Steven Mumma - Chairman, Chief Executive Officer Kevin Donlon - President.

Eric Hagen - KBW Ben Zucker - JMP Securities David Walrod - Jones Trading.

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Fourth Quarter and Full Year 2016 Results conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

If you have a question, please press the star followed by the one on your touchtone phone. That will place you into the queue. If you would like to withdraw your question, you may press the pound key. If you are using speaker equipment, we do ask that you please lift the handset before making your selection.

This conference is being recorded on Wednesday, February 22, 2017. A press release with New York Mortgage Trust’s fourth quarter and full year 2016 results was released yesterday. The press release is available on the company’s website at www.nymtrust .com - that’s www.nymtrust.com.

Additionally, we are hosting a live webcast of today’s call which you can access in the Events and 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 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..

portfolio turnover increasing exposure to lower yielding but higher credit quality assets which utilize leverage as part of their return and accordingly have lower net interest margins, an increase in prepayment speeds in our agency securities portfolio, and increased short-term borrowing costs.

Overall average earning assets remain largely unchanged for the year at approximately $1.7 billion. Included in our press release is a detailed analysis by quarter by investment saddle for interest spread analysis for the previous five quarters. We had total interest income for the quarter of $14.8 million and $64.6 million for the year.

Total other income decreased by $4.6 million for the year ended December 31, 2016 as compared to the prior year. We had a decrease in realized gains on distressed residential loans of $16 million due to decreased sales activity in 2016 as compared to the prior year.

Fourth quarter interest rate volatility impacted our ability to complete a sale, which we now anticipate closing in the first quarter of 2017.

This decrease was partially offset from an increase in other income of $9.7 million in 2016 which was primarily due to the income related to increased ownership of Riverbanc and the related entities that we purchased.

Our total general, administrative and other expenses for the fourth quarter were approximately $7.2 million, down $1.5 million from the third quarter. Salaries, benefits and directors comp decreased by approximately $700,000, which was largely attributable to the year-end bonus compensation adjustment.

For the year ended December 31, 2016 as compared to the prior year, general, administrative and other expenses decreased by $4.3 million.

Salary, benefits and directors comp was driven higher during the period as compared to the prior year, primarily due to the increase in employee headcount resulting from the Riverbanc acquisition, which was offset by a $9.9 million decrease in base management and incentive fees during the year.

In addition, the decline in base management fee and incentive fees was due in part to the termination of Riverbanc’s management agreement as of May 17, 2016 and lower incentive fees earned in 2016 by our other external managers.

The management fees in our distressed residential loan strategy decreased due to a change in methodology for calculating base management fees from 1.5% of assets under management to 1.5% of invested capital, beginning in the third quarter of 2016.

In January 2017, the company issued $138 million of five-year convertible debt instrument that resulted in net proceeds to the company of approximately $127 million after underwriting fees. The debt, which is unsecured and was sold at a discount to principal, has a total cost to the company of approximately 8.14%.

This unsecured debt will be used to finance the origination of certain higher yielding investments such as preferred multi-family equity investments, the legal terms for which tend to limit our ability to use in secured financing leverage. We believe this convertible debt instrument will reduce our overall cost of capital during its outstanding term.

We enter 2017 optimistic but cautious as we await the impact of the new administration’s policies on the economy, interest rate environment, and the overall regulatory environment. We will continue to focus on both residential and multi-family credit opportunities going forward in 2017. Thank you for your continued support.

Our 10-K will be filed on our about Tuesday, February 28 with the SEC and will be available on our website thereafter. Operator, you can go ahead and open the questions for Kevin and myself. Thank you..

[Operator instructions] We’ll be taking our first question from the line of Eric Hagen from KBW. Your line is open..

Thanks. Good morning, Steve. .

Good morning, Eric..

Good morning.

How do you think about possibly hedging your exposure to the commercial market, given how tight spreads are there, and do you think we could see any noticeable weakening in the funding market for CMBS given, say, 100 basis point back-up in loan spreads?.

You know, it’s interesting - we came into the fourth quarter and saw a significant rise in rates. You saw people clearly jump into wider margin and the higher yielding securities, and so you saw some spread tightening in the fourth quarter. You’ve seen some significant spread tightening in the first part of the year.

You’ve seen more access to liquidity, so today, even with the back-up of 100 basis points, that would really put us back to where we were in the third quarter. If you think about a year ago in February, spreads on triple-B CMBS securities were almost 650 over, and today they’re trading at 350 over.

