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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10K

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

For the fiscal year ended December 31, 2016

Commission File Number:  001-32171

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

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes   No 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K.  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No 

State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2016:

(a) The aggregate market value was calculated by using the last sale price of the Class A Common Stock as of June 30, 2016.

(b) The market value of the Class B and Class C Common Stock is an estimate based on their initial purchase price.

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

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its 2017 Annual Meeting of Stockholders of the Registrant are incorporated by reference into Part III of this Annual Report on Form 10K.

BIMINI CAPITAL MANAGEMENT, INC.

INDEX

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this annual report that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "intend," "should," "may," "plans," "projects," "will," or similar expressions, or the negative of these words, we intend to identify forward-looking statements. Statements regarding the following subjects are forward-looking by their nature:

	our business and investment strategy;

	our expected operating results;

	our ability to acquire investments on attractive terms;

	the effect of actual or proposed actions of the U.S. Federal Reserve with respect to monetary policy or interest rates;

	the effect of rising interest rates on unemployment, inflation and mortgage supply and demand;

	the effect of increased prepayment rates on the value of our assets;

	our ability to access the capital markets;

	our ability to obtain future financing arrangements;

	our ability to successfully hedge the interest rate risk and prepayment risk associated with our portfolio;

	the federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government;

	our ability to make distributions to our stockholders in the future;

	mortgage loan modification programs and future legislative action;

	our understanding of our competition and our ability to compete effectively;

	our ability to quantify risk based on historical experience;

	the termination of our status as a Real Estate Investment Trust for federal income tax purposes effective January 1, 2015 and our ability to use net operating loss ("NOLs")carryforwards to reduce our taxable income;



our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our NOLs to offset future taxable income, including whether our recently adopted shareholder rights plan will be effective in preventing an ownership change that would significantly limit our ability to utilize such losses;

	the impact of possible future changes in tax laws;

	our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act;

	market trends;

	expected capital expenditures; and

	the impact of technology on our operations and business.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements.  These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption ''Risk Factors'' in this Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q.  If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

Overview

Bimini Capital Management, Inc., a Maryland corporation ("Bimini Capital" and, collectively with its subsidiaries, the "Company," "we", "us" or "our") is a specialty finance company that primarily invests in mortgage-backed securities ("MBS"), for both our own portfolio and as the external manager of Orchid Island Capital, Inc. ("Orchid").  In both cases, the principal and interest payments of these MBS are guaranteed by the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation, ("Freddie Mac") or the Government National Mortgage Association ("Ginnie Mae" and, collectively with Fannie Mae and Freddie Mac, "GSEs") and are backed primarily by single-family residential mortgage loans. We refer to these types of MBS as Agency MBS. The investment strategy focuses on, and the portfolios consist of, two categories of Agency MBS: (i) traditional pass-through Agency 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. References to the general management of the Company's portfolio of MBS refer to the operations Bimini Capital and its wholly-owned subsidiary, Royal Palm Capital, LLC (formerly known as MortCo TRS, LLC) ("Royal Palm").

Beginning in 2013, and as noted above, the Company, through its wholly-owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors"), began to serve as the external manager of Orchid and from this arrangement the Company receives management fees and expense reimbursements.  In addition, the Company receives dividends from its investment in Orchid common shares.  The Company is self-managed and self-advised.

The Investment and Capital Allocation Strategy

Investment Strategy

With respect to both our own portfolio and Orchid's portfolio, the business objective is to provide attractive risk-adjusted total returns to our investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in and strategically allocating capital between pass-through Agency MBS and structured Agency MBS. We seek to generate income from (i) the net interest margin on the leveraged pass-through Agency MBS portfolio and the leveraged portion of the structured Agency MBS portfolio, and (ii) the interest income we generate from the unleveraged portion of the structured Agency MBS portfolio. We also seek to minimize the volatility of both the net asset value of, and income from, the portfolio through a process which emphasizes capital allocation, asset selection, liquidity and active interest rate risk management.

We fund the pass-through Agency MBS and certain of the structured Agency MBS, such as fixed and floating rate tranches of CMOs and POs, through repurchase agreements. However, we generally do not employ leverage on the structured Agency MBS that have no principal balance, such as IOs and IIOs. We may pledge a portion of these assets to increase the cash balance, but we do not intend to invest the cash derived from pledging the assets. Otherwise, we do not use leverage in these instances because the securities contain structural leverage.

The target asset categories and principal assets in which we intend to invest are as follows:

Pass-through Agency MBS

We invest in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. In effect, these securities pass through the monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer or guarantor of the securities. Pass-through certificates can be divided into various categories based on the characteristics of the underlying mortgages, such as the term or whether the interest rate is fixed or variable.

The payment of principal and interest on mortgage pass-through securities issued by Ginnie Mae, but not the market value, is guaranteed by the full faith and credit of the federal government. Payment of principal and interest on mortgage pass-through certificates issued by Fannie Mae and Freddie Mac, but not the market value, is guaranteed by the respective agency issuing the security.

A key feature of most mortgage loans is the ability of the borrower to repay principal earlier than scheduled. This is called a prepayment. Prepayments arise primarily due to sale of the underlying property, refinancing or foreclosure. Prepayments result in a return of principal to pass-through certificate holders. This may result in a lower or higher rate of return upon reinvestment of principal. This is generally referred to as prepayment uncertainty. If a security purchased at a premium prepays at a higher-than-expected rate, then the value of the premium would be eroded at a faster-than-expected rate. Similarly, if a discount mortgage prepays at a lower-than-expected rate, the amortization towards par would be accumulated at a slower-than-expected rate. The possibility of these undesirable effects is sometimes referred to as "prepayment risk."

In general, declining interest rates tend to increase prepayments, and rising interest rates tend to slow prepayments. Like other fixed-income securities, when interest rates rise, the value of Agency MBS generally declines. The rate of prepayments on underlying mortgages will affect the price and volatility of Agency MBS and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If interest rates rise, our holdings of Agency MBS may experience reduced spreads over our funding costs if the borrowers of the underlying mortgages pay off their mortgages later than anticipated. This is generally referred to as "extension" risk.

The mortgage loans underlying pass-through certificates can generally be classified into the following three categories:



Fixed-Rate Mortgages. Fixed-rate mortgages are those where the borrower pays an interest rate that is constant throughout the term of the loan. Traditionally, most fixed-rate mortgages have an original term of 30 years. However, shorter terms (also referred to as "final maturity dates") have become common in recent years. Because the interest rate on the loan never changes, even when market interest rates change, there can be a divergence between the interest rate on the loan and current market interest rates over time. This in turn can make fixed-rate mortgages price-sensitive to market fluctuations in interest rates. In general, the longer the remaining term on the mortgage loan, the greater the price sensitivity to movements in interest rates and, therefore, the likelihood for greater price variability.



ARMs. ARMs are mortgages for which the borrower pays an interest rate that varies over the term of the loan. The interest rate usually resets based on market interest rates, although the adjustment of such an interest rate may be subject to certain limitations. Traditionally, interest rate resets occur at regular intervals (for example, once per year). We refer to such ARMs as "traditional" ARMs. Because the interest rates on ARMs fluctuate based on market conditions, ARMs tend to have interest rates that do not deviate from current market rates by a large amount. This in turn can mean that ARMs have less price sensitivity to interest rates and, consequently, are less likely to experience significant price volatility.



Hybrid Adjustable-Rate Mortgages. Hybrid ARMs have a fixed-rate for the first few years of the loan, often three, five, seven or ten years, and thereafter reset periodically like a traditional ARM. Effectively, such mortgages are hybrids, combining the features of a pure fixed-rate mortgage and a traditional ARM. Hybrid ARMs have price sensitivity to interest rates similar to that of a fixed-rate mortgage during the period when the interest rate is fixed and similar to that of an ARM when the interest rate is in its periodic reset stage. However, because many hybrid ARMs are structured with a relatively short initial time span during which the interest rate is fixed, even during that segment of its existence, the price sensitivity may be high.

