bmnm10q03312009.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2009
¨ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to ___________
Commission
File Number: 001-32171
Bimini
Capital Management, Inc.
(Exact
name of registrant as specified in its charter)
|
|
|
Maryland
|
|
72-1571637
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
3305
Flamingo Drive, Vero Beach, Florida 32963
(Address
of principal executive offices) (Zip Code)
(772)
231-1400
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES þ NO
¨
Indicate
by check mark whether the registrant has submitted electronically and posted to
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES¨ NO ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨
Smaller Reporting Company ý
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES ¨ NO
þ
As of May
8, 2009, the number of shares outstanding of the registrant’s Class A Common
Stock, $0.001 par value, was 26,951,189; the number of shares outstanding of the
registrant’s Class B Common Stock, $0.001 par value, was 319,388; and the number
of shares outstanding of the registrant’s Class C Common Stock, $0.001 par
value, was 319,388.
BIMINI
CAPITAL MANAGEMENT, INC.
INDEX
PART
I. FINANCIAL INFORMATION
|
|
ITEM
1. FINANCIAL STATEMENTS.
|
3
|
Consolidated
Balance Sheets as of March 31, 2009 (unaudited) and December 31,
2008
|
3
|
Consolidated
Statements of Operations (unaudited) for the three months ended March 31,
2009 and 2008
|
4
|
Consolidated
Statement of Stockholders’ Deficit (unaudited) for the three months ended
March 31, 2009
|
5
|
Consolidated
Statements of Cash Flows (unaudited) for the three months ended March 31,
2009 and 2008
|
6
|
Notes
to Consolidated Financial Statements (unaudited)
|
7
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS.
|
25
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
|
36
|
ITEM
4T. CONTROLS AND PROCEDURES.
|
36
|
|
|
PART
II. OTHER INFORMATION
|
|
ITEM
1. LEGAL PROCEEDINGS.
|
36
|
ITEM
1A. RISK FACTORS.
|
37
|
ITEM
6. EXHIBITS.
|
39
|
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
BIMINI
CAPITAL MANAGEMENT, INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
ASSETS:
|
|
|
|
|
|
|
Mortgage-backed
securities, trading:
|
|
|
|
|
|
|
Pledged
to counterparties, at fair value
|
|
$ |
80,617,777 |
|
|
$ |
158,444,253 |
|
Unpledged,
at fair value
|
|
|
10,786,430 |
|
|
|
13,664,242 |
|
Total
mortgage-backed securities, trading
|
|
|
91,404,207 |
|
|
|
172,108,495 |
|
Cash
and cash equivalents
|
|
|
22,113,048 |
|
|
|
7,668,581 |
|
Principal
payments receivable
|
|
|
39,955 |
|
|
|
187,779 |
|
Accrued
interest receivable
|
|
|
683,601 |
|
|
|
887,536 |
|
Property
and equipment, net
|
|
|
4,046,227 |
|
|
|
4,062,116 |
|
Prepaids
and other assets
|
|
|
4,434,420 |
|
|
|
4,590,601 |
|
Assets
held for sale
|
|
|
35,598,142 |
|
|
|
43,287,020 |
|
Total
Assets
|
|
$ |
158,319,600 |
|
|
$ |
232,792,128 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$ |
74,735,787 |
|
|
$ |
148,695,082 |
|
Junior
subordinated notes due to Bimini Capital Trust I & II
|
|
|
103,097,000 |
|
|
|
103,097,000 |
|
Accrued
interest payable
|
|
|
798,025 |
|
|
|
983,069 |
|
Accounts
payable, accrued expenses and other
|
|
|
278,698 |
|
|
|
480,655 |
|
Liabilities
related to assets held for sale
|
|
|
8,107,050 |
|
|
|
10,431,330 |
|
Total
Liabilities
|
|
|
187,016,560 |
|
|
|
263,687,136 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized; designated,
1,800,000 shares as Class A Redeemable and 2,000,000 shares as Class B
Redeemable; no shares issued and outstanding as of March 31 ,
2009 and December 31, 2008
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Class
A Common Stock, $0.001 par value; 98,000,000 shares designated:
26,951,189 shares issued and outstanding as of March 31, 2009
and 26,207,023 shares issued and outstanding as of December 31,
2008
|
|
|
26,951 |
|
|
|
26,207 |
|
|
|
|
|
|
|
|
|
|
Class
B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
shares issued and outstanding as of March 31 , 2009 and December 31,
2008
|
|
|
319 |
|
|
|
319 |
|
|
|
|
|
|
|
|
|
|
Class
C Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
shares issued and outstanding as of March 31 , 2009 and December 31,
2008
|
|
|
319 |
|
|
|
319 |
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
339,164,170 |
|
|
|
339,124,251 |
|
Accumulated
deficit
|
|
|
(367,888,719 |
) |
|
|
(370,046,104 |
) |
Total
Stockholders’ Deficit
|
|
|
(28,696,960 |
) |
|
|
(30,895,008 |
) |
Total
Liabilities and Stockholders’ Deficit
|
|
$ |
158,319,600 |
|
|
$ |
232,792,128 |
|
See
Notes to Consolidated Financial Statements
|
|
BIMINI
CAPITAL MANAGEMENT, INC.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Interest
income, net of amortization of premium and discount
|
|
$ |
3,674,403 |
|
|
$ |
10,110,893 |
|
Interest
expense
|
|
|
(253,952 |
) |
|
|
(7,627,461 |
) |
Net
interest income, before interest on junior subordinated
notes
|
|
|
3,420,451 |
|
|
|
2,483,432 |
|
Interest
expense on junior subordinated notes
|
|
|
(2,090,432 |
) |
|
|
(2,090,432 |
) |
Net
interest income
|
|
|
1,330,019 |
|
|
|
393,000 |
|
Fair
value adjustment - held for trading securities
|
|
|
557,109 |
|
|
|
603,081 |
|
Gain
on sale of mortgage-backed securities, net
|
|
|
1,136,500 |
|
|
|
322,571 |
|
Revenues,
net
|
|
|
3,023,628 |
|
|
|
1,318,652 |
|
|
|
|
|
|
|
|
|
|
Direct
REIT operating expenses
|
|
|
153,304 |
|
|
|
185,289 |
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses:
|
|
|
|
|
|
|
|
|
Compensation
and related benefits
|
|
|
320,247 |
|
|
|
845,378 |
|
Directors'
fees and liability insurance
|
|
|
111,592 |
|
|
|
174,046 |
|
Audit,
legal and other professional fees
|
|
|
394,262 |
|
|
|
394,087 |
|
Other
administrative
|
|
|
122,385 |
|
|
|
490,628 |
|
Total
general and administrative expenses
|
|
|
948,486 |
|
|
|
1,904,139 |
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
|
1,101,790 |
|
|
|
2,089,428 |
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
1,921,838 |
|
|
|
(770,776 |
) |
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations, net of tax
|
|
|
235,547 |
|
|
|
(4,333,501 |
) |
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
2,157,385 |
|
|
$ |
(5,104,277 |
) |
|
|
|
|
|
|
|
|
|
Basic
And Diluted Net Income (Loss) Per Share Of:
|
|
|
|
|
|
|
|
|
CLASS
A COMMON STOCK
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.07 |
|
|
$ |
(0.03 |
) |
Discontinued
operations
|
|
|
0.01 |
|
|
|
(0.17 |
) |
Total
basic and diluted net income (loss) per Class A share
|
|
$ |
0.08 |
|
|
$ |
(0.20 |
) |
CLASS
B COMMON STOCK
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.07 |
|
|
$ |
(0.03 |
) |
Discontinued
operations
|
|
|
0.01 |
|
|
|
(0.17 |
) |
Total
basic and diluted net income (loss) per Class B share
|
|
$ |
0.08 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
|
|
|
|
|
|
CLASS
A COMMON STOCK
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,331,630 |
|
|
|
24,929,750 |
|
Diluted
|
|
|
26,408,649 |
|
|
|
24,929,750 |
|
CLASS
B COMMON STOCK, basic and diluted
|
|
|
319,388 |
|
|
|
319,388 |
|
See
Notes to Consolidated Financial Statements
|
|
BIMINI
CAPITAL MANAGEMENT, INC.
|
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT
|
|
(Unaudited)
|
|
Three
Months Ended March 31, 2009
|
|
|
|
|
Common
Stock,
Amounts
at par value
|
|
Additional
Paid-in
|
|
Accumulated
|
|
|
|
|
Class
A
|
|
Class
B
|
|
Class
C
|
|
Capital
|
|
Deficit
|
|
Total
|
|
Balances,
December 31, 2008
|
|
$ |
26,207 |
|
|
$ |
319 |
|
|
$ |
319 |
|
|
$ |
339,124,251 |
|
|
$ |
(370,046,104 |
) |
|
$ |
(30,895,008 |
) |
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,157,385 |
|
|
|
2,157,385 |
|
Issuance
of Class A common shares for board compensation and equity plan share
exercises, net
|
|
|
744 |
|
|
|
- |
|
|
|
- |
|
|
|
28,006 |
|
|
|
- |
|
|
|
28,750 |
|
Amortization
of equity plan compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,913 |
|
|
|
- |
|
|
|
11,913 |
|
Balances,
March 31, 2009
|
|
$ |
26,951 |
|
|
$ |
319 |
|
|
$ |
319 |
|
|
$ |
339,164,170 |
|
|
$ |
(367,888,719 |
) |
|
$ |
(28,696,960 |
) |
See
Notes to Consolidated Financial Statements
|
|
BIMINI
CAPITAL MANAGEMENT, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
2,157,385 |
|
|
$ |
(5,104,277 |
) |
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Net
(income) loss from discontinued operations
|
|
|
(235,547 |
) |
|
|
4,333,501 |
|
Stock
compensation
|
|
|
40,663 |
|
|
|
416,502 |
|
Depreciation
and amortization
|
|
|
182,088 |
|
|
|
38,338 |
|
Gain
on sale of mortgage-backed securities, net
|
|
|
(1,136,499 |
) |
|
|
(322,571 |
) |
Fair
value adjustment - held for trading securities
|
|
|
(557,109 |
) |
|
|
(603,081 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease
in accrued interest receivable
|
|
|
203,935 |
|
|
|
1,025,566 |
|
(Increase)
decrease in prepaids and other assets
|
|
|
(813 |
) |
|
|
283,714 |
|
Decrease
in accrued interest payable
|
|
|
(185,043 |
) |
|
|
(1,360,394 |
) |
Decrease
in accounts payable, accrued expenses and other
|
|
|
(201,960 |
) |
|
|
(61,774 |
) |
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
267,100 |
|
|
|
(1,354,476 |
) |
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
From
mortgage-backed securities investments:
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
(30,106,576 |
) |
|
|
(22,199,857 |
) |
Sales
|
|
|
105,476,558 |
|
|
|
158,390,897 |
|
Principal
repayments
|
|
|
7,175,739 |
|
|
|
41,609,037 |
|
Purchases
of property and equipment, and other
|
|
|
(9,205 |
) |
|
|
(8,172 |
) |
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
82,536,516 |
|
|
|
177,791,905 |
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Decrease
in restricted cash
|
|
|
- |
|
|
|
8,800,000 |
|
Proceeds
from repurchase agreements
|
|
|
926,057,181 |
|
|
|
1,516,887,978 |
|
Principal
payments on repurchase agreements
|
|
|
(1,000,016,476 |
) |
|
|
(1,704,048,750 |
) |
Stock
issuance costs, and other adjustments
|
|
|
- |
|
|
|
(943 |
) |
NET
CASH USED IN FINANCING ACTIVITIES
|
|
|
(73,959,295 |
) |
|
|
(178,361,715 |
) |
CASH
FLOWS FROM DISCONTINUED OPERATIONS:
|
|
|
|
|
|
|
|
|
Net
cash provided (used in) by operating activities
|
|
|
5,600,146 |
|
|
|
(228,962 |
) |
Net
cash used in financing activities
|
|
|
- |
|
|
|
(10,000,000 |
) |
NET
CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
|
|
|
5,600,146 |
|
|
|
(10,228,962 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
14,444,467 |
|
|
|
(12,153,248 |
) |
CASH
AND CASH EQUIVALENTS, beginning of the period
|
|
|
7,668,581 |
|
|
|
27,284,760 |
|
CASH
AND CASH EQUIVALENTS, end of the period
|
|
$ |
22,113,048 |
|
|
$ |
15,131,512 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$ |
2,529,427 |
|
|
$ |
11,926,750 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Securities
transferred from available-for-sale to trading (at fair
value)
|
|
$ |
- |
|
|
$ |
296,117,873 |
|
See
Notes to Consolidated Financial Statements
|
|
BIMINI
CAPITAL MANAGEMENT, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March
31, 2009
NOTE
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
Organization
and Business Description
Bimini
Capital Management, Inc., a Maryland corporation (“Bimini Capital”), was
originally formed in September 2003 as Bimini Mortgage Management, Inc. (“Bimini
Mortgage”) for the purpose of creating and managing a leveraged investment
portfolio consisting of residential mortgage-backed securities (“MBS”). Bimini
Capital’s website is located at http://www.biminicapital.com. On February 10,
2006, Bimini Mortgage changed its name to Opteum Inc. (“Opteum”). On September
28, 2007, Opteum changed its name to Bimini Capital Management,
Inc.
On
November 3, 2005, Bimini Capital acquired Opteum Financial Services, LLC
(“OFS”). Upon closing of the transaction, OFS became a wholly-owned taxable REIT
subsidiary of Bimini Capital. This entity, which was previously
referred to as “OFS,” was renamed Orchid Island TRS, LLC (“OITRS”) effective
July 3, 2007. Hereinafter, any historical mention, discussion or
references to Opteum Financial Services, LLC or to OFS (such as in previously
filed documents or Exhibits) now means Orchid Island TRS, LLC or
“OITRS.”
On
December 21, 2006, Bimini Capital sold to Citigroup Global Markets Realty Corp.
(“Citigroup Realty”) a Class B non-voting limited liability company membership
interest in OITRS, representing 7.5% of all of OITRS’s outstanding limited
liability company membership interests, for $4.1 million. On May 27,
2008, Bimini Capital repurchased Citigroup Realty’s interest in OITRS for $0.05
million.
On April 18, 2007, the Board of
Managers of OITRS, at the recommendation of the Board of Directors of
Bimini Capital, approved the closure of OITRS’
wholesale and conduit mortgage loan origination channels in the second quarter
of 2007. Also, during the second and third quarters of 2007,
substantially all of the operating assets of OITRS were
sold. Therefore, all OITRS’s assets are considered as
held for sale, and OITRS is reported as a discontinued operation for all periods
presented following applicable accounting standards. Bimini Capital
now operates in a single business segment.
Bimini
Capital has elected to be taxed as a real estate investment trust (“REIT”) under
the Internal Revenue Code of 1986, as amended (the “Code”). As a
REIT, Bimini Capital is generally not subject to federal income tax on its REIT
taxable income provided that it distributes to its stockholders at least 90% of
its REIT taxable income on an annual basis. OITRS has elected to be
treated as a taxable REIT subsidiary and, as such, is subject to federal, state
and local income taxation. In addition, the ability of OITRS to
deduct interest paid or accrued to Bimini Capital for federal, state and local
tax purposes is subject to certain limitations.
As used
in this document, discussions related to “Bimini Capital,” the parent company,
the registrant, and to real estate investment trust (“REIT”) qualifying
activities or the general management of Bimini Capital’s portfolio of mortgage
backed securities (“MBS”) refer to “Bimini Capital Management,
Inc.” Further, discussions related to Bimini Capital’s taxable REIT
subsidiary or non-REIT eligible assets refer to OITRS and its consolidated
subsidiaries. Discussions relating to the “Company” refer to the consolidated
entity (the combination of Bimini Capital and OITRS). The assets and activities
that are not REIT eligible, such as mortgage origination, acquisition and
servicing activities, were formerly conducted by OITRS and are now reported as
discontinued operations.
Liquidity
Throughout
most of 2008 the financing markets utilized by the Company to fund its MBS
portfolio, as well as the market for MBS securities, were severely distressed.
Moreover, the turmoil that originated in the MBS market spread into many other
financial markets and the global economy as a whole. The disruptions in the
market prompted unprecedented intervention by the new administration of
President Obama, the world’s central banks, the Congress of the United States,
the US Treasury and the Federal Reserve in an effort to restore stability. As a
result of these efforts, market conditions were somewhat less volatile in March
2009, although credit is still tight and it is unknown at this time when and to
what extent market conditions will become more stable. These conditions have and
will continue to impact the Company.
