BIMINI CAPITAL MANAGEMENT, INC. - Quarter Report: 2009 June (Form 10-Q)

bmnm10q06302009.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 June 30, 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 August 10, 2009, the number of shares outstanding of the registrant’s Class A Common Stock, $0.001 par value, was 27,314,203; 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 June 30, 2009 (unaudited) and December 31, 2008	3
Consolidated Statements of Operations (unaudited) for the six and three months ended June 30, 2009 and 2008	4
Consolidated Statement of Stockholders’ Equity (Deficit) (unaudited) for the six months ended June 30, 2009	5
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2009 and 2008	6
Notes to Consolidated Financial Statements (unaudited)	8
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	38
ITEM 6. EXHIBITS.	39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
	(Unaudited)
	June 30, 2009			December 31, 2008
ASSETS:
Mortgage-backed securities, trading:
Pledged to counterparties, at fair value	$	75,158,923		$	158,444,253
Unpledged, at fair value		19,334,510			13,664,242
Total mortgage-backed securities, trading		94,493,433			172,108,495
Cash and cash equivalents		4,820,584			7,668,581
Principal payments receivable		7,692			187,779
Accrued interest receivable		1,161,604			887,536
Property and equipment, net		4,021,057			4,062,116
Prepaids and other assets		2,174,821			4,590,601
Assets held for sale		25,905,470			43,287,020
Total Assets	$	132,584,661		$	232,792,128

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES:
Repurchase agreements	$	69,887,365		$	148,695,082
Junior subordinated notes due to Bimini Capital Trust I & II		51,547,000			103,097,000
Accrued interest payable		180,531			983,069
Accounts payable, accrued expenses and other		199,164			480,655
Liabilities related to assets held for sale		7,520,306			10,431,330
Total Liabilities		129,334,366			263,687,136

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (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 June 30 , 2009 and December 31, 2008		-			-

Class A Common Stock, $0.001 par value; 98,000,000 shares designated: 27,314,203 shares issued and outstanding as of June 30, 2009 and 26,207,023 shares issued and outstanding as of December 31, 2008		27,314			26,207

Class B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding as of June 30 , 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 June 30, 2009 and December 31, 2008		319			319

Additional paid-in capital		339,252,278			339,124,251
Accumulated deficit		(336,029,935	)		(370,046,104	)
Total Stockholders’ Equity (Deficit)		3,250,295			(30,895,008	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	132,584,661		$	232,792,128
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Six Months Ended June 30,						Three Months Ended June 30,
	2009			2008			2009			2008
Interest income, net of amortization of premium and discount	$	6,357,667		$	16,897,697		$	2,683,264		$	6,786,804
Interest expense		(359,427	)		(13,085,907	)		(105,475	)		(5,458,446	)
Net interest income, before interest on junior subordinated notes		5,998,240			3,811,790			2,577,789			1,328,358
Interest expense on junior subordinated notes		(3,388,455	)		(4,180,863	)		(1,298,024	)		(2,090,431	)
Net interest income (expense)		2,609,785			(369,073	)		1,279,765			(762,073	)
Fair value adjustment - held for trading securities		1,717,597			(134,831	)		1,160,488			(737,912	)
Gain on sale of mortgage-backed securities, net		1,509,658			708,319			373,159			385,748
Revenues (expenses), net		5,837,040			204,415			2,813,412			(1,114,237	)

Direct REIT operating expenses		302,770			373,613			149,466			188,324

General and administrative expenses:
Compensation and related benefits		611,924			1,673,344			291,677			827,966
Directors' fees and liability insurance		228,543			368,742			116,950			194,696
Audit, legal and other professional fees		559,468			455,469			165,206			61,382
Other administrative		256,200			758,726			133,816			268,098
Total general and administrative expenses		1,656,135			3,256,281			707,649			1,352,142

Total expenses		1,958,905			3,629,894			857,115			1,540,466

Gain on debt extinguishment		32,446,642			-			32,446,642			-

Income (loss) from continuing operations		36,324,777			(3,425,479	)		34,402,939			(2,654,703	)

Income (loss) from discontinued operations, net of tax		(2,308,608	)		(36,238,946	)		(2,544,155	)		(31,905,445	)

Net income (loss)	$	34,016,169		$	(39,664,425	)	$	31,858,784		$	(34,560,148	)

