In 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, and refer to our wholly-owned taxable REIT subsidiaries as “TRSs” and our wholly-owned qualified REIT subsidiaries as “QRSs.” In addition, the following defines certain of the commonly used terms in this report: 

We are a real estate investment trust ("REIT"(“REIT”) for U.S. federal income tax purposes, in the business of acquiring, investing in, financing and managing mortgage-related and residential housing-related assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest margin and net realized capital gains from a diversified investment portfolio. Our investment portfolio includes credit sensitive assets, andincluding investments sourced from distressed markets that create the potential for capital gains, as well as more traditional types of mortgage-relatedfixed-income investments that generate interest income.provide coupon income and we believe provide downside protection.

    

Our investment portfolio includes (i) structured multi-family property investmentscredit assets, such as multi-family CMBS (excluding Agency CMBS) and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) distressed residentialsingle-family credit assets, such as residential mortgage loans, sourced fromincluding distressed marketsresidential mortgage loans, non-QM loans, second mortgages, residential bridge loans and other residential mortgage loans, and non-Agency RMBS, (iii) second mortgages, (iv)Agency securities such as Agency RMBS and (v)Agency CMBS and (iv) certain other mortgage-relatedmortgage-, residential housing- and residential housing-relatedcredit-related assets. Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we also may opportunistically acquire and manage various other types of mortgage-relatedmortgage-, residential housing- and residential housing-relatedother credit-related assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, collateralized mortgage obligations, mortgage servicing rights, excess mortgage servicing spreads and securities 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-term borrowings, such as repurchase agreements with terms typically of 3030-90 days, longer term repurchase agreement borrowing with terms between one year and 1824 months and longer term financings, such as securitizations and convertible notes, with terms longer than one year.

We have elected to be taxed as a REIT for U.S. federal income tax purposes and have complied, and intend to continue to comply, with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), with respect thereto. Accordingly, we do not expect to be subject to federal income tax on our REIT taxable income that we currently distribute to our stockholders if certain asset, income, distribution and ownership tests and record keeping requirements 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 generated in 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 this Annual Report on Form 10-K.

Our strategy is to construct a portfolio of mortgage-related and residential housing-related assets that include elements of credit risk and interest rate risk. We seekhave sought in recent years, and intend in the future to acquire and manage acontinue, to focus on expanding our portfolio of “credit residential”“single-family and multi-family credit” assets, which we believe benefit from improving credit metrics. We define credit assets as (i) structured multi-family property investments, (ii) residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, residential bridge loans and secondother residential mortgage loans, (iii) non-Agency RMBS and (iv) other mortgage-relatedmortgage-, residential housing- and residential housing-relatedcredit-related assets that contain credit risk. In pursuing credit residential assets, we target assets that we believe will provide an attractive total rate of return, as compared to assets that strictly provide strictly net interest margin. We also own and manage a highly-leveraged portfolio of Agency RMBS,securities primarily comprised of Agency fixed-rate RMBS and Agency ARMs, and Agency CMBS, and we may pursue opportunistic acquisitions of other types of assets that meet our investment criteria.

Prior to deploying capital to any of the assets we target or determining to dispose of any of our investments, our management team will consider, among other things, the availability of suitable investments, the amount and nature of anticipated cash flows from the asset, our ability to finance or borrow against the asset and the terms of such financing, the related capital requirements, the credit risk, prepayment risk, hedging risk, interest rate risk, fair value risk and/or liquidity risk related to the asset or the underlying collateral, the composition of our investment portfolio, REIT qualification, the maintenance of our exclusion from registration as an investment company under the Investment Company Act and other regulatory requirements and future general market conditions. In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets until such time as we are able to re-invest that capital in assets that meet our underwriting and return requirements. Consistent with our strategy 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 within our 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 from registration as an investment company under the Investment Company Act, limit the amount of our capital that may be invested in any of these investments 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 in this Annual Report on Form 10-K. Our investment and capital allocation decisions depend on prevailing market conditions, among other factors, and may change over time in response to opportunities available in different economic and capital market environments. As a result, we cannot predict 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, 2017,2019, see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

Our portfolio of credit residential assets is currentlysubstantially comprised of investments in two asset categories: structured multi-family propertycredit investments and residential assets.single-family credit investments.

