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 June 30, 2009





 ̈           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 has submitted electronically and posted to
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES  ̈     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  ̈                                           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
August 10, 2009, the number of shares outstanding of the registrant’s Class A
Common Stock, $0.001 par value, was 27,314,203; 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 June 30, 2009 (unaudited) and December 31,
      2008
            3Consolidated
      Statements of Operations (unaudited) for the six and three months ended
      June 30, 2009  and 2008
            4Consolidated
      Statement of Stockholders’ Equity (Deficit) (unaudited) for the six months
      ended June 30, 2009
            5Consolidated
      Statements of Cash Flows (unaudited) for the six months ended June 30,
      2009  and 2008
            6Notes
      to Consolidated Financial Statements (unaudited)
            8ITEM
      2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION
              AND
      RESULTS OF OPERATIONS.
            25ITEM
      3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK.
            36ITEM
      4T.   CONTROLS AND PROCEDURES.
            36PART
      II. OTHER INFORMATIONITEM
      1.     LEGAL PROCEEDINGS.
            36ITEM
      1A.  RISK FACTORS.
            37ITEM
      4.     SUBMISSION OF MATTERS TO A VOTE OF
      SECURITY HOLDERS.
            38ITEM
      6.     EXHIBITS.
            39











2


PART
I. FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS.
 BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      BALANCE SHEETS(Unaudited)June
      30, 2009
              
              
              December
      31, 2008ASSETS:Mortgage-backed
      securities, trading:Pledged
      to counterparties, at fair value
              
              $
              75,158,923
              
              
              $
              158,444,253Unpledged,
      at fair value
              
              
              19,334,510
              
              
              
              13,664,242Total
      mortgage-backed securities, trading
              
              
              94,493,433
              
              
              
              172,108,495Cash
      and cash equivalents
              
              
              4,820,584
              
              
              
              7,668,581Principal
      payments receivable
              
              
              7,692
              
              
              
              187,779Accrued
      interest receivable
              
              
              1,161,604
              
              
              
              887,536Property
      and equipment, net
              
              
              4,021,057
              
              
              
              4,062,116Prepaids
      and other assets
              
              
              2,174,821
              
              
              
              4,590,601Assets
      held for sale
              
              
              25,905,470
              
              
              
              43,287,020Total
      Assets
              
              $
              132,584,661
              
              
              $
              232,792,128LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)LIABILITIES:Repurchase
      agreements
              
              $
              69,887,365
              
              
              $
              148,695,082Junior
      subordinated notes due to Bimini Capital Trust I & II
              
              
              51,547,000
              
              
              
              103,097,000Accrued
      interest payable
              
              
              180,531
              
              
              
              983,069Accounts
      payable, accrued expenses and other
              
              
              199,164
              
              
              
              480,655Liabilities
      related to assets held for sale
              
              
              7,520,306
              
              
              
              10,431,330Total
      Liabilities
              
              
              129,334,366
              
              
              
              263,687,136COMMITMENTS
      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 June 30 ,
      2009 and December 31, 2008
              
              
              -
              
              
              
              -Class
      A Common Stock, $0.001 par value; 98,000,000 shares designated:
      27,314,203  shares issued and outstanding as of June 30, 2009
      and 26,207,023 shares issued and outstanding as of December 31,
      2008
              
              
              27,314
              
              
              
              26,207Class
      B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
      shares issued and outstanding as of June 30 , 2009 and December 31,
      2008
              
              
              319
              
              
              
              319Class
      C Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
      shares issued and outstanding as of June 30, 2009 and December 31,
      2008
              
              
              319
              
              
              
              319Additional
      paid-in capital
              
              
              339,252,278
              
              
              
              339,124,251Accumulated
      deficit
              
              
              (336,029,935
              )
              
              
              (370,046,104
              )Total
      Stockholders’ Equity (Deficit)
              
              
              3,250,295
              
              
              
              (30,895,008
              )Total
      Liabilities and Stockholders’ Equity (Deficit)
              
              $
              132,584,661
              
              
              $
              232,792,128See
      Notes to Consolidated Financial Statements




3








BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)Six
      Months Ended June 30,
            
            
            Three
      Months Ended June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Interest
      income, net of amortization of premium and discount
            
            $
            6,357,667
            
            
            $
            16,897,697
            
            
            $
            2,683,264
            
            
            $
            6,786,804Interest
      expense
            
            
            (359,427
            )
            
            
            (13,085,907
            )
            
            
            (105,475
            )
            
            
            (5,458,446
            )Net
      interest income, before interest on junior subordinated
    notes
            
            
            5,998,240
            
            
            
            3,811,790
            
            
            
            2,577,789
            
            
            
            1,328,358Interest
      expense on junior subordinated notes
            
            
            (3,388,455
            )
            
            
            (4,180,863
            )
            
            
            (1,298,024
            )
            
            
            (2,090,431
            )Net
      interest income (expense)
            
            
            2,609,785
            
            
            
            (369,073
            )
            
            
            1,279,765
            
            
            
            (762,073
            )Fair
      value adjustment - held for trading securities
            
            
            1,717,597
            
            
            
            (134,831
            )
            
            
            1,160,488
            
            
            
            (737,912
            )Gain
      on sale of mortgage-backed securities, net
            
            
            1,509,658
            
            
            
            708,319
            
            
            
            373,159
            
            
            
            385,748Revenues
      (expenses), net
            
            
            5,837,040
            
            
            
            204,415
            
            
            
            2,813,412
            
            
            
            (1,114,237
            )Direct
      REIT operating expenses
            
            
            302,770
            
            
            
            373,613
            
            
            
            149,466
            
            
            
            188,324General
      and administrative expenses:Compensation
      and related benefits
            
            
            611,924
            
            
            
            1,673,344
            
            
            
            291,677
            
            
            
            827,966Directors'
      fees and liability insurance
            
            
            228,543
            
            
            
            368,742
            
            
            
            116,950
            
            
            
            194,696Audit,
      legal and other professional fees
            
            
            559,468
            
            
            
            455,469
            
            
            
            165,206
            
            
            
            61,382Other
      administrative
            
            
            256,200
            
            
            
            758,726
            
            
            
            133,816
            
            
            
            268,098Total
      general and administrative expenses
            
            
            1,656,135
            
            
            
            3,256,281
            
            
            
            707,649
            
            
            
            1,352,142Total
      expenses
            
            
            1,958,905
            
            
            
            3,629,894
            
            
            
            857,115
            
            
            
            1,540,466Gain
      on debt extinguishment
            
            
            32,446,642
            
            
            
            -
            
            
            
            32,446,642
            
            
            
            -Income
      (loss) from continuing operations
            
            
            36,324,777
            
            
            
            (3,425,479
            )
            
            
            34,402,939
            
            
            
            (2,654,703
            )Income
      (loss) from discontinued operations, net of tax
            
            
            (2,308,608
            )
            
            
            (36,238,946
            )
            
            
            (2,544,155
            )
            
            
            (31,905,445
            )Net
      income (loss)
            
            $
            34,016,169
            
            
            $
            (39,664,425
            )
            
            $
            31,858,784
            
            
            $
            (34,560,148
            )Basic
      And Diluted Net Income (Loss) Per Share Of:CLASS
      A COMMON STOCKContinuing
      operations
            
            $
            1.35
            
            
            $
            (0.14
            )
            
            $
            1.25
            
            
            $
            (0.10
            )Discontinued
      operations
            
            
            (0.09
            )
            
            
            (1.43
            )
            
            
            (0.09
            )
            
            
            (1.26
            )Total
      basic net income (loss) per Class A share
            
            $
            1.26
            
            
            $
            (1.57
            )
            
            $
            1.16
            
            
            $
            (1.36
            )Total
      diluted net income (loss) per Class A share
            
            $
            1.25
            
            
            $
            (1.57
            )
            
            $
            1.16
            
            
            $
            (1.36
            )CLASS
      B COMMON STOCKContinuing
      operations
            
            $
            1.31
            
            
            $
            (0.13
            )
            
            $
            1.24
            
            
            $
            (0.10
            )Discontinued
      operations
            
            
            (0.08
            )
            
            
            (1.41
            )
            
            
            (0.09
            )
            
            
            (1.25
            )Total
      basic and diluted net income (loss) per Class B share
            
            $
            1.23
            
            
            $
            (1.54
            )
            
            $
            1.15
            
            
            $
            (1.35
            )





Weighted
      Average Shares OutstandingCLASS
      A COMMON STOCKBasic
            
            
            26,750,819
            
            
            
            25,023,908
            
            
            
            27,165,402
            
            
            
            25,118,066Diluted
            
            
            26,817,641
            
            
            
            25,023,908
            
            
            
            27,222,137
            
            
            
            25,118,066CLASS
      B COMMON STOCK, basic and diluted
            
            
            319,388
            
            
            
            319,388
            
            
            
            319,388
            
            
            
            319,388See
      Notes to Consolidated Financial Statements


4








BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)(Unaudited)Six
      Months Ended June 30, 2009Common
      Stock,
              Amounts
      at par value
            
            Additional
              Paid-in
              Capital
            
            Accumulated
              DeficitClass
      A
            
            Class
      B
            
            Class
      C
            
            TotalBalances,
      December 31, 2008
            
            $
            26,207
            
            
            $
            319
            
            
            $
            319
            
            
            $
            339,124,251
            
            
            $
            (370,046,104
            )
            
            $
            (30,895,008
            )Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            34,016,169
            
            
            
            34,016,169Issuance
      of Class A common shares for board compensation and equity plan share
      exercises, net
            
            
            1,107
            
            
            
            -
            
            
            
            -
            
            
            
            68,331
            
            
            
            -
            
            
            
            69,438Amortization
      of equity plan compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            59,696
            
            
            
            -
            
            
            
            59,696Balances,
      June 30, 2009
            
            $
            27,314
            
            
            $
            319
            
            
            $
            319
            
            
            $
            339,252,278
            
            
            $
            (336,029,935
            )
            
            $
            3,250,295See
      Notes to Consolidated Financial Statements








5





BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)Six
      Months Ended June 30,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            34,016,169
            
            
            $
            (39,664,425
            )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Net
      loss from discontinued operations
            
            
            2,308,608
            
            
            
            36,238,946Stock
      compensation
            
            
            129,133
            
            
            
            583,118Depreciation
      and amortization
            
            
            301,136
            
            
            
            396,550Gain
      on sale of mortgage-backed securities, net
            
            
            (1,509,658
            )
            
            
            (708,319
            )Fair
      value adjustment - held for trading securities
            
            
            (1,717,597
            )
            
            
            134,831Gain
      on extinguishment of long-term debt
            
            
            (32,446,642
            )
            
            
            -Changes
      in operating assets and liabilities:(Increase)
      decrease in accrued interest receivable
            
            
            (274,068
            )
            
            
            1,359,715Decrease
      in prepaids and other assets
            
            
            258,089
            
            
            
            88,778Increase
      (decrease) in accrued interest payable
            
            
            41,284
            
            
            
