Maryland
|
72-1571637
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Large
accelerated filer ¨
|
Accelerated
filer þ
|
Non-accelerated
filer ¨
|
PART
I. FINANCIAL INFORMATION
|
3
|
ITEM
1. FINANCIAL STATEMENTS.
|
3
|
Consolidated
Balance Sheets as
of June 30, 2007 (unaudited) and December 31, 2006
|
3
|
Consolidated
Statements of
Operations for the six and three months ended June 30, 2007 and
2006
(unaudited)
|
4
|
Consolidated
Statement of
Stockholders’ Equity for the six months ended June 30, 2007
(unaudited)
|
6
|
Consolidated
Statements of Cash
Flows for the six months ended June 30, 2007 and 2006
(unaudited)
|
7
|
Notes
to Consolidated Financial
Statements
(unaudited)
|
9
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF
OPERATIONS.
|
37
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
54
|
ITEM
4. CONTROLS AND PROCEDURES.
|
54
|
PART
II. OTHER INFORMATION
|
|
ITEM
1. LEGAL PROCEEDINGS.
|
55
|
ITEM
1A. RISK FACTORS.
|
55
|
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
55
|
ITEM 6. EXHIBITS.
|
57
|
OPTEUM
INC.
|
||||
CONSOLIDATED
BALANCE SHEETS
|
||||
(Unaudited)
|
||||
ASSETS
|
June
30, 2007
|
December
31, 2006
|
||
MORTGAGE-BACKED
SECURITIES:
|
||||
Pledged
to counterparties, at fair value
|
$
|
1,818,234,441
|
$
|
2,803,019,180
|
Unpledged,
at fair value
|
401,568
|
5,714,860
|
||
TOTAL
MORTGAGE BACKED SECURITIES
|
1,818,636,009
|
2,808,734,040
|
||
Cash
and cash equivalents
|
41,902,854
|
82,751,795
|
||
Principal
payments receivable
|
10,016,176
|
12,209,825
|
||
Accrued
interest receivable
|
9,835,614
|
14,072,078
|
||
Property
and equipment, net
|
4,253,272
|
4,372,997
|
||
Prepaids
and other assets
|
5,696,687
|
6,168,736
|
||
Assets
held for sale
|
218,317,915
|
1,009,324,465
|
||
TOTAL
ASSETS
|
$
|
2,108,658,527
|
$
|
3,937,633,936
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
LIABILITIES:
|
||||
Repurchase
agreements
|
$
|
1,783,331,466
|
$
|
2,741,679,650
|
Junior
subordinated notes due to Bimini Capital Trust I & II
|
103,097,000
|
103,097,000
|
||
Accrued
interest payable
|
10,303,971
|
17,776,464
|
||
Dividends
payable
|
-
|
1,266,937
|
||
Accounts
payable, accrued expenses and other
|
2,239,480
|
692,469
|
||
Minority
interest in consolidated subsidiary
|
-
|
770,563
|
||
Liabilities
related to assets held for sale
|
180,917,866
|
879,916,024
|
||
TOTAL
LIABILITIES
|
2,079,889,783
|
3,745,199,107
|
||
STOCKHOLDERS'
EQUITY:
|
||||
Preferred
Stock, $0.001 par value; 10,000,000 shares authorized;
designated 1,800,000 Class A Redeemable and 2,000,000 Class B Redeemable;
no shares issued and outstanding as of June 30, 2007 and December
31,
2006
|
-
|
-
|
||
Class
A Common Stock, $0.001 par value; 98,000,000 shares designated:
24,603,560
shares issued and outstanding as of June 30, 2007 and 24,515,717
shares
issued and outstanding as of December 31, 2006
|
24,603
|
24,516
|
||
Class
B Common Stock, $0.001 par value; 1,000,000 shares designated,
319,388
shares issued and outstanding as of June 30, 2007 and December
31,
2006
|
319
|
319
|
||
Class
C Common Stock, $0.001 par value; 1,000,000 shares designated,
319,388
shares issued and outstanding as of June 30, 2007 and December
31,
2006
|
319
|
319
|
||
Additional
paid-in capital
|
337,011,764
|
335,646,460
|
||
Accumulated
other comprehensive loss
|
-
|
(76,773,610)
|
||
Accumulated
deficit
|
(308,268,261)
|
(66,463,175)
|
||
TOTAL
STOCKHOLDERS' EQUITY
|
28,768,744
|
192,434,829
|
||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
2,108,658,527
|
$
|
3,937,633,936
|
See
notes to consolidated financial
statements.
|
OPTEUM
INC.
