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): August 10,
2007
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))
|
|
RESULTS
OF OPERATIONS AND FINANCIAL
CONDITION.
|
On
August
10, 2007, Opteum Inc. (the “Company”) issued the press release attached
hereto as Exhibit 99.1 announcing the Company’s preliminary estimates of its
consolidated results of operations for the three month period ended June 30,
2007, and information concerning the Company’s investment portfolio of
residential mortgage backed securities at June 30, 2007.
The
information furnished under this “Item 2.02 Results of Operations and Financial
Condition,” 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
|
|
(d)
|
Exhibits
|
Exhibit
99.1 – Press Release of Opteum Inc. dated August 10, 2007
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:
August 10, 2007
|
OPTEUM
INC.
|
||
|
By:
|
/s/
Jeffrey J. Zimmer
|
||
|
Jeffrey
J. Zimmer
|
|||
|
Chairman,
President and Chief Executive
Officer
|
|||
|
Exhibit
No.
|
||
|
99.1
|
-
|
Press
Release of Opteum Inc. dated August 10,
2007
|
Exhibit
99.1
[Opteum
Inc. Logo]
OPTEUM
INC. FILES FORM 12b-25;
PROVIDES
GUIDANCE ON SECOND QUARTER 2007 RESULTS;
PROVIDES
MBS PORTFOLIO INFORMATION AS OF JUNE 30, 2007
•
MBS Portfolio Remains 100% Invested in Agency MBS
•
All Margin Calls Have Been Satisfied
•
Funding Lines Remain Intact
VERO
BEACH, FL (August 10, 2007)— 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.
Contact: Robert
E. Cauley
Chief
Financial Officer
772-231-1400
www.opteum.com
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)
|
$
|
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
|