Basic And Diluted Net Income (Loss) Per Share Of:
CLASS A COMMON STOCK
Continuing operations	$	1.35		$	(0.14	)	$	1.25		$	(0.10	)
Discontinued operations		(0.09	)		(1.43	)		(0.09	)		(1.26	)
Total basic net income (loss) per Class A share	$	1.26		$	(1.57	)	$	1.16		$	(1.36	)
Total diluted net income (loss) per Class A share	$	1.25		$	(1.57	)	$	1.16		$	(1.36	)
CLASS B COMMON STOCK
Continuing operations	$	1.31		$	(0.13	)	$	1.24		$	(0.10	)
Discontinued operations		(0.08	)		(1.41	)		(0.09	)		(1.25	)
Total basic and diluted net income (loss) per Class B share	$	1.23		$	(1.54	)	$	1.15		$	(1.35	)

Weighted Average Shares Outstanding
CLASS A COMMON STOCK
Basic	26,750,819	25,023,908	27,165,402	25,118,066
Diluted	26,817,641	25,023,908	27,222,137	25,118,066
CLASS B COMMON STOCK, basic and diluted	319,388	319,388	319,388	319,388
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
Six Months Ended June 30, 2009

	Common Stock, Amounts at par value									Additional Paid-in Capital			Accumulated Deficit
	Class A			Class B			Class C			Additional Paid-in Capital			Accumulated Deficit				Total
Balances, December 31, 2008		$	26,207		$	319		$	319		$	339,124,251		$	(370,046,104	)		$	(30,895,008	)
Net income			-			-			-			-			34,016,169				34,016,169
Issuance of Class A common shares for board compensation and equity plan share exercises, net			1,107			-			-			68,331			-				69,438
Amortization of equity plan compensation			-			-			-			59,696			-				59,696
Balances, June 30, 2009		$	27,314		$	319		$	319		$	339,252,278		$	(336,029,935	)		$	3,250,295
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	34,016,169		$	(39,664,425	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net loss from discontinued operations		2,308,608			36,238,946
Stock compensation		129,133			583,118
Depreciation and amortization		301,136			396,550
Gain on sale of mortgage-backed securities, net		(1,509,658	)		(708,319	)
Fair value adjustment - held for trading securities		(1,717,597	)		134,831
Gain on extinguishment of long-term debt		(32,446,642	)		-
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest receivable		(274,068	)		1,359,715
Decrease in prepaids and other assets		258,089			88,778
Increase (decrease) in accrued interest payable		41,284			(1,410,488	)
(Decrease) increase in accounts payable, accrued expenses and other		(281,491	)		986,558
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		824,963			(1,994,736	)
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(73,304,344	)		(87,630,648	)
Sales		141,950,058			241,307,931
Principal repayments		12,376,690			63,936,504
Purchases of property and equipment, and other		(9,205	)		(12,152	)
NET CASH PROVIDED BY INVESTING ACTIVITIES		81,013,199			217,601,635
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in restricted cash		-			8,800,000
Proceeds from repurchase agreements		1,246,853,449			2,655,653,975
Principal payments on repurchase agreements		(1,325,661,166	)		(2,881,384,992	)
Stock issuance costs, and other adjustments		-			(943	)
Cash paid to extinguish long-term debt		(18,040,361	)		-
NET CASH USED IN FINANCING ACTIVITIES		(96,848,078	)		(216,931,960	)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash provided by operating activities		12,161,919			9,378,045
Net cash used in financing activities		-			(18,000,000	)
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS		12,161,919			(8,621,955	)
		(2,847,998
NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,847,997	)		(9,947,016	)
CASH AND CASH EQUIVALENTS, beginning of the period		7,668,581			27,284,760
CASH AND CASH EQUIVALENTS, end of the period	$	4,820,584		$	17,337,744

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

	Six Months Ended June 30,
	2009		2008
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	3,455,765	$	19,938,708

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Securities transferred from available-for-sale to trading (at fair value)	$	-	$	1,714,096

Assets and liabilities retired through debt extinguishment transaction:
Investment in Bimini Capital Trust I	$	1,550,000	$	-
Unamortized debt issuance costs		356,820		-
Junior subordinated notes due to Bimini Capital Trust I		34,050,000		-
Accrued interest payable due to Bimini Capital Trust I		843,822		-

See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 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 real estate investment trust (“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. Bimini Capital now operates in a single business segment.

