UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2018

NEW YORK MORTGAGE TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
001-32216
47-0934168
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

275 Madison Avenue
New York, New York 10016
(Address and zip code of
principal executive offices)

Registrant’s telephone number, including area code: (212) 792-0107

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (§230.405 of this chapter) or Rule 12b-2 under the Exchange Act (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐







Item 1.02.      Termination of a Material Contract.

Internalization of Distressed Residential Loan Strategy

On August 2, 2018, New York Mortgage Trust, Inc. (the “Company”) announced that it had begun the process to internalize the management of its distressed residential loan strategy as part of an effort to expand its capabilities in self managing, sourcing and creating single family residential credit assets. The Company has recently hired ten investment professionals to build and expand its single family residential credit asset platform. The Company expects that the single family residential credit team will ultimately be comprised of 15 to 20 professionals in total. The Company believes the internalization of the management of the distressed residential loans, as well as expanded capabilities in sourcing and originating will strengthen the Company’s ability to capitalize on future credit investment opportunities.

In connection with the internalization, the Company also announced it provided Headlands Asset Management, LLC (“Headlands”) with written notice on August 2, 2018 (the “Notice”) that it will not renew its management agreement with Headlands (the “Management Agreement”) at the end of the current term, which is set to expire on June 30, 2019. Headlands has provided investment management services to the Company with respect to its investments in distressed residential loans since 2010. Pursuant to the terms of the Management Agreement, Headlands will continue to manage the loans sourced by it and currently owned by the Company (the “Headlands Loans”) and will be entitled to continue to receive a base management fee, incentive fees (to the extent earned) and certain ancillary fees on such assets until such assets have been liquidated. In addition, in accordance with the Management Agreement, Headlands has an exclusive right of first refusal on an ongoing basis to purchase or arrange for purchase any of the Headlands Loans. As of June 30, 2018, Headlands managed approximately $404.4 million of assets and approximately $218.1 million of equity under the terms of the Management Agreement.

A copy of the Notice is filed as Exhibit 99.1 hereto and incorporated by reference herein. A copy of the Management Agreement is filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 3, 2016 and is incorporated by reference herein.

Item 2.02.      Results of Operations and Financial Condition.

The information contained in this item (including Exhibit 99.2 attached hereto) is being furnished by the Company pursuant to Item 7.01 of Form 8-K in satisfaction of the public disclosure requirements of Regulation FD and Item 2.02 of Form 8-K, insofar as it discloses historical information regarding the Company’s results of operations or financial condition for the three and six months ended June 30, 2018.

On August 2, 2018, the Company issued a press release announcing its financial results for the three and six months ended June 30, 2018. A copy of the press release is furnished herewith as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this item (including Exhibit 99.2 attached hereto), shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01.      Regulation FD Disclosure.

The disclosure contained in Item 2.02 is incorporated herein by reference.










Item 9.01.         Financial Statements and Exhibits.

(d)   Exhibits.
Investment Management Agreement, by and between NYMT Loan Financing, LLC and Headlands Asset Management, LLC, dated as of November 2, 2016 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 3, 2016).
Notice of Non-Renewal of Management Agreement, from NYMT Loan Financing, LLC to Headlands Asset Management, LLC, dated as of August 2, 2018*
Press release dated as of August 2, 2018**

*    Filed herewith
**    Furnished herewith






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
NEW YORK MORTGAGE TRUST, INC.
 
(Registrant)
 
 
 
Date: August 2, 2018
By:
/s/ Steven R. Mumma
 
 
Steven R. Mumma
 
 
Chief Executive Officer





EXHIBIT INDEX

Exhibit
Description
Investment Management Agreement, by and between NYMT Loan Financing, LLC and Headlands Asset Management, LLC, dated as of November 2, 2016 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 3, 2016).
Notice of Non-Renewal of Management Agreement, from NYMT Loan Financing, LLC to Headlands Asset Management, LLC, dated as of August 2, 2018*
Press release dated as of August 2, 2018**

*
Filed herewith
**
Furnished herewith





LOGOA12.JPG

August 2, 2018

Headlands Asset Management, LLC
405 Park Avenue
New York, New York 10022
Attention: Mieko Willoughby

Headlands Asset Management, LLC
765 Baywood Drive, Suite 340
Petaluma, California 94954
Attention: Kristen Decker

Re:      Notice of Non-Renewal of Management Agreement

Ladies and Gentleman,

Reference is made to that certain management agreement (the “Management Agreement”), dated as of November 2, 2016, between NYMT Loan Financing, LLC (“NYMTLF”), a Delaware limited liability company, and Headlands Asset Management, LLC, a California limited liability company (“HAM”). Initially capitalized terms not defined herein shall have the meanings ascribed to them in the Management Agreement.

In accordance with Section 9.1 of the Management Agreement, this letter serves as the NYMTLF’s written notice to HAM that NYMTLF has determined to not renew the Management Agreement at the end of the Management Agreement’s current term, with an Effective Termination Date of June 30, 2019.

Please do not hesitate to contact Steven R. Mumma at (212) 792-0107 should you have any questions.