We seek to position our structured multi-family credit investment platform in the marketplace as a real estate investor focused on debt and equity transactions. We do not seek to be the sole owner or day-to-day manager of properties. Rather, we intend to participate at various levels within the capital structure of the properties, typically (i) as a “capital partner” by lending to or co-investing alongside a project-level sponsor that has already identified an attractive investment opportunity, or (ii) through a subordinated security of a multi-family loan securitization. Our multi-family property investments are not limited to any particular geographic area in the United States. In general terms, we expect that our multi-family credit investments will principally be in the form of multi-family CMBS (excluding Agency CMBS) as well as preferred equity investments in, and mezzanine loans to, owners of multi-family apartment properties.

As a capital partner, we generally seek experienced property-level operators or real estate entrepreneurs who have the ability to identify and manage strong investment opportunities. We intend to require our operating partners to maintain a material investment in every multi-family property in which we make a preferred equity investment or provide mezzanine financing.

We may structure our mezzanine loans so that we receive a fixed or variable interest rate on the loan. Our mezzanine loans may also have prepayment lockouts, prepayment penalties, minimum profit hurdles or other mechanisms to protect and enhance returns in the event of premature repayment. We expect these investments will typically have terms from three to ten years and typically bear interest at a rate of 11% to 14% in the current market.years. Mezzanine loans typically have loan-to-value ratios between 50%70% and 90%. Similar to our preferred equity investments, we generally expect to underwrite our mezzanine loans such that a when combined with the first-mortgage loan will produce not less than an approximately 11% current return on investment, plus fees.amount.

 

Our leveraged Agency fixed-rate RMBS portfolio consists of pass-through certificates,Agency fixed-rate RMBS and Agency ARMs, the principal and interest of which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, whichMae. Our current portfolio of Agency fixed-rate RMBS are primarily backed by 15-year and 30-year residential fixed rate mortgage loans. The securities have coupons ranging from 2.5% to 3.5%.

We mayalso invest in Agency IOs.CMBS. Our current portfolio of Agency IOs areCMBS is primarily comprised of senior securities that represent the right to receive the interest portion of the cash flow from a pool of mortgage loans issued orby certain multi-family loan K-series securitizations sponsored and guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. PriorMac.

The Company’s relative allocation to January 1, 2018, our investments in Agency IOs were managed by The Midway Group, L.P. We sometimes referSecurities declined over the years as the opportunity became less compelling relative to these investments and related hedging and borrowing activitiesother strategies of focus. Today, the Company primarily uses Agency Securities as our Agency IO strategy or our Agency IO portfolio.

We strive to maintain and achieve a balanced and diverse funding mix to finance our assets and operations. To achieve this, we rely primarily on a combination of short-term and longer-term repurchase agreement borrowings and structured financings, including securitized debt, CDOs, long-term subordinated debt, and convertible notes. The Company's policy for leverage is based on the type of asset, underlying collateral and overall market conditions, with the intent of obtaining more permanent, longer-term financing for our more illiquid assets. Currently, we target maximum leverage ratios for each eligible investment, callable or short-term financings of 8 to 1, in the case of our liquid assets such as our Agency RMBS, and 2 to 1 forin the case of our more illiquid assets, such as our first loss CMBSPO securities. The Company’sBased on our current overallportfolio composition, our target total debt leverage ratio is approximately 2.4between 2 to 1.2.5 times. This target can movemay be adjusted depending on the composition of our overall portfolio.

As of December 31, 2017,2019, our overalltotal debt leverage ratio, which represents our total debt divided by our total stockholders' equity, was approximately 1.71.5 to 1. Our overalltotal debt leverage ratio does not include the mortgage debt of Riverchase Landing and The Clusters or debt associated with the Multi-family CDOs, or theSLST CDOs, Residential CDOs or other non-recourse debt, for which we have no obligation. Our portfolio leverage ratio, on our short-term financings or callable debt, which represents our repurchase agreement borrowings divided by our total stockholders' equity, was approximately 1.51.4 to 1.1 as of December 31, 2019. We monitor all at risk or short-term borrowings to ensure that we have adequate liquidity to satisfy margin calls and liquidity covenant requirements.

