New York Mortgage Trust Inc (NYMT)

Business Description

New York Mortgage Trust, Inc. (NYMT) is an internally-managed real estate investment trust (REIT) that specializes in acquiring, investing in, financing, and managing mortgage-related residential assets. The company focuses on delivering long-term stable distributions to its stockholders by leveraging a diversified portfolio of single-family and multi-family residential investments. NYMT's operations include loan servicing, securitization activities, and property management, supported by a balanced funding structure and geographic presence in New York, Los Angeles, and Charlotte.

Single-Family Residential Assets - Focuses on credit-sensitive investments, including bridge loans and rental loans, to generate income and capital gains.
Multi-Family Residential Assets - Invests in multi-family properties to diversify the portfolio and provide stable returns.
Agency RMBS (Residential Mortgage-Backed Securities) - Includes fixed-income investments backed by government-sponsored entities, offering coupon income.
Corporate/Other Investments - Comprises other fixed-income investments and activities designed to optimize funding and returns.

Q3 2024 Summary

Initial Price$5.84July 1, 2024

Final Price$6.12October 1, 2024

Price Change$0.28

% Change+4.79%

What went well

Strong Expected Returns in BPL Bridge Strategy: NYMT anticipates gross ROEs exceeding 20% on a levered basis in its BPL Bridge segment, driven by robust execution and recent securitizations.
Increased Activity in Agency RMBS with Attractive ROEs: With wider spreads in the agency market, NYMT plans to be more active in the agency space, targeting mid-teens ROEs, which could enhance profitability.
Stabilization of Book Value Due to Reduction in JV Equity Exposure: The company has significantly reduced its JV equity book to $19 million, alleviating previous book value volatility and leading to a more stable book value going forward.

What went wrong

The company's adjusted book value per share decreased by 1%-2% as of late October 2024, indicating challenges in maintaining shareholder value.
Increased rate volatility has negatively impacted commercial real estate and multifamily deal activity, potentially hindering the company's ability to deploy capital and generate returns in these sectors.
Book value volatility has stemmed from the JV equity book, with ongoing reductions due to the remaining multifamily investments, which could continue to affect the company's financial performance.

Q&A Summary

Book Value Outlook
Q: Has your book value bottomed out, or should we watch for further impacts?
A: The volatility in our book value stemmed mainly from our JV equity book, which now has only $19 million remaining across seven assets. Four assets have near-term resolutions reflected in current holding values, leaving about $1.4 million in remaining value. We expect book value volatility to subside as we wind down this portfolio.
Gross ROE by Strategy
Q: Where do you see gross ROE by strategy, specifically agency and BPL?
A: For our BPL bridge strategy, we see 20%+ gross ROEs on a levered basis. In the agency space, despite recent volatility, ROEs are in the mid-teens. Our BPL rental strategy also offers ROEs in the mid to high teens.
Agency Allocation Amid Volatility
Q: Given wider spreads and higher ROEs, have you shifted capital into agencies?
A: Yes, we adapt our agency strategy based on market conditions. Last quarter, with tight spreads, we deemphasized agencies. Now, with wider spreads, we plan to be more active in the agency space, aiming to grow the portfolio steadily.
CRE and Multifamily Deal Activity
Q: How has rate volatility impacted CRE and multifamily deals?
A: Increased rate volatility has slowed market activity and property purchases. We're finalizing a JV agreement to add up to $300 million in mezzanine loans, but pipelines are lower year-over-year and quarter-over-quarter. Recent rate hikes led to properties coming off the market as unhedged buyers withdrew. We expect subdued activity in November and December, with a rebound possible in January and February.

Key Metrics

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Executive Team

Name	Position	Start Date	Short Bio
Jason T. Serrano	Chief Executive Officer	January 1, 2022	Jason T. Serrano has served as the Chief Executive Officer of NYMT since January 1, 2022. He joined the company as President in January 2019 and held that role until December 31, 2022. He has been a member of the Board of Directors since March 2019. Before joining NYMT, he was a Partner at Oak Hill Advisors, L.P., and held senior roles at The Blackstone Group, Fortress Investment Group, and Moody's. He holds a Bachelor of Science degree from Oswego State University.
Nicholas Mah	President	January 1, 2023	Nicholas Mah has served as President of NYMT since January 1, 2023. Prior to this role, he was a Managing Director at NYMT from July 2018, overseeing portfolio management and trading of mortgage securities and whole loans. Before joining NYMT, he was a Portfolio Manager and Managing Director at Oak Hill Advisors, L.P., and worked at The Blackstone Group and Fortress Investment Group. He holds a Bachelor of Science degree from Carnegie Mellon University.
Kristine R. Nario-Eng	Chief Financial Officer and Secretary	May 14, 2014	Kristine R. Nario-Eng is the Chief Financial Officer and Secretary of NYMT. She was appointed as the Chief Financial Officer effective May 14, 2014. Before this role, she served as the Company's Controller since joining in November 2012. Prior to joining NYMT, she was an Assistant Vice President at Deutsche Bank AG and gained experience at Grant Thornton LLP. She is a Certified Public Accountant (inactive) and graduated Cum Laude from the University of Santo Thomas in Manila, Philippines.

