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, 2008





 ̈           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 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. (Check one):


Large
accelerated filer  ̈                                           Accelerated
filer ý


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
9, 2008, the number of shares outstanding of the registrant’s Class A Common
Stock, $0.001 par value, was 25,032,645; 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 INFORMATIONITEM
      1.     FINANCIAL
      STATEMENTS.
              3Consolidated
      Balance Sheets as of March 31, 2008 (unaudited) and December 31,
      2007
              3Consolidated
      Statements of Operations for the three months ended March 31,
      2008  and 2007(unaudited)
              4Consolidated
      Statement of Stockholders’ Equity for the three months ended March 31,
      2008 (unaudited)
              5Consolidated
      Statements of Cash Flows for the three months ended March 31,
      2008  and 2007 (unaudited)
              6Notes
      to Consolidated Financial Statements
      (unaudited)
              7ITEM
      2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION
                AND
      RESULTS OF
      OPERATIONS.
              29ITEM
      3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK.
              42ITEM
      4.     CONTROLS AND
      PROCEDURES.
              42ITEM
      4T.   CONTROLS AND
      PROCEDURES.
              42PART
      II. OTHER INFORMATIONITEM
      1.     LEGAL
      PROCEEDINGS.
              42ITEM
      1A.  RISK
      FACTORS.
              43ITEM
      2.     UNREGISTERED SALES OF EQUITY SECURITIES
      AND USE OF PROCEEDS.
              43ITEM
      6.     EXHIBITS.
              44







PART
I. FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS.


BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      BALANCE SHEETS(Unaudited)March
      31,
            
            
            December
      31,2008
            
            
            2007ASSETS:Mortgage-backed
      securities:Available-for-sale,
      pledged to counterparties, at LOCOM
            
            $
            -
            
            
            $
            293,729,451Held
      for trading, pledged to counterparties, at fair value
            
            
            509,826,331
            
            
            
            396,175,157Unpledged,
      at fair value
            
            
            5,490,612
            
            
            
            674,326Total
      mortgage-backed securities
            
            
            515,316,943
            
            
            
            690,578,934Cash
      and cash equivalents
            
            
            15,131,512
            
            
            
            27,284,760Restricted
      cash
            
            
            -
            
            
            
            8,800,000Principal
      payments receivable
            
            
            200,751
            
            
            
            99,089Accrued
      interest receivable
            
            
            2,611,736
            
            
            
            3,637,302Property
      and equipment, net
            
            
            4,151,647
            
            
            
            4,181,813Prepaids
      and other assets
            
            
            5,032,121
            
            
            
            5,315,835Assets
      held for sale
            
            
            92,266,517
            
            
            
            96,619,615Total
      Assets
            
            $
            634,711,227
            
            
            $
            836,517,348LIABILITIES
      AND STOCKHOLDERS’ EQUITYLIABILITIES:Repurchase
      agreements
            
            $
            491,016,999
            
            
            $
            678,177,771Junior
      subordinated notes due to Bimini Capital Trust I & II
            
            
            103,097,000
            
            
            
            103,097,000Accrued
      interest payable
            
            
            2,511,707
            
            
            
            3,872,101Accounts
      payable, accrued expenses and other
            
            
            583,506
            
            
            
            644,858Liabilities
      related to assets held for sale
            
            
            17,593,615
            
            
            
            27,842,174Total
      Liabilities
            
            
            614,802,827
            
            
            
            813,633,904COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYPreferred
      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
            
            
            -
            
            
            
            -Class
      A Common Stock, $0.001 par value; 98,000,000 shares designated: 25,013,099
      shares issued and outstanding as of March 31, 2008 and 24,861,404 shares
      issued and outstanding as of December 31, 2007
            
            
            25,013
            
            
            
            24,861Class
      B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
      shares issued and outstanding as of March 31, 2008 and December 31,
      2007
            
            
            319
            
            
            
            319Class
      C Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
      shares issued and outstanding as of March 31, 2008 and December 31,
      2007
            
            
            319
            
            
            
            319Additional
      paid-in capital
            
            
            338,656,567
            
            
            
            338,241,582Accumulated
      deficit
            
            
            (318,773,818
            )
            
            
            (315,383,637
            )Stockholders’
      Equity, net
            
            
            19,908,400
            
            
            
            22,883,444Total
      Liabilities and Stockholders’ Equity
            
            $
            634,711,227
            
            
            $
            836,517,348See
      Notes to Consolidated Financial Statements











BIMINI
      CAPITAL MANAGEMENT, INC.
              CONSOLIDATED
      STATEMENTS OF OPERATIONS
              (Unaudited)Three
      Months Ended March 31,2008
            
            
            2007Interest
      income, net of amortization of premium and discount
            
            $
            10,110,893
            
            
            $
            38,634,264Interest
      expense
            
            
            (7,627,461
            )
            
            
            (37,552,204
            )Net
      interest income, before interest on trust preferred debt
            
            
            2,483,432
            
            
            
            1,082,060Interest
      expense on trust preferred debt
            
            
            (2,090,432
            )
            
            
            (2,090,432
            )Net
      interest income (expense)
            
            
            393,000
            
            
            
            (1,008,372
            )Fair
      value adjustment - held for trading securities
            
            
            603,081
            
            
            
            -Gains/(loss)
      on sale of mortgage-backed securities, net
            
            
            322,571
            
            
            
            (820,271
            )Revenues
      (Deficiency of revenues), net
            
            
            1,318,652
            
            
            
            (1,828,643
            )Direct
      REIT operating expenses
            
            
            185,289
            
            
            
            228,247General
      and administrative expenses:Compensation
      and related benefits
            
            
            845,378
            
            
            
            1,192,385Directors'
      fees and liability insurance
            
            
            174,046
            
            
            
            188,574Audit,
      legal and other professional fees
            
            
            394,087
            
            
            
            342,396Other
      administrative
            
            
            490,628
            
            
            
            156,691Total
      general and administrative expenses
            
            
            1,904,139
            
            
            
            1,880,046Total
      expenses
            
            
            2,089,428
            
            
            
            2,108,293Loss
      from continuing operations before minority interest
            
            
            (770,776
            )
            
            
            (3,936,936
            )Minority
      interest in consolidated subsidiary
            
            
            -
            
            
            
            770,563Loss
      from continuing operations
            
            
            (770,776
            )
            
            
            (3,166,373
            )Loss
      from discontinued operations, net of tax
            
            
            (4,333,501
            )
            
            
            (74,903,645
            )Net
      loss
            
            $
            (5,104,277
            )
            
            $
            (78,070,018
            )Basic
      And Diluted Net Loss Per Share Of:CLASS
      A COMMON STOCKContinuing
      operations
            
            $
            (0.03
            )
            
            $
            (0.13
            )Discontinued
      operations
            
            
            (0.17
            )
            
            
            (3.01
            )Total
      basic and diluted net loss per Class A share
            
            $
            (0.20
            )
            
            $
            (3.14
            )CLASS
      B COMMON STOCKContinuing
      operations
            
            $
            (0.03
            )
            
            $
            (0.13
            )Discontinued
      operations
            
            
            (0.17
            )
            
            
            (3.01
            )Total
      basic and diluted net loss per Class B share
            
            $
            (0.20
            )
            
            $
            (3.14
            )Average
      Shares OutstandingCLASS
      A COMMON STOCK
            
            
            24,929,750
            
            
            
            24,534,374CLASS
      B COMMON STOCK
            
            
            319,388
            
            
            
            319,388Cash
      dividends declared per share of:CLASS
      A COMMON STOCK
            
            $
            -
            
            
            $
            0.05CLASS
      B COMMON STOCK
            
            $
            -
            
            
            $
            0.05See
      Notes to Consolidated Financial Statements














BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY(Unaudited)Three
      Months Ended March 31, 2008Common
      Stock,
              Amounts
      at par value
            
            Additional
              Paid-in
            
            AccumulatedClass
      A
            
            Class
      B
            
            Class
      C
            
            Capital
            
            Deficit
            
            TotalBalances,
      December 31, 2007
            
            $
            24,861
            
            
            $
            319
            
            
            $
            319
            
            
            $
            338,241,582
            
            
            $
            (315,383,637
            )
            
            $
            22,883,444Cumulative
      effect adjustment upon adoption of SFAS No. 159
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,714,096
            
            
            
            1,714,096Net
      loss and comprehensive loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,104,277
            )
            
            
            (5,104,277
            )Issuance
      of Class A common shares for board compensation and equity plan share
      exercises, net
            
            
            152
            
            
            
            -
            
            
            
            -
            
            
            
            61,125
            
            
            
            -
            
            
            
            61,277Amortization
      of equity plan compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            355,225
            
            
            
            -
            
            
            
            355,225Equity
      plan shares withheld for statutory minimum withholding
    taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (422
            )
            
            
            -
            
            
            
            (422
            )Stock
      issuance costs, and other adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (943
            )
            
            
            -
            
            
            
            (943
            )Balances,
      March 31, 2008
            
            $
            25,013
            
            
            $
            319
            
            
            $
            319
            
            
            $
            338,656,567
            
            
            $
            (318,773,818
            )
            
            $
            19,908,400See
      Notes to Consolidated Financial Statements























BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)Three
      Months Ended March 31,2008
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (5,104,277
            )
            
            $
            (78,070,018
            )Adjustments
      to reconcile loss from continuing operationsto
      net cash  provided by operating activities:Net
      loss from discontinued operations
            
            
            4,333,501
            
            
            
            74,903,645Amortization
      of premium and discount on mortgage-backed securities, net
            
            
            -
            
            
            
            2,390,095Stock
      compensation
            
            
            416,502
            
            
            
            679,536Depreciation
      and amortization
            
            
            38,338
            
            
            
            59,028(Gain)
      loss on sale of mortgage-backed securities, net
            
            
            (322,571
            )
            
            
            820,271Fair
      value adjustment - held for trading securities
            
            
            (603,081
            )
            
            
            -From
      trading securities:Purchases
            
            
            (22,199,857
            )
            
            
            -Sales
            
            
            158,390,897
            
            
            
            -Principal
      repayments
            
            
            41,609,037
            
            
            
            -Changes
      in operating assets and liabilities:Decrease
      (increase) in accrued interest receivable
            
            
            1,025,566
            
            
            
            (409,390
            )Decrease
      in prepaids and other assets
            
            
            283,714
            
            
            
            46,417(Decrease)
      increase  in accrued interest payable
            
            
            (1,360,394
            )
            
            
            2,781,792Decrease
      in accounts payable, accrued expenses and other
            
            
            (61,774
            )
            
            
            (58,752
            )NET
      CASH PROVIDED BY OPERATING ACTIVITIES
            
            
            176,445,601
            
            
            
            3,142,624CASH
      FLOWS FROM INVESTING ACTIVITIES:From
      available-for-sale securities:Purchases
            
            
            -
            
            
            
            (834,671,789
            )Sales
            
            
            -
            
            
            
            302,615,047Principal
      repayments
            
            
            -
            
            
            
            412,879,551Purchases
      of property and equipment, and other
            
            
            (8,172
            )
            
            
            1,467NET
      CASH USED IN INVESTING ACTIVITIES
            
            
            (8,172
            )
            
            
            (119,175,724
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Decrease
      in restricted cash
            
            
            8,800,000
            
            
            
            -Proceeds
      from repurchase agreements
            
            
            1,516,887,978
            
            
            
            5,288,715,205Principal
      payments on repurchase agreements
            
            
            (1,704,048,750
            )
            
            
            (5,168,272,927
            )Stock
      issuance costs, and other adjustments
            
            
            (943
            )
            
            
            -Cash
      dividends paid
            
            
            -
            
            
            
            (1,266,937
            )NET
      CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES
            
            
            (178,361,715
            )
            
            
            119,175,341CASH
      FLOWS FROM DISCONTINUED OPERATIONS:Net
      cash (used in) provided by  operating activities
            
            
            (228,962
            )
            
            
            312,107,915Net
      cash used in investing activities
            
            
            -
            
            
            
            (300,917
            )Net
      cash used in financing activities
            
            
            (10,000,000
            )
            
            
            (325,892,347
            )NET
      CASH USED IN DISCONTINUED OPERATIONS
            
            
            (10,228,962
            )
            
            
            (14,085,349
            )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (12,153,248
            )
            
            
            (10,943,108
            )CASH
      AND CASH EQUIVALENTS, Beginning of the period
            
            
            27,284,760
            
            
            
            82,751,795CASH
      AND CASH EQUIVALENTS, End of the period
            
            $
            15,131,512
            
            
            $
            71,808,687SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
            
            $
            11,926,750
            
            
            $
            36,860,844SUPPLEMENTAL
      SCHEDULE OF NONCASH INVESTING AND
      FINANCING  ACTIVITIES:Cash
      dividends declared and payable, not yet paid
            
            $
            -
            
            
            $
            1,267,645Securities
      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, 2008








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 Mortgage acquired Opteum Financial Services,
LLC.  This entity, which was previously referred to as “OFS,” was
renamed Orchid Island TRS, LLC 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.”  Upon closing of the transaction,
OITRS became a wholly-owned taxable REIT subsidiary of Bimini
Mortgage.





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.  Immediately
following the transaction, Bimini Capital held Class A voting Limited Liability
Company membership interests in OITRS representing 92.5% of all of OITRS’s
outstanding limited liability company membership interests.  In
connection with the transaction, Bimini Capital also granted Citigroup Realty an
option to acquire additional Class B non-voting limited liability company
membership interests in OITRS representing 7.49% of all of OITRS’s outstanding
limited liability company membership interests. This option expired unexercised
on December 20, 2007.





On April 18, 2007, the Board of
Managers of OITRS, at the recommendation of the Board of Directors ofBimini 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 other operating assets of OITRS were
sold.   Therefore,all of OITRS’s assets are considered
held for sale, and OITRS is reported as a discontinued operation for all periods
presented following applicable accounting standards (see Note
11).  For financial statement presentation purposes, Bimini Capital is
now operating in a single business segment, as areal estate investment trust
(“REIT”).





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





As used
in this document, discussions related to Bimini Capital, the parent company, the
registrant, and to REIT qualifying activities or the general management of
Bimini Capital’s portfolio of mortgage-backed securities (“MBS”) refer to Bimini
Capital Management, Inc.  Further, discussions related to Bimini
Capital’s taxable REIT subsidiary or non-REIT eligible assets refer to OITRS and
its consolidated subsidiaries. Discussions relating to the “Company” refer to
the consolidated entity (the combination of Bimini Capital and OITRS). The
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





The
financing market utilized by the Company to fund its MBS portfolio, as well as
the market for MBS securities itself, have been extremely turbulent
recently.  The volatility in the market prompted intervention on the
part of the Federal Reserve in an effort to restore stability. There can be no
assurance such actions will be sufficient to achieve the desired result, or that
market conditions may not deteriorate further. The Company has outstanding
$395.3 million of repurchase agreements with maturities through September 2008.
Should the Company be unable to extend the maturity of this debt, it may be
forced to sell assets, which may result in losses upon such sales.  While
the financing of $8.0 million in place for the Company’s retained interests is
committed through May 26, 2008, the lender on the financing facility has and may
continue to request additional margin be posted in connection with the facility.
If the Company is unable to meet such requests in the future, the Company may be
forced to sell the assets or seek alternative financing.  At present, such
alternative financing arrangements for the residual interests may not be
available or only available at substantially higher cost.  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. The Company presently believes that its equity and
junior subordinated debt capital, combined with the cash flow from operations
and the utilization of borrowings, will be sufficient to enable the Company to
meet its anticipated liquidity requirements. Continued disruptions in market
conditions could, however, adversely affect the Company’s liquidity, including
the lack of available financing for the Company’s MBS assets, increases in
interest rates, increases in prepayment rates substantially above expectations
and decreases in value of assets held for sale. Therefore, no assurances can be
made regarding the Company's ability to satisfy its long-term liquidity and
working capital requirements.





