Good day, ladies and gentlemen. And welcome to the First Quarter 2014 Arbor Realty Trust Earnings Conference Call. My name is Derrick, and I will be your operator for today. At this time all participants are in a listen-only mode. We shall facilitate a question-and-answer session at the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Paul Elenio, Chief Financial Officer. Please proceed.

Okay. Thank you, Derrick. And good morning everyone and welcome to the quarterly earnings call for Arbor Realty Trust. This morning we’ll discuss the results for the quarter ended March 31, 2014. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer. Before we begin, I need to inform you that statements made in this earnings call maybe deemed forward-looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. These statements are based on our beliefs, assumptions and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor’s expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. I’ll now turn the call over to Arbor’s President and CEO, Ivan Kaufman.

Thank you, Paul and thanks to everyone for joining us on today’s call. Before Paul takes you through the financial results, I would like to reflect on some of our significant recent accomplishments and talk about our business strategy and outlook for the remainder of 2014. As I mentioned on our last call 2014 will be a transition year for Arbor one in which we’ll focus not just on achieving strong operating results for the current year but more importantly on achieving some of our key operating objectives that will lay the foundation with strong and sustainable growth in our core earnings in 2015 and beyond along with setting up our balance sheet to have the appropriate liability structure that will insulate us from market volatility in the future periods. We’re pleased with our operating results for the first quarter and more importantly in accomplishing some of our key objectives which will have a positive impact for 2014 and beyond. The first of these accomplishments and perhaps some most significant is the closing of our third CLO earlier this week. This vehicle contains $375 million of collateral which significantly improved features from our two previous deals including $68 million of additional capacity to fund future investments to ramp up feature for 120 days, increased leverage to 75% and reduced pricing as well as a longer replenishment feature which allows us substitute collateral for a period of two and a half years. A clear component of our business strategy continues to be to finance the substantial amount of our investments with non-recourse, non mark-to-market, match funded debt allowing us to effectively operate in all environments. The closing of this transaction marks our third CLO execution in an 18 month period and we now have three CLO vehicles in place with $716…

Okay. Thank you, Ivan. As noted in the press release FFO for the first quarter was approximately $8 million or $0.16 per share and GAAP net income was $5.9 million or $0.12 per share for the first quarter. This translates into an annualized FFO return for the quarter on average common equity of approximately 8.5% and an FFO return on average adjusted common equity of approximately 7%. As Ivan mentioned we recorded $1.3 million in loan loss reserves and impairment charges related to two assets in our portfolio and had $900,000 in recoveries of previously recorded reserves during the first quarter. And in March 31, 2014 we had approximately $117 million of loan loss reserves on 14 loans in our portfolio with a (UPB) of around $201 million. On March 31 our book value per common share was $7.55 and our adjusted book value per common share was $9.15 adding back to deferred gains and temporary losses on our swaps. Looking at the rest of the results for the quarter the average balance in our core investments decreased to approximately $1.62 billion for the first quarter from approximately $1.76 billion for the fourth quarter despite originations exceeding run-off in the first quarter due to the timing of the run-off occurring early versus the originations occurring later in the quarter. The yield for the first quarter in these core investments was around 6.23% compared to 5.86% for the fourth quarter. This increase in yield was primarily due to acceleration of fees on some of our first quarter run-off which exceeded the acceleration of fees in the fourth quarter. And weighted average all-in yield on our portfolio also increased to around 5.79% at March 31, 2014 compared to around 5.69% at December 31, 2013 due to the first quarter originations having a…

(Operator Instructions) Our first question will be from the line of Steve DeLaney, JMP Securities.

Thank you. Good morning Ivan and Paul and congrats on your recent 10th year anniversary as a public company.

Good morning, Steve. Thank you.

Yes. So obviously a huge sequential increase in loans, we usually think of the fourth quarter is being the busiest quarter of the year and the first quarter maybe a little light on originations but you certainly buck that trend. And then we also noticed the average loan size was way up, is it about $15 million in the first quarter compared to $8 million to $9 million. So my first question would be are there are couple of large lumpy loans in there that we should make note of or is there simply is there any change and focus on larger loans. So any color if you could give us around both the increase in volume and the average size would be helpful?

I think Steve its Ivan. Just in general as we return to the lending market quarter-by-quarter we keep increasing our loan sizes and as we expand our credit facilities and we increase our capability in our securitization allows us to go after bigger loans. And that’s just was on a quarter-by-quarter basis until we got comfortable that the securitization would be there. So that has a lot to do with it.

Okay.

We’re hoping once smaller loans getting our systems processes and then getting ourselves in position to securitization. When we securitize the first two deals they were smaller deals and you can’t have outsized loan so the larger the deal, the larger the loans that we can do and the more vehicles we have out the more capable we have to do larger loans. So it has to do with the growth of the platform and our business strategy and staying disciplined and we’ve just gotten to the point where we can now do loans of significant amount and utilize our vehicles which is possible from a course strategy.

Okay. That’s great, helpful. And we did notice that the third deal $375 million was significantly larger than the first two that were $260 million and $125 million respectively. One thought on your CLOs I mean you continue to be able to obtain replenishment periods and ramps. It appears to me that, that Arbor is the only issuer at least among the public commercial mortgage REITs that’s being able to obtain that kind of flexibility and the structures everyone else is using sort of a static pool approach. Is there something unique about the loans you’re putting in, the AAA buyers are comfortable with giving you that reinvestment period?

