10-Q - BMNM - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☑

QUARTERLY

REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2021

☐

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number

001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)

Maryland

72-1571637

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3305 Flamingo Drive

Vero Beach

Florida

32963

(Address of principal executive offices) (Zip Code)

(

772

)

231-1400

(Registrant’s telephone number, including area code)

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

Indicate by

check mark

whether the

registrant (1) has

filed all

reports required

to be

filed by

Section 13 or

15(d) of

the Securities

Exchange Act

1934 during the preceding 12 months (or for such shorter

period that the registrant was required to file such

reports), and (2) has been subject to such

filing requirements for the past 90 days.

Yes

☐

Indicate by check

mark whether the registrant

has submitted electronically every

Interactive Data File required

to be submitted pursuant

to Rule 405

of Regulation S-T (§232.405 of this chapter) during the preceding 12

months (or for such shorter period that the registrant was

required to submit such

files).

Yes

☐

Indicate by check mark whether the registrant is

a large accelerated filer,

an accelerated filer, a non-accelerated filer,

a smaller reporting company,

an emerging growth company. See the definitions of "large accelerated filer,"

"accelerated filer", "smaller reporting company", and "emerging growth

company" in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☒

Emerging growth company

☐

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

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

☐

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

Yes

☐

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

Title of each Class

Latest Practicable Date

Shares Outstanding

Class A Common Stock, $0.001 par value

November 9, 2021

10,726,864

Class B Common Stock, $0.001 par value

November 9, 2021

31,938

Class C Common Stock, $0.001 par value

November 9, 2021

31,938

BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL

INFORMATION

ITEM 1. Financial

Statements

Condensed

Consolidated

Balance Sheets

(unaudited)

Condensed

Consolidated

Statements

of Operations

(unaudited)

Condensed

Consolidated

Statement

of Stockholders’

Equity (unaudited)

Condensed

Consolidated

Statements

of Cash Flows

(unaudited)

Notes to

Condensed

Consolidated

Financial

Statements

(unaudited)

ITEM 2. Management’s

Discussion

and Analysis

of Financial

Condition

and Results

of Operations

ITEM 3. Quantitative

and Qualitative

Disclosures

About Market

Risk

ITEM 4. Controls

and Procedures

PART II. OTHER INFORMATION

ITEM 1. Legal

Proceedings

ITEM 1A.

Risk Factors

ITEM 2. Unregistered

Sales of Equity

Securities

and Use of

Proceeds

ITEM 3. Defaults

Upon Senior

Securities

ITEM 4. Mine

Safety Disclosures

ITEM 5. Other

Information

ITEM 6. Exhibits

SIGNATURES

PART I. FINANCIAL

INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED

BALANCE SHEETS

(Unaudited)

September 30, 2021

December 31, 2020

ASSETS:

Mortgage-backed securities, at fair value

Pledged to counterparties

64,371,408

65,153,274

Unpledged

18,869

24,957

Total mortgage

-backed securities

64,390,277

65,178,231

Cash and cash equivalents

7,854,843

7,558,342

Restricted cash

1,690,160

3,353,015

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

12,691,296

13,547,764

Accrued interest receivable

247,716

202,192

Property and equipment, net

2,041,503

2,093,440

Deferred tax assets

34,332,078

34,668,467

Due from affiliates

934,797

632,471

Other assets

1,551,073

1,466,647

Total Assets

125,733,743

128,700,569

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Repurchase agreements

63,159,999

65,071,113

Long-term debt

27,444,508

27,612,781

Accrued interest payable

53,868

107,417

Other liabilities

1,322,784

1,421,409

Total Liabilities

91,981,159

94,212,720

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:

Preferred stock, $

0.001

par value;

10,000,000

shares authorized;

100,000

designated Series A Junior Preferred Stock,

9,900,000

shares undesignated;

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

31, 2020

Class A Common stock, $

0.001

par value;

98,000,000

shares designated:

10,794,481

and 11,608,555 shares issued and

outstanding as of September 30, 2021

and December 31, 2020, respectively.

10,794

11,609

Class B Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

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

Class C Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

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

Additional paid-in capital

331,073,064

332,642,758

Accumulated deficit

(297,331,338)

(298,166,582)

Stockholders’ Equity

33,752,584

34,487,849

Total Liabilities

and Stockholders' Equity

125,733,743

128,700,569

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF OPERATIONS

(Unaudited)

For the Nine and Three Months Ended September 30, 2021 and 2020

Nine Months Ended September

Three Months Ended September

2021

2020

2021

2020

Revenues:

Advisory services

6,757,799

4,969,143

2,546,578

1,629,463

Interest income

1,726,268

3,167,439

537,200

604,158

Dividend income from Orchid Island Capital, Inc. common stock

1,518,284

1,246,636

506,095

493,118

Total revenues

10,002,351

9,383,218

3,589,873

2,726,739

Interest expense

Repurchase agreements

(94,926)

(1,030,372)

(23,729)

(42,955)

Long-term debt

(747,577)

(893,299)

(248,465)

(261,341)

Net revenues

9,159,848

7,459,547

3,317,679

2,422,443

Other income (expense):

Unrealized (losses) gains on mortgage-backed securities

(2,221,521)

303,651

(323,659)

275,796

Realized gains (losses) on mortgage-backed securities

69,498

(5,804,656)

69,498

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

(856,468)

38,935

(778,607)

793,727

(Losses) gains on derivative instruments

(280)

(5,292,346)

(147)

Gains on retained interests in securitizations

58,735

Other income (expense)

154,122

(8,248)

149

(8,890)

Total other (expense)

income

(2,854,649)

(10,703,929)

(1,032,766)

1,119,443

Expenses:

Compensation and related benefits

3,219,685

3,157,074

1,029,465

1,010,407

Directors' fees and liability insurance

568,087

511,786

190,453

166,093

Audit, legal and other professional fees

405,828

467,015

133,925

120,374

Administrative and other expenses

939,966

870,919

298,719

318,874

Total expenses

5,133,566

5,006,794

1,652,562

1,615,748

Net income (loss) before income tax provision

1,171,633

(8,251,176)

632,351

1,926,138

Income tax provision

336,389

9,295,859

167,751

608,351

Net income (loss)

835,244

(17,547,035)

464,600

1,317,787

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

CLASS A COMMON STOCK

Basic and Diluted

0.07

(1.51)

0.04

0.11

CLASS B COMMON STOCK

Basic and Diluted

0.07

(1.51)

0.04

0.11

Weighted Average Shares Outstanding:

CLASS A COMMON STOCK

Basic and Diluted

11,358,346

11,608,555

10,866,087

11,608,555

CLASS B COMMON STOCK

Basic and Diluted

31,938

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF STOCKHOLDERS' EQUITY

(Unaudited)

For the Nine and Three Months Ended September 30, 2021 and 2020

Stockholders' Equity

Common Stock

Additional

Accumulated

Par Value

Paid-in Capital

Deficit

Total

Balances, January 1, 2020

11,672,431

11,673

332,642,758

(292,677,440)

39,976,991

Net loss

(22,332,947)

Balances, March 31, 2020

11,672,431

11,673

332,642,758

(315,010,387)

17,644,044

Net income

3,468,125

Balances, June 30, 2020

11,672,431

11,673

332,642,758

(311,542,262)

21,112,169

Net income

1,317,787

Balances, September 30, 2020

11,672,431

11,673

332,642,758

(310,224,475)

22,429,956

Balances, January 1, 2021

11,672,431

11,673

332,642,758

(298,166,582)

34,487,849

Net income

1,290,430

Balances, March 31, 2021

11,672,431

11,673

332,642,758

(296,876,152)

35,778,279

Net loss

(919,786)

Balances, June 30, 2021

11,672,431

11,673

332,642,758

(297,795,938)

34,858,493

Net income

464,600

Class A common shares repurchased and retired

(814,074)

(815)

(1,569,694)

(1,570,509)

Balances, September 30, 2021

10,858,357

10,858

331,073,064

(297,331,338)

33,752,584

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF CASH FLOWS

(Unaudited)

For the Nine Months Ended September 30, 2021 and 2020

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss)

835,244

(17,547,035)

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

activities:

Depreciation

51,937

52,223

Deferred income tax provision

336,389

9,285,344

Losses on mortgage-backed securities, net

2,152,023

5,501,005

Gains on retained interests in securitizations

(58,735)

PPP loan forgiveness

(153,724)

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

856,468

(38,935)

Realized and unrealized losses on forward settling TBA securities

1,441,406

Changes in operating assets and liabilities:

Accrued interest receivable

(45,524)

516,444

Due from affiliates

(302,326)

32,057

Other assets

(84,426)

1,558,632

Accrued interest payable

(51,990)

(561,918)

Other liabilities

(98,625)

(26,123)

NET CASH PROVIDED BY OPERATING

ACTIVITIES

3,495,446

154,365

CASH FLOWS FROM INVESTING ACTIVITIES:

From mortgage-backed securities investments:

Purchases

(26,189,505)

(43,129,835)

Sales

13,063,248

171,155,249

Principal repayments

11,762,188

11,170,005

Costs associated with termination of retained interests

58,735

Net settlement of forward settling TBA contracts

(1,500,000)

Purchases of Orchid Island Capital, Inc. common stock

(4,071,593)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

(1,364,069)

133,682,561

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from repurchase agreements

195,962,000

501,460,570

Principal repayments on repurchase agreements

(197,873,114)

(640,729,398)

Proceeds from long-term debt

152,165

Principal repayments on long-term debt

(16,108)

(15,238)

Class A common shares repurchased and retired

(1,570,509)

NET CASH USED IN FINANCING ACTIVITIES

(3,497,731)

(139,131,901)

NET DECREASE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

(1,366,354)

(5,294,975)

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH, beginning of the period

10,911,357

12,385,117

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH, end of the period

9,545,003

7,090,142

SUPPLEMENTAL DISCLOSURES OF CASH

FLOW INFORMATION:

Cash paid (received) during the period for:

Interest expense

896,052

2,485,589

Income taxes

(1,568,363)

See Notes to Condensed Consolidated Financial Statements

BIMINI CAPITAL

MANAGEMENT, INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL

STATEMENTS

(Unaudited)

September

30, 2021

NOTE 1.

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Business

Description

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

formed in September 2003, is a

holding company.

The Company operates in two business segments through its principal

wholly-owned operating subsidiary, Royal

Palm Capital LLC, which includes its wholly-owned subsidiary, Bimini Advisors Holdings, LLC.

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

the

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

Advisors."

Bimini Advisors manages a residential

mortgage-backed securities (“MBS”) portfolio for Orchid Island Capital, Inc.

("Orchid") and receives fees for providing these services.

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

Royal Palm Capital, LLC maintains an investment portfolio, consisting primarily of MBS investments

and shares of Orchid common

stock, for its own benefit. Royal Palm Capital, LLC and its wholly-owned subsidiaries

are collectively referred to as "Royal Palm."

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini

Capital, Bimini Advisors and Royal Palm.

All

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

financial statements.

Variable Interest Entities (“VIEs”)

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

primary beneficiary of the VIE. Bimini Capital

has a common share investment

in a trust used in connection with the issuance of Bimini Capital's junior subordinated

notes. See Note

8 for a description of the accounting used for this VIE.

The Company obtains interests in VIEs through its investments in mortgage-backed

securities.

The interests in these VIEs are

passive in nature and are not expected to result in the Company obtaining a controlling

financial interest in these VIEs in the future.

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

in these VIEs as mortgage-backed securities.

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

The maximum exposure to

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

Basis of

Presentation

The accompanying unaudited condensed consolidated financial statements

have been prepared in accordance with accounting

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

information and with the instructions to Form 10-Q and

Article 8 of Regulation S-X.

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

financial statements.

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

accruals) considered necessary for

a fair presentation have been included.

Operating results for the nine and three-month periods ended September

30, 2021 are not

necessarily indicative of the results that may be expected for the year ending December

31, 2021.

The consolidated balance sheet at December 31, 2020 has been derived from the

audited financial statements at that date but

does not include all of the information and footnotes required by GAAP for

complete consolidated financial statements.

For further

information, refer to the financial statements and footnotes thereto included in the

Company’s Annual Report on Form 10-K for the year

ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires

management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the consolidated

financial statements and the reported amounts of revenues and expenses during

the reporting period. Actual results could differ from

those estimates.

Significant estimates affecting the accompanying consolidated financial statements include

determining the fair

values of MBS, investment in Orchid common shares and derivatives, determining

the amounts of asset valuation allowances, and the

computation of the income tax provision or benefit and the deferred tax asset allowances

recorded for each accounting period.

Segment Reporting

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

management segment and the

investment portfolio segment. These segments are evaluated by management in deciding

how to allocate resources and in assessing

performance.

The accounting policies of the operating segments are the same as the

Company’s accounting policies with the

exception that inter-segment revenues and expenses are included in the presentation

of segment results.

For further information see

Note 14.

Cash and Cash Equivalents and Restricted Cash

Cash and

cash equivalents

include

cash on deposit

with financial

institutions

and highly

liquid investments

with original

maturities

three months

or less at

the time

of purchase.

Restricted

cash includes

cash pledged

as collateral

for repurchase

agreements

and

derivative

instruments.

The following

table presents

the Company’s

cash, cash

equivalents

and restricted

cash as of

September

30, 2021

and December

31, 2020.

September 30, 2021

December 31, 2020

Cash and cash equivalents

7,854,843

7,558,342

Restricted cash

1,690,160

3,353,015

Total cash, cash equivalents

and restricted cash

9,545,003

10,911,357

The Company

maintains

cash balances

at several

banks and

excess margin

with an exchange

clearing member.

At times,

balances

may exceed

federally

insured

limits. The

Company has

not experienced

any losses

related to

these balances.

The Federal

Deposit

Insurance Corporation

insures eligible

accounts up

to $250,000

per depositor

at each financial

institution.

Restricted

cash balances

are

uninsured,

but are held

in separate

accounts that

are segregated

from the

general funds

of the counterparty.

The Company

limits

uninsured

balances to

only large,

well-known

banks

and exchange

clearing members

and believes

that it is

not exposed

to significant

credit risk

on cash and

cash equivalents

or restricted

cash balances.

Advisory Services

Orchid is

externally

managed and

advised by

Bimini Advisors

pursuant

to the terms

of a management

agreement.

Under the

terms of

the management

agreement,

Orchid is

obligated

to pay Bimini

Advisors a

monthly management

fee and a

pro rata

portion of

certain

overhead

costs and

to reimburse

the Company

for any direct

expenses incurred

on its behalf.

Revenues

from management

fees are

recognized

over the

period of

time in which

the service

is performed.

Mortgage-Backed

Securities

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

certificates issued by Freddie Mac, Fannie Mae

or Ginnie Mae (“MBS”), collateralized mortgage obligations (“CMOs”), interest-only

(“IO”) securities and inverse interest-only (“IIO”)

securities representing interest in or obligations backed by pools of mortgage-backed

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

We refer to IO and IIO securities as structured MBS. The Company has elected to account

for its investment in MBS under the fair

value option.

Electing the fair value option requires the Company to record changes

in fair value in the consolidated statement of

operations, which, in management’s view, more appropriately reflects the results of our operations for a particular reporting period

and

is consistent with the underlying economics and how the portfolio is managed.

The Company records MBS transactions on the trade date.

Security purchases that have not settled as of the balance sheet date

are included in the MBS balance with an offsetting liability recorded, whereas securities sold

that have not settled as of the balance

sheet date are removed from the MBS balance with an offsetting receivable recorded.

Fair value is defined as the price that would be received to sell the asset or paid

to transfer the liability in an orderly transaction

between market participants at the measurement date.

The fair value measurement assumes that the transaction to sell

the asset or

transfer the liability either occurs in the principal market for the asset

or liability, or in the absence of a principal market, occurs in the

most advantageous market for the asset or liability. Estimated fair values for MBS are based on independent pricing sources and/or

third-party broker quotes, when available.

Income on PT MBS is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase

are

not amortized.

Premium lost and discount accretion resulting from monthly principal repayments

are reflected in unrealized gains and

losses on MBS in the consolidated statements of operations.

For IO securities,

the income

is accrued

based on

the carrying

value and

the effective

yield. The

difference

between income

accrued and

the interest

received on

the security

is characterized

as a return

investment

and serves

to reduce

the asset’s

carrying value.

At each reporting date, the effective yield is adjusted prospectively for future

reporting periods based on the new estimate of prepayments and the contractual

terms of the security.

For IIO securities, effective

yield and income recognition calculations also take into account the index

value applicable to the security.

Changes in fair value of

MBS during each reporting period are recorded in earnings and reported as

unrealized gains or losses on mortgage-backed securities

in the accompanying consolidated statements of operations.

The amount reported as unrealized gains or losses on mortgage-backed

securities thus captures the net effect of changes in the fair market value of securities caused by

market developments and any

premium or discount lost as a result of principal repayments during the period.

Orchid Island Capital, Inc. Common Stock

The Company

accounts for

its investment

in Orchid

common shares

at fair value.

The change

in the fair

value and

dividends

received

on this investment

are reflected

in the consolidated

statements

of operations.

We estimate

the fair

value of our

investment

in Orchid

on a

market approach

using “Level

1” inputs

based on

the quoted

market price

of Orchid’s

common stock

on a national

stock exchange.

Retained

Interests

in Securitizations

The Company

holds retained

interests

in the subordinated

tranches

of securities

created in

securitization

transactions.

These retained

interests

currently

have a recorded

fair value

of zero,

as the prospect

of future

cash flows

being received

is uncertain.

Any cash

received

from the

retained

interests

is reflected

in the consolidated

statements

of operations.

Derivative

Financial

Instruments

The Company

uses derivative

instruments

to manage

interest

rate risk,

facilitate

asset/liability

strategies

and manage

other

exposures,

and it may

continue

to do so

in the future.