Very truly yours,

NYMT LOAN FINANCING, LLC

By:      New York Mortgage Trust, Inc.,
its sole member


By:      /s/ Steven R. Mumma                          
Name: Steven R. Mumma
Title: Chief Executive Officer



cc:      Phil R. Pollock
Christopher C. Green


New York Mortgage Trust, Inc. 275 Madison Avenue Suite 3200 New York, NY 10016 www.nymtrust.com
 



LOGOA12.JPG
New York Mortgage Trust Reports
Second Quarter 2018 Results

NEW YORK, NY - August 2, 2018 (GLOBE NEWSWIRE) - New York Mortgage Trust, Inc. (Nasdaq: NYMT) (“NYMT,” the “Company,” “we,” “our” or “us”) today reported results for the three and six months ended June 30, 2018 .

Summary of Second Quarter 2018:
•
Net income attributable to common stockholders of $23.8 million , or $0.21 per share (basic), and comprehensive income to common stockholders of $17.2 million , or $0.15 per share.
•
Net interest income of $17.5 million and portfolio net interest margin of 239 basis points.
•
Book value per common share of $5.76 at June 30, 2018 , a decrease of less than 1% from March 31, 2018, resulting in an economic return of 2.9% for the quarter and an annualized economic return of 5.3% for the six months ended June 30, 2018.
•
Declared second quarter dividend of $0.20 per common share that was paid on July 26, 2018 .
•
Issued and sold 12,145,144 shares of common stock, resulting in net proceeds to the Company of $73.8 million , under our at-the-market equity offering program.    

Subsequent Developments:

The Company announced today that it had begun the process to internalize the management of its distressed residential loan strategy as part of an effort to expand its capabilities in self managing, sourcing and creating single family residential credit assets. The Company has recently hired ten investment professionals to build and expand its single family residential credit asset platform. The Company expects that the single family residential credit team will ultimately be comprised of 15 to 20 professionals in total. The Company believes the internalization of the management of the distressed residential loans, as well as expanded capabilities in sourcing and originating will strengthen the Company’s ability to capitalize on future credit investment opportunities.

In connection with the internalization, the Company notified Headlands Asset Management, the external manager of its distressed residential loan portfolio, that it will allow its management agreement with the manager to expire on June 30, 2019. This represents a continuation of steps taken in recent years by the Company to fully internalize its investment portfolio management. In May 2016, the Company announced the internalization of its multi-family credit investment platform through the acquisition of RiverBanc LLC. During the second quarter, the Company completely exited out of its Agency IO strategy, which had been managed externally prior to January 1, 2018.


1


Management Overview

Steven Mumma, NYMT’s Chairman and Chief Executive Officer, commented: "The Company delivered another quarter of stable earnings and book value, with GAAP EPS of $0.21 per common share and book value at $5.76, down $0.03 from the previous quarter. Multi-Family continued to be the significant contributor during the quarter, with both net interest income and unrealized gains increasing from the prior quarter. The Company was opportunistic in raising capital through its at-the-market equity offering program raising approximately $73.8 million during the quarter, resulting in $0.03 accretion to overall book value.
As the Company has grown in recent years, we have taken steps to internalize the investment management of our various investment portfolios. In May 2016, we acquired our external manager for our multi-family credit investments and during the quarter, we exited our Agency IO portfolio, which had been externally managed. We are pleased to announce that we have begun the process to internalize the management of our distressed residential loan strategy. As part of an effort to expand our capabilities in self managing, sourcing and creating single family residential credit assets, we have added ten investment professionals to our single family residential credit investment team.
In connection with this internalization, we provided Headlands notice that we intend to cause our management agreement with them to expire when its term ends in June 2019. Headlands has been a valued and trusted partner and advisor to us since 2010 and we are grateful for their many contributions to our growth.
We believe that internalization of all our credit investing functions, including both multi-family and single family residential, will strengthen the Company's ability to identify and secure future investment opportunities in this key strategic area."



2


Capital Allocation
 
The following tables set forth our allocated capital by investment type at June 30, 2018 , our interest income and interest expense by investment type, and the weighted average yield, average cost of funds and portfolio net interest margin for our average interest earning assets (by investment type) for the three months ended June 30, 2018 (dollar amounts in thousands):
Capital Allocation at June 30, 2018:
 
 Agency RMBS (1)
 
 Multi-Family (2)
 
 Distressed Residential (3)
 
 Other (4)
 
 Total
Carrying Value
$
1,101,344

 
$
875,563

 
$
445,353

 
$
154,405

 
$
2,576,665

Liabilities
 
 
 
 
 
 
 
 
 
Callable (5)
(874,917
)
 
(295,294
)
 
(164,149
)
 
(37,834
)
 
(1,372,194
)
Non-Callable
—

 
(29,628
)
 
(31,398
)
 
(107,198
)
 
(168,224
)
Convertible
—

 
—

 
—

 
(129,738
)
 
(129,738
)
Hedges (Net) (6)
10,543

 
—

 
—

 
—

 
10,543

Cash (7)
11,015

 
15,000

 
5,423

 
58,973

 
90,411

Goodwill
—

 
—

 
—

 
25,222

 
25,222

Other
2,512

 
(8,219
)
 
17,305

 
(28,082
)
 
