New York Mortgage Trust(NYMT)2023-02-24 21:53Investment Portfolio - As of December 31, 2022, the company owned 137.7 million of preferred equity interests in a joint venture owning 13 multi-family properties across seven states as of December 31, 2022[43]. - The company’s investments in multi-family CMBS included first loss PO securities, which represented 7.5% of the overall securitization totaling approximately 388.8 million in joint venture equity interests in multi-family properties, representing approximately 10.2% of its total investment portfolio as of December 31, 2022[146]. Leverage and Financing - The company has historically employed leverage through repurchase agreements in managing its Agency RMBS portfolio[32]. - The company’s recourse leverage ratio was approximately 0.3 to 1, indicating a conservative use of debt relative to equity[53]. - The company targets maximum leverage ratios of 8:1 for liquid Agency securities and between 4:1 and 6:1 for illiquid assets, with a total debt leverage ratio not exceeding 3:1[52]. - The company completed nine non-recourse securitizations and three non-mark-to-market repurchase agreement financings since Q1 2020, enhancing its financing strategy[51]. - The company has entered into three repurchase agreements with an aggregate outstanding balance of $446.8 million as of December 31, 2022, which are not subject to margin calls[57]. - The company utilizes leverage through various forms of debt, which can exacerbate losses and reduce cash available for distribution to stockholders[172]. - The company has historically used leverage to enhance returns, but current market volatility may limit its ability to leverage assets, potentially diminishing returns and distributions to stockholders[174]. - The company utilizes non-recourse securitizations and structured financings, which expose it to risks that could result in losses and affect its ability to finance assets[175]. Risk Factors - The company faces risks from changes in interest rates, credit spreads, and market volatility, which could impact asset values and financial performance[88]. - The company may experience increased volatility in GAAP results due to the fair value option elected for most investments[92]. - Risks include potential losses from inaccurate estimates of loss-adjusted yields and the impact of economic downturns on asset performance[92]. - The company is subject to extensive regulation, and failure to comply with REIT requirements could adversely affect operations and liquidity[94]. - Changes in government policies and economic conditions, including the impact of COVID-19, may affect the company's business and market conditions[94]. - The planned discontinuation of LIBOR and transition to alternative reference rates may adversely impact the company's borrowings and assets[94]. - The company faces risks related to credit-sensitive assets, including potential inaccuracies in loss-adjusted yield estimates[104]. - Residential loans are subject to increased risks of loss, particularly as they are not guaranteed by the federal government or any GSE[113]. - Business purpose loans are directly exposed to losses from default and foreclosure, with potential liquidation proceeds insufficient to recover the cost basis in the loan[117]. - Economic disruptions may lead to increased delinquencies and defaults, adversely affecting net interest income and earnings[190]. Compliance and Regulation - The company is structured as a REIT and is generally not subject to U.S. federal income tax on distributed taxable income, but failure to qualify as a REIT could adversely impact operations and distributions[78]. - Subsidiaries investing in residential mortgage loans rely on an exemption under the Investment Company Act, requiring at least 55% of assets to be qualifying real estate assets[80]. - The company must maintain compliance with the Investment Company Act to avoid significant operational changes or asset sales that could negatively affect stock value and business sustainability[79]. - The company is required to distribute at least 90% of its REIT taxable income to avoid corporate income tax, which could impact liquidity[215]. - If the company fails to qualify as a REIT, it would be subject to U.S. federal income tax at regular corporate rates, potentially requiring asset liquidation or borrowing[213]. - The company’s investments in repurchase agreements may be challenged by the IRS, potentially affecting REIT qualification[223]. - The company’s mezzanine loans may not meet IRS requirements for qualifying real estate assets, posing a risk to REIT status[224]. Workforce and Diversity - The company has a fully flexible workplace policy adopted in 2022, allowing employees to choose their work environment[70]. - As of December 31, 2022, women comprised 24% of the workforce, and 30% identified as ethnically diverse, reflecting the company's commitment to diversity[68]. - The company has not laid off or furloughed any employees due to the COVID-19 pandemic, maintaining workforce stability[71]. Market Conditions and Economic Impact - The company anticipates that increases in interest rates will generally decrease net income and the market value of the investment portfolio[98]. - Rising interest rates may reduce the availability of targeted assets and increase interest expenses, adversely affecting earnings and distributions[105]. - The company’s portfolio may be concentrated in certain asset types, increasing exposure to economic downturns and risks associated with the real estate and lending industries[110]. - Competition in the market for investment opportunities has increased, leading to reduced levels of investment and negatively impacting net earnings during periods of high demand[156]. - Government actions in response to the COVID-19 pandemic and inflation may create volatility and uncertainty in financial markets, impacting the company's operations[191]. - The uncertainty surrounding U.S. government policies and regulations has increased macroeconomic and political risks, potentially impacting the company's financial condition and operations[192]. Asset Management and Valuation - The company’s valuation models may be based on incomplete information, exposing it to risks if assumptions prove inaccurate[151]. - The company’s fair value determinations of assets may differ from market realizations, potentially affecting its financial condition and results of operations[152]. - The company's investments in residential loans are challenging to value, particularly for re-performing loans (RPLs) and non-performing loans (NPLs), which could adversely affect liquidity and operational results[153]. - The ability to sell RPLs for profit is contingent on borrowers continuing to make payments; a shift to NPLs could reduce earnings[153]. - Changes in prepayment rates can adversely affect the performance of the company's assets, impacting income and cash flows[124]. Cybersecurity and Operational Risks - Cybersecurity and data security are critical, as breaches could harm reputation and materially impact financial results; the company has implemented measures to protect sensitive information[157]. - The company is highly dependent on information systems, and any operational disruptions could adversely affect business and financial condition[163]. - Access to financing sources may be limited, particularly during market volatility, which could adversely affect operations and ability to distribute to stockholders[165].