Opteum Inc. (NYSE:OPX)
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Opteum Inc. (NYSE:OPX) (“Opteum”
or the “Company”), a
real estate investment trust (“REIT”),
today announced that it has filed a Form 12b-25 with the Securities and
Exchange Commission in respect of its Quarterly Report on Form 10-Q for
the period ended June 30, 2007. The Company today also announced
preliminary estimates of its second quarter results of operations and
Book Value Per Share at June 30, 2007. These estimates are subject to
continuing review by the Company’s independent
registered public accounting firm and are subject to change. As
previously announced, the Company expects to report its definitive
second quarter results and file its second quarter Form 10-Q on Tuesday,
August 14, 2007. The Company today also announced the June 30, 2007,
composition of the Company’s investment
portfolio of residential mortgage-backed securities (“MBS”).
This information appears in the tables at the end of this press release.
Book Value Per Share
The Company estimates its Book Value Per Share at June 30, 2007, at
approximately $1.17 compared with $4.80 as of March 31, 2007. Book Value
Per Share is regularly used as a valuation metric by various equity
analysts that follow the Company and may be deemed a non-GAAP financial
measure pursuant to Regulation G. The Company computes Book Value Per
Share by dividing total stockholders’ equity
by the total number of shares outstanding of the Company’s
Class A Common Stock.
Estimated Second Quarter Results of Operations
The Company presently estimates a consolidated net loss of approximately
$162.5 million, or approximately ($6.53) per Class A Common Share for
the three-month period ended June 30, 2007. The Company presently
estimates its second quarter loss from continuing operations at
approximately $82.0 million and losses from discontinued operations, net
of tax, of approximately $80.5 million. Discontinued operations refer to
the mortgage loan origination operations previously conducted by the
Company’s majority-owned subsidiary, Orchid
Island TRS, LLC (“OITRS”).
Estimated Second Quarter Results of Continuing Operations
The Company’s estimated second quarter loss
from continuing operations includes an estimated realized loss of
approximately $18.6 million on the sale of MBS and an estimated
other-than-temporary impairment charge of approximately $55.3 million on
MBS previously held in an unrealized loss position. In accordance with
U.S. generally accepted accounting principles (“GAAP”),
the Company previously reported the unrealized losses on MBS that were
held as available for sale securities as accumulated other comprehensive
loss (“AOCI”) on
the Company’s consolidated balance sheet.
During the second quarter, the Company sold MBS with a market value at
the time of sale of approximately $782 million, resulting in the
estimated realized loss of approximately $18.6 million. These sales were
undertaken to preserve and protect the Company’s
liquidity during a period of substantially increased market distress in
the secondary market for mortgage loans and to give comfort to the
Company’s lenders that the Company could meet
its margin calls, all of which have been satisfied.
Under GAAP, the estimated $18.6 million realized loss is required to be
reported in current period earnings and reduces AOCI. In addition, as a
result of these sales, the Company is no longer able to assert its
ability and intent to hold the remaining unsold MBS to maturity.
Accordingly, GAAP requires the elimination of the AOCI associated with
these remaining unsold assets, and this will result in the Company
recognizing an estimated $55.3 million other-than-temporary impairment
charge to earnings during the second quarter.
The Company estimates that its net interest margin on its MBS portfolio
will be approximately 86 basis points as of June 30, 2007, following the
recognition of this other-than-temporary impairment charge. Further, the
recognition of the other-than-temporary impairment charge in the Company’s
second quarter results and the corresponding elimination of the AOCI
balance will not result in any material incremental reduction in the
Company’s consolidated stockholders’
equity at June 30, 2007, because the AOCI balance was previously
included as a deduction in arriving at consolidated stockholders’
equity in prior periods. The Company estimates its consolidated
stockholders’ equity at approximately $28.8
million as of June 30, 2007.
Estimated Second Quarter Results of Discontinued Operations
The Company’s estimated second quarter losses
from discontinued operations of approximately $80.5 million, net of tax,
include an estimated $10.5 in losses on sales of assets of the
discontinued operations, net of tax, and an estimated $70.0 million in
losses from discontinued operations, net of tax. The estimated $70.0
million in losses from discontinued operations, net of tax, includes an
estimated $26.2 million negative fair value adjustment to the Company’s
retained interests in securitizations.
