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

bmnm10q03312009.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number: 001-32171

Bimini Capital Management, Inc.

(Exact name of registrant as specified in its charter)


Maryland		72-1571637
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3305 Flamingo Drive, Vero Beach, Florida 32963

(Address of principal executive offices) (Zip Code)

(772) 231-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES¨ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

As of May 8, 2009, the number of shares outstanding of the registrant’s Class A Common Stock, $0.001 par value, was 26,951,189; the number of shares outstanding of the registrant’s Class B Common Stock, $0.001 par value, was 319,388; and the number of shares outstanding of the registrant’s Class C Common Stock, $0.001 par value, was 319,388.

BIMINI CAPITAL MANAGEMENT, INC.

INDEX

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.	3
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008	3
Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2009 and 2008	4
Consolidated Statement of Stockholders’ Deficit (unaudited) for the three months ended March 31, 2009	5
Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2009 and 2008	6
Notes to Consolidated Financial Statements (unaudited)	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	36
ITEM 4T. CONTROLS AND PROCEDURES.	36

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.	36
ITEM 1A. RISK FACTORS.	37
ITEM 6. EXHIBITS.	39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
	(Unaudited)
	March 31, 2009			December 31, 2008
ASSETS:
Mortgage-backed securities, trading:
Pledged to counterparties, at fair value	$	80,617,777		$	158,444,253
Unpledged, at fair value		10,786,430			13,664,242
Total mortgage-backed securities, trading		91,404,207			172,108,495
Cash and cash equivalents		22,113,048			7,668,581
Principal payments receivable		39,955			187,779
Accrued interest receivable		683,601			887,536
Property and equipment, net		4,046,227			4,062,116
Prepaids and other assets		4,434,420			4,590,601
Assets held for sale		35,598,142			43,287,020
Total Assets	$	158,319,600		$	232,792,128

LIABILITIES AND STOCKHOLDERS’ DEFICIT

LIABILITIES:
Repurchase agreements	$	74,735,787		$	148,695,082
Junior subordinated notes due to Bimini Capital Trust I & II		103,097,000			103,097,000
Accrued interest payable		798,025			983,069
Accounts payable, accrued expenses and other		278,698			480,655
Liabilities related to assets held for sale		8,107,050			10,431,330
Total Liabilities		187,016,560			263,687,136

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; designated, 1,800,000 shares as Class A Redeemable and 2,000,000 shares as Class B Redeemable; no shares issued and outstanding as of March 31 , 2009 and December 31, 2008		-			-

Class A Common Stock, $0.001 par value; 98,000,000 shares designated: 26,951,189 shares issued and outstanding as of March 31, 2009 and 26,207,023 shares issued and outstanding as of December 31, 2008		26,951			26,207

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

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

Additional paid-in capital		339,164,170			339,124,251
Accumulated deficit		(367,888,719	)		(370,046,104	)
Total Stockholders’ Deficit		(28,696,960	)		(30,895,008	)
Total Liabilities and Stockholders’ Deficit	$	158,319,600		$	232,792,128
See Notes to Consolidated Financial Statements

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

	Three Months Ended March 31,
	2009			2008
Interest income, net of amortization of premium and discount	$	3,674,403		$	10,110,893
Interest expense		(253,952	)		(7,627,461	)
Net interest income, before interest on junior subordinated notes		3,420,451			2,483,432
Interest expense on junior subordinated notes		(2,090,432	)		(2,090,432	)
Net interest income		1,330,019			393,000
Fair value adjustment - held for trading securities		557,109			603,081
Gain on sale of mortgage-backed securities, net		1,136,500			322,571
Revenues, net		3,023,628			1,318,652

Direct REIT operating expenses		153,304			185,289

General and administrative expenses:
Compensation and related benefits		320,247			845,378
Directors' fees and liability insurance		111,592			174,046
Audit, legal and other professional fees		394,262			394,087
Other administrative		122,385			490,628
Total general and administrative expenses		948,486			1,904,139

Total expenses		1,101,790			2,089,428

Income (loss) from continuing operations		1,921,838			(770,776	)

Income (loss) from discontinued operations, net of tax		235,547			(4,333,501	)

Net income (loss)	$	2,157,385		$	(5,104,277	)

Basic And Diluted Net Income (Loss) Per Share Of:
CLASS A COMMON STOCK
Continuing operations	$	0.07		$	(0.03	)
Discontinued operations		0.01			(0.17	)
Total basic and diluted net income (loss) per Class A share	$	0.08		$	(0.20	)
CLASS B COMMON STOCK
Continuing operations	$	0.07		$	(0.03	)
Discontinued operations		0.01			(0.17	)
Total basic and diluted net income (loss) per Class B share	$	0.08		$	(0.20	)

Weighted Average Shares Outstanding
CLASS A COMMON STOCK
Basic		26,331,630			24,929,750
Diluted		26,408,649			24,929,750
CLASS B COMMON STOCK, basic and diluted		319,388			319,388
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
(Unaudited)
Three Months Ended March 31, 2009

	Common Stock, Amounts at par value									Additional Paid-in			Accumulated
	Class A			Class B			Class C			Capital			Deficit				Total
Balances, December 31, 2008		$	26,207		$	319		$	319		$	339,124,251		$	(370,046,104	)		$	(30,895,008	)
Net income			-			-			-			-			2,157,385				2,157,385
Issuance of Class A common shares for board compensation and equity plan share exercises, net			744			-			-			28,006			-				28,750
Amortization of equity plan compensation			-			-			-			11,913			-				11,913
Balances, March 31, 2009		$	26,951		$	319		$	319		$	339,164,170		$	(367,888,719	)		$	(28,696,960	)
See Notes to Consolidated Financial Statements

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

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,157,385		$	(5,104,277	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net (income) loss from discontinued operations		(235,547	)		4,333,501
Stock compensation		40,663			416,502
Depreciation and amortization		182,088			38,338
Gain on sale of mortgage-backed securities, net		(1,136,499	)		(322,571	)
Fair value adjustment - held for trading securities		(557,109	)		(603,081	)
Changes in operating assets and liabilities:
Decrease in accrued interest receivable		203,935			1,025,566
(Increase) decrease in prepaids and other assets		(813	)		283,714
Decrease in accrued interest payable		(185,043	)		(1,360,394	)
Decrease in accounts payable, accrued expenses and other		(201,960	)		(61,774	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		267,100			(1,354,476	)
CASH FLOWS FROM INVESTING ACTIVITIES:
From mortgage-backed securities investments:
Purchases		(30,106,576	)		(22,199,857	)
Sales		105,476,558			158,390,897
Principal repayments		7,175,739			41,609,037
Purchases of property and equipment, and other		(9,205	)		(8,172	)
NET CASH PROVIDED BY INVESTING ACTIVITIES		82,536,516			177,791,905
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in restricted cash		-			8,800,000
Proceeds from repurchase agreements		926,057,181			1,516,887,978
Principal payments on repurchase agreements		(1,000,016,476	)		(1,704,048,750	)
Stock issuance costs, and other adjustments		-			(943	)
NET CASH USED IN FINANCING ACTIVITIES		(73,959,295	)		(178,361,715	)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash provided (used in) by operating activities		5,600,146			(228,962	)
Net cash used in financing activities		-			(10,000,000	)
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS		5,600,146			(10,228,962	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		14,444,467			(12,153,248	)
CASH AND CASH EQUIVALENTS, beginning of the period		7,668,581			27,284,760
CASH AND CASH EQUIVALENTS, end of the period	$	22,113,048		$	15,131,512

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	2,529,427		$	11,926,750

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Securities transferred from available-for-sale to trading (at fair value)	$	-		$	296,117,873
See Notes to Consolidated Financial Statements

BIMINI CAPITAL MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2009

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Bimini Capital Management, Inc., a Maryland corporation (“Bimini Capital”), was originally formed in September 2003 as Bimini Mortgage Management, Inc. (“Bimini Mortgage”) for the purpose of creating and managing a leveraged investment portfolio consisting of residential mortgage-backed securities (“MBS”). Bimini Capital’s website is located at http://www.biminicapital.com. On February 10, 2006, Bimini Mortgage changed its name to Opteum Inc. (“Opteum”). On September 28, 2007, Opteum changed its name to Bimini Capital Management, Inc.

