes gains or losses on all contracts in effect during the reporting period, covering the current period as well as periods in the future.

 

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 and nine-month period in 2023 and 2022.

 

Gains (Losses) on Derivative Instruments

(in thousands)

                                                        
         

Attributed to Current Period (Non-GAAP)

    

Attributed to Future Periods (Non-GAAP)

  
    Statement of     Repurchase     Long-Term             Repurchase     Long-Term          

Three Months Ended

  

Operations

    

Agreements

    

Debt

    

Total

    

Agreements

    

Debt

    

Total

  

September 30, 2023

   $ 1,169     $ (11 )   $ -     $ (11 )   $ 1,180     $ -     $ 1,180  

June 30, 2023

     516       (18 )     -       (18 )     534       -       534  

March 31, 2023

     (274 )     (33 )     -       (33 )     (241 )     -       (241 )

December 31, 2022

     7       (185 )     (48 )     (233 )     192       48       240  

September 30, 2022

     844       (184 )     (48 )     (232 )     1,028       48       1,076  

June 30, 2022

     (50 )     (186 )     (48 )     (234 )     136       48       184  

March 31, 2022

     -       (185 )     (48 )     (233 )     185       48       233  

Nine Months Ended

                                                        

September 30, 2023

   $ 1,411     $ (62 )   $ -     $ (62 )   $ 1,473     $ -     $ 1,473  

September 30, 2022

     794       (555 )     (144 )     (699 )     1,349       144       1,493  

 

Economic Net Portfolio Interest Income

(in thousands)

                                                
           

Interest Expense on Repurchase Agreements

    

Net Portfolio

  
    GAAP             Effect of             Interest Income  
   

Interest

    

GAAP

    

Non-GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Income

    

Basis

    

Hedges(1)

    

Basis(2)

    

Basis

    

Basis(3)

  

September 30, 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  

December 31, 2022

     534       401       185       586       133       (52 )

September 30, 2022

     445       210       184       394       235       51  

June 30, 2022

     392       73       186       259       319       133  

March 31, 2022

     491       31       185       216       460       275  

Nine Months Ended

                                                

September 30, 2023

   $ 1,962     $ 1,903     $ 62     $ 1,965     $ 59     $ (3 )

September 30, 2022

     1,328       314       555       869       1,014       459  

 

(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)

                                                        
   

Net Portfolio

    

Interest Expense on Long-Term Debt

                  
   

Interest Income

            

Effect of

            

Net Interest Income (Loss)

  
   

GAAP

    

Economic

    

GAAP

    

Non-GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Basis

    

Basis(1)

    

Basis

    

Hedges(2)

    

Basis(3)

    

Basis

    

Basis(4)

  

September 30, 2023

   $ 7     $ (4 )   $ 611     $ -     $ 611     $ (604 )   $ (615 )

June 30, 2023

     3       (15 )     565       -       565       (562 )     (580 )

March 31, 2023

     49       16       546       -       546       (497 )     (530 )

December 31, 2022

     133       (52 )     477       48       525       (344 )     (577 )

September 30, 2022

     235       51       379       48       427       (144 )     (376 )

June 30, 2022

     319       133       304       48       352       15       (219 )

March 31, 2022

     460       275       256       48       304       204       (29 )

Nine Months Ended

                                                        

September 30, 2023

   $ 59     $ (3 )   $ 1,722     $ -     $ 1,722     $ (1,663 )   $ (1,725 )

September 30, 2022

     1,014       459       939       144       1,083       75       (624 )

 

(1)

Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net portfolio interest income.

(2)

Reflects the effect of derivative instrument hedges for only the period presented.

(3)

Calculated by subtracting the effect of derivative instrument hedges attributed to the period presented from GAAP interest expense.

(4)

Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net interest income.

 

Segment Information

 

We have two operating segments. The asset management segment includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. The investment portfolio segment includes the investment activities conducted by Royal Palm.

 

Segment information for the nine months ended September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 10,519     $ -     $ -     $ -     $ 10,519  

Advisory services, other operating segments(1)

     89       -       -       (89 )     -  

Interest and dividend income

     -       2,780       2       -       2,782  

Interest expense(2)

     -       (1,903 )     (1,722 )     -       (3,625 )

Net revenues

     10,608       877       (1,720 )     (89 )     9,676  

Other expenses

     -       (2,467 )     -       -       (2,467 )

Operating expenses(3)

     (5,174 )     (1,483 )     -       -       (6,657 )

Intercompany expenses(1)

     -       (89 )     -       89       -  

Income (loss) before income taxes(4)

   $ 5,434     $ (3,162 )   $ (1,720 )   $ -     $ 552  

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 9,720     $ -     $ -     $ -     $ 9,720  

Advisory services, other operating segments(1)

     85       -       -       (85 )     -  

Interest and dividend income

     -       2,364       -       -       2,364  

Interest expense(2)

     -       (314 )     (938 )     -       (1,252 )

Net revenues

     9,805       2,050       (938 )     (85 )     10,832  

Other (expenses) revenue

     -       (14,092 )     66       -       (14,026 )

Operating expenses(3)

     (4,914 )     (1,302 )     -       -       (6,216 )

Intercompany expenses(1)

     -       (85 )     -       85       -  

Income (loss) before income taxes(4)

   $ 4,891     $ (13,429 )   $ (872 )   $ -     $ (9,410 )

 

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Segment information for the three months ended September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 3,620     $ -     $ -     $ -     $ 3,620  

Advisory services, other operating segments(1)

     33       -       -       (33 )     -  

Interest and dividend income

     -       1,110       1       -       1,111  

Interest expense(2)

     -       (831 )     (610 )     -       (1,441 )

Net revenues

     3,653       279       (609 )     (33 )     3,290  

Other expenses

     -       (2,361 )     -       -       (2,361 )

Operating expenses(3)

     (1,582 )     (523 )     -       -       (2,105 )

Intercompany expenses(1)

     -       (33 )     -       33       -  

Income (loss) before income taxes(4)

   $ 2,071     $ (2,638 )   $ (609 )   $ -     $ (1,176 )

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 3,312     $ -     $ -     $ -     $ 3,312  

Advisory services, other operating segments(1)

     29       -       -       (29 )     -  

Interest and dividend income

     -       728       -       -       728  

Interest expense(2)

     -       (210 )     (379 )     -       (589 )

Net revenues

     3,341       518       (379 )     (29 )     3,451  

Other (expenses) revenue

     -       (4,868 )     66       -       (4,802 )

Operating expenses(3)

     (1,677 )     (401 )     -       -       (2,078 )

Intercompany expenses(1)

     -       (29 )     -       29       -  

Income (loss) before income taxes(4)

   $ 1,664     $ (4,780 )   $ (313 )   $ -     $ (3,429 )

 

(1)

Includes advisory services revenue received by Bimini Advisors from Royal Palm.

(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

  

September 30, 2023

   $ 2,144     $ 113,934       7,208     $ 123,286  

December 31, 2022

     1,970       77,483       6,864       86,317  

 

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 2024 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 nine-month period during 2023 and 2022.

 

(in thousands)

                                                
                   

Advisory Services

  
                                   

Repurchase,

          
   

Average

    

Average

                    

Clearing and

          
   

Orchid

    

Orchid

    

Management

    

Overhead

    

Administrative

          

Three Months Ended

  

MBS

    

Equity

    

Fee

    

Allocation

    

Fees

    

Total

  

September 30, 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  

December 31, 2022

     3,370,608       823,516       2,566       560       150       3,276  

September 30, 2022

     3,571,037       839,935       2,616       522       174       3,312  

June 30, 2022

     4,260,727       866,539       2,631       519       183       3,333  

March 31, 2022

     5,545,844       853,576       2,634       441       -       3,075  

Nine Months Ended

                                                

September 30, 2023

   $ 4,134,664     $ 909,687     $ 8,216     $ 1,772     $ 531     $ 10,519  

September 30, 2022

     4,459,203       853,350       7,881       1,482       357       9,720  

 

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 nine months ended September 30, 2023, we generated $0.1 million of net portfolio interest income, consisting of $2.0 million of interest income from MBS assets offset by $1.9 million of interest expense on repurchase liabilities. For the comparable period ended September 30, 2022, we generated $1.0 million of net portfolio interest income, consisting of $1.3 million of interest income from MBS assets offset by $0.3 million of interest expense on repurchase liabilities. The $0.6 million increase in interest income was due to an 84 basis point ("bp") increase in yields, combined with a $9.7 million increase in average MBS holdings. There was a $1.6 million increase in interest expense for the nine months ended September 30, 2023 that was due to a 369 bp increase in cost of funds, combined with a $7.8 million increase in average repurchase liabilities.

 

Our economic interest expense on repurchase liabilities for the nine months ended September 30, 2023 and 2022 was $2.0 million and $0.9 million, respectively, resulting in $(3.0) thousand and $0.5 million of economic net portfolio interest income (expense), respectively.

 

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During the three months ended September 30, 2023, we generated $7,000 of net portfolio interest income, consisting of $838,000 of interest income from MBS assets offset by $831,000 of interest expense on repurchase liabilities. For the comparable period ended September 30, 2022, we generated $235,000 of net portfolio interest income, consisting of $445,000 of interest income from MBS assets offset by $210,000 of interest expense on repurchase liabilities. The $393,000 increase in interest income was due to a 21 basis point ("bp") increase in yields, combined with an $32.9 million increase in average MBS holdings. There was a $621,000 increase in interest expense for the three months ended September 30, 2023 that was due to a 259 bp increase in cost of funds, combined with a $30.9 million increase in average repurchase liabilities.

 

Our economic interest expense on repurchase liabilities for the three months ended September 30, 2023 and 2022 was $842,000 and $394,000, respectively, resulting in $(4,000) and $51,000 of economic net portfolio interest (expense) income, respectively.

 

The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the nine months ended September 30, 2023 and 2022 and each quarter in 2023 and 2022 on both a GAAP and economic basis.

 

($ in thousands)

                                                                
   

Average

            

Yield on

    

Average

    

Interest Expense

    

Average Cost of Funds

  
   

MBS

    

Interest

    

Average

    

Repurchase

    

GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Held(1)

    

Income

    

MBS

    

Agreements(1)

    

Basis

    

Basis(2)

    

Basis

    

Basis(3)

  

September 30, 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 %

December 31, 2022

     45,081       534       4.74 %     43,656       401       586       3.68 %     5.37 %

September 30, 2022

     41,402       445       4.30 %     40,210       210       394       2.09 %     3.92 %

June 30, 2022

     46,607       392       3.36 %     45,870       73       259       0.63 %     2.25 %

March 31, 2022

     57,741       491       3.40 %     56,846       31       216       0.22 %     1.52 %

Nine Months Ended

                                                                

September 30, 2023

   $ 58,263     $ 1,962       4.49 %   $ 55,468     $ 1,903     $ 1,965       4.57 %     4.72 %

September 30, 2022

     48,584       1,328       3.65 %     47,642       314       869       0.88 %     2.43 %

 

($ in thousands)

                                
   

Net Portfolio

    

Net Portfolio

  
   

Interest Income

    

Interest Spread

  
   

GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Basis

    

Basis(2)

    

Basis

    

Basis(4)

  

September 30, 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 )%

December 31, 2022

     133       (52 )     1.06 %     (0.63 )%

September 30, 2022

     235       51       2.21 %     0.38 %

June 30, 2022

     319       133       2.73 %     1.11 %

March 31, 2022

     460       275       3.18 %     1.88 %

Nine Months Ended

                                

September 30, 2023

   $ 59     $ (3 )     (0.08 )%     (0.23 )%

September 30, 2022

     1,014       459       2.77 %     1.22 %

 

(1)

Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 28 and 29 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 29 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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Interest Income and Average Earning Asset Yield

 

Our interest income for the nine months ended September 30, 2023 was approximately $2.0 million, compared to $1.3 million for the comparable period ended September 30, 2022. Average MBS holdings during the nine months ended September 30, 2023 and 2022 were $58.3 million and $48.6 million, respectively, and yields were 4.49% and 3.65%, for the same time periods, respectively.

 

Our interest income was approximately $838,000 for the three months ended September 30, 2023 and $445,000 for the three months ended September 30, 2022. Average MBS holdings were $74.3 million and $41.4 million for the three months ended September 30, 2023 and 2022, respectively. The $393,000 increase in interest income was due to a 21 bp increase in yields, combined with a $32.9 million increase in average MBS holdings.

 

The tables below present the average portfolio size, income and yields of our respective sub-portfolios, consisting of PT MBS and structured, for the nine months ended September 30, 2023 and 2022, and for each quarter during 2023 and 2022.

