Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Second Quarter 2023 Financial 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] This conference is being recorded on Thursday, August 3rd, 2023.

supplemental XXXX with results and Trust's York release quarter second was press financial New presentation Mortgage A released yesterday. release website press on the and presentation financial Both are the company's at www.nymtrust.com. supplemental available

can website. hosting a Presentations of which Events Additionally, we access the live the company's are in of today's webcast call, you section &

of historical, statements the conference meaning call, At this me Private like within during would the deemed to inform statements are Reform made XXXX. not may Litigation time, management you be forward-looking that Act certain Securities which the of

in Although forward-looking assumptions, Trust New assurance be York believes Mortgage give can are the that reasonable expectations on reflected expectations will attained. any based its no statements it

detailed that Factors and could time the time release cause in and to expectations from materially Commission. filings and risks Exchange are Securities yesterday's with in the company's to press results differ actual from the

Jason, Executive this ahead. at Serrano, Jason Now, Chief I introduce time, please go to like Officer. would

Jason Serrano

for call. Good joining and Chief you. Thank quarter Financial Ma, Officer. me Kristine is With XXXX President; Nario, morning, Nick second our today Thank everyone. you earnings

some more by then additional touch who I and portfolio call commentary discuss respect Kristine, on results before passing market quarter will providing information the to and will will quarterly to our our the detail. begin Nick second in briefly update with provide market opportunity.

our to inform few have highlighted we help quarters, market behind page on past management and supplemental, of seven various plans the Starting key decisions. graphs over our data company rationale

the The indicated economy in time, the measured predicted at months showed a quarter, which US to since table time curve. would out recession a the given data of of tenors recession XXXX. we of inversion XX in the XX be this that recessions the illustrates correctly that different Last yield

effective at to the ever. on and most record fastest rate is recent the has funds bring occurred X.XX% the hike pace rate The

growth hikes forcing So, not economic dented Fed materially higher the question is unemployment? have why the

seems story of the XX% and be fiscal the into neutralized through fiscal biggest by looking is rolling a year-over-year materially government rate this believe be growth, US over easing answered move. balance $X.X growth trillion basis were can continued year the sheet I to and financed economic XX-month Fed's Current policies. substantial spending.

spending only months, which $X spending. is accelerated not level Federal is has up recent from but in XX% trillion, pre-COVID

is Astonishingly, when unemployment this a pinned is X%. below time

full before, administration Congress the And is ratio the GDP seen from X.X% never of running assistance employment. with at a a time

$X projected AAA payments US week from situation Fitch ahead demand destruction with AA+ XX% recently years two to continue the earlier lies and caused rates. interest debt take growth constraint ago, to government took sales expected QX downgrade offset fiscal in to revenue to a offense a trillion higher serious the of with debt by X% US physical this of from this to and

the healthy Maryland, sector, not the investments Many as reflect credit economy For credit in our as do is advertised. downturn. for asset pricing not

entirely However, past is over this six not incorrect. the months,

bankruptcies However, defaults highs, to edging Not to with up two inflection hitting one see consumer personal strength can year-over-year. and three-year credit auto mention credit an respectively. XX% point and

Looking $XXX where to regional at course, $XX stress only billion, deposit cohort observing not Deposits I the regional of thus the which, showing the have cohort the the is with is system. page in far, Banks banks billion banking addressed are X, declines, market reside.

week assets. billion the FDIC capital banks the in requirement The this FDIC anticipated a sorry, Board highly details made $XXX was ago, Exacerbating announcement with changes of to provide Director' week. these for concerns by

lending requirements The sheet diminished capital desire recent further The changes address to the bank's and address charges International failures. increased and Standards with change of X capacity. to align balance Basel capital bank

sheets assets are such will strategies as PacWest through bank Due case balance the merger. bank the we to shrink to more to assured, where see of California this, it mergers, Bank grow short recent is of shed

is different ways. here NYMT presented two significant opportunity in The to

banks. pricing sales are seeing portfolio we from First,

increase We sheet in differing year expect types flow to and this cleanup investments particularly and attractive include sizes bank to the at see asset activity. with more prices late potential trades of for

grab an Secondly, lower increase market coming we development competition. requirements see larger to as market higher NYMT for expect this This coupons share opportunities and stringent believe to more We in to a multi-and within favorable we which lending us. months, extremely single-family, book exciting with translate earnings. our is given lending to banking will