Structured Agency MBS

We also invest in structured Agency MBS, which include CMOs, IOs, IIOs and POs. The payment of principal and interest, as appropriate, on structured Agency MBS issued by Ginnie Mae, but not the market value, is guaranteed by the full faith and credit of the federal government. Payment of principal and interest, as appropriate, on structured Agency MBS issued by Fannie Mae and Freddie Mac, but not the market value, is guaranteed by the respective agency issuing the security. The types of structured Agency MBS in which we invest are described below.



CMOs. CMOs are a type of MBS the principal and interest of which are paid, in most cases, on a monthly basis. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities issued directly by or under the auspices of Ginnie Mae, Freddie Mac or Fannie Mae. CMOs are structured into multiple classes, with each class bearing a different stated maturity. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. Generally, fixed-rate mortgages are used to collateralize CMOs. However, the CMO tranches need not all have fixed-rate coupons. Some CMO tranches have floating rate coupons that adjust based on market interest rates, subject to some limitations. Such tranches, often called "CMO floaters," can have relatively low price sensitivity to interest rates.



IOs. IOs represent the stream of interest payments on a pool of mortgages, either fixed-rate mortgages or hybrid ARMs. Holders of IOs have no claim to any principal payments. The value of IOs depends primarily on two factors, which are prepayments and interest rates. Prepayments on the underlying pool of mortgages reduce the stream of interest payments going forward, hence IOs are highly sensitive to prepayment rates. IOs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future interest payments on a pool of mortgages. On the other hand, an increase in interest rates has a tendency to reduce prepayments, which increases the expected absolute amount of future interest payments.



IIOs. IIOs represent the stream of interest payments on a pool of mortgages, either fixed-rate mortgages or hybrid ARMs. Holders of IIOs have no claim to any principal payments. The value of IIOs depends primarily on three factors, which are prepayments, London Interbank Offered Rate ("LIBOR") and term interest rates. Prepayments on the underlying pool of mortgages reduce the stream of interest payments, making IIOs highly sensitive to prepayment rates. The coupon on IIOs is derived from both the coupon interest rate on the underlying pool of mortgages and 30-day LIBOR. IIOs are typically created in conjunction with a floating rate CMO that has a principal balance and which is entitled to receive all of the principal payments on the underlying pool of mortgages. The coupon on the floating rate CMO is also based on 30-day LIBOR. Typically, the coupon on the floating rate CMO and the IIO, when combined, equal the coupon on the pool of underlying mortgages. The coupon on the pool of underlying mortgages typically represents a cap or ceiling on the combined coupons of the floating rate CMO and the IIO. Accordingly, when the value of 30-day LIBOR increases, the coupon of the floating rate CMO will increase and the coupon on the IIO will decrease. When the value of 30-day LIBOR falls, the opposite is true. Accordingly, the value of IIOs are sensitive to the level of 30-day LIBOR and expectations by market participants of future movements in the level of 30-day LIBOR. IIOs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future interest payments on a pool of mortgages. On the other hand, an increase in interest rates has a tendency to reduce prepayments, which increases the expected absolute amount of future interest payments.



POs. POs represent the stream of principal payments on a pool of mortgages. Holders of POs have no claim to any interest payments, although the ultimate amount of principal to be received over time is known, equaling the principal balance of the underlying pool of mortgages. The timing of the receipt of the principal payments is not known. The value of POs depends primarily on two factors, which are prepayments and interest rates. Prepayments on the underlying pool of mortgages accelerate the stream of principal repayments, making POs highly sensitive to the rate at which the mortgages in the pool are prepaid. POs are also sensitive to changes in interest rates. An increase in interest rates reduces the present value of future principal payments on a pool of mortgages. Further, an increase in interest rates has a tendency to reduce prepayments, which decelerates, or pushes further out in time, the ultimate receipt of the principal payments. The opposite is true when interest rates decline.

Our investment strategy consists of the following components:

	investing in pass-through Agency MBS and certain structured Agency MBS, such as fixed and floating rate tranches of CMOs and POs, on a leveraged basis to increase returns on the capital allocated to this portfolio;



investing in certain structured Agency MBS, such as IOs and IIOs, generally on an unleveraged basis in order to (i) increase returns due to the structural leverage contained in such securities, (ii) enhance liquidity due to the fact that these securities will be unencumbered or, when encumbered, the cash from such borrowings may be retained and (iii) diversify portfolio interest rate risk due to the different interest rate sensitivity these securities have compared to pass-through Agency MBS;

	investing in Agency MBS in order to minimize credit risk;

	investing in assets that will cause us to maintain our exclusion from regulation as an investment company under the Investment Company Act.

Our management makes investment decisions based on various factors, including, but not limited to, relative value, expected cash yield, supply and demand, costs of hedging, costs of financing, liquidity requirements, expected future interest rate volatility and the overall shape of the U.S. Treasury and interest rate swap yield curves. We do not attribute any particular quantitative significance to any of these factors, and the weight we give to these factors depends on market conditions and economic trends.

Over time, we will modify our investment strategy as market conditions change to seek to maximize the returns from our investment portfolio.  We believe that this strategy will enable us to provide attractive long-term returns to our stockholders.

Capital Allocation Strategy

The percentage of capital invested in our two asset categories will vary and will be managed in an effort to maintain the level of income generated by the combined portfolios, the stability of that income stream and the stability of the value of the combined portfolios. Typically, pass-through Agency MBS and structured Agency MBS exhibit materially different sensitivities to movements in interest rates. Declines in the value of one portfolio may be offset by appreciation in the other, although we cannot assure you that this will be the case. Additionally, we will seek to maintain adequate liquidity as we allocate capital.

We allocate our capital to assist our interest rate risk management efforts. The unleveraged portfolio does not require unencumbered cash or cash equivalents to be maintained in anticipation of possible margin calls. To the extent more capital is deployed in the unleveraged portfolio, our liquidity needs will generally be less.

During periods of rising interest rates, refinancing opportunities available to borrowers typically decrease because borrowers are not able to refinance their current mortgage loans with new mortgage loans at lower interest rates. In such instances, securities that are highly sensitive to refinancing activity, such as IOs and IIOs, typically increase in value. Our capital allocation strategy allows us to redeploy our capital into such securities when and if we believe interest rates will be higher in the future, thereby allowing us to hold securities the value of which we believe is likely to increase as interest rates rise. Also, by being able to re-allocate capital into structured Agency MBS, such as IOs, during periods of rising interest rates, we may be able to offset the likely decline in the value of our pass-through Agency MBS, which are negatively impacted by rising interest rates.

Financing Strategy

We borrow against our Agency MBS and certain of our structured Agency MBS using short-term repurchase agreements. Our borrowings currently consist of short-term repurchase agreements. We may use other sources of leverage, such as secured or unsecured debt or issuances of preferred stock. We do not have a policy limiting the amount of leverage we may incur. However, we generally expect that the ratio of our total liabilities compared to our equity, which we refer to as our leverage ratio, will be less than 12 to 1. Our amount of leverage may vary depending on market conditions and other factors that we deem relevant.