            (1,410,488
            )(Decrease)
      increase in accounts payable, accrued expenses and other
            
            
            (281,491
            )
            
            
            986,558NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
            
            
            824,963
            
            
            
            (1,994,736
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:From
      mortgage-backed securities investments:Purchases
            
            
            (73,304,344
            )
            
            
            (87,630,648
            )Sales
            
            
            141,950,058
            
            
            
            241,307,931Principal
      repayments
            
            
            12,376,690
            
            
            
            63,936,504Purchases
      of property and equipment, and other
            
            
            (9,205
            )
            
            
            (12,152
            )NET
      CASH PROVIDED BY INVESTING ACTIVITIES
            
            
            81,013,199
            
            
            
            217,601,635CASH
      FLOWS FROM FINANCING ACTIVITIES:Decrease
      in restricted cash
            
            
            -
            
            
            
            8,800,000Proceeds
      from repurchase agreements
            
            
            1,246,853,449
            
            
            
            2,655,653,975Principal
      payments on repurchase agreements
            
            
            (1,325,661,166
            )
            
            
            (2,881,384,992
            )Stock
      issuance costs, and other adjustments
            
            
            -
            
            
            
            (943
            )Cash
      paid to extinguish long-term debt
            
            
            (18,040,361
            )
            
            
            -NET
      CASH USED IN FINANCING ACTIVITIES
            
            
            (96,848,078
            )
            
            
            (216,931,960
            )CASH
      FLOWS FROM DISCONTINUED OPERATIONS:Net
      cash provided by operating activities
            
            
            12,161,919
            
            
            
            9,378,045Net
      cash used in financing activities
            
            
            -
            
            
            
            (18,000,000
            )NET
      CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
            
            
            12,161,919
            
            
            
            (8,621,955
            )(2,847,998NET
      DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (2,847,997
            )
            
            
            (9,947,016
            )CASH
      AND CASH EQUIVALENTS, beginning of the period
            
            
            7,668,581
            
            
            
            27,284,760CASH
      AND CASH EQUIVALENTS, end of the period
            
            $
            4,820,584
            
            
            $
            17,337,744





6





BIMINI
      CAPITAL MANAGEMENT, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)(Unaudited)Six
      Months Ended June 30,2009
            
            
            2008SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
            
            $
            3,455,765
            
            
            $
            19,938,708SUPPLEMENTAL
      SCHEDULE OF NONCASH INVESTING ACTIVITIES:Securities
      transferred from available-for-sale to trading (at fair
    value)
            
            $
            -
            
            
            $
            1,714,096Assets
      and liabilities retired through debt extinguishment
      transaction:Investment
      in Bimini Capital Trust I
            
            $
            1,550,000
            
            
            $
            -Unamortized
      debt issuance costs
            
            
            356,820
            
            
            
            -Junior
      subordinated notes due to Bimini Capital Trust I
            
            
            34,050,000
            
            
            
            -Accrued
      interest payable due to Bimini Capital Trust I
            
            
            843,822
            
            
            
            -See
      Notes to Consolidated Financial Statements





7





BIMINI
CAPITAL MANAGEMENT, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


June
30, 2009








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
(“OFS”). Upon closing of the transaction, OFS became a wholly-owned taxable real
estate investment trust (“REIT”) subsidiary of Bimini Capital.  This
entity, which was previously referred to as “OFS,” was renamed Orchid Island
TRS, LLC (“OITRS”) 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’
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 operating assets of OITRS were
sold.   Therefore,all OITRS’s assets are considered as
held for sale, and OITRS is reported as a discontinued operation for all periods
presented.  Bimini Capital now operates in a single business
segment.
 
 Bimini
Capital has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the “Code”).  As a REIT, Bimini Capital is generally
not subject to federal income tax on its REIT taxable income provided that it
distributes to its stockholders at least 90% of its REIT taxable income on an
annual basis.  OITRS has elected to be treated as a taxable REIT
subsidiary and, as such, is subject to federal, state and local income
taxation.  In addition, the ability of OITRS to deduct interest paid
or accrued to Bimini Capital for federal, state and local tax purposes is
subject to certain limitations.
 
 As used
in this document, discussions related to “Bimini Capital,” the parent company,
the registrant, and to REIT qualifying activities or the general management of
Bimini Capital’s portfolio of mortgage-backed securities (“MBS”) refer to
“Bimini Capital Management, Inc.”  Further, discussions related to
Bimini Capital’s taxable REIT subsidiary or non-REIT eligible assets refer to
OITRS and its consolidated subsidiaries. Discussions relating to the “Company”
refer to the consolidated entity (the combination of Bimini Capital and OITRS).
The mortgage origination business, formerly conducted by OITRS is now designated
as discontinued operations.





Liquidity





Throughout
most of 2008 and to date during 2009 the financing markets utilized by the
Company to fund its MBS portfolio, as well as the market for MBS securities,
were severely distressed. Moreover, the turmoil that originated in the MBS
market spread into many other financial markets and the global economy as a
whole. The disruptions in the market prompted unprecedented intervention by the
new administration of President Obama, the world’s central banks, the Congress
of the United States, the US Treasury and the Federal Reserve in an effort to
restore stability. As a result of these efforts, market conditions have
stabilized although credit conditions are still tight and it is unknown when and
to what extent market conditions will fully recover. These conditions have and
will continue to impact the Company.





8


As of
June 30, 2009 the Company had approximately $69.9 million of outstanding
obligations under repurchase agreements with maturities through July 10, 2009.
Subsequent to period-end and through August 10, 2009, the Company has been able
to maintain its repurchase facilities with comparable terms to those that
existed at June 30, 2009 with maturities through August 27,
2009.  Should the Company be unable to continue extending the maturity
of the remaining repurchase obligations, it may be forced to sell 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 with repurchase agreements
but instead purchased directly.  However, if cash resources are, at
any time, insufficient to satisfy the Company’s liquidity requirements, such as
when cash flows 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.





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 accounting
principles generally accepted in the United States (“GAAP”) for annual financial
statements. The operating results for the interim period ended June 30, 2009 are
not necessarily indicative of results that can be expected for the year ending
December 31, 2009. The consolidated balance sheet as of December 31, 2008 was
derived from audited financial statements included in the Company’s 2008 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, 2008.





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, valuation of securities
held for sale and the valuation of retained interests.





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.




On March
25, 2009 the Company entered into an agreement with the collateral manager of
certain collateralized debt obligations issued in 2005 and collateralized by,
among other securities, the trust preferred capital securities sold by Bimini
Capital Trust I (BCTI).  Pursuant to the terms of the agreement,
effective as of April 21, 2009, the obligations under the trust preferred
capital securities issued by BCTI were discharged and the securities redeemed
(see Note 12).  Concurrently, Bimini Capital redeemed its junior
subordinated notes issued to BCTI.  At June 30, 2009, the trust
preferred securities of Bimini Capital Trust II (BCTII) remain
outstanding.
  9


Condensed
Statement of Comprehensive Income (Loss)




A
condensed statement of comprehensive income (loss) has not been included, per
SFAS No. 130, “Reporting Comprehensive Income,” as the Company has no items of
other comprehensive income (loss).  Comprehensive income (loss) is the same
as net income (loss) for all periods presented.




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. The remaining assets and liabilities are considered contingent
and remain pursuant to the terms of the disposal of the operations with the
exception of mortgage loans held for sale, security held for sale and retained
interests for which the disposals of such has been delayed as a result of the
current economic climate, however are still being actively marketed by the
Company.  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 June 30, 2009 and December 31,
2008.





The
Company maintains cash balances at several banks.  Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$250,000.  At June 30, 2009, uninsured deposits were approximately
$4.4 million.





Mortgage-Backed
Securities





The
Company invests primarily in mortgage pass-through certificates, collateralized
mortgage obligations, and interest only securities or inverse interest only
securities representing interest in or obligations backed by pools of mortgage
loans (collectively, “Mortgage-Backed Securities” or “MBS”).  MBS
transactions are recorded on the trade date.  Realized gains and
losses on the sale of MBS are determined based on the specific identified cost
of the security.





The fair
value 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).  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 classifies its investments in
MBS as either trading, available-for-sale or held-to-maturity. The Company
classified all of its securities acquired prior to June 30, 2007 as
available-for-sale.  All securities acquired after June 30, 2007 are
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. All MBS securities held by Bimini Capital are reflected in the
Company's financial statements at their estimated fair value at June 30,
2009.




The
Company’s investments in mortgage-related derivatives are carried at fair value
on the balance sheet and are included with mortgage-backed securities. Income on
MBS pass through securities classified as held for trading is based on the
stated interest rate of the security. Premiums or discounts present at the date
of purchase are not amortized.  For interest only securities
classified as held for trading, the income is accrued based on the carrying
value and the effective yield.  Cash received 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 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.  Changes in fair value during the period
are recorded in earnings and reported as a fair value adjustment-held for
trading securities in the accompanying consolidated statements of
operations.





10




Financial
Instruments





SFAS No.
107, Disclosure About Fair
Value of Financial Instruments, requires disclosure of the fair value of
financial instruments for which it is practicable to estimate that value.
Mortgage backed securities are accounted for at fair value in the consolidated
balance sheet. The methods and assumptions used to estimate fair value for these
instruments are presented in Note 10 of the financial statements.





The
estimated fair value of cash and cash equivalents, restricted cash, principal
payments receivable, accrued interest receivable, repurchase agreements,
unsettled security transactions, accrued interest payable and accounts payable
and other liabilities generally approximates their carrying value as of June 30,
2009 due to the short term nature of these financial instruments.





It is
impracticable to estimate the fair value of the Company’s junior subordinated
notes.  Currently, there is a limited market for these types of
instruments and it is unclear what interest rates would be available to the
Company.  Information regarding carrying amounts, effective interest
rates and maturity dates for these instruments is presented in the Note 5 to the
financial statements.





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 June 30, 2009 and December 31, 2008, is
presented net of accumulated depreciation of$560,000 and $510,000,
respectively. Depreciation expense was $50,000 and $25,000 for the six and three
months ended June 30, 2009, respectively, and $77,000 and $44,000 for the six
and three months ended June 30, 2008, respectively.





Repurchase
Agreements





The
Company finances the acquisition of the majority of its MBS through the use of
repurchase agreements. Repurchase agreements are treated as collateralized
financing transactions and are carried at their contractual amounts, including
accrued interest, as specified in the respective agreements. Although structured
as a sale and repurchase obligation, a repurchase agreement operates as a
financing under which securities are pledged as collateral to secure a
short-term loan equal in value to a specified percentage (generally between 93
and 95 percent) of the market value of the pledged collateral. While used as
collateral, the borrower retains beneficial ownership of the pledged collateral,
including the right to distributions. At the maturity of a repurchase agreement,
the borrower is required to repay the loan and concurrently receive the pledged
collateral from the lender or, with the consent of the lender, renew such
agreement at the then prevailing financing rate.





