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): March
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:
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
|
REGULATION
FD DISCLOSURE
|
On
March
28, 2006, Opteum Inc. (the “Company”) made available to investors a
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 exhibit 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.
|
EXHIBITS
|
|
(a)
|
Exhibits.
|
The
following exhibit is filed pursuant to Item 601 of Regulation S-K:
99.1
-
Investor presentation of Opteum Inc.
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.
|
Date:
March 28, 2006
|
OPTEUM
INC.
|
||
|
By:
|
/s/
Jeffrey J. Zimmer
|
||
|
Jeffrey
J. Zimmer
|
|||
|
Chairman,
Chief Executive Officer and
President
|
|||
|
Exhibit
No.
|
|
|
|
|
|
|
|
99.1
|
-
|
Investor
Presentation of Opteum
Inc.
|
March
2006
This
presentation contains forward-looking statements. Such
forward-looking statements are based on information available at
the time of the preparation of this presentation 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
herein. Important factors that could cause such differences are
described in the Company’s periodic filings with the Securities
and Exchange Commission, including the Company’s
Registration Statement on Form S-3, Form 10-K and quarterly
reports on Form 10-Q. The Company assumes no obligation to
update forward looking information to reflect actual results,
changes in assumptions or changes in other factors affecting
forward-looking information.
forward-looking statements are based on information available at
the time of the preparation of this presentation 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
herein. Important factors that could cause such differences are
described in the Company’s periodic filings with the Securities
and Exchange Commission, including the Company’s
Registration Statement on Form S-3, Form 10-K and quarterly
reports on Form 10-Q. The Company assumes no obligation to
update forward looking information to reflect actual results,
changes in assumptions or changes in other factors affecting
forward-looking information.
Safe
Harbor
Statement
1.
Strengths
and Weaknesses of the Mortgage REIT Business Model (Page
4)
2.
Making
the Mortgage REIT Business Model Better (Page
9)
»
Corporate
Mission and
Long Term Goal
»
Diversity,
Diversity,
Diversity
»
Board
and Management
are Large Shareholders
»
The
Strategic
Thinking Behind the OFS Acquisition
3.
Capital
Allocation and the Relationship Between the REIT and the Taxable
REIT
Subsidiary (“TRS”)(Page 15)
Subsidiary (“TRS”)(Page 15)
4.
Opteum Financial Services (Page
16)
5.
The
REIT Portfolio (Page
24)
»
8K
Released
3/21/2006
6.
Analyst Estimates for OPX (Page
32)
Table
of
Contents
Strengths
and Weaknesses of the
Mortgage REIT Business Model
Mortgage REIT Business Model
§
Biggest
Strength
»
Permanent
Equity to Invest in Fixed Income Instruments and Expand an
Origination Platform through Various Business Cycles
Origination Platform through Various Business Cycles
§
Stock
Price can go
Down, but that does not Force the Investment Manager to Sell Assets and
take Permanent Losses to Book Value.
take Permanent Losses to Book Value.
§
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.
should be Buying, Forcing the Hedge Fund Manager to Sell at the Wrong Time.
§
Biggest
Weaknesses
»
Lack
of
Diversity
§
Assets,
Sources of
Income, Sources of Funds, Channels of Origination.
§
Many
Mortgage
Companies and REITs are Founded by Originators who Lack Financial
Expertise nor are they Asset Managers.
Expertise nor are they Asset Managers.
»
Event
Risk
§
Margin
Calls
Data
Provided By Bloomberg
Strengths
and Weaknesses of the Mortgage REIT
Business Model: Fed Funds Target Rate
Business Model: Fed Funds Target Rate
Data
Provided By Bloomberg
Strengths
and Weaknesses of the Mortgage REIT
Business Model: Stock Prices Reflect Fed Funds
Business Model: Stock Prices Reflect Fed Funds
Data
Provided By Bloomberg
Strengths
and Weaknesses of the Mortgage REIT Business Model:
Origination REITs Maintain Dividends Longer than RMBS REITs
Origination REITs Maintain Dividends Longer than RMBS REITs
Q3
2004
Average
RMBS Peer
Group
Q4 2005 Average
13.7%
10.1%
Q3
2004
Average Active Originator
Peer
Group
Q4 2005 Average
14.7%
13.9%
Data
Provided By Bloomberg and FlagStone Securities
Strengths
and Weaknesses of the Mortgage REIT Business Model:
Despite Rising Rates, ROEs Have Been Relatively Stable
Despite Rising Rates, ROEs Have Been Relatively Stable
Making
the
Mortgage REIT Business Model Better:
Corporate Mission and Long Term Goal
Corporate Mission and Long Term Goal
Clearly
Defined Corporate Mission
§
“Provide
Superior Returns to our Shareholders.”
