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EX-32.2 - EXHIBIT 32.2 - BIMINI CAPITAL MANAGEMENT, INC.bmnm10q20160630x322.htm
EX-32.1 - EXHIBIT 32.1 - BIMINI CAPITAL MANAGEMENT, INC.bmnm10q20160630x321.htm
EX-31.2 - EXHIBIT 31.2 - BIMINI CAPITAL MANAGEMENT, INC.bmnm10q20160630x312.htm
EX-31.1 - EXHIBIT 31.1 - BIMINI CAPITAL MANAGEMENT, INC.bmnm10q20160630x311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

 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)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b2 of the Exchange Act.
Large accelerated filer  Accelerated filer Non-accelerated filer Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No
Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
Title of each Class
Latest Practicable Date
Shares Outstanding
Class A Common Stock, $0.001 par value
August 10, 2016
12,631,627
Class B Common Stock, $0.001 par value
August 10, 2016
31,938
Class C Common Stock, $0.001 par value
August 10, 2016
31,938


BIMINI CAPITAL MANAGEMENT, INC.

TABLE OF CONTENTS


   
Page
     
PART I. FINANCIAL INFORMATION
     
ITEM 1. Condensed Financial Statements
1
 
Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015
1
 
Consolidated Statements of Operations (unaudited) for the six and three months ended June 30, 2016 and 2015
2
 
Consolidated Statement of Stockholders' Equity (unaudited) for the six months ended June 30, 2016
3
 
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and 2015
4
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
24
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
45
ITEM 4. Controls and Procedures
45
   
PART II. OTHER INFORMATION
   
ITEM 1. Legal Proceedings
46
ITEM 1A. Risk Factors
46
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
46
ITEM 3. Defaults Upon Senior Securities
46
ITEM 4. Mine Safety Disclosures
46
ITEM 5. Other Information
46
ITEM 6. Exhibits
47
SIGNATURES
48


PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
             
    
(Unaudited)
       
   
June 30, 2016
   
December 31, 2015
ASSETS:
           
Mortgage-backed securities, at fair value
           
Pledged to counterparties
 
$
109,365,163
   
$
81,192,199
 
Unpledged
   
1,472,840
     
2,796,200
 
Total mortgage-backed securities
   
110,838,003
     
83,988,399
 
Cash and cash equivalents
   
3,879,595
     
6,310,683
 
Restricted cash
   
562,630
     
401,800
 
Orchid Island Capital, Inc. common stock, at fair value
   
14,354,920
     
13,852,707
 
Retained interests in securitizations
   
1,359,275
     
1,124,278
 
Accrued interest receivable
   
426,005
     
351,049
 
Property and equipment, net
   
3,448,624
     
3,492,612
 
Deferred tax assets, net
   
64,300,364
     
64,832,242
 
Other assets
   
2,921,690
     
2,701,655
 
Total Assets
 
$
202,091,106
   
$
177,055,425
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
LIABILITIES:
               
Repurchase agreements
 
$
103,724,730
   
$
77,234,249
 
Junior subordinated notes due to Bimini Capital Trust II
   
26,804,440
     
26,804,440
 
Payable for unsettled securities purchased
   
-
     
1,859,277
 
Accrued interest payable
   
118,979
     
83,957
 
Other liabilities
   
1,645,672
     
2,533,442
 
Total Liabilities
   
132,293,821
     
108,515,365
 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' EQUITY:
               
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 shares
               
designated Series A Junior Preferred Stock, 9,900,000 shares undesignated;
               
no shares issued and outstanding as of June 30, 2016 and 2015
   
-
     
-
 
Class A Common stock, $0.001 par value; 98,000,000 shares designated: 12,631,627
               
shares issued and outstanding as of June 30, 2016 and 12,373,294 shares
               
issued and outstanding as of December 31, 2015
   
12,632
     
12,373
 
Class B Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
               
issued and outstanding as of June 30, 2016 and December 31, 2015
   
32
     
32
 
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
               
issued and outstanding as of June 30, 2016 and December 31, 2015
   
32
     
32
 
Additional paid-in capital
   
334,839,540
     
334,630,263
 
Accumulated deficit
   
(265,054,951
)
   
(266,102,640
)
Stockholders' equity
   
69,797,285
     
68,540,060
 
Total Liabilities and Stockholders' Equity
 
$
202,091,106
   
$
177,055,425
 
See Notes to Consolidated Financial Statements
 
-1-

BIMINI CAPITAL MANAGEMENT, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Unaudited)
 
For the Six and Three Months Ended June 30, 2016 and 2015
 
                         
    
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Interest income
 
$
1,842,540
   
$
2,281,256
   
$
1,025,076
   
$
1,074,122
 
Interest expense
   
(301,973
)
   
(198,334
)
   
(174,069
)
   
(98,142
)
Net interest income, before interest on junior subordinated notes
   
1,540,567
     
2,082,922
     
851,007
     
975,980
 
Interest expense on junior subordinated notes
   
(539,972
)
   
(491,461
)
   
(276,361
)
   
(247,988
)
Net interest income
   
1,000,595
     
1,591,461
     
574,646
     
727,992
 
Unrealized (losses) gains on mortgage-backed securities
   
(39,157
)
   
(197,399
)
   
249,087
     
(1,026,695
)
Realized gains on mortgage-backed securities
   
250,973
     
-
     
19,126
     
-
 
(Losses) gains on derivative instruments
   
(2,057,475
)
   
(1,009,075
)
   
(757,613
)
   
5,625
 
Net portfolio (loss) income
   
(845,064
)
   
384,987
     
85,246
     
(293,078
)
                                 
Other income:
                               
Advisory services
   
2,542,536
     
2,382,357
     
1,273,517
     
1,287,702
 
Gains on retained interests in securitizations
   
1,079,867
     
2,538,580
     
533,847
     
1,052,824
 
Unrealized gains (losses) on Orchid Island Capital, Inc. common stock
   
502,213
     
(1,806,264
)
   
(111,603
)
   
(1,992,780
)
Orchid Island Capital, Inc. dividends
   
1,171,830
     
1,060,198
     
585,915
     
530,099
 
Other income
   
460
     
477
     
230
     
214
 
Total other income
   
5,296,906
     
4,175,348
     
2,281,906
     
878,059
 
                                 
Expenses:
                               
Compensation and related benefits
   
1,551,017
     
1,521,725
     
755,307
     
737,621
 
Directors' fees and liability insurance
   
311,075
     
342,703
     
155,538
     
174,937
 
Audit, legal and other professional fees
   
295,150
     
1,047,451
     
138,078
     
712,674
 
Settlement of litigation
   
-
     
3,500,000
     
-
     
-
 
Administrative and other expenses
   
566,556
     
433,552
     
304,930
     
193,012
 
Total expenses
   
2,723,798
     
6,845,431
     
1,353,853
     
1,818,244
 
                                 
Net income (loss) before income tax provision
   
1,728,044
     
(2,285,096
)
   
1,013,299
     
(1,233,263
)
Income tax provision
   
680,355
     
608,311
     
411,601
     
271,216
 
                                 
Net income (loss)
 
$
1,047,689
   
$
(2,893,407
)
 
