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Bimini Capital Management Announces Third Quarter 2021 Results

Bimini Capital Management, Inc. (OTCQB: BMNM), (“Bimini Capital,” “Bimini,” or the “Company”), today announced results of operations for the three-month period ended September 30, 2021.

Third Quarter 2021 Highlights

  • Net income of $0.5 million, or $0.04 per common share
  • Book value per share of $3.13
  • Company to discuss results on Tuesday, November 9, 2021, at 10:00 AM ET

     

Management Commentary

Commenting on the third quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “The effects of COVID-19 continued to dominate economic activity during the third quarter of 2021, particularly the Delta variant that first emerged in earnest during July. Daily new infections from the Delta variant rose rapidly during the summer and appeared to peak in early September. The net effect of a spreading virus and a reluctance on the part of many to get vaccinated has been subdued job growth during the third quarter of 2021. However, we may be at a crossroads as the effects of the Delta variant appears to be waning and the number of people with either a vaccination and/or prior infections of the virus grow. Pandemic related relief measures such as supplemental unemployment insurance payments and foreclosure moratoriums have lapsed. Hopefully the combination of these factors will lead to surging job growth and act to quickly lessen the severe supply shortage of goods and labor. This in turn should slow the stubbornly high inflation the economy has suffered. If these events come to pass, the economy appears to be positioned to perform very well. The Fed views this outcome as likely and will commence a tapering of their asset purchases in November as they slowly remove the considerable accommodation they have provided the market since the onset of the pandemic. Conversely, if these events do not unfold and the supply shortages of goods and labor remain, the economy will likely continue to suffer from elevated levels of inflation. Under this scenario the path of economic growth is less certain, and the path of monetary policy could prove to be quite challenging for the Fed.

“Interest rates across the U.S. Treasury curve and U.S. dollar swap curve were little changed during the third quarter of 2021. The only notable development within the rates complex was the slight flattening of both curves between the five- and 30-year points as the market anticipated the eventual tapering of asset purchases beginning in the fourth quarter of 2021 and increases to the Fed funds rate in either the second half of 2022 or early 2023. Both Orchid Island Capital, Inc. (“Orchid”) and Royal Palm were positioned defensively as we entered the third quarter, but the rates market did not meaningfully impact results for either portfolio. Orchid recorded net income of $26.0 million or $0.20 per share for the quarter that included ($0.02) of realized and unrealized mark to market gains and losses. However, Orchid had another strong quarter growing its shareholders’ equity after raising net proceeds of approximately $207.5 million through its “at the market” program during the third quarter of 2021. For the third quarter the net effect of the new shares issued, net income and dividends paid resulted in Orchid’s shareholders’ equity increasing $176.8 million, or 32% for during the third quarter. Through the end of the third quarter of 2021 Orchid has increased its shareholders’ equity by approximately $315.3 million, or 76%. As a result, Bimini Advisor’s advisory services revenue increased 17% over the second quarter and, as the increased capital base at Orchid was not in place for the entire quarter, the run rate entering the fourth quarter is higher still. Dividend income on our shares of Orchid common stock was flat with the second quarter of 2021 and increased slightly by 3% over the third quarter of 2020.

“The Agency RMBS portfolio at Royal Palm Capital decreased by 7% during the third quarter of 2021, the net effect of structured security asset purchases of $2.1 million offset by $6.5 million of net sales of pass-throughs. We also recorded paydowns on the pass-through portfolio of $4.2 million, return of investment of $0.2 million on the structured portfolio and $0.3 of mark to market losses on the combined portfolio. Prepayment activity finally moderated somewhat during the quarter, as the pass-through portfolio prepaid at 15.5 CPR versus 21.0 CPR during the second quarter. Inclusive of our structured securities the combined portfolio prepaid at 18.3 CPR for the third quarter versus 21.9 CPR during the second. The securities owned by Royal Palm are predominantly higher coupon and more seasoned, and while rates on the loans underlying theses securities are still in the money and the economic incentive to refinance is still present, we are finally seeing slower speeds, or burnout. We did see some widening in spreads of these securities as specified pool pay-ups softened late in the quarter. As a result, for the third quarter of 2021, we recorded the mark to market loss mentioned above of $0.4 million on our RMBS pass-through holdings. In spite of a $0.06 increase in book value that occurred at Orchid during the third quarter, the price of our Orchid shares declined by $0.30, or $0.8 million. Finally, operating expenses declined modestly again, this time by 4% for the third quarter versus the second quarter of 2021, following the 2% decline during the second quarter. Operating expenses increased 2% versus the third quarter of 2020.”

