Bimini Capital Management, Inc. (BMNM) Earnings Call Transcript

Thank you. Hello and welcome to Benhamin Capital Management second quarter 2026 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

I will now like to hand the conference over to Melissa Alfonso. You may begin. Thank you. Good morning and welcome to the second quarter 2026 earnings conference call for Bimini Capital Management. This call is being recorded today, August 7th, 2026. 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 results to differ materially from those expressed in such forward-looking statements. 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 forward-looking statement. Now I'd like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Colley. Please go ahead, sir. Thanks, Melissa, and good morning.

Regarding our results for the second quarter of 2026, market conditions for the agency RMBS market and risk assets generally were uneven and developments related to the war with Iran created volatility, causing market rallies and sell-offs with every headline. The Federal Reserve has a new chairman who was initially viewed as a stout inflationary hawk after his first press conference in June but much less so much less so after a second in late July resulting in a significant sell-off and longer maturity interest rates and a steepening of the Treasury curve Finally, the economy of the US has proven to be very resilient and the labor market appears to have stabilized, at least before this morning. On top of all this, second quarter corporate earnings were robust and the AI driven build out resulted in unprecedented levels of CapEx spending on the part of the hyperscalers. While this may prove to be inflationary near term, as chip demand and prices surge, impacting prices of any product that uses them, productivity gains that are from AI should suppress inflation in future periods, or at least that's the conventional wisdom. In sum, even with this very mixed backdrop, risk assets had a very solid quarter and this continued into the third quarter. Orchid Island Capital, or ORCID, reported an economic return of 6.2% for the quarter, grew its share count by approximately 1.5%, and increased its average equity base by approximately 5.7% over the first quarter of 2026. This resulted in a 3.4% increase in our As you know, we closed on the acquisition of Tom Johnson Investment Management on April 1st, or 2026, TGIM, so the results are now consolidated with ours. Advisory service revenues, inclusive of those of TGIM, were approximately $6.8 million for the second quarter, versus $3.8 million for the second quarter of 2025, and 0.1 million for the first quarter of 2026, neither of which included any results from TGEM. In order to facilitate the acquisition of TGEM, which was an all-cash transaction, we used a combination of available cash and proceeds from the disposition of a portion of the investment portfolio. Note, we did not have to incur any debt facilitate the transaction. In fact, we were able to retain a portion of the portfolio as well as our shares of work in Ireland. I want to highlight for the second quarter of 2026, advisory service revenue of TGEM, less direct operating expenses, was roughly equal to the interest and dividend income, less repurchase agreement interest expense of the portfolio during the second quarter of 2025. As mentioned, investment portfolio after funding the purchase of TISM, the TISM acquisition. Although the market value of the portfolio as of June 30th, 2026 was 37.9 million versus 120.8 million as of June 30th, 2025. So it's a little under one-third of the size. We view the acquisition of PGM as transformational for BIMIDI. Our goal is to enhance the consistency of the earnings we generate as part of our tax-driven strategy in the near term, but also beyond. The acquisition should help us to do this as we diversify the mix of assets under management away from a sole focus on the agency RMBS market. We look forward to helping teaching grow their AUM over time, leveraging their track record, quality management team, and sound investment process. We hope we can facilitate this growth by leveraging our relationships across Wall Street and the banking community developed over the last 20 plus years by BIMINI. Further, while we remain focused on our tax-driven strategy of harvesting the tax savings provided by our NOLs, we recognize we are nearing the maturity of the NOLs and we must begin to focus on the years that follow. By the end of 2028, all but approximately 5.5 million of the NOLs of our former mortgage company will have been used or expired. and that will drop to approximately 1 million by the end of 2029. BIMini has additional NOLs that do not expire until 2036, but those are quite small in comparison. Of course, we will attempt to take full advantage of all the NOLs we have available to us prior to their expiration. However, once the available NOLs have been acquired, and utilize or expire, we will become a tax paying entity. This will drive how we see the business in our balance sheet going forward. BIMINI has been profitable year to date and cash flow positive as well. We anticipate this to be the case going forward. Given our market outlook and the possibility of increasing funding costs so that Federal Reserve raised the Fed funds rate in the near term, we may start to pay down our trust preferred debt with available cash. This process will operate just like growing an income-producing asset base, only by a decreased interest expense versus increased interest income, had we increased the size of the portfolio. It will also facilitate the transition of our balance sheet referenced above, especially in light of the fact that our trust-referred debt matures in 2035. Finally, today we are joined on the call by Richard Perry, the President and CIO of Tom Johnson Investment Management, or TGEM. I would like to turn the call over to Richard to tell us more about TGEM's history, provide an overview of their investment products and processes, and give us an update on how their year is going so far.

