BIMINI CAPITAL MANAGEMENT, INC. - Quarter Report: 2021 March (Form 10-Q)

bmnm10q20210331

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

March 31, 2021

☐

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________

to ___________

Commission File Number

001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)

Maryland

72-1571637

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3305 Flamingo Drive

Vero Beach

Florida

32963

(Address of principal executive offices) (Zip Code)

(

772

)

231-1400

(Registrant’s telephone number, including area code)

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

Indicate by check

mark whether the

registrant (1) has filed

all reports required

to be filed

by Section 13 or

15(d) of the

Securities Exchange Act

1934 during the preceding 12 months (or for such shorter

period that the registrant was required to file such reports),

and (2) has been subject to such

filing requirements for the past 90 days.

Yes

☐

Indicate by check mark whether

the registrant has submitted electronically

every Interactive Data File required

to be submitted pursuant to

Rule 405

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

(or for such shorter period that the registrant was required

to submit such

files).

Yes

☐

Indicate by check mark whether the registrant is a

large accelerated filer, an accelerated filer,

a non-accelerated filer, a smaller reporting

company, or

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☒

Emerging growth company

☐

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

any

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

☐

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

Yes

☐

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

Title of each Class

Latest Practicable Date

Shares Outstanding

Class A Common Stock, $0.001 par value

May 14, 2021

11,608,555

Class B Common Stock, $0.001 par value

May 14, 2021

31,938

Class C Common Stock, $0.001 par value

May 14, 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

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

- 1 -

PART I. FINANCIAL

INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED BALANCE

SHEETS

(Unaudited)

March 31, 2021

December 31, 2020

ASSETS:

Mortgage-backed securities, at fair value

Pledged to counterparties

72,833,006

65,153,274

Unpledged

22,826

24,957

Total mortgage

-backed securities

72,855,832

65,178,231

Cash and cash equivalents

5,973,247

7,558,342

Restricted cash

4,037,655

3,353,015

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

15,598,096

13,547,764

Accrued interest receivable

212,051

202,192

Property and equipment, net

2,076,127

2,093,440

Deferred tax assets

34,204,364

34,668,467

Due from affiliates

711,657

632,471

Other assets

1,564,005

1,466,647

Total Assets

137,233,034

128,700,569

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Repurchase agreements

73,135,999

65,071,113

Long-term debt

27,607,361

27,612,781

Accrued interest payable

91,841

107,417

Other liabilities

619,554

1,421,409

Total Liabilities

101,454,755

94,212,720

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:

Preferred stock, $

0.001

par value;

10,000,000

shares authorized;

100,000

designated Series A Junior Preferred Stock,

9,900,000

shares undesignated;

no shares issued and outstanding as of March 31, 2021 and December

31, 2020

Class A Common stock, $

0.001

par value;

98,000,000

shares designated:

11,608,555

shares issued and outstanding as of March 31, 2021 and December 31, 2020

11,609

Class B Common stock, $

0.001

par value;

1,000,000

shares designated,

31,938

issued and outstanding as of March 31, 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 March 31, 2021 and December 31, 2020

Additional paid-in capital

332,642,758

Accumulated deficit

(296,876,152)

(298,166,582)

Stockholders’ Equity

35,778,279

34,487,849

Total Liabilities

and Stockholders' Equity

137,233,034

128,700,569

See Notes to Condensed Consolidated Financial Statements

- 2 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

(Unaudited)

For the three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

2021

2020

Revenues:

Advisory services

2,025,409

1,724,597

Interest income

610,618

2,039,994

Dividend income from Orchid Island Capital, Inc. common stock

506,095

364,809

Total revenues

3,142,122

4,129,400

Interest expense

Repurchase agreements

(39,858)

(927,816)

Long-term debt

(249,548)

(349,501)

Net revenues

2,852,716

2,852,083

Other income (expense):

Unrealized losses on mortgage-backed securities

(1,392,261)

(574,281)

Realized losses on mortgage-backed securities

(5,804,656)

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

2,050,332

(4,408,105)

Gains (losses) on derivative instruments

243

(5,290,731)

Other income

324

Total other income (expense)

658,400

(16,077,449)

Expenses:

Compensation and related benefits

1,123,530

1,100,044

Directors' fees and liability insurance

188,020

164,581

Audit, legal and other professional fees

137,168

159,293

Administrative and other expenses

307,865

282,039

Total expenses

1,756,583

1,705,957

Net income (loss) before income tax provision

1,754,533

(14,931,323)

Income tax provision

464,103

7,401,624

Net income (loss)

1,290,430

(22,332,947)

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

CLASS A COMMON STOCK

Basic and Diluted

0.11

(1.92)

CLASS B COMMON STOCK

Basic and Diluted

0.11

(1.92)

Weighted Average Shares Outstanding:

CLASS A COMMON STOCK

Basic and Diluted

11,608,555

CLASS B COMMON STOCK

Basic and Diluted

31,938

See Notes to Condensed Consolidated Financial Statements

- 3 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

(Unaudited)

For the three Months Ended March 31, 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

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

See Notes to Condensed Consolidated Financial Statements

- 4 -

BIMINI CAPITAL MANAGEMENT,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

For the Three Months Ended March 31, 2021 and 2020

2021

2020

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss)

1,290,430

(22,332,947)

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

(used in) operating activities:

Depreciation

17,313

17,598

Deferred income tax provision

464,103

7,400,852

Losses on mortgage-backed securities, net

1,392,261

6,378,937

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

(2,050,332)

4,408,105

Realized and unrealized losses on forward settling TBA securities

1,441,406

Changes in operating assets and liabilities:

Accrued interest receivable

(9,859)

527,542

Due from affiliates

(79,186)

101,800

Other assets

(97,358)

(126,771)

Accrued interest payable

(15,576)

(535,734)

Other liabilities

(801,855)

(849,083)

NET CASH PROVIDED BY (USED IN) OPERATING

ACTIVITIES

109,941

(3,568,295)

CASH FLOWS FROM INVESTING ACTIVITIES:

From mortgage-backed securities investments:

Purchases

(12,367,589)

(20,823,373)

Sales

171,155,249

Principal repayments

3,297,727

6,687,740

Net settlement of forward settling TBA contracts

(1,500,000)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

(9,069,862)

155,519,616

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from repurchase agreements

74,799,000

361,393,397

Principal repayments on repurchase agreements

(66,734,114)

(518,990,000)

Principal repayments on long-term debt

(5,420)

(5,077)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

8,059,466

(157,601,680)

NET DECREASE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

(900,455)

(5,650,359)

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

10,010,902

6,734,758

SUPPLEMENTAL DISCLOSURES OF CASH

FLOW INFORMATION:

Cash paid (received) during the period for:

Interest expense

304,982

1,813,051

Income taxes

13,465

See Notes to Condensed Consolidated Financial Statements

- 5 -

BIMINI CAPITAL

MANAGEMENT, INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL

STATEMENTS

(Unaudited)

March 31,

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,

for its own benefit. Royal

Palm Capital, LLC and its wholly-owned subsidiaries are collectively referred to as "Royal

Palm."

COVID-19

Impact

Beginning

in mid-March

2020, the

global pandemic

associated

with the novel

coronavirus

(“COVID-19”)

and related

economic

conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought

about by COVID-19,

the MBS market

experienced

severe dislocations.

This resulted

in falling

prices of our

assets and

increased

margin

calls from

our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial

condition.

The MBS market

largely stabilized

after the

Federal Reserve

announced

on March 23,

2020 that

it would purchase

MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning.

As of March

31, 2020,

and at all

times since

then, we

have timely

satisfied all

margin calls.

The MBS

market continues

to react to

the pandemic

and the various

measures put

in place to

stabilize

the

market. To the extent

the financial

or mortgage

markets do

not respond

favorably to

any of these

actions, or

such actions

do not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely affected.

Although

the

Company cannot

estimate the

length or

gravity of

the impact

of the COVID-19

pandemic at

this time, if

the pandemic

continues,

it may

continue to

have materially

adverse effects

on the Company’s

results of

future operations,

financial position,

and liquidity

during 2021.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini

Capital, Bimini Advisors and Royal Palm.

All

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

financial statements.

Variable Interest Entities (“VIEs”)

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

primary beneficiary of the VIE. Bimini Capital

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

Capital's junior subordinated notes. See Note

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

- 6 -

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 three-month period ended March 31, 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

March 31,

2021 and

December 31,

2020.

March 31, 2021

December 31, 2020

Cash and cash equivalents

5,973,247

7,558,342

Restricted cash

4,037,655

3,353,015

Total cash, cash equivalents

and restricted cash

10,010,902

10,911,357

- 7 -

The Company

maintains cash

balances at

several banks

and excess

margin with

an exchange

clearing member.

At times,

balances

may exceed

federally insured

limits. The

Company has

not experienced

any losses

related to

these balances.

The Federal

Deposit

Insurance

Corporation

insures eligible

accounts up

to $250,000

per depositor

at each financial

institution.

Restricted

cash balances

are

uninsured,

but are held

in separate

accounts that

are segregated

from the general

funds of the

counterparty.

The Company

limits

uninsured

balances to

only large,

well-known

banks

and exchange

clearing members

and believes

that it is

not exposed

to significant

credit risk

on cash and

cash equivalents

or restricted

cash balances.

Advisory Services

Orchid is externally

managed and

advised by

Bimini Advisors

pursuant to

the terms

of a management

agreement.

Under the terms

the management

agreement,

Orchid is

obligated to

pay Bimini

Advisors a

monthly management

fee and a

pro rata portion

of certain

overhead costs

and to reimburse

the Company

for any direct

expenses incurred

on its behalf.

Revenues from

management

fees are

recognized

over the period

of time in

which the

service is

performed.

Mortgage-Backed

Securities

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

certificates issued by Freddie Mac, Fannie Mae

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

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

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

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

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

its investment in MBS under the fair

value option.

Electing the fair value option requires the Company to record changes in

fair value in the consolidated statement of

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

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

The Company records MBS transactions on the trade date.

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

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

that have not settled as of the balance

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

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

the liability in an orderly transaction

between market participants at the measurement date.

The fair value measurement assumes that the transaction to sell

the asset or

transfer the liability either occurs in the principal market for the asset or liability, or in the absence of a principal market, occurs in

the

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

third-party broker quotes, when available.

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

are

not amortized.