As of
March 31, 2009 the Company had approximately $74.7 million of outstanding
obligations under repurchase agreements with maturities through April 2009.
Subsequent to period-end and through May 8, 2009, the Company has been able
to maintain its repurchase facilities with comparable terms to those that
existed at March 31, 2009 with maturities through May 20,
2009. Should the Company be unable to continue extending the maturity
of the remaining repurchase obligations, it may be forced to sell assets, which
may result in losses upon such sales. Accordingly, the Company has
taken steps to augment its existing leveraged MBS portfolio with an alternative
investment strategy since sufficient repurchase agreement funding is not
available. The Company is currently employing an investment strategy that
utilizes derivative mortgage backed securities collateralized by MBS with
comparable borrower and prepayment characteristics to the securities currently
in the portfolio. Such securities are not funded with repurchase agreements
but instead purchased directly. However, if cash resources are, at
any time, insufficient to satisfy the Company’s liquidity requirements, such as
when cash flow from operations are materially negative, the Company may be
required to pledge additional assets to meet margin calls, liquidate assets,
sell additional debt or equity securities or pursue other financing
alternatives.
As
described more fully in Note 12, on April 21, 2009 the Company completed a debt
exchange with Taberna Capital Management, LLC, the collateral manager of certain
collateralized debt obligations issued in 2005 and collateralized by, among
other securities, the trust preferred capital securities sold by Bimini Capital
Trust I (BCT I) in May of 2005. As a result of this transaction, the
Company’s interest expense associated with its trust preferred securities will
be reduced going forward and, because of the anticipated gain on early
extinguishment of debt of approximately $32 million, the Company’s deficit in
stockholders equity will be reduced or eliminated as of the date of
closing. All asset sales needed to fund the exchange occurred prior
to March 31, 2009, and therefore no further reductions in the Company’s
portfolio of MBS assets are necessary to complete the transaction.
Basis
of Presentation and Use of Estimates
The
accompanying interim financial statements reflect all adjustments, consisting of
normal recurring items that, in the opinion of management, are necessary for a
fair presentation of the Company’s financial position, results of operations,
statement of stockholders’ deficit and cash flows for the periods presented.
These interim financial statements have been prepared in accordance with
disclosure requirements for interim financial information and accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States (“GAAP”) for annual financial
statements. The operating results for the interim period ended March 31, 2009
are not necessarily indicative of results that can be expected for the year
ended December 31, 2009. The consolidated balance sheet as of December 31, 2008
was derived from audited financial statements included in the Company’s 2008
Annual Report on Form 10-K but does not include all disclosures required by
GAAP. The financial statements included as part of this Form 10-Q
should be read in conjunction with the financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2008.
The
preparation of interim financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates affecting the accompanying
financial statements include the fair values of MBS, and certain discontinued
operations related items including the deferred tax asset valuation allowance,
the valuation allowance on mortgage loans held for sale and the valuation of
retained interests.
Consolidation
The
accompanying consolidated financial statements include the accounts of Bimini
Capital and its wholly-owned subsidiary, OITRS, as well as the wholly-owned and
majority-owned subsidiaries of OITRS. OITRS is reported as a
discontinued operation for all periods presented. All inter-company
accounts and transactions have been eliminated from the consolidated financial
statements.
As
further described in Note 5, Bimini Capital has a common share investment in two
trusts used in connection with the issuance of Bimini Capital’s junior
subordinated notes. Pursuant to the accounting guidance provided in
Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46,
Consolidation of Variable
Interest Entities, Bimini Capital’s common share investments in the
trusts are not consolidated in the financial statements of Bimini Capital, and
accordingly, these investments are accounted for on the equity
method.
On March
25, 2009 the Company entered into an agreement with collateral manager of
certain collateralized debt obligations issued in 2005 and collateralized by,
among other securities, the trust preferred capital securities sold by Bimini
Capital Trust I (BCT I). The agreement closed on April 21, 2009 (see
Note 12). Pursuant to the terms of the agreement, the obligations under the
trust preferred capital securities issued by BCT I where discharged and the
securities redeemed. Concurrently, Bimini Capital redeemed its junior
subordinated notes issued to BCT I. Henceforth only one of the common
share investments used in connection with the issuance of Bimini Capital’s
junior subordinated remain.
Statement
of Cash Flows
On
January 1, 2008, the Company elected the fair value option for its
available-for-sale portfolio of mortgage-backed securities. Upon
making this election, the Company elected to classify its cash flow activities
from its trading securities consistent with its intent on holding these
securities.
Condensed
Statement of Comprehensive Income (Loss)
A
condensed statement of comprehensive income (loss) has not been included, per
SFAS No. 130, “Reporting Comprehensive Income,” as the Company has no items of
other comprehensive income (loss). Comprehensive income (loss) is the same
as net income (loss) for all periods presented.
Discontinued
Operations
During
the second quarter of 2007, the Company closed OITRS’s wholesale and conduit
mortgage loan origination channels and sold substantially all of the operating
assets of OITRS. The remaining assets and liabilities are considered to be
contingent and remain pursuant to the terms of disposal of the operations with
the exception of mortgage loans held for sale, security held for sale and
retained interests for which the disposals of such has been delayed as a result
of the current economic climate, however are still being actively marketed by
the Company. Accordingly, all current and prior financial information
related to OITRS and the mortgage banking business has been presented as
discontinued operations in the accompanying consolidated financial statements.
Refer to Note 11 - Discontinued Operations.
Cash
and Cash Equivalents
Cash and
cash equivalents include cash on hand and highly liquid investments with
original maturities of three months or less. The carrying amount of cash
equivalents approximates its fair value as of March 31, 2009 and December 31,
2008.
The
Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$250,000. At March 31, 2009, uninsured deposits were approximately
$20.7 million.
Mortgage-Backed
Securities
The
Company invests primarily in mortgage pass-through certificates, collateralized
mortgage obligations, and interest only securities or inverse interest only
securities representing interest in or obligations backed by pools of mortgage
loans (collectively, “Mortgage-Backed Securities” or “MBS”). MBS
transactions are recorded on the trade date. Realized gains and
losses on sale of MBS are determined based on the specific identified cost of
the security.
The
fair value of the Company’s investments in MBS is governed by Statement of
Financial Accounting Standards (“SFAS”) No. 157, Fair Value
Measurements. The definition of fair value in SFAS No. 157
focuses on the price that would be received to sell the asset or paid to
transfer the liability (i.e., an exit price), rather than the price that would
be paid to acquire the asset or received to assume the liability (i.e., an entry
price). Estimated fair values for MBS are based on the average of
third-party broker quotes received and/or independent pricing sources when
available.
In
accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, the Company classifies its investments in
MBS as either trading, available-for-sale or held-to-maturity. The Company
classified all of its securities acquired prior to June 30, 2007 as
available-for-sale. All securities acquired after June 30, 2007 are
classified as trading. On January 1, 2008, in connection with the
adoption of SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement 115, the Company transferred its remaining available-for-sale
securities to trading and accordingly, recognized a $1.7 million fair value
adjustment. All MBS securities held by Bimini Capital are reflected in the
Company's financial statements at their estimated fair value at March 31,
2009.
The
Company’s investments in mortgage-related derivatives are carried at fair value
on the balance sheet and are included with mortgage-backed securities.Income on
MBS pass through securities classified as held for trading is based on the
stated interest rate of the security. Premiums or discounts present at the date
of purchase are not amortized. For interest only securities
classified as held for trading, the income is accrued based on the carrying
value and the effective yield. As cash is received it is first
applied to accrued interest and then to reduce the carrying value. At
each reporting date, the effective yield is adjusted prospectively from the
reporting period based on the new estimate of prepayments and the contractual
terms of the security. For inverse interest only securities effective
yield and income recognition calculations also take into account the index value
applicable to the security. Changes in fair value during the period
are recorded in earnings and reported as fair value adjustment-held for trading
securities in the accompanying consolidated statement of
operations.
Property
and Equipment, net
Property
and equipment, net, consisting primarily of computer equipment with a
depreciable life of 3 years, office furniture and equipment with a depreciable
life of 8 to 20 years, leasehold improvements with a depreciable life of 15
years, land which has no depreciable life and building with a depreciable life
of 30 years, is recorded at acquisition cost and depreciated using the
straight-line method over the estimated useful lives of the assets.
Bimini
Capital’s property and equipment as of March 31, 2009 and December 31, 2008, is
net of accumulated depreciation of $535,000 and $510,000,
respectively. Depreciation expense for the three months ended March 31, 2009 and
2008 was $25,000 and $38,000, respectively.
Repurchase
Agreements
The
Company finances the acquisition of the majority of its MBS through the use of
repurchase agreements. Repurchase agreements are treated as collateralized
financing transactions and are carried at their contractual amounts, including
accrued interest, as specified in the respective agreements. Although structured
as a sale and repurchase obligation, a repurchase agreement operates as a
financing under which securities are pledged as collateral to secure a
short-term loan equal in value to a specified percentage (generally between 93
and 97 percent) of the market value of the pledged collateral. While used as
collateral, the borrower retains beneficial ownership of the pledged collateral,
including the right to distributions. At the maturity of a repurchase agreement,
the borrower is required to repay the loan and concurrently receive the pledged
collateral from the lender or, with the consent of the lender, renew such
agreement at the then prevailing financing rate.
Stock-Based
Compensation
The
Company follows the provisions of SFAS No. 123(R), Share-Based Payment to
account for stock and stock-based awards. For stock and stock-based awards
issued to employees, a compensation charge is recorded against earnings based on
the fair value of the award. For transactions with non-employees in which
services are performed in exchange for the Company's common stock or other
equity instruments, the transactions are recorded on the basis of the fair value
of the service received or the fair value of the equity instruments issued,
whichever is more readily measurable at the date of issuance. The Company’s
stock-based compensation transactions resulted in an aggregate compensation
expense of approximately $40,000 and $416,000 for the three months ended March
31, 2009 and 2008, respectively.
Earnings
Per Share
The
Company follows the provisions of SFAS No. 128, Earnings per Share, and the
guidance provided in the FASB's Emerging Issues Task Force (“EITF”) Issue No.
03-6, Participating
Securities and the Two-Class Method under FASB Statement No. 128, Earnings
Per Share, which requires companies with complex capital structures,
common stock equivalents or two (or more) classes of securities that participate
in the declared dividends to present both basic and diluted earnings per share
(“EPS”) on the face of the consolidated statement of operations. Basic EPS is
calculated as income available to common stockholders divided by the weighted
average number of common shares outstanding during the period. Diluted EPS is
calculated using the “if converted” method for common stock equivalents.
However, the common stock equivalents are not included in computing diluted EPS
if the result is anti-dilutive.
Outstanding
shares of Class B Common Stock, participating and convertible into Class A
Common Stock, are entitled to receive dividends in an amount equal to the
dividends declared on each share of Class A Common Stock if, as and when
authorized and declared by the Board of Directors. Following the provisions of
EITF 03-6, shares of the Class B Common Stock are included in the computation of
basic EPS using the two-class method and, consequently, are presented separately
from Class A Common Stock.
The
shares of Class C Common Stock are not included in the basic EPS
computation as these shares do not have participation rights. The outstanding
shares of Class C Common Stock, totaling 319,388 shares, are not included
in the computation of diluted EPS for the Class A Common Stock as the conditions
for conversion into shares of Class A Common Stock were not
met.
Income
Taxes
Bimini
Capital has elected to be taxed as a REIT under the Code. As further described
in Note 11, Discontinued Operations, OITRS is a taxpaying entity for income tax
purposes and is taxed separately from Bimini Capital. Bimini Capital will
generally not be subject to federal income tax on its REIT taxable income to the
extent that Bimini Capital distributes its REIT taxable income to its
stockholders and satisfies the ongoing REIT requirements, including meeting
certain asset, income and stock ownership tests. A REIT must generally
distribute at least 90% of its REIT taxable income to its stockholders, of which
85% generally must be distributed within the taxable year, in order to avoid the
imposition of an excise tax. The remaining balance may be distributed up to the
end of the following taxable year, provided the REIT elects to treat such amount
as a prior year distribution and meets certain other requirements. In December
2008, the Internal Revenue Service (IRS) issued Revenue Procedure 2008-68,
providing that the IRS will treat a REIT’s distribution of common stock that is
declared with respect to a taxable year ending on or before December 31, 2009 as
a qualifying dividend for purposes of the 90 percent distribution requirement so
long as it meets certain conditions, including a cash limitation requirement
that is not less than 10% of the entire distribution.
Reclassifications
Certain
prior year amounts have been reclassified to conform to current year
presentations.
Recent
Accounting Pronouncements
In April
2009, the FASB issued Staff Position (FSP) FAS 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly. This
FSP provides additional guidance on determining fair value when the volume and
level of activity for the asset or liability have significantly decreased when
compared with normal market activity for the asset or liability (or similar
assets or liabilities). The FSP gives specific factors to evaluate if
there has been a decrease in normal market activity and if so, provides a
methodology to analyze transactions or quoted prices and make necessary
adjustments to fair value in accordance with Statement 157. The objective is to
determine the point within a range of fair value estimates that is most
representative of fair value under current market conditions. FSP
FAS157-4 is effective for interim and annual reporting periods ending after June
15, 2009 with early adoption permitted for periods ending after March 15,
2009. The Company is currently evaluating the impact of adopting FSP
FAS 157-4 and does not anticipate a material effect.
Additionally,
in conjunction with FSP FAS 157-4, the FASB issued FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other Than Temporary Impairments. The objective
of the new guidance is to make impairment guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments
(OTTI) on debt and equity securities in financial statements. The
guidance revises the OTTI evaluation methodology. Previously the analytical
focus was on whether the company had the "intent and ability to retain its
investment in the debt security for a period of time sufficient to allow for any
anticipated recovery in fair value". Now the focus is on whether the Company has
the (1) the intent to sell the Investment Securities, (2)
it is more likely than not that it will be required to sell the Investment
Securities before recovery, or (3) it does not expect to recover the
entire amortized cost basis of the Investment Securities. Further, the security
is analyzed for credit loss, (the difference between the present value of cash
flows expected to be collected and the amortized cost basis). The credit loss,
if any, will then be recognized in the statement of earnings, while the balance
of impairment related to other factors will be recognized in OCI. FAS 115-2 and
FAS 124-2 are effective for all interim and annual periods ending after June 15,
2009 with early adoption permitted for periods ending after March 15, 2009. The
Company is currently evaluating the impact of adopting FSP FAS 115-2 and FAS
124-2 and does not anticipate a material effect.
In April,
2009, the FASB also issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments. The guidance requires disclosures about
fair value of financial instruments for interim reporting periods as well as in
annual financial statements. The effective date of this
rule/guideline is for interim reporting periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The Company is
currently evaluating the impact of adopting FSP FAS 107-1 and APB 28-1 and does
not anticipate a material effect.
In
December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public entities
(Enterprises) about Transfers of Financial Assets and Interest in Variable
Interest Entities. This FASB Staff Position (FSP) amends FASB Statement
No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, to require public entities to provide additional disclosures
about transfers of financial assets. It also amends FASB Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest
Entities, to require public enterprises, including sponsors that have a
variable interest in a variable interest entity, to provide additional
disclosures about their involvement with variable interest entities.
Additionally, this FSP requires certain disclosures to be provided by a public
enterprise that is (a) a sponsor of a qualifying special purpose entity (SPE)
that holds a variable interest in the qualifying SPE but was not the transferor
(nontransferor) of financial assets to the qualifying SPE and (b) a servicer of
a qualifying SPE that holds a significant variable interest in the qualifying
SPE but was not the transferor (nontransferor) of financial assets to the
qualifying SPE. The disclosures required by this FSP are intended to
provide greater transparency to financial statement users about a transferor’s
continuing involvement with transferred financial assets and an enterprise’s
involvement with variable interest entities and qualifying SPEs. The adoption of
FSP FAS 140-4 and FIN 46(R) -8 did not impact the Company.