Bimini Capital has elected to be taxed as a 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 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 mortgage origination business, formerly conducted by OITRS is now designated as discontinued operations.

Liquidity

Throughout most of 2008 and to date during 2009 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 have stabilized although credit conditions are still tight and it is unknown when and to what extent market conditions will fully recover. These conditions have and will continue to impact the Company.

As of June 30, 2009 the Company had approximately $69.9 million of outstanding obligations under repurchase agreements with maturities through July 10, 2009. Subsequent to period-end and through August 10, 2009, the Company has been able to maintain its repurchase facilities with comparable terms to those that existed at June 30, 2009 with maturities through August 27, 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 flows 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.

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’ equity (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 June 30, 2009 are not necessarily indicative of results that can be expected for the year ending 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, valuation of securities 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 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 (BCTI). Pursuant to the terms of the agreement, effective as of April 21, 2009, the obligations under the trust preferred capital securities issued by BCTI were discharged and the securities redeemed (see Note 12). Concurrently, Bimini Capital redeemed its junior subordinated notes issued to BCTI. At June 30, 2009, the trust preferred securities of Bimini Capital Trust II (BCTII) remain outstanding.

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 contingent and remain pursuant to the terms of the 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 June 30, 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 June 30, 2009, uninsured deposits were approximately $4.4 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 the 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 June 30, 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. Cash received 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 a fair value adjustment-held for trading securities in the accompanying consolidated statements of operations.

Financial Instruments

SFAS No. 107, Disclosure About Fair Value of Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. Mortgage backed securities are accounted for at fair value in the consolidated balance sheet. The methods and assumptions used to estimate fair value for these instruments are presented in Note 10 of the financial statements.

The estimated fair value of cash and cash equivalents, restricted cash, principal payments receivable, accrued interest receivable, repurchase agreements, unsettled security transactions, accrued interest payable and accounts payable and other liabilities generally approximates their carrying value as of June 30, 2009 due to the short term nature of these financial instruments.

It is impracticable to estimate the fair value of the Company’s junior subordinated notes. Currently, there is a limited market for these types of instruments and it is unclear what interest rates would be available to the Company. Information regarding carrying amounts, effective interest rates and maturity dates for these instruments is presented in the Note 5 to the financial statements.

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 June 30, 2009 and December 31, 2008, is presented net of accumulated depreciation of $560,000 and $510,000, respectively. Depreciation expense was $50,000 and $25,000 for the six and three months ended June 30, 2009, respectively, and $77,000 and $44,000 for the six and three months ended June 30, 2008, 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 95 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.

Share-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. Share-based compensation was approximately $129,000 and $88,000 for the six and three months ended June 30, 2009, respectively, and $583,000 and $167,000 for the six and three months ended June 30, 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 June 2009, the FASB issued Statement of Financial Accounting No. 168 (“FAS 168”), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162. FAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied to nongovernmental entities in the preparation of financial statements in conformity with US GAAP. FAS 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superseded. The adoption of FAS 168 is not expected to have a material impact on the Company’s financial statements.

In June 2009, the FASB issued Statement of Financial Accounting No. 167 (“FAS 167), Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities. FAS 167 changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FAS 167 will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reports thereafter. Earlier application is prohibited. The Company will adopt FAS 167 on January 1, 2010. The Company does not expect the implementation to have a material impact on its consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting No. 166 (“FAS 166”), Accounting for Transfers of Financial Assets. FAS 166 is a revision of FASB Statement of Financial Accounting No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. FAS 166 also eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. FAS 166 will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reports thereafter. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 shall be applied to transfers that occur on or after the effective date. The Company will adopt FAS 166 on January 1, 2010. The Company does not expect the implementation to have a material impact on its consolidated financial statements.

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 FAS 157-4 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 impact of adopting FSP FAS 157-4 did not have 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 (1) the Company has 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 impact of adopting FSP FAS 115-2 and FAS 124-2 did not have 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 guidance is effective for interim reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The impact of adopting FSP FAS 107-1 and APB 28-1 did not have a material effect.

