10-Q - BMNM - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☑

QUARTERLY

REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2021

☐

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________

to ___________

Commission File Number

001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)

Maryland

72-1571637

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3305 Flamingo Drive

Vero Beach

Florida

32963

(Address of principal executive offices) (Zip Code)

(

772

)

231-1400

(Registrant’s telephone number, including area code)

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

Indicate by check

mark whether the

registrant (1) has filed

all reports required

to be filed

by Section 13 or

15(d) of the

Securities Exchange Act

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

☐

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

☐

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

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any

new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes

☐

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

Title of each Class

Latest Practicable Date

Shares Outstanding

Class A Common Stock, $0.001 par value

August 13, 2021

10,795,676

Class B Common Stock, $0.001 par value

August 13, 2021

31,938

Class C Common Stock, $0.001 par value

August 13, 2021

31,938

BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL

INFORMATION

ITEM 1. Financial

Statements

Condensed

Consolidated

Balance Sheets

(unaudited)

Condensed

Consolidated

Statements

of Operations

(unaudited)

Condensed

Consolidated

Statement

of Stockholders’

Equity (unaudited)

Condensed

Consolidated

Statements

of Cash Flows

(unaudited)

Notes to Condensed

Consolidated

Financial Statements

(unaudited)

ITEM 2. Management’s

Discussion

and Analysis

of Financial

Condition

and Results

of Operations

ITEM 3. Quantitative

and Qualitative

Disclosures

About Market

Risk

ITEM 4. Controls

and Procedures

PART II. OTHER INFORMATION

ITEM 1. Legal

Proceedings

ITEM 1A.

Risk Factors

ITEM 2. Unregistered

Sales of Equity

Securities

and Use of

Proceeds

ITEM 3. Defaults

Upon Senior

Securities

ITEM 4. Mine

Safety Disclosures

ITEM 5. Other

Information

ITEM 6. Exhibits

SIGNATURES

PART I. FINANCIAL

INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED BALANCE

SHEETS

(Unaudited)

June 30, 2021

December 31, 2020

ASSETS:

Mortgage-backed securities, at fair value

Pledged to counterparties

68,973,238

65,153,274

Unpledged

20,392

24,957

Total mortgage

-backed securities

68,993,630

65,178,231

Cash and cash equivalents

7,275,488

7,558,342

Restricted cash

5,892,425

3,353,015

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

13,469,903

13,547,764

Accrued interest receivable

216,050

202,192

Property and equipment, net

2,058,815

2,093,440

Deferred tax assets

34,499,829

34,668,467

Due from affiliates

794,251

632,471

Other assets

1,471,857

1,466,647

Total Assets

134,672,248

128,700,569

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Repurchase agreements

71,345,999

65,071,113

Long-term debt

27,449,886

27,612,781

Accrued interest payable

77,569

107,417

Other liabilities

940,301

1,421,409

Total Liabilities

99,813,755

94,212,720

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:

Preferred stock, $

0.001

par value;

10,000,000

shares authorized;

100,000

designated Series A Junior Preferred Stock,

9,900,000

shares undesignated;

no shares issued and outstanding as of June 30, 2021 and December

31, 2020

Class A Common stock, $

0.001

par value;

98,000,000

shares designated:

11,608,555

shares issued and outstanding as of June 30, 2021 and December 31,

2020

11,609

Class B Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

issued and outstanding as of June 30, 2021 and December 31, 2020

Class C Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

issued and outstanding as of June 30, 2021 and December 31, 2020

Additional paid-in capital

332,642,758

Accumulated deficit

(297,795,938)

(298,166,582)

Stockholders’ Equity

34,858,493

34,487,849

Total Liabilities

and Stockholders' Equity

134,672,248

128,700,569

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

(Unaudited)

For the Six and Three Months Ended June 30, 2021 and

2020

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

2021

2020

Revenues:

Advisory services

4,211,221

3,339,680

2,185,812

1,615,083

Interest income

1,189,068

2,563,281

578,450

523,287

Dividend income from Orchid Island Capital, Inc. common stock

1,012,189

753,518

506,094

388,709

Total revenues

6,412,478

6,656,479

3,270,356

2,527,079

Interest expense

Repurchase agreements

(71,197)

(987,417)

(31,339)

(59,601)

Long-term debt

(499,112)

(631,958)

(249,564)

(282,457)

Net revenues

5,842,169

5,037,104

2,989,453

2,185,021

Other income (expense):

Unrealized (losses) gains on mortgage-backed securities

(1,897,862)

27,855

(505,601)

602,136

Realized losses on mortgage-backed securities

(5,804,656)

Unrealized (losses) gains on Orchid Island Capital, Inc. common stock

(77,861)

(754,792)

(2,128,193)

3,653,312

Losses on derivative instruments

(133)

(5,292,421)

(376)

(1,690)

Other income

153,973

642

153,887

318

Total other (expense)

income

(1,821,883)

(11,823,372)

(2,480,283)

4,254,076

Expenses:

Compensation and related benefits

2,190,220

2,146,667

1,066,690

1,046,623

Directors' fees and liability insurance

377,634

345,693

189,614

181,112

Audit, legal and other professional fees

271,903

346,641

134,735

187,348

Administrative and other expenses

641,247

552,045

333,382

270,005

Total expenses

3,481,004

3,391,046

1,724,421

1,685,088

Net income (loss) before income tax provision (benefit)

539,282

(10,177,314)

(1,215,251)

4,754,009

Income tax provision (benefit)

168,638

8,687,508

(295,465)

1,285,884

Net income (loss)

370,644

(18,864,822)

(919,786)

3,468,125

Basic and Diluted Net income (loss) Per Share of:

CLASS A COMMON STOCK

Basic and Diluted

0.03

(1.62)

(0.08)

0.30

CLASS B COMMON STOCK

Basic and Diluted

0.03

(1.62)

(0.08)

0.30

Weighted Average Shares Outstanding:

CLASS A COMMON STOCK

Basic and Diluted

11,608,555

CLASS B COMMON STOCK

Basic and Diluted

31,938

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

(Unaudited)

For the Six and Three Months Ended June 30, 2021 and

2020

Stockholders' Equity

Common Stock

Additional

Accumulated

Par Value

Paid-in Capital

Deficit

Total

Balances, January 1, 2020

11,672,431

11,673

332,642,758

(292,677,440)

39,976,991

Net loss

(22,332,947)

Balances, March 31, 2020

11,672,431

11,673

332,642,758

(315,010,387)

17,644,044

Net income

3,468,125

Balances, June 30, 2020

11,672,431

11,673

332,642,758

(311,542,262)

21,112,169

Balances, January 1, 2021

11,672,431

11,673

332,642,758

(298,166,582)

34,487,849

Net income

1,290,430

Balances, March 31, 2021

11,672,431

11,673

332,642,758

(296,876,152)

35,778,279

Net loss

(919,786)

Balances, June 30, 2021

11,672,431

11,673

332,642,758

(297,795,938)

34,858,493

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

For the Six Months Ended June 30, 2021 and 2020

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss)

370,644

(18,864,822)

Adjustments to reconcile net income (loss) to net cash provided by

(used in) operating activities:

Depreciation

34,625

34,911

Deferred income tax provision

168,638

8,686,736

Losses on mortgage-backed securities, net

1,897,862

5,776,801

PPP loan forgiveness

(153,724)

Unrealized losses on Orchid Island Capital, Inc. common stock

77,861

754,792

Realized and unrealized losses on forward settling TBA securities

1,441,406

Changes in operating assets and liabilities:

Accrued interest receivable

(13,858)

556,646

Due from affiliates

(161,780)

52,970

Other assets

(5,210)

(20,960)

Accrued interest payable

(28,289)

(575,438)

Other liabilities

(481,108)

(489,128)

NET CASH PROVIDED BY (USED IN) OPERATING

ACTIVITIES

1,705,661

(2,646,086)

CASH FLOWS FROM INVESTING ACTIVITIES:

From mortgage-backed securities investments:

Purchases

(13,139,464)

(20,823,373)

Sales

171,155,249

Principal repayments

7,426,203

8,914,759

Net settlement of forward settling TBA contracts

(1,500,000)

Purchases of Orchid Island Capital, Inc. common stock

(3,615,712)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

(5,713,261)

154,130,923

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from repurchase agreements

117,034,000

430,566,397

Principal repayments on repurchase agreements

(110,759,114)

(588,903,397)

Proceeds from long-term debt

152,165

Principal repayments on long-term debt

(10,730)

(10,125)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

6,264,156

(158,194,960)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

2,256,556

(6,710,123)

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, beginning of the period

10,911,357

12,385,117

CASH, CASH EQUIVALENTS AND

RESTRICTED CASH, end of the period

13,167,913

5,674,994

SUPPLEMENTAL DISCLOSURES OF CASH

FLOW INFORMATION:

Cash paid (received) during the period for:

Interest expense

600,157

2,194,813

Income taxes

13,465

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL

MANAGEMENT, INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL

STATEMENTS

(Unaudited)

June 30, 2021

NOTE 1.

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business

Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” or 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.

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.

Bimini Advisors also manages the MBS portfolio of Royal Palm Capital, 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."

COVID-19

Impact

Beginning

in March 2020,

the global

pandemic associated

with the novel

coronavirus

(“COVID-19”)

and related

economic conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought about

COVID-19,

the MBS market

experienced

severe dislocations.

This resulted

in falling

prices of

our assets

and increased

margin calls

from

our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial condition.

The MBS market

largely stabilized

after the

Federal Reserve

announced

on March 23,

2020 that

it would purchase

MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning.

As of March

31, 2020,

and at all

times since

then, we

have timely

satisfied all

margin calls.

The MBS

market continues

to react to

the pandemic

and the various

measures put

in place to

stabilize the

market. To the extent

the financial

or mortgage

markets do

not respond

favorably to

any of these

actions, or

such actions

do not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely affected.

Although the

Company cannot

estimate the

length or

gravity of

the impact

of the COVID-19

pandemic at

this time, it

may have a

material adverse

effect

on the Company’s

results of

future operations,

financial position,

and liquidity

during 2021.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini

Capital, Bimini Advisors and Royal Palm.

All

inter-company accounts and transactions have been eliminated from the consolidated

financial statements.

Variable Interest Entities (“VIEs”)

A variable interest entity ("VIE") is consolidated by an enterprise if it is deemed the

primary beneficiary of the VIE. Bimini Capital

has a common share investment in a trust used in connection with the issuance of Bimini

Capital's junior subordinated notes. See Note

8 for a description of the accounting used for this 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.

a result, the Company does not consolidate these VIEs and accounts for the interest

in these VIEs as mortgage-backed securities.

See Note 3 for additional information regarding the Company’s investments in mortgage-backed securities.

The maximum exposure to

loss for these VIEs is the carrying value of the mortgage-backed securities.

Basis of

Presentation

The accompanying unaudited condensed consolidated financial statements have

been prepared in accordance with accounting

principles generally accepted in the United States (“GAAP”) for interim financial

information and with the instructions to Form 10-Q and

Article 8 of Regulation S-X.

Accordingly, they may not include all of the information and footnotes required by GAAP for complete

financial statements.

In the opinion of management, all adjustments (consisting of normal recurring

accruals) considered necessary for

a fair presentation have been included.

Operating results for the six and three-month period ended June 30, 2021

are not necessarily

indicative of the results that may be expected for the year ending December 31, 2021.

The consolidated balance sheet at December 31, 2020 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, 2020.

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, investment in Orchid common shares and derivatives, 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.

Segment Reporting

The Company’s operations are classified into two principal 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 14.

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

three months

or less at

the time

of purchase.

Restricted

cash includes

cash pledged

as collateral

for repurchase

agreements

and

derivative

instruments.

The following

table presents

the Company’s

cash, cash

equivalents

and restricted

cash as of

June 30,

2021 and

December 31,

2020.

June 30, 2021

December 31, 2020

Cash and cash equivalents

7,275,488

7,558,342

Restricted cash

5,892,425

3,353,015

Total cash, cash equivalents

and restricted cash

13,167,913

10,911,357

The Company

maintains cash

balances at

several banks

and excess

margin with

an exchange

clearing member.

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.

Under the terms

the management

agreement,

Orchid is

obligated to

pay Bimini

Advisors a

monthly management

fee and a

pro rata portion

of certain

overhead costs

and to reimburse

the Company

for any direct

expenses incurred

on its behalf.

Revenues from

management

fees are

recognized

over the period

of time in

which the

service is

performed.

Mortgage-Backed

Securities

The Company invests primarily in mortgage pass-through (“PT”) mortgage-backed

certificates 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. We refer to MBS and CMOs as PT MBS.

We refer to 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 our 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

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.

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.

We estimate

the fair value

of our investment

in Orchid

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.

These retained

interests currently

have a recorded

fair value

of zero, as

the prospect

of future

cash flows

being received

is uncertain.

Any cash

received

from the retained

interests is

reflected

in the consolidated

statements

of operations.

Derivative

Financial Instruments

The Company

uses 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 to

date are Treasury

Note (“T-

Note”) and

Eurodollar

futures contracts,

and “to-be-announced”

(“TBA”) securities

transactions,

but it may

enter into

other derivative

instruments

in the future.

The Company

accounts for

TBA securities

as derivative

instruments.

Gains and losses

associated

with TBA

securities

transactions

are reported

in gain (loss)

on derivative

instruments

in the accompanying

consolidated

statements

of operations.

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.

Holding derivatives

creates exposure

to credit

risk related

to the potential

for failure

by counterparties

to honor their

commitments.

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.

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.

Financial

Instruments

The fair value of financial instruments for which it is practicable to estimate that

value 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 13 of the consolidated financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest

receivable, other assets, repurchase

agreements, accrued interest payable and other liabilities generally approximates

their carrying value as of June 30, 2021 and

December 31, 2020, due to the short-term nature of these financial instruments.

It is impractical to estimate the fair value of the Company’s junior subordinated notes.

Currently, there is a limited market for these

types of instruments and the Company is unable to ascertain what interest rates would

be available to the Company for similar financial

instruments. Further information regarding these instruments is presented in Note

8 to the consolidated financial statements.

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 buildings and

improvements with depreciable lives of 30

years.

Property and equipment is recorded at acquisition cost and depreciated

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, 2017 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

10 -

In March 2020, the FASB issued 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. The Company does not

believe the adoption of this ASU will have a material impact on its consolidated 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, 2022, as reference rate reform

activities occur. The Company does not believe the adoption of this ASU will have a material impact on its consolidated

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:

●

One-twelfth of 1.5% 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.

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. The management

agreement has been renewed through February 20, 2022

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 automatic

renewal term.

The following table summarizes the advisory services revenue from Orchid

for the six and three months ended June 30, 2021 and

2020.

