NYMT - Earnings call transcript Q3 2018 | New York Mortgage Trust, Inc.

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust's Third Quarter 2018 Results Conference Call.

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

Following the presentation, the conference will be open for questions. [Operator Instructions] This conference is being recorded on Tuesday, November 06, 2018. New yesterday. Trust's with results quarter release released was press York third Mortgage XXXX A release available press The is www.nymtrust.com. website at on the Company's

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

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

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

Steven Mumma

has residential points earnings sensitive previous to June share $XXX.X quarter. accretive months annualized improved value. our Company quarter. improvement is solid Company million multifamily, September $X.XX gains The also X.X% at proceeds The The equity investments, The had which results. written more on $X.XX the of points down to million distressed internalization see down. delivered we interest per an you, everyone, the the credit the and good for from return sales improved in Company's in after a previously June XXX Company largely total the continued XX earnings assets or XXXX in residential announced loans during quarter. with with quarter. $XXX.X XX, Company's XX, unchanged the you previous approximately net average GAAP book Company for of common quarter. securities The employees. book quarter during quarter from a nine strategy third-quarter family benefited in price million release market credit and fourth XX a equity employees, the the a to margin our $X.X quarter and a Company basis net assets return joint attributable new focus ended XXXX Company the during total of of raised to from previously from quarter third X% a the XX, three multifamily both hires in delivered one sold close of economic contributing during $XX.X the anticipates thank the and ending to for The morning quarter the for our economic $XX.X unrealized filing continued in common million the nicely single X-K press progressed venture the $X.XX and and from million XX today. months year-to-date Included with on multifamily bringing the total of valuation was addition call the the being multifamily our value of of for Thank number operator, yesterday adding $X.XX X.X% recovery CMBS XXXX. in

are or XXXX that stock third share of points. October our portfolio million loans aftermarket of approximately common a million total the stock of a for performance. shares a work approximately to of third resulting million. We stock per paid of equity continue quarter in mutual income termination than our highlights agreement the net decrease by for residential anticipate underwritten our X.X million. towards aggregate end public stockholders had of $XX common XX, those million proceeds common loan assets of offering management on external distressed acquired September year. dividend common totaling quarter less XX.X through and total or June the residential a basis from was the per at net share common per our program and $X.XX and declared $XXX.X shares and $X.XX share. XX.XXX million from is earned We ATM per common million attributable multifamily credit to early to comprehensive Company We the transition proceeds margin common We net XXX We million of offering X%, $XX.X and income services We final XXXX. following of common strategy XX, under XXXX. of of $X.XX XX, for a residential net book mortgage interest $X.XX or share had and income interest mortgage of value $XX.X We had $XXX.X issued The including

As and over strategy multifamily of strategies XX% of capital loan credit-related capital in in million September our $XXX capital XX, invested had million residential $XXX on our including distressed strategy. on our we in

$X.X stock assets invested capital preferred of including X.X total and common of billion. and total have billion We

which income portfolio loan from offset portfolio. to in million quarter. net current an from a continues the $X.XX income XX.X callable portfolio leverage margin Our fixed and XXXX, ratio CPR was net X.X% decrease margin in portfolio XXXX. ended net quarter distressed agency is basis of XXX quarter of and was the X.X quarter was in our of by million points debt XXX conservatively increase third times million fees which basis interest quarter ratio of XX, XX% for of our an to ended X.X primarily $XX.X $X.X times to and be income the points the was managed. agency as a compared total net the to and leverage for generated from partially rate million CPR of X.X% We was multifamily equity due of the our equity agency for strategy increase $X.X to debt net our million our XX, interest June Prepayments residential $XXX,XXX versus of September in for previous portfolio, increase portfolio interest our

on to slightly prepayment from agency remain still XX.X% elevated. fess but XX.X% decreased Our

Our to to credit continue investment agencies decrease continued strategy. exposure as build to our we on

$X.X of other accounted $X.X from million from loan the $X.X million unrealized from of from XX, the gains our September investments we investments credit from recognized and XXXX, XX.X ended venture were continued sale, valuation joint in quarter main the components previous $XX.X interest and $X.X the follows. rate million investment, residential gain trading due spreads the for a K-series as compared mortgage of consolidated total and income quarter, recovery as other to to instruments. income our For million a gains swaps tightening million equity Unrealized on as million net equity

XX, million million $X to and in an internalization as general ended the part of increase expenses primarily September to the the the the benefit strategy. our credit XXXX, single-family increased to of of $X.X residential employee administrative headcount $X.X For in had Company salary and increase related was quarter, quarter million the previous in compared as due

