UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ýþQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2005~~2006

or¨

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to .___________

Commission File ~~No. 001-32171~~Number: 1-32171

~~BIMINI MORTGAGE MANAGEMENT, INC.~~Opteum Inc.

(Exact name of registrant as specified in its charter)

~~Maryland~~		~~72-1571637~~
Maryland		72-1571637
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~3305 Flamingo Drive, Vero Beach, Florida 32963~~
~~(Address of principal executive offices - zip code)~~

~~(772) 231-1400~~
~~(Registrant’s telephone number, including area code)~~

3305 Flamingo Drive, Vero Beach, Florida 32963

(Address of principal executive offices) (Zip Code)

(772) 231-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~YES ýþ NO ¨ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer þ

Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act Rule 12b-2)~~Act). ~~Yes~~

YES o¨ NO þ No ý

~~At March 31, 2005,~~

As of May 5, 2006, the number of shares outstanding of the registrant’s Class A Common Stock, $0.001 par value, was ~~20,374,883;~~24,318,586; the number of shares outstanding of the registrant’s Class B Common Stock, $0.001 par value, was 319,388; and the number of shares outstanding of the registrant’s Class C Common Stock, $0.001 par value, was 319,388.

~~BIMINI MORTGAGE MANAGEMENT,~~OPTEUM INC.

INDEX

PART I. FINANCIAL INFORMATION	3

ITEM 1. FINANCIAL STATEMENTS		3
Consolidated Balance Sheets as of March 31, 2006 (unaudited) and December 31, 2005		3
~~BALANCE SHEETS~~Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005 (unaudited)	3 4
Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2006 (unaudited)	5
~~STATEMENTS OF INCOME~~Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005 (unaudited)	4 6
Notes to Consolidated Financial Statements (unaudited)	8
~~STATEMENT OF STOCKHOLDERS’ EQUITY~~	5

~~STATEMENTS OF CASH FLOWS~~		6

~~NOTES TO FINANCIAL STATEMENTS~~		7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21 32

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		27 47

ITEM 4. CONTROLS AND PROCEDURES		33 55
PART II. OTHER INFORMATION
~~PART II OTHER INFORMATION~~	34

ITEM 1. LEGAL PROCEEDINGS		34 56
ITEM 1A. RISK FACTORS		56
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34 56

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		34 57

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		34 57

ITEM 5. OTHER INFORMATION		34 57

ITEM 6. EXHIBITS ~~AND REPORTS ON FORM 8-K~~		34 57

PART I.1. FINANCIAL INFORMATION

ITEM 1. Financial Statements. ~~FINANCIAL STATEMENTS~~

BIMINI MORTGAGE MANAGEMENT, INC.

~~BALANCE SHEETS~~

(Unaudited)
March 31, 2005

December 31, 2004

ASSETS

MORTGAGE-BACKED SECURITIES:

Pledged to counterparties, at fair value

$
3,287,521,075

$
2,901,158,559

Unpledged, at fair value

11,530,486

72,074,338

TOTAL MORTGAGE-BACKED SECURITIES

3,299,051,561

2,973,232,897

CASH AND CASH EQUIVALENTS

113,855,808

128,942,436

RESTRICTED CASH

29,590,000

8,662,000

PRINCIPAL PAYMENTS RECEIVABLE

5,875,514

3,419,199

ACCRUED INTEREST RECEIVABLE

13,681,819

11,377,807

PROPERTY AND EQUIPMENT, net

2,131,135

2,050,923

PREPAIDS AND OTHER ASSETS

5,774,331

732,469

$
3,469,960,168

$
3,128,417,731

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:

Repurchase agreements

$
3,181,655,356

$
2,771,162,957

Accrued interest payable

14,926,521

7,980,829

Unsettled security purchases

—

65,765,630

Dividends payable

11,241,953

—

Compensation and related benefits payable

116,279

87,323

Accounts payable, accrued expenses and other

402,429

458,665

TOTAL LIABILITIES

3,208,342,538

2,845,455,404

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:

Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding

—

—

Class A common stock, $0.001 par value; 98,000,000 shares designated; issued and outstanding, 20,374,883 shares at March 31, 2005 and 20,368,915 shares at December 31, 2004

20,375

20,369

Class B common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding each period

319

319

Class C common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding each period

319

319

Additional paid-in capital

285,685,505

285,174,651

Accumulated other comprehensive loss

(22,677,214
)
(1,155,771
)
Accumulated deficit

(1,411,674
)
(1,077,560
)

STOCKHOLDERS’ EQUITY, net

261,617,630

282,962,327

$
3,469,960,168

$
3,128,417,731

~~See notes to financial statements.~~

OPTEUM INC.
CONSOLIDATED BALANCE SHEETS
		(Unaudited)
		March 31,		December 31,
ASSETS		2006		2005

MORTGAGE BACKED SECURITIES:
Pledged to counterparties, at fair value	$	3,528,646,943	$	3,493,490,046
Unpledged, at fair value		9,907,267		539,313

TOTAL MORTGAGE BACKED SECURITIES		3,538,554,210		3,494,029,359

Cash and cash equivalents		90,872,039		130,510,948
Restricted cash		-		2,310,000
Mortgage loans held for sale, net		721,593,366		894,237,630
Retained interests, trading		105,196,205		98,010,592
Securities held for sale		1,847,248		2,782,548
Mortgage servicing rights, net		93,337,355		86,081,594
Receivables, net		6,656,880		24,512,118
Principal payments receivable		15,624,670		21,497,365
Accrued interest receivable		16,441,403		15,740,475
Property and equipment, net		17,038,985		16,067,170
Prepaid and other assets		18,882,146		19,321,766
	$	4,626,044,507	$	4,805,101,565
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Repurchase agreements	$	3,413,954,826	$	3,337,598,362
Warehouse lines of credit and drafts payable		697,860,930		873,741,429
Other secured borrowings		105,452,119		104,886,339
Junior subordinated notes due to Bimini Capital Trust I & II		103,097,000		103,097,000
Accrued interest payable		34,639,214		30,232,719
Unsettled security purchases		1,709,728		58,278,701
Dividends payable		2,645,853		-
Deferred tax liability		16,243,642		18,360,679
Accounts payable, accrued expenses and other		18,850,263		26,417,996

TOTAL LIABILITIES		4,394,453,575		4,552,613,225

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; designated, 1,800,000 shares as Class A Redeemable and 2,000,000 shares as Class B Redeemable; shares issued and outstanding at March 31, 2006 and December 31, 2005, 1,223,208 Class A Redeemable and no Class B Redeemable		1,223		1,223
Class A common stock, $0.001 par value; 98,000,000 shares designated; 24,172,598 shares issued and 23,083,498 shares outstanding at March 31, 2006, and 24,129,042 shares issued and 23,567,242 shares outstanding at December 31, 2005		24,173		24,129
Class B common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding at March 31, 2006 and December 31, 2005		319		319
Class C common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding at March 31, 2006 and December 31, 2005		319		319
Additional paid-in capital		342,759,382		342,230,342
Accumulated other comprehensive loss		(88,309,476)		(76,494,378)
Accumulated deficit		(13,148,327)		(8,037,260)
Treasury Stock; Class A common stock, at cost; 1,089,100 shares at March 31, 2006 and 561,800 shares at December 31, 2005		(9,736,681)		(5,236,354)

STOCKHOLDERS' EQUITY, NET		231,590,932		252,488,340
	$	4,626,044,507	$	4,805,101,565
See notes to consolidated financial statements.

OPTEUM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
		(Unaudited)
		Three Months Ended March 31,
		2006		2005
INTEREST INCOME:
Interest income, net of amortization of premium and discount	$	60,690,122	$	31,069,934
Interest expense		(56,206,771)		(19,841,710)

NET INTEREST INCOME:		4,483,351		11,228,224

NON-INTEREST INCOME:
GAIN OF SALE OF MORTGAGE LOANS		7,076,658		-
GAINS ON SALES OF MORTGAGE BACKED SECURITIES		-		1,982,382

Servicing fee income		6,299,224		-
Fair Value adjustments to mortgage servicing rights		(8,062,481)		-
NET SERVICING (LOSS)		(1,763,257)		-

OTHER NON-INTEREST INCOME		1,748,142		-
TOTAL NON-INTEREST INCOME		7,061,543		1,982,382

TOTAL NET REVENUE		11,544,894		13,210,606

DIRECT OPERATING EXPENSES		319,250		589,973
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and related benefits		8,023,814		1,205,333
Directors' fees and liability insurance		209,896		156,450
Audit, legal and other professional fees		1,202,147		198,005
Other interest expense		1,731,785		-
Other administrative expenses		8,938,478		153,006
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES		20,106,120		1,712,794

(LOSS) INCOME BEFORE INCOME TAXES		(8,880,476)		10,907,839

INCOME TAX BENEFIT		(3,793,344)		-
NET (LOSS) INCOME	$	(5,087,132)	$	10,907,839
BASIC AND DILUTED NET (LOSS) INCOME:
PER CLASS A REDEEMABLE PREFERRED SHARE	$	-	$	-
PER CLASS A COMMON SHARE	$	(0.21)	$	0.52
PER CLASS B COMMON SHARE	$	(0.21)	$	0.51

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTING BASIC AND DILUTED PER SHARE AMOUNTS:
CLASS A REDEEMABLE PREFERRED SHARES		1,223,208		N/A
CLASS A COMMON SHARES		23,436,534		20,795,612
CLASS B COMMON SHARES		319,388		319,388
CASH DIVIDENDS DECLARED PER:
CLASS A REDEEMABLE PREFERRED SHARE	$	-	$	-
CLASS A COMMON SHARE	$	0.11	$	0.53
CLASS B COMMON SHARE	$	0.11	$	0.53
See notes to consolidated financial statements.

BIMINI MORTGAGE MANAGEMENT, INC.

~~STATEMENTS OF INCOME~~

(Unaudited)
Three months ended
March 31, 2005

(Unaudited)
Three months ended
March 31, 2004

Interest income, net of amortization of premium and discount

$
31,069,934

$
7,194,033

Interest expense

19,841,710

2,736,434

NET INTEREST INCOME

11,228,224

4,457,599

GAIN ON SALES OF MORTGAGE-BACKED SECURITIES

1,982,382

—

DIRECT OPERATING EXPENSES:

Trading costs, commissions, and other trading expenses

536,284

200,064

Other direct costs

53,689

25,919

TOTAL DIRECT OPERATING EXPENSES

589,973

225,983

GENERAL AND ADMINISTRATIVE EXPENSES:

Compensation and related benefit/costs

1,205,333

91,345

Directors’ fees

92,027

24,750

Directors’ liability insurance costs

64,423

41,082

Audit, legal and other professional fees

198,005

33,834

Other administrative expenses

153,006

97,443

TOTAL GENERAL AND ADMINISTRATIVE EXPENSES

1,712,794

288,454

NET INCOME

$
10,907,839

$
3,943,162

BASIC AND DILUTED INCOME PER CLASS A COMMON SHARE

$
0.52

$
0.49

BASIC AND DILUTED INCOME PER CLASS B COMMON SHARE

$
0.51

$
—

WEIGHTED AVERAGE NUMBER OF CLASS A COMMON SHARES OUTSTANDING USED IN COMPUTING PER SHARE AMOUNTS:

BASIC AND DILUTED

20,795,612

8,001,052

WEIGHTED AVERAGE NUMBER OF CLASS B COMMON SHARES OUTSTANDING USED IN COMPUTING PER SHARE AMOUNTS:

BASIC AND DILUTED

319,388

—

CASH DIVIDENDS DECLARED PER:

CLASS A COMMON SHARE

$
0.53

$
0.39

CLASS B COMMON SHARE

$
0.53

$
—

~~See notes to financial statements.~~

OPTEUM INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
Three Months Ended March 31, 2006

	Common Stock, Amounts at par value			Class A Redeemable Preferred	Treasury	Additional Paid-in	Accumulated Other Comprehensive	Accumulated
	Class A	Class B	Class C	Stock	Stock	Capital	Loss	Deficit	Total
Balances, December 31, 2005	$ 24,129	$ 319	$ 319	$ 1,223	$(5,236,354)	$342,230,342	$ (76,494,378)	$(8,037,260)	$ 252,488,340

Fair value adjustment upon adoption of SFAS No. 156 (see Note 5)	-	-	-	-	-	-	-	2,621,918	2,621,918
Issuance of Class A common shares for board compensation and plan phantom share exercises, net	44	-	-	-	-	98,105	-	-	98,149
Treasury stock purchases	-	-	-	-	(4,500,327)	-	-	-	(4,500,327)
Cash dividends declared	-	-	-	-	-	-	-	(2,645,853)	(2,645,853)
Phantom shares vested and amortization of equity plan compensation, net	-	-	-	-	-	559,318	-	-	559,318
Stock issuance costs	-	-	-	-	-	(128,383)	-	-	(128,383)
Net loss	-	-	-	-	-	-	-	(5,087,132))	(5,087,132)
Unrealized loss on available for sale securities, net	-	-	-	-	-	-	(11,815,098)	-	(11,815,098)
Comprehensive loss	-	-	-	-	-	-	-	-	(16,902,230)

Balances, March 31, 2006	$ 24,173	$ 319	$ 319	$ 1,223	$(9,736,681)	$ 342,759,382	$(88,309,476)	$(13,148,327)	$ 231,590,932

See notes to consolidated financial statements.

OPTEUM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended March 31,

2006

2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (5,087,132) $ 10,907,839
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Gain on sale of mortgage loans held for sale (7,076,658) -
Amortization of premium and discount on mortgage backed securities 3,080,393 8,097,698
Retained interest, trading (7,185,613) -
Securities held for sale 935,300 -
Mortgage servicing rights, net (4,633,843) -
Deferred tax liability (2,117,037) -
Gains on sales of mortgage backed securities - (1,982,382)
Stock compensation 808,614 554,784
Depreciation and amortization 1,027,644 11,974
Changes in operating assets and liabilities:
Mortgage loans held for sale 179,720,922 -
Receivables, net 17,855,238 -
Accrued interest receivable (700,928) (2,304,010)
Prepaids and other assets 282,625 (5,041,862)
Accrued interest payable 4,406,495 6,945,692
Accounts payable, accrued expenses and other 2,682,549 (27,280)
NET CASH PROVIDED BY OPERATING ACTIVITIES 183,998,569 17,162,453

CASH FLOWS FROM INVESTING ACTIVITIES:
From available-for-sale securities:
Purchases (432,101,377) (827,611,830)
Sales - 172,040,665
Principal repayments 321,984,757 233,893,795
Purchases of property and equipment (1,842,465) (92,180)
NET CASH USED IN INVESTING ACTIVITIES (111,959,085) (421,769,550)

CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease (increase) in restricted cash 2,310,000 (20,928,000)
Net borrowings under repurchase agreements 76,356,464 410,492,399
Decrease in warehouse lines of credit, drafts payable and other secured borrowings (185,565,000) -
Stock issuance and other costs (279,530) (43,930)
Purchases of treasury stock (4,500,327) -
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (111,678,393) 389,520,469

NET CHANGE IN CASH AND CASH EQUIVALENTS (39,638,909) (15,086,628)

CASH AND CASH EQUIVALENTS, Beginning of the period 130,510,948 128,942,436

CASH AND CASH EQUIVALENTS, End of the period $ 90,872,039 $ 113,855,608

OPTEUM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)

(Unaudited)

Three Months Ended March 31,

2006

2005

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 51,800,276 $ 12,896,018

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Cash dividends declared and payable, not yet paid $ 2,645,853 $ 11,241,953
Unsettled security purchases $ 1,709,728 $ -
See notes to consolidated financial statements.

~~BIMINI MORTGAGE MANAGEMENT,~~OPTEUM INC.

~~STATEMENT OF STOCKHOLDERS’ EQUITY~~
~~THREE MONTHS ENDED~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

MARCH 31, ~~2005~~2006

~~(UNAUDITED)~~

Accumulated

Common stock,
Amounts at Par Value

Additional
Paid-in

Other
Comprehensive

Accumulated

Class A

Class B

Class C

Capital

Loss

Deficit

Total

Balances, December 31, 2004

$
20,369

$
319

$
319

$
285,174,651

$
(1,155,771
)
$
(1,077,560
)
$
282,962,327

Issuance of Class A common shares as board compensation

6

92,021

92,027

Cash dividends declared, March 2005

(11,241,953
)
(11,241,953
)
Amortization of equity plan compensation

462,763

462,763

Stock issuance costs

(43,930
)

(43,930
)
Reclassify unrealized loss on security sales

(1,982,382
)

(1,982,382
)
Net income

10,907,839

10,907,839

Unrealized loss on available for sale securities, net

(19,539,061
)

(19,539,061
)
Comprehensive loss

(10,613,604
)

Balances, March 31, 2005

$
20,375

$
319

$
319

$
285,685,505

$
(22,677,214
)
$
(1,411,674
)
$
261,617,630

BIMINI MORTGAGE MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)
Three months ended
March 31, 2005

(Unaudited)
Three months ended
March 31, 2004

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
10,907,839

$
3,943,162

Amortization of premium and discount

8,097,698

1,898,016

Stock compensation and depreciation

566,758

28,473

Gain on sales of mortgage-backed securities

(1,982,382
)
—

Changes in certain assets and liabilities:

Accrued interest receivable

(2,304,010
)
(4,362,526
)
Prepaids and other assets

(5,041,862
)
(370,691
)
Accrued interest payable

6,945,692

1,993,227

Accounts payable, accrued expenses and other

(27,280
)
160,974

NET CASH PROVIDED BY OPERATING ACTIVITIES

17,162,453

3,290,635

CASH FLOWS FROM INVESTING ACTIVITIES:

From available-for-sale securities:

Purchases

(827,611,830
)
(1,311,612,358
)
Sales

172,040,665

—

Principal repayments

233,893,795

22,972,383

Purchases of property and equipment

(92,180
)
(66,910
)
NET CASH USED IN INVESTING ACTIVITIES

(421,769,550
)
(1,288,706,885
)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in restricted cash

(20,928,000
)
—

Net borrowings under repurchase agreements

410,492,399

1,253,947,000

Stock issuance costs

(43,930
)
—

Proceeds from sales of common stock, net of costs of issuance

—

85,112,817

NET CASH PROVIDED BY FINANCING ACTIVITIES

389,520,469

1,339,059,817

NET CHANGE IN CASH AND CASH EQUIVALENTS

(15,086,628
)
53,643,567

CASH AND CASH EQUIVALENTS, Beginning of the period

128,942,436

18,404,130

CASH AND CASH EQUIVALENTS, End of the period

$
113,855,808

$
72,047,697

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for interest

$
12,896,018

$
743,207

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Cash dividends declared and payable, not yet paid

$
11,241,953

$
3,903,569

~~See notes to financial statements.~~

BIMINI MORTGAGE MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

~~MARCH 31, 2005~~

NOTE 1.ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

~~Bimini Mortgage Management,~~

Opteum Inc. ~~(the “Company”~~(“Opteum”) was incorporated in Maryland on September 24, 2003, and it commenced its planned business activities on December 19, 2003, the date of the initial closing of a private issuance of its common stock.

