BMNM 10-Q
Bimini Capital Management, Inc. (BMNM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number:
| Bimini Capital Management, Inc. |
| (Exact name of registrant as specified in its charter) |
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Check one:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☐ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:
| Title of each Class | Latest Practicable Date | Shares Outstanding |
| Class A Common Stock, $0.001 par value | August 6, 2026 | |
| Class B Common Stock, $0.001 par value | August 6, 2026 | |
| Class C Common Stock, $0.001 par value | August 6, 2026 | |
BIMINI CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this Report that are subject to risks and uncertainties. In some cases, these statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “should,” “may,” “plans,” “projects,” “will,” or similar expressions, or the negatives of these words. These forward-looking statements involve risks and uncertainties because they relate to events, developments, and circumstances relating to our business, industry financial condition, liquidity, results of operations, plans and objectives and/or general economic or other conditions that may or may not occur in the future or may occur on longer or shorter timelines or to a greater or lesser degree than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate, may differ materially from the forward-looking statements contained in this Report as a result of the following factors, among others:
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adverse movements in interest rates; |
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our business and investment strategy and our ability to execute against that strategy; |
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our ability to acquire investments on attractive terms; |
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the effect of prepayment rates on the value of our assets; |
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our ability to access the capital markets or to obtain other financing on acceptable terms; |
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our ability to successfully hedge the interest rate risk and prepayment risk associated with our portfolio; |
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our understanding of our competition and our ability to compete effectively; |
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our ability to quantify risk based on historical experience; |
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our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our net operating loss carryforwards (“NOLs”) to offset future taxable income, including whether our stockholder rights plan will be effective in preventing an ownership change that would significantly limit our ability to utilize such NOLs; |
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the impact of technology, including cybersecurity incidents and technology failures, on our operations and business; |
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our ability to maintain our exemption from the obligation to register under the Investment Company Act of 1940, as amended; |
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the effect of actual, anticipated or proposed actions of the U.S. government, including the U.S. Federal Reserve, the Federal Housing Finance Agency, the Federal Housing Administration, the Federal Open Market Committee and the U.S. Treasury, on interest rates, monetary policy, fiscal policy and the housing and credit markets; |
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the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. government; |
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the impact of inflation on general economic conditions and monetary policy; |
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the impact of future changes in laws, regulations, accounting standards, tax laws or tax rates; |
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geopolitical events, government responses to such events and the related impact on the economy both nationally and internationally; |
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| ● | the fluctuation of assets under management and performance-based revenues; | |
| ● | the cost of maintaining compliance with the SEC’s regulations applicable to registered investment advisor; | |
| ● | the impact of our investment performance on our assets under management and our reputation; | |
| ● | our ability to attract and maintain key investment professionals and client relationships; | |
| ● | our ability to efficiently and effectively integrate the recently acquired investment advisory business; | |
| ● | potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; and | |
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other risks described from time to time in our filings with the Securities and Exchange Commission (the “SEC”). |
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption “Risk Factors” in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025 and any subsequent reports filed with or furnished to the SEC. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Unaudited) June 30, 2026 | December 31, 2025 | |||||||
| ASSETS: | ||||||||
| Mortgage-backed securities, at fair value (includes pledged assets of $ and $, respectively) | $ | $ | ||||||
| U.S. Treasury securities, at fair value | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Orchid Island Capital, Inc. common stock, at fair value | ||||||||
| Identifiable intangibles, net | ||||||||
| Goodwill | ||||||||
| Accounts receivable | ||||||||
| Property and equipment, net | ||||||||
| Deferred tax assets, net | ||||||||
| Due from affiliates | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY: | ||||||||
| LIABILITIES: | ||||||||
| Repurchase agreements | $ | $ | ||||||
| Long-term debt | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||
| Redeemable noncontrolling interest | $ | $ | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; shares designated Series A Junior Preferred Stock, shares undesignated; shares issued and outstanding as of June 30, 2026 and December 31, 2025 | ||||||||
| Class A Common stock, $ par value; shares designated: shares issued and outstanding as of June 30, 2026 and December 31, 2025 | ||||||||
| Class B Common stock, $ par value; shares designated, shares issued and outstanding as of June 30, 2026 and December 31, 2025 | ||||||||
| Class C Common stock, $ par value; shares designated, shares issued and outstanding as of June 30, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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| (Unaudited) |
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| For the Six and Three Months Ended June 30, 2026 and 2025 |
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues: | ||||||||||||||||
| Advisory services: | ||||||||||||||||
| REIT management fees | $ | $ | $ | $ | ||||||||||||
| Investment advisory fees | ||||||||||||||||
| Interest income | ||||||||||||||||
| Dividend income from Orchid Island Capital, Inc. common stock | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Interest expense: | ||||||||||||||||
| Repurchase agreements | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net revenues | ||||||||||||||||
| Other income (expense): | ||||||||||||||||
| Unrealized (losses) gains on mortgage-backed securities and U.S. Treasury securities | ( | ) | ( | ) | ||||||||||||
| Realized losses on mortgage-backed securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Unrealized losses on Orchid Island Capital Inc. common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gains (losses) on derivative instruments | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Expenses: | ||||||||||||||||
| Compensation and related benefits | ||||||||||||||||
| Direct advisory services costs | ||||||||||||||||
| Directors' fees and liability insurance | ||||||||||||||||
| Audit, legal and other professional fees | ||||||||||||||||
| Acquisition related expenses | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Administrative and other expenses | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Net income before income tax provision | ||||||||||||||||
| Income tax provision | ||||||||||||||||
| Net income | ||||||||||||||||
| Less: income attributable to noncontrolling interests | ||||||||||||||||
| Net income attributable to Bimini Capital Management, Inc. stockholders | $ | $ | $ | $ | ||||||||||||
| Per share information attributable to Bimini Capital Management, Inc. stockholders: | ||||||||||||||||
| Basic and Diluted Net Income Per Share of: | ||||||||||||||||
| Class A Common Stock | $ | $ | $ | $ | ||||||||||||
| Class B Common Stock | $ | $ | $ | $ | ||||||||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||
| Class A Common Stock | ||||||||||||||||
| Class B Common Stock | ||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY |
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| (Unaudited) |
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| For the Six and Three Months Ended June 30, 2026 and 2025 |
| Stockholders' Equity | ||||||||||||||||||||||||
| Redeemable | Additional | |||||||||||||||||||||||
| Noncontrolling | Common Stock, all classes | Paid-in | Accumulated | |||||||||||||||||||||
| Interest | Shares | Par Value | Capital | Deficit | Total | |||||||||||||||||||
| Balances, January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Balances, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Issuance on redeemable noncontrolling interest | - | |||||||||||||||||||||||
| Class A common shares repurchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balances, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balances, January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Balances, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Balances, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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| (Unaudited) |
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| For the Six Months Ended June 30, 2026 and 2025 |
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income tax provision | ||||||||
| Unrealized losses (gains) on mortgage-backed securities and U.S. Treasury securities | ( | ) | ||||||
| Realized losses on mortgage-backed securities | ||||||||
| Losses (gains) on TBA securities | ||||||||
| Unrealized losses on Orchid Island Capital, Inc. common stock | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Due from affiliates | ( | ) | ( | ) | ||||
| Other assets | ||||||||
| Other liabilities | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Sales of mortgage-backed securities | ||||||||
| Principal repayments on mortgage-backed securities | ||||||||
| Purchases of U.S. Treasury securities | ( | ) | ||||||
| Net payments on derivative instruments | ( | ) | ||||||
| Acquisition of Tom Johnson Investment Management, LLC (net of $ cash acquired) | ( | ) | ||||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from repurchase agreements | ||||||||
| Principal repayments on repurchase agreements | ( | ) | ( | ) | ||||
| Principal repayments on long-term debt | ( | ) | ( | ) | ||||
| Class A common shares repurchased and retired | ( | ) | ||||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
| NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest expense | $ | $ | ||||||
| Noncash investing and financing activities: | ||||||||
| Deferred acquisition consideration incurred - TJIM acquisition | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
BIMINI CAPITAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2026
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Description
Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and collectively with its subsidiaries, the “Company”), operates in business segments through its wholly owned subsidiaries and an
Our wholly owned subsidiary Bimini Advisors, LLC (an SEC-registered investment advisor referred to as “Bimini Advisors”) manages a mortgage-backed securities (“MBS”) portfolio for Orchid Island Capital, Inc. (“Orchid”) and receives fees for providing these services. Bimini Advisors also provides certain repurchase agreement trading, clearing and administrative services to Orchid. Bimini Advisors also manages the MBS portfolio of Royal Palm Capital LLC (including its subsidiaries, “Royal Palm”), another wholly owned subsidiary. Royal Palm maintains an investment portfolio, consisting primarily of residential MBS investments and shares of Orchid common stock, for its own benefit.
TJIM
On April 1, 2026, the Company completed the acquisition of an
The Company now operates as a diversified financial services and asset management platform providing discretionary and non-discretionary investment advisory services to institutional investors, high-net-worth individuals, retirement plans, subadvisor platforms, and foundations.
TJIM manages over $
TJIM delivers investment strategies through two primary operational channels. For direct advisory clients - including individuals, high-net-worth families, retirement plans, foundations, and institutions - TJIM constructs customized Separately Managed Accounts ("SMAs") paired with dedicated personal service. TJIM also serves as a trusted third-party asset manager on many of the industry’s prominent nationally distributed platforms, enabling financial advisors at broker-dealers, banks, insurance companies, and independent RIAs to complement their existing practices with TJIM’s time-tested strategies:
| ● | TJIM Core/Relative Value Stock Portfolio | |
| ● | TJIM Diversified Stock Income Portfolio | |
| ● | TJIM Fixed Income Portfolio | |
| ● | TJIM Intermediate Fixed Income Portfolio | |
| ● | TJIM Balanced Portfolios | |
| ● | TJIM Tax-Exempt Fixed Income Portfolio | |
| ● | TJIM Short-Term Income Portfolio | |
| ● | TJIM Asset Allocations Portfolios |
TJIM is compensated primarily through asset-based management fees calculated as a percentage of assets under management.
With the exception of the “Pro Forma Financial Information” included in Note 16, the financial information contained in these financial statements relating to TJIM takes into account only the results of operations and performance of TJIM after April 1, 2026.
Segment Reporting
The Company’s operations are classified into reportable segments: the asset management segment of Bimini Advisors, the asset management segment of TJIM, 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 those of the Company’s except that inter-segment revenues and expenses are included in the presentation of segment results. For further information see Note 14.
Consolidation
The accompanying condensed consolidated financial statements include the accounts of Bimini Capital and its subsidiaries, as listed above. All inter-company accounts and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods are included. Operating results for the three-month period ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The consolidated balance sheet at December 31, 2025 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Reclassifications
Beginning in the current period, the Company aggregated certain financial statement line items to enhance the presentation and readability of its consolidated financial statements. Comparative prior-period amounts have been conformed to the current presentation, where applicable. The aggregation of these line items had no effect on previously reported total assets, total liabilities, stockholders' equity, net income, earnings per share, or cash flows.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could significantly differ from those estimates. Significant estimates affecting the accompanying consolidated financial statements include determining the value of and estimated useful lives of intangible assets, determining the fair values of MBS and the amounts of asset valuation allowances, determining the fair value of assets acquired and liabilities assumed in business combinations, including redeemable noncontrolling interests and deferred consideration, and the computation of the income tax provision or benefit and the deferred tax asset allowances recorded for each accounting period.
Variable Interest Entities
A variable interest entity (“VIE”) is consolidated by an enterprise if it is deemed the primary beneficiary of the VIE. The Company obtains interests in VIEs through its investments in MBS. The interests in these VIEs are passive in nature and are not expected to result in the Company obtaining a controlling financial interest in these VIEs in the future. As a result, the Company does not consolidate these VIEs and accounts for the interest in these VIEs as MBS. See Note 3. The maximum exposure to loss for these VIEs is the carrying value of the MBS.
Bimini Capital has a common share investment in a trust, Bimini Capital Trust II, (“BCTII”), used in connection with the issuance of Bimini Capital's junior subordinated notes. BCTII is a VIE, as the holders of the equity investment at risk do not have adequate decision-making ability over BCTII’s activities. Bimini Capital's investment was financed directly by BCTII as a result of its loan of the proceeds to Bimini Capital; therefore, that investment is not an equity investment at risk and is not a variable interest. Since Bimini Capital is not the primary beneficiary of BCTII, the Company has not consolidated the financial statements of BCTII into its consolidated financial statements, and this investment is accounted for on the equity method. See Note 8.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and margin for derivative instruments. The following table presents the Company’s cash, cash equivalents and restricted cash as of June 30, 2026 and December 31, 2025.
| June 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
The Company maintains cash balances at several banks and excess margin with one exchange clearing member. At times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. Restricted cash balances are uninsured, but are held in separate accounts that are segregated from the general funds of the counterparty. The Company limits uninsured balances to only large, well-known banks and exchange clearing members and believes that it is not exposed to significant credit risk on cash and cash equivalents or restricted cash balances.
Advisory Services
Bimini Advisors manages and advises Orchid pursuant to the terms of a management agreement. See Note 2. Under the terms of the management agreement, Orchid is obligated to pay Bimini Advisors a monthly management fee and a pro rata portion of certain overhead costs and to reimburse the Company for any direct expenses incurred on its behalf. Revenues from management fees are recognized over the period of time in which the service is performed.
TJIM provides discretionary and non-discretionary investment advisory services to institutional investors, high-net-worth individuals, retirement plans, subadvisor platforms, and foundations. See Note 2. Advisory service fee income is earned pursuant to investment advisory agreements and is generally calculated as a percentage of assets under management. Revenue is recognized over time as investment management services are provided. Fees are generally received in arrears.
Accounts Receivable
Accounts receivable consist primarily of investment advisory, asset management, and other fee-based revenues earned in the ordinary course of business. Receivables are recorded when the Company's right to consideration becomes unconditional and are presented net of an allowance for expected credit losses. The Company maintains an allowance for expected credit losses in accordance with Accounting Standards Codification ("ASC") Topic 326, Financial Instruments—Credit Losses. The allowance reflects management's estimate of lifetime expected credit losses and is based on historical loss experience, the aging of outstanding receivables, the financial condition and payment history of customers, current economic conditions, and reasonable and supportable forecasts that may affect collectability. Investment advisory fee receivables are generally short-term in nature and are collected pursuant to contractual arrangements with clients or directly from client investment accounts maintained by qualified custodians. As a result, the Company has historically experienced minimal credit losses on these receivables. As such, as of June 30, 2026 and December 31, 2025, the Company has not recorded an allowance for credit losses. Management evaluates the adequacy of the allowance on a recurring basis and adjusts the allowance, as necessary, based on changes in facts and circumstances.
Accounts receivable are written off when management determines that collection is not probable, after considering all available information and collection efforts. Any subsequent recoveries of amounts previously written off are recorded as a reduction of credit loss expense in the period collected.
Because substantially all accounts receivable arise from contractual fee arrangements with investment advisory clients and are generally collected within a relatively short period, the Company believes that its exposure to credit risk is limited. The Company does not generally require collateral from its clients.
