Variable Interest Entities

12 Months Ended

Dec. 31, 2015

Consolidated Variable Interest Entity And Noncontrolling Interest

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

As discussed in Note 1, Orchid completed its IPO on February 20, 2013. Management concluded that, after the close of its IPO, Orchid was a VIE because Orchid's equity holders lack the ability through voting rights to make decisions about its activities that have a significant effect on its success. Management also concluded that Bimini Capital was the primary beneficiary of Orchid because, under the terms of the management agreement, Bimini Capital had the power to direct the activities of Orchid that most significantly impact its economic performance including asset selection, asset and liability management and investment portfolio risk management. As a result, subsequent to Orchid’s IPO, and until December 31, 2014, the Company continued to consolidate Orchid in its consolidated financial statements.

Orchid completed additional offerings of its common stock during the year ended December 31, 2014. Management continued to re-evaluate the conditions resulting in the consolidation of Orchid and at December 31, 2014 concluded that, due to Bimini’s decreased percentage ownership interest in Orchid, there was no longer a variable interest requiring consolidation. In accordance with ASC 810, the Company deconsolidated Orchid from the consolidated balance sheet as of December 31, 2014. Orchid’s activities were included in the consolidated statements of operations, equity and cash flows through December 31, 2014 and are excluded in subsequent periods.

The table below presents the effects of the above on the changes in equity attributable to Bimini Capital stockholders during the year ended December 31, 2014.

Net income of Orchid for the year ended December 31, 2014 is allocated between the noncontrolling interests and to Bimini Capital in proportion to their relative ownership interests in Orchid. The following is a roll forward of the noncontrolling interest during the year ended December 31, 2014.

(in thousands)
		2014
Balance, January 1	$	31,615
Issuance of common shares of Orchid Island Capital, Inc.		171,993
Net income attributed to noncontrolling interest		22,127
Amortization of Orchid Island Capital, Inc. equity plan compensation		65
Cash dividends paid to noncontrolling interest		(20,523)
Deconsolidation of Orchid Island Capital, Inc.		(205,277)
Balance, December 31	$	-

The following table summarizes the operating results of Orchid (excluding intercompany transactions) for the year ended December 31, 2014 which are reflected in our consolidated statements of operations for the year ended December 31, 2014.

(in thousands)
Interest income	$	31,804
Interest expense		(3,031)
Net interest income		28,773
Unrealized gains on mortgage-backed securities		11,368
Realized gains on mortgage-backed securities		2,791
Losses on derivative instruments		(13,925)
Net portfolio income		29,007

Expenses:
Accrued incentive compensation		500
Directors' fees and liability insurance		569
Audit, legal and other professional fees		588
Direct REIT operating expenses		182
Other administrative		246
Total expenses		2,085

Net income	$	26,922

(in thousands)

Net income attributable to Bimini Capital

Transfers from the noncontrolling interests

Decrease in Bimini Capital's paid-in capital for the sale of 13,357,991 common shares of Orchid

and the effect of the 24,000 shares of unvested restricted shares of Orchid

Change from net income attributable to Bimini Capital and transfers from noncontrolling interest