So I think the funding market, we’re less concerned about the day-to-day funding exposure. We have access to longer term funding, both in the repo market and in the secured market that limits some of that exposure, per se.

Clearly we’re sensitive to the mark-to-market, and from a hedging perspective we’re probably more focused on hedging our exposure relative to interest rates than credit spreads widening.

I mean, I think most of the credit investments we’re making, both in Freddie Mac CMBS agency securities and in our direct lending, would be tough to hedge with CMBS index as well.

We can make a bet on the overall market, but I’m not sure it has a great tracking record against our specific asset classes, and we would be more inclined to focus on interest rate exposure than just pure credit exposure..

Got it. There’s some basis exposure there that you don’t want to take on..

Yes. I think it’s too difficult to hedge efficiently..

Right, right. That makes perfect sense.

As the agency segment continues to wind down, how do you think about possibly consolidating your other external relationships there, and how much of the agency exposure do you actually need to maintain in order to keep that REIT qualification at this point?.

I mean, really we don’t need to keep any agency exposure, to be honest with you. Most of our whole pool of commitments can be met by our lending, either in direct lending in the multi-family or in our whole loan activity in distressed residential loan.

So I mean, we do have some amounts--we’ll probably keep some amount of agency from a liquidity standpoint, but less concerned with keeping any significant amounts to qualify for anything from a REIT or 40 Act perspective..

Got it, and how about consolidating some of your relationships there?.

Look - as we wind down the agency trade, at some point there will be a scenario where we’ll have very little activity probably with the Midway Group today as we go forward into ’17, and we could see that relationship probably getting to a point where we’ll exit that relationship at some point.

They’ve been a great partner for us in a difficult environment, and in the future if we think the opportunities change, we’re 100% happy with the activities that they’ve done for us in a difficult market and we would have no problem going back into that trade in the future. But that’s something we’d see to get out.

I mean, clearly we’re monitoring our distressed residential portfolio and want to make sure we get a better turnover velocity. We were disappointed in that again, not getting a trade-off in the fourth quarter.

The rate environment didn’t help, and we need to get that activity more responsive and more activity turnover in the portfolio for us to continue to invest in that strategy..

Right. Well, thanks for the comments, Steve..

Thanks Eric..

Thank you. Our next question comes from the line of Ben Zucker from JMP Securities. Your line is open..

Good morning and thanks for taking my question, guys. I was curious if you could tell us when you expect to re-securitize the multi-family CMBS and what kind of rate you thought you could get, based on current market pricing. I think what you just repaid had a rate of L+525, so just trying to get a sense of the cost savings we could expect there..

Yes, that’s right. Look - when we say multiple options, not only can we do a fixed rate transaction that we think will be 150--you know, if we did a three-year financing today, it’d probably 150 to 200 lower on a floating rate basis.

If we did a fixed rate, it’s probably 150 basis points lower, but we have other options to do longer term financing with banks that not only have very competitive rates but also eliminate probably 100 basis points in legal and underwriting placement fees from a securitization, and have similar types of mark-to-market risk that we would get in a securitization.

So when we talk about multiple options, we really mean probably two or three different kind of secured financing options placed with a private investor, as well as multiple counterparties willing to lend one and two-year money to us on those particular asset classes..

That’s great, and do you think we’ll see that come through sometime this year, early 2017?.

Yes, absolutely. I mean, I think we’re trying to figure out when we want to put the leverage on as we accumulate asset growth. Right now, we’re about $1.8 billion in assets, what we consider assets, not when you look at our balance sheet with the on-balance sheet consolidation, but when you look at our equity allocation table.

We think we can get the asset balance sheet up to about $2.4 million just with what we’ve done in terms of the note that we raised as well as our borrowing capacity of assets we have on the balance sheet today, and we think that’s about the right run rate from a total leverage standpoint for the company and that puts us in a pretty scenario.

So we would see scaling into that leverage as the asset acquisitions come on balance sheet. .

I got you, that makes sense. This is more high level. Could you help me understand what is going on in the agency IO silo? I understand the interest rate volatility in 2016, I’m just trying to really understand the yield pattern that we saw throughout 2016 while also understanding this is part of a larger trading strategy on the whole. .

The IO portfolio, which is run by Midway, is a total return strategy, so their method of running the portfolio, which has been consistent since they started the fund in 2000, is a combination of generating interest from the IOs and inverse IOs is one aspect, and then hedging that exposure with derivatives, including TBA, options on futures, et cetera, interest rate swaps.