Mortgage-Backed Securities and U.S. Treasury Notes
The investment portfolio is invested primarily in common shares of Orchid and mortgage pass-through (“PT”) MBS issued by Freddie Mac, Fannie Mae or Ginnie Mae, collateralized mortgage obligations (“CMOs”), interest-only (“IO”) securities and inverse interest-only (“IIO”) securities representing interests in or obligations backed by pools of mortgage-backed loans. The Company refers to MBS and CMOs as PT MBS and IO and IIO securities as structured MBS. The Company also invests in U.S. Treasury Notes. The Company has elected to account for its investment in MBS and U.S. Treasury Notes under the fair value option. Electing the fair value option requires the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of the Company’s operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed.
The Company records securities transactions on the trade date. Security purchases that have not settled as of the balance sheet date are included in the portfolio balance with an offsetting liability recorded, whereas securities sold that have not settled as of the balance sheet date are removed from the portfolio 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 and U.S. Treasury Notes are based on independent pricing sources and/or third-party broker quotes, when available.
Income on PT MBS and U.S. Treasury Notes is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. Premium loss and discount accretion resulting from monthly principal repayments are reflected in unrealized gains and losses on MBS in the consolidated statements of operations. For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of MBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on MBS in the accompanying consolidated statements of operations. The amount reported as unrealized gains or losses on MBS thus captures the net effect of changes in the fair market value of securities caused by market developments and any premium or discount lost as a result of principal repayments during the period. Realized gains and losses on sales of MBS, using the specific identification method, are reported as a separate component of net portfolio income on the statement of operations.
Orchid Common Stock
The Company accounts for its investment in Orchid common shares at fair value. The change in the fair value and dividends received on this investment are reflected in the consolidated statements of operations for each reporting period. We estimate the fair value of Orchid’s common shares on a market approach using “Level 1” inputs based on the quoted market price of Orchid’s common stock on a national stock exchange.
Derivative Financial Instruments
The Company has historically used derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and it may continue to do so in the future. The principal instruments that the Company has used are interest rate futures contracts, and “to-be-announced” (“TBA”) securities transactions. The Company accounts for TBA securities as derivative instruments. Other types of derivative instruments may be used in the future. Gains and losses associated with derivative transactions are reported in gain (loss) on derivative instruments in the accompanying consolidated statements of operations.
Derivative instruments are carried at fair value, and changes in fair value are recorded in the consolidated operations for each period. The Company’s derivative financial instruments are not designated as hedge accounting relationships, but rather are used as economic hedges of its portfolio assets and liabilities. Gains and losses on derivatives, except those that result in cash receipts or payments, are included in operating activities on the statements of cash flows. Cash payments and cash receipts from settlement of derivatives, including current period net cash settlements on interest rate swaps, are classified as an investing activity on the statements of cash flows. The Company's derivative agreements generally contain provisions that allow for netting or setting off derivative assets and liabilities with the counterparty; however, related assets and liabilities are reported on a gross basis in the Company's consolidated balance sheets. Derivative instruments in a gain position, if any, are reported as derivative assets at fair value and derivative instruments in a loss position, if any, are reported as derivative liabilities at fair value in the consolidated balance sheets.
Holding derivatives creates exposure to credit risk related to the potential for failure by counterparties to honor their commitments. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. The Company’s derivative agreements require it to post or receive collateral to mitigate such risk. In addition, the Company uses only registered central clearing exchanges and well-established commercial banks as counterparties, monitors positions with individual counterparties and adjusts posted collateral as required. The Company’s futures contracts are exchange traded contracts that are valued based on exchange pricing with daily margin requirements. The margin requirement varies based on the market value of the open position and the equity retained in the account. Margin posted is treated as settlement of the outstanding value of the futures contract. Any margin excess or deficit outstanding is recorded as a receivable or payable as of the date of the Company’s balance sheets. The Company realizes gains and losses on these contracts upon expiration equal to the difference between the current fair value of the underlying asset and the contractual price of the futures contract.
Financial Instruments
The fair value of financial instruments is disclosed either in the body of the consolidated financial statements or in the accompanying notes. MBS, U.S. Treasury Notes, 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.
Property and Equipment, net
Property and equipment, net, consists of computer equipment with a depreciable life of years, office furniture and equipment with depreciable lives of to
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 earnings per share ("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.
Any accretion or other adjustment to the redeemable noncontrolling interests is reflected as an adjustment to retained earnings, or in the absence of retained earnings, additional paid-in capital, and reduces income available to common stockholders for EPS purposes.
Income Taxes
Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities represent the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates. The measurement of net deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it is more likely than not that they will not be fully realized in future accounting periods.
The Company’s U.S. federal income tax returns for years ended on or after December 31, 2022 remain open for examination. Although management believes its calculations for tax returns are correct and the positions taken thereon are reasonable, the final outcome of a tax examination, should it occur, could be materially different from the tax returns filed by the Company, and those differences could result in significant costs or benefits to the Company. Bimini Capital and its includable subsidiaries, and Royal Palm and its includable subsidiaries, file their tax returns as separate tax paying entities.
The Company assesses the likelihood, based on their technical merit, that uncertain tax positions will be sustained during a tax examination based on the facts, circumstances and information available. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The difference between the benefit recognized and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit and is recorded as a liability in the consolidated balance sheets. The Company has recorded no such liabilities. The Company records income tax-related interest and penalties, if applicable, within the income tax provision.
Business Combinations
Mergers and acquisitions are accounted for using the acquisition method of accounting. Assets and liabilities acquired and assumed are recorded at their fair values as of the date of the transaction. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Subsequent adjustments to provisional fair value amounts that are identified in reporting periods within one year after the acquisition date in a business combination are recognized in the reporting period in which the adjustment amounts are determined. Significant estimates and judgments are involved in the fair valuation and purchase price allocation process. Results of operations of the acquired business are included in the statement of operations from the effective date of acquisition.
Redeemable Noncontrolling Interests ("NCI")
Under the terms of TJIM's governing documents and subject to certain conditions, the Company has a call option to purchase the remaining interests from the minority owner (i.e., noncontrolling interests) and the minority owner has a put option to sell all of its interests to the Company for
The redeemable NCI is carried at the higher of the carrying amount – reflecting the Sellers share of net income/loss, other comprehensive income/loss, and distributions – or the applicable redemption value. The change in carrying value of the redeemable NCI is recorded as an offset to retained earnings, with a corresponding impact on earnings per share. Upon exercise of the call or put options, any difference between the consideration paid and carrying value of the redeemable NCI is recorded as an adjustment to additional paid-in capital.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is subject to impairment testing at the reporting unit level, which is conducted at least annually or when events or changes in circumstances indicate the goodwill might be impaired. The Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing updated qualitative factors, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it performs a quantitative goodwill impairment test. Determining the fair value of a reporting unit requires judgment and often involves the use of significant estimates and assumptions. Similarly, estimates and assumptions are used in determining the fair value of other intangible assets. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions.
Intangible assets are carried at cost less accumulated amortization. Intangible assets are amortized using the straight-line methods over their estimated useful lives. For finite-lived intangible assets, if potential impairment circumstances are considered to exist, the Company will perform a recoverability test using an undiscounted cash flow analysis. If the carrying value of the asset is greater than the total undiscounted cash flows, the difference between the carrying value of the asset and its current fair value would be recognized as an expense in the period in which the impairment occurs.
To measure the fair value of intangible assets acquired in the TJIM Acquisition, various measurement techniques were used including the relief-from-royalty method for the acquired tradename and the multi-period excess earnings method for the acquired client relationships.
Deferred Consideration
The Company records deferred consideration relating to business combinations in other liabilities on the balance sheet with a corresponding increase to the purchase price at its acquisition date fair value. Because the deferred amount is fixed and payable after a stated period, it is not contingent on future performance. Any difference between the present value recognized at the acquisition date and the ultimate cash payment is recognized as interest expense over the deferral period using the effective interest method.
Recent Accounting Pronouncements
On January 1, 2025, the Company adopted Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, greater disaggregation of information in the income tax rate reconciliation and for paid income taxes to be disaggregated by jurisdiction. The Company adopted ASU 2023-09 on a retrospective basis, and the adoption did not have any impact on the financial statements or results of operations.
In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Consolidated Statements of Income, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026. We are currently evaluating the impact of adoption on our financial disclosures.
In November 2025, the FASB issued ASU No. 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. The amendments expand the population of acquired financial assets subject to the gross-up approach under Topic 326 to include certain purchased seasoned loans that are acquired without evidence of credit deterioration. Under the amended guidance, an allowance for expected credit losses is recognized at the acquisition date as an adjustment to the amortized cost basis of qualifying purchased loans, rather than through current-period credit loss expense. The amendments are intended to improve comparability between the accounting for purchased credit deteriorated loans and other qualifying acquired loans. The amendments in ASU 2025-08 are effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods, with early adoption permitted. The standard is to be applied prospectively to qualifying loans acquired on or after the date of adoption. The Company is currently evaluating the impact of adopting ASU 2025-08. Because the Company does not originate or routinely acquire loan portfolios as part of its normal business operations, the Company does not currently expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements or related disclosures.
NOTE 2. ADVISORY SERVICES
Bimini Advisors
Bimini Advisors serves as the manager and advisor for Orchid pursuant to the terms of a management agreement. As Manager, Bimini Advisors is responsible for administering Orchid's business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel. Bimini Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and authority as delegated to it. Bimini Advisors receives a monthly management fee in the amount of:
| ● | One- of |
| ● | One- of |
| ● | One- of |
The Company also provides certain repurchase agreement trading, clearing and administrative services to Orchid. In consideration for such services, Orchid pays the following fees to the Company:
| ● | a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by |
| ● | a fee for the clearing and operational services provided by personnel of the Manager equal to $ |
Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred on its behalf and to pay to Bimini Advisors an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. Orchid is required to pay Bimini Advisors by the 15th day of the month following the month the services are performed. The management agreement has been renewed through February 20, 2027 and provides for automatic -year extension options thereafter. Should Orchid terminate the management agreement without cause, it will be obligated to pay Bimini Advisors a termination fee equal to times the average annual management fee, as defined in the management agreement, before or on the last day of the applicable renewal term.
The following table summarizes the advisory services revenue from Orchid for the six and three months ended June 30, 2026 and 2025.
| (in thousands) | ||||||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Management fee | $ | $ | $ | $ | ||||||||||||
| Allocated overhead | ||||||||||||||||
| Repurchase, clearing and administrative fee | ||||||||||||||||
| Total REIT management fees | ||||||||||||||||
At June 30, 2026 and December 31, 2025, the net amount due from Orchid was approximately $
TJIM
TJIM provides discretionary and non-discretionary investment advisory services to institutional investors, high-net-worth individuals, retirement plans, subadvisor platforms, and foundations.
TJIM generates revenue primarily from asset-based management fees calculated as a percentage of assets under management.
Management fees are generally calculated as a percentage of AUM and are affected by market conditions, investor inflows and outflows, investment performance, and client retention.
The following table summarizes advisory services revenue for TJIM for the three months June 30, 2026.
| (in thousands) | ||||
| Advisory programs | $ | |||
| Sub-advisor programs | ||||
| Model programs | ||||
| Total investment advisory fees |
NOTE 3. MORTGAGE-BACKED SECURITIES AND U.S. TREASURY NOTES
The following table presents the Company’s MBS portfolio as of June 30, 2026 and December 31, 2025:
| (in thousands) | ||||||||||||
| Par Value | Cost (1) | Fair Value | ||||||||||
| June 30, 2026 | $ | $ | $ | |||||||||
| December 31, 2025 | ||||||||||||
| (1) | The cost information in the table above represents the aggregate current par value, multiplied by the purchase price of each security in the portfolio. |
The following table presents the Company’s U.S. Treasury Note portfolio as of June 30, 2026:
| (in thousands) | ||||||||||||
| Par Value | Cost | Fair Value | ||||||||||
| U.S. Treasury Note, %, 8/31/2026 | $ | $ | $ | |||||||||
| U.S. Treasury Note, %, 8/31/2026 | ||||||||||||
| Totals | $ | $ | $ | |||||||||
The following table is a summary of the Company’s net gain (loss) from the sales of MBS for the six months ended June 30, 2026 and 2025.
| (in thousands) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Proceeds from sales of MBS | $ | $ | ||||||
| Carrying value of MBS sold | ( | ) | ( | ) | ||||
| Net loss on sales of MBS | $ | ( | ) | $ | ( | ) | ||
| Gross gain on sales of MBS | $ | $ | ||||||
| Gross loss on sales of MBS | ( | ) | ( | ) | ||||
| Net loss on sales of MBS | $ | ( | ) | $ | ( | ) | ||
NOTE 4. REPURCHASE AGREEMENTS
The Company pledges certain of its MBS as collateral under repurchase agreements with financial institutions. Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is generally paid at the termination of a borrowing. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as “margin calls.” Similarly, if the fair value of the pledged securities increases, lenders may release collateral back to the Company. During the six months ended June 30, 2026 and 2025, the Company had met all margin call requirements.
As of June 30, 2026 and December 31, 2025, the Company’s repurchase agreements had remaining maturities as summarized below:
| ($ in thousands) | ||||||||||||||||||||
| OVERNIGHT | BETWEEN 2 | BETWEEN 31 | GREATER | |||||||||||||||||
| (1 DAY OR | AND | AND | THAN | |||||||||||||||||
| LESS) | 30 DAYS | 90 DAYS | 90 DAYS | TOTAL | ||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Fair value of securities pledged, including accrued interest receivable | $ | $ | $ | $ | $ | |||||||||||||||
| Repurchase agreement liabilities associated with these securities | $ | $ | $ | $ | $ | |||||||||||||||
| Net weighted average borrowing rate | % | % | % | |||||||||||||||||
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, 2026 and December 31, 2025, the Company had an aggregate amount at risk (the difference between the amount loaned to the Company, including interest payable, and the fair value of securities and any cash pledged, including accrued interest on such securities) with all counterparties of approximately $
NOTE 5. PLEDGED ASSETS
Assets Pledged to Counterparties
The table below summarizes Bimini’s assets pledged as collateral under its repurchase agreements and derivative agreements as of June 30, 2026 and December 31, 2025.
| ($ in thousands) | ||||||||||||||||||||||||
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Repurchase | Derivative | Repurchase | Derivative | |||||||||||||||||||||
| Agreements | Agreements | Total | Agreements | Agreements | Total | |||||||||||||||||||
| Mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Accrued interest on pledged securities | ||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
NOTE 6. OFFSETTING ASSETS AND LIABILITIES
The Company’s derivatives and repurchase agreements are subject to underlying agreements with master netting or similar arrangements, which provide for the right of offset in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its assets and liabilities subject to these arrangements on a gross basis. The following tables present information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2026 and December 31, 2025.
| (in thousands) | ||||||||||||||||||||||||
| Offsetting of Liabilities | ||||||||||||||||||||||||
| Net Amount | Gross Amount Not Offset | |||||||||||||||||||||||
| Gross | of Liabilities | in the | ||||||||||||||||||||||
| Gross | Amount | Presented | Consolidated Balance Sheet | |||||||||||||||||||||
| Amount | Offset in the | in the | Financial | |||||||||||||||||||||
| of | Consolidated | Consolidated | Instruments | Cash | ||||||||||||||||||||
| Recognized | Balance | Balance | Posted as | Posted as | Net | |||||||||||||||||||
| Liabilities | Sheet | Sheet | Collateral | Collateral | Amount | |||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||
| Repurchase Agreements | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| Repurchase Agreements | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
The amounts disclosed for collateral received by or posted to the same counterparty are limited to the amount sufficient to reduce the asset or liability presented in the consolidated balance sheet to zero. The fair value of the actual collateral received by or posted to the same counterparty typically exceeds the amounts presented. See Note 5 for a discussion of collateral posted for, or received against, repurchase obligations and derivative instruments.
