UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
DC 20549
  FORM
10-Q
  x
                        QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934For
      the quarterly period ended March 31, 2009ORo
                        TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period from  
to ____________
  Commission
file number 001-32216
  NEW
YORK MORTGAGE TRUST, INC.
 (Exact
Name of Registrant as Specified in Its Charter)
 
 Maryland
              47-0934168(State
      or Other Jurisdiction of
                Incorporation
      or Organization)
              (I.R.S.
      Employer
                Identification
      No.)
 
 52
Vanderbilt Avenue, Suite 403, New York, New York 10017
 (Address
of Principal Executive Office) (Zip Code)
  (212)
792-0107
 (Registrant’s
Telephone Number, Including Area Code)
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 Yes x
    No o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 Yes o
    No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filers” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one.):
 
 Large
      Accelerated Filer o
              Accelerated
      Filer o
              Non-Accelerated
      Filer x
              Smaller
      Reporting Company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes o    No
x
 
 The
number of shares of the registrant’s common stock, par value $.01 per share,
outstanding on May 6, 2009 was 9,320,094
  
 NEW
YORK MORTGAGE TRUST, INC.
  FORM
10-Q
   PART
      I. Financial Information
                        2Item 1. Condensed Consolidated Financial
      Statements (unaudited)
                        2CONDENSED
      CONSOLIDATED BALANCE SHEETS
                        2CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
                        3CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                        4CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        5NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        6Item 2. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations
                        24Item 3. Quantitative and Qualitative
      Disclosures about Market Risk
                        39Item 4. Controls and
      Procedures
                        44PART
      II. OTHER INFORMATION
                        44Item 1A.  Risk
      Factors
                        44Item 6. Exhibits
                        44SIGNATURE
                        45
 
 
 PART
I.  FINANCIAL INFORMATION
  Item
1.Condensed Consolidated Financial Statements
(unaudited)
  NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  (amounts
in thousands, except share and per share amounts)
 (unaudited)
  March
      31, 2009
                    
                    
                    December 31,2008ASSETSCash
      and cash equivalents
                    
                    $
                    44,990
                    
                    
                    $
                    9,387Restricted
      cash
                    
                    
                    4,249
                    
                    
                    
                    7,959Investment
      securities - available for sale, at fair value (including pledged
      securities of $305,004 and $456,506, respectively)
                    
                    
                    313,630
                    
                    
                    
                    477,416Receivable
      for securities sold
                    
                    
                    18,203
                    
                    
                    
                    —Accounts
      and accrued interest receivable
                    
                    
                    2,800
                    
                    
                    
                    3,095Mortgage
      loans held in securitization trusts (net)
                    
                    
                    335,980
                    
                    
                    
                    348,337Derivative
      assets
                    
                    
                    9
                    
                    
                    
                    22Prepaid
      and other assets
                    
                    
                    1,502
                    
                    
                    
                    1,230Assets
      related to discontinued operation
                    
                    
                    4,784
                    
                    
                    
                    5,854Total
      Assets
                    
                    $
                    726,147
                    
                    
                    $
                    853,300LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilities:Financing
      arrangements, portfolio investments
                    
                    $
                    276,182
                    
                    
                    $
                    402,329Collateralized
      debt obligations
                    
                    
                    323,645
                    
                    
                    
                    335,646Derivative
      liabilities
                    
                    
                    4,007
                    
                    
                    
                    4,194Payable
      for securities purchased
                    
                    
                    8,998
                    
                    
                    
                    —Accounts
      payable and accrued expenses
                    
                    
                    4,001
                    
                    
                    
                    3,997Subordinated
      debentures (net)
                    
                    
                    44,687
                    
                    
                    
                    44,618Convertible
      preferred debentures (net)
                    
                    
                    19,739
                    
                    
                    
                    19,702Liabilities
      related to discontinued operation
                    
                    
                    3,371
                    
                    
                    
                    3,566Total
      liabilities
                    
                    
                    684,630
                    
                    
                    
                    814,052Commitments
      and ContingenciesStockholders’
      Equity:Common
      stock, $0.01 par value, 400,000,000 authorized, 9,320,094 and 9,320,094,
      shares issued and outstanding, respectively
                    
                    
                    93
                    
                    
                    
                    93Additional
      paid-in capital
                    
                    
                    149,112
                    
                    
                    
                    150,790Accumulated
      other comprehensive loss
                    
                    
                    (6,628
                    )
                    
                    
                    (8,521
                    )Accumulated
      deficit
                    
                    
                    (101,060
                    )
                    
                    
                    (103,114
                    )Total
      stockholders’ equity
                    
                    
                    41,517
                    
                    
                    
                    39,248Total
      Liabilities and Stockholders’ Equity
                    
                    $
                    726,147
                    
                    
                    $
                    853,300
 
 See
notes to condensed consolidated financial statements.
  2
 NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
  (amounts
in thousands, except per share amounts)
 (unaudited)
  For
      the Three Months Ended March 31,2009
                            
                            
                            2008REVENUE:Interest
      income-investment securities and loans held in securitization
      trusts
                            
                            $
                            8,585
                            
                            
                            $
                            13,253Interest
      expense-investment securities and loans held in securitization
      trusts
                            
                            
                            3,130
                            
                            
                            
                            10,514Net
      interest income from investment securities and loans held in
      securitization trusts
                            
                            
                            5,455
                            
                            
                            
                            2,739Interest
      expense – subordinated debentures
                            
                            
                            (824
                            )
                            
                            
                            (959
                            )Interest
      expense – convertible preferred debentures
                            
                            
                            (537
                            )
                            
                            
                            (506
                            )Net
      interest income
                            
                            
                            4,094
                            
                            
                            
                            1,274OTHER
      EXPENSE:Provision
      for loan losses
                            
                            
                            (629
                            )
                            
                            
                            (1,433
                            )Impairment
      loss on investment securities
                            
                            
                            (119
                            )
                            
                            
                            —Realized
      gain (loss) on securities and related hedges
                            
                            
                            123
                            
                            
                            
                            (19,848
                            )Total
      other expense
                            
                            
                            (625
                            )
                            
                            
                            (21,281
                            )EXPENSE:Salaries
      and benefits
                            
                            
                            541
                            
                            
                            
                            313Professional
      fees
                            
                            
                            341
                            
                            
                            
                            352Management
      fees
                            
                            
                            182
                            
                            
                            
                            109Insurance
                            
                            
                            92
                            
                            
                            
                            180Other
                            
                            
                            414
                            
                            
                            
                            477Total
      expenses
                            
                            
                            1,570
                            
                            
                            
                            1,431INCOME
      (LOSS) FROM CONTINUING OPERATIONS
                            
                            
                            1,899
                            
                            
                            
                            (21,438
                            )Income
      from discontinued operation - net of tax
                            
                            
                            155
                            
                            
                            
                            180NET
      INCOME (LOSS)
                            
                            $
                            2,054
                            
                            
                            $
                            (21,258
                            )Basic
      income (loss) per common share
                            
                            $
                            0.22
                            
                            
                            $
                            (4.19
                            )Diluted
      income (loss) per common share
                            
                            $
                            0.22
                            
                            
                            $
                            (4.19
                            )Dividends
      declared per share common share
                            
                            $
                            0.18
                            
                            
                            $
                            —Weighted
      average shares outstanding-basic
                            
                            
                            9,320
                            
                            
                            
                            5,070Weighted
      average shares outstanding-diluted
                            
                            
                            11,820
                            
                            
                            
                            5,070
 
 See
notes to condensed consolidated financial statements.
  3
 NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
  For
the three months ended March 31, 2009
  (dollar
amounts in thousands)
 (unaudited)
  Common
                            Stock
                          
                          
                          Additional
                            Paid-In
                            Capital
                          
                          
                          Accumulated
      Deficit
                          
                          
                          Accumulated
                            Other
                            Comprehensive
                            Income (Loss)
                          
                          
                          Comprehensive
                            Income
                          
                          
                          TotalBalance,
      January 1, 2009
                          
                          $
                          93
                          
                          
                          $
                          150,790
                          
                          
                          $
                          (103,114
                          )
                          
                          $
                          (8,521
                          )
                          
                          
                          
                          
                          $
                          39,248Net
      income
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          2,054
                          
                          
                          
                          —
                          
                          
                          $
                          2,054
                          
                          
                          
                          2,054Dividends
      declared
                          
                          
                          —
                          
                          
                          
                          (1,678
                          )
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (1,678
                          )Increase
      in net unrealized gain on investment available for sale
      securities
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          1,478
                          
                          
                          
                          1,478
                          
                          
                          
                          1,478Increase
      in derivative instruments utilized for cash flow
hedge
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          415
                          
                          
                          
                          415
                          
                          
                          
                          415Comprehensive
      income
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          $
                          3,947Balance,
      March 31, 2009
                          
                          $
                          93
                          
                          
                          $
                          149,112
                          
                          
                          $
                          (101,060
                          )
                          
                          $
                          (6,628
                          )
                          
                          
                          
                          
                          
                          $
                          41,517
   See
notes to condensed consolidated financial statements.
  4
  NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
  (dollar
amounts in thousands)
 (unaudited)
  For the Three Months
      Ended March
      31,2009
                                                                
                                                                
                                                                2008Cash
      Flows from Operating Activities:Net
      income (loss)
                                                                
                                                                $
                                                                2,054
                                                                
                                                                
                                                                $
                                                                (21,258
                                                                )Adjustments
      to reconcile net loss to net cash provided by (used in)
      operating activities:Depreciation
      and amortization
                                                                
                                                                
                                                                353
                                                                
                                                                
                                                                
                                                                332(Accretion)
      Amortization of (discount) premium on investment securities and mortgage
      loans held in securitization trusts
                                                                
                                                                
                                                                (98
                                                                )
                                                                
                                                                
                                                                224(Gain)loss
      on securities and related hedges
                                                                
                                                                
                                                                (123
                                                                )
                                                                
                                                                
                                                                19,848Impairment
      loss on investment securities
                                                                
                                                                
                                                                119
                                                                
                                                                
                                                                
                                                                —Provision
      for loan losses
                                                                
                                                                
                                                                629
                                                                
                                                                
                                                                
                                                                1,109Lower
      of cost or market adjustments
                                                                
                                                                
                                                                103
                                                                
                                                                
                                                                
                                                                86Changes
      in operating assets and liabilities:Accounts
      and accrued interest receivable
                                                                
                                                                
                                                                303
                                                                
                                                                
                                                                
                                                                724Prepaid
      and other assets
                                                                
                                                                
                                                                (281
                                                                )
                                                                
                                                                
                                                                540Due
      to loan purchasers
                                                                
                                                                
                                                                (19
                                                                )
                                                                
                                                                
                                                                500Accounts
      payable and accrued expenses
                                                                
                                                                
                                                                (1,687
                                                                )
                                                                
                                                                
                                                                (3,039
                                                                )Payments
      received on loans held for sale
                                                                
                                                                
                                                                961
                                                                
                                                                
                                                                
                                                                1,782Net
      cash provided by operating activities:
                                                                
                                                                
                                                                2,314
                                                                
                                                                
                                                                
                                                                848Cash
      Flows from Investing Activities:Decrease
      in restricted cash
                                                                
                                                                
                                                                3,710
                                                                
                                                                
                                                                
                                                                6,146Purchases
      of investment securities
                                                                
                                                                
                                                                (7,728
                                                                )
                                                                
                                                                
                                                                (801,746
                                                                )Proceeds
      from sale of investment securities
                                                                
                                                                
                                                                144,502
                                                                
                                                                
                                                                
                                                                587,704Principal
      repayments received on mortgage loans held in securitization
      trusts
                                                                
                                                                
                                                                11,492
                                                                
                                                                
                                                                
                                                                30,754Principal
      paydown on investment securities - available for sale
                                                                
                                                                
                                                                19,510
                                                                
                                                                
                                                                
                                                                25,602Net
      cash provided (used in) by investing activities
                                                                
                                                                
                                                                171,486
                                                                
                                                                
                                                                
                                                                (151,540
                                                                )Cash
      Flows from Financing Activities:Proceeds
      from common stock issued (net)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                56,628Proceeds
      from convertible preferred debentures
 (net)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                19,590Payments
      made for termination of swaps
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (8,333
                                                                )(Decrease)
      increase in financing arrangements
                                                                
                                                                
                                                                (126,147
                                                                )
                                                                
                                                                
                                                                115,934Collateralized
      debt obligation paydowns
                                                                
                                                                
                                                                (12,050
                                                                )
                                                                
                                                                
                                                                (30,623
                                                                )Net
      cash (used in) provided by financing activities
                                                                
                                                                
                                                                (138,197
                                                                )
                                                                
                                                                
                                                                153,196Net
      Increase in Cash and Cash Equivalents
                                                                
                                                                
                                                                35,603
                                                                
                                                                
                                                                
                                                                2,504Cash
      and Cash Equivalents - Beginning of Period
                                                                
                                                                
                                                                9,387
                                                                
                                                                
                                                                
                                                                5,508Cash
      and Cash Equivalents - End of Period
                                                                
                                                                $
                                                                44,990
                                                                
                                                                
                                                                $
                                                                8,012Supplemental
      DisclosureCash
      paid for interest
                                                                
                                                                $
                                                                4,033
                                                                
                                                                
                                                                $
                                                                11,689Non Cash Investing
    ActivitiesPurchase
      of investment securities
                                                                
                                                                $
                                                                8,998
                                                                
                                                                
                                                                $
                                                                —Proceeds
      from sale of investment securities
                                                                
                                                                $
                                                                18,203
                                                                
                                                                
                                                                $
                                                                —Non
      Cash Financing ActivitiesDividends
      declared to be paid in subsequent period
                                                                
                                                                $
                                                                1,678
                                                                
                                                                
                                                                $
                                                                —
 
 5
 NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (unaudited)
 
 1.
              Organization
      and Summary of Significant Accounting
Policies
  Organization - New York
Mortgage Trust, Inc. together with its consolidated subsidiaries (“NYMT”, the
“Company”, “we”, “our”, and “us”) is a self-advised real estate investment
trust, or REIT, in the business of investing in residential adjustable rate
mortgage-backed securities issued by a United States government-sponsored
enterprise (“GSE” or “Agency”), such as the Federal National Mortgage
Association (“Fannie Mae”), or the Federal Home Loan Mortgage Corporation
(“Freddie Mac”), prime credit quality residential adjustable-rate mortgage
(“ARM”) loans, or prime ARM loans, and non-agency mortgage-backed securities. We
refer to residential adjustable rate mortgage-backed securities throughout this
Quarterly Report on Form 10-Q as “RMBS” and RMBS issued by a GSE as “Agency
RMBS”. We also invest, although to a lesser extent, in certain alternative real
estate related and financial assets that present greater credit risk and less
interest rate risk than our current RMBS investments and prime ARM
loans.  We refer to our investment in these alternative assets as our
“alternative investment strategy.” We seek attractive long-term investment
returns by investing our equity capital and borrowed funds in such securities.
Our principal business objective is to generate net income for distribution to
our stockholders resulting from the spread between the interest and other income
we earn on our interest-earning assets and the interest expense we pay on the
borrowings that we use to finance these assets, which we refer to as our net
interest income.
  The
Company conducts its business through the parent company, NYMT, and several
subsidiaries, including special purpose subsidiaries established for loan
securitization purposes, a taxable REIT subsidiary ("TRS") and a qualified
REIT subsidiary ("QRS").  The Company conducts certain
of its operations related to its alternative investment strategy
through its wholly-owned TRS, Hypotheca Capital, LLC (“HC”), in order to
utilize some or all of a net operating loss carry-forward held in HC that
resulted from the Company's exit from the mortgage lending
business.  Prior to March 31, 2007, the Company conducted
substantially all of its mortgage lending business through
HC.   The Company's wholly-owned QRS, New York Mortgage
Funding, LLC (“NYMF”), currently holds certain mortgage-related
assets under our principal investment strategy for regulatory
compliance purposes.  The Company also may conduct certain of its
operations related to its alternative investment strategy through NYMF. 
The Company consolidates all of its subsidiaries under generally accepted
accounting principals in the United States of America (“GAAP”).
 
 The
Company is organized and conducts its operations to qualify as a REIT for
federal income tax purposes. As such, the Company will generally not be subject
to federal income tax on that portion of its income that is distributed to
stockholders if it distributes at least 90% of its REIT taxable income to its
stockholders by the due date of its federal income tax return and complies with
various other requirements.
 
