Filing summary
Entity discrepancy: Request metadata identifies ADAMAS TRUST, INC., but the supplied Form 10-Q is for New York Mortgage Trust, Inc. (NASDAQ: NYMT). This summary reflects the filing text provided, not an Adamas Trust filing.
Business context and reporting period
The unaudited report covers the three months ended March 31, 2019, with comparisons to the three months ended March 31, 2018. New York Mortgage Trust is a REIT that invests in mortgage-related and residential housing assets, including multifamily credit, residential mortgage loans, and Agency and non-Agency mortgage-backed securities.
Financial results and position
| Metric | Q1 2019 | Q1 2018 or prior date |
|---|---|---|
| Interest income | $148.0 million | $108.9 million |
| Interest expense | $121.8 million | $89.1 million |
| Net interest income | $26.2 million | $19.8 million |
| Net income attributable to common stockholders | $38.2 million | $23.7 million |
| Basic / diluted earnings per share | $0.22 / $0.21 | $0.21 / $0.20 |
| Net cash from operating activities | $8.2 million | $7.1 million |
| Cash and cash equivalents at period-end | $65.4 million | $103.7 million at Dec. 31, 2018 |
| Total assets | $17.6 billion | $14.7 billion at Dec. 31, 2018 |
| Total liabilities | $16.2 billion | $13.6 billion at Dec. 31, 2018 |
| Company stockholders’ equity | $1.38 billion | $1.18 billion at Dec. 31, 2018 |
Portfolio net interest margin was 2.40%, down from 2.86% a year earlier. The reported total interest income and expense include substantial consolidated multifamily securitization activity; the company’s economic interest in the Consolidated K-Series is limited to its securities, rather than the full consolidated loans and debt. Management reported a 1.8-to-1 overall leverage ratio, excluding specified non-recourse and securitization debt, and a 1.6-to-1 ratio for short-term financing.
Cash, cash equivalents, and restricted cash declined by $42.9 million during the quarter. Investing activities used $253.4 million, financing activities provided $202.3 million, and operating activities provided $8.2 million. Management reported $410.4 million of unencumbered investment securities in addition to cash as potential liquidity for margin or valuation requirements.
Material changes versus the comparable period
- Common-stockholder net income increased by $14.5 million, while diluted EPS rose by $0.01 to $0.21. Higher net interest income and other income contributed; expenses also increased.
- Net interest income rose $6.5 million, principally from growth in residential and multifamily credit assets. Agency RMBS net interest income declined, and the overall portfolio margin narrowed.
- Total other income increased $9.9 million. The quarter included a $16.8 million realized gain on investment securities, $11.0 million of gains on residential loans carried at fair value, and a $14.6 million unrealized loss on investment securities and related hedges. It also included a $2.9 million loss on extinguishment of debt.
- Assets and liabilities expanded substantially, in part because the company consolidated two additional Freddie Mac multifamily K-Series securitizations. Consolidation added approximately $2.4 billion of loans and $2.3 billion of related debt; it does not represent an equivalent increase in the company’s direct economic investment.
- The company issued 31.74 million common shares in two public offerings, generating approximately $184.9 million of net proceeds. Common shares outstanding increased from 155.6 million at year-end to 187.8 million at quarter-end.
- The company redeemed its $33.2 million multifamily CMBS re-securitization notes and repaid $6.5 million of notes from a distressed-loan securitization. The related collateral was returned to the company.
- The Clusters apartment property was sold in February 2019; the company redeemed its preferred-equity investment and deconsolidated the entity.
Outlook, management commentary, risks, and unusual items
- Management said it expects existing cash, financing availability, and operating cash flows to meet liquidity needs for at least the next 12 months. It also expects to continue quarterly common dividends in the near term, subject to quarterly Board review; this is not a commitment. The Q1 common dividend was $0.20 per share.
- No numerical earnings or portfolio guidance was provided. Management intends to continue expanding single-family and multifamily credit assets and said it acquired $432.8 million of such assets during the quarter.
- Management cited potential volatility from interest rates, credit spreads, mortgage prepayments, asset values, and financing conditions. Repo borrowings are short-term and generally uncommitted, creating refinancing and margin-call risk. The filing warns that forced asset sales could cause losses.
- At March 31, 2019, investment-securities repo borrowings were $1.65 billion, with a 3.43% weighted average rate and a 68-day average maturity. Residential-loan repo borrowings were $619.6 million at a 4.58% weighted average rate. The company reported $300.3 million of aggregate repo amount-at-risk.
- Interest-rate sensitivity modeling estimated that a 100-basis-point increase would reduce next-12-month net interest income by $12.8 million; a 200-basis-point increase would reduce it by $24.9 million. These are model estimates, not forecasts.
- Fair-value estimates rely in part on models and unobservable inputs; actual outcomes may differ materially. The company recognized a $0.9 million impairment on Kiawah Island real estate under development.
- After quarter-end, the company issued common and preferred shares under distribution agreements. On May 3, 2019, it terminated the Headlands management agreement and arranged transition services through June 30, excluding incentive fees.
- Management reported no material change to the risk factors in its 2018 Form 10-K, no material litigation expected to adversely affect the company, and effective disclosure controls as of March 31, 2019.
Important facts for investors to verify
- Confirm the intended filer: the supplied filing is New York Mortgage Trust, Inc., not ADAMAS TRUST, INC.
- Review how much reported earnings depended on realized asset-sale gains and fair-value changes, including the $16.8 million securities gain and $14.6 million unrealized loss on securities and hedges.
- Assess refinancing, collateral, and margin-call exposure from short-term repo funding, including the $300.3 million reported amount-at-risk and availability of unencumbered assets.
- Distinguish consolidated K-Series balances from NYMT’s actual retained economic interest; verify portfolio growth and leverage on a comparable economic basis.
- Evaluate dilution from the common-stock offerings and subsequent at-the-market issuances against per-share earnings, book value, and dividend sustainability.
- Monitor credit performance of residential loans and multifamily investments, as well as interest-rate, spread, prepayment, and housing-market sensitivity.