SEC Filing Summary: New York Mortgage Trust, Inc. (10-Q)
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2009. New York Mortgage Trust, Inc. (NYMT) is a self-advised Real Estate Investment Trust (REIT) primarily investing in residential adjustable-rate mortgage-backed securities (RMBS) issued by U.S. government-sponsored enterprises (Agency RMBS) and prime credit quality residential adjustable-rate mortgage (ARM) loans held in securitization trusts. The Company also pursues an "alternative investment strategy" involving non-Agency RMBS and collateralized loan obligations (CLOs).
Key Financial Metrics
| Metric | Three Months Ended June 30, 2009 | Six Months Ended June 30, 2009 | As of June 30, 2009 |
|---|---|---|---|
| Net Interest Income | $4.16 million | $8.25 million | - |
| Net Income (Loss) | $2.55 million | $4.60 million | - |
| Diluted EPS | $0.27 | $0.49 | - |
| Total Assets | - | - | $611.5 million |
| Total Liabilities | - | - | $565.9 million |
| Stockholders' Equity | - | - | $45.6 million |
| Cash and Cash Equivalents | - | - | $15.8 million |
| Net Interest Spread | 361 bps | - | - |
| Dividends Declared (Common) | $0.23/share | $0.41/share | - |
Material Changes vs. Prior Period
- Profitability Improvement: Net income for the six months ended June 30, 2009, was $4.6 million, a significant turnaround from a net loss of $20.0 million in the same period in 2008. This improvement is attributed to a lower interest rate environment, reduced borrowing costs, and the sale of lower-yielding Agency CMO floaters.
- Portfolio Restructuring: Total assets decreased from $853.3 million at December 31, 2008, to $611.5 million at June 30, 2009. This reduction was primarily due to the disposition of approximately $193.8 million in Agency CMO floaters.
- Financing Costs: The weighted average interest rate on repurchase agreements dropped significantly to 0.53% at June 30, 2009, compared to 2.62% at December 31, 2008.
- Prepayment Rates: Constant prepayment rates (CPR) increased to approximately 21% for the quarter ended June 30, 2009, up from 12% in the prior quarter, driven by refinancing activity in a low-rate environment.
Outlook, Risks, and Management Commentary
- Alternative Investment Strategy: The Company initiated its alternative investment strategy in Q2 2009, purchasing $9.0 million in CLOs and $4.6 million in non-Agency RMBS. Subsequent to the period end, an additional $19.3 million was invested in non-Agency RMBS.
- Liquidity and Leverage: Management maintains a leverage ratio of 3:1 for the RMBS portfolio (including convertible preferred debentures) and 4.5:1 excluding them. The Company believes existing cash balances and operating cash flows are sufficient for the next 12 months, though financing for alternative assets remains challenging and is currently unlevered.
- Market Risks: Primary risks include interest rate volatility, liquidity constraints in the credit markets, and prepayment risk. The Company utilizes interest rate swaps and caps to hedge interest rate exposure. As of June 30, 2009, the Company had $121.3 million in notional interest rate swaps outstanding.
- Discontinued Operations: The mortgage lending segment was classified as a discontinued operation. Income from this segment was $0.11 million for the quarter and $0.26 million for the six months ended June 30, 2009.
Investor Verification Checklist
- Asset Quality: Verify the delinquency rates of the $314 million mortgage loan portfolio held in securitization trusts (3.69% delinquent 90+ days as of June 30, 2009) and the adequacy of the $1.9 million loan loss reserve.
- Unrealized Losses: Review the $5.1 million in unrealized losses on investment securities, specifically the $5.0 million in non-Agency RMBS held for greater than 12 months, to assess the risk of future other-than-temporary impairment charges.
- Financing Stability: Confirm the stability of the $188.2 million in repurchase agreements, noting that these are short-term (average 20 days to maturity) and subject to margin calls if collateral values decline.
- Convertible Preferred Stock: Note the $20.0 million Series A Preferred Stock obligation, which carries a mandatory redemption feature on December 31, 2010, and a dividend rate that increased to 11.5% due to common stock dividend levels.
- Repurchase Obligations: Monitor the $1.5 million in unresolved repurchase requests related to the discontinued mortgage lending business, against which a $0.4 million reserve has been established.