Steve Mumma - Chairman, CEO and President.

Eric Hagen - KBW Sam Cho - Credit Suisse David Walrod - Ladenburg Jeff Marino - Colorado Wealth Management Stephen Laws - Deutsche Bank Steve Delaney - JMP Securities.

Good morning ladies and gentlemen, and thank you for standing-by. Welcome to the New York Mortgage Trust First Quarter 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.

[Operator Instructions] This conference is being recorded on Wednesday, May 4th, 2016. A press release of the New York Mortgage Trust’s first quarter 2016 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 selection of the company’s website.

At this time, management would like 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, CEO and President. Steve, please go ahead..

Thank you operator. Good morning everyone and thank you for being on the call. Included in our 8K filing yesterday after the market closed was our first quarter earnings press release as well as the summary of a planned purchase of the remaining assets of RiverBanc a multifamily external manager.

The first quarter continued to be a difficult environment for fixed income strategies. As the 10 year treasury note hit a six month low of 1.65% in January down 2.3% at the end of 2015 only to retreat back up to over 2% before the end of the first quarter.

Credit spreads continue to widen through February before showing signs of some recovery in March and ending slightly tighter than the spreads at December 31st 2015.

Trading volumes and related opportunities decreased during the quarter as banks and other financial institutions adjusted the new regulatory capital requirements as well as oppose Dodd Frank proprietary trading limitations.

While our Earnings Per Share was negatively impacted by the realities of this environment our portfolio performed well delivering 11.6% animized economic return with less than a 1% decline in book value.

In light of the first quarter volatile interest rate environment and projected continued disappointing economic activity both of which we believe have put or will continue to put pressure on the performance of our agency RMBS portfolio. We've decided to restructure our portfolio and reduce our exposure in agency RMBS.

At the same time we will increase our strategic investments in both residential and multifamily credit assets where we see continued opportunities.

We believe these combined actions will provide better risk adjust returns in light of the current operating environment and expect this transition to take place over the next several quarters as opportunity we deploy or identify.

We are particularly excited about our acquisition of the remaining 80% interest in RiverBanc, and believe the RiverBanc balance approach to both fixed income and growth oriented investments aligns well with our proven, stable and long term investment strategy.

This internalization builds on the more than five years of successful partnership between our two companies and provides us with a significant opportunity to capitalize on and enhance our competitive position in the 2.5 trend US multifamily market.

In RiverBanc we have a trusted partner that is a leading manager with a proven track record of originating and credit underwriting.

Moreover we believe the multifamily investment expertise that RiverBanc founder Kevin Donlon will bring to our senior management team in his new role as president will significantly strengthen our ability to identify and secure future opportunities in this area.

The company generated the net income of $13.7 million or $0.13 per share for the first quarter. The portfolio generated net interest income of $18.1 million and net interest margin of 333 basis points, an increase of 29 basis points as compared to the previous quarter.

The Company delivered an annualized economic return of 11.6% or 2.9% for the first quarter. During the quarter the Company sold distressed residential loans with a carrying value of $34 million for aggregate proceeds of $39.5 million, which resulted in realized gains of approximately $5.5 million.

Company also declared a first quarter dividend of $0.24 per share which was paid in April of this year. As you can see in the capital allocation table included in the press release, we had approximately 20% of our capital allocated to agency strategy.

We intend over time to transit to much of this capital to multifamily related investment opportunities, which may include CMBS, direct originations and direction investment in single multifamily properties. The internalization of RIverBanc will give us a better expense leverage over time as we allocate more capital to the strategy.

RiverBanc will continue to pursue third party capital to invest alongside of the Company or to provide capital to other parts of the financial structures where we are not interested in investing, such as the senior loan positions.

Our other area of main focus residential credit where we currently have approximately 42% of our capital allocated, which is mostly in re-performing and performing loans or likely referred to as distressed residential loan portfolio, will continue to be a key driver in our earnings.

We completed a re-performing securitization in April 2015 resulting in total proceeds net to the Company of $167 million. This type of securitization allows us better tools to manage the portfolio over longer periods of time as compared to traditional bank warehouse lines, which are subject to market cost and limitations set by the lender.