Premium lost and discount accretion resulting from monthly principal repayments

are reflected in unrealized gains and

losses on MBS in the consolidated statements of operations.

For IO securities,

the income

is accrued

based on the

carrying value

and

the effective

yield. The

difference

between income

accrued and

the interest

received on

the security

is characterized

as a return

investment

and serves

to reduce

the asset’s

carrying value.

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

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

terms of the security.

For IIO securities, effective

yield and income recognition calculations also take into account the index

value applicable to the security.

Changes in fair value of

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

gains or losses on mortgage-backed securities

in the accompanying consolidated statements of operations.

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

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

developments and any

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

Orchid Island Capital, Inc. Common Stock

- 8 -

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 March 31, 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

- 9 -

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

life of 3 years, office furniture and equipment with

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

improvements with depreciable lives of 30

years.

Property and equipment is recorded at acquisition cost and depreciated

using the straight-line method over the estimated useful

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

in the consolidated statement of operations.

Repurchase

Agreements

The Company

finances the

acquisition

of the majority

of its PT

MBS through

the use of

repurchase

agreements

under master

repurchase

agreements.

Repurchase

agreements

are accounted

for as collateralized

financing

transactions,

which are

carried at

their

contractual

amounts, including

accrued interest,

as specified

in the respective

agreements.

Earnings

Per Share

Basic EPS is calculated as income available to common stockholders divided

by the weighted average number of common shares

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

method, as applicable for common stock

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

Outstanding shares of Class B Common Stock, participating and convertible into Class

A Common Stock, are entitled to receive

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

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

two-class method and, consequently, are presented

separately from Class A Common Stock.

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

as these shares do not have participation

rights. The outstanding shares of Class B and Class C Common Stock are not

included in the computation of diluted EPS for the Class

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

Stock were not met.

Income Taxes

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

liabilities represent the differences

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

tax rates. The measurement of net

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

is more likely than not that they will

not be realized.

The Company’s U.S. federal income tax returns for years ended on or after December 31, 2017 remain

open for examination.

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

taken thereon are reasonable, the final

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

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

and

its includable subsidiaries, file as separate tax paying entities.

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

tax positions will be sustained upon

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

end of each period.

The measurement of uncertain tax

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

that requires a change. The Company recognizes tax

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

not that the position will be sustained upon

examination by the relevant taxing authority based on the technical merits of the position.

A position that meets this standard is

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

settlement. The difference between the benefit

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

tax benefit and is recorded as a liability in the

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

if applicable, within the income tax

provision.

- 10 -

Recent Accounting

Pronouncements

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial

Instruments – Credit Losses (Topic

326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires credit

losses on most financial assets to be

measured at amortized cost and certain other instruments to be measured using an expected

credit loss model (referred to as the

current expected credit loss model). The Company’s adoption of this ASU did not have a material impact

on its consolidated financial

statements as its financial assets were already measured at fair value through earnings.

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

Facilitation of the Effects of Reference Rate

Reform on Financial Reporting

.”

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

modifications

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

transition from the London Interbank

Offered Rate (“LIBOR,”),

and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU

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

be an event that does not require contract

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

determination. The guidance in ASU 2020-04 is

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

rate reform activities occur. The Company does not

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

statements.

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

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

aspects of the contract modification and

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

addition, ASU 2021-01 adds

implementation guidance to permit a company to apply certain optional expedients

to modifications of interest rate indexes used for

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

of reference rate reform initiatives and extends

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

the existing contract and to continue hedge

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

made as part of the discounting transition. The

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

31, 2022, as reference rate reform

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

financial

statements.

NOTE 2. ADVISORY SERVICES

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

terms of a management agreement.

As Manager,

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

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

management agreement, Bimini Advisors provides Orchid with its management

team, including its officers, along with appropriate

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

oversight of Orchid's board of directors and has only

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

management fee in the amount of:

●

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

●

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

than or equal to $500 million, and

●

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

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

on its behalf and to pay to Bimini Advisors an

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

the management agreement. The management

agreement has been renewed through February 20, 2022 and provides for automatic

one-year extension options thereafter. Should

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

to pay Bimini Advisors a termination fee equal to three

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

before or on the last day of the automatic

renewal term.

- 11 -

The following table summarizes the advisory services revenue from Orchid

for the three months ended March 31, 2021 and 2020.

(in thousands)

Three Months Ended March 31,

2021

2020

Management fee

1,621

1,377

Allocated overhead

404

348

Total

2,025

1,725

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

0.7

million and $

0.6

million, respectively.

NOTE 3.

MORTGAGE-BACKED SECURITIES

The following

table presents

the Company’s

MBS portfolio

as of March

31, 2021 and

December 31,

2020:

(in thousands)

March 31, 2021

December 31, 2020

Fixed-rate MBS

72,504

64,902

Interest-Only MBS

329

251

Inverse Interest-Only MBS

Total

72,856

65,178

NOTE 4.

REPURCHASE AGREEMENTS

The Company

pledges certain

of its MBS

as collateral

under repurchase

agreements

with financial

institutions.

Interest rates

are

generally fixed

based on prevailing

rates corresponding

to the terms

of the borrowings,

and interest

is generally

paid at the

termination

of a

borrowing.

If the fair

value of the

pledged securities

declines,

lenders will

typically require

the Company

to post additional

collateral

or pay

down borrowings

to re-establish

agreed upon

collateral

requirements,

referred to

as "margin

calls." Similarly,

if the fair

value of the

pledged

securities

increases,

lenders may

release collateral

back to the

Company. As of March

31, 2021,

the Company

had met all

margin call

requirements.

As of March

31, 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

March 31, 2021

Fair value of securities pledged, including accrued

interest receivable

28,910

13,054

31,081

73,045

Repurchase agreement liabilities associated with

these securities

28,488

13,281

31,367

73,136

Net weighted average borrowing rate

0.21%

0.27%

0.20%

0.21%

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%

- 12 -

In addition,

cash pledged

to counterparties

for repurchase

agreements

was approximately

4.0

million and

3.4

million as

of March

31, 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 March

31, 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

3.9

million and

3.6

million,

respectively.

As of March

31, 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

March 31, 2021

and December

31, 2020.

($ in thousands)

As of March 31, 2021

Junior Subordinated Debt Funding Hedges

Average

Weighted

Contract

Average

Notional

Entry

Effective

Open

Expiration Year

Amount

Rate

Equity

(1)

2021

1,000

1.01%

0.21%

(6)

Total /

Weighted Average

1,000

1.01%

0.21%

(6)

($ 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)

Total /

Weighted Average

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 three months ended March 31, 2021 and 2020

(in thousands)

Three Months Ended March 31,

2021

2020

Eurodollar futures contracts (short positions)

Repurchase agreement funding hedges

(2,329)

- 13 -

Junior subordinated debt funding hedges

(515)

T-Note futures contracts (short positions)

Repurchase agreement funding hedges

(1,006)

Net TBA securities

(1,441)

Losses on derivative instruments

(5,291)

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

Assets Pledged

to Counterparties

The table

below summarizes

Bimini’s assets

pledged as

collateral

under its repurchase

agreements

and derivative

agreements

as of

March 31,

2021 and December

31, 2020.

($ in thousands)

March 31, 2021

December 31, 2020

Repurchase

Derivative

Repurchase

Derivative

Assets Pledged to Counterparties

Agreements

Total

Agreements

Total

PT MBS - at fair value

72,504

64,902

Structured MBS - at fair value

329

251

Accrued interest on pledged securities

212

201

Restricted cash

4,037

4,038

3,352

3,353

Total

77,082

77,083

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 March 31,

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

March 31, 2021

December 31, 2020

Repurchase agreements

Total

- 14 -

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 March 31,

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

March 31, 2021

Repurchase Agreements

73,136

(69,099)

(4,037)

73,136

(69,099)

(4,037)

December 31, 2020

Repurchase Agreements

65,071

(61,719)

(3,352)

65,071

(61,719)

(3,352)

The amounts

disclosed for

collateral

received by

or posted

to the same

counterparty

are limited

to the amount

sufficient to

reduce the

asset or liability

presented

in the consolidated

balance sheet

to zero.

The fair value

of the actual

collateral

received by

or posted

to the

same counterparty

typically

exceeds the

amounts presented.

See Note

6 for a discussion

of collateral

posted for, or

received against,

repurchase

obligations

and derivative

instruments.

NOTE 8.

LONG-TERM DEBT

Long-term

debt at March

31, 2021 and

December 31,

2020 is summarized

as follows:

(in thousands)

March 31, 2021

December 31, 2020

Junior subordinated debt

26,804

Note payable

651

657

Paycheck Protection Plan ("PPP") loan

(1)

152

Total

27,607

27,613

(1)

The Small Business Administration has notified the Company that, effective

April 22, 2021, all principal and accrued interest under the PPP loan

has been forgiven.

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 March

31, 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

- 15 -

that floats

at a spread

of 3.50% over

the prevailing

three-month

LIBOR rate.

As of March

31, 2021,

the interest

rate was 3.68%.

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,

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.

PPP loans

carry a fixed

rate of

1.00

% and a term

of two years,

if not forgiven,

in whole or

in part.

Payments are

deferred for

the first ten

months after

the completion

of the loan

forgiveness

covered period.

PPP loans

may be forgiven,

whole or in

part, if the

proceeds are

used for payroll

and other

permitted

purposes in

accordance

with the requirements

of the PPP

and if

certain other

requirements

are met.

The Small

Business Administration

has 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. The

table gives

effect to

forgiveness

of all principal

and interest

under the

PPP loan.

(in thousands)

Last nine months of 2021

2022

2023

2024

2025

After 2025

27,341

Total

27,455

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

three months

ended March

31, 2021 and

2020.

- 16 -

Stock Repurchase

Plan

On March 26,

2018, the

Board of Directors

of Bimini Capital

Management,

Inc. (the

“Company”)

approved a

Stock Repurchase

Plan

(“Repurchase

Plan”).

Pursuant to

Repurchase

Plan, the

Company may

purchase up

500,000

shares of

its Class A

Common Stock

from

time to time,

subject to

certain limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

of 1934.

Share repurchases

may be

executed through

various means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the

Company to

purchase any

shares.

The Repurchase

Plan was originally

set to expire

on November

15, 2018, but

it has been

extended by the

Board of Directors

and it is currently

set to expire

November 15, 2021

From the inception

of the Repurchase

Plan through

March 31,

2021, the

Company repurchased

a total of

70,404

shares at

aggregate

cost of approximately

166,945

, including

commissions

and fees,

for a weighted

average price

of $

2.37

per share.