$
601,698
   
$
(1,504,479
)
                                 
                                 
Basic and Diluted Net Income (Loss) Per Share of:
                               
CLASS A COMMON STOCK
                               
Basic and Diluted
 
$
0.08
   
$
(0.23
)
 
$
0.05
   
$
(0.12
)
CLASS B COMMON STOCK
                               
Basic and Diluted
 
$
0.08
   
$
(0.23
)
 
$
0.05
   
$
(0.12
)
Weighted Average Shares Outstanding:
                               
CLASS A COMMON STOCK
                               
Basic and Diluted
   
12,687,836
     
12,339,358
     
12,709,127
     
12,346,224
 
CLASS B COMMON STOCK
                               
Basic and Diluted
   
31,938
     
31,938
     
31,938
     
31,938
 
See Notes to Consolidated Financial Statements
 
 
 
 
 
-2-

BIMINI CAPITAL MANAGEMENT, INC.
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 
(Unaudited)
 
For the Six Months Ended June 30, 2016
 
                         
 
Stockholders' Equity
     
   
Common
 
Additional
 
Accumulated
     
   
Stock
 
Paid-in Capital
 
Deficit
 
Total
 
Balances, January 1, 2016
 
$
12,437
   
$
334,630,263
   
$
(266,102,640
)
 
$
68,540,060
 
Net income
   
-
     
-
     
1,047,689
     
1,047,689
 
Issuance of Class A common shares for equity plan exercises
   
259
     
193,491
     
-
     
193,750
 
Amortization of equity plan compensation
   
-
     
15,786
     
-
     
15,786
 
                                 
Balances, June 30, 2016
 
$
12,696
   
$
334,839,540
   
$
(265,054,951
)
 
$
69,797,285
 
See Notes to Consolidated Financial Statements
 
 
 
 
-3-

 
BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 2016 and 2015
             
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income (loss)
 
$
1,047,689
   
$
(2,893,407
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
               
Stock based compensation
   
209,536
     
49,036
 
Depreciation
   
43,988
     
47,198
 
Deferred income tax provision
   
531,878
     
471,310
 
(Gains) losses on mortgage-backed securities
   
(211,816
)
   
197,399
 
Gains on retained interests in securitizations
   
(1,079,867
)
   
(2,538,580
)
Unrealized (gains) losses on Orchid Island Capital, Inc. common stock
   
(502,213
)
   
1,806,264
 
Changes in operating assets and liabilities:
               
Accrued interest receivable
   
(74,956
)
   
20,059
 
Other assets
   
(220,035
)
   
307,426
 
Accrued interest payable
   
35,022
     
(5,286
)
Other liabilities
   
(887,770
)
   
3,251,276
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
   
(1,108,544
)
   
712,695
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
From mortgage-backed securities investments:
               
Purchases
   
(74,459,950
)
   
(986,194
)
Sales
   
41,767,104
     
-
 
Principal repayments
   
6,055,058
     
10,858,661
 
Payments received on retained interests in securitizations
   
844,870
     
2,296,806
 
Increase in restricted cash
   
(160,830
)
   
(1,813,890
)
Purchases of Orchid Island Capital, Inc. common stock
   
(1,859,277
)
   
-
 
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
   
(27,813,025
)
   
10,355,383
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from repurchase agreements
   
424,489,350
     
451,679,644
 
Principal repayments on repurchase agreements
   
(397,998,869
)
   
(460,437,709
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
   
26,490,481
     
(8,758,065
)
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
   
(2,431,088
)
   
2,310,013
 
CASH AND CASH EQUIVALENTS, beginning of the period
   
6,310,683
     
4,699,059
 
CASH AND CASH EQUIVALENTS, end of the period
 
$
3,879,595
   
$
7,009,072
 
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
Interest
 
$
806,923
   
$
695,081
 
Income taxes
 
$
515,433
   
$
137,001
 
                 
See Notes to Consolidated Financial Statements
-4-

BIMINI CAPITAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2016

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Bimini Capital Management, Inc., a Maryland corporation ("Bimini Capital" or the "Company"), was formed in September 2003 for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities ("MBS").  In addition, the Company manages an MBS portfolio for Orchid Island Capital, Inc. ("Orchid") and receives fees for providing these services.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital, Bimini Advisors Holdings, LLC, and its wholly-owned subsidiary, Bimini Advisors, LLC (together "Bimini Advisors"), and MortCo TRS, LLC and its consolidated subsidiaries ("MortCo"). All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") Topic 810, Consolidation, requires the consolidation of a variable interest entity ("VIE") by an enterprise if it is deemed the primary beneficiary of the VIE. Further, ASC 810 requires a qualitative assessment to determine the primary beneficiary of a VIE, an ongoing assessment of whether an enterprise is the primary beneficiary of a VIE, and additional disclosures for entities that have variable interests in VIEs.  As further described in Note 8, Bimini Capital has a common share investment in a trust used in connection with the issuance of Bimini Capital's junior subordinated notes.  Pursuant to ASC 810, management has concluded that, while the trust is a VIE, Bimini Capital's common share investment in the trust is not a variable interest.  Therefore, the trust has not been consolidated in the financial statements of Bimini Capital, and accordingly, this investment has been accounted for on the equity method.

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 do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three month periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

The consolidated balance sheet at December 31, 2015 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, 2015.

-5-


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 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 the fair values of MBS, investment in Orchid common shares, derivatives, retained interests, asset valuation allowances and deferred tax asset allowances recorded for each accounting period.

Statement of Comprehensive Income

In accordance with ASC Topic 220, Comprehensive Income, a statement of comprehensive income has not been included as the Company has no items of other comprehensive income (loss).  Comprehensive income (loss) is the same as net income (loss) for all periods presented.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on deposit with financial institutions and highly liquid investments with original maturities of three months or less at the time of purchase. Restricted cash includes cash pledged as collateral for repurchase agreements and derivative instruments.

The Company maintains cash balances at several banks, and at times these 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. At June 30, 2016, the Company's cash deposits exceeded federally insured limits by approximately $2.2 million. Restricted cash balances are uninsured, but are held in separate customer accounts that are segregated from the general funds of the counterparty.  The Company limits uninsured balances to only large, well-known banks and derivative counterparties and believes that it is not exposed to significant credit risk on cash and cash equivalents or restricted cash balances.

Mortgage-Backed Securities

The Company invests primarily in mortgage pass-through ("PT") certificates, collateralized mortgage obligations, and interest-only ("IO") securities and inverse interest-only ("IIO") securities representing interest in or obligations backed by pools of mortgage-backed loans. 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.

The fair value of the Company's investment in MBS is governed by ASC Topic 820, Fair Value Measurement.  The definition of fair value in ASC Topic 820 focuses on 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.

-6-

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 on MBS in the consolidated statements of operations.  For IO securities, the income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset's carrying value. At each reporting date, the effective yield is adjusted prospectively from the reporting period based on the new estimate of prepayments and the contractual terms of the security. For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value of MBS during each reporting period are recorded in earnings and reported as unrealized gains or losses on mortgage-backed securities in the accompanying consolidated statements of operations. The amount reported as unrealized gains or losses on mortgage backed securities thus captures the net effect of changes in the fair market value of securities caused by market developments and any premium or discount lost as a result of principal repayments during the period.

