Bimini Capital Management (BMNM) reported its third-quarter earnings for 2024, revealing a mix of positive financial outcomes against a backdrop of economic uncertainty and monetary policy shifts. The company's net income stood at $17.3 million, with a significant increase in shareholders' equity.
Despite the Federal Reserve's recent interest rate cuts, the market's anticipation of economic weakening may not align with the latest economic data, potentially impacting future monetary policy decisions. Bimini's advisory service revenues saw a 4% increase over the previous quarter, while its investment portfolio generated net interest income of $0.3 million. The company is considering expanding its portfolio in response to market conditions post-election.
Key Takeaways
- Bimini Capital Management's Q3 net income reached $17.3 million.
- Shareholders' equity increased from $555.9 million to $656 million.
- Advisory service revenues rose by 4% over the second quarter to approximately $3.3 million.
- The company's capital base has grown nearly 40% year-to-date.
- Net interest income for the year-to-date was $1.04 million, up from $0.88 million in the same period of 2023.
- The RMBS portfolio expanded significantly, with funding costs expected to decline due to Federal Reserve rate cuts.
- The company reported a net income before taxes of $0.8 million for the quarter.
Company Outlook
- Bimini anticipates that the Federal Reserve will further reduce short-term rates, which could enhance net interest margins.
- The company is poised to grow its portfolio using excess funds once market conditions stabilize post-election.
Bearish Highlights
- Year-to-date advisory service revenues are down 11% despite the quarterly increase.
- The economic indicators suggest that the market's expectation of a weakening economy might not be accurate, potentially affecting future rate cuts.
Bullish Highlights
- The RMBS portfolio at Royal Palm has grown by 28% year-to-date and 37% since June 30, 2024.
- The Agency RMBS index returned 4.7% for the quarter, outperforming comparable duration swaps.
Misses
- The capital base's decline in 2023 has not been fully reversed in 2024.
Q&A Highlights
- Bimini's management did not highlight specific questions from the Q&A session but encouraged participants to reach out with further inquiries post-call.
Bimini Capital Management's third-quarter earnings call painted a picture of a company navigating a complex economic landscape, with the Federal Reserve's monetary policy and upcoming presidential elections playing a significant role in future strategies. The company's financial health appears robust, with increases in net income and shareholders' equity. However, the broader economic indicators and market expectations will continue to influence Bimini's approach as it looks to expand its portfolio and capitalize on changing interest rates. The outcome of the presidential election and subsequent market reactions remain key factors for Bimini's strategic decisions in the coming months.
InvestingPro Insights
Bimini Capital Management's (BMNM) recent financial performance, as reported in their Q3 earnings, can be further contextualized with real-time data from InvestingPro. The company's market capitalization stands at $9.29 million, reflecting its current valuation in the market.
One of the InvestingPro Tips highlights that BMNM has seen a significant return over the last week, with data showing a 1-week price total return of 8.88%. This aligns with the positive financial outcomes reported in the earnings call, including the increase in net income and shareholders' equity. However, it's worth noting that the stock has fared poorly over the last month, with a 1-month price total return of -15.86%, suggesting some volatility in investor sentiment.
The company's revenue for the last twelve months as of Q2 2024 was $10.62 million, with a revenue growth of 6.26% over the same period. This growth, albeit modest, supports the narrative of the company's expanding advisory service revenues and growing RMBS portfolio mentioned in the earnings report.
An important InvestingPro Tip to consider is that BMNM has not been profitable over the last twelve months, which is reflected in its negative P/E ratio of -1.74. This information adds context to the company's reported net income and underscores the importance of the anticipated Federal Reserve rate cuts in potentially improving Bimini's net interest margins.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and data points that could provide deeper insights into BMNM's financial health and market position. There are 6 additional InvestingPro Tips available for Bimini Capital Management, which could be valuable for investors looking to make informed decisions based on a broader range of financial metrics and expert insights.