»
Protect
Ultimate
Book Value.
»
Stable
Returns over
Time.
If
we achieve our
Corporate Mission, we will be able
to
achieve our
Corporate Long Term Goal.
Clearly
Defined Long Term Goal
§
“Attract,
Retain, and Grow Equity Capital.”
Making
the
Mortgage REIT Model Better:
Diversity, Diversity, Diversity
Diversity, Diversity, Diversity
Diversity
is
Inherent in Everything We Do
§
Diverse
Business Model in our Core Competences
»
Mortgage
Origination Platform– Three Origination Channels, Over 100
Products, Geographic Diversity.
Products, Geographic Diversity.
»
Portfolio
Management - $3.5 Billion in Assets, 40 Asset Sub-Classes.
»
Liquidity
Management– REPO, Margin Waivers, Committed Facilities,
Trust Preferred Debt.
Trust Preferred Debt.
§
Being
Diverse is Key to Avoiding Event Risk
»
Margin
Calls
– Principal Prepayments, Price Declines.
»
Cash
Flow
– Some Part of the Portfolio is Always Generating
CashFlow.
»
Business
Cycles – Each Product and Asset Responds Differently to
Changing Business Environments.
Changing Business Environments.
Making
the
Mortgage REIT Business Model Better:
Board and Management are Large Shareholders
Board and Management are Large Shareholders
# of Shares
§
Independent
Board(1)
675,499
»
Bespolka,
Hendricks,
Kaplan, Mortenson, Ortale
•
Self,
Spouse,
Children, Trusts
§
Senior
Management(1,2)
3,755,078
»
Zimmer,
Cauley,
Norden, Levine, Floyd
•
Self,
Spouse,
Children,
Trusts
§
13
Other
Senior Employees(1,2)343,442
Total # of Shares = 4,773,969
Current
Value
of $40,578,737 as of 3/16/2006
Ownership
Position
Equals ~19% Of All Classes of Shares Outstanding
No
Board Member,
Management Personnel, or Employee Referred to on this Page has Sold any
Shares
of OPX since Inception of the Company and through 3/16/2006
of OPX since Inception of the Company and through 3/16/2006
Notes:
(1)
Includes all
Issued or Fully Vested Class A, Preferred A, and Class B Shares
(2)
Includes Shares
Paid as Past Compensation Vesting Between May 2006 though 2008
All
Data as of
3/16/06
Making
the
Mortgage REIT Business Model Better:
The Strategic Thinking Behind the OFS Acquisition
The Strategic Thinking Behind the OFS Acquisition
§
Diversify
Sources of Revenue, Yet within Opteum’s Core Area of
Competence.
»
Decrease
Reliance of
RMBS Portfolio Arbitrage on Federal Reserve Rate Decisions.
§
High
Teens
ROE Potential is Accretive to REIT Investment
Opportunities.
§
Purchase
Price was Very Fair, if not Cheap.
»
Price
was
approximately “Book Value” at a time when the Publicly Traded Peer Group
Multiples
were 1.3x to 2.2x book.
were 1.3x to 2.2x book.
»
Book
Value Consists
of Mortgage Servicing Rights and Residuals.
»
The
Mortgage Banking
Operation was Essentially “Free.”
§
Executive
Expertise – Experience is Key to Avoiding Event Risk.
»
Top
Three OFS
Managers Each have Between 18 and 28 Years of Origination
Experience.
»
100%
Stock Deal –
Only 20% of OFS Management’s OPX Stock can be Sold within First
Three
Years.
Years.