(16,484
)
Net Capital Allocated
$
250,497

 
$
557,422

 
$
272,534

 
$
(64,252
)
 
$
1,016,201

% of Capital Allocated
24.6
 %
 
54.9
 %
 
26.8
 %
 
(6.3
)%
 
100.0
 %
 
 
 
 
 
 
 
 
 
 
Net Interest Income- Three Months Ended June 30, 2018:
Interest Income
$
7,851

 
$
18,280

 
$
5,110

 
$
1,796

 
$
33,037

Interest Expense
(4,644
)
 
(4,090
)
 
(2,467
)
 
(4,336
)
 
(15,537
)
Net Interest Income (Expense)
$
3,207

 
$
14,190

 
$
2,643

 
$
(2,540
)
 
$
17,500

 
 
 
 
 
 
 
 
 
 
Portfolio Net Interest Margin - Three Months Ended June 30, 2018
Average Interest Earning Assets (8)
$
1,167,278

 
$
639,637

 
$
453,407

 
$
142,975

 
$
2,403,297

Weighted Average Yield on Interest Earning Assets (9)
2.69
 %
 
11.43
 %
 
4.51
 %
 
5.02
 %
 
5.50
 %
Less: Average Cost of Funds (10)
(2.02
)%
 
(4.69
)%
 
(4.87
)%
 
(3.99
)%
 
(3.11
)%
Portfolio Net Interest Margin (11)
0.67
 %
 
6.74
 %
 
(0.36
)%
 
1.03
 %
 
2.39
 %
(1)  
Includes Agency fixed-rate RMBS and Agency ARMs.
(2)  
The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements.  Carrying Value and Average Interest Earning Assets for the quarter excludes all Consolidated K-Series assets other than those securities actually owned by the Company. Interest income amounts represent interest income earned by securities that are actually owned by the Company. A reconciliation of net capital allocated to and net interest income from multi-family investments is included below in “Additional Information.”
(3)
Includes $290.6 million of distressed residential mortgage loans, $96.9 million of distressed residential mortgage loans, at fair value and $54.1 million of Non-Agency RMBS.
(4)  
Other includes residential mortgage loans held in securitization trusts amounting to $66.0 million , residential second mortgage loans, at fair value of $72.3 million , investments in unconsolidated entities amounting to $13.3 million and mortgage loans held for sale and mortgage loans held for investment totaling $2.8 million . Mortgage loans held for sale and mortgage loans held for investment are included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets. Other non-callable liabilities consist of  $45.0 million  in subordinated debentures and $62.2 million in residential collateralized debt obligations.
(5)  
Includes repurchase agreements.
(6)  
Includes derivative assets and variation margin.
(7)  
Includes $5.4 million in deposits held in our distressed residential securitization trusts to be used to pay down outstanding debt. These deposits are included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets.
(8)  
Our Average Interest Earning Assets is calculated each quarter based on daily average amortized cost.

3


(9)  
Our Weighted Average Yield on Interest Earning Assets was calculated by dividing our annualized interest income for the quarter by our Average Interest Earning Assets for the quarter.
(10)  
Our Average Cost of Funds was calculated by dividing our annualized interest expense for the quarter by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, which generated interest expense of approximately $0.7 million and $2.7 million , respectively, for the quarter. Our Average Cost of Funds includes interest expense on our interest rate swaps.
(11)  
Portfolio Net Interest Margin is the difference between our Weighted Average Yield on Interest Earning Assets and our Average Cost of Funds, excluding the weighted average cost of subordinated debentures and convertible notes.

Prepayment History

The following table sets forth the constant prepayment rates (“CPR”) for selected asset classes, by quarter, for the quarterly periods indicated.
Quarter Ended
 
Agency
Fixed-Rate RMBS
 
Agency
ARMs
 
Residential Securitized Loans
June 30, 2018
 
5.9
%
 
16.3
%
 
20.1
%
March 31, 2018
 
5.4
%
 
10.2
%
 
10.8
%
December 31, 2017
 
6.3
%
 
12.9
%
 
22.1
%
September 30, 2017
 
12.8
%
 
9.4
%
 
18.2
%
June 30, 2017
 
9.6
%
 
16.5
%
 
16.8
%



4


Second Quarter Earnings Summary

For the quarter ended June 30, 2018 , we reported net income attributable to common stockholders of $23.8 million as compared to $23.7 million in the quarter ended March 31, 2018.

We generated net interest income of $17.5 million and a portfolio net interest margin of 239 basis points for the quarter ended June 30, 2018 as compared to net interest income of $19.8 million and a portfolio net interest margin of 286 basis points for the quarter ended March 31, 2018. The $2.3 million decrease in net interest income in the second quarter was primarily due to lower net interest income generated by our distressed residential portfolio. Our distressed residential portfolio experienced a decrease in asset yield of 174 basis points and an increase in cost of funds of 42 basis points, which resulted in a decline in net interest margin of $2.4 million in this portfolio as compared to the prior quarter. The decline in net interest margin in the Company's distressed residential portfolio is mainly attributable to changes in expected cash flows resulting from greater loan sale activity in the second quarter as compared to the first quarter of 2018.

