Delaware
|
75-2243266
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification
No.)
|
Page
|
|||
PART
I.
|
FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
||
Consolidated
Balance Sheets at June 30, 2007 and December 31, 2006
|
3
|
||
Consolidated
Statements of Income for the three and six months ended
|
|||
June
30, 2007 and June 30, 2006
|
4
|
||
Consolidated
Statement of Changes in Stockholders’ Equity
|
|||
for
the six months ended June 30, 2007
|
5
|
||
Consolidated
Statements of Cash Flows for the six months ended
|
|||
June
30, 2007 and June 30, 2006
|
6
|
||
Notes
to Consolidated Financial Statements
|
7
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations
|
20
|
|
|
|||
Application
of Critical Accounting Policies and Estimates
|
20
|
||
Portfolio
Characteristics
|
21
|
||
Results
of Operations
|
31
|
||
Liquidity
and Capital Resources
|
37
|
||
Borrowings
|
39
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
44
|
|
Item
4.
|
Controls
and Procedures
|
45
|
|
PART
II.
|
OTHER
INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
46
|
|
Item
1A.
|
Risk
Factors
|
46
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
49
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
49
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
49
|
|
Item
5.
|
Other
Information
|
49
|
|
Exhibits
|
50
|
||
SIGNATURES
|
51
|
June
30, 2007
(Unaudited)
|
December
31, 2006
|
||||||
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
8,544,360
|
$
|
3,983,104
|
|||
Restricted
cash
|
33,583,678
|
32,689,154
|
|||||
Short-term
investments
|
23,342,223
|
20,311,193
|
|||||
Notes
Receivable:
|
|||||||
Principal
|
1,392,325,773
|
1,174,039,567
|
|||||
Purchase
discount
|
(11,322,314
|
)
|
(12,423,746
|
)
|
|||
Allowance
for loan losses
|
(46,276,474
|
)
|
(52,424,375
|
)
|
|||
Net
notes receivable
|
1,334,726,985
|
1,109,191,446
|
|||||
Originated
loans held for sale
|
9,830,115
|
4,114,284
|
|||||
Originated
loans held for investment, net
|
485,775,053
|
422,682,795
|
|||||
Accrued
interest receivable
|
26,562,620
|
22,010,027
|
|||||
Other
real estate owned
|
33,142,484
|
22,977,725
|
|||||
Deferred
financing costs, net
|
11,777,638
|
10,622,961
|
|||||
Other
receivables
|
7,065,179
|
6,614,386
|
|||||
Building,
furniture and equipment, net
|
3,936,342
|
3,715,908
|
|||||
Income
tax receivable
|
8,328,939
|
8,594,119
|
|||||
Other
assets
|
1,041,424
|
850,897
|
|||||
Total
assets
|
$
|
1,987,657,040
|
$
|
1,668,357,999
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Liabilities:
|
|||||||
Notes
payable, net of debt discount of $425,499 at June 30, 2007
and
$515,799 at December 31, 2006
|
$
|
1,861,277,953
|
$
|
1,520,217,264
|
|||
Financing
agreements
|
58,260,637
|
55,962,315
|
|||||
Accounts
payable and accrued expenses
|
25,128,779
|
22,875,527
|
|||||
Repurchase
obligation
|
-
|
18,094,061
|
|||||
Deferred
tax liability
|
727,276
|
3,655,483
|
|||||
Total
liabilities
|
1,945,394,645
|
1,620,804,650
|
|||||
Commitments
and Contingencies
|
|||||||
Stockholders’
Equity:
|
|||||||
Preferred
stock, $.01 par value; authorized 3,000,000; issued - none
|
-
|
-
|
|||||
Common
stock and additional paid-in capital, $.01 par value, 22,000,000
authorized shares; issued and
outstanding:
8,025,295 at June 30, 2007 and 8,025,295 at December 31,
2006
|
22,961,215
|
22,715,180
|
|||||
Retained
earnings
|
19,301,180
|
24,838,169
|
|||||
Total
stockholders’ equity
|
42,262,395
|
47,553,349
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
1,987,657,040
|
$
|
1,668,357,999
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues:
|
|||||||||||||
Interest
income
|
$
|
43,393,657
|
$
|
35,272,864
|
$
|
82,297,592
|
$
|
68,715,174
|
|||||
Purchase
discount earned
|
1,366,649
|
2,223,710
|
2,780,207
|
4,202,673
|
|||||||||
Gain
on sale of notes receivable
|
31,118
|
-
|
31,118
|
69,049
|
|||||||||
Gain
on sale of originated loans
|
197,694
|
170,924
|
200,733
|
336,796
|
|||||||||
Gain
on sale of other real estate owned
|
117,632
|
440,741
|
238,807
|
1,242,283
|
|||||||||
Prepayment
penalties and other income
|
2,024,813
|
2,335,115
|
4,124,793
|
4,540,321
|
|||||||||
Total
revenues
|
47,131,563
|
40,443,354
|
89,673,250
|
79,106,296
|
|||||||||
Operating
Expenses:
|
|||||||||||||
Interest
expense
|
35,408,803
|
27,898,497
|
66,968,607
|
52,390,065
|
|||||||||
Collection,
general and administrative
|
10,769,328
|
10,432,793
|
19,662,773
|
18,380,672
|
|||||||||
Provision
for loan losses
|
5,663,222
|
3,162,146
|
9,996,686
|
5,031,275
|
|||||||||
Amortization
of deferred financing costs
|
977,663
|
1,130,415
|
1,753,498
|
2,038,430
|
|||||||||
Depreciation
|
369,809
|
251,613
|
717,355
|
563,318
|
|||||||||
Total
expenses
|
53,188,825
|
42,875,464
|
99,098,919
|
78,403,760
|
|||||||||
(Loss)/income
before provision for income taxes
|
(6,057,262
|
)
|
(2,432,110
|
)
|
(9,425,669
|
)
|
702,536
|
||||||
Income
tax (benefit)/expense
|
(2,473,949
|
)
|
(1,042,698
|
)
|
(3,888,680
|
)
|
305,200
|
||||||
Net
(loss)/income
|
$
|
(3,583,313
|
)
|
$
|
(1,389,412
|
)
|
$
|
(5,536,989
|
)
|
$
|
397,336
|
||
Net
(loss)/income per common share:
|
|||||||||||||
Basic
|
$
|
(0.45
|
)
|
$
|
(0.18
|
)
|
$
|
(0.70
|
)
|
$
|
0.05
|
||
Diluted
|
$
|
(0.45
|
)
|
$
|
(0.18
|
)
|
$
|
(0.70
|
)
|
$
