AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 2004
REGISTRATION STATEMENT NO. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEW YORK MORTGAGE TRUST, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 47-0934168
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 634-9400
(Address of principal executive office, including zip code)
NEW YORK MORTGAGE TRUST, INC.
2004 STOCK INCENTIVE PLAN
(Full title of the Plan)
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STEVEN B. SCHNALL
DAVID A. AKRE
CO-CHIEF EXECUTIVE OFFICERS
NEW YORK MORTGAGE TRUST, INC.
NEW YORK, NEW YORK 10019
(212) 634-9400
(Name, address, including zip code, and telephone number including area code, of
agent for service)
WITH COPIES TO:
DANIEL M. LEBEY, ESQ.
HUNTON & WILLIAMS LLP
RIVERFRONT PLAZA, EAST TOWER
951 E. BYRD STREET
RICHMOND, VIRGINIA 23219-4074
(804) 788-8200
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1)(2) SHARE(3) PRICE REGISTRATION FEE(4)
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Common Stock, $0.01 par value per
share................................ 412,125 shares $9.12 $3,758,580 $477
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(1) Pursuant to Rule 416(a) of the Securities Exchange Act of 1933, as amended
(the "Securities Act"), this Registration Statement shall also cover any
additional shares of New York Mortgage Trust, Inc.'s (the "Company") Common
Stock that become issuable under the plan by reason of any stock splits,
stock dividends or similar transactions.
(2) Represents the number of shares of restricted Common Stock issued by the
Company on June 29, 2004 pursuant to the Company's 2004 Stock Incentive
Plan.
(3) Calculated pursuant to Rule 457(c) of the Securities Act on the basis of
$9.12 per share, which was the average of the high and low prices of the
Common Stock as quoted on the New York Stock Exchange on July 16, 2004.
(4) Pursuant to Rule 457(p) of the Securities Act, the $477 registration fee for
the Company's Form S-8, dated July 20, 2004, shall be deducted from the
$14,570.50 previously paid against the filing of Amendment No. 2 to the
Company's Registration Statement on Form S-11 (Registration No. 333-111668)
on March 26, 2004, for which securities were registered but remain unsold.
EXPLANATORY NOTE
Under cover of this Form S-8 is our prospectus prepared in accordance with
Part I of Form S-3 under the Securities Act of 1933, as amended. Our prospectus
has been prepared pursuant to Instruction C of Form S-8, in accordance with the
requirements of Part I of Form S-3, and may be used for reofferings and resales
on a continuous or delayed basis in the future of up to an aggregate of 412,125
"control securities" which have been issued pursuant to our 2004 Stock Incentive
Plan on June 29, 2004 to each of Mr. Steven B. Schnall, Chairman of our board of
directors and our Co-Chief Executive Officer, Mr. David A. Akre, our Co-Chief
Executive Officer and director, Mr. Raymond A. Redlingshafer, Jr., our
President, Chief Investment Officer and director, Mr. Michael I. Wirth, our
Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Mr.
Steven R. Mumma, our Vice President and Chief Operating Officer, Mr. Joseph V.
Fierro, Chief Operating Officer of our wholly-owned subsidiary, The New York
Mortgage Company, LLC, as well as Mr. David R. Bock, Mr. Alan L. Hainey, Mr.
Steven G. Norcutt, Ms. Mary Dwyer Pembroke, Mr. Jerome F. Sherman and Mr. Thomas
W. White, each a member of our board of directors. Each of the shares of common
stock registered pursuant to this registration statement on Form S-8 and held by
the selling stockholders named above are subject to a lock-up agreement
restricting any sale, transfer or other disposition of these shares for 180 days
following June 29, 2004.
REOFFER PROSPECTUS
412,125 SHARES OF COMMON STOCK
NEW YORK MORTGAGE TRUST, INC.
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This prospectus relates to 412,125 shares of our common stock that may be
offered and resold from time to time by the selling stockholders identified in
this prospectus for their own accounts. It is anticipated that the selling
stockholders will offer shares for sale at prevailing prices on the New York
Stock Exchange on the date of sale. The selling stockholders are subject to a
lock-up agreement restricting any sale, transfer or other disposition of the
shares for 180 days following June 29, 2004. We will receive no part of the
proceeds from sales made under this prospectus. The selling stockholders will
bear all sales commissions and similar expenses. Any other expenses incurred by
us in connection with the registration and offering not borne by the selling
stockholders will be borne by us.
The selling stockholders and any brokers executing selling orders on their
behalf may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, in which event commissions received by such brokers may be deemed
to be underwriting commissions under the Securities Act of 1933.
Our common stock is listed on the New York Stock Exchange, under the symbol
"NTR." On July 19, 2004, the last reported price of our common stock on such
market was $9.36 per share. Our principal offices are located at 1301 Avenue of
the Americas, New York, New York 10019.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS,"
BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR CERTAIN RISK FACTORS RELEVANT TO AN
INVESTMENT IN OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is July 20, 2004.
TABLE OF CONTENTS
PAGE NUMBER
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Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Special Note Regarding Forward-Looking Statements........... 22
Use of Proceeds............................................. 22
Selling Stockholders........................................ 22
Plan of Distribution........................................ 24
Incorporation of Certain Information by Reference........... 25
Where You Can Find More Information......................... 26
Legal Matters............................................... 26
Experts..................................................... 26
Disclosure of SEC's Position on Indemnification for
Securities Act Liabilities................................ 27
You should rely only on the information contained in this document or to
which we have referred you. Neither we nor the selling stockholders have
authorized anyone to provide you with different or additional information. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
You should not assume that the information in the prospectus, or incorporated
herein by reference, or in any prospectus supplement is accurate as of any date
other than the date on the front of those documents.
i
PROSPECTUS SUMMARY
This is only a summary and does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus, including "Risk Factors," "Selling Stockholders," "Plan of
Distribution" and other information incorporated by reference, before deciding
to invest in our common stock. In this prospectus, unless the context suggests
otherwise, references to "our company," "we," "us" and "our" mean New York
Mortgage Trust, Inc., including its subsidiaries. NYMC refers to our subsidiary
and predecessor, The New York Mortgage Company, LLC.
OVERVIEW
We are a Maryland corporation newly formed to acquire The New York Mortgage
Company, LLC, or NYMC, a residential mortgage banking company. We closed our
initial public offering and our acquisition of NYMC on June 29, 2004, raising
net proceeds of approximately $123 million. We intend to build a leveraged
portfolio of residential mortgage loans comprised largely of prime
adjustable-rate mortgage loans that we originate, including adjustable-rate
loans that have an initial fixed-rate period, which we refer to as hybrid
mortgage loans. In addition, in the short term and from time to time in the
future, we intend to invest in mortgage-backed securities on a leveraged basis.
NYMC has originated, and we will continue to originate, mortgage loans of all
types, and although we do not have specific guidelines as to the relative
amounts of prime and non-prime mortgage loans that we can originate, we have a
particular focus on prime adjustable- and fixed-rate, first lien, residential
purchase mortgage loans. While the definition of a prime loan varies from
institution to institution, we consider prime loans to be loans to borrowers
with strong credit profiles, which we evaluate by analyzing the borrower's
credit score, employment, income and assets and related documentation, the
amount of equity in and the value of the property securing the borrower's loan,
debt to income ratio, credit history, funds available for closing and
post-closing liquidity. NYMC has historically sold or brokered all of the loans
it has originated and has therefore historically relied on the underwriting
criteria of the institutions to which NYMC has sold its loans.
We intend to continue to originate mortgage loans of all types through NYMC
utilizing NYMC's historical origination strategy. NYMC is our taxable REIT
subsidiary. Generally, we intend to continue to sell the fixed-rate loans that
we originate to third parties, and to retain in our portfolio and finance a
majority of the adjustable-rate and hybrid mortgage loans that we originate. Our
portfolio loans are held at the REIT level or by a qualified REIT subsidiary.
Any adjustable-rate and hybrid mortgage loans we originate that do not meet our
investment criteria or portfolio requirements will be sold to third parties. We
will rely on our own underwriting criteria with respect to the mortgage loans we
intend to retain and will continue to rely on the underwriting criteria of the
institutions to which we sell our loans with respect to the loans we intend to
sell.
While we are originating and building our portfolio of adjustable-rate and
hybrid mortgage loans, we intend to use a substantial portion of the proceeds
from our initial public offering to purchase from one or more third parties on a
leveraged basis residential mortgage-backed securities guaranteed by a
government sponsored entity or rated investment grade by a nationally recognized
statistical rating agency. While we have not established and do not expect to
establish a limit on the amount of leverage we may incur, we expect to leverage
our equity eight to 12 times. Our board of directors has adopted a policy
pursuant to which we may only invest a maximum of 7.5% of our assets in
mortgage-backed securities that are not guaranteed by a government sponsored
entity or rated investment grade by a nationally recognized statistical rating
agency. Mortgage-backed securities that are guaranteed by a government sponsored
entity are not guaranteed by the United States government. Over time, we expect
that these securities will be replaced by adjustable-rate and hybrid mortgage
loans that we originate, although we may continue to purchase securities from
third parties. We believe that our ability to use primarily mortgage loans that
we originate as the basis for our portfolio will enable us to build a portfolio
that generates a higher return than the returns realized by mortgage investors
that do not have their own origination capabilities, because mortgage investors
that do not have their own origination capabilities must purchase their mortgage
loans
1
from third parties at higher premiums than NYMC's cost of originating the
mortgage loans that we will retain.
Historically, NYMC has financed its mortgage originations on a short-term
basis through a variety of warehouse lines of credit and repurchase facilities.
We will continue to use warehouse lines of credit and repurchase facilities to
fund NYMC's originations, and we will finance our portfolio of mortgage loans
with a combination of equity capital, repurchase facilities and securitizations.
Once we have built a large enough portfolio comprised mainly of retained
mortgage loans, we intend to securitize our mortgage loans. We anticipate that
the securitization transactions through which we finance the adjustable-rate and
hybrid mortgage loans that we retain will be structured as financings for both
tax and financial accounting purposes. Therefore, we do not expect to generate a
gain or loss on sales from these activities, and, following the securitizations,
the loans will remain on our consolidated balance sheet as assets with the
securitization debt listed as a liability.
We expect to qualify as a REIT under the Internal Revenue Code and have
elected to be taxed as a REIT for our short taxable year beginning on the
business day preceding the closing of our initial public offering and ending
December 31, 2004. As a REIT, we generally will not be subject to federal income
tax on the REIT taxable income that we distribute to our stockholders, but the
taxable income generated by NYMC, our taxable REIT subsidiary, which includes
fee income on all loans we originate and gains and net interest income on all
loans we sell, will be subject to regular corporate income tax.
Currently, NYMC's core market is the tri-state area of New York, New Jersey
and Connecticut, one of the most densely populated regions in the United States,
which comprised approximately 86.5% of our loan originations, as measured by
principal balance, for the three month period ended March 31, 2004. To a lesser
extent, NYMC is presently doing business in a number of other states across the
United States, including California, Florida and Pennsylvania. NYMC is presently
licensed or authorized to do business in a total of 38 states, and license
applications are pending in several other states.
We believe that the substantial growth of NYMC's mortgage banking business
since its inception has resulted from its commitment to providing exemplary
service to its customers and its concentration on retail, referral-based,
mortgage banking to borrowers with strong credit profiles. Based on NYMC's past
experience and our knowledge of the mortgage industry, we believe that referrals
from realtors, attorneys, accountants and other professionals and business from
repeat customers tend to generate a higher percentage of purchase mortgage loan
applications than refinance applications as compared to the loan applications
generated by advertising and other mass marketing efforts. In the three month
period ended March 31, 2004, NYMC's purchase loan originations represented 59.7%
of NYMC's total residential mortgage loan originations as measured by principal
balance, as compared to an industry-wide percentage of 47% for one-to-four
family mortgage loans, according to the May 18, 2004 report of the Mortgage
Bankers Association of America, or MBAA. We believe that the market for mortgage
loans for home purchases is less susceptible than the refinance market to
downturns during periods of increasing interest rates, because borrowers seeking
to purchase a home do not generally base their decision to purchase on changes
in interest rates alone, while borrowers that refinance their mortgage loans
often make their decision as a direct result of changes in interest rates.