Moving our is on plan. to continuation the of X page strategic

first flexibility April at As today, and discussed the operating and afford Reducing Fed's the liquidity, market the achieved time, after low at in us XXXX, portfolio the past, the curtailed through coupons excess investment load in through debt low-cost lower hike. shortly a activity runoff reallocating structure. rate we sharply that not

risk tight Not in believe only peak avoided avoided at structures. to of from capital loans produced the material, valuations half credit surface do from that extension NIM we XXXX. We we locking have our risk may second financing material over

are more loan asset reset is constructive funding of deployment consideration with risk-adjusted earlier. superior increasing improvement With from higher than higher this coupons our we Today, selling have available capital opportunities, returns costs. alongside on pressure of as in regional banks,

market balance investors. the out the to for on short-term sacrifice On page XX efforts many sheet. earlier value right of capitalize We Unfortunately, our to to stepping shrink shows it in Bank's longer-term income ways. top interest the was

This And believe intentional. was right the we call.

forecast by to liability While mismatches did for repeat consolidation presented liquidity an today's the from asset it, in issues pressures expect financial opportunity we didn't history we banking market community. with and

QX on Agency space, after two Earlier powder space. of We primarily liquidity the to Bank investment forward activity increased impact sequential within to the improve We of this are issues, was performance near-term. as interest within declines. looking especially billion dry made in unlocking income capitalizing $X.X on quarters over look the of Regional the by

before to Kristine. from highlights Page XX, on quarter on Quick the passing

sale, held total. properties performance positions Our this by multifamily period taking in impacted for in XX was our JV negatively to equity impairments

to adjusting detail taxes, discussion, which increases and share to and As under portfolio insurance of caps $X.XX. which contributed market contributed loss Nick for impairments in more discuss -- we Texas, and will in in of Florida higher per $XX after particularly to managed the undepreciated million, took

results of mainly equity Including to million and reduced book impairment quarter, decline portfolio by sale our in adjusted the over activity properties, adjusted $XX book JV X%. our the value contributing just operating four of value

million we our the Agency balance increased discussed, As of sheet $XXX quarter with in $XXX RMBS. acquisitions, million including of

credit increased of the times, leverage low quarter With to to our overall. last our to QX. is from flat leverage this company addition times times increase, reflecting maintain Due our high company at of flexibility in leverage the X.X previous exceptionally agency in recourse Utilization X.X from X.X we still ratio bonds, desire quarter. book within maintain

the At call financial Kristine? this time, Kristine to commentary. to the I provide will pass

Kristine Nario

Thank my today, results. will you, financial comments commentary Jason. morning. In my the on I quarter second focus main of Good drivers

snapshot and key the results for quarter, portfolio quarter. XX the Slide for on financial covers the metrics summarizes XX Slide financial Our

in share quarter, per undepreciated income had As per in Jason compared $X.XX of discussed, quarter. the the $X.XX earnings share from company $XX.X the to of in first of had the a contribution undepreciated $X.XX interest share, per net down share million, second We loss of as first $X.XX per quarter.

in during for the a bridge our to the as in quarter. in as $XX.X net during the investment income interest the quarter, million increased of income due decrease income portfolio. offset the increase RMBS to is of first The expense increase the continued million This Agency by our financing the swaps. was RMBS well quarter by in offset $X.XX benefit purchases million a quarter which due the interest Our interest was loans. in million runoff of adjusted adjusted to to SFR short-duration offset higher-yielding $XXX related financing of made in-the-money our rate interest interest interest $XX.X from Agency of BPL This

non-interest-related share the or income had of We $X.XX million $XX.X quarter. in second per

income, per an second properties in business JV per continue from plans rents as multifamily drive increase share $X.XX higher. quarter, consolidated the contributed implement $X.XX Our to in properties to share