|
0.05
|
||
Weighted
average number of shares outstanding:
|
|||||||||||||
Basic
|
7,940,295
|
7,634,878
|
7,935,295
|
7,574,837
|
|||||||||
Diluted
|
7,940,295
|
7,634,878
|
7,935,295
|
8,055,260
|
|
|
|
Common
Stock and
Additional
Paid-in Capital
|
|
|
|
|
|
|
|
|||
|
|
|
Shares
|
|
|
Amount
|
|
|
Retained
Earnings
|
|
|
Total
|
|
BALANCE,
JANUARY 1, 2007
|
|
|
8,025,295
|
|
$
|
22,715,180
|
|
$
|
24,838,169
|
|
$
|
47,553,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
246,035
|
|
|
-
|
|
|
246,035
|
|
Net
(loss)
|
|
|
-
|
|
|
-
|
|
|
(5,536,989
|
)
|
|
(5,536,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
JUNE 30, 2007
|
|
|
8,025,295
|
|
$
|
22,961,215
|
|
$
|
19,301,180
|
|
$
|
42,262,395
|
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
(loss)/income
|
$
|
(5,536,989
|
)
|
$
|
397,336
|
||
Adjustments
to reconcile (loss)/income to net cash provided by/(used in) operating
activities:
|
|||||||
Gain
on sale of notes receivable
|
(31,118
|
)
|
(69,049
|
)
|
|||
Gain
on sale of other real estate owned
|
(238,807
|
)
|
(1,242,283
|
)
|
|||
Gain
on sale of originated loans
|
(200,733
|
)
|
(336,796
|
)
|
|||
Depreciation
|
717,355
|
563,318
|
|||||
Amortization
of deferred costs and fees on originated loans
|
1,007,867
|
734,090
|
|||||
Amortization
of deferred financing costs
|
1,753,498
|
2,038,430
|
|||||
Amortization
of debt discount
|
90,300
|
680,646
|
|||||
Excess
tax benefit
|
-
|
(531,403
|
)
|
||||
Non-cash
compensation
|
246,035
|
484,108
|
|||||
Proceeds
from the sale of and principal collections on loans held for
sale
|
26,397,862
|
20,988,948
|
|||||
Deferred
tax provision
|
(2,928,207
|
)
|
1,138,572
|
||||
Purchase
discount earned
|
(2,780,207
|
)
|
(4,202,673
|
)
|
|||
Provision
for loan losses
|
9,996,686
|
5,031,275
|
|||||
Origination
of loans held for sale
|
(32,221,015
|
)
|
(11,946,300
|
)
|
|||
Changes
in operating assets and liabilities:
|
|||||||
Accrued
interest receivable
|
(4,552,593
|
)
|
(1,246,127
|
)
|
|||
Other
receivables
|
(450,793
|
)
|
1,181,629
|
||||
Income
tax receivable
|
265,180
|
-
|
|||||
Other
assets
|
(190,527
|
)
|
(4,718,708
|
)
|
|||
Accounts
payable and accrued expenses
|
2,253,252
|
2,553,000
|
|||||
Net
cash (used) in/provided by operating activities
|
(6,402,954
|
)
|
11,498,013
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Increase
in restricted cash
|
(894,524
|
)
|
(22,417,907
|
)
|
|||
Purchase
of notes receivable
|
(386,132,716
|
)
|
(216,054,219
|
)
|
|||
Principal
collections on notes receivable
|
105,768,330
|
141,008,398
|
|||||
Principal
collections on loans held for investment
|
97,018,212
|
110,406,287
|
|||||
Origination
of loans held for investment
|
(177,642,361
|
)
|
(192,466,907
|
)
|
|||
Investment
in short-term securities
|
(3,031,030
|
)
|
825,165
|
||||
Repurchase
of loans held for sale and loans held for investment
|
(6,325,528
|
)
|
-
|
||||
Putback
of acquired notes receivable
|
12,598,126
|
-
|
|||||
Proceeds
from sale of other real estate owned
|
16,189,577
|
17,078,333
|
|||||
Proceeds
from sale of loans held for investment
|
11,088,596
|
13,519,573
|
|||||
Proceeds
from sale of notes receivable
|
20,998,838
|
84,553
|
|||||
Purchase
of building, furniture and equipment
|
(937,788
|
)
|
(309,598
|
)
|
|||
Net
cash used in investing activities
|
(311,302,268
|
)
|
(148,326,322
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from notes payable
|
600,860,150
|
431,163,623
|
|||||
Principal
payments of notes payable
|
(259,889,760
|
)
|
(270,268,195
|
)
|
|||
Proceeds
from financing agreements
|
285,207,486
|
206,386,407
|
|||||
Principal
payments of financing agreements
|
(282,909,162
|
)
|
(228,651,503
|
)
|
|||
Repurchase
obligation
|
(18,094,061
|
)
|
-
|
||||
Excess
tax benefit
|
-
|
531,403
|
|||||
Payment
of deferred financing costs
|
(2,908,175
|
)
|
(2,665,458
|
)
|
|||
Exercise
of options
|
-
|
326,845
|
|||||
Net
cash provided by financing activities
|
322,266,478
|
136,823,122
|
|||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
4,561,256
|
(5,187
|
)
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
3,983,104
|
3,886,506
|
|||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
8,544,360
|
$
|
3,881,319
|
|||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||||||
Cash
payments for interest
|
$
|
82,993,281
|
$
|
47,212,204
|
|||
Cash
payments for taxes
|
$
|
89,708
|
$
|
3,524,080
|
|||
NON-CASH
INVESTING AND FINANCING ACTIVITY:
|
|||||||
Transfer
of loans from held for sale to loans held for investment
|
$
|
704,698
|
$
|
483,601
|
|||
Transfer
from notes receivable and loans held for investment to
OREO
|
$
|
26,115,529
|
$
|
23,354,090
|
·
|
performing
loans
-
loans to borrowers who are contractually current, but may have been
delinquent in the past and which may have deficiencies relating to
credit
history, loan-to-value ratios, income ratios or
documentation;
|
·
|
reperforming
loans
-
loans to borrowers who are not contractually current, but have recently
made regular payments and where there is a good possibility the loans
will
be repaid in full; and
|
·
|
nonperforming
loans
-
loans to borrowers who are delinquent, not expected to cure, and
for which
a primary avenue of recovery is through the sale of the property
securing
the loan.
