UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 2006
Opteum Inc.
(Exact Name of Registrant as Specified in Charter)
|
Maryland |
|
001-32171 |
|
72-1571637 |
|
(State or Other Jurisdiction of Incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
3305 Flamingo Drive, Vero Beach, Florida 32963
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code (772) 231-1400
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01. REGULATION FD DISCLOSURE
On February 28, 2006, Opteum Inc. (the “Company”) made available to investors an investor presentation. A copy of this investor presentation is attached hereto as Exhibit 99.1.
The Company believes that certain statements in the information attached may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in the Company’s filings with the U.S. Securities and Exchange Commission.
This information furnished under this “Item 7.01 Regulation FD Disclosure,” including the exhibits related hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any disclosure document of the Company, except as shall be expressly set forth by specific reference in such document.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
99.1 — Investor Presentation
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: February 28, 2006 |
Opteum Inc. |
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By: |
/s/ Jeffrey J. Zimmer |
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Jeffrey J. Zimmer |
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Chairman, Chief Executive Officer and President |
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3
EXHIBIT INDEX
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Exhibit No. |
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99.1 - Investor Presentation |
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4
Exhibit 99.1
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[LOGO]
February 2006
[LOGO]
Table of Contents
1. Why Merge with OFS? (Page 3)
2. Analyst Estimates for OPX (Page 10)
3. Corporate Mission and The Merger (Page 12)
4. Opteum Portfolio and Liabilities Update (Page 15)
a. 8K Released 2/22/2006
5. OFS Business Model (Page 29)
6. Discussion of GAAP Accounting & Proper SEC Presentations (Page 42)
7. What Causes Book Value to Fluctuate? (Page 45)
8. Corporate Achievements and Disappointments in 2005 (Page 47)
2
Why Merge with OFS
• Decrease Reliance of RMBS Portfolio Arbitrage on Federal Reserve Rate Decisions
• Diversify Sources of Revenue
• High Teens ROE Potential is Accretive to REIT Investment Opportunities
• New Peer Group Stock Prices Trade at Higher Multiples to Book
• Executive Expertise
• Portfolio Management
• Liquidity Management
• Mortgage Banking
• Companies that can Effectively Manage all Three Facets of the Mortgage Business have Historically had Stock Prices which Trade at Higher Multiples
• Origination Synergies
• OFS is Nearing the Point in Their Lifecycle where Cash Flow from Operations are Sufficient to Sustain Organic Growth while the Mortgage Banking Business Cycle is at a Point where Originators Trade at Lower Multiples — Thus Providing an Ideal Entry Point for Opteum
3
Price/Book for RMBS and Origination REITs
Median Price to Book Ratio
[CHART]
4
Percentage of Median Price/Book of Active Prime Group to Median Price/Book of RMBS Group
[CHART]
5
Median Price to Book Ratio of Active & Prime Group
[CHART]
6
Opteum (REIT) Portfolio Return on Marginal Equity Opportunities (2/24/06)
|
Net Asset Yield |
|
5.55 |
% |
|
Cost of Funding (#) |
|
4.80 |
% |
|
Net Interest Spread (NIS) |
|
0.75 |
% |
|
|
|
|
|
|
NIS x Leverage (11.5:1) |
|
8.63 |
% |
|
Return on Unlevered Equity |
|
5.00 |
% |
|
Return on Investment |
|
13.63 |
% |
|
|
|
|
|
|
Overhead |
|
(2.00 |
)% |
|
Funding Contracts |
|
(0.25 |
)% |
|
Other Expenses |
|
(0.25 |
)% |
|
Return on Equity |
|
11.13 |
% |
(#) 3 Month LIBOR is 4.80%
7
OFS Origination Projections for 2006
|
Closings |
|
$ |
7,250,000,000 |
|
|
# of Closings |
|
38,625 |
|
|
|
Average Loan Size |
|
$ |
187,715 |
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
264,000,000 |
|
|
Operating Expenses |
|
$ |
(149,000,000 |
) |
|
Non-Operating Expenses |
|
$ |
(94,000,000 |
) |
|
OFS Net Income Before Taxes |
|
$ |
21,000,000 |
|
|
|
|
|
|
|
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Minority Interest |
|
$ |
(1,000,000 |
) |
|
Income Taxes |
|
$ |
(8,000,000 |
) |
|
Net Income |
|
$ |
12,000,000 |
|
Return on Equity: $12,000,000 / $56,300,000 = 21.3%
8
Return Evaluation of OFS Investment
|
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Return to REIT |
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||
|
Equity Investment |
($56.3MM) |
|
$ |
12.00MM |
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(after-tax) |
|
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Loan (11%) |
($15.0MM) |
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$ |
1.65MM |
|
(non-taxable) |
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Loan (BCCII) (11%) |
($50.0MM) |
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$ |
5.50MM |
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(non-taxable) |
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Total Return |
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$ |
19.15MM |
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Cost to REIT |
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Equity Investment + $15MM Loan |
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($71.3MM @ 11.13%)* |
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$ |
7.94MM |
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$50MM Loan (BCCII) |
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|
|
($50.0MM @ 7.8575%)** |
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$ |
3.93MM |
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Total Cost |
|
$ |
11.87MM |
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|
|
Excess Return = $7.28MM
* The implied charge of 11.13% equals the current REIT investment opportunities on marginal equity
** 7.8575% is the coupon on the BCCII
9
Analysts Estimates for OPX
10
Analyst Estimates for OPX Earnings
|
Firm |
|
Analyst |
|
Q4 2005 |
|
Q1 2006 |
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Q2 2006 |
|
Date of Most Recent |
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Rating |
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Year 2006 |
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||||
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Deutsche Bank |
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Steven Laws |
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$ |
0.14 |
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$ |
0.09 |
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$ |
0.12 |
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December 13, 2005 |
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Buy |
|
$ |
0.55 |
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FIG Partners |
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Chris Marinac |
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$ |
0.14 |
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$ |
0.15 |
(1) |
$ |
0.17 |
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December 5, 2005 |
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Outperform |
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$ |
0.70 |
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Friedman Billings Ramsey |
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Merrill Ross |
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$ |
0.14 |
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$ |
0.06 |
(2) |
$ |
0.04 |
(2) |
December 13, 2005 |
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Market Perform |
|
$ |
0.39 |
(2) |
|
Hilliard Lyons |
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Ross Demmerle |
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N/A |
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N/A |
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N/A |
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December 2, 2005 |
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Neutral |
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$ |
0.75 |
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|||
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Cohen Brothers |
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Alvar Soosaar |
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$ |
0.15 |
(1) |
N/A |
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N/A |
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January 6, 2006 |
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N/A |
|
$ |
0.79 |
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Flagstone Securities |
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Steve Delaney |
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$ |
0.13 |
(2) |
$ |
0.12 |
**(1) |
$ |
0.18 |
**(1) |
February 21, 2006 |
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N/A |
|
$ |
0.80 |
**(1) |
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Average = |
|
$ |
0.14 |
(3) |
$ |
0.11 |
(3) |
$ |
0.13 |
(3) |
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|
|
$ |
0.66 |
(3) |
(1) High
(2) Low
(3) Average
* “Earnings Estimates” generally reflect analyst’s dividend expectations.