 

($ in thousands)

                                                                        
   

Average MBS Held

    

Interest Income

    

Realized Yield on Average MBS

  
   

PT

    

Structured

            

PT

    

Structured

            

PT

    

Structured

          

Three Months Ended

  

MBS

    

MBS

    

Total

    

MBS

    

MBS

    

Total

    

MBS

    

MBS

    

Total

  

September 30, 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 %

December 31, 2022

     42,125       2,956       45,081       473       61       534       4.49 %     8.31 %     4.74 %

September 30, 2022

     38,384       3,018       41,402       383       62       445       3.99 %     8.17 %     4.30 %

June 30, 2022

     43,568       3,039       46,607       333       59       392       3.06 %     7.75 %     3.36 %

March 31, 2022

     54,836       2,905       57,741       472       19       491       3.45 %     2.61 %     3.40 %

Nine Months Ended

                                                                        

September 30, 2023

   $ 55,549     $ 2,714     $ 58,263     $ 1,789     $ 173     $ 1,962       4.29 %     8.51 %     4.49 %

September 30, 2022

     45,596       2,988       48,584       1,188       140       1,328       3.48 %     6.22 %     3.65 %

 

Interest Expense on Repurchase Agreements and the Cost of Funds

 

Our average outstanding balances under repurchase agreements were $55.5 million and $47.6 million, generating interest expense of approximately $1.9 million and $0.3 million for the nine months ended September 30, 2023 and 2022, respectively. Our average cost of funds was 4.57% and 0.88% for nine months ended September 30, 2023 and 2022, respectively.  There was a 369 bp increase in the average cost of funds and a $7.8 million increase in average outstanding repurchase agreements during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. 

 

Our economic interest expense was $2.0 million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively. There was a 229 bp increase in the average economic cost of funds to 4.72% for the nine months ended September 30, 2023 from 2.43% for the nine months ended September 30, 2022. The $1.1 million increase in economic interest expense was due to the $7.8 million increase in average outstanding repurchase agreements, combined with the increase in economic cost of funds during the nine months ended September 30, 2023.

 

Our average outstanding balances under repurchase agreements were $71.1 million and $40.2 million, generating interest expense of approximately $831,000 and $210,000 for the three months ended September 30, 2023 and 2022, respectively. Our average cost of funds was 4.68% and 2.09% for three months ended September 30, 2023 and 2022, respectively.  There was a 259 bp increase in the average cost of funds and a $30.9 million increase in average outstanding repurchase agreements during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. 

 

Our economic interest expense was $842,000 and $394,000 for the three months ended September 30, 2023 and 2022, respectively. There was a 82 bp increase in the average economic cost of funds to 4.74% for the three months ended September 30, 2023 from 3.92% for the three months ended September 30, 2022. The $448,000 increase in economic interest expense was due to the $30.9 million increase in average outstanding repurchase agreements, combined with the increase in economic cost of funds during the three months ended September 30, 2023.

 

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Table of Contents

 

Because all of our repurchase agreements are short-term, changes in market rates have a more immediate impact on our interest expense. Our average cost of funds calculated on a GAAP basis was 64 bps below the average one-month SOFR and 49 bps below the average six-month SOFR for the quarter ended September 30, 2023. Our average economic cost of funds was 58 bps below the average one-month SOFR and 43 bps below the average six-month SOFR for the quarter ended September 30, 2023. The average term to maturity of the outstanding repurchase agreements was 37 days at September 30, 2023, compared to 15 days at December 31, 2022.

 

The tables below present the average outstanding balances under our repurchase agreements, interest expense and average economic cost of funds, and average one-month and six-month SOFR rates for the nine months ended September 30, 2023 and 2022, and for each quarter in 2023 and 2022, on both a GAAP and economic basis.

 

($ in thousands)

                                        
   

Average

                                  
   

Balance of

    

Interest Expense

    

Average Cost of Funds

  
   

Repurchase

    

GAAP

    

Economic

    

GAAP

    

Economic

  

Three Months Ended

  

Agreements

    

Basis

    

Basis

    

Basis

    

Basis

  

September 30, 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 %

December 31, 2022

     43,656       401       586       3.68 %     5.37 %

September 30, 2022

     40,210       210       394       2.09 %     3.92 %

June 30, 2022

     45,870       73       259       0.63 %     2.25 %

March 31, 2022

     56,846       31       216       0.22 %     1.52 %

Nine Months Ended

                                        

September 30, 2023

   $ 55,468     $ 1,903     $ 1,965       4.57 %     4.72 %

September 30, 2022

     47,642       314       869       0.88 %     2.43 %

 

               

Average GAAP Cost of Funds

    

Average Economic Cost of Funds

  
               

Relative to Average

    

Relative to Average

  
   

Average SOFR

    

One-Month

    

Six-Month

    

One-Month

    

Six-Month

  

Three Months Ended

  

One-Month

    

Six-Month

    

SOFR

    

SOFR

    

SOFR

    

SOFR

  

September 30, 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 %

December 31, 2022

   4.06 %   2.89 %   (0.38 )%   0.79 %   1.31 %   2.48 %

September 30, 2022

   2.47 %   1.43 %   (0.38 )%   0.66 %   1.45 %   2.49 %

June 30, 2022

   1.09 %   0.39 %   (0.46 )%   0.24 %   1.16 %   1.86 %

March 31, 2022

   0.16 %   0.07 %   0.06 %   0.15 %   1.36 %   1.45 %

Nine Months Ended

                                    

September 30, 2023

   5.01 %   4.68 %   (0.44 )%   (0.11 )%   (0.29 )%   0.04 %

September 30, 2022

   1.24 %   0.63 %   (0.36 )%   0.25 %   1.19 %   1.80 %

 

Dividend Income from Orchid

 

During the nine months ended September 30, 2023 and 2022, we owned 569,071 and 519,071 shares of Orchid common stock, respectively. Orchid paid total dividends of $1.440 and $1.995 per share during the nine months ended September 30, 2023 and 2022, respectively, resulting in dividend income on this common stock investment of approximately $0.8 million and $1.0 million, respectively. Orchid paid total dividends of $0.48 and $0.545 per share during the three months ended September 30, 2023 and 2022, respectively.  During the three months ended September 30, 2023 and 2022, we received dividends on this common stock investment of approximately $0.3 million and $0.3 million, respectively.

 

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Long-Term Debt

 

Junior Subordinated Debt

 

The junior subordinated debt securities pay 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. As of September 30, 2023, the interest rate was 9.17%. 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 negatively impacted our interest expense.

 

Interest expense on our junior subordinated debt securities was $1.7 million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively. The average rate of interest paid for the nine months ended September 30, 2023 was 8.62% compared to 4.64% for the comparable period in 2022.

 

Interest expense on our junior subordinated debt securities was $0.6 million and $0.4 million for the three month periods ended September 30, 2023 and 2022, respectively.  The average rate of interest paid for the three months ended September 30, 2023 was 9.07% compared to 5.58% for the comparable period in 2022.

 

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 nine and three months ended September 30, 2023 and 2022.

 

(in thousands)

                                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

Change

    

2023

    

2022

    

Change

  

Realized losses on sales of MBS

   $ -     $ (858 )   $ 858     $ -     $ -     $ -  

Unrealized losses on MBS

     (2,746 )     (6,606 )     3,860       (2,483 )     (2,572 )     89  

Total losses on MBS

     (2,746 )     (7,464 )     4,718       (2,483 )     (2,572 )     89  

Gains on derivative instruments

     1,411       795       616       1,170       844       326  

Gains on retained interests in securitizations

     -       66       (66 )     -       66       (66 )

Unrealized losses on Orchid Island Capital, Inc. common stock

     (1,132 )     (7,423 )     6,291       (1,047 )     (3,140 )     2,093  

 

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 nine months ended September 30, 2022, we sold MBS with a fair value of $23.1 million. We did not sell any MBS during the nine months ended September 30, 2023.

 

The fair value of our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are driven 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. The table below presents historical interest rate data as of the end of quarter during 2023 and 2022.

 

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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 for each quarter end during 2023 and 2022.

 

   

5 Year

    

10 Year

    

15 Year

    

30 Year

    

Three

  
   

U.S. Treasury

    

U.S. Treasury

    

Fixed-Rate

    

Fixed-Rate

    

Month

  
   

Rate(1)

    

Rate(1)

    

Mortgage Rate(2)

    

Mortgage Rate(2)

    

SOFR(3)

  

September 30, 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%

  

December 31, 2022

  

4.00%

    

3.88%

    

5.68%

    

6.42%

    

3.62%

  

September 30, 2022

  

4.04%

    

3.80%

    

5.96%

    

6.70%

    

2.13%

  

June 30, 2022

  

3.00%

    

2.97%

    

4.83%

    

5.70%

    

0.70%

  

March 31, 2022

  

2.42%

    

2.33%

    

3.83%

    

4.67%

    

0.09%

  

 

(1)

Historical 5 Year and 10 Year U.S. Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange.

(2)

Historical 15 Year and 30 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac’s Primary Mortgage Market Survey.

(3)

Historical SOFR is obtained from the Federal Reserve Bank of New York. The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 day periods.

 

Operating Expenses

 

For the nine and three months ended September 30, 2023, our total operating expenses were approximately $6.7 million and $2.1 million, respectively, compared to approximately $6.2 million and $2.1 million, respectively, for the nine and three months ended September 30, 2022. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2023 and 2022.

 

(in thousands)

                                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

Change

    

2023

    

2022

    

Change

  

Compensation and related benefits

   $ 3,900     $ 3,836     $ 64     $ 1,258     $ 1,230     $ 28  

Direct advisory services costs

     1,138       915       223       317       359       (42 )

Legal fees

     48       64       (16 )     11       29       (18 )

Accounting, auditing and other professional fees

     379       306       73       108       74       34  

Directors’ fees and liability insurance

     627       588       39       214       195       19  

Administrative and other expenses

     565       507       58       197       190       7  
    $ 6,657     $ 6,216     $ 441     $ 2,105     $ 2,077     $ 28  

 

Income Tax Provision

 

We recorded an income tax benefit for the nine months ended September 30, 2023 and 2022 of approximately $(0.3) million and $(1.6) million, respectively, on consolidated pre-tax book income (loss) of $0.6 million and $(9.4) million, respectively. We recorded an income tax benefit for the three months ended September 30, 2023 and 2022 of approximately $(0.8) million and $(0.3) million, respectively, on a consolidated pre-tax book loss of $(1.2) million and $(3.4) million, respectively. The Company is unable to reliably estimate an annual effective tax rate; therefore, it uses the discrete-period computation method for determining its income tax (benefit) provision.  Our income tax (benefit) provision could be affected by numerous factors, including 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. In that regard, the income tax benefit for both the nine and three months ended September 30, 2023 included an adjustment to the deferred tax asset valuation allowance of approximately $0.5 million.

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Financial Condition:

 

Mortgage-Backed Securities

 

As of September 30, 2023, our MBS portfolio consisted of $84.9 million of agency or government MBS at fair value and had a weighted average coupon of 4.78%. During the nine months ended September 30, 2023, we received principal repayments of $3.3 million compared to $7.0 million for the comparable period ended September 30, 2022. The average prepayment speeds for the quarters ended September 30, 2023 and 2022 were 4.8% and 10.8%, respectively.

 

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

 

         

Structured

        
   

PT MBS

    

MBS

    

Total

  

Three Months Ended

  

Portfolio (%)

    

Portfolio (%)

    

Portfolio (%)

  

September 30, 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  

December 31, 2022

   8.2     8.4     8.3  

September 30, 2022

   13.1     7.5     10.8  

June 30, 2022

   17.2     22.9     20.0  

March 31, 2022

   18.5     25.6     20.9  

 

The following tables summarize certain characteristics of our PT MBS and structured MBS as of September 30, 2023 and December 31, 2022:

 

($ in thousands)

                                  
                           

Weighted

    
           

Percentage

            

Average

    
           

of

    

Weighted

    

Maturity

    
   

Fair

    

Entire

    

Average

    

in

  

Longest

Asset Category

  

Value

    

Portfolio

    

Coupon

    

Months

  

Maturity

September 30, 2023

                                  

Fixed Rate MBS

   $ 82,303       97.0 %     5.22 %     341  

1-Oct-53

Structured MBS

     2,558       3.0 %     2.84 %     292  

15-May-51

Total MBS Portfolio

   $ 84,861       100.0 %     4.78 %     339  

1-Oct-53

December 31, 2022

                                  

Fixed Rate MBS

   $ 42,974       93.6 %     4.07 %     329  

1-Aug-52

Structured MBS

     2,919       6.4 %     2.84 %     300  

15-May-51

Total MBS Portfolio

   $ 45,893       100.0 %     3.67 %     327  

1-Aug-52

 

($ in thousands)

                                
   

September 30, 2023

    

December 31, 2022

  
           

Percentage of

            

Percentage of

  

Agency

  

Fair Value

    

Entire Portfolio

    

Fair Value

    

Entire Portfolio

  

Fannie Mae

   $ 30,352       35.8 %   $ 33,883       73.8 %

Freddie Mac

     54,509       64.2 %     12,010       26.2 %

Total Portfolio

   $ 84,861       100.0 %   $ 45,893       100.0 %

 

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September 30, 2023

    

December 31, 2022

  

Weighted Average Pass-through Purchase Price

   $ 103.88     $ 105.30  

Weighted Average Structured Purchase Price

   $ 4.48     $ 4.48  

Weighted Average Pass-through Current Price

   $ 95.45     $ 95.58  

Weighted Average Structured Current Price

   $ 13.20     $ 13.37  

Effective Duration (1)

     3.981       4.323  

 

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 3.981 indicates that an interest rate increase of 1.0% would be expected to cause a 3.981% decrease in the value of the MBS in our investment portfolio at September 30, 2023. An effective duration of 4.323 indicates that an interest rate increase of 1.0% would be expected to cause a 4.323% decrease in the value of the MBS in our investment portfolio at December 31, 2022. These figures include the structured securities in the portfolio but do include the effect of our hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

 

The following table presents a summary of our portfolio assets acquired during the nine months ended September 30, 2023 and 2022.

