UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 19, 2019
|
Bimini Capital Management, Inc.
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|
(Exact name of registrant as specified in its charter)
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Maryland
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001-32171
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72-1571637
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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3305 Flamingo Drive, Vero Beach, Florida 32963
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code (772) 231-1400
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
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☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the
Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On March 19, 2019, Bimini Capital Management, Inc., (the “Company”) issued the press release attached hereto as Exhibit 99.1
announcing the Company’s consolidated results of operations for the period ended December 30, 2018.
The information furnished under this “Item 2.02 Results of Operations and Financial Condition,” including the exhibit related
hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any disclosure document of the Company, except as shall be expressly set forth by specific
reference in such document.
ITEM 9.01. EXHIBITS.
(d) Exhibits
Exhibit 99.1 ― Press Release of Bimini Capital Management, Inc. dated March 19, 2019.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
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Date: March 19, 2019
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BIMINI CAPITAL MANAGEMENT, INC
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|
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By:
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/s/ Robert E. Cauley
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Robert E. Cauley
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||
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Chairman and Chief Executive Officer
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||
EXHIBIT 99.1
BIMINI CAPITAL MANAGEMENT ANNOUNCES FOURTH QUARTER 2018 RESULTS
VERO BEACH, Fla. (March 19, 2019) – Bimini Capital Management, Inc. (OTCBB:BMNM), (“Bimini Capital,” “Bimini,” or the “Company”) today
announced results of operations for the three month period ended December 31, 2018.
Fourth Quarter 2018 Highlights
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·
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Net loss of $24.6 million, or $1.93 per common share
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|
·
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Income tax provision of $21.8 million, or $1.72 per common share
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|
·
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Book value per share of $2.28
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|
·
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Company to discuss results on Wednesday, March 20, 2019, at 10:00 AM ET
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Details of Fourth Quarter 2018 Results of Operations
The Company reported net loss of $24.6 million for the three month period ended December 31, 2018. The income tax provision of $21.8 million
was a result of the reassessment of our deferred tax assets, and did not impact cash flows as it is a non-cash GAAP accounting adjustment. The results for the quarter also included advisory services revenue of $1.8 million, interest and dividend
income of $2.6 million, interest expense of $1.6 million, net realized and unrealized losses of $4.0 million, and operating expenses of $1.6 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, 2018, Bimini’s statement of operations included a fair value adjustment of $(1.3) million and dividends of $0.4 from its investment in Orchid
common stock. Also during the three months ended December 31, 2018, Bimini recorded $1.8 million in advisory services revenue for managing Orchid’s portfolio consisting of $1.4 million of management fees and $0.4 million in overhead
reimbursement.
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.
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Portfolio Activity for the Quarter
|
||||||||||||||||||||
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Structured Security Portfolio
|
||||||||||||||||||||
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Pass-Through
|
Interest-Only
|
Inverse Interest
|
||||||||||||||||||
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Portfolio
|
Securities
|
Only Securities
|
Sub-total
|
Total
|
||||||||||||||||
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Market Value - September 30, 2018
|
$
|
210,267,429
|
$
|
1,222,155
|
$
|
719,221
|
$
|
1,941,376
|
$
|
212,208,805
|
||||||||||
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Securities Purchased
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1,802,253
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1,136,424
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-
|
1,136,424
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2,938,677
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|||||||||||||||
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Return of Investment
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n/a
|
(153,661
|
)
|
(33,105
|
)
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(186,766
|
)
|
(186,766
|
)
|
|||||||||||
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Pay-downs
|
(3,636,758
|
)
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n/a
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n/a
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n/a
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(3,636,758
|
)
|
|||||||||||||
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Premium Lost Due to Pay-downs
|
(113,117
|
)
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n/a
|
n/a
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n/a
|
(113,117
|
)
|
|||||||||||||
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Mark to Market (Losses) Gains
|
1,355,413
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(183,740
|
)
|
41,678
|
(142,062
|
)
|
1,213,351
|
|||||||||||||
|
Market Value - December 31, 2018
|
$
|
209,675,220
|
$
|
2,021,178
|
$
|
727,794
|
$
|
2,748,972
|
$
|
212,424,192
|
||||||||||
The tables below present the allocation of capital between the respective portfolios at December 31, 2018 and September 30, 2018, and the
return on invested capital for each sub-portfolio for the three month period ended December 31, 2018. 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 (7.4)% and (4.9)%, respectively, for the fourth
quarter of 2018. The combined portfolio generated a return on invested capital of approximately (7.1)%.
