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 September 30, 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.





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
November 6, 2008, the number of shares outstanding of the registrant’s Class A
Common Stock, $0.001 par value, was 25,534,816; 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 September 30, 2008 (unaudited) and December 31,
      2007
            3Consolidated
      Statements of Operations for the nine and three months ended September 30,
      2008  and 2007
              (unaudited)
            4Consolidated
      Statement of Stockholders’ Equity (Deficit) for the nine months ended
      September 30, 2008 (unaudited)
            5Consolidated
      Statements of Cash Flows for the nine months ended September 30,
      2008  and 2007 (unaudited)
            6Notes
      to Consolidated Financial Statements (unaudited)
            7ITEM
      2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION
              AND
      RESULTS OF OPERATIONS.
            27ITEM
      3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK.
            40ITEM
      4.     CONTROLS AND PROCEDURES.
            41ITEM
      4T.   CONTROLS AND PROCEDURES.
            41PART
      II. OTHER INFORMATIONITEM
      1.     LEGAL PROCEEDINGS.
            41ITEM
      1A.  RISK FACTORS.
            41ITEM
      6.     EXHIBITS.
            42














PART
I. FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS.


BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      BALANCE SHEETS(Unaudited)September
      30, 2008
            
            
            December
      31, 2007ASSETS:Mortgage-backed
      securities:Available-for-sale,
      pledged to counterparties, at LOCOM
            
            $
            -
            
            
            $
            293,729,451Held
      for trading, pledged to counterparties, at fair value
            
            
            208,921,118
            
            
            
            396,175,157Unpledged,
      at fair value
            
            
            17,646,698
            
            
            
            674,326Total
      mortgage-backed securities
            
            
            226,567,816
            
            
            
            690,578,934Cash
      and cash equivalents
            
            
            12,376,528
            
            
            
            27,284,760Restricted
      cash
            
            
            250,000
            
            
            
            8,800,000Principal
      payments receivable
            
            
            59,443
            
            
            
            99,089Accrued
      interest receivable
            
            
            1,084,148
            
            
            
            3,637,302Property
      and equipment, net
            
            
            4,086,364
            
            
            
            4,181,813Prepaids
      and other assets
            
            
            4,910,876
            
            
            
            5,315,835Assets
      held for sale
            
            
            42,583,586
            
            
            
            96,619,615Total
      Assets
            
            $
            291,918,761
            
            
            $
            836,517,348LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)LIABILITIES:Repurchase
      agreements
            
            $
            200,707,819
            
            
            $
            678,177,771Junior
      subordinated notes due to Bimini Capital Trust I & II
            
            
            103,097,000
            
            
            
            103,097,000Accrued
      interest payable
            
            
            1,399,624
            
            
            
            3,872,101Accounts
      payable, accrued expenses and other
            
            
            1,051,300
            
            
            
            644,858Liabilities
      related to assets held for sale
            
            
            14,352,687
            
            
            
            27,842,174Total
      Liabilities
            
            
            320,608,430
            
            
            
            813,633,904COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      stock, $0.001 par value; 10,000,000 shares authorized; designated,
      1,800,000 shares as Class A Redeemable and 2,000,000 shares as Class B
      Redeemable; no shares issued and outstanding  as of September
      30, 2008 and December 31, 2007
            
            
            -
            
            
            
            -Class
      A Common Stock, $0.001 par value; 98,000,000 shares designated: 25,534,816
      shares issued and outstanding as of September 30, 2008 and 24,861,404
      shares issued and outstanding as of December 31, 2007
            
            
            25,535
            
            
            
            24,861Class
      B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
      shares issued and outstanding as of September 30, 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 September 30, 2008 and December 31,
      2007
            
            
            319
            
            
            
            319Additional
      paid-in capital
            
            
            339,008,659
            
            
            
            338,241,582Accumulated
      deficit
            
            
            (367,724,501
            )
            
            
            (315,383,637
            )Total
      Stockholders’ Equity (Deficit)
            
            
            (28,689,669
            )
            
            
            22,883,444Total
      Liabilities and Stockholders’ Equity (Deficit)
            
            $
            291,918,761
            
            
            $
            836,517,348See
      Notes to Consolidated Financial Statements











Bimini
      Capital Management, Inc.
              CONSOLIDATED
      STATEMENTS OF OPERATIONS
              (Unaudited)Nine
      Months Ended
            
            
            Three
      Months EndedSeptember
      30, 2008
            
            
            September
      30, 2007
            
            
            September
      30, 2008
            
            
            September
      30, 2007Interest
      income, net of amortization of premium and discount
            
            $
            23,046,363
            
            
            $
            90,793,422
            
            
            $
            6,148,667
            
            
            $
            24,634,854Interest
      expense
            
            
            (17,278,745
            )
            
            
            (92,286,037
            )
            
            
            (4,192,838
            )
            
            
            (21,143,461
            )Net
      interest income(expense), before interest on junior subordinated
      notes
            
            
            5,767,618
            
            
            
            (1,492,615
            )
            
            
            1,955,829
            
            
            
            3,491,393Interest
      expense on junior subordinated notes
            
            
            (6,271,295
            )
            
            
            (6,271,296
            )
            
            
            (2,090,432
            )
            
            
            (2,090,432
            )Net
      interest income(expense)
            
            
            (503,677
            )
            
            
            (7,763,911
            )
            
            
            (134,603
            )
            
            
            1,400,961Fair
      value adjustment- available-for-sale securities
            
            
            -
            
            
            
            (1,707,840
            )
            
            
            -
            
            
            
            (1,707,840
            )Fair
      value adjustment - held for trading securities
            
            
            (1,166,408
            )
            
            
            282,089
            
            
            
            (1,031,577
            )
            
            
            282,089Other-than-temporary
      loss on mortgage-backed securities
            
            
            -
            
            
            
            (55,250,278
            )
            
            
            -
            
            
            
            -Gain/(loss)
      on sale of mortgage-backed securities, net
            
            
            755,135
            
            
            
            (20,492,779
            )
            
            
            46,815
            
            
            
            (1,104,402
            )Deficiency
      of revenues, net
            
            
            (914,950
            )
            
            
            (84,932,719
            )
            
            
            (1,119,365
            )
            
            
            (1,129,192
            )Direct
      REIT operating expenses
            
            
            538,944
            
            
            
            632,709
            
            
            
            165,331
            
            
            
            181,007General
      and administrative expenses:Compensation
      and related benefits
            
            
            2,256,582
            
            
            
            3,562,711
            
            
            
            583,239
            
            
            
            1,218,881Directors'
      fees and liability insurance
            
            
            514,724
            
            
            
            581,608
            
            
            
            145,982
            
            
            
            197,634Audit,
      legal and other professional fees
            
            
            562,821
            
            
            
            1,004,987
            
            
            
            107,351
            
            
            
            323,761Other
      administrative
            
            
            974,029
            
            
            
            507,811
            
            
            
            215,303
            
            
            
            174,634Total
      general and administrative expenses
            
            
            4,308,156
            
            
            
            5,657,117
            
            
            
            1,051,875
            
            
            
            1,914,910Total
      expenses
            
            
            4,847,100
            
            
            
            6,289,826
            
            
            
            1,217,206
            
            
            
            2,095,917Loss
      from continuing operations before minority interest
            
            
            (5,762,050
            )
            
            
            (91,222,545
            )
            
            
            (2,336,571
            )
            
            
            (3,225,109
            )Minority
      interest in consolidated subsidiary
            
            
            -
            
            
            
            770,563
            
            
            
            -
            
            
            
            -Loss
      from continuing operations
            
            
            (5,762,050
            )
            
            
            (90,451,982
            )
            
            
            (2,336,571
            )
            
            
            (3,225,109
            )Gain/(loss) on sale and
      disposal of assets of discontinued operations, net of
      tax
            
            
            -
            
            
            
            (6,357,596
            )
            
            
            -
            
            
            
            4,111,607Loss
      from discontinued operations, net of tax
            
            
            (48,292,910
            )
            
            
            (148,451,063
            )
            
            
            (12,053,964
            )
            
            
            (5,609,698
            )Total
      loss from discontinued operations, net of tax
            
            
            (48,292,910
            )
            
            
            (154,808,659
            )
            
            
            (12,053,964
            )
            
            
            (1,498,091
            )Net
      loss
            
            $
            (54,054,960
            )
            
            $
            (245,260,641
            )
            
            $
            (14,390,535
            )
            
            $
            (4,723,200
            )Basic
      And Diluted Net Loss Per Share Of:CLASS
      A COMMON STOCKContinuing
      operations
            
            $
            (0.23
            )
            
            $
            (3.63
            )
            
            $
            (0.09
            )
            
            $
            (0.13
            )Discontinued
      operations
            
            
            (1.89
            )
            
            
            (6.21
            )
            
            
            (0.47
            )
            
            
            (0.06
            )Total
      basic and diluted net loss per Class A share
            
            $
            (2.12
            )
            
            $
            (9.84
            )
            
            $
            (0.56
            )
            
            $
            (0.19
            )CLASS
      B COMMON STOCKContinuing
      operations
            
            $
            (0.22
            )
            
            $
            (3.61
            )
            
            $
            (0.09
            )
            
            $
            (0.13
            )Discontinued
      operations
            
            
            (1.87
            )
            
            
            (6.18
            )
            
            
            (0.47
            )
            
            
            (0.06
            )Total
      basic and diluted net loss per Class B share
            
            $
            (2.09
            )
            
            $
            (9.79
            )
            
            $
            (0.56
            )
            
            $
            (0.19
            )Average
      Shares OutstandingCLASS
      A COMMON STOCK
            
            
            25,147,824
            
            
            
            24,600,795
            
            
            
            25,392,962
            
            
            
            24,690,089CLASS
      B COMMON STOCK
            
            
            319,388
            
            
            
            319,388
            
            
            
            319,388
            
            
            
            319,388Cash
      dividends declared per share of:CLASS
      A COMMON STOCK
            
            $
            -
            
            
            $
            0.05
            
            
            $
            -
            
            
            $
            -CLASS
      B COMMON STOCK
            
            $
            -
            
            
            $
            0.05
            
            
            $
            -
            
            
            $
            -See
      Notes to Consolidated Financial Statements













BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)(Unaudited)Nine
      Months Ended September 30, 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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (54,054,960
            )
            
            
            (54,054,960
            )Issuance
      of Class A common shares for board compensation and equity plan share
      exercises, net
            
            
            674
            
            
            
            -
            
            
            
            -
            
            
            
            185,467
            
            
            
            -
            
            
            
            186,141Amortization
      of equity plan compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            583,352
            
            
            
            -
            
            
            
            583,352Equity
      plan shares withheld for statutory minimum withholding
    taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (799
            )
            
            
            -
            
            
            
            (799
            )Stock
      issuance costs, and other adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (943
            )
            
            
            -
            
            
            
            (943
            )Balances,
      September 30, 2008
            
            $
            25,535
            
            
            $
            319
            
            
            $
            319
            
            
            $
            339,008,659
            
            
            $
            (367,724,501
            )
            
            $
            (28,689,669
            )See
      Notes to Consolidated Financial Statements














BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)Nine
      Months EndedSeptember
      30, 2008
            
            
            September
      30, 2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (54,054,960
            )
            
            $
            (245,260,641
            )Adjustments
      to reconcile net loss
              to
      net cash  provided by operating activities:Net  loss
      from discontinued operations
            
            
            48,292,910
            
            
            
            154,808,659Other-than-temporary
      loss on mortgage backed securities
            
            
            -
            
            
            
            55,250,278Amortization
      of premium and discount on mortgage-backed securities, net
            
            
            135,370
            
            
            
            8,759,452Stock
      compensation
            
            
            769,493
            
            
            