 Basis of Presentation - The
condensed consolidated balance sheets at March 31, 2009 and December 31, 2008,
the condensed consolidated statements of operations for the three months ended
March 31, 2009 and 2008, and the condensed consolidated statements of cash flows
for the three months ended March 31, 2009 and 2008 are unaudited.  In
our opinion, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows have been made.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted in accordance with Article 10 of
Regulation S-X and the instructions to Form 10-Q.  These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2008, as filed with the
Securities and Exchange Commission (“SEC”).  The results of operations
for the three months ended March 31, 2009 are not necessarily indicative of the
operating results for the full year.
  The
accompanying condensed consolidated financial statements include our accounts
and those of our consolidated subsidiaries.  All significant
intercompany amounts have been eliminated.  The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
periods.  Actual results could differ from those
estimates.
  6
 New Accounting Pronouncements -In June 2007, the Emerging Issues Task Force (“EITF”) reached consensus
on Issue No. 06-11, Accounting for Income Tax Benefits
of Dividends on Share-Based Payment Award.  EITF Issue
No. 06-11 requires that the tax benefit related to dividend equivalents
paid on restricted stock units that are expected to vest, be recorded as an
increase to additional paid-in capital.  The Company currently
accounts for this tax benefit as a reduction to income tax
expense.  EITF Issue No. 06-11 is to be applied prospectively for
tax benefits on dividends declared in fiscal years beginning after
December 15, 2008, and the Company adopted the provisions of EITF
Issue No. 06-11 during the first quarter of 2009.  The adoption
of EITF Issue No. 06-11 did not have a material effect on the Company’s
condensed consolidated financial statements.
  In
December 2007, the Financial Accoounting Statements Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations and
issued SFAS No. 141(R) Business
Combinations.  SFAS No. 141(R) broadens the guidance of SFAS
No. 141, extending its applicability to all transactions and other events in
which one entity obtains control over one or more other
businesses.  It broadens the fair value measurement and recognition of
assets acquired, liabilities assumed, and interests transferred as a result of
business combinations; and it stipulates that acquisition related costs be
generally expensed rather than included as part of the basis of the
acquisition.  SFAS No. 141(R) expands required disclosures to improve the
ability to evaluate the nature and financial effects of business
combinations.  SFAS No. 141(R) is effective for all transactions the
Company closes, on or after January 1, 2009.  The Company adopted SFAS No.
141(R) as of January 1, 2009 and it has not had a material impact on the
Company’s condensed consolidated financial statements.
  In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No.
51.  SFAS No. 160 requires a noncontrolling interest in a
subsidiary to be reported as equity and the amount of consolidated net income
specifically attributable to the noncontrolling interest to be identified in the
consolidated financial statements.  SFAS No. 160 also calls for
consistency in the manner of reporting changes in the parent’s ownership
interest and requires fair value measurement of any noncontrolling equity
investment retained in a deconsolidation.  SFAS No. 160 is effective
for the Company on January 1, 2009 and most of its provisions will apply
prospectively.  The Company adopted SFAS No. 160 as of January 1, 2009
and it has not had a material impact on the Company’s condensed consolidated
financial statements.
  In
February 2008, the FASB issued FASB Staff Position (“FSP”) No. 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions.  SFAS
No. 140-3 requires an initial transfer of a financial asset and a repurchase
financing that was entered into contemporaneously or in contemplation of the
initial transfer to be evaluated as a linked transaction under SFAS
No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(“SFAS No. 140”) unless certain criteria are met, including that the
transferred asset must be readily obtainable in the marketplace.  The
Company adopted FSP as of January 1, 2009 and it had no impact on the Company’s
condensed consolidated financial statements.
  In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No.
133.SFAS No. 161 requires enhanced disclosures
about an entity’s derivative and hedging activities, and is effective for
financial statements the Company issues for fiscal years beginning after
November 15, 2008, with early application encouraged.  Because
SFAS No. 161 requires only additional disclosures concerning
derivatives and hedging activities, adoption of SFAS No. 161 did not
affect the Company’s financial condition, results of operations or cash flows.
The Company adopted SFAS No. 161 in the first quarter of 2009 and
expanded the footnote disclosure included in the condensed consolidated
financial statements (see note 4).
  In May
2008, the FASB issued FSP No. APB 14-1,Accounting for Convertible Debt
Instruments that may beSettled in Cash upon Conversion
(Including Partial Cash Settlement). The FSP requires the initial
proceeds from the sale of our convertible preferred debentures to be allocated
between a liability component and an equity component.  The resulting
discount would be amortized using the effective interest method over the period
the debt is expected to remain outstanding asadditional
interest expense.  The FSP is effective for our fiscal year beginning
on January 1, 2009 and requires retroactive application. The Company adopted FSP
as of January 1, 2009 and it had no impact on the Company’s condensed
consolidated financial statements.
  On
October 10, 2008, the FASB issued FSP SFAS No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not
Active.  SFAS FSP No. 157-3 clarifies the application of SFAS
No. 157 in a market that is not active and provides an example to illustrate key
consideration in determining the fair value of a financial asset when the market
for that financial asset is not active.  The issuance of FSP SFAS No.
157-3 did not have any impact on the Company’s determination of fair value for
its financial assets.
  7
 In April
2009, the FASB issued FSP SFAS No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly(“FSP No.
157-4”), to provide additional guidance for estimating fair value in accordance
with SFAS No. 157 when the volume and level of activity for the asset or
liability have significantly decreased as well as on identifying circumstances
that indicate that a transaction is not orderly. FSP No. 157-4 provides
additional guidance on determining fair value when the volume and level of
activity for the asset or liability have significantly decreased when compared
with normal market activity for the asset or liability (or similar assets or
liabilities). FSP No. 157-4 further amends SFAS 157 to require the disclosure in
interim and annual periods of the inputs and valuation technique(s) used to
measure fair value and a discussion of changes in valuation techniques and
related inputs, if any, during the period.  FSP No. 157-4 is effective
for the Company’s interim and annual reporting periods ending after June 15,
2009, and should be applied prospectively. The Company is currently evaluating
the impact the adoption of FSP No. 157-4 will have on the Company’s financial
statements.
  In April
2009, the FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which provides additional guidance on
the recognition, presentation and disclosure of losses in earnings for the
impairment of investments in debt securities when changes in fair value of those
securities are not regularly recognized in earnings (other-than-temporary
impairment for debt securities).  This FSP also requires additional
disclosures regarding expected cash flows, credit losses, and aging of
securities with unrealized losses. Under this FSP, an other than temporary
impairment is taken if the Company intends or is forced to sell the related debt
security before its anticipated recovery with any impairment charge recognized
in the statements of income. Realized credit losses are also recognized in the
statement of operations. The FSP is effective for the Company’s interim and
annual reporting periods ending after June 15, 2009, and should be applied
prospectively. The Company is currently evaluating the impact the adoption of
FSP SFAS No. 115-2 and FSP SFAS No. 124-2 will have on the Company’s financial
statements.
  In April
2009, the FASB issued FSP SFAS No. 107-1 and APB No. 28-1, Interim Disclosures about Fair Value
of Financial Instruments,to require 1) disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements and 2) disclosures in summarized
financial information at interim periods. This FSP does not affect the ongoing
requirement to report non-fair-value amounts on the face of the financial
statements. This FSP further requires that an entity disclose the method(s) and
significant assumptions used to estimate the fair value of financial instruments
and a description of changes in the method(s) and significant assumptions, if
any, during the period. The FSP is effective for the Company’s interim and
annual reporting periods ending after June 15, 2009, and should be applied
prospectively. The Company is currently evaluating the impact the adoption of
FSP SFAS No. 107-1 and APB No. 28-1 will have on the Company’s financial
statements.
  2.
              Investment
      Securities - Available for Sale
  Investment
securities available for sale consist of the following as of March 31, 2009
(dollar amounts in thousands):
  Amortized
                    Cost
                  
                  
                  Unrealized
                    Gains
                  
                  
                  Unrealized
                    Losses
                  
                  
                  Carrying
                    ValueAgency
      Hybrid ARM Securities
                  
                  $
                  248,467
                  
                  
                  
                  3,007
                  
                  
                  
                  —
                  
                  
                  $
                  251,474Agency
      REMIC CMO Floaters
                  
                  
                  33,135
                  
                  
                  
                  142
                  
                  
                  
                  —
                  
                  
                  
                  33,277Private
      Label CMO Floaters
                  
                  
                  23,836
                  
                  
                  
                  —
                  
                  
                  
                  (4,499
                  )
                  
                  
                  19,337Collateralized
      Loan Obligations
                  
                  
                  8,998
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  8,998NYMT
      Retained Securities
                  
                  
                  677
                  
                  
                  
                  —
                  
                  
                  
                  (133
                  )
                  
                  
                  544Total
                  
                  $
                  315,113
                  
                  
                  
                  3,149
                  
                  
                  
                  (4,632
                  )
                  
                  $
                  313,630
 
 8
 
 Investment
securities available for sale consist of the following as of December 31, 2008
(dollar amounts in thousands):
  Amortized
                          Cost
                        
                        
                        Unrealized
                          Gains
                        
                        
                        Unrealized
                          Losses
                        
                        
                        Carrying
                          ValueAgency
      Hybrid Arm Securities
                        
                        $
                        256,978
                        
                        
                        $
                        1,316
                        
                        
                        $
                        (98
                        )
                        
                        $
                        258,196Agency
      REMIC CMO Floaters
                        
                        
                        197,675
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        197,675Private
      Label Floaters
                        
                        
                        25,047
                        
                        
                        
                        —
                        
                        
                        
                        (4,101
                        )
                        
                        
                        20,946NYMT
      Retained Securities
                        
                        
                        677
                        
                        
                        
                        —
                        
                        
                        
                        (78
                        )
                        
                        
                        599Total
                        
                        $
                        480,377
                        
                        
                        $
                        1,316
                        
                        
                        $
                        (4,277
                        )
                        
                        $
                        477,416
 
 The
Company commenced its alternative investment strategy by purchasing $46.0
million face amount of CRATOS CLO I collateralized loan obligations (“CLO”) on
March 31, 2009 at a purchase price of approximately $9.0. This transaction
closed on April 7, 2009. This marks the Company’s first investment under its
alternative investment strategy.
  During
March 2009, the Company determined that the Agency CMO floaters in its portfolio
were no longer producing acceptable returns and initiated a program for the
purpose of disposing of these securities. As of March 31, 2009, the Company had
sold approximately $159.5 million in current par value of Agency CMO floaters
for a net gain of approximately $0.1 million.  The remaining
securities totaling $34.3 million in current par value were sold during April
2009 and resulted in an additional net gain of $22,760.  As a result
of this sale program, the Company incurred an additional impairment of $0.1
million in the quarter ended March 31, 2009 as the Company no longer had the
intent to hold the Agency CMO floaters.  This loss will be offset by a
gain of $0.1 million realized in the second quarter of 2009 as a result of the
sale.
  Moreover,
because the sale of these Agency CMO floaters occurred prior to filing of our
Annual Report on Form 10-K for the year ended December 31, 2008, the Company
determined that the unrealized losses related to our Agency CMO floaters were
considered to be other than temporarily impaired as of December 31, 2008 and
incurred a $4.1 million impairment charge for the quarter ended December 31,
2008.  In addition, we also determined that $6.1 million in
current par value of non-agency RMBS, which includes $2.5 million in
current par value of retained residual interest, had suffered an
other-than-temporary impairment and, accordingly, recorded an impairment charge
of $1.2 million for the quarter and year ended December 31, 2008.
  All RMBS
securities held in investment securities available for sale, including Agency
RMBS and investment and non-investment grade securities, are based on unadjusted
price quotes for similar securities in active markets and are categorized as
Level 2 per SFAS No. 157 (see note 10).
  9
 The
following tables set forth the stated reset periods and weighted average yields
of our investment securities at March 31, 2009 (dollar amounts in
thousands):
  Less than 6 Months
                                                    
                                                    
                                                    More than 6
      Months
                                                      to 24 Months
                                                    
                                                    
                                                    More than 24
      Months
                                                      to 60 Months
                                                    
                                                    
                                                    TotalCarrying
                                                      Value
                                                    
                                                    
                                                    Weighted
                                                      Average
                                                      Yield
                                                    
                                                    
                                                    Carrying
                                                      Value
                                                    
                                                    
                                                    Weighted
                                                      Average
                                                      Yield
                                                    
                                                    
                                                    Carrying
                                                      Value
                                                    
                                                    
                                                    Weighted
                                                      Average
                                                      Yield
                                                    
                                                    
                                                    Carrying
                                                      Value
                                                    
                                                    
                                                    Weighted
                                                      Average
                                                      YieldAgency
      Hybrid ARM Securities
                                                    
                                                    $
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    $
                                                    62,844
                                                    
                                                    
                                                    
                                                    3.59
                                                    %
                                                    
                                                    $
                                                    188,630
                                                    
                                                    
                                                    
                                                    4.02
                                                    %
                                                    
                                                    $
                                                    251,474
                                                    
                                                    
                                                    
                                                    3.92
                                                    %Agency
      REMIC CMO Floaters
                                                    
                                                    
                                                    33,277
                                                    
                                                    
                                                    
                                                    6.39
                                                    %
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    33,277
                                                    
                                                    
                                                    
                                                    6.39
                                                    %Private
      Label CMO Floaters
                                                    
                                                    
                                                    19,337
                                                    
                                                    
                                                    
                                                    14.23
                                                    %
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    19,337
                                                    
                                                    
                                                    
                                                    14.23
                                                    %Collateralized
      Loan Obligations
                                                    
                                                    
                                                    8,998
                                                    
                                                    
                                                    
                                                    25.28
                                                    %
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    8,998
                                                    
                                                    
                                                    
                                                    25.28
                                                    %NYMT
      Retained Securities (1)
                                                    
                                                    
                                                    475
                                                    
                                                    
                                                    
                                                    15.00
                                                    %
                                                    
                                                    
                                                    69
                                                    
                                                    
                                                    
                                                    19.10
                                                    %
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    544
                                                    
                                                    
                                                    
                                                    15.52
                                                    %Total/Weighted
      average
                                                    
                                                    $
                                                    62,087
                                                    
                                                    
                                                    
                                                    11.64
                                                    %
                                                    
                                                    $
                                                    62,913
                                                    
                                                    
                                                    
                                                    3.61
                                                    %
                                                    
                                                    $
                                                    188,630
                                                    
                                                    
                                                    
                                                    4.02
                                                    %
                                                    
                                                    $
                                                    313,630
                                                    
                                                    
                                                    
                                                    5.45
                                                    %
  (1)
              The
      NYMT retained securities includes $0.1 million of residual interests
      related to the NYMT 2006-1
transaction.
  The
following table sets forth the stated reset periods and weighted average yields
of our investment securities at December 31, 2008 (dollar amounts in
thousands):
  Less than 6 Months
                                                          
                                                          
                                                          More than 6
      Months
                                                            to 24 Months
                                                          
                                                          
                                                          More than 24
      Months
                                                            to 60 Months
                                                          
                                                          
                                                          TotalCarrying
                                                            Value
                                                          
                                                          
                                                          Weighted
                                                            Average
                                                            Yield
                                                          
                                                          
                                                          Carrying
                                                            Value
                                                          
                                                          
                                                          Weighted
                                                            Average
                                                            Yield
                                                          
                                                          
                                                          Carrying
                                                            Value
                                                          
                                                          
                                                          Weighted
                                                            Average
                                                            Yield
                                                          
                                                          
                                                          Carrying
                                                            Value
                                                          
                                                          
                                                          Weighted
                                                            Average
                                                            YieldAgency
      Hybrid ARM Securities
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          $
                                                          66,910
                                                          
                                                          
                                                          
                                                          3.69
                                                          %
                                                          
                                                          $
                                                          191,286
                                                          
                                                          
                                                          
                                                          4.02
                                                          %
                                                          
                                                          $
                                                          258,196
                                                          
                                                          
                                                          
                                                          3.93
                                                          %Agency
      REMIC CMO Floaters
                                                          
                                                          
                                                          197,675
                                                          
                                                          
                                                          
                                                          8.54
                                                          %
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          197,675
                                                          
                                                          
                                                          
                                                          8.54
                                                          %Private
      Label CMO Floaters
                                                          
                                                          
                                                          20,946
                                                          
                                                          
                                                          
                                                          14.25
                                                          %
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          20,946
                                                          
                                                          
                                                          
                                                          14.25
                                                          %NYMT
      Retained Securities (1)
                                                          
                                                          
                                                          530
                                                          
                                                          
                                                          
                                                          8.56
                                                          %
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          69
                                                          
                                                          
                                                          
                                                          16.99
                                                          %
                                                          
                                                          
                                                          599
                                                          
                                                          
                                                          
                                                          15.32
                                                          %Total/Weighted
      average
                                                          
                                                          $
                                                          219,151
                                                          
                                                          
                                                          
                                                          9.21
                                                          %
                                                          
                                                          $
                                                          66,910
                                                          
                                                          
                                                          
                                                          3.69
                                                          %
                                                          
                                                          $
                                                          191,355
                                                          
                                                          
                                                          
                                                          4.19
                                                          %
                                                          
                                                          $
                                                          477,416
                                                          
                                                          
                                                          
                                                          6.51
                                                          %
 
 (1)
              The
      NYMT retained securities includes $0.1 million of residual interests
      related to the NYMT 2006-1
transaction.
  10
 The
following table presents the Company’s investment securities available for sale
in an unrealized loss position, aggregated by investment category and length of
time that individual securities have been in a continuous unrealized loss
position at March 31, 2009.  (dollar amounts in
thousands):
  Greater
      than 12 months
                            and
      less than 18 months
                          
                          TotalCarrying
                            Value
                          
                          Gross
                            Unrealized
                            Losses
                          
                          Carrying
                            Value
                          
                          Gross
                            Unrealized
                            LossesNon-Agency
      floaters
                          
                          
                          19,337
                          
                          
                          
                          4,499
                          
                          
                          
                          19,337
                          
                          
                          
                          4,499NYMT
      Retained Securities
                          
                          
                          475
                          
                          
                          
                          133
                          
                          
                          
                          475
                          
                          
                          
                          133Total
                          
                          $
                          19,812
                          
                          
                          $
                          4,632
                          
                          
                          $
                          19,812
                          
                          
                          $
                          4,632
 
 The
following table presents the Company’s investment securities available for sale
in an unrealized loss position, aggregated by investment category and length of
time that individual securities have been in a continuous unrealized loss
position at December 31, 2008.
  Less
      than 12 Months
                          
                          
                          TotalCarrying
                            Value
                          
                          
                          Gross
                            Unrealized
                            Losses
                          
                          
                          Carrying
                            Value
                          
                          
                          Gross
                            Unrealized
                            LossesAgency
      Hybrid ARM securities
                          
                          
                          9,406
                          
                          
                          
                          98
                          
                          
                          
                          9,406
                          
                          
                          
                          98Non-Agency
      floaters
                          
                          
                          18,119
                          
                          
                          
                          4,101
                          
                          
                          
                          18,119
                          
                          
                          
                          4,101NYMT
      retained security
                          
                          
                          530
                          
                          
                          
                          78
                          
                          
                          
                          530
                          
                          
                          
                          78Total
                          
                          $
                          28,055
                          
                          
                          $
                          4,277
                          
                          
                          $
                          28,055
                          
                          
                          $
                          4,277
 
 As of
March 31, 2009 and the date of this filing, we have the intent and ability to
hold our portfolio of securities which are currently in unrealized loss
positions until recovery of their amortized cost, which may be until
maturity.  In
assessing the Company’s ability to hold its impaired RMBS, it considers the
significance of each investment and the amount of impairment, as well as the
Company’s current and anticipated leverage capacity and liquidity
position.  In addition, the Company anticipates collecting all
principal repayments owed on its non agency RMBS. Given the
uncertain state of the financial markets, should conditions change that would
require us to sell securities at a loss, we may no longer be able to assert that
we have the ability to hold our remaining securities until recovery, and we
would then be required to record impairment charges related to these
securities.  Substantially all of the Company’s RMBS investment
securities available for sale are pledged as collateral for borrowings under
financing arrangements (see note 5).
  3.
              Mortgage
      Loans Held in Securitization Trusts
(net)
  Mortgage
loans held in securitization trusts (net) consist of the following as of March
31, 2009 and December 31, 2008 (dollar amounts in thousands):
  March
      31,
                          2009
                        
                        
                        December
      31,
                          2008Mortgage
      loans principal amount
                        
                        $
                        335,538
                        
                        
                        $
                        347,546Deferred
      origination costs – net
                        
                        
                        2,122
                        
                        
                        
                        2,197Reserve
      for loan losses
                        
                        
                        (1,680
                        )
                        
                        
                        (1,406
                        )Total
                        
                        $
                        335,980
                        
                        
                        $
                        348,337
 
 11
  Reserve for Loan losses - The
following table presents the activity in the Company’s reserve for loan losses
on mortgage loans held in securitization trusts for the three months
ended March 31, 2009 and 2008 (dollar amounts in thousands).
  March
      31,2009
                          
                          
                          2008Balance at
      beginning of period
                          
                          $
                          1,406
                          
                          
                          $
                          1,647Provisions
      for loan losses
                          
                          
                          629
                          
                          
                          
                          1,433Charge-offs
                          
                          
                          (355
                          )
                          
                          
                          —Balance
      of the end of period
                          
                          $
                          1,680
                          
                          
                          $
                          3,080
 
 All of
the Company’s mortgage loans held in securitization trusts are pledged as
collateral for the collateralized debt obligations (“CDO”) issued by the Company
(see note 6).  As of March 31, 2009, the Company’s net investment in
the securitization trusts, which is the maximum amount of the Company’s
investment that is at risk to loss and represents the difference between the
carrying amount of the loans and the amount of CDO’s outstanding, was $12.4
million.
  The
following tables set forth delinquent loans in our securitization trusts as of
March 31, 2009 and December 31, 2008 (dollar amounts in thousands):
  March
      31, 2009Days
      Late
                        
                        Number
      of
                          Delinquent
                          Loans
                        
                        
                        Total
                          Dollar
      Amount
                        
                        
                        %
      of Loan
                          Portfolio30-60
                        
                        
                        7
                        
                        
                        $
                        4,686
                        
                        
                        
                        1.40%61-90
                        
                        
                        4
                        
                        
                        
                        1,262
                        
                        
                        
                        0.38%90+
                        
                        
                        12
                        
                        
                        
                        4,672
                        
                        
                        
                        1.39%Real
      estate owned through foreclosure
                        
                        
                        3
                        
                        
                        
                        816
                        
                        
                        
                        0.24%
 
 December
      31, 2008Days
      Late
                        
                        Number
      of
                          Delinquent
                          Loans
                        
                        
                        Total
                          Dollar
      Amount
                        
                        
                        %
      of Loan
                          Portfolio30-60
                        
                        
                        3
                        
                        
                        $
                        1,363
                        
                        
                        
                        0.39%61-90
                        
                        
                        1
                        
                        
                        
                        263
                        
                        
                        
                        0.08%90+
                        
                        
                        13
                        
                        
                        
                        5,734
                        
                        
                        
                        1.65%Real
      estate owned through foreclosure
                        
                        
                        4
                        
                        
                        
                        1,927
                        
                        
                        
                        0.55%
 
 4.
              Derivative
      Instruments and Hedging Activities
  The
Company enters into derivatives instruments to manage its interest rate risk
exposure. These derivative instruments include interest rate swaps and caps
entered into to reduce interest expense costs related to our repurchase
agreements, collateralized debt obligations and our subordinated debentures.
 These derivative instruments are comprised of interest rate swaps and
interest rate caps for the periods presented and are accounted for in accordance
with SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended (“SFAS
133”).  The Company’s interest rate swaps are designated as cash flow
hedges against the benchmark interest rate risk associated with its short term
repurchase agreements.  There were no costs incurred at the inception
of our interest rate swaps, under which the Company agrees to pay a fixed rate
of interest and receive a variable interest rate based on one month LIBOR, on
the notional amount of the interest rate swaps.  The Company’s
interest rate swap notional amounts are based on an amortizing schedule fixed at
the start date of the transaction.  The Company’s interest rate cap
transactions are designated as cashflow hedges against the bench mark interest
rate risk associated with the collateralized debt obligations and the
subordinated debentures.  The interest rate cap transactions were
initiated with an upfront premium that is being amortized over the life of the
contract.
  12
 The
Company documents its risk-management policies, including objectives and
strategies, as they relate to its hedging activities, and upon entering into
hedging transactions, documents the relationship between the hedging instrument
and the hedged liability.  The Company assesses, both at inception of
a hedge and on an on-going basis, whether or not the hedge is “highly
effective,” in accordance with FAS 133.
  The
Company discontinues hedge accounting on a prospective basis and recognizes
changes in the fair value through earnings when:  (i) it is determined
that the derivative is no longer effective in offsetting cash flows of a hedged
item (including forecasted transactions); (ii) it is no longer probable that the
forecasted transaction will occur; or (iii) it is determined that designating
the derivative as a hedge is no longer appropriate.  The Company’s
derivative instruments are carried on the Company’s balance sheet at fair value,
as assets, if their fair value is positive, or as liabilities, if their fair
value is negative.  Since the Company’s derivative instruments are
designated as “cash flow hedges,” changes in their fair value are recorded in
other comprehensive (loss) income provided that the hedges are
effective.  A change in fair value for any ineffective amount of the
Company’s derivative instruments would be recognized in earnings.  The
Company has not recognized any change in the value of its existing derivative
instruments through earnings as a result of ineffectiveness of the
hedge.
 