The principal

instruments

that the

Company

has used to

date are

Treasury Note

(“T-

Note”) and

Eurodollar

futures contracts,

and “to-be-announced”

(“TBA”) securities

transactions,

but it may

enter into

other derivative

instruments

in the future.

The Company

accounts for

TBA securities

as derivative

instruments.

Gains and

losses associated

with TBA

securities

transactions

are reported

in gain (loss)

on derivative

instruments

in the accompanying

consolidated

statements

of operations.

Derivative

instruments

are carried

at fair value,

and changes

in fair

value are

recorded

in the consolidated

operations

for each

period.

The Company’s

derivative

financial

instruments

are not designated

as hedge

accounting

relationships,

but rather

are used

as economic

hedges of

its portfolio

assets and

liabilities.

Holding derivatives

creates exposure

to credit

risk related

to the potential

for failure

by counterparties

to honor

their commitments.

the event

of default

by a counterparty,

the Company

may have difficulty

recovering

its collateral

and may not

receive payments

provided

for under

the terms

of the agreement.

The Company’s

derivative

agreements

require it

to post or

receive collateral

to mitigate

such risk.

addition,

the Company

uses only

registered

central clearing

exchanges

and well-established

commercial

banks as

counterparties,

monitors positions

with individual

counterparties

and adjusts

posted collateral

as required.

Financial

Instruments

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

value is disclosed, either in the body of the

consolidated financial statements or in the accompanying notes. MBS,

Orchid common stock and derivative assets and liabilities are

accounted for at fair value in the consolidated balance sheets. The methods and

assumptions used to estimate fair value for these

instruments are presented in Note 13 of the consolidated financial statements.

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

interest receivable, other assets, repurchase

agreements, accrued interest payable and other liabilities generally approximates

their carrying value as of September 30, 2021 and

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

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

Currently, there is a limited market for these

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

would be available to the Company for similar financial

instruments. Further information regarding these instruments is presented in

Note 8 to the consolidated financial statements.

Property

and Equipment,

net

Property and equipment, net, consists of computer equipment with a depreciable

life of 3 years, office furniture and equipment with

depreciable lives of 8 to 20 years, land which has no depreciable life, and buildings

and improvements with depreciable lives of 30

years.

Property and equipment is recorded at acquisition cost and depreciated

using the straight-line method over the estimated useful

lives of the assets. Depreciation is included in administrative and other expenses

in the consolidated statement of operations.

Repurchase

Agreements

The Company

finances the

acquisition

of the majority

of its PT

MBS through

the use of

repurchase

agreements

under master

repurchase

agreements.

Repurchase

agreements

are accounted

for as collateralized

financing

transactions,

which are

carried at

their

contractual

amounts,

including

accrued interest,

as specified

in the respective

agreements.

Earnings

Per Share

Basic EPS is calculated as income available to common stockholders divided

by the weighted average number of common shares

outstanding during the period. Diluted EPS is calculated using the treasury stock or two-class

method, as applicable for common stock

equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result

is anti-dilutive.

Outstanding shares of Class B Common Stock, participating and convertible

into Class A Common Stock, are entitled to receive

dividends in an amount equal to the dividends declared, if any, on each share of Class A Common Stock.

Accordingly, shares of the

Class B Common Stock are included in the computation of basic EPS using

the two-class method and, consequently, are presented

separately from Class A Common Stock.

The shares of Class C Common Stock are not included in the basic EPS computation

as these shares do not have participation

rights. The outstanding shares of Class B and Class C Common Stock are

not included in the computation of diluted EPS for the Class

A Common Stock as the conditions for conversion into shares of Class A Common

Stock were not met.

Income Taxes

Income taxes are provided for using the asset and liability method. Deferred tax assets and

liabilities represent the differences

between the financial statement and income tax bases of assets and liabilities using enacted

tax rates. The measurement of net

deferred tax assets is adjusted by a valuation allowance if, based on the Company’s evaluation, it

is more likely than not that they will

not be realized.

The Company’s U.S. federal income tax returns for years ended on or after December 31,

2018 remain open for examination.

Although management believes its calculations for tax returns are correct and the positions

taken thereon are reasonable, the final

outcome of tax audits could be materially different from the tax returns filed by the Company, and those differences could result in

significant costs or benefits to the Company. For tax filing purposes, Bimini Capital and its includable subsidiaries, and Royal Palm

and

its includable subsidiaries, file as separate tax paying entities.

The Company assesses the likelihood, based on their technical merit, that uncertain

tax positions will be sustained upon

examination based on the facts, circumstances and information available at the

end of each period.

The measurement of uncertain tax

positions is adjusted when new information is available, or when an event occurs

that requires a change. The Company recognizes tax

positions in the consolidated financial statements only when it is more likely than

not that the position will be sustained upon

examination by the relevant taxing authority based on the technical merits

of the position. A position that meets this standard is

measured at the largest amount of benefit that will more likely than not be realized upon

settlement. The difference between the benefit

recognized and the tax benefit claimed on a tax return is referred to as an unrecognized

tax benefit and is recorded as a liability in the

consolidated balance sheets. The Company records income tax-related interest and penalties,

if applicable, within the income tax

provision.

Recent Accounting

Pronouncements

In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate

Reform on Financial Reporting

.”

ASU 2020-04 provides optional expedients and exceptions to GAAP requirements

for modifications

on debt instruments, leases, derivatives, and other contracts, related to the expected

market transition from the London Interbank

Offered Rate (“LIBOR,”), and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU

2020-04 generally considers contract modifications related to reference rate reform to

be an event that does not require contract

remeasurement at the modification date nor a reassessment of a previous accounting

determination. The guidance in ASU 2020-04 is

optional and may be elected over time, through December 31, 2022, as reference

rate reform activities occur. The Company does not

believe the adoption of this ASU will have a material impact on its consolidated financial

statements.

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)”. ASU 2021-01 expands the scope of ASC

848 to include all affected derivatives and give market participants the ability to apply

certain aspects of the contract modification and

hedge accounting expedients to derivative contracts affected by the discounting transition. In

addition, ASU 2021-01 adds

implementation guidance to permit a company to apply certain optional expedients

to modifications of interest rate indexes used for

10 -

margining, discounting or contract price alignment of certain derivatives as a result

of reference rate reform initiatives and extends

optional expedients to account for a derivative contract modified as a continuation

of the existing contract and to continue hedge

accounting when certain critical terms of a hedging relationship change to modifications

made as part of the discounting transition. The

guidance in ASU 2021-01 is effective immediately and available generally through December

31, 2022, as reference rate reform

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

financial

statements.

NOTE 2. ADVISORY SERVICES

Bimini Advisors serves as the manager and advisor for Orchid pursuant to the

terms of a management agreement.

As Manager,

Bimini Advisors is responsible for administering Orchid's business activities and

day-to-day operations. Pursuant to the terms of the

management agreement, Bimini Advisors provides Orchid with its management

team, including its officers, along with appropriate

support personnel. Bimini Advisors is at all times subject to the supervision

and oversight of Orchid's board of directors and has only

such functions and authority as delegated to it. Bimini Advisors receives a monthly

management fee in the amount of:

●

One-twelfth of 1.5% of the first $250 million of Orchid’s month-end equity, as defined in the management agreement,

●

One-twelfth of 1.25% of Orchid’s month-end equity that is greater than $250 million

and less than or equal to $500 million, and

●

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

Orchid is obligated to reimburse Bimini Advisors for any direct expenses incurred

on its behalf and to pay to Bimini Advisors an

amount equal to Orchid's pro rata portion of certain overhead costs set forth in the

management agreement. The management

agreement has been renewed through February 20, 2022

and provides for automatic one-year extension options thereafter. Should

Orchid terminate the management agreement without cause, it will be obligated to

pay Bimini Advisors a termination fee equal to three

times the average annual management fee, as defined in the management

agreement, before or on the last day of the automatic

renewal term.

The following table summarizes the advisory services revenue from

Orchid for the nine and three months ended September 30,

2021 and 2020.

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

2021

2020

Management fee

5,569

3,897

2,157

1,252

Allocated overhead

1,189

1,072

390

377

Total

6,758

4,969

2,547

1,629

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

0.9

million and

0.6

million, respectively.

NOTE 3.

MORTGAGE-BACKED SECURITIES

The following

table presents

the Company’s

MBS portfolio

as of September

30, 2021

and December

31, 2020:

(in thousands)

September 30, 2021

December 31, 2020

Fixed-rate MBS

61,372

64,902

Interest-Only MBS

2,999

251

Inverse Interest-Only MBS

Total

64,390

65,178

11 -

NOTE 4.

REPURCHASE AGREEMENTS

The Company

pledges certain

of its MBS

as collateral

under repurchase

agreements

with financial

institutions.

Interest

rates are

generally

fixed based

on prevailing

rates corresponding

to the terms

of the borrowings,

and interest

is generally

paid at the

termination

of a

borrowing.

If the fair

value of the

pledged securities

declines,

lenders

will typically

require the

Company to

post additional

collateral

or pay

down borrowings

to re-establish

agreed upon

collateral

requirements,

referred

to as "margin

calls." Similarly,

if the fair

value of

the pledged

securities

increases,

lenders

may release

collateral

back to the

Company. As of

September

30, 2021,

the Company

had met all

margin call

requirements.

As of September

30, 2021

and December

31, 2020,

the Company’s

repurchase

agreements

had remaining

maturities

as summarized

below:

($ in thousands)

OVERNIGHT

BETWEEN 2

BETWEEN 31

GREATER

(1 DAY OR

AND

THAN

LESS)

30 DAYS

90 DAYS

TOTAL

September 30, 2021

Fair value of securities pledged, including accrued

interest receivable

46,857

17,761

64,618

Repurchase agreement liabilities associated with

these securities

45,730

17,430

63,160

Net weighted average borrowing rate

0.14%

0.12%

0.13%

December 31, 2020

Fair value of securities pledged, including accrued

interest receivable

49,096

8,853

7,405

65,354

Repurchase agreement liabilities associated with

these securities

49,120

8,649

7,302

65,071

Net weighted average borrowing rate

0.25%

0.23%

0.30%

0.25%

In addition,

cash pledged

to counterparties

for repurchase

agreements

was approximately

1.7

million and

3.4

million as

September

30, 2021

and December

31, 2020,

respectively.

If, during

the term

of a repurchase

agreement,

a lender

files

for bankruptcy,

the Company

might experience

difficulty recovering

its

pledged assets,

which could

result in

an unsecured

claim against

the lender

for the difference

between the

amount loaned

to the Company

plus interest

due to the

counterparty

and the fair

value of the

collateral

pledged to

such lender,

including the accrued interest receivable,

and cash posted by the Company as collateral, if any.

At September

30, 2021

and December

31, 2020,

the Company

had an aggregate

amount at

risk (the

difference

between the

amount loaned

to the Company,

including

interest

payable, and

the fair

value of securities

and

cash pledged

(if any),

including

accrued interest

on such securities)

with all

counterparties

of approximately

3.1

million and

3.6

million,

respectively.

As of September

30, 2021

and December

31, 2020,

the Company

did not have

an amount

at risk with

any individual

counterparty

greater than

10% of the

Company’s equity.

NOTE 5. DERIVATIVE

FINANCIAL INSTRUMENTS

Eurodollar

and T-Note futures

are cash settled

futures contracts

on an interest

rate, with

gains and losses

credited or

charged to the

Company’s cash

accounts on

a daily basis.

A minimum

balance, or

“margin”,

is required

to be maintained

in the

account on a

daily basis.

The tables

below present

information

related to

the Company’s

Eurodollar

and T-note futures

positions at

September 30,

2021 and December

31, 2020.

($ in thousands)

As of September 30, 2021

12 -

Junior Subordinated Debt Funding Hedges

Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.01%

0.17%

(2)

($ in thousands)

As of December 31, 2020

Junior Subordinated Debt Funding Hedges

Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.02%

0.18%

(8)

(1)

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

futures positions from inception.

(Losses) Gains on Derivative Instruments

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

operations for the nine and three months ended September 30, 2021 and 2020

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

2021

2020

Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

(2,328)

Junior subordinated debt funding hedges

(517)

T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,006)

Net TBA securities

(1,441)

Losses on derivative instruments

(5,292)

Credit Risk-Related Contingent Features

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

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

minimize this risk in several ways.

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

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

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

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

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

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

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

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

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

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

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

settled as of the reporting date.

NOTE 6. PLEDGED ASSETS

13 -

Assets Pledged

to Counterparties

The table

below summarizes

Bimini’s assets

pledged

as collateral

under its

repurchase

agreements

and derivative

agreements

as of

September

30, 2021

and December

31, 2020.

($ in thousands)

September 30, 2021

December 31, 2020

Repurchase

Derivative

Repurchase

Derivative

Assets Pledged to Counterparties

Agreements

Total

Agreements

Total

PT MBS - at fair value

61,372

64,902

Structured MBS - at fair value

2,999

251

Accrued interest on pledged securities

248

201

Restricted cash

1,690

3,352

3,353

Total

66,309

68,706

68,707

Assets Pledged

from Counterparties

The table

below summarizes

cash pledged

to Bimini

from counterparties

under repurchase

agreements

and derivative

agreements

of September

30, 2021

and December

31, 2020.

Cash received

as margin

is recognized

in cash and

cash equivalents

with a

corresponding

amount recognized

as an increase

in repurchase

agreements

or other

liabilities

in the consolidated

balance sheets.

($ in thousands)

Assets Pledged to Bimini

September 30, 2021

December 31, 2020

Repurchase agreements

487

Total

487

NOTE 7. OFFSETTING ASSETS AND LIABILITIES

The Company’s

derivatives

and repurchase

agreements

are subject

to underlying

agreements

with master

netting or

similar

arrangements,

which provide

for the right

of offset in

the event

of default

or in the

event of

bankruptcy

of either

party to the

transactions.

The Company

reports its

assets and

liabilities

subject to

these arrangements

on a gross

basis.

The following

tables present

information

regarding

those assets

and liabilities

subject to

such arrangements

as if the

Company had

presented

them on a

net basis as

of September

30, 2021

and December

31, 2020.

(in thousands)

Offsetting of Liabilities

Gross Amount Not Offset in the

Net Amount

Consolidated Balance Sheet

Gross Amount

of Liabilities

Financial

Gross Amount

Offset in the

Presented in the

Instruments

Cash

of Recognized

Consolidated

Posted as

Net

Liabilities

Balance Sheet

Collateral

Amount

September 30, 2021

Repurchase Agreements

63,160

(61,470)

(1,690)

63,160

(61,470)

(1,690)

December 31, 2020

Repurchase Agreements

65,071

(61,719)

(3,352)

65,071

(61,719)

(3,352)

The amounts

disclosed

for collateral

received by

or posted

to the same

counterparty

are limited

to the amount

sufficient

to reduce

the

asset or

liability

presented

in the consolidated

balance sheet

to zero.

The fair

value of the

actual collateral

received by

or posted

to the

same counterparty

typically

exceeds the

amounts presented.

See Note

6 for a discussion

of collateral

posted for, or

received against,

14 -

repurchase

obligations

and derivative

instruments.

NOTE 8.

LONG-TERM DEBT

Long-term

debt at September

30, 2021 and

December

31, 2020

is summarized

as follows:

(in thousands)

September 30, 2021

December 31, 2020

Junior subordinated debt

26,804

Note payable

641

657

Paycheck Protection Plan ("PPP") loan

152

Total

27,445

27,613

Junior Subordinated Debt

During 2005,

Bimini Capital

sponsored

the formation

of a statutory

trust, known

as Bimini

Capital Trust

II (“BCTII”)

of which 100%

the common

equity is owned

by Bimini

Capital.

It was formed

for the purpose

of issuing

trust preferred

capital securities

to third-party

investors

and investing

the proceeds

from the

sale of such

capital securities

solely in

junior subordinated

debt securities

of Bimini

Capital.

The debt

securities

held by BCTII

are the sole

assets of

BCTII.

As of September

30, 2021

and December

31, 2020,

the outstanding

principal

balance on

the junior

subordinated

debt securities

owed

to BCTII

was $

26.8

million.

The BCTII

trust preferred

securities

and Bimini

Capital's

BCTII Junior

Subordinated

Notes have

a rate of

interest

that floats

at a spread

3.50

% over the

prevailing

three-month

LIBOR rate.

As of September

30, 2021,

the interest

rate was

3.62

%. The BCTII

trust preferred

securities

and Bimini

Capital's

BCTII Junior

Subordinated

Notes require

quarterly

interest

distributions

and are redeemable

at Bimini

Capital's

option, in

whole or

in part and

without penalty.

Bimini Capital's

BCTII Junior

Subordinated

Notes

are subordinate

and junior

in right

of payment

to all present

and future

senior indebtedness.

BCTII is

a VIE because

the holders

of the equity

investment

at risk do

not have

substantive

decision-making

ability over

BCTII’s

activities.

Since Bimini

Capital's

investment

in BCTII’s

common equity

securities

was financed

directly by

BCTII as

a result of

its loan of

the

proceeds

to Bimini

Capital,

that investment

is not considered

to be an

equity investment

at risk.

Since Bimini

Capital's

common share

investment

in BCTII

is not a variable

interest,

Bimini Capital

is not the

primary beneficiary

of BCTII.

Therefore,

Bimini Capital

has not

consolidated

the financial

statements

of BCTII

into its consolidated

financial

statements,

and this

investment

is accounted

for on the

equity

method.

The accompanying

consolidated

financial

statements

present

Bimini Capital's

BCTII Junior

Subordinated

Notes issued

to BCTII

as a

liability

and Bimini

Capital's

investment

in the common

equity securities

of BCTII

as an asset

(included

in other

assets).

For financial

statement

purposes,

Bimini Capital

records payments

of interest

on the Junior

Subordinated

Notes issued

to BCTII

as interest

expense.

Note Payable

On October

30, 2019,

the Company

borrowed

680,000

from a bank.

The note

is payable

in equal

monthly principal

and interest

installments

of approximately

4,500

through October

30, 2039.