»
OFS
Managers Have
Purchased More Shares in the Open Market Since the Transaction
was
Announced.
Announced.
§
OFS
is
Nearing the Point in Their Lifecycle (sometime in mid-2007) where Cash
Flow
from Operations will be Sufficient to Sustain Organic Growth.
from Operations will be Sufficient to Sustain Organic Growth.
Data
Provided By FlagStone Securities
Price
to
Book Ratios for RMBS (Portfolio Only) REITs
and REITs with Origination Platforms (Active/Prime)
and REITs with Origination Platforms (Active/Prime)
Data
Provided By FlagStone Securities
Current
Price to Book Ratios for
Active Originator REITs
Active Originator REITs
Capital
Allocation and the Relationship Between the
REIT and the Taxable REIT Subsidiary (“TRS”)
REIT and the Taxable REIT Subsidiary (“TRS”)
§
The
Company
can Allocate Resources in Three Ways.
1.
Capital
to Opteum
Financial Services (“OFS”, the Company’s TRS) to Facilitate Growth.
2.
REIT
Portfolio
Investments.
3.
Corporate
Stock
Buy-Back at a Discount to Current Book Value.
4.
Q4
2005 - 561,800
Shares Bought at an Average Price of $9.29.
5.
Q1
2006 - 527,300
Shares Bought at an Average Price of $8.50.
§
OFS
(TRS) is
Expected to Make a Profit through Their Own Operations.
»
OFS
will Securitize
in Agency or Private Label Format their Originations and Sell them at the
TRS
Level.
Level.
»
OFS
(TRS) will Retain
the Mortgage Servicing Rights and the Securitization Residuals.
»
OFS
uses Gain on Sale
GAAP Accounting.
»
Any
GAAP Profit
Produced by OFS over at least the Next Few Quarters will be Retained
(Book
Value Growth).
Value Growth).
§
The
REIT
(Opteum Inc.) does Not Currently Anticipate Purchasing OFS
Originations for Portfolio.
Originations for Portfolio.
»
Exception:
Specified
Agency Pools.
Opteum
Financial Services
The
Company’s Mortgage Origination Platform
and
and
Taxable
REIT
Subsidiary
Who
is
OFS?
Opteum
Financial Services
§
OFS
is a Paramus,
New Jersey Based Mortgage Banker
§
Founded
in 1999 by
Peter Norden and Marty Levine
»
28
Years Each in the
Mortgage Business (Accounting and Financial Backgrounds)
»
Founded
Three
Mortgage Companies Previously
§
Diversified
Originator
»
Three
Channels of
Originations
»
Retail
–
1/3
»
Wholesale
–
1/3
»
Conduit
–
1/3
»
All
Loan Products
Originated
»
Prime
‘A’
»
Alt-A
–
62%
of 2005
Originations
»
Expanded
A-
»
Subprime
–
All
sold,
servicing released, for cash
»
Originate
Loans
Through Builders and Realtors
»
Not
a REFI
Shop
»
Loans
Originated in
47 States in 2005
»
Over
1,000 Employees
with 35 Offices
§
Expansion
Through
Selectively Adding New Offices with Seasoned
Mortgage Loan Officers
Mortgage Loan Officers
Wholesale
Division:
Regional
Offices
(2)
Branch
Offices
(3)
Retail
Division:
Branch
Offices
(29)
Conduit
Division:
National
Office
(1)
The
Origination Platform: Opteum Financial
Services
§
OFS
no longer
securitizes Subprime products (starting with OPMAC 2005-2).
§
OFS
sells 100% of
it’s Subprime Originations Servicing Released.
§
OFS
no longer
securitizes second mortgages (the last one in OPMAC 2005-2).
|
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%
|
OFS
Fiscal
2005 Production Summary
2005
includes closed
loan production for 13 months ended December 31st.
OFS
Origination Production by Channel
|
Name
|
UPB
Issue
Amount |
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
|
OFS
Issuance
Summary By Deal Name
|
Provider
|
Commitments
|
|
|
Inter-Company
Loan
|
||
|
REIT
Loan to
OFS (10 Year Fixed Rate at 11%)
|
$
65,000,000
|
|
|
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
|
|
OFS
Credit
Facilities and Sources of Capital
OFS
Origination and ROE 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
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%
The
REIT
Portfolio
The
REIT
Portfolio
§
The
REIT
Currently owns Agency Mortgage Related Securities.
