New York Mortgage Trust
Annual Report 2015

Plain-text annual report

NEW YORK MORTGAGE TRUST INC FORM 10-K (Annual Report) Filed 02/25/16 for the Period Ending 12/31/15 Address Telephone CIK 275 MADISON AVENUE NEW YORK, NY 10016 (212) 792-0107 0001273685 Symbol NYMT SIC Code 6798 - Real Estate Investment Trusts Industry Real Estate Operations Sector Fiscal Year Services 12/31 http://www.edgar-online.com © Copyright 2016, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.  UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549___________________FORM 10-K___________________xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2015 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ____________ to ____________Commission File Number 001-32216NEW YORK MORTGAGE TRUST, INC.(Exact name of registrant as specified in its charter)Maryland 47-0934168(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)275 Madison Avenue, New York, NY 10016(Address of principal executive office) (Zip Code)(212) 792-0107(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share NASDAQ Stock Market7.75% Series B Cumulative Redeemable Preferred Stock,par value $0.01 per share, $25.00 Liquidation Preference NASDAQ Stock Market7.875% Series C Cumulative Redeemable Preferred Stock, par value$0.01 per share, $25.00 Liquidation Preference NASDAQ Stock MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ¨ No xIndicate 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 duringthe 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 thepast 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe 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 x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xThe aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2015 was $ 813,215,764 .The number of shares of the registrant’s common stock, par value $.01 per share, outstanding on February 24, 2016 was 109,360,208 .DOCUMENTS INCORPORATED BY REFERENCEDocument WhereIncorporated Part III, Items 10-141. Portions of the Registrant's Definitive Proxy Statement relating to its 2016 Annual Meeting ofStockholders scheduled for May 2016 to be filed with the Securities and Exchange Commission by no later than April29, 2016. 2NEW YORK MORTGAGE TRUST, INC.FORM 10-KFor the Fiscal Year Ended December 31, 2015TABLE OF CONTENTSPART I Item 1.Business4Item 1A.Risk Factors16Item 1B.Unresolved Staff Comments42Item 2.Properties42Item 3.Legal Proceedings42Item 4.Mine Safety Disclosures42 PART II Item 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities43Item 6.Selected Financial Data45Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations46Item 7A.Quantitative and Qualitative Disclosures About Market Risk75Item 8.Financial Statements and Supplementary Data80Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure80Item 9A.Controls and Procedures80Item 9B.Other Information80 PART III Item 10.Directors and Executive Officers of the Registrant and Corporate Governance81Item 11.Executive Compensation81Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters81Item 13.Certain Relationships and Related Party Transactions and Director Independence81Item 14.Principal Accounting Fees and Services81 PART IV Item 15.Exhibits, Financial Statement Schedules82PART IItem 1. BUSINESSIn this Annual Report on Form 10-K we refer to New York Mortgage Trust, Inc., together with its consolidated subsidiaries, as “we,” “us,” “Company,”or “our,” unless we specifically state otherwise or the context indicates otherwise. We refer to our wholly-owned taxable REIT subsidiaries as “TRSs” and ourwholly-owned qualified REIT subsidiaries as “QRSs.” In addition, the following defines certain of the commonly used terms in this report: “RMBS” refers toresidential mortgage-backed securities comprised of adjustable-rate, hybrid adjustable-rate, fixed-rate, interest only and inverse interest only, and principal onlysecurities; “Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by a federallychartered corporation (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation(“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”); “Agency ARMs” refers toAgency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; “non-Agency RMBS” refers to RMBS backed by prime jumbo and Alternative A-paper (“Alt-A”) residential mortgage loans; “IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the rightto the interest component of the cash flow from a pool of mortgage loans; “Agency IOs” refers to IOs that represent the right to the interest components of thecash flow from a pool of residential mortgage loans issued or guaranteed by a GSE or an agency of the U.S. government; “POs” refers to mortgage-backedsecurities that represent the right to the principal component of the cash flow from a pool of mortgage loans; “ARMs” refers to adjustable-rate residentialmortgage loans; “prime ARM loans” and “residential securitized loans” each refer to prime credit quality residential ARM loans (“prime ARM loans”) held insecuritization trusts; “distressed residential loans” refers to pools of performing and re-performing, fixed-rate and adjustable-rate, fully amortizing, interest-onlyand balloon, seasoned mortgage loans secured by first liens on one- to four-family properties ; “ CMBS” refers to commercial mortgage-backed securitiescomprised of commercial mortgage pass-through securities, as well as IO or PO securities that represent the right to a specific component of the cash flow from apool of commercial mortgage loans; “multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties; “CDOs” refers tocollateralized debt obligations; “CLO” refers to collateralized loan obligation; “Consolidated K-Series” refers to, as of December 31, 2015 , five separateFreddie Mac- sponsored multi-family loan K-Series securitizations, or, as of December 31, 2014 , six separate Freddie Mac-sponsored multi-family loan K-Seriessecuritizations of which we, or one of our "special purpose entities," or "SPEs," own the first loss PO securities and certain IO securities; “Variable InterestEntity" or "VIE” refers to an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity atrisk for the entity to finance its activities without additional subordinated financial support from other parties; and “Consolidated VIEs” refers to VIEs where theCompany is the primary beneficiary, as it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a rightto receive benefits or absorb losses of the entity that could be potentially significant to the VIE.GeneralWe are a real estate investment trust, or REIT, for federal income tax purposes, in the business of acquiring, investing in, financing and managingprimarily mortgage-related assets and financial assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economicconditions through a combination of net interest margin and net realized capital gains from a diversified investment portfolio. Our portfolio includes creditsensitive assets and investments sourced from distressed markets in recent years that create the potential for capital gains, as well as more traditional types ofmortgage-related investments that generate interest income. Our investment portfolio includes residential mortgage loans, including second mortgages and loans sourced from distressed markets, multi-familyCMBS, mezzanine loans to and preferred equity investments in owners of multi-family properties, equity and debt securities issued by entities that invest inresidential and commercial real estate and commercial real estate-related debt investments, and Agency RMBS. Subject to maintaining our qualification as a REIT,we also may opportunistically acquire and manage various other types of mortgage-related and financial assets that we believe will compensate us appropriately forthe risks associated with them, including, without limitation, non-Agency RMBS (which may include IOs and POs), collateralized mortgage obligations andsecurities issued by newly originated residential securitizations, including credit sensitive securities from these securitizations.We seek to achieve a balanced and diverse funding mix to finance our assets and operations. We currently rely primarily on a combination of short-termborrowings, such as repurchase agreements with terms typically of 30 days, longer term repurchase agreement borrowing with terms between one year and 18months and longer term structured financings, such as securitizations with terms longer than one year.4We internally manage a certain portion of our portfolio, including Agency ARMs, Agency fixed-rate RMBS, non-Agency RMBS, CLOs, residentialsecuritized loans and second mortgage loans. In addition, as part of our investment strategy, we also contract with certain external investment managers to managespecific asset types targeted by us. We are a party to separate investment management agreements with Headlands Asset Management, LLC, or Headlands,RiverBanc, LLC, or RiverBanc, and The Midway Group, L.P., or Midway, with Headlands providing investment management services with respect to ourinvestments in certain distressed residential loans, RiverBanc providing investment management services with respect to our investments in multi-family CMBSand certain commercial real estate-related debt investments, and Midway providing investment management services with respect to our investments in AgencyIOs.We have elected to be taxed as a REIT for federal income tax purposes and have complied, and intend to continue to comply, with the provisions of theInternal Revenue Code of 1986, as amended (the “Internal Revenue Code”), with respect thereto. Accordingly, we do not expect to be subject to federal income taxon our REIT taxable income that we currently distribute to our stockholders if certain asset, income, distribution and ownership tests and recordkeepingrequirements are fulfilled. Even if we maintain our qualification as a REIT, we expect to be subject to some federal, state and local taxes on our income generatedin our TRSs.The financial information requirements required under this Item 1 may be found in our consolidated financial statements beginning on page F-1 of thisAnnual Report.Our Investment StrategyOur strategy is to construct a residential portfolio that includes elements of both interest rate and credit risk. Our investment strategy focuses on theacquisition and management of (i) “credit residential” assets, which we define as residential mortgage loans, including distressed residential loans and secondmortgage loans, multi-family investments, including CMBS, mezzanine loans to and preferred equity investments in owners of multi-family properties and equityand debt securities issued by entities that invest in commercial real estate and commercial real estate-related debt investments, (ii) leveraged Agency RMBS, whichmay include Agency ARMs, Agency fixed-rate and Agency IOs and (iii) the opportunistic acquisition of other types of mortgage-related and financial assets thatmeet our investment criteria.Prior to deploying capital to any of our targeted asset classes or determining to dispose of any of our investments, our management team will consider,among other things, the amount and nature of anticipated cash flows from the asset, our ability to finance or borrow against the asset and the terms of suchfinancing, the related capital requirements, the credit risk related to the asset or the underlying collateral and future general market conditions. Consistent with ourstrategy to produce returns through a combination of net interest margin and net realized capital gains, we will seek, from time to time, to sell certain assets withinour portfolio when we believe the combination of realized gains on an asset and reinvestment potential for the related sale proceeds are consistent with our long-term return objectives.Our investment strategy does not, subject to our continued compliance with applicable REIT tax requirements and the maintenance of our exclusion fromthe Investment Company Act of 1940, as amended (the “Investment Company Act”), limit the amount of our capital that may be invested in any of theseinvestments or in any particular class or type of assets. Thus, our future investments may include asset types different from the targeted or other assets described inthis Annual Report. The investment and capital allocation decisions of our company and our external managers depend on prevailing market conditions, amongother factors, and may change over time in response to opportunities available in different economic and capital market environments. As a result, we cannotpredict the percentage of our capital that will be invested in any particular investment at any given time.For more information regarding our portfolio as of December 31, 2015 , see Item 7 - “Management’s Discussion and Analysis of Financial Condition andResults of Operations” below.Investments in Credit Residential AssetsWe seek to identify credit sensitive assets, primarily relating to residential housing, including multi-family housing, from which we can extract valuethrough a combination of current yield and/or capital appreciation. Our portfolio of credit residential assets is currently comprised of residential mortgage loans,including distressed residential loans and second mortgage loans, multi-family CMBS, mezzanine loans to and preferred equity investments in owners of multi-family properties and equity and debt securities issued by entities that invest in residential and commercial real estate and commercial real estate-related debtinvestments. Our portfolio also includes distressed residential mortgage loans held in securitization trusts and prime ARM loans held in securitization trusts (whichwe refer to as residential securitized loans).5During the years ended December 31, 2015 and 2014, we acquired multiple pools of distressed residential mortgage loans having an estimated aggregatemarket value of approximately $152.2 million and $400.9 million , respectively, at the time of their respective acquisitions. These distressed residential mortgageloans consist of performing and re-performing, fixed- and adjustable-rate, fully-amortizing, interest-only and balloon, seasoned mortgage loans secured by firstliens on one- to four-family properties. The loans were purchased at a discount to the aggregate principal amount outstanding, which we believe will provide uswith adequate credit protection and an opportunity to modify and sell the loan and achieve an attractive yield. Our distressed residential mortgage loans are sourcedand managed by Headlands. During the third quarter of 2015, we announced the expansion of our credit residential strategy through investments in targeted newly originated secondlien mortgages, or "second mortgages". Pursuant to our second mortgage program, we have established relationships with mortgage originators that will underwritethe second mortgages to guidelines established by us. These guidelines should lead to the origination of a mortgage that will be a qualified mortgage as defined bythe Consumer Finance Protection Bureau. We intend to purchase from these originators the closed second mortgages that meet our underwriting guidelines andhave gone through our due diligence procedures. We intend to continue to accumulate second mortgage loans pursuant to flow sale and purchase agreements withour current partners and we intend to pursue new relationships with additional partners in the future. We believe this program will provide us with an attractiveway to expand our portfolio with credit assets that should generate attractive risk- adjusted returns by targeting higher credit-quality borrowers that we believe arecurrently underserved by large financial institutions.Our portfolio of multi-family CMBS is comprised of (i) fixed rate PO securities issued from the first loss tranche, or “first loss,” of certain multi-familyK-series securitizations sponsored by Freddie Mac and (ii) certain IO securities issued by these securitizations. Our investments in these privately placed first lossPO securities generally represent approximately 7.5% of the overall securitization which typically totals approximately $1.0 billion in multi-family residentialloans consisting of 70 to 100 individual properties diversified across a wide geographic footprint. These first loss securities are typically backed by balloon non-recourse mortgage loans that provide for the payment of principal at maturity date, which is typically seven to ten years. Moreover, each first loss tranche of multi-family CMBS in our portfolio is, in most cases, the most junior tranche of security issued by the securitization, meaning it will absorb all losses in thesecuritization prior to other more senior tranches being exposed to loss. As a result, each of the first loss securities in our portfolio has been purchased, uponcompletion of a credit analysis and due diligence by our external manager and after consultation with and approval of our senior management, at a significantdiscount to its then-current par value, which we believe provides us with adequate protection against projected losses. In addition, as the owner of the first losstranche, the Company, through RiverBanc, has the right to participate in the workout of any distressed property in the securitization. We believe this right willallow the Company to mitigate or reduce any possible loss associated with the distressed property. The Company also invests in IO securities from a number of thesame multi-family securitizations from which we acquired our first loss PO investments. These IO securities are stripped off the entire securitization allowing theCompany to receive cashflows over the life of the multi-family loans backing the securitization. These investments range from 10 to 17 basis points and theunderlying notional amount approximates $1.0 billion each. We may in the future invest in more senior tranches of multi-family CMBS, which may include someform of leverage, if we believe the risk-adjusted returns for such assets are attractive. In addition, we may acquire multi-family CMBS from private originators of,or investors in, mortgage loans, including non-financial institutions and other entities. With respect to the multi-family CMBS owned by us, all of the loans thatback the respective securitizations have been underwritten in accordance with Freddie Mac underwriting guidelines and standards; however, the multi-familysecurities we own are not guaranteed by Freddie Mac.We invest in other commercial real estate-related investments, such as the origination or acquisition of mezzanine loans to and preferred equityinvestments in owners of multi-family properties, with a primary focus on conventional apartments, cooperative housing associations, student housing and otherrelated property types in increments as low as $1 million secured by properties valued at $10 million or greater. A mezzanine loan is a loan made to a propertyowner that is subordinate to mortgage debt and is typically secured by a pledge of the borrower’s ownership interests in the property and/or direct or indirectentities that own the property. A preferred equity investment typically takes the form of an equity investment in the special purpose entity (“SPE”) that owns theproperty and is structured such that the preferred equity investor will receive cash distributions from the SPE in seniority to a more junior class of equity. Thesepreferred equity interests may be subordinate to other forms of mortgage or property-level debt. We also may participate in structured investments such as theacquisition of seasoned or distressed commercial loan portfolios.We also invest in equity and debt securities of entities that invest in residential and commercial real estate and commercial real estate-related debtinvestments focused on multi-family properties. For example, as of December 31, 2015, we own a $56.9 million investment in RB Multifamily Investors LLC(“RBMI”), a fund that is managed by RiverBanc and owns preferred equity and joint venture investments in, and mezzanine loans secured by, an aggregate of tenmulti-family apartment properties. Included in our total investment in RBMI are preferred equity interests amounting to approximately $41.5 million as ofDecember 31, 2015, with the balance represented by common equity interests.6The prime ARM loans held in securitization trusts, which we refer to as “residential mortgage loans held in securitization trusts” in our consolidatedfinancial statements, are loans that primarily were originated by our discontinued mortgage lending business, and to a lesser extent purchased from third parties,that we securitized in 2005. These loans are substantially prime, full documentation, hybrid ARMs on residential properties and are all first lien mortgages. Wemaintain the ownership trust certificates, or equity, of these securitizations, which includes rights to excess interest, if any, and also take an active role in managingdelinquencies and default risk related to the loans.Investments in Agency RMBSOur Agency RMBS consist of Agency ARMs, Agency fixed-rate RMBS and Agency IOs. Our Agency ARMs and Agency fixed-rate RMBS portfoliosare managed by us, our Agency IO portfolio is managed by Midway. Our Agency ARMs consist of pass-through certificates, the principal and interest of which areguaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, and are backed by ARMs or hybrid ARMs. Our current portfolio of Agency ARMs has interest resetperiods ranging from 30 years to less than three months.Our Agency fixed-rate RMBS portfolio consists of pass-through certificates, the principal and interest of which are guaranteed by Fannie Mae, FreddieMac or Ginnie Mae, which are primarily backed by 15-year residential fixed rate mortgage loans with lesser amounts invested in 20-year residential fixed-ratemortgage loans. The majority of these securities have coupons ranging from 2.5% to 3.5%.Agency IOs are securities that represent the right to receive the interest portion of the cash flow from a pool of mortgage loans issued or guaranteed byFannie Mae, Freddie Mac or Ginnie Mae. Agency IOs allow us to make a direct investment in borrower prepayment trends; however, Agency IOs introduceincreased risk due to price sensitivity as these securities have no underlying principal cash flows, which will cause them to underperform in high prepaymentenvironments as future interest payments will be reduced as a direct result of prepayments. In a rising interest rate environment, the value of an Agency IOgenerally tends to increase as their expected average life increases and prepayments decrease. Our investments in Agency IOs and related hedging and borrowingactivities are managed by Midway. We sometimes refer to these investments and related hedging and borrowing activities as our Agency IO strategy or ourAgency IO portfolio.It should be noted that the guarantee provided by the GSEs on Agency RMBS issued by them does not protect us from prepayment risk. In addition, ourAgency RMBS (including Agency IOs) are at risk to new or modified government-sponsored homeowner stimulus programs that may induce unpredictable andexcessively high prepayment speeds resulting in accelerated premium amortization and reduced net interest margin, both of which could materially adversely affectour business, financial condition and results of operations.Our Financing StrategyWe strive to maintain and achieve a balanced and diverse funding mix to finance our assets and operations. To achieve this, we rely primarily on acombination of short-term and longer-term repurchase agreement borrowings and structured financings, including securitized debt, CDOs and long termsubordinated debt. The Company's policy for leverage is based on the type of asset, underlying collateral and overall market conditions, with the intent of obtainingmore permanent, longer-term financing for our more illiquid assets, such as our credit sensitive first loss tranche multi-family CMBS and distressed residentialloans. Currently, we target maximum leverage ratios for callable or short-term financings of 8 to 1, in the case of Agency RMBS (other than Agency IOs), and 2 to1, in the case of Agency IOs. We may utilize short term financing on other asset classes with leverage ratios driven by the nature of the underlying asset as well ascurrent market conditions.As of December 31, 2015 , our overall leverage ratio, including our short-term financings, such as repurchase agreements, and longer-term financings,such as securitized debt and subordinated debt (excluding the CDOs issued by the Consolidated K-Series and our residential CDOs), divided by stockholders’equity, was approximately 1.1 to 1. Our leverage ratio on our short term financings or callable debt was approximately 0.9 to 1. In each case, there may beoccasional short-term increases or decreases in the amount of leverage used due to significant market events, and we may change our leverage strategy at any time.We monitor all at risk or short term borrowings to ensure that we have adequate liquidity to satisfy margin calls and liquidity covenant requirements.7We primarily rely on short-term repurchase agreements to fund our Agency RMBS portfolio. These repurchase agreements provide us with short-termborrowings (typically 30 days) that bear interest rates that are linked to the London Interbank Offered Rate (“LIBOR”), a short term market interest rate used todetermine short term loan rates. Pursuant to these repurchase agreements, the financial institution that serves as a counterparty will generally agree to provide uswith financing based on the market value of the securities that we pledge as collateral, less a “haircut.” The market value of the collateral represents the price ofsuch collateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income. Our repurchase agreementsmay require us to deposit additional collateral pursuant to a margin call if the market value of our pledged collateral declines as a result of market conditions or dueto principal repayments on the mortgages underlying our pledged securities. Interest rates and haircuts will depend on the underlying collateral pledged.With respect to our investments in multi-family CMBS, other commercial mortgage debt-related investments and distressed residential loans, we financeour investment in these assets through working capital and, subject to market conditions, both short-term and long-term borrowings. Our financings may includerepurchase agreement borrowings with terms of one year or less, or longer term structured debt financing, such as longer-term repurchase agreement financing andsecuritized debt where the assets we intend to finance are contributed to an SPE and serve as collateral for the financing. We engage in longer-term financings forthe primary purpose of obtaining longer-term non-recourse financing on these assets. As of December 31, 2015 , our multi-family CMBS amounting toapproximately $265.0 million and distressed residential mortgage loans amounting to approximately $421.2 million are financed by some form of repurchaseagreement borrowing or securitized debt.Pursuant to the terms of our long-term debt financings, our ability to access the cash flows generated by the assets serving as collateral for theseborrowings may be significantly limited and we may be unable to sell or otherwise transfer or dispose of or modify such assets until the financing has matured. Aspart of each of our securitized debt financings and longer-term master repurchase agreements we are currently party to, we have provided a guarantee with respectto certain terms of some of these longer-term borrowings incurred by certain of our subsidiaries and we may provide similar guarantees in connection with futurefinancings.We finance our prime ARM loans held in securitization trusts with approximately $116.7 million of residential CDOs as of December 31, 2015 . Theseresidential CDOs were issued in securitization transactions we completed in 2005.For more information regarding our outstanding borrowings and debt instruments at December 31, 2015 , see Item 7 - “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” of this Annual Report.Our Hedging Strategy The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rateswaps, swaptions, futures, put and call options on futures and mortgage derivatives such as forward-settling purchases and sales of Agency RMBS where theunderlying pools of mortgage loans are “To-Be-Announced,” or TBAs.In connection with our investment in Agency IOs, we utilize several types of derivative instruments such as interest rate swaps, futures, put and calloptions on futures and TBAs to hedge interest rate risk and spread risk. For example, we utilize TBAs to hedge the interest rate and spread risk inherent in ourAgency fixed rate RMBS, including certain of our Agency IOs that are backed by Agency fixed rate RMBS. In a TBA transaction, we would agree to purchase orsell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to bedelivered is not identified until shortly before the TBA settlement date. The Company typically does not take delivery of TBAs, but rather settles with its tradingcounterparties on a net basis prior to the forward settlement date. By utilizing TBA transactions, we attempt to reduce changes in portfolio values due to changes ininterest rates. Although TBAs are liquid and have quoted market prices and represent the most actively traded class of RMBS, the use of TBAs exposes us toincreased market value risk. We typically conduct TBA and other interest rate futures hedging transactions through one of our TRSs.We also use interest rate swaps (separately from the interest rate swaps we use in connection with our Agency IO portfolio) to hedge variable cash flowsassociated with borrowings made under our financing arrangements and Residential CDOs. We typically pay a fixed rate and receive a floating rate based on onemonth LIBOR, on the notional amount of the interest rate swaps. The floating rate we receive under our swap agreements has the effect of offsetting the repricingcharacteristics and cash flows of our financing arrangements.8In connection with our hedging strategy, we, together with our external managers, utilize a model based risk analysis system to assist in projectingportfolio performances over a variety of different interest rates and market scenarios, such as shifts in interest rates, changes in prepayments and other factorsimpacting the valuations of our assets and liabilities. However, given the uncertainties related to prepayment rates, it is not possible to perfectly lock-in a spreadbetween the earnings asset yield and the related cost of borrowings. Moreover, the cash flows and market values of certain types of structured Agency RMBS, suchas the IOs we invest in, are more sensitive to prepayment risks than other Agency RMBS. Nonetheless, through active management and the use of evaluative stressscenarios, we believe that we can mitigate a significant amount of both value and earnings volatility.Our External ManagersThe Midway Group, L.P.A portion of our Agency RMBS portfolio comprised of Agency IOs is externally managed and advised by Midway pursuant to an investmentmanagement agreement between Midway and us (as amended, the “Midway Management Agreement”). Midway was founded in 2000 by Mr. Robert Sherak, amortgage industry veteran with more than 25 years’ experience, to serve as investment manager to the Midway Market Neutral Fund LLC, a private investmentfund. Midway has been managing a hedged portfolio of mortgage-related securities for over 15 years.Midway is responsible for administering the business activities and day-to-day operations of our investments in Agency IOs, and certain derivativeinstruments. These responsibilities include arranging and coordinating the purchase and sale of various investment assets and the financing and hedging associatedwith such assets, with direct oversight from our management team. Midway also may invest from time to time in, among other things, Agency RMBS consisting ofpass-through certificates, CMOs, and POs and non-agency RMBS (which may include IOs and POs). As part of its investment process, we expect that Midway willanalyze significant amounts of data regarding the historical performance of mortgage-related securities transactions and collateral over various market cycles.Midway has established portfolio management resources for the investment assets described above and an established infrastructure supporting thoseresources. We believe that we benefit from Midway’s highly analytical investment processes, broad-based deal flow, extensive relationships in the financialcommunity and operational expertise. Moreover, since its founding, we believe Midway has developed strong relationships with a wide range of dealers and othermarket participants that provide Midway access to a broad range of trading opportunities and market information.As of December 31, 2015 , we had allocated approximately $108.3 million of capital to investments managed by Midway.The Midway Management AgreementWe entered into an investment management agreement with Midway on February 11, 2011, as amended on March 9, 2012 and April 1, 2014. TheMidway Management Agreement currently operates under a one-year term that is automatically renewed for successive one-year terms unless a termination noticeis delivered by either party to the other party at least six months prior to the end of the then current term. Pursuant to the Midway Management Agreement,Midway implements our Agency IO investment strategy and related hedging and borrowing activities and has complete discretion and authority to manage theseassets and related hedging and borrowing activities, subject to compliance with the written investment guidelines included in the Midway Management Agreementand the other terms and conditions of the Midway Management Agreement, including our authority to direct Midway to modify its investment strategy forpurposes of maintaining our qualification as a REIT and exemption from the Investment Company Act.9Pursuant to the terms of the Midway Management Agreement, Midway receives a base management fee payable monthly in arrears in a cash amountequal to (i) 1.50% per annum of our invested capital in the assets managed by Midway as of the last business day of the previous month, multiplied by (ii) 1/12th.In addition, Midway is entitled to a quarterly incentive fee (the "Midway Incentive Fee") that is calculated quarterly and paid quarterly in arrears. The MidwayIncentive Fee is subject to a high water mark equal to an 11% return on our invested capital in assets managed by Midway (the “High Water Mark”), and is payablein an amount equal to the excess, if any, of 35% of the dollar amount by which adjusted net income (as defined below) attributable to the assets managed byMidway, on a quarterly basis and before accounting for the Midway Incentive Fee, exceeds an annual 12.5% rate of return on invested capital (the “Hurdle Rate”),after adjusting for any carried over shortfall from previous quarters. The return rate for each quarter (the “Calculation Period”) is determined by dividing (i) theadjusted net income for the Calculation Period by (ii) the weighted average of our invested capital in assets managed by Midway during the CalculationPeriod. Upon mutual agreement of the parties to the Midway Management Agreement, a portion of each Midway Incentive Fee payable to Midway may be paid inshares of our common stock. For the purpose of the Midway Management Agreement, adjusted net income is defined as net income (loss) calculated in accordancewith generally accepted accounting principles in the United States (“GAAP”), including any unrealized gains and losses, after giving effect to certain expenses. Allsecurities managed for us by Midway are valued in accordance with GAAP. Unlike the Hurdle Rate, which is calculated on a three month basis, the High WaterMark is calculated on a calendar 12 month basis and resets every 24 months. The High Water Mark is a static dollar figure that Midway is required to recoup, tothe extent there is a deficit in the prior High Water Mark calculation period, before it is eligible again to receive a Midway Incentive Fee.In addition to the base management and incentive fees provided for in the Midway Management Agreement, we issued 213,980 shares of restricted stockto Midway in March 2012 that vested annually in one-third increments beginning on December 31, 2012. All of the restricted shares issued to Midway had vestedin full as of December 31, 2014. We also reimburse Midway for all transaction costs and expenses incurred in connection with the management and administrationof the assets and liabilities that they manage on our behalf.Although the assets and invested capital managed by Midway are held in an account that is wholly owned by our company, we may only redeem investedcapital in an amount equal to the lesser of 10% of our invested capital managed by Midway or $10 million as of the last calendar day of the month upon not lessthan 75 days written notice, subject to our authority to direct Midway to modify its investment strategy for purposes of maintaining our qualification as a REIT andexemption from the Investment Company Act. Pursuant to the terms of the Midway Management Agreement, we are only permitted to make one such redemptionrequest in any 75-day period. RiverBanc LLC In April 2011, we formed a relationship with RiverBanc, a privately owned investment management and specialty finance company founded by KevinDonlon, for the purpose of investing in multi-family CMBS, such as Freddie Mac Multifamily Loan Securitization K-Series’ assets, and other commercial realestate-related debt investments, such as mezzanine loans to and preferred equity investments in owners of multi-family properties. Pursuant to an investmentmanagement agreement between RiverBanc and us. RiverBanc sources, structures and manages our investments in these asset classes. As of December 31, 2015 ,we owned a 20% equity interest in RiverBanc. In addition to the assets that RiverBanc manages directly for us, it also manages RBMI of which the Company owns, as of December 31, 2015 ,approximately 67% of the outstanding common equity interests. Pursuant to a management agreement between RiverBanc and this entity, RiverBanc is entitled toreceive base management and incentive fees for its management of assets owned by RBMI. Our total investment in RBMI, amounts to approximately $56.9 millionas of December 31, 2015 . Included in our total investment in RBMI are preferred equity interests having an aggregate liquidation preference of approximately$41.5 million as of December 31, 2015 .RiverBanc Management Agreement On March 13, 2013, we entered into an amended and restated management agreement with RB Commercial Mortgage LLC, our wholly-ownedsubsidiary, and RiverBanc (the “RiverBanc Management Agreement”). The RiverBanc Management Agreement, which replaces the prior management agreementbetween RiverBanc and RB Commercial Mortgage LLC, has an annual term that is now subject to automatic annual one-year renewals (subject to any notice oftermination).10 Pursuant to the terms of the RiverBanc Management Agreement, RiverBanc will receive a monthly base management fee in arrears in a cash amountequal to the product of (i) 1.50% per annum of “Equity” as of the last business day of the previous month, multiplied by (ii) 1/12th. For purposes of the RiverBancManagement Agreement, Equity is defined as “Assets” minus “Debt,” where Assets is defined as the aggregate net carrying value (in accordance with GAAP) ofthose assets of our company managed by RiverBanc (specifically excluding (i) any unrealized gains or losses that have impacted net carrying value as reported inour financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss or in netincome, and (ii) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case, as mutually agreedbetween RiverBanc and us) and Debt is defined as the greater of (1) the net carrying value (in accordance with GAAP, excluding adjustments for unrealized gainsor losses) of all third-party debt or liabilities secured by the Assets and (2) prior to termination of the RiverBanc Management Agreement, zero, or followingtermination of the RiverBanc Management Agreement, an amount equal to 50% of Assets. In addition, RiverBanc will be entitled to an incentive fee that iscalculated quarterly and paid in cash in arrears. The incentive fee is based upon the average Equity during the fiscal quarter, subject to a high water mark equal to a9% return on Equity, and shall be payable in an amount equal to 35% of the dollar amount by which adjusted net income (as defined in the RiverBanc ManagementAgreement) attributable to the Assets, before accounting for any incentive fees payable to RiverBanc, exceeds an annualized 12% rate of return on such averageEquity (provided, however, that the applicable percentage for calculation of the incentive fee on any incremental return in excess of 21% shall be reduced to 20%from 35%). Any incentive fee paid for the fourth fiscal quarter of each year under the agreement is calculated based on the incentive fee earned during the calendartwelve-month period less the aggregate incentive fees paid for the first three quarters during the period. We may terminate the RiverBanc Management Agreement or elect not to renew the agreement, subject to certain conditions and subject, in certain cases,to paying a termination fee equal to the product of (A) 24 and (B) the monthly base management fee earned by RiverBanc during the month immediately precedingthe month in which the termination occurs. In the event we terminate the RiverBanc Management Agreement for any reason (other than for “cause”), RiverBanchas, subject to certain conditions, a right of first refusal to purchase from us the assets managed by them.Headlands Asset Management LLC We engaged Headlands to manage and advise us with respect to the distressed residential mortgage loans that we acquire. Headlands sources andperforms due-diligence procedures on the pools of distressed residential mortgage loans that we acquire and manages the servicing, modification and finaldisposition or resolution of the loans, which can range from modifying a mortgage loan balance, interest rate or payment to selling the underlying loan or the realestate asset. Headlands was founded on May 2008 as an investment manager focused on purchasing, servicing and managing all aspects of a portfolio of residentialmortgage loans. Headlands Management Agreements Pursuant to the terms of our investment management agreements with Headlands, Headlands receives a monthly base management fee payable on thetenth business day of each month in a cash amount equal to the product of (i) 1.50% per annum of assets under management (“AUM”) as of the first day of eachsuch month, multiplied by (ii) 1/12 th , where AUM represents the net asset value of the mortgage loans being managed by Headlands. In addition, Headlands isentitled to an incentive fee that is calculated quarterly. The incentive fee is based upon the weighted average AUM during the fiscal quarter and is payable in anamount equal to 35% of the dollar amount by which the taxable income (before accounting for any incentive fees earned by Headlands and interest on the notes) ofthe subsidiary that holds the loans exceeds an annualized 12% rate of return on such weighted average AUM (provided, however, that the applicable percentage forcalculation of the incentive fee on any incremental return in excess of 22% shall be reduced by the amount of any subordinate servicing fees). The parties willrecalculate the annual incentive fee earned by Headlands (if any) after the fourth fiscal quarter of each year and will adjust any payments owed or required to beremitted based on such annual calculation. We also pay Headlands a servicing surveillance fee equal to 0.5% of the unpaid principal of the mortgage loans theymanage for us. Headlands may terminate its investment management relationship with us at any time upon not less than 60 days’ notice; provided, however, that, subjectto certain exceptions, it may not terminate or resign as manager prior to the time certain debt issued to finance the mortgage loans managed by them is repaid. Wemay terminate an investment management agreement with Headlands in the event of an uncured violation of the agreement or any bankruptcy, insolvency orliquidation proceedings in respect of Headlands. Neither Headlands nor we will incur a termination fee upon termination of any Headlands investment managementagreement. We have agreed to guarantee the payment of the base management fees and expenses payable to Headlands by our subsidiaries. 11 Conflicts of Interest with Our External Managers; Equitable Allocation of Opportunities Each of Midway, RiverBanc and Headlands manages, and is expected to continue to manage, other client accounts with similar or overlapping investmentstrategies. In connection with the services provided to those accounts, these managers may be compensated more favorably than for the services provided underour external management agreements, and such discrepancies in compensation may affect the level of service provided to us by our external managers. Moreover,each of our external managers may have an economic interest in the accounts they manage or the investments they propose. In addition, we have in the pastengaged in certain co-investment opportunities with an external manager or one of its affiliates and we may participate in future co-investment opportunities withour external managers or their affiliates. In these cases, it is possible that our interests and the interests of our external managers will not always be aligned and thiscould result in decisions that are not in the best interests of our company. Each of Midway and RiverBanc has agreed that, when making investment allocation decisions between us and its other client accounts, it will, in the caseof RiverBanc, allocate investments in a fair and equitable manner and, in the case of Midway, seek to allocate investment opportunities on an equitable basis and ina manner it believes is in the best interests of its relevant accounts. Since certain of our targeted assets are typically available only in specified quantities and sincecertain of these targeted assets will also be targeted assets for other accounts managed by or associated with our external managers, our external managers may notbe able to buy as much of certain assets as required to satisfy the needs of all of its clients’ or associated accounts. In these cases, we understand that the allocationprocedures and policies of our external managers would typically allocate such assets to multiple accounts in proportion to, among other things, the objectives,strategy, and stage of development or needs of each account. Moreover, the investment allocation policies of Midway may permit departure from proportionalallocation when the total allocation would result in an inefficiently small amount of the security being purchased for an account. Although we believe that each ofour external managers will seek to allocate investment opportunities in a manner which it believes to be in the best interests of all accounts involved and will seekto allocate, on an equitable basis, investment opportunities believed to be appropriate for us and the other accounts it manages or is associated with, there can be noassurance that a particular investment opportunity will be allocated in any particular manner.Midway is authorized to follow broad investment guidelines in determining which assets it will invest in. Although our Board of Directors will ultimatelydetermine when and how much capital to allocate to assets managed by Midway, we generally will not approve transactions in advance of their execution. As aresult, because Midway has great latitude to determine the types of assets it may decide are proper investments for us, there can be no assurance that we wouldotherwise approve of these investments individually or that they will be successful. Meanwhile, RiverBanc has complete discretion and authority to manage assetson our behalf subject to investment guidelines approved by our Board of Directors. However, our Board of Directors may elect to change the investment guidelinesor waive them for various investments. In addition to conducting periodic reviews, we will rely primarily on information provided to us by our external managers.Finally, our external managers may use complex investment strategies and may engage in complex transactions on our behalf which may be difficult or impossibleto unwind. Pursuant to the terms of the Midway Management Agreement, we may only redeem invested capital in an amount equal to the lesser of 10% of theinvested capital in assets managed by Midway or $10 million as of the last calendar day of the month upon not less than 75 days written notice, subject to ourauthority to direct Midway to modify its investment strategy for purposes of maintaining our qualification as a REIT and exemption from the Investment CompanyAct, and we are only permitted to make one such redemption request in any 75-day period. In the event of a significant market event or shock, we may be unable toeffect a redemption of invested capital in greater amounts or at a greater rate unless we obtain the consent of Midway. Because a reduction of invested capitalwould reduce the base management fee under the Midway Management Agreement, Midway may be less inclined to consent to such redemptions. None of our external managers is obligated to dedicate any specific personnel exclusively to us, nor are they or their personnel obligated to dedicate anyspecific portion of their time to the management of our business. As a result, we cannot provide any assurances regarding the amount of time our external managerswill dedicate to the management of our business. Moreover, each of our external managers has significant responsibilities for other investment vehicles and maynot always be able to devote sufficient time to the management of our business. Consequently, we may not receive the level of support and assistance that weotherwise might receive if such services were provided internally by us.12Certain Federal Income Tax Considerations and Our Status as a REIT We have elected to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code for federal income tax purposes, commencing with ourtaxable year ended December 31, 2004, and we believe that our current and proposed method of operation will enable us to continue to qualify as a REIT for ourtaxable year ending December 31, 2016 and thereafter. Accordingly, the net interest income we earn on our assets is generally not subject to federal income tax aslong as we distribute at least 90% of our REIT taxable income in the form of a dividend to our stockholders each year and comply with various other requirements.Taxable income generated by TRSs is subject to regular corporate income tax. The benefit of REIT tax status is a tax treatment that avoids “double taxation,” or taxation at both the corporate and stockholder levels, that generallyapplies to distributions by a corporation to its stockholders. Failure to qualify as a REIT would subject us to federal income tax (including any applicable minimumtax) on our taxable income at regular corporate rates and distributions to our stockholders would not be deductible by us.Summary Requirements for QualificationOrganizational Requirements A REIT is a corporation, trust, or association that meets each of the following requirements: 1)It is managed by one or more trustees or directors.2)Its beneficial ownership is evidenced by transferable shares, or by transferable certificates of beneficial interest.3)It would be taxable as a domestic corporation, but for the REIT provisions of the federal income tax laws.4)It is neither a financial institution nor an insurance company subject to special provisions of the federal income tax laws.5)At least 100 persons are beneficial owners of its shares or ownership certificates.6)Not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals,which the federal income tax laws define to include certain entities, during the last half of any taxable year.7)It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrativerequirements established by the IRS that must be met to elect and maintain REIT status.8)It meets certain other qualification tests, described below, regarding the nature of its income and assets.We must meet requirements 1 through 4 during our entire taxable year and must meet requirement 5 during at least 335 days of a taxable year of 12months, or during a proportionate part of a taxable year of less than 12 months.Qualified REIT Subsidiaries . A corporation that is a QRS is not treated as a corporation separate from its parent REIT. All assets, liabilities, and items ofincome, deduction, and credit of a “QRS” are treated as assets, liabilities, and items of income, deduction, and credit of the REIT. A “QRS” is a corporation, all ofthe capital stock of which is owned by the REIT. Thus, in applying the requirements described herein, any “QRS” that we own will be ignored, and all assets,liabilities, and items of income, deduction, and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction, and credit. Taxable REIT Subsidiaries . A REIT is permitted to own up to 100% of the stock of one or more TRSs. A TRS is a fully taxable corporation that may earnincome that would not be qualifying income if earned directly by the parent REIT. Overall, no more than 25% (20% for taxable years beginning after December31, 2017) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. A TRS will pay income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid oraccrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Our TRSs are subject to corporate income tax ontheir taxable income.13 Qualified REIT Assets . On the last day of each calendar quarter, at least 75% of the value of our assets (which includes any assets held through a QRS)must consist of qualified REIT assets — primarily real estate, mortgage loans secured by real estate, and certain mortgage-backed securities (“Qualified REITAssets”), government securities, cash, and cash items. We believe that substantially all of our assets are and will continue to be Qualified REIT Assets. On the lastday of each calendar quarter, of the assets not included in the foregoing 75% asset test, the value of securities that we hold issued by any one issuer may not exceed5% in value of our total assets and we may not own more than 10% of the voting power or value of any one issuer’s outstanding securities (with an exception forsecurities of a QRS or of a TRS). In addition, the aggregate value of our securities in TRSs cannot exceed 25% (20% for taxable years beginning after December31, 2017) of our total assets, and no more than 25% of the value of our total assets may consist of debt instruments of "publicly offered REITs" (i.e., REITs that arerequired to file annual and periodic reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act). We monitor thepurchase and holding of our assets for purposes of the above asset tests and seek to manage our portfolio to comply at all times with such tests. We may from time to time hold, through one or more TRSs, assets that, if we held them directly, could generate income that would have an adverse effecton our qualification as a REIT or on certain classes of our stockholders. Gross Income TestsWe must meet the following separate income-based tests each year:1.The 75% Test. At least 75% of our gross income for the taxable year must be derived from Qualified REIT Assets. Such income includes interest(other than interest based in whole or in part on the income or profits of any person) on obligations secured by mortgages on real property, rentsfrom real property, gains from the sale of Qualified REIT Assets, and qualified temporary investment income or interests in real property. Theinvestments that we have made and intend to continue to make will give rise primarily to mortgage interest qualifying under the 75% incometest.2.The 95% Test. At least 95% of our gross income for the taxable year must be derived from the sources that are qualifying for purposes of the75% test, and from dividends, interest or gains from the sale or disposition of stock or other assets that are not dealer property.Distributions We must distribute to our stockholders on a pro rata basis each year an amount equal to at least (i) 90% of our taxable income before deduction ofdividends paid and excluding net capital gain, plus (ii) 90% of the excess of the net income from foreclosure property over the tax imposed on such income by theInternal Revenue Code, less (iii) any “excess non-cash income.” We have made and intend to continue to make distributions to our stockholders in sufficientamounts to meet the distribution requirement for REIT qualification.CompetitionOur success depends, in large part, on our ability to acquire assets at favorable spreads over our borrowing costs. When we invest in mortgage-backedsecurities, mortgage loans and other investment assets, we compete with other REITs, investment banking firms, savings and loan associations, insurancecompanies, mutual funds, hedge funds, pension funds, banks and other financial institutions and other entities that invest in the same types of assets.Corporate Offices and PersonnelWe were formed as a Maryland corporation in 2003. Our corporate headquarters are located at 275 Madison Avenue, Suite 3200, New York, New York,10016 and our telephone number is (212) 792-0107. As of December 31, 2015 , we employed seven full-time employees.14Access to our Periodic SEC Reports and Other Corporate InformationOur internet website address is www.nymtrust.com. We make available free of charge, through our internet website, our annual report on Form 10-K, ourquarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments thereto that we file or furnish pursuant to Section 13(a) or 15(d) of theExchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Corporate Governance Guidelines andCode of Business Conduct and Ethics and the charters of our Audit, Compensation and Nominating and Corporate Governance Committees are also available onour website and are available in print to any stockholder upon request in writing to New York Mortgage Trust, Inc., c/o Secretary, 275 Madison Avenue, Suite3200, New York, New York, 10016. Information on our website is neither part of, nor incorporated into, this Annual Report on Form 10-K.CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSWhen used in this Annual Report on Form 10-K, in future filings with the SEC or in press releases or other written or oral communications, statementswhich are not historical in nature, including those containing words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,”“would,” “could,” “goal,” “objective,” “will,” “may” or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act, and, as such, may involve known and unknown risks,uncertainties and assumptions.Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all informationcurrently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events orfactors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from thoseexpressed in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-lookingstatements: changes in interest rates and the market value of our securities; changes in credit spreads; the impact of the downgrade of the long-term credit ratings ofthe U.S., Fannie Mae, Freddie Mac, and Ginnie Mae; market volatility; changes in the prepayment rates on the mortgage loans underlying our investmentsecurities; increased rates of default and/or decreased recovery rates on our assets; delays in identifying and acquiring our targeted assets; our ability to borrow tofinance our assets and the terms thereof; changes in governmental laws, regulations, or policies affecting our business; changes to our relationships with ourexternal managers; our ability to maintain our qualification as a REIT for federal tax purposes; our ability to maintain our exemption from registration under theInvestment Company Act; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These andother risks, uncertainties and factors, including the risk factors described in Item 1A – “Risk Factors” elsewhere in this Annual Report on Form 10-K, as updatedby those risks described in our subsequent filings under the Exchange Act, could cause our actual results to differ materially from those projected in any forward-looking statements we make. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time and it isnot possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise.15Item 1A. RISK FACTORSSet forth below are the risks that we believe are material to stockholders and prospective investors. You should carefully consider the following risk factors andthe various other factors identified in or incorporated by reference into any other documents filed by us with the SEC in evaluating our company and ourbusiness. The risks discussed herein can adversely affect our business, liquidity, operating results, prospects, and financial condition. These risks could causethe market price of our securities to decline. The risk factors described below are not the only risks that may affect us. Additional risks and uncertainties notpresently known to us, or not presently deemed material by us, also may adversely affect our business, liquidity, operating results, prospects, and financialcondition.Risks Related to Our Business and Our CompanyDeclines in the market values of assets in our investment portfolio may adversely affect periodic reported results and credit availability, which may reduceearnings and, in turn, cash available for distribution to our stockholders.The market value of the interest-bearing assets in which we invest and any related hedging instruments may move inversely with changes in interest rates.We anticipate that increases in interest rates will generally tend to decrease our net income and the market value of our interest-bearing assets. A significantpercentage of the securities within our investment portfolio are classified for accounting purposes as “available for sale.” Changes in the market values of tradingsecurities will be reflected in earnings and changes in the market values of available for sale securities will be reflected in stockholders’ equity. As a result, adecline in market values of certain of our investment securities may reduce the book value of our assets. Moreover, if the decline in market value of an availablefor sale security is other than temporary, such decline will reduce earnings.A decline in the market value of our interest-bearing assets may adversely affect us, particularly in instances where we have borrowed money based onthe market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan, whichwould reduce our liquidity and limit our ability to leverage our assets. In addition, if we are, or anticipate being, unable to post the additional collateral, we wouldhave to sell the assets at a time when we might not otherwise choose to do so. In the event that we do not have sufficient liquidity to meet such requirements,lending institutions may accelerate indebtedness, increase interest rates and terminate our ability to borrow, any of which could result in a rapid deterioration of ourfinancial condition and cash available for distribution to our stockholders. Moreover, if we liquidate the assets at prices lower than the amortized cost of suchassets, we will incur losses.The market values of our investments may also decline without any general increase in interest rates for a number of reasons, such as increases indefaults, actual or perceived increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, and widening of creditspreads. If the market values of our investments were to decline for any reason, the value of your investment could also decline.Difficult conditions in the mortgage and real estate markets, the financial markets and the economy generally have caused and may cause us to experiencelosses and these conditions may persist for the foreseeable future.Our business is materially affected by conditions in the residential and commercial mortgage markets, the residential and commercial real estate markets,the financial markets and the economy generally. Furthermore, because a significant portion of our current assets and our targeted assets are credit sensitive, webelieve the risks associated with our investments will be more acute during periods of economic slowdown, recession or market dislocations, especially if theseperiods are accompanied by declining real estate values and defaults. In recent years, concerns about the health of the global economy generally and the residentialand commercial mortgage markets specifically, as well as inflation, energy costs, European sovereign debt, U.S. budget debates and geopolitical issues and theavailability and cost of credit have contributed to increased volatility and uncertainty for the economy and financial markets. The residential and commercialmortgage markets were adversely affected by changes in the lending landscape during the financial market crisis of 2008, the severity of which was largelyunanticipated by the markets, and there is no assurance that these markets will not worsen again.16In addition, an economic slowdown, delayed recovery or general disruption in the mortgage markets may result in decreased demand for residential andcommercial property, which would likely further compress homeownership rates and place additional pressure on home price performance, while forcingcommercial property owners to lower rents on properties with excess supply. We believe there is a strong correlation between home price growth rates andmortgage loan delinquencies. Moreover, to the extent that a property owner has fewer tenants or receives lower rents, such property owners will generate less cashflow on their properties, which reduces the value of their property and increases significantly the likelihood that such property owners will default on their debtservice obligations. If the borrowers of our mortgage loans, or the loans underlying certain of our investment securities, default, we may incur material losses onthose loans or investment securities. Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interestincome and our ability to acquire our targeted assets in the future on favorable terms or at all. The further deterioration of the mortgage markets, the residential orcommercial real estate markets, the financial markets and the economy generally may result in a decline in the market value of our investments or cause us toexperience losses related to our assets, which may adversely affect our results of operations, the availability and cost of credit and our ability to make distributionsto our stockholders.An increase in interest rates may cause a decrease in the availability of certain of our targeted assets, which could adversely affect our ability toacquire targeted assets that satisfy our investment objectives and to generate income and pay dividends.Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction in the volume of mortgage loansoriginated may affect the volume of targeted assets available to us, which could adversely affect our ability to acquire assets that satisfy our investment andbusiness objectives. Rising interest rates may also cause our targeted assets that were issued or originated prior to an interest rate increase to provide yields that arebelow prevailing market interest rates. If rising interest rates cause us to be unable to acquire a sufficient volume of our targeted assets with a yield that is aboveour borrowing cost, our ability to satisfy our investment objectives and to generate income and pay dividends may be materially and adversely affected.In addition, the RMBS and residential mortgage loans we invest in may be comprised of ARMs that are subject to periodic and lifetime interest rate caps.Periodic interest rate caps limit the amount an interest rate can increase during any given period. Lifetime interest rate caps limit the amount an interest rate canincrease over the life of the security or loan. Our borrowings typically are not subject to similar restrictions. Accordingly, in a period of rapidly increasing interestrates, the interest rates paid on our borrowings could increase without limitation while interest rate caps could limit the interest rates on the Agency ARMs orresidential mortgage loans comprised of ARMs in our portfolio. This problem is magnified for securities backed by, or residential mortgage loans comprised of,ARMs and hybrid ARMs that are not fully indexed. Further, certain securities backed by, or residential mortgage loans comprised of, ARMs and hybrid ARMsmay be subject to periodic payment caps that result in a portion of the interest being deferred and added to the principal outstanding. As a result, the payments wereceive on Agency ARMs backed by, or residential mortgage loans comprised of, ARMs and hybrid ARMs may be lower than the related debt service costs. Thesefactors could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.Interest rate fluctuations will also cause variances in the yield curve, which may reduce our net income. The relationship between short-term and longer-term interest rates is often referred to as the “yield curve.” If short-term interest rates rise disproportionately relative to longer-term interest rates (a flattening of theyield curve), our borrowing costs may increase more rapidly than the interest income earned on our interest-earning assets. For example, because the AgencyRMBS in our investment portfolio typically bear interest based on longer-term rates while our borrowings typically bear interest based on short-term rates, aflattening of the yield curve would tend to decrease our net income and the market value of these securities. Additionally, to the extent cash flows from investmentsthat return scheduled and unscheduled principal are reinvested, the spread between the yields of the new investments and available borrowing rates may decline,which would likely decrease our net income. It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion), inwhich event our borrowing costs may exceed our interest income and we could incur significant operating losses.Prepayment rates can change, adversely affecting the performance of our assets.The frequency at which prepayments (including both voluntary prepayments by the borrowers and liquidations due to defaults and foreclosures) occur onthe residential mortgage loans we own and those that underlie our RMBS is difficult to predict and is affected by a variety of factors, including the prevailing levelof interest rates as well as economic, demographic, tax, social, legal, legislative and other factors. Generally, borrowers tend to prepay their mortgages whenprevailing mortgage rates fall below the interest rates on their mortgage loans.17In general, “premium” securities (securities whose market values exceed their principal or par amounts) are adversely affected by faster-than-anticipatedprepayments because the above-market coupon that such premium securities carry will be earned for a shorter period of time. Generally, “discount” securities(securities whose principal or par amounts exceed their market values) are adversely affected by slower-than-anticipated prepayments. Since many RMBS will bediscount securities when interest rates are high, and will be premium securities when interest rates are low, these RMBS may be adversely affected by changes inprepayments in any interest rate environment. Although we estimate prepayment rates to determine the effective yield of our assets and valuations, these estimatesare not precise and prepayment rates do not necessarily change in a predictable manner as a function of interest rate changes.The adverse effects of prepayments may impact us in various ways. First, particular investments, such as IOs, may experience outright losses in anenvironment of faster actual or anticipated prepayments. Second, particular investments may under-perform relative to any hedges that we may have constructedfor these assets, resulting in a loss to us. In particular, prepayments (at par) may limit the potential upside of many RMBS to their principal or par amounts,whereas their corresponding hedges often have the potential for unlimited loss. Furthermore, to the extent that faster prepayment rates are due to lower interestrates, the principal payments received from prepayments will tend to be reinvested in lower-yielding assets, which may reduce our income in the long run.Therefore, if actual prepayment rates differ from anticipated prepayment rates, our business, financial condition and results of operations and ability to makedistributions to our stockholders could be materially adversely affected.Some of the commercial real estate loans we may originate or invest in may allow the borrower to make prepayments without incurring a prepaymentpenalty and some may include provisions allowing the borrower to extend the term of the loan beyond the originally scheduled maturity. Because the decision toprepay or extend a commercial loan is typically controlled by the borrower, we may not accurately anticipate the timing of these events, which could affect theearnings and cash flows we anticipate and could impact our ability to finance these assets.Increased levels of prepayments on the mortgages underlying structured mortgage-backed securities, particularly IOs, might decrease net interest income orresult in a net loss, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to ourstockholders.When we acquire structured mortgage-backed securities, such as IOs, we anticipate that the underlying mortgages will prepay at a projected rate,generating an expected yield. When the prepayment rates on the mortgages underlying these securities are higher than expected, our returns on those securities maybe materially adversely affected. For example, the value of our Agency IOs is extremely sensitive to prepayments because holders of these securities do not havethe right to receive any principal payments on the underlying mortgages. As a result, increased levels of prepayments on our Agency IOs will negatively impactour net interest income and may result in a loss.Interest rate mismatches between the interest-earning assets held in our investment portfolio and the borrowings used to fund the purchases of those assetsmay reduce our net income or result in a loss during periods of changing interest rates.Certain of the assets held in our investment portfolio have a fixed coupon rate, generally for a significant period, and in some cases, for the averagematurity of the asset. At the same time, our repurchase agreements and certain other borrowings typically provide for a payment reset period of 30 days or less. Inaddition, the average maturity of our borrowings generally will be shorter than the average maturity of the assets currently in our portfolio and certain othertargeted assets in which we seek to invest. Historically, we have used swap agreements as a means for attempting to fix the cost of certain of our liabilities over aperiod of time; however, these agreements will generally not be sufficient to match the cost of all our liabilities against all of our investments. In the event weexperience unexpectedly high or low prepayment rates on RMBS or other mortgage-related assets, our strategy for matching our assets with our liabilities is morelikely to be unsuccessful which may result in reduced earnings or losses and reduced cash available for distribution to our stockholders.Our investments include high yield or subordinated and lower rated securities that have greater risks of loss than other investments, which could adverselyaffect our business, financial condition and cash available for dividends.We own and seek to acquire higher yielding or subordinated or lower rated securities, including subordinated tranches of CMBS or non-Agency RMBS,which involve a higher degree of risk than other investments. Numerous factors may affect a company’s ability to repay its high yield or subordinated securities,including the failure to meet its business plan, a downturn in its industry or negative economic conditions. These assets may not be secured by mortgages or lienson assets. Our right to payment and security interest with respect to such assets may be subordinated to the payment rights and security interests of the seniorlender. Therefore, we may be limited in our ability to enforce our rights to collect on these assets through a foreclosure of collateral.18The commercial mortgage loans we may originate or acquire and the mortgage loans underlying our CMBS investments are subject to the ability of thecommercial property owner to generate net income from operating the property as well as the risks of delinquency and foreclosure.Commercial mortgage loans are secured by multi-family or commercial property and are subject to risks of delinquency and foreclosure, and risk of lossthat may be greater than similar risks associated with loans made on the security of single-family residential property. The ability of a borrower to repay a loansecured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence ofindependent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired. Netoperating income of an income-producing property can be adversely affected by, among other things:•tenant mix;•success of tenant businesses;•property management decisions;•property location, condition, and design;•new construction of competitive properties;•changes in laws that increase operating expenses or limit rents that may be charged;•changes in national, regional or local economic conditions and/or specific industry segments, including the labor, credit and securitization markets;•declines in regional or local real estate values;•declines in regional or local rental or occupancy rates;•increases in interest rates, real estate tax rates, and other operating expenses;•costs of remediation and liabilities associated with environmental conditions;•the potential for uninsured or underinsured property losses;•changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs ofcompliance; and•acts of God, terrorist attacks, social unrest, and civil disturbances.In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss to the extent of any deficiency between the value of thecollateral and the outstanding principal and accrued interest of the mortgage loan, and any such losses could have a material adverse effect on our cash flow fromoperations and our ability to make distributions to our stockholders. Similarly, the CMBS we own will be adversely affected by a default on any of the loans thatunderly those securities. See "—We invest in CMBS that are subordinate to more senior securities issued by the applicable securitization, which entails certainrisks."In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of thevalue of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to theavoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can bean expensive and lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan.19The preferred equity investments or mezzanine loan assets that we may acquire or originate will involve greater risks of loss than senior loans secured byincome-producing properties.We may acquire or originate mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property orloans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns theinterest in the entity owning the property. We also may make preferred equity investments in the entity that owns the property. These types of assets involve ahigher degree of risk than long-term senior mortgage lending secured by income-producing real property, because the loan may become unsecured or our equityinvestment may be effectively extinguished as a result of foreclosure by the senior lender. In addition, mezzanine loans and preferred equity investments are oftenused to achieve a very high leverage on large commercial projects, resulting in less equity in the property and increasing the risk of loss of principal or investment.If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan or preferred equityinvestment will be satisfied only after the senior debt, in case of a mezzanine loan, or all senior and subordinated debt, in case of a preferred equity investment, ispaid in full. Where senior debt exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, acceptprepayments, exercise our remedies or control decisions made in bankruptcy proceedings relating to borrowers or preferred equity investors. As a result, we maynot recover some or all of our investment, which could result in significant losses.To the extent that due diligence is conducted on potential assets, such due diligence may not reveal all of the risks associated with such assets and may notreveal other weaknesses in such assets, which could lead to losses.Before acquiring certain assets, such as whole mortgage loans, CMBS or other mortgage-related or other fixed income assets, we or the external managerresponsible for the acquisition and management of such asset may decide to conduct (either directly or using third parties) certain due diligence. Such due diligencemay include (i) an assessment of the strengths and weaknesses of the asset’s credit profile, (ii) a review of all or merely a subset of the documentation related to theasset, or (iii) other reviews that we or the external manager may deem appropriate to conduct. There can be no assurance that we or the external manager willconduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts or that any purchase will besuccessful, which could result in losses on these assets, which, in turn, could adversely affect our business, financial condition and results of operations and ourability to make distributions to our stockholders.Our real estate assets are subject to risks particular to real property.We own real estate and assets secured by real estate, and may in the future acquire more real estate, either through direct or indirect investments or upona default of mortgage loans. Real estate assets are subject to various risks, including:•acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses;•acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;•adverse changes in national and local economic and market conditions; and•changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations,fiscal policies and ordinances.The occurrence of any of the foregoing or similar events may reduce our return from an affected property or asset and, consequently, materially adverselyaffect our business, financial condition and results of operations and our ability to make distributions to our stockholders.20The lack of liquidity in certain of our assets may adversely affect our business.A portion of the securities or loans we own or acquire may be subject to legal, contractual and other restrictions on resale or will otherwise be less liquidthan publicly-traded securities. For example, a portion of our multi-family CMBS is held in a securitization trust and may not be sold or transferred until the noteissued by the securitization trust matures or is repaid. Similarly, any transfer of our investment in the equity and debt securities of an entity externally managed byRiverBanc requires prior consent of the Board and certain preferred equity holders in that entity. The illiquidity of certain of our assets may make it difficult for usto sell such assets if the need or desire arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly lessthan the value at which we have previously recorded our assets. As a result, our ability to vary our portfolio in response to changes in economic and otherconditions may be relatively limited, which could adversely affect our results of operations and financial condition.Our Level 2 portfolio investments are recorded at fair value based on market quotations from pricing services and brokers/dealers. Our Level 3 investments arerecorded at fair value utilizing internal valuation models. The value of our common stock could be adversely affected if our determinations regarding the fairvalue of these investments were materially higher than the values that we ultimately realize upon their disposal.All of our current portfolio investments are, and some of our future portfolio investments will be, in the form of securities or other investments that arenot publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We currently value and willcontinue to value these investments on a quarterly-basis at fair value as determined by our management based on market quotations from pricing services andbrokers/dealers and/or internal valuation models. Because such quotations and valuations are inherently uncertain, they may fluctuate over short periods of timeand are based on estimates, our determinations of fair value may differ materially from the values that would have been used if a public market for these securitiesexisted. The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments were materially higher thanthe values that we ultimately realize upon their disposal.Our adoption of fair value option accounting could result in income statement volatility, which in turn, could cause significant market price and tradingvolume fluctuations for our securities.We have determined that certain securitization trusts that issued certain of our multi-family CMBS or securitized debt are VIEs of which we are theprimary beneficiary, and elected the fair value option on the assets and liabilities held within those securitization trusts. As a result, we are required to consolidatethe underlying multi-family loan or securities, as applicable, related debt, interest income and interest expense of those securitization trusts in our financialstatements, although our actual investments in these securitization trusts generally represent a small percentage of the total assets of the trusts. Prior to the yearended December 31, 2012, we historically accounted for the multi-family CMBS in our investment portfolio through accumulated other comprehensive income,pursuant to which unrealized gains and losses on those multi-family CMBS were reflected as an adjustment to stockholders’ equity. However, the fair value optionrequires that changes in valuations in the assets and liabilities of those VIEs of which we are the primary beneficiary, such as the Consolidated K-Series, bereflected through our earnings. As we acquire additional multi-family CMBS assets in the future that are similar in structure and form to the Consolidated K-Series’ assets or securitize investment securities owned by us, we may be required to consolidate the assets and liabilities of the issuing or securitization trust andwould expect to elect the fair value option for those assets. Because of this, our earnings may experience greater volatility in the future as a decline in the fair valueof the assets of any VIE that we consolidate in our financial statements could reduce both our earnings and stockholders' equity, which in turn, could causesignificant market price and trading volume fluctuations for our securities.Competition may prevent us from acquiring assets on favorable terms or at all, which could have a material adverse effect on our business, financial conditionand results of operations.We operate in a highly competitive market for investment opportunities. Our net income largely depends on our ability to acquire our targeted assets atfavorable spreads over our borrowing costs. In acquiring our targeted assets, we compete with other REITs, investment banking firms, savings and loanassociations, banks, insurance companies, mutual funds, other lenders and other entities that purchase mortgage-related assets, many of which have greaterfinancial resources than us. Additionally, many of our potential competitors are not subject to REIT tax compliance or required to maintain an exclusion from theInvestment Company Act. As a result, we may not in the future be able to acquire sufficient quantities of our targeted assets at favorable spreads over ourborrowing costs, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to ourstockholders.21We may change our investment strategy, hedging strategy and asset allocation and operational and management policies without stockholder consent, whichmay result in the purchase of riskier assets and materially adversely affect our business, financial condition and results of operations and our ability to makedistributions to our stockholders.We may change our investment strategy, hedging strategy and asset allocation and operational and management policies at any time without the consentof our stockholders, which could result in our purchasing assets or entering into hedging transactions that are different from, and possibly riskier than, the assetsand hedging transactions described in this report. A change in our investment strategy or hedging strategy may increase our exposure to real estate values, interestrates, prepayment rates, credit risk and other factors. A change in our asset allocation could result in us purchasing assets in classes different from those describedin this report. Our Board of Directors determines our operational policies and may amend or revise our policies, including those with respect to our acquisitions,growth, operations, indebtedness, capitalization and distributions or approve transactions that deviate from these policies without a vote of, or notice to, ourstockholders. In addition, certain of our external managers have great latitude in making investment and hedging decisions on our behalf. Changes in ourinvestment strategy, hedging strategy and asset allocation and operational and management policies could materially adversely affect our business, financialcondition and results of operations and ability to make distributions to our stockholders.Lack of diversification in the number of assets we acquire would increase our dependence on relatively few individual assets.Our management objectives and policies do not place a limit on the size or the amount of capital used to support, or the exposure to (by any othermeasure), any individual asset or any group of assets with similar characteristics or risks. In addition, because we are a relatively small company, we may beunable to sufficiently deploy capital into a number of assets or asset groups. As a result, our portfolio may be concentrated in a small number of assets or may beotherwise undiversified, increasing the risk of loss and the magnitude of potential losses to us and our stockholders if one or more of these assets perform poorly.In connection with our operating and investment activity, we rely on third-party service providers, including our external managers, to perform a variety ofservices, comply with applicable laws and regulations, and carry out contractual covenants and terms, the failure of which by any of these third-party serviceproviders may adversely impact our business and financial results.In connection with our business of acquiring and holding loans, engaging in securitization transactions, and investing in third-party issued securities, werely on third-party service providers, including our external managers, to perform a variety of services, comply with applicable laws and regulations, and carry outcontractual covenants and terms. For example, we rely on the mortgage servicers who service the mortgage loans we purchase as well as the mortgage loansunderlying our CMBS to, among other things, collect principal and interest payments on such mortgage loans and perform loss mitigation services. In addition,legislation that has been enacted or that may be enacted in order to reduce or prevent foreclosures through, among other things, loan modifications may reduce thevalue of mortgage loans backing our CMBS or mortgage loans that we acquire. Mortgage servicers may be incentivized by the U.S. Government to pursue suchloan modifications, as well as forbearance plans and other actions intended to prevent foreclosure, even if such loan modifications and other actions are not in thebest interests of the beneficial owners of the mortgage loans. Mortgage servicers and other service providers, such as our external managers, trustees, bondinsurance providers, due diligence vendors and document custodians, may fail to perform or otherwise not perform in a manner that promotes our interests. As aresult, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors,miscalculations, or insolvency.22We may be affected by deficiencies in foreclosure practices of third parties, as well as related delays in the foreclosure process.One of the biggest risks overhanging the RMBS market has been uncertainty around the timing and ability of servicers to foreclose on defaulted loans, sothat they can liquidate the underlying properties and ultimately pass the liquidation proceeds through to RMBS holders. Given the magnitude of the recent housingcrisis, and in response to the well-publicized failures of many servicers to follow proper foreclosure procedures (such as involving "robo-signing"), mortgageservicers are being held to much higher foreclosure-related documentation standards than they previously were. However, because many mortgages have beentransferred and assigned multiple times (and by means of varying assignment procedures) throughout the origination, warehouse, and securitization processes,mortgage servicers are generally having much more difficulty furnishing the requisite documentation to initiate or complete foreclosures. This leads to stalled orsuspended foreclosure proceedings, and ultimately additional foreclosure-related costs. Foreclosure-related delays also tend to increase ultimate loan loss severitiesas a result of property deterioration, amplified legal and other costs, and other factors. Many factors delaying foreclosure, such as borrower lawsuits and judicialbacklog and scrutiny, are outside of a servicer's control and have delayed, and will likely continue to delay, foreclosure processing in both judicial states (whereforeclosures require court involvement) and non-judicial states. The extension of foreclosure timelines also increases the inventory backlog of distressed homes onthe market and creates greater uncertainty about housing prices. The concerns about deficiencies in foreclosure practices of servicers and related delays in theforeclosure process may impact our loss assumptions and affect the values of, and our returns on, our investments in RMBS and residential mortgage loans.Our results of operations may be affected by the value of equity securities we hold for investment and we may be unable to liquidate such equity securities in atimely manner at full value.As of December 31, 2015, we owned approximately 67% of the common equity ownership interests and 71% of preferred equity ownership interests inRBMI (the “RBMI Equity Interests”), a private entity that owns a portfolio of structured investments comprised of preferred equity and joint venture investmentsin, and mezzanine loans secured by, multifamily apartment properties, and that is externally managed by RiverBanc. In July 2015, we entered into a ContributionAgreement with RiverBanc Multifamilty Investors Inc. (“RMI”) and certain other third parties pursuant to which we agreed to contribute 100% of our RBMIEquity Interests to RMI in exchange for shares of RMI’s common stock (the “RMI Stock”). RBMI would become a subsidiary of RMI upon completion of thetransaction. The transaction contemplated by the contribution agreement is subject to certain closing conditions, including the completion of RMI’s initial publicoffering of RMI stock, which as of the date of this report, has not been completed.At December 31, 2015, the fair value of our RBMI Equity Interests was approximately $56.9 million and represents approximately 3% of our total assets(excluding all Consolidated K-Series assets other than those securities issued by the securitizations comprising the Consolidated K-Series that are actually ownedby us). Our results of operations may be affected by gain or loss recognized upon the sale of these investments, including the exchange of our RBMI EquityInterests for RMI Stock, or upon the determination that any such investment has become impaired.Our investment in these securities involve special risks relating to RBMI or RMI, as applicable, including the financial and operating condition andbusiness outlook of the entity, its focus on the multi-family apartment sector and risks inherent to investing in real estate generally, and preferred equity and jointventure investments in, and mezzanine loans secured by, multi-family apartment properties specifically. Moreover, our investment in such entities are furthersubject to risks of: limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities; substantial market price volatility in the caseof traded equity securities; subordination to the debt and other liabilities of the issuer; the possibility that earnings of the issuer may be insufficient to meet its debtservice and other obligations and, therefore, to make distributions to us on any equity securities we may currently own or acquire in the future; and the decliningcreditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. In the event that the transactionscontemplated by the exchange of RBMI Equity Interests for RMI Stock are completed, RMI will become a listed company and the fair value of our investment inthis issuer will be conducted as a Level 1 or Level 2 instrument. Accordingly, there may be periods where the trading price of RMI’s common stock does notcorrelate with the performance or value of its assets. These risks may adversely affect the value of RMI's equity securities and its ability to make distributions to itsequity holders, which in turn could have a material adverse effect on our business, result of operations, financial conditions and ability to make distributions to ourstockholders.In addition, we own a significant amount of RBMI’s outstanding equity ownership interests and may in the future own a significant amount of RMI’soutstanding common stock and we may be unable to liquidate or dispose of our investment in a timely manner at full value or at all. In the event that we are unableto liquidate or dispose of our investment at full value, our gain from the sale of our investment may be reduced or our loss from the sale of our investment may beincreased.23We are dependent on certain of our external managers and certain of their key personnel and may not find a suitable replacement if their respectivemanagement agreements with us are terminated or such key personnel are no longer available to us.We historically were organized as a self-advised company that acquired, originated, sold and managed its assets; however, as we modified our businessstrategy and our targeted assets, we began to outsource the management of certain targeted asset classes for which we had limited internal resources or experience.We presently utilize three external managers to manage certain of our assets and investment strategies. Each of our external managers, in some manner, identifies,evaluates, negotiates, structures, closes and monitors certain investments on our behalf. In each case, we have engaged these third parties because of the expertiseof certain key personnel of our external managers. The departure of any of the senior officers of our external managers, or of a significant number of investmentprofessionals or principals of our external managers, could have a material adverse effect on our ability to achieve our investment objectives. We are subject to therisk that our external managers will terminate their respective management agreement with us or that we may deem it necessary to terminate such agreement orprevent certain individuals from performing services for us, and that no suitable replacement will be found to manage certain of our assets and investmentstrategies on a timely basis or at all.Pursuant to our management agreements, our external managers are entitled to receive a management fee that is payable regardless of the performance of theassets under their management.We will pay each of our external managers substantial base management fees, based on our invested capital (as such term is defined in the respectivemanagement agreements), regardless of the performance of the assets under their management. The external managers’ entitlement in many cases to non-performance based compensation may reduce its incentive to devote the time and effort of its professionals to seeking profitable investment opportunities for ourcompany, which could result in the under-performance of assets under their management and negatively affect our ability to pay distributions to our stockholdersor to achieve capital appreciation.Pursuant to the terms of our management agreements, our external managers are generally entitled to receive an incentive fee, which may induce them tomake certain investments, including speculative or high risk investments.In addition to the base management fees payable to our external managers, our external managers are generally entitled to receive incentive compensationbased, in part, upon the achievement of targeted levels of net income. In evaluating investments and other management strategies, the opportunity to earn incentivecompensation based on net income may lead our external managers to place undue emphasis on the maximization of net income at the expense of other criteria,such as preservation of capital, maintaining liquidity and/or management of interest rate, credit or market risks, in order to achieve higher incentive compensation.Investments with higher yield potential are generally riskier or more speculative. In addition, Midway has broad discretion regarding the types of investments itwill make pursuant to its management agreement with us. This could result in increased risk to the value of our assets under the management of our externalmanagers.We compete with our external managers’ other clients for access to them.Each of our external managers manages, and is expected to continue to manage, other client accounts with similar or overlapping investment strategies. Inconnection with the services provided to those accounts, these managers may be compensated more favorably than for the services provided under our externalmanagement agreements, and such discrepancies in compensation may affect the level of service provided to us by our external managers. Moreover, each of ourexternal managers may have an economic interest in the accounts they manage or the investments they propose. As a result, we will compete with these otheraccounts and interests for access to our external managers and the benefits derived from those relationships. For the same reasons, the personnel of our externalmanagers may be unable to dedicate a substantial portion of their time managing our investments to the extent they manage or are associated with any futureinvestment vehicles not related to us.There are conflicts of interest in our relationships with our external managers, which could result in decisions that are not in the best interests of ourstockholders.We may acquire or sell assets in which an external manager or its affiliates have or may have an interest, or we may participate in co-investmentopportunities with our external managers or their affiliates. In these cases, it is possible that our interests and the interests of our external managers will not alwaysbe aligned and this could result in decisions that are not in the best interests of our company. Similarly, our external managers or its affiliates may acquire or sellassets in which we have or may have an interest. Although such acquisitions or dispositions may present conflicts of interest, we nonetheless may pursue andconsummate such transactions. Additionally, we may engage in transactions directly with our external managers or their affiliates, including the purchase and saleof all or a portion of a targeted asset.24Acquisitions made for entities with similar objectives may be different from those made on our behalf. Our external managers may have economicinterests in or other relationships with others in whose obligations or assets we may acquire. In particular, such persons may make and/or hold an investment inassets that we acquire that may be pari passu, senior or junior in ranking to our interest in the assets or in which partners, security holders, officers, directors, agentsor employees of such persons serve on boards of directors or otherwise have ongoing relationships. Each of such ownership and other relationships may result insecurities laws restrictions on transactions in such assets and otherwise create conflicts of interest. In such instances, the external managers may, in their solediscretion, make recommendations and decisions regarding such assets for other entities that may be the same as or different from those made with respect to assetsacquired by us and may take actions (or omit to take actions) in the context of these other economic interests or relationships, the consequences of which may beadverse to our interests.The key personnel of our external managers and its affiliates devote as much time to us as our external managers deem appropriate, however, theseindividuals may have conflicts in allocating their time and services among us and their other accounts and investment vehicles. During turbulent conditions in themortgage industry, distress in the credit markets or other times when we will need focused support and assistance from our external managers, other entities forwhich our external managers serve as manager, or their accounts, will likewise require greater focus and attention, placing the resources of our external managersin high demand. In such situations, we may not receive the necessary support and assistance we require or would otherwise receive if we were internally managed.We, directly or through our external managers, may obtain confidential information about the companies or securities in which we have invested or mayinvest. If we do possess confidential information about such companies or securities, there may be restrictions on our ability to dispose of, increase the amount of,or otherwise take action with respect to the securities of such companies. Our external managers’ management of other accounts could create a conflict of interestto the extent such external manager is aware of material non-public information concerning potential investment decisions and this in turn could impact our abilityto make necessary investment decisions. Any limitations that develop as a result of our access to confidential information could therefore materially adverselyaffect our business, financial condition and results of operations and our ability to make distributions to our stockholders.There are limitations on our ability to withdraw invested capital from the account managed by Midway and our inability to withdraw our invested capital whennecessary may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.Pursuant to the terms of the Midway Management Agreement, we may only redeem invested capital in an amount equal to the lesser of 10% of theinvested capital in the account managed by Midway or $10 million as of the last calendar day of the month upon not less than 75 days written notice, subject to ourauthority to direct Midway to modify its investment strategy for purposes of maintaining our qualification as a REIT and exclusion from the Investment CompanyAct. In addition, we are only permitted to make one such redemption request in any 75-day period. In the event of a significant market event or shock, we may beunable to effect a redemption of invested capital in greater amounts or at a greater rate unless we obtain the consent of Midway. Moreover, because a reduction ofinvested capital would reduce the base management fee under the Midway Management Agreement, Midway may be less inclined to consent to such redemptions.If we are unable to withdraw invested capital as needed to meet our obligations in the future, our business and financial condition could be materially adverselyaffected.Termination of our external management agreements may be difficult and costly.Termination of the RiverBanc Management Agreement without cause is subject to several conditions which may make such a termination difficult andcostly. The RiverBanc Management Agreement provides that we may only terminate the agreement (i) for cause, (ii) without cause and upon providing 180 daysadvance notice and subject to a termination fee described herein, or (iii) in the event we realize a negative 15% return on the assets managed for us by RiverBanc.In the event the RiverBanc Management Agreement is terminated pursuant to clauses (i) or (iii) in the preceding sentence, no termination fee is required. Thetermination fee required upon termination of the RiverBanc Management Agreement for cause is equal to the product of (A) 24 and (B) the base management feeearned by RiverBanc during the one month period immediately preceding the termination date. Thus, in the event we elect not to renew the RiverBancManagement Agreement for any reason other than cause or as otherwise described in this paragraph, we will be required to pay this termination fee. In addition,the RiverBanc Management Agreement provides RiverBanc with an exclusive right of first refusal to purchase any of our assets managed by it subject to certainexceptions, in the event we terminate them for any reason. This provision could result in our loss of assets that our earnings are dependent upon or may cause us tosell assets prior to our recovery of lost value. These provisions may increase the effective cost to us of terminating the RiverBanc Management Agreement, therebyadversely affecting our ability to terminate RiverBanc without cause.25Pursuant to the Midway Management Agreement, in the event we determine to terminate the Midway Management Agreement at any time in the future,Midway has the right to liquidate the assets it manages on our behalf in its sole discretion. Moreover, as discussed above, there are certain restrictions on ourability to redeem invested capital under the Midway Management Agreement. As a result, we may have little control over the liquidation of any of our assets thatare managed by Midway or the timing of the full redemption of our invested capital, which may make it more difficult to terminate our agreement with Midwayand could have a material adverse effect on our business, financial condition and results of operations.The market price and trading volume of our stock may be volatile.The market price of our stock is highly volatile and subject to wide fluctuations. In addition, the trading volume in our stock may fluctuate and causesignificant price variations to occur. Some of the factors that could result in fluctuations in the price or trading volume of our stock include, among other things:actual or anticipated changes in our current or future financial performance; actual or anticipated changes in our current or future dividend yield; changes in marketinterest rates and general market and economic conditions. We cannot assure you that the market price of our stock will not fluctuate or decline significantly.We have not established a minimum dividend payment level for our common stockholders and there are no assurances of our ability to pay dividends tocommon or preferred stockholders in the future.We intend to pay quarterly dividends and to make distributions to our common stockholders in amounts such that all or substantially all of our taxableincome in each year, subject to certain adjustments, is distributed. This, along with other factors, should enable us to qualify for the tax benefits accorded to a REITunder the Internal Revenue Code. We have not established a minimum dividend payment level for our common stockholders and our ability to pay dividends maybe harmed by the risk factors described herein. From July 2007 until April 2008, our Board of Directors elected to suspend the payment of quarterly dividends onour common stock. Our Board’s decision reflected our focus on the elimination of operating losses through the sale of our mortgage lending business and theconservation of capital to build future earnings from our portfolio management operations. All distributions to our common stockholders will be made at thediscretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our Boardof Directors may deem relevant from time to time. There are no assurances of our ability to pay dividends to our common or preferred stockholders in the future atthe current rate or at all.Future offerings of debt securities, which would rank senior to our common stock and preferred stock upon our liquidation, and future offerings of equitysecurities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, mayadversely affect the market price of our common stock.In the future, we may attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities, includingcommercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock or common stock. Upon liquidation, holders of our debtsecurities and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our preferred stock and commonstock, with holders of our preferred stock having priority over holders of our common stock. Additional equity offerings may dilute the holdings of our existingstockholders or reduce the market price of our common stock, or both. Because our decision to issue securities in any future offering will depend on marketconditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our commonstock bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.Future sales of our stock could have an adverse effect on the price of our stock.We cannot predict the effect, if any, of future sales of our stock, or the availability of shares for future sales, on the market price of our common orpreferred stock. Sales of substantial amounts of stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our commonor preferred stock.An increase in interest rates may have an adverse effect on the market price of our stock and our ability to make distributions to our stockholders.One of the factors that investors may consider in deciding whether to buy or sell shares of our stock is our dividend rate (or expected future dividendrates) as a percentage of our common stock price, relative to market interest rates. If market interest rates increase, prospective investors may demand a higherdividend rate on our shares or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditionscan affect the market price of our stock independent of the effects such conditions may have on our portfolio.26Your interest in us may be diluted if we issue additional shares.Current stockholders of our company do not have preemptive rights to any common stock issued by us in the future. Therefore, our stockholders mayexperience dilution of their equity investment if we sell additional common stock in the future, sell securities that are convertible into common stock or issueshares of common stock or options exercisable for shares of common stock. In addition, we could sell securities at a price less than our then-current book value pershare.Investing in our securities may involve a high degree of risk.The investments we make in accordance with our investment strategy may result in a high degree of risk, volatility or loss of principal than alternativeinvestment options. Our investments may be highly speculative and aggressive, and therefore, an investment in our securities may not be suitable for someone withlower risk tolerance.The downgrade of the U.S.'s and certain European countries' or certain European financial institutions’ credit ratings, any future downgrades of the U.S.'sand certain European countries' or certain European financial institutions’ credit ratings and the failure to resolve issues related to U.S. fiscal and debtpolicies may materially adversely affect our business, liquidity, financial condition and results of operations.U.S. debt ceiling and budget deficit concerns in recent years have increased the possibility of credit-rating downgrades or economic slowdowns in theU.S. Although U.S. lawmakers passed legislation to raise the federal debt ceiling in 2011 and again in 2013, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the U.S. from “AAA” to “AA+” in August 2011. The impact of any further downgrades to the U.S. Government's sovereign creditrating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. If the U.S.'s credit rating weredowngraded it would likely impact the credit risk associated with Agency RMBS in our portfolio. A downgrade of the U.S. Government's credit rating or a defaultby the U.S. Government to satisfy its debt obligations likely would create broader financial turmoil and uncertainty, which would weigh heavily on the globalbanking system and these developments could cause interest rates and borrowing costs to rise and a reduction in the availability of credit, which may negativelyimpact the value of the assets in our portfolio, our net income, liquidity and our ability to finance our assets on favorable terms.In the years following the financial and credit crisis of 2007-2008, many financial institutions in Europe experienced financial difficulty and were eitherrescued by government assistance or otherwise benefited from accommodative monetary policy of central banks. Several European governments implementedmeasures to attempt to shore up their financial sectors through loans, credit guarantees, capital infusions, promises of continued liquidity funding and interest ratecuts. Additionally, other governments of the world’s largest economic countries also implemented interest rate cuts. Some of these European financial institutionshave U.S. banking subsidiaries that serve as financing or hedging counterparties to us. Although economic and credit conditions have stabilized in the past fewyears, there is no assurance that these and other plans and programs will be successful in the longer term, and, in particular, when governments and central banksbegin to significantly unwind or otherwise reverse these programs and policies. In addition, in recent years, the U.S. government placed many of the U.S. bankingsubsidiaries of these major European financial institutions on credit watch. If European credit concerns continue to impact these major European banks, there isthe possibility that it will also impact the operations of their U.S. banking subsidiaries. Some of these financial institutions have U.S. banking subsidiaries thatserve as financing or hedging counterparties to us. Any future downgrade of the credit ratings of these European financial institutions could result in greatercounterparty default risk and could materially adversely affect our business, liquidity, access to financing and results of operations.Risks Related to Our Company, Structure and Change in Control ProvisionsWe are highly dependent on information systems and system failures could significantly disrupt our business, which may, in turn, materially adversely affectour business, financial condition and results of operations and our ability to make distributions to our stockholders.Our business is highly dependent on communications and information systems. Any failure or interruption of our systems could cause delays or otherproblems in our securities trading and other investment activities which could materially adversely affect our business, financial condition and results of operationsand our ability to make distributions to our stockholders.27The occurrence of cyber-incidents, or a deficiency in our cybersecurity or in those of any of our third party service providers, could negatively impact ourbusiness by causing a disruption to our operations, a compromise or corruption of our confidential information or damage to our business relationships orreputation, all of which could negatively impact our business and results of operations.A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources or theinformation resources of our third party service providers. More specifically, a cyber-incident is an intentional attack or an unintentional event that can includegaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has increased, so havethe risks posed to our systems, both internal and those we have outsourced. The primary risks that could directly result from the occurrence of a cyber-incidentinclude operational interruption and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but thesemeasures, as well as our increased awareness of a risk of a cyber-incident, do not guarantee that our business and results of operations will not be negativelyimpacted by such an incident.Our directors have approved broad investment guidelines for us and do not approve each investment we make.Our external managers are generally authorized to follow broad investment guidelines in determining which assets we will invest in. Although our Boardof Directors will ultimately determine when and how much capital to allocate to our investment strategies, we generally will not, with certain exceptions, approvetransactions in advance of their execution by these managers. In addition, in conducting periodic reviews, we will rely primarily on information provided to us byour external managers. Complicating matters further, our external managers may use complex investment strategies and transactions, which may be difficult orimpossible to unwind. As a result, because our external managers have great latitude to determine the types of assets they may decide are proper investments forus, there can be no assurance that we would otherwise approve of these investments individually or that they will be successful.We are dependent on certain key personnel.We are a small company and are substantially dependent upon the efforts of our Chief Executive Officer and President, Steven R. Mumma, and certainkey individuals employed by our external managers. The loss of Mr. Mumma or any key personnel of our Company or our external manager or their services couldhave a material adverse effect on our operations.The stock ownership limit imposed by our charter may inhibit market activity in our common stock and may restrict our business combination opportunities.In order for us to maintain our qualification as a REIT under the Internal Revenue Code, not more than 50% in value of the issued and outstanding sharesof our capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) atany time during the last half of each taxable year (other than our first year as a REIT). This test is known as the “5/50 test.” Attribution rules in the InternalRevenue Code apply to determine if any individual or entity actually or constructively owns our capital stock for purposes of this requirement. Additionally, atleast 100 persons must beneficially own our capital stock during at least 335 days of each taxable year (other than our first year as a REIT). To help ensure that wemeet these tests, our charter restricts the acquisition and ownership of shares of our capital stock. Our charter, with certain exceptions, authorizes our directors totake such actions as are necessary and desirable to preserve our qualification as a REIT and provides that, unless exempted by our Board of Directors, no personmay own more than 9.9% in value of the aggregate of the outstanding shares of our capital stock or more than 9.9% in value or in number of shares, whichever ismore restrictive, of the aggregate of our outstanding shares of common stock. The ownership limits contained in our charter could delay or prevent a transaction ora change in control of our company under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the thencurrent market price for our common stock or would otherwise be in the best interests of our stockholders.Risks Related to CreditOur efforts to manage credit risks may fail.Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our credit policies and procedures may not besuccessful in limiting future delinquencies, defaults, and losses, or they may not be cost effective. Our underwriting reviews may not be effective. Loan servicingcompanies may not cooperate with our loss mitigation efforts or those efforts may be ineffective. Service providers to securitizations, such as trustees, loansservicers, bond insurance providers, and custodians, may not perform in a manner that promotes our interests. Delay of foreclosures could delay resolution andincrease ultimate loss severities, as a result.28The value of the properties collateralizing or underlying the loans or securities we own may decline. The frequency of default and the loss severity onloans upon default may be greater than we anticipate. Interest-only loans, negative amortization loans, adjustable-rate loans, larger balance loans, reduceddocumentation loans, non-QM loans, subprime loans, alt-a loans, second lien loans, loans in certain locations, and loans or investments that are partiallycollateralized by non-real estate assets may have increased risks and severity of loss. If property securing or underlying loans become real estate owned as a resultof foreclosure, we bear the risk of not being able to sell the property and recovering our investment and of being exposed to the risks attendant to the ownership ofreal property.If we underestimate the loss-adjusted yields of our investments in credit sensitive assets, we may experience losses.We and our managers expect to value our investments in many credit sensitive assets, including, but not limited to, multi-family CMBS, based on loss-adjusted yields taking into account estimated future losses on the loans that we are investing in directly or that underly securities owned by us, and the estimatedimpact of these losses on expected future cash flows. Our loss estimates may not prove accurate, as actual results may vary from our estimates. In the event that weunderestimate the losses relative to the price we pay for a particular investment, we may experience material losses with respect to such investment.We invest in CMBS that are subordinate to more senior securities issued by the applicable securitization, which entails certain risks.We currently own and may acquire in the future principal only multi-family CMBS that represent the first loss tranche of a multi-family mortgage loansecuritization. These first loss principal only securities are subject to the first risk of loss if any losses are realized on the underlying mortgage loans in thesecuritization. We also own and may acquire in the future interest only securities issued by multi-family mortgage loan securitizations. However, these interestonly CMBS typically only receive payments of interest to the extent that there are funds available in the securitization to make the payments. CMBS generallyentitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of commercial or multi-family mortgage loans.Consequently, the CMBS, and in particular, first loss principal only CMBS, will be adversely affected by payment defaults, delinquencies and losses on theunderlying mortgage loans, each of which could have a material adverse effect on our cash flows and results of operations.Residential mortgage loans, including non-QM residential mortgage loans, subprime residential mortgage loans and non-performing, sub-performing and re-performing residential mortgage loans, are subject to increased risks.We acquire and manage residential whole mortgage loans, including loans sourced from distressed markets. Residential mortgage loans, including non-performing, sub-performing and re-performing mortgage loans as well as subprime mortgage loans and mortgage loans that are not deemed "qualified mortgage",or "QM," loans under the rules of the Consumer Financial Protection Bureau, or "CFPB", are subject to increased risks of loss. Unlike Agency RMBS, theresidential mortgage loans we invest in generally are not guaranteed by the federal government or any GSE. Additionally, by directly acquiring residentialmortgage loans, we do not receive the structural credit enhancements that benefit senior tranches of RMBS. A residential whole mortgage loan is directly exposedto losses resulting from default. Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority andenforceability of the lien will significantly impact the value of such mortgage. In the event of a foreclosure, we may assume direct ownership of the underlying realestate. The liquidation proceeds upon sale of such real estate may not be sufficient to recover our cost basis in the loan, and any costs or delays involved in theforeclosure or liquidation process may increase losses.Residential mortgage loans are also subject to "special hazard" risk (property damage caused by hazards, such as earthquakes or environmental hazards,not covered by standard property insurance policies), and to bankruptcy risk (reduction in a borrower's mortgage debt by a bankruptcy court). In addition, claimsmay be assessed against us on account of our position as a mortgage holder or property owner, including assignee liability, responsibility for tax payments,environmental hazards and other liabilities. In some cases, these liabilities may be "recourse liabilities" or may otherwise lead to losses in excess of the purchaseprice of the related mortgage or property.29Our targeted assets currently include distressed residential loans that we acquire from third parties, typically at a discount. Distressed residential loans sellat a discount because they may constitute riskier investments than those selling at or above par value. The distressed residential loans we invest in may bedistressed because a borrower may have defaulted thereupon, because the borrower is or has been in the past delinquent on paying all or a portion of his obligationunder the loan or because the loan may otherwise contain credit quality that is considered to be poor. The likelihood of full recovery of a distressed loan’s principaland contractual interest is less than that for loans trading at or above par value. Although we typically expect to receive less than the principal amount or face valueof the distressed residential loans that we purchase, the return that we in fact receive thereupon may be less than our investment in such loans due to the failure ofthe loans to perform or reperform. An economic downturn would exacerbate the risks of the recovery of the full value of the loan or the cost of our investmenttherein.Second mortgage loan investments expose us to greater credit risks.We expect to invest in second mortgages on residential properties, which are subject to a greater risk of loss than a traditional mortgage. Our securityinterest in the property securing a second mortgage is subordinated to the interest of the first mortgage holder and the second mortgages have a higher combinedloan-to-value ratio than do the first mortgages. If the borrower experiences difficulties in making senior lien payments or if the value of the property is equal to orless than the amount needed to repay the borrower's obligation to the first mortgage holder upon foreclosure, our investment in the second mortgage loan may notbe repaid in full or at all. Further, it is likely that any investments we make in second mortgages will be placed with private entities and not insured by a GSE.If we sell or transfer any whole mortgage loans to a third party, including a securitization entity, we may be required to repurchase such loans or indemnifysuch third party if we breach representations and warranties.When we sell or transfer any whole mortgage loans to a third party, including a securitization entity, we generally are required to make customaryrepresentations and warranties about such loans to the third party. Our residential mortgage loan sale agreements and terms of any securitizations into which wesell or transfer loans will generally require us to repurchase or substitute loans in the event we breach a representation or warranty given to the loan purchaser orsecuritization. In addition, we may be required to repurchase loans as a result of borrower fraud or in the event of early payment default on a mortgage loan. Theremedies available to a purchaser of mortgage loans are generally broader than those available to us against an originating broker or correspondent. Repurchasedloans are typically worth only a fraction of the original price. Significant repurchase activity could materially adversely affect our business, financial condition andresults of operations and our ability to pay dividends to our stockholders.Risks Related to Our Use of Hedging StrategiesHedging against credit events and interest rate changes and other risks may materially adversely affect our business, financial condition and results ofoperations and our ability to make distributions to our stockholders.Subject to compliance with the requirements to qualify as a REIT, we engage in certain hedging transactions to limit our exposure to changes in interestrates and therefore may expose ourselves to risks associated with such transactions. We may utilize instruments such as interest rate swaps, caps, collars and floorsand Eurodollar and U.S. Treasury futures to seek to hedge the interest rate risk associated with our portfolio. Hedging against a decline in the values of ourportfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline.However, we may establish other hedging positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfoliopositions. Such hedging transactions may also limit the opportunity for gain if the values of the portfolio positions should increase. Moreover, at any point in timewe may choose not to hedge all or a portion of these risks, and we generally will not hedge those risks that we believe are appropriate for us to take at such time, orthat we believe would be impractical or prohibitively expensive to hedge.30Even if we do choose to hedge certain risks, for a variety of reasons we generally will not seek to establish a perfect correlation between our hedginginstruments and the risks being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. Ourhedging activity will vary in scope based on the composition of our portfolio, our market views, and changing market conditions, including the level and volatilityof interest rates. When we do choose to hedge, hedging may fail to protect or could materially adversely affect us because, among other things:•either we or our external managers may fail to correctly assess the degree of correlation between the performance of the instruments used in thehedging strategy and the performance of the assets in the portfolio being hedged;•either we or our external managers may fail to recalculate, re-adjust and execute hedges in an efficient and timely manner;•the hedging transactions may actually result in poorer over-all performance for us than if we had not engaged in the hedging transactions;•credit hedging can be expensive, particularly when the market is forecasting future credit deterioration and when markets are more illiquid;•interest rate hedging can be expensive, particularly during periods of volatile interest rates;•available hedges may not correspond directly with the risks for which protection is sought;•the durations of the hedges may not match the durations of the related assets or liabilities being hedged;•many hedges are structured as over-the-counter contracts with counterparties whose creditworthiness is not guaranteed, raising the possibility that thehedging counterparty may default on their payment obligations; and•to the extent that the creditworthiness of a hedging counterparty deteriorates, it may be difficult or impossible to terminate or assign any hedgingtransactions with such counterparty.For these and other reasons, our hedging activity may materially adversely affect our business, financial condition and results of operations and our abilityto make distributions to our stockholders.Hedging instruments and other derivatives may not, in many cases, be traded on regulated exchanges, or guaranteed or regulated by any U.S. or foreigngovernmental authorities and involve risks and costs that could result in material losses.Hedging instruments and other derivatives involve risk because they may not, in many cases, be traded on regulated exchanges and may not be guaranteedor regulated by any U.S. or foreign governmental authorities. Consequently, for these instruments, there are no requirements with respect to record keeping,financial responsibility or segregation of customer funds and compliance with applicable statutory and commodity and other regulatory requirements and,depending on the identity of the counterparty, applicable international requirements. We are restricted from dealing with any particular counterparty or fromconcentrating any or all of our transactions with one counterparty. The business failure of a hedging counterparty with whom we enter into a hedging transactionwill most likely result in a default under the hedging agreement. Default by a party with whom we enter into a hedging transaction may result in losses and mayforce us to re-initiate similar hedges with other counterparties at the then-prevailing market levels. Generally we will seek to reserve the right to terminate ourhedging transactions upon a counterparty’s insolvency, but absent an actual insolvency, we may not be able to terminate a hedging transaction without the consentof the hedging counterparty, and we may not be able to assign or otherwise dispose of a hedging transaction to another counterparty without the consent of both theoriginal hedging counterparty and the potential assignee. If we terminate a hedging transaction, we may not be able to enter into a replacement contract in order tocover our risk. There can be no assurance that a liquid secondary market will exist for hedging instruments purchased or sold, and therefore we may be required tomaintain any hedging position until exercise or expiration, which could materially adversely affect our business, financial condition and results of operations.The Commodity Futures Trading Commission ("CFTC ") and certain commodity exchanges have established limits referred to as speculative positionlimits or position limits on the maximum net long or net short position which any person or group of persons may hold or control in particular futures and options.Limits on trading in options contracts also have been established by the various options exchanges. It is possible that trading decisions may have to be modifiedand that positions held may have to be liquidated in order to avoid exceeding such limits. Such modification or liquidation, if required, could materially adverselyaffect our business, financial condition and results of operation and our ability to make distributions to our stockholders.31Certain of our hedging instruments are regulated by the CFTC and such regulations may cause us to incur increased compliance costs.From time to time, we enter into interest rate swaps and other derivative instruments on corporate indices to hedge risks associated with our portfolio.Entities entering into such swaps are exposed to credit losses in the event of non-performance by counterparties to these transactions. Effective October 12, 2012,the CFTC issued new rules regarding such swaps under the authority granted to it pursuant to the Dodd-Frank Act. Although the new rules do not directly affectthe negotiations and terms of individual hedging transactions between counterparties, they do require that since September 9, 2013, these swap transactions becleared through registered derivatives clearing organizations, or swap execution facilities, through standardized documents under which each swap counterpartytransfers its position to another entity. In this arrangement, the centralized clearinghouse effectively becomes the counterparty to each side of the swap. It is theintent of the Dodd-Frank Act that the clearing of swaps in this manner is designed to avoid concentration of swap risk in any single entity by spreading andcentralizing the risk in the clearinghouse and its members. In addition to greater initial and periodic margin (collateral) requirements and additional transaction feesboth by the swap execution facility and the clearinghouse, the swap transactions are now subjected to greater regulation by both the CFTC and the SEC. Theseadditional fees, costs, margin requirements, documentation, and regulation could adversely affect our business and results of operations.Our delayed delivery transactions, including TBAs, subject us to certain risks, including price risks and counterparty risks.We purchase a significant portion of our Agency RMBS through delayed delivery transactions, including TBAs. In a delayed delivery transaction, weenter into a forward purchase agreement with a counterparty to purchase either (i) an identified Agency RMBS, or (ii) a to-be-issued (or “to-be-announced”)Agency RMBS with certain terms. As with any forward purchase contract, the value of the underlying Agency RMBS may decrease between the contract date andthe settlement date. Furthermore, a transaction counterparty may fail to deliver the underlying Agency RMBS at the settlement date. If any of the above risks wereto occur, our financial condition and results of operations may be materially adversely affected.Risks Related to Debt FinancingFailure to procure adequate funding and capital would adversely affect our results and may, in turn, negatively affect the value of our common stock and ourability to distribute cash to our stockholders.We depend upon the availability of adequate funding and capital for our operations. To maintain our status as a REIT, we are required to distribute at least90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gain, to our stockholders andtherefore are not able to retain our earnings for new investments. We cannot assure you that any, or sufficient, funding or capital will be available to us in the futureon terms that are acceptable to us. In the event that we cannot obtain sufficient funding and capital on acceptable terms, there may be a negative impact on thevalue of our common stock and our ability to make distributions to our stockholders, and you may lose part or all of your investment.32Our access to financing sources, which may not be available on favorable terms, or at all, may be limited, and this may materially adversely affect ourbusiness, financial condition and results of operations and our ability to make distributions to our stockholders.We depend upon the availability of adequate capital and financing sources on acceptable terms to fund our operations. However, as previously discussed,the capital and credit markets have experienced unprecedented levels of volatility and disruption in recent years that has generally caused a reduction of availablecredit. Continued volatility or disruption in the credit markets or a downturn in the global economy could materially adversely affect one or more of our lendersand could cause one or more of our lenders to be unwilling or unable to provide us with financing, or to increase the costs of that financing, or to become insolvent.Although we finance some of our assets with longer-term structured financing having terms of three years or more, we rely heavily on access to short-termborrowings, primarily in the form of repurchase agreements, to finance our investments. We are currently party to repurchase agreements of a short duration andthere can be no assurance that we will be able to roll over or re-set these borrowings on favorable terms, if at all. In the event we are unable to roll over or re-setour repurchase agreement borrowings, it may be more difficult for us to obtain debt financing on favorable terms or at all. In addition, regulatory capitalrequirements imposed on our lenders have changed the willingness of many repurchase agreement lenders to make repurchase agreement financing available andadditional regulatory capital requirements imposed on our lenders may cause them to change, limit, or increase the cost of, the financing they provide to us. Ingeneral, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price. Under current marketconditions, securitizations are generally unavailable or limited, which has also limited borrowings under warehouse facilities and other credit facilities that areintended to be refinanced by such securitizations. Consequently, depending on market conditions at the relevant time, we may have to rely on additional equityissuances to meet our capital and financing needs, which may be dilutive to our stockholders, or we may have to rely on less efficient forms of debt financing thatrestrict our operations or consume a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future businessopportunities, cash distributions to our stockholders and other purposes. We cannot assure you that we will have access to such equity or debt capital on favorableterms (including, without limitation, cost and term) at the desired times, or at all, which may cause us to curtail our investment activities and/or dispose of assets,which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.We may incur increased borrowing costs related to repurchase agreements and that would adversely affect our profitability.Currently, a significant portion of our borrowings are collateralized borrowings in the form of repurchase agreements. If the interest rates on theseagreements increase at a rate higher than the increase in rates payable on our investments, our profitability would be adversely affected.Our borrowing costs under repurchase agreements generally correspond to short-term interest rates such as LIBOR or a short-term Treasury index, plus orminus a margin. The margins on these borrowings over or under short-term interest rates may vary depending upon a number of factors, including, withoutlimitation:•the movement of interest rates;•the availability of financing in the market; and•the value and liquidity of our mortgage-related assets.During 2008 and 2009, many repurchase agreement lenders required higher levels of collateral than they had required in the past to support repurchaseagreements collateralized by RMBS. Although these collateral requirements have been reduced to more appropriate levels, we cannot assure you that they will notagain experience a dramatic increase. If the interest rates, lending margins or collateral requirements under our short-term borrowings, including repurchaseagreements, increase, or if lenders impose other onerous terms to obtain this type of financing, our results of operations will be adversely affected.33The repurchase agreements that we use to finance our investments may require us to provide additional collateral, which could reduce our liquidity and harmour financial condition.We use repurchase agreements to finance certain of our investments, primarily RMBS. If the market value of the loans or securities pledged or sold by usto a funding source decline in value, we may be required by the lending institution to provide additional collateral or pay down a portion of the funds advanced, butwe may not have the funds available to do so. Posting additional collateral to support our repurchase agreements will reduce our liquidity and limit our ability toleverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lending institutions can accelerate our indebtedness, increase ourborrowing rates, liquidate our collateral at inopportune times and terminate our ability to borrow. This could result in a rapid deterioration of our financialcondition and possibly require us to file for protection under the U.S. Bankruptcy Code.We leverage our equity, which can exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to ourstockholders.We leverage our equity through borrowings, generally through the use of repurchase agreements and other short-term borrowings or through longer-termstructured debt, such as CDOs and other forms of securitized debt. We may, in the future, utilize other forms of borrowing. The amount of leverage we incur variesdepending on the asset type, our ability to obtain borrowings, the cost of the debt and our lenders’ estimates of the value of our portfolio’s cash flow. The return onour investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions cause the cost of ourfinancing to increase relative to the income that can be derived from the assets we hold in our investment portfolio. Further, the leverage on our equity mayexacerbate any losses we incur.Our debt service payments will reduce the net income available for distribution to our stockholders. We may not be able to meet our debt serviceobligations and, to the extent that we cannot, we risk the loss of some or all of our assets to sale to satisfy our debt obligations. A decrease in the value of the assetsmay lead to margin calls under our repurchase agreements which we will have to satisfy. Significant decreases in asset valuation, could lead to increased margincalls, and we may not have the funds available to satisfy any such margin calls. Although we have established target leverage amounts for many of our assets, thereis no established limitation, other than may be required by our financing arrangements, on our leverage ratio or on the aggregate amount of our borrowings.If we are unable to leverage our equity to the extent we currently anticipate, the returns on certain of our assets could be diminished, which may limit oreliminate our ability to make distributions to our stockholders.If we are limited in our ability to leverage our assets to the extent we currently anticipate, the returns on these assets may be harmed. A key element of ourstrategy is our use of leverage to increase the size of our portfolio in an attempt to enhance our returns. Our repurchase agreements, excluding our repurchaseagreements with Deutsche Bank AG, Cayman Islands Branch that finance our residential mortgage loans, including our distressed loans are not currentlycommitted facilities, meaning that the counterparties to these agreements may at any time choose to restrict or eliminate our future access to the facilities and wehave no other committed credit facilities through which we may leverage our equity. If we are unable to leverage our equity to the extent we currently anticipate,the returns on our portfolio could be diminished, which may limit or eliminate our ability to make distributions to our stockholders.We directly or indirectly utilize non-recourse securitizations and recourse structured financings and such structures expose us to risks that could result inlosses to us.We sometimes utilize non-recourse securitizations of our investments in mortgage loans or CMBS to the extent consistent with the maintenance of ourREIT qualification and exclusion from the Investment Company Act in order to generate cash for funding new investments and/or to leverage existing assets. Inmost instances, this involves us transferring loans or CMBS owned by us to a SPE in exchange for cash and typically the ownership certificate or residual interestin the entity. In some sale transactions, we also retain a subordinated interest in the loans or CMBS sold, such as a B-note. The securitization or other structuredfinancing of our portfolio investments might magnify our exposure to losses on those portfolio investments because the subordinated interest we retain in the loansor CMBS sold would be subordinate to the senior interest in the loans or CMBS sold, and we would, therefore, absorb all of the losses sustained with respect to aloan sold before the owners of the senior interest experience any losses. Under the terms of these financings, which generally have terms of three to ten years, wemay agree to receive no cash flows from the assets transferred to the SPE until the debt issued by the special purpose entity has matured or been repaid. We cannotbe assured that we will be able to access the securitization markets in the future, or be able to do so at favorable rates. The inability to consummate longer termfinancing for the credit sensitive assets in our portfolio could require us to seek other forms of potentially less attractive financing or to liquidate assets at aninopportune time or price, which could adversely affect our performance and our ability to grow our business.34In addition, under the terms of the securitization or structured financing, we may have limited or no ability to sell, transfer or replace the assets transferredto the SPE, which could have a material adverse effect on our ability to sell the assets opportunistically or during periods when our liquidity is constrained or torefinance the assets. Finally, we have in the past and may in the future guarantee certain terms or conditions of these financings, including the payment of principaland interest on the debt issued by the SPE, the cash flows for which are typically derived from the assets transferred to the entity. If a SPE defaults on itsobligations and we have guaranteed the satisfaction of that obligation, we may be materially adversely affected.If a counterparty to our repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term or if wedefault on our obligations under the repurchase agreement, we may incur losses.When we engage in repurchase transactions, we generally sell RMBS, CMBS, mortgage loans or certain other assets to lenders (i.e., repurchaseagreement counterparties) and receive cash from the lenders. The lenders are obligated to resell the same security or asset back to us at the end of the term of thetransaction. Because the cash we receive from the lender when we initially sell the security or asset to the lender is less than the value of that security or asset (thisdifference is referred to as the “haircut”), if the lender defaults on its obligation to resell the same security or asset back to us we would incur a loss on thetransaction equal to the amount of the haircut (assuming there was no change in the value of the security). Certain of the assets that we pledge as collateral,including Agency IOs, CLOs and distressed residential loans are currently subject to significant haircuts. Further, if we default on one of our obligations under arepurchase transaction, the lender can terminate the transaction and cease entering into any other repurchase transactions with us. Our repurchase agreementscontain cross-default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default. Anylosses we incur on our repurchase transactions could adversely affect our earnings and thus our cash available for distribution to our stockholders.Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy.Our borrowings under repurchase agreements may qualify for special treatment under the bankruptcy code, giving our lenders the ability to avoid theautomatic stay provisions of the bankruptcy code and to take possession of and liquidate our collateral under the repurchase agreements without delay in the eventthat we file for bankruptcy. Furthermore, the special treatment of repurchase agreements under the bankruptcy code may make it difficult for us to recover ourpledged assets in the event that a lender files for bankruptcy. Thus, the use of repurchase agreements exposes our pledged assets to risk in the event of a bankruptcyfiling by either a lender or us.Our liquidity may be adversely affected by margin calls under our repurchase agreements because we are dependent in part on the lenders' valuation of thecollateral securing the financing.Each of these repurchase agreements allows the lender, to varying degrees, to revalue the collateral to values that the lender considers to reflect marketvalue. If a lender determines that the value of the collateral has decreased, it may initiate a margin call requiring us to post additional collateral to cover thedecrease. When we are subject to such a margin call, we must provide the lender with additional collateral or repay a portion of the outstanding borrowings withminimal notice. Any such margin call could harm our liquidity, results of operation and financial condition. Additionally, in order to obtain cash to satisfy a margincall, we may be required to liquidate assets at a disadvantageous time, which could cause it to incur further losses and adversely affect our results of operations andfinancial condition.35Risks Related to Regulatory MattersChanges in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. government may adversely affect our business.Payments on the Agency RMBS (excluding Agency IOs) in which we invest are guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Fannie Maeand Freddie Mac are government sponsored enterprises, or "GSEs," but their guarantees are not backed by the full faith and credit of the United States. As broadlypublicized, significant losses at Fannie Mae and Freddie Mac caused the U.S. Government to place Fannie Mae and Freddie Mac under federal conservatorship andto inject significant capital in these businesses. Questions regarding the continued viability of Fannie Mae and Freddie Mac, as currently structured, including theguarantees that back the RMBS issued by them, and the U.S. Government’s participation in the U.S. residential mortgage market through the GSEs, continue topersist. In February 2011, the U.S. Department of the Treasury along with the U.S. Department Housing and Urban Development released a much-awaited reporttitled “ Reforming America’s Housing Finance Market, ” which outlines recommendations for reforming the U.S. housing system, including reducing the roles ofFannie Mae and Freddie Mac and transforming the government’s involvement in the housing market and its relationship to Fannie Mae and Freddie Mac. InFebruary 2012, the Federal Housing Finance Agency, or FHFA, released its “Strategic Plan for Enterprise Conservatorships,” as updated in May 2014, which setsforth three goals for the next phase of the Fannie Mae and Freddie Mac conservatorships, which include (i) build a new infrastructure for the secondary mortgagemarket, (ii) gradually reduce Fannie Mae and Freddie Mac’s presence in the marketplace while simplifying and shrinking their operations, and (iii) maintainingforeclosure prevention activities and credit availability for new and refinanced mortgages. Since the FHFA first released its strategic plan, there have been anumber of other housing finance reform proposals introduced, both from industry groups and by the U.S. Congress, many of which could potentially increaseprivate capital flows to the mortgage sector while reducing taxpayer risk. One of the proposed bills to receive serious consideration is the “Housing FinanceReform and Taxpayer Protection Act of 2013,” which, among other things, would eliminate Freddie Mac and Fannie Mae and replace them with a new agencywhich would provide a financial guarantee that would only be tapped after private institutions and investors stepped in. This proposed bill failed to make it out ofthe Senate Banking Committee for a full vote. To date, no definitive legislation has been enacted with respect to a possible unwinding of Fannie Mae or FreddieMac or a material reduction in their roles in the U.S. mortgage market and it is not possible at this time to predict the scope and nature of the actions that the U.S.Government will ultimately take with respect to these entities.As discussed above, each of Fannie Mae, Freddie Mac and Ginnie Mae could be dissolved and the U.S. Government could determine to stop providingliquidity support of any kind to the mortgage market. If Fannie Mae, Freddie Mac or Ginnie Mae were eliminated, or their structures were to change radically orthe U.S. Government significantly reduced its support for any or all of them which would drastically reduce the amount and type of Agency RMBS available forpurchase, we may be unable or significantly limited in our ability to acquire Agency RMBS, which, in turn, could materially adversely affect our ability tomaintain our exclusion from regulation as an investment company under the Investment Company Act. Moreover, any changes to the nature of the guaranteesprovided by, or laws affecting, Fannie Mae, Freddie Mac and Ginnie Mae could materially adversely affect the credit quality of the guarantees, could increase therisk of loss on purchases of Agency RMBS issued by these GSEs and could have broad adverse market implications for the Agency RMBS they currentlyguarantee and the mortgage industry generally. Any action that affects the credit quality of the guarantees provided by Fannie Mae, Freddie Mac and Ginnie Maecould materially adversely affect the value of the Agency RMBS and other residential mortgage-related assets that we own or seek to acquire. In addition, anymarket uncertainty that arises from any such proposed changes, or the perception that such changes will come to fruition, could have a similar impact on us and thevalues of the Agency RMBS and other mortgage-related assets that we own.In addition, we rely on our Agency RMBS as collateral for our financings under the repurchase agreements that we have entered into. Any decline in theirvalue, or perceived market uncertainty about their value, would make it more difficult for us to obtain financing on our Agency RMBS on acceptable terms or atall, or to maintain compliance with the terms of any financing transactions.36Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets.The U.S. Government, through the U.S. Treasury, the Federal Housing Administration, or "FHA", and the Federal Deposit Insurance Corporation, or“FDIC," commenced implementation of programs designed to provide homeowners with assistance in avoiding residential or commercial mortgage loanforeclosures, including the Home Affordable Modification Program, or “HAMP,” which provides homeowners with assistance in avoiding residential mortgageloan foreclosures, and the Home Affordable Refinance Program, or “HARP,” which allows borrowers who are current on their mortgage payments to refinance andreduce their monthly mortgage payments at loan-to-value ratios up to 125% without new mortgage insurance. The programs may involve, among other things, themodification of residential mortgage loans to reduce the principal amount of the loans or the rate of interest payable on the loans, or to extend the payment terms ofthe loans.Loan modification and refinance programs may adversely affect the performance of Agency RMBS, non-Agency RMBS and residential mortgage loansowned by us. Residential distressed mortgage loans and non-Agency RMBS are particularly sensitive to loan modification and refinance programs, as a significantnumber of loan modifications with respect to a given security or pool of loans, including those related to principal forgiveness and coupon reduction, couldnegatively impact the realized yields and cash flows on such investments. In addition, it is also likely that loan modifications would result in increasedprepayments on some RMBS and residential mortgage loans.The U.S. Congress and various state and local legislatures have considered in the past, and in the future may adopt, legislation, which, among otherprovisions, would permit limited assignee liability for certain violations in the mortgage loan origination process, and would allow judicial modification of loanprincipal in the event of personal bankruptcy. We cannot predict whether or in what form the U.S. Congress or the various state and local legislatures may enactlegislation affecting our business or whether any such legislation will require us to change our practices or make changes in our portfolio in the future. Thesechanges, if required, could materially adversely affect our business, results of operations and financial condition and our ability to make distributions to ourstockholders, particularly if we make such changes in response to new or amended laws, regulations or ordinances in any state where we acquire a significantportion of our mortgage loans, or if such changes result in us being held responsible for any violations in the mortgage loan origination process. These loanmodification programs, future legislative or regulatory actions, including possible amendments to the bankruptcy laws, which result in the modification ofoutstanding residential mortgage loans, as well as changes in the requirements necessary to qualify for refinancing mortgage loans with Fannie Mae, Freddie Macor Ginnie Mae, may adversely affect the value of, and the returns on, our assets which, in turn, could materially adversely affect our business, financial conditionand results of operations and our ability to make distributions to our stockholders.Actions of the U.S. Government, including the U.S. Congress, the U.S. Federal Reserve, U.S. Treasury and other governmental and regulatory bodies, tostabilize or reform the financial markets and economy may not achieve their desired effect and may materially adversely affect our business, financialcondition and results of operations and our ability to pay dividends to our stockholdersIn response to turmoil in the financial markets beginning in 2007, the U.S. Government, including the U.S. Congress, U.S. Federal Reserve, U.S. Treasuryand other governmental and regulatory bodies have taken a number of actions designed to stabilize and reform the financial markets and economy. For example,the Federal Reserve implemented three different parts of the Federal Reserve’s accommodative monetary policy that was designed to keep long-term interest ratesat low levels. The most recent quantitative easing program, known as "QE3," involved the purchase by the Federal Reserve of an additional $40 billion of AgencyRMBS and an additional $45 million of longer-term U.S. Treasury securities per month until key economic indicators showed sufficient signs of improvement.Given indications that the U.S. economy had improved sufficiently, the Federal Reserve reduced the pace of its purchases beginning in December 2013and ultimately ending QE3 in October 2014. In December 2015, for the first time since 2006, the Federal Reserve increased the target for the federal funds rate by25 basis points and has indicated its expectations for additional rate hikes in 2016. Should the U.S. economy begin to indicate signs of deterioration, the FederalReserve could decide to restart an asset purchase program or institute other measures designed to reduce interest rates. These measures could lead to a flattening inthe yield curve, and increased prepayment rates (resulting from lower long-term interest rates, including mortgage rates), and a narrowing of our net interestmargin.37There can be no assurance that, in the long term, these actions taken by the U.S. Government will improve the efficiency and stability of the financialmarkets or the economy. To the extent the financial markets do not respond favorably to any of these actions or such actions do not function as intended over thelonger term, our business may be harmed. The U.S. Government, the U.S. Federal Reserve, the U.S. Treasury and other governmental and regulatory bodies maytake additional actions in the future to address financial crises and stimulate the economy. We cannot predict whether or when such actions may occur, and suchactions could have an adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.We could be subject to liability for potential violations of predatory lending laws, which could materially adversely affect our business, financial condition andresults of operations, and our ability to pay dividends to our stockholders.Residential mortgage loan originators and servicers are required to comply with various federal, state and local laws and regulations, including anti-predatory lending laws and laws and regulations imposing certain restrictions on requirements on high cost loans. Failure of residential mortgage loan originatorsor servicers to comply with these laws, to the extent any of their residential mortgage loans become part of our investment portfolio, could subject us, as anassignee or purchaser of the related residential mortgage loans, to monetary penalties and could result in the borrowers rescinding the affected residential mortgageloans. Lawsuits have been brought in various states making claims against assignees or purchasers of high cost loans for violations of state law. Named defendantsin these cases have included numerous participants within the secondary mortgage market. If the loans are found to have been originated in violation of predatoryor abusive lending laws, we could incur losses that would materially adversely affect our business.The Dodd-Frank Act and regulations implementing such legislation have had a substantial impact on the mortgage industry and the RMBS markets; theseregulations as well as new and pending regulations yet to be implemented under Dodd-Frank may have an adverse impact on our business, results ofoperations and financial condition.On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which has changed and continues to significantly change the regulation offinancial institutions and the financial services industry, including the mortgage industry. The Dodd-Frank Act tasked many agencies with issuing a variety of newregulations, including rules related to mortgage origination, mortgage servicing, securitization transactions and derivatives. While a majority of the rulemakingrequirements established by the Dodd-Frank Act have been finalized, a significant number of rulemakings remain in the proposal phase. Consequently, it is notpossible to predict how additional regulation under the Dodd-Frank Act will affect our business, and there can be no assurance that new rules promulgated underthe Dodd-Frank Act will not have an adverse effect on our business, results of operations and financial condition.The Dodd-Frank Act created a new regulator, the CFPB, which is responsible for regulating the offering and provision of financial products and servicesfor personal, family and household purposes. In addition to assuming many of the consumer financial protection functions exercised by other federal regulatorsunder certain enumerated financial protection statutes, such as the Truth in Lending Act, or "TILA," the Real Estate Settlement Procedures Act, or "RESPA" andthe Fair Credit Reporting Act, the CFPB was granted broad rulemaking and enforcement authority to protect consumers from unfair, deceptive or abusivepractices. The CFPB has issued a series of final rules as part of ongoing efforts to effect reforms and create uniform standards for the mortgage lending andservicing industries. These new rules, many of which became effective recently, include requirements addressing how lenders must evaluate a consumer’s ability torepay a mortgage loan, what specific communications must be made to consumers at various stages in the mortgage lending and servicing processes, howconsumer account records must be maintained and how servicers must respond to written borrower requests, complaints and notices of errors. The rules alsoprovide specific guidance relating to servicing delinquent loans, undertaking loss mitigation efforts and commencing foreclosure proceedings. In addition, theCFPB has also issued final rules that combine the mortgage disclosures consumers are required to receive under TILA and RESPA, which will become effective inAugust 2015. The foregoing rules have led and will likely lead to increased costs to originate and service loans across the mortgage industry, and given theircomplexity, it is anticipated the originators, servicers and other mortgage industry participants will be exposed to greater regulatory scrutiny from federal and stateregulators, and increased litigation and complaints from both consumers and government officials. We have incurred and expect in the future to incur ongoingoperational and system costs as we build and maintain processes to ensure compliance with the rules and regulations applicable to us as well as to monitorcompliance by our business partners and third-party service providers. Additional rules and regulations implemented by the CFPB could lead to changes in the waywe conduct or business and increased costs of compliance, both of which may have an adverse impact on our business and financial condition.38Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on thevalue of our securities.Certain provisions of Maryland law, our charter and our bylaws may have the effect of delaying, deferring or preventing transactions that involve anactual or threatened change in control. These provisions include the following, among others:•our charter provides that, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may beremoved with or without cause only by the affirmative vote of holders of at least two-thirds of all votes entitled to be cast by our stockholdersgenerally in the election of directors;•our bylaws provide that only our Board of Directors shall have the authority to amend our bylaws;•under our charter, our Board of Directors has authority to issue preferred stock from time to time, in one or more series and to establish the terms,preferences and rights of any such series, all without the approval of our stockholders;•the Maryland Business Combination Act; and•the Maryland Control Share Acquisition Act.Although our Board of Directors has adopted a resolution exempting us from application of the Maryland Business Combination Act and our bylawsprovide that we are not subject to the Maryland Control Share Acquisition Act, our Board of Directors may elect to make the “business combination” statute and“control share” statute applicable to us at any time and may do so without stockholder approval.Maintenance of our Investment Company Act exemption imposes limits on our operations.We have conducted and intend to continue to conduct our operations so as not to become regulated as an investment company under the InvestmentCompany Act. We believe that there are a number of exclusions under the Investment Company Act that are applicable to us. To maintain the exclusion, the assetsthat we acquire are limited by the provisions of the Investment Company Act and the rules and regulations promulgated under the Investment Company Act. OnAugust 31, 2011, the SEC published a concept release entitled “Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments”(Investment Company Act Rel. No. 29778). This release suggests that the SEC may modify the exclusion relied upon by companies similar to us that invest inmortgage loans and mortgage-backed securities. If the SEC acts to narrow the availability of, or if we otherwise fail to qualify for, our exclusion, we could, amongother things, be required either (a) to change the manner in which we conduct our operations to avoid being required to register as an investment company or (b) toregister as an investment company, either of which could have a material adverse effect on our operations and the market price of our common stock.Tax Risks Related to Our StructureFailure to qualify as a REIT would adversely affect our operations and ability to make distributions.We have operated and intend to continue to operate so to qualify as a REIT for federal income tax purposes. Our continued qualification as a REIT willdepend on our ability to meet various requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources ofour income, and the amount of our distributions to our stockholders. In order to satisfy these requirements, we might have to forego investments we mightotherwise make. Thus, compliance with the REIT requirements may hinder our investment performance. Moreover, while we intend to continue to operate so toqualify as a REIT for federal income tax purposes, given the highly complex nature of the rules governing REITs, there can be no assurance that we will so qualifyin any taxable year.If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, we would be subject to federal income tax(including any applicable alternative minimum tax) on our taxable income at regular corporate rates. We might be required to borrow funds or liquidate someinvestments in order to pay the applicable tax. Our payment of income tax would reduce our net earnings available for investment or distribution to stockholders.Furthermore, if we fail to qualify as a REIT and do not qualify for certain statutory relief provisions, we would no longer be required to make distributions tostockholders. Unless our failure to qualify as a REIT were excused under the federal income tax laws, we generally would be disqualified from treatment as a REITfor the four taxable years following the year in which we lost our REIT status.39REIT distribution requirements could adversely affect our liquidity.In order to qualify as a REIT, we generally are required each year to distribute to our stockholders at least 90% of our REIT taxable income, excludingany net capital gain. To the extent that we distribute at least 90%, but less than 100% of our REIT taxable income, we will be subject to corporate income tax onour undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paidby us with respect to any calendar year are less than the sum of (i) 85% of our ordinary REIT income for that year, (ii) 95% of our REIT capital gain net income forthat year, and (iii) 100% of our undistributed REIT taxable income from prior years.We have made and intend to continue to make distributions to our stockholders to comply with the 90% distribution requirement and to avoid corporateincome tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt of cash couldrequire us to sell assets or to borrow funds on a short-term basis to meet the 90% distribution requirement and to avoid corporate income tax and the nondeductibleexcise tax.Certain of our assets may generate substantial mismatches between REIT taxable income and available cash. Such assets could include mortgage-backedsecurities we hold that have been issued at a discount and require the accrual of taxable income in advance of the receipt of cash. As a result, our taxable incomemay exceed our cash available for distribution and the requirement to distribute a substantial portion of our net taxable income could cause us to:•sell assets in adverse market conditions,•borrow on unfavorable terms or•distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt in order to comply with theREIT distribution requirements.Further, our lenders could require us to enter into negative covenants, including restrictions on our ability to distribute funds or to employ leverage, whichcould inhibit our ability to satisfy the 90% distribution requirement.Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations.The maximum U.S. federal income tax rate for dividends payable to domestic stockholders that are individuals, trust and estates is 20%. Dividendspayable by REITs, however, are generally not eligible for the reduced rates. Although the reduced U.S. federal income tax rate applicable to dividend income fromregular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rate applicable to regular corporatedividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in thestocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common shares.Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments.To qualify as a REIT, we must continually satisfy various tests regarding the sources of our income, the nature and diversification of our assets, theamounts we distribute to our stockholders and the ownership of our common stock. In order to meet these tests, we may be required to forego investments wemight otherwise make. We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available fordistribution, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversificationrequirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our investment performance.Complying with REIT requirements may limit our ability to hedge effectively.The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge the RMBS in our investment portfolio. Our aggregate grossincome from non-qualifying hedges, fees, and certain other non-qualifying sources cannot exceed 5% of our annual gross income. As a result, we might have tolimit our use of advantageous hedging techniques or implement those hedges through a TRS. Any hedging income earned by a TRS would be subject to federal,state and local income tax at regular corporate rates. This could increase the cost of our hedging activities or expose us to greater risks associated with changes ininterest rates than we would otherwise want to bear.40Our ability to invest in and dispose of “to be announced” securities could be limited by our REIT status, and we could lose our REIT status as a result of theseinvestments.In connection with our investment in Agency IOs, we may purchase Agency RMBS through TBAs, or dollar roll transactions. In certain instances, ratherthan take delivery of the Agency RMBS subject to a TBA, we will dispose of the TBA through a dollar roll transaction in which we agree to purchase similarsecurities in the future at a predetermined price or otherwise, which may result in the recognition of income or gains. We account for dollar roll transactions aspurchases and sales. The law is unclear regarding whether TBAs will be qualifying assets for the 75% asset test and whether income and gains from dispositions ofTBAs will be qualifying income for the 75% gross income test.Until such time as we seek and receive a favorable private letter ruling from the IRS, or we are advised by counsel that TBAs should be treated asqualifying assets for purposes of the 75% asset test, we will limit our investment in TBAs and any non-qualifying assets to no more than 25% of our assets at theend of any calendar quarter. Further, until such time as we seek and receive a favorable private letter ruling from the IRS or we are advised by counsel that incomeand gains from the disposition of TBAs should be treated as qualifying income for purposes of the 75% gross income test, we will limit our gains from dispositionsof TBAs and any non-qualifying income to no more than 25% of our gross income for each calendar year. Accordingly, our ability to purchase Agency RMBSthrough TBAs and to dispose of TBAs, through dollar roll transactions or otherwise, could be limited.Moreover, even if we are advised by counsel that TBAs should be treated as qualifying assets or that income and gains from dispositions of TBAs shouldbe treated as qualifying income, it is possible that the IRS could successfully take the position that such assets are not qualifying assets and such income is notqualifying income. In that event, we could be subject to a penalty tax or we could fail to qualify as a REIT if (i) the value of our TBAs, together with our non-qualifying assets for the 75% asset test, exceeded 25% of our gross assets at the end of any calendar quarter or (ii) our income and gains from the disposition ofTBAs, together with our non-qualifying income for the 75% gross income test, exceeded 25% of our gross income for any taxable year.We may incur a significant tax liability as a result of selling assets that might be subject to the prohibited transactions tax if sold directly by us.A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets heldprimarily for sale to customers in the ordinary course of business. There is a risk that certain loans that we are treating as owning for federal income tax purposesand property received upon foreclosure of these loans will be treated as held primarily for sale to customers in the ordinary course of business. Although we expectto avoid the prohibited transactions tax by contributing those assets to one of our TRSs and conducting the marketing and sale of those assets through that TRS, noassurance can be given that the IRS will respect the transaction by which those assets are contributed to our TRS. Even if those contribution transactions arerespected, our TRS will be subject to federal, state and local corporate income tax and may incur a significant tax liability as a result of those sales.We may fail to qualify as a REIT as a result of our investment in another REIT.We may acquire a significant equity ownership interest in RMI, which intends to make an election to be taxed as a REIT. If RMI were to fail to qualify asa REIT, we would likely fail to satisfy one or more of the REIT gross income and asset tests. If we failed to satisfy a REIT gross income or asset test as a result ofan investment in RMI, we would fail to continue to qualify as a REIT unless we are able to qualify for a statutory REIT "savings" provisions, which may require usto pay a significant penalty tax to maintain our REIT qualification.41Item 1B. UNRESOLVED STAFF COMMENTSNone.Item 2. PROPERTIESThe Company does not own any materially important physical properties; however, it does have residential homes (or real estate owned) that it acquires,from time to time, through or in lieu of foreclosures on mortgage loans. As of December 31, 2015 , our principal executive and administrative offices are located inleased space at 275 Madison Avenue, Suite 3200, New York, New York 10016.Item 3. LEGAL PROCEEDINGSWe are at times subject to various legal proceedings arising in the ordinary course of our business. As of the date of this report, we do not believe that anyof our current legal proceedings, individually or in the aggregate, will have a material adverse effect on our operations, financial condition or cash flows.Item 4. MINE SAFETY DISCLOSURESNot applicable.42PART IIItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESMarket Price of and Dividends on the Registrant’s Common Equity and Related Stockholder MattersOur common stock is traded on the NASDAQ Global Select Market under the trading symbol “NYMT”. As of December 31, 2015 , we had 109,401,721shares of common stock outstanding and as of December 31, 2015 , there were approximately 30 holders of record of our common stock. This figure does notreflect the beneficial ownership of shares held in nominee name.The following table sets forth, for the periods indicated, the high, low and quarter end closing sales prices per share of our common stock and the cashdividends paid or payable on our common stock on a per share basis: Common Stock Prices Cash Dividends High Low QuarterEnd DeclarationDate PaymentDate AmountPer ShareYear Ended December 31, 2015 Fourth quarter$6.01 $4.99 $5.33 12/16/2015 1/25/2016 $0.24Third quarter7.80 5.49 5.49 9/18/2015 10/26/2015 0.24Second quarter8.04 7.48 7.48 6/18/2015 7/27/2015 0.27First quarter8.11 7.48 7.76 3/18/2015 4/27/2015 0.27 Common Stock Prices Cash Dividends High Low QuarterEnd DeclarationDate PaymentDate AmountPer ShareYear Ended December 31, 2014 Fourth quarter$8.20 $7.30 $7.71 12/12/2014 1/26/2015 $0.27Third quarter8.03 7.23 7.23 9/18/2014 10/27/2014 0.27Second quarter8.12 7.16 7.81 6/18/2014 7/25/2014 0.27First quarter8.04 6.79 7.78 3/13/2014 4/25/2014 0.27We intend to continue to pay quarterly dividends to holders of shares of common stock. Future distributions will be at the discretion of the Board ofDirectors and will depend on our earnings and financial condition, maintenance of our REIT qualification, restrictions on making distributions under Maryland lawand such other factors as our Board of Directors deems relevant.