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

2021

2020

Management fee

3,412

2,645

1,791

1,268

Allocated overhead

799

695

395

347

Total

4,211

3,340

2,186

1,615

11 -

At June 30, 2021 and December 31, 2020, the net amount due from Orchid was approximately $

0.8

million and $

0.6

million, respectively.

NOTE 3.

MORTGAGE-BACKED SECURITIES

The following

table presents

the Company’s

MBS portfolio

as of June

30, 2021 and

December 31,

2020:

(in thousands)

June 30, 2021

December 31, 2020

Fixed-rate MBS

67,910

64,902

Interest-Only MBS

1,064

251

Inverse Interest-Only MBS

Total

68,994

65,178

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 June

30, 2021,

the Company

had met all

margin call

requirements.

As of June

30, 2021 and

December 31,

2020,

the Company’s

repurchase

agreements

had remaining

maturities

as summarized

below:

($ in thousands)

OVERNIGHT

BETWEEN 2

BETWEEN 31

GREATER

(1 DAY OR

AND

THAN

LESS)

30 DAYS

90 DAYS

TOTAL

June 30, 2021

Fair value of securities pledged, including accrued

interest receivable

49,981

19,208

69,189

Repurchase agreement liabilities associated with

these securities

51,764

19,582

71,346

Net weighted average borrowing rate

0.16%

0.14%

0.16%

December 31, 2020

Fair value of securities pledged, including accrued

interest receivable

49,096

8,853

7,405

65,354

Repurchase agreement liabilities associated with

these securities

49,120

8,649

7,302

65,071

Net weighted average borrowing rate

0.25%

0.23%

0.30%

0.25%

In addition,

cash pledged

to counterparties

for repurchase

agreements

was approximately

5.9

million and

3.4

million as

of June 30,

2021 and December

31, 2020,

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 June 30,

2021 and December

31, 2020,

the Company

had an aggregate

12 -

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

3.7

million and

3.6

million,

respectively.

As of June

30, 2021

and December

31, 2020,

the Company

did not have

an amount

at risk with

any individual

counterparty

greater than

10% of the

Company’s equity.

NOTE 5. DERIVATIVE

FINANCIAL INSTRUMENTS

Eurodollar

and T-Note futures

are cash settled

futures contracts

on an interest

rate, with

gains and losses

credited or

charged to the

Company’s cash

accounts on a

daily basis.

A minimum balance,

or “margin”,

is required

to be maintained

in the

account on a

daily basis.

The tables below

present information

related to the

Company’s Eurodollar

and T-note futures

positions at

June 30, 2021

and December

31, 2020.

($ in thousands)

As of June 30, 2021

Junior Subordinated Debt Funding Hedges

Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.00%

0.17%

(4)

($ in thousands)

As of December 31, 2020

Junior Subordinated Debt Funding Hedges

Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.02%

0.18%

(8)

(1)

Open equity represents the cumulative gains (losses) recorded on open

futures positions from inception.

(Losses) Gains on Derivative Instruments

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of

operations for the six and three months ended June 30, 2021 and 2020

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

2021

2020

Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

(2,328)

Junior subordinated debt funding hedges

(517)

(2)

T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,006)

Net TBA securities

(1,441)

Losses on derivative instruments

(5,292)

(2)

Credit Risk-Related Contingent Features

The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event

that the counterparties to these instruments fail to perform their obligations under the contracts. The Company attempts to

minimize this risk in several ways.

For instruments which are not centrally cleared on a registered exchange, the Company

13 -

limits its counterparties to major financial institutions with acceptable credit ratings, and by monitoring positions with

individual counterparties. In addition, the Company may be required to pledge assets as collateral for its derivatives, whose

amounts vary over time based on the market value, notional amount and remaining term of the derivative contract. In the

event of a default by a counterparty, the Company may not receive payments provided for under the terms of its derivative

agreements, and may have difficulty recovering its assets pledged as collateral for its derivatives. The cash and cash

equivalents pledged as collateral for the Company’s derivative instruments are included in restricted cash on the

consolidated balance sheets. It is the Company's policy not to offset assets and liabilities associated with open derivative

contracts. However, the Chicago Mercantile Exchange (“CME”) rules characterize variation margin transfers as settlement

payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally

cleared derivatives for which the CME serves as the central clearing party are presented as if these derivatives had been

settled as of the reporting date.

NOTE 6. PLEDGED ASSETS

Assets Pledged

to Counterparties

The table

below summarizes

Bimini’s assets

pledged as

collateral

under its repurchase

agreements

and derivative

agreements

as of

June 30, 2021

and December

31, 2020.

($ in thousands)

June 30, 2021

December 31, 2020

Repurchase

Derivative

Repurchase

Derivative

Assets Pledged to Counterparties

Agreements

Total

Agreements

Total

PT MBS - at fair value

67,910

64,902

Structured MBS - at fair value

1,064

251

Accrued interest on pledged securities

215

201

Restricted cash

5,892

3,352

3,353

Total

75,081

68,706

68,707

Assets Pledged

from Counterparties

The table

below summarizes

cash pledged

to Bimini from

counterparties

under repurchase

agreements

and derivative

agreements

of June 30,

2021 and December

31, 2020.

Cash received

as margin is

recognized

in cash and

cash equivalents

with a corresponding

amount recognized

as an increase

in repurchase

agreements

or other liabilities

in the consolidated

balance sheets.

($ in thousands)

Assets Pledged to Bimini

June 30, 2021

December 31, 2020

Repurchase agreements

187

Total

187

NOTE 7. OFFSETTING ASSETS AND LIABILITIES

The Company’s

derivatives

and repurchase

agreements

are subject

to underlying

agreements

with master

netting or

similar

arrangements,

which provide

for the right

of offset in

the event

of default

or in the

event of bankruptcy

of either

party to the

transactions.

The Company

reports its

assets and

liabilities

subject to

these arrangements

on a gross

basis.

The following

tables present

information

regarding

those assets

and liabilities

subject to

such arrangements

as if the Company

had presented

them on a

net basis as

of June 30,

2021 and December

31, 2020.

(in thousands)

Offsetting of Liabilities

Gross Amount Not Offset in the

14 -

Net Amount

Consolidated Balance Sheet

Gross Amount

of Liabilities

Financial

Gross Amount

Offset in the

Presented in the

Instruments

Cash

of Recognized

Consolidated

Posted as

Net

Liabilities

Balance Sheet

Collateral

Amount

June 30, 2021

Repurchase Agreements

71,346

(65,454)

(5,892)

71,346

(65,454)

(5,892)

December 31, 2020

Repurchase Agreements

65,071

(61,719)

(3,352)

65,071

(61,719)

(3,352)

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

6 for a discussion

of collateral

posted for, or

received against,

repurchase

obligations

and derivative

instruments.

NOTE 8.

LONG-TERM DEBT

Long-term

debt at June

30, 2021 and

December 31,

2020 is summarized

as follows:

(in thousands)

June 30, 2021

December 31, 2020

Junior subordinated debt

26,804

Note payable

646

657

Paycheck Protection Plan ("PPP") loan

(1)

152

Total

27,450

27,613

Junior Subordinated Debt

During 2005,

Bimini Capital

sponsored the

formation

of a statutory

trust, known

as Bimini Capital

Trust II (“BCTII”)

of which 100%

the common

equity is owned

by Bimini

Capital.

It was formed

for the purpose

of issuing

trust preferred

capital securities

to third-party

investors and

investing the

proceeds

from the sale

of such capital

securities

solely in

junior subordinated

debt securities

of Bimini

Capital.

The debt securities

held by BCTII

are the sole

assets of BCTII.

As of June

30, 2021 and

December 31,

2020,

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

3.50

% over the

prevailing

three-month

LIBOR rate.

As of June

30, 2021, the

interest rate

was

3.62

%. 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.

BCTII is a

VIE because

the holders

of the equity

investment

at risk do

not have substantive

decision-making

ability over

BCTII’s

activities.

Since Bimini

Capital's

investment

in BCTII’s

common equity

securities

was financed

directly by

BCTII as

a result of

its loan of

the

proceeds to

Bimini Capital,

that investment

is not considered

to be an equity

investment

at risk. Since

Bimini Capital's

common share

investment

in BCTII

is not a variable

interest,

Bimini Capital

is not the

primary beneficiary

of BCTII.

Therefore,

Bimini Capital

has not

consolidated

the financial

statements

of BCTII

into its consolidated

financial statements,

and this investment

is accounted

for on the

equity

method.

The accompanying

consolidated

financial statements

present Bimini

Capital's BCTII

Junior Subordinated

Notes issued

to BCTII

as a

15 -

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.

Note Payable

On October

30, 2019,

the Company

borrowed

680,000

from a bank.

The note is

payable in

equal monthly

principal and

interest

installments

of approximately

4,500

through October

30, 2039.

Interest accrues

at 4.89% through

October 30,

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.

Paycheck Protection

Plan Loan

On April 13,

2020, the

Company received

approximately

152,000

through the

Paycheck Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan.

PPP loans

carry a fixed

rate of

1.00

% and a term

of two years,

if not forgiven,

in whole or

in part. The

Small Business

Administration

notified the

Company that,

effective as

of April 22,

2021, all principal

and accrued

interest under

the PPP

loan has been

forgiven.

The table

below presents

the future

scheduled principal

payments on

the Company’s

long-term

debt.

(in thousands)

Last six months of 2021

2022

2023

2024

2025

After 2025

27,341

Total

27,450

NOTE 9.

COMMON STOCK

There were

no issuances

of Bimini Capital's

Class A Common

Stock, Class

B Common Stock

or Class C

Common Stock

during the

six months

ended June

30, 2021

and 2020.

Stock Repurchase

Plan

On March 26,

2018, the

Board of Directors

of Bimini Capital

Management,

Inc. (the

“Company”)

approved a

Stock Repurchase

Plan

(“Repurchase

Plan”).

Pursuant to

Repurchase

Plan, the

Company may

purchase up

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.

Share repurchases

may be

executed through

various means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the

Company to

purchase any

shares.

The Repurchase

Plan was originally

set to expire

on November

15, 2018, but

it has been

extended by the

Board of Directors

and it is currently

set to expire

November 15, 2021

From the inception

of the Repurchase

Plan through

June 30, 2021,

the Company

repurchased

a total of

70,404

shares at

aggregate

cost of approximately

166,945

, including

commissions

and fees,

for a weighted

average price

of $

2.37

per share.

There were

no shares

repurchased

during the

six months

ended June

30, 2021.

Tender Offer

In July 2021,

the Company

completed

a “modified

Dutch auction”

tender offer

and paid an

aggregate

of $1.5 million,

excluding

fees

16 -

and related

expenses, to

repurchase

812,879 shares

of Bimini

Capital’s Class

A common stock

at a price

of $1.85 per

share.

The financial

statement

impact of the

completion

of this tender

offer will

be reported

in our September

30, 2021 Form

10-Q filing.

NOTE 10.

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.

April 22, 2020

, the Company received a demand for payment from Citigroup, Inc. in the amount

of $

33.1

million related to the

indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets

Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,

LLC) prior to the date Royal Palm’s mortgage origination

operations ceased in 2007.

The demand is based on Royal Palm’s alleged breaches of certain representations and warranties

in the

related MLPA’s.

The Company believes the demands are without merit and intends to defend

against the demand vigorously.

provision or accrual has been recorded as of June 30, 2021 related to the Citigroup demand.

Management is not aware of any other significant reported or unreported contingencies

at June 30, 2021.

NOTE 11.

INCOME TAXES

The total income tax provision recorded for the six months ended June 30, 2021 and 2020

was $

0.2

million and $

8.7

million,

respectively, on consolidated pre-tax book income (loss) of $

0.5

million and $(

10.2

) million in the six and three months ended June 30,

2021 and 2020, respectively.

The total income tax (benefit) provision recorded for the three months ended June 30,

2021 and 2020

was $(

0.3

) million and $

1.3

million, respectively, on consolidated pre-tax book (loss) income of $(

1.2

) million and $

4.8

million in the

three months ended June 30, 2021 and 2020, respectively.

The Company’s tax provision is 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 a valuation

allowance at each reporting date.

As a result of adverse economic impacts of COVID-19 on its business, the Company performed

an assessment of the need for

additional valuation allowances against existing deferred tax assets as of March 31,

Following the more-likely-than-not standard

that benefits will not be realized in the future, the Company determined an additional

valuation allowance of approximately $

11.2

million

was necessary for the net operating loss carryforwards and capital loss carryforwards

during the three months ended March 31, 2020.

With the rapidly evolving and changing landscape caused by the pandemic, including the

potential for new government restrictions on

the economy in reaction to the Delta Variant, the Company will continue to closely monitor the impacts of COVID-19 on the Company’s

ability to realize its deferred tax assets, and it may re-evaluate valuation allowances

in the future as new information becomes

available.

NOTE 12.

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

Directors.

The Class

B common stock

is included

in the computation

of basic EPS

using the two-class

method, and

consequently

presented

separately

from Class

A common stock.

Shares of

Class B common

stock are not

included in

the computation

of diluted

Class A

17 -

EPS as the

conditions

for conversion

to Class A

common stock

were not

met at June

30, 2021 and

2020.

Shares of

Class C common

stock are not

included in

the basic

EPS computation

as these shares

do not have

participation

rights.

Shares of

Class C common

stock are not

included in

the computation

of diluted

Class A EPS

as the conditions

for conversion

to Class A

common stock

were not

met at June

30, 2021 and

2020.

The table

below reconciles

the numerator

and denominator

of EPS for

the six and

three months

ended June

30, 2021 and

2020.

(in thousands, except per-share information)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

2021

2020

Basic and diluted EPS per Class A common share:

Income (loss) attributable to Class A common shares:

Basic and diluted

370

(18,813)

(917)

3,458

Weighted average common shares:

Class A common shares outstanding at the balance sheet date

11,609

Weighted average shares-basic and diluted

11,609

Income (loss) per Class A common share:

Basic and diluted

0.03

(1.62)

(0.08)

0.30

(in thousands, except per-share information)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

2021

2020

Basic and diluted EPS per Class B common share:

Income (loss) attributable to Class B common shares:

Basic and diluted

(52)

(3)

Weighted average common shares:

Class B common shares outstanding at the balance sheet date

Weighted average shares-basic and diluted

Income (loss) per Class B common share:

Basic and diluted

0.03

(1.62)

(0.08)

0.30

NOTE 13.

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.

18 -

MBS, Orchid

common stock,

retained

interests and

TBA securities

were all recorded

at fair value

on a recurring

basis during

the six

and three

months ended

June 30, 2021

and 2020.

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.