|
||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
(Unaudited)
|
||||||||
Six
Months Ended
|
Three
Months Ended
|
|||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||
Interest
income, net of amortization of premium and discount
|
$
|
71,419,602
|
$
|
98,869,734
|
$
|
29,563,192
|
$
|
57,041,544
|
Interest
expense
|
(75,323,440)
|
(82,702,101)
|
(35,680,803)
|
(43,822,078)
|
||||
NET
INTEREST INCOME (EXPENSE)
|
(3,903,838)
|
16,167,633
|
(6,117,611)
|
13,219,466
|
||||
REALIZED
LOSS ON SALE OF MORTGAGE-BACKED SECURITIES
|
(19,388,377)
|
-
|
(18,568,106)
|
-
|
||||
OTHER
INCOME
|
-
|
70,566
|
-
|
70,566
|
||||
OTHER-THAN-TEMPORARY
LOSS ON MORTGAGE-BACKED SECURITIES
|
(55,250,278)
|
-
|
(55,250,278)
|
-
|
||||
TOTAL
NET REVENUES (DEFICIENCY OF REVENUES)
|
(78,542,493)
|
16,238,199
|
(79,935,995)
|
13,290,032
|
||||
DIRECT
REIT OPERATING EXPENSES
|
451,702
|
545,823
|
223,455
|
226,573
|
||||
GENERAL
AND ADMINISTRATIVE EXPENSES:
|
||||||||
Compensation
and related benefits
|
2,343,830
|
3,570,516
|
1,151,445
|
2,159,429
|
||||
Directors’
fees and liability insurance
|
388,536
|
420,034
|
188,573
|
210,140
|
||||
Audit,
legal and other professional fees
|
681,226
|
676,301
|
338,830
|
391,720
|
||||
Other
administrative expenses
|
328,614
|
490,503
|
183,310
|
266,355
|
||||
TOTAL
GENERAL AND ADMINISTRATIVE EXPENSES
|
3,742,206
|
5,157,354
|
1,862,158
|
3,027,644
|
||||
TOTAL
EXPENSES
|
4,193,908
|
5,703,177
|
2,085,613
|
3,254,217
|
||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST
|
(82,736,401)
|
10,535,022
|
(82,021,608)
|
10,035,815
|
||||
MINORITY
INTEREST IN CONSOLIDATED SUBSIDIARY
|
770,563
|
-
|
-
|
-
|
||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
(81,965,838)
|
10,535,022
|
(82,021,608)
|
10,035,815
|
||||
DISCONTINUED
OPERATIONS (see Note 12):
|
||||||||
Loss
from discontinued operations, net of tax
|
(148,102,400)
|
(19,902,189)
|
(69,976,611)
|
(11,431,171)
|
||||
Loss
on sale and disposal of assets of discontinued operations, net
of
tax
|
(10,469,203)
|
-
|
(10,469,203)
|
-
|
||||
TOTAL
LOSS FROM DISCONTINUTED OPERATIONS, NET OF TAX
|
(158,571,603)
|
(19,902,189)
|
(80,445,814)
|
11,431,171
|
||||
NET
LOSS
|
$
|
(240,537,441)
|
$
|
(9,367,167)
|
$
|
(162,467,422)
|
$
|
(1,395,356)
|
OPTEUM
INC.
CONSOLIDATED
STATEMENT OF OPERATIONS (con’t)
(Unaudited)
|
||||||||
Six
Months Ended
|
Three
Months Ended
|
|||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||
BASIC
AND DILUTED NET INCOME (LOSS) PER SHARE OF:
|
||||||||
CLASS
A COMMON STOCK
|
||||||||
Continuing
operations
|
$
|
(3.30)
|
$
|
0.43
|
$
|
(3.29)
|
$
|
0.40
|
Discontinued
operations
|
(6.37)
|
(0.81)
|
(3.24)
|
(0.46)
|
||||
Total
basic and diluted net (loss) per Class A share
|
$
|
(9.67)
|
$
|
(0.38)
|
$
|
(6.53)
|
$
|
(0.06)
|
CLASS
B COMMON STOCK
|
||||||||
Continuing
operations
|
$
|
(3.29)
|
$
|
0.42
|
$
|
(3.29)
|
$
|
0.40
|
Discontinued
operations
|
(6.36)
|
(0.79)
|
(3.23)
|
(0.45)
|
||||
Total
basic and diluted net (loss) per Class B share
|
$
|
(9.65)
|
$
|
(0.37)
|
$
|
(6.52)
|
$
|
(0.05)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING USED IN COMPUTING BASIC AND DILUTED
PER SHARE
AMOUNTS:
|
||||||||
Class
A Common Stock
|
24,555,916
|
24,398,310
|
24,577,222
|
24,664,197
|
||||
Class
B Common Stock
|
319,388
|
319,388
|
319,388
|
319,388
|
||||
CASH
DIVIDENDS DECLARED PER SHARE OF:
|
||||||||
CLASS
A COMMON STOCK
|
$
|
0.05
|
$
|
0.36
|
$
|
-
|
$
|
0.25
|
CLASS
B COMMON STOCK
|
$
|
0.05
|
$
|
0.36
|
$
|
-
|
$
|
0.25
|
See
notes to consolidated financial
statements.
|
OPTEUM
INC.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
Six
Months Ended
June
30, 2007
|
|||||||||
Common
Stock,
Amounts
at par value
|
Additional
Paid-in
|
Accumulated
Other Comprehensive
|
Accumulated
|
||||||
Class
A
|
Class
B
|
Class
C
|
Capital
|
Loss
|
Deficit
|
Total
|
|||
Balances,
December 31, 2006
|
$
24,516
|
$ 319
|
$ 319
|
$
335,646,460
|
$
(76,773,610)
|
$
(66,463,175)
|
$
192,434,829
|
||
Issuance
of Class A Common Stock for board compensation and equity plan
share
exercises, net
|
87
|
-
|
-
|
67,997
|
-
|
-
|
68,084
|
||
Cash
dividends declared, March 2007
|
-
|
-
|
-
|
-
|
-
|
(1,267,645)
|
(1,267,645)
|
||
Amortization
of equity plan compensation
|
-
|
-
|
-
|
1,479,217
|
-
|
-
|
1,479,217
|
||
Equity
plan shares withheld for statutory minimum withholding
taxes
|
-
|
-
|
-
|
(181,910)
|
-
|
-
|
(181,910)
|
||
Reclassify
net realized loss on mortgage-backed security sales
|
-
|
-
|
-
|
-
|
19,388,377
|
-
|
19,388,377
|
||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(240,537,441)
|
(240,537,441)
|
||
Unrealized
gain on available-for-sale securities, net
|
-
|
-
|
-
|
-
|
2,134,955
|
-
|
2,134,955
|
||
Reclassify
other-than-temporary loss on mortgage-backed securities
|
-
|
-
|
-
|
-
|
55,250,278
|
-
|
55,250,278
|
||
Comprehensive
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(163,763,831)
|
||
|
|
|
|
|
|
|
|||
Balances,
June 30, 2007
|
$
24,603
|
$ 319
|
$ 319
|
$
337,011,764
|
$ -
|
$
(308,268,261)
|
$
28,768,744
|
||
See
notes to consolidated financial
statements.
|
OPTEUM
INC.