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Capital Allocation
|
||||||||||||||||||||
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Structured Security Portfolio
|
||||||||||||||||||||
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Pass-Through
|
Interest-Only
|
Inverse Interest
|
||||||||||||||||||
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Portfolio
|
Securities
|
Only Securities
|
Sub-total
|
Total
|
||||||||||||||||
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December 31, 2018
|
||||||||||||||||||||
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Market Value
|
$
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209,675,220
|
$
|
2,021,178
|
$
|
727,794
|
$
|
2,748,972
|
$
|
212,424,192
|
||||||||||
|
Cash equivalents and restricted cash(1)
|
6,155,053
|
-
|
-
|
-
|
6,155,053
|
|||||||||||||||
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Repurchase Agreement Obligations
|
(200,396,000
|
)
|
-
|
-
|
-
|
(200,396,000
|
)
|
|||||||||||||
|
Total(2)
|
$
|
15,434,273
|
$
|
2,021,178
|
$
|
727,794
|
$
|
2,748,972
|
$
|
18,183,245
|
||||||||||
|
% of Total
|
84.9
|
%
|
11.2
|
%
|
4.0
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%
|
15.1
|
%
|
100.0
|
%
|
||||||||||
|
September 30, 2018
|
||||||||||||||||||||
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Market Value
|
$
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210,267,429
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$
|
1,222,155
|
$
|
719,221
|
$
|
1,941,376
|
$
|
212,208,805
|
||||||||||
|
Cash equivalents and restricted cash(1)
|
9,791,086
|
-
|
-
|
-
|
9,791,086
|
|||||||||||||||
|
Repurchase Agreement Obligations
|
(203,742,239
|
)
|
-
|
-
|
-
|
(203,742,239
|
)
|
|||||||||||||
|
Total(2)
|
$
|
16,316,276
|
$
|
1,222,155
|
$
|
719,221
|
$
|
1,941,376
|
$
|
18,257,652
|
||||||||||
|
% of Total
|
89.4
|
%
|
6.7
|
%
|
3.9
|
%
|
10.6
|
%
|
100.0
|
%
|
||||||||||
|
(1)
|
Amount excludes restricted cash of $85,435 and $113,230 at December 31, 2018 and September 30, 2018, 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
|
||||||||||||||||||||
|
Structured Security Portfolio
|
||||||||||||||||||||
|
Pass-Through
|
Interest-Only
|
Inverse Interest
|
||||||||||||||||||
|
Portfolio
|
Securities
|
Only Securities
|
Sub-total
|
Total
|
||||||||||||||||
|
Income (net of repo cost)
|
$
|
946,697
|
$
|
15,402
|
$
|
30,647
|
$
|
46,049
|
$
|
992,746
|
||||||||||
|
Realized and unrealized (losses) gains
|
1,242,296
|
(183,740
|
)
|
41,678
|
(142,062
|
)
|
1,100,234
|
|||||||||||||
|
Hedge gains(1)
|
(3,397,032
|
)
|
n/a
|
n/a
|
n/a
|
(3,397,032
|
)
|
|||||||||||||
|
$
|
(1,208,039
|
)
|
$
|
(168,338
|
)
|
$
|
72,325
|
$
|
(96,013
|
)
|
$
|
(1,304,052
|
)
|
|||||||
|
Beginning Capital Allocation
|
16,316,276
|
1,222,155
|
719,221
|
1,941,376
|
18,257,652
|
|||||||||||||||
|
Return on Invested Capital for the Quarter(2)
|
(7.4
|
)%
|
(13.8
|
)%
|
10.1
|
%
|
(4.9
|
)%
|
(7.1
|
)%
|
||||||||||
|
(1)
|
Excludes losses of approximately $437,000 associated with trust preferred funding hedges.
|
|
(2)
|
Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage.