Fair value

measurements

for the retained

interests are

generated

by a model

that requires

management

to make a

significant

number of

assumptions,

and this model

resulted in

a value of

zero

at both June

30, 2021 and

December 31,

2020.

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, when

available.

Because the

price estimates

may vary,

the Company

must make certain

judgments and

assumptions

about the

appropriate

price to use

to calculate

the fair values.

The Company

and the independent

pricing sources

use various

valuation techniques

to determine

the price

of the Company’s

securities.

These

techniques

include observing

the most

recent market

for like or

identical assets

(including

security coupon,

maturity, yield,

and prepayment

speeds),

spread pricing

techniques

to determine

market credit

spreads (option

adjusted spread,

zero volatility

spread, spread

to the U.S.

Treasury curve

or spread

to a benchmark

such as a TBA

security),

and model driven

approaches

(the discounted

cash flow

method, Black

Scholes and

SABR models

which rely

upon observable

market rates

such as the

term structure

of interest

rates and volatility).

The

appropriate

spread pricing

method used

is based on

market convention.

The pricing

source determines

the spread

of recently

observed

trade activity

or observable

markets for

assets similar

to those being

priced. The

spread is then

adjusted based

on variances

in certain

characteristics

between the

market observation

and the asset

being priced.

Those characteristics

include: type

of asset, the

expected life

of the asset,

the stability

and predictability

of the expected

future cash

flows of the

asset, whether

the coupon

of the asset

is fixed or

adjustable,

the guarantor

of the security

if applicable,

the coupon,

the maturity, the

issuer, size of

the underlying

loans, year

in which

the

underlying

loans were

originated,

loan to value

ratio, state

in which the

underlying

loans reside,

credit score

of the underlying

borrowers

and other

variables if

appropriate.

The fair value

of the security

is determined

by using the

adjusted spread.

The Company’s

futures contracts

are Level

1 valuations,

as they

are exchange-traded

instruments

and quoted

market prices

are

readily available.

Futures contracts

are settled

daily. The Company’s

interest rate

swaps and

interest rate

swaptions

are Level 2

valuations.

The fair value

of interest

rate swaps

is determined

using a discounted

cash flow

approach

using forward

market interest

rates

and discount

rates, which

are observable

inputs. The

fair value

of interest

rate swaptions

is determined

using an option

pricing model.

The following

table presents

financial assets

and liabilities

measured

at fair value

on a recurring

basis as of

June 30, 2021

and

December 31,

2020:

(in thousands)

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair Value

Assets

Inputs

Measurements

(Level 1)

(Level 2)

(Level 3)

June 30, 2021

Mortgage-backed securities

68,994

Orchid Island Capital, Inc. common stock

13,470

December 31, 2020

Mortgage-backed securities

65,178

Orchid Island Capital, Inc. common stock

13,548

During the

six months

ended June

30, 2021 and

2020, there

were no transfers

of financial

assets or liabilities

between levels

1, 2 or 3.

NOTE 14.

SEGMENT INFORMATION

19 -

The Company’s operations are classified into two principal reportable segments: the asset

management segment and the

investment portfolio segment.

The asset management segment includes the investment advisory services provided by

Bimini Advisors to Orchid and Royal

Palm. As discussed in Note 2, the revenues of the asset management segment consist of

management fees and overhead

reimbursements received

pursuant to a management agreement with Orchid.

Total revenues received under this management

agreement for the six months ended June 30, 2021 and 2020, were approximately

4.2

million and $

3.4

million, respectively,

accounting for approximately

% and

% of consolidated revenues, respectively.

The investment portfolio segment includes the investment activities conducted by

Royal Palm.

The investment portfolio segment

receives revenue in the form of interest and dividend income on its investments.

Segment information for the six months ended June 30, 2021 and 2020 is as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

4,211

Advisory services, other operating segments

(1)

(72)

Interest and dividend income

2,201

Interest expense

(71)

(499)

(2)

(570)

Net revenues

4,283

2,130

(499)

(72)

5,842

Other income

(1,976)

154

(3)

(1,822)

Operating expenses

(4)

(2,230)

(1,251)

(3,481)

Intercompany expenses

(1)

(72)

Income (loss) before income taxes

2,053

(1,169)

(345)

539

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

3,340

Advisory services, other operating segments

(1)

(84)

Interest and dividend income

3,317

Interest expense

(988)

(632)

(2)

(1,620)

Net revenues

3,424

2,329

(632)

(84)

5,037

Other expenses

(11,307)

(516)

(3)

(11,823)

Operating expenses

(4)

(1,690)

(1,701)

(3,391)

Intercompany expenses

(1)

(84)

Income (loss) before income taxes

1,734

(10,763)

(1,148)

(10,177)

Segment information for the three months ended June 30, 2021 and 2020 is as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,186

Advisory services, other operating segments

(1)

(37)

Interest and dividend income

1,084

Interest expense

(31)

(250)

(2)

(281)

Net revenues

2,223

1,053

(250)

(37)

2,989

20 -

Other

(2,634)

154

(3)

(2,480)

Operating expenses

(4)

(1,125)

(599)

(1,724)

Intercompany expenses

(1)

(37)

Income (loss) before income taxes

1,098

(2,217)

(96)

(1,215)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,615

Advisory services, other operating segments

(1)

(26)

Interest and dividend income

912

Interest expense

(60)

(282)

(2)

(342)

Net revenues

1,641

852

(282)

(26)

2,185

Other

4,256

(2)

(3)

4,254

Operating expenses

(4)

(1,067)

(618)

(1,685)

Intercompany expenses

(1)

(26)

Income (loss) before income taxes

574

4,464

(284)

4,754

(1)

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

(2)

Includes interest on long-term debt.

(3)

Includes income recognized on the forgiveness of the PPP loan and

gains (losses) on Eurodollar futures contracts entered into as a hedge

junior subordinated notes.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment as of June 30, 2021 and December 31, 2020 were as

follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

June 30, 2021

1,733

120,020

12,919

134,672

December 31, 2020

1,469

113,764

13,468

128,701

NOTE 15. RELATED PARTY TRANSACTIONS

Relationships with Orchid

At both June 30, 2021 and December 31, 2020, the Company owned

2,595,357

shares of Orchid common stock, representing

approximately

2.2

% and

3.4

% of Orchid’s outstanding common stock on such dates.

The Company received dividends on this

common stock investment of approximately $

1.0

million and $

0.5

million during the six and three months ended June 30, 2021, and

approximately $

0.8

million and $

0.4

million during the six and three months ended June 30, 2020, 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, receives 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, our

independent directors, each own shares of common stock of Orchid.

21 -

ITEM 2. MANAGEMENT’S

DISCUSSION

AND ANALYSIS OF FINANCIAL

CONDITION

AND RESULTS OF

OPERATIONS.

The following

discussion of

our financial

condition and

results of

operations should

be read

in conjunction

with the

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

and any subsequent

Quarterly

Reports on Form 10-Q, our actual results may differ materially from those anticipated in such

forward-looking statements.

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") is a holding company

that was formed in September 2003.

The Company’s principal wholly-owned operating subsidiary is Royal Palm Capital, LLC.

We operate in two business segments: the

asset management segment, which includes (a) the investment advisory services provided

by Royal Palm’s wholly-owned subsidiary,

Bimini Advisors Holdings, LLC, to Orchid, and (b) the investment portfolio segment, which includes

the investment activities conducted

by Royal Palm.

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

the

Securities and Exchange Commission), are collectively referred to as “Bimini

Advisors.”

Bimini Advisors serves as the external

manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"). From this arrangement,

the Company receives management fees and

expense reimbursements.

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

operations.

Pursuant to the terms of the management agreement, Bimini Advisors

provides Orchid with its management team,

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

subject to the supervision and oversight of

Orchid's board of directors and has only such functions and authority as delegated to

it.

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"). 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.

Impact of

the COVID-19

Pandemic

Beginning

in March 2020,

the global

pandemic associated

with the novel

coronavirus

COVID-19 (“COVID-19”)

and related

economic

conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought

about by COVID-19,

the Agency

MBS market

experienced

severe dislocations.

This resulted

in falling

prices of our

assets and

increased

margin calls

from our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial

statements.

The Agency

MBS market

largely stabilized

after the

Federal Reserve

(the “Fed”)

announced

on March 23,

2020 that

it would purchase

Agency MBS

and U.S.

Treasuries in the

amounts needed

to support

smooth market

functioning.

As of March

31, 2020,

and at all

times

since then,

we have timely

satisfied

all margin

calls. The

MBS market

continues to

react to the

pandemic and

the various

measures put

place to stabilize

the market.

To the extent the

financial or

mortgage markets

do not respond

favorably to

any of these

actions, or

such

actions do

not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely

affected. Although

the Company

cannot estimate

the length

or gravity

of the impact

of the COVID-19

pandemic at

this time,

it may continue

to have materially

adverse effects

on the Company’s

results of

future operations,

financial position,

and liquidity

during 2021.

Stock Repurchase

Plan

22 -

On March 26,

2018, the

Board of Directors

of the Company

approved a

Stock Repurchase

Plan (“Repurchase

Plan”).

Pursuant to

Repurchase

Plan, we

may purchase

up to 500,000

shares of

the Company’s

Class A Common

Stock from

time to time,

subject to

certain

limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

of 1934.

Share repurchases

may be executed

through various

means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the

Company to

purchase any

shares. The

Repurchase

Plan was originally

set to expire

on November

15, 2018,

but it has

been extended

by the Board

of Directors

and it is currently

set to expire

on November

15, 2021.

The authorization

for the Share

Repurchase

Plan may be

terminated,

increased or

decreased by

the

Company’s Board

of Directors

in its discretion

at any time.

From commencement

of the Repurchase

Plan, through

June 30, 2021,

the Company

repurchased

a total of

70,404 shares

at an

aggregate

cost of approximately

166,945,

including commissions

and fees, for

a weighted

average price

of $2.37 per

share.

Tender Offer

In July 2021,

we completed

a “modified

Dutch auction”

tender offer

and paid an

aggregate

of $1.5 million,

excluding fees

and related

expenses, to

repurchase

812,879 shares

of our Class

A common stock,

which were

retired, at

a price of

$1.85 per

share.

Factors that Affect our Results of Operations and Financial Condition

A variety

of industry and

economic factors (in

addition to those

related to the

COVID-19 pandemic) may

impact our results

operations and financial condition. These factors include:

• interest rate trends;

• the difference between Agency MBS yields and our funding and hedging costs;

• competition for,

and supply of, investments in Agency MBS;

• actions taken

by the

U.S. government, including

the presidential

administration, the

U.S. Federal

Reserve (the

“Fed”), the

Federal Open Market Committee (the “FOMC”), the Federal Housing Finance

Agency (the “FHFA”) and the U.S. Treasury;

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

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

• other market developments.

In addition, a variety

of factors relating to

our business may also

impact our results of

operations and financial condition.

These

factors include:

• our degree of leverage;

• our access to funding and borrowing capacity;

• our borrowing costs;

• our hedging activities;

• the market value of our investments;

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

• our ability to use net operating loss carryforwards and net capital loss carryforwards to reduce our taxable

income;

• the impact of possible future changes in tax laws or tax rates; and

• our ability to manage the portfolio of Orchid and maintain our role as manager.

Results of

Operations

Described

below are the Company’s

results of operations

for the six and three months

ended June 30, 2021,

as compared to the six

and three

months ended

June 30, 2020.

23 -

Net Income

(Loss) Summary

Consolidated

net income

for the

six months

ended June

30, 2021

was $0.4

million, or

$0.03 basic

and diluted

income per

share of

Class

A Common Stock, as compared to consolidated net loss of $18.9 million,

or $1.62 basic and diluted loss per share of Class A Common

Stock,

for the six

months ended

June 30, 2020.

Consolidated

net loss for

the three months

ended June

30, 2021 was

$0.9 million,

or $0.08 basic

and diluted

loss per share

of Class A

Common Stock,

as compared

to consolidated

net income of

$3.5 million,

or $0.30 basic

and diluted

income per share

of Class A Common

Stock,

for the three

months ended

June 30, 2020.

The components of net income (loss)

for the six and three months ended June 30, 2021 and 2020, along with the changes in those

components

are presented

in the table

below:

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

Change

2021

2020

Change

Advisory services revenues

4,211

3,340

871

2,186

1,615

571

Interest and dividend income

2,201

3,317

(1,116)

1,084

912

172

Interest expense

(570)

(1,620)

1,050

(281)

(342)

Net revenues

5,842

5,037

805

2,989

2,185

804

Other (expense) income

(1,822)

(11,823)

10,001

(2,480)

4,254

(6,734)

Expenses

(3,481)

(3,391)

(90)

(1,724)

(1,685)

(39)

Net income (loss) before income tax provision (benefit)

539

(10,177)

10,716

(1,215)

4,754

(5,969)

Income tax provision (benefit)

(168)

(8,688)

8,520

295

(1,286)

1,581

Net income (loss)

371

(18,865)

19,236

(920)

3,468

(4,388)

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

We use derivative instruments, specifically Eurodollar and Treasury Note (“T-Note”) futures contracts and TBA short positions to

hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.

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

but rather hold them for economic

hedging purposes. Changes in fair value of these instruments are presented in a

separate line item in our consolidated statements of

operations and not included in interest expense. As such, for financial reporting

purposes, interest expense and cost of funds are not

impacted by the fluctuation in value of the derivative instruments.

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

of funds measures, GAAP interest expense

has been 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 interest expense for the periods

presented by the gains or losses on

these derivative instruments would 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 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, 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,

24 -

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 respective amounts prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its

financial position and performance without the effects of certain transactions and GAAP adjustments

that are not necessarily indicative

of our current investment portfolio or operations. The unrealized gains or losses on derivative

instruments presented in our

consolidated statements of operations are not necessarily representative of the total interest

rate 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 rate expense in future periods, may differ from the unrealized gains or losses recognized

as of the reporting date.

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

First, other market participants may

calculate economic interest expense and economic net interest income differently than the

way we calculate them. Second, while we

believe that the calculation of the economic value of our hedging strategy described

above helps to present our financial position and

performance, it may be of limited usefulness as an analytical tool. Therefore, the economic

value of our investment strategy should not

be viewed in isolation and is not a substitute for interest expense and net interest

income computed in accordance with GAAP.

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our

derivative instruments, and the consolidated statements of operations line item, gains (losses) on derivative instruments,

calculated in accordance with GAAP for each quarter in 2021 and 2020.

As a result of the market turmoil during the first quarter of 2020 several hedge positions where closed.

However, the

hedges closed were hedges that covered periods well beyond the first quarter of 2020.

Accordingly, the open equity at the

time these hedges were closed will result in adjustments to economic interest expense through the balance of their

respective original hedge periods.