 

($ in thousands)

                                                
   

Nine Months Ended September 30,

  
   

2023

    

2022

  
   

Total Cost

    

Average Price

    

Weighted Average Yield

    

Total Cost

    

Average Price

    

Weighted Average Yield

  

PT MBS

   $ 45,007     $ 101.61       5.76 %   $ 21,009     $ 99.14       4.12 %

Structured MBS

     -       -       -       -       -       -  

 

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.

 

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The following sensitivity analysis shows the estimated impact on the fair value of our interest rate-sensitive investments and hedge positions as of September 30, 2023, 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

   $ 82,303     $ 3,150     $ (3,656 )   $ (7,783 )     3.83 %     (4.44 )%     (9.46 )%

Structured MBS

     2,558       (44 )     14       1       (1.72 )%     0.55 %     0.04 %

Total MBS Portfolio

   $ 84,861     $ 3,106     $ (3,642 )   $ (7,782 )     3.66 %     (4.29 )%     (9.17 )%
   

Notional

    

$ Change in Fair Value

    

% Change in Fair Value

  

Repurchase Agreement Hedges

  

Amount(1)

    

-100BPS

    

+100BPS

    

+200BPS

    

-100BPS

    

+100BPS

    

+200BPS

  

Treasury Futures Contracts

     36,400       (2,143 )     2,018       4,054       (5.89 )%     5.54 %     11.14 %

Gross Totals

           $ 963     $ (1,624 )   $ (3,728 )                        

 

(1)

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

 

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

 

Repurchase Agreements

 

As of September 30, 2023, 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 September 30, 2023, we had obligations outstanding under the repurchase agreements of approximately $81.4 million with a net weighted average borrowing cost of 5.50%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 17 to 72 days, with a weighted average maturity of 37 days. Securing the repurchase agreement obligation as of September 30, 2023 are MBS with an estimated fair value, including accrued interest, of $85.1 million. Through November 3, 2023, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2023 with maturities through December 11, 2023.

 

The table below presents information about our period-end, maximum and average repurchase agreement obligations for each quarter in 2023 and 2022.

 

   

Ending

    

Maximum

    

Average

    

Difference Between Ending

  
   

Balance

    

Balance

    

Balance

    

Repurchase Agreements and

  
   

of Repurchase

    

of Repurchase

    

of Repurchase

    

Average Repurchase Agreements

  

Three Months Ended

  

Agreements

    

Agreements

    

Agreements

    

Amount

    

Percent

  

September 30, 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 )%

December 31, 2022

     43,818       44,780       43,656       162       0.37 %

September 30, 2022

     43,494       46,977       40,210       3,284       8.17 %

June 30, 2022

     36,926       53,289       45,870       (8,944 )     (19.50 )%

March 31, 2022

     54,815       58,772       56,846       (2,031 )     (3.57 )%

 

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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 4 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 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 T-Note or TBA short positions related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.

 

External Sources of Liquidity

 

Our primary external sources of liquidity are our ability to (i) borrow under master repurchase agreements and (ii) use the TBA security market. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our master repurchase agreements have no stated expiration, but can be terminated at any time at our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur, but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.

 

Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis.

 

We invest a portion of our capital in structured MBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repo market. This structured MBS strategy has been a core element of the Company’s overall investment strategy since 2008. However, we have and may continue to pledge a portion of our structured MBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.

 

In future periods we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of September 30, 2023, we had cash and cash equivalents of $3.8 million. We generated cash flows of $5.0 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $55.5 million during the nine months ended September 30, 2023. In addition, during the nine months ended September 30, 2023, we received approximately $10.5 million in management fees and expense reimbursements as manager of Orchid and approximately $0.8 million in dividends from our investment in Orchid common stock.

 

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Outlook

 

Orchid Island Capital Inc.

 

Orchid Island Capital reported a third quarter 2023 net loss of $80.1 million and its shareholders equity decreased from $490.1 million to $466.8 million. The market conditions described below led to the losses as Orchid reported realized and unrealized losses on its MBS portfolio of $208.9 million, exceeding unrealized gains on hedge instruments of $142.0 million. Orchid raised additional equity capital of approximately $80.4 million during the third quarter of 2023. 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 third quarter of 2023 did not play out as market participants expected.  As the Federal Reserve (the “Fed”) and central banks across the globe have continued with their tightening campaigns, the economy in the U.S. has remained remarkably resilient.  In fact, the advanced reading on gross domestic product (“GDP”) for the third quarter of 2023, released on October 26 was 4.9%.  Conversely the inflation data has continued to slowly trend down towards the Fed’s 2% target. The Fed is monitoring this trend with respect to potential future actions, and it may not have to increase short-term interest rates much more, if at all. However, the unknown is just how long the Fed will have to keep monetary policy at the current restrictive levels to ensure inflation appears likely to decline to its target level. The Fed continues to be concerned about the jobs market, which has remained very strong and seems likely to support continued services inflation at elevated levels, as wage levels are the biggest driver of services inflation.

 

Consumer spending in the U.S. remains quite strong, driven by a robust labor market, as evidenced by strong job gains and initial unemployment claims at very low levels, enhanced by residual savings from the pandemic related government stimulus payments distributed since 2020. While there are clear signs that the tightening conducted by the Fed since their campaign began in March of 2022 has slowed the economy, they are not pervasive and signs of strength in economic growth remain. To the extent these conditions persist, monetary policy is likely to remain restrictive.

 

Interest Rates

 

Interest rate movements during the third quarter of 2023 were driven by two significant developments. The first may have implications for the economy for the foreseeable future, not just near-term monetary policy.  At the end of July Fitch Ratings downgraded the credit rating of the United States and Moody’s Investor Services announced the credit rating of the U.S. was under review for a potential down-grade later in the quarter.  At approximately the same time as Fitch announced its downgrade, the U.S. Treasury announced a revision to its debt issuance levels for the balance of the third quarter of 2023.  The revision amounted to an approximate 35% increase compared to previous estimates. The Congressional budget office estimates the fiscal 2023 deficit may reach $2 trillion dollars. Fitch and Moody’s cited the rapidly expanding deficits as the primary cause of the downgrades but also cited the continued government dysfunction owing to rampant partisanship, which may impair the government's ability to effectively manage deficits going forward. Evidence of the latter was on display when the government narrowly avoided a shut-down at the end of September, closely followed by the majority party in the House ousting their speaker.  Since the agreement reached on September 30 only funds the government through November 17, 2023, the next attempt to fund the government for the balance of fiscal year 2024 could prove challenging. The rates market reacted to this development as longer maturity rates increased throughout the balance of the third quarter and into the fourth, implying the market is increasing the term premium associated with longer-term U.S. Treasury notes and bonds. From mid-July through late October, the yield on the 10-year U.S. Treasury note increased by over 100 basis points. Actions abroad also affected longer-term rates in the U.S., namely the Bank of Japan taking steps to relax its yield curve control regime by allowing yields on longer-term maturity Japanese Government Bonds (“JGBs”) to increase. By doing so, it increased the attractiveness of JGBs to Japanese investors over U.S. Treasury securities, thereby lessening demand for U.S. Treasury securities, leading to potentially higher U.S. yields.  The increases in longer-term U.S. Treasury yields tighten financial conditions in the U.S. and support the restrictive monetary policy of the Fed, likely reducing the need of the Fed to increase short-term rates or keep their policy restrictive for as long as might be needed absent this development.  However, to the extent the U.S. continues to generate historically high budget deficits – as is expected - and U.S. Treasury issuance remains elevated, it is possible longer-term rates may remain elevated for much longer than the current economic cycle and have negative implications for the U.S. economy in the future.

 

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A second development during the quarter occurred at the Fed’s September Federal Open Market Committee ("FOMC") meeting when the Fed released their “dot” plot, a summary of FOMC members' anticipated level of the Fed Funds rate for the next several years. The dot plot released reflected a funds rate 50 basis points higher at the end of 2024 than the last dot plot issued at the conclusion of the FOMC meeting in June 2023. The increase reflected expectations for a minimal reduction in the funds rate prior to the end of 2024. The Fed cited the persistently strong economy, particularly the labor market as referenced above, as reasons for keeping monetary policy restrictive for so long. The following morning initial unemployment claims for the prior week were released and were barely above 200,000, a level consistent with a very strong labor market. This triggered a second round of significant movement in long-term U.S. Treasury rates as the U.S. Treasury yield curve steepened even further.  On July 3, 2023, the spread between the 2-year U.S. Treasury note and the 10-year U.S. Treasury note reached a peak for the current cycle at -108.04 basis points.  At the end of the third quarter, the inversion was only -47.35 basis points and has approached -12 basis points in late October. The impact of this development was felt across all markets as risk sentiment collapsed and all financial markets suffered heavy losses. 

 

The developments above also increased volatility across both the fixed income and equity markets, with both realizing levels of volatility and market pricing assumptions of volatility going forward.

 

The Agency MBS Market

 

The regional banking crisis that occurred in March of 2023 led to the liquidation of the holdings of the institutions taken over by the FDIC.  The liquidation auctions of over $60 billion of Agency MBS concluded during the third quarter and did not have the outsized negative impact on the market that many had feared.  However, the developments in the rates market described above did have an impact on the Agency MBS market, especially the Fed meeting in September.  As risk sentiment across markets collapsed and volatility across the equity and rates markets increased market participants largely remained on the sidelines as the events unfolded and most asset classes performed very poorly.  This was the case with the Agency MBS market as well.  Spreads on Agency MBS to comparable duration U.S. Treasuries or swaps increased markedly, and in the case of the current coupon 30-year conventional security with a coupon of approximately 6.5%, the spread to the 5-year U.S. Treasury increased by approximately 30 basis points from September 15, 2023 through October 3, 2023.  This spread peaked at just over 186 basis points on October 3, 2023.  By comparison, the same spread was 143.4 basis points in mid-June of 2023.

 

Based on ICE Bank of America data for the fixed income indices, for the third quarter of 2023 Agency MBS generated a return of -4.1% and -1.6% versus comparable duration swaps, respectively. With respect to individual sectors of the Agency MBS index, longer duration sectors and coupons underperformed owing to the significant steepening of the interest rate curve.  The 30-year fixed rate sector generated returns of -4.6% and -1.9% versus swaps, respectively.  The 15-year sector and Ginnie Mae sectors generated absolute returns of -1.7% and -3.7% respectively.  Returns versus swaps for the 15-year fixed rate and Ginnie Mae sectors were -0.5% and -1.3%, respectively.  Across the 30-year fixed rate coupon stack returns varied from -5.7% for 2.0% coupons to -1.7% for 5.5% coupons. Excess returns for the same coupons were -2.4% and -1.2%, respectively, and the distribution of returns followed the durations of the various coupons in a consistent fashion. The Agency MBS sector underperformed investment grade and sub-investment grade corporates both on an absolute and relative basis (to comparable duration swaps) for the third quarter. 

 

Recent Legislative and Regulatory Developments

 

In response to the deterioration in the markets for U.S. Treasuries, Agency MBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency MBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency MBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing the balance sheet by a maximum of $60 billion of U.S Treasuries and $35 billion of Agency MBS per month. As interest rates have increased and prepayment speeds have slowed, the actual balance sheet reduction of Agency MBS has trended well below the cap during 2023.