** Expected dividends are $0.09, $0.12, and $0.60 for Q1-2006, Q2-2006, and YR-2006, respectively.
11
Corporate Mission and the Merger
a. Thousand Employees Working as One
12
Corporate Mission & Long Term Goal
Our Corporate Mission:
• Provide Superior Returns to our Shareholders.
If we achieve our Corporate Mission, we will be able to achieve our Corporate Long Term Goal.
Our Corporate Long Term Goal:
• Attract, Retain, and Grow Equity Capital.
That simple Corporate Mission and Long Term Goal can only be successfully achieved if our entire enterprise – every associate - embraces the same Corporate Principles. The Principles are also simple, but must be rigorously applied to achieve the Corporate Mission and Long Term Goal. Quite simply, our success will depend on all of us applying these principles.
13
Corporate Principles
1. We will always have an uncompromising determination to be guided by integrity and by what serves our customers and investors best.
2. We will always strive to exceed our customers and investors expectations.
3. We will always strive to achieve excellence in everything we do – both inside and outside the enterprise.
4. We will always recognize that diversity is not optional and is inherent in everything we do.
5. We will always have the uncompromising conviction that our associates are our most important asset.
6. We will always ensure an entrepreneurial environment that will create innovative solutions for new as well as existing challenges.
7. We will always ensure a performance reward system which recognizes important contributions and enables us to attract and retain the best associates.
8. We will always remember that we are a team and that personal agendas are left at home. Any associate who puts their personal interests ahead of the interest of our investors, customers, and the company will no longer be part of the team.
9. We will always invest in the most innovative technology to enhance every associate’s ability to perform most efficiently and with a competitive advantage.
10. We will always remember that our reputation is as dear as our investors’ capital and our customer relationships.
11. Best Practices is a life time commitment to always do what is right.
12. We will always be committed to Think like an Investor and Act like an Owner. We will always encourage associates to be owners, which results in a further alignment with our investors and customers.
14
Opteum Portfolio and Liabilities Update
• 8K Released 2/22/2006 with Snapshot of 2/17/2006 Portfolio and Liabilities
15
Opteum Current Portfolio Highlights
• Opteum Currently owns Agency Mortgage Related Securities — Little Credit Risk
• Diversification Across Various Types of Short-Duration Asset Classes
• Short-Duration Assets have Historically Exhibited Low Price Volatility
• Diversification Limits Potential Volatility from Overexposure to any One Asset Class
1. Adjustable Rate Securities (those that reset within 12 months)
2. CMO Monthly Resetting Floaters
3. Hybrid ARMS and Balloons
4. Fixed Rate Assets (specified pools, sequential CMO’s, agency debt - with low durations)
5. Cash (Opteum typically has 40% of its equity in cash, especially prior to monthly bond factor and prepayment release)
• Leverage, Defined as Debt to Equity, Typically Ranges from 8x - 12x
• Portfolio Constructed with the Aim of Performing Well in Both Rising and Falling Interest Rate Environments
• Inelastic Borrowers and Adjustable Rate Assets
16
Portfolio Information
UNAUDITED as of 2/17/2006
|
|
Opteum Inc. - Asset Information |
|
|
|
This Table Reflects All Transactions. Prices Used Are Internally Generated. |
[LOGO] |
Valuation
|
|
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|
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|
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As a Percentage of |
|
|
|
|
|
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As a Percentage of |
|
Mortgage Assets, Cash |
|
|
|
Asset Category |
|
Market Value |
|
Mortgage Assets |
|
and P&I Receivable |
|
|
|
Adjustable Rate Mortgage Backed Securities (1) |
|
$ |
2,073,842,989 |
|
58.16 |
% |
55.48 |
% |
|
Hybrid Adjustable Rate Mortgage Backed Securities |
|
$ |
728,843,996 |
|
20.44 |
% |
19.50 |
% |
|
Fixed Rate Mortgage Backed Securities |
|
$ |
549,428,498 |
|
15.41 |
% |
14.70 |
% |
|
Fixed Rate Agency Debt |
|
$ |
96,727,786 |
|
2.71 |
% |
2.59 |
% |
|
Fixed Rate CMO |
|
$ |
70,067,967 |
|
1.96 |
% |
1.87 |
% |
|
Balloon Maturity Mortgage Backed Securities |
|
$ |
47,223,309 |
|
1.32 |
% |
1.26 |
% |
|
Total: Mortgage Assets (2) |
|
$ |
3,566,134,545 |
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and Net Short-Term Receivables |
|
$ |
107,071,755 |
|
|
|
2.86 |
% |
|
Cash out on Margin (Encumbered Cash) |
|
$ |
— |
|
|
|
0.00 |
% |
|
Long-Term Receivables From Opteum Financial Services |
|
$ |
65,000,000 |
|
|
|
1.74 |
% |
|
Total: All Assets |
|
$ |
3,738,206,300 |
|
|
|
100.00 |
% |
Note: The Value of Securities in the Box (Unencumbered) is $9,336,979
(1) Adjustable Rate MBS are those that reset coupons within one year’s time.
(2) This includes Forward Settling Purchases.
