UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
 
x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)          
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2007
 
OR
 
o       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)        
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from               to              
 
Commission file number 001-32216
 
NEW YORK MORTGAGE TRUST, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
47-0934168 
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
1301 Avenue of the Americas, New York, New York 10019
(Address of Principal Executive Office) (Zip Code)
 
(212) 792-0107
(Registrant's Telephone Number, Including Area Code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x    No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filers” and “large accelerated filers” in Rule 12b-2 of the Exchange Act. (Check one.):
 
Large Accelerated Filer o
Accelerated Filer x
Non-Accelerated Filer o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o   No x
 
The number of shares of the registrant's common stock, par value $.01 per share, outstanding on November 5, 2007 was 3,640,209.
 
 
NEW YORK MORTGAGE TRUST, INC.
FORM 10-Q
 
 
  
Page
  
 
  
 
  
Part I. Financial Information
     3  
Item 1. Consolidated Financial Statements (unaudited):
     3  
Consolidated Balance Sheets
     3  
Consolidated Statements of Operations
     4  
Consolidated Statements of Stockholders' Equity
     5  
Consolidated Statements of Cash Flows
     6  
Notes to Consolidated Financial Statements
     8  
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
     29  
Forward Looking Statement Effects
     29  
General
     30  
Presentation Format
     31  
Strategic Overview
     31  
Financial Overview
     32  
Description of Business
     33  
Known Material Trends and Commentary
     33  
Significance of Estimates and Critical Accounting Policies
     34  
Overview of Performance
     37  
Summary of Operations and Key Performance Measurements
     37  
Financial Condition
     37  
Balance Sheet Analysis - Asset Quality
     38  
Balance Sheet Analysis - Financing Arrangements
     44  
Balance Sheet Analysis - Stockholders' Equity
     45  
Securitizations
     45  
Prepayment Experience
     46  
Results of Operations
     46  
Results of Operations - Comparison of nine months ended September 30, 2007 and September 30, 2006
     47  
Off- Balance Sheet Arrangements
     50  
Liquidity and Capital Resources
     50  
    51  
Item 3. Quantitative and Qualitative Disclosures about Market Risk
     52  
Interest Rate Risk
     52  
Market (Fair Value) Risk
     54  
Credit Spread Risk
     56  
Liquidity and Funding Risk
     56  
Prepayment Risk
     57  
Credit Risk
     57  
    57  
    58  
Item 1. Legal Proceedings
     58  
Item 1A. Risk Factors
     58  
    60  
    61  

2
 
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
 
 
  
September 30,
2007
  
December 31,
2006
  
 
  
(unaudited)
  
                        
  
ASSETS
          
Cash and cash equivalents
  
$
11,144
 
$
969
  
Restricted cash
    
6,030
   
3,151
  
Investment securities - available for sale
    
359,872
   
488,962
  
Accounts and accrued interest receivable
    
4,915
   
5,189
  
Mortgage loans held in securitization trusts
    
458,968
    
588,160
  
Prepaid and other assets
    
2,411
    
20,951
  
Derivative assets
    
977
   
2,632
  
Property and equipment (net)
    
76
   
89
  
Assets related to discontinued operation
    
9,883
    
212,805
  
Total Assets
  
$
854,276
 
$
1,322,908
  
 
          
LIABILITIES AND STOCKHOLDERS' EQUITY
          
Liabilities:
          
Financing arrangements, portfolio investments
  
$
327,877
 
$
815,313
  
Collateralized debt obligations
    
444,204
   
197,447
  
Derivative liabilities
    
1,601
   
-
  
Accounts payable and accrued expenses
    
5,003
    
5,871
  
Subordinated debentures
    
45,000
   
45,000
  
Liabilities related to discontinued operation
    
5,600
    
187,705
  
Total liabilities
    
829,285
   
1,251,336
  
Commitments and Contingencies (note 9)
          
Stockholders' Equity:
          
Common stock, $0.01 par value, 400,000,000 shares authorized, 3,635,854 shares issued and outstanding at September 30, 2007 and 3,665,037 shares issued and 3,615,576 outstanding at December 31, 2006
    
36
   
37
  
Additional paid-in capital
    
99,277
   
99,655
  
Accumulated other comprehensive loss
    
(10,930
)
  
(4,381
)
Accumulated deficit
    
(63,392
)
  
(23,739
)
Total stockholders' equity
    
24,991
   
71,572
  
Total Liabilities and Stockholders' Equity
  
$
854,276
 
$
1,322,908
  
 
See notes to consolidated financial statements.
 
3

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(amounts in thousands, except per share data)

 
  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30, 
  
 
    
2006
  
 2007
  
2006
  
REVENUE:
                  
Interest income investment securities and loans held in securitization trusts
  
$
12,376
  
$
16,998
  
$
38,987
  
$
50,050
  
Interest expense investment securities and loans held in securitization trusts
    
11,212
    
15,882
    
36,188
    
42,320
  
Net interest income from investment securities and loans held in securitization trusts
    
1,164
    
1,116
    
2,799
    
7,730
  
Interest expense - subordinated debentures
    
895
    
877
    
2,671
    
2,656
  
Net interest income
    
269
    
239
    
128
    
5,074
  
OTHER EXPENSE:
                      
Realized (loss)/gain on sale of investment securities
    
(1,013
)
  
440
    
(4,834
)
  
(529
)
Loan loss reserve on loans held in securitization trusts
    
(99
)
  
-
    
(1,039
)
      
Total other (expense) income
    
(1,112
)
  
440
    
(5,873
)
  
(529
)
EXPENSES:
                      
Salaries and benefits
    
178
    
166
    
674
    
618
  
Marketing and promotion
    
37
    
20
    
99
    
54
  
Data processing and communications
    
50
    
58
    
143
    
177
  
Professional fees
    
266
    
82
    
471
    
447
  
Depreciation and amortization
    
93
    
131
    
242
    
398
  
Allowance for deferred tax asset
    
18,352
    
-
    
18,352
    
-
  
Other
    
222
    
(46
)
  
393
    
177
  
Total expenses
    
19,198
    
411
    
20,374
    
1,871
  
(LOSS) INCOME FROM CONTINUING OPERATIONS
    
(20,041
)
  
268
    
(26,119
)
  
2,674
  
Loss from discontinued operation - net of tax
    
(675
)
  
(4,136
)
  
(13,534
)
  
(8,160
)
NET LOSS
  
$
(20,716
)
$
(3,868
)
$
(39,653
)
$
(5,486
)
Basic and diluted loss per share
  
$
(5.70
)
$
(1.07
)
$
(10.94
)
$
(1.53
)
Weighted average shares outstanding-basic and diluted
    
3,636
    
3,605
    
3,625
    
3,595
  
 
See notes to consolidated financial statements.
 
4
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 
 
   
For the Nine Months Ended September 30, 2007 
  
 
  
Common Stock
  
Additional Paid-In Capital
  
Stockholders' Deficit
  
Accumulated Other Comprehensive Loss
  
Comprehensive Loss
  
Total
  
 
  
(dollar amounts in thousands)
  
 
  
(unaudited)
  
Balance, January 1, 2007 - Stockholders' Equity
  
$
37
  
$
99,655
  
$
(23,739
)
$
(4,381
)
      
$
71,572
  
Net loss
    
 
    
 
    
(39,653
)
      
$
(39,653
)
  
(39,653
)
Dividends declared
        
(909
)
                    
(909
)
Vested restricted stock
    
(1
)
  
531
                      
530
 
Increase in net unrealized loss on available for sale securities
                    
(3,891
)
  
(3,891
)
  
(3,891
)
Increase in net unrealized gain on derivative instruments
                    
(2,658
)
  
(2,658
)
  
(2,658
)
Comprehensive loss
                            
$
(46,202
)
      
Balance, September 30, 2007 - Stockholders' Equity
  
$
36
  
$
99,277
  
$
(63,392
)
$
(10,930
)
      
$
24,991
  
 
See notes to consolidated financial statements.
 