 

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On September 30, 2019, the FHFA announced that Fannie Mae and Freddie Mac (the "Enterprises") 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 January agreement, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties.  On February 25, 2022, the FHFA published a final rule, effective as of April 26, 2022, amending the 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 March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) was signed into law as part of the Consolidated Appropriations Act, 2022 (H.R. 2471). The LIBOR Act provides for a statutory replacement benchmark rate for contracts that use LIBOR as a benchmark and do not contain any fallback mechanism independent of LIBOR. Pursuant to the LIBOR Act, SOFR becomes the new benchmark rate by operation of law for any such contract. The LIBOR Act establishes a safe harbor from litigation for claims arising out of or related to the use of SOFR as the recommended benchmark replacement. The LIBOR Act makes clear that it should not be construed to disfavor the use of any benchmark on a prospective basis.

 

On July 28, 2022, the Fed published a proposed rule to implement the LIBOR Act, which was adopted on December 16, 2022.  The final rule, which went into effect on February 27, 2023, sets benchmark SOFR rates to replace overnight, one-month, three-month, six-month and 12-month LIBOR contracts and provides mechanisms for converting most existing LIBOR contracts, including Agency MBS, to SOFR no later than June 30, 2023. The last remaining LIBOR bank panel ended June 30, 2023.  Overnight and 12-month U.S. dollar LIBOR settings have permanently ceased, and 1-, 3- and 6-month U.S. dollar LIBOR will continue to be calculated using a synthetic methodology through September 2024.

 

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

 

Effect on Us

 

Regulatory developments, movements in interest rates and prepayment rates affect us in many ways, including the following:

 

Effects on our Assets

 

A change in or elimination of the guarantee structure of Agency MBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency MBS may cause us to change our investment strategy to focus on non-Agency MBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.

 

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If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency MBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.

 

If prepayment levels increase, the value of any of our Agency MBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency MBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency MBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency MBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency MBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency MBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency MBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.

 

Higher long-term rates can also affect the value of our Agency MBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency MBS declines. Some of the instruments we may use to hedge our Agency MBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency MBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for pass-through Agency MBS.

 

The Agency MBS market began to experience severe dislocations in mid-March 2020 as a result of the economic, health and market turmoil brought about by COVID-19. On March 23, 2020, the Fed announced that it would purchase Agency MBS and U.S. Treasuries in the amounts needed to support smooth market functioning, which largely stabilized the Agency MBS market, but ended these purchases entirely in September 2022 and announced plans to reduce its balance sheet. The Fed's continued reduction of its balance sheet could negatively impact our investments portfolio.

 

Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency MBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT MBS, particularly PT MBS backed by fixed-rate mortgages.

 

Effects on our borrowing costs

 

We leverage our PT MBS portfolio and a portion of our structured Agency MBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate 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. This would be most prevalent with respect to our Agency MBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.

 

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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 and T-Note futures contracts or interest rate swaptions.

 

Summary

 

The third quarter of 2023 was a very challenging period for the financial markets, especially the fixed income markets in the U.S. The U.S. economy proved incredibly resilient in the face of continued rate increases by the Fed since March of 2022 of 500 basis points of Fed policy tightening in the aggregate. Growth for the third quarter was a surprising 4.9%, as measured by GDP.  The Fed recognizes its goal of bringing inflation back to its 2% target is likely going to require tight monetary policy for an extended period, likely well into 2024.  Fiscal deficits in the U.S. continue to grow and are expected to remain at elevated levels for the next few years.  The deficits, coupled with the dysfunction in Washington, led Fitch to downgrade the debt of the U.S. and Moody’s has indicated it may do the same.  The combination of these factors, among others, drove long-term U.S. Treasury rates much higher and steepened the yield curve, as short-term rates remained fairly steady as the market expects the Fed is at or near the end of their tightening cycle.

 

The Agency MBS market was meaningfully impacted by these developments, particularly late in the third quarter.  From mid-July through late October, the yield on the 10-year U.S. Treasury note increased by over 100 basis points. At the conclusion of the September Fed meeting the dot plot released by the FOMC indicated it anticipated the Fed Funds rate would be 50 basis points higher at the end of 2024 than its last release in June. These developments drove investors away from risk assets, and they had an outsized impact on the Agency MBS market. One of the primary causes lies in the fact that there are few marginal buyers of the asset class at the moment.  The Fed is proceeding with its quantitative tightening program, so its holdings of Agency MBS and U.S. Treasuries are running off.  The other very large traditional buyer of MBS, banks, are not active in the space given the inverted curve, and multi-sector asset managers are already heavily invested in the sector.  This leaves only the dealer community and the hedge funds that are typically active in the space to support the sector.  Hedge funds are typically very levered and unable to stay engaged in the sector for any length of time during periods of high volatility. As a result, the sector performed very poorly during the third quarter, particularly from late September and into early October.  The returns for the MBS index for the third quarter of 2023 and the month of September were -4.1% and -3.1%, respectively.

 

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, 2022.

 

Capital Expenditures

 

At September 30, 2023, 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.

 

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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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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

In April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. in the total amount of $33.3 million related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to the date Royal Palm’s mortgage origination operations ceased in 2007. The Company believes the demands are without merit and intends to defend against the demands vigorously if pursued by Citigroup. No provision or accrual has been recorded related to the Citigroup demands.

 

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, 2022, filed with the SEC on March 10, 2023.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

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. The 2021 Repurchase Plan expired on September 16, 2023.

 

The table below presents the Company’s share repurchase activity for the three months ended September 30, 2023.

 

                           

Approximate Dollar

  
                   

Shares Purchased

    

Amount of Shares

  
   

Total Number

    

Weighted-Average

    

as Part of Publicly

    

That May Yet be

  
   

of Shares

    

Price Paid

    

Announced

    

Repurchased Under

  
   

Repurchased

    

Per Share

    

Programs

    

the Authorization

  

July 1, 2023 - July 31, 2023

     -     $ -       -     $ 1,254,427  

August 1, 2023 - August 31, 2023

     -       -       -       1,254,427  

September 1, 2023 - September 30, 2023

     14,431       0.91       -       -  

Totals / Weighted Average

     14,431     $ 0.91       -     $ -  

 

The Company did not have any unregistered sales of its equity securities during the three months ended September 30, 2023.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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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:          November 3, 2023

By:

/s/ Robert E. Cauley

  
   

Robert E. Cauley

Chairman and Chief Executive Officer

  

 

 

 

Date:          November 3, 2023

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)

  

 

- 44 -

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: November 3, 2023  
   
/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: November 3, 2023  
   
/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 September 30, 2023 (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

 

 

 

November 3, 2023

/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 September 30, 2023 (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

 

 

 

November 3, 2023

/s/ G. Hunter Haas, IV

 

 

G. Hunter Haas, IV

President and Chief Financial Officer

 

 

 
v3.23.3
Document And Entity Information - shares
 9 Months Ended
Sep. 30, 2023
Nov. 03, 2023
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 Q3  
Document Fiscal Year Focus 2023  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2023  
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]    
Title of 12(b) Security Class C Common Stock, $0.001 par value  
Entity Common Stock, Shares Outstanding   31,938
Common Class B [Member]    
Document Information [Line Items]    
Title of 12(b) Security Class B Common Stock, $0.001 par value  
Entity Common Stock, Shares Outstanding   31,938
Common Class A [Member]    
Document Information [Line Items]    
Title of 12(b) Security Class A Common Stock, $0.001 par value  
Entity Common Stock, Shares Outstanding   10,005,457
v3.23.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
ASSETS:    
Total mortgage-backed securities $ 84,861,161 $ 45,893,436
Cash and cash equivalents 3,793,312 6,010,799
Restricted cash 1,412,250 763,000
Orchid Island Capital, Inc. common stock, at fair value 4,842,794 5,975,248
Accrued interest receivable 420,919 204,018
Property and equipment, net 1,939,946 1,997,313
Deferred tax assets, net 23,498,839 23,178,243
Other assets 1,264,819 1,164,181
Total Assets 123,285,560 86,316,951
LIABILITIES:    
Repurchase agreements 81,416,999 43,817,999
Long-term debt 27,400,415 27,416,239
Accrued interest payable 237,095 194,629
Other liabilities 1,247,833 2,764,005
Total Liabilities 110,302,342 74,192,872
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 September 30, 2023 and December 31, 2022 0 0
Additional paid-in capital 329,815,150 329,828,268
Accumulated deficit (316,842,001) (317,714,273)
Total Stockholders’ Equity 12,983,218 12,124,079
Total Liabilities and Stockholders' Equity 123,285,560 86,316,951
Common Class A [Member]    
STOCKHOLDERS' EQUITY:    
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 and 10,019,888 shares issued and outstanding as of September 30, 2023 and December 31, 2022 10,005 10,020
Common Class B [Member]    
STOCKHOLDERS' EQUITY:    
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 and 10,019,888 shares issued and outstanding as of September 30, 2023 and December 31, 2022 32 32
Common Class C [Member]    
STOCKHOLDERS' EQUITY:    
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 10,005,457 and 10,019,888 shares issued and outstanding as of September 30, 2023 and December 31, 2022 32 32
Related Party [Member]    
ASSETS:    
Due from affiliates 1,251,520 1,130,713
Asset Pledged as Collateral [Member]    
ASSETS:    
Total mortgage-backed securities 84,693,749 45,716,793
Restricted cash 1,412,000 763,000
Accrued interest receivable 417,000 200,000
Total Assets 86,523,000 46,680,000
Asset Not Pledged as Collateral [Member]    
ASSETS:    
Total mortgage-backed securities $ 167,412 $ 176,643
v3.23.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Sep. 30, 2023
Dec. 31, 2022
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 10,019,888
Common stock, outstanding (in shares) 10,005,457 10,019,888
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
v3.23.3
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Revenues:        
Advisory services $ 3,620,002 $ 3,311,962 $ 10,518,862 $ 9,719,703
Interest income 838,505 444,808 1,962,301 1,328,264
Dividend income from Orchid Island Capital, Inc. common stock 273,154 282,893 819,462 1,035,547
Total revenues 4,731,661 4,039,663 13,300,625 12,083,514
Interest expense:        
Repurchase agreements (831,068) (209,928) (1,903,101) (313,843)
Long-term debt (610,303) (378,752) (1,721,760) (938,557)
Net revenues 3,290,290 3,450,983 9,675,764 10,831,114
Other income (expense):        
Realized losses on mortgage-backed securities     (0) (858,001)
Gains on derivative instruments 1,169,766 844,188 1,411,438 794,500
Gains on retained interests in securitizations 0 65,928 0 65,928
Other income 47 81 167 268
Other expense, net (2,360,590) (4,802,482) (2,466,795) (14,025,878)
Expenses:        
Compensation and related benefits 1,258,297 1,230,113 3,900,039 3,835,763
Direct advisory services costs 316,637 358,928 1,137,935 915,134
Directors' fees and liability insurance 214,165 194,519 627,431 587,566
Audit, legal and other professional fees 119,231 103,090 427,210 370,323
Administrative and other expenses 197,094 190,657 564,678 506,872
Total expenses 2,105,424 2,077,307 6,657,293 6,215,658
Net income (loss) before income tax benefit [1] (1,175,724) (3,428,806) 551,676 (9,410,422)
Income tax benefit (757,016) (255,618) (320,596) (1,571,076)
Net income (loss) $ (418,708) $ (3,173,188) $ 872,272 $ (7,839,346)
Common Class A [Member]        
Basic and Diluted Net Income (Loss) Per Share of:        
Basic and Diluted (in dollars per share) $ (0.04) $ (0.31) $ 0.09 $ (0.75)
Weighted Average Shares Outstanding:        
Basic and Diluted (in shares) 10,018,163 10,288,785 10,019,307 10,467,091
Common Class B [Member]        
Basic and Diluted Net Income (Loss) Per Share of:        
Basic and Diluted (in dollars per share) $ (0.04) $ (0.31) $ 0.09 $ (0.75)
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 $ 300,000 $ 300,000 $ 800,000 $ 1,000,000
Other income (expense):        
Unrealized gains (losses) on investments (1,047,091) (3,140,383) (1,132,454) (7,422,723)
Collateralized Mortgage-Backed Securities [Member]        
Other income (expense):        
Unrealized gains (losses) on investments (2,483,312) (2,572,296) (2,745,946) (6,605,850)
Realized losses on mortgage-backed securities $ 0 $ 0 $ 0 $ (858,001)
[1] Totals in the table above may not foot due to rounding differences.
v3.23.3
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, 2021 10,766,070      
Balances at Dec. 31, 2021 $ 10,766 $ 330,880,252 $ (297,891,168) $ 32,999,850
Net income (loss) $ 0 0 (3,479,584) (3,479,584)
Class A common shares repurchased and retired (in shares) (188,280)      
Class A common shares repurchased and retired $ (188) (377,110) 0 (377,298)
Balances (in shares) at Mar. 31, 2022 10,577,790      
Balances at Mar. 31, 2022 $ 10,578 330,503,142 (301,370,752) 29,142,968
Balances (in shares) at Dec. 31, 2021 10,766,070      
Balances at Dec. 31, 2021 $ 10,766 330,880,252 (297,891,168) 32,999,850
Net income (loss)       (7,839,346)
Balances (in shares) at Sep. 30, 2022 10,310,685      
Balances at Sep. 30, 2022 $ 10,311 330,068,058 (305,730,514) 24,347,855
Balances (in shares) at Mar. 31, 2022 10,577,790      
Balances at Mar. 31, 2022 $ 10,578 330,503,142 (301,370,752) 29,142,968
Net income (loss) $ 0 0 (1,186,574) (1,186,574)
Class A common shares repurchased and retired (in shares) (41,135)      
Class A common shares repurchased and retired $ (41) (72,958) 0 (72,999)
Balances (in shares) at Jun. 30, 2022 10,536,655      
Balances at Jun. 30, 2022 $ 10,537 330,430,184 (302,557,326) 27,883,395
Net income (loss) $ 0 0 (3,173,188) (3,173,188)
Class A common shares repurchased and retired (in shares) (225,970)      
Class A common shares repurchased and retired $ (226) (362,126) 0 (362,352)
Balances (in shares) at Sep. 30, 2022 10,310,685      
Balances at Sep. 30, 2022 $ 10,311 330,068,058 (305,730,514) 24,347,855
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 income (loss) $ 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 income (loss)       872,272
Balances (in shares) at Sep. 30, 2023 10,069,333      
Balances at Sep. 30, 2023 $ 10,069 329,815,150 (316,842,001) 12,983,218
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 income (loss) $ 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
Net income (loss) $ 0 0 (418,708) (418,708)
Class A common shares repurchased and retired (in shares) (14,431)      
Class A common shares repurchased and retired $ (15) (13,118) 0 (13,133)
Balances (in shares) at Sep. 30, 2023 10,069,333      
Balances at Sep. 30, 2023 $ 10,069 $ 329,815,150 $ (316,842,001) $ 12,983,218
v3.23.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ 872,272 $ (7,839,346)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation 57,367 53,930
Deferred income tax benefit (320,596) (1,571,076)
Realized losses on mortgage-backed securities 0 858,001
Gains on retained interests in securitizations 0 (65,928)
Changes in operating assets and liabilities:    
Accrued interest receivable (216,901) 29,838
Due from affiliates (120,807) (13,034)
Other assets (100,638) 391,964
Accrued interest payable 42,466 79,128
Other liabilities (1,516,172) (1,241,306)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,575,391 4,710,744
CASH FLOWS FROM INVESTING ACTIVITIES:    
Payments received on retained interests in securitizations 0 65,928
Purchases of property and equipment 0 (46,176)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (41,713,671) 9,089,518
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from repurchase agreements 380,920,000 268,710,690
Principal repayments on repurchase agreements (343,321,000) (284,094,690)
Principal repayments on long-term debt (15,824) (16,926)
Class A common shares repurchased and retired (13,133) (812,649)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 37,570,043 (16,213,575)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (1,568,237) (2,413,313)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period 6,773,799 9,812,410
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period 5,205,562 7,399,097
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Interest expense 3,582,395 1,173,272
Orchid Island Capital [Member]    
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Unrealized losses (gains) on investments 1,132,454 7,422,723
Collateralized Mortgage-Backed Securities [Member]    
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Unrealized losses (gains) on investments 2,745,946 6,605,850
Realized losses on mortgage-backed securities 0 858,001
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases (45,006,724) (21,009,391)
Sales 0 23,096,853
Principal repayments $ 3,293,053 $ 6,982,304
v3.23.3
Note 1 - Organization and Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
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”) formed in September 2003, 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 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 Island Capital, Inc. ("Orchid") and receives fees for providing these services. Effective April 1, 2022, Bimini Advisors started providing certain repurchase agreement trading, clearing and administrative services to Orchid that were previously provided by a third party. Bimini Advisors also manages the MBS portfolio of Royal Palm Capital, LLC.