There were

no shares

repurchased

during the

three months

ended March

31, 2021.

NOTE 10.

COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various claims and legal

actions arising in the ordinary course of

business.

April 22, 2020

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

of $

33.1

million related to the

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

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

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

operations ceased in 2007.

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

in the

related MLPA’s.

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

against the demand vigorously.

provision or accrual has been recorded as of March 31, 2021 related to the Citigroup

demand.

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

at March 31, 2021.

NOTE 11.

INCOME TAXES

The total income tax provision recorded for the three months ended March 31, 2021

and 2020 was $

0.5

million and $

7.4

million,

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

1.8

million and $(

14.9

) million in the three months ended March 31, 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,

2020. 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

- 17 -

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 March

31, 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 March

31, 2021 and

2020.

The table

below reconciles

the numerator

and denominator

of EPS for

the three months

ended March

31, 2021 and

2020.

(in thousands, except per-share information)

2021

2020

Basic and diluted EPS per Class A common share:

Income (loss) attributable to Class A common shares:

Basic and diluted

1,286

(22,272)

Weighted average common shares:

Class A common shares outstanding at the balance sheet date

11,609

Weighted average shares-basic and diluted

11,609

Income (loss) per Class A common share:

Basic and diluted

0.11

(1.92)

(in thousands, except per-share information)

2021

2020

Basic and diluted EPS per Class B common share:

Income (loss) attributable to Class B common shares:

Basic and diluted

(61)

Weighted average common shares:

Class B common shares outstanding at the balance sheet date

Effect of weighting

Weighted average shares-basic and diluted

Income (loss) per Class B common share:

Basic and diluted

0.11

(1.92)

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

- 18 -

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 three

months ended

March 31,

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

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 March

31, 2021 and

December 31,

2020.

The Company's

MBS and TBA

securities

are valued

using Level

2 valuations,

and such valuations

currently are

determined

by the

Company based

on independent

pricing sources

and/or third

party broker

quotes, when

available.

Because the

price estimates

may vary,

the Company

must make certain

judgments and

assumptions

about the

appropriate

price to use

to calculate

the fair values.

The Company

and the independent

pricing sources

use various

valuation techniques

to determine

the price

of the Company’s

securities.

These

techniques

include observing

the most

recent market

for like or

identical assets

(including

security coupon,

maturity, yield,

and prepayment

speeds),

spread pricing

techniques

to determine

market credit

spreads (option

adjusted spread,

zero volatility

spread, spread

to the U.S.

Treasury curve

or spread

to a benchmark

such as a TBA

security),

and model driven

approaches

(the discounted

cash flow

method, Black

Scholes and

SABR models

which rely

upon observable

market rates

such as the

term structure

of interest

rates and

volatility).

The

appropriate

spread pricing

method used

is based on

market convention.

The pricing

source determines

the spread

of recently

observed

trade activity

or observable

markets for

assets similar

to those being

priced. The

spread is then

adjusted based

on variances

in certain

characteristics

between the

market observation

and the asset

being priced.

Those characteristics

include: type

of asset, the

expected life

of the asset,

the stability

and predictability

of the expected

future cash

flows of the

asset, whether

the coupon

of the asset

is fixed or

adjustable,

the guarantor

of the security

if applicable,

the coupon,

the maturity, the

issuer, size of

the underlying

loans, year

in which

the

underlying

loans were

originated,

loan to value

ratio, state

in which the

underlying

loans reside,

credit score

of the underlying

borrowers

and other

variables if

appropriate.

The fair value

of the security

is determined

by using the

adjusted spread.

The Company’s

futures contracts

are

Level 1 valuations,

as they are

exchange-traded

instruments

and quoted

market prices

are

readily available.

Futures contracts

are settled

daily. The Company’s

interest rate

swaps and

interest rate

swaptions

are Level 2

valuations.

The fair value

of interest

rate swaps

is determined

using a discounted

cash flow

approach

using forward

market interest

rates

and discount

rates, which

are observable

inputs. The

fair value

of interest

rate swaptions

is determined

using an option

pricing model.

The following

table presents

financial assets

and liabilities

measured

at fair value

on a recurring

basis as of

March 31,

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)

March 31, 2021

Mortgage-backed securities

72,856

Orchid Island Capital, Inc. common stock

15,598

December 31, 2020

Mortgage-backed securities

65,178

Orchid Island Capital, Inc. common stock

13,548

During the

three months

ended March

31, 2021 and

2020, there

were no transfers

of financial

assets or liabilities

between levels

1, 2

- 19 -

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 three months ended March 31, 2021 and 2020, were approximately $

2.0

million and $

1.7

million, respectively,

accounting for approximately

% and

% of consolidated revenues, respectively.

The investment portfolio segment includes the investment activities conducted by

Royal Palm.

The investment portfolio segment

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

Segment information for the three months ended March 31, 2021 and 2020 is as

follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,025

Advisory services, other operating segments

(1)

(36)

Interest and dividend income

1,117

Interest expense

(40)

(250)

(2)

(290)

Net revenues

2,061

1,077

(250)

(36)

2,852

Other income

658

(3)

659

Operating expenses

(4)

(1,103)

(653)

(1,756)

Intercompany expenses

(1)

(36)

Income (loss) before income taxes

958

1,046

(249)

1,755

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,725

Advisory services, other operating segments

(1)

(59)

Interest and dividend income

2,405

Interest expense

(928)

(350)

(2)

(1,278)

Net revenues

1,784

1,477

(350)

(59)

2,852

Other expenses

(15,563)

(514)

(3)

(16,077)

Operating expenses

(4)

(709)

(997)

(1,706)

Intercompany expenses

(1)

(59)

Income (loss) before income taxes

1,075

(15,142)

(864)

(14,931)

(1)

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

(2)

Includes interest on long-term debt.

(3)

Includes gains (losses) on Eurodollar futures contracts entered into as

a hedge on junior subordinated notes and fair value adjustments

retained interests in securitizations.

(4)

Corporate expenses are allocated based on each segment’s proportional

share of total revenues.

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

follows:

- 20 -

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Total

March 31, 2021

1,700

122,894

12,639

137,233

December 31, 2020

1,469

113,764

13,468

128,701

NOTE 15. RELATED PARTY TRANSACTIONS

Relationships with Orchid

At both March 31, 2021 and December 31, 2020, the Company owned

2,595,357

shares of Orchid common stock, representing

approximately

2.8

% and

3.4

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

The Company received dividends on this

common stock investment of approximately $

0.5

million and $

0.4

million during the three months ended March 31, 2021 and 2020,

respectively.

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

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

from Orchid, and owns shares of common

stock of Orchid.

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

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

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

Robert J. Dwyer and Frank E. Jaumot, our

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

- 21 -

ITEM 2. MANAGEMENT’S

DISCUSSION

AND ANALYSIS OF FINANCIAL

CONDITION

AND RESULTS OF

OPERATIONS.

The following discussion of our financial condition and results of operations should be

read in conjunction with the consolidated

financial statements and notes to those statements included in Item 1 of this Form 10-Q.

The discussion may contain certain forward-

looking statements that involve risks and uncertainties. Forward-looking statements

are those that are not historical in nature. As a

result of many factors, such as those set forth under “Risk Factors” in our most recent

Annual Report on Form 10-K, our actual results

may differ materially from those anticipated in such forward-looking statements.

Overview

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

that was formed in September 2003.

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

We operate in two business segments: the

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

by Royal Palm’s wholly-owned subsidiary,

Bimini Advisors Holdings, LLC, to Orchid, 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.

COVID-19

Impact

Beginning

in mid-March

2020, the

global pandemic

associated

with the novel

coronavirus

(“COVID-19”)

and related

economic

conditions

began to impact

our financial

position and

results of

operations.

As a result

of the economic,

health and

market turmoil

brought

about by COVID-19,

the MBS market

experienced

severe dislocations.

This resulted

in falling

prices of our

assets and

increased

margin

calls from

our repurchase

agreement

lenders, resulting

in material

adverse effects

on our results

of operations

and to our

financial

condition.

The MBS market

largely stabilized

after the

Federal Reserve

announced

on March 23,

2020 that

it would purchase

MBS and U.S.

Treasuries in

the amounts

needed to

support smooth

market functioning.

As of March

31, 2020,

and at all

times since

then, we

have timely

satisfied all

margin calls.

The MBS

market continues

to react to

the pandemic

and the various

measures put

in place to

stabilize the

market. To the extent

the financial

or mortgage

markets do

not respond

favorably to

any of these

actions, or

such actions

do not function

as intended,

our business,

results of

operations

and financial

condition

may continue

to be materially

adversely affected.

Although the

Company cannot

estimate the

length or

gravity of

the impact

of the COVID-19

pandemic at

this time, if

the pandemic

continues,

it may

continue to

have materially

adverse effects

on the Company’s

results of

future operations,

financial position,

and liquidity

during 2021.

- 22 -

Stock Repurchase

Plan

On March 26,

2018, the

Board of Directors

of the Company

approved a

Stock Repurchase

Plan (“Repurchase

Plan”).

Pursuant to

the

Repurchase

Plan, we

may purchase

up to 500,000

shares of

the Company’s

Class A Common

Stock from

time to time,

subject to

certain

limitations

imposed by

Rule 10b-18

of the Securities

Exchange Act

of 1934.

Share repurchases

may be executed

through various

means,

including,

without limitation,

open market

transactions.

The Repurchase

Plan does

not obligate

the Company

to purchase

any shares.

The

Repurchase

Plan,

as currently

extended, expires

on November

15, 2021.

The authorization

for the Share

Repurchase

Plan may be

terminated,

increased or

decreased by

the Company’s

Board of Directors

in its discretion

at any time.

From commencement

of the Repurchase

Plan, through

March 31,

2021, the

Company repurchased

a total of

70,704 shares

at an

aggregate

cost of approximately

$166,945,

including commissions

and fees, for

a weighted

average price

of $2.37 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 of

operations and financial condition. These factors include:

●

interest rate trends;

●

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

●

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

●

actions taken by the U.S. government, including the

presidential administration, the 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;

●

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 three

months ended

March 31,

2021,

as compared

to the three

months ended

March 31,

2020.