            2,076,036Depreciation
      and amortization
            
            
            107,601
            
            
            
            627,044(Gain)
      loss on sale of mortgage-backed securities, net
            
            
            (755,135
            )
            
            
            20,492,779Fair
      value adjustment - held for trading securities
            
            
            1,166,408
            
            
            
            (282,089
            )Fair
      value adjustment – available-for-sale securities
            
            
            -
            
            
            
            1,707,840From
      trading securities:Purchases
            
            
            (150,129,824
            )
            
            
            -Sales
            
            
            529,615,670
            
            
            
            -Principal
      repayments
            
            
            85,732,371
            
            
            
            -Changes
      in operating assets and liabilities:Decrease
      in accrued interest receivable
            
            
            2,553,154
            
            
            
            6,654,984Decrease
      in prepaids and other assets
            
            
            404,960
            
            
            
            371,367Decrease
      in accrued interest payable
            
            
            (2,472,477
            )
            
            
            (9,993,867
            )Increase
      (decrease) in accounts payable, accrued expenses and other
            
            
            405,643
            
            
            
            (122,961
            )NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
            
            
            461,771,184
            
            
            
            (4,911,119
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:From
      available-for-sale securities:Purchases
            
            
            -
            
            
            
            (1,140,585,456
            )Sales
            
            
            -
            
            
            
            1,896,831,041Principal
      repayments
            
            
            -
            
            
            
            835,792,555Purchases
      of property and equipment, and other
            
            
            (12,152
            )
            
            
            (3,937
            )NET
      CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
            
            
            (12,152
            )
            
            
            1,592,034,203CASH
      FLOWS FROM FINANCING ACTIVITIES:(Increase)/decrease
      in restricted cash
            
            
            8,550,000
            
            
            
            (35,300,000
            )Proceeds
      from repurchase agreements
            
            
            3,505,827,617
            
            
            
            13,167,044,670Principal
      payments on repurchase agreements
            
            
            (3,983,297,569
            )
            
            
            (14,697,237,320
            )Stock
      issuance costs, and other adjustments
            
            
            (943
            )
            
            
            -Cash
      dividends paid
            
            
            -
            
            
            
            (2,534,582
            )NET
      CASH USED IN FINANCING ACTIVITIES
            
            
            (468,920,895
            )
            
            
            (1,568,027,232
            )CASH
      FLOWS FROM DISCONTINUED OPERATIONS:Net
      cash provided by operating activities
            
            
            10,253,631
            
            
            
            734,846,245Net
      cash provided by investing activities
            
            
            -
            
            
            
            1,195,582Net
      cash used in financing activities
            
            
            (18,000,000
            )
            
            
            (813,015,954
            )NET
      CASH USED IN DISCONTINUED OPERATIONS
            
            
            (7,746,369
            )
            
            
            (76,974,127
            )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (14,908,232
            )
            
            
            (57,878,275
            )CASH
      AND CASH EQUIVALENTS, Beginning of the period
            
            
            27,284,760
            
            
            
            82,751,795CASH
      AND CASH EQUIVALENTS, End of the period
            
            $
            12,376,528
            
            
            $
            24,873,520SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
            
            $
            27,289,202
            
            
            $
            108,551,200SUPPLEMENTAL
      SCHEDULE OF NONCASH INVESTING ACTIVITIES:Securities
      transferred from available-for-sale to trading (at fair
    value)
            
            $
            1,714,096
            
            
            $
            -See
      Notes to Consolidated Financial Statements














BIMINI
CAPITAL MANAGEMENT, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


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





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





On April 18, 2007, the Board of
Managers of OITRS, at the recommendation of the Board of Directors ofBimini Capital, approved the closure of OITRS’s
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.





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





As used
in this document, discussions related to Bimini Capital, the parent company, the
registrant, and to REIT qualifying activities or the general management of
Bimini Capital’s portfolio of 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, have deteriorated materially since June 30, 2008.
Moreover, the turmoil that originated in the MBS market has now spread into many
other financial markets as well as the global real economy. The disruptions in
the market have prompted unprecedented intervention on the part of most of the
world’s central banks, the Congress of the United States, the US Treasury and
the Federal Reserve in an effort to restore stability. In spite of these efforts
market conditions are extremely volatile, credit is very tight and it is unknown
at this time when and to what extent market conditions will stabilize and return
to normal. These conditions have impacted the Company and are expected to
continue to impact the Company.





At
September 30, 2008 the Company had outstanding $200.7 million of obligations
under repurchase agreements with maturities through December 2008. On October
27, 2008, $29.3 million of these repurchase agreement obligations matured and
could not be extended.  The Company was forced to sell the associated
MBS assets pledged to satisfy the obligation.  Should the Company be
unable to extend the maturity of the remaining repurchase obligations, it may be
forced to sell additional assets, which may result in losses upon such
sales.  Accordingly, the Company has taken steps to augment its
existing leveraged MBS portfolio with an alternative investment strategy since
sufficient repurchase agreement funding is not available. The Company is
currently employing an investment strategy that utilizes derivative mortgage
backed securities collateralized by MBS with comparable borrower and prepayment
characteristics to the securities currently in the portfolio. Such
securities are not funded in the repurchase market but instead are owned free
and clear.  However, if cash resources are, at any time, insufficient
to satisfy the Company’s liquidity requirements, such as when cash flow from
operations are materially negative, the Company may be required to pledge
additional assets to meet margin calls, liquidate assets, sell additional debt
or equity securities or pursue other financing alternatives. The Company
presently believes that its 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.
Nonetheless, no assurances can be made regarding the Company's ability to
satisfy its liquidity and working capital requirements going
forward.





Basis
of Presentation and Use of Estimates





The
accompanying interim financial statements reflect all adjustments, consisting of
normal recurring items that, in the opinion of management, are necessary for a
fair presentation of the Company’s financial position, results of operations,
statement of stockholders’ equity (deficit) and cash flows for the periods
presented. These interim financial statements have been prepared in accordance
with disclosure requirements for interim financial information and accordingly,
they do not include all of the information and footnotes required by United
States generally accepted accounting principles (“GAAP”) for annual financial
statements. The operating results for the interim period ended September 30,
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.





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





Consolidation





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





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





Discontinued
Operations





During
the second quarter of 2007, the Company closed OITRS’s wholesale and conduit
mortgage loan origination channels and sold substantially all of the operating
assets of OITRS. 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 September 30, 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





At
September 30, 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 MBS securities held by Bimini Capital are reflected in
the Company's financial statements at their estimated fair value at September
30, 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, available-for-sale or held-to-maturity. 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.  On January 1, 2008, in
connection with the adoption of SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB
Statement 115, the Company transferred its remaining available-for-sale
securities to trading and accordingly, recognized a $1.7 million fair value
adjustment.





The
Company’s investments in mortgage-related derivatives are carried at fair value
on the balance sheet and are included with mortgage-backed
securities.





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 September 30, 2008 and December 31, 2007,
is net of accumulated depreciation of$0.5 million and $0.4
million, respectively. Depreciation expense for the nine and three months ended
September 30, 2008 was $0.1 million and $0.02 million,
respectively.





Repurchase
Agreements





The
Company finances the acquisition of the majority 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 nine months ended September 30, 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 September 30, 2008 are classified as held
for trading securities. All securities are either MBS pass through securities,
interest only securities or inverse interest only securities. Income on MBS pass
through securities classified as held for trading is based on the stated
interest rate of the security. Premium or discount present at the date of
purchase is not amortized.  For interest only securities classified as
held for trading, the income is accrued based on the carrying value and the
effective yield.  As cash is received it is first applied to accrued
interest and then to reduce the carrying value.  At each reporting
date, the effective yield is adjusted prospectively from the reporting period
based on the new estimate of prepayments.  The new effective yield is
calculated based on the carrying value at the end of the previous reporting
period, the new prepayment estimates and the contractual terms of the
security.  For inverse interest only securities effective yield and
income recognition calculations also take into account the index value
applicable to the security.  Owing to the fact realized cash flows for
inverse interest only securities are driven by both prepayments and the index
value, yield calculations have to take into account the impact of the index
value on future cash flows.  In accordance with Emerging Issues Task
Force 99-20 (“EITF 99-20”), effective yield is derived from projected future
cash flows.  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.


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. 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.





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 September 30, 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)Nine
      Months Ended September 30,
            
            
            Three
      Months Ended September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      loss
            
            $
            (54,054
            )
            
            $
            (245,261
            )
            
            $
            (14,391
            )
            
            $
            (4,723
            )Reclassify
      net realized loss on MBS
            
            
            -
            
            
            
            19,389
            
            
            
            -
            
            
            
            -Reclassify
      other-than-temporary loss on MBS
            
            
            -
            
            
            
            55,250
            
            
            
            -
            
            
            
            -Unrealized
      gain on available-for-sale securities, net
            
            
            -
            
            
            
            2,135
            
            
            
            -
            
            
            
            -Comprehensive
      loss
            
            $
            (54,054
            )
            
            $
            (168,487
            )
            
            $
            (14,391
            )
            
            $
            (4,723
            )





Stock-Based
Compensation





The
Company utilizes SFAS No. 123(R),Share-Based Payment, to
account 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
$0.8 million and $0.2 million for the nine and three months ended September 30,
2008 and $2.3 million and $0.8 million for the nine and three months ended
September 30, 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, 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





In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.  The FSP addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting
and, therefore, need to be included in the earnings allocation in computing
earnings per share (EPS) under the two-class method.   The FASB
Emerging Issues Task Force (EITF) in Issue No. 03-6, Participating Securities and the
Two-Class Method under FASB Statement No. 128, previously reached a
consensus that, share-based payment awards containing a right to receive
dividends declared on common stock represent participating securities if such
awards are fully vested.Issue No. 03-6 does not,
however, provide guidance on share-based payment awards that are not fully
vested (i.e., the requisite service for vesting has not yet been rendered). TheFSP has been issued to clarify that unvested instruments
granted in share-based payment transactions containing non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) represent
participating securities that should be included in the computation of EPS
according to the two-class method.  This FSP shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those years. Early application is not
permitted.  The Company has not issued share-based awards containing
non-forfeitable rights to dividends or dividend equivalents; therefore, the
adoption of FSP EITF 03-6-1 is not expected to have any impact.





In March
2008, the FASB issued statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No. 133
(“SFAS 161”). This statement revises the requirements for the disclosure
of derivative instruments and hedging activities that include the reasons a
company uses derivative instruments, how derivative instruments and related
hedged items are accounted under SFAS 133 and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. SFAS 161 will be effective in the fourth quarter of
fiscal 2009. The Company is currently evaluating the impact of adopting SFAS 161
and does not anticipate a material effect.





In
February 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions. The FSP addresses
whether there are circumstances that would permit a transferor and a transferee
to evaluate the accounting for the transfer of a financial asset separately from
a repurchase financing when the counterparties to the two transactions are the
same. The FSP presumes that the initial transfer of a financial asset and a
repurchase financing are considered part of the same arrangement (a linked
transaction) under FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities
(Statement 140). However, if certain criteria specified in the FSP are met, the
initial transfer and repurchase financing may be evaluated separately under
Statement 140.  The FSP 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 (5) 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.  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
Company adopted EITF 06-11 on January 1, 2008 for dividends declared
on share-based payment awards subsequent to this date. The adoption did not have
a material impact.