 

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

 

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 nine and three-month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending  December 31, 2023.

 

The consolidated balance sheet at December 31, 2022 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, 2022.

 

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 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 September 30, 2023 and December 31, 2022.

 

  

September 30, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $3,793,312  $6,010,799 

Restricted cash

  1,412,250   763,000 

Total cash, cash equivalents and restricted cash

 $5,205,562  $6,773,799 

 

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

 

Orchid is externally managed and advised by Bimini Advisors 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 in accordance with FASB Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. 

 

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 lost 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 nine and three months ended September 30, 2023 and 2022, the Company only held U.S. Treasury Note ("T-Note") futures contracts. The Company recorded gains of approximately $1.4 million and $1.2 million on these instruments during nine and three months ended September 30, 2023, respectively, and gains of $0.8 million during both the nine and three months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, the Company had open short positions of T-Note futures with notional balances of $36.4 million and $14.4 million, 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.

 

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 tax audits 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. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm and its includable subsidiaries, file as separate tax paying entities.

 

The Company assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. 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 records income tax-related interest and penalties, if applicable, within the income tax provision.

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR,”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform (Topic 848)," deferring the sunset date provided in ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company adopted this ASU during the second quarter of 2023 as the Secured Overnight Financing Rate ("SOFR") replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.

 

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give market participants the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. In addition, ASU 2021-01 adds implementation guidance to permit a company to apply certain optional expedients to modifications of interest rate indexes used for margining, discounting or contract price alignment of certain derivatives as a result of reference rate reform initiatives and extends optional expedients to account for a derivative contract modified as a continuation of the existing contract and to continue hedge accounting when certain critical terms of a hedging relationship change to modifications made as part of the discounting transition. The guidance in ASU 2021-01 is effective immediately and available generally through December 31, 2024, as reference rate reform activities occur. The Company adopted this ASU during the second quarter of 2023 as SOFR replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.
v3.23.3
Note 2 - Advisory Services
 9 Months Ended
Sep. 30, 2023
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.

 

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 a third party. In consideration for such services, Orchid will pay 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, 2024 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 nine and three months ended September 30, 2023 and 2022.

 

(in thousands)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Management fee

   $ 8,216     $ 7,881     $ 2,870     $ 2,616  

Allocated overhead

     1,772       1,482       557       522  

Repurchase, Clearing and Administrative Fee

     531       357       193       174  

Total

   $ 10,519     $ 9,720     $ 3,620     $ 3,312  

 

At September 30, 2023 and December 31, 2022, the net amount due from Orchid was approximately $1.3 million and $1.1 million, respectively.
v3.23.3
Note 3 - Mortgage-backed Securities
 9 Months Ended
Sep. 30, 2023
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 September 30, 2023 and December 31, 2022:

 

(in thousands)

                                                
   

September 30, 2023

                          
   

Par Value

    

Cost (1)

    

Fair Value

    

Par Value

    

Cost (1)

    

Fair Value

  

Fixed-rate MBS

   $ 86,224     $ 88,417     $ 82,303     $ 44,963     $ 46,603     $ 42,974  

Structured MBS (2)

     n/a       1,823       2,558       n/a       2,053       2,919  

Total

   $ 86,224     $ 90,240     $ 84,861     $ 44,963     $ 48,656     $ 45,893  

 

(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 $19.4 million and $21.8 million as of September 30, 2023 and December 31, 2022, respectively.

 

The following table is a summary of the Company’s net loss from the sale of RMBS for the nine months ended September 30, 2023 and 2022.

 

(in thousands)

                
   

2023

    

2022

  

Proceeds from sales of MBS

   $ -     $ 23,097  

Carrying value of MBS sold

     -       (23,955 )

Net loss on sales of MBS

   $ -     $ (858 )
                 

Gross gain on sales of MBS

   $ -     $ -  

Gross loss on sales of MBS

     -       (858 )

Net loss on sales of MBS

   $ -     $ (858 )
v3.23.3
Note 4 - Repurchase Agreements
 9 Months Ended
Sep. 30, 2023
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. As of September 30, 2023, the Company had met all margin call requirements.

 

As of September 30, 2023 and December 31, 2022, the Company’s repurchase agreements had remaining maturities as summarized below:

 

($ in thousands)

                                        
   

OVERNIGHT

    

BETWEEN 2

    

BETWEEN 31

    

GREATER

          
   

(1 DAY OR

    

AND

    

AND

    

THAN

          
   

LESS)

    

30 DAYS

    

90 DAYS

    

90 DAYS

    

TOTAL

  

September 30, 2023

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 50,480     $ 34,631     $ -     $ 85,111  

Repurchase agreement liabilities associated with these securities

   $ -     $ 47,888     $ 33,529     $ -     $ 81,417  

Net weighted average borrowing rate

     -       5.47 %     5.53 %     -       5.50 %

December 31, 2022

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 42,553     $ 3,364     $ -     $ 45,917  

Repurchase agreement liabilities associated with these securities

   $ -     $ 40,492     $ 3,326     $ -     $ 43,818  

Net weighted average borrowing rate

     -       4.50 %     4.29 %     -       4.48 %

 

In addition, cash pledged to counterparties for repurchase agreements was approximately $0.7 million and $0.5 million as of  September 30, 2023 and  December 31, 2022, respectively.

 

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable, and cash posted by the Company as collateral, if any. At  September 30, 2023 and December 31, 2022, 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 cash pledged (if any), including accrued interest on such securities) with all counterparties of approximately $4.3 million and $2.5 million, respectively. Summary information regarding amounts at risk with individual counterparties greater than 10% of equity at  September 30, 2023 and December 31, 2022 is presented in the table below. 

 

$ in thousands)

                        
           

% of

    

Weighted

  
           

Stockholders'

    

Average

  
   

Amount

    

Equity

    

Maturity

  

Repurchase Agreement Counterparty

  

at Risk

    

at Risk

    

(in Days)

  

September 30, 2023

                        

Citigroup Global Markets, Inc.

   $ 1,792       13.8 %     29  

December 31, 2022

                        

Mirae Asset Securities (USA), Inc.

   $ 1,322       10.9 %     14  
v3.23.3
Note 5 - Pledged Assets
 9 Months Ended
Sep. 30, 2023
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 September 30, 2023 and December 31, 2022.

 

($ in thousands)

                                                
   

September 30, 2023

    

December 31, 2022

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 82,303     $ -     $ 82,303     $ 42,975     $ -     $ 42,975  

Structured MBS - at fair value

     2,391       -       2,391       2,742       -       2,742  

Accrued interest on pledged securities

     417       -       417       200       -       200  

Restricted cash

     693       719       1,412       454       309       763  

Total

   $ 85,804     $ 719     $ 86,523     $ 46,371     $ 309     $ 46,680  

 

Assets Pledged from Counterparties

 

The table below summarizes cash pledged to Bimini from counterparties under repurchase agreements as of September 30, 2023 and December 31, 2022. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements in the consolidated balance sheets.

 

($ in thousands)

                

Assets Pledged to Bimini

  

September 30, 2023

    

December 31, 2022

  

Cash

   $ -     $ 148  

Total

   $ -     $ 148  
v3.23.3
Note 6 - Offsetting Assets And Liabilities
 9 Months Ended
Sep. 30, 2023
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 September 30, 2023 and December 31, 2022.

 

(in thousands)

                                                

Offsetting of Liabilities

  
                           

Gross Amount Not Offset in the

          
                   

Net Amount

    

Consolidated Balance Sheet

          
           

Gross Amount

    

of Liabilities

    

Financial

                  
   

Gross Amount

    

Offset in the

    

Presented in the

    

Instruments

    

Cash

          
   

of Recognized

    

Consolidated

    

Consolidated

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Balance Sheet

    

Balance Sheet

    

Collateral

    

Collateral

    

Amount

  

September 30, 2023

                                                

Repurchase Agreements

   $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  
    $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  

December 31, 2022

                                                

Repurchase Agreements

   $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  
    $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  

 

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.
v3.23.3
Note 7 - Long-term Debt
 9 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7. LONG-TERM DEBT

 

Long-term debt at September 30, 2023 and December 31, 2022 is summarized as follows:

 

(in thousands)

        
  

September 30, 2023

  

December 31, 2022

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  596   612 

Total

 $27,400  $27,416 

 

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 September 30, 2023 and December 31, 2022, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes have a rate of interest that floats at a spread of 3.50% over the prevailing three-month LIBOR rate. As of September 30, 2023, the interest rate was 9.17%. 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 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 three months of 2023

 $7 

For the years ended:

    

2024

  25 

2025

  26 

2026

  28 

2027

  29 

After 2027

  27,285 

Total

 $27,400 
v3.23.3
Note 8 - Common Stock
 9 Months Ended
Sep. 30, 2023
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 nine months ended September 30, 2023 and 2022.