We expect and be decrease expiration management incentive agreement. to upon our increase the management offset external in fees by of a base

existing including As residential loans. addition us commitments strong well credit XXXX, has million for to our of we quarter positioned and believe credit of for fourth or is into entered team our assets the purchase XXXX. our pipeline team with of purchases $XXX new new together securities in with We professionals over investments

environment XX% total your credit our in while appreciate have September our to rate through the deliver annualized book rate XX, a of We XXXX, continued difficult return an in combination stable stockholders. delivered We and and to quarter XXXX. support. as investment we return interest a best into We is annualized very a to our attractive X.X% economic strategy opportunity fourth of continue believe dividends values go

be you questions. November the will please on open Operator, for on Xth XX-Q Our will about can or available filed Friday, be SEC now thereafter. website our with and

Operator

Instructions] Harter with first Doug question comes our [Operator Suisse. proceed. Please Credit And from

Doug Harter

have the you about know capital with Can once investment, referenced the those I be of credit additional deployment of are that is you pipeline close? there today talk capital? deployed to the you where

Steven Mumma

we strong when you the look takes of going stuff lot loans longer buying the than Yes, a fourth into quarter, a have securities. as pipeline know you're pretty

increase have to in have some that all capital in some opportunistic ways the we Company portfolio. increase base always to the have as of for quarter ways grow the capital but well the Company, looking to leverage as the quarter or are the assets financing our third So, in the we as we of fourth of early deployed we will well access other the raised as

Doug Harter

talk how that what then, bond fourth the can impact about the spread gains And and the so And lines? on quarter? you unrealized in realized has far K-series might been the experience

Steven Mumma

new no markets. there issue on Sure, is question the

weighted the widened X recently. I of have significantly, say widened but wouldn’t and have points XX basis to widened spreads Some bond

new demand far and has issued we little the of heavy amount there saw to expectation Our quite really in the and The of that's in supply coming is spreads. market. been backup so the November October a more market

that is though The the we that first own piece security loss trades.

a related, While a securities, particular supply bit there has security and in a and trading have tightening quite of trade in in we seen those secondary oriented third spread spreads. which of demand quarter the is resulted

loss a the to that well Company, to asset anticipate and perform continue we So, continuing we very investment instrument monitor fourth that into as quarter. first great the for

Doug Harter

of Where on do you instruments see types today? those yields

Steven Mumma

we on really those. overall general don't started in instrument. instruments when have an I come significantly We the in disclose say yields individual would the in investing

I securities the would the on digits to mid the some those or Our initial were depending cases double-digits and say vintage in in investments now very investments years. X, X low XX closer teens, to or high high single are in which

Operator

from Mark And question of proceed. our comes Barclays. Please next DeVries

Unidentified Analyst

Mark Ivan here. Ivan Zwick was Just

up about how you talk quarter just forward, you just guess talk run rate there a you if Just XX.X I that? we on wanted and follow had. in the comments this just guys could gains million going to about about Can quickly think was that K-series guys

Steven Mumma

less If K-series they very today. about little million you long than duration. assets, totals about have think $XXX position about our Talking which

amount much it yield tightening significant take So, to of a add of a to value those assets. doesn’t

our average years. so, since is been we approximately the across add portfolio portfolio, have but continue life the across the in position life to to to And entire we asset buying X X.X XXXX, our so

our we while yields in, aggressive the on seen at which tightening vintages, the quarter on have the very significant had values five several significant years these of So to third of portfolio. impact saw the a trading securities of bonds some some in we

don’t you trading -- a of secondary Now, those instruments. in lot it’s

gotten, So, and a number starting different several securities. of outstanding now that program the markets, of to exchange the see in players you of in starting frequent terms program to has types really of into more develop it's issues the robust are

to that's it mark-to-market the in really and process So, getting activity, majority of get based was issue XXXX. market the that’s extent I we this sense prior participated as to better think secondary where evaluation really when that our securities in some bidding information And we those you of active a valuation. majority that Prior improvement allows seen the to in of new on and/or to holders are securities year, have recently. the

Unidentified Analyst

Can there between for allocation you you of about at? sort XXX talk looking the you different [multiple credit some maybe that XQ? assets talk speaker] are you Can guys of What the multifamily? disclosed about just kinds

Steven Mumma

XXX that. can million about million XXX in say more that or low get XXX million to is we to don’t of specific is What want loans, to but about loans, loans multifamily mez I was security residential and

until we those the are closing that specific more would are doing stuff, that In general talked all not physically in be of about in general. due and of we be all, diligence. those anticipate closing, of all and we rather but to close items them we Some purchase we commitments process