Since the Company’s portfolio was significantly reduced during the first quarter of 2020,

the effect of applying the open equity at the time of closure of these hedge instruments to the current, and much smaller,

repurchase agreement interest expense amounts has materially impacted the economic interest amounts reported below.

Losses on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)

(in thousands)

Recognized in

Statement of

TBA

Operations

Securities

Futures

Three Months Ended

(GAAP)

Loss

Contracts

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(2)

March 31, 2020

(5,291)

(1,441)

(3,850)

Six Months Ended

June 30, 2021

June 30, 2020

(5,292)

(1,441)

(3,851)

Gains (Losses) on Derivative Instruments - Attributed to Current Period (Non-GAAP)

(in thousands)

Attributed to Current Period (Non-GAAP)

Attributed to Future Periods (Non-GAAP)

Repurchase

Long-Term

Repurchase

Long-Term

Statement of

Three Months Ended

Agreements

Debt

Total

Agreements

Debt

Total

Operations

June 30, 2021

(708)

(58)

(766)

708

766

March 31, 2021

(708)

(58)

(766)

708

766

25 -

December 31, 2020

(615)

(40)

(655)

615

655

September 30, 2020

(1,065)

(40)

(1,105)

1,065

1,105

June 30, 2020

(456)

(40)

(496)

456

494

(2)

March 31, 2020

(456)

(40)

(496)

(2,879)

(475)

(3,354)

(3,850)

Six Months Ended

June 30, 2021

(1,416)

(116)

(1,532)

1,416

116

1,532

June 30, 2020

(912)

(80)

(992)

(2,423)

(437)

(2,860)

(3,852)

Economic Net Portfolio Interest Income

(in thousands)

Interest Expense on Repurchase Agreements

Net Portfolio

Effect of

Interest Income

Interest

GAAP

Non-GAAP

Economic

GAAP

Economic

Three Months Ended

Income

Basis

Hedges

(1)

Basis

(2)

Basis

(3)

June 30, 2021

578

(708)

739

547

(161)

March 31, 2021

611

(708)

748

571

(137)

December 31, 2020

597

(615)

658

554

(61)

September 30, 2020

604

(1,065)

1,108

561

(504)

June 30, 2020

523

(456)

516

463

March 31, 2020

2,040

928

(456)

1,384

1,112

656

Six Months Ended

June 30, 2021

1,189

(1,416)

1,487

1,118

(298)

June 30, 2020

2,563

988

(912)

1,900

1,575

663

(1)

Reflects the effect of derivative instrument hedges for only the

period presented.

(2)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense.

(3)

Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net portfolio interest

income.

Economic Net Interest Income

(in thousands)

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

(1)

Basis

Hedges

(2)

Basis

(3)

Basis

(4)

June 30, 2021

547

(161)

250

(58)

308

297

(469)

March 31, 2021

571

(137)

250

(58)

308

321

(445)

December 31, 2020

554

(61)

257

(40)

297

(358)

September 30, 2020

561

(504)

261

(40)

301

300

(805)

June 30, 2020

463

282

(40)

322

181

(315)

March 31, 2020

1,112

656

350

(40)

390

762

266

Six Months Ended

June 30, 2021

1,118

(298)

500

(116)

616

618

(914)

June 30, 2020

1,575

663

632

(80)

712

943

(49)

(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

26 -

We have two operating segments. The asset management segment includes the investment

advisory services provided by Bimini

Advisors to Orchid and Royal Palm. The investment portfolio segment includes the

investment activities conducted by Royal Palm.

Segment information for the six months ended June 30, 2021 and 2020 is as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

4,211

Advisory services, other operating segments

(1)

(72)

Interest and dividend income

2,201

Interest expense

(71)

(499)

(2)

(570)

Net revenues

4,283

2,130

(499)

(72)

5,842

Other income

(1,976)

154

(3)

(1,822)

Operating expenses

(4)

(2,230)

(1,251)

(3,481)

Intercompany expenses

(1)

(72)

Income (loss) before income taxes

2,053

(1,169)

(345)

539

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

3,340

Advisory services, other operating segments

(1)

(84)

Interest and dividend income

3,317

Interest expense

(988)

(632)

(2)

(1,620)

Net revenues

3,424

2,329

(632)

(84)

5,037

Other expenses

(11,307)

(516)

(3)

(11,823)

Operating expenses

(4)

(1,690)

(1,701)

(3,391)

Intercompany expenses

(1)

(84)

Income (loss) before income taxes

1,734

(10,763)

(1,148)

(10,177)

Segment information for the three months ended June 30, 2021 and 2020 is as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,186

Advisory services, other operating segments

(1)

(37)

Interest and dividend income

1,084

Interest expense

(31)

(250)

(2)

(281)

Net revenues

2,223

1,053

(250)

(37)

2,989

Other

(2,634)

154

(3)

(2,480)

Operating expenses

(4)

(1,125)

(599)

(1,724)

Intercompany expenses

(1)

(37)

Income (loss) before income taxes

1,098

(2,217)

(96)

(1,215)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,615

Advisory services, other operating segments

(1)

(26)

Interest and dividend income

912

Interest expense

(60)

(282)

(2)

(342)

27 -

Net revenues

1,641

852

(282)

(26)

2,185

Other

4,256

(2)

(3)

4,254

Operating expenses

(4)

(1,067)

(618)

(1,685)

Intercompany expenses

(1)

(26)

Income (loss) before income taxes

574

4,464

(284)

4,754

(1)

Includes advisory services revenue received by Bimini Advisors from

Royal Palm.

(2)

Includes interest on long-term debt.

(3)

Includes income recognized on the forgiveness of the PPP loan and

gains (losses) on Eurodollar futures contracts entered into as a hedge

junior subordinated notes.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment were as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

June 30, 2021

1,733

120,020

12,919

134,672

December 31, 2020

1,469

113,764

13,468

128,701

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 1.5% 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.

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 2022 and provides for automatic one-year extension

options. Should Orchid terminate the management

agreement without cause, it will be obligated to pay to us a termination fee equal

to three times the average annual management fee,

as defined in the management agreement, before or on the last day of the automatic

renewal term.

The following table summarizes the advisory services revenue received from

Orchid in each quarter during 2021 and 2020.

(in thousands)

Average

Advisory Services

Orchid

Management

Overhead

Three Months Ended

MBS

Equity

Fee

Allocation

Total

June 30, 2021

4,504,887

542,679

1,791

395

2,186

March 31, 2021

4,032,716

456,687

1,621

404

2,025

December 31, 2020

3,633,631

387,503

1,384

442

1,826

September 30, 2020

3,422,564

368,588

1,252

377

1,629

June 30, 2020

3,126,779

361,093

1,268

347

1,615

March 31, 2020

3,269,859

376,673

1,377

348

1,725

Six Months Ended

June 30, 2021

4,268,801

499,683

3,412

799

4,211

28 -

June 30, 2020

3,198,319

368,883

2,645

695

3,340

Investment Portfolio Segment

Net Portfolio Interest Income

We define net

portfolio

interest income

as interest

income on

MBS less interest

expense on

repurchase

agreement

funding.

During the

six months

ended June

30, 2021,

we generated

$1.1 million

of net portfolio

interest income,

consisting

of $1.2

million of

interest income

from

MBS assets offset by

$0.1 million of interest

expense on repurchase liabilities.

For the comparable period ended

June 30, 2020,

generated

$1.6 million

of net portfolio

interest income,

consisting

of $2.6 million

of interest

income from

MBS assets

offset by

$1.0 million

interest expense

on repurchase

liabilities.

The $1.4 million

decrease

in interest

income for

the six months

ended June

30, 2021

was due to

a $24.9 million

decrease

in average

MBS balances,

combined

with a 200 basis

point ("bp")

decrease

in yields earned

on the portfolio.

The

$0.9 million

decrease in

interest

expense for the

six months

ended June

30, 2021 was

due to a combination

of a $20.9 million

decrease in

average repurchase

liabilities

and a 196

bp decrease

in cost of

funds.

Our economic interest

expense on repurchase

liabilities

for the six months ended

June 30, 2021 and 2020

was $1.5 million

and $1.9

million, respectively,

resulting in

($0.3) million

and $0.7 million

of economic

net portfolio

interest

income, respectively.

During the three months ended June 30, 2021, we generated approximately $547,000 of net portfolio interest income, consisting

approximately

$578,000 of

interest

income from MBS

assets offset

by approximately

$31,000 of

interest expense

on repurchase

liabilities.

For the

three months

ended June

30, 2020,

we generated

approximately

$523,000 of

net portfolio

interest income, consisting

approximately

$463,000 of

interest

income from

MBS assets

offset by approximately

$60,000 of

interest expense

on repurchase

liabilities.

Our economic

interest expense

on repurchase

liabilities

for the three

months ended

June 30,

2021 and

2020 was $0.7

million and

$0.5

million, respectively,

resulting in

($0.2) million

and approximately

$7,000 of

economic net

portfolio

interest income,

respectively.

The tables

below provide

information

on our

portfolio

average balances,

interest income,

yield on

assets, average

repurchase

agreement

balances, interest

expense, cost

of funds,

net interest

income and

net interest

rate spread

for the six

months ended

June 30,

2021 and

2020

and each quarter

in 2021 and

2020 on both

a GAAP and

economic basis.

($ in thousands)

Average

Yield on

Average

Interest Expense

Average Cost of Funds

MBS

Interest

Average

Repurchase

GAAP

Economic

GAAP

Economic

Three Months Ended

Held

(1)

Income

(2)

MBS

Agreements

(1)

Basis

(2)

Basis

(3)

June 30, 2021

70,925

578

3.26%

72,241

739

0.17%

4.09%

March 31, 2021

69,017

611

3.54%

69,104

748

0.23%

4.33%

December 31, 2020

69,161

597

3.45%

67,878

658

0.25%

3.88%

September 30, 2020

62,981

604

3.84%

61,151

1,108

0.28%

7.25%

June 30, 2020

53,630

523

3.90%

51,987

516

0.46%

3.97%

March 31, 2020

136,142

2,040

5.99%

131,156

928

1,384

2.83%

4.22%

Six Months Ended

June 30, 2021

69,971

1,189

3.40%

70,672

1,487

0.20%

4.21%

June 30, 2020

94,886

2,563

5.40%

91,571

988

1,900

2.16%

4.15%

($ in thousands)

Net Portfolio

Interest Income

Interest Spread

GAAP

Economic

GAAP

Economic

Three Months Ended

Basis

(2)

Basis

(4)

June 30, 2021

547

(161)

3.09%

(0.83)%

March 31, 2021

571

(137)

3.31%

(0.79)%

29 -

December 31, 2020

554

(61)

3.20%

(0.42)%

September 30, 2020

561

(504)

3.56%

(3.40)%

June 30, 2020

463

3.44%

(0.07)%

March 31, 2020

1,112

656

3.16%

1.77%

Six Months Ended

June 30, 2021

1,118

(298)

3.20%

(0.81)%

June 30, 2020

1,575

663

3.24%

1.25%

(1)

Portfolio yields and

costs of borrowings

presented in the

tables

above and the

tables on pages

29 and 30

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

30 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.

Interest Income and Average Earning Asset Yield

Our interest

income was

$1.2 million

for the six

months ended

June 30, 2021

and $2.6 million

for the six

months ended

June 30,

2020.

Average MBS

holdings were

$70.0 million

and $94.9

million for

the six months

ended June

30, 2021

and 2020,

respectively. The

$1.4 million

decrease in

interest income

was due to

a $24.9 million

decrease

in average

MBS holdings,

combined with

a 200 bp decrease

in yields.

Our interest

income was $0.6

million for the

three months

ended June

30, 2021 and $0.5

million for

the three months

ended June

30,

2020.

Average MBS holdings

were $70.9 million

and $53.6 million

for the three

months ended

June 30, 2021

and 2020, respectively.

The

$0.1 million

increase in

interest income

was due to

a $17.3 million

increase in

average MBS

holdings,

partially offset

by a 64 bp

decrease in

yields.

The tables below present

the average portfolio

size, income and yields

of our respective

sub-portfolios,

consisting

of structured

MBS

and PT MBS,

for the six

months ended

June 30, 2021

and 2020,

and for each

quarter during

2021 and 2020.

($ in thousands)

Average MBS Held

Interest Income

Realized Yield on Average MBS

Structured

Three Months Ended

MBS

Total

MBS

Total

MBS

Total

June 30, 2021

70,207

718

70,925

579

(1)

578

3.30%

(0.11)%

3.26%

March 31, 2021

68,703

314

69,017

605

611

3.53%

6.54%

3.54%

December 31, 2020

68,842

319

69,161

598

(1)

597

3.47%

(1.20)%

3.45%

September 30, 2020

62,564

417

62,981

588

604

3.76%

15.35%

3.84%

June 30, 2020

53,101

529

53,630

502

523

3.78%

16.12%

3.90%

March 31, 2020

135,044

1,098

136,142

2,029

2,040

6.01%

3.93%

5.99%

Six Months Ended

June 30, 2021

69,455

516

69,971

1,184

1,189

3.41%

1.92%

3.40%

June 30, 2020

94,073

813

94,886

2,531

2,563

5.38%

7.89%

5.40%

Interest Expense on Repurchase Agreements and the Cost of Funds

Our average

outstanding

balances

under repurchase

agreements

were $70.7

million and

$91.6 million,

generating

interest expense

$0.1 million and $1.0 million for the six months ended June 30, 2021 and 2020, respectively.

Our average cost of funds was 0.20% and

2.16% for

six months

ended June

30, 2021 and

2020,

respectively.

There was

a 196 bp

decrease

in the average

cost of funds

and a $20.9

million decrease

in average outstanding

repurchase

agreements

during the six months

ended June 30,

2021, compared

to the six months

ended June

30, 2020.

30 -

Our economic

interest expense

was $1.5

million and

$1.9 million

for the

six months

ended June

30, 2021

and 2020,

respectively. There

was a 6

bp increase

in the average

economic cost

of funds

to 4.21%

for the six

months ended

June 30,

2021 from

4.15% for

the six months

ended June

30, 2020.

The $0.4

million decrease

in economic

interest

expense was

due to

the $20.9

million decrease

in average

outstanding

repurchase

agreements

during the

six months

ended June

30, 2021.

Our average

outstanding

balances

under repurchase

agreements

were $72.2

million and

$52.0 million,

generating

interest expense

approximately

$31,000 and

60,000 for

the three

months ended

June 30,

2021 and

2020, respectively.

Our average

cost of

funds was

0.17%

and 0.46% for

three months

ended June

30, 2021 and

2020, respectively.