NOTE 7. INTANGIBLES AND GOODWILL
Intangible Assets
Intangible assets as of June 30, 2026 and December 31, 2025 consisted of the following:
| (in thousands) | ||||||||||||||||
| Amortization Term (months) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||
| TJIM client relationships | $ | $ | $ | |||||||||||||
| TJIM tradename | ||||||||||||||||
| Total | $ | $ | $ | |||||||||||||
Amortization expense for both the six and three months ended June 30, 2026 was $
| (in thousands) | ||||
| Last six months of 2026 | $ | |||
| For the years: | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| After 2030 (cumulative) | ||||
| Total | $ |
Goodwill
As of June 30, 2026, the Company had goodwill of $
NOTE 8. LONG-TERM DEBT
Long-term debt at June 30, 2026 and December 31, 2025 is summarized as follows:
| (in thousands) | ||||||||
| June 30, 2026 | December 31, 2025 | |||||||
| Junior subordinated debt | $ | $ | ||||||
| Secured note payable | ||||||||
| Total | $ | $ | ||||||
Junior Subordinated Debt
During 2005, Bimini Capital sponsored the formation of a statutory trust, known as BCTII,
As of June 30, 2026 and December 31, 2025, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $
The Company's included consolidated financial statements present Bimini Capital's BCTII Junior Subordinated Notes issued to BCTII as a liability and Bimini Capital's investment in the common equity securities of BCTII as an asset (included in other assets). For financial statement purposes, Bimini Capital records payments of interest on the Junior Subordinated Notes issued to BCTII as interest expense.
Secured Note Payable
On October 30, 2019, the Company borrowed $
The table below presents the future scheduled principal payments on the Company’s long-term debt.
| (in thousands) | ||||
| Last six months of 2026 | $ | |||
| For the years: | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| After 2030 (cumulative) | ||||
| Total | $ |
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, 2026 and 2025.
Stock Repurchase Plans
On March 12, 2026, the Board authorized a share repurchase plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 (the “2026 Repurchase Plan”). Pursuant to the 2026 Repurchase Plan, the Company can purchase shares of its Class A Common Stock from time to time for an aggregate purchase price not to exceed million. Share repurchases can be executed through various means, including, without limitation, open market transactions. The 2026 Repurchase Plan does not obligate the Company to purchase any shares. During the three months ended June 30, 2026, the Company repurchased
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.
As previously disclosed, in April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to 2007. As of June 30, 2026, no further information has been received related to this matter. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the demands are without merit and the likelihood of a material adverse outcome is remote. Accordingly, provision or accrual has been recorded.
Management is not aware of any other significant reported or unreported contingencies at June 30, 2026.
NOTE 11. INCOME TAXES
The total income tax provision recorded for the six months ended June 30, 2026 and 2025 was $
During the three months ended June 30, 2026, the Company reassessed the realizability of its deferred tax assets in connection with the acquisition of TJIM. As a result of this reassessment, the Company recorded an increase in its valuation allowance and a corresponding increase in income tax expense of approximately $
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 of Directors. Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at June 30, 2026 and 2025.
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, 2026 and 2025.
Net income attributable to noncontrolling interests is excluded from the numerator in the calculation of both basic and diluted EPS because those earnings are not attributable to the Company's common stockholders. Accordingly, the numerator used in the EPS calculation is net income attributable to the Company's common stockholders after deducting net income attributable to noncontrolling interests.
The table below reconciles the numerator and denominator of EPS for the six and three months ended June 30, 2026 and 2025.
| (in thousands, except per-share information) | ||||||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic and diluted EPS per Class A common share: | ||||||||||||||||
| Income attributable to Class A common shares: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares: | ||||||||||||||||
| Class A common shares outstanding at the balance sheet date | ||||||||||||||||
| Effect of weighting | ||||||||||||||||
| Weighted average shares-basic and diluted | ||||||||||||||||
| Income per Class A common share: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| (in thousands, except per-share information) | ||||||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic and diluted EPS per Class B common share: | ||||||||||||||||
| Income attributable to Class B common shares: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares: | ||||||||||||||||
| Class B common shares outstanding at the balance sheet date | ||||||||||||||||
| Weighted average shares-basic and diluted | ||||||||||||||||
| Income per Class B common share: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
NOTE 13. FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include presentation of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These inputs are:
| ● | Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume), |
| ● | Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and |
| ● | Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. |
The Company's MBS and Orchid common stock are recorded at fair value on a recurring basis as of June 30, 2026 and December 31, 2025. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.
The Company's MBS are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third-party broker quotes. Because the price estimates may vary, the Company must make certain judgments and assumptions about the appropriate price to use to calculate the fair values. The Company and the independent pricing sources use various valuation techniques to determine the price of the Company’s securities. These techniques include observing the most recent market for like or identical assets (including security coupon, maturity, yield, and prepayment speeds), spread pricing techniques to determine market credit spreads (option adjusted spread, zero volatility spread, spread to the U.S. Treasury curve or spread to a benchmark such as a TBA security), and model driven approaches (the discounted cash flow method, Black Scholes and SABR models which rely upon observable market rates such as the term structure of interest rates and volatility). The appropriate spread pricing method used is based on market convention. The pricing source determines the spread of recently observed trade activity or observable markets for assets similar to those being priced. The spread is then adjusted based on variances in certain characteristics between the market observation and the asset being priced. Those characteristics include: type of asset, the expected life of the asset, the stability and predictability of the expected future cash flows of the asset, whether the coupon of the asset is fixed or adjustable, the guarantor of the security if applicable, the coupon, the maturity, the issuer, size of the underlying loans, year in which the underlying loans were originated, loan to value ratio, state in which the underlying loans reside, credit score of the underlying borrowers and other variables if appropriate. The fair value of the security is determined by using the adjusted spread.
The Company’s U.S. Treasury securities that are based on quoted prices for identical instruments in active markets are classified as Level 1 assets. U.S. Treasury securities are considered Level 2 investments when they were issued before the most recent issue and were still outstanding at measurement day.
The Company’s futures contracts are Level 1 valuations, as they are exchange-traded instruments and quoted market prices are readily available. Futures contracts are settled daily.
The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities generally approximates their carrying values due to the short-term nature of these financial instruments. The Company estimates the fair value of the cash and cash equivalents and restricted cash using Level 1 inputs, and the accrued interest receivable, other assets, due from affiliates, repurchase agreements, accrued interest payable and other liabilities using Level 2 inputs. The fair value of the Company’s junior subordinated debt approximates its carrying value. The carrying value is a reasonable estimate of fair value since the instrument carries a floating rate that resets frequently. Further information regarding this instrument is presented in Note 8.
The following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025:
| (in thousands) | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Fair Value | Assets | Inputs | Inputs | |||||||||||||
| Measurements | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| June 30, 2026 | ||||||||||||||||
| Mortgage-backed securities | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities | ||||||||||||||||
| Orchid Island Capital, Inc. common stock | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||
| Mortgage-backed securities | $ | $ | $ | $ | ||||||||||||
| Orchid Island Capital, Inc. common stock | ||||||||||||||||
During the six months ended June 30, 2026 and 2025, there were no transfers of financial assets or liabilities between Levels 1, 2 or 3.
NOTE 14. SEGMENT INFORMATION
The Company’s business is organized into the asset management segment of Bimini Advisors, the asset management segment of TJIM, and the investment portfolio segment, with each representing a reportable segment. Our chief operating decision maker ("CODM") is our Chief Executive Officer. The results of each segment are regularly reviewed by the CODM to assess the performance of the segment and make decisions regarding the allocation of resources to the segments. The primary measure of segment performance used by the CODM is income (loss) before income taxes. Net revenues is also used to assess the financial performance of the segments and for purposes of allocating resources. The accounting policies of our reportable business segments are the same as those described in Note 1.
The asset management segment of Bimini Advisors includes the investment advisory services provided by Bimini Advisors to Orchid and Royal Palm. As discussed in Note 2, the revenues of this asset management segment consist of management fees, overhead reimbursements and repurchase, clearing and administrative fees received pursuant to a management agreement with Orchid. Total revenues received under this management agreement for the six and three months ended June 30, 2026 were approximately $
The asset management segment of TJIM includes discretionary and non-discretionary investment advisory services to institutional investors, high-net-worth individuals, retirement plans, sub advisory platforms, and foundations, in all cases attributable only to the operation of TJIM after April 1, 2026. Total revenues received under this segment for the three months ended June 30, 2026 were approximately $
The investment portfolio segment includes the investment activities conducted by Royal Palm. The investment portfolio segment receives revenue in the form of interest and dividend income on its investments.
The majority of our assets, revenues and expenses are directly associated with each respective business segment and are included in determining each segment's asset balance and operating results. Those assets, revenues and expenses that are not directly attributable to a particular business segment are included in the Corporate function. Corporate operating expenses are allocated to the reportable segments based on their proportional share of total revenues. As a result, the sum of each statement of operations line item for the three reportable segments and the Corporate function is equal to that same statement of operations line item for the consolidated entity. In addition, the sum of the total assets for the three reportable segments and the Corporate function is equal to the total assets of the consolidated entity.
Segment information for the six and three months ended June 30, 2026 and 2025 is as follows:
| (in thousands) | ||||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||
| Bimini | Investment | |||||||||||||||||||||||
| Six Months Ended June 30, 2026 | Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||
| Total revenues | ( | ) | ||||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Allocated expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||
| Bimini | Investment | |||||||||||||||||||||||
| Six Months Ended June 30, 2025 | Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||
| Total revenues | ( | ) | ||||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Allocated expenses(3) | ( | ) | ( | ) | ||||||||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||
| Bimini | Investment | |||||||||||||||||||||||
| Three Months Ended June 30, 2026 | Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||
| Total revenues | ( | ) | ||||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||||||
| Other income, net | ||||||||||||||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Allocated expenses(3) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||
| Bimini | Investment | |||||||||||||||||||||||
| Three Months Ended June 30, 2025 | Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Advisory services, other operating segments(1) | ( | ) | ||||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||
| Total revenues | ( | ) | ||||||||||||||||||||||
| Interest expense(2) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Allocated expenses(3) | ( | ) | ( | ) | ||||||||||||||||||||
| Intercompany expenses(1) | ( | ) | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||
| (1) | Includes fees paid by Royal Palm to Bimini Advisors for advisory services at an annualized rate of |
| (2) | Includes interest on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column. |
| (3) | Operating expenses are allocated based on each segment’s proportional share of total revenues. |
| (4) | The activity and results of operations of TJIM prior to April 1, 2026, the closing date of the TJIM Acquisition, are not included. |
Assets in each reportable segment as of June 30, 2026 and December 31, 2025 were as follows:
| (in thousands) | ||||||||||||||||||||
| Asset Management | ||||||||||||||||||||
| Bimini | Investment | |||||||||||||||||||
| Advisors | TJIM | Portfolio | Corporate | Total | ||||||||||||||||
| June 30, 2026 | $ | $ | $ | $ | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
As a result of the TJIM Acquisition, the composition of the Company’s business changed both from the perspective of how its capital is deployed and how it reports its results for its operating segments. The TJIM Acquisition required the deployment of a significant portion of the Company’s capital, including most of the capital deployed into the investment portfolio prior to the TJIM Acquisition.
NOTE 15. RELATED PARTY TRANSACTIONS
At both June 30, 2026 and December 31, 2025, the Company owned
Robert Cauley, the Chief Executive Officer and Chairman of the Board of Directors of the Company, also serves as Chief Executive Officer and Chairman of the Board of Directors of Orchid, participates in Orchid's long term incentive compensation plan, and owns shares of common stock of Orchid. In addition, Hunter Haas, the Chief Financial Officer, Chief Investment Officer, Treasurer and member of the Board of Directors of the Company, also serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of Orchid’s Board of Directors, participates in Orchid's long term incentive compensation plan, and owns shares of common stock of Orchid. Robert J. Dwyer, an independent director of the Company, owns shares of common stock of Orchid.
NOTE 16. BUSINESS COMBINATION
On April 1, 2026, the Company acquired
Purchase Consideration
The aggregate purchase consideration was approximately $
| (in thousands) | ||||
| Cash consideration, including transaction costs | $ | |||
| Fair value of deferred consideration | ||||
| Total consideration | $ |
The purchase agreement provides for a deferred payment of approximately $
Preliminary Purchase Price Allocation
The following table summarizes the preliminary allocation of purchase consideration to the assets acquired and liabilities assumed as of April 1 2026. The preliminary purchase price allocation is based on management's current estimates and assumptions and remains subject to change during the measurement period as additional information becomes available regarding the final working capital adjustment. Any measurement period adjustments could be material to the Company's consolidated financial statements.
| (in thousands) | ||||
| Total consideration | $ | |||
| Allocated to: | ||||
| Cash and cash equivalents | ||||
| Accounts receivable | ||||
| Property and equipment, net | ||||
| Other assets | ||||
| Identifiable intangibles, net | ||||
| Other liabilities | ( | ) | ||
| Redeemable noncontrolling interest | ( | ) | ||
| Goodwill | $ |
Intangible Assets
Identifiable intangible assets consist of tradenames and client relationships. These intangible assets are being amortized over estimated useful lives ranging from
Goodwill
Goodwill recognized in connection with the acquisition primarily represents expected synergies, the assembled workforce, and other future economic benefits that do not qualify for separate recognition. Goodwill will not be amortized. Instead, goodwill will be tested for impairment at least annually, or more frequently in the case of a triggering event. Goodwill was allocated to the asset management segment of TJIM. Goodwill is expected to be deductible for tax purposes. See Note 7.
Redeemable Noncontrolling Interest
At the acquisition date, the redeemable noncontrolling interest was initially measured at its acquisition-date fair value in accordance with ASC 805. The fair value was determined using a market participant perspective and incorporated significant unobservable inputs, including projected future cash flows, expected growth rates, profitability assumptions, market multiples of comparable companies, and an appropriate discount rate.
Acquisition-Related Costs
The Company incurred acquisition-related costs of approximately $
Pro Forma Financial Information
The TJIM Acquisition contributed $
The following unaudited pro forma financial information presents the combined results of operations of the Company and TJIM as if the acquisition had occurred on January 1, 2025:
| (in thousands, except per share data) | ||||||||||||||||
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Net income attributable to Bimini Capital Management, Inc. stockholders | $ | $ | $ | $ | ||||||||||||
| Basic and diluted net income per share of: | $ | $ | $ | $ | ||||||||||||
The unaudited pro forma information is presented for informational purposes only and does not necessarily reflect the results of operations that would have occurred had the acquisition been completed on the date indicated, nor is it indicative of future operating results.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our consolidated financial condition, cash flows, and results of operations should be read in conjunction with the consolidated financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements. In addition, please see the section "Special Note Regarding Forward-Looking Statements" included at the beginning of this Form 10-Q.