Our unchanged first $X.XX per income method, from in under equity share contributed mezzanine accounted book the loan quarter. for

an during rate recognized losses interest million in and swaps due and to partially mentioned, offset the book of interest loan our recognized SLST, Jason residential quarter, As unrealized gains per consolidated the of rates, $X.XX impacted caps. our investment or $X.X pricing we on which increase by share in

earnings we in carrying million. costs, GAAP of a for the held properties out had per quarter. properties this the share GAAP consolidated of to The of of four impairment in GAAP compared during quarter. interest After a shareholders common did significant that sale impact addition, multifamily an net our four XX the considering of not as loss resulting holders, loss resulted share determined sale lower to or In $X.X sales on the property non-controlling $X.XX million consolidated have multifamily valuations $XX.X

to quarter, base on for million to which $XX.X included in in reduced to by amounted bridge declining increase due interest BPL on in net slightly portfolio, was increase an our expenses fees estate $XX.X operating change rates. expense in previous quarter, operating portfolio and partially due real are million on payable the from consolidated This expenses. servicing offset G&A Total the up primarily mortgages

quarter earlier, value attributable quarter. four declared and negative amortization consolidated basic loss The adjusted at book properties cumulative ended the share, the As of our during book the $X.XX per during the depreciation primarily of main $XX.XX, multi-family $X.XX value recognized the were due multi-family Jason the adjusted which for adjusted quarter. a per four and consolidated properties impairment share drivers on and change during value mentioned to sold share per book removal back X.XX% $X.XX per dividend of return add economic share, to was

ratio times of of leverage ratio end, XX. recourse X.XX times leverage March increased as times and recourse X.X to the times X.X from As respectively and slightly quarter portfolio company's and X.X

the our slight The relative the is repricing due cost, margin our comprised leverage collateral remaining in subject RMBS. and agency credit. of financing counterparties. of which our exposure XX% is newly XX% quarter low debt agency acquired of Currently, historic to only XX% primarily to liquid While mark-to-market highly no to of XX% is remains the have to financing levels, increase

fixed in and can $XX in XXXX. on have slide bonds we In million unsecured million XX, see addition, debt $XXX due due as subordinated of you of XXXX

near-term mentioned to maturity our previous cash corporate us have quarters, to avoiding by debt of related As maturities. bond allows in holdbacks flexibility the more profile

share $X.XX common $X.XX paid down dividend prior per from quarter. We a to

per With in that earnings we projection XX-month not the the to each interest next our said, from to continue quarter We income the given we also liquidity rotation below note expect that net evaluate asset the policy to at excess our can our dividend but the portfolio. investment be ramp over only that capital of gains undepreciated share look and to quarter. of generated XX remain wanted realized our dividend, current

will that, market the to turn it I and over over And strategy go with now Nick? update. to Nick

Nick Ma

Thank you, everyone. Kristine. Good morning,

quarters. few past the over patient remained have We

capital a in pace, conserve be to opted liquidity approaching and In have quarter, doing cyclical a may hiking cycle, peak after the the we to rates. environment value. investment its favorable rate for We longer-term noted historic deploy more exceptional Fed's by

However, of more economy. investments. overall effect From there portfolio on is still a ultimate actions taking Fed's stabilizing are in interest plenty of path rates the inflation, we more our of and now approach perspective, the asset the on portfolio cumulative a through positioning the balanced uncertainty decline

still on assets a can credit are through that potential We focused downturn. be acquiring resilient

the times of Investment second since second quarter. quarter. purchases million almost curtail the we quarter acquisition. had And prior three amount activity than XXXX. grew $XXX This the more in the meaningfully of We in is portfolio highest

in RMBS. in stringent spreads We origination Notably, underwriting increase, pricing bridge and second more that those loan begun our capitalize to unfolded agencies have criteria. on to in also $XXX million Agency purchases partners elevated of our as BPL adjust the were quarter. acquisitions

focus increase and decline in a smaller perspective, for That asset in When a Over that a of were today. these initially the smaller as with targeted reported of will those an few have entire maturity-related positive result reiterated the bridge in amount portfolio cognizant assets that effects the significant even. commensurate our reach delinquency is credit size. BPL deleveraging portfolio, a purchase activity from across our BPL of true, on portfolio from This as decline maturity. portfolio defaults dynamic in but rapid base. duration our loans a last we are Both particular, its any a on and short peak bridge management given higher we is quarters, we seeing opportunity, more we holds

to highlights the XXXX Page the declined portfolios $X.X in peak The billion QX XX on today. from BPL of chart million bridge of $XXX

right now next XX For each XX aged that seven months, an up XX.X delinquency past the term is incremental times net of portfolio size. Furthermore, to bumping bridge our reduction BPL months, has materialized almost portfolio more original portfolio in over the the experienced average months.

