UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549




FORM
10-Q


x  OF THE
SECURITIES EXCHANGE ACT OF 1934
  For the
quarterly period ended September 30, 2009
  OR
  oTRANSITION 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 November 3, 2009 was 9,419,094.









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 THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  6Item 2. Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  25Item 3. Quantitative
      and Qualitative Disclosures about Market
      Risk
                  41Item 4. Controls
      and Procedures
                  46PART
      II. OTHER INFORMATION
                  47Item
      1A. Risk Factors
                  47Item
      6. Exhibits
                  47SIGNATURES
                  48




1




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)




September
      30,
                    2009
                  
                  
                  December 31,
                    2008ASSETSCash
      and cash equivalents
                  
                  $
                  22,403
                  
                  
                  $
                  9,387Restricted
      cash
                  
                  
                  3,359
                  
                  
                  
                  7,959Investment
      securities - available for sale, at fair value (including pledged
      securities of $208,327 and $456,506, respectively)
                  
                  
                  282,594
                  
                  
                  
                  477,416Accounts
      and accrued interest receivable
                  
                  
                  2,623
                  
                  
                  
                  3,095Mortgage
      loans held in securitization trusts (net)
                  
                  
                  290,940
                  
                  
                  
                  348,337Derivative
      assets
                  
                  
                  15
                  
                  
                  
                  22Prepaid
      and other assets
                  
                  
                  1,636
                  
                  
                  
                  1,230Assets
      related to discontinued operation
                  
                  
                  4,544
                  
                  
                  
                  5,854Total
      Assets
                  
                  $
                  608,114
                  
                  
                  $
                  853,300LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilities:Financing
      arrangements, portfolio investments
                  
                  $
                  194,745
                  
                  
                  $
                  402,329Collateralized
      debt obligations
                  
                  
                  280,223
                  
                  
                  
                  335,646Derivative
      liabilities
                  
                  
                  3,025
                  
                  
                  
                  4,194Accounts
      payable and accrued expenses
                  
                  
                  5,095
                  
                  
                  
                  3,997Subordinated
      debentures (net)
                  
                  
                  44,823
                  
                  
                  
                  44,618Convertible
      preferred debentures (net)
                  
                  
                  19,814
                  
                  
                  
                  19,702Liabilities
      related to discontinued operation
                  
                  
                  2,240
                  
                  
                  
                  3,566Total
      liabilities
                  
                  
                  549,965
                  
                  
                  
                  814,052Commitments
      and ContingenciesStockholders’
      Equity:Common
      stock, $0.01 par value, 400,000,000 authorized, 9,419,094 and 9,320,094,
      shares issued and outstanding, respectively
                  
                  
                  94
                  
                  
                  
                  93Additional
      paid-in capital
                  
                  
                  144,838
                  
                  
                  
                  150,790Accumulated
      other comprehensive income/(loss)
                  
                  
                  8,853
                  
                  
                  
                  (8,521
                  )Accumulated
      deficit
                  
                  
                  (95,636
                  )
                  
                  
                  (103,114
                  )Total
      stockholders’ equity
                  
                  
                  58,149
                  
                  
                  
                  39,248Total
      Liabilities and Stockholders’ Equity
                  
                  $
                  608,114
                  
                  
                  $
                  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
      September 30,
                                        
                                        
                                        For
      the Nine Months
                                          Ended
      September 30,2009
                                        
                                        
                                        2008
                                        
                                        
                                        2009
                                        
                                        
                                        2008REVENUE:Interest
      income-investment securities and loans held in securitization
      trusts
                                        
                                        $
                                        7,994
                                        
                                        
                                        $
                                        10,324
                                        
                                        
                                        $
                                        24,200
                                        
                                        
                                        $
                                        34,332Interest
      expense-investment securities and loans held in securitization
      trusts
                                        
                                        
                                        1,864
                                        
                                        
                                        
                                        6,692
                                        
                                        
                                        
                                        7,041
                                        
                                        
                                        
                                        23,997Net
      interest income from investment securities andloans held in securitization trusts
                                        
                                        
                                        6,130
                                        
                                        
                                        
                                        3,632
                                        
                                        
                                        
                                        17,159
                                        
                                        
                                        
                                        10,335Interest
      expense – subordinated debentures
                                        
                                        
                                        (785
                                        )
                                        
                                        
                                        (913
                                        
                                        
                                        
                                        (2,417
                                        )
                                        
                                        
                                        (2,768
                                        )Interest
      expense – convertible preferred debentures
                                        
                                        
                                        (662
                                        )
                                        
                                        
                                        (537
                                        
                                        
                                        
                                        (1,807
                                        )
                                        
                                        
                                        (1,612
                                        )Net
      interest income
                                        
                                        
                                        4,683
                                        
                                        
                                        
                                        2,182
                                        
                                        
                                        
                                        12,935
                                        
                                        
                                        
                                        5,955OTHER
      EXPENSE:Provision
      for loan losses
                                        
                                        
                                        (526
                                        )
                                        
                                        
                                        (7
                                        
                                        
                                        
                                        (1,414
                                        )
                                        
                                        
                                        (1,462
                                        )Impairment
      loss on investment securities
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (119
                                        )
                                        
                                        
                                        —Realized
      gain (loss) on securities and related hedges
                                        
                                        
                                        359
                                        
                                        
                                        
                                        4
                                        
                                        
                                        
                                        623
                                        
                                        
                                        
                                        (19,927
                                        )Total
      other expense
                                        
                                        
                                        (167
                                        )
                                        
                                        
                                        (3
                                        
                                        
                                        
                                        (910
                                        )
                                        
                                        
                                        (21,389
                                        )EXPENSE:Salaries
      and benefits
                                        
                                        
                                        473
                                        
                                        
                                        
                                        258
                                        
                                        
                                        
                                        1,486
                                        
                                        
                                        
                                        988Professional
      fees
                                        
                                        
                                        323
                                        
                                        
                                        
                                        367
                                        
                                        
                                        
                                        1,021
                                        
                                        
                                        
                                        1,065Management
      fees
                                        
                                        
                                        508
                                        
                                        
                                        
                                        186
                                        
                                        
                                        
                                        935
                                        
                                        
                                        
                                        479Insurance
                                        
                                        
                                        171
                                        
                                        
                                        
                                        275
                                        
                                        
                                        
                                        358
                                        
                                        
                                        
                                        668Other
                                        
                                        
                                        400
                                        
                                        
                                        
                                        349
                                        
                                        
                                        
                                        1,247
                                        
                                        
                                        
                                        1,626Total
      expenses
                                        
                                        
                                        1,875
                                        
                                        
                                        
                                        1,435
                                        
                                        
                                        
                                        5,047
                                        
                                        
                                        
                                        4,826INCOME
      (LOSS) FROM CONTINUING OPERATIONS
                                        
                                        
                                        2,641
                                        
                                        
                                        
                                        744
                                        
                                        
                                        
                                        6,978
                                        
                                        
                                        
                                        (20,260
                                        )Income
      from discontinued operation - net of tax
                                        
                                        
                                        236
                                        
                                        
                                        
                                        285
                                        
                                        
                                        
                                        500
                                        
                                        
                                        
                                        1,294NET
      INCOME (LOSS)
                                        
                                        $
                                        2,877
                                        
                                        
                                        $
                                        1,029
                                        
                                        
                                        $
                                        7,478
                                        
                                        
                                        $
                                        (18,966
                                        )Basic
      income (loss) per common share
                                        
                                        $
                                        0.31
                                        
                                        
                                        $
                                        0.11
                                        
                                        
                                        $
                                        0.80
                                        
                                        
                                        $
                                        (2.39
                                        )Diluted
      income (loss) per common share
                                        
                                        $
                                        0.30
                                        
                                        
                                        $
                                        0.11
                                        
                                        
                                        $
                                        0.78
                                        
                                        
                                        $
                                        (2.39
                                        )Dividends
      declared per common share
                                        
                                        $
                                        0.25
                                        
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        0.66
                                        
                                        
                                        $
                                        0.44Weighted
      average shares outstanding-basic
                                        
                                        
                                        9,406
                                        
                                        
                                        
                                        9,320
                                        
                                        
                                        
                                        9,349
                                        
                                        
                                        
                                        7,924Weighted
      average shares outstanding-diluted
                                        
                                        
                                        11,906
                                        
                                        
                                        
                                        9,320
                                        
                                        
                                        
                                        11,849
                                        
                                        
                                        
                                        7,924





See
notes to condensed consolidated financial statements.




3




NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY




For
the nine months ended September 30, 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
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        7,478
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        $
                                                        7,478
                                                        
                                                        
                                                        
                                                        7,478Restricted
      Stock issuance
                                                        
                                                        
                                                        1
                                                        
                                                        
                                                        
                                                        224
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        225Dividends
      declared
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        (6,176
                                                        )
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        (6,176
                                                        )Reclassification
      of gain for sales of investment – available for sale
      securities
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        141
                                                        
                                                        
                                                        
                                                        141
                                                        
                                                        
                                                        
                                                        141Increase
      in fair value of derivative instruments utilized for cash flow
      hedges
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        1,898
                                                        
                                                        
                                                        
                                                        1,898
                                                        
                                                        
                                                        
                                                        1,898Comprehensive
      income
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        $
                                                        24,852Balance,
      September 30, 2009
                                                        
                                                        $
                                                        94
                                                        
                                                        
                                                        $
                                                        144,838
                                                        
                                                        
                                                        $
                                                        (95,636
                                                        )
                                                        
                                                        $
                                                        8,853
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        $
                                                        58,149




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 Nine Months
      Ended
                            September
      30,2009
                          
                          
                          2008Cash
      Flows from Operating Activities:Net
      income (loss)
                          
                          $
                          7,478
                          
                          
                          $
                          (18,966
                          )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                          
                          
                          1,069
                          
                          
                          
                          1,044Accretion/amortization
      of discount/premium on investment securities and mortgage loans held in
      securitization trusts
                          
                          
                          (126
                          )
                          
                          
                          819Realized
      (gain) loss on securities and related hedges
                          
                          
                          (623
                          )
                          
                          
                          19,927Impairment
      loss on investment securities
                          
                          
                          119
                          
                          
                          
                          —Provision
      for loan losses
                          
                          
                          1,414
                          
                          
                          
                          1,520Loans
      held for sale lower of cost or market adjustments
                          
                          
                          307
                          
                          
                          
                          —Restricted
      stock compensation expense
                          
                          
                          224
                          
                          
                          
                          —Changes
      in operating assets and liabilities:Proceeds
      from sales or repayments of mortgage loans held for sale
                          
                          
                          975
                          
                          
                          
                          2,732Accounts
      and accrued interest receivable
                          
                          
                          480
                          
                          
                          
                          48Prepaid
      and other assets
                          
                          
                          (409
                          )
                          
                          
                          207Due
      to loan purchasers
                          
                          
                          (192
                          )
                          
                          
                          117Accounts
      payable and accrued expenses
                          
                          
                          (1,297
                          )
                          
                          
                          (1,221
                          )Net
      cash provided by operating activities
                          
                          
                          9,419
                          
                          
                          
                          6,227Cash
      Flows from Investing Activities:Decrease
      in restricted cash
                          
                          
                          4,600
                          
                          
                          
                          7,237Purchases
      of investment securities
                          
                          
                          (43,440
                          )
                          
                          
                          (850,609
                          )Proceeds
      from sales of investment securities
                          
                          
                          198,494
                          
                          
                          
                          625,986Principal
      repayments received on mortgage loans held in securitization
      trusts
                          
                          
                          55,473
                          
                          
                          
                          70,815Principal
      paydowns on investment securities - available for sale
                          
                          
                          56,453
                          
                          
                          
                          64,043Net
      cash provided by (used in) investing activities
                          
                          
                          271,580
                          
                          
                          
                          (82,528
                          )Cash
      Flows from Financing Activities:Proceeds
      from common stock issued (net)
                          
                          
                          —
                          
                          
                          
                          56,544Proceeds
      from convertible preferred debentures
 (net)
                          
                          
                          —
                          
                          
                          
                          19,590Payments
      from termination of swaps
                          
                          
                          —
                          
                          
                          
                          (8,333
                          )(Decrease)
      increase in financing arrangements
                          
                          
                          (207,584
                          )
                          
                          
                          90,581Dividends
      paid
                          
                          
                          (4,753
                          )
                          
                          
                          (2,610
                          )Payments
      made on collateralized debt obligations
                          
                          
                          (55,646
                          )
                          
                          
                          (71,672
                          )Net
      cash (used in) provided by financing activities
                          
                          
                          (267,983
                          )
                          
                          
                          84,100Net
      Increase in Cash and Cash Equivalents
                          
                          
                          13,016
                          
                          
                          
                          7,799Cash
      and Cash Equivalents - Beginning of Period
                          
                          
                          9,387
                          
                          
                          
                          5,508Cash
      and Cash Equivalents - End of Period
                          
                          $
                          22,403
                          
                          
                          $
                          13,307Supplemental
      Disclosure:Cash
      paid for interest
                          
                          $
                          10,092
                          
                          
                          $
                          28,030Non-Cash
      Financing Activities:Dividends
      declared to be paid in subsequent period
                          
                          $
                          2,355
                          
                          
                          $
                          1,491Restricted
      stock grants
                          
                          $
                          523
                          
                          
                          $
                          —




5




NEW
YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(unaudited)





1.restartOrganization 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 acquiring and managing primarily 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”), and prime credit quality residential
adjustable-rate mortgage (“ARM”) loans, and/or prime ARM loans. 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 which may include,
among other things, non-Agency RMBS, certain non-rated residential mortgage
assets, commercial mortgage-backed securities, commercial real estate loans,
collateralized loan obligations and other similar investments.  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, to the extent permitted by law, 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 principles 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 September 30, 2009 and December 31,
2008, the condensed consolidated statements of operations for the three and nine
months ended September 30, 2009 and 2008, the condensed consolidated statement
of stockholders’ equity for the nine months ended September 30, 2009 and the
condensed consolidated statements of cash flows for the nine months ended
September 30, 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 and nine
months ended September 30, 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 GAAP 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 2009, the Financial Accounting Statements Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB
Accounting Standards Codification (Codification “ASC”) and the Hierarchy of GAAP
("SFAS No. 168").  SFAS No. 168 replaces SFAS No. 162, The Hierarchy of GAAP and
establishes the Codification as the single source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities. SEC rules and
interpretive releases are also sources of authoritative GAAP for SEC
registrants.  SFAS No. 168 modifies the GAAP hierarchy to include only
two levels of GAAP: authoritative and non-authoritative.  SFAS No. 168
is effective for financial statements issued for fiscal years ending after
September 15, 2009 and interim periods within those fiscal years, and will
therefore became effective for us as of September 30, 2009. Due to the nature of
this pronouncement, we do not anticipate that the adoption of SFAS No. 168 will
have a material impact on our results of operations and financial
condition.





