Good day, and thank you for standing by. Welcome to the Bimini Capital third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised, today's conference is being recorded. I would now 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 6th, 2026. At this time, the company would like to remind 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 under management's good faith, belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K.
The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.
Robert?
Oh.
Thank you, Melissa. Sorry about that. I inadvertently hit the mute button. Good morning, and thank you for joining us today. The third quarter of 2026 was very challenging for levered RMBS investors, particularly late September and early October. As the third quarter came to a close, the markets were under severe duress. Several 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 Iran, 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 build-out 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?
Yes, good morning. As 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 2025 and down a little bit from the June 30th 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 September 30th. 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 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 September 30. However, I think that is starting to a small degree, reverse itself. 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 principles embedded in our portfolio, and that has 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 are laddered, and we have a higher concentration at this time in treasuries, given the narrow spread between government and corporates.
Just briefly regarding synergy exercises we are doing with Bimini, we are working on in scale with regards to insurance and accounting at this time. That concludes my portion of the presentation.
Thanks, Richard. I will continue. Bimini is currently configured with three operating segments. The larger segment by revenue is the management of Orchid Island Capital via our subsidiary, Bimini Advisors LLC. As for the results for the quarter, Orchid generated an economic return of - 12.5% for the third quarter of 2026, unannualized. These results were the product of the difficult market conditions mentioned previously. Orchid's outstanding share count declined modestly by approximately 2.5%, as Orchid took advantage of the share price trading at a discount to book value and repurchased shares. With respect to our results related to the management of Orchid, management fees, inclusive of overhead allocation and repurchase agreements and clearing fees, decreased modestly from $5.08 million to $4.95 million. The second segment, our recently acquired 80% stake in TJIM, generated $1.69 million of advisory service revenues for the quarter.
Finally, our third segment, the investment portfolio, is considerably smaller than in prior periods, owing to the need to fund our acquisition of TJIM, generated $0.42 million of interest and dividend gross income, and net of repurchase agreement funding interest, $0.28 million of net interest income. For the nine-month period ending September 30th, 2026, gross investment advisory service revenues were approximately $18.6 million versus $11.9 million for the same period in 2025. The large increase reflects a combination of the growth in the capital base at Orchid Island, as well as the inclusion of revenues from TJIM for the two quarters since the transaction closed on April 1st, 2026.
As the acquisition of TJIM was funded by a sale of a substantial portion of the investment portfolio at Royal Palm, the net revenues of the portfolio for the 2026 period, which is inclusive of interest charges on our repo funding and trust preferred debt, were $1.2 million versus $1.8 million for the 2025 period. In the aggregate, consolidated net revenues for the 2026 period were $18.3 million versus $12 million for the 2025 period. As we stated last quarter, and want to repeat to stress the point, we view the acquisition of TJIM as transformational for Bimini. Our goal is to enhance the consistency of the earnings we generate as part of our tax-driven strategy in the near term, but also beyond. The acquisition should help us to do this as we diversify the mix of assets under management away from the sole focus on the Agency RMBS market.
We look forward to helping TJIM grow its AUM over time, leveraging its track record, quality management team, and sound investment process. We hope we can facilitate this growth by leveraging Bimini's relationships across Wall Street and the banking community developed over the past 20 years. As I mentioned, in order to facilitate the acquisition of TJIM, which was an all-cash transaction, we used a combination of available cash and proceeds from the disposition of a portion of the investment portfolio. Note, we did not have to incur any debt to facilitate the transaction. In fact, we were able to retain a portion of the portfolio as well, and our shares of Orchid Island. The market value of the investment portfolio at September 30th, 2026, was $14.5 million.
Further, while it required approximately $12.9 million to close the transaction on April 1st, the company ended the third quarter with $10.3 million of cash, inclusive of funds held at TJIM. This point highlights the positive cash flow generated by the business as it's currently configured and provides flexibility for us going forward. Further, while we remain focused on our tax-driven strategy of harvesting the tax savings provided by NOLs, we recognize we are nearing the maturity of the NOLs, and we must begin to focus on the years that follow. By the end of 2028, all but approximately $5.5 million of the NOLs of our former mortgage company will have been used or expired, and that will drop to approximately $1 million by the end of 2029. Bimini has additional NOLs due to not expire till 2036, but those are quite small in comparison.
Of course, we will attempt to take full advantage of the NOLs we have available to us prior to their expiration. However, once the available NOLs have been utilized or expire, we will become a tax-paying entity. This will drive how we see the business and our balance sheet going forward. As mentioned above, Bimini has been profitable year-to-date and cash flow positive as well. Given our market outlook and the possibility of increasing funding costs should the Federal Reserve continue to raise the fed funds rate in the near term, we are considering paying down our trust preferred debt with available cash. This process would operate just like us growing the income-producing asset base, only via decreased interest expense versus increased interest income had we increased the size of the portfolio.
It would also facilitate the transition of our balance sheet referenced above, especially in light of the fact our trust preferred debt matures at the end of 2035. Operator, we can open the call up for questions. That concludes my prepared remarks.
Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star one one again. We will pause for a moment while we compile our Q&A roster. Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. I'm not showing any questions at this time.
All right. Thank you, operator. Thanks, everybody, for listening. To the extent that you have a question that pops up later, or if you didn't have a chance to listen to the call and only listened to the replay and have a question, please feel free to reach us at the office. The number is 772-231-1400. Otherwise, we look forward to speaking with you at the end of the year and fourth quarter. Thank you, everyone.
Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect and have a wonderful day.