 The
following table presents the fair value of derivative instruments and their
location in the Company’s condensed consolidated balance sheets at March 31,
2009 and December 31, 2008, respectively (amounts in thousands):
  Derivative
      Designated as Hedging
                        Instruments
      Under SFAS 133
                      
                      Balance
      Sheet Location
                      
                      March
      31, 2009
                      
                      
                      December
      31, 2008Interest
      Rate Caps
                      
                      Derivative
      Assets
                      
                      $
                      9
                      
                      
                      $
                      22Interest
      Rate Swaps
                      
                      Derivative
      Liabilities
                      
                      $
                      4,007
                      
                      
                      $
                      4,194
 
 The
following table presents the impact of the Company’s derivative instruments, on
the Company’s accumulated other comprehensive income (loss) for the three months
ended March 31, 2009 and 2008 (amounts in thousands):
 
 Derivative
      Designated as Hedging Instruments Under SFAS 133
                  
                  March
      31, 2009
                  
                  
                  March
      31, 2008Accumulated
      other comprehensive loss for derivative instruments:Balance
      at beginning of the period
                  
                  $
                  (5,560
                  )
                  
                  $
                  (1,951
                  )Unrealized
      gain (losses) on interest rate caps
                  
                  
                  229
                  
                  
                  
                  (54
                  )Unrealized
      gain (losses) on interest rate swaps
                  
                  
                  187
                  
                  
                  
                  (1,169
                  )Reclassification
      adjustment for net losses included in net income for
hedges
                  
                  
                  —
                  
                  
                  
                  —Balance
      at the end of the period
                  
                  $
                  (5,144
                  )
                  
                  $
                  (3,174
                  )
 
 The
Company estimates that over the next 12 months, approximately $1.6 million
of the net unrealized gains on the interest rate swaps will be reclassified
from accumulated other comprehensive income (loss) into earnings.
  The
following table details the impact of the Company’s interest rate swaps and
interest rate caps included in interest expense for the three months ended March
31, 2009 and 2008 (amounts in thousands):
  Derivative
      Designated as Hedging Instruments Under SFAS 133
                  
                  March
      31, 2009
                  
                  
                  March
      31, 2008Interest
      Rate Caps:Interest
      expense-investment securities and loans held in securitization
      trusts
                  
                  $
                  160
                  
                  
                  $
                  189Interest
      expense-subordinated debentures
                  
                  
                  81
                  
                  
                  
                  (1
                  )Interest
      Rate Swaps:Interest
      expense-investment securities and loans held in securitization
      trusts
                  
                  
                  853
                  
                  
                  
                  (16
                  )
 
  13
 Interest Rate Swaps-The
Company is required to pledge assets under a bi-lateral margin arrangement,
including either cash or Agency RMBS, as collateral for its interest rate swaps,
which collateral requirements vary by counterparty and change over time based on
the market value, notional amount, and remaining term of the interest rate swap
(“Swap”).  In the event the Company was unable to meet a margin call
under one of its Swap agreements, thereby causing an event of default or
triggering an early termination event under one of its Swap agreements, the
counterparty to such agreement may have the option to terminate all of such
counterparty’s outstanding Swap transactions with the Company. In addition,
under this scenario, any close-out amount due to the counterparty upon
termination of the counterparty’s transactions would be immediately payable by
the Company pursuant to the applicable agreement.  The Company was in
compliance with all margin requirements under its Swap agreements as of March
31, 2009 and December 31, 2008.  The Company had $4.0 million and $4.2
million of restricted cash related to margin posted for Swaps as of March 31,
2009 and December 31, 2008, respectively.
  The use
of interest rate swaps exposes the Company to counterparty credit risks in the
event of a default by a Swap counterparty. If a counterparty defaults under the
applicable Swap agreement the Company may be unable to collect payments to which
it is entitled under its Swap agreements, and may have difficulty collecting the
assets it pledged as collateral against such Swaps.  The Company
currently has in place with all outstanding swap counterparties bi-lateral
margin agreements thereby requiring a party to post collateral to the Company
for any valuation deficit.  This arrangement is intended to limit the
Company’s exposure to losses in the event of a counterparty
default.
  The
following table presents information about the Company’s interest rate swaps as
of March 31, 2009 and December 31, 2008 (amounts in thousands):
  March
      31, 2009
                                
                                
                                December
      31, 2008Maturity(1)
                                
                                Notional
      Amount
                                
                                
                                Weighted
      Average Fixed Pay Interest Rate
                                
                                
                                Notional
      Amount
                                
                                
                                Weighted
      Average Fixed Pay Interest RateWithin
      30 Days
                                
                                $
                                2,700
                                
                                
                                
                                2.99
                                %
                                
                                
                                $
                                2,960
                                
                                
                                
                                3.00
                                %Over
      30 days to 3 months
                                
                                
                                5,070
                                
                                
                                
                                2.99
                                
                                
                                
                                
                                5,220
                                
                                
                                
                                3.00Over
      3 months to 6 months
                                
                                
                                7,410
                                
                                
                                
                                2.99
                                
                                
                                
                                
                                7,770
                                
                                
                                
                                2.99Over
      6 months to 12 months
                                
                                
                                12,210
                                
                                
                                
                                2.99
                                
                                
                                
                                
                                13,850
                                
                                
                                
                                2.99Over
      12 months to 24 months
                                
                                
                                69,060
                                
                                
                                
                                3.01
                                
                                
                                
                                
                                48,640
                                
                                
                                
                                2.99Over
      24 months to 36 months
                                
                                
                                13,370
                                
                                
                                
                                3.02
                                
                                
                                
                                
                                34,070
                                
                                
                                
                                3.03Over
      36 months to 48 months
                                
                                
                                19,270
                                
                                
                                
                                3.07
                                
                                
                                
                                
                                7,560
                                
                                
                                
                                3.01Over
      48 monhts
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                
                                17,200
                                
                                
                                
                                3.08Total
                                
                                $
                                129,090
                                
                                
                                
                                3.00
                                %
                                
                                
                                $
                                137,270
                                
                                
                                
                                3.00
                                %
 
 (1)
              The
      Company enters into scheduled amortizing interest rate swap transactions
      whereby the Company pays a fixed rate of interest and receives one month
      LIBOR.
 
 Interest Rate Caps – Interest
rate caps are designated by the Company as cash flow hedges against interest
rate risk associated with the Company’s collateralized debt obligations and the
subordinated debentures. The interest rate caps associated with the
collateralized debt obligations are amortizing contractual notional schedules
determined at origination and had $457.6 million and $434.4 million outstanding
as of March 31, 2009 and December 31, 2008, respectively.  These
interest rate caps are utilized to cap the interest rate on the collateralized
debt obligations at a fixed-rate when one month LIBOR exceeds a predetermined
rate.  In addition, the Company has an interest rate cap contract on
$25.0 million of subordinated debentures that effectively caps three month LIBOR
at 3.75% until March 31, 2010.
  5.
              Financing
      Arrangements, Portfolio Investments
  The
Company has entered into repurchase agreements with third party financial
institutions to finance its RMBS portfolio.  The repurchase agreements
are short-term borrowings that bear interest rates typically based on a spread
to LIBOR, and are secured by the securities which they finance.  At
March 31, 2009, the Company had repurchase agreements with an outstanding
balance of $276.2 million and a weighted average interest rate of
0.99%.  As of December 31, 2008, the Company had repurchase agreements
with an outstanding balance of $402.3 million and a weighted average interest
rate of 2.62%.  At March 31, 2009 and December 31, 2008, securities
pledged by the Company as collateral for repurchase agreements had estimated
fair values of $305.0 million and $456.5 million, respectively.  All
outstanding borrowings under our repurchase agreements mature within 30
days.  As of March 31, 2009, the average days to maturity for all
repurchase agreements are 17 days.  The Company had outstanding
repurchase agreements with seven different financial institutions as of March
31, 2009 as compared to six as of December 31, 2008.
  14
 As of
March 31, 2009, our Agency ARM RMBS are financed with $227.4 million of
repurchase agreement funding with an advance rate of 93% that implies a
haircut of 7%, our Agency CMO floaters are financed with $41.7 million of
repurchase agreement financing with an advance rate of 89% that implies a
haircut of 11%, and the non-Agency CMO floater was financed with $7.1 million of
repurchase agreements funding with an advance rate of 80% that implies a 20%
haircut.
  In the
event we are unable to obtain sufficient short-term financing through repurchase
agreements or otherwise, or our lenders start to require additional collateral,
we may have to liquidate our investment securities at a disadvantageous time,
which could result in losses.  Any losses resulting from the
disposition of our investment securities in this manner could have a material
adverse effect on our operating results and net profitability.
  As of
March 31, 2009, the Company had $45.0 million in cash and $16.4 million in
unencumbered securities, including $11.8 million in Agency RMBS, to meet
additional haircut or market valuation requirements.
  6.
              Collateralized
      Debt Obligations
  The
Company’s CDOs, which are recorded as liabilities on the Company’s balance
sheet, are secured by ARM loans pledged as collateral, which are recorded as
assets of the Company.  As of March 31, 2009 and December 31, 2008,
the Company had CDOs outstanding of $323.6 million and $335.6 million,
respectively.  As of March 31, 2009 and December 31, 2008, the current
weighted average interest rate on these CDOs was 0.90% and 0.85%,
respectively.  The CDOs are collateralized by ARM loans with a
principal balance of $335.5 million and $347.5 million at March 31, 2009 and
December 31, 2008, respectively.  The Company retained the owner trust
certificates, or residual interest for three securitizations, and, as of March
31, 2009 and December 31, 2008, had a net investment in the securitizations
trusts after loan loss reserves of $12.4 million and $12.7 million,
respectively.
  The CDO
transactions include amortizing interest rate cap contracts with an aggregate
notional amount of $457.6 million as of March 31, 2009 and an aggregate notional
amount of $456.9 million as of December 31, 2008, which are recorded as an asset
of the Company.  The interest rate caps are carried at fair value and
totaled $8,358 as of March 31, 2009 and $18,575 as of December 31, 2008,
respectively.  The interest rate cap reduces interest rate risk
exposure on these transactions.
  7.
              Discontinued
      Operation
  In
connection with the sale of our mortgage origination platform assets during the
quarter ended March 31, 2007, we classified our mortgage lending segment as a
discontinued operation in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.  As a result, we have reported
revenues and expenses related to the segment as a discontinued operation and the
related assets and liabilities as assets and liabilities related to a
discontinued operation for all periods presented in the accompanying condensed
consolidated financial statements.  Certain assets, such as the
deferred tax asset, and certain liabilities, such as subordinated debt and
liabilities related to leased facilities not assigned to Indymac, will become
part of our ongoing operations and accordingly, we have not included these items
as part of the discontinued operation in accordance with the provisions of SFAS
No. 144.
  15
 Balance
Sheet Data
  The
components of assets related to the discontinued operation as of March 31, 2009
and December 31, 2008 are as follows (dollar amounts in thousands):
  March
      31,
                            2009
                          
                          
                          December
      31,
                            2008Accounts
      and accrued interest receivable
                          
                          $
                          18
                          
                          
                          $
                          26Mortgage
      loans held for sale(net)
                          
                          
                          4,313
                          
                          
                          
                          5,377Prepaid
      and other assets
                          
                          
                          453
                          
                          
                          
                          451Total assets
                          
                          $
                          4,784
                          
                          
                          $
                          5,854
 
 The
components of liabilities related to the discontinued operation as of March 31,
2009 and December 31, 2008 are as follows (dollar amounts in
thousands):
  March
      31,
                          2009
                        
                        
                        December
      31,
                          2008Due
      to loan purchasers
                        
                        $
                        527
                        
                        
                        $
                        708Accounts
      payable and accrued expenses
                        
                        
                        2,844
                        
                        
                        
                        2,858Total liabilities
                        
                        $
                        3,371
                        
                        
                        $
                        3,566
 
 Statements
of Operations Data
  The
statements of operations of the discontinued operation for the three months
ended March 31, 2009 and 2008 are as follows (dollar amounts in
thousands):
  For
      the Three Months EndedMarch 31,2009
                                                            
                                                            
                                                            2008Revenues
                                                            
                                                            $
                                                            290
                                                            
                                                            
                                                            $
                                                            171Expenses
                                                            
                                                            
                                                            135
                                                            
                                                            
                                                            
                                                            (9
                                                            )Income
      from discontinued operation –  net of tax
                                                            
                                                            $
                                                            155
                                                            
                                                            
                                                            $
                                                            180
 
 8.
              Commitments
      and Contingencies
  Loans Sold to Investors - For loans originated and
sold by our discontinued mortgage lending business, the Company is not exposed
to long term credit risk.  In the normal course of business however, the
Company is obligated to repurchase loans based on violations of representations
and warranties in the sale agreement, or early payment defaults.  The
Company did not repurchase any loans during the three months ended March 31,
2009.
  The
Company periodically receives repurchase requests, each of which management
reviews to determine, based on management’s experience, whether such requests
may reasonably be deemed to have merits.  As of March 31, 2009, we had
a total of $1.7 million of unresolved repurchase requests that management
concluded may reasonably be deemed to have merit, against which the Company has
a reserve of approximately $0.4 million.  The reserve is based on one
or more of the following factors, including historical settlement rates,
property value securing the loan in question and specific settlement discussion
with third parties.
  Outstanding Litigation - The
Company is at times subject to various legal proceedings arising in the ordinary
course of business. As of March 31, 2009, the Company does not believe that any
of its current legal proceedings, individually or in the aggregate, will have a
material adverse effect on its operations, financial condition or cash
flows.
  Leases - The Company leases
its corporate offices and certain office space related to our discontinued
mortgage lending operation and equipment under short-term lease agreements
expiring at various dates through 2013.  All such leases are accounted
for as operating leases.  Total rental expense for property and
equipment amounted to $49,170 for the three months ended March 31,
2009.
  16
 Letters of Credit – The
Company maintains a letter of credit in the amount of $178,200 in lieu of a cash
security deposit for its current corporate headquarters, located at 52
Vanderbilt Avenue in New York City, for its landlord, Vanderbilt Associates I,
L.L.C, as beneficiary.  This letter of credit is secured by cash
deposited in a bank account maintained at JP Morgan Chase bank.
  9.
              Concentrations
      of Credit Risk
  At March
31, 2009 and December 31, 2008, there were geographic concentrations of credit
risk exceeding 5% of the total loan balances within mortgage loans held in the
securitization trusts and retained interests in our REMIC securitization, NYMT
2006-1, as follows:
  March
      31, 2009
                    
                    
                    December
      31,2008New
      York
                    
                    
                    31.0
      %
                    
                    
                    
                    30.7%Massachusetts
                    
                    
                    17.5
      %
                    
                    
                    
                    17.2
      %Florida
                    
                    
                    7.8
      %
                    
                    
                    
                    7.8
      %California
                    
                    
                    7.5
      %
                    
                    
                    
                    7.2
      %New
      Jersey
                    
                    
                    6.1
      %
                    
                    
                    
                    6.0
      %
 
 10.
              Fair
      Value of Financial Instruments
  The
Company adopted SFAS No. 157 effective January 1, 2008, and accordingly, all
assets and liabilities measured at fair value utilize valuation methodologies in
accordance with the statement.  The Company has established and
documented processes for determining fair values.  Fair value is based
upon quoted market prices, where available.  If listed prices or
quotes are not available, then fair value is based upon internally developed
models that primarily use inputs that are market-based or independently-sourced
market parameters, including interest rate yield curves.
  A
financial instrument’s categorization within the valuation hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement.  The three levels of valuation hierarchy established by
SFAS No. 157 are defined as follows:
  Level 1 - inputs to the
valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
  Level 2 - inputs to the
valuation methodology include quoted prices for similar assets and liabilities
in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial
instrument.
  Level 3 - inputs to the
valuation methodology are unobservable and significant to the fair value
measurement.
  The
following describes the valuation methodologies used for the Company’s financial
instruments measured at fair value, as well as the general classification of
such instruments pursuant to the valuation hierarchy.
  a. Investment Securities Available
for Sale (RMBS) - Fair value for the RMBS in our portfolio is generally
based on quoted prices provided by dealers who make markets in similar financial
instruments. The dealers will incorporate common market pricing methods,
including a spread measurement to the Treasury curve or Interest Rate Swap Cure
as well as underlying characteristics of the particular security including
coupon, periodic and life caps, collateral type, rate reset period and seasoning
or age of the security. If quoted prices for a security are not reasonably
available from a dealer, the security will be re-classified as a Level 3
security and, as a result, management will determine the fair value based on
characteristics of the security that the Company receives from the issuer and
based on available market information. Management reviews all prices used in
determining valuation to ensure they represent current market conditions. This
review includes surveying similar market transactions, comparisons to interest
pricing models as well as offerings of like securities by dealers. The Company's
investment securities are valued based upon readily observable market parameters
and are classified as Level 2 fair values.
 