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 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.
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.  EITF issue No. 6-11 has been incorporated into ASC 718
Accounting for Income Tax
Benefits of Dividends on Share-Based Payment Awards.





In
December 2007, the Financial Accounting 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 did not have a material impact on the
Company’s condensed consolidated financial statements. SFAS No. 141(R) has been
incorporated into ASC 805 Business
Combinations.




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 as a
result expanded the footnote disclosure included in the condensed consolidated
financial statements (see note 4).  SFAS No. 161 has been incorporated
into ASC 815 Derivatives and
Hedging.




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 No. APB 14-1 is effective for our fiscal
year beginning on January 1, 2009 and requires retrospective application. The
Company adopted FSP as of January 1, 2009 and it had no impact on the Company’s
condensed consolidated financial statements. FSP No. APB 14-1 has been
incorporated into ASC 470 Debt, with Conversion and Other
Options.




7




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 “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 No. 157-3 did not have a significant
impact on the Company’s determination of fair value for its financial assets.
FSP SFAS No. 157-3 has been incorporated into ASC 820 Fair Value Measurements and
Disclosures.




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 No. 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 adopted
FSP SFAS No. 157-4 did not have a material impact on the Company’s condensed
consolidated financial statements. FSP SFAS No. 157-4 has been incorporated into
ASC 320Accounting for Debt
Securities After an Other-than-temporary Impairment.




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 operations. 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 adopted FSP SFAS No. 115-2 and FSP SFAS No. 124-2 and
it did not have a material impact on the Company’s condensed consolidated
financial statements. FSP SFAS No. 115-2 and SFAS No. 124-2 has been
incorporated into ASC 825 Financial Instruments, Fair Value
Option and ASC 270Interim Reporting.




In June
2009, the FASB issued SFAS No. 165, Subsequent Eventswhich is
effective for interim and annual periods ending after June 15,
2009.  SFAS No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date. The Company adopted SFAS No. 165 in the second
quarter of 2009 and has evaluated all events or transactions through November 6,
2009. During this period, we did not have any material subsequent events that
impacted our consolidated financial statements. SFAS No. 165 has been
incorporated into ASC 855 Subsequent
Events.




In June 2009, the FASB issued SFAS
No. 166,Accounting for
Transfers of Financial Assets—an amendment of FASB Statement
No. 140(“SFAS
No. 166”), which amends the derecognition guidance in SFAS No. 140,Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,eliminates the concept of
a “qualifying special-purpose entity” (“QSPE”) and requires more information
about transfers of financial assets, including securitization transactions as
well as a company’s continuing exposure to the risks related to transferred
financial assets. The SFAS No. 166 will update ASC 810Consolidation.SFAS No. 166 is effective for financial asset transfers occurring
after the beginning of an entity’s first fiscal year that begins after
November 15, 2009 and early adoption is prohibited. Management is currently evaluating the
impact on our consolidated financial statements of adopting SFAS
No. 166.




In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) (“SFAS No. 167”), which amends the consolidation
guidance applicable to variable interest entities. The amendments will
significantly affect the overall consolidation analysis under FASB ASC 810,
Consolidation (“FASB
ASC 810”) and changes the way entities account for securitizations and special
purpose entities as a result of the elimination of the QSPE concept in SFAS
No.166. SFAS No. 167 is effective as of the beginning of the first fiscal
year that begins after November 15, 2009 and early adoption is prohibited.
Management is currently evaluating the impact of adopting SFAS
No. 167.




8




In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05Measuring Liabilities at Fair
Value. The update clarifies that the unadjusted quoted price for an
identical liability, when traded as an asset in an active market is a Level 1
measurement for the liability and provides guidance on the valuation techniques
to estimate fair value of a liability in the absence of a Level 1
measurement.  The update is effective for the first interim or annual
reporting period beginning after its issuance. The update did not have a
material effect on our consolidated financial statements.





2.Investment
Securities - Available for Sale




Investment
securities available for sale consist of the following as of September 30, 2009
(dollar amounts in thousands):




Amortized
                  Cost
                
                
                Unrealized
                  Gains
                
                
                Unrealized
                  Losses
                
                
                Carrying
                  ValueAgency
      RMBS (1)
                
                $
                218,202
                
                
                $
                6,687
                
                
                $
                —
                
                
                $
                224,889Non-Agency
      RMBS
                
                
                42,889
                
                
                
                4,133
                
                
                
                (2,637
                )
                
                
                44,385Collateralized
      Loan Obligations
                
                
                8,988
                
                
                
                4,332
                
                
                
                —
                
                
                
                13,320Total
                
                $
                270,079
                
                
                $
                15,152
                
                
                $
                (2,637
                )
                
                $
                282,594





(1)
            -  Agency
      RMBS only includes Fannie Mae securities at September 30,
      2009.




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
      RMBS (1)
                
                $
                454,653
                
                
                $
                1,316
                
                
                $
                (98
                )
                
                $
                455,871Non-Agency
      RMBS
                
                
                25,724
                
                
                
                —
                
                
                
                (4,179
                )
                
                
                21,545Total
                
                $
                480,377
                
                
                $
                1,316
                
                
                $
                (4,277
                )
                
                $
                477,416





(1)
            -  Agency
      RMBS carrying value included $354.4 million of Fannie Mae and $101.5
      million of Freddie Mac securities.




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 million. This
transaction settled on April 7, 2009. This marked the Company’s first investment
under its alternative investment strategy.  In addition, during the
second and third quarters of 2009 the Company opportunistically purchased
approximately $45.0 million current par value of non-Agency RMBS at an average
cost of 60.2% of par.    The $45.0 million current par value
of non-Agency RMBS purchased were previously rated AAA (at issuance) and
represent the senior cashflows of the applicable deal structures.




During
March 2009, the Company determined that the Agency collateralized mortgage
obligations (“CMO”) floaters in its portfolio were no longer producing
acceptable returns and initiated a program for the purpose of disposing of these
securities. The Company disposed approximately $159.5 million in current par
value of Agency CMO floaters during March 2009, with the balance of the Agency
CMO floaters, or $34.3 million in current par value, in its portfolio being sold
in April 2009, for an aggregate disposition of approximately $193.8 million in
current par value of Agency CMO floaters and a net gain of approximately $0.1
million.  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 intended to sell their Agency CMO floaters.




9




The
following tables set forth the stated reset periods and weighted average yields
of our investment securities at September 30, 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
      RMBS
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            $
                                                            94,064
                                                            
                                                            
                                                            
                                                            3.30
                                                            %
                                                            
                                                            $
                                                            130,825
                                                            
                                                            
                                                            
                                                            4.50
                                                            %
                                                            
                                                            $
                                                            224,889
                                                            
                                                            
                                                            
                                                            4.00
                                                            %Non-Agency
      RMBS
                                                            
                                                            
                                                            19,365
                                                            
                                                            
                                                            
                                                            8.47
                                                            %
                                                            
                                                            
                                                            8,597
                                                            
                                                            
                                                            
                                                            7.47
                                                            %
                                                            
                                                            
                                                            16,423
                                                            
                                                            
                                                            
                                                            12.52
                                                            %
                                                            
                                                            
                                                            44,385
                                                            
                                                            
                                                            
                                                            9.77
                                                            %CLO
                                                            
                                                            
                                                            13,320
                                                            
                                                            
                                                            
                                                            22.25
                                                            %
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            13,320
                                                            
                                                            
                                                            
                                                            22.25
                                                            %Total/Weighted
      Average
                                                            
                                                            $
                                                            32,685
                                                            
                                                            
                                                            
                                                            14.09
                                                            %
                                                            
                                                            $
                                                            102,661
                                                            
                                                            
                                                            
                                                            3.64
                                                            %
                                                            
                                                            $
                                                            147,248
                                                            
                                                            
                                                            
                                                            5.39
                                                            %
                                                            
                                                            $
                                                            282,594
                                                            
                                                            
                                                            
                                                            5.76
                                                            %




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
      RMBS
                                                                                                
                                                                                                $
                                                                                                197,675
                                                                                                
                                                                                                
                                                                                                
                                                                                                8.54
                                                                                                %
                                                                                                
                                                                                                $
                                                                                                66,910
                                                                                                
                                                                                                
                                                                                                
                                                                                                3.69
                                                                                                %
                                                                                                
                                                                                                $
                                                                                                191,286
                                                                                                
                                                                                                
                                                                                                
                                                                                                4.02
                                                                                                %
                                                                                                
                                                                                                $
                                                                                                455,871
                                                                                                
                                                                                                
                                                                                                
                                                                                                5.99
                                                                                                %Non-Agency
      RMBS  (1)
                                                                                                
                                                                                                
                                                                                                21,476
                                                                                                
                                                                                                
                                                                                                
                                                                                                14.11
                                                                                                %
                                                                                                
                                                                                                
                                                                                                —
                                                                                                
                                                                                                
                                                                                                
                                                                                                —
                                                                                                
                                                                                                
                                                                                                
                                                                                                69
                                                                                                
                                                                                                
                                                                                                
                                                                                                16.99
                                                                                                %
                                                                                                
                                                                                                
                                                                                                21,545
                                                                                                
                                                                                                
                                                                                                
                                                                                                14.35
                                                                                                %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.




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 September 30, 2009.  (dollar amounts in
thousands):




Less
      than 12 Months
                                          
                                          
                                          Greater
      than 12 Months
                                          
                                          
                                          TotalCarrying
                                            Value
                                          
                                          
                                          Unrealized
                                            Losses
                                          
                                          
                                          Carrying
                                            Value
                                          
                                          
                                          Unrealized
                                            Losses
                                          
                                          
                                          Carrying
                                            Value
                                          
                                          
                                          Unrealized
                                            LossesNon-Agency
      RMBS
                                          
                                          $
                                          2,134
                                          
                                          
                                          $
                                          128
                                          
                                          
                                          $
                                          13,492
                                          
                                          
                                          $
                                          2,509
                                          
                                          
                                          $
                                          15,626
                                          
                                          
                                          $
                                          2,637Total
                                          
                                          $
                                          2,134
                                          
                                          
                                          $
                                          128
                                          
                                          
                                          $
                                          13,492
                                          
                                          
                                          $
                                          2,509
                                          
                                          
                                          $
                                          15,626
                                          
                                          
                                          $
                                          2,637







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
                                                              
                                                              
                                                              Greater
      than 12 Months
                                                              
                                                              
                                                              TotalCarrying
                                                                Value
                                                              
                                                              
                                                              Unrealized
                                                                Losses
                                                              
                                                              
                                                              Carrying
                                                                Value
                                                              
                                                              
                                                              Unrealized
                                                                Losses
                                                              
                                                              
                                                              Carrying
                                                                Value
                                                              
                                                              
                                                              Unrealized
                                                                LossesAgency
      RMBS
                                                              
                                                              $
                                                              9,406
                                                              
                                                              
                                                              $
                                                              98
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              9,406
                                                              
                                                              
                                                              
                                                              98Non-Agency
      RMBS
                                                              
                                                              
                                                              18,649
                                                              
                                                              
                                                              
                                                              4,179
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              18,649
                                                              
                                                              
                                                              
                                                              4,179Total
                                                              
                                                              $
                                                              28,055
                                                              
                                                              
                                                              $
                                                              4,277
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              28,055
                                                              
                                                              
                                                              
                                                              4,277





10




As of
September 30, 2009 and the date of this filing, we either do not have the intent
to sell or we believe that it is more likely than not that we will not have to
sell our portfolio of securities which are currently in unrealized loss
positions for the foreseeable future.  In assessing the Company’s ability
to hold its securities, 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 principal repayments in amounts sufficient to recover the amortized
cost of the related non-Agency RMBS and anticipates that credit losses will not
exceed the purchased discount. Should conditions change that would require us to
sell securities at a loss or for liquidity reasons, we may no longer be able to
assert that we will not have to sell our portfolio of securities which are
currently in an unrealized loss position for the foreseeable future, in which
case we would then be required to record impairment charges related to these
securities.




The
majority of the Company’s Agency RMBS that are classified as 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
September 30, 2009 and December 31, 2008 (dollar amounts in
thousands):




September
      30,
                  2009
                
                
                December
      31,
                  2008Mortgage
      loans principal amount  (1)
                
                $
                291,423
                
                
                $
                347,546Deferred
      origination costs – net
                
                
                1,840
                
                
                
                2,197Reserve
      for loan losses
                
                
                (2,323
                )
                
                
                (1,406
                )Total
                
                $
                290,940
                
                
                $
                348,337




(1)
            Includes
      $1.3 million and $1.9 million in real estate owned through foreclosure as
      of September 30, 2009 and December 31, 2008,
  respectively.




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 nine months
ended September 30, 2009 and 2008 (dollar amounts in
thousands).