Overview
Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital” and, collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) is a specialty finance company that operates in three business segments: (i) the asset management segment of Bimini Advisors, LLC (together with Bimini Advisors Holdings, LLC, “Bimini Advisors”) (serving as the external manager of Orchid Island Capital, Inc. (“Orchid”)), (ii) the asset management segment of Tom Johnson Investment Management, LLC (“TJIM”) (providing investment advisory and wealth management services to individuals, high-net-worth families, retirement plans, foundations, and institutions), and (iii) the investment portfolio segment (investing through our wholly owned subsidiary, Royal Palm Capital, LLC (collectively with its wholly owned subsidiaries, “Royal Palm”), in mortgage-backed securities (“MBS”) and Orchid common stock in our own portfolio). See Note 14. In the two segments where we invest in MBS, in both cases, the principal and interest payments of these MBS are guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association (“Ginnie Mae” and, collectively with Fannie Mae and Freddie Mac, “GSEs”) and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as “Agency MBS.” Our investment strategy focuses on, and our portfolios primarily consist of traditional pass-through (“PT”) Agency MBS, such as mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT MBS”); and structured Agency MBS, such as interest only securities (“IOs”), inverse interest only securities (“IIOs”) and principal only securities (“POs”).
Recent Significant Events
On April 1, 2026, the Company completed the acquisition of an 80% ownership stake in TJIM. As a result of the acquisition, the Company expanded beyond investing in MBS securities solely and into investment management across equity, fixed income, and balanced strategies for individuals, high-net-worth families, retirement plans, foundations, and institutions. Unless stated otherwise, the financial information contained in this Item 2 regarding the results of operations and financial condition of TJIM take into account only the results of operations, financial condition, and performance of TJIM after April 1, 2026.
The acquisition expanded the nature of the Company’s operations and revenue composition. Following the acquisition, a portion of the Company’s revenues is derived from recurring management fees based on assets under management ("AUM").
Management believes the acquisition provides:
| ● |
expanded recurring revenue streams; |
| ● |
increased exposure to fee-based advisory businesses; |
| ● |
enhanced cash flow generation opportunities; |
| ● |
expanded client relationships; and |
| ● |
additional long-term growth opportunities in asset and wealth management. |
Key Business Metrics
Management monitors several operating metrics with respect to TJIM, including:
| ● |
assets under management; |
| ● |
net client inflows and outflows; |
| ● |
investment performance; |
| ● |
fee rates; |
| ● |
client retention; |
| ● |
operating margins; and |
| ● |
compensation ratios. |
Regulatory Environment
As a result of the acquisition, the Company became subject to additional regulatory requirements applicable to SEC-registered investment advisers beyond just Bimini Advisors management of Orchid. Compliance with these regulations has increased operating complexity and may increase future compliance, legal, and administrative costs. These regulations govern, among other matters:
| ● |
fiduciary duties to clients; |
| ● |
custody of client assets; |
| ● |
disclosure obligations; |
| ● |
advertising and marketing practices; |
| ● |
valuation procedures; |
| ● |
conflicts of interest; |
| ● |
trading practices; |
| ● |
cybersecurity and recordkeeping; |
| ● |
anti-money laundering compliance; |
| ● |
privacy and data protection; and |
| ● |
compliance policies and procedures. |
The Company has adopted compliance policies and supervisory procedures designed to address regulatory obligations and fiduciary standards applicable to registered investment advisers. Failure to comply with applicable laws and regulations could result in examinations, investigations, enforcement actions, censures, fines, reputational harm, restrictions on business activities, or the loss of advisory registrations.
Results of Operations
Described below are the Company’s results of operations for the six and three months ended June 30, 2026, as compared to the six and three months ended June 30, 2025.
Net Income Summary
Consolidated net income attributable to Bimini stockholders for the six months ended June 30, 2026 was $1.2 million, or $0.12 basic and diluted income per share of Class A Common Stock, as compared to consolidated net income of $0.6 million, or $0.06 basic and diluted income per share of Class A Common Stock, for the six months ended June 30, 2025. The components of net income for the six and three months ended June 30, 2026 and 2025, 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, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Advisory services revenues |
$ | 11,933 | $ | 7,393 | $ | 4,540 | $ | 6,806 | $ | 3,811 | $ | 2,995 | ||||||||||||
| Interest and dividend income |
1,791 | 3,734 | (1,943 | ) | 422 | 1,787 | (1,365 | ) | ||||||||||||||||
| Interest expense |
(1,837 | ) | (3,576 | ) | 1,739 | (643 | ) | (1,732 | ) | 1,089 | ||||||||||||||
| Net revenues |
11,887 | 7,551 | 4,336 | 6,585 | 3,866 | 2,719 | ||||||||||||||||||
| Other (expense) revenue |
(491 | ) | (1,026 | ) | 535 | 67 | (998 | ) | 1,065 | |||||||||||||||
| Expenses |
(8,571 | ) | (5,742 | ) | (2,829 | ) | (4,845 | ) | (2,819 | ) | (2,026 | ) | ||||||||||||
| Net income before income tax provision |
2,825 | 783 | 2,042 | 1,807 | 49 | 1,758 | ||||||||||||||||||
| Income tax provision |
1,526 | 188 | 1,338 | 1,309 | 6 | 1,303 | ||||||||||||||||||
| Net income |
1,299 | 595 | 704 | 498 | 43 | 455 | ||||||||||||||||||
| Less: income (loss) attributable to noncontrolling interests |
124 | - | 124 | 124 | - | 124 | ||||||||||||||||||
| Net income attributable to Bimini Capital Management, Inc. stockholders |
$ | 1,175 | $ | 595 | 580 | $ | 374 | $ | 43 | 331 | ||||||||||||||
GAAP and Non-GAAP Reconciliation
Economic Interest Expense and Economic Net Interest Income
We use derivative instruments, primarily U.S. Treasury Note (“T-Note”) and SOFR futures contracts to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.
We have not designated our derivative financial instruments as hedge accounting relationships, but rather hold them for economic hedging purposes. Changes in fair value of these instruments are presented in a separate line item in our consolidated statements of operations and not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.
For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense, as reflected in our consolidated statements of operations, is adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses that pertain to each period presented. We believe that adjusting our GAAP interest expense for the periods presented by the gains or losses on these derivative instruments may not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments may cover periods that extend into the future, not just the current period. Any realized or unrealized gains or losses on the derivative instruments reflect the change in market value of the instrument caused by changes in underlying interest rates applicable to the term covered by the instrument, which changes are reflective of the future periods covered by the derivative instrument, not just the current period.
For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on repurchase agreements to reflect total economic interest expense for the applicable period. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income. This presentation includes gains or losses on all contracts in effect during the reporting period, covering the current period as well as periods in the future.
We believe that economic interest expense and economic net interest income provide meaningful information to consider, in addition to the financial information prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio or operations. The gains or losses on derivative instruments presented in our consolidated statements of operations are not necessarily representative of the total interest expense that we will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses we ultimately realize, and which will affect our total interest expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.
Our presentation of the economic value of our hedging strategy has important limitations. First, other market participants may calculate economic interest expense and economic net interest income differently than the way we calculate them. Second, while we believe that the calculation of the economic value of our hedging strategy described above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, the economic value of our investment strategy should not be viewed in isolation and is not a substitute for interest expense and net interest income computed in accordance with GAAP.
The tables below present a reconciliation of the adjustments discussed above to interest expense shown for each period relative to our derivative instruments, and the consolidated statements of operations line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for each quarter in 2026 and 2025.
Gains (Losses) on Derivative Instruments
| (in thousands) |
||||||||||||||||
| Funding Hedges |
||||||||||||||||
| Consolidated |
Attributed to |
Attributed to |
||||||||||||||
| Statement of |
Current |
Future |
||||||||||||||
| Operations |
TBA |
Period |
Periods |
|||||||||||||
| Three Months Ended |
(GAAP) |
Securities |
(Non-GAAP) |
(Non-GAAP) |
||||||||||||
| June 30, 2026 |
$ | 95 | $ | - | 81 | 14 | ||||||||||
| March 31, 2026 |
178 | (55 | ) | 76 | 157 | |||||||||||
| December 31, 2025 |
36 | - | 109 | (73 | ) | |||||||||||
| September 30, 2025 |
(170 | ) | - | 108 | (278 | ) | ||||||||||
| June 30, 2025 |
(431 | ) | - | 112 | (543 | ) | ||||||||||
| March 31, 2025 |
(1,369 | ) | - | 106 | (1,475 | ) | ||||||||||
| Six Months Ended |
||||||||||||||||
| June 30, 2026 |
$ | 273 | $ | (55 | ) | $ | 157 | $ | 171 | |||||||
| June 30, 2025 |
(1,800 | ) | - | 218 | (2,018 | ) | ||||||||||
Economic Net Portfolio Interest Income
| (in thousands) |
||||||||||||||||||||||||
| Interest Expense on Repurchase Agreements |
Net Portfolio |
|||||||||||||||||||||||
| GAAP |
Effect of |
Interest Income |
||||||||||||||||||||||
| Interest |
GAAP |
Non-GAAP |
Economic |
GAAP |
Economic |
|||||||||||||||||||
| Three Months Ended |
Income |
Basis |
Hedges(1) |
Basis(2) |
Basis |
Basis(3) |
||||||||||||||||||
| June 30, 2026 |
$ | 251 | $ | 145 | $ | (81 | ) | $ | 64 | $ | 106 | $ | 187 | |||||||||||
| March 31, 2026 |
1,164 | 697 | (76 | ) | 621 | 467 | 543 | |||||||||||||||||
| December 31, 2025 |
1,451 | 1,022 | (109 | ) | 913 | 429 | 538 | |||||||||||||||||
| September 30, 2025 |
1,534 | 1,157 | (108 | ) | 1,049 | 377 | 485 | |||||||||||||||||
| June 30, 2025 |
1,582 | 1,191 | (112 | ) | 1,079 | 391 | 503 | |||||||||||||||||
| March 31, 2025 |
1,742 | 1,307 | (106 | ) | 1,201 | 435 | 541 | |||||||||||||||||
| Six Months Ended |
||||||||||||||||||||||||
| June 30, 2026 |
$ | 1,415 | $ | 842 | $ | (157 | ) | $ | 685 | $ | 573 | $ | 730 | |||||||||||
| June 30, 2025 |
3,324 | 2,498 | (218 | ) | 2,280 | 826 | 1,044 | |||||||||||||||||
| (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. |
Segment Information
Segment information for the six and three months ended June 30, 2026 and 2025 is as follows:
| (in thousands) |
||||||||||||||||||||||||
| Asset Management |
||||||||||||||||||||||||
| Bimini |
Investment |
|||||||||||||||||||||||
| Six Months Ended June 30, 2026 |
Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers |
$ | 10,205 | $ | 1,728 | $ | - | $ | - | $ | - | $ | 11,933 | ||||||||||||
| Advisory services, other operating segments(1) |
76 | - | - | - | (76 | ) | - | |||||||||||||||||
| Interest and dividend income |
- | 10 | 1,781 | - | - | 1,791 | ||||||||||||||||||
| Total revenues |
10,281 | 1,738 | 1,781 | - | (76 | ) | 13,724 | |||||||||||||||||
| Interest expense(2) |
- | - | (842 | ) | (995 | ) | - | (1,837 | ) | |||||||||||||||
| Net revenues |
10,281 | 1,738 | 939 | (995 | ) | (76 | ) | 11,887 | ||||||||||||||||
| Other income (expense), net |
- | 3 | (494 | ) | - | - | (491 | ) | ||||||||||||||||
| Operating expenses |
(102 | ) | (1,120 | ) | (46 | ) | (7,303 | ) | - | (8,571 | ) | |||||||||||||
| Allocated expenses(3) |
(5,405 | ) | (878 | ) | (1,020 | ) | 7,303 | - | - | |||||||||||||||
| Intercompany expenses(1) |
- | - | (76 | ) | - | 76 | - | |||||||||||||||||
| Income (loss) before income taxes |
$ | 4,774 | $ | (257 | ) | $ | (697 | ) | $ | (995 | ) | $ | - | $ | 2,825 | |||||||||
| (in thousands) |
||||||||||||||||||||||||
| Asset Management |
||||||||||||||||||||||||
| Bimini |
Investment |
|||||||||||||||||||||||
| Six Months Ended June 30, 2025 |
Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers |
$ | 7,393 | $ | - | $ | - | $ | - | $ | - | $ | 7,393 | ||||||||||||
| Advisory services, other operating segments(1) |
81 | - | - | - | (81 | ) | - | |||||||||||||||||
| Interest and dividend income |
- | - | 3,734 | - | - | 3,734 | ||||||||||||||||||
| Total revenues |
7,474 | - | 3,734 | - | (81 | ) | 11,127 | |||||||||||||||||
| Interest expense(2) |
- | - | (2,497 | ) | (1,079 | ) | - | (3,576 | ) | |||||||||||||||
| Net revenues |
7,474 | - | 1,237 | (1,079 | ) | (81 | ) | 7,551 | ||||||||||||||||
| Other income (expense), net |
- | - | (1,026 | ) | - | - | (1,026 | ) | ||||||||||||||||
| Operating expenses |
(73 | ) | - | (65 | ) | (5,604 | ) | - | (5,742 | ) | ||||||||||||||
| Allocated expenses(3) |
(3,724 | ) | - | (1,881 | ) | 5,605 | - | - | ||||||||||||||||
| Intercompany expenses(1) |
- | - | (81 | ) | - | 81 | - | |||||||||||||||||
| Income (loss) before income taxes |
$ | 3,677 | $ | - | $ | (1,816 | ) | $ | (1,078 | ) | $ | - | $ | 783 | ||||||||||
| (in thousands) |
||||||||||||||||||||||||
| Asset Management |
||||||||||||||||||||||||
| Bimini |
Investment |
|||||||||||||||||||||||
| Three Months Ended June 30, 2026 |
Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers |
$ | 5,078 | $ | 1,728 | $ | - | $ | - | $ | - | $ | 6,806 | ||||||||||||
| Advisory services, other operating segments(1) |
20 | - | - | - | (20 | ) | - | |||||||||||||||||
| Interest and dividend income |
- | 10 | 412 | - | - | 422 | ||||||||||||||||||
| Total revenues |
5,098 | 1,738 | 412 | - | (20 | ) | 7,228 | |||||||||||||||||
| Interest expense(2) |
- | - | (144 | ) | (499 | ) | - | (643 | ) | |||||||||||||||
| Net revenues |
5,098 | 1,738 | 268 | (499 | ) | (20 | ) | 6,585 | ||||||||||||||||
| Other income, net |
- | 3 | 64 | - | - | 67 | ||||||||||||||||||
| Operating expenses |
(52 | ) | (1,120 | ) | (22 | ) | (3,651 | ) | - | (4,845 | ) | |||||||||||||
| Allocated expenses(3) |
(2,565 | ) | (878 | ) | (208 | ) | 3,651 | - | - | |||||||||||||||
| Intercompany expenses(1) |
- | - | (20 | ) | - | 20 | - | |||||||||||||||||
| Income (loss) before income taxes |
$ | 2,481 | $ | (257 | ) | $ | 82 | $ | (499 | ) | $ | - | $ | 1,807 | ||||||||||
| (in thousands) |
||||||||||||||||||||||||
| Asset Management |
||||||||||||||||||||||||
| Bimini |
Investment |
|||||||||||||||||||||||
| Three Months Ended June 30, 2025 |
Advisors | TJIM(4) | Portfolio | Corporate | Eliminations | Total | ||||||||||||||||||
| Advisory services, external customers |
$ | 3,811 | $ | - | $ | - | $ | - | $ | - | $ | 3,811 | ||||||||||||
| Advisory services, other operating segments(1) |
40 | - | - | - | (40 | ) | - | |||||||||||||||||
| Interest and dividend income |
- | - | 1,787 | - | - | 1,787 | ||||||||||||||||||
| Total revenues |
3,851 | - | 1,787 | - | (40 | ) | 5,598 | |||||||||||||||||
| Interest expense(2) |
- | - | (1,191 | ) | (541 | ) | - | (1,732 | ) | |||||||||||||||
| Net revenues |
3,851 | - | 596 | (541 | ) | (40 | ) | 3,866 | ||||||||||||||||
| Other income (expense), net |
- | - | (998 | ) | - | - | (998 | ) | ||||||||||||||||
| Operating expenses |
(31 | ) | - | (25 | ) | (2,763 | ) | - | (2,819 | ) | ||||||||||||||
| Allocated expenses(3) |
(1,881 | ) | - | (882 | ) | 2,763 | - | - | ||||||||||||||||
| Intercompany expenses(1) |
- | - | (40 | ) | - | 40 | - | |||||||||||||||||
| Income (loss) before income taxes |
$ | 1,939 | $ | - | $ | (1,349 | ) | $ | (541 | ) | $ | - | $ | 49 | ||||||||||
| (1) |
Includes fees paid by Royal Palm to Bimini Advisors for advisory services at an annualized rate of 1.5% of capital allocated to Royal Palm's MBS portfolio. |
| (2) |
Includes interest expense on repurchase agreements in the Investment Portfolio column and long-term debt in the Corporate column. |
| (3) |
Operating expenses are allocated based on each segment’s proportional share of total revenues. |
| (4) | The activity and results of operations of TJIM prior to April 1, 2026, the closing date of the TJIM Acquisition, are not included. |
Assets in each reportable segment were as follows:
| (in thousands) |
||||||||||||||||||||
| Asset Management |
||||||||||||||||||||
| Bimini |
Investment |
|||||||||||||||||||
| Advisors |
TJIM |
Portfolio |
Corporate |
Total |
||||||||||||||||
| June 30, 2026 |
$ | 2,668 | $ | 17,969 | $ | 37,936 | 5,793 | $ | 64,366 | |||||||||||
| December 31, 2025 |
2,617 | - | 120,751 | 6,326 | 129,694 | |||||||||||||||
Asset Management Segment - Bimini Advisors/Orchid Island
Advisory Services Revenue
Advisory services revenue consists of management fees and overhead reimbursements charged to Orchid for the management of its portfolio pursuant to the terms of a management agreement. We receive a monthly management fee in the amount of:
| ● |
One-twelfth of 1.50% of the first $250 million of Orchid’s month-end equity, as defined in the management agreement, |
| ● |
One-twelfth of 1.25% of Orchid’s month-end equity that is greater than $250 million and less than or equal to $500 million, and |
| ● |
One-twelfth of 1.00% of Orchid’s month-end equity that is greater than $500 million. |
The Company also provides certain repurchase agreement trading, clearing and administrative services to Orchid. In consideration for such services, Orchid pays the following fees to the Company:
| ● |
a daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and |
| ● |
a fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month. |
In addition, Orchid is obligated to reimburse us for any direct expenses incurred on its behalf and to pay to us an amount equal to Orchid's pro rata portion of certain overhead costs set forth in the management agreement. The management agreement has been renewed through February 2027 and provides for automatic one-year extension options. Should Orchid terminate the management agreement without cause, it will be obligated to pay to us a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the applicable renewal term.
