Q2 2026 Bimini Capital Management Inc Earnings Call

August 7, 2026

Speaker #1: To ask a question during the session, you will need to press Start 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press Star 11 again. I would now like to hand the conference over to Melissa Afonso. You may begin.

Melissa Alfonso: Thank you. Good morning. Welcome to the Q2 2026 earnings conference call for Bimini Capital Management. This call is being recorded today, 7 August 2026. 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 1995. Listeners are 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.

Speaker #2: Thank you. Good morning, and welcome to the Q2 2026 earnings conference call for Bimini Capital Management. This call is being recorded today, August 7, 2026.

Speaker #2: 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 1995.

Speaker #2: Listeners are 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 risk and uncertainty that could cause actual performance results to differ materially from those expressed in such forward-looking statements.

Speaker #2: 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.

Melissa Alfonso: The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I'd like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Speaker #2: The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements.

Speaker #2: Now, I'd like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Colley. Please go ahead, sir.

Robert E. Cauley: Thanks, Melissa. Good morning. Regarding our results for the Q2 2026, market conditions for the Agency RMBS market and risk assets generally were uneven, and developments related to the war with Iran created volatility, causing market rallies and sell-offs with every headline. The Federal Reserve has a new chairman who was initially viewed as a stout inflation hawk after his first press conference in June, but much less so after his second in late July, resulting in a significant sell-off in longer-maturity interest rates and a steepening of the Treasury curve. Finally, the economy of the US has proven to be very resilient, and the labor market appears to have stabilized, at least before this morning. On top of all this, Q2 corporate earnings were robust, and the AI-driven build-out has resulted in unprecedented levels of CapEx spending on the part of the hyperscalers.

Speaker #3: Thanks, Melissa. And good morning. Regarding our results for the Q2 of 2026, market conditions for the agency RMBS market and risk assets generally were uneven in developments related to the war with Iran created volatility causing market rallies and sell-offs with every headline.

Speaker #3: The Federal Reserve has a new chairman who is initially viewed as a stout inflation hawk after his first press conference in June, but much less so after his second in late July, resulting in a significant sell-off in longer maturity interest rates and a steepening of the Treasury curve.

Speaker #3: Finally, the economy of the US has proven to be very resilient in the labor market appears to have stabilized, at least before this morning.

Speaker #3: On top of all this, Q2 corporate earnings were robust, and the AI-driven build-out has resulted in an unprecedented level of CapEx spending on the part of the hyperscalers.

Robert E. Cauley: While this may prove to be inflationary near term as chip demand and prices surge, impacting prices of any product that uses them, productivity gains that are anticipated from AI should suppress inflation in future periods, or at least that's the conventional wisdom. In sum, even with this very mixed backdrop, risk assets had a very solid quarter, and this continued into the third quarter. Orchid Island Capital, or Orchid, reported an economic return of 6.2% for the quarter, grew its share count by approximately 1.5%, and increased its average equity base by approximately 5.7% over Q1 2026. This resulted in a 3.4% increase in our management fee revenue. As you know, we closed on the acquisition of Tom Johnson Investment Management on 1 April 2026, TJIM. The results are now consolidated with ours.

Speaker #3: While this may prove to be inflationary near term, as chip demand and prices surge, impacting prices of any product that uses them, productivity gains that are anticipated from AI should suppress inflation in future periods.

Speaker #3: In sum, even with this very mixed backdrop, risk assets had a very solid quarter, and this continued into the third quarter. Orchid Island Capital, or Orchid, reported an economic return of 6.2% for the quarter, grew its share count by approximately 1.5%, and increased its average equity base by approximately 5.7% over the first quarter of 2026.

Speaker #3: This resulted in a 3.4% increase in our management fee revenue. As you know, we closed on the acquisition of Tom Johnson Investment Management on April 1, 2026.

Speaker #3: Tejin, so the results are now consolidated with ours. Advisory service revenues, inclusive of those of Tejin, were approximately $6.8 million for the second quarter, versus $3.8 million for the second quarter of 2025, and $5.1 million for the first quarter of 2026, neither of which included any results from Tejin.

