New York Mortgage Trust(NYMT) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company incurred a loss of $0.22 per share, largely due to an unrealized loss on the balance sheet, resulting in a negative 0.4% loss to book value for the quarter [3][7] - The GAAP book value per share was $4.06, and the undepreciated book value per share ended at $4.24, down 4.7% from the previous quarter, translating to a negative 2.5% economic return on depreciated book value [7][8] - The portfolio net interest margin decreased to 3.48%, a drop of 39 basis points from the previous quarter [8] Business Line Data and Key Metrics Changes - The company acquired $890 million in investments, primarily in bridge loans, and repurchased 2.8 million shares at attractive pricing [4][21] - Portfolio interest income increased by $9.3 million to $61.8 million, while portfolio interest expense rose by $7.4 million due to increased utilization of warehouse facilities [9][10] - Non-interest related losses amounted to $20.2 million, primarily from net unrealized losses of $67.7 million due to rising interest rates and credit spreads [10][11] Market Data and Key Metrics Changes - The market has transitioned to a buyer's market, with new originated assets trading at discounts due to rate changes [14][15] - The company is observing a slowdown in existing home sales, attributed to historically low inventory levels [17][18] - In the multifamily space, rent growth remains strong, particularly in the South, with positive migration trends and solid job markets [20][34] Company Strategy and Development Direction - The company aims to rotate its balance sheet into higher yielding assets and is focusing on gap funding opportunities in the multifamily space [15][20] - The strategy includes selectively adding to the portfolio while allowing existing assets to mature and redeploy into future opportunities [18][19] - The company is preparing for a sizable market in bridge loans, anticipating a maturity wall in the coming years [20][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the market is undergoing a seismic shift, with expectations for deep discount assets to become available [14][15] - The company is cautious about the current market conditions but believes that liquidity and cash availability will lead to opportunities [15][16] - Management expects leverage to remain low, with a focus on unlevered assets in the new market environment [63] Other Important Information - The company ended the quarter with $383 million in cash and expects this number to increase as opportunities arise [6][26] - The company has a low recourse leverage ratio of 0.7 times and portfolio leverage at 0.6 times [8][9] Q&A Session Summary Question: Can you talk about the multifamily JV portfolio and embedded gains? - The assets are held at cost basis less depreciation, and the company is exploring monetization opportunities [40][41] Question: How do you view the timing for monetization? - The company has sufficient cash to access opportunities without relying solely on multifamily equity [41] Question: What strategies are being considered for gap funding? - The company plans to provide lending rather than equity, focusing on recapitalizing assets that need additional capital [48][51] Question: How is the company addressing the current market conditions? - The company is observing a shift in cap rates and rental growth, which may offset increased funding costs [52][53] Question: What is the expected leverage moving forward? - The company anticipates leverage to decrease over time as more unencumbered assets are added to the balance sheet [63]