|
Prepayments
For the fourth quarter of 2018, the Company received approximately $3.8 million in scheduled and unscheduled principal repayments and
prepayments, which equated to a constant prepayment rate (“CPR”) of approximately 6.6% for the fourth quarter of 2018. Prepayment rates on the two MBS sub-portfolios were as follows (in CPR):
|
PT
|
Structured
|
|||||||||||
|
MBS Sub-
|
MBS Sub-
|
Total
|
||||||||||
|
Three Months Ended,
|
Portfolio
|
Portfolio
|
Portfolio
|
|||||||||
|
December 31, 2018
|
5.5
|
11.7
|
6.6
|
|||||||||
|
September 30, 2018
|
8.6
|
13.5
|
9.5
|
|||||||||
|
June 30, 2018
|
13.4
|
11.6
|
13.1
|
|||||||||
|
March 31, 2018
|
7.2
|
16.8
|
8.6
|
|||||||||
|
December 31, 2017
|
7.2
|
16.9
|
8.8
|
|||||||||
|
September 30, 2017
|
5.2
|
18.8
|
8.3
|
|||||||||
|
June 30, 2017
|
5.9
|
20.4
|
9.9
|
|||||||||
|
March 31, 2017
|
4.8
|
18.8
|
8.8
|
|||||||||
Portfolio
The following tables summarize the MBS portfolio as of December 31, 2018 and 2017.
|
($ in thousands)
|
||||||
|
Weighted
|
||||||
|
Percentage
|
Average
|
|||||
|
of
|
Weighted
|
Maturity
|
||||
|
Fair
|
Entire
|
Average
|
in
|
Longest
|
||
|
Asset Category
|
Value
|
Portfolio
|
Coupon
|
Months
|
Maturity
|
|
|
December 31, 2018
|
||||||
|
Fixed Rate MBS
|
$
|
209,675
|
98.7%
|
4.26%
|
327
|
1-Aug-48
|
|
Interest-Only Securities
|
2,021
|
1.0%
|
3.69%
|
837
|
25-Dec-39
|
|
|
Inverse Interest-Only Securities
|
728
|
0.3%
|
4.06%
|
272
|
25-Apr-41
|
|
|
Total Mortgage Assets
|
$
|
212,424
|
100.0%
|
4.25%
|
332
|
1-Aug-48
|
|
December 31, 2017
|
||||||
|
Fixed Rate MBS
|
207,179
|
98.8%
|
4.21%
|
321
|
1-Dec-47
|
|
|
Interest-Only Securities
|
1,476
|
0.7%
|
3.43%
|
229
|
25-Dec-39
|
|
|
Inverse Interest-Only Securities
|
1,037
|
0.5%
|
5.01%
|
278
|
25-Apr-41
|
|
|
Total Mortgage Assets
|
$
|
209,692
|
100.0%
|
4.21%
|
320
|
1-Dec-47
|
|
($ in thousands)
|
||||||||||||||||
|
December 31, 2018
|
December 31, 2017
|
|||||||||||||||
|
Percentage of
|
Percentage of
|
|||||||||||||||
|
Agency
|
Fair Value
|
Entire Portfolio
|
Fair Value
|
Entire Portfolio
|
||||||||||||
|
Fannie Mae
|
$
|
193,437
|
91.1
|
%
|
$
|
178,581
|
85.2
|
%
|
||||||||
|
Freddie Mac
|
18,881
|
8.9
|
%
|
30,896
|
14.7
|
%
|
||||||||||
|
Ginnie Mae
|
106
|
0.0
|
%
|
215
|
0.1
|
%
|
||||||||||
|
Total Portfolio
|
$
|
212,424
|
100.0
|
%
|
$
|
209,692
|
100.0
|
%
|
||||||||
|
Entire Portfolio
|
December 31, 2018
|
December 31, 2017
|
||||||
|
Weighted Average Pass Through Purchase Price
|
$
|
106.81
|
$
|
109.06
|
||||
|
Weighted Average Structured Purchase Price
|
$
|
6.39
|
$
|
6.02
|
||||
|
Weighted Average Pass Through Current Price
|
$
|
103.87
|
$
|
107.13
|
||||
|
Weighted Average Structured Current Price
|
$
|
8.67
|
$
|
7.06
|
||||
|
Effective Duration (1)
|
3.935
|
3.832
|
||||||
|
(1)
|
Effective duration of 3.935 indicates that an interest rate increase of 1.0% would be expected to cause a 3.935% decrease in the
value of the MBS in the Company’s investment portfolio at December 31, 2018. An effective duration of 3.832 indicates that an interest rate increase of 1.0% would be expected to cause a 3.832% decrease in the value of the MBS in the
Company’s investment portfolio at December 31, 2017. These figures include the structured securities in the portfolio but not the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are
obtained from The Yield Book, Inc.
