Bimini Capital Mgmt Inc A

Good morning, and welcome to the third quarter 2024 earnings conference call for Bimini Capital Management. This call is being recorded today, November 1st, 2024. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the 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 the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now I would like to turn the conference over to the company's chairman and chief executive officer, Mr. Robert Cauley. Please go ahead, sir.

Thank you, operator, and good morning. First, I'll give a brief synopsis of events during the quarter. The impacts of tight monetary policy orchestrated by the Federal Reserve appear to have finally had the desired impacts on inflation and the imbalances in the labor market. Inflation is closing in on the Fed's 2% target and hiring and wage growth are slowing while the unemployment rate has steadily risen. In contrast, growth in the economy and consumer spending have remained robust throughout. In late September, the Fed reduced the overnight funding rate by 50 basis points, and the market anticipated it was the first of many such cuts. Unfortunately, the nonfarm payroll report for September 2024, released in early October, as well as the latest readings on inflation and consumer spending, imply the economy may not be weakening so much after all. If this proves to be the case, the magnitude and urgency of additional rate cuts by the Fed may not live up to market expectations mentioned above. Now turning to our results. Oak Island Capital reported net income for the third quarter of 2024 of $17.3 million, and its shareholders' equity increased from $555.9 million to $656 million. As a result, BIM's advisory service revenues of approximately $3.3 million represented a 4% increase over the second quarter. ORCID's capital base has increased substantially year-to-date, nearly 40%, although advisory service revenues are down 11% year-to-date. ORCID's capital base declined over the course of 2023, and the decline has yet to be totally reversed so far in 2024. The investment portfolio generated an interest income of $0.3 million, inclusive of dividends on our shares of Orchid Island, down very slightly from the prior quarter. For the year-to-date period, net interest income was $1.04 million versus $0.88 million for the first nine months of 2023. The RMBS portfolio at Royal Palm has grown by approximately 28% year-to-date and 37% since June 30, 2024. Our funding costs should decline if short-term rates continue to be reduced by the Federal Reserve potentially enhancing our net interest margin. Otherwise, our funding costs have varied slightly between 5.5% and 5.6% for the past four quarters. The return for the agency RMBS index for the quarter was 4.7% on an absolute basis, and the excess return versus comparable duration swaps, a proxy for hedge returns, was 0.7%. Market-to-market gains and losses on our RMBS portfolio, hedge position, and shares of ORCID reported as other income on our statement of operations, netted to income of $0.4 million for the quarter and $1.1 million for the nine-month period ended September 30th, 2024. The company, inclusive of both the advisory services segment and the investment portfolio segment, recorded net income before taxes for the quarter of $0.8 million versus a net loss before taxes of $0.2 million for the second quarter of 2024. For the nine-month period ended September 30, 2024, on net interest income, net income before taxes was $1.25 million. For the three and nine-month periods ended September 30, 2024, BIMI reported tax provisions of $0.5 million and $1.1 million, respectively. As the fourth quarter unfolds, the reversal in sentiment and interest rate levels that started in late September continues. The market appears to be rethinking the perceived strength of the economy in the outlook for further rate cuts by the Federal Reserve. With the presidential election on the horizon, the market seems to anticipate a possible Republican sweep, with the implications being they would be pro-growth with accompanying fiscal deficit expansion. As a result, interest rates are higher and mortgages have underperformed their hedges. There's also another FED issue. Fed FOMC meeting next week, and the market expects another 25 basis point reduction in their overnight funding rate. We are considering using available excess funds to grow the portfolio when we sense the move has run its course. We will see how things look once the outcome of the election is determined and look forward to speaking with you again after your end. Thank you, operator, and we can turn the call over to questions.

As a reminder, if you'd like to ask a question this time, please press star 11 on your touch tone telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I'm showing no questions at this time. I'd like to turn the call back to Mr. Cawley for closing remarks.

Thank you, operator, and thank you for joining us today. To the extent you have questions that come up after the call, please feel free to call. Or likewise, if you didn't listen to the call live, listen to a recording and you have questions, you can reach us at the office. The number is 772-231-1400. Otherwise, we look forward to speaking with you again at the end of the fourth quarter. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.