Filing identity and reporting period
Important issuer discrepancy: The supplied filing is a Form 10-Q for New York Mortgage Trust, Inc. (NYSE/SEC filing identifies NYMT), not Adamas Trust, Inc. It covers the quarter and nine months ended September 30, 2020, and the financial statements are unaudited. Confirm the intended issuer before relying on this summary.
NYMT is a mortgage REIT investing in residential and multifamily mortgage-related assets. Its stated objective is long-term distributions from net interest income and capital gains.
Financial results and condition
| Metric | Q3 2020 | Nine months 2020 |
|---|---|---|
| Net interest income | $25.5 million | $101.1 million |
| Net income (loss) attributable to common stockholders | $91.3 million | $(399.8) million |
| Basic earnings (loss) per common share | $0.24 | $(1.08) |
| Comprehensive income (loss) attributable to common stockholders | $113.8 million | $(436.9) million |
| Portfolio net interest margin | 2.18% | 2.64% |
| Operating cash flow | Not presented separately for the quarter | $76.6 million |
Q3 net income included $81.2 million of net unrealized gains as markets recovered; nine-month results included $212.7 million of net unrealized losses, $149.9 million of realized net losses, a $54.1 million deconsolidation loss and $25.2 million of goodwill impairment.
At September 30, total assets were $4.62 billion, liabilities $2.37 billion and stockholders’ equity $2.25 billion. Cash and cash equivalents were $649.8 million; cash, cash equivalents and restricted cash totaled $704.6 million. Book value was $4.58 per common share, down from $5.78 at December 31, 2019. Common shares outstanding increased from 291.4 million to 377.7 million, principally following 85.1 million shares issued in public offerings for net proceeds of $511.9 million.
Repurchase agreements were $672.5 million, down from $3.11 billion at year-end; all remaining repurchase financing at quarter-end was secured by residential loans. The company reported overall leverage of 0.4 times equity and portfolio leverage of 0.3 times. Additional reported debt included $138.0 million principal of convertible notes due 2022 and $45.0 million of subordinated debentures. The $1.08 billion SLST CDOs, $268.8 million Residential CDOs and $88.8 million securitized debt were described as non-recourse obligations of consolidated securitization entities.
Material changes versus comparable periods
- Q3 common-stockholder income rose to $91.3 million from $34.8 million a year earlier, supported by asset-price recovery and unrealized gains; net interest income fell to $25.5 million from $32.0 million, mainly reflecting a smaller portfolio after asset sales.
- The nine-month period shifted from $89.5 million of common-stockholder income in 2019 to a $399.8 million loss in 2020, driven primarily by first-quarter market disruption, asset and hedge losses, the K-Series deconsolidation and goodwill impairment.
- Total assets fell from $23.48 billion to $4.62 billion. A major driver was the March sale of K-Series securities and resulting deconsolidation of $17.4 billion of multifamily loans and $16.6 billion of related debt; the change should not be read simply as a like-for-like contraction in owned assets.
- NYMT sold about $2.5 billion of assets during the nine months, terminated $495.5 million notional of interest-rate swaps, and reduced leverage. It raised $511.9 million through common-stock offerings. The common dividend was suspended for Q1 2020, then declared at $0.05 per share for Q2 and $0.075 for Q3.
Outlook, management commentary and risks
Management gave no specific earnings or dividend guidance. It said it expected to maintain a defensive investment posture amid COVID-19 uncertainty, focus on core residential and multifamily credit assets, and favor longer-term financing such as securitizations to reduce exposure to repo-market repricing and liquidity shocks. Management stated that available cash, financing and operating cash flow were expected to meet liquidity needs for at least 12 months, while cautioning that future financing access and terms were not assured.
Markets improved in Q2 and Q3, but management expected elevated volatility into year-end 2020 and warned that renewed restrictions, reduced government support, unemployment and borrower or renter stress could increase delinquencies, defaults and forbearance. About 2% of residential loans were in an active COVID-19 assistance plan; one multifamily operating partner, representing about 1% of preferred equity and mezzanine investments, was delinquent on distributions. Residential loans more than 90 days past due had a reported fair value of $136.0 million and unpaid principal of $157.7 million.
Other notable risks include repo margin calls and refinancing, credit and fair-value estimation risk (including Level 3 assets), interest-rate and prepayment risk, and LIBOR transition. NYMT had no interest-rate hedges outstanding at quarter-end. It disclosed a subsequent October 2020 residential-loan securitization generating approximately $299.4 million net proceeds, of which about $236.0 million repaid residential-loan repos. The company reported compliance with repo covenants as of November 6, 2020 and effective disclosure controls as of September 30, 2020.
Important facts for investors to verify
- Confirm that New York Mortgage Trust, Inc.—not Adamas Trust, Inc.—is the intended issuer and that NYMT is the relevant security.
- Review the drivers and accounting treatment of the nine-month loss, especially fair-value marks, hedge termination, K-Series deconsolidation and goodwill impairment.
- Assess liquidity quality and refinancing exposure: distinguish unrestricted cash from restricted cash, and recourse repo debt from non-recourse securitization debt.
- Track residential loan delinquencies, COVID-19 assistance, multifamily partner payment performance and subsequent credit-loss or valuation changes.
- Verify future dividend declarations, financing availability and terms, and the effects of unhedged interest-rate exposure and LIBOR transition.