Orchid Island Capital, Inc. Common Stock

The Company has elected the fair value option for its continuing investment in Orchid common shares. The change in the fair value of this investment and dividends received on this investment are reflected in other income 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. Electing the fair value option requires the Company to record changes in fair value in the consolidated statements of operations, which, in management's view, more appropriately reflects the results of our operations for a particular reporting period and is consistent with how the investment is managed.

Advisory Services

Orchid is externally managed and advised by Bimini Advisors pursuant to the terms of a management agreement. Under the terms of the management agreement, Orchid is obligated to pay Bimini Advisors a monthly management fee and a pro rata portion of certain overhead costs and to reimburse the Company for any direct expenses incurred on its behalf.

Retained Interests in Securitizations

Retained interests in the subordinated tranches of securities created in securitization transactions were initially recorded at their fair value when issued by MortCo. Subsequent adjustments to fair value are reflected in earnings. Quoted market prices for these assets are generally not available, so the Company estimates fair value based on the present value of expected future cash flows using management's best estimates of key assumptions, which include expected credit losses, prepayment speeds, weighted-average life, and discount rates commensurate with the inherent risks of the asset.

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 Eurodollar futures contracts, but it may enter into other transactions in the future.

The Company has elected not to treat any of its derivative financial instruments as hedges in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option.  FASB ASC Topic 815, Derivatives and Hedging, requires that all derivative instruments be carried at fair value. Changes in fair value are recorded in earnings for each period.

-7-


Holding derivatives creates exposure to credit risk related to the potential for failure on the part of counterparties to honor their commitments. In addition, the Company may be required to post collateral based on any declines in the market value of the derivatives. In the event of default by a counterparty, the Company may have difficulty recovering its collateral and may not receive payments provided for under the terms of the agreement. To mitigate this risk, the Company uses only well-established commercial banks as counterparties.

Financial Instruments

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value, either in the body of the financial statements or in the accompanying notes. MBS, Orchid common stock, Eurodollar futures contracts, interest rate swaptions and retained interests in securitization transactions 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 14 of the consolidated financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, accrued interest receivable, other assets, repurchase agreements, payable for unsettled securities purchased, accrued interest payable and other liabilities generally approximates their carrying value as of June 30, 2016 and December 31, 2015, 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. Information regarding carrying amount, effective interest rate and maturity date for these instruments is presented in Note 8 to the consolidated financial statements.

Property and Equipment, net

Property and equipment, net, consists of computer equipment with a depreciable life of 3 years, office furniture and equipment with depreciable lives of 8 to 20 years, land which has no depreciable life, and buildings and improvements with depreciable lives of 30 years. Property and equipment is recorded at acquisition cost and depreciated using the straight-line method over the estimated useful lives of the assets.

Repurchase Agreements

The Company finances the acquisition of the majority of its PT MBS through the use of repurchase agreements under master repurchase agreements. Pursuant to ASC Topic 860, Transfers and Servicing, the Company accounts for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts, including accrued interest, as specified in the respective agreements.

Share-Based Compensation

The Company follows the provisions of ASC Topic 718, Compensation – Stock Compensation, to account for stock and stock-based awards. For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings over the vesting period based on the fair value of the award. Payments pursuant to dividend equivalent rights, which are granted along with certain equity based awards, are charged to stockholders' equity when dividends are declared. The Company applies a zero forfeiture rate for its equity based awards, as such awards have been granted to a limited number of employees and historical forfeitures have been minimal. A significant forfeiture, or an indication that significant forfeitures may occur, would result in a revised forfeiture rate which would be accounted for prospectively as a change in an estimate. For transactions with non-employees in which services are performed in exchange for the Company's common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance.

-8-

Earnings Per Share

The Company follows the provisions of ASC Topic 260, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents or two (or more) classes of securities that participate in dividend distributions to present both basic and diluted earnings per share ("EPS") on the face of the consolidated statement of operations. 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 on each share of Class A Common Stock if, as and when authorized and declared by the Board of Directors. 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

For the calendar year ended December 31, 2015, Bimini Capital, Bimini Advisors and MortCo were separate taxpaying entities for income tax purposes and filed separate Federal income tax returns. Bimini Advisors remained a separate tax paying entity through January 31, 2016; on that date, Bimini Advisors was reorganized to be an LLC wholly-owned by Bimini Capital. Beginning with the tax period starting on February 1, 2016, Bimini Capital and Bimini Advisors will be a single tax paying entity. MortCo continues to be treated as a separate tax paying entity for the year ending December 31, 2016.

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, 2012 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.

The Company measures, recognizes and presents its uncertain tax positions in accordance with ASC Topic 740, Income Taxes. Under that guidance, the Company assesses the likelihood, based on their technical merit, that 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 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.

-9-


Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentations.

Recent Accounting Pronouncements

In June 2016, the FASB issued 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 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 (CECL) model). ASU 2016-13 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2019. Early application is permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In March 2016, the FASB issued ASU2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 simplifies certain aspects related to the accounting for share-based payment transactions, including income tax consequences, statutory withholding requirements, forfeitures and classification on the statement of cash flows. The guidance in this update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Certain of the amendments related to timing of the recognition of tax benefits and tax withholding requirements should be applied using a modified retrospective transition method. Amendments related to classification on the statement of cash flows should be applied retrospectively. All other provisions may be applied on a prospective or modified retrospective basis. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 provides guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. ASU 2016-01 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017 and, for most provisions, is effective using the cumulative-effect transition approach. Early application is permitted for certain provisions. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that performance targets that affect vesting and that could be achieved after the requisite service period be treated as performance conditions. The effective date of ASU 2014-12 is for interim and annual reporting periods beginning after December 15, 2015. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

NOTE 2.   MORTGAGE-BACKED SECURITIES

The following table presents the Company's MBS portfolio as of June 30, 2016 and December 31, 2015:

(in thousands)
           
   
June 30, 2016
   
December 31, 2015
 
Pass-Through MBS:
           
Hybrid Adjustable-rate Mortgages
 
$
115
   
$
118
 
Fixed-rate Mortgages
   
107,751
     
79,170
 
Total Pass-Through MBS
   
107,866
     
79,288
 
Structured MBS:
               
Interest-Only Securities
   
1,299
     
2,554
 
Inverse Interest-Only Securities
   
1,673
     
2,146
 
Total Structured MBS
   
2,972
     
4,700
 
Total
 
$
110,838
   
$
83,988
 

-10-

The following table summarizes the Company's MBS portfolio as of June 30, 2016 and December 31, 2015, according to the contractual maturities of the securities in the portfolio. Actual maturities of MBS investments are generally shorter than stated contractual maturities and are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.