The following table summarizes the advisory services revenue received from Orchid in each quarter and during 2026 and 2025.
| (in thousands) |
||||||||||||||||||||||||||||
| Advisory Services |
||||||||||||||||||||||||||||
| Average |
Repurchase, |
|||||||||||||||||||||||||||
| Average |
Average |
Orchid |
Clearing and |
|||||||||||||||||||||||||
| Orchid |
Orchid |
Repurchase |
Management |
Overhead |
Administrative |
|||||||||||||||||||||||
| Three Months Ended |
MBS |
Equity |
Agreements |
Fee |
Allocation |
Fees |
Total |
|||||||||||||||||||||
| June 30, 2026 |
$ | 11,439,353 | $ | 1,442,960 | $ | 10,975,819 | $ | 4,124 | $ | 585 | $ | 369 | $ | 5,078 | ||||||||||||||
| March 31, 2026 |
10,983,600 | 1,365,471 | 10,490,095 | 3,988 | 786 | 353 | 5,127 | |||||||||||||||||||||
| December 31, 2025 |
9,492,369 | 1,233,957 | 9,061,222 | 3,700 | 705 | 319 | 4,724 | |||||||||||||||||||||
| September 30, 2025 |
7,674,720 | 1,108,307 | 7,331,428 | 3,294 | 887 | 277 | 4,458 | |||||||||||||||||||||
| June 30, 2025 |
6,865,727 | 1,012,986 | 6,537,260 | 2,982 | 582 | 247 | 3,811 | |||||||||||||||||||||
| March 31, 2025 |
5,995,702 | 902,590 | 5,722,092 | 2,747 | 608 | 227 | 3,582 | |||||||||||||||||||||
| Six Months Ended |
||||||||||||||||||||||||||||
| June 30, 2026 |
$ | 11,211,477 | $ | 1,404,216 | $ | 10,732,957 | $ | 8,112 | $ | 1,371 | $ | 722 | $ | 10,205 | ||||||||||||||
| June 30, 2025 |
6,430,715 | 957,788 | 6,129,676 | 5,729 | 1,190 | 474 | 7,393 | |||||||||||||||||||||
Asset Management Segment – TJIM
TJIM is an SEC-registered investment adviser managing over $1.7 billion in regulatory assets under management across equity, fixed income, and balanced strategies. Operating as a fiduciary, TJIM provides discretionary portfolio management centered on fundamental research, high-quality security selection, and continuous risk oversight.
TJIM delivers investment strategies through two primary operational channels. For direct advisory clients - including individuals, high-net-worth families, retirement plans, foundations, and institutions - TJIM constructs customized Separately Managed Accounts ("SMAs") paired with dedicated personal service. TJIM also serves as a trusted third-party asset manager on many of the industry’s prominent nationally distributed platforms, enabling financial advisors at broker-dealers, banks, insurance companies, and independent RIAs to complement their existing practices with TJIM’s time-tested strategies.
TJIM is compensated primarily through asset-based management fees calculated as a percentage of assets under management. Backed by over four decades of investment experience, the firm’s disciplined approach supported positive growth in both regulatory assets under management and advisory revenues through the six-month period ending June 30, 2026.
Management fees are generally calculated as a percentage of AUM and are affected by market conditions, investor inflows and outflows, investment performance, and client retention. Assets under management are influenced by market appreciation or depreciation, investor flows, investment performance, and changes in client allocations. Because advisory revenues are generally based on the value of client assets, declines in financial markets or sustained client withdrawals may adversely affect the Company’s revenues, operating margins, cash flows, and results of operations.
TJIM competes with a broad range of financial institutions and investment managers, including registered investment advisers, alternative asset managers, wealth management firms, banks, broker-dealers, insurance companies, and other financial services providers. Competition is based on investment performance, reputation, service quality, distribution capabilities, personnel, product offerings, fees, and client relationships. TJIM’s business is dependent on the experience, judgment, and continued service of key investment professionals, portfolio managers, executives, and relationship personnel. The loss of key personnel or an inability to attract and retain qualified professionals could adversely affect investment performance, client retention, and future growth.
The following table presents selected unaudited historical operating information of TJIM, including advisory AUM and advisory services revenue, for the periods indicated, including periods prior to April 1, 2026, the closing date of the TJIM Acquisition. This information is presented solely to provide investors with additional context regarding the historical operations of the acquired business. The information is not intended to represent, and should not be considered indicative of, the results of operations or financial position that would have been achieved had the acquisition occurred on an earlier date, nor is it necessarily indicative of the future results of the combined company.
| (in thousands) |
||||||||||||||||||||||||||||||||
| Ending Assets Under Management |
Fee Revenue |
|||||||||||||||||||||||||||||||
| Advisory |
Sub-advisor |
Model |
Advisory |
Sub-advisor |
Model |
|||||||||||||||||||||||||||
| Three Months Ended |
Programs |
Programs |
Programs |
Total |
Programs |
Programs |
Programs |
Total |
||||||||||||||||||||||||
| June 30, 2026 |
$ | 665,996 | $ | 193,836 | $ | 870,965 | $ | 1,730,797 | $ | 905 | $ | 152 | $ | 671 | $ | 1,728 | ||||||||||||||||
| March 31, 2026 |
578,611 | 178,367 | 876,008 | 1,632,986 | 751 | 156 | 675 | 1,582 | ||||||||||||||||||||||||
| December 31, 2025 |
564,931 | 191,473 | 893,286 | 1,649,690 | 744 | 161 | 681 | 1,586 | ||||||||||||||||||||||||
| September 30, 2025 |
552,213 | 189,464 | 914,322 | 1,655,999 | 723 | 152 | 681 | 1,556 | ||||||||||||||||||||||||
| June 30, 2025 |
517,635 | 181,779 | 902,819 | 1,602,233 | 677 | 151 | 697 | 1,525 | ||||||||||||||||||||||||
| March 31, 2025 |
535,911 | 184,703 | 911,464 | 1,632,078 | 644 | 158 | 688 | 1,490 | ||||||||||||||||||||||||
| Six Months Ended |
||||||||||||||||||||||||||||||||
| June 30, 2026 |
$ | 665,996 | $ | 193,836 | $ | 870,965 | $ | 1,730,797 | $ | 1,656 | $ | 308 | $ | 1,346 | $ | 3,310 | ||||||||||||||||
| June 30, 2025 |
517,635 | 181,779 | 902,819 | 1,602,233 | 1,321 | 309 | 1,385 | 3,015 | ||||||||||||||||||||||||
Investment Portfolio Segment
Net Portfolio Interest Income
In anticipation of the closing of the TJIM Acquisition, we sold a significant portion of the MBS portfolio in the first quarter of 2026. Our outstanding balances under repurchase agreement borrowings declined proportionately as well. As a result, many figures discussed below appear distorted when simple average balances are calculated, such as average MBS held and average outstanding balances under repurchase agreement borrowings. Further, since the sales occurred late in the quarter, interest income and interest expense amounts reflect balances of both assets and borrowing in place for the majority of the quarter. The combination of these two factors led to certain metrics such as our yield on average MBS and cost of funds measures to appear higher than they would have been had these large sales not occurred, or occurred earlier in the quarter. These factors should be kept in mind when reading the discussion of our investment portfolio segment results for the quarter.
During the six months ended June 30, 2026, we generated $0.6 million of net portfolio interest income, consisting of $1.4 million of interest income from MBS assets offset by $0.8 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2025, we generated $0.8 million of net portfolio interest income, consisting of $3.3 million of interest income from MBS assets offset by $2.5 million of interest expense on repurchase liabilities. The $1.9 million decrease in interest income was due to a $83.7 million decrease in average MBS holdings, offset by a 263 basis point ("bp") increase in yields. There was a $1.7 million decrease in interest expense for the six months ended June 30, 2026 that was due to a $79.8 million decrease in average repurchase liabilities, offset by a 71 bp increase in cost of funds.
During the three months ended June 30, 2026, we generated $0.1 million of net portfolio interest income, consisting of $0.3 million of interest income from MBS assets offset by $0.2 million of interest expense on repurchase liabilities. For the comparable period ended June 30, 2025, we generated $0.4 million of net portfolio interest income, consisting of $1.6 million of interest income from MBS assets offset by $1.2 million of interest expense on repurchase liabilities. The $1.3 million decrease in interest income was due to a $98.3 million decrease in average MBS holdings, offset by a 73 bp increase in yields. There was a $1.1 million decrease in interest expense for the three months ended June 30, 2026 that was due to a $93.5 million decrease in average repurchase liabilities, offset by a 56 bp decrease in cost of funds.
Our economic interest expense on repurchase liabilities for the six months ended June 30, 2026 and 2025 was $0.7 million and $2.3 million, respectively, resulting in $0.7 million and $1.0 million of economic net portfolio interest income, respectively. Our economic interest expense on repurchase liabilities for the three months ended June 30, 2026 and 2025 was $0.1 million and $1.1 million, respectively, resulting in $0.2 million and $0.5 million of economic net portfolio interest income, respectively.
The tables below provide information on our portfolio average balances, interest income, yield on assets, average repurchase agreement balances, interest expense, cost of funds, net interest income and net interest rate spread for the six months ended June 30, 2026 and 2025 and each quarter in 2026 and 2025 on both a GAAP and economic basis.
