Business context and reporting period
Filing identity discrepancy: The request identifies ADAMAS TRUST, INC., but the supplied Form 10-K is for New York Mortgage Trust, Inc. (NASDAQ: NYMT). This summary reflects the filing provided. It covers the fiscal year ended December 31, 2020; quarterly results include the three months ended December 31, 2020.
NYMT is a mortgage REIT investing in single-family and multifamily residential credit assets, including residential loans, mortgage-backed securities, preferred equity and mezzanine loans. Its stated objective is to provide long-term distributions through net interest income and capital gains.
Financial results and position
| Metric | 2020 | 2019 |
|---|---|---|
| Interest income | $350.2 million | $694.6 million |
| Net interest income | $127.1 million | $127.9 million |
| Net income (loss) attributable to common stockholders | $(329.7) million | $144.8 million |
| Basic earnings (loss) per share | $(0.89) | $0.65 |
| Common dividends declared per share | $0.23 | $0.80 |
| Operating cash flow | $110.8 million | $35.1 million |
- Fourth-quarter 2020 net income attributable to common stockholders was $70.1 million, or $0.19 per basic share, compared with $55.3 million, or $0.20 per share, in fourth-quarter 2019.
- 2020 comprehensive loss attributable to common stockholders was $353.8 million. Book value was $4.71 per common share at year-end, down from $5.78.
- Year-end assets were $4.66 billion, versus $23.48 billion a year earlier; total equity was $2.31 billion. The asset reduction largely reflects the March 2020 sale of interests that led to deconsolidation of the Consolidated K-Series, not simply portfolio runoff.
- Year-end cash and cash equivalents were $293.2 million; cash, cash equivalents and restricted cash totaled $304.5 million. Net cash provided by investing activities was $2.12 billion, while financing activities used $2.05 billion; cash and restricted cash increased $182.9 million.
- Repurchase agreements were $405.5 million, down from $3.11 billion. Total leverage was approximately 0.3x equity and repo leverage 0.2x. These ratios exclude non-recourse securitization debt.
- Collateralized debt obligations were $1.62 billion, including $1.05 billion related to Consolidated SLST; the filing describes CDOs as non-recourse to NYMT. Convertible notes had $138.0 million principal outstanding, bear 6.25% interest and mature January 15, 2022. Subordinated debentures totaled $45.0 million.
- NYMT reported a 2.59% portfolio net interest margin for 2020, versus 2.48% in 2019. Average interest-earning assets and their average yield declined; portfolio financing costs also fell.
Material changes versus the prior period
- COVID-19 market disruption triggered margin calls, asset-price declines and urgent liquidity measures. NYMT sold approximately $2.5 billion of assets during 2020, including its Agency securities portfolio and first-loss multifamily securities, and terminated $495.5 million notional of interest-rate swaps.
- Net realized losses were $148.1 million; net unrealized losses were $160.2 million; the K-Series deconsolidation generated a $54.1 million realized loss; and the company impaired all $25.2 million of goodwill.
- NYMT deconsolidated $17.4 billion of multifamily loans and $16.6 billion of related K-Series CDOs after selling its first-loss positions. The change materially affects year-over-year balance-sheet and income comparisons.
- Net interest income was nearly flat year over year, but the loss on non-interest items drove the swing from profit to loss. General, administrative and operating expenses rose to $54.6 million from $49.8 million.
- NYMT issued 85.1 million common shares in January and February 2020 for $511.9 million net proceeds, increasing year-end common shares to 377.7 million from 291.4 million.
- The common dividend was suspended for the first quarter and resumed at lower quarterly rates; declared dividends totaled $0.225 per share for 2020 versus $0.80 in 2019. Preferred dividends were also temporarily suspended and later reinstated, including payment of arrears.
Outlook, risks and unusual items
- Management described a defensive investment posture, with emphasis on actively managed residential credit assets and less reliance on leveraged Agency securities. It intends to selectively realize gains and pursue longer-term or non-mark-to-market financing. No specific earnings or dividend guidance was provided.
- Management stated that cash, financing availability and operating cash flows were expected to meet liquidity needs for at least the next 12 months, while cautioning that future financing access, terms and timing are uncertain.
- COVID-19, borrower and operating-partner distress, delinquencies, defaults, forbearance, foreclosures, property values and loan-servicer performance remain material uncertainties. At year-end, about 2% of residential borrowers were in active COVID-19 relief plans; one multifamily investment was delinquent and another was in forbearance, together representing 3.6% of preferred-equity and mezzanine investments.
- NYMT had no interest-rate hedges at year-end. Its sensitivity analysis estimated that a 100-basis-point rate increase would reduce next-12-month net interest income by $4.0 million; a 200-basis-point increase by $16.3 million. Estimated portfolio fair value would decline $40.8 million and $63.8 million, respectively, under those shocks.
- Fair values for residential loans and other less-liquid assets rely substantially on Level 3 models and management assumptions. The auditor identified residential-loan and Consolidated SLST security valuations as critical audit matters. Other key risks include repo margin calls, credit-spread volatility, LIBOR transition, REIT qualification and maintaining the Investment Company Act exemption.
- The company reported that disclosure controls and internal control over financial reporting were effective at year-end; the auditor issued unqualified opinions on the financial statements and internal controls. Ordinary-course litigation was not expected to have a material adverse effect.
Investor facts to verify
- Confirm the intended issuer: the supplied filing is NYMT’s 10-K, not a filing identified as ADAMAS TRUST, INC.
- Review the audited financial statements and notes for the effects of fair-value estimates, K-Series deconsolidation and other COVID-related realized and unrealized losses.
- Check current liquidity, repo maturities and collateral terms, covenant compliance, and the ability to refinance the $138 million convertible notes due in 2022.
- Monitor dividend coverage and board decisions; 2020 common dividends were sharply reduced and are not guaranteed at any stated level.
- Track residential and multifamily delinquencies, forbearance, defaults and recoveries, particularly in concentrated property and geographic exposures.