I think it speaks to the manager and the fact that we’ve successfully managed our legacy deals very effectively. We maintain relationship with our investors and we have a very, very good name in the market and we maintain those relationships with our investors. So I think we’re very unique in the ability to have these hyper financing vehicles. And unlike other people or other of our competitors who originate and securitized in our static facilities, we view these vehicles as financing vehicles which gives us a tremendous competitive advantage in the market if there was a liquidity issue. In addition it allows us to also lower our warehouse and cost with our line lenders because there is a takeout for these loans. So it has to do with the experience of the manager and secondarily the collateral which we traffic in meaning mostly multi-family the company has such a deep history of and the investors are comfortable with it. So we’re staying very disciplined, sticking to our net – but I’ll also want you to note there in this last CLO we did have a small percentage of being able to put another asset class in there. So we continue to expand the (terms) to make it a better financing vehicle for the company, but we’re unique in this space to be able to have a vehicle like this.

It definitely appears so. And lastly Ivan you mentioned in your prepared remarks that you expect in the second half of this year to see some increased competition. I’m curious whether you’re thinking that, that would be new players coming into this space, new sources of capital or is it just pricing pressures as people are trying to just get bigger, bigger in this space where this sort of comment on where you see the biggest competition coming from for Arbor?

Right. I think as you can see in the REIT space there was a lot of capital being raised and there was pressure to put that money out. So there was definitely more liquidity with new system players, there are some new players coming into the market. So just based on the additional liquidity and some new players we’re seeing a lot of pressure. We’re very sensitized also to the fact that asset values continue to increase and that people are being a little bit – they’re going two ways, they’re being a little bit more aggressive on loan terms and look more aggressive on the credit quality. So that’s one of the reasons why we were a little bit more aggressive in the first quarter to build our portfolio thinking that we get a little bit too competitive in the third and fourth quarter that would be able to back off a little bit.

Makes a lot of sense. Well thank you both for the comments and good quarter.

Thanks, Steve.

(Operator Instructions) Your next question will be from the line of Lee Cooperman, Omega Advisors.

Thank you, and good morning. I’ll leave the tough question to Mr. Steve, there’s a good job in asking good questions and maybe I could ask you some easy ones. It maybe a difficult question to actually answer, but if you kind of look at the legacy CLO run-offs coupled with the opportunity in a new CLO that you just priced. Would you think the combination will allow us a, to maintain the present dividend and sometime in 2015 raised the present dividend as the new CLO was employed, that’s the question one? And second my favorite question is which book value that you guys believe in there are a lot of shareholders in the company in ‘15 is 755 or something in between?

Hey Paul why don’t you take a shot at that and I’ll comment afterwards.

Sure. Lee, I’ll handle the first part of the question and then will go to that – your favorite question. But certainly yes we do feel that the combination of the run-off and the delevering we’re seeing in these legacy CDO vehicles combined with the more favorable terms we’re seeing now in our new CLO issuances will allow us to definitely be able to delever these vehicles towards the end of the year maybe into early 2015 hopefully replace them with more efficient vehicles which we think as we said in our prepared remarks will certainly set the stage for us to grow our earnings in 15 and beyond on a more substantial pace. As far as being able to maintain our dividend and our earnings yes we’re very focused on that, we do believe that we’ll go into it despite the run-off in the legacy CDO vehicles we still – as we said in our commentary are expecting to grow the portfolio net during the year, I think we’ve done a really good job of being good stewards of capital, very sensitive to dilution and being able to raise the capital in order to continue to grow the portfolio despite the run-off being trapped in the legacy CDO vehicle and continue to maintain that earnings base in our dividend. So we have every intention to maintain that earnings base for 2014 in that dividend, but really more importantly really get these key objectives behind us and be able to setup 2015 and beyond to be very strong earnings years. And there are a couple of reasons to that. One, not only being able to have more efficient vehicle and the new financing structures we’re seeing. Two, when we’re able to replace the legacy CDO vehicles and the future run-off…

Got it. It sounds to me though there is a question not only the dividend sales, but after your business plan is fluctuated that we’d probably look into dividend bump sometime during 2015?

Yes. We think by delevering these vehicles and putting these vehicles in place and not having to deal with the run-off on the delevered older vehicles and some of the lower rates on the legacy that you’ll see a cruel increase in core earnings in 2015 as well as getting rid of the swaps. And it should be very significant and what would be really nice is that to go along very nicely with the issue that you mentioned on the adjusted book verse the real book and the growth in the dividends could help us achieve growing our stock price to our real book.

I guess one last question I had asked before. Has your special committee making any progress on the possibility of the private entity and the public entity being put together?

I don’t believe the special committee has gotten back together yet. We just got a Board Meeting this week. So I don’t believe that, that discussion has begun on a special committee basis but we’ll inform you as to when the appropriate time is.

Good. Thank you. You guys are doing a good job and I appreciate it. Thank you.

Thanks, Lee.

At this time I’m showing no further questions in queue. I’d like to turn the call back over to Mr. Ivan Kaufman for any closing remarks.

Hey thanks to everybody for their participation. I’m very, very pleased with our first quarter and the significant accomplishments we’ve made in order to be in our business plan for this year. Thank you everybody. Have a nice day.

Ladies and gentlemen that concludes today’s conference. We thank you for your participation. You may now disconnect. Have a great day.