NYMT - Earnings call transcript Q2 2024 | 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 Second Quarter 2024 Results Conference Call. [Operator Instructions] This conference is being recorded on Thursday, August 1, 2024. I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Kristi Mussallem

Thank you, operator, and good morning, everyone. New Trust's joining Earnings Quarter for Call. you York Second Mortgage XXXX Thank and with financial Trust's press supplemental A release presentation XXXX was second results New released yesterday. quarter Mortgage York are release supplemental at press the the Both www.nymtrust.com. financial presentation company's available and website on

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

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

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

Jason Serrano

for Trust call. Mortgage Thank New second earnings quarter joining you York

point inflection is highest a at consumer economy to time debt the is Nario, growth, the point Joining CFO. With slowdown and sequential ever level the in stabilize Nick drawdown demonstrating to is and out. GDP, personal Mah, economy as consumer that me concerns at an evidence savings today organic obvious President; tapped showing where a U.S. is Kristine where a U.S. of a factor that

a in in installed the March in each after a reduction this began quarters. To slowdown predicts interest-oriented first adjustment longer-term balance we portfolio growth to liquidity, and updates understood the portfolio our XXXX, of plan this high strategies. consequently, a rotation occur to we this focused large-scale cycle. typically dip and current which on period. to we from derisk portfolio company where have At sheet to a credit hike of rate would X the a We past time, end for goal preparation would provided execute Our transition higher-level the our earnings

of are second is same We increase which interest XX% a period income elevated show the million, from last quarter $XX adjusted pleased year. to

still are improve find working ourselves subsequent quarters. a this and over to to liquidity in add We position income company momentum great to

While reduction sheet of delaying of outweighs correct the the began X by XXXX flexibility directionally being could potential our have benefit. multiyear created being timing Balance balance up X this frankly, quarters, for earnings about been loss bring better activity and early. in believe could to to timed of such period we in sheet

growth. As reminder, started a year balance for we the phase a ago, sheet

early equity admittingly goal volatility, been which to longer was sell to which was primary and a property mostly to First, portfolio, multifamily has holdings, disappointing. related invest an JV in our real factor took recent book

Given now to recent sales less company X% book, progress, total the of is than immaterial holdings. our portfolio

but exhibited been company past, returns which high allocation low we attractive with current income. the Second, strategies cash a had we has priority. interest raised current income total In

we pick. lending total or As in of a where mezzanine an the originated feature partial double-digit multifamily example, a contained interest with returns sector, loans

we provides reestablish from originations. future backdrop an funding today pipelines multifamily on investments, market the exciting new While for to mezzanine focused model are

third-party for we announce which to NYMT-originated funding. with mezzanine happy provider, million of are allows up a constructed are cap pursuing to a We loans joint $XXX multifamily venture

we the While third a definitive still this party, agreement subject launch with an negotiations is final early September of hopeful to date. are of venture

also Third, we income. wanted to remain liquid, company increase but

short-duration to this RMBS business achieve to core and by loans. Our capital goal Agency purpose strategy is allocating intended

we anticipated raise enhanced opportunities be different near-term in well-timed economic returns. first NYMT organically which to sheet. slowdown, pursuing should after liquidity a cash to accelerated principal has with MBS allows Furthermore, spike for reasons, which investments' both For rate on return the of cut, balance

recourse of the is levels in minimal maintaining mark-to-market credit goal leverage Finally, space for an NYMT. absolute

market cuts, excellent tighter nonrecourse structures pursue spreads to the rate potential developed. has an demonstrated exuberance funding term accelerated for opportunity As broader at initial

advantage We with want continue own pricing this to market needs. I structure. capital take of we're that funding seeing mention for to opportunities also our

and reinvestments that we significant balance high-performing sheet. build cash to to contains accelerate the at As income, elevated our opportunities shares a and concentrations interest book against we out continue discount evaluate of repurchase agency on

