Steve Mumma - Chairman and CEO Kevin Donlon - President and Senior Executive.

Doug Harter - Credit Suisse Eric Hagen - KBW Jessica Levi-Ribner - FBR Christopher Nolan - Ladenburg Thalmann David Walrod - Jones Trading.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Second Quarter 2017 Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions.

[Operator Instructions] This conference is being recorded today on Friday, August 4, 2017. A press release with New York Mortgage Trust Second Quarter 2017 Results was released yesterday. The press release is available on the Company’s website at www.nymtrust.com.

Additionally, we are hosting a live webcast of today’s call, which you can access in the Events & Presentations section of the Company’s website.

At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although New York Mortgage Trust believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.

Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday’s press release and from time-to-time in the Company’s filings with the Securities and Exchange Commission. Now, at this time, I would like to introduce Steve Mumma, Chairman and CEO. Steve, please go ahead..

Thank you, Operator. Good morning, everyone, and thank you for being on the call. Kevin Donlon, our President and Senior Executive, heading up the multi-family business, will also be on the call and will be available to answer questions at the end of the presentation.

Included in our 8-K filing yesterday was our earnings press release for the 2017 second quarter results. The Company delivered a 2.3% economic return for the second quarter and a 9.5% annualized economic return for the first six months of the year.

Company had GAAP earnings of $0.10 per share and comprehensive earnings of $0.13 per share for the second quarter.

Company’s net interest margin improved to 312 basis points from 270 basis points in the first quarter, largely due to improved net margin in our distressed residential loan portfolio and increased average earning assets in our CMBS multi-family portfolio.

Credit markets continued to improve in the second quarter with spreads in several markets tightening to levels not seen in many years. This has benefited our current residential and multi-family portfolios, both in our security investments as well as our direct lending.

We expect to profitably exit several multi-family JV equity investments that were made over the last two years in the third quarter of this year. We will continue to participate in the Freddie Mac K Series multi-family program and expect an additional opportunity to invest in first loss securities in 2017.

Our portfolio margin will benefit in the third quarter from the $26.3 million preferred equity investment we closed in July. This investment has an expected return of over 12%.

While the consummation of these types of credit investments continue to involve significant lead times, they remain an attractive use of capital that we will continue to focus on.

For the quarter ending June 30th, we had net income attributable to common stockholders of $11.1 million or $0.10 per common share, and comprehensive income to stockholders of $14.9 million or $0.13 per common share.

We had net interest income of $15.7 million and the portfolio net interest margin of 312 basis points, as compared to $13.9 million in net interest margin and 270 basis points for the first quarter of 2017.

The book value per common share was $6.02 at June 30, 2017, down 1% from the previous quarter while still delivering an economic return of 2.3% for the quarter. We declared second quarter dividend of $0.20 per common share that was paid July 25, 2017.

For the quarter ended June 30, 2017, we reported net income attributable to common stockholders of $11.1 million, as compared to $16 million in the first quarter ended March 31, 2017.

The $4.9 million decrease is primarily due to lower gains from our decreased sales activity in our distressed residential loans portfolio, partially offset by an increase in net interest margin and the recovery in the incentive fees related to the strategy.

We generated net interest income of $15.7 million in the second quarter as compared to net interest margin of $13.9 million in the first quarter.

This increase in net interest income of $1.8 million was primarily driven by an increase in net interest income of $1.3 million from our multi-family portfolio due to an increase in average earnings assets in multi-family CMBS securities, resulting from the purchases that were funded at the end of the first quarter, thereby having the full impact of this investment during the entirety of the second quarter; an increase in net income of approximately $1.4 million from our distressed residential portfolio due to an increase in asset yields for these assets during the quarter.

This was offset by a decrease in net interest income of approximately $400,000 from our Agency IO portfolio related to lower asset yields resulting from increased prepayments fees and the increase in liability [ph] rates during the period.

For the quarter ended June 30, 2017, we recognized other income of $8.2 million as compared to other income of $16.7 million for the quarter ending March 31, 2017. Decrease in other income of $8.5 million is primarily due to decrease in realized gains on distressed residential loans of $9.6 million, resulting from decreased sales activity.

The decrease in net income contribution from our distressed portfolio was approximately $4.5 million, after giving effect for both the increase in net interest margin and the reversal of the incentive fees expense for the quarter. We expect improved contributions from the distressed portfolio throughout the remainder of the year.

The other income section also includes $2.3 million related to our two preferred equity investments which we were deemed to have control rights as of March 31, 2017, and in accordance with GAAP are required to consolidate the multi-family properties for financial statement presentation purposes.