Consequently, while our referral-based marketing strategy may cause our overall
loan origination volume during periods of declining interest rates to lag our
competitors who rely on mass marketing and advertising and who therefore capture
a greater percentage of loan refinance applications during those periods, we
believe our strategy will enable us to sustain stronger home purchase loan
origination volumes than those same competitors during periods of flat to rising
interest rates. In addition, we believe that our referral-based business results
in relatively higher gross margins and lower advertising costs and loan
generation expenses than most other mortgage companies whose businesses are not
referral-based.
Our principal offices are located at 1301 Avenue of the Americas, New York,
New York 10019. Our telephone number is (212) 634-9400. Our web site addresses
are http://www.nymtrust.com and http://www.nymc.com. The information on our web
sites does not constitute a part of this prospectus.
2
OUR BUSINESS STRATEGY
Our goal is to continue to grow the residential mortgage loan origination
business of NYMC and to build and manage a leveraged portfolio of prime
adjustable-rate and hybrid residential mortgage loans. We intend to execute our
strategy by:
- continuing to focus on originating prime residential mortgage loans
through NYMC that we believe can either be retained in our portfolio or
sold at a profit;
- focusing on maximizing our lending to home buyers rather than to home
owners seeking to refinance their mortgage loans, which we believe makes
our business less vulnerable to declines in loan origination volume
resulting from increases in interest rates;
- leveraging our portfolio to increase its size with the intent to enhance
our returns while at the same time managing the increased risk of loss
associated with this leverage;
- utilizing hedge strategies that we consider appropriate to minimize
exposure to interest rate changes; and
- expanding our retail mortgage banking business through hiring additional
loan officers, the opening of new retail branch offices in new markets
and selectively pursuing strategic acquisitions in the mortgage banking
industry.
OUR COMPETITIVE ADVANTAGES
We believe we enjoy several key competitive advantages that will enable us
to implement our business strategy. These competitive advantages include:
- our ability to use mortgage loans that we originate as the basis for our
portfolio, which we believe will enable us to build a portfolio that
generates a higher return than the returns realized by other mortgage
investors that do not have their own origination capabilities, because
mortgage investors that do not have their own origination capabilities
must purchase their mortgage loans from third parties at higher premiums
than NYMC's cost of originating the mortgage loans that we will retain;
- our extensive network of sources that generates recurring purchase loan
origination referrals;
- our ability to offer a broader range of mortgage loan products than most
of our competitors, including fixed-rate, adjustable-rate and hybrid
mortgage loans with varying total terms, allows us to meet the needs of a
wider variety of customers as compared to those of our competitors that
do not offer as many loan products;
- access to real time data and trends in the residential mortgage business
from NYMC, our mortgage loan originator; and
- a management team that includes experienced mortgage bankers and other
professionals.
SUMMARY RISK FACTORS
An investment in our common stock has risks. The "Risk Factors" section of
this prospectus contains a detailed discussion of the most important risks,
including the risks summarized below.
- we may experience a decline in the market value of our assets due to
rising interest rates;
- a decrease in the demand for mortgage loans due to a period of rising
interest rates may adversely affect our earnings, which could negatively
affect the cash available for distribution to you;
- our success will depend on our ability to obtain financing to leverage
our equity;
- we intend to leverage our equity eight to 12 times, which will exacerbate
any losses we incur on our planned investments and may reduce the cash
available for distribution to you;
- interest rate fluctuations resulting in our interest expense exceeding
our interest income would result in operating losses for us and may limit
or eliminate our ability to make distributions to you;
- a prolonged economic slow down, a lengthy or severe recession or
declining real estate values could harm our operations;
3
- we have no operating history with respect to securitizing mortgage loans
or managing a portfolio of mortgage securities;
- our success will partially depend on our ability to originate prime
adjustable-rate and hybrid mortgage loans for our portfolio;
- we may not be successful in qualifying as a REIT or maintaining our
qualification as a REIT for federal income tax purposes, in which case we
would be subject to federal income tax on our taxable income at regular
corporate rates, thereby reducing the amount of funds available for
making distributions to you; and
- REIT distribution requirements could adversely affect our liquidity.
OUR MARKET OPPORTUNITY
The residential mortgage loan market is the largest consumer finance market
in the United States. According to the 1-to-4 Family Mortgage Originations,
1990-2002: Total, Refi Share and ARM Share, Annual, 1990 to 2002, Report of the
MBAA, lenders in the United States originated more than $2.85 trillion in one to
four family mortgage loans in 2002, while the May 18, 2004 Mortgage Finance
Forecast of the MBAA estimated that lenders originated approximately $3.81
trillion in 2003. In the May forecast, the MBAA projects mortgage loan volumes
to fall to $2.42 trillion in 2004 and $1.75 trillion in 2005, primarily
attributable to an expected continued decline in the volume of refinancings of
existing loans relative to 2003. The MBAA also projects that mortgage loan
volume to home purchasers will increase from $1.28 trillion in 2003 to $1.37
trillion in 2004 and to decrease to $1.32 trillion in 2005. In the three month
period ended March 31, 2004, NYMC's purchase loan originations represented 59.7%
of NYMC's total residential mortgage loan originations as measured by principal
balance, as compared to an industry-wide percentage of 47% for one-to-four
family mortgage loans, according to the May forecast of the MBAA. We believe
that our concentration on purchase mortgage loan originations will cause our
loan origination volume to be less susceptible to the expected industry-wide
decline in origination volume.
OUR UNDERWRITING PHILOSOPHY
The adjustable-rate and hybrid mortgage loans that we will retain will meet
underwriting criteria established by our management. Our underwriting philosophy
is to analyze the overall creditworthiness of the borrower and evaluate
carefully the value of the property securing the loan, while matching risk and
price. In the past, virtually all of the loans that NYMC originated were sold to
large institutional investors, and NYMC relied on the underwriting criteria of
those investors in originating those loans. Going forward, we intend to continue
this practice with respect to the fixed-rate and other mortgage loans that we
will originate and sell through NYMC.
OUR MANAGEMENT
We are a self-administered REIT. Our senior management team has extensive
experience in mortgage banking and investing in and managing portfolios of
residential mortgage loans and residential mortgage-backed securities.
Additionally, our chief financial officer has prior experience as a publicly
traded REIT chief financial officer. We believe this experience will contribute
significantly to our ability to provide an attractive risk-adjusted return to
our stockholders.
OUR HISTORY
NYMC was formed in 1998 as the result of a combination of New York Mortgage
Corp. and First Security Financial Services, Inc. Prior to 1998, New York
Mortgage Corp. was a retail mortgage brokerage founded in 1991 by Steven B.
Schnall. Prior to 1998, First Security Financial Services was a wholesale
mortgage banker founded in 1989 by Joseph V. Fierro. Since its inception in
1998, NYMC has achieved substantial year-over-year growth in loan volume,
revenues and profitability. New York Mortgage Trust, Inc. was formed as a
Maryland corporation in September 2003.
4
We intend to make cash distributions to Steven B. Schnall and Joseph V.
Fierro and their respective affiliates, who together previously comprised all of
the members of NYMC, within 30 days following completion of our initial public
offering in an aggregate amount equal to the estimated paid-in equity and
retained earnings of NYMC as of the closing date of our initial public offering.
The cash distribution will be made to the former members of NYMC pro rata in
accordance with their respective ownership interests immediately prior to
completion of our initial public offering. We anticipate that this cash
distribution will equal approximately $3,500,000 in the aggregate. The actual
amount of the distributions may be more or less than this amount depending on
NYMC's actual performance through closing, but it will not exceed $4,500,000.
OUR ACQUISITION OF NYMC
Upon completion of our initial public offering, Messrs. Schnall and Fierro
and their affiliates contributed all of the outstanding ownership interests in
NYMC to us and NYMC became a wholly-owned taxable REIT subsidiary of ours. As
consideration for the contribution of their ownership interests in NYMC to us,
we issued Messrs. Schnall and Fierro and their affiliates a total of 2,750,000
shares of our common stock (70% of which, or 1,925,000 shares, was issued to Mr.
Schnall and his affiliate and 30% of which, or 825,000 shares, was issued to Mr.
Fierro and his affiliate), of which 100,000 shares in the aggregate are held in
escrow through December 31, 2004 and are available to satisfy any
indemnification claims we may have against the contributors of the NYMC
membership interests under the contribution agreement between us and the
contributors during the escrow period for losses we incur as a result of
defaults on any of the residential mortgage loans originated by NYMC and closed
prior to the completion of our initial public offering. The shares of common
stock we issued to Messrs. Schnall and Fierro and their affiliates in exchange
for their contributed ownership interests in NYMC have an aggregate value of
$24,750,000 based on the $9.00 per share initial public offering price.
OUR REIT STATUS
As a REIT, we generally will not be subject to federal income tax on REIT
taxable income that we distribute to our stockholders, but taxable income
generated by NYMC, our taxable REIT subsidiary, will be subject to regular
corporate income tax. Under the Internal Revenue Code, REITs are subject to
numerous organizational and operational requirements, including a requirement
that they distribute at least 90% of their REIT taxable income to their
stockholders. If we fail to qualify for taxation as a REIT in any year, our
income will be taxed at regular corporate rates, and we may be precluded from
qualifying for treatment as a REIT for the four taxable years following the year
in which we failed to qualify. Even if we qualify as a REIT for federal income
tax purposes, we may still be subject to state and local taxes on our income and
property and to federal income and excise taxes on our undistributed income.
DIVIDEND POLICY AND DISTRIBUTIONS
In order to qualify as a REIT, we must distribute to our stockholders at
least 90% of our REIT taxable income each year. To the extent that we distribute
at least 90%, but less than 100% of our REIT taxable income in a taxable year,
we will be subject to federal corporate income tax on our undistributed income.
In addition, if we fail to distribute an amount during each year equal to the
sum of 85% of our REIT ordinary income and 95% of our capital gain net income
for that year and any undistributed income from prior periods, we will be
subject to a 4% nondeductible excise tax on the excess of the required
distribution over the amount we actually distributed. Distributions to our
stockholders will be treated as dividends to the extent that we have current or
accumulated earnings and profits. We intend to make regular quarterly
distributions to our stockholders so that we distribute each year all or
substantially all of our REIT taxable income so as to avoid paying corporate
income tax and excise tax on our earnings and to qualify for the tax benefits
accorded to REITs under the Internal Revenue Code. Our REIT taxable income may
exceed our cash available for distribution and the requirement to distribute a
substantial portion of our net taxable income could cause us to:
- sell assets in adverse market conditions;
5
- borrow on unfavorable terms; or
- distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt
in order to comply with the REIT distribution requirements.
We expect to pay our first dividend following the close of our third
quarter ending September 30, 2004.
Our ability to pay dividends to you will depend primarily on our receipt of
interest and principal payments from our loans and mortgage-backed securities
and any distributions we receive from NYMC. As a taxable REIT subsidiary, NYMC
will be subject to regular corporate income tax on the taxable income that it
generates. We may cause NYMC to retain after-tax earnings or distribute all or a
portion of its after-tax earnings to us to the extent allowable under the REIT
provisions of the Internal Revenue Code. If NYMC distributes any of its
after-tax earnings to us, we will include that distributed amount in the
dividends we pay to our stockholders and, for domestic non-corporate taxpayers,
that portion of our dividends, unlike distributions of our REIT taxable income,
generally will be eligible to be taxed at the current 15% maximum marginal rate
for regular corporate dividends. We also have the authority to make a
distribution of capital or of assets. All distributions, however, must be
authorized by our board of directors.