We allocate our capital between two sub-portfolios. The pass-through Agency MBS portfolio will be leveraged generally through repurchase agreement funding. The structured Agency MBS portfolio generally will not be leveraged. The leverage ratio is calculated by dividing our total liabilities by total stockholders' equity at the end of each period. The amount of leverage will be a function of the capital allocated to the pass-through Agency MBS portfolio and the amount of haircuts required by our lenders on our borrowings. When the capital allocation to the pass-through Agency MBS portfolio is high, the leverage ratio will be high since more capital is being explicitly leveraged and less capital is un-leveraged. If the haircuts required by our lenders on our borrowings are higher, all else being equal, our leverage will be lower since our lenders will lend less against the value of the capital deployed to the pass-through Agency MBS portfolio. The allocation of capital between the two portfolios will be a function of several factors:

	The relative durations of the respective portfolios — We generally seek to have a combined duration at or near zero. If our pass-through securities have a longer duration, we will allocate more capital to the structured security portfolio to achieve a combined duration close to zero.



The relative attractiveness of pass-through securities versus structured securities — To the extent we believe the expected returns of one type of security are higher than the other, we will allocate more capital to the more attractive securities, subject to the caveat that its combined duration remains at or near zero.



Liquidity — We seek to maintain adequate cash and unencumbered securities relative to our repurchase agreement borrowings well in excess of anticipated price or prepayment related margin calls from our lenders. To the extent we feel price or prepayment related margin calls will be higher/lower, we will allocate less/more capital to the pass-through Agency MBS portfolio. Our pass-through Agency MBS portfolio likely will be our only source of price or prepayment related margin calls because we generally will not apply leverage to our structured Agency MBS portfolio. From time to time we may pledge a portion of our structured securities and retain the cash derived so it can be used to enhance our liquidity.

Risk Management

We invest in Agency MBS to mitigate credit risk. Additionally, our Agency MBS are backed by a diversified base of mortgage loans to mitigate geographic, loan originator and other types of concentration risks.

Interest Rate Risk Management

We believe that the risk of adverse interest rate movements represents the most significant risk to the value of our portfolio. This risk arises because (i) the interest rate indices used to calculate the interest rates on the mortgages underlying our assets may be different from the interest rate indices used to calculate the interest rates on the related borrowings, and (ii) interest rate movements affecting our borrowings may not be reasonably correlated with interest rate movements affecting our assets. We attempt to mitigate our interest rate risk by using the techniques described below:

Agency MBS Backed by ARMs. We seek to minimize the differences between interest rate indices and interest rate adjustment periods of our Agency MBS backed by ARMs and related borrowings. At the time of funding, we typically align (i) the underlying interest rate index used to calculate interest rates for our Agency MBS backed by ARMs and the related borrowings and (ii) the interest rate adjustment periods for our Agency MBS backed by ARMs and the interest rate adjustment periods for our related borrowings. As our borrowings mature or are renewed, we may adjust the index used to calculate interest expense, the duration of the reset periods and the maturities of our borrowings.

Agency MBS Backed by Fixed-Rate Mortgages. As interest rates rise, our borrowing costs increase; however, the income on our Agency MBS backed by fixed-rate mortgages remains unchanged. We may seek to limit increases to our borrowing costs through the use of interest rate swap or cap agreements, options, put or call agreements, futures contracts, forward rate agreements or similar financial instruments to effectively convert our floating-rate borrowings into fixed-rate borrowings.

Agency MBS Backed by Hybrid ARMs. During the fixed-rate period of our Agency MBS backed by hybrid ARMs, the security is similar to Agency MBS backed by fixed-rate mortgages. During this period, we may employ the same hedging strategy that we employ for our Agency MBS backed by fixed-rate mortgages. Once our Agency MBS backed by hybrid ARMs convert to floating rate securities, we may employ the same hedging strategy as we employ for our Agency MBS backed by ARMs.

Derivative Instruments. We enter into derivative instruments to economically hedge against the possibility that rising rates may adversely impact the value of our repurchase agreement liabilities.  The principal instruments that the Company has used to date are Eurodollar and Treasury Note ("T-Note") futures contracts and options to enter into interest rate swaps ("interest rate swaptions"), but may enter into other transactions in the future.

Interest rate swaptions provide us the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. We may enter into swaption agreements that provide us the option to enter into a pay fixed rate interest rate swap ("payer swaption"),  or swaption agreements that provide us the option to enter into a receive fixed interest rate swap ("receiver swaptions").

Additionally, our structured Agency MBS generally exhibit sensitivities to movements in interest rates different than our pass-through Agency MBS. To the extent they do so, our structured Agency MBS may protect us against declines in the market value of our combined portfolio that result from adverse interest rate movements, although we cannot assure you that this will be the case.

We may purchase a portion of our Agency RMBS through forward settling transactions, including "to-be-announced" ("TBA") securities transactions.  We account for TBA securities as derivative instruments if either the TBA securities do not settle in the shortest period of time possible or if we cannot assert that it is probable at the inception of the TBA transaction, and throughout its term, that we will take physical delivery of the Agency RMBS for a long position, or make delivery of the Agency RMBS for a short position, upon settlement of the trade. However, we have not entered into these TBA securities transactions as a hedge of our interest rate risk.

Prepayment Risk Management

The risk of mortgage prepayments is another significant risk to our portfolio. When prevailing interest rates fall below the coupon rate of a mortgage, mortgage prepayments are likely to increase. Conversely, when prevailing interest rates increase above the coupon rate of a mortgage, mortgage prepayments are likely to decrease.

When prepayment rates increase, we may not be able to reinvest the money received from prepayments at yields comparable to those of the securities prepaid. Also, some ARMs and hybrid ARMs which back our Agency MBS may bear initial "teaser" interest rates that are lower than their fully-indexed interest rates. If these mortgages are prepaid during this "teaser" period, we may lose the opportunity to receive interest payments at the higher, fully-indexed rate over the expected life of the security. Additionally, some of our structured Agency MBS, such as IOs and IIOs, may be negatively affected by an increase in prepayment rates because their value is wholly contingent on the underlying mortgage loans having an outstanding principal balance.

A decrease in prepayment rates may also have an adverse effect on our portfolio. For example, if we invest in POs, the purchase price of such securities will be based, in part, on an assumed level of prepayments on the underlying mortgage loan. Because the returns on POs decrease the longer it takes the principal payments on the underlying loans to be paid, a decrease in prepayment rates could decrease our returns on these securities.

Prepayment risk also affects our hedging activities. When an Agency MBS backed by a fixed-rate mortgage or hybrid ARM is acquired with borrowings, we may cap or fix our borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related Agency MBS. If prepayment rates are different than our projections, the term of the related hedging instrument may not match the fixed-rate portion of the security, which could cause us to incur losses.

Because our business may be adversely affected if prepayment rates are different than our projections, we seek to invest in Agency MBS backed by mortgages with well-documented and predictable prepayment histories. To protect against increases in prepayment rates, we invest in Agency MBS backed by mortgages that we believe are less likely to be prepaid. For example, we invest in Agency MBS backed by mortgages (i) with loan balances low enough such that a borrower would likely have little incentive to refinance, (ii) extended to borrowers with credit histories weak enough to not be eligible to refinance their mortgage loans, (iii) that are newly originated fixed-rate or hybrid ARMs or (iv) that have interest rates low enough such that a borrower would likely have little incentive to refinance. To protect against decreases in prepayment rates, we may also invest in Agency MBS backed by mortgages with characteristics opposite to those described above, which would typically be more likely to be refinanced. We may also invest in certain types of structured Agency MBS as a means of mitigating our portfolio-wide prepayment risks. For example, certain tranches of CMOs are less sensitive to increases in prepayment rates, and we may invest in those tranches as a means of hedging against increases in prepayment rates.

Liquidity Management Strategy

Because of our use of leverage, we manage liquidity to meet our lenders' margin calls by maintaining cash balances or unencumbered assets well in excess of anticipated margin calls; and making margin calls on our lenders when we have an excess of collateral pledged against our borrowings.