As a result of the new 5% risk retention requirement for the sponsor of a securitization, we believe we have more opportunities to participate as permanent holders of risk as other traditional sponsors move away from being a direct issuer to avoid these risk retention requirements.

We currently are working on several strategies that we hope to execute in the coming quarters that will be accretive to earnings. Our second lean origination program launched in 2015 continues to move forward but not at the volumes and pace that we had hoped.

Origination volume continues to be impacted by the persistently low rate environment as well as other borrower options that have entered the marketplace since starting this program a year ago. We have the infrastructure in place and we’ll continue to maintain a presence in this market.

On a positive note, the loans that we’ve accumulated are all performing as expected and exhibit better credit attributes than originally planned. In general, our portfolio performed consistent with the previous quarter. Our CPRCs were slightly lower coming in at 12.7% for the quarter versus 14.7% for the previous quarter.

Our annual portfolio which is the most sensitive to CPR levels was unchanged from the previous quarter. The distressed residential loan portfolio net margin improved as compared to the previous quarter increasing by 94 basis points. In addition, we’ve realized a $5.5 million gain in the first quarter from the sale of $34 million in loans.

Our expenses for the quarter were $9.4 million down approximately $300,000 in the previous quarter. Going forward, we would expect an accretive impact from the internalization of RiverBanc to the Company’s overall earnings. We will be more specific in those figures as those numbers normalize in the coming quarter.

We believe our new portfolio focus on multifamily and residential credit combined with the RiverBanc team addition and our strong balance sheet positions us well in these difficult markets as we head into the remainder of the year and thereafter. Again we like to thank you for your continued support. And I’d like to open it up for questions.

Our 10-K will be filed on Friday, May 6th, with the SEC and available on our Web site thereafter. So operator, please open for questions now. Thank you..

[Operator Instructions] And our first question comes from Eric Hagen of KBW. Eric your line is open..

Two part question.

What is the yield you expect to hit on the RPL securitization completed? And then can you comment on how active the RPL/NPL market is for whole loans today versus say year ago?.

The securitization was done at a 4.25% yield, 4% coupon floated a slight discount for 4.25% yield. We’ve probably got an excellent execution in the marketplace. It was a tighter yield in EBITDA in the previous three NPL deals, so we were pretty happy with that execution.

The overall market I think the volumes in the overall market are down slightly from a year ago. We still see active two way flows in the marketplace, there is still large bank sellers of RPL loans several billion dollar to the transaction so far this year, so we still say there is a lot of opportunities out there.

Some of the things we’re working on is focusing as much on possible securitizations where we’re taking back some of the A2 notes and putting leverage on them through REPO where we think we can little bit better all in yield relative to holding the loans that right, no different things that we're working on but we still think there's a lot of opportunity in NPL, where all the pricing is held in.

We had a nice execution sale in the first quarter and we will continue to transact sales periodically throughout the year. .

When you relever the [indiscernible] to a kind of can you discuss the structure for that kind of….

So A1, so A1, I apologize I said A2, typically when you're getting a repo that's somewhere less than 2% in costs, much less than 2% between 1.5 and 1.75 you typically get a haircut of about 25% so that levered return on that transaction ends up being in the 13 to 15% yield depending on what securitization you're working with on the A1 note but we think that we can create some structures going forward and partner with traditional securatizers that is going to give us additional access to paper that we currently don't have.

We're working on a couple of those right now with partners..

Great, thanks, thanks Steve..

And our next question comes from Douglas Harter of Credit Suisse, your line is open Douglas..

Hi, this is actually Sam Cho filling in for Doug, so I guess I had like, I guess strategic question as to the RiverBanc acquisition. I was just wondering why this made sense right now as opposed to maybe in prior quarters or I guess we just start from there actually..

Look I think you look at your opportunities unfold over time and I think in hindsight if you have the ability to go back in time, yes we would have rather internalized them three years ago if we knew today what we knew back then or we knew today what we could have known back then.