Interest

accrues at

4.89% through

October 30,

Thereafter,

interest

accrues based

on the weekly

average

yield to the

United States

Treasury securities

adjusted to

a constant

maturity of

5 years,

plus

3.25

The note

is secured

by a mortgage

on the Company’s

office building.

Paycheck

Protection

Plan Loan

On April

13, 2020,

the Company

received approximately

152,000

through the

Paycheck Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan.

PPP loans

carry a fixed

rate of

1.00

% and a term

of two years,

if not forgiven,

in whole or

in part.

The

15 -

Small Business

Administration

notified the

Company that,

effective as

of April

22, 2021,

all principal

and accrued

interest

under the

PPP

loan has been

forgiven.

The table

below presents

the future

scheduled

principal

payments

on the Company’s

long-term

debt.

(in thousands)

Last three months of 2021

2022

2023

2024

2025

After 2025

27,341

Total

27,445

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

nine months

ended September

30, 2021

and 2020.

Stock Repurchase

Plans

On March 26,

2018, the

Board of

Directors

of the Company

(the “Board”)

approved

a Stock Repurchase

Plan (the

“2018 Repurchase

Plan”).

Pursuant

to the 2018

Repurchase

Plan, the

Company could

purchase

up to

500,000

shares of

its Class

A Common

Stock from

time to time,

subject to

certain limitations

imposed by

Rule 10b-18

of the Securities

Exchange

Act of 1934.

The 2018 Repurchase

Plan

was terminated

on September

16, 2021

During the

three months

ended September

30, 2021,

the Company

repurchased

a total of

1,195

shares under

the 2018 Repurchase

Plan at an

aggregate

cost of approximately

2,298

, including

commissions

and fees,

for a weighted

average price

of $

1.92

per share.

From the

inception

of the 2018

Repurchase

Plan through

its termination,

the Company

repurchased

a total of

71,598

shares at

aggregate

cost of approximately

169,243

, including

commissions

and fees,

for a weighted

average price

of $

2.36

per share.

On September

16, 2021,

the Board

authorized

a share repurchase

plan pursuant

to Rule 10b5-1

of the Securities

Exchange

Act of

1934 (the

“2021 Repurchase

Plan”). Pursuant

to the 2021

Repurchase

Plan, the

Company may

purchase

shares of

its Class

A Common

Stock from

time to time

for an aggregate

purchase

price not

to exceed

2.5

million. Share

repurchases

may be executed

through various

means, including,

without limitation,

open market

transactions.

The 2021 Repurchase

Plan does

not obligate

the Company

to purchase

any shares,

and it expires

on September

16, 2023.

The authorization

for the 2021

Repurchase

Plan may

be terminated,

increased

decreased

by the Company’s

Board of

Directors

in its discretion

at any time.

There were

no shares

repurchased

during the

nine months

ended September

30, 2021

under 2021

Repurchase

Plan.

Tender Offer

In July 2021,

the Company

completed

a “modified

Dutch auction”

tender offer

and paid

$1.5 million,

excluding

fees and

expenses,

to repurchase

812,879

shares of

Bimini Capital’s

Class A common

stock at a

price of

1.85

per share.

The aggregate

cost of

the tender

offer, including

commissions

and fees,

was approximately

1.6

million.

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.

16 -

April 22, 2020

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

amount of $

33.1

million related to the

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

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

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

operations ceased in 2007.

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

in the

related MLPA’s.

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

against the demand vigorously.

provision or accrual has been recorded as of September 30, 2021 related to the Citigroup

demand.

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

at September 30, 2021.

NOTE 11.

INCOME TAXES

The total income tax provision recorded for the nine months ended September

30, 2021 and 2020 was $

0.3

million and $

9.3

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

1.2

million and $(

8.3

) million in the nine months ended September

30, 2021 and 2020, respectively.

The total income tax provision recorded for the three months ended September

30, 2021 and 2020

was $

0.2

million and $

0.6

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

0.6

million and $

1.9

million in the three months

ended September 30, 2021 and 2020, respectively.

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to

actual income to date

and includes the expected realization of a portion of the tax benefits of federal

and state net operating losses carryforwards (“NOLs”).

In assessing the realizability of deferred tax assets, management considers whether it

is more likely than not that some portion or all of

the deferred tax assets will not be realized. The ultimate realization of capital

loss and NOL carryforwards is dependent upon the

generation of future capital gains and taxable income in periods prior to their expiration.

The Company currently provides a valuation

allowance against a portion of the NOLs since the Company believes that it is more likely

than not that some of the benefits will not be

realized in the future. The Company will continue to assess the need for a valuation

allowance at each reporting date.

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

performed an assessment of the need for

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

Following the more-likely-than-not standard

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

valuation allowance of approximately $

11.2

million

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

during the three months ended March 31, 2020.

NOTE 12.

EARNINGS PER SHARE

Shares of

Class B common

stock,

participating

and convertible

into Class

A common

stock, are

entitled to

receive dividends

in an

amount equal

to the dividends

declared

on each share

of Class A

common stock

if, and when,

authorized

and declared

by the Board

Directors.

The Class

B common

stock is included

in the computation

of basic EPS

using the

two-class

method, and

consequently

presented

separately

from Class

A common

stock.

Shares of

Class B common

stock are

not included

in the computation

of diluted

Class A

EPS as the

conditions

for conversion

to Class A

common stock

were not

met at September

30, 2021 and

2020.

Shares of

Class C common

stock are

not included

in the basic

EPS computation

as these shares

do not have

participation

rights.

Shares of

Class C common

stock are

not included

in the computation

of diluted

Class A EPS

as the conditions

for conversion

to Class A

common stock

were not

met at September

30, 2021

and 2020.

The table

below reconciles

the numerator

and denominator

of EPS for

the nine

and three

months ended

September

30, 2021

and

2020.

(in thousands, except per-share information)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

2021

2020

17 -

Basic and diluted EPS per Class A common share:

Income (loss) attributable to Class A common shares:

Basic and diluted

833

(17,499)

464

1,314

Weighted average common shares:

Class A common shares outstanding at the balance sheet date

10,794

11,609

10,794

11,609

Effect of weighting

564

Weighted average shares-basic and diluted

11,358

11,609

10,866

11,609

Income (loss) per Class A common share:

Basic and diluted

0.07

(1.51)

0.04

0.11

(in thousands, except per-share information)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

2021

2020

Basic and diluted EPS per Class B common share:

Income (loss) attributable to Class B common shares:

Basic and diluted

(48)

Weighted average common shares:

Class B common shares outstanding at the balance sheet date

Weighted average shares-basic and diluted

Income (loss) per Class B common share:

Basic and diluted

0.07

(1.51)

0.04

0.11

NOTE 13.

FAIR VALUE

Fair value

is the price

that would

be received

to sell an

asset or

paid to transfer

a liability

(an exit

price). A

fair value

measure should

reflect the

assumptions

that market

participants

would use

in pricing

the asset

or liability, including

the assumptions

about the

risk inherent

in a particular

valuation

technique,

the effect

of a restriction

on the sale

or use of

an asset and

the risk of

non-performance.

Required

disclosures

include stratification

of balance

sheet amounts

measured

at fair value

based on

inputs the

Company uses

to derive

fair value

measurements.

These stratifications

are:

●

Level 1 valuations,

where the

valuation

is based on

quoted market

prices for

identical

assets or

liabilities

traded in

active markets

(which include

exchanges

and over-the-counter

markets with

sufficient

volume),

●

Level 2 valuations,

where the

valuation

is based on

quoted market

prices for

similar instruments

traded in

active markets,

quoted

prices for

identical

or similar

instruments

in markets

that are

not active

and model-based

valuation

techniques

for which

all

significant

assumptions

are observable

in the market,

and

●

Level 3 valuations,

where the

valuation

is generated

from model-based

techniques

that use

significant

assumptions

not

observable

in the market,

but observable

based on Company-specific

data. These

unobservable

assumptions

reflect the

Company’s own

estimates

for assumptions

that market

participants

would use

in pricing

the asset

or liability. Valuation

techniques

typically

include option

pricing models,

discounted

cash flow

models and

similar techniques,

but may also

include

the

use of market

prices of

assets or

liabilities

that are

not directly

comparable

to the subject

asset or

liability.

MBS, Orchid

common stock,

retained

interests

and TBA

securities

were all recorded

at fair value

on a recurring

basis during

the nine

and three

months ended

September

30, 2021

and 2020.

When determining

fair value

measurements,

the Company

considers

the principal

or most advantageous

market in

which it

would transact

and considers

assumptions

that market

participants

would use

when pricing

the

asset. When

possible,

the Company

looks to active

and observable

markets to

price identical

assets.

When identical

assets are

not traded

in active

markets, the

Company

looks to market

observable

data for

similar assets.

Fair value

measurements

for the retained

interests

are

generated

by a model

that requires

management

to make a

significant

number of

assumptions,

and this model

resulted

in a value

of zero

at both September

30, 2021

and December

31, 2020.

The Company's

MBS and TBA

securities

are valued

using Level

2 valuations,

and such valuations

currently

are determined

by the

18 -

Company based

on independent

pricing sources

and/or third

party broker

quotes, when

available.

Because the

price estimates

may vary,

the Company

must make

certain

judgments

and assumptions

about the

appropriate

price to

use to calculate

the fair

values. The

Company

and the independent

pricing sources

use various

valuation

techniques

to determine

the price

of the Company’s

securities.

These

techniques

include observing

the most

recent market

for like

or identical

assets (including

security

coupon, maturity,

yield, and

prepayment

speeds),

spread pricing

techniques

to determine

market credit

spreads (option

adjusted spread,

zero volatility

spread, spread

to the U.S.

Treasury curve

or spread

to a benchmark

such as a

TBA security),

and model

driven approaches

(the discounted

cash flow

method, Black

Scholes and

SABR models

which rely

upon observable

market rates

such as the

term structure

of interest

rates and

volatility).

The

appropriate

spread pricing

method used

is based on

market convention.

The pricing

source determines

the spread

of recently

observed

trade activity

or observable

markets for

assets similar

to those

being priced.

The spread

is then adjusted

based on

variances

in certain

characteristics

between the

market observation

and the asset

being priced.

Those characteristics

include: type

of asset,

the expected

life

of the asset,

the stability

and predictability

of the expected

future cash

flows of

the asset,

whether

the coupon

of the asset

is fixed

adjustable,

the guarantor

of the security

if applicable,

the coupon,

the maturity, the

issuer, size of

the underlying

loans, year

in which

the

underlying

loans were

originated,

loan to value

ratio, state

in which

the underlying

loans reside,

credit score

of the underlying

borrowers

and other

variables

if appropriate.

The fair

value of the

security is

determined

by using the

adjusted

spread.

The Company’s

futures contracts

are Level

1 valuations,

as they are

exchange-traded

instruments

and quoted

market prices

are

readily available.

Futures contracts

are settled

daily. The Company’s

interest

rate swaps

and interest

rate swaptions

are Level

valuations.

The fair

value of interest

rate swaps

is determined

using a discounted

cash flow

approach

using forward

market interest

rates

and discount

rates, which

are observable

inputs. The

fair value

of interest

rate swaptions

is determined

using an option

pricing model.

The following

table presents

financial

assets and

liabilities

measured

at fair value

on a recurring

basis as of

September

30, 2021

and

December

31, 2020:

(in thousands)

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair Value

Assets

Inputs

Measurements

(Level 1)

(Level 2)

(Level 3)

September 30, 2021

Mortgage-backed securities

64,390

Orchid Island Capital, Inc. common stock

12,691

December 31, 2020

Mortgage-backed securities

65,178

Orchid Island Capital, Inc. common stock

13,548

During the

nine months

ended September

30, 2021

and 2020,

there were

no transfers

of financial

assets or

liabilities

between levels

1, 2 or 3.

NOTE 14.

SEGMENT INFORMATION

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

management segment and the

investment portfolio segment.

The asset management segment includes the investment advisory services provided by

Bimini Advisors to Orchid and Royal

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

of management fees and overhead

reimbursements received pursuant to a management agreement with Orchid.

Total revenues received under this management

agreement for the nine months ended September 30, 2021 and 2020, were approximately

6.8

million and $

5.0

million, respectively,

accounting for approximately

% and

% of consolidated revenues, respectively.

19 -

The investment portfolio segment includes the investment activities conducted

by Royal Palm.

The investment portfolio segment

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

Segment information for the nine months ended September 30, 2021 and 2020 is

as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

6,758

Advisory services, other operating segments

(1)

108

(108)

Interest and dividend income

3,245

Interest expense

(95)

(748)

(2)

(843)

Net revenues

6,866

3,150

(748)

(108)

9,160

Other income

(3,008)

154

(3)

(2,854)

Operating expenses

(4)

(3,396)

(1,738)

(5,134)

Intercompany expenses

(1)

(108)

108

Income (loss) before income taxes

3,470

(1,704)

(594)

1,172

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

4,969

Advisory services, other operating segments

(1)

116

(116)

Interest and dividend income

4,414

Interest expense

(1,030)

(893)

(2)

(1,923)

Net revenues

5,085

3,384

(893)

(116)

7,460

Other expenses

(10,238)

(466)

(3)

(10,704)

Operating expenses

(4)

(2,632)

(2,375)

(5,007)

Intercompany expenses

(1)

(116)

116

Income (loss) before income taxes

2,453

(9,345)

(1,359)

(8,251)

Segment information for the three months ended September 30, 2021 and 2020 is

as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,547

Advisory services, other operating segments

(1)

(35)

Interest and dividend income

1,043

Interest expense

(24)

(248)

(2)

(272)

Net revenues

2,582

1,019

(248)

(35)

3,318

Other

(1,033)

Operating expenses

(4)

(1,157)

(496)

(1,653)

Intercompany expenses

(1)

(35)

Income (loss) before income taxes

1,425

(545)

(248)

632

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,629

Advisory services, other operating segments

(1)

(32)

20 -

Interest and dividend income

1,097

Interest expense

(43)

(261)

(2)

(304)

Net revenues

1,661

1,054

(261)

(32)

2,422

Other

1,070

(3)

1,119

Operating expenses

(4)

(956)

(659)

(1,615)

Intercompany expenses

(1)

(32)

Income (loss) before income taxes

705

1,433

(212)

1,926

(1)

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

(2)

Includes interest on long-term debt.

(3)

Includes income recognized on the forgiveness of the PPP loan and gains (losses)

on Eurodollar futures contracts entered into as a hedge on

junior subordinated notes.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment as of September 30, 2021 and December

31, 2020 were as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

September 30, 2021

1,823

110,711

13,200

125,734

December 31, 2020

1,469

113,764

13,468

128,701

NOTE 15. RELATED PARTY TRANSACTIONS

Relationships with Orchid

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

2,595,357

shares of Orchid common stock, representing

approximately

1.7

% and

3.4

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

The Company received dividends on this

common stock investment of approximately $

1.5

million and $

0.5

million during the nine and three months ended September 30, 2021,

and approximately $

1.2

million and $

0.5

million during the nine and three months ended September 30, 2020, respectively.

Robert Cauley, the Chief Executive Officer and Chairman of the Board of Directors of the Company, also serves as Chief

Executive Officer and Chairman of the Board of Directors of Orchid, receives compensation

from Orchid, and owns shares of common

stock of Orchid.

In addition, Hunter Haas, the Chief Financial Officer, Chief Investment Officer and Treasurer of the Company, also

serves as Chief Financial Officer, Chief Investment Officer and Secretary of Orchid, is a member of Orchid’s Board of Directors,

receives compensation from Orchid, and owns shares of common stock of Orchid. Robert

J. Dwyer and Frank E. Jaumot, our

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

21 -

ITEM 2. MANAGEMENT’S

DISCUSSION

AND ANALYSIS OF FINANCIAL

CONDITION

AND RESULTS OF

OPERATIONS.

The

following

discussion

our

financial

condition

and

results

operations

should

read

conjunction

with

the

financial

statements and

notes to

those statements

included in

Item 1

of this

Form 10-Q.

The discussion

may contain

certain forward-looking

statements that involve

risks and uncertainties.

Forward-looking statements

are those that

are not historical

in nature. As

a result of

many

factors, such

as those

set forth

under “Risk

Factors” in

our most

recent Annual

Report on

Form 10-K

and any

subsequent Quarterly

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

forward-looking statements.

Overview

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

company that was formed in September 2003.

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

LLC. We operate in two business segments: the

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

by Royal Palm’s wholly-owned subsidiary,

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

includes the investment activities conducted

by Royal Palm.

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

with the

Securities and Exchange Commission), are collectively referred to as

“Bimini Advisors.”

Bimini Advisors serves as the external

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

the Company receives management fees and

expense reimbursements.

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

operations.

Pursuant to the terms of the management agreement, Bimini Advisors

provides Orchid with its management team,

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

subject to the supervision and oversight of

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

it.

Royal Palm Capital, LLC (collectively with its wholly-owned subsidiaries

referred to as “Royal Palm”) maintains an investment

portfolio, consisting primarily of residential mortgage-backed securities ("MBS")

issued and guaranteed by a federally chartered

corporation or agency ("Agency MBS"). Our investment strategy focuses on,

and our portfolio consists of, two categories of Agency

MBS: (i) traditional pass-through Agency MBS, such as mortgage pass-through

certificates issued by Fannie Mae, Freddie Mac or

Ginnie Mae (the “GSEs”) and collateralized mortgage obligations (“CMOs”)

issued by the GSEs (“PT MBS”) and (ii) structured Agency

MBS, such as interest only securities ("IOs"), inverse interest only securities

("IIOs") and principal only securities ("POs"), among other

types of structured Agency MBS. In addition, Royal Palm receives dividends

from its investment in Orchid common shares.

Stock Repurchase

Plans

On March 26,

2018, the

Board of

Directors

of the Company

approved

a Stock Repurchase

Plan the

“2018 Repurchase

Plan”).

