1273685--3/31/2008--NEW_YORK_MORTGAGE_TRUST

related topics

{investment, property, distribution}

{stock, price, share}

{tax, income, asset}

{loss, insurance, financial}

{debt, indebtedness, cash}

{provision, law, control}

{loan, real, estate}

{personnel, key, retain}

Risks Related to Our Business Interest rate fluctuations may cause losses. We may experience a decline in the market value of our assets. Changes in prepayment rates on our investment securities may decrease our net interest income. A disproportionate rise in short-term interest rates as compared to longer-term interest rates may adversely affect our income. A flat or inverted yield curve may adversely affect prepayment rates on and supply of our investment securities. Interest rate mismatches between our adjustable-rate agency securities and our borrowings used to fund our purchases of these securities may reduce our income during periods of changing interest rates. Interest rate caps on our adjustable-rate investment securities may reduce our income or cause us to suffer a loss during periods of rising interest rates. Continued adverse developments in the residential mortgage market may adversely affect the value of the mortgage-related securities in which we invest and our ability to finance or sell any securities that we acquire. Competition may prevent us from acquiring mortgage-related assets at favorable yields and that would negatively impact our profitability. Because assets we acquire may experience periods of illiquidity, we may lose profits or be prevented from earning capital gains if we cannot sell the investment securities in our portfolio at an opportune time. We currently leverage our equity, which will exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders. If we are unable to leverage our equity to the extent we currently anticipate, the returns on our MBS portfolio could be diminished, which may limit or eliminate our ability to make distributions to our stockholders. The Company's loan delinquencies may increase as a result of significantly increased monthly payments required from ARM borrowers after the initial fixed period. We may be required to repurchase loans if we breached representations and warranties from loan sale transactions, which could harm our profitability and financial condition. We are dependent on certain key personnel. Risk Related to Our Debt Financing We may incur increased borrowing costs related to repurchase agreements and that would harm our profitability. If we are unable to renew our borrowings at favorable rates, it may force us to sell assets and our profitability may be adversely affected. Possible market developments could reduce the amount of liquidity available to us and could cause our lenders to require us to pledge additional assets as collateral. If we are unable to obtain sufficient short-term financing or our assets are insufficient to meet the collateral requirements, then we may be compelled to liquidate particular assets at an inopportune time. Adverse developments involving major financial institutions or involving one of our lenders could result in a rapid reduction in our ability to borrow and adversely affect our business and profitability. If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we would incur losses. Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy. The Company's liquidity may be adversely affected by margin calls under its repurchase agreements because they are dependent in part on the lenders' valuation of the collateral securing the financing. Our hedging transactions may limit our gains or result in losses. Our use of hedging strategies to mitigate our interest rate exposure may not be effective and may expose us to counterparty risks. Since we invest in Agency MBS that are guaranteed by Fannie Mae and Freddie Mac, we are subject to the risk that these U.S. Government-sponsored entities may not be able to fully satisfy their guarantee obligations, which may adversely affect the value of our investment portfolio and our ability to sell or finance these securities. New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the U.S. Government, on the other, which could adversely affect the price of agency securities. Our directors have approved broad investment guidelines for us and do not approve each investment we make. We may change our investment strategy, operating policies and/or asset allocations without stockholder consent. Risks Related to the Advisory Agreement with JMPAM We are dependent on JMPAM and certain of its key personnel and may not find a suitable replacement if JMPAM terminates the advisory agreement or such key personnel are no longer available to us. Pursuant to the advisory agreement, JMPAM is entitled to receive an advisory fee payable regardless of the performance of the assets of the Managed Subsidiaries. We compete with JMPAM s other clients for access to JMPAM. There are conflicts of interest in our relationship with JMPAM, which could result in decisions that are not in the best interests of our stockholders. Termination of the advisory agreement may be difficult and costly. Risks Related to an Investment in Our Common Stock Our common stock is currently quoted for trading on the Over the Counter Bulletin Board which may adversely impact the liquidity of our shares and reduce the value of an investment in our stock. The market price and trading volume of our common stock may be volatile. We have not established a minimum dividend payment level for our common stockholders and there are no assurances of our ability to pay dividends to them in the future. Upon conversion of our Series A Preferred Shares, we will be required to issue shares of common stock to holders of our Series A Preferred Shares, which will dilute the holders of our outstanding common stock. Our outstanding Series A Preferred Shares are senior to our common stock for purposes of dividend and liquidation distributions and have voting rights equal to those of our common stock. The Series A Preferred Shares represent approximately 21% of our outstanding capital stock, on a fully diluted basis, as of March 1, 2008, excluding the purchase option that expires on April 4, 2008. Therefore, the holders of our Series A Preferred Shares have voting control over us. Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock. Future sales of our common stock could have an adverse effect on our stock price. Under the registration rights agreement we entered in connection with our private placement of common stock in February 2008, we will pay liquidated damages to the holders of the shares of common stock purchased in that private placement if we breech certain provisions. Risks Related to Our Company, Structure and Change in Control Provisions Our Co-Chief Executive Officers have agreements that provide them with benefits in the event their employment is terminated following a change in control. The stock ownership limit imposed by our charter may inhibit market activity in our common stock and may restrict our business combination opportunities. Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities. Maintenance of our Investment Company Act exemption imposes limits on our operations. Tax Risks Related to Our Structure Failure to qualify as a REIT would adversely affect our operations and ability to make distributions. REIT distribution requirements could adversely affect our liquidity. Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations. Risks Related to Our Business Interest rate fluctuations may cause losses. We may experience a decline in the market value of our assets. Changes in prepayment rates on our investment securities may decrease our net interest income. Changes in prepayment rates on our investment securities may decrease our net interest income. A disproportionate rise in short-term interest rates as compared to longer-term interest rates may adversely affect our income. A flat or inverted yield curve may adversely affect prepayment rates on and supply of our investment securities. Interest rate mismatches between our adjustable-rate agency securities and our borrowings used to fund our purchases of these securities may reduce our income during periods of changing interest rates. Interest rate caps on our adjustable-rate investment securities may reduce our income or cause us to suffer a loss during periods of rising interest rates. Continued adverse developments in the residential mortgage market may adversely affect the value of the mortgage-related securities in which we invest and our ability to finance or sell any securities that we acquire. Competition may prevent us from acquiring mortgage-related assets at favorable yields and that would negatively impact our profitability. Because assets we acquire may experience periods of illiquidity, we may lose profits or be prevented from earning capital gains if we cannot sell the investment securities in our portfolio at an opportune time. We currently leverage our equity, which will exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders. If we are unable to leverage our equity to the extent we currently anticipate, the returns on our MBS portfolio could be diminished, which may limit or eliminate our ability to make distributions to our stockholders. The Company's loan delinquencies may increase as a result of significantly increased monthly payments required from ARM borrowers after the initial fixed period. We may be required to repurchase loans if we breached representations and warranties from loan sale transactions, which could harm our profitability and financial condition. We are dependent on certain key personnel. Risk Related to Our Debt Financing We may incur increased borrowing costs related to repurchase agreements and that would harm our profitability. If we are unable to renew our borrowings at favorable rates, it may force us to sell assets and our profitability may be adversely affected. Possible market developments could reduce the amount of liquidity available to us and could cause our lenders to require us to pledge additional assets as collateral. If we are unable to obtain sufficient short-term financing or our assets are insufficient to meet the collateral requirements, then we may be compelled to liquidate particular assets at an inopportune time. Adverse developments involving major financial institutions or involving one of our lenders could result in a rapid reduction in our ability to borrow and adversely affect our business and profitability. If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we would incur losses. Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy. The Company's liquidity may be adversely affected by margin calls under its repurchase agreements because they are dependent in part on the lenders' valuation of the collateral securing the financing. Our hedging transactions may limit our gains or result in losses. Our use of hedging strategies to mitigate our interest rate exposure may not be effective and may expose us to counterparty risks. Since we invest in Agency MBS that are guaranteed by Fannie Mae and Freddie Mac, we are subject to the risk that these U.S. Government-sponsored entities may not be able to fully satisfy their guarantee obligations, which may adversely affect the value of our investment portfolio and our ability to sell or finance these securities. New laws may be passed affecting the relationship between Fannie Mae and Freddie Mac, on the one hand, and the U.S. Government, on the other, which could adversely affect the price of agency securities. Our directors have approved broad investment guidelines for us and do not approve each investment we make. We may change our investment strategy, operating policies and/or asset allocations without stockholder consent. Risks Related to the Advisory Agreement with JMPAM We are dependent on JMPAM and certain of its key personnel and may not find a suitable replacement if JMPAM terminates the advisory agreement or such key personnel are no longer available to us. Pursuant to the advisory agreement, JMPAM is entitled to receive an advisory fee payable regardless of the performance of the assets of the Managed Subsidiaries. We compete with JMPAM s other clients for access to JMPAM. There are conflicts of interest in our relationship with JMPAM, which could result in decisions that are not in the best interests of our stockholders. Termination of the advisory agreement may be difficult and costly. Risks Related to an Investment in Our Common Stock Our common stock is currently quoted for trading on the Over the Counter Bulletin Board which may adversely impact the liquidity of our shares and reduce the value of an investment in our stock. The market price and trading volume of our common stock may be volatile. We have not established a minimum dividend payment level for our common stockholders and there are no assurances of our ability to pay dividends to them in the future. Upon conversion of our Series A Preferred Shares, we will be required to issue shares of common stock to holders of our Series A Preferred Shares, which will dilute the holders of our outstanding common stock. Our outstanding Series A Preferred Shares are senior to our common stock for purposes of dividend and liquidation distributions and have voting rights equal to those of our common stock. The Series A Preferred Shares represent approximately 21% of our outstanding capital stock, on a fully diluted basis, as of March 1, 2008, excluding the purchase option that expires on April 4, 2008. Therefore, the holders of our Series A Preferred Shares have voting control over us. Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock. Future sales of our common stock could have an adverse effect on our stock price. Under the registration rights agreement we entered in connection with our private placement of common stock in February 2008, we will pay liquidated damages to the holders of the shares of common stock purchased in that private placement if we breech certain provisions. Risks Related to Our Company, Structure and Change in Control Provisions Our Co-Chief Executive Officers have agreements that provide them with benefits in the event their employment is terminated following a change in control. The stock ownership limit imposed by our charter may inhibit market activity in our common stock and may restrict our business combination opportunities. Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities. Maintenance of our Investment Company Act exemption imposes limits on our operations. Tax Risks Related to Our Structure Failure to qualify as a REIT would adversely affect our operations and ability to make distributions. REIT distribution requirements could adversely affect our liquidity. Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations.

Full 10-K form ▸

1273685--3/31/2008--NEW_YORK_MORTGAGE_TRUST_INC