For the quarter ended June 30, 2018 , we recognized other income of $20.0 million as compared to other income of $21.0 million in the quarter ended March 31, 2018. The change in other income is primarily comprised of the following:

•
An increase in net unrealized gains on multi-family loans and debt held in securitization trusts of $4.5 million.
•
An increase in realized gains on residential mortgage loans, including distressed residential mortgage loans of $3.1 million.
•
An increase in net realized loss on investment securities and related hedges of $5.2 million resulting from the final liquidation of our Agency IO portfolio, partially offset by an increase in unrealized loss recovery of $4.7 million previously recognized on these assets and included in the net unrealized gain on investment securities and related hedges as discussed below.
•
An increase in net unrealized gain on investment securities and related hedges of $0.9 million primarily consisting of a $4.7 million increase in gain from our Agency IO portfolio offset by a $3.8 million increase in unrealized loss from our interest rate swaps accounted for as trading instruments for accounting purposes.
•
A decrease in other income of $3.8 million, which is due to a $2.1 million impairment loss recognized on the real estate development property owned through the Company's 50% interest in an entity that owns and develops land and residential homes in Kiawah Island, SC. The Company's $2.1 million impairment loss is partially offset by the $1.0 million non-controlling interest share of the loss. In addition, the first quarter activity included a $2.3 million gain recognized by a consolidated variable interest entity from the sale of its multi-family apartment property in March 2018.

The following table details the general and administrative expenses for the quarters ended June 30, 2018 and March 31, 2018 respectively (dollar amounts in thousands):
 
 
Three Months Ended
General and Administrative Expenses
 
June 30, 2018
 
March 31, 2018
Salaries, benefits and directors’ compensation
 
$
3,173

 
$
2,556

Base management and incentive fees
 
809

 
833

Other general and administrative expenses
 
2,103

 
2,100

Total general and administrative expenses
 
$
6,085

 
$
5,489


The increase in general and administrative expenses is primarily related to the annual awards in equity compensation paid to the board of directors in the second quarter.


5


The following table sets out the operating expenses related to our distressed residential mortgage loans and the operating real estate and real estate held for sale in consolidated variable interest entities for the quarters ended June 30, 2018 and March 31, 2018, respectively (dollar amounts in thousands):
 
 
Three Months Ended
Operating Expenses
 
June 30, 2018
 
March 31, 2018
Expenses related to distressed residential mortgage loans
 
$
1,811

 
$
1,603

Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities
 
873

 
1,606

Total operating expenses
 
$
2,684

 
$
3,209

    
The decrease in operating expenses in the second quarter can be primarily attributed to a decrease in expenses related to our operating real estate and real estate held for sale in consolidated variable interest entities due to the sale of a multi-family apartment property in the prior quarter.
    
The results of operations applicable to the operating real estate and real estate held for sale in consolidated variable interest entities included in the Company's condensed consolidated statements of operations for the three months ended June 30, 2018 are as follows (dollar amounts in thousands):

 
 
Three Months Ended June 30, 2018
Income from operating real estate and real estate held for sale in consolidated variable interest entities
 
$
1,253

Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities
 
(873
)
Net income from operating real estate and real estate held for sale in consolidated variable interest entities
 
380

Net income from operating real estate and real estate held for sale in consolidated variable interest entities attributable to non-controlling interest
 
(274
)
Net income from operating real estate and real estate held for sale in consolidated variable interest entities attributable to Company's common stockholders
 
$
106



6


Analysis of Changes in Book Value

The following table analyzes the changes in book value of our common stock for the quarter ended June 30, 2018 (amounts in thousands, except per share):
 
Quarter Ended June 30, 2018
 
Amount
 
Shares
 
Per Share (1)
Beginning Balance
$
649,046

 
112,117

 
$
5.79

Common stock issuance, net (2)
74,540

 
12,196

 
 
Balance after share issuance activity
723,586

 
124,313

 
5.82

Dividends declared
(24,863
)
 
 
 
(0.20
)
Net change in accumulated other comprehensive income:
 
 
 
 
 
Investment securities  (3)
(6,525
)
 
 
 
(0.05
)
Net income attributable to Company's common stockholders
23,769

 
 
 
0.19

Ending Balance
$
715,967

 
124,313

 
$
5.76


(1)  
Outstanding shares used to calculate book value per share for the ending balance is based on outstanding shares as of June 30, 2018 of 124,312,846 .
(2)  
Includes amortization of stock based compensation.
(3)  
The $6.5 million decrease related to investment securities is primarily due to a decline in the value of the Agency RMBS portfolio for the three months ended June 30, 2018 .

Conference Call

On Friday, August 3, 2018 at 9:00 a.m., Eastern Time, New York Mortgage Trust's executive management is scheduled to host a conference call and audio webcast to discuss the Company’s financial results for the three and six months ended June 30, 2018 . The conference call dial-in number is (877) 312-8806. The replay will be available until Friday, August 10, 2018 and can be accessed by dialing (855) 859-2056 and entering passcode 4545709. A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis, at the Company's website at http://www.nymtrust.com . Please allow extra time, prior to the call, to visit the site and download the necessary software to listen to the Internet broadcast.