Share-Based
Compensation





The
Company follows the provisions of SFAS No. 123(R),Share-Based Payment to
account for stock and stock-based awards. 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. Share-based
compensation was approximately $129,000 and $88,000 for the six and three months
ended June 30, 2009, respectively, and $583,000 and $167,000 for the six and
three months ended June 30, 2008, respectively.





11


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.





Outstanding
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, as and when
authorized and declared by the Board of Directors. Following the provisions of
EITF 03-6, shares of the Class B Common Stock are included in the computation of
basic EPS using the two-class method and, consequently, are presented separately
from Class A Common Stock.





The
shares of Class C Common Stock are not included in the basic EPS
computation as these shares do not have participation rights. The outstanding
shares of Class C Common Stock, totaling 319,388 shares, are not included
in the computation of diluted EPS for the Class A Common Stock as the conditions
for conversion into shares of Class A Common Stock were not
met.





Income
Taxes





Bimini
Capital has elected to be taxed as a REIT under the Code. As further described
in Note 11, Discontinued Operations, OITRS is a taxpaying entity for income tax
purposes and is taxed separately from Bimini Capital. Bimini Capital will
generally not be subject to federal income tax on its REIT taxable income to the
extent that Bimini Capital distributes its REIT taxable income to its
stockholders and satisfies the ongoing REIT requirements, including meeting
certain asset, income and stock ownership tests. A REIT must generally
distribute at least 90% of its REIT taxable income to its stockholders, of which
85% generally must be distributed within the taxable year, in order to avoid the
imposition of an excise tax. The remaining balance may be distributed up to the
end of the following taxable year, provided the REIT elects to treat such amount
as a prior year distribution and meets certain other requirements. In December
2008, the Internal Revenue Service (IRS) issued Revenue Procedure 2008-68,
providing that the IRS will treat a REIT’s distribution of common stock that is
declared with respect to a taxable year ending on or before December 31, 2009 as
a qualifying dividend for purposes of the 90 percent distribution requirement so
long as it meets certain conditions, including a cash limitation requirement
that is not less than 10% of the entire distribution.





Reclassifications





Certain
prior year amounts have been reclassified to conform to current year
presentations.





Recent
Accounting Pronouncements





In June
2009, the FASB issued Statement of Financial Accounting No. 168 (“FAS 168”),
The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162. FAS 168 establishes the FASB
Accounting Standards Codification as the source of authoritative accounting
principles recognized by the FASB to be applied to nongovernmental entities in
the preparation of financial statements in conformity with US GAAP. FAS 168 will
be effective for financial statements issued for interim and annual periods
ending after September 15, 2009, for most entities. On the effective date, all
non-SEC accounting and reporting standards will be superseded. The adoption of
FAS 168 is not expected to have a material impact on the Company’s financial
statements.





12





In June
2009, the FASB issued Statement of Financial Accounting No. 167 (“FAS 167),
Amendments to FASB
Interpretation No. 46(R), Consolidation of Variable Interest
Entities.  FAS 167 changes how a company determines when an
entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an
entity’s purpose and design and a company’s ability to direct the activities of
the entity that most significantly impact the entity’s economic performance. FAS
167 will be effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period, and for interim and annual reports
thereafter. Earlier application is prohibited. The Company will adopt FAS 167 on
January 1, 2010. The Company does not expect the implementation to have a
material impact on its consolidated financial statements.





In June
2009, the FASB issued Statement of Financial Accounting No. 166 (“FAS 166”),
Accounting for Transfers of
Financial Assets.  FAS 166 is a revision of FASB Statement of
Financial Accounting No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, and
will require more information about transfers of financial assets, including
securitization transactions, and where companies have continuing exposure to the
risks related to transferred financial assets. FAS 166 also eliminates the
concept of a “qualifying special-purpose entity,” changes the requirements for
derecognizing financial assets and requires additional disclosures. FAS 166 will
be effective as of the beginning of each reporting entity’s first annual
reporting period that begins after November 15, 2009, for interim periods within
that first annual reporting period, and for interim and annual reports
thereafter. Earlier application is prohibited. The recognition and measurement
provisions of FAS 166 shall be applied to transfers that occur on or after the
effective date. The Company will adopt FAS 166 on January 1, 2010. The Company
does not expect the implementation to have a material impact on its consolidated
financial statements.





In April
2009, the FASB issued Staff Position (FSP) FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. This FSP
provides additional guidance on determining fair value when the volume and level
of activity for the asset or liability have significantly decreased when
compared with normal market activity for the asset or liability (or similar
assets or liabilities).  The FSP gives specific factors to evaluate if
there has been a decrease in normal market activity and if so, provides a
methodology to analyze transactions or quoted prices and make necessary
adjustments to fair value in accordance with Statement 157. The objective is to
determine the point within a range of fair value estimates that is most
representative of fair value under current market conditions.  FSP FAS
157-4 is effective for interim and annual reporting periods ending after June
15, 2009 with early adoption permitted for periods ending after March 15,
2009.  The impact of adopting FSP FAS 157-4 did not have a material
effect.





Additionally,
in conjunction with FSP FAS 157-4, the FASB issued FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation
of Other Than Temporary Impairments. The objective of the new guidance is
to make impairment guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments (OTTI) on debt and equity
securities in financial statements.  The guidance revises the OTTI
evaluation methodology. Previously the analytical focus was on whether the
company had the "intent and ability to retain its investment in the debt
security for a period of time sufficient to allow for any anticipated recovery
in fair value". Now the focus is on whether (1) the Company has the intent to
sell the Investment Securities, (2) it is more likely than not that it will be
required to sell the Investment Securities before recovery, or (3) it does not
expect to recover the entire amortized cost basis of the Investment Securities.
Further, the security is analyzed for credit loss, (the difference between the
present value of cash flows expected to be collected and the amortized cost
basis). The credit loss, if any, will then be recognized in the statement of
earnings, while the balance of impairment related to other factors will be
recognized in OCI. FAS 115-2 and FAS 124-2 are effective for all interim and
annual periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The impact of adopting FSP FAS 115-2 and
FAS 124-2 did not have a material effect.





In April,
2009, the FASB also issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. The guidance requires disclosures about fair
value of financial instruments for interim reporting periods as well as in
annual financial statements.  The guidance is effective for interim
reporting periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The impact of adopting FSP FAS 107-1 and
APB 28-1 did not have a material effect.


13







NOTE
2.   MORTGAGE-BACKED SECURITIES





The
following are the carrying values of Bimini Capital’s MBS portfolio as of June
30, 2009 and December 31, 2008:





(in
thousands)


June
      30, 2009
            
            
            December
      31, 2008Pass-Through
      Certificates:Hybrid
      Arms and Balloons
            
            $
            34,118
            
            
            $
            63,068Adjustable
      Rate Mortgages
            
            
            41,041
            
            
            
            70,632Fixed
      Rate Mortgages
            
            
            -
            
            
            
            24,884Total
      Pass-Through Certificates
            
            
            75,159
            
            
            
            158,584Mortgage
      Derivative Certificates:MBS
      Derivatives
            
            
            19,334
            
            
            
            13,524Totals
            
            $
            94,493
            
            
            $
            172,108





As of
June 30, 2009, securities with a carrying value of approximately $3.5 million
had contractual maturities less than 36 months.  The remainder 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




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 periods ended June 30, 2009 and 2008. For the six and three months
ended June 30, 2009, a weighted average of 82,654 and 159,152 of these incentive
plan shares are included in the basic and diluted per share computations, as
they have dividend participation rights. These stock incentive plan shares have
no contractual obligation to share in losses. Since there is no such obligation,
these incentive plan shares are not included, pursuant to EITF 03-6, in the
three and six months ended June 30, 2008 basic EPS computations, even though
they are participating securities.





The
Company has also issued stock incentive plan shares that are not dividend
eligible.  For the computation of diluted EPS for the six and three
months ended June 30, 2009, a weighted average of 67,000 and 57,000 of these
incentive plan shares have been included.  These shares were excluded
from the calculation for the six and three months ended June 30, 2008, as their
inclusion would be anti-dilutive.





14





The table
below reconciles the numerators and denominators of the basic and diluted
EPS.





(in thousands, except per share data)


(Unaudited)
            
            
            (Unaudited)Six
      Months Ended June 30,
            
            
            Three
      Months Ended June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Basic
      and diluted EPS per Class A common share:Numerator:
      net income (loss) allocated to the Class A common shares
            
            $
            33,623
            
            
            $
            (39,171
            )
            
            $
            31,491
            
            
            $
            (34,130
            )Denominator:
      basic and diluted:Class
      A common shares outstanding at the balance sheet date
            
            
            27,314
            
            
            
            25,350
            
            
            
            27,314
            
            
            
            25,350Effect
      of weighting
            
            
            (563
            )
            
            
            (326
            )
            
            
            (149
            )
            
            
            (232
            )Weighted
      average shares-basic
            
            
            26,751
            
            
            
            25,024
            
            
            
            27,165
            
            
            
            25,118Effect
      of dilutive stock incentive plan shares
            
            
            67
            
            
            
            -
            
            
            
            57
            
            
            
            -Weighted
      average shares-diluted
            
            
            26,818
            
            
            
            25,024
            
            
            
            27,222
            
            
            
            25,118Basic
      EPS per Class A common share
            
            $
            1.26
            
            
            $
            (1.57
            )
            
            $
            1.16
            
            
            $
            (1.36
            )Diluted
      EPS per Class A common share
            
            $
            1.25
            
            
            $
            (1.57
            )
            
            $
            1.16
            
            
            $
            (1.36
            )Basic
      and diluted EPS per Class B common share:Numerator:
      net income (loss) allocated to Class B common shares
            
            $
            393
            
            
            $
            (493
            )
            
            $
            368
            
            
            $
            (430
            )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 EPS per Class B common share
            
            $
            1.23
            
            
            $
            (1.54
            )
            
            $
            1.15
            
            
            $
            (1.35
            )








NOTE
4.   REPURCHASE AGREEMENTS





As of
June 30, 2009, Bimini Capital had outstanding repurchase obligations of
approximately $69.9 million with a net weighted average borrowing rate of 0.49%
and these agreements were collateralized by MBS with a fair value of
approximately $75.4 million.  As of December 31, 2008,
Bimini Capital had outstanding repurchase obligations of approximately $148.7
million with a net weighted average borrowing rate of 1.89%, and these
agreements were collateralized by MBS with a fair value of approximately $159.1
million.





As of
June 30, 2009 and December 31, 2008, all of Bimini Capital's repurchase
agreements had remaining maturities of 30 days or less.





The
following summarizes information regarding the Company’s amounts at risk with
individual counterparties greater than 10% of the Company’s equity as of June
30, 2009 and December 31, 2008.





(in
thousands)


Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            Weighted
      Average
              Maturity
      of
              Repurchase
              Agreements
              in
      DaysJune
      30, 2009MF
      Global , Inc.
            
            $
            5,521
            
            
            
            8December
      31, 2008MF
      Global , Inc.
            