We also attempt to minimize the number of margin calls we receive by:

	Deploying capital from our leveraged Agency MBS portfolio to our unleveraged Agency MBS portfolio;



Investing in Agency MBS backed by mortgages that we believe are less likely to be prepaid to decrease the risk of excessive margin calls when monthly prepayments are announced. Prepayments are declared, and the market value of the related security declines, before the receipt of the related cash flows. Prepayment declarations give rise to a temporary collateral deficiency and generally result in margin calls by lenders;

	Obtaining funding arrangements which defer or waive prepayment-related margin requirements in exchange for payments to the lender tied to the dollar amount of the collateral deficiency and a predetermined interest rate; and

	Reducing our overall amount of leverage.

 

		High				Low				Close				Dividends Declared
2016
First quarter		$	1.88			$	0.59			$	1.64			$	-
Second quarter			1.74				1.07				1.38				-
Third quarter			2.70				1.26				2.50				-
Fourth quarter			2.70				1.69				2.62				-
2015															.
First quarter		$	1.90			$	1.48			$	1.75			$	-
Second quarter			2.98				1.51				2.80				-
Third quarter			2.94				1.21				1.33				-
Fourth quarter			1.45				0.66				0.80				-

							Number of securities
							remaining available for
			Total number of securities		Weighted-average		future issuance under
			to be issued upon exercise		exercise price of		equity compensation plans
			of outstanding options,		of outstanding options,		(excluding securities
			warrants and rights		warrants and rights		reflected in column (a))
Plan Category			(a)		(b)
Equity compensation plans approved by
	by security holders		70,000		-		2,621,667 (2)
Equity compensation plans not approved
	by security holders(1)		-		-		-
Total			70,000		-		2,621,667

(in thousands)
		2016				2015				Change
Net portfolio interest income		$	3,488			$	3,887			$	(399	)
Interest expense on junior subordinated notes			(1,109	)			(998	)			(111	)
Losses on MBS and derivative instruments			(3,622	)			(3,400	)			(222	)
Net portfolio loss			(1,243	)			(511	)			(732	)
Other income			11,514				6,991				4,523
Expenses			(5,743	)			(9,699	)			3,956
Income (loss) before income tax provision (benefit)			4,528				(3,219	)			7,747
Income tax provision (benefit)			1,142				(62,450	)			63,592
Net income		$	3,386			$	59,231			$	(55,845	)

Gains (Losses) on Derivative Instruments - Recognized in Consolidated Statement of Operations (GAAP)
(in thousands)
						Junior
		Repurchase				Subordinated
Three Months Ended		Agreements				Debt				Total
December 31, 2016		$	496			$	1,037			$	1,533
September 30, 2016			326				182				508
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
Years Ended		Agreements				Debt				Total
December 31, 2016		$	(318	)		$	302			$	(16	)
December 31, 2015			(930	)			(447	)			(1,377	)

Losses on Derivative Instruments - Attributed to Current Period (Non-GAAP)
(in thousands)
						Junior
		Repurchase				Subordinated
Three Months Ended		Agreements				Debt				Total
December 31, 2016		$	(122	)		$	(57	)		$	(179	)
September 30, 2016			(93	)			(55	)			(148	)
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
Years Ended		Agreements				Debt				Total
December 31, 2016		$	(320	)		$	(269	)		$	(589	)
December 31, 2015			(61	)			(272	)			(333	)

Gains (Losses) on Derivative Instruments - Attributed to Future Periods (Non-GAAP)
(in thousands)
						Junior
		Repurchase				Subordinated
Three Months Ended		Agreements				Debt				Total
December 31, 2016		$	618			$	1,094			$	1,712
September 30, 2016			419				237				656
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
Years Ended		Agreements				Debt				Total
December 31, 2016		$	2			$	571			$	573
December 31, 2015			(869	)			(175	)			(1,044	)

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
December 31, 2016		$	1,285			$	251			$	(122	)		$	373			$	1,034			$	912
September 30, 2016			1,108				195				(92	)			287				913				821
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
Years Ended		Income				Basis				Hedges(1)				Basis(2)				Basis				Basis
December 31, 2016		$	4,235			$	747			$	(319	)		$	1,066			$	3,488			$	3,169
December 31, 2015			4,312				425				(61	)			486				3,887				3,826

Economic Net Interest Income
(in thousands)
		Net Portfolio								Interest Expense on Junior Subordinated Notes
		Interest Income												Effect of								Net Interest Income
		GAAP				Economic				GAAP				Non-GAAP				Economic				GAAP				Economic
Three Months Ended		Basis				Basis(1)				Basis				Hedges(2)				Basis(3)				Basis				Basis(4)
December 31, 2016		$	1,034			$	912			$	291			$	(57	)		$	348			$	743			$	564
September 30, 2016			913				821				278				(55	)			333				635				488
June 30, 2016			851				791				276				(77	)			353				575				438
March 31, 2016			690				645				264				(80	)			344				426				301
December 31, 2015			915				884				255				(80	)			335				660				549
September 30, 2015			889				869				252				(74	)			326				637				543
June 30, 2015			976				967				248				(64	)			312				728				655
March 31, 2015			1,107				1,106				243				(54	)			297				864				809
(in thousands)
		Net Portfolio								Interest Expense on Junior Subordinated Notes
		Interest Income												Effect of								Net Interest Income
		GAAP				Economic				GAAP				Non-GAAP				Economic				GAAP				Economic
Years Ended		Basis				Basis(1)				Basis				Hedges(2)				Basis(3)				Basis				Basis
December 31, 2016		$	3,488			$	3,169			$	1,109			$	(269	)		$	1,378			$	2,379			$	1,791
December 31, 2015			3,887				3,826				998				(272	)			1,270				2,889				2,556

($ in thousands)
		Average								Yield on				Average				Interest Expense								Average Cost of Funds
		MBS				Interest				Average				Repurchase				GAAP				Economic				GAAP				Economic
Three Months Ended		Held(1)				Income(2)				MBS				Agreements(1)				Basis				Basis(2)				Basis				Basis(3)
December 31, 2016		$	131,952			$	1,285				3.89	%		$	123,909			$	251			$	373				0.81	%			1.20	%
September 30, 2016			122,220				1,108				3.63	%			114,858				195				287				0.68	%			1.00	%
June 30, 2016			110,017				1,025				3.73	%			103,259				174				234				0.67	%			0.91	%
March 31, 2016			96,592				817				3.39	%			90,014				127				172				0.57	%			0.77	%
December 31, 2015			103,551				1,035				4.00	%			95,456				120				151				0.50	%			0.63	%
September 30, 2015			115,437				996				3.45	%			107,442				107				127				0.40	%			0.47	%
June 30, 2015			111,674				1,074				3.85	%			103,750				98				107				0.38	%			0.41	%
March 31, 2015			116,709				1,207				4.14	%			108,129				100				101				0.37	%			0.37	%
($ in thousands)
		Average								Yield on				Average				Interest Expense								Average Cost of Funds
		MBS				Interest				Average				Repurchase				GAAP				Economic				GAAP				Economic
Years Ended		Held(1)				Income(2)				MBS				Agreements(1)				Basis				Basis(2)				Basis				Basis(3)
December 31, 2016		$	115,195			$	4,235				3.68	%		$	108,010			$	747			$	1,066				0.69	%			0.99	%
December 31, 2015			111,843				4,312				3.86	%			103,694				425				486				0.41	%			0.47	%

($ in thousands)
		Net Portfolio								Net Portfolio
		Interest Income								Interest Spread
		GAAP				Economic				GAAP				Economic
Three Months Ended		Basis				Basis(2)				Basis				Basis(4)
December 31, 2016		$	1,034			$	912				3.08	%			2.69	%
September 30, 2016			913				821				2.95	%			2.63	%
June 30, 2016			851				791				3.06	%			2.82	%
March 31, 2016			690				645				2.82	%			2.62	%
December 31, 2015			915				884				3.50	%			3.37	%
September 30, 2015			889				869				3.05	%			2.98	%
June 30, 2015			976				967				3.47	%			3.44	%
March 31, 2015			1,107				1,106				3.77	%			3.77	%
($ in thousands)
		Net Portfolio								Net Portfolio
		Interest Income								Interest Spread
		GAAP				Economic				GAAP				Economic
Years Ended		Basis				Basis(2)				Basis				Basis(4)
December 31, 2016		$	3,488			$	3,169				2.99	%			2.69	%
December 31, 2015			3,887				3,826				3.45	%			3.39	%