We primarily rely on repurchase agreements to fund ourthe securities portfolio.we own. We also have repurchase agreements with third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages. These repurchase agreements provide us with borrowings, which have terms ranging from 30 days to 1812 months, that bear interest rates that are linked to the London Interbank Offered Rate (“LIBOR”), a short-term market interest rate used to determine short term loan rates. Pursuant to these repurchase agreements, the financial institution that serves as a counterparty will generally agree to provide us with 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 of such collateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income. Our repurchase agreements may 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 due to 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 credit residential assets that are not financed by short-term repurchase agreements, we finance our investment in these assets through longer-term borrowings and working capital and, subject to market conditions, both short-term and long-term borrowings.capital. Our financings may include repurchase agreement borrowings with terms of 18 months or less, or longer termlonger-term structured debt financing, such as longer-term repurchase agreement financing with terms of up to 24 months and securitized 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 financingsissue securitized debt for the primary purpose of obtaining longer-term non-recourse financing on these assets.

 

Pursuant to the terms of our long-termany longer-term debt financings we utilize, our ability to access the cash flows generated by the assets serving as collateral for these borrowings 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. As part of each of our securitized debt financings and longer-term master repurchase agreements we are currently party to,that finance certain of our credit assets, we have provided a guarantee with respect to certain terms of some of these longer-term borrowings incurred by certain of our subsidiaries and we may provide similar guarantees in connection with future financings. The Company had no securitized debt outstanding as of December 31, 2019.

For more information regarding our outstanding borrowings and debt instruments at December 31, 2017,2019, see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, interest rate caps, futures, options on futures and mortgage derivatives such as forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs.

We have usedmay use TBAs, swaptions, futures and options on futures to hedge market value risk for certain of our strategies. We have utilized TBAs as part of our Agency investment strategy to enhance the overall yield of the portfolio. In a TBA transaction, we would agree to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. The Company typically does not take delivery of TBAs, but rather settles with its trading counterparties on a net basis prior to the forward settlement date. Although TBAs are liquid and have quoted market prices and represent the most actively traded class of RMBS, the use of TBAs exposes us to increased market value risk.

In connection with our hedging strategy, we utilize a model based risk analysis system to assist in projecting portfolio performances over a variety of different interest rates and market scenarios, such as shifts in interest rates, changes in prepayments and other factors impacting the valuations of our assets and liabilities. However, given the uncertainties related to prepayment rates, it is not possible to perfectly lock-in a spread between the earnings asset yield and the related cost of borrowings. Moreover, the cash flows and market values of certain types of structured Agency RMBS, such as the IOs we invest in, are more sensitive to prepayment risks than other Agency RMBS. Nonetheless, through active management and the use of evaluative stress scenarios, we believe that we can mitigate a significant amount of both value and earnings volatility.

Our success depends, in large part, on our ability to acquire assets at favorable spreads over our borrowing costs. When we invest in mortgage-backed securities, mortgage loans and other investment assets, we compete with other REITs, investment banking firms, savings and loan associations, insurance companies, mutual funds, hedge funds, pension funds, banks and other financial institutions and other entities that invest in the same types of assets.

We were formed as a Maryland corporation in 2003. Our corporate headquarters are located at 275 Madison90 Park Avenue, Suite 3200,Floor 23, New York, New York, 10016 and our telephone number is (212) 792-0107. We also maintain an officeoffices in Charlotte, North Carolina.Carolina and Woodland Hills, California. As of December 31, 2017,2019, we employed 1955 full-time employees.