Interim
Financial Statements





The
accompanying interim financial statements reflect all adjustments, consisting of
normal recurring items that, in the opinion of management, are necessary for a
fair presentation of the Company’s financial position, results of operations,
statement of stockholders’ equity 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
may not include all of the information and footnotes required by United States
generally accepted accounting principles (“GAAP”) for annual financial
statements. The operating results for the interim period ended March 31, 2008
are not necessarily indicative of results that can be expected for the year
ended December 31, 2008. The consolidated balance sheet as of December 31, 2007
was derived from audited financial statements included in the Company’s 2007
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, 2007.





Basis
of Presentation and Use of Estimates





The
accompanying consolidated financial statements are prepared on the accrual basis
of accounting in accordance with GAAP. The preparation of financial statements
in conformity with GAAP 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, the prepayment speeds used to calculate amortization and
accretion of premiums and discounts on MBS, and certain discontinued operations
related items including the deferred tax asset valuation allowance, the
valuation allowance on mortgage loans held for sale, the valuation of retained
interests, trading and the fair value of mortgage servicing rights.





Consolidation





The
accompanying consolidated financial statements include the accounts of Bimini
Capital and its majority-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.





During
the three month period ended March 31, 2007, Citigroup Realty’s proportionate
share of OITRS’s loss exceeded the net investment attributable to Citigroup
Realty. Therefore, the portion of the net loss of OITRS that is attributable to
Citigroup Realty’s interest is charged against the Company.  The
losses absorbed by the Company which are in excess of Citigroup Realty’s
investment were approximately $0.6 and $5.1 million for the three months ended
March 31, 2008 and 2007, respectively.  The Company does not expect to
recover these losses in future periods.





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.





Discontinued
Operations





During
the second quarter of 2007, the Company closed OITRS’ wholesale and conduit
mortgage loan origination channels and sold substantially all of the operating
assets of OITRS.  All remaining assets and liabilities are reported as
held for sale on the consolidated financial statements.  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, 2008 and December 31,
2007. Restricted cash represents cash held on deposit as collateral with certain
repurchase agreement counterparties (i.e. lenders). Such amounts may be used to
make principal and interest payments on the related repurchase
agreements.





Valuation
of Mortgage-Backed Securities





As of
March 31, 2008, the valuation 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).  All REIT securities are reflected in the Company's financial
statements at their estimated fair value as of March 31, 2008. 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 classified its investments in
MBS as either trading investments, available-for-sale investments or
held-to-maturity investments. Management determined the appropriate
classification of the securities at the time they were acquired and evaluates
the appropriateness of such classifications at each balance sheet date. The
Company classifies all of its securities acquired prior to June 30, 2007 as
available-for-sale.  All securities acquired after June 30, 2007 were
classified as trading securities.  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.




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, 2008 and December 31, 2007, is
net of accumulated depreciation of$427,000 and $389,000,
respectively. Depreciation expense for the three months ended March 31, 2008 and
2007 was $38,000 and $65,000, respectively.





Repurchase
Agreements





The
Company finances the acquisition of its MBS through the use of repurchase
agreements. Under these repurchase agreements, the Company sells securities to a
repurchase counterparty and agrees to repurchase the same securities in the
future for a price that is higher than the original sales price. The difference
between the sales price that the Company receives and the repurchase price that
the Company pays represents interest paid to the repurchase counterparty.
Although structured as a sale and repurchase obligation, a repurchase agreement
is accounted for as a financing under which the Company pledges its securities
as collateral to secure a loan which is equal in value to a specified percentage
of the estimated fair value of the pledged collateral. The Company retains
beneficial ownership of the pledged collateral. At the maturity of a repurchase
agreement, the Company is required to repurchase the underlying MBS and
concurrently receives back its pledged collateral from the repurchase
counterparty or, with the consent of the repurchase counterparty, the Company
may renew such agreement at the then prevailing rate. These repurchase
agreements may require the Company to pledge additional assets to the repurchase
counterparty in the event the estimated fair value of the existing pledged
collateral has declined. For the three months ended March 31, 2008 and for the
year ended December 31, 2007, the Company did not have any margin calls on its
repurchase agreements that it was not able to satisfy with either cash or
additional pledged collateral.





Original
terms to maturity of the Company's repurchase agreements generally, but not
always, range from one month to twelve months; however, the Company is not
precluded from entering into repurchase agreements with shorter or longer
maturities. Repurchase agreement transactions are reflected in the financial
statements at their cost. Should a counterparty decide not to renew a repurchase
agreement at maturity, the Company must either refinance elsewhere or be in a
position to satisfy this obligation. If, during the term of a repurchase
agreement, a counterparty files for bankruptcy, the Company could experience
difficulty recovering its pledged assets and may have an unsecured claim against
the counterparty's assets for the difference between the amount received by the
Company and the estimated fair value of the collateral pledged to such
counterparty.





Interest
Income Recognition on MBS





All
securities in the MBS portfolio as of March 31, 2008 are classified trading
securities. Income on trading securities is based on the stated interest rate of
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.   Premium or
discount present at the date of purchase is not amortized.





MBS are
recorded at cost on the date the MBS are purchased or sold, which is generally
the trade date. Realized gains or losses from MBS transactions are determined
based on the specific identified carrying value of the MBS. Interest income is
accrued based on the outstanding principal amount of the MBS and their stated
contractual terms. Prior to January 1, 2008, with respect to securities
classified as available-for-sale, premiums and discounts associated with the
purchase of the MBS were amortized or accreted into interest income over the
estimated lives of the MBS adjusted for estimated prepayments using the
effective interest method. Adjustments were made using the retrospective method
to the effective interest computation each reporting period. The adjustment was
based on the actual prepayment experiences to date and the present expectation
of future prepayments of the underlying mortgages and/or the current value of
the indices underlying adjustable rate mortgage securities versus index values
in effect at the time of purchase or the last adjustment period.  For
securities classified as trading, interest income is based on the stated
interest rate and the outstanding principal balance; premium or discount
associated with the purchase of the MBS classified as trading securities are not
amortized.





Comprehensive
Loss




In
accordance with SFAS No. 130,Reporting Comprehensive
Income, the Company is required to separately report its comprehensive
income (loss) each reporting period. Other comprehensive income refers to
revenue, expenses, gains and losses that, under GAAP, are included in
comprehensive income but are excluded from net income, as these amounts are
recorded directly as an adjustment to stockholders' equity. Other comprehensive
income for the period ended March 31, 2007 arose from unrealized gains from
changes in market values of securities classified as
available-for-sale.  Comprehensive loss is as
follows:





(in
thousands)





(Unaudited)Three
      Months Ended March 31,2008
            
            
            2007Net
      loss
            
            $
            (5,104
            )
            
            $
            (78,070
            )Unrealized
      gain on available-for-sale securities, net
            
            
            -
            
            
            
            3,178Comprehensive
      loss
            
            $
            (5,104
            )
            
            $
            (74,892
            )








Stock-Based
Compensation





The
Company adopted SFAS No. 123(R),Share-Based Payment, on
January 1, 2006, and this adoption did not have an impact on the Company, as the
Company had previously accounted for stock-based compensation using the fair
value based method prescribed by SFAS No. 123,Accounting for Stock-Based
Compensation. 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. Stock-based compensation was approximately
$416,000 and $783,000 for the three months ended March 31, 2008 and 2007,
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.





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.





Recent
Accounting Pronouncements





On
February 20, 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 is effective for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. Earlier
application is not permitted.  The Company is currently evaluating FSP
FAS 140-3 but does not expect its application to have a significant impact on
its financial reporting.





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.  The Company currently reports minority interests as a liability
on the balance sheet and a separate line item on the income statement.
Management is currently evaluating the effects, if any, that SFAS 160 will
have upon adoption of this standard.





In June
2007, the FASB ratified the consensus reached in EITF 06-11, Accounting for Income Tax Benefits
of Dividends on Share-Based Payment Awards. EITF 06-11 applies to
entities that have share-based payment arrangements that entitle employees to
receive dividends or dividend equivalents on equity-classified nonvested shares
when those dividends or dividend equivalents are charged to retained earnings
and result in an income tax deduction. Entities that have share-based payment
arrangements that fall within the scope of EITF 06-11 will be required to
increase capital surplus for any realized income tax benefit associated with
dividends or dividend equivalents paid to employees for equity classified
nonvested equity awards. Any increase recorded to capital surplus is required to
be included in an entity’s pool of excess tax benefits that are available to
absorb potential future tax deficiencies on share-based payment awards. The
Corporation adopted EITF 06-11 on January 1, 2008 for dividends
declared on share-based payment awards subsequent to this date. The adoption is
not expected to have any impact on financial condition or results of operations
as long as the Company’s REIT tax status in maintained.





On
February 15, 2007, the FASB issued statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities — Including an Amendment of FASB Statement
No. 115 (“SFAS 159”).  This standard permits an entity to
measure financial instruments and certain other items at estimated fair value.
Most of the provisions of SFAS No. 159 are elective; however, the amendment
to SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, applies to all entities that own trading and available-for-sale
securities.  The fair value option created by SFAS 159 permits an entity to
measure eligible items at fair value as of specified election dates. The fair
value option is generally applied instrument by instrument, is irrevocable
unless a new election date occurs, and must be applied to the entire instrument
and not to only a portion of the instrument.  SFAS 159 is effective as of
the beginning of the first fiscal year that begins after November 15,
2007.  On January 1, 2008, the Company elected the fair value
option for its available-for-sale portfolio of mortgage-backed securities.
Previously, these securities were considered to be other than temporarily
impaired and carried at lower-of-cost or market. As of the adoption date, the
carrying value of the existing mortgage-backed securities classified as
available-for-sale were adjusted to fair value through a cumulative-effect
adjustment to the beginning balance of retained earnings. This adjustment
represented an increase in the carrying value of the securities of approximately
$1.7 million.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to
eliminate the diversity in practice that exists due to the different definitions
of fair value that are dispersed among the many accounting pronouncements that
require fair value measurements, and the limited guidance for applying those
definitions.  SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years.  The Company adopted SFAS 157 on
January 1, 2008, and the adoption did not have a material impact on
financial condition or results of operations.





NOTE
2.   MORTGAGE-BACKED SECURITIES





As of
December 31, 2007, all of Bimini Capital's MBS were classified as either trading
or available-for-sale. On January 1, 2008, the entire available-for-sale
securities portfolio was transferred to trading in conjunction with the
Company’s comprehensive review of its balance sheet management strategies and
adoption of SFAS No. 159.  Accordingly, fluctuations in the
portfolio’s fair value are recorded directly to income effective January 1,
2008.





The
following are the carrying values of Bimini Capital's MBS portfolio as of March
31, 2008 and December 31, 2007:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Hybrid
      Arms
            
            $
            331,698
            
            
            $
            398,982Adjustable
      Rate Mortgages
            
            
            159,115
            
            
            
            177,608Fixed
      Rate Mortgages
            
            
            24,504
            
            
            
            113,989Totals
            
            $
            515,317
            
            
            $
            690,579















The
following table presents the components of the carrying value of Bimini
Capital’s MBS portfolio as of March 31, 2008 and December 31,
2007:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Available-for-Sale
      SecuritiesPrincipal
      balance
            
            $
            -
            
            
            $
            291,579Unamortized
      premium
            
            
            -
            
            
            
            3,134Unaccreted
      discount
            
            
            -
            
            
            
            (309
            )Trading
      SecuritiesPrincipal
      Balance
            
            
            503,650
            
            
            
            385,849Premium
            
            
            11,671
            
            
            
            10,326Discount
            
            
            (4
            )
            
            
            -Carrying
      value/estimated fair value
            
            $
            515,317
            
            
            $
            690,579





As of
March 31, 2008, all of Bimini Capital's MBS investments have contractual
maturities greater than 24months. 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, 2008 and 2007. These stock incentive
plan shares have dividend participation rights, but 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 and 2007, basic EPS computations for the Class A Common Stock, even though
they are participating securities. For the computation of diluted EPS for the
Class A Common Stock for the periods ended March 31, 2008 and 2007, 118,942
and 477,290 phantom shares, respectively, are 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)





(Unaudited)Three
      Months Ended March 31,2008
            
            
            2007Basic
      and diluted EPS per Class A common share:Numerator:
      net loss allocated to the Class A common shares
            
            $
            (5,040
            )
            
            $
            (77,068
            )Denominator:
      basic and diluted:Class
      A common shares outstanding at the balance sheet date
            
            
            25,013
            
            
            
            24,556Effect
      of weighting
            
            
            (83
            )
            
            
            (22
            )Weighted
      average shares-basic and diluted
            
            
            24,930
            
            
            
            24,534Basic
      and diluted EPS per Class A common share
            
            $
            (0.20
            )
            
            $
            (3.14
            )Basic
      and diluted EPS per Class B common share:Numerator:
      net loss allocated to Class B common shares
            
            $
            (64
            )
            
            $
            (1,002
            )Denominator:
      basic and diluted:Class
      B common shares outstanding at the balance sheet date
            
            
            319
            
            
            
            319Effect
      of weighting
            
            
            -
            
            
            
            -Weighted
      average shares-basic and diluted
            
            
            319
            
            
            
            319Basic
      and diluted EPS per Class B common share
            
            $
            (0.20
            )
            
            $
            (3.14
            )





NOTE
4.   REPURCHASE AGREEMENTS





Bimini Capital has entered into
repurchase agreements to finance most of its MBS security purchases. The
repurchase agreements are short-term borrowings that bear interest at rates that
have historically moved in close relationship tothe forward London Interbank Offered
Rate (“LIBOR”) interest rate curve. As of March 31, 2008, Bimini Capital
had outstanding repurchase obligations of$491.0million with a net weighted average
borrowing rate of4.76% and these obligations were
collateralized by MBS with a fair value of$509.8million.  As of
December 31, 2007, Bimini Capital had outstanding repurchase obligations of$678.2million with a net weighted average
borrowing rate of5.07%.  These obligations were
collateralized by MBS with a fair value of $689.9 million.





As of
March 31, 2008 and December 31, 2007, Bimini Capital’s repurchase
agreements and the collateral agreements thereon had remaining maturities as
summarized below:





($
in thousands)





OVERNIGHT
              (1
      DAY OR LESS)
            
            
            BETWEEN
      2 AND
              30
      DAYS
            
            
            BETWEEN
      31 AND
              90
      DAYS
            
            
            GREATER
      THAN
              90
      DAYS
            
            
            TOTALMarch
      31, 2008Agency-Backed
      Mortgage-Backed Securities:Amortized
      cost of securities sold, including accrued interest
    receivable
            
            $
            5,603
            
            
            $
            94,242
            
            
            $
            -
            
            
            $
            412,567
            
            
            $
            512,412Fair
      market value of securities sold, including accrued interest
      receivable
            
            $
            5,603
            
            
            $
            94,242
            
            
            $
            -
            
            
            $
            412,567
            
            
            $
            512,412Repurchase
      agreement liabilities associated with these securities
            
            $
            5,169
            
            
            $
            90,518
            
            
            $
            -
            
            
            $
            395,330
            
            
            $
            491,017Net
      weighted average borrowing rate
            
            
            2.70
            %
            
            
            4.00
            %
            
            
            -
            
            
            
            4.96
            %
            
            
            4.76
            %December 31,
      2007Agency-Backed
      Mortgage-Backed Securities:Amortized
      cost of securities sold, including accrued interest
    receivable
            
            $
            -
            
            
            $
            249,124
            
            
            $
            37,559
            
            
            $
            397,260
            
            
            $
            683,943Fair
      market value of securities sold, including accrued interest
      receivable
            
            $
            -
            
            
            $
            249,124
            
            
            $
            37,559
            
            
            $
            397,260
            
            
            $
            683,943Repurchase
      agreement liabilities associated with these securities
            
            $
            -
            
            
            $
            244,379
            
            
            $
            37,577
            
            
            $
            396,222
            
            
            $
            678,178Net
      weighted average borrowing rate
            
            
            -
            
            
            
            5.21
            %
            
            
            5.34
            %
            
            
            4.96
            %
            
            
            5.07
            %





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, 2008 and December 31, 2007.