(in thousands)
           
 
June 30, 2016
 
December 31, 2015
 
Greater than five years and less than ten years
 
$
1
   
$
3
 
Greater than or equal to ten years
   
110,837
     
83,985
 
Total
 
$
110,838
   
$
83,988
 

NOTE 3. RETAINED INTERESTS IN SECURITIZATIONS

The following table summarizes the estimated fair value of the Company's retained interests in asset backed securities as of June 30, 2016 and December 31, 2015:

(in thousands)
             
Series
Issue Date
 
June 30, 2016
   
December 31, 2015
 
HMAC 2004-2
May 10, 2004
 
$
166
   
$
110
 
HMAC 2004-3
June 30, 2004
   
493
     
453
 
HMAC 2004-4
August 16, 2004
   
400
     
75
 
HMAC 2004-5
September 28, 2004
   
83
     
182
 
HMAC 2004-6
November 17, 2004
   
217
     
304
 
              Total
   
$
1,359
   
$
1,124
 

NOTE 4. REPURCHASE AGREEMENTS

As of June 30, 2016, the Company had outstanding repurchase agreement obligations of approximately $103.7 million with a net weighted average borrowing rate of 0.69%.  These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $109.7 million.  As of December 31, 2015, the Company had outstanding repurchase agreement obligations of approximately $77.2 million with a net weighted average borrowing rate of 0.61%.  These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $81.5 million.

-11-


As of June 30, 2016 and December 31, 2015, the Company's repurchase agreements had remaining maturities as summarized below:

($ in thousands)
                             
    
OVERNIGHT
   
BETWEEN 2
   
BETWEEN 31
   
GREATER
       
    
(1 DAY OR
   
AND
   
AND
   
THAN
       
   
LESS)
   
30 DAYS
   
90 DAYS
   
90 DAYS
   
TOTAL
 
June 30, 2016
                             
Fair value of securities pledged, including accrued
                             
interest receivable
 
$
-
   
$
92,994
   
$
16,738
   
$
-
   
$
109,732
 
Repurchase agreement liabilities associated with
                                       
these securities
 
$
-
   
$
88,103
   
$
15,622
   
$
-
   
$
103,725
 
Net weighted average borrowing rate
   
-
     
0.69
%
   
0.69
%
   
-
     
0.69
%
December 31, 2015
                                       
Fair value of securities pledged, including accrued
                                       
interest receivable
 
$
-
   
$
81,464
   
$
-
   
$
-
   
$
81,464
 
Repurchase agreement liabilities associated with
                                       
these securities
 
$
-
   
$
77,234
   
$
-
   
$
-
   
$
77,234
 
Net weighted average borrowing rate
   
-
     
0.61
%
   
-
     
-
     
0.61
%

If, during the term of a repurchase agreement, a lender files for bankruptcy, the Company might experience difficulty recovering its pledged assets, which could result in an unsecured claim against the lender for the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged to such lender, including the accrued interest receivable, and cash posted by the Company as collateral, if any.  At June 30, 2016 and December 31, 2015, 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 $5.9 million and $3.5 million, respectively.  The Company did not have an amount at risk with any individual counterparty greater than 10% of the Company's equity at June 30, 2016 or December 31, 2015.

NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS

In connection with its interest rate risk management strategy, the Company economically hedges a portion of the cost of its repurchase agreement funding and junior subordinated notes by entering into derivatives and other hedging contracts. To date the Company has entered into Eurodollar and T-Note futures contracts, but may enter into other contracts in the future. The Company has not elected hedging treatment under GAAP, and as such all gains or losses (realized and unrealized) on these instruments are reflected in earnings for all periods presented.

As of June 30, 2016 and December 31, 2015, such instruments were comprised entirely of Eurodollar futures contracts. Eurodollar futures are cash settled futures contracts on an interest rate, with gains or losses credited or charged to the Company's account on a daily basis and reflected in earnings as they occur. A minimum balance, or "margin", is required to be maintained in the account on a daily basis. The Company is exposed to the changes in value of the futures by the amount of margin held by the broker. This margin represents the collateral the Company has posted for its open positions and is recorded on the consolidated balance sheets as part of restricted cash.

-12-


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 futures positions at June 30, 2016 and December 31, 2015.

($ in thousands)
                       
As of June 30, 2016
                       
   
Repurchase Agreement Funding Hedges
 
   
Average
   
Weighted
   
Weighted
       
   
Contract
   
Average
   
Average
       
   
Notional
   
Entry
   
Effective
   
Open
 
Expiration Year
 
Amount
   
Rate
   
Rate
   
Equity(1)
 
2016
 
$
56,000
     
1.76
%
   
0.66
%
 
$
(307
)
2017
   
56,000
     
2.23
%
   
0.75
%
   
(827
)
2018
   
43,000
     
2.21
%
   
0.92
%
   
(552
)
2019
   
30,000
     
1.63
%
   
1.15
%
   
(146
)
Total / Weighted Average
 
$
44,857
     
2.03
%
   
0.86
%
 
$
(1,832
)

($ in thousands)
                       
As of June 30, 2016
                       
   
Junior Subordinated Debt Funding Hedges
 
   
Average
   
Weighted
   
Weighted
       
   
Contract
   
Average
   
Average
       
   
Notional
   
Entry
   
Effective
   
Open
 
Expiration Year
 
Amount
   
Rate
   
Rate
   
Equity(1)
 
2016
 
$
26,000
     
1.85
%
   
0.66
%
 
$
(154
)
2017
   
26,000
     
2.49
%
   
0.75
%
   
(450
)
2018
   
26,000
     
2.16
%
   
0.94
%
   
(319
)
2019
   
26,000
     
1.65
%
   
1.15
%
   
(130
)
2020
   
26,000
     
1.95
%
   
1.39
%
   
(146
)
2021
   
26,000
     
2.22
%
   
1.62
%
   
(155
)
Total / Weighted Average
 
$
26,000
     
2.07
%
   
1.12
%
 
$
(1,354
)

($ in thousands)
                       
As of December 31, 2015
                       
   
Repurchase Agreement Funding Hedges
 
   
Average
   
Weighted
   
Weighted
       
   
Contract
   
Average
   
Average
       
   
Notional
   
Entry
   
Effective
   
Open
 
Expiration Year
 
Amount
   
Rate
   
Rate
   
Equity(1)
 
2016
 
$
56,000
     
1.45
%
   
0.98
%
 
$
(264
)
2017
   
56,000
     
2.23
%
   
1.59
%
   
(362
)
2018
   
56,000
     
2.65
%
   
1.91
%
   
(207
)
Total / Weighted Average
 
$
56,000
     
2.00
%
   
1.41
%
 
$
(833
)

-13-


($ in thousands)
                       
As of December 31, 2015
                       
   
Junior Subordinated Debt Funding Hedges
 
   
Average
   
Weighted
   
Weighted
       
   
Contract
   
Average
   
Average
       
   
Notional
   
Entry
   
Effective
   
Open
 
Expiration Year
 
Amount
   
Rate
   
Rate
   
Equity(1)
 
2016
 
$
26,000
     
1.77
%
   
0.98
%
 
$
(205
)
2017
   
26,000
     
2.49
%
   
1.59
%
   
(234
)
2018
   
26,000
     
2.94
%
   
1.91
%
   
(134
)
Total / Weighted Average
 
$
26,000
     
2.29
%
   
1.41
%
 
$
(573
)

(1)
Open equity represents the cumulative losses recorded on open futures positions from inception.

(Losses)/Gains From Derivative Instruments, Net

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations for the six and three months ended June 30, 2016 and 2015.