Details of Third Quarter 2021 Results of Operations

The Company reported net income of $0.5 million for the three-month period ended September 30, 2021. As Orchid Island Capital, Inc. (“Orchid”) was able to grow its capital base during the first nine months of 2021, advisory service revenues increased 56% compared to the third quarter of 2020. We recorded interest and dividend income of $1.0 million and interest expense on long-term debt of $0.3 million. We recorded a $0.8 million mark to market loss on our shares of Orchid common stock and a mark to market loss of $0.3 million on our MBS portfolio. The results for the quarter also included operating expenses of $1.7 million and an income tax provision of $0.2 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 September 30, 2021, Bimini’s statement of operations included a fair value adjustment of $(0.8) million and dividends of $0.5 million from its investment in Orchid’s common stock. Also during the three months ended September 30, 2021, Bimini recorded $2.5 million in advisory services revenue for managing Orchid’s portfolio consisting of $2.1 million of management fees and $0.4 million in overhead reimbursement.

Book Value Per Share

The Company's Book Value Per Share at September 30, 2021 was $3.13. 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 September 30, 2021, the Company's stockholders’ equity was $33.8 million, with 10,794,481 Class A Common shares outstanding.

In July 2021, the Company completed a “modified Dutch auction” tender offer and paid an aggregate of $1.6 million, excluding fees and related expenses, to repurchase 812,879 shares of Bimini Capital’s Class A common stock at a price of $1.85 per share.

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 - June 30, 2021

$

67,910,395

 

$

1,062,843

 

$

20,392

 

$

1,083,235

 

$

68,993,630

 

Securities purchased

 

10,969,865

 

 

2,080,176

 

 

-

 

 

2,080,176

 

 

13,050,041

 

Securities sold

 

(13,063,248

)

 

-

 

 

-

 

 

-

 

 

(13,063,248

)

Gains on sales

 

69,498

 

 

-

 

 

-

 

 

-

 

 

69,498

 

Return of investment

 

n/a

 

 

(181,134

)

 

(1,196

)

 

(182,330

)

 

(182,330

)

Pay-downs

 

(4,153,655

)

 

n/a

 

 

n/a

 

 

n/a

 

 

(4,153,655

)

Premium lost due to pay-downs

 

(395,328

)

 

n/a

 

 

n/a

 

 

n/a

 

 

(395,328

)

Mark to market gains (losses)

 

34,706

 

 

37,290

 

 

(327

)

 

36,963

 

 

71,669

 

Market Value - September 30, 2021

$

61,372,233

 

$

2,999,175

 

$

18,869

 

$

3,018,044

 

$

64,390,277

 

 

The tables below present the allocation of capital between the respective portfolios at September 30, 2021 and June 30, 2021, and the return on invested capital for each sub-portfolio for the three-month period ended September 30, 2021. 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 2.2% and 3.8%, respectively, for the third quarter of 2021. The combined portfolio generated a return on invested capital of approximately 2.4%.

Capital Allocation

 

 

 

Structured Security Portfolio

 

 

 

Pass-Through

Interest-Only

Inverse Interest

 

 

 

 

Portfolio

Securities

Only Securities

Sub-total

Total

September 30, 2021

 

 

 

 

 

 

 

 

 

 

Market value

$

61,372,233

 

$

2,999,175

 

$

18,869

 

$

3,018,044

 

$

64,390,277

 

Cash equivalents and restricted cash(1)

 

9,544,843

 

 

-

 

 

-

 

 

-

 

 

9,544,843

 

Repurchase agreement obligations

 

(63,159,999

)

 

-

 

 

-

 

 

-

 

 

(63,159,999

)

 

Total(2)

$

7,757,077

 

$

2,999,175

 

$

18,869

 

$

3,018,044

 

$

10,775,121

 

 

% of Total

 

72.0

%

 

27.8

%

 

0.2

%

 

28.0

%

 

100.0

%

June 30, 2021

 

 

 

 

 

 

 

 

 

 

Market value

$

67,910,395

 

$

1,062,843

 

$

20,392

 

$

1,083,235

 

$

68,993,630

 

Cash equivalents and restricted cash(1)

 

13,167,488

 

 

-

 

 

-

 

 

-

 

 

13,167,488

 

Repurchase agreement obligations

 

(71,345,999

)

 

-

 

 

-

 

 

-

 

 

(71,345,999

)

 

Total(2)

$

9,731,884

 

$

1,062,843

 

$

20,392

 

$

1,083,235

 

$

10,815,119

 

 

% of Total

 

90.0

%

 

9.8

%

 

0.2

%

 

10.0

%

 

100.0

%

(1)

Amount excludes restricted cash of $160 and $425 at September 30, 2021 and June 30, 2021, respectively, related to trust preferred debt funding hedges.