($ in thousands)
		Average MBS Held												Interest Income												Realized Yield on Average MBS
		PT				Structured								PT				Structured								PT				Structured
Three Months Ended		MBS				MBS				Total				MBS				MBS				Total				MBS				MBS				Total
December 31, 2016		$	127,627			$	4,325			$	131,952			$	1,238			$	47			$	1,285				3.88	%			4.32	%			3.89	%
September 30, 2016			119,411				2,809				122,220				1,092				16				1,108				3.66	%			2.19	%			3.63	%
June 30, 2016			106,653				3,364				110,017				1,008				17				1,025				3.78	%			2.05	%			3.73	%
March 31, 2016			92,365				4,227				96,592				783				34				817				3.39	%			3.25	%			3.39	%
December 31, 2015			98,585				4,966				103,551				1,057				(22	)			1,035				4.29	%			(1.82	)%			4.00	%
September 30, 2015			109,582				5,855				115,437				1,038				(42	)			996				3.79	%			(2.90	)%			3.45	%
June 30, 2015			105,368				6,306				111,674				1,031				43				1,074				3.91	%			2.75	%			3.85	%
March 31, 2015			111,035				5,674				116,709				1,090				117				1,207				3.93	%			8.25	%			4.14	%
($ in thousands)
		Average MBS Held												Interest Income												Realized Yield on Average MBS
		PT				Structured								PT				Structured								PT				Structured
Years Ended		MBS				MBS				Total				MBS				MBS				Total				MBS				MBS				Total
December 31, 2016		$	111,514			$	3,681			$	115,195			$	4,121			$	114			$	4,235				3.70	%			3.09	%			3.68	%
December 31, 2015			106,143				5,700				111,843				4,216				96				4,312				3.97	%			1.67	%			3.86	%

($ in thousands)
		Average
		Balance of				Interest Expense								Average Cost of Funds
		Repurchase				GAAP				Economic				GAAP				Economic
Three Months Ended		Agreements				Basis				Basis				Basis				Basis
December 31, 2016		$	123,909			$	251			$	373				0.81	%			1.20	%
September 30, 2016			114,858				195				287				0.68	%			1.00	%
June 30, 2016			103,259				174				234				0.67	%			0.91	%
March 31, 2016			90,014				127				172				0.57	%			0.77	%
December 31, 2015			95,456				120				151				0.50	%			0.63	%
September 30, 2015			107,442				107				127				0.40	%			0.47	%
June 30, 2015			103,750				98				107				0.38	%			0.41	%
March 31, 2015			108,129				100				101				0.37	%			0.37	%
($ in thousands)
		Average
		Balance of				Interest Expense								Average Cost of Funds
		Repurchase				GAAP				Economic				GAAP				Economic
Years Ended		Agreements				Basis				Basis				Basis				Basis
December 31, 2016		$	108,010			$	747				1,066				0.69	%			0.99	%
December 31, 2015			103,694				425				486				0.41	%			0.47	%

										Average GAAP Cost of Funds								Average Economic Cost of Funds
										Relative to Average								Relative to Average
		Average LIBOR								One-Month				Six-Month				One-Month				Six-Month
Three Months Ended		One-Month				Six-Month				LIBOR				LIBOR				LIBOR				LIBOR
December 31, 2016			0.62	%			1.28	%			0.19	%			(0.47	)%			0.58	%			(0.08	)%
September 30, 2016			0.49	%			1.09	%			0.19	%			(0.41	)%			0.51	%			(0.09	)%
June 30, 2016			0.44	%			0.92	%			0.23	%			(0.25	)%			0.47	%			(0.01	)%
March 31, 2016			0.40	%			0.84	%			0.17	%			(0.27	)%			0.37	%			(0.07	)%
December 31, 2015			0.28	%			0.65	%			0.22	%			(0.15	)%			0.35	%			(0.02	)%
September 30, 2015			0.19	%			0.49	%			0.21	%			(0.09	)%			0.28	%			(0.02	)%
June 30, 2015			0.18	%			0.40	%			0.20	%			(0.02	)%			0.23	%			0.01	%
March 31, 2015			0.17	%			0.35	%			0.20	%			0.02	%			0.20	%			0.02	%
										Average GAAP Cost of Funds								Average Economic Cost of Funds
										Relative to Average								Relative to Average
		Average LIBOR								One-Month				Six-Month				One-Month				Six-Month
Years Ended		One-Month				Six-Month				LIBOR				LIBOR				LIBOR				LIBOR
December 31, 2016			0.49	%			1.03	%			0.20	%			(0.34	)%			0.50	%			(0.04	)%
December 31, 2015			0.21	%			0.47	%			0.20	%			(0.06	)%			0.26	%			(0.00	)%

(in thousands)
		2016				2015				Change
Realized gains (losses) on sales of MBS		$	180			$	(79	)		$	259
Unrealized losses on MBS			(3,786	)			(1,944	)			(1,842	)
Total losses on MBS			(3,606	)			(2,023	)			(1,583	)
Losses on derivative instruments			(16	)			(1,377	)			1,361
Advisory services			5,489				5,042				447
Gains on retained interests			2,425				2,962				(537	)
Unrealized gains (losses) on Orchid Island Capital, Inc.			1,256				(2,961	)			4,217
Orchid Island Capital, Inc. dividends			2,344				1,894				450

										15 Year				30 Year				Three
		5 Year				10 Year				Fixed-Rate				Fixed-Rate				Month
		Treasury Rate(1)				Treasury Rate(1)				Mortgage Rate(2)				Mortgage Rate(2)				Libor(3)
December 31, 2016			1.93	%			2.45	%			3.43	%			4.20	%			0.98	%
September 30, 2016			1.16	%			1.61	%			2.76	%			3.46	%			0.85	%
June 30, 2016			1.01	%			1.49	%			2.84	%			3.57	%			0.65	%
March 31, 2016			1.22	%			1.79	%			2.97	%			3.69	%			0.63	%
December 31, 2015			1.76	%			2.27	%			3.21	%			3.96	%			0.54	%
September 30, 2015			1.38	%			2.06	%			3.10	%			3.89	%			0.33	%
June 30, 2015			1.63	%			2.34	%			3.19	%			3.98	%			0.28	%
March 31, 2015			1.38	%			1.93	%			3.04	%			3.77	%			0.27	%

(in thousands)
		2016				2015				Change
Compensation and benefits		$	3,325			$	2,907			$	418
Legal fees			210				1,051				(841	)
Accounting, auditing and other professional fees			389				574				(185	)
Directors' fees and liability insurance			622				670				(48	)
Direct operating expenses			306				282				24
Settlement of litigation			-				3,500				(3,500	)
Other G&A expenses			892				715				177
		$	5,744			$	9,699			$	(3,955	)

						Structured
		PT MBS				MBS				Total
Three Months Ended		Portfolio (%)				Portfolio (%)				Portfolio (%)
December 31, 2016			5.5				27.3				11.1
September 30, 2016			9.4				19.7				13.6
June 30, 2016			7.8				20.4				12.6
March 31, 2016			11.8				16.6				14.3
December 31, 2015			7.9				13.7				10.4
September 30, 2015			13.4				12.4				13.0
June 30, 2015			16.2				15.3				15.9
March 31, 2015			9.6				12.3				10.5