($
in thousands)





Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            WeightedAverageMaturity
      ofRepurchase
              Agreementsin
      DaysMarch
      31, 2008JP
      Morgan Securities
            
            $
            9,567
            
            
            
            158Deutsche
      Bank Securities, Inc.
            
            
            6,472
            
            
            
            158Goldman
      Sachs
            
            
            2,458
            
            
            
            6December
      31, 2007Deutsche
      Bank Securities, Inc.
            
            $
            8,823
            
            
            
            193Goldman
      Sachs
            
            
            2,931
            
            
            
            19





(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





As of
March 31, 2008, 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, 2008
            
            
            December
      31, 2007Junior
      subordinated notes owed to Bimini Capital Trust I (BCTI)
            
            $
            51,550
            
            
            $
            51,550Junior
      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, 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 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, 2008, the Company issued a total of 125,002
shares of Class A Common Stock to its independent directors for the payment of
director fees for services rendered.





During
the three months ended March 31, 2008, the Company issued 26,693 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 awardsdo 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, 2008 and 2007 totaled
approximately, $355,000 and $733,000, 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, 2008
and 2007is
presented below:





Three
      Months Ended March 31,2008
            
            
            2007Shares
            
            
            Weighted-Average
      Grant-Date Fair Value
            
            
            Shares
            
            
            Weighted-Average
      Grant-Date Fair ValueNonvested,
      at January 1
            
            
            127,372
            
            
            $
            11.36
            
            
            
            339,862
            
            
            $
            12.60Granted
            
            
            250,000
            
            
            
            0.26
            
            
            
            25,607
            
            
            
            7.61Vested
            
            
            (48,334
            )
            
            
            6.86
            
            
            
            (51,961
            )
            
            
            13.35Forfeited
            
            
            (56,762
            )
            
            
            0.54
            
            
            
            -
            
            
            
            -Nonvested,
      at March 31
            
            
            272,276
            
            
            $
            4.22
            
            
            
            313,508
            
            
            $
            12.07





There
were a total of 20,833 and 164,782 phantom shares that were vested and unissued
as of March 31, 2008 and 2007, respectively. The total number of outstanding
(vested and nonvested) phantom share awards that include dividend equivalent
rights as of March 31, 2008 and 2007 were 118,942 and 477,290, respectively. As
of March 31, 2008, there was approximately $980,000 of total unrecognized
compensation cost related to nonvested phantom share awards.  The cost
is expected to be recognized over a weighted-average period of 9.7
months.





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 under 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 and other
damages are sought. These lawsuits and claims relate primarily to contractual
disputes arising out of the ordinary course of the Company’s business. The
outcome of such lawsuits and claims is inherently unpredictable. However,
management believes that, in the aggregate, the outcome of all lawsuits and
claims involving the Company will not have a material effect on the Company’s
consolidated financial position or liquidity; however, any such outcome may be
material to the results of operations of any particular period in which costs,
if any, are recognized.





On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against the Company, certain of
the Company’s 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 the Company, certain of the
Company’s 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 Company
believes the plaintiffs’ claims in these actions are without merit, has filed a
motion to consolidate these actions and intends to vigorously defend the
cases.





Guarantees.  Bimini
Capital has guaranteed the obligations of OITRS and OITRS’s wholly-owned
subsidiary, HS Special Purpose, LLC, under their respective financing facilities
with Citigroup described in Note 11. These guarantees will remain in effect so
long as the applicable financing facilities remain in effect.  If an
Event of Default occurs under these financing facilities that are not cured or
waived, Bimini Capital may be required to perform under its
guarantees.  There is no specific limitation on the maximum potential
future payments under these guarantees.  However, Bimini Capital’s
liability under these guarantees would be reduced in an amount equal to the
amount by which the collateral securing such obligations exceeds the amounts
outstanding under the applicable facilities.  In addition, Bimini has
guaranteed the performance of OITRS with respect to other contractual
obligations.





NOTE
9.  INCOME TAXES





Taxable
income, as generated by Bimini Capital’s qualifying REIT activities, is computed
differently from Bimini Capital’s financial statement net income 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 Bimini Capital’s financial statement
net income (loss) can be substantial and each item can affect several years.
Since inception through March 31, 2008, Bimini Capital's REIT taxable income is
approximately $84.1 million greater than Bimini Capital's financial statement
net income (loss) as reported in its financial statements.





For the
three months ended March 31, 2008, Bimini Capital's REIT taxable income was
approximately $2.6 million less than Bimini Capital's financial statement net
income from REIT activities. Bimini Capital's most significant book to tax
differences include interest on inter-company loans with OITRS, interest income
from the MBS portfolio (computed differently for GAAP and tax), mark to market
adjustments, equity plan stock awards, depreciation of property and equipment,
and the accounting for debt issuance costs. The debt issuance costs are being
amortized, and property and equipment are being depreciated, over different
useful lives for tax purposes.  The future deduction of equity plan
stock compensation against REIT taxable income is uncertain as to the amount,
because the tax impact is measured at the fair value of the shares as of a
future date, and this amount may be greater than or less than the financial
statement expense already recognized by Bimini Capital.





During
the three months ended March 31, 2008, book gains of approximately $0.3million
on MBS sales were realized; tax capital losses are available to offset the gain
from these MBS sales, and therefore they do not increase REIT taxable
income.   As of March 31, 2008 the REIT has a tax net operating
loss carryforward of approximately $6.5 million that is immediately available to
offset future REIT taxable income.





NOTE
10.   FAIR VALUE





In
connection with the adoption of SFAS No. 159, Bimini Capital elected to transfer
its available-for-sale portfolio of mortgage-backed securities to
trading.  The securities transferred have similar characteristics to
the Company’s existing trading portfolio, including issuer, credit quality,
yield, duration and remaining term.





The
securities transferred were previously considered to be other than temporarily
impaired and carried at lower-of-cost-or market.  As such, decreases
in fair value were charged directly to earnings, while increases in fair value
were not recorded.  As a result of electing to record these securities
at fair value pursuant to the provisions of SFAS No. 159, the Company recorded
the following to opening retained earnings:





(in
thousands)





Balance
      at January 1, 2008 (after adoption)
            
            $
            296,118Balance
      at December 31, 2007 (prior to adoption)
            
            
            (294,404
            )Cumulative
      effect of adopting the fair value option
            
            $
            1,714







The
Company measures or monitors all of its mortgage-backed securities 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 or liability. When
possible, the Company looks to active and observable markets to price identical
assets.  When identical assets and liabilities 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 amounts included in current period earnings resulted from Level 2
fair value methodologies; that is, the Company is able to value the assets and
liabilities 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, 2008 is determined as
follows:





(in
thousands)





Fair
      Value Measurements at March 31, 2008, UsingQuoted
      Prices in Active Markets for Identical Assets (Level 1)
            
            $
            -Significant
      Other Observable Inputs (Level 2)
            
            
            515,317Significant
      Unobservable Inputs (Level 3)
            
            
            -Total
      Fair Value Measurements
            
            $
            515,317





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, 2008
and 2007 were as follows:





(in
thousands)





Three
      Months ended March 31,2008
            
            
            2007RevenuesInterest
      income, net
            
            $
            1
            
            
            $
            15,243Interest
      expense
            
            
            (5
            )
            
            
            (12,329
            )Net
      interest income
            
            
            (4
            )
            
            
            2,914Loss
      on mortgage banking activities
            
            
            (2,061
            )
            
            
            (18,395
            )Other
      income and expenses, net of non-recurring items
            
            
            246
            
            
            
            1,802Net
      servicing income (loss)
            
            
            175
            
            
            
            (4,643
            )Other
      interest expense and loss reserves
            
            
            (1,185
            )
            
            
            (23,168
            )Deficiency
      of revenues
            
            
            (2,829
            )
            
            
            (41,490
            )ExpensesGeneral
      and administrative expenses
            
            
            (1,505
            )
            
            
            (21,951
            )Loss
      before provision for income taxes
            
            
            (4,334
            )
            
            
            (63,441
            )Provision
      for income taxes and valuation allowance
            
            
            -
            
            
            
            (11,463
            )Loss
      from discontinued operations, net of taxes
            
            $
            (4,334
            )
            
            $
            (74,904
            )





The
assets and liabilities of OITRS included in the consolidated balance sheet as of
March 31, 2008 and December 31, 2007 were as follows:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007AssetsCash
      and cash equivalents
            
            $
            66
            
            
            $
            705Mortgage
      loans held for sale
            
            
            633
            
            
            
            983Retained
      interests, trading
            
            
            63,789
            
            
            
            69,301Securities
      held for sale
            
            
            173
            
            
            
            173Originated
      mortgage servicing rights
            
            
            3,062
            
            
            
            3,073Receivables
            
            
            20,020
            
            
            
            17,868Property
      and equipment, net
            
            
            285
            
            
            
            285Prepaids
      and other assets
            
            
            4,239
            
            
            
            4,232Assets
      held for sale
            
            $
            92,267
            
            
            $
            96,620LiabilitiesSecured
      borrowings
            
            $
            8,000
            
            
            $
            18,000Accounts
      payable, accrued expenses and other
            
            
            9,594
            
            
            
            9,842Liabilities
      related to assets held for sale
            
            $
            17,594
            
            
            $
            27,842





(a)
            –
      Significant accounting policies of
OITRS





The
following accounting policies were applicable prior to the discontinuation of
the residential mortgage origination operations.  Going forward such
policies generally will not be applicable to OITRS as it no longer originates
residential mortgage loans. OITRS will continue to actively market for sale
originated mortgage servicing rights and retained interests in securitizations,
but will not generate any such assets in the future.





Mortgage Loans Held for
Sale.Mortgage loans held for sale represent mortgage loans
originated and held by OITRS pending sale to investors. The mortgages are
carried at the lower of cost or market as determined by outstanding commitments
from investors or current investor yield requirements calculated on the
aggregate loan basis. Deferred net fees or costs are not amortized during the
period the loans are held for sale, but are recorded when the loan is sold.
OITRS generally, but not always, sells or securitizes loans with servicing
rights retained. These transfers of financial assets are accounted for as sales
for financial reporting purposes when control over the assets has been
surrendered. Control over transferred assets is surrendered when (i) the assets
have been isolated from OITRS; (ii) the purchaser obtains the right, free of
conditions that constrain such purchaser from taking advantage of that right, to
pledge or exchange the transferred assets and (iii) OITRS does not maintain
effective control over the transferred assets through an agreement to repurchase
them before their maturity. These transactions are treated as sales in
accordance with SFAS No. 140Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. Gains or losses on such sales are recognized at the time
legal title transfers to the purchaser and are based upon the difference between
the sales proceeds from the purchaser and the allocated basis of the loan sold,
adjusted for net deferred loan fees and certain direct costs and selling costs.
A valuation allowance is recorded to adjust mortgage loans held for sale to the
lower of cost or market.





Retained Interest,
Trading.OITRS previously used warehouse loan arrangements to
finance the origination and purchase of pools of fixed and adjustable-rate
residential mortgage loans (the “Mortgage Loans”). Subsequent to their
origination or purchase, OITRS either sells these Mortgage Loans to third-party
institutional investors through bulk sale arrangements or through securitization
transactions. OITRS generally makes several representations and warranties
regarding the performance of the Mortgage Loans in connection with each sale or
securitization.





In a
securitization, OITRS accumulated the desired amount of Mortgage Loans and
securitized them in order to create marketable securities. First, pursuant to a
Mortgage Loan Purchase Agreement (“MLPA”), OITRS sells Mortgage Loans to Opteum
Mortgage Acceptance Corporation (“OMAC”), OITRS wholly-owned special purpose
entity created for the execution of these securitizations. Under this MLPA,
OITRS makes general representations and warranties for the Mortgage Loans sold
by OITRS to OMAC.





OMAC then
deposits the Mortgage Loans purchased from OITRS into a Real Estate Mortgage
Investment Conduit (“REMIC”) trust where, pursuant to a Pooling and Servicing
Agreement (“P&S Agreement”), the rights to the cash flows associated with
such Mortgage Loans are sold to investors in the form of marketable debt
securities. These securities, issued by the REMIC trust, are divided into
different classes of certificates (the “Certificates”) with varying claims to
payments received on the Mortgage Loans.





Certain
of these Certificates are offered to the public (the “Public Certificates”)
pursuant to a prospectus. These Public Certificates are sold to underwriters on
the closing date pursuant to an underwriting agreement. The proceeds from the
sale of the Public Certificates to the underwriters (less an underwriting
discount) are ultimately transferred to OITRS as partial consideration for the
Mortgage Loans sold to OMAC pursuant to the MLPA.





Finally,
subsequent to a securitization transaction as described above, OITRS typically
executes an additional net interest margin (“NIM”) securitization, or
“resecuritization” of the non-publicly offered Certificates, representing
prepayment penalties and over-collateralization fundings (the “Underlying
Certificates”). This NIM securitization is typically transacted as
follows:





OMAC
first deposits the Underlying Certificates into a trust (the “NIM Trust”)
pursuant to a deposit trust agreement. The NIM Trust, pursuant to an indenture,
then issues (i) notes (the “NIM Notes”) representing interests in the Underlying
Certificates and (ii) an owner trust certificate (the “Owner Trust Certificate”)
representing the residual interest in the NIM Trust. The NIM Notes are sold to
third parties via private placement transactions. The net proceeds from the sale
of the NIM Notes and the Owner Trust Certificate are then transferred from OMAC
to OITRS. The Owner Trust Certificates from OITRS’s various securitizations
represent the retained interest, trading on the consolidated balance sheet and
are carried at fair value with changes in fair value reflected in
earnings.





Mortgage Servicing
Rights.OITRS recognizes mortgage servicing rights (“MSRs”) as
an asset when separated from the underlying mortgage loans in connection with
the sale of such loans. Upon sale of a loan, OITRS measures the retained MSRs by
allocating the total cost of originating a mortgage loan between the loan and
the servicing right based on their relative fair values. The estimated fair
value of MSRs is determined by obtaining a market valuation from a specialist
who brokers MSRs.  The broker, Interactive Mortgage Advisors, LLC
(IMA), is 50% owned by OITRS.  To determine the market valuation, the
broker uses a valuation model that incorporates assumptions relating to the
estimate of the cost of servicing the loan, a discount rate, a float value, an
inflation rate, ancillary income of the loan, prepayment speeds and default
rates that market participants use for acquiring similar servicing rights. Gains
or losses on the sale of MSRs are recognized when title and all risks and
rewards have irrevocably passed to the purchaser of such MSRs and there are no
significant unresolved contingencies.




Goodwill and Other Intangible
Assets.Goodwill represents the excess of the purchase price
over the fair value of net assets acquired in a business combination. OITRS’s
goodwill all arose from the OITRS merger. Contingent consideration paid in
subsequent periods under the terms of the OITRS merger agreement, if any, would
be considered acquisition costs and classified as goodwill. In accordance with
SFAS No. 142,Goodwill and
Other Intangible Assets, OITRS subjects its goodwill to at least an
annual assessment for impairment by applying a fair value-based test. If the
carrying value exceeds the fair value, goodwill is impaired. During the year
ended December 31, 2007, OITRS recorded an impairment charge of approximately
$3.4 million to reduce the carrying value to zero.





Derivative Assets and Derivative
Liabilities.  Prior to the suspension of the mortgage
origination operations, OITRS’s mortgage committed pipeline included interest
rate lock commitments (“IRLCs”) that had been extended to borrowers who had
applied for loan funding and met certain defined credit and underwriting
criteria. Effective with the adoption of SFAS No. 133,Accounting for Derivative
Instruments and Hedging Activities, as amended, OITRS classified and
accounted for the IRLCs as derivatives. Accordingly, IRLCs were recorded at
their fair value with changes in fair value recorded to current earnings.
Changes in fair value of IRLCs were determined based on changes in value of
similar loans observed over the period in question. OITRS used other derivative
instruments to economically hedge the IRLCs, which were also classified and
accounted for as derivatives.