Prepayment Speeds
|
|
|
Weighted Average |
|
Weighted Average |
|
|
|
|
One Month |
|
Three Month |
|
|
|
|
Prepayment Speeds |
|
Prepayment Speeds |
|
|
Asset Category |
|
(CPR) |
|
(CPR) |
|
|
Adjustable Rate Mortgage Backed Securities |
|
26.24 |
% |
32.17 |
% |
|
Hybrid Adjustable Rate Mortgage Backed Securities |
|
16.82 |
% |
23.54 |
% |
|
Fixed Rate Mortgage Backed Securities |
|
20.96 |
% |
26.00 |
% |
|
Fixed Rate Agency Debt |
|
n/a |
|
n/a |
|
|
Fixed Rate CMO |
|
17.36 |
% |
24.37 |
% |
|
Balloon Maturity Mortgage Backed Securities |
|
16.71 |
% |
15.58 |
% |
|
Total: Mortgage Assets |
|
22.79 |
% |
28.85 |
% |
On February 7, 2006 Prepayment Speeds were released for paydowns occurring in January 2006 (November - January for three month speeds). The numbers above reflect that data.
|
Portfolio Price and Duration |
|
|
|
|
|
|
|
Weighted Average Purchase Price |
|
$ |
102.52 |
|
|
|
|
Weighted Average Current Price |
|
$ |
100.83 |
|
|
|
|
Modeled Effective Duration |
|
1.233 |
|
|
|
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Characteristics
|
|
|
|
|
|
|
Weighted Average |
|
Weighted Average |
|
|
|
Weighted Average |
|
|
|
|
Weighted Average |
|
Weighted Average |
|
Periodic Cap |
|
Coupon Reset |
|
Longest |
|
Maturity |
|
|
Asset Category |
|
Coupon |
|
Lifetime Cap |
|
Per Year (3) |
|
(in Months) |
|
Maturity |
|
(in Months) |
|
|
Adjustable Rate Mortgage Backed Securities (3) |
|
4.61 |
% |
10.42 |
% |
1.79 |
% |
4.87 |
|
1-Apr-44 |
|
332 |
|
|
Hybrid Adjustable Rate Mortgage Backed Securities |
|
4.32 |
% |
9.84 |
% |
1.72 |
% |
19.31 |
|
1-Nov-35 |
|
337 |
|
|
Fixed Rate Mortgage Backed Securities |
|
6.91 |
% |
n/a |
|
n/a |
|
n/a |
|
1-Feb-36 |
|
275 |
|
|
Fixed Rate Agency Debt |
|
4.00 |
% |
n/a |
|
n/a |
|
n/a |
|
25-Feb-10 |
|
48 |
|
|
Fixed Rate CMO |
|
5.58 |
% |
n/a |
|
n/a |
|
n/a |
|
25-Jul-34 |
|
330 |
|
|
Balloon Maturity Mortgage Backed Securities |
|
4.06 |
% |
n/a |
|
n/a |
|
n/a |
|
1-Feb-11 |
|
47 |
|
|
Total: Mortgage Assets |
|
4.90 |
% |
10.27 |
% |
1.77 |
% |
8.62 |
|
1-Apr-44 |
|
313 |
|
(3) 31.3% ($649.8 million) of The Adjustable Rate Mortgage Portfolio Have No Periodic Caps. These assets are excluded from the weighted average periodic cap per year calculation
|
|
|
|
|
As a Percentage of |
|
|
|
Agency |
|
Market Value |
|
Mortgage Assets |
|
|
|
Fannie Mae |
|
$ |
2,275,520,234 |
|
63.81 |
% |
|
Freddie Mac |
|
$ |
697,406,331 |
|
19.56 |
% |
|
Ginnie Mae |
|
$ |
593,207,980 |
|
16.63 |
% |
|
Total Portfolio |
|
$ |
3,566,134,545 |
|
100.00 |
% |
|
|
|
|
|
As a Percentage of |
|
|
|
Pool Status |
|
Market Value |
|
Mortgage Assets |
|
|
|
Whole Pool |
|
$ |
2,176,625,554 |
|
61.04 |
% |
|
Non Whole Pool |
|
$ |
1,389,508,991 |
|
38.96 |
% |
|
|
|
|
|
|
|
|
|
Total Portfolio |
|
$ |
3,566,134,545 |
|
100.00 |
% |
17
|
|
Internally |
|
|
|
|
|
||
|
|
|
Generated Market |
|
% of Asset |
|
% of Total |
|
|
|
|
|
Value |
|
Class |
|
Mortgage Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable Rate Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Month LIBOR |
|
$ |
41,207,709 |
|
1.99 |
% |
1.16 |
% |
|
Moving Treasury Average |
|
$ |
59,368,641 |
|
2.86 |
% |
1.66 |
% |
|
Cost Of Funds Index |
|
$ |
399,406,681 |
|
19.26 |
% |
11.20 |
% |
|
Six Month LIBOR |
|
$ |
210,395,397 |
|
10.15 |
% |
5.90 |
% |
|
Six Month CD Rate |
|
$ |
2,877,030 |
|
0.14 |
% |
0.08 |
% |
|
One Year LIBOR |
|
$ |
409,223,222 |
|
19.73 |
% |
11.48 |
% |
|
Conventional One Year CMT |
|
$ |
581,577,004 |
|
28.04 |
% |
16.31 |
% |
|
FHA and VA One Year CMT |
|
$ |
363,094,211 |
|
17.51 |
% |
10.18 |
% |
|
Other |
|
$ |
6,693,094 |
|
0.32 |
% |
0.19 |
% |
|
Total ARMs |
|
$ |
2,073,842,989 |
|
100.00 |
% |
58.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
Hybrid ARMs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generic Fannie or Freddie Hybrid ARMs |
|
|
|
|
|
|
|
|
|
13 - 18 Months to First Reset |
|
$ |
318,101,010 |
|
43.64 |
% |
8.92 |
% |
|
19 - 24 Months to First Reset |
|
$ |
131,473,261 |
|
18.04 |
% |
3.69 |
% |
|
25 - 36 Months to First Reset |
|
$ |
51,030,472 |
|
7.00 |
% |
1.43 |
% |
|
37 - 48 Months to First Reset |
|
$ |
0 |
|
0.00 |
% |
0.00 |
% |
|
Total |
|
$ |
500,604,743 |
|
68.68 |
% |
14.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
Agency Alt-A Hybrid ARMs |
|
|
|
|
|
|
|
|
|
13 - 18 Months to First Reset |
|
$ |
17,021,633 |
|
2.34 |
% |
0.48 |
% |
|
19 - 24 Months to First Reset |
|
$ |
3,821,659 |
|
0.52 |
% |
0.10 |
% |
|
25 - 36 Months to First Reset |
|
$ |
14,932,781 |
|
2.05 |
% |
0.42 |
% |
|
37 - 47 Months to First Reset |
|
$ |
4,144,958 |
|
0.57 |
% |
0.12 |
% |
|
Total |
|
$ |
39,921,031 |
|
5.48 |
% |
1.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
GNMA Hybrid ARMs |
|
|
|
|
|
|
|
|
|
13 - 24 Months to First Reset |
|
$ |
167,074,229 |
|
22.92 |
% |
4.68 |
% |
|
25 - 36 Months to First Reset |
|
$ |
21,243,993 |
|
2.92 |
% |
0.60 |
% |
|
Total |
|
$ |
188,318,222 |
|
25.84 |
% |
5.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Hybrid ARMs |
|
$ |
728,843,996 |
|
100.00 |
% |
20.44 |
% |
|
|
|
Internally |
|
% of Asset |
|
% of Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balloons |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< = 4.0 Years to Balloon Date |
|
$ |
36,179,124 |
