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Bimini Capital Management Announces Fourth Quarter 2022 Results

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

Fourth Quarter 2022 Highlights

  • Net loss of $12.0 million, or $1.17 per common share
  • Book value per share of $1.21
  • Company to discuss results on Friday, March 10, 2023, at 10:00 AM ET

Management Commentary

Commenting on the fourth quarter results, Robert E. Cauley, Chairman and Chief Executive Officer, said, “As 2022 came to an end the markets and the Federal Reserve’s (“Fed”) outlook for the economy, inflation and the path of monetary policy had diverged. The seeds for the divergence were planted as the third quarter came to an end with the Fed convincing the market that they had additional work to do to slow the economy and reduce inflation; a process that would continue longer than the market had expected. In fact, the Fed was so successful at convincing the market it would aggressively remove accommodation and slow inflation that the market began to look beyond this step in the process and instead focus on the ramifications of such policy removal – namely a slowing of the economy. The change of focus – or “pivot” – on the part of the market occurred in late October/early November due to inflation data. The consumer price index data for October and November were much lower than previous months - although this data was revised higher in early February of 2023. The market interpreted this development as evidence that inflation had peaked and was coming down quite quickly.”

“As incoming data over the course of the fourth quarter of 2022 appeared to be consistent with the markets' thesis that inflation had peaked and the economy was slowing, confidence grew that the Fed would need to pivot and start to loosen its tight monetary policy later in 2023. This led to a material change in risk sentiment during the fourth quarter and risk assets performed very well. The Agency MBS market returns for 2022 were negative – down 11.9%. However, the sector posted positive returns for the fourth quarter of 2.1%, which was 110 basis points higher than comparable duration swaps. The performance of the Agency RMBS sector was not uniformly positive for the fourth quarter. Early in the quarter U.S. Treasury yields reached their highest levels in many years in late October. Agency MBS spreads to comparable duration U.S. Treasuries also reached their widest levels since the 2008 financial crisis, easily surpassing the levels observed in March of 2020. As market sentiment turned mid-quarter and risk appetite improved, Agency MBS, like most other asset classes, were viewed as very attractive. The sector’s rebound was likely triggered by the extreme spread levels reached in late October, and the rebound has continued into early 2023. However, the absence of the largest of the traditional buyers of the asset class – banks, and since March of 2020, the Fed - may result in the sector recovering more slowly towards pre-pandemic levels, if it can do so at all.

“For the quarter, Orchid reported net income $34.9 million, and its shareholders equity increased from $400.4 million at September 30, 2022 to $438.8 million at December 31, 2022. Increases in shareholders' equity may lead to additional management fees at Bimini Advisors in the near-term since the management fees are a function of Orchid’s equity. Orchid’s share price increased during the quarter from $8.20 to $10.50, resulting in a $1.2 million dollar gain. Orchid’s dividend was unchanged for the quarter although dividend income for the quarter was down slightly as the dividend rate at the beginning of third quarter 2022 was higher. Finally, advisory service revenues related to Bimini Advisors management of Orchid Island were essentially unchanged from the third quarter.

“With respect to the MBS portfolio at Royal Palm, as was the case throughout most of the year our intention was to grow our cash position until we saw clear evidence the market had stabilized before redeploying our cash to resume growing the portfolio. The Agency MBS did in fact stabilize during the latter half of the fourth quarter and we did add modestly to the portfolio. For the fourth quarter we added approximately $2.2 million in new MBS, recorded $0.7 million of unrealized mark to market gains which were offset by paydowns of approximately $1.2 million. The net of these was a $1.6 million increase in the pass-through portfolio. The structured portfolio was essentially unchanged during the quarter. We added further early in the first quarter of 2023 although the recent reemergence of elevated expectations for Fed policy tightening and the subsequent softness in the Agency MBS market has caused us to pause our growth plans for now.”