If we are unable to successfully execute our business plan, we may not have
cash available to pay dividends.
STOCK EXCHANGE LISTING
Our common stock is listed on the New York Stock Exchange under the symbol
"NTR."
RESTRICTIONS ON OWNERSHIP OF OUR COMMON STOCK
In order to assist us in maintaining our qualification as a REIT under the
Internal Revenue Code, our charter contains restrictions on the number of shares
of our capital stock that a person may own. No person may acquire or hold,
directly or indirectly, in excess of 9.4% in value of the outstanding shares of
our capital stock other than Mr. Schnall, who will be permitted to hold up to
12.0% of our outstanding common stock. These ownership limits could delay, defer
or prevent a transaction or a change in control that might involve a premium
price for our common stock or otherwise be in your best interest. Our board of
directors may, in its sole discretion, waive the ownership limit with respect to
a particular stockholder if it is presented with evidence satisfactory to it
that the ownership of that stockholder will not then or in the future jeopardize
our status as a REIT. Our board of directors has granted a temporary waiver to
Mr. Schnall to allow him to own up to 12.7% of our common stock through June 30,
2005. Our charter also prohibits certain cooperatives, governmental entities and
tax-exempt organizations that are exempt from the unrelated business income tax
from owning our stock because a tax could be imposed on us if our shares are
held by such entities and we own real estate mortgage investment conduit, or
REMIC, residual interests or, although the law is unclear on the matter, an
interest in a taxable mortgage pool.
6
RISK FACTORS
You should carefully consider the risks described below, together with all
of the other information included in this prospectus, before you decide to
purchase our securities. Investing in our common stock involves a high degree of
risk. Any of the following factors could harm our business and future results of
operations and could result in a partial or complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
WE MAY EXPERIENCE A DECLINE IN THE MARKET VALUE OF OUR ASSETS.
The market value of the interest-bearing assets we plan to acquire, most
notably mortgage-backed securities and originated or purchased residential
mortgage loans and any related hedging instruments, may move inversely with
changes in interest rates. We anticipate that increases in interest rates will
tend to decrease our net income. A decline in the market value of our
investments may limit our ability to borrow or result in lenders requiring
additional collateral or initiating margin calls under our reverse repurchase
agreements. As a result, we could be required to sell some of our investments
under adverse market conditions in order to maintain liquidity. If such sales
are made at prices lower than the amortized costs of such investments, we will
incur losses. A default under our reverse repurchase agreements could also
result in the liquidation of the underlying investments used as collateral and
result in a loss equal to the difference between the value of the collateral and
the amount owed under our reverse repurchase agreements.
A DECREASE IN THE DEMAND FOR MORTGAGE LOANS DUE TO A PERIOD OF RISING INTEREST
RATES MAY ADVERSELY AFFECT OUR EARNINGS, WHICH COULD NEGATIVELY AFFECT THE
CASH AVAILABLE FOR DISTRIBUTION TO YOU.
Rising interest rates generally reduce the demand for consumer credit,
including mortgage loans. Interest rates have been at relatively low levels in
recent years. The Mortgage Bankers Association of America has predicted that
residential mortgage loan originations will decrease in 2004 and 2005 primarily
due to an anticipated decrease in refinancings caused by rising interest rates.
In a period of rising interest rates, we expect to originate and sell fewer
loans. Accordingly, a period of rising interest rates would adversely affect our
business, revenues and results of operations, which could adversely affect the
amount of cash available for distribution to you.
OUR SUCCESS WILL PARTIALLY DEPEND ON OUR ABILITY TO ORIGINATE PRIME
ADJUSTABLE-RATE AND HYBRID MORTGAGE LOANS FOR OUR PORTFOLIO.
We intend to build a portfolio of prime adjustable-rate and hybrid mortgage
loans that will, over time, be comprised primarily of mortgage loans that we
originate through NYMC. This source of mortgage loans is a key part of our
strategy. During the three month period ended March 31, 2004, approximately
42.5% of our mortgage loan originations, as measured by principal balance, were
adjustable-rate and hybrid loans of a type that will be eligible to be included
in our portfolio, although a portion of these loans would not have met our
investment criteria for retention in our portfolio.
If NYMC is not able to originate prime adjustable-rate and hybrid mortgage
loans that meet our investment criteria in the volume we expect, the time
required for, and the cost associated with, building our portfolio may be
greater than expected, which could have an adverse effect on our results of
operations and our ability to make distributions to you.
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO OBTAIN FINANCING TO LEVERAGE OUR
EQUITY.
If we are limited in our ability to leverage our assets, the returns on our
portfolio may be harmed. A key element of our strategy is our intention to use
leverage to increase the size of our portfolio in an attempt to enhance our
returns. We intend to leverage our equity eight to 12 times through the use of
reverse repurchase agreements and other borrowings. Our reverse repurchase
agreements are not currently committed facilities, meaning that the
counterparties to these agreements may at any time choose to restrict or
eliminate our future access to the facilities and we have no other committed
credit facilities
7
through which we may leverage our equity. If we are unable to leverage our
equity to the extent we currently anticipate, the returns on our portfolio could
be diminished, which may limit or eliminate our ability to pay dividends to you.
WE INTEND TO LEVERAGE OUR EQUITY EIGHT TO 12 TIMES, WHICH WILL EXACERBATE ANY
LOSSES WE INCUR ON OUR PLANNED INVESTMENTS AND MAY REDUCE CASH AVAILABLE FOR
DISTRIBUTION TO YOU.
We intend to leverage our equity through borrowings, generally through the
use of reverse repurchase agreements, bank credit facilities, securitizations,
including the issuance of collateralized debt securities, which are obligations
issued in multiple classes secured by an underlying portfolio of securities, and
other borrowings. The amount of leverage we incur will vary depending on our
ability to obtain credit facilities and our lenders' estimates of the value of
our portfolio's cash flow. The return on our investments and cash available for
distribution to you may be reduced to the extent that changes in market
conditions cause the cost of our financing to increase relative to the income
that can be derived from the assets we hold in our portfolio. Further, the
leverage on our equity may exacerbate any losses we incur.
Our debt service payments will reduce the net income available for
distributions to you. We may not be able to meet our debt service obligations
and, to the extent that we cannot, we risk the loss of some or all of our assets
to foreclosure or sale to satisfy our debt obligations. We intend to use
leverage through repurchase agreements. A decrease in the value of the assets
may lead to margin calls which we will have to satisfy. We may not have the
funds available to satisfy any such margin calls. We have a target overall
leverage amount of eight to 12 times our equity, but there is no limitation on
our leverage ratio or on the aggregate amount of our borrowings.
THE TERMS OF OUR WAREHOUSE CREDIT FACILITIES AND REVERSE REPURCHASE AGREEMENTS
RESTRICT OUR ABILITY TO PAY DIVIDENDS IN SITUATIONS WHERE WE ARE NOT CURRENTLY
IN COMPLIANCE WITH CERTAIN FINANCIAL AND OTHER COVENANTS.
The terms of our warehouse credit facilities and reverse repurchase
agreements contain a number of restrictive financial and other covenants that,
among other things, require us to maintain a minimum ratio of total liabilities
to tangible net worth, minimum levels of tangible net worth, liquidity and
stockholders' equity and maximum leverage ratios, as well as to comply with
applicable regulatory and other requirements. These facilities and agreements
may restrict our ability to pay any dividends to you if we are not in compliance
with the covenants.
OUR MORTGAGE LOAN ORIGINATIONS HISTORICALLY HAVE BEEN CONCENTRATED IN SPECIFIC
GEOGRAPHIC REGIONS AND ANY ADVERSE MARKET OR ECONOMIC CONDITIONS IN THOSE
REGIONS MAY HAVE A DISPROPORTIONATELY ADVERSE EFFECT ON THE ABILITY OF OUR
CUSTOMERS TO MAKE THEIR LOAN PAYMENTS.
Our mortgage loan originations have been and may in the future be
concentrated in specific geographic regions. For example, for the three month
period ended March 31, 2004, approximately 86.5% of our residential mortgage
loans, as measured by principal balance, were originated with borrowers located
in New York, New Jersey and Connecticut. Adverse market or economic conditions
in a particular region may disproportionately increase the risk that borrowers
in that region are unable to make their mortgage payments. In addition, the
market value of the real estate securing those mortgage loans could be adversely
affected by adverse market and economic conditions in that region. Any sustained
period of increased payment delinquencies, foreclosures or losses caused by
adverse market or economic conditions in that geographic region could adversely
affect both our net interest income from loans in our portfolio as well as our
ability to originate, sell and securitize loans, which would significantly harm
our revenues, results of operations, financial condition, business prospects and
our ability to make distributions to you.
FAILURE TO SUCCEED IN NEW GEOGRAPHIC MARKETS MAY LIMIT OUR GROWTH AND COULD
ADVERSELY AFFECT OUR PROFITABILITY.
As of March 31, 2004, NYMC operated 24 retail lending offices in 12
different states and was licensed or authorized to do business in 38 different
states. However, as of March 31, 2004, approximately 86.5% of
8
NYMC's residential mortgage loans, as measured by principal balance, were
originated in just three states, New York, New Jersey and Connecticut. NYMC has
historically, and we will continue to, concentrate on retail, referral-based,
mortgage loans to borrowers with strong credit profiles. As part of our business
plan, we intend to expand our loan origination network and business in
geographic areas in which we may have little or no prior operating experience,
in which our referral-based loan origination network may be insufficiently
developed and in which it may be difficult to recruit experienced loan officers.
Accordingly, we cannot assure you that we will be successful in expanding our
loan origination network in these geographic areas, the failure of which could
significantly limit our growth and cause us to incur costs greater than those
incurred in other areas, which may adversely affect our profitability.
INTEREST RATE FLUCTUATIONS MAY CAUSE LOSSES.
We expect our primary interest rate exposure to relate to our mortgage
loans, mortgage-backed securities and variable-rate debt, as well as the
interest rate swaps and caps that we intend to utilize for risk management
purposes. Changes in interest rates may affect our net interest income, which is
the difference between the interest income we earn on our interest-earning
investments and the interest expense we incur in financing these investments.
Changes in the level of interest rates also can affect our ability to originate
or acquire mortgage loans or mortgage-backed securities, the value of our assets
and our ability to realize gains from the sale of such assets. In a period of
rising interest rates, our interest expense could increase while the interest we
earn on our assets would not change as rapidly. This would adversely affect our
profitability.
Our operating results will depend in large part on differences between
income received from our assets, net of credit losses, and our financing costs.
We anticipate that in most cases, for any period during which our assets are not
match-funded, the income from such assets will adjust more slowly to interest
rate fluctuations than the cost of our borrowings. Consequently, changes in
interest rates, particularly short-term interest rates, may significantly
influence our net income. We anticipate that increases in interest rates will
tend to decrease our net income. Interest rate fluctuations resulting in our
interest expense exceeding our interest income would result in operating losses
for us and may limit or eliminate our ability to make distributions to you.
A PROLONGED ECONOMIC SLOWDOWN, A LENGTHY OR SEVERE RECESSION OR DECLINING REAL
ESTATE VALUES COULD HARM OUR OPERATIONS.
We believe the risks associated with our business will be more acute during
periods of economic slowdown or recession if these periods are accompanied by
declining real estate values. Declining real estate values will likely reduce
our level of new mortgage loan originations, since borrowers often use increases
in the value of their existing home to support the refinancing of their existing
mortgage loans or the purchase of new homes at higher levels of borrowings.
Further, declining real estate values significantly increase the likelihood that
we will incur losses on our loans in the event of default. Any sustained period
of increased payment delinquencies, foreclosures or losses could adversely
affect both our net interest income from loans in our portfolio as well as our
ability to originate, sell and securitize loans, which would significantly harm
our revenues, results of operations, financial condition, business prospects and
our ability to make distributions to you.