Net Income

(Loss) Summary

Consolidated

net income

for the three

months ended

March 31,

2021 was $1.3

million, or

$0.11 basic and diluted

income per

share of

Class A Common

Stock, as

compared to

a consolidated

net loss of

$22.3 million,

or $1.92 basic

and diluted

loss per share

of Class

- 23 -

Common Stock,

for the three

months ended

March 31,

2020. The

components

of net income

(loss) for

the three

months ended

March 31,

2021 and 2020,

along with

the changes

in those components

are presented

in the table

below.

(in thousands)

Three Months Ended March 31,

2021

2020

Change

Advisory services revenues

2,025

1,725

300

Interest and dividend income

1,117

2,405

(1,288)

Interest expense

(289)

(1,277)

988

Net revenues

2,853

Other income (expense)

658

(16,077)

16,735

Expenses

(1,757)

(1,706)

(51)

Net income (loss) before income tax provision

1,754

(14,930)

16,684

Income tax provision

(464)

(7,403)

6,939

Net income (loss)

1,290

(22,333)

23,623

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

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.

- 24 -

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 could materially impact the economic interest amounts reported below.

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

(in thousands)

Recognized in

Statement of

TBA

Operations

Securities

Futures

(GAAP)

Income (Loss)

Contracts

Three Months Ended

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(2)

March 31, 2020

(5,291)

(1,441)

(3,850)

Gains (Losses) on Futures Contracts

(in thousands)

Attributed to Current Period (Non-GAAP)

Attributed to Future Periods (Non-GAAP)

Repurchase

Long-Term

Repurchase

Long-Term

Statement of

Agreements

Debt

Total

Agreements

Debt

Total

Operations

Three Months Ended

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)

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

Income

Basis

Hedges

(1)

Basis

(2)

Basis

(3)

Three Months Ended

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)

- 25 -

June 30, 2020

523

(456)

516

463

March 31, 2020

2,040

928

(456)

1,384

1,112

656

(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

GAAP

Economic

GAAP

Non-GAAP

Economic

GAAP

Economic

Basis

(1)

Basis

Hedges

(2)

Basis

(3)

Basis

(4)

Three Months Ended

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

(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 three months ended March 31, 2021 and 2020 is as

follows:

(in thousands)

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2021

Advisory services, external customers

2,025

Advisory services, other operating segments

(1)

(36)

Interest and dividend income

1,117

Interest expense

(40)

(250)

(2)

(290)

Net revenues

2,061

1,077

(250)

(36)

2,852

Other income

658

(3)

659

Operating expenses

(4)

(1,103)

(653)

(1,756)

Intercompany expenses

(1)

(36)

Income (loss) before income taxes

958

1,046

(249)

1,755

Asset

Investment

Management

Portfolio

Corporate

Eliminations

Total

2020

Advisory services, external customers

1,725

Advisory services, other operating segments

(1)

(59)

Interest and dividend income

2,405

Interest expense

(928)

(350)

(2)

(1,278)

Net revenues

1,784

1,477

(350)

(59)

2,852

- 26 -

Other expenses

(15,563)

(514)

(3)

(16,077)

Operating expenses

(4)

(709)

(997)

(1,706)

Intercompany expenses

(1)

(59)

Income (loss) before income taxes

1,075

(15,142)

(864)

(14,931)

(1)

Includes advisory services revenue received by Bimini Advisors from

Royal Palm.

(2)

Includes interest on long-term debt.

(3)

Includes gains (losses) on Eurodollar futures contracts entered into as

a hedge on junior subordinated notes and fair value adjustments

retained interests in securitizations.

(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

March 31, 2021

1,700

122,894

12,639

137,233

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

March 31, 2021

4,032,716

453,353

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

Investment Portfolio Segment

Net Portfolio Interest Income

- 27 -

In response

to the COVID-19

related market

developments

during the

first quarter

of 2020 discussed

above, the

Company sold

significant

portion of

the MBS portfolio.

Our outstanding

balances under

repurchase

agreement

borrowings

declined proportionately

well. As a

result, many

figures discussed

below appear

distorted

when simple

average balances

are calculated,

such as average

MBS

held and average

outstanding

balances under

repurchase

agreement

borrowings.

Further, since

the sales occurred

very late

in the

quarter, interest

income and

interest expense

amounts reflect

balances of

both assets

and borrowing

in place for

the majority

of the

quarter.

The combination

of these two

factors led

to certain

metrics such

as our yield

on average

MBS and cost

of funds measures

appear higher

than they

would have

been had these

large sales

not occurred,

or had they

occurred earlier

in the quarter.

These factors

should be kept

in mind when

reading the

discussion of

our investment

portfolio

segment results

for the quarters

that follow.

We define net

portfolio

interest income

as interest

income on MBS

less interest

expense on

repurchase

agreement

funding.

During

the three

months ended

March 31,

2021, we generated

$0.6 million

of net portfolio

interest income,

consisting

of $0.6 million

of interest

income from

MBS assets

offset by $40,000

of interest

expense on

repurchase

liabilities.

For the comparable

period ended

March 31,

2020, we generated

$1.1 million

of net portfolio

interest income,

consisting

of $2.0 million

of interest

income from

MBS assets

offset by

$0.9 million

of interest

expense on

repurchase

liabilities.

The $1.4

million decrease

in interest

income for

the three

months ended

March

31, 2021 was

due to a 245

basis point

("bp") decrease

in yields

earned on

the portfolio,

combined with

a $67.1 million

decrease

in average

MBS balances.

The $0.9 million

decrease in

interest expense

for the three

months ended

March 31,

2021 was due

to a $62.1

million

decrease in

average repurchase

liabilities,

combined with

a 260 bp decrease

in cost of

funds.

Our economic

interest expense

on repurchase

liabilities

for the three

months ended

March 31,

2021 and 2020

was $0.7 million

and

$1.4 million,

respectively, resulting

in ($0.1)

million and

$0.7 million

of economic

net portfolio

interest

income, respectively.

The tables

below provide

information

on our portfolio

average balances,

interest income,

yield on

assets, average

repurchase

agreement

balances, interest

expense, cost

of funds,

net interest

income and

net interest

rate spread

for the three

months ended

March

31, 2021 and

for each quarter

in 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

Held

(1)

Income

(2)

MBS

Agreements

(1)

Basis

(2)

Basis

(3)

Three Months Ended

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%

7.24%

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%

($ in thousands)

Net Portfolio

Interest Income

Interest Spread

GAAP

Economic

GAAP

Economic

Basis

(2)

Basis

(4)

Three Months Ended

March 31, 2021

571

(137)

3.31%

(0.79)%

December 31, 2020

554

(61)

3.20%

(0.43)%

September 30, 2020

561

(504)

3.56%

(3.40)%

June 30, 2020

463

3.44%

(0.07)%

March 31, 2020

1,112

656

3.16%

1.77%

(1)

Portfolio yields and costs of borrowings presented in the table above

and the tables on pages

31 and 32 are calculated based on the

average balances of the underlying investment portfolio/repurchase

agreement balances and are annualized for the quarterly periods

presented. Average balances for quarterly periods are calculated

using two data points, the beginning and ending balances.

- 28 -

(2)

Economic interest expense and economic net interest income

presented in the table above and the tables on page 32 include

the effect

of derivative instrument hedges for only the period presented.

(3)

Represents interest cost of our borrowings and the effect of derivative

instrument hedges attributed to the period related to hedging

activities divided by average MBS held.

(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

$0.6 million

for the three

months ended

March 31,

2021 and $2.0

million for

the three

months ended

March

31, 2020.

Average MBS

holdings were

$69.0 million

and $136.1

million for

the three months

ended March

31, 2021 and

2020,

respectively. The

$1.4 million

decrease

in interest

income was

due to a $67.1

million decrease

in average

MBS holdings,

combined with

245 basis point

("bp") decrease

in yields.

Average balances

as presented

here, and

in the table

below, are based

on beginning

and ending

outstanding

balances and

are skewed

lower for

the quarter

ended March

31, 2020 because

nearly all

of the disposals

occurred

at the end

of March 2020.

If average

balances were

calculated

based on

daily balances,

average MBS

holdings for

the three months

ended March

31, 2020 would

have been

$209.7 million

and the yield

would have

been 3.89%.

The table

below presents

the average

portfolio

size, income

and yields

of our respective

sub-portfolios,

consisting

of structured

MBS

and pass-through

MBS (“PT

MBS”) for

the three months

ended March

31, 2021 and

for each quarter

in 2020.

($ in thousands)

Average MBS Held

Interest Income

Realized Yield on Average MBS

Structured

MBS

Total

MBS

Total

MBS

Total

Three Months Ended

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%

Interest Expense on Repurchase Agreements and the Cost of Funds

Our average

outstanding

balances under

repurchase

agreements

were $69.1

million and

$131.2 million,

generating

interest expense

of $40,000

and $0.9 million

for the three

months ended

March 31,

2021 and 2020,

respectively.

Our average

cost of funds

was 0.23%

and

2.83% for

three months

ended March

31, 2021 and

2020,

respectively.

There was

a 260 bp decrease

in the average

cost of funds

and a

$62.1 million

decrease in

average outstanding

balances under

repurchase

agreements

during the

three months

ended March

31, 2021 as

compared to

the three

months ended

March 31,

2020. Average

balances as

presented

here, and

in the table

below, are based

beginning and

ending outstanding

balances and

are skewed

lower for

the quarter

ended March

31, 2020 because

nearly all

of the

deleveraging

occurred at

the end of

March 2020.

If average

balances were

calculated

based on

daily balances,

average outstanding

repurchase

agreements

for the three

months ended

March 31,

2020 would

have been

$198.4 million

and the cost

of funds would

have

been 1.87%.

Our economic

interest expense

was $0.7 million

and $1.4 million

for the three

months ended

March 31, 2021

and 2020, respectively.

There was

a 11 bp increase

in the average

economic cost

of funds

to 4.33%

for the three

months ended

March 31,

2021 from

4.22% for

the

three months

ended March

31, 2020.

The $0.7

million decrease

in economic

interest expense

was due

to a 260

bp decrease

in the average

cost of funds

combined with

the unfavorable

performance

of our derivative

holdings attributed

to the current

period.

Because all

of our repurchase

agreements

are short-term,

changes in

market rates

have a more

immediate impact

on our interest

expense.

The Company’s

average cost

of funds calculated

on a GAAP

basis was 10

bps above the

average one-month

LIBOR and

equal

to the average

six-month LIBOR

for the quarter

ended March

31, 2021.