|
||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||
(Unaudited)
|
||||
Six
Months Ended
|
||||
June
30, 2007
|
June
30, 2006
|
|||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||
Income
(loss) from continuing operations
|
$
|
(81,965,838)
|
$
|
10,535,022
|
Adjustments
to reconcile income (loss) from continuing operations
to
net cash provided by operating activities:
|
||||
Other-than-temporary
loss on mortgage backed securities
|
55,250,278
|
-
|
||
Amortization
of premium and discount on mortgage backed securities
|
10,776,614
|
(7,409,186)
|
||
Stock
compensation
|
1,365,391
|
1,326,032
|
||
Depreciation
and amortization
|
432,246
|
188,280
|
||
Loss
on sales of mortgage-backed securities
|
19,388,377
|
-
|
||
Changes
in operating assets and liabilities:
|
||||
(Increase)/decrease
in accrued interest receivable
|
4,236,464
|
(366,980)
|
||
(Increase)/decrease
in prepaids and other assets
|
(472,050)
|
267,937
|
||
(Decrease)
in accrued interest payable
|
(7,472,493)
|
(4,742,294)
|
||
Increase
in accounts payable, accrued expenses and other
|
1,547,010
|
563,333
|
||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
3,085,999
|
362,144
|
||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||
From
available-for-sale securities:
|
||||
Purchases
|
(834,671,779)
|
(706,141,129)
|
||
Sales
|
1,191,814,282
|
-
|
||
Principal
repayments
|
626,507,518
|
711,094,904
|
||
Purchases
of property and equipment, and other
|
1,500
|
(686,875)
|
||
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
983,651,521
|
4,266,900
|
||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||
Decrease
in restricted cash
|
-
|
1,230,000
|
||
Proceeds
from repurchase agreements
|
10,106,181,385
|
11,637,052,539
|
||
Principal
payments on repurchase agreements
|
(11,064,529,569)
|
(11,667,763,651)
|
||
Stock
issuance and other costs
|
-
|
(128,384)
|
||
Purchase
of treasury stock
|
-
|
(4,500,327)
|
||
Cash
dividends paid
|
(2,534,582)
|
(2,645,854)
|
||
NET
CASH USED IN FINANCING ACTIVITIES
|
(960,882,766)
|
(36,755,677)
|
||
CASH
FLOWS FROM DISCONTINUED OPERATIONS:
|
||||
Net
cash provided by operating activities
|
633,335,325
|
122,017,551
|
||
Net
cash provided by (used in) investing activities
|
1,195,582
|
(2,122,563)
|
||
Net
cash (used in) financing activities
|
(701,234,602)
|
(143,678,568)
|
||
NET
CASH FLOWS FROM DISCONTINUED OPERATIONS
|
(66,703,695)
|
(23,783,580)
|
||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(40,848,941)
|
(55,910,213)
|
||
CASH
AND CASH EQUIVALENTS, Beginning of the period
|
82,751,795
|
122,072,166
|
||
CASH
AND CASH EQUIVALENTS, End of the period
|
$
|
41,902,854
|
$
|
66,161,953
|
OPTEUM
INC.
|
||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONT’D)
|
||||
(Unaudited)
|
||||
Six
Months Ended
|
||||
June
30, 2007
|
June
30, 2006
|
|||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||
Cash
paid during the period for interest
|
$
|
82,795,933
|
$
|
87,444,395
|
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
|
||||
Cash
dividends declared and payable, not yet paid
|
$
|
-
|
$
|
6,318,383
|
See
notes to consolidated financial
statements.
|
(Unaudited)
|
||||||||
Six
Months Ended
|
Three
Months Ended
|
|||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||
Net
(loss)
|
$
|
(240,537)
|
$
|
(9,367)
|
$
|
(162,467)
|
$
|
(1,395)
|
Reclassify
net realized loss on MBS
|
19,388
|
-
|
18,568
|
-
|
||||
Reclassify
other-than-temporary loss on MBS
|
55,250
|
-
|
55,250
|
-
|
||||
Unrealized
gain (loss) on available-for-sale securities, net
|
2,135
|
(33,897)
|
(1,043)
|
(22,472)
|
||||
Comprehensive
(loss)
|
$
|
(163,764)
|
$
|
(43,264)
|
$
|
(89,692)
|
$
|
(23,867)
|
June
30, 2007
|
December
31, 2006
|
|||
Hybrid
Arms
|
$
|
213,859
|
$
|
76,488
|
Adjustable
Rate Mortgages
|
1,171,277
|
2,105,818
|
||
Fixed
Rate Mortgages
|
433,500
|
626,428
|
||
Totals
|
$
|
1,818,636
|
$
|
2,808,734
|
June
30, 2007
|
December
31, 2006
|
|||
Principal
balance
|
$
|
1,801,492
|
$
|
2,779,867
|
Unamortized
premium
|
72,647
|
116,114
|
||
Unaccreted
discount
|
(253)
|
(502)
|
||
Gross
unrealized gains
|
-
|
422
|
||
Other-than-temporary
losses
|
(55,250)
|
(9,971)
|
||
Gross
unrealized losses
|
-
|
(77,196)
|
||
Carrying
value/estimated fair value
|
$
|
1,818,636
|
$
|
2,808,734
|
Loss
Position More than 12 Months
|
Loss
Position Less than 12 Months
|
Total
|
||||||||||
Estimated
Fair
Value
|