In
February 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
September 30, 2008 and December 31, 2007:





(in
thousands)





September
      30, 2008
            
            
            December
      31, 2007Hybrid
      Arms
            
            $
            62,915
            
            
            $
            398,982Adjustable
      Rate Mortgages
            
            
            84,387
            
            
            
            177,608Fixed
      Rate Mortgages
            
            
            65,244
            
            
            
            113,989MBS
      Derivatives
            
            
            14,022
            
            
            
            -Total
            
            $
            226,568
            
            
            $
            690,579





The
following table presents the components of the carrying value of Bimini
Capital’s MBS portfolio as of September 30, 2008 and December 31,
2007:





(in
thousands)





September
      30, 2008
            
            
            December
      31, 2007Available-for-Sale
      SecuritiesPrincipal
      balance
            
            $
            -
            
            
            $
            291,579Unamortized
      premium
            
            
            -
            
            
            
            3,134Unaccreted
      discount
            
            
            -
            
            
            
            (309
            )Held
      for Trading SecuritiesPrincipal
      balance
            
            
            210,374
            
            
            
            385,849Premium
            
            
            2,440
            
            
            
            10,326Discount
            
            
            (268
            )
            
            
            -Trading
      Securities – MBS Derivatives
            
            
            14,022
            
            
            
            -Carrying
      value/estimated fair value
            
            $
            226,568
            
            
            $
            690,579





As of
September 30, 2008, all of Bimini Capital's MBS investments have contractual
maturities greater than 36months. 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 nine and three months ended September 30, 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 nine and
three months ended September 30, 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
September 30, 2008 and 2007, 21,658 and 259,016 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)
            
            
            (Unaudited)Nine
      Months Ended September 30,
            
            
            Three
      Months Ended September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
      and diluted net loss per Class A common share:Numerator:
      net loss allocated to the Class A common shares
            
            $
            (53,387
            )
            
            $
            (242,138
            )
            
            $
            (14,213
            )
            
            $
            (4,663
            )Denominator:
      basic and diluted:Class
      A common shares outstanding at the balance sheet date
            
            
            25,535
            
            
            
            24,765
            
            
            
            25,535
            
            
            
            24,765Effect
      of weighting
            
            
            (387
            )
            
            
            (164
            )
            
            
            (142
            )
            
            
            (75
            )Weighted
      average shares-basic and diluted
            
            
            25,148
            
            
            
            24,601
            
            
            
            25,393
            
            
            
            24,690Basic
      and diluted net loss  per Class A common share
            
            $
            (2.12
            )
            
            $
            (9.84
            )
            
            $
            (0.56
            )
            
            $
            (0.19
            )Basic
      and diluted net loss per Class B common share:Numerator:
      net loss allocated to Class B common shares
            
            $
            (668
            )
            
            $
            (3,123
            )
            
            $
            (178
            )
            
            $
            (60
            )Denominator:
      basic and diluted:Class
      B common shares outstanding at the balance sheet date
            
            
            319
            
            
            
            319
            
            
            
            319
            
            
            
            319Effect
      of weighting
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Weighted
      average shares-basic and diluted
            
            
            319
            
            
            
            319
            
            
            
            319
            
            
            
            319Basic
      and diluted net loss per Class B common share
            
            $
            (2.09
            )
            
            $
            (9.79
            )
            
            $
            (0.56
            )
            
            $
            (0.19
            )





NOTE
4.   REPURCHASE AGREEMENTS





Bimini
Capital has entered into repurchase agreements to finance most of its MBS
purchases. The repurchase agreements are short-term borrowings that bear
interest at rates that have historically moved in close relationship to London
Interbank Offered Rates (“LIBOR”). As of September 30, 2008, Bimini Capital had
outstanding repurchase obligations of $200.7million
with a net weighted average borrowing rate of2.99% and these
obligations were collateralized by MBS with a fair value of$208.9million.
As of December 31, 2007, Bimini Capital had outstanding repurchase
obligations of $678.2million
with a net weighted average borrowing rate of 5.07%. These obligations were
collateralized by MBS with a fair value of $683.9 million.




As of
September 30, 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
            
            
            TOTALSeptember 30,
      2008Agency-Backed
      Mortgage-Backed Securities:Amortized
      cost of securities sold, including accrued interest
    receivable
            
            $
            -
            
            
            $
            89,128
            
            
            $
            119,871
            
            
            $
            -
            
            
            $
            208,999Fair
      market value of securities sold, including accrued interest
      receivable
            
            $
            -
            
            
            $
            89,128
            
            
            $
            119,871
            
            
            $
            -
            
            
            $
            208,999Repurchase
      agreement liabilities associated with these securities
            
            $
            -
            
            
            $
            85,532
            
            
            $
            115,176
            
            
            $
            -
            
            
            $
            200,708Net
      weighted average borrowing rate
            
            
            -
            
            
            
            3.46
            %
            
            
            2.65
            %
            
            
            -
            
            
            
            2.99
            %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
September 30, 2008 and December 31, 2007.





(in
thousands)





Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            Weighted
      Average
              Maturity
      of
              Repurchase
              Agreements
              in
      DaysSeptember
      30, 2008MF
      Global Inc.
            
            $
            6,461
            
            
            
            47RBS
      Greenwich Capital
            
            
            1,998
            
            
            
            27December
      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





At
September 30, 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)





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




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





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





NOTE
6.  CAPITAL STOCK





During
the nine and three months ended September 30, 2008, the Company issued a total
of 568,565 and 141,950 shares of Class A Common Stock to its independent
directors for the payment of director fees for services rendered.





During
the nine and three months ended September 30, 2008, the Company issued 104,847
and 42,666 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 nine and three months ended September 30, 2008 and
2007 totaled approximately, $0.6 and $0.2 million and $2.2 and $0.8 million,
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 nine month periods ended September 30, 2008
and 2007is
presented below:





Nine
      Months Ended September 30,2008
            
            
            2007Shares
            
            
            Weighted-Average
      Grant-Date Fair Value
            
            
            Shares
            
            
            Weighted-Average
      Grant-Date Fair ValueNonvested,
      at January 1
            
            
            127,373
            
            
            $
            11.36
            
            
            
            339,862
            
            
            $
            12.60Granted
            
            
            250,000
            
            
            
            0.26
            
            
            
            25,607
            
            
            
            7.61Vested
            
            
            (106,958
            )
            
            
            6.00
            
            
            
            (164,729
            )
            
            
            13.08Forfeited
            
            
            (106,256
            )
            
            
            5.82
            
            
            
            (16,550
            )
            
            
            8.78Nonvested,
      at September 30
            
            
            164,159
            
            
            $
            1.54
            
            
            
            184,190
            
            
            $
            11.82





There
were a total of 0 and 75,326 phantom shares that were vested and unissued as of
September 30, 2008 and 2007, respectively. The total number of outstanding
(vested and nonvested) phantom share awards that include dividend equivalent
rights as of September 30, 2008 and 2007 were 21,658 and 259,016, respectively.
As of September 30, 2008, there was approximately $165,000 of total unrecognized
compensation cost related to nonvested phantom share awards.  The cost
is expected to be recognized over a weighted-average period of 11.3
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





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





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.  On September
29, 2008, the Kornfeldand Coy cases
were consolidated as In re
Opteum Inc. Securities Litigationand the Court appointed a lead
plaintiff and lead counsel.  On October 29, 2008, a consolidated
amended complaint was filed in this action. The Company believes it has
meritorious defenses in this action.





Guarantees. Bimini Capital has
guaranteed the performance of OITRS with respect to certain contractual
obligations arising in connection with the sale of mortgage servicing rights by
OITRS.  See also Note 11(g).





NOTE
9.  INCOME TAXES





REIT
taxable income (loss), as generated by Bimini Capital’s qualifying REIT
activities, is computed differently from Bimini Capital’s financial statement
net income (loss) as computed in accordance with GAAP. Depending on the number
and size of the various items or transactions being accounted for differently,
the differences between Bimini Capital’s REIT taxable income (loss) and Bimini
Capital’s financial statement net income (loss) can be substantial and each item
can affect several years.





As of
September 30, 2008, the REIT has approximately $68.7 million of tax capital loss
carryforwards available to offset future tax capital gains. As of September 30,
2008 the REIT has a tax net operating loss carryforward of approximately $13.5
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 MBS 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 MBS on a fair value basis. Fair value is
the price that would be received to sell an asset or transfer a liability in an
orderly transaction between market participants at the measurement date. When
determining the fair value measurements for its mortgage-backed securities, the
Company considers the principal or most advantageous market in which it would
transact and considers assumptions that market participants would use when
pricing the asset. When possible, the Company looks to active and observable
markets to price identical assets.  When identical assets are not
traded in active markets, the Company looks to market observable data for
similar assets. Nevertheless, certain assets are not actively traded in
observable markets and the Company must use alternative valuation techniques to
derive a fair value measurement.




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




Fair
value is used to measure the trading portfolio on a recurring
basis.  The fair value as of September 30, 2008 is determined as
follows:





(in
thousands)





Fair
      Value Measurements as of September 30, 2008, UsingQuoted
      Prices in Active Markets for Identical Assets (Level 1)
            
            $
            -Significant
      Other Observable Inputs (Level 2)
            
            
            226,568Significant
      Unobservable Inputs (Level 3)
            
            
            -Total
      Fair Value Measurements
            
            $
            226,568











NOTE
11.   DISCONTINUED OPERATIONS





OITRS





The
results of discontinued operations of OITRS included in the accompanying
consolidated statements of operations for the nine and three months ended
September 30, 2008 and 2007 were as follows:





(in
thousands)





Nine
      Months Ended September 30,
            
            
            Three
      Months Ended September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007RevenuesInterest
      income
            
            $
            3
            
            
            $
            22,543
            
            
            $
            -
            
            
            $
            515Interest
      expense
            
            
            (20
            )
            
            
            (17,521
            )
            
            
            (5
            )
            
            
            (472
            )Net
      interest income (deficiency)
            
            
            (17
            )
            
            
            5,022
            
            
            
            (5
            )
            
            
            43Loss
      on discontinued mortgage banking activitiesFair
      value adjustment on retained interest, trading
            
            
            (43,085
            )
            
            
            (28,126
            )
            
            
            (8,255
            )
            
            
            (634
            )Other
      discontinued mortgage banking activities
            
            
            (126
            )
            
            
            (40,794
            )
            
            
            (79
            )
            
            
            (6,471
            )Other
      income and expenses, net of non-recurring items
            
            
            1,885
            
            
            
            (15,412
            )
            
            
            47
            
            
            
            4,364Net
      servicing loss
            
            
            (1,364
            )
            
            
            (13,868
            )
            
            
            (2,328
            )
            
            
            (1,241
            )Other
      interest income (expense) and loss reserves
            
            
            (2,001
            )
            
            
            (23,617
            )
            
            
            (759
            )
            
            
            1,077Deficiency
      of revenues
            
            
            (44,708
            )
            
            
            (116,795
            )
            
            
            (11,379
            )
            
            
            (2,862
            )ExpensesGeneral
      and administrative expenses
            
            
            (3,585
            )
            
            
            (30,833
            )
            
            
            (675
            )
            
            
            (2,918
            )Loss
      before provision for income taxes
            
            
            (48,293
            )
            
            
            (147,628
            )
            
            
            (12,054
            )
            
            
            (5,780
            )Provision
      for income taxes and valuation allowance
            
            
            -
            
            
            
            (7,181
            )
            
            
            -
            
            
            
            4,282Loss
      from discontinued operations, net of taxes
            
            $
            (48,293
            )
            
            $
            (154,809
            )
            
            $
            (12,054
            )
            
            $
            (1,498
            )





During
the nine months ended September 30, 2008, OITRS’s 51% membership interest in
Interactive Mortgage Advisors, LLC, a Delaware limited liability company
(“IMA”), was sold for $500,000 as evidenced by a promissory note.  The
note, which is secured by the assets of IMA and guaranteed by certain affiliates
of IMA, bears interest at a rate of 8% per annum and is payable in full on
December 31, 2008.  The sale of OITRS’ membership interest resulted in
a loss of approximately $285,000.  This loss is included in the table
above under “Other income and expenses, net of non-recurring
items.”