| ($ in thousands) |
||||||||||||||||||||||||||||||||
| Average |
Yield on |
Average |
Interest Expense |
Average Cost of Funds |
||||||||||||||||||||||||||||
| MBS |
Interest |
Average |
Repurchase |
GAAP |
Economic |
GAAP |
Economic |
|||||||||||||||||||||||||
| Three Months Ended |
Held(1) |
Income |
MBS |
Agreements(1) |
Basis |
Basis(2) |
Basis |
Basis(3) |
||||||||||||||||||||||||
| June 30, 2026 |
$ | 16,025 | $ | 251 | 6.27 | % | $ | 15,109 | $ | 145 | $ | 64 | 3.83 | % | 1.68 | % | ||||||||||||||||
| March 31, 2026 |
52,497 | 1,164 | 8.87 | % | 50,255 | 697 | 621 | 5.55 | % | 4.94 | % | |||||||||||||||||||||
| December 31, 2025 |
96,668 | 1,451 | 6.00 | % | 92,640 | 1,022 | 913 | 4.41 | % | 3.94 | % | |||||||||||||||||||||
| September 30, 2025 |
106,016 | 1,534 | 5.79 | % | 100,848 | 1,157 | 1,049 | 4.59 | % | 4.16 | % | |||||||||||||||||||||
| June 30, 2025 |
114,294 | 1,582 | 5.54 | % | 108,626 | 1,191 | 1,079 | 4.39 | % | 3.97 | % | |||||||||||||||||||||
| March 31, 2025 |
121,657 | 1,742 | 5.73 | % | 116,346 | 1,307 | 1,201 | 4.49 | % | 4.13 | % | |||||||||||||||||||||
| Six Months Ended |
||||||||||||||||||||||||||||||||
| June 30, 2026 |
$ | 34,261 | $ | 1,415 | 8.26 | % | $ | 32,682 | $ | 842 | $ | 685 | 5.15 | % | 4.19 | % | ||||||||||||||||
| June 30, 2025 |
117,976 | 3,324 | 5.63 | % | 112,486 | 2,498 | 2,280 | 4.44 | % | 4.05 | % | |||||||||||||||||||||
| ($ in thousands) |
||||||||||||||||
| Net Portfolio |
Net Portfolio |
|||||||||||||||
| Interest Income |
Interest Spread |
|||||||||||||||
| GAAP |
Economic |
GAAP |
Economic |
|||||||||||||
| Three Months Ended |
Basis |
Basis(2) |
Basis |
Basis(4) |
||||||||||||
| June 30, 2026 |
$ | 106 | $ | 187 | 2.44 | % | 4.59 | % | ||||||||
| March 31, 2026 |
467 | 543 | 3.32 | % | 3.93 | % | ||||||||||
| December 31, 2025 |
429 | 538 | 1.59 | % | 2.06 | % | ||||||||||
| September 30, 2025 |
377 | 485 | 1.20 | % | 1.63 | % | ||||||||||
| June 30, 2025 |
391 | 503 | 1.15 | % | 1.57 | % | ||||||||||
| March 31, 2025 |
435 | 541 | 1.24 | % | 1.60 | % | ||||||||||
| Six Months Ended |
||||||||||||||||
| June 30, 2026 |
$ | 573 | $ | 730 | 3.11 | % | 4.07 | % | ||||||||
| June 30, 2025 |
826 | 1,044 | 1.19 | % | 1.58 | % | ||||||||||
| (1) |
Portfolio yields and costs of borrowings presented in the tables above 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 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. |
Cost of Funds
Since all of our repurchase agreements are short-term, changes in market rates have a more immediate impact on our interest expense. Our average cost of funds calculated on a GAAP basis was 20 bps above the average one-month SOFR and 16 bps above the average six-month SOFR for the quarter ended June 30, 2026. Our average economic cost of funds was 195 bps below the average one-month SOFR and 199 bps below the average six-month SOFR for the quarter ended June 30, 2026. The average term to maturity of the outstanding repurchase agreements was 22 days at June 30, 2026, compared to 31 days at December 31, 2025. The tables below present the average outstanding balances under our repurchase agreements, interest expense and average economic cost of funds, and average one-month and six-month SOFR rates for each quarter in 2026 and 2025, on both a GAAP and economic basis.
| Average GAAP Cost of Funds |
Average Economic Cost of Funds |
|||||||||||||||||||||||
| Relative to Average |
Relative to Average |
|||||||||||||||||||||||
| Average SOFR |
One-Month |
Six-Month |
One-Month |
Six-Month |
||||||||||||||||||||
| Three Months Ended |
One-Month |
Six-Month |
SOFR |
SOFR |
SOFR |
SOFR |
||||||||||||||||||
| June 30, 2026 |
3.63 | % | 3.67 | % | 0.20 | % | 0.16 | % | (1.95 | )% | (1.99 | )% | ||||||||||||
| March 31, 2026 |
3.65 | % | 3.86 | % | 1.90 | % | 1.69 | % | 1.29 | % | 1.08 | % | ||||||||||||
| December 31, 2025 |
3.79 | % | 4.20 | % | 0.62 | % | 0.21 | % | 0.15 | % | (0.26 | )% | ||||||||||||
| September 30, 2025 |
4.31 | % | 4.37 | % | 0.28 | % | 0.22 | % | (0.15 | )% | (0.21 | )% | ||||||||||||
| June 30, 2025 |
4.32 | % | 4.37 | % | 0.07 | % | 0.02 | % | (0.35 | )% | (0.40 | )% | ||||||||||||
| March 31, 2025 |
4.33 | % | 4.55 | % | 0.16 | % | (0.06 | )% | (0.20 | )% | (0.42 | )% | ||||||||||||
| Six Months Ended |
||||||||||||||||||||||||
| June 30, 2026 |
3.64 | % | 3.77 | % | 1.51 | % | 1.38 | % | 0.55 | % | 0.42 | % | ||||||||||||
| June 30, 2025 |
4.33 | % | 4.46 | % | 0.11 | % | (0.02 | )% | (0.28 | )% | (0.41 | )% | ||||||||||||
Dividend Income from Orchid
We owned 569,071 shares of Orchid common stock throughout each of the six months ended June 30, 2026 and 2025. Orchid paid total dividends of $0.66 per share and $0.72 per share during the six months ended June 30, 2026 and 2025, respectively, resulting in dividend income of approximately $0.4 million in each period. We owned 569,071 shares of Orchid common stock throughout each of the three months ended June 30, 2026 and 2025. Orchid paid total dividends of $0.30 per share and $0.36 per share during the three months ended June 30, 2026 and 2025, resulting in dividend income of approximately $0.2 million in each period.
Long-Term Debt
Junior Subordinated Debt
The junior subordinated debt securities paid interest at a floating rate. The interest rate is the CME Term SOFR on the applicable reset date plus the tenor spread adjustment of 0.26161% plus the coupon spread of 3.50%. Interest expense on our junior subordinated debt securities was $1.0 million and $1.1 million for the six months ended June 30, 2026 and 2025, respectively. The average rate of interest paid for the six months ended June 30, 2026 was 7.45% compared to 8.09% for the comparable period in 2025. Interest expense on our junior subordinated debt securities was $0.5 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively. The average rate of interest paid for the three months ended June 30, 2026 was 7.43% compared to 8.06% for the comparable period in 2025.
Note Payable
On October 30, 2019, the Company borrowed $680,000 from a bank which is secured by a mortgage on the Company’s office building and has a final maturity of October 30, 2039. Through October 30, 2024, interest accrued on the note at 4.89%. Thereafter, interest accrues based on the weekly average yield to the United States Treasury securities adjusted to a constant maturity of 5 years, plus 3.25%. The interest rate reset to 7.37% on October 30, 2024 and will reset again on October 30, 2029.
Gains or Losses and Other Income - Investment Portfolio Segment
The table below presents our gains or losses and other income for the six and three months ended June 30, 2026 and 2025.
| (in thousands) |
||||||||||||||||||||||||
| Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Realized losses on sales of MBS |
$ | (372 | ) | $ | (178 | ) | $ | (194 | ) | $ | - | $ | (178 | ) | $ | 178 | ||||||||
| Unrealized (losses) gains on MBS |
(262 | ) | 1,390 | (1,652 | ) | 5 | (99 | ) | 104 | |||||||||||||||
| Total (losses) gains on MBS |
(634 | ) | 1,212 | (1,846 | ) | 5 | (277 | ) | 282 | |||||||||||||||
| Gains (losses) on derivative instruments |
273 | (1,800 | ) | 2,073 | 95 | (431 | ) | 526 | ||||||||||||||||
| Unrealized losses on Orchid Island Capital, Inc. common stock |
(131 | ) | (438 | ) | 307 | (34 | ) | (290 | ) | 256 | ||||||||||||||
We invest in MBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from trading in these securities. However, we have sold, and may sell in the future, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the six months ended June 30, 2026 and 2025, we received proceeds totaling $68.6 million and $9.8 million, respectively, from the sales of MBS.
The fair value of our MBS portfolio and derivative instruments, and the gains (losses) reported on those financial instruments, are driven in part by changes in yields and interest rates, the spreads that MBS trade relative to comparable duration U.S. Treasuries or swaps, as well as varying levels of demand for MBS, which affect the pricing of the securities in our portfolio. The unrealized gains and losses on MBS may also include the premium lost as a result of prepayments on the underlying mortgages, decreasing unrealized gains or increasing unrealized losses as prepayment speeds or premiums increase. To the extent MBS are carried at a discount to par, unrealized gains or losses on MBS would also include discount accreted as a result of prepayments on the underlying mortgages, increasing unrealized gains or decreasing unrealized losses as speeds on discounts increase. Gains and losses on interest rate futures contracts are affected by changes in implied forward rates during the reporting period. The table below presents historical interest rate data as of the end of each quarter during 2026 and 2025.
| 5 Year |
10 Year |
15 Year |
30 Year |
Three |
|||||||||||
| U.S. Treasury |
U.S. Treasury |
Fixed-Rate |
Fixed-Rate |
Month |
|||||||||||
| Rate(1) |
Rate(1) |
Mortgage Rate(2) |
Mortgage Rate(2) |
SOFR(3) |
|||||||||||
| June 30, 2026 |
4.19% |
4.42% |
5.84% |
6.49% |
3.63% |
||||||||||
| March 31, 2026 |
3.95% |
4.31% |
5.75% |
6.38% |
3.68% |
||||||||||
| December 31, 2025 |
3.72% |
4.16% |
5.44% |
6.15% |
4.01% |
||||||||||
| September 30, 2025 |
3.73% |
4.15% |
5.49% |
6.30% |
4.35% |
||||||||||
| June 30, 2025 |
3.80% |
4.23% |
5.89% |
6.77% |
4.34% |
||||||||||
| March 31, 2025 |
3.98% |
4.25% |
5.89% |
6.65% |
4.35% |
| (1) |
Historical 5 Year and 10 Year U.S. Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange. |
| (2) |
Historical 15 Year and 30 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac’s Primary Mortgage Market Survey. |
| (3) |
Historical SOFR is obtained from the Federal Reserve Bank of New York. The SOFR averages are compounded averages of the SOFR over rolling 30- and 180-day periods. |
Operating Expenses
For the six and three months ended June 30, 2026, our total operating expenses were approximately $8.6 million and $4.9 million, respectively, compared to $5.7 million and $2.8 million for the six and three months ended June 30, 2025, respectively, as detailed in the table below.
| (in thousands) |
||||||||||||||||||||||||
| Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||||||||||
| 2026 |
2025 |
Change |
2026 |
2025 |
Change |
|||||||||||||||||||
| Compensation and related benefits |
$ | 4,666 | $ | 3,772 | $ | 894 | $ | 2,620 | $ | 1,854 | $ | 766 | ||||||||||||
| Direct advisory services costs |
863 | 787 | 76 | 419 | 446 | (27 | ) | |||||||||||||||||
| Audit, legal and other professional fees |
492 | 490 | 2 | 233 | 165 | 68 | ||||||||||||||||||
| Acquisition related expenses |
1,516 | - | 1,516 | 915 | - | 915 | ||||||||||||||||||
| Directors’ fees and liability insurance |
406 | 390 | 16 | 203 | 189 | 14 | ||||||||||||||||||
| Amortization of intangible assets |
170 | - | 170 | 170 | - | 170 | ||||||||||||||||||
| Administrative and other expenses |
459 | 304 | 155 | 285 | 165 | 120 | ||||||||||||||||||
| $ | 8,572 | $ | 5,743 | $ | 2,829 | $ | 4,845 | $ | 2,819 | $ | 2,026 | |||||||||||||
Approximately $0.7 million of the increase in compensation and related benefits for the six and three month periods ended June 30, 2026, was attributable to additional personnel associated with the TJIM Acquisition. Amortization expense for the six and three month periods ended June 30, 2026, primarily reflects the amortization of identifiable intangible assets recognized in connection with the TJIM Acquisition.
Income Tax Provision
We recorded income tax provisions for the six months ended June 30, 2026 and 2025 of approximately $1.5 million and $0.2 million, respectively, on consolidated pre-tax book income of $2.8 million and $0.8 million, respectively. We recorded income tax provisions for the three months ended June 30, 2026 and 2025 of approximately $1.3 million and $0.01 million, respectively, on consolidated pre-tax book income of $1.8 million and $0.05 million, respectively. The Company uses the discrete-period computation method for determining its income tax provision. Our income tax provision is affected by numerous factors, including non-deductible expenses, the projected utilization of net operating loss carryovers and changes in our deferred tax assets and liabilities and their valuations, and can result in significant variations in the customary relationship between pretax income and income tax expense. During the three months ended June 30, 2026, the Company reassessed the realizability of its deferred tax assets in connection with the acquisition of TJIM. As a result of this reassessment, the Company recorded an increase in its valuation allowance and a corresponding increase in income tax expense of approximately $1.1 million.
Financial Condition:
Mortgage-Backed Securities - Investment Portfolio Segment
As of June 30, 2026, our MBS portfolio consisted of $16.0 million of agency or government MBS at fair value and had a weighted average coupon of 5.35%. During the six months ended June 30, 2026, we received principal repayments of $3.7 million compared to $6.2 million for the comparable period ended June 30, 2025. The average prepayment speeds for the quarters ended June 30, 2026 and 2025 were 8.1% and 9.9%, respectively.
The following table presents the three-month constant prepayment rate (“CPR”) experienced on our portfolio, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three-month prepayment rate of the securities in the respective asset category.
| Total |
||||
| Three Months Ended |
Portfolio (%) |
|||
| June 30, 2026 |
8.1 | |||
| March 31, 2026 |
2.9 | |||
| December 31, 2025 |
16.6 | |||
| September 30, 2025 |
16.8 | |||
| June 30, 2025 |
9.9 | |||
| March 31, 2025 |
7.3 | |||
The following tables summarize certain characteristics of our PT MBS and structured MBS as of June 30, 2026 and December 31, 2025:
| ($ in thousands) |
|||||||||||||
| Weighted |
|||||||||||||
| Average |
|||||||||||||
| Weighted |
Maturity |
||||||||||||
| Fair |
Average |
in |
Longest |
||||||||||
| Value |
Coupon |
Months |
Maturity |
||||||||||
| June 30, 2026 |
$ | 15,985 | 5.35 | % | 319 | 5/1/2053 |
|||||||
| December 31, 2025 |
$ | 88,929 | 5.73 | % | 331 | 8/1/2054 |
|||||||
| ($ in thousands) |
||||||||||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||||||||||
| Percentage of |
Percentage of |
|||||||||||||||
| Agency |
Fair Value |
Entire Portfolio |
Fair Value |
Entire Portfolio |
||||||||||||
| Fannie Mae |
$ | 2,287 | 14.3 | % | $ | 21,924 | 24.7 | % | ||||||||
| Freddie Mac |
13,698 | 85.7 | % | 67,005 | 75.3 | % | ||||||||||
| Total Portfolio |
$ | 15,985 | 100.0 | % | $ | 88,929 | 100.0 | % | ||||||||
As of June 30, 2026, the Company's portfolio had an effective duration of 3.495, indicating that an interest rate increase of 1.0% would be expected to cause a 3.495% decrease in the value of the MBS in our investment portfolio. As of December 31, 2025, the Company's portfolio had an effective duration of 2.229, indicating that an interest rate increase of 1.0% would be expected to cause a 2.229% decrease in the value of the MBS in our investment portfolio. These figures do not include the effect of our funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.
Our portfolio of PT MBS is typically comprised of adjustable-rate MBS, fixed-rate MBS and hybrid adjustable-rate MBS. We generally seek to acquire low duration assets that offer high levels of protection from mortgage prepayments provided that they are reasonably priced by the market. The stated contractual final maturity of the mortgage loans underlying our portfolio of PT MBS generally ranges up to 30 years. However, the effect of prepayments of the underlying mortgage loans tends to shorten the resulting cash flows from our investments substantially. Prepayments occur for various reasons, including refinancing of underlying mortgages, loan payoffs in connection with home sales, and borrowers paying more than their scheduled loan payments, which accelerates the amortization of the loans.