|
76.61 |
% |
1.01 |
% |
|
4.01 - 5.0 Years to Balloon Date |
|
$ |
11,044,185 |
|
23.39 |
% |
0.31 |
% |
|
5.01 - 5.5 Years to Balloon Date |
|
$ |
0 |
|
0.00 |
% |
0.00 |
% |
|
Total Balloons |
|
$ |
47,223,309 |
|
100.00 |
% |
1.32 |
% |
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Agency Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5yr Stated Final Maturity |
|
$ |
96,727,786 |
|
100.00 |
% |
2.71 |
% |
|
Total Fixed Rate Agency Debt |
|
$ |
96,727,786 |
|
100.00 |
% |
2.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate CMOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate CMOs |
|
$ |
70,067,967 |
|
100.00 |
% |
1.96 |
% |
|
Total Fixed Rate CMOs |
|
$ |
70,067,967 |
|
100.00 |
% |
1.96 |
% |
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10yr Other (Seasoned, Low Avg Bal, Low FICO, etc.) |
|
$ |
2,031,512 |
|
0.37 |
% |
0.06 |
% |
|
15yr $85,000 Maximum Loan Size |
|
$ |
70,884,818 |
|
12.90 |
% |
1.98 |
% |
|
15yr $110,000 Maximum Loan Size |
|
$ |
4,689,136 |
|
0.85 |
% |
0.13 |
% |
|
15yr 100% Investor Property |
|
$ |
610,435 |
|
0.11 |
% |
0.02 |
% |
|
15yr 100% FNMA Expanded Approval Level 3 |
|
$ |
946,891 |
|
0.17 |
% |
0.03 |
% |
|
15yr 100% Alt-A |
|
$ |
38,751,040 |
|
7.05 |
% |
1.09 |
% |
|
15yr Geography Specific (NY, FL, VT, TX) |
|
$ |
1,818,235 |
|
0.33 |
% |
0.05 |
% |
|
15yr Other (Seasoned, Low Avg Bal, Low FICO, etc.) |
|
$ |
25,605,844 |
|
4.66 |
% |
0.72 |
% |
|
20yr Other (Seasoned, Low Avg Bal, Low FICO, etc.) |
|
$ |
1,127,853 |
|
0.21 |
% |
0.03 |
% |
|
20yr 100% Alt-A |
|
$ |
771,324 |
|
0.14 |
% |
0.02 |
% |
|
30yr $85,000 Maximum Loan Size |
|
$ |
161,731,593 |
|
29.44 |
% |
4.54 |
% |
|
30yr $110,000 Maximum Loan Size |
|
$ |
38,492,163 |
|
7.01 |
% |
1.08 |
% |
|
30yr 100% Investor Property |
|
$ |
6,276,128 |
|
1.15 |
% |
0.18 |
% |
|
30yr 100% FNMA Expanded Approval Level 3 |
|
$ |
49,264,461 |
|
8.97 |
% |
1.38 |
% |
|
30yr 100% Alt-A |
|
$ |
35,789,691 |
|
6.51 |
% |
1.00 |
% |
|
30yr Geography Specific (NY, FL, VT, TX) |
|
$ |
4,528,275 |
|
0.82 |
% |
0.13 |
% |
|
30yr 100% GNMA Builder Buydown Program |
|
$ |
5,431,751 |
|
0.99 |
% |
0.15 |
% |
|
30yr Other (Seasoned, Low Avg Bal, Low FICO, etc.) |
|
$ |
100,677,348 |
|
18.32 |
% |
2.82 |
% |
|
Total Fixed Rate Collateral |
|
$ |
549,428,498 |
|
100.00 |
% |
15.41 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total (All Mortgage Assets) |
|
$ |
3,566,134,545 |
|
|
|
100.00 |
% |
|
Total Cash and Short-Term Receivables |
|
$ |
107,071,755 |
|
|
|
|
|
|
Long-term Receivables From OFS |
|
$ |
65,000,000 |
|
|
|
|
|
|
Total Assets and Cash |
|
$ |
3,738,206,300 |
|
|
|
|
|
|
Total Forward Settling Purchases |
|
$ |
139,882,457 |
|
|
|
|
|
18
ARM Reset Schedule
Opteum Inc Coupon Reset Schedule
Opteum’s Total Outstanding Current Face as of 2/17/2006
(Entire Portfolio, Assumes No Paydowns)
[CHART]
19
Opteum (REIT) Portfolio Return on Marginal Equity Opportunities (2/21/06)
( 1 Year CMT Rate + 225 bps margin) - (1 Month LIBOR)
[CHART]
20
Opteum (REIT) Liabilities
[LOGO]
Unaudited Funding Information as of 2/17/2006
|
|
|
Dollar Amount of |
|
Weighted Average |
|
Longest |
|
|
|
Repurchase Counterparties |
|
Borrowings |
|
Maturity in Days |
|
Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche Bank (1) |
|
$ |
950,737,006 |
|
101 |
|
11-Oct-06 |
|
|
Nomura |
|
$ |
671,699,000 |
|
84 |
|
18-Sep-06 |
|
|
WAMU |
|
$ |
383,501,000 |
|
22 |
|
13-Apr-06 |
|
|
Cantor Fitzgerald |
|
$ |
346,402,000 |
|
43 |
|
25-Apr-06 |
|
|
Bear Stearns |
|
$ |
236,335,000 |
|
97 |
|
7-Jul-06 |
|
|
UBS Securities |
|
$ |
171,096,000 |
|
83 |
|
19-Oct-06 |
|
|
Goldman Sachs |
|
$ |
141,917,000 |
|
48 |
|
1-May-06 |
|
|
Merrill Lynch |
|
$ |
128,119,000 |
|
48 |
|
19-Apr-06 |
|
|
JP Morgan Secs |
|
$ |
93,783,000 |
|
143 |
|
18-Jul-06 |
|
|
Morgan Stanley |
|
$ |
72,606,455 |
|
67 |
|
27-Apr-06 |
|
|
Lehman Bros |
|
$ |
62,643,000 |
|
39 |
|
28-Mar-06 |
|
|
Daiwa Secs |
|
$ |
35,772,000 |
|
85 |
|
7-Jul-06 |
|
|
Countrywide Secs |
|
$ |
22,930,000 |
|
38 |
|
27-Mar-06 |
|
|
RBS Greenwich Capital |
|
$ |
1,503,000 |
|
45 |
|
3-Apr-06 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,319,043,461 |
|
76 |
|
19-Oct-06 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Forward Settling Purchases Without Commited Repo Terms |
|
139,882,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Haircut (at 3%) |
|
4,196,474 |
|
|
|
|
|
|
|
Estimated Forward Borrowings |
|
135,685,983 |
|
|
|
|
|
|
|
Est Total Borrowing |
|
$ |
3,454,729,445 |
|
|
|
|
|
(1) Includes $507 Million floating rate repo obligations
21
Studying the Opteum Business Model
• “Best Practices” – OPX Founders Took Two Years Researching the Sector Prior to Completing Business Plan
• Identify “Best Practices”
• Clarify “Not-So Best Practices”
• Biggest Strength
• Permanent Equity to Invest in Fixed Income Instruments
• Stock price can go down but that does not force the investment manager to sell assets
• Hedge fund investors often times withdraw their funds at precisely the moment when they should be buying, forcing the hedge fund manager to sell at the wrong time
• Biggest Weakness
• Event Risk
• Margin Call
22
How does Opteum Effectively Address Weaknesses in the Business
Model & Make the RMBS REIT Business Model Better?