On February 6, 2006, Opteum announced that its Board of Directors voted unanimously to change its name from Bimini Mortgage Management, Inc. to Opteum Inc. On February 10, 2006, the corporate name change was effective and its New York Stock Exchange, ticker symbol was changed from “BMM” to “OPX.” The ~~Company~~corporate name change leverages the brand identity of Opteum Financial Services, LLC (our taxable REIT subsidiary - see Note 2), and further enhances the integration of Opteum and the associates of Opteum Financial Services, LLC. One company and one national brand now represent a unified image to investors, customers and associates.

Opteum was formed to invest primarily in, but not limited to, residential mortgage related securities issued by the Federal National Mortgage Association (more commonly known as Fannie Mae), the Federal Home Loan Mortgage Corporation (more commonly known as Freddie Mac) and the Government National Mortgage Association (more commonly known as Ginnie Mae).

~~The Company~~ Opteum funds investments in its portfolio of mortgage backed securities (“MBS”) through borrowings under repurchase agreements. Opteum earns a net interest spread between the yield on the investments in mortgage backed securities and the borrowing costs on the repurchase agreements.

Opteum has elected to be taxed as a real estate investment trust ~~(“REIT”~~("REIT") under the Internal Revenue Code of 1986, as ~~amended.~~amended (the “Code”). In order to maintain its REIT ~~status, the Company~~qualification, Opteum must comply with a number of requirements under ~~Federal~~federal tax law, including that it must distribute at least 90% of its annual REIT taxable ~~net~~ income to its stockholders, subject to certain adjustments. Such portfolio management activity mentioned above comprises the REIT qualifying operations of Opteum.

On September 29, 2005, Opteum executed a definitive merger agreement with Opteum Financial Services, LLC (“OFS”), a privately held home mortgage lender headquartered in Paramus, New Jersey. OFS has approximately 1,000 associates operating out of 35 offices and lending in 46 states. The transaction, in which OFS became a wholly-owned taxable REIT subsidiary (“TRS”) of Opteum, closed on November 3, 2005 (see Note 2). OFS acquires and originates mortgages that are either sold to third parties or securitized by Opteum Mortgage Acceptance Corporation (“OPMAC”). OFS services the mortgages securitized by OPMAC.

As aused in this document, the parent company, the registrant, “Opteum” and discussions related to REIT qualifying activities or the ~~Company will routinely distribute substantially all~~general management of ~~its taxable income generated from operations~~Opteum’s portfolio of mortgage backed securities (“MBS”) refers to ~~its stockholders. The Company will generally not be subject~~“Opteum Inc.” Further, as used in this document, “OFS,” the TRS or non REIT eligible assets refer to ~~Federal income tax~~Opteum Financial Services, LLC. Discussions relating to the ~~extent that it distributes its net income~~“Company” refer to the ~~stockholders,~~consolidated entity (the combination of Opteum and ~~satisfies the ongoing~~OFS). The assets and activities that are not REIT ~~requirements including meeting certain asset, income~~eligible, such as mortgage origination, acquisition and ~~stock ownership tests.~~

servicing activities, are conducted by OFS.

Interim Financial Statements

The accompanying interim financial statements reflect all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations, statement of stockholder equity and cash flows for the periods presented. These interim financial statements have been prepared in accordance with disclosure requirements for interim financial information and accordingly, they may not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for annual financial statements. The operating results for the interim period ended March 31, ~~2005~~2006 are not necessarily indicative of results that can be expected for the year ended December 31, 2006. The operating results of the interim period ended March 31, 2005 do not include the results of OFS, as the merger closed in November 2005. The financial statements included as part of this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2004. Certain prior year amounts have been reclassified to conform to the current year presentation.~~

2005.

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the accompanying financial statements include the fair values of ~~mortgage-backed~~mortgage backed securities, ~~(“MBS”) and~~ the prepayment speeds used to calculate amortization and accretion of premiums and discounts on ~~MBS.~~

~~Securities~~mortgage backed securities, the deferred tax liability valuation, the valuation allowance on mortgage loans held for sale, the valuation of derivative financial instruments and the fair value of mortgage servicing rights.

Consolidation

The accompanying March 31, 2006 consolidated financial statements include the accounts of Opteum and its wholly-owned subsidiary, OFS, as well the wholly-owned and majority owned subsidiaries of OFS. Opteum uses the equity method to account for other investments for which it has the ability to exercise significant influence over operating and financial policies. Consolidated net earnings of Opteum include Opteum’s share of the net earnings (losses) of these companies, if any. The inter-company loan and all other material inter-company accounts and transactions have been eliminated from the consolidated financial statements.

As further described in Note 11, Opteum has a common share investment in two trusts used to issue Opteum’s junior subordinated notes. Pursuant to the accounting guidance provided in Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46, Consolidation of Variable Interest ~~Income Recognition~~Entities

, Opteum’s common share investment in the trusts are not consolidated in the financial statements of Opteum, and accordingly, these investments are accounted for on the equity method.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less. The ~~Company invests primarily in residential mortgage~~carrying amount of cash equivalents approximates its fair value at March 31, 2006 and December 31, 2005.

Restricted cash represents cash held on deposit as collateral with certain repurchase agreement counter-parties (i.e. lenders). Such amounts may be used to make principal and interest payments on the related ~~securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae.~~

repurchase agreements.

Valuation of Mortgage Backed Securities

In accordance with GAAP, ~~the Company~~Opteum classifies its investments in MBS as either trading investments, available-for-sale investments or held-to-maturity investments. Management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. ~~The Company~~Although Opteum intends to hold its MBS until maturity, it may, from time to time, sell any of its MBS as part of the overall management of the business. Opteum currently classifies all of its securities as available-for-sale, and assets so classified are carried on the balance sheet at fair value, and unrealized gains or losses arising from changes in market values are ~~excluded from earnings and~~ reported inas other comprehensive income or loss as a component of ~~stockholders’~~stockholders' equity. ~~Permanent~~Other-than-temporary impairment losses, if any, are reported in earnings.

When the fair value of an available-for-sale security is less than amortized cost, management considers whether there is an other-than-temporary impairment in the value of the security. The decision is based on the credit quality of the issue (agency versus non-agency, and for non-agency, the credit performance of the underlying collateral), the security prepayment speeds, the length of time the security has been in an unrealized loss position and our ability and intent to hold securities. At March 31, 2006, Opteum did not hold any non-agency securities in its portfolio. If, in management's judgment, an other-than-temporary impairment exists, the cost basis of the security is written down in the period to the then-current fair value, and the unrealized loss is transferred from accumulated other comprehensive income as an immediate reduction of current earnings (i.e., as if the loss had been realized in the period of impairment).

Mortgage Loans Held for Sale

Mortgage loans held for sale represent mortgage loans originated and held pending sale to investors. The mortgages are carried at the lower of cost or market as determined by outstanding commitments from investors or current investor yield requirements calculated on the aggregate loan basis. Deferred net fees or costs are not amortized during the period the loans are held for sale, but are recognized when the loan is sold. OFS generally, but not always, sells or securitizes loans with servicing rights retained. These transfers of financial assets are accounted for as sales for financial reporting purposes when control over the assets has been surrendered. Control over transferred assets is surrendered when (i) the assets have been isolated from OFS; (ii) the investor obtains the right, free of conditions that constrain it from taking advantage of that right, to pledge or exchange the transferred assets and (iii) OFS does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. These transactions are treated as sales in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. Gains or losses on such sales, are recognized at the time legal title transfers to the investor, are based upon the difference between the sales proceeds from the final investor and the allocated basis of the loan sold, adjusted for net deferred loan fees and certain direct costs and selling costs.

Valuation Allowance

A valuation allowance is recorded to adjust mortgage loans held for sale to the lower of cost or market.

Retained Interest, Trading

OFS uses warehouse loan arrangements to finance the origination and purchase of pools of principally fixed and adjustable-rate residential first mortgage loans (the “Mortgage Loans”). Subsequent to their origination or purchase, OFS either sells these loans to third party institutional investors through bulk sale arrangements, or through securitization transactions. OFS generally makes several representations and warranties regarding the performance of the Mortgage Loans in connection with each sale or securitization. OFS accumulates the desired amount of Mortgage Loans, and securitizes them in order to create marketable securities.

OFS, pursuant to a purchase and sale agreement, transfers the Mortgage Loans to OPMAC, the wholly-owned special purpose entity set-up for the execution of these securitizations.

OPMAC then sells the Mortgage Loans to an institutional third party to serve as Depositor, pursuant to a Mortgage Loan Purchase and Servicing Agreement (“P&S Agreement”). Under this P&S Agreement, OFS makes general representations and warranties for Mortgage Loans sold by OFS.

The Depositor then deposits the Mortgage Loans into a Real Estate Mortgage Investment Conduit trust (the “REMIC”) where the rights to such Mortgage Loans are pooled and converted into marketable debt securities pursuant to the P&S Agreement. These securities, issued by the REMIC, are divided into different classes of certificates (the “Certificates”) with varying claims to payments received on the Mortgage Loans. These Certificates are transferred to the Depositor in exchange for all of its rights in the Mortgage Loans deposited into the REMIC.

Certain Certificates are rated by Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s (“S&P”). In all of the securitizations to date, all of the senior certificate classes were rated “AAA” by S&P, and “Aaa” by Moody’s, respectively. In addition, most of the mezzanine classes of Certificates, starting with Class M-1 through the lowest respective subordinate class for each offering, with each lower numerical class designation being subordinated to the previous designation, are each given investment grade ratings. The subordinate classes not given an investment grade rating are sold through a private placement offering memorandum. Certain of these Certificates are offered to the public (the “Public Certificates”) pursuant to a prospectus. These Public Certificates are sold to underwriters on the closing date pursuant to an underwriting agreement. The proceeds from the sale of the Public Certificates to the underwriters (less an underwriting discount) and the remaining non-publicly offered Certificates are transferred to OFS as consideration for the Mortgage Loans sold to the Depositor pursuant to the P&S Agreement.

Finally, OFS transfers the proceeds from the sale of the Public Certificates and the non-publicly offered Certificates representing the residual interest in the REMIC to OPMAC pursuant to the P&S Agreement. The additional non-publicly offered Certificates, representing prepayment penalties and over-collateralization fundings (the “Underlying Certificates”) are held by OPMAC in anticipation of a net interest margin (“NIM”) securitization. Subsequent to a securitization transaction as described above, OFS executes an additional securitization or “resecuritization” of the Underlying Certificates being held by OPMAC. This NIM securitization is typically transacted as follows:

OPMAC deposits the Underlying Certificates into a trust (the “NIM Trust”) pursuant to a deposit trust agreement. The NIM Trust is a Delaware statutory trust. The NIM Trust, pursuant to an indenture, issues (i) notes (the “NIM Notes”) representing interests in the Underlying Certificates and (ii) an owner trust certificate representing the residual interest in the NIM trust. The NIM Notes are sold to third parties via private placement transactions, and the Trust Certificate is transferred from OPMAC to OFS in consideration for the deposit of the Underlying Certificates.

Securities Held for Sale

Securities held for sale are recorded as of the date of purchase or sale at fair value. Changes in fair value subsequent to the purchase date are reflected in earnings as gains and losses from investments. Realized gains and losses are determined on a specific identified basis cost basis.

Mortgage Servicing Rights

OFS recognizes mortgage servicing rights (“MSRs”) as an asset when separated from the underlying mortgage loans, upon the sale of the loans. Upon sale of a loan, OFS measures the retained MSRs by allocating the total cost of originating a mortgage loan between the loan and the servicing right based on their relative fair values. Fair value is estimated based on expected cash flows considering market prepayment estimates, historical prepayment rates, portfolio characteristics, interest rates, and other economic factors. Gains or losses on the sale of MSRs are recognized when title and all risks and rewards have irrevocably passed to the buyer and there are no significant unresolved contingencies.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets ("SFAS 156"). SFAS 156 amends SFAS 140 with respect to the accounting for separately-recognized servicing assets and liabilities. SFAS 156 requires all separately-recognized servicing assets and liabilities to be initially measured at fair value, and permits companies to elect, on a class-by-class basis, to account for servicing assets and liabilities on either a lower of cost or market value basis or a fair value measurement basis. Opteum elected to early adopt SFAS 156 as of January 1, 2006 and to measure all mortgage servicing assets at fair value (and as one class). Servicing assets and liabilities at December 31, 2005 were accounted for at the lower of amortized cost or market value basis. As a result of adopting SFAS 156, Opteum recognized $2.6 million after-tax increase ($4.3 million pre-tax) as a cumulative effect adjustment to opening retained earnings as of January 1, 2006, representing the effect of re-measuring all servicing assets and liabilities that existed at December 31, 2005 from a lower of amortized cost or market basis to a fair value basis.

Property and Equipment, net

Property and equipment, net, consisting primarily of computer equipment, office furniture, leasehold improvements, land and buildings, is recorded at acquisition cost and depreciated using the straight-line method over the estimated useful lives of the assets. Asset lives range from five years for computer equipment to thirty years for the building. Property and equipment at March 31, 2006 and December 31, 2005 is net of accumulated depreciation of $1,477,539 and $606,889, respectively. Depreciation expense for the three months ended March 31, 2006 and 2005 was $870,650and$11,968, respectively.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Opteum’s goodwill all arose from the OFS merger. Contingent consideration paid in subsequent periods under the terms of the OFS purchase agreement, if any, would be considered acquisition costs and classified as goodwill. Goodwill was $3.0 million as of March 31, 2006.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, Opteum will subject its goodwill to at least an annual assessment for impairment by applying a fair value-based test. If the carrying value exceeds the fair value, goodwill is impaired. There has been no impairment charge recorded for the OFS goodwill.

See Note 2 to our 2005 10-K for a description of identified intangible assets associated with the acquisition.

Derivative Assets and Derivative Liabilities

OFS’s mortgage committed pipeline includes interest rate lock commitments (“IRLCs”) that have been extended to borrowers who have applied for loan funding and meet certain defined credit and underwriting criteria. Effective with the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, OFS classifies and accounts for the IRLCs as freestanding derivatives. Accordingly, IRLCs are recorded at their fair value with changes in fair value recorded to current earnings. OFS uses other derivative instruments to economically hedge the IRLCs, which are also classified and accounted for as freestanding derivatives.

OFS’s risk management objective for its mortgage loans held for sale includes use of mortgage forward delivery contracts designed as fair value derivative instruments to protect earnings from an unexpected change due to a decline in value. Effective with the adoption of SFAS No. 133, OFS’s mortgage forward delivery contracts are recorded at their fair value with changes in fair value recorded to current earnings.

IRLCs and derivative assets or liabilities arising from OFS’s derivative activities are included in either receivables or accounts payable and accrued liabilities in the accompanying consolidated balance sheets. OFS also evaluates its contractual arrangements, assets and liabilities for the existence of embedded derivatives.

Repurchase Agreements

Opteum finances the acquisition of its MBS through the use of repurchase agreements. Under these repurchase agreements, Opteum transfers securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sales price that Opteum receives and the repurchase price that Opteum pays represents interest paid to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which Opteum pledges its securities as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. Opteum retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, Opteum is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, Opteum may renew such agreement at the then prevailing financing rate. These repurchase agreements may require Opteum to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. As of March 31, 2006 and December 31, 2005, Opteum did not have any margin calls on its repurchase agreements that it was not able to satisfy with either cash or additional pledged collateral.

Original terms to maturity of Opteum's repurchase agreements generally, but not always, range from one month to twelve months; however, Opteum is not precluded from entering into repurchase agreements with shorter or longer maturities. Should a counter-party decide not to renew a repurchase agreement at maturity, Opteum must either refinance elsewhere or be in a position to satisfy this obligation. If, during the term of a repurchase agreement, a lender should file for bankruptcy, Opteum might experience difficulty recovering its pledged assets and may have an unsecured claim against the lender's assets for the difference between the amount loaned to Opteum and the estimated fair value of the collateral pledged to such lender. At March 31, 2006, Opteum had amounts outstanding under repurchase agreements with fifteen separate lenders with a maximum net exposure (the difference between the amount loaned to Opteum and the estimated fair value of the security pledged by Opteum as collateral) to any single lender of approximately $16.9 million. At December 31, 2005, Opteum had amounts outstanding under repurchase agreements with fourteen separate lenders with a maximum net exposure to any single lender of approximately $27.0 million.

Opteum has entered into contracts and paid commitment fees to three lenders providing for an aggregate of $1.65 billion in committed repurchase lines at pre-determined borrowing rates and haircuts for a 364 day period following the commencement date of each contract. Opteum has no obligation to utilize these repurchase lines and at March 31, 2006 had approximately $500 million outstanding.

