Bimini Capital Management Announces First Quarter 2022 Results

Rhea-AI Summary

Bimini Capital Management (OTCQB: BMNM) reported a net loss of $3.5 million, or $0.33 per share, for Q1 2022 amid volatile market conditions influenced by rapid Federal Reserve interest rate hikes. The company's book value per share decreased to $2.77. Advisory service revenue was $3.1 million, while the firm faced substantial mark-to-market losses on its investments, including a $3.2 million loss on Orchid shares. The company is focusing on preserving cash and mitigating risks amid a challenging economic landscape impacted by inflation and geopolitical issues.

Positive

• Advisory service revenue of $3.1 million for Q1 2022.
• Focus on preserving cash and investments amid market instability.

Negative

• Net loss of $3.5 million for Q1 2022, resulting in a loss of $0.33 per share.
• Decline in book value per share from $3.08 to $2.77.
• Substantial $3.2 million mark-to-market loss on Orchid common stock.
• 10% decrease in the Agency RMBS portfolio value.

VERO BEACH, Fla.--(BUSINESS WIRE)-- Bimini Capital Management, Inc. (OTCQB: BMNM), (“Bimini Capital,” “Bimini,” or the “Company”), today announced results of operations for the three-month period ended March 31, 2022.

First Quarter 2022 Highlights

• Net loss of $3.5 million, or $0.33 per common share
• Book value per share of $2.77
• Company to discuss results on Friday, May 13, 2022, at 10:00 AM ET

Management Commentary

Commenting on the first quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The first quarter of 2022 was extremely volatile as the Federal Reserve (the “Fed”) pivoted quickly from unprecedented monetary policy accommodation to the rapid removal of the accommodation. The Fed announced their first rate hike of the cycle at their March 2022 meeting of 25 basis points and last week announced another hike, this time of 50 basis points and stated 50 basis point hikes were on the table for the June 2022 and July 2022 meetings as well. Current market pricing in the futures markets implies the Fed will raise the target for the Fed Funds rate to approximately 2.70% by the end of 2022 and to slightly over 3.00% by the second quarter of 2023. The U.S. economy has recovered quickly from the COVID-19 induced downturn with the help of the Fed’s monetary policy and equally unprecedented fiscal stimulus from the government. As the economy recovered rapidly, inflationary pressures emerged including labor, with a sub-4% unemployment rate which continues to fall and wage growth well above 5%. The war in Ukraine has further stimulated inflationary pressures as Russia and Ukraine are leading suppliers of food, energy, and many other commodities. COVID-19 induced shutdowns in China have also increased supply constraints, another source of inflationary pressure. As the second quarter of 2022 unfolds, these trends have intensified, and the Fed has stated their intention to get the policy rate to neutral as quickly as practical. The Fed will also begin their balance sheet reduction commencing in June of 2022.

“Orchid Island Capital reported a first quarter 2022 loss of $148.7 million and its shareholders equity declined from $768.1 million to $592.4 million. The market conditions described above drove the loss as agency MBS underperformed comparable duration treasuries and the Orchid’s hedge positions. The decline in shareholders equity will lead to reduced management fees at Bimini Advisors in the near-term since the management fees are a function of Orchid’s equity. Orchid also reduced its monthly dividend twice during the first quarter from $0.065 per month to $0.045 per month. The reductions in the monthly dividend decreased the revenues to the Company on its approximately 2.5 million shares. Orchid, like Bimini, will focus on weathering the current market conditions and looks forward to capitalizing on the attractive returns that historically have become available as markets settle.

“The Agency RMBS portfolio at Royal Palm Capital decreased by 10% during the first quarter of 2022, the combined effect of $2.8 million of paydowns, return of investment on the structured securities portfolio of $0.2 million and a net $3.1 million market to market loss. As the market continues to be impacted by the events described above and MBS assets remain under pressure, we have further reduced our RMBS holdings in order to preserve cash and book value. For the second quarter of 2022 to date, we have sold RMBS assets with a market value at the time of sale of $23.1 million, realizing a loss of $0.9 million. The RMBS portfolio has a market value as of April 30, 2022 of approximately $29.0 million. Our intention is to grow our cash position until we see clear evidence the market has stabilized before redeploying our cash to resume growing the portfolio. We may add to our Orchid share holdings given the stock is trading at attractive levels but do not have unlimited capacity to do so.