OITRS’s
risk management objective for its mortgage loans held for sale included use of
mortgage forward delivery contracts designed as fair value derivative
instruments to protect earnings from an unexpected change due to a decline in
value. Effective with the adoption of SFAS No. 133, OITRS mortgage forward
delivery contracts were recorded at their fair value with changes in fair value
recorded to current earnings. The value of mortgage forward delivery contracts
were obtained from readily available market sources. OITRS also evaluated its
contractual arrangements, assets and liabilities for the existence of embedded
derivatives.




Prior to
the mortgage origination operations of OITRS being terminated and their
operations reported as discontinued operations, derivative assets or liabilities
arising from OITRS’s derivative activities were reported as separate line
items in the accompanying consolidated financial statements in “Derivative
Asset” or Derivative Liability.” IRLCs were included in Mortgage loans held for
sale. Fluctuations in the fair market value of IRLCs and other derivatives
employed were reflected in the consolidated statement of operations under the
caption “Gains on mortgage banking activities.”





Gain on Sale of
Loans.Gains or losses on the sale of mortgage loans are
recognized at the time legal title transfers to the purchaser of such loans
based upon the difference between the sales proceeds from the purchaser and the
allocated basis of the loan sold, adjusted for net deferred loan fees and
certain direct costs and selling costs. OITRS defers net loan origination costs
and fees as a component of the loan balance on the balance sheet. Such costs are
not amortized and are recognized into income as a component of the gain or loss
upon sale. Accordingly, salaries, commissions, benefits and other operating
expenses of $12.2 million were capitalized as direct loan origination costs
during the three months ended March 31, 2007 and reflected in the basis of loans
sold for gain on sale calculation purposes. Prior to the mortgage origination
operations of OITRS being terminated and their operations reported as
discontinued operations, the net gain on sale of loans is included with changes
in fair market value of IRLCs and mortgage loans held for sale and reported as
“Gains on mortgage banking activities” on OITRS’s consolidated statement of
operations.




Servicing Fee
Income.Servicing fee income is generally a fee based on a
percentage of the outstanding principal balances of the mortgage loans serviced
by OITRS (or by a subservicer where OITRS is the master servicer) and is
recorded as income as the installment payments on the mortgages are received by
OITRS or the subservicer.





Income Taxes.OITRS
and its activities are subject to corporate income taxes and the applicable
provisions of SFAS No. 109,Accounting for Income Taxes.  Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.  To the extent management believes deferred tax assets
will not be fully realized in future periods, a provision is recorded so as to
reflect the net portion, if any, of the deferred tax asset management expects to
realize in the future.





(b)
- Mortgage Loans Held for Sale





Prior to
ceasing operations, upon the closing of a residential mortgage loan or shortly
thereafter, OITRS would sell or securitize the majority of its mortgage loan
originations. OITRS also sold mortgage loans insured or guaranteed by various
government-sponsored entities and private insurance agencies. The insurance or
guaranty is provided primarily on a nonrecourse basis to OITRS, except where
limited by the Federal Housing Administration and Veterans Administration and
their respective loan programs.  Mortgage loans held for sale consist
of the following as of March 31, 2008 and December 31, 2007:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Mortgage
      loans held for sale, and other, net
            
            $
            4,145
            
            
            $
            4,780Valuation
      allowance
            
            
            (3,512
            )
            
            
            (3,797
            )Total
            
            $
            633
            
            
            $
            983





(c)
– Retained interest, trading





Retained
interest, trading is the subordinated interests retained by OITRS resulting from
securitizations and includes the over-collateralization and residual net
interest spread remaining after payments to the Public Certificates and NIM
Notes. Retained interest, trading represents the present value of estimated cash
flows to be received from these subordinated interests in the future. The
subordinated interests retained are classified as “trading securities” and are
reported at fair value with unrealized gains or losses reported in
earnings.




All of
OITRS’s securitizations were structured and are accounted for as sales in
accordance with SFAS No. 140,Accounting for Transfers andServicingof Financial Assets and
Extinguishments of Liabilities. Generally, to meet the sale treatment
requirements of SFAS No. 140, the REMIC trust is structured as a “qualifying
special purpose entity” or QSPE, which specifically limits the REMIC trust's
activities, and OITRS surrenders control over the mortgage loans upon their
transfer to the REMIC trust.





Valuation of Investments.OITRS classifies its retained interests as trading securities and
therefore records these securities at their estimated fair value. In order to
value these unrated, unquoted securities, OITRS records these assets at their
estimated fair value utilizing pricing information available directly from
dealers, when available, and the present value calculated by projecting the
future cash flows of a security on a publicly available analytical system. When
a publicly available analytical system is utilized, OITRS will input the
following variable factors which will have an impact on determining the fair
value:





Interest Rate Forecast. LIBOR
interest rate curve.





Discount Rate. The present
value of all future cash flows utilizing a discount rate assumption established
at the discretion of OITRS to represent market conditions and value of similar
instruments with similar risks.  Discount rates used will vary over
time.  Management observes discount rates used for assets with similar
risk profiles.  In selecting which assets to monitor for variations in
discount rates, management seeks to identify assets that share most, if not all
of the risk attributes of the Company’s retained interests,
trading.  Such assets are typically traded between market participants
whereby the discount rate is the primary variable.





Prepayment Forecast. The
prepayment forecast may be expressed by OITRS in accordance with one of the
following standard market conventions: 1) Constant Prepayment Rate (CPR) or 2)
Percentage of a Prepayment Vector (PPV). Prepayment forecasts may be changed as
OITRS observes trends in the underlying collateral as delineated in the
Statement to Certificate Holders generated by the REMIC trust’s Trustee for each
underlying security.  Prepayment forecast will also vary over time as
the level of interest rates change, the difference between rates available to
borrowers on adjustable rate versus fixed rate mortgages change and non-interest
rate related variables fluctuate such as home price appreciation, among
others.





Credit Performance Forecast.A forecast of future credit performance of the underlying collateral pool
will include an assumption of default frequency, loss severity, and a recovery
lag. In general, OITRS will utilize the combination of default frequency and
loss severity in conjunction with a collateral prepayment assumption to arrive
at a target cumulative loss to the collateral pool over the life of the pool
based on historical performance of similar collateral by the originator. The
target cumulative loss forecast will be developed and noted at the pricing date
of the individual security but may be updated by OITRS consistent with
observations of the actual collateral pool performance.





Default
Frequency may be expressed by OITRS in accordance with any of three standard
market conventions: 1) Constant Default Rate (CDR) 2) Percentage of a Standard
Default Assumption (SDA) curve, or 3) a vector or curve established to meet
forecasted performance for specific collateral pools.





Loss
Severity will be expressed by OITRS in accordance with historical performance of
similar collateral and the standard market conventions of a percentage of the
unpaid principal balance of the forecasted defaults lost during the foreclosure
and liquidation process.





During
the first year of a new issue OITRS may balance positive or adverse effects of
the prepayment forecast and the credit performance forecast allowing for
deviation between actual and forecasted performance of the collateral pool.
After the first year, OITRS will generally adjust the Prepayment and Credit
Performance Forecasts to replicate actual performance trends without balancing
adverse and positive effects.





The
following table summarizes OITRS’s residual interests in securitizations as of
March 31, 2008 and December 31, 2007:





(in
thousands)





Series
            Issue
      Date
            
            March
      31, 2008
            
            
            December
      31, 2007HMAC
      2004-1
            March
      4, 2004
            
            $
            2,317
            
            
            $
            2,460HMAC
      2004-2
            May
      10, 2004
            
            
            3,126
            
            
            
            1,408HMAC
      2004-3
            June
      30, 2004
            
            
            2,459
            
            
            
            880HMAC
      2004-4
            August
      16, 2004
            
            
            2,109
            
            
            
            1,506HMAC
      2004-5
            September
      28, 2004
            
            
            4,071
            
            
            
            3,043HMAC
      2004-6
            November
      17, 2004
            
            
            4,717
            
            
            
            5,181OMAC
      2005-1
            January
      31, 2005
            
            
            6,638
            
            
            
            6,948OMAC
      2005-2
            April
      5, 2005
            
            
            5,509
            
            
            
            7,046OMAC
      2005-3
            June
      17, 2005
            
            
            12,109
            
            
            
            10,736OMAC
      2005-4
            August
      25, 2005
            
            
            6,499
            
            
            
            9,752OMAC
      2005-5
            November
      23, 2005
            
            
            2,510
            
            
            
            7,717OMAC
      2006-1
            March
      23, 2006
            
            
            10,131
            
            
            
            10,835OMAC
      2006-2
            June
      26, 2006
            
            
            1,594
            
            
            
            1,789Total
            
            
            $
            63,789
            
            
            $
            69,301







At March
31, 2008 and December 31, 2007, key economic assumptions and the sensitivity of
the current fair value of residual cash flows to the immediate 10% and 20%
adverse change in those assumptions are as follows:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Balance
      sheet carrying value of retained interests – fair value
            
            $
            63,789
            
            
            $
            69,301Weighted
      average life (in years)
            
            
            4.63
            
            
            
            4.09Prepayment
      assumption (annual rate)
            
            
            18.55
            %
            
            
            26.37
            %Impact
      on fair value of 10% adverse change
            
            $
            (5,410
            )
            
            $
            (6,908
            )Impact
      on fair value of 20% adverse change
            
            $
            (10,223
            )
            
            $
            (12,577
            )Expected
      credit losses (% of original unpaid principal balance)
            
            
            2.07
            %
            
            
            1.22
            %Impact
      on fair value of 10% adverse change
            
            $
            (7,914
            )
            
            $
            (6,409
            )Impact
      on fair value of 20% adverse change
            
            $
            (14,908
            )
            
            $
            (13,633
            )Residual
      cash-flow discount rate
            
            
            27.50
            %
            
            
            20.00
            %Impact
      on fair value of 10% adverse change
            
            $
            (5,246
            )
            
            $
            (4,138
            )Impact
      on fair value of 20% adverse change
            
            $
            (9,822
            )
            
            $
            (7,907
            )Interest
      rates on variable and adjustable loans and bonds
            
            Forward
      LIBOR Yield Curve
            
            
            Forward
      LIBOR Yield CurveImpact
      on fair value of 10% adverse change
            
            $
            (11,088
            )
            
            $
            (14,906
            )Impact
      on fair value of 20% adverse change
            
            $
            (21,644
            )
            
            $
            (28,225
            )





These
sensitivities are hypothetical and should be used with caution. As the figures
indicate, changes in fair value based upon a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also, in this table,
the effect of the variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption; in
reality, changes in one factor may result in changes in another which may
magnify or counteract the sensitivities. To estimate the impact of a 10% and 20%
adverse change of the Forward LIBOR curve, a parallel shift in the Forward LIBOR
curve was assumed based on the Forward LIBOR curve as of March 31, 2008 and
December 31, 2007.





Credit
loss percentages are calculated by using the original unpaid principal balance
of each pool of assets as the denominator. The following credit loss percentages
are calculated based upon all OITRS securitizations that have been completed to
date:





(in
thousands)





Series
            Issue
      Date
            
            Original
      Unpaid Principal Balance
            
            
            Actual
      Losses Through March 31, 2008
            
            
            Projected
      Future Credit Losses as of March 31, 2008
            
            
            Projected
      Total Credit Losses as of March 31, 2008HMAC
      2004-1
            March
      4, 2004
            
            $
            309,710
            
            
            
            0.43
            %
            
            
            0.48
            %
            
            
            0.91
            %HMAC
      2004-2
            May
      10, 2004
            
            
            388,738
            
            
            
            0.64
            %
            
            
            0.35
            %
            
            
            0.99
            %HMAC
      2004-3
            June
      30, 2004
            
            
            417,055
            
            
            
            0.45
            %
            
            
            0.34
            %
            
            
            0.79
            %HMAC
      2004-4
            August
      16, 2004
            
            
            410,123
            
            
            
            0.37
            %
            
            
            0.63
            %
            
            
            1.00
            %HMAC
      2004-5
            September
      28, 2004
            
            
            413,875
            
            
            
            0.45
            %
            
            
            0.67
            %
            
            
            1.12
            %HMAC
      2004-6
            November
      17, 2004
            
            
            761,027
            
            
            
            0.72
            %
            
            
            1.11
            %
            
            
            1.83
            %OMAC
      2005-1
            January
      31, 2005
            
            
            802,625
            
            
            
            0.44
            %
            
            
            1.30
            %
            
            
            1.74
            %OMAC
      2005-2
            April
      5, 2005
            
            
            883,987
            
            
            
            0.32
            %
            
            
            1.37
            %
            
            
            1.69
            %OMAC
      2005-3
            June
      17, 2005
            
            
            937,117
            
            
            
            0.36
            %
            
            
            1.21
            %
            
            
            1.57
            %OMAC
      2005-4
            August
      25, 2005
            
            
            1,321,739
            
            
            
            0.30
            %
            
            
            2.28
            %
            
            
            2.58
            %OMAC
      2005-5
            November
      23, 2005
            
            
            986,277
            
            
            
            0.23
            %
            
            
            2.98
            %
            
            
            3.21
            %OMAC
      2006-1
            March
      23, 2006
            
            
            934,441
            
            
            
            0.26
            %
            
            
            2.24
            %
            
            
            2.50
            %OMAC
      2006-2
            June
      26, 2006
            
            
            491,571
            
            
            
            0.34
            %
            
            
            4.25
            %
            
            
            4.59
            %Total
            
            
            $
            9,058,285
            
            
            
            0.38
            %
            
            
            1.69
            %
            
            
            2.07
            %










The table
below summarizes certain cash flows received from and paid to securitization
trusts:





(in
thousands)





March
      31, 2008
            
            
            March
      31, 2007Servicing
      fees received
            
            $
            467
            
            
            $
            5,310Servicing
      advances, net of repayments
            
            
            (2,344
            )
            
            
            605Cash
      flows received on retained interests
            
            
            3,392
            
            
            
            901





The
following information presents quantitative information about delinquencies and
credit losses on securitized financial assets as of March 31, 2008 and December
31, 2007:





(in
thousands)





As
      of Date
            
            Total
      Principal Amount of Loans
            
            
            Principal
      Amount of Loans 60 Days or more delinquent
            
            
            Net
      Credit LossesMarch
      31, 2008
            
            $
            4,373,604
            
            
            $
            595,901
            
            
            $
            34,497December
      31, 2007
            
            
            4,528,481
            
            
            
            457,872
            
            
            
            23,639





(d)
– Mortgage Servicing Rights, Net





OITRS
has elected to account for all originated MSRs as one class and, therefore, all
MSRs are carried at fair value. In addition, changes in value due to run-offs of
the portfolio are recorded as valuation adjustments instead of
amortization.




The fair
value of MSRs is determined using discounted cash flow techniques based on
market assumptions. Changes in fair value are the result of changes in market
conditions, changes in valuation assumptions and run-off of the underlying
mortgage loans. Changes in fair value due to run-off of the underlying mortgage
loans and changes in value due to changes in market conditions are grouped
together above. When the underlying assumptions used for valuation purposes are
changed, the effect on fair value is presented separately.





Activities
for MSRs are summarized as follows for the three months ended March 31, 2008 and
2007:





(in
thousands)





Three
      Months ended March 31,2008
            
            
            2007Balance
      at beginning of period (at cost)
            
            $
            3,073
            
            
            $
            98,859Additions
            
            
            -
            
            
            
            5,303Sales,
      net of reserve for prepayment protection
            
            
            -
            
            
            
            -Changes
      in fair value:Due
      to changes in market conditions and run-off
            
            
            (261
            )
            
            
            (9,663
            )Due
      to change in valuation assumptions
            
            
            250
            
            
            
            (2,559
            )Balance
      at end of period
            
            $
            3,062
            
            
            $
            91,940





Estimates
of fair value involve several assumptions, including the key valuation
assumptions about market expectations of future prepayment rates, interest rates
and discount rates. Prepayment rates are projected using a prepayment model. The
model considers key factors, such as refinance incentive, housing turnover,
seasonality and aging of the pool of loans. Prepayment speeds incorporate
expectations of future rates implied by the forward LIBOR/swap curve, as well as
collateral specific information.