Second quarter 2018 financial and operating data can be viewed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 , which is expected to be filed with the Securities and Exchange Commission on or about August 9, 2018. A copy of the Form 10-Q will be posted at the Company’s website as soon as reasonably practicable following its filing with the Securities and Exchange Commission.



7


About New York Mortgage Trust

New York Mortgage Trust, Inc. is a Maryland corporation that has elected to be taxed as a real estate investment trust for federal income tax purposes (“REIT”). NYMT is an internally managed REIT in the business of acquiring, investing in, financing and managing mortgage-related and residential housing-related assets and targets multi-family CMBS, direct financing to owners of multi-family properties through preferred equity and mezzanine loan investments, residential mortgage loans, including second mortgages and loans sourced from distressed markets, non-Agency RMBS, Agency RMBS and other mortgage-related and residential housing-related investments. Headlands Asset Management, LLC provides investment management services to the Company with respect to certain of its distressed residential loans. For a list of defined terms used from time to time in this press release, see “Defined Terms” below.

Defined Terms

The following defines certain of the commonly used terms in this press release: “RMBS” refers to residential mortgage-backed securities comprised of adjustable-rate, hybrid adjustable-rate, fixed-rate, interest only and inverse interest only, and principal only securities; “Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of residential mortgage loans issued or guaranteed by a federally chartered corporation ("GSE"), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”); "Non-Agency RMBS" refers to RMBS backed by performing, re-performing and non-performing mortgage loans; “Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; "Agency fixed-rate RMBS" refers to Agency RMBS comprised of fixed-rate RMBS; “IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans; “Agency IOs” refers to an IO that represents the right to the interest component of cash flow from a pool of residential mortgage loans issued or guaranteed by a GSE, or an agency of the U.S. government; “POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans; “ARMs” refers to adjustable-rate residential mortgage loans; “residential securitized loans” refers to prime credit quality ARMs held in securitization trusts; “distressed residential mortgage loans” or "distressed residential loans" refers to pools of performing and re-performing fixed-rate and adjustable-rate, fully amortizing, interest-only and balloon, seasoned mortgage loans secured by first liens on one- to four-family properties; “CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities, as well as IO or PO securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans; “multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties; “multi-family securitized loans” refers to the commercial mortgage loans included in the Consolidated K-Series; “CDO” refers to collateralized debt obligation; “CLO” refers to collateralized loan obligation; and "Consolidated K-Series” refers to Freddie Mac- sponsored multi-family loan K-Series securitizations, of which we, or one of our special purpose entities, own the first loss PO securities and certain IO and/or mezzanine securities issued by them.



8


Additional Information

We determined that the Consolidated K-Series were variable interest entities and that we are the primary beneficiary of the Consolidated K-Series. As a result, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans including their liabilities, income and expenses in our condensed consolidated financial statements. We have elected the fair value option on the assets and liabilities held within the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series be reflected in our condensed consolidated statements of operations.

A reconciliation of our net capital allocated to multi-family investments to our condensed consolidated financial statements as of June 30, 2018 is set forth below (dollar amounts in thousands):

Multi-family loans held in securitization trusts, at fair value
$
9,345,360

Multi-family CDOs, at fair value
(8,838,841
)
Net carrying value
506,519

Investment securities available for sale, at fair value
134,614

Total CMBS, at fair value
641,133

Preferred equity investments, mezzanine loans and investments in unconsolidated entities
217,111

Real estate under development (1)
20,337

Real estate held for sale in consolidated variable interest entities
29,502

Mortgages and notes payable in consolidated variable interest entities
(32,520
)
Financing arrangements, portfolio investments
(295,294
)
Securitized debt
(29,628
)
Cash and other
6,781

Net Capital in Multi-Family
$
557,422


(1)  
Included in the Company’s accompanying condensed consolidated balance sheets in receivables and other assets.

A reconciliation of our net interest income in multi-family investments to our condensed consolidated financial statements for the three months ended June 30, 2018 is set forth below (dollar amounts in thousands):
 
Three Months Ended June 30, 2018
Interest income, multi-family loans held in securitization trusts
$
85,629

Interest income, investment securities, available for sale (1)
2,474

Interest income, preferred equity investments and mezzanine loans (1)
4,862

Interest expense, multi-family collateralized debt obligation
(74,686
)
Interest income, Multi-Family, net
18,279

Interest expense, investment securities, available for sale
(3,365
)
Interest expense, securitized debt
(724
)
Net interest income, Multi-Family
$
14,190


(1)  
Included in the Company’s accompanying condensed consolidated statements of operations in interest income, investment securities and other.