significant continue acquisitions the and ages BPL of rise a bridge expect down. pays the will delinquency We portfolio to as that absent increase percentage,

performance, the we past bridge fees cash been equivalent With due of amounts resolving not months. and cash a interest including XX% still respect on On are a have Not late the amount over past Those paydowns. proceeds. ancillary in interest portfolio only of consistent we by BPL with flows of few interests. principal has portfolio. interest received delinquent many their flows scheduled collect of the bolstered to flow default the a but further stable to across extension fees, of ultimately the assets cash relatively are XX-month catch-up our form average, come That trend the

Overall, of point the is bridge as as assets still quarter. to across goal our the invested Principal less residential are to loss credit, end BPL resolution bridge X as of presenting risk-adjusted of total amount basis returns. muted portfolio navigate second losses expectation, loans of BPL we minimization. to within compelling The we the see date still the with performing than

assets. are a with scarcity Because are relatively Rental credit-related housing many mortgage by bridge for the housing higher Existing backdrop still cycle. rates we locked low. of market. only their as BPL winding loan other are of lower been whole but brought sales not into There our lingering positive homes. This these the a for HPA into on loans, rates despite our stable still the down is portfolio a BPL factors, home tight also is Fortunately, at and decade housing borrowers has mortgage inventory hiking

to we RMBS also add continued positions. Agency quarter, the In our to

Today, All, hawkish wide from while there and April overhang of We May, crisis more into bank the a more several moderated XXXX. the find the QX debt attractive coupon of during when an credit have risk of a In exposure current a to significant the the we spreads. not given taking market macroeconomic which this Fed had periods. since dissipated. broader believe May, spreads in was tone negotiations. Agency to a provide We environment for however, profile investment that sector MBS book, MBS escalation was outperformed This June, and diversified culminated regional recessionary agencies ceiling to Agency response our peaking have in data. as these in through risks historically

interest due but a and to stand coupons environment, ability only We into also from having portfolio spread to versus not benefit also in building production scale assets. the today, that to higher better down a rate present carry profile coupon

of is quarter payouts, minimal spec As our X.X% aggregating $XXX additional liquid for been as we have entirety about agency prepayment pools. homogeneous And it spec million of the protection. on of portfolio consisting stands average relatively end, still X.XX portfolio the coupon with pools point with

X.X tenors of at book a of duration combination target terms Agency with we times. across with leverage swaps neutral on In hedging, ended of being have used purchase. different the quarter of We our the

in the agencies we increased levered our portfolio, in up. overall have a Overall, as to we apply on our high to leverage across low the we MBS depending book be Given credit expect teens on utilization room of leverage. to mid Agency ramp return leverage

believe be of year. positive for We going second will that agencies into there tailwinds half the the

process liquidation of week, year. failed As the the has XX% of regional bank complete by mortgage portfolios. of of substantially FDIC should already the billion end $XXX pass-throughs This the from last sold be

slowly be and also its We recent Agency abating factors expect peak to has seasonal that the in the rate year-end March. supply/demand volatility market. into MBS Interest since going dynamics better beneficial the to been

multifamily. to on Moving

joint as existing venture core positions, well divestiture of as our positions. of equity continued the management our here the remains Our focus held-for-sale asset

information XX. We second made in that in this in provided quarter regard and the further have progress on have slide

returns We the maturity are also bank in med pipeline debt multifamily the in senior seeing sector a space. growing the XX% at deals of to wall upcoming XX% of given multifamily

rent has X% portfolio more and with portfolio. growth our offset This mass follows our expansive multifamily in see equity annualized Across and pressures and our to X% This inflation JV higher driven rates. been to by XXXX in rent some positive positive we growth rent growth portfolio, continue expense XXXX. in helpful both XXXX, a in

with multifamily far, consistently this the year year, over mass the a Our multiple. portfolio portfolio prepay netting XX% off X.XX times to thus continues paying of

pleased and of are multifamily We strategy met as future. performance the look with the here mentioned earlier, judiciously we'll I into deploy capital the to

multifamily in Now, disposition those positions relating a of to resulted continues executed the our have we JV XX% quarter's quarter. equity in on carrying of value. of realization This made earnest additional two prices the JV are phase, This imply cautiously we by selling progress of process with first four adjusted PSAs the at sales, are in an equity will book quarter. These properties. that optimistic an million although to increase and on two third due estimated $XX basis, are are diligence we they PSAs that close value past the in