WE HAVE NO OPERATING HISTORY WITH RESPECT TO SECURITIZING MORTGAGE LOANS OR
MANAGING A PORTFOLIO OF MORTGAGE SECURITIES, WHICH LIMITS YOUR ABILITY TO
EVALUATE A KEY COMPONENT OF OUR BUSINESS STRATEGY AND OUR GROWTH PROSPECTS AND
INCREASES YOUR INVESTMENT RISK.
Historically, NYMC's business has consisted of the origination and sale of
mortgage loans of all types, with a particular focus on prime adjustable- and
fixed-rate, first lien, residential purchase mortgage loans. In the future, we
intend to build a leveraged portfolio of residential mortgage loans comprised
largely of prime adjustable-rate mortgage loans that we originate, including
hybrid adjustable-rate loans that have an initial fixed-rate period, while
continuing, generally, to sell the fixed-rate loans that we originate to third
parties. In addition, we intend to invest in mortgage-backed securities on a
leveraged basis. Although certain members of our senior management team have
past experience in mortgage banking and investing in and managing portfolios of
residential mortgage loans and mortgage-backed securities, we have no prior
9
history with respect to securitizing mortgage loans or managing a portfolio of
mortgage securities. Our ability to complete securitizations in the future on
favorable terms will depend upon a number of factors, including the experience
and ability of our management team, conditions in the securities markets
generally, conditions in the mortgage-backed securities market specifically, the
performance of our portfolio of securitized loans and our ability to obtain
leverage. In addition, poor performance of any pool of loans we do securitize
could increase the expense of any subsequent securitization we bring to market.
Accordingly, a decline in the securitization market or a change in the market's
demand for our securities could have a material adverse effect on our results of
operations, financial condition and business prospects. If we are unable to
securitize efficiently the adjustable-rate and hybrid mortgage loans that we
originate and that we may invest in from time to time, then our revenues for the
duration of our investment in those loans would decline, which would lower our
earnings for the time the loans remain in our portfolio. We cannot assure you
that we will be able to complete loan securitizations in the future on favorable
terms, or at all.
LOAN PREPAYMENT RATES MAY INCREASE, ADVERSELY AFFECTING YIELDS ON OUR PLANNED
INVESTMENTS.
The value of the assets we plan to acquire may be affected by prepayment
rates on mortgage loans. Prepayment rates on mortgage loans are influenced by
changes in current interest rates and a variety of economic, geographic and
other factors beyond our control, and consequently, such prepayment rates cannot
be predicted with certainty. In periods of declining mortgage loan interest
rates, prepayments on mortgage loans generally increase. If general interest
rates decline as well, the proceeds of such prepayments received during such
periods are likely to be reinvested by us in assets with lower yields than the
yields on the assets that were prepaid. In addition, the market value of any
mortgage assets may, because of the risk of prepayment, benefit less than other
fixed-income securities from declining interest rates. Conversely, in periods of
rising interest rates, prepayments on mortgage loans generally decrease, in
which case we would not have the prepayment proceeds available to invest in
assets with higher yields. Under certain interest rate and prepayment scenarios,
we may fail to recoup fully our cost of acquisition of certain investments.
THE MORTGAGE LOANS WE MAY INVEST IN AND THE MORTGAGE LOANS UNDERLYING THE
MORTGAGE-BACKED SECURITIES WE MAY INVEST IN ARE SUBJECT TO RISKS OF
DELINQUENCY, FORECLOSURE AND LOSS, WHICH COULD RESULT IN LOSSES TO US.
Residential mortgage loans are secured by residential properties and are
subject to risks of delinquency and foreclosure, and risks of loss. The ability
of a borrower to repay a loan secured by residential property typically is
dependent primarily upon the income or assets of the borrower. In addition, the
ability of the borrower to repay its mortgage loan may be affected by, among
other things: property location and condition, competition and demand for
comparable properties, changes in zoning laws for the property or its
surrounding area, environmental contamination at the property, the occurrence of
any uninsured casualty at the property, changes in national, regional or local
economic conditions, declines in regional or local real estate values, increases
in interest rates, real estate tax rates, changes in governmental rules,
regulations and fiscal policies, including environmental legislation, acts of
God, terrorism, social unrest and civil disturbances.
In the event of any default under a mortgage loan held directly by us, we
will bear a risk of loss of principal to the extent of any deficiency between
the value of the collateral that we can realize upon foreclosure and sale and
the principal and accrued interest of the mortgage loan, which could have a
material adverse effect on our cash flow from operations and could limit the
amount we have available for distribution to you. In the event of the bankruptcy
of a mortgage loan borrower, the mortgage loan to such borrower will be deemed
to be secured only to the extent of the value of the underlying collateral at
the time of bankruptcy (as determined by the bankruptcy court), and the lien
securing the mortgage loan will be subject to the avoidance powers of the
bankruptcy trustee or debtor-in-possession to the extent the lien is
unenforceable under state law. Foreclosure of a mortgage loan can be an
expensive and lengthy process that can have a substantial negative effect on our
originally anticipated return on the foreclosed mortgage loan. Residential
mortgage-backed securities evidence interests in or are secured by pools of
residential
10
mortgage loans. Accordingly, the mortgage-backed securities we plan to invest in
are subject to all of the risks of the underlying mortgage loans.
OUR SUCCESS WILL DEPEND ON OUR SELECTION OF INVESTMENTS AND A DELAY IN
INVESTING FUNDS MAY CAUSE A DELAY IN OUR ABILITY TO DELIVER RETURNS TO
INVESTORS.
We have not yet identified an initial portfolio of the residential
mortgage-backed securities to be purchased with the available net proceeds of
our initial public offering. You will have no opportunity to evaluate the terms
of investments or other economic or financial data concerning our investments
that are not described in this prospectus. You must rely entirely on our future
investment selection.
WE WERE INCORPORATED IN SEPTEMBER 2003 AND HAVE A LIMITED OPERATING HISTORY.
NYMC, our mortgage banking operation subsidiary, has a substantial
operating history, but we were not formed until September 2003 and have had
limited operations since the closing of our initial public offering on June 29,
2004. We are relying on capital raised in our initial public offering to fund
our initial investments in retained mortgage loans and residential
mortgage-backed securities. As a result, we have no history managing a portfolio
of mortgage loans or mortgage-backed securities for you to determine the
likelihood of our achieving our investment objectives. The results of our
operations will depend on many factors, including:
- the availability of opportunities for the acquisition of assets;
- our ability to originate prime adjustable-rate and hybrid mortgage loans
for our portfolio;
- the level and volatility of interest rates;
- readily accessible short- and long-term funding;
- conditions in the financial markets; and
- general economic conditions.
Our failure to invest the available net proceeds of our initial public offering
in loans and securities meeting our investment criteria could diminish our
returns and have an adverse effect on our ability to make distributions to you.
WE RELY ON KEY PERSONNEL WITH LONG-STANDING BUSINESS RELATIONSHIPS, THE LOSS
OF ANY OF WHOM COULD IMPAIR OUR ABILITY TO SUCCESSFULLY OPERATE.
Our future success depends, to a significant extent, on the continued
services of Steven B. Schnall, our chairman of the board and co-chief executive
officer, David A. Akre, our co-chief executive officer, Raymond A.
Redlingshafer, Jr., our president and chief investment officer and other key
members of our senior management team. In particular, the extent and nature of
the relationships that these individuals have developed with financial
institutions and existing and prospective mortgage loan origination channels are
critically important to the success of our business. Although we have employment
agreements with Mr. Schnall and other key executives, these executives may not
remain employed with us. We do not maintain key person life insurance on any of
our officers. The loss of services of one or more members of our senior
management team could harm our business and our prospects.
THE VALUATION OF NYMC WAS DETERMINED BETWEEN MANAGEMENT AND THE UNDERWRITERS.
The valuation of NYMC, and, as a result, the number of shares of our common
stock issued and cash, if any, paid to the principals of NYMC, Messrs. Schnall
and Fierro, as consideration for our acquisition of NYMC, was determined jointly
by Messrs. Schnall and Fierro and the underwriters. No third-party valuations or
appraisals were obtained in determining this valuation. As a result, the
valuation of NYMC does not represent an arms-length transaction, and may not be
indicative of NYMC's actual fair market value.
11
OUR DIRECTORS WILL APPROVE BROAD INVESTMENT GUIDELINES FOR US AND WILL NOT
APPROVE EACH INVESTMENT WE MAKE.
We will be authorized by our board of directors to invest in accordance
with broad investment guidelines. Our board of directors will periodically
review our investment guidelines and our portfolio. However, our board of
directors will not review each proposed investment. In addition, in conducting
periodic reviews, our directors will rely primarily on information provided to
them by our executive officers. Furthermore, transactions entered into by us may
be difficult or impossible to unwind by the time they are reviewed by our
directors. We will have substantial discretion within the broad investment
guidelines in determining the types of assets we may decide are proper
investments for us.
WE MAY CHANGE OUR INVESTMENT STRATEGY WITHOUT YOUR CONSENT, WHICH MAY RESULT
IN OUR INVESTING IN RISKIER INVESTMENTS THAN OUR CURRENTLY PLANNED
INVESTMENTS.
We may change our investment strategy at any time without the consent of
our stockholders, which could result in our making investments that are
different from, and possibly riskier than, the investments described in this
prospectus. A change in our investment strategy may increase our exposure to,
among other things, credit risk, interest rate risk and real estate market
fluctuations.
OUR HEDGING TRANSACTIONS MAY LIMIT OUR GAINS OR RESULT IN LOSSES.
We intend to use derivatives, primarily interest rate swaps and caps, to
hedge our liabilities and this has certain risks, including the risk that losses
on a hedging transaction will reduce the amount of cash available for
distribution to you and that such losses may exceed the amount invested in such
instruments. Our board of directors will adopt a general policy with respect to
the use of derivatives, which will generally allow us to use derivatives when we
deem appropriate for risk management purposes, but does not set forth specific
guidelines. To the extent consistent with maintaining our status as a REIT, we
may use derivatives, including interest rate swaps and caps, options, term
repurchase contracts, forward contracts and futures contracts, in our risk
management strategy to limit the effects of changes in interest rates on our
operations. However, a hedge may not be effective in eliminating the risks
inherent in any particular position. Our profitability may be adversely affected
during any period as a result of the use of derivatives in a hedging
transaction.
WE MAY BE REQUIRED TO REPURCHASE MORTGAGE LOANS THAT WE HAVE SOLD OR TO
INDEMNIFY HOLDERS OF OUR MORTGAGE-BACKED SECURITIES.
If any of the mortgage loans that we originate and sell, or that we pledge
to secure mortgage-backed securities that we issue in our securitizations, do
not comply with the representations and warranties that we make about the
characteristics of the loans, the borrowers and the properties securing the
loans, we may be required to repurchase those loans in the case of the loans
that we have sold, or replace them with substitute loans or cash in the case of
securitized loans. If this occurs, we may have to bear any associated losses
directly. In addition, in the case of loans that we have sold, we may be
required to indemnify the purchasers of such loans for losses or expenses
incurred as a result of a breach of a representation or warranty made by us.
Repurchased loans typically require an allocation of working capital to carry on
our books, and our ability to borrow against such assets is limited, which could
limit the amount by which we can leverage our equity. Any significant
repurchases or indemnification payments could significantly harm our cash flow
and results of operations and limit our ability to make distributions to you.
WE MAY BE SUBJECT TO LOSSES DUE TO FRAUDULENT AND NEGLIGENT ACTS ON THE PART
OF LOAN APPLICANTS, MORTGAGE BROKERS, OTHER VENDORS AND OUR EMPLOYEES.