The Company’s

average economic

cost of funds

was 420 bps

above the

average one-month

LIBOR and

410 bps above

the average

six-month LIBOR

for the quarter

ended March

31, 2021.

The

- 29 -

average term

to maturity

of the outstanding

repurchase

agreements

increased from

33 days at

December 31,

2020 to 64

days at March

31, 2021.

The tables

below present

the average

outstanding

balances under

all repurchase

agreements,

interest expense

and average

economic cost

of funds,

and average

one-month

and six-month

LIBOR rates

for the three

months ended

March 31,

2021 and for

each

quarter in

2020 on both

a GAAP and

economic basis.

($ in thousands)

Average

Balance of

Interest Expense

Average Cost of Funds

Repurchase

GAAP

Economic

GAAP

Economic

Agreements

Basis

Three Months Ended

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%

7.24%

June 30, 2020

51,987

516

0.46%

3.97%

March 31, 2020

131,156

928

1,384

2.83%

4.22%

Average GAAP Cost of Funds

Average Economic Cost of Funds

Relative to Average

Average LIBOR

One-Month

Six-Month

One-Month

Six-Month

One-Month

Six-Month

LIBOR

Three Months Ended

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%

6.89%

June 30, 2020

0.55%

0.70%

(0.09)%

(0.24)%

3.42%

3.27%

March 31, 2020

1.34%

1.43%

1.49%

1.40%

2.88%

2.79%

Dividend Income

At both March

31, 2021 and

December 31,

2020,

we owned

2,595,357 shares

of Orchid common

stock.

Orchid paid

total dividends

$0.195 and

$0.24 and

per share

during the

three months

ended March

31, 2021 and

2020,

respectively.

During the

three months

ended

March 31,

2021 and 2020,

we received

dividends

on this common

stock investment

of approximately

$0.5

million and

$0.4

million,

respectively.

Long-Term Debt

Junior Subordinated Debt

Interest expense

on our junior

subordinated

debt securities

was approximately

$0.2 million

for the three-month

period ended

March

31, 2021,

compared to

approximately

$0.3 million

for the same

period in

2020.

The average

rate of interest

paid for the

three months

ended March

31, 2021 was

3.71% compared

to 5.19% 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 March

31, 2021,

the interest

rate was 3.68%.

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,

- 30 -

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

may be forgiven,

in whole or

in part, if

the proceeds

are used for

payroll and

other

permitted

purposes in

accordance

with the requirements

of the PPP

and if certain

other requirements

are met.

These loans

carry a fixed

rate of 1.00%

and a term

of two years,

if not forgiven,

in whole or

in part.

Payments are

deferred for

the first

ten months

after the

completion

of the loan

forgiveness

period.

The Small

Business Administration

has 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 three

months ended

March 31,

2021 and 2020.

(in thousands)

2021

2020

Change

Realized losses on sales of MBS

(5,805)

5,805

Unrealized losses on MBS

(1,392)

(574)

(818)

Total losses on

MBS

(1,392)

(6,379)

4,987

Losses on derivative instruments

(5,291)

5,291

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

2,050

(4,408)

6,458

We invest in

MBS with

the intent

to earn net

income from

the realized

yield on those

assets over

their related

funding and

hedging

costs, and

not for the

purpose of

making short

term gains

from trading

in these securities.

However, we have

sold, and may

continue to

sell, existing

assets to

acquire new

assets, which

our management

believes might

have higher

risk-adjusted

returns in

light of current

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

three months

ended March

31, 2020 we

received proceeds

of approximately

$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.

We did not

sell any MBS

during the

three months

March 31,

2021.

The fair value

of our MBS

portfolio and

derivative

instruments,

and the gains

(losses) reported

on those financial

instruments,

are

sensitive to

changes in

interest rates.

The table

below presents

historical

interest rate

data as of

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)

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 U.S. Year

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 is obtained from the Intercontinental Exchange Benchmark

Administration Ltd.

Operating Expenses

- 31 -

For the three

months ended

March 31,

2021, our

total operating

expenses were

approximately

$1.8 million

compared

approximately

$1.7 million

for the three

months ended

March 31,

2020. The

table below

presents a

breakdown

of operating

expenses for

the three

months ended

March 31,

2021 and 2020.

(in thousands)

2021

2020

Change

Compensation and benefits

1,124

1,100

Legal fees

Accounting, auditing and other professional fees

139

(46)

Directors’ fees and liability insurance

188

165

Other G&A expenses

308

282

1,757

1,706

Income Tax Provision

We recorded an income tax provision for the three months ended March 31, 2021 of approximately

$0.5 million on consolidated

pre-tax book income of $1.8 million. We recorded an income tax provision for the three months ended

March 31, 2020 of approximately

$7.4 million on a consolidated pre-tax book loss of $14.9 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 be

realized in

the future,

we determined

an additional

valuation allowance

of approximately

$11.2 million was

necessary during

the three

months ended

March 31,

2020 for

the net operating

loss carryforwards

and capital

loss carryforwards.

With the evolving

and changing

landscape caused

by the pandemic,

we will continue

to closely

monitor the

impacts of

COVID-19

on the Company’s

ability to

realize its

deferred tax

assets and

may increase

valuation allowances

in the future

as new information

becomes available.

Financial

Condition:

Mortgage-Backed Securities

As of March

31, 2021,

our MBS portfolio

consisted of

$72.9 million

of agency or

government

MBS at fair

value and had

a weighted

average coupon

of 3.66%.

During the

three months

ended March

31, 2021,

we received

principal repayments

of $3.3 million

compared to

$6.7 million

for the comparable

period ended

March 31,

2020.

The average

prepayment

speeds for

the quarters

ended March

31, 2021

and 2020 were

18.3% and

13.7%,

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.

Assets that

were not

owned for

the

entire quarter

have been

excluded from

the calculation.

The exclusion

of certain

assets during

periods of

high trading

activity can

create a

very high,

and often

volatile, reliance

on a small

sample of

underlying

loans.

Structured

PT MBS

MBS

Total

Three Months Ended

Portfolio (%)

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

- 32 -

The following

tables summarize

certain characteristics

of our PT

MBS and structured

MBS as of March

31, 2021 and

December 31,

2020:

($ in thousands)

Weighted

Percentage

Average

Weighted

Maturity

Fair

Entire

Average

Longest

Asset Category

Value

Portfolio

Coupon

Months

Maturity

March 31, 2021

Fixed Rate MBS

72,504

99.5%

3.66%

335

1-Jan-51

Interest-Only MBS

329

0.5%

3.51%

298

15-Jul-48

Inverse Interest-Only MBS

0.0%

5.87%

218

15-May-39

Total MBS Portfolio

72,856

100.0%

3.66%

335

1-Jan-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)

March 31, 2021

December 31, 2020

Percentage of

Agency

Fair Value

Entire Portfolio

Fair Value

Entire Portfolio

Fannie Mae

48,564

66.7%

38,946

59.8%

Freddie Mac

24,292

33.3%

26,232

40.2%

Total Portfolio

72,856

100.0%

65,178

100.0%

March 31, 2021

December 31, 2020

Weighted Average Pass-through Purchase Price

108.84

109.51

Weighted Average Structured Purchase Price

4.28

Weighted Average Pass-through Current Price

109.63

112.67

Weighted Average Structured Current Price

4.80

3.20

Effective Duration

(1)

3.976

3.309

(1)

Effective duration is the approximate percentage change

in price for a 100 basis point change in rates.

An effective duration of 3.976 indicates

that an interest rate increase of 1.0% would be expected to cause a 3.976% decrease

in the value of the MBS in our investment portfolio

March 31, 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

three months

ended March

31, 2021 and

2020.

($ in thousands)

Three Months Ended March 31,

2021

2020

Total Cost

Average

Price

Weighted

Average

Yield

Total Cost

Average

Price

Weighted

Average

Yield

PT MBS

12,368

104.84

1.19%

20,823

110.83

2.64%

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

- 33 -

priced by the

market.

The stated

contractual

final maturity

of the mortgage

loans underlying

our portfolio

of PT MBS

generally ranges

to 30 years.

However, the effect

of prepayments

of the underlying

mortgage loans

tends to shorten

the resulting

cash flows

from our

investments

substantially. Prepayments

occur for

various reasons,

including refinancing

of underlying

mortgages,

loan payoffs

connection

with home

sales, and

borrowers

paying more

than their

scheduled loan

payments,

which accelerates

the amortization

of the

loans.

The duration

of our IO

and IIO portfolio

will vary greatly

depending

on the structural

features of

the securities.

While prepayment

activity will

always affect

the cash flows

associated

with the securities,

the interest

only nature

of IO’s may cause

their durations

to become

extremely negative

when prepayments

are high,

and less negative

when prepayments

are low. Prepayments

affect the duration

of IIO’s

similarly, but the

floating rate

nature of

the coupon

of IIOs (which

is inversely

related to

the level

of one month

LIBOR) causes

their price

movements -

and model duration

- to be affected

by changes

in both prepayments

and one month

LIBOR - both

current and

anticipated

levels.

As a result,

the duration

of IIO securities

will also vary

greatly.

Prepayments

on the loans

underlying

our MBS can

alter the

timing of the

cash flows

received by

us. As a result,

we gauge the

interest

rate sensitivity

of its assets

by measuring

their effective

duration.

While modified

duration measures

the price

sensitivity

of a bond

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 March 31,

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

in interest

rates.

($ in thousands)

Fair

$ Change in Fair Value

% Change in Fair Value

MBS Portfolio

Value

-100BPS

+100BPS

+200BPS

-100BPS

+100BPS

+200BPS

Fixed Rate MBS

72,504

2,487

(3,399)

(7,366)

3.43%

(4.69)%

(10.16)%

Interest-Only MBS

329

(100)

127

(30.33)%

22.55%

38.71%

Inverse Interest-Only MBS

(3)

(7)

3.56%

(14.46)%

(30.16)%

Total MBS Portfolio

72,856

2,388

(3,328)

(7,246)

3.28%

(4.57)%

(9.95)%

($ 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

(10)

(1.00)%

1.00%

2.00%

1,000

(10)

Gross Totals

2,378

(3,318)

(7,226)

(1)

Represents the

average contract/notional

amount of Eurodollar

futures contracts.

- 34 -

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 March

31, 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.

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 March

31, 2021,

we had obligations

outstanding

under the

repurchase

agreements

of approximately

$73.1 million

with a net

weighted average

borrowing

cost of 0.21%.