(in thousands)
                       
   
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Eurodollar futures contracts (short positions)
 
$
(2,057
)
 
$
(1,009
)
 
$
(758
)
 
$
6
 
Net (losses) gains on derivative instruments
 
$
(2,057
)
 
$
(1,009
)
 
$
(758
)
 
$
6
 

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 obtaining 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.

-14-


NOTE 6. PLEDGED ASSETS

Assets Pledged to Counterparties

The table below summarizes our assets pledged as collateral under our repurchase agreements and derivative agreements pledged related to securities sold but not yet settled, as of June 30, 2016 and December 31, 2015.

($ in thousands)
                 
As of June 30, 2016
                 
   
Repurchase
   
Derivative
       
Assets Pledged to Counterparties
 
Agreements
   
Agreements
   
Total
 
PT MBS - at fair value
 
$
107,774
   
$
-
   
$
107,774
 
Structured MBS - at fair value
   
1,591
     
-
     
1,591
 
Accrued interest on pledged securities
   
367
     
-
     
367
 
Cash
   
-
     
563
     
563
 
Total
 
$
109,732
   
$
563
   
$
110,295
 

($ in thousands)
                 
As of December 31, 2015
                 
   
Repurchase
   
Derivative
       
Assets Pledged to Counterparties
 
Agreements
   
Agreements
   
Total
 
PT MBS - at fair value
 
$
79,288
   
$
-
   
$
79,288
 
Structured MBS - at fair value
   
1,904
     
-
     
1,904
 
Accrued interest on pledged securities
   
272
     
-
     
272
 
Cash
   
-
     
402
     
402
 
Total
 
$
81,464
   
$
402
   
$
81,866
 

Assets Pledged from Counterparties

The table below summarizes our assets pledged to us from counterparties under our repurchase agreements as of June 30, 2016 and December 31, 2015. Cash received as margin is recognized in cash and cash equivalents with a corresponding amount recognized as an increase in repurchase agreements in the consolidated balance sheets.

($ in thousands)
           
Assets Pledged to Bimini
 
June 30, 2016
   
December 31, 2015
 
Cash
 
$
87
   
$
-
 
Total
 
$
87
   
$
-
 

-15-


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 table presents information regarding those assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2016 and December 31, 2015.

(in thousands)
                                   
Offsetting of Liabilities
 
                   
Gross Amount Not Offset in the
       
             
Net Amount
 
Consolidated Balance Sheet
       
     
Gross Amount
 
of Liabilities
 
Financial
         
 
Gross Amount
 
Offset in the
 
Presented in the
 
Instruments
 
Cash
     
 
of Recognized
 
Consolidated
 
Consolidated
 
Posted as
 
Posted as
 
Net
 
 
Liabilities
 
Balance Sheet
 
Balance Sheet
 
Collateral
 
Collateral
 
Amount
 
June 30, 2016
                                   
Repurchase Agreements
 
$
103,725
   
$
-
   
$
103,725
   
$
(103,725
)
 
$
-
   
$
-
 
December 31, 2015
                                               
Repurchase Agreements
 
$
77,234
   
$
-
   
$
77,234
   
$
(77,234
)
 
$
-
   
$
-
 

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 in accordance with ASU No. 2011-11, as amended by ASU No. 2013-01. 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. TRUST PREFERRED SECURITIES

During 2005, Bimini Capital sponsored the formation of a statutory trust, known as Bimini Capital Trust II ("BCTII") of which 100% of the common equity is owned by Bimini Capital. It was formed for the purpose of issuing trust preferred capital securities to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt securities of Bimini Capital. The debt securities held by BCTII are the sole assets of BCTII.

As of June 30, 2016 and December 31, 2015, the outstanding principal balance on the junior subordinated debt securities owed to BCTII was $26.8 million.  The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes have a rate of interest that floats at a spread of 3.50% over the prevailing three-month LIBOR rate.  As of June 30, 2016, the interest rate was 4.15%. 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 of all present and future senior indebtedness.

BCTII is a VIE because the holders of the equity investment at risk do not have adequate 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.

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.

-16-

NOTE 9.  COMMON STOCK

The table below presents information related to Bimini Capital's Class A Common Stock issued during the six and three months ended June 30, 2016 and 2015.

   
Six Months Ended June 30,
   
Three Months Ended, June 30,
 
Shares Issued Related To:
 
2016
   
2015
   
2016
   
2015
 
Directors' compensation
   
-
     
21,985
     
-
     
13,870
 
Vested incentive plan shares
   
258,333
     
-
     
-
     
-
 
Total shares of Class A Common Stock issued
   
258,333
     
21,985
     
-
     
13,870
 

There were no issuances of Bimini Capital's Class B Common Stock and Class C Common Stock during the six months ended June 30, 2016 and 2015.

NOTE 10. STOCK INCENTIVE PLANS

On August 12, 2011, Bimini Capital's shareholders approved the 2011 Long Term Compensation Plan (the "2011 Plan") to assist the Company in recruiting and retaining employees, directors and other service providers by enabling them to participate in the success of Bimini Capital and to associate their interests with those of the Company and its stockholders.  The 2011 Plan is intended to permit the grant of stock options, stock appreciation rights ("SARs"), stock awards, performance units and other equity-based and incentive awards.  The maximum aggregate number of shares of common stock that may be issued under the 2011 Plan pursuant to the exercise of options and SARs, the grant of stock awards or other equity-based awards and the settlement of incentive awards and performance units is equal to 4,000,000 shares.

Share Awards

During the three months ended March 31, 2016, the Compensation Committee of the Board of Directors of Bimini Capital (the "Committee") approved certain performance bonuses for members of management.  These bonuses were awarded primarily in recognition of service in 2015.  The bonuses consisted of cash of approximately $0.5 million and 258,333 fully vested shares of the Company's Class A Common Stock with an approximate value of $0.2 million, or $0.75 per share.  The shares were issued under the 2011 Plan.  For purposes of these bonuses, shares of the Company's common stock were valued based on the closing price of the Company's Class A Common Stock on January 15, 2016, the bonus date. The expense related to this bonus was accrued at December 31, 2015 and does not affect the results of operations for the six and three months ended June 30, 2016.

Performance Units

The Compensation Committee of the Board of Directors (the "Committee") may issue Performance Units under the 2011 Plan to certain officers and employees. "Performance Units" represent the participant's right to receive an amount, based on the value of a specified number of shares of common stock, if the terms and conditions prescribed by the Committee are satisfied. The Committee will determine the requirements that must be satisfied before Performance Units are earned, including but not limited to any applicable performance period and performance goals. Performance goals may relate to the Company's financial performance or the participant's performance or such other criteria determined by the Committee, including goals stated with reference to the performance measures discussed below. If Performance Units are earned, they will be settled in cash, shares of common stock or a combination thereof.

