Executive Summary / Key Takeaways

• Dual-Segment Resilience: Bimini Capital Management (BMNM) leverages a unique dual-segment business model, combining a stable asset management arm with a dynamic investment portfolio, which has enabled financial resilience and modest profitability even as the broader mortgage REIT sector faced losses.
• Orchid Island Capital Synergy: The strategic relationship with Orchid Island Capital, Inc. (ORC) (Orchid), as its external manager, is a significant revenue driver, with Orchid's recent capital raises directly boosting Bimini's advisory service revenues by over 20% year-over-year in Q2 2025.
• Disciplined Portfolio Management: Bimini employs sophisticated risk management principles, utilizing fair value accounting and derivative instruments for economic hedging, which allows for adaptive portfolio construction and aims to optimize net interest margins in varying interest rate environments.
• Strategic Growth & Tax Advantages: Supported by positive operating cash flows and the ability to retain earnings due to net operating loss carryforwards (NOLs), Bimini is poised to resume growth in its Agency MBS portfolio, capitalizing on attractive market levels and a potentially steeper yield curve.
• Navigating Macro Headwinds: While facing uncertainties from tariffs, fiscal deficits, and evolving regulatory landscapes, management expresses cautious optimism for the Agency RMBS sector, anticipating continued favorable conditions and potential Federal Reserve rate adjustments to buttress the economy.

A Specialty Finance Play: Bimini's Dual-Engine Approach

Bimini Capital Management, Inc. (BMNM) operates as a specialty finance company, strategically positioned within the financial services sector. Established in September 2003, initially as Opteum Inc. before its name change in 2007, Bimini has evolved its business model to encompass two distinct yet complementary segments: asset management and an investment portfolio. This dual-engine approach forms the core of its operational strategy, aiming to generate diversified revenue streams and enhance overall financial stability.

The company's history reflects a proactive adaptation to market dynamics. A pivotal strategic shift occurred in 2008 when the structured mortgage-backed securities (MBS) strategy became a foundational element of its investment approach. This focus on Agency MBS, including both traditional pass-through (PT) and structured securities like interest-only (IO) and inverse interest-only (IIO) instruments, underpins the investment portfolio segment. Concurrently, the asset management segment developed through its role as the external manager of Orchid Island Capital, Inc. (Orchid), a relationship that has become increasingly vital to Bimini's revenue profile.

Sophisticated Portfolio Management and Risk Mitigation

Bimini's operational strength lies in its sophisticated approach to portfolio management and risk mitigation, which serves as a key differentiator. The company accounts for its MBS investments at fair value, a method management believes "more appropriately reflects the results of the Companys operations for a particular reporting period and is consistent with the underlying economics and how the portfolio is managed." This fair value option provides transparency into the real-time economic performance of its assets.

The company actively manages interest rate risk through the use of derivative instruments, primarily U.S. Treasury Note (T-Note) and Secured Overnight Financing Rate (SOFR) futures contracts, as well as to-be-announced (TBA) securities transactions. While these instruments are not designated as hedge accounting relationships, they are strategically employed for economic hedging purposes. This disciplined hedging strategy aims to protect the portfolio's net interest margin against adverse movements in interest rates, particularly given the short-term nature of its repurchase agreement financing. For instance, the use of IO securities in the portfolio is a deliberate choice; as interest rates rise, their expected average life increases, leading to generally positive price movements that can offset declines in pass-through Agency MBS. This strategic use of financial instruments and risk management principles, rather than relying solely on anticipated interest rate movements, allows Bimini to allocate capital to structured Agency MBS with shorter durations in volatile environments, thereby reducing sensitivity to long-term interest rate changes.

Segment Performance and Financial Health

Bimini's financial performance in the first half of 2025 demonstrates the effectiveness of its dual-segment model. For the six months ended June 30, 2025, consolidated net income reached $0.6 million, or $0.06 basic and diluted income per share of Class A Common Stock, a notable turnaround from a consolidated net loss of $0.1 million in the comparable period of 2024. This positive shift occurred despite a turbulent start to the second quarter of 2025, marked by market turmoil stemming from reciprocal tariffs.

The Asset Management Segment has been a consistent driver of profitability. Advisory service revenues for the six months ended June 30, 2025, surged to $7.474 million, representing a 21.4% increase over the $6.158 million reported in the same period of 2024. For the second quarter alone, advisory revenues were $3.851 million, up 20.4% year-over-year. This growth is directly attributable to Orchid Island Capital's successful capital raises, which significantly expanded its shareholders' equity. Orchid raised $205.4 million in Q1 2025 and an additional $139.4 million in Q2 2025, boosting its equity to $912.0 million by June 30, 2025. This increase in Orchid's capital base directly translates to higher management fees for Bimini.