|
Three
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
UAccretable
DiscountU
|
|||||||
Balance,
beginning of period
|
$
|
16,311,205
|
$
|
14,454,449
|
|||
New
acquisitions
|
-
|
-
|
|||||
Accretion
|
(807,939
|
)
|
(1,063,092
|
)
|
|||
Transfers
from nonaccretable
|
2,303,550
|
815,934
|
|||||
Net
reductions relating to loans sold
|
(558,022
|
)
|
-
|
||||
Net
reductions relating to loans repurchased
|
-
|
-
|
|||||
Other
|
-
|
33,237
|
|||||
Balance,
end of period
|
$
|
17,248,794
|
$
|
14,240,528
|
|||
UNonaccretable
DiscountU
|
|||||||
Balance,
beginning of period
|
$
|
73,782,538
|
$
|
27,516,933
|
|||
New
acquisitions
|
50,637,093
|
13,314,691
|
|||||
Transfers
to accretable
|
(2,303,550
|
)
|
(815,934
|
)
|
|||
Net
reductions relating to loans sold
|
(227,821
|
)
|
-
|
||||
Net
reductions relating to loans repurchased
|
(340,347
|
)
|
(197,153
|
)
|
|||
Net
reduction relating to loans charged off
|
(1,905,237
|
)
|
-
|
||||
Other,
loans transferred to OREO
|
(1,755,372
|
)
|
(606,075
|
)
|
|||
Balance,
end of period
|
$
|
117,887,304
|
$
|
39,212,462
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
UAccretable
DiscountU
|
|||||||
Balance,
beginning of period
|
$
|
12,842,755
|
$
|
11,360,617
|
|||
New
acquisitions
|
29,080
|
2,545,873
|
|||||
Accretion
|
(1,530,698
|
)
|
(1,926,473
|
)
|
|||
Transfers
from nonaccretable
|
6,467,051
|
2,187,617
|
|||||
Net
reductions relating to loans sold
|
(558,022
|
)
|
-
|
||||
Net
reductions relating to loans repurchased
|
-
|
(2,189
|
)
|
||||
Other
|
(1,372
|
)
|
75,083
|
||||
Balance,
end of period
|
$
|
17,248,794
|
$
|
14,240,528
|
|||
UNonaccretable
DiscountU
|
|||||||
Balance,
beginning of period
|
$
|
60,531,503
|
$
|
23,981,013
|
|||
New
acquisitions
|
71,516,117
|
18,689,222
|
|||||
Transfers
to accretable
|
(6,467,052
|
)
|
(2,187,617
|
)
|
|||
Net
reductions relating to loans sold
|
(227,821
|
)
|
(7,885
|
)
|
|||
Net
reductions relating to loans repurchased
|
(493,614
|
)
|
(204,026
|
)
|
|||
Net
reduction relating to loans charged off
|
(3,990,477
|
)
|
-
|
||||
Other,
loans transferred to OREO
|
(2,981,352
|
)
|
(1,058,245
|
)
|
|||
Balance,
end of period
|
$
|
117,887,304
|
$
|
39,212,462
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Risk-free
interest rate
|
4.96
|
%
|
3.85
|
%
|
|||
Weighted
average volatility
|
95.15
|
47.57
|
|||||
Expected
lives (years)
|
6.0
|
6.0
|
Shares
|
Weighted
Average Exercise
|
Weighted
Average Remaining Contractual Term
|
Aggregate
Intrinsic Value
|
||||||||||
Balance,
January 1, 2007
|
355,000
|
$
|
3.38
|
5.41
years
|
$
|
1,014,560
|
|||||||
Granted
|
15,000
|
4.98
|
10.00
years
|
-
|
|||||||||
Balance,
June 30, 2007
|
370,000
|
3.44
|
5.12
years
|
1,069,560
|
|||||||||
Options
exercisable at June 30, 2007
|
370,000
|
$
|
3.44
|
$
|
1,069,560
|
Shares
|
Weighted
Average Grant Date
Fair
Value
|
||||||
Non-vested
balance, January 1, 2007
|
95,000
|
$
|
8.36
|
||||
Vested
|
(15,000
|
)
|
9.55
|
||||
Forfeited
|
-
|
-
|
|||||
Non-vested
balance, June 30, 2007
|
80,000
|
$
|
8.13
|
Three
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
CONSOLIDATED
REVENUE:
|
|||||||
Portfolio
asset acquisition and resolution
|
$
|
35,097,042
|
$
|
27,890,748
|
|||
Mortgage
banking
|
12,034,521
|
12,552,606
|
|||||
Consolidated
revenue
|
$
|
47,131,563
|
$
|
40,443,354
|
|||
CONSOLIDATED
NET INCOME:
|
|||||||
Portfolio
asset acquisition and resolution
|
$
|
(2,072,685
|
)
|
$
|
(2,378,743
|
)
|
|
Mortgage
banking
|
(1,510,628
|
)
|
989,331
|
||||
Consolidated
net income
|
$
|
(3,583,313
|
)
|
$
|
(1,389,412
|
)
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
CONSOLIDATED
REVENUE:
|
|||||||
Portfolio
asset acquisition and resolution
|
$
|
67,126,405
|
$
|
55,834,379
|
|||
Mortgage
banking
|
22,546,845
|
23,271,917
|
|||||
Consolidated
revenue
|
$
|
89,673,250
|
$
|
79,106,296
|
|||
CONSOLIDATED
NET INCOME:
|
|||||||
Portfolio
asset acquisition and resolution
|
$
|
(3,632,572
|
)
|
$
|
(1,601,295
|
)
|
|
Mortgage
banking
|
(1,904,417
|
)
|
1,998,631
|
||||
Consolidated
net income
|
$
|
(5,536,989
|
)
|
$
|
397,336
|
June
30, 2007
|
December
31, 2006
|
||||||
CONSOLIDATED
ASSETS:
|
|||||||
Portfolio
asset acquisition and resolution
|
$
|
1,449,990,989
|
$
|
1,207,914,463
|
|||
Mortgage
banking
|
537,666,051
|
460,443,536
|
|||||
Consolidated
assets
|
$
|
1,987,657,040
|
$
|
1,668,357,999
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
UProperty
TypesU
|
UPrincipal
BalanceU
|
Percentage
of Total
UPrincipal
BalanceU
|
|||||
Residential
1-4 family
|
$
|
1,674,949,031
|
82.56
|
%
|
|||
Condos,
co-ops, PUD dwellings
|
251,725,088
|
12.41
|
%
|
||||
Manufactured
and mobile homes
|
20,663,493
|
1.02
|
%
|
||||
Multi-family
|
761,755
|
0.04
|
%
|
||||
Secured,
property type unknown(1)
|
35,356,433
|
1.74
|
%
|
||||
Commercial
|
3,144,598
|
0.16
|
%
|
||||
Unsecured
loans(2)
|
31,836,515
|
1.57
|
%
|
||||
Other
|
596,500
|
0.03
|
%
|
||||
Not
Boarded(3)
|
9,626,489
|
0.47
|
%
|
||||
Total
|
$
|
2,028,659,902
|
100.00
|
%
|
(1)
|
The
loans included in this category are principally small balance (less
than
$10,000) second-lien loans acquired, and are collateralized by residential
real estate.