At March 31, 2006, Opteum's repurchase agreements had the following counter-parties, amounts at risk and weighted average remaining maturities:

Repurchase Agreement Counter-parties		Amount Outstanding ($000)		Amount at Risk(1) ($000)	Weighted Average Maturity of Repurchase Agreements in Days	Percent of Total Amount Outstanding
Deutsche Bank Securities, Inc.	$	963,877	$	11,941	66	28.23	%
Nomura Securities International, Inc.		430,521		16,862	85	12.61
Washington Mutual		410,994		12,625	9	12.04
Bear Stearns & Co. Inc.		299,764		7,788	44	8.78
UBS Investment Bank, LLC		246,670		8,448	54	7.23
Cantor Fitzgerald		209,148		10,256	24	6.13
Goldman Sachs		170,567		4,645	50	5.00
Morgan Stanley		165,555		5,053	41	4.85
JP Morgan Securities		149,603		4,665	78	4.38
Merrill Lynch		112,255		4,129	55	3.29
RBS Greenwich Capital		94,053		2,631	55	2.75
BNP Paribas		67,430		1,993	8	1.98
Lehman Brothers		56,782		1,499	89	1.66
Daiwa Securities America Inc.		19,732		884	98	0.57
Countrywide Securities Corp		17,004		491	24	0.50
Total	$	3,413,955	$	93,910		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.

At December 31, 2005, Opteum's repurchase agreements had the following counter-parties, amounts at risk and weighted average remaining maturities:

Repurchase Agreement Counter-parties		Amount Outstanding ($000)		Amount at Risk(1) ($000)	Weighted Average Maturity of Repurchase Agreements in Days	Percent of Total Amount Outstanding
Deutsche Bank Securities, Inc.	$	894,748	$	12,018	135	26.81	%
Nomura Securities International, Inc.		623,631		27,010	122	18.69
Cantor Fitzgerald		467,638		15,958	70	14.01
Washington Mutual		375,345		11,630	7	11.25
Goldman Sachs		207,525		7,438	44	6.22
Bear Stearns & Co. Inc.		167,610		6,096	157	5.02
UBS Investment Bank, LLC		158,781		5,059	93	4.76
Merrill Lynch		128,119		(7,949)	96	3.84
JP Morgan Securities		115,807		1,652	151	3.47
Morgan Stanley		73,505		1,767	26	2.20
Lehman Brothers		62,643		2,399	87	1.88
Countrywide Securities Corp		22,930		1,238	86	0.69
Daiwa Securities America Inc.		19,732		39	188	0.58
Bank of America Securities, LLC		19,584		815	27	0.58
Total	$	3,337,598	$	85,170		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.

Interest Income Recognition on MBS

Securities are recorded on the date the securities are purchased or sold, which is generally the trade date. Realized gains or losses from securities transactions are determined based on the specific ~~identification method.~~

identified cost of the securities. Interest income is accrued based on the outstanding principal amount of the securities and their stated contractual terms. Premiums and discounts associated with the purchase of the securities are ~~accreted~~amortized or ~~amortized~~accreted into interest income over the estimated lives of the assets adjusted for estimated prepayments using the effective interest method. Adjustments are made using the retrospective method to the effective interest computation each reporting period based on the actual prepayment experiences to date, and the present expectation of future prepayments of the underlying mortgages.

~~Cash and Cash Equivalents~~

~~Cash and cash equivalents include cash~~Gain on ~~hand and highly liquid investments with original maturities~~Sale of ~~three months or less. The carrying amount of cash equivalents approximates its fair value at March 31, 2005 and December 31, 2004.~~

~~Restricted Cash~~Loans

~~Restricted cash represents cash held on deposit as collateral with certain repurchase agreement counter-parties. Such amounts may be used to make principal and interest payments~~

OFS recognizes gain (or loss) on the ~~related repurchase agreements.~~

~~Credit Risk~~

~~At March 31, 2005, the Company had limited its exposure to credit~~sale of loans. Gains or losses on ~~its portfolio of securities by purchasing primarily securities from federal agencies or federally chartered entities,~~ such ~~as, but not limited to, Fannie Mae, Freddie Mac, and Ginnie Mae. The portfolio is diversified to avoid undue loan originator, geographic and other types of concentrations. The Company manages~~sales are recognized at the ~~risk of prepayments of the underlying mortgages by creating a diversified portfolio with a variety of prepayment characteristics.~~

The Company is engaged in various trading and brokerage activities in which counter-parties primarily include broker-dealers, banks, and other financial institutions. In the event counter-parties do not fulfill their obligations, the Company may be exposed to risk of loss. The risk of default depends on the creditworthiness of the counter-party and/or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing for each counter-party.

~~Repurchase Agreements~~

The Company finances the acquisition of its MBS through the use of repurchase agreements. Under these repurchase agreements, the Company sells securities to a lender and agrees to repurchase the same securities in the future for a price that is higher than the original sales price. The difference between the sale price that the Company receives and the repurchase price that the Company pays represents interest paidtime legal title transfers to the lender. Although structured as a sale and repurchase obligation, a repurchase agreement operates as a financing under which the Company pledges its securities as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral. At the maturity of a repurchase agreement, the Company is required to repay the loan and concurrently receives back its pledged collateral from the lender or, with the consent of the lender, the Company may renew such agreement at the then prevailing financing rate. These repurchase agreements may require the Company to pledge additional assets to the lender in the event the estimated fair value of the existing pledged collateral declines. As of March 31, 2005 and December 31, 2004, the Company did not have any margin calls on its repurchase agreements that it was not able to satisfy with either cash or additional pledged collateral.

Original terms to maturity of the Company’s repurchase agreements generally range from one month to 36 months; however, the Company is not precluded from entering into repurchase agreements with longer maturities. Should a counter-party decide not to renew a repurchase agreement at maturity, the Company must either refinance elsewhere or be in a position to satisfy this obligation. If, during the term of a repurchase agreement, a lender should file for bankruptcy, the Company might experience difficulty recovering its pledged assets and may have an unsecured claim against the lender’s assets forinvestor based upon the difference between the ~~amount loaned to~~sales proceeds from the ~~Company~~final investor and the estimated fair value of the collateral pledged to such lender. At March 31, 2005, the Company had amounts outstanding under repurchase agreements with fifteen separate lenders with a maximum net exposure (the difference between the amount loaned to the Company and the estimated fair value of the security pledged by the Company as collateral) to any single lender of approximately $25.0 million. At December 31, 2004, the Company had amounts outstanding under repurchase agreements with twelve separate lenders with a maximum net exposure to any single lender of approximately $29.0 million.

~~At March 31, 2005, the Company’s repurchase agreements had the following counter-parties, amounts at risk and weighted average remaining maturities (unaudited):~~

Repurchase Agreement Counter-parties

Amount
Outstanding

Amount
at Risk(1)

Weighted Average
Maturity of
Repurchase
Agreements
in Days

Percent
of Total
Amount
Outstanding

($000)

($000)

Nomura Securities International, Inc.

$
485,270

$
25,007

160

15.3
%
JP Morgan Securities

403,899

15,385

30

12.7
%
Deutsche Bank Securities, Inc.

385,439

16,638

142

12.1
%
Bear Stearns & Co. Inc.

297,251

11,808

98

9.3
%
Goldman Sachs

264,902

8,438

82

8.3
%
Cantor Fitzgerald

247,942

12,367

151

7.8
%
Washington Mutual

239,851

10,920

73

7.5
%
Banc of America Securities, LLC

239,290

11,932

93

7.5
%
UBS Investment Bank, LLC

148,360

6,534

70

4.7
%
Lehman Brothers

144,277

4,458

96

4.6
%
Countrywide Securities Corp.

131,062

6,235

39

4.1
%
Merrill Lynch

103,032

1

92

3.2
%
Daiwa Securities America Inc.

59,046

3,370

99

1.9
%
Morgan Stanley

28,288

1,213

12

0.9
%
REFCO Securities, LLC

3,746

208

55

0.1
%

Total

$
3,181,655

$
134,514

100.0
%

~~(1)~~~~Equal to the fair value of securities sold, plus accrued interest income, minus the sum of repurchase agreement liabilities, plus accrued interest expense.~~

~~At December 31, 2004, the Company’s repurchase agreements had the following counter–parties, amounts at risk and weighted average remaining maturities:~~

Repurchase Agreement Counter-parties

Amount
Outstanding

Amount
at Risk(1)

Weighted Average
Maturity of
Repurchase
Agreements
in Days

Percent
of Total
Amount
Outstanding

($000)

($000)

UBS Investment Bank, LLC

$
512,697

$
29,005

64

18.5
%
Nomura Securities International, Inc.

463,901

26,083

99

16.7

Banc of America Securities, LLC

309,270

18,079

66

11.2

Deutsche Bank Securities, Inc.

308,645

16,246

227

11.1

Lehman Brothers

257,191

8,793

81

9.3

Bear Stearns & Co. Inc.

255,229

14,068

127

9.2

Countrywide Securities Corp.

178,574

8,447

43

6.4

Morgan Stanley

119,659

352

65

4.3

Daiwa Securities America Inc.

114,436

5,287

67

4.2

Goldman Sachs

107,822

1,706

37

3.9

Merrill Lynch

83,561

2,268

172

3.0

JP Morgan Securities

60,178

3,152

37

2.2

Total

$
2,771,163

$
133,486

100.0
%

~~(1)~~ ~~Equal to the fair value of securities sold, plus accrued interest income, minus the sum of repurchase agreement liabilities, plus accrued interest expense.~~

~~Stock-Based Compensation~~

Stock-based compensation is accounted for using the fair value based method prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” The adoption of SFAS No. 123(R), “Share-Based Payment,” on January 1, 2006 is not expected to have an impact on the Company. For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings based on the fair value of the award. For transactions with non-employees in which services are performed in exchange for the Company’s common stock or other equity

~~Instruments, the transactions are recorded on the~~allocated basis of the ~~fair value~~loan sold, adjusted for net deferred loan fees and certain direct costs and selling costs. OFS defers net loan origination costs and fees as a component of the ~~service received or~~loan balance on the ~~fair value~~balance sheet. Such costs are not amortized and are recognized into income as a component of the ~~equity instruments issued, whichever is more readily measurable at the date~~gain or loss upon sale. The net gain on sale of ~~issuance. The Company’s stock-based compensation transactions resulted in an aggregate of $554,784 and $24,750 of compensation expense~~loans was $7.1 million for the three months ended March 31, ~~2005~~2006.

Servicing Fee Income

Servicing fee income is generally a fee based on a percentage of the outstanding principal balances of the mortgage loans serviced by OFS (or by a subservicer where OFS is the master servicer) and is recorded as income as the installment payments on the mortgages are received by OFS or the subservicer.

Loan Origination Fees and Costs

Loan fees, discount points, and certain direct origination costs are recorded as an adjustment of the cost of the loan and are included in gain on sales of loans when the loan is sold. Accordingly, salaries, commissions, benefits and other operating expenses have been reduced by $16.0 million during the three months ended March 31, ~~2004, respectively.~~

~~Earnings Per Share~~

~~The Company follows~~2006, due to direct loan origination costs, including commission costs. Loan fees related to the ~~provisions~~origination and funding of SFAS No. 128, “Earnings per Share,” (SFAS 128) and the guidance provided in EITF 03-6, “Participating Securities and the two-class method under FASB Statement No. 128, Earnings Per Share,” (EITF 03-6) which requires companies with complex capital structures, common stock equivalents, or two classes of participating securities to present both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstandingmortgage loans held for sale were $1.6 million during the ~~period. Diluted EPS is calculated using the “if converted” method for common stock equivalents.~~

Effective July 9, 2004, the shares of Class B Common Stock, participating and convertible into Class A common stock, became entitled to receive dividends in an amount equal to the dividends declared on each share of Class A Common Stock if, as and when authorized and declared by the Board of Directors. Following the provisions of EITF 03-6, the Class B Common Stock, beginning in the three-month periodthree months ended September 30, 2004, is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A Common Stock. Prior to July 9, 2004, the Class B shares of common stock are not included in the basic EPS computation as the conditions to participate in earnings were not met, and they were not included in the computation of diluted Class A EPS as the conditions for conversion to Class A shares were not met.

The Class C common shares are not included in the basic EPS computation as these shares do not have participation rights. The Class C common shares totaling 319,388 are not included in the computation of diluted Class A EPS as the conditions for conversion to Class A shares were not met.

March 31, 2006.

~~The table below reconciles the numerators and denominators of the basic and diluted EPS.~~

Three months
ended
March 31, 2005

Three months
ended
March 31, 2004

(unaudited)

(unaudited)

Basic and diluted EPS per Class A common share:

Numerator: net income allocated to the Class A common shares

$
10,743,594

$
3,943,162

Denominator—basic and diluted:

Class A common shares outstanding at the balance sheet date

20,374,883

10,009,150

Phantom shares issued as of the balance sheet date

516,961

—

Effect of weighting

(96,232
)
(2,008,098
)

Weighted average shares—basic and diluted

20,795,612

8,001,052

Basic and diluted EPS per Class A common share

$
0.52

$
0.49

Basic and diluted EPS per Class B common share:

Numerator: net income allocated to the Class B common shares

$
164,245

$
—

Denominator—basic and diluted:

Class B common shares outstanding at the balance sheet date

319,388

319,388

Effect of weighting (based on the date the Class B shares participate in dividends)

—

(319,388
)

Weighted average shares—basic and diluted

319,388

—

Basic and diluted EPS per Class B common share

$
0.51

$
—

Comprehensive Income (Loss)

In accordance with SFAS No. 130, ~~“Reporting~~Reporting Comprehensive Income”, the Company is required to separately report its comprehensive ~~income.~~income (loss) each reporting period. Other comprehensive income refers to revenue, expenses, gains, and losses that under GAAP are included in comprehensive income but are excluded from net income, as these amounts are recorded directly as an adjustment to stockholders’ equity. Other comprehensive income (loss) arises from unrealized gains or losses generated from changes in market values of its securities held as available-for-sale.

Comprehensive ~~income (loss)~~(Loss) is as follows:

		(Unaudited)
		Three Months Ended March 31,
		2006		2005
Net (Loss)/Income	$	(5,087,132)	$	10,907,839

Realized gain on available for sale securities, net		-		(1,982,382)

Unrealized loss on available for sale securities, net		(11,815,098)		(19,539,061)

Comprehensive (Loss)	$	(16,902,230)	$	(10,613,604)

The Company adopted SFAS No. 123(R), Share-Based Payment on January 1, 2006, and this adoption did not have an impact on the Company, as the Company had previously accounted for stock-based compensation using the fair value based method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation. For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings based on the fair value of the award. For transactions with non-employees in which services are performed in exchange for Opteum's common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance. Opteum's stock-based compensation transactions resulted in an aggregate of $0.8 million and $0.6 million of compensation expense for the three months ended March 31, 2006 and 2005, respectively.

The Company follows the provisions of SFAS No. 128, Earnings per Share, and the guidance provided in the FASB’s Emerging Issues Task Force (“EITF”) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share, which requires companies with complex capital structures, common stock equivalents, or two (or more) classes of securities that participate in the declared dividends to present both basic and diluted earnings per share (“EPS”) on the face of the statement of income. Basic EPS is calculated as income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the “if converted” method for common stock equivalents. However, the common stock equivalents are not included in computing diluted EPS if the result is anti-dilutive.

Effective July 9, 2004, the shares of Class B common stock, participating and convertible into Class A common stock, became entitled to receive dividends in an amount equal to the dividends declared on each share of Class A common stock if, as and when authorized and declared by the Board of Directors. Following the provisions of EITF 03-6, the Class B common stock is included in the computation of basic EPS using the two-class method, and consequently is presented separately from Class A common stock.

Effective November 3, 2005, the Company issued 1,223,208 shares of Class A Redeemable preferred stock, pursuant to the acquisition of OFS. After January 1, 2006 and prior to March 31, ~~2004, respectively,~~2006, holders of preferred stock are entitled to receive dividends according to the formula described in the Company’s amended charter. For the Company’s first quarter 2006 dividend, declared on March 10, 2006, the preferred shares, although considered to be participating securities, did not receive a dividend pursuant to the formula. Following the provisions of EITF 03-6, the preferred stock is a participating security and is included in the computation of basic EPS using the two-class method and is separately presented from the common stock classes.

EITF 03-6 also discusses the allocation of losses to nonconvertible and convertible participating securities when using the two-class method. Losses are only allocated to a participating security if this security has a contractual obligation to share in the loss, and there is no such obligation for the Class A Redeemable preferred stock. Therefore, for the three months ended March 31, 2006, the shares of Class A preferred stock are not allocated any of the loss in the computation of basic EPS, even though it is a participating security that is includable in the basic EPS presentation.

The shares of Class A Redeemable preferred stock are eligible to convert into shares of Class A common stock. Since this conversion was approved after March 31, 2006, the shares are not included in the computation of diluted Class A common stock EPS. (The conversion of the Class A Redeemable Preferred Stock was approved by a majority number of stockholders at the Company’s annual meeting on April 28, 2006).

The Company has dividend eligible stock incentive plan shares that were outstanding during the three months ended March 31, 2006. These stock incentive plan (or "phantom") shares have dividend participation rights, but like the preferred shares, the phantom shares have no contractual obligation to share in the loss; since there is no such obligation, phantom shares are not included, pursuant to EITF 03-6, in the March 31, 2006 basic EPS computation for the Class A common shares, even though they are considered to be a participating security. For the computation of diluted EPS for the Class A common shares, phantom shares, totaling 650,320 at March 31, 2006, are not included as ~~follows:~~

Three months ended

March 31, 2005

March 31, 2004

(unaudited)

Net Income

$
10,907,839

$
3,943,162

Realized gain on available for sale securities, net

(1,982,382)

—

Unrealized (loss) gain on available for sale securities, net

(19,539,061
)
3,176,287

Comprehensive (Loss) Income

$
(10,613,604
)
$
7,119,449

their inclusion would be anti-dilutive.

The table below reconciles the numerators and denominators of the basic and diluted EPS.