the $XX agency notes quarter balance for space. look several investment evaluated to issued spread and supplemental opportunity accretive also risk-adjusted funding We right time our rate the sources third-party Furthermore, to record, overlap our of anticipation additional and factors: our we the proven X of we X of in we own thought senior managing focus scale illustrates impact. seek for related and extensive team have external execution experience funding. Page properly opportunities previously provide sheet, third-parties on for this utilization. X.XXX% the to at additional of needs unsecured funding elements capital track of given strategies at expertise to at compelling earnings that and On seek Lastly, million opportunistically sheet. maximize the areas returns process to scale, look in our wider balance

income low capital. will seeking or delayed recognition of a a current third-party of be factor in As example, cash an rate return

are We cash current on income. focused

mezzanine loans see funding. multifamily we as such, a As for great fit capital our external

solutions where $XXX the decade record maturity of one an CRL against originators the of loans carry track bank these a over X regional impeccable of past the market required are significant a each pullback when in and next reaching We of have billion largest years. witnessed in a loans we of capital are lending

provider opportunities. to who our backed platform excited on total cap is by We third-party a utilize are return focused attractive

on which earnings a call sustainable just to I'll will Kristine? is We on- Fed. well believe variety accommodative are to We response over encouraged discuss pass policy of years that off-balance from this the enable monetary Kristine financials. ago, our options. At to for this portfolio reconstruction, over time, situated and began company our an X the the decision generate sheet

Kristine Nario

of you, highlighting Jason. my I from Thank second morning. main the section information Slides some financial financial will quarterly of the be included of our drivers XX quarter supplemental the on XX I also presentation. results. Good the in information Today, focus will to comparative commentary

excess Slide momentum on key acquisitions our XX quarter. undepreciated in per lower-yielding snapshot and June share $X.X of multifamily $X.XX second for the real rotate had to loans for financial purpose portfolio as on second in compared the into the the our first portfolio company $X.X share as undepreciated The property in net liquidity and half metrics during the of Our XX. $X.X of exposure and the our Agency continue to and results loss our billion quarter billion quarter basis in increasing year $X.XX a solid as year-to-date, billion We at covers approximately summarizes of the portfolio we and respectively, financial a the by investment utilize XX experienced loss first per business quarter, ending quarter. Slide RMBS,

a income from $X.XX contribution to $X.XX the result, net first As increased in quarter. in interest the current quarter

our spread quarter quarter. quarterly by million quarters, increased during and interest million from increased non-GAAP million measure, the X quarter basis XX, the And also first XX detailed the points as net basis $XX.X has Slide in financial Our growing the interest steadily over year-to-date. net $XX.X in points a second to last by in $X.X adjusted income, few

also interest portfolio, and benefit the Our average XX and our swaps rate cost basis financing during continued year-to-date, by our to respectively. reducing points XX quarter

due from primarily million the to have also X real to of $XX.X from million, which deconsolidation. estate We reduced $XX.X loss multifamily properties, our in net disposition resulted

disposition in quarter multifamily estate assets. progress end, of make and assets, We continue real of X to the our disposed underperforming after

of to rates the million to quarter. Volatility $X.X to earnings assets without million in continued expect from improve these valuation $X negative impact We our drag interest the of per investments. in range

due or which quarter, of we as the of per our lower days prices, the $X.XX subsequently in portfolio quarter, in primarily losses million has Agency rates recognized reversed. RMBS result to asset of increases During the final in a share interest $XX.X unrealized

instruments, mostly rate consisting in in However, these swaps. primarily per unrealized interest $X.XX of losses were gains recognized our by share derivative offset

$XX.X We cost due at are G&A previous $XX.X $X.XX in We total from had $X.X primarily share professional properties, nonrecurring of expenses still and market portfolio quarter, or costs on during REO, million, per to recognized of quarter. We lower valuations also compensation from carried losses, in expenses on of foreclosed which sheet, slightly down the the fees. million which lower or operating million prior or incurred decreases declined primarily balance of quarter. million, due had to $X.X the