“The economic developments that occurred during the first quarter have continued, and in many cases accelerated so far in the second quarter of 2022. Interest rates have risen materially since the end of the quarter and the Fed has started to aggressively remove the emergency accommodation measures put in place in response to the COVID-19 pandemic. In response we have reduced our portfolio, and thus exposure to the current turbulent market conditions in order to build dry powder that can be deployed as the market settles. Market conditions such as these, while challenging, always provide very attractive investment opportunities. The chance to take advantage of these opportunities may require us to wait out the current Fed tightening cycle for a while longer, but we suspect it will just make the opportunities that much more attractive when we sense the end is near.”

Details of First Quarter 2022 Results of Operations

The Company reported net loss of $3.5 million for the three-month period ended March 31, 2022. Advisory service revenue for the quarter was $3.1 million. We recorded interest and dividend income of $0.9 million and interest expense on long-term debt of $0.3 million. We recorded a $3.2 million mark to market loss on our shares of Orchid common stock and a mark to market loss of $3.1 million on our MBS portfolio. The results for the quarter also included operating expenses of $2.0 million and an income tax benefit of $1.2 million.

Management of Orchid Island Capital, Inc.

Orchid is managed and advised by Bimini. As Manager, Bimini is responsible for administering Orchid’s business activities and day-to-day operations. Pursuant to the terms of the management agreement, Bimini Advisors provides Orchid with its management team, including its officers, along with appropriate support personnel.

Bimini also maintains a common stock investment in Orchid which is accounted for under the fair value option, with changes in fair value recorded in the statement of operations for the current period. For the three months ended March 31, 2022, Bimini’s statement of operations included a fair value adjustment of $(3.2) million and dividends of $0.4 million from its investment in Orchid’s common stock. Also during the three months ended March 31, 2022, Bimini recorded $3.1 million in advisory services revenue for managing Orchid’s portfolio consisting of $2.7 million of management fees and $0.4 million in overhead reimbursement.

Book Value Per Share

The Company's Book Value Per Share at March 31, 2022 was $2.77. The Company computes Book Value Per Share by dividing total stockholders' equity by the total number of shares outstanding of the Company's Class A Common Stock. At March 31, 2022, the Company's stockholders’ equity was $29.1 million, with 10,513,914 Class A Common shares outstanding.

Capital Allocation and Return on Invested Capital

The Company allocates capital between two MBS sub-portfolios, the pass-through MBS portfolio (“PT MBS”) and the structured MBS portfolio, consisting of interest only (“IO”) and inverse interest-only (“IIO”) securities. The table below details the changes to the respective sub-portfolios during the quarter.

Portfolio Activity for the Quarter
				Structured Security Portfolio
	Pass-Through			Interest-Only			Inverse Interest
	Portfolio			Securities			Only Securities			Sub-total			Total
Market Value - December 31, 2021	$	58,028,859		$	2,759,269		$	15,016		$	2,774,285		$	60,803,144
Return of investment		n/a			(167,474	)		(1,561	)		(169,035	)		(169,035	)
Pay-downs		(2,840,703	)		n/a			n/a			n/a			(2,840,703	)
Premium lost due to pay-downs		(267,434	)		n/a			n/a			n/a			(267,434	)
Mark to market gains (losses)		(3,276,758	)		427,754			2,234			429,988			(2,846,770	)
Market Value - March 31, 2022	$	51,643,964		$	3,019,549		$	15,689		$	3,035,238		$	54,679,202

The tables below present the allocation of capital between the respective portfolios at March 31, 2022 and December 31, 2021, and the return on invested capital for each sub-portfolio for the three-month period ended March 31, 2022. Capital allocation is defined as the sum of the market value of securities held, less associated repurchase agreement borrowings, plus cash and cash equivalents and restricted cash associated with repurchase agreements. Capital allocated to non-portfolio assets is not included in the calculation.

