New York Mortgage Trust Inc (NYMT) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the New York Mortgage Trust second quarter 2008 earnings conference call.

(OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded today, Tuesday, August 5th of 2008.

At this time I'd like to turn the conference over to Scott Eckstein with Financial Relations Board.

Please go ahead.

Thank you, operator.

Good morning, everyone, and welcome to the New York Mortgage Trust second quarter 2008 results conference call.

Our press release was distributed yesterday after the close of the market.

If you did not receive a copy, the release is available on the Company's website at www.nymtrust.com in the Investor Relations section.

Additionally, we are hosting a live webcast of today's call, which you can access in the same section or through www.earnings.com.

If you would like to be added to the Company's quarterly distribution list, please contact Samantha Alfonso at 212-827-3746.

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 its 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, Co-Chief Executive Office, President, and Chief Financial Officer.

Steve, please go ahead.

Thank you, Scott.

Good morning, everyone, and thank you for being on the call.

With me today is David Akre, Co-CEO of the company, and Jim Fowler, Chairman of the Board.

They will speak about our loan securitization portfolio later in the call, and Jim will be available for questions at the end of our call.

The Company had a record portfolio net margin for 143 basis points for the second quarter ending June 30th, 2008, our highest quarterly average since going public in June of 2004, and an improvement of 58 basis points over the first quarter of 2008.

The Company had consolidated net income for the quarter, including a profitable quarter for the discontinued operation, the first since September 30th, 2005.

The Company declared and paid a first quarter dividend in April 2008 of $0.12 per common share and declared a second quarter dividend in June of $0.16 per common share which was paid in July of 2008, our first dividend since April 2007.

The Company was listed on NASDAQ Exchange in June of 2008.

As part of this listing, the Company completed a one for two reverse stock split on May 29th.

The Company earned $1.3 million, or $0.14 per common share, for the quarter ended June 30th, 2008, as compared to a $14.2 million loss, or $7.84 per common share loss for the same period in 2007.

Included in the second quarter earnings for 2008 was a nonrecurring charge of $460,000 related to liquidated damages from our private placement equity offering that occurred in the first quarter of 2008.

Excluding that charge, the quarterly earnings per share would have been $0.18 per common share.

Our consolidated net income of $0.14 per common share for the second quarter was $0.01 below the low end of our previously issued earnings guidance for 2008.

This was due primarily to increased amortization expenses related to our convertible preferred stock issuance, slight increases in D&O insurance, and legal costs related to our loss mitigation.

As I said previously, our portfolio net margin increased to 180 -- 143 basis points in the quarter ended June 30th, 2008, as compared to 85 basis points in the quarter March 31st, 2008, and 46 basis points for the fourth quarter of 2007.

The Company's average earning assets for the quarter were approximately $899 million, as compared to $1 billion for the quarter ended March 31st, 2008, and approximately $800 million for the quarter ending December 31st, 2007.

As of June 30th, 2008, the Company had total assets of approximately $897 million, as compared to $932 million for the period ended June 30th, 2008, and $809 million for the same period ending December 31st, 2007.

Included in the total assets for the period ended June 30th, 2008, were $499 million in MBS securities and $377 million in mortgage loans held on securitization trusts.

As of June 30th, 2008, the Company had total liabilities of $855 million, as compared to $871 million on March 31st, 2008, and $791 million as of December 31st, 2007.

Included in the liabilities as of June 30th, 2008, were $418 million of MBS repurchase agreements, $365 million of permanently financed collateralized debt obligations related to our on balance sheet securitization, $20 million in convertible preferred debentures, and $45 million in subordinated debt.

As of June 30th, 2008, the MBS portfolio totaled approximately $499 million and consisted of $472 million of agency MBS, including $273 million of agency ARM MBS and $199 million of agency CMO floating rate securities.

We also own $27 million mostly of AAA-rated non-agency floating rate securities.

The MBS portfolio had an average coupon of 4.29% and a yield of 4.50%.