The remaining

maturity of

our outstanding

repurchase

agreement

obligations

ranged from

6 to

127 days, with

a weighted

average maturity

of 64 days.

Securing the

repurchase

agreement

obligation

as of March

31, 2021 are

MBS

with an estimated

fair value,

including

accrued interest,

of $73.0 million

and a weighted

average maturity

of 336 months.

Through May

14,

2021, we have

been able

to maintain

our repurchase

facilities

with comparable

terms to those

that existed

at March 31,

2021 with

maturities

through August

5, 2021.

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

repurchase agreement obligations for each

quarter in 2021 and 2020.

($ in thousands)

Ending

Maximum

Average

Difference Between Ending

Balance

Repurchase Agreements and

of Repurchase

Average Repurchase Agreements

Three Months Ended

Agreements

Amount

Percent

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

has increased.

Our hedging

strategy typically

involves taking

short positions

in Eurodollar

futures, T-Note

futures, TBAs

or other instruments.

- 35 -

Currently, our

hedge positions

are limited

to short positions

in Eurodollar

futures.

When the market

causes these

short positions

to decline

in value we

are required

to meet margin

calls with

cash.

This can reduce

our liquidity

position to

the extent

other securities

in our portfolio

move in price

in such a way

that we do

not receive

enough cash

through margin

calls to offset

the Eurodollar

related margin

calls. If this

were to occur

in sufficient

magnitude,

the loss of

liquidity might

force us to

reduce the

size of the

levered portfolio,

pledge additional

structured

securities

to raise funds

or risk operating

the portfolio

with less liquidity.

Our master

repurchase

agreements

have no stated

expiration,

but can be

terminated

at any time

at our option

or at the

option of the

counterparty. However,

once a definitive

repurchase

agreement

under a master

repurchase

agreement

has been entered

into, it generally

may not be

terminated

by either

party.

A negotiated

termination

can occur, but

may involve

a fee to

be paid by

the party

seeking to

terminate

the repurchase

agreement

transaction.

Under our

repurchase

agreement funding

arrangements,

we are required

to post margin

at the initiation

of the borrowing.

The margin

posted represents

the haircut,

which is a

percentage

of the market

value of the

collateral

pledged. To the extent

the market

value of the

asset collateralizing

the financing

transaction

declines, the

market value

of our posted

margin will

be insufficient

and we will

be required

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 March

31, 2021,

we had cash

and cash equivalents

of $6.0 million.

We generated

cash flows

of $3.9 million

from principal

and interest

payments on

our MBS portfolio

and had average

repurchase

agreements

outstanding

of $69.1 million

during the

three months

ended March

31, 2021.

In addition,

during

the three

months ended

March 31,

2021, we received

approximately

$2.0 million

in management

fees and expense

reimbursements

manager of

Orchid and

approximately

$0.5 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.

On April 13,

2020, we received

approximately

$152,000 through

the Paycheck

Protection

Program (“PPP”)

of the CARES

Act in the

form of a

low interest

loan. These

loans carry

a fixed rate

of 1.00% and

a term of

two years,

if not forgiven,

in whole or

in part. Payments

are deferred

for the first

six months

of the loan.

PPP loans

may be forgiven,

in whole or

in part, if

the proceeds

are used for

payroll and

other permitted

purposes in

accordance

with the requirements

of the PPP

and if certain

other requirements

are met. The

Small Business

Administration

has 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 summarizes the effect that certain future contractual obligations existing as of March

31, 2021 will have on our

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

the PPP loan.

- 36 -

(in thousands)

Obligations Maturing

Within One

Year

One to Three

Years

Three to Five

Years

More than

Five Years

Total

Repurchase agreements

73,136

Interest expense on repurchase agreements

(1)

Junior subordinated notes

(2)

26,000

Interest expense on junior subordinated notes

(1)

1,016

1,945

1,942

9,434

14,337

Principal and interest on mortgage loan

(1)

107

730

998

Totals

74,277

2,052

2,049

36,164

114,542

(1)

Interest expense

on repurchase

agreements,

junior subordinated

notes and mortgage

loan are based

on current interest

rates as of March

31, 2021

and the remaining

term of liabilities

existing at

that date.

(2)

We hold a common

equity interest

in Bimini Capital

Trust II.

The amount presented

represents our

net cash outlay.

Outlook

Orchid Island

Capital Inc.

Orchid Island Capital continued to recover from the market impact during the first quarter

of 2020 caused by the COVID-19

pandemic.

Orchid was able to grow its capital base with two secondary offerings of common

stock, realizing net proceeds of $96.9

million. However, as the economic recovery from the pandemic accelerated during the first quarter of 2021 interest rates

increased as

the market anticipated strong growth for 2021 and a potential acceleration in inflation.

As described more fully below, these

developments had an adverse impact on the Agency MBS market and Orchid incurred

a net loss for the quarter of $29.4 million.

The

net effect of the capital raises and the net loss was a $50.9 million increase in the shareholders

equity of Orchid Island.

The increase

in the equity base of Orchid resulted in an 11% increase in advisory service revenue for the first quarter of 2021 versus the fourth

quarter of 2020 and a 17% increase versus the first quarter of 2020. In addition, 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

During the

first quarter

of 2021 the

economy made

tremendous

strides towards

recovery from

the COVID-19

pandemic. Evidence

the recovery

was pervasive.

New cases

of COVID-19,

which peaked

around the

turn of the

year, moderated

significantly, as

did

hospitalizations

and deaths.

As a result

of the U.S.

Senate run-off

elections in

early January, both

of which were

won by Democrats,

one

party was

now in control

of the White

House and

both houses

of Congress.

This led the

way to a new

stimulus package

being passed

that

was at the

high end of

market expectations

- $1.9 trillion.

The American

Rescue Plan

Act of 2021

was signed

into law on

March 11, 2021.

This marked

the third

legislative

act related

to the nation’s

recovery from

the COVID-19

pandemic, after

the $2.2 trillion

CARES Act

(described

below), which

passed on March

27, 2020 and

the $2.3 trillion

Consolidated

Appropriations

Act of 2021,

which contained

$900

billion of

COVID-19

relief and

was signed on

December 27,

2020.

Given the momentum

the administration

had after

passing the

- 37 -

American Rescue

Plan Act of

2021, President

Biden shortly

thereafter

announced plans

for a $2 trillion-plus

infrastructure

bill.

The vaccine

roll-out,

which initially

seemed haphazard,

improved to

the point

where the

U.S. became

a world leader.

The U.S.

was well on

its way to

herd immunity

as over 200

million inoculations

were administered

by April 21,

2021, well

ahead of even

the most optimistic

projections

the beginning

of the year.

Economic data

released over

the course

of the first

quarter has

been consistently

very strong.

Fueled by

two

rounds of

stimulus checks

during the

first quarter,

consumers have

been spending.

Retail sales,

home sales,

demand for

new cars

and

other durable

goods are

all benefitting

from the stimulus

and considerable

pent-up demand.

Job growth

appears to

be accelerating

quickly, and the

unemployment

rate has dropped

to 6.1%.

All of the

developments

described above

have stoked

inflation fears.

The most

obvious evidence

of potential

price pressures

relate to

supply shortages

of a variety

of consumer

goods and

commodities

caused by

the

combination

of still constrained

production

and surging

demand that

have begun

to surface

across the

economy.

The factors

highlighted

above have

led to a surging

economy, which

grew at an

annualized

rate of 6.4%

during the

first quarter.

They

have also impacted

the financial

markets.

The various

broad equity

indices are

making new

all-time highs

on a frequent

basis, and

corporate

debt issuance

levels – both

investment

grade and

high yield

– are at or

near record

levels reflecting

the demand

for capital

and

investor appetite

for yield.

U.S. Treasury

rates, at

least longer-term

rates, have

risen significantly.

The ten-year

U.S. Treasury

note yield

increased from

0.916% to

1.742% over

the course

of the first

quarter, an increase

of 82.6 basis

points, and

the U.S.

Treasury curve

has

steepened substantially.

The market

has moved up

expectations

for a recovery

from the pandemic

and return

to normalcy

significantly.

The Federal

Reserve (the

“Fed”) gave

a green light

to higher

rates, referring

to them as

a sign of economic

strength.

However, when

the

market has

attempted

to price in

an acceleration

to the timing

of the rate

increases by

the Fed, the

Fed has pushed

back against

such

sentiment.

These efforts

have largely

been successful,

and current

market pricing

only reflects

one interest

rate hike by

the end of

2022.

Legislative

Response and

the Federal

Reserve

Congress passed

the CARES

Act quickly

in response

to the pandemic’s

emergence

last spring

and followed

with additional

legislation

over the ensuing

months.

However, as certain

provisions

of the CARES

Act expired,

such as supplemental

unemployment

insurance

last

July, there appeared

to be a need

for additional

stimulus for

the economy

to deal with

the surge

in the pandemic

that occurred

as cold

weather set

in, particularly

over the Christmas

holiday.

As mentioned

above, the

Federal government

eventually

passed an additional

stimulus package

in late December

2020 and again

in March of

2021. In addition,

the Fed has

provided,

and continues

to provide,

much support

to the markets

and the economy

as it can within

the constraints

of its mandate.

During the

third quarter

of 2020, the

Fed

unveiled a

new monetary

policy framework

focused on

average inflation

rate targeting

that allows

the Fed Funds

rate to remain

quite low,

even if inflation

is expected

to temporarily

surpass the

2% target

level. Further,

the Fed will

look past the

presence of

very tight

labor

markets, should

they be present

at the time.

This marks

a significant

shift from

their prior

policy framework,

which was

focused on

the

unemployment

rate as a

key indicator

of impending

inflation.

Adherence

to this policy

could steepen

the U.S.

Treasury curve

as short-term

rates could

remain low

for a considerable

period but

longer-term

rates could

rise given

the Fed’s intention

to let inflation

potentially

run

above 2% in

the future

as the economy

more fully

recovers.

As mentioned

above, this

appears to

be occurring

early in 2021

now that

effective vaccines

have been

found and

inoculations

are distributed

at an accelerating

pace.

Interest Rates

Interest rates

steadily increased

throughout

the first

quarter as

described above

and levels

of implied

volatility

rose as well.

Mortgage

rates slowly

declined at

the end of

2020 as originators

added capacity

and could handle

ever increasing

levels of production

volume.