5
)
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
  
For the Nine Months Ended
September 30,
  
 
  
2007
  
2006
  
 
  
(dollar amounts in thousands)
(unaudited)
  
Cash Flows from Operating Activities:
          
Net loss
  
$
(39,653
)
$
(5,486
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
          
Depreciation and amortization
    
683
    
1,625
  
Amortization of premium on investment securities and mortgage loans
    
1,602
    
1,962
  
Purchase of mortgage loans held for sale
    
-
    
(222,907
)
Origination of mortgage loans held for sale
    
(300,863
)
  
(1,402,457
)
Proceeds from sales of mortgage loans
    
398,807
    
1,621,438
  
Restricted stock compensation expense
   
529
    
734
  
Loss on sale of securities and related hedges
    
4,834
    
529
  
Loss on sale of securitized loans
    
-
    
747
  
Gain on sale of retail lending segment
    
(4,525
)
  
-
  
Allowance for deferred tax asset / tax (benefit) 
    
18,352
    
(8,494
)
Change in value of derivatives
    
550
    
110
  
Minority interest expense
    
12
    
(30
)
Loan losses
    
6,648
    
3,289
  
Loss on disposal of fixed assets
    
505
    
-
  
Changes in operating assets and liabilities:
            
Due from loan purchasers
    
88,351
    
(11,137
)
Escrow deposits - pending loan closings
    
3,814
    
(188
)
Accounts and accrued interest receivable
    
2,183
    
5,610
  
Prepaid and other assets
    
2,526
    
(3,036
)
Due to loan purchasers
    
(11,721
)
  
8,875
  
Accounts payable and accrued expenses
    
(4,116
)
  
(6,802
)
Other liabilities
    
(131
)
  
(385
)
Net cash provided by (used in) operating activities:
    
168,387
    
(16,003
)
 
              
Cash Flows from Investing Activities:
              
Restricted cash
    
(2,879
)
  
3,489
  
Net purchase of investment securities
    
14,942
    
(388,398
)
Proceeds from sale of retail lending platform
    
12,936
    
452,780
  
Principal repayments received on mortgage loans held in securitization trusts
    
127,301
    
151,450
  
Principal paydown on investment securities
    
104,875
    
126,203
  
Purchases of property and equipment
    
(396
)
  
(1,373
)
Disposal of fixed assets
    
485
    
-
  
Net cash provided by investing activities
    
257,264
    
344,151
  
               
 Cash Flows from Financing Activities:
              
Repurchase of common stock
    
-
    
(300
)
Change in financing arrangements
    
(413,650
)
  
(321,120
)
Dividends paid
    
(1,826
)
  
(8,947
)
Capital Contributions from minority interest member
    
-
    
42
  
Net cash used in financing activities
    
(415,476
)
  
(330,325
)
 
See notes to consolidated financial statements.
 
6
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
 
  
  
For the Nine Months Ended September 30,
  
 
  
2007
  
2006
  
 
  
(dollar amounts in thousands)
  
 
  
(unaudited)
  
Net Increase (Decrease) in Cash and Cash Equivalents
    
10,175
    
(2,177
)
Cash and Cash Equivalents - Beginning of Period
    
969
    
9,056
  
Cash and Cash Equivalents - End of Period
  
$
11,144
  
$
6,879
  
 
          
Supplemental Disclosure
          
Cash paid for interest
  
$
41,338
  
$
68,398
  
Non Cash Financing Activities
          
Dividends declared to be paid in subsequent period
  
$
-
  
$
2,566
  
 
See notes to consolidated financial statements.
 
7

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

1.  
Summary of Significant Accounting Policies

Organization- New York Mortgage Trust, Inc. (“NYMT” or the “Company”) is a self-advised real estate investment trust ("REIT") that invests in and manages a portfolio of mortgage loans and mortgage-backed securities.

The Company is organized and conducts its operations to qualify as a REIT for federal income tax purposes. As such, the Company will generally not be subject to federal income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by the due date of its federal income tax return and complies with various other requirements.

Until March 31, 2007, the company operated a mortgage lending business through its wholly-owned subsidiary, Hypotheca Capital, LLC (formerly known as The New York Mortgage Company, LLC) (“HC”).

On March 31, 2007, we completed the sale of substantially all of the operating assets related to HC's retail mortgage lending platform to IndyMac Bank, F.S.B. (“Indymac”), a wholly-owned subsidiary of Indymac Bancorp, Inc. On February 22, 2007, we completed the sale of substantially all of the operating assets related to HC's wholesale mortgage lending platform to Tribeca Lending Corp. (“Tribeca Lending”), a wholly-owned subsidiary of Franklin Credit Management Corporation.
 
Subsequent to its exit from the mortgage origination business, the Company has continued the process of exploring strategic alternatives while continuing its passive REIT strategy. There can be no assurances that the Company will be successful in entering into a strategic alternative. Should the Company be unsuccessful in doing so, it will operate at a higher expense ratio relative to its peers, and will have to reevaluate its long term viability.
 
In connection with the sale of the assets of our wholesale mortgage origination platform assets on February 22, 2007 and the sale of the assets of our retail mortgage lending platform on March 31, 2007, during the fourth quarter of 2006, we classified our mortgage lending segment as a discontinued operation in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. As a result, we have reported revenues and expenses related to the segment as a discontinued operation and the related assets and liabilities as assets and liabilities related to the discontinued operation for all periods presented in the accompanying consolidated financial statements. Certain assets, such as the deferred tax asset, and certain liabilities, such as subordinated debt and liabilities related to leased facilities not assigned to Indymac or Tribeca Lending, will become part of the ongoing operations of NYMT and accordingly, have not been classified as a discontinued operation in accordance with the provisions of SFAS No. 144. (See note 8)

While the Company sold substantially all of the assets of its wholesale and retail mortgage lending platforms and exited the mortgage lending business as of March 31, 2007, it retains certain liabilities associated with that former line of business. Among these liabilities are the costs associated with the disposal of the mortgage loans held for sale, potential repurchase and indemnification obligations (including early payment defaults) on previously sold mortgage loans and remaining lease payment obligations on real and personal property not assigned as part of those transactions.
 
Basis of Presentation- The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period classifications. In addition, certain previously reported discontinued operation balances have been reclassified to continuing operations, including $1.1 million in restricted cash, a $1.0 million derivative asset balance related to interest rate caps, $0.1 million in property and equipment net and $0.3 million in accounts payable and accrued expenses.
 
The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2007 and results of operations for all periods presented have been made. The results of operations for the nine-month period ended September 30, 2007 should not be construed as indicative of the results to be expected for the full year.
 
As used herein, references to the “Company,” “NYMT,” “we,” “our” and “us” refer to New York Mortgage Trust, Inc., collectively with its subsidiaries.

The Board of Directors declared a one for five reverse stock split of our common stock, providing shareholders of record as of October 9, 2007, with one share of common stock for each five shares owned of record as of October 7, 2007 (the "Reverse Stock Split"). The reduction in shares resulting from the reverse stock split was effective on October 9, 2007, decreasing the number of common shares outstanding to approximately 3.6 million. Prior year share amounts and earnings per share disclosures have been restated to reflect the reverse stock split.
 
8

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's estimates and assumptions primarily arise from risks and uncertainties associated with interest rate volatility, prepayment volatility and credit exposure. Although management is not currently aware of any factors that would significantly change its estimates and assumptions in the near term, future changes in market conditions may occur which could cause actual results to differ materially.
  
Cash and Cash Equivalents- Cash and cash equivalents include cash on hand, amounts due from banks and overnight deposits. The Company maintains its cash and cash equivalents in highly rated financial institutions, and at times these balances exceed insurable amounts.

Restricted Cash- Restricted cash includes amounts held by counterparties as collateral for hedging instruments, amounts held as collateral for two letters of credit related to the Company's lease of office space, including its corporate headquarters and amounts held in an escrow account to support warranties and indemnifications related to the sale of the retail mortgage lending platform to Indymac.

Investment Securities - Available for Sale- The Company's investment securities are residential mortgage-backed securities comprised of Fannie Mae (“FNMA”), Freddie Mac (“FHLMC” and together with FNMA, referred to as “Agency”) securities and “AAA”- rated adjustable-rate securities, including adjustable-rate loans that have an initial fixed-rate period. Investment securities are classified as available for sale securities and are reported at fair value with unrealized gains and losses reported in other comprehensive income (“OCI”). Realized gains and losses recorded on the sale of investment securities available for sale are based on the specific identification method and included in gain on sale of securities and related hedges. Purchase premiums or discounts on investment securities are accreted or amortized to interest income over the estimated life of the investment securities using the interest method. Investment securities may be subject to interest rate, credit and/or prepayment risk.
 