The MBS portfolio had an average CPR rate for the quarter of 9%, as compared to 7% for the first quarter.

The MBS portfolio was financed in part with $418 million of repurchase agreements with an average cost at the end of the quarter of 2.6%.

The average haircut on these outstanding repurchase agreements was approximately 9% or an advance rate of 91%.

The company had seven counterparties at the end of the quarter.

In addition, the investment portfolio includes $377 million of loans held in securitization trusts.

These loans had an average coupon of 5.68% and a yield of 5.19%.

These loans were permanently financed with $365 million in collateralized debt obligations, which had an average quarter ending cost of 2.87%.

When including the deferred interest costs relating to the first and second securitization, the overall cost for the quarter averaged 4.10%.

The Company's net investment in our on balance sheet securitization is approximately $12 million after deducting a $2.7 million loan loss reserve.

Dave Akre will speak on further detail about our securitized loan portfolio and our experience on delinquencies later in this call.

The Company also had $45 million of subordinated debentures outstanding with an average interest rate cost of 7.88% and $28 million of convertible preferred debentures with an average cost of 10.79%.

We ended the quarter with a book value of $4.50 per share.

Included in this book value is$12.4 million in unrealized mark-to-market losses, or $1.33 per common share.

The Company maintained a conservative leverage ratio throughout the second quarter of 7 to 1.

This ratio was maintained as the market continued to show signs of instability, and we will continue to maintain that in the future until we are more comfortable with the outcome of financial situations related to several large institutions in our marketplace.

The Company anticipates in the third quarter additional cash inflows, nonrelated to the operations, from a $1.8 million payment from the -- from Lehman Brothers, which represents the final turning over of our old corporate headquarter lease to Lehman Brothers as of August 1st and a $600,000 inflow from the last released from escrow related to the sale of the retail lending platform from IndyMac Bank.

Both of those will be beneficial for liquidity in the third quarter.

We believe the market continues to provide attractive yields for us to enable us to improve our interest rate margins going forward into the third quarter and throughout the remainder of the year.

We will continue to transition out of our CMO portfolio when opportunities allow us, which will have further benefits on interest rate spend -- spread.

We feel comfortable with the performance in the second quarter and feel confident that we can continue to perform at that rate level over the coming quarters.

I'd now like to turn over the call to Dave so that he can speak further about our loan securitization portfolio.

Thanks very much, Steve.

Good morning, everyone.

Just a quick update on the $377 million of prime hybrid loans held in securitization trusts that are permanently financed with collateralized debt obligations.

As an overview, these are 2005 and earlier vintage, predominantly full documentation loans with an average loan to value at origination of 69%, average FICO score of 738.

As of June 30th, 2008, our 60-day plus delinquencies were 181 basis points, or $6.8 million, with another 99 basis points, or $3.7 million, in REO.

As an update to that, as of July 30th, we've seen improvement.

Our 60-day plus delinquencies are down to 170 basis points, or $6.2 million, and our REO is also down to $1.3 million, or 37 basis points.

Again, these results reflect focused and deliberate efforts on our part to closely monitor loss mitigation efforts on the part of our subservicer and on the part of servicers of loans that we purchased for securitization back in 2005.

The fact that these loans are now three years' seasoned greatly reduces the chance of a dramatic increase in delinquencies outside of some macro event.

That fact plus our continued loss mitigation efforts give us a high degree of confidence about the results of this portfolio going forward.

Prepayment speeds on the loans held in securitization trusts averaged a 22% CPR rate in the second quarter as compared to a 24% CPR in the first quarter.

As we've said before, given the high quality of our loan portfolio, these borrowers don't have issues when they decide to refinance or pay off the loan.

The slightly slower speed in the second quarter most likely reflects higher mortgage rates.

As far as issues related to our discontinued mortgage lending operation, we continue to make progress by reducing our outstanding repurchase agree -- repurchase requests in the quarter by approximately $4 million with a remaining balance of $1.5 million.