There was a

29 bp decrease

in the average

cost of funds

and a

$20.3 million

increase in

average outstanding

repurchase

agreements

during the

three months

ended June

30, 2021,

compared to

the three

months ended

June 30, 2020.

Our economic interest

expense was $0.7 million

and $0.5 million for the three months ended June 30, 2021 and 2020, respectively.

There was a

12 bp increase

in the average

economic cost

of funds

to 4.09% for

the three months

ended June

30, 2021 from

3.97% for the

three months

ended June

30, 2020.

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 7 bps above the average one-month LIBOR and 1

bp below the

average six-month

LIBOR for

the quarter

ended June

30, 2021.

Our average

economic cost

of funds was

399 bps above

the average

one-

month LIBOR

and 391 bps above

the average

six-month LIBOR

for the quarter

ended June 30,

The average

term to maturity

of the

outstanding

repurchase

agreements

decreased from

33 days at

December 31,

2020 to 25

days at June

30, 2021.

The tables

below present

the average

outstanding

balances under

our repurchase

agreements,

interest expense

and average

economic

cost of funds,

and average

one-month

and six-month

LIBOR rates

for the six months

ended June

30, 2021 and

2020, and for

each quarter

in 2021 and

2020, 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

June 30, 2021

72,241

739

0.17%

4.09%

March 31, 2021

69,104

748

0.23%

4.33%

December 31, 2020

67,878

658

0.25%

3.88%

September 30, 2020

61,151

1,108

0.28%

7.25%

June 30, 2020

51,987

516

0.46%

3.97%

March 31, 2020

131,156

928

1,384

2.83%

4.22%

Six Months Ended

June 30, 2021

70,672

1,487

0.20%

4.21%

June 30, 2020

91,571

988

1,900

2.16%

4.15%

Average GAAP Cost of Funds

Average Economic Cost of Funds

Relative to Average

Average LIBOR

One-Month

Six-Month

One-Month

Six-Month

Three Months Ended

One-Month

Six-Month

LIBOR

June 30, 2021

0.10%

0.18%

0.07%

(0.01)%

3.99%

3.91%

March 31, 2021

0.13%

0.23%

0.10%

0.00%

4.20%

4.10%

December 31, 2020

0.15%

0.27%

0.10%

(0.02)%

3.73%

3.61%

September 30, 2020

0.17%

0.35%

0.11%

(0.07)%

7.08%

6.90%

June 30, 2020

0.55%

0.70%

(0.09)%

(0.24)%

3.42%

3.27%

March 31, 2020

1.34%

1.43%

1.49%

1.40%

2.88%

2.79%

Six Months Ended

31 -

June 30, 2021

0.11%

0.20%

0.09%

0.00%

4.10%

4.01%

June 30, 2020

0.94%

1.06%

1.22%

1.10%

3.21%

3.09%

Dividend Income

We owned 1,520,036

shares of Orchid

common stock

as of March 31, 2020.

We acquired 975,321

additional

shares during

the three

months ended June 30, 2020, and an additional 100,000 shares during the three months ended September 30, 2020, bringing our total

ownership

to 2,595,357

shares. Orchid

paid total

dividends of

$0.39 per

share and

$0.195 per

share during

the six and

three months

ended

June 30,

2021, respectively,

and $0.405

per share

and $0.165

per share

during the

six and

three months

ended June

30, 2020,

respectively.

During the

six and

three months

ended June

30, 2021,

we received

dividends

on this

common stock

investment

of approximately

$1.0 million

and $0.5

million, respectively,

compared

to $0.8 million

and $0.4

million during

the six and

three months

ended June

30, 2020,

respectively.

Long-Term Debt

Junior Subordinated Notes

Interest expense

on our junior subordinated

debt securities

was $0.5 million

and $0.6 million

for the six months ended

June 30, 2021

and 2020,

respectively.

The average

rate of interest

paid for the six months

ended June 30, 2021

was 3.69% compared

to 4.68% for the

comparable

period in

2020.

Interest expense

on our junior subordinated

debt securities

was $0.2 million

and $0.3 million

for the three month

periods ended June

30, 2021 and 2020, respectively.

The average rate of interest paid for the three months ended June 30,

2021 was 3.67% compared to

4.17% for

the comparable

period in

2020.

The junior

subordinated

debt securities

pay interest

at a floating

rate.

The rate is

adjusted quarterly

and set at

a spread of

3.50% over

the prevailing

three-month

LIBOR rate

on the determination

date.

As of June

30, 2021,

the interest

rate was 3.62%.

Note Payable

On October 30, 2019,

the Company borrowed $680,000 from a

bank. The note is

payable in equal monthly principal and

interest

installments

of approximately

$4,500 through

October 30, 2039.

Interest accrues

at 4.89% through

October 30, 2024. Thereafter,

interest

accrues based

on the weekly

average yield

to the United

States Treasury

securities

adjusted to

a constant maturity

of 5 years, plus

3.25%.

The note is

secured by

a mortgage

on the Company’s

office building.

Paycheck Protection Plan Loan

On April 13, 2020, the Company received

approximately

$152,000

through the Paycheck

Protection

Program (“PPP”)

of the CARES

Act in

the form

of a low

interest loan.

The Small

Business Administration

notified the

Company that,

effective as

of April

22, 2021,all

principal

and accrued

interest under

the PPP loan

has been forgiven.

Gains or Losses and Other Income

The table

below presents

our gains

or losses and

other income

for the six

and three

months ended

June 30, 2021

and 2020.

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

Change

2021

2020

Change

Realized losses on sales of MBS

(5,805)

5,805

Unrealized (losses) gains on MBS

(1,898)

(1,926)

(506)

602

(1,108)

32 -

Total (losses)

gains on MBS

(1,898)

(5,777)

3,879

(506)

602

(1,108)

Losses on derivative instruments

(5,292)

5,292

(2)

Unrealized (losses) gains on

Orchid Island Capital, Inc. common stock

(78)

(755)

677

(2,128)

3,653

(5,781)

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 high

er risk-adjusted returns in

light of current

anticipated

interest rates, federal government programs

or general economic conditions or to manage our

balance sheet as part of

our

asset/liability

management

strategy. During

the six months

ended June 30,

2020, we received

proceeds of

$171.2 million

from the sales

MBS.

Most of

these sales

occurred

during the

second half

of March

2020 as

we sold

assets in

order to

maintain our

leverage ratio

at prudent

levels, maintain

sufficient cash

and liquidity

and reduce

risk associated

with the market

turmoil brought

about by COVID-19.

We did not

sell

any MBS during

the six months

ended June

30, 2021.

The fair value of

our MBS portfolio and derivative instruments, and

the gains (losses) reported on

those financial instruments, are

sensitive to

changes in

interest rates.

The table

below presents

historical

interest rate

data for each

quarter end

during 2021

and 2020.

5 Year

10 Year

15 Year

30 Year

Three

U.S. Treasury

Fixed-Rate

Month

Rate

(1)

Rate

(1)

Mortgage Rate

(2)

Mortgage Rate

(2)

Libor

(3)

June 30, 2021

0.87%

1.44%

2.27%

2.98%

0.13%

March 31, 2021

0.94%

1.75%

2.39%

3.08%

0.19%

December 31, 2020

0.36%

0.92%

2.22%

2.68%

0.23%

September 30, 2020

0.27%

0.68%

2.39%

2.89%

0.24%

June 30, 2020

0.29%

0.65%

2.60%

3.16%

0.31%

March 31, 2020

0.38%

0.70%

2.89%

3.45%

1.10%

(1)

Historical 5 Year and

10 Year U.S. Treasury

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

Options Exchange.

(2)

Historical 15 Year and

30 Year Fixed

Rate Mortgage Rates are obtained from Freddie Mac’s

Primary Mortgage Market Survey.

(3)

Historical LIBOR are obtained from the Intercontinental Exchange Benchmark

Administration Ltd.

Operating Expenses

For the six and three months

ended June 30, 2021, our total operating expenses were approximately $3.5 million and $1.7 million,

respectively, compared

to approximately

$3.4 million

and $1.7

million for

the six and

three months

ended June

30, 2020,

respectively.

The

table below

presents a

breakdown

of operating

expenses for

the six and

three months

ended June

30, 2021 and

2020.

(in thousands)

Six Months Ended June 30,

Three Months Ended June 30,

2021

2020

Change

2021

2020

Change

Compensation and related benefits

2,190

2,147

1,067

1,047

Legal fees

(18)

(43)

Accounting, auditing and other professional fees

195

251

(56)

102

112

(10)

Directors’ fees and liability insurance

378

346

190

181

Administrative and other expenses

641

552

333

270

3,481

3,391

1,724

1,685

Income Tax Provision

We recorded an income tax provision (benefit) for the six and three months ended June 30,

2021 of approximately $0.2 million and

$(0.3) million, respectively, on consolidated pre-tax book income (loss) of $0.5 million and $(1.2) million, respectively.

We recorded an

33 -

income tax provision for the six and three months ended June 30, 2020 of approximately $8.7

million and $1.3 million, respectively, on

consolidated pre-tax book (loss) income of $(10.2) million and $4.8 million.

As a result

of adverse

economic impacts

of COVID-19

on our business,

management

performed

an assessment

of the need

for

additional

valuation allowances

against existing

deferred tax

assets. Following

the more-likely-than-not

standard that

benefits will

not be

realized in

the future,

we determined

an additional

valuation allowance

of approximately

$11.2 million was

necessary during

the three

months ended

March 31,

2020 for

the net operating

loss carryforwards

and capital

loss carryforwards.

With the evolving

and changing

landscape caused

by the pandemic,

we will continue

to closely

monitor the

impacts of

COVID-19

on the Company’s

ability to

realize its

deferred tax

assets and

may increase

valuation allowances

in the future

as new information

becomes available.

Financial

Condition:

Mortgage-Backed Securities

As of June

30, 2021,

our MBS portfolio

consisted of

$69.0 million

of agency or

government

MBS at fair

value and had

a weighted

average coupon

of 3.33%.

During the

six months

ended June

30, 2021,

we received

principal repayments

of $7.4 million

compared

$8.9 million

for the comparable

period ended

June 30, 2020.

The average

prepayment

speeds for

the quarters

ended June

30, 2021 and

2020 were

21.9% and

15.3%,

respectively.

The following

table presents

the 3-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 (%)

June 30, 2021

21.0

31.3

21.9

March 31, 2021

18.5

16.4

18.3

December 31, 2020

12.8

24.5

14.4

September 30, 2020

13.0

32.0

15.8

June 30, 2020

12.4

25.0

15.3

March 31, 2020

11.6

18.1

13.7

The following

tables summarize

certain characteristics

of our PT

MBS and structured

MBS as of June

30, 2021 and

December 31,

2020:

($ in thousands)

Weighted

Percentage

Average

Weighted

Maturity

Fair

Entire

Average

Longest

Asset Category

Value

Portfolio

Coupon

Months

Maturity

June 30, 2021

Fixed Rate MBS

67,910

98.4%

3.62%

333

1-Jan-51

Interest-Only MBS

1,064

1.6%

2.16%

346

1-May-51

Inverse Interest-Only MBS

0.0%

5.93%

215

15-May-39

Total MBS Portfolio

68,994

100.0%

3.33%

333

1-May-51

December 31, 2020

Fixed Rate MBS

64,902

99.6%

3.89%

333

1-Aug-50

Interest-Only MBS

251

0.4%

3.56%

299

15-Jul-48

34 -

Inverse Interest-Only MBS

0.0%

5.84%

221

15-May-39

Total MBS Portfolio

65,178

100.0%

3.89%

333

1-Aug-50

($ in thousands)

June 30, 2021

December 31, 2020

Percentage of

Agency

Fair Value

Entire Portfolio

Fair Value

Entire Portfolio

Fannie Mae

45,707

66.2%

38,946

59.8%

Freddie Mac

23,287

33.8%

26,232

40.2%

Total Portfolio

68,994

100.0%

65,178

100.0%

June 30, 2021

December 31, 2020

Weighted Average Pass-through Purchase Price

108.84

109.51

Weighted Average Structured Purchase Price

4.48

4.28

Weighted Average Pass-through Current Price

109.40

112.67

Weighted Average Structured Current Price

6.82

3.20

Effective Duration

(1)

3.562

3.309

(1)

Effective duration is the approximate percentage change

in price for a 100 basis point change in rates.

An effective duration of 3.562 indicates

that an interest rate increase of 1.0% would be expected to cause a 3.562% decrease

in the value of the MBS in our investment portfolio

June 30, 2021.

An effective duration of 3.309 indicates that an interest rate

increase of 1.0% would be expected to cause a 3.309% decrease

in the value of the MBS in our investment portfolio at December 31,

These figures include the structured securities in the portfolio

but do

include the effect of our hedges.

Effective duration quotes for individual investments are obtained

from The Yield Book, Inc.

The following

table presents

a summary of

our portfolio

assets acquired

during the

six months

ended June

30, 2021 and

2020.

($ in thousands)

Six Months Ended June 30,

2021

2020

Total Cost

Average

Price

Weighted

Average

Yield

Total Cost

Average

Price

Weighted

Average

Yield

PT MBS

12,368

104.84

1.19%

20,823

110.83

2.64%

Structured MBS

772

7.72

3.33%

Our portfolio

of PT MBS

is typically

comprised of

adjustable-rate

MBS, fixed-rate

MBS and hybrid

adjustable-rate

MBS. We generally

seek to acquire

low duration

assets that

offer high levels

of protection

from mortgage

prepayments

provided that

they are reasonably

priced by the

market.

The stated

contractual

final maturity

of the mortgage

loans underlying

our portfolio

of PT MBS

generally ranges

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

connection

with home

sales, and

borrowers

paying more

than their

scheduled loan

payments,

which accelerates

the amortization

of the

loans.

The duration

of our IO

and IIO portfolio

will vary greatly

depending

on the structural

features of

the securities.

While prepayment

activity will

always affect

the cash flows

associated

with the securities,

the interest

only nature

of IO’s may cause

their durations

to become

extremely negative

when prepayments

are high,

and less negative

when prepayments

are low. Prepayments

affect the duration

of IIO’s

similarly, but the

floating rate

nature of

the coupon

of IIOs (which

is inversely

related to

the level

of one month

LIBOR) causes

their price

movements -

and model duration

to be affected

by changes

in both prepayments

and one month

LIBOR - both

current and

anticipated

levels.

As a result,

the duration

of IIO securities

will also vary

greatly.

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

35 -

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

expected prepayments.

We face

the risk that

the market

value of our

PT MBS assets

will increase

or decrease

at different

rates than

that of our

structured

MBS or liabilities,

including our

hedging instruments.

Accordingly, we

assess our

interest rate

risk by estimating

the duration

of our assets

and the duration

of our liabilities.