When the fair value of an available for sale security is less than amortized cost, management considers whether there is an other-than-temporary impairment in the value of the security (e.g., whether the security will be sold prior to the recovery of fair value). Management considers at a minimum the following factors that, both individually or in combination, could indicate the decline is “other-than-temporary:” 1) the length of time and extent to which the market value has been less than book value; 2) the financial condition and near-term prospects of the issuer; or 3) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. If, in management's judgment, an other-than-temporary impairment exists, the cost basis of the security is written down to the then-current fair value, and the unrealized loss is transferred from accumulated other comprehensive income as an immediate reduction of current earnings (i.e., as if the loss had been realized in the period of impairment). Even though no credit concerns exist with respect to an available for sale security, an other-than-temporary impairment may be evident if management determines that the Company does not have the intent and ability to hold an investment until a forecasted recovery of the value of the investment.
 
Accounts and Accrued Interest Receivable- Accounts and accrued interest receivable includes accrued interest receivable for investment securities and mortgage loans held in securitization trusts.

Mortgage Loans Held in Securitization Trusts- Mortgage loans held in securitization trusts are certain first-lien adjustable rate mortgage (“ARM”) loans transferred to New York Mortgage Trust 2005-1, New York Mortgage Trust 2005-2 and New York Mortgage Trust 2005-3 that have been securitized into sequentially rated classes of beneficial interests. Mortgage loans held in securitization trusts are recorded at amortized cost, using the same accounting principles as those used for mortgage loans held for investment.  (see note 3)  From time to time the Company may sell certain securities from its securitizations resulting in a permanent financing. See Collateralized Debt Obligations below for further description.
 
9

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
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, but in no case 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.
  
Loan Loss Reserves on Mortgage Loans Held in Securitization Trusts- We establish a reserve for loan losses based on management's judgment and estimate of credit losses inherent in our portfolio of mortgage loans held in securitization trusts.
 
Loss estimations involve the consideration of various credit-related factors including but not limited to, macro-economic conditions, the current housing market conditions, loan-to-value ratios, delinquency status, historical credit loss severity rates, purchased mortgage insurance, the borrower's credit and other factors deemed to warrant consideration. Additionally, we look at the balance of any delinquent loan and compare that to the value of the property. We utilize various internet based property data services to look at comparable properties in the same area or consult with a realtor in the property's area to determine the property’s value.
 
Comparing the current loan balance to the property value determines the current loan-to-value (“LTV”) ratio of the loan. Generally, we estimate that a first lien loan on a property that goes into a foreclosure process and becomes real estate owned (“REO”), results in the property being disposed of at approximately 68% of the property's value. This estimate is based on management's long term experience in similar market conditions. Thus, for a first lien loan that is delinquent, we will adjust the property value down to approximately 68% of the property value and compare that to the current balance of the loan. The difference, determines the base reserve taken for that loan. This base reserve for a particular loan may be adjusted if we are aware of specific circumstances, including the uncertain market conditions that may affect the outcome of the loss mitigation process for that loan. Predominately, however, we use the base reserve number for our reserve.
 
At September 30, 2007, we had a loan loss reserve of $1.0 million on mortgage loans held in securitization trusts. (see note 3)
   
Property and Equipment (Net)- Property and equipment have lives ranging from three to ten years, and are stated at cost less accumulated depreciation and amortization. Depreciation is determined in amounts sufficient to charge the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Leasehold improvements are amortized over the lesser of the life of the lease or service lives of the improvements using the straight-line method. (see note 4)
 
Financing Arrangements, Portfolio Investments- Portfolio investments are typically financed with repurchase agreements, a form of collateralized borrowing which is secured by portfolio securities on the balance sheet. Such financings are recorded at their outstanding principal balance with any accrued interest due recorded as an accrued expense. (see note 6)

Collateralized Debt Obligations- CDOs are securities that are issued and secured by first-lien ARM loans. For financial reporting purposes, the first-lien ARM loans held as collateral are recorded as assets of the Company and the CDO is recorded as the Company's debt. Our CDO securitization transactions include interest rate caps which are held by the securitization trust and recorded as an asset or liability of the Company. (see note 7)

The Company, as transferor, securitizes mortgage loans and securities by transferring the loans or securities to entities (“Transferees”) which generally qualify under GAAP as “qualifying special purpose entities” (“QSPE's”) as defined under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities-a replacement of FASB Statement No. 125 (“Off Balance Sheet Securitizations”)”. The QSPEs issue investment grade and non-investment grade securities. Generally, the investment grade securities are sold to third party investors, and the Company retains the non-investment grade securities. If a transaction meets the requirements for sale recognition under GAAP, and the Transferee meets the requirements to be a QSPE, the assets transferred to the QSPE are considered sold, and gain or loss is recognized. The gain or loss is based on the price of the securities sold and the estimated fair value of any securities and servicing rights retained over the cost basis of the assets transferred net of transaction costs. If subsequently the Transferee fails to continue to qualify as a QSPE, or the Company obtains the right to purchase assets out of the Transferee, then the Company may have to include in its financial statements such assets, or potentially, all the assets of such Transferee.

Derivative Financial Instruments- The Company has developed risk management programs and processes, which include investments in derivative financial instruments designed to manage market risk associated with its mortgage-backed securities investment activities.
 
10

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
 
Derivative instruments contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. The Company minimizes its risk exposure by limiting the counterparties with which it enters into contracts to banks, investment banks and certain private investors who meet established credit and capital guidelines. Management does not expect any counterparty to default on its obligations and, therefore, does not expect to incur any loss due to counterparty default. These commitments and option contracts are considered in conjunction with the Company's valuation of its mortgage loans held for sale.
 
The Company uses other derivative instruments, including treasury, Agency or mortgage-backed securities forward sale contracts which are also classified as free-standing, undesignated derivatives and thus are recorded at fair value with the changes in fair value recognized in current earnings.
 
Interest Rate Risk- The Company hedges the aggregate risk of interest rate fluctuations with respect to its borrowings, regardless of the form of such borrowings, which require payments based on a variable interest rate index. The Company generally intends to hedge only the risk related to changes in the benchmark interest rate (London Interbank Offered Rate (“LIBOR”) or a Treasury rate).

In order to reduce such risks, the Company enters into swap agreements whereby the Company receives floating rate payments in exchange for fixed rate payments, effectively converting the borrowing to a fixed rate. The Company also enters into cap agreements whereby, in exchange for a fee, the Company is reimbursed for interest paid in excess of a certain capped rate.
 
11

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
To qualify for cash flow hedge accounting, interest rate swaps and caps must meet certain criteria, including:
 
 
·
the items to be hedged expose the Company to interest rate risk; and
 
 
·
the interest rate swaps or caps are expected to be and continue to be highly effective in reducing the Company's exposure to interest rate risk.
 
The fair values of the Company's interest rate swap agreements and interest rate cap agreements are based on market values provided by dealers who are familiar with the terms of these instruments. Correlation and effectiveness are periodically assessed at least quarterly based upon a comparison of the relative changes in the fair values or cash flows of the interest rate swaps and caps and the items being hedged.

For derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instruments are reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instruments 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 the period of change.

With respect to interest rate swaps and caps that have not been designated as hedges, any net payments under, or fluctuations in the fair value of, such swaps and caps, will be recognized in current earnings.

Termination of Hedging Relationships- The Company employs a number of risk management monitoring procedures to ensure that the designated hedging relationships are demonstrating, and are expected to continue to demonstrate, a high level of effectiveness. Hedge accounting is discontinued on a prospective basis if 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 hedged item.

Additionally, the Company may elect to un-designate a hedge relationship during an interim period and re-designate upon the rebalancing of a hedge profile and the corresponding hedge relationship. When hedge accounting is discontinued, the Company continues to carry the derivative instruments at fair value with changes recorded in current earnings.