            
            10,270
            
            
            
            11





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





15





NOTE
5.  TRUST PREFERRED SECURITIES





At June
30, 2009, 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)


June
      30, 2009
            
            
            December
      31, 2008Junior
      subordinated notes owed to Bimini Capital Trust I (BCTI)
            
            $
            -
            
            
            $
            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
had a fixed rate of interest until 2010, of 7.61% and thereafter, through
maturity in 2035, the rate would float at a spread of 3.30% over the prevailing
three-month LIBOR rate.  During the six months ended June 30, 2009, the
Company entered into an agreement pursuant to which the obligations under the
trust preferred capital securities issued by BCTI where discharged and the
securities redeemed and the junior subordinated notes issued to BCTI were
redeemed.


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. 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.  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 six and three months ended June 30, 2009, the Company issued a total of
1,009,373 and 290,623 shares of its Class A Common Stock to its independent
directors for the payment of director fees for services rendered and 97,807 and
72,391 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.





16





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 June 16, 2014. The Company recognizes
compensation expense over the vesting period. Compensation expense recognized
for phantom shares during the six months ended June 30, 2009 and 2008 totaled
approximately, $60,000 and $425,000, respectively.Phantom share awards may
or may not include dividend equivalent rights.  Dividends paid on
unsettled phantom shares are charged to retained earnings when
declared.





A summary
of phantom share activity during the six month periods ended June 30, 2009 and
2008is presented
below:





Six
      Months Ended June 30,2009
            
            
            2008Shares
            
            
            Weighted-Average
      Grant-Date Fair Value
            
            
            Shares
            
            
            Weighted-Average
      Grant-Date Fair ValueNonvested,
      at January 1
            
            
            132,369
            
            
            $
            0.58
            
            
            
            127,372
            
            
            $
            11.36Granted
            
            
            1,000,000
            
            
            
            0.15
            
            
            
            250,000
            
            
            
            0.26Vested
            
            
            (81,974
            )
            
            
            0.74
            
            
            
            (80,125
            )
            
            
            6.33Forfeited
            
            
            (50,395
            )
            
            
            0.32
            
            
            
            (106,255
            )
            
            
            5.82Nonvested,
      at June 30
            
            
            1,000,000
            
            
            $
            0.15
            
            
            
            190,992
            
            
            $
            2.03





As of
June 30, 2009, there was approximately $149,000 of unrecognized compensation
cost related to nonvested phantom share awards.  This cost is expected
to be recognized over a weighted-average period of 59.5 months.  All
of the remaining unvested awards at June 30, 2009 have dividend participation
rights.





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 and no shares of
the Company’s stock have been issued under the Performance Bonus
Plan.





NOTE
8.  COMMITMENTS AND CONTINGENCIES





Outstanding
Litigation





The
Company is involved in various lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which monetary 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(d).





On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against us, certain of our
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 us, certain of our current and former
officers and directors, Flagstone Securities, LLC and BB&T Capital Markets
alleging various violations of the federal securities laws and seeking class
action certification.  The cases have been consolidated, class
certification has been granted, and lead plaintiffs’ counsel has been
appointed.  We filed a motion to dismiss the case on December 22,
2008, and plaintiffs have filed a response in opposition.  Our motion
to dismiss is currently pending before the court.  We believe the
plaintiffs’ claims in these actions are without merit and we intend to
vigorously defend the cases.





17





Guarantees





Bimini
Capital 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(d). During the six months ended June 30, 2009, the
Company entered into an agreement with the counterparty to the sale of the
mortgage servicing rights which terminated this guarantee.





NOTE
9.  INCOME TAXES





REIT
taxable income (loss), as generated by Bimini Capital’s qualifying REIT
activities, is determined in accordance with the Code, which is different
from the Company’s financial statement net income (loss) as determined 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 the Company’s financial statement net
income (loss) can be substantial and each item can affect several
years.  Bimini’s REIT taxable income for the six-months ended June 30,
2009 is estimated to be $6.4 million;  this amount includes the gain
on the debt extinguishment described in Note 12, and it is net of a tax net
operating loss carryforward further described below.




During
the six months ended June 30, 2009, book gains of approximately $1.5 million
were realized on MBS sales; for tax purposes, the realized net capital gains
from the MBS portfolio were approximately $3.7 million.  Since there
are tax capital losses available to offset these gains, the tax gains do not
increase REIT taxable income.  As of June 30, 2009, the REIT has
approximately $68.6 million of remaining tax capital loss carryforwards that are
immediately available to offset future tax capital gains.  These tax
capital loss carryforwards begin to expire in 2012.




As of
March 31, 2009, the REIT had an estimated tax net operating loss carryforward of
$22.5 million that was immediately available to offset future REIT taxable
income.  This net operating loss carryforward is expected to be fully
utilized in 2009 to offset REIT taxable income, including the realized tax gain
on the debt extinguishment.




During
April 2009, the Company received updated information from the issuers of certain
of its portfolio securities regarding the year 2008 taxation of the cash flows
received from those securities.  This new information, along with other tax
reporting adjustments, resulted in the Company changing its computation of the
estimated net REIT taxable loss for the year ended December 31, 2008.  The
Company’s estimated REIT taxable loss for the year 2008 is approximately $14.1
million, and the cumulative REIT net operating loss carryover into the year
ending December 31, 2009 is approximately $21.1 million.  These year
2008 amounts are still subject to further adjustment, because as of July 31,
2009, the issuers of certain of the Company’s portfolio securities have not yet
reported their year 2008 tax results.  These tax reporting changes
have no impact on GAAP earnings.





NOTE
10.   FAIR VALUE




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 income (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.





18





Fair
value is used to measure the trading portfolio on a recurring
basis.  The fair value as of June 30, 2009 is determined as
follows:





(in
thousands)


Fair
      Value Measurements as of June 30, 2009, UsingQuoted
      Prices in Active Markets for Identical Assets (Level 1)
            
            $
            -Significant
      Other Observable Inputs (Level 2)
            
            
            94,493Significant
      Unobservable Inputs (Level 3)
            
            
            -Total
      Fair Value Measurements
            
            $
            94,493





NOTE
11.   DISCONTINUED OPERATIONS





OITRS





The
results of discontinued operations of OITRS included in the accompanying
consolidated statements of operations for the six and three months ended June
30, 2009 and 2008 were as follows:





(in
thousands)


Six
      Months Ended June 30,
            
            
            Three
      Months ended June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008RevenuesInterest
      income
            
            $
            82
            
            
            $
            3
            
            
            $
            19
            
            
            $
            2Interest
      expense
            
            
            -
            
            
            
            (15
            )
            
            
            -
            
            
            
            (10
            )Net
      interest income (deficiency)
            
            
            82
            
            
            
            (12
            )
            
            
            19
            
            
            
            (8
            )Loss
      on discontinued mortgage banking activitiesFair
      value adjustment on retained interest, trading
            
            
            (916
            )
            
            
            (34,830
            )
            
            
            (2,190
            )
            
            
            (32,710
            )Other
      discontinued mortgage banking activities
            
            
            501
            
            
            
            (47
            )
            
            
            10
            
            
            
            (106
            )Other
      income and expenses, net of non-recurring items
            
            
            120
            
            
            
            1,837
            
            
            
            44
            
            
            
            1,591Net
      servicing income (loss)
            
            
            (245
            )
            
            
            965
            
            
            
            (40
            )
            
            
            790Other
      interest expense and loss reserves
            
            
            (468
            )
            
            
            (1,241
            )
            
            
            -
            
            
            
            (56
            )Deficiency
      of revenues
            
            
            (926
            )
            
            
            (33,328
            )
            
            
            (2,157
            )
            
            
            (30,499
            )ExpensesGeneral
      and administrative expenses
            
            
            (1,383
            )
            
            
            (2,911
            )
            
            
            (387
            )
            
            
            (1,406
            )Loss
      from discontinued operations, net of taxes
            
            $
            (2,309
            )
            
            $
            (36,239
            )
            
            $
            (2,544
            )
            
            $
            (31,905
            )





The
assets and liabilities of OITRS included in the consolidated balance sheets as
of June 30, 2009 and December 31, 2008 were as follows:





(in
thousands)


June
      30, 2009
            
            
            December
      31, 2008AssetsCash
      and cash equivalents
            
            $
            47
            
            
            $
            35Mortgage
      loans held for sale (a)
            
            
            409
            
            
            
            464Retained
      interests, trading (b)
            
            
            8,997
            
            
            
            15,601Security
      held for sale
            
            
            438
            
            
            
            15Receivables
            
            
            12,813
            
            
            
            23,792Prepaids
      and other assets
            
            
            3,201
            
            
            
            3,380Assets
      held for sale
            
            $
            25,905
            
            
            $
            43,287LiabilitiesAccounts
      payable, accrued expenses and other (d)
            
            
            7,520
            
            
            
            10,431Liabilities
      related to assets held for sale
            
            $
            7,520
            
            
            $
            10,431





19





(a)
- Mortgage Loans Held for Sale





Mortgage
loans held for sale consist of the following as of June 30, 2009 and December
31, 2008:





(in
thousands)


June
      30, 2009
            
            
            December
      31, 2008Mortgage
      loans held for sale, and other, net
            
            $
            2,869
            
            
            $
            3,022Valuation
      allowance
            
            
            (2,460
            )
            
            
            (2,558
            )Total
            
            $
            409
            
            
            $
            464





(b)
– Retained interest, trading





The
following table summarizes OITRS’s residual interests in securitizations as of
June 30, 2009 and December 31, 2008:





(in
thousands)


Series
            Issue
      Date
            
            June
      30, 2009
            
            
            December
      31, 2008HMAC
      2004-1
            March
      4, 2004
            
            $
            848
            
            
            $
            2,441HMAC
      2004-2
            May
      10, 2004
            
            
            1,358
            
            
            
            2,735HMAC
      2004-3
            June
      30, 2004
            
            
            1,763
            
            
            
            1,281HMAC
      2004-4
            August
      16, 2004
            
            
            2,420
            
            
            
            1,867HMAC
      2004-5
            September
      28, 2004
            
            
            1,074
            
            
            
            3,080HMAC
      2004-6
            November
      17, 2004
            
            
            1,476
            
            
            
            1,846OMAC
      2005-1
            January
      31, 2005
            
            
            14
            
            
            
            999OMAC
      2005-2
            April
      5, 2005
            
            
            44
            
            
            
            169OMAC
      2005-3
            June
      17, 2005
            
            
            -
            
            
            
            1,181OMAC
      2005-4
            August
      25, 2005
            
            
            -
            
            
            
            2OMAC
      2005-5
            November
      23, 2005
            
            
            -
            
            
            
            -OMAC
      2006-1
            March
      23, 2006
            
            
            -
            
            
            
            -OMAC
      2006-2
            June
      26, 2006
            
            
            -
            
            
            
            -Total
            
            
            $
            8,997
            
            
            $
            15,601





As of
June 30, 2009 and December 31, 2008, 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)