The
assets and liabilities of OITRS included in the consolidated balance sheets as
of September 30, 2008 and December 31, 2007 were as follows:





(in
thousands)





September
      30, 2008
            
            
            December
      31, 2007AssetsCash
      and cash equivalents
            
            $
            73
            
            
            $
            705Mortgage
      loans held for sale
            
            
            456
            
            
            
            983Retained
      interests, trading
            
            
            14,384
            
            
            
            69,301Securities
      held for sale
            
            
            15
            
            
            
            173Originated
      mortgage servicing rights
            
            
            -
            
            
            
            3,073Receivables
            
            
            23,923
            
            
            
            17,868Property
      and equipment, net
            
            
            -
            
            
            
            285Prepaids
      and other assets
            
            
            3,733
            
            
            
            4,232Assets
      held for sale
            
            $
            42,584
            
            
            $
            96,620LiabilitiesSecured
      borrowings
            
            $
            -
            
            
            $
            18,000Accounts
      payable, accrued expenses and other
            
            
            14,353
            
            
            
            9,842Liabilities
      related to assets held for sale
            
            $
            14,353
            
            
            $
            27,842





(a)
- 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 was 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 September 30, 2008 and December 31, 2007:





(in
thousands)





September
      30, 2008
            
            
            December
      31, 2007Mortgage
      loans held for sale, and other, net
            
            $
            3,637
            
            
            $
            4,780Valuation
      allowance
            
            
            (3,181
            )
            
            
            (3,797
            )Total
            
            $
            456
            
            
            $
            983





(b)
– 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.





The total
fair value of these retained interests was approximately $14.4 million as of
September 30, 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
loss severity assumptions and discount rates, the fair value of the retained
interests decreased by $43.1 million and $8.3 million for the nine and three
months ended September 30, 2008, respectively. Due to higher forward LIBOR rates
and increased loss assumptions on the underlying mortgage loans, the fair value
of the retained interests decreased by $28.1 million and $0.6 million for the
nine and three months ended September 30, 2007.





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
September 30, 2008 and December 31, 2007:





(in
thousands)





Series
            Issue
      Date
            
            September
      30, 2008
            
            
            December
      31, 2007HMAC
      2004-1
            March
      4, 2004
            
            $
            1,744
            
            
            $
            2,460HMAC
      2004-2
            May
      10, 2004
            
            
            1,424
            
            
            
            1,408HMAC
      2004-3
            June
      30, 2004
            
            
            386
            
            
            
            880HMAC
      2004-4
            August
      16, 2004
            
            
            1,023
            
            
            
            1,506HMAC
      2004-5
            September
      28, 2004
            
            
            1,874
            
            
            
            3,043HMAC
      2004-6
            November
      17, 2004
            
            
            1,534
            
            
            
            5,181OMAC
      2005-1
            January
      31, 2005
            
            
            2,182
            
            
            
            6,948OMAC
      2005-2
            April
      5, 2005
            
            
            631
            
            
            
            7,046OMAC
      2005-3
            June
      17, 2005
            
            
            2,428
            
            
            
            10,736OMAC
      2005-4
            August
      25, 2005
            
            
            470
            
            
            
            9,752OMAC
      2005-5
            November
      23, 2005
            
            
            180
            
            
            
            7,717OMAC
      2006-1
            March
      23, 2006
            
            
            508
            
            
            
            10,835OMAC
      2006-2
            June
      26, 2006
            
            
            -
            
            
            
            1,789Total
            
            
            $
            14,384
            
            
            $
            69,301




As of
September 30, 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)





September
      30, 2008
            
            
            December
      31, 2007Balance
      sheet carrying value of retained interests – fair value
            
            $
            14,384
            
            
            $
            69,301Weighted
      average life (in years)
            
            
            3.99
            
            
            
            4.09Prepayment
      assumption (annual rate)
            
            
            19.93
            %
            
            
            26.37
            %Impact
      on fair value of 10% adverse change
            
            $
            (1,388
            )
            
            $
            (6,908
            )Impact
      on fair value of 20% adverse change
            
            $
            (2,042
            )
            
            $
            (12,577
            )Expected
      credit losses (% of original unpaid principal balance)
            
            
            3.40
            %
            
            
            1.22
            %Impact
      on fair value of 10% adverse change
            
            $
            (2,577
            )
            
            $
            (6,409
            )Impact
      on fair value of 20% adverse change
            
            $
            (4,200
            )
            
            $
            (13,633
            )Residual
      cash-flow discount rate
            
            
            27.50
            %
            
            
            20.00
            %Impact
      on fair value of 10% adverse change
            
            $
            (1,396
            )
            
            $
            (4,138
            )Impact
      on fair value of 20% adverse change
            
            $
            (2,600
            )
            
            $
            (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
            
            $
            (4,876
            )
            
            $
            (14,906
            )Impact
      on fair value of 20% adverse change
            
            $
            (7,294
            )
            
            $
            (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 September 30, 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 September 30, 2008
            
            
            Projected
      Future Credit Losses as of September 30, 2008
            
            
            Projected
      Total Credit Losses as of September 30, 2008HMAC
      2004-1
            March
      4, 2004
            
            $
            309,710
            
            
            
            0.57
            %
            
            
            0.36
            %
            
            
            0.93
            %HMAC
      2004-2
            May
      10, 2004
            
            
            388,737
            
            
            
            0.78
            %
            
            
            0.46
            %
            
            
            1.24
            %HMAC
      2004-3
            June
      30, 2004
            
            
            417,055
            
            
            
            0.59
            %
            
            
            0.66
            %
            
            
            1.25
            %HMAC
      2004-4
            August
      16, 2004
            
            
            410,123
            
            
            
            0.54
            %
            
            
            0.55
            %
            
            
            1.09
            %HMAC
      2004-5
            September
      28, 2004
            
            
            413,875
            
            
            
            0.67
            %
            
            
            0.80
            %
            
            
            1.47
            %HMAC
      2004-6
            November
      17, 2004
            
            
            761,027
            
            
            
            0.91
            %
            
            
            1.15
            %
            
            
            2.06
            %OMAC
      2005-1
            January
      31, 2005
            
            
            802,625
            
            
            
            0.84
            %
            
            
            1.44
            %
            
            
            2.28
            %OMAC
      2005-2
            April
      5, 2005
            
            
            883,987
            
            
            
            0.95
            %
            
            
            1.62
            %
            
            
            2.57
            %OMAC
      2005-3
            June
      17, 2005
            
            
            937,117
            
            
            
            0.78
            %
            
            
            1.88
            %
            
            
            2.66
            %OMAC
      2005-4
            August
      25, 2005
            
            
            1,321,739
            
            
            
            1.02
            %
            
            
            2.75
            %
            
            
            3.77
            %OMAC
      2005-5
            November
      23, 2005
            
            
            986,277
            
            
            
            1.11
            %
            
            
            3.87
            %
            
            
            4.98
            %OMAC
      2006-1
            March
      23, 2006
            
            
            934,441
            
            
            
            0.95
            %
            
            
            4.60
            %
            
            
            5.55
            %OMAC
      2006-2
            June
      26, 2006
            
            
            491,572
            
            
            
            1.81
            %
            
            
            8.69
            %
            
            
            10.50
            %Total
            
            
            $
            9,058,285
            
            
            
            0.93
            %
            
            
            2.47
            %
            
            
            3.40
            %




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





(in
thousands)





September
      30, 2008
            
            
            September
      30, 2007Servicing
      fees received
            
            $
            1,055
            
            
            $
            11,375Servicing
      advances and repayments
            
            
            92
            
            
            
            5,110Cash
      flows received on retained interests
            
            
            11,831
            
            
            
            4,479





The
following information presents quantitative information about delinquencies and
credit losses on securitized financial assets as of September 30, 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 LossesSeptember
      30, 2008
            
            $
            4,068,088
            
            
            $
            701,639
            
            
            $
            83,895December
      31, 2007
            
            
            4,528,481
            
            
            
            457,872
            
            
            
            23,639





(c)
– Mortgage Servicing Rights, Net





Owing to
the excessive and increasing burden of the monthly advancing requirement on
delinquent loans serviced by OITRS, coupled with the Company’s reduced
liquidity, OITRS was unable to meet such servicing advance requirements in
September of 2008 and as a result committed a servicer event of default under
the various pooling and servicing agreements under which OITRS serviced
loans.  Accordingly, such servicing was surrendered to the master
servicer and the carrying value of the related servicing right was written
off.  Such charge was approximately $2.0 million.  All
advances made on such loans prior to the event of default, net of any costs
incurred by the master servicer related to the servicing transfer, will be
returned to the Company as the delinquent loans are liquidated over
time.  The balance of the receivable at September 30, 2008 was $19.6
million.  Thr Company believes that the balance is fully collectible;
therefore, no valuation allowance has been provided.





For the
nine and three months ended September 30, 2008, OITRS had net servicing loss of
$1.4million and
$2.3million.  The
results were driven primarily by the surrender of the MSRs owing to the event of
default resulting from the inability of OITRS to continue to meet servicing
advance requirements.





The table
below provides the elements of the change in carrying value of the MSRs for the
nine month periods ended September 30, 2008 and 2007.





(in
thousands)





September
      30, 2008
            
            
            September
      30, 2007Balance
      at beginning of period
            
            $
            3,073
            
            
            $
            98,859Additions
            
            
            -
            
            
            
            7,727Sales,
      net of reserve for prepayment protection
            
            
            (1,344
            )
            
            
            (87,603
            )Changes
      in fair value:Due
      to changes in market conditions and run-off
            
            
            614
            
            
            
            (13,785
            )Due
      to change in valuation assumptions
            
            
            -
            
            
            
            (2,558
            )Mortgage
      servicing rights surrendered
            
            
            (2,028
            )
            
            
            -Valuation
      Allowance
            
            
            (315
            )
            
            
            -Balance
      at end of period
            
            $
            -
            
            
            $
            2,640




(d)
– Receivables





A summary
of receivables as of September 30, 2008 and December 31, 2007 is presented
below:





(in
thousands)





September
      30, 2008
            
            
            December
      31, 2007Servicing
      advances (principal and interest)
            
            $
            11,385
            
            
            $
            5,636Servicing
      advances (taxes and insurance)
            
            
            8,185
            
            
            
            7,495Servicing
      sale receivable
            
            
            3,899
            
            
            
            4,681Other
      receivables
            
            
            454
            
            
            
            56Totals
            
            $
            23,923
            
            
            $
            17,868





(e)
– Secured Borrowings





Secured
borrowings consisted of a line of credit for $80.0 million that was secured by
the retained interests in securitizations. The line was paid in full on May 26,
2008.  The agreement provided for interest rate based on LIBOR plus
3.00%.




(f)  - Income taxes




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 September 30, 2008, all
deferred tax assets, net of deferred tax liabilities, are offset in their
entirety by a deferred tax asset valuation allowance.  Substantially all of
the net deferred tax assets are a result of net tax losses incurred. The amount
of the gross tax benefit generated by these losses are reduced by an offsetting
valuation allowance of the same amount.





For the
period ended September 30, 2007, OITRS has recorded a provision of $7.2 million
for the nine months then ended, and a benefit of $4.3 million for the three
months then ended. At December 31, 2006, OITRS had recorded net deferred tax
assets of approximately $7.1 million. During the three month ended March 31,
2007, OITRS recorded a valuation allowance (among other items) resulting in
OITRS recording an income tax provision of $11.5 million, which reduced the
December 31, 2006 net deferred tax asset to a net deferred tax liability at
March 31, 2007 of approximately $4.3 million. As part of the recording of this
allowance at March 31, 2007, State tax NOLs were fully allowanced, as their
availability to fully offset recorded deferred tax liabilities was not assured.
The losses incurred by OITRS from March 31, 2007 through September 30, 2007 were
sufficient to ensure that the State NOLs will be available to offset recorded
deferred tax liabilities and realized gains on sales of OITRS
assets; therefore the net deferred tax liability of $4.3 million was offset
by the deferred tax assets related to the State NOLs expected to be realized as
of September 30, 2007.  Consequently, the benefit for income taxes for
the three months ended September 30, 2007 is $4.3 million, and the provision for
income taxes for the nine months ended September 30, 2007 is $7.2
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.





