NYMT - Earnings call transcript Q4 2017 | New York Mortgage Trust, Inc.

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Fourth Quarter and Full Year 2017 Results Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for questions. [Operator Instructions]. recorded February being XXXX. is conference on XX, Wednesday, This Mortgage the quarter was A with York released Trust results press release XXXX New fourth year and yesterday. full www.nymtrust.com. the press Web The available on is site release at company's

which which the Additionally, we are Web not section within access you a are me live site. Presentations certain conference At the & made the management that Reform you would the to deemed today's Events like Act maybe webcast in of forward-looking can meanings of XXXX. the hosting call, Private call, during company's this Litigation statements Securities historical, time, of inform statements of

assurance Trust release filings based materially will be that Although Mortgage believes press New that are expectations attained. Factors forward-looking on and and reflected York and cause time-to-time with differ the it the in to from in risks actual assumptions, Commission. results detailed yesterday's statements no its any reasonable company's Exchange could from in expectations the give Securities are expectations can

this please Now Steve, Steve Chairman introduce Mumma, would to like CEO. I ahead. and go time, at

Steve Mumma

quarter. for full Thank $X.XX was Included delivered the common earnings fourth filing in X-K of per $X.XX and thank Good yesterday everyone fourth net year and share per XXXX results. release of for The call. income being income our press quarter morning you, you for share comprehensive operator. on our and company the common

for share year. was and for We quarter per the down the common quarter. return return delivered from XX.X% book Our economic previous economic entire a than X.X% value $X, less X% a the fourth

believe XXXX investments, accretive to the multi-family our year. total to loss multi-family gain our credit Freddie by our portfolio's The distressed invested in residential as company with The the second as bringing first Series benefit in over its company offering a approximately $XX.X program loan million distressed for sales portfolio. improved distressed from on quarter, company a contribution strategy million the our during outstanding new stock, to credit million solid which $XX the of for adding year we million strategy D CMBS the In $XX investment in quarter, multi-family to over previous loan of our loans, million Mac portfolio the $X.X year end. during of million. bringing approximately residential quarter second bringing K the for million, completed in structured stockholders. our securities $XX.X to October, at well realized RMBS approximately property October, increased our investments on balance its total in lien preferred We changes generated the the the We quarter, the remaining while be million residential million $XXX The continued $XX.X the proceeds of its will valuation up common the million realized execution gains add in offering spreads $XXX Agency spread $XX.X tightening invested $XX.X to for purchased security continue strategy. from in in

to continue highlights this further. expect now some quarterly over to rise, rates mortgage As the would and I we volume like to for increase go company. would yearly

portfolio which stockholders and net dividend had realized million. taxes, We of RMBS sold in Agency-fixed million, $X.XX fourth $XXX share residential We million, of share. or to on of XX, declared rate was to gain, income December $XX.X ended million quarter We January securities. per and common of aggregate points. basis the resulted $X.XX loans stockholders income $X.X had interest proceeds of income or approximately XX, a our For common XXXX, XXXX. of million net million, comprehensive paid margin $XX XXX distressed attributable income basic, for which we invested common $XX quarter approximately net $XX.X net We of in $X.XX share per a per before

income of XXXX, first In sold of million. aggregate a approximately We million the securities an $XXX points loss months preferred of per Mac multi-family common purchase attributable $XXX also distressed basic. resulting $XXX total of loans basis properties. of million. net points $XXX [ph]. Freddie residential realized XXX common of dividends for purchased convertible to or declared before For equity taxes, company net margin $XX portfolio two owners [million] notes income of December we million basis proceeds per the aggregate million, versus net investments of prior and issued interest in funded We $XX We resulting price of proceeds $X.XX $X.XX of XXX we year. stockholders for million had including million over for XX gross PO of gain, the $XX.X ended XXXX, securities, CMBS in multi-family share We XXXX five-year approximately And approximately of XX, income share. aggregate had net the net and $XX January in