Unrealized
Losses
|
Estimated
Fair
Value
|
Unrealized
Losses
|
Estimated
Fair
Value
|
Unrealized
Losses
|
|||||||
Hybrid
Arms and Balloons
|
$
|
67,437
|
$
|
(1,858)
|
$
|
-
|
$
|
-
|
$
|
67,437
|
$
|
(1,858)
|
Adjustable
Rate Mortgages
|
1,232,644
|
(46,715)
|
348,901
|
(2,591)
|
1,581,545
|
(49,306)
|
||||||
Fixed
Rate Mortgages
|
515,067
|
(25,662)
|
48,604
|
(370)
|
563,671
|
(26,032)
|
||||||
$
|
1,815,148
|
$
|
(74,235)
|
$
|
397,505
|
$
|
(2,961)
|
$
|
2,212,653
|
$
|
(77,196)
|
Six
Months Ended
|
Three
Months Ended
|
|||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||
Basic
and diluted EPS per Class A common share:
|
||||||||
Numerator:
net loss allocated to the Class A common shares
|
$
|
(237,455)
|
$
|
(9,248)
|
$
|
(160,385)
|
$
|
(1,379)
|
Denominator:
basic and diluted:
|
||||||||
Class
A common shares outstanding at the balance sheet date
|
24,603
|
24,354
|
24,603
|
24,354
|
||||
Dividend
eligible equity plan shares issued as of the balance sheet
date
|
-
|
612
|
-
|
612
|
||||
Effect
of weighting
|
(47)
|
(568)
|
(26)
|
(302)
|
||||
Weighted
average shares-basic and diluted
|
24,556
|
24,398
|
24,577
|
24,664
|
||||
Basic
and diluted EPS per Class A common share
|
$
|
(9.67)
|
$
|
(0.38)
|
$
|
(6.53)
|
$
|
(0.06)
|
Basic
and diluted EPS per Class B common share:
|
||||||||
Numerator:
net loss allocated to Class B common shares
|
$
|
(3,082)
|
$
|
(119)
|
$
|
(2,082)
|
$
|
(16)
|
Denominator:
basic and diluted:
|
||||||||
Class
B common shares outstanding at the balance sheet date
|
319
|
319
|
319
|
319
|
||||
Effect
of weighting
|
-
|
-
|
-
|
-
|
||||
Weighted
average shares-basic and diluted
|
319
|
319
|
319
|
319
|
||||
Basic
and diluted EPS per Class B common share
|
$
|
(9.65)
|
$
|
(0.37)
|
$
|
(6.52)
|
$
|
(0.05)
|
OVERNIGHT
(1
DAY OR LESS)
|
BETWEEN
2 AND
30
DAYS
|
BETWEEN
31 AND
90
DAYS
|
GREATER
THAN
90
DAYS
|
TOTAL
|
||||||
Agency-Backed
Mortgage Backed Securities:
|
||||||||||
Amortized
cost of securities sold, including accrued interest
receivable
|
$
|
-
|
$
|
783,663
|
$
|
461,018
|
$
|
561,373
|
$
|
1,806,054
|
Fair
market value of securities sold, including accrued interest
receivable
|
$
|
-
|
$
|
758,540
|
$
|
447,892
|
$
|
547,456
|
$
|
1,753,888
|
Repurchase
agreement liabilities associated with these securities
|
$
|
-
|
$
|
750,428
|
$
|
466,984
|
$
|
565,919
|
$
|
1,783,331
|
Net
weighted average borrowing rate
|
-
|
5.33%
|
5.32%
|
5.06%
|
5.24%
|
OVERNIGHT
(1
DAY OR LESS)
|
BETWEEN
2 AND
30
DAYS
|
BETWEEN
31 AND
90
DAYS
|
GREATER
THAN
90
DAYS
|
TOTAL
|
||||||
Agency-Backed
Mortgage Backed Securities:
|
||||||||||
Amortized
cost of securities sold, including accrued interest
receivable
|
$
|
—
|
$
|
859,344
|
$
|
807,488
|
$
|
1,149,309
|
$
|
2,816,141
|
Fair
market value of securities sold, including accrued interest
receivable
|
$
|
—
|
$
|
833,436
|
$
|
793,702
|
$
|
1,106,228
|
$
|
2,733,366
|
Repurchase
agreement liabilities associated with these securities
|
$
|
—
|
$
|
842,094
|
$
|
805,595
|
$
|
1,093,991
|
$
|
2,741,680
|
Net
weighted average borrowing rate
|
—
|
5.31%
|
5.33%
|
5.29%
|
5.31%
|
Repurchase
Agreement Counterparties
|
Amount
Outstanding
|
Amount
at
Risk(1)
|
Weighted
Average
Maturity
of
Repurchase
Agreements
in
Days
|
Percent
of
Total
Amount
Outstanding
|
|||
Deutsche
Bank Securities, Inc.
|
$
|
785,347
|
$
|
10,232
|
118
|
44.04
|
%
|
JP
Morgan Securities Inc.
|
646,699
|
16,211
|
183
|
36.26
|
|||
ING
Financial Markets,LLC
|
81,790
|
969
|
93
|
4.59
|
|||
HSBC
Securities (USA) Inc.
|
78,232
|
1,599
|
13
|
4.39
|
|||
UBS
Securities LLC
|
52,821
|
1,452
|
26
|
2.96
|
|||
Lehman
Brothers Inc
|
44,564
|
1,279
|
256
|
2.50
|
|||
Nomura
Securities International, Inc.
|
40,857
|
1,531
|
10
|
2.29
|
|||
Citigroup
Global Markets Inc
|
24,814
|
502
|
6
|
1.39
|
|||
Goldman
Sachs & Co.
|
23,570
|
456
|
60
|
1.32
|
|||
Bear,
Stearns & Co. Inc.
|
4,637
|
154
|
6
|
0.26
|
|||
Total
|
$
|
1,783,331
|
$
|
34,385
|
100.00
|
%
|
(1)
|
Equal
to the fair value of securities sold, plus accrued interest income,
minus
the sum of repurchase agreement liabilities, plus accrued interest
expense.
|
Repurchase
Agreement Counterparties
|
Amount
Outstanding
|
Amount
at
Risk(1)
|
Weighted
Average
Maturity
of
Repurchase
Agreements
in
Days
|
Percent
of
Total
Amount
Outstanding
|
|||
Deutsche
Bank Securities, Inc.
|
$
|
834,940
|
$
|
10,189
|
28
|
30.45
|
%
|
JP
Morgan Securities Inc.