|
Financing, Leverage and Liquidity
As of December 31, 2018, the Company had outstanding repurchase obligations of approximately $200.4 million with a net weighted average
borrowing rate of 2.56%. These agreements were collateralized by MBS with a fair value, including accrued interest, of approximately $213.1 million. At December 31, 2018, the Company’s liquidity was approximately $5.0 million, consisting of
unpledged MBS and cash and cash equivalents.
We may pledge more of our structured MBS as part of a repurchase agreement funding, but retain cash in lieu of acquiring additional assets.
In this way, we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash. Below is a listing of outstanding borrowings under repurchase
obligations at December 31, 2018.
|
($ in thousands)
|
|||||||||
|
Repurchase Agreement Obligations
|
|||||||||
|
Weighted
|
Weighted
|
||||||||
|
Total
|
Average
|
Average
|
|||||||
|
Outstanding
|
% of
|
Borrowing
|
Amount
|
Maturity
|
|||||
|
Counterparty
|
Balances
|
Total
|
Rate
|
at Risk(1)
|
(in Days)
|
||||
|
ED&F Man Capital Markets, Inc.
|
$
|
72,182
|
36.0%
|
2.48%
|
$
|
4,036
|
17
|
||
|
Mirae Asset Securities (USA) Inc.
|
59,927
|
29.9%
|
2.56%
|
3,506
|
40
|
||||
|
Citigroup Global Markets, Inc.
|
32,102
|
16.0%
|
2.70%
|
2,498
|
30
|
||||
|
JVB Financial Group, LLC
|
26,091
|
13.0%
|
2.60%
|
1,563
|
39
|
||||
|
Mitsubishi UFJ Securities (USA), Inc.
|
8,140
|
4.1%
|
2.56%
|
580
|
50
|
||||
|
South Street Securities, LLC
|
1,954
|
1.0%
|
2.54%
|
168
|
45
|
||||
|
$
|
200,396
|
100.0%
|
2.56%
|
$
|
12,351
|
31
|
|||
Hedging
In connection with its interest rate risk management strategy, the Company economically
hedges a portion of the cost of its repurchase agreement funding and also its junior subordinated notes by entering into derivative financial instrument contracts. The Company has not elected hedging treatment under U.S. generally accepted
accounting principles (“GAAP”) in order to align the accounting treatment of its derivative instruments with the treatment of its portfolio assets under the fair value option election. As such all gains or losses on these instruments are
reflected in earnings for all periods presented. As of December 31, 2018, such instruments were comprised of Eurodollar futures contracts and “to-be-announced” (“TBA”) securities transactions. .
The table below presents information related to outstanding Eurodollar futures positions at December 31, 2018.
|
($ in thousands)
|
||||||||||||||||
|
Repurchase Agreement Funding Hedges
|
||||||||||||||||
|
Average
|
Weighted
|
Weighted
|
||||||||||||||
|
Contract
|
Average
|
Average
|
||||||||||||||
|
Notional
|
Entry
|
LIBOR
|
Open
|
|||||||||||||
|
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity(1)
|
||||||||||||
|
2019
|
$
|
125,000
|
2.56
|
%
|
2.67
|
%
|
$
|
139
|
||||||||
|
2020
|
150,000
|
2.84
|
%
|
2.49
|
%
|
(523
|
)
|
|||||||||
|
2021
|
100,000
|
2.80
|
%
|
2.46
|
%
|
(346
|
)
|
|||||||||
|
Total / Weighted Average
|
$
|
125,000
|
2.74
|
%
|
2.54
|
%
|
$
|
(730
|
)
|
|||||||
|
($ in thousands)
|
||||||||||||||||
|
Junior Subordinated Debt Funding Hedges
|
||||||||||||||||
|
Average
|
Weighted
|
Weighted
|
||||||||||||||
|
Contract
|
Average
|
Average
|
||||||||||||||
|
Notional
|
Entry
|
LIBOR
|
Open
|
|||||||||||||
|
Expiration Year
|
Amount
|
Rate
|
Rate
|
Equity(1)
|
||||||||||||
|
2019
|
$
|
26,000
|
1.63
|
%
|
2.68
|
%
|
$
|
271
|
||||||||
|
2020
|
26,000
|
1.95
|
%
|
2.49
|
%
|
142
|
||||||||||
|
2021
|
26,000
|
2.22
|
%
|
2.46
|
%
|
61
|
||||||||||
|
Total / Weighted Average
|
$
|
26,000
|
1.93
|
%
|
2.54
|
%
|
$
|
474
|
||||||||
|
(1)
|
Open equity represents the cumulative gains (losses) recorded on open futures positions.