 17
 b. Investment Securities Available
for Sale (CLO) - The fair value of the CLO notes, as of March 31, 2009,
was based on the purchase price for the CLO notes on March 31,
2009.  In the future, the fair value of these assets will be
determined by management by using a discounted future cash flows model that
management believes would be used by market participants to value similar
financial instruments. If a reliable market for these assets develops in the
future, management will consider quoted prices provided by dealers who make
markets in similar financial instruments in determining the fair value of the
CLO notes.The CLO notes are classified as Level 3 fair values.
 
 c. Interest Rate Swaps and
Caps - The fair value of interest rate swaps and caps are based on
using market accepted financial models as well as dealer quotes.  The
model utilizes readily observable market parameters, including treasury rates,
interest rate swap spreads and swaption volatility curves.  The
Company’s interest rate caps and swaps are classified as Level 2 fair
values.
  The
following table presents, by SFAS No. 157 valuation hierarchy, the Company’s
financial instruments carried at fair value as of March 31, 2009 and December
31, 2008 on the condensed consolidated balance sheet (dollar amounts in
thousands):
 
 Asset
      Measured at Fair Value on a Recurring Basis at March 31,
    2009Level 1
                          
                          
                          Level 2
                          
                          
                          Level 3
                          
                          
                          TotalAssets
      carried at fair value:Investment
      securities available for sale
                          
                          $
                          —
                          
                          
                          $
                          304,632
                          
                          
                          $
                          8,998
                          
                          
                          $
                          313,630Derivative
      assets (interest rate caps)
                          
                          
                          —
                          
                          
                          
                          9
                          
                          
                          
                          —
                          
                          
                          
                          9Total
                          
                          $
                          —
                          
                          
                          $
                          304,641
                          
                          
                          $
                          8,998
                          
                          
                          $
                          313,639
 
 Liabilities
      carried at fair value:Derivative
      liabilities (interest rate swaps)
                      
                      $
                      —
                      
                      
                      $
                      4,007
                      
                      
                      $
                      —
                      
                      
                      $
                      4,007Total
                      
                      $
                      —
                      
                      
                      $
                      4,007
                      
                      
                      $
                      —
                      
                      
                      $
                      4,007
 
 18
 
 Asset
      Measured at Fair Value on a Recurring Basis atDecember 31,
      2008Level 1
                          
                          
                          Level 2
                          
                          
                          Level 3
                          
                          
                          TotalAssets
      carried at fair value:Investment
      securities available for sale
                          
                          $
                          —
                          
                          
                          $
                          477,416
                          
                          
                          $
                          —
                          
                          
                          $
                          477,416Derivative
      assets (interest rate caps)
                          
                          
                          —
                          
                          
                          
                          22
                          
                          
                          
                          —
                          
                          
                          
                          22Total
                          
                          $
                          —
                          
                          
                          $
                          477,438
                          
                          
                          $
                          —
                          
                          
                          $
                          477,438
 
 Liabilities
      carried at fair value:Derivative
      liabilities (interest rate swaps)
                    
                    $
                    —
                    
                    
                    $
                    4,194
                    
                    
                    $
                    —
                    
                    
                    $
                    4,194Total
                    
                    $
                    —
                    
                    
                    $
                    4,194
                    
                    
                    $
                    —
                    
                    
                    $
                    4,194
  Any
changes to the valuation methodology are reviewed by management to ensure the
changes are appropriate.  As markets and products develop and the
pricing for certain products becomes more transparent, the Company continues to
refine its valuation methodologies.  The methods described above may
produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values.  Furthermore, while the
Company believes its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies, or assumptions, to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.  The Company
uses inputs that are current as of the measurement date, which may include
periods of market dislocation, during which time price transparency may be
reduced.  This condition could cause the Company’s financial
instruments to be reclassified from Level 2 to Level 3 in future
periods.
  19
 
 The
following table presents assets measured at fair value on a non-recurring basis
as of March 31, 2009 and December 31, 2008 on the condensed consolidated balance
sheet (dollar amounts in thousands):
 
 Assets
      Measured at Fair Value on a Non-Recurring Basis
                                  at
      March 31, 2009
                                
                                
                                Losses for the Three Months
      EndedLevel
      1
                                
                                
                                Level
      2
                                
                                
                                Level
      3
                                
                                
                                Total
                                
                                
                                March
      31, 2009Mortgage
      loans held for sale (net)
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                4,313
                                
                                
                                $
                                4,313
                                
                                
                                $
                                103Mortgage
      loans held n securitization trusts (net) – impaired loans
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                5,874
                                
                                
                                $
                                5,874
                                
                                
                                $
                                629
 
 Assets
      Measured at Fair Value on a Non-Recurring Basis
                                  at
      December 31, 2008
                                
                                
                                Losses for the Three Months
      EndedLevel
      1
                                
                                
                                Level
      2
                                
                                
                                Level
      3
                                
                                
                                Total
                                
                                
                                March
      31, 2008Mortgage
      loans held for sale (net)
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                5,377
                                
                                
                                $
                                5,377
                                
                                
                                $
                                398Mortgage
      loans held n securitization trusts (net) – impaired loans
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                2,958
                                
                                
                                $
                                2,958
                                
                                
                                $
                                1,433
 
 Mortgage Loans Held in
Securitization Trusts (net) –Impaired Loans– Impaired mortgage
loans in the securitization trusts are recorded at amortized cost less of
specific loan loss reserves. Impaired loan value is based on net realizable
value taking into consideration the aggregated characteristics of the loans such
as, but not limited to, collateral type, index, interest rate, margin, length of
fixed-rate period, life cap, periodic cap, underwriting standards, age and
credit estimated using the estimated market prices for similar types of
loans.
 
 Mortgage Loans Held for Sale (net)–The fair value of mortgage loans held for sale (net) are estimated by
the Company based on the price that would be received if the loans were sold as
whole loans taking into consideration the aggregated characteristics of the
loans such as, but not limited to, collateral type, index, interest rate,
margin, length of fixed interest rate period, life cap, periodic cap,
underwriting standards, age and credit.
 11.
              Segment
      Reporting
  Until
March 31, 2007, the Company operated two reportable segments, the mortgage
portfolio management segment and the mortgage lending segment.  Upon
the sale of substantially all the mortgage lending operating assets on March 31,
2007, the Company exited the mortgage lending business and accordingly, no
longer reports segment information.
  12.
              Capital
      Stock and Earnings per Share
  The
Company had 400,000,000 shares of common stock, par value $0.01 per share,
authorized with 9,320,094 shares issued and outstanding as of March 31, 2009,
and 9,320,094 shares issued and outstanding as of December 31,
2008.  The Company had 200,000,000 shares of preferred stock, par
value $0.01 per share, authorized, including 2,000,000 shares of Series A
Cumulative Convertible Redeemable Preferred Stock (“Series A Preferred Stock”)
authorized.  As of March 31, 2009 and December 31, 2008, the
Company had issued and outstanding 1,000,000 and 1,000,000 shares, respectively,
of Series A Preferred Stock.  Of the common stock
authorized, 103,111 shares were reserved for issuance as restricted stock
awards to employees, officers and directors pursuant to the 2005 Stock Incentive
Plan.  As of March 31, 2009, 103,111 shares remain reserved for
issuance under the 2005 Plan.
  20
 On
February 21, 2008, the Company completed the issuance and sale of 7.5 million
shares of its common stock in a private placement at a price of $8.00 per
share.  This private offering of the Company’s common stock generated net
proceeds to the Company of $56.5 million after payment of private placement fees
and expenses. The Company filed a resale shelf registration statement on
Form S-3 on April 4, 2008, registering for resale the 7.5 million shares issued
in February 2008, which became effective on April 18, 2008.
  The Board
of Directors declared a one-for-two reverse stock split of the Company’s common
stock, effective on May 27, 2008, decreasing the number of shares then
outstanding to approximately 9.3 million. All per share and share amounts
provided in the quarterly report have been restated to give effect the
reverse stock splits.
  The
following table presents cash dividends declared by the Company on its common
stock from January 1, 2008 through March 31, 2009.
  Period
                    
                    Declaration
      Date
                    
                    Record
      Date
                    
                    Payment
      Date
                    
                    Cash
                      Dividend
                      Per
      ShareFirst
      Quarter 2009
                    
                    March
      25, 2009
                    
                    April
      6, 2009
                    
                    April
      27, 2009
                    
                    $
                    0.18Fourth
      Quarter 2008
                    
                    December
      23, 2008
                    
                    January
      7, 2009
                    
                    January
      26, 2009
                    
                    $
                    0.10Third
      Quarter 2008
                    
                    September
      26, 2008
                    
                    October
      10, 2008
                    
                    October
      27, 2008
                    
                    
                    0.16Second
      Quarter 2008
                    
                    June
      30, 2008
                    
                    July
      10, 2008
                    
                    July
      25, 2008
                    
                    
                    0.16First
      Quarter 2008
                    
                    April
      21, 2008
                    
                    April
      30, 2008
                    
                    May
      15,2008
                    
                    
                    0.12
 
 The
following table presents cash dividends declared by the Company on its Series A
Preferred Stock from January 1, 2008 through March 31, 2009.
  Period
                    
                    Declaration
      Date
                    
                    Record
      Date
                    
                    Payment
      Date
                    
                    Cash
                      Dividend
                      Per
      ShareFirst
      Quarter 2009
                    
                    March
      25, 2009
                    
                    March
      31, 2009
                    
                    April
      30, 2009
                    
                    $
                    0.50Fourth
      Quarter 2008
                    
                    December
      23, 2008
                    
                    December
      31, 2008
                    
                    January
      30,2009
                    
                    $
                    0.50Third
      Quarter 2008
                    
                    September
      26, 2008
                    
                    September
      30, 2008
                    
                    October
      30, 2008
                    
                    
                    0.50Second
      Quarter 2008
                    
                    June
      30, 2008
                    
                    June
      30, 2008
                    
                    July
      30, 2008
                    
                    
                    0.50First
      Quarter 2008
                    
                    April
      21, 2008
                    
                    March
      31, 2008
                    
                    April
      30,2008
                    
                    
                    0.50
 
 The
Company calculates basic net income (loss) per share by dividing net income
(loss) for the period by the weighted-average shares of common stock outstanding
for that period.  Diluted net income (loss) per share takes into
account the effect of dilutive instruments, such as convertible preferred
stock, stock options and unvested restricted or performance stock, but uses
the average share price for the period in determining the number of incremental
shares that are to be added to the weighted-average number of shares
outstanding.
  21
 The
following table presents the computation of basic and diluted net income (loss)
per share for the periods indicated (in thousands, except per share
amounts):
  For
      the Three Months
                          Ended
      March 312009
                        
                        
                        2008Numerator:Net
      income (loss) – Basic
                        
                        $
                        2,054
                        
                        
                        $
                        (21,258
                        )Net
      income (loss) from continuing operations
                        
                        
                        1,899
                        
                        
                        
                        (21,438
                        )Net
      income from discontinued operation (net of tax)
                        
                        
                        155
                        
                        
                        
                        180Effect
      of dilutive instruments:Convertible
      preferred debentures (1)
                        
                        
                        537
                        
                        
                        
                        506Net
      income  (loss) – Dilutive
                        
                        
                        2,591
                        
                        
                        
                        (21,258
                        )Net
      income (loss) from continuing operations
                        
                        
                        2,436
                        
                        
                        
                        (21,438
                        )Net
      income from discontinued operation (net of tax)
                        
                        $
                        155
                        
                        
                        $
                        180Denominator:Weighted
      average basis shares outstanding
                        
                        
                        9,320
                        
                        
                        
                        5,070Effect
      of dilutive instruments:Convertible
      preferred debentures (1)
                        
                        
                        2,500
                        
                        
                        
                        2,028Weighted
      average dilutive shares outstanding
                        
                        
                        11,820
                        
                        
                        
                        5,070Net
      Income Per Share:Basic
      EPS
                        
                        $
                        0.22
                        
                        
                        $
                        (4.23
                        )Basic
      income (loss) per common share from continuing
    operations
                        
                        
                        0.20
                        
                        
                        
                        (4.19
                        )Basic
      income per common share from discontinued operation (net of
      tax)
                        
                        
                        0.02
                        
                        
                        
                        0.04Dilutive
      EPS
                        
                        $
                        0.22
                        
                        
                        $
                        (4.23
                        )Dilutive
      income (loss) per common share from continuing operations
                        
                        
                        0.21
                        
                        
                        
                        (4.19
                        )Dilutive income
      per common share from discontinued operation (net of tax)
                        
                        
                        0.01
                        
                        
                        
                        0.04
 
 (1) –
Amounts are excluded from dilutive calculation if it is
anti-dilutive.
 
 13.
              Convertible
      Preferred Debentures (net)
  As of
March 31, 2009, there were 1.0 million shares of our Series A Preferred Stock
outstanding, with an aggregate redemption value of $20.0 million and current
dividend payment rate of 10% per year, subject to adjustment.  The
Series A Preferred Stock matures on December 31, 2010, at which time
any outstanding shares must be redeemed by the Company at the $20.00
per share liquidation preference.  Pursuant to SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, because of this
mandatory redemption feature, the Company classifies these securities as a
liability on its balance sheet, and accordingly, the corresponding dividend as
an interest expense.
  We issued
these shares of Series A Preferred Stock to JMP Group Inc. and certain of its
affiliates for an aggregate purchase price of $20.0 million.  The
Series A Preferred Stock entitles the holders to receive a cumulative
dividend of 10% per year, subject to an increase to the extent any future
quarterly common stock dividends exceed $0.20 per share.  The Series A
Preferred Stock is convertible into shares of the Company’s common stock
based on a conversion price of $8.00 per share of common stock, which represents
a conversion rate of two and one-half (2 1⁄2) shares of common stock for each
share of Series A Preferred Stock.
  14.
              Related
      Party Transactions
  On
January 18, 2008, the Company entered into an advisory agreement with Harvest
Capital Strategies LLC (“HCS”) (formerly known as JMP Asset Management LLC),
pursuant to which HCS is responsible for implementing and managing the Company’s
investments in alternative real estate-related and financial assets, which is
referred to in this report to as the “alternative investment strategy.” The
Company entered into the advisory agreement concurrent and in connection with
its private placement of Series A Preferred Stock to JMP Group Inc. and certain
of it affiliates. HCS is a wholly-owned subsidiary of JMP Group Inc. Pursuant to
Schedule 13D’s filed with the SEC, as of December 31, 2008, HCS and JMP Group
Inc. beneficially owned approximately 16.8% and 12.2%, respectively, of the
Company’s common stock, and 100%, collectively, of it Series A Preferred
Stock.
  22
 Pursuant
to the advisory agreement, HCS is responsible for managing investments made by
HC and NYMF, as well as any additional subsidiaries acquired or formed in the
future to hold investments made on the Company’s behalf by HCS. The Company
refers to these subsidiaries in its periodic reports filed with the Securities
and Exchange Commission as the “Managed Subsidiaries.” On March 31, 2009, the
Company commenced its alternative investment strategy by purchasing
approximately $9.0 million in collateralized loan obligations. The Company’s
investment in these assets was completed in connection with the acquisition by
JMP Group Inc. of the investment adviser of the collateralized loan obligations.
The Company expects that, from time to time in the future, certain of its
alternative investments will take the form of a co-investment alongside or in
conjunction with JMP Group Inc. or certain of its affiliates. In accordance with
investment guidelines adopted by the Company’s Board of Directors, any
subsequent alternative investments by the Managed Subsidiaries must be approved
by the Board of Directors and must adhere to investment guidelines adopted by
the Board of Directors. The advisory agreement provides that HCS will be paid a
base advisory fee that is a percentage of the “equity capital” (as defined in
the advisory agreement) of the Managed Subsidiaries, which may include the net
asset value of assets held by the Managed Subsidiaries as of any fiscal quarter
end, and an incentive fee upon the Managed Subsidiaries achieving certain
investment hurdles. For the year ended December 31, 2008, HCS earned a base
advisory fee of approximately $0.7 million on the net proceeds to the Company
from its private offerings in each of January 2008 and February 2008. For the
three months ended March 31, 2009, HCS earned a base advisory fee of
approximately $0.2 million.  As of March 31, 2009, HCS was managing
approximately $9.0 million of assets on the Company’s behalf.
  15.
              Income
      Taxes
  At March
31, 2009, the Company had approximately $65.6 million of net operating loss
carryforwards which may be used to offset future taxable income. The
carryforwards will expire in 2024 through 2028. The Internal Revenue Code places
certain limitations on the annual amount of net operating loss carryforwards
that can be utilized if certain changes in the Company’s ownership occur. The
Company may have undergone an ownership change within the meaning of IRC section
382 that would impose such a limitation, but a final conclusion has not been
made. Management does not believe that the limitation would cause a significant
amount of the Company's net operating losses to expire unused.
 
 
 23
 Item
2.Management’s Discussion and Analysis of Financial Condition
and Results of Operations
  CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
  This
Quarterly Report on Form 10-Q contains certain forward-looking
statements.  Forward-looking statements are those which are not
historical in nature.  They can often be identified by their inclusion
of words such as “will,” “anticipate,” “estimate,” “should,” “expect,”
“believe,” “intend” and similar expressions.  Any projection of
revenues, earnings or losses, capital expenditures, distributions, capital
structure or other financial terms is a forward-looking
statement.  Certain statements regarding the following particularly
are forward-looking in nature:
  ·
              our
      business strategy;
  ·
              future
      performance, developments, market forecasts or projected
      dividends;
  ·
              projected
      acquisitions or joint ventures; and
  ·
              projected
      capital expenditures.
  It is
important to note that the description of our business is general and our
investment in real estate-related and certain alternative assets in particular,
is a statement about our operations as of a specific point in time and is not
meant to be construed as an investment policy.  The types of assets we
hold, the amount of leverage we use or the liabilities we incur and other
characteristics of our assets and liabilities disclosed in this report as of a
specified period of time are subject to reevaluation and change without
notice.
  Our
forward-looking statements are based upon our management’s beliefs, assumptions
and expectations of our future operations and economic performance, taking into
account the information currently available to us.  Forward-looking
statements involve risks and uncertainties, some of which are not currently
known to us and many of which are beyond our control and that might cause our
actual results, performance or financial condition to be materially different
from the expectations of future results, performance or financial condition we
express or imply in any forward-looking statements.  Some of the
important factors that could cause our actual results, performance or financial
condition to differ materially from expectations are:
  ·
              our
      portfolio strategy and operating strategy may be changed or modified by
      our management without advance notice to you or stockholder approval and
      we may suffer losses as a result of such modifications or
      changes;
  ·
              our
      ability to successfully implement and grow our alternative investment
      strategy and to identify suitable alternative
  assets;
  ·
              market
      changes in the terms and availability of repurchase agreements used to
      finance our investment portfolio
activities;
  ·
              reduced
      demand for our securities in the mortgage securitization and secondary
      markets;
  ·
              interest
      rate mismatches between our interest-earning assets and our borrowings
      used to fund such purchases;
  ·
              changes
      in interest rates and mortgage prepayment
rates;
  ·
              changes
      in the financial markets and economy generally, including the continued or
      accelerated deterioration of the U.S.
economy;
  ·
              effects
      of interest rate caps on our adjustable-rate mortgage-backed
      securities;
  24
 ·
              the
      degree to which our hedging strategies may or may not protect us from
      interest rate volatility;
  ·
              potential
      impacts of our leveraging policies on our net income and cash available
      for distribution;
  ·
              our
      board’s ability to change our operating policies and strategies without
      notice to you or stockholder
approval;
  ·
              our
      ability to manage, minimize or eliminate liabilities stemming from the
      discontinued operation including, among other things, litigation,
      repurchase obligations on the sales of mortgage loans and property
      leases;
  ·
              actions
      taken by the U.S. and foreign governments, central banks and other
      governmental and regulatory bodies for the purpose of stabilizing the
      financial credit and housing markets, and economy generally, including
      loan modification programs;
  ·
              changes
      to the nature of the guarantees provided by Fannie Mae and Freddie Mac;
      and
  ·
              the
      other important factors identified, or incorporated by reference into this
      report, including, but not limited to those under the captions
      “Management’s Discussion and Analysis of Financial Condition and Results
      of Operations” and “Quantitative and Qualitative Disclosures about Market
      Risk”, and those described in Part I, Item 1A – “Risk Factors” of our
      Annual Report on Form 10-K for the year ended December 31, 2008, and the
      various other factors identified in any other documents filed by us with
      the SEC.
  We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.  In light of these risks, uncertainties and assumptions,
the events described by our forward-looking events might not
occur.  We qualify any and all of our forward-looking statements by
these cautionary factors.  In addition, you should carefully review
the risk factors described in other documents we file from time to time with the
SEC.
  General
  New York
Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT”, the
“Company”, “we”, “our”, and “us”), is a self-advised real estate investment
trust, or REIT, that invests primarily in real estate-related assets, including
residential adjustable-rate mortgage-backed securities, which
includes collateralized mortgage obligation floating rate
securities (“RMBS”), and prime credit quality residential adjustable-rate
mortgage (“ARM”) loans (“prime ARM loans”), and to a lesser extent, in certain
alternative real estate-related and financial assets that present greater credit
risk and less interest rate risk than our historical investments in RMBS and
prime ARM loans.  Beginning in August 2007, our investment strategy
focused on investments in RMBS issued or guaranteed by a U.S. government agency,
such as the Government National Mortgage Association, (“Ginnie Mae”), or by a
U.S. Government-sponsored entity, such as the Federal National Mortgage
Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”). We sometimes refer in this Quarterly Report on Form 10-Q to
RMBS issued by a U.S. government agency or U.S. Government-sponsored entity as
“Agency RMBS” and our historic investment strategy as our “principal investment
strategy.”
  In
January 2008, we formed a strategic relationship with JMP Group Inc., a
full-service investment banking and asset management firm, and certain of its
affiliates (collectively, the “JMP Group”), for the purpose of improving our
capitalization and diversifying our investment strategy away from a strategy
exclusively focused on investments in Agency RMBS, in part to achieve attractive
risk-adjusted returns, and to potentially utilize all or part of a net operating
loss carry-forward that resulted from our exit from the mortgage lending
business in 2007. In connection with this strategic relationship and the
investment by JMP Group Inc. and certain of its affiliates in $20 million of our
Series A Preferred Stock, we entered into an advisory agreement with Harvest
Capital Strategies LLC (“HCS”), formerly known as JMP Asset Management LLC,
pursuant to which HCS is responsible for implementing and managing our
investments in alternative real estate-related and financial
assets.  Pursuant to the advisory agreement, HCS is responsible for
managing investments made by two of our wholly-owned subsidiaries, Hypotheca
Capital, LLC (“HC,” also formerly known as The New York Mortgage Company, LLC),
and New York Mortgage Funding, LLC, as well as any additional subsidiaries
acquired or formed in the future to hold investments made on our behalf by HCS.
We refer to these subsidiaries in our periodic reports filed with the SEC as the
“Managed Subsidiaries.”  Due to market conditions and other factors in
2008, we elected to forgo making investments in alternative real estate-related
and financial assets and instead, exclusively focused our resources and efforts
on preserving capital and investing in Agency RMBS.  However, on March
31, 2009, we commenced our alternative investment strategy by opportunistically
investing in $9.0 million of collateralized loan obligations. We sometimes refer
in this report to our investment in certain alternative real estate-related and
financial assets, or equity interests therein, including, without limitation,
certain non-Agency RMBS and other non-rated mortgage assets, commercial
mortgage-backed securities, commercial real estate loans, collateralized loan
obligations and other investments, as our “alternative investment strategy” and
such assets as our “alternative assets.”
  25
 Our
principal business objective is to generate net income for distribution to our
stockholders resulting from the spread between the interest and other income we
earn on our interest-earning assets and the interest expense we pay on the
borrowings that we use to finance these assets, which we refer to as our net
interest income.  Because we intend to continue to qualify as a REIT
for federal income tax purposes and to operate our business so as to be exempt
from regulation under the Investment Company Act of 1940, we will be required to
invest a substantial majority of our assets in qualifying real estate assets,
such as agency RMBS, mortgage loans and other liens on and interests in real
estate.
  Recent
Events
  Commencement
of Alternative Investment Strategy
  On March
31, 2009, we commenced our alternative investment strategy by purchasing $9
million of discounted notes issued by Cratos CLO I, Ltd. (the “CLO”), a
collateralized loan obligation.  The purchase of these assets closed
on April 7, 2009.  As of March 31, 2009, the CLO’s portfolio was
comprised of approximately $466 million, par amount of senior secured corporate
loans, extended to more than 74 different borrowers and is diversified by
industry, geography and borrower classification.  Our investment in
the CLO was completed in connection with the acquisition of the CLO’s investment
adviser by JMP Group Inc., and is the type of transaction contemplated by the
advisory agreement and our alternative investment strategy.
 