September
      30,2009
                
                
                2008Balance at
      beginning of period
                
                $
                1,406
                
                
                $
                1,647Provisions
      for loan losses
                
                
                1,414
                
                
                
                1,433Charge-offs
                
                
                (497
                )
                
                
                (1,674
                )Balance
      at the end of period
                
                $
                2,323
                
                
                $
                1,406





On a
ongoing basis, the Company evaluates the adequacy of its reserve for loan
losses.  The Company’s reserve for loan losses at September 30,
2009 was $2.3 million, representing 80 basis points of the outstanding principal
balance of loans held in securitization trusts as compared to 40 basis points as
of December 31, 2008.  As part of the Company’s reserve adequacy
analysis, management will access an overall level of reserves while also
assessing credit losses inherent in each non-performing mortgage loan held in
securitization trusts. These estimates involve the consideration of various
credit related factors, including but not limited to, current housing market
conditions, current loan to value ratios, collateral value,
delinquency status, borrower’s current economic and credit status
and other relevant factors.




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 September 30, 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 $10.7
million.




11




The
following tables set forth delinquent mortgage loans in our securitization
trusts as of September 30, 2009 and December 31, 2008 (dollar amounts in
thousands):




September
      30, 2009Days
      Late
                                                                      
                                                                      
                                                                      Number
      of
                                                                        Delinquent
                                                                        Loans
                                                                      
                                                                      
                                                                      Total
                                                                        Dollar
      Amount
                                                                      
                                                                      
                                                                      %
      of Loan
                                                                        Portfolio30-60
                                                                      
                                                                      
                                                                      
                                                                      1
                                                                      
                                                                      
                                                                      $
                                                                      76
                                                                      
                                                                      
                                                                      
                                                                      0.03
                                                                      %61-90
                                                                      
                                                                      
                                                                      
                                                                      5
                                                                      
                                                                      
                                                                      
                                                                      3,219
                                                                      
                                                                      
                                                                      
                                                                      1.10
                                                                      %90+
                                                                      
                                                                      
                                                                      
                                                                      26
                                                                      
                                                                      
                                                                      
                                                                      13,145
                                                                      
                                                                      
                                                                      
                                                                      4.51
                                                                      %Real
      estate owned through foreclosure
                                                                      
                                                                      
                                                                      
                                                                      3
                                                                      
                                                                      
                                                                      
                                                                      1,260
                                                                      
                                                                      
                                                                      
                                                                      0.43
                                                                      %




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, CDO’s and our subordinated debentures. 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 benchmark interest rate risk
associated with the CDO’s 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.




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 contemporaneously.  The Company assesses,
both at inception of a hedge and on an on-going basis, whether or not the hedge
is “highly effective” when using the matched term basis.




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.  The Company’s derivative instruments are
designated as “cash flow hedges,” changes in their fair value are recorded in
accumulated other comprehensive income/(loss), 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 any of its
hedges.




12





The
following table presents the fair value of derivative instruments and their
location in the Company’s condensed consolidated balance sheets at September 30,
2009 and December 31, 2008, respectively (amounts in thousands):





Derivative
      Designated as Hedging
                      
                      Balance
      Sheet Location
                      
                      September
      30,
                        2009
                      
                      
                      December
      31,
                        2008Interest
      Rate Caps
                      
                      Derivative
      Assets
                      
                      $
                      15
                      
                      
                      $
                      22Interest
      Rate Swaps
                      
                      Derivative
      Liabilities
                      
                      
                      3,025
                      
                      
                      
                      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 nine months
ended September 30, 2009 and 2008 (amounts in thousands):





Nine
      Months Ended September 30Derivative
      Designated as Hedging Instruments
                                              
                                              2009
                                              
                                              
                                              2008Accumulated
      other comprehensive income/(loss) for derivative
    instruments:Balance
      at beginning of the period
                                              
                                              $
                                              (5,560
                                              )
                                              
                                              $
                                              (1,951
                                              )Unrealized
      gain on interest rate caps
                                              
                                              
                                              729
                                              
                                              
                                              
                                              602Unrealized
      gain on interest rate swaps
                                              
                                              
                                              1,169
                                              
                                              
                                              
                                              1,481Reclassification
      adjustment for net gains/losses included in net income for
      hedges
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —Balance
      at the end of the period
                                              
                                              $
                                              (3,662
                                              )
                                              
                                              $
                                              132





The
Company estimates that over the next 12 months, approximately $2.5 million
of the net unrealized losses 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 and nine months
ended September 30, 2009 and 2008 (amounts in thousands):




Three
      Months ended September 30,
                
                
                Nine
      Months Ended September 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Interest
      Rate Caps:Interest
      expense-investment securities and loans held in securitization
      trusts
                
                $
                157
                
                
                $
                171
                
                
                $
                485
                
                
                $
                528Interest
      expense-subordinated debentures
                
                
                90
                
                
                
                77
                
                
                
                252
                
                
                
                218Interest
      Rate Swaps:Interest
      expense-investment securities and loans held in securitization
      trusts
                
                
                799
                
                
                
                167
                
                
                
                2,464
                
                
                
                285







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,
whose 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 is 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
believes it was in compliance with all margin requirements under its Swap
agreements as of September 30, 2009 and December 31, 2008.  The
Company had $3.2 million and $4.2 million of restricted cash related to margin
posted for Swaps as of September 30, 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.




13




The
following table presents information about the Company’s interest rate swaps as
of September 30, 2009 and December 31, 2008 (amounts in thousands):




September
      30, 2009
                        
                        
                        December
      31, 2008Maturity(1)
                        
                        Notional
                          Amount
                        
                        
                        Weighted
      Average
                          Fixed
      Pay
                          Interest
      Rate
                        
                        
                        Notional
                          Amount
                        
                        
                        Weighted
      Average
                          Fixed
      Pay
                          Interest
      RateWithin
      30 Days
                        
                        $
                        2,260
                        
                        
                        
                        2.99
                        %
                        
                        $
                        2,960
                        
                        
                        
                        3.00
                        %Over
      30 days to 3 months
                        
                        
                        4,180
                        
                        
                        
                        2.99
                        
                        
                        
                        5,220
                        
                        
                        
                        3.00Over
      3 months to 6 months
                        
                        
                        5,770
                        
                        
                        
                        2.99
                        
                        
                        
                        7,770
                        
                        
                        
                        2.99Over
      6 months to 12 months
                        
                        
                        19,100
                        
                        
                        
                        2.98
                        
                        
                        
                        13,850
                        
                        
                        
                        2.99Over
      12 months to 24 months
                        
                        
                        54,700
                        
                        
                        
                        3.01
                        
                        
                        
                        48,640
                        
                        
                        
                        2.99Over
      24 months to 36 months
                        
                        
                        10,140
                        
                        
                        
                        3.01
                        
                        
                        
                        34,070
                        
                        
                        
                        3.03Over
      36 months to 48 months
                        
                        
                        17,760
                        
                        
                        
                        3.08
                        
                        
                        
                        7,560
                        
                        
                        
                        3.01Over
      48 months
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        17,200
                        
                        
                        
                        3.08Total
                        
                        $
                        113,910
                        
                        
                        
                        3.01
                        %
                        
                        $
                        137,270
                        
                        
                        
                        3.01
                        %





(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 CDO’s and the subordinated debentures.
The interest rate caps associated with the CDO’s are amortizing contractual
notional schedules determined at origination and had $411.4 million and $456.9
million outstanding as of September 30, 2009 and December 31, 2008,
respectively.  These interest rate caps are utilized to cap the
interest rate on the CDO’s 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 agency 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 September 30, 2009, the Company had repurchase agreements
with an outstanding balance of $194.7 million and a weighted average interest
rate of 0.39%.  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 September 30, 2009 and December 31, 2008,
securities pledged by the Company as collateral for repurchase agreements had
estimated fair values of $208.3 million and $456.5 million,
respectively.  All outstanding borrowings under our repurchase
agreements mature within 30 days.  As of September 30, 2009,
the average days to maturity for all repurchase agreements are 25
days.  The Company had outstanding repurchase agreements with five
different financial institutions as of September 30, 2009 and six as of December
31, 2008.




As of
September 30, 2009, our Agency RMBS are financed with $194.7 million of
repurchase agreement funding with an advance rate of 93.6% that implies an
overall haircut of 6.4%.




14




As of
September 30, 2009, the Company had $22.4 million in cash and $74.3 million in
unencumbered investment securities to meet additional haircut or market
valuation requirements including $60.9 million of RMBS, of which $16.6 million
are Agency RMBS.




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 September 30, 2009 and December 31,
2008, the Company had CDOs outstanding of $280.2 million and $335.6 million,
respectively.  As of September 30, 2009 and December 31, 2008, the
current weighted average interest rate on these CDOs was 0.63% and 0.85%,
respectively.  The CDOs are collateralized by ARM loans with a
principal balance of $291.4 million and $347.5 million at September 30, 2009 and
December 31, 2008, respectively.  The Company retained the owner trust
certificates, or residual interest, for three securitizations, and, as of
September 30, 2009 and December 31, 2008, had a net investment in the
securitizations trusts after loan loss reserves of $10.7 million and $12.7
million, respectively.




The CDO
transactions include amortizing interest rate cap contracts with an aggregate
notional amount of $411.4 million as of September 30, 2009 and an aggregate
notional amount of $456.9 million as of December 31, 2008, which are recorded as
derivative assets of the Company.  The interest rate caps are carried
at fair value and totaled $14,535 as of September 30, 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.  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
lease facilities not sold, are part of our ongoing operations and accordingly,
we have not included these items as part of the discontinued
operation.




Balance
Sheet Data




The
components of assets related to the discontinued operation as of September 30,
2009 and December 31, 2008 are as follows (dollar amounts in
thousands):




September
      30,
                          2009
                        
                        
                        December
      31,
                          2008Accounts
      and accrued interest receivable
                        
                        $
                        20
                        
                        
                        $
                        26Mortgage
      loans held for sale (net)
                        
                        
                        4,096
                        
                        
                        
                        5,377Prepaid
      and other assets
                        
                        
                        428
                        
                        
                        
                        451Total assets
                        
                        $
                        4,544
                        
                        
                        $
                        5,854





The
components of liabilities related to the discontinued operation as of September
30, 2009 and December 31, 2008 are as follows (dollar amounts in
thousands):




September
      30,
                  2009
                
                
                December
      31,
                  2008Due
      to loan purchasers
                
                $
                354
                
                
                $
                708Accounts
      payable and accrued expenses
                
                
                1,886
                
                
                
                2,858Total liabilities
                
                $
                2,240
                
                
                $
                3,566





15





Statements
of Operations Data




The
statements of operations of the discontinued operation for the three and nine
months ended September 30, 2009 and 2008 are as follows (dollar amounts in
thousands):




Three
      Months
                    Ended
      September 30,
                  
                  Nine
      Months
                    Ended
      September 30,2009
                  
                  2008
                  
                  2009
                  
                  2008Revenues
                  
                  $
                  395
                  
                  
                  $
                  203
                  
                  
                  $
                  905
                  
                  
                  $
                  1,136Expenses
                  
                  
                  159
                  
                  
                  
                  (82
                  )
                  
                  
                  405
                  
                  
                  
                  (158
                  )Income
      from discontinued operation-net of tax
                  
                  $
                  236
                  
                  
                  $
                  285
                  
                  
                  $
                  500
                  
                  
                  $
                  1,294







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 nine months ended September 30,
2009.




The
Company periodically receives repurchase requests based on alleged violations of
representations and warranties, each of which management reviews to determine,
based on management’s experience, whether such requests may reasonably be deemed
to have merit.  As of September 30, 2009, we had a total of $1.5
million of unresolved repurchase requests that management concluded may
reasonably be deemed to have merit against which the Company has a reserve of
approximately $0.3 million.  The reserve is based on one or more of
the following factors; historical settlement rates, property value securing the
loan in question and specific settlement discussions with third
parties.




Outstanding Litigation - The
Company is at times subject to various legal proceedings arising in the ordinary
course of business. As of September 30, 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 office and equipment under short-term lease agreements expiring at
various dates through 2013.  All such leases are accounted for as
operating leases.  Total lease expense for property and equipment
amounted to $0.1 million and $0.2 million for the three and nine months ended
September 30, 2009.




Letters of Credit – The
Company maintains a letter of credit in the amount of $0.2 million 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.






16




9.Concentrations
of Credit Risk




At
September 30, 2009, there were geographic concentrations of credit risk
exceeding 5% of the total loan balances within mortgage loans held in the
securitization trusts. At 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, The Company sold all the retained interests
related to NYMT 2006-1 during the quarter ended September 30, 2009. At September
30, 2009 and December 31, 2008, the geographic concentrations of credit risk
exceeding 5% are as follows:




September
      30,
                      2009
                    
                    
                    December
      31,
                      2008New
      York
                    
                    
                    39.4
                    %
                    
                    
                    30.7
                    %Massachusetts
                    
                    
                    23.7
                    %
                    
                    
                    17.2
                    %New
      Jersey
                    
                    
                    8.3
                    %
                    
                    
                    6.0
                    %Florida
                    
                    
                    5.8
                    %
                    
                    
                    7.8
                    %




10.Fair
Value of Financial Instruments




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 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 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 curve
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 that are comprised of RMBS are valued based upon readily
observable market parameters and are classified as Level 2 fair
values.





b. Investment Securities Available
for Sale (CLO) - The fair value of the CLO notes, as of September 30,
2009, was based on management’s valuation determined 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.