Yes, good morning. My name is Richard Perry. And just to give you a little history of the firm, we were founded in 1983. Prior to that, a number of us were at the bank, First National Bank and Trust Company. Tom Johnson was the head of the Trust Investment Department. And at that time, CHOSE TO STEP OUT AND START HIS OWN FIRM. SO WE'VE BEEN IN EXISTENCE SINCE 1983. period of time to help us with the transition. We sold the firm to United Asset Management that ultimately became a part of old mutual and then I bought the firm back in 2003. We're now at 1.7 billion in assets approximately. We have two equity portfolios and we have four fixed FIXED INCOME PORTFOLIOS THAT WE USE FOR OUR CLIENTELE PROVIDING DIRECT EQUITIES OR FIXED AND ALSO DEGREES OF BALANCED ACCOUNTS FOR OUR CLIENTS. WE HAVE TWO KINDS OF LINES OF BUSINESSES. WE HAVE DIRECT CLIENTS THAT REPRESENTS ABOUT 38% OF OUR BUSINESS AND THEN ABOUT 60% OF OUR BUSINESS. 62% of our business is through platforms where we provide our separate account management services to those groups. WE'RE VERY IMPORTANT FOR OUR FIRM IS TO BE DIVERSIFIED, SO WE HAVE EQUITIES AND FIXED AND BALANCED. CURRENTLY WE HAVE ABOUT 15% OF OUR ASSETS IS IN EQUITIES, 30% IS IN BALANCED, AND 55% IS IN FIXED INCOME. SO NET-NET ABOUT 33% OF OUR ASSETS IS IN EQUITIES. OF OUR ASSETS ARE DEDICATED TO EQUITIES AND 67% IS DEDICATED TO FIXED INCOME. I WOULD STRONGLY SUGGEST THAT YOU LOOK AT OUR FACT SHEETS ON OUR TGIM WEBSITE AND THAT WILL GIVE YOU KIND OF AN IDEA OF OUR PERFORMANCE RELATIVE TO OUR BENCHMARKS AND ALSO OUR RULES RISK-RETURN CHARACTERISTICS. OBVIOUSLY, AS MY INVESTMENT TEAM, WE'RE VERY PROUD OF THOSE NEAR-TERM AND LONG-TERM RESULTS. WE'VE HAD A VERY GOOD SEASON, IN MY OPINION. Let's see, going over the – right now, going forward, just to illuminate, we're kind of a very conservative investment firm. We have valuations of about 14 times on our – PE ratios relative to the market that's over 20 times earnings. Our fixed income structure is just a little bit less than our benchmarks in terms of duration and we're kind of more focused at this point in time on the treasuries relative to the corporate market. And currently, relative to, say, last year where we had a barbell strategy, we have more of a laddered structured strategy because of the environment we're faced in. And from that, I welcome questions and turn the platform over to Bob.

Thanks, Richard. Operator, we can turn the call over to questions now.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please first start 1-1 on your telephone, then wait for your name to be announced. withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gary Ribb with Accretive Wealth Partners.

hey Bob hunter how are you good good yes I'm doing good how you guys doing.

bad little wet but not that train here like like we start to build an art but go ahead.

