Filing summary
Important identity note: The supplied filing is New York Mortgage Trust, Inc. (NASDAQ: NYMT), not Adamas Trust, Inc. It is a Form 10-Q for the quarter ended September 30, 2021, filed November 4, 2021. The figures below summarize the filing as provided and should not be attributed to Adamas Trust without verification.
Business context and reporting period
NYMT is a mortgage REIT investing in residential loans and securities, multi-family loans and equity interests, and related assets. Management’s stated objective is to deliver long-term stable distributions through net interest margin and capital gains. Financial statements are unaudited and cover the three and nine months ended September 30, 2021, with comparisons to 2020.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net interest income | $31.0 million | $25.5 million | $92.8 million | $101.1 million |
| Net income attributable to common stockholders | $36.9 million | $91.3 million | $121.7 million | $(399.8) million |
| Basic earnings (loss) per common share | $0.10 | $0.24 | $0.32 | $(1.08) |
| Net unrealized gains (losses) | $30.1 million | $81.2 million | $80.2 million | $(212.7) million |
| Net cash from operating activities | — | $78.0 million | $76.6 million | |
| Net cash from investing activities | — | $109.5 million | $2,430.7 million | |
| Net cash used in financing activities | — | $(61.3) million | $(1,924.3) million |
At September 30, 2021, total assets were $4.91 billion, total liabilities $2.55 billion, and company stockholders’ equity $2.36 billion. Cash and cash equivalents were $408.8 million; cash, cash equivalents and restricted cash totaled $430.7 million. Book value was $4.74 per common share. Portfolio net interest margin was 3.25% for Q3 and 2.88% for the first nine months; these measures exclude specified corporate debt and mortgage interest costs, as detailed in the filing.
Debt included $334.6 million of repurchase agreements, $1.62 billion of collateralized debt obligations (CDOs), $137.2 million of convertible notes, $96.5 million of senior unsecured notes, $45.0 million of subordinated debentures and $200.7 million of mortgages payable on operating real estate. Much of the CDO and property mortgage debt is non-recourse. Management reported total leverage of 0.3x and portfolio leverage of 0.1x, using its stated definitions. The $138.0 million principal amount of 6.25% convertible notes matures January 15, 2022.
Material changes versus comparable periods
- Q3 net interest income increased year over year, chiefly as higher investment in higher-yielding business-purpose loans lifted single-family interest income. Nine-month net interest income decreased, reflecting a smaller average interest-earning asset base following 2020 asset sales, including the disposition of the Consolidated K-Series portfolio.
- Common-stockholder earnings were lower in Q3 than in Q3 2020, despite higher net interest income, with lower unrealized gains and higher expenses contributing. The nine-month 2021 profit contrasts with the 2020 loss, which included market-related asset and hedge losses, a $54.1 million loss on de-consolidation of the K-Series, and $25.2 million of goodwill impairment.
- Investment securities available for sale declined to $448.1 million from $724.7 million at year-end 2020, primarily due to sales and paydowns. Residential loans rose to $3.27 billion from $3.05 billion.
- Operating real estate increased to $270.6 million from $50.5 million, following consolidation and investment in multi-family apartment communities. Nine-month real estate-related expenses were $15.4 million; the segment produced a net loss attributable to the Company of $6.2 million.
- NYMT issued $100 million of 5.75% senior unsecured notes in April. In July, it raised $138.6 million net through Series F preferred stock and redeemed all Series C preferred stock, reducing the coupon on the redeemed preferred capital by 100 basis points. Common dividends declared were $0.10 per share in each of the first three quarters of 2021.
Outlook, management commentary and risks
Management said it intended to maintain a defensive posture toward new investments, prioritize credit assets it believes offer attractive risk-adjusted returns, selectively realize gains on non-Agency RMBS and CMBS, and pursue longer-term or more committed financing. It stated that existing cash, financing availability and operating cash flows were expected to meet liquidity needs for at least 12 months; this is management’s assessment, not a guarantee. No specific earnings or dividend guidance was provided.
Management cited uncertainty from COVID-19, interest-rate and credit-spread changes, asset prepayments and defaults, financing-counterparty access, and potential repurchase-agreement margin calls. The company had no outstanding derivatives at quarter-end and reported no hedges in place; its sensitivity analysis estimated that an instantaneous 100-basis-point rate increase would reduce next-12-month net interest income by $6.3 million, and a 200-basis-point increase by $14.3 million. A portion of residential-loan repurchase financing is subject to margin calls; the reported difference between pledged loan fair value and related repurchase balances was approximately $157.4 million. Management also identified LIBOR transition and possible increases in borrower or property-level delinquencies as uncertainties. Less than 1% of its residential loan portfolio was in an active COVID-19 relief plan; one multi-family preferred-equity investment, about 1.1% of that portfolio, was delinquent in distributions. The company reported compliance with financing covenants and no litigation expected to have a material adverse effect.
Investor verification priorities
- Confirm the registrant: the filing identifies New York Mortgage Trust, Inc., not Adamas Trust, Inc.
- Review the January 2022 convertible-note maturity and the company’s plan or capacity to repay, refinance or address conversion.
- Assess liquidity against repurchase financing, potential collateral calls, refinancing needs and the stated non-recourse debt structure.
- Examine earnings quality and sensitivity to fair-value estimates: a substantial portion of assets and certain liabilities are Level 3, and unrealized valuation changes materially affected results.
- Track delinquency, forbearance and credit performance in residential loans and multi-family investments, along with property operating losses and valuation assumptions.
- Verify subsequent developments in financing, dividends, LIBOR/SOFR transition and management’s stated liquidity outlook; the filing cautions that estimates and results may change with market conditions.