Further details on the results for New York Mortgage Trust in the second quarter will be available on our 10-Q, which will be filed no later than August 14th.

That will be available on our website at NYMTrust.com or the SEC website at SEC.gov.

Now with that, let me turn it back over to Vince for questions.

Thank you, sir.

(OPERATOR INSTRUCTIONS).

And our first question comes from the line of [Patrick Murphy] with Fulcrum Securities.

Please go ahead.

Good morning.

Congratulations on a strong quarter.

I wanted to ask about expenses.

In the other expenses, could you break that down?

Sure.

The other -- the primary numbers in the other expenses is $460,000 related to the liquidated damages, $200,000 in management fees related to the JMPS management advisory agreement that we put in place as part of the subordinated debentures investment in January, and then the remaining portion, the majority of the remaining portion is related to D&O insurance, which was approximately $190,000 for the quarter.

Okay, great.

And how about overhead savings from the corporate relocation, how might that benefit you guys going forward?

The current -- you know, we currently are occupying a space that's 3,000 feet, or approximately $15,000 in rent as compared to 66,000 square feet and several hundred thousand dollars.

Now, I will tell you over the last six months the majority of the rent over there has been covered by IndyMac Bank that was subleasing the space from us until they transition to a more permanent place.

But we will be getting a significant amount of money from Lehman Brothers who had contracted to take over that space from us for $3 million back in '06.

And because of IndyMac's delay in getting out of the space, actually IndyMac has paid us about $1.2 million of the $3.

So Lehman will be giving us a $1.8 million payment sometime in the next week that will allow us to use that to offset expenses.

Okay, great.

And on the net interest spread side, is it possible to give us an idea of what the spread was at quarter end?

I know the average was great at 143, but how did it look?

Right.

I think the average -- well, I don't think -- the quarter end average run rate is within that range.

I would say between 140 and 150 basis points.

I think the telling event that will happen in the third quarter will be the relationship of LIBOR and Fed funds and where repos are getting done versus LIBOR I think in May.

And the end of April and the majority of May you were able fund repo rates probably 15 to 20 through LIBOR.

As we got towards the end of June, that relationship tightened the LIBOR.

So it will be interesting to see as we get further away from the quarter end and what the Fed does today what impact that will have on that relationship.

Okay, great.

Last one.

The number of repo lenders at seven -- I don't recall what that number was in the previous quarter.

It was actually six at the end of March.

You know it's seven.

We're working with several other counterparties to add all day long capacity.

Okay, great.

Congratulations on a great quarter.

Thank you.

Our next question is from the line of Matthew Kelley with the Sterne Agee.

Please go ahead.

Yes, hi.

Any update on the terms of the repo agreements?

Any changes at all during the quarter just in terms of the way those were structured or becoming --?

No, I mean, the majority or all of our repo agreements are, they're noncommitted lines, which is typical for a repo.

We typically are doing them for a 30-day term or less.

The haircuts have remained fairly constant since the first quarter.

You have some improvements in some and some deteriorations with other, but I think we had a 9% average haircut at the end of the first quarter, which is the same average haircut we have today.

So, I think one of the things you try to do is increase your counterparties, have a constant communication with the credit department so they feel comfortable with your business model, and make sure you have -- you can always improve the collateral when they have the ability to do so.

Okay, great.

Thank you.

Thank you.

(OPERATOR INSTRUCTIONS).

And there are no additional questions at this time.

I'd like to turn it back to management for any closing remarks.

Thank you, Vincent.

Thank you for being on the call.

We look forward to having our third quarter call, and it's nice to be profitable again.

Thank you very much.

Thank you, sir.

Ladies and gentlemen, this does conclude the New York Mortgage Trust second quarter 2008 earnings conference call.

If you'd like to listen to a replay of today's conference, you do so by dialing 1-800-405-2236 or 303-590-3000 and using the access code of 11117818.

ACT would like to thank you for your participation.

You may now disconnect.