And it's nice to meet the folks from the from the firm you acquired. I got a couple questions. I got a question for you guys. You alluded this in sort of your prepared remarks, but as you're looking towards the NOL expiring in 2028, to the extent that you have levers to accelerate asset value and income, to what extent do you think about... The advisory agreement with ORCID, it seems to me that that's a significant source of value. And my understanding is that asset management agreements in the marketplace have a much higher potential value than even the termination fee on the ORCID agreement would have. And it seems to me that maybe a value maximizing move is you can do that. you're looking at the NOL expiration is perhaps monetizing that ahead of the expiration, because there's significant, some money and significant potential tax strike. And I was just curious how you guys are thinking about that.

actually did it's troublesome here's why In case of Richard business, they manage the assets of their clients. They have a fiduciary responsibility. They manage their assets on a fee basis with respect to ORC. We're the management team. It's not just like we have AUM. run the day-to-day operations of the business in order for us to do that we could I guess sell the management fee you know ask them to buy us out and hire somebody else but in all likelihood what would happen is hunter and I will just become employees of Orchid yes so I was a leader either either a marketing process with a sale or some sort of internalization at Orchid potentially right that's what occur but then it would be troublesome for us to then continue to run bimini also that's That's kind of the rub there is that, yes, that would be great for BIMI to get a big windfall, maybe go out and deploy those proceeds into some other income-generating assets. but who really runs the business? and would Orchid be content to have us continue to do that? And that's not as clear an answer to me. It would, I think that would be a conflict. It might seem that like, you know, potentially you could, if you know, with, with Richard's business, if that's a new line of business that you guys are interested in pursuing, uh,.

you know, sort of the environment for that, you know, M&A in that environment is pretty strong. You might, if you had a giant cash pile, you might be able to get a lot of money out of might have people approaching you saying, we'd like to merge into you. And that problem might obviate itself and, you know, you guys and Bimini shareholders could make an awful lot of money potentially in that kind of transaction.

You could and it would be a short-term gain you would you know probably use up More of the NOL in the near term, but I think the business is worth more on a going concern basis Okay, granted. Maybe we don't use quite as much of the NOL But looking down the road I We're not that far from, as I said, utilizing all these, maybe not as much, becoming a taxpaying entity, but also we generate a lot of cash flow even as to where we are. And to the extent we continue to grow ORCID, the small share count that we have there's a lot of earnings leverage there and we're not that far from that I don't you know and again it allows us to continue to run the company I'm not really willing to just walk away as a large shareholder too so I mean it's it's kind of how we look yes.

I mean, the company's $30 million, $26 million as we sit here today in market cap. I mean... You know, there are things that you could do that could get that to 100 million, potentially. And, you know, you guys own half of that, so... Maybe we could talk about that more offline. But I guess in light of some of the hidden value, in terms of like the value of that management agreement and a few other things. maybe the earnings power becoming a bit more obvious. Have you thought about being a little bit more aggressive in terms of trying to tender for shares or maybe do some kind of forward-reverse split where you cash some people out and you get a little bit of a buyback that way, but you also get a stock price where people are actually allowed to buy it? There's a lot of people that can't buy stocks that are less than like $5. Yes.

Right. I mean, I thought that I have an answer for that question today. I saw that you asked me that yesterday. Something with take-under advisement. But another, and we may, not ruling that out at all. And we have, as far as share buybacks, yes, we have, perhaps, release. You did a little in the quarter. That was good. Yes, and we will continue to do so. The problem is that there's just not a lot of sellers out there. Um, You know if you were to call we've done two tenders the first one went extremely well. It was fully subscribed Uh, the second one wasn't even close and And while we are able to sell or buy back some shares, there's just not a lot of sellers out there. I mean, we could do the split, as you alluded to, that might get some people out. A lot of the small shareholders are remnants of the former mortgage company. I don't know how many employees were affected. They all got like 100 shares at the time. So there's never, you know, several hundred of those. Other than that, I suspect, and I don't know because everybody tends to hold their position under the 5% reporting threshold, but I suspect there's really only about 10 or 12 shareholders who own shares. close to that and it's really hard to just let people see what's going on. I mean, it's, you know, anybody in most, another thing I would say, most people that hold it are kind of like yourself. They've known the stock, they followed it for years. They know what's going on and they know what's on the horizon. So it's hard to get them to sell it. And it's, it's been viewed as a big. a private equity investment for 10 plus years. And so if they think they're getting close to cashing in, they don't necessarily want to sell out. So we could try those things. But, you know, the other thing is, and I don't want to, I got to be careful what I say, but, you know, it, It's not here today, we're not there yet. But in the not too distant future, a lot of things can change. If we're here five years from now and the NOLs have been used to the extent possible and we started to transition the balance sheet, it opens the door to a lot of different things. that can transform the company, but you gotta get through this next step first. And I think there's tremendous upside in the business then.