(g)
– Commitments and Contingencies





Loans Sold to Investors.
Generally, OITRS was not exposed to significant credit risk on the loans it sold
to investors. In the normal course of business, OITRS provided certain
representations and warranties during the sale of mortgage loans which obligated
it to repurchase loans which were subsequently unable to be sold through the
normal investor channels. The repurchased loans were secured by the related real
estate properties, and could usually be sold directly to other permanent
investors.





OITRS
recognized 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 was recorded as a reduction of the gain
on sale of mortgage loans and included as part of liabilities related to assets
held for sale in the accompanying financial statements.





Changes
in this liability during the nine months ended September 30, 2008 and 2007 are
as follows:





(in
thousands)




For
      the Nine Months EndedSeptember
      30, 2008
                
                
                September
      30, 2007Balance—Beginning
      of period
                
                $
                5,260
                
                
                $
                7,136Reclassification
      from other liabilities
                
                
                1,700
                
                
                
                -Provision
                
                
                1,759
                
                
                
                16,159Charge-Offs
                
                
                (1,416
                )
                
                
                (14,013
                )Balance—End
      of period
                
                $
                7,303
                
                
                $
                9,282
  Litigation
Contingencies. OITRS is involved in various lawsuits and claims, both
actual and potential, including some that it has asserted against others, in
which monetary damages and other relief is sought.  The resolution of such
lawsuits and claims is inherently unpredictable.  In accordance with
GAAP, it is the policy of OITRS to accrue for loss contingencies only when it is
both probable that a loss has actually been incurred and an amount of such loss
is reasonably estimable.  The lawsuits and claims involving OITRS, the
most significant of which are described below, relate primarily to contractual
disputes arising out of the ordinary course of OITRS's business as previously
conducted.





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 monetary damages and specific performance and alleging breach of
contract for allegedly failing to repurchase approximately fifty
loans.  On September 5, 2007, OITRS filed a motion to dismiss Coast’s
complaint.  On February 25, 2008, the Court denied OITRS’s motion to
dismiss.  On March 14, 2008, the Court entered an order clarifying its
order entered on February 25, 2008 and stating that it was unable to determine
whether Coast’s claims are barred under Florida law without hearing additional
facts.  As a result of the Court’s orders, discovery has now
commenced.  OITRS believes it has meritorious defenses in this
action.





On July
2, 2008, an amended complaint was filed in the Superior Court of the State of
California for the County of Los Angeles, Central District by IndyMac Bank,
F.S.B. against OITRS and others seeking monetary damages and specific
performance and alleging, among other allegations, breach of contract for
allegedly failing to repurchase thirty-six loans.  On August 11, 2008,
OITRS filed a special demurrer to various causes of action set forth in the
amended complaint.  On August 18, 2008, the Court entered an order
substituting the Federal Deposit Insurance Corporation (the “FDIC”), as
conservator for IndyMac Federal Bank, F.S.B., in the place of IndyMac Bank,
F.S.B.  On September 29, 2008, the Court denied OITRS’s special
demurrer.  OITRS believes it has meritorious defenses in this
action.





(h)
– 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 September 30, 2008, UsingFair
      Value Measurements
              September
      30, 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
            
            $
            456
            
            
            $
            -
            
            
            $
            -
            
            
            $
            456Retained
      interests, trading
            
            
            14,384
            
            
            
            -
            
            
            
            -
            
            
            
            14,384Securities
      held for sale
            
            
            15
            
            
            
            -
            
            
            
            -
            
            
            
            15Originated
      mortgage servicing rights
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -





A
reconciliation of activity for the nine months ended September 30, 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
            
            
            (19
            )
            
            
            (43,085
            )
            
            
            (27
            )
            
            
            (1,729
            )Purchases,
      issuances and settlements
            
            
            (508
            )
            
            
            (11,832
            )
            
            
            (131
            )
            
            
            (1,344
            )Ending
      Balance
            
            $
            456
            
            
            $
            14,384
            
            
            $
            15
            
            
            $
            -





Gains and
losses included in earnings for the nine months ended September 30, 2008 are
reported in loss on discontinued 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. For purposes of
this calculation, Bimini Capital treats its junior subordinated notes as an
equity capital equivalent. 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.  During the third quarter of 2008 Bimini
Capital expanded its investment strategy to include the use of inverse interest
only and interest only securities due to disruption in the repurchase agreement
funding market.  Such securities are collateralized by mortgages with
similar characteristics as those collateralizing the residential mortgage
related securities that the Company invests in otherwise. 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 nine months ended September 30, 2007. The
results of the ongoing activities associated with the wind-down of the mortgage
loan origination business for the nine months ended September 30, 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 (deficit) section of the financial statements) as of
September 30, 2008.  This deficit is computed on a GAAP basis, and
does not directly affect the REIT’s ability to pay dividends except as otherwise
limited by Maryland law.  As described in Note 9 to the accompanying
consolidated financial statements, the differences between GAAP results and REIT
taxable income is substantial;  from inception to September 30, 2008,
Bimini Capital’s REIT taxable income is approximately $77.9 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 nine and three months
ended September 30, 2008, as compared to the Company’s results of operations for
the nine and three months ended September 30, 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 nine and three months ended September 30, 2008, was $54.1
million and $14.4 million,compared to a
consolidated net loss of$245.3 million and $4.7
million, respectively, for the nine and three months ended September 30, 2007.
The consolidated net loss for the nine and three months ended September 30, 2008
was primarily the result of negative mark to market adjustments to the retained
interests, trading of OITRS of $43.1 million and $8.3 million, respectively. For
the nine and three months ended September 30, 2008, Bimini Capital had a loss
from continuing operations of $5.8 million and $2.3 million,
respectively.  The consolidated net loss for the nine and three months
ended September 30, 2007 was primarily the result of an other-than-temporary
impairment of $55.3 million taken on the Company’s MBS portfolio during the nine
months ended September 30, 2007 and a loss from discontinued operations at OITRS
of $154.8 million and $1.5 million, respectively, for the nine and three month
periods ended September 30, 2007. Consolidated net loss per basic and diluted
share of Class A Common Stock was $2.12 and $0.56, respectively, for the
nine and three months ended September 30, 2008, compared to a consolidated net
loss per basic and diluted share of Class A Common Stock of $9.84 and $0.19,
respectively, for the comparable prior period.





For the
nine and three months ended September 30, 2008, comprehensive loss was$54.1 million and $14.4
million, respectively.  For the nine and three months ended September
30, 2007, comprehensive loss was $168.5 million and $4.7 million, including the
net unrealized gain on available-for-sale securities of $2.1 million and $0.0
million and the reclassification of other-than-temporary loss on MBS of $55.3
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 MBS securities and their cost basis.  The unrealized
gain on available-for-sale securities for the nine months ended September 30,
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 adjustable-rate mortgage (“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
nine and three months ended September 30, 2008, Bimini Capital generated $23.0
million and $6.1 million, respectively, of interest income from MBS assets and
$17.3 million and $4.2 million, respectively, of interest expense on repo
liabilities, resulting in gross portfolio interest income of $5.8 million and
$2.0 million, respectively.  In addition, for the nine and three
months ended September 30, 2008, Bimini Capital incurred $6.3 million and $2.1
million, respectively, of interest expense on the junior subordinated notes
resulting in net interest expense of $0.5 million and $0.1 million,
respectively.  Gross portfolio interest income for the nine months
ended September 30, 2008 increased by approximately $7.3 million and for the
three months ended September 30, 2008 decreased by $1.5 million, from the same
respective periods of 2007.  The $7.3 million increase is due to
higher net interest margin available in the market in 2008, offset to some
extent by a substantially reduced portfolio. The results for the nine and three
months ended September 30, 2008, were also positively impacted by the Company’s
implementation of its alternative investment strategy which employed inverse
interest only (IIO) securities.  Such securities benefited from lower
levels of one month LIBOR and slower repayments, even though they were only
deployed for a portion of the nine and three month period.





For the
nine and three months ended September 30, 2008, Bimini Capital’s general and
administrative costs were approximately $4.3 million and $1.1, respectively. For
the nine and three months ended September 30, 2008, compensation and related
benefits were $1.3 million and $0.6 million, respectively, 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 $0.5
million and $0.04 million, respectively.





Bimini
Capital had $0.8 million and $0.05 million, respectively, in realized gains from
the sales of securities in the MBS portfolio during the nine and three months
ended September 30, 2008, compared to losses of $20.5 million and $1.1 million,
respectively, during the nine and three months ended September 30,
2007.





For the
nine and three months ended September 30, 2008, Bimini Capital had a loss from
continuing operations of $5.8 million and $2.3 million,
respectively.




As of
September 30, 2008, the MBS pass through portfolio consisted of $226.6 million
of agency or government MBS at fair value and had a weighted average coupon on
assets of 5.47% and a net weighted average borrowing cost of
2.99%.  The following tables summarize Bimini Capital’s agency and
government mortgage related securities as of September 30, 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
      CapSeptember
      30, 2008Adjustable-Rate
      MBS
            $
            84,387
            37.24%
            5.17%
            279
            1-Jan-36
            6.48
            10.49%
            8.82%Fixed-Rate
      MBS
            
            65,244
            28.80%
            6.62%
            336
            1-Jul-38
            n/a
            n/a
            n/aHybrid
      Adjustable-Rate MBS
            
            62,915
            27.77%
            5.03%
            338
            1-Apr-38
            52.69
            10.03%
            2.00%Total
      Mortgage Backed Pass Through
            
            212,546
            93.81%
            5.57%
            314
            1-Jul-38
            26.21
            10.29%
            3.49%Inverse
      IO MBS
            
            14,022
            6.19%
            3.91%
            351
            25-Jan-38
            0.31
            n/a
            n/aTotal
      Mortgage Assets
            $
            226,568
            100.00%
            5.47%
            316
            1-Jul-38
            23.96
            n/a
            3.49%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)





September
      30, 2008
            
            
            December
      31, 2007Agency
            
            Market
      Value
            
            
            Percentage
      of
              Entire
      Portfolio
            
            
            Market
      Value
            
            
            Percentage
      of
              Entire
      PortfolioFannie
      Mae
            
            $
            217,707
            
            
            
            96.09
            %
            
            $
            638,763
            
            
            
            92.50
            %Freddie
      Mac
            
            
            7,684
            
            
            
            3.39
            %
            
            
            46,318
            
            
            
            6.70
            %Ginnie
      Mae
            
            
            1,177
            
            
            
            0.52
            %
            
            
            5,498
            
            
            
            0.80
            %Total
      Portfolio
            
            $
            226,568
            
            
            
            100.00
            %
            
            $
            690,579
            
            
            
            100.00
            %





Entire
      Portfolio
            
            September
      30, 2008
            
            
            December
      31, 2007Weighted
      Average Pass Through Purchase Price
            
            $
            102.83
            
            
            $
            102.32Weighted
      Average Derivative Purchase Price
            
            
            6.86
            
            
            
            -Weighted
      Average Pass Through Current Price
            
            $
            101.03
            
            
            $
            101.94Weighted
      Average Derivative Current Price
            
            $
            7.04
            
            
            $
            -Effective
      Duration (1)
            
            
            2.789
            
            
            
            1.267





(1) Effective duration of 2.789
indicates that an interest rate increase of 1.0% would be expected to cause a
2.789% decline in the value of the MBS in the Company’s investment portfolio at
September 30, 2008.  Effective duration of 1.267 indicates that an
interest rate increase of 1.0% 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.These figures include the derivative
securities in the portfolio.