9


Cautionary Statement Regarding Forward-Looking Statements

When used in this press release, in future filings with the Securities and Exchange Commission (“SEC”) or in other written or oral communications, 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, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and, as such, may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. 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 the Company. If a change occurs, the Company’s business, financial condition, liquidity and results of operations may vary materially from those expressed in its forward-looking statements. The following factors are examples of those that could cause actual results to vary from the Company’s forward-looking statements: changes in interest rates and the market value of the Company’s investments; changes in credit spreads; changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, and Ginnie Mae; market volatility; changes in the prepayment rates on the mortgage loans underlying the Company’s investment securities; increased rates of default and/or decreased recovery rates on the Company's assets; delays in identifying and acquiring the Company’s targeted assets; the Company’s ability to borrow to finance its assets and the terms thereof; changes in governmental laws, regulations or policies affecting the Company’s business; the Company’s ability to maintain its qualification as a REIT for federal tax purposes; the Company’s ability to maintain its exemption from registration under the Investment Company Act of 1940, as amended; 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 the Company’s reports filed with the SEC pursuant to the Exchange Act, could cause the Company’s actual results to differ materially from those projected in any forward-looking statements it makes. 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 the Company. Except as required by law, the Company is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For Further Information

CONTACT:    AT THE COMPANY    
Kristine R. Nario-Eng
Chief Financial Officer
Phone: (646) 216-2363
Email: KNario@nymtrust.com











10


FINANCIAL TABLES FOLLOW

11


NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
 
June 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
ASSETS
 
 
 
Investment securities, available for sale, at fair value (including pledged securities of $976,113 and $1,076,187, as of June 30, 2018 and December 31, 2017, respectively, and $50,134 and $47,922 held in securitization trusts as of June 30, 2018 and December 31, 2017, respectively)
$
1,290,015

 
$
1,413,081

Residential mortgage loans held in securitization trusts, net
66,047

 
73,820

Residential mortgage loans, at fair value
169,197

 
87,153

Distressed residential mortgage loans, net (including $105,851 and $121,791 held in securitization trusts as of June 30, 2018 and December 31, 2017, respectively)
290,645

 
331,464

Multi-family loans held in securitization trusts, at fair value
9,345,360

 
9,657,421

Derivative assets
10,543

 
10,101

Cash and cash equivalents
84,717

 
95,191

Investment in unconsolidated entities
53,671

 
51,143

Preferred equity and mezzanine loan investments
176,741

 
138,920

Real estate held for sale in consolidated variable interest entities
29,502

 
64,202

Goodwill
25,222

 
25,222

Receivables and other assets
99,213

 
108,567

Total Assets (1)
$
11,640,873

 
$
12,056,285

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Financing arrangements, portfolio investments
$
1,179,961

 
$
1,276,918

Financing arrangements, residential mortgage loans
192,233

 
149,063

Residential collateralized debt obligations
62,198

 
70,308

Multi-family collateralized debt obligations, at fair value
8,838,841

 
9,189,459

Securitized debt
61,026

 
81,537

Mortgages and notes payable in consolidated variable interest entities
32,520

 
57,124

Accrued expenses and other liabilities
83,155

 
82,126

Subordinated debentures
45,000

 
45,000

Convertible notes
129,738

 
128,749

Total liabilities  (1)
10,624,672

 
11,080,284

Commitments and Contingencies
 
 
 
Stockholders' Equity:
 
 
 
Preferred stock, $0.01 par value, 7.75% Series B cumulative redeemable, $25 liquidation preference per share, 6,000,000 shares authorized, 3,000,000 shares issued and outstanding
72,397

 
72,397

Preferred stock, $0.01 par value, 7.875% Series C cumulative redeemable, $25 liquidation preference per share, 4,140,000 shares authorized, 3,600,000 shares issued and outstanding
86,862

 
86,862

Preferred stock, $0.01 par value, 8.00% Series D Fixed-to-Floating Rate cumulative redeemable, $25 liquidation preference per share, 5,750,000 shares authorized and 5,400,000 shares issued and outstanding
130,496

 
130,496

Common stock, $0.01 par value, 400,000,000 shares authorized, 124,312,846 and 111,909,909 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
1,243

 
1,119

Additional paid-in capital
825,960

 
751,155

Accumulated other comprehensive (loss) income
(25,450
)
 
5,553

Accumulated deficit
(75,541
)
 
(75,717
)
Company's stockholders' equity
1,015,967

 
971,865

Non-controlling interest in consolidated variable interest entities
234

 
4,136

Total equity
1,016,201

 
976,001

Total Liabilities and Stockholders' Equity
$
11,640,873

 
$
12,056,285

(1)  
Our condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company is the primary beneficiary of these VIEs. As of June 30, 2018 and December 31, 2017 , assets of consolidated VIEs totaled $9,663,179 and $10,041,468 , respectively, and the liabilities of consolidated VIEs totaled $9,027,733 and $9,436,421 , respectively.

12


NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
(unaudited)
 
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
INTEREST INCOME:
 
 
 
 
 
 
 
Investment securities and other
$
16,990

 
$
10,199

 
$
33,248

 
$
20,000

Multi-family loans held in securitization trusts
85,629

 
75,752

 
170,721

 
137,056

Residential mortgage loans
2,384

 
1,365

 
4,571

 
2,607

Distressed residential mortgage loans
2,720

 
6,665

 
8,074

 
12,703

Total interest income
107,723

 
93,981

 
216,614

 
172,366

 
 
 
 
 
 
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
Investment securities and other
10,477

 
5,805

 
20,127

 
11,374

Convertible notes
2,652

 
2,615

 
5,301

 
4,590

Multi-family collateralized debt obligations
74,686

 
66,873

 
149,165

 
120,805

Residential collateralized debt obligations
475

 
239

 
886

 
575

Securitized debt
1,243

 
2,171

 
2,574

 
4,286

Subordinated debentures
690

 
570

 
1,310

 
1,110

Total interest expense
90,223

 
78,273

 
179,363

 
142,740

 
 