December invested distressed balance XX% including [million] capital lien and in in $XXX had and with of capital million or [ph] $XXX multi-family our XX% our our over capital on in residential or securitizations. invested XX, of XX% the second As we loan in strategy our legacy strategies in strategy credit-related

of the themselves. in strategies fully offering. to opportunities raised on over the to added credit during these our believe October will to Agency our preferred transition focus interest we assets quarter environments. in stable intend economic XXXX from current the We We types We as strategy our more we deliver to capital rate to credit returns continue capital of present this deploy when one

year. invested to for assets total $X.X increased Our the million

September $XX.X XX, callable of RMBS earning debt the million quarter income a for of basis our points generated net $XX as to margin in of to securities to We basis [multi-family] XXX million ratio in X.Xx in net and and purchase the of as margin and $X.X of leverage income our purchase the [ph] leverage increase of and We well net million conservative securities maintain had increase a income of our compared quarter continue equity. total of loans. net from interest portfolio equity portfolio a X.Xx the as to by net driven primarily quarter interest Agency assets was points XXXX. for increased fourth average previous ended an interest XXX

margin of effect leveraged allocation strategy As net is income. the portfolio highly during accounting our a methodology we strategy distressed income in loss the increased $X.X for reclass specifically million decreasing credit which the overall for more from to decrease portfolio, our quarter more the our also this due margin the of was our Agency resulted required credit increased quarter the had residential of to basis loan net loan quarter, of and in spread interest overall but points which to recovery. distressed net the than XX Approximately the

year majority We the IO reallocated end of dedicated this the also other and the have to strategy at to capital of strategy that our exited investments.

Over had difficulty the as funding asset strategy elevated, and XX positive remain months, last short-term lower yields contributing the costs IO were CPRs increasing. results were

will income we the Going company. forward, income our expect overall represent increasing net portion an the for of net interest

in XX, the $XX.X $XX.X XXXX, as recognized flat. the to million ended XX, For essentially of December quarter quarter other million income September ended we compared

debt the are sales unrealized hedges gains We changes joint loans The as securities were quarter. no CMBS as We the decrease the held third the primarily income in redemptions as We several payoffs on that loan. $X.X our fourth We different. quarter and/or that million. of sources gains prior of recognized $X.X investments due million income of in other sources had in had during gains multi-family mezzanine compared to reduced of the and those to compared of well at as to and from quarter due quarter. net we the $XX.X decrease component realized our follows. as related had was redemptions fourth in in However, securitizations investment venture had a sales increase which a of an to from million

For purposes for this million XX expenses ending administrative $X.X quarter-over-quarter. the for related these expenses Salaries decrease is expenses, a of company decrease release incurred of in is $X.X compared Expenses directly. a for activities the $X.X million. to million previous net by and decrease both which due consolidated company distressed the Included expenses incentive a residential was our not of positive the but quarter. general for strategy XXXX, million to fees related expenses $X.X the in unchanged had real accounting December approximately estate decreased related were operating decrease remaining we to quarter do the Operating quarter the $XXX,XXX incur largely reconciliation of $X.X and to we for $XXX,XXX. the press a income million consolidate December quarter. expenses $X.X external as compared manager. was quarter, ended income to our the activities and to million our as of which for in previous to were these other The XX, for

ended said I strategies. the the capital As with year the before, of credit approximately X% company allocated to its

strategy to company with into and second we positioned and up you. Thursday, into better on We liquidity with first We site direct operator, continue One first the lending the program higher adequate March today. build open assets XXXX. these continue Web adding thereafter. on please be will the to in quality and appreciate currently and marketplace look focus in be is of conference will our to XX-K or credit And our programs we your future XXXX, lien thing, for on questioning. available forward more we As including coupled we which lien about Xst support the multi-family its SEC believe with non-QM half that yielding, today our will discussing head purchase on strategies can our filed capital well a results with believe continued year to the bring

Okay, operator, questions. now for open

Operator

Instructions]. Thank [Operator you.

of from comes line question Jessica from first B. the Riley. Our Levi-Ribner

Unidentified Analyst

Jessica Mackenzie Hello. actually [ph] This How Brown on you? are for today. is

Steve Mumma

Sure. Mackenzie? you, are How

Unidentified Analyst

Good.

a us the you’re to if you that. begin and maybe little So a little for of you aggregate first this the to first bit you wondering them around give bit today just about could a was announced opportunities half I see? loans talk more program lien non-QM year. that plans the How planning more color

Steve Mumma

for half trying to way figure been the around and program a year the non-QM out We’ve participate. to Sure. a in best involved

see a and a and that comfortable type is there standpoint outtake of continue of going more As with from products, the got be active there to an out we build more to we’ve those market is liquidity securitization. in securitizations volume volume see