Robert E. Cauley: Advisory service revenues, inclusive of those of TJIM, were approximately $6.8 million for Q2 versus $3.8 million for Q2 2025 and $5.1 million for Q1 2026, neither of which included any results from TJIM. In order to facilitate the acquisition of TJIM, which was an all-cash transaction, we used a combination of available cash and proceeds from the disposition of a portion of the investment portfolio. Note, we did not have to incur any debt to facilitate the transaction. In fact, we were able to retain a portion of the portfolio as well as our shares of Orchid Island. I want to highlight for Q2 2026, advisory service revenue with TJIM, less direct operating expenses, was roughly equal to the interest in dividend income, less repurchase agreement interest expense of the portfolio during Q2 2025.

Speaker #3: In order to facilitate the acquisition of Tejin, which was an all-cash transaction, we used a combination of available cash and proceeds from the disposition of a portion of the investment portfolio.

Speaker #3: Note, we did not have to incur any debt to facilitate the transaction. In fact, we were able to retain a portion of the portfolio as well as our shares of Orchid Island.

Speaker #3: I want to highlight, for the second quarter of 2026, advisory service revenue of Tejin less direct operating expenses was roughly equal to the interest and dividend income less repurchase agreement interest expense of the portfolio during the second quarter of 2025.

Robert E. Cauley: As mentioned, we still retain investment portfolio after funding the purchase of TJIM, the TJIM acquisition. Although the market value of the portfolio as of 30 June 2026, was $37.9 million versus $120.8 million as of 30 June 2025. It's a little under one-third of the size. We view the acquisition of TJIM as transformational for Bimini. Our goal is to enhance the consistency of the earnings we generate as part of our tax-driven strategy in the near term, but also beyond. The acquisition should help us to do this as we diversify the mix of assets under management away from a sole focus on the Agency RMBS market. We look forward to helping TJIM grow their AUM over time, leveraging their track record, quality management team, and sound investment process.

Speaker #3: As mentioned, we still retain an investment portfolio after funding the purchase of Tejin's acquisition, although the market value of the portfolio as of June 30, 2026, was $37.9 million, versus $120.8 million as of June 30, 2025.

Speaker #3: So it's a little under one-third of the size. We viewed the acquisition of Tejin as a transformational for BIMINI. Our goal is to enhance the consistency of the earnings we generate as part of our tax-driven strategy in the near term but also beyond.

Speaker #3: The acquisition should help us to do this as we diversify the mix of assets under management away from a sole focus on the agency RMBS market.

Speaker #3: We look forward to helping Tejin grow their AUM over time, leveraging their track record, quality management team, and sound investment process. We hope we can facilitate this growth by leveraging our relationships across Wall Street and the banking community to develop over the past 20-plus years by BIMINI.

Robert E. Cauley: We hope we can facilitate this growth by leveraging our relationships across Wall Street and the banking community, developed over the past 20-plus years by Bimini. Further, while we remain focused on our tax-driven strategy of harvesting the tax savings provided by our NOLs, we recognize we are nearing the maturity of the NOLs, and we must begin to focus on the years that follow. By the end of 2028, all but approximately $5.5 million of the NOLs of our former mortgage company will have been used or expired, and that will drop to approximately $1 million by the end of 2029. Bimini has additional NOLs do not expire until 2036, but those are quite small in comparison. Of course, we will attempt to take full advantage of all the NOLs we have available to us prior to their expiration.

Speaker #3: Further, while we remain focused on our tax-driven strategy of harvesting the tax savings provided by our NOLs, we recognize we are nearing the maturity of the NOLs, and we must begin to focus on the years that follow.

Speaker #3: By the end of 2028, all but approximately $5.5 million of the NOLs of our former mortgage company will have been used or expired, and that will drop to approximately $1 million by the end of 2029.

Speaker #3: BIMINI has additional NOLs that do not expire until 2036, but those are quite small in comparison. Of course, we will attempt to take full advantage of all of the NOLs we have available to us prior to their expiration.

Robert E. Cauley: However, once the available NOLs have been utilized or expired, we will become a tax-paying entity. This will drive how we see the business in our balance sheet going forward. Bimini has been profitable year to date and cash flow positive as well. We anticipate this to be the case going forward. Given our market outlook and the possibility of increasing funding costs should the Federal Reserve raise the Fed funds rate in the near term, we may start to pay down our trust-preferred debt with available cash. This process will operate just like growing an income-producing asset base, only by a decreased interest expense versus increased interest income had we increased the size of the portfolio. It will also facilitate the transition of our balance sheet referenced above, especially in light of the fact that our trust-preferred debt matures in 2035.

