1072806--3/31/2010--CAPITAL_CROSSING_PREFERRED

related topics

{loan, real, estate}

{stock, price, share}

{investment, property, distribution}

{tax, income, asset}

{condition, economic, financial}

{control, financial, internal}

{loss, insurance, financial}

{regulation, change, law}

Bank regulators may continue to limit the ability of the Company to implement its business plan and may restrict its ability to declare and pay dividends, to redeem the Series D preferred stock or to enter into asset sales or exchanges. If the OTS does not approve Aurora Bank s request to permit the payment of future dividends, the Company will be prohibited from paying dividends in the future and therefore may fail to qualify as a REIT. The bankruptcy of LBHI may limit the ability of LBHI to contribute capital to Aurora Bank and negatively impact the timing and amount of payments received by Aurora Bank with respect to debts owed to Aurora Bank by LBHI. The failure of Aurora Bank could result in the loss of the Company s funds on deposit with Aurora Bank, which could reduce the amount of cash available to pay distributions, including dividends on the Series B and Series D preferred stock. The Company s business and financial results are significantly affected by general business and economic conditions. The Company is subject to extensive government regulation and supervision. The Company s results will be affected by factors beyond its control. The Company s loans are concentrated in California and adverse conditions in that market could adversely affect its operations. A substantial majority of the Company s loans were originated by other parties. A portion of the Company s loan portfolio is made up of commercial mortgage loans, which are generally riskier than other types of loans. The November Asset Exchange resulted in the Company owning a portfolio consisting primarily of residential mortgage loans. Continued declines in home prices would negatively impact the performance of residential mortgages. The realizable value of the Company s loan portfolio may differ from fair value. The Company may not be able to purchase loans at the same volumes or with the same yields as it has historically purchased. The Company could be held responsible for environmental liabilities of properties it acquires through foreclosure. The Company is dependent in virtually every phase of its operations on the diligence and skill of the management of Aurora Bank. The Company s relationship with Aurora Bank may create conflicts of interest. Servicing of the Company s mortgage assets by Aurora Bank. Future dispositions by the Company of mortgage assets to Aurora Bank or its affiliates. Future modifications of the Advisory Agreement or Master Service Agreement. The Company s controls and procedures may fail or be circumvented. The Board of Directors has broad discretion to revise the Company s strategies. Fluctuations in interest rates could reduce the Company s earnings and affect its ability to pay dividends. The Company is subject to the risk of litigation, and the outcome of proceedings it may become involved in could materially adversely affect the Company s business and ability to pay dividends on the Series B and Series D preferred stock. Tax Risks Related to REITs If the Company fails to qualify as a REIT, it will be subject to federal and state income tax at regular corporate rates. If the Company does not distribute 90% of its net taxable income, it may not qualify as a REIT. The Company may redeem the Series B and Series D preferred stock at any time upon the occurrence of a tax event.

Full 10-K form ▸

1072806--3/31/2010--CAPITAL_CROSSING_PREFERRED_CORP