|
652,936
|
13,195
|
98
|
23.82
|
|||
Nomura
Securities International, Inc.
|
463,410
|
13,405
|
94
|
16.90
|
|||
WAMU
Capital Corp.
|
333,587
|
12,476
|
24
|
12.17
|
|||
Countrywide
Securities Corporation
|
206,220
|
4,401
|
79
|
7.52
|
|||
BNP
Paribas Securities Corp.
|
92,155
|
2,666
|
18
|
3.36
|
|||
Goldman
Sachs & Co.
|
70,068
|
1,278
|
122
|
2.56
|
|||
Bank
of America Securities, LLC
|
54,120
|
1,742
|
136
|
1.97
|
|||
UBS
Securities LLC
|
21,515
|
231
|
17
|
0.78
|
|||
Greenwich
Capital Markets, Inc.
|
12,729
|
44
|
7
|
0.47
|
|||
Total
|
$
|
2,741,680
|
$
|
59,627
|
100.00
|
%
|
(1)
|
Equal
to the fair value of securities sold, plus accrued interest income,
minus
the sum of repurchase agreement liabilities, plus accrued interest
expense.
|
|
|
|
|
|
June
30, 2007
|
December
31, 2006
|
|||
Cash
and cash equivalents
|
$
|
706
|
$
|
9,754
|
Mortgage
loans held for sale
|
93,544
|
749,834
|
||
Retained
interests, trading
|
73,798
|
104,199
|
||
Securities
held for sale
|
505
|
858
|
||
Originated
mortgage servicing rights
|
32,145
|
98,859
|
||
Receivables
|
5,611
|
5,958
|
||
Property
and equipment, net
|
343
|
11,415
|
||
Prepaids
and other assets
|
11,666
|
28,447
|
||
Assets
held for sale
|
$
|
218,318
|
$
|
1,009,324
|
Warehouse
lines of credit and drafts payable
|
$
|
89,259
|
$
|
734,879
|
Other
secured borrowings
|
59,820
|
121,977
|
||
Accounts
payable, accrued expenses and other
|
31,839
|
23,060
|
||
Liabilities
related to assets held for sale
|
$
|
180,918
|
$
|
879,916
|
|
|
Six
Months Ended
|
||
|
June
30, 2007
|
June
30, 2006
|
||
Interest
income, net
|
$
|
16,407
|
$
|
37,000
|
Interest
expense
|
(17,050)
|
(34,005)
|
||
Net
interest income (deficiency)
|
(643)
|
2,995
|
||
Loss
on mortgage banking activities
|
(61,815)
|
(2,881)
|
||
Other
income and expenses, net
|
(9,652)
|
-
|
||
Net
servicing income (loss)
|
(10,618)
|
1,844
|
||
Other
non-interest income
|
2,254
|
3,207
|
||
Total
net revenues (deficiency of revenues)
|
(80,474)
|
5,165
|
||
General
and administrative expenses
|
(66,635)
|
(37,717)
|
||
Loss
before benefit (provision) for income taxes
|
(147,109)
|
|
(32,552)
|
|
Benefit
(provision) for income taxes
|
(11,463)
|
12,650
|
||
Net
loss from discontinued operations
|
$
|
(158,572)
|
$
|
(19,902)
|
|
|
Three
Months Ended
|
||
|
June
30, 2007
|
June
30, 2006
|
||
Interest
income, net
|
$
|
4,746
|
$
|
18,548
|
Interest
expense
|
(4,720)
|
(16,696)
|
||
Net
interest income
|
26
|
1,852
|
||
Loss
on mortgage banking activities
|
(43,855)
|
(5,878)
|
||
Other
income and expenses, net
|
(9,652)
|
-
|
||
Net
servicing income (loss)
|
(5,975)
|
3,607
|
||
Other
non-interest income
|
886
|
1,459
|
||
Total
net revenues (deficiency of revenues)
|
(58,570)
|
1,040
|
||
General
and administrative expenses
|
(21,876)
|
(19,741)
|
||
Loss
before benefit for income taxes
|
(80,446)
|
|
(18,701)
|
|
Benefit
for income taxes
|
-
|
7,270
|
||
Net
loss from discontinued operations
|
$
|
(80,446)
|
$
|
(11,431)
|
June
30, 2007
|
December
31, 2006
|
|||
Mortgage
loans held for sale, and other, net
|
$
|
104,573
|
$
|
741,545
|
Deferred
loan origination costs and other-net
|
1,155
|
9,188
|
||
Lower
of cost or market and valuation allowance
|
(12,184)
|
(899)
|
||
$
|
93,544
|
$
|
749,834
|
Series
|
Issue
Date
|
June
30, 2007
|
December
31, 2006
|
|||
HMAC
2004-1
|
March
4, 2004
|
$
|
1,946
|
$
|
2,948
|
|
HMAC
2004-2
|
May
10, 2004
|
749
|
1,939
|
|||
HMAC
2004-3
|
June
30, 2004
|
90
|
362
|
|||
HMAC
2004-4
|
August
16, 2004
|
952
|
1,544
|
|||
HMAC
2004-5
|
September
28, 2004
|
3,147
|
4,545
|
|||
HMAC
2004-6
|
November
17, 2004
|
6,428
|
9,723
|
|||
OMAC
2005-1
|
January
31, 2005
|
7,538
|
13,331
|
|||
OMAC
2005-2
|
April
5, 2005
|
9,841
|
14,259
|
|||
OMAC
2005-3
|
June
17, 2005
|
11,871
|
16,091
|
|||
OMAC
2005-4
|
August
25, 2005
|
10,079
|
12,491
|
|||
OMAC
2005-5
|
November
23, 2005
|
7,566
|
8,916
|
|||
OMAC
2006-1
|
March
23, 2006
|
9,735
|
13,219
|
|||
OMAC
2006-2
|
June
26, 2006
|
3,856
|
4,831
|
|||
Total
|
$
|
73,798
|
$
|
104,199
|
December
31, 2006
|
|
Prepayment
speeds (CPR)
|
36.25%
|
Weighted-average-life
|
4.18
|
Expected
credit losses