Speaker #3: However, once the available NOLs have been utilized or expired, we will become a tax-paying entity. This will affect how we view the business on our balance sheet going forward.

Speaker #3: BIMINI has been profitable year to date, and cash flow positive as well. We anticipate this to be the case going forward. Given our market outlook and the possibility of increasing funding costs should the Federal Reserve raise the Fed funds rate in the near term, we may start to pay down our trust preferred debt with available cash.

Speaker #3: This process will operate just like growing an income-producing asset base, only by a decreased interest expense versus increased interest income had we increased the size of the portfolio.

Speaker #3: It will also facilitate the transition of our balance sheet referenced above, especially in light of the fact that our trust preferred debt matures in 2035.

Robert E. Cauley: Finally, today we're joined on the call by Richard Parry, the President and CIO of Tom Johnson Investment Management or TJIM. I would like to turn the call over to Richard to tell us more about TJIM's history, provide an overview of their investment products and processes, and give us an update on how their year is going so far. Richard?

Speaker #3: Finally, today we are joining on the call by Richard Perry, the president and CIO of Tom Johnson Investment Management, or Tejin. I would like to turn the call over to Richard.

Speaker #3: Tell us more about Tejin's history, provide an overview of their investment products and processes, and give us an update on how their year is going so far.

Speaker #3: Richard?

Richard H. Parry: Yes, good morning. My name is Richard Parry, just to give you a little history of the firm, we were founded in 1983. Prior to that, a number of us were at the bank, First National Bank and Trust Company. Tom Johnson was the head of the trust investment department, at that time chose to step out and start his own firm. We've grown. We've been in existence since 1983. At a period of time to help us with the transition, we sold the firm to United Asset Management. That ultimately became a part of Old Mutual, then I bought the firm back in 2003. We're now at 1.7 billion in assets approximately. We have two equity portfolios, and we have four fixed income portfolios that we use for our clientele, providing direct equities or fixed, and also degrees of balanced accounts for our clients.

Speaker #2: Yes, good morning. My name is Richard Perry. Just to give you a little history of the firm, we were founded in 1983. Prior to that, a number of us were at First National Bank and Trust Company. Tom Johnson was the head of the trust investment department and, at that time, chose to step out and start his own firm.

Speaker #2: So we've been in existence since 1983. At a period of time, to help us with the transition, we sold the firm to United Asset Management that ultimately became a part of Old Mutual, and then I bought the firm back in 2003.

Speaker #2: We're now at approximately $1.7 billion in assets. We have two equity portfolios and four fixed income portfolios that we use for our clientele, providing direct equities or fixed income, as well as varying degrees of balanced accounts for our clients.

Richard H. Parry: We have two kinds of lines of businesses. We have direct clients that represents about 38% of our business, about 62% of our business is through platforms where we provide our separate account management services to those groups. Very important for our firm is to be diversified, we have equities and fixed and balanced. Currently, we have about 15% of our assets is in equities, 30% is in balanced, and 55% is in fixed income. Net net about 33% of our assets are dedicated to equities and 67% is dedicated to fixed income. I would strongly suggest that you look at our fact sheets on our TJIM website, that will give you kind of an idea of our performance relative to our benchmarks, and also our risk-return characteristics. Obviously, as my investment team, we're very proud of those near-term and long-term results.

Speaker #2: We have two kinds of lines of businesses. We have direct clients that represents about 38% of our business, and then about 62% of our business is through platforms where we provide our separate account management services to those groups.

Speaker #2: We're very important for our firm is to be diversified, so we have equities and fixed and balanced. Currently, we have about 15% of our assets is in equities, 30% is in balanced, and 55% is in fixed income.

Speaker #2: So, net-net, about 33% of our assets are dedicated to equities, and 67% is dedicated to fixed income. I would strongly suggest that you look at our fact sheets on our TJIM website, and that will give you kind of an idea of our performance relative to our benchmarks and also our risk-return characteristics.

Speaker #2: Obviously, as my investment team, we're very proud of those near-term and long-term results. We've had a very good season in my opinion. Let's see.