The returns on invested capital in the PT MBS and structured MBS portfolios were approximately (34.6)% and 16.2%, respectively, for the first quarter of 2022. The combined portfolio generated a return on invested capital of approximately (22.6)%.

Capital Allocation
				Structured Security Portfolio
	Pass-Through			Interest-Only			Inverse Interest
	Portfolio			Securities			Only Securities			Sub-total			Total
March 31, 2022
Market value	$	51,643,964		$	3,019,549		$	15,689		$	3,035,238		$	54,679,202
Cash equivalents and restricted cash		7,983,873			-			-			-			7,983,873
Repurchase agreement obligations		(54,814,689	)		-			-			-			(54,814,689	)
Total(1)	$	4,813,148		$	3,019,549		$	15,689		$	3,035,238		$	7,848,386
% of Total		61.3	%		38.5	%		0.2	%		38.7	%		100.0	%
December 31, 2021
Market value	$	58,028,859		$	2,759,269		$	15,016		$	2,774,285		$	60,803,144
Cash equivalents and restricted cash		9,812,410			-			-			-			9,812,410
Repurchase agreement obligations		(58,877,999	)		-			-			-			(58,877,999	)
Total(1)	$	8,963,270		$	2,759,269		$	15,016		$	2,774,285		$	11,737,555
% of Total		76.4	%		23.5	%		0.1	%		23.6	%		100.0	%

(1)

Invested capital includes the value of the MBS portfolio and cash equivalents and restricted cash, reduced by repurchase agreement borrowings.

Returns for the Quarter Ended March 31, 2022
				Structured Security Portfolio
	Pass-Through			Interest-Only			Inverse Interest
	Portfolio			Securities			Only Securities			Sub-total			Total
Interest income (net of repo cost)	$	441,228		$	17,769		$	1,150		$	18,919		$	460,147
Realized and unrealized (losses) gains		(3,544,192	)		427,754			2,234			429,988			(3,114,204	)
Total Return	$	(3,102,964	)	$	445,523		$	3,384		$	448,907		$	(2,654,057	)
Beginning capital allocation	$	8,963,270		$	2,759,269		$	15,016		$	2,774,285		$	11,737,555
Return on invested capital for the quarter(1)		(34.6	)%		16.1	%		22.5	%		16.2	%		(22.6	)%

(1)

Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage.

Prepayments

For the first quarter of 2022, the Company received approximately $3.0 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 20.9% for the first quarter of 2022. Prepayment rates on the two MBS sub-portfolios were as follows (in CPR):

					PT	Structured
					MBS Sub-	MBS Sub-	Total
Three Months Ended					Portfolio	Portfolio	Portfolio
March 31, 2022					18.5	25.6	20.9
December 31, 2021					13.7	35.2	21.1
September 30, 2021					15.5	26.9	18.3
June 30, 2021					21.0	31.3	21.9
March 31, 2021					18.5	16.4	18.3

Portfolio

The following tables summarize the MBS portfolio as of March 31, 2022 and December 31, 2021:

($ in thousands)
					Weighted
			Percentage		Average
			of	Weighted	Maturity
		Fair	Entire	Average	in	Longest
Asset Category		Value	Portfolio	Coupon	Months	Maturity
March 31, 2022
Fixed Rate MBS	$	51,644	94.4%	3.69%	327	1-Sep-51
Interest-Only MBS		3,019	5.6%	2.84%	304	15-May-51
Inverse Interest-Only MBS		16	0.0%	5.60%	206	15-May-51
Total MBS Portfolio	$	54,679	100.0%	3.41%	326	1-Sep-51
December 31, 2021
Fixed Rate MBS	$	58,029	95.4%	3.69%	330	1-Sep-51
Interest-Only MBS		2,759	4.6%	2.86%	306	15-May-51
Inverse Interest-Only MBS		15	0.0%	5.90%	209	15-May-39
Total MBS Portfolio	$	60,803	100.0%	3.41%	329	1-Sep-51