 Our
investment in the CLO was conducted through HC.  HC maintains an
approximately $65.6 million net operating loss carry-forward.  We
expect to utilize a portion of this net operating loss carry forward to offset
taxable income generated by these alternative assets. Pursuant to the advisory
agreement, our investment in these assets will be managed by HCS.
 
 Restructuring
of Principal Investment Portfolio
 
 As of
December 31, 2008, our principal investment portfolio included
approximately $197.7 million of collateralized mortgage obligation floating rate
securities issued by Fannie Mae or Freddie Mac, which we refer to as Agency CMO
floaters.  Following a review of our principal investment portfolio, we
determined in March 2009 that the Agency CMO floaters held in our
portfolio were no longer producing acceptable returns, and as a result, we
decided to initiate a program to dispose of these securities on an opportunistic
basis overtime.  As of March 31, 2009, we had sold approximately
$159.5 million in current par value of Agency CMO floaters under this
program resulting in a net gain of approximately $0.1 million.  As of the
date of this report, we had sold all of our Agency CMO floaters, or
approximately $228.0 million in current par value of Agency CMO
floaters, under this program resulting in a net gain of approximately $0.1
million.
 
 Known
Material Trends and Commentary
  General.The well
publicized disruptions in the credit markets that began in 2007 escalated
throughout 2008 and spread to the financial markets and the greater
economy.  The financial and credit markets continued to experience
difficulties during most of the 2009 first quarter, but have shown signs of
improvement more recently.  However, the U.S. economy exhibited signs
of a continued recession during the 2009 first quarter, with gross domestic
product declining for the third consecutive quarter.
 
 26
 As discussed under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations―Current Market Conditions
and Known Material Trends”in our Annual Report on Form 10-K for the year
ended December 31, 2008, U.S. and foreign governments, central banks and other
governmental and regulatory bodies have taken or are considering taking numerous
actions to address the financial and credit crisis and the global recession,
such as the U.S. government’s passage of a $787 billion economic stimulus plan
and the Troubled Asset Relief Program, the Homeowner Affordability and Stability
Plan (“HASP”), and the Federal Reserve Bank’s (“Federal Reserve”) commitment to
purchase up to $1.25 trillion of Agency RMBS.  We refer you to the
caption in our Form 10-K noted in the immediately preceding sentence for more
information regarding these initiatives. The outcome of these events remain
highly uncertain and we cannot predict whether or when such actions may occur or
what impact, if any, such actions could have on our business, results of
operations and financial condition.
  Mortgage asset values. The Federal Reserve’s
announcement on January 9, 2009 that it had begun to buy Agency RMBS, combined
with Federal Reserve’s announcement in March 2009 of an increase of up to $750
billion in its commitment to purchase Agency RMBS has resulted in a substantial
increase in the sale prices of Agency RMBS.  We believe that the
stronger backing for the guarantors of Agency RMBS, resulting from the
conservatorship of Fannie Mae and Freddie Mac, along with the U.S. Treasury’s
commitment to purchase senior preferred stock in these companies and the Federal
Reserve’s Agency RMBS purchase program has positively impacted the value of our
Agency RMBS.  However, we expect this positive impact to be partially
offset in future months due expected increases in prepayment rates resulting
from greater refinancing activity.
 
 Financing markets and liquidity
- Financing and liquidity markets showed signs of improvement in the 2009
first quarter.  As of March 31, 2009, we had outstanding repurchase
borrowings from seven counterparties, as compared to six counterparties at
December 31, 2008 and five counterparties at September 30, 2008.
 
 Financing costs and interest rates
- As of March 31, 2009, 30-day LIBOR was 0.50 % while the Fed Funds
effective rate was 0.16%, as compared to 30-day LIBOR of 0.44% and a Fed Funds
effective rate of 0.14% at December 31, 2008.  Because of continued
uncertainty in the credit markets and U.S. economic conditions, we expect that
interest rates are likely to remain at these historically low levels until such
time as the economic data begin to confirm an improvement in the overall
economy.
 
 Prepayment rates.
   As a result of various government initiatives, rates on
conforming mortgages have declined, nearing historical lows.  Hybrid
and adjustable-rate mortgage originations have declined substantially, as rates
on these types of mortgages are comparable with rates available on 30-year
fixed-rate mortgages.  Moreover, the recent creation of the HASP is
aimed to further assist homeowners in refinancing and to reduce potential
foreclosures.  Although we expect that the constant prepayment rate,
or CPR, will trend upward during 2009 based on current market interest rates,
future CPRs will be affected by the success of HASP and thetiming and purpose
ofany future
legislation, if any, and the resulting impact on borrowers’ ability to
refinance, mortgage interest rates in the market and home values.
 
 Presentation
Format
  In
connection with the sale of substantially all of our wholesale and retail
mortgage lending platform assets during the first quarter of 2007, we classified
certain assets and liabilities related to our mortgage lending segment as a
discontinued operation in accordance with the provisions of SFAS No.
144.  As a result, we have reported revenues and expenses related to
the segment as a discontinued operation and the related assets and liabilities
as assets and liabilities related to a discontinued operation for all periods
presented in the accompanying condensed consolidated financial
statements.  Our continuing operations are primarily comprised of what
had been our portfolio management operations.  In addition, certain
assets such as the deferred tax asset, and certain liabilities, such as
subordinated debt and liabilities related to leased facilities not assigned to
Indymac, have become part of the ongoing operations of NYMT and
accordingly, we have not classified as a discontinued operation in accordance
with the provisions of SFAS No. 144.
  The
Company completed a one for two reverse stock split of its common stock in May
2008.  All share amounts and earnings per share disclosures have been
restated to reflect this reverse stock split.
  27
 Significance
of Estimates and Critical Accounting Policies
  A summary
of our critical accounting policies is included in Item 7 of our Annual Report
on Form 10-K for the year ended December 31, 2008 and “Note 1 – Significant
Accounting Policies” to the consolidated financial statements included
therein.  There have been no significant changes to those policies
during 2009.
  Summary
of Operations
  Net Interest Spread. For the
three months ended March 31, 2009, our net income was dependent upon the net
interest income (the interest income on portfolio assets net of the interest
expense and hedging costs associated with such assets) generated from our
portfolio of RMBS and mortgage loans held in securitization trusts, which was
partially offset by losses on delinquent loans held in securitization trusts and
certain other expenses.  The net interest spread on our investment
portfolio was 252 basis points for the quarter ended March 31, 2009, as compared
to 131 basis points for the quarter ended December 31, 2008, and 85 basis points
for the quarter ended March 31, 2008.
  Financing. During the quarter
ended March 31, 2009, we continued to employ a balanced and diverse funding mix
to finance our investment portfolio and assets.  At March 31, 2009,
our RMBS portfolio was funded with approximately $276.2 million of repurchase
agreement borrowing, or approximately 40.3% of our total liabilities, at a
weighted average interest rate of 0.99%.  The Company’s average
haircut on its repurchase borrowings was approximately 7.7% at March 31, 2009.
As of March 31, 2009, the loans held in securitization trusts were permanently
financed with approximately $323.6 million of CDOs, or approximately 47.3% of
our total liabilities at an average interest rate of 0.90%.  The
Company has a net equity investment of $12.4 million in the securitization
trusts.
  At March
31, 2009 our leverage ratio for our RMBS investment portfolio, which we define
as our outstanding indebtedness under repurchase agreements divided by the sum
of stockholders’ equity and our convertible preferred debentures, was 5 to
1.  Given the continued uncertainty in the credit markets, we believe
that maintaining a leverage ratio in the range of 6 to 8 times is appropriate at
this time.
  Prepayment Experience.The
cumulative prepayment rate (“CPR”) on our overall mortgage portfolio
averaged approximately 12% during the three months ended March 31, 2009, as
compared to 13% for the three months ended March 31, 2008.  CPRs on
our purchased portfolio of investment securities averaged approximately 12% for
the period ended March 31, 2009, as compared to 7% for the period ended March
31, 2008.  The CPRs on our mortgage loans held in our securitization
trusts averaged approximately 12% during the three months ended March 31, 2009,
as compared to 24% for the period ended March 31, 2008.  When
prepayment expectations over the remaining life of assets increase, we have to
amortize premiums over a shorter time period resulting in a reduced yield to
maturity on our investment assets.  Conversely, if prepayment
expectations decrease, the premium would be amortized over a longer period
resulting in a higher yield to maturity.  We monitor our prepayment
experience on a monthly basis and adjust the amortization of our net premiums
accordingly.
  Financial
Condition
  As of
March 31, 2009, we had approximately $726.1 million of total assets, as compared
to approximately $853.3 million of total assets as of December 31,
2008.  The decrease in total assets resulted primarily from the sale
of substantially all of the CMO Agency floaters totaling approximately $159.5
million, as discussed above.
  Balance
Sheet Analysis - Asset Quality
  Investment Securities - Available
for Sale - The following tables set forth the credit characteristics of
our securities portfolio as of March 31, 2009 and December 31, 2008 (dollar
amounts in thousands):
  28
 Credit
Characteristics of Our Investment Securities
  March
      31, 2009
                  Sponsor
      or Rating
                  
                  Par
                    Value
                  
                  
                  Carrying
                    Value
                  
                  
                  %
      of
                    Portfolio
                  
                  
                  Coupon
                  
                  
                  YieldAgency
      REMIC CMO floaters
                  FNMA/
                    FHLMC
                  
                  $
                  34,279
                  
                  
                  $
                  33,277
                  
                  
                  
                  11%
                  
                  
                  
                  1.43%
                  
                  
                  
                  6.39%Agency
      Hybrid Arms
                  FNMA
                  
                  
                  243,456
                  
                  
                  
                  251,474
                  
                  
                  
                  80%
                  
                  
                  
                  5.15%
                  
                  
                  
                  3.92%Private
      Label CMO Floaters
                  AAA-BBB
                  
                  
                  23,803
                  
                  
                  
                  18,219
                  
                  
                  
                  6%
                  
                  
                  
                  1.34%
                  
                  
                  
                  14.15%Private
      Label CMO Floaters
                  Below
      BBB
                  
                  
                  1,863
                  
                  
                  
                  1,118
                  
                  
                  
                  0%
                  
                  
                  
                  1.27%
                  
                  
                  
                  15.50%NYMT
      Retained Securities
                  AAA-BBB
                  
                  
                  609
                  
                  
                  
                  475
                  
                  
                  
                  0%
                  
                  
                  
                  4.84%
                  
                  
                  
                  15.00%NYMT
      Retained Securities
                  Below
      BBB
                  
                  
                  2,459
                  
                  
                  
                  69
                  
                  
                  
                  0%
                  
                  
                  
                  5.64%
                  
                  
                  
                  19.10%Collateralized
      Loan Obligations
                  A-BBB
                  
                  
                  25,700
                  
                  
                  
                  5,758
                  
                  
                  
                  2%
                  
                  
                  
                  3.12%
                  
                  
                  
                  20.03%Collateralized
      Loan Obligations
                  Below
      BBB
                  
                  
                  20,250
                  
                  
                  
                  3,240
                  
                  
                  
                  1%
                  
                  
                  
                  6.25%
                  
                  
                  
                  34.61%Total/Weighted
      average
                  
                  
                  $
                  352,419
                  
                  
                  $
                  313,630
                  
                  
                  
                  100%
                  
                  
                  
                  4.43%
                  
                  
                  
                  5.45%
 
 
 December
      31, 2008
                              Sponsor
      or Rating
                              
                              Par
                                Value
                              
                              
                              Carrying
                                Value
                              
                              
                              %
      of
                                Portfolio
                              
                              
                              Coupon
                              
                              
                              YieldAgency
      Hybrid ARMs
                              FNMA
                              
                              $
                              251,810
                              
                              
                              $
                              258,196
                              
                              
                              
                              54%
                              
                              
                              
                              5.15%
                              
                              
                              
                              3.93%Agency
      REMIC CMO Floaters
                              FNMA/
                                FHLMC
                              
                              
                              203,638
                              
                              
                              
                              197,675
                              
                              
                              
                              41%
                              
                              
                              
                              1.83%
                              
                              
                              
                              8.54%Private
      Label CMO floaters
                              AAA
                              
                              
                              23,289
                              
                              
                              
                              18,118
                              
                              
                              
                              4%
                              
                              
                              
                              1.27%
                              
                              
                              
                              15.85%Private
      Label CMO floaters
                              Aa
                              
                              
                              3,648
                              
                              
                              
                              2,828
                              
                              
                              
                              1%
                              
                              
                              
                              2.30%
                              
                              
                              
                              4.08%NYMT
      Retained Securities
                              AAA-BBB
                              
                              
                              609
                              
                              
                              
                              530
                              
                              
                              
                              0%
                              
                              
                              
                              5.80%
                              
                              
                              
                              8.56%NYMT
      Retained Securities
                              Below
      BBB
                              
                              
                              2,462
                              
                              
                              
                              69
                              
                              
                              
                              0%
                              
                              
                              
                              5.67%
                              
                              
                              
                              16.99%Total/Weighted
      average
                              
                              
                              $
                              485,456
                              
                              
                              $
                              477,416
                              
                              
                              
                              100%
                              
                              
                              
                              3.55%
                              
                              
                              
                              6.51%
 
 Mortgage Loans Held in
Securitization Trusts (net)- Included in our
portfolio are ARM loans that we originated or purchased in bulk from third
parties that met our investment criteria and portfolio
requirements.  These loans were initially classified as “mortgage
loans held for investment” during a period of aggregation and until the
portfolio reaches a size sufficient for us to securitize such
loans.  Once the securitization of these loans qualified as a
financing for SFAS No. 140 purposes, the loans were then re-classified as
“mortgage loans held in securitization trusts.”
  New York
Mortgage Trust 2006-1, qualified as a sale under SFAS No. 140, which resulted in
the recording of residual assets and mortgage servicing rights.  As of
March 31, 2009 the residual assets totaled $0.1 million and are included in
investment securities available for sale.
  The
following table details mortgage loans held in securitization trusts at March
31, 2009 (dollar amounts in thousands):
  Par Value
                      
                      Coupon
                      
                      
                      Carrying Value
                      
                      YieldMarch
      31, 2009
                      
                      $
                      335,538
                      
                      
                      
                      5.54%
                      
                      
                      $
                      335,980
                      
                      
                      
                      5.57%
 
 At March
31, 2009, mortgage loans held in securitization trusts totaled approximately
$336.0 million, or 46.3% of our total assets.  Of this mortgage loan
investment portfolio, 100% are traditional ARMs or hybrid ARMs, 81% of which are
ARM loans that are interest only.  On our hybrid ARMs, interest rate
reset periods are predominately five years or less and the
interest-only/amortization period is typically 10 years, which mitigates the
“payment shock” at the time of interest rate reset.  No loans in our
investment portfolio of mortgage loans are option-ARMs or ARMs with negative
amortization.
  29
 The
following table sets forth the composition of our portfolio of
mortgage loans held in securitization trusts and retained interests in our
REMIC securitization, NYMT 2006-1, as of March 31, 2009 (dollar amounts in
thousands):
  #
      of Loans
                        
                        Par
      Value
                        
                        Carrying
                          ValueLoan
      Characteristics:Mortgage
      loans held in securitization trusts
                        
                        
                        772
                        
                        
                        $
                        335,538
                        
                        
                        $
                        335,980Retained
      interest in securitization (included in investment securities
      available for sale)
                        
                        
                        323
                        
                        
                        
                        170,273
                        
                        
                        
                        544Total
      loans held
                        
                        
                        1,095
                        
                        
                        $
                        505,811
                        
                        
                        $
                        336,524
 
 Average
                    
                    
                    High
                    
                    
                    LowGeneral
      Loan Characteristics:Original
      Loan Balance (dollar amounts in thousands)
                    