In addition, our financial statements also include $4.4 million in another expenses, as well as a reversal of $2.5 million related to non-controlling interests, both related to these properties.

The net effect of all this is approximately $400,000 in income, which is the actual interest we earned during the period on our preferred equity investments on these properties. Our total G&A expenses for the second quarter were approximately $5 million, down $3 million from the first quarter.

The reduction is primarily due to the incentive fee reversal from the first quarter related to distressed residential loans. While competition for certain credit assets continues to be crowded, our diverse portfolio investment strategy allows us to seek other attractive opportunities and monetize previous investment decisions.

Given the prevailing market conditions for the sourcing of new investments in credit assets, we are also considering new investments in non-credit assets that we believe will compensate us appropriately for the risk associated with them.

We continue to believe that our portfolio is well-positioned to adapt to the changing market and economic conditions as we go forward into this year and to next. We continue to thank you for your support and look forward to answering your questions.

Our 10-Q will be filed on or about Wednesday, August 9th with the SEC and will be available on our website thereafter. Operator, if you want to go ahead and open up for questions for Kevin and I. Thank you..

Thank you. [Operator Instructions] Our first question is from Doug Harter of Credit Suisse. Your line is open..

Thanks.

Can you just expand a little bit about what some of the non-credit assets that you might be exploring?.

Sure, Doug. Yes. Look, we have said over the last several quarters that we’re going to be reducing our exposure in agency like [ph] securities, agency MBS.

With the credit spreads tightening, a lot of the investment security -- CUSIP securities, specifically in some of the BBB and NPL/RPL securities that we were very active in, in the end of 2016 and beginning of this year. Some of the opportunities in the 30-year agency MBS present one of the better earning asset capabilities as we sit here today.

And so, we’re looking at possibly increasing some of that exposure in the third quarter, while we continue to roll out investing in some of the other credit assets. Longer term, we would preferably like to have more credit assets on our balance sheet. It’s just been a more lengthy time period in sourcing some of those assets..

And then on -- while you have been delivering a positive economic return, can you talk about how you’re thinking about or the Board is thinking about the dividend policy, since GAAP earnings hasn’t covered the dividend for quite some time?.

Sure. One of the things that we’ve always said is that, it’s important to us, to maintain positive economic return. While we understand, part of that return is coming from the dividend payout, we’re also aware of the impact it has on our book value.

When we set the dividend policy, we’re looking at what we think the portfolio can contribute over a longer period of time, not quarter-to-quarter. And while we have under-earned our dividend over the last several quarters, we do continue to have a portfolio that we think we have substantial gains.

And as we start to harvest those gains, we’ll start to see a pick-up in earnings.

To the extent that we will continue review our ability to invest and keep investing our portfolio to drive earnings upward, is one of the reasons why we’re looking at some other investment opportunities because of the delay in getting some of these credit assets on our books..

Thank you. Our next question is from Eric Hagen of KBW. Your line is open..

I guess it was a couple of quarters ago that you guided us to using higher leverage in the portfolio and outside of using potentially higher leverage with agency MBS investments or something similar.

On the credit side, is raising leverage something that you’ve considered, can you kind of update us on your thoughts on that generally?.

Sure. Look, we’ve said many times, we are under-levered. Look, we are running at $1.9 billion in assets. And to the extent that we were going to be increasing the portfolio of credit assets, we have room to go up to $2.2 billion to $2.3 billion of that additional capital need. That would be adding about a half return to leverage the portfolio.

To the extent that we would go into some type of non-agency risk such as a MBS security, obviously those would have higher amounts of leverage on them. But what we were speaking historically over the last couple of quarters, it’s really about our credit assets.

And we have been involved in several large transactions that we are looking at and continue to look at, and they just take time to get invested on. But as they come to fruition, they’ll be nice additions to our portfolio that you’ll see the credit leverage going up in the future..

Tight credit spreads is clearly among the themes again this quarter. I think you used the word crowded in your opening remarks to describe the environment.

So, I’m curious, are you seeing any pick-up in competition for your core assets, like multi-family and distressed loans, from new participants that haven’t traditionally been investors in those asset classes?.

No, I think without question, when you look at the security -- CUSIP market specifically the NPL/RPL, both non-rated and rated and the CMBS, both private and agency, we clearly have an increase of participation from non-core mortgage people that are looking for yields that they can’t drive in other parts of the market.

And that is you are seeing spreads come in several hundred basis points over a six months period or over nine months periods, which is just typically you don’t -- you have not seen historically without the appropriate credit improvement. It’s 100% driven by technical factors, not fundamental factors..

How do you respond to that, there being new investors in the asset class that might not have the sophistication of someone who has been investing in it historically?.