Operator

from And KBW. our question Hagen proceed. next Eric with Please comes

Eric Hagen

the on Another I it's hope just gains, unrealized not follow-up a…

Steven Mumma

sure. No,

Eric Hagen

certainly pay how dividend? unrealized Can of gains that unrealized order a dividend talk to the in potentially. you portion monetize value know help gains just of I seem about Anyway, the those pay to you those that

Steven Mumma

think income I you the one performance year five when of company's of been years, all that and last purely at the not analysts I includes not our rate And return, while look we our generate that this cover spread and our to said which the as year, times gain. look, Now, generate total that's our is think from last investment comes thesis spreading have over to capital frustrations is dividend. many

other short-term repo or on it do able banks Now are out able also those way Today But ago years long-term repos the was markup years. and five through two Freddie from as securitization to we format. bond, is, repos only three via securitizations occasion. get and we which term can up gains two year go have securitization. those sold assets of it's financing we year finance on banks either our fixed from just types K-series we can historically re-REMIC the to through monetize get are to We unrealized or that go straight and we five many

money So, we which than no lot opportunities assets, of every different in class a different asset really rebalance is sheet. other against asset, have to borrow a those

against money borrowing all are them. We

I So, at generate see bit but only the spread And of some we all loans back what have our do get earnings value in we're so a we that's selling lack trying through velocity higher not generate which but realized it don't mean distressed as the deterioration need in get cash why a to income dividend to their well in them. those have and pay continue dividend. money that's unrealized when that multifamily our that is is in frustrated gains great, are for to hedging. gains of because we book we loans, little how here. we I they hedging as assets a really realized a of or distressed covers people realizing to not improvement because it's mismatch give sell value matter spread,

income I economic try but times many have spread book total of as think we said is of focus the not rate only value. on component, to return our So, the call, the part and of we as

put the we we dividend do return. forward year pressure economic to the with So, value sustain What to maintain so the value to have this to want the it the want deteriorate on don't Company we the able far to going franchise positive been X.X% which dividend. and is pay franchise do of extreme

Eric Hagen

be credit On know I managed, any an was when there in that that the fee. format? incentive expense will cost fully expect in-house front, the do portfolio Houston? you under was be that Will portfolio managing savings that there from preserved externally

Steven Mumma

on Company, of compensation at programs part The have program in-house all employees level. to we will various the other depending and be every the similar employee,

the have So, based no, savings, investment executives performance is same what do is -- expect everybody, to at so that under, of we don’t Company cost. a the specific expect performance But all do that robust a key there team bonus will be to we about not assets. attributable the are and we expect largely more

quarter, opportunities we anticipate And with So, the you I increase do to is are think employees decrease, any types is, as think would both grow I is our part we in multifamily. see number assets other classes residential and add while tremendously. if invest to look add we to credit you'll continue at to team. robust to this of pipeline what what expect don’t in expenses have won't anticipate What in and we more fourth of continue I the investment other asset that to that going

Eric Hagen

just And But quarter you or if leverage then positive. I the at roughly? even mind. the the one on end certainly leverage, that’s know low what don’t your unencumbered assets and were of is

Steven Mumma

tell Hold on a you. second, I can

pledge at $X.X you have position, securities million billion. If about we $XXX versus our look

significant some asset borrowing we have borrowed have that again couple of a amount again. capacity not classes historically We

that million, our loans We book. $XXX currently mezzanine finance at million are or have in we approximately ways $XXX of to looking that multifamily

the have We be will levered period in due it's in securitization and that. call XXXX, portfolio we three so distressed residential have expectation outstanding March that its probably about under something at to year the sometime that would

money spoke when capital you counterparties years lend to five relief assets those have question against the against seen We from seen different none. XX ago, willing come parties had first we So, previous willing in the bonds. we marketplace have more Freddie today your to some additional into increased what marketplace and financing And have securitizations. have is, loss that we I probably to that about K lend

financing We days available doing classes, two years higher we asset from stable at those to have large ago. rate advance from XX three even maturities much years for banks, very than were

the marginal our the at company between of on so REIT, learnt only of we company, the our the more depending will balance agency assets, have have components with we our have us assets times assets, be liquidity higher. we run right. any go types I to comparative in depending mean of really ratio at we to it's components sheet. safely think and I on more leverage but leverage ratio understand If we not our look around can balance kind levers never then sheet lower. X.X be X.X go the we to would and we that the that leverage, securities, loans, what So If of would leverage do a will be mezzanine those you in And

Operator

And question comes from Thalmann. Nolan with Ladenburg Please Christopher our next proceed.

