New York Mortgage Trust Inc (NYMT) 2009 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to the New York Mortgage Trust Second Quarter 2009 Conference Call.

(Operator Instructions).

As a reminder, today's teleconference is being recorded, August 5 of 2009.

At this time, I would like to turn the presentation over to Scott Eckstein, with the Financial Relations Board.

Please go ahead, sir.

Thank you, Operator.

Good morning, everyone, and welcome to the New York Mortgage Trust second quarter 2009 results conference call.

A press release was distributed yesterday after the close of 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, they 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, Chief Executive Officer, President and Chief Financial Officer.

Steve, please go ahead.

Thank you, Scott.

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

Jim Fowler, who is our Chairman, is also on the call, and will be available at the end of this -- at the end of the call after I go through our financial review.

The second quarter was a testament to the hard work that the Company has done.

We persevered, and our focus on market opportunities allowed the Company to deliver ever-improving results.

I'd like to go over some of those highlights for the second quarter.

The Company earned $0.27 per common share for the three months ended June 30, 2009, and $0.49 per common share for the six months ended June 30, 2009.

Our net portfolio interest margin increased to 361 basis points, up from 252 basis points in the previous quarter, and we believe that there is still upside improvement in the coming quarter, as we did not fully implement our new broadened investment strategy until July of 2009.

In April 2009, as we've discussed previously, we liquidated the entire Agency CMO portfolio.

The sale freed up approximately $45 million of working capital that we have reallocated into higher yielding assets.

After the sale, the Company is now only financing Agency ARM securities, reducing the liquidity pressure on overall Company.

As we talked about in our previous quarter, we made a $9 million investment in CLO notes at deeply discounted prices that we believe will provide 25% cash-on-cash returns over the coming years.

We initiated a $25 million non-Agency RMBS strategy, including adding approximately $5 million at the end of the second quarter, with the remaining invested in July of 2009, at yields approximating between 17% and 18%.

Our book value increased to $4.89, or 10% increase over the book value of March 31, 2009, with us seeing improvements in valuations across all asset classes as well as our derivative products.

Now I'd like to go into more detail on the Company's second quarter performance.

As I previously noted, the Company earnings for second quarter of 2009 were $2.5 million, or $0.27 per common share, as compared to net income of $1.3 million, or $0.14 per common share, for the second quarter of 2008.

For the six months ended June 30, 2009, the Company earned $4.6 million, or $0.49 per common share, as compared to a net loss of $20 million, or $2.77 per common share, for the same period in the previous year.

The Company declared and paid a second quarter dividend of $0.23 per common share, an increase of $0.05 per common share over the previous quarter.

The Company had net interest margin of $4.2 million for the second quarter ended June 30, 2009, an improvement of $1.7 million over the second quarter of the previous year.

The Company had $8.3 million net interest margin for the six months ended June 30, 2009, again an improvement of $4.5 million over the same period for the previous year.

The Company also added approximately $0.3 million of loan loss reserves for the quarter as relates to our loans held in securitization trusts, as well as a total of $0.9 million for the first six months for the loans.

The Company had total expenses of $1.6 million for the second quarter, a decrease of approximately $0.4 million from the second quarter of 2008.

For the six months, the Company had total expenses of $3.2 million, as compared to $3.4 million for the same six-month period in the previous year.

Again, as I stated earlier, our portfolio net margin averaged 361 basis points for the quarter ended June 30, 2009, as compared to 252 basis points in the previous quarter and 143 basis points for the quarter ending June 30, 2008.

Improvement in net margin was due to several factors -- exiting the lower margin Agency CMO floater book; the addition of higher yielding CLO notes; and, to a lesser extent, the non-Agency RMBS initiative that we began in June of 2009, as well as continued excellent performance in our on-balance sheet securitizations.

And, finally, we had an overall reduction in our liability costs for the quarter of approximately 31 basis points.

In addition, the Company started a $25 million non-Agency RMBS strategy, which we fully invested in July, and, accordingly, we expect to see margin improvement in the coming quarter.

The Company average assets for the second quarter were approximately $601 million, as compared to $797 million for the quarter ending March 31, 2009.

As we transition to a lower leverage balance sheet, we anticipate average assets trending lower over the coming quarters.

As of June 30, 2009, the Company had total assets of approximately $611 million, as compared to $853 million at December 31, 2008.

Included in total assets as of June 30, 2009 were $269 million in investment securities and $314 million in mortgage loans held in securitization trusts.

The Company had total liabilities of $566 million as of June 30, compared to $814 million as of December 31, 2008.