($ in thousands)
					Weighted		Weighted
			Percentage		Average		Average	Weighted	Weighted
			of	Weighted	Maturity		Coupon	Average	Average
		Fair	Entire	Average	in	Longest	Reset in	Lifetime	Periodic
Asset Category		Value	Portfolio	Coupon	Months	Maturity	Months	Cap	Cap
December 31, 2016
Fixed Rate MBS	$	124,299	95.4%	4.24%	347	1-Oct-46	NA	NA	NA
Total PT MBS		124,299	95.4%	4.24%	347	1-Oct-46	NA	NA	NA
Interest-Only Securities		2,654	2.0%	3.48%	245	25-Dec-39	NA	NA	NA
Inverse Interest-Only Securities		3,349	2.6%	5.52%	325	25-Dec-46	NA	3.25%	NA
Total Structured MBS		6,003	4.6%	4.62%	290	25-Dec-46	NA	NA	NA
Total Mortgage Assets	$	130,302	100.0%	4.26%	344	25-Dec-46	NA	NA	NA
December 31, 2015
Fixed Rate MBS	$	79,170	94.3%	4.26%	313	1-Sep-45	NA	NA	NA
Hybrid Adjustable Rate MBS		118	0.1%	4.00%	313	20-Jan-42	15.03	9.00%	1.00%
Total PT MBS		79,288	94.4%	4.26%	313	1-Sep-45	NA	NA	NA
Interest-Only Securities		2,554	3.0%	3.10%	242	25-Dec-39	NA	NA	NA
Inverse Interest-Only Securities		2,146	2.6%	6.12%	301	25-Apr-41	NA	6.53%	NA
Total Structured MBS		4,700	5.6%	4.48%	269	25-Apr-41	NA	NA	NA
Total Mortgage Assets	$	83,988	100.0%	4.27%	310	1-Sep-45	NA	NA	NA

($ in thousands)
		December 31, 2016								December 31, 2015
						Percentage of								Percentage of
Agency		Fair Value				Entire Portfolio				Fair Value				Entire Portfolio
Fannie Mae		$	120,961				92.8	%		$	42,065				50.1	%
Freddie Mac			8,870				6.8	%			40,928				48.7	%
Ginnie Mae			471				0.4	%			995				1.2	%
Total Portfolio		$	130,302				100.0	%		$	83,988				100.0	%

		December 31, 2016				December 31, 2015
Weighted Average Pass-through Purchase Price		$	110.31			$	107.96
Weighted Average Structured Purchase Price		$	6.74			$	6.11
Weighted Average Pass-through Current Price		$	107.54			$	107.86
Weighted Average Structured Current Price		$	10.4			$	8.45
Effective Duration (1)			4.769				2.326

($ in thousands)
	2016												2015
		Total Cost				Average Price				Weighted Average Yield				Total Cost				Average Price				Weighted Average Yield
PT MBS		$	133,100			$	110.31				2.42	%		$	25,410			$	109.45				2.49	%
Structured MBS			2,993				11.43				5.15	%			987				8.18				10.23	%

($ in thousands)
		Fair				$ Change in Fair Value												% Change in Fair Value
MBS Portfolio		Value				-100BPS				+100BPS				+200BPS				-100BPS				+100BPS				+200BPS
Fixed Rate MBS			124,299				5,442				(7,306	)			(15,400	)			4.38	%			(5.88	)%			(12.39	)%
Interest-Only MBS			2,654				(932	)			622				998				(35.12	)%			23.44	%			37.60	%
Inverse Interest-Only MBS			3,349				84				(449	)			(1,058	)			2.51	%			(13.41	)%			(31.59	)%
Total MBS Portfolio		$	130,302			$	4,594			$	(7,133	)		$	(15,460	)			3.53	%			(5.47	)%			(11.86	)%

($ in thousands)
		Notional				$ Change in Fair Value												% Change in Fair Value
		Amount(1)				-100BPS				+100BPS				+200BPS				-100BPS				+100BPS				+200BPS
Eurodollar Futures Contracts
Repurchase Agreement Hedges		$	1,200,000			$	(2,461	)		$	3,000			$	6,000				(0.84	)%			1.02	%			2.04	%
Junior Subordinated Debt Hedges			520,000				(1,067	)			1,300				2,600				(0.84	)%			1.02	%			2.04	%
		$	1,720,000			$	(3,528	)		$	4,300			$	8,600				(0.84	)%			1.02	%			2.04	%
Gross Totals						$	1,066			$	(2,833	)		$	(6,860	)

($ in thousands)
									Difference Between Ending
			Ending Balance			Average Balance			Repurchase Agreements and
			of Repurchase			of Repurchase			Average Repurchase Agreements
Three Months Ended			Agreements			Agreements			Amount	Percent
December 31, 2016		$	121,828		$	123,909		$	(2,081)	(1.68)%
September 30, 2016			125,991			114,858			11,133	9.69%
June 30, 2016			103,725			103,259			466	0.45%
March 31, 2016			102,794			90,014			12,780	14.20%(1)
December 31, 2015			77,234			95,456			(18,222)	(19.09)%(2)
September 30, 2015			113,677			107,442			6,235	5.80%
June 30, 2015			101,206			103,750			(2,544)	(2.45)%
March 31, 2015			106,294			108,129			(1,835)	(1.70)%

(in thousands)
		Obligations Maturing
		Within				One to Three				Three to Five				More than Five				Total
		Year				Years				Years				Years				Total
Repurchase agreements		$	121,828			$	-			$	-			$	-			$	121,828
Interest expense on repurchase agreements(1)			190				-				-				-				190
Junior subordinated notes(2)			-				-				-				26,000				26,000
Interest expense on junior subordinated notes(1)			1,231				2,353				2,356				16,431				22,371
Litigation settlement			250				500				-				-				750
Totals		$	123,499			$	2,853			$	2,356			$	42,431			$	171,139

	Page
Report of Independent Registered Public Accounting Firm	57
Consolidated Balance Sheets	58
Consolidated Statements of Operations	59
Consolidated Statements of Equity	60
Consolidated Statements of Cash Flows	61
Notes to Consolidated Financial Statements	62