Pursuant

to the 2018

Repurchase

Plan, we

could purchase

up to 500,000

shares of

the Company’s

Class A Common

Stock from

time to

time, subject

to certain

limitations

imposed by

Rule 10b-18

of the Securities

Exchange

Act of 1934.

The 2018

Repurchase

Plan was

terminated

on September

16, 2021.

During the

three months

ended September

30, 2021,

the Company

repurchased

a total of

1,195 shares

under the

2018 Repurchase

Plan at an

aggregate

cost of approximately

$2,298, including

commissions

and fees,

for a weighted

average price

of $1.92

per share.

From commencement

of the 2018

Repurchase

Plan, through

its termination,

the Company

repurchased

a total of

71,599 shares

at an

aggregate

cost of approximately

$169,243,

including

commissions

and fees,

for a weighted

average price

of $2.36

per share.

On September

16, 2021,

the Board

authorized

a share

repurchase

plan pursuant

to Rule 10b5-1

of the Securities

Exchange

Act of

1934 (the

“2021 Repurchase

Plan”). Pursuant

to the 2021

Repurchase

Plan, we

may purchase

shares of

our Class

A Common

Stock from

time to time

for an aggregate

purchase price

not to exceed

$2.5 million.

Share repurchases

may be executed

through various

means,

including,

without limitation,

open market

transactions.

The 2021

Repurchase

Plan does

not obligate

the Company

to purchase

any

22 -

shares, and

it expires

on September

16, 2023.

The authorization

for the 2021

Repurchase

Plan may be

terminated,

increased

decreased

by the Company’s

Board of

Directors

in its discretion

at any time.

No shares

were repurchased

under the

2021 Repurchase

Plan through

September

30, 2021.

Tender Offer

In July 2021,

we completed

a “modified

Dutch auction”

tender offer

and paid

$1.5 million,

excluding

fees and

related expenses,

repurchase

812,879 shares

of our Class

A common

stock, which

were retired,

at a price

of $1.85 per

share.

Factors that Affect our Results of Operations and Financial Condition

A variety

of industry

and economic

factors (in

addition to

those related

to the

COVID-19 pandemic)

may impact

our results

operations and financial condition. These factors include:

•

interest rate trends;

•

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

•

competition for, and supply of, investments in Agency MBS;

•

actions

taken

the

U.S.

government,

including

the

presidential

administration,

the

U.S.

Federal

Reserve

(the

“Fed”),

the

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

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

•

prepayment rates on mortgages underlying our Agency MBS, and credit trends

insofar as they affect prepayment rates; and

•

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

•

other market developments.

In addition, a

variety of factors

relating to our

business may also

impact our results

of operations and

financial condition. These

factors include:

•

our degree of leverage;

•

our access to funding and borrowing capacity;

•

our borrowing costs;

•

our hedging activities;

•

the market value of our investments;

•

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

•

our ability to use net operating loss carryforwards and net capital loss carryforwards

to reduce our taxable income;

•

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

•

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

Results

of Operations

Described below

are the Company’s results

of operations for

the nine and three months

ended September

30, 2021, as compared

the nine

and three

months ended

September

30, 2020.

Net Income

(Loss) Summary

Consolidated

net income

for the

nine months

ended September

30, 2021

was $0.8

million,

or $0.07

basic and

diluted

income per

of Class A

Common Stock, as compared to consolidated net loss of

$17.5 million,

or $1.51 basic and

diluted loss per share of

Class A

Common Stock,

for the nine

months ended

September

30, 2020.

Consolidated

net income

for the

three

months

ended September

30, 2021

was $0.5

million,

or $0.04

basic and

diluted

income per

23 -

of Class

A Common

Stock, as

compared

to consolidated

net income

of $1.3

million,

or $0.11 basic

and diluted

income per

share of

Class A

Common Stock,

for the

three months

ended September

30, 2020.

The components of

net income (loss)

for the nine and three months

ended September

30, 2021 and 2020, along

with the changes

those components

are presented

in the table

below:

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

Change

2021

2020

Change

Advisory services revenues

6,758

4,969

1,789

2,547

1,629

918

Interest and dividend income

3,245

4,414

(1,169)

1,043

1,097

(54)

Interest expense

(843)

(1,924)

1,081

(272)

(304)

Net revenues

9,160

7,459

1,701

3,318

2,422

896

Other (expense) income

(2,855)

(10,703)

7,848

(1,033)

1,119

(2,152)

Expenses

(5,134)

(5,007)

(127)

(1,653)

(1,615)

(38)

Net income (loss) before income tax provision

1,171

(8,251)

9,422

632

1,926

(1,294)

Income tax provision

(336)

(9,296)

8,960

(167)

(608)

441

Net income (loss)

835

(17,547)

18,382

465

1,318

(853)

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

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

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

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

but rather hold them for economic

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

separate line item in our consolidated statements of

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

purposes, interest expense and cost of funds are not

impacted by the fluctuation in value of the derivative instruments.

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

of funds measures, GAAP interest expense

has been adjusted to reflect the realized and unrealized gains or losses on

certain derivative instruments the Company uses that

pertain to each period presented. We believe that adjusting our interest expense for the

periods presented by the gains or losses on

these derivative instruments would not accurately reflect our economic interest

expense for these periods. The reason is that these

derivative instruments may cover periods that extend into the future, not just the

current period.

Any realized or unrealized gains or

losses on the instruments reflect the change in market value of the instrument caused

by changes in underlying interest rates

applicable to the term covered by the instrument, not just the current period.

For each period presented, we have combined the effects of the derivative financial instruments

in place for the respective period

with the actual interest expense incurred on borrowings to reflect total economic

interest expense for the applicable period. Interest

expense, including the effect of derivative instruments for the period, is referred to as economic interest

expense. Net interest income,

when calculated to include the effect of derivative instruments for the period, is referred to

as economic net interest income. This

presentation includes gains or losses on all contracts in effect during the reporting period,

covering the current period as well as

periods in the future.

We believe that economic interest expense and economic net interest income provide

meaningful information to consider, in

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

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

that are not necessarily indicative

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

on derivative instruments presented in our

24 -

consolidated statements of operations are not necessarily representative of the

total interest rate expense that we will ultimately

realize. This is because as interest rates move up or down in the future, the

gains or losses we ultimately realize, and which will affect

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

as of the reporting date.

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

limitations. First, other market participants may

calculate economic interest expense and economic net interest income differently than

the way we calculate them. Second, while we

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

above helps to present our financial position and

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

economic value of our investment strategy should not

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

interest income computed in accordance with GAAP.

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

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

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

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

However, the

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

Accordingly, the open equity at the

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

respective original hedge periods.

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

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

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

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

(in thousands)

Recognized in

Statement of

TBA

Operations

Securities

Futures

Three Months Ended

(GAAP)

Loss

Contracts

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(2)

March 31, 2020

(5,291)

(1,441)

(3,850)

Nine Months Ended

September 30, 2021

September 30, 2020

(5,292)

(1,441)

(3,851)

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

(in thousands)

Attributed to Current Period (Non-GAAP)

Attributed to Future Periods (Non-GAAP)

Repurchase

Long-Term

Repurchase

Long-Term

Statement of

Three Months Ended

Agreements

Debt

Total

Agreements

Debt

Total

Operations

September 30, 2021

(709)

(57)

(766)

709

766

June 30, 2021

(708)

(58)

(766)

708

766

March 31, 2021

(708)

(58)

(766)

708

766

December 31, 2020

(615)

(40)

(655)

615

655

September 30, 2020

(1,065)

(40)

(1,105)

1,065

1,105

June 30, 2020

(456)

(40)

(496)

456

494

(2)

March 31, 2020

(456)

(40)

(496)

(2,879)

(475)

(3,354)

(3,850)

Nine Months Ended

September 30, 2021

(2,125)

(173)

(2,298)

2,125

173

2,298

September 30, 2020

(1,977)

(120)

(2,097)

(1,358)

(396)

(1,754)

(3,851)

25 -

Economic Net Portfolio Interest Income

(in thousands)

Interest Expense on Repurchase Agreements

Net Portfolio

Effect of

Interest Income

Interest

GAAP

Non-GAAP

Economic

GAAP

Economic

Three Months Ended

Income

Basis

Hedges

(1)

Basis

(2)

Basis

(3)

September 30, 2021

537

(709)

733

513

(196)

June 30, 2021

578

(708)

739

547

(161)

March 31, 2021

611

(708)

748

571

(137)

December 31, 2020

597

(615)

658

554

(61)

September 30, 2020

604

(1,065)

1,108

561

(504)

June 30, 2020

523

(456)

516

463

March 31, 2020

2,040

928

(456)

1,384

1,112

656

Nine Months Ended

September 30, 2021

1,726

(2,125)

2,220

1,631

(494)

September 30, 2020

3,167

1,030

(1,978)

3,008

2,137

159

(1)

Reflects the effect of derivative instrument hedges for only the period

presented.

(2)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense.

(3)

Calculated by adding the effect of derivative instrument hedges attributed

to the period presented to GAAP net portfolio interest income.

Economic Net Interest Income

(in thousands)

Net Portfolio

Interest Expense on Long-Term Debt

Interest Income

Effect of

Net Interest Income (Loss)

GAAP

Economic

GAAP

Non-GAAP

Economic

GAAP

Economic

Three Months Ended

Basis

(1)

Basis

Hedges

(2)

Basis

(3)

Basis

(4)

September 30, 2021

513

(196)

248

(57)

305

265

(501)

June 30, 2021

547

(161)

250

(58)

308

297

(469)

March 31, 2021

571

(137)

250

(58)

308

321

(445)

December 31, 2020

554

(61)

257

(40)

297

(358)

September 30, 2020

561

(504)

261

(40)

301

300

(805)

June 30, 2020

463

282

(40)

322

181

(315)

March 31, 2020

1,112

656

350

(40)

390

762

266

Nine Months Ended

September 30, 2021

1,631

(494)

748

(173)

921

883

(1,415)

September 30, 2020

2,137

159

893

(120)

1,013

1,244

(854)

(1)

Calculated by adding the effect of derivative instrument hedges attributed

to the period presented to GAAP net portfolio interest income.

(2)

Reflects the effect of derivative instrument hedges for only the period

presented.

(3)

Calculated by subtracting the effect of derivative instrument hedges

attributed to the period presented from GAAP interest expense.

(4)

Calculated by adding the effect of derivative instrument hedges

attributed to the period presented to GAAP net interest income.

Segment Information

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

advisory services provided by Bimini

Advisors to Orchid and Royal Palm. The investment

portfolio segment includes the investment activities conducted

by Royal Palm.

Segment information for the nine months ended September 30, 2021 and 2020 is as

follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

26 -

2021

Advisory services, external customers

6,758

Advisory services, other operating segments

(1)

108

(108)

Interest and dividend income

3,245

Interest expense

(95)

(748)

(2)

(843)

Net revenues

6,866

3,150

(748)

(108)

9,160

Other income

(3,008)

154

(3)

(2,854)

Operating expenses

(4)

(3,396)

(1,738)

(5,134)

Intercompany expenses

(1)

(108)

108

Income (loss) before income taxes

3,470

(1,704)

(594)

1,172

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

4,969

Advisory services, other operating segments

(1)

116

(116)

Interest and dividend income

4,414

Interest expense

(1,030)

(893)

(2)

(1,923)

Net revenues

5,085

3,384

(893)

(116)

7,460

Other expenses

(10,238)

(466)

(3)

(10,704)

Operating expenses

(4)

(2,632)

(2,375)

(5,007)

Intercompany expenses

(1)

(116)

116

Income (loss) before income taxes

2,453

(9,345)

(1,359)

(8,251)

Segment information for the three months ended September 30, 2021 and 2020 is

as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,547

Advisory services, other operating segments

(1)

(35)

Interest and dividend income

1,043

Interest expense

(24)

(248)

(2)

(272)

Net revenues

2,582

1,019

(248)

(35)

3,318

Other

(1,033)

Operating expenses

(4)

(1,157)

(496)

(1,653)

Intercompany expenses

(1)

(35)

Income (loss) before income taxes

1,425

(545)

(248)

632

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,629

Advisory services, other operating segments

(1)

(32)

Interest and dividend income

1,097

Interest expense

(43)

(261)

(2)

(304)

Net revenues

1,661

1,054

(261)

(32)

2,422

Other

1,070

(3)

1,119

Operating expenses

(4)

(956)

(659)

(1,615)

Intercompany expenses

(1)

(32)

Income (loss) before income taxes

705

1,433

(212)

1,926

(1)

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

27 -

(2)

Includes interest on long-term debt.

(3)

Includes income recognized on the forgiveness of the PPP loan and gains (losses)

on Eurodollar futures contracts entered into as a hedge on

junior subordinated notes.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

Assets in each reportable segment were as follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

September 30, 2021

1,823

110,711

13,200

125,734

December 31, 2020

1,469

113,764

13,468

128,701

Asset Management

Segment

Advisory Services

Revenue

Advisory services

revenue

consists

of management

fees and

overhead

reimbursements

charged

to Orchid

for the management

of its

portfolio

pursuant

to the terms

of a management

agreement.

We receive a monthly management fee in the amount of:

●

One-twelfth of 1.5% of the first $250 million of Orchid’s month-end equity, as defined in the management agreement,

●

One-twelfth of 1.25% of Orchid’s month-end equity that is greater than $250 million

and less than or equal to $500 million, and

●

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

In addition, Orchid is obligated to reimburse us for any direct expenses

incurred on its behalf and to pay to us an amount equal to

Orchid's pro rata portion of certain overhead costs set forth in the management

agreement. The management agreement has been

renewed through February 2022 and provides for automatic one-year

extension options. Should Orchid terminate the management

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

equal to three times the average annual management fee,

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

renewal term.

The following table summarizes the advisory services revenue received from

Orchid in each quarter during 2021 and 2020.

(in thousands)

Average

Advisory Services

Orchid

Management

Overhead

Three Months Ended

MBS

Equity

Fee

Allocation

Total

September 30, 2021

5,136,331

672,384

2,157

390

2,547

June 30, 2021

4,504,887

542,679

1,791

395

2,186

March 31, 2021

4,032,716

456,687

1,621

404

2,025

December 31, 2020

3,633,631

387,503

1,384

442

1,826

September 30, 2020

3,422,564

368,588

1,252

377

1,629

June 30, 2020

3,126,779

361,093

1,268

347

1,615

March 31, 2020

3,269,859

376,673

1,377

348

1,725

Nine Months Ended

September 30, 2021

4,557,978

557,250

5,569

1,189

6,758

September 30, 2020

3,273,068

368,785

3,897

1,072

4,969

Investment Portfolio Segment

Net Portfolio Interest Income

28 -

We define

net portfolio

interest

income as

interest

income on

MBS less

interest

expense on

repurchase

agreement

funding.

During the

nine months ended September 30, 2021, we generated $1.6 million of

net portfolio interest income, consisting of $1.7 million of interest

income from MBS

assets offset by $0.1

million of interest

expense on repurchase

liabilities.

For the comparable

period ended September

30, 2020, we

generated

$2.1 million

of net portfolio

interest income,

consisting

of $3.2 million

of interest

income from

MBS assets offset

$1.0 million

of interest

expense

on repurchase

liabilities.

The $1.5

million decrease

in interest

income for

the nine

months ended

September

30, 2021 was

due to a $15.4

million decrease

in average

MBS balances,

combined with

a 167 basis

point ("bp")

decrease in

yields earned

on the

portfolio.

The $0.9

million decrease

in interest

expense for

the nine

months ended

September

30, 2021

was due

to a combination

an $11.9 million

decrease

in average

repurchase

liabilities

and a 151

bp decrease

in cost of

funds.

Our economic

interest

expense

on repurchase

liabilities

for the

nine months

ended September

30, 2021

and 2020

was $2.2

million and

$3.0 million,

respectively, resulting

in ($0.5)

million and

$0.2 million

of economic

net portfolio

interest

income, respectively.

During the

three months

ended September

30, 2021,

we generated

approximately

$513,000

of net portfolio

interest

income,

consisting

of approximately

$537,000

of interest

income

from MBS

assets offset

by approximately

$24,000

of interest

expense

on repurchase

liabilities.

For the

three months ended

September 30, 2020,

we generated approximately $561,000 of

net portfolio interest income, consisting of

approximately

$604,000

of interest

income from

MBS assets

offset by

approximately

$43,000

of interest

expense on

repurchase

liabilities.

Our economic interest expense

on repurchase liabilities

for the three months ended September 30, 2021 and 2020 was $0.7 million

and

$1.1

million, respectively,

resulting in

approximately ($0.2)

million

and

($0.5)

million of

economic net

portfolio interest

expense,

respectively.

The

tables

below

provide

information

on our

portfolio

average

balances,

interest

income,

yield

assets,

average

repurchase

agreement

balances, interest

expense, cost

of funds, net interest

income and net

interest rate

spread for the

nine months ended

September 30,

2021

and 2020

and each

quarter in

2021 and

2020 on both

a GAAP and

economic basis.