(Unaudited)

Three Months Ended March 31,

2006

2005
Basic and diluted EPS per Class A common share:
Numerator: net (loss) income allocated to the shares of Class A common shares $ (5,018,738) $ 10,743,594
Denominator: basic and diluted:
Class A common shares outstanding at the balance sheet date 23,083,498 20,374,883
Dividend eligible equity plan shares issued as of the balance sheet date - 516,961
Effect of weighting 353,036 (96,232)
Weighted average shares-basic and diluted 23,436,534 20,795,612
Basic and diluted EPS per Class A common share $ (0.21) $ 0.52

Basic and diluted EPS per Class B common share:
Numerator: net (loss) income allocated to Class B common shares $ (68,394) $ 164,245
Denominator: basic and diluted:
Class B common shares outstanding at the balance sheet date 319,388 319,388
Basic and diluted EPS per Class B common share $ (0.21) $ 0.51

Basic and diluted EPS per Class A redeemable preferred share:
Numerator: net (loss) income allocated to Class A redeemable preferred shares $ - $ N/A
Denominator: basic and diluted:
Class A redeemable preferred shares outstanding at the balance sheet date 1,223,208 N/A
Basic and diluted EPS per Class A redeemable preferred share $ - $ N/A

The Company has elected to be taxed as a REIT under the Code. As further described below, the Company’s TRS is a taxpaying entity for income tax purposes, and is taxed separately from Opteum. Opteum will generally not be subject to federal income tax on its taxable net income to the extent that Opteum distributes its taxable net income to its stockholders and satisfies the ongoing REIT requirements including meeting certain asset, income and stock ownership tests. A REIT must generally distribute at least 90% of its net taxable income to its stockholders of which 85% generally must be distributed within the taxable year in order to avoid the imposition of an excise tax. The remaining balance may be distributed up to the end of the following taxable year, provided the REIT elects to treat such amount as a prior year distribution and meets certain other requirements.

OFS is the Company’s TRS, and its activities are subject to corporate income taxes and the applicable provisions of SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140. SFAS 155 permits an entity to measure at fair value any financial instrument that contains an embedded derivative that otherwise would require bifurcation. As permitted, the Company early adopted SFAS 155 in the first quarter of 2006. Adoption did not have any material effect on the Company’s financial condition, results of operations or cash flows.

See Note 5 for a description of the adoption of SFAS No. 156, Accounting for Servicing of Financial Assets.

NOTE 2. ~~SECURITIES~~

ACQUISITION OF OPTEUM FINANCIAL SERVICES, LLC

On November 3, 2005, Opteum acquired 100% of the equity interests of OFS through a newly formed wholly-owned subsidiary of Opteum. OFS is a mortgage lender that originates loans nationwide. Opteum acquired OFS to diversify its revenue stream while remaining in Opteum’s area of expertise. For OFS, the acquisition provides increased access to capital to fund growth. The results of operations of OFS have been included in the Company’s consolidated financial statements since November 3, 2005. During the three months ended March 31, 2006, the Company has increased the aggregate purchase price by $0.6 million for additional legal and accounting fees incurred, and it has made insignificant modifications to the allocation of the purchase price to the net assets acquired, based on final valuations and completion of analysis . See Note 2 to the Company Form 10-K for the year ended 2005 for a complete description.

NOTE 3.MORTGAGE LOANS HELD FOR SALE, NET

Upon the closing of a residential mortgage loan or shortly thereafter, OFS will securitize the majority of its mortgage loan originations. OFS also sells mortgage loans insured or guaranteed by various government-sponsored entities and private insurance agencies. The insurance or guaranty is provided primarily on a nonrecourse basis to OFS, except where limited by the Federal Housing Administration and Veterans Administration and their respective loan programs. At March 31, ~~2005~~2006, OFS serviced approximately $1.7 billion of mortgage loans sold into the secondary market. All of OFS’s loans held for sale are pledged as collateral under the various financing arrangements described in Note 8. Mortgage loans held for sale consist of the following as of March 31, 2006:

Mortgage loans held for sale	$	707,095,613
Deferred loan origination costs—and others		14,803,327
Valuation allowance		(305,574)

	$	721,593,366

NOTE 4.RETAINED INTEREST, TRADING

Subordinated interests retained represent the over-collateralization and net interest spread, which represents the estimated cash-flows to be received from the trust in the future from mortgage loan securitizations structured as sales in accordance with SFAS No. 140. Generally, to meet the sale treatment requirements of SFAS No. 140, the REMIC Trust is structured as a “qualifying special purpose entity” or QSPE, which specifically limits the trust’s activities, and OFS surrenders control over the mortgage loans upon their transfer to the REMIC Trust. All of OFS’s securitization issues were accounted for as a sale under SFAS No. 140. The subordinated interests retained are classified as “trading securities” and are reported at fair value with unrealized gains or losses reported in earnings.

Valuation of Investments. OFS classifies its retained interests as trading securities and therefore records these securities at their estimated fair value. In order to value the unrated, unquoted, investments, OFS will record these assets at their estimated fair value utilizing either pricing available directly from dealers or the present value calculated by projecting the future cash flows of an investment on a publicly available analytical system. When a publicly available analytical system is utilized, OFS will input the following variable factors which will have an impact on determining the market value:

Interest Rate Forecast. The forward London Interbank Offered Rate (“LIBOR”) interest rate curve.

Discount Rate. The present value of all future cash flows utilizing a discount rate assumption established at the discretion of OFS to represent market conditions and value.

Prepayment Forecast. The prepayment forecast may be expressed by OFS in accordance with one of the following standard market conventions: Constant Prepayment Rate (“CPR”) or Percentage of a Prepayment Vector. Prepayment forecasts may be changed as OFS observes trends in the underlying collateral as delineated in the Statement to Certificate Holders generated by the REMIC trust’s Trustee for each underlying security.

Credit Performance Forecast. A forecast of future credit performance of the underlying collateral pool will include an assumption of default frequency, loss severity and a recovery lag. In general, OFS will utilize the combination of default frequency and loss severity in conjunction with a collateral prepayment assumption to arrive at a target cumulative loss to the collateral pool over the life of the pool based on historical performance of similar collateral by the originator. The target cumulative loss forecast will be developed and noted at the pricing date of the individual security but may be updated by OFS consistent with observations of the actual collateral pool performance.

Default Frequency may be expressed by OFS in accordance with any of three standard market conventions: Constant Default Rate, Percentage of a Standard Default Assumption curve or a vector or curve established to meet forecasted performance for specific collateral pools.

Loss Severity will be expressed by OFS in accordance with historical performance of similar collateral and the standard market conventions of a percentage of the unpaid principal balance of the forecasted defaults lost during the foreclosure and liquidation process.

During the first year of a new issue OFS may balance positive or adverse effects of the prepayment forecast and the credit performance forecast allowing for deviation between actual and forecasted performance of the collateral pool. After the first year OFS will generally adjust the Prepayment and Credit Performance Forecasts to replicate actual performance trends without balancing adverse and positive effects.

The following table summarizes OFS’s residual interests in securitizations as of March 31, 2006 and December 31, ~~2004,~~2005:

Series	Issue Date		March 31, 2006		December 31, 2005

HMAC 2004-1	March 4, 2004	$	4,152,435	$	5,096,056
HMAC 2004-2	May 10, 2004		2,719,505		3,240,431
HMAC 2004-3	June 30, 2004		513,216		1,055,651
HMAC 2004-4	August 16, 2004		3,475,833		3,749,261
HMAC 2004-5	September 28, 2004		5,965,609		6,177,669
HMAC 2004-6	November 17, 2004		12,732,512		14,321,046
OpteMac 2005-1	January 31, 2005		15,049,058		14,720,910
OpteMac 2005-2	April 5, 2005		13,443,741		11,301,619
OpteMac 2005-3	June 17, 2005		15,627,247		14,656,477
OpteMac 2005-4	August 25, 2005		10,969,462		12,551,775
OpteMac 2005-5	November 23, 2005		8,985,248		11,139,697
OpteMac 2006-1	March 23, 2006		11,562,339		-

Total		$	105,196,205	$	98,010,592

Key economic assumptions used in measuring the fair value of retained interests at the date of securitization resulting from securitizations completed during 2005 and 2006 were as follows:

	2006	2005
Prepayment speeds (CPR)	39.63%	28.65%
Weighted-average-life	4.810	2.830
Expected credit losses	0.640%	1.069%
Discount rates	16.710%	14.896%
Interest rates	Forward LIBOR Yield curve	Forward LIBOR Yield curve

At March 31, 2006 and December 31, 2005, key economic assumptions and the sensitivity of the current fair value of residual cash flows to the immediate 10% and 20% adverse change in those assumptions are as follows:

		March 31, 2006		December 31, 2005

Balance Sheet Carrying value of retained interests - fair value	$	105,196,205	$	98,010,592
Weighted average life (in years)		3.81		2.62
Prepayment assumption (annual rate)		36.99%		32.53%
Impact on fair value of 10% adverse change	$	(10,788,268)	$	(7,817,000)
Impact on fair value of 20% adverse change	$	(19,670,422)	$	(16,089,000)
Expected Credit losses (annual rate)		0.545%		0.607%
Impact on fair value of 10% adverse change	$	(3,859,312)	$	(3,247,000)
Impact on fair value of 20% adverse change	$	(7,078,785)	$	(6,419,000)
Residual Cash-Flow Discount Rate		13.99%		13.96%
Impact on fair value of 10% adverse change	$	(5,761,154)	$	(3,804,000)
Impact on fair value of 20% adverse change	$	(11,014,808)	$	(7,392,000)
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	$	(31,560,231)	$	(21,265,000)
Impact on fair value of 20% adverse change	$	(58,145,201)	$	(34,365,000)

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based upon a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of the variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption, in reality, changes in one factor may result in changes in another which may magnify or counteract the sensitivities. To estimate the impact of a 10% and 20% adverse change of the Forward LIBOR curve, a parallel shift in the forward LIBOR curve was assumed based on the Forward LIBOR curve at March 31, 2006.

Static pool losses are calculated by dividing projected future credit losses (at the time of securitization) and actual losses incurred as of the date indicated, by the original balance of each pool of assets. The amount shown here is calculated based upon all securitizations that have occurred to date.

Series	Issue Date	Original Unpaid Principal Balance	Projected Aggregate Credit Losses	Through March 31, 2006	Through December 31, 2005

HMAC 2004-1	March 4, 2004	$ 309,710,005	0.985%	0.034%	0.007%
HMAC 2004-2	May 10, 2004	$ 388,737,548	1.308%	0.167%	0.118%
HMAC 2004-3	June 30, 2004	$ 417,055,285	1.516%	0.098%	0.055%
HMAC 2004-4	August 16, 2004	$ 410,122,752	1.432%	0.005%	0.005%
HMAC 2004-5	September 28, 2004	$ 413,874,856	1.619%	0.002%	0.003%
HMAC 2004-6	November 17, 2004	$ 761,026,691	1.543%	0.012%	0.007%
OpteMac 2005-1	January 31, 2005	$ 802,625,137	1.366%	0.019%	0.010%
OpteMac 2005-2	April 5, 2005	$ 883,987,488	0.913%	0.000%	0.000%
OpteMac 2005-3	June 17, 2005	$ 937,116,704	0.624%	0.000%	0.000%
OpteMac 2005-4	August 25, 2005	$ 1,321,738,691	0.817%	0.000%	0.000%
OpteMac 2005-5	November 23, 2005	$ 986,276,688	0.720%	0.000%	0.000%
OpteMac 2006-1	March 23, 2006	$ 934,441,049	0.647%	0.000%	0.000%

Total		$ 8,566,712,894

The table below summarizes certain cash flows received from and paid to securitization trusts:

		For the Three Months Ended March 31, 2006		For the Period November 3, 2005 (date of merger) through December 31, 2005
Proceeds from securitizations	$	939,305,000	$	989,843,000
Servicing fees received		4,592,355		2,837,500
Servicing advances		335,270		290,952
Cash flows received on retained interests		1,016,108		261,269
Repayments of servicing advances	$	-	$	-

The following information presents quantitative information about delinquencies and credit losses on securitized financial assets as of March 31, 2006 and December 31, 2005:

As of Date		Total Principal Amount of Loans		Principal Amount of Loans Greater than 60 Days Past Due		Net Credit Losses
March 31, 2006	$	6,666,436,939	$	60,544,732	$	1,688,294
December 31, 2005	$	6,363,279,281	$	57,871,123	$	912,990

NOTE 5.MORTGAGE SERVICING RIGHTS, NET

Activities for MSRs are summarized as follows at March 31, 2006 and December 31, 2005, (there is no comparable three month period for 2005 owing to the date of the merger). As permitted by the effective date provisions of SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of SFAS No. 140, the Company has early adopted SFAS No. 156 as of January 1, 2006 with respect to the valuation of its MSRs. (See Note 1 - Mortgage Servicing Rights):

		For the Three Months Ended March 31, 2006		For the Period November 3, 2005 (date of merger) through December 31, 2005

Balance at beginning of period (at Cost)	$	86,081,594	$	87,079,777

Adjustment to fair value upon adoption of SFAS 156 at January 1, 2006		4,298,225		-

Additions		11,020,018		1,431,576
Changes in Fair Value:
Changes in fair value due to run-off		(5,104,756)		-
Changes in fair value due to amortization/curtailment		(418,255)		-
Change in fair value due to market changes		(1,394,738)		-

Amortization		-		(2,429,759)
Valuation/impairment		-		-

Fair Value at end of period		94,482,088		86,081,594

Change in fair value due to change in valuation assumptions		(1,144,733)		-

Balance at end of period	$	93,337,355	$	86,081,594

The Company has elected to account for all originated mortgage servicing rights as one class and therefore all MSR will be carried at fair value. As a result of the early adoption of SFAS 156, the carrying value of the MSRs has been increased by approximately $4.3 million (pre tax) as of January 1, 2006. As required by the provisions of SFAS 156, the net of tax effect was recorded as a cumulative-effect adjustment to retained earnings of OFS as of January 1, 2006. In addition, changes in value due to run-offs of the portfolio are recorded as valuation adjustments instead of amortization.

The fair value of MSRs is determined using discounted cash flow techniques. During the first quarter of 2006, OFS decreased the MSR value in the aggregate by $2.5 million primarily as a result of changes in market conditions and adoption of a new valuation model. Estimates of fair value involve several assumptions, including the key valuation assumptions about market expectations of future prepayment rates, interest rates and discount rates. Prepayment rates are projected using a prepayment model. The model considers key factors, such as refinance incentive, housing turnover, seasonality and aging of the pool of loans. Prepayment speeds incorporate expectations of future rates implied by the forward LIBOR/swap curve, as well as collateral specific information.

At March 31, 2006 and December 31, 2005, key economic assumptions and the sensitivity of the current fair value of mortgage servicing rights cash flows to the immediate 10 percent and 20 percent adverse change in those assumptions are as follows:

		At March 31, 2006		At December 31, 2005

Prepayment assumption (annual rate) (PSA)		429		254
Impact on fair value of 10% adverse change	$	(3,216,413)	$	(3,615,000)
Impact on fair value of 20% adverse change	$	(6,139,467)	$	(6,936,000)
MSR Cash-Flow Discount Rate		15.16%		10.74%
Impact on fair value of 10% adverse change	$	(3,470,252)	$	(4,856,000)
Impact on fair value of 20% adverse change	$	(6,651,529)	$	(9,280,000)

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based upon a 10% and 20% variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of the variation in a particular assumption on the fair value of the mortgage servicing right is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another which may magnify or counteract the sensitivities.

NOTE 6.MORTGAGE BACKED SECURITIES

At March 31, 2006 and December 31, 2005, all of ~~the Company’s securities~~Opteum's MBS were classified as available-for-sale and, as such, are reported at their estimated fair value. Estimated fair value was determined based on the average of third-party broker quotes received and/or independent pricing sources when available.

At March 31, 2006, Opteum had financed MBS with a historical amortized cost of $200.3 million with the party it acquired the MBS. Such securities are included in MBS at a fair value of $196.8 million and a corresponding repurchase agreement of $197.4 million at March 31, 2006.

The following are the carrying values of ~~the Company’s securities~~Opteum's MBS portfolio at March 31, ~~2005~~2006 and December 31, ~~2004:~~

March 31, 2005

December 31, 2004

(Unaudited)

Floating-Rate CMO’s

$
73,743,802

$
250,438,730

Hybrid Arms and Balloons

563,520,406

569,623,089

Adjustable-Rate Mortgages

1,674,786,388

1,403,381,666

Fixed-Rate Mortgages

987,000,965

749,789,412

$
3,299,051,561

$
2,973,232,897

2005:

		March 31, 2006		December 31, 2005
Hybrid Arms and Balloons	$	770,860,599	$	753,895,705
Adjustable Rate Mortgages		2,005,867,897		2,006,767,437
Fixed Rate Mortgages		761,825,714		733,366,217

Totals	$	3,538,554,210	$	3,494,029,359

The following table presents the components of the carrying value of ~~the Company’s~~Opteum's MBS portfolio at March 31, ~~2005~~2006 and December 31, ~~2004:~~

March 31, 2005

December 31, 2004

(Unaudited)

Principal balance

$
3,212,516,823

$
2,876,568,150

Unamortized premium

110,136,659

98,202,287

Unaccreted discount

(924,706
)
(381,769
)
Gross unrealized gains

6,132,352

7,824,313

Gross unrealized losses

(28,809,567
)
(8,980,084
)

Carrying value/estimated fair value

$
3,299,051,561

$
2,973,232,897

2005:

		March 31, 2006		December 31, 2005

Principal balance	$	3,515,112,798	$	3,457,887,912
Unamortized premium		114,165,772		115,133,248
Unaccreted discount		(2,411,427)		(2,497,423)
Gross unrealized gains		633,487		265,615
Gross unrealized losses		(88,946,420)		(76,759,993)

Carrying value/estimated fair value	$	3,538,554,210	$	3,494,029,359

The following table presents for ~~the Company’s~~Opteum's MBS investments with gross unrealized losses, the estimated fair value and gross unrealized losses aggregated by investment category, at March 31, ~~2005(unaudited):~~

Less than 12 Months

More than 12 Months

Total

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Fixed-Rate Mortgages

$
919,025,604

$
(11,477,797
)
$
—

$
—

$
919,025,604

(11,477,797
)
Floating-Rate CMOs

—

—

—

—

—

—

Adjustable-Rate Mortgages

1,133,574,693

(10,798,550
)
—

—

1,133,574,693

(10,798,550
)
Hybrid Arms & Balloons

462,130,424

(6,533,220
)
—

—

462,130,424

(6,533,220
)

$
2,514,730,721

$
(28,809,567
)
$
—

$
—

$
2,514,730,721

$
(28,809,567
)

2006:

	Loss Position Less than 12 Months				Loss Position More than 12 Months				Total
		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Hybrid Arms and Balloons	$	518,655,723	$	(8,158,572)	$	190,264,347	$	(6,963,295)	$	708,920,070	$	(15,121,867)
Adjustable Rate Mortgages		1,308,104,280		(22,605,886)		641,284,220		(20,290,457)		1,949,388,500		(42,896,343)
Fixed Rate Mortgages		225,934,463		(6,117,103)		534,452,912		(24,811,108)		760,387,375		(30,928,211)
	$	2,052,694,466	$	(36,881,561)	$	1,366,001,479	$	(52,064,860)	$	3,418,695,945	$	(88,946,421)

Less than 12 Months

More than 12 Months

Total

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Floating-Rate CMOs

$
—

$
—

$
—

$
—

$
—

$
—

Hybrid Arms and Balloons

334,918,233

(1,974,605
)
31,954,324

(75,968
)
366,872,557

(2,050,573
)
Adjustable-Rate Mortgages

479,284,021

(2,930,772
)
9,374,573

(21,845
)
488,658,594

(2,952,617
)
Fixed-Rate Mortgages

519,546,019

(3,950,372
)
11,260,668

(26,522
)
530,806,687

(3,976,894
)

$
1,333,748,273

$
(8,855,749
)
$
52,589,565

$
(124,335
)
$
1,386,337,838

$
(8,980,084
)

~~All~~2005:

	Loss Position Less than 12 Months				Loss Position More than 12 Months				Total
		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Hybrid Arms and Balloons	$	563,661,156	$	(8,409,428)	$	$141,675,752	$	(4,510,901)	$	705,336,908	$	(12,920,329)
Adjustable Rate Mortgages		1,648,085,054		(27,917,630)		270,945,493		(8,944,837)		1,919,030,547		(36,862,467)
Fixed Rate Mortgages		425,260,838		(10,762,306)		346,435,009		(16,214,890)		771,695,847		(26,977,197)
	$	2,637,007,048	$	(47,089,364)	$	759,056,254	$	(29,670,628)	$	3,396,063,302	$	(76,759,993)

At March 31, 2006, all of ~~the Company’s~~Opteum's MBS investments have contractual maturities greater than ~~two years.~~20 months. Actual maturities of MBS investments are generally shorter than stated contractual maturities. Actual maturities of ~~the Company’s~~Opteum's MBS investments are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.