In
evaluating the MBS pass through 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 pass throughs 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.





Bimini
Capital’s sub-portfolio of inverse interest only securities have underlying
borrower and loan characteristics as that of the MBS pass through
sub-portfolio.  The values of inverse interest only securities are
impacted by movements in one month LIBOR and the interest rate caps associated
with the security, which directly affect the coupon of such securities, as well
as prepayments.  Generally interest only securities are more sensitive
to prepayment behavior owing to their lack of a principal
balance.  Also, as market conditions fluctuate over time the relative
attractiveness of inverse interest only and interest only securities can also
vary. Owing to the smaller size of the inverse interest only and interest only
market in relation to the MBS pass through market, such fluctuations can
exacerbate price movements.  Bimini Capital does not intend to pledge
such securities as collateral under repurchase agreement funding arrangements
and so will not be exposed to price related margin calls from
lenders.





As of
September 30, 2008, approximately27.8% of Bimini
Capital’s portfolio is comprised of hybrid adjustable rate MBS and 28.8% are
premium fixed rate MBS pass throughs. 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 September 30, 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
            
            $
            84,387Change
      in Fair Value
            
            
            
            
            
            $
            816
            
            
            $
            (816
            )
            
            $
            (1,632
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.97
            %
            
            
            (0.97
            %)
            
            
            (1.93
            %)Fixed
      Rate MBSFair
      Value
            
            $
            65,244Change
      in Fair Value
            
            
            
            
            
            $
            1,781
            
            
            $
            (1,781
            )
            
            $
            (3,562
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            2.73
            %
            
            
            (2.73
            %)
            
            
            (5.46
            %)Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            62,915Change
      in Fair Value
            
            
            
            
            
            $
            1,833
            
            
            $
            (1,833
            )
            
            $
            (3,666
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            2.91
            %
            
            
            (2.91
            %)
            
            
            (5.83
            %)DerivativesFair
      Value
            
            $
            14,022Change
      in Fair Value
            
            
            
            
            
            $
            1,889
            
            
            $
            (1,889
            )
            
            $
            (3,778
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            13.47
            %
            
            
            (13.47
            %)
            
            
            (26.94
            %)CashFair
      Value
            
            $
            12,377Portfolio
      TotalFair
      Value
            
            $
            226,568Change
      in fair Value
            
            
            
            
            
            $
            6,319
            
            
            $
            (6,319
            )
            
            $
            (12,638
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            2.79
            %
            
            
            (2.79
            %)
            
            
            (5.58
            %)




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
            
            $
            84,387Change
      in fair Value
            
            
            
            
            
            $
            909
            
            
            $
            (1,329
            )
            
            $
            (2,977
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.08
            %
            
            
            (1.57
            %)
            
            
            (3.53
            %)Fixed
      Rate MBSFair
      Value
            
            $
            65,244Change
      in fair Value
            
            
            
            
            
            $
            1,236
            
            
            $
            (2,395
            )
            
            $
            (5,399
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.89
            %
            
            
            (3.67
            %)
            
            
            (8.28
            %)Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            62,915Change
      in fair Value
            
            
            
            
            
            $
            522
            
            
            $
            (792
            )
            
            $
            (1,864
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.83
            %
            
            
            (1.26
            %)
            
            
            (2.96
            %)DerivativesFair
      Value
            
            $
            14,022Change
      in Fair Value
            
            
            
            
            
            $
            (1,105
            )
            
            $
            (2,946
            )
            
            $
            (6,949
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            (7.88
            %)
            
            
            (21.01
            %)
            
            
            (49.56
            %)CashFair
      Value
            
            $
            12,377Portfolio
      TotalFair
      Value
            
            $
            226,568Change
      in fair Value
            
            
            
            
            
            $
            1,562
            
            
            $
            (7,462
            )
            
            $
            (17,189
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.69
            %
            
            
            (3.29
            %)
            
            
            (7.59
            %)





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, the level of one month LIBOR (IIO’s),
market expectations as to future interest rate changes and disruptions in the
financial markets. 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.




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 September 30, 2008, and the eighteen 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
            
            
            Quarterly
      Retrospective Adj.
            
            
            Premium
      Lost due to Paydowns
            
            
            Yield
      on Average Interest Earning Assets (1)
            
            
            Average
      Balance of Repurchase Agreements Outstanding
            
            
            Interest
      Expense (2)
            
            
            Average
      Cost of Funds (2)
            
            
            Net
      Interest Income
            
            
            Net
      Interest Spread
            
            
            Trust
      Preferred Interest ExpenseSeptember
      30, 2008
            
            $
            375,239
            
            
            
            6,149
            
            
            
            -
            
            
            
            568,213
            
            
            
            5.95
            %
            
            $
            326,577
            
            
            
            4,193
            
            
            
            5.14
            %
            
            $
            1,956
            
            
            
            0.81
            %
            
            $
            1,933June
      30, 2008
            
            
            519,614
            
            
            
            6,787
            
            
            
            -
            
            
            
            415
            
            
            
            4.91
            %
            
            
            471,732
            
            
            
            5,448
            
            
            
            4.62
            %
            
            
            1,339
            
            
            
            0.29
            %
            
            
            1,933March
      31, 2008
            
            
            602,948
            
            
            
            10,112
            
            
            
            -
            
            
            
            652
            
            
            
            6.28
            %
            
            
            584,597
            
            
            
            7,590
            
            
            
            5.19
            %
            
            
            2,522
            
            
            
            1.08
            %
            
            
            1,933December
      31, 2007
            
            
            972,236
            
            
            
            11,364
            
            
            
            (345
            )
            
            
            -
            
            
            
            4.68
            %
            
            
            944,832
            
            
            
            10,531
            
            
            
            4.46
            %
            
            
            833
            
            
            
            0.22
            %
            
            
            1,933September
      30, 2007
            
            
            1,536,265
            
            
            
            24,634
            
            
            
            (404
            )
            
            
            -
            
            
            
            6.41
            %
            
            
            1,497,409
            
            
            
            20,998
            
            
            
            5.61
            %
            
            
            3,636
            
            
            
            0.81
            %
            
            
            1,933June
      30, 2007
            
            
            2,375,216
            
            
            
            26,970
            
            
            
            (6,182
            )
            
            
            -
            
            
            
            4.54
            %
            
            
            2,322,727
            
            
            
            33,444
            
            
            
            5.76
            %
            
            
            (6,475
            )
            
            
            (1.22
            %)
            
            
            1,933March
      31, 2007
            
            
            2,870,265
            
            
            
            38,634
            
            
            
            1,794
            
            
            
            -
            
            
            
            5.38
            %
            
            
            2,801,901
            
            
            
            37,405
            
            
            
            5.34
            %
            
            
            1,229
            
            
            
            0.04
            %
            
            
            1,933December
      31, 2006
            
            
            2,944,397
            
            
            
            31,841
            
            
            
            (4,013
            )
            
            
            -
            
            
            
            4.33
            %
            
            
            2,869,210
            
            
            
            39,448
            
            
            
            5.50
            %
            
            
            (7,607
            )
            
            
            (1.17
            %)
            
            
            1,933September
      30, 2006
            
            
            3,243,674
            
            
            
            43,051
            
            
            
            3,523
            
            
            
            -
            
            
            
            5.31
            %
            
            
            3,151,813
            
            
            
            42,683
            
            
            
            5.42
            %
            
            
            368
            
            
            
            (0.11
            %)
            
            
            1,933June
      30, 2006
            
            
            3,472,921
            
            
            
            54,811
            
            
            
            13,395
            
            
            
            -
            
            
            
            6.31
            %
            
            
            3,360,421
            
            
            
            41,674
            
            
            
            4.96
            %
            
            
            13,137
            
            
            
            1.35
            %
            
            
            1,933March
      31, 2006
            
            
            3,516,292
            
            
            
            40,512
            
            
            
            1,917
            
            
            
            -
            
            
            
            4.61
            %
            
            
            3,375,777
            
            
            
            36,566
            
            
            
            4.33
            %
            
            
            3,946
            
            
            
            0.28
            %
            
            
            1,933December
      31, 2005
            
            
            3,676,175
            
            
            
            43,140
            
            
            
            3,249
            
            
            
            -
            
            
            
            4.69
            %
            
            
            3,533,486
            
            
            
            35,337
            
            
            
            4.00
            %
            
            
            7,803
            
            
            
            0.69
            %
            
            
            1,858September
      30, 2005
            
            
            3,867,263
            
            
            
            43,574
            
            
            
            4,348
            
            
            
            -
            
            
            
            4.51
            %
            
            
            3,723,603
            
            
            
            32,345
            
            
            
            3.48
            %
            
            
            11,230
            
            
            
            1.03
            %
            
            
            973June 30,
      2005
            
            
            3,587,629
            
            
            
            36,749
            
            
            
            2,413
            
            
            
            -
            
            
            
            4.10
            %
            
            
            3,449,744
            
            
            
            26,080
            
            
            
            3.02
            %
            
            
            10,668
            
            
            
            1.07
            %
            
            
            454March 31,
      2005
            
            
            3,136,142
            
            
            
            31,070
            
            
            
            1,013
            
            
            
            -
            
            
            
            3.96
            %
            
            
            2,976,409
            
            
            
            19,731
            
            
            
            2.65
            %
            
            
            11,339
            
            
            
            1.31
            %
            
            
            -December 31,
      2004
            
            
            2,305,748
            
            
            
            20,463
            
            
            
            1,250
            
            
            
            -
            
            
            
            3.55
            %
            
            
            2,159,891
            
            
            
            10,796
            
            
            
            2.00
            %
            
            
            9,667
            
            
            
            1.55
            %
            
            
            -September 30,
      2004
            
            
            1,573,343
            
            
            
            11,017
            
            
            
            -
            
            
            
            -
            
            
            
            2.80
            %
            
            
            1,504,919
            
            
            
            4,253
            
            
            
            1.13
            %
            
            
            6,764
            
            
            
            1.67
            %
            
            
            -June 30,
      2004
            
            
            1,512,481
            
            
            
            10,959
            
            
            
            -
            
            
            
            -
            
            
            
            2.90
            %
            
            
            1,452,004
            
            
            
            4,344
            
            
            
            1.20
            %
            
            
            6,615
            
            
            
            1.70
            %
            
            
            -March 31,
      2004
            
            
            871,140
            
            
            
            7,194
            
            
            
            -
            
            
            
            -
            
            
            
            3.30
            %
            
            
            815,815
            
            
            
            2,736
            
            
            
            1.34
            %
            
            
            4,458
            
            
            
            1.96
            %
            
            
            -





(1)
            Adjusted
      for premium lost on paydowns


(2)
            Excludes
      Trust Preferred Interest





The net
interest figures in the table above exclude interest associated with the trust
preferred debt, which is reflected in the last column separately. The net
interest figures do reflect the quarterly retrospective adjustment, where
applicable.  As a result of the entire MBS portfolio being classified
as held for trading for the three months ended September 30, 2008, there are no
longer quarterly retrospective adjustments.  For the three months
ended September 30, 2008, the net margin was 81 basis points on a portfolio of
MBS securities classified entirely as held for trading.   For the
three months ended September 30, 2007, ($0.4) million of the $24.6 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 such period was reduced by 10.5 basis points to 641.4 basis
points.





PERFORMANCE OF DISCONTINUED
OPERATIONS OF OITRS





As stated
previously, 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.





Currently,
there are no operating activities at OITRS and all income and expenses at OITRS
are attributable to mark to market adjustments on the retained interest, trading
(market value of $14.4 million as of September 30, 2008), the remaining
originated mortgage servicing rights (market value as of September 30, 2008 of
$0.0 million), the remaining mortgage loans held for sale (market value as of
September 30, 2008 of $0.5 million) and general and administrative expenses
associated with the wind down of operations.