Richard H. Parry: We've had a very good season, in my opinion. Let's see. Right now going forward, just to illuminate, we're kind of a very conservative investment firm. We have valuations of about 14 times on our P/E ratios relative to the market that's over 20 times earnings. Our fixed income structure is just a little bit less than our benchmarks in terms of duration, and we're kind of more focused at this point in time on the Treasuries relative to the corporate market. Currently, relative to, say, last year, where we had a barbell strategy, we have more of a laddered structured strategy because of the environment we faced in. From that, I welcome questions and turn the platform over to Bob.

Speaker #2: Going over that right now, going forward, just to illuminate, we're kind of a very conservative investment firm. We have valuations of about 14 times on our P/E ratios, relative to the market, which is over 20 times earnings.

Speaker #2: Our fixed income structure is just a little bit less than our benchmarks in terms of duration, and we're kind of more focused at this point in time on Treasuries relative to the corporate market.

Speaker #2: And currently, relative to, say, last year, where we had a barbell strategy, we have more of a laddered structured strategy because of the environment we faced in.

Speaker #2: And from that, I welcome questions and turn the platform over to Bob.

Robert E. Cauley: Thanks, Richard. Operator, we can turn the call over to questions now.

Speaker #3: Thanks, Richard. Operator, we can turn the call over to questions now.

Operator: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gary Ribe with Accretive Wealth Partners. Your line is open.

Speaker #4: Thank you. Ladies and gentlemen, as a reminder to ask the question, please first start one-one on your telephone. Then wait for your name to be announced.

Speaker #4: To withdraw your question, please first start one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gary Ribb with accredited wealth partners.

Speaker #4: Your line is open.

Gary Ribe: Hey, Bob, Hunter.

Speaker #5: Hey, Bob. Hunter.

Robert E. Cauley: Hey, how are you, Gary? Still good?

Speaker #3: Hey, how are you, Gary?

Speaker #5: I'm good. Yeah, I'm doing good. How are you guys doing?

Gary Ribe: Yeah, I'm doing good. How you guys doing?

Robert E. Cauley: Not too bad. A little wet, but not bad. It's raining here like we're starting to build an ark. Go ahead.

Speaker #3: Not too bad. A little wet, but not bad. Raining here like at least enough to build an ark, but go ahead.

Speaker #5: And it's nice to meet the folks from the firm you acquired. I've got a couple of questions. I've got a question for you guys.

Gary Ribe: It's nice to meet the folks from the firm you acquired. I got a couple of questions. I got a question for you guys. You alluded this in sort of your prepared remarks, but as you're looking towards the NOL expiring in 2028.

Speaker #5: You alluded this in sort of your prepared marks, but as you're looking towards the NOL expiring, in 2028, to the extent that you have levers to accelerate asset value and income, to what extent do you think about the advisory agreement with ORCID?

Gary Ribe: to the extent that you have levers to accelerate asset value and income, to what extent do you think about the advisory agreement with Orchid? It seems to me that that's a significant source of value. My understanding is that asset management agreements in the marketplace have a much higher potential value than even the termination fee on the Orchid agreement would have. It seems to me that maybe a value-maximizing move as you're looking at the NOL expiration is perhaps monetizing that ahead of the expiration because there's a significant sum of money and significant potential tax drag.

Speaker #5: It seems to me that that's a significant source of value, and my understanding is that asset management agreements in the marketplace have a much higher potential value than even the termination fee on the ORCID agreement would have.

Speaker #5: And it seems to me that maybe a value-maximizing move, as you're looking at the NOL expiration, is perhaps monetizing that ahead of the expiration.

Speaker #5: Because there's a significant sum of money and significant potential tax drag. And I was just kind of curious how you guys are thinking about that.

Robert E. Cauley: Yeah.

Gary Ribe: I was just kind of curious how you guys are thinking about that.

Robert E. Cauley: We actually did. It's troublesome. Here's why. In case of Richard's business, they manage the assets of their clients, right? They have a fiduciary responsibility. They manage their assets on a fee basis. With respect to Orchid, we're the management team. It's not just like we have AUM. We actually run the day-to-day operations of the business. In order for us to do that, we could, I guess, sell the management fee, ask them to buy us out and hire somebody else. In all likelihood, what would happen is Hunter and I will just become employees of Orchid.

Speaker #3: We actually did. It's troublesome. Here's why. In the case of Richard's business, they manage the assets of their clients, right? So they have a fiduciary responsibility.