The ~~unrealized losses on the~~decline in fair value of MBS investments ~~are~~is not considered ~~other-than-temporary, and are therefore not written-down~~to be other-than-temporary. Accordingly, the write down to fair value is recorded in other comprehensive loss as ~~being impaired.~~an unrealized loss. The factors considered in making this determination ~~included:~~include: the expected cash flow from the MBS investment, the general quality of the MBS owned, any credit protection available, current market conditions, and the magnitude and duration of the historical decline in market prices as well as ~~the Company’s~~Opteum's ability and intention to hold ~~such~~the MBS owned.

NOTE 7.FAIR VALUE OF FINANCIAL INSTRUMENTS

The valuation of Opteum’s investments in MBS is governed by SFAS No. 107, Disclosures about Fair Value of Financial Instruments. SFAS No. 107, defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. All REIT securities ~~owned. Because management’s assessments~~are reflected in the financial statements at their estimated fair value as of March 31, 2006 and December 31, 2005. Estimated fair values for MBS are based on ~~factual~~the average of third-party broker quotes received and/or independent pricing sources when available. However, the fair values reported reflect estimates and may not necessarily be indicative of the amounts Opteum could realize in a current market exchange. Cash and cash equivalents, accrued interest receivable, repurchase agreements and accrued interest payable are reflected in the financial statements at their costs, which approximates their fair value because of the short-term nature of these instruments.

Fair value of mortgage loans held for sale, mortgage servicing rights, interest rate lock commitments and commitments to deliver mortgages are based on estimates. Fair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.

Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the Company’s fair values should not be compared to those of other companies. All forward delivery commitments and option contracts to buy securities are to be contractually settled within six months of the balance sheet date.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The fair value of certain OFS assets and liabilities either equal to or approximate carrying value due to their short-term nature, terms of repayment, floating interest rate associated with the asset or liability or accounting principles applied. Such assets or liabilities include cash, receivables, retained interests, other trading securities, accounts payable and other liabilities, warehouse lines of credit and drafts payable.

The following describes the methods and assumptions used by OFS in estimating fair values of other financial instruments:

The following tables set forth information about financial instruments and other selected assets, except for those noted above for which the carrying value approximates fair value.

		Notional Amounts		Carrying Amount		Estimated Fair Value
March 31, 2006
Assets:
Mortgage loans held for sale	$	-	$	707,095,613	$	709,910,926
Mortgage servicing rights		-		93,337,355		93,337,355

Commitments and contingencies:
Mortgage loans held for sale related asset (liability) positions:
Interest Rate Lock Commitments	$	368,156,694	$	1,150,707	$	1,150,707
Interest Rate SWAP Agreements		533,700,000		1,494,429		1,494,429
Forward delivery commitments		213,000,000		876,966		876,966

NOTE 8.WAREHOUSE LINES OF CREDIT AND DRAFTS PAYABLE

OFS issues drafts or wires at loan settlement in order to facilitate the closing of mortgage loans held for sale. Drafts payable represent mortgage loans on which a closing has occurred prior to quarter end but the related drafts have not cleared the respective bank. Upon clearing the bank, the drafts are funded by the appropriate warehouse line of credit. Warehouse and aggregate lines of credit and loan sale agreements accounted for as ~~well as subjective information available~~financing consisted of the following at March 31, 2006:

Warehouse and aggregate lines of credit:		2006

A committed warehouse line of credit for $100.0 million between OFS and Residential Funding Corporation ("RFC"). The agreement expires on May 31, 2006. The agreement provides for interest rates based upon 1 month LIBOR plus a margin between 1.25% and 1.50% depending on the product that was originated or acquired.	$	7,095,775

A committed warehouse line of credit for $284.5 million between OFS and Colonial Bank. The agreement expires on May 30, 2006. The agreement provides for interest rates, based upon 1 month LIBOR, plus a margin of 1.25% to 2.00% depending on the product that was originated or acquired.		199,050,231

A committed warehouse line of credit for $150.0 million between OFS and JP Morgan Chase. The agreement expires on May 30, 2006 and is expected to be renewed prior to its expiration. The agreement provides for interest rates based upon 1 month LIBOR plus a margin of 1.25% to 2.00% depending on the product originated or acquired.		90,881,688

An aggregation facility for $1.0 billion between OFS and Citigroup Global Markets Realty Inc. to aggregate loans pending securitization. The agreement expires on February 28, 2007. The agreement provides for interest rates based upon 1 month LIBOR plus a margin of 0.50%.		273,213,144

A $750.0 million purchase and security agreement between OFS and UBS Warburg Real Estate Securities, Inc. (“UBS Warburg”). The facility is due upon demand and can be cancelled by either party upon notification to the counter-party. OFS incurs a charge for the facility based on 1 month LIBOR plus 1.00%. The facility is secured by loans held for sale and cash generated from sales to investors.		108,955,338

		679,196,176

Drafts payable		18,664,754

Total warehouse lines and drafts payable	$	697,860,930

In addition to the RFC, Colonial Bank, UBS Warburg, and Citigroup facilities, OFS has purchase and sale agreements with Greenwich Capital and Fannie Mae. The agreements allow for OFS to accelerate the sale of its mortgage loan inventory, resulting in a more effective use of its warehouse facilities. OFS has a combined capacity of $300.0 million under these purchase and sale agreements. There were no amounts sold and being held under these agreements at March 31, 2006. The agreements are not committed facilities and may be terminated at the ~~time~~discretion of ~~assessment, the determination as~~either party.

The facilities are secured by mortgage loans and other assets of OFS. The facilities contain various covenants pertaining to ~~whether an other-than-temporary decline exists~~tangible net worth, net income, available cash and ~~if so, the amount considered impaired is also subjective~~liquidity, leverage ratio, current ratio and ~~therefore, constitutes material estimates that are susceptible to significant change.~~servicing delinquency. At March 31, ~~2005 and December~~2006, OFS was not in compliance with respect to one covenant with one lender. The covenant pertained to net income at March 31, ~~2004,~~2006. OFS has obtained a waiver from the ~~Company had no securities on which an impairment charge had been made.~~

covenant violation.

NOTE 3.9. ~~REPURCHASE AGREEMENTS~~

~~The Company~~OTHER SECURED BORROWINGS

Other secured borrowings consisted of the following at March 31, 2006:

		2006
A committed working capital line of credit for $82.5 million between OFS and Colonial Bank. The agreement expires on May 30, 2006. The agreement provides for an interest rate, based on 1 month LIBOR plus a margin of up to 2.60% and is secured by the servicing rights for FNMA, FHLMC and REMIC securitizations.	$	63,355,607

A committed warehouse line of credit for $150.0 million between OFS and JP Morgan Chase, that allows for a sublimit for mortgage servicing rights. The agreement expires May 30, 2006 and is expected to be renewed prior to its expiration. The agreement provides for an interest rate based on LIBOR plus 2.0%		7,710,000

Citigroup Global Realty Inc., working capital line of credit secured by the Retained interests in securitizations through OPMAC 2006-1. The facility expires on October 31, 2006. The agreement provides for an interest rate based on LIBOR plus 2.00%		34,386,512
	$	105,452,119

NOTE 10.Repurchase Agreements

Opteum has entered into repurchase agreements to finance most of its ~~security~~MBS purchases. The repurchase agreements are short-term borrowings that bear interest at rates that have historically moved in close relationship to ~~LIBOR (London Interbank Offered Rate).~~LIBOR. At March 31, ~~2005, the Company~~2006, Opteum had an outstanding amount of ~~$3.18~~$3.4 billion with a net weighted average borrowing rate of ~~2.78%~~4.54%, and these agreements were collateralized by MBS with a fair value of ~~$3.29~~$3.5 billion. At December 31, ~~2004, the Company~~2005, Opteum had an outstanding amount of ~~$2.77~~$3.3 billion with a net weighted average borrowing rate of ~~2.28%~~4.15%, and these agreements were collateralized by MBS with a fair value of ~~$2.90 billion.~~

$3.5 billion and restricted cash of $2.3 million.

At March 31, ~~2005, the Company’s~~2006, Opteum's repurchase agreements had remaining maturities as summarized ~~below (unaudited):~~

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

$
133,628,739

$
845,093,807

$
507,704,595

$
1,697,506,162

$
3,183,933,303

Fair market value of securities sold, including accrued interest receivable

$
133,041,311

$
846,271,283

$
503,411,543

$
1,683,751,845

$
3,166,475,982

Repurchase agreement liabilities associated with these securities

$
133,837,000

$
847,691,598

$
502,127,646

$
1,697,999,112

$
3,181,655,356

Average interest rate of repurchase agreement liabilities

2.57

2.59

2.68

2.93

2.78

below:

		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	$	—	$	1,604,222,330	$	1,171,220,926	$	589,841,287	$	3,365,284,543
Fair market value of securities sold, including accrued interest receivable	$	—	$	1,566,314,050	$	1,143,914,636	$	574,915,061	$	3,285,143,747
Repurchase agreement liabilities associated with these securities	$	—	$	1,644,318,455	$	1,142,548,371	$	627,088,000	$	3,413,954,826
Net weighted average borrowing rate		—		4.49%		4.67%		4.43%		4.54%

At December 31, ~~2004, the Company’s~~2005, Opteum's repurchase agreements had remaining maturities as summarized below:

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

$
—

$
821,387,879

$
975,251,727

$
1,028,522,165

$
2,825,161,771

Fair market value of securities sold, including accrued interest receivable

$
—

$
823,087,580

$
975,020,524

$
1,025,389,631

$
2,823,497,735

Repurchase agreement liabilities associated with these securities

$
—

$
797,655,321

$
968,417,528

$
1,005,090,108

$
2,771,162,957

Average interest rate of repurchase agreement liabilities

—

2.28
%
2.11
%
2.45
%
2.28
%

		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	$	—	$	906,106,459	$	813,436,832	$	1,533,016,956	$	3,252,560,247
Fair market value of securities sold, including accrued interest receivable	$	—	$	893,159,892	$	791,259,152	$	1,498,980,224	$	3,183,399,268
Repurchase agreement liabilities associated with these securities	$	—	$	914,262,355	$	857,995,007	$	1,565,341,000	$	3,337,598,362
Net weighted average borrowing rate		—		4.22%		4.01%		4.19%		4.15%

NOTE 4. 11.TRUST PREFERRED SECURITIES

On May 17, 2005, Opteum completed a private offering of $50.0 million of trust preferred securities of Bimini Capital Trust I, a Delaware statutory business trust sponsored by Opteum.

Bimini Capital Trust I (“BCTI”) used the proceeds of the private offering, together with Opteum’s investment of $1.6 million in the BCTI common securities, to purchase $51.6 million aggregate principal amount of Opteum’s Junior Subordinated Notes with terms that parallel the terms of the trust preferred securities. The trust preferred securities have a fixed rate of interest until March 30, 2010 at 7.61% and thereafter through maturity in 2035 the rate will float at a spread of 3.30% over the prevailing three-month LIBOR rate. The trust preferred securities require quarterly interest distributions and are redeemable at Opteum’s option, in whole or in part and without penalty, beginning March 30, 2010 and at any date thereafter. The notes are subordinate and junior in right of payment of all present and future senior indebtedness. The proceeds from the private offering net of costs were approximately $48.5 million.

On October 5, 2005, Opteum completed a private offering of $50.0 million of trust preferred securities of Bimini Capital Trust II, a Delaware statutory business trust sponsored by Opteum.

Bimini Capital Trust II (“BCTII”) used the proceeds of the private offering, together with Opteum’s investment of $1.5 million in the BCTII common securities to purchase $51.5 million aggregate principal amount of Opteum’s Junior Subordinated Notes with terms that parallel the terms of the trust preferred securities. The trust preferred securities have a fixed rate of interest until December 15, 2010 at 7.8575% and thereafter through maturity in 2035 the rate will float at a spread of 3.50% over the prevailing three-month LIBOR rate. The trust preferred securities require quarterly interest distributions and are redeemable at Opteum’s option, in whole or in part and without penalty, beginning December 15, 2010 and at any date thereafter. The notes are subordinate and junior in right of payment of all present and future senior indebtedness. The proceeds from the private offering net of costs were approximately $48.5 million.

The trust is a variable interest entity pursuant to FIN No. 46, because the holders of the equity investment at risk do not have adequate decision making ability over the trust’s activities. Because Opteum’s investment in the trust’s common shares was financed directly by the trust as a result of its loan of the proceeds to Opteum, that investment is not considered to be an equity investment at risk pursuant to FIN No. 46. Since Opteum’s common shares investments in BCTI and BCTII are not a variable interest, Opteum is not the primary beneficiary of the trusts. Therefore, Opteum has not consolidated the financial statements of BCTI and BCTII into its financial statements. Based on the aforementioned accounting guidance, the financial statements present the notes issued to the trusts as liabilities and the investments in BCTI and BCTII as assets. For financial statement purposes, Opteum records payments of interest on the corresponding notes issued to BCTI and BCTII as interest expense.

NOTE 12.CAPITAL STOCK

During the ~~three-months~~three months ended March 31, ~~2005,~~2006, the Company issued a total of 10,115 shares of Class A Common Stock to its five independent directors for the payment of director fees for services rendered.

For the three months ended March 31, 2006, the Company issued 33,441 shares of its Class A Common Stock to two officers pursuant to the terms of the stock incentive plan phantom share grants (see Note 14).

During the three months ended March 31, 2006, the Company repurchased 527,300 shares of its Class A Common Stock for an aggregate of $4.5 million and recorded them as Treasury Stock on the accompanying balance sheet.

On March 10, 2006, the Company's Board of Directors declared a $0.11 per share cash distribution to the holders of its dividend eligible securities. Dividends were payable on 23,083,498 shares of Class A Common Stock, 650,320 phantom shares granted under the Company's stock incentive plan (see Note 14) and 319,388 shares of Class B Common Stock. No dividends were paid on the Class A Redeemable Preferred Stock as the provisions of a formula in the Company’s amended charter were not met. The distribution totaling $2,645,853 was paid on April 7, 2006.

Other Classes of Common and Preferred Stock

There was no change in the issued and outstanding shares of the Company’s Class B and Class C Common Stock or its Class A Redeemable Preferred Stock during the three month period ended March 31, 2006. However, the conversion of the Class A Redeemable Preferred Stock to Class A Common Stock was approved by a majority number of stockholders at the Company’s annual meeting on April 28, 2006.

NOTE 13.TRANSACTIONS WITH RELATED PARTIES

In January 2006, the five independent directors received a total of 10,115 shares of Class A Common Stock, valued at $98,149, as compensation for their activities as directors.

OFS has a subordinated promissory agreement with Opteum for borrowings in the amount of $65.0 million at March 31, 2006. The note bears an annual interest rate of 11%. This promissory agreement matures on November 1, 2015. OFS also has a short term loan from Opteum in the amount of $8.1 million at March 31, 2006. This short term loan bears an annual interest rate of 11%. Interest accrued at March 31, 2006 was $0.7 million. These amounts are eliminated during the process of preparing consolidated financial statements for the Company. A portion of these loan proceeds were used to repay $18.3 million of debt to the former OFS owners immediately after the closing of the merger transaction.

In January 2005, the four independent directors received a total of 5,968 shares of Class A Common Stock, ~~to its four independent directors~~valued at $92,027, as compensation for ~~the payment of director fees for services rendered during the quarter.~~

their activities as directors.

~~Dividends~~

On March 9, 2005, the Board of Directors declared a regular quarterly cash dividend of $0.53 per share on the Company’s Class A and Class B Common Stock for the quarter ending March 31, 2005. The dividend was paid on April 8, 2005.

NOTE 5.14.STOCK INCENTIVE PLAN

On December 1, 2003, ~~the Company~~Opteum adopted the 2003 Long Term Incentive Compensation Plan (the “2003 Plan”) to provide ~~the Company~~Opteum with the flexibility to use stock options and other awards as part of an overall compensation package to provide a means of performance-based compensation to attract and retain qualified ~~personnel.~~associates. The 2003 Plan was amended and restated in March 2004. Key employees, directors and consultants are eligible to be granted stock options, restricted stock, phantom shares, dividend equivalent rights and other stock-based awards under the 2003 Plan.