This

trend in mortgage

rates quickly

reversed during

the first

quarter of

2021 as rates

began to increase,

especially in

late February

and March.

With the increase

in interest

rates, prepayment

activity slowed.

The percent

of the Agency

RMBS universe

with sufficient

rate incentive

economically

refinance

has declined

from approximately

80%

at the end

of 2020 to

approximately

46% at the

end of the

first quarter.

However, the spread

between rates

available to

borrowers

and the implied

yield on a

current coupon

mortgage,

known as the

primary/secondary

spread, has

continued to

compress.

The spread

is still slightly

above long-term

average levels

so further

compression

is possible,

meaning rates

available

to borrowers

could remain

at current

levels even

if U.S. Treasury

rates increased

further. Since

the

end of the

first quarter,

interest rates

have declined

by approximately

10 basis points

in the case

of the 10-year

U.S. Treasury

note.

Accordingly, prepayment

levels on

RMBS securities

are likely

to remain

high unless

U.S. Treasury

rates increase

above current

levels.

- 38 -

The Agency

MBS Market

The

market conditions

that prevailed

throughout

the first

quarter were

not conducive

to mortgage

performance.

In fact, apart

from high

yield bonds,

all fixed income

sectors had

negative returns

for the quarter.

Interest rates

rose rapidly, and

volatility was

elevated.

Agency

RMBS had

negative absolute

and excess

returns for

the first

quarter of

-1.2% and

-0.3%, respectively

(both vs U.S

Treasuries and

LIBOR/swaps).

There is a

benefit to

higher interest

rates, and

as interest

rates rose

prepayment

levels declined.

The Mortgage

Bankers

Association

refinance

index declined

from approximately

4700 in early

January 2021

to approximately

2900 in early

April 2021,

before

rebounding

slightly since.

The Agency

RMBS market

continues to

be essentially

bifurcated

with two

separate and

distinct sub-markets.

Lower coupon

fixed rate

mortgages,

coupons of

1.5% through

2.5%, are

purchased by

the Fed.

Fed purchase

activity maintains

substantial

price pressure

under these

coupons, and

they benefit

from attractive

TBA dollar

roll drops.

Higher coupons

in the TBA

market

do not have

the benefit

of Fed purchases.

Importantly, the

Fed tends

to take the

worst performing

collateral

out of the

market.

The

absence of

Fed purchases

of higher

coupons means

the market

is left to

absorb still

very high

prepayment

speeds on these

securities

rates have

not risen

enough to

eliminate the

economic incentive

to refinance.

The market

expects prepayments

on higher

coupons will

eventually

decline as

“burn out”

sets in – a

phenomenon

whereby refinancing

activity declines

as borrowers

are exposed

to refinancing

incentives for

an extended

period.

Through the

April 2021

prepayment

report released

in early May, this

has yet to

occur.

While

market

participants

continue to

favor specified

pools that

have favorable

prepayment

characteristics

that mute

the refinance

incentive,

the

premium over

generic TBA

securities

has declined

significantly

with the reduced

refinance

incentive caused

by the increase

in rates

available to

borrowers.

Recent Legislative

and Regulatory

Developments

The Fed conducted

large scale

overnight repo

operations

from late

2019 until

July 2020 to

address disruptions

in the U.S.

Treasury,

Agency debt

and Agency

MBS financing

markets. These

operations

ceased in July

2020 after

the central

bank successfully

tamed volatile

funding costs

that had threatened

to cause disruption

across the

financial system.

The Fed has

taken a number

of other actions

to stabilize

markets as

a result of

the impacts

of the COVID-19

pandemic. In

March of

2020, the

Fed announced

a $700 billion

asset purchase

program to

provide liquidity

to the U.S.

Treasury and

Agency RMBS

markets. The

Fed also lowered

the Fed Funds

rate to a

range of 0.0%

– 0.25%, after

having already

lowered the

Fed Funds

rate by 50

bps earlier

in the

month. Later

that same

month the

Fed announced

a program

to acquire

U.S. Treasuries

and Agency

RMBS in the

amounts needed

support smooth

market functioning.

With these

purchases,

market conditions

improved substantially.

Currently, the Fed

is committed

purchasing

$80 billion

of U.S. Treasuries

and $40 billion

of Agency

RMBS each

month. Chairman

Powell and

the Fed have

reiterated

their

commitment

to this level

of asset purchases

at every meeting

since their

meeting on

June 30,

2020. Chairman

Powell has

also maintained

that the Fed

expects to

maintain interest

rates at this

level until

the Fed is

confident that

the economy

has weathered

the pandemic

and its

impact on economic

activity and

is on track

to achieve

its maximum

employment

and price

stability goals.

The Fed has

taken various

other

steps to support

certain other

fixed income

markets, to

support mortgage

servicers and

to implement

various portions

of the Coronavirus

Aid, Relief,

and Economic

Security (“CARES”)

Act.

The CARES

Act was passed

by Congress

and signed

into law by

President

Trump on March

27, 2020.

The CARES

Act provided

many forms

of direct

support to

individuals

and small

businesses

in order to

stem

the steep

decline in

economic activity.

This over

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

businesses,

states and

municipalities

and grants

to the airline

industry. On April

24, 2020,

President

Trump signed an

additional

funding

bill into law

that provides

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

evictions (July

25, 2020),

expanded

unemployment

benefits (July

31, 2020),

and a moratorium

on foreclosures

(August 31,

2020). 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

- 39 -

measures to

temporarily

halt residential

evictions and

foreclosures,

including through

temporary

financial assistance.

On December

27, 2020,

President

Trump signed into

law an additional

$900 billion

coronavirus

aid package

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 further

extended to

June 30, 2021

on March 29,

2021. 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

to June 30,

2021 on February

25, 2021.

On February

16, 2021,

the U.S.

Housing and

Urban Development

Department

announced

the extension

of the FHA

eviction and

foreclosure

moratorium

to June 30,

2021.

On March 11, 2021,

the $1.9 trillion

American Rescue

Plan Act of

2021 was signed

into law.

This stimulus

program furthered

the

Federal government’s

efforts to stabilize

the economy

and provide

assistance

to sectors

of the population

still suffering

from the

various

physical and

economic effects

of the pandemic.

In January

2019, the

Trump administration

made statements

of its plans

to work with

Congress to

overhaul Fannie

Mae and Freddie

Mac and expectations

to announce

a framework

for the development

of a policy

for comprehensive

housing finance

reform soon.

September

30, 2019,

the FHFA announced

that Fannie

Mae and Freddie

Mac were allowed

to increase

their capital

buffers to

$25 billion

and $20 billion,

respectively, from

the prior

limit of $3

billion each.

This step could

ultimately

lead to Fannie

Mae and Freddie

Mac being

privatized

and represents

the first

concrete step

on the road

to GSE reform.

On June 30,

2020, the

FHFA released

a proposed

rule on a

new regulatory

framework

for the GSEs

which seeks

to implement

both a risk-based

capital framework

and minimum

leverage

capital

requirements.

The final

rule on the

new capital

framework

for the GSEs

was published

in the federal

December 2020.

January 14,

2021, the

U.S. Treasury

and the FHFA executed

letter agreements

allowing the

GSEs to continue

to retain

capital up

to their

regulatory

minimums, including

buffers, as

prescribed

in the December

rule.

These letter

agreements

provide, in

part, (i)

there will

be no

exit from conservatorship

until all

material litigation

is settled

and the GSE

has common

equity Tier

1 capital of

at least 3%

of its assets,

(ii)

the GSEs will

comply with

the FHFA’s regulatory

capital framework,

(iii) higher-risk

single-family

mortgage acquisitions

will be restricted

current levels,

and

(iv) the U.S.

Treasury and

the FHFA will

establish a

timeline and

process for

future GSE

reform. However,

no definitive

proposals or

legislation

have been

released or

enacted with

respect to

ending the

conservatorship,

unwinding

the GSEs,

or materially

reducing the

roles of the

GSEs in the

U.S. mortgage

market.

In 2017, policymakers

announced

that LIBOR

will be replaced

by December

31, 2021.

The directive

was spurred

by the fact

that

banks are uncomfortable

contributing

to the LIBOR

panel given

the shortage

of underlying

transactions

on which to

base levels

and the

liability associated

with submitting

an unfounded

level. The

ICE Benchmark

Administration,

in its capacity

as administrator

of USD LIBOR,

has confirmed

that it will

cease publication

of (i) the

one-week and

two-month

USD LIBOR

settings immediately

following

the LIBOR

publication

on December

31, 2021,

and (ii) the

overnight

and one, three,

six and 12-month

USD LIBOR

settings immediately

following

the

LIBOR publication

on June 30,

2023. A joint

statement

by key regulatory

authorities

calls on banks

to cease entering

into new

contracts

that use USD

LIBOR as a

reference rate

by no later

than December

31, 2021.

The Alternative

Reference

Rates Committee,

a steering

committee comprised

of large U.S.

financial institutions,

has proposed

replacing USD-LIBOR

with a new

SOFR, a rate

based on U.S.

repo

trading. On

December 31,

2020, FNMA

and FHLMC

ceased purchasing

LIBOR-based

adjustable-rate

mortgage (“ARM”)

loans and began

accepting SOFR-based

ARMs and issuing

SOFR-based

MBS. However,

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

of 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

- 40 -

monthly payments

to twenty-four

consecutively

missed monthly

payments (i.e.,

24 months past

due). This

new timeframe

will apply

outstanding

single-family

pools and

newly issued

single-family

pools and was

first reflected

when January

2021 factors

were released

the fourth

business day

in February

2021.

For Agency

RMBS investors,

when a delinquent

loan is bought

out of a pool

of mortgage

loans, the

removal of

the loan from

the pool

is the same

as a total

prepayment

of the loan.

The respective

GSEs currently

anticipate,

however, that

delinquent

loans will

repurchased

in most cases

before the

24-month deadline

under one

of the following

exceptions

listed below.

• a loan that is paid

in full, or

where the

related lien

is released

and/or the

note debt

is satisfied

or forgiven;

• a loan repurchased by

a seller/servicer

under applicable

selling and

servicing requirements;

• a loan entering a permanent

modification,

which generally

requires

it to be removed

from the MBS.

During any

modification

trial

period, the

loan will

remain in the

MBS until

the trial

period ends;

• a loan subject to a

short sale

or deed-in-lieu

of foreclosure;

• a loan referred to

foreclosure.