Speaker #3: They manage their assets. On a fee-based with respect to ORCID, we're the management team. So it's not just like we have AUM. We actually run the day-to-day operations of the business.

Speaker #3: In order for us to do that, I mean, we could, I guess, sell the management fee, ask them to buy us out and hire somebody else.

Speaker #3: But in all likelihood, what would happen is Hunter and I would just become employees of ORCID.

Gary Ribe: Yeah. I was alluding to either a marketing process with a sale or some sort of internalization at Orchid, potentially.

Speaker #5: Yeah, so I was alluding to either a marketing process with a sale, or some sort of internalization at ORCID, potentially.

Robert E. Cauley: Right. That's what would occur, it would be troublesome for us to then continue to run Bimini also. That's kind of the rub there is that, yeah, that would be great for Bimini to get a big windfall, maybe go out and deploy those proceeds into some other income-generating assets. Who really runs the business? Would Orchid be content to have us continue to do that? That's not as clear an answer to me. I think that's going to be the conflict of interest.

Speaker #3: Right. That's what would occur. But then it would be troublesome for us to then continue to run BIMINI also. That's kind of the rub there, is that, yeah, that would be great for BIMINI to get a big windfall, maybe go out and deploy those proceeds into some other income-generating assets.

Speaker #3: But who really runs the business? And would ORCID be content to have us continue to do that? And that's not as clear an answer to me.

Speaker #3: I think that's going to be a conflict of interest.

Gary Ribe: Well, it might seem that potentially, with Richard's business, if that's a new line of business that you guys are interested in pursuing, sort of the environment for that, M&A in that environment is pretty strong. If you had a giant cash pile, you might have people approaching you saying, We'd like to merge into you. That problem might obviate itself and you guys and Bimini shareholders could make an awful lot of money potentially in that kind of transaction.

Speaker #5: Well, it might seem that potentially you could, if with Richard's business, if that's a new line of business that you guys are interested in pursuing, sort of the environment for that M&A in that environment is pretty strong.

Speaker #5: You might, if you had a giant cash pile you might have people approaching you saying, "We'd like to merge into you." And that problem might obviate itself in you guys and BIMINI shareholders could make an awful lot of money potentially in that kind of transaction.

Robert E. Cauley: You could, it would be a short-term gain. You would probably use up more of the NOL in the near term. I think the business is worth more on a going concern basis. Okay, granted, maybe we don't use quite as much of the NOL. Looking down the road, we're not that far from, as I said, utilizing all these, maybe not as much, becoming a tax-paying entity, but also we generate a lot of cash flow even as where we are. To the extent we continue to grow Orchid with the small share count that we have, there's a lot of earnings leverage there. We're not that far from that. It allows us to continue to run the company. I'm not really willing to just walk away as a large shareholder, too. It's kind of how we look at it.

Speaker #3: You could. And it would be a short-term gain. You would probably use up more of the NOL in the near term. But I think the business is worth more on a going concern basis, okay, granted, maybe we don't use quite as much of the NOL, but looking down the road, we're not that far from, as I said, utilizing all these, maybe not as much, becoming a tax-paying entity, but also we generate a lot of cash flow even as where we are.

Speaker #3: And to the extent we continue to grow ORCID, with the small share count that we have, there's a lot of earnings leverage there. And we're not that far from that.

Speaker #3: And again, it allows us to continue to run the company. I'm not really willing to just walk away as a large shareholder, too. So, I mean, that's kind of how we look at it.

Gary Ribe: Yeah. The company's $30 million, $26 million as we sit here today in market cap. There are things that you could do that could get that to $100 million, potentially. You guys own half of that, so maybe we could talk about that more offline. I guess in light of some of the hidden value in terms of the value of that management agreement and a few other things, maybe the earnings power becoming a bit more obvious. Have you thought about being a little bit more aggressive in terms of trying to tender for shares or maybe do some kind of forward reverse split where you cash some people out and you get a little bit of a buyback that way, but you also get a stock price that people are actually allowed to buy it?

Speaker #5: Yeah. I mean, the company's 30 million dollars, 26 million dollars, as we sit here today, in market cap, I mean, there are things that you can do that could get that to 100 million potentially.