NOTE 2. MORTGAGE-BACKED SECURITIES

The following are the carrying values of Bimini Capital’s MBS portfolio as of June 30, 2009 and December 31, 2008:

(in thousands)

	June 30, 2009		December 31, 2008
Pass-Through Certificates:
Hybrid Arms and Balloons	$	34,118	$	63,068
Adjustable Rate Mortgages		41,041		70,632
Fixed Rate Mortgages		-		24,884
Total Pass-Through Certificates		75,159		158,584
Mortgage Derivative Certificates:
MBS Derivatives		19,334		13,524
Totals	$	94,493	$	172,108

As of June 30, 2009, securities with a carrying value of approximately $3.5 million had contractual maturities less than 36 months. The remainder 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

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 periods ended June 30, 2009 and 2008. For the six and three months ended June 30, 2009, a weighted average of 82,654 and 159,152 of these incentive plan shares are included in the basic and diluted 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 and six months ended June 30, 2008 basic EPS computations, even though they are participating securities.

The Company has also issued stock incentive plan shares that are not dividend eligible. For the computation of diluted EPS for the six and three months ended June 30, 2009, a weighted average of 67,000 and 57,000 of these incentive plan shares have been included. These shares were excluded from the calculation for the six and three months ended June 30, 2008, 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)

	(Unaudited)						(Unaudited)
	Six Months Ended June 30,						Three Months Ended June 30,
	2009			2008			2009			2008
Basic and diluted EPS per Class A common share:
Numerator: net income (loss) allocated to the Class A common shares	$	33,623		$	(39,171	)	$	31,491		$	(34,130	)
Denominator: basic and diluted:
Class A common shares outstanding at the balance sheet date		27,314			25,350			27,314			25,350
Effect of weighting		(563	)		(326	)		(149	)		(232	)
Weighted average shares-basic		26,751			25,024			27,165			25,118
Effect of dilutive stock incentive plan shares		67			-			57			-
Weighted average shares-diluted		26,818			25,024			27,222			25,118
Basic EPS per Class A common share	$	1.26		$	(1.57	)	$	1.16		$	(1.36	)
Diluted EPS per Class A common share	$	1.25		$	(1.57	)	$	1.16		$	(1.36	)
Basic and diluted EPS per Class B common share:
Numerator: net income (loss) allocated to Class B common shares	$	393		$	(493	)	$	368		$	(430	)
Denominator: basic and diluted:
Class B common shares outstanding at the balance sheet date		319			319			319			319
Effect of weighting		-			-			-			-
Weighted average shares-basic and diluted		319			319			319			319
Basic and diluted EPS per Class B common share	$	1.23		$	(1.54	)	$	1.15		$	(1.35	)

NOTE 4. REPURCHASE AGREEMENTS

As of June 30, 2009, Bimini Capital had outstanding repurchase obligations of approximately $69.9 million with a net weighted average borrowing rate of 0.49% and these agreements were collateralized by MBS with a fair value of approximately $75.4 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 June 30, 2009 and December 31, 2008, all of 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 June 30, 2009 and December 31, 2008.

(in thousands)

Repurchase Agreement Counterparties	Amount at Risk(1)		Weighted Average Maturity of Repurchase Agreements in Days
June 30, 2009
MF Global , Inc.	$	5,521		8
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 June 30, 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)

	June 30, 2009		December 31, 2008
Junior subordinated notes owed to Bimini Capital Trust I (BCTI)	$	-	$	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 had a fixed rate of interest until 2010, of 7.61% and thereafter, through maturity in 2035, the rate would float at a spread of 3.30% over the prevailing three-month LIBOR rate. During the six months ended June 30, 2009, the Company entered into an agreement pursuant to which the obligations under the trust preferred capital securities issued by BCTI where discharged and the securities redeemed and the junior subordinated notes issued to BCTI were redeemed.

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. 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. 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 six and three months ended June 30, 2009, the Company issued a total of 1,009,373 and 290,623 shares of its Class A Common Stock to its independent directors for the payment of director fees for services rendered and 97,807 and 72,391 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 June 16, 2014. The Company recognizes compensation expense over the vesting period. Compensation expense recognized for phantom shares during the six months ended June 30, 2009 and 2008 totaled approximately, $60,000 and $425,000, 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 six month periods ended June 30, 2009 and 2008 is presented below:

	Six Months Ended June 30,
	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		1,000,000			0.15		250,000			0.26
Vested		(81,974	)		0.74		(80,125	)		6.33
Forfeited		(50,395	)		0.32		(106,255	)		5.82
Nonvested, at June 30		1,000,000		$	0.15		190,992		$	2.03

As of June 30, 2009, there was approximately $149,000 of unrecognized compensation cost related to nonvested phantom share awards. This cost is expected to be recognized over a weighted-average period of 59.5 months. All of the remaining unvested awards at June 30, 2009 have dividend participation rights.