|
The following table summarizes our contracts to purchase and sell TBA securities as of December 31, 2018.
|
($ in thousands)
|
|||||
|
Notional
|
Net
|
||||
|
Amount
|
Cost
|
Market
|
Carrying
|
||
|
Long (Short)(1)
|
Basis(2)
|
Value(3)
|
Value(4)
|
||
|
December 31, 2018
|
|||||
|
30-Year TBA Securities:
|
|||||
|
3.0%
|
$(50,000)
|
$(47,844)
|
$(48,782)
|
$(938)
|
|
| (2) |
Cost basis represents the forward price to be paid (received) for the underlying Agency MBS.
|
| (3) |
Market value represents the current market value of the TBA securities (or of the underlying Agency MBS) as of period-end.
|
| (4) |
Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in
derivative assets (liabilities), at fair value in our consolidated balance sheets.
|
Book Value Per Share
The Company's Book Value Per Share at December 31, 2018 was $2.28. 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, 2018, the Company's stockholders’ equity was $29.0 million with 12,709,269 Class A Common shares outstanding.
Management Commentary
Commenting on the fourth quarter, Robert E. Cauley, Chairman and Chief Executive Officer, said, “While 2017 was a strong year for growth at
Bimini, 2018 was more about holding on as market conditions where very challenging. With the economy growing at the fastest rate since the financial crisis the Federal Reserve, or Fed, raised the target for the Federal Funds rate four times in
2018. In fact, economic growth for 2018 exceeded 3.0% for the first time in years as the effects of the tax cuts and jobs act passed in late 2017 and the fiscal stimulus package passed early in the year added substantial fiscal stimulus to an
already healthy economy. As the Fed drove short term rates progressively higher, the rates curve flattened, suppressing earnings for levered bond funds. This impacted Bimini in several ways. The reduced net interest spread on our MBS portfolio
was also felt at Orchid Island Capital, the REIT we manage via our subsidiary, Bimini Advisors. Orchid reduced its dividend three times during the year, reducing our dividend income. The dividend cuts, along with book value erosion at Orchid,
reduced both the price of Orchid shares and the capital base that our management fee is based on. Orchid’s capital base declined by approximately 21% in 2018. Even with the decline in its capital base, Orchid’s average capital base for the year
was slightly higher than in 2017 and our advisory services revenue increased 5% over 2017. Advisory services revenue was down approximately 2% in the fourth quarter of 2018 versus the prior quarter. Dividend income on our Orchid shares was down
35% for the year and down 4% in the fourth quarter versus the third quarter of 2018.
“Although they did not rise as much as short rates, longer maturity interest rates rose over the course of the year and interest income on our
MBS portfolio increased by approximately 8% in 2018 versus 2017. The MBS portfolio at Royal Palm Capital was essentially unchanged in size from the fourth quarter of 2017, but the average yield on our MBS assets increased 0.32%, from 3.88% to
4.20%. Compared to the third quarter of 2018, interest income in the fourth quarter increased 8% as the yield on our MBS assets increased 6 basis points and the size of the MBS portfolio increased by $13.5 million. As the Fed raised rates four
times over the course of 2018, our average borrowing costs increased materially, from 1.41% to 2.44%, resulting in a 124% increase in repo interest costs for 2018 versus 2017. Compared to the third quarter, repo interest expense increased by
18%. The net of these developments was a 6% decrease in net revenues for the year and 2% for the quarter.