On November 3, 2005, Bimini Capital acquired Opteum Financial Services, LLC (“OFS”). Upon closing of the transaction, OFS became a wholly-owned taxable REIT subsidiary of Bimini Capital. This entity, which was previously referred to as “OFS,” was renamed Orchid Island TRS, LLC (“OITRS”) effective July 3, 2007. Hereinafter, any historical mention, discussion or references to Opteum Financial Services, LLC or to OFS (such as in previously filed documents or Exhibits) now means Orchid Island TRS, LLC or “OITRS.”

On December 21, 2006, Bimini Capital sold to Citigroup Global Markets Realty Corp. (“Citigroup Realty”) a Class B non-voting limited liability company membership interest in OITRS, representing 7.5% of all of OITRS’s outstanding limited liability company membership interests, for $4.1 million. On May 27, 2008, Bimini Capital repurchased Citigroup Realty’s interest in OITRS for $0.05 million.

On April 18, 2007, the Board of Managers of OITRS, at the recommendation of the Board of Directors of Bimini Capital, approved the closure of OITRS’ wholesale and conduit mortgage loan origination channels in the second quarter of 2007. Also, during the second and third quarters of 2007, substantially all of the operating assets of OITRS were sold. Therefore, all OITRS’s assets are considered as held for sale, and OITRS is reported as a discontinued operation for all periods presented following applicable accounting standards. Bimini Capital now operates in a single business segment.

Bimini Capital has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, Bimini Capital is generally not subject to federal income tax on its REIT taxable income provided that it distributes to its stockholders at least 90% of its REIT taxable income on an annual basis. OITRS has elected to be treated as a taxable REIT subsidiary and, as such, is subject to federal, state and local income taxation. In addition, the ability of OITRS to deduct interest paid or accrued to Bimini Capital for federal, state and local tax purposes is subject to certain limitations.

As used in this document, discussions related to “Bimini Capital,” the parent company, the registrant, and to real estate investment trust (“REIT”) qualifying activities or the general management of Bimini Capital’s portfolio of mortgage backed securities (“MBS”) refer to “Bimini Capital Management, Inc.” Further, discussions related to Bimini Capital’s taxable REIT subsidiary or non-REIT eligible assets refer to OITRS and its consolidated subsidiaries. Discussions relating to the “Company” refer to the consolidated entity (the combination of Bimini Capital and OITRS). The assets and activities that are not REIT eligible, such as mortgage origination, acquisition and servicing activities, were formerly conducted by OITRS and are now reported as discontinued operations.

Liquidity

Throughout most of 2008 the financing markets utilized by the Company to fund its MBS portfolio, as well as the market for MBS securities, were severely distressed. Moreover, the turmoil that originated in the MBS market spread into many other financial markets and the global economy as a whole. The disruptions in the market prompted unprecedented intervention by the new administration of President Obama, the world’s central banks, the Congress of the United States, the US Treasury and the Federal Reserve in an effort to restore stability. As a result of these efforts, market conditions were somewhat less volatile in March 2009, although credit is still tight and it is unknown at this time when and to what extent market conditions will become more stable. These conditions have and will continue to impact the Company.

As of March 31, 2009 the Company had approximately $74.7 million of outstanding obligations under repurchase agreements with maturities through April 2009. Subsequent to period-end and through May 8, 2009, the Company has been able to maintain its repurchase facilities with comparable terms to those that existed at March 31, 2009 with maturities through May 20, 2009. Should the Company be unable to continue extending the maturity of the remaining repurchase obligations, it may be forced to sell assets, which may result in losses upon such sales. Accordingly, the Company has taken steps to augment its existing leveraged MBS portfolio with an alternative investment strategy since sufficient repurchase agreement funding is not available. The Company is currently employing an investment strategy that utilizes derivative mortgage backed securities collateralized by MBS with comparable borrower and prepayment characteristics to the securities currently in the portfolio. Such securities are not funded with repurchase agreements but instead purchased directly. However, if cash resources are, at any time, insufficient to satisfy the Company’s liquidity requirements, such as when cash flow from operations are materially negative, the Company may be required to pledge additional assets to meet margin calls, liquidate assets, sell additional debt or equity securities or pursue other financing alternatives.

As described more fully in Note 12, on April 21, 2009 the Company completed a debt exchange with Taberna Capital Management, LLC, the collateral manager of certain collateralized debt obligations issued in 2005 and collateralized by, among other securities, the trust preferred capital securities sold by Bimini Capital Trust I (BCT I) in May of 2005. As a result of this transaction, the Company’s interest expense associated with its trust preferred securities will be reduced going forward and, because of the anticipated gain on early extinguishment of debt of approximately $32 million, the Company’s deficit in stockholders equity will be reduced or eliminated as of the date of closing. All asset sales needed to fund the exchange occurred prior to March 31, 2009, and therefore no further reductions in the Company’s portfolio of MBS assets are necessary to complete the transaction.

Basis of Presentation and Use of Estimates

The accompanying interim financial statements reflect all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations, statement of stockholders’ deficit and cash flows for the periods presented. These interim financial statements have been prepared in accordance with disclosure requirements for interim financial information and accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for annual financial statements. The operating results for the interim period ended March 31, 2009 are not necessarily indicative of results that can be expected for the year ended December 31, 2009. The consolidated balance sheet as of December 31, 2008 was derived from audited financial statements included in the Company’s 2008 Annual Report on Form 10-K but does not include all disclosures required by GAAP. The financial statements included as part of this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates affecting the accompanying financial statements include the fair values of MBS, and certain discontinued operations related items including the deferred tax asset valuation allowance, the valuation allowance on mortgage loans held for sale and the valuation of retained interests.

Consolidation

The accompanying consolidated financial statements include the accounts of Bimini Capital and its wholly-owned subsidiary, OITRS, as well as the wholly-owned and majority-owned subsidiaries of OITRS. OITRS is reported as a discontinued operation for all periods presented. All inter-company accounts and transactions have been eliminated from the consolidated financial statements.

As further described in Note 5, Bimini Capital has a common share investment in two trusts used in connection with the issuance of Bimini Capital’s junior subordinated notes. Pursuant to the accounting guidance provided in Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities, Bimini Capital’s common share investments in the trusts are not consolidated in the financial statements of Bimini Capital, and accordingly, these investments are accounted for on the equity method.