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). During the six months ended June 30, 2009, the Company entered into an agreement with the counterparty to the sale of the mortgage servicing rights which terminated this guarantee.

NOTE 9. INCOME TAXES

REIT taxable income (loss), as generated by Bimini Capital’s qualifying REIT activities, is determined in accordance with the Code, which is different from the Company’s financial statement net income (loss) as determined 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 income for the six-months ended June 30, 2009 is estimated to be $6.4 million; this amount includes the gain on the debt extinguishment described in Note 12, and it is net of a tax net operating loss carryforward further described below.

During the six months ended June 30, 2009, book gains of approximately $1.5 million were realized on MBS sales; for tax purposes, the realized net capital gains from the MBS portfolio were approximately $3.7 million. Since there are tax capital losses available to offset these gains, the tax gains do not increase REIT taxable income. As of June 30, 2009, the REIT has approximately $68.6 million of remaining tax capital loss carryforwards that are immediately available to offset future tax capital gains. These tax capital loss carryforwards begin to expire in 2012.

As of March 31, 2009, the REIT had an estimated tax net operating loss carryforward of $22.5 million that was immediately available to offset future REIT taxable income. This net operating loss carryforward is expected to be fully utilized in 2009 to offset REIT taxable income, including the realized tax gain on the debt extinguishment.

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, resulted in the Company changing its computation of the estimated net REIT taxable loss for the year ended December 31, 2008. The Company’s estimated 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 approximately $21.1 million. These year 2008 amounts are still subject to further adjustment, because as of July 31, 2009, the issuers of certain of the Company’s portfolio securities have not yet reported their year 2008 tax results. 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 June 30, 2009 is determined as follows:

(in thousands)

Fair Value Measurements as of June 30, 2009, Using
Quoted Prices in Active Markets for Identical Assets (Level 1)	$	-
Significant Other Observable Inputs (Level 2)		94,493
Significant Unobservable Inputs (Level 3)		-
Total Fair Value Measurements	$	94,493

NOTE 11. DISCONTINUED OPERATIONS

OITRS

The results of discontinued operations of OITRS included in the accompanying consolidated statements of operations for the six and three months ended June 30, 2009 and 2008 were as follows:

(in thousands)

	Six Months Ended June 30,						Three Months ended June 30,
	2009			2008			2009			2008
Revenues
Interest income	$	82		$	3		$	19		$	2
Interest expense		-			(15	)		-			(10	)
Net interest income (deficiency)		82			(12	)		19			(8	)
Loss on discontinued mortgage banking activities
Fair value adjustment on retained interest, trading		(916	)		(34,830	)		(2,190	)		(32,710	)
Other discontinued mortgage banking activities		501			(47	)		10			(106	)
Other income and expenses, net of non-recurring items		120			1,837			44			1,591
Net servicing income (loss)		(245	)		965			(40	)		790
Other interest expense and loss reserves		(468	)		(1,241	)		-			(56	)
Deficiency of revenues		(926	)		(33,328	)		(2,157	)		(30,499	)
Expenses
General and administrative expenses		(1,383	)		(2,911	)		(387	)		(1,406	)
Loss from discontinued operations, net of taxes	$	(2,309	)	$	(36,239	)	$	(2,544	)	$	(31,905	)

The assets and liabilities of OITRS included in the consolidated balance sheets as of June 30, 2009 and December 31, 2008 were as follows:

(in thousands)

	June 30, 2009		December 31, 2008
Assets
Cash and cash equivalents	$	47	$	35
Mortgage loans held for sale (a)		409		464
Retained interests, trading (b)		8,997		15,601
Security held for sale		438		15
Receivables		12,813		23,792
Prepaids and other assets		3,201		3,380
Assets held for sale	$	25,905	$	43,287
Liabilities
Accounts payable, accrued expenses and other (d)		7,520		10,431
Liabilities related to assets held for sale	$	7,520	$	10,431

