Filing summary
Entity discrepancy: The request identifies ADAMAS TRUST, INC., but the supplied Form 10-Q is for New York Mortgage Trust, Inc. (NYSE-listed NYMT; Nasdaq preferred tickers). Verify the intended issuer before relying on this summary.
Business context and reporting period
This unaudited 10-Q covers the quarter and nine months ended September 30, 2022; it was signed November 4, 2022. New York Mortgage Trust is a REIT investing in residential mortgage loans and securities, structured multifamily investments, and rental properties. In September it announced a strategic shift to sell multifamily joint-venture equity investments over time and redirect capital toward targeted assets, while continuing multifamily mezzanine lending.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Interest income | $68.9m | $52.3m | $195.4m | $154.5m |
| Interest expense | $54.7m | $21.3m | $125.2m | $61.7m |
| Net interest income | $14.2m | $31.0m | $70.2m | $92.8m |
| Net income (loss) attributable to common stockholders | $(125.8)m | $36.9m | $(292.5)m | $121.7m |
| Basic loss/earnings per share | $(0.33) | $0.10 | $(0.77) | $0.32 |
| Adjusted net interest spread (non-GAAP) | 2.18% | 2.45% | 2.93% | 2.22% |
Q3 unrealized losses were $128.1m, versus unrealized gains of $30.1m a year earlier; nine-month unrealized losses were $279.4m, versus gains of $80.2m. Management attributed the losses principally to wider credit spreads and lower market prices for residential credit assets. Q3 included $18.0m of realized gains on ABS sales and a $16.8m gain on a multifamily property sale; the latter yielded approximately $14.4m attributable to common shareholders. Nine-month expenses also rose sharply, particularly real-estate costs, reflecting the expanded consolidated property portfolio and related depreciation and lease-intangible amortization.
Operating cash flow was $83.4m for the first nine months, investing cash outflow was $800.3m, and financing cash inflow was $858.9m. Cash, cash equivalents and restricted cash ended at $479.9m, including $355.3m unrestricted cash and $124.6m restricted cash. The company reported total assets of $6.77bn, total liabilities of $4.79bn, and stockholders’ equity of $1.92bn at September 30. GAAP book value per common share was $3.65, down from $4.70 at year-end 2021; undepreciated book value per share, a non-GAAP measure, was $3.89 versus $4.74.
Debt included $1.22bn of repurchase agreements, $1.97bn of collateralized debt obligations, $97.2m carrying value of senior unsecured notes, $45.0m of subordinated debentures, and $387.8m of mortgages payable on real estate. A further $875.6m of liabilities was classified in the disposal group held for sale. The $138.0m convertible notes were repaid at maturity in January 2022. Company-reported recourse leverage was 0.5x and portfolio recourse leverage was 0.4x. Common and preferred dividends declared were $0.10 and $0.43–$0.50 per share, respectively, for Q3.
Material changes and management commentary
- Interest income increased with growth in residential loans, especially higher-yielding business-purpose loans, but financing costs rose as borrowings and interest rates increased. GAAP net interest income fell year over year in both the quarter and nine-month period.
- The residential loan portfolio grew to $3.93bn from $3.58bn at year-end 2021. Investment securities available for sale declined to $102.7m from $200.8m.
- Assets of disposal groups held for sale were $1.15bn, with related liabilities of $875.6m. The company reported $50.6m of pretax disposal-group losses for the nine months, of which $45.3m was attributable to common stockholders.
- During Q3, the company completed a residential-loan securitization producing approximately $220.8m net proceeds, used to repay related repurchase financing. Management said only 23% of financing arrangements, including company-sponsored CDOs, were subject to mark-to-market margin-call risk, compared with 99% at December 31, 2019.
- The company repurchased 8.26m common shares for $21.9m in the first nine months at an average $2.64 per share. It disclosed an additional 2.1m shares repurchased after quarter-end at an average $2.23 per share.
Outlook, risks and contingencies
Management gave no specific earnings or dividend guidance. It said existing cash, financing availability and operating cash flows were expected to meet liquidity needs for at least 12 months, while emphasizing selective investment, opportunistic asset sales, liquidity preservation and conservative leverage amid volatility. Management anticipated continued market volatility through year-end and into 2023 and cited recession risk; it noted that a contemporaneous economist survey put the probability of a U.S. recession in the following 12 months at 63%.
Principal risks include further interest-rate and credit-spread movements that reduce asset values; repo margin calls, refinancing or counterparty nonrenewal; borrower and property-partner defaults, delinquencies or vacancies; the execution, timing and proceeds of multifamily dispositions; and uncertainty in fair-value estimates, many of which rely on Level 3 inputs. The company reported compliance with applicable financing covenants and no litigation expected to have a material adverse effect. It recorded no COVID-19 contingency, but said pandemic-related effects remained uncertain. It also identified the transition from LIBOR to alternative rates as an ongoing uncertainty. Disclosure controls were assessed as effective, and the filing reported no material changes to risk factors from the prior 10-K.
Investor verification priorities
- Confirm that New York Mortgage Trust, rather than ADAMAS TRUST, is the intended issuer.
- Track actual sales, proceeds, timing and realized gains or losses from the multifamily repositioning, including the held-for-sale portfolio.
- Review quarterly fair-value marks and assumptions for residential loans, securitizations and other Level 3 assets, and separate those noncash effects from realized performance.
- Monitor repo exposure, margin requirements, unencumbered collateral, financing maturities and the company’s liquidity as rates and spreads change.
- Assess whether net interest income and spread, earnings, book value and cash generation support common and preferred dividends and further share repurchases.
- Check subsequent filings for loan delinquencies, property operating results, covenant compliance, LIBOR transition updates and changes in the stated 12-month liquidity outlook.