Details of Fourth Quarter 2022 Results of Operations

The Company reported net loss of $12.0 million for the three-month period ended December 31, 2022. Advisory service revenue for the quarter was $3.3 million. We recorded interest and dividend income of $0.8 million and interest expense on repurchase agreements of $0.4 million and long-term debt of $0.5 million. We recorded a $1.2 million mark to market gain on our shares of Orchid common stock and unrealized gains of $0.7 million on our MBS portfolio. The results for the quarter also included operating expenses of $3.6 million and an income tax provision of $13.4 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 December 31, 2022, Bimini’s statement of operations included a fair value adjustment of $1.2 million and dividends of $0.3 million from its investment in Orchid’s common stock. Also during the three months ended December 31, 2022, Bimini recorded $3.3 million in advisory services revenue for managing Orchid’s portfolio consisting of $2.6 million of management fees, $0.6 million in overhead reimbursement and $0.1 million in repurchase, clearing and administrative fees.

Book Value Per Share

The Company's Book Value Per Share at December 31, 2022 was $1.21. 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 December 31, 2022, the Company's stockholders’ equity was $12.1 million, with 10,019,888 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 - September 30, 2022

 

$

41,275,887

 

$

2,987,442

 

$

6,198

 

$

2,993,640

 

$

44,269,527

Securities purchased

 

2,182,331

 

-

 

-

 

-

 

2,182,331

Return of investment

 

n/a

 

(94,976

)

 

(156

)

 

(95,132

)

 

(95,132

)

Pay-downs

 

(1,153,237

)

 

n/a

 

n/a

 

n/a

 

(1,153,237

)

Discount accreted due to pay-downs

 

48,914

 

n/a

 

n/a

 

n/a

 

48,914

Mark to market gains (losses)

 

620,712

 

21,134

 

(813

)

 

20,321

 

641,033

Market Value - December 31, 2022

 

$

42,974,607

 

$

2,913,600

 

$

5,229

 

$

2,918,829

 

$

45,893,436

The tables below present the allocation of capital between the respective portfolios at December 31, 2022 and September 30, 2022, and the return on invested capital for each sub-portfolio for the three-month period ended December 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 14.4% and 2.7%, respectively, for the fourth quarter of 2022. The combined portfolio generated a return on invested capital of approximately 10.1%.

Capital Allocation

 

 

 

 

 

 

 

Structured Security Portfolio

 

 

 

 

 

 

Pass-Through

 

Interest-Only

 

Inverse Interest

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Securities

 

Only Securities

 

Sub-total

 

Total

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market value

 

$

42,974,607

 

$

2,913,600

 

$

5,229

 

$

2,918,829

 

$

45,893,436

Cash equivalents and restricted cash

 

6,773,799

 

-

 

-

 

-

 

6,773,799

Repurchase agreement obligations

 

(43,817,999

)

 

-

 

-

 

-

 

(43,817,999

)

Total(1)

 

$

5,930,407

 

$

2,913,600

 

$

5,229

 

$

2,918,829

 

$

8,849,236

% of Total

 

67.0

%

 

32.9

%

 

0.1

%

 

33.0

%

 

100.0

%

September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market value

 

$

41,275,887

 

$

2,987,442

 

$

6,198

 

$

2,993,640

 

$

44,269,527

Cash equivalents and restricted cash

 

7,399,097

 

-

 

-

 

-

 

7,399,097

Repurchase agreement obligations

 

(43,493,999

)

 

-

 

-

 

-

 

(43,493,999

)

Total(1)

 

$

5,180,985

 

$

2,987,442

 

$

6,198

 

$

2,993,640

 

$

8,174,625

% of Total

 

63.4

%

 

36.5

%

 

0.1

%

 

36.6

%

 

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 December 31, 2022

 

 

 

 

 

 

 

Structured Security Portfolio

 

 

 

 

 

 

Pass-Through

 

Interest-Only

 

Inverse Interest

 

 

 

 

 

 

 

 

 

 

Portfolio

 

Securities

 

Only Securities

 

Sub-total

 

Total

Interest income (net of repo cost)

 

$

71,227

 

$

60,539

 

$

908

 

$

61,447

 