June
      30, 2009
            
            
            December
      31, 2008Balance
      sheet carrying value of retained interests – fair value
            
            $
            8,997
            
            
            $
            15,601Weighted
      average life (in years)
            
            
            3.32
            
            
            
            14.76Prepayment
      assumption (annual rate)
            
            
            14.26
            %
            
            
            19.36
            %Impact
      on fair value of 10% adverse change
            
            $
            (209
            )
            
            $
            (1,838
            )Impact
      on fair value of 20% adverse change
            
            $
            (240
            )
            
            $
            (3,086
            )Expected
      credit losses (% of original unpaid principal balance)
            
            
            7.20
            %
            
            
            5.61
            %Impact
      on fair value of 10% adverse change
            
            $
            (512
            )
            
            $
            (2,841
            )Impact
      on fair value of 20% adverse change
            
            $
            (1,127
            )
            
            $
            (6,095
            )Residual
      cash-flow discount rate
            
            
            27.5
            %
            
            
            27.50
            %Impact
      on fair value of 10% adverse change
            
            $
            (172
            )
            
            $
            (1,540
            )Impact
      on fair value of 20% adverse change
            
            $
            (330
            )
            
            $
            (2,838
            )Interest
      rates on variable and adjustable loans and bonds
            
            Forward
      LIBOR Yield Curve
            
            
            Forward
      LIBOR Yield CurveImpact
      on fair value of 10% adverse change
            
            $
            (658
            )
            
            $
            (2,692
            )Impact
      on fair value of 20% adverse change
            
            $
            (1,206
            )
            
            $
            (5,067
            )





20





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 June 30, 2009 and
December 31, 2008.





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 June 30, 2009
            
            
            Projected
      Future Credit Losses as of June 30, 2009
            
            
            Projected
      Total Credit Losses as of June 30, 2009HMAC
      2004-1
            March
      4, 2004
            
            $
            309,710
            
            
            
            0.77
            %
            
            
            0.95
            %
            
            
            1.72
            %HMAC
      2004-2
            May
      10, 2004
            
            
            388,737
            
            
            
            1.02
            %
            
            
            1.14
            %
            
            
            2.16
            %HMAC
      2004-3
            June
      30, 2004
            
            
            417,055
            
            
            
            0.97
            %
            
            
            0.90
            %
            
            
            1.87
            %HMAC
      2004-4
            August
      16, 2004
            
            
            410,123
            
            
            
            0.81
            %
            
            
            0.56
            %
            
            
            1.37
            %HMAC
      2004-5
            September
      28, 2004
            
            
            413,875
            
            
            
            1.03
            %
            
            
            1.62
            %
            
            
            2.65
            %HMAC
      2004-6
            November
      17, 2004
            
            
            761,027
            
            
            
            1.40
            %
            
            
            2.07
            %
            
            
            3.47
            %OMAC
      2005-1
            January
      31, 2005
            
            
            802,625
            
            
            
            2.02
            %
            
            
            2.26
            %
            
            
            4.28
            %OMAC
      2005-2
            April
      5, 2005
            
            
            883,987
            
            
            
            2.15
            %
            
            
            2.63
            %
            
            
            4.78
            %OMAC
      2005-3
            June
      17, 2005
            
            
            937,117
            
            
            
            2.23
            %
            
            
            4.03
            %
            
            
            6.26
            %OMAC
      2005-4
            August
      25, 2005
            
            
            1,321,739
            
            
            
            3.38
            %
            
            
            4.81
            %
            
            
            8.19
            %OMAC
      2005-5
            November
      23, 2005
            
            
            986,277
            
            
            
            4.39
            %
            
            
            6.10
            %
            
            
            10.49
            %OMAC
      2006-1
            March
      23, 2006
            
            
            934,441
            
            
            
            4.56
            %
            
            
            9.12
            %
            
            
            13.68
            %OMAC
      2006-2
            June
      26, 2006
            
            
            491,572
            
            
            
            7.56
            %
            
            
            15.32
            %
            
            
            22.88
            %Total
            
            
            $
            9,058,285
            
            
            
            2.79
            %
            
            
            4.41
            %
            
            
            7.20
            %





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





(in
thousands)


Six
      months Ended June 30,2009
            
            
            2008Net
      servicing fees  received
            
            $
            -
            
            
            $
            845Servicing
      repayments
            
            
            8,184
            
            
            
            786Cash
      flows received on retained interests
            
            
            5,688
            
            
            
            10,671





The
following information presents quantitative information about delinquencies and
credit losses on securitized financial assets as of June 30, 2009 and December
31, 2008:





(in
thousands)


As
      of Date
            
            Total
      Principal Amount of Loans
            
            
            Principal
      Amount of Loans 60 Days or more delinquent
            
            
            Net
      Credit LossesJune
      30, 2009
            
            $
            3,583,127
            
            
            $
            829,322
            
            
            $
            252,532December
      31, 2008
            
            
            3,920,433
            
            
            
            728,884
            
            
            
            129,715





21





(c)  -
      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 June 30, 2009 and
December 31, 2008, all deferred tax assets are fully provided for with a
valuation allowance.  Substantially all of the deferred tax assets are a
result of net tax losses incurred.  The deferred tax assets and
offsetting valuation allowances at June 30, 2009 and December 31, 2008 were
approximately $101.2 million and $103.4 million, respectively.  The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income within OITRS.  At June 30, 2009, management believed
that it was more likely than not that the Company will not realize the full
benefits of all deferred tax assets of OITRS;  therefore, an allowance
for the full amount of the deferred tax assets has been
recorded.  OITRS has abandoned the tax NOLs in the states where
operations have ceased, and those deferred tax assets have been
written-off.





For the
six month periods ended June 30, 2009 and 2008, the amount of the gross tax
benefit generated by the losses incurred in these period are reduced by an
offsetting valuation allowance of the same amount; therefore, the tax benefit is
zero.  The income tax provision or benefit for the periods ended June
30, 2009 and 2008 differ from the amount determined by applying the statutory
Federal rate of 35% to the pre-tax income or loss due primarily to the recording
of, and adjustments to, the deferred tax asset valuation
allowances.





During
2008, OITRS re-evaluated a previous tax position with regards to the taxability
of excess inclusion income (“EII”).  OITRS holds residual interests in
various real estate mortgage investment conduits (“REMICs”), some of which
generate EII pursuant to specific provisions of the Code.  OITRS based
its previously-held tax position on advice received from tax consultants
regarding the taxability of EII, including the aggregation (or non-aggregation)
of the tax inputs from all REMICs owned for purposes of the EII tax
computation.  As a result of the re-evaluation of the tax position,
which included consulting with additional tax experts, OITRS now believes that
it is no longer more likely than not that the tax position would be fully
sustained upon examination, even though the exact computational methods and the
ultimate EII tax due (if any) are still uncertain.  Therefore,
pursuant to the provisions of accounting standard FIN 48, “Accounting for
Uncertainty in Income Taxes,” OITRS recorded in 2008 a tax provision for $1.5
million for taxes that may be due on EII.  Interest through June 30,
2009 has been accrued in the amount of $0.4 million.  OITRS is
continuing to research all the tax issues relating to EII and its ownership of
the REMICs, and will adjust the tax and interest accrual in future periods as
the uncertainty is resolved.





As of
June 30, 2009, OITRS has an estimated federal tax net operating loss
carryforward of approximately $272.1 million, and estimated available state tax
NOLs of $67.1 million, which begin to expire in 2025, and are fully available to
offset future taxable income.





(d)
– Commitments and Contingencies





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




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




22





Changes
in this liability for the six months ended June 30, 2009 and 2008 are presented
below:




(in thousands)


Six
      Months Ended June 30,2009
            
            
            2008Balance—Beginning
      of period
            
            $
            7,303
            
            
            $
            6,960Provision
            
            
            468
            
            
            
            1,000Settlements
            
            
            (2,622
            )
            
            
            (1,416
            )Balance—End
      of period
            
            $
            5,149
            
            
            $
            6,544





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 based on
the Florida Banking Statute of Frauds.  On February 25, 2008, the Court
denied OITRS’s motion to dismiss, but the court subsequently
clarified that the motion was denied because the Court needs
additional facts in order to determine whether Coast’s claims are barred
under the Florida Banking Statute of Frauds.  As a
result, the parties conducted limited discovery relating to the Statute of
Frauds and OITRS filed a motion for summary judgment in November, 2008;
however, that motion was never ruled on because on February 3, 2009, Coast
filed a motion for leave to amend its complaint. The Court ruled in favor
of Coast on March 16, 2009 and OITRS was given 20 days, subsequently extended by
three additional weeks, to answer the amended complaint.  On May 4, 2009,
OITRS filed a response to the amended complaint.  The amended
complaint differs from the original complaint in that it raises new facts and
changes the nature of the claims.  We believe the plaintiff’s claims in
this matter are without merit and we intend to vigorously defend this
case.





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 18,
2008, the Court entered an order substituting the Federal Deposit Insurance
Corporation as conservator for IndyMac Federal Bank, F.S.B., in the place of
IndyMac Bank, F.S.B.   On January 16, 2009, the Court entered an order
dismissing the amended complaint with prejudice pursuant to a stipulation of
dismissal that was entered into among the parties to the case.  As a result
of the Court’s order of dismissal, this proceeding is now concluded.  No
amounts were paid by OITRS in connection with the execution of the stipulation
of dismissal or the Court’s order of dismissal.





(e)
– 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 and security held for sale. 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.





23





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





(in
thousands)


Fair
      Value Measurements at June 30, 2009, UsingFair
      Value Measurements
              June
      30, 2009
            
            
            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
            
            $
            409
            
            
            $
            -
            
            
            $
            -
            
            
            $
            409Retained
      interests, trading
            
            
            8,997
            
            
            
            -
            
            
            
            -
            
            
            
            8,997Security
      held for sale
            
            
            438
            
            
            
            -
            
            
            
            -
            
            
            
            438





A
reconciliation of activity for the six months ended June 30, 2009 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 SaleBeginning
      balance
            
            $
            464
            
            
            $
            15,601
            
            
            $
            15Gains
      (losses) included in earnings
            
            
            27
            
            
            
            (916
            )
            
            
            476Sales
      and collections
            
            
            (82
            )
            
            
            (5,688
            )
            
            
            (53
            )Ending
      Balance
            
            $
            409
            
            
            $
            8,997
            
            
            $
            438





Gains and
losses included in earnings for the six months ended June 30, 2009 are reported
in income on discontinued mortgage banking activities.





NOTE
12.   GAIN ON EXTINGUISHMENT OF DEBT





During
the six months ended June 30, 2009, the Company entered into an agreement with
Taberna Capital Management, LLC (Taberna), the collateral manager of certain
collateralized debt obligations issued in 2005 and collateralized by, among
other securities, the trust preferred capital securities sold by Bimini Capital
Trust I (BCTI) in May of 2005 (see Note 5).  Pursuant to the terms of
the agreement, the obligations under the trust preferred capital securities
issued by BCTI were discharged and the securities
redeemed.  Concurrently, Bimini Capital redeemed $50 million of its
junior subordinated notes issued to BCTI and recognized a gain of approximately
$32.4 million on the early extinguishment of this debt.