On March 25, 2009 the Company entered into an agreement with collateral manager of certain collateralized debt obligations issued in 2005 and collateralized by, among other securities, the trust preferred capital securities sold by Bimini Capital Trust I (BCT I). The agreement closed on April 21, 2009 (see Note 12). Pursuant to the terms of the agreement, the obligations under the trust preferred capital securities issued by BCT I where discharged and the securities redeemed. Concurrently, Bimini Capital redeemed its junior subordinated notes issued to BCT I. Henceforth only one of the common share investments used in connection with the issuance of Bimini Capital’s junior subordinated remain.

Statement of Cash Flows

On January 1, 2008, the Company elected the fair value option for its available-for-sale portfolio of mortgage-backed securities. Upon making this election, the Company elected to classify its cash flow activities from its trading securities consistent with its intent on holding these securities.

Condensed Statement of Comprehensive Income (Loss)

A condensed statement of comprehensive income (loss) has not been included, per SFAS No. 130, “Reporting Comprehensive Income,” as the Company has no items of other comprehensive income (loss). Comprehensive income (loss) is the same as net income (loss) for all periods presented.

Discontinued Operations

During the second quarter of 2007, the Company closed OITRS’s wholesale and conduit mortgage loan origination channels and sold substantially all of the operating assets of OITRS. The remaining assets and liabilities are considered to be contingent and remain pursuant to the terms of disposal of the operations with the exception of mortgage loans held for sale, security held for sale and retained interests for which the disposals of such has been delayed as a result of the current economic climate, however are still being actively marketed by the Company. Accordingly, all current and prior financial information related to OITRS and the mortgage banking business has been presented as discontinued operations in the accompanying consolidated financial statements. Refer to Note 11 - Discontinued Operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less. The carrying amount of cash equivalents approximates its fair value as of March 31, 2009 and December 31, 2008.

The Company maintains cash balances at several banks. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At March 31, 2009, uninsured deposits were approximately $20.7 million.

Mortgage-Backed Securities

The Company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations, and interest only securities or inverse interest only securities representing interest in or obligations backed by pools of mortgage loans (collectively, “Mortgage-Backed Securities” or “MBS”). MBS transactions are recorded on the trade date. Realized gains and losses on sale of MBS are determined based on the specific identified cost of the security.

The fair value of the Company’s investments in MBS is governed by Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. The definition of fair value in SFAS No. 157 focuses on the price that would be received to sell the asset or paid to transfer the liability (i.e., an exit price), rather than the price that would be paid to acquire the asset or received to assume the liability (i.e., an entry price). Estimated fair values for MBS are based on the average of third-party broker quotes received and/or independent pricing sources when available.

In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company classifies its investments in MBS as either trading, available-for-sale or held-to-maturity. The Company classified all of its securities acquired prior to June 30, 2007 as available-for-sale. All securities acquired after June 30, 2007 are classified as trading. On January 1, 2008, in connection with the adoption of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement 115, the Company transferred its remaining available-for-sale securities to trading and accordingly, recognized a $1.7 million fair value adjustment. All MBS securities held by Bimini Capital are reflected in the Company's financial statements at their estimated fair value at March 31, 2009.

The Company’s investments in mortgage-related derivatives are carried at fair value on the balance sheet and are included with mortgage-backed securities.Income on MBS pass through securities classified as held for trading is based on the stated interest rate of the security. Premiums or discounts present at the date of purchase are not amortized. For interest only securities classified as held for trading, the income is accrued based on the carrying value and the effective yield. As cash is received it is first applied to accrued interest and then to reduce the carrying value. At each reporting date, the effective yield is adjusted prospectively from the reporting period based on the new estimate of prepayments and the contractual terms of the security. For inverse interest only securities effective yield and income recognition calculations also take into account the index value applicable to the security. Changes in fair value during the period are recorded in earnings and reported as fair value adjustment-held for trading securities in the accompanying consolidated statement of operations.

Property and Equipment, net

Property and equipment, net, consisting primarily of computer equipment with a depreciable life of 3 years, office furniture and equipment with a depreciable life of 8 to 20 years, leasehold improvements with a depreciable life of 15 years, land which has no depreciable life and building with a depreciable life of 30 years, is recorded at acquisition cost and depreciated using the straight-line method over the estimated useful lives of the assets.

Bimini Capital’s property and equipment as of March 31, 2009 and December 31, 2008, is net of accumulated depreciation of $535,000 and $510,000, respectively. Depreciation expense for the three months ended March 31, 2009 and 2008 was $25,000 and $38,000, respectively.

Repurchase Agreements

The Company finances the acquisition of the majority of its MBS through the use of repurchase agreements. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which securities are pledged as collateral to secure a short-term loan equal in value to a specified percentage (generally between 93 and 97 percent) of the market value of the pledged collateral. While used as collateral, the borrower retains beneficial ownership of the pledged collateral, including the right to distributions. At the maturity of a repurchase agreement, the borrower is required to repay the loan and concurrently receive the pledged collateral from the lender or, with the consent of the lender, renew such agreement at the then prevailing financing rate.

Stock-Based Compensation

The Company follows the provisions of SFAS No. 123(R), Share-Based Payment to account for stock and stock-based awards. For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings based on the fair value of the award. For transactions with non-employees in which services are performed in exchange for the Company's common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance. The Company’s stock-based compensation transactions resulted in an aggregate compensation expense of approximately $40,000 and $416,000 for the three months ended March 31, 2009 and 2008, respectively.

Earnings Per Share

The Company follows the provisions of SFAS No. 128, Earnings per Share, and the guidance provided in the FASB's Emerging Issues Task Force (“EITF”) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents or two (or more) classes of securities that participate in the declared dividends to present both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the “if converted” method for common stock equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive.

Outstanding shares of Class B Common Stock, participating and convertible into Class A Common Stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A Common Stock if, as and when authorized and declared by the Board of Directors. Following the provisions of EITF 03-6, shares of the Class B Common Stock are included in the computation of basic EPS using the two-class method and, consequently, are presented separately from Class A Common Stock.

The shares of Class C Common Stock are not included in the basic EPS computation as these shares do not have participation rights. The outstanding shares of Class C Common Stock, totaling 319,388 shares, are not included in the computation of diluted EPS for the Class A Common Stock as the conditions for conversion into shares of Class A Common Stock were not met.

Income Taxes

Bimini Capital has elected to be taxed as a REIT under the Code. As further described in Note 11, Discontinued Operations, OITRS is a taxpaying entity for income tax purposes and is taxed separately from Bimini Capital. Bimini Capital will generally not be subject to federal income tax on its REIT taxable income to the extent that Bimini Capital distributes its REIT taxable income to its stockholders and satisfies the ongoing REIT requirements, including meeting certain asset, income and stock ownership tests. A REIT must generally distribute at least 90% of its REIT taxable income to its stockholders, of which 85% generally must be distributed within the taxable year, in order to avoid the imposition of an excise tax. The remaining balance may be distributed up to the end of the following taxable year, provided the REIT elects to treat such amount as a prior year distribution and meets certain other requirements. In December 2008, the Internal Revenue Service (IRS) issued Revenue Procedure 2008-68, providing that the IRS will treat a REIT’s distribution of common stock that is declared with respect to a taxable year ending on or before December 31, 2009 as a qualifying dividend for purposes of the 90 percent distribution requirement so long as it meets certain conditions, including a cash limitation requirement that is not less than 10% of the entire distribution.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentations.