A. Clearly Defined Investment Objectives (Balancing the Two)
• Book Value Preservation
• Avoid Permanent Losses (NLY, LUM, MFA, FBR)
• Grow Book Value
• Stable Returns Over Time
• Large Percentage of Shareholders Buy REITs for the Dividend Income
B. Avoid Event Risk
• Event Risk Scenarios Manifest Themselves through Margin Calls
• Major Price Movements
• Very High Prepayments
• Spread Widening
• Reduction in the Availability of Credit
23
Making The Business Model Better
1. Cash Management and Committed Funding Agreements
2. True Quantitative Risk Management
3. Diversification: Portfolio is Diversified across Five Classes of Short-Duration Low Price Volatility Agency Mortgage Related Assets
4. Loan Level Detail Analysis
5. Full Transparency
6. Repo and Settlement Outsourcing
7. Low General & Administrative Expense Ratio
8. Application of Best Practices
24
Making the RMBS REIT Business Model Better
1. Cash Management and Committed Funding Agreements
• 40% (or more) of Book Equity Cash Available Prior to Monthly Bond Factor and Prepayment Release
• Current Portfolio Generates Approximately $90 to $130 Million a Month in Cash Flow
• Substantial Borrowing Lines (Approximately $14 billion in Repo Lines)
• Committed Borrowing Lines
• $1.85 Billion, 364-Day Committed Repo Lines with Three Banks
• Principal Prepayment Margin Call Waiver
• $100 Million Allocation of a $1 Billion facility
2. True Quantitative Risk Management
• Risk Based Capital Allocation Model
• Patterned after Risk-Based Capital Guidelines Established by Basel Accords
• Risk Profile of the Portfolio Drives Leverage Ratio
• Asset Allocation Model used to Construct Target Portfolio
• Target Portfolio Allocations is Fine Tuned by Management
• All of these Tools are Used on an Ongoing Basis to Monitor the Risk Profile, Guide the Leverage Ratio and Determine Asset Allocations
25
3. Diversification
• Portfolio is Diversified across Various Types of Short-Duration, Low Price Volatility Agency Mortgage Related Assets (see 8K)
• Agency Assets offer Greatest Liquidity
• Maintain Low Duration
• Opteum Acquisition is an Extension of Diversification Model
• Diversification Limits Income Volatility & Book Value Event Risk
• Prepayments, Spread/Price Changes & Retrospective Method of Accounting
4. Loan Level Detail Analysis
• CPR & CDR Technologies
• Providers of ongoing loan level detail
• Inelastic Borrowers
• Prepay within a tighter range of expectations
• Pay higher rates (higher coupon income for Opteum)
• Top of the “Pear Tree” – pick the borrower who is least likely to refinance
• Weakness in the Performance of Hybrid Mortgages
• It is the Investment of Choice for Much of the Sector
26
5. Full Transparency
• OPX Releases its Portfolio and Liabilities at Least Every Six Weeks
• Credit officers always know what Opteum owns
• Lenders take great comfort in knowing Opteum ‘s financial condition
• Investors take comfort in knowing Opteum is willing to show all that they own and what they have borrowed
• Top of the “Pear Tree” – be the firm the creditors are least likely to worry about in a financial crisis situation
6. Repo and Settlement Outsourcing
• AVM, LP and III Associates
• In-house (Opteum) Liability Management with Outsourcing Execution
• Improves Repo Pricing
• Maximizes Settlement Efficiency and Reliability
• All Counter-Party Relationships in Opteum’s name
• Efficient use of Reverse Margin Calls enables Opteum to Maintain Accurate Leverage Levels
• AVM can Regularly Deliver a Cost Advantage over Prime Brokerage in Repo Transactions
• No Custodian Set up Fee and Small Ongoing Fees
• Diversified (19) Repurchase Counter Parties
27
7. Low General and Administrative Expense Ratio
• Low cost producers in most industries have the best chance of longevity
• General Administrative Expenses historically have been 18 bp’s of Assets (excluding fees for independent directors)
8. Application of Best Practices
• Early Dividend Payment Dates and Early 10K and 10Q Releases
• Board of Directors – Independent & Experienced
• See Company Website (www.opteum.com ) for Board Member and Senior Management Biographies
• Board Members and Senior Management Have Purchased Over $4,000,000 of Company Stock During Various Equity Offerings and in the Open Market
• Through 2005, all Independent Board Members have Received all Board Compensation in Stock
• Compensation Consultants
• FASB 123
• Senior Legal Representation
28
OFS Business Model
29
Origination Channels
[GRAPHIC]
|
Conduit Division:
National Office (1) |
Wholesale Division:
Regional Offices (2)
Branch Offices (3) |
Retail Division:
Branch Offices (29) |
30
Fiscal 2005 Production Summary
• Through December 31, 2005, Opteum Closed 6.7 Billion Dollars of Residential Mortgages
|
Product |
|
# Of Loans |
|
Loan Amount |
|
% Of Total |
|
|
FNMA / FHLMC |
|
2,784 |
|
508,751,552 |
|
7.6 |
% |
|
FHA / VA |
|
1,682 |
|
245,493,826 |
|
3.6 |
% |
|
Non-Conforming |
|
1,084 |
|
343,155,332 |
|
5.1 |
% |
|
Prime ARM |
|
518 |
|
106,226,617 |
|
1.6 |
% |
|
ALT-A |
|
15,438 |
|
4,202,591,998 |
|
62.4 |
% |
|
Expanded A- / Subprime |
|
2,880 |
|
701,699,259 |
|
10.4 |
% |
|
Second Liens |
|
7,184 |
|
385,583,161 |
|
5.7 |
% |
|
Negative Am ARM |
|
50 |
|
17,332,919 |
|
0.3 |
% |
|
Brokered Loan |
|
1,430 |
|
226,854,353 |
|
3.4 |
% |
|
TOTAL |
|
33,051 |
|
6,737,689,017 |
|
100.0 |
% |
* Opteum no longer securitize Subprime products (starting with OPMAC 2005-2) or seconds (the last one in OPMAC 2005-2).