(2)

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 September 30, 2021

 

 

 

Structured Security Portfolio

 

 

 

Pass-Through

Interest-Only

Inverse Interest

 

 

 

 

Portfolio

Securities

Only Securities

Sub-total

Total

Interest income (net of repo cost)

$

508,797

 

$

2,504

 

$

2,170

 

$

4,674

 

$

513,471

 

Realized and unrealized (losses) gains

 

(291,124

)

 

37,290

 

 

(327

)

 

36,963

 

 

(254,161

)

 

Total Return

$

217,673

 

$

39,794

 

$

1,843

 

$

41,637

 

$

259,310

 

Beginning capital allocation

$

9,731,884

 

$

1,062,843

 

$

20,392

 

$

1,083,235

 

$

10,815,119

 

Return on invested capital for the quarter(1)

 

2.2

%

 

3.7

%

 

9.0

%

 

3.8

%

 

2.4

%

(1)

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

 

Prepayments

For the third quarter of 2021, the Company received approximately $4.3 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 18.3% for the third quarter of 2021. 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

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

December 31, 2020

 

 

 

 

12.8

24.5

14.4

September 30, 2020

 

 

 

 

13.0

32.0

15.8

June 30, 2020

 

 

 

 

12.4

25.0

15.3

March 31, 2020

 

 

 

 

11.6

18.1

13.7

 

Portfolio

The following tables summarize the MBS portfolio as of September 30, 2021 and December 31, 2020:

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Percentage

 

Average

 

 

 

 

of

Weighted

Maturity

 

 

 

Fair

Entire

Average

in

Longest

Asset Category

 

Value

Portfolio

Coupon

Months

Maturity

September 30, 2021

 

 

 

 

 

 

Fixed Rate MBS

$

61,372

95.3

%

3.69

%

333

1-Sep-51

Interest-Only MBS

 

2,999

4.7

%

2.87

%

305

15-May-51

Inverse Interest-Only MBS

 

19

0.0

%

5.90

%

212

15-May-39

Total MBS Portfolio

$

64,390

100.0

%

3.40

%

331

1-Sep-51

December 31, 2020

 

 

 

 

 

 

Fixed Rate MBS

$

64,902

99.6

%

3.89

%

333

1-Aug-50

Interest-Only MBS

 

251

0.4

%

3.56

%

299

15-Jul-48

Inverse Interest-Only MBS

 

25

0.0

%

5.84

%

221

15-May-39

Total MBS Portfolio

$

65,178

100.0

%

3.89

%

333

1-Aug-50

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

December 31, 2020

 

 

 

 

Percentage of

 

 

 

Percentage of

Agency

 

Fair Value

 

Entire Portfolio

 

Fair Value

 

Entire Portfolio

Fannie Mae

$

41,938

 

65.1

%

$

38,946

 

59.8

%

Freddie Mac

 

22,452

 

34.9

%

 

26,232

 

40.2

%

Total Portfolio

$

64,390

 

100.0

%

$

65,178

 

100.0

%

 

 

 

September 30, 2021

 

December 31, 2020

Weighted Average Pass Through Purchase Price

$

109.33

$

109.51

Weighted Average Structured Purchase Price

$

4.81

$

4.28

Weighted Average Pass Through Current Price

$

110.38

$

112.67

Weighted Average Structured Current Price

$

9.45

$

3.20

Effective Duration (1)

 

2.542

 

3.309

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 2.542 indicates that an interest rate increase of 1.0% would be expected to cause a 2.542% decrease in the value of the MBS in the Company’s investment portfolio at September 30, 2021. An effective duration of 3.309 indicates that an interest rate increase of 1.0% would be expected to cause a 3.309% decrease in the value of the MBS in the Company’s investment portfolio at December 31, 2020. 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 September 30, 2021, the Company had outstanding repurchase obligations of approximately $63.2 million with a net weighted average borrowing rate of 0.13%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $64.6 million and cash of approximately $1.7 million. At September 30, 2021, the Company’s liquidity was approximately $7.9 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 September 30, 2021.

($ 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.

$

37,046

 

58.6

%

 

0.12

%

$

1,825

21

ED&F Man Capital Markets, Inc.

 

9,283

 

14.7

%

 

0.12

%

 

462

15

South Street Securities, LLC

 

5,870

 

9.3

%

 

0.12

%

 

174

46

Citigroup Global Markets, Inc.