When we originate mortgage loans, we rely upon information supplied by
borrowers and other third parties, including information contained in the
applicant's loan application, property appraisal reports, title information and
employment and income documentation. If any of this information is
misrepresented or falsified and if we do not discover it prior to funding a
loan, the actual value of such loan may be
12
significantly lower than anticipated. As a practical matter, we generally bear
the risk of loss associated with a misrepresentation whether it is made by the
loan applicant, the mortgage broker, another third party or one of our
employees. A loan subject to a material misrepresentation is typically
unsaleable or is subject to repurchase or substitution if it is sold or
securitized prior to detection of the misrepresentation. Although we may have
rights against persons and entities who made or knew about the
misrepresentation, those persons and entities may be difficult to locate, and it
is often difficult to collect any monetary losses from them that we may have
suffered.
In addition, for the three month period ended March 31, 2004, with respect
to approximately 37.0% of the mortgage loans we originated, as measured by
principal balance, we received less than full documentation of the borrower's
income and/or assets. In those cases, we base our credit decision on the
borrower's credit score and credit history, the value of the property securing
the loan and the effect of the loan on the borrower's debt service requirements.
We believe that there is a higher risk of default on loans where there is less
than full documentation of the borrower's income and/or assets.
OUR PAST OPERATING RESULTS HAVE OCCURRED DURING A PERIOD OF RAPID GROWTH FOR
THE RESIDENTIAL MORTGAGE INDUSTRY AND PRIOR TO THE IMPLEMENTATION OF OUR NEW
BUSINESS STRATEGY AND, AS A RESULT, MAY NOT BE INDICATIVE OF OUR FUTURE
OPERATING RESULTS.
NYMC's growth rate has benefited from low interest rates and a long period
of economic growth. NYMC's net income grew by more than 266.8% between the
beginning of 2000 and the end of 2002 and by 360.5% for the year ended December
31, 2003 as compared to the same period in 2002. We do not know whether these
favorable conditions will continue. Indeed, the MBAA projects that overall loan
originations will decline in 2004 compared to 2003 and will decline further in
2005. These projected declines in overall volume of closed loan originations are
likely to have a negative affect on our loan origination volume and net income.
Accordingly, NYMC's historical performance may not be indicative of results in a
rising interest rate environment, and our results of operations may be
materially adversely affected as interest rates rise. In addition, NYMC's recent
and rapid growth may distort some of its ratios and financial statistics and our
change in business strategy to include the development of a portfolio of
mortgage loans and mortgage-backed securities will make period-to-period
comparisons difficult. In light of this growth and change in business strategy,
NYMC's historical performance and operating and origination data may be of
little relevance in predicting our future performance.
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR FINANCIAL PERFORMANCE COULD BE
HARMED.
In recent years, NYMC has experienced rapid growth which has placed
pressure on NYMC's management, administrative, operational and financial
infrastructure. If we experience rapid growth similar to NYMC, we may experience
those same pressures. As of May 1, 2004, NYMC had grown to employ approximately
460 people, many of whom have limited experience with NYMC and a limited
understanding of our systems and controls. An increase in the size of our
operations may make it more difficult for us to ensure that we originate quality
loans. We will need to attract and hire additional loan officers and management
personnel in a competitive hiring environment to expand our business and, at the
same time, continue to upgrade and expand our financial, operational and
managerial systems and controls. We cannot assure you that we will be able to
meet our capital needs, expand our systems effectively, allocate our human
resources optimally nor identify and hire qualified employees. The failure to
manage our growth effectively may significantly harm our business, financial
condition, liquidity and profitability.
WE FACE INTENSE COMPETITION THAT COULD ADVERSELY AFFECT OUR MARKET SHARE AND
OUR REVENUES.
We face intense competition from finance and mortgage banking companies,
other mortgage REITs, Internet-based lending companies where entry barriers are
relatively low, and, to a growing extent, from traditional bank and thrift
lenders that have increased their participation in the mortgage industry. As we
seek to expand our loan origination business further and expand our business
strategy to build a portfolio of mortgage loans and mortgage-backed securities,
we will face a significant number of additional competitors, many of whom will
be well established in the markets we seek to penetrate. Some of our
13
competitors are much larger than we are, have better name recognition than we do
and have far greater financial and other resources than we do.
We anticipate that the majority of our competition will be in the mortgage
industry. In addition to mortgage banking companies, Internet-based lending
companies, traditional banks and thrift lenders, the government sponsored
entities Fannie Mae and Freddie Mac are also expanding their participation in
the mortgage industry. While the government sponsored entities presently do not
have the legal authority to originate mortgage loans, they do have the authority
to buy loans. If as a result of their purchasing practices, these government
sponsored entities experience significantly higher-than-expected losses, the
experience could adversely affect overall investor perception of the mortgage
industry.
Competition in the industry can take many forms, including lower interest
rates and fees, less stringent underwriting standards, convenience in obtaining
a loan, customer service, amount and term of a loan and marketing and
distribution channels. The need to maintain mortgage loan volume in this
competitive environment creates a risk of price and quality competition in the
mortgage industry. Price competition could cause us to lower the interest rates
that we charge borrowers, which could lower the value of our loans we sell or
retain in our portfolio. If our competitors adopt less stringent underwriting
standards, we will be pressured to do so as well. If we do not relax
underwriting standards in response to our competitors, we may lose market share.
If we relax our underwriting standards in response to price competition, we may
be exposed to higher credit risk without receiving higher pricing to compensate
for the higher risk. Any increase in these pricing and underwriting pressures
could reduce the volume of our loan originations and sales and significantly
harm our business, financial condition, liquidity and results of operations.
WE MAY COMPLETE STRATEGIC ACQUISITIONS OF OTHER MORTGAGE BANKING BUSINESSES OR
RELATED ASSETS AT A PURCHASE PRICE THAT EXCEEDS THEIR FAIR VALUE, AND EVEN IF
WE COMPLETE THESE ACQUISITIONS AT A FAIR PRICE, WE MAY NOT BE SUCCESSFUL IN
INTEGRATING ANY ACQUIRED BUSINESS WITH OURS EFFICIENTLY.
We intend to selectively pursue strategic acquisitions in the mortgage
banking business as part of our business strategy to grow our business. We may
overvalue the business or assets we are seeking to acquire and, as a result, we
may pay a purchase price that exceeds the fair value of the acquired business or
assets. In addition, even if we pay a fair price for any acquired business, we
may not be able to integrate the acquired business with our own efficiently.
Finally, we may incur unforeseen liabilities in connection with any acquisition
we undertake. Any of the foregoing risks could have a material adverse effect on
our financial condition or results of operations and our ability to make
distributions to you.
THE SUCCESS AND GROWTH OF OUR MORTGAGE LOAN ORIGINATION BUSINESS WILL DEPEND
UPON OUR ABILITY TO ADAPT TO AND IMPLEMENT TECHNOLOGICAL CHANGES.
Our mortgage loan origination business is dependent upon our ability to
interface effectively with our borrowers and other third parties and to process
loan applications efficiently. The origination process is becoming more
dependent upon technological advancement, such as the ability to process
applications over the Internet, interface with borrowers and other third parties
through electronic means and underwrite loan applications using specialized
software. Implementing new technology and maintaining the efficiency of the
current technology used in our operations may require significant capital
expenditures. As these requirements increase in the future, we will have to
develop these technological capabilities fully to remain competitive or our
business will be significantly harmed.
AN INTERRUPTION IN SERVICE OR BREACH IN SECURITY OF OUR INFORMATION SYSTEMS
COULD IMPAIR OUR ABILITY TO ORIGINATE LOANS ON A TIMELY BASIS AND MAY RESULT
IN LOST BUSINESS.
We rely heavily upon communications and information systems to conduct our
business. Any failure or interruption in service or breach in security of our
information systems or the third-party information systems on which we rely
could cause underwriting or other delays and could result in fewer loan
applications being received and processed and reduced efficiency in loan
servicing. We cannot assure you that no material failures or interruptions will
occur or, if they do occur, that we or the third parties on
14
whom we rely will adequately address them. The occurrence of any failures or
interruptions could significantly harm our business.
OUR OPERATIONS ARE SUBJECT TO A BODY OF COMPLEX LAWS AND REGULATIONS AT THE
FEDERAL, STATE AND LOCAL LEVELS.
We must comply with the laws, rules and regulations, as well as judicial
and administrative decisions, of all jurisdictions in which we originate
mortgage loans, as well as an extensive body of federal laws, rules and
regulations. The volume of new or modified laws, rules and regulations
applicable to our business has increased in recent years and individual
municipalities have also begun to enact laws, rules and regulations that
restrict or otherwise affect loan origination activities, and in some cases loan
servicing activities. The laws, rules and regulations of each of these
jurisdictions are different, complex and, in some cases, in direct conflict with
each other. It may be more difficult to identify comprehensively, to interpret
accurately, to program properly our information systems and to effectively train
our personnel with respect to all of these laws, rules and regulations, thereby
potentially increasing the risks of non-compliance with these laws, rules and
regulations.
Our failure to comply with these laws, rules and regulations can lead to:
- civil and criminal liability, including potential monetary penalties;
- loss of state licenses or permits required for continued lending and
servicing operations;
- legal defenses causing delay or otherwise adversely affecting our ability
to enforce loans, or giving the borrower the right to rescind or cancel
the loan transaction;
- demands for indemnification or loan repurchases from purchasers of our
loans;
- class action lawsuits; and
- administrative enforcement actions.
Some states in which we operate may impose regulatory requirements on our
officers and directors and parties holding 10%, and in some cases 5%, of our
outstanding shares of common stock. If any officer, director or person holding
10%, and in some cases 5%, or more of our outstanding shares of common stock
fails to meet or refuses to comply with a state's applicable regulatory
requirements for mortgage lending, we could lose our authority to conduct
business in that state. The loss of our authority to conduct business in a
state, for this or any other reason, could have a material adverse effect on our
business, financial condition, liquidity and results of operations.
NEW LEGISLATION MAY RESTRICT OUR ABILITY TO MAKE MORTGAGE LOANS, NEGATIVELY
IMPEDING OUR REVENUES.
In recent years, federal and several state and local laws, rules and
regulations have been adopted, or are under consideration, that are intended to
eliminate certain lending practices, often referred to as "predatory" lending
practices, that are considered to be abusive. Many of these laws, rules and
regulations restrict commonly accepted lending activities and would impose
additional costly and burdensome compliance requirements on us. These laws,
rules and regulations impose certain restrictions on loans on which certain
points and fees or the annual percentage rate, or APR, meets or exceeds
specified thresholds. Some of these restrictions expose a lender to risks of
litigation and regulatory sanction regardless of how carefully a loan is
underwritten. In addition, an increasing number of these laws, rules and
regulations seek to impose liability for violations on the purchasers of
mortgage loans, regardless of whether a purchaser knew of or participated in the
violation. Accordingly, the third parties that buy our loans or provide
financing for our loan originations may not want, and are not contractually
required, to buy or finance loans that do not comply with these laws, rules and
regulations.
The continued enactment of these laws, rules and regulations may prevent us
from making certain loans and may cause us to reduce the APR or the points and
fees we charge on the mortgage loans that we originate. In addition, the
difficulty of managing the compliance risks presented by these laws, rules and
regulations may decrease the availability of warehouse financing and the overall
demand for the purchase of our originated loans. These laws, rules and
regulations have increased, and may continue to
15
increase, our cost of doing business as we have been required, and may continue
to be required, to develop systems and procedures to ensure that we do not
violate any aspect of these new requirements.
In addition, many of these state laws, rules and regulations are not
applicable to the mortgage loan operations of national banks or other financial
institutions chartered by the federal government. Therefore, the mortgage loan
operations of these institutions are at a competitive advantage to us since they
do not have to comply with many of these laws.