 

Stock Repurchase Plans

 

On March 26, 2018, the Board of Directors of the Company (the “Board”) approved a Stock Repurchase Plan (the “2018 Repurchase Plan”). Pursuant to the 2018 Repurchase Plan, the Company could purchase up to 500,000 shares of its Class A Common Stock from time to time, subject to certain limitations imposed by Rule 10b-18 of the Securities Exchange Act of 1934. The 2018 Repurchase Plan was terminated on September 16, 2021.

 

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. The 2021 Repurchase Plan expired on September 16, 2023 and did not obligate the Company to purchase any shares. 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. 

 

The Inflation Reduction Act of 2022 signed into law during in August 2022 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 provisions, including a $1 million threshold before the tax becomes applicable. The excise tax is effective beginning in 2023. Since the amount of stock repurchases during the nine months ended September 30, 2023 were under the $1 million threshold, no accrual for this excise tax has been recorded during 2023.
v3.23.3
Note 9 - Commitments and Contingencies
 9 Months Ended
Sep. 30, 2023
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.

 

In April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. in the total amount of $33.3 million related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to the date Royal Palm’s mortgage origination operations ceased in 2007. The Company believes the demands are without merit and intends to defend against the demands vigorously if pursued by Citigroup. No provision or accrual has been recorded related to the Citigroup demands.

 

Management is not aware of any other significant reported or unreported contingencies at September 30, 2023.

 
v3.23.3
Note 10 - Income Taxes
 9 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10. INCOME TAXES

 

The total income tax benefit recorded for the nine months ended September 30, 2023 and 2022 was $(0.3) million and $(1.6) million, respectively, on consolidated pre-tax book income (loss) of $0.6 million and $(9.4) million, respectively. The total income tax benefit recorded for the three months ended September 30, 2023 and 2022 was $(0.8) million and $(0.3) million, respectively, on consolidated pre-tax book loss of $(1.2) million and $(3.4) million, respectively. The Company is unable to reliably estimate an annual effective tax rate; therefore, it uses the discrete-period computation method for determining its income tax (benefit) provision. The Company's income tax (benefit) provision could be affected by numerous factors, including the projected utilization of net operating loss carryovers and changes in its deferred tax assets and liabilities and their valuations. In that regard, the Company's reported income tax benefit for both the nine and three months ended September 30, 2023 included an adjustment to the deferred tax asset valuation allowance of approximately $0.5 million.

 

The Company’s tax provisions are based on a projected effective rate based on annualized amounts applied to actual income to date and includes 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. 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 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.
v3.23.3
Note 11 - Earnings Per Share
 9 Months Ended
Sep. 30, 2023
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. The Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, 2023 and 2022.

 

Shares of Class C common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at September 30, 2023 and 2022.

 

The table below reconciles the numerator and denominator of EPS for the nine and three months ended September 30, 2023 and 2022.

 

(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class A common share:

                                

Loss attributable to Class A common shares:

                                

Basic and diluted

   $ 869     $ (7,815 )   $ (418 )   $ (3,163 )

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,247       10,005       10,247  

Effect of weighting

     14       220       13       42  

Weighted average shares-basic and diluted

     10,019       10,467       10,018       10,289  

Loss per Class A common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )

 

(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class B common share:

                                

Loss attributable to Class B common shares:

                                

Basic and diluted

   $ 3     $ (24 )   $ (1 )   $ (10 )

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 per Class B common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )
v3.23.3
Note 12 - Fair Value
 9 Months Ended
Sep. 30, 2023
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 stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications 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.

 

MBS, Orchid common stock, retained interests and TBA securities were all recorded at fair value on a recurring basis as of September 30, 2023 and December 31, 2022. 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 and TBA securities 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 September 30, 2023 and December 31, 2022, 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, repurchase agreements, accrued interest payable and other liabilities approximate their carrying value as Level 1 assets under the fair value hierarchy as of September 30, 2023 and December 31, 2022, due to the short-term nature of these financial instruments. The fair value of the Company’s junior subordinated debt approximates its carrying value. The carrying value is a reasonable estimate of fair value since the instrument carries a floating rate that resets frequently. Further information regarding this instrument is presented in Note 7.

 

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

 

(in thousands)

                
      

Quoted Prices

         
      

in Active

  

Significant

     
      

Markets for

  

Other

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
  

Fair Value

  

Assets

  

Inputs

  

Inputs

 
  

Measurements

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

September 30, 2023

                

Mortgage-backed securities

 $84,861  $-  $84,861  $- 

Orchid Island Capital, Inc. common stock

  4,843   4,843   -   - 

December 31, 2022

                

Mortgage-backed securities

 $45,893  $-  $45,893  $- 

Orchid Island Capital, Inc. common stock

  5,975   5,975   -   - 

 

During the nine months ended September 30, 2023 and 2022, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.
v3.23.3
Note 13 - Segment Information
 9 Months Ended
Sep. 30, 2023
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 nine and three months ended September 30, 2023, were approximately $10.5 million and $3.6 million, respectively, accounting for approximately 79% and 77% of consolidated revenues, respectively. Total revenues received under this management agreement for the nine and three months ended September 30, 2022, were approximately $9.7 million and $3.3 million, respectively, accounting for approximately 80% and 82% 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 nine months ended  September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 10,519     $ -     $ -     $ -     $ 10,519  

Advisory services, other operating segments(1)

     89       -       -       (89 )     -  

Interest and dividend income

     -       2,780       2       -       2,782  

Interest expense(2)

     -       (1,903 )     (1,722 )     -       (3,625 )

Net revenues

     10,608       877       (1,720 )     (89 )     9,676  

Other expenses

     -       (2,467 )     -       -       (2,467 )

Operating expenses(3)

     (5,174 )     (1,483 )     -       -       (6,657 )

Intercompany expenses(1)

     -       (89 )     -       89       -  

Income (loss) before income taxes(4)

   $ 5,434     $ (3,162 )   $ (1,720 )   $ -     $ 552  

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 9,720     $ -     $ -     $ -     $ 9,720  

Advisory services, other operating segments(1)

     85       -       -       (85 )     -  

Interest and dividend income

     -       2,364       -       -       2,364  

Interest expense(2)

     -       (314 )     (938 )     -       (1,252 )

Net revenues

     9,805       2,050       (938 )     (85 )     10,832  

Other (expenses) revenue

     -       (14,092 )     66       -       (14,026 )

Operating expenses(3)

     (4,914 )     (1,302 )     -       -       (6,216 )

Intercompany expenses(1)

     -       (85 )     -       85       -  

Income (loss) before income taxes(4)

   $ 4,891     $ (13,429 )   $ (872 )   $ -     $ (9,410 )

 

Segment information for the three months ended  September 30, 2023 and 2022 is as follows:

 

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 3,620     $ -     $ -     $ -     $ 3,620  

Advisory services, other operating segments(1)

     33       -       -       (33 )     -  

Interest and dividend income

     -       1,110       1       -       1,111  

Interest expense(2)

     -       (831 )     (610 )     -       (1,441 )

Net revenues

     3,653       279       (609 )     (33 )     3,290  

Other expenses

     -       (2,361 )     -       -       (2,361 )

Operating expenses(3)

     (1,582 )     (523 )     -       -       (2,105 )

Intercompany expenses(1)

     -       (33 )     -       33       -  

Income (loss) before income taxes(4)

   $ 2,071     $ (2,638 )   $ (609 )   $ -     $ (1,176 )

 

   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 3,312     $ -     $ -     $ -     $ 3,312  

Advisory services, other operating segments(1)

     29       -       -       (29 )     -  

Interest and dividend income

     -       728       -       -       728  

Interest expense(2)

     -       (210 )     (379 )     -       (589 )

Net revenues

     3,341       518       (379 )     (29 )     3,451  

Other (expenses) revenue

     -       (4,868 )     66       -       (4,802 )

Operating expenses(3)

     (1,677 )     (401 )     -       -       (2,078 )

Intercompany expenses(1)

     -       (29 )     -       29       -  

Income (loss) before income taxes(4)

   $ 1,664     $ (4,780 )   $ (313 )   $ -     $ (3,429 )

 

(1)

Includes fees paid by Royal Palm to Bimini Advisors for advisory services.

(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 September 30, 2023 and December 31, 2022 were as follows:

 

(in thousands)

                                
   

Asset

    

Investment

                  
   

Management

    

Portfolio

    

Corporate

    

Total

  

September 30, 2023

   $ 2,144     $ 113,934       7,208     $ 123,286  

December 31, 2022

     1,970       77,483       6,864       86,317  
v3.23.3
Note 14 - Related Party Transactions
 9 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

NOTE 14. RELATED PARTY TRANSACTIONS

 

Relationships with Orchid

 

At both September 30, 2023 and December 31, 2022, the Company owned 569,071 shares of Orchid common stock, representing approximately 1.1% and 1.6%, respectively, of Orchid’s outstanding common stock on such dates. The Company received dividends on this common stock investment of approximately $0.8 million and $1.0 million during the nine months ended September 30, 2023 and 2022, respectively, and $0.3 million and $0.3 million during the three months ended September 30, 2023 and 2022, 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 and Treasurer 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.

 
v3.23.3
Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2023
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 consolidated financial statements include the accounts of Bimini Capital and its subsidiaries, as listed above. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

 
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 nine and three-month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending  December 31, 2023.

 

The consolidated balance sheet at December 31, 2022 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, 2022.

 
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 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 September 30, 2023 and December 31, 2022.

 

  

September 30, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $3,793,312  $6,010,799 

Restricted cash

  1,412,250   763,000 

Total cash, cash equivalents and restricted cash

 $5,205,562  $6,773,799 

 

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

 

Orchid is externally managed and advised by Bimini Advisors 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 in accordance with FASB Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. 

 
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 lost 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 nine and three months ended September 30, 2023 and 2022, the Company only held U.S. Treasury Note ("T-Note") futures contracts. The Company recorded gains of approximately $1.4 million and $1.2 million on these instruments during nine and three months ended September 30, 2023, respectively, and gains of $0.8 million during both the nine and three months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, the Company had open short positions of T-Note futures with notional balances of $36.4 million and $14.4 million, 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.

 

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 tax audits 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. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm and its includable subsidiaries, file as separate tax paying entities.

 

The Company assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. 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 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 March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from the London Interbank Offered Rate (“LIBOR,”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform (Topic 848)," deferring the sunset date provided in ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company adopted this ASU during the second quarter of 2023 as the Secured Overnight Financing Rate ("SOFR") replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.

 

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give market participants the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. In addition, ASU 2021-01 adds implementation guidance to permit a company to apply certain optional expedients to modifications of interest rate indexes used for margining, discounting or contract price alignment of certain derivatives as a result of reference rate reform initiatives and extends optional expedients to account for a derivative contract modified as a continuation of the existing contract and to continue hedge accounting when certain critical terms of a hedging relationship change to modifications made as part of the discounting transition. The guidance in ASU 2021-01 is effective immediately and available generally through December 31, 2024, as reference rate reform activities occur. The Company adopted this ASU during the second quarter of 2023 as SOFR replaced LIBOR for the Company's junior subordinated debt positions. The adoption of this ASU did not have a material impact on the Company's financial statements.
v3.23.3
Note 1 - Organization and Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Schedule of Cash and Cash Equivalents [Table Text Block]
  

September 30, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $3,793,312  $6,010,799 

Restricted cash

  1,412,250   763,000 

Total cash, cash equivalents and restricted cash

 $5,205,562  $6,773,799 
v3.23.3
Note 2 - Advisory Services (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Schedule of Advisory Fee Income [Table Text Block]

(in thousands)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Management fee

   $ 8,216     $ 7,881     $ 2,870     $ 2,616  

Allocated overhead

     1,772       1,482       557       522  

Repurchase, Clearing and Administrative Fee

     531       357       193       174  

Total

   $ 10,519     $ 9,720     $ 3,620     $ 3,312  
v3.23.3
Note 3 - Mortgage-backed Securities (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Marketable Securities [Table Text Block]

(in thousands)

                                                
   

September 30, 2023

                          
   

Par Value

    

Cost (1)

    

Fair Value

    

Par Value

    

Cost (1)

    

Fair Value

  

Fixed-rate MBS

   $ 86,224     $ 88,417     $ 82,303     $ 44,963     $ 46,603     $ 42,974  

Structured MBS (2)

     n/a       1,823       2,558       n/a       2,053       2,919  

Total

   $ 86,224     $ 90,240     $ 84,861     $ 44,963     $ 48,656     $ 45,893  
Gain (Loss) on Securities [Table Text Block]

(in thousands)

                
   

2023

    

2022

  

Proceeds from sales of MBS

   $ -     $ 23,097  

Carrying value of MBS sold

     -       (23,955 )

Net loss on sales of MBS

   $ -     $ (858 )
                 

Gross gain on sales of MBS

   $ -     $ -  

Gross loss on sales of MBS

     -       (858 )

Net loss on sales of MBS

   $ -     $ (858 )
v3.23.3
Note 4 - Repurchase Agreements (Tables)
 9 Months Ended
Sep. 30, 2023
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

  

September 30, 2023

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 50,480     $ 34,631     $ -     $ 85,111  

Repurchase agreement liabilities associated with these securities

   $ -     $ 47,888     $ 33,529     $ -     $ 81,417  

Net weighted average borrowing rate

     -       5.47 %     5.53 %     -       5.50 %

December 31, 2022

                                        

Fair value of securities pledged, including accrued interest receivable

   $ -     $ 42,553     $ 3,364     $ -     $ 45,917  

Repurchase agreement liabilities associated with these securities

   $ -     $ 40,492     $ 3,326     $ -     $ 43,818  

Net weighted average borrowing rate

     -       4.50 %     4.29 %     -       4.48 %
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)

  

September 30, 2023

                        

Citigroup Global Markets, Inc.