And did so second developed we’ve own our with guidelines. our like we program, lien

to originate that with loan. be us We closed we product for work the will will purchasing originators but

mortgage out no company. of have building We our intention own

just it’s dedicated similar already getting a and so and have for we’ll and the a – And relationships those of start have guidelines non-QM matter we lien running. very up program, program with to several our second we’ll originators

have in we place financing We loans half up we to lines as and finance this in them. get look to that said when But that the before. we’ve first adequate running closing thing start and do

Unidentified Analyst

And type just give of you the Great. a the us. a little just right for bit space I of Thank market competition in color and as you’re you. one mezzanine more that? could on goes, seeing little far if the was talk wondering that now about as could if bit then pricing you

Steve Mumma

the markets XXXX The in Sure. We on really we’re that dedicated investments in. almost in participate these credit less, the and mezzanine in properties competitive markets the loans. space, we equity – funded the are $XX in it there’s is diligent of We preferred that’s very far for which $XX nonetheless, type in million clearly so But million tremendous mezzanine very market more competition. lend we lending loan commercial to are of that to and not have or balances we competing larger we’re competitive. typically people sourcing at several all to

property We good purchases. sponsors of very through have relationships multi-family a of lot

in the of get through nationwide for have priced that aggressively New relationships difficult which investments lot markets in from just A majority Some our San a return in markets time so Mac the our to generally it’s the in with try we to that been west. target very because loans a standpoint Chicago over they’re or York, general. in that Freddie as doesn’t multi-family we loss make industry. bigger Francisco, But southeast or of compete it’s south participate as that’s to really first LA, have the sense of it us through audience, with group’s relationships well particular

Unidentified Analyst

Got taking it. Thank for you today. questions our

Steve Mumma

Thanks, Mackenzie.

Operator

Harter Douglas open. Sir, of line the from now comes question next Suisse. Our your is Credit from line

Josh Bolton

This on actually Thanks. Josh is for Bolton Doug.

allocation to tight say Thanks. unwind, how throughout to expectations are Given see agency and fair the widening spreads Fed agency of that credit as could trading creep possible capital year? it we continues is the to up

Steve Mumma

in we have. We’re constantly looking at that strategies investment opportunities the all

it be opportunistically right a the still like favorable here, market the I down rate having widen one if may dealing basis difficulty – agency you’re it volatile strategy, looks directional. widens spreads think that the in now while that’s with interest fairly more

So to – it Clearly, X% without marching between and out. XXX does a settles The this now thing like go it is question need XXX where or there a we we’re get sense it of is range is stop. to a looks something higher. X%

bit the And fourth hefty think quarter. little credit over It a more was always in and take move We so we time. monitoring an a how agency But the so we’ll our anticipating it’s hedges like environment and opportunities. current put all at. manageable think the add I that some But some something out breath we a a We than that’s strategy. did move. We pretty agency strategy. are we’ll look in see plays on market market

is. our invest And of to competitively. really only short do so that’s strategy where RMBS time, the main amounts money to in large that right is amount now Agency of Unfortunately focus strategy the a

Josh Bolton

volatility thinking Great. Yes, that a interest And then can year, you that us sense. we’ve seen update? about this rate value give makes the book year-to-date just

Steve Mumma

basis, to we REITs a do typically a It’s value pressure monthly the of it’s the take do don’t to given unless But do to things on first the action is have do think the but you going RMBS, but about that. some historically say and publish agency on our we We that price book of and that some that hedges the we have allocation the credit quarter. company’s not. that one continued fair book when against portfolio tighten to this also try have seen done in we’ve spreads

would offset the deterioration spreads improved book So by our of be we anticipate some would portfolio credit of in CMBS the agency book.

work us. appears in But we it that from So speak to continues that It that’s amount, an quarter. to worked first exact for not historically would today. the

Josh Bolton

guys. the Thanks comments, enough. for Fair

Steve Mumma

Sure.

Operator

Our Jones open. the is now next Sir, line question from David comes from your Walrod line Trading. of

David Walrod

Good morning, Steve.