Other Comprehensive Income- Other comprehensive income is comprised primarily of the impact of changes in value of the Company's available for sale securities, and the impact of deferred gains or losses on changes in the fair value of derivative contracts hedging future cash flows.
 
Employee Benefits Plans- The Company sponsors a defined contribution plan (the “Plan”) for all eligible domestic employees. The Plan qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Plan, participating employees may defer up to 15% of their pre-tax earnings, subject to the annual Internal Revenue Code contribution limit. The plan provides that the Company may match contributions up to a maximum of 25% of the first 5% of salary. Employees vest immediately in their contribution and vest in the Company's contribution at a rate of 25% after two full years and then an incremental 25% per full year of service until fully vested at 100% after five full years of service. The Company's total contributions to the Plan were $18,495 and $0.3 million for the nine month periods ended September 30, 2007 and 2006 respectively.
 
Stock Based Compensation- The Company accounts for its stock options and restricted stock grants in accordance with SFAS No. 123R, “Share-Based Payment,” (“SFAS No. 123R”) which requires all companies to measure compensation costs for all share-based payments, including employee stock options, at fair value. (see note 14)
 
12
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
Income Taxes- The Company operates so as to qualify as a REIT under the requirements of the Internal Revenue Code. Requirements for qualification as a REIT include various restrictions on ownership of the Company's stock, requirements concerning distribution of taxable income and certain restrictions 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 any undistributed amounts from the prior year must be distributed within the taxable year in order to avoid the imposition of an excise tax. The remaining balance may extend until timely filing of the Company's tax return in the subsequent taxable year. Qualifying distributions of taxable income are deductible by a REIT in computing taxable income.  (see note 12)

HC is a taxable REIT subsidiary and therefore, is subject to corporate Federal income taxes. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base upon the change in tax status. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income 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 tax rates is recognized in income in the period that includes the enactment date. The Company has fully reserved its deferred tax asset at September 30, 2007 due to the uncertainty surrounding the asset's utilization.

Earnings Per Share- Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities 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 in the earnings of the Company. (see note 15)
 
Loan Loss Reserves on Repurchase Requests and Mortgage Under Indemnification Agreements- (Discontinued operation - See note 8) We establish reserves for loans we have been requested to repurchase from investors and for loans subject to indemnification agreements. Generally loans wherein the borrowers do not make each of all the first three payments to the new investor once the loan has been sold, require us, under the terms of purchase and sale agreement entered into with the investor, to repurchase the loan. During the three month period ended September 30, 2007, we received $1.0 million of new repurchase requests, while $0.5 million of existing repurchase requests were rescinded.
 
During the three months ended September 30, 2007, we eliminated $18.4 million in repurchase requests by entering into settlement and release agreements with the parties requesting the repurchases. The settlements provided for a payment of a negotiated amount taking into account the loss incurred or otherwise borne by the loan purchaser in return for the elimination of the repurchase request, and in a majority of the cases, a release from all future claims due to EPDs, quality control issues, and indemnification obligations. As of September 30, 2007, we had $7.3 million in outstanding repurchase requests and a reserve of $0.6 million.

From time to time, as an alternative to repurchasing loans, we sign indemnification agreements with loan investors. Generally these agreements specify that if a loan goes delinquent and the investor realizes a loss as a result of foreclosure, the Company will reimburse the investor for their loss. As of June 30, 2007, we had outstanding indemnification agreements on $7.4 million of mortgage loans, against which the Company had taken a reserve of $0.4 million. During the three months ended September 30, 2007, we entered into no new indemnification agreements and eliminated $5.3 million in existing indemnification obligations by entering into settlement and release agreements with the parties pertaining to repurchase requests. As of September 30, 2007, we had outstanding indemnification agreements on $2.1 million of mortgage loans, against which the Company maintained a reserve of $0.4 million.
 
At September 30, 2007, we had $9.6 million of loans held for sale of which we had a loan loss reserve of $1.6 million. All of these items are included in discontinued operations. We had incurred $8.4 million of loan losses for the nine months ended September 30, 2007 as compared to $4.1 million for the same period for 2006. In addition, the Company incurred $0.2 million of loan losses for the three months ended September 30, 2007 as compared to $4.1 million for the same period in 2006.
 
    Recent Accounting Pronouncements- In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No.157”). SFAS No.157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No.157 will be applied under other accounting principles that require or permit fair value measurements, as this is a relevant measurement attribute. This statement does not require any new fair value measurements. We will adopt the provisions of SFAS No.157 beginning January 1, 2008. We are currently evaluating the impact of the adoption of this statement on our consolidated financial statements.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 establishes presentation and disclosure requirements and requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company's choice to use fair value on its earnings. SFAS No. 159 also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of analyzing the impact of the adoption of SFAS No. 159 on our consolidated financial statements.
 
In June 2007, the EITF reached consensus on Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards ("EITF 06-11"). EITF 06-11 requires that the tax benefit related to dividend equivalents paid on restricted stock units, which are expected to vest, be recorded as an increase to additional paid-in capital. EITF 06-11 is to be applied prospectively for tax benefits on dividends declared in fiscal years beginning after December 15, 2007, and the Company expects to adopt the provisions of EITF 06-11 beginning in the first quarter of 2008. The Company is currently evaluating the potential effect on the consolidated financial statements of adopting EITF 06-11.
 
13

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

 In June 2007, the AICPA issued SOP No. 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (“SOP 07-1”). SOP 07-1 addresses whether the accounting principles of the AICPA Audit and Accounting Guide Investment Companies may be applied to an entity by clarifying the definition of an investment company and whether those accounting principles may be retained by a parent company in consolidation or by an investor in the application of the equity method of accounting. In October of 2007, the provisions of SOP 07-1 were deferred indefinitely. The Company has not determined whether or not SOP 07-1 will have an impact if it is ultimately implemented. 
 
2. Investment Securities Available for Sale
 
Investment securities available for sale consist of the following as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):
 
               
  
September 30,
2007
  
December 31,
2006
  
 
  
                         
  
                         
  
Amortized cost
  
$
367,578
  
$
492,777
  
Gross unrealized gains
    
47
    
623
  
Gross unrealized losses
    
(7,753
)
  
(4,438
)
Fair value
  
$
359,872
  
$
488,962
  
 
The Company sold approximately $246.9 million of non-Agency ARM securities, including $225.4 million of lower yielding non-Agency ARM securities previously designated as impaired, with a reserve of $3.8 million. The Company incurred an additional net loss of $1.0 million in the sale of the incremental $21.5 million in securities.

As of September 30, 2007 and the date of this filing, we have the intent, and believe we have the ability, to hold our portfolio of securities which are currently in unrealized loss positions until recovery of their amortized cost, which  may be until maturity.  Given the uncertain state of the market for such securities, should conditions change that would require us to sell securities at a loss, we may no longer be able to assert that we have the ability to hold our remaining securities until recovery, and we would then be required to record impairment charges related to these securities. Substantially all of the Company's investment securities available for sale are pledged as collateral for borrowings under financing arrangements. (see note 6)

All securities held in Investment Securities Available for Sale, including Agency, investment and non-investment grade securities, are based on unadjusted price quotes for similar securities in active markets obtained from independent dealers.
 
The following table sets forth the stated reset periods and weighted average yields of our investment securities at September 30, 2007 (dollar amounts in thousands):

   
September 30, 2007
  
   
Less than 6 Months
  
More than 6
Months
to 24 Months
  
More than 24
Months
to 60 Months
  
Total
  
   
Carrying
Value
  
Weighted
Average
Yield
  
Carrying
Value
  
Weighted
Average
Yield
  
Carrying
Value
  
Weighted
Average
Yield
  
Carrying
Value
  
Weighted
Average
Yield
  
Agency REMIC CMO floaters
  
$
326,422
    
6.53
%
$
-
    
-
  
$
-
    
-
  
$
326,422
    
6.53
%
Non-Agency floaters
    
29,813
    
6.01
%
  
-
    
-
    
-
    
-
    
29,813
    
6.01
%
NYMT retained securities
    
2,175
    
6.37
%
  
-
    
-
    
1,462
    
14.32
%
  
3,637
    
10.82
%
Total/Weighted average
  
$
358,410
    
6.48
%
$
-
    
-
  
$
1,462
    
14.32
%
$
359,872
    
6.54
%
 
The NYMT retained securities includes $1.5 million of residual interests related to the NYMT 2006-1 transaction.
 