                    $
                    489
                    
                    
                    $
                    3,500
                    
                    
                    $
                    48Coupon
      Rate
                    
                    
                    5.60
                    %
                    
                    
                    7.75
                    %
                    
                    
                    1.50
                    %Gross
      Margin
                    
                    
                    2.33
                    %
                    
                    
                    5.00
                    %
                    
                    
                    1.13
                    %Lifetime
      Cap
                    
                    
                    11.19
                    %
                    
                    
                    13.38
                    %
                    
                    
                    9.13
                    %Original
      Term (Months)
                    
                    
                    360
                    
                    
                    
                    360
                    
                    
                    
                    360Remaining
      Term (Months)
                    
                    
                    316
                    
                    
                    
                    324
                    
                    
                    
                    280Average
      Months to Reset
                    
                    
                    16
                    
                    
                    
                    49
                    
                    
                    
                    1Original
      Average FICO Score
                    
                    
                    736
                    
                    
                    
                    820
                    
                    
                    
                    593Original
      Average LTV
                    
                    
                    70.0
                    
                    
                    
                    95.0
                    
                    
                    
                    10.9
  30
 The
following table details loan summary information for loans held in
securitization trust at March 31, 2009 (dollar amounts in
thousands)
  Description
                                
                                
                                Interest
      Rate %
                                
                                
                                Final
      Maturity
                                
                                
                                Periodic
      Payment
                                
                                
                                
                                Original
                                  Principal
                                
                                
                                Current
                                  Principal
                                
                                
                                Principal
      Amount of Loans Subject to Delinquent PrincipalProperty
                                    Type
                                
                                Balance
                                
                                Loan
                                    Count
                                
                                
                                Max
                                
                                
                                Min
                                
                                
                                Avg
                                
                                
                                Min
                                
                                
                                Max
                                
                                
                                Terms(months)
                                
                                PriorLiens
                                
                                of
                                    Mortgage
                                
                                
                                of
                                    Mortgage
                                
                                
                                or
                                    InterestSingle
                                
                                <=
      $100
                                
                                
                                12
                                
                                
                                
                                7.75
                                
                                
                                
                                4.00
                                
                                
                                
                                5.32
                                
                                
                                12/01/34
                                
                                
                                11/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                1,595
                                
                                
                                $
                                843
                                
                                
                                $
                                -Family
                                
                                <=$250
                                
                                
                                92
                                
                                
                                
                                7.50
                                
                                
                                
                                4.75
                                
                                
                                
                                5.56
                                
                                
                                09/01/32
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                18,646
                                
                                
                                
                                16,567
                                
                                
                                
                                605<=$500
                                
                                
                                140
                                
                                
                                
                                7.13
                                
                                
                                
                                4.25
                                
                                
                                
                                5.54
                                
                                
                                09/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                51,908
                                
                                
                                
                                49,131
                                
                                
                                
                                2,204<=$1,000
                                
                                
                                61
                                
                                
                                
                                6.38
                                
                                
                                
                                1.75
                                
                                
                                
                                5.38
                                
                                
                                07/01/33
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                45,245
                                
                                
                                
                                43,323
                                
                                
                                
                                2,659>$1,000
                                
                                
                                33
                                
                                
                                
                                6.75
                                
                                
                                
                                1.63
                                
                                
                                
                                5.55
                                
                                
                                01/01/35
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                57,617
                                
                                
                                
                                55,656
                                
                                
                                
                                1,999Summary
                                
                                
                                338
                                
                                
                                
                                7.75
                                
                                
                                
                                1.63
                                
                                
                                
                                5.51
                                
                                
                                09/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                175,011
                                
                                
                                $
                                165,520
                                
                                
                                $
                                7,4672-4
                                
                                <=
      $100
                                
                                
                                1
                                
                                
                                
                                6.63
                                
                                
                                
                                6.63
                                
                                
                                
                                6.63
                                
                                
                                02/01/35
                                
                                
                                02/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                80
                                
                                
                                $
                                76
                                
                                
                                $
                                -FAMILY
                                
                                <=$250
                                
                                
                                6
                                
                                
                                
                                6.75
                                
                                
                                
                                4.38
                                
                                
                                
                                5.75
                                
                                
                                12/01/34
                                
                                
                                07/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                1,115
                                
                                
                                
                                1,008
                                
                                
                                
                                -<=$500
                                
                                
                                20
                                
                                
                                
                                7.25
                                
                                
                                
                                2.25
                                
                                
                                
                                5.54
                                
                                
                                09/01/34
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                7,456
                                
                                
                                
                                7,246
                                
                                
                                
                                513<=$1,000
                                
                                
                                4
                                
                                
                                
                                6.88
                                
                                
                                
                                5.38
                                
                                
                                
                                5.91
                                
                                
                                12/01/34
                                
                                
                                08/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                3,068
                                
                                
                                
                                3,045
                                
                                
                                
                                ->$1,000
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Summary
                                
                                
                                31
                                
                                
                                
                                7.25
                                
                                
                                
                                2.25
                                
                                
                                
                                5.67
                                
                                
                                09/01/34
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                11,719
                                
                                
                                $
                                11,375
                                
                                
                                $
                                513Condo
                                
                                <=
      $100
                                
                                
                                16
                                
                                
                                
                                6.00
                                
                                
                                
                                4.38
                                
                                
                                
                                5.44
                                
                                
                                01/01/35
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                2,119
                                
                                
                                $
                                1,125
                                
                                
                                $
                                -<=$250
                                
                                
                                93
                                
                                
                                
                                6.50
                                
                                
                                
                                4.50
                                
                                
                                
                                5.62
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                18,494
                                
                                
                                
                                16,834
                                
                                
                                
                                245<=$500
                                
                                
                                87
                                
                                
                                
                                6.88
                                
                                
                                
                                1.63
                                
                                
                                
                                5.35
                                
                                
                                09/01/32
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                30,352
                                
                                
                                
                                29,215
                                
                                
                                
                                915<=$1,000
                                
                                
                                34
                                
                                
                                
                                6.13
                                
                                
                                
                                1.75
                                
                                
                                
                                5.22
                                
                                
                                08/01/33
                                
                                
                                11/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                25,210
                                
                                
                                
                                23,530
                                
                                
                                
                                546>$1,000
                                
                                
                                14
                                
                                
                                
                                6.13
                                
                                
                                
                                5.13
                                
                                
                                
                                5.59
                                
                                
                                07/01/34
                                
                                
                                09/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                21,488
                                
                                
                                
                                20,953
                                
                                
                                
                                -Summary
                                
                                
                                244
                                
                                
                                
                                6.88
                                
                                
                                
                                1.63
                                
                                
                                
                                5.45
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                97,663
                                
                                
                                $
                                91,657
                                
                                
                                $
                                1,706CO-OP
                                
                                <=
      $100
                                
                                
                                3
                                
                                
                                
                                5.63
                                
                                
                                
                                4.75
                                
                                
                                
                                5.29
                                
                                
                                10/01/34
                                
                                
                                06/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                230
                                
                                
                                $
                                221
                                
                                
                                $
                                -<=$250
                                
                                
                                24
                                
                                
                                
                                6.25
                                
                                
                                
                                4.00
                                
                                
                                
                                5.38
                                
                                
                                10/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                4,710
                                
                                
                                
                                4,305
                                
                                
                                
                                -<=$500
                                
                                
                                40
                                
                                
                                
                                6.38
                                
                                
                                
                                1.50
                                
                                
                                
                                5.38
                                
                                
                                08/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                16,469
                                
                                
                                
                                14,996
                                
                                
                                
                                -<=$1,000
                                
                                
                                27
                                
                                
                                
                                5.63
                                
                                
                                
                                4.75
                                
                                
                                
                                5.28
                                
                                
                                11/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                20,074
                                
                                
                                
                                18,556
                                
                                
                                
                                ->$1,000
                                
                                
                                5
                                
                                
                                
                                6.00
                                
                                
                                
                                2.38
                                
                                
                                
                                4.80
                                
                                
                                11/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                7,544
                                
                                
                                
                                7,033
                                
                                
                                
                                -Summary
                                
                                
                                99
                                
                                
                                
                                6.38
                                
                                
                                
                                1.50
                                
                                
                                
                                5.30
                                
                                
                                08/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                49,027
                                
                                
                                $
                                45,111
                                
                                
                                $
                                -PUD
                                
                                <=
      $100
                                
                                
                                3
                                
                                
                                
                                5.63
                                
                                
                                
                                5.25
                                
                                
                                
                                5.38
                                
                                
                                07/01/35
                                
                                
                                08/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                938
                                
                                
                                $
                                229
                                
                                
                                $
                                -<=$250
                                
                                
                                25
                                
                                
                                
                                6.50
                                
                                
                                
                                4.38
                                
                                
                                
                                5.48
                                
                                
                                01/01/35
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                5,275
                                
                                
                                
                                4,653
                                
                                
                                
                                -<=$500
                                
                                
                                21
                                
                                
                                
                                7.63
                                
                                
                                
                                4.38
                                
                                
                                
                                5.61
                                
                                
                                08/01/32
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                7,409
                                
                                
                                
                                7,167
                                
                                
                                
                                934<=$1,000
                                
                                
                                7
                                
                                
                                
                                5.88
                                
                                
                                
                                4.75
                                
                                
                                
                                5.34
                                
                                
                                05/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                4,746
                                
                                
                                
                                4,631
                                
                                
                                
                                ->$1,000
                                
                                
                                4
                                
                                
                                
                                6.13
                                
                                
                                
                                5.22
                                
                                
                                
                                5.71
                                
                                
                                04/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                5,233
                                
                                
                                
                                5,195
                                
                                
                                
                                -Summary
                                
                                
                                60
                                
                                
                                
                                7.63
                                
                                
                                
                                4.38
                                
                                
                                
                                5.52
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                23,601
                                
                                
                                $
                                21,875
                                
                                
                                $
                                934Summary
                                
                                <=
      $100
                                
                                
                                35
                                
                                
                                
                                7.75
                                
                                
                                
                                4.00
                                
                                
                                
                                5.41
                                
                                
                                10/01/34
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                4,962
                                
                                
                                $
                                2,494
                                
                                
                                $
                                -<=$250
                                
                                
                                240
                                
                                
                                
                                7.50
                                
                                
                                
                                4.00
                                
                                
                                
                                5.56
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                48,240
                                
                                
                                
                                43,367
                                
                                
                                
                                850<=$500
                                
                                
                                308
                                
                                
                                
                                7.63
                                
                                
                                
                                1.50
                                
                                
                                
                                5.54
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                113,594
                                
                                
                                
                                107,755
                                
                                
                                
                                4,566<=$1,000
                                
                                
                                133
                                
                                
                                
                                6.88
                                
                                
                                
                                1.75
                                
                                
                                
                                5.33
                                
                                
                                07/01/33
                                
                                
                                12/01/35
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                98,343
                                
                                
                                
                                93,085
                                
                                
                                
                                3,205>$1,000
                                
                                
                                56
                                
                                
                                
                                6.75
                                
                                
                                
                                1.63
                                
                                
                                
                                5.50
                                
                                
                                04/01/34
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                
                                91,882
                                
                                
                                
                                88,837
                                
                                
                                
                                1,999Grand
      Total / Weighted Average
                                
                                
                                772
                                
                                
                                
                                7.75
                                
                                
                                
                                1.50
                                
                                
                                
                                5.47
                                
                                
                                08/01/32
                                
                                
                                01/01/36
                                
                                
                                
                                360
                                
                                NA
                                
                                $
                                357,021
                                
                                
                                $
                                335,538
                                
                                
                                $
                                10,620
 
 
 31
  The
following table details activity for loans held in securitization trust for the
three months ended March 31, 2009.
  Current
      Principal
                              
                              
                              Premium
                              
                              
                              Loan
      Reserve
                              
                              
                              Net
      Carrying ValueBalance,
      January 1, 2009
                              
                              $
                              347,546
                              
                              
                              $
                              2,197
                              
                              
                              $
                              (1,406
                              )
                              
                              $
                              348,337Additions
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Principal
      repayments
                              
                              
                              (12,008
                              )
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              (12,008
                              )Provision
      for loan losses
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              (629
                              )
                              
                              
                              (629
                              )Charge-offs
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              355
                              
                              
                              
                              355Amortization
      for premium
                              
                              
                              —
                              
                              
                              
                              (75
                              )
                              
                              
                              —
                              
                              
                              
                              (75
                              )Balance,
      March 31, 2009
                              
                              $
                              335,538
                              
                              
                              $
                              2,122
                              
                              
                              $
                              (1,680
                              )
                              
                              $
                              335,980
 
 Cash and cash equivalents -
We had unrestricted cash and cash equivalents of $45.0 million at March 31, 2009
versus $9.4 million at December 31, 2008.
  Restricted Cash - Restricted
cash of $4.2 million at March 31, 2009 includes amounts held as collateral for
two letters of credit related to the Company’s lease of office space, including
its corporate headquarters.  Restricted cash of $7.9 million at
December 31, 2008, includes amounts held by counterparties as collateral for
hedging instruments and a repurchase agreement and amounts held as collateral
for two letters of credit related to the Company’s lease of office space,
including its corporate headquarters.
  Accounts and accrued interest
receivable - Accounts and accrued interest receivable includes accrued
interest receivable for the investment securities and mortgage loans held in
securitization trusts.
  Prepaid and other assets -
Prepaid and other assets totaled $1.5 million as of March 31, 2009 and $1.2
million as of December 31, 2008.  Prepaid and other assets consist
mainly of $0.5 million of capitalization expenses related to equity and bond
issuance cost, $0.4 million of escrow advances related to our securitizations
and $0.2 million of capitalized servicing costs related to our securitization
accounted for as a sale.
  Assets
Related to Discontinued Operation:
  Mortgage Loans Held for Sale
(net) - Mortgage loans that we have originated but do not intend to hold
for investment and are held pending sale to investors are classified as mortgage
loans held for sale.  We had mortgage loans held for sale (net) of
$4.3 million at March 31, 2009 as compared to $5.4 million at December 31,
2008.
  Balance
Sheet Analysis - Financing Arrangements
  Financing Arrangements, Portfolio
Investments - As of March 31, 2009 and December 31 2008, there were
approximately $276.2 million and $402.3 million of repurchase borrowings
outstanding, respectively.  Our repurchase agreements typically have
terms of 30 days or less.  As of March 31, 2009, the current weighted
average borrowing rate on these financing facilities was 0.99% as compared to
2.62% as of December 31, 2008.
  Collateralized Debt
Obligations - As of March 31, 2009 and December 31, 2008, we have CDOs
outstanding of approximately $323.6 million and $335.6 million, respectively,
with an average interest rate of 0.90% and 0.85%, respectively.
  Subordinated Debentures - As
of March 31, 2009, we have trust preferred securities outstanding of $44.7
million with an average interest rate of 6.48%.  As of December 31,
2008, we had trust preferred securities outstanding of $44.6 million with an
average interest rate of 6.61%. The securities are fully guaranteed by the
Company with respect to distributions and amounts payable upon liquidation,
redemption or repayment.  These securities are classified as
subordinated debentures in the liability section of our consolidated balance
sheet.
  32
 Convertible Preferred Debentures
- As of March 31, 2009 and December 31, 2008, there were 1.0 million
shares of our Series A Preferred Stock outstanding with an aggregate redemption
value of $20.0 million.  The Series A Preferred Stock entitles the
holders to receive a cumulative dividend of 10% per year, subject to an increase
to the extent any future quarterly common stock dividends exceed $0.20 per
share.  The Series A Preferred Stock is convertible into shares of our
common stock based on a conversion price of $8.00 per share of common stock,
which represents a conversion rate of two and one-half (2 1/2) shares of common
stock for each share of Series A Preferred Stock.  The Series A
Preferred Stock matures on December 31, 2010, at which time
any outstanding shares must be redeemed by us at the $20.00 per share
liquidation preference.  Pursuant to SFAS No. 150, because of this
mandatory redemption feature, we classify these securities as convertible
preferred debentures in the liability section of our balance sheet.
  Derivative Assets and
Liabilities - We generally attempt to hedge only the risk related to
changes in the interest rates, usually a London LIBOR or a U.S. Treasury
rate.
  In order
to mitigate these risks, we enter into interest rate swap agreements whereby we
receive floating rate payments in exchange for fixed rate payments, effectively
converting the borrowing to a fixed rate.  We also enter into interest
rate cap agreements whereby, in exchange for a fee, we are reimbursed for
interest paid in excess of a contractually specified capped rate.
  Derivative
financial instruments contain credit risk to the extent that the institutional
counterparties may be unable to meet the terms of the agreements.  We
minimize this risk by using multiple counterparties and limiting our
counterparties to major financial institutions with good credit
ratings.  The Company regularly monitors the potential risk of loss
with any one party resulting from this type of credit risk.  In
addition, the Company has in place with all outstanding swap counterparties
bi-lateral margin agreements thereby requiring a party to post collateral to the
Company for any valuation deficit.  This arrangement is intended to
limit the Company’s exposure to losses in the event of a counterparty default.
Accordingly, we do not expect any material losses as a result of default by
other parties.
  We enter
into derivative transactions solely for risk management purposes and not for
speculation.  The decision of whether or not a given transaction (or
portion thereof) is hedged is made on a case-by-case basis, based on the risks
involved and other factors as determined by senior management, including the
financial impact on income and asset valuation and the restrictions imposed on
REIT hedging activities by the Internal Revenue Code, among
others.  In determining whether to hedge a risk, we may consider
whether other assets, liabilities, firm commitments and anticipated transactions
already offset or reduce the risk.  All transactions undertaken as a
hedge are entered into with a view towards minimizing the potential for economic
losses that could be incurred by us.  Generally, all derivatives
entered into are intended to qualify as cashflow hedges in accordance with GAAP,
unless specifically precluded under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities(“SFAS No. 133”).  To this
end, the terms of the hedges are matched closely to the terms of the hedged
items to minimize ineffectiveness.  We closely monitor the hedge’s
effectiveness and record the related ineffectiveness into earnings.
  The
following table summarizes the estimated fair value of derivative assets and
liabilities as of March 31, 2009 and December 31, 2008 (dollar amounts in
thousands):
  March
      31,
                      2009
                    
                    
                    December
      31,
                      2008Derivative
      Assets:Interest
      rate caps
                    
                    $
                    9
                    
                    
                    $
                    22Total
                    
                    $
                    9
                    
                    
                    $
                    22Derivative
      Liabilities:Interest
      rate swaps
                    
                    $
                    4,007
                    
                    
                    $
                    4,194Total
                    
                    $
                    4,007
                    
                    
                    $
                    4,194
 
 Balance
Sheet Analysis - Stockholders’ Equity
  Stockholders’
equity at March 31, 2009 was $41.5 million and included $6.6 million of net
unrealized losses on available for sale securities and cash flow hedges
presented as accumulated other comprehensive loss.
  33
 Results
of Operations
  Overview
of Performance
  For the
three months ended March 31, 2009 we reported net income of $2.1 million as
compared to a net loss of $21.3 million, for the same period in
2008.
  The main
components of the change in net income (loss) for the three months ended March
31, 2009 as compared to the same period for the prior year are detailed in
the following table (dollar amounts in thousands):
  For
      the Three Months
                                              Ended
      March 31,2009
                                            
                                            
                                            2008
                                            
                                            
                                            DifferenceNet
      interest income from investment securities and loans held in
      securitization trusts
                                            
                                            $
                                            5,455
                                            
                                            
                                            $
                                            2,739
                                            
                                            
                                            $
                                            2,716Net
      interest income
                                            
                                            
                                            4,094
                                            
                                            
                                            
                                            1,274
                                            
                                            
                                            
                                            2,820Provision
      for loan losses
                                            
                                            
                                            (629
                                            )
                                            
                                            
                                            (1,433
                                            )
                                            
                                            
                                            (804
                                            )Impairment
      loss on securities
                                            
                                            
                                            (119
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (119
                                            )Realized
      gain (loss) on securities and related hedges
                                            
                                            
                                            123
                                            
                                            
                                            
                                            (19,848
                                            )
                                            
                                            
                                            19,971Total
      expenses
                                            
                                            
                                            1,570
                                            
                                            
                                            