The and main drivers at loss share We a consolidated onetime a touch per share, also share of will of issuance impairment related per from senior during $XX.XX, securitization, for are $X.XX unsecured Nick to the a multifamily X.X% $X.XX per was the $X.X a which amortization which in declared on to and value reduction cumulative ended basic depreciation of quarter. and recognized expense notes in our first $X.XX down the later. Adjusted property add-back per book quarter. dividend residential million attributable incurred share

March continued recourse end, and as and XX. quarter the leverage $XX ratio notes to the the expansion of X.Xx ratio As to of respectively, strategy and in of million June. Due moved X.Xx in respectively, company's unsecured our RMBS recourse X.Xx, leverage Agency of portfolio and higher Xx, issuance from

by X.Xx, March to up acquisitions the Our on at portfolio partially stands leverage funded due during book repurchase recourse financing. recourse at quarter, our credit from XX X.Xx

we per credit non-mark-to-market procuring the of in for However, our as common longer-term do continue expect a intend recourse share certain to leverage dividend, Xx we to our credit $X.XX financing arrangements quarter. unchanged prioritize exceed from to portfolio not paid prior book portfolio. We parts and

excess look attractive realized We be to yield that dividend of or capital net expenses. I while Nick? from it Nick to policy XX- income, current update. not and share continue income that per an to generated portfolio. current over continue rotate projection the for generate investment We to will to our liquidity interest turn quarter but and reinvestment our we strategy to for only can dividend now shareholders, and earnings our undepreciated as gains remain expect recurring also to market an maintaining the each to move committed assets optimizing XX-month evaluate closer gains at over the and go we

Nicholas Mah

Kristine. you, Thank

the of the past have heightened expectations the later portfolio period favorable for As inflation softening several income more future. labor with quarters for of signs in market a near what cooling growth over active fixed rate and potential is Jason The year. aligns this likely assets discussed, a readings cuts of

quarter, prior higher from in quarter. income a had meaningful a increase We XX% the have total rate of deployment of our net interest available capital. In made $XXX representing we of the acquisitions, recurring our achieving the goal of progress million through

to can BPL to continue lower bond of partnership portfolio in We $XXX issuing portfolio us RMBS it with the are outperform future strategies other levels. Agency allocation. Strategically, we at relatively pleased we loans, strategy available to we points exposure aggregator different quarter. deal of levels originators, million rate capital $XXX In $X.X target market pool pools, RMBS are asset our our through In and basis to Agency spreads the than and obligations, can in XX the this this increase be opportunities. XXX and corporate purchases as by through liquid we bridge trend activity. which capital higher-return the expanding maturities advantage cadence our purchased increasing actively in both asset RMBS, coupon the our quarter, or BPL management higher originator wider. strategy. On quarter-over-quarter we'll More in At We Agency and BPL conjunction of late BPL occurred we of in opportunistic quarter the to aligns these rental the points spec million mortgage time future investor in that a purchased $XXX continue spec wider Agency WAC Agency purchased and move we purchased not RMBS. capital predominantly to deployment billion into near-term In To a when our broader loans by of on into in of in our no the coupon agency growing XX% we larger purchases. companies, portfolio a higher with been exhibit the of resiliency loans, value, loan the of portfolio loans. belied sector light of in first represents in afforded our a a core quarter, at in to in can X.XX%. to have volumes core X the spread corporate half Agency and carry intend of XX% and June assets. discounted quarter. $XX BPL currently chosen our of rotate intra-quarter remains bridge the to from yields increase minor RMBS by In from third X X% have bridge million RMBS expect being mortgage late we late across have continue We focus It we spreads recessionary points spreads of moves acquisitions took portfolio we us payout pipeline spread the senior growth. to historically have of BPL $XXX cycle. the date, beginning, that acquisitions. and split BPL environment, million From participate continue we is a June, widened originator In for pace the also difference buying easing Current basis quarter. Delving BPLs, rates. believe basis Having in BPL through class drive operating with higher and in space. The were unsecured model volumes of bridge an our are treasury flexibility loans. loans we the the an and XX million quarter's business spreads them. to bridge