The following table sets forth the stated reset periods and weighted average yields of our investment securities at December 31, 2006 (dollar amounts in thousands):

14

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

 
  
 December 31, 2006
 
 
 
Less than 6 Months
 
More than 6
Months
To 24 Months
 
More than 24
Months
To 60 Months
 
Total
 
 
 
Carrying
Value
 
Weighted
Average
Yield
 
Carrying
Value
 
Weighted
Average
Yield
 
Carrying
Value
  
Weighted
Average
Yield
  
Carrying
Value 
  
Weighted
Average
Yield
  
Agency REMIC CMO floaters
  
$
163,898
    
6.40
%
$
-
    
-
 
$
-
    
-
 
$
163,898
    
6.40
%
Non-Agency floaters
    
22,284
   
6.46
%
  
-
   
-
   
-
   
-
   
22,284
   
6.46
%
Non-Agency ARMs
    
16,673
   
5.60
%
  
78,565
   
5.80
%
  
183,612
   
5.64
%
  
278,850
   
5.68
%
NYMT retained securities
    
6,024
   
7.12
%
  
-
   
-
   
17,906
   
7.83
%
  
23,930
   
7.66
%
Total/Weighted average
  
$
208,879
    
6.37
%
$
78,565
    
5.80
%
$
201,518
    
5.84
%
$
488,962
    
6.06
%
 
The following tables present the Company's investment securities available for sale in an unrealized loss position, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2007 and December 31, 2006 (dollar amounts in thousands):

   
September 30, 2007
  
   
Less than 12 Months
  
12 Months or More
  
Total
  
   
Fair
Value
  
Gross
Unrealized
Losses
  
Fair
Value
  
Gross
Unrealized
Losses
  
Fair
Value
  
Gross
Unrealized
Losses
  
Agency REMIC CMO floaters
  
$
262,161,
  
$
5,064
  
$
57,925
  
$
1,533
  
$
320,086
  
$
6,597
  
Non-Agency floaters
    
26,231
    
514
    
3,582
    
56
    
29,813
    
570
  
Non-Agency ARMs
    
-
    
-
    
-
    
-
    
-
    
-
  
   
-
    
-
    
3,637
    
586
    
3,637
    
586
  
Total
  
$
288,392
  
$
5,578
  
$
65,144
  
$
2,175
  
$
353,536
  
$
7,753
  
 
 
  
December 31, 2006
  
 
  
Less than 12 Months
  
12 Months or More
  
Total
  
 
  
Fair
Value
  
Gross
Unrealized
Losses
  
Fair
Value
  
Gross
Unrealized
Losses
  
Fair
Value
  
Gross
Unrealized
Losses
  
Agency REMIC CMO floaters
  
$
966
  
$
2
  
$
1,841
  
$
4
  
$
2,807
  
$
6
  
Non-Agency floaters
    
22,284
    
80
    
-
    
-
    
22,284
    
80
  
Non-Agency ARMs
    
30,385
    
38
    
248,465
    
4,227
    
278,850
    
4,265
  
NYMT retained securities
    
7,499
    
87
    
-
    
-
    
7,499
    
87
  
Total
  
$
61,134
  
$
207
  
$
250,306
  
$
4,231
  
$
311,440
  
$
4,438
  
 
3. Mortgage Loans Held in Securitization Trusts
 
Mortgage loans held in securitization trusts consist of the following as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):
 
 
  
September 30,
2007
  
December 31,
2006
  
 
  
 
  
  
  
Mortgage loans principal amount
  
$
457,057
  
$
584,358
  
Deferred origination costs – net
    
2,922
    
3,802
  
Reserve for loan losses                 
    
(1,011
)
  
-
  
Total mortgage loans held in securitization trusts                 
  
$
458,968
  
$
588,160
  
 
15

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

All of the Company's mortgage loans held in securitization trusts are pledged as collateral for the collateralized debt obligation (see note 7). The Company’s net investment in the loans held in securitization trusts, or the difference between the purchase cost of the loans and the amount of collateralized debt obligations outstanding, was $15.8 million, of which the Company had a $1.0 million reserve.
 
The following tables set forth delinquent loans in our portfolio as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):

September 30, 2007
  
Days Late
  
Number of
Delinquent
Loans
  
Total
Dollar Amount
  
% of Loan
Portfolio
  
30-60
    
1
  
$
246
    
0.05
%
61-90
    
2
    
1,131
    
0.25
%
90+
    
10
  
$
7,604
    
1.66
%
 
As of September 30, 2007, we had no real estate owned through foreclosure (REO).
 
December 31, 2006
  
Days Late
  
Number of
Delinquent
Loans
  
Total
Dollar Amount
  
% of Loan
Portfolio
  
 
  
  
  
  
  
  
  
30-60
    
1
  
$
166
    
0.03
%
61-90
    
1
    
193
    
0.03
%
90+
    
4
    
5,819
    
0.99
%
REO
    
1
  
$
625
    
0.11
%
 
Delinquencies on loans held in securitization trusts increased from December 31, 2006 to September 30, 2007 by approximately 0.91%, while REO decreased to zero during the same period. This trend is primarily due to the increasing age of the loans held in securitization trusts, a deteriorating real estate market as evidenced by increased number of homes listed for sale, decreased appreciation rates for home prices, and in certain markets, deteriorating home prices.
 
4. Property and Equipment - Net
 
Property and equipment - net consists of the following as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):

                         
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
Office and computer equipment
  
$
175
  
$
156
  
Furniture and fixtures
    
152
    
147
  
Total equipment, furniture and fixtures
    
327
    
303
  
Less: accumulated depreciation
    
(251
)
  
(214
)
Property and equipment - net
  
$
76
  
$
89
  
 
5. Derivative Instruments and Hedging Activities

The Company enters into derivatives to manage its interest rate and market risk exposure associated with its mortgage-backed securities investment activities and its subordinated debentures. These derivatives include interest rate swaps and caps to mitigate the effects of major interest rate changes on net investment spread.

16

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

The following table summarizes the estimated fair value of derivative assets and liabilities as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):

 
  
September 30,
2007
  
December 31,
2006
  
Derivative Assets:
  
 
  
 
  
Interest rate caps
  
$
977
  
$
2,011
  
Interest rate swaps
    
-
    
621
  
Total derivative assets
  
$
977
  
$
2,632
  
               
Derivative Liabilities:
          
Interest rate swaps
  
$
1,601
  
$
-
  
Total derivative assets
  
$
1,601
  
$
-
  
 
The notional amounts of the Company's interest rate swaps and interest rate caps as of September 30, 2007 were $220.0 million and $783.3 million, respectively.
 
The notional amounts of the Company's interest rate swaps and interest rate caps as of December 31, 2006 were $285.0 million and $1.5 billion, respectively.
 
The Company estimates that over the next twelve months, approximately $0.2 million of the net unrealized losses on the interest rate swaps will be reclassified from accumulated OCI into earnings.
 
6. Financing Arrangements, Portfolio Investments

The Company has entered into repurchase agreements with third party financial institutions to finance its residential mortgage-backed securities and certain mortgage loans held in the securitization trusts not financed by collateralized debt obligations. The repurchase agreements are short-term borrowings that bear interest rates based on a spread to LIBOR, and are secured by the residential mortgage-backed securities and mortgage loans held in the securitization trusts which they finance. At September 30, 2007, the Company had repurchase agreements with an outstanding balance of $327.9 million and a weighted average interest rate of 5.28%. As of December 31, 2006, the Company had repurchase agreements with an outstanding balance of $815.3 million and a weighted average interest rate of 5.37%. At September 30, 2007 and December 31, 2006, securities and mortgage loans pledged as collateral for repurchase agreements had estimated fair values of $349.6 million and $850.6 million, respectively. In August 2007, the Company entered into a six month repurchase agreement with Credit Suisse totaling approximately $102.2 million. The repurchase agreement will mature in February 22, 2008 with interest rates to reset monthly. All outstanding borrowings under other repurchase agreements mature within 30 days. The average days to maturity for all repurchase agreements is 56 days. In the event we are unable to obtain sufficient short-term financing through repurchase agreements or otherwise, or our lenders start to require additional collateral, we may have to liquidate our investment securities at a disadvantageous time, and result in losses. Any losses resulting from the disposition of our investment securities in this manner could have a material adverse effect on our operating results and net profitability.
 