~~For~~ Subject to adjustment upon certain corporate transactions or events, a maximum of 4,000,000 shares of the ~~three months~~Class A Common Stock (but not more than 10% of the Class A Common Stock outstanding on the date of grant) may be subject to stock options, shares of restricted stock, phantom shares and dividend equivalent rights under the 2003 Plan.

During the period ended March 31, ~~2005, the Company~~2006, Opteum granted ~~203,361~~200,784 phantom shares to ~~employees.~~employees with an aggregate fair value of $1.8 million. Each phantom share represents a right to receive a share of ~~the Company’s~~Opteum’s Class A Common ~~Stock, and a dividend~~Stock. Dividend equivalent ~~right was~~rights were also granted on ~~each~~these phantom ~~share. The phantom~~shares.

Phantom share awards ~~were~~are valued at the fair value of ~~the Company’s~~Opteum’s Class A Common Stock at the date of the ~~grant, for a~~grant. The total grant date value of ~~$3,097,389.~~all awards since the 2003 Plan’s inception is $9.7 million. The phantom awards do not have an exercise price. The grant date value is being amortized to compensation expense on a straight-line basis over the vesting ~~period.~~period of the respective award. The phantom shares vest, based on the employees’ continuing employment, onfollowing a ~~quarterly~~ schedule as provided in the grant agreements, for periods ~~from February~~through December 15, ~~2005 through November 15,~~ 2008.

As of March 31, ~~2005,~~2006, a total of ~~all~~719,245 phantom stock awards have been granted ~~to date, 62,619~~since the inception of the 2003 Plan, however 2,090 shares were forfeited during 2005. The future compensation charge that was eliminated by the forfeiture totaled $31,852. Of the remaining shares, 224,637 shares have fully vested and ~~454,342~~492,518 shares remain unvested. No phantom share awards have ~~expired or~~expired. Of the vested shares, 33,441 were issued to grantees during the period ended March 31, 2006, 16,809 were surrendered to pay for the income taxes due on the issued shares and a total of 65,335 shares have been ~~forfeited by the grantee.~~distributed since inception. As of March 31, 2006, 651,820 phantom shares remain outstanding. Total compensation cost recognized for the three months ended March 31, 2006 and 2005 was $0.7 million and ~~2004, was $462,763 and $0,~~$0.5 million, respectively. Dividends paid on phantom shares are charged to retained earnings when declared.

NOTE 15. SAVINGS INCENTIVE PLAN

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~The following discussion of our financial condition and results of operations should be read~~Opteum’s employees have the option to participate in ~~conjunction with our financial statements and related notes included elsewhere in this report.~~

~~Introduction and Overview~~

the Bimini Mortgage Management Inc. ~~(“we”~~, ~~“our” or “Company”~~401K Plan (the “Plan”) ~~was formed~~. Under the terms of the Plan, eligible employees can make tax-deferred 401(k) contributions, and at Opteum’s sole discretion, Opteum can match the employees’ contributions. For the three months ended March 31, 2006 and 2005, Opteum made 401(k) matching contributions of $20,290 and zero, respectively.

OFS’s employees have the option to participate in ~~September 2003~~The Company Savings and Incentive Plan (the “OFS Plan”). Under the terms of the OFS Plan, eligible employees can make tax-deferred 401(k) contributions, and at OFS’s sole discretion, OFS can match the employees’ contributions as well as make annual profit-sharing contributions to ~~invest primarily in residential~~the OFS Plan. For the three months ended March 31, 2006, OFS made 401(k) matching contributions of $246,828.

NOTE 16.COMMITMENTS AND CONTINGENCIES

Loans Sold to Investors. Generally, OFS is not exposed to significant credit risk on its loans sold to investors. In the normal course of business, OFS provides certain representations and warranties during the sale of mortgage ~~related securities issued~~loans which obligate it to repurchase loans which are subsequently unable to be sold through the normal investor channels. The repurchased loans are secured by the ~~Federal National Mortgage Association (more commonly known as Fannie Mae),~~related real estate properties, and can usually be sold directly to other permanent investors. There can be no assurance, however, that OFS will be able to recover the ~~Federal Home Loan Mortgage Corporation (more commonly known as Freddie Mac) and~~repurchased loan value either through other investor channels or through the ~~Government National Mortgage Association (more commonly known as Ginnie Mae). We earn returns~~assumption of the secured real estate.

OFS recognizes a liability for the estimated fair value of this obligation at the inception of each mortgage loan sale based on the ~~spread between~~anticipated repurchase levels and historical experience. The liability is recorded as a reduction of the ~~yield~~gain on ~~our assets~~sale of mortgage loans and ~~our costs, including~~included as part of other liabilities in the accompanying financial statements.

Changes in the liability for the three months ended March 31, 2006:

Balance—Beginning of period	$	2,037,980
Provision		551,213
Charge-Offs		(662,961)

Balance—End of period	$	1,926,232

Loan Funding and Delivery Commitments. At March 31, 2006, OFS has commitments to fund loans approximating $368.2 million. OFS hedges the interest ~~expense on~~rate risk of such commitments primarily with mandatory delivery commitments. The remaining commitments to fund loans with agreed-upon rates are anticipated to be sold through “best-efforts” and investor programs. OFS does not anticipate any material losses from such sales.

Net Worth Requirements. OFS is required to maintain certain specified levels of minimum net worth to maintain its approved status with Fannie Mae, HUD, and other investors. At March 31, 2006, the ~~funds we borrow. We intend~~highest minimum net worth requirement applicable to ~~borrow between eight and 12 times~~OFS was approximately $55.0 million.

Outstanding Litigation. OFS is involved in litigation arising in the normal course of business. Although the amount of ~~equity capital to attempt to enhance our returns to stockholders. We are self-managed~~any ultimate liability arising from these matters cannot presently be determined, OFS does not anticipate that any such liability will have a material effect on OFS’s consolidated financial position or results of operations.

NOTE 17.SEGMENTS

Opteum follows SFAS No. 131, Disclosures about Segments of an Enterprise and ~~self-advised. We have elected to be taxed~~Related Information. The Company operates in two reportable segments: as a ~~real estate investment trust, or~~ REIT, ~~for federal income tax purposes commencing with~~and as an originator of mortgage loans.

Certain of our ~~initial taxable period ended December 31, 2003.~~operations qualify as a REIT, under applicable provisions of the Code. The REIT activities primarily involve Opteum investing in residential mortgage-related securities. As a REIT, ~~we generally~~these activities are not subject to federal income tax onas long as the net taxable earnings from REIT ~~taxable income that we distribute~~activities are distributed to our stockholders. ~~In evaluating our assets~~

On November 3, 2005, Opteum acquired OFS. OFS is a mortgage lender that originates loans. It offers retail and ~~their performance, our management team primarily evaluates these critical factors: asset performance~~wholesale products including fixed- and adjustable-rate mortgages, 100% financing, interest-only products and home loans for the credit challenged. Opteum has 35 offices and lending in ~~differing interest rate environments, duration of the security, yield to maturity, potential for prepayment of principal, and the market price of the investment.~~

~~Financial Condition~~

~~All of our assets~~46 states. Goodwill associated with OFS was $3.0 million at March 31, ~~2005 were acquired with~~2006.

The accounting policies of the ~~proceeds~~segments are the same as those described in the summary of ~~our private placements~~significant accounting policies in Note 1. The Company evaluates the performance of its REIT segment and ~~public offerings~~mortgage origination business segment results based on net income. Each of the business segments’ net income or loss includes direct costs incurred at each segment’s operating level, plus a minimal amount of allocated corporate-level expenses.

(Amounts in thousands)		REIT		OFS		TOTAL

Net interest income	$	1,508	$	2,975	$	4,483
Other revenues, net		-		7,062		7,062
Income (loss) before income taxes		892		(9,772)		(8,880)
Other interest expense		-		1,732		1,732
Depreciation and amortization		184		844		1,028
Income tax expense (benefit)		-		(3,793)		(3,793)
Total assets		3,668,317		957,728		4,626,045
Capital expenditures		392		1,450		1,842

The following information is needed to reconcile the segment amounts to the ~~underwriters’ exercise of their over allotment option. We received net proceeds of approximately $66.7~~total information, which agrees to the amounts shown in the accompanying consolidated financial statements. During the consolidation process, loans receivable totaling $73.1 million, ~~in a secondary public offering of our Class A Common Stock~~and the related interest income and accrued interest, which ~~closed~~are recorded on ~~December 21, 2004.~~

~~Mortgage Related Securities~~

~~At March 31, 2005, we held $3.3 billion of mortgage~~Opteum’s segment financial information, are eliminated against corresponding liabilities and expenses recorded on OFS’s segment financial statements. The interest income related securities at fair value. Our portfolio of mortgage related securities will typically be comprised of fixed-rate mortgage-backed securities, floating rate collateralized mortgage obligations, adjustable-rate mortgage-backed securities, hybrid adjustable-rate mortgage-backed securities and balloon maturity mortgage-backed securities. We seek to ~~acquire low duration assets that offer high levels of protection from mortgage prepayments. Although~~these loans is reported above as inter-segment interest income. There were no inter-segment gross revenues during the duration of an individual asset can change as a result of changes in interest rates, we plan to maintain a portfolio with an average effective duration of less than 2.0. The stated contractual final maturity of the mortgage loans underlying our portfolio of mortgage related securities generally ranges up to 30 years. However, the effect of prepayments of the underlying mortgage loans tends to shorten the resulting cash flows from our investments substantially. Prepayments occur for various reasons, including refinancings of underlying mortgages and payoffs associated with sales of the underlying homes as people move.

~~For the three months~~period ended March 31, ~~2005, we had~~2006, except for this interest, and therefore all other revenues were from external sources.

No single customer accounted for more than 10% of revenues at OFS. For the REIT activities, approximately 94.8% of the interest income ~~of $31.1 million~~was derived from MBS issued by U.S. Government agencies.

NOTE 18.INCOME TAXES

As more fully described in Note 2, Opteum acquired OFS on November 3, 2005. OFS is a TRS, which is a taxpaying entity for income tax purposes, and ~~interest expense of $19.8 million. As of March 31, 2005, we had a weighted average yield on assets of 3.63% and a net weighted average borrowings cost of 2.78%. The constant prepayment rate~~is taxed separately from Opteum. There is no tax provision for the portfolio was 23.5% for March 2005, which reflects the annualized proportion of principal that was prepaid. Prepayments on the loans underlying our mortgage related securities can alter the timing of the cash flows from the underlying loans to the company. As a result, we gauge the interest rate sensitivity of our assets by measuring their effective duration. While modified duration measures the price sensitivity of a bond to movements in interest rates, effective duration captures both the movement in interest rates and the fact that

cash flows to a mortgage related security are altered when interest rates move. Accordingly, when the contract interest rate on a mortgage loan is substantially above prevailing interest rates in the market, the effective duration of securities collateralized by such loans can be quite low because of expected prepayments. Although the fixed-rate mortgage-backed securities in our portfolio are collateralized by loans with a lower propensity to prepay when the contract rate is above prevailing rates, their price movements track securities with like contract rates and therefore exhibit similar effective duration. The value of our portfolio will change as interest rates rise or fall. See “Qualitative and Quantitative Disclosures about Market Risk—Interest Rate Risk—Effect on Fair Value.”

Over the course of the first quarter of 2005 there was a substantial move in the short end of the yield curve. The yield associated with the on-the-run two year Treasury note increased 71 basis points from 3.069% to 3.779%. During that same period the shorter 12-month LIBOR rate increased 74.5 basis points from 3.100% to 3.845%. In the latter part of the quarter, large volumes of seasoned hybrid ARMs were sold by banks and money managers. This selling put upward pressure on shorter resetting ARM spreads, widening them substantially. Simultaneously, an increase in the generic prepayment consensus for ARMs and hybrid ARMs caused spreads to widen further. The combination of higher interest rates and wider spreads resulted in approximately a $22.7 million dollar decline in the market value of our portfolio.

~~The following tables summarize our mortgage related securities as of March 31, 2005:~~

Asset
Category

Market Value

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

($000)

Fixed-Rate Mortgage-Backed Securities

$
987,001

29.91
%
6.51
%
272

1-Mar-35

n/a

n/a

n/a

CMO Floaters

73,744

2.24
%
3.26
%
330

25-May-34

0.70

7.78
%
n/a

Adjustable-Rate Mortgage-Backed Securities

1,674,786

50.77
%
4.03
%
343

1-Dec-42

3.83

10.81
%
1.44
%
Hybrid Adjustable Rate Mortgage-Backed Securities

499,492

15.14
%
4.62
%
348

20-Jan-35

26.69

10.25
%
1.23
%
Balloon Maturity Mortgage-Backed Securities

64,029

1.94
%
4.07
%
57

1-Feb-11

n/a

n/a

n/a

Total Portfolio

$
3,299,052

100.00
%
4.84
%
317

1-Dec-42

8.81

10.59
%
1.37
%

Agency

Market Value

Percentage of Entire
Portfolio

($000)

Fannie Mae

$
2,148,247

65.12
%
Freddie Mac

514,470

15.59
%
Ginnie Mae

636,335

19.29
%

Total Portfolio

$
3,299,052

100.00
%

~~Entire Portfolio~~

Effective Duration

1.23

Weighted Average Purchase Price

$
103.45

Weighted Average Current Price

$
102.69

As of March 31, 2005, approximately 47.37% of our portfolio of 15-year fixed-rate coupon mortgage securities, and 30.93% of our 30-year fixed-rate coupon mortgage securities, contain only loans with principal balances of $85,000 or less. Because of the low loan balance on these mortgages, we believe borrowers have a lower economic incentive to refinance and have historically prepaid more slowly than comparable securities.

~~We had approximately $113.9 million of cash and cash equivalents as of March 31, 2005.~~

~~Liabilities~~

We have entered into repurchase agreements to finance acquisitions of mortgage related securities. None of the counter-parties to these agreements are affiliates of us. These agreements are secured by our mortgage related securities and bear interest rates that have historically moved in close relationship to LIBOR. As of March 31, 2005, we had 18 master repurchase agreements with various investment banking firms and other lenders and had outstanding balances under 15 of these agreements.

At March 31, 2005, we had approximately $3.18 billion outstanding under repurchase agreements with a net weighted average borrowing cost of 2.78%, $133.8 million of which matures in one day, $847.7 million of which matures between two and 30 days, $502.1 million of which matures between 31 and 90 days, and $1,698 million of which matures in more than 90 days. It is our present intention to seek to renew these repurchase agreements as they mature under the then-applicable borrowing terms of the counter-parties to our repurchase agreements. At March 31, 2005, the repurchase agreements were secured by mortgage related securities with an estimated fair value of $3.29 billion and a weighted average maturity of 317 months.

~~At March 31, 2005, our repurchase agreements had the following counter-parties, amounts outstanding, amounts at risk and weighted average remaining maturities:~~

Repurchase Agreement Counter-parties

Amount Outstanding

Amount
at Risk (1)

Weighted
Average
Maturity of
Repurchase
Agreements
in Days

Percent
of Total
Amount
Outstanding

($000)

($000)

Nomura Securities International, Inc.

$
485,270

$
25,007

160

15.3
%
JP Morgan Securities

403,899

15,385

30

12.7
%
Deutsche Bank Securities, Inc.

385,439

16,638

142

12.1
%
Bear Stearns & Co. Inc.

297,251

11,808

98

9.3
%
Goldman Sachs

264,902

8,438

82

8.3
%
Cantor Fitzgerald

247,942

12,367

151

7.8
%
Washington Mutual

239,851

10,920

73

7.5
%
Banc of America Securities, LLC

239,290

11,932

93

7.5
%
UBS Investment Bank, LLC

148,360

6,534

70

4.7
%
Lehman Brothers

144,277

4,458

96

4.6
%
Countrywide Securities Corp.

131,062

6,235

39

4.1
%
Merrill Lynch

103,032

1

92

3.2
%
Daiwa Securities America Inc.

59,046

3,370

99

1.9
%
Morgan Stanley

28,288

1,213

12

0.9
%
REFCO Securities, LLC

3,746

208

55

0.1
%

Total

$
3,181,655

$
134,514

100.0
%

~~(1)~~ ~~Equal to the fair value of securities sold, plus accrued interest income, minus the sum of repurchase agreement liabilities, plus accrued interest expense.~~

~~Results of Operations~~

~~Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004~~

It should be noted that due to the significant growth in our assets as well as the completion of private equity raises in January 2004 and February 2004 and our public offerings in September 2004 and December 2004, the amount and components of our income and expenses for the three month period ending March 31, 2005 differ significantly from the same period in 2004.

In response to the changing interest rate environment, in the first quarter of 2005 we continued to modify the mix of mortgage related securities in our portfolio by purchasing greater percentages of adjustable-rate and hybrid adjustable-rate mortgage related securities and a smaller percentage of fixed-rate mortgage related securities than we owned prior to this quarter. This process began during the third quarter of 2004. During the first quarter of 2005, we sold floating-rate collateralized mortgage obligations in order to reduce exposure to 8.0% lifetime caps, for proceeds of $172.0 million. In connection with these sales, we recorded gains of approximately $1.98 million. With the proceeds of these sales we purchased a combination of monthly resetting eleventh district cost of funds indexed adjustable rate securities and low duration fixed rate agency debt with an average life tied to the prepayments of a Fannie Mae mortgage-backed security pool (the “reference” pool). These sales and subsequent purchases have altered the mix of mortgage related securities in our portfolio such that the percentage of adjustable-rate securities whose coupons reset in one year or less had increased to 50.8% from 47.2% at year end 2004. The percentage of floating rate collateralized mortgage obligations has decreased to 2.2% of the portfolio from 8.4% at year end 2004. We are generally using the proceeds of our monthly mortgage-backed securities principal payments to purchase greater percentages of adjustable-rate and hybrid-adjustable-rate mortgage related securities and a smaller percentage of fixed-rate mortgage backed pools than we owned at the beginning of the year.

