New York Mortgage Trust(NYMT) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.11 and comprehensive earnings per share of$ 0.12 for Q2 2021, with a book value increase to $4.74, resulting in a total economic return of 2.8% for the quarter [6][17]. - The net margin for the quarter was 2.97%, an increase of 55 basis points from the previous quarter, attributed to improved asset yields and decreased funding costs [13][14]. - The investment portfolio totaled$ 3.2 billion, with market capitalization remaining at $2.2 billion, both unchanged from the previous quarter [9]. Business Line Data and Key Metrics Changes - The company allocated 77% of its capital to single-family investments and 21% to multifamily investments, focusing on credit investments for better risk-adjusted returns [9]. - The weighted average yield of the portfolio improved to 6.31%, an increase of 28 basis points, due to a shift from lower-yielding securities to higher-yielding residential loans [13]. - The company acquired residential loans for$ 258 million and closed on a multifamily joint venture investment for $12 million during the quarter [16]. Market Data and Key Metrics Changes - The multifamily rental rates increased by 7% year-over-year, with double-digit gains in markets like Atlanta, Tampa, and Raleigh [32]. - The company noted a significant housing deficit, estimating a need for 5.5 million new housing units to meet demand, which supports its investment strategy [28]. Company Strategy and Development Direction - The company continues to favor business purpose loans (BPL) and multifamily lending, focusing on transitional properties in secondary markets [27][33]. - The strategy includes maintaining low leverage and focusing on long-term financing options to navigate the changing financial landscape [36]. - The company aims to strengthen its balance sheet by investing in core strategies and prudent liability management [26]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current favorable environment for their strategies, despite increased competition in the market [27][29]. - The company is cautious about potential liquidity impacts due to the Delta variant and aims to be conservative in financing opportunities [58]. - Management anticipates a slight increase in book value, supported by strong credit markets [75]. Other Important Information - The company completed a private placement of$ 100 million in senior unsecured notes and raised approximately $139 million from a preferred stock offering, using part of the proceeds to redeem higher-cost preferred stock [7][8]. - The company reported net income of$ 43 million and comprehensive income of $47 million attributable to common stockholders [17]. Q&A Session Summary Question: Discussion on raising unsecured debt and preferred equity - Management explained the decision to raise$ 137 million in preferred equity while redeeming $105 million, aiming to lower the overall cost of capital without significantly increasing preferred equity [55][56]. Question: Update on competition in the BPL space - Management acknowledged increased competition but emphasized their operational capabilities and relationships with originators, allowing them to maintain yield requirements [67][68]. Question: Impact of agency multifamily guidelines on investment opportunities - Management noted that changes in agency guidelines could create opportunities for joint ventures and mezzanine capital investments, particularly in properties with potential for improvement [80][81]. Question: Trends in book value since quarter-end - Management indicated that book value is likely up slightly due to the strength of the credit markets [75]. Question: Expected advanced rates from the 2020-SP1 securitization - Management clarified that the resecuritization aims to access better financing levels rather than unlock fresh capital for new investments [94]. Question: Operating expenses breakdown - Management explained that the increase in operating expenses was primarily due to growth in the business purpose loan portfolio and consolidation of multifamily properties [98][101].