($ in thousands)
		March 31, 2022				December 31, 2021
				Percentage of				Percentage of
Agency		Fair Value		Entire Portfolio		Fair Value		Entire Portfolio
Fannie Mae	$	34,936		63.9%	$	39,703		65.3%
Freddie Mac		19,743		36.1%		21,100		34.7%
Total Portfolio	$	54,679		100.0%	$	60,803		100.0%

		March 31, 2022		December 31, 2021
Weighted Average Pass Through Purchase Price	$	109.33	$	109.33
Weighted Average Structured Purchase Price	$	4.81	$	4.81
Weighted Average Pass Through Current Price	$	102.78	$	109.30
Weighted Average Structured Current Price	$	11.92	$	9.87
Effective Duration (1)		1.720		2.103

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 1.720 indicates that an interest rate increase of 1.0% would be expected to cause a 1.720% decrease in the value of the MBS in the Company’s investment portfolio at March 31, 2022. An effective duration of 2.103 indicates that an interest rate increase of 1.0% would be expected to cause a 2.103% decrease in the value of the MBS in the Company’s investment portfolio at December 31, 2021. These figures include the structured securities in the portfolio but not the effect of the Company’s hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

Financing and Liquidity

As of March 31, 2022, the Company had outstanding repurchase obligations of approximately $54.8 million with a net weighted average borrowing rate of 0.34%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $54.9 million and cash of approximately $3.4 million. At March 31, 2022, the Company’s liquidity was approximately $4.6 million, consisting of unpledged MBS and cash and cash equivalents.

We may pledge more of our structured MBS as part of a repurchase agreement funding, but retain cash in lieu of acquiring additional assets. In this way, we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a list of outstanding borrowings under repurchase obligations at March 31, 2022.

($ in thousands)
Repurchase Agreement Obligations
						Weighted			Weighted
		Total				Average			Average
		Outstanding		% of		Borrowing		Amount	Maturity
Counterparty		Balances		Total		Rate		at Risk(1)	(in Days)
Mirae Asset Securities (USA) Inc.	$	30,950		56.4%		0.36%	$	1,862	32
ED&F Man Capital Markets, Inc.		11,540		21.1%		0.19%		659	14
South Street Securities, LLC		5,053		9.2%		0.37%		237	18
Citigroup Global Markets, Inc.		4,742		8.7%		0.38%		289	25
Mitsubishi UFJ Securities (USA), Inc.		2,530		4.6%		0.75%		361	22
	$	54,815		100.0%		0.34%	$	3,408	26

(1)

Equal to the fair value of securities sold (including accrued interest receivable) and cash posted as collateral, if any, minus the sum of repurchase agreement liabilities, accrued interest payable and securities posted by the counterparty (if any).

Summarized Consolidated Financial Statements

The following is a summarized presentation of the unaudited consolidated balance sheets as of March 31, 2022, and December 31, 2021, and the unaudited consolidated statements of operations for the three months ended March 31, 2022 and 2021. Amounts presented are subject to change.

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited - Amounts Subject To Change)
		March 31, 2022		December 31, 2021
ASSETS
Mortgage-backed securities	$	54,679,202	$	60,803,144
Cash equivalents and restricted cash		7,983,873		9,812,410
Orchid Island Capital, Inc. common stock, at fair value		8,434,910		11,679,107
Accrued interest receivable		214,550		229,942
Deferred tax assets, net		36,258,788		35,036,312
Other assets		4,439,555		4,523,726
Total Assets	$	112,010,878	$	122,084,641
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase agreements	$	54,814,689	$	58,877,999
Long-term debt		27,433,290		27,438,976
Other liabilities		619,931		2,767,816
Total Liabilities		82,867,910		89,084,791
Stockholders' equity		29,142,968		32,999,850
Total Liabilities and Stockholders' Equity	$	112,010,878	$	122,084,641
Class A Common Shares outstanding		10,513,914		10,702,194
Book value per share	$	2.77	$	3.08

