Bimini Capital Management, Inc.

Robert Cauley – Chairman, Chief Executive Officer and Secretary Hunter Haas – President, Chief Investment Officer, Chief Financial Officer and Treasurer

Derek Pilecki – Gator

Thank you operator. The trends we have experienced for the first three quarters of 2014 continued into the fourth.

The market continued to defy expectations and rates continued to rally. While the flash rally on October 15th did not hold, we still ended the year with rates down over 80 basis points on the 10 year U.S.

Treasury and the curve substantially flatter. The swap curve moved similarly.

In spite of the bull flattener, typically the bane of RMBS investors, 30 year agency RMBS continued to tighten to comparable duration treasuries. The reason for the outperformance was a combination of speeds that continued to ignore lower rates available to borrowers and reduced supply in the market.

Also in spite of the rally, volatility, as measured by the SRVX index remained stable and near the low end of the range for the year. The SRVX index refer to the Chicago Board Options Exchange interest rate volatility index that measures the fair market value of future volatility implied by the 1 year option to enter into a 10 year pay fixed swap.

Conditions in Europe continued to deteriorate and the European Central Bank announced their intention to initiate a $1 trillion program of quantitative easing on January 22, 2015. The program was initiated last Monday and yields on most sovereign debt across the continent have decreased.

As we neared the end of the year, tensions surrounding Greece started to rise as a new regime seemed poised to take control and was focused on defying the austerity measures imposed by the European Union when the Greek external debt was restructured just a few years ago. This raised the prospects for a Greek exit from the EU, or Grexit, and, coupled with the EU quantitative easing program, continues to drive sovereign rates across Europe to levels never seen outside of Japan.

In some cases rates were negative, as overnight funding rates pushed well through the previously unthinkable zero bound repeatedly. These developments caused U.S.

rates to accelerate their rally into January, with the 10 year U.S. Treasury rate reaching a low of 1.642% on January 30.

Economic data in the U.S. was generally mixed with the exception of the jobs data, which was continued to be robust.

The non-farm payroll figures for November, released in early December, were strong and perhaps more importantly, we saw the first signs of wage inflation. Specifically, average hourly earnings increased 0.4% for November of 2014, the first reading of this magnitude since December of 2013.

The December data, released in early January, was negative and the November data was revised lower. However, the January data was strong again, up 0.5%, and the job growth figures were revised substantially higher.

Inclusive of the figures released Friday, March 6, the average monthly non-farm payroll gain for the past four months is approximately 304,000, and the average gain for calendar 2014 was approximately 260,000, well above the approximately 200,000 level seen for the last three years. These developments have caused the markets to struggle over what this all means for the Federal Reserve and their intentions with respect to the timing of an increase in interest rates and the removal of their accommodation that has been in place since the financial crisis.

We should get our first [indiscernible] of thoughts tomorrow when Sherry Yellin holds a press conference after the conclusion of the two day meeting that commences today. As has been the case since its initial public offering in February of 2013, Orchid Island has dominated our performance since we consolidated Orchid's operations.

As of December 31, 2014 and going forward this will no longer be the case. However, up until that date we did consolidate Orchids operations.

The Orchid portfolio is managed in the same manner and with the same focus as the Bimini portfolio. Orchid raised additional capital throughout Q4 2014, most recently utilizing an At-The-Market program.

During the fourth quarter, Orchid sold an additional 3.7 million shares, raising approximately $49.8 million in proceeds, net of fees paid to the agent, through its second ATM program, which was put in place in early September. This brings the total number of shares sold under ATM programs during 2014 to approximately 7.6 million shares.

Orchid's stand-alone net assets were $218.1 million at December 31, 2014, versus $44.8 million at December 31, 2013. As a result, the Orchid portfolio and results dominate our reported results even more.

For the quarter, Orchid generated approximately $3.5 million of net income while the consolidated operations of Bimini only generated net income of $1.7 million, including its proportionate share of Orchid's net income. As the external manager of Orchid, Bimini, through Bimini Advisors, earned approximately $0.74 million of management fees and allocated approximately $0.2 million in overhead to Orchid during the three months ended December 31, 2014.

However, under GAAP these fees are eliminated in consolidation. As I mentioned above, as of December 31, 2014 and going forward we will no longer consolidate the operations of Orchid Island.

This means our results of operations will include the management fees earned as the external manager of Orchid, as well as the reimbursement of certain overhead costs and the dividends we receive on the nearly 1 million shares of Orchid we own. We will mark our share position in Orchid to market at each reporting period as well.

And finally, we will report only the portfolio of Bimini and the results obtained from the portfolio each period. As a result, our financial statements should be far more transparent with respect to our operations as both the external manager of Orchid and the manager of our own RMBS portfolio.