The follow table summarizes outstanding repurchase agreement borrowings secured by portfolio investments as of September 30, 2007 and December 31, 2006 (dollars amounts in thousands):
 
Repurchase Agreements by Counterparty

Counterparty Name
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
Barclays
  
$
105,489
  
$
-
  
Countrywide Securities Corporation
    
-
    
168,217
  
Credit Suisse
    
102,242
    
-
  
Goldman, Sachs & Co.
    
68,601
    
121,824
  
HSBC
    
51,545
    
-
  
J.P. Morgan Securities Inc.
    
-
    
33,631
  
Nomura Securities International, Inc.
    
-
    
156,352
  
SocGen/SG Americas Securities
    
-
    
87,995
  
West LB
    
-
    
247,294
  
Total financing arrangements, portfolio investments
  
$
327,877
  
$
815,313
  
 
17

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

 During the third quarter, the availability of short-term collateralized borrowing through repurchase agreements worsened considerably, primarily as a result of the fall-out from increasing defaults in the sub-prime mortgage market and losses incurred at a number of larger companies in the mortgage industry. The Company sold approximately $21.5 million in non-Agency securities as a result of an inability to obtain financing, resulting in a net loss of $1.0 million. At September 30, 2007, we had outstanding balances under repurchase agreements with four different counterparties and, as of the date of this report, we have been successful at resetting all outstanding balances under our various repurchase agreements. In the event a counterparty elected to not reset the outstanding balance into a new repurchase agreement, we would be required to repay the outstanding balance with proceeds received from a new counterparty or to surrender the mortgage-backed securities that serve as collateral for the outstanding balance. If we are unable to secure financing from another counterparty and as a result surrender the collateral, we would expect to incur a loss. Although we presently expect the short-term collateralized borrowing markets to continue providing us with necessary financing through repurchase agreements, we cannot assure you that this form of financing will be available to us in the future on comparable terms, if at all.
 
7. Collateralized Debt Obligations
 
The Company had CDOs outstanding of $444.2 million with a weighted average interest rate of 5.51% as of September 30, 2007 and $197.4 million with a weighted average interest rate of 5.72% as of December 31, 2006. The CDOs include amortizing interest rate cap contracts with a notional amount of $303.8 million as of September 30, 2007 and a notional amount of $187.5 million as of December 31, 2006, which were recorded as an asset of the Company. The Company's CDOs are secured by ARM loans pledged as collateral which are recorded as an asset of the Company. The pledged ARM loans included in mortgage loans held in securitization trust had a principal balance of $457.1 million and $204.6 million at September 30, 2007 and December 31, 2006, respectively.
 
8. Discontinued Operation
 
In connection with the sale of our wholesale mortgage origination platform assets on February 22, 2007 and the sale of our retail mortgage lending platform on March 31, 2007, during the fourth quarter of 2006, we classified our mortgage lending segment as a discontinued operation in accordance with the provisions of SFAS No. 144. As a result, we have reported revenues and expenses related to the segment as a discontinued operation and the related assets and liabilities as assets and liabilities related to a discontinued operation for all periods presented in the accompanying consolidated financial statements. Certain assets, such as the deferred tax asset, and certain liabilities, such as subordinated debt and liabilities related to leased facilities not assigned to Indymac, will become part of the ongoing operations of NYMT and accordingly, we have not included these items as part of the discontinued operation in accordance with the provisions of SFAS No. 144.
 
18

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

Balance Sheet

The following tables indicate a significant decline in the assets and liabilities related to the discontinued operation from December 31, 2006 to September 30, 2007, as the Company exited from the mortgage lending business at the end of March 2007.
 
The components of Assets related to the discontinued operation as of September 30, 2007 and December 31, 2006 are as follows (dollar amounts in thousands):
 
 
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
Due from loan purchasers
  
$
-
  
$
88,351
  
Escrow deposits-pending loan closings
    
-
    
3,814
  
Accounts and accrued interest receivable
    
579
    
2,488
  
Mortgage loans held for sale (net)
    
7,999
    
106,900
  
Prepaid and other assets
    
1,294
    
4,654
  
Derivative assets
    
-
    
171
  
Property and equipment, net
    
11
    
6,427
  
Total assets
  
$
9,883
  
$
212,805
  
 
The components of Liabilities related to the discontinued operation as of September 30, 2007 and December 31, 2006 are as follows (dollar amounts in thousands):
 
 
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
Financing arrangements, mortgage loans held for sale
  
$
-
  
$
172,972
  
Due to loan purchasers
    
1,180
    
8,334
  
Accounts payable and accrued expenses
    
4,420
    
6,066
  
Derivative liabilities
    
-
    
216
  
Other liabilities
    
-
    
117
  
Total liabilities
  
$
5,600
  
$
187,705
  
  
Mortgage Loans Held for Sale - Mortgage loans held for sale consists of the following as of September 30, 2007 and December 31, 2006 (dollar amounts in thousands):
  
                         
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
Mortgage loans principal amount
  
$
9,598
  
$
110,804
  
Deferred origination costs - net
    
(45
)
  
138
  
Reserve for loan losses
    
(1,554
)
  
(4,042
)
Total mortgage loans held for sale (net)
  
$
7,999
  
$
106,900
  
 
Loan losses -The following table presents the activity in the Company's reserve for loan losses on mortgage loans held for sale for the nine months ended September 30, 2007 and 2006 (dollar amounts in thousands).  

19

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

 
  
September 30,
  
 
  
2007
  
2006
  
 
  
 
  
 
  
Balance at beginning of period
  
$
4,042
  
$
-
  
Provisions for loan losses
    
957
    
-
  
Charge-offs
    
(3,445
)
  
-
  
Balance of the end of period
  
$
1,554
  
$
-
  
 
Financing Arrangements, Mortgage Loans Held for Sale - Financing arrangements secured by mortgage loans held for sale consisted of the following as of December 31, 2006 (dollar amounts in thousands):

 
  
December 31,
2006
  
 
  
    
  
$120 million master repurchase agreement as of March 31, 2007 with CSFB expiring on June 29, 2007 and $200 million as of December 31, 2006, bearing interest at daily LIBOR plus spreads from 0.75% to 2.000% depending on collateral (6.36% at December 31, 2006). Principal repayments are required 90 days from the funding date. Management did not seek renewal of this facility.
  
$
106,801
  
$300 million master repurchase agreement with Deutsche Bank Structured Products, Inc. expiring on March 26, 2007 bearing interest at 1 month LIBOR plus spreads from 0.625% to 1.25% depending on collateral (6.0% at December 31, 2006). Principal payments are due 120 days from the repurchase date. Management did not seek renewal of this facility.
    
66,171
 
Total Financing Arrangements
  
$
172,972
  
 
 As of September 30, 2007, the Company had no outstanding financing arrangements secured by mortgage loans held for sale.
 