Management Commentary
During the second quarter, the Company exited the mortgage loan
origination business by closing OITRS’s
Conduit and Wholesale mortgage origination channels and selling OITRS’s
Retail mortgage origination channel. As previously disclosed, these
actions were precipitated by a dramatic deterioration in the secondary
market for mortgage loans and continuing weakness in consumer demand for
mortgage products and services.
During the second quarter, the Company also completed the sale by OITRS
of approximately two-thirds of its private-label and agency mortgage
servicing portfolio, the performing loans of which had an aggregate
unpaid principal balance of approximately $5.67 billion as of March 31,
2007. The proceeds of this sale were used to repay debt that was secured
by OITRS’s mortgage servicing portfolio. On
July 26, 2007, the Company announced that OITRS had entered into a
definitive agreement to sell substantially all of its remaining mortgage
servicing portfolio, the loans of which had an aggregate unpaid
principal balance of approximately $2.97 billion as of June 30, 2007.
This sale, which is subject to various closing conditions, is expected
to be completed by September 4, 2007, and the proceeds will be used to
repay the remaining debt that is currently secured by OITRS’s
mortgage servicing portfolio and for other general corporate purposes.
Commenting on the Company’s second quarter
guidance, Jeffrey J. Zimmer, Chairman, President and Chief Executive
Officer, said, “The magnitude of our second
quarter estimated losses is far greater than we could have imagined when
the second quarter began and such losses were precipitated by the now
well-known developments in the secondary market for mortgage loans. We
were unable to immunize ourselves from these developments and our second
quarter results were significantly impacted as a result. However, unlike
some other mortgage market participants, we have survived the recent
market turmoil and we believe that we are well positioned for the
future. This is in no small part due to our prudent liquidity management
and our decision to exit the mortgage loan origination business so as to
reduce our exposure to the housing and secondary mortgage market in the
future.”
Mr. Zimmer continued, “Our recent past
performance notwithstanding, we are optimistic about our prospects going
forward for several reasons. First, a positive net interest margin on
our MBS portfolio has been re-established. At June 30, our MBS portfolio’s
net interest margin is estimated at a positive 86 basis points and the
portfolio was valued at approximately $1.8 billion. Second, our MBS
portfolio is 100% invested in Fannie Mae, Freddie Mac and Ginnie Mae
agency MBS rather than private-label MBS. Third, because we own various
interest-rate-sensitive assets, we stand to benefit if the economic data
begin to show compelling evidence that inflation is under control and
the Federal Reserve eases monetary policy. Fourth, by the end of the
third quarter, we expect that we will have monetized substantially all
of the value associated with our mortgage servicing rights portfolio,
will have fully repaid the debt secured by this asset and will have
further enhanced our liquidity. Fifth, we have over $100 million in
trust preferred debt capital that does not mature until 2035. Sixth, and
perhaps most importantly, the mortgage origination business albatross is
no longer around our necks and we will no longer incur the substantial
operating losses associated with this business that we have experienced
over the course of the last several quarters. In summary, we believe
that our future is bright. We sincerely thank our shareholders, our
lenders and our counterparties that have stood by us through these
difficult times, and we look forward to restoring our profitability.”
The Company has scheduled an online Web simulcast and conference call to
discuss these announcements that will begin at 8:15 a.m. E.T. today,
Friday, August 10, 2007. An online replay will be available
approximately two hours following the conclusion of the live broadcast
and will continue for four days. A link to these events will be
available at the Company's website www.opteum.com.
Those persons without Internet access may listen to the live call by
dialing (800) 240-5318 or (303) 262-2141, confirmation code: 11095503.
About Opteum
Opteum Inc. is a REIT that invests primarily in, but is not limited to,
residential mortgage-related securities issued by the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage
Corporation (Freddie Mac) and the Government National Mortgage
Association (Ginnie Mae). Its objective is to earn returns on the spread
between the yield on its assets and its costs, including the interest
expense on the funds it borrows.
