Filing summary
Entity discrepancy: The request metadata identifies ADAMAS TRUST, INC., but the supplied Form 10-Q is for New York Mortgage Trust, Inc. (NYMT). This summary reflects the filing text provided, not Adamas Trust.
Business context and reporting period
NYMT is a mortgage and residential real estate investment trust (REIT) that invests in mortgage-related assets, multi-family credit, distressed residential loans, and real estate interests. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2017; comparisons are with the corresponding 2016 periods and December 31, 2016 balance sheet.
Financial performance and condition
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Interest income | $94.0 million | $79.8 million | $172.4 million | $161.4 million |
| Net interest income | $15.7 million | $16.7 million | $29.6 million | $34.3 million |
| Net income attributable to common stockholders | $11.1 million | $11.2 million | $27.1 million | $24.9 million |
| Basic and diluted EPS | $0.10 | $0.10 | $0.24 | $0.23 |
For the six months, operating cash flow was $10.8 million, investing cash flow was $149.3 million, and financing cash outflow was $185.3 million. Cash, cash equivalents, and restricted cash totaled $114.4 million at period-end, down $25.2 million from the start of the year; balance-sheet cash and cash equivalents alone were $75.4 million.
At June 30, total assets were $10.4 billion and total liabilities were $9.6 billion, compared with $9.0 billion and $8.1 billion at year-end 2016. Company stockholders’ equity was $838.4 million; reported common book value was $6.02 per share. The balance sheet includes substantial consolidated variable-interest-entity balances: $8.9 billion of VIE assets and $8.35 billion of VIE liabilities, primarily associated with multi-family securitizations. The filing states NYMT has no claims to most Consolidated K-Series assets and no obligations for their related liabilities beyond its retained securities.
Portfolio repurchase financing was $656.4 million, with a 2.29% weighted-average rate and an average 14.1% haircut; the borrowings were generally due within 30 days. Additional debt included $174.9 million of residential-loan financing, $82.3 million of residential CDOs, $110.0 million of securitized debt, $45.0 million of subordinated debentures, and $127.8 million carrying value of convertible notes. Management reported $75.4 million cash, $18.8 million in Agency IO overnight deposits, and $250.8 million of unencumbered securities available as liquidity resources. Its stated overall leverage ratio was approximately 1.3:1, excluding specified securitization and VIE debt.
Material changes versus comparable periods
- Q2 net interest income fell $1.0 million year over year; six-month net interest income declined $4.7 million. Higher multi-family portfolio income was offset by weaker Agency IO, Agency RMBS, and distressed-loan contribution, increased financing costs, and $2.6 million of Q2 convertible-note interest expense.
- Six-month common-stockholder earnings increased $2.1 million year over year, largely reflecting higher realized gains on distressed residential loan sales and improved multi-family results. Q2 earnings were nearly flat.
- NYMT consolidated six Freddie Mac-sponsored multi-family K-Series securitizations at June 30, versus five at year-end. This added approximately $1.5 billion of loans and $1.5 billion of CDO liabilities to the consolidated balance sheet; the increase is largely a consolidation effect.
- In March 2017, NYMT began consolidating Riverchase Landing and The Clusters after becoming their primary beneficiary. Riverchase Landing’s property was classified as held for sale, with a sale anticipated before December 31, 2017.
- Common dividends declared were $0.20 per share for each of the first two quarters of 2017, down from $0.24 per share in each comparable 2016 quarter. The 7.75% Series B and 7.875% Series C preferred dividends continued.
Outlook, commentary, risks, contingencies, and unusual items
Management said it expects to continue quarterly common dividends in the near term, while emphasizing that the board will reassess the policy each quarter based on liquidity, earnings, financial condition, REIT requirements, and business prospects. Management believed available cash, financing capacity, and operating cash flows would meet liquidity needs for at least 12 months. It planned to continue pursuing credit assets while considering other investments, including Agency RMBS; no numerical earnings or return guidance was provided.
Management described a stable but potentially changing market environment: the Federal Reserve raised rates in March and June 2017 and indicated plans to reduce its balance sheet. The filing identifies interest-rate and spread changes, prepayments, credit losses, funding availability, repo margin calls, counterparties, fair-value estimates, real estate performance, and changes to government housing policy as material risks. Model scenarios estimated a $77.4 million portfolio market-value decline for an immediate 200-basis-point rate increase and a $34.2 million increase for a 100-basis-point decline; modeled 12-month net interest income declined $2.8 million under a 200-basis-point increase. These are sensitivities, not forecasts.
Distressed residential loans had a $429.8 million carrying value; 46.2% of the portfolio had loan-to-value ratios above 100% at purchase, and 15.0% was more than 90 days delinquent at June 30. The company reported no material adverse impact expected from current litigation, no loan repurchases during the six-month period, and no material changes to the prior annual report’s risk factors. A $26.3 million preferred-equity investment in multi-family properties was funded after quarter-end. The filing also notes that significant fair-value and expected-cash-flow estimates rely on assumptions that may change.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is NYMT’s 10-Q, despite the Adamas Trust metadata.
- Assess the quality and sustainability of earnings: net interest income declined, while loan-sale gains and fair-value movements contributed to results.
- Distinguish company-level obligations from consolidated VIE debt and assets, especially the multi-family K-Series balances.
- Review short-term repo renewal, collateral haircuts, margin-call exposure, and the December 2017 maturity of the $165.0 million distressed-loan facility.
- Evaluate dividend coverage and liquidity against cash needs, financing costs, and the board’s quarterly discretion over distributions.
- Monitor credit performance and valuation assumptions for distressed loans, first-loss multi-family securities, and newly consolidated properties.