-17-


The following table presents the activity related to Performance Units during the six months ended June 30, 2016 and 2015:

   
Six Months Ended
 
   
2016
   
2015
 
         
Weighted
         
Weighted
 
         
Average
         
Average
 
         
Grant Date
         
Grant Date
 
   
Shares
   
Fair Value
 
Shares
   
Fair Value
 
Unvested, beginning of period
   
77,500
   
$
1.22
     
31,500
   
$
1.78
 
Granted
   
-
     
-
     
-
     
-
 
Vested and issued
   
-
     
-
     
-
     
-
 
Unvested, end of period
   
77,500
   
$
1.22
     
31,500
   
$
1.78
 
                                 
Compensation expense during the period
         
$
16
           
$
9
 
Unrecognized compensation expense at period end
         
$
59
           
$
46
 
Weighted-average remaining vesting term (in years)
           
2.0
             
2.5
 
Intrinsic value of unvested shares at period end
         
$
107
           
$
88
 

NOTE 11. 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. Management is not aware of any significant reported or unreported contingencies at June 30, 2016.

NOTE 12. INCOME TAXES

The total income tax provision recorded for the six and three months ended June 30, 2016 was $0.7 million and $0.4 million, respectively, on consolidated pre-tax book income (loss) of $1.7 million and $1.0 million in the six and three months ended June 30, 2016, respectively. The total income tax provision recorded for the six and three months ended June 30, 2015 was $0.6 million and $0.3 million, respectively, on consolidated pre-tax book losses of $2.3 million and $1.2 million in the six and three months ended June 30, 2015, respectively.

The consolidated loss for the six months ended June 30, 2015 consisted of a loss of approximately $5.9 million attributed to Bimini Capital and income of approximately $3.6 million attributed to the operations of Bimini Advisors and MortCo.  The consolidated loss for the three months ended June 30, 2015 consisted of a loss of approximately $2.9 million attributed to Bimini Capital and income of approximately $1.7 million attributed to the operations of Bimini Advisors and MortCo.  At June 30, 2015, the Company anticipated Bimini Capital would retain its Real Estate Investment Trust exemption under the Internal Revenue Code of 1986 for the full year 2015; therefore, no income tax benefit was accrued related to the loss attributed to its operations.

The Company's tax provision is based on projected effective rate based annualized amounts and includes the expected realization of a portion of the tax benefits of the federal and state net operating losses carryforwards ("NOLs") in 2016. 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.

-18-


NOTE 13. EARNINGS PER SHARE

Shares of Class B common stock, participating and convertible into Class A common stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, and when, authorized and declared by the Board of Directors. Following the provisions of FASB ASC 260, the Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock. Shares of Class B common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at June 30, 2016 and 2015.

Shares of Class C common stock are not included in the basic EPS computation as these shares do not have participation rights. Shares of Class C common stock are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A common stock were not met at June 30, 2016 and 2015.

The Company has dividend eligible stock incentive plan shares that were outstanding during the six and three months ended June 30, 2016. The basic and diluted per share computations include these unvested incentive plan shares if there is income available to Class A common stock, as they have dividend participation rights. The stock incentive plan shares have no contractual obligation to share in losses. Because there is no such obligation, the incentive plan shares are not included in the basic and diluted EPS computations when no income is available to Class A common stock even though they are considered participating securities. The average number of dividend eligible stock incentive plan shares that were anti-dilutive and not included in diluted earnings per share for both the six and three months ended June 30, 2015 was 31,600.

The table below reconciles the numerator and denominator of EPS for the six and three months ended June 30, 2016 and 2015.

(in thousands, except per-share information)
                       
     
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Basic and diluted EPS per Class A common share:
                       
Income (loss) attributable to Class A common shares:
                       
Basic and diluted
 
$
1,045
   
$
(2,886
)
 
$
600
   
$
(1,500
)
Weighted average common shares:
                               
Class A common shares outstanding at the balance sheet date
   
12,632
     
12,346
     
12,632
     
12,346
 
Unvested dividend-eligible stock incentive plan shares
                               
outstanding at the balance sheet date
   
78
     
-
     
78
     
-
 
Effect of weighting
   
(22
)
   
(7
)
   
(1
)
   
-
 
Weighted average shares-basic and diluted
   
12,688
     
12,339
     
12,709
     
12,346
 
Income (loss) per Class A common share:
                               
Basic and diluted
 
$
0.08
   
$
(0.23
)
 
$
0.05
   
$
(0.12
)

(in thousands, except per-share information)
                       
    
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Basic and diluted EPS per Class B common share:
                       
Income (loss) attributable to Class B common shares:
                       
Basic and diluted
 
$
3
   
$
(7
)
 
$
2
   
$
(4
)
Weighted average common shares:
                               
Class B common shares outstanding at the balance sheet date
   
32
     
32
     
32
     
32
 
Weighted average shares-basic and diluted
   
32
     
32
     
32
     
32
 
Income (loss) per Class B common share:
                               
Basic and diluted
 
$
0.08
   
$
(0.23
)
 
$
0.05
   
$
(0.12
)

-19-


NOTE 14. FAIR VALUE

Authoritative accounting literature establishes a framework for using fair value to measure assets and liabilities and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) as opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of non-performance. Required disclosures include stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair value measurements. These stratifications are:

Level 1 valuations, where the valuation is based on quoted market prices for identical assets or liabilities traded in active markets (which include exchanges and over-the-counter markets with sufficient volume),
Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market, and
Level 3 valuations, where the valuation is generated from model-based techniques that use significant assumptions not observable in the market, but observable based on Company-specific data. These unobservable assumptions reflect the Company's own estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.

The Company's MBS are valued using Level 2 valuations, and such valuations currently are determined by the Company based on independent pricing sources and/or third-party broker quotes, 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. Alternatively, the Company could opt to have the value of all of our MBS positions determined by either an independent third-party or do so internally.

MBS, Orchid common stock, retained interests and futures contracts were all recorded at fair value on a recurring basis during the six and three months ended June 30, 2016 and 2015. When determining fair value measurements, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets.  When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.  Fair value measurements for the retained interests are generated by a model that requires management to make a significant number of assumptions.

-20-


The following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:

(in thousands)
                       
         
Quoted Prices
             
         
in Active
   
Significant
       
         
Markets for
   
Other
   
Significant
 
         
Identical
   
Observable
   
Unobservable
 
   
Fair Value
   
Assets
   
Inputs
   
Inputs
 
   
Measurements
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
June 30, 2016
                       
Mortgage-backed securities
 
$
110,838
   
$
-
   
$
110,838
   
$
-
 
Margin posted on derivative agreements
   
563
     
563
     
-
     
-
 
Orchid Island Capital, Inc. common stock
   
14,355
     
14,355
     
-
     
-
 
Retained interests
   
1,359
     
-
     
-
     
1,359
 
December 31, 2015
                               
Mortgage-backed securities
 
$
83,988
   
$
-
   
$
83,988
   
$
-
 
Margin posted on derivative agreements
   
402
     
402
     
-
     
-
 
Orchid Island Capital, Inc. common stock
   
13,853
     
13,853
     
-
     
-
 
Retained interests
   
1,124
     
-
     
-
     
1,124
 

The following table illustrates a roll forward for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2016 and 2015:

(in thousands)
           
   
Retained Interests
 
   
2016
   
2015
 
Balances, January 1
 
$
1,124
   
$
1,900
 
Gain included in earnings
   
1,080
     
2,539
 
Collections
   
(845
)
   
(2,298
)
Balances, June 30
 
$
1,359
   
$
2,141
 

During the six months ended June 30, 2016 and 2015, there were no transfers of financial assets or liabilities between levels 1, 2 or 3.

