In This Article:
Participants
Robert Cauley; Chairman of the Board, President, Chief Executive Officer; Orchid Island Capital Inc
Presentation
Operator
Good morning and welcome to the third quarter, 2024 earnings conference call for Bimini Capital Management. This call is being recorded today, November 2024.
At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the private Securities Litigation Reform Act of 1,995. Listener cautioned that such forward-looking statements are based on information currently available on the management's good faith belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.
Important factors that could cause such differences are described in the company's filings with the securities and exchange commission, including the company's most recent annual report on form 10-K.
The company assumes no negation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements.
Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr Robert Cawley Please go ahead, sir.
Robert Cauley
Thank you, operator and good morning. First, I'll give a brief synopsis of events during the quarter. The impacts of tight monetary policy orchestrated by the Federal Reserve appear to have finally had the desired impact on inflation and the imbalances in the labor market. Inflation is closing in on the 5th 2% target and hiring and wages are slowing while the unemployment rate has steadily risen.
In contrast, growth in the economy and consumer spending have remained robust throughout in late September, the fed reduced the overnight funding rate by 50 basis points and the market anticipated it was the first of many such cuts. Unfortunately, Anon payroll report for September 2024 released in early October as well as the latest readings on inflation and consumer spending imply the economy may not be leaking so much after all. If this proves to be the case, the magnitude and urgency of additional rate cuts by the FED may not live up to market expectations mentioned above.
Now turning to our results. Okay. Capital reported net income for the third quarter of 2024 of $17.3 million and its shareholders equity increased from $555.9 million to $656 million. As a result in these advisory service revenues of approximately $3.3 million represented a 4% increase over the second quarter. Orchid's capital base has increased substantially year-to-date nearly 40% although advisory service revenues are down 11% year-to-date.
Orchid's capital base declined over the course of 2023 and the decline is yet to be probably reversed. So far in 2024 the investment portfolio generated net interest income of$ 0.3 million inclusive of dividends on our shares of Orchid Island down very slightly from the prior quarter for the year-to-date period. Net interest income was $1.04 million versus $0.88 million for the first nine months of 2023.
The RMBS portfolio at Royal Palm has grown by approximately 28% year-to-date and 37% since June 30th 2024. Our funding costs should decline if short term rates continue to be reduced by the Federal Reserve, potentially enhancing our net interest margin. Otherwise, our funding costs have varied slightly between 5.5 and 5.6% for the past four quarters.
The return for the agency R and BS index for the quarter was 4.7% on an absolute basis and the excess return versus comparable duration swaps. A proxy for hedge returns was 0.7% mark to market gains and losses on our MBS portfolio hedge position and shares of market reported as other income on our statement of operations netted to income of $0.4 million for the quarter and $1.1 million for the nine month period ended September 30th 2024 the company inclusive of both the advisory services segment and the investment portfolio segment reported net income before taxes for the quarter of $0.8 million versus a net loss before taxes of $0.2 million for the second quarter of 2024 for the nine month period ended September 30th 2024 on net interest income net income before taxes was $1.25 million for the three and nine month periods ended September 30th 2024 maybe reported tax provisions of $0.5 million and $1.1 million respectively.
As the fourth quarter unfolds the reversal and sentiment and interest rate levels that started in late September continues, the market appears to be rethinking the perceived strength of the economy and the outlook for further rate cuts by the Federal Reserve. With the Presidential election on the horizon, the market needs to anticipate the possible Republican sweep. With the implications being they would be pro growth with accompanying fiscal deficit expansion.
As a result, interest rates are higher and mortgages have underperformed their hedges. There's also another FFEFFOC meeting next week and the market expects another 25 basis point reduction in their overnight funding rate.
We are considering available access funds to grow the portfolio. When we sense the move has run its course, we will see how things look once the outcome of the election is determined and look forward to speaking with you again after your end Thank you operator and we can turn the call over to questions.