|
(2)
|
The
loans included in this category are principally second-lien loans
where
the residential real estate collateral has been foreclosed by the
first-lien holder.
|
(3)
|
A
portion of not boarded loans has been included in the appropriate
property
type categories based on available information provided by the
servicer-seller. The total amount of not boarded loans was $111.5
million
at June 30, 2007.
|
ULocationU
|
UPrincipal
BalanceU
|
Percentage
of Total
UPrincipal
BalanceU
|
|||||
California
|
$
|
282,313,427
|
13.92
|
%
|
|||
New
York
|
211,512,748
|
10.43
|
%
|
||||
New
Jersey
|
189,068,429
|
9.32
|
%
|
||||
Florida
|
174,612,816
|
8.61
|
%
|
||||
Texas
|
91,883,054
|
4.53
|
%
|
||||
Pennsylvania
|
87,007,262
|
4.29
|
%
|
||||
Ohio
|
71,876,962
|
3.54
|
%
|
||||
Illinois
|
66,141,335
|
3.26
|
%
|
||||
Maryland
|
65,386,568
|
3.22
|
%
|
||||
Michigan
|
62,870,798
|
3.10
|
%
|
||||
All
Others
|
716,360,014
|
35.31
|
%
|
||||
Not
Boarded*
|
9,626,489
|
0.47
|
%
|
||||
Total
|
$
|
2,028,659,902
|
100.00
|
%
|
June
30, 2007
|
||||||||||||||||
|
Contractual
Delinquency
|
Recency
Delinquency
|
||||||||||||||
Days
Past Due
|
Amount
|
%
|
Amount
|
%
|
||||||||||||
Current
|
0
- 30 days
|
$
|
1,101,749,313
|
54.31
|
%
|
$
|
1,250,018,729
|
61.62
|
%
|
|||||||
Delinquent
|
31
- 60 days
|
112,030,175
|
5.52
|
%
|
73,818,987
|
3.64
|
%
|
|||||||||
61
- 90 days
|
67,867,470
|
3.35
|
%
|
41,765,848
|
2.06
|
%
|
||||||||||
90+
days
|
219,997,673
|
10.84
|
%
|
136,041,067
|
6.70
|
%
|
||||||||||
UBankruptcyU
|
0
- 30 days
|
31,576,639
|
1.56
|
%
|
91,529,459
|
4.51
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
6,583,052
|
0.32
|
%
|
6,939,507
|
0.34
|
%
|
|||||||||
61
- 90 days
|
6,338,693
|
0.31
|
%
|
4,992,138
|
0.25
|
%
|
||||||||||
90+
days
|
107,217,088
|
5.29
|
%
|
48,254,368
|
2.38
|
%
|
||||||||||
|
||||||||||||||||
UForeclosureU
|
0
- 30 days
|
2,148,447
|
0.10
|
%
|
23,959,975
|
1.18
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
625,461
|
0.03
|
%
|
5,472,433
|
0.27
|
%
|
|||||||||
61
- 90 days
|
6,645,615
|
0.33
|
%
|
15,528,917
|
0.76
|
%
|
||||||||||
90+
days
|
254,366,935
|
12.54
|
%
|
218,825,133
|
10.79
|
%
|
||||||||||
Not
Boarded*
|
111,513,341
|
5.50
|
%
|
111,513,341
|
5.50
|
%
|
||||||||||
|
Total
|
$
|
2,028,659,902
|
100.00
|
%
|
$
|
2,028,659,902
|
100.00
|
%
|
|||||||
Total
loans
|
0
- 30 days
|
$
|
1,135,474,399
|
55.97
|
%
|
$
|
1,365,508,163
|
67.31
|
%
|
*
|
Not
boarded represents recently acquired loans serviced by the seller
on a
temporary basis. Approximately $93.5 million of these loans were
contractually current at the time of
acquisition.
|
December
31, 2006
|
||||||||||||||||
|
Contractual
Delinquency
|
Recency
Delinquency
|
||||||||||||||
Days
Past Due
|
Amount
|
%
|
Amount
|
%
|
||||||||||||
Current
|
0
- 30 days
|
$
|
868,344,388
|
52.29
|
%
|
$
|
1,003,457,115
|
60.43
|
%
|
|||||||
Delinquent
|
31
- 60 days
|
89,662,792
|
5.40
|
%
|
57,397,832
|
3.46
|
%
|
|||||||||
61
- 90 days
|
12,558,911
|
0.76
|
%
|
20,572,952
|
1.24
|
%
|
||||||||||
90+
days
|
195,922,320
|
11.80
|
%
|
85,060,512
|
5.12
|
%
|
||||||||||
Bankruptcy
|
0
- 30 days
|
38,276,181
|
2.31
|
%
|
101,649,384
|
6.12
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
8,523,006
|
0.51
|
%
|
6,957,591
|
0.42
|
%
|
|||||||||
61
- 90 days
|
3,231,686
|
0.19
|
%
|
2,920,336
|
0.18
|
%
|
||||||||||
90+
days
|
104,883,243
|
6.32
|
%
|
43,386,805
|
2.61
|
%
|
||||||||||
Foreclosure
|
0
- 30 days
|
622,379
|
0.04
|
%
|
8,371,118
|
0.50
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
214,085
|
0.01
|
%
|
1,789,362
|
0.11
|
%
|
|||||||||
61
- 90 days
|
244,283
|
0.02
|
%
|
2,593,268
|
0.16
|
%
|
||||||||||
90+
days
|
208,091,113
|
12.53
|
%
|
196,418,112
|
11.83
|
%
|
||||||||||
Not
Boarded(1)
|
129,906,356
|
7.82
|
%
|
129,906,356
|
7.82
|
%
|
||||||||||
Total(2)
|
$
|
1,660,480,743
|
100.00
|
%
|
$
|
1,660,480,743
|
100.00
|
%
|
||||||||
Total
loans
|
0
- 30 days
|
$
|
907,242,948
|
54.64
|
%
|
$
|
1,113,477,617
|
67.06
|
%
|
(1)
|
Not
boarded represents recently acquired loans serviced by the seller
on a
temporary basis. Approximately $93.2 million of these loans were
contractually current at the time of
acquisition.