Full transcript - Bimini Capital Management Inc (BMNM) Q3 2024:
Operator: Good morning, and welcome to the Third Quarter 2024 Earnings Conference Call for Bimini Capital Management. This call is being recorded today, November 1, 2024. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith, belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements. Now I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.
Robert Cauley: Thank you, operator and good morning. First, I'll give a brief synopsis of events during the quarter. The impacts of tight monetary policy orchestrated by the Federal Reserve appeared to have finally have the desired impacts on inflation and the imbalances in the labor market. Inflation is closing in on Fed's 2% target and hiring and wage growth are slowing, while the unemployment rate has steadily risen. In contrast, growth in the economy and consumer spending have remained robust throughout. In late September, the Fed reduced the overnight funding rate by 50 basis points and the market anticipated it was the first of many such cuts. Unfortunately, the non-farm payroll reports for September 2024 released in early October as well as the latest readings on inflation and consumer spending, imply the economy may not be weakening so much after all. If this proves to be the case, the magnitude and urgency of additional rate cuts by the Fed may not live up to market expectations mentioned above. Now turning to our results. Orchid Island (NYSE:ORC) Capital reported net income for the third quarter of 2024 of $17.3 million and its shareholders' equity increased from $555.9 million to $656 million. As a result, Bimini's advisory service revenues of approximately $3.3 million represented a 4% increase over the second quarter. Orchid’s capital bases increased substantially year-to-date, nearly 40%, although advisory service revenues are down 11% year-to-date. Orchid's capital base declined over the course of 2023, and the decline has yet to be fully reversed so far in 2024. The investment portfolio generated net interest income of $0.3 million, inclusive of dividends on our shares of Orchid Island, down very slightly from the prior quarter. For the year-to-date period, net interest income was $1.04 million versus $0.88 million for the first nine months of 2023. The RMBS portfolio at Royal Palm has grown by approximately 28% year-to-date and 37% since June 30, 2024. Our funding costs should decline as short-term rates continue to be reduced by the Federal Reserve, potentially enhancing our net interest margin. Otherwise, our funding costs have varied slightly between 5.5% and 5.6% for the past four quarters. The return for the Agency RMBS index for the quarter was 4.7% on an absolute basis, and the excess return versus comparable duration swaps of proxy for hedge returns was 0.7%. Mark-to-market gains and losses on our RMBS portfolio, hedge position and shares of Orchid reported as other income on our statement of operations netted to income of $0.4 million for the quarter and $1.1 million for the nine month period ended September 30, 2024. The company, inclusive of both the Advisory Services segment and the Investment Portfolio segment reported net income before taxes for the quarter of $0.8 million versus a net loss before taxes of $0.2 million for the second quarter of 2024. For the nine month period ended September 30, 2024, our net interest income -- net income before taxes was $1.25 million. For the three and nine month periods ended September 30, 2024, a Bimini reported tax provisions of $0.5 million and $1.1 million, respectively. As the fourth quarter unfolds, the reversal in sentiment in interest rate levels that started in late September continues. The market appears to be rethinking the perceived strength of the economy and the outlook for further rate cuts by the Federal Reserve. With the Presidential election on the horizon, the market seems to anticipate a possible Republican sweep with the implications being they would be pro-growth with accompanying fiscal deficit expansion. As a result, interest rates are higher and mortgages have underperformed their hedges. There's also another Fed, FOMC meeting next week, and the market expects another 25 basis point reduction in our overnight funding rate. We are considering using available excess funds to grow the portfolio when we sense the move has run its course. We will see how things look once the outcome of the election is determined and look forward to speaking with you again after year-end. Thank you, operator, and we can turn the call over to questions.
Operator:
Robert Cauley: Thank you, operator and thank you for joining us today. To the extent you have questions that come up after the call, please feel free to call or likewise, if you didn't listen to the call live listen to a recording and you have questions, you can reach us at the office. The number is (772) 231-1400. Otherwise, we look forward to speaking with you again at the end of the fourth quarter. Have a good day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
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