 
 
 
 
 
 
NET INTEREST INCOME
17,500

 
15,708

 
37,251

 
29,626

 
 
 
 
 
 
 
 
OTHER INCOME (LOSS):
 
 
 
 
 
 
 
Recovery of (provision for) loan losses
437

 
(300
)
 
395

 
(112
)
Realized (loss) gain on investment securities and related hedges, net
(8,654
)
 
1,114

 
(12,076
)
 
(109
)
Realized gain on distressed residential mortgage loans at carrying value, net
2,021

 
2,364

 
1,248

 
14,335

Net gain (loss) on residential mortgage loans at fair value
97

 
—

 
(70
)
 
—

Unrealized gain (loss) on investment securities and related hedges, net
12,606

 
(1,051
)
 
24,298

 
495

Unrealized gain on multi-family loans and debt held in securitization trusts, net
12,019

 
1,447

 
19,564

 
2,831

Income from operating real estate and real estate held for sale in consolidated variable interest entities
1,253

 
2,316

 
3,379

 
2,316

Other income
228

 
2,282

 
4,223

 
5,121

Total other income
20,007

 
8,172

 
40,961

 
24,877

 
 
 
 
 
 
 
 
GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:
 
 
 
 
 
 
 
General and administrative expenses
5,276

 
5,065

 
9,932

 
9,952

Base management and incentive fees
809

 
(109
)
 
1,642

 
2,969

Expenses related to distressed residential mortgage loans
1,811

 
2,218

 
3,414

 
4,457

Expenses related to operating real estate and real estate held for sale in consolidated variable interest entities
873

 
4,415

 
2,479

 
4,415

Total general, administrative and operating expenses
8,769

 
11,589

 
17,467

 
21,793

 
 
 
 
 
 
 
 
INCOME FROM OPERATIONS BEFORE INCOME TAXES
28,738

 
12,291

 
60,745

 
32,710

Income tax (benefit) expense
(13
)
 
442

 
(92
)
 
1,680

NET INCOME
28,751

 
11,849

 
60,837

 
31,030

Net loss (income) attributable to non-controlling interest in consolidated variable interest entities
943

 
2,487

 
(1,526
)
 
2,487

NET INCOME ATTRIBUTABLE TO COMPANY
29,694

 
14,336

 
59,311

 
33,517

Preferred stock dividends
(5,925
)
 
(3,225
)
 
(11,850
)
 
(6,450
)
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS
$
23,769

 
$
11,111

 
$
47,461

 
$
27,067

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.21

 
$
0.10

 
$
0.42

 
$
0.24

Diluted earnings per common share
$
0.20

 
$
0.10

 
$
0.40

 
$
0.24

Weighted average shares outstanding-basic
115,211

 
111,863

 
113,623

 
111,792

Weighted average shares outstanding-diluted
135,164

 
111,863

 
133,470

 
111,792


13


NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY EARNINGS
(Dollar amounts in thousands, except per share data)
(unaudited)
 
For the Three Months Ended
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
Net interest income
$
17,500

 
$
19,752

 
$
15,040

 
$
13,320

 
$
15,708

Total other income
20,007

 
20,953

 
25,218

 
24,918

 
8,172

Total general, administrative and operating expenses
8,769

 
8,698

 
8,288

 
10,996

 
11,589

Income from operations before income taxes
28,738

 
32,007

 
31,970

 
27,242

 
12,291

Income tax (benefit) expense
(13
)
 
(79
)
 
1,169

 
507

 
442

Net income
28,751

 
32,086

 
30,801

 
26,735

 
11,849

Net loss (income) attributable to non-controlling interest in consolidated variable interest entities
943

 
(2,468
)
 
(184
)
 
1,110

 
2,487

Net income attributable to Company
29,694

 
29,618

 
30,617

 
27,845

 
14,336

Preferred stock dividends
(5,925
)
 
(5,925
)
 
(5,985
)
 
(3,225
)
 
(3,225
)
Net income attributable to Company's common stockholders
23,769

 
23,693

 
24,632

 
24,620

 
11,111

Basic earnings per common share
$
0.21

 
$
0.21

 
$
0.22

 
$
0.22

 
$
0.10

Diluted earnings per common share
$
0.20

 
$
0.20

 
$
0.21

 
$
0.21

 
$
0.10

Weighted average shares outstanding - basic
115,211

 
112,018

 
111,871

 
111,886

 
111,863

Weighted average shares outstanding - diluted
135,164

 
131,761

 
131,565

 
131,580

 
111,863

 
 
 
 
 
 
 
 
 
 