|
(2) |
Excludes
$17.2 million of loans sold to investors, which the Company committed
to
repurchase, that are included on the face of the balance sheet at
December
31, 2006.
|
June
30, 2007
|
December
31, 2006
|
||||||
Performing
loans
|
$
|
1,151,646,479
|
$
|
866,296,721
|
|||
Allowance
for loan losses
|
2,790,659
|
7,745,261
|
|||||
Nonaccretable
discount*
|
64,768,963
|
29,536,412
|
|||||
Total
performing loans, net of allowance for loan losses
and
nonaccretable discount
|
1,084,086,857
|
829,015,048
|
|||||
Impaired
loans
|
264,302,051
|
251,210,748
|
|||||
Allowance
for loan losses
|
43,485,815
|
44,679,114
|
|||||
Nonaccretable
discount*
|
32,901,028
|
19,892,190
|
|||||
Total
impaired loans, net of allowance for loan losses
and
nonaccretable discount
|
187,915,208
|
186,639,444
|
|||||
Not
yet boarded onto servicing system
|
111,513,341
|
129,906,356
|
|||||
Nonaccretable
discount*
|
20,217,313
|
11,102,901
|
|||||
Not
yet boarded onto servicing system, net of allowance
for
loan losses and nonaccretable discount
|
91,296,028
|
118,803,455
|
|||||
Total
notes receivable, net of allowance for loan losses
and
nonaccretable discount
|
1,363,298,093
|
1,134,457,947
|
|||||
Accretable
discount*
|
17,248,794
|
12,842,755
|
|||||
Total
Notes Receivable, net of allowance for loan losses
and
accretable/nonaccretable discount
|
$
|
1,346,049,299
|
$
|
1,121,615,192
|
June
30, 2007
|
December
31, 2006
|
||||||
Performing
Loans:
|
|||||||
Fixed
rate
|
$
|
931,926,671
|
$
|
755,334,985
|
|||
Adjustable
rate
|
216,929,149
|
103,216,474
|
|||||
Total
Performing Loans
|
$
|
1,148,855,820
|
$
|
858,551,459
|
|||
Impaired
Loans:
|
|||||||
Fixed
rate
|
$
|
168,272,356
|
$
|
169,586,108
|
|||
Adjustable
rate
|
52,543,880
|
36,945,527
|
|||||
Total
Impaired Loans
|
$
|
220,816,236
|
$
|
206,531,635
|
|||
Not
Boarded Loans
|
$
|
111,513,341
|
$
|
129,906,356
|
|||
Total
Notes
|
$
|
1,481,185,397
|
$
|
1,194,989,450
|
|||
Accretable
discount
|
$
|
17,248,794
|
$
|
12,842,755
|
|||
Nonaccretable
discount
|
$
|
117,887,304
|
$
|
60,531,503
|
|||
Total
Notes Receivable, net of allowance for loan losses
|
$
|
1,346,049,299
|
$
|
1,121,615,192
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Number
of loans
|
3,876
|
3,740
|
5,990
|
6,278
|
|||||||||
Aggregate
unpaid principal balance at acquisition
|
$
|
311,210,405
|
$
|
133,462,289
|
$
|
457,506,807
|
$
|
237,289,905
|
|||||
Purchase
price
|
$
|
260,746,325
|
$
|
120,146,984
|
$
|
386,132,716
|
$
|
216,054,218
|
|||||
Purchase
price percentage
|
84
|
%
|
90
|
%
|
84
|
%
|
91
|
%
|
|||||
Percentage
of 1st
liens
|
42
|
%
|
7
|
%
|
45
|
%
|
11
|
%
|
|||||
Percentage
of 2nd
liens
|
58
|
%
|
93
|
%
|
55
|
%
|
89
|
%
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Sale
of Performing Loans
|
|||||||||||||
Aggregate
unpaid principal balance
|
$
|
22,255,982
|
$
|
-
|
$
|
22,255,982
|
$
|
-
|
|||||
Gain
on sale
|
$
|
31,118
|
$
|
-
|
$
|
31,118
|
$
|
-
|
|||||
Sale
of Non-Performing Loans
|
|||||||||||||
Aggregate
unpaid principal balance
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
161,149
|
|||||
Gain
on sale
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
69,049
|
|||||
Total
gain on sale
|
$
|
31,118
|
$
|
-
|
$
|
31,118
|
$
|
69,049
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Number
of loans originated
|
471
|
467
|
851
|
944
|
|||||||||
Original
principal balance(1)
|
$
|
118,699,834
|
$
|
99,638,002
|
$
|
209,863,371
|
$
|
204,413,207
|
|||||
Average
loan amount
|
$
|
252,017
|
$
|
213,358
|
$
|
246,608
|
$
|
216,539
|
|||||
Originated
as fixed
|
$
|
13,890,040
|
$
|
6,415,450
|
$
|
29,465,540
|
$
|
10,479,900
|
|||||
Originated
as ARM(2)
|
$
|
104,809,794
|
$
|
93,222,552
|
$
|
180,397,831
|
$
|
193,933,307
|
|||||
Number
of loans sold
|
104
|
119
|
119
|
144
|
|||||||||
Aggregate
face value
|
$
|
27,425,560
|
$
|
27,041,507
|
$
|
31,268,022
|
$
|
33,793,948
|
|||||
Gain
on sale
|
$
|
197,694
|
$
|
170,924
|
$
|
200,733
|
$
|
336,796
|
|||||
Gain
on sale percentage
|
0.72
|
%* |
0.63
|
%** |
0.64
|
%* |
1.00
|
%** |
Loans
Held for Investment
at
June 30, 2007
|
|||||||
UProperty
TypesU
|
UPrincipal
BalanceU
|
Percentage
of Total
UPrincipal
BalanceU
|
|||||
Residential
1-4 family