Recent Accounting Pronouncements

In April 2009, the FASB issued Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased when compared with normal market activity for the asset or liability (or similar assets or liabilities). The FSP gives specific factors to evaluate if there has been a decrease in normal market activity and if so, provides a methodology to analyze transactions or quoted prices and make necessary adjustments to fair value in accordance with Statement 157. The objective is to determine the point within a range of fair value estimates that is most representative of fair value under current market conditions. FSP FAS157-4 is effective for interim and annual reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company is currently evaluating the impact of adopting FSP FAS 157-4 and does not anticipate a material effect.

Additionally, in conjunction with FSP FAS 157-4, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other Than Temporary Impairments. The objective of the new guidance is to make impairment guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments (OTTI) on debt and equity securities in financial statements. The guidance revises the OTTI evaluation methodology. Previously the analytical focus was on whether the company had the "intent and ability to retain its investment in the debt security for a period of time sufficient to allow for any anticipated recovery in fair value". Now the focus is on whether the Company has the (1) the intent to sell the Investment Securities, (2) it is more likely than not that it will be required to sell the Investment Securities before recovery, or (3) it does not expect to recover the entire amortized cost basis of the Investment Securities. Further, the security is analyzed for credit loss, (the difference between the present value of cash flows expected to be collected and the amortized cost basis). The credit loss, if any, will then be recognized in the statement of earnings, while the balance of impairment related to other factors will be recognized in OCI. FAS 115-2 and FAS 124-2 are effective for all interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company is currently evaluating the impact of adopting FSP FAS 115-2 and FAS 124-2 and does not anticipate a material effect.

In April, 2009, the FASB also issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. The guidance requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. The effective date of this rule/guideline is for interim reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company is currently evaluating the impact of adopting FSP FAS 107-1 and APB 28-1 and does not anticipate a material effect.

In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public entities (Enterprises) about Transfers of Financial Assets and Interest in Variable Interest Entities. This FASB Staff Position (FSP) amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets. It also amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is (a) a sponsor of a qualifying special purpose entity (SPE) that holds a variable interest in the qualifying SPE but was not the transferor (nontransferor) of financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor (nontransferor) of financial assets to the qualifying SPE. The disclosures required by this FSP are intended to provide greater transparency to financial statement users about a transferor’s continuing involvement with transferred financial assets and an enterprise’s involvement with variable interest entities and qualifying SPEs. The adoption of FSP FAS 140-4 and FIN 46(R) -8 did not impact the Company.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method. The FASB Emerging Issues Task Force (EITF) in Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, previously reached a consensus that, share-based payment awards containing a right to receive dividends declared on common stock represent participating securities if such awards are fully vested. Issue No. 03-6 does not, however, provide guidance on share-based payment awards that are not fully vested (i.e., the requisite service for vesting has not yet been rendered). The FSP has been issued to clarify that unvested instruments granted in share-based payment transactions containing non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) represent participating securities that should be included in the computation of EPS according to the two-class method. The Company has not issued share-based awards containing non-forfeitable rights to dividends or dividend equivalents; therefore, the adoption of FSP EITF 03-6-1 on January 1, 2009 did not have any impact.

In March 2008, the FASB issued statement No. 161, Disclosures about Derivative Instruments and Hedging Activities - An Amendment of FASB Statement No. 133 (“SFAS 161”). This statement revises the requirements for the disclosure of derivative instruments and hedging activities that include the reasons a company uses derivative instruments, how derivative instruments and related hedged items are accounted under SFAS 133 and how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. The implementation of this statement did not have a material effect on the financial statements of the Company.

In February 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. The FSP addresses whether there are circumstances that would permit a transferor and a transferee to evaluate the accounting for the transfer of a financial asset separately from a repurchase financing when the counterparties to the two transactions are the same. The FSP presumes that the initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (a linked transaction) under FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (Statement 140). However, if certain criteria specified in the FSP are met, the initial transfer and repurchase financing may be evaluated separately under Statement 140. The FSP was effective for the Company on January 1, 2009. The implementation of this FSP did not have a material effect on the financial statements of the Company.

In December 2007, the FASB issued statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”), amendment to ARB No. 51. This standard establishes accounting and reporting standards that require: (1) the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity; (2) the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; (3) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; (4) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value; and (4) entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective as of the beginning of the fiscal year that begins on or after December 15, 2008. As of March 31, 2009, the Company does not have any noncontrolling interest in any of its subsidiaries.

NOTE 2. MORTGAGE-BACKED SECURITIES

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

(in thousands)

	March 31, 2009		December 31, 2008
Pass-Through Certificates:
Hybrid Arms and Balloons	$	14,608	$	63,068
Adjustable Rate Mortgages		66,010		70,632
Fixed Rate Mortgages		-		24,884
Total Pass-Through Certificates		80,618		158,584
Mortgage Derivative Certificates:
MBS Derivatives		10,786		13,524
Totals	$	91,404	$	172,108

As of March 31, 2009 all of Bimini Capital's MBS investments have contractual maturities greater than 36 months. Actual maturities of MBS investments are generally shorter than stated contractual maturities. Actual maturities of Bimini Capital's MBS investments are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.

NOTE 3. EARNINGS PER SHARE

The Company follows the provisions of SFAS No. 128, Earnings per Share, and the guidance provided in the FASB's Emerging Issues Task Force (“EITF”) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents, or two classes of participating securities to present both basic and diluted EPS on the face of the statement of operations. Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the “if converted” method for common stock equivalents.

Shares of Class B Common Stock, participating and convertible into Class A Common Stock, are entitled to receive dividends in an amount equal to the dividends declared on each share of Class A Common Stock if, and when authorized and declared by the Board of Directors. Following the provisions of EITF 03-6, the Class B Common Stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A Common Stock. Class B common shares are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A shares were not met.

The Class C common shares are not included in the basic EPS computation as these shares do not have participation rights. The Class C common shares totaling 319,388 are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A shares were not met.

The Company has dividend eligible stock incentive plan shares that were outstanding during the three months ended March 31, 2009 and 2008. At March 31, 2009, 5,306 of these incentive plan shares are included in the basic per share computations, as they have dividend participation rights. These stock incentive plan shares have no contractual obligation to share in losses. Since there is no such obligation, these incentive plan shares are not included, pursuant to EITF 03-6, in the three months ended March 31, 2008 basic EPS computations, even though they are participating securities.

The Company has also issued stock incentive plan shares that are not dividend eligible. At March 31, 2009, 67,085 of such plan shares are outstanding and are included in the diluted per share computations. For the computation of diluted EPS for the period ended March 31, 2008, 118,942 of these incentive plan shares were excluded as their inclusion would be anti-dilutive.

The table below reconciles the numerators and denominators of the basic and diluted EPS.

(in thousands, except per share data)

	Three Months Ended March 31,
	2009			2008
Basic and diluted net income (loss) per Class A common share:
Numerator: net income (loss) allocated to the Class A common shares	$	2,132		$	(5,040	)
Denominator: basic and diluted:
Class A common shares outstanding at the balance sheet date, plus participating incentive plan shares		26,956			25,013
Effect of weighting		(624	)		(83	)
Weighted average shares outstanding - basic		26,332			24,930
Effect of dilutive stock incentive plan shares		77			-
Weighted average shares outstanding – diluted		26,409			24,930
Basic and diluted net income (loss) per Class A common share	$	0.08		$	(0.20	)
Basic and diluted net income (loss) per Class B common share:
Numerator: net income (loss) allocated to Class B common shares	$	25		$	(64	)
Denominator: basic and diluted:
Class B common shares outstanding at the balance sheet date		319			319
Effect of weighting		-			-
Weighted average shares-basic and diluted		319			319
Basic and diluted net income (loss) per Class B common share	$	0.08		$	(0.20	)

NOTE 4. REPURCHASE AGREEMENTS

As of March 31, 2009, Bimini Capital had outstanding repurchase obligations of approximately $74.7 million with a net weighted average borrowing rate of 0.72% and these agreements were collateralized by MBS with a fair value of approximately $80.9 million. As of December 31, 2008, Bimini Capital had outstanding repurchase obligations of approximately $148.7 million with a net weighted average borrowing rate of 1.89%, and these agreements were collateralized by MBS with a fair value of approximately $159.1 million.