Statements of Operations
 
The combined results of operations of the discontinued operation for the three and nine months ended September 30, 2007 and 2006 are as follows (dollar amounts in thousands):
 
 
  
For the Three Months Ended
  
 For the Nine Months Ended
  
 
  
September 30,
  
September 30,
  
 
  
2007
  
2006
  
2007
  
2006
  
Revenues:
  
 
  
 
  
 
  
 
  
Net interest income
  
$
179
  
$
543
  
$
931
  
$
2,871
  
Gain on sale of mortgage loans
    
(10
)
  
4,311
    
2,540
    
14,362
  
Loan losses
    
(172
)
  
(4,077
)
  
(8,414
)
  
(4,077
)
Brokered loan fees
    
3
    
2,402
    
2,319
    
8,672
  
Gain on sale of retail lending segment
    
-
    
-
    
4,525
    
-
  
Other income (expense)
    
(39
)
  
43
    
(24
)
  
(437
)
Total net revenues
    
(39
)
  
3,222
    
1,877
    
21,391
  
Expenses:
                      
Salaries, commissions and benefits
    
424
    
5,212
    
6,508
    
17,102
  
Brokered loan expenses
    
-
    
1,674
    
1,731
    
6,609
  
Occupancy and equipment
    
(86
)
  
1,255
    
2,124
    
3,870
  
General and administrative
    
298
    
3,132
    
5,048
    
10,464
  
Total expenses
    
636
    
11,273
    
15,411
    
38,045
  
Loss before income tax benefit
    
(675
)
  
(8,051
)
  
(13,534
)
  
(16,654
)
Income tax (provision) benefit
    
-
 
  
3,915
    
-
 
  
8,494
  
Loss from discontinued operations - net of tax
  
$
(675
)
$
(4,136
)
$
(13,534
)
$
(8,160
)

Gain on Sale of Mortgage Loans- The Company recognizes gain on sale of loans sold to third parties as the difference between the sales price and the adjusted cost basis of the loans when title transfers. The adjusted cost basis of the loans includes the original principal amount adjusted for deferrals of origination and commitment fees received, net of direct loan origination costs paid.

20

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

Loan Origination Fees and Direct Origination Cost- The Company records loan fees, discount points and certain incremental direct origination costs as an adjustment of the cost of the loan and such amounts are included in gain on sales of loans when the loan is sold.
  
Brokered Loan Fees and Expenses- The Company recorded commissions associated with brokered loans when such loans are closed with the borrower. Costs associated with brokered loans are expensed when incurred.

Loan Commitment Fees- Fees received for the funding of mortgage loans to borrowers at pre-set conditions are deferred and recognized at the date at which the loan is sold.
 
9. Commitments and Contingencies
 
Loans Sold to Investors- The Company is not exposed to long term credit risk on its loans sold to investors. In the normal course of business, however, the Company is obligated to repurchase loans based on violations of representations and warranties, or early payment defaults. For the three months ended September 30, 2007, we repurchased no loans, however for the nine months ended September 30, 2007, we repurchased a total of $6.5 million of mortgage loans that were originated in either 2005 or 2006, the majority of which were due to early payment defaults. Of the repurchased loans originated in 2006, a majority were Alt-A. As of September 30, 2007, we had pending repurchase requests totaling $7.3 million in unpaid principal balances, against which the Company has taken a reserve of $1.0 million included in due to loan purchasers within liabilities related to discontinued operations. The Company intends to address the $7.3 million in outstanding repurchase requests by either repurchasing the mortgage loans and reselling them to third parties or entering into settlement agreements with the parties requesting the repurchases and paying such parties negotiated amounts based on the actual loss incurred or the estimated amount to be borne by such party in lieu of repurchasing the mortgage loans.
 
Outstanding Litigation- The Company has at times been subject to various legal proceedings arising in the ordinary course of its discontinued mortgage lending business. Other than as described in the following paragraphs, the Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on its operations or financial condition. As of September 30, 2007, the Company has a reserve of $0.5 million for legal defense costs it expects to incur with respect to these various legal proceedings. 

On December 13, 2006, Steven B. Yang and Christopher Daubiere (“Plaintiffs”), filed suit in the United States District Court for the Southern District of New York (the “Court”) against HC and our Company alleging that we failed to pay them, and similarly situated employees, overtime in violation of the Fair Labor Standards Act (“FLSA”) and New York State law. Plaintiffs, former employees in our discontinued Mortgageline division who purport to bring a FLSA "collective action" on behalf of similarly situated loan officers in our now discontinued mortgage lending operations, are seeking unspecified amounts for alleged unpaid overtime wages, liquidated damages, attorney's fees and costs. Because the parties have agreed to attempt mediation, as of November 9, 2007, Plaintiffs have not applied to the Court for permission to certify the class or send notice of the collective action to prospective collective action members.
 
We are currently engaged in discovery and continue to investigate Plaintiffs' claims. This case involves complex issues of law and fact and has not yet progressed to the point where the Company can: (1) predict its outcome; (2) precisely estimate damages that might result from such case due to the uncertainty of the class certification and the number of potential participants in any class that may be certified; or (3) predict the effect that final resolution of this litigation might have on it, its business, financial condition or results of operations, although such effect could be materially adverse. After consulting with counsel, the Company believes that it has defenses to the claims against it in these cases and is vigorously defending these proceedings.
 
Leases- The Company leases its corporate offices, certain office space related to our discounted mortgage lending operation not assumed by IndyMac and certain equipment under short-term lease agreements expiring at various dates through 2010. All such leases are accounted for as operating leases. Total rental expense for property and equipment amounted to $2.1 million and $3.9 million for the nine months ended September 30, 2007 and 2006, respectively.
 
On November 13, 2006, the Company entered into an Assignment and Assumption of Sublease and an Escrow Agreement, each with Lehman Brothers Holdings Inc. (“Lehman”) (collectively, the “Agreements”). Under the Agreements, the Company assigned and Lehman has assumed the sublease for the Company's corporate headquarters at 1301 Avenue of the Americas. Pursuant to the Agreements, Lehman has funded an escrow account for the benefit of HC such that if the Company vacates the leased space before February 1, 2008, the Company will receive $3.2 million. The escrow amount shall be reduced by $0.2 million for each month the Company remains in the leased space beginning February 1, 2008. The entire remaining amount held in the escrow account will be released to the Company when it vacates the leased space. Pursuant to the provisions of the sale transaction with IndyMac, beginning August 1, 2007, so long as IndyMac continues to occupy and use the leased space at the Company’s corporate headquarters, IndyMac will pay rent equal to Company’s cost, including any penalties and foregone bonuses resulting from the delayed vacation of the leased premises. Until February 1, 2008, the Company’s lease cost, including penalties and foregone bonuses, is $0.2 million per month. The Company intends to relocate its corporate headquarters to a smaller facility at a location that is yet to be determined.

21

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

Letters of Credit - HC maintains a letter of credit in the amount of $100,000 in lieu of a cash security deposit for an office lease dated June 1998 for the Company's former headquarters located at 304 Park Avenue South in New York City. The sole beneficiary of this letter of credit is the owner of the building, 304 Park Avenue South LLC. This letter of credit is secured by cash deposited in a bank account maintained at JP Morgan Chase bank.
 
Subsequent to the move to a new headquarters location in New York City in July 2003, in lieu of a cash security deposit for the office lease we entered into an irrevocable transferable letter of credit in the amount of $313,000 with PricewaterhouseCoopers, LLP (sublandlord), as beneficiary. This letter of credit is secured by cash deposited in a bank account maintained at JP Morgan Chase bank.
 
10. Concentrations of Credit Risk
 
At September 30, 2007 and December 31, 2006, there were geographic concentrations of credit risk exceeding 5% of the total loan balances within mortgage loans held in the securitization trusts and retained interests in our REMIC securitization, NYMT 2006-1, as follows:
 
               
  
September 30,
2007
  
December 31,
2006
  
 
  
  
  
  
  
New York
    
31.2
%
  
29.1
%
Massachusetts
    
17.5
%
  
17.5
%
Florida
    
8.0
%
  
11.4
%
California
    
7.9
%
  
7.5
%
New Jersey
    
5.7
%
  
5.1
%
  
11. Fair Value of Financial Instruments
 
Fair value estimates are made as of a specific point in time based on estimates using market quotes, present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimate of future cashflow, future expected loss experience, and other factors.
 
Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be necessarily substantiated by comparison to independent markets and, in many cases, could not be necessarily realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the Company's fair values should not be compared to those of other companies.
 
Fair value estimates are based on existing financial instruments and do not attempt to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented below do not represent the underlying value of the Company.
 
The fair value of certain assets and liabilities approximate cost due to their short-term nature, terms of repayment or interest rates associated with the asset or liability. Such assets or liabilities include cash and cash equivalents, escrow deposits, unsettled mortgage loan sales, and financing arrangements. All forward delivery commitments and option contracts to buy securities are to be contractually settled within six months of the balance sheet date.