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone.43Securities Authorized for Issuance Under Equity Compensation PlansThe following table sets forth information as of December 31, 2015 with respect to compensation plans under which equity securities of the Company areauthorized for issuance. The Company has no such plans that were not approved by security holders.Plan Category Number of Securities to beIssued upon Exercise ofOutstanding Options,Warrants and Rights Weighted Average Exercise Priceof Outstanding Options,Warrants and Rights Number of SecuritiesRemaining Available forFuture Issuance under EquityCompensation PlansEquity compensation plans approved by securityholders — $— 551,609Performance GraphThe following line graph sets forth, for the period from December 31, 2010 through December 31, 2015 , a comparison of the percentage change in thecumulative total stockholder return on the Company’s common stock compared to the cumulative total return of the Russell 2000 Index and the FTSE NationalAssociation of Real Estate Investment Trusts Mortgage REIT (“FTSE NAREIT Mortgage REITs”) Index. The graph assumes that the value of the investment inthe Company’s common stock and each of the indices were $100 as of December 31, 2010 .The foregoing graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K intoany filing under the Securities Act or under the Exchange Act, except to the extent we specifically incorporate this information by reference, and shall nototherwise by deemed filed under those acts.44Item 6. SELECTED FINANCIAL DATA The following table sets forth our selected historical operating and financial data. The selected historical operating and financial data for the years endedDecember 31, 2015 , 2014 , 2013 , 2012 and 2011 have been derived from our historical financial statements.The information presented below is only a summary and does not provide all of the information contained in our historical financial statements, includingthe related notes. You should read the information below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and our historical financial statements, including the related notes, (amounts in thousands, except per share data):Selected Statement of Operations Data: For the Years Ended December 31, 2015 2014 2013 2012 2011Interest income$336,838 $378,847 $291,727 $137,348 $24,291Interest expense260,651 301,010 231,178 105,926 4,837Net interest income76,187 77,837 60,549 31,422 19,454Other income (loss)45,841 105,208 29,062 9,105 (3,693)General, administrative and other expenses(39,480) (40,459) (19,917) (11,427) (10,518)Net income attributable to common stockholders$67,023 $130,379 $65,387 $28,279 $4,776Per share basic income$0.62 $1.48 $1.11 $1.08 $0.46Per share diluted income$0.62 $1.48 $1.11 $1.08 $0.46Dividends declared per common share$1.02 $1.08 $1.08 $1.06 $1.00Weighted average shares outstanding-basic108,399 87,867 59,102 26,067 10,495Weighted average shares outstanding-diluted108,399 87,867 59,102 26,067 10,495Selected Balance Sheet Data: As of December 31, 2015 2014 2013 2012 2011Investment securities, available for sale, at fair value$724,720 $816,647 $912,443 $1,034,711 $200,342Investment securities, available for sale, at fair value held insecuritization trusts40,734 38,594 92,578 71,159 —Residential mortgage loans held in securitization trusts (net)119,921 149,614 163,237 187,229 206,920Distressed residential mortgage loans held in securitization trusts(net)114,214 221,591 254,721 60,459 —Distressed residential mortgage loans (net)444,775 361,106 9,713 — —Multi-family loans held in securitization trusts, at fair value7,105,336 8,365,514 8,111,022 5,442,906 —Total assets (1)9,059,564 10,540,005 9,898,675 7,160,401 682,705Financing arrangements, portfolio investments577,413 651,965 791,125 889,134 112,674Financing arrangements, residential mortgage loans214,490 238,949 — — —Residential collateralized debt obligations116,710 145,542 158,410 180,979 199,762Multi-family collateralized debt obligations, at fair value6,818,901 8,048,053 7,871,020 5,319,573 —Securitized debt117,528 232,877 304,964 117,591 —Subordinated debentures45,000 45,000 45,000 45,000 45,000Total liabilities (1)8,179,038 9,722,078 9,418,009 6,838,395 596,398Total stockholders’ equity$880,526 $817,927 $480,666 $322,006 $85,278(1)Our consolidated balance sheets include assets and liabilities of Consolidated VIEs, as the Company is the primary beneficiary of these VIEs. As ofDecember 31, 2015 , December 31, 2014 and December 31, 2013 , assets of the Company's Consolidated VIEs totaled $7,413,082 , $8,847,078 , and$8,665,829 , respectively, and the liabilities of these Consolidated VIEs totaled $7,078,162 , $8,457,034 , and $8,365,345 , respectively. See Note 7 of ourconsolidated financial statements included in this Annual Report for further discussion.45Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGeneralWe are a REIT, for federal income tax purposes, in the business of acquiring, investing in, financing and managing primarily mortgage-related assets andfinancial assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of netinterest margin and net realized capital gains from a diversified investment portfolio. Our portfolio includes certain credit sensitive assets and investments sourcedfrom distressed markets in recent years that create the potential for capital gains, as well as more traditional types of mortgage-related investments that generateinterest income.Our investment portfolio includes residential mortgage loans, including second mortgages and loans sourced from distressed markets, multi-familyCMBS, mezzanine loans to and preferred equity investments in owners of multi-family properties, equity and debt securities issued by entities that invest inresidential and commercial real estate and commercial real estate-related debt investments and Agency RMBS. Subject to maintaining our qualification as a REIT,we also may opportunistically acquire and manage various other types of mortgage-related and financial assets that we believe will compensate us appropriately forthe risks associated with them, including, without limitation, non-Agency RMBS (which may include IOs and POs), collateralized mortgage obligations andsecurities issued by newly originated residential securitizations, including credit sensitive securities from these securitizations.We seek to achieve a balanced and diverse funding mix to finance our assets and operations. We currently rely primarily on a combination of short-termborrowings, such as repurchase agreements with terms typically of 30 days , longer term repurchase agreement borrowing with terms between one year and 18months and longer term structured financings, such as securitizations, with terms longer than one year.We internally manage a certain portion of our portfolio, including Agency ARMs, fixed-rate Agency RMBS, non-Agency RMBS, CLOs, residentialsecuritized loans and second mortgage loans. In addition, as part of our investment strategy, we also contract with certain external investment managers to managespecific asset types targeted by us. We are a party to separate investment management agreements with Headlands, Midway, and RiverBanc, with Headlandsproviding investment management services with respect to our investments in certain distressed residential mortgage loans, Midway providing investmentmanagement services with respect to our investments in Agency IOs, and RiverBanc providing investment management services with respect to our investments inmulti-family CMBS and certain commercial real estate-related investments.Significant Events in 2015•We generated net income attributable to common stockholders in 2015 of $67.0 million , or $ 0.62 per share.•We declared aggregate 2015 dividends of $1.02 per common share.•We issued and sold 4,116,115 shares of common stock under our at-the-market offering programs, resulting in net proceeds to us of $31.9 million .•We closed on an underwritten public offering of 3,600,000 shares of our 7.875% Series C Preferred Stock. The issue and sale of the Series CPreferred Stock resulted in total net proceeds to us of $86.9 million , after deductions of underwriting discounts andcommissions and offering expenses.•We completed the sale of a first loss tranche PO security issued by a single Freddie Mac-sponsored securitization, realizing an aggregate gain ofapproximately $1.5 million .•We completed the sale of certain CLO securities, realizing a gain of approximately $3.2 million .•We sold residential mortgage loans, including distressed residential mortgage loans, with a carrying value of approximately $146.1 million foraggregate proceeds of approximately $175.3 million , which resulted in a net realized gain, before income taxes, of approximately $29.1 million .•We acquired residential mortgage loans, including distressed residential mortgage loans, for an aggregate purchase cost of approximately $156.0million .46Key Fourth Quarter 2015 DevelopmentsRepayment of Outstanding Notes from Distressed Residential Mortgage Loan Securitization Transaction In December 2015, we repaid the outstanding notes from our distressed residential mortgage loan securitization transaction completed in December 2012with an outstanding principal balance of $5.5 million at the time of repayment. The notes were issued in December 2012 in an original principal amount of $38.7million .Acquisition of Pools of Distressed Residential Mortgage LoansDuring the fourth quarter of 2015 , we closed on the acquisition of two pools of distressed residential mortgage loans for an aggregate purchase price,including accrued interest, of approximately $58.4 million . The pools are comprised of re-performing modified first lien mortgage loans that had an aggregateunpaid principal balance of approximately $70.4 million at the time of acquisition.Completion of Financing TransactionsOn November 25, 2015, we entered into a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch that provides for borrowings inan aggregate principal amount of up to $100 million that may be used to fund the future purchase of residential mortgage loans, which loans will serve as collateralfor borrowing thereunder. This master repurchase agreement has a term that will expire on May 25, 2017. The outstanding balance on this master repurchaseagreement will bear interest at one-month LIBOR plus 4.0% and expires on May 25, 2017. There was no outstanding balance on this master repurchase agreementas of December 31, 2015 .On December 14, 2015, we amended a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch, which was previously entered intoin December 2014. The amended master repurchase agreement provides for borrowings in an aggregate principal amount of up to $250 million collateralized bydistressed residential mortgage loans. The amended master repurchase agreement has a term that will expire on December 15, 2016 .Fourth Quarter 2015 Common Stock and Preferred Stock DividendsOn December 16, 2015 , our Board of Directors declared a regular quarterly cash dividend of $0.24 per common share for the quarter endedDecember 31, 2015 . The dividend was paid on January 25, 2016 to our common stockholders of record as of December 28, 2015 .On December 16, 2015 , our Board of Directors declared a Series B Preferred Stock quarterly cash dividend of $0.484375 per share of Series B PreferredStock. The dividend was paid on January 15, 2016 to our preferred stockholders of record as of January 1, 2016 .On December 16, 2015 , our Board of Directors declared a Series C Preferred Stock quarterly cash dividend of $0.4921875 per share of Series C PreferredStock. The dividend was paid on January 15, 2016 to our preferred stockholders of record as of January 1, 2016 .Subsequent EventsFHLBI Membership and AdvancesOn February 20, 2015, our wholly-owned captive insurance subsidiary, Great Lakes Insurance Holdings LLC ("GLIH") was granted membership to theFederal Home Loan Bank of Indianapolis ("FHLBI"). On January 12, 2016, the regulator of the Federal Home Loan Bank ("FHLB") system, the Federal HousingFinance Agency, released a final rule that amends regulations governing FHLB membership, including preventing captive insurance companies from being eligiblefor FHLB membership. Under the terms of the final rule, our captive insurance subsidiary is required to terminate its membership and repay its existing advanceswithin one year following the effective date of the final rule. In addition, our captive insurance subsidiary is prohibited from taking new advances or renewingexisting maturing advances during the one-year transition period. The final rule became effective on February 19, 2016. As of December 31, 2015, the our captiveinsurance subsidiary had $121 million of outstanding secured advances from the FHLBI. During January 2016, we repaid all of our outstanding FHLBI advances,which repayment was funded primarily through repurchase agreement financing. 47Current Market Conditions and Commentar yThe housing market, credit conditions and the interest rate environment each have a significant impact on our business. While the U.S. economy grew at amoderate pace throughout 2015 and the U.S. labor market continued its steady, if moderate, advance, the uncertainty surrounding commodity prices, monetarypolicy and the global economic outlook greatly impacted the volatility in U.S. credit and financial markets. These uncertainties resulted in pricing pressures acrossmany asset classes, including the CMBS market, in the second half of 2015. In light of these conditions, we elected to remain defensive throughout most of thesecond half of 2015, maintaining a higher than optimal cash position and lower leverage. We limited our investments in the second half of 2015 to primarilyoriginations of loans, both in multi-family mezzanine loan and second lien residential mortgages, as well as purchases of reperforming residential loans. Themarket conditions discussed below weighed heavily on our strategy and performance in 2015.General. The U.S. economy grew at a moderate pace in 2015 as evidenced by the 2.4% expansion of real gross domestic product (“GDP”), which wasbelow Federal Reserve policymakers’ forecast at the outset of the 2015 fiscal year. Data for 2015 suggests that economic activity slowed during the second half ofthe year with GDP only increasing by 0.7% in the fourth quarter 2015 and 2.0% in the third quarter of 2015, compared to an increase of 4.1% in the first half of2015. According to the minutes of the Federal Reserve’s December 2015 meeting, Federal Reserve policymakers expect slightly lower GDP growth in 2016 and2017, with the central tendency projections for GDP growth ranging from 2.3% to 2.5% for 2016 and 2.0% to 2.3% for 2017, with slower growth projected in 2018and beyond. The labor market continued to display signs of improvement in 2015. According to the U.S. Department of Labor, the U.S. unemployment rate fell from5.6% as of the end of December 2014 to 5.0% as of the end of December 2015, while total nonfarm payroll employment posted an average monthly increase of221,000 jobs in 2015, down modestly from an average monthly increase of 246,000 jobs in 2014. Data from the U.S. Department of Labor in January 2016indicated that the U.S. unemployment rate showed little change from 2015 at 4.9%, while the nonfarm payroll exhibited a slightly slower increase, posting amonthly average increase of only 151,000 jobs for the month. Global market volatility in equity markets as well as the collapse in oil prices has weighed heavily on the outlook for many global economies. It remainsunclear how great an impact these conditions will have on the U.S. economy in the coming months and quarters. Foreign and domestic banks that have lendingexposure to the oil industry have experienced significant equity pricing pressure which has been reflected in overall credit spreads across many fixed incomesectors, including many that we invest in or to which we are currently exposed.Federal Reserve and Monetary Policy. In December 2015, given indications that the U.S. economy had improved sufficiently, the Federal Reserveannounced that it would raise the target range for the federal funds rate by 25 basis points and has indicated its expectations for additional rate hikes in 2016,although the Federal Reserve opted not to increase the rate at its January 2016 meeting. The Federal Reserve indicated that in determining the size and timing offuture adjustments to the target range for the federal funds rate, it will assess progress, both realized and expected, towards and economic conditions relative to itsobjectives of maximum employment and 2% inflation. Significant uncertainty with respect to the speed at which the Federal Reserve will tighten its monetarypolicy continues to persist and has resulted in substantial market volatility in recent months. We anticipate further uncertainty as the recent economic data suggestsa slowing U.S. economy which may cause the Federal Reserve to leave rates lower for an extended period. Greater uncertainty frequently leads to wider assetspreads or lower prices and higher hedging costs.Single-Family Homes and Residential Mortgage Market. The residential real estate market showed signs of growth during 2015 after deceleratingthroughout much of 2014. Data released by S&P Indices for its S&P/Case-Shiller Home Price Indices for November 2015 showed that, on average, home pricesincreased 5.8% for the 20-City Composite over November 2014. In addition, according to data provided by the U.S. Department of Commerce, privately-ownedhousing starts for single family homes averaged a seasonally adjusted annual rate of 768,000 during the fourth quarter of 2015, which was 6.1% above theDecember 2014 rate of 724,000. We expect the single-family residential real estate market to continue to improve modestly in the near term. We expect thatimproving single family housing fundamentals will have a positive impact on the overall credit profile of our existing portfolio of distressed residential loans.48Multi-family Housing. Apartments and other residential rental properties remain one of the better performing segments of the commercial real estatemarket. According to data provided by the U.S. Department of Commerce, starts on multi-family homes containing five units or more averaged a seasonallyadjusted annual rate of 365,000 during the fourth quarter of 2015 and 409,917 for the full year 2015, as compared to 370,333 for the full year 2014. Moreover,even with the recent growth in supply, vacancy trends in the multi-family sector appear to remain stable. According to the third quarter of 2015 MultifamilyVacancy Index (“MVI”), which is produced by the National Association of Home Builders and surveys the multifamily housing industry’s perception of vacancies,the MVI was at 39 for the third quarter of 2015, equal to the level reported for the fourth quarter of 2014. Strength in the multi-family housing sector hascontributed to valuation improvements for multi-family properties and, in turn, many of the multi-family CMBS that we own. We expect the multi-family sector tocontinue to be a strong performer in the near term given the current favorable conditions for multi-family housing in the U.S; however, widening credit spreads inthe second half of 2015 has caused valuations in this space to pull back from recent highs. Credit Spreads. During the first six months of 2015, we saw continued tightening of credit spreads, which had a positive impact on the value of many ofour credit sensitive assets while also resulting in a more challenging current return environment for new investment in many of these asset classes. However,during the second half of 2015 and into the beginning of 2016, credit spreads on many of the credit sensitive assets in which we invest widened, which hasnegatively impacted the valuation of certain of these assets, particularly our multi-family CMBS investments. In the event credit spreads continue to widen, theseassets may experience a further decline in valuation. Financing markets. During 2015, the bond market experienced a significant amount of volatility with the closing yield of the ten-year U.S. Treasury Notetrading between 1.68% and 2.50%, settling at 2.27% at December 31, 2015. Although stabilizing somewhat at the end of 2015, the bond has market continued toexperience significant fluctuations, largely as a result of market reaction to uncertain monetary policy and conditions in the global economy.Developments at Fannie Mae and Freddie Mac. Payments on the Agency ARMs and fixed-rate Agency RMBS in which we invest are guaranteed byFannie Mae and Freddie Mac. In addition, although not guaranteed by Freddie Mac, all of our multi-family CMBS has been issued by securitization vehiclessponsored by Freddie Mac and the Agency IOs we invest in are issued by Fannie Mae, Freddie Mac or Ginnie Mae. As broadly publicized, Fannie Mae andFreddie Mac are presently under federal conservatorship as the U.S. Government continues to evaluate the future of these entities and what role the U.S.Government should continue to play in the housing markets in the future. Since being placed under federal conservatorship, there have been a number of proposalsintroduced, both from industry groups and by the U.S. Congress, relating to changing the role of the U.S. government in the mortgage market and reforming oreliminating Fannie Mae and Freddie Mac. It remains unclear how the U.S. Congress will move forward on such reform at this time and what impact, if any, thisreform will have on mortgage REITs. See “Item 1A. Risk Factors-Risks Related to Our Business and Our Company-Changes in laws and regulations affecting therelationship between Fannie Mae and Freddie Mac and the U.S. government may adversely affect our business.”Significant Estimates and Critical Accounting PoliciesWe prepare our consolidated financial statements in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions thataffect reported amounts. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe arereasonable based on facts and circumstances existing at the time of reporting. The results of these estimates affect reported amounts of assets, liabilities andaccumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and othercomprehensive income during the periods presented.Changes in the estimates and assumptions could have a material effect on these financial statements. Accounting policies and estimates related to specificcomponents of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. In accordance with SEC guidance, thosematerial accounting policies and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and which requirecomplex management judgment are discussed below.Revenue Recognition . Interest income on our investment securities is accrued based on the outstanding principal balance and their contractualterms. Premiums and discounts associated with investment securities at the time of purchase or origination are amortized into interest income over the life of suchsecurities using the effective yield method. Adjustments to premium amortization are made for actual prepayment activity.49Interest income on our credit sensitive securities, such as our CMBS that were purchased at a discount to par value, is recognized based on the security’seffective interest rate. The effective interest rate on these securities is based on management’s estimate from each security of the projected cash flows, which areestimated based on assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis,management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and its ownjudgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, orfrom those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on these securities.A portion of the purchase discount on the Company’s first loss tranche PO multi-family CMBS is designated as non-accretable purchase discount orcredit reserve, which partially mitigates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accretedinto interest income. The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlyingcollateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit reserve is morefavorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time. Conversely, if the performance of asecurity with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and write-downs ofsuch securities to a new cost basis could be required.With respect to interest rate swaps that have not been designated as hedges, any net payments under, or fluctuations in the fair value of, such swaps willbe recognized in current earnings.Fair Value. The Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, whereavailable. 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 orindependently-sourced market parameters, including interest rate yield curves. Such inputs to the valuation methodology are unobservable and significant to thefair value measurement. The Company’s interest-only CMBS, principal-only CMBS, multi-family loans held in securitization trusts and multi-family CDOs areconsidered to be the most significant of its fair value estimates.The Company’s valuation methodologies are described in “Note 14 – Fair Value of Financial Instruments” included in Item 8 of this Annual Report onForm 10-K.Residential Mortgage Loans Held in Securitization Trusts – Impaired Loans (net) – Impaired residential mortgage loans held in securitization trusts arerecorded at amortized cost less specific loan loss reserves. Impaired loan value is based on management’s estimate of the net realizable value taking intoconsideration local market conditions of the distressed property, updated appraisal values of the property and estimated expenses required to remediate theimpaired loan.Variable Interest Entities – A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity inwhich equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activitieswithout additional subordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE. As primarybeneficiary, it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits orabsorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIEeach reporting period, based upon changes in the facts and circumstances pertaining to the VIE.Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations – As of December 31, 2015 , we owned 100% of the firstloss tranche securities of the “Consolidated K-Series.” The Consolidated K-Series collectively represents, as of December 31, 2015 and December 31, 2014 , fiveand six, respectively, separate Freddie Mac sponsored multi-family loan K-Series securitizations, of which we, or one of our special purpose entities, or SPEs, ownthe first loss tranche PO securities and certain IO securities. We determined that the Consolidated K-Series were VIEs and that we are the primary beneficiary ofthe Consolidated K-Series. As a result, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans including their liabilities, incomeand expenses in our consolidated financial statements. We have elected the fair value option on the assets and liabilities held within the Consolidated K-Series,which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series will be reflected in our consolidated statement of operations.Fair Value Option – The fair value option provides an election that allows companies to irrevocably elect fair value for financial assets and liabilities onan instrument-by-instrument basis at initial recognition. Changes in fair value for assets and liabilities for which the election is made will be recognized in earningsas they occur. The Company elected the fair value option for its Agency IO strategy, certain of its investments in unconsolidated entities and the Consolidated K-Series (as defined in Note 2 to our consolidated financial statements included in this report).50Acquired Distressed Residential Mortgage Loans – Acquired distressed residential mortgage loans that have evidence of deteriorated credit quality atacquisition are accounted for under ASC Subtopic 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30"). Managementevaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recentborrower credit scores and recent loan-to-value percentages. Acquired distressed residential mortgage loans are recorded at fair value at the date of acquisition,with no allowance for loan losses. Under ASC 310-30, the acquired loans may be aggregated and accounted for as a pool of loans if the loans being aggregatedhave common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an expectation of aggregate cash flows. Once apool is assembled, it is treated as if it was one loan for purposes of applying the accounting guidance.Under ASC 310-30, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” isaccreted into interest income over the life of the loans in each pool or individually using a level yield methodology. Accordingly, our acquired distressed residentialmortgage loans accounted for under ASC 310-30 are not subject to classification as nonaccrual classification in the same manner as our residential mortgage loansthat were not distressed when acquired by us. Rather, interest income on acquired distressed residential mortgage loans relates to the accretable yield recognized atthe pool level or on an individual loan basis, and not to contractual interest payments received at the loan level. The difference between contractually requiredprincipal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact ofprepayments and expected credit losses over the life of the individual loan, or the pool (for loans grouped into a pool).Management monitors actual cash collections against its expectations, and revised cash flow expectations are prepared as necessary. A decrease inexpected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of anallowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods initially reduces any previouslyestablished allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount ofaccretable yield for the loan pool. The adjustment of accretable yield due to a significant increase in expected cash flows is accounted for prospectively as a changein estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodicaccretion is adjusted accordingly over the remaining life of the loans in the pool or individual loan, as applicable. The impacts of (i) prepayments, (ii) changes invariable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income. Recent Accounting PronouncementsA discussion of recent accounting pronouncements and the possible effects on our financial statements is included in “Note 2 — Summary of SignificantAccounting Policies” included in Item 8 of this Annual Report on Form 10-K.51Capital AllocationThe following tables set forth our allocated capital by investment type at December 31, 2015 and December 31, 2014, respectively (dollar amounts inthousands):At December 31, 2015 : AgencyRMBS (1) Agency IOs Multi-Family (2) DistressedResidentialLoans (3) ResidentialSecuritizedLoans (4) Other (5) TotalCarrying value$547,745 $175,408 $450,228 $562,303 $119,921 $15,184 $1,870,789Liabilities: Callable (6)(489,253) (88,160) — (214,490) — — (791,903)Non-callable— — (83,871) (33,657) (116,710) (45,000) (279,238)Hedges (Net) (7)2,997 2,623 — — — — 5,620Cash (8)5,477 13,663 525 551 — 56,213 76,429Other9,311 4,799 (2,185) 13,330 1,187 (27,613) (1,171)Net capital allocated$76,277 $108,333 $364,697 $328,037 $4,398 $(1,216) $880,526(1)Includes both Agency ARMs and Agency fixed rate RMBS.(2)The Company determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’sfinancial statements. A reconciliation to our financial statements as of December 31, 2015 follows:Multi-Family loans held in securitization trusts, at fair value$7,105,336Multi-Family CDOs, at fair value(6,818,901)Net carrying value286,435Investment securities available for sale, at fair value held in securitization trusts40,734Total CMBS, at fair value327,169Mezzanine loan, preferred equity investments and investments in unconsolidated entities123,059Securitized debt(83,871)Other(1,660)Net Capital in Multi-Family$364,697(3)Includes mortgage loans held for sale with a carrying value of $3.3 million that is included in the Company’s accompanying consolidated balance sheet inreceivables and other assets.(4)Represents our residential mortgage loans held in securitization trusts. We securitized these loans in 2005.(5)Other includes non-Agency RMBS and mortgage loans held for sale and mortgage loans held for investment. Other non-callable liabilities consist of $45million in subordinated debentures.(6)Includes repurchase agreements and FHLBI advances.(7)Includes derivative assets, derivative liabilities, payable for securities purchased and restricted cash posted as margin.(8)Includes $11.6 million held in overnight deposits in our Agency IO portfolio to be used for trading purposes. These deposits are included in theCompany’s accompanying consolidated balance sheet in receivables and other assets.52At December 31, 2014 : AgencyRMBS (1) Agency IOs Multi-Family (2) DistressedResidentialLoans (3) ResidentialSecuritizedLoans (4) Other (5) TotalCarrying value$660,374 $119,131 $430,789 $587,860 $149,614 $41,383 $1,989,151Liabilities: Callable (6)(585,051) (66,914) — (238,949) — — (890,914)Non-callable— — (83,513) (149,364) (145,542) (45,000) (423,419)Hedges (Net) (7)3,501 11,415 — — — — 14,916Cash (8)2,781 40,572 — — — 72,809 116,162Other2,731 3,329 (5,569) 39,759 1,531 (29,750) 12,031Net capital allocated$84,336 $107,533 $341,707 $239,306 $5,603 $39,442 $817,927(1)Includes both Agency ARMs and Agency fixed rate RMBS.(2)The Company determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’sfinancial statements. A reconciliation to our financial statements as of December 31, 2014 follows:Multi-Family loans held in securitization trusts, at fair value$8,365,514Multi-Family CDOs, at fair value(8,048,053)Net carrying value317,461Investment securities available for sale, at fair value held in securitization trusts38,594Total CMBS, at fair value356,055Mezzanine loan, preferred equity investments and investments in unconsolidated entities74,734Securitized debt(83,513)Other(5,569)Net Capital in Multi-Family$341,707(3)Includes mortgage loans held for sale with a carrying value of $5.2 million that is included in the Company’s accompanying consolidated balance sheet inreceivables and other assets.(4)Represents our residential mortgage loans held in securitization trusts. We securitized these loans in 2005.(5)Other includes CLOs having a carrying value of $35.2 million . Other non-callable liabilities consist of $45 million in subordinated debentures.(6)Includes repurchase agreements.(7)Includes derivative assets, derivative liabilities, payable for securities purchased and restricted cash posted as margin.(8)Includes $40.6 million held in overnight deposits in our Agency IO portfolio to be used for trading purposes. These deposits are included in theCompany’s accompanying consolidated balance sheet in receivables and other assets.53Results of OperationsComparison of the Year Ended December 31, 2015 to the Year Ended December 31, 2014For the year ended December 31, 2015 , we reported net income attributable to common stockholders of $ 67.0 million , as compared to net incomeattributable to common stockholders of $130.4 million for the prior year. The main components of the change in net income for the year ended December 31, 2015as compared to the prior year are detailed in the following table (amounts in thousands, except per share data): For the Years Ended December 31, 2015 2014 $ ChangeNet interest income$76,187 $77,837 $(1,650)Total other income$45,841 $105,208 $(59,367)Total general, administrative and other expenses$(39,480) $(40,459) $979Income from operations before income taxes$82,548 $142,586 $(60,038)Income tax expense$(4,535) $(6,395) $1,860Net income$78,013 $136,191 $(58,178)Preferred stock dividends$(10,990) $(5,812) $(5,178)Net income attributable to common stockholders$67,023 $130,379 $(63,356)Basic income per common share$0.62 $1.48 $(0.86)Diluted income per common share$0.62 $1.48 $(0.86)Net Interest IncomeThe decrease in net interest income of approximately $1.7 million for the year ended December 31, 2015 as compared to the corresponding period in 2014was driven by:•A decrease in net interest income of approximately $7.8 million and $3.4 million in our Agency IO and Agency RMBS portfolios, respectively,in 2015 due to a decrease in average interest earning assets in these portfolios and higher prepayment experience on these assets in 2015.•A decrease in net interest income of approximately $2.6 million in our multi-family portfolio in 2015 due to a reduction in this portfolio’saverage interest earning assets. We sold two multi-family CMBS PO and two IO securities in the third and fourth quarter of 2014 and one multi-family CMBS PO security in the first quarter of 2015 and multiple multi-family CMBS IO securities in the third quarter of 2015.•A decrease in net interest income of approximately $3.2 million in 2015 due to the sale of CLO securities in the second quarter of 2015.•A decrease in net interest income of approximately $0.6 million in our residential securitized loan portfolio due to a decrease in average interestearning assets in this portfolio.•An increase in net interest income of approximately $16.0 million in our distressed residential loan portfolio due to an increase in averageinterest earning assets in this portfolio. Average interest earning assets in this portfolio increased to $572.8 million for the year endedDecember 31, 2015 as compared to $249.0 million for the corresponding period in 2014.54Other IncomeTotal other income decreased by $59.4 million for the year ended December 31, 2015 as compared to the prior year. The change was primarily driven by:•A decrease in realized gain on investment securities and related hedges of $46.7 million in 2015. Realized gains in our multi-family portfoliodecreased by $39.0 million due to the sale of certain multi-family CMBS investments in the third and fourth quarter of 2014 that resulted in arealized gain amounting to $39.1 million. In addition, our Agency IO portfolio generated a $10.9 million increase in realized losses on itsderivative instruments for the year ended December 31, 2015 . These changes were partially offset by realized gains recognized on the sale ofthe Company's CLO securities in 2015 amounting to $3.2 million.•A decrease in net unrealized loss on investment securities and related hedges of $5.0 million for the year ended December 31, 2015 , primarilyrelated to our Agency IO portfolio.•An decline in net unrealized gains on multi-family loans and debt held in securitization trusts of $44.6 million in 2015 due to widening creditspreads in 2015.•An increase in realized gains on distressed residential mortgage loans of $16.9 million in 2015 due primarily to the sale of two pools ofdistressed residential mortgage loans in September 2015 with a carrying value of $120.3 million for aggregate proceeds of approximately $144.2million. Because each loan buyer’s diligence requirements differ, income generation from the workout or resale of these loans remainschallenging to predict and is expected to be uneven from quarter to quarter.•An increase in gain on de-consolidation of $1.5 million in 2015 due to the sale of a first loss PO security issued by a single Freddie Mac-sponsored securitization included in the Consolidated K-Series in the first quarter of 2015.•An increase in other income of $4.6 million in 2015, which is primarily due to an increase in income from our common and preferred equityownership interests in RBMI, an entity that invests in commercial real estate and commercial real estate-related debt investments.Comparative General, Administrative and Other Expenses (dollar amounts in thousands) For the Years Ended December 31,General, Administrative and Other Expenses: 2015 2014 $ ChangeSalaries, benefits and directors’ compensation $4,661 $4,281 $380Professional fees 2,542 2,618 (76)Base management and incentive fees 19,188 24,530 (5,342)Expenses on distressed residential mortgage loans 10,364 6,429 3,935Other 2,725 2,601 124Total $39,480 $40,459 $(979)The decrease in base management and incentive fees for the year ended December 31, 2015 as compared to the same period in 2014 was primarily drivenby a decrease in incentive compensation earned by RiverBanc. In the third and fourth quarter of 2014, RiverBanc earned incentive compensation from the sale ofcertain multi-family CMBS investments that generated $39.1 million in realized gains.The increase in expenses related to distressed residential mortgage loans for the year ended December 31, 2015 as compared to the same period in 2014 isdue to a higher average balance of loans outstanding, thereby resulting in higher servicing costs, work-out costs and due diligence costs.55Comparison of the Year Ended December 31, 2014 to the Year Ended December 31, 2013For the year ended December 31, 2014 , we reported net income attributable to common stockholders of $ 130.4 million , as compared to net incomeattributable to common stockholders of $65.4 million for the prior year. The main components of the change in net income for the year ended December 31, 2014as compared to the prior year are detailed in the following table (dollar amounts in thousands, except per share data): For the Years Ended December 31, 2014 2013 $ ChangeNet interest income$77,837 $60,549 $17,288Total other income$105,208 $29,062 $76,146Total general, administrative and other expenses$(40,459) $(19,917) $(20,542)Income from continuing operations before income taxes$142,586 $69,694 $72,892Income tax expense$(6,395) $(739) $(5,656)Net income$136,191 $68,955 $67,236Preferred stock dividends$(5,812) $(3,568) $(2,244)Net income attributable to common stockholders$130,379 $65,387 $64,992Basic income per common share$1.48 $1.11 $0.37Diluted income per common share$1.48 $1.11 $0.37Net Interest IncomeThe increase in net interest income of approximately $17.3 million for the year ended December 31, 2014 as compared to the prior year was driven by:•A increase in net interest income of approximately $7.9 million in our multi-family portfolio in 2014 due to an increase in this portfolio’saverage interest earning assets. Average interest earning assets in this portfolio increased to $302.0 million for the year ended December 31,2014 as compared to $233.5 million for the corresponding period in 2013.•An increase net interest income of approximately $4.8 million in our Agency IO portfolio in 2014 due to an increase in average interest earningassets in this portfolio and lower prepayment experience on these assets in 2014 as compared to 2013.•An increase in net interest income of approximately $3.3 million in our distressed residential loan portfolio in 2014 due to an increase in thisportfolio's average interest earning assets. Average interest earning assets in this portfolio increased to $249.0 million for the year endedDecember 31, 2014 as compared to $158.2 million for the corresponding period in 2013.•An increase in net interest income of approximately $2.6 million in 2014 due to our higher yielding CLO securities.•A decrease in net interest income of approximately $0.6 million in our residential securitized loan portfolio and approximately $1.0 million inour Agency RMBS portfolio in 2014 due to declines in average interest earning assets in these portfolios.56Other IncomeTotal other income increased by $76.1 million for the year ended December 31, 2014 as compared to the prior year. The change was primarily driven by:•An increase in realized gain on investment securities and related hedges of $52.8 million in 2014 as compared to the prior year. We sold certainmulti-family CMBS securities in the third and fourth quarters of 2014 resulting in a realized gain amounting to $39.1 million for the year endedDecember 31, 2014 . This realized gain was partially offset by $3.4 million of loss on extinguishment of debt related to the early termination of arecourse financing that was collateralized by certain of our multi-family CMBS, including the security we sold in the third quarter of 2014. Inaddition, realized gains from our Agency IO portfolio hedging activities increased by $13.7 million for the year ended December 31, 2014 ascompared to the prior year.•An increase in unrealized loss on investment securities and related hedges of $13.1 million for the year ended December 31, 2014 , as comparedto the same periods in 2013, which change was primarily related to our Agency IO strategy. The Agency IO portfolio is an actively managedstrategy resulting in both unrealized and realized activity. Over time we expect the unrealized and realized activity of our Agency IO strategy tooffset and result in no material income or loss.•An increase in realized gains on distressed residential mortgage loans of $12.8 million for the year ended December 31, 2014 , as compared tothe prior year. The realized gains were derived from loan refinancings, workouts and resales, with the majority of the realized gains on theseassets being attributable to loan resales during the first and fourth quarters of 2014.•An increase in net unrealized gains on multi-family loans and debt held in securitization trusts of $25.4 million for the year ended December 31,2014 , as compared to the prior year, which was primarily due to improved pricing on our multi-family CMBS investments that was driven, inpart, by greater market demand for this product.•An increase in other income of $2.1 million for the year ended December 31, 2014 , as compared to the prior year, which was primarily afunction of an increase in income related to our 20% ownership interest in RiverBanc.Comparative General, Administrative and Other Expenses (dollar amounts in thousands) For the Years Ended December 31,General, Administrative and Other Expenses: 2014 2013 $ ChangeSalaries, benefits and directors’ compensation $4,281 $2,786 $1,495Professional fees 2,618 2,721 (103)Management fees 24,530 8,133 16,397Expenses on distressed residential mortgage loans 6,429 3,868 2,561Other 2,601 2,409 192Total $40,459 $19,917 $20,542The increase in salaries, benefits and directors’ compensation in 2014 as compared to the prior year is due to an increase in performance-basedcompensation paid to our employees. The increase in base management and incentive fees for the year ended December 31, 2014 , as compared to the prior year is primarily due to incentivefees earned by RiverBanc from the sale of the multi-family CMBS securities during the third and fourth quarters of 2014. Base management and incentive fees forthe year ended December 31, 2014 were also driven higher by the increase in capital allocated to assets managed by our external managers and the improvedperformance of the assets they manage for us in 2014, which resulted in incentive fees earned. The increase in expenses related to distressed residential mortgage loans is related to the upfront due diligence costs related to our purchase of a large poolof distressed residential loans in December 2014 and to a higher average balance of loans outstanding, thereby resulting in higher servicing costs, work-out costsand due diligence costs.57Income Tax Expense The increase in income tax expense for the year ended December 31, 2014 as compared to the prior year was primarily due to the increase in realizedgains resulting from loan sales in our distressed residential loan portfolio. A gain on sale from loan activity is transacted in a taxable REIT subsidiary for REITcompliance purposes and is subject to local, state and federal taxes.Quarterly Comparative Net Interest SpreadOur results of operations for our investment portfolio during a given period typically reflects the net interest income earned on our investment portfolio ofRMBS, CMBS (including CMBS held in securitization trusts), residential securitized loans, distressed residential loans (including distressed residential loans heldin securitization trusts), loans held for investment, mezzanine loans and preferred equity investments, where the risks and payment characteristics are equivalent toand accounted for as loans, loans held for sale and CLOs (collectively, our “Interest Earning Assets”). The net interest spread is impacted by factors such as ourcost of financing, the interest rate that our investments bear and our interest rate hedging strategies. Furthermore, the amount of premium or discount paid onpurchased portfolio investments and the prepayment rates on portfolio investments will impact the net interest spread as such factors will be amortized over theexpected term of such investments. Realized and unrealized gains and losses on TBAs, Eurodollar and Treasury futures and other derivatives associated with ourAgency IO investments, which do not utilize hedge accounting for financial reporting purposes, are included in other income (loss) in our statement of operations,and therefore, not reflected in the data set forth below.The following table sets forth certain information about our portfolio by investment type and their related interest income, interest expense, weightedaverage yield, average cost of funds and net interest spread for the twelve months ended December 31, 2015 , 2014 and 2013 (dollar amounts in thousands):Twelve Months Ended December 31, 2015 AgencyRMBS Agency IOs Multi-Family (1)(2) DistressedResidentialLoans ResidentialSecuritizedLoans Other TotalInterest Income$11,039 $11,412 $32,311 $39,739 $3,285 $6,081 $103,867Interest Expense(4,693) (892) (6,006) (13,125) (936) (147) (25,799)Net Interest Income (3)$6,346 $10,520 $26,305 $26,614 $2,349 $5,934 $78,068 Average Interest Earning Assets (2) (4)$624,111 $132,468 $268,726 $572,796 $143,200 $17,108 $1,758,409Weighted Average Yield on InterestEarning Assets (5)1.77 % 8.61 % 12.02 % 6.94 % 2.29 % 35.54% 5.91 %Average Cost of Funds (6)(0.87)% (1.28)% (7.11)% (4.03)% (0.69)% —% (2.23)%Net interest spread (7)0.90 % 7.33 % 4.91 % 2.91 % 1.60 % 35.54% 3.68 %Twelve Months Ended December 31, 2014 Agency RMBS Agency IOs Multi- Family (1)(2) Distressed Residential Loans Residential Securitized Loans Other TotalInterest Income$14,360 $19,068 $37,668 $18,681 $3,895 $9,259 $102,931Interest Expense(4,588) (797) (8,784) (8,075) (904) (87) (23,235)Net Interest Income (3)$9,772 $18,271 $28,884 $10,606 $2,991 $9,172 $79,696 Average Interest Earning Assets (2) (4)$724,769 $146,001 $302,009 $248,970 $161,596 $24,828 $1,608,173Weighted Average Yield on InterestEarning Assets (5)1.98 % 13.06 % 12.47 % 7.50 % 2.41 % 37.29 % 6.40 %Average Cost of Funds (6)(0.74)% (0.92)% (7.17)% (4.82)% (0.58)% (1.59)% (2.00)%Net interest spread (7)1.24 % 12.14 % 5.30 % 2.68 % 1.83 % 35.70 % 4.40 %58Twelve Months Ended December 31, 2013 Agency RMBS Agency IOs Multi- Family (1)(2) Distressed Residential Loans Residential Securitized Loans Other TotalInterest Income$16,135 $14,305 $28,007 $11,752 $4,701 $6,598 $81,498Interest Expense(5,395) (860) (7,045) (4,457) (1,123) (191) (19,071)Net Interest Income (3)$10,740 $13,445 $20,962 $7,295 $3,578 $6,407 $62,427 Average Interest Earning Assets (2) (4)$833,263 $135,380 $233,477 $158,190 $172,468 $17,702 $1,550,480Weighted Average Yield on InterestEarning Assets (5)1.94 % 10.57 % 12.00 % 7.43 % 2.73 % 37.27 % 5.26 %Average Cost of Funds (6)(0.72)% (0.95)% (7.90)% (4.88)% (0.64)% (2.15)% (1.58)%Net interest spread (7)1.22 % 9.62 % 4.10 % 2.55 % 2.09 % 35.12 % 3.68 %(1)The Company, through its ownership of certain securities has determined it is the primary beneficiary of the Consolidated K-Series and has consolidatedthe Consolidated K-Series into the Company’s financial statements. Average Interest Earning Assets for the periods indicated exclude all Consolidated K-Series assets other than those securities actually owned by the Company. Interest income amounts represent interest income earned by securities that areactually owned the Company. A reconciliation of our interest income from, multi-family investments to our consolidated financial statements for thetwelve months ended months ended December 31, 2015 , 2014 and 2013 is set forth below (dollar amounts in thousands): Twelve Months Ended December 31, 2015 2014 2013Interest income, multi-family loans held in securitization trusts $257,417 $301,877 $228,631Interest income, investment securities, available for sale (a) 3,516 9,167 9,090Interest expense, multi-family collateralized obligation 232,971 275,916 210,229Interest income, multi-family CMBS 27,962 35,128 27,492Interest income mezzanine loan and preferred equity investments (a) 4,349 2,540 515Interest income in Multi-Family $32,311 $37,668 $28,007(a) Included in the Company’s accompanying consolidated statements of operations in interest income, investment securities and other.(2)Average Interest Earning Assets for the quarter excludes all Consolidated K-Series assets other than those securities issued by the securitizationscomprising the Consolidated K-Series that are actually owned by the Company.(3)Net Interest Income excludes interest expense on our subordinated debentures.(4)Our Average Interest Earning Assets is calculated based on daily average amortized cost for the respective periods.(5)Our Weighted Average Yield on Interest Earning Assets was calculated by dividing our annualized interest incomeby our average Interest Earning Assetsfor the respective periods.(6)Our Average Cost of Funds was calculated by dividing our annualized interest expense by our average interest bearing liabilities, excluding subordinateddebentures for the respective periods. Our Average Cost of funds includes interest expense on our interest rate swaps.