(a) - Mortgage Loans Held for Sale

Mortgage loans held for sale consist of the following as of June 30, 2009 and December 31, 2008:

	June 30, 2009			December 31, 2008
Mortgage loans held for sale, and other, net	$	2,869		$	3,022
Valuation allowance		(2,460	)		(2,558	)
Total	$	409		$	464

Series	Issue Date	June 30, 2009		December 31, 2008
HMAC 2004-1	March 4, 2004	$	848	$	2,441
HMAC 2004-2	May 10, 2004		1,358		2,735
HMAC 2004-3	June 30, 2004		1,763		1,281
HMAC 2004-4	August 16, 2004		2,420		1,867
HMAC 2004-5	September 28, 2004		1,074		3,080
HMAC 2004-6	November 17, 2004		1,476		1,846
OMAC 2005-1	January 31, 2005		14		999
OMAC 2005-2	April 5, 2005		44		169
OMAC 2005-3	June 17, 2005		-		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		$	8,997	$	15,601

	June 30, 2009			December 31, 2008
Balance sheet carrying value of retained interests – fair value	$	8,997		$	15,601
Weighted average life (in years)		3.32			14.76
Prepayment assumption (annual rate)		14.26	%		19.36	%
Impact on fair value of 10% adverse change	$	(209	)	$	(1,838	)
Impact on fair value of 20% adverse change	$	(240	)	$	(3,086	)
Expected credit losses (% of original unpaid principal balance)		7.20	%		5.61	%
Impact on fair value of 10% adverse change	$	(512	)	$	(2,841	)
Impact on fair value of 20% adverse change	$	(1,127	)	$	(6,095	)
Residual cash-flow discount rate		27.5	%		27.50	%
Impact on fair value of 10% adverse change	$	(172	)	$	(1,540	)
Impact on fair value of 20% adverse change	$	(330	)	$	(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	$	(658	)	$	(2,692	)
Impact on fair value of 20% adverse change	$	(1,206	)	$	(5,067	)

Series	Issue Date	Original Unpaid Principal Balance		Actual Losses Through June 30, 2009			Projected Future Credit Losses as of June 30, 2009			Projected Total Credit Losses as of June 30, 2009
HMAC 2004-1	March 4, 2004	$	309,710		0.77	%		0.95	%		1.72	%
HMAC 2004-2	May 10, 2004		388,737		1.02	%		1.14	%		2.16	%
HMAC 2004-3	June 30, 2004		417,055		0.97	%		0.90	%		1.87	%
HMAC 2004-4	August 16, 2004		410,123		0.81	%		0.56	%		1.37	%
HMAC 2004-5	September 28, 2004		413,875		1.03	%		1.62	%		2.65	%
HMAC 2004-6	November 17, 2004		761,027		1.40	%		2.07	%		3.47	%
OMAC 2005-1	January 31, 2005		802,625		2.02	%		2.26	%		4.28	%
OMAC 2005-2	April 5, 2005		883,987		2.15	%		2.63	%		4.78	%
OMAC 2005-3	June 17, 2005		937,117		2.23	%		4.03	%		6.26	%
OMAC 2005-4	August 25, 2005		1,321,739		3.38	%		4.81	%		8.19	%
OMAC 2005-5	November 23, 2005		986,277		4.39	%		6.10	%		10.49	%
OMAC 2006-1	March 23, 2006		934,441		4.56	%		9.12	%		13.68	%
OMAC 2006-2	June 26, 2006		491,572		7.56	%		15.32	%		22.88	%
Total		$	9,058,285		2.79	%		4.41	%		7.20	%

As of Date	Total Principal Amount of Loans		Principal Amount of Loans 60 Days or more delinquent		Net Credit Losses
June 30, 2009	$	3,583,127	$	829,322	$	252,532
December 31, 2008		3,920,433		728,884		129,715

			Fair Value Measurements at June 30, 2009, Using
	Fair Value Measurements June 30, 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		8,997		-		-		8,997
Security held for sale		438		-		-		438

	Mortgage Loans Held for Sale			Retained Interests, Trading			Securities Held for Sale
Beginning balance	$	464		$	15,601		$	15
Gains (losses) included in earnings		27			(916	)		476
Sales and collections		(82	)		(5,688	)		(53	)
Ending Balance	$	409		$	8,997		$	438