                                            1,431
                                            
                                            
                                            
                                            139Income
      (loss) from continuing operations
                                            
                                            
                                            1,899
                                            
                                            
                                            
                                            (21,438
                                            )
                                            
                                            
                                            23,337Income
      from discontinued operation - net of tax
                                            
                                            
                                            155
                                            
                                            
                                            
                                            180
                                            
                                            
                                            
                                            (25
                                            )Net
      income (loss)
                                            
                                            $
                                            2,054
                                            
                                            
                                            $
                                            (21,258
                                            )
                                            
                                            $
                                            23,312Basic
      income (loss) per common share
                                            
                                            $
                                            0.22
                                            
                                            
                                            $
                                            4.19
                                            
                                            
                                            $
                                            2.32
 
 The
increase in net income of approximately $23.3 million was due primarily to
significantly improved operating conditions and a lower interest rate
environment during the period ended March 31, 2009.  Lower interest
rates during the three months ended March 31, 2009 resulted in an a $2.8 million
improvement in net interest margin as compared to the three months ended March
31, 2008.  The large loss recorded in the 2008 first quarter was
primarily a result of the March 2008 market disruption and the Company’s
response to such disruption.  The company sold an aggregate of $592.8
million of Agency RMBS in its portfolio during March 2008 in an effort to reduce
its leverage and improve its liquidity position in response to the market
disruption of March 2008, and incurred a loss of $15.0 million.  In
addition, the Company terminated a total of $517.7 million of notional interest
rate swaps in the quarter ended March 31, 2008, resulting in a realized loss of
$4.8 million.
  Comparative
Net Interest Income
  Our
results of operations for our mortgage portfolio during a given period typically
reflect the net interest spread earned on our investment portfolio of
residential mortgage loans and RMBS.  The net interest spread is
impacted by factors such as our cost of financing, the interest rate our
investments are earning and our interest hedging
strategies.  Furthermore, the amount of premium or discount paid on
purchased portfolio investments and the prepayment rates on portfolio
investments will impact the net interest spread as such factors will be
amortized over the expected term of such investments.  Loan losses due
to defaults and repurchase obligations may also negatively impact our
earnings.
  34
  The
following table sets forth the changes in net interest income, yields earned on
mortgage loans and securities and rates on financial arrangements for the three
months ended March 31, 2009 and 2008 (dollar amounts in thousands, except as
noted):
  For the Three Months Ended
      March
      31,2009
                  
                  
                  2008Average
                    Balance
                  
                  
                  Amount
                  
                  
                  Yield/
                    Rate
                  
                  
                  Average
                    Balance
                  
                  
                  Amount
                  
                  
                  Yield/
                    Rate($
      Millions)
                  
                  
                  ($
      Millions)Interest
      income:Investment
      securities and loans held in the securitization trusts
                  
                  $
                  798.7
                  
                  
                  $
                  8,436
                  
                  
                  
                  4.22
                  %
                  
                  $
                  1,019.5
                  
                  
                  $
                  13,346
                  
                  
                  
                  5.24
                  %Amortization
      of net premium
                  
                  
                  (1.5
                  )
                  
                  
                  149
                  
                  
                  
                  0.09
                  %
                  
                  
                  (0.3
                  )
                  
                  
                  (93
                  )
                  
                  
                  (0.04
                  )%Interest
      income/weighted average
                  
                  $
                  797.20
                  
                  
                  $
                  8,585
                  
                  
                  
                  4.31
                  %
                  
                  $
                  1,019.2
                  
                  
                  $
                  13,253
                  
                  
                  
                  5.20
                  %Interest
      expense:Investment
      securities and loans held in the securitization trusts
                  
                  $
                  690.7
                  
                  
                  $
                  3,130
                  
                  
                  
                  1.79
                  %
                  
                  $
                  957.2
                  
                  
                  $
                  10,514
                  
                  
                  
                  4.35
                  %Subordinated
      debentures
                  
                  
                  45.0
                  
                  
                  
                  824
                  
                  
                  
                  7.24
                  %
                  
                  
                  45.0
                  
                  
                  $
                  959
                  
                  
                  
                  8.43
                  %Convertible
      preferred debentures
                  
                  
                  20.0
                  
                  
                  
                  537
                  
                  
                  
                  10.62
                  %
                  
                  
                  20.0
                  
                  
                  
                  506
                  
                  
                  
                  10.01
                  %Interest
      expense/weighted average
                  
                  $
                  755.7
                  
                  
                  $
                  4,491
                  
                  
                  
                  2.35
                  %
                  
                  $
                  1,022.2
                  
                  
                  $
                  11,979
                  
                  
                  
                  4.64
                  %Net
      interest income/weighted average
                  
                  
                  
                  
                  
                  $
                  4,094
                  
                  
                  
                  1.96
                  %
                  
                  
                  
                  
                  
                  $
                  1,274
                  
                  
                  
                  0.56
                  %
  The
increase in net interest income for three months ended March 31, 2009, as
compared to the same period of 2008 is due to a more favorable interest rate
environment and significant portfolio restructuring in 2008. In
addition, our loans held in securitization trusts contributed approximately $3.5
million in additional net interest margin in the period ended March 31, 2009 as
compared to the same period in 2008.
  
 35
  The
following table sets forth, among other things, the net interest spread, since
inception, for our portfolio of investment securities available for sale,
mortgage loans held for investment and mortgage loans held in
securitization trusts, excluding the costs of our subordinated debentures and
convertible preferred debentures.
  Quarter
      Ended
                
                Average
      Interest Earning Assets ($ millions)
                
                
                Weighted
      Average Coupon
                
                
                Weighted
      Average Cash Yield on Interest Earning Assets
                
                
                Cost
      of Funds
                
                
                Net
      Interest Spread
                
                
                Constant
      Prepayment Rate
                  (CPR)March
      31, 2009
                
                $
                797.2
                
                
                
                4.22%
                
                
                
                4.31%
                
                
                
                1.79%
                
                
                
                2.52%
                
                
                
                12.3%December
      31, 2008
                
                $
                841.7
                
                
                
                4.77%
                
                
                
                4.65%
                
                
                
                3.34%
                
                
                
                1.31%
                
                
                
                9.2%September
      30, 2008
                
                $
                874.5
                
                
                
                4.81%
                
                
                
                4.72%
                
                
                
                3.36%
                
                
                
                1.36%
                
                
                
                13.8%June
      30, 2008
                
                $
                899.3
                
                
                
                4.86%
                
                
                
                4.78%
                
                
                
                3.35%
                
                
                
                1.43%
                
                
                
                14.0%March
      31, 2008
                
                $
                1,019.2
                
                
                
                5.24%
                
                
                
                5.20%
                
                
                
                4.35%
                
                
                
                0.85%
                
                
                
                13.0%December
      31, 2007
                
                $
                799.2
                
                
                
                5.90%
                
                
                
                5.79%
                
                
                
                5.33%
                
                
                
                0.46%
                
                
                
                19.0%September
      30, 2007
                
                $
                865.7
                
                
                
                5.93%
                
                
                
                5.72%
                
                
                
                5.38%
                
                
                
                0.34%
                
                
                
                21.0%June
      30, 2007
                
                $
                948.6
                
                
                
                5.66%
                
                
                
                5.55%
                
                
                
                5.43%
                
                
                
                0.12%
                
                
                
                21.0%March
      31, 2007
                
                $
                1,022.7
                
                
                
                5.59%
                
                
                
                5.36%
                
                
                
                5.34%
                
                
                
                0.02%
                
                
                
                19.2%December
      31, 2006
                
                $
                1,111.0
                
                
                
                5.53%
                
                
                
                5.35%
                
                
                
                5.26%
                
                
                
                0.09%
                
                
                
                17.2%September
      30, 2006
                
                $
                1,287.6
                
                
                
                5.50%
                
                
                
                5.28%
                
                
                
                5.12%
                
                
                
                0.16%
                
                
                
                20.7%June
      30, 2006
                
                $
                1,217.9
                
                
                
                5.29%
                
                
                
                5.08%
                
                
                
                4.30%
                
                
                
                0.78%
                
                
                
                19.8%March
      31, 2006
                
                $
                1,478.6
                
                
                
                4.85%
                
                
                
                4.75%
                
                
                
                4.04%
                
                
                
                0.71%
                
                
                
                18.7%December
      31, 2005
                
                $
                1,499.0
                
                
                
                4.84%
                
                
                
                4.43%
                
                
                
                3.81%
                
                
                
                0.62%
                
                
                
                26.9%September
      30, 2005
                
                $
                1,494.0
                
                
                
                4.69%
                
                
                
                4.08%
                
                
                
                3.38%
                
                
                
                0.70%
                
                
                
                29.7%June
      30, 2005
                
                $
                1,590.0
                
                
                
                4.50%
                
                
                
                4.06%
                
                
                
                3.06%
                
                
                
                1.00%
                
                
                
                30.5%March
      31, 2005
                
                $
                1,477.9
                
                
                
                4.39%
                
                
                
                4.01%
                
                
                
                2.86%
                
                
                
                1.15%
                
                
                
                29.2%December
      31, 2004
                
                $
                1,325.7
                
                
                
                4.29%
                
                
                
                3.84%
                
                
                
                2.58%
                
                
                
                1.26%
                
                
                
                23.7%September
      30, 2004
                
                $
                776.5
                
                
                
                4.04%
                
                
                
                3.86%
                
                
                
                2.45%
                
                
                
                1.41%
                
                
                
                16.0%
  Comparative
Expenses
  For
      the Quarter Ended March 31,Expenses:
                        (dollar
      amounts in thousands)
                      
                      2009
                      
                      
                      2008
                      
                      %
      ChangeSalaries
      and benefits
                      
                      $
                      541
                      
                      
                      $
                      313
                      
                      72.8
                      %Professional
      fees
                      
                      
                      341
                      
                      
                      
                      352
                      
                      (3.1)
                      %Management
      fees
                      
                      
                      182
                      
                      
                      
                      109
                      
                      67.0
                      %Insurance
                      
                      
                      92
                      
                      
                      
                      180
                      
                      (48.9)
                      %Other
                      
                      
                      414
                      
                      
                      
                      477
                      
                      13.2
                      %Total
      Expenses
                      
                      $
                      1,570
                      
                      
                      $
                      1,431
                      
                      9.7
                      %
 
 The
increase in expenses of approximately $0.1 million for the three months ended
March 31, 2009 as compared to the same period in 2008 is primarily due to a $0.1
million increase in the bonus accrual and a $0.1 million increase in management
fees.
  Other
Operational Information
  The
Company currently has four employees.
  Off-Balance
Sheet Arrangements
  Since
inception, we have not maintained any relationships with unconsolidated entities
or financial partnerships, such as entities often referred to as structured
finance or special purpose entities, established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes.  Further, we have not guaranteed any obligations of
unconsolidated entities nor do we have any commitment or intent to provide
funding to any such entities.  Accordingly, we are not materially
exposed to any market, credit, liquidity or financing risk that could arise if
we had engaged in such relationships.
  36
 Liquidity
and Capital Resources
  Liquidity
is a measure of our ability to meet potential cash requirements, including
ongoing commitments to repay borrowings, fund and maintain investments, fund our
operations, pay dividends to our stockholders and other general business
needs.  We recognize the need to have funds available for our
operating businesses and meet these potential cash requirements.  Our
investments and assets generate liquidity on an ongoing basis through mortgage
principal and interest payments, prepayments and net earnings held prior to
payment of dividends.  In addition, depending on market conditions,
the sale of investment securities or capital market transactions may provide
additional liquidity.  We intend to meet our liquidity needs through
normal operations with the goal of avoiding unplanned sales of assets or
emergency borrowing of funds.  The Company substantially completed the
sale program of the CMO Agency floater’s previously discussed in the 2008 Form
10-K generating approximately $45 million in additional liquidity.  At
March 31, 2009, we had cash balances of $45.0 million, $16.4 million in
unencumbered securities and borrowings of 276.2 million under outstanding
repurchase agreements.  At March 31, 2009, we also had longer-term
capital resources, including CDOs outstanding of $323.6
million, subordinated debt of $44.7 million and $19.7 million of
convertible debentures.  Based on our current investment portfolio,
leverage ratio and available borrowing arrangements, we believe our
existing cash balances, funds available under our current repurchase
agreements and cash flows from operations will meet our liquidity
requirements for at least the next 12 months.  However, should further
volatility and deterioration in the broader credit, residential mortgage and
RMBS markets occur in the future, we cannot assure you that our existing sources
of liquidity will be sufficient to meet our liquidity requirements during the
next 12 months.
  To
finance our RMBS investment portfolio, we generally seek to borrow between six
and eight times the amount of our equity.  At March 31, 2009, our
leverage ratio for our RMBS investment portfolio, which we define as our
outstanding indebtedness under repurchase agreements divided by the sum of total
stockholders’ equity and the convertible preferred debentures, was
5:1.  This definition of the leverage ratio is consistent with the
manner in which the credit providers under our repurchase agreements calculate
our leverage.
  We had
outstanding repurchase agreements, a form of collateralized short-term
borrowing, with seven different financial institutions as of March 31,
2009.  These agreements are secured by our mortgage-backed securities
and bear interest rates that have historically moved in close relationship to
LIBOR.  Our borrowings under repurchase agreements are based on the
fair value of our mortgage backed securities portfolio.  Interest rate
changes can have a negative impact on the valuation of these securities,
reducing the amount we can borrow under these agreements.  Moreover,
our repurchase agreements allow the counterparties to determine a new market
value of the collateral to reflect current market conditions and because these
lines of financing are not committed, the counterparty can call the loan at any
time.  If a counterparty determines that the value of the collateral
has decreased, the counterparty may initiate a margin call and require us to
either post additional collateral to cover such decrease or repay a portion of
the outstanding borrowing, on minimal notice.  Moreover, in the event
an existing counterparty elected to not reset the outstanding balance at its
maturity into a new repurchase agreement, we would be required to repay the
outstanding balance with cash or proceeds received from a new
counterparty or to surrender the mortgage-backed securities that serve as
collateral for the outstanding balance, or any combination
thereof.  If we are unable to secure financing from a new counterparty
and had to surrender the collateral, we could to incur a significant
loss.
  We enter
into interest rate swap agreements to extend as a mechanism to reduce the
interest rate risk of the securities portfolio.  At March 31, 2009, we
had $129.1 million in notional interest rate swaps
outstanding.  Should market rates for similar term interest rate swaps
drop below the fixed rates we have agreed to on our interest rate swaps, we will
be required to post additional margin to the swap counterparty, reducing
available liquidity.  The weighted average maturity of the swaps was
3.4 years at March 31, 2009.
  Our
inability to sell approximately $4.3 million, net of loan loss reserve, of
mortgage loans we own could adversely affect our profitability as any sale for
less than the current reserved balance would result in a
loss.  Currently, these loans are not financed or
pledged.
  37
 As it
relates to loans sold previously under certain loan sale agreements by our
discontinued mortgage lending business, we may be required to repurchase some of
those loans or indemnify the loan purchaser for damages caused by a breach of
the loan sale agreement.  While in the past we complied with the
repurchase demands by repurchasing the loan with cash and reselling it at a
loss, thus reducing our cash position; more recently we have addressed these
requests by negotiating a net cash settlement based on the actual or assumed
loss on the loan in lieu of repurchasing the loans.  The Company
periodically receives repurchase requests, each of which management reviews to
determine, based on management’s experience, whether such request may reasonably
be deemed to have merit.  As of March 31, 2009, the amount of
repurchase requests outstanding was approximately $1.7 million, against which we
had a reserve of approximately $0.4 million.  We cannot assure
you that we will be successful in settling the remaining repurchase demands
on favorable terms, or at all.  If we are unable to continue to
resolve our current repurchase demands through negotiated net cash settlements,
our liquidity could be adversely affected.  In addition, we may be
subject to new repurchase requests from investors with whom we have not
settled or with respect to repurchase obligations not covered under the
settlement.
  We paid a
fourth quarter 2008 cash dividend of $0.10 in January 2009 and on March 25,
2009, we declared a first quarter cash dividend of $0.18 per common share to
common stockholders of record April 6, 2009, which was paid on April 27,
2009.
  On
January 31, 2009 we paid the 2008 fourth quarter $0.50 per share cash dividend,
or $0.5 million in the aggregate, on shares of the Series A Preferred Stock to
holders of record on December 31, 2008.  On April 30, 2009, we paid a
$0.50 per share cash dividend, or $0.5 million in the aggregate, on shares of
our Series A Preferred Stock to holders of record as of March 31,
2009.  Our board of directors will continue to evaluate our dividend
policy each quarter and will make adjustments as necessary, based on a variety
of factors, including, among other things, the need to maintain our REIT status,
our financial condition, liquidity, earnings projections and business
prospects.  Our dividend policy does not constitute an obligation to
pay dividends, which only occurs when our board of directors declares a
dividend.
  We intend
to make distributions to our stockholders to comply with the various
requirements to maintain our REIT status and to minimize or 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 REIT distribution requirements and to avoid corporate income tax and
the nondeductible excise tax.
  Advisory
Agreement
  On
January 18, 2008, we entered into an advisory agreement with HCS, pursuant to
which HCS will advise, manage and make investments on behalf the Managed
Subsidiaries. Pursuant to the advisory agreement, HCS is entitled to receive the
following compensation:
  ·
              base
      advisory fee equal to 1.50% per annum of the “equity capital” (as defined
      in advisory agreement) of the Managed Subsidiaries is payable by us to HCS
      in cash, quarterly in arrears; and
  ·
              incentive
      compensation equal to 25% of the GAAP net income of the Managed
      Subsidiaries attributable to the investments that are managed by HCS that
      exceed a hurdle rate equal to the greater of (a) 8.00% and (b) 2.00% plus
      the ten year treasury rate for such fiscal year will be payable by us to
      HCS in cash, quarterly in arrears; provided, however, that
      a portion of the incentive compensation may be paid in shares of our
      common stock.
  If we
terminate the advisory agreement (other than for cause) or elect not to renew
it, we will be required to pay JMPAM a cash termination fee equal to the sum of
(i) the average annual base advisory fee and (ii) the average annual incentive
compensation earned during the 24-month period immediately preceding the date of
termination.
  38
 Inflation
  For the
periods presented herein, inflation has been relatively low and we believe that
inflation has not had a material effect on our results of
operations.
  Item
3.Quantitative and Qualitative Disclosures about Market
Risk
  Market
risk is the exposure to loss resulting from changes in interest rates, credit
spreads, foreign currency exchange rates, commodity prices and equity
prices.  Because we are invested solely in U.S.-dollar denominated
instruments, primarily residential mortgage instruments, and our borrowings are
also domestic and U.S. dollar denominated, we are not subject to foreign
currency exchange, or commodity and equity price risk; the primary market risk
that we are exposed to is interest rate risk and its related ancillary
risks.  Interest rate risk is highly sensitive to many factors,
including governmental monetary and tax policies, domestic and international
economic and political considerations and other factors beyond our
control.  All of our market risk sensitive assets, liabilities and
related derivative positions are for non-trading purposes only.
  Management
recognizes the following primary risks associated with our business and the
industry in which we conduct business:
 
 ·
                                                        Interest
      rate
risk
 
 ·
                Liquidity
      risk
 
 ·
                Prepayment
      risk
 
 ·
                Credit
      risk
 
 ·
                Market
      (fair value) risk
 
 Interest
Rate Risk
 
 Interest
rates are sensitive to many factors, including governmental, monetary, tax
policies, domestic and international economic conditions, and political or
regulatory matters beyond our control. Changes in interest rates affect the
value of our RMBS and ARM loans we manage and hold in our investment portfolio,
the variable-rate borrowings we use to finance our portfolio, and the interest
rate swaps and caps we use to hedge our portfolio. All of our portfolio interest
market risk sensitive assets, liabilities and related derivative positions are
managed with a long term perspective and are not for trading
purposes.
 