As of March 31, 2009 and December 31, 2008, Bimini Capital's repurchase agreements had remaining maturities of 30 days or less.

The following summarizes information regarding the Company’s amounts at risk with individual counterparties greater than 10% of the Company’s equity as of March 31, 2009 and December 31, 2008.

(in thousands)

Repurchase Agreement Counterparties	Amount at Risk(1)		Weighted Average Maturity of Repurchase Agreements in Days
March 31, 2009
MF Global , Inc.	$	6,185		7
December 31, 2008
MF Global , Inc.		10,270		11

(1)	Equal to the fair value of securities sold, plus accrued interest income, minus the sum of repurchase agreement liabilities, plus accrued interest expense.

NOTE 5. TRUST PREFERRED SECURITIES

At March 31, 2009, Bimini Capital sponsored two statutory trusts, of which 100% of the common equity is owned by the Company, formed for the purpose of issuing trust preferred capital securities to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt securities of the Company. The debt securities held by each trust are the sole assets of that trust. Obligations related to these statutory trusts are presented below.

(in thousands)

	March 31, 2009		December 31, 2008
Junior subordinated notes owed to Bimini Capital Trust I (BCTI)	$	51,550	$	51,550
Junior subordinated notes owed to Bimini Capital Trust II (BCTII)	$	51,547	$	51,547

The BCTI trust preferred securities and Bimini Capital's BCTI Junior Subordinated Notes have a fixed rate of interest until March 30, 2010, in the case of Series A Preferred Securities, and until April 30, 2010, in the case of Series B Preferred Securities, of 7.61% and thereafter, through maturity in 2035, the rate will float at a spread of 3.30% over the prevailing three-month LIBOR rate. The BCTI trust preferred securities and Bimini Capital's BCTI Junior Subordinated Notes require quarterly interest distributions and are redeemable at Bimini Capital's option, in whole or in part and without penalty, beginning March 30, 2010, in the case of Series A Preferred Securities, and beginning April 30, 2010, in the case of Series B Preferred Securities and at any date thereafter. Bimini Capital's BCTI Junior Subordinated Notes are subordinate and junior in right of payment of all present and future senior indebtedness.

The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes have a fixed rate of interest until December 15, 2010, of 7.8575% and thereafter, through maturity in 2035, the rate will float at a spread of 3.50% over the prevailing three-month LIBOR rate. The BCTII trust preferred securities and Bimini Capital's BCTII Junior Subordinated Notes require quarterly interest distributions and are redeemable at Bimini Capital's option, in whole or in part and without penalty, beginning December 15, 2010, and at any date thereafter. Bimini Capital's BCTII Junior Subordinated Notes are subordinate and junior in right of payment of all present and future senior indebtedness.

Each trust is a variable interest entity pursuant to FIN No. 46 because the holders of the equity investment at risk do not have adequate decision making ability over the trust's activities. Since Bimini Capital's investment in each trust's common equity securities was financed directly by the applicable trust as a result of its loan of the proceeds to Bimini Capital, that investment is not considered to be an equity investment at risk pursuant to FIN No. 46. Since Bimini Capital's common share investments in BCTI and BCTII are not a variable interest, Bimini Capital is not the primary beneficiary of the trusts. Therefore, Bimini Capital has not consolidated the financial statements of BCTI and BCTII into its financial statements. Based on the aforementioned accounting guidance, the accompanying consolidated financial statements present Bimini Capital's BCTI and BCTII Junior Subordinated Notes issued to the trusts as liabilities and Bimini Capital's investments in the common equity securities of BCTI and BCTII as assets. For financial statement purposes, Bimini Capital records payments of interest on the Junior Subordinated Notes issued to BCTI and BCTII as interest expense.

NOTE 6. CAPITAL STOCK

During the three months ended March 31, 2009, the Company issued a total of 718,750 shares of Class A Common Stock to its independent directors for the payment of director fees for services rendered and 25,416 shares of its Class A Common Stock to employees pursuant to the terms of the stock incentive plan phantom share grants (see Note 7).

NOTE 7. STOCK INCENTIVE PLANS

On December 1, 2003, Bimini Capital adopted the 2003 Long Term Incentive Compensation Plan (the “2003 Plan”) to provide Bimini Capital with the flexibility to use stock options and other awards as part of an overall compensation package to provide a means of performance-based compensation to attract and retain qualified personnel. The 2003 Plan was amended and restated in March 2004. Key employees, directors and consultants are eligible to be granted stock options, restricted stock, phantom shares, dividend equivalent rights and other stock-based awards under the 2003 Plan. Subject to adjustment upon certain corporate transactions or events, a maximum of 4,000,000 shares of the Class A Common Stock (but not more than 10% of the Class A Common Stock outstanding on the date of grant) may be subject to stock options, shares of restricted stock, phantom shares and dividend equivalent rights under the 2003 Plan.

Phantom share awards represent a right to receive a share of Bimini's Class A Common Stock. These awards do not have an exercise price and are valued at the fair value of Bimini Capital’s Class A Common Stock at the date of the grant. The grant date value is being amortized to compensation expense on a straight-line basis over the vesting period of the respective award. The phantom shares vest, based on the employees’ continuing employment, following a schedule as provided in the grant agreements, for periods through December 31, 2010. The Company recognizes compensation expense over the vesting period. Compensation expense recognized for phantom shares during the three months ended March 31, 2009 and 2008 totaled approximately, $12,000 and $355,000, respectively. Phantom share awards may or may not include dividend equivalent rights. Dividends paid on unsettled phantom shares are charged to retained earnings when declared.

A summary of phantom share activity during the three month periods ended March 31, 2009 and 2008 is presented below:

	Three Months Ended March 31,
	2009					2008
	Shares			Weighted-Average Grant-Date Fair Value		Shares			Weighted-Average Grant-Date Fair Value
Nonvested, at January 1		132,369		$	0.58		127,372		$	11.36
Granted		-			-		250,000			0.26
Vested		(9,583	)		0.26		(48,334	)		6.86
Forfeited		(50,395	)		0.32		(56,762	)		0.54
Nonvested, at March 31		72,391		$	0.80		272,276		$	4.22

As of March 31, 2009, there was approximately $47,000 of total unrecognized compensation cost related to nonvested phantom share awards. This cost is expected to be recognized over a weighted-average period of 13.2 months. Of the remaining unvested awards at March 31, 2009, 5,306 have dividend participation rights, and 67,085 do not.