The duration of our IO and IIO portfolios will vary greatly depending on the structural features of the securities. While prepayment activity will always affect the cash flows associated with the securities, the interest only nature of IO’s may cause their durations to become extremely negative when prepayments are high, and less negative when prepayments are low. Prepayments affect the duration of IIO’s similarly, but the floating rate nature of the coupon of IIOs (which has inverse relationship to their reference index) causes their price movements - and model duration - to be affected by changes in both prepayments and their reference index - both current and anticipated levels. As a result, the duration of IIO securities will also vary greatly.
Prepayments on the loans underlying our MBS can alter the timing of the cash flows received by us. As a result, we gauge the interest rate sensitivity of its assets by measuring their effective duration. While modified duration measures the price sensitivity of a bond to movements in interest rates, effective duration captures both the movement in interest rates and the fact that cash flows to a mortgage related security are altered when interest rates move. Accordingly, when the contract interest rate on a mortgage loan is substantially above prevailing interest rates in the market, the effective duration of securities collateralized by such loans can be quite low because of expected prepayments.
We face the risk that the market value of our MBS assets will increase or decrease at different rates than those of our hedging instruments. Accordingly, we assess our interest rate risk by estimating the duration of our assets and the duration of our hedge instruments. 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, 2026, assuming rates instantaneously fall 200 bps, fall 100 bps and rise 100 bps, adjusted to reflect the impact of convexity, which is the measure of the sensitivity of our hedge positions and Agency MBS’ effective duration to movements in interest rates.
| ($ in thousands) |
||||||||||||||||||||||||||||
| Fair |
$ Change in Fair Value |
% Change in Fair Value |
||||||||||||||||||||||||||
| MBS Portfolio |
Value |
-200BPS |
-100BPS |
+100BPS |
-200BPS |
-100BPS |
+100BPS |
|||||||||||||||||||||
| MBS Portfolio |
$ | 15,985 | $ | 708 | $ | 452 | $ | (644 | ) | 4.43 | % | 2.83 | % | (4.03 | )% | |||||||||||||
| Notional |
$ Change in Fair Value |
% Change in Fair Value |
||||||||||||||||||||||||||
| Repurchase Agreement Hedges |
Amount |
-200BPS |
-100BPS |
+100BPS |
-200BPS |
-100BPS |
+100BPS |
|||||||||||||||||||||
| Interest Rate Futures Contracts |
10,000 | (1,112 | ) | (538 | ) | 507 | (11.12 | )% | (5.38 | )% | 5.07 | % | ||||||||||||||||
| Gross Totals |
$ | (404 | ) | $ | (86 | ) | $ | (137 | ) | |||||||||||||||||||
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, 2026, 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 three of these counterparties. We believe these facilities provide borrowing capacity in excess of our needs. None of these lenders are affiliated with us. These borrowings are secured by our MBS.
As of June 30, 2026, we had obligations outstanding under the repurchase agreements of approximately $15.0 million with a net weighted average borrowing cost of 3.76%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 13 to 42 days, with a weighted average maturity of 22 days. Securing the repurchase agreement obligation as of June 30, 2026 are MBS with an estimated fair value, including accrued interest, of $15.9 million. Through August 6, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed at June 30, 2026 with maturities through August 31, 2026.
The table below presents information about our period-end, maximum and average repurchase agreement obligations for each quarter in 2026 and 2025.
| Ending |
Maximum |
Average |
Difference Between Ending |
|||||||||||||||||
| Balance |
Balance |
Balance |
Repurchase Agreements and |
|||||||||||||||||
| of Repurchase |
of Repurchase |
of Repurchase |
Average Repurchase Agreements |
|||||||||||||||||
| Three Months Ended |
Agreements |
Agreements |
Agreements |
Amount |
Percent |
|||||||||||||||
| June 30, 2026 |
$ | 15,033 | $ | 15,203 | $ | 15,109 | $ | (76 | ) | (0.50 | )% | |||||||||
| March 31, 2026 |
15,184 | 85,332 | 50,255 | (35,071 | ) | (69.79 | )% | |||||||||||||
| December 31, 2025 |
85,326 | 99,953 | 92,640 | (7,314 | ) | (7.90 | )% | |||||||||||||
| September 30, 2025 |
99,953 | 101,788 | 100,848 | (895 | ) | (0.89 | )% | |||||||||||||
| June 30, 2025 |
101,742 | 115,096 | 108,626 | (6,884 | ) | (6.34 | )% | |||||||||||||
| March 31, 2025 |
115,511 | 117,603 | 116,346 | (835 | ) | (0.72 | )% | |||||||||||||
Liquidity and Capital Resources
Liquidity is our ability to turn non-cash assets into cash to fund our operations and to meet our obligations in both the short-term (one year or less) and long-term (greater than one year). Our material cash requirements include our operating expenses, such as payroll for our employees, our professional fees such as legal and accounting, servicing our debt obligations, such as our trust preferred debt (see Note 8 to the consolidated financial statements for more information related to the timing of principal payments and maturities of our long-term debt.), the purchase of additional investments, the repayment of principal and interest on repurchase agreements, and the fulfillment of margin calls. We have both internal and external sources of liquidity. Our material unused sources of liquidity include cash balances, unencumbered assets and our ability to sell encumbered assets to raise cash.
Internal Sources of Liquidity
Our internal sources of liquidity include our cash balances, as well as the collection of management fees and other fees related to our advisory services segments. payments of principal and interest we receive on our MBS portfolio and dividends we receive on our investment in Orchid common stock. We also possess unencumbered RMBS assets and the ability to liquidate our encumbered security holdings.
While our investment portfolio employs a much lower portion of our capital, the management of the portfolio relies on a hedging strategy that typically involves taking short positions in T-Note and SOFR futures, "to-be-announced" ("TBA") securities or other instruments. When the market causes these short positions to decline in value we are required to meet margin calls with cash. This can reduce our liquidity position to the extent other securities in our portfolio move in price in such a way that we do not receive enough cash through margin calls to offset the futures or TBA short positions related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.
External Sources of Liquidity
Our primary external sources of liquidity are our ability to (i) borrow under master repurchase agreements and (ii) use the TBA security market. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our master repurchase agreements have no stated expiration but can be terminated at any time at our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.
Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis.
In future periods, we expect to continue to finance our activities through repurchase agreements and through revenues from our advisory services business. As of June 30, 2026, we had cash and cash equivalents of $6.5 million. We generated cash flows of $5.3 million from principal and interest payments on our MBS portfolio and had average repurchase agreements outstanding of $32.7 million during the six months ended June 30, 2026. In addition, during the six months ended June 30, 2026, we received approximately $10.2 million in management fees and expense reimbursements as manager of Orchid and approximately $0.4 million in dividends from our investment in Orchid common stock.
Capital Expenditures
At June 30, 2026, we had no material commitments for capital expenditures.
Outlook
Orchid Island Capital Inc.
Orchid reported net income for the second quarter of 2026 of $89.2 million, or $0.44 per share and its shareholders equity increased from $1.392 billion to $1.441 billion. During the second quarter, market conditions were generally favorable for levered MBS investors. Orchid reported gains on hedge instruments of $62.4 million and realized and unrealized losses on its MBS portfolio of $26.4 million, which together resulted in gains of $36.0 million. Orchid is obligated to reimburse Bimini for direct expenses paid on its behalf as well as Orchid’s pro-rata share of overhead expenses 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 flow from Orchid.
Tom Johnson Investment Management, LLC
The asset management segment of TJIM reported a net loss for the second quarter of $0.3 million, net of allocated expenses of $0.9 million, on management fee revenues of $1.7 million. Total assets under management have increased from $1.65 billion at December 31, 2025 and $1.63 billion at March 31, 2026, to $1.73 billion at June 30, 2026. Advisory fee revenues for the second quarter were $1.73 million versus $1.58 million for the first quarter of 2026. Advisory fee revenue for the first six months of 2026 were $3.31 million, versus $3.02 million for the first six months of 2025. Note that, due to the closing date of the TJIM Acquisition of April 1, 2026, all figures relating to the results of operations of TJIM for periods prior to the second quarter of 2026 are unaudited and are not included in the consolidated results of the Company. Such information is discussed solely to provide investors with additional context regarding the historical operations of TJIM. The information is not intended to represent, and should not be considered indicative of, the results of operations or financial position that would have been achieved had the TJIM Acquisition occurred on an earlier date, nor is it necessarily indicative of the future results of the combined company.
Economic Summary
The second quarter of 2026 was pivotal in many ways. The Fed transitioned from an easing bias to a hiking bias and a new Fed Chairman with a strong anti-inflation disposition was seated. Meanwhile, the war between the United States, Israel and Iran (the “Iran War”) appeared to be on course to wind down by June before conditions deteriorated materially. A near-term resolution now appears unlikely, allowing energy related inflationary pressures to persist.
On May 22, 2026, Kevin Warsh became the new Chairman of the Fed, replacing Jerome Powell. The new Chairman brings an elevated level of vigor in addressing the persistently high inflation that has exceeded the Fed’s 2% target for approximately 5 years. Even before Chairman Warsh assumed his new role, the FOMC appeared to be shifting its bias away from additional easing toward hiking. At the Fed’s meeting on April 29, 2026, there were three votes in favor of signaling a more two-sided characterization of the Fed’s future interest rate decisions. At Chairman Warsh’s first press conference on June 17, 2026, all doubt regarding the bias of the FOMC was put to rest. The new Chairman was very stern in declaring his highest priority was bringing inflation back to the Fed’s target.
The Iran War appeared to be nearing conclusion when a ceasefire was announced on April 8, 2026, and a formal Memorandum of Understanding (“MOU”) was signed by the parties on June 17, 2026. Shipping traffic through the Strait of Hormuz (“SOH”) was slowly returning to pre-war levels, and market volatility materially subsided. However, shortly after the MOU was signed, hostilities between the parties began to escalate and shipping traffic through the SOH has slowed significantly again. Commodity prices have rebounded in turn and are slowly heading back toward the peak levels reached in the early days of the war. At this point, there is no obvious path to an end to the war, as the two crucial points of disagreement – control over the SOH and the status of Iran’s nuclear capability – seem unlikely to be resolved diplomatically. Unless and until the war pivots again toward a peaceful resolution, upward pressure on commodity prices seems likely to persist, adding to already elevated levels of inflation in the United States and globally.
Developments in the Iran War have only exacerbated problems for the new Fed Chair and the FOMC. The economy in the United States has proven to be very resilient in the face of inflation, particularly elevated commodity prices and disruptions to critical supply channels. At the beginning of 2026, the labor market appeared to be stable, yet at low levels of job growth. During the second quarter of 2026, the labor market appeared to pivot as job growth rebounded. Consumer spending has also remained robust. If the war remains unresolved for an extended period, the Fed will likely need to act and increase the Fed Funds rate. Data for June 2026 released in July – namely the jobs report and the consumer price index and producer price index – were all weak. As a result, market pricing of Fed hikes over the balance of 2026 and into 2027 has subsided. Unless this data remains weak, the market is likely to see higher funding levels.
Interest Rates
Consistent with the pivot in the outlook for Fed policy during the quarter, the nominal rates curve moved higher and flatter during the second quarter of 2026. Specifically, the yield on the 2-year U.S. Treasury note increased from 3.796% at March 31, 2026 to 4.175% at June 30, 2026, while the yield on the 10-year U.S. Treasury note increased from 4.319% at March 31, 2026 to 4.466% at June 30, 2026. As a result, the curve between these two points flattened by approximately 9 basis points. Most proxies for the shape of the rates curve show comparable – or greater – levels of flattening during the second quarter of 2026. The primary impetus for the movements in the nominal U.S. Treasury curve and the swap curve was the pivot in market expectations for Fed Funds rate going forward. At March 31, 2026, market expectations for the Fed Funds rate (based on Fed Funds futures contracts) were for slightly more than one rate cut by year end and two cuts by mid-2027. By the end of the second quarter of 2026, Fed Funds futures implied nearly two hikes by year-end and in excess of three hikes by the end of first quarter of 2027. Current pricing, reflecting the soft June 2026 data released in early July, is unchanged in terms of year-end levels but now reflects very modest cuts in early 2027.
The Fed ended its quantitative tightening program, which reduced its balance sheet via the maturation of its holdings, and began reinvesting them into additional U.S. Treasury holdings on December 1, 2025. Run-off from the Agency RMBS holdings is now directed toward purchasing U.S. Treasuries. The Fed also announced its intention, via Reserve Management Purchases (“RMPs”), to grow its balance sheet over time to maintain a stable relationship between the size of its balance sheet and the economy. These steps resulted in increased purchases of U.S. Treasuries by the Fed. When the RMP program was first introduced, U.S. Treasury purchases were $40 billion per month, although they have declined since and are currently $10 billion per month. However, even at the lower level of purchases, the program has been successful at taking pressure off of the overnight funding markets, as market participants such as money-market funds had fewer options to deploy their liquidity and therefore increased the pool of available funds for the overnight repurchase agreement (“repo”) funding markets. As a result, funding levels available to the Company in the repo markets – typically expressed as a spread over SOFR – have remained stable during the second quarter, continuing the trend we saw during the first quarter of 2026.
The Agency MBS Market
Interest rate volatility spiked meaningfully after the outbreak of the Iran War, consistent with the increase in interest rates across the curve. Volatility peaked just before the first quarter of 2026 ended, with the Merrill Lynch Option Volatility Estimate Index reaching 115.02. Following the announcement of a ceasefire on April 8, 2026, rate volatility dropped nearly to pre-war levels by mid-April and remained relatively stable throughout the balance of the second quarter. Implied interest rate volatility has remained range-bound at low levels since the end of the second quarter. As is typically the case, subdued levels of implied interest rate volatility and range-bound interest rates are conducive to Agency RMBS market performance, and the sector had a positive quarter in both absolute and excess returns. For the second quarter of 2026, the Agency RMBS sector generated a total return of 0.6% and 0.5% versus comparable duration swaps. By comparison, the high-yield and investment-grade corporate bond sectors produced returns of 2.5% and 1.4%, respectively, and excess returns of 2.4% and 1.5%, respectively, versus comparable duration swaps over the same period.
Within Agency RMBS for the second quarter of 2026, conventional 30-year mortgages generated a total return of 0.6%, 15-year mortgages generated a total return of 0.1% and Ginnie Mae 30-year mortgages generated a total return of 0.7%. Versus comparable duration swaps, the returns were 0.6%, 0.0% and 0.6% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack were lowest for lower coupons and increased for progressively higher coupons, with returns for coupons 4% and lower between 0.2% and 0.5%, and above 1.0% for coupons of 5% and higher. This is consistent with higher interest rates, lower prepayment expectations, and the durations of the various coupons inversely related to coupon – the lower the coupon the higher the duration, and visa-versa. Conversely, excess returns were best for middle coupons – between the 4.5% and 6.0% coupons, with lower and higher coupons lagging. Excess returns for middle coupons were between 0.7% and 1.2%, while the lower and higher coupons ranged between 0.3% and 0.8%.
Recent Legislative and Regulatory Developments
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and 2025. On December 1, 2025, the Fed ended quantitative tightening and began reinvesting all proceeds from maturing Agency RMBS up to a $35 billion per month cap in U.S. Treasuries and announced that it would begin buying an additional $40 billion per month of U.S. Treasuries via RMPs in order to maintain an ample level of reserves on an ongoing basis. RMPs were reduced to $25 billion per month in April 2026, and further reduced to $10 billion per month in May 2026, As of June 30, 2026, the Fed had reduced its balance sheet for Agency RMBS by approximately $792 billion from the peak of approximately $2.7 trillion to approximately $1.9 trillion, shedding approximately 58% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since August 2020.