This will be the case when we report our results for the first quarter of 2015, likely in early May. With respect to the portfolio of Bimini, we continue to slowly rebuild the portfolio as it increased from $89.6 million at September 30, 2014 to $117.8 million at December 31, 2014.

With the growth at Orchid and the resulting increase in management fees, coupled with cash flows received as part of the overhead sharing agreement with Orchid which commenced on July 1 of last year, Bimini has been able to slowly rebuild its MBS portfolio, which in turn generates even more net interest income over time – absent a compression in net interest spreads, of course. We added to both sub-portfolios this quarter.

We purchased structured securities with a value of $0.9 million and on the pass-through side, we purchased fixed rate, 30 year MBS with a value of $39.5 million and sold $9.7 million for net purchases of approximately $29.8 million. The pass-through purchases were exclusively 4.5% coupon, call protected securities.

As is the case at Orchid, we continue to favor the lower premium call protected securities versus the higher pay-up bonds given that those pay-ups are at unattractive levels in our view. We feel the modest incremental speed potential of these securities is more than off-set by the lower initial cost, resulting in more attractive expected returns over our anticipated investment horizon.

The capital allocation between the two sub-portfolios changed materially again this quarter. Our allocation to the pass-through sub-portfolio was increased again and is now 60.3% versus 47.7% at September 30, 2014.

The increase in the capital allocation to pass-throughs reflects our practice of building the pass-through portfolio first during periods of growth, versus a long term view of the market. Since year end, we have added to the structured securities portfolio.

At year end, the structured security sub-portfolio accounted for 39.7% of the capital allocation versus 52.3% at September 30, 2014. The structured securities sub-portfolio grew slightly from $5.1 million at September 30, 2014 to $5.2 million at December 31, 2014, again reflecting management's decision to add to the pass-through portfolio first during periods of growth.

Payments – repayments fees have remained muted all year. Speeds of our pass-through portfolio were in the mid single-digits all year and averaged 7.3 CPR for the fourth quarter of 2014.

Speeds on the structured securities portfolio have slowed somewhat over the course of 2014, averaging year 20 CPR for the first half of the year and 50.9 and 15.2 CPR for the third and fourth quarters of 2014 respectively. The slow down in speeds of restructured securities portfolio was influenced by the acquisition of lower coupon 20 and 30 year IOs, both of which have paid in the mid single digits CPR since being acquired.

As I mentioned a minute ago, since the December 31, 2014, we have additional IO collateralized by 30 year Ginnie Mae clearance. As for returns, with longer rates continuing to decrease over the course of the quarter, the realized and unrealized gains for the combined portfolio were a positive $0.2 million, reflective – reflecting the sensitivity of both sub-portfolios to prepayment concerns.

Our structured securities generated interest income of $0.06 million. The pass-through sub-portfolio generated a 26.1% return for the quarter, not annualized, and the structured portfolio generated a loss for the quarter of 5.4%.

The two portfolios combined generated a positive return on invested capital of 9.6% for the quarter, again, not annualized. With respect to the balance of our results, the retained interests of our former mortgage company were marked up by approximately $1.2 million for the quarter.

As was the case at the end of the third quarter, the portfolio is positioned for a continuation of modest prepayment speeds. While refinancing activity reported last week accelerated, reflecting the rally in January, and we may see a modest continuation in speeds when the March figures are released in early April, the sell-off since the end of January has reversed most of the rally and mortgage rates are close to the year-end levels.

Going forward, we do not expect a significant wave of mortgage refinancings. Only mortgages originated since the summer of 2013 are exposed to low rates for the first time and, because of lenders unwillingness to aggressively pursue refinancing activity, the primary/secondary spread has increased.

A primary reason for mortgage lenders unwillingness to aggressively refinance mortgages is due to their reduced capacity and new regulations imposed by the Dodd-Frank Act that have impaired their ability to quickly ramp up their staffs and capacity levels. We no longer see the greatest risks to the market as two-fold.

Previously, we feared there was a small, but non-zero probability we might see an outbreak of inflation, resulting in a more aggressive Fed and elevated volatility in the rates markets. With the drop in oil prices, strong dollar and very low inflation in Europe, this outcome seems even more unlikely – although the downside risks associated with this outcome are so severe that we will continue to protect ourselves against this scenario.

We believe developments around the globe and the strength in the dollar will limit the pace and extent of Fed tightening once it begins, with an increase in interest rates likely to occur by the end of the third quarter of this year, if not at the June meeting. Another possible, perhaps probable, risk we see would be a continuation of the rally we experienced earlier this quarter.