In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities. The FSP addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting
and, therefore, need to be included in the earnings allocation in computing
earnings per share (EPS) under the two-class method. The FASB
Emerging Issues Task Force (EITF) in Issue No. 03-6, Participating Securities and the
Two-Class Method under FASB Statement No. 128, previously reached a
consensus that, share-based payment awards containing a right to receive
dividends declared on common stock represent participating securities if such
awards are fully vested. Issue No. 03-6 does not,
however, provide guidance on share-based payment awards that are not fully
vested (i.e., the requisite service for vesting has not yet been rendered). The
FSP has been issued to clarify that unvested instruments
granted in share-based payment transactions containing non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) represent
participating securities that should be included in the computation of EPS
according to the two-class method. The Company has not issued
share-based awards containing non-forfeitable rights to dividends or dividend
equivalents; therefore, the adoption of FSP EITF 03-6-1 on January 1, 2009 did
not have any impact.
In March
2008, the FASB issued statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No. 133
(“SFAS 161”). This statement revises the requirements for the disclosure
of derivative instruments and hedging activities that include the reasons a
company uses derivative instruments, how derivative instruments and related
hedged items are accounted under SFAS 133 and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. The
implementation of this statement did not have a material effect on the financial
statements of the Company.
In
February 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions. The FSP addresses
whether there are circumstances that would permit a transferor and a transferee
to evaluate the accounting for the transfer of a financial asset separately from
a repurchase financing when the counterparties to the two transactions are the
same. The FSP presumes that the initial transfer of a financial asset and a
repurchase financing are considered part of the same arrangement (a linked
transaction) under FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities
(Statement 140). However, if certain criteria specified in the FSP are met, the
initial transfer and repurchase financing may be evaluated separately under
Statement 140. The FSP was effective for the Company on January 1,
2009. The implementation of this FSP did not have a material effect
on the financial statements of the Company.
In
December 2007, the FASB issued statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements (“SFAS 160”), amendment to ARB No.
51. This standard establishes accounting and reporting standards that
require: (1) the
ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent’s equity; (2) the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of income; (3) changes in a parent’s ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently; (4) when a subsidiary is deconsolidated, any
retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value; and (4) entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 is effective as of
the beginning of the fiscal year that begins on or after December 15,
2008. As of March 31, 2009, the Company does not have any
noncontrolling interest in any of its subsidiaries.
NOTE
2. MORTGAGE-BACKED SECURITIES
The
following are the carrying values of Bimini Capital’s MBS portfolio as of March
31, 2009 and December 31, 2008:
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Pass-Through
Certificates:
|
|
|
|
|
|
|
Hybrid
Arms and Balloons
|
|
$ |
14,608 |
|
|
$ |
63,068 |
|
Adjustable
Rate Mortgages
|
|
|
66,010 |
|
|
|
70,632 |
|
Fixed
Rate Mortgages
|
|
|
- |
|
|
|
24,884 |
|
Total
Pass-Through Certificates
|
|
|
80,618 |
|
|
|
158,584 |
|
Mortgage
Derivative Certificates:
|
|
|
|
|
|
|
|
|
MBS
Derivatives
|
|
|
10,786 |
|
|
|
13,524 |
|
Totals
|
|
$ |
91,404 |
|
|
$ |
172,108 |
|
As of
March 31, 2009 all of Bimini Capital's MBS investments have contractual
maturities greater than 36 months. Actual
maturities of MBS investments are generally shorter than stated contractual
maturities. Actual maturities of Bimini Capital's MBS investments are affected
by the contractual lives of the underlying mortgages, periodic payments of
principal, and prepayments of principal.
NOTE
3. EARNINGS PER SHARE
The
Company follows the provisions of SFAS No. 128, Earnings per Share, and the
guidance provided in the FASB's Emerging Issues Task Force (“EITF”) Issue No.
03-6, Participating Securities
and the Two-Class Method under FASB Statement No. 128, Earnings Per
Share, which requires companies with complex capital structures, common
stock equivalents, or two classes of participating securities to present both
basic and diluted EPS on the face of the statement of operations. Basic EPS is
calculated as income available to common stockholders divided by the weighted
average number of common shares outstanding during the period. Diluted EPS is
calculated using the “if converted” method for common stock
equivalents.
Shares of
Class B Common Stock, participating and convertible into Class A
Common Stock, are entitled to receive dividends in an amount equal to the
dividends declared on each share of Class A Common Stock if, and when
authorized and declared by the Board of Directors. Following the provisions of
EITF 03-6, the Class B Common Stock is included in the computation of basic
EPS using the two-class method, and consequently is presented separately from
Class A Common Stock. Class B common shares are not included in the
computation of diluted Class A EPS as the conditions for conversion to
Class A shares were not met.
The
Class C common shares are not included in the basic EPS computation as
these shares do not have participation rights. The Class C common shares
totaling 319,388 are not included in the computation of diluted Class A EPS
as the conditions for conversion to Class A shares were not
met.
The
Company has dividend eligible stock incentive plan shares that were outstanding
during the three months ended March 31, 2009 and 2008. At March 31, 2009, 5,306
of these incentive plan shares are included in the basic per share computations,
as they have dividend participation rights. These stock incentive plan shares
have no contractual obligation to share in losses. Since there is no such
obligation, these incentive plan shares are not included, pursuant to EITF 03-6,
in the three months ended March 31, 2008 basic EPS computations, even though
they are participating securities.
The
Company has also issued stock incentive plan shares that are not dividend
eligible. At March 31, 2009, 67,085 of such plan shares are
outstanding and are included in the diluted per share computations. For the
computation of diluted EPS for the period ended March 31, 2008, 118,942 of these
incentive plan shares were excluded as their inclusion would be
anti-dilutive.
The table
below reconciles the numerators and denominators of the basic and diluted
EPS.
(in
thousands, except per share data)
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Basic
and diluted net income (loss) per Class A common share:
|
|
|
|
|
|
|
Numerator:
net income (loss) allocated to the Class A common shares
|
|
$ |
2,132 |
|
|
$ |
(5,040 |
) |
Denominator:
basic and diluted:
|
|
|
|
|
|
|
|
|
Class
A common shares outstanding at the balance sheet date, plus participating
incentive plan shares
|
|
|
26,956 |
|
|
|
25,013 |
|
Effect
of weighting
|
|
|
(624 |
) |
|
|
(83 |
) |
Weighted
average shares outstanding - basic
|
|
|
26,332 |
|
|
|
24,930 |
|
Effect
of dilutive stock incentive plan shares
|
|
|
77 |
|
|
|
- |
|
Weighted
average shares outstanding – diluted
|
|
|
26,409 |
|
|
|
24,930 |
|
Basic
and diluted net income (loss) per Class A common
share
|
|
$ |
0.08 |
|
|
$ |
(0.20 |
) |
Basic
and diluted net income (loss) per Class B common share:
|
|
|
|
|
|
|
|
|
Numerator:
net income (loss) allocated to Class B common shares
|
|
$ |
25 |
|
|
$ |
(64 |
) |
Denominator:
basic and diluted:
|
|
|
|
|
|
|
|
|
Class
B common shares outstanding at the balance sheet date
|
|
|
319 |
|
|
|
319 |
|
Effect
of weighting
|
|
|
- |
|
|
|
- |
|
Weighted
average shares-basic and diluted
|
|
|
319 |
|
|
|
319 |
|
Basic
and diluted net income (loss) per Class B common share
|
|
$ |
0.08 |
|
|
$ |
(0.20 |
) |
NOTE
4. REPURCHASE AGREEMENTS
As of
March 31, 2009, Bimini Capital had outstanding repurchase obligations of
approximately $74.7 million with a net weighted average borrowing rate of 0.72%
and these agreements were collateralized by MBS with a fair value of
approximately $80.9 million. As of December 31, 2008, Bimini
Capital had outstanding repurchase obligations of approximately $148.7 million
with a net weighted average borrowing rate of 1.89%, and these agreements were
collateralized by MBS with a fair value of approximately $159.1
million.
As of
March 31, 2009 and December 31, 2008, Bimini Capital's repurchase agreements had
remaining maturities of 30 days or less.
The
following summarizes information regarding the Company’s amounts at risk with
individual counterparties greater than 10% of the Company’s equity as of March
31, 2009 and December 31, 2008.
(in
thousands)
Repurchase
Agreement Counterparties
|
|
Amount
at
Risk(1)
|
|
|
Weighted
Average
Maturity
of
Repurchase
Agreements
in
Days
|
|
March
31, 2009
|
|
|
|
|
|
|
MF
Global , Inc.
|
|
$ |
6,185 |
|
|
|
7 |
|
December
31, 2008
|
|
|
|
|
|
|
|
|
MF
Global , Inc.
|
|
|
10,270 |
|
|
|
11 |
|
(1)
|
Equal
to the fair value of securities sold, plus accrued interest income, minus
the sum of repurchase agreement liabilities, plus accrued interest
expense.
|
NOTE
5. TRUST PREFERRED SECURITIES
At March
31, 2009, Bimini Capital sponsored two statutory trusts, of which 100% of the
common equity is owned by the Company, formed for the purpose of issuing trust
preferred capital securities to third-party investors and investing the proceeds
from the sale of such capital securities solely in junior subordinated debt
securities of the Company. The debt securities held by each trust are the sole
assets of that trust. Obligations related to these statutory trusts are
presented below.
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Junior
subordinated notes owed to Bimini Capital Trust I (BCTI)
|
|
$ |
51,550 |
|
|
$ |
51,550 |
|
Junior
subordinated notes owed to Bimini Capital Trust II (BCTII)
|
|
$ |
51,547 |
|
|
$ |
51,547 |
|
The BCTI
trust preferred securities and Bimini Capital's BCTI Junior Subordinated Notes
have a fixed rate of interest until March 30, 2010, in the case of Series A
Preferred Securities, and until April 30, 2010, in the case of Series B
Preferred Securities, of 7.61% and thereafter, through maturity in 2035, the
rate will float at a spread of 3.30% over the prevailing three-month LIBOR
rate. The BCTI trust preferred securities and Bimini Capital's BCTI Junior
Subordinated Notes require quarterly interest distributions and are redeemable
at Bimini Capital's option, in whole or in part and without penalty, beginning
March 30, 2010, in the case of Series A Preferred Securities, and beginning
April 30, 2010, in the case of Series B Preferred Securities and at any date
thereafter. Bimini Capital's BCTI Junior Subordinated Notes are
subordinate and junior in right of payment of all present and future senior
indebtedness.
On March
25, 2009, the Company entered into an agreement with Taberna Capital Management,
LLC (Taberna), the collateral manager of certain collateralized debt obligations
issued in 2005 and collateralized by, among other securities, the trust
preferred capital securities of BCT I. The transaction closed April
21, 2009 (see Note 12). Pursuant to the terms of the agreement, the obligations
under the trust preferred capital securities issued by BCT I where discharged
and the securities redeemed. Concurrently, Bimini Capital redeemed
its junior subordinated notes issued to BCT I.
The BCTII
trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes
have a fixed rate of interest until December 15, 2010, of 7.8575% and
thereafter, through maturity in 2035, the rate will float at a spread of 3.50%
over the prevailing three-month LIBOR rate. The BCTII trust preferred securities
and Bimini Capital's BCTII Junior Subordinated Notes require quarterly interest
distributions and are redeemable at Bimini Capital's option, in whole or in part
and without penalty, beginning December 15, 2010, and at any date thereafter.
Bimini Capital's BCTII Junior Subordinated Notes are subordinate and junior in
right of payment of all present and future senior indebtedness.
Each
trust is a variable interest entity pursuant to FIN No. 46 because the
holders of the equity investment at risk do not have adequate decision making
ability over the trust's activities. Since Bimini Capital's investment in each
trust's common equity securities was financed directly by the applicable trust
as a result of its loan of the proceeds to Bimini Capital, that investment is
not considered to be an equity investment at risk pursuant to FIN No. 46. Since
Bimini Capital's common share investments in BCTI and BCTII are not a variable
interest, Bimini Capital is not the primary beneficiary of the trusts.
Therefore, Bimini Capital has not consolidated the financial statements of BCTI
and BCTII into its financial statements. Based on the aforementioned
accounting guidance, the accompanying consolidated financial statements present
Bimini Capital's BCTI and BCTII Junior Subordinated Notes issued to the trusts
as liabilities and Bimini Capital's investments in the common equity securities
of BCTI and BCTII as assets. For financial statement purposes, Bimini Capital
records payments of interest on the Junior Subordinated Notes issued to BCTI and
BCTII as interest expense.
NOTE
6. CAPITAL STOCK
During
the three months ended March 31, 2009, the Company issued a total of 718,750
shares of Class A Common Stock to its independent directors for the payment of
director fees for services rendered and 25,416 shares of its Class A Common
Stock to employees pursuant to the terms of the stock incentive plan phantom
share grants (see Note 7).
NOTE
7. STOCK INCENTIVE PLANS
On
December 1, 2003, Bimini Capital adopted the 2003 Long Term Incentive
Compensation Plan (the “2003 Plan”) to provide Bimini Capital with the
flexibility to use stock options and other awards as part of an overall
compensation package to provide a means of performance-based compensation to
attract and retain qualified personnel. The 2003 Plan was amended and restated
in March 2004. Key employees, directors and consultants are eligible to be
granted stock options, restricted stock, phantom shares, dividend equivalent
rights and other stock-based awards under the 2003 Plan. Subject to adjustment
upon certain corporate transactions or events, a maximum of 4,000,000 shares of
the Class A Common Stock (but not more than 10% of the Class A Common Stock
outstanding on the date of grant) may be subject to stock options, shares of
restricted stock, phantom shares and dividend equivalent rights under the 2003
Plan.
Phantom
share awards represent a right to receive a share of Bimini's Class A
Common Stock. These awards do not have an exercise
price and are valued at the fair value of Bimini Capital’s Class A Common
Stock at the date of the grant. The grant date value is being amortized to
compensation expense on a straight-line basis over the vesting period of the
respective award. The phantom shares vest, based on the employees’
continuing employment, following a schedule as provided in the grant
agreements, for periods through December 31, 2010. The Company recognizes
compensation expense over the vesting period. Compensation expense recognized
for phantom shares during the three months ended March 31, 2009 and 2008 totaled
approximately, $12,000 and $355,000, respectively. Phantom share awards may
or may not include dividend equivalent rights. Dividends paid on
unsettled phantom shares are charged to retained earnings when
declared.
A summary
of phantom share activity during the three month periods ended March 31, 2009
and 2008 is
presented below:
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant-Date Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant-Date Fair Value
|
|
Nonvested,
at January 1
|
|
|
132,369 |
|
|
$ |
0.58 |
|
|
|
127,372 |
|
|
$ |
11.36 |
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
|
0.26 |
|
Vested
|
|
|
(9,583 |
) |
|
|
0.26 |
|
|
|
(48,334 |
) |
|
|
6.86 |
|
Forfeited
|
|
|
(50,395 |
) |
|
|
0.32 |
|
|
|
(56,762 |
) |
|
|
0.54 |
|
Nonvested,
at March 31
|
|
|
72,391 |
|
|
$ |
0.80 |
|
|
|
272,276 |
|
|
$ |
4.22 |
|
As of
March 31, 2009, there was approximately $47,000 of total unrecognized
compensation cost related to nonvested phantom share awards. This
cost is expected to be recognized over a weighted-average period of 13.2
months. Of the remaining unvested awards at March 31, 2009, 5,306
have dividend participation rights, and 67,085 do not.
Bimini
Capital also has adopted the 2004 Performance Bonus Plan (the “Performance Bonus
Plan”). The Performance Bonus Plan is an annual bonus plan that permits the
issuance of the Company’s Class A Common Stock in payment of stock-based awards
made under the plan. No stock-based awards have been made and no shares of
the Company’s stock have been issued under the Performance Bonus
Plan.
NOTE
8. COMMITMENTS AND CONTINGENCIES
Outstanding
Litigation
The
Company is involved in various lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which monetary damages
and other relief is sought. The resolution of such lawsuits and claims is
inherently unpredictable. In accordance with GAAP, it is the
Company’s policy to accrue for loss contingencies only when it is both probable
that a loss has actually been incurred and an amount of such loss is reasonably
estimable. Except as described below, the lawsuits and claims
involving the Company relate primarily to contractual disputes arising out of
the ordinary course of the Company’s current and past business
activities. See also Note 11(d).