24





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, references 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, references 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.”  References 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. When market
conditions are not under severe stress as they are currently, Bimini Capital
intends to borrow between eight and twelve times the amount of its equity
capital in an attempt to enhance its returns to stockholders. This leverage may
be adjusted above or below this range to the extent management or the Company’s
Board of Directors deems necessary or appropriate.  For purposes of
this calculation, Bimini Capital treats its junior subordinated notes as an
equity capital equivalent. Bimini Capital is self-managed and self-advised and
has elected to be taxed as a REIT for U.S. federal income tax
purposes.





On April
18, 2007, the Board of Managers of OITRS, at the recommendation of the Board of
Directors of the Company, approved the closure of the wholesale and conduit
mortgage loan origination channels.  Both channels ceased accepting
new applications for mortgage loans on April 20, 2007.  On May 7,
2007, OITRS signed a binding agreement to sell its retail mortgage loan
origination channel to a third party as well.  On June 30, 2007, OITRS
entered into an amendment to this agreement.  The proceeds of the
transactions were approximately$1.5million plus the
assumption of certain liabilities of OITRS.  The transaction, coupled
with the disposal of the conduit and wholesale origination channels, resulted in
a loss of approximately $10.5 million.  OITRS has not operated a
mortgage loan origination business and the results of such operations are
reported as discontinued operations.





25





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. In December 2008, the Internal Revenue Service (IRS)
issued Revenue Procedure 2008-68, providing that the IRS will treat a REIT’s
distribution of common stock that is declared with respect to a taxable year
ending on or before December 31, 2009 as a qualifying dividend for purposes of
the 90 percent distribution requirement so long as it meets certain conditions,
including a cash limitation requirement that is not less than 10% of the entire
distribution.





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 most significant difference is that the
results of the Company’s taxable REIT subsidiary do not impact REIT taxable
income.





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.  Accordingly, Bimini Capital’s dividends are based on its
taxable income, as determined for federal income tax purposes, as opposed to its
net income computed in accordance with GAAP (as reported in the accompanying
consolidated financial statements).





Results
of Operations





PERFORMANCE
OVERVIEW





Described
below are the Company’s results of operations for the six and three months ended
June 30, 2009, as compared to the Company’s results of operations for the six
and three months ended June 30, 2008. 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 income for the six and three months ended June 30, 2009 was $34.0 million
and $31.9 million, respectively, compared to a consolidated net loss of$39.7 million and $34.6
million, respectively, for the six and three months ended June 30, 2008.
Consolidated net income per basic and diluted share of Class A Common Stock
was $1.26 and $1.25, respectively, for the six months ended June 30, 2009,
compared to a consolidated net loss per basic and diluted share of Class A
Common Stock of $1.57, for the comparable prior period.  Consolidated
net income per basic and diluted share of Class A Common Stock was $1.16
for the three months ended June 30, 2009, compared to a consolidated net loss
per basic and diluted share of Class A Common Stock of $1.36, for the comparable
prior period.





PERFORMANCE OF BIMINI
CAPITAL’S MBS PORTFOLIO





For the
six and three months ended June 30, 2009, Bimini Capital generated $6.4 million
and $2.7 million, respectively, of interest income from MBS assets and $0.4
million and $0.1 million, respectively, of interest expense on repo liabilities,
resulting in gross portfolio interest income of $6.0 million and $2.6 million,
respectively.  All repurchase agreement liabilities and the associated
interest expense are the result of pledging MBS pass through securities as part
of a financing agreement.  Only the MBS pass throughs are pledged. The
various MBS derivatives employed in the Company’s alternative investment
strategy are not pledged as part of financing arrangements or levered in any
way.  In addition, for the six and three months ended June 30, 2009,
Bimini Capital incurred $3.4 million and $1.3 million, respectively, of interest
expense on the junior subordinated notes resulting in net interest income of
$2.7 million and $1.3 million, respectively.  Gross portfolio interest
income for the six and three months ended June 30, 2009 decreased by
approximately $10.5 million and $4.2 million, respectively, from the same period
in 2008.  The decrease is due to the substantially smaller portfolio
offset to some extent by higher net interest margin available in the market in
2009. For the six and three month periods ended June 30, 2008, average
investment securities held were approximately $607 million and $520 million,
respectively.  For the comparable periods in the 2009, the average
investment securities held were approximately $133 million and $93 million,
respectively.


The
results for the six and three months ended June 30, 2009, were also positively
impacted by the Company’s implementation of its alternative investment strategy
which employed interest only (IO) and inverse interest only (IIO)
securities.  Such securities benefited from lower levels of one month
LIBOR and slower repayments.





26


For the
six and three months ended June 30, 2009, Bimini Capital’s general and
administrative costs were approximately $1.7 million and $0.7 million,
respectively, compared to approximately $3.3 million and $1.4 million for the
six and three months ended June 30, 2008. The largest elements of general and
administrative costs are compensation and related
benefits.  Compensation and related benefits were approximately $1.1
million and $0.5 million lower for the six and three months ended June 30, 2009,
respectively, than for the same periods in 2008. At June 30, 2009, Bimini
Capital had 5 full time and two part time employees.  At June 30,
2008, the comparable figures were 11 full time and no part time
employees.





Bimini
Capital had $1.5 million and $0.4 million in realized gains from the sales of
securities in the MBS portfolio during the six and three months ended June 30,
2009, respectively, compared to gains of $0.7 million and $0.4 million for the
six and three months ended June 30, 2008, respectively.  The sales
were consummated in order to facilitate either the debt exchange of our trust
preferred debt (in 2009), or to fund the wind down of the mortgage company in
2008.





For the
six and three months ended June 30, 2009, Bimini Capital had income from
continuing operations of $36.3 million and $34.4 million,
respectively.





As of
June 30, 2009, the MBS portfolio consisted of $94.5 million of agency or
government MBS at fair value and had a weighted average coupon on assets of
4.58% and a net weighted average borrowing cost of 0.49%.  The
following tables summarize Bimini Capital’s agency and government mortgage
related securities as of June 30, 2009 and December 31, 2008:





(in
thousands)


Asset
      Category
            
            Fair
      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
      CapJune
      30, 2009Adjustable-Rate
      MBS
            $
            41,041
            43.43%
            3.83%
            257
            1-Jun-35
            3.46
            10.76%
            9.64%Hybrid
      Adjustable-Rate MBS
            
            34,118
            36.11%
            4.79%
            312
            1-Aug-36
            18.71
            10.23%
            2.00%Total
      Mortgage Backed Pass Through
            
            75,159
            79.54%
            4.58%
            281
            1-Aug-36
            10.38
            10.52%
            5.60%Derivative
      MBS
            
            19,334
            20.46%
            5.80%
            277
            25-Jun-39
            n/a
            n/a
            n/aTotal
      Mortgage Assets
            $
            94,493
            100.00%
            4.58%
            281
            25-Jun-39
            10.38
            n/a
            5.60%December
      31, 2008Adjustable-Rate
      MBS
            $
            70,632
            41.0%
            4.79%
            276
            1-Jan-36
            7.76
            10.37%
            10.11%Fixed-Rate
      MBS
            
            24,884
            14.5%
            6.50%
            356
            1-Sep-38
            n/a
            n/a
            n/aHybrid
      Adjustable-Rate MBS
            
            63,068
            36.6%
            5.03%
            335
            1-Apr-38
            49.65
            10.03%
            2.00%Total
      Mortgage Backed Pass Through
            
            158,584
            92.1%
            5.15%
            312
            1-Sep-38
            27.52
            10.21%
            5.13%Derivative
      MBS
            
            13,524
            7.9%
            5.64%
            348
            25-Jan-38
            0.34
            n/a
            n/aTotal
      Mortgage Assets
            $
            172,108
            100.0%
            5.19%
            315
            1-Sep-38
            25.02
            n/a
            5.13





(in
thousands)


June
      30, 2009
            
            
            December
      31, 2008Agency
            
            Fair
      Value
            
            
            Percentage
      of
              Entire
      Portfolio
            
            
            Fair
      Value
            
            
            Percentage
      of
              Entire
      PortfolioFannie
      Mae
            
            $
            88,926
            
            
            
            94.11
            %
            
            $
            141,364
            
            
            
            82.1
            %Freddie
      Mac
            
            
            5,567
            
            
            
            5.89
            %
            
            
            30,744
            
            
            
            17.9
            %Total
      Portfolio
            
            $
            94,493
            
            
            
            100.00
            %
            
            $
            172,108
            
            
            
            100.0
            %





27








Entire
      Portfolio
            
            June
      30, 2009
            
            
            December
      31, 2008Weighted
      Average Pass Through Purchase Price
            
            $
            102.25
            
            
            $
            102.05Weighted
      Average Derivative Purchase Price
            
            
            4.39
            
            
            
            6.86Weighted
      Average Pass Through Current Price
            
            $
            102.28
            
            
            $
            101.10Weighted
      Average Derivative Current Price
            
            $
            4.59
            
            
            $
            6.98Effective
      Duration (1)
            
            
            0.960
            
            
            
            1.279





(1)
Effective duration of 0.960 indicates that an interest rate increase of 1.0%
would be expected to cause a 0.960% decline in the value of the MBS in the
Company’s investment portfolio at June 30, 2009.  An effective
duration of 1.279 indicates that an interest rate increase of 1.0% would be
expected to cause a 1.279% decline in the value of the MBS in the Company’s
investment portfolio at December 31, 2008. These figures include the derivative
securities in the portfolio.





In
evaluating Bimini Capital’s MBS portfolio assets and their performance, Bimini
Capital’s management team primarily evaluates these critical factors: asset
performance in differing interest rate environments, duration of the security,
yield to maturity, potential for prepayment of principal and the market price of
the investment.  The Company employs two investment strategies, one
involving MBS pass through securities that are leveraged via repurchase
agreement financing,  and a second involving derivative MBS
securities.  Our alternative investment strategy, which employs the
derivative MBS securities, does not involve the use of leverage applied to the
MBS derivative securities.





With
respect to our levered MBS pass through strategy, Bimini Capital’s portfolio of
MBS will typically be comprised of adjustable-rate MBS, fixed-rate MBS, hybrid
adjustable-rate MBS and balloon maturity MBS. Bimini Capital seeks to acquire
low duration assets that offer high levels of protection from mortgage
prepayments. 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 Bimini
Capital’s 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 Bimini Capital’s 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 like contract rates and therefore exhibit
similar effective duration.





The
derivative MBS securities employed in the Company’s alternative investment
strategy are inverse interest only and interest only
securities.  Inverse interest only securities have coupons determined
by one month LIBOR and as a result the value of such securities will be affected
by actual or anticipated movements in one month LIBOR.  Both inverse
interest only and interest only securities are especially sensitive to movements
in prepayments of the underlying mortgage loans, as their cash flows are tied to
the coupon interest of the underlying loans only.  This strategy does
involve the use of any form of financing to apply leverage to the derivative
portfolio.