31
Production by Channel
Opteum Financial Services:
Loan Production by Channel through December 31, 2005
[CHART]
* 2005 includes closed loan production for 13 months ended December 31st.
32
Product Mix – Retail
Opteum Financial Services: Retail Production by Product Year-to-Date through December 31, 2005
[CHART]
Total Retail Production = $2,274M
33
Product Mix – Wholesale
Opteum Financial Services: Wholesale Production by Product Year-to-Date through December 31, 2005
[CHART]
Total Wholesale Production = $2,114M
34
Product Mix – Conduit
Opteum Financial Services: Conduit Production by Product Year-to-Date through December 31, 2005
[CHART]
Total Conduit Production = $2,350M
35
Opteum Mortgage Acceptance Corp – Securitizations thru December 2005
|
|
|
HMAC 2004-1 |
|
HMAC 2004-2 |
|
HMAC 2004-3 |
|
HMAC 2004-4 |
|
HMAC 2004-5 |
|
|||||
|
Original Balance |
|
$ |
309,846,147.00 |
|
$ |
387,791,245.00 |
|
$ |
417,055,302.00 |
|
$ |
410,125,325.00 |
|
$ |
413,874,752.00 |
|
|
Close Date |
|
March 5, 2004 |
|
May 10, 2004 |
|
July 1, 2004 |
|
August 17, 2004 |
|
October 1, 2004 |
|
|||||
|
LTV |
|
81.640 |
|
77.350 |
|
77.000 |
|
79.600 |
|
79.340 |
|
|||||
|
Credit Score |
|
683 |
|
692 |
|
692 |
|
690 |
|
690 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Product Type |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Fixed |
|
$ |
74,565,674.00 |
|
$ |
114,345,346.00 |
|
$ |
134,693,470.00 |
|
$ |
100,946,691.00 |
|
$ |
130,103,752.00 |
|
|
ARM 6 ML |
|
$ |
45,576,295.00 |
|
$ |
17,328,194.00 |
|
$ |
21,432,084.50 |
|
$ |
17,451,467.00 |
|
$ |
27,883,289.00 |
|
|
ARM 2/6 |
|
$ |
121,797,275.00 |
|
$ |
113,142,568.00 |
|
$ |
103,004,081.32 |
|
$ |
141,354,408.00 |
|
$ |
141,783,825.00 |
|
|
ARM 3/6 |
|
$ |
16,160,180.00 |
|
$ |
51,137,778.00 |
|
$ |
59,666,419.76 |
|
$ |
65,789,554.00 |
|
$ |
55,335,292.00 |
|
|
ARM 5/6 |
|
$ |
50,542,803.00 |
|
$ |
85,878,609.00 |
|
$ |
90,720,624.97 |
|
$ |
75,316,889.00 |
|
$ |
54,476,221.00 |
|
|
ARM 7/6 |
|
$ |
951,920.00 |
|
$ |
5,606,750.00 |
|
$ |
6,469,822.51 |
|
$ |
8,898,316.00 |
|
$ |
3,658,106.00 |
|
|
ARM 10/6 |
|
$ |
252,000 |
|
$ |
352,000.00 |
|
$ |
1,068,800.00 |
|
$ |
368,000.00 |
|
$ |
634,267.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Product Credit |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Alt A |
|
$ |
273,664,352.00 |
|
$ |
363,554,685.00 |
|
$ |
379,626,203.00 |
|
$ |
354,733,529.00 |
|
$ |
355,627,679.00 |
|
|
Expanded (A-) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|||||
|
Subprime* |
|
$ |
36,181,795.00 |
|
$ |
24,236,560.00 |
|
$ |
37,429,099.00 |
|
$ |
40,869,138.00 |
|
$ |
44,043,766.00 |
|
|
Second Lien* |
|
0 |
|
0 |
|
0 |
|
$ |
14,522,658.00 |
|
$ |
14,203,307.00 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Prepay Type |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total Prepay |
|
43.18 |
% |
45.53 |
% |
60.72 |
% |
73.63 |
% |
78.39 |
% |
|||||
|
Hard Type Only |
|
43.15 |
% |
17.70 |
% |
37.45 |
% |
62.46 |
% |
68.36 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Prepay Speed |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Curr. Annualized |
|
44.54 |
% |
24.82 |
% |
32.47 |
% |
31.72 |
% |
35.30 |
% |
|||||
|
CPR |
|
|
|
|
|
|
|
|
|
|
|
|||||
* Opteum no longer securitize Subprime products (starting with OPMAC 2005-2) and seconds (the last one in OPMAC 2005-2).