On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against us, certain of our
current and former officers and directors, Flagstone Securities, LLC and
BB&T Capital Markets alleging various violations of the federal securities
laws and seeking class action certification. On October 9, 2007, a
complaint was filed in the U.S. District Court for the Southern District of
Florida by Richard and Linda Coy against us, certain of our current and former
officers and directors, Flagstone Securities, LLC and BB&T Capital Markets
alleging various violations of the federal securities laws and seeking class
action certification. The cases have been consolidated, class
certification has been granted, and lead plaintiffs’ counsel has been
appointed. We filed a motion to dismiss the case on December 22,
2008, and plaintiffs have filed a response in opposition. Our motion
to dismiss is currently pending before the court. We believe the
plaintiffs’ claims in these actions are without merit and we intend to
vigorously defend the cases.
Guarantees
Bimini
Capital guaranteed the performance of OITRS with respect to certain contractual
obligations arising in connection with the sale of mortgage servicing rights by
OITRS. See also Note 11(d). On April 16, 2009, the Company entered into an
agreement with the counterparty to the sale of the mortgage servicing rights
which will terminate this guarantee. Henceforth, Bimini Capital will
have no guarantees in place with respect to OITRS.
NOTE
9. INCOME TAXES
REIT
taxable income (loss), as generated by Bimini Capital’s qualifying REIT
activities, is computed in accordance with the Code, which is different from the
Company’s financial statement net income (loss) as computed in accordance with
GAAP. Depending on the number and size of the various items or transactions
being accounted for differently, the differences between Bimini Capital’s REIT
taxable income (loss) and the Company’s financial statement net income (loss)
can be substantial and each item can affect several years. Bimini’s
REIT taxable loss for the three-months ended March 31, 2009 is estimated to be
$1.4 million.
During
the three months ended March 31, 2009, book gains of approximately $1.1 million
on MBS sales were realized; for tax purposes, the realized gains were
approximately $2.7 million. Since there are tax capital losses
available to offset these gains, the tax gains do not increase REIT taxable
income.
As of
March 31, 2009, the REIT has approximately $69.6 million of remaining tax
capital loss carryforwards available to offset future tax capital gains. As of
March 31, 2009, the REIT has a tax net operating loss carryforward of
approximately $22.5 million that is immediately available to offset future REIT
taxable income. The tax capital loss carryforwards begin to expire in
2012, and the tax net operating loss carryforwards begin to expire in
2027.
During
April 2009, the Company received updated information from the issuers of certain
of its portfolio securities regarding the year 2008 taxation of the cash flows
received from those securities. This new information, along with other tax
reporting adjustments, has resulted in the Company changing its computation of
the net REIT taxable loss for the year ended December 31, 2008. The
Company’s updated REIT taxable loss for the year 2008 is approximately $14.1
million, and the cumulative REIT net operating loss carryover into the year
ending December 31, 2009 is now approximately $21.1 million. These tax
reporting changes have no impact on GAAP earnings.
NOTE
10. FAIR VALUE
The
Company measures or monitors all of its MBS on a fair value basis. Fair value is
the price that would be received to sell an asset or transfer a liability in an
orderly transaction between market participants at the measurement date. When
determining the fair value measurements for its mortgage-backed securities, the
Company considers the principal or most advantageous market in which it would
transact and considers assumptions that market participants would use when
pricing the asset. When possible, the Company looks to active and observable
markets to price identical assets. When identical assets are not
traded in active markets, the Company looks to market observable data for
similar assets. Nevertheless, certain assets are not actively traded in
observable markets and the Company must use alternative valuation techniques to
derive a fair value measurement.
All of
the fair value adjustments included in income (losses) from continuing
operations resulted from Level 2 fair value methodologies; that is, the Company
is able to value the assets based on observable market data for similar
instruments. The securities in the Company’s trading portfolio are priced via
independent providers, whether those are pricing services or quotations from
market-makers in the specific instruments. In obtaining such valuation
information from third parties, the Company has evaluated the valuation
methodologies used to develop the fair values in order to determine whether such
valuations are representative of an exit price in the Company’s principal
markets.
Fair
value is used to measure the trading portfolio on a recurring
basis. The fair value as of March 31, 2009 is determined as
follows:
(in
thousands)
Fair
Value Measurements as of March 31, 2009, Using
|
|
Quoted
Prices in Active Markets for Identical Assets (Level 1)
|
|
$ |
- |
|
Significant
Other Observable Inputs (Level 2)
|
|
|
91,404 |
|
Significant
Unobservable Inputs (Level 3)
|
|
|
- |
|
Total
Fair Value Measurements
|
|
$ |
91,404 |
|
NOTE
11. DISCONTINUED OPERATIONS
OITRS
The
results of discontinued operations of OITRS included in the accompanying
consolidated statements of operations for the three months ended March 31, 2009
and 2008 were as follows:
(in
thousands)
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
Interest
income
|
|
$ |
63 |
|
|
$ |
1 |
|
Interest
expense
|
|
|
- |
|
|
|
(5 |
) |
Net
interest income (deficiency)
|
|
|
63 |
|
|
|
(4 |
) |
Income
(loss) on discontinued mortgage banking activities
|
|
|
|
|
|
|
|
|
Fair
value adjustment on retained interest, trading
|
|
|
1,274 |
|
|
|
(2,120 |
) |
Other
discontinued mortgage banking activities
|
|
|
491 |
|
|
|
59 |
|
Other
income and expenses, net of non-recurring items
|
|
|
75 |
|
|
|
246 |
|
Net
servicing loss
|
|
|
(204 |
) |
|
|
175 |
|
Other
interest expense and loss reserves
|
|
|
(468 |
) |
|
|
(1,185 |
) |
Net
revenues (deficiency of revenues)
|
|
|
1,231 |
|
|
|
(2,829 |
) |
Expenses
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
995 |
|
|
|
1,505 |
|
Income
(loss) from discontinued operations, net of taxes
|
|
$ |
236 |
|
|
$ |
(4,334 |
) |
The
assets and liabilities of OITRS included in the consolidated balance sheets as
of March 31, 2009 and December 31, 2008 were as follows:
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
136 |
|
|
$ |
35 |
|
Mortgage
loans held for sale (a)
|
|
|
409 |
|
|
|
464 |
|
Retained
interests, trading (b)
|
|
|
14,554 |
|
|
|
15,601 |
|
Security
held for sale
|
|
|
480 |
|
|
|
15 |
|
Receivables
|
|
|
16,836 |
|
|
|
23,792 |
|
Prepaids
and other assets
|
|
|
3,183 |
|
|
|
3,380 |
|
Assets
held for sale
|
|
$ |
35,598 |
|
|
$ |
43,287 |
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable, accrued expenses and other (d)
|
|
|
8,107 |
|
|
|
10,431 |
|
Liabilities
related to assets held for sale
|
|
$ |
8,107 |
|
|
$ |
10,431 |
|
(a)
- Mortgage Loans Held for Sale
Mortgage
loans held for sale consist of the following as of March 31, 2009 and December
31, 2008:
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Mortgage
loans held for sale, and other, net
|
|
$ |
2,871 |
|
|
$ |
3,022 |
|
Valuation
allowance
|
|
|
(2,462 |
) |
|
|
(2,558 |
) |
Total
|
|
$ |
409 |
|
|
$ |
464 |
|
(b)
– Retained interest, trading
The
following table summarizes OITRS’s residual interests in securitizations as of
March 31, 2009 and December 31, 2008:
(in
thousands)
Series
|
Issue
Date
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
HMAC
2004-1
|
March
4, 2004
|
|
$ |
2,191 |
|
|
$ |
2,441 |
|
HMAC
2004-2
|
May
10, 2004
|
|
|
3,307 |
|
|
|
2,735 |
|
HMAC
2004-3
|
June
30, 2004
|
|
|
3,116 |
|
|
|
1,281 |
|
HMAC
2004-4
|
August
16, 2004
|
|
|
2,609 |
|
|
|
1,867 |
|
HMAC
2004-5
|
September
28, 2004
|
|
|
2,152 |
|
|
|
3,080 |
|
HMAC
2004-6
|
November
17, 2004
|
|
|
395 |
|
|
|
1,846 |
|
OMAC
2005-1
|
January
31, 2005
|
|
|
312 |
|
|
|
999 |
|
OMAC
2005-2
|
April
5, 2005
|
|
|
14 |
|
|
|
169 |
|
OMAC
2005-3
|
June
17, 2005
|
|
|
458 |
|
|
|
1,181 |
|
OMAC
2005-4
|
August
25, 2005
|
|
|
- |
|
|
|
2 |
|
OMAC
2005-5
|
November
23, 2005
|
|
|
- |
|
|
|
- |
|
OMAC
2006-1
|
March
23, 2006
|
|
|
- |
|
|
|
- |
|
OMAC
2006-2
|
June
26, 2006
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
$ |
14,554 |
|
|
$ |
15,601 |
|
As of
March 31, 2009 and December 31, 2008, key economic assumptions and the
sensitivity of the current fair value of residual cash flows to the immediate
10% and 20% adverse change in those assumptions are as follows:
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Balance
sheet carrying value of retained interests – fair value
|
|
$ |
14,554 |
|
|
$ |
15,601 |
|
Weighted
average life (in years)
|
|
|
12.83 |
|
|
|
14.76 |
|
Prepayment
assumption (annual rate)
|
|
|
14.22 |
% |
|
|
19.36 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,337 |
) |
|
$ |
(1,838 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(2,035 |
) |
|
$ |
(3,086 |
) |
Expected
credit losses (% of original unpaid principal balance)
|
|
|
6.37 |
% |
|
|
5.61 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,900 |
) |
|
$ |
(2,841 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(3,544 |
) |
|
$ |
(6,095 |
) |
Residual
cash-flow discount rate
|
|
|
27.50 |
% |
|
|
27.50 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,152 |
) |
|
$ |
(1,540 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(2,134 |
) |
|
$ |
(2,838 |
) |
Interest
rates on variable and adjustable loans and bonds
|
|
Forward
LIBOR Yield Curve
|
|
|
Forward
LIBOR Yield Curve
|
|
Impact
on fair value of 10% adverse change
|
|
$ |
(2,105 |
) |
|
$ |
(2,692 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(3,426 |
) |
|
$ |
(5,067 |
) |
These
sensitivities are hypothetical and should be used with caution. As the figures
indicate, changes in fair value based upon a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also, in this table,
the effect of the variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption; in
reality, changes in one factor may result in changes in another which may
magnify or counteract the sensitivities. To estimate the impact of a 10% and 20%
adverse change of the Forward LIBOR curve, a parallel shift in the Forward LIBOR
curve was assumed based on the Forward LIBOR curve as of March 31, 2009 and
December 31, 2008.
Credit
loss percentages are calculated by using the original unpaid principal balance
of each pool of assets as the denominator. The following credit loss percentages
are calculated based upon all OITRS securitizations that have been completed to
date:
(in
thousands)
Series
|
Issue
Date
|
|
Original
Unpaid Principal Balance
|
|
|
Actual
Losses Through March 31, 2009
|
|
|
Projected
Future Credit Losses as of March 31, 2009
|
|
|
Projected
Total Credit Losses as of March 31, 2009
|
|
HMAC
2004-1
|
March
4, 2004
|
|
$ |
309,710 |
|
|
|
0.68 |
% |
|
|
0.67 |
% |
|
|
1.35 |
% |
HMAC
2004-2
|
May
10, 2004
|
|
|
388,737 |
|
|
|
0.97 |
% |
|
|
0.85 |
% |
|
|
1.82 |
% |
HMAC
2004-3
|
June
30, 2004
|
|
|
417,055 |
|
|
|
0.70 |
% |
|
|
1.21 |
% |
|
|
1.91 |
% |
HMAC
2004-4
|
August
16, 2004
|
|
|
410,123 |
|
|
|
0.73 |
% |
|
|
0.76 |
% |
|
|
1.49 |
% |
HMAC
2004-5
|
September
28, 2004
|
|
|
413,875 |
|
|
|
0.94 |
% |
|
|
1.36 |
% |
|
|
2.30 |
% |
HMAC
2004-6
|
November
17, 2004
|
|
|
761,027 |
|
|
|
1.22 |
% |
|
|
2.27 |
% |
|
|
3.49 |
% |
OMAC
2005-1
|
January
31, 2005
|
|
|
802,625 |
|
|
|
1.50 |
% |
|
|
2.34 |
% |
|
|
3.84 |
% |
OMAC
2005-2
|
April
5, 2005
|
|
|
883,987 |
|
|
|
1.68 |
% |
|
|
2.75 |
% |
|
|
4.43 |
% |
OMAC
2005-3
|
June
17, 2005
|
|
|
937,117 |
|
|
|
1.54 |
% |
|
|
3.81 |
% |
|
|
5.35 |
% |
OMAC
2005-4
|
August
25, 2005
|
|
|
1,321,739 |
|
|
|
2.46 |
% |
|
|
5.01 |
% |
|
|
7.47 |
% |
OMAC
2005-5
|
November
23, 2005
|
|
|
986,277 |
|
|
|
3.11 |
% |
|
|
6.93 |
% |
|
|
10.04 |
% |
OMAC
2006-1
|
March
23, 2006
|
|
|
934,441 |
|
|
|
2.84 |
% |
|
|
8.20 |
% |
|
|
11.04 |
% |
OMAC
2006-2
|
June
26, 2006
|
|
|
491,572 |
|
|
|
4.97 |
% |
|
|
14.28 |
% |
|
|
19.25 |
% |
Total
|
|
|
$ |
9,058,285 |
|
|
|
1.99 |
% |
|
|
4.38 |
% |
|
|
6.37 |
% |
The table
below summarizes certain cash flows received from and paid to securitization
trusts:
(in
thousands)
|
|
Three
months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Net
servicing fees (paid) received
|
|
$ |
(1 |
) |
|
$ |
467 |
|
Servicing
advances and repayments
|
|
|
4,346 |
|
|
|
(2,344 |
) |
Cash
flows received on retained interests
|
|
|
2,321 |
|
|
|
3,392 |
|
The
following information presents quantitative information about delinquencies and
credit losses on securitized financial assets as of March 31, 2009 and December
31, 2008:
(in
thousands)
As
of Date
|
|
Total
Principal Amount of Loans
|
|
|
Principal
Amount of Loans 60 Days or more delinquent
|
|
|
Net
Credit Losses
|
|
March
31, 2009
|
|
$ |
3,774,621 |
|
|
$ |
818,440 |
|
|
$ |
180,410 |
|
December
31, 2008
|
|
|
3,920,433 |
|
|
|
728,884 |
|
|
|
129,715 |
|
OITRS is
a taxpaying entity for income tax purposes and is taxed separately from Bimini
Capital. Therefore, OITRS separately reports an income tax provision or
benefit based on its own taxable activities. As of March 31, 2009 and
December 31, 2008, all deferred tax assets are fully provided for with a
valuation allowance. Substantially all of the deferred tax assets are a
result of net tax losses incurred. The deferred tax assets and
offsetting valuation allowances at March 31, 2009 and December 31, 2008 were
approximately $103.3 million and $103.4 million, respectively. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income within OITRS. At March 31, 2009, management believed
that it was more likely than not that the Company will not realize the full
benefits of all deferred tax assets of OITRS; therefore, an allowance
for the full amount of the deferred tax assets has been
recorded. OITRS has abandoned the tax NOLs in the states where
operations have ceased, and those deferred tax assets have been
written-off.
During
the three months ended March 31, 2009, approximately $52,000 of the deferred tax
asset valuation allowance was reversed, as the utilization of this portion of
the deferred tax asset was deemed more likely than not, due to the utilization
of tax net operating losses to offset taxable income; therefore, the
tax provision is zero. For the three month period ended March 31,
2008, the amount of the gross tax benefit generated by the losses incurred in
this period are reduced by an offsetting valuation allowance of the same amount;
therefore, the tax benefit is zero. The income tax provision or
benefit for the periods ended March 31, 2009 and 2008 differ from the amount
determined by applying the statutory Federal rate of 35% to the pre-tax income
or loss due primarily to the recording of, and adjustments to, the deferred tax
asset valuation allowances.
During
2008, OITRS re-evaluated a previous tax position with regards to the taxability
of excess inclusion income (“EII”). OITRS holds residual interests in
various real estate mortgage investment conduits (“REMICs”), some of which
generate EII pursuant to specific provisions of the Code. OITRS based
its previously-held tax position on advice received from tax consultants
regarding the taxability of EII, including the aggregation (or non-aggregation)
of the tax inputs from all REMICs owned for purposes of the EII tax
computation. As a result of the re-evaluation of the tax position,
which included consulting with additional tax experts, OITRS now believes that
it is no longer more likely than not that the tax position would be fully
sustained upon examination, even though the exact computational methods and the
ultimate EII tax due (if any) are still uncertain. Therefore,
pursuant to the provisions of accounting standard FIN 48, “Accounting for
Uncertainty in Income Taxes,” OITRS recorded in 2008 a tax provision for $1.5
million for taxes that may be due on EII. Interest through March 31,
2009 has been accrued in the amount of $0.4 million. OITRS is
continuing to research all the tax issues relating to EII and its ownership of
the REMICs, and will adjust the tax and interest accrual in future periods as
the uncertainly is resolved.