»
Very
Little Credit
Risk.
§
Diversification
Across Various Types of Low-Duration Assets.
»
There
is Always Cash
Flow from Some Type of Mortgage, Even When other Types are
Not Generating Cash Flow.
Not Generating Cash Flow.
»
Low-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
Structured 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)
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.
Falling Interest Rate Environments.
»
Inelastic
Borrowers
and Adjustable Rate Assets.
How
does
Opteum Effectively Address Weaknesses in the Mortgage
REIT Investment Portfolio Model and Make it Better?
REIT Investment Portfolio Model and Make it Better?
1.
Cash
Management and Committed Funding
Agreements.
•
$1.85
Billion in
Committed Lines
•
$100
million
Principal Prepay Margin Waiver
•
40%
of Equity in Cash
Prior to Factor Releases
1.
True
Quantitative Risk Management– Basel
Accord.
2.
Diversification–
Portfolio is Diversified across
Many Classes of
Low-Duration,
Low
Price Volatility, Agency Mortgage Related Assets.
Price Volatility, Agency Mortgage Related Assets.
•
Over
40 Subset Types
of Loans
•
Weakness
of Hybrid
Mortgage Investment Model
•
Inelastic
Borrowers
1.
Loan
Level
Detail Analysis – CPR-CDR
Technologies.
•
Top
of The Pear
Tree
1.
Full
Transparency– Portfolio Released Every 6 Weeks, 8-K
Releases.
2.
Repo
&
Settlement Outsourcing– Experts, Fail
Rates, Reverse Margin Calls.
3.
Application
of Best Practices – In Everything We
Do.
REIT
Current
Portfolio Holdings
REIT
Current
Portfolio Holdings in More Detail
REIT
ARM
Reset Schedule
Opteum
(REIT) Liabilities
As
of
3/16/06
3/16/06
Today’s
REIT
Investment Opportunities
on Marginal Equity
on Marginal Equity
Net
Asset Yield
(After
Amortization)
5.65%
Cost
of
Funding
(3 Month
LIBOR)
4.93%
Net
Interest Spread
(NIS) 0.72%
NIS
x Leverage
(11.5:1)
8.28%
Return
on
Unlevered Equity 5.22%
Return
on
Investment
13.50%
Overhead
(2.00%)
Funding
Contracts
(0.25%)
Other
Expenses
(0.25%)
Return
on
Equity
11.00%
Analysts
Estimates
for OPX
|
Firm
|
Analyst
|
Q1
2006
Earnings Estimate |
Q2
2006
Earnings Estimate |
Date
of
Most Recent
Report |
Rating
|
Year
2006
Earnings Estimate |
|
Deutsche
Bank
|
Steven
Laws
|
$
0.10
|
$
0.13
|
January
10,
2006
|
Buy
|
$0.61
|
|
FIG
Partners
|
Chris
Marinac |
$
0.11
|
$
0.05
|
March
17,
2006
|
Market
Perform
|
$
0.24
|
|
Friedman
Billings
Ramsey |
Merrill
Ross
|
$
0.06
|
$
0.04
|
December
13,
2005
|
Market
Perform
|
$
0.39
|
|
Hilliard
Lyons
|
Ross
Demmerle |
N/A
|
N/A
|
March
22,
2006
|
Neutral
|
$
0.81
|
|
Cohen
Brothers
|
Alvar
Soosaar |
N/A
|
N/A
|
February
28,
2006
|
N/A
|
$
1.33
|
|
Flagstone
Securities
|
Steve
Delaney |
$
0.14
|
$
0.16
|
March
10,
2006
|
N/A
|
$
0.72
|
|
Average
=
|
$
0.10
|
$
0.09
|
$
0.68
|
|||
|
High
|
Low
|
Average
|
Expected
dividends
are $0.14, $0.12, and $0.58 for Q1-2006, Q2-2006, and YR-2006,
respectively.
Analyst
Estimates for OPX Earnings Including OFS
Earnings
www.opteum.com