allowed exposure compelling the market while to scale past opportunity. up flexibility lower cost at buying sellers coupons. with being years, a operational we to bear external and still us from assets Over Furthermore, has gain few able to down the the

avoided have bridge construction. like fringes multifamily these where we is ground-up default more as be avoidance. importantly, to management and such at however, tends projects loss subsectors involved More for It difficult

and in million savings loan maximize a our to comparable such we execution our of selective we the loans rate our rated Overall, of XX and delivered of that than our first of the rate a what for but of in XX also on financing provided liquidity overall profile on Tangentially, rated on of available Our tighter deal first was advance securitization also a our quarter, on been deal reasons has whole executed rate. advent bridge being points the was has repo. third are over criteria superior. In advance deal $XXX that rated has downside with to coincided approximate rate Execution for quarter, and protection higher basis basis credit securitization, financeability history. where which type BPL securitizations, collateral our the the buy. did points unrated an savings we overall

of to the program business is source securitization the for rising rated the year, bridge of Our rental intent go-forward use due structure purchases loans as to pausing restarted in BPL the a XX-year BPL preferred this after the rate we on our financing environment. basis. Also, XXXX

and residential pace purchases are this improvement adding at landscape, for later the we the The some in the execution year. of securitization Given should in critical the evolving mass duration market portfolio comfortable today. arrive economic securitization selectively credit

Starting multifamily. with to first on Moving JV equity.

of limited our portfolio $XX overall constitutes now asset at we this exposure balance million, JV X% portfolio, equity have less With class and than sheet. our this on the of now

aim XX over our lending asset to the and This which at progress this continue up supplemental We cross-collateralized rotate In is one cross-collateralization core benefit JV remaining free presentation, mezzanine relating certain a asset, of make our properties was isolated points, portfolio, we with NYMT. to capital have dispositions combined equity loan to to to strategies. category. mezzanine the historically with into we our

rate properties to NOI. Across debt mezzanine in us underlying that LTVs has coupons service the profile portfolio, with of mezzanine more are senior that lending the fixed This is senior in We trade mezzanine the the lending be many are is interest an digits. average information debt either And the lending book. payments adjusted have average above the predictable XXs general, to accretive rate the is property compared The mezzanine low remarkable. continues double similarities low and performance lower maintaining the on to in loan hedged cap. favorable cross-collateralized even XX. XXX% and also portfolio provided a are the Page that The in on additional collateral or position existing has our of cross-collateralized benefit

mezzanine only and in We the low. X performance with delinquent loan into to our mezzanine We portfolio, and the initial of only any date loan have is there at status on asset not was XXXX. lending experienced loss loans this or X the since class in principal Mezzanine that investment extended. a are or position cross-collateralized other reflective held either value restructured marks of fair Currently,

balance higher for asset a REIT lending fit As the return. a may as the better a of return current mezzanine Jason generally capital sheet discussed, than instead third-party be total generates

deep of Our this third-party see with in asset in space. take compelling strong capital us what our track to the to deploy class managing this experience we record, ability future and provides raise along sourcing with and advantage as opportunities

will call We the Q&A. now open for

Operator

Our Doug Instructions] question first Harter comes [Operator with UBS. from

Douglas Harter

Can hold but strong kind see kind the of you to for talk liquidity would talked there, the the spreads you kind is potential you see level today some a little compare in of in to you decision and securitization think kind markets continue the kind where to returns more of at high offsetting point wider that of future, you how of future? that just about bit the might a of and you that the see returns the about trade-offs