Statements herein relating to matters that are not historical facts
are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. The reader is cautioned that such
forward-looking statements are based on information available at the
time and on 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 Opteum Inc.'s filings with the
Securities and Exchange Commission, including Opteum Inc.'s most recent
Annual Report on Form 10-K or Quarterly Report on Form 10-Q. Opteum Inc.
assumes no obligation to update forward-looking statements to reflect
subsequent results, changes in assumptions or changes in other factors
affecting forward-looking statements.
Opteum Inc.
Unaudited RMBS Portfolio
Information as of June 30, 2007
Prices Obtained From Independent
Third-Party Broker/Dealers
Valuation
Asset Category
June 30, 2007
Market Value
As a Percentage of Mortgage Assets
As a Percentage of Mortgage Assets, Cash and P&I Receivable
Adjustable Rate Mortgage Backed Securities (1)
$
1,171,276,901
64.40%
62.91%
Hybrid Adjustable Rate Mortgage Backed Securities
213,858,546
11.76%
11.49%
Fixed Rate Mortgage Backed Securities
392,575,297
21.59%
21.09%
Fixed Rate Agency Debt
36,777,056
2.02%
1.98%
Fixed Rate CMO
4,148,229
0.23%
0.22%
Total: Mortgage Assets (2)
$
1,818,636,030
100.00%
Total Cash and Net Short-Term Receivables
$
42,938,043
2.31%
Cash out on Margin (Encumbered Cash)
-
0.00%
Total: All Assets
$
1,861,574,073
100.00%
(1) Adjustable Rate MBS are those that reset coupons within one
year’s time.
(2) The value of unencumbered securities at June 30, 2007, is
$401,568.
Characteristics
Asset Category
Weighted Average Coupon
Weighted Average Lifetime Cap
Weighted Average Periodic Cap Per Year (3)
Weighted Average Coupon Reset (in Months)
Longest Maturity
Weighted Average Maturity (in Months)
Adjustable Rate Mortgage Backed Securities (3)
5.42%
9.85%
1.74%
4.95
1-Apr-44
318
Hybrid Adjustable Rate Mortgage Backed Securities
4.40%
9.91%
2.04%
13.87
1-May-36
336
Fixed Rate Mortgage Backed Securities
6.89%
n/a
n/a
n/a
1-Jan-37
261
Fixed Rate Agency Debt
4.00%
n/a
n/a
n/a
25-Feb-10
32
Fixed Rate CMO
7.00%
n/a
n/a
n/a
18-May-27
239
Total: Mortgage Assets
5.59%
9.86%
1.79%
6.32
1-Apr-44
302
(3) 13.4% ($156.9 million) of the Adjustable Rate Mortgage
Portfolio have no periodic caps. These assets are excluded from
the weighted average periodic cap per year calculation.
Agency
June 30, 2007
Market Value
As a Percentage of Mortgage Assets
Pool Status
June 30, 2007
Market Value
As a Percentage of Mortgage Assets
Fannie Mae
$
1,413,318,075
77.71%
Whole Pool
$
1,255,302,839
69.02%
Freddie Mac
107,250,345
5.90%
Non Whole Pool
563,333,191
30.98%
Ginnie Mae
298,067,610
16.39%
Total Portfolio
$
1,818,636,030
100.00%
Total Portfolio
$
1,818,636,030
100.00%
Prepayment Speeds
Asset Category
Weighted Average One Month Prepayment Speeds (CPR)
Weighted Average Three Month Prepayment Speeds (CPR) (4)
Adjustable Rate Mortgage Backed Securities
41.32%
43.75%
Hybrid Adjustable Rate Mortgage Backed Securities
21.92%
23.09%
Fixed Rate Mortgage Backed Securities
13.06%
14.49%
Fixed Rate Agency Debt
23.53%
21.63%
Fixed Rate CMO
18.92%
21.86%
Total: Mortgage Assets
32.57%
34.54%
(4) On June 6, 2007, Prepayment Speeds were released for
paydowns occurring in May 2007 (March –
May for three month speeds). The numbers above reflect that data.