Bimini
Capital faces the risk that the market value of its assets will increase or
decrease at different rates than that of its liabilities, including its hedging
instruments.  Accordingly, the Company assesses its interest rate risk
by estimating the duration of its assets and the duration of its liabilities.
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





28





The
following sensitivity analysis shows the estimated impact on the fair value of
Bimini Capital's interest rate-sensitive investments as of June 30, 2009,
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
            
            $
            41,041Change
      in Fair Value
            
            
            
            
            
            $
            489
            
            
            $
            (489
            )
            
            $
            (978
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.19
            %
            
            
            (1.19
            )%
            
            
            (2.38
            )%Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            34,118Change
      in Fair Value
            
            
            
            
            
            $
            495
            
            
            $
            (495
            )
            
            $
            (990
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            1.45
            %
            
            
            (1.45
            )%
            
            
            (2.90
            )%Derivative
      MBSFair
      Value
            
            $
            19,334Change
      in Fair Value
            
            
            
            
            
            $
            (77
            )
            
            $
            77
            
            
            $
            154Change
      as a % of Fair Value
            
            
            
            
            
            
            (0.40
            )%
            
            
            0.40
            %
            
            
            0.80
            %Portfolio
      TotalFair
      Value
            
            $
            94,493Change
      in fair Value
            
            
            
            
            
            $
            907
            
            
            $
            (907
            )
            
            $
            (1,814
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.96
            %
            
            
            (0.96
            )%
            
            
            (1.92
            )%CashFair
      Value
            
            $
            4,821





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
            
            $
            41,041Change
      in Fair Value
            
            
            
            
            
            $
            406
            
            
            $
            (541
            )
            
            $
            (1,178
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.99
            %
            
            
            (1.32
            )%
            
            
            (2.87
            )%Hybrid
      Adjustable Rate MBSFair
      Value
            
            $
            34,118Change
      in Fair Value
            
            
            
            
            
            $
            258
            
            
            
            (690
            )
            
            $
            (1,611
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            0.76
            %
            
            
            (2.02
            )%
            
            
            (4.72
            )%Derivative
      MBSFair
      Value
            
            $
            19,334Change
      in Fair Value
            
            
            
            
            
            $
            (1,729
            )
            
            $
            708
            
            
            $
            (406
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            (8.94
            )%
            
            
            3.66
            %
            
            
            (2.10
            )%Portfolio
      TotalFair
      Value
            
            $
            94,493Change
      in fair Value
            
            
            
            
            
            $
            (1,065
            )
            
            
            (523
            )
            
            $
            (3,195
            )Change
      as a % of Fair Value
            
            
            
            
            
            
            (1.13
            )%
            
            
            (0.55
            )%
            
            
            (3.38
            )%CashFair
      Value
            
            $
            4,821





29





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 June 30, 2009, and the twenty one 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 ExpenseJune
      30, 2009
            
            $
            92,949
            
            
            
            2,683
            
            
            
            -
            
            
            
            627
            
            
            
            8.85
            %
            
            $
            72,312
            
            
            
            105
            
            
            
            0.58
            %
            
            $
            2,578
            
            
            
            8.27
            %
            
            $
            1,204March
      31, 2009
            
            
            131,756
            
            
            
            3,674
            
            
            
            -
            
            
            
            277
            
            
            
            10.31
            %
            
            
            111,715
            
            
            
            254
            
            
            
            0.91
            %
            
            
            3,420
            
            
            
            9.41
            %
            
            
            1,933December
      31, 2008
            
            
            199,338
            
            
            
            3,093
            
            
            
            -
            
            
            
            458
            
            
            
            5.29
            %
            
            
            174,701
            
            
            
            1,114
            
            
            
            2.55
            %
            
            
            1,979
            
            
            
            2.74
            %
            
            
            1,933September
      30, 2008
            
            
            375,239
            
            
            
            6,149
            
            
            
            -
            
            
            
            568
            
            
            
            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.  For the three months ended June 30, 2009, the net margin
was 827 basis points compared to 29 basis points for the three months ended June
30, 2008.





30





PERFORMANCE OF DISCONTINUED
OPERATIONS OF OITRS





As
previously disclosed, the Company sold or discontinued all residential mortgage
origination activities at OITRS during 2007.  The principal business
activities of OITRS were the origination and sale of mortgage
loans.  In addition, as part of the securitization of loans sold,
OITRS retained an interest in the resulting residual interest cash flows more
fully described below.  Finally, OITRS serviced the loans securitized
as well as some loans sold on a whole loan basis.  As of June 30,
2009, there are no remaining sources of revenue, nor have there been, outside of
a small servicing portfolio, since 2007.  The only expenses incurred
relate to legal expenses associated with various legal matters stemming from the
mortgage loan origination operations, the allocation of audit fees, storage
costs associated with mortgage loan files and various other minor administrative
expenses.  However, the results of discontinued operations are
impacted by the mark to market of the retained interest in
securitizations.  There are no longer any originated mortgage
servicing rights and mortgage loans held for sale are immaterial and not likely
to result in meaningful income or loss.  Such assets are also held for
sale.





Losses on
OITRS activities for the six and three months ended June 30, 2009, were
approximately $2.3 million and $2.5 million, respectively, compared to a losses
of approximately $36.2 million and $32.0 million for the six and three months
ended June 30, 2008, respectively.  The fair value adjustment of
retained interest, trading was approximately $(0.9) million and $(2.2) million
for the six and three months ended June 30, 2009, respectively, compared to
$(34.8) million and $(32.7) million, respectively for the same periods in
2008.  The retained interests in securitizations represent residual
interests in loans originated or purchased by OITRS prior to
securitization.  The total fair market value of these retained
interests was approximately $9.0 million as of June 30, 2009. 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. The decrease in value for the period ended
June 30, 2009, was primarily due to increased projected losses, driven by
deteriorating fundamentals in the economy, and to a lesser extent, slightly
increased forward LIBOR assumptions.





The table
below provides details of OITRS’s gain (loss) on its discontinued mortgage
banking activities for the six and three months ended June 30, 2009 and
2008.  OITRS recognized a gain or loss on the sale of mortgages held
for sale only when the loans were actually sold.





(in
thousands)


Six
      Months Ended June 30,
            
            
            Three
      Months Ended June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Fair
      value adjustment of retained interests, trading
            
            $
            (916
            )
            
            $
            (34,830
            )
            
            $
            (2,190
            )
            
            $
            (32,710
            )Losses
      on sales of mortgage loans and securities
            
            
            (5
            )
            
            
            (35
            )
            
            
            (2
            )
            
            
            (93
            )Change
      in market value of security held for sale
            
            
            476
            
            
            
            -
            
            
            
            11
            
            
            
            -Change
      in market value of mortgage loans held for sale
            
            
            30
            
            
            
            (12
            )
            
            
            1
            
            
            
            (12
            )Loss
      on discontinued mortgage banking activities
            
            $
            (415
            )
            
            $
            (34,877
            )
            
            $
            (2,180
            )
            
            $
            (32,815
            )





General
and administrative expenses of OITRS for the six and three months ended June 30,
2009 were $1.4 million and $0.4 million, respectively, compared to $2.9 million
and $1.4 million, respectively, for the six and three months ended June 30,
2008.  For the six months ended June 30, 2009, legal and professional
fees of $0.5 million and a reserve against a receivable of $0.3 million were the
principal components of the general and administrative expenses.





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 from  OITRS as  repayment of the
intercompany debt.  The principal sources of cash at OITRS are the
residual interests and collections of advances made on their servicing portfolio
before it was surrendered in 2008.  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.





As of
June 30, 2009, Bimini Capital had funding in place via master repurchase
agreements with one counterparty.  The counterparty to this agreement
is not an affiliate of Bimini Capital. The agreement is secured by Bimini
Capital’s MBS and bears interest rates that are based on a spread to
LIBOR.





31


As of
June 30, 2009, Bimini Capital had an obligation outstanding under the repurchase
agreement of approximately $69.9 million with a net weighted average borrowing
cost of 0.49%. Bimini Capital’s outstanding repurchase agreement obligation is
due in less than 30 days.  Securing the repurchase agreement
obligation as of June 30, 2009, are MBS with an estimated fair value, including
accrued interest, of $75.4 million and a weighted average maturity of 283
months.





As of
June 30, 2009, Bimini Capital had amounts at risk greater than 10% of the equity
of the Company with the following counterparty:





(in
thousands)


Repurchase
      Agreement Counterparties
            
            Amount
              at
      Risk(1)
            
            
            Weighted
      Average
              Maturity
      of
              Repurchase
              Agreements
              in
      DaysMF
      Global Inc.
            
            $
            5,521
            
            
            
            8





(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.





As a
result of the closure of the mortgage origination operations at OITRS, the
Company has had to amortize the financing line associated with retained interest
in securitizations and meet the advancing obligations associated with OITRS’s
remaining mortgage servicing rights. Accordingly, during the year ended December
31, 2008, the Company undertook a series of assets sales intended to raise funds
necessary to support the cash needs of OITRS and maintain adequate
liquidity.





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 purchased
directly.  The leverage inherent in the securities replaces the
leverage obtained by acquiring pass-through securities and funding them in the
repurchase market.





As more
fully discussed in Note 5 to the consolidated financial statements, 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. During
the six months ended June 30, 2009, the Company entered into an agreement with
Taberna Capital Management, LLC (Taberna), the collateral manager of certain
collateralized debt obligations issued in 2005 and collateralized by, among
other securities, the trust preferred capital securities sold by BCTI in May of
2005.  Pursuant to the terms of the agreement, the obligations under
the trust preferred capital securities issued by BCTI where discharged and the
securities redeemed.  Concurrently, Bimini Capital redeemed its junior
subordinated notes issued to BCTI.





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. See Note 5 to the consolidated financial
statements for a full description.





32


As a
result of the transaction with respect to BCTI, the Company’s interest expense
associated with its trust preferred securities will be reduced going forward
and, because of the gain on early extinguishment of debt of approximately $32.4
million, the Company’s stockholders’ deficit was eliminated as of June 30,
2009.





Bimini
Capital attempts to ensure that the income generated from available investment
opportunities, when the use of leverage is employed for the purchase of assets,
exceeds the cost of its borrowings. However, the issuance of debt at a fixed
rate for any long-term period, considering the use of leverage, could create an
interest rate mismatch if Bimini Capital is not able to invest at yields that
exceed the interest rates of the Company’s junior subordinated notes and other
borrowings.





Outlook





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 and maximize the earning capacity of our limited capital. Nonetheless, in
spite of the positive effects of the early debt extinguishment of trust
preferred debt referred to above, 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.  Given the continued tight credit
conditions, which make access to funding precarious, and the reduced size of our
portfolio, even with the benefit of our alternative investment strategy, no
assurance can be made of our ability to generate sufficient net interest income
to cover all of our costs.