~~For the three months ended March 31, 2005 and 2004, we recorded $10.9 million and $3.9 million in net income, respectively. Our net interest income~~Company for the three months ended March 31, 2005, as this was prior to the acquisition of the TRS, and ~~2004~~Opteum was ~~$11.2~~solely a non-taxpaying REIT during this period. At the date of acquisition, OFS recorded a deferred tax liability of approximately $22.6 million related to the difference in the carrying amount and ~~$4.5 million, respectively and our expenses were $2.3 million net~~the tax basis of ~~$1.98 million~~the originated mortgage servicing rights at the date of ~~realized gains and $0.5 million, respectively, resulting in net~~the business combination, among other items.

The income ~~of $10.9 million or $0.52 per diluted Class A Common Share and $3.9 million or $0.49 per diluted Class A Common Share, respectively.~~

~~For~~tax benefit computed on the OFS loss is as follows for the three months ended March 31, ~~2005 and 2004, comprehensive (loss)~~2006:

Deferred income tax benefit:
Federal	$	(6,401,371)
State		(713,295)	(7,114,666)
Total deferred income tax benefit
Deferred income tax expense:
Federal		2,987,557
State		333,566	3,321,123
Total deferred income tax expense

Total deferred income tax (benefit)	$		(3,793,543)

The effective income ~~was ($10.6 milllion) including~~tax (benefit) for the ~~net unrealized loss on~~three months ended March 31, 2006 differs from the ~~available for sale securities~~amount determined by applying the statutory Federal rate of ($19.5 million) and $7.1 million including the net unrealized gain on available for sale securities of $3.2 million, respectively. The factors resulting in the unrealized loss on available for sale securities are described previously in the section, “Financial Conditions, Mortgage Related Securities” discussing the Company’s securities portfolio.

~~As a result of our public secondary offering in December of 2004, our assets increased substantially in the first quarter of 2005 as compared~~35% to the ~~fourth quarter of 2004~~OFS loss before income tax as follows:

Net loss, if taxed at the Federal tax rate	$	(3,420,034)
Permanent tax differences		7,780
State tax benefit, net of Federal tax effect		(381,090)
Total deferred income tax (benefit)	$	(3,793,344)

The tax effected cumulative temporary differences that give rise to deferred tax assets and ~~the first quarter of 2004. The proceeds from that secondary offering were deployed by the end of January 2005.~~

~~Liquidity and Capital Resources~~

~~Our primary source of funds~~liabilities as of March 31, ~~2005 consisted of repurchase agreements totaling $3.18 billion, with a net weighted average borrowing cost of 2.78%. We expect~~2006 are as follows:

Deferred tax assets:
Federal tax loss carry-forward	$	8,723,698
State tax loss carry-forward		1,136,821
Mark-to-market adjustments		675,765
Total gross deferred tax assets	$	10,536,284

Deferred tax liabilities:
Capitalized cost of mortgage servicing rights	$	21,616,169
Loan origination and other amounts		3,472,946
Intangibles assets		1,690,811
Total gross deferred tax liabilities	$	26,779,926

Net deferred tax liabilities	$	16,243,642

Management believes that the deferred tax assets will more likely than not be realized due to ~~continue to borrow funds in~~ the form of repurchase agreements. At March 31, 2005, we had master repurchase agreements in place with 18 counter-parties and had outstanding balances under 15 of these agreements. These master repurchase agreements have no stated expiration but can be terminated at any time at our option or at the optionreversal of the ~~counter-party. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party.~~deferred tax liabilities and expected future taxable income. As of March 31, ~~2005, all~~2006, Opteum had an estimated Federal tax net operating loss carry-forward of ~~our existing repurchase agreements matured~~$24.3 million, which expires in less than one year. Increases in short-term interest rates could negatively impact the valuation of our mortgage related securities, which could limit our borrowing ability or cause our lenders to initiate margin calls.

~~In December of 2004, the Company entered into contracts~~2025, and paid commitment fees to three lenders providing for an aggregate of $900 million in committed repurchase lines at pre-determined borrowing rates and haircuts for a 364 day period following the commencement date of each contract. The Company has no obligation to utilize these repurchase lines. During the first quarter of 2005, the Company commenced negotiations to increase the size and improve the terms of these agreements with one of the lenders. It is ~~anticipated that this will be finalized during the second quarter of 2005.~~

For liquidity, we will also rely on cash flow from operations, primarily monthly principal and interest payments to be received on our mortgage related securities, as well as any primary securities offerings authorized by our Board of Directors.

We believe that equity capital, combined with the cash flow from operations and the utilization of borrowings, will be sufficient to enable us to meet anticipated liquidity requirements. Various changes in market conditions could adversely affect our liquidity, including increases in interest rates and increases in prepayment rates substantially above our expectations. If our cash resources are at any time insufficient to satisfy our liquidity requirements, we may be required to pledge additional assets to meet margin calls, liquidate mortgage related securities or sell debt or additional equity securities. If required, the sale of mortgage related securities at prices lower than the carrying value of such assets would result in losses and reduced income.

We may in the future increase our capital resources by making additional offerings of equity and debt securities, including classes of preferred stock, common stock, commercial paper, medium-term notes, collateralized mortgage obligations and senior or subordinated notes. All debt securities, other borrowings, and classes of preferred stock will be senior to the Class A Common Stock in a liquidation of our Company. Additional equity offerings may be dilutive to stockholders’ equity or reduce the market price of our Class A Common Stock, or both. We are unable to estimate the amount, timing or nature of any additional offerings as they will depend upon market conditions and other factors.

~~Contractual Obligations and Commitments~~

~~The following table provides information with respect to our contractual obligations at March 31, 2005.~~

Payment due by period

Contractual Obligations

Total

Less than
1 year

Repurchase Agreements

$
3,181,655,356

$
3,181,655,356

Total

$
3,181,655,356

$
3,181,655,356

~~Critical Accounting Policies~~

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). These accounting principles require us to make some complex and subjective decisions and assessments. Our most critical accounting policies involve decisions and assessments which could significantly affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our financial statements are based were reasonable at the time made based upon informationfully available to ~~us at that time. For a description of the accounting policies that management believes are the most critical, refer to our Annual Report~~offset future taxable income.

Tax differences on ~~Form 10-K for the year ended December 31, 2004.~~

~~Classifications of Investment Securities~~REIT income

~~In accordance with applicable GAAP, our investments in mortgage related securities are classified~~

Taxable net income, as available-for-sale securities. As a result, changes in fair value are recorded as a balance sheet adjustment to accumulated other comprehensive income (loss), which is a component of stockholders’ equity, rather than through our statement of operations. If available-for-sale securities were classified as trading securities, there could be substantially greater volatility in earnings from period-to-period.

~~Valuations of Mortgage Related Securities~~

~~All investment securities are carried on the balance sheet at fair value. Our mortgage related securities have fair values determined~~generated by management based on the average of third-party broker quotes received and/or by independent pricing sources when available. Because the price estimates may vary to some degree between sources, management must make certain judgments and assumptions about the appropriate price to use to calculate the fair values for financial reporting purposes. Different judgments and assumptions could result in different presentations of value.

When the fair value of an available-for-sale security is less than amortized cost, management considers whether there is an other-than-temporary impairment in the value of the security (for example, whether the security will be sold prior to the recovery of fair value). If, in management’s judgment, an other-than-temporary impairment exists, the cost basis of the security is written down to the then-current fair value, and this loss is realized and charged against earnings. The determination of other than temporary impairment is a subjective process, and different judgments and assumptions could affect the timing of loss realization.

The decline in fair value of investments held in our portfolio at March 31, 2005, and December 31, 2004 is not considered to be other than temporary. Accordingly the write down to fair value is recorded in other comprehensive loss as an unrealized loss. The factors considered in making this determination included the expected cash flow from the investment, the general quality of the mortgage related security owned, any credit protection available, current market conditions, and the magnitude and duration of the historical decline in market prices as well as the Company’s ability and intention to hold such securities owned.

~~Interest Income Recognition~~

Interest income on our mortgage related securities is accrued based on the actual coupon rate and the outstanding principal amount of the underlying mortgages. Premiums and discounts are amortized or accreted into interest income over the estimated lives of the securities using the effective yield method adjusted for the effects of estimated prepayments based on Statement of Financial Accounting Standards, or SFAS, No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases—an amendment of FASB Statements No. 13, 60, and 65 and a rescission of FASB Statement No. 17. Adjustments are made using the retrospective method to the effective interest computation each reporting period based on the actual prepayment experiences to date and the present expectation of future prepayments of the underlying mortgages. To make assumptions as to future estimated rates of prepayments, we currently use actual market prepayment history for our securities and for similar securities that we do not own and current market conditions. If our estimate of prepayments is incorrect, we are required to make an adjustment to the amortization or accretion of premiums and discounts that would have an impact on future income.

~~Future~~Opteum’s qualifying REIT ~~Taxable Income Distributions~~

In order to maintain our qualification as a REIT, we are required (among other provisions) to distribute dividends to our stockholders in an amount at least equal to 90% of our “REIT taxable income.” “REIT taxable income” is a term that describes our operating results following taxation rules and regulations governed by various provisions of the Internal Revenue Code. REIT taxable incomeactivities, is computed differently from ~~our~~Opteum’s financial statement net income from REIT activities as computed in accordance with ~~generally accepted accounting principles (“GAAP net income”).~~GAAP. Depending on the number and size of the various items or transactions being accounted for differently, the differences between ~~REIT~~Opteum’s taxable net income and ~~GAAP~~Opteum’s financial statement net income from REIT activities can be substantial, and each item can affect several years. ~~See our Annual Report on Form 10-K~~Opteum's most significant items and transactions currently being accounted for differently from REIT activities include restricted stock awards, depreciation of property and equipment, and the ~~year ended December 31, 2004~~accounting for ~~a more extensive description.~~

debt issuance costs.

For the three ~~month period~~months ended March 31, ~~2005, the Company’s REIT~~2006, Opteum's taxable net income was ~~estimated to be~~ approximately ~~$370,000~~$0.4 million greater than ~~the Company’s GAAP~~Opteum's financial statement net income ~~and the Company therefore has declared and paid~~from REIT ~~distributions (dividends) based on this higher amount. The most significant portion~~activities. Substantially all of this amount is attributable to the phantom stock awards, and the future deduction of this amount against ~~REIT~~ taxable net income is uncertain both as to the year (as the timing of the tax impact of each restricted stock award is up to each employee who has received a grant) and as to the ~~amount.~~

~~Depending on~~amount (the amount of the ~~actual size~~tax impact is measured at the fair value of ~~these timing or temporary differences, some~~the shares as of ~~which are not entirely in the Company’s control,~~a future ~~REIT distributions (dividends)~~date, and this amount may be ~~substantially~~ greater than or less than the ~~Company’s GAAP net income in any future fiscal reporting quarter or year.~~financial statement deduction already taken by Opteum). Since inception through March 31, ~~2005, the Company’s REIT~~2006, Opteum's taxable net income is ~~estimated to be~~ approximately ~~$1,283,660~~$3.3 million greater than ~~the Company’s GAAP net income.~~

~~Inflation~~

~~Virtually all of our assets and liabilities are~~Opteum's financial in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States and our distributions are determined by our board of directors based primarily on ourstatement net income from REIT activities as ~~calculated for tax purposes;~~reported in ~~each case, our activities~~its financial statements.

PART I.1. FINANCIAL INFORMATION

BIMINI MORTGAGE MANAGEMENT, INC.

BIMINI MORTGAGE MANAGEMENT, INC.

BIMINI MORTGAGE MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS

BIMINI MORTGAGE MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

PART II II.

ITEM 6.Conversion Proposals EXHIBITS

	(Unaudited) March 31, 2005			December 31, 2004
ASSETS

MORTGAGE-BACKED SECURITIES:
Pledged to counterparties, at fair value	$	3,287,521,075		$	2,901,158,559
Unpledged, at fair value	11,530,486			72,074,338

TOTAL MORTGAGE-BACKED SECURITIES	3,299,051,561			2,973,232,897

CASH AND CASH EQUIVALENTS	113,855,808			128,942,436
RESTRICTED CASH	29,590,000			8,662,000
PRINCIPAL PAYMENTS RECEIVABLE	5,875,514			3,419,199
ACCRUED INTEREST RECEIVABLE	13,681,819			11,377,807
PROPERTY AND EQUIPMENT, net	2,131,135			2,050,923
PREPAIDS AND OTHER ASSETS	5,774,331			732,469

	$	3,469,960,168		$	3,128,417,731

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Repurchase agreements	$	3,181,655,356		$	2,771,162,957
Accrued interest payable	14,926,521			7,980,829
Unsettled security purchases	—			65,765,630
Dividends payable	11,241,953			—
Compensation and related benefits payable	116,279			87,323
Accounts payable, accrued expenses and other	402,429			458,665

TOTAL LIABILITIES	3,208,342,538			2,845,455,404

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding	—			—
Class A common stock, $0.001 par value; 98,000,000 shares designated; issued and outstanding, 20,374,883 shares at March 31, 2005 and 20,368,915 shares at December 31, 2004	20,375			20,369
Class B common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding each period	319			319
Class C common stock, $0.001 par value; 1,000,000 shares designated, 319,388 shares issued and outstanding each period	319			319
Additional paid-in capital	285,685,505			285,174,651
Accumulated other comprehensive loss	(22,677,214		)	(1,155,771		)
Accumulated deficit	(1,411,674		)	(1,077,560		)

STOCKHOLDERS’ EQUITY, net	261,617,630			282,962,327

	$	3,469,960,168		$	3,128,417,731

OPTEUM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

		(Unaudited)
		Three Months Ended March 31,
		2006		2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(5,087,132)	$	10,907,839
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Gain on sale of mortgage loans held for sale		(7,076,658)		-
Amortization of premium and discount on mortgage backed securities		3,080,393		8,097,698
Retained interest, trading		(7,185,613)		-
Securities held for sale		935,300		-
Mortgage servicing rights, net		(4,633,843)		-
Deferred tax liability		(2,117,037)		-
Gains on sales of mortgage backed securities		-		(1,982,382)
Stock compensation		808,614		554,784
Depreciation and amortization		1,027,644		11,974
Changes in operating assets and liabilities:
Mortgage loans held for sale		179,720,922		-
Receivables, net		17,855,238		-
Accrued interest receivable		(700,928)		(2,304,010)
Prepaids and other assets		282,625		(5,041,862)
Accrued interest payable		4,406,495		6,945,692
Accounts payable, accrued expenses and other		2,682,549		(27,280)
NET CASH PROVIDED BY OPERATING ACTIVITIES		183,998,569		17,162,453

CASH FLOWS FROM INVESTING ACTIVITIES:
From available-for-sale securities:
Purchases		(432,101,377)		(827,611,830)
Sales		-		172,040,665
Principal repayments		321,984,757		233,893,795
Purchases of property and equipment		(1,842,465)		(92,180)
NET CASH USED IN INVESTING ACTIVITIES		(111,959,085)		(421,769,550)

CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease (increase) in restricted cash		2,310,000		(20,928,000)
Net borrowings under repurchase agreements		76,356,464		410,492,399
Decrease in warehouse lines of credit, drafts payable and other secured borrowings		(185,565,000)		-
Stock issuance and other costs		(279,530)		(43,930)
Purchases of treasury stock		(4,500,327)		-
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(111,678,393)		389,520,469

NET CHANGE IN CASH AND CASH EQUIVALENTS		(39,638,909)		(15,086,628)

CASH AND CASH EQUIVALENTS, Beginning of the period		130,510,948		128,942,436

CASH AND CASH EQUIVALENTS, End of the period	$	90,872,039	$	113,855,608

OPTEUM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)


		(Unaudited)
		Three Months Ended March 31,
		2006		2005

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	51,800,276	$	12,896,018

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Cash dividends declared and payable, not yet paid	$	2,645,853	$	11,241,953
Unsettled security purchases	$	1,709,728	$	-
See notes to consolidated financial statements.