Our internet website address is www.nymtrust.com. We make available free of charge, through our internet website, our Annual Report on Form 10-K, our Quarterly 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 the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We have adopted a Code of Business Conduct and Ethics that applies to our executive officers, including our principal executive officer, principal financial officer, principal accounting officer and to our other employees. We have also adopted a Code of Ethics for senior financial officers, including the principal financial officer. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of either of these Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer and other persons performing similar functions by posting such information on our website at www.nymtrust.com, “Corporate Governance”. Our Corporate Governance Guidelines and Code of Business Conduct and Ethics and the charters of our Audit, Compensation and Nominating and Corporate Governance Committees are also available on our website and are available in print to any stockholder upon request in writing to New York Mortgage Trust, Inc., c/o Secretary, 275 Madison90 Park Avenue, Suite 3200,Floor 23, New York, New York, 10016. Information on our website is neither part of, nor incorporated into, this Annual Report on Form 10-K.

When 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 issued or made by us, statements which 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 Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, and, as amended, or 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 information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, 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 those expressed in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our securities;assets, changes in credit spreads; the impact of a downgrade ofspreads, changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, or Ginnie Mae; market volatility; changes in the prepayment rates on the mortgage loans underlyingwe own or that underlie our investment securities; increased rates of default and/or decreased recovery rates on our assets; delays in identifyingour ability to identify and acquiringacquire our targeted assets; our ability to borrow to finance our assets and the terms thereof; changes in governmental laws, regulations, or policies affecting our business; changes to our relationship with Headlands; our ability to maintain our qualification as a REIT for federal tax purposes; our ability to maintain our exemption from registration under the Investment Company Act; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. These and other risks, uncertainties and factors, including the risk factors described in Part I, Item 1A – “Risk Factors” elsewhere in this Annual Report on Form 10-K, as updated by 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 is not 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 any forward-looking statements, whether as a result of new information, future events or otherwise.

We are not required to pay distributions to our stockholders.

Interest rate mismatches between the interest-earning assets held inAs of December 31, 2019, approximately 23.8% of our investment portfolio are comprised of first loss POs issued by certain multi-family loan K-series securitizations sponsored by Freddie Mac and the borrowings used to fund the purchases of those assets may reduce our net income or resultcertain IOs and mezzanine securities issued by these securitizations. Our investments in athese privately placed first loss during periods of changing interest rates.

Our directSimilarly, as of December 31, 2019, approximately 47.8% of our total investment portfolio is comprised of residential mortgage loans and indirect investments in multi-family or other commercial property are subject to risksnon-Agency RMBS. Moreover, as of delinquency and foreclosure onDecember 31, 2019, significant portions of the properties that underlie or back these investments,secure our multi-family loans held in securitization trusts are concentrated in California and risk of loss that 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 loan or obligation secured by, or an equity interest in an entity that owns, an income-producing property typically is dependent primarily upon the successful operation of such property. If the net operating incomeTexas, among other states, while significant portions of the subject property is reduced, the borrower's ability to repay the loan, orproperties that secure our ability to receive adequate returns on our investment, may be impaired. Net operating income of an income-producing property can be adversely affected by,residential mortgage loans, including loans that secure Consolidated SLST, are concentrated in California, Florida, Texas and New York, among other things:

Actions by one of our operating partners or one of the property managers of the multi-family properties in which we invest, which are generally out of our control, might subject us to liabilities in excess of those contemplated and thus reduce our investment returns. If we have a right of first refusal or buy/sell right to buy out an operating partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase the interest of our operating partner that is subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. Finally, we may not be able to sell our interest in a joint venture if we desire to exit the venture.

Over the past several years the proportion of our overall investment portfolio that is accounted for under GAAP using the fair value option has grown. We have elected the fair value option for a number of our consolidated assets, including, the investment securities available for sale beginning in the fourth quarter of 2019, Consolidated K-Series, Consolidated SLST and a large portion of our distressed and other residential mortgage loans, among others, which could adversely impactrequires that changes in valuations of these assets and associated liabilities be reflected through our earnings.

The 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, 2017,2019, our principal executive and administrative offices are located in leased space at 275 Madison90 Park Avenue, Suite 3200,Floor 23, New York, New York 10016. We also maintain an officeoffices in Charlotte, North Carolina.Carolina and Woodland Hills, California.

