Filing identity and business context
Important source mismatch: The supplied filing is New York Mortgage Trust, Inc. (NYSE/Nasdaq ticker NYMT), not ADAMAS TRUST, INC. It is a Form 10-Q for the quarter ended June 30, 2019; the summary below describes the filing provided. NYMT is a mortgage REIT investing in residential and multifamily mortgage-related assets.
Financial performance and condition
Amounts below are in millions of dollars, except per-share data. The statements are unaudited.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Interest income | $167.3 | $107.7 | $315.2 | $216.6 |
| Net interest income | $25.7 | $17.5 | $51.9 | $37.3 |
| Net income attributable to common stockholders | $16.5 | $23.8 | $54.7 | $47.5 |
| Basic / diluted EPS | $0.08 / $0.08 | $0.21 / $0.20 | $0.29 / $0.29 | $0.42 / $0.40 |
| Portfolio net interest margin | 2.16% | 2.39% | 2.27% | 2.62% |
- Q2 net income attributable to the company was $22.7 million before $6.3 million in preferred dividends. Q2 operating income before tax was $21.9 million, versus $28.7 million a year earlier.
- At June 30, total assets were $18.27 billion, liabilities $16.74 billion, and total equity $1.53 billion. Assets and liabilities include consolidated securitization entities; approximately $13.77 billion of multifamily CDOs are associated with the Consolidated K-Series, and NYMT says it has no obligation for those liabilities beyond its owned securities.
- Cash and cash equivalents were $135.0 million. Repurchase agreements totaled $2.60 billion; convertible notes were $131.8 million, subordinated debentures $45.0 million, and residential CDOs $45.3 million. Securitized debt was fully repaid by quarter-end.
- Management reported a 1.8-to-1 overall leverage ratio excluding non-recourse CDO and other debt, and 1.7-to-1 leverage on callable repurchase financing. Cash plus unencumbered securities available for liquidity totaled about $523.1 million.
- For the first six months, operating cash flow was $7.0 million, investing cash flow was negative $549.9 million, and financing cash flow was positive $569.7 million. Cash, cash equivalents and restricted cash ended at $136.0 million.
Material changes versus comparable periods
- Q2 net interest income rose $8.2 million year over year, mainly from growth in residential and multifamily credit assets, while common-stockholder income fell $7.3 million and EPS declined as the weighted-average common share count increased substantially.
- For the first half, common-stockholder income increased $7.2 million year over year, but EPS fell from $0.42 to $0.29 because of share issuance and dilution. Net interest income increased $14.6 million.
- Assets grew to $18.3 billion from $14.7 billion at year-end 2018, partly reflecting the consolidation of additional multifamily securitizations. Residential mortgage loans at fair value increased to $1.06 billion from $737.5 million; investment securities available for sale increased to $1.74 billion from $1.51 billion.
- Q2 other income was lower year over year, including a $15.0 million unrealized loss on interest-rate swaps and weaker net fair-value gains on multifamily loans and related debt. Six-month results included $16.8 million in realized securities gains, compared with $12.3 million in realized losses in the prior-year period.
- Common shares outstanding rose to 210.9 million at quarter-end from 155.6 million at year-end 2018. First-half common-stock offerings generated $324.5 million net proceeds; preferred offerings generated $16.1 million.
Outlook, risks and unusual items
- Management provided no specific earnings or financial guidance. It said existing cash, financing availability and operating cash flows were expected to meet liquidity needs for at least the next 12 months, and expected to continue quarterly common dividends in the near term, subject to quarterly board review.
- Management intends to expand residential and multifamily credit investments. It acquired $937.1 million of residential, multifamily and other credit assets in the first half. The board declared a $0.20-per-share common dividend for Q2.
- After quarter-end, NYMT issued 23.0 million common shares on July 22, 2019, generating $137.5 million net proceeds.
- Key exposures include short-term, uncommitted repurchase financing, collateral margin calls, refinancing availability, interest-rate and spread movements, prepayments, borrower defaults, property-market conditions, and valuation uncertainty for Level 3 assets. The company disclosed that a 100-basis-point rate increase was modeled to reduce next-12-month net interest income by $15.8 million; a 200-basis-point increase by $30.0 million. A 100-basis-point increase was modeled to reduce portfolio fair value by $72.0 million.
- Management noted slowing single-family housing indicators and rising multifamily vacancy concerns, alongside generally tight credit spreads. It also cited uncertainty about future Fannie Mae and Freddie Mac reform. These market conditions could affect asset values, financing costs and returns.
- The company reported no material change in risk factors from its 2018 Form 10-K, no material adverse expected effect from current litigation, and effective disclosure controls as of June 30, 2019.
Important facts for investors to verify
- Confirm the issuer: the provided filing is for New York Mortgage Trust, not ADAMAS TRUST.
- Assess whether portfolio growth and increased net interest income can offset lower reported EPS, dilution, higher expenses and fair-value volatility.
- Review the composition and recourse status of reported debt, especially repurchase-agreement maturities, collateral haircuts and liquidity available for margin calls.
- Examine sensitivity to interest rates, credit spreads and prepayments, and the assumptions supporting Level 3 valuations and residential loan gains.
- Track dividend coverage, future equity issuance and the effect of additional shares on per-share book value and earnings.