Bimini Capital also has adopted the 2004 Performance Bonus Plan (the “Performance Bonus Plan”). The Performance Bonus Plan is an annual bonus plan that permits the issuance of the Company’s Class A Common Stock in payment of stock-based awards made under the plan. No stock-based awards have been made and no shares of the Company’s stock have been issued under the Performance Bonus Plan.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Outstanding Litigation

The Company is involved in various lawsuits and claims, both actual and potential, including some that it has asserted against others, in which monetary damages and other relief is sought. The resolution of such lawsuits and claims is inherently unpredictable. In accordance with GAAP, it is the Company’s policy to accrue for loss contingencies only when it is both probable that a loss has actually been incurred and an amount of such loss is reasonably estimable. Except as described below, the lawsuits and claims involving the Company relate primarily to contractual disputes arising out of the ordinary course of the Company’s current and past business activities. See also Note 11(d).

On September 17, 2007, a complaint was filed in the U.S. District Court for the Southern District of Florida by William Kornfeld against us, certain of our current and former officers and directors, Flagstone Securities, LLC and BB&T Capital Markets alleging various violations of the federal securities laws and seeking class action certification. On October 9, 2007, a complaint was filed in the U.S. District Court for the Southern District of Florida by Richard and Linda Coy against us, certain of our current and former officers and directors, Flagstone Securities, LLC and BB&T Capital Markets alleging various violations of the federal securities laws and seeking class action certification. The cases have been consolidated, class certification has been granted, and lead plaintiffs’ counsel has been appointed. We filed a motion to dismiss the case on December 22, 2008, and plaintiffs have filed a response in opposition. Our motion to dismiss is currently pending before the court. We believe the plaintiffs’ claims in these actions are without merit and we intend to vigorously defend the cases.

Guarantees

Bimini Capital guaranteed the performance of OITRS with respect to certain contractual obligations arising in connection with the sale of mortgage servicing rights by OITRS. See also Note 11(d). On April 16, 2009, the Company entered into an agreement with the counterparty to the sale of the mortgage servicing rights which will terminate this guarantee. Henceforth, Bimini Capital will have no guarantees in place with respect to OITRS.

NOTE 9. INCOME TAXES

REIT taxable income (loss), as generated by Bimini Capital’s qualifying REIT activities, is computed in accordance with the Code, which is different from the Company’s financial statement net income (loss) as computed in accordance with GAAP. Depending on the number and size of the various items or transactions being accounted for differently, the differences between Bimini Capital’s REIT taxable income (loss) and the Company’s financial statement net income (loss) can be substantial and each item can affect several years. Bimini’s REIT taxable loss for the three-months ended March 31, 2009 is estimated to be $1.4 million.

During the three months ended March 31, 2009, book gains of approximately $1.1 million on MBS sales were realized; for tax purposes, the realized gains were approximately $2.7 million. Since there are tax capital losses available to offset these gains, the tax gains do not increase REIT taxable income.

As of March 31, 2009, the REIT has approximately $69.6 million of remaining tax capital loss carryforwards available to offset future tax capital gains. As of March 31, 2009, the REIT has a tax net operating loss carryforward of approximately $22.5 million that is immediately available to offset future REIT taxable income. The tax capital loss carryforwards begin to expire in 2012, and the tax net operating loss carryforwards begin to expire in 2027.

During April 2009, the Company received updated information from the issuers of certain of its portfolio securities regarding the year 2008 taxation of the cash flows received from those securities. This new information, along with other tax reporting adjustments, has resulted in the Company changing its computation of the net REIT taxable loss for the year ended December 31, 2008. The Company’s updated REIT taxable loss for the year 2008 is approximately $14.1 million, and the cumulative REIT net operating loss carryover into the year ending December 31, 2009 is now approximately $21.1 million. These tax reporting changes have no impact on GAAP earnings.

NOTE 10. FAIR VALUE

The Company measures or monitors all of its MBS on a fair value basis. Fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for its mortgage-backed securities, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets. Nevertheless, certain assets are not actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

All of the fair value adjustments included in income (losses) from continuing operations resulted from Level 2 fair value methodologies; that is, the Company is able to value the assets based on observable market data for similar instruments. The securities in the Company’s trading portfolio are priced via independent providers, whether those are pricing services or quotations from market-makers in the specific instruments. In obtaining such valuation information from third parties, the Company has evaluated the valuation methodologies used to develop the fair values in order to determine whether such valuations are representative of an exit price in the Company’s principal markets.

Fair value is used to measure the trading portfolio on a recurring basis. The fair value as of March 31, 2009 is determined as follows:

(in thousands)

Fair Value Measurements as of March 31, 2009, Using
Quoted Prices in Active Markets for Identical Assets (Level 1)	$	-
Significant Other Observable Inputs (Level 2)		91,404
Significant Unobservable Inputs (Level 3)		-
Total Fair Value Measurements	$	91,404

NOTE 11. DISCONTINUED OPERATIONS

OITRS

The results of discontinued operations of OITRS included in the accompanying consolidated statements of operations for the three months ended March 31, 2009 and 2008 were as follows:

(in thousands)

	Three Months Ended March 31,
	2009			2008
Revenues
Interest income	$	63		$	1
Interest expense		-			(5	)
Net interest income (deficiency)		63			(4	)
Income (loss) on discontinued mortgage banking activities
Fair value adjustment on retained interest, trading		1,274			(2,120	)
Other discontinued mortgage banking activities		491			59
Other income and expenses, net of non-recurring items		75			246
Net servicing loss		(204	)		175
Other interest expense and loss reserves		(468	)		(1,185	)
Net revenues (deficiency of revenues)		1,231			(2,829	)
Expenses
General and administrative expenses		995			1,505
Income (loss) from discontinued operations, net of taxes	$	236		$	(4,334	)

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

(in thousands)

	March 31, 2009		December 31, 2008
Assets
Cash and cash equivalents	$	136	$	35
Mortgage loans held for sale (a)		409		464
Retained interests, trading (b)		14,554		15,601
Security held for sale		480		15
Receivables		16,836		23,792
Prepaids and other assets		3,183		3,380
Assets held for sale	$	35,598	$	43,287
Liabilities
Accounts payable, accrued expenses and other (d)		8,107		10,431
Liabilities related to assets held for sale	$	8,107	$	10,431

(a) - Mortgage Loans Held for Sale

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

	March 31, 2009			December 31, 2008
Mortgage loans held for sale, and other, net	$	2,871		$	3,022
Valuation allowance		(2,462	)		(2,558	)
Total	$	409		$	464

Series	Issue Date	March 31, 2009		December 31, 2008
HMAC 2004-1	March 4, 2004	$	2,191	$	2,441
HMAC 2004-2	May 10, 2004		3,307		2,735
HMAC 2004-3	June 30, 2004		3,116		1,281
HMAC 2004-4	August 16, 2004		2,609		1,867
HMAC 2004-5	September 28, 2004		2,152		3,080
HMAC 2004-6	November 17, 2004		395		1,846
OMAC 2005-1	January 31, 2005		312		999
OMAC 2005-2	April 5, 2005		14		169
OMAC 2005-3	June 17, 2005		458		1,181
OMAC 2005-4	August 25, 2005		-		2
OMAC 2005-5	November 23, 2005		-		-
OMAC 2006-1	March 23, 2006		-		-
OMAC 2006-2	June 26, 2006		-		-
Total		$	14,554	$	15,601