Our retained interests are valued based on a discounted cash flow approach. These values are sensitive to changes in unobservable inputs, including: estimated prepayment speeds, default rates and loss severity, weighted-average life, and discount rates. Significant increases or decreases in any of these inputs may result in significantly different fair value measurements.

-21-


The following table summarizes the significant quantitative information about our level 3 fair value measurements as of June 30, 2016.

Retained interests fair value (in thousands)
             
$
1,359
 
         
CPR Range
         
Prepayment Assumption
       
(Weighted Average)
         
Constant Prepayment Rate
         
10% (10
%)
       
         
Severity
         
Default Assumptions
 
Probability of Default
   
(Weighted Average)
   
Range Of Loss Timing
 
Real Estate Owned
   
100
%
   
33
%
 
Next 10 Months
 
Loans in Foreclosure
   
100
%
   
33
%
 
Month 4 - 13
 
Loans 90 Day Delinquent
   
100
%
   
45
%
 
Month 11-28
 
Loans 60 Day Delinquent
   
85
%
   
45
%
 
Month 11-28
 
Loans 30 Day Delinquent
   
75
%
   
45
%
 
Month 11-28
 
Current Loans
   
3.1
%
   
45
%
 
Month 29 and Beyond
 
           
Remaining Life Range
   
Discount Rate Range
 
Cash Flow Recognition
 
Valuation Technique
   
(Weighted Average)
   
(Weighted Average)
 
Nominal Cash Flows
 
Discounted Cash Flow
     
0.2 - 15.1
(11.2)
   
27.50% (27.50
%)
Discounted Cash Flows
 
Discounted Cash Flow
     
0.2 - 2.6
(1.3)
   
27.50% (27.50
%)

NOTE 15. RELATED PARTY TRANSACTIONS

Management Agreement

Upon completion of its initial public offering, Orchid became externally managed and advised by Bimini Advisors 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 the Orchid's equity, as defined in the management agreement,
One-twelfth of 1.25% of the Orchid's equity that is greater than $250 million and less than or equal to $500 million, and
One-twelfth of 1.00% of the Orchid's equity that is greater than $500 million.

Orchid is obligated to reimburse the Bimini Advisors for any direct expenses incurred on its behalf and to pay to Bimini Advisors Orchid's pro rata portion of certain overhead costs set forth in the management agreement.  Should the Orchid terminate the management agreement without cause, it will pay to 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 initial term or automatic renewal term.

The following table summarizes the advisory services revenue from Orchid for the six and three months ended June 30, 2016 and 2015.

($ in thousands)
                       
   
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Management fee
 
$
1,916
   
$
1,869
   
$
945
   
$
1,014
 
Allocated overhead
   
626
     
514
     
329
     
274
 
Total
 
$
2,542
   
$
2,383
   
$
1,274
   
$
1,288
 

-22-


At June 30, 2016 and December 31, 2015, the net amount due from Orchid was approximately $0.5 million and $0.5 million, respectively, and is included in "other assets" in the consolidated balance sheets.  Orchid accrued cash and equity compensation payable to officers and employees of Bimini of $0.4 million and $0.2 million during the six and three months ended June 30, 2016, respectively, and $0.3 million and $0.2 million during the six and three months ended June 30, 2015, respectively.  This compensation is not included in the consolidated statements of operations.

Other Relationships with Orchid

At June 30, 2016 and December 31, 2015, the Company owned 1,395,036 shares of Orchid common stock, including share purchases that settled after December 31, 2015, representing approximately 6.2% and 6.4% of the outstanding shares, respectively.  The Company received dividends on this common stock investment of approximately $1.2 million and $0.6 million during the six and three months ended June 30, 2016, respectively, and $1.1 million and $0.5 million during the six and three months ended June 30, 2015, 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 and owns shares of common stock of Orchid. Also, 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 and owns shares of common stock of Orchid.

-23-

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under "Risk Factors" in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, our actual results may differ materially from those anticipated in such forward-looking statements.

Overview

Bimini Capital Management, Inc. ("Bimini Capital" or the "Company") was formed in September 2003 to invest primarily in 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 ("PT MBS") and (ii) structured Agency MBS, such as collateralized mortgage obligations ("CMOs"), interest only securities ("IOs"), inverse interest only securities ("IIOs") and principal only securities ("POs"), among other types of structured Agency MBS.

As described more fully below under "Outlook/Tax Matters", the Company no longer operates as a Real Estate Investment Trust ("REIT") and possesses significant net operating loss carryforwards ("NOL"), as does its wholly-owned subsidiary, MortCo TRS, LLC ("MortCo"). In order to more effectively utilize the NOLs the Company began the process of transferring MBS assets from the Company to MortCo in late 2015 and continued to do so during the six months  ended June 30, 2016. The Company plans to ultimately transfer all or substantially all of the existing MBS assets to MortCo and to grow the MBS portfolio at MortCo over time in order to utilize NOLs at MortCo before their expiration. After such transfer is complete the MBS portfolio management operations will be conducted at MortCo and not at the Company.

In 2013, the Company also began to serve as the external manager of the portfolio of Orchid Island Capital, Inc. ("Orchid"), through its wholly owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors").  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. In addition, the Company receives dividends from its investment in Orchid common shares.

Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:

interest rate trends;
the difference between Agency MBS yields and our funding and hedging costs;
competition for investments in Agency MBS;
actions taken by the Federal Reserve and the U.S. Treasury;
prepayment rates on mortgages underlying our Agency MBS, and credit trends insofar as they affect prepayment rates; 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; and
the requirements to qualify for a registration exemption under the Investment Company Act; and
 our ability to utilize net operating loss carryforwards and capital loss carryforwards to reduce our taxable income.
 

 
-24-

Results of Operations

Described below are the Company's results of operations for the six and three months ended June 30, 2016, as compared to the six and three months ended June 30, 2015.

Net Income (Loss) Summary

Consolidated net income for the six months ended June 30, 2016 was $1.0 million, or $0.08 basic and diluted income per share of Class A Common Stock, as compared to consolidated net loss of $2.9 million, or $0.23 basic and diluted loss per share of Class A Common Stock, for the six months ended June 30, 2015.

Consolidated net income for the three months ended June 30, 2016 was $0.6 million, or $0.05 basic and diluted income per share of Class A Common Stock, as compared to consolidated net loss of $1.5 million, or $0.12 basic and diluted loss per share of Class A Common Stock, for the three months ended June 30, 2015.