($ in thousands)

Average

Yield on

Average

Interest Expense

Average Cost of Funds

MBS

Interest

Average

Repurchase

GAAP

Economic

GAAP

Economic

Three Months Ended

Held

(1)

Income

(2)

MBS

Agreements

(1)

Basis

(2)

Basis

(3)

September 30, 2021

66,692

537

3.22%

67,253

733

0.14%

4.36%

June 30, 2021

70,925

578

3.26%

72,241

739

0.17%

4.09%

March 31, 2021

69,017

611

3.54%

69,104

748

0.23%

4.33%

December 31, 2020

69,161

597

3.45%

67,878

658

0.25%

3.88%

September 30, 2020

62,981

604

3.84%

61,151

1,108

0.28%

7.25%

June 30, 2020

53,630

523

3.90%

51,987

516

0.46%

3.97%

March 31, 2020

136,142

2,040

5.99%

131,156

928

1,384

2.83%

4.22%

Nine Months Ended

September 30, 2021

68,878

1,726

3.34%

69,533

2,220

0.18%

4.26%

September 30, 2020

84,251

3,167

5.01%

81,431

1,031

3,008

1.69%

4.92%

($ in thousands)

Net Portfolio

Interest Income

Interest Spread

GAAP

Economic

GAAP

Economic

Three Months Ended

Basis

(2)

Basis

(4)

September 30, 2021

513

(196)

3.08%

(1.14)%

June 30, 2021

547

(161)

3.09%

(0.83)%

March 31, 2021

571

(137)

3.31%

(0.79)%

December 31, 2020

554

(61)

3.20%

(0.42)%

September 30, 2020

561

(504)

3.56%

(3.40)%

June 30, 2020

463

3.44%

(0.07)%

29 -

March 31, 2020

1,112

656

3.16%

1.77%

Nine Months Ended

September 30, 2021

1,631

(494)

3.16%

(0.92)%

September 30, 2020

2,136

159

3.32%

0.09%

(1)

Portfolio yields

and costs

of borrowings

presented in

the tables

above and

the tables

on pages

29 and

30 are

calculated based

on the

average balances

of the underlying

investment portfolio/repurchase

agreement balances

and are annualized

for the periods

presented.

Average balances for quarterly periods are calculated using two data

points, the beginning and ending balances.

(2)

Economic interest expense and economic net interest income

presented in the tables above and the tables on page 30 include

the effect

of derivative instrument hedges for only the period presented.

(3)

Represents

interest

cost

our

borrowings

and

the

effect

derivative

instrument

hedges

attributed

the

period

hedging

activities divided by average MBS.

(4)

Economic net interest spread is calculated by subtracting average economic

cost of funds from yield on average MBS.

Interest Income and Average Earning Asset Yield

Our interest income

was $1.7

million for

the nine

months ended September 30,

2021 and

$3.2 million

for the

nine months ended

September

30, 2020.

Average

MBS holdings

were

$68.9

million

and $84.3

million

for the

nine months

ended

September

30, 2021

and 2020,

respectively. The $1.5

million decrease

in interest income

was due to a $15.4

million decrease

in average MBS

holdings,

combined with

167 bp decrease

in yields.

Our interest income was $0.5 million for

the three months ended September 30, 2021 and

$0.6 million for the

three months ended

September 30, 2020.

Average MBS holdings were $66.7 million and $63.0 million for the three months ended September

30, 2021 and

2020, respectively. The $0.1 million decrease in interest income was due to

a 62

bp decrease in yields, partially offset by a

$3.7 million

increase in

average MBS

holdings.

The tables below present the average

portfolio size, income

and yields of our respective

sub-portfolios,

consisting of structured

MBS

and PT MBS,

for the nine

months ended

September

30, 2021

and 2020,

and for each

quarter during

2021 and

2020.

($ in thousands)

Average MBS Held

Interest Income

Realized Yield on Average MBS

Structured

Three

Months Ended

MBS

Total

MBS

Total

MBS

Total

September 30, 2021

64,641

2,051

66,692

533

537

3.30%

0.91%

3.22%

June 30, 2021

70,207

718

70,925

579

(1)

578

3.30%

(0.11)%

3.26%

March 31, 2021

68,703

314

69,017

605

611

3.53%

6.54%

3.54%

December 31, 2020

68,842

319

69,161

598

(1)

597

3.47%

(1.20)%

3.45%

September 30, 2020

62,564

417

62,981

588

604

3.76%

15.35%

3.84%

June 30, 2020

53,101

529

53,630

502

523

3.78%

16.12%

3.90%

March 31, 2020

135,044

1,098

136,142

2,029

2,040

6.01%

3.93%

5.99%

Nine Months Ended

September 30, 2021

67,851

1,027

68,878

1,717

1,726

3.37%

1.25%

3.34%

September 30, 2020

83,570

681

84,251

3,119

3,167

4.98%

9.42%

5.01%

Interest Expense on Repurchase Agreements and the Cost of Funds

Our average

outstanding

balances

under repurchase

agreements

were $69.5

million and

$81.4 million,

generating

interest expense

$0.1 million

and $1.0

million for

the nine months

ended September

30, 2021

and 2020,

respectively.

Our average

cost of funds

was 0.18%

and 1.69%

for nine

months ended

September

30, 2021

and 2020,

respectively.

There was

a 151 bp decrease

in the average

cost of funds

and a

$11.9 million

decrease

in average

outstanding

repurchase

agreements

during

the nine

months

ended September

30, 2021,

compared

to the nine

months ended

September

30, 2020.

30 -

Our economic

interest

expense

was $2.2

million

and $3.0

million

for the

nine

months

ended

September

30, 2021

and 2020,

respectively.

There was a 66 bp decrease

in the average economic

cost of funds to

4.26% for the nine

months ended September

30, 2021 from 4.92%

for the nine

months ended September 30, 2020.

The $0.8 million decrease in

economic interest expense was due to the

$11.9 million

decrease

in average

outstanding

repurchase

agreements

during the

nine months

ended September

30, 2021.

Our average

outstanding

balances

under repurchase

agreements

were $67.3

million and

$61.2 million,

generating

interest expense

approximately

$24,000

and 43,000

for the

three months

ended September

30, 2021

and 2020,

respectively.

Our average

cost of

funds was

0.14% and

0.28% for

three months

ended September

30, 2021 and

2020, respectively.

There was

a 14 bp

decrease

in the average

cost of

funds and a

$6.1 million increase in

average outstanding repurchase agreements

during the three months

ended September 30, 2021,

compared

to the three

months ended

September

30, 2020.

Our

economic

interest

expense

was

$0.7

million

and

$1.1

million

for

the

three

months

ended

September 30,

2021

and

2020,

respectively.

There was

a 289

bp decrease

in the

average

economic

cost of

funds to

4.36% for

the three

months ended

September

30, 2021

from 7.25%

for the three

months ended

September

30, 2020.

Because all of

our repurchase agreements are short-term, changes in market rates

have a

more immediate impact on our

interest

expense.

Our average cost of funds calculated on a GAAP basis was 5 bps above the average one-month LIBOR and 2 bps below the

average

six-month

LIBOR for

the quarter

ended September

30, 2021.

Our average

economic

cost of

funds was

427 bps

above the

average

one-month LIBOR and 420

bps above

the average six-month LIBOR

for the

quarter ended September 30,

The average

term to

maturity of

the outstanding

repurchase

agreements

decreased

from 33 days

at December

31, 2020

to 25 days

at September

30, 2021.

The tables

below

present

the average

outstanding

balances

under

our repurchase

agreements,

interest

expense

and average

economic

cost of funds,

and average

one-month and

six-month LIBOR

rates for the

nine months

ended September

30, 2021 and

2020, and for

each

quarter in

2021 and

2020, on

both a GAAP

and economic

basis.

($ in thousands)

Average

Balance of

Interest Expense

Average Cost of Funds

Repurchase

GAAP

Economic

GAAP

Economic

Three Months Ended

Agreements

Basis

September 30, 2021

67,253

733

0.14%

4.36%

June 30, 2021

72,241

739

0.17%

4.09%

March 31, 2021

69,104

748

0.23%

4.33%

December 31, 2020

67,878

658

0.25%

3.88%

September 30, 2020

61,151

1,108

0.28%

7.25%

June 30, 2020

51,987

516

0.46%

3.97%

March 31, 2020

131,156

928

1,384

2.83%

4.22%

Nine Months Ended

September 30, 2021

69,533

2,220

0.18%

4.26%

September 30, 2020

81,431

1,030

3,008

1.69%

4.92%

Average GAAP Cost of Funds

Average Economic Cost of Funds

Relative to Average

Average LIBOR

One-Month

Six-Month

One-Month

Six-Month

Three Months Ended

One-Month

Six-Month

LIBOR

September 30, 2021

0.09%

0.16%

0.05%

(0.02)%

4.27%

4.20%

June 30, 2021

0.10%

0.18%

0.07%

(0.01)%

3.99%

3.91%

March 31, 2021

0.13%

0.23%

0.10%

0.00%

4.20%

4.10%

December 31, 2020

0.15%

0.27%

0.10%

(0.02)%

3.73%

3.61%

September 30, 2020

0.17%

0.35%

0.11%

(0.07)%

7.08%

6.90%

June 30, 2020

0.55%

0.70%

(0.09)%

(0.24)%

3.42%

3.27%

31 -

March 31, 2020

1.34%

1.43%

1.49%

1.40%

2.88%

2.79%

Nine Months Ended

September 30, 2021

0.10%

0.19%

0.08%

(0.01)%

4.16%

4.07%

September 30, 2020

0.68%

0.83%

1.01%

0.86%

4.24%

4.09%

Dividend Income

We owned 1,520,036

shares of Orchid

common stock as of

March 31, 2020.

We acquired 975,321

additional shares

during the three

months ended June 30, 2020, and

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

ownership to 2,595,357 shares. Orchid paid total dividends

of $0.585 per share and $0.195 per share during the nine

and three months

ended September

30, 2021, respectively, and $0.595

per share and $0.19 per share

during the nine and three

months ended September

30, 2020,

respectively.

During the

nine and

three months

ended September 30,

2021, we

received dividends on

this common

stock

investment

of approximately

$1.5 million

and $0.5 million,

respectively, compared

to $1.2 million

and $0.5

million during

the nine and

three

months ended

September

30, 2020,

respectively.

Long-Term Debt

Junior Subordinated Notes

Interest

expense on

our junior

subordinated

debt securities

was $0.7

million and

$0.9 million

for the nine

months ended

September

30,

2021 and 2020, respectively.

The average rate of interest paid for the nine months

ended September 30, 2021 was 3.67% compared

4.38% for

the comparable

period in

2020.

Interest expense

our

junior subordinated debt

securities was

$0.2

million and

$0.3 million

for

the

three month

periods ended

September

30, 2021

and 2020,

respectively.

The average

rate of

interest

paid for

the three

months ended

September

30, 2021

was 3.62%

compared

to 3.80%

for the comparable

period in

2020.

The junior subordinated

debt securities

pay interest

at a floating

rate.

The rate is

adjusted quarterly

and set at

a spread of

3.50% over

the prevailing

three-month

LIBOR rate

on the determination

date.

As of September

30, 2021,

the interest

rate was

3.62%.

Note Payable

On October

30, 2019,

the Company borrowed

$680,000 from a

bank. The

note is

payable in equal

monthly principal and interest

installments of approximately

$4,500 through October

30, 2039. Interest accrues

at 4.89% through October

30, 2024. Thereafter, interest

accrues based

on the weekly

average yield

to the United

States Treasury

securities

adjusted to

a constant

maturity of

5 years, plus

3.25%.

The note

is secured

by a mortgage

on the Company’s

office building.

Paycheck Protection Plan Loan

On April 13, 2020, the Company received approximately

$152,000 through

the Paycheck Protection

Program (“PPP”) of the CARES

Act in

the form

of a

low interest

loan.

The Small

Business

Administration

notified

the Company

that,

effective

as of

April

22, 2021,all

principal

and accrued

interest

under the

PPP loan

has been

forgiven.

Gains or Losses and Other Income

The table

below presents

our gains

or losses

and other

income for

the nine and

three months

ended September

30, 2021

and 2020.

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

32 -

2021

2020

Change

2021

2020

Change

Realized gains (losses) on sales of MBS

(5,805)

5,874

Unrealized (losses) gains on MBS

(2,222)

304

(2,526)

(324)

276

(600)

Total (losses)

gains on MBS

(2,153)

(5,501)

3,348

(255)

276

(531)

Losses on derivative instruments

(5,292)

5,292

Gains on retained interests in securitizations

(59)

Unrealized (losses) gains on

Orchid Island Capital, Inc. common stock

(856)

(895)

(779)

794

(1,573)

We invest

in MBS

with the

intent

to earn

net income

from the

realized

yield on

those

assets

over

their related

funding

and hedging

costs,

and not for the

purpose of making short term gains from trading in these securities.

However, we have sold, and may

continue to sell,

existing assets

acquire new

assets, which

our

management believes

might have

higher risk-adjusted

returns in

light of

current or

anticipated interest rates, federal government programs or general economic conditions or to

manage our balance sheet

as part

of our

asset/liability

management

strategy. During the nine months

ended September

30, 2020, we received

proceeds of $171.2

million from the

sales of MBS.

Most of these

sales occurred

during the

second half

of March 2020

as we sold

assets in order

to maintain

our leverage

ratio

at prudent levels, maintain sufficient cash

and liquidity and reduce risk

associated with the market turmoil brought about

by COVID-19.

During the

nine months

ended September

30, 2021,

we received

proceeds

of $13.1

million 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

sensitive

to changes

in interest

rates.

The table

below presents

historical

interest

rate data

for each

quarter end

during 2021

and 2020.

5 Year

10 Year

15 Year

30 Year

Three

U.S. Treasury

Fixed-Rate

Month

Rate

(1)

Rate

(1)

Mortgage Rate

(2)

Mortgage Rate

(2)

Libor

(3)

September 30, 2021

1.00%

1.53%

2.18%

2.90%

0.12%

June 30, 2021

0.87%

1.44%

2.27%

2.98%

0.13%

March 31, 2021

0.94%

1.75%

2.39%

3.08%

0.19%

December 31, 2020

0.36%

0.92%

2.22%

2.68%

0.23%

September 30, 2020

0.27%

0.68%

2.39%

2.89%

0.24%

June 30, 2020

0.29%

0.65%

2.60%

3.16%

0.31%

March 31, 2020

0.38%

0.70%

2.89%

3.45%

1.10%

(1)

Historical 5 Year and

10 Year U.S. Treasury

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

Exchange.

(2)

Historical 15 Year and

30 Year Fixed

Rate Mortgage Rates are obtained from Freddie Mac’s Primary

Mortgage Market Survey.

(3)

Historical LIBOR are obtained from the Intercontinental Exchange Benchmark Administration

Ltd.

Operating Expenses

For the nine

and three months ended September 30, 2021,

our total operating expenses were approximately $5.1 million and $1.7

million,

respectively, compared to approximately

$5.0 million and $1.6 million for the nine and three months ended September 30, 2020,

respectively.

The table

below presents

a breakdown

of operating

expenses for

the nine

and three

months ended

September

30, 2021 and

2020.

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

2021

2020

Change

2021

2020

Change

Compensation and related benefits

3,220

3,157

1,029

1,010

Legal fees

113

122

(9)

Accounting, auditing and other professional fees

293

345

(52)

Directors’ fees and liability insurance

568

512

190

166

Administrative and other expenses

940

871

300

319

(19)

5,134

5,007

127

1,653

1,616

33 -

Income Tax Provision

We recorded an income tax provision for the nine and three months ended September 30,

2021 of approximately $0.3 million and

$0.2 million, respectively, on consolidated pre-tax book income of $1.2 million and $0.6 million, respectively.

We recorded an income

tax provision for the nine and three months ended September 30, 2020

of approximately $9.3 million and $0.6 million, respectively, on

consolidated pre-tax book (loss) income of $(8.3) million and $1.9 million.

As a result

of adverse

economic

impacts of

COVID-19

on our business,

management

performed

an assessment

of the need

for

additional

valuation

allowances

against existing

deferred

tax assets.

Following

the more-likely-than-not

standard

that benefits

will not

realized in

the future,

we determined

an additional

valuation

allowance

of approximately

$11.2 million was

necessary

during the

three

months ended

March 31,

2020 for

the net operating

loss carryforwards

and capital

loss carryforwards.

Financial

Condition:

Mortgage-Backed Securities

As of September

30, 2021,

our MBS portfolio

consisted

of $64.4

million of

agency or

government

MBS at fair

value and

had a

weighted

average coupon

of 3.40%.

During the

nine months

ended September

30, 2021,

we received

principal

repayments

of $11.8

million compared

to $11.2 million

for the comparable

period ended

September

30, 2020.

The average

prepayment

speeds for

the quarters

ended September

30, 2021

and 2020

were 18.3%

and 15.8%,

respectively.

The following

table presents

the 3-month

constant prepayment

rate (“CPR”)

experienced

on our structured

and PT MBS

sub-

portfolios,

on an annualized

basis, for

the quarterly

periods presented.

CPR is a

method of

expressing

the prepayment

rate for

a mortgage

pool that

assumes that

a constant

fraction of

the remaining

principal

is prepaid

each month

or year. Specifically,

the CPR

in the chart

below represents

the three-month

prepayment

rate of the

securities

in the respective

asset category.

Structured

PT MBS

MBS

Total

Three Months Ended

Portfolio (%)

September 30, 2021

15.5

26.9

18.3

June 30, 2021

21.0

31.3

21.9

March 31, 2021

18.5

16.4

18.3

December 31, 2020

12.8

24.5

14.4

September 30, 2020

13.0

32.0

15.8

June 30, 2020

12.4

25.0

15.3

March 31, 2020

11.6

18.1

13.7

The following

tables summarize

certain characteristics

of our PT

MBS and structured

MBS as of

September

30, 2021

and December

31, 2020:

($ in thousands)

Weighted

Percentage

Average

Weighted

Maturity

Fair

Entire

Average

Longest

Asset Category

Value

Portfolio

Coupon

Months

Maturity

September 30, 2021

Fixed Rate MBS

61,372

95.3%

3.69%

333

1-Sep-51

Interest-Only MBS

2,999

4.7%

2.87%

305

15-May-51

Inverse Interest-Only MBS

0.0%

5.90%

212

15-May-39

34 -

Total MBS Portfolio

64,390

100.0%

3.40%

331

1-Sep-51

December 31, 2020

Fixed Rate MBS

64,902

99.6%

3.89%

333

1-Aug-50

Interest-Only MBS

251

0.4%

3.56%

299

15-Jul-48

Inverse Interest-Only MBS

0.0%

5.84%

221

15-May-39

Total MBS Portfolio

65,178

100.0%

3.89%

333

1-Aug-50

($ in thousands)

September 30, 2021

December 31, 2020

Percentage of

Agency

Fair Value

Entire Portfolio

Fair Value

Entire Portfolio

Fannie Mae

41,938

65.1%

38,946

59.8%

Freddie Mac

22,452

34.9%

26,232

40.2%

Total Portfolio

64,390

100.0%

65,178

100.0%

September 30, 2021

December 31, 2020

Weighted Average Pass-through Purchase Price

109.33

109.51

Weighted Average Structured Purchase Price

4.81

4.28

Weighted Average Pass-through Current Price

110.38

112.67

Weighted Average Structured Current Price

9.45

3.20

Effective Duration

(1)

2.542

3.309

(1)

Effective duration is the approximate percentage change in price

for a 100 basis point change in rates.