We are at times subject to various legal proceedings arising in the ordinary course of our business. As of the date of this Annual Report on Form 10-K, we do not believe that any of our current legal proceedings, individually or in the aggregate, will have a material adverse effect on our operations, financial condition or cash flows.

Our common stock is traded on the NASDAQ Global Select Market under the trading symbol “NYMT”. As of December 31, 2017,2019, we had 111,909,909291,371,039 shares of common stock outstanding and there were approximately 4160 holders of record of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name.

We intend to continue to pay quarterly dividends to holders of shares of our common stock. Future distributions will be at the discretion of theour Board of Directors and will depend on our earnings and financial condition, maintenance of our REIT qualification, restrictions on making distributions under Maryland law and such other factors as our Board of Directors deems relevant.

The following table sets forth information as of December 31, 20172019 with respect to compensation plans under which equity securities of the Company are authorized for issuance. The Company has no such plans that were not approved by security holders.

The following line graph sets forth, for the period from December 31, 20122014 through December 31, 2017,2019, a comparison of the percentage change in the cumulative total stockholder return on the Company’s common stock compared to the cumulative total return of the Russell 2000 Index and the FTSE National Association of Real Estate Investment Trusts Mortgage REIT (“FTSE NAREIT Mortgage REITs”) Index. The graph assumes (i) that the value of the investment in the Company’s common stock and each of the indices were $100 as of December 31, 2012.2014 and (ii) the reinvestment of all dividends.

The following table sets forth our selected historical operating and financial data. The selected historical operating and financialbalance sheet data for the years ended and as of December 31, 2019, 2018, 2017, 2016 2015, 2014 and 20132015 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 consolidated financial statements, including the related notes. You should read the information below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements, including the related notes (amounts in thousands, except per share data):

We are a real estate investment trust or REIT,(“REIT”) for U.S. federal income tax purposes, in the business of acquiring, investing in, financing and managing primarily mortgage-related and residential-housing relatedresidential housing-related assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest margin and net realized capital gains from a diversified investment portfolio. Our investment portfolio includes certain credit sensitive assets, andincluding investments sourced from distressed markets that create the potential for capital gains, as well as more traditional types of mortgage-relatedfixed-income investments that generate interest income.provide coupon income and we believe provide downside protection.

Our investment portfolio includes (i) structured multi-family property investmentscredit assets, such as multi-family CMBS (excluding Agency CMBS) and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) distressed residentialsingle-family credit assets, such as residential mortgage loans, sourced fromincluding distressed marketsresidential mortgage loans, non-QM loans, second mortgages, residential bridge loans and other residential mortgage loans, and non-Agency RMBS, (iii) second mortgages, (iv)Agency securities such as Agency RMBS and (v)Agency CMBS and (iv) certain other mortgage-relatedmortgage-, residential housing- and residential housing-relatedcredit-related assets. Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we also may opportunistically acquire and manage various other types of mortgage-relatedmortgage-, residential housing- and residential housing-relatedother credit-related assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, collateralized mortgage obligations, mortgage servicing rights, excess mortgage servicing spreads and securities issued by newly originated residential securitizations, including credit sensitive securities from these securitizations.

We intend to maintain our focus on residentialexpanding our portfolio of single-family and multi-family credit assets, which we believe will benefit from improving credit metrics. Consistent with this approach to capital allocation, we acquired an additional $415.6 million of residential and multi-family credit assets during the year ended December 31, 2017. In periods where we have working capital in excess of our short-term liquidity needs, we expect tomay invest the excess in more liquid assets such as Agency CMBS and Agency RMBS, until such time as we are able to re-invest that capital in credit assets that meet our underwriting requirements. Our investment and capital allocation decisions depend on prevailing market conditions, among other factors, and may change over time in response to opportunities available in different economic and capital market environments.

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-term borrowings, such as repurchase agreements with terms typically of 3030-90 days, longer term repurchase agreement borrowingborrowings with terms between one year and 1824 months and longer term structured financings, such as securitizations and convertible notes, with terms longer than one year.