The components of net income (loss) for the six and three months ended June 30, 2016 and 2015, along with the changes in those components are presented in the table below:

(in thousands)
                                   
   
Six Months Ended June 30,
   
Three Months Ended June 30,
 
   
2016
   
2015
   
Change
   
2016
   
2015
   
Change
 
Net portfolio interest
 
$
1,541
   
$
2,083
   
$
(542
)
 
$
851
   
$
976
   
$
(125
)
Interest expense on junior subordinated notes
   
(540
)
   
(491
)
   
(49
)
   
(276
)
   
(248
)
   
(28
)
Losses on MBS and derivative instruments
   
(1,846
)
   
(1,207
)
   
(639
)
   
(490
)
   
(1,021
)
   
531
 
Net portfolio (loss) income
   
(845
)
   
385
     
(1,230
)
   
85
     
(293
)
   
378
 
Other income
   
5,297
     
4,175
     
1,122
     
2,282
     
878
     
1,404
 
Expenses, including income taxes
   
(3,404
)
   
(7,453
)
   
4,049
     
(1,765
)
   
(2,089
)
   
324
 
Net income (loss)
 
$
1,048
   
$
(2,893
)
 
$
3,941
   
$
602
   
$
(1,504
)
 
$
2,106
 

GAAP and Non-GAAP Reconciliation

Economic Interest Expense and Economic Net Interest Income

To date, the Company has used derivatives, specifically interest rate futures contracts, such as Eurodollar and Treasury Note ("T-Note") futures contracts, to hedge a portion of the interest rate risk on its repurchase agreements and junior subordinate notes in a rising rate environment. Each interest rate futures contract covers a specific three month period, but the Company typically has many contracts in place at any point in time — usually covering several years in the aggregate.

-25-


The Company has not elected to designate its derivative holdings for hedge accounting treatment under the Financial Accounting Standards Board, (the "FASB"), Accounting Standards Codification, ("ASC"), Topic 815, Derivatives and Hedging. Changes in fair value of these instruments are presented in a separate line item in the Company's 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. In the future, the Company may use other derivative instruments to hedge its interest expense and/or elect to designate its derivative holdings for hedge accounting treatment.

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 gains or losses on specific derivative instruments that pertain to each period presented. As of June 30, 2016, the Company has Eurodollar futures contracts in place through 2021. Adjusting our interest expense for the periods presented by the gains or losses on all derivative instruments would not accurately reflect our economic interest expense for these periods.

For each period presented, the Company has combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on repurchase agreements and junior subordinated notes to reflect total 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.
However, because the Company has not elected hedging treatment under ASC Topic 815, the gains or losses on all of the Company's derivative instruments held during the period are reflected in our consolidated statements of operations. This presentation includes gains or losses on all contracts in effect during the reporting period, including those covering both the current period as well as future periods.

The Company believes that economic interest expense and economic net interest income provides meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help the Company to evaluate its financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of its current investment portfolio or operations. The realized and unrealized gains or losses presented in the Company's consolidated statements of operations are not necessarily representative of the total interest rate expense that the Company will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses the Company ultimately realizes, and which will affect the Company's total interest rate expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.

The Company's presentation of the economic value of its hedging strategy has important limitations. First, other market participants may calculate economic interest expense and economic net interest income differently than the Company calculates them. Second, while the Company believes 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 the Company's 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.

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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, losses on derivative instruments, calculated in accordance with GAAP for the six months ended June 30, 2016 and for each quarter in 2016 and 2015.

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
 
(in thousands)
                 
         
Junior
       
   
Repurchase
   
Subordinated
       
Three Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                 
June 30, 2016
 
$
(353
)
 
$
(404
)
 
$
(757
)
March 31, 2016
   
(787
)
   
(513
)
   
(1,300
)
December 31, 2015
   
426
     
197
     
623
 
September 30, 2015
   
(676
)
   
(315
)
   
(991
)
June 30, 2015
   
7
     
(1
)
   
6
 
March 31, 2015
   
(687
)
   
(328
)
   
(1,015
)
                         
(in thousands)
                       
           
Junior
         
   
Repurchase
   
Subordinated
         
Six Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                       
June 30, 2016
 
$
(1,140
)
 
$
(917
)
 
$
(2,057
)
June 30, 2015
   
(680
)
   
(329
)
   
(1,009
)

Losses on Derivative Instruments - Attributed to Current Period (Non-GAAP)
 
(in thousands)
                 
         
Junior
       
   
Repurchase
   
Subordinated
       
Three Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                 
June 30, 2016
 
$
(60
)
 
$
(77
)
 
$
(137
)
March 31, 2016
   
(45
)
   
(80
)
   
(125
)
December 31, 2015
   
(31
)
   
(80
)
   
(111
)
September 30, 2015
   
(20
)
   
(74
)
   
(94
)
June 30, 2015
   
(9
)
   
(64
)
   
(73
)
March 31, 2015
   
(1
)
   
(54
)
   
(55
)
                         
(in thousands)
                       
           
Junior
         
   
Repurchase
   
Subordinated
         
Six Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                       
June 30, 2016
 
$
(105
)
 
$
(157
)
 
$
(262
)
June 30, 2015
   
(10
)
   
(118
)
   
(128
)

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Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP)
 
(in thousands)
                 
         
Junior
       
   
Repurchase
   
Subordinated
       
Three Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                 
June 30, 2016
 
$
(293
)
 
$
(327
)
 
$
(620
)
March 31, 2016
   
(742
)
   
(433
)
   
(1,175
)
December 31, 2015
   
457
     
277
     
734
 
September 30, 2015
   
(656
)
   
(241
)
   
(897
)
June 30, 2015
   
16
     
63
     
79
 
March 31, 2015
   
(686
)
   
(274
)
   
(960
)
                         
(in thousands)
                       
           
Junior
         
   
Repurchase
   
Subordinated
         
Six Months Ended
 
Agreements
   
Debt
   
Total
 
Consolidated
                       
June 30, 2016
 
$
(1,035
)
 
$
(760
)
 
$
(1,795
)
June 30, 2015
   
(670
)
   
(211
)
   
(881
)

Economic Net Portfolio Interest Income
 
(in thousands)
 
         
Interest Expense on Repurchase Agreements
   
Net Portfolio
 
               
Effect of
         
Interest Income
 
   
Interest
   
GAAP
   
Non-GAAP
   
Economic
   
GAAP
   
Economic
 
Three Months Ended
 
Income
   
Basis
   
Hedges(1)
   
Basis(2)
   
Basis
   
Basis(3)
 
Consolidated
 
June 30, 2016
 
$
1,025
   
$
174
   
$
(60
)
 
$
234
   
$
851
   
$
791
 
March 31, 2016
   
817
     
127
     
(45
)
   
172
     
690
     
645
 
December 31, 2015
   
1,035
     
120
     
(31
)
   
151
     
915
     
884
 
September 30, 2015
   
996
     
107
     
(20
)
   
127
     
889
     
869
 
June 30, 2015
   
1,074
     
98
     
(9
)
   
107
     
976
     
967
 
March 31, 2015
   
1,207
     
100
     
(1
)
   
101
     
1,107
     
1,106
 
                                                 
(in thousands)
 
           
Interest Expense on Repurchase Agreements
   
Net Portfolio
 
                   
Effect of
           
Interest Income
 
   
Interest
   
GAAP
   
Non-GAAP
   
Economic
   
GAAP
   
Economic
 
Six Months Ended
 
Income
   
Basis
   
Hedges(1)
   
Basis(2)
   
Basis
   
Basis(3)
 
Consolidated
 
June 30, 2016
 
$
1,842
   
$
301
   
$
(105
)
 
$
406
   
$
1,541
   
$
1,436