The
retained interests in securitizations represent residual interest in pools of
loans securitized.  The total fair value of these retained interests
was approximately $14.4 million as of September 30, 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 significantly higher levels of seriously
delinquent loans in the underlying securitizations and higher loss severity
assumptions going forward, the fair value of the retained interests decreased by
$43.1 million and $8.3 million for the nine and three months ended September 30,
2008, respectively. Due to higher forward London Interbank Offered Rate
(“LIBOR”) rates and increased loss assumptions on the underlying mortgage loans,
the fair value of the retained interests decreased by $28.1 million and $0.6
million for the nine and three months ended September 30, 2007.





As of
September 30, 2008, OITRS owned $0.5 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 discontinued mortgage banking activities for the nine months ended September
30, 2008, were $43.2 million and consist primarily of fair value adjustments on
the retained interests, trading.





The table
below provides details of OITRS’s loss on discontinued mortgage banking
activities for the nine and three months ended September 30, 2008 and
2007.  OITRS recognizes a gain or loss on sale of mortgages held for
sale only when the loans are actually sold.





(in
thousands)





Nine
      Months Ended
            
            
            Three
      Months EndedSeptember
      30, 2008
            
            
            September
      30, 2007
            
            
            September
      30, 2008
            
            
            September
      30, 2007Fair
      value adjustment of retained interests, trading
            
            $
            (43,085
            )
            
            $
            (28,126
            )
            
            $
            (8,255
            )
            
            $
            (634
            )Losses
      on sales of mortgage loans and securities
            
            
            (43
            )
            
            
            (6,064
            )
            
            
            (8
            )
            
            
            (11,006
            )Fees
      on brokered loans
            
            
            -
            
            
            
            1,749
            
            
            
            -
            
            
            
            -Gains/(losses)
      on derivatives
            
            
            -
            
            
            
            (4,473
            )
            
            
            -
            
            
            
            246Direct
      loan origination expenses, deferred
            
            
            -
            
            
            
            (7,122
            )
            
            
            -
            
            
            
            (1,627
            )Fees
      earned, brokering
            
            
            -
            
            
            
            887
            
            
            
            -
            
            
            
            182Direct
      loan origination expenses, reclassified
            
            
            -
            
            
            
            (22,181
            )
            
            
            -
            
            
            
            -Change
      in market value of IRLC’s
            
            
            -
            
            
            
            14
            
            
            
            -
            
            
            
            -Change
      in market value of mortgage loans held for sale
            
            
            (83
            )
            
            
            (3,604
            )
            
            
            (71
            )
            
            
            5,734Loss
      on discontinued mortgage banking activities
            
            $
            (43,211
            )
            
            $
            (68,920
            )
            
            $
            (8,334
            )
            
            $
            (7,105
            )





For the
nine and three months ended September 30, 2007, losses realized on the
discontinued mortgage banking activities were $68.9million and $7.1million.  Mark
to market gains/(losses) of loans held for sale of ($3.6)million and $5.7
million, for the nine and three months ended September 30, 2007, were the result
of a sharp deterioration in the secondary market for the loans originated and
sold.  Losses from discontinued 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$36.3million and $6.7millionfor the nine and three
months ended September 30, 2007.





For the
nine and three months ended September 30, 2007, OITRS originated $1.5billion and $0.0billion, respectively,
and sold $2.1billion and $0.1billion, respectively,
of mortgage loans.  Of the originated mortgage loans sold during the
nine and three months ended September 30, 2007, $0.8billion and $0.0
billion, respectively, were sold on a servicing retained basis.





Owing to
the excessive and increasing burden of the monthly advancing requirement on
delinquent loans serviced by OITRS, coupled with the Company’s reduced
liquidity, OITRS was unable to meet such servicing advance requirement in
September of 2008 which resulted in a servicer event of default under the
various pooling and servicing agreements under which OITRS serviced
loans.  Accordingly, such servicing was surrendered to the master
servicer and the carrying value of the related servicing was written
off.  Such charge was $2.0 million.  All advances made on
such loans prior to the event of default, net of any costs incurred by the
master servicer related to the servicing transfer, will be returned to the
Company as the delinquent loans are liquidated over time.  The balance
of the receivable at September 30, 2008 was $19.6 million.





For the
nine and three months ended September 30, 2008, OITRS had net servicing loss of
$1.4million and
$2.3million.  The
results were driven primarily by the surrender of the MSRs owing to the event of
default resulting from the inability of OITRS to continue to meet servicing
advance requirements.





For the
nine and three months ended September 30, 2007, OITRS had net servicing loss of
$13.9million and
$1.2million.  The
results were driven primarily by negative fair value adjustments to the MSRs
(inclusive of run-off of the servicing portfolio).





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 that are used to
repay intercompany debt.  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 September 30, 2008, we purchased $13.8 million of MBS
(consisting entirely of IIO securities), using prepayments and sales of MBS and
existing cash.  During the third quarter of 2008, we received cash of
$21.2 million from prepayments on our MBS. During the nine months ended
September 30, 2008, we generated net proceeds of $288.6 million from the sale of
MBS.  Also, the residual interests at OITRS generated $11.8 million
and $1.2 million, respectively, in cash flows for the nine and three months
ended September 30, 2008.





As of
September 30, 2008, Bimini Capital had outstanding balances under master
repurchase agreements with various counterparties.  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
September 30, 2008, Bimini Capital had obligations outstanding under its
repurchase agreements totaling $200.7 million with a net weighted average
borrowing cost of 2.99%.  As of September 30, 2008, all of Bimini
Capital’s outstanding repurchase agreement obligations are due in less than 6
months with $0.0 million maturing overnight, $85.5 million maturing between 2
and 30 days and the remaining $115.2 million maturing between 31 and
90 days.  Securing these repurchase agreement obligations as of
September 30, 2008, were MBS with an estimated fair value of $208.9 million and
a weighted average maturity of 316 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
September 30, 2008 and December 31, 2007.





(in
thousands)





Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            Weighted
      Average
              Maturity
      of
              Repurchase
              Agreements
              in
      DaysSeptember
      30, 2008MF
      Global Inc.
            
            
            6,461
            
            
            
            47RBS
      Greenwich Capital
            
            
            1,998
            
            
            
            27December
      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 absent an event of default.  A negotiated termination
can occur, but may involve a fee to be paid by the party seeking to terminate
the repurchase agreement transaction.





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 repurchase agreement counterparties could initiate margin
calls, thus inhibiting its liquidity or forcing us to sell assets.





During
the nine month period ended September 30, 2008, the Company undertook a series
of asset sales intended to raise funds necessary to service the residual
financing line of OITRS, de-lever to the extent funding was not available and
maintain adequate liquidity during the continuing period of disruption in the
mortgage market.  On October 27, 2008, $29.3 million of repurchase
agreement obligations matured and could not be extended.  The Company
was forced to sell the associated MBS assets pledged to satisfy the
obligation.  Such sales may have to continue to the extent funding is
not available in the future.





Given the
current difficulties with respect to the availability of funding via the
repurchase market, the Company has opted to augment its existing leveraged MBS
portfolio with alternative sources of income.  The Company has
employed an alternative investment strategy utilizing derivative mortgage backed
securities collateralized by MBS with comparable borrower and prepayment
characteristics to the securities currently in the portfolio.  Such
securities are not funded in the repurchase market but instead are owned free
and clear.  The leverage inherent in the securities replaces the
leverage obtained by acquiring pass-through securities and funding them in the
repurchase 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, in spite of the efforts contemplated above to address any potential
loss of sufficient repurchase agreement funding, no assurances can be made
regarding the Company's ability to satisfy its liquidity and working capital
requirements.





Outlook





The
Company's results of operations for the nine months ended September 30, 2008
were impacted by the unprecedented disruptions in the mortgage-backed securities
market and the global fixed income and equity markets generally, which brought
about a severe tightening of credit conditions and volatile asset
prices.  The result was a substantial deleveraging of the financial
system and substantial losses incurred by various market
participants.  In an effort to combat these developments, the world’s
central banks, the Congress of the United States, the US Treasury and Federal
Reserve Bank have taken numerous actions, most of which are
unprecedented.  The outcome of these developments continues to unfold
and the end result is unclear.





The
funding costs of the MBS portfolio, while low, have not fully stabilized but the
coupon on the MBS assets now exceeds the associated repo funding costs. Also,
the Company no longer needs to fund negative cash flow operations at OITRS,
which in the past 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.





Going
forward, at current interest rate levels, the lack of cash flow needs for OITRS
and resulting halt of asset sales should allow the net interest margin (“NIM”)
of the MBS portfolio to remain positive. As mentioned above, credit conditions
have deteriorated materially and access to funding is
precarious.  Accordingly, no assurance can be made of our ability to
maintain a positive NIM or for rates to remain at current levels.  The
Company has implemented an alternative investment strategy to supplement the
levered MBS strategy in an effort to continue to maximize our net interest
income until market conditions improve. Nonetheless, even with any potential for
an expanded NIM and the alternative investment strategy, 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
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:





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 management’s
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
September 30, 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)





September
      30, 2008
            
            
            December
      31, 2007Balance
      Sheet Carrying value of retained interests – fair value
            
            $
            14,384
            
            
            $
            69,301Weighted
      average life (in years)
            
            
            3.99
            
            
            
            4.09Prepayment
      assumption (annual rate)
            
            
            19.93
            %
            
            
            26.37
            %Impact
      on fair value of 10% adverse change
            
            $
            (1,388
            )
            
            $
            (6,908
            )Impact
      on fair value of 20% adverse change
            
            $
            (2,042
            )
            
            $
            (12,577
            )Expected
      Credit losses (annual rate)
            
            
            3.40
            %
            
            
            1.22
            %Impact
      on fair value of 10% adverse change
            
            $
            (2,577
            )
            
            $
            (6,409
            )Impact
      on fair value of 20% adverse change
            
            $
            (4,200
            )
            
            $
            (13,633
            )Residual
      Cash-Flow Discount Rate
            
            
            27.50
            %
            
            
            20.00
            %Impact
      on fair value of 10% adverse change
            
            $
            (1,396
            )
            
            $
            (4,138
            )Impact
      on fair value of 20% adverse change
            
            $
            (2,600
            )
            
            $
            (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
            
            $
            (4,876
            )
            
            $
            (14,906
            )Impact
      on fair value of 20% adverse change
            
            $
            (7,294
            )
            
            $
            (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 September 30, 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.





All
securities in the MBS portfolio as of September 30, 2008 are classified as held
for trading securities. All securities are either MBS pass through securities,
interest only securities or inverse interest only securities. Income on MBS pass
through securities classified as held for trading is based on the stated
interest rate of the security. Premium or discount present at the date of
purchase is not amortized. For inverse interest only and interest only
securities classified as held for trading, the income is accrued based on the
carrying value and the effective yield. As cash is received it is first applied
to accrued interest and then to reduce the carrying value. At each reporting
date, the effective yield is adjusted prospectively from the reporting period
based on the new estimate of prepayments. The new effective yield is calculated
based on the carrying value at the end of the previous reporting period, the new
prepayment estimates and the contractual terms 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.





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 $14.4 million of retained
interests from securitizations as of September 30, 2008.





The cash
flows associated with OITRS’s securitization activities over the nine and three
months ended September 30, 2008, were as follows:





(in
thousands)





Nine
      Months Ended September 30, 2008
            
            
            Three
      Months Ended September 30, 2008Servicing
      fees received
            
            $
            1,055
            
            
            $
            210Servicing
      advances and repayments
            
            
            92
            
            
            
            (694
            )Cash
      flows received on retained interests
            
            
            11,831
            
            
            
            1,160





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 damages
and other relief is sought. The resolution of such lawsuits and claims is
inherently unpredictable.  See Notes 8 and 11(g) to the Company’s
accompanying consolidated financial statements for a description of certain of
these matters.