Because of

these exceptions,

the GSEs

currently believe

based on

prevailing

assumptions

and market

conditions

this change

will

have only a

marginal impact

on prepayment

speeds, in

aggregate.

Cohort level

impacts may

vary. For example,

more than

half of loans

referred to

foreclosure

are historically

referred within

six months

of delinquency. The

degree to

which speeds

are affected

depends on

delinquency

levels, borrower

response, and

referral to

foreclosure

timelines.

The scope and

nature of

the actions

the U.S.

government

or the Fed

will ultimately

undertake

are unknown

and will continue

evolve, especially

in light of

the COVID-19

pandemic, President

Biden’s new

administration

and the new

Congress in

the United

States.

On April 28,

2021 the FHFA

announced new

refinance

options for

low-income

families with

enterprise

backed mortgages

(FNMA and

FHLMC). Eligible

borrowers

will benefit

from a reduced

interest rate

and lower

monthly payment.

Eligibility

for the program

was further

clarified

the respective

GSEs on May

4, 2021. The

impact on

refinancing

on the Company

and the universe

of Agency

MBS is expected

to be limited

and concentrated

in loans with

lower loan

balances.

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

- 41 -

prepayment

risk because

holders of

those mortgages

are most likely

to refinance

to a lower

rate. IOs

and IIOs, however,

may be the

types

of Agency

RMBS most

sensitive to

increased prepayment

rates. Because

the holder

of an IO or

IIO receives

no principal

payments,

the

values of IOs

and IIOs are

entirely dependent

on the existence

of a principal

balance on

the underlying

mortgages.

If the principal

balance

is eliminated

due to prepayment,

IOs and IIOs

essentially

become worthless.

Although increased

prepayment

rates can

negatively

affect

the value of

our IOs and

IIOs, they

have the opposite

effect on POs.

Because POs

act like zero-coupon

bonds, meaning

they are

purchased at

a discount

to their

par value and

have an effective

interest rate

based on the

discount and

the term of

the underlying

loan, an

increase in

prepayment

rates would

reduce the

effective term

of our POs

and

accelerate

the yields

earned on

those assets,

which would

increase our

net income.

Higher long-term

rates can

also affect

the value of

our Agency

RMBS.

As long-term

rates rise,

rates available

to borrowers

also rise.

This tends

to cause prepayment

activity to

slow and extend

the expected

average life

of mortgage

cash flows.

As the expected

average

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,

including its

most recent

meeting in

April of 2021.

If the Fed

modifies,

reduces or

suspends its

purchases

of Agency RMBS,

our investment

portfolio could

be negatively

impacted. Further,

the moratoriums

foreclosures

and evictions

described

above will

likely delay

potential

defaults on

loans that

would otherwise

be bought

out of Agency

MBS

pools as described

above.

Depending

on the ultimate

resolution

of the foreclosure

or evictions,

when and if

it occurs,

these loans

may be

removed from

the pool into

which they

were securitized.

If this were

to occur, it would

have the effect

of delaying

a prepayment

on the

Company’s securities

until such

time. As the

majority of

the Company’s

Agency RMBS

assets were

acquired at

a premium

to par, this will

tend to increase

the realized

yield on the

asset in question.

Because we

base our investment

decisions on

risk management

principles

rather than

anticipated

movements in

interest rates,

in a

volatile interest

rate environment

we may allocate

more capital

to structured

Agency RMBS

with shorter

durations.

We believe these

securities

have a lower

sensitivity

to changes

in long-term

interest

rates than

other asset

classes. We

may attempt

to mitigate

our

exposure to

changes in

long-term

interest rates

by investing

in IOs and

IIOs, which

typically

have different

sensitivities

to changes

in long-

term interest

rates than

PT RMBS, particularly

PT RMBS backed

by fixed-rate

mortgages.

Effects on our borrowing costs

We leverage

our PT RMBS

portfolio and

a portion

of our structured

Agency RMBS

with principal

balances through

the use of

short-

term repurchase

agreement

transactions.

The interest

rates on

our debt are

determined

by the short-term

interest rate

markets. An

increase in

the Fed Funds

rate or LIBOR

would increase

our borrowing

costs, which

could affect

our interest

rate spread

if there is

corresponding

increase in

the interest

we earn on

our assets.

This would

be most prevalent

with respect

to our Agency

RMBS backed

fixed rate

mortgage loans

because the

interest rate

on a fixed-rate

mortgage loan

does not change

even though

market rates

may change.

In order to

protect our

net interest

margin against

increases in

short-term

interest rates,

we may enter

into interest

rate swaps,

which

economically

convert our

floating-rate

repurchase

agreement

debt to fixed-rate

debt, or utilize

other hedging

instruments

such as

Eurodollar, Fed

Funds and

T-Note futures

contracts or

interest rate

swaptions.

- 42 -

Summary

COVID-19

continues to

dominate the

performance

of the markets

and economy.

In the case

of the first

quarter of

2021 this meant

the

recovery from

the pandemic,

in stark contrast

to the first

quarter of

2020 when

the pandemic

first emerged

in the U.S.

The recovery

has

been driven

by many factors

– the emergence

and widespread

distribution

of a very effective

vaccine, substantial

government

stimulus

and accommodative

monetary

policy. The economy

is recovering

rapidly as

the emergence

of an effective

vaccine has

allowed pent-up

demand to

lead to a

surge in demand

for goods

and services,

fueled further

by multiple

rounds of

stimulus checks

and numerous

other

means of financial

support provided

by the government.

Financial

markets are

benefiting

from extremely

lose financial

conditions,

abundant liquidity,

high risk tolerance

and an insatiable

demand for

returns.

The surge

in economic

activity during

the first

quarter of

2021 and expectations

for activity

to return

to pre-pandemic

levels much

sooner than

anticipated

caused interest

rates to rise

rapidly as

well.

The yield on

the 10-year

U.S. Treasury

note increased

by over 82

basis points

and closed

the quarter

at approximately

1.75%, not

far below

the yield level

that prevailed

last January

before the

pandemic

emerged last

March.

In addition,

the U.S.

Treasury curve

has steepened

as the market

fears an

outbreak in

inflation caused

by the

combination

of abundant

liquidity

via government

stimulus,

loose financial

conditions

and very

strong demand

for all types

of goods and

services.

Constrained

supply of

needed raw

materials,

various inputs

to consumer

goods, such

as micro chips,

and even labor

have

exacerbated

the upward

pressure on

prices. It

remains to

be seen if

these price

pressures prove

to be temporary

lead to more

sustained

inflation.

The Fed believes

the effects

are transitory.

Current market

pricing is

roughly in

line with

the Fed’s view

as the Eurodollar

and

Fed Funds

futures markets

only reflect

at most one

interest rate

hike by the

end of 2022.

The Agency

RMBS market

did not perform

well during

the first quarter

as market conditions

– rapidly

rising rates

and increased

volatility –

led to extension

fears in

mortgage cash

flows, driving

convexity related

selling and

spread widening.

Agency RMBS

had

negative absolute

and excess

returns for

the first

quarter of

2021 of -1.2%

and -0.3%,

respectively

(both vs U.S.

Treasuries and

LIBOR/swaps).

A positive

impact from

higher rates

and lowered

prepayment

expectations

is slower

premium amortization,

which

enhances net

income all

else equal.

The Mortgage

Bankers Association

refinance index

declined from

approximately

4700 in early

January 2021

to approximately

2900 in early

April, before

rebounding

slightly since.

As was the

case for much

of 2020, the

Agency RMBS

market continues

to be essentially

bifurcated

with two

separate and

distinct sub-markets.

Lower coupon

fixed rate

mortgages,

coupons of

1.5% through

2.5%, are

purchased by

the Fed and

benefit from

the substantial

price pressure

and attractive

TBA dollar

roll drops.

Higher

coupons in

the TBA market

do not have

the benefit

of Fed purchases,

so the market

is left to

absorb still

very high prepayment

speeds on

these securities

as rates have

not risen

enough to

eliminate the

economic incentive

to refinance.

The market

expects prepayments

higher coupons

will eventually

decline as

“burn out”

sets in, although

this has yet

to occur.

One final

element to

poor MBS

performance

for

the quarter

was the impact

of higher

rates on the

premiums paid

for specified

pools.

The premium

over generic

TBA securities

has

declined significantly

with the reduced

refinance incentive

caused by

the increase

in rates available

to borrowers.

Now that

the containment

of the COVID-19

pandemic appears

to be within

sight, at least

in the U.S.,

the economy

and life as

we were

accustomed

to should return

to pre-pandemic

norms.

The key questions

the market

must grapple

with going

forward relate

to whether

there have

been any permanent

changes that

will result,

including,

for example,

inflationary

pressures

resulting from

the unprecedented

government

stimulus and

monetary

quantitative

easing by the

Fed, the impact

of the many

technological

advancements

that were

born out

of the pandemic,

such as employees’

ability to

effectively

work remotely, the

desire to

live in congested

cities and

the implications

for

commercial

real estate

values for

the cities

that many

may not want

to return

to, and the

willingness

to gather

in large numbers

or travel

air. These factors

will matter

to both the

Company and

Orchid to the

extent they

impact the

levels of

interest rates

and the efficacy

refinancing

specifically, and

economic activity

and inflation

generally.

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

- 43 -

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 March 31, 2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At March 31, 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

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.

- 44 -

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 March 31, 2021 related to the Citigroup

demand.

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

in Item 103 of Regulation S-K.

ITEM 1A.

RISK FACTORS.

There have been

no material

changes to the

risk factors

disclosed in

our Annual Report

on Form 10-K

for the year

ended

December 31,

2020, filed

with the SEC

on March 15,

2021.

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

On March 26,

2018, the Company's

Board of Directors

authorized the

repurchase of

up to 500,000

shares of the

Company's Class

A common stock.

The maximum

remaining number

of shares that

may be repurchased

under this

authorization

is 429,596 shares.

The authorization,

as currently

extended, expires

on November

15, 2021.

The Company

did

not repurchase

any of its common

stock during

the three months

ended March

31, 2021.

The Company

did not have

any unregistered

sales of its

equity securities

during the three

months ended

March 31,

2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY

DISCLOSURES.

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No

3.1

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

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

3.2

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

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

3.3

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

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

- 45 -

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.

- 46 -

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:

May 14, 2021

By:

/s/ Robert E. Cauley

Robert E. Cauley

Chairman and Chief Executive Officer

Date:

May 14, 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)