“With interest rates higher the value of our MBS portfolio declined and, as described above, developments at Orchid led to a $4.4 million
decline in the market value of our Orchid shares for the year and $0.9 million decline for the quarter. During the fourth quarter interest rates declined but our MBS securities underperformed our hedge instruments, resulting in an aggregate $2.7
million mark to market loss on our derivative instruments and MBS securities. Finally, we increased the valuation allowance on the deferred tax assets at both Royal Palm and Bimini, resulting in a tax provision of $21.1 million for the year and
$21.8 million for the quarter. This was necessary since Orchid’s capital base and dividend rate declined during 2018, as did the net interest margin on Royal Palm’s MBS portfolio, resulting in lower projected taxable income over the next 10 to
15 years versus our projection at the end of 2017.
“In spite of very adverse market conditions in 2018, and particularly the fourth quarter of the year, our net revenues were down only modestly
in 2018 and the fourth quarter of the year. Going forward, to the extent the term structure of rates remains flat and our net interest spread remains depressed, our earnings and dividends form our Orchid shares will remain depressed as well.
However, to the extent the Fed is at or near the end of its tightening cycle, and if there are reductions to the Fed funds rate in the future, we would expect this to impact us positively in terms of our net interest spread, Orchid’s net interest
spread, and our revenues and earnings generally.
“As we enter 2019 the outlook is far different than it was at the end of the third quarter. The risks to the economic outlook – at least in
the eyes of the market – are now clearly to the downside. Risks include a potential hard “Brexit” for the United Kingdom from the European Union, very weak growth in Europe and China, the trade dispute between the U.S. and China, and the prospect
that all of these factors will cause growth in the U.S. to slow materially. The market now sees at most one more Fed rate hike in 2019 and likely cuts by the end of 2020.”
Summarized Financial Statements
The following is a summarized presentation of the unaudited consolidated balance sheets as of December 31, 2018, and 2017, and the unaudited
consolidated statements of operations for the calendar quarters and years ended December 31, 2018 and 2017. Amounts presented are subject to change.
|
BIMINI CAPITAL MANAGEMENT, INC.
|
||||||||
|
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(Unaudited - Amounts Subject to Change)
|
||||||||
|
December 31, 2018
|
December 31, 2017
|
|||||||
|
ASSETS
|
||||||||
|
Mortgage-backed securities
|
$
|
212,424,192
|
$
|
209,692,132
|
||||
|
Cash equivalents and restricted cash
|
6,240,488
|
8,752,860
|
||||||
|
Investment in Orchid Island Capital, Inc.
|
9,713,030
|
14,105,934
|
||||||
|
Retained interests in securitizations
|
-
|
653,380
|
||||||
|
Accrued interest receivable
|
780,535
|
746,121
|
||||||
|
Deferred tax assets, net
|
23,202,821
|
44,524,584
|
||||||
|
Other assets
|
7,038,610
|
6,113,786
|
||||||
|
Total Assets
|
$
|
259,399,676
|
$
|
284,588,797
|
||||
|
LIABILITIES AND EQUITY
|
||||||||
|
Repurchase agreements
|
$
|
200,396,000
|
$
|
200,182,751
|
||||
|
Junior subordinated notes
|
26,804,440
|
26,804,440
|
||||||
|
Other liabilities
|
3,244,615
|
1,909,358
|
||||||
|
Total Liabilities
|
230,445,055
|
228,896,549
|
||||||
|
Stockholders' equity
|
28,954,621
|
55,692,248
|
||||||
|
Total Liabilities and Equity
|
$
|
259,399,676
|
$
|
284,588,797
|
||||
|
Class A Common Shares outstanding
|
12,709,269
|
12,660,627
|
||||||
|
Book value per share
|
$
|
2.28
|
$
|
4.40
|
||||
|
BIMINI CAPITAL MANAGEMENT, INC.