West Palm Beach, Florida March 8, 2017

/s/ BDO USA, LLP Certified Public Accountants

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2016 and 2015
		2016				2015
ASSETS:
Mortgage-backed securities, at fair value
Pledged to counterparties		$	129,582,386			$	81,192,199
Unpledged			719,603				2,796,200
Total mortgage-backed securities			130,301,989				83,988,399
Cash and cash equivalents			4,429,459				6,310,683
Restricted cash			1,221,978				401,800
Investment in Orchid Island Capital, Inc. common stock, at fair value			15,108,240				13,852,707
Retained interests in securitizations			1,113,736				1,124,278
Accrued interest receivable			512,760				351,049
Property and equipment, net			3,407,040				3,492,612
Deferred tax assets, net			63,833,063				64,832,242
Other assets			2,942,139				2,701,655
Total Assets		$	222,870,404			$	177,055,425
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Repurchase agreements		$	121,827,586			$	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			114,199				83,957
Other liabilities			1,977,281				2,533,442
Total Liabilities			150,723,506				108,515,365
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 December 31, 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 December 31, 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 December 31, 2016 and 2015			32				32
Class C Common stock, $0.001 par value; 1,000,000 shares designated, 31,938 shares
issued and outstanding as of December 31, 2016 and 2015			32				32
Additional paid-in capital			334,850,838				334,630,263
Accumulated deficit			(262,716,636	)			(266,102,640	)
Total Stockholders' Equity			72,146,898				68,540,060
Total Liabilities and Equity		$	222,870,404			$	177,055,425
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2016 and 2015
		2016				2015
Interest income		$	4,235,081			$	4,312,063
Interest expense			(747,374	)			(425,107	)
Net interest income, before interest on junior subordinated notes			3,487,707				3,886,956
Interest expense on junior subordinated notes			(1,108,610	)			(997,812	)
Net interest income			2,379,097				2,889,144
Unrealized losses on mortgage-backed securities			(3,785,939	)			(1,944,186	)
Realized gains (losses) on mortgage-backed securities			179,667				(78,850	)
Losses on derivative instruments			(15,638	)			(1,376,963	)
Net portfolio loss			(1,242,813	)			(510,855	)
Other income:
Advisory services			5,488,691				5,041,692
Gains on retained interests in securitizations			2,425,190				2,962,158
Unrealized gains (losses) on Orchid Island Capital, Inc. common stock			1,255,533				(2,960,771	)
Orchid Island Capital, Inc. dividends			2,343,660				1,894,480
Other income			1,125				53,172
Total other income			11,514,199				6,990,731
Expenses:
Compensation and related benefits			3,324,955				2,907,186
Directors' fees and liability insurance			621,873				669,944
Audit, legal and other professional fees			599,243				1,624,822
Settlement of litigation			-				3,500,000
Administrative and other expenses			1,197,593				996,886
Total expenses			5,743,664				9,698,838
Net income (loss) before income tax provision (benefit)			4,527,722				(3,218,962	)
Income tax provision (benefit)			1,141,718				(62,449,791	)
Net income			3,386,004				59,230,829
Basic and Diluted Net Income Per Share of:
CLASS A COMMON STOCK
Basic and Diluted		$	0.27			$	4.77
CLASS B COMMON STOCK
Basic and Diluted		$	0.27			$	4.77
Weighted Average Shares Outstanding:
CLASS A COMMON STOCK
Basic and Diluted			12,698,122				12,385,938
CLASS B COMMON STOCK
Basic and Diluted			31,938				31,938
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2016 and 2015
		Stockholders' Equity
		Common				Additional				Accumulated
		Stock				Paid-in Capital				Deficit				Total
Balances, January 1, 2015		$	12,388			$	334,522,850			$	(325,333,469	)		$	9,201,769
Net income			-				-				59,230,829				59,230,829
Issuance of Class A common shares pursuant to stock
based compensation plans			49				88,186				-				88,235
Amortization of stock based compensation			-				19,227				-				19,227
Balances, December 31, 2015			12,437				334,630,263				(266,102,640	)			68,540,060
Net income			-				-				3,386,004				3,386,004
Issuance of Class A common shares pursuant to stock
based compensation plans			259				193,491				-				193,750
Amortization of stock based compensation			-				27,084				-				27,084
Balances, December 31, 2016		$	12,696			$	334,850,838			$	(262,716,636	)		$	72,146,898
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016 and 2015
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	3,386,004			$	59,230,829
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation and equity plan amortization			220,834				107,462
Depreciation			85,572				91,991
Deferred income tax provision (benefit)			999,179				(62,932,178	)
Losses on mortgage-backed securities			3,606,272				2,023,036
Gains on retained interests in securitizations			(2,425,190	)			(2,962,158	)
Fair value adjustment on Investment in Orchid Island Capital, Inc.			(1,255,533	)			2,960,771
Changes in operating assets and liabilities:
Accrued interest receivable			(161,711	)			109,277
Other assets			(240,484	)			258,387
Accrued interest payable			30,242				(10,440	)
Other liabilities			(556,161	)			1,718,845
NET CASH PROVIDED BY OPERATING ACTIVITIES			3,689,024				595,822
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases			(136,092,749	)			(26,396,648	)
Sales			73,061,443				37,545,348
Principal repayments			13,111,444				20,670,897
Payments received on retained interests in securitizations			2,435,732				3,737,564
(Increase) decrease in restricted cash			(820,178	)			331,860
Purchases of Orchid Island Capital, Inc. common stock			(1,859,277	)			(2,143,473	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES			(50,163,585	)			33,745,548
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements			1,041,580,945				1,010,947,179
Principal repayments on repurchase agreements			(996,987,608	)			(1,043,676,925	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			44,593,337				(32,729,746	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(1,881,224	)			1,611,624
CASH AND CASH EQUIVALENTS, beginning of the year			6,310,683				4,699,059
CASH AND CASH EQUIVALENTS, end of the year		$	4,429,459			$	6,310,683
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest		$	1,825,742			$	1,433,359
Income taxes		$	540,627			$	137,001
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Securities acquisitions settled in later period		$	-			$	1,859,277
See Notes to Consolidated Financial Statements

(in thousands)
		2016				2015
Pass-Through MBS:
Fixed-rate Mortgages		$	124,299			$	79,170
Hybrid Adjustable-rate Mortgages			-				118
Total Pass-Through MBS			124,299				79,288
Structured MBS:
Interest-Only Securities			2,654				2,554
Inverse Interest-Only Securities			3,349				2,146
Total Structured MBS			6,003				4,700
Total		$	130,302			$	83,988

(in thousands)
	December 31, 2016				December 31, 2015
Greater than five years and less than ten years		$	-			$	3
Greater than or equal to ten years			130,302				83,985
Total		$	130,302			$	83,988

(in thousands)
Series	Issue Date		2016				2015
HMAC 2004-2	May 10, 2004		$	143			$	110
HMAC 2004-3	June 30, 2004			364				453
HMAC 2004-4	August 16, 2004			463				75
HMAC 2004-5	September 28, 2004			144				182
HMAC 2004-6	November 17, 2004			-				304
Total			$	1,114			$	1,124

(in thousands)
		2016				2015
Land		$	2,247			$	2,247
Buildings and improvements			1,827				1,827
Computer equipment and software			177				187
Office furniture and equipment			180				227
Total cost			4,431				4,488
Less accumulated depreciation and amortization			1,024				995
Property and equipment, net		$	3,407			$	3,493

(in thousands)
		2016				2015
Prepaid expenses		$	756			$	499
Servicing advances			245				546
Servicing sale receivable, including accrued interest			309				308
Investment in Bimini Capital Trust II			804				804
Due from affiliates			566				465
Other			262				80
Total other assets		$	2,942			$	2,702

($ in thousands)
		OVERNIGHT				BETWEEN 2				BETWEEN 31				GREATER
		(1 DAY OR				AND				AND				THAN
		LESS)				30 DAYS				90 DAYS				90 DAYS				TOTAL
December 31, 2016
Fair value of securities pledged, including accrued
interest receivable		$	-			$	71,565			$	41,334			$	17,172			$	130,071
Repurchase agreement liabilities associated with
these securities		$	-			$	66,919			$	38,733			$	16,176			$	121,828
Net weighted average borrowing rate			-				1.01	%			0.96	%			0.98	%			0.99	%
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	%

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2016
		Repurchase Agreement Funding Hedges
		Average				Weighted				Weighted
		Contract				Average				Average
		Notional				Entry				LIBOR				Open
Expiration Year		Amount				Rate				Rate				Equity(1)
2017		$	60,000				1.32	%			1.28	%		$	(26	)
2018			60,000				1.90	%			1.82	%			(49	)
2019			60,000				2.32	%			2.21	%			(69	)
2020			60,000				2.60	%			2.45	%			(88	)
2021			60,000				2.80	%			2.64	%			(93	)
Total / Weighted Average		$	60,000				2.19	%			2.08	%		$	(325	)

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2016
		Junior Subordinated Debt Funding Hedges
		Average				Weighted				Weighted
		Contract				Average				Average
		Notional				Entry				LIBOR				Open
Expiration Year		Amount				Rate				Rate				Equity(1)
2017		$	26,000				1.93	%			1.28	%		$	(169	)
2018			26,000				1.84	%			1.82	%			(6	)
2019			26,000				1.63	%			2.21	%			150
2020			26,000				1.95	%			2.45	%			132
2021			26,000				2.22	%			2.64	%			110
Total / Weighted Average		$	26,000				1.91	%			2.08	%		$	217