As of
March 31, 2008 and December 31, 2007, key economic assumptions and the
sensitivity of the current fair value of MSR rights cash flows to the immediate
10% and 20% adverse change in those assumptions are as follows:  (Note
- base case prepayment and discount rate assumptions are a weighted average of
the values applied to the various mortgage loans).





($
in thousands)





March
      31, 2008
            
            
            December
      31, 2007Prepayment
      assumption (annual rate) (PSA)
            
            
            692.7
            
            
            
            557.3Impact
      on fair value of 10% adverse change
            
            $
            (180
            )
            
            $
            (129
            )Impact
      on fair value of 20% adverse change
            
            $
            (338
            )
            
            $
            (242
            )MSR
      Cash-Flow Discount Rate
            
            
            13.38
            %
            
            
            13.46
            %Impact
      on fair value of 10% adverse change
            
            $
            (116
            )
            
            $
            (105
            )Impact
      on fair value of 20% adverse change
            
            $
            (223
            )
            
            $
            (201
            )





These
sensitivities are entirely hypothetical and should be used with caution. As the
figures indicate, changes in fair value based upon 10% and 20% variations in
assumptions generally cannot be extrapolated to greater or lesser percentage
variation because the relationship of the change in assumption to the change in
fair value may not be linear. Also, in this table, the effect of the variation
in a particular assumption on the fair value of the MSR is calculated without
changing any other assumption. In reality, changes in one factor may result in
changes in another which may magnify or counteract the
sensitivities.





(e)
– Receivables





A summary
of receivables as March 31, 2008 and December 31, 2007 is presented
below:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Servicing
      advances (principal and interest)
            
            $
            7,481
            
            
            $
            5,636Servicing
      advances (taxes and insurance)
            
            
            7,994
            
            
            
            7,495Servicing
      sale receivable
            
            
            4,522
            
            
            
            4,681Other
      receivables
            
            
            23
            
            
            
            56Totals
            
            $
            20,020
            
            
            $
            17,868





(f)
– Secured Borrowings





Secured
      borrowings consisted of the following as of March 31, 2008 and December
      31, 2007:




(in
thousands)




March
      31, 2008
            
            
            December
      31, 2007Citigroup
      Global Markets Realty Corp., line of credit for $80.0 million secured by
      the retained interests in securitizations. The facility was extended on
      December 19, 2007 through February 26, 2008 and the limit reduced in
      stages, ultimately to $11.0 million.  The facility was extended
      again through May 26, 2008 and the limit further reduced in stages,
      initially to $8.0 million through March 26, 2008, $5.0 million through
      April 30, 2008 and $0.0 million as of May 26, 2008.  The
      agreement provides for interest rate based on LIBOR plus
      3.00%.
            
            $
            8,000
            
            
            $
            18,000





The
residual financing facility contains financial covenants pertaining to tangible
net worth and total indebtedness.  The Company was in compliance with
such covenants as of March 31, 2008.





(g)  -
Income taxes





As
previously described, Bimini Capital acquired OITRS on November 3, 2005, and
OITRS is a taxpaying entity for income tax purposes and is taxed separately from
Bimini Capital.  Therefore, OITRS separately reports an income tax
provision or benefit based on its own taxable activities.  As of March 31,
2008, all deferred tax assets, net of deferred tax liabilities, which are
primarily generated by the net losses incurred are offset in their entirety by a
deferred tax asset valuation allowance.  The amount of the gross tax
benefit generated by these losses are reduced by an offsetting valuation
allowance of the same amount.





During
the three month period ended March 31, 2007, OITRS recorded a deferred tax asset
valuation allowance of approximately $37.4 million; there was no allowance
recorded previously.  As of December 31, 2006, OITRS had recorded net
deferred tax assets of approximately $7.1 million. The recording of the
valuation allowance (among other items) during the three months ended March 31,
2007 resulted in OITRS recording an income tax provision of $11.5 million, and
reduced the December 31, 2006 net deferred tax asset to a net deferred tax
liability as of March 31, 2007 of approximately $4.3 million.





The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income within OITRS.  Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment.  At this
time, management believes it is more likely than not that the Company will not
realize the full benefits of all of the federal and state tax loss
carryforwards, and that the Company will not realize any benefit of the other
deferred tax assets.  Therefore, the Company has recorded a valuation
allowance against all the net deferred tax assets of OITRS.





(h)
– Commitments and Contingencies





Loans Sold to Investors.
Generally, OITRS is not exposed to significant credit risk on its loans sold to
investors. In the normal course of business, OITRS provides certain
representations and warranties during the sale of mortgage loans which obligate
it to repurchase loans which are subsequently unable to be sold through the
normal investor channels. The repurchased loans are secured by the related real
estate properties, and can usually be sold directly to other permanent
investors. There can be no assurance, however, that OITRS will be able to
recover the repurchased loan value either through other investor channels or
through the assumption of the secured real estate.





OITRS
recognizes a liability for the estimated fair value of this obligation at the
inception of each mortgage loan sale based on the anticipated repurchase levels
and historical experience. The liability is recorded as a reduction of the gain
on sale of mortgage loans and included as part of other liabilities in the
accompanying financial statements.





Changes
in the liability during the three months ended March 31, 2008 and
2007:





(in
thousands)





For
      the Three Months Ended March 31,2008
            
            
            2007Balance—Beginning
      of period
            
            $
            5,260
            
            
            $
            7,136Provision
            
            
            1,000
            
            
            
            12,674Charge-Offs
            
            
            -
            
            
            
            (6,345
            )Balance—End
      of period
            
            $
            6,260
            
            
            $
            13,465





Outstanding Litigation. OITRS
is involved in various lawsuits and claims, both actual and potential, including
some that it has asserted against others, in which monetary and other damages
are sought. These lawsuits and claims relate primarily to contractual disputes
arising out of the ordinary course of OITRS’s business as previously conducted.
The outcome of such lawsuits and claims is inherently unpredictable. However,
management believes that, in the aggregate, the outcome of all lawsuits and
claims involving OITRS will not have a material effect on the Company’s
consolidated financial position or liquidity; however, any such outcome may be
material to the results of operations of any particular period in which costs,
if any, are recognized.





On June
14, 2007, a complaint was filed in the Circuit Court of the Twelfth Judicial
District in and for Manatee County, Florida by Coast Bank of Florida against
OITRS, seeking specific performance and alleging breach of contract for
allegedly failing to repurchase certain loans.  OITRS believes the
plaintiff’s claim is without merit and intends to vigorously defend the
case.





As part
of the November 3, 2005 merger pursuant to which OITRS became a wholly-owned
subsidiary of Bimini, the parties to the Agreement and Plan of Merger and
Reorganization (the “Merger Agreement”) agreed to special resolution procedures
concerning certain litigation matters in which OITRS was a party and that was
pending at the time of the merger.  Certain provisions of the Merger
Agreement specified the manner in which four separate litigation matters would
be treated for purposes of determining the rights and obligations of the parties
to the Merger Agreement.  In two of these matters, OITRS was the
plaintiff and was seeking money damages from third parties.  In the
other two matters, OITRS was a defendant and was defending itself against claims
for money damages. Each of these matters have been concluded.  The net
proceeds received by OITRS as a result of the conclusion of these matters are
being held in escrow and will be distributed to the former owners of OITRS
pursuant to the terms of the Merger Agreement.





Guarantees. OITRS has
guaranteed the obligations of OITRS’s wholly-owned subsidiary, HS Special
Purpose, LLC, under its financing facility with Citigroup described in Note11(f). This guaranty
will remain in effect so long as the applicable financing facility remains in
effect.  If an Event of Default occurs under this financing facility
that is not cured or waived, OITRS may be required to perform under its
guaranty.  There is no specific limitation on the maximum potential
future payments under this guaranty.  However, OITRS’s liability under
this guaranty would be reduced in an amount equal to the amount by which the
collateral securing such obligations exceeds the amounts outstanding under the
applicable facility.





(i)
– Fair Value




OITRS
measures or monitors many of its assets on a fair value basis. Fair value is
used on a recurring basis for certain assets in which fair value is the primary
basis of accounting. Examples of these include, loans held for sale, retained
interests, trading, securities held for sale and mortgage servicing rights.
Additionally, fair value is used on a non-recurring basis to evaluate assets for
impairment.  Examples of these non-recurring uses of fair value
include goodwill, and long-lived assets. Depending on the nature of the asset or
liability, OITRS uses various valuation techniques and assumptions when
estimating the instrument’s fair value. These valuation techniques and
assumptions are in accordance with SFAS No. 157.







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 assets and
liabilities required or permitted to be recorded at and/or marked to fair value,
OITRS considers the principal or most advantageous market in which it would
transact and considers assumptions that market participants would use when
pricing the asset or liability. When possible, OITRS looks to active and
observable markets to price identical assets or liabilities. When identical
assets and liabilities are not traded in active markets, OITRS looks to market
observable data for similar assets and liabilities. Nevertheless, certain assets
and liabilities are not actively traded in observable markets and OITRS must use
alternative valuation techniques to derive a fair value
measurement.









The
following table presents financial assets measured at fair value on a recurring
basis:





(in
thousands)





Fair
      Value Measurements at March 31, 2008, UsingFair
      Value Measurements
              March
      31, 2008
            
            
            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
            
            $
            633
            
            
            $
            -
            
            
            $
            -
            
            
            $
            633Retained
      interests, trading
            
            
            63,789
            
            
            
            -
            
            
            
            -
            
            
            
            63,789Securities
      held for sale
            
            
            173
            
            
            
            -
            
            
            
            -
            
            
            
            173Originated
      mortgage servicing rights
            
            
            3,062
            
            
            
            -
            
            
            
            -
            
            
            
            3,062





A
reconciliation of activity for the three months ended March 31, 2008 for assets
measured at fair value based on significant unobservable (non-market)
information (Level 3) is presented in the following table:





(in
thousands)





Mortgage
      Loans Held for Sale
            
            
            Retained
      Interests, Trading
            
            
            Securities
      Held for Sale
            
            
            Originated
      Mortgage Servicing RightsBeginning
      balance
            
            $
            983
            
            
            $
            69,301
            
            
            $
            173
            
            
            $
            3,073Gains
      (losses) included in earnings
            
            
            78
            
            
            
            (2,120
            )
            
            
            -
            
            
            
            (11
            )Purchases,
      issuances and settlements
            
            
            (428
            )
            
            
            (3,392
            )
            
            
            -
            
            
            
            -Ending
      Balance
            
            $
            633
            
            
            $
            63,789
            
            
            $
            173
            
            
            $
            3,062





Gains and
losses included in earnings for the three months ended March 31, 2008 are
reported in loss on mortgage banking activities.








ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





FORWARD-LOOKING
STATEMENTS




When used
in this Quarterly Report on Form 10-Q, in future filings with the
Securities and Exchange Commission (the “Commission”) or in press releases or
other written or oral communications, statements which are not historical in
nature, including those containing words such as “anticipate,” “estimate,”
“should,” “expect,” “believe,” “intend” and similar expressions, are intended to
identify “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).




These
forward-looking statements are subject to various risks and uncertainties,
including, but not limited to, those described or incorporated by reference in
Part II - Item 1A - Risk Factors of this Form 10-Q. These and other risks,
uncertainties and factors, including those described in reports that the Company
files from time to time with the Commission, could cause the Company’s actual
results to differ materially from those reflected in such forward-looking
statements. All forward-looking statements speak only as of the date they are
made and the Company does not undertake, and specifically disclaims, any
obligation to update or revise any forward-looking statements to reflect events
or circumstances occurring after the date of such statements.





The
following discussion of the financial condition and results of operations should
be read in conjunction with the Company’s consolidated financial statements and
related notes included elsewhere in this report.





Introduction





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 Orchid Island TRS, LLC and its
consolidated subsidiaries. This entity, which was previously named Opteum
Financial Services, LLC, and referred to as “OFS,” was renamed Orchid Island
TRS, LLC 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.”  Discussions relating to the “Company” refer to the
consolidated entity (the combination of Bimini Capital and OITRS).





Bimini
Capital Management, Inc., formerly Opteum Inc. and Bimini Mortgage Management,
Inc., was formed in September 2003 to invest primarily in but not limited to,
residential mortgage related securities issued by the Federal National Mortgage
Association (more commonly known as Fannie Mae), the Federal Home Loan Mortgage
Corporation (more commonly known as Freddie Mac) and the Government National
Mortgage Association (more commonly known as Ginnie Mae). Bimini Capital
attempts to earn a return on the spread between the yield on its assets and its
costs, including the interest expense on the funds it borrows. It generally
intends to borrow between eight and twelve times the amount of its equity
capital in an attempt to enhance its returns to stockholders. This leverage may
be adjusted above or below this range to the extent management or the Company’s
Board of Directors deems necessary or appropriate.  For purposes of
this calculation, Bimini Capital treats its junior subordinated notes as an
equity capital equivalent. Bimini Capital is self-managed and self-advised and
has elected to be taxed as a REIT for U.S. federal income tax
purposes.





On April
18, 2007, the Board of Managers of OITRS, at the recommendation of the Board of
Directors of the Company, approved the closure of the wholesale and conduit
mortgage loan origination channels.  Both channels ceased accepting
new applications for mortgage loans on April 20, 2007.  On May 7,
2007, OITRS signed a binding agreement to sell its retail mortgage loan
origination channel to a third party as well.  On June 30, 2007, OITRS
completed such sale and ceased its mortgage loan origination business and
therefore the results of the mortgage origination business are reported as
discontinued operations for the three months ended March 31, 2007. The results
of the ongoing activities associated with the wind-down of the mortgage loan
origination business for the three months ended March 31, 2008 are likewise
reported as discontinued operations.





DIVIDENDS
TO STOCKHOLDERS





In order
to maintain its qualification as a REIT, Bimini Capital is required (among other
provisions) to annually distribute dividends to its stockholders in an amount at
least equal to, generally, 90% of Bimini Capital’s REIT taxable income. REIT
taxable income is a term that describes Bimini Capital’s operating results
calculated in accordance with rules and regulations promulgated pursuant to the
Internal Revenue Code.  As a REIT, Bimini Capital may be subject to a
federal excise tax if Bimini Capital distributes less than 85% of its taxable
income by the end of the calendar year.





Bimini
Capital’s REIT taxable income is computed differently from net income as
computed in accordance with generally accepted accounting principles ("GAAP net
income"), as reported in the Company’s accompanying consolidated financial
statements.  Depending on the number and size of the various items or
transactions being accounted for differently, the differences between REIT
taxable income and GAAP net income can be substantial and each item can affect
several reporting periods. Generally, these items are timing or temporary
differences between years; for example, an item that may be a deduction for GAAP
net income in the current year may not be a deduction for REIT taxable income
until a later year.





The
Company has negative retained earnings (titled “Accumulated deficit” in the
stockholders’ equity section of the financial statements) as of March 31,
2008.  This deficit is computed on a GAAP basis, and does not directly
affect the REIT’s ability to pay dividends.  As described in Note 9 to
the financial statements, titled Income Taxes, the differences between GAAP
results and REIT taxable income is substantial;  from inception to
March 31, 2008, Bimini Capital’s REIT taxable income is approximately $84.1
million greater than Bimini Capital’s results as reported in its GAAP financial
statements.





Results
of Operations





PERFORMANCE
OVERVIEW





Described
below are the Company’s results of operations for the three months ended March
31, 2008, as compared to the Company’s results of operations for the three
months ended March 31, 2007.   During the year ended December 31,
2007, the Company ceased all mortgage origination business at OITRS. As stated
above, results of those operations are reported in the financial statements as
discontinued operations.





Consolidated
net loss for the three months ended March 31, 2008, was $5.1 million,compared to a
consolidated net loss of$78.1 million, for the
three months ended March 31, 2007. Consolidated net loss per basic and diluted
share of Class A Common Stock was $0.20, respectively, for the three months
ended March 31, 2008, compared to a consolidated net loss per basic and diluted
share of Class A Common Stock of $3.14, respectively, for the comparable prior
period.





For the
three months ended March 31, 2008, comprehensive loss was$5.1
million.  For three months ended March 31 2007, comprehensive loss was
$74.9 million, including the net unrealized gain on available-for-sale
securities of $3.2 million.