We hold to liquidity forward to to sold sales we redeploy able that on sheet. assets. into have to to properties continuing and accretive unlock or be we continued are or these actual though historically that JV continue of the down a the of we the speed provides has properties slowed and been wait sell On will top selling in down has has when market position. outcome. disposition down. some as determine the impacted of This being to The first slump financing whole for the as pursuing activity execution remaining market more properties. equity an There with to XX individually, lines factors settle rates overall market sales anemic a we volume have selling challenges process of than the also groups this, participants from we our actively prices been in portfolio our look combination of initiated have eventual balance to market time Even

will Jason. it that, now I And back pass with to

Jason Serrano

Thank as platform market management value. come our We unlock We're that ahead. to where can you, enables sheet market where flexible and we asset such leverage to challenges in Nick. this will value add this is in We new operating looking a opportunities opportunities businesses us to the balance the market believe our experience can value. liquidity that deep drive and forward seek our believe flexibility

pass to for With I'll questions. it that, the operator back

Operator

you. Thank

the will comes question-and-answer first [Operator conduct Doug from now Instructions] at Harter Credit question We Suisse. Our session.

is open, Doug line Your

Doug Harter

Thanks.

around GAAP the on that of value, quarter, that Just carrying book be comments kind of value or carrying hoping for a the the in economic a clarification four sales that is carrying economic the an would XX% value value.

Kristine Nario

is That GAAP value. carrying

Doug Harter

Okay. But said and that the of PSAs prices $XX the the you two had that you north million then be would that in economic carrying on, --

Kristine Nario

That's right. That's correct.

Doug Harter

better And on why forward then guess you the to remain and for - to right pause sell? just sell, a to attractive is the can if sales to with guess, still of maybe I the waiting sort the now of strategy time continue cash still flows a and about environment I kind push rationale operating the talk taking versus --

Jason Serrano

that. take I'll This is Yes, Jason.

is taken This seeing the and has respect at on items. looking process. patient. reinvesting we've other what operating into at So return a with looking on the to the income capital the process sale for not sale rationale available really the been is total we're that The twofold. One, sale other opportunities and are

larger transactions. a number number of passed have including counterparties taken from and options, portfolio We on in of bids a

the need opportunities value liquidity given higher think continue seeing accept our upside to comes these right better is bid not returning through where point assets, strategy, we with that next that in market. believe, -- the So and we're a position, therefore, we we're some marketing given we we the at

top was of insurance insurers are the mostly primarily down of the property fact that a part and value decline insurance-related the we assets market in taxes so leaving that higher function Now South experienced a of in and some the our in more lot overhead. have of the we in Texas expensive located Southeast on issues Florida, is

like But item that like rent the the in cap as of portfolio. pre-funded operating rates. we're growth that's we're as do transition work the in We with then we transactions those continuing more on overall, an that we budgets the have those properties. So what plans adjustment we a that slight CapEx seeing, and like are to to far already

us business So or as it's those capital that question to in just the find that whether It's not accretive reinvest attractive assets. respect usual we an more exit with of to assets. can point allows

Doug Harter

you, Thank Great. Jason.

Operator

Instructions] like turn [Operator you. would to further speakers At this I to the Thank it any for you. time, back Thank comments.

Jason Serrano

thank update a forward Well, business. business with We third you time with much, respect update operator. Thank our great a quarter speaking and our to you, on call financial to today. you provide have and day. your Thank for you very and look

Operator

conference today's for call. concludes Thank participating. This you

may be now disconnected. You

New York Mortgage Trust (NYMT) 3 Aug 232023 Q2 Earnings call transcript