17





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 the Company’s financial instruments measured at fair
value on a recurring basis as of September 30, 2009 and December 31, 2008 on the
condensed consolidated balance sheets (dollar amounts in
thousands):




Assets
      Measured at Fair Value on a Recurring Basis
                  at
      September 30, 2009Level 1
                
                
                Level 2
                
                
                Level 3
                
                
                TotalAssets
      carried at fair value:Investment
      securities available for sale
                
                $
                —
                
                
                $
                269,274
                
                
                $
                13,320
                
                
                $
                282,594Derivative
      assets (interest rate caps)
                
                
                —
                
                
                
                15
                
                
                
                —
                
                
                
                15Total
                
                $
                —
                
                
                $
                269,289
                
                
                $
                13,320
                
                
                $
                282,609




Liabilities
      carried at fair value:Derivative
      liabilities (interest rate swaps)
                
                $
                —
                
                
                $
                3,025
                
                
                $
                —
                
                
                $
                3,025Total
                
                $
                —
                
                
                $
                3,025
                
                
                $
                —
                
                
                $
                3,025
  Assets
      Measured at Fair Value on a Recurring Basis
                  at
      December 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




The
following table details changes in valuation for the Level 3 assets for the
three and nine months ended September 30, 2009 (amounts in
thousands):




Investment
securities available for sale




Three
      Months Ended
                                      September
      30, 2009
                                    
                                    
                                    Nine
      Months Ended
                                      September
      30, 2009Beginning
      Balance
                                    
                                    $
                                    8,988
                                    
                                    
                                    $
                                    —Total
      gains (realized/unrealized)Included
      in earnings (1)
                                    
                                    
                                    155
                                    
                                    
                                    
                                    260Included
      in other comprehensive income/(loss)
                                    
                                    
                                    4,177
                                    
                                    
                                    
                                    4,332Purchases
                                    
                                    
                                    —
                                    
                                    
                                    
                                    8,728Ending
      Balance
                                    
                                    $
                                    13,320
                                    
                                    
                                    $
                                    13,320




(1) - Amounts
included in interest income-investment securities and loans held in
securitizations trusts.


18




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 each reporting 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.




The
following table presents assets measured at fair value on a non-recurring basis
as of September 30, 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
      September 30, 2009Level 1
                                                
                                                
                                                Level 2
                                                
                                                
                                                Level 3
                                                
                                                
                                                TotalMortgage
      loans held for sale (Net)
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                4.096
                                                
                                                
                                                $
                                                4,096Mortgage
      loans held in securitization trusts (net) – impaired loans
    (1)
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                6,068
                                                
                                                
                                                $
                                                6,068(1)
      Includes $0.4 million in real estate owned through foreclosure.Assets
      Measured at Fair Value on a Non-Recurring Basis
                                                  at
      December 31, 2008Level 1
                                                
                                                
                                                Level 2
                                                
                                                
                                                Level 3
                                                
                                                
                                                TotalMortgage
      loans held for sale (net)
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                5,377
                                                
                                                
                                                $
                                                5,377Mortgage
      loans held in securitization trusts (net) – impaired loans
    (1)
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                2,958
                                                
                                                
                                                $
                                                2,958




(1)
Includes $0.5 million in real estate owned through foreclosure.





The
following table presents losses incurred for assets measured at fair value on a
non-recurring basis for the three and nine months ended September 30, 2009 and
September 30, 2008 on the condensed statements of operations (dollar amounts in
thousands):




Three
      Months Ended
                      
                      
                      Nine
      Months EndedSeptember
      30, 2009
                      
                      
                      September
      30, 2008
                      
                      
                      September
      30, 2009
                      
                      
                      September
      30, 2008Mortgage
      loans held for sale (net)
                      
                      $
                      —
                      
                      
                      $
                      34
                      
                      
                      $
                      245
                      
                      
                      $
                      433Mortgage
      loans held in securitization trusts (net) – impaired loans
                      
                      $
                      525
                      
                      
                      $
                      7
                      
                      
                      $
                      1,414
                      
                      
                      $
                      1,440





Mortgage Loans Held in
Securitization Trusts (net) – Impaired Loans – Impaired mortgage loans
held in the securitization trusts are recorded at amortized cost less specific
loan loss reserves. Impaired loan value is based on management’s estimate of the
net realizable value taking into consideration local market conditions of the
distressed property, updated appraisal values of the property and estimated
expenses required to remediate the impaired loan.





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.




19





The
following table presents the carrying value and estimated fair value of the
Company’s financial instruments, at September 30, 2009 and December 31, 2008
(dollar amounts in thousands):





September
      30, 2009
                
                
                December
      31, 2008Carrying
                  Value
                
                
                Estimated
                  Fair
      Value
                
                
                Carrying
                  Value
                
                
                Estimated
                  Fair
      ValueFinancial
      assets:Cash
      and cash equivalents
                
                $
                22,403
                
                
                $
                22,403
                
                
                $
                9,387
                
                
                $
                9,387Restricted
      cash
                
                
                3,359
                
                
                
                3,359
                
                
                
                7,959
                
                
                
                7,959Investment
      securities – available for sale
                
                
                282,594
                
                
                
                282,594
                
                
                
                477,416
                
                
                
                477,416Mortgage
      loans held in securitization trusts (net)
                
                
                290,940
                
                
                
                266,189
                
                
                
                348,337
                
                
                
                343,028Derivative
      assets
                
                
                15
                
                
                
                15
                
                
                
                22
                
                
                
                22Assets
      related to discontinued operation-Mortgage loans held for sale
      (net)
                
                
                4,096
                
                
                
                4,096
                
                
                
                5,377
                
                
                
                5,377Financial
      Liabilities:Financing
      arrangements, portfolio investments
                
                
                194,745
                
                
                
                194,745
                
                
                
                402,329
                
                
                
                402,329Collateralized
      debt obligations
                
                
                280,223
                
                
                
                183,090
                
                
                
                335,646
                
                
                
                199,503Derivative
      liabilities
                
                
                3,025
                
                
                
                3,025
                
                
                
                4,194
                
                
                
                4,194Subordinated
      debentures (net)
                
                
                44,823
                
                
                
                24,067
                
                
                
                44,618
                
                
                
                10,049Convertible
      preferred debentures (net)
                
                
                19,814
                
                
                
                18,981
                
                
                
                19,702
                
                
                
                16,363





In
addition to the methodology to determine the fair value of the Company’s
financial assets and liabilities reported at fair value on a recurring basis and
non-recurring basis, as previously described, the following methods and
assumptions were used by the Company in arriving at the fair value of the
Company’s other financial instruments in the following table:





a.     Cash and cash equivalents and
restricted cash:Estimated fair value approximates the
carrying value of such assets.





b.     Mortgage Loans Held in
Securitization Trusts - Mortgage loans held in the securitization trusts
are recorded at amortized cost. Fair value 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.





c.     Financing arrangements, portfolio
investments – The fair value of these financing arrangements approximates
cost as they are short term in nature and mature in 30 days.





d.     Collateralized debt obligations –The fair value of these collateralized debt obligations is based on
discounted cashflows as well as market pricing on comparable
obligations.





e.     Subordinated debentures (net) –The fair value of these subordinated debentures (net) is based on
discounted cashflows using management’s estimate for market yields.





f.     Convertible preferred debentures
(net) –The fair value of the convertible preferred debentures (net) is
based on discounted cashflows using management’s estimate for market
yields.







11.
Capital Stock and Earnings per Share




The
Company had 400,000,000 shares of common stock, par value $0.01 per share,
authorized with 9,419,094 and 9,320,094 shares issued and outstanding as of
September 30, 2009 and December 31, 2008, respectively.  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 September 30, 2009 and December 31, 2008, the
Company had issued and outstanding 1,000,000 shares, of Series A Preferred
Stock.  Of the common stock authorized at September 30,
2009, 4,111 shares were reserved for issuance as Restricted Stock awards to
employees, officers and directors pursuant to the 2005 Stock Incentive
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 shares. All per share and share amounts
provided in the quarterly report have been restated to give to effect the
reverse stock split.




The
following table presents cash dividends declared by the Company on its common
stock from January 1, 2008 through September 30, 2009.




Period
                  Declaration
      Date
                  Record
      Date
                  Payment
      Date
                  
                  Cash
                    Dividend
                    Per
      ShareThird
      Quarter 2009
                  September
      29, 2009
                  October
      13, 2009
                  October
      26, 2009
                  
                  $
                  0.25Second
      Quarter 2009
                  June
      15, 2009
                  June
      26, 2009
                  July
      27, 2009
                  
                  
                  0.23First
      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 September 30, 2009.




Period
                Declaration
      Date
                Record
      Date
                Payment
      Date
                
                Cash
                  Dividend
                  Per
      ShareThird
      Quarter 2009
                September
      29 , 2009
                September
      30, 2009
                October
      30, 2009
                
                $
                0.63Second
      Quarter 2009
                June
      15, 2009
                June
      30, 2009
                July
      30, 2009
                
                $
                0.58First
      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
      29, 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 September 30,
                      
                      
                      For
      the Nine Months Ended September 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Numerator:Net
      income (loss) – Basic
                      
                      $
                      2,877
                      
                      
                      $
                      1,029
                      
                      
                      $
                      7,478
                      
                      
                      $
                      (18,966
                      )Net
      income (loss) from continuing operations
                      
                      
                      2,641
                      
                      
                      
                      744
                      
                      
                      
                      6,978
                      
                      
                      
                      (20,260
                      )Net
      income from discontinued operations (net of tax)
                      
                      
                      236
                      
                      
                      
                      285
                      
                      
                      
                      500
                      
                      
                      
                      1,294Effect
      of dilutive instruments:Convertible
      preferred debentures (1)
                      
                      
                      662
                      
                      
                      
                      537
                      
                      
                      
                      1,807
                      
                      
                      
                      1,612Net
      income  (loss) – Dilutive
                      
                      
                      3,539
                      
                      
                      
                      1,029
                      
                      
                      
                      9,285
                      
                      
                      
                      (18,966
                      )Net
      income (loss) from continuing operations
                      
                      
                      3,303
                      
                      
                      
                      744
                      
                      
                      
                      8,785
                      
                      
                      
                      (20,260
                      )Net
      income from discontinued operations (net of tax)
                      
                      $
                      236
                      
                      
                      $
                      285
                      
                      
                      $
                      500
                      
                      
                      $
                      1,294Denominator:Weighted
      average basis shares outstanding
                      
                      
                      9,406
                      
                      
                      
                      9,320
                      
                      
                      
                      9,349
                      
                      
                      
                      7,919Effect
      of dilutive instruments:Convertible
      preferred debentures (1)
                      
                      
                      2,500
                      
                      
                      
                      2,500
                      
                      
                      
                      2,500
                      
                      
                      
                      2,344Weighted
      average dilutive shares outstanding
                      
                      
                      11,906
                      
                      
                      
                      9,320
                      
                      
                      
                      11,849
                      
                      
                      
                      7,919EPS:Basic
      EPS
                      
                      $
                      0.31
                      
                      
                      $
                      0.11
                      
                      
                      $
                      0.80
                      
                      
                      $
                      (2.39
                      )Basic
      EPS from continuing operations
                      
                      
                      0.28
                      
                      
                      
                      0.08
                      
                      
                      
                      0.75
                      
                      
                      
                      (2.55
                      )Basic
      EPS from discontinued operations (net of tax)
                      
                      
                      0.03
                      
                      
                      
                      0.03
                      
                      
                      
                      0.05
                      
                      
                      
                      0.16Dilutive
      EPS
                      
                      $
                      0.30
                      
                      
                      $
                      0.11
                      
                      
                      $
                      0.78
                      
                      
                      $
                      (2.39
                      )Dilutive
      EPS from continuing operations
                      
                      
                      0.28
                      
                      
                      
                      0.08
                      
                      
                      
                      0.74
                      
                      
                      
                      (2.55
                      )Basic
      EPS from discontinued operations (net of tax)
                      
                      
                      0.02
                      
                      
                      
                      0.03
                      
                      
                      
                      0.04
                      
                      
                      
                      0.16


(1) –
Amount excluded from dilutive calculation in 2008 as it is
anti-dilutive.







12.Convertible
Preferred Debentures (net)




As of
September 30, 2009, 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 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.  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 Company
paid a third quarter 2009 common stock dividend of $0.25, resulting in an
increase in the dividend rate for the Series A Preferred Stock in the 2009 third
quarter to 12.5% (per annum).  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.




13.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 (other than certain RMBS that are held in these entities for
regulatory compliance purposes) 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 three and nine months ended September 30, 2009, HCS
earned a base advisory fee of approximately $0.2 million and $0.6 million,
respectively.  For the three and nine months ended September 30, 2008,
HCS earned a base advisory fee of approximately $0.2 million and $0.5 million,
respectively.  In addition, in the three months and nine months ended
September 30, 2009, HCS earned an incentive fee of approximately $0.3 million
and $0.3
million, respectively.  There was no incentive fee earned in the nine
months ended September 30, 2008. As of September 30, 2009, HCS was managing
approximately $41.3 million of assets on the Company’s behalf.




14.Income
Taxes




At
September 30, 2009, the Company had approximately $62.9 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. At this time, based on management’s initial assessment of the limitations,
management does not believe that the limitation would cause a significant amount
of the Company's net operating losses to expire unused.  The Company
continues to maintain a reserve for 100% of the deferred tax
benefits.







15.
Stock Incentive Plan




Pursuant
to the 2005 Stock Incentive Plan (the "Plan"), eligible employees, officers and
directors of the Company are offered the opportunity to acquire the Company's
common stock through the award of Restricted Stock under the Plan. The maximum
number of Restricted Stock awards that may be granted under the Plan is
103,111.




The
Company awarded 99,000 shares of Restricted Stock under the Plan on July 13,
2009, of which 34,335 shares have fully vested.  As of September
30, 2009, 4,111 shares remain available for issuance under the Plan. During the
three and nine months ended September 30, 2009, the Company recognized non-cash
compensation expense of $0.2 million and $0.2 million,
respectively.  Dividends are paid on all Restricted Stock issued,
whether those shares are vested or not. In general, unvested Restricted Stock is
forfeited upon the recipient's termination of employment.




23




A summary
of the status of the Company's non-vested Restricted Stock as of September 30,
2009 and changes during the nine months then ended is presented
below:




Number
      of
                              Non-vested
                              Restricted
                              Shares
                            
                            
                            Weighted
                              Average
                              Grant
      Date
                              Fair
      ValueNon-vested
      shares at beginning of year, January 1, 2009
                            
                            
                            -
                            
                            
                            $
                            -Granted
                            
                            
                            99,000
                            
                            
                            
                            5.28Forfeited
                            
                            
                            -
                            
                            
                            
                            -Vested
                            
                            
                            (34,335
                            )
                            
                            
                            5.28Non-vested
      shares as of  September 30, 2009
                            
                            
                            64,665
                            
                            
                            $
                            5.28Weighted-average
      fair value of Restricted Stock granted during the period
                            
                            
                            99,000
                            
                            
                            $
                            5.28




There was
no outstanding  non-vested Restricted Stock for the previous
period.