Our goal is to avoid originating loans that meet or exceed the APR or
"points and fees" threshold of these laws, rules and regulations except in the
relatively small number of states in which the laws, rules and regulations
relating to APR and "points and fees" thresholds allow, in our judgment, these
loans to be made within our strict legal compliance standards and without undue
risk relative to litigation or to the enforcement of the loan according to its
terms. If we elect to relax our self-imposed restrictions on originating loans
subject to these laws, rules and regulations, we will be subject to greater
risks for actual or perceived non-compliance with the laws, rules and
regulations, including demands for indemnification or loan repurchases from the
parties to whom we broker or sell loans, class action lawsuits, increased
defenses to foreclosure of individual loans in default, individual claims for
significant monetary damages and administrative enforcement actions. Any of the
foregoing could significantly harm our business, cash flow, financial condition,
liquidity and results of operations.
COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002 AND PROPOSED AND RECENTLY
ENACTED CHANGES IN SECURITIES LAWS AND REGULATIONS ARE LIKELY TO INCREASE OUR
COSTS.
The Sarbanes-Oxley Act of 2002 and rules and regulations promulgated by the
Securities and Exchange Commission and the New York Stock Exchange have
increased the scope, complexity and cost of corporate governance, reporting and
disclosure practices. These rules and regulations could also make it more
difficult for us to attract and retain qualified executive officers and members
of our board of directors, particularly to serve on our audit committee.
WE ARE EXPOSED TO ENVIRONMENTAL LIABILITIES WITH RESPECT TO PROPERTIES TO
WHICH WE TAKE TITLE.
In the course of our business, we may foreclose and take title to
residential properties securing our mortgage loans, and, if we do take title, we
could be subject to environmental liabilities with respect to these properties.
In such a circumstance, we may be held liable to a governmental entity or to
third parties for property damage, personal injury, investigation and clean-up
costs incurred by these parties in connection with environmental contamination,
or we may be required to investigate or clean up hazardous or toxic substances
or chemical releases at a property. The costs associated with investigation or
remediation activities could be substantial. If we become subject to significant
environmental liabilities, our business, financial condition, liquidity and
results of operations could be materially and adversely affected.
RISKS RELATED TO THIS OFFERING
OUR COMMON STOCK TRADES IN A LIMITED MARKET WHICH COULD HINDER YOUR ABILITY TO
SELL OUR SHARES.
Although our common stock is listed on the New York Stock Exchange under
the symbol "NTR," our common stock experiences limited trading volume, and many
investors may not be interested in owning our common stock because of the
inability to acquire or sell a substantial block of our common stock at one
time. This illiquidity could have an adverse effect on the market price of our
common stock. In addition, a stockholder may not be able to borrow funds using
our common stock as collateral because lenders may be unwilling to accept the
pledge of securities having such a limited market. A substantial sale of our
common stock could have a material adverse effect on the market price of our
common stock.
16
OUR STOCK PRICE AND TRADING VOLUME MAY BE VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR OUR STOCKHOLDERS.
Even if an active trading market develops for our common stock, the market
price of our common stock may be highly volatile and be subject to wide
fluctuations. In addition, the trading volume in our common stock may fluctuate
and cause significant price variations to occur. Some of the factors that could
negatively affect our share price or result in fluctuations in the price or
trading volume of our common stock include:
- general economic conditions;
- actual or anticipated changes in our future financial performance;
- changes in financial estimates by securities analysts;
- changes in market interest rates;
- competitive developments, including announcements by us or our
competitors of new products or services or significant contracts,
acquisitions, strategic partnerships or capital commitments;
- the operations and stock performance of our competitors;
- developments in the mortgage lending industry or the financial services
sector generally;
- the impact of new state or federal legislation or court decisions
restricting the activities of lenders or suppliers of credit in our
market;
- fluctuations in our quarterly operating results;
- additions or departures of senior management and key personnel;
- actions by institutional stockholders; and
- general market and economic conditions.
If the market price of our common stock declines, you may be unable to
resell your common stock at or above the price you paid for our common stock. We
cannot assure you that the market price of our common stock will not fluctuate
or decline significantly, including a decline below the price you paid for our
common stock, in the future. In addition, the stock market in general can
experience considerable price and volume fluctuations.
WE HAVE NOT ESTABLISHED A MINIMUM DIVIDEND PAYMENT LEVEL AND WE MAY NOT HAVE
THE ABILITY TO PAY DIVIDENDS TO YOU IN THE FUTURE.
We intend to pay quarterly dividends following the close of our third
quarter ending September 30, 2004 and to pay dividends to our stockholders of
all or substantially all of our REIT taxable income in each year. We have not
established a minimum dividend payment level and our ability to pay dividends
may be adversely affected by the risk factors described in this prospectus. In
addition, some of our distributions may include a return of capital. All
dividends will be made at the discretion of our board of directors and will
depend on our earnings, our financial condition, maintenance of our REIT status
and other factors as our board of directors may deem relevant from time to time.
We cannot predict our ability to pay dividends to you in the future.
FUTURE SALES OF SHARES OF OUR COMMON STOCK, INCLUDING SALES BY OUR INSIDERS,
MAY DEPRESS THE PRICE OF OUR COMMON STOCK.
Any sales of a substantial number of shares of our common stock, or the
perception that those sales might occur, may cause the market price of our
common stock to decline. Our directors and our executive officers have agreed
with the underwriters not to sell the common stock they hold earlier than 180
days after June 29, 2004. We are unable to predict whether significant numbers
of shares will be sold in the open market in anticipation of or following a sale
by insiders.
17
OUR BOARD OF DIRECTORS MAY AUTHORIZE THE ISSUANCE OF ADDITIONAL SHARES THAT
MAY CAUSE DILUTION.
Our charter authorizes our board of directors, without your approval, to:
- authorize the issuance of additional common or preferred stock in
connection with future equity offerings, acquisitions of securities or
other assets of companies; and
- classify or reclassify any unissued common stock or preferred stock and
to set the preferences, rights and other terms of the classified or
reclassified shares, including the issuance of shares of preferred stock
that have preference rights over the common stock with respect to
dividends, liquidation, voting and other matters or shares of common
stock having special voting rights.
The issuance of additional shares could be substantially dilutive to your
shares. Additionally, as permitted by the Maryland General Corporation Law, our
charter contains a provision permitting our board of directors, without any
action by our stockholders, to amend our charter to increase the aggregate
number of shares of stock or the number of shares of stock of any class or
series that we have authority to issue.
FUTURE OFFERINGS OF DEBT SECURITIES, WHICH WOULD BE SENIOR TO OUR COMMON STOCK
IN LIQUIDATION, OR EQUITY SECURITIES, WHICH WOULD DILUTE OUR EXISTING
STOCKHOLDERS AND MAY BE SENIOR TO OUR COMMON STOCK FOR THE PURPOSES OF
DISTRIBUTIONS, MAY HARM THE VALUE OF OUR COMMON STOCK.
In the future, we may attempt to increase our capital resources by making
additional offerings of debt or equity securities, including commercial paper,
medium-term notes, senior or subordinated notes, preferred stock or common
stock. If we were to liquidate, holders of our debt securities and shares of
preferred stock and lenders with respect to other borrowings would receive a
distribution of our available assets before the holders of our common stock.
Additional equity offerings by us may dilute your interest in us or reduce the
value of your shares of common stock, or both. Our preferred stock, if issued,
could have a preference on distribution payments that could limit our ability to
make a distribution to you. Because our decision to issue securities in any
future offering will depend on market conditions and other factors beyond our
control, we cannot predict or estimate the amount, timing or nature of our
future offerings. Further, market conditions could require us to accept less
favorable terms for the issuance of our securities in the future. Thus, you will
bear the risk of our future offerings reducing the value of your shares of
common stock and diluting your interest in us.
TAX RISKS RELATED TO OUR BUSINESS AND STRUCTURE
FAILURE TO QUALIFY AS A REIT WOULD ADVERSELY AFFECT OUR OPERATIONS AND ABILITY
TO MAKE DISTRIBUTIONS.
We intend to operate so as to qualify as a REIT for federal income tax
purposes. Although we have not requested, and do not expect to request, a ruling
from the Internal Revenue Service, or IRS, that we qualify as a REIT, we
received at the closing of our initial public offering an opinion of our legal
counsel Hunton & Williams LLP that, based on certain assumptions and
representations, we will so qualify. Investors should be aware, however, that
opinions of counsel are not binding on the IRS or any court. The REIT
qualification opinion only represents the view of Hunton & Williams LLP based on
its review and analysis of existing law, which includes no controlling
precedent. Furthermore, both the validity of the opinion and our qualification
as a REIT will depend on our ability to meet various requirements concerning,
among other things, the ownership of our outstanding stock, the nature of our
assets, the sources of our income, and the amount of our distributions to our
stockholders.
If we fail to qualify as a REIT in any taxable year, we would be subject to
federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. In addition, we generally would be
disqualified from treatment as a REIT for the four taxable years following the
year in which we lost our REIT status. Failing to obtain, or losing, our REIT
status would reduce our net earnings available for investment or distribution to
stockholders because of the additional tax liability, and we would no longer be
required to make distributions to stockholders. We might be required to borrow
funds or liquidate some investments in order to pay the applicable tax.
18
REIT DISTRIBUTION REQUIREMENTS COULD ADVERSELY AFFECT OUR LIQUIDITY.
In order to qualify as a REIT, we generally are required each year to
distribute to our stockholders at least 90% of our REIT taxable income,
excluding any net capital gain. To the extent that we distribute at least 90%,
but less than 100% of our REIT taxable income, we will be subject to corporate
income tax on our undistributed REIT taxable income. In addition, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by us with respect to any calendar year are less than the sum
of (i) 85% of our ordinary REIT income for that year, (ii) 95% of our REIT
capital gain net income for that year, and (iii) 100% of our undistributed REIT
taxable income from prior years.
We intend to make distributions to our stockholders to comply with the 90%
distribution requirement and to avoid corporate income tax and the nondeductible
excise tax. However, differences in timing between the recognition of REIT
taxable income and the actual receipt of cash could require us to sell assets or
to borrow funds on a short-term basis to meet the 90% distribution requirement
and to avoid corporate income tax and the nondeductible excise tax.
Certain of our assets may generate substantial mismatches between REIT
taxable income and available cash. Such assets could include mortgage-backed
securities we hold that have been issued at a discount and require the accrual
of taxable income in advance of the receipt of cash. As a result, our taxable
income may exceed our cash available for distribution and the requirement to
distribute a substantial portion of our net taxable income could cause us to:
- sell assets in adverse market conditions,
- borrow on unfavorable terms or
- distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt
in order to comply with the REIT distribution requirements.
Further, amounts distributed will not be available to fund investment
activities. We expect to fund our investments, initially, by raising capital in
this offering and, subsequently, through borrowings from financial institutions,
along with securitization financings. If we fail to obtain debt or equity
capital in the future, it could limit our ability to grow, which could have a
material adverse effect on the value of our common stock.
RECENT CHANGES IN TAXATION OF CORPORATE DIVIDENDS MAY ADVERSELY AFFECT THE
VALUE OF OUR COMMON STOCK.
The Jobs and Growth Tax Relief Reconciliation Act of 2003, which was signed
into law on May 28, 2003, among other things, generally reduces to 15% the
maximum marginal rate of tax payable by domestic noncorporate taxpayers on
dividends received from a regular subchapter C corporation. This reduced tax
rate, however, generally will not apply to dividends paid to domestic
noncorporate taxpayers by a REIT on its stock, except for certain limited
amounts. Although the earnings of a REIT that are distributed to its
stockholders still generally will be subject to less total federal income
taxation than earnings of a non-REIT subchapter C corporation that are
distributed to its stockholders net of corporate-level income tax, this
legislation could cause domestic noncorporate investors to view the stock of
non-REIT subchapter C corporations as more attractive relative to the stock of a
REIT than was the case prior to the enactment of the legislation, because
dividends from non-REIT subchapter C corporations generally will be taxed at a
lower rate to the investor while dividends from REITs generally will be taxed at
the same rate as the investor's other ordinary income. We cannot predict what
effect, if any, the enactment of this legislation may have on the value of the
stock of REITs in general or on our common stock in particular, either in terms
of absolute price or relative to other investments.