|
||||||||||||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
|
(Unaudited - Amounts Subject to Change)
|
||||||||||||||||
|
Years Ended
|
Three Months Ended
|
|||||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
|||||||||||||
|
Advisory services
|
$
|
7,770,761
|
$
|
7,431,359
|
$
|
1,837,301
|
$
|
2,033,340
|
||||||||
|
Interest and dividend income
|
9,988,247
|
8,573,041
|
2,591,593
|
2,617,636
|
||||||||||||
|
Interest expense
|
(5,519,827
|
)
|
(3,033,367
|
)
|
(1,626,603
|
)
|
(1,008,925
|
)
|
||||||||
|
Net revenues
|
12,239,181
|
12,971,033
|
2,802,291
|
3,642,051
|
||||||||||||
|
Losses
|
(11,447,554
|
)
|
(3,672,718
|
)
|
(4,042,717
|
)
|
(2,114,684
|
)
|
||||||||
|
Expenses
|
6,442,833
|
6,402,785
|
1,557,210
|
1,851,398
|
||||||||||||
|
Net (loss) income before income tax benefit
|
(5,651,206
|
)
|
2,895,530
|
(2,797,636
|
)
|
(324,031
|
)
|
|||||||||
|
Income tax expense
|
21,126,955
|
19,378,150
|
21,802,530
|
18,094,969
|
||||||||||||
|
Net loss
|
$
|
(26,778,161
|
)
|
$
|
(16,482,620
|
)
|
$
|
(24,600,166
|
)
|
$
|
(18,419,000
|
)
|
||||
|
Basic and Diluted Net loss Per Share of:
|
||||||||||||||||
|
CLASS A COMMON STOCK
|
$
|
(2.10
|
)
|
$
|
(1.30
|
)
|
$
|
(1.93
|
)
|
$
|
(1.45
|
)
|
||||
|
CLASS B COMMON STOCK
|
$
|
(2.10
|
)
|
$
|
(1.30
|
)
|
$
|
(1.93
|
)
|
$
|
(1.45
|
)
|
||||
|
Consolidated
|
||||||||
|
Three Months Ended December 31,
|
||||||||
|
Key Balance Sheet Metrics
|
2018
|
2017
|
||||||
|
Average MBS(1)
|
$
|
212,316,501
|
$
|
203,841,267
|
||||
|
Average repurchase agreements(1)
|
202,069,120
|
193,778,266
|
||||||
|
Average equity(1)
|
41,264,973
|
64,898,520
|
||||||
|
Key Performance Metrics
|
||||||||
|
Average yield on MBS(2)
|
4.20
|
%
|
3.88
|
%
|
||||
|
Average cost of funds(2)
|
2.44
|
%
|
1.41
|
%
|
||||
|
Average economic cost of funds(3)
|
2.18
|
%
|
1.77
|
%
|
||||
|
Average interest rate spread(4)
|
1.76
|
%
|
2.47
|
%
|
||||
|
Average economic interest rate spread(5)
|
2.02
|
%
|
2.11
|
%
|
||||
|
(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. is an asset manager that invests primarily 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).
Through our wholly-owned subsidiary, Bimini Advisors Holdings, LLC ("Bimini Advisors"), we serve as the external manager of Orchid Island
Capital, Inc. ("Orchid"). Orchid is a publicly-traded real estate investment trust (NYSE: ORC). Orchid is managed to earn returns on the spread between the yield on its assets and its costs, including the interest expense on the funds it
borrows. As Orchid’s external manager, Bimini Advisors receives management fees and expense reimbursements for managing Orchid's investment portfolio 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 Advisors is at all times subject to the supervision and oversight of Orchid's board of directors and has only such functions and
authority as are delegated to it.
We also manage the portfolio of our wholly-owned subsidiary, Royal Palm Capital, LLC (“Royal Palm”). Royal Palm is managed with an investment
strategy similar to that of Orchid. Bimini Capital Management, Inc. and its subsidiaries are headquartered in Vero Beach, Florida.
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 Wednesday, March 20, 2019, at 10:00 AM ET. The conference call may be
accessed by dialing toll free (877) 312-5414. International callers dial (408) 940-3877. The conference passcode is 4449988. A live audio webcast of the conference call can be accessed via the investor relations section of the Company’s
website at www.biminicapital.com, and an audio archive
of the webcast will be available for approximately one year.
CONTACT:
Bimini Capital Management, Inc.
Robert E. Cauley, 772-231-1400
Chairman and Chief Executive Officer
www.biminicapital.com