	March 31, 2009			December 31, 2008
Balance sheet carrying value of retained interests – fair value	$	14,554		$	15,601
Weighted average life (in years)		12.83			14.76
Prepayment assumption (annual rate)		14.22	%		19.36	%
Impact on fair value of 10% adverse change	$	(1,337	)	$	(1,838	)
Impact on fair value of 20% adverse change	$	(2,035	)	$	(3,086	)
Expected credit losses (% of original unpaid principal balance)		6.37	%		5.61	%
Impact on fair value of 10% adverse change	$	(1,900	)	$	(2,841	)
Impact on fair value of 20% adverse change	$	(3,544	)	$	(6,095	)
Residual cash-flow discount rate		27.50	%		27.50	%
Impact on fair value of 10% adverse change	$	(1,152	)	$	(1,540	)
Impact on fair value of 20% adverse change	$	(2,134	)	$	(2,838	)
Interest rates on variable and adjustable loans and bonds	Forward LIBOR Yield Curve			Forward LIBOR Yield Curve
Impact on fair value of 10% adverse change	$	(2,105	)	$	(2,692	)
Impact on fair value of 20% adverse change	$	(3,426	)	$	(5,067	)

Series	Issue Date	Original Unpaid Principal Balance		Actual Losses Through March 31, 2009			Projected Future Credit Losses as of March 31, 2009			Projected Total Credit Losses as of March 31, 2009
HMAC 2004-1	March 4, 2004	$	309,710		0.68	%		0.67	%		1.35	%
HMAC 2004-2	May 10, 2004		388,737		0.97	%		0.85	%		1.82	%
HMAC 2004-3	June 30, 2004		417,055		0.70	%		1.21	%		1.91	%
HMAC 2004-4	August 16, 2004		410,123		0.73	%		0.76	%		1.49	%
HMAC 2004-5	September 28, 2004		413,875		0.94	%		1.36	%		2.30	%
HMAC 2004-6	November 17, 2004		761,027		1.22	%		2.27	%		3.49	%
OMAC 2005-1	January 31, 2005		802,625		1.50	%		2.34	%		3.84	%
OMAC 2005-2	April 5, 2005		883,987		1.68	%		2.75	%		4.43	%
OMAC 2005-3	June 17, 2005		937,117		1.54	%		3.81	%		5.35	%
OMAC 2005-4	August 25, 2005		1,321,739		2.46	%		5.01	%		7.47	%
OMAC 2005-5	November 23, 2005		986,277		3.11	%		6.93	%		10.04	%
OMAC 2006-1	March 23, 2006		934,441		2.84	%		8.20	%		11.04	%
OMAC 2006-2	June 26, 2006		491,572		4.97	%		14.28	%		19.25	%
Total		$	9,058,285		1.99	%		4.38	%		6.37	%

As of Date	Total Principal Amount of Loans		Principal Amount of Loans 60 Days or more delinquent		Net Credit Losses
March 31, 2009	$	3,774,621	$	818,440	$	180,410
December 31, 2008		3,920,433		728,884		129,715

			Fair Value Measurements at March 31, 2009, Using
	Fair Value Measurements March 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mortgage loans held for sale	$	409	$	-	$	-	$	409
Retained interests, trading		14,554		-		-		14,554
Security held for sale		480		-		-		480

	Mortgage Loans Held for Sale			Retained Interests, Trading			Securities Held for Sale
Beginning balance	$	464		$	15,601		$	15
Gains included in earnings		26			1,274			465
Sales and collections		(81	)		(2,321	)		-
Ending Balance	$	409		$	14,554		$	480

Pro Forma Balance Sheet, as of March 31, 2009 (Unaudited)
Assets
Total assets	$	138,344

Liabilities and Stockholders’ Equity
Junior subordinated notes	$	51,547
Other Liabilities		83.298
Total liabilities		134,845
Total stockholders’ equity		3,499
Total liabilities and stockholders’ equity	$	138,344

Asset Category	Fair Value		Percentage of Entire Portfolio			Weighted Average Coupon			Weighted Average Maturity in Months		Longest Maturity	Weighted Average Coupon Reset in Months		Weighted Average Lifetime Cap			Weighted Average Periodic Cap
March 31, 2009
Adjustable-Rate MBS	$	66,010		72.22	%		4.48	%		278	1-Nov-35		4.65		10.47	%		7.16	%
Hybrid Adjustable-Rate MBS		14,608		15.98	%		6.04	%		340	1-Aug-37		40.03		11.06	%		2.00	%
Total Mortgage Backed Pass Through		80,618		88.20	%		4.81	%		293	1-Aug-37		11.07		10.57	%		6.09	%
Derivative MBS		10,786		11.80	%		5.17	%		323	25-Jan-38		n/a		n/a			n/a
Total Mortgage Assets	$	91,404		100.00	%		4.81	%		293	25-Jan-38		11.07		n/a			6.09	%
December 31, 2008
Adjustable-Rate MBS	$	70,632		41.0	%		4.79	%		276	1-Jan-36		7.76		10.37	%		10.11	%
Fixed-Rate MBS		24,884		14.5	%		6.50	%		356	1-Sep-38		n/a		n/a			n/a
Hybrid Adjustable-Rate MBS		63,068		36.6	%		5.03	%		335	1-Apr-38		49.65		10.03	%		2.00	%
Total Mortgage Backed Pass Through		158,584		92.1	%		5.15	%		312	1-Sep-38		27.52		10.21	%		5.13	%
Derivative MBS		13,524		7.9	%		5.64	%		348	25-Jan-38		0.34		n/a			n/a
Total Mortgage Assets	$	172,108		100.0	%		5.19	%		315	1-Sep-38		25.02		n/a			5.13

	March 31, 2009					December 31, 2008
Agency	Fair Value		Percentage of Entire Portfolio			Fair Value		Percentage of Entire Portfolio
Fannie Mae	$	89,360		97.76	%	$	141,364		82.1	%
Freddie Mac		2,044		2.24	%		30,744		17.9	%
Total Portfolio	$	91,404		100.00	%	$	172,108		100.0	%

	Three Months Ended March 31,
	2009			2008
Balance—Beginning of period	$	7,303		$	6,960
Provision		468			1,000
Settlements		(2,622	)		-
Balance—End of period	$	5,149		$	7,960

			Interest Rates Fall 100 BPS			Interest Rates Rise 100 BPS			Interest Rates Rise 200 BPS
Adjustable Rate MBS
Fair Value	$	66,010
Change in Fair Value			$	414		$	(597	)	$	(1,349	)
Change as a % of Fair Value				0.63	%		(0.90	)%		(2.04	)%
Hybrid Adjustable Rate MBS
Fair Value	$	14,608
Change in Fair Value			$	203			(343	)	$	(791	)
Change as a % of Fair Value				1.39	%		(2.35	)%		(5.42	)%
Derivative MBS
Fair Value	$	10,786
Change in Fair Value			$	(992	)	$	584		$	349
Change as a % of Fair Value				(9.20	)%		5.41	%		3.24	%
Portfolio Total
Fair Value	$	91,404
Change in fair Value			$	(374	)	$	(356	)	$	(1,791	)
Change as a % of Fair Value				(0.41	)%		(0.39	)%		(1.96	)%
Cash
Fair Value	$	22,113