(7)Net Interest Spread is the difference between our Weighted Average Yield on Interest Earning Assets and our Average Cost of Funds, excluding theWeighted Average Cost of subordinated debentures.59Prepayment HistoryThe following table sets forth the actual constant prepayment rates (“CPR”) for selected asset classes, by quarter, for the periods indicated:Quarter Ended Agency ARMs Agency Fixed Rate Agency IOs Non-Agency RMBS ResidentialSecuritizations Total WeightedAverageDecember 31, 2015 16.9% 8.5% 14.6% 15.3% 31.2% 14.7%September 30, 2015 18.6% 10.5% 18.0% 12.5% 8.9% 15.1%June 30, 2015 9.2% 10.6% 16.3% 12.5% 11.1% 13.3%March 31, 2015 9.1% 6.5% 14.7% 15.5% 13.7% 11.5%December 31, 2014 12.3% 6.5% 14.6% 13.7% 5.4% 11.1%September 30, 2014 20.5% 9.2% 15.2% 18.7% 5.4% 13.1%June 30, 2014 9.9% 6.7% 12.7% 10.5% 7.0% 10.1%March 31, 2014 8.8% 5.2% 11.3% 9.7% 7.5% 8.8%December 31, 2013 6.7% 5.3% 13.5% 16.8% 12.6% 10.0%September 30, 2013 16.8% 8.5% 20.4% 23.6% 12.0% 15.3%June 30, 2013 22.2% 6.4% 21.9% 18.3% 6.5% 15.4%March 31, 2013 20.8% 3.8% 21.6% 15.9% 10.2% 12.9%When prepayment expectations over the remaining life of assets increase, we have to amortize premiums over a shorter time period resulting in a reducedyield to maturity on our investment assets. Conversely, if prepayment expectations decrease, the premium would be amortized over a longer period resulting in ahigher yield to maturity. In addition, the market values and cash flows from our Agency IOs can be materially adversely affected during periods of elevatedprepayments. We monitor our prepayment experience on a monthly basis and adjust the amortization rate to reflect current market conditions.Financial ConditionAs of December 31, 2015 , we had approximately $9.1 billion of total assets, as compared to approximately $10.5 billion of total assets as ofDecember 31, 2014 . A significant portion of our assets represents the assets comprising the Consolidated K-Series, which we consolidate under the accountingrules. The Consolidated K-Series assets as of December 31, 2015 and December 31, 2014 amount to approximately $7.1 billion and $8.4 billion , respectively. InFebruary 2015, the Company sold a first loss tranche PO security issued by one of the Consolidated K-Series securitizations that resulted in a de-consolidation of$1.1 billion in Multi-Family loans held in a securitization trust. See "Significant Estimates and Critical Accounting Policies - Loan Consolidation ReportingRequirement for Certain Multi-Family K-Series Securitizations."60Balance Sheet AnalysisInvestment Securities Available for Sale . At December 31, 2015 , our securities portfolio includes Agency RMBS, including Agency fixed-rate andARM pass-through certificates, Agency IOs, and non-Agency RMBS, which are classified as investment securities available for sale. At December 31, 2015 , wehad no investment securities in a single issuer or entity that had an aggregate book value in excess of 10% of our total assets. The decrease in carrying value ofinvestment securities available for sale as of December 31, 2015 as compared to December 31, 2014 is primarily a result of principal paydowns and the sale of ourCLO securities.The following tables set forth the balances of our investment securities available for sale by vintage (i.e., by issue year) as of December 31, 2015 andDecember 31, 2014 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014 Par Value CarryingValue Par Value CarryingValueAgency RMBS ARMs Prior to 2012$47,463 $49,670 $38,537 $40,7102012116,517 120,379 135,885 140,98320131,282 1,313 — —20141,203 1,233 — —2015401 418 — —Total ARMs166,866 173,013 174,422 181,693 Fixed Prior to 201221,947 24,947 1,899 1,9732012386,293 397,541 458,871 476,7082013309 335 — —20151,668 1,890 — —Total Fixed410,217 424,713 460,770 478,681IO Prior to 2012230,329 33,714 335,507 49,1702012254,354 40,938 278,332 46,2622013113,845 19,214 125,176 21,822201465,295 7,976 16,577 1,877201591,837 13,548 — —Total IOs755,660 115,390 755,592 119,131 Total Agency RMBS1,332,743 713,116 1,390,784 779,505 US Treasury Securities Prior to 201210,000 10,037 — —Non Agency RMBS 20062,088 1,567 2,533 1,939CLOs 2007— — 35,550 35,203 Total$1,344,831 $724,720 $1,428,867 $816,64761Investment Securities Available for Sale Held in Securitization Trusts . At December 31, 2015 , our securities portfolio includes multi-family CMBSclassified as investment securities available for sale held in securitization trusts, which are multi-family CMBS transferred to Consolidated VIEs that have beensecuritized into beneficial interests. The decrease in carrying value of investment securities available for sale held in securitization trusts as of December 31, 2015as compared to December 31, 2014 is due to widening of credit spreads in 2015.The following table sets forth the balances of our investment securities available for sale held in securitization trusts by vintage (i.e., by issue year) as ofDecember 31, 2015 and December 31, 2014 (dollar amounts in thousands): December 31, 2015 December 31, 2014 Par Value CarryingValue Par Value CarryingValueCMBS: 2011$853,408 $40,734 $886,117 $38,594 Total$853,408 $40,734 $886,117 $38,594Residential Mortgage Loans Held in Securitization Trusts (net) . Included in our portfolio are prime ARM loans that we originated or purchased in bulkfrom third parties that met our investment criteria and portfolio requirements and that we subsequently securitized in 2005.At December 31, 2015 , residential mortgage loans held in securitization trusts totaled approximately $119.9 million . The Company’s net investment inthe residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between thecarrying amount of (i) the ARM mortgage loans and real estate owned held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding,was $4.4 million . Of the residential mortgage loans held in securitized trusts, 100% are traditional ARMs or hybrid ARMs, 82.7% of which are ARM loans thatare interest only, at the time of origination. With respect to the hybrid ARMs included in these securitizations, interest rate reset periods were predominately fiveyears or less and the interest-only period is typically 9 years at the time of origination, which mitigates the “payment shock” at the time of interest rate reset. Noneof the residential mortgage loans held in securitization trusts are pay option-ARMs or ARMs with negative amortization. At December 31, 2015, the interest onlyARM loans included in these securitizations are out their interest only period.The following table details our residential mortgage loans held in securitization trusts at December 31, 2015 and December 31, 2014 , respectively (dollaramounts in thousands): Number of Loans Unpaid Principal Carrying ValueDecember 31, 2015331 $122,545 $119,921December 31, 2014395 $152,277 $149,61462Characteristics of Our Residential Mortgage Loans Held in Securitization Trusts:The following table sets forth the composition of our residential mortgage loans held in securitization trusts as of December 31, 2015 and December 31,2014 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014 Average High Low Average High LowGeneral Loan Characteristics: Original Loan Balance$432 $2,850 $48 $441 $2,950 $48Current Coupon Rate2.82% 4.63% 1.38% 2.75% 7.25% 1.25%Gross Margin2.37% 4.13% 1.13% 2.38% 4.13% 1.13%Lifetime Cap11.3% 13.25% 9.38% 11.34% 13.25% 9.38%Original Term (Months)360 360 360 360 360 360Remaining Term (Months)233 240 199 245 252 211Average Months to Reset5 11 1 5 11 1Original FICO Score724 818 593 726 818 593Original LTV69.77% 95.00% 13.94% 70.38% 95.00% 13.94%The following tables detail the activity for the residential mortgage loans held in securitization trusts (net) for the years ended December 31, 2015 and2014 , respectively (dollar amounts in thousands): Principal Premium Allowance forLoan Losses Net CarryingValueBalance, January 1, 2015 $152,277 $968 $(3,631) $149,614Principal repayments (30,684) — — (30,684)Provision for loan loss — — (1,161) (1,161)Transfer to real estate owned (75) — — (75)Charge-Offs 1,027 — 1,393 2,420Amortization of premium — (193) — (193)Balance, December 31, 2015 $122,545 $775 $(3,399) $119,921 Principal Premium Allowance forLoan Losses Net CarryingValueBalance, January 1, 2014 $165,173 $1,053 $(2,989) $163,237Principal repayments (13,178) — — (13,178)Provision for loan loss — — (998) (998)Transfer to real estate owned (830) — 356 (474)Charge-Offs 1,112 — — 1,112Amortization of premium — (85) — (85)Balance, December 31, 2014 $152,277 $968 $(3,631) $149,61463Acquired Distressed Residential Mortgage Loans . Distressed residential mortgage loans are comprised of pools of fixed and adjustable rate residentialmortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company willnot collect all contractually required principal payments. Management evaluates whether there is evidence of credit quality deterioration as of the acquisition dateusing indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages. Distressed residentialmortgage loans held in securitization trusts are distressed residential mortgage loans transferred to Consolidated VIEs that have been securitized into beneficialinterests.The following table details our portfolio of distressed residential mortgage loans, including those distressed residential mortgage loans held insecuritization trusts, at December 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): Number of Loans Unpaid principal Carrying ValueDecember 31, 20155,877 $640,570 $558,989December 31, 20146,291 $684,508 $582,697The Company’s distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $ 114.2 million and $221.6million at December 31, 2015 and December 31, 2014 , respectively, are pledged as collateral for certain of the securitized debt issued by the Company. TheCompany’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 thedifference between the carrying amount of the net assets and liabilities associated with the distressed residential mortgage loans held in securitization trusts, was$86.3 million and $110.3 million at December 31, 2015 and 2014 , respectively.In addition, distressed residential mortgage loans with a carrying value of approximately $ 307.0 million and $327.4 million at December 31, 2015 andDecember 31, 2014 , respectively, are pledged as collateral for a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch.Characteristics of our Distressed Residential Mortgage Loans, including Distressed Residential Mortgage Loans Held in Securitization Trusts:The following tables detail the characteristics of our distressed residential mortgage loans, including distressed residential mortgage loans held insecuritization trusts, as of December 31, 2015 and December 31, 2014 :Loan to Value at PurchaseDecember 31, 2015 December 31, 201450.00% or less3.3% 3.6%50.01% - 60.00%3.6% 3.7%60.01% - 70.00%6.7% 6.6%70.01% - 80.00%10.0% 9.0%80.01% - 90.00%11.9% 11.9%90.01% - 100.00%13.1% 12.4%100.01% and over51.4% 52.8%Total100.0% 100.0%FICO Scores at PurchaseDecember 31, 2015 December 31, 2014550 or less17.7% 13.8%551 to 60030.3% 26.3%601 to 65028.2% 29.0%651 to 70015.4% 18.4%701 to 7506.5% 8.9%751 to 8001.7% 3.0%801 and over0.2% 0.6%Total100.0% 100.0%64Current CouponDecember 31, 2015 December 31, 20143.00% or less14.9% 17.1%3.01% - 4.00%9.3% 7.0%4.01 to 5.00%21.3% 15.2%5.01 - 6.00%11.5% 12.7%6.01% and over43.0% 48.0%Total100.0% 100.0%Delinquency StatusDecember 31, 2015 December 31, 2014Current68.1% 88.2%31- 60 days11.0% 5.5%61 - 90 days9.0% 2.3%90+ days11.9% 4.0%Total100.0% 100.0%Origination YearDecember 31, 2015 December 31, 20142005 or earlier27.1% 25.6%200619.0% 19.8%200734.2% 36.5%2008 or later19.7% 18.1%Total100.0% 100.0%Consolidated K-Series. As of December 31, 2015 and December 31, 2014 , we owned 100% of the first loss securities of the Consolidated K-Series. TheConsolidated K-Series are comprised of multi-family mortgage loans held in five and six Freddie Mac-sponsored multi-family K-Series securitizations as ofDecember 31, 2015 and December 31, 2014 , respectively, of which we, or one of our SPEs, own the first loss securities and certain IOs. We determined that thesecuritizations comprising the Consolidated K-Series were VIEs and that we are the primary beneficiary of these securitizations. Accordingly, we are required toconsolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our financial statements.We have elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in theassets and liabilities of the Consolidated K-Series be reflected in our statement of operations. As of December 31, 2015 and December 31, 2014 , the ConsolidatedK-Series was comprised of $7.1 billion and $8.4 billion , respectively in multi-family loans held in securitization trusts and $6.8 billion and $8.0 billion ,respectively, in multi-family CDOs outstanding with a weighted average interest rate of 3.98% and 4.15% respectively. In addition, as a result of the consolidationof the Consolidated K-Series, our statement of operations for the years ended December 31, 2015 and 2014 included $257.4 million and $301.9 million in interestincome, respectively, and $233.0 million and $275.9 million in interest expense, respectively. Also, we recognized a $12.4 million and $56.9 million unrealizedgain in the statements of operations for the years ended December 31, 2015 and 2014 , respectively, as a result of the fair value accounting method election.We do not have any claims to the assets (other than the security represented by our first loss piece) or obligations for the liabilities of the Consolidated K-Series. Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss tranche PO securities and or/certain IOs issued bythese K-Series securitizations with an aggregate net carrying value of $286.4 million and $317.5 million as of December 31, 2015 and December 31, 2014 ,respectively.In February 2015, the Company sold a first loss tranche PO security in one of the Company’s Consolidated K-Series obtaining total proceeds ofapproximately $44.3 million and realizing a gain of approximately $1.5 million . The sale resulted in a de-consolidation of $1.1 billion in Multi-Family loans heldin a securitization trust and $1.0 billion in Multi-Family CDOs.65Multi-Family CMBS Loan Characteristics:The following table details the loan characteristics of the loans that back our multi-family CMBS (including the Consolidated K-Series) in our portfolio asof December 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014 Current balance of loans$9,034,361 $10,189,074 Number of loans548 610 Weighted average original LTV68.8% 68.8% Weighted average underwritten debt service coverage ratio1.49x 1.48x Current average loan size$16,486 $16,703 Weighted average original loan term (in months)120 119 Weighted average current remaining term (in months)79 82 Weighted average loan rate4.40% 4.54% First mortgages100% 100% Geographic state concentration (greater than 5.0%): California13.8% 13.5% Texas12.3% 12.5% New York8.0% 7.7% Maryland5.2% 5.2% 66Financing Arrangements, Portfolio Investments . The Company finances its portfolio investments with a combination of repurchase agreements andFederal Home Loan Bank advances. The Company has entered into repurchase agreements with third party financial institutions and the Company’s wholly ownedsubsidiary, GLIH, which is a member of the FHLBI, accessed secured advances provided by the FHLBI. These financing arrangements are short-term borrowingsthat bear interest rates typically based on a spread to LIBOR, and are secured by the securities which they finance.As of December 31, 2015 and December 31, 2014 , we had approximately $577.4 million and $652.0 million of borrowings under financingarrangements, including Federal Home Loan Bank advances, respectively. As of December 31, 2015 and December 31, 2014, the current weighted averageborrowing rate on these financing facilities was 0.71% and 0.43% , respectively. Our repurchase agreements typically have terms of 30 days or less.As of December 31, 2015 and December 31, 2014 , we had no counterparties where the amount at risk was in excess of 5% of Stockholders’ Equity. Theamount at risk is defined as the fair value of securities pledged as collateral to the repurchase agreement in excess of the repurchase agreement liability.As of December 31, 2015 , the outstanding balance under our repurchase agreements was funded at an advance rate of 92.1% that implies an averagehaircut of 7.9% . As of December 31, 2014 , the outstanding balance under our repurchase agreements was funded at an advance rate of 92.8% that implies anaverage haircut of 7.2% . The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS (excluding Agency IOs) andAgency IOs was approximately 5% and 25% , respectively.The following table details the ending balance, quarterly average balance and maximum balance at any month-end during each quarter in 2015 , 2014 and2013 for repurchase agreement borrowings outstanding (dollar amounts in thousands):Quarter Ended Quarterly AverageBalance End of QuarterBalance Maximum Balanceat any Month-EndDecember 31, 2015 $574,847 $577,413 $578,136September 30, 2015 $578,491 $586,075 $586,075June 30, 2015 $513,254 $585,492 $585,492March 31, 2015 $633,132 $619,741 $645,162 December 31, 2014 $658,360 $651,965 $668,901September 30, 2014 $639,831 $627,881 $653,181June 30, 2014 $725,761 $668,428 $758,857March 31, 2014 $774,545 $767,827 $784,019 December 31, 2013 $796,044 $791,125 $800,193September 30, 2013 $799,341 $794,181 $810,506June 30, 2013 $885,942 $855,153 $924,667March 31, 2013 $879,732 $878,824 $882,611Financing Arrangements, Residential Mortgage Loans. On December 14, 2015 , the Company amended the master repurchase agreement with DeutscheBank AG, Cayman Islands Branch, that funds purchases of distressed residential mortgage loans and decreased the maximum aggregate principal amount to $250.0million and extended the expiration date of the agreement to December 15, 2016 . The outstanding balance on the master repurchase agreement, as ofDecember 31, 2015 and December 31, 2014 , amounts to approximately $214.5 million and $238.9 million , respectively, and bore interest at one-month LIBORplus 2.5% ( 2.92% and 2.66% at December 31, 2015 and December 31, 2014 , respectively). Distressed residential mortgage loans with a carrying value ofapproximately $307.0 million at December 31, 2015 are pledged as collateral for the borrowings under this master repurchase agreement.On November 25, 2015 , the Company entered into a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch in an aggregateprincipal amount of up to $100.0 million to fund the future purchase of residential mortgage loans, particularly second mortgage loans. The outstanding balance onthe master repurchase agreement will bear interest at one-month LIBOR plus 4% and expires on May 25, 2017. There was no outstanding balance on this masterrepurchase agreement as of December 31, 2015 .67Residential Collateralized Debt Obligations . As of December 31, 2015 and 2014 , we had residential collateralized debt obligations, or ResidentialCDOs, of $ 116.7 million and $145.5 million , respectively. As of December 31, 2015 and 2014 , the weighted average interest rate of these Residential CDOs was0.80% and 0.55% , respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of $122.5 million and $152.3 million atDecember 31, 2015 and 2014 , respectively. The Company retained the owner trust certificates, or residual interest, for three securitizations, and, as ofDecember 31, 2015 and 2014 , had a net investment in the residential securitization trusts of $4.4 million and $5.6 million , respectively.Securitized Debt . As of December 31, 2015 and 2014 , we had approximately $117.5 million and $232.9 million of securitized debt, respectively. As ofDecember 31, 2015 and 2014, the weighted average interest rate for our securitized debt was 5.28% and 4.81% , respectively. The Company’s securitized debt iscollateralized by multi-family CMBS and distressed residential mortgage loans. See Note 7 of our consolidated financial statements included in this report for moreinformation on securitized debt. In December 2015, the Company repaid the outstanding notes from its distressed residential mortgage loan securitizationtransaction completed in December 2012 with an outstanding principal balance of $5.5 million at the time of repayment. The notes were issued in December 2012in an original principal amount of $38.7 million .Subordinated Debentures . As of December 31, 2015 and 2014 , certain of our wholly owned subsidiaries had trust preferred securities outstanding of$45.0 million with a weighted average interest rate of 4.32% and 4.08%, respectively. The securities are fully guaranteed by us with respect to distributions andamounts payable upon liquidation, redemption or repayment. These securities are classified as subordinated debentures in the liability section of our consolidatedbalance sheets.Derivative Assets and Liabilities. The Company enters into derivative instruments in connection with its risk management activities. These derivativeinstruments may include interest rate swaps, swaptions, futures, put and call options on futures and mortgage derivatives such as forward-settling purchases andsales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs.In connection with our investment in Agency IOs, we utilize several types of derivative instruments such as interest rate swaps, futures, put and calloptions on futures and TBAs to hedge the interest rate risk and spread risk. This hedging technique is dynamic in nature and requires frequent adjustments, whichaccordingly makes it very difficult to qualify for hedge accounting treatment. Hedge accounting treatment requires specific identification of a risk or group of risksand then requires that we designate a particular trade to that risk with no minimal ability to adjust over the life of the transaction. Because we and Midway arefrequently adjusting these derivative instruments in response to current market conditions, we have determined to account for all the derivative instruments relatedto our Agency IO investments as derivatives not designated as hedging instruments. Realized and unrealized gains and losses associated with derivatives in ourAgency IO portfolio are recognized through earnings in the consolidated statements of operations.We also use interest rate swaps (separately from interest rate swaps in our Agency IO portfolio) to hedge variable cash flows associated with borrowingsmade under our financing arrangements and Residential CDOs. We typically pay a fixed rate and receive a floating rate based on one month LIBOR, on thenotional amount of the interest rate swaps. The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics and cashflows of our financing arrangements. At December 31, 2015 and December 31, 2014, the Company had $215 million and $350 million of notional amount ofinterest rate swaps outstanding that qualify as cash flow hedges for financial reporting purposes. The interest rate swaps had a net fair market asset value of $0.3million and $1.1 million at December 31, 2015 and December 31, 2014, respectively. See Note 8 to our consolidated financial statements included in this Form 10-K for more information on our derivative instruments and hedging activities.Derivative financial instruments may contain credit risk to the extent that the institutional counterparties may be unable to meet the terms of theagreements. We minimize this risk by limiting our counterparties to major financial institutions with good credit ratings. In addition, we regularly monitor thepotential risk of loss with any one party resulting from this type of credit risk. Accordingly, we do not expect any material losses as a result of default by otherparties, but we cannot guarantee that we will not experience counterparty failures in the future.68Balance Sheet Analysis - Stockholders’ EquityStockholders’ equity at December 31, 2015 was $880.5 million and included $2.9 million of accumulated other comprehensive loss. The accumulatedother comprehensive loss consisted of $15.2 million in unrealized losses related to our Agency RMBS and non-Agency RMBS offset by $12.0 million in netunrealized gains related to our CMBS and $0.3 million in unrealized derivative gains related to cash flow hedges. Stockholders’ equity at December 31, 2014 was$817.9 million and included $10.0 million of accumulated other comprehensive income. The accumulated other comprehensive income consisted of $9.1 million inunrealized gains primarily related to our CLOs, $ 12.4 million in net unrealized gains related to our CMBS and $1.1 million in unrealized derivative gains relatedto cash flow hedges, partially offset by $ 12.6 million in unrealized losses related to our Agency RMBS and non-Agency RMBS.Analysis of Changes in Book ValueThe following table analyzes the changes in book value for the quarter and year ended December 31, 2015 , respectively (amounts in thousands, exceptper share): Quarter Ended December 31, 2015 Year Ended December 31, 2015 Amount Shares Per Share (1) Amount Shares Per Share (1)Beginning Balance$745,648 109,402 $6.82 $742,927 105,095 $7.07Common stock issuance, net230 32,782 4,307 Preferred stock issuance, net— 86,862 Preferred stock liquidation preference— (90,000) Balance after share issuance activity745,878 109,402 6.82 772,571 109,402 7.06Dividends declared(26,256) (0.24) (111,199) (1.02)Net change AOCI: (2) Hedges1,112 0.01 (831) (0.01)RMBS(5,651) (0.05) (2,613) (0.02)CMBS(539) (0.01) (362) —CLOs— — (9,063) (0.08)Net income attributable to commonstockholders982 0.01 67,023 0.61Ending Balance$715,526 109,402 $6.54 $715,526 109,402 $6.54(1)Outstanding shares used to calculate book value per share for the quarter and year ended periods are based on outstanding shares as of December 31, 2015 of109,401,721 .(2)Accumulated other comprehensive income (“AOCI”).69The following table analyzes the changes in book value for the quarter and year ended December 31, 2014 , respectively (amounts in thousands, exceptper share): Quarter Ended December 31, 2014 Year Ended December 31, 2014 Amount Shares Per Share (1) Amount Shares Per Share (1)Beginning Balance$633,377 90,685 $6.98 $405,666 64,102 $6.33Common stock issuance, net111,063 14,410 297,726 40,993 Balance after share issuance activity744,440 105,095 7.08 703,392 105,095 6.69Dividends declared(28,375) (0.27) (97,786) (0.93)Net change AOCI: (2) Hedges(757) (0.01) (906) (0.01)RMBS6,785 0.07 19,378 0.19CMBS(17,518) (0.17) (5,864) (0.06)CLOs(2,171) (0.02) (5,666) (0.05)Net income attributable to commonstockholders40,523 0.39 130,379 1.24Ending Balance$742,927 105,095 $7.07 $742,927 105,095 $7.07(1)Outstanding shares used to calculate book value per share for the quarter and year ended periods are based on outstanding shares as of December 31, 2014 of105,094,565 .(2)Accumulated other comprehensive income (“AOCI”).Liquidity and Capital ResourcesGeneralLiquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintaininvestments, comply with margin requirements, fund our operations, pay management, incentive and consulting fees, pay dividends to our stockholders and othergeneral business needs. Our investments and assets, excluding the principal only multi-family CMBS we invest in, generate liquidity on an ongoing basis throughprincipal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from unconsolidated investments. Our principalonly multi-family CMBS are backed by balloon non-recourse mortgage loans that provide for the payment of principal at maturity date, which is typically seven toten years from the date the underlying mortgage loans are originated, and therefore do not directly contribute to monthly cash flows. In addition, the Company will,from time to time, sell on an opportunistic basis certain securities, primarily CMBS and distressed residential mortgage loans as part of its overall investmentstrategy and these sales are expected to provide additional liquidity.During the year ended December 31, 2015 , net cash decreased primarily as a result of $333.9 million used in financing activities, which was partiallyoffset by $36.3 million provided by operating activities and $284.0 million provided by investing activities. Our financing activities primarily included netpayments made on financing arrangements of $99.0 million , $86.0 million in payments made on multi-family CDOs, $122.5 million in dividends paid on commonstock, Series B Preferred Stock and Series C Preferred Stock, $29.0 million in payments made on Residential CDOs, and $116.1 million in payments made onsecuritized debt, partially offset by $118.7 million in net proceeds from common and preferred stock issuances. Our investing activities primarily included a $33.4million increase in restricted cash, $105.8 million in principal paydowns on investment securities available for sale, $238.8 million in principal repayments andproceeds from sales and refinancing of distressed residential mortgage loans, $99.2 million of proceeds from sales of investment securities, $86.0 million inprincipal repayments received on multi-family loans held in securitization trusts, $28.2 million in principal repayments received on residential mortgage loans heldin securitization trusts, $65.6 million in proceeds from sale of loans held in multi-family securitization trusts, $4.3 million in proceeds from sales of mezzanineloan and preferred equity investments and $1.0 million in proceeds from sale of real estate owned, partially offset by $156.0 million of purchases of residentialmortgage loans and distressed residential mortgage loans, $152.9 million of purchases of investment securities, $58.2 million in the funding of mezzanine loansand preferred equity investments, $5.8 million in net payments on other derivative instruments settled during the period, and $5.4 million of purchases of FHLBIstock.70We fund our investments and operations through a balanced and diverse funding mix, which includes proceeds from equity offerings, short-term andlonger-term repurchase agreement borrowings, CDOs, securitized debt, and trust preferred debentures. The type and terms of financing used by us depends on theasset being financed. In those cases where we utilize some form of structured financing, be it through CDOs, longer-term repurchase agreements or securitizeddebt, the cash flow produced by the assets that serve as collateral for these structured finance instruments may be restricted in terms of its use or applied to payprincipal or interest on CDOs, repurchase agreements, or notes that are senior to our interests. At December 31, 2015 , we had cash and cash equivalents balancesof $62.0 million , which decreased from December 31, 2014 by $13.6 million . Based on our current investment portfolio, new investment initiatives, leverage ratioand available and future possible borrowing arrangements, we believe our existing cash balances, funds available under our various financing arrangements andcash flows from operations will meet our liquidity requirements for at least the next 12 months.Liquidity – Financing ArrangementsWe rely primarily on short-term repurchase agreements to finance the more liquid assets in our investment portfolio, such as Agency RMBS. In recentyears, certain repurchase agreement lenders have elected to exit the repo lending market for various reasons, including new capital requirement regulations.However, as certain lenders have exited the space, other financing counterparties that had not participated in the repo lending market historically have begun tostep in to replace many of the lenders that have elected to exit.In light of the evolving repurchase agreement lending environment, we elected to replace a portion of our repurchase agreement borrowings with securedadvances from the FHLBI, of which, GLIH, one of our subsidiaries, is a member. Each advance from the FHLBI requires approval by the FHLBI and is secured bycollateral in accordance with the FHLBI’s credit and collateral guidelines, as may be revised from time to time by the FHLBI. Eligible collateral may includeconventional one-to-four family residential mortgage loans, CMBS, Agency RMBS and Non-Agency RMBS with an A rating and above. In connection with GLIHbecoming a member of the FHLBI, the Company agreed to guarantee the due and punctual payment of GLIH’s obligations under its financing agreement withFHLBI. As of December 31, 2015 , the Company had $121.0 million in outstanding secured advances from FHLBI. Subsequent to December 31, 2015, the federalregulator of the FHLB-system released a final rule that amends regulations governing FHLB membership, including preventing captive insurance companies, suchas GLIH, from being eligible for FHLB membership. Under the terms of the final rule, GLIH is required to terminate its FHLBI membership and repay its existingadvances within one year following the effective date of the final rule and is prohibited from taking new advances or renewing existing maturing advances duringthe one-year transition period. During January 2016, the Company repaid all of its outstanding FHLBI advances, which repayment was funded primarily throughrepurchase agreement financing from three counterparties, all of whom were existing repurchase agreement counterparties of the Company as of December 31,2015.As of December 31, 2015 , we have outstanding short-term repurchase agreements, a form of collateralized short-term borrowing, with six differentfinancial institutions, including the FHLBI. These agreements are secured by certain of our investment securities and bear interest rates that have historicallymoved in close relationship to LIBOR. Our borrowings under repurchase agreements are based on the fair value of our investment securities portfolio. Interest ratechanges and increased prepayment activity can have a negative impact on the valuation of these securities, reducing the amount we can borrow under theseagreements. Moreover, our repurchase agreements allow the counterparties to determine a new market value of the collateral to reflect current market conditionsand because these lines of financing are not committed, the counterparty can call the loan at any time. Market value of the collateral represents the price of suchcollateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income. If a counterparty determines thatthe 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 orrepay a portion of the outstanding borrowing in cash, on minimal notice. Moreover, in the event an existing counterparty elected to not renew the outstandingbalance at its maturity into a new repurchase agreement, we would be required to repay the outstanding balance with cash or proceeds received from a newcounterparty or to surrender the securities that serve as collateral for the outstanding balance, or any combination thereof. If we are unable to secure financing froma new counterparty and had to surrender the collateral, we would expect to incur a loss. In addition, in the event one of our lenders under the repurchase agreementdefaults on its obligation to “re-sell” or return to us the securities that are securing the borrowings at the end of the term of the repurchase agreement, we wouldincur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amountat risk.” As of December 31, 2015 , we had an aggregate amount at risk under our repurchase agreements with six counterparties of approximately $62.3 million ,with no greater than approximately $36.6 million at risk with any single counterparty. The volatility in the market place during 2015 did not have a material impacton our liquidity or our ability to finance our more liquid assets through short-term repurchase agreements. At December 31, 2015 , the Company had short-termrepurchase agreement borrowings on our investment securities of $577.4 million as compared to $652.0 million as of December 31, 2014 .71At December 31, 2015, the Company had $62.0 million in cash and $147.2 million in unencumbered securities to meet additional haircut or marketvaluation requriements, including $84.0 million of RMBS, of which $82.5 million are Agency RMBS and $62.1 million are multi-family CMBS (which representsthe net fair value of certain first loss tranche PO securities and/or certain IOs issued by certain K-Series securitizations included in the Consolidated K-Series). The$62.0 million of cash, the $84.0 million in RMBS, the $62.1 million in multi-family CMBS, and $11.6 million held in overnight deposits in our Agency IOportfolio included in restricted cash (that is available to meet margin calls as it relates to our Agency IO portfolio repurchase agreements), which collectivelyrepresent 38.2% of our financing arrangements, are liquid and could be monetized to pay down or collateralize the liability immediately.At December 31, 2015 , the Company also had two master repurchase agreements, with Deutsche Bank AG, Cayman Islands Branch, in aggregateprincipal amounts of up to $250 million and $100 million , expiring on December 15, 2016 and May 25, 2017, respectively. The outstanding balances under themaster repurchase agreements amounted to approximately $214.5 million and $0, respectively, at December 31, 2015 . The agreement with an aggregate principalamount of up to $250 million is collateralized by distressed residential mortgage loans with a carrying value of $307.0 million at December 31, 2015 .At December 31, 2015 , we also had other longer-term debt, including Residential CDOs outstanding of $116.7 million , multi-family CDOs outstandingof $6.8 billion (which represent obligations of the Consolidated K-Series), subordinated debt of $45.0 million and securitized debt of $117.5 million . The CDOsare collateralized by residential and multi-family loans held in securitization trusts, respectively. The securitized debt as of December 31, 2015 represents the notesissued in (i) our May 2012 multi-family re-securitization transaction, (ii) our November 2013 multi-family CMBS collateralized recourse financing transaction,and (iii) our December 2012, July 2013 and September 2013 distressed residential mortgage loan securitization transactions, which are described in Note 7 in ourconsolidated financial statements.As of December 31, 2015 , our overall leverage ratio, including both our short-term and longer-term financing (and excluding the CDO’s issued by theConsolidated K-Series and our Residential CDOs) divided by stockholders’ equity, was approximately 1.1 to 1. As of December 31, 2015 , our leverage ratio onour short term financings or callable debt was approximately 0.9 to 1. We monitor all at risk or short term borrowings to ensure that we have adequate liquidity tosatisfy margin calls and liquidity covenant requirements.Liquidity – Hedging and Other FactorsCertain of our hedging instruments may also impact our liquidity. We use interest rate swaps, swaptions, TBAs, futures, put and call options on to hedgeinterest rate and spread risk associated with our investments in Agency RMBS,including Agency IOs.With respect to interest rate swaps, futures contracts and TBAs, initial margin deposits, which can be comprised of either cash or securities will be madeupon entering into these contracts. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses bymarking to market on a daily basis to reflect the market value of these contracts at the end of each day’s trading. We may be required to satisfy variable marginpayments periodically, depending upon whether unrealized gains or losses are incurred. In addition, because delivery of TBAs extend beyond the typical settlementdates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, andthereby are more vulnerable to increasing amounts at risk with the applicable counterparties. The use of TBAs associated with our Agency IO investments createssignificant short term payables (and/or receivables), amounting to $228.0 million at December 31, 2015 , and is included in payable for securities purchased on ourconsolidated balance sheet.We also use interest rate swaps (separately from interest rate swaps in our Agency IO portfolio) to hedge variable cash flows associated with borrowingsmade under our financing arrangements and Residential CDOs.For additional information regarding the Company’s derivative instruments and hedging activities for the periods covered by this report, including the fairvalues and notional amounts of these instruments and realized and unrealized gains and losses relating to these instruments, please see Note 8 to our consolidatedfinancial statements included in this report. Also, please see Item 7A. Quantitative and Qualitative Disclosures about Market Risk, under the caption, “Fair ValueRisk”, for a tabular presentation of the sensitivity of the market value and net duration changes of the Company’s portfolio across various changes in interest rates,which takes into account the Company’s hedging activities.72Liquidity — Equity OfferingsIn addition to the financing arrangements described above under the caption “Liquidity—Financing Arrangements,” we also rely on secondary equityofferings as a source of both short-term and long-term liquidity. On April 22, 2015 , the Company closed on an underwritten public offering of 3,600,000 shares ofthe Company’s Series C Preferred Stock. The issuance and sale of the 3,600,000 shares of Series C Preferred Stock resulted in total net proceeds to the Companyof approximately $86.9 million after deduction of underwriting discounts and commissions and offering expenses.We also may generate liquidity through the sale of shares of our common stock in an “at the market” offering program pursuant to an equity distributionagreement, as well as through the sale of shares of our common stock pursuant to our Dividend Reinvestment Plan, or DRIP. On January 14, 2013, we filed aregistration statement on Form S-3 to enable us to issue up to $20,000,000 of shares of our common stock pursuant to our DRIP.On March 20, 2015, the Company entered into separate equity distribution agreements (collectively, the “Equity Distribution Agreements”) with each ofJMP Securities LLC (“JMP”) and MLV & Co. LLC (“MLV”), each an “Agent” and collectively, the “Agents”, pursuant to which the Company may sell up to$75,000,000 of aggregate value of (i) shares of the Company’s common stock, par value $0.01 per and (ii) shares of the Company’s Series B Preferred Stock, fromtime to time through the Agents. Pursuant to the Equity Distribution Agreements, the shares may be offered and sold through the Agents in transactions that aredeemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on The Nasdaq GlobalSelect Market or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from us, in privately negotiatedtransactions. We have no obligation to sell any of the shares under the Equity Distribution Agreements and may at any time suspend solicitations and offers underthe Equity Distribution Agreements. During the year ended December 31, 2015 , the Company issued 2,789,439 shares of its common stock under the EquityDistribution Agreements, at an average sales price of $7.91 resulting in total net proceeds to the Company of $21.6 million , after deducting the placement fees. Asof December 31, 2015 , approximately $52.9 million of securities remains available for issuance under the Equity Distribution Agreements.On March 20, 2015, in connection with the Company’s execution of the Equity Distribution Agreements described above, the Company delivered to JMP anotice of termination of the Equity Distribution Agreement dated June 11, 2012 (the “Prior Equity Distribution Agreement”), which termination became effectiveMarch 23, 2015. The Prior Equity Distribution Agreement provided for the sale by the Company of common stock having a maximum aggregate value of up to$25,000,000 from time to time through JMP, as the Company’s agent. During the year ended December 31, 2015 , the Company issued 1,326,676 shares under thePrior Equity Distribution Agreement, at an average sales price of $7.89 resulting in total net proceeds to the Company of $10.3 million , after deducting theplacement fees. During the term of the Prior Equity Distribution Agreement, the Company sold a total of 2,153,989 shares of its common stock at an average priceof $7.63 per share pursuant to the Prior Distribution Agreement, resulting in aggregate net proceeds to the Company of approximately $16.1 million .Management AgreementsWe have investment management agreements with RiverBanc, Midway and Headlands, pursuant to which we pay these managers a base management andincentive fee quarterly in arrears. See "- Results of Operations - Comparison of the Year Ended December 31, 2015 to Year Ended December 31, 2014 -Comparative Expenses" for more information regarding the management fees paid during the year ended December 31, 2015 . See also "Business—Our ExternalManagers" for a description of these agreements.DividendsFor information regarding the declaration and payment of dividends on our preferred stock, see “Note 15 – Stockholders’ Equity” below. For informationregarding the declaration and payment of dividends on our common stock, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities” above.We expect to continue to pay quarterly cash dividends on our common stock during the near term. However, our Board of Directors will continue toevaluate our dividend policy each quarter and will make adjustments as necessary, based on a variety of factors, including, among other things, the need tomaintain our REIT status, our financial condition, liquidity, earnings projections and business prospects. Our dividend policy does not constitute an obligation topay dividends.73We intend to make distributions to our stockholders to comply with the various requirements to maintain our REIT status and to minimize or avoidcorporate income tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt ofcash could require us to sell assets or to borrow funds on a short-term basis to meet the REIT distribution requirements and to minimize or avoid corporate incometax and the nondeductible excise tax.Exposure to European financial counterpartiesWe finance a significant portion of our mortgage-backed securities with repurchase agreements. In connection with these financing arrangements, wepledge our securities as collateral to secure the borrowings. The amount of collateral pledged will typically exceed the amount of the financing with the extent ofover-collateralization from 5% of the amount borrowed (in the case of Agency ARM and Agency fixed rate RMBS collateral) and 25% (in the case of AgencyIOs).While our repurchase agreement financing results in us recording a liability to the counterparty in our consolidated balance sheet, we are exposed to thecounterparty, if during the term of the repurchase agreement financing, a lender should default on its obligation and we are not able to recover our pledged assets.The amount of this exposure is the difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral pledged byus to the lender (including accrued interest receivable on such collateral).Several large European banks have experienced financial difficulty in recent years, some of whom have required a rescue or assistance from other largeEuropean banks or the European Central Bank. Some of these banks have U.S. banking subsidiaries which have provided repurchase agreement financing orinterest rate swap agreements to us in connection with the acquisition of various investments, including mortgage-backed securities investments. We haveoutstanding repurchase agreement borrowings with Deutsche Bank AG, Cayman Islands Branch, in the amount of $214.5 million at December 31, 2015 with a netexposure of $90.1 million . In addition, certain of our U.S. based counterparties may have significant exposure to the financial and economic turmoil in Europewhich could impact their future lending activities or cause them to default under agreements with us. In the event one or more of these counterparties or theiraffiliates experience liquidity difficulties in the future, our liquidity could be materially adversely affected.InflationFor 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.The impact of inflation is primarily reflected in the increased costs of our operations. Virtually all our assets and liabilities are financial in nature. Our consolidatedfinancial statements and corresponding notes thereto have been prepared in accordance with GAAP, which require the measurement of financial position andoperating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. As a result,interest rates and other factors influence our performance far more than inflation. Inflation affects our operations primarily through its effect on interest rates, sinceinterest rates typically increase during periods of high inflation and decrease during periods of low inflation. During periods of increasing interest rates, demand formortgages and a borrower’s ability to qualify for mortgage financing in a purchase transaction may be adversely affected. During periods of decreasing interestrates, borrowers may prepay their mortgages, which in turn may adversely affect our yield and subsequently the value of our portfolio of mortgage assets.74Contractual Obligations and CommitmentsThe Company had the following contractual obligations at December 31, 2015 (dollar amounts in thousands): Total Less than 1year 1 to 3 years 4 to 5 years More than 5yearsOperating leases$1,715 $207 $422 $434 $652Financing arrangements791,903 791,903 — — —Subordinated debentures (1)84,658 2,037 4,062 4,068 74,491Securitized debt (1)(3)93,364 93,364 — — —Interest rate swaps (1)2,312 1,124 1,022 166 —Management fees (2)11,688 11,688 — — —Employment agreements700 700 — — —Total contractual obligations (3)$986,340 $901,023 $5,506 $4,668 $75,143(1)Amounts include projected interest payments during the period. Interest based on interest rates in effect on December 31, 2015 .(2)Amounts include the base fees for Midway, RiverBanc and Headlands based on the current invested capital. The management fees exclude incentivefees which are based on future performance.(3)We exclude our Residential CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralizedand, therefore, must be satisfied exclusively from the proceeds of the residential mortgage loans and real estate owned held in the securitization trusts.See Note 11 in the Notes to Consolidated Financial Statements for further information regarding our Residential CDOs. We also exclude the securitizeddebt related to our May 2012 re-securitization transaction as this debt is non-recourse to the Company. See Note 7 in the Notes to ConsolidatedFinancial Statements for further information regarding our Securitized Debt. The Company’s Multi-Family CDOs, which represent the CDOs issued bythe Consolidated K-Series is excluded as this debt is non-recourse to the Company.Off-Balance Sheet ArrangementsWe did not maintain any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance orspecial purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, wehave not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.Item 7A. Quantitative and Qualitative Disclosures about Market RiskThis section should be read in conjunction with “Item 1A. Risk Factors” in this Annual Report on Form 10-K and our subsequent periodic reports filedwith the SEC.We seek to manage risks that we believe will impact our business including, interest rates, liquidity, prepayments, credit quality and market value. Whenmanaging these risks we consider the impact on our assets, liabilities and derivative positions. While we do not seek to avoid risk completely, we believe the riskcan be quantified from historical experience. We seek to actively manage that risk, to generate risk-adjusted total returns that we believe compensate usappropriately for those risks and to maintain capital levels consistent with the risks we take.The following analysis includes forward-looking statements that assume that certain market conditions occur. Actual results may differ materially fromthese projected results due to changes in our portfolio assets and borrowings mix and due to developments in the domestic and global financial and real estatemarkets. Developments in the financial markets include the likelihood of changing interest rates and the relationship of various interest rates and their impact onour 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 projectionsof future events or operating performance.75Interest Rate RiskInterest rates are sensitive to many factors, including governmental, monetary, tax policies, domestic and international economic conditions, and politicalor regulatory matters beyond our control. Changes in interest rates affect the value of the financial assets we manage and hold in our investment portfolio and thevariable-rate borrowings we use to finance our portfolio. Changes in interest rates also affect the interest rate swaps and caps, Eurodollar and other futures, TBAsand other securities or instruments we use to hedge our portfolio. As a result, our net interest income is particularly affected by changes in interest rates.For example, we hold RMBS, some of which may have fixed rates or interest rates that adjust on various dates that are not synchronized to the adjustmentdates on our repurchase agreements. In general, the re-pricing of our repurchase agreements occurs more quickly than the re-pricing of our variable-interest assets.Thus, it is likely that our floating rate borrowings, such as our repurchase agreements, may react to interest rates before our RMBS because the weighted averagenext re-pricing dates on the related borrowings may have shorter time periods than that of the RMBS. In addition, the interest rates on our Agency ARMs backedby hybrid ARMs may be limited to a “periodic cap,” or an increase of typically 1% or 2% per adjustment period, while our borrowings do not have comparablelimitations. Moreover, changes in interest rates can directly impact prepayment speeds, thereby affecting our net return on RMBS. During a declining interest rateenvironment, the prepayment of RMBS may accelerate (as borrowers may opt to refinance at a lower interest rate) causing the amount of liabilities that have beenextended by the use of interest rate swaps to increase relative to the amount of RMBS, possibly resulting in a decline in our net return on RMBS, as replacementRMBS may have a lower yield than those being prepaid. Conversely, during an increasing interest rate environment, RMBS may prepay more slowly thanexpected, requiring us to finance a higher amount of RMBS than originally forecast and at a time when interest rates may be higher, resulting in a decline in our netreturn on RMBS. Accordingly, each of these scenarios can negatively impact our net interest income.We seek to manage interest rate risk in our portfolio by utilizing interest rate swaps, swaptions, caps, Eurodollar and other futures, options and U.S.Treasury securities with the goal of optimizing the earnings potential while seeking to maintain long term stable portfolio values. We continually monitor theduration of our mortgage assets and have a policy to hedge the financing of those assets such that the net duration of the assets, our borrowed funds related to suchassets, and related hedging instruments, is less than one year. In addition, we utilize TBAs to mitigate the risks on our long Agency RMBS positions associatedwith our investments in Agency IOs.We utilize a model-based risk analysis system to assist in projecting portfolio performances over a scenario of different interest rates. The modelincorporates shifts in interest rates, changes in prepayments and other factors impacting the valuations of our financial securities and instruments, includingmortgage-backed securities, repurchase agreements, interest rate swaps and interest rate caps, TBAs and Eurodollar futures.Based on the results of the model, the instantaneous changes in interest rates specified below would have had the following effect on net interest incomefor the next 12 months based on our assets and liabilities as of December 31, 2015 (dollar amounts in thousands):Changes in Net Interest IncomeChanges in Interest Rates Changes in Net Interest Income+200 $5,679+100 $5,589-100 $(14,070)Interest rate changes may also impact our net book value as our financial assets and related hedge derivatives are marked-to-market each quarter.Generally, as interest rates increase, the value of our mortgage assets, other than IOs, decreases, and conversely, as interest rates decrease, the value of suchinvestments will increase. The value of an IO will likely be negatively affected in a declining interest rate environment due to the risk of increasing prepaymentrates because the IOs’ value is wholly contingent on the underlying mortgage loans having an outstanding balance. In general, we expect that, over time, decreasesin the value of our portfolio attributable to interest rate changes will be offset, to the degree we are hedged, by increases in the value of our interest rate swaps orother financial instruments used for hedging purposes, and vice versa. However, the relationship between spreads on securities and spreads on our hedginginstruments may vary from time to time, resulting in a net aggregate book value increase or decline. That said, unless there is a material impairment in value thatwould 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 ourability to make a distribution to our stockholders.76Liquidity RiskLiquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintaininvestments, pay dividends to our stockholders and other general business needs. We recognize the need to have funds available to operate our business. It is ourpolicy to have adequate liquidity at all times. We plan to meet liquidity through normal operations with the goal of avoiding unplanned sales of assets oremergency borrowing of funds.Our principal sources of liquidity are the repurchase agreements on our mortgage-backed securities, the CDOs we have issued to finance our loans held insecuritization trusts, securitized debt, trust preferred securities, the principal and interest payments from our assets and cash proceeds from the issuance of equity ordebt securities (as market and other conditions permit). We believe our existing cash balances and cash flows from operations will be sufficient for our liquidityrequirements for at least the next 12 months.We are subject to “margin call” risk under the terms of our repurchase agreements. In the event the value of our assets pledged as collateral suddenlydecreases, margin calls relating to our repurchase agreements could increase, causing an adverse change in our liquidity position. Additionally, if one or more ofour repurchase agreement counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorableterms or at all. As such, we provide no assurance that we will be able to roll over our repurchase agreements as they mature from time to time in the future. SeeItem 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in this Annual Report onForm 10-K for further information about our liquidity and capital resource management.Derivative financial instruments used to hedge interest rate risk are subject to “margin call” risk. For example, under our interest rate swaps, typically wepay 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 berequired to post cash margin.Prepayment RiskWhen borrowers repay the principal on their residential mortgage loans before maturity or faster than their scheduled amortization, the effect is to shortenthe period over which interest is earned, and therefore, reduce the yield for residential mortgage assets purchased at a premium to their then current balance, aswith our portfolio of Agency RMBS. Conversely, residential mortgage assets purchased for less than their then current balance, such as our distressed residentialmortgage loans, exhibit higher yields due to faster prepayments. Furthermore, actual prepayment speeds may differ from our modeled prepayment speedprojections impacting 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. The impact of increasing prepayment rates, whether as a result ofdeclining interest rates, government intervention in the mortgage markets or otherwise, is particularly acute with respect to our Agency IOs. Because the value ofan IO security is wholly contingent on the underlying mortgage loans having an outstanding principal balance, an unexpected increase in prepayment rates on thepool of mortgage loans underlying the IOs could significantly negatively impact the performance of our Agency IOs.Our modeled prepayments will help determine the amount of hedging we use to off-set changes in interest rates. If actual prepayment rates are higher thanmodeled, the yield will be less than modeled in cases where we paid a premium for the particular residential mortgage asset. Conversely, when we have paid apremium, if actual prepayment rates experienced are slower than modeled, we would amortize the premium over a longer time period, resulting in a higher yield tomaturity.In an environment of increasing prepayment speeds, the timing difference between the actual cash receipt of principal paydowns and the announcement ofthe principal paydown may result in additional margin requirements from our repurchase agreement counterparties.We mitigate prepayment risk by constantly evaluating our residential mortgage assets relative to prepayment speeds observed for assets with similarstructures, quantities and characteristics. Furthermore, we stress-test the portfolio as to prepayment speeds and interest rate risk in order to further develop or makemodifications to our hedge balances. Historically, we have not hedged 100% of our liability costs due to prepayment risk.Credit RiskCredit risk is the risk that we will not fully collect the principal we have invested in our credit sensitive assets, including distressed residential and othermortgage loans, CMBS and commercial real estate-related debt investments, due to borrower defaults. In selecting the credit sensitive assets in our portfolio, weseek to identify and invest in assets with characteristics that we believe offset or limit the exposure of borrower defaults to the Company.77We seek to manage credit risk through our pre-acquisition or pre-funding due diligence process, and by factoring projected credit losses into the purchaseprice we pay or loan terms we negotiate for all of our credit sensitive assets. In general, we evaluate relative valuation, supply and demand trends, prepaymentrates, delinquency and default rates, vintage of collateral and macroeconomic factors as part of this process. Nevertheless, these procedures do not guaranteeunanticipated credit losses which would materially affect our operating results.With respect to the $559.0 million of distressed residential mortgage loans the Company owned at December 31, 2015 , the mortgage loans werepurchased at a discount to par reflecting their distressed state or perceived higher risk of default, which may include higher loan to value ratios and, in certaininstances, delinquent loan payments. Prior to the acquisition of distressed residential mortgage loans, the Company validates key information provided by thesellers that is necessary to determine the value of the distressed residential mortgage loans. We then seek to maximize the value of the mortgage loans that weacquire either through borrower assisted refinancing, outright loan sale or through foreclosure and resale of the underlying home. We evaluate credit quality on anongoing basis by reviewing borrower’s payment status and current financial and economic condition. Additionally, we look at the carrying value of any delinquentloan and compare to the current value of the underlying collateral.As of December 31, 2015 , we own $317.6 million of first loss CMBS comprised primarily of first loss POs that are backed by commercial mortgageloans on multi-family properties at a weighted average amortized purchase price of approximately 35.1% of current par. Prior to the acquisition of each of our firstloss CMBS securities, the Company completes an extensive review of the underlying loan collateral, including loan level cash flow re-underwriting, siteinspections on selected properties, property specific cash flow and loss modeling, review of appraisals, property condition and environmental reports, and othercredit risk analyses. We continue to monitor credit quality on an ongoing basis using updated property level financial reports provided by borrowers and periodicsite inspection of selected properties. We also reconcile on a monthly basis the actual bond distributions received against projected distributions to assure properallocation of cash flow generated by the underlying loan pool.As of December 31, 2015 , we owned approximately $131.2 million of first mortgage loan, mezzanine loans, preferred equity and equity investmentsbacked by residential or multi-family properties. The performance and value of these investments depend upon the applicable operating partner’s or borrower’sability to effectively operate the multifamily and residential properties, that serve as the underlying collateral, to produce cash flows adequate to pay distributions,interest or principal due to us. The Company monitors the performance and credit quality of the underlying assets that serve as collateral for its investments. In thecase of our multi-family investments, the procedures for ongoing monitoring include financial statement analysis and regularly scheduled site inspections ofportfolio properties to assess property physical condition, performance of on-site staff and competitive activity in the sub-market. We also formulate annualbudgets and performance goals alongside our operating partners for use in measuring the ongoing investment performance and credit quality of our investments.Fair Value RiskChanges in interest rates also expose us to market value (fair value) fluctuation on our assets, liabilities and hedges. While the fair value of the majority ofour assets (when excluding all Consolidated K-Series assets other than the securities we actually own) that are measured on a recurring basis are determined usingLevel 2 fair values, we own certain assets, such as our CMBS, for which fair values may not be readily available if there are no active trading markets for theinstruments. In such cases, fair values would only be derived or estimated for these investments using various valuation techniques, such as computing the presentvalue of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated future cash flows isinherently subjective and imprecise. Minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fairvalues. Our fair value estimates and assumptions are indicative of the interest rate environments as of December 31, 2015 , and do not take into consideration theeffects of subsequent interest rate fluctuations.We note that the values of our investments in derivative instruments will be sensitive to changes in market interest rates, interest rate spreads, creditspreads and other market factors. The value of these investments can vary and has varied materially from period to period.