19
RISKS RELATED TO OUR COMPANY, STRUCTURE AND CHANGE IN CONTROL PROVISIONS
MAINTENANCE OF OUR INVESTMENT COMPANY ACT EXEMPTION IMPOSES LIMITS ON OUR
OPERATIONS.
We intend to conduct our operations so as not to become regulated as an
investment company under the Investment Company Act of 1940, as amended. We
believe that there are a number of exemptions under the Investment Company Act
that may be applicable to us. To maintain exemption, the assets that we may
acquire will be limited by the provisions of the Investment Company Act and the
rules and regulations promulgated under the Investment Company Act. In addition,
we could, among other things, be required either (a) to change the manner in
which we conduct our operations to avoid being required to register as an
investment company or (b) to register as an investment company, either of which
could have an adverse effect on our operations and the market price for our
common stock.
THE STOCK OWNERSHIP LIMIT IMPOSED BY OUR CHARTER MAY INHIBIT MARKET ACTIVITY
IN OUR STOCK AND MAY RESTRICT OUR BUSINESS COMBINATION OPPORTUNITIES.
In order for us to maintain our qualification as a REIT under the Internal
Revenue Code, not more than 50% in value of the issued and outstanding shares of
our stock may be owned, actually or constructively, by five or fewer individuals
(as defined in the Internal Revenue Code to include certain entities) at any
time during the last half of each taxable year after our first REIT taxable
year. Attribution rules in the Internal Revenue Code apply to determine if any
individual or entity actually or constructively owns our stock for purposes of
this requirement. Additionally, at least 100 persons must beneficially own our
stock during at least 335 days of each taxable year. To help insure that we meet
these tests, our charter restricts the acquisition and ownership of shares of
our stock. Our charter, with certain exceptions, authorizes our directors to
take such actions as are necessary and desirable to preserve our qualification
as a REIT and provides that, unless exempted by our board of directors, no
person other than Mr. Schnall may own more than 9.4% in value of the outstanding
shares of our capital stock. Our charter provides that Mr. Schnall may own up to
12.0% of our outstanding common stock. Our board of directors may grant an
exemption from that ownership limit in its sole discretion, subject to such
conditions, representations and undertakings as it may determine. This ownership
limit could delay or prevent a transaction or a change in our control that might
involve a premium price for our common stock or otherwise be in the best
interest of our stockholders.
OUR EXECUTIVE OFFICERS HAVE AGREEMENTS THAT PROVIDE THEM WITH BENEFITS IN THE
EVENT THEIR EMPLOYMENT IS TERMINATED FOLLOWING A CHANGE OF CONTROL.
We have entered into agreements with the members of our senior management
team, Messrs. Schnall, Akre, Redlingshafer, Fierro, Wirth and Mumma, that
provide them with severance benefits if their employment ends under specified
circumstances following a change in control. These benefits could increase the
cost to a potential acquirer of us and thereby prevent or discourage a change of
control that might involve a premium price for your shares or otherwise be in
your best interest.
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 COMMON STOCK.
Certain provisions of Maryland law, our charter and our bylaws may have the
effect of discouraging, delaying or preventing transactions that involve an
actual or threatened change in control. These provisions include the following:
Removal of Directors. Under our charter, subject to the rights of one
or more classes or series of preferred stock to elect one or more
directors, a director may be removed with or without cause only by the
affirmative vote of the holders of at least two-thirds of all votes
entitled to be cast by our stockholders generally in the election of
directors.
Classified Board of Directors. Although currently all members of our
board of directors will be subject to election or re-election at each
annual meeting of stockholders, Maryland law permits our
20
board of directors, without stockholder approval and regardless of what is
provided in our charter or bylaws, to divide the members of our board of
directors into up to three classes with only one class standing for
election in any year.
Board Vacancies. We have elected to be subject to certain provisions
of Maryland law that vest in the board of directors the exclusive right, by
the affirmative vote of the majority of the remaining directors, to fill
vacancies on the board resulting from any reason, even if the remaining
directors do not constitute a quorum. A vacancy shall be filled for the
remainder of the term in which the vacancy occurred.
Limitation on Stockholder-Requested Special Meetings. Our bylaws
provide that our secretary must call a special meeting of stockholders only
upon the written request of stockholders entitled to cast not less than a
majority of all the votes entitled to be cast by the stockholders at such
meeting.
Advance Notice Provisions for Stockholder Nominations and Proposals.
Generally, our bylaws require advance written notice for stockholders to
nominate persons for election as directors at, or to bring other business
before, meetings of stockholders. This bylaw provision limits the ability
of stockholders to make nominations of persons for election as directors or
to introduce other proposals unless we are notified in a timely manner
prior to the meeting.
Preferred Stock. Under our charter, our board of directors has
authority to issue preferred stock from time to time in one or more series
and to establish the terms, preferences and rights of any such series of
preferred stock, all without the approval of our stockholders.
Maryland Business Combination Act. The Maryland Business Combination
Act provides that unless exempted, a Maryland corporation may not engage in
business combinations, including mergers, dispositions of 10% or more of
its assets, issuance of shares of stock and other specified transactions,
with an "interested stockholder" or an affiliate of an interested
stockholder for five years after the most recent date on which the
interested stockholder became an interested stockholder, and thereafter
unless specified criteria are met. An interested stockholder is generally a
person owning or controlling, directly or indirectly, 10% or more of the
voting power of the outstanding voting stock of a Maryland corporation. Our
board of directors adopted a resolution immediately prior to our initial
public offering exempting us from application of this statute. However, our
board of directors may repeal or modify this resolution in the future, in
which case the provisions of the Maryland Business Combination Act will be
applicable to business combinations between us and other persons.
Maryland Control Share Acquisition Act. Maryland law provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" shall have no voting rights except to the extent approved by a
vote of two-thirds of the votes eligible to be cast on the matter under the
Maryland Control Share Acquisition Act. Shares owned by the acquiror, by
officers or by directors who are employees of the corporation are excluded
from shares entitled to vote on the matter. "Control shares" means voting
shares of stock that, if aggregated with all other shares of stock
previously acquired by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: one-tenth or more but less than one-third, one-third or more but
less than a majority or a majority or more of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote
as a result of having previously obtained stockholder approval. A "control
share acquisition" means an acquisition of control shares, subject to
certain exceptions. A person who has made or proposes to make a control
share acquisition may compel the board of directors of the corporation to
call a special meeting of stockholders to be held within 50 days of demand
to consider the voting rights of the shares. The right to compel the
calling of a special meeting is subject to the satisfaction of certain
conditions, including an undertaking to pay the expenses of the meeting. If
no request for a meeting is made, the corporation may itself present the
question at any stockholders meeting. If voting rights of control shares
acquired in a control share acquisition are not approved at a stockholders'
meeting or if the acquiring person does not deliver an acquiring person
statement as required by the statute, then subject to certain conditions
21
and limitations, the corporation may redeem any or all of the control
shares for fair value. If voting rights of control shares are approved at a
stockholders' meeting and the acquiror becomes entitled to vote a majority
of the shares of stock entitled to vote, all other stockholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition. The control
share acquisition statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by the charter
or bylaws of the corporation. Our bylaws contain a provision exempting any
and all acquisitions by any person of our shares from the Maryland Control
Share Acquisition Act. However, our board of directors may amend our bylaws
in the future to repeal or modify this exemption, in which case any control
shares of our company acquired in a control share acquisition would be
subject to the Maryland Control Share Acquisition Act.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Summary," "Risk Factors," and elsewhere in
this prospectus constitute forward-looking statements. Forward-looking
statements relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can identify
forward-looking statements by terms such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "potential," "should," "will" and
"would" or the negative of these terms or other comparable terminology.
The forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. These beliefs, assumptions and expectations can
change as a result of many possible events or factors, not all of which are
known to us or are within our control. If a change occurs, our business,
financial condition, liquidity and results of operations may vary materially
from those expressed in our forward-looking statements. You should carefully
consider the following risks before you make an investment in our common stock:
- the factors referenced in this prospectus, including those set forth
under the sections captioned "Risk Factors;"
- general volatility of the capital markets and the market price of our
common stock;
- changes in our business strategy;
- availability, terms and deployment of capital;
- availability of qualified personnel; and
- changes in our industry, interest rates or the general economy.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common
stock by the selling stockholders.
SELLING STOCKHOLDERS
This prospectus relates to the reoffer or resale of shares of our common
stock that have been acquired by the selling stockholders pursuant to the grant
of restricted stock awards under our 2004 Stock Incentive Plan. The following
table identifies the selling stockholders and sets forth (i) the number of
shares of common stock outstanding that are beneficially owned by such selling
stockholder prior to the date of this
22
offering as of the date of this prospectus, (ii) the number of shares of common
stock that may be offered by such selling stockholder under this prospectus and
(iii) the number of shares of common stock that will be owned by such selling
stockholder and the percentage of common stock outstanding that such shares will
represent assuming the sale of all of the shares of common stock upon completion
of this offering.
Because the selling stockholders may sell all, some or none of the shares
of common stock that they hold and because the number of shares of common stock
outstanding may increase or decrease, we have estimated the amounts and
percentages of shares of common stock that the selling stockholders will hold
after completion of this offering by assuming that (i) the beneficial
stockholders will not acquire the beneficial ownership of any additional shares
of common stock, (ii) the selling stockholders will dispose of only shares
offered under this prospectus prior to completion of this offering, (iii) all
options to acquire common stock that the selling stockholders beneficially own
have become fully vested and have been exercised, and (iv) the selling
stockholders will sell all of the shares offered by this prospectus.
NUMBER OF SHARES NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING(1) BEING REGISTERED FOLLOWING OFFERING(1) FOLLOWING OFFERING(2)
------------------- -------------------- ---------------- --------------------- ---------------------
Steven B. Schnall(3).... 2,260,002 71,352 2,260,002 12.4%
Joseph V. Fierro(4)..... 968,630 30,580 968,630 5.3%
David A. Akre(5)........ 95,683 95,583 95,683 *
Raymond A Redlingshafer,
Jr.(6)................ 95,683 95,583 95,683 *
Michael I. Wirth(7)..... 74,530 74,430 74,530 *
Steven R. Mumma(8)...... 29,697 29,597 29,697 *
David R. Bock(9)........ 2,500 2,500 2,500 *
Alan L. Hainey(10)...... 2,500 2,500 2,500 *
Steven G. Norcutt(11)... 2,500 2,500 2,500 *
Mary Dwyer
Pembroke(12).......... 2,500 2,500 2,500 *
Jerome F. Sherman(13)... 2,500 2,500 2,500 *
Thomas W. White(14)..... 2,500 2,500 2,500 *
---------------
* Less than 1%
(1) All shares outstanding but which may be acquired by the stockholder within
60 days by the exercise of any stock option or any other right are deemed
to be outstanding for the purposes of calculating beneficial ownership and
computing the percentage of the class beneficially owned by the
stockholder, but not by any other stockholder.
(2) The percentage of beneficial ownership shown in the table is based on
18,162,125 shares of common stock issued and outstanding as of June 29,
2004.
(3) Includes 1,855,000 shares issued to Mr. Schnall and his affiliate in
connection with our acquisition of the outstanding membership interests in
NYMC. Includes 70,000 shares of our common stock held in escrow through
December 31, 2004 and that will be available to satisfy any indemnification
claims we may have against the contributors of the NYMC membership
interests under the contribution agreement between us and the contributors
during the escrow period for losses we incur as a result of defaults on any
residential mortgage loans originated by NYMC and closed prior to
completion of our initial public offering. Includes 123,550 options to
purchase shares of our common stock granted to Mr. Schnall upon completion
of our initial public offering that fully vested upon grant and have an
exercise price of $9.00. Includes 140,000 shares of our common stock
purchased by Mr. Schnall through our directed share program. Includes 100
shares of our common stock purchased by Mr. Schnall in an open market
transaction. Includes 71,352 shares of restricted stock granted to Mr.