An effective duration of 2.542 indicates

that an interest rate increase of 1.0% would be expected to cause a 2.542% decrease in the

value of the MBS in our investment portfolio at

September 30, 2021.

An effective duration of 3.309 indicates that an interest rate

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

decrease in the value of the MBS in our investment portfolio at December

31, 2020. These figures include the structured securities in the

portfolio but do include the effect of our hedges.

Effective duration quotes for individual investments are obtained

from The Yield Book, Inc.

The following

table presents

a summary

of our portfolio

assets acquired

during the

nine months

ended September

30, 2021

and 2020.

($ in thousands)

Nine Months Ended September 30,

2021

2020

Total Cost

Average

Price

Weighted

Average

Yield

Total Cost

Average

Price

Weighted

Average

Yield

PT MBS

23,337

106.48

1.41%

43,130

111.44

1.99%

Structured MBS

2,852

10.01

0.43%

Our portfolio

of PT MBS

is typically

comprised

of adjustable-rate

MBS, fixed-rate

MBS and hybrid

adjustable-rate

MBS. We generally

seek to acquire

low duration

assets that

offer high

levels of

protection

from mortgage

prepayments

provided

that they

are reasonably

priced by

the market.

The stated

contractual

final maturity

of the mortgage

loans underlying

our portfolio

of PT MBS

generally ranges

to 30 years.

However, the

effect of prepayments

of the underlying

mortgage

loans tends

to shorten

the resulting

cash flows

from our

investments

substantially.

Prepayments

occur for

various reasons,

including

refinancing

of underlying

mortgages,

loan payoffs

connection

with home

sales, and

borrowers

paying more

than their

scheduled

loan payments,

which accelerates

the amortization

of the

loans.

The duration

of our IO

and IIO portfolio

will vary

greatly depending

on the structural

features

of the securities.

While prepayment

activity will

always affect

the cash

flows associated

with the

securities,

the interest

only nature

of IO’s may

cause their

durations

to become

extremely

negative when

prepayments

are high,

and less negative

when prepayments

are low. Prepayments

affect the

duration

of IIO’s

similarly, but the

floating rate

nature of

the coupon

of IIOs (which

is inversely

related to

the level

of one month

LIBOR) causes

their price

movements

and model

duration

to be affected

by changes

in both

prepayments

and one month

LIBOR - both

current and

anticipated

levels.

As a result,

the duration

of IIO securities

will also

vary greatly.

35 -

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

movements

in interest

rates, effective

duration

captures

both the

movement in

interest

rates and

the fact

that cash

flows to a

mortgage

related security

are altered

when interest

rates move.

Accordingly, when

the contract

interest

rate on a

mortgage

loan is substantially

above prevailing

interest

rates in

the market,

the effective

duration

of securities

collateralized

by such loans

can be quite

low because

expected prepayments.

We face

the risk that

the market

value of our

PT MBS assets

will increase

or decrease

at different

rates than

that of our

structured

MBS or liabilities,

including

our hedging

instruments.

Accordingly, we

assess our

interest

rate risk

by estimating

the duration

of our assets

and the duration

of our liabilities.

We generally

calculate

duration

and effective

duration

using various

third-party

models or

obtain these

quotes from

third parties.

However, empirical

results and

various third-party

models may

produce

different duration

numbers for

the same

securities.

The following

sensitivity

analysis

shows the

estimated

impact on

the fair

value of our

interest

rate-sensitive

investments

and hedge

positions

as of September

30, 2021,

assuming rates

instantaneously

fall 100 bps,

rise 100

bps and

rise 200

bps, adjusted

to reflect

the

impact of

convexity, which

is the

measure of

the sensitivity

of our hedge

positions

and Agency

MBS’ effective

duration

to movements

interest

rates.

($ in thousands)

Fair

$ Change in Fair Value

% Change in Fair Value

MBS Portfolio

Value

-100BPS

+100BPS

+200BPS

-100BPS

+100BPS

+200BPS

Fixed Rate MBS

61,372

2,070

(2,857)

(6,133)

3.37%

(4.66)%

(9.99)%

Interest-Only MBS

2,999

(955)

636

996

(31.84)%

21.21%

33.22%

Inverse Interest-Only MBS

(3)

(5)

6.09%

(13.97)%

(28.53)%

Total MBS

Portfolio

64,390

1,116

(2,224)

(5,142)

1.73%

(3.45)%

(7.99)%

($ in thousands)

Notional

$ Change in Fair Value

% Change in Fair Value

Amount

(1)

-100BPS

+100BPS

+200BPS

-100BPS

+100BPS

+200BPS

Eurodollar Futures Contracts

Junior Subordinated Debt Hedges

1,000

(3)

(1.00)%

1.00%

2.00%

1,000

(3)

Gross Totals

1,113

(2,221)

(5,137)

(1)

Represents

the average contract/notional

amount of Eurodollar

futures contracts.

In addition

to changes

in interest

rates, other

factors impact

the fair

value of our

interest

rate-sensitive

investments

and hedging

instruments,

such as the

shape of

the yield

curve, market

expectations

as to future

interest

rate changes

and other

market conditions.

Accordingly, in

the event

of changes

in actual

interest

rates, the

change in

the fair

value of our

assets would

likely differ

from that

shown

above and

such difference

might be

material and

adverse to

our stockholders.

Repurchase Agreements

As of September

30, 2021,

we had established

borrowing

facilities

in the repurchase

agreement

market with

a number

of commercial

banks and

other financial

institutions

and had borrowings

in place with

six of these

counterparties.

We believe

these facilities

provide

borrowing

capacity

in excess

of our needs.

None of these

lenders are

affiliated

with us.

These borrowings

are secured

by our MBS.

As of September

30, 2021,

we had obligations

outstanding

under the

repurchase

agreements

of approximately

$63.2 million

with a

36 -

net weighted

average borrowing

cost of 0.13%.

The remaining

maturity of

our outstanding

repurchase

agreement

obligations

ranged from

6 to 53 days,

with a weighted

average maturity

of 25 days.

Securing

the repurchase

agreement

obligation

as of September

30, 2021

are

MBS with

an estimated

fair value,

including

accrued interest,

of $64.6 million

and a weighted

average maturity

of 332 months.

Through

November

8, 2021,

we have been

able to maintain

our repurchase

facilities

with comparable

terms to

those that

existed at

September

30,

2021 with

maturities

through January

14, 2022.

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

repurchase agreement obligations for each

quarter in 2021 and 2020.

($ in thousands)

Ending

Maximum

Average

Difference Between Ending

Balance

Repurchase Agreements and

of Repurchase

Average Repurchase Agreements

Three Months Ended

Agreements

Amount

Percent

September 30, 2021

63,160

72,047

67,253

(4,093)

(6.09)%

June 30, 2021

71,346

72,372

72,241

(895)

(1.24)%

March 31, 2021

73,136

76,004

69,104

4,032

5.83%

December 31, 2020

65,071

70,684

67,878

(2,807)

(4.14)%

September 30, 2020

70,685

70,794

61,151

9,534

15.59%

(1)

June 30, 2020

51,617

52,068

51,987

(370)

(0.71)%

March 31, 2020

52,357

214,921

131,156

(78,799)

(60.08)%

(2)

(1)

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

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

During that quarter, the Company's investment in

PT MBS increased $20.4 million.

(2)

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

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

COVID-19 pandemic. During that quarter,

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

Liquidity and Capital Resources

Liquidity

is our ability

to turn non-cash

assets into

cash, purchase

additional

investments,

repay principal

and interest

on borrowings,

fund overhead

and fulfill

margin calls.

Our primary

immediate

sources of

liquidity

include cash

balances,

unencumbered

assets, the

availability

to borrow

under repurchase

agreements,

and fees

and dividends

received from

Orchid.

Our borrowing

capacity will

vary over

time as the

market value

of our interest

earning assets

varies.

Our investments

also generate

liquidity

on an on-going

basis through

payments of

principal

and interest

we receive

on our MBS

portfolio.

The COVID-19

pandemic has

adversely

affected our

liquidity,

assets under

management

and operating

results.

During March

2020,

we significantly

reduced our

MBS assets

to meet margin

calls and

repay debts.

As described

elsewhere

in this report,

since March

2020

Bimini’s operating

results have

stabilized,

liquidity

has improved

and our investments

in MBS and

Orchid shares

have increased

compared to

investments

in MBS and

Orchid shares

at March

31, 2020.

Our hedging

strategy

typically

involves

taking short

positions

in Eurodollar

futures,

T-Note futures,

TBAs or other

instruments.

Currently, our

hedge positions

are limited

to short positions

in Eurodollar

futures.

When the market

causes these

short positions

to decline

in value we

are required

to meet margin

calls with

cash.

This can

reduce our

liquidity

position

to the extent

other securities

in our portfolio

move in price

in such a

way that

we do not

receive enough

cash through

margin calls

to offset

the Eurodollar

related margin

calls. If this

were to

occur in sufficient

magnitude,

the loss of

liquidity

might force

us to reduce

the size of

the levered

portfolio,

pledge additional

structured

securities

to raise

funds or

risk operating

the portfolio

with less

liquidity.

Our master

repurchase

agreements

have no stated

expiration,

but can be

terminated

at any time

at our option

or at the

option of

the

counterparty. However,

once a definitive

repurchase

agreement

under a master

repurchase

agreement

has been

entered into,

it generally

may not be

terminated

by either

party.

A negotiated

termination

can occur, but

may involve

a fee to

be paid by

the party

seeking to

37 -

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

post additional

collateral.

Conversely, if

the market

value of the

asset pledged

increases

in value,

we would

be over collateralized

and we

would be

entitled to

have excess

margin returned

to us by the

counterparty.

Our lenders

typically

value our

pledged securities

daily to

ensure the

adequacy of

our margin

and make margin

calls as

needed, as

do we.

Typically, but not

always, the

parties agree

to a minimum

threshold

amount for

margin calls

so as to avoid

the need

for nuisance

margin calls

on a daily

basis.

As discussed

above, we

invest a

portion of

our capital

in structured

MBS.

We generally

do not apply

leverage

to this portion

of our

portfolio.

The leverage

inherent

in the structured

securities

replaces

the leverage

obtained

by acquiring

PT securities

and funding

them in

the repurchase

market.

This structured

MBS strategy

has been

a core element

of the Company’s

overall investment

strategy

since 2008.

However, we

have and

may continue

to pledge

a portion

of our structured

MBS in order

to raise our

cash levels,

but generally

will not

pledge these

securities

in order

to acquire

additional

assets.

In future

periods we

expect to

continue to

finance our

activities

through repurchase

agreements.

As of September

30, 2021, we

had

cash and cash

equivalents

of $7.9

million.

We generated

cash flows

of $13.4

million from

principal

and interest

payments on

our MBS

portfolio

and had average

repurchase

agreements

outstanding

of $69.5

million during

the nine

months ended

September

30, 2021.

addition,

during the

nine months

ended September

30, 2021,

we received

approximately

$6.5 million

in management

fees and

expense

reimbursements

as manager

of Orchid

and approximately

$1.5 million

in dividends

from our investment

in Orchid

common stock.

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

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

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

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

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

30, 2024. Thereafter, interest accrued

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

maturity of five years, plus 3.25%.

Net loan proceeds were approximately $651,000.

In addition, during 2020, we completed the sale of real property that

was

not used in

the Company’s business.

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

invested in our MBS portfolio.

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

of September 30, 2021 will have on

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

interest under the PPP loan.

(in thousands)

Obligations Maturing

Within One

Year

One to Three

Years

Three to Five

Years

More than

Five Years

Total

Repurchase agreements

63,160

Interest expense on repurchase agreements

(1)

Junior subordinated notes

(2)

26,000

Interest expense on junior subordinated notes

(1)

995

1,909

1,906

8,783

13,593

Principal and interest on mortgage loan

(1)

107

108

703

972

Totals

64,227

2,016

2,014

35,486

103,743

(1)

Interest expense

on repurchase

agreements,

junior subordinated

notes and mortgage

loan are based

on current

interest rates

as of September

30,

2021 and the

remaining term

of liabilities

existing at

that date.

(2)

We hold a common

equity interest

in Bimini Capital

Trust II.

The amount presented

represents our

net cash outlay.

Outlook

38 -

Orchid Island

Capital Inc.

Orchid Island Capital continued to grow its capital base in the third quarter of 2021.

Orchid raised net proceeds of approximately

$207.5 million through its “at the market” (“ATM”) program during the third quarter and an additional $38.4 million subsequent to

September 30, 2021. The capital raised subsequent to September 30, 2021,

exhausted the remaining capacity under the ATM program

in place at the time and Orchid announced a new ATM program on October 29, 2021, of $250 million.

As for Orchid’s financial

performance, Orchid recorded GAAP net income of $0.20 per share or $26.0 million

in the third quarter of 2021.

The net effect of the

new shares issued, net income and dividends paid resulted in Orchid’s capital base increasing

$176.8 million, or 32% for during the

third quarter.

Year to date Orchid has increased its capital base by approximately $315.3 million, or 76%.

As a result, Bimini Advisor’s

advisory services revenue increased 17% over the second quarter and, as the increased

capital base at Orchid was not in place for the

entire quarter, the run rate entering the fourth quarter is higher still.

Orchid’s financial performance and dividend activity will also

continue to impact the size of its capital base going forward.

Orchid is obligated to reimburse us for direct expenses paid on its behalf and to pay

to us Orchid’s pro rata share of overhead as

defined in the management agreement.

As a stockholder of Orchid, we will also continue to share in distributions, if

any, paid by

Orchid to its stockholders.

Our operating results are also impacted by changes in the market value of

our holdings of Orchid common

shares, although these market value changes do not impact our cash flows

from Orchid. The Company increased its holdings of Orchid

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

discount to Orchid’s reported book value as of

March 31, 2020.

The Company currently owns approximately 2.6 million shares of Orchid.

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

management agreement and thus end our ability to

collect management fees and share overhead costs.

Should Orchid terminate the management agreement without cause,

it will be

obligated to pay us a termination fee equal to three times the average annual management

fee, as defined in the management

agreement, before or on the last day of the current automatic renewal term.

Economic Summary

The effects

of COVID-19

continued to

dominate

economic activity

during the

third quarter

of 2021,

particularly

the Delta

variant that

first emerged

in earnest

during July.

Daily new

infections

from the

Delta variant

rose rapidly

during the

summer but

appeared

to peak in

early September

and have

been slowly

falling since.

COVID related

deaths have

followed

a similar

pattern.

Progress

on vaccinations

has

slowed, and

most of the

new cases

were among

the unvaccinated.

This has led

to various

measures

by governments

and corporations

mandate employees

receive vaccinations.

The net effect

of a spreading

virus and

a reluctance

on the part

of many to

get vaccinated

has

been subdued

job growth

during the

third quarter

of 2021.

This is particularly

true among

workers with

high exposure

to customers,

such

as those in

the leisure

and hospitality

industries.

The various

forms of

pandemic related

supplemental

unemployment

insurance

ended in

early September,

so job growth

may accelerate

in the fourth

quarter.

In the interim,

the combination

of a reluctance

to return

to work on

the part

of many individuals,

coupled with

sufficient

income via

unemployment

insurance,

has resulted

in both robust

demand for

goods

and services

and shortages

of labor

in many industries.

Coupled

with a demand/supply

imbalance

in favor of

demand for

many

commodities

and parts,

the combination

of the two

forces has

led to severe

supply shortages

across the

economy.

The supply

imbalances

for goods

and services

have in turn

led to price

pressures

for both,

driving inflation

to multi-decade

highs.

The Fed chairman,

among other

members of

the Federal

Open Market

Committee

(“FOMC”)

has maintained

these inflationary

forces are

temporary

and will

ease once

the

effects of

the COVID

pandemic fade

and workers

can return

to work.

Yet, as implied by

market pricing

of inflation

linked U.S.

Treasury

securities

and opinions

expressed

by various

market participants,

inflation

may prove

to be more

than transitory,

and of late

even FOMC

members themselves

have admitted

inflation

has remained

high longer

than they

had anticipated.

Over the course

of the third

quarter and

into the

fourth, expectations

for growth

in the U.S.

economy continued

to decline.

On October

28, 2021,

the advanced

read on gross

domestic product

growth for

the U.S.

economy was

reported to

be 2.0%.

Expectations

for growth

during the

quarter were

significantly

higher at

the beginning

of the quarter.

As noted

above, job

growth has

decelerated,

and supply

constraints

of goods

and services

are keeping

activity levels

suppressed.

Over the

course of

the balance

of the year

it should

become

39 -

apparent

whether

the supply

constraints,

especially with

respect

to labor, are

transitory

now that essentially

all forms

of pandemic

unemployment

insurance

have ended

and the new

cases of the

Delta variant

of the COVID

virus are subsiding.

This in turn

should also

answer the

question about

the

transitory

nature of

inflation.

The housing

market remains

robust as

evidenced

by sales

of new and

existing homes,

as well

as new home

construction.

However,

as home prices

have risen

at 10% –

20% over

the last year

and supply

shortages

of goods

and materials

are constraining

new home

construction,

this trend

may slow.

If this were

to occur, it would

be beneficial

for the Company’s

RMBS portfolio

as prepayments

related to

housing turnover

may decelerate.