$

132,674

Realized and unrealized (losses) gains

 

669,626

 

21,134

 

(813

)

 

20,321

 

689,947

Hedge gains

 

6,320

 

n/a

 

n/a

 

n/a

 

6,320

Total Return

 

$

747,173

 

$

81,673

 

$

95

 

$

81,768

 

$

828,941

Beginning capital allocation

 

$

5,180,985

 

$

2,987,442

 

$

6,198

 

$

2,993,640

 

$

8,174,625

Return on invested capital for the quarter(1)

 

14.4

%

 

2.7

%

 

1.5

%

 

2.7

%

 

10.1

%

(1)

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

Prepayments

For the fourth quarter of 2022, the Company received approximately $1.3 million in scheduled and unscheduled principal repayments and prepayments, which equated to a 3-month constant prepayment rate (“CPR”) of approximately 8.3% for the fourth 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

December 31, 2022

 

8.2

 

8.4

 

8.3

September 30, 2022

 

13.1

 

7.5

 

10.8

June 30, 2022

 

17.2

 

22.9

 

20.0

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 December 31, 2022 and 2021:

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

Average

 

 

 

 

 

 

 

of

 

Weighted

 

Maturity

 

 

 

Fair

 

Entire

 

Average

 

in

Longest

Asset Category

 

Value

 

Portfolio

 

Coupon

 

Months

Maturity

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Rate MBS

 

$

42,974

 

93.6

%

 

4.07

%

 

329

1-Aug-52

Structured MBS

 

2,919

 

6.4

%

 

2.84

%

 

300

15-May-51

Total MBS Portfolio

 

$

45,893

 

100.0

%

 

3.67

%

 

327

1-Aug-52

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Rate MBS

 

$

58,029

 

95.4

%

 

3.69

%

 

330

1-Sep-51

Structured MBS

 

2,774

 

4.6

%

 

2.88

%

 

306

15-May-51

Total MBS Portfolio

 

$

60,803

 

100.0

%

 

3.41

%

 

329

1-Sep-51

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

December 31, 2021

 

 

 

 

 

 

Percentage of

 

 

 

 

 

Percentage of

Agency

 

Fair Value

 

Entire Portfolio

 

Fair Value

 

Entire Portfolio

Fannie Mae

 

$

33,883

 

73.8

%

 

$

39,703

 

65.3

%

Freddie Mac

 

12,010

 

26.2

%

 

21,100

 

34.7

%

Total Portfolio

 

$

45,893

 

100.0

%

 

$

60,803

 

100.0

%

 

 

December 31, 2022

 

December 31, 2021

Weighted Average Pass Through Purchase Price

 

$

105.30

 

$

109.33

Weighted Average Structured Purchase Price

 

$

4.48

 

$

4.81

Weighted Average Pass Through Current Price

 

$

95.58

 

$

109.30

Weighted Average Structured Current Price

 

$

13.37

 

$

9.87

Effective Duration (1)

 

4.323

 

2.103

(1)

Effective duration is the approximate percentage change in price for a 100 basis point change in rates. An effective duration of 4.323 indicates that an interest rate increase of 1.0% would be expected to cause a 4.323% decrease in the value of the MBS in the Company’s investment portfolio at December 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 December 31, 2022, the Company had outstanding repurchase obligations of approximately $43.8 million with a net weighted average borrowing rate of 4.48%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $45.9 million and cash of approximately $0.5 million. At December 31, 2022, the Company’s liquidity was approximately $6.2 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 December 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.

 

$

24,262

 

55.4

%

 

4.46

%

 

1,322

 

 

14

 

Citigroup Global Markets, Inc.

 

9,258

 

21.1

%

 

4.53

%

 

494

 

 

13

 

Mitsubishi UFJ Securities, Inc.

 

4,490

 

10.2

%

 

4.50

%

 

492

 

 

17

 

South Street Securities, LLC

 

3,887

 

8.9

%

 

4.48

%

 

125

 

 

17

 

ED&F Man Capital Markets, Inc.

