Opteum Inc. Reports First Quarter 2007 Results
11 5월 2007 - 5:53AM
Business Wire
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.
Opteum Inc. (NYSE:OPX)
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