We generally

calculate duration

and effective

duration using

various third-party

models or obtain

these

quotes from

third parties.

However, empirical

results and

various third-party

models may

produce different

duration numbers

for the same

securities.

The following

sensitivity

analysis

shows the

estimated impact

on the fair

value of our

interest rate-sensitive

investments

and hedge

positions as

of June 30,

2021, assuming

rates instantaneously

fall 100 bps,

rise 100 bps

and rise

200 bps, adjusted

to reflect

the impact

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

67,910

2,287

(3,172)

(6,909)

3.37%

(4.67)%

(10.17)%

Interest-Only MBS

1,064

(274)

194

289

(25.79)%

18.29%

27.21%

Inverse Interest-Only MBS

(3)

(6)

5.01%

(14.81)%

(30.23)%

Total MBS Portfolio

68,994

2,014

(2,981)

(6,626)

2.92%

(4.32)%

(9.60)%

($ in thousands)

Notional

$ Change in Fair Value

% Change in Fair Value

Amount

(1)

-100BPS

+100BPS

+200BPS

-100BPS

+100BPS

+200BPS

Eurodollar Futures Contracts

Junior Subordinated Debt Hedges

1,000

(5)

(1.00)%

1.00%

2.00%

1,000

(5)

Gross Totals

2,009

(2,976)

(6,616)

(1)

Represents the

average contract/notional

amount of Eurodollar

futures contracts.

In addition

to changes

in interest

rates, other

factors impact

the fair value

of our interest

rate-sensitive

investments

and hedging

instruments,

such as the

shape of

the yield curve,

market expectations

as to future

interest rate

changes and

other market

conditions.

Accordingly, in the

event of changes

in actual interest

rates, the

change in the

fair value

of our assets

would likely

differ from

that shown

above and

such difference

might be

material and

adverse to

our stockholders.

Repurchase Agreements

As of June

30, 2021,

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.

believe these

facilities

provide

borrowing

capacity in

excess of

our needs.

None of these

lenders are

affiliated with

us.

These borrowings

are secured

by our MBS.

As of June

30, 2021,

we had obligations

outstanding

under the

repurchase

agreements

of approximately

$71.3 million

with a net

weighted average

borrowing

cost of 0.16%.

The remaining

maturity of

our outstanding

repurchase

agreement

obligations

ranged from

6 to

51 days, with

a weighted

average maturity

of 25 days.

Securing the

repurchase

agreement

obligation

as of June

30, 2021 are

MBS with

an estimated

fair value,

including

accrued interest,

of $69.2 million

and a weighted

average maturity

of 332 months.

Through August

13,

36 -

2021, we have

been able

to maintain

our repurchase

facilities

with comparable

terms to those

that existed

at June 30,

2021 with

maturities

through October

19, 2021.

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

repurchase agreement obligations for each

quarter in 2021 and 2020.

($ in thousands)

Ending

Maximum

Average

Difference Between Ending

Balance

Repurchase Agreements and

of Repurchase

Average Repurchase Agreements

Three Months Ended

Agreements

Amount

Percent

June 30, 2021

71,346

72,372

72,241

(895)

(1.24)%

March 31, 2021

73,136

76,004

69,104

4,032

5.83%

December 31, 2020

65,071

70,684

67,878

(2,807)

(4.14)%

September 30, 2020

70,685

70,794

61,151

9,534

15.59%

(1)

June 30, 2020

51,617

52,068

51,987

(370)

(0.71)%

March 31, 2020

52,357

214,921

131,156

(78,799)

(60.08)%

(2)

(1)

The higher ending balance relative to the average balance during the

quarter ended September 30, 2020 reflects the increase in the portfolio.

During that quarter, the Company's investment

in PT MBS increased $20.4 million.

(2)

The lower ending balance relative to the average balance during the quarter

ended March 31, 2020 reflects the Company’s response to

the

COVID-19 pandemic. During that quarter,

the Company's investment in PT MBS decreased $162.4 million.

Liquidity and Capital Resources

Liquidity is

our ability

to turn non-cash

assets into

cash, purchase

additional

investments,

repay principal

and interest

on borrowings,

fund overhead

and fulfill

margin calls.

Our primary

immediate

sources of

liquidity include

cash balances,

unencumbered

assets, the

availability

to borrow

under repurchase

agreements,

and fees and

dividends received

from Orchid.

Our borrowing

capacity will

vary over

time as the

market value

of our interest

earning assets

varies.

Our investments

also generate

liquidity on

an on-going

basis through

payments of

principal and

interest

we receive

on our MBS

portfolio.

The COVID-19

pandemic has

adversely affected

our liquidity,

assets under

management

and operating

results.

During March

2020,

we significantly

reduced our

MBS assets

to meet margin

calls and

repay debts.

As described

elsewhere

in this report,

since March

2020

Bimini’s operating

results have

stabilized,

liquidity

has improved

and our investments

in MBS and

Orchid shares

have increased.

Our hedging

strategy typically

involves taking

short positions

in Eurodollar

futures, T-Note

futures, TBAs

or other instruments.

Currently, our

hedge positions

are limited

to short positions

in Eurodollar

futures.

When the market

causes these

short positions

to decline

in value we

are required

to meet margin

calls with

cash.

This can reduce

our liquidity

position to

the extent

other securities

in our portfolio

move in price

in such a way

that we do

not receive

enough cash

through margin

calls to offset

the Eurodollar

related margin

calls. If this

were to occur

in sufficient

magnitude,

the loss of

liquidity might

force us to

reduce the

size of the

levered portfolio,

pledge additional

structured

securities

to raise funds

or risk operating

the portfolio

with less liquidity.

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

37 -

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.

As discussed

above, we

invest a portion

of our capital

in structured

MBS.

We generally

do not apply

leverage to

this portion

of our

portfolio.

The leverage

inherent in

the structured

securities

replaces the

leverage obtained

by acquiring

PT securities

and funding

them in

the repurchase

market.

This structured

MBS strategy

has been a

core element

of the Company’s

overall investment

strategy

since 2008.

However, we have

and may continue

to pledge

a portion

of our structured

MBS in order

to raise our

cash levels,

but generally

will not

pledge these

securities

in order

to acquire

additional

assets.

In future

periods we

expect to continue

to finance

our activities

through repurchase

agreements.

As of June

30, 2021,

we had cash

and cash equivalents

of $7.3 million.

We generated

cash flows

of $8.6 million

from principal

and interest

payments on

our MBS portfolio

and had average

repurchase

agreements

outstanding

of $70.7 million

during the

six months

ended June

30, 2021.

In addition,

during the

six months

ended June

30, 2021,

we received

approximately

$4.1 million

in management

fees and

expense reimbursements

as manager

of Orchid and

approximately

$1.0 million

in dividends

from our investment

in Orchid common

stock.

In order to generate additional cash to be invested in our MBS portfolio, on October

30, 2019, we obtained a $680,000 loan

secured by a mortgage on the Company’s office property.

The loan is payable in equal monthly principal and interest installments of

approximately $4,500 through October 30, 2039. Interest accrues at 4.89%, through October

30, 2024. Thereafter, interest accrued

based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity

of five years, plus 3.25%.

Net loan proceeds were approximately $651,000.

In addition,

during 2020, we completed the sale of real property that was

not used in

the Company’s business.

The proceeds from this sale were approximately $462,000 and were

invested in our MBS portfolio.

The table below summarizes the effect that certain future contractual obligations existing as of June

30, 2021 will have on our

liquidity and cash flows. The figures below reflect forgiveness of all principal and interest under

the PPP loan.

(in thousands)

Obligations Maturing

Within One

Year

One to Three

Years

Three to Five

Years

More than

Five Years

Total

Repurchase agreements

71,346

Interest expense on repurchase agreements

(1)

Junior subordinated notes

(2)

26,000

Interest expense on junior subordinated notes

(1)

996

1,911

1,908

9,030

13,845

Principal and interest on mortgage loan

(1)

107

108

717

986

Totals

72,439

2,018

2,016

35,747

112,220

(1)

Interest expense

on repurchase

agreements,

junior subordinated

notes and mortgage

loan are based

on current interest

rates as of June

30, 2021

and the remaining

term of liabilities

existing at

that date.

(2)

We hold a common

equity interest

in Bimini Capital

Trust II.

The amount presented

represents our net

cash outlay.

Outlook

Orchid Island

Capital Inc.

Orchid Island Capital had another strong quarter growing its capital base.

Orchid raised net proceeds of approximately $124.7

million through its “at the market” program. As for Orchid’s financial performance, while the

economy continued its strong recovery from

the COVID-19 pandemic, the interest rate market in the U.S. reversed course during the

second quarter as rates rallied throughout the

38 -

quarter and even more so into the third quarter.

Orchid had positioned its portfolio and hedges quite defensively as the second

quarter

unfolded, and Orchid’s MBS portfolio underperformed its hedge positions, resulting in a GAAP

loss of $0.17 per share or $16.9 million.

The net effect of the new shares issued, the net loss and dividends paid resulted in Orchid’s capital base increasing

$87.6 million, or

19% for during the second quarter.

Year to date Orchid has increased it capital base by approximately $138.5 million, or 33%.

As a

result, Bimini Advisor’s advisory services revenue increased 8% over the

first quarter and, as the increased capital base at Orchid was

not in place for the entire quarter, the run rate entering the third quarter is higher still.

Orchid’s financial performance and dividend

activity will also continue to impact the size of the capital base going forward.

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.

The Company increased its holdings of Orchid

during the second quarter of 2020, as the shares of Orchid were trading at a significant

discount to Orchid’s reported book value as of

March 31, 2020.

The Company currently owns approximately 2.6 million shares of Orchid.

The independent Board of Directors of Orchid has the ability to terminate the

management agreement and thus end our ability to

collect management fees and share overhead costs.

Should Orchid terminate the management agreement without cause,

it will be

obligated to pay 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 current automatic renewal term.

Economic Summary

The economy

continued its

strong recovery

from the COVID-19

pandemic during

the second

quarter of

2021.

The surge

in COVID-19

cases that

occurred during

the first

quarter of

2021 abated

quickly as inoculations

of the new

vaccines were

widely distributed

throughout

the

population

– especially

to those

most susceptible

to the virus.

New COVID-19

cases, hospitalizations

and deaths

from the

virus

decreased dramatically,

allowing

the economy

to reopen

and substantial

pent-up demand

on the part

of consumers

to be unleashed.

Additional

fiscal policy

steps taken

by the Biden

administration,

as described

below, added to

the surge

in economic

activity.

The economic

data released

throughout

the second

quarter provided

evidence of

the recovery.

Retail sales,

especially

car sales,

air

travel and

hotel demand,

surged.

Home sales

grew at a

pace that

exceeded the

early 2000s.

Home price

increases exceeded

levels

seen in the

early 2000s

as well,

eventually

leading to

a slow down

in home sales

and price

appreciation

in the early

days of the

third

quarter as

elevated home

prices became

an impediment

to new sales.

As the demand

for many goods

and services

surged, the

lingering

effects of the

pandemic acted

to retard

supply, leading to

price increases.

For example,

the supply

of computer

chips in the

case of autos

and consumer

electronics

could not

keep up with

demand.

Shortages

of commodities

like lumber

in the case

of housing,

and labor

generally, constrained

the economy’s

ability to

meet demand.

Labor remained

constrained

as workers

either were

content to

collect

supplemental

unemployment

insurance

available initially

under COVID-19

related legislation,

were fearful

of excess exposure

to COVID-

19 (especially

in the case

of leisure

and hospitality

workers) or

affected by

the lack of

access to

childcare,

and thus unable

to return

work.

Gross domestic

product,

or GDP, expanded at

an 6.5% annualized

rate during

the second

quarter of

2021.

Importantly, the

supply/demand

imbalance

mentioned

above, coupled

with an expansion

in the monetary

base driven

by both fiscal

and monetary

policy

(the Fed’s monthly

asset purchases),

have driven

inflation higher.

The consumer

price index,

or CPI, has

accelerated

to over 5%

on a

year over year

basis for the

first time

since 2008.

The lone disappointment

over the period

has been job

growth, as

mentioned above.

we enter the

third quarter

of 2021 job

growth has

accelerated,

but the rapid

emergence

of the delta

variant of

COVID-19

during July

may

negatively

impact job

growth.

Legislative

Response and

the Federal

Reserve

Congress passed

the CARES

Act quickly

in response

to the pandemic’s

emergence

last spring

and followed

with additional

legislation

over the ensuing

months.

However, as certain

provisions

of the CARES

Act expired,

such as supplemental

unemployment

insurance

last

39 -

July, there appeared

to be a need

for additional

stimulus for

the economy

to deal with

the surge

in the pandemic

that occurred

as cold

weather set

in, particularly

over the Christmas

holiday.

As mentioned

above, the

Federal government

eventually

passed an additional

stimulus package

in late December

of 2020 and

again in March

of 2021. In

addition, the

Fed has provided,

and continues

to provide,

much support

to the markets

and the economy

as it can within

the

constraints

of its mandate.

During the

third quarter

of 2020, the

Fed

unveiled a

new monetary

policy framework

focused on

average inflation

rate targeting

that allows

the Fed Funds

rate to remain

quite low,

even if inflation

is expected

to temporarily

surpass the

2% target

level. Further,

the Fed will

look past the

presence of

very tight

labor

markets, should

they be present

at the time.

This marks

a significant

shift from

their prior

policy framework,

which was

focused on

the

unemployment

rate as a

key indicator

of impending

inflation.

Adherence

to this policy

could steepen

the U.S.

Treasury curve

as short-term

rates could

remain low

for a considerable

period but

longer-term

rates could

rise given

the Fed’s intention

to let inflation

potentially

run

above 2% in

the future

as the economy

more fully

recovers.

The response

of U.S. Treasury

rates appeared

to follow

this pattern

precisely

during the

first quarter

of 2021 but

it has since

reversed since

early in the

second quarter

2021.

Interest Rates

As economic

activity and

inflation

accelerated

during the

second quarter

of 2021, market

participants

anticipated

interest rates

would

continue to

rise as they

had done

during the

first quarter

of the year.

This was most

evident in

the open interest

in the various

U.S.

Treasury futures

– namely the

level of contracts

shorted.

However, interest

rates did

not continue

to rise in

the second

quarter of

fact, over

the course

of the quarter,

longer term

interest rates

declined slowly

– by 27.2

bps in the

case of the

10-year U.S.

Treasury note

and 32.5 bps

in the case

of the 30-year

U.S. Treasury

bond.

Since quarter

end, rates

have accelerated

their decline,

especially

so as the

delta variant

of COVID-19

has appeared

to spread

at an accelerating

rate across

both the U.S.

and the globe.