Steve Mumma

David. Good morning,

David Walrod

talk able A you it obviously in the in that? the on quarter. couple I fourth Can things, about early raised were results sort quickly drag deploy that may you capital of quarter? And to how had of guess any you have

Steve Mumma

the standpoint ended from November. got portfolio a until we up but deployed not look, in majority Yes, the settling October a commitment of lot agency

first So the portfolio you’ll see an interest definitely in income the from increase fully funded for full quarter. quarter, the

that get benefit. You’ll

wanted felt So there We chance was to a environment was there for in drag little raise rate fact hostile capital. has. become which somewhat We REITs like bit it would of a there. that

stocks of we And go the direction would the so pricing REIT the prefer in. gone have to not in

the credit, to of at that books we Like to we’ve that call, particular raised capital that we’ve want on of So difficult on we’re majority the those for said yields assets October. right products. in would happy we prefer the in types the have credit it’s the invest getting just the

we the hedged think generate market nice mark-to-market with some agency it marketplace a think you we be We income But issues to see that the the you’re some will it. in portfolio. the of in to going agency subject We spread. for So strategy. the decent entered

David Walrod

-- then And

Steve Mumma

And if company, company, leverage of than the you that. we’re with the of comfortable overall still small we’re portion at towards represents overall the less capital the so It our leverage of a capital. Xx look still

we significant it an impact. think have be while So it will don’t will impact, a

David Walrod

I income just sales outlook about first mentioned guess you asset for your that I in be in your of portion the will guess then larger quarter overall XXXX? you can interest And a Okay. and talk earnings. net

Steve Mumma

residential active were we the competitive side have an in look, buying sellers very primarily XXXX a portfolio. was because Yes, on We net distressed buy it market.

in We’re seeing possibly. the some relief that XXXX quarter first of of

actively loans We’re now. pools couple pursuing right of a

significant where sales continue will the throughout we We year those had sell in to XXXX did we loans like each quarter. actively

with. sold some continue CMBS that lots. did bought first other some We’ve securities very have XXXX do from and away well well We our opportunistically to in with securities we

an ongoing those we’ll basis. on So see

not Our active loans, of mezzanine we’re that. originate We them. sellers

as have out got gotten some XXXX. we properties and in – JV had investments We turnover redemptions the three we of

three we Now have remaining.

but those We’re at the know one in we’ve anticipate comment the time and agency feel non-QM always continue those going in JV don’t to would to the build I both are I portfolio, investments point. loan at where about the active anticipate loans, and The we is a about, and as actively more. which good sellers. lien turnover working will portfolio exiting and the be think more this least of out that income the would those see the start not And more second portfolio interest I pursuing But the year margin analyst But generating for on. net we more company. are something first that longer leaving increased mezzanine very over term, less in JV of we’re you’ll any of think investments also. world investments it half we’re two I other predictable the

David Walrod

Okay. Thank you.

Operator

Instructions]. [Operator

Our next Ladenburg the question Christopher from comes from Nolan Thalmann. of line

open. Your now line is

Christopher Nolan

Hi, Steve.

elaborate JV not Can more You commented actively you pursuing investments. why?

Steve Mumma

a JVs marketplace. the to tried We mortgage REIT – really the do XXXX a equity out And ago going investments investing we that and ended was in not getting years lending. separate started combination Sure. was that we mezzanine of several to in have up JV that and into

so current generate of investments return total investments, of while a the rate they JV good income. don’t And they’re lot

very like in set a to a a we particular and bit of – types couple now than but typically different handholding are income just it way the well ago. more would direction we’re up were going generating, fit little not we do it we today a expertise what for years does so of takes And we’re that’s and the as and

And that’s reason. so the primary

down stack those us take are XX%, XX%. The our to participating of credit with down – equity. will We the and LTVs up to preferred mezzanine or

So not significant a the us. the pretty for of situations have we position the in stack And while lending protection which a lot we we’re our in the in certain of rights equity, of bottom gives capital stack. use control property for are of us we on the

Christopher Nolan

we now from expect previous Got settle roughly XX. credit is of XX%, then recall allocation eventually? your should quarters. right allocation down out And as to the to you. Back Where sort roughly to XX% of credit I

Steve Mumma

a you so asset allocation the particular we gets really at as spend little tricky and type assets. by of that – Yes, because dollars around it it’s – of and moves those our funding if on look that,

close XX And hard The credit would to that next three price, find that the continue the think money that credit to fits I and going look can if in can the the strategies. and that in agency marketplace point assets we’ll at as that investments. to think is to criteria. we that comfortably would we on we’re I put will we interest market’s credit much strategy where we and/or our feel and rate the say be yield so And to part loans to hedge a our we possibly of comfortable time in as credit takes a constantly work quality criteria unless put as on those we think accumulate months, strategy combination either over characteristics focus we parameters fitting

Christopher Nolan

it. Got

Thank for my questions. Okay. taking you

Steve Mumma

Sure, Chris.