|
$
|
458,773,250
|
93.43
|
%
|
|||
Condos,
co-ops, PUD dwellings
|
29,775,910
|
6.07
|
%
|
||||
Commercial
|
2,268,040
|
0.46
|
%
|
||||
Other
|
205,918
|
0.04
|
%
|
||||
Total
|
$
|
491,023,118
|
100.00
|
%
|
Loans
Originated for
Six
Months Ended June 30, 2007
|
Loans
Held for Investment
at
June 30, 2007
|
||||||||||||
Location
|
Principal
Balance
|
Percentage
of Total
Principal
Balance
|
Principal
Balance
|
Percentage
of Total
Principal
Balance
|
|||||||||
New
Jersey
|
$
|
60,527,054
|
28.84
|
%
|
$
|
145,757,662
|
29.69
|
%
|
|||||
New
York
|
57,239,942
|
27.28
|
%
|
146,089,542
|
29.75
|
%
|
|||||||
Florida
|
15,849,845
|
7.55
|
%
|
28,104,029
|
5.72
|
%
|
|||||||
Pennsylvania
|
13,665,956
|
6.51
|
%
|
43,460,120
|
8.85
|
%
|
|||||||
Maryland
|
12,476,823
|
5.95
|
%
|
25,211,851
|
5.14
|
%
|
|||||||
Connecticut
|
9,755,406
|
4.65
|
%
|
17,831,379
|
3.63
|
%
|
|||||||
Massachusetts
|
9,626,200
|
4.59
|
%
|
28,214,793
|
5.75
|
%
|
|||||||
Virginia
|
8,275,220
|
3.94
|
%
|
16,900,335
|
3.44
|
%
|
|||||||
California
|
4,616,250
|
2.20
|
%
|
10,064,522
|
2.05
|
%
|
|||||||
North
Carolina
|
3,114,150
|
1.48
|
%
|
4,767,691
|
0.97
|
%
|
|||||||
All
Others
|
14,716,525
|
7.01
|
%
|
24,621,194
|
5.01
|
%
|
|||||||
Total
|
$
|
209,863,371
|
100.00
|
%
|
$
|
491,023,118
|
100.00
|
%
|
June
30, 2007
|
||||||||||||||||
Contractual
Delinquency
|
Recency
Delinquency
|
|||||||||||||||
Days
Past Due
|
Amount
|
%
|
Amount
|
%
|
||||||||||||
Current
|
0
- 30 days
|
$
|
254,561,907
|
50.79
|
%
|
$
|
299,147,753
|
59.68
|
%
|
|||||||
Delinquent
|
31
- 60 days
|
30,638,392
|
6.11
|
%
|
22,418,230
|
4.47
|
%
|
|||||||||
61
- 90 days
|
17,045,315
|
3.40
|
%
|
5,914,581
|
1.18
|
%
|
||||||||||
90+
days
|
46,922,792
|
9.36
|
%
|
21,687,842
|
4.33
|
%
|
||||||||||
UBankruptcyU
|
0
- 30 days
|
138,857
|
0.03
|
%
|
4,789,041
|
0.96
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
-
|
-
|
1,275,392
|
0.25
|
%
|
||||||||||
61
- 90 days
|
55,297
|
0.01
|
%
|
1,402,811
|
0.28
|
%
|
||||||||||
90+
days
|
19,179,533
|
3.83
|
%
|
11,906,443
|
2.38
|
%
|
||||||||||
UForeclosure*U
|
0
- 30 days
|
845,930
|
0.17
|
%
|
16,030,034
|
3.20
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
466,822
|
0.09
|
%
|
3,828,799
|
0.76
|
%
|
|||||||||
61
- 90 days
|
5,554,033
|
1.11
|
%
|
12,963,977
|
2.59
|
%
|
||||||||||
90+
days
|
125,789,153
|
25.10
|
%
|
99,833,128
|
19.92
|
%
|
||||||||||
|
Total
|
$
|
501,198,031
|
100.00
|
%
|
$
|
501,198,031
|
100.00
|
%
|
|||||||
Total
loans
|
0
- 30 days
|
$
|
255,546,694
|
50.99
|
%
|
$
|
319,966,828
|
63.84
|
%
|
*
|
$132.7
million of loans were in various stages of the foreclosure process;
our
servicing practice for this portfolio is to move loans into our
foreclosure collection process at an early stage of
delinquency.
|
December
31, 2006
|
||||||||||||||||
|
Contractual
Delinquency
|
Recency
Delinquency
|
||||||||||||||
Days
Past Due
|
Amount
|
%
|
Amount
|
%
|
||||||||||||
Current
|
0
- 30 days
|
$
|
188,855,227
|
45.72
|
%
|
$
|
239,784,515
|
58.05
|
%
|
|||||||
Delinquent
|
31
- 60 days
|
31,652,388
|
7.66
|
%
|
23,558,856
|
5.70
|
%
|
|||||||||
61
- 90 days
|
2,561,701
|
0.62
|
%
|
8,105,861
|
1.96
|
%
|
||||||||||
90+
days
|
76,292,627
|
18.47
|
%
|
27,912,711
|
6.76
|
%
|
||||||||||
UBankruptcyU
|
0
- 30 days
|
134,904
|
0.03
|
%
|
2,039,871
|
0.49
|
%
|
|||||||||
Delinquent
|
31
- 60 days
|
55,652
|
0.02
|
%
|
330,509
|
0.08
|
%
|
|||||||||
61
- 90 days
|
-
|
-
|
-
|
-
|
||||||||||||
90+
days
|
|
9,885,179
|
2.39
|
%
|
7,705,355
|
1.87
|
%
|
|||||||||
|
||||||||||||||||
UForeclosure(1)
|
0
- 30 days
|
-
|
-
|
1,894,422
|
0.46
|
%
|
||||||||||
Delinquent
|
31
- 60 days
|
-
|
-
|
621,003
|
0.15
|
%
|
||||||||||
61
- 90 days
|
-
|
-
|
1,258,886
|
0.31
|
%
|
|||||||||||
90+
days
|
103,629,240
|
25.09
|
%
|
99,854,929
|
24.17
|
%
|
||||||||||
|
Total(2)
|
$
|
413,066,918
|
100.00
|
%
|
$
|
413,066,918
|
100.00
|
%
|
|||||||
Total
loans
|
0
- 30 days
|
$
|
188,990,131
|
45.75
|
%
|
$
|
243,718,808
|
59.00
|
%
|
(1)
|
$103.6
million of loans were in various stages of the foreclosure process;
our
servicing practice for this portfolio is to move loans into our
foreclosure collection process at an early stage of
delinquency.