   $ 1,792       13.8 %     29  

December 31, 2022

                        

Mirae Asset Securities (USA), Inc.

   $ 1,322       10.9 %     14  
v3.23.3
Note 5 - Pledged Assets (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Schedule of Financial Instruments Owned and Pledged as Collateral [Table Text Block]

($ in thousands)

                                                
   

September 30, 2023

    

December 31, 2022

  
   

Repurchase

    

Derivative

            

Repurchase

    

Derivative

          
   

Agreements

    

Agreements

    

Total

    

Agreements

    

Agreements

    

Total

  

PT MBS - at fair value

   $ 82,303     $ -     $ 82,303     $ 42,975     $ -     $ 42,975  

Structured MBS - at fair value

     2,391       -       2,391       2,742       -       2,742  

Accrued interest on pledged securities

     417       -       417       200       -       200  

Restricted cash

     693       719       1,412       454       309       763  

Total

   $ 85,804     $ 719     $ 86,523     $ 46,371     $ 309     $ 46,680  
Schedule of Financial Instruments Pledged as Collateral From Counterparties [Table Text Block]

($ in thousands)

                

Assets Pledged to Bimini

  

September 30, 2023

    

December 31, 2022

  

Cash

   $ -     $ 148  

Total

   $ -     $ 148  
v3.23.3
Note 6 - Offsetting Assets And Liabilities (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Offsetting Liabilities [Table Text Block]

(in thousands)

                                                

Offsetting of Liabilities

  
                           

Gross Amount Not Offset in the

          
                   

Net Amount

    

Consolidated Balance Sheet

          
           

Gross Amount

    

of Liabilities

    

Financial

                  
   

Gross Amount

    

Offset in the

    

Presented in the

    

Instruments

    

Cash

          
   

of Recognized

    

Consolidated

    

Consolidated

    

Posted as

    

Posted as

    

Net

  
   

Liabilities

    

Balance Sheet

    

Balance Sheet

    

Collateral

    

Collateral

    

Amount

  

September 30, 2023

                                                

Repurchase Agreements

   $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  
    $ 81,417     $ -     $ 81,417     $ (80,724 )   $ (693 )   $ -  

December 31, 2022

                                                

Repurchase Agreements

   $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  
    $ 43,818     $ -     $ 43,818     $ (43,364 )   $ (454 )   $ -  
v3.23.3
Note 7 - Long-term Debt (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Schedule of Long-Term Debt Instruments [Table Text Block]

(in thousands)

        
  

September 30, 2023

  

December 31, 2022

 

Junior subordinated debt

 $26,804  $26,804 

Secured note payable

  596   612 

Total

 $27,400  $27,416 
Schedule of Maturities of Long-Term Debt [Table Text Block]

(in thousands)

    

Last three months of 2023

 $7 

For the years ended:

    

2024

  25 

2025

  26 

2026

  28 

2027

  29 

After 2027

  27,285 

Total

 $27,400 
v3.23.3
Note 11 - Earnings Per Share (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class A common share:

                                

Loss attributable to Class A common shares:

                                

Basic and diluted

   $ 869     $ (7,815 )   $ (418 )   $ (3,163 )

Weighted average common shares:

                                

Class A common shares outstanding at the balance sheet date

     10,005       10,247       10,005       10,247  

Effect of weighting

     14       220       13       42  

Weighted average shares-basic and diluted

     10,019       10,467       10,018       10,289  

Loss per Class A common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )

(in thousands, except per-share information)

                                
   

Nine Months Ended September 30,

    

Three Months Ended September 30,

  
   

2023

    

2022

    

2023

    

2022

  

Basic and diluted EPS per Class B common share:

                                

Loss attributable to Class B common shares:

                                

Basic and diluted

   $ 3     $ (24 )   $ (1 )   $ (10 )

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 per Class B common share:

                                

Basic and diluted

   $ 0.09     $ (0.75 )   $ (0.04 )   $ (0.31 )
v3.23.3
Note 12 - Fair Value (Tables)
 9 Months Ended
Sep. 30, 2023
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)

 

September 30, 2023

                

Mortgage-backed securities

 $84,861  $-  $84,861  $- 

Orchid Island Capital, Inc. common stock

  4,843   4,843   -   - 

December 31, 2022

                

Mortgage-backed securities

 $45,893  $-  $45,893  $- 

Orchid Island Capital, Inc. common stock

  5,975   5,975   -   - 
v3.23.3
Note 13 - Segment Information (Tables)
 9 Months Ended
Sep. 30, 2023
Notes Tables  
Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 10,519     $ -     $ -     $ -     $ 10,519  

Advisory services, other operating segments(1)

     89       -       -       (89 )     -  

Interest and dividend income

     -       2,780       2       -       2,782  

Interest expense(2)

     -       (1,903 )     (1,722 )     -       (3,625 )

Net revenues

     10,608       877       (1,720 )     (89 )     9,676  

Other expenses

     -       (2,467 )     -       -       (2,467 )

Operating expenses(3)

     (5,174 )     (1,483 )     -       -       (6,657 )

Intercompany expenses(1)

     -       (89 )     -       89       -  

Income (loss) before income taxes(4)

   $ 5,434     $ (3,162 )   $ (1,720 )   $ -     $ 552  
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 9,720     $ -     $ -     $ -     $ 9,720  

Advisory services, other operating segments(1)

     85       -       -       (85 )     -  

Interest and dividend income

     -       2,364       -       -       2,364  

Interest expense(2)

     -       (314 )     (938 )     -       (1,252 )

Net revenues

     9,805       2,050       (938 )     (85 )     10,832  

Other (expenses) revenue

     -       (14,092 )     66       -       (14,026 )

Operating expenses(3)

     (4,914 )     (1,302 )     -       -       (6,216 )

Intercompany expenses(1)

     -       (85 )     -       85       -  

Income (loss) before income taxes(4)

   $ 4,891     $ (13,429 )   $ (872 )   $ -     $ (9,410 )

(in thousands)

                                        
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2023

                                        

Advisory services, external customers

   $ 3,620     $ -     $ -     $ -     $ 3,620  

Advisory services, other operating segments(1)

     33       -       -       (33 )     -  

Interest and dividend income

     -       1,110       1       -       1,111  

Interest expense(2)

     -       (831 )     (610 )     -       (1,441 )

Net revenues

     3,653       279       (609 )     (33 )     3,290  

Other expenses

     -       (2,361 )     -       -       (2,361 )

Operating expenses(3)

     (1,582 )     (523 )     -       -       (2,105 )

Intercompany expenses(1)

     -       (33 )     -       33       -  

Income (loss) before income taxes(4)

   $ 2,071     $ (2,638 )   $ (609 )   $ -     $ (1,176 )
   

Asset

    

Investment

                          
   

Management

    

Portfolio

    

Corporate

    

Eliminations

    

Total

  

2022

                                        

Advisory services, external customers

   $ 3,312     $ -     $ -     $ -     $ 3,312  

Advisory services, other operating segments(1)

     29       -       -       (29 )     -  

Interest and dividend income

     -       728       -       -       728  

Interest expense(2)

     -       (210 )     (379 )     -       (589 )

Net revenues

     3,341       518       (379 )     (29 )     3,451  

Other (expenses) revenue

     -       (4,868 )     66       -       (4,802 )

Operating expenses(3)

     (1,677 )     (401 )     -       -       (2,078 )

Intercompany expenses(1)

     -       (29 )     -       29       -  

Income (loss) before income taxes(4)

   $ 1,664     $ (4,780 )   $ (313 )   $ -     $ (3,429 )
Reconciliation of Assets from Segment to Consolidated [Table Text Block]

(in thousands)

                                
   

Asset

    

Investment

                  
   

Management

    

Portfolio

    

Corporate

    

Total

  

