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

[Operator Instructions] Please be advised, today's conference is being recorded. I would like to turn the call over to your speaker today, Melissa Alfonso. Please go ahead.

Thank you, Kevin. Good morning and welcome to the Third Quarter 2026 Earnings Conference Call for Bimini Capital Management. This call is being recorded today, November 6, 2026. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Robert, is that? Oh. Thank you, Melissa. Sorry about that. I inadvertently hit the mute button. Okay. Good morning and thank you for joining us today. The third quarter of 2026 was very challenging to levered RMBS investors, particularly late September and early October. As the third quarter came to a close, the markets were under severe duress. All factors combined to drive interest rates in the U.S. to multi-decade high levels. Implied interest rate volatility also spiked. Domestic equity markets managed to generate modest positive returns for the quarter, but all sectors of the fixed income markets generated negative absolute returns. While there were many drivers of these developments, persistent high inflation, resilient growth in the economy of the United States, persistently high energy prices as a result of the war in Ukraine, perhaps the most significant drivers relate to the demand for capital. The U.S. continues to run fiscal deficits at or above $2 trillion per year, and the hyperscalers associated with the AI buildout continue to tap the debt markets for funding at unprecedented levels. The combined effect of this demand for capital from the fixed income markets has driven the cost of capital higher as reflected in the elevated level of interest rates across the economy. Today, we are once again joined on our call by Richard Parry, the President and CIO of Tom Johnson Investment Management, or TJIM, and a member of the Board of Directors of Bimini. I would like to turn the call over to Richard to provide an update on TJIM and the equity and investment-grade debt markets. Richard?

Thank you, Bob. Yes, good morning. As kind of noted in the corporate release, assets under management for TJIM at the end of the third quarter were approximately $1.7 billion. 61% of that is coming from our investment management business and 39% from our direct advisory relationships. This is up from approximately $1.65 billion at the end of March '25 and down a little bit from the 6/30 quarter of $1.73 billion. By account investment styles, we have about 53% is dedicated to fixed income, 16% of our portfolios are in equities, and 31% from balanced accounts. If you break out that balanced account allocation, it gets down to about 35% in equity strategies, 63.3% in fixed income strategies, and about 1.8% in allocation of ETF models that we do for direct clientele. In terms of performance, given performance requirements, I would recommend that you go to our website, tjim.com, to get our fact sheets that are through 9/30. I think you'll be pleased with this data. Basically, strong relative numbers on equities year-to-date and in line on fixed income versus our benchmarks. Retention and new business for the quarter: currently, we're doing better on the direct advisory side given our marketing financial planning activities, which include RMD, Roth conversions, gifting exercises, and also our equity performance year-to-date. The investment management side of our business has a higher concentration towards fixed income. And as Bob alluded to, we've had kind of volatile markets in the fixed income. We're also working within that investment management business on getting more of our equity product lines, given our relative performance and relevance of these strategies. The CapEx, corporate, and the government deficit funding, as Bob alluded to, plus the inflation concerns, have impacted both the bond performance and interest for fixed income exposure by our consultant community through 9/30. However, I think that's starting to a small degree reverse itself, and also given the high rates that are provided by fixed income, this is becoming more of a useful component in asset allocation for consultants. Regarding our styles, we have very prudent diversification and conservative valuation in our portfolio, and that's been very successful this year. We think it continues to have good merits and provides downside capture and performance over a market cycle. For our fixed income, our attributes are A or better at purchase, and we're laddered, and we have a high concentration at this time in Treasuries given the narrow spread between government and corporates. And just briefly regarding synergy exercises we're doing with Bimini, working on scale with regards to insurance and accounting at this time. That concludes my portion of the presentation.