Christopher Nolan

net a comments little what detail was in it the interest to quite that? your around higher quarter, driving margin The clear in me that could wasn’t give

Steven Mumma

earning related piece, another to was a multifamily we attributable the largely of yielding As security. low added it first so asset is piece double that increased that to digits Freddie so K loss balances,

a net margin contributes margin. increase relative the margin is yield the were K loans trading interest experience general, of And a generated higher value. that interest-bearing of because for has so fair accounting to But reducing balance quarter. noisy obviously the And underlying and of to doing a overall that that which So, Freddie lot sheet. been the on better just going very had of larger that in the rest residential balance, our then distressed distressed that’s collections we yielding loans, nicely market a position continue a the to to it accretion, relates credits to from higher generate the portfolio as

Christopher Nolan

recovery? include the And did NIM million $X.X higher the

Steven Mumma

other -- another income. is That not. did It

Christopher Nolan

forth. indicated assets your are a your and economy that sort of question adding you sensitive growing levered in you what distressed so comments comments given realize that? and pulling multifamily benefits to point around which What of able credit cycle is point investments, towards Follow-up give model the or given of sort back? you might we business will At be any residential start that that do top

Steven Mumma

I number sheet. credit balance obviously absolutely, that’s the you a one when no mean question Well, learning are look

program, the those the XX% broad the areas it that is Freddie the around relates things when MSA in from generally As if country, United securitizations to so, are represented specific of look portfolios swap have across we're are -- and large States, of you of there K we country. a do largely of our the at that a some but centered a those entire

So now X,XXX you that or know we reviewing probably across, looking at properties over have multifamily underwriting. we're

So we of a financing, different then individual And when we properties. specific mezzanine get lot a pretty at good are into loan looking we MSAs. make

So, we has to because been it's there MSAs don't or overpriced that is lend like think into particular that direct we overbuilt.

have are because some little are looking what you doing new assets. those are But we of on. credit in loans decisions. residential Distressed at underwriting we that a about residential credit are protection hope HPA from those the we is assets any old, years talking elected that we XX is different putting you assets do so are clearly So,

competition we that very criteria like when we it's adding some growing portfolio and non-QM in have the to willing some we think selective accumulated the we are not I sectors. that’s our one as criteria do and reasons fast because credit loans grow, their why not to loans lowered to it in of are as has portfolio of

properties at. all it. across how the properties, monitor So, things and We at otherwise, look our are We we deals on K and individual look looking do flows do those changing. multifamily cash

high. So growths Occupancy are everything rent strong. looks very rates strong, are far,

we still point to have particular about try look the that continue classes have into that the and be particular markets here starts today. better that’s the multifamily opportunities could no But we that’s is if XX-XX, economy or are shift something You asset had we'll do have in steepen thought will But portfolio but have trade not and to there was are -- issues to agency be selective to sit curve feel very designed multifamily we we if XX-XX we right the we that, that, XX-XX, eventually avoid, resi, may we good where going look you going. question, it environment also cycle to that, now, the to. multifamily issues resi, or at as be sometime at could the start where residential you are some in to think but

Christopher Nolan

rates? on to focus given fair i.e. say increased and balance increasing forth benefit asset it so that your sensitivity making sheet from more your that is Is long-term your K-series higher

Steven Mumma

of know, incremental how really it I cost raise to we the the for are a the yield don’t good yield, put higher on higher don’t Higher long-term our spread as ability to that the our from of investment a A us just cost lot. you flat that of It's gives I our really basis, capital. but better than the look higher are curve do own. to raises perspective, of really if It whole rates on assets financing fast widening a current spreads pressure we the as but in the the the asset depends liabilities investing get raise financing. other an whole with to if nothing we assets mean, rates to lot accomplish rates. our all, yield, is asset relationship

Operator

with James. question Raymond Stephen Laws comes next Please proceed. our from And

Stephen Laws

just and loans and new mix versus you again the couple covered but to hit A capital wanted these already, them but on during number things, of need the touch of on portfolio quarter. sold a base leverage some for you

portfolio the more decision-making and utilize as quarter. ATM are shifting the opposed recycle in think you forward? as selling, anticipate about we those capital process leverage to capital sales assets you you of that or move as commented or new monetize mix for higher the and some you release program, you your growing to press identify do decide Your the How the that fourth what's