36
|
|
|
HMAC 2004-6 |
|
OPMAC 2005-1 |
|
OPMAC 2005-2 |
|
OPMAC 2005-3 |
|
OPMAC 2005-4 |
|
OPMAC 2005-5 |
|
||||||
|
Original Balance |
|
$ |
761,026,691.00 |
|
$ |
802,625,137.00 |
|
$ |
883,988,562.00 |
|
$ |
937,116,704.00 |
|
$ |
1,321,738,004.00 |
|
$ |
986,662,596.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Close Date |
|
November 19, 2004 |
|
January 31, 2005 |
|
April 5, 2005 |
|
June 17, 2005 |
|
August 25, 2005 |
|
November 30, 2005 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
LTV |
|
81.300 |
|
78.100 |
|
75.99 |
|
75.56 |
|
75.59 |
|
74.05 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Credit Score |
|
686 |
|
688 |
|
683 |
|
699 |
|
701 |
|
702 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Product Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Fixed |
|
$ |
226,419,814.00 |
|
$ |
209,017,651.00 |
|
$ |
227,079,252.00 |
|
$ |
260,318,431.00 |
|
$ |
499,220,444.00 |
|
$ |
382,726,488.00 |
|
|
ARM 6 ML |
|
$ |
43,686,158.00 |
|
$ |
39,354,589.00 |
|
$ |
51,893,393.50 |
|
$ |
70,918,541.00 |
|
$ |
36,876,490.00 |
|
$ |
8,555,720.00 |
|
|
ARM 2/6 |
|
$ |
325,665,601.00 |
|
$ |
362,888,669.00 |
|
$ |
361,545,549.00 |
|
$ |
245,857,302.00 |
|
$ |
331,095,370.00 |
|
$ |
271,071,226.00 |
|
|
ARM 3/6 |
|
$ |
83,706,367.00 |
|
$ |
82,401,534.00 |
|
$ |
87,817,025.00 |
|
$ |
61,304,982.00 |
|
$ |
64,236,467.00 |
|
$ |
34,560,586.00 |
|
|
ARM 5/6 |
|
$ |
77,665,615.00 |
|
$ |
101,087,883.00 |
|
$ |
137,607,001.00 |
|
$ |
272,428,873.00 |
|
$ |
343,255,360.00 |
|
$ |
276,289,413.00 |
|
|
ARM 7/6 |
|
$ |
2,607,936.00 |
|
$ |
5,201,261.00 |
|
$ |
8,954,187.00 |
|
$ |
14,084,409.00 |
|
$ |
33,836,493.00 |
|
$ |
10,314,613.00 |
|
|
ARM 10/6 |
|
$ |
1,275,200.000 |
|
$ |
2,673,550.00 |
|
$ |
9,092,155.00 |
|
$ |
12,204,165.00 |
|
$ |
13,217,380.00 |
|
$ |
3,144,550.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Product Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Alt A |
|
$ |
661,448,582.00 |
|
$ |
719,172,200.00 |
|
$ |
854,593,388.00 |
|
$ |
921,181,705.00 |
|
$ |
1,182,426,818.0 |
|
$ |
866,667,651.00 |
|
|
Expanded (A-) |
|
$ |
13,580,180.00 |
|
$ |
9,242,685.00 |
|
$ |
27,272,284.00 |
|
$ |
15,935,700.00 |
|
0 |
|
$ |
119,994,945.00 |
|
|
|
Subprime* |
|
$ |
51,317,831.00 |
|
$ |
41,707,962.00 |
|
0 |
|
0 |
|
$ |
139,311,186.00 |
|
0 |
|
|||
|
Second Lien* |
|
$ |
34,680,098.00 |
|
$ |
32,502,290.00 |
|
$ |
2,122,890.00 |
|
0 |
|
0 |
|
0 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Prepay Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total Prepay |
|
68.32 |
% |
72.5 |
% |
73.7 |
% |
73.6 |
% |
71.9 |
% |
76.4 |
% |
||||||
|
Hard Type Only |
|
62.72 |
% |
69.9 |
% |
69.9 |
% |
69.5 |
% |
64.0 |
% |
69.2 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Prepay Speed |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Curr. Annualized CPR |
|
40.84 |
% |
39.69 |
% |
24.85 |
% |
16.71 |
% |
13.52 |
|
2.46 |
|
||||||
* Opteum no longer securitize Subprime products (starting with OPMAC 2005-2) and seconds (the last one in OPMAC 2005-2).
37
Issuance Summary By Deal Name
|
Name |
|
UPB Issue |
|
Gross WAC |
|
Net WAC |
|
WALTV |
|
WACLTV |
|
WA Fico |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-1 |
|
309,846,147 |
|
6.114 |
|
5.634 |
|
81.64 |
|
84.67 |
|
683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-2 |
|
387,791,245 |
|
5.559 |
|
5.296 |
|
77.35 |
|
81.32 |
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-3 |
|
417,055,302 |
|
5.529 |
|
5.244 |
|
77.00 |
|
81.89 |
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-4 |
|
410,125,325 |
|
5.960 |
|
5.620 |
|
79.60 |
|
84.72 |
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-5 |
|
413,874,752 |
|
6.161 |
|
5.864 |
|
79.34 |
|
85.15 |
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMAC 2004-6 |
|
761,026,691 |
|
6.255 |
|
5.936 |
|
81.30 |
|
87.56 |
|
686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPMAC 2005-1 |
|
802,625,137 |
|
6.077 |
|
5.792 |
|
78.10 |
|
85.18 |
|
688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPMAC 2005-2 |
|
883,988,562 |
|
5.927 |
|
5.642 |
|
75.99 |
|
84.13 |
|
693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPMAC 2005-3 |
|
937,116,704 |
|
6.067 |
|
5.796 |
|
75.56 |
|
84.61 |
|
699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPMAC 2005-4 |
|
1,321,738,004 |
|
6.203 |
|
5.923 |
|
75.57 |
|
85.09 |
|
701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPMAC 2005-5 |
|
986,662,596 |
|
6.209 |
|
5.918 |
|
74.05 |
|
82.35 |
|
702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Issuance |
|
7,631,850,465 |
|
6.059 |
|
5.765 |
|
77.10 |
|
84.42 |
|
694 |
|
38
Collateral Detail - thru December 2005
|
Documentation Type |
|
Percentage |
|
|
Full Doc |
|
22 |
% |
|
Stated Inc/Verified Asset |
|
38 |
% |
|
Stated Inc/Stated Asset |
|
24 |
% |
|
No Ratio |
|
5 |
% |
|
NINA |
|
11 |
% |
|
LTV Distribution |
|
Percentage |
|
|
Less than 60% |
|
11 |
% |
|
60.01-65% |
|
5 |
% |
|
65.01-70% |
|
8 |
% |
|
70.01-75% |
|
6 |
% |
|
75.01-80% |
|
57 |
% |
|
80.01-85% |
|
2 |
% |
|
85.01-90% |
|
6 |
% |
|
90.01-95% |
|
5 |
% |
|
95.01-100% |
|
2 |
% |
|
Fico Score |
|
Percentage |
|
|
680+ |
|
60 |
% |
|
660-679 |
|
15 |
% |
|
620-659 |
|
21 |
% |
|
580-619 |
|
4 |
% |
|
520-579 |
|
0 |
% |
|
State Distribution |
|
Percentage |
|
|
CA |
|
50 |
% |
|
GA |
|
13 |
% |
|
NJ |
|
7 |
% |
|
FL |
|
5 |
% |
|
Other |
|
25 |
% |
39
Security Performance
|
Name |
|
Period |
|
CPR |
|
60 Day |
|
90 Day |
|
Total |
|
BK |
|
FC |
|
REO |
|
|
2004-1 |
|
21 |
|
44.54 |
|
0.37 |
% |
0.08 |
% |
1.04 |
% |
3.48 |
% |
1.37 |
% |
1.46 |
% |
|
2004-2 |
|
19 |
|
24.82 |
|
0.39 |
% |
0.10 |
% |
1.49 |
% |
1.16 |
% |
0.78 |
% |
0.75 |
% |
|
2004-3 |
|
18 |
|
32.47 |
|
0.10 |
% |
0.00 |
% |
1.11 |
|
1.22 |
% |
1.26 |
% |
0.34 |
% |
|
2004-4 |
|
16 |
|
31.72 |
|
0.04 |
% |
0.32 |
% |
0.75 |
% |
1.00 |
% |
1.40 |
% |
0.27 |
% |
|
2004-5 |
|
14 |
|
35.30 |
|
0.24 |
% |
0.14 |
% |
0.95 |
% |
0.43 |
% |
1.25 |
% |
0.21 |
% |
|
2004-6 |
|
13 |
|
40.84 |
|
0.18 |
% |
0.03 |
% |
0.99 |
% |
0.89 |
% |
0.98 |
% |
0.42 |
% |
|
2005-1 |
|
11 |
|
39.69 |
|
0.38 |
% |
0.01 |
% |
1.26 |
% |
0.35 |
% |
0.99 |
% |
0.08 |
% |
|
2005-2 |
|
8 |
|
24.85 |
|
0.04 |
% |
0.06 |
% |
0.62 |
% |
0.49 |
% |
0.68 |
% |
0.02 |
% |
|
2005-3 |
|
6 |
|
16.71 |
|
0.05 |
% |
0.00 |
% |
0.50 |
% |
0.13 |
% |
0.49 |
% |
0.00 |
% |
|
2005-4 |
|
4 |
|
13.52 |
|
0.12 |
% |
0.00 |
% |
0.63 |
% |
0.07 |
% |
0.05 |
% |
0.00 |
% |
|
2005-5 |
|
1 |
|
2.46 |
|
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
0.00 |
% |
* Information provided as of December 2005
For more Performance information, visit www.opteum.com ( click on “Corporate” on the top menu; choose “Investors” from the left nav bars; click on “HMAC-OPTEMAC Performance”; and sign-up/register to obtain log-in access ).