24





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, in 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;




·
            increased
      rates of default and/or decreased recovery rates on our
      assets;




·
            changes
      in the financial markets and economy generally, including the continued or
      accelerated deterioration of the U.S.
economy;




25




·
            effects
      of interest rate caps on our adjustable-rate mortgage-backed
      securities;




·
            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, in the business of acquiring and managing
primarily  residential adjustable-rate, hybrid adjustable-rate and
fixed-rate mortgage-backed securities (“RMBS”), for which the principal and
interest payments are guaranteed by a U.S. Government agency, such as the
Government National Mortgage Association (“Ginnie Mae”) or a U.S.
Government-sponsored entity (“GSE” or “Agency”), such as the Federal National
Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), which we refer to collectively as “Agency RMBS,”
and prime credit quality residential adjustable-rate mortgage (“ARM”)
loans, or prime ARM loans.  We also acquire and manage, although to a
lesser extent, certain alternative real estate-related and financial assets that
present greater credit risk and less interest rate risk than our investments in
Agency RMBS and prime ARM loans, which may include, among other things,
non-Agency RMBS and certain non-rated residential mortgage assets, commercial
mortgage-backed securities (“CMBS”), commercial real estate loans,
collateralized loan obligations (“CLO”) and other similar
investments.  We refer to our investments in Agency RMBS, prime ARM
loans and certain legacy non-Agency RMBS as our “principal investment strategy”
and investments in certain alternative real estate-related and financial assets
that present greater credit risk as our “alternative investment strategy” and
such assets as our “alternative assets.”  We elected to be taxed as a
REIT for federal income tax purposes commencing with our taxable year ended on
December 31, 2004. Therefore, we generally will not be subject to federal income
tax on our taxable income that is distributed to our stockholders.





Our investment strategy historically
has focused on holding a portfolio comprised of Agency RMBS, prime ARM loans
held in securitization trusts, and, to a lesser extent, on certain non-agency
RMBS rated in the highest rating category by two rating agencies. The prime ARM
loans in our portfolio were originated by us through Hypotheca Capital, LLC
(“HC,” then doing business as The New York Mortgage Company LLC), our
wholly-owned subsidiary and former mortgage lending business, or purchased from
third parties, and were subsequently securitized by us and are held in our four
securitization trusts.




26





In connection with a $20.0 million
private investment in our Series A Cumulative Convertible Redeemable preferred
stock (the “Series A Preferred Stock”) by JMP Group Inc. and certain of its
affiliates (collectively, the “JMP Group”) on January 18, 2008, we entered into
an advisory agreement with Harvest Capital Strategies LLC (“HCS,” formerly known
as JMP Asset Management LLC), an affiliate of the JMP Group, on the same date,
pursuant to which HCS manages the assets held by HC and New York Mortgage
Funding, LLC other than certain Agency RMBS held in these entities for
regulatory compliance purposes, as well as any additional subsidiaries acquired
or formed in the future to hold investments made on the Company’s
behalf.  We refer to these entities as the “Managed Subsidiaries.” We
expect these assets to include certain types of alternative assets described
above. We formed this relationship with HCS and the JMP Group for the purpose of
improving our capitalization and diversifying our investment strategy away from
a strategy focused exclusively on investments in Agency RMBS, in part to achieve
attractive risk-adjusted returns, and to potentially utilize all or part of an
approximately $62.9 million net operating loss carry-forward held by HC at
September 30, 2009.  On March 31, 2009, we initiated our first
investment under the alternative investment strategy.





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.  We intend
to achieve this objective by investing in a broad class of real estate-related
and financial assets to construct an investment portfolio that is designed to
achieve attractive risk-adjusted returns and that is structured to comply with
the various federal income tax requirements for REIT status and to maintain our
exemption from registration under the Investment Company Act of 1940, as amended
(the “Investment Company Act”).  Because we intend to continue to
qualify as a REIT and to maintain our exemption from registration under the
Investment Company Act, 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




Continued
Deployment of Capital Under 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. a CLO.  The
purchase of these assets closed on April 7, 2009.  As of September 30,
2009, the CLO’s portfolio was comprised of approximately $473.9 million par
amount of senior secured corporate loans, extended to more than 88 different
borrowers and was diversified by industry, geography and borrower
classification.  Our investment in this CLO was completed in
connection with the acquisition of the CLO’s investment adviser by JMP Group
Inc.





In
addition, during the 2009 second quarter and continuing through the third
quarter, the Company deployed capital under its alternative investment strategy
by investing approximately $27.1 million in non-Agency RMBS which were
previously rated in the highest rating categories by one or more of the rating
agencies.  The Company purchased these securities for an average
purchase price equal to 60.2% of current par value.  As of September
30, 2009, the Company had $24.1 million invested in non-Agency RMBS with an
average price equal to of 60.4% of current par value and an estimated a risk
adjusted average yield of approximately 15.8%.





Each of
the assets described under this caption is held in HC and managed by
HCS.





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 half, but have shown signs of
improvement more recently.




As discussed under the caption “Item 7. Management’s Discussion and Analysisof 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.




27




In
addition to the initiatives referred to in the immediately preceding paragraph
and described in our Annual Report on Form 10-K for the year ended December 31,
2008, as a further response to the continued challenges in the credit and
financial markets, the U.S. Government and the Federal Reserve, as applicable,
have announced the creation of new initiatives and modifications to certain
existing initiatives supported or backed by the U.S. Government or the Federal
Reserve. The Term Asset-Backed Securities Loan Facility, or TALF, was first
announced by the U.S. Treasury on November 25, 2008, and has been expanded
in size and scope since its initial announcement. Under the TALF, the Federal
Reserve Bank of New York makes non-recourse loans to borrowers to fund their
purchase of eligible assets, currently certain ABS but not RMBS. Currently, TALF
loans have three-year terms, have interest due monthly, are exempt from
mark-to-market accounting rules and margin calls related to a decrease in the
underlying collateral value, are pre-payable in whole or in part, and prohibit
the substitution of any underlying collateral. It is expected that the TALF
loans will require that any payments of principal made on the underlying
collateral will reduce the principal amount of the TALF loan pro rata based upon
the original loan-to-value ratio.




The
nature of the eligible assets under TALF has been expanded several times. The
U.S. Treasury has stated that through its expansion of the TALF, non-recourse
loans will be made available to investors to fund certain purchases of legacy
securitization assets. In May 2009, the Federal Reserve announced that certain
types of CMBS are now eligible for TALF financing. The TALF-eligibility
requirements for CMBS include, but are not limited to, the following:
(i) at closing, the CMBS must have been rated in the highest long-term
investment-grade rating category of an eligible rating agency, (ii) the
CMBS must not have been junior to other securities with claims on the same pool
of loans, and (iii) payments on the CMBS must be applied to both principal
and interest (no interest only or principal only). Other types of TALF-eligible
assets are expected to include certain non-Agency RMBS. On August 17, 2009,
the Federal Reserve and the Treasury announced that they approved an extension
of the TALF. With respect to newly issued asset-backed securities and legacy
CMBS, the TALF was extended through March 31, 2010 and, with respect to
newly issued CMBS, the TALF was extended through June 30, 2010. In
connection with the announcement of such extension, the Federal Reserve and the
Treasury announced that they did not anticipate any further additions to the
types of collateral that are eligible for the TALF.




While we
are considering utilizing the TALF program to the extent feasible, we can
provide no assurance that we will be eligible to do so, or if eligible, will be
able to utilize it successfully.




In
addition, on March 23, 2009, the U.S. Government announced that the U.S.
Treasury in conjunction with the Federal Deposit Insurance Corporation, and the
Federal Reserve, would create the Public-Private Investment Program, or PPIP.
The PPIP aims to recreate a market for specific illiquid residential and
commercial loans and securities through a number of joint public and private
investment funds. The PPIP is designed to draw new private capital into the
market for these securities and loans by providing government equity
co-investment and attractive public financing.  Since September 30,
2009 the U.S. Treasury has announced the closing of five legacy securities PPIP
funds, each with at least $500.0 million of committed equity capital from
investors.




Although
these aggressive steps are intended to protect and support the U.S. housing and
mortgage market, we continue to operate under very difficult market conditions.
As a result, 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 the 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.  The Federal
Reserve announced on September 23, 2009 an increase of up to $1.25 trillion in
its commitment to purchase Agency RMBS and up to $200 million of agency debt. 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 to expected increases in prepayment
rates resulting from greater refinancing activity.




28




With
respect to non-Agency RMBS and other alternative assets, available leverage has
decreased significantly in the past few years, which has negatively affected the
liquidity of these assets and has contributed to the significant rise in market
yields on these types of assets. As described above, there has been significant
government action aimed at increasing the liquidity of various types of
non-Agency RMBS and certain other alternative assets. However, non-Agency RMBS
and certain other alternative assets have continued to experience significant
price volatility, which has made it more difficult to accurately value these
assets.  The PPIP program has the potential to increase available
leverage to finance the purchase of non-Agency RMBS and certain other
alternative assets; however, the effect of this program on the liquidity of
non-Agency RMBS and certain other alternative assets is currently
unknown.





Financing markets and
liquidity. Financing and liquidity markets continued to show signs of
improvement during the third quarter.  As of September 30, 2009, we
had outstanding repurchase borrowings from five counterparties, as compared to
six counterparties at December 31, 2008 and five counterparties at September 30,
2008.  The Company does not anticipate difficulty financing its Agency
RMBS portfolio.




As noted
above, available leverage for non-Agency RMBS and certain other alternative
assets has remained scarce due to the recent conditions in the credit markets
and reductions in the value of various types of RMBS.  As of September
30, 2009, our investment in CLO and non-Agency RMBS was unlevered.





Financing costs and interest
rates. As of September 30, 2009, 30-day LIBOR was 0.25 % while the Fed
Funds effective rate was 0.07% 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 difficult 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, including HASP
and the reduction in intermediate and longer-term treasury yields, rates on
conforming mortgages have declined, nearing historical lows during the first
nine months of 2009.  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.  We experienced
similar prepayment rates on both our Agency RMBS and prime ARM loans during the
quarter ended September 30, 2009 as compared to the quarter ended June 30,
2009.  We expect that the constant prepayment rate, or CPR, will
remain in a range of between 17%-22% CPR during the fourth quarter of 2009 based
on current market interest rates, however, future CPRs may be affected by
current and future government initiatives, 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 FASB ASC 205-20
Presentation of Financial
Statements Discontinued Operations.  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 sold, have become part of the
ongoing operations of NYMT and accordingly, we have not classified such assets
or liabilities as a discontinued operation in accordance with the provisions of
FASB ASC 205-20.




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.




29




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 and nine months ended September 30, 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, CLO and mortgage loans held in securitization
trusts.  The net interest spread on our investment portfolio was 413
basis points for the quarter ended September 30, 2009, as compared to 361 basis
points for the quarter ended June 30, 2009, and 136 basis points for the quarter
ended September 30, 2008.




Financing. During the quarter
ended September 30, 2009, we continued to employ a balanced and diverse funding
mix to finance our assets.  At September 30, 2009, our Agency RMBS
portfolio was funded with approximately $194.7 million of repurchase agreement
borrowing, or approximately 35.4% of our total liabilities, at a weighted
average interest rate of 0.39%.  The Company’s average haircut on its
repurchase borrowings was approximately 6.4% at September 30, 2009. As of
September 30, 2009, the loans held in securitization trusts were permanently
financed with approximately $280.2 million of CDOs, or approximately 51.0% of
our total liabilities, at an average interest rate of 0.63%.  The
Company has a net equity investment of $10.7 million in the securitization
trusts.





At
September 30, 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
2.5 to 1. Excluding the convertible preferred debentures, the leverage ratio for
our RMBS investment portfolio was 3.3 to 1.  Given the continued
uncertainty in the credit markets, we believe that maintaining a maximum
leverage ratio in the range of 6 to 8 times for our Agency RMBS portfolio and an
overall Company leverage ratio of 4 to 5 times is appropriate at this
time.  To date, the Company has used cash from operating activities to
purchase its alternative assets.




Prepayment Experience.The
cumulative prepayment rate (“CPR”) on our overall mortgage portfolio
averaged approximately 22.5% during the three months ended September 30, 2009,
as compared to 21.4% for the three months ended June 30, 2009.  CPRs
on our purchased portfolio of RMBS averaged approximately 20.4% for the three
months ended September 30, 2009, as compared to 20.2% for the three months ended
June 30, 2009.  The CPRs on our mortgage loans held in our
securitization trusts averaged approximately 24.7% during the three months ended
September 30, 2009, as compared to 22.3% for the three months ended June 30,
2009.  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.