Included in the liabilities as of June 30 were $188 million in MBS repurchase agreement, $302 million in permanently financed collateralized debt obligation, $20 million in convertible preferred and $45 million in subordinated debentures.

As of June 30, 2009, our residential MBS portfolio totaled approximately $260 million, consisting of $239 million of Agency hybrid-ARM MBS and $21 million of non-Agency MBS securities, including $4.6 million of the recently added MBS securities that were purchased at an average price of 58.17% of current par, with a risk-adjusted yield of approximately 17%.

Subsequent to June 30, the Company added an additional $20 million of assets at similar prices and yields to complete the initial phase of our non-Agency investment strategy.

The residential MBS portfolio had an average coupon during the second quarter of 5.26% and an average yield of 4.57%.

The portfolio had an average CPR rate in the second quarter of 20%, as compared to 12% for the previous quarter.

The residential MBS portfolio was financed in part with $188 million of repurchase agreements, with an average cost for the quarter of 90 basis points.

And, after giving the effect of the interest rate swaps, the rate increased to 148 basis points, or a decrease of 31 basis points from the previous quarter.

The average haircut in the Company's outstanding repurchase agreements as of June 30 was approximately 6.5%.

The Company had repos outstanding with five counterparties at the end of the quarter, with current leverage ratio of 3 to 1, down from 4.5 to 1 as of March 31, 2009.

As of June 30, 2009, the Company had $16 million in cash on hand, as well as $56 million of MBS securities, unencumbered, including $36 million of Agency unencumbered MBS securities.

As we've talked about previously, the Company made an initial investment of $9 million in the Cratos notes, which continue to perform as expected, including paying us an interest payment of over $0.5 million on May 15, 2009, an interest payment that was not paid for in the initial purchase price.

In addition, the investment portfolio includes $314 million of loans held in securitization trusts for on-balance sheet securitization.

These loans had an average coupon during the quarter of 5.22%, with an average yield of 5.03%.

The loans were permanently financed with $302 million of collateralized debt obligations, which had an average cost for the quarter of 116 basis points.

The Company's net investment in our on-balance sheet securitization is approximately $12 million, after deducting $1.9 million in loan loss reserves.

The securitizations had $12.9 million in greater than 60 days delinquencies, or 25 loans as of June 30, 2009, as compared to $10.6 million for the previous quarter.

There were three REO properties totaling $1.2 million as of June 30, as compared to three REO properties totaling $0.8 million in the previous quarter.

The increase in delinquencies is partially attributable to our temporary payment plan that we've implemented to assist our borrowers.

As these plans are not permanent, the borrowers continue to remain in the delinquent categories.

We currently have 12 loans, or $4.3 million, included in delinquent loans that are under some form of temporary payment plan.

The Company continues to monitor all our delinquent loans diligently, updating property values, reviewing borrower economic conditions for possible assistance, and, if necessary, disposing of the property as soon as possible.

All these measures have enabled us to minimize losses to date on our loans held in securitization trusts.

The Company enters the third quarter with historically high expanding net interest margins, lower leverage, better liquidity and opportunities that we believe will continue to allow us to build shareholder value.

One final note, our 10-Q will be available on or about October (sic) 7, which is Friday of this week.

Operator, Jim and I would now like to open the call for questions.

Thank you.

Thank you, sir.

(Operator instructions).

Our first question will come from the line of Matthew Howlett, with Fox-Pitt Kelton.

Please go ahead.

Hi, guys.

Thanks for taking my question, and congratulations on a terrific quarter.

The question, first, on the non-Agency strategy you got ramped up here it looks like right at the end of June and then into July.

How much -- given your leverage targets, how much additional room is there to buy these type of assets or, really, any type of assets?

And given the recent rally in non-Agency prices on levered deals in the senior market have come to sort of the high double digits, high single digits, what are you looking at now to put on the books?

What are the opportunities that you're looking at now?

Again, thanks, Matt, for your following and your interest in the Company.

We initially earmarked $25 million.

We have $25 million we've put to work at the end of June and in July, as you said, the double digit yields at lower prices.

The market has clearly rallied in the last six weeks and continues to show price improvement as these [p-tip] plans come online.

I think at the moment we're going to take a step back and monitor the market to see exactly how these plans impact the overall pricing and where the non-Agency market heads into.

I mean, we are looking at opportunities at some of the Re-REMIC deals that are out there, possibly.

We're looking at other opportunities in the mortgage market, possibly some other types of security classes that may not be the senior structure classes, it could be the secondary classes if there are some Re-REMICs done in those classes.