As of
March 31, 2009, OITRS has an estimated federal tax net operating loss
carryforward of approximately $269.3 million, and estimated available state tax
NOLs of $67.7 million, which begin to expire in 2025, and are fully available to
offset future taxable income.
(d)
– Commitments and Contingencies
Loans Sold to Investors.
Generally, OITRS is not exposed to significant credit risk on its loans sold to
investors. In the normal course of business, OITRS provided certain
representations and warranties during the sale of mortgage loans which obligated
it to repurchase loans which are subsequently unable to be sold through the
normal investor channels. The repurchased loans are secured by the related real
estate properties, and can usually be sold directly to other permanent
investors. There can be no assurance, however, that OITRS will be able to
recover the repurchased loan value either through other investor channels or
through the assumption of the secured real estate.
OITRS
recognizes a liability for the estimated fair value of this obligation at the
inception of each mortgage loan sale based on the anticipated repurchase levels
and historical experience. The liability is recorded as a reduction of the gain
on sale of mortgage loans and included as part of other liabilities in the
accompanying financial statements.
Changes
in this liability for the three months ended March 31, 2009 and 2008 are
presented below:
(in thousands)
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Balance—Beginning
of period
|
|
$ |
7,303 |
|
|
$ |
6,960 |
|
Provision
|
|
|
468 |
|
|
|
1,000 |
|
Settlements
|
|
|
(2,622 |
) |
|
|
- |
|
Balance—End
of period
|
|
$ |
5,149 |
|
|
$ |
7,960 |
|
Litigation Contingencies.
OITRS is involved in various lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which monetary damages
and other relief is sought. The resolution of such lawsuits and claims is
inherently unpredictable. In accordance with GAAP, it is the policy
of OITRS to accrue for loss contingencies only when it is both probable that a
loss has actually been incurred and an amount of such loss is reasonably
estimable. The lawsuits and claims involving OITRS, the most
significant of which are described below, relate primarily to contractual
disputes arising out of the ordinary course of OITRS's business as previously
conducted.
On June
14, 2007, a complaint was filed in the Circuit Court of the Twelfth Judicial
District in and for Manatee County, Florida by Coast Bank of Florida against
OITRS seeking monetary damages and specific performance and alleging breach of
contract for allegedly failing to repurchase approximately fifty loans. On
September 5, 2007, OITRS filed a motion to dismiss Coast’s complaint based on
the Florida Banking Statute of Frauds. On February 25, 2008, the Court
denied OITRS’s motion to dismiss, but the court subsequently
clarified that the motion was denied because the Court needs
additional facts in order to determine whether Coast’s claims are barred
under the Florida Banking Statute of Frauds. As a
result, the parties conducted limited discovery relating to the Statute of
Frauds and OITRS filed a motion for summary judgment in November, 2008;
however, that motion was never ruled on because on February 3, 2009, Coast
filed a motion for leave to amend its complaint. The Court ruled in favor
of Coast on March 16, 2009 and OITRS was given 20 days, subsequently extended by
three additional weeks, to answer the amended complaint. On May 4, 2009,
OITRS filed a response to the amended complaint. The amended
complaint differs from the original complaint in that it raises new facts and
changes the nature of the claims. We believe the plaintiff’s claims in
this matter are without merit and we intend to vigorously defend this
case.
On July
2, 2008, an amended complaint was filed in the Superior Court of the State of
California for the County of Los Angeles, Central District by IndyMac Bank,
F.S.B. against OITRS and others seeking monetary damages and specific
performance and alleging, among other allegations, breach of contract for
allegedly failing to repurchase thirty-six loans. On August 18,
2008, the Court entered an order substituting the Federal Deposit Insurance
Corporation as conservator for IndyMac Federal Bank, F.S.B., in the place of
IndyMac Bank, F.S.B. On January 16, 2009, the Court entered an order
dismissing the amended complaint with prejudice pursuant to a stipulation of
dismissal that was entered into among the parties to the case. As a result
of the Court’s order of dismissal, this proceeding is now concluded. No
amounts were paid by OITRS in connection with the execution of the stipulation
of dismissal or the Court’s order of dismissal.
(e)
– Fair Value
OITRS
measures or monitors many of its assets on a fair value basis. Fair value is
used on a recurring basis for certain assets in which fair value is the primary
basis of accounting. Examples of these include, loans held for sale, retained
interests, trading and security held for sale. Depending on the nature of the
asset or liability, OITRS uses various valuation techniques and assumptions when
estimating the instrument’s fair value. These valuation techniques and
assumptions are in accordance with SFAS No. 157.
Fair
value is the price that would be received to sell an asset or transfer a
liability in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements for assets and
liabilities required or permitted to be recorded at and/or marked to fair value,
OITRS considers the principal or most advantageous market in which it would
transact and considers assumptions that market participants would use when
pricing the asset or liability. When possible, OITRS looks to active and
observable markets to price identical assets or liabilities. When identical
assets and liabilities are not traded in active markets, OITRS looks to market
observable data for similar assets and liabilities. Nevertheless, certain assets
and liabilities are not actively traded in observable markets and OITRS must use
alternative valuation techniques to derive a fair value
measurement.
The
following table presents financial assets measured at fair value on a recurring
basis:
(in
thousands)
|
|
|
|
|
Fair
Value Measurements at March 31, 2009, Using
|
|
|
|
Fair
Value Measurements
March
31, 2009
|
|
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Mortgage
loans held for sale
|
|
$ |
409 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
409 |
|
Retained
interests, trading
|
|
|
14,554 |
|
|
|
- |
|
|
|
- |
|
|
|
14,554 |
|
Security
held for sale
|
|
|
480 |
|
|
|
- |
|
|
|
- |
|
|
|
480 |
|
A
reconciliation of activity for the three months ended March 31, 2009 for assets
measured at fair value based on significant unobservable (non-market)
information (Level 3) is presented in the following table:
(in
thousands)
|
|
Mortgage
Loans Held for Sale
|
|
|
Retained
Interests, Trading
|
|
|
Securities
Held for Sale
|
|
Beginning
balance
|
|
$ |
464 |
|
|
$ |
15,601 |
|
|
$ |
15 |
|
Gains
included in earnings
|
|
|
26 |
|
|
|
1,274 |
|
|
|
465 |
|
Sales
and collections
|
|
|
(81 |
) |
|
|
(2,321 |
) |
|
|
- |
|
Ending
Balance
|
|
$ |
409 |
|
|
$ |
14,554 |
|
|
$ |
480 |
|
Gains and
losses included in earnings for the three months ended March 31, 2009 are
reported in income on discontinued mortgage banking activities.
NOTE 12. SUBSEQUENT
EVENT
On March
25, 2009, the Company entered into an agreement with Taberna Capital Management,
LLC (Taberna), the collateral manager of certain collateralized debt obligations
issued in 2005 and collateralized by, among other securities, the trust
preferred capital securities sold by Bimini Capital Trust I (BCT I) in May of
2005 (see Note 5). The transaction was finalized on April 21, 2009.
Pursuant to the terms of the agreement, the obligations under the trust
preferred capital securities issued by BCT I were discharged and the securities
redeemed. Concurrently, Bimini Capital redeemed $50 million of its
junior subordinated notes issued to BCT I and recognized a gain of approximately
$32 million on the early extinguishment of this debt. The Company’s
pro forma balance sheet as of March 31, 2009 giving effect to the transaction as
if it had occurred on that date is presented in the table below.
(in
thousands)
Pro
Forma Balance Sheet, as of March 31, 2009 (Unaudited)
|
|
Assets
|
|
|
|
Total
assets
|
|
$ |
138,344 |
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
Junior
subordinated notes
|
|
$ |
51,547 |
|
Other
Liabilities
|
|
|
83.298 |
|
Total
liabilities
|
|
|
134,845 |
|
Total
stockholders’ equity
|
|
|
3,499 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
138,344 |
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
FORWARD-LOOKING
STATEMENTS
When used
in this Quarterly Report on Form 10-Q, in future filings with the
Securities and Exchange Commission (the “Commission”) or in press releases or
other written or oral communications, statements which are not historical in
nature, including those containing words such as “anticipate,” “estimate,”
“should,” “expect,” “believe,” “intend” and similar expressions, are intended to
identify “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).
These
forward-looking statements are subject to various risks and uncertainties,
including, but not limited to, those described or incorporated by reference in
Part II - Item 1A - Risk Factors of this Form 10-Q. These and other risks,
uncertainties and factors, including those described in reports that the Company
files from time to time with the Commission, could cause the Company’s actual
results to differ materially from those reflected in such forward-looking
statements. All forward-looking statements speak only as of the date they are
made and the Company does not undertake, and specifically disclaims, any
obligation to update or revise any forward-looking statements to reflect events
or circumstances occurring after the date of such statements.
The
following discussion of the financial condition and results of operations should
be read in conjunction with the Company’s consolidated financial statements and
related notes included elsewhere in this report.
Introduction
As used
in this document, references to “Bimini Capital,” the parent company, the
registrant, and to real estate investment trust (“REIT”) qualifying activities
or the general management of Bimini Capital’s portfolio of mortgage backed
securities (“MBS”) refer to “Bimini Capital Management,
Inc.” Further, references to Bimini Capital’s taxable REIT subsidiary
or non-REIT eligible assets refer to Orchid Island TRS, LLC and its consolidated
subsidiaries. This entity, which was previously named Opteum Financial Services,
LLC, and referred to as “OFS,” was renamed Orchid Island TRS, LLC effective July
3, 2007. Hereinafter, any historical mention, discussion or
references to Opteum Financial Services, LLC or to OFS (such as in previously
filed documents or Exhibits) now means Orchid Island TRS, LLC or
“OITRS.” References to the “Company” refer to the consolidated entity
(the combination of Bimini Capital and OITRS).
Bimini
Capital Management, Inc., formerly Opteum Inc. and Bimini Mortgage Management,
Inc., was formed in September 2003 to invest primarily in but not limited to,
residential mortgage related securities issued by the Federal National Mortgage
Association (more commonly known as Fannie Mae), the Federal Home Loan Mortgage
Corporation (more commonly known as Freddie Mac) and the Government National
Mortgage Association (more commonly known as Ginnie Mae). Bimini Capital
attempts to earn a return on the spread between the yield on its assets and its
costs, including the interest expense on the funds it borrows. It generally,
when market conditions are not under severe stress as they are currently,
intends to borrow between eight and twelve times the amount of its equity
capital in an attempt to enhance its returns to stockholders. This leverage may
be adjusted above or below this range to the extent management or the Company’s
Board of Directors deems necessary or appropriate. For purposes of
this calculation, Bimini Capital treats its junior subordinated notes as an
equity capital equivalent. Bimini Capital is self-managed and self-advised and
has elected to be taxed as a REIT for U.S. federal income tax
purposes.
On April
18, 2007, the Board of Managers of OITRS, at the recommendation of the Board of
Directors of the Company, approved the closure of the wholesale and conduit
mortgage loan origination channels. Both channels ceased accepting
new applications for mortgage loans on April 20, 2007. On May 7,
2007, OITRS signed a binding agreement to sell its retail mortgage loan
origination channel to a third party as well. On June 30, 2007, OITRS
entered into an amendment to this agreement. The proceeds of the
transactions were approximately $1.5 million plus the
assumption of certain liabilities of OITRS. The transaction, coupled
with the disposal of the conduit and wholesale origination channels, resulted in
a loss of approximately $10.5 million. Going forward, OITRS will not
operate a mortgage loan origination business and the results of the mortgage
origination business are reported as discontinued operations.
DIVIDENDS
TO STOCKHOLDERS
In order
to maintain its qualification as a REIT, Bimini Capital is required (among other
provisions) to annually distribute dividends to its stockholders in an amount at
least equal to, generally, 90% of Bimini Capital’s REIT taxable income. REIT
taxable income is a term that describes Bimini Capital’s operating results
calculated in accordance with rules and regulations promulgated pursuant to the
Internal Revenue Code. In December 2008, the Internal Revenue Service (IRS)
issued Revenue Procedure 2008-68, providing that the IRS will treat a REIT’s
distribution of common stock that is declared with respect to a taxable year
ending on or before December 31, 2009 as a qualifying dividend for purposes of
the 90 percent distribution requirement so long as it meets certain conditions,
including a cash limitation requirement that is not less than 10% of the entire
distribution.
Bimini
Capital’s REIT taxable income is computed differently from net income as
computed in accordance with generally accepted accounting principles ("GAAP net
income"), as reported in the Company’s accompanying consolidated financial
statements. Depending on the number and size of the various items or
transactions being accounted for differently, the differences between REIT
taxable income and GAAP net income can be substantial and each item can affect
several reporting periods. Generally, these items are timing or temporary
differences between years; for example, an item that may be a deduction for GAAP
net income in the current year may not be a deduction for REIT taxable income
until a later year. The most significant difference is that the
results of the Company’s taxable REIT subsidiary do not impact REIT taxable
income.
As a
REIT, Bimini Capital may be subject to a federal excise tax if Bimini Capital
distributes less than 85% of its taxable income by the end of the calendar
year. Accordingly, Bimini Capital’s dividends are based on its
taxable income, as determined for federal income tax purposes, as opposed to its
net income computed in accordance with GAAP (as reported in the accompanying
consolidated financial statements).
Results
of Operations
PERFORMANCE
OVERVIEW
Described
below are the Company’s results of operations for the three months ended March
31, 2009, as compared to the Company’s results of operations for the three
months ended March 31, 2008. During the year ended December 31, 2007, the
Company ceased all mortgage origination business at OITRS. As stated above,
results of those operations are reported in the financial statements as
discontinued operations.
Consolidated
net income for the three months ended March 31, 2009 was $2.2 compared to a
consolidated net loss of $5.1 for the three
months ended March 31, 2008. Consolidated net income per basic and diluted share
of Class A Common Stock was $0.08, respectively, for the three months ended
March 31, 2009, compared to a consolidated net loss per basic and diluted share
of Class A Common Stock of $0.20, respectively, for the comparable prior
period.
PERFORMANCE OF BIMINI
CAPITAL’S MBS PORTFOLIO
For the
three months ended March 31, 2009, Bimini Capital generated $3.67 million of
interest income from MBS assets and $0.25 million of interest expense on repo
liabilities, resulting in gross portfolio interest income of
$3.42. In addition, for the three months ended March 31, 2009, Bimini
Capital incurred $2.1 million of interest expense on the junior subordinated
notes resulting in net interest income of $1.3 million. Gross
portfolio interest income for the three months ended March 31, 2009 decreased by
approximately $6.4 million from the same period in 2008. The decrease
is due to the substantially smaller portfolio offset to some extent by higher
net interest margin available in the market in 2009. The results for the three
months ended March 31, 2009, were also positively impacted by the Company’s
implementation of its alternative investment strategy which employed interest
only (IO) and inverse interest only (IIO) securities. Such securities
benefited from lower levels of one month LIBOR and slower
repayments.
For the
three months ended March 31, 2009, Bimini Capital’s general and administrative
costs were approximately $0.95 million, compared to approximately $1.90 million
for the three months ended March 31, 2008. Compensation and related benefits
where approximately $0.53 million lower for the three months ended March 31,
2009, than for the same period in 2008.
Bimini
Capital had $1.14 million in realized gains from the sales of securities in the
MBS portfolio during the three months ended March 31, 2009, compared to gains of
$0.32 million for the three months ended March 31, 2008.
For the
three months ended March 31, 2009, Bimini Capital had income from continuing
operations of $1.92 million.