Critical
Accounting Policies





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





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





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. 157, Fair Value
Measurements.





REPURCHASE
AGREEMENTS





We
finance the acquisition of our MBS through the use of repurchase agreements.
Repurchase agreements are treated as collateralized financing transactions and
are carried at their contractual amounts, including accrued interest, as
specified in the respective agreements.





33





RETAINED INTEREST, TRADING
(CLASSIFIED AS HELD FOR SALE)





Retained
interest, trading is the subordinated interests retained by OITRS from their
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). 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 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:




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 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
June 30, 2009, and December 31, 2008, 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)


June
      30, 2009
            
            
            December
      31, 2008Balance
      Sheet Carrying value of retained interests – fair value
            
            $
            8,997
            
            
            $
            15,601Weighted
      average life (in years)
            
            
            3.32
            
            
            
            14.76Prepayment
      assumption (annual rate)
            
            
            14.26
            %
            
            
            19.36
            %Impact
      on fair value of 10% adverse change
            
            $
            (209
            )
            
            $
            (1,838
            )Impact
      on fair value of 20% adverse change
            
            $
            (240
            )
            
            $
            (3,086
            )Expected
      Credit losses (annual rate)
            
            
            7.20
            %
            
            
            5.61
            %Impact
      on fair value of 10% adverse change
            
            $
            (512
            )
            
            $
            (2,841
            )Impact
      on fair value of 20% adverse change
            
            $
            (1,127
            )
            
            $
            (6,095
            )Residual
      Cash-Flow Discount Rate
            
            
            27.5
            %
            
            
            27.50
            %Impact
      on fair value of 10% adverse change
            
            $
            (172
            )
            
            $
            (1,540
            )Impact
      on fair value of 20% adverse change
            
            $
            (330
            )
            
            $
            (2,838
            )Interest
      rates on variable and adjustable loans and bonds
            
            Forward
      LIBOR Yield Curve
            
            
            Forward
      LIBOR Yield CurveImpact
      on fair value of 10% adverse change
            
            $
            (658
            )
            
            $
            (2,692
            )Impact
      on fair value of 20% adverse change
            
            $
            (1,206
            )
            
            $
            (5,067
            )





34





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 June 30, 2009 and December 31,
2008.





INCOME
RECOGNITION




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 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. All of the consequences of OITRS’s income
tax accounting are included in discontinued operations.  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. 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.





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 were transferred to a trust where they served as collateral
for asset-backed bonds, which the trust primarily issued to the public. OITRS
held approximately $9.0 million of retained interests from securitizations as of
June 30, 2009.





35





The cash
flows associated with OITRS’s securitization activities over the six months
ended June 30, 2009 and 2008, were as follows:





(in
thousands)


Six
      months Ended June 302009
            
            
            2008Net
      servicing fees (paid)  received
            
            $
            -
            
            
            $
            845Servicing
      advances and repayments
            
            
            8,184
            
            
            
            786Cash
      flows received on retained interests
            
            
            5,688
            
            
            
            10,671








ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Not
Applicable.








ITEM
4T.  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.








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(d) to the Company’s
accompanying consolidated financial statements for a description of certain of
these matters.


36





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 based on
the Florida Banking Statute of Frauds.  On February 25, 2008, the Court
denied OITRS’s motion to dismiss, but the court subsequently
clarified that the motion was denied because the Court needs
additional facts in order to determine whether Coast’s claims are barred
under the Florida Banking Statute of Frauds.  As a
result, the parties conducted limited discovery relating to the Statute of
Frauds and OITRS filed a motion for summary judgment in November, 2008;
however, that motion was never ruled on because on February 3, 2009, Coast
filed a motion for leave to amend its complaint. The Court ruled in favor
of Coast on March 16, 2009 and OITRS was given 20 days, subsequently extended by
three additional weeks, to answer the amended complaint.  On May 4, 2009,
OITRS filed a response to the amended complaint.  The amended
complaint differs from the original complaint in that it alleges certain new
facts and amends the nature of certain claims.  We believe the
plaintiff’s claims in this matter are without merit and we intend to vigorously
defend this case.





On
September 17, 2007, a complaint was filed in the U.S. District Court for the
Southern District of Florida by William Kornfeld against us, certain of our
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 us, certain of our current and former
officers and directors, Flagstone Securities, LLC and BB&T Capital Markets
alleging various violations of the federal securities laws and seeking class
action certification.  The cases have been consolidated, class
certification has been granted, and lead plaintiffs’ counsel has been
appointed.  We filed a motion to dismiss the case on December 22,
2008, and plaintiffs have filed a response in opposition.  Our motion
to dismiss is currently pending before the court.  We believe the
plaintiffs’ claims in these actions are without merit and we intend to
vigorously defend the cases.





ITEM
1A.  RISK FACTORS.





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2008, which could materially
affect our business, financial condition or future results. The materialization
of any risks and uncertainties identified in our forward looking
statements  contained in this report together with those previously
disclosed in the Form 10-K or those that are presently unforeseen could result
in significant adverse  effects on
our  financial  condition,  results
of  operations  and cash flows. The information presented
below updates and should be read in conjunction with the risk factors and
information disclosed in that Form 10-K.





The
actions of the U.S. government, Federal Reserve and Treasury, including the
establishment of the TALF and the PPIP, may adversely affect our
business.





The Term
Asset-Backed Securities Loan Facility (“TALF”) was first announced by the
Treasury on November 25, 2008, and has been expanded in size and scope since its
initial announcement.  Under the TALF, the Federal Reserve Bank of New
York makes non-recourse loans to borrowers to fund their purchase of eligible
assets, currently certain asset backed securities but not mortgage-backed
securities. The nature of the eligible assets has been expanded several times.
The Treasury has stated that through its expansion of the TALF, non-recourse
loans will be made available to investors to certain fund purchases of legacy
securitization assets. On March 23, 2009, the Treasury in conjunction with the
FDIC, and the Federal Reserve, announced the Public-Private Investment Program
(“PPIP”). The PPIP aims to recreate a market for specific illiquid residential
and commercial loans and securities through a number of joint public and private
investment funds.  The PPIP is designed to draw new private capital
into the market for these securities and loans by providing government equity
co-investment and attractive public financing.





These
programs have not been in place long enough to accurately gauge their impact on
the financial markets.  To the extent  they do not function
as intended, our business may not receive any benefits from this
legislation.  In addition, the U.S. government, Federal Reserve,
Treasury and other governmental and regulatory bodies have taken, and may
continue to take,  actions to address the disruptions caused by the
financial crisis that occurred in late 2008 and early 2009. We cannot predict
whether or when such actions may occur, and such actions could have a dramatic
impact on our business, results of operations and financial
condition.





37





To
maintain our REIT qualification, we may be forced to borrow funds on unfavorable
terms or sell our MBS portfolio securities at unfavorable prices to make
distributions to our stockholders.





As a
REIT, we must distribute at least 90% of our annual net taxable income
(excluding net capital gains) to our stockholders. To the extent that we satisfy
this distribution requirement, but distribute less than 100% of our net taxable
income, we will be subject to federal corporate income tax. In addition, we will
be subject to a 4% nondeductible excise tax if the actual amount that we pay to
our stockholders in a calendar year is less than a minimum amount specified
under the Code. From time to time, we may generate taxable income greater than
our income for financial reporting purposes from, among other things,
amortization of capitalized purchase premiums, or our net taxable income may be
greater than our cash flow available for distribution to our stockholders. If we
do not have other funds available in these situations, we could be required to
borrow funds, sell a portion of our mortgage-related securities at unfavorable
prices or find other sources of funds in order to meet the REIT distribution
requirements and to avoid corporate income tax and the 4% excise tax. These
other sources could increase our costs or reduce equity and reduce amounts
available to invest in mortgage-related securities.





In
December 2008, the Internal Revenue Service (IRS) issued Revenue Procedure
2008-68, providing that the IRS will treat a REIT’s distribution of common stock
that is declared with respect to a taxable year ending on or before December 31,
2009 as a qualifying dividend for purposes of the 90 percent distribution
requirement so long as it meets certain conditions, including a cash limitation
requirement that is not less than 10% of the entire
distribution.  Management is evaluating this new guidance and its
impact on any potential distributions for 2009.








ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





At the
Company’s 2009 Annual Meeting of Stockholders held on June 16, 2009, the
following matters were submitted to a vote of the Company’s
stockholders:





1. Election of Directors. 
Frank E. Jaumot was elected and Robert J. Dwyer was re-elected as directors of
the Company.  Mr. Jaumot was elected as a Class I director to serve
until the Company's 2010 Annual Meeting of Stockholders.  Mr. Dwyer
was re-elected as a Class III director to serve until the Company's 2012 Annual
Meeting of Stockholders.  For each director nominee, votes were cast
as follows:





NOMINEE
            
            FOR
            
            
            ABSTAINRobert
      E. Jaumot
            
            
            16,974,455
            
            
            
            5,792,373Robert
      J. Dwyer
            
            
            20,069,519
            
            
            
            2,697,309





The
following directors continued in office after the meeting:




Robert E.
Cauley.





2.Ratification of Appointment of
Independent Registered Public Accounting Firm.  At the meeting, the
appointment of BDO Seidman, LLP as the Company’s independent registered public
accounting firm for the year ending December 31, 2009 was ratified by the
Company’s stockholders.  The number of votes cast for and against the
ratification of BDO Seidman, LLP and the number of abstentions and broker
non-votes were as follows:




FOR
              
              AGAINST
              
              ABSTAIN
              
              BROKER
                NON-VOTES20,650,856
              
              0
              
              2,115,973
              
              0


38





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, 2008†10.10
            Agreement
      dated as of June 30, 2009, by and between Bimini Capital Management, Inc.
      and Robert E. Cauley, incorporated by reference to Exhibit 99.1 to the
      Company’s Current Report on Form 8-K, dated June 30, 2009, filed with the
      SEC on July 2, 2009†10.11
            Agreement
      dated as of June 30, 2009, by and between Bimini Capital Management, Inc.
      and G. Hunter Haas, incorporated by reference to Exhibit 99.2 to the
      Company’s Current Report on Form 8-K, dated June 30, 2009, filed with the
      SEC on July 2, 200910.12
            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,
      200510.13
            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, 200610.14
            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,
      200710.15
            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,
      200710.16
            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, 200710.17
            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, 200810.18
            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, 200810.19
            Amended
      and Restated Junior Subordinated Indenture, dated as of September 26,
      2005, between the Company and JPMorgan Chase Bank, National Association,
      as trustee.10.20
            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.10.21
            Indenture,
      dated as of October 5, 2005, between the Company and Wilmington Trust
      Company, as debenture trustee.10.22
            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.














39










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:                      July
      10, 2009
            
            By:
            /s/
      Robert E. CauleyRobert
      E. Cauley
              Chairman
      and Chief Executive Officer