30


Financial
Condition
  As of
September 30, 2009, we had approximately $608.1 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 our sale
of all CMO Agency floaters totaling approximately $245.2 million.
  Balance
Sheet Analysis - Asset Quality
  Investment Securities - Available
for Sale - The following tables set forth the credit characteristics of
our securities portfolio as of September 30, 2009 and December 31, 2008 (dollar
amounts in thousands):
  September
      30, 2009
                              
                              Sponsor
      or Rating
                                S&P/Moodys/Fitch
                              
                              
                              Par
                                Value
                              
                              
                              Carrying
                                Value
                              
                              
                              %
      of
                                Portfolio
                              
                              
                              Coupon
                              
                              
                              YieldAgency
      RMBS
                              
                              FNMA
                              
                              $
                              213,802
                              
                              $
                              224,889
                              
                              
                              79.6
      %
                              
                              
                              5.14
      %
                              
                              
                              4.00%Non-Agency
      RMBS
                              
                              AAA/Aaa
                              
                              
                              2,398
                              
                              
                              1,870
                              
                              
                              0.7%
                              
                              
                              4.98
      %
                              
                              
                              11.38
      %AA/Aa
                              
                              
                              15,677
                              
                              
                              12,970
                              
                              
                              4.6
      %
                              
                              
                              1.70
      %
                              
                              
                              11.08
      %A/A
                              
                              
                              4,040
                              
                              
                              3,260
                              
                              
                              1.2
      %
                              
                              
                              1.51
      %
                              
                              
                              6.34
      %BBB/Baa
                              
                              
                              609
                              
                              
                              451
                              
                              
                              0.1
      %
                              
                              
                              4.15
      %
                              
                              
                              8.77
      %BB/Ba
                              
                              
                              1,273
                              
                              
                              976
                              
                              
                              0.3
      %
                              
                              
                              5.02
      %
                              
                              
                              8.55
      %B/B
                              
                              
                              7,186
                              
                              
                              5,398
                              
                              
                              1.9
      %
                              
                              
                              5.64
      %
                              
                              
                              9.72
      %CCC
      or Below
                              
                              
                              29,006
                              
                              
                              19,460
                              
                              
                              6.9
      %
                              
                              
                              5.24
      %
                              
                              
                              9.42
      %CLO
                              
                              BBB/Baa
                              
                              
                              10,400
                              
                              
                              4,680
                              
                              
                              1.7
      %
                              
                              
                              1.53
      %
                              
                              
                              12.43
      %BB/Ba
                              
                              
                              15,300
                              
                              
                              4,590
                              
                              
                              1.6
      %
                              
                              
                              2.83
      %
                              
                              
                              20.61
      %B/B
                              
                              
                              20,250
                              
                              
                              4,050
                              
                              
                              1.4
      %
                              
                              
                              5.43
      %
                              
                              
                              35.47
      %Total/Weighted
      average
                              
                              $
                              319,941
                              
                              $
                              282,594
                              
                              
                              100.0
      %
                              
                              
                              4.74
      %
                              
                              
                              5.76
      %
 
 December
      31, 2008
                          
                          Sponsor
      or Rating
                            S&P/Moodys/Fitch
                          
                          
                          Par
                            Value
                          
                          
                          Carrying
                            Value
                          
                          
                          %
      of
                            Portfolio
                          
                          
                          Coupon
                          
                          
                          YieldAgency
      RMBS
                          
                          FNMA/FHLMC
                          
                          $
                          455,447
                          
                          $
                          455,871
                          
                          
                          95
      %
                          
                          
                          3.67
      %
                          
                          
                          5.99
      %Non-Agency
      RMBS
                          
                          AAA/Aaa
                          
                          
                          23,289
                          
                          
                          18,118
                          
                          
                          4
      %
                          
                          
                          1.27
      %
                          
                          
                          15.85
      %AA/Aa
                          
                          
                          609
                          
                          
                          530
                          
                          
                          0
      %
                          
                          
                          1.22
      %
                          
                          
                          4.32
      %A/A
                          
                          
                          3,648
                          
                          
                          2,828
                          
                          
                          1
      %
                          
                          
                          2.30
      %
                          
                          
                          4.08
      %CCC/Caa
      or Below
                          
                          
                          2,058
                          
                          
                          69
                          
                          
                          0
      %
                          
                          
                          5.67
      %
                          
                          
                          20.33
      %Not
      Rated
                          
                          
                          404
                          
                          
                          —
                          
                          
                          0
      %
                          
                          
                          5.67
      %
                          
                          
                          0.00
      %Total/Weighted
      average
                          
                          $
                          485,455
                          
                          $
                          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 reached a size sufficient for us to securitize such
loans.  Once the securitization of these loans qualified as a
financing for GAAP purposes, the loans were then re-classified as “mortgage
loans held in securitization trusts (net).”
  New York
Mortgage Trust 2006-1, qualified as a sale under GAAP, which resulted in the
recording of residual assets and mortgage servicing rights.  The
Company sold all the residual assets related to the 2006-1 securitization during
the third quarter ended September 30, 2009 incurring a realized loss of
approximately $32,000.
  31
 The
following table details mortgage loans held in securitization trusts at
September 30, 2009 (dollar amounts in thousands):
  Par Value
                          
                          Coupon
                          
                          Carrying Value
                          
                          YieldSeptember
      30, 2009
                          $
                          291,423
                          
                          
                          5.05
                          %
                          $
                          290,940
                          
                          
                          5.41
                          %
 
 At
September 30, 2009, mortgage loans held in securitization trusts totaled
approximately $290.9 million, or 47.8% of our total assets.  Of this
mortgage loan investment portfolio, 100% are traditional ARMs or hybrid ARMs,
81.2% 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 period is typically 10 years, which mitigates the “payment shock”
at the time of interest rate reset.  None of the mortgage loans held
in securitization trusts are payment option-ARMs or ARMs with negative
amortization.
  The
following table sets forth the composition of our portfolio of
mortgage loans held in securitization trusts as of September 30, 2009
(dollar amounts in thousands):
  Loans
Held in SecuritizationTrusts:
 Average
                    
                    
                    High
                    
                    
                    LowGeneral
      Loan Characteristics:Original
      Loan Balance (dollar amounts in thousands)
                    
                    $
                    453
                    
                    
                    $
                    2,950
                    
                    
                    $
                    48Coupon
      Rate
                    
                    
                    5.43
                    %
                    
                    
                    7.50
                    %
                    
                    
                    2.50
                    %Gross
      Margin
                    
                    
                    2.37
                    %
                    
                    
                    5.00
                    %
                    
                    
                    1.13
                    %Lifetime
      Cap
                    
                    
                    11.24
                    %
                    
                    
                    13.25
                    %
                    
                    
                    9.13
                    %Original
      Term (Months)
                    
                    
                    360
                    
                    
                    
                    360
                    
                    
                    
                    360Remaining
      Term (Months)
                    
                    
                    307
                    
                    
                    
                    315
                    
                    
                    
                    274Average
      Months to Reset
                    
                    
                    10
                    
                    
                    
                    18
                    
                    
                    
                    1Original
      Average FICO Score
                    
                    
                    733
                    
                    
                    
                    820
                    
                    
                    
                    593Original
      Average LTV
                    
                    
                    70.19
                    
                    
                    
                    95.00
                    
                    
                    
                    13.94
 
 Index
/ Reset  Characteristics:
 Index
      Type
                    
                    
                    Weighted
      Average Gross Margin (%)General
      Loan Characteristics:One
      Month Libor
                    
                    
                    2.9
                    %
                    
                    
                    1.67
                    %Six
      Month Libor
                    
                    
                    71.7
                    %
                    
                    
                    2.41
                    %One
      Year Libor
                    
                    
                    16.3
                    %
                    
                    
                    2.27
                    %One
      Year CMT
                    
                    
                    9.1
                    %
                    
                    
                    2.66
                    %Total
      / Weighted Average
                    
                    
                    100.0
                    %
                    
                    
                    2.39
                    %
 
 32
 
 The
following table details loan summary information for loans held in
securitization trusts at September 30, 2009 (dollar amounts in
thousands).
  Description
                                      
                                      
                                      Interest
      Rate %
                                      
                                      
                                      Final
      MaturityProperty
                                          Type
                                      
                                      Balance
                                      
                                      Loan
                                          Count
                                      
                                      
                                      Max
                                      
                                      
                                      Min
                                      
                                      
                                      Avg
                                      
                                      
                                      Min
                                      
                                      
                                      Max
                                      
                                      
                                      Periodic
      Payment Terms (months)
                                      
                                      Prior
      Liens
                                      
                                      Face
      Amount of Mortgage
                                      
                                      
                                      Carrying
      Amount of Mortgage
                                      
                                      
                                      Principal
                                          Amount
      of Loans Subject to Delinquent Principal or InterestSingle
                                      
                                      <=
      $100
                                      
                                      
                                      12
                                      
                                      
                                      
                                      5.88
                                      
                                      
                                      
                                      3.38
                                      
                                      
                                      
                                      4.96
                                      
                                      
                                      12/01/34
                                      
                                      
                                      11/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      1,874
                                      
                                      
                                      $
                                      846
                                      
                                      
                                      $
                                      -Family
                                      
                                      <=$250
                                      
                                      
                                      75
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      3.88
                                      
                                      
                                      
                                      5.47
                                      
                                      
                                      09/01/32
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      15,106
                                      
                                      
                                      
                                      13,407
                                      
                                      
                                      
                                      287<=$500
                                      
                                      
                                      125
                                      
                                      
                                      
                                      7.13
                                      
                                      
                                      
                                      2.75
                                      
                                      
                                      
                                      5.42
                                      
                                      
                                      10/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      46,851
                                      
                                      
                                      
                                      43,653
                                      
                                      
                                      
                                      3,556<=$1,000
                                      
                                      
                                      53
                                      
                                      
                                      
                                      6.38
                                      
                                      
                                      
                                      1.63
                                      
                                      
                                      
                                      5.19
                                      
                                      
                                      07/01/33
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      40,324
                                      
                                      
                                      
                                      38,326
                                      
                                      
                                      
                                      3,169>$1,000
                                      
                                      
                                      26
                                      
                                      
                                      
                                      6.25
                                      
                                      
                                      
                                      1.50
                                      
                                      
                                      
                                      5.55
                                      
                                      
                                      01/01/35
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      45,082
                                      
                                      
                                      
                                      44,434
                                      
                                      
                                      
                                      6,247Summary
                                      
                                      
                                      291
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      1.50
                                      
                                      
                                      
                                      5.38
                                      
                                      
                                      09/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      149,237
                                      
                                      
                                      $
                                      140,666
                                      
                                      
                                      $
                                      13,2592-4
                                      
                                      <=
      $100
                                      
                                      
                                      1
                                      
                                      
                                      
                                      6.63
                                      
                                      
                                      
                                      6.63
                                      
                                      
                                      
                                      6.63
                                      
                                      
                                      02/01/35
                                      
                                      
                                      02/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      80
                                      
                                      
                                      $
                                      75
                                      
                                      
                                      $
                                      76FAMILY
                                      
                                      <=$250
                                      
                                      
                                      6
                                      
                                      
                                      
                                      6.75
                                      
                                      
                                      
                                      4.38
                                      
                                      
                                      
                                      5.75
                                      
                                      
                                      12/01/34
                                      
                                      
                                      07/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      1,115
                                      
                                      
                                      
                                      1,001
                                      
                                      
                                      
                                      -<=$500
                                      
                                      
                                      18
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      2.13
                                      
                                      
                                      
                                      5.40
                                      
                                      
                                      09/01/34
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      6,522
                                      
                                      
                                      
                                      6,290
                                      
                                      
                                      
                                      513<=$1,000
                                      
                                      
                                      4
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      4.63
                                      
                                      
                                      
                                      5.66
                                      
                                      
                                      12/01/34
                                      
                                      
                                      08/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      3,068
                                      
                                      
                                      
                                      3,042
                                      
                                      
                                      
                                      ->$1,000
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Summary
                                      
                                      
                                      29
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      2.13
                                      
                                      
                                      
                                      5.55
                                      
                                      
                                      09/01/34
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      10,785
                                      
                                      
                                      $
                                      10,408
                                      
                                      
                                      $
                                      589Condo
                                      
                                      <=
      $100
                                      
                                      
                                      17
                                      
                                      
                                      
                                      6.38
                                      
                                      
                                      
                                      4.00
                                      
                                      
                                      
                                      5.08
                                      
                                      
                                      01/01/35
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      2,812
                                      
                                      
                                      $
                                      1,258
                                      
                                      
                                      $
                                      -<=$250
                                      
                                      
                                      87
                                      
                                      
                                      
                                      6.50
                                      
                                      
                                      
                                      3.25
                                      
                                      
                                      
                                      5.47
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      16,788
                                      
                                      
                                      
                                      15,576
                                      
                                      
                                      
                                      723<=$500
                                      
                                      
                                      77
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      1.50
                                      
                                      
                                      
                                      5.24
                                      
                                      
                                      09/01/32
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      26,485
                                      
                                      
                                      
                                      25,473
                                      
                                      
                                      
                                      649<=$1,000
                                      
                                      
                                      29
                                      
                                      
                                      
                                      6.13
                                      
                                      
                                      
                                      1.63
                                      
                                      
                                      
                                      5.13
                                      
                                      
                                      08/01/33
                                      
                                      
                                      11/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      20,717
                                      
                                      
                                      
                                      19,796
                                      
                                      
                                      
                                      546>$1,000
                                      
                                      
                                      13
                                      
                                      
                                      
                                      6.13
                                      
                                      
                                      
                                      4.88
                                      
                                      
                                      
                                      5.49
                                      
                                      
                                      07/01/34
                                      
                                      
                                      09/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      20,373
                                      
                                      
                                      
                                      19,690
                                      
                                      
                                      
                                      -Summary
                                      
                                      
                                      223
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      1.50
                                      
                                      
                                      
                                      5.32
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      87,175
                                      
                                      
                                      $
                                      81,793
                                      
                                      
                                      $
                                      1,918CO-OP
                                      
                                      <=
      $100
                                      
                                      
                                      4
                                      
                                      
                                      
                                      5.50
                                      
                                      
                                      
                                      4.63
                                      
                                      
                                      
                                      5.00
                                      
                                      
                                      10/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      1,350
                                      
                                      
                                      $
                                      222
                                      
                                      
                                      $
                                      -<=$250
                                      
                                      
                                      24
                                      
                                      
                                      
                                      6.25
                                      
                                      
                                      
                                      4.00
                                      
                                      
                                      
                                      5.20
                                      
                                      
                                      10/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      4,710
                                      
                                      
                                      
                                      4,273
                                      
                                      
                                      
                                      212<=$500
                                      
                                      
                                      35
                                      
                                      
                                      
                                      6.38
                                      
                                      
                                      
                                      1.38
                                      
                                      
                                      
                                      5.20
                                      
                                      
                                      08/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      14,317
                                      
                                      
                                      
                                      13,003
                                      
                                      
                                      
                                      -<=$1,000
                                      
                                      
                                      19
                                      
                                      
                                      
                                      5.63
                                      
                                      
                                      
                                      4.75
                                      
                                      
                                      