Quarter Ended	Average Investment Securities Held		Total Interest Income		Quarterly Retrospective Adj.			Premium Lost due to Paydowns		Yield on Average Interest Earning Assets (1)			Average Balance of Repurchase Agreements Outstanding		Interest Expense (2)		Average Cost of Funds (2)			Net Interest Income			Net Interest Spread			Trust Preferred Interest Expense
March 31, 2009	$	131,756		3,674		-			277		10.31	%	$	111,715		254		0.91	%	$	3,420			9.41	%	$	1,933
December 31, 2008		199,338		3,093		-			458		5.29	%		174,701		1,114		2.55	%		1,979			2,74	%		1,933
September 30, 2008		375,239		6,149		-			568		5.95	%		326,577		4,193		5.14	%		1,956			0.81	%		1,933
June 30, 2008		519,614		6,787		-			415		4.91	%		471,732		5,448		4.62	%		1,339			0.29	%		1,933
March 31, 2008		602,948		10,112		-			652		6.28	%		584,597		7,590		5.19	%		2,522			1.08	%		1,933
December 31, 2007		972,236		11,364		(345	)		-		4.68	%		944,832		10,531		4.46	%		833			0.22	%		1,933
September 30, 2007		1,536,265		24,634		(404	)		-		6.41	%		1,497,409		20,998		5.61	%		3,636			0.81	%		1,933
June 30, 2007		2,375,216		26,970		(6,182	)		-		4.54	%		2,322,727		33,444		5.76	%		(6,475	)		(1.22	%)		1,933
March 31, 2007		2,870,265		38,634		1,794			-		5.38	%		2,801,901		37,405		5.34	%		1,229			0.04	%		1,933
December 31, 2006		2,944,397		31,841		(4,013	)		-		4.33	%		2,869,210		39,448		5.50	%		(7,607	)		(1.17	%)		1,933
September 30, 2006		3,243,674		43,051		3,523			-		5.31	%		3,151,813		42,683		5.42	%		368			(0.11	%)		1,933
June 30, 2006		3,472,921		54,811		13,395			-		6.31	%		3,360,421		41,674		4.96	%		13,137			1.35	%		1,933
March 31, 2006		3,516,292		40,512		1,917			-		4.61	%		3,375,777		36,566		4.33	%		3,946			0.28	%		1,933
December 31, 2005		3,676,175		43,140		3,249			-		4.69	%		3,533,486		35,337		4.00	%		7,803			0.69	%		1,858
September 30, 2005		3,867,263		43,574		4,348			-		4.51	%		3,723,603		32,345		3.48	%		11,230			1.03	%		973
June 30, 2005		3,587,629		36,749		2,413			-		4.10	%		3,449,744		26,080		3.02	%		10,668			1.07	%		454
March 31, 2005		3,136,142		31,070		1,013			-		3.96	%		2,976,409		19,731		2.65	%		11,339			1.31	%		-
December 31, 2004		2,305,748		20,463		1,250			-		3.55	%		2,159,891		10,796		2.00	%		9,667			1.55	%		-
September 30, 2004		1,573,343		11,017		-			-		2.80	%		1,504,919		4,253		1.13	%		6,764			1.67	%		-
June 30, 2004		1,512,481		10,959		-			-		2.90	%		1,452,004		4,344		1.20	%		6,615			1.70	%		-
March 31, 2004		871,140		7,194		-			-		3.30	%		815,815		2,736		1.34	%		4,458			1.96	%		-

Entire Portfolio	March 31, 2009		December 31, 2008
Weighted Average Pass Through Purchase Price	$	46.94	$	102.05
Weighted Average Derivative Purchase Price		3.10		6.86
Weighted Average Pass Through Current Price	$	101.42	$	101.10
Weighted Average Derivative Current Price	$	3.11	$	6.98
Effective Duration (1)		0.468		1.279

3.1	Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Form S-11/A, filed with the SEC on April 29, 2004
3.2	Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
3.5	Certificate of Notice, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated January 28, 2008, filed with the SEC on February 1, 2008
3.6	Articles of Amendment, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May 29, 2008
3.7	Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated September 24, 2007, filed with the SEC on September 24, 2007
†10.1	Bimini Capital Management, Inc. 2003 Long Term Incentive Compensation Plan, as amended September 28, 2007, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, filed with the SEC on November 8, 2007
†10.2	Bimini Capital Management, Inc. 2004 Performance Bonus Plan, as amended September 28, 2007, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, filed with the SEC on November 8, 2007
†10.3	Form of Phantom Share Award Agreement incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, filed with the SEC on November 8, 2007
†10.4	Form of Restricted Stock Award Agreement incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, filed with the SEC on November 8, 2007
†10.5	Separation Agreement and General Release, dated as of June 29, 2007, by and among Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the SEC on July 5, 2007
†10.6	Separation Agreement and General Release by and between Bimini Capital Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 14, 2008, filed with the SEC on April 16, 2008
†10.7	Retention and Severance Agreement between Bimini Capital Management, Inc. and G. Hunter Haas, IV, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the SEC on April 18, 2008
†10.8	Retention and Severance Agreement between Bimini Capital Management, Inc. and J. Christopher Clifton, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the SEC on April 18, 2008
†10.9	Employment Agreement dated as of April 27, 2006, by and between Opteum Inc. and J. Christopher Clifton, incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, dated August 11, 2008, filed with the SEC on August 11, 2008
10.10	Voting Agreement, among certain stockholders of Bimini Mortgage Management, Inc., Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas, IV, Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson, Buford H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan, certain of Mr. Kaplan’s affiliates and other former owners of Opteum Financial Services, LLC, incorporated by reference to Exhibit 99(D) to the Schedule 13D, dated November 3, 2005, filed with the SEC on November 14, 2005
10.11	Membership Interest Purchase, Option and Investor Rights Agreement among Opteum Inc., Opteum Financial Services, LLC and Citigroup Global Markets Realty Corp. dated as of December 21, 2006, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated December 21, 2006, filed with the SEC on December 21, 2006
10.12	Seventh Amended and Restated Limited Liability Company Agreement of Orchid Island TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum Inc. and Citigroup Global Markets Realty Corp., incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2007, filed with the SEC on August 14, 2007
10.13	Asset Purchase Agreement, dated May 7, 2007, by and among Opteum Financial Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated May 7, 2007, filed with the SEC on May 7, 2007
10.14	First Amendment to Purchase Agreement, dated June 30, 2007, by and among Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services, LLC and Opteum Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the SEC on July 5, 2007
10.15	Membership Interest Purchase Agreement, dated May 27, 2008, by and among Bimini Capital Management, Inc., Orchid Island TRS, LLC and Citigroup Global Markets Realty Corp., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May 29, 2008
10.16	Eighth Amended and Restated Limited Liability Company of Orchid Island TRS, LLC, dated as of May 27, 2008, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May 29, 2008
10.17	Amended and Restated Junior Subordinated Indenture, dated as of September 26, 2005, between the Company and JPMorgan Chase Bank, National Association, as trustee.
10.18	Second Amended and Restated Trust Agreement, dated as of September 26, 2005, among the Company, as depositor, JPMorgan Chase Bank, National Association, as property trustee, Chase Bank USA, National Association, as Delaware trustee and the Administrative Trustees named therein.
10.19	Indenture, dated as of October 5, 2005, between the Company and Wilmington Trust Company, as debenture trustee.
10.20	Amended and Restated Declaration of Trust, dated as of October 5, 2005, by and among Wilmington Trust Company, as Delaware trustee, Wilmington Trust Company, as institutional trustee, the Company, as sponsor, and Jeffrey J. Zimmer, Robert E. Cauley and Amber K. Luedke, as administrators.
*31.1	Certification of the Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of the Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	* Filed herewith. † Management compensatory plan or arrangement required to be filed by Item 601 of Regulation S-K.

Date: May 11, 2009		By:	/s/ Robert E. Cauley
			Robert E. Cauley Chairman and Chief Executive Officer