Business context and reporting period
Filing identity: The request identifies Adamas Trust, Inc., but the supplied Form 10-Q is for New York Mortgage Trust, Inc. (NYSE: NYMT). Confirm the issuer before relying on this summary. The report covers the quarter and six months ended June 30, 2022; financial statements are unaudited.
NYMT is a mortgage REIT investing in residential loans and securities, multi-family investments, and rental properties. It aims to provide long-term distributions through net interest margin and capital gains.
Financial results and position
Amounts below are in millions, except per-share data and percentages.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Interest income | $68.0 | $52.2 | $126.5 | $102.2 |
| Interest expense | $41.9 | $20.7 | $70.5 | $40.4 |
| Net interest income | $26.1 | $31.5 | $56.0 | $61.8 |
| Net unrealized losses | $67.7 | — | $151.4 | — |
| Net loss attributable to common stockholders | $(82.4) | $42.9 income | $(166.7) | $84.9 income |
| Basic loss/earnings per common share | $(0.22) | $0.11 | $(0.44) | $0.22 |
Q2 portfolio net interest margin, a company-defined non-GAAP measure, was 3.48%, versus 2.97%; for the first half it was 3.64%, versus 2.70%. The reported yield on average interest-earning assets was 6.69% in Q2 and 6.74% for the first half. Company-reported undepreciated loss per common share was $(0.13) for Q2 and $(0.30) for the first half; this measure excludes the company’s share of real-estate depreciation and lease-intangible amortization.
At June 30, total assets were $7.30 billion, liabilities $5.14 billion, and total equity $2.13 billion. Common-stock book value was $4.06 per share, down from $4.70 at year-end 2021; undepreciated book value was $4.24, down from $4.74. Cash and cash equivalents were $407.1 million; cash, cash equivalents, and restricted cash together were $551.7 million.
Total debt liabilities included $1.69 billion of repurchase agreements, $1.82 billion of collateralized debt obligations (CDOs), $1.25 billion of mortgages payable on real estate, $97.0 million of senior unsecured notes, and $45.0 million of subordinated debentures. The $138.0 million convertible notes were repaid at maturity in January 2022. Company-reported recourse leverage was 0.7x and portfolio recourse leverage 0.6x; these measures exclude specified non-recourse CDO and property mortgage debt.
For the first half, operating cash flow was $78.2 million, investing cash outflow $1.11 billion, and financing cash inflow $1.25 billion. Cash, cash equivalents, and restricted cash increased $213.9 million.
Material changes versus comparable periods
- Common-stockholders’ results swung from profit to loss, principally as $151.4 million of first-half unrealized losses replaced $50.0 million of unrealized gains in the 2021 period. Management attributed the losses mainly to wider credit spreads affecting residential loans and Consolidated SLST.
- First-half net interest income fell $5.8 million year over year: higher interest income was more than offset by higher financing costs, including increased repurchase and securitization borrowings, higher rates, and property mortgage interest.
- Portfolio activity expanded: residential loans were $4.33 billion at quarter-end versus $3.58 billion at year-end 2021; real estate was $1.79 billion versus $1.02 billion. Management cited $890.2 million of Q2 investment acquisitions and $488.8 million net portfolio growth during the quarter.
- First-half real-estate expenses rose to $118.7 million from $6.8 million, alongside growth in consolidated apartment properties. Management said depreciation and amortization of lease intangibles accounted for a significant portion of real-estate losses.
- The company repaid the convertible notes and increased use of repurchase financing and residential loan securitizations. Repurchase-agreement balances rose to $1.69 billion from $554.3 million at year-end.
Outlook, commentary, risks and unusual items
Management did not provide numerical earnings or investment guidance. It expects continued market volatility and described plans for selective residential-sector investments, greater focus on higher-coupon, short-duration investor loans, potential opportunistic asset sales, and prudent liability management. It intends to favor longer-term or more committed financing while retaining liquidity and a conservative leverage stance. Management said available cash, financing and operating cash flows were expected to meet liquidity requirements for at least 12 months, while noting that additional financing may not be available on acceptable terms.
Management cited rising rates, inflation, widening credit spreads, Federal Reserve tightening, geopolitical instability, and increased recession risk. It reported no hedges in place at quarter-end. Key exposures include fair-value declines, interest-rate and spread movements, margin calls, refinancing and counterparty risk, borrower delinquencies/defaults, property vacancies and valuations, and uncertainty from COVID-19 and the LIBOR transition. The filing reports less than 1% of residential loans on active COVID-19 assistance plans and one delinquent multi-family investment representing 1.5% of the preferred-equity and mezzanine-loan portfolio.
Unusual items include two first-half residential loan securitizations, with $509.6 million in aggregate proceeds cited in MD&A; a $138.0 million convertible-note repayment; and a multi-family property sale that generated approximately $0.4 million net gain and $0.6 million loss on mortgage extinguishment. A $40.0 million multi-family joint-venture funding commitment remained outstanding. Management said current litigation was not expected to have a material adverse effect, and no COVID-19 contingencies were recorded. Disclosure controls were deemed effective; no material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Confirm that the supplied NYMT filing, rather than an Adamas Trust filing, is the intended issuer and reporting period.
- Review the drivers and valuation assumptions behind the large Level 3 fair-value losses and the sensitivity of loan and securitization values to credit spreads and defaults.
- Assess the composition, recourse status, maturity, margin-call terms, and refinancing needs of debt; distinguish consolidated VIE liabilities from obligations directly recourse to NYMT.
- Check liquidity availability against potential collateral calls and the company’s $40.0 million investment commitment; distinguish unrestricted cash from restricted cash.
- Evaluate whether common and preferred dividends remain supportable given losses, lower book value, REIT distribution requirements, and financing costs.
- Monitor apartment-property operating performance and the large reported depreciation and lease-intangible amortization charges.