 Interest
rate risk is measured by the sensitivity of our current and future earnings to
interest rate volatility, variability of spread relationships, the difference in
re-pricing intervals between our assets and liabilities and the effect that
interest rates may have on our cash flows, especially the speed at which
prepayments occur on our residential mortgage related assets. Changes in
interest rates can affect our net interest income, which is the difference
between the interest income earned on assets and our interest expense incurred
in connection with our borrowings.
 
 Our
adjustable-rate hybrid ARM assets reset on various dates that are not matched to
the reset dates on our repurchase agreements.  In general, the
repricing of our repurchase agreements occurs more quickly than the repricing of
our assets. First, our floating rate borrowings may react to changes in interest
rates before our adjustable rate assets because the weighted average next
re-pricing dates on the related borrowings may have shorter time periods than
that of the adjustable rate assets. Second, interest rates on adjustable rate
assets may be limited to a “periodic cap” or an increase of typically 1% or 2%
per adjustment period, while our borrowings do not have comparable limitations.
Third, our adjustable rate assets typically lag changes in the applicable
interest rate indices by 45 days due to the notice period provided to adjustable
rate borrowers when the interest rates on their loans are scheduled to
change.
 
 We seek
to manage interest rate risk in the portfolio by utilizing interest rate swaps,
caps and Eurodollar futures, with the goal of optimizing the earnings potential
while seeking to maintain long term stable portfolio values. We continually
monitor the duration of our mortgage assets and have a policy to hedge the
financing such that the net duration of the assets, our borrowed funds related
to such assets, and related hedging instruments, are less than one
year.
  39
 Interest
rates can also affect our net return on hybrid ARM securities and loans net of
the cost of financing hybrid ARMs. We continually monitor and estimate the
duration of our hybrid ARMs and have a policy to hedge the financing of the
hybrid ARMs such that the net duration of the hybrid ARMs, our borrowed funds
related to such assets, and related hedging instruments are less than one year.
During a declining interest rate environment, the prepayment of hybrid ARMs may
accelerate (as borrowers may opt to refinance at a lower rate) causing the
amount of liabilities that have been extended by the use of interest rate swaps
to increase relative to the amount of hybrid ARMs, possibly resulting in a
decline in our net return on hybrid ARMs as replacement hybrid ARMs may have a
lower yield than those being prepaid. Conversely, during an increasing interest
rate environment, hybrid ARMs may prepay slower than expected, requiring us to
finance a higher amount of hybrid ARMs than originally forecast and at a time
when interest rates may be higher, resulting in a decline in our net return on
hybrid ARMs. Our exposure to changes in the prepayment speeds of hybrid
ARMs is mitigated by regular monitoring of the outstanding balance of hybrid
ARMs, and adjusting the amounts anticipated to be outstanding in future periods
and, on a regular basis, making adjustments to the amount of our fixed-rate
borrowing obligations for future periods.
  We
utilize a model based risk analysis system to assist in projecting portfolio
performances over a scenario of different interest rates. The model incorporates
shifts in interest rates, changes in prepayments and other factors impacting the
valuations of our financial securities, including mortgage-backed securities,
repurchase agreements, interest rate swaps and interest rate caps.
 
 Based on
the results of the model, as of March 31, 2009, changes in interest rates would
have the following effect on net interest income: (dollar amounts in
thousands)
  Changes in Net Interest IncomeChanges in Interest Rates
                    
                    Changes in Net Interest
                      Income+200
                    
                    $
                    (5,094)+100
                    
                    $
                    (4,676)-100
                    
                    $
                    (4,145)
 
 Interest
rate changes may also impact our net book value as our mortgage assets and
related hedge derivatives are marked-to-market each quarter. Generally, as
interest rates increase, the value of our mortgage assets decreases and as
interest rates decrease, the value of such investments will increase. In
general, we would expect however that, over time, decreases in value of our
portfolio attributable to interest rate changes will be offset, to the degree we
are hedged, by increases in value of our interest rate swaps, and vice versa.
However, the relationship between spreads on securities and spreads on swaps may
vary from time to time, resulting in a net aggregate book value increase or
decline. However, unless there is a material impairment in value that would
result in a payment not being received on a security or loan, changes in the
book value of our portfolio will not directly affect our recurring earnings or
our ability to make a distribution to our stockholders.
 
 40
 Liquidity
Risk
  Liquidity
is a measure of our ability to meet potential cash requirements, including
ongoing commitments to repay borrowings, fund and maintain investments, pay
dividends to our stockholders and other general business needs. We recognize the
need to have funds available to operate our business. It is our policy to have
adequate liquidity at all times. We plan to meet liquidity through normal
operations with the goal of avoiding unplanned sales of assets or emergency
borrowing of funds.
  Our
principal sources of liquidity are the repurchase agreements on our RMBS, the
CDOs we have issued to finance our loans held in securitization trust, the
principal and interest payments from mortgage assets and cash proceeds from the
issuance of equity securities. We believe our existing cash balances and cash
flows from operations will be sufficient for our liquidity requirements for at
least the next 12 months.
 
 As it
relates to our investment portfolio, derivative financial instruments we use to
hedge interest rate risk subject us to “margin call” risk. If the value of our
pledged assets decreases, due to a change in interest rates, credit
characteristics, or other pricing factors, we may be required to post additional
cash or asset collateral, or reduce the amount we are able to borrower versus
the collateral. Under our interest rate swaps typically we pay a fixed rate to
the counterparties while they pay us a floating rate. If interest rates drop
below the fixed rate we are paying on an interest rate swap, we may be required
to post cash margin.
  Prepayment
Risk
 
 When
borrowers repay the principal on their mortgage loans before maturity or faster
than their scheduled amortization, the effect is to shorten the period over
which interest is earned, and therefore, reduce the yield for mortgage assets
purchased at a premium to their then current balance, as with the majority of
our assets. Conversely, mortgage assets purchased for less than their then
current balance exhibit higher yields due to faster prepayments. Furthermore,
prepayment speeds exceeding or lower than our modeled prepayment speeds impact
the effectiveness of any hedges we have in place to mitigate financing and/or
fair value risk. Generally, when market interest rates decline, borrowers have a
tendency to refinance their mortgages, thereby increasing
prepayments.
  Our
prepayment model will help determine the amount of hedging we use to off-set
changes in interest rates. If actual prepayment rates are higher than modeled,
the yield will be less than modeled in cases where we paid a premium for the
particular mortgage asset. Conversely, when we have paid a premium, if actual
prepayment rates experienced are slower than modeled, we would amortize the
premium over a longer time period, resulting in a higher yield to
maturity.
 
 In an
increasing prepayment environment, the timing difference between the actual cash
receipt of principal paydowns and the announcement of the principal paydown may
result in additional margin requirements from our repurchase agreement
counterparties.
 
 We
mitigate prepayment risk by constantly evaluating our mortgage assets relative
to prepayment speeds observed for assets with a similar structure, quality and
characteristics. Furthermore, we stress-test the portfolio as to prepayment
speeds and interest rate risk in order to further develop or make modifications
to our hedge balances. Historically we have not hedged 100% of our liability
costs due to prepayment risk.
 
 Credit
Risk
 
 Credit
risk is the risk that we will not fully collect the principal we have invested
in mortgage loans or securities due to either borrower defaults, or a
counterparty failure. Our portfolio of loans held in securitization trusts as of
March 31, 2009 consisted of approximately $336.0 million of securitized first
liens originated in 2005 and earlier, approximately $284.7 million of Agency
RMBS backed by the credit of Fannie Mae or Freddie Mac, approximately $18.7
million of non-Agency floating rate securities rated investment grade by either
Standard and Poor’s, Moody’s or Fitch. In addition we own approximately $4.3
million of loans held for sale in HC, net of lower of cost or market (“LOCOM”)
adjustment.
 
 41
 The
securitized first liens were principally originated by our subsidiary, HC, prior
to our exit from the mortgage lending business. These are predominately
high-quality loans with average loan-to-value (“LTV”) ratio at origination of
approximately 69.7%, and average borrower credit score of approximately 734. In
addition approximately 70.0% of these loans were originated with full income and
asset verification. While we feel that our origination and underwriting of these
loans will help to mitigate the risk of significant borrower defaults,
on these loans, we cannot assure you that all borrowers will continue to satisfy
their payment obligations under these loans, thereby avoiding
default.
 
 The
$336.0 million of mortgage loans held in securitization trusts are permanently
financed with $323.6 million of CDOs leaving the Company with a net exposure of
$12.4 million of credit exposure, which represents the Company's equity interest
in the CDOs.
 
 Market
(Fair Value) Risk
  Changes
in interest rates also expose us to market risk that the market value (fair)
value on our assets may decline. For certain of the financial instruments that
we own, fair values will not be readily available since there are no active
trading markets for these instruments as characterized by current exchanges
between willing parties. Accordingly, fair values can only be derived or
estimated for these investments using various valuation techniques, such as
computing the present value of estimated future cash flows using discount rates
commensurate with the risks involved. However, the determination of estimated
future cash flows is inherently subjective and imprecise. Minor changes in
assumptions or estimation methodologies can have a material effect on these
derived or estimated fair values. These estimates and assumptions are indicative
of the interest rate environments as of March 31, 2009, and do not take into
consideration the effects of subsequent interest rate fluctuations.
  We note
that the values of our investments in mortgage-backed securities and in
derivative instruments, primarily interest rate hedges on our debt, will be
sensitive to changes in market interest rates, interest rate spreads, credit
spreads and other market factors. The value of these investments can vary and
has varied materially from period to period. Historically, the values of our
mortgage loan portfolio have tended to vary inversely with those of its
derivative instruments.
  The
following describes the methods and assumptions we use in estimating fair values
of our financial instruments:
  Fair
value estimates are made as of a specific point in time based on estimates using
present value or other valuation techniques. These techniques involve
uncertainties and are significantly affected by the assumptions used and the
judgments made regarding risk characteristics of various financial instruments,
discount rates, estimate of future cashflows, future expected loss experience
and other factors.
  Changes
in assumptions could significantly affect these estimates and the resulting fair
values. Derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in an immediate
sale of the instrument. Also, because of differences in methodologies and
assumptions used to estimate fair values, the fair values used by us should not
be compared to those of other companies.
  The fair
values of the Company's residential mortgage-backed securities are generally
based on market prices provided by five to seven dealers who make markets in
these financial instruments. If the fair value of a security is not reasonably
available from a dealer, management estimates the fair value based on
characteristics of the security that the Company receives from the issuer and on
available market information.
  The fair
value of mortgage loans held for in securitization trusts is estimated using
pricing models and taking into consideration the aggregated characteristics of
groups of loans such as, but not limited to, collateral type, index, interest
rate, margin, length of fixed-rate period, life cap, periodic cap, underwriting
standards, age and credit estimated using the estimated market prices for
similar types of loans. Due to significant market dislocation secondary market
prices were given minimal weighting when arriving at loan valuation at March 31,
2009 and December 31, 2008 fair value.
 
 42
 The fair
value of these collateralized debt obligations is based on discounted cashflows
as well as market pricing on comparable collateralized debt
obligations.
 
 The
market risk management discussion and the amounts estimated from the analysis
that follows are forward-looking statements that assume that certain market
conditions occur. Actual results may differ materially from these projected
results due to changes in our portfolio assets and borrowings mix and due to
developments in the domestic and global financial and real estate markets.
Developments in the financial markets include the likelihood of changing
interest rates and the relationship of various interest rates and their impact
on our portfolio yield, cost of funds and cash flows. The analytical methods
that we use to assess and mitigate these market risks should not be considered
projections of future events or operating performance.
  As a
financial institution that has only invested in U.S.-dollar denominated
instruments, primarily residential mortgage instruments, and has only borrowed
money in the domestic market, we are not subject to foreign currency exchange or
commodity price risk. Rather, our market risk exposure is largely due to
interest rate risk. Interest rate risk impacts our interest income, interest
expense and the market value on a large portion of our assets and liabilities.
The management of interest rate risk attempts to maximize earnings and to
preserve capital by minimizing the negative impacts of changing market rates,
asset and liability mix, and prepayment activity.
 
 The table
below presents the sensitivity of the market value and net duration
changes of our portfolio as of March 31, 2009, using a
discounted cash flow simulation model. Application of this method results in an
estimation of the fair market value change of our assets, liabilities and
hedging instruments per 100 basis point (“bp”) shift in interest
rates.
 
 The use
of hedging instruments is a critical part of our interest rate risk management
strategies, and the effects of these hedging instruments on the market value of
the portfolio are reflected in the model's output. This analysis also takes into
consideration the value of options embedded in our mortgage assets including
constraints on the re-pricing of the interest rate of assets resulting from
periodic and lifetime cap features, as well as prepayment options. Assets and
liabilities that are not interest rate-sensitive such as cash, payment
receivables, prepaid expenses, payables and accrued expenses are
excluded.
  Changes
in assumptions including, but not limited to, volatility, mortgage and financing
spreads, prepayment behavior, defaults, as well as the timing and level of
interest rate changes will affect the results of the model. Therefore, actual
results are likely to vary from modeled results.
  Market Value ChangesChanges in
                                                                Interest Rates
                                                              
                                                              
                                                              
                                                              Changes in
                                                                Market Value
                                                              
                                                              
                                                              Net
                                                                Duration(Amount in thousands)+200
                                                              
                                                              
                                                              
                                                              $
                                                              (5,870
                                                              )
                                                              
                                                              
                                                              0.41 years+100
                                                              
                                                              
                                                              
                                                              $
                                                              (2,099
                                                              )
                                                              
                                                              
                                                              0.01 yearsBase
                                                              
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (0.29) years-100
                                                              
                                                              
                                                              
                                                              $
                                                              1,291
                                                              
                                                              
                                                              
                                                              (0.21) years
  It should
be noted that the model is used as a tool to identify potential risk in a
changing interest rate environment but does not include any changes in portfolio
composition, financing strategies, market spreads or changes in overall market
liquidity.
  Based on
the assumptions used, the model output suggests a very low degree of portfolio
price change given increases in interest rates, which implies that our cash flow
and earning characteristics should be relatively stable for comparable changes
in interest rates.
  Although
market value sensitivity analysis is widely accepted in identifying interest
rate risk, it does not take into consideration changes that may occur such as,
but not limited to, changes in investment and financing strategies, changes in
market spreads and changes in business volumes. Accordingly, we make extensive
use of an earnings simulation model to further analyze our level of interest
rate risk.
  43
 There are
a number of key assumptions in our earnings simulation model. These key
assumptions include changes in market conditions that affect interest rates, the
pricing of ARM products, the availability of investment assets and the
availability and the cost of financing for portfolio assets. Other key
assumptions made in using the simulation model include prepayment speeds and
management's investment, financing and hedging strategies, and the issuance of
new equity. We typically run the simulation model under a variety of
hypothetical business scenarios that may include different interest rate
scenarios, different investment strategies, different prepayment possibilities
and other scenarios that provide us with a range of possible earnings outcomes
in order to assess potential interest rate risk. The assumptions used represent
our estimate of the likely effect of changes in interest rates and do not
necessarily reflect actual results. The earnings simulation model takes into
account periodic and lifetime caps embedded in our assets in determining the
earnings at risk.
 
 Item
4.Controls and Procedures
  Evaluation of Disclosure Controls
and Procedures - We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the reports that
we file or submit under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that such information is accumulated and
communicated to our management as appropriate to allow timely decisions
regarding required disclosures.  An evaluation was performed under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of March 31,
2009.  Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of March 31, 2009.
  Changes in Internal Control over
Financial Reporting - There has been no change in our internal control
over financial reporting during the quarter ended March 31, 2009 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
  PART
II.  OTHER INFORMATION
  Item
1A.  Risk Factors
  There
have been no material changes to the risk factors disclosed in Item 1A. “Risk
Factors” in the Company’s Annual Report on Form 10-K for the year ended December
31, 2008.
  Item
6. Exhibits
  The
information set forth under “Exhibit Index” below is incorporated herein by
reference.
  44
 SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  NEW
      YORK MORTGAGE TRUST, INC.Date:
      May 11, 2009
                          By:
                          /s/
      Steven R. MummaSteven
      R. Mumma
                            Chief
      Executive Officer, President and Chief Financial Officer
                            (Principal
      Executive Officer and Principal Financial
  Officer)
 
 45
 EXHIBIT
INDEX
  Exhibit
                  
                  Description3.1(a)
                  
                  Articles
      of Amendment and Restatement of New York Mortgage Trust, Inc.
      (Incorporated by reference to Exhibit 3.1 to the Company’s Registration
      Statement on Form S-11 as filed with the Securities and Exchange
      Commission (Registration No. 333-111668), effective June 23,
      2004).3.1(b)
                  
                  Articles
      of Amendment of the Registrant (Incorporated by reference to Exhibit 3.1
      to the Company’s Current Report on Form 8-K filed on October 4,
      2007).3.1(c)
                  
                  Articles
      of Amendment of the Registrant (Incorporated by reference to Exhibit 3.2
      to the Company’s Current Report on Form 8-K filed on October 4,
      2007).3.1(d)
                  
                  Articles
      of Amendment of the Registrant (Incorporated by reference to Exhibit
      3.1(d) to the Company’s Current Report on Form 8-K filed on May 16,
      2008.)3.1(e)
                  
                  Articles
      of Amendment of the Registrant (Incorporated by reference to Exhibit
      3.1(e) to the Company’s Current Report on Form 8-K filed on May 16,
      2008.)3.2(a)
                  
                  Bylaws
      of New York Mortgage Trust, Inc. (Incorporated by reference to Exhibit 3.2
      to the Company’s Registration Statement on Form S-11 as filed with the
      Securities and Exchange Commission (Registration No. 333-111668),
      effective June 23, 2004).3.2(b)
                  
                  Amendment
      No. 1 to Bylaws of New York Mortgage Trust, Inc. (Incorporated by
      reference to Exhibit 3.2(b) to Registrant's Annual Report on Form 10-K
      filed on March 16, 2006).4.1
                  
                  Form
      of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to
      the Company’s Registration Statement on Form S-11 as filed with the
      Securities and Exchange Commission (Registration No. 333-111668),
      effective June 23, 2004).4.2(a)
                  
                  Junior
      Subordinated Indenture between The New York Mortgage Company, LLC and
      JPMorgan Chase Bank, National Association, as trustee, dated
      September 1, 2005. (Incorporated by reference to Exhibit 4.1 to the
      Company’s Current Report on Form 8-K as filed with the Securities and
      Exchange Commission on September 6, 2005).4.2(b)
                  
                  Amended
      and Restated Trust Agreement among The New York Mortgage Company,
      LLC, JPMorgan Chase Bank, National Association, Chase Bank USA, National
      Association and the Administrative Trustees named therein, dated
      September 1, 2005. (Incorporated by reference to Exhibit 4.2 to the
      Company’s Current Report on Form 8-K as filed with the Securities and
      Exchange Commission on September 6, 2005).4.3(a)
                  
                  Articles
      Supplementary Establishing and Fixing the Rights and Preferences of
      Series A Cumulative Redeemable Convertible Preferred Stock of the
      Company   (Incorporated by reference to Exhibit 4.1 to the Company’s
      Current Report on Form 8-K filed on January 25, 2008).4.3(b)
                  
                  Form
      of Series A Cumulative Redeemable Convertible Preferred Stock Certificate
      (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report
      on Form 8-K filed on January 25,
2008).
 
 
 46
 10.1
                
                Separation
      Agreement and General Release, by and between New York Mortgage Trust,
      Inc. and David A. Akre, dated as of February 3, 2009 (Incorporated by
      reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed on February 4, 2009).10.2
                
                Amended
      and Restated Employment Agreement, by and between New York Mortgage Trust,
      Inc. and Steven R. Mumma, dated as of February 11, 2009 (Incorporated by
      reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed on February 12, 2009).
 
 31.1
                
                Section
      302 Certification of Chief Executive Officer and Chief Financial
      Officer.*32.1
                
                Section
      906 Certification of Chief Executive Officer and Chief Financial
      Officer.*
  47