Speaker #5: And you guys own half of that. So maybe we could talk about that more offline. But I guess in light of some of the hidden value, in terms of the value of that management agreement and a few other things, maybe the earnings power becoming a bit more obvious, have you thought about being a little bit more aggressive in terms of trying to tender for shares or maybe do some kind of forward reverse split where you cash some people out and you get a little bit of a buyback that way, but you also get a stock price that where people are actually allowed to buy it.

Gary Ribe: There's a lot of people that can't buy stocks that are less than, like, five bucks.

Speaker #5: There's a lot of people that can't buy stocks that are less than like five bucks.

Robert E. Cauley: Right. I mean, that's not that I have an answer for that question today. I saw that you asked me that yesterday. That's something we'll take under advisement. We may, I'm not ruling that out at all. As far as share buybacks, yes, we have in the press release-

Speaker #3: Right. I mean, that's something I haven't answered for that question today. I saw that you asked me that yesterday. Something would take under advisement.

Speaker #3: But another and we may. That's rolling that out at all. And we have, as far as share buybacks, we have press release.

Gary Ribe: You did a little in the quarter. That was good.

Speaker #5: Yeah, you did a little in the quarter. That was good.

Robert E. Cauley: Yep. We will continue to do so. The problem is that there's just not a lot of sellers out there. If you recall, we've done two tenders. The first one went extremely well. It was fully subscribed. The second one wasn't even close. While we are able to sell or buy back some shares, there's just not a lot of sellers out there. We could do the split, as you alluded to. That might get some people out. A lot of the small shareholders are remnants of the former mortgage company.

Speaker #3: Yep. And we will continue to do so. The problem is that there's just not a lot of sellers out there. If you were to call, we've done two tenders.

Speaker #3: The first one went extremely well; it was fully subscribed. The second one wasn't even close. While we are able to sell or buy back some shares, there's just not a lot of sellers out there.

Speaker #3: I mean, we could do the split, as you alluded to. That might get some people out. A lot of the small shareholders are remnants of the former mortgage company.

Gary Ribe: Yeah.

Robert E. Cauley: I don't know how many employees were affected. They owned about, like, 100 shares at the time. There's whatever, several hundred of those. Other than that, I suspect, and I don't know because everybody tends to hold their position under the 5% reporting threshold, but I suspect there's really only about 10 or 12 shareholders who own close to that. It's really hard to. People see what's going on. Another thing I would say, most people that hold it are kind of like yourself. They've known the stock, they've followed it for years. They know what's going on and they know what's on the horizon. It's hard to get them to sell. It's been viewed as basically a private equity investment for 10 plus years. If they think they're getting close to cashing in, they don't necessarily want to sell out. We could try those things.

Speaker #3: I don't know how many employees were affected. They are not like 100 shares at the time. So there's whatever, several hundred of those. Other than that, I suspect, and I don't know because everybody tends to hold their position under the 5% reporting threshold, but I suspect there's really only about 10 or 12 shareholders who own close to that.

Gary Ribe: Yeah

Robert E. Cauley: hard to. People see what's going on. Another thing I would say, most people that hold it are kind of like yourself. They've known the stock, they've followed it for years. They know what's going on and they know what's on the horizon. It's hard to get them to sell. It's been viewed as basically a private equity investment for 10 plus years. If they think they're getting close to cashing in, they don't necessarily want to sell out. We could try those things.

Speaker #3: And it's really hard to and people see what's going on. I mean, anybody in another thing I would say, most people that hold it are kind of like yourself.

Speaker #3: They've known the stock. They've followed it for years. They know what's going on, and they know what's on the horizon. So it's hard to get them to sell.

Speaker #3: It's been viewed as basically a private equity investment for 10-plus years. And so if they think they're getting close to cashing in, they don't necessarily want to sell out.

Speaker #3: So we could try those things. But the other thing is, and I don't want to I got to be careful what I say, but it's not here today.

Gary Ribe: Yeah.

Robert E. Cauley: The other thing is, and I got to be careful what I say, but it's not here today. We're not there yet, but in the not-too-distant future, a lot of things can change. If we're here five years from now and the NOLs have been used to the extent possible and we started to transition the balance sheet, it opens the door to a lot of different things that can transform the company. You kind of got to get through this next step first, and I think there's

Speaker #3: We're not there yet. But in the not-too-distant future, a lot of things can change if we're here five years from now and the NOLs have been used to the extent possible and we started to transition the balance sheet.