As of
March 31, 2009, the MBS portfolio consisted of $91.4 million of agency or
government MBS at fair value and had a weighted average coupon on assets of
4.81% and a net weighted average borrowing cost of 0.72%. The
following tables summarize Bimini Capital’s agency and government mortgage
related securities as of March 31, 2009 and December 31, 2008:
(in
thousands)
Asset
Category
|
|
Fair
Value
|
|
|
Percentage
of
Entire
Portfolio
|
|
|
Weighted
Average
Coupon
|
|
|
Weighted
Average
Maturity
in
Months
|
|
Longest
Maturity
|
|
Weighted
Average
Coupon
Reset
in Months
|
|
|
Weighted
Average
Lifetime
Cap
|
|
|
Weighted
Average
Periodic
Cap
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable-Rate
MBS
|
|
$ |
66,010 |
|
|
|
72.22 |
% |
|
|
4.48 |
% |
|
|
278 |
|
1-Nov-35
|
|
|
4.65 |
|
|
|
10.47 |
% |
|
|
7.16 |
% |
Hybrid
Adjustable-Rate MBS
|
|
|
14,608 |
|
|
|
15.98 |
% |
|
|
6.04 |
% |
|
|
340 |
|
1-Aug-37
|
|
|
40.03 |
|
|
|
11.06 |
% |
|
|
2.00 |
% |
Total
Mortgage Backed Pass Through
|
|
|
80,618 |
|
|
|
88.20 |
% |
|
|
4.81 |
% |
|
|
293 |
|
1-Aug-37
|
|
|
11.07 |
|
|
|
10.57 |
% |
|
|
6.09 |
% |
Derivative
MBS
|
|
|
10,786 |
|
|
|
11.80 |
% |
|
|
5.17 |
% |
|
|
323 |
|
25-Jan-38
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Total
Mortgage Assets
|
|
$ |
91,404 |
|
|
|
100.00 |
% |
|
|
4.81 |
% |
|
|
293 |
|
25-Jan-38
|
|
|
11.07 |
|
|
|
n/a |
|
|
|
6.09 |
% |
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable-Rate
MBS
|
|
$ |
70,632 |
|
|
|
41.0 |
% |
|
|
4.79 |
% |
|
|
276 |
|
1-Jan-36
|
|
|
7.76 |
|
|
|
10.37 |
% |
|
|
10.11 |
% |
Fixed-Rate
MBS
|
|
|
24,884 |
|
|
|
14.5 |
% |
|
|
6.50 |
% |
|
|
356 |
|
1-Sep-38
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Hybrid
Adjustable-Rate MBS
|
|
|
63,068 |
|
|
|
36.6 |
% |
|
|
5.03 |
% |
|
|
335 |
|
1-Apr-38
|
|
|
49.65 |
|
|
|
10.03 |
% |
|
|
2.00 |
% |
Total
Mortgage Backed Pass Through
|
|
|
158,584 |
|
|
|
92.1 |
% |
|
|
5.15 |
% |
|
|
312 |
|
1-Sep-38
|
|
|
27.52 |
|
|
|
10.21 |
% |
|
|
5.13 |
% |
Derivative
MBS
|
|
|
13,524 |
|
|
|
7.9 |
% |
|
|
5.64 |
% |
|
|
348 |
|
25-Jan-38
|
|
|
0.34 |
|
|
|
n/a |
|
|
|
n/a |
|
Total
Mortgage Assets
|
|
$ |
172,108 |
|
|
|
100.0 |
% |
|
|
5.19 |
% |
|
|
315 |
|
1-Sep-38
|
|
|
25.02 |
|
|
|
n/a |
|
|
|
5.13 |
|
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Agency
|
|
Fair
Value
|
|
|
Percentage
of
Entire
Portfolio
|
|
|
Fair
Value
|
|
|
Percentage
of
Entire
Portfolio
|
|
Fannie
Mae
|
|
$ |
89,360 |
|
|
|
97.76 |
% |
|
$ |
141,364 |
|
|
|
82.1 |
% |
Freddie
Mac
|
|
|
2,044 |
|
|
|
2.24 |
% |
|
|
30,744 |
|
|
|
17.9 |
% |
Total
Portfolio
|
|
$ |
91,404 |
|
|
|
100.00 |
% |
|
$ |
172,108 |
|
|
|
100.0 |
% |
Entire
Portfolio
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Weighted
Average Pass Through Purchase Price
|
|
$ |
46.94 |
|
|
$ |
102.05 |
|
Weighted
Average Derivative Purchase Price
|
|
|
3.10 |
|
|
|
6.86 |
|
Weighted
Average Pass Through Current Price
|
|
$ |
101.42 |
|
|
$ |
101.10 |
|
Weighted
Average Derivative Current Price
|
|
$ |
3.11 |
|
|
$ |
6.98 |
|
Effective
Duration (1)
|
|
|
0.468 |
|
|
|
1.279 |
|
(1) Effective
duration of 0.468 indicates that an interest rate increase of 1.0% would be
expected to cause a 0.468% decline in the value of the MBS in the Company’s
investment portfolio at March 31, 2009. An effective duration of
1.279 indicates that an interest rate increase of 1.0% would be expected to
cause a 1.279% decline in the value of the MBS in the Company’s investment
portfolio. These figures
include the derivative securities in the portfolio.
In
evaluating Bimini Capital’s MBS portfolio assets and their performance, Bimini
Capital’s management team primarily evaluates these critical factors: asset
performance in differing interest rate environments, duration of the security,
yield to maturity, potential for prepayment of principal and the market price of
the investment.
Bimini
Capital’s portfolio of MBS will typically be comprised of adjustable-rate MBS,
fixed-rate MBS, hybrid adjustable-rate MBS and balloon maturity MBS. Bimini
Capital seeks to acquire low duration assets that offer high levels of
protection from mortgage prepayments. Although the duration of an individual
asset can change as a result of changes in interest rates, Bimini Capital
strives to maintain a portfolio with an effective duration of less than 2.0. The
stated contractual final maturity of the mortgage loans underlying Bimini
Capital’s portfolio of MBS generally ranges up to 30 years. However, the
effect of prepayments of the underlying mortgage loans tends to shorten the
resulting cash flows from Bimini Capital’s investments substantially.
Prepayments occur for various reasons, including refinancing of underlying
mortgages and loan payoffs in connection with home sales.
Prepayments
on the loans underlying Bimini Capital’s MBS can alter the timing of the cash
flows from the underlying loans to the Company. As a result, Bimini Capital
gauges the interest rate sensitivity of its assets by measuring their effective
duration. While modified duration measures the price sensitivity of a bond to
movements in interest rates, effective duration captures both the movement in
interest rates and the fact that cash flows to a mortgage related security are
altered when interest rates move. Accordingly, when the contract interest rate
on a mortgage loan is substantially above prevailing interest rates in the
market, the effective duration of securities collateralized by such loans can be
quite low because of expected prepayments. Although some of the fixed-rate MBS
in Bimini Capital’s portfolio are collateralized by loans with a lower
propensity to prepay when the contract rate is above prevailing rates, their
price movements track securities with like contract rates and therefore exhibit
similar effective duration.
The
derivative MBS securities employed in the Company’s alternative investment
strategy are inverse interest only and interest only
securities. Inverse interest only securities have coupons determined
by one month LIBOR and as a result the value of such securities will be affected
by actual or anticipated movements in one month LIBOR. Both inverse
interest only and interest only securities are especially sensitive to movements
in prepayments of the underlying mortgage loans, as their cash flows are tied to
the coupon interest of the underlying loans only.
Bimini
Capital faces the risk that the market value of its assets will increase or
decrease at different rates than that of its liabilities, including its hedging
instruments. Accordingly, the Company assesses its interest rate risk
by estimating the duration of its assets and the duration of its liabilities.
Bimini Capital generally calculates duration using various financial models and
empirical data and different models and methodologies can produce different
duration numbers for the same securities
The
following sensitivity analysis shows the estimated impact on the fair value of
Bimini Capital's interest rate-sensitive investments as of March 31, 2009,
assuming rates instantaneously fall 100 basis points, rise 100 basis points and
rise 200 basis points:
(in
thousands)
|
|
|
|
|
Interest
Rates Fall 100 BPS
|
|
|
Interest
Rates Rise 100 BPS
|
|
|
Interest
Rates Rise 200 BPS
|
|
Adjustable
Rate MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
66,010 |
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
528 |
|
|
$ |
(528 |
) |
|
$ |
(1,055 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
0.80 |
% |
|
|
(0.80 |
)% |
|
|
(1.60 |
)% |
Hybrid
Adjustable Rate MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
14,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
251 |
|
|
$ |
(251 |
) |
|
$ |
(503 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
1.72 |
% |
|
|
(1.72 |
)% |
|
|
(3.44 |
)% |
Derivative
MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
10,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
(352 |
) |
|
$ |
352 |
|
|
$ |
703 |
|
Change
as a % of Fair Value
|
|
|
|
|
|
|
(3.26 |
)% |
|
|
3.26 |
% |
|
|
6.52 |
% |
Portfolio
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
91,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair Value
|
|
|
|
|
|
$ |
428 |
|
|
$ |
(428 |
) |
|
$ |
(855 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
0.47 |
% |
|
|
(0.47 |
)% |
|
|
(0.94 |
)% |
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
22,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The table
below reflects the same analysis presented above but with the figures in the
columns that indicate the estimated impact of a 100 basis point fall or rise
adjusted to reflect the impact of convexity.
(in
thousands)
|
|
|
|
|
Interest
Rates Fall 100 BPS
|
|
|
Interest
Rates Rise 100 BPS
|
|
|
Interest
Rates Rise 200 BPS
|
|
Adjustable
Rate MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
66,010 |
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
414 |
|
|
$ |
(597 |
) |
|
$ |
(1,349 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
0.63 |
% |
|
|
(0.90 |
)% |
|
|
(2.04 |
)% |
Hybrid
Adjustable Rate MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
14,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
203 |
|
|
|
(343 |
) |
|
$ |
(791 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
1.39 |
% |
|
|
(2.35 |
)% |
|
|
(5.42 |
)% |
Derivative
MBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
10,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Fair Value
|
|
|
|
|
|
$ |
(992 |
) |
|
$ |
584 |
|
|
$ |
349 |
|
Change
as a % of Fair Value
|
|
|
|
|
|
|
(9.20 |
)% |
|
|
5.41 |
% |
|
|
3.24 |
% |
Portfolio
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
91,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair Value
|
|
|
|
|
|
$ |
(374 |
) |
|
$ |
(356 |
) |
|
$ |
(1,791 |
) |
Change
as a % of Fair Value
|
|
|
|
|
|
|
(0.41 |
)% |
|
|
(0.39 |
)% |
|
|
(1.96 |
)% |
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
$ |
22,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to changes in interest rates, other factors impact the fair value of
Bimini Capital's interest rate-sensitive investments and hedging instruments,
such as the shape of the yield curve, the level of one month LIBOR (IIO’s),
market expectations as to future interest rate changes and disruptions in the
financial markets. Accordingly, in the event of changes in actual interest
rates, the change in the fair value of Bimini Capital's assets would likely
differ from that shown above and such difference might be material and adverse
to Bimini Capital's stockholders.
The table
below shows Bimini Capital’s average investments held, total interest income,
yield on average earning assets, average repurchase obligations outstanding,
interest expense, average cost of funds, net interest income and net interest
spread for the quarter ended March 31, 2009, and the twenty previous quarters
for Bimini Capital’s portfolio of MBS securities only. The data in the table
below does not include information pertaining to discontinued operations at
OITRS.
RATIOS
FOR THE QUARTERS HAVE BEEN ANNUALIZED
(in
thousands)
Quarter
Ended
|
|
Average
Investment
Securities
Held
|
|
|
Total
Interest Income
|
|
|
Quarterly
Retrospective Adj.
|
|
|
Premium
Lost due to Paydowns
|
|
|
Yield
on Average Interest Earning Assets (1)
|
|
|
Average
Balance of Repurchase Agreements Outstanding
|
|
|
Interest
Expense (2)
|
|
|
Average
Cost of Funds (2)
|
|
|
Net
Interest Income
|
|
|
Net
Interest Spread
|
|
|
Trust
Preferred Interest Expense
|
|
March
31, 2009
|
|
$ |
131,756 |
|
|
|
3,674 |
|
|
|
- |
|
|
|
277 |
|
|
|
10.31 |
% |
|
$ |
111,715 |
|
|
|
254 |
|
|
|
0.91 |
% |
|
$ |
3,420 |
|
|
|
9.41 |
% |
|
$ |
1,933 |
|
December
31, 2008
|
|
|
199,338 |
|
|
|
3,093 |
|
|
|
- |
|
|
|
458 |
|
|
|
5.29 |
% |
|
|
174,701 |
|
|
|
1,114 |
|
|
|
2.55 |
% |
|
|
1,979 |
|
|
|
2,74 |
% |
|
|
1,933 |
|
September
30, 2008
|
|
|
375,239 |
|
|
|
6,149 |
|
|
|
- |
|
|
|
568 |
|
|
|
5.95 |
% |
|
|
326,577 |
|
|
|
4,193 |
|
|
|
5.14 |
% |
|
|
1,956 |
|
|
|
0.81 |
% |
|
|
1,933 |
|
June
30, 2008
|
|
|
519,614 |
|
|
|
6,787 |
|
|
|
- |
|
|
|
415 |
|
|
|
4.91 |
% |
|
|
471,732 |
|
|
|
5,448 |
|
|
|
4.62 |
% |
|
|
1,339 |
|
|
|
0.29 |
% |
|
|
1,933 |
|
March
31, 2008
|
|
|
602,948 |
|
|
|
10,112 |
|
|
|
- |
|
|
|
652 |
|
|
|
6.28 |
% |
|
|
584,597 |
|
|
|
7,590 |
|
|
|
5.19 |
% |
|
|
2,522 |
|
|
|
1.08 |
% |
|
|
1,933 |
|
December
31, 2007
|
|
|
972,236 |
|
|
|
11,364 |
|
|
|
(345 |
) |
|
|
- |
|
|
|
4.68 |
% |
|
|
944,832 |
|
|
|
10,531 |
|
|
|
4.46 |
% |
|
|
833 |
|
|
|
0.22 |
% |
|
|
1,933 |
|
September
30, 2007
|
|
|
1,536,265 |
|
|
|
24,634 |
|
|
|
(404 |
) |
|
|
- |
|
|
|
6.41 |
% |
|
|
1,497,409 |
|
|
|
20,998 |
|
|
|
5.61 |
% |
|
|
3,636 |
|
|
|
0.81 |
% |
|
|
1,933 |
|
June
30, 2007
|
|
|
2,375,216 |
|
|
|
26,970 |
|
|
|
(6,182 |
) |
|
|
- |
|
|
|
4.54 |
% |
|
|
2,322,727 |
|
|
|
33,444 |
|
|
|
5.76 |
% |
|
|
(6,475 |
) |
|
|
(1.22 |
%) |
|
|
1,933 |
|
March
31, 2007
|
|
|
2,870,265 |
|
|
|
38,634 |
|
|
|
1,794 |
|
|
|
- |
|
|
|
5.38 |
% |
|
|
2,801,901 |
|
|
|
37,405 |
|
|
|
5.34 |
% |
|
|
1,229 |
|
|
|
0.04 |
% |
|
|
1,933 |
|
December
31, 2006
|
|
|
2,944,397 |
|
|
|
31,841 |
|
|
|
(4,013 |
) |
|
|
- |
|
|
|
4.33 |
% |
|
|
2,869,210 |
|
|
|
39,448 |
|
|
|
5.50 |
% |
|
|
(7,607 |
) |
|
|
(1.17 |
%) |
|
|
1,933 |
|
September
30, 2006
|
|
|
3,243,674 |
|
|
|
43,051 |
|
|
|
3,523 |
|
|
|
- |
|
|
|
5.31 |
% |
|
|
3,151,813 |
|
|
|
42,683 |
|
|
|
5.42 |
% |
|
|
368 |
|
|
|
(0.11 |
%) |
|
|
1,933 |
|
June
30, 2006
|
|
|
3,472,921 |
|
|
|
54,811 |
|
|
|
13,395 |
|
|
|
- |
|
|
|
6.31 |
% |
|
|
3,360,421 |
|
|
|
41,674 |
|
|
|
4.96 |
% |
|
|
13,137 |
|
|
|
1.35 |
% |
|
|
1,933 |
|
March
31, 2006
|
|
|
3,516,292 |
|
|
|
40,512 |
|
|
|
1,917 |
|
|
|
- |
|
|
|
4.61 |
% |
|
|
3,375,777 |
|
|
|
36,566 |
|
|
|
4.33 |
% |
|
|
3,946 |
|
|
|
0.28 |
% |
|
|
1,933 |
|
December
31, 2005
|
|
|
3,676,175 |
|
|
|
43,140 |
|
|
|
3,249 |
|
|
|
- |
|
|
|
4.69 |
% |
|
|
3,533,486 |
|
|
|
35,337 |
|
|
|
4.00 |
% |
|
|
7,803 |
|
|
|
0.69 |
% |
|
|
1,858 |
|
September
30, 2005
|
|
|
3,867,263 |
|
|
|
43,574 |
|
|
|
4,348 |
|
|
|
- |
|
|
|
4.51 |
% |
|
|
3,723,603 |
|
|
|
32,345 |
|
|
|
3.48 |
% |
|
|
11,230 |
|
|
|
1.03 |
% |
|
|
973 |
|
June 30,
2005
|
|
|
3,587,629 |
|
|
|
36,749 |
|
|
|
2,413 |
|
|
|
- |
|
|
|
4.10 |
% |
|
|
3,449,744 |
|
|
|
26,080 |
|
|
|
3.02 |
% |
|
|
10,668 |
|
|
|
1.07 |
% |
|
|
454 |
|
March 31,
2005
|
|
|
3,136,142 |
|
|
|
31,070 |
|
|
|
1,013 |
|
|
|
- |
|
|
|
3.96 |
% |
|
|
2,976,409 |
|
|
|
19,731 |
|
|
|
2.65 |
% |
|
|
11,339 |
|
|
|
1.31 |
% |
|
|
- |
|
December 31,
2004
|
|
|
2,305,748 |
|
|
|
20,463 |
|
|
|
1,250 |
|
|
|
- |
|
|
|
3.55 |
% |
|
|
2,159,891 |
|
|
|
10,796 |
|
|
|
2.00 |
% |
|
|
9,667 |
|
|
|
1.55 |
% |
|
|
- |
|
September 30,
2004
|
|
|
1,573,343 |
|
|
|
11,017 |
|
|
|
- |
|
|
|
- |
|
|
|
2.80 |
% |
|
|
1,504,919 |
|
|
|
4,253 |
|
|
|
1.13 |
% |
|
|
6,764 |
|
|
|
1.67 |
% |
|
|
- |
|
June 30,
2004
|
|
|
1,512,481 |
|
|
|
10,959 |
|
|
|
- |
|
|
|
- |
|
|
|
2.90 |
% |
|
|
1,452,004 |
|
|
|
4,344 |
|
|
|
1.20 |
% |
|
|
6,615 |
|
|
|
1.70 |
% |
|
|
- |
|
March 31,
2004
|
|
|
871,140 |
|
|
|
7,194 |
|
|
|
- |
|
|
|
- |
|
|
|
3.30 |
% |
|
|
815,815 |
|
|
|
2,736 |
|
|
|
1.34 |
% |
|
|
4,458 |
|
|
|
1.96 |
% |
|
|
- |
|
(1)
|
Adjusted
for premium lost on paydowns
|
(2)
|
Excludes
Trust Preferred Interest
|
The net
interest figures in the table above exclude interest associated with the trust
preferred debt, which is reflected in the last column separately. The net
interest figures do reflect the quarterly retrospective adjustment, where
applicable. For the three months ended March 31, 2009, the net margin
was 941 basis points compared to 108 basis points for the three months ended
March 31, 2008.