|
0.74%
|
Discount
rates
|
16.81%
|
Interest
rates
|
Forward
LIBOR Yield curve
|
June
30, 2007
|
December
31, 2006
|
|||
Carrying
value of retained interests – fair value
|
$
|
73,798
|
$
|
104,199
|
Weighted
average life (in years)
|
4.65
|
4.26
|
||
Prepayment
assumption (annual rate)
|
33.78%
|
37.88%
|
||
Impact
on fair value of 10% adverse change
|
$
|
(4,821)
|
$
|
(8,235)
|
Impact
on fair value of 20% adverse change
|
$
|
(8,873)
|
$
|
(14,939)
|
Expected
credit losses (% of original unpaid principal balance)
|
0.55%
|
0.56%
|
||
Impact
on fair value of 10% adverse change
|
$
|
(2,642)
|
$
|
(3,052)
|
Impact
on fair value of 20% adverse change
|
$
|
(5,365)
|
$
|
(6,098)
|
Residual
cash-flow discount rate
|
17.35%
|
16.03%
|
||
Impact
on fair value of 10% adverse change
|
$
|
(3,542)
|
$
|
(4,575)
|
Impact
on fair value of 20% adverse change
|
$
|
(6,767)
|
$
|
(8,771)
|
Interest
rates on variable and adjustable loans and bonds
|
Forward
LIBOR Yield Curve
|
Forward
LIBOR Yield Curve
|
||
Impact
on fair value of 10% adverse change
|
$
|
(24,550)
|
$
|
(18,554)
|
Impact
on fair value of 20% adverse change
|
$
|
(43,031)
|
$
|
(39,292)
|
Series
|
Issue
Date
|
Original
Unpaid Principal Balance
|
Actual
Losses Through June 30, 2007
|
Projected
Future Credit Losses as of June 30, 2007
|
Projected
Total Credit Losses as of June 30, 2007
|
HMAC
2004-1
|
March
4, 2004
|
$
309,710
|
0.20%
|
0.14%
|
0.34%
|
HMAC
2004-2
|
May
10, 2004
|
388,737
|
0.42%
|
0.12%
|
0.54%
|
HMAC
2004-3
|
June
30, 2004
|
417,055
|
0.18%
|
0.15%
|
0.33%
|
HMAC
2004-4
|
August
16, 2004
|
410,123
|
0.17%
|
0.14%
|
0.31%
|
HMAC
2004-5
|
September
28, 2004
|
413,875
|
0.15%
|
0.27%
|
0.42%
|
HMAC
2004-6
|
November
17, 2004
|
761,027
|
0.31%
|
0.32%
|
0.63%
|
OMAC
2005-1
|
January
31, 2005
|
802,625
|
0.15%
|
0.28%
|
0.43%
|
OMAC
2005-2
|
April
5, 2005
|
883,987
|
0.12%
|
0.34%
|
0.46%
|
OMAC
2005-3
|
June
17, 2005
|
937,117
|
0.08%
|
0.33%
|
0.41%
|
OMAC
2005-4
|
August
25, 2005
|
1,321,739
|
0.04%
|
0.54%
|
0.58%
|
OMAC
2005-5
|
November
23, 2005
|
986,277
|
0.04%
|
0.59%
|
0.63%
|
OMAC
2006-1
|
March
23, 2006
|
934,441
|
0.01%
|
0.66%
|
0.67%
|
OMAC
2006-2
|
June
26, 2006
|
491,572
|
0.00%
|
1.25%
|
1.25%
|
Total
|
$
9,058,285
|
Six
Months Ended
|
||||
June
30, 2007
|
June
30, 2006
|
|||
Proceeds
from securitizations
|
$
|
-
|
$
|
1,436,838
|
Servicing
fees received
|
9,691
|
9,252
|
||
Servicing
advances
|
1,433
|
1,550
|
||
Cash
flows received on retained interests
|
2,909
|
2,009
|
As
of Date
|
Total
Principal Amount of Loans
|
Principal
Amount of Loans 60 Days or more
|
Net
Credit Losses
|
|||
June
30, 2007
|
$
|
5,041,845
|
$
|
260,012
|
$
|
10,657
|
December
31, 2006
|
5,849,013
|
138,205
|
5,210
|
|
(f)
– Mortgage Servicing Rights,
Net
|
June
30, 2007
|
December
31, 2006
|
|||
Balance
at beginning of period
|
$
|
98,859
|
$
|
86,082
|
Adjustment
to fair value upon adoption of SFAS 156 as of January 1,
2006
|
-
|
4,298
|
||
Additions
|
7,693
|
43,175
|
||
Changes
in fair value:
|
||||
Changes
in fair value due to changes in market conditions and
run-off
|
(12,330)
|
(33,551)
|
||
Changes
in fair value due to change in valuation assumptions
|
(4,630)
|
(1,145)
|
||
Less
servicing sold
|
(56,440)
|
-
|
||
Fair
value at end of period
|
33,152
|
98,859
|
||
Less
cost to sell
|
(1,007)
|
-
|
||
Balance
at end of period
|
$
|
32,145
|
$
|
98,859
|
June
30, 2007
|
December
31, 2006
|
|||
Prepayment
assumption (annual rate) (PSA)
|
387.9
|
424.6
|
||
Impact
on fair value of 10% adverse change
|
$
|
(1,311)
|
$
|
(3,923)
|
Impact
on fair value of 20% adverse change
|
$
|
(2,494)
|
$
|
(7,557)
|
MSR
Cash-Flow Discount Rate
|
14.50%
|
14.50%
|
||
Impact
on fair value of 10% adverse change
|
$
|
(1,194)
|
$
|
(3,505)
|
Impact
on fair value of 20% adverse change
|
$
|
(2,296)
|
$
|
(6,727)
|
Warehouse
and aggregation lines of credit:
|
June
30, 2007
|
December
31, 2006
|
||
A
committed warehouse line of credit for $100.0 million between OITRS
and
Residential Funding Corporation ("RFC"). The agreement expired
on February
28, 2007 and was not renewed. RFC is now a party to the
JPM syndicated facility below.