Book value per common share
$
5.76

 
$
5.79

 
$
6.00

 
$
6.05

 
$
6.02

Dividends declared per common share
$
0.20

 
$
0.20

 
$
0.20

 
$
0.20

 
$
0.20

Dividends declared per preferred share on Series B Preferred Stock
$
0.48

 
$
0.48

 
$
0.48

 
$
0.48

 
$
0.48

Dividends declared per preferred share on Series C Preferred Stock
$
0.49

 
$
0.49

 
$
0.49

 
$
0.49

 
$
0.49

Dividends declared per preferred share on Series D Preferred Stock
$
0.50

 
$
0.50

 
$
0.51

 
—

 
—



14


Capital Allocation Summary

The following tables set forth our allocated capital by investment type as well as the weighted average yield on interest earning assets, average cost of funds and portfolio net interest margin for our interest earning assets for the periods indicated (dollar amounts in thousands):
 
 Agency RMBS
 
 Multi-Family
 
 Distressed Residential
 
Other
 
 Total
At June 30, 2018
 
 
 
 
 
 
 
 

Carrying value
$
1,101,344

 
$
875,563

 
$
445,353

 
$
154,405

 
$
2,576,665

Net capital allocated
$
250,497

 
$
557,422

 
$
272,534

 
$
(64,252
)
 
$
1,016,201

Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 

Average interest earning assets
$
1,167,278

 
$
639,637

 
$
453,407

 
$
142,975

 
$
2,403,297

Weighted average yield on interest earning assets
2.69
 %
 
11.43
 %
 
4.51
 %
 
5.02
 %
 
5.50
 %
Less: Average cost of funds
(2.02
)%
 
(4.69
)%
 
(4.87
)%
 
(3.99
)%
 
(3.11
)%
Portfolio net interest margin
0.67
 %
 
6.74
 %
 
(0.36
)%
 
1.03
 %
 
2.39
 %
 
 
 
 
 
 
 
 
 
 
At March 31, 2018
 
 
 
 
 
 
 
 
 
Carrying value
$
1,161,445

 
$
836,353

 
$
461,305

 
$
150,461

 
$
2,609,564

Net capital allocated
$
251,405

 
$
500,813

 
$
282,561

 
$
(83,992
)
 
$
950,787

Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
Average interest earning assets
$
1,208,900

 
$
612,357

 
$
467,898

 
$
136,135

 
$
2,425,290

Weighted average yield on interest earning assets
2.64
 %
 
11.43
 %
 
6.25
 %
 
4.81
 %
 
5.68
 %
Less: Average cost of funds
(1.82
)%
 
(4.51
)%
 
(4.45
)%
 
(3.25
)%
 
(2.82
)%
Portfolio net interest margin
0.82
 %
 
6.92
 %
 
1.80
 %
 
1.56
 %
 
2.86
 %
 
 
 
 
 
 
 
 
 
 
At December 31, 2017
 
 
 
 
 
 
 
 
 
Carrying value
$
1,169,535

 
$
816,805

 
$
474,128

 
$
140,325

 
$
2,600,793

Net capital allocated
$
264,801

 
$
475,200

 
$
285,766

 
$
(49,766
)
 
$
976,001

Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
Average interest earning assets
$
971,707

 
$
596,701

 
$
480,711

 
$
126,447

 
$
2,175,566

Weighted average yield on interest earning assets
2.50
 %
 
11.11
 %
 
3.68
 %
 
4.53
 %
 
5.24
 %
Less: Average cost of funds
(1.68
)%
 
(4.49
)%
 
(4.56
)%
 
(3.22
)%
 
(2.85
)%
Portfolio net interest margin
0.82
 %
 
6.62
 %
 
(0.88
)%
 
1.31
 %
 
2.39
 %
 
 
 
 
 
 
 
 
 
 
At September 30, 2017
 
 
 
 
 
 
 
 
 
Carrying value
$
417,957

 
$
723,170

 
$
535,520

 
$
136,304

 
$
1,812,951

Net capital allocated
$
90,526

 
$
495,882

 
$
305,668

 
$
(46,071
)
 
$
846,005

Three Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
Average interest earning assets
$
453,323

 
$
536,537

 
$
531,050

 
$
126,848

 
$
1,647,758

Weighted average yield on interest earning assets
1.70
 %
 
11.39
 %
 
4.37
 %
 
4.21
 %
 
5.91
 %
Less: Average cost of funds
(1.44
)%
 
(4.46
)%
 
(4.28
)%
 
(2.57
)%
 
(3.10
)%
Portfolio net interest margin
0.26
 %
 
6.93
 %
 
0.09
 %
 
1.64
 %
 
2.81
 %
 
 
 
 
 
 
 
 
 
 
At June 30, 2017
 
 
 
 
 
 
 
 
 
Carrying value
$
449,437

 
$
749,643

 
$
568,273

 
$
133,488

 
$
1,900,841

Net capital allocated
$
110,497

 
$
508,068

 
$
290,414

 
$
(65,536
)
 
$
843,443

Three Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
Average interest earning assets
$
485,194

 
$
529,285

 
$
621,936

 
$
123,711

 
$
1,760,126

Weighted average yield on interest earning assets
1.65
 %
 
11.10
 %
 
5.91
 %
 
3.96
 %
 
6.16
 %
Less: Average cost of funds
(1.30
)%
 
(4.28
)%
 
(4.29
)%
 
(2.13
)%
 
(3.04
)%
Portfolio net interest margin
0.35
 %
 
6.82
 %
 
1.62
 %
 
1.83
 %
 
3.12
 %
 
 
 
 
 
 
 
 
 
 

15