The following describes the methods and assumptions used by the Company in estimating fair values of other financial instruments:
 
a. Investment Securities Available for Sale- Fair value is generally estimated based on market prices provided by five to seven dealers who make markets in these financial instruments. If the fair value of a security is not reasonably available from a dealer, management estimates the fair value based on characteristics of the security that the Company receives from the issuer and based on available market information.
 
 b. Mortgage Loans Held in the Securitization Trusts- Mortgage loans held in the securitization trusts are recorded at amortized cost. Fair value is estimated using pricing models and taking into consideration the aggregated characteristics of groups of loans such as, but not limited to, collateral type, index, interest rate, margin, length of fixed-rate period, life cap, periodic cap, underwriting standards, age and credit estimated using the quoted market prices for securities backed by similar types of loans.

22

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

c. Interest Rate Swaps and Caps- The fair value of interest rate swaps and caps is based on using market accepted financial models as well as dealer quotes.
  
The following tables set forth information about financial instruments, except for those noted above for which the carrying amount approximates fair value (dollar amounts in thousands):

 
  
September 30, 2007
  
 
  
Notional
Amount
  
Carrying
Amount
  
Estimated
Fair Value
  
Investment securities available for sale
  
$
367,980
  
$
359,872
  
$
359,872
  
Mortgage loans held in the securitization trusts
    
457,057
    
458,968
    
453,067
  
Commitments and contingencies:
                    
Interest rate swaps
    
220,000
    
(1,601
)
  
(1,601
)
Interest rate caps
  
$
783,334
  
$
977
  
$
977
  
 
 
  
December 31, 2006
  
 
  
Notional
Amount
  
Carrying
Amount
  
Estimated
Fair Value
  
Investment securities available for sale
  
$
491,293
  
$
488,962
  
$
488,962
  
Mortgage loans held in the securitization trusts
    
584,358
    
588,160
    
582,504
  
Commitments and contingencies:
              
Interest rate swaps
    
285,000
    
621
    
621
  
Interest rate caps
  
$
1,540,518
  
$
2,011
  
$
2,011
  
 
12. Income Taxes
 
All income tax benefits relate to HC and are included in the results of operations of the discontinued operation (see note 8). A reconciliation of the statutory income tax provision (benefit) to the effective income tax provision for the nine months ended September 30, 2007 and September 30, 2006, is as follows (dollar amounts in thousands).
 
 
   
  September 30. 
  
   
2007
  
  2006
  
Benefit at statutory rate
 
$
(7,434
)
  
(35.0
)%
$
(4.893
)
  
(35.0
)%
Non-taxable REIT income (loss)
    
1,813
    
8.5
%
  
(1,825
)
  
(13.1
)%
Transfer pricing of loans sold to nontaxable parent
    
-
    
-
    
11
    
0.1
%
State and local tax benefit
    
(1,480
)
  
(7.0
)%
  
(1,773
)
  
(12.7
)%
Valuation allowance
    
25,438
    
119.8
%
  
-
    
-
  
Miscellaneous
    
15
    
0.1
%
  
(14
)
  
(0.1
)%
Total provision (benefit)
  
$
18,352
    
86.4
%
$
(8,494
)
  
(60.8
)%
 
The income tax benefit for the nine month period ended September 30, 2006 is comprised of the following components (dollar amounts in thousands):  

 
  
Deferred
  
Federal
  
$
(6,721
)
State
    
(1,773
)
Total tax benefit
  
$
(8,494
)
 
23

NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)

The deferred tax asset at September 30, 2007 includes a deferred tax asset of $18.4 million (included in prepaid and other assets on our consolidated balance sheet) and a deferred tax liability of $0.1 million (included in accounts payable and accrued expenses on our consolidated balance sheet) which represents the tax effect of differences between tax basis and financial statement carrying amounts of assets and liabilities. The major sources of temporary differences and their deferred tax effect at September 30, 2007 were as follows (dollar amounts in thousands):
 
Deferred tax assets:
  
 
  
Net operating loss carryover
  
$
27,407
  
Restricted stock, performance shares and stock option expense
    
418
  
Marked to market adjustment
    
56
  
Sec. 267 disallowance
    
268
  
Charitable contribution carryforward
    
35
  
GAAP reserves
    
1,202
  
Rent expense
    
319
  
Loss on sublease
    
67
  
Gross deferred tax asset
    
29,772
  
Valuation allowance
    
(29,707
)
Net deferred tax asset
  
$
65
  
Deferred tax liabilities:
        
Depreciation
  
$
65
  
Total deferred tax liability
  
$
65
  
         
Net deferred tax asset
  
$
-
  
 
The deferred tax asset at December 31, 2006 includes a deferred tax asset of $18.4 million (included in prepaid and other assets on our consolidated balance sheet) and a deferred tax liability of $0.1million (included in accounts payable and accrued expenses on our consolidated balance sheet) which represents the tax effect of differences between tax basis and financial statement carrying amounts of assets and liabilities. The major sources of temporary differences and their deferred tax effect at December 31, 2006 were as follows (dollar amounts in thousands):

Deferred tax assets:
  
 
  
Net operating loss carryover
  
$
19,949
  
Restricted stock, performance shares and stock option expense
    
410
  
Marked to market adjustment
    
2
  
Sec. 267 disallowance
    
268
  
Charitable contribution carryforward
    
35
  
GAAP reserves
    
1,399
  
Rent expense
    
518
  
Loss on sublease
    
121
  
Gross deferred tax asset
    
22,702
  
Valuation allowance
    
(4,269
)
Net deferred tax asset
  
$
18,433
  
Deferred tax liabilities:
      
Management compensation
  
$
16
  
Depreciation
    
65
  
Total deferred tax liability
  
$
81
  
         
Net deferred tax asset
  
$
18,352
  
 
24
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
The net operating loss carry-forward expires at various intervals between 2012 and 2027. The charitable contribution carry-forward will expire in 2011.

On January 1, 2007, the Company adopted FIN 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Interest and penalties are accrued and reported as interest expenses and other expenses reported in the consolidated statement of income are booked when incurred. In addition, the 2003-2006 tax years remain open to examination by the major taxing jurisdictions. The adoption of FIN 48 has had no material impact on the Company's consolidated financial statements.
 
13. Segment Reporting
 
Until March 31, 2007, the Company operated two reportable segments, the mortgage portfolio management segment and the mortgage lending segment. Upon the sale of substantially all the mortgage lending operating assets on March 31, 2007, the Company exited the mortgage lending business and accordingly will no longer report segment information.
 
25
 
NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(unaudited)
 
14. Stock Incentive Plans
 
A summary of the status of the Company's options as of September 30, 2007 and changes during the nine months then ended is presented below:
 
               
  
Number of
Options
  
Weighted
Average
Exercise
Price
  
 
  
  
  
  
  
Outstanding at January 1, 2007
    
93,300
  
$
47.60
  
Granted
    
-
    
-
  
Cancelled
    
(93,300
)
  
47.60
  
Exercised
    
-
    
-
  
Outstanding at September 30, 2007
    
-
  
$
-
  
Options exercisable at September 30, 2007
    
-
  
$
-
  
 
A summary of the status of the Company's options as of December 31, 2006 and changes during the year then ended is presented below:

               
  
Number of
Options
  
Weighted
Average
Exercise
Price
  
 
  
  
  
  
  
Outstanding at January 1, 2006
    
108,300
  
$
47.80
  
Granted
    
-
    
-
  
Cancelled
    
(15,000
)
  
49.15
  
Exercised
    
-
    
-
  
Outstanding at December 31, 2006
    
93,300
  
$
47.60
  
Options exercisable at December 31, 2006
    
93,300
  
$
47.60
  
 
There were no stock options outstanding at September 30, 2007.
 
The following table summarizes information about stock options at December 31, 2006:
 
 
 
 
 
 
 
Options
Outstanding
Weighted
Average
Remaining
 
 
 
Options Exercisable
 
Fair Value
 
Range of Exercise Prices
 
Date of
Grants
 
Number
Outstanding
 
Contractual
Life (Years)
 
Exercise
Price
 
Number
Exercisable
 
Exercise
Price
 
of Options
Granted
 
$9.00
 
 
6/24/04
 
 
35,300
 
 
7.5
 
$
45.00
 
 
35,300
 
$
45.00
 
$