|
$
|
-
|
$
|
6,172
|
A
syndicated committed warehouse line of credit for $850.0 million
as of
December 31, 2006, between OITRS and JP Morgan Chase (“JPM”). The
agreement was scheduled to expire on May 30, 2007. The
agreement was extended until July 31, 2007 and the limit reduced
in
stages, initially to $155 million through June 30, 2007 and $50.0
million
through July 31, 2007. The agreement provides for interest
rates based upon one month LIBOR plus a margin of 0.60% to 1.50%
depending
on the product originated or acquired. During the extension
period the applicable margin was increased to 1.5% on all
borrowings.
|
22,272
|
409,609
|
||
An
aggregation facility for $1.5 billion as of December 31, 2006 for
the
whole loan and servicing rights facility, collectively, (of which
no more
than $100.0 million as of December 31, 2006 may be allocated to
the
servicing rights facility) between HS Special Purpose, LLC, a wholly-owned
subsidiary of OITRS, and Citigroup Global Markets Realty Corp.
(“Citigroup”) to aggregate loans pending securitization. The agreement was
scheduled to expire on December 20, 2007. The agreement provides
for
interest rates based upon one month LIBOR plus a margin of
0.30%. The facility was amended on May 25, 2007 and the limit
was reduced to $300 million and is now scheduled to expire September
30,
2007. On August 9, 2007, the facility was further amended and
the limit was reduced to $40 million.
|
37,233
|
5,358
|
||
A
$750.0 million purchase and security agreement between OITRS and
UBS
Warburg Real Estate Securities, Inc. (“UBS Warburg”). The
agreement expired on February 28, 2007 and was not
renewed.
|
-
|
3,283
|
||
Drafts
payable
|
-
|
6,542
|
||
Loan
sale agreements accounted for as financings:
|
||||
An
uncommitted $700.0 million purchase agreement between OITRS and
Colonial
Bank. The facility is due upon demand and can be cancelled by
either party upon notification to the counterparty. OITRS
incurs a charge for the facility based on one month LIBOR plus
0.50% for
the first $300.0 million purchased and one month LIBOR plus 0.75%
for the
amount used above and beyond $300.0 million. The facility is
secured by loans held for sale and cash generated from sales to
investors. The borrowing capacity of the facilities was reduced
to $30 million effective July 1, 2007 and both parties agreed to
cancel
the facility effective July 31, 2007.
|
29,754
|
303,915
|
||
Total
warehouse lines and drafts payable
|
$
|
89,259
|
$
|
734,879
|
|
Other
secured borrowings consisted of the following as of June 30, 2007
and
December 31, 2006:
|
|
(in
thousands)
|
June
30, 2007
|
December
31, 2006
|
|||
A
committed warehouse line of credit between OITRS and JP Morgan
Chase, that
allows for a sublimit for Originated Mortgage Servicing Rights. The
agreement was extended until July 31, 2007 and the limit reduced
in
stages, initially to $75.0 million through June 30, 2007 and $20.0
million
through July 31, 2007. The agreement was further extended until
September 28, 2007. The agreement provides for interest rate based
on
LIBOR plus 1.50% to 1.85% depending on collateral type.
|
$
|
20,048
|
$
|
71,657
|
Citigroup
Global Realty Inc., working capital line of credit for $80.0 million
secured by the retained interests in securitizations through
OMAC 2006-2. The facility expires on December 20, 2007. The agreement
provides for interest rate based on LIBOR plus 1.00%.
|
39,772
|
50,320
|
||
$
|
59,820
|
$
|
121,977
|
(j)
|
-
Transactions With a Related
Party
|
Six
Months Ended
|
||||
June
30, 2007
|
June
30, 2006
|
|||
Balance—Beginning
of period
|
$
|
7,136
|
$
|
2,038
|
Provision
|
16,010
|
1,567
|
||
Charge-Offs
|
(10,492)
|
(896)
|
||
Balance—End
of period
|
$
|
12,654
|
$
|
2,709
|
Six
Month Ended
|
Three
Months Ended
|
|||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||
Net
(loss)
|
$
|
(240,537)
|
$
|
(9,367)
|
$
|
(162,467)
|
$
|
(1,395)
|
Reclassify
net realized loss on MBS
|
19,388
|
-
|
18,568
|
-
|
||||
Reclassify
other-than-temporary loss on MBS
|
55,250
|
-
|
55,250
|
-
|
||||
Unrealized
gain (loss) on available-for-sale securities, net
|
2,135
|
(33,897)
|
(1,043)
|
(22,472)
|
||||
Comprehensive
(loss)
|
$
|
(163,764)
|
$
|
(43,264)
|
$
|
(89,692)
|
$
|
(23,867)
|
Asset
Category
|
Market
Value
(in
thousands)
|
Percentage
of
Entire
Portfolio
|
Weighted
Average
Coupon
|
Weighted
Average
Maturity
in
Months
|
Longest
Maturity
|
Weighted
Average
Coupon Reset in Months
|
Weighted
Average
Lifetime
Cap
|
Weighted
Average
Periodic Cap
|
|||
Adjustable-Rate
MBS
|
$
|
1,171,277
|
64.40%
|
5.42%
|
318
|
1-Apr-44
|
4.95
|
9.85%
|
1.74%
|
||
Fixed-Rate
MBS
|
$
|
433,500
|
23.84%
|
6.64%
|
241
|
1-Jan-37
|
n/a
|
n/a
|
n/a
|
||
Hybrid
Adjustable-Rate MBS
|
$
|
213,859
|
11.76%
|
4.40%
|
336
|
1-May-36
|
13.87
|
9.91%
|
2.04%
|
||
Total
Portfolio
|
$
|
1,818,636
|
100.00%
|
5.59%
|
302
|
1-Apr-44
|
6.32
|
9.86%
|
1.79%
|
Agency
|
Market
Value
(in
thousands)
|
Percentage
of
Entire
Portfolio
|
||
Fannie
Mae
|
$
|
1,413,319
|
77.71%
|
|
Freddie
Mac
|
107,250
|
5.90%
|
||
Ginnie
Mae
|
298,067
|
16.39%
|
||
Total
Portfolio
|
$
|
1,818,636
|
100.00%
|
Entire
Portfolio
|
||
Effective
Duration (1)
|
1.36
|
|
Weighted
Average Purchase Price
|
$
|
102.31
|
Weighted
Average Current Price
|
$
|
100.95
|
(1)
|
Effective
duration of 1.36 indicates that an interest rate
increase of 1% would be expected to cause a
1.36% decline in the value of the MBS in the
Company’s investment portfolio.