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 involveuncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments,discount rates, estimate of future cash flows, future expected loss experience and other factors.78Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated bycomparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologiesand assumptions used to estimate fair values, the fair values used by us should not be compared to those of other companies.The table below presents the sensitivity of the market value and net duration changes of our portfolio as of December 31, 2015 , using a discounted cashflow simulation model assuming an instantaneous interest rate shift. Application of this method results in an estimation of the fair market value change of ourassets, 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 marketvalue 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 includingconstraints 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 thatare 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 andlevel 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 ($ amounts in thousands) +200 $(101,064) 3.63+100 $(52,457) 3.28Base 2.58-100 $36,492 1.54It 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 inportfolio composition, financing strategies, market spreads or changes in overall market liquidity.Although market value sensitivity analysis is widely accepted in identifying interest rate risk, it does not take into consideration changes that may occursuch as, but not limited to, changes in investment and financing strategies, changes in market spreads and changes in business volumes. Accordingly, we makeextensive use of an earnings simulation model to further analyze our level of interest rate risk.There are a number of key assumptions in our earnings simulation model. These key assumptions include changes in market conditions that affect interestrates, the pricing of ARM products, the availability of investment assets and the availability and the cost of financing for portfolio assets. Other key assumptionsmade 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 investmentstrategies, different prepayment possibilities and other scenarios that provide us with a range of possible earnings outcomes in order to assess potential interest raterisk. The assumptions used represent our estimate of the likely effect of changes in interest rates and do not necessarily reflect actual results. The earningssimulation model takes into account periodic and lifetime caps embedded in our assets in determining the earnings at risk.79Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAOur financial statements and the related notes, together with the Report of Independent Registered Public Accounting Firm thereon, as required by thisItem 8, are set forth beginning on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.None.Item 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and Procedures - We maintain disclosure controls and procedures that are designed to ensure that information requiredto be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified inthe rules and forms of the SEC, and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regardingrequired disclosures. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer andChief 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 ExchangeAct of 1934, as amended) as of December 31, 2015 . Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of December 31, 2015 .Management’s Report on Internal Control Over Financial Reporting . Our management is responsible for establishing and maintaining adequate internalcontrol over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed to provide reasonable assuranceto our management and Board of Directors regarding the reliability, preparation and fair presentation of published financial statements in accordance withgenerally accepted accounting principles. Under the supervision and with the participation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013) (the "COSO framework") . Based on ourevaluation under the COSO framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2015 .The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by Grant Thornton LLP, an independentregistered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K and is incorporated by reference herein.Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting during the quarterended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Inherent Limitations on Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expectthat our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how welldesigned and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system mustreflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitationsin all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues andinstances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or bymanagement override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and therecan be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controlseffectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree ofcompliance with policies or procedures.Item 9B. OTHER INFORMATIONNone.80PART IIIItem 10. DIRECTORS, EXECUTIVE OFFICER AND CORPORATE GOVERNANCEThe information required by this item is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders to be filed with the SEC within120 days after the end of the fiscal year ended December 31, 2015 (the “2016 Proxy Statement”) and is incorporated herein by reference.Item 11. EXECUTIVE COMPENSATIONThe information required by this item is included in the 2016 Proxy Statement and is incorporated herein by reference.Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSExcept as set forth below, the information required by this item is included in the 2016 Proxy Statement and is incorporated herein by reference.The information presented under the heading “Market for the Registrant’s Common Equity and Related Stockholder Matters — Securities Authorized forIssuance Under Equity Compensation Plans” in Item 5 of Part II of this Form 10-K is incorporated herein by reference.Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item is included in the 2016 Proxy Statement and is incorporated herein by reference.Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this item is included in the 2016 Proxy Statement and is incorporated herein by reference.81PART IVItem 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial Statements Page Reports of Independent Registered Public Accounting Firm - Grant Thornton LLPF-2 Consolidated Balance SheetsF-4 Consolidated Statements of OperationsF-5 Consolidated Statements of Comprehensive Income (Loss)F-6 Consolidated Statements of Changes in Stockholders’ EquityF-7 Consolidated Statements of Cash FlowsF-8 Notes to Consolidated Financial StatementsF-10 (b)Exhibits.The information set forth under “Exhibit Index” below is incorporated herein by reference.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. NEW YORK MORTGAGE TRUST, INC. Date: February 25, 2016By: /s/ Steven R. Mumma Steven R. Mumma Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)Date: February 25, 2016By: /s/ Kristine R. Nario Kristine R. Nario Chief Financial Officer (Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Signature Title Date /s/ Steven R. Mumma Chairman of the Board, Chief Executive Officer andPresident February 25, 2016Steven R. Mumma (Principal Executive Officer) /s/ Kristine R. Nario Chief Financial Officer February 25, 2016Kristine R. Nario (Principal Financial and Accounting Officer) /s/ Douglas E. Neal Director February 25, 2016Douglas E. Neal /s/ Alan L. Hainey Director February 25, 2016Alan L. Hainey /s/ Steven G. Norcutt Director February 25, 2016Steven G. Norcutt /s/ David R. Bock Director February 25, 2016David R. Bock NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSANDREPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMFor Inclusion in Form 10-KFiled withUnited States Securities and Exchange CommissionDecember 31, 2015NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESIndex to Consolidated Financial StatementsFINANCIAL STATEMENTS:PAGE Reports of Independent Registered Public Accounting Firm - Grant Thornton LLPF-2 Consolidated Balance SheetsF-4 Consolidated Statements of OperationsF-5 Consolidated Statements of Comprehensive Income (Loss)F-6 Consolidated Statements of Changes in Stockholders' EquityF-7 Consolidated Statements of Cash FlowsF-8 Notes to Consolidated Financial StatementsF-10REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersNew York Mortgage Trust, Inc.We have audited the accompanying consolidated balance sheets of New York Mortgage Trust, Inc. (a Maryland corporation) and subsidiaries (the “Company”) asof December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cashflows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New York Mortgage Trust,Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2015 in conformity with accounting principles generally accepted in the United States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control overfinancial reporting as of December 31, 2015 , based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2016 expressed an unqualified opinion thereon./s/ Grant Thornton LLPNew York, New YorkFebruary 25, 2016F-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersNew York Mortgage Trust, Inc.We have audited the internal control over financial reporting of New York Mortgage Trust, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as ofDecember 31, 2015 , based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on criteriaestablished in the 2013 Internal Control—Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statementsof the Company as of and for the year ended December 31, 2015 , and our report dated February 25, 2016 expressed an unqualified opinion on those financialstatements./s/ Grant Thornton LLPNew York, New YorkFebruary 25, 2016F-3Table of ContentsNEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollar amounts in thousands, except share data) December 31, 2015 December 31, 2014ASSETS Investment securities, available for sale, at fair value (including pledged securities of $639,683 and $702,684,respectively)$724,720 $816,647Investment securities, available for sale, at fair value held in securitization trusts40,734 38,594Residential mortgage loans held in securitization trusts (net)119,921 149,614Distressed residential mortgage loans held in securitization trusts (net)114,214 221,591Distressed residential mortgage loans (net)444,775 361,106Multi-family loans held in securitization trusts, at fair value7,105,336 8,365,514Derivative assets228,775 288,850Cash and cash equivalents61,959 75,598Receivables and other assets219,130 222,491Total Assets (1)$9,059,564 $10,540,005LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Financing arrangements, portfolio investments$577,413 $651,965Financing arrangements, residential mortgage loans214,490 238,949Residential collateralized debt obligations116,710 145,542Multi-family collateralized debt obligations, at fair value6,818,901 8,048,053Securitized debt117,528 232,877Derivative liabilities1,500 1,463Payable for securities purchased227,969 283,537Accrued expenses and other liabilities (including $1,745 and $6,317 to related parties, respectively)59,527 74,692Subordinated debentures45,000 45,000Total liabilities (1)$8,179,038 $9,722,078Commitments and Contingencies Stockholders' Equity: Preferred stock, $0.01 par value, 7.75% Series B cumulative redeemable, $25 liquidation preference per share,6,000,000 and 3,450,000 shares authorized as of December 31, 2015 and December 31, 2014, respectively,3,000,000 shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively$72,397 $72,397Preferred stock, $0.01 par value, 7.875% Series C cumulative redeemable, $25 liquidation preference per share,4,140,000 and 0 shares authorized as of December 31, 2015 and December 31, 2014, respectively 3,600,000 and 0shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively86,862 —Common stock, $0.01 par value, 400,000,000 shares authorized, 109,401,721 and 105,094,565 shares issued andoutstanding as of December 31, 2015 and December 31, 2014, respectively1,094 1,051Additional paid-in capital734,610 701,871Accumulated other comprehensive (loss) income(2,854) 10,015(Accumulated deficit) retained earnings(11,583) 32,593Total stockholders' equity$880,526 $817,927Total Liabilities and Stockholders' Equity$9,059,564 $10,540,005(1)Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company is the primary beneficiaryof these VIEs. As of December 31, 2015 and December 31, 2014 , assets of consolidated VIEs totaled $7,413,082 and $8,847,078 , respectively, and theliabilities of consolidated VIEs totaled $7,078,162 and $8,457,034 , respectively. See Note 7 for further discussion.The accompanying notes are an integral part of the consolidated financial statements.F-4Table of ContentsNEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share data) For the Years Ended December 31, 2015 2014 2013INTEREST INCOME: Investment securities and other$36,390 $54,391 $46,646Multi-family loans held in securitization trusts257,417 301,877 228,631Residential mortgage loans held in securitization trusts3,728 3,755 4,709Distressed residential mortgage loans39,303 18,824 11,741Total interest income$336,838 $378,847 $291,727 INTEREST EXPENSE: Investment securities and other$13,737 $5,569 $6,655Multi-family collateralized debt obligations232,971 275,916 210,229Residential collateralized debt obligations936 904 1,123Securitized debt11,126 16,762 11,293Subordinated debentures1,881 1,859 1,878Total interest expense$260,651 $301,010 $231,178 NET INTEREST INCOME$76,187 $77,837 $60,549 OTHER INCOME (LOSS): Provision for loan losses$(1,363) $(1,939) $(1,262)Impairment loss on investment securities— — (225)Realized (loss) gain on investment securities and related hedges, net(4,617) 42,091 (10,719)Gain on de-consolidation of multi-family loans held in securitization trust and multi-family collateralizeddebt obligations1,483 — —Realized gain on distressed residential mortgage loans31,251 14,380 1,600Unrealized (loss) gain on investment securities and related hedges, net(2,641) (7,667) 5,464Unrealized gain on multi-family loans and debt held in securitization trusts, net12,368 56,931 31,495Loss on extinguishment of debt— (3,397) —Other income (including $6,078, $3,261 and $439 from related parties, respectively)9,360 4,809 2,709Total other income$45,841 $105,208 $29,062 Base management and incentive fees (including $8,083, $14,799 and $3,360 to related parties, respectively)$19,188 $24,530 $8,133Expenses related to distressed residential mortgage loans10,364 6,429 3,868Other general and administrative expenses (including $0, $80 and $698 to related parties, respectively)9,928 9,500 7,916Total general, administrative and other expenses$39,480 $40,459 $19,917 INCOME FROM OPERATIONS BEFORE INCOME TAXES$82,548 $142,586 $69,694Income tax expense4,535 6,395 739NET INCOME78,013 136,191 68,955Preferred stock dividends(10,990) (5,812) (3,568)NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$67,023 $130,379 $65,387Basic income per common share$0.62 $1.48 $1.11Diluted income per common share$0.62 $1.48 $1.11Weighted average shares outstanding-basic108,399 87,867 59,102Weighted average shares outstanding-diluted108,399 87,867 59,102The accompanying notes are an integral part of the consolidated financial statements.F-5NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Dollar amounts in thousands) For the Years Ended December 31, 2015 2014 2013NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$67,023 $130,379 $65,387OTHER COMPREHENSIVE (LOSS) INCOME (Decrease) increase in net unrealized gain on available for sale securities(2,975) 20,881 (18,800)Reclassification adjustment for net gain included in net income(9,063) (13,033) —(Decrease) increase in fair value of derivative instruments utilized for cash flow hedges(831) (906) 3,785OTHER COMPREHENSIVE (LOSS) INCOME(12,869) 6,942 (15,015)COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$54,154 $137,321 $50,372The accompanying notes are an integral part of the consolidated financial statements.F-6Table of ContentsNEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFor the Years Ended December 31, 2015, 2014 and 2013(Dollar amounts in thousands) CommonStock PreferredStock AdditionalPaid-InCapital Retained Earnings (AccumulatedDeficit) Accumulated OtherComprehensiveIncome (Loss) TotalBalance, December 31, 2012$496 $— $355,006 $(51,584) $18,088 $322,006Net income— — — 68,955 — 68,955Common Stock issuance, net145 — 100,959 — — 101,104Preferred Stock issuance, net— 72,397 — — — 72,397Dividends declared on common stock— — (51,410) (13,803) — (65,213)Dividends declared on preferred stock— — — (3,568) — (3,568)Decrease in net unrealized gain onavailable for sale securities— — — — (18,800) (18,800)Increase in fair value of derivativeinstruments utilized for cash flowhedges— — — — 3,785 3,785Balance, December 31, 2013641 72,397 404,555 — 3,073 480,666Net income— — — 136,191 — 136,191Common Stock issuance, net410 — 297,316 — — 297,726Dividends declared on common stock— — — (97,786) — (97,786)Dividends declared on preferred stock— — — (5,812) — (5,812)Reclassification adjustment for net gainincluded in net income— — — — (13,033) (13,033)Increase in net unrealized gain on available for sale securities— — — — 20,881 20,881Decrease in fair value of derivativeinstruments utilized for cash flowhedges— — — — (906) (906)Balance, December 31, 20141,051 72,397 701,871 32,593 10,015 817,927Net income— — — 78,013 — 78,013Stock issuances, net43 86,862 32,739 — — 119,644Dividends declared on common stock— — — (111,199) — (111,199)Dividends declared on preferred stock— — — (10,990) — (10,990)Reclassification adjustment for net gainincluded in net income— — — — (9,063) (9,063)Decrease in net unrealized gain onavailable for sale securities— — — — (2,975) (2,975)Decrease in fair value of derivativeinstruments utilized for cash flowhedges— — — — (831) (831)Balance, December 31, 2015$1,094 $159,259 $734,610 $(11,583) $(2,854) $880,526The accompanying notes are an integral part of the consolidated financial statements.F-7Table of ContentsNEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollar amounts in thousands) For the Years Ended December 31, 2015 2014 2013Cash Flows from Operating Activities: Net income$78,013 $136,191 $68,955Adjustments to reconcile net income to net cash provided by operating activities: Net amortization542 (2,671) 13,424Realized loss (gain) on investment securities and related hedges, net4,617 (42,091) 10,719Realized gain on distressed residential mortgage loans(31,251) (14,380) (1,600)Unrealized loss (gain) on investment securities and related hedges, net2,641 7,667 (5,464)Gain on de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debtobligations(1,483) — —Unrealized gain on loans and debt held in multi-family securitization trusts(12,368) (56,931) (31,495)Impairment loss on investment securities— — 225Loss on extinguishment of debt— 3,397 —Net decrease in loans held for sale323 87 341Provision for loan losses1,363 1,939 1,262Income from investments in limited partnerships and limited liability companies(12,997) (4,562) (2,297)Distributions of income from investments in limited partnership and limited liability companies9,827 2,238 1,976Amortization of stock based compensation, net983 1,180 897Changes in operating assets and liabilities: Receivables and other assets10,945 (3,631) (18,097)Accrued expenses and other liabilities and accrued expenses, related parties(14,819) 9,118 14,457Net cash provided by operating activities36,336 37,551 53,303 Cash Flows from Investing Activities: Restricted cash33,448 (10,150) 2,467Proceeds from sales of investment securities99,235 93,578 1,254Purchases of investment securities(152,883) (20,273) (72,183)Return of capital from investments in limited partnerships and limited liability companies— — 3,558Purchases of FHLBI stock(5,445) — —Purchases of other assets(61) (254) (975)Funding of first mortgage loan— (1,142) (6,500)Funding of mezzanine loan and preferred equity investments(58,215) (48,674) (16,788)Proceeds from sale of mezzanine loan and preferred equity investments4,308 5,590 —Net (payments) proceeds from other derivative instruments settled during the period(5,766) 1,124 (11,011)Principal repayments received on residential mortgage loans held in securitization trusts28,166 12,687 22,292Principal repayments and proceeds from sales and refinancing of distressed residential mortgage loans238,798 64,715 15,646Principal repayments received on multi-family loans held in securitization trusts85,980 80,451 73,831Principal paydowns on investment securities - available for sale105,774 98,877 125,913Proceeds from sale of real estate owned1,044 3,882 —Purchases of residential mortgage loans and distressed residential mortgage loans(156,005) (405,427) (218,166)Proceeds from sales of loans held in multi-family securitization trusts65,587 — —Purchases of loans held in multi-family securitization trusts— — (71,625)Net cash provided by (used in) investing activities283,965 (125,016) (152,287) Cash Flows from Financing Activities: (Payments made on) proceeds from financing arrangements, net of FHLBI advances(99,011) 99,789 (98,009)Common stock issuance, net31,799 296,546 100,207Preferred stock issuance, net86,862 — 72,397Dividends paid on common stock(113,318) (86,705) (61,302)Dividends paid on preferred stock(9,218) (5,812) (2,115)Payments made on residential collateralized debt obligations(28,952) (12,918) (22,657)Payments made on multi-family collateralized debt obligations(85,966) (83,839) (73,813)Proceeds from securitized debt— — 191,705Payments made and extinguishment of securitized debt(116,136) (75,796) (7,408)Net cash (used in) provided by financing activities(333,940) 131,265 99,005Net (Decrease) increase in Cash and Cash Equivalents(13,639) 43,800 21Cash and Cash Equivalents - Beginning of Period75,598 31,798 31,777Cash and Cash Equivalents - End of Period$61,959 $75,598 $31,798 Supplemental Disclosure: Cash paid for interest$307,162 $352,232 $268,552Cash paid for income taxes$4,922 $8,295 $794F-8Table of ContentsNEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollar amounts in thousands)Non-Cash Investment Activities: Purchase of investment securities not yet settled$227,969 $283,537 $191,592Deconsolidation of multi-family loans held in securitization trusts$1,075,529 $— $—Deconsolidation of multi-family collateralized debt obligations$1,009,942 $— $—Consolidation of multi-family loans held in securitization trusts$— $— $3,218,301Consolidation of multi-family collateralized debt obligations$— $— $3,146,676Non-Cash Financing Activities: Dividends declared on common stock to be paid in subsequent period$26,256 $28,376 $17,295Dividends declared on preferred stock to be paid in subsequent period$3,225 $1,453 $1,453The accompanying notes are an integral part of the consolidated financial statements.F-9Table of ContentsNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 20151.OrganizationNew York Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT,” "we," "our," or the “Company”), is a real estate investment trust, orREIT, in the business of acquiring, investing in, financing and managing primarily mortgage-related assets and financial assets. Our objective is to deliver stabledistributions to our stockholders over diverse economic conditions through a combination of income generated by net interest margin and net realized capital gainsfrom our diversified investment portfolio. Our portfolio includes residential mortgage loans, including loans sourced from distressed markets, multi-family CMBS,mezzanine loans to and preferred equity investments in owners of multi-family properties, equity and debt securities issued by entities that invest in commercialreal estate and commercial real estate-related debt investments, Agency RMBS consisting of fixed-rate, adjustable-rate and hybrid adjustable-rate RMBS andAgency IOs consisting of interest only and inverse interest-only RMBS that represent the right to the interest component of the cash flow from a pool of mortgageloans and certain other investments in mortgage-related and financial assets.The Company conducts its business through the parent company, NYMT, and several subsidiaries, including special purpose subsidiaries established forresidential loan, distressed residential loan and CMBS securitization purposes, taxable REIT subsidiaries ("TRSs") and qualified REIT subsidiaries ("QRSs"). TheCompany 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 U.S. federal income tax purposes. As such, the Company will generallynot be subject to federal income taxes on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to itsstockholders by the due date of its federal income tax return and complies with various other requirements.2.Summary of Significant Accounting PoliciesDefinitions – The following defines certain of the commonly used terms in these financial statements: “RMBS” refers to residential adjustable-rate, hybrid adjustable-rate, fixed-rate, interest only and inverse interest only and principal only mortgage-backedsecurities;“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by a federally charteredcorporation (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or anagency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”);“Non-Agency RMBS” refers to RMBS backed by prime jumbo mortgage loans;“IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cashflow from a pool of mortgage loans;“POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans;“Agency IOs” refers to an IO that represents the right to the interest component of the cash flows from a pool of residential mortgage loans issued orguaranteed by a GSE or an agency of the U.S. government;“ARMs” refers to adjustable-rate residential mortgage loans;“Prime ARM loans” and “residential securitized loans” each refer to prime credit quality residential ARM loans (“prime ARM loans”) held insecuritization trusts;“Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; “CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities, as well as IO or PO securities that represent the right to a specific component of thecash flow from a pool of commercial mortgage loans;“Multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties;“CDOs” refers to collateralized debt obligations; and“CLO” refers to collateralized loan obligations.F-10Basis of Presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance withGAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Management has made significant estimates in several areas, including valuation of its CMBS investments, multi-familyloans held in securitization trusts and multi-family CDOs, as well as income recognition on distressed residential mortgage loans purchased at a discount. Althoughthe Company’s estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions could bedifferent than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.Reclassifications – Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation.Principles of Consolidation and Variable Interest Entities (VIE) – The accompanying consolidated financial statements of the Company include theaccounts of all its subsidiaries which are majority-owned, controlled by the Company or a VIE where the Company is the primary beneficiary. All significantintercompany accounts and transactions have been eliminated in consolidation.A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do nothave the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additionalsubordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE, herein referred to as"Consolidated VIE". As primary beneficiary, it has both the power to direct the activities that most significantly impact the economic performance of the VIE and aright to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation ofwhether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.Investment Securities Available for Sale – The Company's investment securities, where the fair value option has not been elected and which are reportedat fair value with unrealized gains and losses reported in Other Comprehensive Income (“OCI”),include Agency RMBS, non-Agency RMBS and CLOs. The Company has elected the fair value option for its Agency IOs, U.S.Treasury securities, certain Agency ARMs and Agency Fixed Rate Securities within the Agency IO portfolio, which measures unrealized gains and losses throughearnings in the accompanying consolidated statements of operations. The fair value option was elected for these investment securities to better match theaccounting for these investment securities with the related derivative instruments within the Agency IO portfolio, which are not designated as hedging instrumentsfor accounting purposes.The Company generally intends to hold its investment securities until maturity; however, from time to time, it may sell any of its securities as part of theoverall management of its business. As a result, our investment securities are classified as available for sale securities.Realized gains and losses recorded on the sale of investment securities available for sale are based on the specific identification method and included inrealized gain (loss) on investment securities and related hedges in the accompanying consolidated statements of operations. Interest income on our investmentsecurities available for sale is accrued based on the outstanding principal balance and their contractual terms. Purchase premiums or discounts on investmentsecurities at the time of purchase are amortized or accreted to interest income over the estimated life of the investment securities using the effective yield method.Adjustments to amortization are made for actual prepayment activity.The Company accounts for debt securities that are of high credit quality (generally those rated AA or better by a Nationally Recognized Statistical RatingOrganization, or NRSRO), at date of acquisition in accordance with Accounting Standards Codification (“ASC”) 320-10. The Company accounts for debtsecurities that are not of high credit quality (i.e., those whose risk of loss is less than remote) or securities that can be contractually prepaid such that we would notrecover our initial investment at the date of acquisition in accordance with ASC 325-40. The Company considers credit ratings, the underlying credit risk and othermarket factors in determining whether the debt securities are of high credit quality; however, securities rated lower than AA or an equivalent rating are notconsidered of high credit quality and are accounted for in accordance with ASC 325-40. If ratings are inconsistent among NRSROs, the Company uses the lowerrating in determining whether the securities are of high credit quality.F-11The Company assesses its impaired securities on at least a quarterly basis and designates such impairments as either “temporary” or “other-than-temporary” by applying the guidance prescribed in ASC Topic 320-10. When the fair value of an investment security is less than its amortized cost as of thereporting balance sheet date, the security is considered impaired. If the Company intends to sell an impaired security, or it is more likely than not that it will berequired to sell the impaired security before its anticipated recovery, then it must recognize an other-than-temporary impairment through earnings equal to theentire difference between the investment’s amortized cost and its fair value as of the balance sheet date. If the Company does not expect to sell an other-than-temporarily impaired security, only the portion of the other-than-temporary impairment related to credit losses is recognized through earnings with the remainderrecognized as a component of other comprehensive income (loss) on the accompanying consolidated balance sheets. Impairments recognized through othercomprehensive income (loss) do not impact earnings. Following the recognition of an other-than-temporary impairment through earnings, a new cost basis isestablished for the security, which may not be adjusted for subsequent recoveries in fair value through earnings. However, other-than-temporary impairmentsrecognized through earnings may be accreted back to the amortized cost basis of the security on a prospective basis through interest income. The determination asto whether an other-than-temporary impairment exists and, if so, the amount considered other-than-temporarily impaired is subjective, as such determinations arebased on both factual and subjective information available at the time of assessment as well the Company’s estimates of the future performance and cash flowprojections. As a result, the timing and amount of other-than-temporary impairments constitute material estimates that are susceptible to significant change.In determining the other-than temporary impairment related to credit losses for securities that are not of high credit quality, the Company compares thepresent value of the remaining cash flows expected to be collected at the prior reporting date or purchase date, whichever is most recent against the present value ofthe cash flows expected to be collected at the current financial reporting date. The Company considers information available about the past and expected futureperformance of underlying mortgage loans, including timing of expected future cash flows, prepayment rates, default rates, loss severities and delinquency rates.Investment Securities Available for Sale Held in Securitization Trusts – The Company’s investment securities available for sale held in securitizationtrusts as of December 31, 2015 and December 31, 2014 are comprised of multi-family CMBS consisting of PO securities that represent the first loss tranche of thesecuritizations from which they were issued, or “first loss tranche”, and certain IOs issued from two Freddie Mac-sponsored multi-family K-Series securitizations.These securities were purchased at a discount to par value and are reported at fair value with unrealized gains and losses reported in OCI. Realized gains and lossesrecorded on the sale of investment securities available for sale held in securitization trusts are based on the specific identification method and included in realizedgain (loss) on sale of securities and related hedges in the accompanying consolidated statements of operations.Interest income on our credit sensitive securities, such as our CMBS that were purchased at a discount to par value, is recognized based on the security’seffective interest rate. The effective interest rate on these securities is based on management’s estimate from each security of the projected cash flows, which areestimated based on assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis,the management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and itsjudgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, orfrom those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on these securities.A portion of the purchase discount on the Company’s first loss tranche PO multi-family CMBS is designated as non-accretable purchase discount orcredit reserve, which partially mitigates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accretedinto interest income. The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlyingcollateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit reserve is morefavorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time. Conversely, if the performance of asecurity with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and writedowns ofsuch securities to a new cost basis could be required.F-12Residential Mortgage Loans Held in Securitization Trusts – Residential mortgage loans held in securitization trusts are comprised of certain ARM loanstransferred to Consolidated VIEs that have been securitized into sequentially rated classes of beneficial interests. The Company accounted for these securitizationtrusts as financings which are consolidated into the Company’s financial statements. Residential mortgage loans held in securitization trusts are carried at theirunpaid principal balances, net of unamortized premium or discount, unamortized loan origination costs and allowance for loan losses. Interest income is accruedand recognized as revenue when earned according to the terms of the mortgage loans and when, in the opinion of management, it is collectible. The accrual ofinterest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business or, when payment becomes greaterthan 90 days delinquent. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.We establish an allowance for loan losses based on management's judgment and estimate of credit losses inherent in our portfolio of residential mortgageloans held in securitization trusts. Estimation involves the consideration of various credit-related factors, including but not limited to, macro-economic conditions,current housing market conditions, loan-to-value ratios, delinquency status, historical credit loss severity rates, purchased mortgage insurance, the borrower'scurrent economic condition and other factors deemed to warrant consideration. Additionally, we look at the balance of any delinquent loan and compare that to thecurrent value of the collateralizing property. We utilize various home valuation methodologies including appraisals, broker pricing opinions, internet-basedproperty data services to review comparable properties in the same area or consult with a broker in the property's area.Acquired Distressed Residential Mortgage Loans – Distressed residential mortgage loans are comprised of pools of fixed and adjustable rate residentialmortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company willnot collect all contractually required principal payments. Distressed residential mortgage loans held in securitization trusts are distressed residential mortgage loanstransferred to Consolidated VIEs that have been securitized into beneficial interests. The Company accounted for these securitization trusts as financings which areconsolidated into the Company’s financial statements.Acquired distressed residential mortgage loans that have evidence of deteriorated credit quality at acquisition are accounted for under ASC Subtopic 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30"). Management evaluates whether there is evidence of credit qualitydeterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-valuepercentages. Acquired distressed residential mortgage loans are recorded at fair value at the date of acquisition, with no allowance for loan losses. Under ASC 310-30, the acquired loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. A pool is accountedfor as a single asset with a single composite interest rate and an expectation of aggregate cash flows. Once a pool is assembled, it is treated as if it was one loan forpurposes of applying the accounting guidance.Under ASC 310-30, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” isaccreted into interest income over the life of the loans in each pool or individually using a level yield methodology. Accordingly, our acquired distressed residentialmortgage loans accounted for under ASC 310-30 are not subject to classification as nonaccrual classification in the same manner as our residential mortgage loansthat were not distressed when acquired by us. Rather, interest income on acquired distressed residential mortgage loans relates to the accretable yield recognized atthe pool level or on an individual loan basis, and not to contractual interest payments received at the loan level. The difference between contractually requiredprincipal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact ofprepayments and expected credit losses over the life of the individual loan, or the pool (for loans grouped into a pool).Management monitors actual cash collections against its expectations, and revised cash flow expectations are prepared as necessary. A decrease inexpected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of anallowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods initially reduces any previouslyestablished allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount ofaccretable yield for the loan pool. The adjustment of accretable yield due to a significant increase in expected cash flows is recognized prospectively as a change inestimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodicaccretion is adjusted accordingly over the remaining life of the loans in the pool or individual loan, as applicable. The impacts of (i) prepayments, (ii) changes invariable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.F-13A distressed residential mortgage loan disposal, which may include a loan sale, receipt of payment in full from the borrower or foreclosure, results inremoval of the loan from the loan pool at its allocated carrying amount. In the event of a sale of the loan and receipt of payment (in full or partial) from theborrower, a gain or loss on sale is recognized and reported based on the difference between the sales proceeds or payment from the borrower and the allocatedcarrying amount of the acquired distressed residential mortgage loan. In the case of a foreclosure, an individual loan is removed from the pool, a gain or loss onsale is recognized and reported based on the difference between the fair value of the underlying collateral less costs to sell and the carrying amount of the acquireddistressed residential mortgage loan. The Company uses the specific allocation method for the removal of loans as the estimated cash flows and related carryingamount for each individual loan are known. In these cases, the remaining accretable yield is unaffected and any material change in remaining effective yield causedby the removal of the loan from the pool is addressed by the re-assessment of the estimate of cash flows for the pool prospectively.Acquired distressed residential mortgage loans subject to modification are not removed from the pool even if those loans would otherwise be consideredtroubled debt restructurings because the pool, and not the individual loan, represents the unit of account.For individual loans not accounted for in pools that are sold or satisfied by payment in full, a gain or loss on sale is recognized and reported based on thedifference between the sales proceeds or payment from the borrower and the carrying amount of the acquired distressed residential mortgage loan. In the case of aforeclosure, a gain or loss on sale is recognized and reported based on the difference between the fair value of the underlying collateral less costs to sell and thecarrying amount of the acquired distressed residential mortgage loan.Multi-Family Loans Held in Securitization Trusts – Multi-family loans held in securitization trusts are comprised of multi-family mortgage loans held infive and six Freddie Mac-sponsored multi-family K-Series securitizations (the “Consolidated K-Series”) as of December 31, 2015 and December 31, 2014 ,respectively. Based on a number of factors, we determined that we were the primary beneficiary of each VIE within the Consolidated K-Series, met the criteria forconsolidation and, accordingly, have consolidated these Freddie Mac-sponsored multi-family K-Series securitizations, including their assets, liabilities, income andexpenses in our financial statements. The Company has elected the fair value option on each of the assets and liabilities held within the Consolidated K-Series,which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in the Company's accompanying consolidatedstatement of operations, as the Company believes this accounting treatment more accurately and consistently reflects its results of operations.Interest income is accrued and recognized as revenue when earned according to the terms of the mortgage loans and when, in the opinion of management,it is collectible. The accrual of interest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, butin no case when payment becomes greater than 90 days delinquent. Loans return to accrual status when principal and interest become current and are anticipated tobe fully collectible.Mezzanine Loan and Preferred Equity Investments - The Company invests in mezzanine loans and preferred equity of entities that have significant realestate assets. The mezzanine loan is secured by a pledge of the borrower’s equity ownership in the property. Unlike a mortgage, this loan does not represent a lienon the property. Therefore, it is always junior and subordinate to any first lien as well as second liens, if applicable, on the property. These loans are senior to anypreferred equity or common equity interests.A preferred equity investment is an equity investment in an entity that owns the underlying property. Preferred equity is not secured by the underlyingproperty, but holders have priority relative to common equity holders on cash flow distributions and proceeds from capital events. In addition, preferred equityholders may be able to enhance their position and protect their equity position with covenants that limit the entity’s activities and grant the holder the exclusiveright to control the property after an event of default.Mezzanine loans and preferred equity investments, where the risks and payment characteristics are equivalent to mezzanine loans, are accounted for asloans and are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances, and areincluded in receivables and other assets in the accompanying consolidated balance sheets. The Company has evaluated its mezzanine loan and preferred equityinvestments for accounting treatment as loans versus equity investment utilizing the guidance provided by the ADC Arrangements Subsection of ASC 310,Receivables.For mezzanine loan and preferred equity investments where the characteristics, facts and circumstances indicate that loan accounting treatment isappropriate, the Company accretes or amortizes any discounts or premiums and deferred fees and expenses over the life of the related asset utilizing the effectiveinterest method or straight line-method, if the result is not materially different.F-14We evaluate the collectibility of both interest and principal of each of our loans, if circumstances warrant, to determine whether they are impaired. A loanis impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractualterms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of theloan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. Interest income is accrued and recognized as revenue when earnedaccording to the terms of the loans and when, in the opinion of management, it is collectible. The accrual of interest on loans is discontinued when, inmanagement’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent.Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.The Company had preferred equity and mezzanine loan investments accounted for as loans included in receivables and other assets in the amounts of$44.2 million and $24.9 million as of December 31, 2015 and December 31, 2014, respectively.Mezzanine loans and preferred equity investments where the risks and payment characteristics are equivalent to an equity investment are accounted forusing the equity method of accounting. See “ Investment in Unconsolidated Entities. ” The mezzanine loans and preferred equity investments are included inreceivables and other assets.Mortgage Loans Held for Investment – Mortgage loans held for investment are stated at unpaid principal balance, adjusted for any unamortized premiumor discount, deferred fees or expenses, net of valuation allowances, and are included in receivables and other assets. Interest income is accrued on the principalamount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interestincome, amortization of premiums and discounts and prepayment fees are reported in interest income. A loan is considered to be impaired when it is probable thatbased upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Based on thefacts and circumstances of the individual loans being impaired, loan specific valuation allowances are established for the excess carrying value of the loan overeither: (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (ii) the estimated fair value of the loan’sunderlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent; or (iii) the loan’s observable market price.Investments in Unconsolidated Entities – Non-controlling, unconsolidated ownership interests in an entity may be accounted for using the equity method,at fair value or the cost method.In circumstances where the Company has a non-controlling interest but either owns a significant interest or is able to exert influence over the affairs of theenterprise, the Company utilizes the equity method of accounting. Under the equity method of accounting, the initial investment is increased each period foradditional capital contributions and a proportionate share of the entity’s earnings or preferred return and decreased for cash distributions and a proportionate shareof the entity’s losses. Management periodically reviews its investments for impairment based on projected cash flows from the entity over the holding period.When any impairment is identified, the investments are written down to recoverable amounts. The Company had equity method investments included inreceivables and other assets in the amounts of $20.1 million and $11.3 million as of December 31, 2015 and December 31, 2014, respectively.The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The Company elected the fairvalue option for certain investments in unconsolidated entities that own interests (directly or indirectly) in commercial and residential real estate assets because theCompany determined that such presentation represents the underlying economics of the respective investment. The Company records the change in fair value of itsinvestment in other income in the consolidated statements of operations. The Company had investments in unconsolidated entities at fair value included inreceivables and other assets in the amounts of $67.6 million and $38.5 million as of December 31, 2015 and December 31, 2014, respectively.F-15Investments in unconsolidated entities accounted at fair value consist of the following as of December 31, 2015 and December 31, 2014 (dollar amountsin thousands): 2015 2014Investment Name OwnershipInterestCarryingAmountIncome (Loss) OwnershipInterestCarryingAmountIncome (Loss)RB Development Holding Company, LLC 63%$1,927$(9) 63%$1,936$373RB Multifamily Investors LLC (1) 70%$56,891$5,263 65%$36,561$617Morrocroft Neighborhood StabilizationFund II, LP 13%$8,754$291 —%$—$—(1) Includes the Company's preferred and common interest.The Company accounts for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using thecost method if the Company determines the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded asdividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment. The Company had noinvestments in unconsolidated entities accounted for using the cost method.Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, amounts due from banks and overnight deposits, all of which have originalmaturities of 90 days or less. The Company maintains its cash and cash equivalents in highly rated financial institutions, and at times these balances exceedinsurable amounts.Receivables and Other Assets – Receivables and other assets as of December 31, 2015 and 2014 include restricted cash held by third parties of $20.8million and $54.2 million , respectively. Included in restricted cash is $ 11.6 million and $ 40.6 million held in our Agency IO portfolio to be used for tradingpurposes and $8.2 million and $11.4 million held by counterparties as collateral for hedging instruments and repurchase agreements as of December 31, 2015 and2014 , respectively. Interest receivable on multi-family loans held in securitization trusts is also included in receivables and other assets in the amounts of $24.6million and $29.8 million as of December 31, 2015 and 2014 , respectively.Financing Arrangements, Portfolio Investments – The Company finances the majority of its Agency RMBS purchases using repurchase agreements.Under a repurchase agreement, an asset is sold to a counterparty to be repurchased at a future date at a predetermined price, which represents the original salesprice plus interest. The Company accounts for these repurchase agreements as financings under ASC 860, Transfers and Servicing . Under ASC 860, for thesetransactions to be treated as financings, they must be separate transactions and not linked. If the Company finances the purchase of its securities with repurchaseagreements with the same counterparty from which the securities are purchased and both transactions are entered into contemporaneously or in contemplation ofeach other, the transactions are presumed under GAAP to be part of the same arrangement, or a "Linked Transaction," unless certain criteria are met. None of theCompany’s repurchase agreements are accounted for as linked transactions because they met the applicable criteria in accordance with ASC 860-10-40.On February 20, 2015, our wholly-owned subsidiary, Great Lakes Insurance Holdings LLC (“GLIH”), became a member of the Federal Home Loan Bankof Indianapolis (“FHLBI”). As a member of the FHLBI, GLIH may access a variety of products and services offered by the FHLBI, including secured advances.As of December 31, 2015 , GLIH had $121 million in outstanding secured advances from FHLBI, which are included on the Company’s accompanyingconsolidated balance sheets in financing arrangements, portfolio investments.Financing Arrangements, Residential Mortgage Loans – The Company finances a portion of its residential mortgage loans, including its distressedresidential mortgage loans through repurchase agreements that expire within 12 - 18 months. The borrowings under the repurchase agreements bear an interest rateof a specified margin over one-month LIBOR. The repurchase agreements are treated as collateralized financing transactions and carried at the contractualamounts, as specified in the respective agreement. Costs related to the establishment of the repurchase agreement which include underwriting, legal, accountingand other fees are reflected as deferred charges. Such costs are included on the Company’s accompanying consolidated balance sheets in receivables and otherassets in the amount of $2.3 million and $1.7 million as of December 31, 2015 and December 31, 2014 , respectively. These deferred charges are amortized as anadjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.F-16Residential Collateralized Debt Obligations (“Residential CDOs”) – We use Residential CDOs to permanently finance our residential mortgage loansheld in securitization trusts. For financial reporting purposes, the ARM loans held as collateral are recorded as assets of the Company and the Residential CDOs arerecorded as the Company’s debt. The Company completed four securitizations in 2005 and 2006. The first three were accounted for as a permanent financing whilethe fourth was accounted for as a sale and accordingly, is not included in the Company’s accompanying consolidated financial statementsMulti-Family Collateralized Debt Obligations (“Multi-Family CDOs”) – We consolidate the Consolidated K-Series including their debt, referred to asMulti-Family CDOs, in our financial statements. The Multi-Family CDOs permanently finance the multi-family mortgage loans held in the Consolidated K-Seriessecuritizations. For financial reporting purposes, the loans held as collateral are recorded as assets of the Company and the Multi-Family CDOs are recorded as theCompany’s debt. We refer to both the Residential CDOs and Multi-Family CDOs as CDOs in this report.Securitized Debt –Securitized Debt represents third-party liabilities of Financing VIEs and excludes liabilities of the VIEs acquired by the Company thatare eliminated on consolidation. The Company has entered into several financing transactions that resulted in the Company consolidating as VIEs the specialpurpose entities (the “SPEs”) that were created to facilitate the transactions and to which underlying assets in connection with the financing were transferred. TheCompany engaged in these transactions primarily to obtain permanent or longer term financing on a portion of its multi-family CMBS and acquired distressedresidential mortgage loans.Costs related to issuance of securitized debt which include underwriting, rating agency, legal, accounting and other fees are reflected as deferred charges.Such costs are included on the Company’s accompanying consolidated balance sheets in receivables and other assets in the amount of $1.0 million and $2.2 millionas of December 31, 2015 and December 31, 2014 , respectively. These deferred charges are amortized as an adjustment to interest expense using the effectiveinterest method, or straight line-method, if the result is not materially different.Derivative Financial Instruments – In accordance with ASC 815, the Company records derivative financial instruments on its consolidated balance sheetas assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative instruments and whether they qualify for hedgeaccounting treatment.In connection with our investment in Agency IOs, the Company uses several types of derivative instruments such as interest rate swaps, futures, put andcall options on futures and TBAs to hedge the interest rate risk, as well as spread risk associated with these investments. The Company also purchase or sell shortTo-Be-Announced securities (“TBAs”) through its Agency IO portfolio. TBAs are forward-settling purchases and sales of Agency RMBS where the underlyingpools of mortgage loans are “To-Be-Announced.” Pursuant to these TBA transactions, we agree to purchase or sell, for future settlement, Agency RMBS withcertain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly beforethe TBA settlement date. For TBA contracts that we have entered into, we have not asserted that physical settlement is probable, therefore we have not designatedthese forward commitments as hedging instruments. The use of TBAs, futures, options on futures and interest rate swaps in our Agency IO portfolio hedge theoverall risk profile of investment securities in the portfolio. The derivative instruments in our Agency IO portfolio are not designated as hedging instruments,therefore realized and unrealized gains and losses associated with these derivative instruments are recognized through earnings and reported as part of the otherincome (loss) category in the consolidated statements of operations.The Company also use interest rate swaps to hedge the variable cash flows associated with borrowings made under our financing arrangements andResidential CDOs. We typically pay a fixed rate and receive a floating rate based on one month LIBOR, on the notional amount of the interest rate swaps. Thefloating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. Theseinterest rate swaps, qualify as a cash flow hedge, where the effective portion of the gain or loss on the derivative instrument is reported as a component of OCI andreclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivativeinstruments in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during theperiod of change.Termination of Hedging Relationships – The Company employs risk management monitoring procedures to ensure that the designated hedgingrelationships are demonstrating, and are expected to continue to demonstrate, a high level of effectiveness. Hedge accounting is discontinued on a prospective basisif it is determined that the hedging relationship is no longer highly effective or expected to be highly effective in offsetting changes in fair value of the hedgeditem.F-17Additionally, the Company may elect to un-designate a hedge relationship during an interim period and re-designate upon the rebalancing of a hedgeprofile and the corresponding hedge relationship. When hedge accounting is discontinued, the Company continues to carry the derivative instruments at fair valuewith changes recorded in earnings.Other Comprehensive Income (Loss) – The Company’s comprehensive income/(loss) available to common stockholders includes net income, the changein net unrealized gains/(losses) on its available for sale securities and its derivative hedging instruments, currently comprised of interest rate swaps, (to the extentthat such changes are not recorded in earnings), adjusted by realized net gains/(losses) reclassified out of accumulated other comprehensive income/(loss) foravailable for sale securities and is reduced by dividends declared on the Company’s preferred stock.Employee Benefits Plans – The Company sponsors a defined contribution plan (the “Plan”) for all eligible domestic employees. The Plan qualifies as adeferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Company made nocontributions to the Plan for the years ended December 31, 2015 and 2014 .Stock Based Compensation – Compensation expense for equity based awards and stock issued for services are recognized over the vesting period of suchawards and services based upon the fair value of the stock at the grant date.Income Taxes – The Company operates in such a manner so as to qualify as a REIT under the requirements of the Internal Revenue Code. Requirementsfor qualification as a REIT include various restrictions on ownership of the Company’s stock, requirements concerning distribution of taxable income and certainrestrictions on the nature of assets and sources of income. A REIT must distribute at least 90% of its taxable income to its stockholders, of which 85% plus anyundistributed amounts from the prior year must be distributed within the taxable year in order to avoid the imposition of an excise tax. Distribution of theremaining balance may extend until timely filing of the Company’s tax return in the subsequent taxable year. Qualifying distributions of taxable income aredeductible by a REIT in computing taxable income.Certain activities of the Company are conducted through TRSs and therefore are subject to federal and various state and local income taxes. Accordingly,deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in income in the period that includes the enactment date.ASC 740, Income Taxes , provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financialstatements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determinewhether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. In situations involving uncertain tax positions related toincome tax matters, we do not recognize benefits unless it is more likely than not that they will be sustained. ASC 740 was applied to all open taxable years as ofthe effective date. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based on factors including, but notlimited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company will recognize interest and penalties, if any, related to uncertaintax positions as income tax expense in our consolidated statements of operations.Earnings Per Share – Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders by theweighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared inthe earnings of the Company.Segment Reporting – ASC 280, Segment Reporting , is the authoritative guidance for the way public entities report information about operating segmentsin their annual financial statements. We are a REIT focused on the business of acquiring, investing in, financing and managing primarily mortgage-related assets,and financial assets, and currently operate in only one reportable segment.F-18Summary of Recent Accounting PronouncementsReceivables (ASC 310)In April 2014, the FASB issued ASU 2014-4, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40)—Reclassification ofResidential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-4”). The amendments of this ASU are intended to clarify when acreditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loanshould be derecognized and the real estate recognized. In addition, the amendments clarify that an in substance repossession or foreclosure occurs, and a creditor isconsidered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (1) the creditor obtaininglegal title to the residential real estate property upon completion of a foreclosure, or (2) the borrower conveying all interest in the residential real estate property tothe creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. ASU 2014-04 became effective for theCompany beginning January 1, 2015. The adoption of ASU 2014-04 did not have a material effect on our financial condition, results of operations and disclosures.Transfers and Servicing (ASC 860)In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing: Repurchase-to-Maturity Transaction, Repurchase Financings, and Disclosures(“ASU 2014-11”). This guidance requires repurchase-to-maturity transactions to be accounted for as secured borrowings as if the transferor retains effectivecontrol, even though the transferred financial assets are not returned to the transferor at settlement. ASU 2014-11 also eliminates existing guidance for repurchasefinancings and requires instead that entities consider the initial transfer and the related repurchase agreement separately when applying the derecognitionrequirements of ASC 860, Transfers and Servicing. New disclosures will be required for (1) certain transactions accounted for as secured borrowings and (2)transfers accounted for as sales when the transferor also retains substantially all of the exposure to the economic return on the transferred financial assetsthroughout the term of the transaction. ASU 2014-11 became effective for the Company beginning January 1, 2015. The adoption of ASU 2014-11 did not have amaterial effect on our financial condition, results of operations and disclosures.Revenue Recognition (Topic 606)In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”). This guidance creates a new, principle-basedrevenue recognition framework that will affect nearly every revenue-generating entity. ASU 2014-9 also creates a new topic in the Codification, Topic 606 (“ASC606”). In addition to superseding and replacing nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance, ASC 606 doesthe following: (1) establishes a new control-based revenue recognition model; (2) changes the basis for deciding when revenue is recognized over time or at a pointin time; (3) provides new and more detailed guidance on specific aspects of revenue recognition; and (4) expands and improves disclosures about revenue. InAugust 2015, the FASB issued ASU 2015-14 that defers the effective date of ASU 2014-09 for public business entities for annual reporting periods beginning afterDecember 15, 2017, including interim periods therein. Early application is not permitted for public business entities. The Company is currently assessing theimpact of this guidance.Consolidation (Topic 810)In August 2014, the FASB issued ASU 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized FinancingEntity (“ASU 2014-13”). For entities that consolidate a collateralized financing entity within the scope of this update, an option to elect to measure the financialassets and the financial liabilities of that collateralized financing entity using either the measurement alternative included in this Update or Topic 820 on fair valuemeasurement is provided. The guidance is effective for fiscal years beginning after December 15, 2015, and the interim periods within those fiscal years. Earlyadoption is permitted as of the beginning of an annual period. The Company is currently assessing the impact of this guidance.In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). The update is intended to improvetargeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralizeddebt obligations, collateralized loan obligations, and mortgage-backed security transactions). The guidance is effective for fiscal years beginning afterDecember 31, 2015 , and the interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period. We do not expect theadoption of ASU 2015-02 to have a material impact on the Company’s financial condition or results of operations.F-19Interest - Imputation of Interest (Topic 835)In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs(“ASU 2015-03”). The amendments in ASU 2015-03 are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuancecosts related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent withdebt discounts. The guidance in ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-creditarrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff statedthat they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratablyover the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 addsthese SEC comments to the "S" section of the Codification. The guidance is effective for financial statements issued for fiscal years beginning after December 31,2015 , and interim periods within those fiscal years. We do not expect the adoption of ASU 2015-03 to have a significant effect on our financial condition, resultsof operations and disclosures.F-203.Investment Securities Available For SaleInvestment securities available for sale consisted of the following as of December 31, 2015 and December 31, 2014 (dollar amounts in thousands): December 31, 2015 December 31, 2014 Amortized Costs Unrealized Fair Value AmortizedCosts Unrealized Fair Value Gains Losses Gains Losses Agency RMBS: Agency ARMs Freddie Mac$62,383 $41 $(770) $61,654 $57,597 $55 $(488) $57,164Fannie Mae92,605 121 (1,334) 91,392 113,192 81 (1,037) 112,236Ginnie Mae20,172 55 (260) 19,967 12,552 — (259) 12,293Total Agency ARMs175,160 217 (2,364) 173,013 183,341 136 (1,784) 181,693 Agency Fixed Rate Freddie Mac31,076 — (719) 30,357 37,800 — (629) 37,171Fannie Mae380,684 — (12,149) 368,535 451,694 — (10,184) 441,510Ginnie Mae25,923 9 (111) 25,821 — — — —Total Agency Fixed Rate437,683 9 (12,979) 424,713 489,494 — (10,813) 478,681 Agency IOs (1) Freddie Mac28,970 680 (4,471) 25,179 38,844 273 (5,779) 33,338Fannie Mae39,603 433 (6,341) 33,695 53,666 741 (6,388) 48,019Ginnie Mae63,050 511 (7,045) 56,516 42,991 310 (5,527) 37,774Total Agency IOs131,623 1,624 (17,857) 115,390 135,501 1,324 (17,694) 119,131 Total Agency RMBS744,466 1,850 (33,200) 713,116 808,336 1,460 (30,291) 779,505Non-Agency RMBS1,727 51 (211) 1,567 2,061 69 (191) 1,939U.S. Treasury securities10,113 — (76) 10,037 — — — —CLOs— — — — 26,140 9,063 — 35,203Total investment securitiesavailable for sale$756,306 $1,901 $(33,487) $724,720 $836,537 $10,592 $(30,482) $816,647 December 31, 2015 December 31, 2014 Amortized Costs Unrealized Fair Value AmortizedCosts Unrealized Fair Value Gains Losses Gains Losses CMBS$28,692 $12,042 $— $40,734 $26,193 $12,401 $— $38,594Total investment securitiesavailable for sale held insecuritization trusts$28,692 $12,042 $— $40,734 $26,193 $12,401 $— $38,594(1)Included in investment securities available for sale as of December 31, 2015 and 2014 are Agency IOs. Agency IOs are measured at fair value throughearnings.F-21Realized GainsDuring the year ended December 31, 2015 , the Company received total proceeds of approximately $99.2 million , realizing approximately $2.1 million ofnet gains, from the sale of investment securities available for sale. During the year ended December 31, 2014 , the Company received total proceeds ofapproximately $93.6 million , realizing approximately $39.1 million of net gains, from the sale of investment securities available for sale. During the year endedDecember 31, 2013 , the Company received total proceeds of approximately $1.3 million , realizing approximately $0.1 million of net gains, from the sale ofinvestment securities available for sale.Weighted Average LifeThe following table sets forth the weighted average lives our investment securities available for sale as of December 31, 2015 and December 31, 2014(dollar amounts in thousands):Weighted Average LifeDecember 31, 2015 December 31, 20140 to 5 years$477,860 $393,080Over 5 to 10 years219,747 365,38610+ years27,113 58,181Total$724,720 $816,647Actual maturities of our available for sale securities are generally shorter than stated contractual maturities (which range up to 30 years ), as they areaffected by the contractual lives of the underlying mortgages, periodic payments and prepayments of principal. As of December 31, 2015 and 2014 , based onmanagement’s estimates using three month historical CPR, the weighted average life of the Company’s available for sale securities portfolio was approximately4.49 years and 4.95 years , respectively.Portfolio Interest Reset PeriodsThe following tables set forth the stated interest reset periods of our investment securities available for sale and investment securities available for saleheld in securitization trusts at December 31, 2015 and December 31, 2014 at carrying value (dollar amounts in thousands): December 31, 2015 December 31, 2014 Less than 6months 6 to 24months More than24 months Total Less than 6months 6 to 24months More than24 months TotalAgency RMBS$92,693 $44,700 $575,723 $713,116 $89,442 $21,746 $668,317 $779,505Non-Agency RMBS188 1,379 — 1,567 1,939 — — 1,939U.S. Treasury securities10,037 — — $10,037 — — — —CLOs— — — — 35,203 — — 35,203Total investment securitiesavailable for sale$102,918 $46,079 $575,723 $724,720 $126,584 $21,746 $668,317 $816,647CMBS$— $— $40,734 $40,734 $— $— $38,594 $38,594Total investment securitiesavailable for sale held insecuritization trusts$— $— $40,734 $40,734 $— $— $38,594 $38,594F-22Unrealized Losses in OCIThe following tables present the Company's investment securities available for sale and investment securities available for sale held in securitization trustsin an unrealized loss position reported through OCI, aggregated by investment category and length of time that individual securities have been in a continuousunrealized loss position at December 31, 2015 (dollar amounts in thousands):December 31, 2015Less than 12 Months Greater than 12 months Total CarryingValue GrossUnrealizedLosses CarryingValue GrossUnrealizedLosses CarryingValue GrossUnrealizedLossesAgency RMBS$71,587 $(688) $476,157 $(14,497) $547,744 $(15,185)Non-Agency RMBS771 — 796 (211) 1,567 (211)Total investment securities available for sale$72,358 $(688) $476,953 $(14,708) $549,311 $(15,396)CMBS$— $— $— $— $— $—Total investment securities available for saleheld in securitization trusts$— $— $— $— $— $—The following tables present the Company's investment securities available for sale and investment securities available for sale held in securitization trustsin an unrealized loss position reported through OCI, aggregated by investment category and length of time that individual securities have been in a continuousunrealized loss position at December 31, 2014 (dollar amounts in thousands):December 31, 2014Less than 12 Months Greater than 12 months Total CarryingValue GrossUnrealizedLosses CarryingValue GrossUnrealizedLosses CarryingValue GrossUnrealizedLossesAgency RMBS$— $— $638,936 $(12,597) $638,936 $(12,597)Non-Agency RMBS— — 967 (191) 967 (191)Total investment securities available forsale$— $— $639,903 $(12,788) $639,903 $(12,788)CMBS$— $— $— $— $— $—Total investment securities available forsale held in securitization trusts$— $— $— $— $— $—Other than Temporary ImpairmentFor the year ended December 31, 2013 , the Company recognized $0.2 million in other-than-temporary impairment through earnings, respectively. For theyears ended December 31, 2015 and December 31, 2014 , the Company did not have unrealized losses in investment securities that were deemed other-than-temporary.F-234.Residential Mortgage Loans Held in Securitization Trusts (Net) and Real Estate OwnedResidential mortgage loans held in securitization trusts (net) consist of the following at December 31, 2015 and December 31, 2014 , respectively(dollar amounts in thousands): December 31, 2015 December 31, 2014Unpaid principal balance$122,545 $152,277Deferred origination costs – net775 968Reserve for loan losses(3,399) (3,631)Total$119,921 $149,614Allowance for Loan Losses - The following table presents the activity in the Company's allowance for loan losses on residential mortgage loans held insecuritization trusts for the years ended December 31, 2015 , 2014 and 2013 , respectively (dollar amounts in thousands): Years Ended December 31, 2015 2014 2013Balance at beginning of period$3,631 $2,989 $2,978Provisions for loan losses1,161 998 701Transfer to real estate owned— (356) (407)Charge-offs(1,393) — (283)Balance at the end of period$3,399 $3,631 $2,989On an ongoing basis, the Company evaluates the adequacy of its allowance for loan losses. The Company’s allowance for loan losses at December 31,2015 was $3.4 million , representing 277 basis points of the outstanding principal balance of residential loans held in securitization trusts as of December 31, 2015, as compared to 238 basis points as of December 31, 2014 . As part of the Company’s allowance for loan loss adequacy analysis, management will assess anoverall level of allowances while also assessing credit losses inherent in each non-performing residential mortgage loan held in securitization trusts. Theseestimates involve the consideration of various credit related factors, including but not limited to, current housing market conditions, current loan to value ratios,delinquency status, the borrower’s current economic and credit status and other relevant factors.Real Estate Owned – The following table presents the activity in the Company’s real estate owned held in residential securitization trusts for the yearsended December 31, 2015 , 2014 and 2013 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014 December 31, 2013Balance at beginning of period$965 $1,108 $732Write downs— (103) (433)Transfer from mortgage loans held in securitization trusts— 537 1,184Disposal(554) (577) (375)Balance at the end of period$411 $965 $1,108Real estate owned held in residential securitization trusts are included in receivables and other assets on the balance sheet and write downs are included inprovision for loan losses in the statement of operations for reporting purposes.All of the Company’s mortgage loans and real estate owned held in residential securitization trusts are pledged as collateral for the Residential CDOsissued by the Company. As of December 31, 2015 and 2014 , the Company’s net investment in the residential securitization trusts, which is the maximum amountof the Company’s investment that is at risk to loss and represents the difference between the carrying amount of the mortgage loans and real estate owned held inresidential securitization trusts and the amount of Residential CDOs outstanding, was $4.4 million and $5.6 million , respectively.Delinquency Status of Our Residential Mortgage Loans Held in Securitization TrustsAs of December 31, 2015 , we had 31 delinquent loans with an aggregate principal amount outstanding of approximately $18.0 million categorized asResidential Mortgage Loans Held in Securitization Trusts (net). Of the $18.0 million in delinquent loans, $11.9 million , or 67% , are under some form of modifiedpayment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, including real estate owned (REO)through foreclosure, as of December 31, 2015 (dollar amounts in thousands):December 31, 2015Days LateNumber ofDelinquentLoans TotalUnpaidPrincipal % of LoanPortfolio30 - 603 $825 0.67%61 - 902 $1,763 1.43%90+26 $15,365 12.48%Real estate owned through foreclosure3 $574 0.47%As of December 31, 2014 , we had 33 delinquent loans with an aggregate principal amount outstanding of approximately $18.5 million categorized asResidential Mortgage Loans Held in Securitization Trusts (net). Of the $18.5 million in delinquent loans, $9.4 million , or 51% , were under some form of modifiedpayment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, including REO through foreclosure,as of December 31, 2014 (dollar amounts in thousands):December 31, 2014Days LateNumber ofDelinquentLoans TotalUnpaidPrincipal % of LoanPortfolio30 - 604 $1,522 0.99%61 - 90— $— —%90+29 $16,997 11.01%Real estate owned through foreclosure6 $2,100 1.36%The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential mortgage loans held in securitization trusts andREO held in residential securitization trusts at December 31, 2015 and 2014 are as follows: December 31, 2015 December 31, 2014New York35.6% 36.1%Massachusetts20.7% 24.0%New Jersey11.1% 10.9%Florida7.7% 6.2%Connecticut6.5% 5.9%5.Distressed Residential Mortgage LoansAs of December 31, 2015 and December 31, 2014 , the carrying value of the Company’s acquired distressed residential mortgage loans amounts toapproximately $559.0 million and $582.7 million , respectively.The Company considers its purchase price for the acquired distressed residential mortgage loans, including distressed residential mortgage loans held insecuritization trusts, to be at fair value at the date of acquisition. The Company only establishes an allowance for loan losses subsequent to acquisition.The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected, and theestimated fair value of the distressed residential mortgage loans acquired during the years ended December 31, 2015 and December 31, 2014 , respectively (dollaramounts in thousands): December 31, 2015 December 31, 2014Contractually required principal and interest$327,611 $910,787Non-accretable yield(17,276) (85,474)Expected cash flows to be collected310,335 825,313Accretable yield(158,149) (424,444)Fair value at the date of acquisition$152,186 $400,869The following table details activity in accretable yield for the distressed residential mortgage loans, including distressed residential mortgage loans heldin securitization trusts, for the years ended December 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014Balance at beginning of period$640,416 $171,112Additions173,497 598,247Disposals(195,615) (110,309)Accretion(39,289) (18,634)Balance at end of period (1)$579,009 $640,416(1)Accretable yield is the excess of the distressed residential mortgage loans’ cash flows expected to be collected over the purchase price. The cash flowsexpected to be collected represents the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions includeaccretable yield estimates for purchases made during the period and reclassification to accretable yield from nonaccretable yield. Deletions includedistressed residential mortgage loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of thedistressed residential mortgage loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications betweenaccretable and nonaccretable yield and the accretion of interest income is based on various estimates regarding loan performance and the value of theunderlying real estate securing the loans. As the Company continues to gather additional information regarding the loans and the underlying collateral, theaccretable yield may change. Therefore, the amount of accretable income recorded in the twelve-month period ended December 31, 2015 is notnecessarily indicative of future results.The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance in our distressed residential mortgage loans, includingdistressed residential mortgage loans held in securitization trusts, as of December 31, 2015 and December 31, 2014 , respectively, are as follows: December 31, 2015 December 31, 2014Florida12.6% 12.4%North Carolina8.1% 8.2%California7.7% 8.9%Georgia6.1% 6.9%Maryland5.4% 3.5%New York5.2% 5.1%F-26The Company’s distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $114.2 million and $221.6million at December 31, 2015 and December 31, 2014 , respectively, are pledged as collateral for certain of the Securitized Debt issued by the Company (see Note7) . In addition, distressed residential mortgage loans with a carrying value of approximately $307.0 million and $327.4 million at December 31, 2015 andDecember 31, 2014 , respectively, are pledged as collateral for a Master Repurchase Agreement, with Deutsche Bank AG, Cayman Islands Branch (see Note 10) .6.Consolidated K-SeriesThe Company has elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes invaluations in the assets and liabilities of the Consolidated K-Series be reflected in the Company's statements of operations. Our investment in the Consolidated K-Series is limited to the first loss tranche PO securities and/or certain IOs issued by certain K-Series securitizations with an aggregate net carrying value of $286.4million and $317.5 million at December 31, 2015 and 2014 , respectively ( see Note 7 ).The condensed consolidated balance sheets of the Consolidated K-Series at December 31, 2015 and December 31, 2014 , respectively, are as follows(dollar amounts in thousands):Balance SheetsDecember 31,2015 December 31,2014Assets Multi-family loans held in securitization trusts$7,105,336 $8,365,514Receivables24,579 29,809Total Assets$7,129,915 $8,395,323Liabilities and Equity Multi-family CDOs$6,818,901 $8,048,053Accrued expenses24,483 29,354Total Liabilities6,843,384 8,077,407Equity286,531 317,916Total Liabilities and Equity$7,129,915 $8,395,323The multi-family loans held in securitization trusts had unpaid aggregate principal balances of approximately $6.8 billion and $7.9 billion atDecember 31, 2015 and December 31, 2014 , respectively. The multi-family CDOs had aggregate unpaid principal balances of approximately $6.8 billion and $7.9billion at December 31, 2015 and December 31, 2014 , respectively. As of December 31, 2015 and 2014 , the current weighted average interest rate on these Multi-Family CDOs was 3.98% and 4.15% , respectively.In February 2015, the Company sold a first loss tranche PO security in one of the Company’s Consolidated K-Series obtaining total proceeds ofapproximately $44.3 million and realizing a gain of approximately $1.5 million . The sale resulted in a de-consolidation of $1.1 billion in Multi-Family loans heldin a securitization trust and $1.0 billion in Multi-Family CDOs.The Company does not have any claims to the assets or obligations for the liabilities of the Consolidated K-Series other than the security represented byour first loss tranche securities. We have elected the fair value option for the Consolidated K-Series. The net fair value of our investment in the Consolidated K-Series, which represents the difference between the carrying values of multi-family loans held in securitization trusts less the carrying value of multi-family CDOs,approximates the fair value of our underlying securities. The fair value of our underlying securities is determined using the same valuation methodology as ourCMBS investments available for sale (see Note 14) .F-27The condensed consolidated statements of operations of the Consolidated K-Series for the years ended December 31, 2015 , 2014 , and 2013 respectively,are as follows (dollar amounts in thousands): Years Ended December 31,Statements of Operations2015 2014 2013Interest income$257,417 $301,877 $228,631Interest expense232,971 275,916 210,229Net interest income24,446 25,961 18,402Unrealized gain on multi-family loans and debt held in securitization trusts, net12,368 56,931 31,495Net Income$36,814 $82,892 $49,897The geographic concentrations of credit risk exceeding 5% of the total loan balances related to our CMBS investments included in investment securitiesavailable for sale and multi-family loans held in securitization trusts as of December 31, 2015 and December 31, 2014 , respectively, are as follows: December 31, 2015 December 31, 2014California13.8% 13.5%Texas12.3% 12.5%New York8.0% 7.7%Maryland5.2% 5.2%F-287.Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. Theobjective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets onimproved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized inthe normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE anddepending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excessassets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or otherform of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment inaccordance with the terms of their investment agreement. The Company has entered into into resecuritization and financing transactions which required the Company to analyze and determine whether the SPEsthat were created to facilitate the transactions are VIEs in ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation. TheCompany evaluated the following resecuritization and financing transactions: 1) its Residential CDOs completed in 2005; 2) its multi-family CMBS re-securitization transaction completed in May 2012; 3) its collateralized recourse financing transactions completed in November 2013 and 4) its distressed residentialmortgage loan securitization transactions completed in December 2012, July 2013 and September 2013 (each a “Financing VIE” and collectively, the “FinancingVIEs”) and concluded that the entities created to facilitate each of the transactions are VIEs and that the Company is the primary beneficiary of these VIEs.Accordingly, the Company consolidated the Financing VIEs as of December 31, 2015 .The Company invests in multi-family CMBS consisting of PO securities that represent the first loss tranche of the securitizations from which they wereissued, and certain IOs issued from Freddie Mac-sponsored multi-family K-Series securitization trusts. The Company has evaluated these CMBS investments inFreddie Mac-sponsored K-Series securitization trusts to determine whether they are VIEs and if so, whether the Company is the primary beneficiary requiringconsolidation. The Company has determined that five and six Freddie Mac-sponsored multi-family K-Series securitization trusts as of December 31, 2015 andDecember 31, 2014 , respectively are VIEs. The Company also determined that it is the primary beneficiary of each VIE within the Consolidated K-Series and,accordingly, has consolidated its assets, liabilities, income and expenses in the accompanying consolidated financial statements ( see Notes 2 and 6 ). One and twoof the Company’s multi-family CMBS investments included in the Consolidated K-Series (herein to referred to as "Non-Financed VIEs") are not subject to anyfinancing as of December 31, 2015 and December 31, 2014 , respectively.In analyzing whether the Company is primary beneficiary of the Consolidated K-Series and the Financing VIEs (collectively referred to in this footnote as"Consolidated VIEs"), the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvementreflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Companywould be considered the primary beneficiary, the following factors were assessed:•whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and•whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.F-29The following table presents a summary of the assets and liabilities of these Consolidated VIEs. Intercompany balances have been eliminated for purposesof this presentation.Assets and Liabilities of Consolidated VIEs as of December 31, 2015 (dollar amounts in thousands): Financing VIEs Non-financedVIEs Multi-family CMBSre-securitization (1) CollateralizedRecourseFinancing (2) Distressed ResidentialMortgage LoanSecuritization (3) ResidentialMortgage LoanSecuritization Multi-familyCMBS (4) TotalInvestment securitiesavailable for sale, at fairvalue held in securitizationtrusts$40,734 $— $— $— $— $40,734Residential mortgage loansheld in securitization trusts(net)— — — 119,921 — 119,921Distressed residentialmortgage loans held insecuritization trust (net)— — 114,214 — — 114,214Multi-family loans held insecuritization trusts, at fairvalue1,224,036 4,633,061 — — 1,248,239 7,105,336Receivables and other assets4,864 15,281 6,076 1,200 5,456 32,877Total assets$1,269,634 $4,648,342 $120,290 $121,121 $1,253,695 $7,413,082Residential collateralizeddebt obligations$— $— $— $116,710 $— $116,710Multi-family collateralizeddebt obligations, at fairvalue1,168,470 4,464,340 — — 1,186,091 6,818,901Securitized debt28,019 55,853 33,656 — — 117,528Accrued expenses and otherliabilities4,436 14,750 368 13 5,456 25,023Total liabilities$1,200,925 $4,534,943 $34,024 $116,723 $1,191,547 $7,078,162(1)The Company classified the multi-family CMBS issued by two K-Series securitizations and held by this Financing VIE as available for sale securities asthe purpose is not to trade these securities. The Financing VIE consolidated one K-Series securitization that issued certain of the multi-family CMBSowned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Companydetermined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization ( see Note 6 ).(2)The multi-family CMBS serving as collateral under the November 2013 collateralized recourse financing are comprised of securities issued from threeseparate Freddie Mac-sponsored multi-family K-Series securitizations. The Financing VIE consolidated these K-Series securitizations, including theirassets, liabilities, income and expenses, in its financial statements as based on a number of factors, the Company determined that it was the primarybeneficiary and has a controlling financial interest in such K-Series securitizations ( see Note 6 ).(3)In December 2015, the Company repaid the Company’s outstanding notes from its distressed residential mortgage loan securitization transactioncompleted in December 2012 with an original principal amount of $38.7 million and outstanding principal balance at the time of repayment amounting to$5.5 million . With the repayment of the notes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transactionand the distressed residential loans serving as collateral on the notes were transferred back to the Company.F-30(4)In February 2015, the Company sold a first loss tranche PO security issued by one of the Consolidated K-Series securitizations obtaining total proceeds ofapproximately $44.3 million and realizing a gain of approximately $1.5 million . The sale resulted in a de-consolidation of $1.1 billion in Multi-Familyloans held in a securitization trust and $1.0 billion in Multi-Family CDOs.Assets and Liabilities of Consolidated VIEs as of December 31, 2014 (dollar amounts in thousands): Financing VIEs Non-financedVIEs Multi-family CMBSre-securitization (1) CollateralizedRecourseFinancings (2) DistressedResidentialMortgage Loan Securitizations ResidentialMortgage LoanSecuritizations Multi- family CMBS (3) TotalInvestment securitiesavailable for sale, at fairvalue held in securitizationtrusts$38,594 $— $— $— $— $38,594Residential mortgage loansheld in securitization trusts(net)— — — 149,614 — 149,614Distressed residentialmortgage loans held insecuritization trusts (net)— — 221,591 — — 221,591Multi-family loans held insecuritization trusts, at fairvalue1,273,633 4,720,908 — — 2,370,973 8,365,514Receivables and other assets5,097 15,631 39,084 1,545 10,408 71,765Total assets$1,317,324 $4,736,539 $260,675 $151,159 $2,381,381 $8,847,078Residential collateralizeddebt obligations$— $— $— $145,542 $— $145,542Multi-family collateralizeddebt obligations, at fairvalue1,221,555 4,558,065 — — 2,268,433 8,048,053Securitized debt27,660 55,853 149,364 — — 232,877Accrued expenses and otherliabilities4,581 14,639 1,024 14 10,304 30,562Total liabilities$1,253,796 $4,628,557 $150,388 $145,556 $2,278,737 $8,457,034(1)The Company classified the multi-family CMBS issued by two K-Series securitizations and held by the Financing VIE as available for sale securities asthe purpose is not to trade these securities. The Financing VIE consolidated one K-Series securitization that issued certain of the multi-family CMBSowned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Companydetermined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization ( see Note 6 ).(2)The multi-family CMBS serving as collateral under the November 2013 collateralized recourse financing are comprised of securities issued from threeseparate Freddie Mac-sponsored multifamily K-Series securitizations. The Financing VIE consolidated these K-Series securitizations, including theirassets, liabilities and expenses, in its financial statements as based on a number of factors, the Company determined that it was the primary beneficiaryand has a controlling financial interest in such K-Series securitizations ( see Note 6 ). In September 2014, the Company repaid the Company’s outstandingnotes from its collateralized recourse financing transaction completed in November 2012 with a principal amount of $52.0 million . With the repaymentof the notes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transaction and the multi-family CMBS servingas collateral on the notes were transferred back to the Company.F-31(3)Two of the Company's Freddie Mac-sponsored multi-family K-Series securitizations included in the Consolidated K-Series are not subject to anyFinancing VIE as of December 31, 2014.The following table summarizes the Company’s securitized debt collateralized by multi-family CMBS or distressed residential mortgage loans (dollaramounts in thousands): Multi-family CMBSRe-securitization (1) CollateralizedRecourse Financings (2) DistressedResidential MortgageLoan Securitizations(3)Original Face amount of Notes issued by the VIE and purchased by 3rd party investors$35,000 $55,853 $176,970Principal Amount at December 31, 2015$33,781 $55,853 $33,656Principal Amount at December 31, 2014$34,208 $55,853 $149,364Carrying Value at December 31, 2015 (4)$28,019 $55,853 $33,656Carrying Value at December 31, 2014 (4)$27,660 $55,853 $149,364Pass-through rate of Notes issued5.35% One-month LIBORplus 5.25% 4.25 - 4.85%(1)The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse financing on a portion of its multi-familyCMBS portfolio. As a result of engaging in this transaction, the Company remains economically exposed to the first loss position on the underlying multi-family CMBS transferred to the Consolidated VIE. The holders of the Note have no recourse to the general credit of the Company, but the Company doeshave the obligation, under certain circumstances, to repurchase assets upon the breach of certain representations and warranties. The Company willreceive all remaining cash flow, if any, through its retained ownership.(2)The Company entered into a CMBS Master Repurchase Agreements with a three -year term for the purpose of financing a portion of its multi-familyCMBS portfolio. In connection with the transaction, the Company agreed to guarantee the due and punctual payment of its wholly-owned subsidiary'sobligations under the CMBS Master Repurchase Agreement.(3)The Company engaged in these transactions for the purpose of financing distressed residential mortgage loans acquired by the Company. The distressedresidential mortgage loans serving as collateral for the financings are comprised of performing, re-performing and to a lesser extent non-performing, fixedand adjustable-rate, fully-amortizing, interest only and balloon, seasoned mortgage loans secured by first liens on one to four family properties. Two ofthe four securitization transactions provide for a revolving period of one to two years from the date of the respective financing (“Revolving Period”)where no principal payments will be made on the note. All cash proceeds generated by the distressed residential mortgage loans and received by therespective securitization trust during the Revolving Period, after payment of interest on the note, reserve amounts and certain other transaction expenses,will be available for the purchase by the trust of additional mortgage loans that satisfy certain eligibility criteria. In December 2015, the Company repaidthe Company’s outstanding notes from its distressed residential mortgage loan securitization transaction completed in December 2012 with an originalprincipal amount of $38.7 million and outstanding principal balance at the time of repayment amounting to $5.5 million .. With the repayment of thenotes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transaction and the distressed residential loans servingas collateral on the notes were transferred back to the Company.(4)Classified as securitized debt in the liability section of the Company’s accompanying consolidated balance sheets.The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of December 31, 2015 and December 31,2014 , respectively (dollar amounts in thousands):Scheduled Maturity (principal amount) December 31, 2015 December 31, 2014Within 24 months $89,509 $205,217Over 36 months 33,781 34,208Total 123,290 239,425Discount (5,762) (6,548)Carrying value $117,528 $232,877F-32There is no guarantee that the Company will receive any cash flows from these securitization trusts.Residential Mortgage Loan Securitization TransactionThe Company has completed four residential mortgage loan securitizations (other than the distressed residential mortgage loan securitizations discussedabove) since inception; the first three were accounted for as permanent financings and have been included in the Company’s accompanying consolidated financialstatements. The fourth was accounted for as a sale and accordingly, is not included in the Company's accompanying consolidated financial statements.Unconsolidated VIEsThe Company has evaluated its multi-family CMBS investments in two Freddie Mac-sponsored K-Series securitizations as of December 31, 2015 and2014 , respectively, and its mezzanine loan, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by theCompany. Based on a number of factors, the Company determined that it does not have a controlling financial interest and is not the primary beneficiary of theseVIEs. The following table presents the classification and carrying value of unconsolidated VIEs as of December 31, 2015 and 2014 (dollar amounts in thousands): December 31, 2015 December 31, 2014 Investmentsecurities available for sale,at fair value, heldin securitizationtrusts Receivables andother Assets Total Investmentsecurities available for sale,at fair value, heldin securitizationtrusts Receivables andother Assets TotalMulti-Family CMBS$40,734 $76 $40,810 $38,594 $80 $38,674Mezzanine loan, preferred equity andinvestments in unconsolidated entities— 129,887 129,887 — 72,799 72,799Total assets$40,734 $129,963 $170,697 $38,594 $72,879 $111,473Our maximum loss exposure on the multi-family CMBS investments and mezzanine loan and equity investments is approximately $170.7 million and$111.5 million at December 31, 2015 and December 31, 2014 , respectively. The Company’s maximum exposure does not exceed the carrying value of itsinvestments.F-338.Derivative Instruments and Hedging ActivitiesThe Company enters into derivative instruments in connection with its risk management activities. These derivative instruments include interest rateswaps, swaptions and futures. The Company may also purchase or sell short TBAs purchase put or call options on U.S. Treasury futures or invest in other types ofmortgage derivative securities.Derivatives Not Designated as Hedging InstrumentsThe following table presents the fair value of derivative instruments that were not designated as hedging instruments and their location in our consolidatedbalance sheets at December 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): Balance Sheet Location December 31, 2015 December 31, 2014TBA securities (1) Derivative assets $226,929 $284,971U.S. Treasury futures Derivative assets — 379Options on U.S. Treasury futures Derivative assets 15 92Interest rate swap futures Derivative assets 706 —Swaptions Derivative assets 821 2,273Eurodollar futures Derivative liabilities 1,242 900Interest rate swap futures Derivative liabilities — 331Interest rate swaps (2) Derivative liabilities 258 232(1)Open TBA purchases and sales involving the same counterparty, same underlying deliverable and the same settlement date are reflected in ouraccompanying consolidated financial statements on a net basis. There was no netting of TBA sales against TBA purchases as of December 31, 2015 andDecember 31, 2014 .(2)Includes interest rate swaps in our Agency IO portfolio.The tables below summarize the activity of derivative instruments not designated as hedges for the years ended December 31, 2015 and 2014 ,respectively (dollar amounts in thousands). Notional Amount For the Year Ended December 31, 2015 December 31, 2014 Additions Settlement,Expirationor Exercise December 31, 2015TBA securities$273,000 $3,801,000 $(3,852,000) $222,000U.S. Treasury futures2,300 150,200 (152,500) —Interest rate swap futures(190,100) 1,165,200 (1,112,300) (137,200)Eurodollar futures(2,961,000) 2,925,000 (2,733,000) (2,769,000)Options on U.S. Treasury futures21,000 375,000 (368,000) 28,000Swaptions180,000 9,000 (30,000) 159,000Interest rate swaps10,000 — — 10,000F-34 Notional Amount For the Year Ended December 31, 2014 December 31, 2013 Additions Settlement,Expirationor Exercise December 31, 2014TBA securities$188,000 $2,575,000 $(2,490,000) $273,000U.S. Treasury futures(11,900) 130,500 (116,300) 2,300Interest rate swap futures(242,700) 996,500 (943,900) (190,100)Eurodollar futures(3,360,000) 3,134,000 (2,735,000) (2,961,000)Options on U.S. Treasury futures40,000 48,200 (67,200) 21,000Swaptions100,000 150,000 (70,000) 180,000Interest rate swaps— 10,000 — 10,000The following table presents the components of realized and unrealized gains and losses related to our derivative instruments that were not designated ashedging instruments included in other income (loss) in our consolidated statements of operations for the years ended December 31, 2015 , 2014 and 2013 : Years Ended December 31, 2015 2014 2013 RealizedGains(Losses) UnrealizedGains (Losses) RealizedGains (Losses) UnrealizedGains (Losses) RealizedGains (Losses) UnrealizedGains (Losses) TBA$5,244 $(2,253) $13,708 $2,472 $(12,393) $(629)Eurodollar futures (1)(2,321) (342) (2,146) 533 (3,591) 2,366Interest rate swaps— (26) 259 (232) — —Swaptions— (658) — (1,068) — 1,153U.S. Treasury and Interest rate swap futures andoptions(9,631) 579 (8,831) (3,332) 5,418 2,866Total$(6,708) $(2,700) $2,990 $(1,627) $(10,566) $5,756(1)At December 31, 2015 , the Eurodollar futures consist of 2,769 contracts with expiration dates ranging between March 2016 and September 2017.The use of TBAs exposes the Company to market value risk, as the market value of the securities that the Company is required to purchase pursuant to aTBA transaction may decline below the agreed-upon purchase price. Conversely, the market value of the securities that the Company is required to sell pursuant toa TBA transaction may increase above the agreed upon sale price. At December 31, 2015 and 2014 , our consolidated balance sheets include TBA-relatedliabilities of $228.0 million and $283.5 million included in payable for securities purchased, respectively. Open TBA purchases and sales involving the samecounterparty, same underlying deliverable and the same settlement date are reflected in our consolidated financial statements on a net basis.Derivatives Designated as Hedging InstrumentsThe Company’s interest rate swaps, except interest swaps included in its Agency IO portfolio, are used to hedge the variable cash flows associated withborrowings made under our financing arrangements including FHLBI advances and are designated as cash flow hedges. There were no costs incurred at theinception of the Company's interest rate swaps, under which the Company agrees to pay a fixed rate of interest and receive a variable interest rate based on onemonth LIBOR, on the notional amount of the interest rate swaps.The Company documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities, and upon entering intohedging transactions, documents the relationship between the hedging instrument and the hedged liability contemporaneously. The Company assesses, both atinception of a hedge and on an on-going basis, whether or not the hedge is “highly effective” when using the matched term basis.F-35The Company discontinues hedge accounting on a prospective basis and recognizes changes in the fair value through earnings when: (i) it is determinedthat 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 forecastedtransaction will occur; or (iii) it is determined that designating the derivative as a hedge is no longer appropriate. The Company’s derivative instruments are carriedon the Company’s balance sheets at fair value, as assets, if their fair value is positive, or as liabilities, if their fair value is negative. For the Company’s derivativeinstruments that are designated as “cash flow hedges,” changes in their fair value are recorded in accumulated other comprehensive income (loss), provided that thehedges are effective. A change in fair value for any ineffective amount of the Company’s derivative instruments would be recognized in earnings. The Companyhas not recognized any change in the value of its existing derivative instruments designated as cash flow hedges through earnings as a result of ineffectiveness ofany of its hedges.The following table presents the fair value of derivative instruments designated as hedging instruments and their location in the Company’s consolidatedbalance sheets at December 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): Balance Sheet Location December 31,2015 December 31,2014Interest rate swaps Derivative assets $304 $1,135The Company has netting arrangements by counterparty with respect to its interest rate swaps. Contracts in a liability position of $0.3 million have beennetted against the asset position of $0.3 million and contracts in a liability position of $0.2 million have been netted against the asset position of $1.3 million in theaccompanying consolidated balance sheets at December 31, 2015 and December 31, 2014 , respectively.The following table presents the impact of the Company’s interest rate swaps designated as hedging instruments on the Company’s accumulated othercomprehensive income (loss) for the years ended December 31, 2015 , 2014 and 2013 (dollar amounts in thousands): Years Ended December 31, 2015 2014 2013Accumulated other comprehensive income (loss) for derivative instruments: Balance at beginning of the period $1,135 $2,041 $(1,744)Unrealized (loss) gain on interest rate swaps (831) (906) 3,785Balance at end of the period $304 $1,135 $2,041The Company estimates that over the next 12 months , approximately $0.3 million of the net unrealized gains on the interest rate swaps will bereclassified from accumulated other comprehensive income (loss) into earnings.The following table details the impact of the Company’s interest rate swaps designated as hedging instruments included in interest expense for the yearsended December 31, 2015 , 2014 and 2013 , respectively (dollar amounts in thousands): Years Ended December 31, 2015 2014 2013Interest Rate Swaps: Interest expense-investment securities$1,619 $1,848 $1,737F-36The following table presents information about the Company’s interest rate swaps, including interest rate swaps in its Agency IO portfolio as ofDecember 31, 2015 and December 31, 2014 , respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014Maturity NotionalAmount WeightedAverageFixed PayInterest Rate NotionalAmount WeightedAverageFixed PayInterest RateWithin 30 Days $— —% $— —%Over 30 days to 3 months — —% — —%Over 3 months to 6 months — —% — —%Over 6 months to 12 months — —% 135,000 0.45%Over 12 months to 24 months 215,000 0.83% — —%Over 24 months to 36 months — —% 215,000 0.83%Over 36 months to 48 months — —% — —%Over 48 months to 60 months 10,000 2.25% 10,000 2.25%Total $225,000 0.90% $360,000 0.73%The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under theapplicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements, and may have difficultycollecting the assets it pledged as collateral against such derivatives. The Company currently has in place with all counterparties bi-lateral margin agreementsrequiring 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 ofa counterparty default.The Company is required to pledge assets under a bi-lateral margin arrangement, including either cash or Agency RMBS, as collateral for its interest rateswaps, futures contracts and TBAs, whose collateral requirements vary by counterparty and change over time based on the market value, notional amount, andremaining term of the agreement. In the event the Company is unable to meet a margin call under one of its agreements, thereby causing an event of default ortriggering an early termination event under one of its agreements, the counterparty to such agreement may have the option to terminate all of such counterparty’soutstanding transactions with the Company. In addition, under this scenario, any close-out amount due to the counterparty upon termination of the counterparty’stransactions would be immediately payable by the Company pursuant to the applicable agreement. The Company believes it was in compliance with all marginrequirements under its agreements as of December 31, 2015 and 2014 . The Company had $6.3 million and $11.4 million of restricted cash related to marginposted for its agreements as of December 31, 2015 and 2014 , respectively. The restricted cash held by third parties is included in receivables and other assets inthe accompanying consolidated balance sheets.F-379.Financing Arrangements, Portfolio InvestmentsThe Company finances its portfolio investments with a combination of repurchase agreements and Federal Home Loan Bank advances. The Company hasentered into repurchase agreements with third party financial institutions and the Company’s wholly owned subsidiary, GLIH, as a member of the FHLBI, mayaccess a variety of products and services offered by the FHLBI, including secured advances. These financing arrangements are short-term borrowings that bearinterest rates typically based on a spread to LIBOR, and are secured by the securities which they finance.At December 31, 2015 , the Company had repurchase agreements with an outstanding balance of $456.4 million and a weighted average interest rate of0.77% . At December 31, 2014 , the Company had repurchase agreements with an outstanding balance of $652.0 million and a weighted average interest rate of0.43% .As of December 31, 2015 , GLIH had $121.0 million in outstanding secured advances from the FHLBI with a weighted average borrowing rate of 0.47% ,and had an additional $79.0 million of available uncommitted capacity for borrowings, which may be adjusted at the sole discretion of the FHLBI. Each advancerequires approval by the FHLBI and is secured by collateral in accordance with the FHLBI’s credit and collateral guidelines, as may be revised from time to timeby the FHLBI. Eligible collateral may include Agency RMBS and certain non-Agency RMBS with a rating of A and above, conventional 1-4 family residentialmortgage loans and commercial real estate loans. Investment securities available for sale with a carrying value of $129.1 million at December 31, 2015 , arepledged or restricted as collateral for the future payment obligations of FHLBI advances. The FHLBI advances had contractual maturities within 30 days fromDecember 31, 2015 .The FHLBI retains the right to mark the underlying collateral for FHLBI advances to fair value. A reduction in the value of pledged assets would requirethe Company to provide additional collateral. In addition, as a condition to membership in the FHLBI, the Company is required to purchase and hold a certainamount of FHLBI stock, which is based, in part, upon the outstanding principal balance of advances from the FHLBI. At December 31, 2015 , the Company hadstock in the FHLBI totaling $5.4 million , which is included in receivables and other assets on the consolidated balance sheet. FHLBI stock is considered a non-marketable, long-term investment, is carried at cost and is subject to recoverability testing under applicable accounting standards. This stock can only be redeemedor sold at its par value, and only to the FHLBI. Accordingly, when evaluating FHLBI stock for impairment, the Company considers the ultimate recoverability ofthe par value rather than recognizing temporary declines in value. As of December 31, 2015 , the Company had not recognized an impairment charge related to itsFHLBI stock.The following table presents detailed information about the Company’s borrowings under financing arrangements, including FHLBI advances, andassociated assets pledged as collateral at December 31, 2015 and December 31, 2014 (dollar amounts in thousands): 2015 2014Assets Pledged as CollateralOutstandingBorrowings Fair Value ofCollateralPledged Amortized CostOf CollateralPledged OutstandingBorrowings Fair Value ofCollateralPledged AmortizedCostOf CollateralPledgedAgency ARMs$227,609 $141,585 $143,754 $171,852 $181,694 $183,342Agency Fixed Rate261,644 374,691 386,853 413,199 437,002 446,851Agency IOs/U.S. Treasury Securities88,160 123,407 139,218 66,914 83,988 95,129Balance at end of the period$577,413 $639,683 $669,825 $651,965 $702,684 $725,322As of December 31, 2015 and 2014 , the average days to maturity for all financing arrangements, including FHLBI advances, were 27 days and 26 days ,respectively. The Company’s accrued interest payable on outstanding financing arrangements, including FHLBI advances, at December 31, 2015 and 2014amounts to $0.3 million and $0.3 million , respectively, and is included in accrued expenses and other liabilities on the Company’s consolidated balance sheets.F-38The following table presents contractual maturity information about the Company’s outstanding financing arrangements, including FHLBI advances, atDecember 31, 2015 and 2014 (dollar amounts in thousands):Contractual MaturityDecember 31, 2015 December 31, 2014Within 30 days$468,402 $157,008Over 30 days to 90 days85,423 494,957Over 90 days23,588 —Total$577,413 $651,965As of December 31, 2015 , the outstanding balance under our financing arrangements was funded at an advance rate of 92.1% that implies an averagehaircut of 7.9% . The weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS (excluding Agency IOs) and Agency IOswere approximately 5% and 25% .In the event we are unable to obtain sufficient short-term financing through financing arrangements or our lenders start to require additional collateral, wemay have to liquidate our investment securities at a disadvantageous time, which could result in losses. Any losses resulting from the disposition of our investmentsecurities in this manner could have a material adverse effect on our operating results and net profitability. At December 31, 2015 and December 31, 2014 , theCompany had financing arrangements with 6 and 10 counterparties respectively. As of December 31, 2015 and December 31, 2014 , we had no counterpartieswhere the amount at risk was in excess of 5% of Stockholders’ Equity. The amount at risk is defined as the fair value of securities pledged as collateral to thefinancing arrangement in excess of the rfinancing arrangement liability.As of December 31, 2015 , the Company had $62.0 million in cash and $147.2 million in unencumbered investment securities to meet additional haircut ormarket valuation requirements, including $84.0 million of RMBS, of which $82.5 million are Agency RMBS and $62.1 million of multi-family CMBS (whichrepresents the net fair value of certain first loss tranche PO securities issued by certain K-Series securitizations included in the Consolidated K-Series). The $62.0million of cash, $84.0 million in RMBS, $62.1 million of CMBS and $11.6 million held in overnight deposits in our Agency IO portfolio included in restrictedcash (that is available to meet margin calls as it relates to our Agency IO portfolio financing arrangements), which collectively represent 38.2% of our financingarrangements, are liquid and could be monetized to pay down or collateralize the financing arrangements immediately.F-3910.Financing Arrangements, Residential Mortgage LoansOn December 16, 2014, the Company entered into a master repurchase agreement, with Deutsche Bank AG, Cayman Islands Branch in an aggregateprincipal amount of up to $260.0 million , to fund a portion of the purchase price of a pool of distressed residential mortgage loans. On December 14, 2015, theCompany amended the master repurchase agreement and decreased the maximum aggregate principal amount to $250.0 million and extended the expiration date ofthe agreement to December 15, 2016 . The outstanding balance on this master repurchase agreement as of December 31, 2015 and December 31, 2014 amounts toapproximately $214.5 million and $238.9 million , respectively and bears interest at one-month LIBOR plus 2.50% ( 2.92% and 2.66% at December 31, 2015 andDecember 31, 2014 , respectively).On November 25, 2015, the Company entered into a master repurchase agreement with Deutsche Bank AG, Cayman Islands Branch in an aggregateprincipal amount of up to $100.0 million , to fund the future purchase of residential mortgage loans. The outstanding balance on the master repurchase agreementwill bear interest at one-month LIBOR plus 4.0% and expires on May 25, 2017. There was no outstanding balance on this master repurchase agreement as ofDecember 31, 2015 .During the terms of the master repurchase agreements, proceeds from the residential mortgage loans, including the Company's distressed residentialmortgage loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the masterrepurchase agreements are subject to margin calls to the extent the market value of the residential mortgage loans falls below specified levels and repurchase maybe accelerated upon an event of default under the master repurchase agreements. The master repurchase agreements contain various covenants, among other things,to maintenance of certain amounts of net worth, liquidity and leverage ratio. The Company is in compliance with such covenants as of February 25, 2016 .11.Residential Collateralized Debt ObligationsThe Company’s Residential CDOs, which are recorded as liabilities on the Company’s consolidated balance sheets, are secured by ARM loans pledged ascollateral, which are recorded as assets of the Company. As of December 31, 2015 and 2014 , the Company had Residential CDOs outstanding of $116.7 millionand $145.5 million , respectively. As of December 31, 2015 and 2014 , the current weighted average interest rate on these CDOs was 0.8% and 0.55% ,respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of $122.5 million and $152.3 million at December 31, 2015 and 2014, respectively. The Company retained the owner trust certificates, or residual interest for three securitizations, and, as of December 31, 2015 and 2014 , had a netinvestment in the residential securitization trusts of $4.4 million and $5.6 million , respectively.F-4012.Subordinated DebenturesSubordinated debentures are trust preferred securities that are fully guaranteed by the Company with respect to distributions and amounts payable uponliquidation, redemption or repayment. The following table summarizes the key details of the Company’s subordinated debentures as of December 31, 2015 andDecember 31, 2014 (dollar amounts in thousands): NYM Preferred Trust I NYM Preferred Trust IIPrincipal value of trust preferred securities$25,000 $20,000Interest RateThree month LIBOR plus 3.75%,resetting quarterly Three month LIBOR plus 3.95%,resetting quarterlyScheduled maturityMarch 30, 2035 October 30, 2035As of February 25, 2016 the Company has not been notified, and is not aware, of any event of default under the covenants for the subordinateddebentures.13.Commitments and ContingenciesLoans Sold to Third Parties – The Company sold its discontinued mortgage lending business in March 2007. In the normal course of business, theCompany is obligated to repurchase loans based on violations of representations and warranties in its loan sale agreements. The Company did not repurchase anyloans during the three years ended December 31, 2015 .Outstanding Litigation – The Company is at times subject to various legal proceedings arising in the ordinary course of business. As of December 31,2015 , the Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on itsoperations, financial condition or cash flows.Leases – In December 2012, the Company entered into a 10 year lease agreement with GP 275 Owner, L.L.C., pursuant to which, the Company relocatedits corporate office in March 2013. The lease is accounted for as a non-cancelable operating lease. Total property lease expense on this lease amounted to $0.2million for the years ended December 31, 2015 and 2014 , respectively. The lease is secured by a $0.2 million cash deposit.The prior corporate office lease with Vanderbilt Associates I, L.L.C. expired in March 2013. Total property lease expense on this lease amounted to $0.1million for the year ended December 31, 2013 .As of December 31, 2015 , obligations under non-cancelable operating leases are as follows (dollar amounts in thousands):Year Ending December 31,Total2016$2072017207201821520192172020217Thereafter652 $1,715F-4114.Fair Value of Financial InstrumentsThe Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, where available. Iflisted 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 valuemeasurement. 