 

5,426

 

8.6

%

 

0.13

%

 

216

53

JVB Financial Group, LLC

 

2,903

 

4.6

%

 

0.12

%

 

191

19

Mitsubishi UFJ Securities (USA), Inc.

 

2,632

 

4.2

%

 

0.45

%

 

268

22

 

$

63,160

 

100.0

%

 

0.13

%

$

3,136

25

(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 September 30, 2021, and December 31, 2020, and the unaudited consolidated statements of operations for the nine and three months ended September 30, 2021 and 2020. Amounts presented are subject to change.

BIMINI CAPITAL MANAGEMENT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts Subject To Change)

 

 

 

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

ASSETS

 

 

 

 

 

Mortgage-backed securities

$

64,390,277

 

$

65,178,231

Cash equivalents and restricted cash

 

9,545,003

 

 

10,911,357

Orchid Island Capital, Inc. common stock, at fair value

 

12,691,296

 

 

13,547,764

Accrued interest receivable

 

247,716

 

 

202,192

Deferred tax assets, net

 

34,332,078

 

 

34,668,467

Other assets

 

4,527,373

 

 

4,192,558

Total Assets

$

125,733,743

 

$

128,700,569

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Repurchase agreements

$

63,159,999

 

$

65,071,113

Long-term debt

 

27,444,508

 

 

27,612,781

Other liabilities

 

1,376,652

 

 

1,528,826

Total Liabilities

 

91,981,159

 

 

94,212,720

Stockholders' equity

 

33,752,584

 

 

34,487,849

Total Liabilities and Stockholders' Equity

$

125,733,743

 

$

128,700,569

Class A Common Shares outstanding

 

10,794,481

 

 

11,608,555

Book value per share

$

3.13

 

$

2.97

   

BIMINI CAPITAL MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - Amounts Subject to Change)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

Three Months Ended September 30,

 

 

2021

 

 

2020

 

 

 

2021

 

 

2020

 

Advisory services

$

6,757,799

 

$

4,969,143

 

 

$

2,546,578

 

$

1,629,463

 

Interest and dividend income

 

3,244,552

 

 

4,414,075

 

 

 

1,043,295

 

 

1,097,276

 

Interest expense

 

(842,503

)

 

(1,923,671

)

 

 

(272,194

)

 

(304,296

)

Net revenues

 

9,159,848

 

 

7,459,547

 

 

 

3,317,679

 

 

2,422,443

 

Other (expense) income

 

(2,854,649

)

 

(10,703,928

)

 

 

(1,032,766

)

 

1,119,443

 

Expenses

 

5,133,566

 

 

5,006,795

 

 

 

1,652,562

 

 

1,615,748

 

Net Income (loss) before income tax provision

 

1,171,633

 

 

(8,251,176

)

 

 

632,351

 

 

1,926,138

 

Income tax provision

 

336,389

 

 

9,295,859

 

 

 

167,751

 

 

608,351

 

Net income (loss)

$

835,244

 

$

(17,547,035

)

 

$

464,600

 

$

1,317,787

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Net Income (Loss) Per Share of:

 

 

 

 

 

 

 

 

 

CLASS A COMMON STOCK

$

0.07

 

$

(1.51

)

 

$

0.04

 

$

0.11

 

CLASS B COMMON STOCK

$

0.07

 

$

(1.51

)

 

$

0.04

 

$

0.11

 

 

 

Three Months Ended September 30,

Key Balance Sheet Metrics

2021

 

2020

 

Average MBS(1)

$

66,691,953

 

$

62,981,022

 

Average repurchase agreements(1)

 

67,252,999

 

 

61,151,086

 

Average stockholders' equity(1)

 

34,305,539

 

 

21,771,062

 

 

 

 

 

 

Key Performance Metrics

 

 

 

 

Average yield on MBS(2)

 

3.22

%

 

3.84

%

Average cost of funds(2)

 

0.14

%

 

0.28

%

Average economic cost of funds(3)

 

4.36

%

 

7.24

%

Average interest rate spread(4)

 

3.08

%

 

3.56

%

Average economic interest rate spread(5)

 

(1.14

)%

 

(3.40

)%

(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 Tuesday, November 9, 2021, at 10:00 AM ET. Participants can receive dial-in information via email by following the link:

https://www.incommglobalevents.com/registration/q4inc/9122/bimini-capital-third-quarter-earnings-conference-call/

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/926983324, and an audio archive of the webcast will be available for approximately one year.

Contacts

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