40
Opteum Financial Services – Warehouse Lines, Working Capital, & Aggregation Lines
|
Provider |
|
Commitments |
|
|
|
Warehouse Lines |
|
|
|
|
|
GMAC – RFC (Committed) |
|
$ |
100,000,000 |
|
|
UBS (Uncommitted) |
|
$ |
750,000,000 |
|
|
Colonial Bank – Syndication (Committed) |
|
$ |
284,500,000 |
|
|
JP Morgan (Committed) |
|
$ |
10,000,000 |
|
|
|
|
|
|
|
|
Aggregation Line |
|
|
|
|
|
Bear Stearns |
|
$ |
750,000,000 |
|
|
Greenwich (Repo Facility) |
|
$ |
250,000,000 |
|
|
Citigroup |
|
$ |
1,500,000,000 |
|
|
|
|
|
|
|
|
Residual Financing Line |
|
|
|
|
|
Citigroup |
|
$ |
50,000,000 |
|
|
|
|
|
|
|
|
Proposed Syndication |
|
|
|
|
|
JP Morgan Chase (Committed) |
|
$ |
1,000,000,000 |
|
As of 11/30/05
41
Discussion of GAAP Accounting &
Proper SEC Presentation
42
GAAP/TAX Accounting Concepts Related to OPX-OFS Merger
|
|
|
GAAP |
|
TAX |
|
|
Financial Statements |
|
Consolidated |
|
Stand Alone |
|
|
Intercompany Transactions |
|
Eliminated |
|
Reported as They Occur |
|
|
Intercompany Loan – OPX to OFS |
|
|
|
|
|
|
Interest Income |
|
Eliminated |
|
Accrued as Earned |
|
|
Interest Expense |
|
Eliminated |
|
Deductible When Paid |
|
|
After-Tax Earnings/Dividends |
|
Earnings Consolidated |
|
OPX Potential Dividend Increases to the Extent After-Tax Earnings Paid to Opteum as Dividends |
|
See following page for a more detailed explanation
43
GAAP
• Opteum and OFS no longer exist as stand alone entities for financial reporting purposes.
• Financial data will now be presented as a combined entity.
• For GAAP purposes inter-company transactions (such as the loan to OFS and the interest paid and received on the loan) will not be presented.
• In order for Opteum to be able to pay OFS earnings out as dividends to Opteum shareholders, OFS must pay cash to Opteum in the form of dividends.
TAX
• Opteum and OFS will each file their own separate tax return.
• Inter-company transactions will be included, for tax purposes.
• OFS may deduct amounts as interest expense to Opteum on their tax return only if those amounts are paid in cash.
• Opteum may accrue amounts as interest income from OFS whether they are paid in cash or not.
• Opteum will report cash earnings up-streamed from OFS as income on their tax return as well as deduct OFS dividends paid out to shareholders as part of the “Dividends Paid” deduction on its tax return.
44
What Causes Book Value to Fluctuate?
45
What Causes Book Value to Fluctuate?
• Change in Value of the Opteum Portfolio
• Rate Moves
• Spread Moves
• Change in Value of Servicing
• Prepayment Assumptions
• Change in Value of the Residuals
• Realized and Projected Payments and Losses
• Retained Earnings at the Taxable REIT Subsidiary (OFS)
46
Corporate Achievements and
Disappointments in 2005
47
2005 Corporate Achievements
• Opteum Acquisition
• Book value price when Opteum peers are trading at large premiums.
• Only paid for the “assets” – servicing and residuals. The mortgage bank was essentially “free”.
• High teens ROE potential.
• Solid senior management team with very loyal employees.
• Increases OPX’s diversity of assets strategy.
• Reduces dependence on just “spread income” and Fed rate moves.
• Great growth opportunities.
• $100 Million Principal Pre-Payment Margin Waiver Agreement & Committed Facilities
• This is the first of its kind. We cannot find anyone who has seen this implemented before.
• Currently provides an average of $42M ($29M-$52M) a month in excess liquidity.
• Able to maintain higher leverage on fast paying assets (ARM’s) and achieve a higher ROE.
• The only company in the current peer group to have committed borrowing facilities.
• The whole facility totals $1.85 Billion.
• Aggressive haircuts and rates.
• Operating Achievements
• Highest ROE of the peer group (12.2%), which is over 250bp above the next highest in peer group.
• REIT made money in every quarter despite a 325bp increase in federal funds rate sine 6/30/2004.
• No permanent losses taken in 2005 (four members of RMBS peer group have taken losses).
• Operated REIT G&A expenses at 18bp’s since inception.
• Sarbanes-Oxley 404 Compliant.
• The October 2005 $50 million issuance of Trust Preferred debt was done 50 bp’s inside any other quote we could get and those quotes were not “firm”.
48
2005 Corporate Disappointments
• Despite having the lowest duration of the peer group every reporting period in 2005, OPX’s book value decreased the most in the group.
• The stock price performance was very negative for the year.
• The stock market has not yet recognized the value of the Opteum merger.
49
www.opteum.com
50