Filing Summary
Entity identification: The request names ADAMAS TRUST, INC., but the supplied Form 10-Q is for New York Mortgage Trust, Inc. (NYSE: NYMT). Confirm that this is the intended filing before relying on the summary.
Business context and reporting period
Unaudited quarterly report for the three and six months ended June 30, 2023, comparing results with the same 2022 periods. New York Mortgage Trust is a REIT focused primarily on residential mortgage-related assets, including residential loans, mortgage-backed securities, multifamily lending and property investments. The company said it is repositioning its portfolio by gradually selling multifamily joint-venture property interests and reallocating capital toward targeted assets, including Agency RMBS.
Key financial metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Interest income | $57.5 million | $68.0 million | $114.7 million | $126.5 million |
| Interest expense | $42.4 million | $28.7 million | $81.7 million | $50.2 million |
| Net interest income | $15.1 million | $39.3 million | $32.9 million | $76.3 million |
| Net loss attributable to common stockholders | $37.2 million | $82.4 million | $26.7 million | $166.7 million |
| Basic loss per common share | $0.41 | $0.86 | $0.29 | $1.75 |
Amounts shown as losses are negative. Q2 total non-interest income was $25.5 million, compared with a $20.2 million loss in Q2 2022; six-month non-interest income was $92.4 million, compared with a $67.0 million loss. Results included fair-value changes and property-sale activity. The company reported a Q2 net interest spread of 0.48%, down from 3.34%; the six-month spread was 0.45%, versus 3.45%. These are non-GAAP measures.
At June 30, 2023, total assets were $6.28 billion and total liabilities were $4.53 billion. Cash and cash equivalents were $232.5 million; cash, cash equivalents and restricted cash totaled $345.5 million. Debt included $1.15 billion of repurchase agreements, $1.99 billion of collateralized debt obligations, $97.7 million of senior unsecured notes, $45.0 million of subordinated debentures and $397.1 million of mortgages payable on real estate. Separately, $755.8 million of liabilities were classified in the disposal group held for sale.
For the six months, operating cash flow was negative $11.5 million, investing cash flow negative $64.2 million and financing cash flow positive $40.2 million. Cash, cash equivalents and restricted cash decreased $35.5 million. GAAP book value per common share was $12.44, compared with $13.27 at December 31, 2022; adjusted book value, a non-GAAP measure, was $14.32, versus $15.89.
Material changes versus comparable periods
- Net interest income fell 61% year over year in Q2, as interest expense increased and interest income declined. Management attributed weaker income principally to runoff of higher-yielding business-purpose loans and investment in lower-yielding Agency RMBS, while financing costs rose with interest rates and additional financing.
- Common-stockholder loss narrowed from $82.4 million to $37.2 million in Q2 and from $166.7 million to $26.7 million for the first half. The comparison reflects, among other items, less severe unrealized losses than in 2022, as well as changes in real-estate expenses and impairments.
- Agency RMBS available-for-sale holdings increased from none at year-end 2022 to $640.1 million at June 30, 2023. The company purchased approximately $545.6 million of Agency RMBS in Q2.
- Repurchase agreements increased to $1.15 billion from $737.0 million at year-end. Management’s Company recourse leverage ratio rose to 0.7x from 0.3x; portfolio recourse leverage rose to 0.6x from 0.3x.
- The company sold four multifamily properties held through joint ventures during Q2. Multifamily properties held for sale were impaired by $16.9 million in Q2 and $27.1 million in the first half.
Outlook, risks and unusual items
Management gave no specific earnings or investment-return guidance. It stated that current cash, financing availability and operating cash flows are expected to meet liquidity needs for at least the next 12 months, while noting that access to future financing is not assured. It expects to remain selective in acquiring credit assets, continue opportunistic property dispositions and may increase leverage modestly as it expands Agency RMBS holdings. The company said it will prioritize liquidity, balance-sheet strength and capital preservation amid continued market volatility.
- Funding and liquidity: Some repurchase agreements are short-term, uncommitted and subject to margin calls or non-renewal. At quarter-end, management identified $223.1 million of cash and $205.4 million of unencumbered securities available to meet additional collateral needs; it also reported $245.9 million of unencumbered residential loans.
- Interest-rate exposure: The filing’s model estimates that an instantaneous 100-basis-point rate increase would reduce next-12-month adjusted net interest income by $12.2 million; a 200-basis-point increase would reduce it by $24.2 million. These are model estimates, not forecasts.
- Credit and property exposure: Management cited possible recession, borrower or tenant stress, loan defaults, vacancies, weaker rents and falling property values as risks. Acquired residential loans 90 or more days delinquent represented 9.9% at June 30, up from 5.4% at year-end 2022.
- Valuation and unusual items: Fair values for substantial assets rely on Level 3 estimates and unobservable assumptions. Multifamily held-for-sale impairments materially affected reported results. Management reported no current litigation expected to have a material adverse effect and said the company was in compliance with its financing covenants.
- Distributions: The common dividend declared for Q2 was $0.30 per share, down from $0.40 in each of the preceding listed quarters. The board reviews the dividend quarterly; the policy is not a commitment to pay dividends.
Important facts for investors to verify
- Confirm the filing is for New York Mortgage Trust, not ADAMAS TRUST, INC.
- Review the reconciliation of GAAP losses and book value to management’s non-GAAP measures, including adjusted book value and net interest spread.
- Check subsequent filings for the sale progress and realized proceeds of multifamily assets held for sale, and for any additional impairment charges.
- Assess financing maturities, counterparty concentration, margin-call exposure and the availability of unencumbered collateral as market values change.
- Track loan delinquency, non-accrual and credit performance, along with the sustainability of common and preferred dividends.