We feel we are well positioned for the first scenario. We continue to guard against a further rally by maintaining a material allocation to call protected securities.

During the latter part of the third quarter and throughout the fourth quarter of 2014, we began to brace for a short-term acceleration in refinancing activity. We sold one large pool pf previously new 30 Year 4.5s and added new issue pools and credit impaired pools.

As prepayment concerns amongst investors became more elevated specified pool pay-ups for the highest quality call protection securities, loan balance pools, increased dramatically. In response the Company continues to favor lower payup call protection that offers better carry per unit of duration like these new issue and credit impaired pools.

In the event of a meaningful increase in speeds, we believe these securities will provide adequate protection and the premiums we paid likely have room to increase to offset the increased premium amortization, as we witnessed in January. Going forward, we anticipate the Federal Reserve will begin the process of policy normalization which will entail, among other measures, increases to the Fed Funds target range.

Such increases in the Fed Funds target range are likely to result to increases in LIBOR rates, which are tied to the Company's funding costs. The Company utilizes Eurodollar futures and swaptions to hedge its funding costs, although it does not employ hedge accounting for GAAP purposes.

For GAAP, our funding costs will rise as short-term rates rise as there will be no hedge offset. However, to the extent the corresponding hedges increase in value as LIBOR increases then we will experience increased income via a positive fair value adjustment associated with the funding hedges.

That concludes my prepared remarks. Operator, we can open the call up for questions.

Hi, Bob, it’s Derek.

Hi, Derek, how are you?

I’m doing well. How are you?

Not too bad.

Good. I have a question about NOLs, so the REIT NOLs are about $18 million.

So you have to use those up before the REIT would have to pay a dividend to offset [indiscernible] how to understand that?

That’s the case. We have that option.

We know it’s not mandatory, but we would have that option.

Okay. And then there is plenty of NOLs for the taxable REIT subsidiaries.

When you have income from the taxable REIT subsidiaries, you don’t have to dividend that out, is that correct?

Yes.

That’s going to retain earnings.

Yes. To the extent the NOLs were utilized at that entity.

Yes.

Right. Okay, great, thanks a lot.

Certainly, thanks Derek.

Hello, sir. Congratulations on another great quarter.

Thank you.

My question relates to any color or commentary you can provide regarding your ATM programs. Specifically, what’s your strategic goal is in terms of what scale you’d like to get to?

What kind of timeframe you had in mind? And any constraints do you see in getting – achieving that objective?

Well, the ATM program is an Orchid not at Bimini, but as far as our plans with respect to that it’s just the needs of growth and its very cheap cost of capital. Typically, when REITs are first put in place, they suffered from a lack of efficiency and scale.

Over the cost of running a REIT is relatively fixed, it’s just a portfolio management team and some financial reporting guys. And so you can scale those operations very easily, until you get to a point where there is very, very great a fit – economies of scale.

However, when you first start out your long way from reaching that point, and so REITs typically go to a relatively painful growth process. It often among other things involves selling capital at a discount.

We did have in fact to do that early in 2014, but once we put the ATM program in place and it was somewhat of a surprise to us. We were able to utilize that and grow relatively rapidly at very, very low cost.

In fact most of not all of that capital is put in place at a price above book value. So it’s accretive to book value.

And in fact, it’s accretive to earnings. As I said when you start off, you have very, very poor economies of scale because your overhead costs are high in relation to the size of your portfolio.

But as you grow, especially during those early growth phases, the marginal revenue exceeds the marginal cost by a significant amount. So it becomes accretive to earnings.

So that’s what we’ve been able to do at the Orchid level. And going forward, we will continue to do that until we reach what we think is an appropriate level that number is a little hard to put a finger on, but it might be anywhere from $500 million to $1 billion in size.

At that point, you’ve kind of gotten all the operational efficiency you can out of the business. And then you just grow to the extent you see good investment opportunities.

Also if you’re aware we have management fee program – not – fee schedule whereby the management fees as a percent of capital [ph] declined up to the $500 million level and then they plateau. So, again, by growing from this early $50 million market cap towards $500 million as you grow, the management fees reduced slowly over time.

So again, it’s accretive to earnings.

I just chime in that I think there’s – as the manager there are three things we look at. The investing environment of course and to the extent that’s relatively similar to prior capital raises that sort of the first thing we look at.

The second is to the extent that we are the – Orchid stock price is trading at a premium to book value then we – as the manager we think it behooves the company to issue stock. And that’s a board level decision at Orchid and again this is a Bimini call, but it does have implications for Bimini to the extent that Bimini earns a management fee on that capital that’s raised.