Speaker #3: It opens the door to a lot of different things. It can transform the company. But you kind of have to get through this next step first.

Gary Ribe: Yeah

Robert E. Cauley: tremendous upside in the business then. You got to chop this wood first.

Speaker #3: And I think there's tremendous upside in the business, but you've got to get through—you've got to chop this wood first.

Gary Ribe: Yeah. No, I hear you. I know a couple people that are just below the waterline. We're not really close to the waterline, but we're pushing 2%.

Speaker #5: Yeah. No, I hear you. And I know a fair amount I know a couple of people that are just a little waterline. We're not really close to the waterline, but we're pushing 2%.

Robert E. Cauley: Like I said, I'm not going to name names, but we field questions and have for years, and I know there's several people that are like that. We speak to them semi-regularly, and they get it. They understand what the strategy is, and you can try to buy them out, but two or three dollars probably isn't going to get it done.

Speaker #3: Yeah. Like I said, I can't I'm not going to name names, but we feel questions and have for years. And I know there's several people that are like that.

Speaker #3: And we speak to them, semi-regularly. And they get it. They're they understand what the strategy is. And you can try to buy them out, but two or three dollars probably isn't going to get it done.

Gary Ribe: Yeah. That's not super exciting for them. Richard, it's nice to meet you. I just have a quick question on your guys' business. Are you guys, as you look at your AUM growth, how much of it is market versus just organic flow?

Speaker #5: Yeah, it's not super exciting for them. Richard, it's nice to meet you. I just have a quick question on your guys' business. Are you guys as you look at your AUM growth, how much of it is market versus just organic flow?

Richard H. Parry: I would say on the direct business, we have more control of that, and I think that will continue to grow on both sides of it. On the platforms, we're really relying on what the consultants want to do in terms of asset allocation. I think our performance creates stability and also potential asset growth. The consultants are really determining how much do they want to have in fixed income and equities. We kind of got to rely on that and just make sure we have products that meet their standards in the categories that we are in.

Speaker #2: I would say that on the direct business, we have more control of that. And I think that will continue to grow. On both sides of it, on the platforms, we're really relying on what the consultants want to do in terms of asset allocation.

Speaker #2: I think our performance creates stability and also potential asset growth, but where the consultants are really determining is how much do they want to have in fixed income and equities.

Speaker #2: And so we kind of got to rely on that and just make sure we have products that meet their standards in the categories that we are in.

Gary Ribe: Makes sense. I think I saw you guys on the Schwab Model Market Center. Will you guys be at IMPACT this year?

Speaker #5: Makes sense. I think I saw you guys on the Schwab Model Marketplace where you guys be at Impact this year.

Richard H. Parry: Yeah. I don't know that. I'd have to ask one of my staff members on that. I definitely know we're in the Envestnet. We go to those conferences and the LPLs.

Speaker #2: Yeah. I don't know that. I'd have to ask one of my staff members on that. I definitely know we're in the invest net. We go to those conferences and the LPLs.

Gary Ribe: Got it.

Richard H. Parry: I don't know about the IMPACT, and I apologize for that.

Speaker #5: Got it.

Speaker #2: But I don't know about the impact. And I apologize for that. We have been there in the past, but.

Gary Ribe: No, no.

Richard H. Parry: We have been there in the past.

Gary Ribe: Okay. Well, thank you guys for all the good work that you're doing. Seems like after a long period of kind of trying to get the head above water, it's starting to really happen, so that's good. Thanks, guys.

Speaker #5: Okay. Well, thank you guys for all the good work that you're doing. It seems like after a long period of kind of trying to get the head above water, it's starting to really starting to really happen.

Robert E. Cauley: Oh, Gary, before you go.

Speaker #5: So that's good. Thanks, guys.

Speaker #3: Well, Gary, before you go.

Gary Ribe: Congrats. Yep.

Robert E. Cauley: Gary, you mentioned in your email the tax. Let me just, for the benefit of everybody. We have this NOL with an associated deferred tax asset, generally under GAAP, we have to evaluate that every year, basically just to kind of update our utilization estimate. Unless.

Speaker #5: Yep.

Speaker #3: Gary, you mentioned in your email the tax. Let me just, for the benefit of everybody, so we have this NOL with an associated deferred tax asset.

Speaker #3: And generally, under GAAP, we have to evaluate that every year basically just to kind of update our utilization estimate. Unless something material happens, in which case you have to do it in the quarter that that occurs.