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 forthe 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 generalclassification of such instruments pursuant to the valuation hierarchy.a.Investment Securities Available for Sale (RMBS, U.S. Treasury Securities and CLOs) – Fair value for the RMBS in our portfolio are valued using athird-party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The dealers willincorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlyingcharacteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of thesecurity. 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 aresult, management will determine the fair value based on characteristics of the security that the Company receives from the issuer and based onavailable market information. Management reviews all prices used in determining valuation to ensure they represent current market conditions. Thisreview includes surveying similar market transactions, comparisons to interest pricing models as well as offerings of like securities by dealers. TheCompany's investment securities that are comprised of RMBS and CLOs are valued based upon readily observable market parameters and areclassified as Level 2 fair values. The Company's U.S. Treasury securities are classified as Level 1 Fair Values.b.Investment Securities Available for Sale Held in Securitization Trusts (CMBS) – As the Company’s CMBS investments are comprised of securitiesfor which there are not substantially similar securities that trade frequently, the Company classifies these securities as Level 3 fair values. Fair valueof the Company’s CMBS investments is based on an internal valuation model that considers expected cash flows from the underlying loans andyields required by market participants. The significant unobservable inputs used in the measurement of these investments are projected losses ofcertain identified loans within the pool of loans and a discount rate. The discount rate used in determining fair value incorporates default rate, lossseverity and current market interest rates. The discount rate ranges from 4.5% to 10.5% . Significant increases or decreases in these inputs wouldresult in a significantly lower or higher fair value measurement.c.Multi-Family Loans Held in Securitization Trusts – Multi-family loans held in securitization trusts are recorded at fair value and classified as Level 3fair values. Fair value is based on an internal valuation model that considers expected cash flows from the underlying loans and yields required bymarket participants. The significant unobservable inputs used in the measurement of these investments are discount rates. The discount rate used indetermining fair value incorporates default rate, loss severity and current market interest rates. The discount rate ranges from 3.0% to 5.6% .Significant increases or decreases in these inputs would result in a significantly lower or higher fair value measurement.d.Derivative Instruments – The fair value of interest rate swaps, swaptions, options and TBAs are based on dealer quotes. The fair value of futures arebased on exchange-traded prices. The Company’s derivatives are classified as Level 1 or Level 2 fair values.F-42e.Multi-Family CDOs – Multi-Family collateralized debt obligations are recorded at fair value and classified as Level 3 fair values. The fair value ofMulti-family CDOs is determined using a third party pricing service or are based on quoted prices provided by dealers who make markets in similarfinancial instruments. The dealers will consider contractual cash payments and yields expected by market participants. Dealers also incorporatecommon market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlyingcharacteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of thesecurity. The Company’s Multi-family CDOs are classified as Level 3 fair values.f.Investments in Unconsolidated Entities – Fair value for investments in unconsolidated entities is determined based on a valuation model usingassumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the unconsolidatedentities and a discount rate. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 of the fairvalue hierarchy.F-43The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2015 and 2014 ,respectively, on the Company’s consolidated balance sheets (dollar amounts in thousands): Measured at Fair Value on a Recurring Basis at December 31, 2015 December 31, 2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 TotalAssets carried at fair value Investment securitiesavailable for sale: Agency RMBS$— $713,116 $— $713,116 $— $779,505 $— $779,505Non-Agency RMBS— 1,567 — 1,567 — 1,939 — 1,939CLOs— — — — — 35,203 — 35,203U.S. Treasury Bills10,037 — — 10,037 — — — —Investment securitiesavailable for sale held insecuritization trusts: CMBS— — 40,734 40,734 — — 38,594 38,594Multi-family loans held insecuritization trusts— — 7,105,336 7,105,336 — — 8,365,514 8,365,514Derivative Assets: TBA Securities— 226,929 — 226,929 — 284,971 — 284,971Options on U.S.Treasury futures15 — — 15 92 — — 92U.S. Treasury futures— — — — 379 — — 379Interest rate swap futures706 — — 706 — — — —Interest rate swaps— 304 — 304 — 1,135 — 1,135Swaptions— 821 — 821 — 2,273 — 2,273Investments inunconsolidated entities— — 67,571 67,571 — — 38,496 38,496Total$10,758 $942,737 $7,213,641 $8,167,136 $471 $1,105,026 $8,442,604 $9,548,101Liabilities carried at fairvalue Multi-family collateralizeddebt obligations$— $— $6,818,901 $6,818,901 $— $— $8,048,053 $8,048,053Derivative liabilities: Interest rate swaps— 258 — 258 — 232 — 232Interest rate swap futures— — — — 331 — — 331Eurodollar futures1,242 — — 1,242 900 — — 900Total$1,242 $258 $6,818,901 $6,820,401 $1,231 $232 $8,048,053 $8,049,516F-44The following table details changes in valuation for the Level 3 assets for the years ended December 31, 2015 , 2014 and 2013 , respectively (amounts inthousands):Level 3 Assets: Years Ended December 31, 2015 2014 2013Balance at beginning of period$8,442,604 $8,209,702 $5,514,065Total gains (realized/unrealized) Included in earnings (1)(90,662) 384,826 (470,334)Included in other comprehensive income (loss)(360) (5,863) 15,532Purchases/(Sales) (2)(1,075,529) (93,578) 3,218,301Contributions26,461 33,075 5,969Paydowns(85,979) (80,451) (73,831)Distributions(2,894) (1,712) —Sale of real estate owned— (3,395) —Balance at the end of period$7,213,641 $8,442,604 $8,209,702(1)Amounts included in interest income from multi-family loans held in securitization trusts, unrealized gain on multi-family loans and debt held insecuritization trusts, realized gain (loss) on investment securities and related hedges, net, other income and gain on deconsolidation.(2)In February 2015, the Company sold a first loss PO security from one of the Company’s Consolidated K-Series securitizations obtaining total proceeds ofapproximately $44.3 million and realizing a gain of approximately $1.5 million . The sale resulted in a de-consolidation of $1.1 billion in Multi-Familyloans held in a securitization trust and $1.0 billion in Multi-Family CDOs.The following table details changes in valuation for the Level 3 liabilities for the years ended December 31, 2015 , 2014 and 2013 , respectively (amountsin thousands):Level 3 Liabilities: Years Ended December 31, 2015 2014 2013Balance at beginning of period$8,048,053 $7,871,020 $5,319,573Total gains (realized/unrealized) Included in earnings (1)(133,245) 260,872 (521,416)Included in other comprehensive income— — —Purchases/(Sales) (2)(1,009,942) — 3,146,676Paydowns(85,965) (83,839) (73,813)Balance at the end of period$6,818,901 $8,048,053 $7,871,020(1)Amounts included in interest expense on multi-family collateralized debt obligations, realized gain (loss) on investment securities and related hedges, netand unrealized gain on multi-family loans and debt held in securitization trusts, net.(2)In February 2015, the Company sold a first loss PO security from one of the Company’s Consolidated K-Series securitizations obtaining total proceeds ofapproximately $44.3 million and realizing a gain of approximately $1.5 million . The sale resulted in a de-consolidation of $1.1 billion in Multi-Familyloans held in a securitization trust and $1.0 billion in Multi-Family CDOs.F-45The following table details the changes in unrealized gains (losses) included in earnings for our Level 3 assets and liabilities for the years endedDecember 31, 2015 , 2014 and 2013 , respectively (dollar amounts in thousands): Years Ended December 31, 2015 2014 2013Change in unrealized gains (losses) – assets$(61,957) $390,371 $(423,949)Change in unrealized (losses) gains – liabilities74,325 (333,440) 455,444Net change in unrealized gains included in earnings for assets and liabilities$12,368 $56,931 $31,495Any changes to the valuation methodology are reviewed by management to ensure the changes are appropriate. As markets and products develop and thepricing for certain products becomes more transparent, the Company continues to refine its valuation methodologies. The methods described above may produce afair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuationmethods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certainfinancial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of each reporting date,which may include periods of market dislocation, during which time price transparency may be reduced. This condition could cause the Company’s financialinstruments to be reclassified from Level 2 to Level 3 in future periods.The following table presents assets measured at fair value on a non-recurring basis as of December 31, 2015 and 2014 , respectively, on the consolidatedbalance sheets (dollar amounts in thousands): Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2015 December 31, 2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 TotalResidential Mortgage loans held insecuritization trusts – impaired loans (net)$— $— $8,976 $8,976 $— $— $9,323 $9,323Real estate owned held in residentialsecuritization trusts— — 411 411 — — 965 965The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the years ended December 31, 2015 ,2014 and 2013 , respectively, on the Company’s consolidated statements of operations (dollar amounts in thousands): Years Ended December 31, 2015 2014 2013Residential mortgage loans held in securitization trusts – impaired loans (net)$(1,261) $(998) $(701)Real estate owned held in residential securitization trusts100 (103) (433)Residential Mortgage Loans Held in Securitization Trusts – Impaired Loans (net) – Impaired residential mortgage loans held in securitization trusts arerecorded at amortized cost less specific loan loss reserves. Impaired loan value is based on management’s estimate of the net realizable value taking intoconsideration local market conditions of the property, updated appraisal values of the property and estimated expenses required to remediate the impaired loan.Real Estate Owned Held in Residential Securitization Trusts – Real estate owned held in the residential securitization trusts are recorded at net realizablevalue. Any subsequent adjustment will result in the reduction in carrying value with the corresponding amount charged to earnings. Net realizable value based onan estimate of disposal taking into consideration local market conditions of the property, updated appraisal values of the property and estimated expenses requiredto sell the property.F-46The following table presents the carrying value and estimated fair value of the Company’s financial instruments at December 31, 2015 and 2014 ,respectively (dollar amounts in thousands): December 31, 2015 December 31, 2014 Fair ValueHierarchyLevel CarryingValue EstimatedFair Value CarryingValue EstimatedFair ValueFinancial Assets: Cash and cash equivalentsLevel 1 $61,959 $61,959 $75,598 $75,598Investment securities available for sale, at fair valueLevel 1 or 2 724,720 724,720 816,647 816,647Investment securities available for sale, at fair value held insecuritization trustsLevel 3 40,734 40,734 38,594 38,594Residential mortgage loans held in securitization trusts (net)Level 3 119,921 109,120 149,614 135,241Distressed residential mortgage loans (net) (1)Level 3 558,989 564,310 582,697 599,182Multi-family loans held in securitization trusts, at fair valueLevel 3 7,105,336 7,105,336 8,365,514 8,365,514Derivative assetsLevel 1 or 2 228,775 228,775 288,850 288,850Mortgage loans held for sale (net) (2)Level 3 5,471 5,557 7,712 7,713Mortgage loans held for investment (2)Level 3 2,706 2,846 1,760 1,900Mezzanine and preferred equity investments (2)(3)Level 3 44,151 44,540 24,907 25,212Investments in unconsolidated entities (4)Level 3 87,065 87,558 48,366 48,490Financial Liabilities: Financing arrangements, portfolio investmentsLevel 2 $577,413 $577,413 $651,965 $651,965Financing arrangements, distressed residential mortgage loansLevel 2 214,490 214,490 238,949 238,949Residential collateralized debt obligationsLevel 3 116,710 105,606 145,542 130,919Multi-family collateralized debt obligations, at fair valueLevel 3 6,818,901 6,818,901 8,048,053 8,048,053Securitized debtLevel 3 117,528 123,776 232,877 240,341Derivative liabilitiesLevel 1 or 2 1,500 1,500 1,463 1,463Payable for securities purchasedLevel 1 227,969 227,969 283,537 283,537Subordinated debenturesLevel 3 45,000 42,731 45,000 36,531(1)Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $114.2 million and $221.6million at December 31, 2015 and December 31, 2014 , respectively and distressed residential mortgage loans with a carrying value amounting toapproximately $444.8 million and $361.1 million at December 31, 2015 and December 31, 2014 , respectively.(2)Included in receivables and other assets in the accompanying consolidated balance sheets.(3)Includes mezzanine and preferred equity investments accounted for as loans (see Note 2 ).(4)Includes investments in unconsolidated entities accounted for under the fair value option with a carrying value of $67.6 million and $38.5 million atDecember 31, 2015 and December 31, 2014, respectively.F-47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 andnon-recurring basis, as previously described, the following methods and assumptions were used by the Company in arriving at the fair value of the Company’sother financial instruments in the table immediately above:a.Cash and cash equivalents – Estimated fair value approximates the carrying value of such assets.b.Residential mortgage loans held in securitization trusts (net) – Residential mortgage loans held in securitization trusts are recorded at amortized cost.Fair value is based on an internal valuation model that considers 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 usingthe estimated market prices for similar types of loans.c.Distressed residential mortgage loans (net) – Fair value is estimated using pricing models taking into consideration current interest rates, loanamount, payment status and property type, and forecasts of future interest rates, home prices and property values, prepayment speeds, default, lossseverities, and actual purchases and sales of similar loans.d.Receivable for securities sold – Estimated fair value approximates the carrying value of such assets.e.Mortgage loans held for sale (net) and mortgage loans held for investment – The fair value of mortgage loans held for sale (net) and mortgage loansheld for investment are estimated by the Company based on the price that would be received if the loans were sold as whole loans taking intoconsideration the aggregated characteristics of the loans such as, but not limited to, collateral type, index, interest rate, margin, length of fixed interestrate period, life time cap, periodic cap, underwriting standards, age and credit.f.Mezzanine loan and preferred equity investments – Estimated fair value is determined by both market comparable pricing and discounted cash flows.The discounted cash flows are based on the underlying contractual cash flows and estimated changes in market yields. The fair value also reflectsconsideration of changes in credit risk since the origination or time of initial investment.g.Investments in Unconsolidated Entities – Fair value for investments in unconsolidated entities is determined based on a valuation model usingassumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the unconsolidatedentities and a discount rate. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 of the fairvalue hierarchy.h.Financing arrangements – The fair value of these financing arrangements approximates cost as they are short term in nature.i.Residential collateralized debt obligations – The fair value of these CDOs is based on discounted cash flows as well as market pricing on comparableobligations.j.Securitized debt – The fair value of securitized debt is based on discounted cash flows using management’s estimate for market yields.k.Payable for securities purchased – Estimated fair value approximates the carrying value of such liabilities.l.Subordinated debentures – The fair value of these subordinated debentures is based on discounted cash flows using management’s estimate formarket yields.F-4815.Stockholders’ Equity(a)Dividends on Preferred StockThe Company had 200,000,000 authorized shares of preferred stock, par value $0.01 per share, with 6,600,000 and 3,000,000 shares issued andoutstanding as of December 31, 2015 and 2014 , respectively.On June 4, 2013, the Company issued 3,000,000 shares of 7.75% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”), with apar value of $0.01 per share and a liquidation preference of $25 per share, in an underwritten public offering, for net proceeds of approximately $72.4 million ,after deducting underwriting discounts and offering expenses. As of December 31, 2015 and December 31, 2014, there were 6,000,000 and 3,450,000 shares ofSeries B Preferred Stock authorized, respectively. The Series B Preferred Stock is entitled to receive a dividend at a rate of 7.75% per year on the $25 liquidationpreference and is senior to the common stock with respect to distributions upon liquidation, dissolution or winding up.On April 22, 2015, the Company issued 3,600,000 shares of 7.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), witha par value of $0.01 per share and a liquidation preference of $25 per share, in an underwritten public offering, for net proceeds of approximately $86.9 million ,after deducting underwriting discounts and offering expenses. As of December 31, 2015, there were 4,140,000 shares of Series C Preferred Stock authorized. TheSeries C Preferred Stock is entitled to receive a dividend at a rate of 7.875% per year on the $25 liquidation preference and is senior to the common stock withrespect to dividends and distribution of assets upon liquidation, dissolution or winding up.The Series B Preferred Stock and Series C Preferred Stock generally do not have any voting rights, subject to an exception in the event the Company failsto pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, holders of the Series B Preferred Stockand Series C Preferred Stock, voting together as a single class with the holders of all other classes or series of our preferred stock upon which like voting rightshave been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock and Series C Preferred Stock, will be entitled tovote to elect two additional directors to the Company’s Board of Directors (the “Board”) until all unpaid dividends have been paid or declared and set apart forpayment. In addition, certain material and adverse changes to the terms of the Series B Preferred Stock or Series C Preferred Stock cannot be made without theaffirmative vote of holders of at least two-thirds of the outstanding shares of Series B Preferred Stock or Series C Preferred Stock, respectively.Neither the Series B Preferred Stock or the Series C Preferred Stock are redeemable by the Company prior to June 4, 2018, in the case of the Series BPreferred Stock, or April 22, 2020, in the case of the Series C Preferred Stock, except under circumstances intended to preserve the Company’s qualification as aREIT and except upon the occurrence of a Change of Control (as defined in the Articles Supplementary designating the Series B Preferred Stock and Series CPreferred Stock, respectively). On and after June 4, 2018, in the case of the Series B Preferred Stock, and April 22, 2020, in the case of the Series C PreferredStock, the Company may, at its option, redeem the preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to$25.00 per share, plus any accumulated and unpaid dividends.In addition, upon the occurrence of a Change of Control, the Company may, at its option, redeem the Series B Preferred Stock and Series C PreferredStock, in whole or in part, within 120 days after the first date on which such Change of Control occurred for cash at a redemption price of $25.00 per share, plusany accumulated and unpaid dividends.Each of the Series B Preferred Stock and Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption andwill remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into the Company’s common stock in connection with a Changeof Control.Upon the occurrence of a Change of Control, each holder of Series B Preferred Stock and Series C Preferred Stock will have the right (unless theCompany has exercised its right to redeem the Series B Preferred Stock or Series C Preferred Stock, respectively) to convert some or all of the Series B PreferredStock or Series C Preferred Stock held by such holder into a number of shares of our common stock per share of Series B Preferred Stock or Series C PreferredStock determined by a formula, in each case, on the terms and subject to the conditions described in the applicable Articles Supplementary for such series.F-49From the time of original issuance of the Series B Preferred Stock and the Series C Preferred Stock, respectively, through December 31, 2015 , theCompany has declared and paid all required quarterly dividends on such stock. The following table presents the relevant dates with respect to such quarterly cashdividends on the Series B Preferred Stock and Series C Preferred Stock from its respective time of original issuance through December 31, 2015 : Series B Preferred Stock Series C Preferred Stock DeclarationDate Record Date Payment Date Cash Dividend Per Share DeclarationDate Record Date Payment Date CashDividendPer Share December 16,2015 January 1, 2016 January 15,2016 $0.484375 December 16,2015 January 1, 2016 January 15,2016 $0.4921875 September 18,2015 October 1, 2015 October 15,2015 0.484375 September 18,2015 October 1, 2015 October 15,2015 0.4921875 June 18, 2015 July 1, 2015 July 15, 2015 0.484375 June 18, 2015 July 1, 2015 July 15, 2015 0.4539100(1) March 18,2015 April 1, 2015 April 15, 2015 0.484375 — — — — December 12,2014 January 1, 2015 January 15,2015 0.484375 — — — — September 18,2014 October 1, 2014 October 15,2014 0.484375 — — — — June 18, 2014 July 1, 2014 July 15, 2014 0.484375 — — — — March 13,2014 April 1, 2014 April 15, 2014 0.484375 — — — — December 10,2013 January 1, 2014 January 15,2014 0.484375 September 12,2013 October 1, 2013 October 15,2013 0.484375 — — — — June 18, 2013 July 1, 2013 July 15, 2013 0.220660(2) — — — — (1)Cash dividend for the partial quarterly period that began on April 22, 2015 and ended on July 14, 2015.(2)Cash dividend for the partial quarterly period that began on June 4, 2013 and ended on July 14, 2013.(b)Dividends on Common StockThe following table presents cash dividends declared by the Company on its common stock with respect to each of the quarterly periods commencingJanuary 1, 2013 and ended December 31, 2015 :Period Declaration Date Record Date Payment Date CashDividendPer ShareFourth Quarter 2015 December 16, 2015 December 28, 2015 January 25, 2016 $0.24Third Quarter 2015 September 18, 2015 September 28, 2015 October 26, 2015 $0.24Second Quarter 2015 June 18, 2015 June 29, 2015 July 27, 2015 $0.27First Quarter 2015 March 18, 2015 March 30, 2015 April 27, 2015 $0.27Fourth Quarter 2014 December 12, 2014 December 22, 2014 January 26, 2015 $0.27Third Quarter 2014 September 18, 2014 September 29, 2014 October 27, 2014 $0.27Second Quarter 2014 June 18, 2014 June 30, 2014 July 25, 2014 $0.27First Quarter 2014 March 13, 2014 March 24, 2014 April 25, 2014 $0.27Fourth Quarter 2013 December 10, 2013 December 20, 2013 January 27, 2014 $0.27Third Quarter 2013 September 12, 2013 September 23, 2013 October 25, 2013 $0.27Second Quarter 2013 June 18, 2013 June 28, 2013 July 25, 2013 $0.27First Quarter 2013 March 18, 2013 March 28, 2013 April 25, 2013 $0.27F-50During 2015 , dividends for our common stock were $1.02 per share. For tax reporting purposes, the 2015 dividends were classified as ordinary income,capital gain distribution and return of capital in the amounts of $0.40 , $0.07 and $0.55 per share, respectively. During 2014 , dividends for our common stock were$1.08 per share. For tax reporting purposes, the 2014 dividends were classified as ordinary income, capital gain distribution and return of capital in the amounts of$0.61 , $0.35 and $0.12 , respectively, per share. During 2013 , dividends for our common stock were $1.08 per share. For tax reporting purposes, the 2013dividends were classified as ordinary income and return of capital in the amounts of $0.81 and $0.27 , respectively, per share.(c)Public Offering of Common StockThe table below presents information with respect to shares of the Company’s common stock issued through underwritten public offerings during thethree years ended December 31, 2015 (amounts in thousands):Share Issue Date Shares Issued Net Proceeds (1)November 26, 2014 14,410 $110,784April 7, 2014 14,950 $109,916January 10, 2014 11,500 $75,846May 3, 2013 13,600 $94,434(1)Proceeds are net of underwriting costs and offering expenses paid by the Company.(d)Equity Distribution AgreementsOn March 20, 2015, the Company entered into separate equity distribution agreements (collectively, the “Equity Distribution Agreements”) with each ofJMP Securities LLC (“JMP”) and MLV & Co. LLC (“MLV”), each an “Agent” and collectively, the “Agents”, pursuant to which the Company may sell up to$75,000,000 of aggregate value of (i) shares of the Company’s common stock, par value $0.01 per and (ii) shares of the Company’s Series B Preferred Stock, fromtime to time through the Agents. The Company has no obligation to sell any of the shares under the Equity Distribution Agreements and may at any time suspendsolicitations and offers under the Equity Distribution Agreements. During the twelve months ended December 31, 2015 , the Company issued 2,789,439 shares ofits common stock under the Equity Distribution Agreements, at an average sales price of $7.91 resulting in total net proceeds to the Company of $21.6 million afterdeducting the placement fees. As of December 31, 2015 , approximately $52.9 million of securities remains available for issuance under the Equity DistributionAgreements.On March 20, 2015, in connection with the Company’s execution of the Equity Distribution Agreements described above, the Company delivered to JMP anotice of termination of the Equity Distribution Agreement dated June 11, 2012 (the “Prior Equity Distribution Agreement”), which termination became effectiveMarch 23, 2015. The Prior Equity Distribution Agreement provided for the sale by the Company of common stock having a maximum aggregate value of up to$25,000,000 from time to time through JMP, as the Company’s agent. During the twelve months ended December 31, 2015 , the Company issued 1,326,676 sharesunder the Prior Equity Distribution Agreement, at an average sales price of $7.89 resulting in total net proceeds to the Company of $10.3 million , after deductingthe placement fees. During the term of the Prior Equity Distribution Agreement, the Company sold a total of 2,153,989 shares of its common stock at an averageprice of $7.63 per share pursuant to the Prior Distribution Agreement, resulting in aggregate net proceeds to the Company of approximately $16.1 million .F-5116.Earnings Per ShareThe Company calculates basic net income per share by dividing net income for the period by weighted-average shares of common stock outstanding forthat period. Diluted net income per share takes into account the effect of dilutive instruments, such as convertible preferred stock, stock options and unvestedrestricted 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 theweighted-average number of shares outstanding. There were no dilutive instruments for the years ended December 31, 2015 , 2014 and 2013 .The following table presents the computation of basic and dilutive net income per share for the periods indicated (amounts in thousands, except per shareamounts): For the Years Ended December 31, 2015 2014 2013Numerator : Net income attributable to common stockholders – Basic$67,023 $130,379 $65,387Net income from continuing operations67,023 130,379 65,387Net income from discontinued operations (net of tax)— — —Net income attributable to common stockholders– Dilutive$67,023 $130,379 $65,387Net income from continuing operations67,023 130,379 65,387Net income from discontinued operations (net of tax)— — —Denominator: Weighted average basic and dilutive shares outstanding108,399 87,867 59,102EPS: Basic EPS$0.62 $1.48 $1.11Basic EPS from continuing operations0.62 1.48 1.11Basic EPS from discontinued operations (net of tax)— — —Dilutive EPS$0.62 $1.48 $1.11Dilutive EPS from continuing operations0.62 1.48 1.11Dilutive EPS from discontinued operations (net of tax)— — —F-5217.Stock Incentive PlanIn May 2010, the Company’s stockholders approved the Company’s 2010 Stock Incentive Plan (the “2010 Plan”), with such stockholder action resultingin the termination of the Company’s 2005 Stock Incentive Plan (the “2005 Plan”). The terms of the 2010 Plan are substantially the same as the 2005 Plan. Pursuantto the 2010 Plan, eligible employees, officers and directors of the Company have the opportunity to acquire the Company's common stock through the award ofrestricted stock and other equity awards under the 2010 Plan. The maximum number of shares that may be issued under the 2010 Plan is 1,190,000 .Of the common stock authorized at December 31, 2015 and 2014 , 551,609 shares and 862,512 shares, respectively, were reserved for issuance under theCompany’s 2010 Stock Incentive Plan. At December 31, 2015 and 2014 , there were 280,457 and 162,171 shares of non-vested restricted stock outstanding underthe 2010 Plan. The Company’s directors have been issued 146,935 and 111,311 shares under the 2010 Plan as of December 31, 2015 and 2014 , respectively. TheCompany’s employees have been issued 401,827 and 216,177 shares under the 2010 Plan as of December 31, 2015 and 2014 , respectively.(a)Restricted Common Stock AwardsDuring the years ended December 31, 2015 , 2014 and 2013 , the Company recognized non-cash compensation expense of $0.9 million , $0.4 million and$0.2 million , respectively. Dividends are paid on all restricted stock issued, whether those shares have vested or not. In general, non-vested restricted stock isforfeited upon the recipient's termination of employment. There were no forfeitures during the years ended December 31, 2015 , 2014 and 2013 .A summary of the activity of the Company's non-vested restricted stock under the 2010 Plan for the years ended December 31, 2015 , 2014 and 2013 ,respectively, is presented below: 2015 2014 2013 Number ofNon-vestedRestrictedShares WeightedAverage PerShareGrant DateFair Value(1) Number ofNon-vestedRestrictedShares WeightedAverage PerShareGrant DateFair Value(1) Number ofNon-vestedRestrictedShares WeightedAverage PerShareGrant DateFair Value(1)Non-vested shares at January 1162,171 $7.26 94,873 $7.01 31,580 $6.58Granted185,650 7.79 104,517 7.39 75,385 7.13Vested(67,364) 7.18 (37,219) 6.97 (12,092) 6.65Non-vested shares as of December 31280,457 $7.63 162,171 $7.26 94,873 $7.01Weighted-average restricted stockgranted during the period185,650 $7.79 104,517 $7.39 75,385 $7.13(1)The grant date fair value of restricted stock awards is based on the closing market price of the Company’s common stock at the grant date.At each of December 31, 2015 and 2014 , the Company had unrecognized compensation expense of $1.3 million and $0.8 million , respectively, related tothe non-vested shares of restricted common stock under the 2010 Plan. The unrecognized compensation expense at December 31, 2015 is expected to berecognized over a weighted average period of 1.9 years . The total fair value of restricted shares vested during the years ended December 31, 2015 , 2014 and 2013was $0.5 million , $0.3 million and $0.1 million , respectively. The requisite service period for restricted shares at issuance is three years .F-53(b)Performance Share AwardsIn May 2015, the Compensation Committee of the Board of Directors approved a performance share award (“PSA”) pursuant to the 2010 Plan to theCompany’s Chairman, Chief Executive Officer and President. The PSA granted consisted of 89,629 shares of common stock and had a grant date fair value ofapproximately $0.4 million . The PSA are awards under which the number of underlying shares of Company common stock that vest and that the recipientbecomes entitled to receive at the time of vesting will generally range from 0% to 200% of the target number of PSAs granted, with the target number of PSAsgranted being adjusted to reflect the value of the reinvestment of any dividends declared on Company common stock during the vesting period. Vesting of thesePSAs will occur at the end of three years based on three -year total stockholder return, or TSR, as follows:•If three -year TSR is less than 33% , then 0% of the PSUs will vest;•If three -year TSR is greater than or equal to 33% and the TSR is not in the bottom quartile of an identified peer group, then 100% of the PSAs willvest;•If three -year TSR is greater than or equal to 33% and the TSR is in the top quartile of an identified peer group, then 200% of the PSAs will vest;•If three -year TSR is greater than or equal to 33% and the TSR is in the bottom quartile of an identified peer group, then 50% of the PSAs will vest.TSR is defined, with respect to the Company and each member of the identified peer group, as applicable, as the average annual total shareholder returnbased on common stock price appreciation/depreciation during the applicable measurement period or until the date of a change of control, whichever first occurs,plus the value on the last day of the applicable measurement period or the date of a change of control of common shares if all cash dividends declared on acommon share during such period were reinvested in additional common shares.The grant date fair values of PSAs were determined through a Monte-Carlo simulation of the Company’s common stock total shareholder return and thecommon stock total shareholder return of its peer companies to determine the TSR of the Company’s common stock relative to its peer companies over a futureperiod of three years. For the 2015 PSA grant, the inputs used by the model to determine the fair value are (i) historical stock return volatilities of the Company andits peer companies over the most recent three year period, (ii) a risk free rate based on the three year U.S. Treasury rate on grant date, and (iii) historical pairwisestock return correlations between the Company and its peer companies over the most recent three year period.Compensation expense related to PSAs was $ 0.1 million for the year ended December 31, 2015 . As of December 31, 2015 , there was $0.3 million ofunrecognized compensation cost related to unvested PSAs.F-5418.Income TaxesFor the years ended December 31, 2015 , 2014 and 2013 , the Company qualified to be taxed as a REIT under the Code for U.S. federal income taxpurposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extentit annually distributes at least 90% of its taxable income to stockholders and does not engage in prohibited transactions. Certain activities the Company performsmay produce income that will not be qualifying income for REIT purposes. The Company has designated its TRSs to engage in these activities. The tables belowreflect the taxes accrued at the TRS level and the tax attributes included in the consolidated financial statements.The income tax provision for the years ended December 31, 2015 , 2014 and 2013 is comprised of the following components (dollar amounts inthousands): Years Ended December 31, 2015 2014 2013Current income tax expense Federal$3,158 $4,572 $381State1,283 2,423 358Total current income tax expense4,441 6,995 739Deferred income tax expense (benefit) Federal69 (458) —State25 (142) —Total deferred income tax expense (benefit)94 (600) — Total provision$4,535 $6,395 $739The Company’s estimated taxable income differs from the statutory U.S. federal rate as a result of state and local taxes, non-taxable REIT income,valuation allowance and other differences. A reconciliation of the statutory income tax provision to the effective income tax provision for the years endedDecember 31, 2015 , 2014 and 2013 , respectively, are as follows (dollar amounts in thousands). December 31, 2015 2014 2013Provision at statutory rate$28,892 35.0 % $49,316 35.0 % $24,393 35.0 %Non-taxable REIT income(25,733) (31.2) (44,247) (31.4) (26,215) (37.6)State and local tax provision1,284 1.6 2,420 1.7 348 0.5Other24,047 29.1 (1,227) (0.9) (853) (1.2)Valuation allowance(23,955) (29.0) 133 0.1 3,066 4.4Total provision$4,535 5.5 % $6,395 4.5 % $739 1.1 %F-55Deferred Tax Assets and LiabilitiesThe major sources of temporary differences included in the deferred tax assets and their deferred tax effect as of December 31, 2015 and 2014 are asfollows (dollar amounts in thousands): December 31, 2015 December 31, 2014Deferred tax assets Net operating loss carryforward$2,083 $28,704Net capital loss carryforward2,029 1,592Other3,043 1,755Total deferred tax assets (1)$7,155 $32,051Deferred tax liabilities Deferred tax liabilities$192 $1,040Total deferred tax liabilities (2)192 1,040Valuation allowance(6,457) (30,412)Total net deferred tax asset$506 $599(1)Included in receivables and other assets in the accompanying consolidated balance sheets.(2)Included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.At December 31, 2014, one of the Company’s wholly owned TRS had approximately $56 million of net operating loss carryforwards which theCompany did not expect to be able to utilize to offset future taxable income, other than taxable income arising from certain "built in gains" on its CLOs. TheInternal Revenue Code places certain limitations on the annual amount of net operating loss carryforwards that can be utilized if certain changes in the Company’sownership occur. The Company determined that it had undergone ownership changes within the meaning of Internal Revenue Code Section 382 resulting insubstantial limitation on use of these net operating loss carryforwards to offset future taxable income therefore, as of December 31, 2014, the Company recorded afull valuation allowance against the deferred tax assets related to the net operating loss carryforwards. In 2015, the Company sold its remaining CLOs and used aportion of its net operating loss carryforwards to offset the "built in gains" from the sale. At December 31, 2015, based on several factors, including Section 382limitation, the TRS's capability to generate sufficient taxable income and capital gains prior to the expiration of the net operating loss carryforwards, managementdetermined it is appropriate to write-off the deferred tax asset and corresponding valuation allowance related to the net operating loss carryover.As of December 31, 2015 , the Company through a wholly owned TRS, had incurred net operating losses in the aggregate amount of approximately $4.5million . The Company’s carryforward net operating losses will expire between 2033 and 2034 if they are not offset by future taxable income. Additionally, as ofDecember 31, 2015 , the Company, through one of its wholly owned TRSs, had also incurred approximately $4.4 million in capital losses. The Company’scarryforward capital losses will expire between 2018 and 2020 if they are not offset by future capital gains. At December 31, 2015 , the Company has recorded avaluation allowance against the deferred tax assets management does not believe it is more likely than not to be realized.The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company is no longer subject to taxexaminations by tax authorities for years prior to 2012. The Company has assessed its tax positions for all open years, which includes 2012 to 2015 and concludedthat there are no material uncertainties to be recognized.In addition, based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’sfinancial statements.F-5619.Related Party TransactionsOn April 5, 2011, the Company entered into a management agreement with RiverBanc LLC (“RiverBanc”), pursuant to which RiverBanc providesinvestment management services to the Company. On March 13, 2013, the Company entered into an amended and restated management agreement with RiverBanc(as amended, the “RiverBanc Management Agreement”). The RiverBanc Management Agreement replaces the prior management agreement between RiverBancand the Company, dated as of April 5, 2011. The amended and restated agreement has an effective date of January 1, 2013 and had an initial term that expired onDecember 31, 2015 and is now subject to automatic annual one -year renewals (subject to any notice of termination).As of December 31, 2015 and December 31, 2014 , the Company owned a 20% membership interest in RiverBanc. For the years ended December 31,2015 , 2014 and 2013 , the Company recognized $0.8 million , $2.6 million and 0.3 million in income related to its investment in RiverBanc, respectively.RiverBanc manages an entity, RB Multifamily Investors LLC (“RBMI”), in which the Company owns, as of December 31, 2015 and December 31, 2014 ,approximately 67% , respectively of the outstanding common equity interests. Pursuant to a management agreement between RiverBanc and this entity, RiverBancis entitled to receive base management and incentive fees for its management of assets owned by RBMI. Our total investment in RBMI, which is included inreceivable and other assets on the accompanying consolidated balance sheets, amounts to approximately $56.9 million and $36.6 million as of December 31, 2015and December 31, 2014 , respectively. Included in our total investment in RBMI are preferred equity interests amounting to approximately $41.5 million and $22.9million as of December 31, 2015 and December 31, 2014 , respectively. For the twelve months ended December 31, 2015 , the Company recognized $5.3 millionin income related to its investment in RBMI. For the twelve months ended December 31, 2014 , the Company recognized $0.5 million in income related to itsinvestment in RBMI. The Company did not recognize any income related to its investment in RBMI for the twelve months ended December 31, 2013.For the years ended December 31, 2015 , 2014 and 2013 , the Company expensed $8.1 million , $14.8 million and $3.4 million in fees to RiverBanc,respectively. As of December 31, 2015 and December 31, 2014 , the Company had management fees payable to RiverBanc of $1.7 million and $6.3 million ,respectively, included in accrued expenses and other liabilities.F-5720.Quarterly Financial Data (unaudited)The following table is a comparative breakdown of our unaudited quarterly results for the immediately preceding eight quarters (amounts in thousands,except per share data): Three Months Ended Mar 31, 2015 Jun 30, 2015 Sep 30, 2015 Dec 31, 2015Interest income$88,985 $84,400 $82,587 $80,866Interest expense67,384 64,097 64,295 64,875Net interest income21,601 20,303 18,292 15,991Other Income (loss): Recovery (provision) for loan losses(436) (112) (1,117) 302Realized gain(loss) on investment securities and related hedges, net1,124 (1,291) (2,895) (1,555)Gain on de-consolidation of multi-family loans held in securitization trust and multi-family collateralized debt obligations1,483 — — —Realized gain(loss) on distressed residential mortgage loans676 3,614 27,224 (263)Unrealized (loss)gain on investment securities and related hedges, net(5,728) 4,716 (2,631) 1,002Unrealized gain(loss) on multi-family loans and debt held in securitization trusts, net13,628 5,418 (2,170) (4,508)Other income2,286 2,300 1,807 2,967Total other income (loss)13,033 14,645 20,218 (2,055)General, administrative and other expenses10,846 9,139 9,830 9,665Income from operations before income taxes23,788 25,809 28,680 4,271Income tax expense245 1,178 3,048 64Net income23,543 24,631 25,632 4,207Preferred Stock Dividends(1,453) (3,087) (3,225) (3,225)Net income attributable to common stockholders$22,090 $21,544 $22,407 $982Per share basic income$0.21 $0.20 $0.20 $0.01Per share diluted income$0.21 $0.20 $0.20 $0.01Dividends declared per common share$0.27 $0.27 $0.24 $0.24Weighted average shares outstanding-basic105,488 109,252 109,402 109,402Weighted average shares outstanding-diluted105,488 109,252 109,402 109,402F-58 Three Months Ended Mar 31, 2014 Jun 30, 2014 Sep 30, 2014 Dec 31, 2014Interest income$95,238 $95,548 $94,937 $93,124Interest expense75,413 75,665 75,617 74,315Net interest income19,825 19,883 19,320 18,809Other Income: Provision for loan losses(489) (663) (82) (705)Realized gain (loss) on investment securities and related hedges, net2,039 1,325 17,055 21,672Realized gain on distressed residential mortgage loans8,225 418 834 4,903Unrealized gain (loss) on investment securities and related hedges, net(1,736) (1,291) (1,020) (3,620)Unrealized gain on multi-family loans and debt held in securitization trusts, net4,926 20,019 18,115 13,871Loss on extinguishment of debt— — (3,397) —Other income510 203 1,613 2,483Total other income13,475 20,011 33,118 38,604General, administrative and other expenses7,559 7,577 11,613 13,710Income from operations before income taxes25,741 32,317 40,825 43,703Income tax expense3,030 538 1,100 1,727Net income22,711 31,779 39,725 41,976Preferred Stock Dividends(1,453) (1,453) (1,453) (1,453)Net income attributable to common stockholders$21,258 $30,326 $38,272 $40,523Per share basic income$0.29 $0.34 $0.42 $0.42Per share diluted income$0.29 $0.34 $0.42 $0.42Dividends declared per common share$0.27 $0.27 $0.27 $0.27Weighted average shares outstanding-basic74,505 89,686 90,685 96,323Weighted average shares outstanding-diluted74,505 89,686 90,685 96,32321.Subsequent EventsOn February 20, 2015, the Company's wholly-owned captive insurance subsidiary, GLIH was granted membership to the FHLBI. On January 12, 2016,the regulator of the FHLB system, the Federal Housing Finance Agency, released a final rule that amends regulations governing FHLB membership, includingpreventing captive insurance companies from being eligible for FHLB membership. Under the terms of the final rule, the Company's captive insurance subsidiaryis required to terminate its membership and repay its existing advances within one year following the effective date of the final rule. In addition, the Company'scaptive insurance subsidiary is prohibited from taking new advances or renewing existing maturing advances during the one -year transition period. The final rulebecome effective on February 19, 2016. During January 2016, the Company repaid all of its outstanding FHLBI advances, which repayment was funded primarilythrough repurchase agreement financing.F-59EXHIBIT INDEXExhibits: The exhibits required by Item 601 of Regulation S-K are listed below. Management contracts or compensatory plans are filed as Exhibits 10.7 through10.14.Exhibit Description3.1 Articles of Amendment and Restatement of New York Mortgage Trust, Inc., as amended (Incorporated by reference to Exhibit 3.1 to theCompany's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2014). 3.2 Bylaws of New York Mortgage Trust, Inc., as amended (Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report onForm 10-K filed with the Securities and Exchange Commission on March 4, 2011). 3.3 Articles Supplementary designating the Company’s 7.75% Series B Cumulative Redeemable Preferred Stock (the “Series B PreferredStock”) (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 8-A filed with the Securities andExchange Commission on May 31, 2013). 3.4 Articles Supplementary classifying and designating 2,550,000 additional shares of the Series B Preferred Stock (Incorporated by referenceto Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015). 3.5 Articles Supplementary classifying and designating the 7.875% Series C Cumulative Redeemable Preferred Stock (the “Series C PreferredStock”) (Incorporated by reference to Exhibit 3.5 to the Company’s Registration Statement on Form 8-A filed with the Securities andExchange Commission on April 21, 2015). 4.1 Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11(Registration No. 333-111668) filed with the Securities and Exchange Commission on June 18, 2004). 4.2 Form of Certificate representing the Series B Preferred Stock Certificate (Incorporated by reference to Exhibit 3.4 to the Company’sRegistration Statement on Form 8-A filed with the Securities and Exchange Commission on May 31, 2013). 4.3 Form of Certificate representing the Series C Preferred Stock (Incorporated by reference to Exhibit 3.6 to the Company’s RegistrationStatement on Form 8-A filed with the Securities and Exchange Commission on April 21, 2015). 4.4(a) Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, astrustee, dated September 1, 2005. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with theSecurities and Exchange Commission on September 6, 2005). 4.4(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 byreference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September6, 2005). 4.4(c) Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guaranteetrustee, dated September 1, 2005. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with theSecurities and Exchange Commission on September 6, 2005). 4.5(a) Junior Subordinated Indenture between The New York Mortgage Company, LLC and JPMorgan Chase Bank, National Association, astrustee, dated March 15, 2005 (Incorporated by reference to Exhibit 4.3(a) to the Company's Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on August 9, 2012). 4.5(b) Parent Guarantee Agreement between New York Mortgage Trust, Inc. and JPMorgan Chase Bank, National Association, as guaranteetrustee, dated March 15, 2005. (Incorporated by reference to Exhibit 4.3(b) to the Company's Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on August 9, 2012). 4.6 Parent Guarantee Agreement by New York Mortgage Trust, Inc. for the benefit of the Federal Home Loan Bank of Indianapolis, datedApril 1, 2015 (Incorporated by reference to Exhibit 4.3(d) to the Company Quarterly Report on Form 10-Q filed with the Securities andExchange Commission on May 7, 2015). Certain instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant toItem 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any suchinstruments. 10.1 Investment Management Agreement, by and between New York Mortgage Trust, Inc. and The Midway Group, LP dated as of February 11,2011 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and ExchangeCommission on May 5, 2011). 10.2 First Amendment to Investment Management Agreement by and between New York Mortgage Trust, Inc. and The Midway Group, L.P.,dated March 9, 2012 (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed with the Securitiesand Exchange Commission on March 12, 2012).10.3 Second Amendment to Investment Management Agreement by and between New York Mortgage Trust, Inc. and The Midway Group, L.P.,dated April 1, 2014 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Securitiesand Exchange Commission on August 7, 2014). 10.4 Amended and Restated Management Agreement, by and between RB Commercial Mortgage LLC, New York Mortgage Trust, Inc. andRiverBanc, LLC, dated as of March 13, 2013. (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 18, 2013). 10.5 Waiver Letter to Certain Provisions of the Management Agreement among New York Mortgage Trust, Inc., RB Commercial Mortgage LLCand RiverBanc LLC, dated as of June 30, 2015 (Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Qfiled with the Securities and Exchange Commission on August 6, 2015). 10.6 Advances, Pledge and Security Agreement, dated March 23, 2015, between Great Lakes Insurance Holdings LLC and the Federal HomeLoan Bank of Indianapolis (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on May 7, 2015). 10.7 New York Mortgage Trust, Inc. 2010 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K filed with the Securities and Exchange Commission on May 17, 2010). 10.8 NYMT, Inc. 2013 Incentive Compensation Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-Kfiled with the Securities and Exchange Commission on March 26, 2013). 10.9 New York Mortgage Trust, Inc. 2013 Incentive Compensation Plan (effective for fiscal year 2015) (Incorporated by reference to Exhibit 10.2to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 29, 2015). 10.1 Form of Restricted Stock Award Agreement for Officers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the Securities and Exchange Commission on July 14, 2009). 10.11 Form of Restricted Stock Award Agreement for Directors (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K filed with the Securities and Exchange Commission on July 14, 2009). 10.12 Performance Share Award Agreement between Steven R. Mumma and New York Mortgage Trust, Inc., dated as of May 28, 2015(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 29,2015). 10.13 Amended and Restated Employment Agreement, by and between New York Mortgage Trust, Inc. and Steven R. Mumma dated as ofNovember 22, 2011 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities andExchange Commission on November 23, 2011). 10.14 Second Amended and Restated Employment Agreement, by and between the Company and Steven R. Mumma, dated as of November 3,2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and ExchangeCommission on November 6, 2014). 10.15 Equity Distribution Agreement, dated March 20, 2015, by and between the Company and JMP Securities LLC (Incorporated by reference toExhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015). 10.16 Equity Distribution Agreement, dated March 20, 2015, by and between the Company and MLV & Co. LLC. (Incorporated by reference toExhibit 1.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015). 10.17 Underwriting Agreement, dated as of January 7, 2014, by and among the Company, UBS Securities LLC, Barclays Capital Inc. and CreditSuisse Securities (USA) LLC (Incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with theSecurities and Exchange Commission on January 10, 2014). 10.18 Underwriting Agreement, dated as of April 2, 2014, by and among the Company, UBS Securities LLC, Credit Suisse Securities (USA) LLC,Barclays Capital Inc. and RBC Capital Markets LLC (Incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2014). 10.19 Underwriting Agreement, dated as of November 21, 2014, by and among the Company, UBS Securities LLC, Deutsche Bank Securities Inc.,Barclays Capital Inc., RBC Capital Markets LLC, Credit Suisse Securities (USA) LLC (Incorporated by reference to Exhibit 1.1 to theCompany's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 26, 2014). 10.20 Underwriting Agreement, dated as of April 15, 2015, by and among the Company, Morgan Stanley & Co. LLC, UBS Securities LLC andKeefe, Bruyette & Woods, Inc. (Incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with theSecurities and Exchange Commission on April 21, 2015). 12.1 Statement re: Computation of Ratios.*21.1 List of Subsidiaries of the Registrant.* 23.1 Consent of Independent Registered Public Accounting Firm (Grant Thornton LLP).* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002** 101.INS XBRL Instance Document *** 101.SCH Taxonomy Extension Schema Document *** 101.CAL Taxonomy Extension Calculation Linkbase Document *** 101.DE XBRL Taxonomy Extension Definition Linkbase Document *** 101.LAB Taxonomy Extension Label Linkbase Document *** 101.PRE Taxonomy Extension Presentation Linkbase Document ****Filed herewith.**Furnished herewith. Such certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.***Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business ReportingLanguage): (i) Consolidated Balance Sheets at December 31, 2015 and 2014 ; (ii) Consolidated Statements of Operations for the years ended December 31,2015 , 2014 and 2013 ; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2015 , 2014 and 2013 ;(iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015 , 2014 and 2013 ; (v) Consolidated Statements ofCash Flows for the years ended December 31, 2015 , 2014 and 2013 ; and (vi) Notes to Consolidated Financial Statements.Exhibit 12.1 Ratio of Earnings to Fixed ChargesRatio of Earnings to Combined Fixed Charges and Preferred Stock Dividends(dollars in thousands) For the Years Ended December 31, 2015 2014 2013 2012 2011Earnings: Pretax income fromoperations$82,548 $142,586 $69,694 $29,100 $5,243Fixed charges260,651 301,010 231,178 105,926 4,837Dividends distributed toshareholders113,318 86,705 61,302 22,304 8,270 Equity investee adjustment(3,474) (2,324) (185) (38) (174) Noncontrolling interest— — — 97 (97) Total Earnings$453,043 $527,977 $361,989 $157,389 $18,079 Fixed Charges: Interest expense$260,651 $301,010 $231,178 $105,926 $4,837 Total Fixed Charges260,651 301,010 231,178 105,926 4,837 Preferred stock dividends10,990 5,812 3,568 — — Total Combined FixedCharges and PreferredStock Dividends$271,641 $306,822 $234,746 $105,926 $4,837 Ratio of earnings to fixedcharges1.74 1.75 1.57 1.49 3.74 Ratio of earnings tocombined fixed chargesand preferred stockdividends1.67 1.72 1.54 1.49 3.74 Deficiency related to ratioof earnings to fixedchargesNA NA NA NA NADeficiency related to ratioof earnings to combinedfixed charges andpreferred stock dividendsNA NA NA NA NAExhibit 21.1List of Significant SubsidiariesName State of Incorporation Names under which it does BusinessHypotheca Capital, LLC (formerly known asThe New York Mortgage Company, LLC) New York n/aNew York Mortgage Funding, LLC Delaware n/aNew York Mortgage Securitization Trust 2013-1 Delaware n/aNew York Mortgage Trust 2005-1 Delaware n/aNew York Mortgage Trust 2005-2 Delaware n/aNew York Mortgage Trust 2005-3 Delaware n/aNYM Preferred Trust I Delaware n/aNYM Preferred Trust II Delaware n/aNYMT Commercial LLC Delaware n/aGreat Lakes Insurance Holdings, LLC Michigan n/aNYMT-Midway LLC Delaware n/aNYMT Residential, LLC Delaware n/aNYMT Residential 2012-RP1, LLC Delaware n/aNYMT Residential Tax, LLC Delaware n/aNYMT Loan Financing, LLC Delaware n/aNYMT Loan Financing Trust, LLC Delaware n/aNYMT Loan Trust 2013-RP1, LLC Delaware n/aNYMT Residential 2013-RP1, LLC Delaware n/aNYMT Residential Tax 2013-RP1, LLC Delaware n/aNYMT Loan Trust 2013-RP2, LLC Delaware n/aNYMT Residential 2013-RP2, LLC Delaware n/aNYMT Residential Tax 2013-RP2, LLC Delaware n/aNYMT Loan Trust 2013-RP3, LLC Delaware n/aNYMT Residential 2013-RP3, LLC Delaware n/aNYMT Residential Tax 2013-RP3, LLC Delaware n/aNYMT Residential 2015 RP-1, LLC Delaware n/aNYMT Residential Tax 2015 RP-1, LLC Delaware n/aNYMT Series Trust One Delaware n/aNYMT Loan Trust 2014-RP1, LLC Delaware n/aRB Commercial Mortgage LLC Delaware n/aRB Commercial Trust Series 2012-RS1 Delaware n/aExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our reports dated February 25, 2016 , with respect to the consolidated financial statements and internal control over financial reporting included inthe Annual Report of New York Mortgage Trust, Inc. on Form 10-K for the year ended December 31, 2015 . We consent to the incorporation by reference of saidreports in the Registration Statements of New York Mortgage Trust, Inc. on Forms S-3 (File No. 333-198177 effective August 15, 2014 and File No. 333-186016effective January 14, 2013) and on Forms S-8 (File No. 333-167609 effective June 17, 2010 and File No. 333-137987 effective October 13, 2006)./s/ Grant Thornton LLPNew York, New YorkFebruary 25, 2016Exhibit 31.1CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002 I, Steven R. Mumma, certify that: 1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of New York Mortgage Trust, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting.Date: February 25, 2016 /s/ Steven R. Mumma Steven R. Mumma Chairman of the Board, Chief ExecutiveOfficer and President(Principal Executive Officer)Exhibit 31.2CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002 I, Kristine R. Nario, certify that:1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of New York Mortgage Trust, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting.Date: February 25, 2016 /s/ Kristine R. Nario Kristine R. Nario Chief Financial Officer(Principal Financial and Accounting Officer)Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of New York Mortgage Trust, Inc., (the “Company”) on Form 10-K for the quarter ended December 31, 2015 , as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant tosection 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to theSecurities and Exchange Commission or its staff upon request. Date: February 25, 2016 /s/ Steven R. Mumma Steven R. Mumma Chairman of the Board, Chief ExecutiveOfficer and President (Principal Executive Officer)Date: February 25, 2016 /s/ Kristine R. Nario Kristine R. Nario Chief Financial Officer(Principal Financial and Accounting Officer)

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