Bimini Capital Management Q1 2023 Earnings Call Transcript

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May 12, 2023

There are 2 speakers on the call.

Operator

Good morning, and welcome to the First Quarter 2023 Earnings Conference Call for Bimini Capital Management. This call is being recorded today, May 12, 2023. 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 ks.

Operator

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'd like to turn the conference call over to the company's Chairman and CEO, Mr. Robert Corley. Please go ahead, sir.

Speaker 1

Thank you, operator, and good morning. Thank you for joining us today. Last Wednesday, the Federal Reserve raised the target range for Fed funds rate another 25 basis points to 5% to 5.25%. With that hike, the Fed has signaled that it's either finished raising rates We're very close to doing so. The pace and magnitude of this tightening cycle that began last March has been unprecedented and the possibility it's nearing its conclusion Should be a major relief to the market, not quite.

Speaker 1

In fact, it hardly seems to matter. The extreme market volatility dominating markets that began in early 2022 has Continued into 2023 and shows little sign of abating. A widely followed measure of fixed income market volatility, the MOVE Index, is at very elevated levels and has been for the longest period since the 2007, 2008 great financial crisis, Adding significantly to the market's angst and volatility has been the failure of several large regional banks requiring These failures led to the FDIC to commence a prolonged process of liquidating their assets or approximately $114,000,000,000 of securities. Both Royal Palm and Orchid's portfolio contain a significant allocation to the MBS sectors to be sold, as does the Agency MBS Index. The liquidation auctions, which commenced on April 18, have adversely affected the Agency MBS market, although there was a considerable Spread widening occurred before the options actually began as the market priced in the effect of the added supply.

Speaker 1

Needless to say, the options have the potential to affect the performance of Royal Palms and Orchid's portfolio. While there is significant uncertainty surrounding the impact of these liquidations Liquidation options on the market over the balance of time needed to complete them, today the sales have gone fairly well and mortgages have not lied materially more. To the extent REIT stock prices are affected as well, the options could also impact Orchid's ability to raise additional capital, which would affect the level of management fees paid to Bimini Advisors. Since the failure of Silicon Valley Bank, the stock prices of the mortgage REITs and Orchid Peer Group are down between 5% 15%, with Orchids down by approximately 7.5%. On the positive side, the recent poor performance of Agency RMBS Resulting from the liquidations is that these securities currently offer very attractive returns over a long time horizon and therefore, the Very attractive returns for both Royal Palm and Orchid.

Speaker 1

On balance, we view these developments as offering near term risks, but offset by a long term opportunity to acquire MBS assets at very attractive levels, potentially on the eve of a pivot by the Federal Reserve and lowered funding costs later this year or in 2024. Turning now to our financial performance during the Q1 of 2023, With respect to the MBS portfolio at Royal Palm, we do not add or sell any MBS securities during the Q1 of 2023. During the Q1, we recorded $700,000 of unrealized mark to market gains, which were offset by pay downs of approximately $900,000 The net of these was a $250,000 decrease in the MBS portfolio. Going forward, we are focused on taking advantage of the attractive long term return opportunities available in the We have accumulated cash and have a sizable idle position that may be liquidated, and we would therefore use the proceeds to grow the pass through portfolio. As for the Advisory Services segment, during the Q1 of 2023, Orchid reported net income of $3,500,000 And its shareholders' equity increased from $438,800,000 at December 31, 2022 to $451,400,000 at March 31, 2023.

Speaker 1

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 $10.50 to $10.73 resulting in a $100,000 gain on our shareholdings. Orchid's dividend was unchanged for the quarter. Finally, advisory services revenue related to Bimini Advisors Management of Orchid Island were $3,400,000 for the Q1 of 2023 compared to $3,300,000 for the Q4 of 2022. Operator, that concludes my prepared remarks, and we can open the call up to questions.

Operator

At this time, we currently have no questions registered. So I'll hand it back over to Robert Paul, leave any remarks.

Speaker 1

Thank you, operator, and thank you everybody for joining us. To the extent you have any questions pop up later or you happen to listen to a replay and have a question, please feel free to contact us. The number here in the office is 772 231-1400. Otherwise, we look forward to speaking with you next quarter. Thank you.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

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Earnings Conference Call
Bimini Capital Management Q1 2023
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