So at the moment we're taking a standoff approach and monitoring the market until these larger plans come through the marketplace.

Great.

Well, it's good that you certainly got ramped up before the rally we've seen recently.

Now, the unlevered -- the assets now are unlevered?

I mean, you're not counting on applying to some leverage to it, but would you be open to that if that did come available through TALF 2 or through a Re-REMIC, doing one on your own?

Yes, I think we would look at leverage very conservatively.

The marketplace seems to be allowing investors to put leverage, again, back on non-Agency securities.

I think that's the kind of leverage you have to look at very closely and carefully.

We would look to enter any kind of leverage transaction with some sort of permanence to it, being it one to two years type of a structured repo and/or through a structuring itself, through a Re-REMIC, or, if TALF does come through and allow a residential [ARMS] to be part of the program, we'd look to do that also.

Great.

And the unleveraged yield you said right now you're accruing at is roughly 17%?

17% to 18%, that's correct.

Great.

And then, Steve, on the Agency front, you've taken leverage down there.

You still have the capacity to ramp up if you chose to do it.

Do you envision next year possibly, if the dollar prices come down in that market or if the yield curve steepened, getting back into it or growing the portfolio on that front, or do you think you've got to keep it flat for the foreseeable future?

I mean, I think what we're looking at is opportunistically looking where to place our money.

We could grab -- given if yields improved in the Agency market we would add some additional leverage into the marketplace, but where the premiums are in Agency securities today and where we think we can get better discounted, more MBS-favorable treatment in other securities, we're going to focus our energies on there.

But we will always monitor the Agency market, and, as you know, any REIT has to maintain a certain percentage of their assets in a what we call the whole pool Agency sector, so there will always be some footprint in that space for us.

Great.

I'll get back in the queue.

Thank you.

Thank you.

Thank you.

We'll move to the next question, from the line of John Sites, with Sterne, Agee.

Please go ahead.

Hey, good morning, guys.

Thanks for taking my call.

Good quarter.

Steve, you just mentioned structured repo for non-Agency collateral, and I've heard a few other people reference that.

Have you seen, or can you give any indication as to the rate that's being offered out there for kind of a non-Agency repo?

You know, we've only had initial discussions with dealers that related to this.

What I have seen, some pricing that I have seen has been LIBOR plus 150 to 200.

Okay.

Those are rates that we're looking at.

We have not done anything to date.

Again, it's something that I think in some of these securities you're going to put them on your balance sheet.

Given what we just went through in 2008, you're going to want to have some kind of permanent financing behind them.

Sure.

That makes sense.

And could you refresh me on, I know you said you've allocated monies to your non-Agency strategy, what type of collateral were you buying?

Was it prime, Alt-A, option ARM?

Well, we have not bought any option ARMs to date.

We've focused primarily on the prime hybrid and Alt-A hybrid space.

Typically we're looking at -- I mean, preferably we'd look at the 2003 and 2005 vintage.

We do have some 2006 vintage.

There would be a price discrepancy, clearly, by the year of origination and the parameters you use to run the analysis, but we try to focus on cleaner collateral, lower balance collateral, more diversified collateral.

Okay, and on the CLO front, how -- are you actively in that market looking for another [CRATO-esque]-type deal, or is that for the time being kind of a one-off and you're more focused on the Agency or non-Agency portion of the portfolio?

I think we are absolutely looking.

We are -- absolutely have earmarked a part of our portfolio to look at the opportunistic purchases like the CRATOS transaction.

I think that fit great into the Company.

It's performing as expected or better than expected.

It looks like if the economy has bottomed out and starts to go forward, as everybody is predicting, that should bode well for that investment.

And we have looked at other opportunities, have not been able to close oin one, but we continue to monitor the possibilities out there.

Okay.

That's all I've got.

Great quarter, guys.

Thank you.

Thank you.

Thank you.

(Operator Instructions).

Management, at this time we have no additional questions in the queue, and I'll turn the conference to you for any further remarks.

Well, thank you very much for being on the call today.

We look forward to going through the third quarter, and thank you very much.

Thank you.

Ladies and gentlemen, at this time we will conclude today's teleconference.

If you would like to listen to a replay of today's program, please do so by dialing 1-800-406-7325, or 303-590-3030, with the access code of 4131353.

Once again, if you would like to listen to a replay, you may do so by dialing 1-800-406-7325, or 303-590-3030, with the access code of 4131353.

We thank you for your participation on today's teleconference.

At this time we will conclude the conference.

You may now disconnect, and please have a pleasant day.