Unrealized
gains/(losses) on available-for-sale securities is a component of accumulated
other comprehensive loss, which is included in stockholders’ equity on the
consolidated balance sheet.  The unrealized gains/(losses) on
available-for-sale securities is the difference between the fair market value of
the portfolio of mortgage-backed securities (“MBS”) securities and their cost
basis.  The unrealized gain on available-for-sale securities for the
three months ended March 31, 2007 was driven by a combination of a decrease in
short term rates for the period, which tends to increase the fair market value
of the Company’s portfolio of MBS securities, and increased amortization of net
premium for the period, which lowers the cost basis in the portfolio of MBS
securities.  The increased amortization for the period was the result
of the continued upward resetting of ARM securities in the portfolio, which
results in higher coupons on the securities relative to their booked yields, and
therefore greater amortization.





On
February 15, 2007, the FASB issued statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities — Including an Amendment of FASB Statement
No. 115 (“SFAS 159”).  This standard permits an entity to
measure financial instruments and certain other items at estimated fair value.
The fair value option created by SFAS 159 permits an entity to measure eligible
items at fair value as of specified election dates. The Company adopted
SFAS 159 on January 1, 2008, and in connection with the adoption of
SFAS No. 159, the Company elected to record  available-for-sale
mortgage-backed securities at fair value and to transfer these securities to its
trading portfolio.  As a result, fluctuations in value of the entire
MBS portfolio are recorded in earnings effective January 1, 2008.





PERFORMANCE OF BIMINI
CAPITAL’S MBS PORTFOLIO





For the
three months ended March 31, 2008, the REIT generated $0.4 million of net
interest income.  Included in these results were $10.1 million of
interest income, offset by $9.7 million of interest expense.  Net
interest income is up approximately $1.4 million compared to the three months
ended March 31, 2007.  The increase is due to higher net interest
margin available in the market in 2008, offset to some extent by a substantially
reduced portfolio.





For each
of the three month periods ended March 31, 2008 and 2007, the REIT’s general and
administrative costs were approximately $1.9 million. For the three months ended
March 31, 2008, compensation and related benefits were $0.4 million lower than
for the same period in 2007, while costs associated with the Company’s
evaluation of possible strategic options caused other administrative expenses to
increase $0.4 million.





Bimini
Capital had $0.3 million in realized gains from the sales of securities in the
MBS portfolio during the three months ended March 31, 2008, compared to losses
of $0.8 million during the three months ended March 31, 2007.










As of
March 31, 2008, the MBS portfolio consisted of $515.3 million of agency or
government MBS at fair value and had a weighted average coupon on assets of
6.16% and a net weighted average borrowing cost of 4.76%.  The
following tables summarize Bimini Capital’s agency and government mortgage
related securities as of March 31, 2008 and December 31, 2007:






($
in thousands)





Asset
      Category
            
            Market
      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
      CapMarch
      31, 2008Adjustable-Rate
      MBS
            
            $
            159,115
            
            
            
            30.88
            %
            
            
            5.62
            %
            
            
            303
            
            1-Jan-41
            
            
            5.46
            
            
            
            10.17
            %
            
            
            2.51
            %Fixed-Rate
      MBS
            
            $
            24,504
            
            
            
            4.76
            %
            
            
            6.92
            %
            
            
            289
            
            1-Mar-35
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/aHybrid
      Adjustable-Rate MBS
            
            $
            331,698
            
            
            
            64.36
            %
            
            
            6.36
            %
            
            
            342
            
            1-Sep-37
            
            
            41.40
            
            
            
            12.29
            %
            
            
            3.88
            %Total
      Portfolio
            
            $
            515,317
            
            
            
            100.00
            %
            
            
            6.16
            %
            
            
            327
            
            1-Jan-41
            
            
            29.74
            
            
            
            11.60
            %
            
            
            3.58
            %December
      31, 2007Adjustable-Rate
      MBS
            
            $
            177,608
            
            
            
            25.72
            %
            
            
            6.58
            %
            
            
            294
            
            1-Apr-44
            
            
            5.49
            
            
            
            10.61
            %
            
            
            2.47
            %Fixed-Rate
      MBS
            
            
            110,297
            
            
            
            15.97
            %
            
            
            6.98
            %
            
            
            335
            
            1-Oct-37
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/aHybrid
      Adjustable-Rate MBS
            
            
            398,982
            
            
            
            57.78
            %
            
            
            6.11
            %
            
            
            344
            
            1-Sep-37
            
            
            39.62
            
            
            
            11.92
            %
            
            
            3.62
            %Fixed-Rate
      CMO
            
            
            3,692
            
            
            
            0.53
            %
            
            
            7.00
            %
            
            
            233
            
            18-May-27
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/aTotal
      Portfolio
            
            $
            690,579
            
            
            
            100.00
            %
            
            
            6.37
            %
            
            
            329
            
            1-Apr-44
            
            
            29.11
            
            
            
            11.52
            %
            
            
            3.41
            %





($
in thousands)





March
      31, 2008
            
            
            December
      31, 2007Agency
            
            Market
      Value
            
            
            Percentage
      of
              Entire
      Portfolio
            
            
            Market
      Value
            
            
            Percentage
      of
              Entire
      PortfolioFannie
      Mae
            
            $
            496,056
            
            
            
            96.26
            %
            
            $
            638,763
            
            
            
            92.50
            %Freddie
      Mac
            
            
            13,933
            
            
            
            2.70
            %
            
            
            46,318
            
            
            
            6.70
            %Ginnie
      Mae
            
            
            5,328
            
            
            
            1.04
            %
            
            
            5,498
            
            
            
            0.80
            %Total
      Portfolio
            
            $
            515,317
            
            
            
            100.00
            %
            
            $
            690,579
            
            
            
            100.00
            %











Entire
      Portfolio
            
            March
      31, 2008
            
            
            December
      31, 2007Weighted
      Average Purchase Price
            
            $
            102.37
            
            
            $
            102.32Weighted
      Average Current Price
            
            $
            102.32
            
            
            $
            101.94Effective
      Duration (1)
            
            
            1.631
            
            
            
            1.267





(1) Effective
duration of 1.631 indicates that an interest rate increase of 1% would be
expected to cause a 1.631% decline in the value of the MBS in the Company’s
investment portfolio at March 31, 2008.  Effective duration of 1.267
indicates that an interest rate increase of 1% would be expected to cause a
1.267% decline in the value of the MBS in the Company’s investment portfolio at
December 31, 2007.





In
evaluating the MBS portfolio assets and their performance, Bimini Capital’s
management team primarily evaluates these critical factors: asset performance in
differing interest rate environments, duration of the security, yield to
maturity, potential for prepayment of principal and the market price of the
investment.





Bimini
Capital’s portfolio of MBS will typically be comprised of adjustable-rate MBS,
fixed-rate MBS, hybrid adjustable-rate MBS and balloon maturity MBS. Bimini
Capital seeks to acquire low duration assets. Although the duration of an
individual asset can change as a result of changes in interest rates, Bimini
Capital strives to maintain a portfolio with an effective duration of less than
2.0. The stated contractual final maturity of the mortgage loans underlying
Bimini Capital’s portfolio of MBS generally ranges up to 30 years. However,
the effect of prepayments of the underlying mortgage loans tends to shorten the
resulting cash flows from investments substantially. Prepayments occur for
various reasons, including refinancing of underlying mortgages and loan payoffs
in connection with home sales.





Prepayments
on the loans underlying MBS can alter the timing of the cash flows from the
underlying loans to the Company. As a result, Bimini Capital gauges the interest
rate sensitivity of its assets by measuring their effective duration. While
modified duration measures the price sensitivity of a bond to movements in
interest rates, effective duration captures both the movement in interest rates
and the fact that cash flows to a mortgage related security are altered when
interest rates move. Accordingly, when the contract interest rate on a mortgage
loan is substantially above prevailing interest rates in the market, the
effective duration of securities collateralized by such loans can be quite low
because of expected prepayments. Although some of the fixed-rate MBS in Bimini
Capital’s portfolio are collateralized by loans with a lower propensity to
prepay when the contract rate is above prevailing rates, their price movements
track securities with the same contract rates but lack such lower propensity to
prepay, and therefore exhibit similar effective duration.





As of
March 31, 2008, approximately64.36% of Bimini
Capital’s portfolio is comprised of hybrid adjustable rate MBS
securities.   Bimini Capital favors such securities since they
offer superior income potential in the current slow prepayment
environment.  Going forward, to the extent such superior relative
income potential is not available, the composition of the portfolio may be
changed to better take advantage of opportunities in the market at that
time.





The value
of the MBS portfolio changes as interest rates rise or fall.  Bimini
Capital faces the risk that the market value of its assets will increase or
decrease at different rates than that of its liabilities.  Bimini
Capital primarily assesses its interest rate risk by estimating the duration of
its assets and the duration of its liabilities. Duration essentially measures
the market price volatility of financial instruments as interest rates change.
Bimini Capital generally calculates duration using various financial models and
empirical data and different models and methodologies can produce different
duration numbers for the same securities.





The
following sensitivity analysis shows the estimated impact on the fair value of
Bimini Capital's interest rate-sensitive investments as of March 31, 2008,
assuming rates instantaneously fall 100 basis points, rise 100 basis points and
rise 200 basis points:





(in
thousands)





Interest
      Rates Fall 100 BPS
            
            
            Interest
      Rates Rise 100 BPS
            
            
            Interest
      Rates Rise 200 BPSAdjustable
      Rate MBSFair
      Value
            
            $
            159,115Change
      in fair Value
            
            
            
            
            
            $
            1,807
            
            
            $
            (1,807
            )
            
            $
            (3,614
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.14
            %
            
            
            (1.14
            %)
            
            
            (2.27
            %)Fixed
      Rate MBSFair
      Value
            
            $
            24,504Change
      in fair Value
            
            
            
            
            
            $
            582
            
            
            $
            (582
            )
            
            $
            (1,164
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            2.38
            %
            
            
            (2.38
            %)
            
            
            (4.75
            %)Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            331,698Change
      in fair Value
            
            
            
            
            
            $
            6,016
            
            
            $
            (6,016
            )
            
            $
            (12,032
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.81
            %
            
            
            (1.81
            %)
            
            
            (3.63
            %)Portfolio
      TotalFair
      Value
            
            $
            515,317Change
      in fair Value
            
            
            
            
            
            $
            8,405
            
            
            $
            (8,405
            )
            
            $
            (16,810
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.63
            %
            
            
            (1.63
            %)
            
            
            (3.26
            %)CashFair
      Value
            
            $
            15,132





The table
below reflects the same analysis presented above but with the figures in the
columns that indicate the estimated impact of a 100 basis point fall or rise
adjusted to reflect the impact of convexity.





(in
thousands)





Interest
      Rates Fall 100 BPS
            
            
            Interest
      Rates Rise 100 BPS
            
            
            Interest
      Rates Rise 200 BPSAdjustable
      Rate MBSFair
      Value
            
            $
            159,115Change
      in fair Value
            
            
            
            
            
            $
            1,654
            
            
            $
            (1,993
            )
            
            $
            (4,407
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.04
            %
            
            
            (1.25
            %)
            
            
            (2.77
            %)Fixed
      Rate MBSFair
      Value
            
            $
            24,504Change
      in fair Value
            
            
            
            
            
            $
            424
            
            
            $
            (763
            )
            
            $
            (1,779
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.73
            %
            
            
            (3.11
            %)
            
            
            (7.26
            %)Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            331,698Change
      in fair Value
            
            
            
            
            
            $
            4,544
            
            
            $
            (7,490
            )
            
            $
            (17,012
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.37
            %
            
            
            (2.26
            %)
            
            
            (5.13
            %)Portfolio
      TotalFair
      Value
            
            $
            515,317Change
      in fair Value
            
            
            
            
            
            $
            6,622
            
            
            $
            (10,246
            )
            
            $
            (23,198
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.29
            %
            
            
            (1.99
            %)
            
            
            (4.50
            %)CashFair
      Value
            
            $
            15,132








In
addition to changes in interest rates, other factors impact the fair value of
Bimini Capital's interest rate-sensitive investments and hedging instruments,
such as the shape of the yield curve, market expectations as to future interest
rate changes and other more recently, disruptions in the financial markets
generally. Accordingly, in the event of changes in actual interest rates, the
change in the fair value of Bimini Capital's assets would likely differ from
that shown above and such difference might be material and adverse to Bimini
Capital's stockholders.





For
reference, the table below shows the principal balance of Bimini Capital’s
investment securities, the net unamortized premium, amortized cost of securities
held, average cost expressed as a price, the fair market value of investments
and the fair market value expressed as a price for the current quarter and each
of the previous sixteen quarters for the portfolio of MBS securities only. 
Premium or discount associated with MBS securities classified as held for
trading is not amortized. The data in the table below does not include
information pertaining to discontinued operations at OITRS.





(in
thousands)





Quarter
      Ended
            
            Principal
              Balance
      of
              Investment
              Securities
      Held
            
            
            Unamortized
              Premium
      (Net)
            
            
            Amortized
      Cost of
              Securities
      Held
            
            
            Amortized
              Cost/Principal
              Balance
      Held
            
            
            Fair
      Market
              Value
      of
              Investment
              Securities
      Held
            
            
            Fair
      Market
              Value/Principal
              Balance
      HeldAt
      March 31, 2008
            
            $
            503,650
            
            
            $
            11,667
            
            
            $
            515,317
            
            
            
            102.32
            
            
            
            515,317
            
            
            
            102.32At
      December 31, 2007
            
            
            677,428
            
            
            
            2,825
            
            
            
            690,579
            
            
            
            101.94
            
            
            
            692,293
            
            
            
            102.19At
      September 30, 2007
            
            
            1,236,629
            
            
            
            11,144
            
            
            
            1,253,894
            
            
            
            101.40
            
            
            
            1,255,231
            
            
            
            101.50At
      June 30, 2007
            
            
            1,801,492
            
            
            
            17,144
            
            
            
            1,818,636
            
            
            
            100.95
            
            
            
            1,818,636
            
            
            
            100.95At
      March 31, 2007
            
            
            2,893,761
            
            
            
            109,445
            
            
            
            3,003,206
            
            
            
            103.78
            
            
            
            2,931,796
            
            
            
            101.31At
      December 31, 2006
            
            
            2,779,867
            
            
            
            115,612
            
            
            
            2,895,479
            
            
            
            104.16
            
            
            
            2,808,734
            
            
            
            101.04At
      September 30, 2006
            
            
            3,055,791
            
            
            
            122,300
            
            
            
            3,178,091
            
            
            
            104.00
            
            
            
            3,080,060
            
            
            
            100.79At
      June 30, 2006
            
            
            3,396,910
            
            
            
            120,769
            
            
            
            3,517,679
            
            
            
            103.56
            
            
            
            3,407,288
            
            
            
            100.31At
      March 31,2006
            
            
            3,515,113
            
            
            
            111,361
            
            
            
            3,626,473
            
            
            
            103.17
            
            
            
            3,538,554
            
            
            
            100.67At
      December 31, 2005
            
            
            3,457,891
            
            
            
            112,636
            
            
            
            3,570,527
            
            
            
            103.26
            
            
            
            3,494,029
            
            
            
            101.05At
      September 30, 2005
            
            
            3,797,401
            
            
            
            113,393
            
            
            
            3,910,793
            
            
            
            102.99
            
            
            
            3,858,320
            
            
            
            101.60At
      June 30, 2005
            
            
            3,784,668
            
            
            
            114,673
            
            
            
            3,899,341
            
            
            
            103.03
            
            
            
            3,876,206
            
            
            
            102.42At
      March 31, 2005
            
            
            3,212,517
            
            
            
            109,390
            
            
            
            3,321,907
            
            
            
            103.41
            
            
            
            3,299,052
            
            
            
            102.69At
      December 31, 2004
            
            
            2,876,319
            
            
            
            97,753
            
            
            
            2,974,072
            
            
            
            103.40
            
            
            
            2,973,233
            
            
            
            103.37At
      September 30, 2004
            
            
            1,589,829
            
            
            
            48,499
            
            
            
            1,638,328
            
            
            
            103.05
            
            
            
            1,638,264
            
            
            
            103.05At
      June 30, 2004
            
            
            1,479,500
            
            
            
            38,034
            
            
            
            1,517,534
            
            
            
            102.57
            
            
            
            1,508,421
            
            
            
            101.96At
      March 31, 2004
            
            
            1,473,584
            
            
            
            39,535
            
            
            
            1,513,119
            
            
            
            102.68
            
            
            
            1,516,540
            
            
            
            102.92
















The table
below shows Bimini Capital’s average investments held, total interest income,
yield on average earning assets, average repurchase obligations outstanding,
interest expense, average cost of funds, net interest income and net interest
spread for the quarter ended March 31, 2008, and the sixteen previous quarters
for Bimini Capital’s portfolio of MBS securities only. The data in the table
below does not include information pertaining to discontinued operations at
OITRS.