And the other thing is just from a standpoint of the At-The-Market program as a manager, we really like that because capital can come in and dribs and drabs. And we’re not forced to put a lot of money to work all at one time.

So, we can deploy the capital almost immediately from a standpoint of as shares are sold in the open market. There is really no downtime or lag time with respect to putting that money to work.

So, as a manager, it’s very efficient and we find that it doesn’t really harm even current period earnings to the extent that we can deploy that capital in the quick manner that I just mentioned.

Thank you. Those are great.

And I may have a couple of quick follow-up questions?

Sure.

As very quickly, how – what’s the current remaining pool of NOLs at this point?

Well, Bimini as the first caller Derek mentioned with $18 million…

Is that $18 million, okay. I am sorry…

Bimini as a TRS, MortCo, which also has NOLs and I want to say about $265 million. I don’t have the number right in front of me...

Those excessive – all right, can those NOLs be applied against future Bimini earnings?

No, they can’t, but to the extent that MortCo can generate earnings, they can be applied against those. MortCo is the former mortgage company and has had a lot of ongoing litigation matters associated with it.

If you’re familiar with for instance country-wide, Bank of America, you know that those litigation matters still go on. With respect to MortCo, they are winding down, but we’re not completely out of the wood.

So, there’s not been any activity at MortCo, but that doesn’t mean that it can’t be in the future to the extent that we feel that we’re kind of free and clear for many potential ongoing litigation risks associated with the former operations of the mortgage company. To the extent we get to that point and we start to generate operations there that any profits that would be generated it could be used or offset by the NOLs that exist there.

Interesting. And then one real quick kind of an embarrassing question.

If I’m looking at your report, how would I find – means the fee income in terms of what – how is it categorized?

Yes, that’s the problem. Up until now, as I said, we’ve consolidated Orchid, so it gets eliminated.

So it’s just like one big box that contains both Orchid and Bimini, if there is a fee paid between the one and the other, it doesn’t show up. That will no longer be the case going forward.

We will not consolidate Orchid. So any management fees that we’ve received will show up as a line item on Bimini for the first time, starting in the first quarter of this year.

I think the number for the fourth quarter was about $0.74 million plus we’re allowed to allocate certain overhead cost that was another $0.2 million, so about $0.94 million for the fourth quarter. And then of course to the extent that Orchid grows, the fee, the management fee goes up.

The overhead allocation doesn’t change much, but we will start to report those numbers to getting this quarter and we are very cognizant of the fact that our financials up until now since the IPO of Orchid are kind of troubling to shift through – that will not be the case. You will be able to focus on what’s going on with Bimini and Bimini only starting in this quarter.

Excellent, thank you very much.

Certainly.

Hi, Hunter, on the portfolio of gains line item in the income statement, is that entirely gains and losses from the residual securitizations from 2005 to 2007?

Yes, just a second. Squeeze or shuffling the paperwork as we get through the – there are unrealized gains and losses on mortgage backed securities.

You’re looking at the income statement for the year right.

For the three months for the parent only.

Okay, well, that’s in the press release, I’m sorry, I’m looking…

I understood.

The parent only would not include anything from any of the subsidiaries that’s a little goofy. So we – I wish we could do a non-Orchid return breakout, but we really can only do – we consolidated in parent only, so parent only would exclude anything from Bimini Advisors and from the retained interest from the securitization.

So that’s just a portfolio related.

Right.

Those are at MortCo, there – it’s a former mortgage company.

Right.

Okay, okay, so I’ll just wait till next quarter when you start reporting the non-consolidated.

Yes, unfortunately it’s been the case up until now, but…

We did as part of the total consolidated results I believe the number was 1.5 million for…

1.2 million…

1.2 million for the retained interest…

Okay, thank you.

And the way that works is it’s just at – those assets are level three assets. They are mark-to-model if you will and – but we use a relatively high discount rates.

So as we roll forward in fact its 27.5%, so the cash flows are very front end loaded, so a lot of times what we’ll see happen is that asset value itself is relatively flat, but we might receive say $1 million in cash. And so since those are gain on sales, I’ve passed that they – when that cash comes into the door, it’s realizing the gain as opposed to income percent.

So that 1.2 million number was in the fourth quarter?

Yes.

Or for the year…

Yes.

Okay.

Thanks operator. Thank you for your interest in Bimini to the extent further questions pop up or somebody if you listen to a replay of the call has a question please feel free to call to the office, 772-231-1400, we’ll be glad to receive your calls.

And thanks again for your time. We look forward to speaking to you in just about six weeks and we can focus then exclusively on Bimini and Bimini’s operations and look forward to that.

Thank you.