Our single-family credit investment strategy is presently focused on mortgage credit and also consists of two primary investment strategies. We declaredinvest in distressed, performing, and other residential mortgage loans and residential bridge loans either in loan form or securities backed by these loans. Consistent with this strategy, we acquired an aggregate 2017 dividends of $0.80 per common share.

The Company’s relative allocation to Agency Securities declined over the years as the opportunity became less compelling relative to other strategies of focus. Today, the Company primarily uses Agency Securities as an aggregate gross purchase price of approximately $171.2 million.incubator to redeploy capital into credit assets. New investment allocation is currently focused on Agency CMBS, as the Company is protected against negative convexity risk.

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets, which is driven by numerous factors including the supply and demand for mortgage, housing market,and credit assets in the marketplace, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions on the real estate and mortgage industries, and the interest rate environment each have a significant impact on our business. The 2017 fiscal year was marked by a synchronized acceleration of global growth, low inflation, continued labor market expansion, reduced volatility and accommodative monetary policy on a relative basis, which in turn helped to fuel a broad-based rally in asset prices. U.S. equity markets benefited from strong corporate earnings, solid economic growth, low volatility and U.S. tax reform legislation, rising 17.9% during the fiscal year, while credit markets also enjoyed a solid year. Although the yield on the 10-year U.S. Treasury Note ranged from a low of 2.05% to a high of 2.62% during 2017, the interest rate environment exhibited greater stability and less volatility in 2017 relative to 2016. More recently though, inflation fears driven largely by recent labor market data have resulted in a spike in market volatility, with the yield on the 10-year U.S. Treasury Note advancing from 2.44% on January 3, 2018 to 2.84% on February 2, 2018.

The U.S. labor market continued its expansion in 2017.2019. According to the U.S. Department of Labor, the U.S. unemployment rate fell from 4.7%3.9% as of the end of December 20162018 to 4.1%3.5% as of the end of December 2017,2019, while total nonfarm payroll employment posted an average monthly increase of 147,000173,000 jobs in 2017,2019, down from an average monthly increase of 187,000223,000 jobs in 2016. Data from2018. Although the U.S. Departmentpace of Laborthe labor market expansion slowed some in January 2018 indicated that the U.S. unemployment rate remained at 4.1%, while total2019, average hourly earnings for all employees of private nonfarm payroll employment added 200,000 jobs in January 2018.payrolls increased by 2.9% during 2019.

We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates, judgments and assumptions that affect reported amounts.amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. The resultsWe believe that the estimates, judgments and assumptions utilized in the preparation of theseour consolidated financial statements are prudent and reasonable. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive 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 specific components of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. In accordance with SEC guidance, those material accounting policies and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and which require complex management judgment are discussed below.

Interest income on certain of our credit sensitive securities such as our CMBS that were purchased at a premium or discount to par value, such as certain of our non-Agency RMBS, CMBS and ABS of less than high credit quality, is recognized based on the security’s effective interest yield. The effective interest yield on these securities is based on management’s estimate of the projected cash flows from each security, which are estimated based onincorporates 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 judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield (or interest income) recognized on these securities.

A portion of the purchase discount on the Company’s first loss PO multi-family CMBS is designated as non-accretable purchase discount or credit reserve, which is intended to partially mitigateestimates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accreted into interest income. The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit reserve is more favorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time. Conversely, if the performance of a security with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and write-downs of such 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 will be recognized in current earnings.

The Company’s valuation methodologies are described in “Note 1815 – Fair Value of Financial Instruments” included in Item 8 of this Annual Report on Form 10-K.

Management monitors actual cash collections against its expectations, and revised cash flow expectations are prepared as necessary. A decrease in expected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods initially reduces any previously established 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 of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion 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 in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.

A discussion of recent accounting pronouncements and the possible effects on our financial statements is included in “Note 2 — Summary of Significant Accounting Policies” included in Item 8 of this Annual Report on Form 10-K.

The following tables set forth our allocated capital by investment typecategory at December 31, 20172019 and December 31, 2016,2018, respectively (dollar amounts in thousands):