|
Interest
Rates Fall
100
Basis Points
|
Interest
Rates Rise
100
Basis Points
|
Interest
Rates Rise
200
Basis Points
|
||||
Adjustable-Rate
MBS
|
||||||
(Fair
Value $1,171,277)
|
||||||
Change
in fair value
|
$
|
8,610
|
$
|
(8,610)
|
$
|
(17,220)
|
Change
as a percent of fair value
|
0.74%
|
(0.74%)
|
(1.47%)
|
|||
Fixed-Rate
MBS
|
||||||
(Fair
Value $433,500)
|
||||||
Change
in fair value
|
$
|
12,721
|
$
|
(12,721)
|
$
|
(25,442)
|
Change
as a percent of fair value
|
2.93%
|
(2.93%)
|
(5.87%)
|
|||
Hybrid
Adjustable-Rate MBS
|
||||||
(Fair
Value $213,859)
|
||||||
Change
in fair value
|
$
|
3,386
|
$
|
(3,386)
|
$
|
(6,772)
|
Change
as a percent of fair value
|
1.58%
|
(1.58)
|
(3.17%)
|
|||
Cash
|
||||||
(Fair
Value $ 41,903)
|
||||||
Portfolio
Total
|
||||||
(Fair
Value $1,818,636)
|
||||||
Change
in fair value
|
$
|
24,717
|
$
|
(24,717)
|
$
|
(49,434)
|
Change
as a percent of fair value
|
1.36%
|
(1.36%)
|
(2.72%)
|
Interest
Rates Fall
100
Basis Points
|
Interest
Rates Rise
100
Basis Points
|
Interest
Rates Rise
200
Basis Points
|
||||
Adjustable-Rate
MBS
|
||||||
(Fair
Value $1,171,277)
|
||||||
Change
in fair value
|
$
|
4,929
|
$
|
(12,238)
|
$
|
(32,091)
|
Change
as a percent of fair value
|
0.42%
|
(1.04%)
|
(2.74%)
|
|||
Fixed-Rate
MBS
|
||||||
(Fair
Value $433,500)
|
||||||
Change
in fair value
|
$
|
9,782
|
$
|
(14,854)
|
$
|
(31,881)
|
Change
as a percent of fair value
|
2.26%
|
(3.43%)
|
(7.35%)
|
|||
Hybrid
Adjustable-Rate MBS
|
||||||
(Fair
Value $213,859)
|
||||||
Change
in fair value
|
$
|
2,552
|
$
|
(4,092)
|
$
|
(9,413)
|
Change
as a percent of fair value
|
1.19%
|
(1.91%)
|
(4.40%)
|
|||
Cash
|
||||||
(Fair
Value $41,903)
|
||||||
Portfolio
Total
|
||||||
(Fair
Value $1,818,636)
|
||||||
Change
in fair value
|
$
|
17,263
|
$
|
(31,184)
|
$
|
(73,385)
|
Change
as a percent of fair value
|
0.95%
|
(1.71%)
|
(4.04%)
|
Quarter
Ended
|
Principal
Balance
of
Investment
Securities
Held
|
Unamortized
Premium
(Net)
|
Amortized
Cost of
Securities
Held
|
Amortized
Cost/Principal
Balance
Held
|
Fair
Market
Value
of
Investment
Securities
Held
|
Fair
Market
Value/Principal
Balance
Held
|
||||
At
June 30, 2007
|
$
|
1,801,492
|
$
|
17,144
|
$
|
1,818,636
|
100.95
|
$
|
1,818,636
|
100.95
|
At
March 31, 2007
|
2,893,761
|
109,445
|
3,003,206
|
103.78
|
2,931,796
|
101.31
|
||||
At
December 31, 2006
|
2,779,867
|
115,612
|
2,895,479
|
104.16
|
2,808,734
|
101.04
|
||||
At
September 30, 2006
|
3,055,791
|
122,300
|
3,178,091
|
104.00
|
3,080,060
|
100.79
|
||||
At
June 30, 2006
|
3,396,910
|
120,769
|
3,517,679
|
103.56
|
3,407,288
|
100.31
|
||||
At
March 31,2006
|
3,515,113
|
111,361
|
3,626,473
|
103.17
|
3,538,554
|
100.67
|
||||
At
December 31, 2005
|
3,457,891
|
112,636
|
3,570,527
|
103.26
|
3,494,029
|
101.05
|
||||
At
September 30, 2005
|
3,797,401
|
113,393
|
3,910,793
|
102.99
|
3,858,320
|
101.60
|
||||
At
June 30, 2005
|
3,784,668
|
114,673
|
3,899,341
|
103.03
|
3,876,206
|
102.42
|
||||
At
March 31, 2005
|
3,212,517
|
109,390
|
3,321,907
|
103.41
|
3,299,052
|
102.69
|
Quarter
Ended
|
Average
Investment
Securities
Held
|
Total
Interest Income
|
Yield
on
Average
Interest
Earning
Assets
|
Average
Balance
of
Repurchase
Obligations
Outstanding
|
Interest
|