New York Mortgage Trust, Inc. (NYMT)

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New York Mortgage Trust, Inc. (NYMT)

Q3 2012 Earnings Call

November 8, 2012 9:00 am ET


Steven R. Mumma – President, Chief Executive Officer and Director

Fredric S. Starker – Chief Financial Officer


Christopher R. Donat – Sandler O'Neill & Partners LP

David M. Walrod – Ladenburg Thalmann & Co. Inc.

Boris E. Pialloux – National Securities Corp.

Zachary Tanenbaum – Mcnicoll, Lewis, & Vlak



Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Third Quarter 2012 Results Conference Call. (Operator Instructions) This conference is being recorded on Wednesday, August 8, 2012. A press release with NYMTs third quarter 2012 results was released yesterday. The press release is available on the Company's website at www.nymtrust.com. Additionally, we are hosting a live webcast of today's call, which you can access in the Events & Presentation section of the Company's website.

At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that the expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the Company's filings with the SEC.

Now at this time for opening remarks, I would like to introduce Steve Mumma, Chief Executive Officer and President. Steve, please go ahead.

Steven R. Mumma

Thank you, operator, and good morning everyone and thank you for being on the call. Fred Starker, our CFO, is also present and available for questions at the end of the call.

Company released it’s earnings after the market close yesterday. Included in the press release were several tables that I will be referring to throughout this call today.

Company earned $7.9 million or $0.30 per common share for the quarter ending September 30, 2012 as compared to a net loss of $15,000 or $0.00 per common share for the quarter ended September 30, 2011. We had adjusted net income per common share of $0.34 after excluding $1.9 million of net unrealized losses related to our investment securities related hedges and $0.8 million of net unrealized gains related to the fair value adjustment of our CMBS multifamily securitization – loans held in securitization trust.

Net income for the three months ended September 30, 2012 was $8.1 million, up approximately $1.9 million from the same period of the previous year and up approximately $2.3 million in the second quarter of 2012. Third quarter performance does not fully reflect the impact of $565 million of investments in Agency fixed rate and Agency ARM investments that were not funded until the latter part of August 2012.

During the quarter the company sold approximately $49.4 million of season agency arms resulting in a net realized gain of $1.6 million. Company also had net unrealized gains of approximately $800,000 related to our CMBS portfolio.

The investment or IO strategy continues to deliver above-average return as our managers were able to navigate through this very difficult markets producing results that were accretive to the overall portfolio performance. Our general and administrative expenses for the quarter were $3.2 million, including $1.5 million of general expenses and $1.7 million related to management fees. Our external managers continue to perform at or above expectation contributing to the success of the company. General expenses, which exclude managerial fees, have averaged approximately $1.5 million for the previous three quarters.

Operating expense leverage has been reduced by over 50% to the growth of the Company's equity base during the year. The company had a weighted average portfolio margin of 470 basis points for the third quarter, a decrease of 125 basis points from the second quarter of 2012. However, the majority of this decrease was due to the increase in allocation to our RMBS portfolio strategy.

The Agency RMBS portfolio excluding Agency IOs increased from a weighted average balance of $59 million during the second quarter to $300 million during the third quarter. Net margins of this particular strategy were less in terms of actual spread, but were enhanced with the addition of leverage. Company utilized the MBS strategy by sourcing additional credit and managerial investments during the quarter.

Company ended the quarter with a book value of $6.52 per share as compared to $6.51 per share for the quarter ended June 30, 2012. Included in our press release is a detailed analysis of the book value transaction from June 30 to September 30, 2012. In addition, in the 10-Q there will be a reconciliation from the beginning of the year through September 30, 2012 of the book value.

The company declared and paid the quarter dividend of $0.27 per common share. We received net proceeds of approximately $33.1 million from a public stock offering in July and $74.7 million in August of 2012. In addition, we also raised approximately $104 million in October of 2012. These proceeds with primarily invested in Agency MBS securities as well as multifamily CMBS securities.

Included in the press release is a portfolio allocation table that details our assets and liabilities investment silo as of September 30, 2012. As you can see, we increased our Agency ARM portfolio during the quarter by approximately $229 million and then added $275 million in agency fixed-rate securities primarily in 15 year sector bringing the total investment in that investment silo to approximately $557 million. The Agency IO portfolio increased by approximately 10% to $78 million in assets.

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