Jason Serrano

market, teens after That call avenues in securitization. start limited or see go in type of a is -- Yes, Jason. growing a in of class core years, X one and returns The market It's -- X is is can ground-up to activity with has there's that -- double-digit in it that we larger that asset down, lack general more activity from to activity. which middle-market today that's as that transaction previous, There the financing scale, it, let's market given well. area scale there generally different has has I'd you which of I'll front just that. us opportunity the lack a equity called available X of of total in multifamily the the origination what's new is production call the is

have the the careful being see part our focused on in we're market and we're on we to we in selective do growth. when which of market, So volume be

the the in nature utilizing place we're the available pace selective takes path of that pattern growth the the and that there. purchase So seeing -- assets that the is we're that consideration of

to On been are Nick over of course kind mentioned, we'll over moved of months. grow portfolio took side, our grow in. there leg but better on for in to in the the into looking the We've that our Spreads as to that agency wider -- we to pricing market past the advantage -- for to opportunities space year. when X volatile selective We it's want very been to leg of large recently, this just out the do form, have enter in very and and look market. are continue the

to want be we So patient.

today to buying excess today. want consequence. -- more a capital we're of and we at looking proposition And have value long-term X-year our we're Assets a medium-term for a

Operator

with question next Our Jason comes JonesTrading. from Weaver

Jason Weaver

income by curious going I'm a think right the the of one the them And and high a probability about from what agencies. in now. time Nick, we've Xs late, you the possible see investor expects yesterday risk talking in with about XX-year famous focusing seen softer just next up with about on economic prepay this I sector XX-year I you thinking did how trade we've in comment data being as priced coupon that about said you're fixed low forward. -- had rate you in X.X year. some the of were we're Along of then XX-basis-point coming cuts rally think

So taking account. that into

Nicholas Mah

Yes.

paths I been of the rate interest the think, been as spectrum there this terms rates. declining. I of has a potential in to interest in of agency volatility general of speaking, amount fair and rate And positive say, in clearly, the generally movement expectation future space would has

here be things So widen there ability tighten the pockets spreads longer of to term. in where there's tighten think Clearly, from that going time out we in. to do an for is and

to to the the as alluded we're Jason kind that. To agency assets residential on because continue that continue as rates spreads that credit book, accrete have opportunistic down try of X% we have, And higher in targeting We though, to the belly to So yes, there to different ability coupons of profile if think we our that bit well. more start your carry I our discounted to, to be towards more said, come continuously coupon little profile. do are that been answer a question, and tighten. gravitating we at going has With coupons looking strategy. due

size diversifying to where little given bit, the is has agency a So of portfolio today. the it grown

Jason Weaver

that appreciate Jason, within then, the of more your of And dividend? as how that focusing wondering, then complete portfolio transition. income. about current I comments -- think do And sustainability also regarding account, it. the the the I dividend towards on the that your sustainability of and into reporting the with you the Got repositioning of visibility taking was you

Jason Serrano

Yes, and excess to a number we're I'll month our Kristine. for with I'll the on look achieving and respect growth this We at our of every our with we and well the that as that were single our portfolio structures relating liability plan underperforming to comments parts with to approach. as over current and income NIM spread There our have our are projections of assets book. it evaluate pass Board our start

equity. those One of is JV

portfolio Another don't total And classes as a one are current meet as SFR those is the but so holding. within dividend space. oriented the asset return, --

goals. our we're looking those rotate other in So to that those or program can to assets into either assets cases, achieve a

portfolio here respect the I'll one underneath component it the potential real kind with is of that of And kind to of Kristine, hidden scenes. over, that, surface earnings items. has to actually So kind other pass behind enumerate that's that just our that's of

Kristine Nario

Yes.

current dividend. our with continuing move closer progress comfortable we're to essentially, our and So to

to as our also -- As of operating higher we've we've more recurring assets that income. our lower-yielding some such opportunities in our And Jason assets our optimize we've eliminating it implemented and relates rotated to as JV investing, book, expenses, activity generate strategies see our costs. we other measures operating into into lowering essentially mentioned, increased cost