You know we just look at what we want to do going forward as a company and we look at the interest rate and economic market that we're operating in and volatility makes it very difficult in our opinion to invest in certain strategies and we have liked the credit transactions and we continue to like the credit rate, we feel very comfortable on taking single multifamily property risk you know we have a great team and as we dedicate more capital and allocate more capital to those strategies it got to the point where it made sense over time to try to bring this management team into the fold, it's what the great additions were, senior management team as well as the RiverBanc team itself has done a great job in credit underwriting and credit origination which we'll build on that..

Got it, and you said that the timing was around the end of second quarter, am I correct. .

We're going to, we entered into the purchase agreements and we would anticipate the close in the second quarter, we will not go past second quarter..

Alright, thank you..

And our next question comes from David Walrod of Ladenburg, your line is open David..

Yes, good morning. .

Hey David..

Hi Steve, I don't know if you'd be able to do this I know you still got two coming up but can you give us some idea and the management fees over maybe a broader term, what percentage of those were RiverBanc and which were some of your other managers..

We don't actually break that out David, I would say, I will tell you that the -- especially in periods of time we're executing sales and have large realized gains on the CMBS which we have done historically.

A significant part of those fees are related to RiverBanc so you will, we absolutely expected to be acceretive you will see the base management fee drop at least by 50% in periods of time when we're selling CMBS securities that number will be even greater so you'll see a corresponding pick up in other general and administrative which will be the payroll for those companies the employees but net net to the company because remember we own 20% of RiverBanc so we were picking up income above the line in other income, but the net of those two numbers will be accretive to the company overall going forward.

And as we -- as we can better define what that accretion looks likes like, we'll talk about that in specific terms in the second quarter..

And then different topic, you've talked a lot about how the board looks at the dividend, as far as the earnings over a cycle. Can you give us some thought as to what do you think the overall earnings you know the earnings over a cycle are still in line with what your dividend is or if maybe that's not the case anymore..

Look you know I think one of the reasons why we're transitioning and we're making this change is that the anticipation was that we were going to go into a different rate environment and I just don't think after the last three quarters or two quarters especially the fourth quarter into the first quarter.

You're just not seeing consistent data that would indicate that either the world economies are improving or specific economies really improving at any significant amount, coupled with the pending election and all that uncertainty that will bring we just.

We're going to reevaluate our portfolio one of the things we're doing is as we put together a planned reallocated capital and look at what kind of yields we can generate. Not only with the assets that we will invest in multifamily but how does that look like in terms of external capital we can bring in and what kind of fees that drives.

So we will be reevaluating our earnings potential we currently have not changed that plan today, I mean we declare the first quarter dividend $0.24, we're keenly focused on our economic book value return, we don't want to start generating negative economic book value returns and under earnings dividend and putting overall pressure on the economic franchise, enterprise franchise.

So we are sensitive to that. So we look at several factors in setting our dividend and we’ll continue to do so. And when we do make a change if we do make a change that change would be to a level that we would anticipate holding for an extend period of time as we’ve done in the past..

Last question is just your thoughts and the board response on our share buyback?.

I’ve been vocal about not being overly excited about doing share buyback. I think there is short term fixes who are not long-term solutions. And while it's accretive, it's absolutely accretive I just don’t like what it does long-term impact to the company. If our stock trades down to levels where it was in January then you get to 50% of book.

I think that those levels we’ve got to start to look at what’s going on in the world and we have the excess liquidities probably step into the market.

I don’t think we can ever make the significant impact that really changes the course of the Company and I think that the excess capital that we can redeploy long-term will be more beneficial to the shareholders than buyback stock..

And our next question comes from Jeff Marino of Colorado Wealth Management. Your line is open..

First thing I’ve got for you.

With the acquisition of RiverBanc in future periods should we expect segment what will data so we could see how effective that acquisition has been?.

We probably will not do segment reporting, and it would only probably be requirement it's the majority of the activity that we’re doing is unrelated to the securities business and types of investments we’re making today which I don’t really see happening.

We can -- you will be able to see the contribution that that does in our capital allocation table where we do break out yields in both asset yields and liability costs.