										Accumulated
	Common stock, Amounts at Par Value						Additional Paid-in			Other Comprehensive			Accumulated
	Class A		Class B		Class C		Capital			Loss			Deficit			Total

Balances, December 31, 2004	$	20,369	$	319	$	319	$	285,174,651		$	(1,155,771	)	$	(1,077,560	)	$	282,962,327

Issuance of Class A common shares as board compensation	6						92,021									92,027
Cash dividends declared, March 2005													(11,241,953		)	(11,241,953		)
Amortization of equity plan compensation							462,763									462,763
Stock issuance costs							(43,930		)							(43,930		)
Reclassify unrealized loss on security sales										(1,982,382		)				(1,982,382		)
Net income													10,907,839			10,907,839
Unrealized loss on available for sale securities, net										(19,539,061		)				(19,539,061		)
Comprehensive loss																(10,613,604		)

Balances, March 31, 2005	$	20,375	$	319	$	319	$	285,685,505		$	(22,677,214	)	$	(1,411,674	)	$	261,617,630

Repurchase Agreement Counter-parties	Amount Outstanding		Amount at Risk(1)			Weighted Average Maturity of Repurchase Agreements in Days	Percent of Total Amount Outstanding
	($000)		($000)
Nomura Securities International, Inc.	$	485,270	$		25,007	160	15.3	%
JP Morgan Securities	403,899		15,385			30	12.7	%
Deutsche Bank Securities, Inc.	385,439		16,638			142	12.1	%
Bear Stearns & Co. Inc.	297,251		11,808			98	9.3	%
Goldman Sachs	264,902		8,438			82	8.3	%
Cantor Fitzgerald	247,942		12,367			151	7.8	%
Washington Mutual	239,851		10,920			73	7.5	%
Banc of America Securities, LLC	239,290		11,932			93	7.5	%
UBS Investment Bank, LLC	148,360		6,534			70	4.7	%
Lehman Brothers	144,277		4,458			96	4.6	%
Countrywide Securities Corp.	131,062		6,235			39	4.1	%
Merrill Lynch	103,032		1			92	3.2	%
Daiwa Securities America Inc.	59,046		3,370			99	1.9	%
Morgan Stanley	28,288		1,213			12	0.9	%
REFCO Securities, LLC	3,746		208			55	0.1	%

Total	$	3,181,655	$	134,514			100.0	%

	Three months ended March 31, 2005			Three months ended March 31, 2004
	(unaudited)			(unaudited)

Basic and diluted EPS per Class A common share:
Numerator: net income allocated to the Class A common shares	$	10,743,594		$	3,943,162

Denominator—basic and diluted:
Class A common shares outstanding at the balance sheet date	20,374,883			10,009,150
Phantom shares issued as of the balance sheet date	516,961			—
Effect of weighting	(96,232		)	(2,008,098		)


Weighted average shares—basic and diluted	20,795,612			8,001,052

Basic and diluted EPS per Class A common share	$	0.52		$	0.49

Basic and diluted EPS per Class B common share:
Numerator: net income allocated to the Class B common shares	$	164,245		$	—

Denominator—basic and diluted:
Class B common shares outstanding at the balance sheet date	319,388			319,388
Effect of weighting (based on the date the Class B shares participate in dividends)	—			(319,388		)

Weighted average shares—basic and diluted	319,388			—

Basic and diluted EPS per Class B common share	$	0.51		$	—

	Three months ended
	March 31, 2005			March 31, 2004
	(unaudited)

Net Income	$	10,907,839		$	3,943,162

Realized gain on available for sale securities, net	(1,982,382)			—

Unrealized (loss) gain on available for sale securities, net	(19,539,061		)	3,176,287

Comprehensive (Loss) Income	$	(10,613,604	)	$	7,119,449

	Less than 12 Months					More than 12 Months				Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses

Fixed-Rate Mortgages	$	919,025,604	$	(11,477,797	)	$	—	$	—	$	919,025,604	(11,477,797		)
Floating-Rate CMOs	—		—			—		—		—		—
Adjustable-Rate Mortgages	1,133,574,693		(10,798,550		)	—		—		1,133,574,693		(10,798,550		)
Hybrid Arms & Balloons	462,130,424		(6,533,220		)	—		—		462,130,424		(6,533,220		)
	$	2,514,730,721	$	(28,809,567	)	$	—	$	—	$	2,514,730,721	$	(28,809,567	)

	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	$	133,628,739	$	845,093,807	$	507,704,595	$	1,697,506,162	$	3,183,933,303
Fair market value of securities sold, including accrued interest receivable	$	133,041,311	$	846,271,283	$	503,411,543	$	1,683,751,845	$	3,166,475,982
Repurchase agreement liabilities associated with these securities	$	133,837,000	$	847,691,598	$	502,127,646	$	1,697,999,112	$	3,181,655,356
Average interest rate of repurchase agreement liabilities	2.57		2.59		2.68		2.93		2.78

Asset Category	Market Value		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
	($000)
Fixed-Rate Mortgage-Backed Securities	$	987,001	29.91	%	6.51	%	272	1-Mar-35	n/a	n/a		n/a
CMO Floaters		73,744	2.24	%	3.26	%	330	25-May-34	0.70	7.78	%	n/a
Adjustable-Rate Mortgage-Backed Securities		1,674,786	50.77	%	4.03	%	343	1-Dec-42	3.83	10.81	%	1.44	%
Hybrid Adjustable Rate Mortgage-Backed Securities		499,492	15.14	%	4.62	%	348	20-Jan-35	26.69	10.25	%	1.23	%
Balloon Maturity Mortgage-Backed Securities		64,029	1.94	%	4.07	%	57	1-Feb-11	n/a	n/a		n/a
Total Portfolio	$	3,299,052	100.00	%	4.84	%	317	1-Dec-42	8.81	10.59	%	1.37	%

Agency	Market Value		Percentage of Entire Portfolio
	($000)
Fannie Mae	$	2,148,247	65.12	%
Freddie Mac		514,470	15.59	%
Ginnie Mae		636,335	19.29	%

Total Portfolio	$	3,299,052	100.00	%

Effective Duration	1.23
Weighted Average Purchase Price	$	103.45
Weighted Average Current Price	$	102.69

Repurchase Agreement Counter-parties	Amount Outstanding		Amount at Risk (1)		Weighted Average Maturity of Repurchase Agreements in Days	Percent of Total Amount Outstanding
	($000)		($000)
Nomura Securities International, Inc.	$	485,270	$	25,007	160	15.3	%
JP Morgan Securities	403,899		15,385		30	12.7	%
Deutsche Bank Securities, Inc.	385,439		16,638		142	12.1	%
Bear Stearns & Co. Inc.	297,251		11,808		98	9.3	%
Goldman Sachs	264,902		8,438		82	8.3	%
Cantor Fitzgerald	247,942		12,367		151	7.8	%
Washington Mutual	239,851		10,920		73	7.5	%
Banc of America Securities, LLC	239,290		11,932		93	7.5	%
UBS Investment Bank, LLC	148,360		6,534		70	4.7	%
Lehman Brothers	144,277		4,458		96	4.6	%
Countrywide Securities Corp.	131,062		6,235		39	4.1	%
Merrill Lynch	103,032		1		92	3.2	%
Daiwa Securities America Inc.	59,046		3,370		99	1.9	%
Morgan Stanley	28,288		1,213		12	0.9	%
REFCO Securities, LLC	3,746		208		55	0.1	%

Total	$	3,181,655	$	134,514		100.0	%

	Payment due by period
Contractual Obligations	Total		Less than 1 year

Repurchase Agreements	$	3,181,655,356	$	3,181,655,356

Total	$	3,181,655,356	$	3,181,655,356

Asset Category		Market Value	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 Mortgage backed securities	$	2,005,867,897	56.7%	4.70%	331	1-Apr-44	3.92	10.43%	1.79%
Fixed-Rate Mortgage backed securities	$	715,618,090	20.2%	6.91%	277	1-Apr-36	n/a	n/a	n/a
Hybrid Adjustable-Rate Mortgage backed securities	$	770,860,599	21.8%	4.33%	336	1-Nov-35	17.43	9.89%	1.75%
Balloon Maturity Mortgage backed securities	$	46,207,624	1.3%	4.05%	45	1-Feb-11	n/a	n/a	n/a
Total Portfolio	$	3,538,554,210	100.0%	4.96%	312	1-Apr-44	7.67	10.28%	1.78%

Agency		Market Value	Percentage of Entire Portfolio
Fannie Mae	$	2,285,690,961	64.59%
Freddie Mac		676,176,953	19.11%
Ginnie Mae		576,686,296	16.30%
Total Portfolio	$	3,538,554,210	100.00%

Entire Portfolio
Effective Duration (1)		1.59
Weighted Average Purchase Price	$	102.49
Weighted Average Current Price	$	100.67

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 March 31,2006	$	3,515,112,798	$	111,754,082	$	3,626,866,880	103.179	$	3,538,554,210	100.667
At December 31, 2005	$	3,457,891,363	$	112,635,825	$	3,570,527,188	103.257	$	3,494,029,359	101.045
At September 30, 2005	$	3,797,400,645	$	113,392,661	$	3,910,793,306	102.986	$	3,858,319,701	101.604
At June 30, 2005	$	3,784,668,467	$	114,672,670	$	3,899,341,137	103.030	$	3,876,205,996	102.419
At March 31, 2005	$	3,212,516,823	$	109,389,703	$	3,321,906,527	103.405	$	3,299,051,561	102.694
At December 31, 2004	$	2,876,319,085	$	97,753,097	$	2,974,072,182	103.399	$	2,973,232,897	103.369
At September 30, 2004	$	1,589,828,988	$	48,498,955	$	1,638,327,943	103.051	$	1,638,264,065	103.047
At June 30, 2004	$	1,479,500,209	$	38,033,673	$	1,517,533,882	102.571	$	1,508,421,270	101.955
At March 31, 2004	$	1,473,583,661	$	39,535,014	$	1,513,118,676	102.683	$	1,516,539,744	102.915

Warehouse and aggregation lines of credit:		March 31, 2006
A committed warehouse line of credit for $100.0 million between the Company and Residential Funding Corporation ("RFC").	$	7,095,775

A committed warehouse line of credit for $284.5 million between the Company and Colonial Bank.		199,050,231

A committed warehouse line of credit for $150.0 million between the Company and JP Morgan Chase.		90,881,688

An Aggregation facility for $1.0 billion between the Company and Citigroup Global Markets Realty Inc. to aggregate loans pending securitization.		273,213,144

A $750.0 million purchase and security agreement among OFS and UBS Warburg Real Estate Securities, Inc. (“UBS Warburg”)		108,955,338

	$	679,196,176

Quarter Ended		Average Investment Securities Held		Total Interest Income	Yield on Average Interest Earning Assets		Average Balance of Repurchase Agreements Outstanding		Interest Expense	Average Cost of Funds		Net Interest Income	Net Interest Spread
March 31, 2006	$	3,516,291,784	$	42,219,327	4.803%	$	3,375,776,594	$	37,660,857	4.462%	$	4,558,470	0.340%
December 31, 2005	$	3,676,174,530	$	43,139,911	4.694 %	$	3,533,486,002	$	35,912,966	4.065 %	$	7,226,945	0.629 %
September 30, 2005	$	3,867,262,849	$	43,574,308	4.507 %	$	3,723,603,116	$	33,101,847	3.556 %	$	10,472,461	0.951 %
June 30, 2005	$	3,587,628,779	$	36,748,640	4.097 %	$	3,449,743,973	$	26,703,422	3.096 %	$	10,045,218	1.001 %
March 31, 2005	$	3,136,142,229	$	31,069,934	3.963 %	$	2,976,409,157	$	19,841,710	2.667 %	$	11,228,224	1.296 %
December 31, 2004	$	2,305,748,481	$	20,463,071	3.550 %	$	2,159,890,886	$	10,824,164	2.005 %	$	9,638,907	1.545 %
September 30, 2004	$	1,573,342,668	$	11,017,346	2.801 %	$	1,504,919,407	$	4,253,337	1.131 %	$	6,764,009	1.670 %
June 30, 2004	$	1,512,480,507	$	10,959,098	2.898 %	$	1,452,004,000	$	4,344,012	1.197 %	$	6,615,086	1.702 %
March 31, 2004	$	871,140,453	$	7,194,033	3.303 %	$	815,814,500	$	2,736,434	1.342 %	$	4,457,599	1.962 %

		For the Period Ending March 31, 2006	For the Period Ending March 31, 2005
Fair Value adjustment of residuals interests, trading	$	(4,226)	N/A
Gain on Sales		20,829	N/A
Fees on brokered loans		1,549	N/A
Gain on derivatives		3,402	N/A
Direct loan origination expenses, deferred		1,238	N/A
Fees earned, brokering servicing		771	N/A
Write off purchased pipeline(Purchase Accounting Adjustment)		(534)	N/A
		23,029	N/A

Direct loan origination expenses, reclassified		(15,952)	N/A

Net gain on sale of mortgage loans	$	7,077	N/A

		Notional Amount		Carrying Amount		Estimated Fair Value
March 31, 2006
Assets:
Mortgage loans held for sale	$		$	707,095,613	$	709,910,926
Mortgage servicing rights	$		$	93,337,355	$	93,337,355

Commitments and contingencies:
Mortgage loans held for sale related positions:
Interest Rate Lock Commitments	$	368,156,694	$	1,150,707	$	1,150,707
Interest Rate SWAP Agreements	$	533,700,000	$	1,494,429	$	1,494,429
Forward delivery commitments	$	213,000,000	$	876,966	$	876,966

		Payments Due by Period
Contractual Obligations		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Repurchase agreements	$	3,413,954	$	3,413,954	$	-	$	-	$	-
Warehouse lines of credit		679,196		679,196		-		-		-
Drafts payable		18,665		18,665		-		-		-
Other secured borrowings		105,452		105,452
Junior subordinated notes		103,097		-		-		103,097		-
Operating leases		18,419		5,914		8,725		2,770		1,010

Total	$	4,338,783	$	4,223,181	$	8,725	$	105,867	$	1,010

	Interest Rates Fall 100 BPS			Interest Rates Rise 100 BPS			Interest Rates Rise 200 BPS
Adjustable-Rate
Fair Value $1,674,786,388
Change in Fair Value	$	10,540,958		$	(10,540,958	)	$	(21,081,917	)
Change as a % of Fair Value	0.63		%	(0.63		)%	(1.26		)%

Fixed-Rate
Fair Value $987,000,965
Change in Fair Value	$	22,451,156		$	(22,451,156	)	$	(44,902,312	)
Change as a % of Fair Value	2.27		%	(2.27		)%	(4.55		)%

CMO Floaters
Fair Value $73,743,802
Change in Fair Value	$	(250,729	)	$	250,729		$	501,458
Change as a % of Fair Value	(0.34		)%	0.34		%	0.68		%

Hybrid
Fair Value $499,491,623
Change in Fair Value	$	7,287,583		$	(7,287,583	)	$	(14,575,166	)
Change as a % of Fair Value	1.46		%	(1.46		)%	(2.92		)%

Balloon
Fair Value $64,028,783
Change in Fair Value	$	1,805,612		$	(1,805,612	)	$	(3,611,223	)
Change as a % of Fair Value	2.82		%	(2.82		)%	(5.64		)%

Cash
Fair Value $113,855,808

Portfolio Total
Fair Value $3,299,051,561
Change in Fair Value	$	41,834,580		$	(41,834,580	)	$	(83,669,160	)
Change as a % of Fair Value	1.27		%	(1.27		)%	(2.54		)%

		Interest Rates Fall 100 Basis Points		Interest Rates Rise 100 Basis Points		Interest Rates Rise 200 Basis Points
Adjustable-Rate Mortgage backed securities
(Fair Value $2,005,867,897)
Change in fair value	$	16,166,632	$	(16,166,632)	$	(32,333,265)
Change as a percent of fair value		0.81%		(0.81)%		(1.61)%
Fixed-Rate Mortgage backed securities
(Fair Value $715,618,090)
Change in fair value	$	20,237,576	$	(20,237,576)	$	(40,475,152)
Change as a percent of fair value		2.83%		(2.83)%		(5.66)%
Hybrid Adjustable-Rate Mortgage backed securities
(Fair Value $770,860,599)
Change in fair value	$	18,999,423	$	(18,999,423)	$	(37,998,847)
Change as a percent of fair value		2.46%		(2.46)%		(4.93)%
Balloon Maturity Mortgage backed securities
(Fair Value $46,207,624)
Change in fair value	$	1,014,616	$	(1,014,616)	$	(2,029,231)
Change as a percent of fair value		2.20%		(2.20)%		(4.39)%
Cash
(Fair Value $90,872,039)
Portfolio Total
(Fair Value $3,538,554,210)
Change in fair value	$	56,418,247	$	(56,418,247)	$	(112,836,495)
Change as a percent of fair value		1.59%		(1.59)%		(3.19)%

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month#1 (1/1/06-1/31/06)	-	-	-	1,238,200
Month#2 (2/01/06-2-28-06)	138,500	8.85	700,300	1,099,700
Month#3 (3/01/06-3/31/06)	388,800	8.21	1,089,100	710,900
Total	527,300	8.38

NOMINEE	FOR	WITHHELD
Robert E. Cauley	17,988,454	119,368
Buford H. Ortale	17,823,151	284,671

	FOR	AGAINST	ABSTAIN
(a)	15,269,107	664,225	205,807
(b)	11,442,580	4,489,762	206,797

2.1	Agreement of Plan of Merger, incorporated by reference to the Company’s Form 8-K, dated September 29, 2005, filed with the SEC on September 30, 2005
3.1	Articles of Amendment and Restatement, incorporated by reference to the Company’s Form S-11/A, filed with the SEC on April 29, 2004
3.2	Articles Supplementary, incorporated by reference to the Company’s Form 8-K, dated November 3, 2005, filed with the SEC on November 8, 2005
3.3	Articles of Amendment, incorporated by reference to the Company’s Form 8-K, dated February 10, 2006, filed with the SEC on February 15, 2006
3.4	Amended and Restated Bylaws, incorporated by reference to the Company’s Form S-11/A, filed with the SEC on April 29, 2004
4.1	Specimen Common Stock Certificate filed herewith
10.1	2003 Long-Term Incentive Compensation Plan, incorporated by reference to the Company’s Form S-11/A, effective as of March 31, 2004, filed with the SEC on May 26, 2004
10.2	Employment Agreement between Bimini Mortgage Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to the Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April 29, 2004
10.3	Employment Agreement between Bimini Mortgage Management, Inc. and Robert E. Cauley, incorporated by reference to the Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April 29, 2004
10.4	Employment Agreement between Opteum Financial Services, LLC and Peter R. Norden, incorporated by reference to the Company’s Form 10-K, dated September 29, 2005, filed with the SEC on March 10, 2006
10.5	Letter Agreement, dated November 4, 2003 from AVM, L.P. to Bimini Mortgage Management, Inc. with respect to consulting services to be provided by AVM, L.P. and Letter Agreement, dated February 10, 2004 from AVM, L.P. to Bimini Mortgage Management with respect to assignment of AVM, L.P.'s rights, interest and responsibilities to III Associates, incorporated by reference to the Company’s Form S-11/A, filed with the SEC on May 26, 2004
10.6	Agency Agreement, dated November 20, 2003 between AVM, L.P. and Bimini Mortgage Management, Inc., incorporated by reference to the Company’s Form S-11/A, dated November 20, 2003, filed with the SEC on May 26, 2004
10.7	2004 Performance Bonus Plan, incorporated by reference to the Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August 25, 2004
10.8	Phantom Share Award Agreement between Bimini Mortgage Management, Inc. and Jeffrey J. Zimmer, incorporated by reference to the Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August 25, 2004
10.9	Phantom Share Award Agreement between Bimini Mortgage Management, Inc. and Robert E. Cauley, incorporated by reference to the Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August 25, 2004
10.10	Voting Agreement, among certain stockholders of Bimini Mortgage Management, Inc., Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas, IV, Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson, Buford H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan, certain of Mr. Kaplan’s affiliates and other former owners of Opteum Financial Services, LLC, incorporated by reference to the Company’s Schedule 13D, dated November 3, 2005, filed with the SEC on November 14, 2005
31.1	Certification of the Chief Executive Officer , pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
31.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
32.1	Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

	~~BIMINI MORTGAGE MANAGEMENT,~~OPTEUM INC.

Date: May 8, 2006
By:		~~By:~~	~~/s/~~ /s/ Robert E. Cauley
			Robert E. Cauley
			Chief Financial Officer, Chief Investment Office and Secretary


~~Date:~~	~~April 25, 2005~~