|
(2)
|
Excludes
$17.2 million of loans sold to investors, which the Company committed
to
repurchase, that are included on the face of the balance sheet at
December
31, 2006.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Other
real estate owned
|
$
|
33,142,484
|
$
|
19,394,263
|
$
|
33,142,484
|
$
|
19,394,263
|
|||||
OREO
as a percentage of total assets
|
1.67
|
%
|
1.32
|
%
|
1.67
|
%
|
1.32
|
%
|
|||||
OREO
sold
|
$
|
7,574,705
|
$
|
8,284,103
|
$
|
15,927,485
|
$
|
15,830,201
|
|||||
Gain
on sale
|
$
|
117,632
|
$
|
440,741
|
$
|
238,807
|
$
|
1,242,283
|
Prime
rate plus a margin of 0.50% to 1.75%
|
$
|
2,929,359
|
||
FHLB
30-day LIBOR advance rate plus 2.00%
|
158,158,300
|
|||
FHLB
30-day LIBOR advance rate plus 2.30%
|
143,413,370
|
|||
FHLB
30-day LIBOR advance rate plus 2.35%
|
552,501,874
|
|||
FHLB
30-day LIBOR advance rate plus 2.50%
|
1,003,496,038
|
|||
FHLB
30-day LIBOR advance rate plus 3.375%
|
352,102
|
|||
FHLB
30-day LIBOR advance rate plus 3.875%
|
852,409
|
|||
$
|
1,861,703,452
|
For
Loans Funded
|
||||
Prior
to July 1, 2005
|
On
or After July 1, 2005
|
|||
If
the 30-day advance rate is
|
the
applicable margin is
|
the
applicable margin is
|
||
Less
than 2.26%
|
350
basis points
|
300
basis points
|
||
2.26
to 4.50%
|
325
basis points
|
275
basis points
|
||
Greater
than 4.50%
|
300
basis points
|
250
basis points
|
If
the 30-day advance rate is
|
the
applicable margin is
|
Less
than 2.26%
|
300
basis points
|
2.26
to 4.50%
|
260
basis points
|
Greater
than 4.50%
|
235
basis points
|
If
the 30-day advance rate is
|
the
applicable margin is
|
Less
than 2.26%
|
300
basis points
|
2.26
to 4.50%
|
225
basis points
|
Greater
than 4.50%
|
200
basis points
|
For
Loans Funded
|
||||||
Prior
to November 15, 2006
|
On
or After November 15, 2006
|
|||||
Purchase
of First Mortgages
|
Tribeca
Originated Loans/
Second
Mortgage Purchases
|
|||||
If
the 30-day advance rate is
|
the
applicable margin is
|
the
applicable margin is
|
the
applicable margin is
|
|||
Less
than 2.26%
|
300
basis points
|
300
basis points
|
300
basis points
|
|||
2.26
to 4.50%
|
275
basis points
|
225
basis points
|
260
basis points
|
|||
Greater
than 4.50%
|
250
basis points
|
200
basis points
|
235
basis points
|
If
the 30-day advance rate is
|
the
applicable margin is
|
Less
than 2.26%
|
300
basis points
|
2.26
to 4.50%
|
275
basis points
|
Greater
than 4.50%
|
250
basis points
|
Interest
Rate Caps
|
Notional
Amount
|
Expiration
Date
|
Premium
Paid
|
Fair
Value
|
|||||||||
Cap
1
|
$
|
300,000,000
|
August
31, 2007
|
$
|
101,000
|
$
|
-
|
||||||
Cap
2
|
500,000,000
|
August
31, 2007
|
60,000
|
-
|
|||||||||
Total
|
$
|
800,000,000
|
$
|
161,000
|
$
|
-
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
CONTROLS
AND PROCEDURES
|
LEGAL
PROCEEDINGS
|
RISK
FACTORS
|
·
|
If
we are not able to identify and acquire portfolios of “scratch and dent”
residential mortgage loans on terms acceptable to us, our revenues
and
profitability could be materially
reduced.
|
·
|
We
may not be able to successfully market our residential mortgage loan
origination products to non-prime
borrowers.
|
·
|
Our
business is dependent on external financing, and we currently receive
the
substantial majority of our financing from a single lender. If our
principal lender ceases to provide financing to us or increases the
cost
to us of such financing and we are unable to access alternative external
sources of financing on favorable terms or at all, we would not be
able to
fund and grow our operations and our business will be materially
harmed.
|
·
|
The
completed merger of our principal lender, Sky Bank, with Huntington
Bancshares Inc., could harm our ability to borrow funds to support
our
business.
|
·
|
Our
ability to fund increased operating expenses depends on the agreement
of
our principal lender to increases in our operating
allowance.
|
·
|
If
our principal lender ceases to renew our maturing loans for additional
terms or provide us with refinancing opportunities, or we are unable
to
secure refinancing opportunities with other lenders, our indebtedness
will
become due and payable upon the contractual maturity of each
borrowing.
|
·
|
Our
credit facilities require us to observe certain covenants, and our
failure
to satisfy such covenants could render us insolvent or preclude our
seeking additional financing from this or other
sources.
|
·
|
Our
business is sensitive to, and can be materially affected by, changes
in
interest rates.
|
·
|
A
prolonged economic slowdown or a lengthy or severe recession could
harm
our operations, particularly if it results in a decline in the real
estate
market. During the past year, residential real estate values in many
markets have been declining and could harm our financial
performance.
|
·
|
The
residential mortgage origination business is a cyclical industry,
with
volumes recently reaching their highest levels ever, volumes and
profitability declining in 2006 and continuing to decline in the
first
half of 2007, which could reduce the number of mortgage loans we
originate
and could adversely impact our
business.
|
·
|
Our
reliance on cash-out refinancings as a significant source of our
origination activities increases the risk that our earnings will
be harmed
if the demand for this type of refinancing
declines.
|
·
|
When
we acquire S&D loans, the price we pay is based on a number of
assumptions. A material difference between the assumptions we use
in
determining the value of S&D loans we acquire and our actual
experience could harm our financial
position.