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2015
		Repurchase Agreement Funding Hedges
		Average				Weighted				Weighted
		Contract				Average				Average
		Notional				Entry				LIBOR				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	)

($ in thousands)
Eurodollar Futures Positions
As of December 31, 2015
		Junior Subordinated Debt Funding Hedges
		Average				Weighted				Weighted
		Contract				Average				Average
		Notional				Entry				LIBOR				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	)

(in thousands)
		Consolidated
		2016				2015
Eurodollar futures contracts (short positions) - Repurchase agreement funding hedges		$	(318	)		$	(930	)
Eurodollar futures contracts (short positions)- Junior subordinated debt funding hedges			302				(447	)
Net losses on derivative instruments		$	(16	)		$	(1,377	)

($ in thousands)
As of December 31, 2016
		Repurchase				Derivative
Assets Pledged to Counterparties		Agreements				Agreements				Total
PT MBS - at fair value		$	124,298			$	-			$	124,298
Structured MBS - at fair value			5,284				-				5,284
Accrued interest on pledged securities			489				-				489
Cash			456				766				1,222
Total		$	130,527			$	766			$	131,293

($ 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

(in thousands)
Offsetting of Liabilities
									Net Amount				Gross Amount Not Offset in the
									of Liabilities				Consolidated Balance Sheet
					Gross Amount				Presented				Financial
	Gross Amount				Offset in the				in the				Instruments				Cash
	of Recognized				Consolidated				Consolidated				Posted as				Posted as				Net
	Liabilities				Balance Sheet				Balance Sheet				Collateral				Collateral				Amount
December 31, 2016
Repurchase Agreements		$	121,828			$	-			$	121,828			$	(121,372	)		$	(456	)		$	-
December 31, 2015
Repurchase Agreements		$	77,234			$	-			$	77,234			$	(77,234	)		$	-			$	-

Shares Issued Related To:		2016				2015
Directors' compensation			-				48,903
Incentive plan shares			258,333				-
Total shares of Class A Common Stock issued			258,333				48,903

		2016								2015
						Weighted-								Weighted-
						Average								Average
						Grant-Date								Grant-Date
		Shares				Fair Value				Shares				Fair Value
Nonvested, at January 1			77,500			$	1.22				31,500			$	1.78
Granted during the year			-				-				46,000				0.84
Forfeited during the period			(7,500	)			1.15				-				-
Nonvested, at December 31			70,000			$	1.23				77,500			$	1.22

($ in thousands)
		2016				2015
Compensation expense recognized during the year		$	27			$	19
Unrecognized compensation expense at year end		$	39			$	75
Weighted-average remaining vesting term (in years)			1.5				2.5
Intrinsic value of unvested shares at year end		$	183			$	62

(in thousands)
		2016				2015
Current		$	143			$	482
Deferred			999				(62,932	)
Income tax provision (benefit)		$	1,142			$	(62,450	)

(in thousands)
		2016				2015
Federal tax based on statutory rate		$	1,539			$	(1,094	)
State income tax			245				(194	)
Adjustment to record beginning deferred taxes due to change to taxable status			-				(9,187	)
Reduction of deferred tax asset valuation allowance			(780	)			(52,135	)
Other			138				160
Income tax provision (benefit)		$	1,142			$	(62,450	)

(in thousands)
		2016				2015
Deferred tax assets:
Net operating loss carryforwards		$	96,500			$	99,106
Orchid Island Capital, Inc. common stock			3,291				3,787
MBS			1,425				(379	)
Management agreement			1,267				1,267
Tax hedges			366				591
Accrued expenses			330				528
Other			697				756
			103,876				105,656
Valuation allowance			(40,043	)			(40,824	)
Net deferred tax assets		$	63,833			$	64,832

(in thousands, except per-share information)
		2016				2015
Basic and diluted EPS per Class A common share:
Income attributable to Class A common shares:
Basic and diluted		$	3,378			$	59,079
Weighted average common shares:
Class A common shares outstanding at the balance sheet date			12,632				12,373
Unvested dividend-eligible share based compensation
outstanding at the balance sheet date			70				78
Effect of weighting			(4	)			(65	)
Weighted average shares-basic and diluted			12,698				12,386
Income per Class A common share:
Basic and diluted		$	0.27			$	4.77

(in thousands, except per-share information)
		2016				2015
Basic and diluted EPS per Class B common share:
Income attributable to Class B common shares:
Basic and diluted		$	8			$	152
Weighted average common shares:
Class B common shares outstanding at the balance sheet date			32				32
Effect of weighting			-				-
Weighted average shares-basic and diluted			32				32
Income per Class B common share:
Basic and diluted		$	0.27			$	4.77

(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)
December 31, 2016
Mortgage-backed securities		$	130,302			$	-			$	130,302			$	-
Margin on derivative agreements			766				766				-				-
Orchid Island Capital, Inc. common stock			15,108				15,108				-				-
Retained interests			1,114				-				-				1,114
December 31, 2015
Mortgage-backed securities		$	83,988			$	-			$	83,988			$	-
Margin on derivative agreements			402				402				-				-
Orchid Island Capital, Inc. common stock			13,853				13,853				-				-
Retained interests			1,124				-				-				1,124

(in thousands)
		Retained Interests
		2016				2015
Balances, January 1		$	1,124			$	1,900
Gain included in earnings			2,425				2,962
Collections			(2,435	)			(3,738	)
Balances, December 31		$	1,114			$	1,124

(in thousands)
		2016				2015
Management fee		$	4,188			$	3,978
Allocated overhead			1,301				1,064
Total		$	5,489			$	5,042

	Page
Report of Independent Registered Public Accounting Firm	57
Consolidated Balance Sheets	58
Consolidated Statements of Operations	59
Consolidated Statements of Equity	60
Consolidated Statements of Cash Flows	61
Notes to Consolidated Financial Statements	62

3.1	Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company's Form S-11/A, filed with the SEC on April 29, 2004
3.2	Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5	Certificate of Notice, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on February 1, 2008
3.6	Articles Supplementary, reclassifying shares of Class A Preferred Stock and Class B Preferred Stock into Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015
3.7	Articles Supplementary, creating the Series A Preferred Stock, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.
3.8	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
4.1	Rights Plan, dated as of December 21, 2015, between the Company and Broadridge Corporate Issuer Solutions, Inc. incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, dated December 21, 2015, filed with the SEC on December 21, 2015.
10.1	Bimini Capital Management, Inc. 2011 Long Term Incentive Compensation Plan, incorporated by reference to Exhibit 10.23 to the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2011*

10.2	Management Agreement between Orchid Island Capital, Inc. and Bimini Advisors, LLC date February 20, 2013, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.
10.3	Investment Allocation Agreement among the Company, Orchid Island Capital, Inc. and Bimini Advisors, LLC dated February 20, 2013, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated February 20, 2013, filed with the SEC on February 20, 2013.*
21.1	Subsidiaries of the Registrant**
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 SarbanesOxley 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 SarbanesOxley 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 SarbanesOxley 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 SarbanesOxley 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****

Date: March 8, 2017		By:	/s/ Robert E. Cauley
			Robert E. Cauley Chairman and Chief Executive Officer

Date: March 8, 2017		By:	/s/ G. Hunter Haas, IV
			G. Hunter Haas, IV President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Signature		Capacity
/s/ Robert E. Cauley
Robert E. Cauley		Director, Chairman of the Board, Chief Executive Officer
/s/ G. Hunter Haas, IV
G. Hunter Haas, IV		President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Robert J. Dwyer
Robert J. Dwyer		Director
/s/ Frank E. Jaumot
Frank E. Jaumot		Director