Orchid Island Capital, Inc. and Bimini Capital Management, Inc. Announce Third Amendment to Management Agreement

Rhea-AI Summary

Orchid Island Capital (NYSE: ORC) and Bimini Capital announced a Third Amendment to their management agreement, effective November 16, 2021. The amendment facilitates the internalization of funding and custody operations, transitioning from AVM to Bimini Advisors as the manager. Bimini will assume repurchase agreement services and has hired Patrick Doyle to oversee these functions. Bimini aims to enhance operational efficiency and liquidity management through this strategic move.

Positive

• Internalization of key functions may lead to improved operational efficiency.
• Hiring of Patrick Doyle adds significant expertise in repo markets.

Negative

• Transition from AVM may pose initial operational challenges.
• Dependence on internal management could increase costs if not managed well.

• Third Amendment to Management Agreement
• Internalization of Funding and Custody/Settlement Operations
• Hiring of Patrick Doyle by Bimini Capital, Inc.

VERO BEACH, Fla.--(BUSINESS WIRE)-- Orchid Island Capital, Inc. (“Orchid”) (NYSE: ORC) and Bimini Capital, Inc. (“Bimini”) (OTCQB: BMNM) jointly announced today that effective as of November 16, 2021, Orchid and its external manager, Bimini Advisors, LLC (the “Manager”), entered into a Third Amendment (the “Amendment”) to the Management Agreement between Orchid and the Manager dated February 20, 2013, as previously amended (the “Agreement”). The Manager is a wholly-owned subsidiary of Bimini.

Pursuant to the Agreement, the Manager performs management services relating to the mortgage-backed securities portfolio, business activities and day-to-day operations of Orchid. In consideration for those services, the Manager receives management fees as well as reimbursement of certain costs and expenses from Orchid. Also pursuant to the Agreement, certain repurchase agreement trading, clearing and administrative services are provided to Orchid by AVM, L.P. (“AVM”). Orchid pays the fees for those services directly to AVM.

Bimini and the Manager are taking steps to internalize the repurchase agreement trading, clearing and administrative services that are currently provided by AVM. Pursuant to the Amendment, Orchid and the Manager have agreed that Orchid’s agreements with AVM will be terminated and the Manager will become responsible for the performance of repurchase agreement trading, clearing and administrative services.

Following termination of the AVM arrangements and in consideration for the repurchase agreement trading, clearing and administrative services to be performed by the Manager, Orchid will pay the following fees to the Manager:

• A daily fee for repurchase agreement funding transaction services equal to the product of the outstanding principal balance of repurchase agreement funding in place as of the end of such day and the applicable basis point factor set forth in the Amendment, divided by 360; and
• A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

Pursuant to the Amendment, Orchid is also required to pay its allocable share of fees incurred for safekeeping, transactions and cash services provided to Orchid by the Bank of New York Mellon (the “BNYM Fee”) directly to the Bank of New York Mellon. Orchid’s allocable share of the BNYM Fee will be equal to Orchid’s percentage of all the assets under management by the Manager, inclusive of the assets of Bimini (measured as of the first day of each month).

AVM also performs repurchase agreement trading, clearing and administrative services for Bimini with respect to its mortgage-backed securities portfolio. The Manager’s internalization of these services will allow Bimini to terminate its arrangements with AVM, and the Manager will become responsible for the performance of these services for Bimini.

Bimini has hired Patrick Doyle, effective as of December 1, 2021, to lead the Manager’s repurchase agreement trading, clearing and administrative services. From 1998 until joining Bimini, Mr. Doyle was employed by AVM, most recently as Head of Funding and Liquidity.

Commenting on the Amendment, the internalization of certain functions and the hiring of Patrick Doyle, Robert E. Cauley, the Chairman and CEO of Orchid and Bimini, stated, “We are very pleased to welcome Pat to Bimini. Pat has significant expertise and experience in the repo markets, as well as extensive knowledge of the settlement and operations related practices of our business. As a manager of repo funding operations at AVM, Pat has worked with Bimini since 2003. Once these critical functions are being performed by Bimini for Orchid, we will be able to provide them in an efficient and cost-effective manner with the help of one of the funding market’s leading professionals.” Mr. Doyle added, “The opportunity to work with Bimini is very exciting for me. I have been working with Bimini as a client since their inception in 2003. This opportunity is a natural fit for both of us. I look forward to enhancing Bimini’s abilities to fund their portfolios under management, to create new operational efficiencies, and to enhance the management of liquidity risks.”

About Orchid Island Capital, Inc.

Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-through Agency RMBS, such as mortgage pass-through certificates and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac or Ginnie Mae, and (ii) structured Agency RMBS. The Company is managed by Bimini Advisors, LLC, a registered investment adviser with the Securities and Exchange Commission.

About Bimini Capital Management, Inc.

Bimini Capital Management, Inc. invests primarily in, but is not limited to investing in, residential mortgage-related securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. Its objective is to earn returns on the spread between the yield on its assets and its costs, including the interest expense on the funds it borrows. In addition, Bimini generates a significant portion of its revenue serving as the manager of the MBS portfolio of Orchid Island Capital, Inc.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements include, but are not limited to, statements about the transition of services from AVM to the Manager and the performance of repurchase agreement funding, clearing and administrative services by the Manager. These forward-looking statements are based upon Orchid’s and Bimini’s present expectations, but these statements are not guaranteed to occur. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 of Bimini and Orchid, respectively.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211117006366/en/

Orchid Island Capital, Inc.

Robert E. Cauley

Telephone: (772) 231-1400

Source: Orchid Island Capital, Inc.

FAQ

What is the recent amendment involving Orchid Island Capital (NYSE: ORC)?

Orchid Island Capital entered a Third Amendment to its management agreement, effective November 16, 2021, which internalizes certain funding and custody operations.

Who was hired by Bimini Capital to manage the new internalized services?

Bimini Capital hired Patrick Doyle to oversee the management of repurchase agreement trading, clearing, and administrative services.

What services will Bimini Advisors now handle for Orchid Island Capital?

Bimini Advisors will take over repurchase agreement trading, clearing, and administrative services previously handled by AVM.

When did the internalization of services become effective for Orchid Island Capital?

The internalization of services became effective on November 16, 2021.