Questions to Ask Management

With your recourse leverage ratio increasing from 2.1x to 2.6x this quarter, how do you assess the risks associated with higher leverage in the current volatile interest rate environment, and what measures are you taking to manage potential liquidity pressures?
Given your concerns about a slowing U.S. economy and high consumer debt levels, how do you justify the substantial $1 billion increase in your investment portfolio this quarter, and could this aggressive growth expose the company to heightened credit risks?
You've mentioned rotating capital into high-coupon, short-duration credit loans and Agency RMBS at wider spreads; with recent volatility in Agency RMBS spreads, how confident are you in this strategy, and what impact could further spread widening have on your net interest income and earnings?
Despite disposing of some multifamily real estate assets, there's still a $19 million exposure remaining in your JV equity book; how might this residual portfolio continue to impact your book value volatility, and what is the timeline for fully winding down these investments?
Adjusted book value per share decreased by 1.4% this quarter due to reductions in the fair value of amortized cost liabilities; can you elaborate on the factors causing these fair value reductions and how you plan to mitigate their impact on shareholder value?

Program Details	Program 1 (Common Stock)	Program 2 (Preferred Stock)
Approval Date	February 2022 (initial), March 2023 (upsize)	March 2023
End Date/Duration	March 31, 2025	March 31, 2025
Total Additional ($M)	$246.0	$100.0
Remaining ($M)	$189.7	$97.6
Details	Shares repurchased are cancelled and deemed authorized but unissued.	Shares repurchased are cancelled and deemed authorized but unissued.

Past Guidance

Q3 2024 Earnings Call

Issued Period: Q3 2024
Guided Period: Q3 2024
Guidance:
1. Dividend Sustainability: Commitment to maintaining a dividend of $0.20 per common share.
2. Portfolio Growth: Investment portfolio increased by $1 billion during Q3 2024 and $1.8 billion year-to-date, ending at $6.9 billion.
3. Multifamily Asset Dispositions: Expected earnings improvement by $1 million to $1.5 million per quarter.
4. Leverage and Financing: Recourse leverage ratio increased to 2.6x.
5. Earnings Growth: Highlighted a 39% year-to-date increase in adjusted interest income.
6. Book Value: Adjusted book value per share ended Q3 2024 at $10.87.
7. Return on Equity (ROE): Expected gross ROEs of 20%+ for BPL Bridge Loans.

Q2 2024 Earnings Call

Issued Period: Q2 2024
Guided Period: Q2 2024
Guidance:
1. Dividend Sustainability: Progress towards covering the dividend of $0.20 per share.
2. Portfolio Recourse Leverage: Not expected to exceed 1x.
3. Adjusted Book Value: Estimated increase by 2% to 3% quarter-to-date.
4. Earnings Improvement: Expected improvement by $2 million to $2.5 million per quarter.
5. Agency RMBS Strategy: Increase exposure to Agency RMBS.
6. Multifamily Mezzanine Loans: Joint venture targeting up to $300 million.
7. Interest Rate Sensitivity: Positioning for potential Federal Reserve rate cuts.
8. Prepayment Activity: Slight increase expected for legacy RPLs.
9. Liquidity and Asset Selection: Maintain high liquidity for selective capital deployment.

Q1 2024 Earnings Call

Issued Period: Q1 2024
Guided Period: FY 2024
Guidance:
1. Undepreciated Earnings Per Share: Expected to remain below the current dividend.
2. Dividend Policy: Commitment to maintaining an attractive yield.
3. Leverage: Expected to increase with Agency RMBS expansion.
4. Portfolio Transition: Reducing exposure to multifamily JV equity investments.
5. Expense Management: Implementing measures to reduce expenses.
6. Securitization Strategy: Increase use of securitizations.
7. Asset Acquisitions: Growth in BPL-Bridge and BPL-Rental loans.
8. Market Outlook: Anticipating slow to moderate economic growth.

Q4 2023 Earnings Call

Issued Period: Q4 2023
Guided Period: 2024
Guidance:
1. Portfolio Strategy: Growth in Agency RMBS and BPL bridge portfolio.
2. Leverage and Capital Deployment: Increased warehouse lending capacity to $2.2 billion.
3. Market Outlook: Seeking market dislocation for attractive entry points.
4. Dividend Policy: Ongoing evaluation to maintain attractive yield.
5. Multifamily JV Equity: No future equity funding for new positions.

This list exhaustively covers the guidance provided in each of the last four earnings calls.