RATIOS
FOR THE QUARTERS HAVE BEEN ANNUALIZED


(in
thousands)





Quarter
      Ended
            
            Average
              Investment
              Securities
      Held
            
            
            Total
      Interest Income
            
            
            Yield
      on
              Average
      Interest
              Earning
      Assets
            
            
            Average
              Balance
      of
              Repurchase
              Obligations
              Outstanding
            
            
            Interest
              Expense
            
            
            Average
              Cost
      of
              Funds
            
            
            Net
              Interest
              Income
            
            
            Net
              Interest
              SpreadMarch
      31, 2008
            
            $
            602,948
            
            
            $
            10,111
            
            
            
            6.71
            %
            
            $
            584,597
            
            
            $
            8,528
            
            
            
            5.84
            %
            
            $
            1,584
            
            
            
            0.87
            %December
      31, 2007
            
            
            972,236
            
            
            
            11,364
            
            
            
            4.68
            %
            
            
            944,832
            
            
            
            11,483
            
            
            
            4.86
            %
            
            
            (119
            )
            
            
            (0.19
            )%September
      30, 2007
            
            
            1,536,265
            
            
            
            24,634
            
            
            
            6.41
            %
            
            
            1,497,409
            
            
            
            21,949
            
            
            
            5.86
            %
            
            
            2,685
            
            
            
            0.55
            %June
      30, 2007
            
            
            2,375,216
            
            
            
            29,009
            
            
            
            4.89
            %
            
            
            2,323,727
            
            
            
            34,396
            
            
            
            5.92
            %
            
            
            (5,387
            )
            
            
            (1.04
            )%March
      31, 2007
            
            
            2,870,265
            
            
            
            41,856
            
            
            
            5.83
            %
            
            
            2,801,901
            
            
            
            38,357
            
            
            
            5.48
            %
            
            
            3,499
            
            
            
            0.36
            %December
      31, 2006
            
            
            2,944,397
            
            
            
            35,162
            
            
            
            4.78
            %
            
            
            2,869,210
            
            
            
            40,400
            
            
            
            5.63
            %
            
            
            (5,238
            )
            
            
            (0.86
            %)September
      30, 2006
            
            
            3,243,674
            
            
            
            45,850
            
            
            
            5.65
            %
            
            
            3,151,813
            
            
            
            42,710
            
            
            
            5.42
            %
            
            
            3,140
            
            
            
            0.23
            %June
      30, 2006
            
            
            3,472,921
            
            
            
            57,027
            
            
            
            6.57
            %
            
            
            3,360,421
            
            
            
            42,829
            
            
            
            5.10
            %
            
            
            14,198
            
            
            
            1.47
            %March
      31, 2006
            
            
            3,516,292
            
            
            
            42,345
            
            
            
            4.82
            %
            
            
            3,375,777
            
            
            
            37,661
            
            
            
            4.46
            %
            
            
            4,684
            
            
            
            0.35
            %December
      31, 2005
            
            
            3,676,175
            
            
            
            43,140
            
            
            
            4.69
            %
            
            
            3,533,486
            
            
            
            35,913
            
            
            
            4.07
            %
            
            
            7,227
            
            
            
            0.63
            %September
      30, 2005
            
            
            3,867,263
            
            
            
            43,574
            
            
            
            4.51
            %
            
            
            3,723,603
            
            
            
            33,102
            
            
            
            3.56
            %
            
            
            10,472
            
            
            
            0.95
            %June 30,
      2005
            
            
            3,587,629
            
            
            
            36,749
            
            
            
            4.10
            %
            
            
            3,449,744
            
            
            
            26,703
            
            
            
            3.10
            %
            
            
            10,045
            
            
            
            1.00
            %March 31,
      2005
            
            
            3,136,142
            
            
            
            31,070
            
            
            
            3.96
            %
            
            
            2,976,409
            
            
            
            19,842
            
            
            
            2.67
            %
            
            
            11,228
            
            
            
            1.30
            %December 31,
      2004
            
            
            2,305,748
            
            
            
            20,463
            
            
            
            3.55
            %
            
            
            2,159,891
            
            
            
            10,824
            
            
            
            2.01
            %
            
            
            9,639
            
            
            
            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
            %





For the
three months ended March 31, 2007, $1.8 million of the $41.9 million of interest
income was attributable to the quarterly retrospective adjustment.  As
a result of the retrospective adjustment, the yield on average interest earning
assets for the period was increased by 25 basis points to 583 basis
points.  As a result of the entire MBS portfolio being classified as
held for trading for the three months ended March 31, 2008, there are no longer
quarterly retrospective adjustments.





PERFORMANCE OF DISCONTINUED
OPERATIONS OF OITRS





As stated
above, the Company has sold or discontinued all residential mortgage origination
activities at OITRS. The principal business activities of OITRS were the
origination and sale of mortgage loans.  In addition, as part of the
securitization of loans sold, OITRS retained an interest in the resulting
residual interest cash flows more fully described below.  Finally,
OITRS serviced the loans securitized as well as some loans sold on a whole loan
basis.





As of
March 31, 2008, OITRS owned $0.6 million of mortgage loans, net of fair value
adjustments, which were classified as mortgage loans held for
sale.  As stated above, OITRS no longer originates mortgage loans and
the remaining loan inventory is being liquidated.  Losses realized on
the mortgage banking activities for the three months ended March 31, 2008, were
$2.1 million and consist primarily of fair value adjustments on the retained
interests, trading.





For the
three months ended March 31, 2007, losses realized on the mortgage banking
activities were $18.0 million.  These losses reflect the effects of
the mark to market of IRLCs and loans held for sale prior to the sale date of
$14.1 million.  Mark to market losses of loans held for sale of $14.3
million were the result of a sharp deterioration in the secondary market for the
loans originated and sold.  Gains/(losses) from mortgage banking
activities also include changes in the fair value of retained interests in
securitizations and the associated hedge gains or losses.  Excluding
changes in fair value of retained interests in securitizations net of hedge
gains and losses, OITRS had losses from sales of mortgages held for sale of$12.0 million for the
three months ended March 31, 2007.





The
retained interests in securitizations represent residual interest
in pools of loans securitized.  The total fair value of
these retained interests was approximately $63.8 million as of March 31, 2008.
Fluctuations in value of retained interests are primarily driven by projections
of future interest rates (the forward LIBOR curve), the discount rate used to
determine the present value of the residual cash flows and prepayment and loss
estimates on the underlying mortgage loans. Due to higher forward LIBOR rates
and increased loss assumptions on the underlying mortgage loans, the fair value
of the retained interests decreased by $1.3 million for the three months ended
March 31, 2007.  Due to higher loss severity assumptions and discount
rates, the fair value of the retained interests decreased by $2.1 million for
the three months ended March 31, 2008.








The table
below provides details of OITRS’s loss on mortgage banking activities for the
three months ended March 31, 2008 and 2007.  OITRS recognizes a gain
or loss on sale of mortgages held for sale only when the loans are actually
sold.





GAINS/(LOSSES)
ON MORTGAGE BANKING ACTIVITIES





(in
thousands)





Three
      Months EndedMarch
      31, 2008
            
            
            March
      31, 2007Fair
      value adjustment of retained interests, trading
            
            $
            (2,120
            )
            
            $
            (1,324
            )Gains
      on sales of mortgage loans
            
            
            59
            
            
            
            14,513Fees
      on brokered loans
            
            
            -
            
            
            
            857Loss
      on derivatives
            
            
            -
            
            
            
            (4,636
            )Direct
      loan origination expenses, deferred
            
            
            -
            
            
            
            (1,492
            )Direct
      loan origination expenses, reclassified
            
            
            -
            
            
            
            (12,239
            )Net
      loss on sale of mortgage loans
            
            
            (2,061
            )
            
            
            (4,321
            )Change
      in market value of IRLC’s
            
            
            -
            
            
            
            204Change
      in market value of mortgage loans held for sale
            
            
            -
            
            
            
            (14,278
            )Loss
      on mortgage banking activities
            
            $
            (2,061
            )
            
            $
            (18,395
            )





For the
three months ended March 31, 2007, OITRS originated $1.1 billion and sold $1.3
billion of mortgage loans.  Of the originated mortgage loans sold
during the three months ended March 31, 2007, $0.6 billion were sold on a
servicing retained basis.





For the
three months ended March 31, 2007, OITRS had net servicing loss of $4.6million.  The
results were driven primarily by negative fair valueadjustments to the MSRs
(inclusive of run-off of the servicing portfolio).





As of
March 31, 2008, OITRS held originated MSRs on approximately $0.6 billion in
mortgages with a fair market value of approximately $3.1
million.  There were no additions for the three month period ended
March 31, 2008.  For the three months ended March 31, 2007, additions
to the MSRs were $5.3 million.  The net fair value adjustments for the
three months ended March 31, 2008, reflect declines in fair value due to run-off
of $0.3 million and adjustments due to increases in fair value of $0.2 million,
respectively.  The net fair value adjustments for the three months
ended March 31, 2007 reflect declines in fair value due to run-off of $4.7
million and adjustments due to decreases in fair value of $7.6 million. There
were no changes in valuation assumptions for the three months ended March 31,
2008.  Changes in valuation assumptions increased fair market value for the
three months ended March 31, 2007, by $2.6 million.





Liquidity
and Capital Resources





Our
principal sources of cash generally consist of borrowings under repurchase
agreements, payments of principal and interest we receive on our MBS portfolio,
and cash flows received by OITRS from the residual interests.  Our
principal uses of cash are the repayment of principal and interest on our
repurchase agreements, purchases of MBS, funding our operations and, to the
extent dividends are declared, making dividend payments on our capital
stock.





During
the three months ended March 31, 2008, we purchased $22.2 million of MBS, using
proceeds from repurchase agreements, prepayments and sales of MBS and existing
cash.  During the first quarter of 2008, we received cash of $41.6
million from prepayments on our MBS. During the three months ended March 2008,
we generated net proceeds of $158.4 million from the sale MBS.  Also,
the residual interests at OITRS generated $3.4 million in cash
flows.





As of
March 31, 2008, Bimini Capital had master repurchase agreements in place with 19
counterparties and had outstanding balances under 5 of these
agreements.  None of the counterparties to these agreements are
affiliates of Bimini Capital. These agreements are secured by Bimini Capital’s
MBS and bear interest rates that are based on a spread to LIBOR.





As of
March 31, 2008, Bimini Capital had obligations outstanding under its repurchase
agreements totaling $491.0 million with a net weighted average borrowing cost of
4.76%.  All of Bimini Capital’s outstanding repurchase agreement
obligations are due in less than 6 months with $5.2 million maturing overnight,
$90.5 million maturing between two and 30 days and the remaining $395.3
million maturing in more than 90 days.  Securing these repurchase
agreement obligations as of March 31, 2008, were MBS with an estimated fair
value of $509.8 million and a weighted average maturity of
327 months.





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, 2008 and December 31, 2007.





(in
thousands)





Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            Weighted
      Average
              Maturity
      of
              Repurchase
              Agreements
              in
      DaysMarch
      31, 2008JP
      Morgan Securities
            
            $
            9,567
            
            
            
            158Deutsche
      Bank Securities, Inc.
            
            
            6,472
            
            
            
            158Goldman
      Sachs
            
            
            2,458
            
            
            
            6December
      31, 2007Deutsche
      Bank Securities, Inc.
            
            
            8,823
            
            
            
            193Goldman
      Sachs
            
            
            2,931
            
            
            
            19





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





Bimini
Capital’s master repurchase agreements have no stated expiration, but can be
terminated at any time at Bimini Capital’s option or at the option of the
counterparty. However, once a definitive repurchase agreement under a master
repurchase agreement has been entered into, it generally may not be terminated
by either party.  A negotiated termination can occur, but may involve
a fee to be paid by the party seeking to terminate the repurchase agreement
transaction.





Bimini
Capital has entered into contracts and paid commitment fees to one counterparty
providing for $0.3billion in committed
repurchase agreement facilities at pre-determined borrowing rates and haircuts
for a 364 day period following the commencement date of each
contract.  The facility expired on April 23, 2008.





As
discussed above, increases in short-term interest rates could negatively impact
the valuation of Bimini Capital’s MBS portfolio.  Should this occur,
Bimini Capital’s ability to enter into new repurchase agreements or extend its
existing repurchase agreements could be limited and may cause Bimini Capital’s
repurchase agreement counterparties to initiate margin calls.  Under
this scenario, Bimini Capital would likely seek alternative sources of financing
which could include additional debt or equity financing or sales of
assets.  Given the current turmoil in the mortgage market, such
alternative sources of financing are not readily available to the
Company.





Further,
as a result of the turmoil in the mortgage market, cash needs of OITRS were
increased.  The increased needs stemmed from margin calls and
amortization associated with the financing line for the retained
interests.  Accordingly, during the three month period ended March 31,
2008, the Company undertook a series of asset sales intended to raise funds
necessary to service the residual financing line of OITRS and maintain adequate
liquidity during the continuing period of disruption in the mortgage
market.








In
May 2005, Bimini Capital completed a private offering of $51.6 million of
trust preferred securities of Bimini Capital Trust I (“BCTI”) resulting in the
issuance by Bimini Capital of $51.6 million of junior subordinated notes. The
interest rate payable by Bimini Capital on the BCTI junior subordinated notes is
fixed for the first five years at 7.61% and then floats at a spread of 3.30%
over three-month LIBOR for the remaining 25 years. However, the BCTI junior
subordinated notes and the corresponding BCTI trust preferred securities are
redeemable at Bimini Capital’s option at the end of the first five year period
and at any subsequent date that Bimini Capital chooses.





In
addition, in October 2005, Bimini Capital completed a private offering of an
additional $51.5 million of trust preferred securities of Bimini Capital Trust
II (“BCTII”) resulting in the issuance by Bimini Capital of an additional $51.5
million of junior subordinated notes. The interest rate on the BCTII junior
subordinated notes and the corresponding BCTII trust preferred securities is
fixed for the first five years at 7.8575% and then floats at a spread of 3.50%
over three-month LIBOR for the remaining 25 years. However, the BCTII junior
subordinated notes and the corresponding BCTII trust preferred securities are
redeemable at Bimini Capital’s option at the end of the first five year period
and at any subsequent date that Bimini Capital chooses.





The
Company presently believes that its equity and junior subordinated debt capital,
combined with the cash flow from operations and retained interests, will be
sufficient to enable the Company to meet its anticipated liquidity requirements.
Continued disruptions in market conditions could, however, adversely affect the
Company’s liquidity, including the lack of available financing for the Company’s
MBS assets, increases in interest rates, increases in prepayment rates
substantially above expectations and decreases in value of assets held for sale.
Therefore, no assurances can be made regarding the Company's ability to satisfy
its long-term liquidity and working capital requirements.