Legislative

Response

and the

Fed

Congress

passed the

CARES Act

quickly in

response

to the pandemic’s

emergence

in the spring

of 2020

and followed

with additional

legislation

over the

ensuing months.

However, as certain

provisions

of the CARES

Act expired,

such as supplemental

unemployment

insurance

in July of

this year,

there appeared

to be a need

for additional

stimulus for

the economy

to deal with

the surge

in the pandemic

that occurred

as cold weather

set in, particularly

over the

Christmas

holiday.

As mentioned

above, the

Federal government

eventually

passed an

additional

stimulus

package in

late December

of 2020 and

again in March

of 2021.

In addition,

the Fed has

provided,

and

continues

to provide,

as much support

to the markets

and the economy

as it can

within the

constraints

of its mandate.

During the

third

quarter of

2020, the

Fed unveiled

a new monetary

policy framework

focused on

average inflation

rate targeting

that allows

the Fed Funds

rate to remain

quite low, even

if inflation

is expected

to temporarily

surpass the

2% target

level. Further,

the Fed has

indicated

that it will

look past

the presence

of very tight

labor markets,

should they

be present

at the time.

This marks

a significant

shift from

their prior

policy

framework,

which was

focused on

the unemployment

rate as a

key indicator

of impending

inflation.

Adherence

to this policy

could steepen

the U.S.

Treasury curve

as short-term

rates could

remain low

for a considerable

period but

longer-term

rates could

rise given

the Fed’s

intention

to let inflation

potentially

run above

2% in the

future as

the economy

more fully

recovers.

The response

of U.S.

Treasury rates

appeared

to follow

this pattern

precisely

during the

first quarter

of 2021,

but have

since reversed

since early

in the second

quarter

2021.

Interest

Rates

Interest

rates across

the U.S.

Treasury curve

and U.S.

dollar swap

curve were

little changed

during the

third quarter

of 2021.

The

only notable

development

within the

rates complex

was the slight

flattening

of both curves

between the

five-

and 30-year

points as

the

market anticipates

the eventual

tapering

of asset purchases

beginning

in the fourth

quarter of

2021 and

increases

to the Fed

funds rate

either the

second half

of 2022 or

early 2023.

As described

above, the

COVID virus

has dominated

economic

activity, since

March 2020,

with the

Delta variant

in particular

becoming dominant

during the

third quarter

of 2021.

However, the FOMC

and the Fed

chairman have

looked through

the effects

of the

pandemic and

see the impact

fading.

At the November

FOMC meeting,

the Fed announced

they would

commence the

tapering

of their

asset purchases

beginning

in November.

The pace

of the tapering

will be $10

billion of

treasury

securities

per month

and $5 billion

Agency MBS

per month.

The Fed stated

the pace

of tapering

could be adjusted

if economic

conditions

warranted.

The Fed indicated

that

absent an

adjustment

to the pace

of the tapering

of their

asset purchases

they would

likely complete

the tapering

by mid next

year.

At the

conclusion

of the Fed’s

September

FOMC meeting

the

Fed released

their summary

of economic

projections,

or “Dot

Plot” as

it is known.

As was the

case with

the June

FOMC Dot

Plot, the

Dot Plot

indicated FOMC

members anticipated

increasing

the Fed Funds

rate sooner

and by a larger

amount than

the market

anticipated.

Nine of the

eighteen FOMC

members,

as evidenced

by the Dot

Plot released

September, expect

the Fed to

increase the

funds rate

at least once

in 2022.

This surprised

the market,

and the market

pricing of

forward

short-term

rates quickly

adjusted

to reflect

these expectations.

As the fourth

quarter has

unfolded and

inflationary

pressures

have continued

to build,

market pricing

of forward

short-term

rates have

continued

to reflect

additional

increases

to the Fed

Funds rate.

Further, as inflation

persists at

higher levels

and continues

to challenge

the

Fed’s assertion

that it will

prove transitory,

longer maturity

rates have

moved higher

so far in

the fourth

quarter.

40 -

The Agency

RMBS Market

Performance

for the Agency

RMBS market

for the third

quarter was

a modest

0.01%, generally

in-line with

most other

asset classes.

The excess

return to

comparable

duration

U.S. Treasuries

and swaps

for the Agency

RMBS sub-index

was 0.1%

for both

for the quarter.

Within the

Agency RMBS

sector, higher

coupon fixed

rate securities

outperformed

lower coupons,

specifically

the coupon

currently

widespread

production.

Total returns for

the third

quarter for

2.0% and 2.5%

securities

were -0.4%

and 0.00%,

respectively.

For 3.0%

and

3.5% coupons

the returns

were 0.6%

and 0.5%,

respectively.

Thirty-year

and fifteen-year

securities

both returned

0.1% for

the quarter. As

mentioned

above, the

Fed announced

they will

begin to

taper their

asset purchases

in November

and, absent

an adjustment

in the pace

their tapering,

which could

occur if

economic conditions

warrant,

conclude the

$40 billion

per month

purchases

of Agency

RMBS assets

mid-2022. Given

the length

of time

the Fed has

been supporting

the Agency

RMBS market,

coupled with

banks that

are flush

with deposits

that need

to be invested,

price levels

in the Agency

RMBS market

were quite

rich prior

to this development,

especially

the coupons

the

Fed routinely

purchases,

which have

been the

2.0% and

2.5% coupons

predominantly. These

factors are

what drove

the relative

underperformance

of these

two coupons

for the quarter

and has continued

to do so

into the

fourth quarter.

The second

driver of

Agency RMBS

performance,

both for

the third

quarter of

2021 and

beyond, is,

as always,

the level

prepayments.

With interest

rates relatively

steady during

the third

quarter and,

after such

a prolonged

period of

low interest

rates

prepayment

speeds on

higher coupon,

premium priced

securities

were expected

to eventually

slow.

This appears

to be finally

happening,

as evidenced

by the August

and September

prepayment

reports,

released in

September

and October, respectively.

As interest

rates have

moved higher

so far in

the fourth

quarter these

coupons have

been impacted

further quarter

to date.

Recent Legislative

and Regulatory

Developments

The Fed conducted

large scale

overnight

repo operations

from late

2019 until

July 2020

to address

disruptions

in the U.S.

Treasury,

Agency debt

and Agency

MBS financing

markets. These

operations

ceased in

July 2020

after the

central bank

successfully

tamed volatile

funding costs

that had

threatened

to cause disruption

across the

financial

system.

The Fed has

taken a number

of other

actions to

stabilize

markets as

a result

of the impacts

of the COVID-19

pandemic.

In March of

2020, the

Fed announced

a $700 billion

asset purchase

program

to provide

liquidity

to the U.S.

Treasury and

Agency RMBS

markets. The

Fed also lowered

the Fed Funds

rate to a

range of

0.0% – 0.25%,

after having

already

lowered the

Fed Funds

rate by 50

bps earlier

in the

month. Later

that same

month the

Fed announced

a program

to acquire

U.S. Treasuries

and Agency

RMBS in

the amounts

needed to

support smooth

market functioning.

With these

purchases,

market conditions

improved substantially.

Currently, the

Fed is committed

purchasing

$80 billion

of U.S.

Treasuries and

$40 billion

of Agency

RMBS each

month. Chairman

Powell and

the Fed have

reiterated

their

commitment

to this level

of asset

purchases

at every

meeting

since their

meeting on

June 30,

However,

at the November

2021

meeting, the

Fed concluded

that substantial

further progress

towards their

dual mandate

had been

met and they

will begin

to taper

their

asset purchases

in November.

They further

stated that

the pace

of the tapering

could be adjusted

if economic

conditions

warranted,

but

otherwise

would conclude

the tapering

in mid-2022.

The Fed has

taken various

other steps

to support

certain other

fixed income

markets,

to support

mortgage

servicers

and to implement

various portions

of the Coronavirus

Aid, Relief,

and Economic

Security

(“CARES”)

Act.

The CARES

Act was passed

by Congress

and signed

into law

on March 27,

2020.

This over

$2 trillion

COVID-19

relief bill,

among

other things,

provided

for direct

payments to

each American

making up

to $75,000

a year, increased

unemployment

benefits

for up to

four

months (on

top of state

benefits),

funding to

hospitals

and health

providers,

loans and

investments

to businesses,

states and

municipalities

and grants

to the airline

industry. On April

24, 2020,

President

Trump signed

an additional

funding

bill into

law that

provided

an additional

$484 billion

of funding

to individuals,

small businesses,

hospitals,

health care

providers

and additional

coronavirus

testing efforts.

Various

provisions

of the CARES

Act began

to expire

in July 2020,

including

a moratorium

on evictions,

expanded unemployment

benefits,

and a

moratorium

on foreclosures.

On August

8, 2020,

President

Trump issued Executive

Order 13945,

directing

the Department

of Health

and

Human Services,

the Centers

for Disease

Control and

Prevention

(“CDC”),

the Department

of Housing

and Urban

Development,

and

Department

of the Treasury

to take measures

to temporarily

halt residential

evictions

and foreclosures,

including through

temporary

financial

assistance.

41 -

On December

27, 2020,

an additional

$900 billion

coronavirus

aid package

was signed

into law

as part of

the Consolidated

Appropriations

Act of 2021,

providing for

extensions

of many of

the CARES

Act policies

and programs

as well as

additional

relief.

The

package provided

for, among other

things, direct

payments to

most Americans

with a gross

income of

less than

$75,000 a

year, extension

of unemployment

benefits through

March 14,

2021, funding

for procurement

of vaccines

and health

providers,

loans to qualified

businesses,

funding for

rental assistance

and funding

for schools.

On January

29, 2021,

the CDC

issued guidance

extending

eviction

moratoriums

for covered

persons

through March

31, 2021,

which was

extended to

July 31, 2021.

On August

26, 2021,

the U.S.

Supreme

Court issued

a decision

ending the

CDC eviction

moratorium.

In addition,

on February

9, 2021,

the FHFA announced

that the foreclosure

moratorium

begun under

the CARES

Act for loans

backed by

Fannie Mae

and Freddie

Mac and

the eviction

moratorium

for real

estate

owned by

Fannie Mae

and Freddie

Mac were

extended

until March

31, 2021,

which was

further extended

through September

30, 2021.

On July 30,

2021, the

FHA announced

an extension

of the eviction

moratorium

through September

30, 2021

for foreclosed

borrowers

and

other occupants

and noted

the expiration

of the foreclosure

moratorium

on July 31,

2021.

On March 11, 2021,

the $1.9

trillion American

Rescue Plan

Act of 2021

was signed

into law.

This stimulus

program furthered

the

Federal government’s

efforts to

stabilize the

economy and

provide

assistance

to sectors

of the population

still suffering

from the

various

physical and

economic

effects of

the pandemic.

On September

30, 2019,

the FHFA announced

that Fannie

Mae and Freddie

Mac were

allowed to

increase their

capital buffers

to $25

billion and

$20 billion,

respectively,

from the

prior limit

of $3 billion

each.

On June 30,

2020, the

FHFA released

a proposed

rule on a

new

regulatory

framework

for the GSEs

which seeks

to implement

both a risk-based

capital framework

and minimum

leverage

capital

requirements.

The final

rule on the

new capital

framework

for the GSEs

was published

in the federal

December

2020.

January 14,

2021, the

U.S. Treasury

and the FHFA

executed letter

agreements

allowing

the GSEs

to continue

to retain

capital up

to their

regulatory

minimums,

including

buffers, as

prescribed

in the December

rule.

These letter

agreements

provide, in

part, (i)

there will

be no

exit from conservatorship

until all

material litigation

is settled

and the GSE

has common

equity Tier

1 capital

of at least

3% of its

assets, (ii)

the GSEs

will comply

with the

FHFA’s regulatory capital

framework,

(iii) higher-risk

single-family

mortgage

acquisitions

will be

restricted

current levels,

and (iv)

the U.S.

Treasury and

the FHFA will

establish

a timeline

and process

for future

GSE reform.

However, no definitive

proposals

or legislation

have been

released or

enacted with

respect to

ending the

conservatorship,

unwinding

the GSEs,

or materially

reducing the

roles of

the GSEs

in the U.S.

mortgage

market. On

June 23, 2021,

President

Biden removed

the director

of the FHFA

and

appointed

an acting

director. On

September

14, 2021,

the FHFA suspended

certain provisions

added to

the letter

agreements

on January

14, 2021,

including

limits on

the enterprises'

cash windows,

multifamily

lending, loans

with higher

risk characteristics,

and second

homes

and investment

properties.

The enterprises

will continue

to build

capital under

the continuing

provisions

of the letter

agreements.

Additionally, the

FHFA is reviewing

the enterprise

regulatory

capital framework

and expects

to announce

further action

in the near

future.

In 2017,

policymakers

announced

that LIBOR

will be replaced

by December

31, 2021.

The directive

was spurred

by the fact

that

banks are

uncomfortable

contributing

to the LIBOR

panel given

the shortage

of underlying

transactions

on which

to base levels

and the

liability associated

with submitting

an unfounded

level. The

ICE Benchmark

Administration,

in its capacity

as administrator

of USD LIBOR,

has confirmed

that it will

cease publication

of (i) the

one-week and

two-month

USD LIBOR

settings immediately

following

the LIBOR

publication

on December

31, 2021,

and (ii) the

overnight

and one,

three, six

and 12-month

USD LIBOR

settings immediately

following

the

LIBOR publication

on June 30,

A joint

statement

by key regulatory

authorities

calls on banks

to cease

entering

into new

contracts

that use USD

LIBOR as a

reference

rate by no

later than

December

31, 2021.

The Alternative

Reference

Rates Committee,

a steering

committee

comprised

of large

U.S. financial

institutions,

has proposed

replacing

USD-LIBOR

with a new

SOFR, a rate

based on U.S.

repo

trading.

Many banks

believe that

it may take

four to five

years to

complete the

transition

to SOFR,

for certain,

despite the

2021 deadline.

We will monitor

the emergence

of this new

rate carefully

as it will

potentially

become the

new benchmark

for hedges

and a range

interest rate

investments.

At this time,

however, no consensus

exists as

to what rate

or rates

may become

accepted alternatives

to LIBOR.

Effective January

1, 2021,

Fannie Mae,

in alignment

with Freddie

Mac, will

extend the

timeframe

for its delinquent

loan buyout

policy

for Single-Family

Uniform Mortgage-Backed

Securities

(UMBS) and

Mortgage-Backed

Securities

(MBS) from

four consecutively

missed

monthly payments

to twenty-four

consecutively

missed monthly

payments (i.e.,

24 months

past due).

This new

timeframe

will apply

42 -

outstanding

single-family

pools and

newly issued

single-family

pools and

was first

reflected

when January

2021 factors

were released

the fourth

business day

in February

2021.

For Agency

RMBS investors,

when a delinquent

loan is bought

out of a

pool of mortgage

loans, the

removal of

the loan

from the

pool

is the same

as a total

prepayment

of the loan.

The respective

GSEs currently

anticipate,

however, that

delinquent

loans will

repurchased

in most cases

before the

24-month deadline

under one

of the following

exceptions

listed below.

•

a loan that

is paid in

full, or

where the

related lien

is released

and/or the

note debt

is satisfied

or forgiven;

•

a loan repurchased

by a seller/servicer

under applicable

selling

and servicing

requirements;

•

a loan entering

a permanent

modification,

which generally

requires

it to be

removed from

the MBS.

During any

modification

trial

period, the

loan will

remain in

the MBS until

the trial

period ends;

•

a loan subject

to a short

sale or deed-in-lieu

of foreclosure;

•

a loan referred

to foreclosure.

Because of

these exceptions,

the GSEs

currently

believe based

on prevailing

assumptions

and market

conditions

this change

will

have only

a marginal

impact on

prepayment

speeds, in

aggregate.

Cohort level

impacts may

vary. For example,

more than

half of loans

referred

to foreclosure

are historically

referred

within six

months of

delinquency. The

degree to

which speeds

are affected

depends on

delinquency

levels, borrower

response, and

referral

to foreclosure

timelines.

The scope

and nature

of the actions

the U.S.

government

or the Fed

will ultimately

undertake

are unknown

and will

continue to

evolve, especially

in light of

the COVID-19

pandemic,

President Biden’s

new administration

and the new

Congress

in the United

States.

Effect on Us

Regulatory

developments,

movements

in interest

rates and

prepayment

rates affect

us in many

ways, including

the following:

Effects on

our Assets

A change

in or elimination

of the guarantee

structure

of Agency

RMBS may

increase our

costs (if,

for example,

guarantee

fees

increase)

or require

us to change

our investment

strategy

altogether.

For example,

the elimination

of the guarantee

structure

of Agency

RMBS may

cause us to

change our

investment

strategy

to focus

on non-Agency

RMBS, which

in turn would

require us

to significantly

increase our

monitoring

of the credit

risks of our

investments

in addition

to interest

rate and

prepayment

risks.

Lower long-term

interest

rates can affect

the value

of our Agency

RMBS in

a number

of ways. If

prepayment

rates are

relatively

low

(due, in

part, to

the refinancing

problems described

above), lower

long-term

interest

rates can

increase the

value of higher-coupon

Agency

RMBS. This

is because

investors

typically place

a premium

on assets

with yields

that are

higher than

market yields.

Although

lower long-

term interest

rates may

increase

asset values

in our portfolio,

we may not

be able to

invest new

funds in similarly-yielding

assets.

If prepayment

levels increase,

the value

of our Agency

RMBS affected

by such prepayments

may decline.

This is because

a principal

prepayment

accelerates

the effective

term of an

Agency RMBS,

which would

shorten the

period during

which an

investor would

receive

above-market

returns (assuming

the yield

on the prepaid

asset is

higher than

market yields).