Valuation - By RMBS Asset Type
June 30, 2007
Market Value
% of Asset Class
% of Total Mortgage Assets
Adjustable Rate Mortgages (“ARMs”)
One Month LIBOR
$
12,670,357
1.08%
0.70%
Moving Treasury Average
31,055,407
2.65%
1.71%
Cost Of Funds Index
4,065,761
0.35%
0.22%
Six Month LIBOR
69,269,904
5.91%
3.81%
Six Month CD Rate
1,963,598
0.17%
0.11%
One Year LIBOR
519,168,747
44.33%
28.55%
Conventional One Year CMT
267,523,707
22.84%
14.71%
FHA and VA One Year CMT
262,174,245
22.38%
14.42%
Other
3,385,176
0.29%
0.19%
Total ARMs
$
1,171,276,901
100.00%
64.40%
Hybrid ARMs
Generic Fannie or Freddie Hybrid ARMs
13 - 18 Months to First Reset
$
140,201,424
65.56%
7.71%
19 - 24 Months to First Reset
59,405,634
27.78%
3.27%
25 - 36 Months to First Reset
0
0.00%
0.00%
37 - 60 Months to First Reset
0
0.00%
0.00%
Total Generic Fannie or Freddie Hybrid ARMs
$
199,607,057
93.34%
10.98%
Agency Alt-A Hybrid ARMs
13 - 18 Months to First Reset
$
0
0.00%
0.00%
19 - 24 Months to First Reset
6,830,586
3.19%
0.38%
25 - 36 Months to First Reset
1,229,916
0.58%
0.07%
37 - 60 Months to First Reset
0
0.00%
0.00%
Total Agency Alt-A Hybrid ARMs
$
8,060,502
3.77%
0.44%
GNMA Hybrid ARMs
13 - 24 Months to First Reset
$
6,190,987
2.89%
0.34%
Total GNMA Hybrid ARMs
$
6,190,987
2.89%
0.34%
Total Hybrid ARMs
$
213,858,546
100.00%
11.76%
June 30, 2007
Market Value
% of Asset Class
% of Total Mortgage Assets
Fixed Rate Agency Debt
Feb 2010 Stated Final Maturity
$
36,777,056
100.00%
2.02%
Total Fixed Rate Agency Debt
$
36,777,056
100.00%
2.02%
Fixed Rate CMOs
Fixed Rate CMOs
$
4,148,229
100.00%
0.23%
Total Fixed Rate CMOs
$
4,148,229
100.00%
0.23%
Fixed Rate Assets
10yr Other (Seasoned, Low Avg Bal, Low FICO, etc.)
$
1,372,253
0.35%
0.08%
15yr $85,000 Maximum Loan Size
53,563,574
13.64%
2.95%
15yr $110,000 Maximum Loan Size
3,329,453
0.85%
0.18%
15yr 100% Investor Property
556,523
0.14%
0.03%
15yr 100% FNMA Expanded Approval Level 3
425,887
0.11%
0.02%
15yr 100% Alt-A
27,768,368
7.07%
1.53%
15yr Geography Specific (NY, FL, VT, TX)
1,370,340
0.35%
0.08%
15yr Other (Seasoned, Low Avg Bal, Low FICO, etc.)
13,776,947
3.51%
0.76%
20yr Other (Seasoned, Low Avg Bal, Low FICO, etc.)
859,029
0.22%
0.05%
20yr 100% Alt-A
644,835
0.16%
0.04%
30yr $85,000 Maximum Loan Size
121,866,429
31.04%
6.70%
30yr $110,000 Maximum Loan Size
29,065,679
7.40%
1.60%
30yr 100% Investor Property
4,907,970
1.25%
0.27%
30yr 100% FNMA Expanded Approval Level 3
25,427,458
6.48%
1.40%
30yr 100% Alt-A
22,209,490
5.66%
1.22%
30yr Geography Specific (NY, FL, VT, TX)
6,461,160
1.65%
0.36%
30yr 100% GNMA Builder Buydown Program
3,183,039
0.81%
0.18%
30yr Other (Seasoned, Low Avg Bal, Low FICO, etc.)
75,786,862
19.31%
4.17%
Total Fixed Rate Assets
$
392,575,297
100.00%
21.59%
Total (All RMBS Portfolio Assets)
$
1,818,636,030
100.00%
Total Cash and Short-Term Receivables
42,938,043
Total Value of RMBS Portfolio Assets, Cash and Short-Term
Receivables
$
1,861,574,073