The driver

of the counter-

intuitive movement

in rates was

likely the result

of technical

factors,

as market positioning

was so skewed

to the short

side and there

simply were

few if any

additional

sellers.

The disappointing

job growth

figures during

the second

quarter were

also cited

as evidence

the

market may

have been

overly optimistic

about the

magnitude of

the economic

recovery.

More recently,

the rapid

spread of

the delta

variant of

COVID-19

is causing

market participants

to lower their

near-term

growth estimates

– both for

the U.S.

and globally.

The Fed has

played a role

in the evolution

of interest

rates over

the course

of the quarter

as well. The

most significant

development

has been the

Fed’s insistence,

at least from

the FOMC leadership,

that the inflationary

pressures

evident in

the economy

will be transitory.

The Fed argues

that COVID-19

related supply

constraints

are driving

most price

pressures,

and that

activity related

to the opening

of the

economy – such

as travel,

dining out

and housing

– is causing

price pressures

related to

excessive demand,

which should

subside as

the

economy returns

to normal

levels of

activity.

Substantial

fiscal stimulus

also played

a role in

the Fed’s view

in that direct

payments to

consumers related

to the various

relief measures

passed by Congress

were one time

in nature

and their

effect will

fade.

Market pricing,

the level of

interest rates,

especially

long-term

rates, seems

to indicate

the market

agrees with

this point

of view.

However, at the

conclusion of

the FOMC meeting

in June, the

market was

surprised to

learn that

while the

leadership

of the Fed

maintained

this view, not

all members

of the FOMC

did.

Certain members

of the committee

believed that

inflation may

not be transitory,

and that as

a result the

Fed

would have

to raise interest

rates begin

to taper their

asset purchases

sooner than

previously

thought.

The market

interpreted

these

developments

as a hawkish

shift on

the part of

the Fed, although

the leadership

of the Fed

– especially

Chairman Powell

has pushed

back against

this interpretation

and insists

the Fed’s stance

has not changed.

The Agency

RMBS Market

Performance

for the Agency

RMBS market

for the second

quarter trailed

most other

asset classes,

especially

so in June.

The total

return for

the Agency

RMBS sub-index

was 0.33%

for the quarter.

As mentioned

above, at

the conclusion

of the June

FOMC meeting

was evident

that not all

committee

members shared

the view of

the Fed leadership

that the removal

of accommodation

was still far

off – or

that the recovery

was far from

complete.

Certain members

thought the

Fed would

have to taper

their asset

purchases and

eventually

raise

short-term

interest rates

much sooner.

For the Agency

RMBS market,

this meant

Fed purchases

of $40 billion

per month

might be

ending

sooner than

most market

participants

expected.

The extremely

strong housing

market added

credence to

the notion

that the Fed

did not

need to continue

to provide

support to

the market

any longer

as well.

Given the length

of time the

Fed has been

supporting

the Agency

RMBS market,

coupled with

banks that are

flush with

deposits that

need to be

invested, price

levels in

the Agency

RMBS market

were

quite rich

prior to this

development.

While all sectors

of the financial

markets appear

to be priced

at the high

end of long-term

price ranges,

40 -

the removal

of such a large

buyer of

Agency RMBS

likely would

have a negative

effect on their

valuations.

The market

has reacted

to the

potential of

lower Fed

purchases of

Agency RMBS,

leading to

the relative

under-performance

of the Agency

RMBS market

during the

second quarter

of 2021.

The second

driver of

Agency RMBS

performance,

both for the

second quarter

of 2021 and

beyond, is,

as always,

the level of

prepayments.

As the market

has rallied

– especially

long-term

rates – rates

available to

borrowers

are now back

to levels seen

last

summer, and burn-out

in higher

coupon, more

seasoned mortgages

has

been modest.

This has been

supportive

of specified

pool

premiums, a

core holding

of the Company.

Going forward,

prepayment activity

could accelerate

as a result

of the FHFA’s recent decision

to remove the

Adverse Market

Refinance

Fee effective

August 1,

2021, earlier

than

had been anticipated.

The fee was

paid by originators

to the GSE’s

as a form

of compensation

to the GSE’s

to cover the

higher default

rates that

were anticipated.

Originators

generally

passed

the fee on

to borrowers,

so its removal

effectively lowers

available

mortgage rates

by the amount

of the fee,

or 50 basis

points.

Recent Legislative

and Regulatory

Developments

The Fed conducted

large scale

overnight repo

operations

from late

2019 until

July

2020 to address

disruptions

in the U.S.

Treasury,

Agency debt

and Agency

MBS financing

markets. These

operations

ceased in July

2020 after

the central

bank successfully

tamed volatile

funding costs

that had threatened

to cause disruption

across the

financial system.

The Fed has

taken a number

of other actions

to stabilize

markets as

a result of

the impacts

of the COVID-19

pandemic. In

March of

2020, the

Fed announced

a $700 billion

asset purchase

program to

provide liquidity

to the U.S.

Treasury and

Agency RMBS

markets. The

Fed also lowered

the Fed Funds

rate to a

range of 0.0%

– 0.25%, after

having already

lowered the

Fed Funds

rate by 50

bps earlier

in the

month. Later

that same

month the

Fed announced

a program

to acquire

U.S. Treasuries

and Agency

RMBS in the

amounts needed

support smooth

market functioning.

With these

purchases,

market conditions

improved substantially.

Currently, the Fed

is committed

purchasing

$80 billion

of U.S. Treasuries

and $40 billion

of Agency

RMBS each

month. Chairman

Powell and

the Fed have

reiterated

their

commitment

to this level

of asset purchases

at every meeting

since their

meeting on

June 30,

At the

July 2021 meeting,

the Fed

indicated they

had begun

their discussions

for adjusting

the path

and composition

of asset purchases,

but reiterated

the intention

provide notice

well in advance

of an announcement

to reduce

the pace of

such purchases.

Chairman

Powell has

also maintained

that the

Fed expects

to maintain

interest

rates at this

level until

the Fed is

confident that

the economy

has weathered

the pandemic

and its impact

on economic

activity and

is on track

to achieve

its maximum

employment

and price

stability

goals. The

Fed has taken

various other

steps

to support

certain other

fixed income

markets, to

support mortgage

servicers and

to implement

various portions

of the Coronavirus

Aid,

Relief, and

Economic Security

(“CARES”)

Act.

The CARES

Act was passed

by Congress

and signed

into law on

March 27, 2020.

This over $2

trillion COVID-19

relief bill,

among

other things,

provided for

direct payments

to each American

making up

to $75,000

a year, increased

unemployment

benefits for

up to four

months (on

top of state

benefits),

funding to

hospitals and

health providers,

loans and investments

to businesses,

states

and municipalities

and grants

to the airline

industry. On April

24, 2020,

an additional

funding bill

was signed

into law

that provided

an additional

$484 billion

funding to

individuals,

small businesses,

hospitals,

health care

providers and

additional

coronavirus

testing efforts.

Various provisions

the CARES

Act began

to expire in

July 2020,

including a

moratorium

on evictions,

expanded

unemployment

benefits, and

a moratorium

foreclosures.

On August

8, 2020,

Executive Order

13945 was

issued,

directing the

Department

of Health

and Human

Services, the

Centers for

Disease Control

and Prevention

(“CDC”),

the Department

of Housing

and Urban

Development,

and Department

of the

Treasury to take

measures to

temporarily

halt residential

evictions

and foreclosures,

including

through temporary

financial assistance.

On December

27, 2020,

an additional

$900 billion

coronavirus

aid package

was signed

into law

as part of

the Consolidated

Appropriations

Act of 2021,

providing for

extensions

of many of

the CARES

Act policies

and programs

as well as

additional

relief. The

package provided

for, among other

things, direct

payments to

most Americans

with a gross

income of

less than $75,000

a year, extension

of unemployment

benefits through

March 14, 2021,

funding for

procurement

of vaccines

and health

providers,

loans to qualified

businesses,

funding for

rental assistance

and funding

for schools.

On January

29, 2021,

the CDC

issued guidance

extending eviction

moratoriums

for covered

persons through

March 31,

2021, which

was subsequently

extended

to July 31,

In addition,

on February

41 -

2021, the

FHFA announced

that the foreclosure

moratorium

begun under

the CARES

Act for loans

backed by Fannie

Mae and Freddie

Mac and the

eviction moratorium

for real estate

owned by Fannie

Mae and Freddie

Mac were extended

until March

31, 2021,

which was

extended to

July 31, 2021.

On February

16, 2021,

the U.S.

Housing and

Urban Development

Department

announced

the extension

of the

FHA eviction

and foreclosure

moratorium

to June 30,

2021, which

was extended

to July 31,

2021 and again

in July, although

the

moratorium

no longer

applies to

all geographic

areas.

On March 11, 2021,

the $1.9 trillion

American Rescue

Plan Act of

2021 was signed

into law.

This stimulus

program furthered

the

Federal government’s

efforts to stabilize

the economy

and provide

assistance

to sectors

of the population

still suffering

from the

various

physical and

economic effects

of the pandemic.

In January

2019, the

Trump administration

made statements

of its plans

to work with

Congress to

overhaul Fannie

Mae and Freddie

Mac and expectations

to announce

a framework

for the development

of a policy

for comprehensive

housing finance

reform soon.

September

30, 2019,

the FHFA announced

that Fannie

Mae and Freddie

Mac were allowed

to increase

their capital

buffers to

$25 billion

and $20 billion,

respectively, from

the prior

limit of $3

billion each.

This step could

ultimately

lead to Fannie

Mae and Freddie

Mac being

privatized

and represents

the first

concrete step

on the road

to GSE reform.

On June 30,

2020, the

FHFA released

a proposed

rule on a

new regulatory

framework

for the GSEs

which seeks

to implement

both a risk-based

capital framework

and minimum

leverage

capital

requirements.

The final

rule on the

new capital

framework

for the GSEs

was published

in the federal

December 2020.

January 14,

2021, the

U.S. Treasury

and the FHFA executed

letter agreements

allowing the

GSEs to continue

to retain

capital up

to their

regulatory

minimums, including

buffers, as

prescribed

in the December

rule.

These letter

agreements

provide, in

part, (i)

there will

be no

exit from conservatorship

until all

material litigation

is settled

and the GSE

has common

equity Tier

1 capital of

at least 3%

of its assets,

(ii)

the GSEs will

comply with

the FHFA’s regulatory

capital framework,

(iii) higher-risk

single-family

mortgage acquisitions

will be restricted

current levels,

and (iv) the

U.S. Treasury

and the FHFA

will establish

a timeline

and process

for future

GSE reform.

However, no definitive

proposals or

legislation

have been

released or

enacted with

respect to

ending the

conservatorship,

unwinding

the GSEs,

or materially

reducing the

roles of the

GSEs in the

U.S. mortgage

market. On

June 23, 2021,

President

Biden removed

the director

of the FHFA and

appointed an

acting director.

With the leadership

change at

FHFA, some observers

anticipate

that the Biden

administration

will be less

likely to focus

on ending

the GSEs’

conservatorship

and that the

January 14,

2021, letter

agreements

between the

U.S. Treasury

and the

FHFA may be renegotiated.

In 2017, policymakers

announced

that LIBOR

will be replaced

by December

31, 2021.

The directive

was spurred

by the fact

that

banks are uncomfortable

contributing

to the LIBOR

panel given

the shortage

of underlying

transactions

on which to

base levels

and the

liability associated

with submitting

an unfounded

level. The

ICE Benchmark

Administration,

in its capacity

as administrator

of USD LIBOR,

has confirmed

that it will

cease publication

of (i) the

one-week and

two-month

USD LIBOR

settings immediately

following

the LIBOR

publication

on December

31, 2021,

and (ii) the

overnight

and one, three,

six and 12-month

USD LIBOR

settings immediately

following

the

LIBOR publication

on June 30,

2023.

A joint statement

by key regulatory

authorities

calls on banks

to cease entering

into new

contracts

that use USD

LIBOR as a

reference rate

by no later

than December

31, 2021.

The Alternative

Reference

Rates Committee,

a steering

committee comprised

of large U.S.

financial institutions,

has proposed

replacing USD-LIBOR

with a new

SOFR, a rate

based on U.S.

repo

trading. Many

banks believe

that it may

take four

to five years

to complete

the transition

to SOFR,

for certain,

despite the

2021 deadline.

We will monitor

the emergence

of this new

rate carefully

as it will

potentially

become the

new benchmark

for hedges

and a range

interest rate

investments.

At this time,

however, no consensus

exists as to

what rate

or rates may

become accepted

alternatives

to LIBOR.

Effective January

1, 2021, Fannie

Mae, in alignment

with Freddie

Mac, will extend

the timeframe

for its delinquent

loan buyout

policy

for Single-Family

Uniform Mortgage-Backed

Securities

(UMBS) and

Mortgage-Backed

Securities

(MBS) from

four consecutively

missed

monthly payments

to twenty-four

consecutively

missed monthly

payments (i.e.,

24 months past

due). This

new timeframe

will apply

outstanding

single-family

pools and

newly issued

single-family

pools and was

first reflected

when January

2021 factors

were released

the fourth

business day

in February

2021.

For Agency

RMBS investors,

when a delinquent

loan is bought

out of a pool

of mortgage

loans, the

removal of

the loan from

the pool

is the same

as a total

prepayment

of the loan.

The respective

GSEs currently

anticipate,

however, that

delinquent

loans will

42 -

repurchased

in most cases

before the

24-month deadline

under one

of the following

exceptions

listed below.

• a loan that is paid

in full, or

where the

related lien

is released

and/or the

note debt

is satisfied

or forgiven;

• a loan repurchased by

a seller/servicer

under applicable

selling and

servicing requirements;

• a loan entering a permanent

modification,

which generally

requires

it to be removed

from the MBS.

During any

modification

trial

period, the

loan will

remain in the

MBS until

the trial

period ends;

• a loan subject to a

short sale

or deed-in-lieu

of foreclosure;

• a loan referred to

foreclosure.

Because of

these exceptions,

the GSEs

currently believe

based on prevailing

assumptions

and market

conditions

this change

will

have only a

marginal impact

on prepayment

speeds, in

aggregate.

Cohort level

impacts may

vary. For example,

more than

half of loans

referred to

foreclosure

are historically

referred within

six months

of delinquency. The

degree to

which speeds

are affected

depends on

delinquency

levels, borrower

response, and

referral to

foreclosure

timelines.

The scope and

nature of

the actions

the U.S.

government

or the Fed

will ultimately

undertake

are unknown

and will continue

evolve, especially

in light of

the COVID-19

pandemic, President

Biden’s new

administration

and the new

Congress in

the

United States.