OITRS has
an $8.0 million repurchase obligation secured by the retained interests in
securitizations.   The repurchase agreement required payments of
$3.0 million on April 25, 2008 and $5.0 million on the maturity date of May 26,
2008.  The Company made the payment of $3.0 million on April 25,
2008.  The facility contains various covenants pertaining to tangible
net worth, available cash and liquidity and a leverage ratio.  As of
March 31, 2008, OITRS was in compliance with respect toall such covenants. In
the event OITRS defaulted under the terms of the agreement, the lenders could
force OITRS to liquidate the retained interest, trading, seek payment from the
Company as guarantor, or force OITRS into an involuntary
bankruptcy.  In the event the Company was required to perform under
its duties as guarantor, the Company’s liquidity would be constrained or it may
not be able to satisfy such obligations.  In such event, this would
also constitute an event of default under the terms of the agreement and the
lenders would have the same remedies available to them as above.





On April
14, 2008, there were changes made to senior management of the
Company.  The cost savings associated with these changes are
estimated to be approximately $0.4 million in 2008.





Outlook





As
discussed above, the Company's results of operations for the three months ended
March 31, 2008 continue to be impacted by disruptions in the residential
mortgage market, the mortgage-backed securities market and a general tightening
of credit conditions brought about by adverse actions taken by ratings agencies,
liquidations of various investment funds and substantial losses incurred by
various market participants.  As a result of these events, the Federal
Reserve Open Market Committee has adjusted their target for overnight lending
rates which has positively impacted the Company’s borrowing rates.





The
funding costs of the MBS portfolio seem to have stabilized and the coupon on the
MBS assets now exceeds the funding costs mainly as a result of Federal Reserve
actions mentioned above. The need to fund negative cash flow operations at OITRS
precluded the Company from reinvesting monthly pay-downs and also required the
Company to sell MBS assets to generate funds throughout much of 2006 and
2007.  Further, OITRS has exposure to early payment default claims
that have been received from buyers of mortgage loans sold in the
past.  The settlement of the remaining claims will also need to be
funded.




Going
forward, the reduced cash flow needs for OITRS and resulting halt of asset sales
should allow the NIM of the MBS portfolio to remain positive. However, the
reduced size of the portfolio in relation to the Company’s operating expenses
will constrain the earnings potential of the Company in the near
term.





Critical
Accounting Policies





The
Company’s financial statements are prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”).  The Company’s significant
accounting policies are described in Note1 to the Company’s
accompanying consolidated financial statements.





GAAP
requires the Company’s management to make some complex and subjective decisions
and assessments. The Company’s most critical accounting policies involve
decisions and assessments which could significantly affect reported assets and
liabilities, as well as reported revenues and expenses. The Company believes
that all of the decisions and assessments upon which its financial statements
are based were reasonable at the time made based upon information available to
it at that time. Management has identified its most critical accounting policies
to be the following:





LONG-LIVED
ASSETS





The
Company makes judgments and estimates about the carrying value of long-lived
assets, comprising of property and equipment, including amounts to be
capitalized, depreciation methods and useful lives. The Company also reviews
these assets for impairment on a periodic basis or whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable. The
impairment test consists of a comparison of an asset’s fair value with its
carrying value; if the carrying value of the asset exceeds its fair value, an
impairment loss is recognized in the Consolidated Statement of Operations in an
amount equal to that excess. When an asset’s fair value is not readily apparent
from other sources, management’s determination of an asset’s fair value requires
it to make long-term forecasts of future net cash flows related to the asset.
These forecasts require assumptions about future demand, future market
conditions and regulatory developments. Significant and unanticipated changes to
these assumptions could require a provision for impairment in a future
period.





In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (“SFAS 144”), the closure and/or sale of
mortgage loan origination channels (discussed in Note 11 of the accompanying
consolidated financial statements) required management to test the associated
long-lived assets for recoverability.  In connection with the testing
of recoverability of the long-lived assets, OITRS recorded an impairment charge
of $6.0 million for the three months ended March 31, 2007.  Further,
in accordance with SFAS 144, such long-lived assets were reported by OITRS as
held for use as of March 31, 2007, and have been included in discontinued
operations for the remainder of 2007.





GOODWILL AND OTHER
INTANGIBLE ASSETS





In
accordance with SFAS No. 142, Goodwill and Other Intangible
Assets, goodwill of a reporting unit (OITRS) and other intangible assets
(the “Opteum” trade
name) not subject to amortization shall be tested for impairment on an annual
basis and between annual tests if an event occurs or circumstances change that
indicate the intangible asset might be impaired, which, in the case of goodwill
of a reporting unit, is when such event or circumstances would more likely than
not reduce the fair value of that reporting unit below its carrying
amount.  The closure and or sale of the mortgage loan origination
channels constituted such an event that would require impairment analyses on the
goodwill and other intangibles not subject to
amortization.  Accordingly, OITRS recorded impairment charges of both
goodwill and other intangible assets not subject to amortization of
approximately $2.8 million, respectively, for the three months ended March 31,
2007.





MORTGAGE-BACKED
SECURITIES





The
Company’s investments in MBS are classified as held for
trading.  Changes in fair value of securities held for trading are
recorded through the statement of operations. The Company’s MBS have fair values
determined by management based on the average of third-party broker quotes
received and/or by independent pricing sources when available. Because the price
estimates may vary to some degree between sources, management must make certain
judgments and assumptions about the appropriate price to use to calculate the
fair values for financial reporting purposes. Alternatively, management could
opt to have the value of all of its positions in MBS determined by either an
independent third-party pricing source or do so internally based on managements
own estimates. Management believes pricing on the basis of third-party broker
quotes is the most consistent with the definition of fair value described in
SFAS No. 107, Disclosures
about the Fair Value of Financial Instruments.





RETAINED INTEREST,
TRADING





Retained
interest, trading is the subordinated interests retained by the Company from the
Company’s various securitizations and includes the over-collateralization and
residual net interest spread remaining after payments to the Public Certificates
and NIM Notes (see Note 11 of the accompanying consolidated financial
statements). Retained interest, trading represents the present value of
estimated cash flows to be received from these subordinated interests in the
future.  The subordinated interests retained are classified as
“trading securities” and are reported at fair value with unrealized gains or
losses reported in earnings.  In order to value these unrated and
unquoted retained interests, the Company utilizes either pricing available
directly from dealers, when available, or calculates their present value by
projecting their future cash flows on a publicly-available analytical system.
When a publicly-available analytical system is employed, the Company uses the
following variable factors in estimating the fair value of these
assets:





InterestRate Forecast. LIBOR
interest rate curve.





Discount Rate. The present
value of all future cash flows utilizing a discount rate assumption established
at the discretion of the Company to represent market conditions and
value.





Prepayment Forecast. The
prepayment forecast may be expressed by the Company in accordance with one of
the following standard market conventions: Constant Prepayment Rate (“CPR”) or
Percentage of a Prepayment Vector. Prepayment forecasts are made utilizing
Citigroup Global Markets Yield Book and/or management estimates based on
historical experience. Conversely, prepayment speed forecasts could have been
based on other market conventions or third-party analytical systems. Prepayment
forecasts may be changed as OITRS observes trends in the underlying collateral
as delineated in the Statement to Certificate Holders generated by the
securitization trust’s Trustee for each underlying security.





Credit Performance Forecast.
A forecast of future credit performance of the underlying collateral pool will
include an assumption of default frequency, loss severity and a recovery lag. In
general, the Company will utilize the combination of default frequency and loss
severity in conjunction with a collateral prepayment assumption to arrive at a
target cumulative loss to the collateral pool over the life of the pool based on
historical performance of similar collateral by the originator. The target
cumulative loss forecast will be developed and noted at the pricing date of the
individual security but may be updated by the Company consistent with
observations of the actual collateral pool performance.





As of
March 31, 2008, and December 31, 2007, key economic assumptions and the
sensitivity of the current fair value of retained interests to the immediate 10%
and 20% adverse change in those assumptions are as follows:





(in
thousands)





March
      31, 2008
            
            
            December
      31, 2007Balance
      Sheet Carrying value of retained interests – fair value
            
            $
            63,789
            
            
            $
            69,301Weighted
      average life (in years)
            
            
            4.63
            
            
            
            4.09Prepayment
      assumption (annual rate)
            
            
            18.55
            %
            
            
            26.37
            %Impact
      on fair value of 10% adverse change
            
            $
            (5,410
            )
            
            $
            (6,908
            )Impact
      on fair value of 20% adverse change
            
            $
            (10,223
            )
            
            $
            (12,577
            )Expected
      Credit losses (annual rate)
            
            
            2.07
            %
            
            
            1.22
            %Impact
      on fair value of 10% adverse change
            
            $
            (7,914
            )
            
            $
            (6,409
            )Impact
      on fair value of 20% adverse change
            
            $
            (14,908
            )
            
            $
            (13,633
            )Residual
      Cash-Flow Discount Rate
            
            
            27.50
            %
            
            
            20.00
            %Impact
      on fair value of 10% adverse change
            
            $
            (5,246
            )
            
            $
            (4,138
            )Impact
      on fair value of 20% adverse change
            
            $
            (9,822
            )
            
            $
            (7,907
            )Interest
      rates on variable and adjustable loans and bonds
            
            Forward
      LIBOR Yield Curve
            
            
            Forward
      LIBOR Yield CurveImpact
      on fair value of 10% adverse change
            
            $
            (11,088
            )
            
            $
            (14,906
            )Impact
      on fair value of 20% adverse change
            
            $
            (21,644
            )
            
            $
            (28,225
            )





These
sensitivities are entirely hypothetical and should be used with caution. As the
figures indicate, changes in fair value based upon 10% and 20% variations in
assumptions generally cannot be extrapolated to greater or lesser percentage
variations because the relationship of the change in assumption to the change in
fair value may not be linear. Also, in this table, the effect of the variation
in a particular assumption on the fair value of the subordinated interest is
calculated without changing any other assumption.  In reality, changes
in one factor may result in changes in another that may magnify or counteract
the sensitivities. To estimate the impact of a 10% and 20% adverse change of the
forward LIBOR curve, a parallel shift in the forward LIBOR curve was assumed
based on the forward LIBOR curve as of March 31, 2008, and December 31,
2007.





INCOMERECOGNITION





For
securities classified as held for trading, interest income is based on the
stated interest rate and the outstanding principal balance; premium or discount
associated with the purchase of the MBS are not amortized.  As of
January 1, 2008 all MBS portfolio securities are classified as held for
trading.





INCOME
TAXES





Bimini
Capital has elected to be taxed as a REIT under the Code. As further described
below, Bimini Capital’s subsidiary, OITRS 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.





OITRS and
its activities are subject to corporate income taxes and the applicable
provisions of SFAS No. 109,Accounting for Income Taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.  In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized.  To the extent
management believes deferred tax assets will not be fully realized in future
periods, a provision is recorded so as to reflect the net portion, if any, of
the deferred tax asset management expects to realize.





FAIR
VALUES





The
Company measures or monitors many of its assets on a fair value basis. Fair
value is used on a recurring basis for certain assets and liabilities in which
fair value is the primary basis of accounting. Examples of these include trading
securities, loans held for sale, retained interests and mortgage servicing
rights (MSRs).  Additionally, fair value is used on a non-recurring
basis to evaluate assets or liabilities for impairment.





Fair
value is the price that could be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. If observable
market prices are not available, then fair value is estimated using modeling
techniques such as discounted cash flow analyses. These modeling techniques
utilize assumptions that market participants would use in pricing the asset or
the liability, including assumptions about the risk inherent in a particular
valuation technique, the effect of a restriction on the sale or use of an asset,
and the risk of nonperformance. To increase consistency and comparability in
fair value measures, SFAS No. 157 establishes a three-level hierarchy to
prioritize the inputs used in valuation techniques between observable inputs
that reflect quoted prices in active markets, inputs other than quoted prices
with observable market data, and unobservable data such as the Company’s own
data.





Off-Balance
Sheet Arrangements





As
previously discussed, OITRS previously pooled loans originated or purchased and
then sold them or securitized them to obtain long-term financing for its assets.
Securitized loans are transferred to a trust where they serve as collateral for
asset-backed bonds, which the trust primarily issues to the public. Since
mid-2006, OITRS has not executed a securitization and is not expected to do so
in the future. However, OITRS held approximately $63.8 million of retained
interests from securitizations as of March 31, 2008.





The cash
flows associated with OITRS’s securitization activities over the three months
ended March 31, 2008 and 2007, were as follows:





(in
thousands)





March
      31, 2008
            
            
            March
      31, 2007Servicing
      fees received
            
            $
            467
            
            
            $
            5,310Servicing
      advances, net of repayments
            
            
            (2,344
            )
            
            
            605Cash
      flows received on retained interests
            
            
            3,392
            
            
            
            901











ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Not
Applicable.





ITEM
4.  CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company’s reports under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and that such information is accumulated and
communicated to the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.  In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.





As of the
end of the period covered by this report, the Company’s management carried out
an evaluation, under the supervision and with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures. 
Based on such evaluation, the Company’s Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and
procedures were effective.





Changes
in Internal Controls over Financial Reporting





There was
no change in the Company’s internal control over financial reporting that
occurred during the Company’s most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.





ITEM
4T.  CONTROLS AND PROCEDURES.





Not
Applicable.





PART
II. OTHER INFORMATION.





ITEM
1.  LEGAL PROCEEDINGS.





The
Company is involved in various lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which monetary and other
damages are sought. Except as described below, these lawsuits and claims relate
primarily to contractual disputes arising out of the ordinary course of the
Company’s business. The outcome of such lawsuits and claims is inherently
unpredictable. However, management believes that, in the aggregate, the outcome
of all lawsuits and claims involving the Company will not have a material effect
on the Company’s consolidated financial position or liquidity; however, any such
outcome may be material to the results of operations of any particular period in
which costs, if any, are recognized. See also Notes8 and 11 to the
Company’s accompanying consolidated financial statements.





On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against the Company, certain of
the Company’s 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 the Company, certain of the
Company’s 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 Company
believes the plaintiffs’ claims in these actions are without merit, has filed a
motion to consolidate these actions and intends to vigorously defend the
cases.














ITEM
1A.  RISK FACTORS.





During
the period covered by this report, there were no material changes from the risk
factors previously disclosed under  Item 1A – Risk Factors in the
Company’s Annual Report on Form 10-K for the period for the period December 31,
2007 as filed on March 14, 2008.  The information set forth under Item
1A – Risk Factors in the Company’s Annual Report on Form 10-K for the period
ended December 31, 2007, is incorporated herein by reference.





ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.





ISSUER
PURCHASES OF EQUITY SECURITIES





Except as
described below, the Company has not repurchased any shares of its equity
securities during 2008.  The following table shows shares of common
stock deemed to have been repurchased in connection with the withholding of a
portion of shares of Class A Common Stock to cover taxes on vested phantom
shares for each calendar month during the quarter ended March 31,
2008.





Calendar
      Month
            
            Total
      Number of Shares Purchased
            
            
            Average
      Price Paid per Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
            
            
            Maximum
      Amount That May Yet Be Purchased Under the Plans or
    ProgramsJanuary
      2008
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            
            -February
      2008
            
            
            808
            
            
            
            0.49
            
            
            
            -
            
            
            
            -March
      2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            
            808
            
            
            $
            0.49
            
            
            
            -
            
            
            
            -







ITEM
6. EXHIBITS.
  Exhibit
No.





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,
      20043.2
              
              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, 20053.3
              
              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, 20063.4
              
              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, 20073.5
              
              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, 20083.6
              
              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, 200810.9
              
              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,
      200510.10
              
              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, 200610.11
              
              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,
      200710.12
              
              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,
      200710.13
              
              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*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.











Signatures





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





BIMINI CAPITAL MANAGEMENT,
INC.





Date:                      May
12,
2008                                                       
By:           /s/ G.
Hunter Haas, IV
 G. Hunter Haas, IV
 Executive Vice President, Chief
Investment Officer
 Interim Chief Financial Officer and
Treasurer





EXHIBIT
INDEX





Exhibit
No.




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,
      20043.2
              
              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, 20053.3
              
              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, 20063.4
              
              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, 20073.5
              
              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, 20083.6
              
              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, 200810.9
              
              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,
      200510.10
              
              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, 200610.11
              
              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,
      200710.12
              
              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,
      200710.13
              
              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*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.