No, I think you have to look at where you -- you have to look at where you think there is value in those assets and that’s where you enter the market and purchase those assets.

And I think when you think the value left those assets, you probably look to reduce that exposure, move on to some other asset class where you feel like you have better control of the direction that can go in..

Thank you. [Operator Instructions] Our next question is from Jessica Levi-Ribner of FBR. Your line is open..

Most of my questions have been asked and answered.

But, can you talk a little bit about the opportunities that you are seeing in the multi-family space?.

Sure. Look, we continue to be a direct lender in mezzanine debt and preferred equity investments. That business, we had budgeted to add approximately $100 million in assets this year. We had a slow start in the first six months, but it started to pick up.

We funded the $26 million in July; it looks like our pipeline is starting to pick up, as we go into the third quarter. We’re looking -- we’re working on the coupe of larger transactions that we knew going into them would take time to work out, and it’s not a 100% certainty that they are going to close.

But, we are continuing to work on several projects. That’s something that we like a lot and continue to like. There’s specific property risk, which we’re comfortable taking.

One of the reasons why we have this consolidation on the financial statements of two properties is that in the event that a property starts to go outside of our guidelines, we can step in and alleviate those issues, or try to alleviate those issues and get our money back and move on from the property, which we are doing.

And that’s something that we focus on; we continue to be active in the Freddie Mac program in a first loss security. So that’s really the focus in multi-family, that’s where we see the opportunities..

And what kind of competition are you seeing these days..

You always have competition, there is a lot of people lending into the space. We’d like to think that we have an expertise in very particular type of asset that gives us some competitive advantages. Our typical size is generally less than $20 million; this last one we funded was 26 which was our largest. But that’s where we think our expertise lies.

We spend a lot of time in underwriting in due-diligence, and we feel confident with that that we can come to the market with smart people and close transactions that some people otherwise wouldn’t consider..

Okay. .

Jessica, hold a one second.

Kevin, would you like to answer some more on that?.

No. Well said..

Okay..

Our next question is from Christopher Nolan of Ladenburg Thalmann. Your line is open. .

Should we expect an increased exposure to multi-family investments, given your comments about you’re looking at some larger transactions?.

Yes, I think absolutely. I mean, I think today, as you sit, we have -- I think the opportunities there are very good for the Company; they’re nice, stable. We feel like they’re longer term duration assets that allow us to build a stable portfolio. So, we absolutely will continue to invest assets in that category.

Again, when we’re a direct lender, the advantage of being a direct lender as opposed to buying a CUSIP security, you’ve done some significant underwriting on the individual property.

So, while you’ll see reports around the country that there is overheating in some of the multi-family, I’d like to think that the markets that we participate in on a specific property we feel that we have, the positive advantages of property outweigh the negative..

And for the exit from multi-family joint ventures that you mentioned earlier in your comments, can you give a little detail on that? Is this question of valuations in the market, just level of mix?.

Yes.

Kevin, do you want to answer that?.

Sure. Some of these joint ventures we entered into two to three years ago, we’ve seen a lot of run-up in multi-family values over the last three years. I think it’s been a real positive for the vast majority of our portfolio, because we’re mostly credit and fixed income. So, the quality of our collaterals improved.

For some of the assets, we’re looking to exit, it’s gone from decisions with our partners to exit now to cases where we’ve had reverse enquiry of prices that we didn’t underwrite or think we’d achieve when we made the investment And it just feels like a good time to exit some of those investments and put the money back into new joint ventures or new preferred equity or our new Freddie Mac K Series..

Thank you. Our next question is from David Walrod of Jones Trading. Your line is open..

You mentioned the sale of the multi-family JVs.

Is there any other asset sales we should be thinking about in the latter part of this year, as far as distressed residential or anything like that?.

Yes, look, it relates to -- again, we continue to expect the distressed residential portfolio to contribute increased contribution in the second half of the year.

And we have a sale that’s scheduled to close in next month or this month actually, it’s in August, and we’re teeing up another sale that’s looking to close sometime in October or early November. So, we anticipate selling that portfolio.

And I think we’ve said multiple times, the thought would be that we would be liquidating about 30% to 35% of the portfolio on an annual basis and trying to add 20% to 30% of the portfolio an annual basis. So, we would expect sales there. The JV sales are more opportunistic. As Kevin said, one was a reverse; one was the planned sale by the partners.

But, we do have other JV investments that clearly we are looking at and the partners are looking at on what’s the right time to exit those strategies..

Thank you and that concludes our Q&A session for today. I’d like to turn the call back over to Steve Mumma for any further remarks..

Thank you everyone for being on the call. We look forward to talking about our third quarter results in November. Have a good rest of the summer. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone, have a good day..