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Amounts Subject to Change)
	Three Months Ended March 31,
		2022			2021
Advisory services	$	3,075,362		$	2,025,409
Interest and dividend income		893,669			1,116,713
Interest expense		(287,308	)		(289,406	)
Net revenues		3,681,723			2,852,716
Other (expense) income		(6,358,304	)		658,400
Expenses		2,025,479			1,756,583
Net (loss) income before income tax (benefit) provision		(4,702,060	)		1,754,533
Income tax (benefit) provision		(1,222,476	)		464,103
Net (loss) income	$	(3,479,584	)	$	1,290,430
Basic and Diluted Net Income (Loss) Per Share of:
CLASS A COMMON STOCK	$	(0.33	)	$	0.11
CLASS B COMMON STOCK	$	(0.33	)	$	0.11

	Three Months Ended March 31,
Key Balance Sheet Metrics	2022		2021
Average MBS(1)	$	57,741,173	$	69,017,031
Average repurchase agreements(1)		56,846,344		69,103,556
Average stockholders' equity(1)		31,071,409		35,133,064
Key Performance Metrics
Average yield on MBS(2)		3.40%		3.54%
Average cost of funds(2)		0.22%		0.23%
Average economic cost of funds(3)		1.52%		4.33%
Average interest rate spread(4)		3.18%		3.31%
Average economic interest rate spread(5)		1.88%		(0.79)%

Summarized Consolidated Financial Statements

(1).		Average MBS, repurchase agreements and stockholders’ equity balances are calculated using two data points, the beginning and ending balances.
(2).		Portfolio yields and costs of funds are calculated based on the average balances of the underlying investment portfolio/repurchase agreement balances and are annualized for the quarterly periods presented.
(3).		Represents interest cost of our borrowings and the effect of derivative agreements attributed to the period related to hedging activities, divided by average repurchase agreements.
(4).		Average interest rate spread is calculated by subtracting average cost of funds from average yield on MBS.
(5).		Average economic interest rate spread is calculated by subtracting average economic cost of funds from average yield on MBS.

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 the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Government National Mortgage Association (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

Statements herein relating to matters that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned that such forward-looking statements are based on information available at the time and on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in Bimini Capital Management, Inc.'s filings with the Securities and Exchange Commission, including Bimini Capital Management, Inc.'s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Bimini Capital Management, Inc. assumes no obligation to update forward-looking statements to reflect subsequent results, changes in assumptions or changes in other factors affecting forward-looking statements.

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Friday, May 13, 2022, at 10:00 AM ET. Participants can receive dial-in information via email by following the link:

https://www.incommglobalevents.com/registration/q4inc/10810/bimini-capital-first-quarter-2022-earnings/

A live audio webcast of the conference call can be accessed via the investor relations section of the Company's website at https://ir.biminicapital.com or at https://events.q4inc.com/attendee/606840623, and an audio archive of the webcast will be available for approximately one year.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220512005858/en/

Bimini Capital Management, Inc.

Robert E. Cauley, 772-231-1400

Chairman and Chief Executive Officer

https://ir.biminicapital.com

Source: Bimini Capital Management, Inc.

FAQ

What were Bimini Capital Management's financial results for Q1 2022?

Bimini Capital reported a net loss of $3.5 million, or $0.33 per share, for Q1 2022.

How much revenue did Bimini Capital earn from advisory services in Q1 2022?

In Q1 2022, Bimini Capital earned $3.1 million in advisory service revenue.

What is Bimini Capital Management's book value per share as of March 31, 2022?

The book value per share was reported at $2.77 as of March 31, 2022.

What impact did the Federal Reserve's interest rate hikes have on Bimini Capital's performance?

The rapid interest rate hikes led to significant market volatility and a net loss for Bimini Capital.

What were the main challenges faced by Bimini Capital in Q1 2022?

Challenges included a net loss, reduction in book value per share, and mark-to-market losses on investments.