September 30, 2023

   $ 2,144     $ 113,934       7,208     $ 123,286  

December 31, 2022

     1,970       77,483       6,864       86,317  
v3.23.3
Note 1 - Organization and Significant Accounting Policies (Details Textual)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Dec. 31, 2022
USD ($)
Number of Operating Segments     2    
Number of Reportable Segments     2    
Gain (Loss) on Derivative Instruments Held for Trading Purposes, Net $ 1,169,766 $ 844,188 $ 1,411,438 $ 794,500  
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 $ 1,200,000 $ (800,000) $ 1,400,000 $ 800,000  
Derivative, Notional Amount $ 36,400,000   $ 36,400,000   $ 14,400,000
v3.23.3
Note 1 - Organization and Significant Accounting Policies - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Cash and cash equivalents $ 3,793,312 $ 6,010,799
Restricted cash 1,412,250 763,000
Total cash, cash equivalents and restricted cash $ 5,205,562 $ 6,773,799
v3.23.3
Note 2 - Advisory Services (Details Textual) - Orchid Island Capital [Member]
 9 Months Ended
Sep. 30, 2023
USD ($)
Dec. 31, 2022
USD ($)
Apr. 01, 2022
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 $ 1,300,000 $ 1,100,000  
v3.23.3
Note 2 - Advisory Services - Advisory Service Revenue (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Advisory services $ 3,620,002 $ 3,311,962 $ 10,518,862 $ 9,719,703
Orchid Island Capital [Member]        
Advisory services 3,620,000 3,312,000 10,519,000 9,720,000
Management Service [Member] | Orchid Island Capital [Member]        
Advisory services 2,870,000 2,616,000 8,216,000 7,881,000
Allocated Overhead [Member] | Orchid Island Capital [Member]        
Advisory services 557,000 522,000 1,772,000 1,482,000
Repurchase, Clearing and Administrative Fee [Member] | Orchid Island Capital [Member]        
Advisory services $ 193,000 $ 174,000 $ 531,000 $ 357,000
v3.23.3
Note 3 - Mortgage-backed Securities (Details Textual) - USD ($)
$ in Millions
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Structured Mortgage-backed Securities [Member]    
Notional Amount of Nonderivative Instruments $ 19.4 $ 21.8
v3.23.3
Note 3 - Mortgage-backed Securities - MBS Portfolio (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Fixed Rate Mortgages [Member]    
Par value $ 86,224 $ 44,963
Cost [1] 88,417 46,603
Fair value 82,303 42,974
Structured Mortgage-backed Securities [Member]    
Cost [1],[2] 1,823 2,053
Fair value [2] 2,558 2,919
Collateralized Mortgage-Backed Securities [Member]    
Par value 86,224 44,963
Cost [1] 90,240 48,656
Fair value $ 84,861 $ 45,893
[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 $19.4 million and $21.8 million as of September 30, 2023 and December 31, 2022, respectively.
v3.23.3
Note 3 - Mortgage-backed Securities - Net Gain (Loss) From Sale of MBS (Details) - Collateralized Mortgage-Backed Securities [Member] - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Proceeds from sales of MBS $ 0 $ 23,096,853
Carrying value of MBS sold 0 (23,955,000)
Net loss on sales of MBS 0 (858,000)
Gross gain on sales of MBS 0 0
Gross loss on sales of MBS $ 0 $ (858,000)
v3.23.3
Note 4 - Repurchase Agreements (Details Textual) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Restricted Cash and Cash Equivalents, Current $ 1,412,250 $ 763,000
Repurchase Agreement Counterparty, Amount at Risk 4,300,000 2,500,000
Asset Pledged as Collateral [Member]    
Restricted Cash and Cash Equivalents, Current 1,412,000 763,000
Securities Sold under Agreements to Repurchase [Member] | Asset Pledged as Collateral [Member]    
Restricted Cash and Cash Equivalents, Current $ 693,000 $ 454,000
v3.23.3
Note 4 - Repurchase Agreements - Schedule of Repurchase Agreements (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Fair value of securities pledged, including accrued interest receivable $ 85,111 $ 45,917
Repurchase agreement liabilities associated with these securities $ 81,417 $ 43,818
Net weighted average borrowing rate 5.50% 4.48%
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 $ 50,480 $ 42,553
Repurchase agreement liabilities associated with these securities $ 47,888 $ 40,492
Net weighted average borrowing rate 5.47% 4.50%
Maturity 30 to 90 Days [Member]    
Fair value of securities pledged, including accrued interest receivable $ 34,631 $ 3,364
Repurchase agreement liabilities associated with these securities $ 33,529 $ 3,326
Net weighted average borrowing rate 5.53% 4.29%
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%
v3.23.3
Note 4 - Repurchase Agreements - Risks With Individual Counterparties (Details) - USD ($)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Amount at risk $ 4,300 $ 2,500
Citigroup Global Markets Inc [Member]    
Amount at risk $ 1,792  
Percent of Stockholders' Equity at Risk 13.80%  
Weighted Average Maturity (Year) 29 years  
Mirae Asset Securities (USA) Inc. [Member]    
Amount at risk   $ 1,322
Percent of Stockholders' Equity at Risk   10.90%
Weighted Average Maturity (Year)   14 years
v3.23.3
Note 5 - Pledged Assets - Schedule of Financial Instruments Owned and Pledged as Collateral (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Investments, fair value $ 4,842,794 $ 5,975,248
Accrued interest on pledged securities 420,919 204,018
Restricted cash 1,412,250 763,000
Assets 123,285,560 86,316,951
Asset Pledged as Collateral [Member]    
Accrued interest on pledged securities 417,000 200,000
Restricted cash 1,412,000 763,000
Assets 86,523,000 46,680,000
Asset Pledged as Collateral [Member] | Securities Sold under Agreements to Repurchase [Member]    
Accrued interest on pledged securities 417,000 200,000
Restricted cash 693,000 454,000
Assets 85,804,000 46,371,000
Asset Pledged as Collateral [Member] | Derivative [Member]    
Accrued interest on pledged securities 0 0
Restricted cash 719,000 309,000
Assets 719,000 309,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Pass Through Certificate [Member]    
Investments, fair value 82,303,000 42,975,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Pass Through Certificate [Member] | Securities Sold under Agreements to Repurchase [Member]    
Investments, fair value 82,303,000 42,975,000
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 2,391,000 2,742,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Structured Finance [Member] | Securities Sold under Agreements to Repurchase [Member]    
Investments, fair value 2,391,000 2,742,000
Asset Pledged as Collateral [Member] | Collateralized Mortgage-Backed Securities [Member] | Structured Finance [Member] | Derivative [Member]    
Investments, fair value $ 0 $ 0
v3.23.3
Note 5 - Pledged Assets -Schedule of Financial Instruments Pledged as Collateral From Counterparties (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Assets Pledged to Bimini $ 0 $ 148
Cash [Member]    
Assets Pledged to Bimini $ 0 $ 148
v3.23.3
Note 6 - Offsetting Assets And Liabilities - Offsetting of Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Repurchase Agreements [Member]    
Gross amount of liabilities   $ 43,818
Gross amount offset   0
Net amount of balance sheet liabilities   43,818
Securities posted as collateral   (43,364)
Cash posted as collateral   (454)
Net amount   0
Gross Amount Of Recognized Liabilties [Member]    
Gross amount of liabilities $ 81,417 43,818
Gross Amount Of Recognized Liabilties [Member] | Repurchase Agreements [Member]    
Gross amount of liabilities 81,417  
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 81,417 43,818
Net Amount Of Liabilities Presented In The Balance Sheet [Member] | Repurchase Agreements [Member]    
Net amount of balance sheet liabilities 81,417  
Gross Amount Of Financial Instruments Posted Not Offset in Balance Sheet [Member]    
Securities posted as collateral (80,724) (43,364)
Gross Amount Of Financial Instruments Posted Not Offset in Balance Sheet [Member] | Repurchase Agreements [Member]    
Securities posted as collateral (80,724)  
Gross Amounts Of Cash Posted Not Offset In Balance Sheet [Member]    
Cash posted as collateral (693) (454)
Gross Amounts Of Cash Posted Not Offset In Balance Sheet [Member] | Repurchase Agreements [Member]    
Cash posted as collateral (693)  
Net Amount Of Liabilities [Member]    
Net amount 0 $ 0
Net Amount Of Liabilities [Member] | Repurchase Agreements [Member]    
Net amount $ 0  
v3.23.3
Note 7 - Long-term Debt (Details Textual) - USD ($)
 9 Months Ended
Oct. 31, 2024
Jun. 30, 2023
Oct. 30, 2019
Sep. 30, 2023
Dec. 31, 2022
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       9.17%  
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%  
v3.23.3
Note 7 - Long-term Debt - Schedule of Debt (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Long-term debt $ 27,400,415 $ 27,416,239
Junior Subordinated Debt [Member]    
Long-term debt 26,804,000 26,804,000
Notes Payable to Banks [Member]    
Long-term debt $ 596,000 $ 612,000
v3.23.3
Note 7 - Long-term Debt - Future Scheduled Principal Payments on Long-term Debt (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Last three months of 2023 $ 7,000  
2024 25,000  
2025 26,000  
2026 28,000  
2027 29,000  
After 2027 27,285,000  
Total $ 27,400,415 $ 27,416,239
v3.23.3
Note 8 - Common Stock (Details Textual) - USD ($)
$ / shares in Units, $ in Millions
 9 Months Ended 33 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 16, 2021
Mar. 26, 2018
The 2018 Repurchase Plan [Member]          
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)         500,000
The 2021 Repurchase Plan [Member]          
Stock 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    
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      
v3.23.3
Note 9 - Commitments and Contingencies (Details Textual) - Threatened Litigation [Member] - Breach Of Representations And Warranties [Member] - USD ($)
$ in Thousands
 9 Months Ended
Apr. 22, 2020
Sep. 30, 2023
Loss Contingency Accrual, Provision   $ 0
Citigroup Demand For Payment [Member]    
Loss Contingency, Damages Sought, Value $ 33,300  
v3.23.3
Note 10 - Income Taxes (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Tax Expense (Benefit) $ (757,016) $ (255,618) $ (320,596) $ (1,571,076)
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest [1] (1,175,724) $ (3,428,806) 551,676 $ (9,410,422)
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount $ 500,000   $ 500,000  
[1] Totals in the table above may not foot due to rounding differences.
v3.23.3
Note 11 - Earnings Per Share - Schedule of Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Common Class A [Member]        
Basic and diluted $ (418) $ (3,163) $ 869 $ (7,815)
Common shares outstanding at the balance sheet date (in shares) 10,005,000 10,247,000 10,005,000 10,247,000
Effect of weighting (in shares) 13,000 42,000 14,000 220,000
Weighted average shares-basic and diluted (in shares) 10,018,163 10,288,785 10,019,307 10,467,091
Basic and diluted (in dollars per share) $ (0.04) $ (0.31) $ 0.09 $ (0.75)
Common Class B [Member]        
Basic and diluted $ (1) $ (10) $ 3 $ (24)
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) $ (0.04) $ (0.31) $ 0.09 $ (0.75)
v3.23.3
Note 12 - Fair Value (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Retained Interest, Fair Value Disclosure $ 0 $ 0
v3.23.3
Note 12 - Fair Value - Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Mortgage-backed securities $ 84,861,161 $ 45,893,436
Fair Value, Recurring [Member]    
Mortgage-backed securities 84,861,000 45,893,000
Orchid Island Capital, Inc. common stock 4,843,000 5,975,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Mortgage-backed securities 0 0
Orchid Island Capital, Inc. common stock 4,843,000 5,975,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Mortgage-backed securities 84,861,000 45,893,000
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
v3.23.3
Note 13 - Segment Information (Details Textual)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Number of Reportable Segments     2  
Revenues $ 4,731,661 $ 4,039,663 $ 13,300,625 $ 12,083,514
Orchid Island Capital [Member]        
Revenues $ 10,500,000 $ 3,300,000 $ 3,600,000 $ 9,700,000
Orchid Island Capital [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]        
Concentration Risk, Percentage 79.00% 82.00% 77.00% 80.00%
v3.23.3
Note 13 - Segment Information - Schedule of Segment Information (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Advisory services, external customers $ 3,620,002 $ 3,311,962 $ 10,518,862 $ 9,719,703
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 1,111,000 728,000 2,782,000 2,364,000
Interest expense(2) (1,441,000) (589,000) (3,625,000) (1,252,000)
Net revenues 3,290,000 3,451,000 9,676,000 10,832,000
Other expenses (2,360,590) (4,802,482) (2,466,795) (14,025,878)
Operating expenses(3) [2] (2,105,000) (2,078,000) (6,657,000) (6,216,000)
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [3] (1,175,724) (3,428,806) 551,676 (9,410,422)
Other (expenses) revenue (2,360,590) (4,802,482) (2,466,795) (14,025,878)
Corporate, Non-Segment [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 1,000 0 2,000 0
Interest expense(2) [4] (610,000) (379,000) (1,722,000) (938,000)
Net revenues (609,000) (379,000) (1,720,000) (938,000)
Other expenses 0 66,000 0 66,000
Operating expenses(3) [2] 0 0 0 0
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [3] (609,000) (313,000) (1,720,000) (872,000)
Other (expenses) revenue 0 66,000 0 66,000
Intersegment Eliminations [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] (33,000) (29,000) (89,000) (85,000)
Interest and dividend income 0 0 0 0
Interest expense(2) 0 0 0 0
Net revenues (33,000) (29,000) (89,000) (85,000)
Other expenses 0 0 0 0
Operating expenses(3) [2] 0 0 0 0
Intercompany expenses(1) [1] 33,000 29,000 89,000 85,000
Income (loss) before income taxes(4) [3] 0 0 0 0
Other (expenses) revenue 0 0 0 0
Asset Management [Member] | Operating Segments [Member]        
Advisory services, external customers 3,620,000 3,312,000 10,519,000 9,720,000
Advisory services, other operating segments(1) [1] 33,000 29,000 89,000 85,000
Interest and dividend income 0 0 0 0
Interest expense(2) 0 0 0 0
Net revenues 3,653,000 3,341,000 10,608,000 9,805,000
Other expenses 0 0 0 0
Operating expenses(3) [2] (1,582,000) (1,677,000) (5,174,000) (4,914,000)
Intercompany expenses(1) [1] 0 0 0 0
Income (loss) before income taxes(4) [3] 2,071,000 1,664,000 5,434,000 4,891,000
Other (expenses) revenue 0 0 0 0
Investment Portfolio [Member] | Operating Segments [Member]        
Advisory services, external customers 0 0 0 0
Advisory services, other operating segments(1) [1] 0 0 0 0
Interest and dividend income 1,110,000 728,000 2,780,000 2,364,000
Interest expense(2) (831,000) (210,000) (1,903,000) (314,000)
Net revenues 279,000 518,000 877,000 2,050,000
Other expenses (2,361,000) (4,868,000) (2,467,000) (14,092,000)
Operating expenses(3) [2] (523,000) (401,000) (1,483,000) (1,302,000)
Intercompany expenses(1) [1] (33,000) (29,000) (89,000) (85,000)
Income (loss) before income taxes(4) [3] (2,638,000) (4,780,000) (3,162,000) (13,429,000)
Other (expenses) revenue $ (2,361,000) $ (4,868,000) $ (2,467,000) $ (14,092,000)
[1] Includes fees paid by Royal Palm to Bimini Advisors for advisory services.
[2] Operating expenses are allocated based on each segment’s proportional share of total revenues.
[3] Totals in the table above may not foot due to rounding differences.
[4] Includes interest on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column.
v3.23.3
Note 13 - Segment Information - Assets in Each Reportable Segment (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Assets $ 123,285,560 $ 86,316,951
Operating Segments [Member] | Asset Management [Member]    
Assets 2,144,000 1,970,000
Operating Segments [Member] | Investment Portfolio [Member]    
Assets 113,934,000 77,483,000
Corporate, Non-Segment [Member]    
Assets $ 7,208,000 $ 6,864,000
v3.23.3
Note 14 - Related Party Transactions (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Investment Income, Dividend $ 273,154 $ 282,893 $ 819,462 $ 1,035,547  
Orchid Island Capital [Member]          
Investment Owned, Balance, Shares (in shares) 569,071   569,071   569,071
Equity Method Investment, Ownership Percentage 1.10%   1.10%   1.60%
Investment Income, Dividend $ 300,000 $ 300,000 $ 800,000 $ 1,000,000  
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