Operator

KBW. Eric of And Sir, your now is line question the from from Hagen open. comes our next line

Eric Hagen

Good distressed a so big spread that the us give spreads and the sense I joining quarter the sold But can remaining the if little in apologize you now? the difference compares a of during for are loans just how answered. that to have been Thanks. already questions my some between portfolio morning. in late, I’m

Steve Mumma

Sure.

I we’re to sell trying those in – of overall think disrupt a when the trying pool, feel pool. distress to we not we’re the

higher of performing. assets assets, maybe I So lower and less yielding yielding better and a performing it’s combination typically but a say would

really file the constant a when largely you It’s at turnover. we you’ll yield just if the XX-K, the of look unchanged. cash the that cash So overall yield see portfolio is

this methodology of over new portfolio. distressed last better has end we that of Now credit you the it to you is complexities for year, And think the after in of up income you’ve value fair difficult done And The fair some credit between for accounting introduce or this these XX distressed that we And credit. sometimes. does for, complexities to to way the lot reclasses of loans June portfolio a to impairment value. recoveries to predict any June activities getting account in a purchases pools and it. elected as change are accounting credit be interest

term. overall gone The generate need long portfolio gains try to margin And the feels in the that so the a the be at generate will have intention keep think funds fair we pool to turnover, and overall same, over intention have credit because hold the net to would do Eric, but become looks the benefited loans any it’s value, to hold do maintain, is to generate same. as we have over time, is the to because the say but spreads it net difficult I tightened. of pool this particular general, look better cost not but turn more the portfolio we up, returns to we for

Eric Hagen

portfolio? the and what’s the Thanks. loans then that how of to point on loans, that fair Yes. you sold the cost of Is just left the And basis? during distressed in your fair value continuing the representative compares value the of quarter that

Steve Mumma

distressed – decent significant of part lot as in which cost balances deferred we basis. have a And of called the the or recognize a we loans credit deferred of Yes, for loans is that a those the credit majority in portion deferred have, that currently are the don’t distressed – so of accounting what’s our balances. the we

to them – don’t However, them. recognize until we realize the we when we want sell

the parts those so of contribute sell to recovering end up helps loans, gain. we large And increasing you deferred the which when balances

those loan. position fair value So when we’ve the – those book historically, the are taken we not to to of difficult

relates the distressed easier went more much As terms therefore as going. readily and in has value to marketplace balances deferred with the that market are become defined it value get fair the them into in of balance to recognized XXXX, loans, we because it’s

so we part that fair the balances of fair balances loans we’re paying those the purchase loan also we’re value as deferred value that on portfolio. And including for, deferred as have –

Eric Hagen

of All the or selling and most recently have value you’re the account account? right. been what you what And from sold fair value not has carrying

Steve Mumma

is second right. which And value, off – this on head, value out there million That’s of I’m the but value and it’s balance is going fair fair represents, have percentage not of it’s the but of is loans – saying at the carrying the sheet, top XXX we of XX XX lien. my fair million whatever million value

So XX – loan. really is the it is of million million XX of that distressed

a – little XX%. than less over it’s So it’s

So loans value represent of sold. the is fair very sold, they small there some portfolio but portion a being being that’s

Eric Hagen

great. Thanks. Yes, That’s helpful, Steve.

Steve Mumma

Sure. No problem.

Operator

to for Steve no CEO, remarks. closing call back I the to and now showing Chairman questions. Mumma, like further turn any would I’m

Steve Mumma

Thank call. you everyone being for on the

for company. support your forward look a with quarter. first much. you appreciate we always, good day. in the We the you Have As Thank very to speaking

Operator

for and Everyone, have gentlemen, thank may and all today’s you great day. This conference. a Ladies concludes in disconnect. participating you today's program

New York Mortgage Trust (NYMT) 21 Feb 182017 Q4 Earnings call transcript