The Investment Portfolio Segment also showed improved performance. Interest and dividend income for the six months ended June 30, 2025, increased to $3.734 million, a 20.8% rise from $3.090 million in the prior year. Despite a strategic sale of $9.8 million of RMBS early in Q2 2025 in response to adverse market conditions, interest revenues still increased by 23% over Q2 2024. The segment's income before taxes for Q2 2025 was $1.349 million. The average MBS holdings for Q2 2025 were $114.29 million, up from $87.54 million in Q2 2024, contributing to higher interest income. The weighted average borrowing cost on repurchase agreements was 4.49% as of June 30, 2025, with a weighted average maturity of 69 days, reflecting the short-term nature of its funding.

Consolidated operating expenses remained relatively stable, decreasing by 1% to $5.74 million for the first six months of 2025 compared to the prior year, indicating cost discipline. The company's non-GAAP "economic net portfolio interest income" for Q2 2025 was $0.50 million, up from $0.20 million in Q2 2024, which management believes provides a more accurate view of its hedging strategy's economic impact.

Liquidity, Capital Allocation, and Competitive Standing

Bimini maintains a robust liquidity position, with cash and cash equivalents totaling $5.34 million and restricted cash of $1.25 million as of June 30, 2025. Internal liquidity is generated from cash balances, unencumbered assets, and ongoing principal and interest payments from its MBS portfolio, as well as dividends from its Orchid common stock holdings. External liquidity is primarily sourced from master repurchase agreements and the TBA security market. The company's hedging strategy, while crucial for risk management, can impact liquidity through margin calls, a factor actively monitored by management.

A significant advantage for Bimini is its ability to retain earnings and deploy them into its investment portfolio, thanks to its net operating loss carryforwards (NOLs). This allows for organic growth without immediate tax implications. The MBS portfolio expanded by $29.5 million in 2024, driven by positive cash flows from operations. Management has indicated plans to resume growth of the RMBS portfolio in the near term, leveraging increased cash positions and attractive market levels.

In the competitive landscape of mortgage REITs, Bimini's dual-segment model provides a distinct advantage. While the broader mortgage REIT sector reported losses in Q2 2025, Bimini achieved modest net income, highlighting its relative resilience. The stable, fee-based revenue from its asset management segment, particularly its management of Orchid's growing capital base, offers a buffer against the volatility inherent in MBS investing. This contrasts with many pure-play mortgage REITs that are solely exposed to interest rate and credit spread fluctuations. Bimini's disciplined risk management, including its strategic use of structured MBS and derivatives, further enhances its competitive positioning by allowing it to adapt to changing market conditions and potentially capture enhanced net interest margins.

Outlook and Macroeconomic Considerations

The outlook for Bimini is shaped by evolving macroeconomic conditions and strategic initiatives. Management notes a considerably calmer market environment as the third quarter of 2025 unfolds, a stark contrast to the turbulence experienced at the start of Q2. The recent signing of the "One Big Beautiful Bill Act" on July 4, 2025, is viewed as a potentially stimulative force for the economy and risk assets, which have responded positively.

Management believes that Agency RMBS, despite not fully recovering from earlier turmoil, are currently trading at attractive levels. The sector is expected to perform well, provided there are no new adverse developments regarding reciprocal tariffs and interest rate volatility remains low. Furthermore, the Federal Reserve's stance suggests a readiness to reduce overnight rates if economic conditions deteriorate, which would serve to buttress the economy and potentially enhance net interest margins for Bimini's and Orchid's portfolios through a steeper interest rate curve. While uncertainties persist regarding the ultimate impact of tariffs and ongoing fiscal deficits, Bimini's strategy to grow its portfolio when market moves stabilize positions it to capitalize on favorable market conditions.

Conclusion

Bimini Capital Management's investment thesis is compelling, rooted in its unique dual-segment business model and disciplined approach to risk management. The synergistic relationship with Orchid Island Capital provides a robust and growing advisory revenue stream, offering a crucial counterbalance to the inherent volatility of its MBS investment portfolio. This strategic diversification, coupled with the company's ability to leverage net operating losses for reinvestment, positions Bimini for sustained growth and value creation.

Despite the ongoing macroeconomic uncertainties, including the evolving impact of tariffs and the broader regulatory landscape, Bimini's proactive portfolio management and strategic capital allocation demonstrate resilience. The company's capacity to generate modest profitability in a challenging sector, alongside its stated intent to expand its MBS holdings at attractive market levels, underscores its potential. Investors seeking exposure to a specialty finance company with a proven ability to adapt and generate returns in dynamic market environments should consider Bimini Capital Management's strategic agility and unique operational strengths.