Steven Mumma

has program. you is would loans a some to lifecycle for shortest the the own from the I a think lifecycles holding say do kind we duration is assets portfolio loan are assets asset loan program more the by really, with the solution, so your driven total from the sell you consistent net margin, much improvement by capital value and then loan get to of of really debt the intention lifecycle The exit loan. is across which the probably return the look paying that distressed buy there margin but rate the payments increases different plus credit The if period. borrower, loan. borrower different I of our And gains figure our driven right not than that because the the when loan distressed all mezzanine out to the the

So, periods to you trying the obviously XX think we loans gone buy are you gone is up. loans that XX but the to as like cost those would new also selling as and The up of holding month, to of loans. are to we are selling into loans have comprised, are pricing loans, those cycle

it is totally So, assets. longer-term to on you a do non-QM non-QM where we are the you in those different a play looked got now market, credit making really and securitization

bit little holdings a cycle. So that's longer

that invest while they couple assets the program Freddie of most now we a and XX-year K the we of are them. expectation assets them we sold of have right in, So, most the is

holding look so, think analysis they we continue to worth our it's perform what pay deals selling. where an K to going to us do the long-term and in the are And Freddie the whether market will we at relative collateral versus the

the the expense looking mean to of market today at and is capital, where it's no those our other common really really of equation. we how is can of constantly hold can it that So equity in we there capital. through the those parts invested. fine then not and underlying we to currently one we in of to relates periods can most looking capital line those at liquidity what how enter And as capital to So, and types lot Company? moving assets. about and we There's not options. with I financed that’s the the There and simple impact that overall on are marketplace it's quickly cost capital does convert. both we preferred And base a what of can financing ratio, raising determine a opportunistically our relative do portfolio, the get invest then of

Stephen Laws

differences to versus maybe the into that question earnings power we is the consideration significant negative the positive a thinking the GAAP on dividend report take follow-up number versus income taxable Thinking dividend? from when there Company or any about either need are about posting earlier, the you

Steven Mumma

to your not think, extent unrealized income distribution in the earnings, does gains your GAAP that requirement. No, have count you look, differences activity I typically unrealized as is yes, taxable taxable there a

but this we're grow to to-date, last would capital to grow at think Company the in front go tax of looking we a mean overall our us we I the are business distribution, and the really the year And really continue of numbers about at back taxable. -- was look of base Company. but trying our performance in to in So and to generate at I allows dividend our -- and you if of XX% trying I maintain looking say which competitive me, dividend the general are marketplace,

Stephen Laws

quick And question. then last one

there. materially structure? management consider I'm the the one-time Or But as the to on need I are internalization earlier commented you not that the going change You expenses to correctly around of we probably paraphrasing any process, think expenses at there take least run won't is internalization place? through

Steven Mumma

are We go XX June to a them in of year. still next to of contract mean in the the existing I come trying resolution. to allows process

We an have have an to will agreement. agreement are think an trying earlier exit, to we to I and come

it to like and or of in At point, what the looks this be it what comment so, discussing like. we not obtained will don't I'd exit process And not. -- about are looks still I how that

Operator

Our question proceed. Instructions] from Please David Jones Trading. next comes [Operator with Walrod

David Walrod

impact the you are going portfolio talk looking that the that quarter? into you about your this had how quarter? Can fourth pre-pays at And and on

Steven Mumma

contribute portfolio significant doesn’t The arm the Company, less contribute fixed a amount and margin now although, It that $X it something. does rate billion. of portfolio is than

it went rates X.X%, decrease from that -- but to arm still the not a in significant it's so a return expense, that net the In do we for movement change anticipate that fixed hedging dropped actually is don’t in convexity portfolio, doing to the those decrease looks continuing the thing Our amortization nothing was of of the even significant amount a ours nothing, the relate $XX million the -- that. X.X% dollar that, portfolio. interest risk spread agency of was No but X.X%, while security the driver of investing exposure an to slight assets. the rate outcome uptick decent the in into that of concerns cost and portfolio. questions us We of opportunity don't on like really

if the continue from a the future, so, not agency, far, some get of And assets it aspects monitor to investment. where the stop bit so may the finally for raising, or go credit it's will that in that return little same the to going and into investing relative to we we back short-term but the the we we sense rates a are curve steepens like

Operator

in I you. Thank I'm would for like no queue. questions the time, remarks. At turn this back showing Mumma Steve to further to over call

Steven Mumma

Have next Thank XXXX fourth in participating it. I February. to forward call. doing things and quarter talking when we that the are the you, day. talk in appreciate everyone look operator, you for very and much. in a We good thank Thank about we

Operator

for your you thank gentlemen, concludes conference. in the This participation program. today's and Ladies

a have disconnect. may now Everyone You day. great

New York Mortgage Trust (NYMT) 6 Nov 182018 Q3 Earnings call transcript