Q3 2024 Earnings Summary
- High Gross ROEs Across Strategies: New York Mortgage Trust is achieving strong gross returns on equity, with 20%+ ROEs on BPL bridge loans and mid-teens ROEs on agency MBS and BPL rental strategies, indicating robust profitability potential.
- Strategic Increase in Agency MBS Allocation: The company plans to increase its allocation to agency MBS as spreads have widened, expecting higher returns and demonstrating a market-driven, strategic approach to capitalize on opportunities.
- Upcoming $300 Million JV Agreement: New York Mortgage Trust is finalizing a joint venture agreement to add up to $300 million in mezzanine loans with third-party capital, which could significantly enhance growth in their multifamily lending business.
- Slowdown in multifamily deal activity due to increased interest rate volatility: The company noted that increased rate volatility has slowed overall activity in the market, with purchases being delayed or canceled. "Overall, the market has been curbed", which may impact NYMT's ability to generate income from multifamily investments.
- Adjusted book value per share has decreased by 1% to 2% quarter-to-date: Management indicated that "we see adjusted book value down somewhere between 1% to 2%", suggesting potential erosion in shareholder value.
- Volatility in Agency MBS strategy affecting returns: The company acknowledged that "on the agency side, there's been a fair amount of volatility", with returns on equity (ROE) currently in the mid-teens. This volatility may impact the company's earnings from this segment.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Agency RMBS | Previously described as a core strategy with historically wide spreads, opportunistic acquisitions, relatively higher current coupon spreads and leverage adjustments across Q4 2023, Q1 2024 and Q2 2024. | In Q3 2024, it was noted that current coupon mortgage spreads declined from 148 bps to 129 bps, resulting in a 20% drop in purchase volume even as the portfolio grew, with the strategy remaining central to the business. | Evolving sentiment: Spreads have tightened and purchase volumes declined, yet the strategy remains core. |
BPL Bridge Loans | Consistently highlighted in Q4 2023, Q1 2024 and Q2 2024 as a high-return, short-duration asset class with securitization benefits, robust execution and attractive ROE on a levered basis. | Q3 2024 emphasized improved execution with a securitization deal at a 5.65% effective cost of funds—112 bps lower than previous deals—and continued portfolio growth with declining delinquencies. | Consistent with incremental cost improvements: The core strategy remains, with notable improvements in financing costs via securitizations. |
Multifamily Investments & JV Equity | In Q4 2023 and Q1 2024, multifamily assets were burdened by impairments, rising expenses and valuation challenges; Q2 2024 emphasized underperformance and prolonged disposition timelines. | In Q3 2024, the company disposed of six multifamily assets generating $34.7 million in net proceeds and converting net losses from $13.1 million to $7.5 million, with expectations of further modest earnings improvement. | Gradual improvement: Challenges persist but disposition activity has begun to yield positive net results. |
Liquidity Management & Capital Deployment | Previously, Q4 2023, Q1 2024 and Q2 2024 discussions detailed ample dry powder ($431m to $402m excess liquidity), active acquisitions (up to 934m in Q2) and robust warehouse and repo capacities. | Q3 2024 reported strengthened liquidity with $706 million revolving debt, access to an additional $2.2 billion in repo capacity and over $1 billion of residential investments, demonstrating deliberate and active capital deployment. | Robust and improving: Liquidity remains strong with increasing funding flexibility for future investments. |
Impact of Interest Rate Volatility | Q4 2023 featured dramatic rate moves (5% to 3.9%), while Q1 2024 and Q2 2024 noted notable unrealized losses and volatility-induced spread fluctuations. | In Q3 2024, a decline in spreads due to lower rate volatility was observed, despite a 20% drop in agency purchase volume; the company continues to leverage opportunities from market fluctuations. | Adaptive: Volatility effects are less pronounced in Q3, indicating effective portfolio management amid shifting market conditions. |
Declining Adjusted Book Value & Dividend Sustainability | Q4 2023, Q1 2024 and Q2 2024 showed ongoing declines in adjusted book value (ranging from 9% in Q1 to 4.3% in Q2) with a consistent dividend of $0.20 per share, amid concerns over impairments and valuation adjustments. | Q3 2024 reported a 1.4% decline in adjusted book value per share at $10.87 while paying an unchanged $0.20 dividend, with management emphasizing initiatives to realign recurring earnings with the dividend. | Stable but cautious: Persistent, mild declines continue while dividend sustainability is maintained through strategic asset rotation and income growth. |
JV Agreement for Multifamily Mezzanine Loans | Not mentioned in Q1 or Q4 2023; introduced in Q2 2024 as a pursuit for up to $300 million funding through a JV with third‐party capital. | In Q3 2024, the company is finalizing this JV agreement for multifamily mezzanine loans, reinforcing its commitment to monetizing multifamily opportunities via external capital. | New and emerging: The topic emerged in Q2 2024 and continues into Q3 2024 as part of a strategic shift in multifamily financing. |
Shift from Fed Rate Cut Expectations to Market‑driven Asset Reallocation | Q1 2024 described an initial shift from expecting six rate cuts to less than two, while Q2 2024 reinforced repositioning towards Agency RMBS and short‐duration loans in anticipation of eventual rate cuts; Q4 2023 mentioned Fed policy impacts following a dovish pivot. | In Q3 2024, following a 50 bps rate cut in September and subsequent volatility driven by robust labor data, executives underscored a market‑driven reallocation, emphasizing adjustments in Agency RMBS investments in response to tightening and then widening spreads. | Evolving and consistent: Market conditions have shifted from Fed‐centric expectations to strategy adjustments based on asset pricing and spread dynamics. |
Expense Reduction & Securitization Cost Savings | Q1 2024 hinted at gradual implementation of expense reduction while Q2 2024 detailed reductions in G&A expenses and significant cost savings from rated securitizations (savings of 80+ bps versus repo). | Q3 2024 continued to underscore expense optimization through asset dispositions (net gains from multifamily asset sales) and reaffirmed securitization cost savings—in particular, the lower effective cost of funds on the BPL bridge securitization. | Consistent and reinforcing: Ongoing initiatives continue to yield cost savings and operational efficiencies over successive periods. |
CRE Market Opportunities & Risks from Maturing Debt | Q2 2024 and Q4 2023 discussed significant CRE debt maturities (e.g., $500 billion maturing over the next four years) and related opportunities (distressed paper, recapitalizations) as well as risks from liquidity constraints and high long‑term rates. | Q3 2024 did not specifically address CRE market opportunities or risks from maturing debt; focus was instead placed on multifamily and Agency RMBS market conditions. | Discontinued focus: Once discussed in Q2 and Q4, this topic was not mentioned in Q3, suggesting a possible deprioritization amid shifting strategic emphasis. |
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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.
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