Opteum Inc. (NYSE:OPX)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Opteum Inc. Charts. Click Here for more Opteum Inc. Charts.](/p.php?pid=staticchart&s=NY%5EOPX&p=8&t=15)
Opteum Inc. (NYSE:OPX) (“Opteum”
or the “Company”), a
real estate investment trust (“REIT”),
today reported a consolidated net loss of $78.1 million, or $(3.14) per
Class A Common Share for the three month period ended March 31, 2007,
compared to a consolidated net loss of $8.0 million, or $(0.34) per
Class A Common Share, for the prior year period. The Company’s
first quarter results were significantly impacted by operations at the
Company’s majority-owned subsidiary, Opteum
Financial Services, LLC (“OFS”).
Nearly 50% of the Company’s first quarter net
loss, or $37.4 million, was attributable to a valuation allowance on OFS’s
deferred tax assets. Nearly 17.5% of the first quarter net loss was
attributable to negative fair value adjustments to OFS’s
mortgage servicing rights and retained interests in securitizations.
Slightly more than 10% of the first quarter net loss was attributable to
asset write downs at OFS due in part to the Company’s
decision to exit the mortgage origination business.
Details of Results of Operations
The Company’s first quarter consolidated
results include net interest income of $1.9 million, other income of
$1.4 million, gross servicing fee income of $7.6 million, a $12.2
million negative fair value adjustment to mortgage servicing rights
(inclusive of $4.7 million of run-off), an $18.0 million loss on
mortgage banking activities, $0.8 million in losses on the sale of
mortgage-backed securities, a $17.8 million provision associated with an
increase in the Company’s loan loss reserve,
$8.8 million in asset write downs at OFS, $20.6 million in operating
expenses, an income tax provision of $11.5 million (inclusive of a $37.4
million valuation allowance on deferred tax assets) and $0.8 million of
minority interest in OFS’s loss.
The Company’s $18.0 million first quarter
loss on mortgage banking activities includes a $14.1 million negative
fair value adjustment to mortgage loans held for sale and interest rate
lock commitments, a $1.3 million negative fair value adjustment to
retained interests in securitizations and hedging losses of $4.6
million. As of March 31, 2007, the Company’s
loan loss reserve was $17.9 million, compared with $8.0 million as of
December 31, 2006, and $2.2 million as of December 31, 2005.
Management Commentary
During the quarter, the secondary market for mortgage loans, into which
OFS sells mortgage loans that it has purchased or originated,
experienced significant distress and substantially increased volatility.
In response to these developments, the Company previously announced that
OFS would exit its Conduit and Wholesale mortgage origination businesses
and has entered into a definitive agreement to sell its Retail mortgage
origination business. Following the completion of these actions, which
collectively resulted in $8.8 million in asset impairments at OFS in the
first quarter, OFS will continue to hold residual interests in
securitizations and its unsold mortgage servicing rights.
The Company also announced on April 26, 2007, that OFS had entered into
a definitive agreement to sell a majority 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 will be used to repay debt
that is currently secured by OFS’s mortgage
servicing portfolio.
With these actions, the Company will be able to focus its full energies
on managing and growing its portfolio of residential mortgage-backed
securities. As of March 31, 2007, the Company’s
portfolio of mortgage-backed securities consisted of $2.9 billion of
Fannie Mae, Freddie Mac and Ginnie Mae agency securities.
Commenting on the Company’s first quarter
results, Jeffrey J. Zimmer, Chairman, President and Chief Executive
Officer, said, “The dramatic deterioration in
the secondary market for whole loan mortgage products during the first
quarter is largely responsible for the losses at OFS reported today,
including the $17.8 million additional loan loss provision and $18
million loss on mortgage banking activities for the quarter. Although we
have taken aggressive steps to avoid similar losses in the future, OFS’s
exit from the mortgage origination business will be a process that will
take a quarter or two to complete. Looking forward, we intend to focus
our full energies on restoring the profitability of our portfolio of
residential mortgage-backed securities that consists entirely of Fannie
Mae, Freddie Mac and Ginnie Mae agency securities.”
Book Value Per Share
The Company’s Book Value Per Share as of
March 31, 2007, is $4.80 compared with $7.85 as of December 31, 2006.
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.
REIT Taxable Income
In order to maintain its qualification as a REIT, the Company is
required (among other provisions) to annually distribute dividends to
its stockholders in an amount at least equal to, generally, 90% of the
Company’s REIT taxable income. REIT taxable
income is a term that describes the Company’s
operating results calculated in accordance with rules and regulations
promulgated pursuant to the Internal Revenue Code. The Company’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
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.
As a REIT, the Company may be subject to a federal excise tax if it
distributes less than 85% of its REIT taxable income by the end of the
calendar year. Accordingly, the Company’s
dividends are based on its REIT taxable income, as determined for
federal income tax purposes, as opposed to its net income computed in
accordance with GAAP (as reported in the Company’s
consolidated financial statements).
For the first quarter, the Company estimates its REIT taxable income at
$0.7 million. The Company’s REIT taxable
income includes $3.2 million of interest income on intercompany debt
owed by OFS. During April, the Company contributed $88.3 million in
capital to OFS by forgiving intercompany debt owed by OFS. As a result,
the Company’s future REIT taxable income will
be lower by the amount of interest that would have otherwise been earned
on this intercompany debt.
Opteum will hold a conference call to discuss this press release
tomorrow, May 11, 2007, at 8:30 a.m. Eastern time. Investors will have
the opportunity to listen to a live Internet broadcast of the conference
call through the Company's Web site at www.opteum.com.
To listen to the live call, please go to the Web site at least 15
minutes early to register, download, and install any necessary audio
software. For those who cannot listen to the live broadcast, an Internet
replay will be available shortly after the call and continue through May
21, 2007.
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). It attempts 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.