Schnall upon completion of our initial public offering. Mr. Schnall is the
Chairman of our board of directors, our Co-Chief-Executive Officer and a
contributor of NYMC to our Company.
23
(4) Includes 795,000 shares issued to Mr. Fierro and his affiliate in
connection with our acquisition of the outstanding membership interests in
NYMC. Includes 30,000 shares of our common stock held in escrow through
December 31, 2004 and that will be available to satisfy any indemnification
claims we may have against the contributors of the NYMC membership
interests under the contribution agreement between us and the contributors
during the escrow period for losses we incur as a result of defaults on any
residential mortgage loans originated by NYMC and closed prior to
completion of our initial public offering. Includes 52,950 options to
purchase shares of our common stock granted to Mr. Fierro upon completion
of our initial public offering that fully vested upon grant and have an
exercise price of $9.00. Includes 60,000 shares of our common stock
purchased by Mr. Fierro through our directed share program. Includes 100
shares of our common stock purchased by Mr. Fierro in an open market
transaction. Includes 30,580 shares of restricted stock granted to Mr.
Fierro upon completion of our initial public offering. Mr. Fierro is the
Chief Operating Officer of NYMC and a contributor of NYMC to our Company.
(5) Includes 95,583 shares of restricted stock granted to Mr. Akre upon
completion of our initial public offering. Includes 100 shares of our
common stock purchased by Mr. Akre in an open market transaction. Mr. Akre
is our Co-Chief Executive Officer and a member of our board of directors.
(6) Includes 95,583 shares of restricted stock granted to Mr. Redlingshafer
upon completion of our initial public offering. Includes 100 shares of our
common stock purchased by Mr. Redlingshafer in an open market transaction.
Mr. Redlingshafer is our President, Chief Investment Officer and a member
of our board of directors.
(7) Includes 74,430 shares of restricted stock granted to Mr. Wirth upon
completion of our initial public offering. Includes 100 shares of our
common stock purchased by Mr. Wirth in an open market transaction. Mr.
Wirth is our Chief Financial Officer, Executive Vice President, Treasurer
and Secretary.
(8) Includes 29,597 shares of restricted stock granted to Mr. Mumma upon
completion of our initial public offering. Includes 100 shares of our
common stock purchased by Mr. Mumma in an open market transaction. Mr.
Mumma is our Chief Operating Officer and Vice President.
(9) Includes 2,500 shares of restricted stock granted to Mr. Bock upon
completion of our initial public offering. Mr. Bock is a member of our
board of directors.
(10) Includes 2,500 shares of restricted stock granted to Mr. Hainey upon
completion of our initial public offering. Mr. Hainey is a member of our
board of directors.
(11) Includes 2,500 shares of restricted stock granted to Mr. Norcutt upon
completion of our initial public offering. Mr. Norcutt is a member of our
board of directors.
(12) Includes 2,500 shares of restricted stock granted to Ms. Pembroke upon
completion of our initial public offering. Ms. Pembroke is a member of our
board of directors.
(13) Includes 2,500 shares of restricted stock granted to Mr. Sherman upon
completion of our initial public offering. Mr. Sherman is a member of our
board of directors.
(14) Includes 2,500 shares of restricted stock granted to Mr. White upon
completion of our initial public offering. Mr. White is a member of our
board of directors.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at market
prices prevailing at the time of sale or at prices otherwise negotiated. The
selling stockholders may use any one or more of the following methods when
selling shares:
- ordinary brokerage transactions and transactions in which the broker
dealer solicits purchasers;
24
- block trades in which the broker dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker dealer as principal and resale by the broker dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- broker dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 of the
Securities Act of 1933, as amended, if available, rather than under this
prospectus. Broker dealers engaged by the selling stockholders may arrange for
other broker dealers to participate in sales. Broker dealers may receive
commissions or discounts from the selling stockholders (or, if any broker dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
Broker dealers may agree to sell a specified number of such shares at a
stipulated price per share, and, to the extent such broker dealer is unable to
do so acting as agent for us or a selling stockholder, to purchase as principal
any unsold shares at the price required to fulfill the broker-dealer commitment.
Broker dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions, which may involve block transactions and
sales to and through other broker dealers, including transactions of the nature
described above, in the over the counter markets or otherwise at prices and on
terms then prevailing at the time of sale, at prices other than related to the
then-current market price or in negotiated transactions. In connection with such
resales, broker-dealers may pay to or receive from the purchasers such shares
commissions as described above.
The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The selling stockholders and any broker dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference and made a part hereof:
1. The Company's registration statement on Form S-8 (Registration No.
333-117228), filed on July 8, 2004.
2. The Company's prospectus filed pursuant to Rule 424(b)(4) under the
Securities Act on June 24, 2004; and
25
3. The description of the Company's common stock, $0.01 par value per
share, contained in the Company's Registration Statement on Form 8-A filed
under the Exchange Act on June 16, 2004.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment that indicates
that all securities offered have been sold or that deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in any
other subsequently filed document that is incorporated by reference herein
modifies or supersedes such earlier statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have filed a registration statement on Form S-11,
including exhibits and schedules thereto. Copies of our filings may be examined
without charge at the public reference room of the Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, DC 20549. The Securities and
Exchange Commission's toll-free number is 1-800-SEC-0330. In addition, the
Securities and Exchange Commission maintains a web site at http://www.sec.gov,
which contains reports, proxy and information statements and other information
regarding registrants, including us, that file electronically with the
Securities and Exchange Commission.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
NEW YORK MORTGAGE TRUST, INC.
Attention: Chief Financial Officer
1301 Avenue of the Americas
New York, New York 10019
(212) 634-9400
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than on the front of this document.
LEGAL MATTERS
Certain matters with respect to the validity of the shares of common stock
offered by this prospectus will be passed upon for us by our counsel, Hunton &
Williams LLP.
EXPERTS
The financial statements of The New York Mortgage Company, LLC as of
December 31, 2003 and 2002 and for each of the three years in the period ended
December 31, 2003, and the balance sheet of New York Mortgage Trust, Inc. as of
December 31, 2003, both of which are incorporated by reference in this
prospectus have been audited by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
26
DISCLOSURE OF SEC'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as the provisions described below in Item 6 of Part II of this
registration statement permit indemnification of directors, officers or persons
controlling the Company, the Company has been informed that in the opinion of
the Securities and Exchange Commission, this indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
27
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
Not required to be filed with the Securities and Exchange Commission (the
"Commission").
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
New York Mortgage Trust, Inc. (the "Company") will provide participants,
upon written or oral request and without charge, a copy of the documents
incorporated by reference in Item 3 of Part II, which are incorporated by
reference in the Section 10(a) prospectus, and all documents required to be
delivered to employees pursuant to Rule 428(b) under the Securities Act. Request
for such documents should be directed to New York Mortgage Trust, Inc., 1301
Avenue of the Americas, New York, New York 10019, Attention: Chief Financial
Officer, telephone number (212) 634-9400.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Commission are incorporated herein
by reference and made a part hereof:
1. The Company's registration statement on Form S-8 (Registration No.
333-117228), filed on July 8, 2004.
2. The Company's prospectus filed pursuant to Rule 424(b)(4) under the
Securities Act on June 24, 2004; and
3. The description of the Company's common stock, $0.01 par value per
share, contained in the Company's Registration Statement on Form 8-A filed
under the Exchange Act on June 16, 2004.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment that indicates
that all securities offered have been sold or that deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in any
other subsequently filed document that is incorporated by reference herein
modifies or supersedes such earlier statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
The description of the Company's common stock, $0.01 par value per share,
contained in the Company's Registration Statement on Form 8-A filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law permits a Maryland corporation to
include in its charter a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active or deliberate dishonesty established
by a final judgment as being material to the cause of action. The Company's
charter contains a provision which limits the liability of its directors and
officers to the maximum extent permitted by Maryland law.
The Company's charter permits it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director and at
the Company's request, serves or has served another real estate investment
trust, corporation, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a trustee, director, officer or partner of such real
estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former director or officer of the
Company. The Company's bylaws obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Company and at the Company's request, serves or has served another real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and who is made a party to the proceeding by
reason of his service in that capacity, against any claim or liability to which
he may become subject by reason of such status. The Company's charter and bylaws
also permit it to indemnify and advance expenses to any person who served a
predecessor of the Company in any of the capacities described above and to any
employee or agent of the Company or a predecessor of the Company. Maryland law
requires the Company to indemnify a director or officer who has been successful,
on the merits or otherwise, in the defense of any proceeding to which he is made
a party by reason of his service in that capacity.
The Maryland General Corporation Law permits a Maryland corporation to
indemnify and advance expenses to its directors, officers, employees and agents.
The Maryland General Corporation Law permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was a result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right if the corporation or if the director or officer was adjudged to be liable
for an improper personal benefit, unless in either case a court orders
indemnification and then only for expenses. Maryland law requires the Company,
as a condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification and (b) a written statement by him or on
his behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.
Insofar as the foregoing provisions permit indemnification of directors,
officers or persons controlling the Company, the Company has been informed that
in the opinion of the Securities and Exchange
II-2
Commission, this indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Company's Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.01 of the Company's
Registration Statement on Form S-11 (Registration No.
333-111668)).
4.2 Company's Bylaws (incorporated by reference to Exhibit 3.02
of the Company's Registration Statement on Form S-11
(Registration No. 333-111668)).
4.3 New York Mortgage Trust, Inc. 2004 Stock Incentive Plan
(incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-8 (Registration No.
333-117228)).
5.1 Opinion of Hunton & Williams LLP as to the legality of the
securities being registered (filed herewith).
23.1 Consent of Hunton & Williams LLP (included in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP (filed herewith).
ITEM 9. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the law or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to Section 13(a) or
II-3
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on July 20, 2004.
NEW YORK MORTGAGE TRUST, INC.
(Registrant)
By: /s/ STEVEN B. SCHNALL
------------------------------------
Steven B. Schnall
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEVEN B. SCHNALL Chairman of the Board and Co-Chief July 20, 2004
-------------------------------------- Executive Officer (principal
Steven B. Schnall executive officer)
/s/ DAVID A. AKRE Director and Co-Chief Executive July 20, 2004
-------------------------------------- Officer
David A. Akre
/s/ MICHAEL I. WIRTH Chief Financial Officer, Vice July 20, 2004
-------------------------------------- President, Secretary and Treasurer
Michael I. Wirth (principal financial officer and
principal accounting officer)
/s/ RAYMOND A. REDLINGSHAFER, JR. Director, President and Chief July 20, 2004
-------------------------------------- Investment Officer
Raymond A. Redlingshafer, Jr.
/s/ DAVID R. BOCK Director July 20, 2004
--------------------------------------
David R. Bock
/s/ ALAN L. HAINEY Director July 12, 2004
--------------------------------------
Alan L. Hainey
/s/ STEVEN G. NORCUTT Director July 20, 2004
--------------------------------------
Steven G. Norcutt
/s/ MARY DWYER PEMBROKE Director July 20, 2004
--------------------------------------
Mary Dwyer Pembroke
/s/ JEROME F. SHERMAN Director July 20, 2004
--------------------------------------
Jerome F. Sherman
/s/ THOMAS W. WHITE Director July 15, 2004
--------------------------------------
Thomas W. White
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Company's Amended and Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.01 of the Company's
Registration Statement on Form S-11 (Registration No.
333-111668)).
4.2 Company's Bylaws (incorporated by reference to Exhibit 3.02
of the Company's Registration Statement on Form S-11
(Registration No. 333-111668)).
4.3 New York Mortgage Trust, Inc. 2004 Stock Incentive Plan
(incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-8 (Registration No.
333-117228)).
5.1 Opinion of Hunton & Williams LLP as to the legality of the
securities being registered (filed herewith).
23.1 Consent of Hunton & Williams LLP (included in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP (filed herewith).