 

1,921

 

4.4

%

 

4.47

%

 

27

 

 

30

 

 

 

$

43,818

 

100.0

%

 

4.48

%

 

$

2,460

 

 

15

 

(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 December 31, 2022, and December 31, 2021, and the unaudited consolidated statements of operations for the calendar quarters and years ended December 31, 2022 and 2021. Amounts presented are subject to change.

BIMINI CAPITAL MANAGEMENT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited - Amounts Subject to Change)

 

 

 

December 31, 2022

 

December 31, 2021

ASSETS

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

45,893,436

 

$

60,803,144

Cash equivalents and restricted cash

 

6,773,799

 

9,812,410

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

 

5,975,248

 

11,679,107

Accrued interest receivable

 

204,018

 

229,942

Deferred tax assets, net

 

23,178,243

 

35,036,312

Other assets

 

4,292,207

 

4,523,726

Total Assets

 

$

86,316,951

 

$

122,084,641

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Repurchase agreements

 

$

43,817,999

 

$

58,877,999

Long-term debt

 

27,416,239

 

27,438,976

Other liabilities

 

2,958,634

 

2,767,816

Total Liabilities

 

74,192,872

 

89,084,791

Stockholders' equity

 

12,124,079

 

32,999,850

Total Liabilities and Stockholders' Equity

 

$

86,316,951

 

$

122,084,641

Class A Common Shares outstanding

 

10,019,888

 

10,702,194

Book value per share

 

$

1.21

 

$

3.08

BIMINI CAPITAL MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - Amounts Subject to Change)

 

 

 

Years Ended

December 31,

 

 

Three Months Ended

December 31,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Advisory services

 

$

12,995,504

 

$

9,788,340

 

$

3,275,801

 

$

3,030,541

Interest and dividend income

 

3,155,181

 

4,261,596

 

791,370

 

1,017,044

Interest expense

 

(2,131,010

)

 

(1,112,973

)

 

(878,610

)

 

(270,470

)

Net revenues

 

14,019,675

 

12,936,963

 

3,188,561

 

3,777,115

Other (expense) income

 

(12,146,005

)

 

(4,744,032

)

 

1,879,873

 

(1,889,383

)

Expenses

 

9,838,706

 

8,285,362

 

3,623,048

 

3,151,796

Net (loss) income before income tax provision (benefit)

 

(7,965,036

)

 

(92,431

)

 

1,445,386

 

(1,264,064

)

Income tax provision (benefit)

 

11,858,069

 

(367,845

)

 

13,429,145

 

(704,234

)

Net (loss) income

 

$

(19,823,105

)

 

$

275,414

 

$

(11,983,759

)

 

$

(559,830

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CLASS A COMMON STOCK

 

$

(1.90

)

 

$

0.02

 

$

(1.17

)

 

$

(0.05

)

CLASS B COMMON STOCK

 

$

(1.90

)

 

$

0.02

 

$

(1.17

)

 

$

(0.05

)

 

 

Three Months Ended December 31,

Key Balance Sheet Metrics

 

2022

 

2021

Average MBS(1)

 

$

45,081,481

 

$

62,596,709

Average repurchase agreements(1)

 

43,655,999

 

61,018,999

Average stockholders' equity(1)

 

18,235,967

 

32,449,980

 

 

 

 

 

 

 

 

 

Key Performance Metrics

 

 

 

 

 

 

 

 

Average yield on MBS(2)

 

4.74

%

 

3.27

%

Average cost of funds(2)

 

3.68

%

 

0.14

%

Average economic cost of funds(3)

 

5.37

%

 

4.77

%

Average interest rate spread(4)

 

1.06

%

 

3.13

%

Average economic interest rate spread(5)

 

(0.63

)%

 

(1.50

)%

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, and providing certain repurchase agreement trading, clearing and administrative services to, 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, March 10, 2023, at 10:00 AM ET. Participants can receive dial-in information via email by following the link:

https://www.netroadshow.com/events/login?show=770c23ca&confId=46674

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

Contacts

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