Business Context and Reporting Period
This Form 8-K, filed on February 14, 2007, reports events occurring on February 6, 2007, for New York Mortgage Trust, Inc. (the "Company"). The filing details the entry into a definitive Asset Purchase Agreement to sell the retail mortgage banking platform of its wholly owned taxable REIT subsidiary, The New York Mortgage Company, LLC ("NYMC"), to IndyMac Bank, F.S.B. ("Indymac"). The transaction is expected to close by March 31, 2007, effectively exiting the Company from the retail mortgage origination business.
Key Financial Metrics
- Estimated Purchase Price: Approximately $13.4 million in cash plus the assumption of certain liabilities by Indymac.
- Net Available Proceeds: Anticipated to be $12.1 million after deducting fees and expenses, before escrow deductions.
- Escrow Amount: NYMC agreed to deposit $2.3 million of the purchase price with an escrow agent to settle the final price and indemnification claims.
- Severance Obligations: Indymac will pay the first $500,000 and amounts over $1.1 million; NYMC is responsible for the next $600,000 (the "NYMC Severance Amount").
- Equity Vesting: Separation agreements provide for the vesting of 15,856 shares of unvested restricted stock for Steven B. Schnall and 6,797 shares for Joseph V. Fierro.
Material Changes
The primary material change is the divestiture of NYMC's retail mortgage banking platform. Assets being sold include retail branch office leases (excluding the corporate headquarters), tangible personal property, the pipeline of residential mortgage loan applications, escrowed deposits, customer lists, and IT systems. Indymac will assume obligations related to the pipeline loans and substantially all liabilities arising after the closing date. This transaction marks a strategic shift away from retail mortgage origination.
Guidance, Outlook, and Management Commentary
- Transaction Timeline: The Company anticipates closing by March 31, 2007.
- Use of Proceeds: Net proceeds are expected to be redeployed into high-quality mortgage loan securities.
- Management Changes: Upon closing, Steven B. Schnall (Chairman, Co-CEO, President) and Joseph V. Fierro (NYMC COO) will resign their executive roles to assume positions with Indymac. Schnall will remain as non-executive Chairman. Steven R. Mumma (COO/CFO) will assume the roles of President and Co-CEO. David A. Akre will remain Vice Chairman and Co-CEO.
- Risks and Conditions: Closing is subject to customary conditions, including the accuracy of representations, absence of material adverse effects, and the agreement of certain officers and employees to accept employment with Indymac.
Investor Verification Checklist
- Verify the final closing date and whether the transaction closes by the anticipated March 31, 2007 deadline.
- Confirm the final purchase price calculation, specifically the book value of assets/liabilities and the pipeline loan adjustments.
- Monitor the redeployment of the $12.1 million in net proceeds into mortgage loan securities.
- Review the Separation Agreements (Exhibits 10.1 and 10.2) for details on severance payments and stock vesting conditions.
- Assess the impact of the departure of key executives (Schnall and Fierro) on the Company's ongoing operations and strategy.