We don’t go through though and break down expenses by category yet but we just done in net margin side, don’t anticipate doing segment reporting going forward given the business we plan on doing today..

Will there be any way for us to see a breakdown then in terms of fees received by RiverBanc for assets under management for other investment periods?.

You will see that. I mean right now because we own 20% of the company we were picking up the income from RiverBanc on the line that was other income. But if the number becomes, if the fees that we’re getting from third parties is material to the overall income statement then it will be broken out as a separate line but it would have to be material.

So that would probably be somewhere $2.5 million to $3 million we would break it out as a separate line that would stay external management fee revenue..

So $2.5 million to $3 million, is that going to be annual or per quarter, do you feel it material?.

Probably per quarter and we hope that it becomes material, believe me we would love to. If it becomes material obviously we’re going to be talking about it and we’ll be disclosing in ways that you’ll be able to understand that..

And then another analyst had a question about expenses paid to RiverBanc and it sounded like you guys are saying that that wasn’t broken out separately.

But on your last 10-K page S-57 it looks like you should break it down by year the fees paid to RiverBanc?.

In the 10-K we put it out there, that’s right. On a quarterly basis we typically do that..

Our next question comes from Stephen Laws with Deutsche Bank. Your line is open Stephen..

Actually Steve all my questions related to RiverBanc have been answered. Thank you..

And our next question comes from Steve Delaney of JMP Securities. Your line is open..

Good morning, and apologize I am hopping on late so I apologize if you’ve already covered some of this. I was just curious I know that RiverBanc was founded by Kevin in 2010, lead it's headquartered in Charlotte, North Carolina.

Kevin could you tell us how many people are on your team down there that are -- I assume all the employees are coming over and will become employees of New York Mortgage Trust?.

Steve, Kevin is not here right now. So he’s got approximately 13 employees in Charlotte when those responsibilities are between origination credit underwriting and asset management..

Now that will just -- the overhead is basically without just one through as comp expense facilities and all that as….

That’s correct..

Because in effect I think I used the term in my note internalization of the substantial-advisor I hope that was [indiscernible] accurate..

Correct, and so if you think about it, if you look at the way we show RiverBanc today we picked 20% of the net income of RiverBanc plus less demands we’ve seen that we’ve paid to RiverBanc but RiverBanc itself runs at a profits that we’re going to collect, we’ll collect the entire business into us, eliminate the management fees that we pay.

But the net evolve activity will be accretive back to the Company over time..

And I know that when you first started working with Kevin the real focus was getting involved in the Freddie Mac case series deals. But when you look at everything that RiverBanc has done and…..

Absolutely. And so we do own 67% of RMI which was a company that we tried to take public last summer and in RMI we have JV equity investments as well as mezzanine debt. We don’t have any senior loans to-date Steve and I don’t think as of now we don’t have interest in putting senior loans on our book.

However, one of the things I did mentioned was we’re going to keep the external manager active so we will continue to try to attract other capital that we can manage. And part of that thoughts would be to the extent that we’ve announced the multifamily property we wanted to be the JV equity and/or mezz provider.

We would use this capital that we raise to lane for the senior position. So we could actually be a full solution for particular property..

And in the past when you’ve allocated capital Steve no markets change, but you expressed a desire to try to find mid-teen ROE.

So as you go into this with RiverBanc would you still be looking for capital to work where with that type of return expectation?.

The typical asset that we think that we can invest in multifamily is in this low double digit 10% to 12%. We think by bringing some of these activities directly on for balance sheet it's going to give us better access to funding those assets and getting some leverage.

So we think after we get some leverage on those assets that will continue to drive close to 13% to 15% tax returns. And those are the things that we’re going to be analyzing going forward in terms of where we think we can drive returns given the environment that we’re in and the type of risk that we’re willing to take to get those returns..

And I am showing no further questions at this time. I would like to turn the conference back to Steve for closing remarks..

Thank you operator and thank you everyone for participating in the call. We appreciate your support. We look forward to talking about the internalization of RiverBanc and our portfolio as we go forward into future on our second earnings quarterly call. Thank you..

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day..