PERFORMANCE OF DISCONTINUED
OPERATIONS OF OITRS
As
previously disclosed, the Company sold or discontinued all residential mortgage
origination activities at OITRS during 2007. The principal business
activities of OITRS were the origination and sale of mortgage
loans. In addition, as part of the securitization of loans sold,
OITRS retained an interest in the resulting residual interest cash flows more
fully described below. Finally, OITRS serviced the loans securitized
as well as some loans sold on a whole loan basis. As of March 31,
2009, there are no remaining originated mortgage servicing rights and mortgage
loans held for sale are immaterial and not likely to result in meaningful income
or loss. Such assets are also held for sale.
Gains
realized on the OITRS activities for the three months ended March 31, 2009, were
approximately $0.24 million compared to a loss of approximately $4.33 million
for the three months ended March 31, 2008. The fair value adjustment
of retained interest, trading was approximately $1.3 million and $(2.1) million
for the three months ended March 31, 2009 and 2008, respectively. The
retained interests in securitizations represent residual interests in loans
originated or purchased by OITRS prior to securitization. The total
fair market value of these retained interests was approximately $14.6 million as
of March 31, 2009. Fluctuations in value of retained interests are primarily
driven by projections of future interest rates (the forward LIBOR curve), the
discount rate used to determine the present value of the residual cash flows and
prepayment and loss estimates on the underlying mortgage loans. The increase in
value for the period ended March 31, 2009, was primarily due to slightly
decreased forward LIBOR assumptions and the effect of discounting.
The table
below provides details of OITRS’s gain (loss) on mortgage banking activities for
the three months ended March 31, 2009 and 2008. OITRS recognized a
gain or loss on the sale of mortgages held for sale only when the loans were
actually sold.
(in
thousands)
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Fair
value adjustment of retained interests, trading
|
|
$ |
1,274 |
|
|
$ |
(2,120 |
) |
Losses
on sales of mortgage loans and securities
|
|
|
(3 |
) |
|
|
59 |
|
Change
in market value of security held for sale
|
|
|
465 |
|
|
|
- |
|
Change
in market value of mortgage loans held for sale
|
|
|
29 |
|
|
|
- |
|
Gain
(loss) on discontinued mortgage banking activities
|
|
$ |
1,765 |
|
|
$ |
(2,061 |
) |
General
and administrative expenses of OITRS for the three months ended March 31, 2009,
and 2008, respectively, were $1.00 million and $1.51 million. For the
three months ended March 31, 2009, legal and professional fees of $0.52 million
and a reserve against a receivable of $0.27 million were the principal
components of the general and administrative expenses.
Liquidity
and Capital Resources
Our
principal sources of cash generally consist of borrowings under repurchase
agreements, payments of principal and interest we receive on our MBS portfolio,
and cash flows received by OITRS from the residual interests and collections
from the master servicer that are used to repay intercompany
debt. Our principal uses of cash are the repayment of principal and
interest on our repurchase agreements, purchases of MBS, funding our operations
and, to the extent dividends are declared, making dividend payments on our
capital stock.
As of
March 31, 2009, Bimini Capital had funding in place via master repurchase
agreements with one counterparty. The counterparty to this agreement
is not an affiliate of Bimini Capital. The agreement is secured by Bimini
Capital’s MBS and bears interest rates that are based on a spread to
LIBOR.
As of
March 31, 2009, Bimini Capital had an obligation outstanding under the
repurchase agreement of approximately $74.7 million with a net weighted average
borrowing cost of 0.72%. Bimini Capital’s outstanding repurchase agreement
obligation is due in less than 1 month. Securing the repurchase
agreement obligation as of March 31, 2009, are MBS with an estimated fair value,
including accrued interest, of $80.9 million and a weighted average maturity of
290 months.
As of
March 31, 2009, Bimini Capital had amounts at risk greater than 10% of the
equity of the Company with the following counterparty:
(in
thousands)
Repurchase
Agreement Counterparties
|
|
Amount
at
Risk(1)
|
|
|
Weighted
Average
Maturity
of
Repurchase
Agreements
in
Days
|
|
MF
Global Inc.
|
|
$ |
6,185 |
|
|
|
7 |
|
(1)
|
Equal
to the fair value of securities sold, plus accrued interest income, minus
the sum of repurchase agreement liabilities, plus accrued interest
expense.
|
Bimini
Capital’s master repurchase agreements have no stated expiration, but can be
terminated at any time at Bimini Capital’s option or at the option of the
counterparty. However, once a definitive repurchase agreement under a master
repurchase agreement has been entered into, it generally may not be terminated
by either party absent an event of default. A negotiated termination
can occur, but may involve a fee to be paid by the party seeking to terminate
the repurchase agreement transaction.
As
discussed above, increases in short-term interest rates could negatively impact
the valuation of Bimini Capital’s MBS portfolio. Should this occur,
Bimini Capital’s repurchase agreement counterparties could initiate margin
calls, thus inhibiting its liquidity or forcing us to sell assets.
As a
result of the closure of the mortgage origination operations at OITRS, the
Company has had to amortize the financing line associated with retained interest
in securitizations and meet the advancing obligations associated with OITRS’s
remaining mortgage servicing rights. Accordingly, during the year ended December
31, 2008, the Company undertook a series of assets sales intended to raise funds
necessary to support the cash needs of OITRS and maintain adequate
liquidity.
Given the
current difficulties with respect to the availability of funding via the
repurchase market, the Company has opted to augment its existing leveraged MBS
portfolio with alternative sources of income. The Company has
employed an alternative investment strategy utilizing derivative mortgage backed
securities collateralized by MBS with comparable borrower and prepayment
characteristics to the securities currently in the portfolio. Such
securities are not funded in the repurchase market but instead are purchased
directly. The leverage inherent in the securities replaces the
leverage obtained by acquiring pass-through securities and funding them in the
repurchase market.
As more
fully discussed in Note 5 to the financial statements, in May 2005, Bimini
Capital completed a private offering of $51.6 million of trust preferred
securities of Bimini Capital Trust I (“BCTI”) resulting in the issuance by
Bimini Capital of $51.6 million of junior subordinated notes. On March 25, 2009
the Company entered into an agreement with Taberna Capital Management, LLC
(Taberna), the collateral manager of certain collateralized debt obligations
issued in 2005 and collateralized by, among other securities, the trust
preferred capital securities sold by BCT I in May of 2005. The
transaction closed April 21, 2009. Pursuant to the terms of the agreement, the
obligations under the trust preferred capital securities issued by BCT I where
discharged and the securities redeemed. Concurrently, Bimini Capital
redeemed its junior subordinated notes issued to BCT I. As a result of this
transaction, the Company’s interest expense associated with its trust preferred
securities will be reduced going forward and, because of the anticipated gain on
early extinguishment of debt of approximately $32 million, the Company’s deficit
in stockholders equity will be reduced or eliminated as of the date of
closing. All asset sales needed to fund the exchange occurred prior
to March 31, 2009, and therefore no further reductions in the Company’s
portfolio of MBS assets are necessary to complete the transaction.
In
addition, in October 2005, Bimini Capital completed a private offering of an
additional $51.5 million of trust preferred securities of Bimini Capital Trust
II (“BCTII”) resulting in the issuance by Bimini Capital of an additional $51.5
million of junior subordinated notes. See Note 5 to the financial statements for
a full description.
Bimini
Capital attempts to ensure that the income generated from available investment
opportunities, when the use of leverage is employed for the purchase of assets,
exceeds the cost of its borrowings. However, the issuance of debt at a fixed
rate for any long-term period, considering the use of leverage, could create an
interest rate mismatch if Bimini Capital is not able to invest at yields that
exceed the interest rates of the Company’s junior subordinated notes and other
borrowings.
Outlook
The
Company's results of operations for the three months ended March 31, 2009
continue to be impacted by the unprecedented disruptions in the securities
markets and the global economy generally that began in the fall of
2008. The market turmoil brought about a severe tightening of credit
conditions and volatile asset prices. In an effort to combat these
developments, the administration of President Obama, the world’s central banks,
the Congress of the United States, the US Treasury and the Federal Reserve have
taken unprecedented steps which have highly publicized in the financial
press. While the outcome of these developments continues to unfold
and the end result is unclear, market conditions appear to be
stabilizing.
The
funding costs of the MBS portfolio have stabilized as well and the coupon on the
MBS assets now exceeds the associated repurchase agreement funding costs. Also,
the Company no longer needs to fund negative cash flow operations at OITRS,
which in the past precluded the Company from reinvesting monthly pay-downs and
also required the Company to sell MBS assets to generate funds throughout
2008.
The
Company has implemented an alternative investment strategy to supplement the
levered MBS strategy in an effort to continue to maximize our net interest
income and maximize the earning capacity of our limited capital. Nonetheless, in
spite of the positive effects of the early debt extinguishment of trust
preferred debt referred to above, the reduced size of the portfolio in relation
to the Company’s operating expenses will constrain the earnings potential of the
Company in the near term. Given the continued tight credit
conditions, which make access to funding precarious, and the reduced size of our
portfolio, even with the benefit of our alternative investment strategy, no
assurance can be made of our ability to generate sufficient net interest income
to cover all of our costs.
Critical
Accounting Policies
The
Company’s financial statements are prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”). The Company’s significant accounting
policies are described in Note 1 to the Company’s
accompanying Consolidated Financial Statements.
GAAP
requires the Company’s management to make some complex and subjective decisions
and assessments. The Company’s most critical accounting policies involve
decisions and assessments which could significantly affect reported assets and
liabilities, as well as reported revenues and expenses. The Company believes
that all of the decisions and assessments upon which its financial statements
are based were reasonable at the time made based upon information available to
it at that time. Management has identified its most critical accounting policies
to be the following:
MORTGAGE BACKED
SECURITIES
The
Company’s investments in MBS are classified as held for
trading. Changes in fair value of securities held for trading are
recorded through the statement of operations. The Company’s MBS have fair values
determined by management based on the average of third-party broker quotes
received and/or by independent pricing sources when available. Because the price
estimates may vary to some degree between sources, management must make certain
judgments and assumptions about the appropriate price to use to calculate the
fair values for financial reporting purposes. Alternatively, management could
opt to have the value of all of its positions in MBS determined by either an
independent third-party pricing source or do so internally based on management’s
own estimates. Management believes pricing on the basis of third-party broker
quotes is the most consistent with the definition of fair value described in
SFAS No. 157, Fair Value
Measurements.
REPURCHASE
AGREEMENTS
We
finance the acquisition of our MBS through the use of repurchase agreements.
Repurchase agreements are treated as collateralized financing transactions and
are carried at their contractual amounts, including accrued interest, as
specified in the respective agreements.
RETAINED INTEREST, TRADING
(CLASSIFIED AS HELD FOR SALE)
Retained
interest, trading is the subordinated interests retained by OITRS from their
various securitizations and includes the over-collateralization and residual net
interest spread remaining after payments to the Public Certificates and NIM
Notes (see Note 14). Retained interest, trading represents the present value of
estimated cash flows to be received from these subordinated interests in the
future. The subordinated interests retained are classified as “trading
securities” and are reported at fair value with unrealized gains or losses
reported in earnings. In order to value these unrated and unquoted
retained interests, the Company utilizes either pricing available directly from
dealers or calculates their present value by projecting their future cash flows
on a publicly-available analytical system. When a publicly-available analytical
system is employed, the Company uses the following variable factors in
estimating the fair value of these assets:
Interest Rate Forecast. LIBOR
interest rate curve.
Discount Rate. The present
value of all future cash flows utilizing a discount rate assumption established
at the discretion of the Company to represent market conditions and
value.
Prepayment Forecast. The
prepayment forecast may be expressed by the Company in accordance with one of
the following standard market conventions: Constant Prepayment Rate (“CPR”) or
Percentage of a Prepayment Vector. Prepayment forecasts are made utilizing
Citigroup Global Markets Yield Book and/or management estimates based on
historical experience. Conversely, prepayment speed forecasts could have been
based on other market conventions or third-party analytical systems. Prepayment
forecasts may be changed as OITRS observes trends in the underlying collateral
as delineated in the Statement to Certificate Holders generated by the
securitization trust’s Trustee for each underlying security.
Credit Performance Forecast.
A forecast of future credit performance of the underlying collateral pool will
include an assumption of default frequency, loss severity and a recovery lag. In
general, the Company will utilize the combination of default frequency and loss
severity in conjunction with a collateral prepayment assumption to arrive at a
target cumulative loss to the collateral pool over the life of the pool based on
historical performance of similar collateral by the originator. The target
cumulative loss forecast will be developed and noted at the pricing date of the
individual security but may be updated by the Company consistent with
observations of the actual collateral pool performance.
As of
March 31, 2009, and December 31, 2008, key economic assumptions and the
sensitivity of the current fair value of retained interests to the immediate 10%
and 20% adverse change in those assumptions are as follows:
(in
thousands)
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Balance
Sheet Carrying value of retained interests – fair value
|
|
$ |
14,554 |
|
|
$ |
15,601 |
|
Weighted
average life (in years)
|
|
|
12.83 |
|
|
|
14.76 |
|
Prepayment
assumption (annual rate)
|
|
|
14.22 |
% |
|
|
19.36 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,337 |
) |
|
$ |
(1,838 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(2,035 |
) |
|
$ |
(3,086 |
) |
Expected
Credit losses (annual rate)
|
|
|
6.37 |
% |
|
|
5.61 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,900 |
) |
|
$ |
(2,841 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(3,544 |
) |
|
$ |
(6,095 |
) |
Residual
Cash-Flow Discount Rate
|
|
|
27.50 |
% |
|
|
27.50 |
% |
Impact
on fair value of 10% adverse change
|
|
$ |
(1,152 |
) |
|
$ |
(1,540 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(2,134 |
) |
|
$ |
(2,838 |
) |
Interest
rates on variable and adjustable loans and bonds
|
|
Forward
LIBOR Yield Curve
|
|
|
Forward
LIBOR Yield Curve
|
|
Impact
on fair value of 10% adverse change
|
|
$ |
(2,105 |
) |
|
$ |
(2,692 |
) |
Impact
on fair value of 20% adverse change
|
|
$ |
(3,426 |
) |
|
$ |
(5,067 |
) |
These
sensitivities are entirely hypothetical and should be used with caution. As the
figures indicate, changes in fair value based upon 10% and 20% variations in
assumptions generally cannot be extrapolated to greater or lesser percentage
variations because the relationship of the change in assumption to the change in
fair value may not be linear. Also, in this table, the effect of the variation
in a particular assumption on the fair value of the subordinated interest is
calculated without changing any other assumption. In reality, changes
in one factor may result in changes in another that may magnify or counteract
the sensitivities. To estimate the impact of a 10% and 20% adverse change of the
forward LIBOR curve, a parallel shift in the forward LIBOR curve was assumed
based on the forward LIBOR curve as of March 31, 2009 and December 31,
2008.
INCOME
RECOGNITION
For
securities classified as held for trading, interest income is based on the
stated interest rate and the outstanding principal balance; premium or discount
associated with the purchase of the MBS are not amortized. As of
January 1, 2008, all MBS portfolio securities are classified as held for
trading.
All
securities are either MBS pass through securities, interest only securities or
inverse interest only securities. Income on MBS pass through securities
classified as held for trading is based on the stated interest rate of the
security. Premium or discount present at the date of purchase is not amortized.
For inverse interest only and interest only securities classified as held for
trading, the income is accrued based on the carrying value and the effective
yield. As cash is received it is first applied to accrued interest and then to
reduce the carrying value. At each reporting date, the effective yield is
adjusted prospectively from the reporting period based on the new estimate of
prepayments. The new effective yield is calculated based on the carrying value
at the end of the previous reporting period, the new prepayment estimates and
the contractual terms of the security. Changes in fair value during
the period are recorded in earnings and reported as fair value adjustment-held
for trading securities in the accompanying consolidated statement of
operations.
INCOME
TAXES
Bimini
Capital has elected to be taxed as a REIT under the Code. As further described
below, Bimini Capital’s subsidiary, OITRS a taxpaying entity for income tax
purposes and is taxed separately from Bimini Capital. Bimini Capital will
generally not be subject to federal income tax on its REIT taxable income to the
extent that Bimini Capital distributes its REIT taxable income to its
stockholders and satisfies the ongoing REIT requirements, including meeting
certain asset, income and stock ownership tests. A REIT must generally
distribute at least 90% of its REIT taxable income to its stockholders, of which
85% generally must be distributed within the taxable year, in order to avoid the
imposition of an excise tax. The remaining balance may be distributed up to the
end of the following taxable year, provided the REIT elects to treat such amount
as a prior year distribution and meets certain other requirements.
OITRS and
its activities are subject to corporate income taxes and the applicable
provisions of SFAS No. 109,
Accounting for Income Taxes. All of the consequences of OITRS’s income
tax accounting are included in discontinued operations. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. To the extent management believes deferred tax assets will not be
fully realized in future periods, a provision is recorded so as to reflect the
net portion, if any, of the deferred tax asset management expects to
realize.
Off-Balance
Sheet Arrangements
As
previously discussed, OITRS previously pooled loans originated or purchased and
then sold them or securitized them to obtain long-term financing for its assets.
Securitized loans were transferred to a trust where they served as collateral
for asset-backed bonds, which the trust primarily issued to the public. OITRS
held approximately $14.6 million of retained interests from securitizations as
of March 31, 2009.
The cash
flows associated with OITRS’s securitization activities over the three months
ended March 31, 2009 and 2008, were as follows:
(in
thousands)
|
|
Three
months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Net
servicing fees (paid) received
|
|
$ |
(1 |
) |
|
$ |
467 |
|
Servicing
advances and repayments
|
|
|
4,346 |
|
|
|
(2,344 |
) |
Cash
flows received on retained interests
|
|
|
2,321 |
|
|
|
3,392 |
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not
Applicable.
ITEM
4T. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company’s reports under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and that such information is accumulated and
communicated to the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
As of the
end of the period covered by this report, the Company’s management carried out
an evaluation, under the supervision and with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures.
Based on such evaluation, the Company’s Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and
procedures were effective.
Changes
in Internal Controls over Financial Reporting
There was
no change in the Company’s internal control over financial reporting that
occurred during the Company’s most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
The
Company is involved in various lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which monetary damages
and other relief is sought. The resolution of such lawsuits and claims is
inherently unpredictable. See Notes 8 and 11(g) to the Company’s
accompanying consolidated financial statements for a description of certain of
these matters.
On June
14, 2007, a complaint was filed in the Circuit Court of the Twelfth Judicial
District in and for Manatee County, Florida by Coast Bank of Florida against
OITRS seeking monetary damages and specific performance and alleging breach of
contract for allegedly failing to repurchase approximately fifty loans. On
September 5, 2007, OITRS filed a motion to dismiss Coast’s complaint based on
the Florida Banking Statute of Frauds. On February 25, 2008, the Court
denied OITRS’s motion to dismiss, but the court subsequently
clarified that the motion was denied because the Court needs
additional facts in order to determine whether Coast’s claims are barred
under the Florida Banking Statute of Frauds. As a
result, the parties conducted limited discovery relating to the Statute of
Frauds and OITRS filed a motion for summary judgment in November, 2008;
however, that motion was never ruled on because on February 3, 2009, Coast
filed a motion for leave to amend its complaint. The Court ruled in favor
of Coast on March 16, 2009 and OITRS was given 20 days, subsequently extended by
three additional weeks, to answer the amended complaint. On May 4, 2009,
OITRS filed a response to the amended complaint. The amended
complaint differs from the original complaint in that it raises new facts and
changes the nature of the claims. We believe the plaintiff’s claims in
this matter are without merit and we intend to vigorously defend this
case.
On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against us, certain of our
current and former officers and directors, Flagstone Securities, LLC and
BB&T Capital Markets alleging various violations of the federal securities
laws and seeking class action certification. On October 9, 2007, a
complaint was filed in the U.S. District Court for the Southern District of
Florida by Richard and Linda Coy against us, certain of our current and former
officers and directors, Flagstone Securities, LLC and BB&T Capital Markets
alleging various violations of the federal securities laws and seeking class
action certification. The cases have been consolidated, class
certification has been granted, and lead plaintiffs’ counsel has been
appointed. We filed a motion to dismiss the case on December 22,
2008, and plaintiffs have filed a response in opposition. Our motion
to dismiss is currently pending before the court. We believe the
plaintiffs’ claims in these actions are without merit and we intend to
vigorously defend the cases.
ITEM
1A. RISK FACTORS.
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2008, which could materially
affect our business, financial condition or future results. The materialization
of any risks and uncertainties identified in our forward looking
statements contained in this report together with those previously
disclosed in the Form 10-K or those that are presently unforeseen could result
in significant adverse effects on
our financial condition, results
of operations and cash flows. The information presented
below updates and should be read in conjunction with the risk factors and
information disclosed in that Form 10-K.
The
actions of the U.S. government, Federal Reserve and Treasury, including the
establishment of the TALF and the PPIP, may adversely affect our
business.
The Term
Asset-Backed Securities Loan Facility (“TALF”) was first announced by the
Treasury on November 25, 2008, and has been expanded in size and scope since its
initial announcement. Under the TALF, the Federal Reserve Bank of New
York makes non-recourse loans to borrowers to fund their purchase of eligible
assets, currently certain asset backed securities but not mortgage-backed
securities. The nature of the eligible assets has been expanded several times.
The Treasury has stated that through its expansion of the TALF, non-recourse
loans will be made available to investors to certain fund purchases of legacy
securitization assets. On March 23, 2009, the Treasury in conjunction with the
FDIC, and the Federal Reserve, announced the Public-Private Investment Program
(“PPIP”). The PPIP aims to recreate a market for specific illiquid residential
and commercial loans and securities through a number of joint public and private
investment funds. The PPIP is designed to draw new private capital
into the market for these securities and loans by providing government equity
co-investment and attractive public financing.
These
programs are still in early stages of development, and it is not possible to
predict how the TALF, the PPIP, or other recent U.S. government actions will
impact the financial markets, including current significant levels of
volatility, or our current or future investments. To the extent the
market does not respond favorably to these initiatives or they do not function
as intended, our business may not receive any benefits from this
legislation. In addition, the U.S. government, Federal Reserve,
Treasury and other governmental and regulatory bodies have taken or are
considering taking other actions to address the financial crisis. We cannot
predict whether or when such actions may occur, and such actions could have a
dramatic impact on our business, results of operations and financial
condition.
To
maintain our REIT qualification, we may be forced to borrow funds on unfavorable
terms or sell our MBS portfolio securities at unfavorable prices to make
distributions to our stockholders.
As a
REIT, we must distribute at least 90% of our annual net taxable income
(excluding net capital gains) to our stockholders. To the extent that we satisfy
this distribution requirement, but distribute less than 100% of our net taxable
income, we will be subject to federal corporate income tax. In addition, we will
be subject to a 4% nondeductible excise tax if the actual amount that we pay to
our stockholders in a calendar year is less than a minimum amount specified
under the Code. From time to time, we may generate taxable income greater than
our income for financial reporting purposes from, among other things,
amortization of capitalized purchase premiums, or our net taxable income may be
greater than our cash flow available for distribution to our stockholders. If we
do not have other funds available in these situations, we could be required to
borrow funds, sell a portion of our mortgage-related securities at unfavorable
prices or find other sources of funds in order to meet the REIT distribution
requirements and to avoid corporate income tax and the 4% excise tax. These
other sources could increase our costs or reduce equity and reduce amounts
available to invest in mortgage-related securities.
In
December 2008, the Internal Revenue Service (IRS) issued Revenue Procedure
2008-68, providing that the IRS will treat a REIT’s distribution of common stock
that is declared with respect to a taxable year ending on or before December 31,
2009 as a qualifying dividend for purposes of the 90 percent distribution
requirement so long as it meets certain conditions, including a cash limitation
requirement that is not less than 10% of the entire
distribution. Management is evaluating this new guidance and its
impact on any potential distributions for 2009.
ITEM
6. EXHIBITS.
Exhibit
No.
3.1
|
Articles
of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to
the Company’s Form S-11/A, filed with the SEC on April 29,
2004
|
3.2
|
Articles
Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on
November 8, 2005
|
3.3
|
Articles
of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on
February 15, 2006
|
3.4
|
Articles
of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, dated September 24, 2007, filed with the SEC
on September 24, 2007
|
3.5
|
Certificate
of Notice, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on
February 1, 2008
|
3.6
|
Articles
of Amendment, incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May
29, 2008
|
3.7
|
Amended
and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the
Company’s Current Report on Form 8-K, dated September 24, 2007, filed with
the SEC on September 24, 2007
|
†10.1
|
Bimini
Capital Management, Inc. 2003 Long Term Incentive Compensation Plan, as
amended September 28, 2007, incorporated by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q for the period ended September
30, 2007, filed with the SEC on November 8, 2007
|
†10.2
|
Bimini
Capital Management, Inc. 2004 Performance Bonus Plan, as amended September
28, 2007, incorporated by reference to Exhibit 10.4 to the Company’s
Quarterly Report on Form 10-Q for the period ended September 30, 2007,
filed with the SEC on November 8, 2007
|
†10.3
|
Form
of Phantom Share Award Agreement incorporated by reference to Exhibit 10.5
to the Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2007, filed with the SEC on November 8,
2007
|
†10.4
|
Form
of Restricted Stock Award Agreement incorporated by reference to Exhibit
10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2007, filed with the SEC on November 8,
2007
|
†10.5
|
Separation
Agreement and General Release, dated as of June 29, 2007, by and among
Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden,
incorporated by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K, dated June 30, 2007, filed with the SEC on July 5,
2007
|
†10.6
|
Separation
Agreement and General Release by and between Bimini Capital
Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 14,
2008, filed with the SEC on April 16, 2008
|
†10.7
|
Retention
and Severance Agreement between Bimini Capital Management, Inc. and
G. Hunter Haas, IV, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
SEC on April 18, 2008
|
†10.8
|
Retention
and Severance Agreement between Bimini Capital Management, Inc. and
J. Christopher Clifton, incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
SEC on April 18, 2008
|
†10.9
|
Employment
Agreement dated as of April 27, 2006, by and between Opteum Inc. and J.
Christopher Clifton, incorporated by reference to Exhibit 10.9 to the
Company’s Quarterly Report on Form 10-Q, dated August 11, 2008, filed with
the SEC on August 11, 2008
|
10.10
|
Voting
Agreement, among certain stockholders of Bimini Mortgage Management, Inc.,
Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas, IV,
Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson, Buford
H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan,
certain of Mr. Kaplan’s affiliates and other former owners of Opteum
Financial Services, LLC, incorporated by reference to Exhibit 99(D) to the
Schedule 13D, dated November 3, 2005, filed with the SEC on November 14,
2005
|
10.11
|
Membership
Interest Purchase, Option and Investor Rights Agreement among Opteum Inc.,
Opteum Financial Services, LLC and Citigroup Global Markets Realty Corp.
dated as of December 21, 2006, incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K, dated December 21, 2006,
filed with the SEC on December 21, 2006
|
10.12
|
Seventh
Amended and Restated Limited Liability Company Agreement of Orchid Island
TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum Inc.
and Citigroup Global Markets Realty Corp., incorporated by reference to
Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the
period ended June 30, 2007, filed with the SEC on August 14,
2007
|
10.13
|
Asset
Purchase Agreement, dated May 7, 2007, by and among Opteum Financial
Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K, dated May 7, 2007, filed with the SEC on May 7,
2007
|
10.14
|
First
Amendment to Purchase Agreement, dated June 30, 2007, by and among
Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services,
LLC and Opteum Inc., incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the
SEC on July 5, 2007
|
10.15
|
Membership
Interest Purchase Agreement, dated May 27, 2008, by and among Bimini
Capital Management, Inc., Orchid Island TRS, LLC and Citigroup Global
Markets Realty Corp., incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
SEC on May 29, 2008
|
10.16
|
Eighth
Amended and Restated Limited Liability Company of Orchid Island TRS, LLC,
dated as of May 27, 2008, incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
SEC on May 29, 2008
|
10.17
|
Amended
and Restated Junior Subordinated Indenture, dated as of September 26,
2005, between the Company and JPMorgan Chase Bank, National Association,
as trustee.
|
10.18
|
Second
Amended and Restated Trust Agreement, dated as of September 26, 2005,
among the Company, as depositor, JPMorgan Chase Bank, National
Association, as property trustee, Chase Bank USA, National Association, as
Delaware trustee and the Administrative Trustees named
therein.
|
10.19
|
Indenture,
dated as of October 5, 2005, between the Company and Wilmington Trust
Company, as debenture trustee.
|
10.20
|
Amended
and Restated Declaration of Trust, dated as of October 5, 2005, by and
among Wilmington Trust Company, as Delaware trustee, Wilmington Trust
Company, as institutional trustee, the Company, as sponsor, and Jeffrey J.
Zimmer, Robert E. Cauley and Amber K. Luedke, as
administrators.
|
*31.1
|
Certification
of the Principal Executive Officer, pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
*31.2
|
Certification
of the Principal Financial Officer, pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
*32.1
|
Certification
of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
*32.2
|
Certification
of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
*
Filed herewith.
† Management
compensatory plan or arrangement required to be filed by Item 601 of
Regulation S-K.
|
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIMINI CAPITAL
MANAGEMENT, INC.
Date: May
11, 2009
|
|
By:
|
/s/ Robert E. Cauley |
|
|
|
|
Robert
E. Cauley
Chairman
and Chief Executive Officer
|