ITEM
1A.  RISK FACTORS.





During
the period covered by this report, and except as described below, there were no
material changes to 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.





As stated
in the accompanying consolidated financial statements, the Company currently has
negative consolidated net worth.  The lack of positive consolidated
net worth could further hamper the Company’s ability to obtain sufficient access
to funding for the MBS portfolio.  To the extent the Company is unable
to obtain other sources of revenue, our ability to cover expenses and/or
generate earnings will be impaired. The Company may need to alter its investment
strategy if it is unable to obtain sufficient access to funding for its MBS
portfolio.




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
            Articles
      of Amendment, incorporated by reference to Exhibit 10.3 to the Company’s
      Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May
      29, 20083.7
            Amended
      and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the
      Company’s Current Report on Form 8-K, dated September 24, 2007, filed with
      the SEC on September 24, 2007†10.1
            Bimini
      Capital Management, Inc. 2003 Long Term Incentive Compensation Plan, as
      amended September 28, 2007, incorporated by reference to Exhibit 10.3 to
      the Company’s Quarterly Report on Form 10-Q for the period ended September
      30, 2007, filed with the SEC on November 8, 2007†10.2
            Bimini
      Capital Management, Inc. 2004 Performance Bonus Plan, as amended September
      28, 2007, incorporated by reference to Exhibit 10.4 to the Company’s
      Quarterly Report on Form 10-Q for the period ended September 30, 2007,
      filed with the SEC on November 8, 2007†10.3
            Form
      of Phantom Share Award Agreement incorporated by reference to Exhibit 10.5
      to the Company’s Quarterly Report on Form 10-Q for the period ended
      September 30, 2007, filed with the SEC on November 8,
  2007†10.4
            Form
      of Restricted Stock Award Agreement incorporated by reference to Exhibit
      10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended
      September 30, 2007, filed with the SEC on November 8,
  2007†10.5
            Separation
      Agreement and General Release, dated as of June 29, 2007, by and among
      Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden,
      incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K, dated June 30, 2007, filed with the SEC on July 5,
      2007†10.6
            Separation
      Agreement and General Release by and between Bimini Capital
      Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 14,
      2008, filed with the SEC on April 16, 2008†10.7
            Retention
      and Severance Agreement between Bimini Capital Management, Inc. and
      G. Hunter Haas, IV, incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
      SEC on April 18, 2008†10.8
            Retention
      and Severance Agreement between Bimini Capital Management, Inc. and
      J. Christopher Clifton, incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
      SEC on April 18, 2008†10.9
            Employment
      Agreement dated as of April 27, 2006, by and between Opteum Inc. and J.
      Christopher Clifton, incorporated by reference to Exhibit 10.9 to the
      Company’s Quarterly Report on Form 10-Q, dated August 11, 2008, filed with
      the SEC on August 11, 200810.10
            Voting
      Agreement, among certain stockholders of Bimini Mortgage Management, Inc.,
      Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas, IV,
      Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson, Buford
      H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan,
      certain of Mr. Kaplan’s affiliates and other former owners of Opteum
      Financial Services, LLC, incorporated by reference to Exhibit 99(D) to the
      Schedule 13D, dated November 3, 2005, filed with the SEC on November 14,
      200510.11
            Membership
      Interest Purchase, Option and Investor Rights Agreement among Opteum Inc.,
      Opteum Financial Services, LLC and Citigroup Global Markets Realty Corp.
      dated as of December 21, 2006, incorporated by reference to Exhibit 10.1
      to the Company’s Current Report on Form 8-K, dated December 21, 2006,
      filed with the SEC on December 21, 200610.12
            Seventh
      Amended and Restated Limited Liability Company Agreement of Orchid Island
      TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum Inc.
      and Citigroup Global Markets Realty Corp., incorporated by reference to
      Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the
      period ended June 30, 2007, filed with the SEC on August 14,
      200710.13
            Asset
      Purchase Agreement, dated May 7, 2007, by and among Opteum Financial
      Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC,
      incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K, dated May 7, 2007, filed with the SEC on May 7,
      200710.14
            First
      Amendment to Purchase Agreement, dated June 30, 2007, by and among
      Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services,
      LLC and Opteum Inc., incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the
      SEC on July 5, 200710.15
            Membership
      Interest Purchase Agreement, dated May 27, 2008, by and among Bimini
      Capital Management, Inc., Orchid Island TRS, LLC and Citigroup Global
      Markets Realty Corp., incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
      SEC on May 29, 200810.16
            Eighth
      Amended and Restated Limited Liability Company of Orchid Island TRS, LLC,
      dated as of May 27, 2008, incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
      SEC on May 29, 2008*10.17
            Amended
      and Restated Junior Subordinated Indenture, dated as of September 26,
      2005, between the Company and JPMorgan Chase Bank, National Association,
      as trustee.*10.18
            Second
      Amended and Restated Trust Agreement, dated as of September 26, 2005,
      among the Company, as depositor, JPMorgan Chase Bank, National
      Association, as property trustee, Chase Bank USA, National Association, as
      Delaware trustee and the Administrative Trustees named
      therein.*10.19
            Indenture,
      dated as of October 5, 2005, between the Company and Wilmington Trust
      Company, as debenture trustee.*10.20
            Amended
      and Restated Declaration of Trust, dated as of October 5, 2005, by and
      among Wilmington Trust Company, as Delaware trustee, Wilmington Trust
      Company, as institutional trustee, the Company, as sponsor, and Jeffrey J.
      Zimmer, Robert E. Cauley and Amber K. Luedke, as
      administrators.*31.1
            Certification
      of the Principal Executive Officer, pursuant to Rule 13a-14(a) or
      15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*31.2
            Certification
      of the Principal Financial Officer, pursuant to Rule 13a-14(a) or
      15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*32.1
            Certification
      of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*32.2
            Certification
      of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*
      Filed herewith.
              † Management
      compensatory plan or arrangement required to be filed by Item 601 of
      Regulation S-K.




























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:                      November
6,
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
            Articles
      of Amendment, incorporated by reference to Exhibit 10.3 to the Company’s
      Current Report on Form 8-K, dated May 27, 2008, filed with the SEC on May
      29, 20083.7
            Amended
      and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the
      Company’s Current Report on Form 8-K, dated September 24, 2007, filed with
      the SEC on September 24, 2007†10.1
            Bimini
      Capital Management, Inc. 2003 Long Term Incentive Compensation Plan, as
      amended September 28, 2007, incorporated by reference to Exhibit 10.3 to
      the Company’s Quarterly Report on Form 10-Q for the period ended September
      30, 2007, filed with the SEC on November 8, 2007†10.2
            Bimini
      Capital Management, Inc. 2004 Performance Bonus Plan, as amended September
      28, 2007, incorporated by reference to Exhibit 10.4 to the Company’s
      Quarterly Report on Form 10-Q for the period ended September 30, 2007,
      filed with the SEC on November 8, 2007†10.3
            Form
      of Phantom Share Award Agreement incorporated by reference to Exhibit 10.5
      to the Company’s Quarterly Report on Form 10-Q for the period ended
      September 30, 2007, filed with the SEC on November 8,
  2007†10.4
            Form
      of Restricted Stock Award Agreement incorporated by reference to Exhibit
      10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended
      September 30, 2007, filed with the SEC on November 8,
  2007†10.5
            Separation
      Agreement and General Release, dated as of June 29, 2007, by and among
      Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden,
      incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K, dated June 30, 2007, filed with the SEC on July 5,
      2007†10.6
            Separation
      Agreement and General Release by and between Bimini Capital
      Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 14,
      2008, filed with the SEC on April 16, 2008†10.7
            Retention
      and Severance Agreement between Bimini Capital Management, Inc. and
      G. Hunter Haas, IV, incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
      SEC on April 18, 2008†10.8
            Retention
      and Severance Agreement between Bimini Capital Management, Inc. and
      J. Christopher Clifton, incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K, dated April 18, 2008, filed with the
      SEC on April 18, 2008†10.9
            Employment
      Agreement dated as of April 27, 2006, by and between Opteum Inc. and J.
      Christopher Clifton, incorporated by reference to Exhibit 10.9 to the
      Company’s Quarterly Report on Form 10-Q, dated August 11, 2008, filed with
      the SEC on August 11, 200810.10
            Voting
      Agreement, among certain stockholders of Bimini Mortgage Management, Inc.,
      Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas, IV,
      Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson, Buford
      H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan,
      certain of Mr. Kaplan’s affiliates and other former owners of Opteum
      Financial Services, LLC, incorporated by reference to Exhibit 99(D) to the
      Schedule 13D, dated November 3, 2005, filed with the SEC on November 14,
      200510.11
            Membership
      Interest Purchase, Option and Investor Rights Agreement among Opteum Inc.,
      Opteum Financial Services, LLC and Citigroup Global Markets Realty Corp.
      dated as of December 21, 2006, incorporated by reference to Exhibit 10.1
      to the Company’s Current Report on Form 8-K, dated December 21, 2006,
      filed with the SEC on December 21, 200610.12
            Seventh
      Amended and Restated Limited Liability Company Agreement of Orchid Island
      TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum Inc.
      and Citigroup Global Markets Realty Corp., incorporated by reference to
      Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the
      period ended June 30, 2007, filed with the SEC on August 14,
      200710.13
            Asset
      Purchase Agreement, dated May 7, 2007, by and among Opteum Financial
      Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC,
      incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K, dated May 7, 2007, filed with the SEC on May 7,
      200710.14
            First
      Amendment to Purchase Agreement, dated June 30, 2007, by and among
      Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services,
      LLC and Opteum Inc., incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the
      SEC on July 5, 200710.15
            Membership
      Interest Purchase Agreement, dated May 27, 2008, by and among Bimini
      Capital Management, Inc., Orchid Island TRS, LLC and Citigroup Global
      Markets Realty Corp., incorporated by reference to Exhibit 10.1 to the
      Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
      SEC on May 29, 200810.16
            Eighth
      Amended and Restated Limited Liability Company of Orchid Island TRS, LLC,
      dated as of May 27, 2008, incorporated by reference to Exhibit 10.2 to the
      Company’s Current Report on Form 8-K, dated May 27, 2008, filed with the
      SEC on May 29, 2008*10.17
            Amended
      and Restated Junior Subordinated Indenture, dated as of September 26,
      2005, between the Company and JPMorgan Chase Bank, National Association,
      as trustee.*10.18
            Second
      Amended and Restated Trust Agreement, dated as of September 26, 2005,
      among the Company, as depositor, JPMorgan Chase Bank, National
      Association, as property trustee, Chase Bank USA, National Association, as
      Delaware trustee and the Administrative Trustees named
      therein.*10.19
            Indenture,
      dated as of October 5, 2005, between the Company and Wilmington Trust
      Company, as debenture trustee.*10.20
            Amended
      and Restated Declaration of Trust, dated as of October 5, 2005, by and
      among Wilmington Trust Company, as Delaware trustee, Wilmington Trust
      Company, as institutional trustee, the Company, as sponsor, and Jeffrey J.
      Zimmer, Robert E. Cauley and Amber K. Luedke, as
      administrators.*31.1
            Certification
      of the Principal Executive Officer, pursuant to Rule 13a-14(a) or
      15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*31.2
            Certification
      of the Principal Financial Officer, pursuant to Rule 13a-14(a) or
      15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*32.1
            Certification
      of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*32.2
            Certification
      of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*
      Filed herewith.
              † Management
      compensatory plan or arrangement required to be filed by Item 601 of
      Regulation S-K.