So that combination is in some periods--if you go back to 2012, ’13 and ’14 when we owned it, a significant part of the return was coming from the net interest margin, and this past year, as you can see and you’ve identified, actually in the fourth quarter we had a negative interest margin but the portfolio was still positive for the quarter because we picked it up in hedging.

They are hyper-sensitive to interest rates in terms of prepayments. The prepayments have been--CPRs have been in the high teens. The portfolio from 10 to 12% delivers a very nice interest rate yield.

As it starts to get north of 15%, the interest rate yield becomes difficult, so it’s been elevated about 15% for the last six quarters and that’s put a lot of pressure on the net interest margin. So they’ve offset some of that with hedging.

The hedging is expensive and not always perfect, and so the more volatile the market, the more difficult it is to generate a return..

That’s very helpful, Steve. Lastly, and maybe this is for Kevin, could you provide some kind of commentary on the market in general and also the competitive landscape for mezzanine and preferred lending right now? Kind of talk about the pipeline and where you’re seeing the most competition.

I’m just trying to get a sense for how quickly this line item could ramp versus CMBS and other multi-family assets. That’s it for me, guys, so thanks..

Sure. So Kevin, go ahead and answer that..

It’s competitive. I think our biggest source of competition is common equity.

A lot of times, we’ll get into deals and we’ll look at doing a slice of mezzanine and preferred equity behind the senior and the transactions, and LPs - and it’s been this way for a year - LPs in the transaction or other forms of common equity will step up and take our position. I think that that’s going to pull back.

As rates move up, the senior financing proceeds will be reduced, and I also think as the stock market and other sectors of the economy do better, people want to diversify away from the real estate exposure, especially since a lot of people are competing with their smaller investors.

So I think it’s positive in the future, but I think it’s fairly competitive now..

Okay, that’s great. Thanks again, guys, for the comments..

Thank you..

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

Good morning. .

Morning David..

You mentioned that you had--there was a sale of distressed residential loans that you had planned for the fourth quarter and you expect that to take place in the first quarter.

Can you talk about the pipeline for other loan sales in the first quarter and maybe first half of the year?.

Yes. You know, our target we talked about al last year in 2016, the goal is to really have a significant sale every quarter. We did not achieve that goal in 2016.

We had a fairly large sale try to execute in the fourth quarter, and given the rate volatility that occurred in the second half of the fourth quarter, we just felt it was better to pull that, pull out of the marketplace and not try to get something closed and force a close into a volatile interest rate market, where people were taking advantage, in our opinion, of pricing.

We felt like we were going to get a much better execution as we got into 2017, but the anticipation would be to have a 33% to 40% turnover of the existing portfolio throughout the year, which puts about a 10%--you know, 8% to 10% of the portfolio being sold each quarter. .

Okay, great. Then I guess if you could just give us an update on the second lien mortgage, just what’s going on there. .

Yes, I mean, we’re about--I think we finished year-end about $20 million in invested assets funded, clearly not anywhere near where we thought we would be. The back-up in interest rates into the fourth quarter will be helpful. We’ve clearly gotten far more attention on the program going into 2017.

We have multiple originators that we’re in a process of bringing on-board. The fall-offs in refinancing in the marketplace, you’ve seen the refinancing index plummet, is only going to be helpful to us going forward.

We have a lot of competitors entering the space that are willing to lend at much higher LTVs than we are, so we will be diligent and just try to be very selective.

If we can’t get a critical mass--I mean, I think we’re at the point now over the next six months if we don’t get a critical mass of $50 million to $100 million by June, it’s something we’re probably going to look to step back from because we just can’t make it work. But we like the assets, we’re very happy with the assets that we’ve accumulated.

They’ve performed exactly as expected, it’s just a matter of accumulating them.

We do have a lot more attention focused on this particular asset class because for the first time in two years since we started the program, you have loan officers that can’t have the low-bearing fruit of a refinance laying up to them, so they have to work now for a living.

So now they’re going out looking at doing all kinds of other type of lending strategies, one of which will be a six-term second..

Okay, thank you very much..

Thanks, David..

Thank you. Ladies and gentlemen, as a brief reminder, you can queue up for a question with star then one on your keypad - that’s star then one. If your question has been answered or if you wish to remove yourself from the queue, you may press the pound key. We will hold for another moment for further questions. .

That’s okay, Operator. If there’s no more questions--.

No questions in the queue..

Okay, then why don’t we complete the call. Thank you everyone for being on the call. We look forward to talking about our first quarter. We appreciate your support..

Ladies and gentlemen, thank you again for your participation in today’s conference. This now concludes the program and you may now disconnect at this time. Everyone have a great day..