Also, prepayment

proceeds

may not

be able

to be reinvested

in similar-yielding

assets. Agency

RMBS backed

by mortgages

with high

interest

rates are

more susceptible

prepayment

risk because

holders

of those mortgages

are most

likely to

refinance

to a lower

rate. IOs

and IIOs,

however, may

be the types

of Agency

RMBS most

sensitive

to increased

prepayment

rates. Because

the holder

of an IO

or IIO receives

no principal

payments,

the

values of

IOs and IIOs

are entirely

dependent

on the existence

of a principal

balance on

the underlying

mortgages.

If the principal

balance

is eliminated

due to prepayment,

IOs and IIOs

essentially

become worthless.

Although

increased

prepayment

rates can

negatively

affect

the value

of our IOs

and IIOs,

they have

the opposite

effect on

POs. Because

POs act like

zero-coupon

bonds, meaning

they are

purchased

at a discount

to their

par value

and have

an effective

interest rate

based on

the discount

and the term

of the underlying

loan, an

43 -

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

the Company

uses to hedge

our Agency

RMBS assets,

such as interest

rate futures,

swaps and

swaptions,

are stable

average

life instruments.

This means

that to the

extent we

use such instruments

to hedge

our Agency

RMBS assets,

our hedges

may not

adequately

protect us

from price

declines,

and therefore

may negatively

impact our

book value.

It is for

this reason

we use interest

only

securities

in our portfolio.

As interest

rates rise,

the expected

average life

of these

securities

increases,

causing generally

positive

price

movements

as the number

and size

of the cash

flows increase

the longer

the underlying

mortgages

remain outstanding.

This makes

interest only

securities

desirable

hedge instruments

for pass-through

Agency RMBS.

As described

above, the

Agency RMBS

market began

to experience

severe dislocations

in mid-March

2020 as a

result of

the

economic,

health and

market

turmoil

brought about

by COVID-19.

In March of

2020, the

Fed announced

that it would

purchase

Agency

RMBS and

U.S. Treasuries

in the amounts

needed to

support smooth

market functioning,

which largely

stabilized

the Agency

RMBS

market, a

commitment

it reaffirmed

at all subsequent

Fed meetings.

At the November

2021 meeting,

the Fed concluded

that the

economy

had progressed

to the point

that they

could begin

the process

of tapering

their asset

purchases.

Beginning

in November,

the Fed will

reduce their

purchases of

treasury

securities

by $10 billion

per month

and their

purchases

of Agency

MBS by $5

billion per

month.

At this

rate they

will completely

eliminate

the current

level of purchases

by mid-2022

although

the Fed

did state

that if economic

conditions

warranted,

they could

alter the

pace of the

tapering

accordingly.

The reduction

of the Fed’s

purchases

of Agency

RMBS could

negatively

impact our

investment

portfolio.

Further, the

moratoriums

on foreclosures

described

above will

likely delay

potential

defaults on

loans that

would otherwise

be bought

out of Agency

MBS pools

as described

above.

Depending

on the ultimate

resolution

of the foreclosures,

when

and if it

occurs, these

loans may

be removed

from the

pool into

which they

were securitized.

If this were

to occur, it would

have the effect

of delaying

a prepayment

on the Company’s

securities

until such

time. As

the majority

of the Company’s

Agency RMBS

assets were

acquired at

a premium

to par, this will

tend to increase

the realized

yield on the

asset in question.

Because we

base our

investment

decisions on

risk management

principles

rather than

anticipated

movements

in interest

rates, in

volatile interest

rate environment

we may allocate

more capital

to structured

Agency RMBS

with shorter

durations.

We believe

these

securities

have a lower

sensitivity

to changes

in long-term

interest

rates than

other asset

classes.

We may attempt

to mitigate

our

exposure to

changes in

long-term

interest rates

by investing

in IOs and

IIOs, which

typically

have different

sensitivities

to changes

in long-

term interest

rates than

PT RMBS,

particularly

PT RMBS backed

by fixed-rate

mortgages.

Effects on

our borrowing

costs

We leverage

our PT RMBS

portfolio and

a portion

of our structured

Agency RMBS

with principal

balances through

the use of

short-

term repurchase

agreement

transactions.

The interest

rates on

our debt

are determined

by the short

term interest

rate markets.

increase in

the Fed Funds

rate or LIBOR

would increase

our borrowing

costs, which

could affect

our interest

rate spread

if there

is no

corresponding

increase in

the interest

we earn on

our assets.

This would

be most prevalent

with respect

to our Agency

RMBS backed

fixed rate

mortgage

loans because

the interest

rate on a

fixed-rate

mortgage

loan does

not change

even though

market rates

may change.

In order

to protect

our net interest

margin against

increases

in short-term

interest

rates, we

may enter into

interest

rate swaps,

which

economically

convert our

floating-rate

repurchase

agreement

debt to fixed-rate

debt, or

utilize other

hedging instruments

such as

Eurodollar, Fed

Funds and

T-Note futures

contracts

or interest

rate swaptions.

Summary

44 -

Once again

COVID-19

dominated

economic activity

this quarter.

However, we may

be at a crossroads

as the effects

of the Delta

variant appear

to be waning

and the number

of people

with either

a vaccination

and/or prior

infections

of the virus

grow.

Pandemic

relief measures

such as supplemental

unemployment

insurance

payments and

foreclosure

moratoriums

have lapsed.

Hopefully

the

combination

of all of

these factors

will lead

to surging

job growth

and act to

quickly lessen

the severe

supply shortage

of goods

and labor.

This in turn

should slow

the stubbornly

high inflation

the economy

has suffered.

If these

events come

to pass, the

economy appears

to be

positioned

to perform

very well.

The Fed views

this outcome

as likely

and will

commence

a tapering

of their

asset purchases

in November

as they slowly

remove the

considerable

accommodation

they have

provided the

market since

the onset

of the pandemic.

Conversely, if

these events

do not unfold

and the

supply shortages

of goods

and labor

remain, the

economy will

likely continue

to suffer from

elevated

levels of

inflation.

Under this

scenario

the path

of economic

growth

is less certain,

and the path

of monetary

policy could

prove to

be quite

challenging

for the Fed.

The performance

of the Agency

RMBS market

was very

modest in

absolute returns,

at 0.0% and

0.1% versus

comparable

duration

interest rates

and swaps.

Performance

for the sector

was generally

in line with

other sectors

of the fixed

income markets.

Within the

Agency RMBS

universe,

performance

was skewed

towards higher

coupons and

away from

lower coupons

that comprise

the bulk of

recent

production

and Fed purchases.

This has continued

into the

fourth quarter,

in large

part because

at the November

FOMC meeting

the Fed

stated they

will begin

to taper

their asset

purchases

and likely

conclude the

process in

mid-2022.

Prepayment

speeds, particularly

on high

coupon securities,

have moderated

and are likely

to do so

even more

with rates

higher so

far in the

fourth quarter

and the typical

seasonal

slow down

as we approach

the winter

months.

Critical Accounting Estimates

Our consolidated

financial

statements

are prepared

in accordance

with GAAP.

GAAP requires

our management

to make some

complex and

subjective

decisions

and assessments.

Our most

critical accounting

policies involve

decisions

and assessments

which could

significantly

affect reported

assets,

liabilities,

revenues

and expenses,

and these

decisions

and assessments

can change

significantly

each reporting

period.

There have

been no changes

to the processes

used to determine

our critical

accounting

estimates

as discussed

our annual

report on

Form 10-K

for the year

ended December

31, 2020.

Capital Expenditures

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

Off-Balance Sheet Arrangements

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

Inflation

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

interest rates and other factors influence

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

necessarily correlate with inflation rates or changes in

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

cost and/or fair market value without

considering inflation.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET

RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

45 -

As of the end of the period covered by this report (the “evaluation date”), we

carried out an evaluation, under the supervision and

with the participation of our management, including our Chief Executive Officer (the “CEO”)

and Chief Financial Officer (the “CFO”), of

the effectiveness of the design and operation of our disclosure controls and procedures,

as defined in Rule 13a-15(e) under the

Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation,

the CEO and CFO concluded our disclosure controls

and procedures, as designed and implemented, were effective as of the evaluation date (1)

in ensuring that information regarding the

Company and its subsidiaries is accumulated and communicated to our management,

including our CEO and CFO, by our employees,

as appropriate to allow timely decisions regarding required disclosure and (2)

in providing reasonable assurance that information we

must disclose in our periodic reports under the Exchange Act is recorded,

processed, summarized and reported within the time periods

prescribed by the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

There were no material changes in the Company’s internal control over financial reporting

that occurred during the Company’s

most recent fiscal quarter that have materially affected, or are reasonably likely

to materially affect, the Company’s internal control over

financial reporting.

46 -

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

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

the amount of $33.1 million related to the

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

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

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

operations ceased in 2007.

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

in the

related MLPA’s.

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

against the demand vigorously.

provision or accrual has been recorded as of September 30, 2021 related to the Citigroup

demand.

We are not party to any other material pending legal proceedings as described

in Item 103 of Regulation S-K.

ITEM 1A.

RISK FACTORS.

There have

been no material

changes to the

risk factors

disclosed

in our Annual

Report on Form

10-K for the

year ended

December 31,

2020, filed

with the SEC

on March 15,

2021.

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

In July 2021,

the Company

completed

a “modified

Dutch auction”

tender offer

and paid an

aggregate of

$1.6 million,

including fees

and related

expenses,

to repurchase

812,879 shares

of Bimini

Capital’s Class

A common stock

at a price

$1.93 per share.

The tender

offer was announced

on May 27,

2021.

On March 26,

2018, the Board

of Directors

of the Company

(the “Board”)

approved a Stock

Repurchase

Plan (the

“2018

Repurchase

Plan”).

Pursuant to

the 2018 Repurchase

Plan, the

Company could

purchase up

to 500,000

shares of

its Class

Common Stock

from time

to time, subject

to certain

limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

1934.

The 2018 Repurchase

Plan was terminated

on September

16, 2021.

On September

16, 2021, the

Board authorized

a share repurchase

plan pursuant

to Rule 10b5-1

of the Securities

Exchange Act

of 1934 (the

“2021 Repurchase

Plan”). Pursuant

to the 2021

Repurchase

Plan, the Company

may purchase

shares of its

Class A Common

Stock from

time to time

for an aggregate

purchase price

not to exceed

$2.5 million.

The table below

presents the

Company’s share

repurchase activity

for the three

months ended

September 30,

2021.

Shares Purchased

Maximum Number

Total Number

Weighted-Average

as Part of Publicly

of Shares or Approximate

Dollar Amount of Shares

That May Yet be

of Shares

Price Paid

Announced

Repurchased Under

Repurchased

Per Share

Programs

the Authorization

July 1, 2021 - July 31, 2021

812,879

1.93

429,596

August 1, 2021 - August 31, 2021

429,596

September 1, 2021 - September 30, 2021

1,195

1.92

1,195

2,500,000

Totals / Weighted Average

814,074

1.93

1,195

2,500,000

The Company

did not have

any unregistered

sales of its

equity securities

during the

three months

ended September

30,

2021.

ITEM 3.

DEFAULTS

UPON SENIOR SECURITIES

None.

47 -

ITEM 4.

MINE SAFETY

DISCLOSURES.

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No

3.1

Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s

Form S-11/A, filed with the SEC on April 29, 2004

3.2

Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on

Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005

3.3

Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on

Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006

3.4

Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on

Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007

3.5

Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current

Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007

31.1

Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities

Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*

31.2

Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities

Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002*

32.1

Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes Oxley Act of 2002**

32.2

Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes Oxley Act of 2002**

101.INS

Instance Document***

101.SCH

Taxonomy Extension Schema

Document***

101.CAL

Taxonomy Extension Calculation

Linkbase Document***

101.DEF

Additional

Taxonomy Extension Definition

Linkbase Document***

101.LAB

Taxonomy Extension Label

Linkbase Document***

101.PRE

Taxonomy Extension Presentation

Linkbase Document***

Filed herewith.

Furnished

herewith

***

Submitted electronically herewith.

48 -

Signatures

Pursuant to the requirements

of Section 13 or 15(d)

of the Securities Exchange

Act of 1934, as amended,

the registrant has duly

caused

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

BIMINI CAPITAL MANAGEMENT,

INC.

Date:

November 9, 2021

By:

/s/ Robert E. Cauley

Robert E. Cauley

Chairman and Chief Executive Officer

Date:

November 9, 2021

By:

/s/ G. Hunter Haas, IV

G. Hunter Haas,

President, Chief Financial Officer, Chief

Investment Officer and Treasurer (Principal

Financial Officer and Principal Accounting Officer)

Exhibit 31.1

CERTIFICATIONS

I, Robert E. Cauley, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q of Bimini Capital<br> Management, Inc. (the "registrant");
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a<br> material fact or omit to state a material fact necessary to make the<br> statements made, in light of the circumstances under which such statements<br> were made, not misleading with respect to the period covered by this report;
---	---
3.	Based<br> on my knowledge, the financial statements, and other financial information<br> included in this report, fairly present in all material respects the<br> financial condition, results of operations and cash flows of the registrant<br> as of, and for, the periods presented in this report;
---	---
4.	The<br> registrant's other certifying officer and I are responsible for establishing<br> and maintaining disclosure controls and procedures (as defined in Exchange<br> Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial<br> reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the<br> registrant and have:
---	---
a)	designed<br> such disclosure controls and procedures, or caused such disclosure controls<br> and procedures to be designed under our supervision, to ensure that material<br> information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities,<br> particularly during the period in which this report is being prepared;
---	---
b)	designed<br> such internal control over financial reporting, or caused such internal<br> control over financial reporting to be designed under our supervision, to<br> provide reasonable assurance regarding the reliability of financial reporting<br> and the preparation of financial statements for external purposes in<br> accordance with generally accepted accounting principles;
---	---
c)	evaluated<br> the effectiveness of the registrant's disclosure controls and procedures and<br> presented in this report our conclusions about the effectiveness of the<br> disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
---	---
d)	disclosed<br> in this report any change in the registrant’s internal control over financial<br> reporting that occurred during the registrant’s most recent fiscal quarter<br> (the registrant’s fourth fiscal quarter in the case of an annual report) that<br> has materially affected, or is reasonably likely to materially affect, the<br> registrant’s internal control over financial reporting; and
---	---
5.	The<br> registrant's other certifying officer and I have disclosed, based on our most<br> recent evaluation of internal control over financial reporting, to the<br> registrant's auditors and the audit committee of the registrant's board of<br> directors (or persons performing equivalent functions):
---	---
a)	all<br> significant deficiencies and material weakness in the design or operation of<br> internal control over financial reporting which are reasonably likely to<br> adversely affect the registrant's ability to record, process, summarize and<br> report financial information; and
---	---
b)	any<br> fraud, whether or not material, that involves management or other employees<br> who have a significant role in the registrant's internal control over<br> financial reporting.
---	---
Date:<br> November 9, 2021
---
/s/<br> Robert E. Cauley
Robert<br> E. Cauley
Chairman<br> of the Board and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, G. Hunter Haas, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q of Bimini Capital<br> Management, Inc. (the "registrant");
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a<br> material fact or omit to state a material fact necessary to make the<br> statements made, in light of the circumstances under which such statements<br> were made, not misleading with respect to the period covered by this report;
---	---
3.	Based<br> on my knowledge, the financial statements, and other financial information<br> included in this report, fairly present in all material respects the<br> financial condition, results of operations and cash flows of the registrant<br> as of, and for, the periods presented in this report;
---	---
4.	The<br> registrant's other certifying officer and I are responsible for establishing<br> and maintaining disclosure controls and procedures (as defined in Exchange<br> Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial<br> reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the<br> registrant and have:
---	---
a)	designed<br> such disclosure controls and procedures, or caused such disclosure controls<br> and procedures to be designed under our supervision, to ensure that material<br> information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities,<br> particularly during the period in which this report is being prepared;
---	---
b)	designed<br> such internal control over financial reporting, or caused such internal<br> control over financial reporting to be designed under our supervision, to<br> provide reasonable assurance regarding the reliability of financial reporting<br> and the preparation of financial statements for external purposes in<br> accordance with generally accepted accounting principles;
---	---
c)	evaluated<br> the effectiveness of the registrant's disclosure controls and procedures and<br> presented in this report our conclusions about the effectiveness of the<br> disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
---	---
d)	disclosed<br> in this report any change in the registrant’s internal control over financial<br> reporting that occurred during the registrant’s most recent fiscal quarter<br> (the registrant’s fourth fiscal quarter in the case of an annual report) that<br> has materially affected, or is reasonably likely to materially affect, the<br> registrant’s internal control over financial reporting; and
---	---
5.	The<br> registrant's other certifying officer and I have disclosed, based on our most<br> recent evaluation of internal control over financial reporting, to the<br> registrant's auditors and the audit committee of the registrant's board of<br> directors (or persons performing equivalent functions):
---	---
a)	all<br> significant deficiencies and material weakness in the design or operation of<br> internal control over financial reporting which are reasonably likely to<br> adversely affect the registrant's ability to record, process, summarize and<br> report financial information; and
---	---
b)	any<br> fraud, whether or not material, that involves management or other employees<br> who have a significant role in the registrant's internal control over<br> financial reporting.
---	---
Date:<br> November 9, 2021
---
/s/<br> G. Hunter Haas, IV
G.<br> Hunter Haas, IV
President<br> and Chief Financial Officer

Exhibit 32.1

CERTIFICATION

PURSUANT TOSECTION 906 OF THE

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

I, Robert E. Cauley, in compliance 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Report”) filed with the Securities and Exchange Commission:

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

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

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

November<br> 9, 2021	/s/<br> Robert E.Cauley
	Robert<br> E. Cauley,<br><br> <br>Chairman<br> of the Board and<br><br> <br>Chief<br> Executive Officer

Exhibit 32.2

CERTIFICATION

PURSUANT TOSECTION 906 OF THE

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

I, G. Hunter Haas, in compliance 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Report”) filed with the Securities and Exchange Commission:

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

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

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

November<br> 9, 2021	/s/<br> G. Hunter Haas, IV
	G.<br> Hunter Haas, IV<br><br> <br>President<br> and Chief Financial Officer