                                      5.33
                                      
                                      
                                      12/01/34
                                      
                                      
                                      11/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      13,252
                                      
                                      
                                      
                                      12,909
                                      
                                      
                                      
                                      ->$1,000
                                      
                                      
                                      5
                                      
                                      
                                      
                                      6.00
                                      
                                      
                                      
                                      2.25
                                      
                                      
                                      
                                      4.78
                                      
                                      
                                      11/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      7,544
                                      
                                      
                                      
                                      7,008
                                      
                                      
                                      
                                      -Summary
                                      
                                      
                                      87
                                      
                                      
                                      
                                      6.38
                                      
                                      
                                      
                                      1.38
                                      
                                      
                                      
                                      5.21
                                      
                                      
                                      08/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      41,173
                                      
                                      
                                      $
                                      37,415
                                      
                                      
                                      $
                                      212PUD
                                      
                                      <=
      $100
                                      
                                      
                                      2
                                      
                                      
                                      
                                      5.63
                                      
                                      
                                      
                                      5.25
                                      
                                      
                                      
                                      5.44
                                      
                                      
                                      07/01/35
                                      
                                      
                                      07/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      438
                                      
                                      
                                      $
                                      99
                                      
                                      
                                      $
                                      -<=$250
                                      
                                      
                                      22
                                      
                                      
                                      
                                      6.50
                                      
                                      
                                      
                                      2.75
                                      
                                      
                                      
                                      5.28
                                      
                                      
                                      01/01/35
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      4,795
                                      
                                      
                                      
                                      4,179
                                      
                                      
                                      
                                      183<=$500
                                      
                                      
                                      21
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      2.75
                                      
                                      
                                      
                                      5.01
                                      
                                      
                                      08/01/32
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      7,409
                                      
                                      
                                      
                                      7,127
                                      
                                      
                                      
                                      279<=$1,000
                                      
                                      
                                      7
                                      
                                      
                                      
                                      5.88
                                      
                                      
                                      
                                      4.14
                                      
                                      
                                      
                                      5.20
                                      
                                      
                                      05/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      4,746
                                      
                                      
                                      
                                      4,555
                                      
                                      
                                      
                                      ->$1,000
                                      
                                      
                                      4
                                      
                                      
                                      
                                      6.13
                                      
                                      
                                      
                                      4.22
                                      
                                      
                                      
                                      5.46
                                      
                                      
                                      04/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      5,233
                                      
                                      
                                      
                                      5,181
                                      
                                      
                                      
                                      -Summary
                                      
                                      
                                      56
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      2.75
                                      
                                      
                                      
                                      5.19
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      22,621
                                      
                                      
                                      $
                                      21,141
                                      
                                      
                                      $
                                      462Summary
                                      
                                      <=
      $100
                                      
                                      
                                      36
                                      
                                      
                                      
                                      6.63
                                      
                                      
                                      
                                      3.38
                                      
                                      
                                      
                                      5.09
                                      
                                      
                                      10/01/34
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      6,554
                                      
                                      
                                      $
                                      2,500
                                      
                                      
                                      $
                                      76<=$250
                                      
                                      
                                      214
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      2.75
                                      
                                      
                                      
                                      5.43
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      42,514
                                      
                                      
                                      
                                      38,436
                                      
                                      
                                      
                                      1,405<=$500
                                      
                                      
                                      276
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      1.38
                                      
                                      
                                      
                                      5.42
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      101,584
                                      
                                      
                                      
                                      95,546
                                      
                                      
                                      
                                      4,997<=$1,000
                                      
                                      
                                      112
                                      
                                      
                                      
                                      6.88
                                      
                                      
                                      
                                      1.63
                                      
                                      
                                      
                                      5.22
                                      
                                      
                                      07/01/33
                                      
                                      
                                      12/01/35
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      82,107
                                      
                                      
                                      
                                      78,628
                                      
                                      
                                      
                                      3,715>$1,000
                                      
                                      
                                      48
                                      
                                      
                                      
                                      6.25
                                      
                                      
                                      
                                      1.50
                                      
                                      
                                      
                                      5.44
                                      
                                      
                                      04/01/34
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      78,232
                                      
                                      
                                      
                                      76,313
                                      
                                      
                                      
                                      6,247Grand
      Total
                                      
                                      
                                      686
                                      
                                      
                                      
                                      7.25
                                      
                                      
                                      
                                      1.38
                                      
                                      
                                      
                                      5.33
                                      
                                      
                                      08/01/32
                                      
                                      
                                      01/01/36
                                      
                                      
                                      
                                      360
                                      
                                      NA
                                      
                                      
                                      310,991
                                      
                                      
                                      $
                                      291,423
                                      
                                      
                                      $
                                      16,440
  33
 The
following table details activity for loans held in securitization trusts for the
nine months ended September 30, 2009.
  Current
      Principal
                        
                        
                        Premium
                        
                        
                        Loan
      Reserve
                        
                        
                        Net
      Carrying ValueBalance,
      January 1, 2009
                        
                        $
                        347,546
                        
                        
                        $
                        2,197
                        
                        
                        $
                        (1,406
                        )
                        
                        $
                        348,337Additions
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Principal
      repayments
                        
                        
                        (56,123
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (56,123
                        )Provision
      for loan losses
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (1,414
                        )
                        
                        
                        (1,414
                        )Charge-offs
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        497
                        
                        
                        
                        497Amortization
      for premium
                        
                        
                        —
                        
                        
                        
                        (357
                        )
                        
                        
                        —
                        
                        
                        
                        (357
                        )Balance,
      September 30, 2009
                        
                        $
                        291,423
                        
                        
                        $
                        1,840
                        
                        
                        $
                        (2,323
                        )
                        
                        $
                        290,940
 
 Cash and cash equivalents -
We had unrestricted cash and cash equivalents of $22.4 million at September 30,
2009 versus $9.4 million at December 31, 2008.
  Restricted Cash - Restricted
cash of $3.4 million at September 30, 2009 includes $3.2 million held by
counterparties as collateral for hedging instruments and $0.2 million as
collateral for a letter of credit related to the Company’s lease of its
corporate headquarters.  Restricted cash of $8.0 million at December
31, 2008 includes $7.7 million held by counterparties as collateral for hedging
instruments and a repurchase agreement and $0.3 million 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 $1.6 million as of September 30, 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, $0.5 million related to insurance costs and $0.2 million of
capitalized servicing costs.
  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
$4.1 million at September 30, 2009 as compared to $5.4 million at December 31,
2008.
  Balance
Sheet Analysis - Financing Arrangements
  Financing Arrangements, Portfolio
Investments - As of September 30, 2009 and December 31 2008, there were
approximately $194.7 million and $402.3 million of repurchase borrowings
outstanding, respectively.  Our repurchase agreements typically have
terms of 30 days or less.  As of September 30, 2009, the current
weighted average borrowing rate on these financing facilities was 0.39% as
compared to 2.62% as of December 31, 2008.
  Collateralized Debt
Obligations - As of September 30, 2009 and December 31, 2008, we have
CDOs outstanding of approximately $280.2 million and $335.6 million,
respectively, with an average interest rate of 0.63% and 0.85%,
respectively.
  Subordinated Debentures - As
of September 30, 2009, we have trust preferred securities outstanding of $44.8
million with an average interest rate of 6.13%.  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.
  34
 Convertible Preferred Debentures
- As of September 30, 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 Company declared a 2009 third quarter common stock dividend of $0.25
resulting in an increase in the Series A Preferred Stock dividend rate for the
2009 third quarter to 12.5% (per annum).  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 GAAP,
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 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.  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 September 30, 2009 and December 31, 2008 (dollar amounts in
thousands):
  September
      30,
                      2009
                    
                    
                    December
      31,
                      2008Derivative
      Assets:Interest
      rate caps
                    
                    $
                    15
                    
                    
                    $
                    22Total
                    
                    $
                    15
                    
                    
                    $
                    22Derivative
      Liabilities:Interest
      rate swaps
                    
                    $
                    3,025
                    
                    
                    $
                    4,194Total
                    
                    $
                    3,025
                    
                    
                    $
                    4,194
 
 Balance
Sheet Analysis - Stockholders’ Equity
  Stockholders’
equity at September 30, 2009 was $58.1 million and included $12.5 million of net
unrealized gains on available for sale securities and a $3.7 million unrealized
loss related to cashflow hedges presented as accumulated other comprehensive
income/(loss).
  35
 Results
of Operations
  Overview
of Performance
  For the
three and nine months ended September 30, 2009 we reported net income of $2.9
million and $7.5 million, respectively, as compared to net income of $1.0
million and a net loss of $19.0 million, for the same periods in
2008.
  The main
components of the change in net income (loss) for the three and nine months
ended September 30, 2009 as compared to the same period for the prior
year are detailed in the following table (dollar amounts in thousands,
except per share data):
   For
      the Three months
                          Ended
      September 30,
                      
                      
                      For
      the Nine months
                        Ended
      September 30,2009
                      
                      
                      2008
                      
                      
                      Difference
                      
                      
                      2009
                      
                      
                      2008
                      
                      
                      DifferenceNet
      interest income from investment securities and loans held in
      securitization trusts
                      
                      $
                      6,130
                      
                      
                      $
                      3,632
                      
                      
                      $
                      2,498
                      
                      
                      $
                      17,159
                      
                      
                      $
                      10,335
                      
                      
                      $
                      6,824Net
      interest income
                      
                      
                      4,683
                      
                      
                      
                      2,182
                      
                      
                      
                      2,501
                      
                      
                      
                      12,935
                      
                      
                      
                      5,955
                      
                      
                      
                      6,980Provision
      for loan losses
                      
                      
                      (526
                      )
                      
                      
                      (7
                      )
                      
                      
                      (519
                      )
                      
                      
                      (1,414
                      )
                      
                      
                      (1,462
                      )
                      
                      
                      48Impairment
      loss on investment securities
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (119
                      )
                      
                      
                      —
                      
                      
                      
                      (119
                      )Realized
      gain (loss) on securities and related hedges
                      
                      
                      359
                      
                      
                      
                      4
                      
                      
                      
                      355
                      
                      
                      
                      623
                      
                      
                      
                      (19,927
                      )
                      
                      
                      20,550Total
      expenses
                      
                      
                      1,875
                      
                      
                      
                      1,435
                      
                      
                      
                      441
                      
                      
                      
                      5,047
                      
                      
                      
                      4,826
                      
                      
                      
                      221Income
      (loss) from continuing operations
                      
                      
                      2,641
                      
                      
                      
                      744
                      
                      
                      
                      1,896
                      
                      
                      
                      6,978
                      
                      
                      
                      (20,260
                      )
                      
                      
                      27,238Income
      from discontinued operation - net of tax
                      
                      
                      236
                      
                      
                      
                      285
                      
                      
                      
                      (49
                      )
                      
                      
                      500
                      
                      
                      
                      1,294
                      
                      
                      
                      (794
                      )Net
      income (loss)
                      
                      $
                      2,877
                      
                      
                      $
                      1,029
                      
                      
                      $
                      1,847
                      
                      
                      $
                      7,478
                      
                      
                      $
                      (18,966
                      )
                      
                      $
                      26,444Basic
      income (loss) per common share
                      
                      $
                      0.31
                      
                      
                      $
                      0.11
                      
                      
                      $
                      0.20
                      
                      
                      $
                      0.80
                      
                      
                      $
                      (2.39
                      )
                      
                      $
                      3.19Diluted
      income (loss) per common share
                      
                      $
                      0.30
                      
                      
                      $
                      0.16
                      
                      
                      $
                      0.19
                      
                      
                      $
                      0.78
                      
                      
                      $
                      (2.39
                      )
                      
                      $
                      3.17
 
 The
increase in net income of $1.8 million for the quarter ended September 30, 2009
as compared to the same period in the previous year was due mainly to a $2.5
million increase in net interest margin on the investment portfolio and on the
loans held in securitization trusts. The improved net interest margin was offset
by an increase in provision for loan losses of $0.5 million. The improved net
interest margin for our portfolio was due  primarily to the transition
out of lower yielding Agency CMO floaters in March and April of 2009 and into
higher yielding non-agency RMBS, and to a lesser extent, a
CLO.   In addition, improved borrowing costs for the Company’s
repurchase agreements and collateralized debt obligations contributed to the
improved results.
  The $26.4
million improvement in net income for the nine months ended September 30, 2009
as compared to the prior year period was due primarily to significantly improved
operating conditions and a lower interest rate environment.  Lower
interest rates and a portfolio restructuring during the nine months ended
September 30, 2009 resulted in a $7.0 million improvement in net interest margin
as compared to the nine months ended September 30, 2008.  The large
realized loss recorded in 2008 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, 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.
  36
 Comparative
Net Interest Income
  Our
results of operations for our investment portfolio during a given period
typically reflect the net interest spread earned on our investment portfolio of
Agency RMBS, non-Agency RBMS, loans held in securitization trusts, and to a
lesser extent, CLOs.  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.  The
following tables set forth the changes in net interest income, yields earned on
securities and mortgage loans and rates on financial arrangements for the three
and nine months ended September 30, 2009 and 2008 (dollar amounts in thousands,
except as noted):
  For the Three Months Ended
      September 30,2009
                      
                      
                      2008Average
                          Balance
                      
                      
                      Amount
                      
                      
                      Yield/
                          Rate
                      
                      
                      Average
                          Balance
                      
                      
                      Amount
                      
                      
                      Yield/
                          Rate($
      Millions)
                      
                      
                      ($
      Millions)Interest
      income:Investment
      securities and loans held in the securitization trusts
                      
                      $
                      610.3
                      
                      
                      $
                      7,594
                      
                      
                      
                      4.98
                      %
                      
                      $
                      872.5
                      
                      
                      $
                      10,517
                      
                      
                      
                      4.82
                      %Amortization
      of net premium
                      
                      
                      (39.3
                      )
                      
                      
                      400
                      
                      
                      
                      0.62
                      %
                      
                      
                      1.9
                      
                      
                      
                      (193
                      )
                      