|
·
|
We
may experience higher loan losses than we have reserved for in our
financial statements.
|
·
|
We
use estimates for recognizing revenue on a majority of our portfolio
investments and our earnings would be reduced if actual results are
less
than our estimates.
|
·
|
If
we do not manage our growth effectively, our financial performance
could
be harmed.
|
·
|
The
inability to attract and retain qualified employees could significantly
harm our business.
|
·
|
We
may have to outsource a portion of the servicing of the loans we
hold due
to capacity constraints or lack of sufficient
personnel.
|
·
|
We
face intense competition that could adversely impact our market share
and
our revenues.
|
·
|
A
significant amount of our mortgage loan originations and acquisitions
are
secured by property in California, New York, New Jersey and Florida,
and
our operations could be harmed by economic downturns or other adverse
events in these states, including substantial and/or sustained declines
in
residential real estate values.
|
·
|
Competition
with other lenders for the business of independent mortgage brokers
could
negatively affect the volume and pricing of our originated
loans.
|
·
|
We
may not be adequately protected against the risks inherent in subprime
residential mortgage loans.
|
·
|
We
are subject to losses due to fraudulent and negligent acts on the
part of
loan applicants, mortgage brokers, sellers of loans we acquire, vendors
and our employees.
|
·
|
An
interruption in or breach of our information systems may result in
lost
business and increased expenses.
|
·
|
The
success and growth of our business will depend on our ability to
adapt to
and implement technological changes to remain competitive, and any
failure
to do so could result in a material adverse effect on our
business.
|
·
|
We
are exposed to the risk of environmental liabilities with respect to
properties to which we take title.
|
·
|
A
loss of our Chairman may adversely affect our
operations.
|
·
|
If
we do not obtain and maintain the appropriate state licenses we will
not
be allowed to originate, purchase and service mortgage loans in some
states, which would adversely affect our
operations.
|
·
|
We
may become subject to liability and incur increased expenditures
as a
result of our restatement of our financial
statements.
|
·
|
Failures
in our internal controls and disclosure controls and procedures could
lead
to material errors in our financial statements and cause us to fail
to
meet our reporting obligations.
|
·
|
New
legislation and regulations directed at curbing predatory lending
practices could restrict our ability to originate, purchase, price,
sell,
or finance non-prime residential mortgage loans, which could adversely
impact our earnings.
|
·
|
The
broad scope of our operations exposes us to risks of noncompliance
with an
increasing and inconsistent body of complex laws and regulations
at the
federal, state and local levels.
|
·
|
If
financial institutions face exposure stemming from legal violations
committed by the companies to which they provide financing or underwriting
services, this could increase our borrowing costs and negatively
affect
the market for whole-loans and mortgage-backed
securities.
|
·
|
We
may be subject to fines or other penalties based upon the conduct
of our
independent brokers.
|
·
|
We
are subject to significant legal and reputational risks and expenses
under
federal and state laws concerning privacy, use and security of customer
information.
|
·
|
If
many of our borrowers become subject to the Servicemembers Civil
Relief
Act of 2003, our cash flows and interest income may be adversely
affected.
|
·
|
Thomas
J. Axon effectively controls our company, substantially reducing
the
influence of our other
stockholders.
|
·
|
Our
organizational documents, Delaware law and our credit facility may
make it
harder for us to be acquired without the consent and cooperation
of our
board of directors, management and
lender.
|
·
|
Our
quarterly operating results may fluctuate and cause our stock price
to
decline.
|
·
|
Various
factors unrelated to our performance may cause the market price of
our
common stock to become volatile, which could harm our ability to
access
the capital markets in the future.
|
·
|
Future
sales of our common stock may depress our stock
price.
|
·
|
Compliance
with the rules of the market in which our common stock trades and
proposed
and recently enacted changes in securities laws and regulations are
likely
to increase our costs.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
DEFAULTS
UPON SENIOR SECURITIES
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
Director
|
For
|
Withhold
|
Abstain
|
Not
Voted
|
Total
|
|||||||||||
Thomas
J. Axon
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Alexander
Gordon Jardin
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
William
F. Sullivan
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Michael
Bertash
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Robert
M. Chiste
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Frank
B. Evans
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Steven
W. Lefkowitz
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
|||||||||||
Allan
R. Lyons
|
7,051,661
|
235
|
12,830
|
944,572
|
8,009,298
|
For
|
Against
|
Abstain
|
Not
Voted
|
Total
|
|||||||||
3,725,667
|
505
|
3,333,554
|
944,572
|
8,009,298
|
OTHER
INFORMATION
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EXHIBITS
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Exhibit
Number
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||
3.1
|
Fifth
Amended and Restated Certificate of Incorporation. Incorporated by
reference to Appendix A to the Registrant’s Definitive Information
Statement on Schedule 14C, filed with the Securities and Exchange
Commission (the “Commission”) on January 20, 2005.
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|
3.2
|
Amended
and Restated By-laws. Incorporated by reference to Appendix B to
the
Registrant’s Definitive Information Statement on Schedule 14C, filed with
the Commission on January 20, 2005.
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31.1*
|
Rule
13a-14(a) Certification of Chief Executive Officer of the Registrant
in
accordance with Section 302 of the Sarbanes-Oxley Act of
2002.
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31.2*
|
Rule
13a-14(a) Certification of Chief Financial Officer of the Registrant
in
accordance with Section 302 of the Sarbanes-Oxley Act of
2002.
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|
32.1*
|
Certification
of Chief Executive Officer of the Registrant in accordance with Section
906 of the Sarbanes-Oxley Act of 2002.
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32.2*
|
Certification
of Chief Financial Officer of the Registrant in accordance with Section
906 of the Sarbanes-Oxley Act of
2002.
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FRANKLIN CREDIT MANAGEMENT CORPORATION | ||
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By: | /s/ ALEXANDER GORDON JARDINU | |
Alexander
Gordon Jardin
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||
Chief
Executive Officer
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Signature
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Title
|
Date
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||
U/s/
ALEXANDER GORDON JARDIN
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Chief
Executive Officer
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August
14, 2007
|
||
Alexander
Gordon Jardin
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||||
(Principal
Executive Officer)
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||||
Executive
Vice President
U
|
August
14, 2007
|
|||
Paul
D. Colasono
|
and
Chief Financial Officer
|
U
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||
(Principal
Financial Officer)
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