Gary Ribe: Right

Robert E. Cauley: Something material happens, in which case you have to do it in the quarter that that occurs. That's what happened here. We did this acquisition that's deemed to be a material enough event that we have to reevaluate, but we're doing it as of 30 June. The last time we did it was as of the end of 2025. We had an estimate of what our utilization rate would be. When we do it again at the end of June, we're updating our utilization estimates going forward, but we also have to recognize what we've used year to date. The large tax accrual that you saw for the six-month period, $1.1 million of that is driven by a combination of the estimated utilization rate going forward and more importantly, what we use year to date. That's why you have that outsized tax.

Speaker #3: So that's what happened here. So we did this acquisition. That's deemed to be a material enough event that we have to reevaluate. But we're doing it as of June 30th.

Speaker #3: So the last time we did it was as of the end of 2025. We had an estimate of what our utilization rate would be.

Speaker #3: When we do it again at the end of June, we're updating our utilization estimates going forward. But we also have to recognize what we've used year to date.

Speaker #3: So the large tax accrual that you saw for the six-month period, 1.1 million of that is driven by a combination of the estimated utilization rate going forward and, more importantly, what we use year to date.

Speaker #3: So that's why you have that outsized tax. And of course, it's all non-cash. But that's really why.

Robert E. Cauley: Of course, it's all non-cash, that's really why it looks odd.

Speaker #5: Yeah. So if I look at that, then that's probably about 11 cents a share. You guys had about another 900,000 of acquisition-related costs or something.

Gary Ribe: If I look at that's probably about $0.11 a share. You guys had about another $900,000 of acquisition-related costs or something. That's about $0.20 of drag to the headline number. Is it fair to think, on a normalized basis, it's about $0.25?

Speaker #5: So that's about 20 cents of drag to the headline number or so. Is it fair to think on a normalized basis, it's about 25 cents?

Robert E. Cauley: I'm glad you said that. I don't want to be the one that said that, but I don't disagree with anything you said. The fact to me is, if you look at the 6 months year-to-date, you had about a million and a half of transaction costs, and you had several hundred thousand dollars of mark-to-market. That doesn't go away because we still own shares of Orchid, and we still own a small portfolio, but they're much smaller. They're roughly a third, as I said. If you normalize what's left, that gives you a pretty decent picture of what we're looking at.

Speaker #3: Well, you said that. I don't want to be the one that said that, but I don't disagree with anything you said. Yeah. I mean, that to me is if you look at the six months year to date, you had about a million and a half of transaction costs.

Speaker #3: And you had several hundred thousand dollars of mark-to-market. And that doesn't go away because we still own shares of ORCID, and we still own a small portfolio.

Speaker #3: But they're much smaller. They're roughly a third, as I said. So, if you kind of normalize what's left, that gives you a pretty decent picture of what we're looking at.

Gary Ribe: Yeah. That's my working number. Okay, cool. Thanks, guys. You guys just go. Keep up the good work.

Speaker #5: Yeah, that's kind of my working number. Okay, cool. Thanks, guys. You guys keep up the good work.

Robert E. Cauley: Thank you.

G. Hunter Haas: Thanks.

Speaker #3: Thank you.

Operator: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11. I am showing no further questions in the queue. I would now like to turn the call back over to Robert for closing remarks.

Speaker #1: Thank you. Ladies and gentlemen, as a reminder, to ask a question, please press star one one. I am showing no further questions in the queue.

Speaker #1: I would now like to turn the call back over to Robert for closing remarks.

Robert E. Cauley: Thank you, operator, and thank you, everybody, for taking the time to listen in. To the extent you did not listen in, and you do so, listen to the repeat, and you have a question, or if you just didn't have a question today, feel free to call in. We'd be glad to take your calls. The number here is 772-231-1400. Otherwise, we look forward to speaking with you at the end of next quarter. Thank you.

Speaker #3: Thank you, operator. And thank you, everybody, for taking the time to listen in to the extent you did not listen in and you do so, listen to the repeat.

Speaker #3: And you have a question or if you just didn't have a question today, feel free to call in. We'd be glad to take your calls.

Speaker #3: The number here is 772-231-1400. Otherwise, we look forward to speaking with you at the end of the next quarter. Thank you.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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