On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions"). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. Throughout 2025 and early 2026, there was some speculation in the market regarding progress towards an end to the conservatorship, including through an initial public offering, but no definitive action has been taken and many analysts believe additional capital is needed before the Enterprises can safely exit conservatorship.
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the “OCC”) the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the “2023 Basel III Endgame”). The 2023 Basel III Endgame, if implemented as originally proposed, would have significantly increased the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could have disincentivized banks from originating mortgages for sale to the GSEs and impacted pricing in the Agency RMBS markets. The comment period for the 2023 Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry.
On November 25, 2025, the Fed, OCC and FDIC jointly adopted a final rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”). The rule, which became effective April 1, 2026 and may be adopted by banks subject to the rule as early as January 1, 2026, seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.
On March 19, 2026, the OCC, FDIC and the Fed rescinded the 2023 Basel III Endgame proposal and concurrently issued three revised notices of proposed rulemaking. The three proposals include (i) a revised Basel III Endgame proposal that would apply an expanded risk-based approach to Category I and Category II banking organizations, thus narrowing the mandatory scope from the 2023 proposal, with all other banking organizations permitted to opt in; (ii) a revised standardized approach proposal that would reduce risk weights for traditional lending activities for banking organizations not subject to the expanded risk-based approach; and (iii) a revised GSIB capital surcharge proposal. The OCC, FDIC, and the Fed estimate that the revised proposals would decrease aggregate common equity tier 1 capital requirements by approximately 4.8% for Category I and Category II banking organizations, in contrast to the significant capital increases that would have resulted under the 2023 Basel III Endgame. Additionally, the revised proposal would eliminate the requirement to deduct mortgage servicing assets from common equity tier 1 capital, instead assigning a 250% risk weight, which is designed to promote mortgage origination and servicing by banking organizations. The Fed voted 6-to-1 to advance all three proposals and the FDIC board voted unanimously in favor of the revised Basel III Endgame and standardized approach proposals. The comment period for the revised proposals closed on June 18, 2026, with the Fed indicating that they hope to release the final rule by the end of 2026.
The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to evolve.
Effect on Us
Regulatory developments, movements in interest rates and prepayment rates affect us in many ways, including the following:
Effects on our Assets
A change in or elimination of the guarantee structure of Agency RMBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency RMBS may cause us to change our investment strategy to focus on non-Agency RMBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.
If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency RMBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.
If prepayment levels increase, the value of any of our Agency RMBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency RMBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency RMBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency RMBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency RMBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.
Higher long-term rates can also affect the value of our Agency RMBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency RMBS declines. Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for PT Agency RMBS.
Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency RMBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT RMBS, particularly PT RMBS backed by fixed-rate mortgages.
Effects on our borrowing costs
We leverage our PT RMBS and structured Agency RMBS through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency RMBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.
In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, dual digital options or interest rate swaptions.
With respect to the markets in which the Company derives its revenues and profits from, prior to the second quarter of 2026, Orchid and Company invested exclusively in Agency MBS securities and applied leverage utilizing repurchase agreement funding. The primary drivers of the performance of these assets – both absolute performance and performance relative to hedges – are interest rates, their impact on both asset prices and the level of prepayments, interest rate volatility, particularly the level of implied volatility in interest rate swaptions and various interest rate derivatives, and our funding levels. Accordingly, we have had, and continue to be significantly exposed to interest rates, and our performance remains driven by our ability to select assets, manage our leverage, and the effectiveness of our hedging strategy. However, as a result of the acquisition of TJIM the Company now derives revenues and profits from the equity market. Accordingly, our focus will broaden to encompass developments in the equity market going forward.
Domestic Equity Market
The U.S. equity market delivered an exceptionally strong rebound in the second quarter of 2026, recovering from a weaker first quarter and finishing near record highs. The rally was driven by renewed enthusiasm for artificial intelligence ("AI"), stronger-than-expected corporate earnings, easing geopolitical concerns late in the quarter, and resilient economic growth.
Performance of the major indexes:
| ● |
S&P 500: Gained approximately 15% during the quarter, marking one of its strongest quarterly performances in years and bringing its year-to-date gain to roughly 10%. |
| ● |
Nasdaq Composite: Significantly outperformed broader markets as technology and semiconductor stocks rallied sharply, posting one of its best quarters since 2020. |
| ● |
Dow Jones Industrial Average: Also advanced solidly, though it lagged the technology-heavy Nasdaq because of its lower exposure to high-growth AI companies. |
Key drivers of the rally:
| ● |
AI investment boom: Continued heavy investment in artificial intelligence fueled exceptional gains in semiconductor manufacturers and other AI-related companies. Semiconductor stocks rose dramatically during the quarter, making technology the best-performing sector. |
| ● |
Strong corporate earnings: Companies generally exceeded analysts' expectations. Earnings growth broadened beyond a handful of mega-cap technology firms, supporting the market's advance. |
| ● |
Improving geopolitical backdrop: Oil prices fell after tensions in the Middle East eased toward the end of the quarter, reducing inflation concerns and improving investor sentiment. |
| ● |
Resilient U.S. economy: Continued economic expansion and healthy consumer spending reassured investors despite persistent inflation and elevated interest rates. |
Sector performance:
| ● |
Technology was the clear leader, propelled by AI-related spending and strong earnings. |
| ● |
Semiconductors were among the strongest-performing industries, reflecting continued demand for AI infrastructure. |
| ● |
Energy underperformed as crude oil prices declined following geopolitical de-escalation. |
Summary
On April 1, 2026, the Company completed the acquisition of an 80% ownership stake in TJIM. As such, the results of the Company’s operations and our focus in our public disclosures going forward will be impacted by factors other than just the fixed income markets and the Agency MBS market, although the MBS market will still be a significant factor. Beginning with the second quarter of 2026 our focus has expanded to include factors impacting the domestic equity markets as well as fixed income markets other than the Agency MBS market.
As we entered 2026, interest rates had been range-bound for more than 12 months, but the range was broken during the first quarter of 2026 as a result of the Iran War. After a brief respite in the conflict, rates moved higher once again as prospects for a resolution dimmed and a new Fed Chairman, Kevin Warsh, took control of the Fed, immediately expressing his strong conviction in ending the five-year period of inflation running above the Fed’s 2% target. Interest rate volatility, both realized and implied in interest rate options, has remained subdued outside of the temporary spike at the onset of the Iran War.
At the outset of 2026, there was uncertainty about how the risks facing the economy would ultimately drive Fed policy and the level of interest rates, with resulting impacts on risk assets and Agency RMBS. Inflation was elevated, but risks to the growth outlook were clearly present, creating a quandary for policy makers. This does not appear to be the case now. Growth has proven to be remarkably resilient, as has the labor market, and the growth of the economy is not a pressing concern for policy makers or markets. Inflation, however, remains well above the Fed’s target and the Iran War seems likely to persist, representing a continued source of commodity inflation. Data released for June in early July reflected a welcome decrease in the various inflation measures, but considerable doubt remains regarding the sustainability of these readings. Looking forward, the Iran War continues to be a dominant force driving the performance of all markets. At this point, it is unclear what the ultimate outcome of the war will be or when it will end. As for the economy and monetary policy, the outlook is no longer uncertain, as the path of inflation alone is likely to drive monetary policy and interest rate levels in the United States. Both Orchid and the Company have maintained modest levels of leverage for the past several quarters and are likely to continue to do so given the prevailing market uncertainty.
For the domestic equity markets, the second quarter of 2026 was characterized by a broad and powerful recovery in U.S. equities. Large-cap stocks reached or approached record highs, technology once again led the market, and strong corporate fundamentals reinforced investor confidence. While optimism about AI remained the dominant theme, the rally also became more broad-based as improving earnings and easing macroeconomic concerns supported gains across much of the market.
Despite the strong gains, investors continued to monitor several risks, with overlap in risks facing the Agency RMBS market:
| ● |
Persistent inflation and the possibility of further Federal Reserve tightening. |
| ● |
Elevated equity valuations following the rapid rally. |
| ● |
Questions about whether AI-related spending and earnings growth could continue at the same pace. |
| ● |
Ongoing geopolitical uncertainty that could affect energy prices and market volatility. |
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which requires our management to make some complex and subjective decisions, estimates and assessments. Our most critical accounting policies involve decisions, estimates and assessments which can have a material impact on reported assets, liabilities, revenues and expenses, and these estimates can change each reporting period. There have been no changes to the processes used to determine our critical accounting estimates as discussed in our annual report on Form 10-K for the year ended December 31, 2025.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide disclosure pursuant to this Item. However, we have elected to include much of the information in Item 7 above.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report (the “evaluation date”), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the CEO and CFO concluded our disclosure controls and procedures, as designed and implemented, were effective as of the evaluation date (1) in ensuring that information regarding the Company and its subsidiaries is accumulated and communicated to our management, including our CEO and CFO, by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) in providing reasonable assurance that information we must disclose in our periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no material changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There were changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter related to the acquisition of an 80% ownership stake in TJIM. These changes primarily relate to the recording of advisory fee income and are not reasonably likely to materially affect, the Company’s internal control over financial reporting.
As previously disclosed, in April 2020 and November 2021, the Company received demands for payment from Citigroup, Inc. related to the indemnification provisions of various mortgage loan purchase agreements entered into prior to 2007. As of June 30, 2026, no further information has been received related to this matter. The ultimate resolution of this matter cannot presently be determined. However, in management's opinion, the demands are without merit and the likelihood of a material adverse outcome is remote. Accordingly, no provision or accrual has been recorded.
We are not party to any other material pending legal proceedings as described in Item 103 of Regulation S-K.
The risk factors set forth below are intended to address new risks arising from the Company's acquisition of TJIM and do not purport to be a comprehensive update of all risks facing the Company. This section is a supplement to, and should be read in conjunction with, the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "Annual Report"). The risk factors included in the Annual Report have not been updated to reflect developments occurring subsequent to the filing of the Annual Report, and investors should carefully consider the risk factors in the Annual Report in addition to the risk factors set forth below. The inclusion of risk factors in this Form 10-Q should not be taken as an indication that the Company intends to update or supplement the risk factors disclosed in the Annual Report in future Quarterly Reports on Form 10-Q.
Our revenues are highly dependent on the level and performance of assets under management.
A substantial portion of our revenues is derived from management fees calculated as a percentage of assets under management (“AUM”). Market declines, increased volatility, changes in interest rates, geopolitical events, inflationary pressures, economic downturns, or poor investment performance may reduce the value of client assets and decrease our revenues. In addition, client withdrawals, redemptions, or reallocations could materially reduce AUM and adversely affect our financial condition and results of operations.
We are subject to extensive regulation as an SEC-registered investment adviser.
Our investment advisory operations are subject to extensive federal and state regulation, including regulation by the SEC under the Investment Advisers Act of 1940. Compliance with these laws and regulations imposes significant operational, compliance, legal, and administrative costs. Failure to comply with applicable laws, rules, or fiduciary obligations could result in:
| ● |
investigations and examinations; |
| ● |
enforcement actions; |
| ● |
fines and penalties; |
| ● |
censures; |
| ● |
limitations on business activities; |
| ● |
suspension or revocation of registrations; and |
| ● |
reputational harm. |
Regulatory requirements may continue to increase, including in areas involving cybersecurity, private fund reporting, marketing practices, custody rules, ESG-related disclosures, valuation, anti-money laundering obligations, and the use of emerging technologies.
We owe fiduciary duties to our advisory clients, and conflicts of interest may arise in the ordinary course of business.
As an investment adviser, we are subject to fiduciary obligations that require us to act in the best interests of our clients. Actual, potential, or perceived conflicts of interest may arise among client accounts, proprietary funds, employees, affiliates, and other business activities. Although we maintain policies and procedures designed to identify and mitigate conflicts, there can be no assurance that such measures will be effective in all circumstances. Any failure to appropriately address conflicts could result in litigation, regulatory scrutiny, client dissatisfaction, or reputational harm.
Poor investment performance could cause clients to withdraw assets and harm our reputation.
Our ability to retain existing clients and attract new clients depends in part on investment performance and our reputation. Underperformance by our investment strategies relative to benchmarks or competitors may result in reduced inflows, increased redemptions, termination of advisory relationships, and reduced revenues.
Our business depends substantially on key investment professionals and client relationships.
Our success depends significantly on the continued service of our senior management team, portfolio managers, investment professionals, and relationship managers. Competition for qualified professionals in the asset management industry is intense. The loss of key personnel, failure to recruit qualified professionals, or disruptions in client relationships could adversely affect our business, financial condition, and results of operations.
The integration of the acquired investment advisory business may be more difficult, costly, or time-consuming than expected.
The integration of the acquired investment adviser involves operational, technological, compliance, personnel, and cultural challenges. We may incur greater-than-expected integration costs, fail to realize anticipated synergies, experience disruptions in operations, or lose clients or employees during the integration process.
We may be subject to litigation and regulatory examinations.
Investment advisers are routinely subject to regulatory examinations and may become involved in litigation, arbitration, or other proceedings relating to investment performance, fiduciary obligations, disclosure practices, valuation matters, trading activities, or other aspects of operations. Such matters may result in substantial costs, liabilities, reputational harm, and diversion of management attention.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not have any unregistered sales of its equity securities during the three months ended June 30, 2026.
The following table contains information about all purchases made during the three months ended June 30, 2026 by, or on behalf of, us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of our equity securities that is registered pursuant to Section 12 of the Exchange Act. All purchases were made pursuant to the 2026 Repurchase Plan.
| Approximate |
||||||||||||||||
| Dollar Amount |
||||||||||||||||
| Shares Purchased |
of Shares |
|||||||||||||||
| Weighted- | as Part of | That May Yet | ||||||||||||||
| Total Number |
Average |
Publicly |
be Repurchased |
|||||||||||||
| of Shares |
Price Paid |
Announced |
Under the |
|||||||||||||
| Repurchased |
Per Share |
Programs |
Authorization |
|||||||||||||
| April 1, 2026 - April 30, 2026 |
4,763 | $ | 2.76 | 4,763 | $ | 2,486,875 | ||||||||||
| May 1, 2026 - May 31, 2026 |
3,448 | 2.73 | 3,448 | 2,477,474 | ||||||||||||
| June 1, 2026 - June 30, 2026 |
6,990 | 2.53 | 6,990 | 2,459,819 | ||||||||||||
| Totals / Weighted Average |
15,201 | $ | 2.64 | 15,201 | $ | 2,459,819 | ||||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
During the quarter ended June 30, 2026, of the Company's directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement (as each term is defined in Item 408 of Regulation S-K).
Exhibit No
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| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document*** |
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* Filed herewith.
** Furnished herewith
*** Submitted electronically herewith.
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 7, 2026 |
By: |
/s/ Robert E. Cauley |
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| Robert E. Cauley Chairman and Chief Executive Officer |
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| Date: August 7, 2026 |
By: |
/s/ G. Hunter Haas, IV |
|
| G. Hunter Haas, IV President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |