In the first quarter of 2024, Bimini Capital Management reported a net income of $19.7 million, with an increase in shareholders' equity from $469.9 million to $481.6 million. Advisory service revenues decreased by approximately 5% from the previous quarter to $2.9 million.
The company also received $0.2 million in dividends, consistent with the previous quarter's distribution. Interest revenue from the investment portfolio was $1.4 million against interest expenses of $1.2 million, resulting in net interest income of $0.2 million.
Bimini Capital Management expects a stable interest rate environment and maintains a cautiously optimistic outlook for both itself and Orchid Island (NYSE:ORC) Capital, despite no questions being raised during the earnings call.
Key Takeaways
- Bimini Capital Management's net income for Q1 2024 was $19.7 million.
- Shareholders' equity increased to $481.6 million from $469.9 million.
- Advisory service revenues were down 5% to $2.9 million.
- Dividends received remained steady at $0.2 million.
- Net interest income was $0.2 million, with interest revenue at $1.4 million.
- The company recorded an unrealized gain on Orchid shares of $0.3 million.
- Bimini expects to add to the MBS portfolio in the current quarter.
- The company anticipates a stable interest rate environment moving forward.
Company Outlook
- Incoming economic data suggests the Fed will not loosen monetary policy in the near-term.
- Market pricing reflects at most one cut in the Fed's overnight rate this year.
- A stable interest rate environment is likely, which would be favorable for Bimini.
- Bimini and Orchid could benefit from a deteriorating economic outlook if it leads to lower overnight rates and expanded net interest margins.
Bearish Highlights
- Advisory service revenues decreased by approximately 5% from the previous quarter.
- The risk exists for longer maturity rates to increase more than short-term rates, potentially causing MBS spreads to widen and volatility to elevate.
Bullish Highlights
- Shareholders' equity has shown an increase.
- The company's hedge positions have performed well and are expected to continue doing so in a stable rate environment.
- The company's net interest spread is narrow, but the environment remains favorable for Orchid Island and its MBS portfolio.
Misses
- The company did not add to the MBS portfolio during the first quarter of 2024.
Q&A Highlights
- There were no questions asked during the earnings call.
In summary, Bimini Capital Management (BMNM) has posted a solid first quarter for 2024, with an increase in net income and shareholder equity. Despite a slight decrease in advisory service revenues, the company's financial position appears stable with consistent dividend income and a cautiously optimistic outlook for the future.
The company plans to add to its MBS portfolio in the current quarter and anticipates a stable interest rate environment that should support its hedge positions and potentially benefit both Bimini and Orchid Island Capital.
InvestingPro Insights
In the context of Bimini Capital Management's first-quarter performance, several key metrics from InvestingPro bring additional insights into the company's current financial health and stock behavior. The company's Market Cap stands at 6.53 million USD, reflecting its valuation in the market as of the last twelve months ending Q4 2023.
The P/E Ratio, which is a measure of the company's current share price relative to its per-share earnings, is at -1.64, indicating that the company was not profitable during this period. This aligns with the reported net income and may be a point of interest for investors considering the company's future profitability.
The Price / Book ratio, which compares a firm's market value to its book value, is currently at 0.8, suggesting that the stock may be potentially undervalued relative to its assets. This could be an attractive point for value investors. Moreover, the company's stock is trading near its 52-week low, which might present a buying opportunity for those who believe in the company's fundamentals and long-term strategy.
InvestingPro Tips suggest that the stock has experienced significant price volatility and has taken a considerable hit over the last week, with a -31.57% price total return. Additionally, short-term obligations exceeding liquid assets may signal liquidity risk for the company. These factors should be taken into account when assessing the risk profile of an investment in Bimini Capital Management.
For investors seeking a deeper dive into Bimini Capital Management's financials and stock performance, additional InvestingPro Tips are available. There are 6 more tips that can provide further guidance on the stock's prospects. To access these, visit https://www.investing.com/pro/BMNM and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Bimini Capital Management Inc (BMNM) Q1 2024:
Operator: Good morning and welcome to the First Quarter 2024 Earnings Conference Call for Bimini Capital Management. This call is being recorded today May 3, 2024. At this time, the company would like to remind the listeners that statements made during today's conference call relating to the matters that are not historical facts, are forward-looking statements subject to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on the information currently available under management's good faith, belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements. And now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead sir.
Robert Cauley: Thank you operator and good morning. The current economic and interest rate cycle that began with the onset of the COVID-19 pandemic in 2020 was supposed to end in early 2024 as the Fed pivoted and started to remove their tight monetary policy. At their meeting Wednesday, the Federal Reserve or Fed say that we will have to wait a little longer. The economy and inflation are simply too strong for this to occur at least not yet. While market participants still expect some easing with monetary policy over the course of 2024, the starting point continues to get pushed out further and further into the future and the magnitude of Visas continues to decrease. Incoming economic data so far in 2024 is consistent with firming inflation and a solid economy and the labor market shows no signs of weakness. Statement of fiscal policy out of Washington is working against restrictive monetary policy from the Fed. And while inflation has decreased significantly from the peak seen in 2022, it still remains far above the Fed's target level of 2%. So, the odds of monetary policy and funding rates remaining higher for longer look very high. Despite the ongoing strength of the economy and interest rates retracing much of the decline seen over the last two months of 2023, Agency MBS securities performed fairly well during the first quarter of 2024. When the first quarter of 2024 ended, the 30-year fixed rate Agency MBS was trading at a spread of comparable duration treasuries at the low end of the prevailing range since mid-2022, shortly after the Fed began their policy firming. This was approximately the same level -- spread level at the beginning of the quarter. As with the economy, inflation, and interest rates, the outlook for the performance of Agency MBS is unclear and there is the possibility the sector could underperform in the near-term if the current trends discussed above continued. Thus far during the second quarter of 2024, mortgages have underperformed hedges slightly, although they still remain far from levels seen last fall when interest rates were at their highest levels since the 2008 financial crisis. Orchid Island Capital reported net income for the first quarter of 2024 of $19.7 million and its shareholders' equity increased from $469.9 million to $481.6 million. Advisory service revenues were approximately $2.9 million for the quarter, down approximately 5% from the fourth quarter of 2023. Orchid is obligated to reimburse us for direct expenses paid on its behalf and they pay us Orchid's pro rata share of overhead as defined in the management agreement. Overhead reimbursement payments of $0.6 million are included in the $2.9 million revenue figure. As a stockholder of Orchid, we also continue to share its distributions if any paid by Orchid to its stockholders. We received $0.2 million of dividends during the first quarter of 2024, the same as the fourth quarter of 2023. Our operating results are also impacted by changes in the market value of our holdings of Orchid common shares, although these market value changes did not impact our cash flows from Orchid. We recorded an unrealized gain on our Orchid shares of $0.3 million during the first quarter. The investment portfolio generated interest revenue of $1.4 million and we incurred interest expense on our repurchase agreement borrowings of $1.2 million, resulting in net interest income of $0.2 million. The realized yield on the portfolio increased slightly from 6.08% for the fourth quarter of 2023 to 6.15% for the first quarter of 2024. Similarly, our average borrowing rate on the repurchase agreement funding increased marginally from 5.60% for the fourth quarter of 2023 to 5.63% for the first quarter of 2024. Our hedge positions generated unrealized mark-to-market gains of $1.2 million versus unrealized losses on our MBS assets of $0.5 million. We do not add to the MBS portfolio during the first quarter, although we expect to do so during the current quarter. Looking forward the incoming economic data does not appear to justify the Fed taking any steps to loosen monetary policy in the near-term. We agree with current market pricing reflected in overnight funding levels on a forward basis that imply at most one cut in the Fed's overnight rate this year. This implies a relatively stable interest rate environment and this will not be a bad outcome for Bimini if it comes to pass. While our net interest spread on our MBS portfolio is narrow, our hedge positions have performed well and absent a material widening of MBS spreads should continue to do so. This type of environment is also favorable for Orchid Island and its MBS portfolio likely to lead to a stable dividend, again absent a material widening of MBS spreads. The deterioration in the economic outlook that leads the Fed to lower overnight rates would likely be beneficial to both Bimini and Orchid as it would likely lead to an expansion of our net interest margins. The risk to both is a scenario that causes longer maturity rates to increase more than short-term rates as the curve dis-inverts compared to steepening of the curve. This scenario would likely be accompanied by elevated levels of volatility and lead MBS spreads to widen. The aftermath of such an episode, however, would be much more benign with expanded net interest spreads and slow prepayment rates on MBS generally. Operator that concludes my prepared remarks and we'll take any questions.
Operator: There are no questions. I will now turn the conference back over to Hunter Haas, Chief Financial Officer and Chief Investment Officer for the closing remarks.
Hunter Haas: Thank you for joining us this morning. To the extent any of you decide you do have a question after all or for those of you listening to the replay or the webcast, feel free to call us at the office, 772-231-1400. Speak to you next quarter.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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