                      
                      (0.10
                      )%Interest
      income/weighted average
                      
                      $
                      571.0
                      
                      
                      $
                      7,994
                      
                      
                      
                      5.60
                      %
                      
                      $
                      874.4
                      
                      
                      $
                      10,324
                      
                      
                      
                      4.72
                      %Interest
      expense:Investment
      securities and loans held in the securitization trusts
                      
                      $
                      495.9
                      
                      
                      $
                      1,864
                      
                      
                      
                      1.47
                      %
                      
                      $
                      779.9
                      
                      
                      $
                      6,692
                      
                      
                      
                      3.36
                      %Subordinated
      debentures
                      
                      
                      45.0
                      
                      
                      
                      785
                      
                      
                      
                      6.83
                      %
                      
                      
                      45.0
                      
                      
                      
                      913
                      
                      
                      
                      7.94
                      %Convertible
      preferred debentures
                      
                      
                      20.0
                      
                      
                      
                      662
                      
                      
                      
                      12.95
                      %
                      
                      
                      20.0
                      
                      
                      
                      537
                      
                      
                      
                      10.51
                      %Interest
      expense/weighted average
                      
                      $
                      560.9
                      
                      
                      $
                      3,311
                      
                      
                      
                      2.31
                      %
                      
                      $
                      844.9
                      
                      
                      $
                      8,142
                      
                      
                      
                      3.77
                      %Net
      interest income/weighted average
                      
                      
                      
                      
                      
                      $
                      4,683
                      
                      
                      
                      3.29
                      %
                      
                      
                      
                      
                      
                      $
                      2,182
                      
                      
                      
                      0.95
                      %
 
 
 For the Nine Months Ended
      September 30,2009
                      
                      
                      2008Average
                          Balance
                      
                      
                      Amount
                      
                      
                      Yield/
                          Rate
                      
                      
                      Average
                          Balance
                      
                      
                      Amount
                      
                      
                      Yield/
                          Rate($
      Millions)
                      
                      
                      ($
      Millions)Interest
      income:Investment
      securities and loans held in the securitization trusts
                      
                      $
                      679.3
                      
                      
                      $
                      23,849
                      
                      
                      
                      4.68
                      %
                      
                      $
                      929.8
                      
                      
                      $
                      34,775
                      
                      
                      
                      4.99
                      %Amortization
      of net premium
                      
                      
                      (23.1
                      )
                      
                      
                      351
                      
                      
                      
                      0.24
                      %
                      
                      
                      1.1
                      
                      
                      
                      (443
                      )
                      
                      
                      (0.07
                      )%Interest
      income/weighted average
                      
                      $
                      656.2
                      
                      
                      $
                      24,200
                      
                      
                      
                      4.92
                      %
                      
                      $
                      930.9
                      
                      
                      $
                      34,332
                      
                      
                      
                      4.92
                      %Interest
      expense:Investment
      securities and loans held in the securitization trusts
                      
                      $
                      577.5
                      
                      
                      $
                      7,041
                      
                      
                      
                      1.60
                      %
                      
                      $
                      846.0
                      
                      
                      $
                      23,997
                      
                      
                      
                      3.73
                      %Subordinated
      debentures
                      
                      
                      45.0
                      
                      
                      
                      2,417
                      
                      
                      
                      7.06
                      %
                      
                      
                      45.0
                      
                      
                      
                      2,768
                      
                      
                      
                      8.08
                      %Convertible
      preferred debentures
                      
                      
                      20.0
                      
                      
                      
                      1,807
                      
                      
                      
                      11.87
                      %
                      
                      
                      20.0
                      
                      
                      
                      1,612
                      
                      
                      
                      10.59
                      %Interest
      expense/weighted average
                      
                      $
                      642.5
                      
                      
                      $
                      11,265
                      
                      
                      
                      2.30
                      %
                      
                      $
                      911.0
                      
                      
                      $
                      28,377
                      
                      
                      
                      4.09
                      %Net
      interest income/weighted average
                      
                      
                      
                      
                      
                      $
                      12,935
                      
                      
                      
                      2.62
                      %
                      
                      
                      
                      
                      
                      $
                      5,995
                      
                      
                      
                      0.83
                      %
 
 37
  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)September
      30, 2009
              
              $
              571.0
              
              4.98
      %
              
              5.60
      %
              
              1.47
      %
              
              4.13
      %
              
              22.5
      %June
      30, 2009
              
              $
              600.5
              
              4.99
      %
              
              5.09
      %
              
              1.48
      %
              
              3.61
      %
              
              21.4
      %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(dollar
amounts in thousands)
  For
      the Three Months Ended
                                                                                    September
      30,
                                                                                  
                                                                                  For
      the Nine Months Ended
                                                                                    September
      30,Expenses:
                                                                                  
                                                                                  2009
                                                                                  
                                                                                  2008
                                                                                  
                                                                                  
                                                                                  %
      Change
                                                                                  
                                                                                  2009
                                                                                  
                                                                                  
                                                                                  2008
                                                                                  
                                                                                  
                                                                                  %
      ChangeSalaries
      and benefits
                                                                                  
                                                                                  $
                                                                                  473
                                                                                  
                                                                                  $
                                                                                  258
                                                                                  
                                                                                  
                                                                                  83.3
                                                                                  %
                                                                                  
                                                                                  $
                                                                                  1,486
                                                                                  
                                                                                  
                                                                                  $
                                                                                  988
                                                                                  
                                                                                  
                                                                                  50.4
                                                                                  %Professional
      fees
                                                                                  
                                                                                  
                                                                                  323
                                                                                  
                                                                                  
                                                                                  367
                                                                                  
                                                                                  
                                                                                  (12.0
                                                                                  )%
                                                                                  
                                                                                  
                                                                                  1,021
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,065
                                                                                  
                                                                                  
                                                                                  (4.1
                                                                                  )
      %Management
      fees
                                                                                  
                                                                                  
                                                                                  508
                                                                                  
                                                                                  
                                                                                  186
                                                                                  
                                                                                  
                                                                                  173.1
                                                                                  %
                                                                                  
                                                                                  
                                                                                  935
                                                                                  
                                                                                  
                                                                                  
                                                                                  479
                                                                                  
                                                                                  
                                                                                  95.2
                                                                                  %Insurance
                                                                                  
                                                                                  
                                                                                  171
                                                                                  
                                                                                  
                                                                                  275
                                                                                  
                                                                                  
                                                                                  (37.8
                                                                                  )%
                                                                                  
                                                                                  
                                                                                  358
                                                                                  
                                                                                  
                                                                                  
                                                                                  668
                                                                                  
                                                                                  
                                                                                  (46.4
                                                                                  )
      %Other
                                                                                  
                                                                                  
                                                                                  400
                                                                                  
                                                                                  
                                                                                  349
                                                                                  
                                                                                  
                                                                                  14.6
                                                                                  %
                                                                                  
                                                                                  
                                                                                  1,247
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,626
                                                                                  
                                                                                  
                                                                                  (23.3
                                                                                  )
      %Total
      Expenses
                                                                                  
                                                                                  $
                                                                                  1,875
                                                                                  
                                                                                  $
                                                                                  1,435
                                                                                  
                                                                                  
                                                                                  30.7
                                                                                  %
                                                                                  
                                                                                  $
                                                                                  5,047
                                                                                  
                                                                                  
                                                                                  $
                                                                                  4,826
                                                                                  
                                                                                  
                                                                                  4.6
                                                                                  %
 
 The
increase in expenses of approximately $0.4 million for the three months ended
September 30, 2009 as compared to the same period in 2008 is primarily due to
$0.2 million in compensation related to a performance based incentive accrual
and a $0.3 million increase in incentive based management
fees.   The $0.5 million increase in salaries and benefits for
the nine months ended September 30, 2009 is due to higher incentive based
compensation accruals.  In addition, the management fees increase of
$0.5 million is due to incentive fees under the advisory agreement, based on
performance. These increases in expenses during the nine months ended September
30, 2009 were partially offset by lower insurance costs and reduced other
expenses.  Other expenses during the nine months ended September 30,
2008 included a non-recurring penalty fees totaling approximately $0.7 million
that was paid to investors in the Company’s February 2008 private placement of
common stock.
  38


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.
  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.  At September 30, 2009, we had cash
balances of $22.4 million, $60.9 million in unencumbered RMBS securities,
including $16.6 million in Agency RMBS, and borrowings of $194.7 million under
outstanding repurchase agreements.  At September 30, 2009, we also
utilized longer-term capital resources, including CDOs outstanding of $280.2
million, subordinated debt of $44.8 million (in the form of trust preferred
securities) and $19.8 million of convertible preferred
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.
  To
finance our RMBS investment portfolio, we generally seek to borrow between six
and eight times the amount of our equity.  At September 30, 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 2.5:1;
excluding the convertible preferred debentures our leverage ratio was 3.3:1. As
of September 30, 2009, our investment in CLO and non-Agency RMBS was
unlevered.  Given the continued uncertainty in the global credit
markets and economy, we believe it is prudent and appropriate to currently
employ leverage at a level below our targeted leverage range.
  We had
outstanding repurchase agreements, a form of collateralized short-term
borrowing, with five different financial institutions as of September 30,
2009.  These agreements are secured by our RMBS 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 RMBS 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 or sell it at a
distressed price, we could incur a significant loss.
  We enter
into interest rate swap agreements as a mechanism to reduce the interest rate
risk of the RMBS portfolio.  At September 30, 2009, we had $113.9
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 2.8 years at September 30,
2009.
  39
 We also
own approximately $4.1 million of loans held for sale.  Our inability
to sell these loans at all or on favorable terms 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.
  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; since December 31, 2007, we have
addressed these requests by attempting to negotiate 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 September
30, 2009, the amount of repurchase requests outstanding was approximately $1.5
million, against which we had a reserve of approximately $0.3
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, a first quarter 2009
cash dividend of $0.18 per common share in April 2009, a second quarter 2009
dividend of $0.23 per common share in July 2009 and a third quarter 2009 cash
dividend of $0.25 per common share in October 2009 the third quarter 2009
dividend was paid to common stockholders of record as of October 13,
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.  On July 30, 2009, we paid a $0.575 per share cash dividend, or
$0.6 million in the aggregate, on shares of our Series A Preferred Stock to
holders of record as of June 30, 2009 and on October 30, 2009, we paid a $0.625
per share cash dividend, or $0.6 million in the aggregate, on shares of our
Series A Preferred Stock to holders of record as of September 30,
2009.  As described above, pursuant to the terms of the Series A
Preferred Stock, we are required to increase the quarterly dividend on the
Series A Preferred Stock, on a pro rata basis, to the extent our future
quarterly common stock dividends exceed $0.20 per share.
  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.
  40
 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.
  For the
three and nine months ended September 30, 2009, we paid HCS a base advisory fee
of $0.2 million and $0.6 million, respectively, and  incentive
compensation of $0.3 million and $0.3 million, respectively.
  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.
 
 41
 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.
  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 September 30, 2009, instantaneous 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
              
              $
              (4,144
              )+100
              
              $
              (1,851
              )-100
              
              $
              1,770
 
 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.
 
 42
 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 trusts, the
principal and interest payments from mortgage assets and cash proceeds from the
issuance of equity securities (as market and other conditions permit). 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 other assets due to either borrower defaults, or a
counterparty failure. Our portfolio of loans held in securitization trusts as of
September 30, 2009 consisted of approximately $280.2 million of securitized
first liens originated in 2005 and earlier. 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 an
average loan-to-value (“LTV”) ratio at origination of approximately 70.2%, and
average borrower FICO score of approximately 733. In addition, approximately
68.4% 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 default, on these loans, we
cannot assure you that all borrowers will continue to satisfy their payment
obligations under these loans and thereby avoid default.
 
 43
 As of
September 30, 2009, we owned approximately $44.4 million on non-Agency RMBS
senior securities. The non-Agency RMBS has a weighted average amortized purchase
price of approximately 71.2% of current par value.  Management
believes the purchase price discount coupled with the credit support within the
bond structure protects the Company from principal loss under most stress
scenarios for these non-Agency RMBS.  In addition, we own
approximately $13.3 million of collateralized loan obligations at a discounted
purchase price of approximately 19.22% of par.  The securities are
backed by a portfolio of middle market corporate loans.
  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 September 30, 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 RMBS are generally based on market prices provided by
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 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 over the past 18
months, secondary market prices were given minimal weighting when arriving at
loan valuation at September 30, 2009 and December 31, 2008 fair
value.
 
 The fair
value of these collateralized debt obligations is based on discounted cashflows
as well as market pricing on comparable collateralized debt
obligations.
 
 44
 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 September 30, 2009, using a
discounted cash flow simulation model assuming an instantaneous interest rate
shift. 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
              
              $
              (10,983
              )
              
              1.34 years+100
              
              $
              (5,032
              )
              
              1.25 yearsBase
              
              
              —
              
              
              0.81 years-100
              
              $
              3,617
              
              
              0.43 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.
  45
 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 September 30,
2009.  Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of September 30, 2009.
  Changes in Internal Control over
Financial Reporting - There has been no change in our internal control
over financial reporting during the quarter ended September 30, 2009 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
  
 46
  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.
  47
 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:
      November 6, 2009
                By:
                /s/ Steven
      R. MummaSteven
      R. Mumma
                  Chief
      Executive Officer, President and Chief Financial Officer
                  (Principal
      Executive Officer and Principal Financial Officer)
   48
  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).3.1(f)
              
              Articles
      of Amendment of the Registrant (Incorporated by reference to Exhibit
      3.1(f) to the Company’s Current Report on Form 8-K filed on June 15,
      2009).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).
 
 49
 
 10.1
              
              Form
      of Restricted Stock Award Agreement for Officers (Incorporated by
      reference to Exhibit 10-1 to the Company’s Current Report on Form 8-K as
      filed with the Securities and Exchange Commission on July14,
      2009.)10.2
              
              Form
      of Restricted Stock Award Agreement for Directors (Incorporated by
      reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as
      filed with the Securities and Exchange Commission on July14,
      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.*
    50