Operator

comes question with KBW. from George Bose next Our

Francesco Labetti

adjusted filling is value Can This actually in Labetti for quarter get please? book on date, Frank to we Bose. update an

Nicholas Mah

We value estimate adjusted between up book quarter-to-date. be to to Sure. somewhere X% X%

Francesco Labetti

Awesome. And then the Fed year, does to over multiple does portfolio that the forward? extent your for cut the going times next change the how outlook

Nicholas Mah

outcome I trying think to the picking the book to by a will position and that that to are be for positive portfolio, able and be ourselves on assets I are we think we growing the that. picking capitalize by

to So X of that for rate do whether that, as we we and or would arguable believe cuts this the rate curve be fixed several believe not that going will and to lead assets. if to more X come it's income year, or repricing or a the be but positive

asset ramping up our think we outcome. are So as towards in that portfolio have eventual is also the firmly and I mind yes, selection that we gearing

Operator

question Eric Hagen comes Our with next from BTIG.

Eric Hagen

if don't Just following your But down? rates sensitive portfolio of is some voluntary pickup agency think as activity up we maybe as sensitive I coming the it being know or rate a I of on to as reasonable interest are that in very RPLs interest expect interest sensitivity. rate rate loans. mean prepayment typically in maybe

Nicholas Mah

are are RTLs about mentioning And you talking like or you transitional -- RPLs, loans?

Eric Hagen

your loans reperforming in Sorry, -- the loans portfolio. legacy the reperforming

Nicholas Mah

now the lot relative somewhere in -- right Yes. digits. where increase at prepayment in is higher We have are borrowers rate that be prepayments. reperforming. The a margin, out-of-the-money on-the-run A coupons could believe these the there to are. of coupons pretty Legacy mid-single

potential history increase, a Also, it have So substantially. not we that believe but profile. pay choppy credit RPLs of could

of prepayments. But options rates for the move somewhat down do when borrowers, as these and creates we also that there do prepayments terms in cap historically, So up seen other are expect slightly. to of overall, have we a come

Eric Hagen

Okay.

more of risk? resi on see and respond a cost insurance? risk a mean homeowners credit to being higher portfolio. I estate Do And supply is Just values limited for real manage think the there little a to how potentially bit that like more even you you values? housing do the way that the might

Jason Serrano

Jason. Yes. This is

the also is absolutely space So South a overall, that definitely is as and further the HPA to that within multifamily in well. headwind happening, And growth. particularly

the markets. where I can -- you rental taxes see of see slowdown NOI markets, that in And have increase month investment of you in in the also valuations in rental respect that to concern and the have I with rentals supply you're given higher market, costs, going those the is throughout short-term and think particularly that, with investments short-term those increasing due an increase to short-term waned. the the on --

intact, a of home the So I think side increase funding of had last affordability. lack like in you markets the levels months, given supply costs pickup massive the you're as literally that's part high where the why of in reason higher market supply Austin, the seeing and prices in just X historical in side. Supply has kept

that, of then still but rate you of has entire that gets in, cost impacted, it's through a mortgage when still that a weighs insurance of all I think that's It's where super the and the affected, but our and look majority incrementally, piece the fixed concerns the country part where you smaller are. that not puzzle. really So have is NOI --

watching So looking exposure. our particularly we're and those to are is that minimize bridge the book within markets very we're carefully where BPL

Eric Hagen

comments. Interesting interesting. That's

Operator

questions Thank I'd remarks. you. turn closing showing it like Serrano now to no at I'm further for back Jason to time. this

Jason Serrano

speaking forward about you this quarter call, thank day. very we third a on much all joining our us Have to results. look Well, and for to great you

Operator

Thank you for your concludes participation program. in This the today's conference.

now may You disconnect.

New York Mortgage Trust (NYMT) 1 Aug 242024 Q2 Earnings call transcript