Effect on Us

Regulatory

developments,

movements

in interest

rates and

prepayment

rates affect

us in many

ways, including

the following:

Effects on our

Assets

A change in

or elimination

of the guarantee

structure

of Agency

RMBS may increase

our costs (if,

for example,

guarantee

fees

increase) or

require us

to change

our investment

strategy altogether.

For example,

the elimination

of the guarantee

structure

of Agency

RMBS may cause

us to change

our investment

strategy to

focus on non-Agency

RMBS, which

in turn would

require us

to significantly

increase our

monitoring

of the credit

risks of our

investments

in addition

to interest

rate and prepayment

risks.

Lower long-term

interest rates

can affect the

value of our

Agency RMBS

in a number

ways. If prepayment

rates are

relatively

low

(due, in part,

to the refinancing

problems described

above), lower

long-term

interest rates

can increase

the value of

higher-coupon

Agency

RMBS. This

is because

investors

typically place

a premium

on assets

with yields

that are higher

than market

yields. Although

lower long-

term interest

rates may increase

asset values

in our portfolio,

we may not

be able to

invest new

funds in similarly-yielding

assets.

If prepayment

levels increase,

the value

of our Agency

RMBS affected

by such prepayments

may decline.

This is because

a principal

prepayment

accelerates

the effective

term of an

Agency RMBS,

which would

shorten the

period during

which an investor

would receive

above-market

returns (assuming

the yield on

the prepaid

asset is higher

than market

yields). Also,

prepayment

proceeds may

not be able

to be reinvested

in similar-yielding

assets. Agency

RMBS backed

by mortgages

with high

interest rates

are more susceptible

prepayment

risk because

holders of

those mortgages

are most likely

to refinance

to a lower

rate. IOs

and IIOs, however,

may be the

types

of Agency

RMBS most

sensitive to

increased prepayment

rates. Because

the holder

of an IO or

IIO receives

no principal

payments,

the

values of IOs

and IIOs are

entirely dependent

on the existence

of a principal

balance on

the underlying

mortgages.

If the principal

balance

is eliminated

due to prepayment,

IOs and IIOs

essentially

become worthless.

Although increased

prepayment

rates can

negatively

affect

the value of

our

IOs and IIOs,

they have

the opposite

effect on POs.

Because POs

act like zero-coupon

bonds, meaning

they are

purchased at

a discount

to their

par value and

have an effective

interest rate

based on the

discount and

the term of

the underlying

loan, an

increase in

prepayment

rates would

reduce the

effective term

of our POs

and accelerate

the yields

earned on

those assets,

which would

increase our

net income.

Higher long-term

rates can

also affect

the value of

our Agency

RMBS.

As long-term

rates rise,

rates available

to borrowers

also rise.

This tends

to cause prepayment

activity to

slow and extend

the expected

average life

of mortgage

cash flows.

As the expected

average

43 -

life of the

mortgage cash

flows increases,

coupled with

higher discount

rates, the

value of Agency

RMBS declines.

Some of the

instruments

the Company

uses to hedge

our Agency

RMBS assets,

such as interest

rate futures,

swaps and

swaptions,

are stable

average life

instruments.

This means

that to the

extent we

use such instruments

to hedge our

Agency RMBS

assets, our

hedges may not

adequately

protect us

from price

declines, and

therefore

may negatively

impact our

book value.

It is for

this reason

we use interest

only

securities

in our portfolio.

As interest

rates rise,

the expected

average life

of these securities

increases,

causing generally

positive price

movements as

the number

and size of

the cash flows

increase the

longer the

underlying

mortgages

remain outstanding.

This makes

interest only

securities

desirable

hedge instruments

for pass-through

Agency RMBS.

As described

above, the

Agency RMBS

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.

In March of

2020, the

Fed announced

that it would

purchase Agency

RMBS and

U.S. Treasuries

in the amounts

needed to

support smooth

market functioning,

which largely

stabilized the

Agency RMBS

market, a commitment

it reaffirmed

at all subsequent

Fed meetings.

At the July

2021 meeting,

the Fed began

to discuss

plans for

adjusting

the path and

composition

of asset purchases,

but reiterated

its intention

to provide

notice well

in advance

of an announcement

to reduce

the pace of

such purchases.

If the Fed

modifies, reduces

or suspends

its purchases

of Agency

RMBS, our

investment

portfolio

could be

negatively

impacted. Further,

the moratoriums

on foreclosures

and evictions

described

above will

likely delay

potential defaults

on loans

that would

otherwise

be bought out

of Agency MBS

pools as described

above.

Depending

on the ultimate

resolution

of the foreclosure

evictions,

when and if

it occurs,

these loans

may be removed

from the

pool into which

they were

securitized.

If this were

to occur, it would

have the effect

of delaying

a prepayment

on the Company’s

securities

until such

time. As the

majority of

the Company’s

Agency RMBS

assets were

acquired at

a premium

to par, this will

tend to increase

the realized

yield on the

asset in question.

Because we

base our investment

decisions on

risk management

principles

rather than

anticipated

movements in

interest rates,

in a

volatile interest

rate environment

we may allocate

more capital

to structured

Agency RMBS

with shorter

durations.

We believe these

securities

have a lower

sensitivity

to changes

in long-term

interest

rates than

other asset

classes. We

may attempt

to mitigate

our

exposure to

changes in

long-term

interest rates

by investing

in IOs and

IIOs, which

typically

have different

sensitivities

to changes

in long-

term interest

rates than

PT RMBS, particularly

PT RMBS backed

by fixed-rate

mortgages.

Effects on our

borrowing

costs

We leverage

our PT RMBS

portfolio and

a portion

of our structured

Agency RMBS

with principal

balances through

the use of

short-

term repurchase

agreement

transactions.

The interest

rates on

our debt are

determined

by the short

term interest

rate markets.

increase in

the Fed Funds

rate or LIBOR

would increase

our borrowing

costs, which

could affect

our interest

rate spread

if there is

corresponding

increase in

the interest

we earn on

our assets.

This would

be most prevalent

with respect

to our Agency

RMBS backed

fixed rate

mortgage loans

because the

interest rate

on a fixed-rate

mortgage loan

does not change

even though

market rates

may change.

In order to

protect our

net interest

margin against

increases in

short-term

interest rates,

we may enter

into interest

rate swaps,

which

economically

convert our

floating-rate

repurchase

agreement

debt to fixed-rate

debt, or utilize

other hedging

instruments

such as

Eurodollar, Fed

Funds and

T-Note futures

contracts or

interest rate

swaptions.

Summary

In contrast

to the twelve

months that

preceded the

second quarter

of 2021, COVID-19

did not suppress

the performance

of the

markets and

economy in

the second

quarter. The recovery

has been driven

by many factors

– the emergence

and widespread

distribution

of a very effective

vaccine, substantial

government

stimulus and

accommodative

monetary

policy. The economy

recovered

rapidly as

effective vaccine

allowed pent-up

demand to lead

to a surge

in demand for

goods and

services,

fueled further

by multiple

rounds of

stimulus checks

and numerous

other means

of financial

support provided

by the government.

Financial markets

are benefiting

from

extremely loose

financial

conditions,

abundant liquidity,

high risk

tolerance and

an insatiable

demand for

returns.

The constraint

that both

limits the

level of activity

and is a driver

of price pressures

is the lingering

effect of the

pandemic on

labor force

participation

– or lack

thereof.

A significant

part of the

price pressure

observed during

the second

quarter was

driven by

supply shortages,

which are

in turn

44 -

driven by under-staffed

producers

of various

goods and

services.

This constraint

should be slowly

removed over

the balance

of 2021

barring a

resurgence

of the pandemic.

The economic

data released

during the

second quarter

tells the story

quite well.

GDP expanded

at a 6.50%

annualized

rate.

The

housing market

is stronger

than in the

days before

the financial

crisis in the

late 2000s

– both in

terms of the

number of

homes sold

and

average prices

– which in

the

case of existing

home sales

are up over

23% year over

year in June

2021 versus

June 2020.

Price

pressures are

evident, due

to the combination

of constrained

supply channels

and robust

demand –

driven by a

strong combination

pent-up demand

and government

stimulus.

The CPI increased

by well over

5% year over

year in June

as well.

The Fed has

insisted

these price

pressures are

temporary, and

the market

appears to

agree based

on the level

of long-term

U.S. Treasury

rates.

However, not

all members

of the

FOMC or market

participants

agree.

Since the

disagreement

stems from

the length

of time the

price pressures

are

present in

the market,

it will be

resolved by

the mere passage

of time.

Returns for the Agency RMBS market trailed most other sectors of the financial markets,

including fixed income and equities or

high-yield.

The driver was the prospect the Fed would begin to taper their asset purchases

as the economy fully recovers.

This was

especially the case in June, after the Fed concluded their FOMC meeting and revealed

there was divergence in views of committee

members regarding the timing of this step.

While Fed leadership maintains this step is still well into the future, the robustness

of the

housing market coupled with the growing divergence of views within the Fed was enough

for the markets to begin to price in a

reduction in Fed asset purchases.

A second factor hurting the sector was the rally in long-term interest rates

that confounded many

market participants.

Rates available to borrowers are back to levels prevalent during the summer of

2020 and refinancing activity has

re-accelerated, delaying once more burn-out for higher coupon, more seasoned loans

and driving premiums for specified pools slightly

higher.

Critical Accounting Estimates

Our consolidated

financial

statements

are prepared

in accordance

with GAAP.

GAAP requires

our management

to make some

complex and

subjective

decisions

and assessments.

Our most critical

accounting

policies involve

decisions and

assessments

which could

significantly

affect reported

assets,

liabilities,

revenues and

expenses,

and these

decisions

and assessments

can change

significantly

each reporting

period.

There have

been no changes

to the processes

used to determine

our critical

accounting

estimates

as discussed

our annual

report on

Form 10-K for

the year ended

December 31,

2020.

Capital Expenditures

At June 30, 2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At June 30, 2021, we did not have any off-balance sheet arrangements.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result,

interest rates and other factors influence

our performance far more so than does inflation. Changes in interest rates do not

necessarily correlate with inflation rates or changes in

inflation rates. Our activities and balance sheet are measured with reference to historical

cost and/or fair market value without

considering inflation.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET

RISK.

Not Applicable.

45 -

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 Controls 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.

46 -

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On April 22, 2020, the Company received a demand for payment from Citigroup, Inc. in

the amount of $33.1 million related to the

indemnification provisions of various mortgage loan purchase agreements (“MLPA’s”) entered into between Citigroup Global Markets

Realty Corp and Royal Palm Capital, LLC (f/k/a Opteum Financial Services,

LLC) prior to the date Royal Palm’s mortgage origination

operations ceased in 2007.

The demand is based on Royal Palm’s alleged breaches of certain representations and warranties

in the

related MLPA’s.

The Company believes the demands are without merit and intends to defend

against the demand vigorously.

provision or accrual has been recorded as of June 30, 2021 related to the Citigroup demand.

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,

2020, filed

with the SEC

on March 15,

2021.

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

On March 26,

2018, the Company's

Board of Directors

authorized the

repurchase of

up to 500,000

shares of the

Company's Class

A common stock.

The maximum

remaining number

of shares that

may be repurchased

under this

authorization

is 429,596 shares.

The authorization,

as currently

extended, expires

on November

15, 2021.

The Company

did

not repurchase

any of its common

stock during

the three months

ended June 30,

2021.

The Company

did not have

any unregistered

sales of its

equity securities

during the three

months ended

June 30, 2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY

DISCLOSURES.

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

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

47 -

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**

101.INS

Instance Document***

101.SCH

Taxonomy Extension Schema

Document***

101.CAL

Taxonomy Extension Calculation

Linkbase Document***

101.DEF

Additional Taxonomy Extension

Definition

Linkbase Document***

101.LAB

Taxonomy Extension Label

Linkbase Document***

101.PRE

Taxonomy Extension Presentation

Linkbase Document***

Filed herewith.

** Furnished herewith

*** Submitted electronically herewith.

48 -

Signatures

Pursuant to the requirements of

Section 13 or 15(d) of

the Securities Exchange Act of

1934, as amended, the registrant

has duly caused

this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIMINI CAPITAL MANAGEMENT,

INC.

Date:

August 13, 2021

By:

/s/ Robert E. Cauley

Robert E. Cauley

Chairman and Chief Executive Officer

Date:

August 13, 2021

By:

/s/ G. Hunter Haas, IV

G. Hunter Haas,

President, Chief Financial Officer, Chief

Investment Officer and Treasurer (Principal

Financial Officer and Principal Accounting Officer)

bmnm10q20210630x311

Exhibit 31.1

CERTIFICATIONS

I, Robert E. Cauley, certify that:

I have reviewed this Quarterly Report on Form 10-Q

of Bimini Capital Management, Inc. (the "registrant");

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;

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;

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:

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;

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;

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

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

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):

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

any fraud, whether or not material, that involves management or other employees

who have a significant role in

the registrant's internal control over financial reporting.

Date: August 13, 2021

/s/ Robert E. Cauley

Robert E. Cauley

Chairman of the Board and Chief Executive Officer

bmnm10q20210630x312

Exhibit 31.2

CERTIFICATIONS

I, G. Hunter Haas, certify that:

I have reviewed this Quarterly Report on Form 10-Q

of Bimini Capital Management, Inc. (the "registrant");

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;

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;

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:

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;

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;

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

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

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):

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

any fraud, whether or not material, that involves management or other employees

who have a significant role in

the registrant's internal control over financial reporting.

Date: August 13, 2021

/s/ G. Hunter Haas, IV

G. Hunter Haas,

President and Chief Financial Officer

bmnm10q20210630x321

Exhibit 32.1

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 10 U.S.C. SECTION 1350

I, Robert E. Cauley, in compliance 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-

Oxley Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the

period ended June 30,

2021 (the “Report”) filed with the Securities and Exchange Commission:

fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934, as

amended; and

the information contained in the Report fairly presents, in all material respects,

the financial condition and results

of operations of the Company.

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

Exchange Act of 1934

August 13, 2021

/s/ Robert E.Cauley

Robert E. Cauley,

Chairman of the Board and

Chief Executive Officer

bmnm10q20210630x322

Exhibit 32.2

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 10 U.S.C. SECTION 1350

I, G. Hunter Haas, in compliance 18 U.S.C. Section 1350, as adopted pursuant

to Section 906 of the Sarbanes-Oxley

Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the period

ended June 30, 2021

(the “Report”) filed with the Securities and Exchange Commission:

fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934, as

amended; and

the information contained in the Report fairly presents, in all material respects,

the financial condition and results

of operations of the Company.

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

Exchange Act of 1934

August 13, 2021

/s/ G. Hunter Haas, IV

G. Hunter Haas, IV

President and Chief Financial Officer