Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- New York Mortgage Trust Inc (NYMT, Financial) reported a 63% increase in adjusted interest income to $84 million compared to the same period last year.
- The company has successfully reduced its net loss from real estate from $16.4 million to $13.1 million, primarily due to the disposition of underperforming multifamily properties.
- NYMT has raised $60 million in senior unsecured notes at a 9.125% rate, providing additional funding for future opportunities.
- The company is pursuing a joint venture for multifamily mezzanine loans with a third-party cap provider, potentially allowing up to $300 million in funding.
- NYMT's portfolio acquisitions have increased significantly, with $934 million in total acquisitions during the quarter, representing a 54% increase from the prior quarter.
Negative Points
- NYMT reported an undepreciated loss per share of $0.25 in the second quarter, although this is an improvement from the $0.68 loss per share in the first quarter.
- The company experienced $16.5 million in unrealized losses due to lower asset prices in its Agency RMBS portfolio, primarily as a result of interest rate increases.
- NYMT's adjusted book value per share decreased by 4.3% from the first quarter, ending at $11.02.
- The company's recourse leverage ratio increased to 2.1x from 1.7x, and its portfolio recourse leverage ratio increased to 2x from 1.6x, indicating higher leverage levels.
- NYMT incurred a one-time expense of $4.6 million related to the issuance of senior unsecured notes and a residential securitization.
Q & A Highlights
Q: Can you talk about the decision to hold a high level of liquidity and the trade-offs involved?
A: Jason Serrano, CEO: The opportunity today involves two avenues: core asset classes with double-digit equity returns and new multifamily middle-market origination activity. We are selective in our growth and timing, especially in the volatile agency market. We aim for medium- to long-term value propositions for our excess capital.
Q: How are you thinking about prepayment risk in the agency RMBS sector given potential rate cuts?
A: Nicholas Mah, President: We target 6% coupons for higher carry profiles but are diversifying into belly coupons. We believe spreads can tighten long-term, and we aim to be opportunistic in our acquisitions.
Q: How do you view the sustainability of the dividend amid portfolio repositioning?
A: Jason Serrano, CEO: We evaluate this monthly with our Board. We are rotating underperforming assets into those that generate recurring income. Kristine Nario-Eng, CFO: We are comfortable with our progress and expect to move closer to our current dividend by optimizing expenses and increasing recurring income.
Q: Can we get an update on adjusted book value quarter-to-date?
A: Nicholas Mah, President: Adjusted book value is estimated to be up between 2% to 3% quarter-to-date.
Q: How would multiple Fed rate cuts over the next year impact your portfolio outlook?
A: Nicholas Mah, President: Rate cuts would be positive for the portfolio. We are positioning ourselves to capitalize on this by growing the book and selecting assets that align with this potential outcome.
Q: Is it reasonable to expect a pickup in voluntary prepayment activity in your reperforming loans (RPLs) if rates come down?
A: Nicholas Mah, President: There could be a slight increase in prepayments, but not substantially, due to the out-of-the-money coupons and choppy pay credit profiles of these borrowers.
Q: How might real estate values respond to higher costs and limited supply of homeowners insurance?
A: Jason Serrano, CEO: This is a headwind, particularly in the South and multifamily space. It impacts short-term rental markets more significantly, potentially increasing supply. We are monitoring these markets carefully, especially within our BPL bridge book.
Q: How are you managing the risk of higher costs and limited supply of homeowners insurance affecting real estate values?
A: Jason Serrano, CEO: We are particularly concerned about short-term rental markets where NOI is impacted. We are minimizing exposure in these areas within our BPL bridge book.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