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
June 30, 2009
Adjustable-Rate MBS	$	41,041	43.43%	3.83%	257	1-Jun-35	3.46	10.76%	9.64%
Hybrid Adjustable-Rate MBS		34,118	36.11%	4.79%	312	1-Aug-36	18.71	10.23%	2.00%
Total Mortgage Backed Pass Through		75,159	79.54%	4.58%	281	1-Aug-36	10.38	10.52%	5.60%
Derivative MBS		19,334	20.46%	5.80%	277	25-Jun-39	n/a	n/a	n/a
Total Mortgage Assets	$	94,493	100.00%	4.58%	281	25-Jun-39	10.38	n/a	5.60%
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

	June 30, 2009					December 31, 2008
Agency	Fair Value		Percentage of Entire Portfolio			Fair Value		Percentage of Entire Portfolio
Fannie Mae	$	88,926		94.11	%	$	141,364		82.1	%
Freddie Mac		5,567		5.89	%		30,744		17.9	%
Total Portfolio	$	94,493		100.00	%	$	172,108		100.0	%

Entire Portfolio	June 30, 2009		December 31, 2008
Weighted Average Pass Through Purchase Price	$	102.25	$	102.05
Weighted Average Derivative Purchase Price		4.39		6.86
Weighted Average Pass Through Current Price	$	102.28	$	101.10
Weighted Average Derivative Current Price	$	4.59	$	6.98
Effective Duration (1)		0.960		1.279

	Six Months Ended June 30,
	2009			2008
Balance—Beginning of period	$	7,303		$	6,960
Provision		468			1,000
Settlements		(2,622	)		(1,416	)
Balance—End of period	$	5,149		$	6,544

			Interest Rates Fall 100 BPS			Interest Rates Rise 100 BPS			Interest Rates Rise 200 BPS
Adjustable Rate MBS
Fair Value	$	41,041
Change in Fair Value			$	406		$	(541	)	$	(1,178	)
Change as a % of Fair Value				0.99	%		(1.32	)%		(2.87	)%
Hybrid Adjustable Rate MBS
Fair Value	$	34,118
Change in Fair Value			$	258			(690	)	$	(1,611	)
Change as a % of Fair Value				0.76	%		(2.02	)%		(4.72	)%
Derivative MBS
Fair Value	$	19,334
Change in Fair Value			$	(1,729	)	$	708		$	(406	)
Change as a % of Fair Value				(8.94	)%		3.66	%		(2.10	)%
Portfolio Total
Fair Value	$	94,493
Change in fair Value			$	(1,065	)		(523	)	$	(3,195	)
Change as a % of Fair Value				(1.13	)%		(0.55	)%		(3.38	)%
Cash
Fair Value	$	4,821

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
June 30, 2009	$	92,949		2,683		-			627		8.85	%	$	72,312		105		0.58	%	$	2,578			8.27	%	$	1,204
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	%		-

	Six months Ended June 30
	2009		2008
Net servicing fees (paid) received	$	-	$	845
Servicing advances and repayments		8,184		786
Cash flows received on retained interests		5,688		10,671

NOMINEE	FOR		ABSTAIN
Robert E. Jaumot		16,974,455		5,792,373
Robert J. Dwyer		20,069,519		2,697,309

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	Agreement dated as of June 30, 2009, by and between Bimini Capital Management, Inc. and Robert E. Cauley, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, dated June 30, 2009, filed with the SEC on July 2, 2009
†10.11	Agreement dated as of June 30, 2009, by and between Bimini Capital Management, Inc. and G. Hunter Haas, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, dated June 30, 2009, filed with the SEC on July 2, 2009
10.12	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
10.13	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
10.14	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
10.15	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
10.16	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
10.17	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
10.18	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
10.19	Amended and Restated Junior Subordinated Indenture, dated as of September 26, 2005, between the Company and JPMorgan Chase Bank, National Association, as trustee.
10.20	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.
10.21	Indenture, dated as of October 5, 2005, between the Company and Wilmington Trust Company, as debenture trustee.
10.22	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.

Date: July 10, 2009		By:	/s/ Robert E. Cauley
			Robert E. Cauley Chairman and Chief Executive Officer